----

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|   | o | Offering a full range of financial products and services. The Bank has a long tradition of focusing on the needs of consumers and small and medium-sized businesses in the community and being an active corporate citizen.  The Bank believes its community orientation, quicker decision-making process and customized products are attractive to its customers and distinguishes it from the large regional banks that operate in its market area.  In this context, the Bank strives to become a financial services company offering one-stop shopping for all of its customers’ financial needs through banking, investments, insurance and trust products and services.  The Bank believes that its broad array of product offerings deepen its relationships with its current customers and entice new customers to begin banking with them, ultimately increasing fee income and profitability. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Actively managing the balance sheet and diversifying the asset mix. The recent economic recession has underscored the importance of a strong balance sheet. The Company manages its balance sheet by: (1) prudently increasing the percentage of its assets consisting of multi-family and commercial real estate and commercial business loans, which offer higher yields, shorter maturities and more sensitivity to interest rate fluctuations; (2) managing its interest rate risk by diversifying the type and maturity of its assets in its loan and investment portfolios and monitoring the maturities in its deposit portfolio; and (3) maintaining strong capital levels and liquidity. Multi-family and commercial real estate and commercial business loans increased $35.5 million, $28.0 million and $36.7 million for the years ended December 31, 2010, 2009 and 2008, respectively, and comprised 49.7% of total loans at December 31, 2010.  The Company intends to continue to pursue the opportunities from the many multi-family and commercial properties and businesses located in its market area. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Continuing conservative underwriting practices and maintaining a high quality loan portfolio. The Bank believes that strong asset quality is a key to long-term financial success.  The Bank has sought to maintain a high level of asset quality and moderate credit risk by using conservative underwriting standards and by diligent monitoring and collection efforts.  Nonperforming loans increased from $3.0 million at December 31, 2009 to $4.9 million at December 31, 2010.  At December 31, 2010, nonperforming loans were 0.80% of the total loan portfolio and 0.53% of total assets.  Although the Bank intends to increase its multi-family and commercial real estate and commercial business lending, it intends to continue its philosophy of managing large loan exposures through conservative loan underwriting and credit administration standards. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Increasing core deposits. The Company’s primary source of funds is retail deposit accounts.  At December 31, 2010, 56.2% of our deposits were core deposits, consisting of demand, savings and money market accounts. The Company values core deposits because they represent longer-term customer relationships and a lower cost of funding compared to certificates of deposit. Core deposits have continued to increase primarily due to the investments we have made in our branch network, new product offerings, competitive interest rates and the movement of customer funds out of riskier investments, including the stock market. The Company intends to continue to increase its core deposits and to focus on gaining market share in counties outside of Windham County by continuing to offer exceptional customer service, cross-selling its loan and deposit products and trust, insurance and investment services and increasing its commercial deposits from small and medium-sized businesses through additional business banking and cash management products. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | o | Supplementing fee income through expanded mortgage banking operations. The Company views the changing regulatory landscape and historically low interest rate environment as an opportunity to gain noninterest income by leveraging its expertise in originating residential mortgages and selling such increased originations in the secondary market. This strategy enables the Company to have a much larger lending capacity, provide a more comprehensive product offering and reduce the interest rate, prepayment and credit risks associated with originating residential loans for retention in its loan portfolio. Further, this strategy allows the Company to be more flexible with the single-family residential loans that are held in portfolio. To accelerate this initiative, the Company hired two additional mortgage originators in 2010 and intends to hire at least one more originator in 2011. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Grow through acquisitions. The Company intends to pursue expansion opportunities in its existing market areas or adjacent areas in strategic locations that maximize growth opportunities or with companies that add complementary products to its existing business. The Company believes that the recent economic recession will increase the rate of consolidation in the banking industry. The Company will look to be opportunistic to expand through the acquisition of banks or other financial service companies and believes the additional capital raised through its recently completed offering will better position the Company to take advantage of those opportunities. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                              |   | Years Ended December 31, |    |
|-----------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                              |   | 2010                     |    |   | 2009 |   |   | 2008 |   |
|                                                                              |   | AverageBalance           |    |   | Interest &Dividends |   |   | AverageYield/Rate |   |   | AverageBalance |   |   | Interest &Dividends |   |   | AverageYield/Rate |   |   | AverageBalance |   |   | Interest &Dividends |   |   | AverageYield/Rate |   |
|                                                                              |   | (Dollars in Thousands)   |    |
| Interest-earning assets:                                                          |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                                                     |   | $                        | 610,480 |   |   | $ | 33,381 |   |   |   | 5.47 | % |   | $ | 624,647 |   |   | $ | 35,440 |   |   |   | 5.67 | % |   | $ | 608,838 |   |   | $ | 37,192 |   |   |   | 6.11 | % |
| Securities (3)                                                                    |   |                     | 190,568 |   |   |   | 6,393 |   |   |   | 3.35 |   |   |   | 177,609 |   |   |   | 7,849 |   |   |   | 4.42 |   |   |   | 178,146 |   |   |   | 8,946 |   |   |   | 5.02 |   |
| Other interest-earning assets                                                     |   |                     | 35,309  |   |   |   | 114 |   |   |   | 0.32 |   |   |   | 20,709 |   |   |   | 112 |   |   |   | 0.54 |   |   |   | 14,160 |   |   |   | 366 |   |   |   | 2.58 |   |
| Total interest-earning assets                                                     |   |                     | 836,357 |   |   |   | 39,888 |   |   |   | 4.77 |   |   |   | 822,965 |   |   |   | 43,401 |   |   |   | 5.27 |   |   |   | 801,144 |   |   |   | 46,504 |   |   |   | 5.80 |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets                                                        |   |                     | 51,584  |   |   |   |   |   |   |   |   |   |   |   | 47,377 |   |   |   |   |   |   |   |   |   |   |   | 44,518 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                      |   | $                        | 887,941 |   |   |   |   |   |   |   |   |   |   | $ | 870,342 |   |   |   |   |   |   |   |   |   |   | $ | 845,662 |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                         |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW and money market                                                              |   | $                        | 240,592 |   |   |   | 1,618 |   |   |   | 0.67 |   |   | $ | 206,012 |   |   |   | 2,189 |   |   |   | 1.06 |   |   | $ | 180,699 |   |   |   | 3,149 |   |   |   | 1.74 |   |
| Savings (4)                                                                       |   |                     | 64,415  |   |   |   | 295 |   |   |   | 0.46 |   |   |   | 62,717 |   |   |   | 408 |   |   |   | 0.65 |   |   |   | 66,796 |   |   |   | 668 |   |   |   | 1.00 |   |
| Certificates of deposit (5)                                                       |   |                     | 302,706 |   |   |   | 7,524 |   |   |   | 2.49 |   |   |   | 318,029 |   |   |   | 10,586 |   |   |   | 3.33 |   |   |   | 304,361 |   |   |   | 11,921 |   |   |   | 3.92 |   |
| Total interest-bearing deposits                                                   |   |                     | 607,713 |   |   |   | 9,437 |   |   |   | 1.55 |   |   |   | 586,758 |   |   |   | 13,183 |   |   |   | 2.25 |   |   |   | 551,856 |   |   |   | 15,738 |   |   |   | 2.85 |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal Home Loan Bank advances                                                   |   |                     | 115,152 |   |   |   | 4,214 |   |   |   | 3.66 |   |   |   | 131,460 |   |   |   | 5,461 |   |   |   | 4.15 |   |   |   | 143,697 |   |   |   | 6,324 |   |   |   | 4.40 |   |
| Subordinated debt                                                                 |   |                     | 8,248   |   |   |   | 173 |   |   |   | 2.10 |   |   |   | 8,248 |   |   |   | 217 |   |   |   | 2.63 |   |   |   | 8,248 |   |   |   | 397 |   |   |   | 4.81 |   |
| Total interest-bearing liabilities                                                |   |                     | 731,113 |   |   |   | 13,824 |   |   |   | 1.89 |   |   |   | 726,466 |   |   |   | 18,861 |   |   |   | 2.60 |   |   |   | 703,801 |   |   |   | 22,459 |   |   |   | 3.19 |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities                                                   |   |                     | 75,667  |   |   |   |   |   |   |   |   |   |   |   | 68,350 |   |   |   |   |   |   |   |   |   |   |   | 64,436 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                 |   |                     | 806,780 |   |   |   |   |   |   |   |   |   |   |   | 794,816 |   |   |   |   |   |   |   |   |   |   |   | 768,237 |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total shareholders' equity                                                        |   |                     | 81,161  |   |   |   |   |   |   |   |   |   |   |   | 75,526 |   |   |   |   |   |   |   |   |   |   |   | 77,425 |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders' equity                                        |   | $                        | 887,941 |   |   |   |   |   |   |   |   |   |   | $ | 870,342 |   |   |   |   |   |   |   |   |   |   | $ | 845,662 |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest-earning assets                                                       |   | $                        | 105,244 |   |   |   |   |   |   |   |   |   |   | $ | 96,499 |   |   |   |   |   |   |   |   |   |   | $ | 97,343 |   |   |   |   |   |   |   |   |   |
|                                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax equivalent net interest income (3)                                            |   |                     |    |   |   |   | 26,064 |   |   |   |   |   |   |   |   |   |   |   | 24,540 |   |   |   |   |   |   |   |   |   |   |   | 24,045 |   |   |   |   |   |
| Tax equivalent interest rate spread (6)                                           |   |                     |    |   |   |   |   |   |   |   | 2.88 | % |   |   |   |   |   |   |   |   |   |   | 2.67 | % |   |   |   |   |   |   |   |   |   |   | 2.61 | % |
| Tax equivalent net interest margin as a percentage of interest-earning assets (7) |   |                     |    |   |   |   |   |   |   |   | 3.12 | % |   |   |   |   |   |   |   |   |   |   | 2.98 | % |   |   |   |   |   |   |   |   |   |   | 3.00 | % |
| Average of interest-earning assets to average interest-bearing liabilities        |   |                     |    |   |   |   |   |   |   |   | 114.40 | % |   |   |   |   |   |   |   |   |   |   | 113.28 | % |   |   |   |   |   |   |   |   |   |   | 113.83 | % |
| Less tax equivalent adjustment (3)                                                |   |                     |    |   |   |   | (13 | ) |   |   |   |   |   |   |   |   |   |   | (16 | ) |   |   |   |   |   |   |   |   |   |   | (5 | ) |   |   |   |   |
| Net interest income                                                               |   |                     |    |   |   | $ | 26,051 |   |   |   |   |   |   |   |   |   |   | $ | 24,524 |   |   |   |   |   |   |   |   |   |   | $ | 24,040 |   |   |   |   |   |

|   | (1) | Amount is net of deferred loan origination fees and costs.  Average balances include nonaccrual loans and loans held for sale. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Loan fees are included in interest income and are immaterial. |
|--------|-----|---------------------------------------------------------------|

|   | (3) | Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%.  The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amounts reported in the statements of operations. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Includes mortgagors’ and investors’ escrow accounts. |
|--------|-----|------------------------------------------------------------------|

|   | (5) | Includes brokered deposits. |
|--------|-----|-----------------------------|

|   | (6) | Tax equivalent net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Tax equivalent net interest margin represents tax equivalent net interest income divided by average interest-earning assets. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

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|                               |   | 2010 Compared to 2009      |   |   | 2009 Compared to 2008      |   |
|------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|
|                               |   | Increase (Decrease) Due To |   |   | Increase (Decrease) Due To |   |
|                               |   | Rate                       |   |   | Volume                     |   |   | Net |   |   | Rate |   |   | Volume |   |   | Net |   |
|                               |   | (In Thousands)             |   |
| Interest-earning assets:           |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest and dividend income:      |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)(2)                       |   | $                          | (1,266 | )      |                       | $      | (793 | ) |   | $ | (2,059 | ) |   | $ | (2,700 | ) |   | $ | 948 |   |   | $ | (1,752 | ) |
| Securities (3)                     |   |                       | (1,997 | )      |                       |   | 541 |   |   |   | (1,456 | ) |   |   | (1,070 | ) |   |   | (27 | ) |   |   | (1,097 | ) |
| Other interest-earning assets      |   |                       | (57    | )      |                       |   | 59 |   |   |   | 2 |   |   |   | (374 | ) |   |   | 120 |   |   |   | (254 | ) |
| Total interest-earning assets      |   |                       | (3,320 | )      |                       |   | (193 | ) |   |   | (3,513 | ) |   |   | (4,144 | ) |   |   | 1,041 |   |   |   | (3,103 | ) |
|                               |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:      |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                  |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits (4)                       |   |                       | (3,593 | )      |                       |   | (153 | ) |   |   | (3,746 | ) |   |   | (3,429 | ) |   |   | 874 |   |   |   | (2,555 | ) |
| Federal Home Loan Bank advances    |   |                       | (611   | )      |                       |   | (636 | ) |   |   | (1,247 | ) |   |   | (343 | ) |   |   | (520 | ) |   |   | (863 | ) |
| Subordinated debt                  |   |                       | (44    | )      |                       |   | - |   |   |   | (44 | ) |   |   | (180 | ) |   |   | - |   |   |   | (180 | ) |
| Total interest-bearing liabilities |   |                       | (4,248 | )      |                       |   | (789 | ) |   |   | (5,037 | ) |   |   | (3,952 | ) |   |   | 354 |   |   |   | (3,598 | ) |
|                               |   |                       |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in net interest income (5)  |   | $                          | 928    |   |                       | $      | 596 |   |   | $ | 1,524 |   |   | $ | (192 | ) |   | $ | 687 |   |   | $ | 495 |   |

|   | (1) | Amount is net of deferred loan origination fees and costs.  Average balances include nonaccrual loans and loans held for sale. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Loan fees are included in interest income and are immaterial. |
|--------|-----|---------------------------------------------------------------|

|   | (3) | Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%.  The tax equivalent adjustment is deducted from tax equivalent net interest income to agree to the amounts reported in the statements of operations. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Includes mortgagors’ and investors’ escrow accounts. |
|--------|-----|------------------------------------------------------------------|

|   | (5) | Presented on a tax equivalent basis using a tax rate of 34%. |
|--------|-----|--------------------------------------------------------------|

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|   | o | Residential Mortgage Loans.  Residential mortgage loans comprise 44.5% of total loans at December 31, 2010.   Residential mortgage loans decreased $35.3 million, or 11.5%.  The sale of $48.7 million in residential mortgage loans from current production during 2010 and the decrease in residential mortgage loan originations by $29.6 million during 2010 contributed to the decrease in residential mortgage loans. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Commercial Loans.  At December 31, 2010, the commercial loan portfolio, which includes multi-family and commercial real estate and commercial business loans, represented 49.7% of the Company’s total loan portfolio.  Multi-family and commercial real estate loans increased $234,000, or 0.2%.  Commercial business loans increased $35.3 million for 2010 as a result of the purchase of $54.0 million in USDA and SBA loans that are fully guaranteed by the U.S. government.  Loan originations for commercial real estate and commercial business loans increased $4.1 million and $951,000, respectively, during 2010. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Consumer Loans.  Consumer loans represent 4.7% of the Company’s total loan portfolio and increased $2.6 million, or 10.0%, resulting from an increase in home equity lines of credit.  Loan originations for consumer loans increased $220,000 over 2009. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                          |   | Years Ended December 31, |   |   | Change |   |
|---------------------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                                          |   | 2010                     |   |   | 2009   |   |   | Dollars |   |   | Percent |   |
|                                                          |   | (Dollars in Thousands)   |   |
| Service fees                                                  |   | $                        | 5,093  |   |   | $      | 5,033 |   |   | $ | 60 |   |   |   | 1.2 | % |
| Wealth management fees                                        |   |                     | 4,083  |   |   |   | 3,912 |   |   |   | 171 |   |   |   | 4.4 |   |
| Increase in cash surrender value of bank-owned life insurance |   |                     | 290    |   |   |   | 294 |   |   |   | (4 | ) |   |   | (1.4 | ) |
| Net gain on sale of securities                                |   |                     | 878    |   |   |   | 285 |   |   |   | 593 |   |   |   | 208.1 |   |
| Net impairment losses recognized in earnings                  |   |                     | (492   | )      |   |   | (228 | ) |   |   | (264 | ) |   |   | 115.8 |   |
| Mortgage banking fees                                         |   |                     | 1,090  |   |   |   | 707 |   |   |   | 383 |   |   |   | 54.2 |   |
| Net loss in fair value on trading securities and derivatives  |   |                     | (429   | )      |   |   | - |   |   |   | (429 | ) |   |   | n/a |   |
| Net (loss) gain on disposal of equipment                      |   |                     | (5     | )      |   |   | 99 |   |   |   | (104 | ) |   |   | (105.1 | ) |
| Other                                                         |   |                     | 177    |   |   |   | 79 |   |   |   | 98 |   |   |   | 124.1 |   |
| Total noninterest income                                      |   | $                        | 10,685 |   |   | $      | 10,181 |   |   | $ | 504 |   |   |   | 5.0 | % |

----

|                                              |   | Years Ended December 31, |   |   | Change |   |
|---------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                              |   | 2010                     |   |   | 2009   |   |   | Dollars |   |   | Percent |   |
|                                              |   | (Dollars in Thousands)   |   |
| Salaries and employee benefits                    |   | $                        | 15,487 |   |   | $      | 15,767 |   |   | $ | (280 | ) |   |   | (1.8 | )% |
| Occupancy and equipment                           |   |                     | 5,628  |   |   |   | 5,559 |   |   |   | 69 |   |   |   | 1.2 |   |
| Computer and electronic banking services          |   |                     | 3,785  |   |   |   | 3,477 |   |   |   | 308 |   |   |   | 8.9 |   |
| Outside professional services                     |   |                     | 944    |   |   |   | 975 |   |   |   | (31 | ) |   |   | (3.2 | ) |
| Marketing and advertising                         |   |                     | 757    |   |   |   | 791 |   |   |   | (34 | ) |   |   | (4.3 | ) |
| Supplies                                          |   |                     | 491    |   |   |   | 524 |   |   |   | (33 | ) |   |   | (6.3 | ) |
| FDIC deposit insurance and regulatory assessments |   |                     | 1,306  |   |   |   | 1,756 |   |   |   | (450 | ) |   |   | (25.6 | ) |
| Other                                             |   |                     | 3,120  |   |   |   | 2,556 |   |   |   | 564 |   |   |   | 22.1 |   |
| Total noninterest expenses                        |   | $                        | 31,518 |   |   | $      | 31,405 |   |   | $ | 113 |   |   |   | 0.4 | % |

----

----

|                                                          |   | Years Ended December 31, |   |   | Change |   |
|---------------------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                                          |   | 2009                     |   |   | 2008   |   |   | Dollars |   |   | Percent |   |
|                                                          |   | (Dollars in Thousands)   |   |
| Service fees                                                  |   | $                        | 5,033  |   |   | $      | 5,251 |   |   | $ | (218 | ) |   |   | (4.2 | )% |
| Wealth management fees                                        |   |                     | 3,912  |   |   |   | 3,923 |   |   |   | (11 | ) |   |   | (0.3 | ) |
| Increase in cash surrender value of bank-owned life insurance |   |                     | 294    |   |   |   | 304 |   |   |   | (10 | ) |   |   | (3.3 | ) |
| Net gain on sale of securities                                |   |                     | 285    |   |   |   | 463 |   |   |   | (178 | ) |   |   | (38.4 | ) |
| Net impairment losses recognized in earnings                  |   |                     | (228   | )      |   |   | (7,148 | ) |   |   | 6,920 |   |   |   | (96.8 | ) |
| Mortgage banking fees                                         |   |                     | 707    |   |   |   | 202 |   |   |   | 505 |   |   |   | 250.0 |   |
| Net gain on disposal of equipment                             |   |                     | 99     |   |   |   | - |   |   |   | 99 |   |   |   | n/a |   |
| Other                                                         |   |                     | 79     |   |   |   | 141 |   |   |   | (62 | ) |   |   | (44.0 | ) |
| Total noninterest income                                      |   | $                        | 10,181 |   |   | $      | 3,136 |   |   | $ | 7,045 |   |   |   | 224.6 | % |

|                                              |   | Years Ended December 31, |   |   | Change |   |
|---------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                              |   | 2009                     |   |   | 2008   |   |   | Dollars |   |   | Percent |   |
|                                              |   | (Dollars in Thousands)   |   |
| Salaries and employee benefits                    |   | $                        | 15,767 |   |   | $      | 16,211 |   |   | $ | (444 | ) |   |   | (2.7 | )% |
| Occupancy and equipment                           |   |                     | 5,559  |   |   |   | 5,733 |   |   |   | (174 | ) |   |   | (3.0 | ) |
| Computer and electronic banking services          |   |                     | 3,477  |   |   |   | 3,084 |   |   |   | 393 |   |   |   | 12.7 |   |
| Outside professional services                     |   |                     | 975    |   |   |   | 842 |   |   |   | 133 |   |   |   | 15.8 |   |
| Marketing and advertising                         |   |                     | 791    |   |   |   | 800 |   |   |   | (9 | ) |   |   | (1.1 | ) |
| Supplies                                          |   |                     | 524    |   |   |   | 569 |   |   |   | (45 | ) |   |   | (7.9 | ) |
| FDIC deposit insurance and regulatory assessments |   |                     | 1,756  |   |   |   | 567 |   |   |   | 1,189 |   |   |   | 209.7 |   |
| Other                                             |   |                     | 2,556  |   |   |   | 2,234 |   |   |   | 322 |   |   |   | 14.4 |   |
| Total noninterest expenses                        |   | $                        | 31,405 |   |   | $      | 30,040 |   |   | $ | 1,365 |   |   |   | 4.5 | % |

----

----

----

|                                                           |   | Payments Due by Period |   |
|----------------------------------------------------------------|--------|------------------------|--------|
|                                                           |   | Less ThanOne Year      |   |   | One toThreeYears |   |   | Three toFive Years |   |   | MoreThan FiveYears |   |   | Total |   |
|                                                           |   | (In Thousands)         |   |
| Federal Home Loan Bank advances                                |   | $                      | 11,000 |   |   | $ | 52,100 |   |   | $ | 44,069 |   |   | $ | 7,000 |   |   | $ | 114,169 |   |
| Operating lease obligations (1)                                |   |                   | 1,381  |   |   |   | 2,343 |   |   |   | 1,829 |   |   |   | 6,178 |   |   |   | 11,731 |   |
| Other long-term liabilities reflected on the balance sheet (2) |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | 8,248 |   |   |   | 8,248 |   |
|                                                           |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total contractual obligations                                  |   | $                      | 12,381 |   |   | $ | 54,443 |   |   | $ | 45,898 |   |   | $ | 21,426 |   |   | $ | 134,148 |   |

|   | (1) | Payments are for the lease of real property. |
|--------|-----|----------------------------------------------|

|   | (2) | Represents junior subordinated debt owed to an unconsolidated trust. |
|--------|-----|----------------------------------------------------------------------|

|                                    |   | December 31,   |   |
|-----------------------------------------|--------|----------------|--------|
|                                    |   | 2010           |   |   | 2009 |   |
|                                    |   | (In Thousands) |   |
| Commitments to extend credit:           |   |           |   |   |   |   |
| Future loan commitments                 |   | $              | 10,166 |   |   | $ | 8,648 |   |
| Undisbursed construction loans          |   |           | 6,708  |   |   |   | 9,843 |   |
| Undisbursed home equity lines of credit |   |           | 21,106 |   |   |   | 18,733 |   |
| Undisbursed commercial lines of credit  |   |           | 12,239 |   |   |   | 12,390 |   |
| Overdraft protection lines              |   |           | 1,311  |   |   |   | 1,425 |   |
| Standby letters of credit               |   |           | 115    |   |   |   | 784 |   |
| Total commitments                       |   | $              | 51,645 |   |   | $ | 51,823 |   |

----

----

----

|                                          |   | Percentage Change in Estimated |   |
|-----------------------------------------------|--------|--------------------------------|--------|
|                                          |   | Net Interest Income Over       |   |
|                                          |   | 12 Months                      |   |   | 24 Months |   |
| 300 basis point increase in rates             |   |                           | 1.74   | % |   |   | 0.47 | % |
| Semi-annual 100 basis point increase in rates |   |                           | 3.11   |   |   |   | 1.98 |   |
| 50 basis point decrease in rates              |   |                           | (1.01  | ) |   |   | (2.22 | ) |

----

----

----

|                                                                                                                                                                                       |   | December 31, |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|
|                                                                                                                                                                                       |   | 2010         |    |   | 2009 |   |
| ASSETS:                                                                                                                                                                                    |   |         |    |   |   |   |
| Cash and due from banks:                                                                                                                                                                   |   |         |    |   |   |   |
| Noninterest-bearing                                                                                                                                                                        |   | $            | 11,204  |   |   | $ | 12,889 |   |
| Interest-bearing                                                                                                                                                                           |   |         | 2,287   |   |   |   | 2,350 |   |
| Federal funds sold                                                                                                                                                                         |   |         | 64,830  |   |   |   | 8,965 |   |
| Total cash and cash equivalents                                                                                                                                                            |   |         | 78,321  |   |   |   | 24,204 |   |
|                                                                                                                                                                                       |   |         |    |   |   |   |   |   |
| Trading securities, at fair value                                                                                                                                                          |   |         | 248     |   |   |   | - |   |
| Available for sale securities, at fair value                                                                                                                                               |   |         | 180,036 |   |   |   | 183,562 |   |
| Loans held for sale                                                                                                                                                                        |   |         | 7,371   |   |   |   | 396 |   |
| Loans receivable (net of allowance for loan losses of $4,799 and $4,891 at December 31, 2010 and 2009, respectively)                                                                       |   |         | 606,214 |   |   |   | 607,692 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                                                      |   |         | 8,388   |   |   |   | 8,388 |   |
| Bank-owned life insurance                                                                                                                                                                  |   |         | 9,024   |   |   |   | 8,734 |   |
| Premises and equipment, net                                                                                                                                                                |   |         | 12,123  |   |   |   | 12,966 |   |
| Goodwill and other intangibles                                                                                                                                                             |   |         | 4,126   |   |   |   | 4,195 |   |
| Accrued interest receivable                                                                                                                                                                |   |         | 3,113   |   |   |   | 3,341 |   |
| Deferred tax asset, net                                                                                                                                                                    |   |         | 5,729   |   |   |   | 6,078 |   |
| Other real estate owned, net                                                                                                                                                               |   |         | 1,285   |   |   |   | 3,680 |   |
| Prepaid FDIC deposit insurance assessment                                                                                                                                                  |   |         | 2,576   |   |   |   | 3,549 |   |
| Other assets                                                                                                                                                                               |   |         | 7,855   |   |   |   | 5,569 |   |
| Total assets                                                                                                                                                                               |   | $            | 926,409 |   |   | $ | 872,354 |   |
|                                                                                                                                                                                       |   |         |    |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY:                                                                                                                                                      |   |         |    |   |   |   |   |   |
| Liabilities:                                                                                                                                                                               |   |         |    |   |   |   |   |   |
| Deposits:                                                                                                                                                                                  |   |         |    |   |   |   |   |   |
| Noninterest-bearing                                                                                                                                                                        |   | $            | 66,845  |   |   | $ | 65,407 |   |
| Interest-bearing                                                                                                                                                                           |   |         | 593,869 |   |   |   | 593,380 |   |
| Total deposits                                                                                                                                                                             |   |         | 660,714 |   |   |   | 658,787 |   |
|                                                                                                                                                                                       |   |         |    |   |   |   |   |   |
| Mortgagors' and investors' escrow accounts                                                                                                                                                 |   |         | 3,425   |   |   |   | 3,591 |   |
| Federal Home Loan Bank advances                                                                                                                                                            |   |         | 114,169 |   |   |   | 116,100 |   |
| Junior subordinated debt owed to unconsolidated trust                                                                                                                                      |   |         | 8,248   |   |   |   | 8,248 |   |
| Stock offering escrow                                                                                                                                                                      |   |         | 48,325  |   |   |   | - |   |
| Accrued expenses and other liabilities                                                                                                                                                     |   |         | 10,424  |   |   |   | 8,166 |   |
| Total liabilities                                                                                                                                                                          |   |         | 845,305 |   |   |   | 794,892 |   |
|                                                                                                                                                                                       |   |         |    |   |   |   |   |   |
| Commitments and contingencies (Notes 11 and 12)                                                                                                                                            |   |         |    |   |   |   |   |   |
|                                                                                                                                                                                       |   |         |    |   |   |   |   |   |
| Shareholders' Equity:                                                                                                                                                                      |   |         |    |   |   |   |   |   |
| Preferred stock ($.01 par value; 1,000,000 shares authorized; none issued)                                                                                                                 |   |         | -       |   |   |   | - |   |
| Common stock ($.01 par value; 75,000,000 shares authorized; 12,563,750  shares issued; 11,777,496 and 11,789,202 shares outstanding at December 31, 2010 and 2009, respectively) |   |         | 126     |   |   |   | 126 |   |
| Additional paid-in-capital                                                                                                                                                                 |   |         | 52,198  |   |   |   | 52,230 |   |
| Unallocated common shares held by ESOP                                                                                                                                                     |   |         | (2,907  | ) |   |   | (3,230 | ) |
| Unearned restricted shares                                                                                                                                                                 |   |         | (25     | ) |   |   | (193 | ) |
| Retained earnings                                                                                                                                                                          |   |         | 40,859  |   |   |   | 38,883 |   |
| Accumulated other comprehensive loss                                                                                                                                                       |   |         | (1,108  | ) |   |   | (2,389 | ) |
| Treasury stock, at cost (786,254 and 774,548 shares at December 31, 2010 and 2009, respectively)                                                                                           |   |         | (8,039  | ) |   |   | (7,965 | ) |
| Total shareholders' equity                                                                                                                                                                 |   |         | 81,104  |   |   |   | 77,462 |   |
| Total liabilities and shareholders' equity                                                                                                                                                 |   | $            | 926,409 |   |   | $ | 872,354 |   |

----

|                                                          |   | Years Ended December 31, |   |
|---------------------------------------------------------------|--------|--------------------------|--------|
|                                                          |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
| Interest and dividend income:                                 |   |                     |   |   |   |   |   |   |   |
| Loans, including fees                                         |   | $                        | 33,381 |   |   | $ | 35,440 |   |   | $ | 37,192 |   |
| Securities:                                                   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Taxable interest                                              |   |                     | 6,319  |   |   |   | 7,744 |   |   |   | 8,516 |   |
| Tax-exempt interest                                           |   |                     | 38     |   |   |   | 47 |   |   |   | 13 |   |
| Dividends                                                     |   |                     | 23     |   |   |   | 42 |   |   |   | 412 |   |
| Other                                                         |   |                     | 114    |   |   |   | 112 |   |   |   | 366 |   |
| Total interest and dividend income                            |   |                     | 39,875 |   |   |   | 43,385 |   |   |   | 46,499 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                             |   |                     |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                      |   |                     | 9,437  |   |   |   | 13,183 |   |   |   | 15,738 |   |
| Federal Home Loan Bank advances                               |   |                     | 4,214  |   |   |   | 5,461 |   |   |   | 6,324 |   |
| Subordinated debt                                             |   |                     | 173    |   |   |   | 217 |   |   |   | 397 |   |
| Total interest expense                                        |   |                     | 13,824 |   |   |   | 18,861 |   |   |   | 22,459 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                           |   |                     | 26,051 |   |   |   | 24,524 |   |   |   | 24,040 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                                     |   |                     | 902    |   |   |   | 2,830 |   |   |   | 1,369 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net interest income after provision for loan losses           |   |                     | 25,149 |   |   |   | 21,694 |   |   |   | 22,671 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| Total other-than-temporary impairment losses on securities    |   |                     | (492   | ) |   |   | (894 | ) |   |   | (7,148 | ) |
| Portion of losses recognized in other comprehensive income    |   |                     | -      |   |   |   | 666 |   |   |   | - |   |
| Net impairment losses recognized in earnings                  |   |                     | (492   | ) |   |   | (228 | ) |   |   | (7,148 | ) |
| Service fees                                                  |   |                     | 5,093  |   |   |   | 5,033 |   |   |   | 5,251 |   |
| Wealth management fees                                        |   |                     | 4,083  |   |   |   | 3,912 |   |   |   | 3,923 |   |
| Increase in cash surrender value of bank-owned life insurance |   |                     | 290    |   |   |   | 294 |   |   |   | 304 |   |
| Net gain on sale of securities                                |   |                     | 878    |   |   |   | 285 |   |   |   | 463 |   |
| Mortgage banking fees                                         |   |                     | 1,090  |   |   |   | 707 |   |   |   | 202 |   |
| Net loss in fair value on trading securities and derivatives  |   |                     | (429   | ) |   |   | - |   |   |   | - |   |
| Net (loss) gain on disposal of equipment                      |   |                     | (5     | ) |   |   | 99 |   |   |   | - |   |
| Other                                                         |   |                     | 177    |   |   |   | 79 |   |   |   | 141 |   |
| Total noninterest income                                      |   |                     | 10,685 |   |   |   | 10,181 |   |   |   | 3,136 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Noninterest expenses:                                         |   |                     |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                |   |                     | 15,487 |   |   |   | 15,767 |   |   |   | 16,211 |   |
| Occupancy and equipment                                       |   |                     | 5,628  |   |   |   | 5,559 |   |   |   | 5,733 |   |
| Computer and electronic banking services                      |   |                     | 3,785  |   |   |   | 3,477 |   |   |   | 3,084 |   |
| Outside professional services                                 |   |                     | 944    |   |   |   | 975 |   |   |   | 842 |   |
| Marketing and advertising                                     |   |                     | 757    |   |   |   | 791 |   |   |   | 800 |   |
| Supplies                                                      |   |                     | 491    |   |   |   | 524 |   |   |   | 569 |   |
| FDIC deposit insurance and regulatory assessments             |   |                     | 1,306  |   |   |   | 1,756 |   |   |   | 567 |   |
| Other                                                         |   |                     | 3,120  |   |   |   | 2,556 |   |   |   | 2,234 |   |
| Total noninterest expenses                                    |   |                     | 31,518 |   |   |   | 31,405 |   |   |   | 30,040 |   |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income tax provision (benefit)           |   |                     | 4,316  |   |   |   | 470 |   |   |   | (4,233 | ) |
| Income tax provision (benefit)                                |   |                     | 1,313  |   |   |   | 35 |   |   |   | (1,360 | ) |
| Net income (loss)                                             |   | $                        | 3,003  |   |   | $ | 435 |   |   | $ | (2,873 | ) |
|                                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share:                                  |   |                     |   |   |   |   |   |   |   |   |   |   |
| Basic                                                         |   | $                        | 0.26   |   |   | $ | 0.04 |   |   | $ | (0.25 | ) |
| Diluted                                                       |   | $                        | 0.26   |   |   | $ | 0.04 |   |   | $ | (0.25 | ) |

----

|                                                                                                       |   | Common Stock |       |   | AdditionalPaid-in |   |   | UnallocatedCommonShares Held |   |   | UnearnedRestricted |   |   | Retained |   |   | AccumulatedOtherComprehensive |   |   | Treasury      |   |   | TotalShareholders' |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|-------------------|--------|--------|------------------------------|--------|--------|--------------------|--------|--------|----------|--------|--------|-------------------------------|--------|--------|---------------|--------|--------|--------------------|--------|
|                                                                                                       |   | Shares       |       |   | Dollars           |   |   | Capital                      |   |   | by ESOP            |   |   | Shares   |   |   | Earnings                      |   |   | (Loss) Income |   |   | Stock              |   |   | Equity |   |
|                                                                                                       |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |
| Balance at December 31, 2007                                                                               |   |         | 12,563,750 |   |              | $      | 126    |                         |   | $      | 51,852             |   |   | $        | (3,876 | )      |                          | $      | (1,181 | )             |   | $      | 39,933             |   |   | $ | 504 |   |   | $ | (5,271 | ) |   | $ | 82,087 |   |
|                                                                                                       |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect adjustment for change in accounting principle for split-dollar life insurance            |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | (547               | )      |   |   | - |   |   |   | - |   |   |   | (547 | ) |
| Comprehensive loss:                                                                                        |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | (2,873             | )      |   |   | - |   |   |   | - |   |   |   | (2,873 | ) |
| Net unrealized loss on available for sale securities, net of reclassification adjustment and tax effects   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | (3,490 | ) |   |   | - |   |   |   | (3,490 | ) |
| Total comprehensive loss                                                                                   |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   | (6,363 | ) |
| Cash dividends declared ($0.16 per share)                                                                  |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | (665               | )      |   |   | - |   |   |   | - |   |   |   | (665 | ) |
| Equity incentive plan shares earned                                                                        |   |         | -          |   |              |   | -      |                         |   |   | 301                |   |   |     | -      |   |                          |   | 467    |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 768 |   |
| Allocation of 32,295 ESOP shares                                                                           |   |         | -          |   |              |   | -      |                         |   |   | (44                | )      |   |     | 323    |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 279 |   |
| Tax deficiency from share-based stock compensation                                                         |   |         | -          |   |              |   | -      |                         |   |   | (6                 | )      |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | (6 | ) |
| Treasury stock purchased (270,655 shares)                                                                  |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | (2,626 | ) |   |   | (2,626 | ) |
| Balance at December 31, 2008                                                                               |   |         | 12,563,750 |   |              |   | 126    |                         |   |   | 52,103             |   |   |     | (3,553 | )      |                          |   | (714   | )             |   |   | 35,848             |   |   |   | (2,986 | ) |   |   | (7,897 | ) |   |   | 72,927 |   |
|                                                                                                       |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect adjustment for change in accounting  principle for impairment of securities    |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | 2,717              |   |   |   | (2,717 | ) |   |   | - |   |   |   | - |   |
| Comprehensive income:                                                                                      |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                 |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | 435                |   |   |   | - |   |   |   | - |   |   |   | 435 |   |
| Net unrealized gain on available for sale securities, net of reclassification adjustment and tax effects   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | 3,314 |   |   |   | - |   |   |   | 3,314 |   |
| Total comprehensive income                                                                                 |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   | 3,749 |   |
| Restricted shares activity                                                                                 |   |         | -          |   |              |   | -      |                         |   |   | 37                 |   |   |     | -      |   |                          |   | 80     |          |   |   | (117               | )      |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity incentive plan shares earned                                                                        |   |         | -          |   |              |   | -      |                         |   |   | 301                |   |   |     | -      |   |                          |   | 441    |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 742 |   |
| Allocation of 32,295 ESOP shares                                                                           |   |         | -          |   |              |   | -      |                         |   |   | (168               | )      |   |     | 323    |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 155 |   |
| Tax deficiency from share-based stock compensation                                                         |   |         | -          |   |              |   | -      |                         |   |   | (43                | )      |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | (43 | ) |
| Treasury stock purchased (11,243 shares)                                                                   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | (68 | ) |   |   | (68 | ) |
| Balance at December 31, 2009                                                                               |   |         | 12,563,750 |   |              |   | 126    |                         |   |   | 52,230             |   |   |     | (3,230 | )      |                          |   | (193   | )             |   |   | 38,883             |   |   |   | (2,389 | ) |   |   | (7,965 | ) |   |   | 77,462 |   |
|                                                                                                       |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect adjustment for change in accounting  principle for embedded credit derivatives |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | (652               | )      |   |   | 652 |   |   |   | - |   |   |   | - |   |
| Comprehensive income:                                                                                      |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                 |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | 3,003              |   |   |   | - |   |   |   | - |   |   |   | 3,003 |   |
| Net unrealized gain on available for sale securities, net of reclassification adjustment and tax effects   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | 714 |   |   |   | - |   |   |   | 714 |   |
| Net unrealized loss on interest-rate swap derivative                                                       |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | (85 | ) |   |   | - |   |   |   | (85 | ) |
| Total comprehensive income                                                                                 |   |         |       |   |              |   |   |                         |   |   |               |   |   |     |   |   |                          |   |   |          |   |   |               |   |   |   |   |   |   |   |   |   |   |   | 3,632 |   |
| Cash dividends declared ($0.09 per share)                                                                  |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | (375               | )      |   |   | - |   |   |   | - |   |   |   | (375 | ) |
| Equity incentive plan shares earned                                                                        |   |         | -          |   |              |   | -      |                         |   |   | 89                 |   |   |     | -      |   |                          |   | 168    |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 257 |   |
| Allocation of 32,295 ESOP shares                                                                           |   |         | -          |   |              |   | -      |                         |   |   | (121               | )      |   |     | 323    |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | - |   |   |   | 202 |   |
| Treasury stock purchased (11,706 shares)                                                                   |   |         | -          |   |              |   | -      |                         |   |   | -                  |   |   |     | -      |   |                          |   | -      |          |   |   | -                  |   |   |   | - |   |   |   | (74 | ) |   |   | (74 | ) |
| Balance at December 31, 2010                                                                               |   |         | 12,563,750 |   |              | $      | 126    |                         |   | $      | 52,198             |   |   | $        | (2,907 | )      |                          | $      | (25    | )             |   | $      | 40,859             |   |   | $ | (1,108 | ) |   | $ | (8,039 | ) |   | $ | 81,104 |   |

----

|                                                                                     |   | Years Ended December 31, |    |
|------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                     |   | 2010                     |    |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities:                                                    |   |                     |    |   |   |   |   |   |   |
| Net income (loss)                                                                        |   | $                        | 3,003   |   |   | $ | 435 |   |   | $ | (2,873 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |                     |    |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                                                                |   |                     | 902     |   |   |   | 2,830 |   |   |   | 1,369 |   |
| Employee stock ownership plan expense                                                    |   |                     | 202     |   |   |   | 155 |   |   |   | 279 |   |
| Equity incentive plan expense                                                            |   |                     | 257     |   |   |   | 742 |   |   |   | 768 |   |
| Excess tax expense from share-based compensation                                         |   |                     | -       |   |   |   | 43 |   |   |   | 6 |   |
| Amortization (accretion) of investment premiums and discounts, net                       |   |                     | 394     |   |   |   | (101 | ) |   |   | (224 | ) |
| Amortization of loan premiums and discounts, net                                         |   |                     | 674     |   |   |   | 282 |   |   |   | 274 |   |
| Depreciation and amortization of premises and equipment                                  |   |                     | 1,971   |   |   |   | 1,926 |   |   |   | 2,074 |   |
| Amortization of core deposit intangible                                                  |   |                     | 32      |   |   |   | 42 |   |   |   | 53 |   |
| Net gain on sale of securities                                                           |   |                     | (878    | ) |   |   | (285 | ) |   |   | (463 | ) |
| Net loss on trading securities                                                           |   |                     | 408     |   |   |   | - |   |   |   | - |   |
| Deferred income tax (benefit) provision                                                  |   |                     | (355    | ) |   |   | 275 |   |   |   | (2,870 | ) |
| Loans originated for sale                                                                |   |                     | (55,634 | ) |   |   | (56,732 | ) |   |   | (13,822 | ) |
| Proceeds from sale of loans held for sale                                                |   |                     | 49,107  |   |   |   | 56,913 |   |   |   | 14,434 |   |
| Net gain on sale of loans                                                                |   |                     | (887    | ) |   |   | (577 | ) |   |   | (202 | ) |
| Net loss (gain) on disposal of equipment                                                 |   |                     | 5       |   |   |   | (99 | ) |   |   | - |   |
| Net loss (gain) on sales or write-downs of other real estate owned                       |   |                     | 534     |   |   |   | (16 | ) |   |   | (10 | ) |
| Increase in cash surrender value of bank-owned life insurance                            |   |                     | (290    | ) |   |   | (294 | ) |   |   | (304 | ) |
| Gain on bank-owned life insurance                                                        |   |                     | -       |   |   |   | (291 | ) |   |   | - |   |
| Other-than-temporary impairment losses on securities                                     |   |                     | 492     |   |   |   | 228 |   |   |   | 7,148 |   |
| Change in operating assets and liabilities:                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Accrued interest receivable                                                              |   |                     | 228     |   |   |   | 380 |   |   |   | (153 | ) |
| Other assets                                                                             |   |                     | 313     |   |   |   | (4,480 | ) |   |   | (807 | ) |
| Accrued expenses and other liabilities                                                   |   |                     | 2,129   |   |   |   | 52 |   |   |   | 1,039 |   |
| Net cash provided by operating activities                                                |   |                     | 2,607   |   |   |   | 1,428 |   |   |   | 5,716 |   |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                    |   |                     |    |   |   |   |   |   |   |   |   |   |
| Purchases of available for sale securities                                               |   |                     | (91,716 | ) |   |   | (95,071 | ) |   |   | (100,810 | ) |
| Proceeds from sales of available for sale securities                                     |   |                     | 40,144  |   |   |   | 24,483 |   |   |   | 19,981 |   |
| Proceeds from maturities of and principal repayments on available for sale securities    |   |                     | 55,515  |   |   |   | 54,782 |   |   |   | 47,720 |   |
| Net decrease (increase) in loans                                                         |   |                     | 52,031  |   |   |   | 41,803 |   |   |   | (11,646 | ) |
| Purchase of Federal Home Loan Bank stock                                                 |   |                     | -       |   |   |   | - |   |   |   | (586 | ) |
| Purchases of loans                                                                       |   |                     | (53,953 | ) |   |   | (40,876 | ) |   |   | (12,281 | ) |
| Proceeds from sale of other real estate owned                                            |   |                     | 3,685   |   |   |   | 1,865 |   |   |   | 923 |   |
| Purchases of premises and equipment                                                      |   |                     | (1,133  | ) |   |   | (3,518 | ) |   |   | (1,808 | ) |
| Proceeds from bank-owned life insurance                                                  |   |                     | -       |   |   |   | 565 |   |   |   | - |   |
| Net cash (paid) received for branch (sale) acquisitions                                  |   |                     | -       |   |   |   | (619 | ) |   |   | 15,805 |   |
| Net cash provided by (used in) investing activities                                      |   |                     | 4,573   |   |   |   | (16,586 | ) |   |   | (42,702 | ) |
|                                                                                     |   |                     |    |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                    |   |                     |    |   |   |   |   |   |   |   |   |   |
| Net increase in deposits                                                                 |   |                     | 1,927   |   |   |   | 39,804 |   |   |   | 44,648 |   |
| Net (decrease) increase  in mortgagors' and investors' escrow accounts         |   |                     | (166    | ) |   |   | (34 | ) |   |   | 188 |   |
| Proceeds from Federal Home Loan Bank advances                                            |   |                     | 23,355  |   |   |   | 37,300 |   |   |   | 53,507 |   |
| Repayments of Federal Home Loan Bank advances                                            |   |                     | (25,286 | ) |   |   | (60,800 | ) |   |   | (55,526 | ) |
| Stock offering escrow, net of expenses                                                   |   |                     | 47,556  |   |   |   | - |   |   |   | - |   |
| Excess tax expense from share-based compensation                                         |   |                     | -       |   |   |   | (43 | ) |   |   | (6 | ) |
| Cash dividends on common stock                                                           |   |                     | (375    | ) |   |   | - |   |   |   | (665 | ) |
| Treasury stock purchased                                                                 |   |                     | (74     | ) |   |   | (68 | ) |   |   | (2,626 | ) |
| Net cash provided by financing activities                                                |   |                     | 46,937  |   |   |   | 16,159 |   |   |   | 39,520 |   |

----

|                                           |   | Years Ended December 31, |   |
|------------------------------------------------|--------|--------------------------|--------|
|                                           |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                           |   |                     |   |   |   |   |   |   |   |
| Net change in cash and cash equivalents        |   |                     | 54,117 |   |   |   | 1,001 |   |   |   | 2,534 |   |
| Cash and cash equivalents at beginning of year |   |                     | 24,204 |   |   |   | 23,203 |   |   |   | 20,669 |   |
| Cash and cash equivalents at end of year       |   | $                        | 78,321 |   |   | $ | 24,204 |   |   | $ | 23,203 |   |
|                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
|                                           |   |                     |   |   |   |   |   |   |   |   |   |   |
| Supplemental cash flow information:            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Interest paid                                  |   | $                        | 13,857 |   |   | $ | 19,050 |   |   | $ | 22,488 |   |
| Income taxes paid, net                         |   |                     | 714    |   |   |   | 731 |   |   |   | 1,356 |   |
| Transfer of loans to other real estate owned   |   |                     | 1,824  |   |   |   | 5,529 |   |   |   | - |   |

|                        |   | Years Ended December 31, |   |
|-----------------------------|--------|--------------------------|--------|
|                        |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                        |   |                     |   |   |   |   |   |   |   |
| Assets:                     |   |                     |   |   |   |   |   |   |   |
| Loans receivable            |   | $                        | -      |   |   | $ | 3 |   |   | $ | 7,441 |   |
| Accrued interest - loans    |   |                     | -      |   |   |   | - |   |   |   | 40 |   |
| Core deposit intangible     |   |                     | -      |   |   |   | - |   |   |   | 159 |   |
| Fixed assets, net           |   |                     | -      |   |   |   | 950 |   |   |   | 685 |   |
| Goodwill                    |   |                     | -      |   |   |   | - |   |   |   | 3,545 |   |
| Other assets                |   |                     | -      |   |   |   | 96 |   |   |   | - |   |
| Total assets                |   |                     | -      |   |   |   | 1,049 |   |   |   | 11,870 |   |
|                        |   |                     |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                |   |                     |   |   |   |   |   |   |   |   |   |   |
| Deposits                    |   |                     | -      |   |   |   | 1,668 |   |   |   | 27,668 |   |
| Accrued interest - deposits |   |                     | -      |   |   |   | - |   |   |   | 7 |   |
| Total liabilities           |   |                     | -      |   |   |   | 1,668 |   |   |   | 27,675 |   |
|                        |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net liabilities             |   | $                        | -      |   |   | $ | 619 |   |   | $ | 15,805 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

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

|   | o | General valuation allowance.  The general component represents a valuation allowance on the remainder of the loan portfolio, after excluding impaired loans.  For this portion of the allowance, loans are segregated by category and assigned an allowance percentage based on historical loan loss experience adjusted for qualitative factors stratified by the following loan segments:  residential one- to four-family, multi-family and commercial real estate, construction, commercial business and consumer.   Management uses a rolling average of historical losses based on the time frame appropriate to capture relevant loss data for each loan segment.  This historical loss factor is adjusted for the following qualitative factors:  levels/trends in delinquencies; level of charge-offs and nonperforming loans; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability and depth of lending management and staff and national and local economic trends and conditions. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|   | o | Unallocated allowance.  An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

| Classification          | Estimated Useful Lives |
|-------------------------|------------------------|
| Buildings               | 5 to 40 years          |
| Furniture and equipment | 3 to 10 years          |
| Leasehold improvements  | 5 to 20 years          |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                        |   | Years Ended December 31,             |       |
|---------------------------------------------|--------|--------------------------------------|------------|
|                                        |   | 2010                                 |       |   | 2009 |   |   | 2008 |   |
|                                        |   | (In Thousands, Except Share Amounts) |       |
| Net income (loss)                           |   | $                                    | 3,003      |   |   | $ | 435 |   |   | $ | (2,873 | ) |
|                                        |   |                                 |       |   |   |   |   |   |   |   |   |   |
| Weighted average common shares outstanding: |   |                                 |       |   |   |   |   |   |   |   |   |   |
| Basic                                       |   |                                 | 11,471,107 |   |   |   | 11,450,541 |   |   |   | 11,476,571 |   |
| Effect of dilutive stock options            |   |                                 | 7,975      |   |   |   | - |   |   |   | - |   |
| Diluted                                     |   |                                 | 11,479,082 |   |   |   | 11,450,541 |   |   |   | 11,476,571 |   |
|                                        |   |                                 |       |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share:                |   |                                 |       |   |   |   |   |   |   |   |   |   |
| Basic                                       |   | $                                    | 0.26       |   |   | $ | 0.04 |   |   | $ | (0.25 | ) |
| Diluted                                     |   | $                                    | 0.26       |   |   | $ | 0.04 |   |   | $ | (0.25 | ) |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                            |   | December 31, 2010 |    |
|-------------------------------------------------|--------|-------------------|---------|
|                                            |   | AmortizedCost (1) |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                            |   | (In Thousands)    |    |
| Debt securities:                                |   |              |    |   |   |   |   |   |   |   |   |   |
| U.S. Government and agency obligations          |   | $                 | 23,399  |   |   | $ | 197 |   |   | $ | (13 | ) |   | $ | 23,583 |   |
| Government-sponsored enterprises                |   |              | 29,912  |   |   |   | 283 |   |   |   | (202 | ) |   |   | 29,993 |   |
| Mortgage-backed securities:(2)                  |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency - residential                            |   |              | 84,408  |   |   |   | 3,132 |   |   |   | (170 | ) |   |   | 87,370 |   |
| Non-agency - residential                        |   |              | 11,039  |   |   |   | 127 |   |   |   | (711 | ) |   |   | 10,455 |   |
| Non-agency - HELOC                              |   |              | 3,797   |   |   |   | - |   |   |   | (598 | ) |   |   | 3,199 |   |
| Corporate debt securities                       |   |              | 14,502  |   |   |   | 252 |   |   |   | (37 | ) |   |   | 14,717 |   |
| Collateralized debt obligations                 |   |              | 6,466   |   |   |   | - |   |   |   | (3,934 | ) |   |   | 2,532 |   |
| Obligations of state and political subdivisions |   |              | 6,800   |   |   |   | 157 |   |   |   | (52 | ) |   |   | 6,905 |   |
| Tax-exempt securities                           |   |              | 140     |   |   |   | 4 |   |   |   | - |   |   |   | 144 |   |
| Foreign government securities                   |   |              | 100     |   |   |   | - |   |   |   | - |   |   |   | 100 |   |
| Total debt securities                           |   |              | 180,563 |   |   |   | 4,152 |   |   |   | (5,717 | ) |   |   | 178,998 |   |
|                                            |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity securities:                              |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity securities - financial services          |   |              | 1,024   |   |   |   | 27 |   |   |   | (13 | ) |   |   | 1,038 |   |
| Total available for sale securities             |   | $                 | 181,587 |   |   | $ | 4,179 |   |   | $ | (5,730 | ) |   | $ | 180,036 |   |

|   | (1) | Net of OTTI write-downs recognized in earnings. |
|--------|-----|-------------------------------------------------|

|   | (2) | Agency securities refer to debt obligations issued or guaranteed by government corporations or government-sponsored enterprises (“GSEs”).  Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by one of the GSEs or the U.S. Government. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                   |   | December 31, 2009 |    |
|--------------------------------------------------------|--------|-------------------|---------|
|                                                   |   | AmortizedCost (1) |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                                   |   | (In Thousands)    |    |
| Debt securities:                                       |   |              |    |   |   |   |   |   |   |   |   |   |
| U.S. Government and agency obligations                 |   | $                 | 35,945  |   |   | $ | 393 |   |   | $ | (109 | ) |   | $ | 36,229 |   |
| Government-sponsored enterprises                       |   |              | 13,980  |   |   |   | 137 |   |   |   | (82 | ) |   |   | 14,035 |   |
| Mortgage-backed securities:(2)                         |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Agency - residential     |   |              | 89,751  |   |   |   | 3,467 |   |   |   | (119 | ) |   |   | 93,099 |   |
|      Non-agency - residential |   |              | 18,690  |   |   |   | - |   |   |   | (2,471 | ) |   |   | 16,219 |   |
|      Non-agency - HELOC       |   |              | 4,328   |   |   |   | - |   |   |   | (2,132 | ) |   |   | 2,196 |   |
| Corporate debt securities                              |   |              | 6,979   |   |   |   | 355 |   |   |   | (13 | ) |   |   | 7,321 |   |
| Collateralized debt obligations                        |   |              | 8,153   |   |   |   | 1 |   |   |   | (3,116 | ) |   |   | 5,038 |   |
| Obligations of state and political subdivisions        |   |              | 5,003   |   |   |   | 145 |   |   |   | (17 | ) |   |   | 5,131 |   |
| Tax-exempt securities                                  |   |              | 3,210   |   |   |   | 9 |   |   |   | - |   |   |   | 3,219 |   |
| Foreign government securities                          |   |              | 100     |   |   |   | - |   |   |   | - |   |   |   | 100 |   |
| Total debt securities                                  |   |              | 186,139 |   |   |   | 4,507 |   |   |   | (8,059 | ) |   |   | 182,587 |   |
|                                                   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity securities:                                     |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity securities - financial services                 |   |              | 1,043   |   |   |   | 19 |   |   |   | (87 | ) |   |   | 975 |   |
| Total available for sale securities                    |   | $                 | 187,182 |   |   | $ | 4,526 |   |   | $ | (8,146 | ) |   | $ | 183,562 |   |

|   | (1) | Net of OTTI write-downs recognized in earnings, other than such noncredit-related amounts reclassified on January 1, 2009 as a cumulative effect adjustment for a change in accounting principle. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Agency securities refer to debt obligations issued or guaranteed by government corporations or government-sponsored enterprises (“GSEs”).  Non-agency securities, or private-label securities, are the sole obligation of their issuer and are not guaranteed by one of the GSEs or the U.S. Government. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                        |   | AmortizedCost  |    |   | FairValue |   |
|-----------------------------|--------|----------------|---------|--------|-----------|--------|
|                        |   | (In Thousands) |    |
| Within 1 year               |   | $              | 2,615   |   |      | $      | 2,648 |   |
| After 1 but within 5 years  |   |           | 42,513  |   |      |   | 42,848 |   |
| After 5 but within 10 years |   |           | 13,845  |   |      |   | 13,871 |   |
| After 10 years              |   |           | 22,346  |   |      |   | 18,607 |   |
|                        |   |           | 81,319  |   |      |   | 77,974 |   |
| Mortgage-backed securities  |   |           | 99,244  |   |      |   | 101,024 |   |
| Total debt securities       |   | $              | 180,563 |   |      | $      | 178,998 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                           |   | Years Ended December 31, |   |
|--------------------------------|--------|--------------------------|--------|
|                           |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                           |   | (In Thousands)           |   |
| Gross gains on sales           |   | $                        | 1,096  |   |   | $ | 942 |   |   | $ | 463 |   |
| Gross losses on sales          |   |                     | (218   | ) |   |   | (657 | ) |   |   | - |   |
| Net gain on sale of securities |   | $                        | 878    |   |   | $ | 285 |   |   | $ | 463 |   |

|                                                   |   | Less Than 12 Months |   |   | 12 Months or More |   |   | Total     |   |
|--------------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-----------|--------|
| December 31, 2010:                                     |   | FairValue           |   |   | UnrealizedLosses  |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                                   |   | (In Thousands)      |   |
| U.S. Government and agency obligations                 |   | $                   | 2,053  |   |              | $      | 4      |      |   | $ | 858 |   |   | $ | 9 |   |   | $ | 2,911 |   |   | $ | 13 |   |
| Government-sponsored enterprises                       |   |                | 16,636 |   |              |   | 202    |      |   |   | - |   |   |   | - |   |   |   | 16,636 |   |   |   | 202 |   |
| Mortgage-backed securities:                            |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Agency - residential     |   |                | 15,881 |   |              |   | 170    |      |   |   | - |   |   |   | - |   |   |   | 15,881 |   |   |   | 170 |   |
|      Non-agency - residential |   |                | 2,805  |   |              |   | 9      |      |   |   | 6,512 |   |   |   | 702 |   |   |   | 9,317 |   |   |   | 711 |   |
|      Non-agency - HELOC       |   |                | -      |   |              |   | -      |      |   |   | 3,198 |   |   |   | 598 |   |   |   | 3,198 |   |   |   | 598 |   |
| Corporate debt securities                              |   |                | 3,667  |   |              |   | 37     |      |   |   | - |   |   |   | - |   |   |   | 3,667 |   |   |   | 37 |   |
| Collateralized debt obligations                        |   |                | 28     |   |              |   | 60     |      |   |   | 2,504 |   |   |   | 3,874 |   |   |   | 2,532 |   |   |   | 3,934 |   |
| Obligations of state and political subdivisions        |   |                | 1,493  |   |              |   | 52     |      |   |   | - |   |   |   | - |   |   |   | 1,493 |   |   |   | 52 |   |
| Equity securities - financial services                 |   |                | -      |   |              |   | -      |      |   |   | 747 |   |   |   | 13 |   |   |   | 747 |   |   |   | 13 |   |
| Total                                                  |   | $                   | 42,563 |   |              | $      | 534    |      |   | $ | 13,819 |   |   | $ | 5,196 |   |   | $ | 56,382 |   |   | $ | 5,730 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                            |   | Less Than 12 Months |   |   | 12 Months Or More |   |   | Total     |   |
|-------------------------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|-----------|--------|
| December 31, 2009:                              |   | FairValue           |   |   | UnrealizedLosses  |   |   | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                            |   | (In Thousands)      |   |
| U.S. Government and agency obligations          |   | $                   | 17,114 |   |              | $      | 90     |      |   | $ | 1,631 |   |   | $ | 19 |   |   | $ | 18,745 |   |   | $ | 109 |   |
| Government-sponsored enterprises                |   |                | 5,899  |   |              |   | 82     |      |   |   | - |   |   |   | - |   |   |   | 5,899 |   |   |   | 82 |   |
| Mortgage-backed securities:                     |   |                |   |   |              |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency - residential                            |   |                | 11,126 |   |              |   | 119    |      |   |   | - |   |   |   | - |   |   |   | 11,126 |   |   |   | 119 |   |
| Non-agency - residential                        |   |                | 5,094  |   |              |   | 80     |      |   |   | 11,125 |   |   |   | 2,391 |   |   |   | 16,219 |   |   |   | 2,471 |   |
| Non-agency - HELOC                              |   |                | -      |   |              |   | -      |      |   |   | 2,196 |   |   |   | 2,132 |   |   |   | 2,196 |   |   |   | 2,132 |   |
| Corporate debt securities                       |   |                | 995    |   |              |   | 13     |      |   |   | - |   |   |   | - |   |   |   | 995 |   |   |   | 13 |   |
| Collateralized debt obligations                 |   |                | 1,337  |   |              |   | 826    |      |   |   | 3,613 |   |   |   | 2,290 |   |   |   | 4,950 |   |   |   | 3,116 |   |
| Obligations of state and political subdivisions |   |                | 483    |   |              |   | 17     |      |   |   | - |   |   |   | - |   |   |   | 483 |   |   |   | 17 |   |
| Tax-exempt securities                           |   |                | -      |   |              |   | -      |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity securities - financial services          |   |                | 201    |   |              |   | 62     |      |   |   | 734 |   |   |   | 25 |   |   |   | 935 |   |   |   | 87 |   |
| Total                                           |   | $                   | 42,249 |   |              | $      | 1,289  |      |   | $ | 19,299 |   |   | $ | 6,857 |   |   | $ | 61,548 |   |   | $ | 8,146 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

| Security | Class (1) |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   | LowestCreditRating (2) |   | TotalCredit-RelatedOTTI (3) |   |   | CreditSupportCoverageRatios (4) |   |
|----------|-----------|--------|---------------|--------|--------|----------------------|--------|--------|-----------------------|--------|--------|-----------|--------|------------------------|--------|-----------------------------|--------|--------|---------------------------------|--------|
|     |      |   |          |   |   |                 |   |   |                  |   |   |      |   |                   |   |                        |   |   |                            |   |
| MBS 1    | SSNR, AS  |   | $             | 2,926  |   |                 | $      | -      |                  |   | $      | 409       |   |                   | $      | 2,517                       |   | CCC    |                            | $      | - |   |   |   | 0.67 |   |
| MBS 2    | SSUP, AS  |   |          | 327    |   |                 |   | 107    |                  |   |   | -         |   |                   |   | 434                         |   | CC     |                            |   | 1,059 |   |   |   | 0.18 |   |
| MBS 3    | PT, AS    |   |          | 423    |   |                 |   | 12     |                  |   |   | -         |   |                   |   | 435                         |   | CC     |                            |   | - |   |   |   | 0.82 |   |
|     |      |   | $             | 3,676  |   |                 | $      | 119    |                  |   | $      | 409       |   |                   | $      | 3,386                       |   |   |                            | $      | 1,059 |   |   |   |   |   |

| (1) | Class definitions:  PT - Pass Through, AS - Accelerated, SSNR - Super Senior and SSUP - Senior Support. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | The Company utilized credit ratings provided by Moody's, S&P and Fitch in its evaluation of issuers. |
|-----|----------------------------------------------------------------------------------------------------------|

| (3) | The OTTI amounts provided in the table represent cumulative credit loss amounts through December 31, 2010. |
|-----|------------------------------------------------------------------------------------------------------------|

| (4) | The credit support coverage ratio, which is the ratio that determines the multiple of credit support, is based on assumptions for the performance of the loans within the delinquency pipeline.  The assumptions used are: current collateral support/((60 day delinquencies x .60)+(90 day delinquencies x .70)+(foreclosures x 1.00) + (other real estate x 1.00)) x .40 for loss severity. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Security  |   | Class  |   |   | AmortizedCost |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |   | LowestCreditRating (1) |   |   | TotalCredit-RelatedOTTI (2) |   |   | % of CurrentPerformingCollateralCoverage |   |
|-----------|--------|--------|--------|--------|---------------|--------|--------|----------------------|--------|--------|-----------------------|--------|--------|-----------|--------|--------|------------------------|--------|--------|-----------------------------|--------|--------|------------------------------------------|--------|
|      |   |   |   |   |          |   |   |                 |   |   |                  |   |   |      |   |   |                   |   |   |                        |   |   |                                     |   |
| CDO 1     |   | B1     |   |   | $             | 1,000  |   |                 | $      | -      |                  |   | $      | 784       |   |   | $                      | 216    |   |                        | CCC    |   |                                     | $      | - |   |   |   | 110.0 |   |
| CDO 2     |   | B3     |   |   |          | 1,000  |   |                 |   | -      |                  |   |   | 782       |   |   |                   | 218    |   |                        | CCC    |   |                                     |   | - |   |   |   | 110.0 |   |
| CDO 3     |   | MEZ    |   |   |          | 88     |   |                 |   | -      |                  |   |   | 60        |   |   |                   | 28     |   |                        | CC     |   |                                     |   | 35 |   |   |   | 123.9 |   |
| CDO 4 (3) |   | B      |   |   |          | 248    |   |                 |   | -      |                  |   |   | -         |   |   |                   | 248    |   |                        | CC     |   |                                     |   | 376 |   |   |   | 106.4 |   |
| CDO 5 (3) |   | C      |   |   |          | -      |   |                 |   | -      |                  |   |   | -         |   |   |                   | -      |   |                        | C      |   |                                     |   | 809 |   |   |   | 76.9 |   |
| CDO 6     |   | A2     |   |   |          | 2,634  |   |                 |   | -      |                  |   |   | 1,577     |   |   |                   | 1,057  |   |                        | CCC    |   |                                     |   | - |   |   |   | 108.4 |   |
| CDO 7     |   | A1     |   |   |          | 1,744  |   |                 |   | -      |                  |   |   | 731       |   |   |                   | 1,013  |   |                        | CCC    |   |                                     |   | - |   |   |   | 137.0 |   |
|      |   |   |   |   | $             | 6,714  |   |                 | $      | -      |                  |   | $      | 3,934     |   |   | $                      | 2,780  |   |                        |   |   |                                     | $      | 1,220 |   |   |   |   |   |

| (1) | The Company utilized credit ratings provided by Moody's, S&P and Fitch in its evaluation of issuers. |
|-----|----------------------------------------------------------------------------------------------------------|

| (2) | The OTTI amounts provided in the table represent cumulative credit loss amounts through December 31, 2010. |
|-----|------------------------------------------------------------------------------------------------------------|

| (3) | These securities were transferred from available for sale to trading securities during the quarter ended  September 30, 2010. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                                     |   | Year Ended December 31, 2010   |   |   | Year Ended December 31, 2009        |   |
|------------------------------------------------------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                     |   | PooledTrustPreferredSecurities |   |   | Non-agencyMortgage-backedSecurities |   |   | Total |   |   | PooledTrustPreferredSecurities |   |   | Non-agencyMortgage-backedSecurities |   |   | Total |   |
|                                                                                     |   | (In Thousands)                 |   |
| OTTI related to credit loss recognized in net income                                     |   | $                              | -      |   |                                | $      | (492 | ) |   | $ | (492 | ) |   | $ | (150 | ) |   | $ | (78 | ) |   | $ | (228 | ) |
| OTTI related to noncredit gain (loss) recognized in accumulated other comprehensive loss |   |                           | 852    |   |                                |   | 702 |   |   |   | 1,554 |   |   |   | (71 | ) |   |   | (595 | ) |   |   | (666 | ) |
| Total OTTI gain (loss) on securities                                                     |   | $                              | 852    |   |                                | $      | 210 |   |   | $ | 1,062 |   |   | $ | (221 | ) |   | $ | (673 | ) |   | $ | (894 | ) |

|                                                                      |   | Years Ended December 31, |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | 2010                     |   |   | 2009 |   |
|                                                                      |   | (In Thousands)           |   |
| Balance at beginning of year                                              |   | $                        | 1,787  |   |   | $ | 1,559 |   |
|  Reduction for securities transferred to trading during period       |   |                     | (1,186 | ) |   |   | - |   |
| Additional credit losses for which OTTI losses were previously recognized |   |                     | 492    |   |   |   | 228 |   |
| Balance at end of year                                                    |   | $                        | 1,093  |   |   | $ | 1,787 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                         |   | December 31,   |    |
|----------------------------------------------|--------|----------------|---------|
|                                         |   | 2010           |    |   | 2009 |   |
|                                         |   | (In Thousands) |    |
| Real estate loans:                           |   |           |    |   |   |   |
| Residential - 1 to 4 family                  |   | $              | 270,923 |   |   | $ | 306,244 |   |
| Multi-family and commercial                  |   |           | 160,015 |   |   |   | 159,781 |   |
| Construction                                 |   |           | 6,952   |   |   |   | 11,400 |   |
| Total real estate loans                      |   |           | 437,890 |   |   |   | 477,425 |   |
|                                         |   |           |    |   |   |   |   |   |
| Commercial business loans:                   |   |           |    |   |   |   |   |   |
| SBA & USDA guaranteed                    |   |           | 116,492 |   |   |   | 77,310 |   |
| Other                                        |   |           | 26,310  |   |   |   | 30,239 |   |
| Total commercial business loans              |   |           | 142,802 |   |   |   | 107,549 |   |
|                                         |   |           |    |   |   |   |   |   |
| Consumer loans:                              |   |           |    |   |   |   |   |   |
| Home equity                                  |   |           | 25,533  |   |   |   | 22,573 |   |
| Other                                        |   |           | 3,167   |   |   |   | 3,513 |   |
| Total consumer loans                         |   |           | 28,700  |   |   |   | 26,086 |   |
|                                         |   |           |    |   |   |   |   |   |
| Total loans                                  |   |           | 609,392 |   |   |   | 611,060 |   |
|                                         |   |           |    |   |   |   |   |   |
| Deferred loan origination costs, net of fees |   |           | 1,621   |   |   |   | 1,523 |   |
| Allowance for loan losses                    |   |           | (4,799  | ) |   |   | (4,891 | ) |
| Loans receivable, net                        |   | $              | 606,214 |   |   | $ | 607,692 |   |

|                                       |   | Years Ended December 31, |   |
|--------------------------------------------|--------|--------------------------|--------|
|                                       |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                       |   | (In Thousands)           |   |
| Balance at beginning of year               |   | $                        | 4,891  |   |   | $ | 6,047 |   |   | $ | 5,245 |   |
| Provision for loan losses                  |   |                     | 902    |   |   |   | 2,830 |   |   |   | 1,369 |   |
| Loans charged-off                          |   |                     | (1,015 | ) |   |   | (4,075 | ) |   |   | (597 | ) |
| Recoveries of loans previously charged-off |   |                     | 21     |   |   |   | 89 |   |   |   | 30 |   |
| Balance at end of year                     |   | $                        | 4,799  |   |   | $ | 4,891 |   |   | $ | 6,047 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                    |   | Residential1 to 4 Family |    |   | CommercialReal Estate |   |    | Construction |   |   | CommercialBusiness |   |   | Consumer |    |   | Total  |   |
|-------------------------------------------------------------------------|--------|--------------------------|---------|--------|-----------------------|--------|---------|--------------|--------|--------|--------------------|--------|--------|----------|---------|--------|--------|--------|
|                                                                    |   | (In Thousands)           |    |
| Amount of allowance for loan losses for loans deemed to be impaired     |   | $                        | 212     |   |                  | $      | 290     |         |   | $      | -                  |   |   | $        | -       |   |   | $      | - |   |   | $ | 502 |   |
| Amount of allowance for loan losses for loans not deemed to be impaired |   |                     | 703     |   |                  |   | 2,410   |         |   |   | 64                 |   |   |     | 790     |   |   |   | 330 |   |   |   | 4,297 |   |
| Total loan loss allowance                                               |   | $                        | 915     |   |                  | $      | 2,700   |         |   | $      | 64                 |   |   | $        | 790     |   |   | $      | 330 |   |   | $ | 4,799 |   |
|                                                                    |   |                     |    |   |                  |   |    |         |   |   |               |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Loans deemed to be impaired                                             |   | $                        | 3,768   |   |                  | $      | 6,169   |         |   | $      | 990                |   |   | $        | 201     |   |   | $      | 51 |   |   | $ | 11,179 |   |
| Loans not deemed to be impaired                                         |   |                     | 267,155 |   |                  |   | 153,846 |         |   |   | 5,962              |   |   |     | 142,601 |   |   |   | 28,649 |   |   |   | 598,213 |   |
| Total loans                                                             |   | $                        | 270,923 |   |                  | $      | 160,015 |         |   | $      | 6,952              |   |   | $        | 142,802 |   |   | $      | 28,700 |   |   | $ | 609,392 |   |

|                        |   | 30-59DaysPast Due |   |   | 60-89DaysPast Due |   |   | Greater Than90 DaysPast Due |   |   | Total 30Days or MorePast Due |   |   | Current |   |   | TotalLoans |   |    | Past Due 90Days or Moreand Accruing |   |
|-----------------------------|--------|-------------------|--------|--------|-------------------|--------|--------|-----------------------------|--------|--------|------------------------------|--------|--------|---------|--------|--------|------------|--------|---------|-------------------------------------|--------|
|                        |   | (In Thousands)    |   |
| Real Estate:                |   |              |   |   |              |   |   |                        |   |   |                         |   |   |    |   |   |       |   |    |                                |   |
| Residential 1 to 4 family   |   | $                 | 2,387  |   |              | $      | 1,291  |                        |   | $      | 2,364                        |   |   | $       | 6,042  |   |       | $      | 264,881 |                                |   | $ | 270,923 |   |   | $ | - |   |
| Multi-family and commercial |   |              | 597    |   |              |   | -      |                        |   |   | 44                           |   |   |    | 641    |   |       |   | 159,374 |                                |   |   | 160,015 |   |   |   | - |   |
| Construction                |   |              | -      |   |              |   | -      |                        |   |   | 82                           |   |   |    | 82     |   |       |   | 6,870   |                                |   |   | 6,952 |   |   |   | - |   |
| Commercial Business:        |   |              |   |   |              |   |   |                        |   |   |                         |   |   |    |   |   |       |   |    |                                |   |   |   |   |   |   |   |   |
| SBA & USDA guaranteed   |   |              | 10,718 |   |              |   | -      |                        |   |   | -                            |   |   |    | 10,718 |   |       |   | 105,774 |                                |   |   | 116,492 |   |   |   | - |   |
| Other                       |   |              | -      |   |              |   | -      |                        |   |   | 46                           |   |   |    | 46     |   |       |   | 26,264  |                                |   |   | 26,310 |   |   |   | - |   |
| Consumer:                   |   |              |   |   |              |   |   |                        |   |   |                         |   |   |    |   |   |       |   |    |                                |   |   |   |   |   |   |   |   |
| Home equity                 |   |              | 25     |   |              |   | 50     |                        |   |   | -                            |   |   |    | 75     |   |       |   | 25,458  |                                |   |   | 25,533 |   |   |   | - |   |
| Other                       |   |              | 10     |   |              |   | 1      |                        |   |   | -                            |   |   |    | 11     |   |       |   | 3,156   |                                |   |   | 3,167 |   |   |   | - |   |
| Total                       |   | $                 | 13,737 |   |              | $      | 1,342  |                        |   | $      | 2,536                        |   |   | $       | 17,615 |   |       | $      | 591,777 |                                |   | $ | 609,392 |   |   | $ | - |   |

|                                              |   | December 31,   |   |
|---------------------------------------------------|--------|----------------|--------|
|                                              |   | 2010           |   |   | 2009 |   |
|                                              |   | (In Thousands) |   |
| Impaired loans without valuation allowance        |   | $              | 4,974  |   |   | $ | 2,107 |   |
| Impaired loans with valuation allowance           |   |           | 5,212  |   |   |   | 967 |   |
| Total impaired loans                              |   | $              | 10,186 |   |   | $ | 3,074 |   |
| Valuation allowance related to impaired loans     |   | $              | 502    |   |   | $ | 267 |   |
| Nonaccrual loans                                  |   | $              | 4,925  |   |   | $ | 3,007 |   |
| Loans past due 90 days or more and still accruing |   | $              | -      |   |   | $ | - |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                        |   | RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   | RelatedAllowance |   |   | TotalNonaccrualLoans |   |
|---------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|--------|------------------|--------|--------|----------------------|--------|
|                                        |   | (In Thousands)     |   |
| Impaired loans without valuation allowance: |   |               |   |   |                   |   |   |             |   |   |                 |   |
| Real Estate:                                |   |               |   |   |                   |   |   |             |   |   |                 |   |
| Residential 1 to 4 family                   |   | $                  | 3,212  |   |                   | $      | 3,212  |             |   | $      | -                    |   |   | $ | 2,345 |   |
| Multi-family and commercial                 |   |               | 1,513  |   |                   |   | 1,513  |             |   |   | -                    |   |   |   | 853 |   |
| Construction                                |   |               | 82     |   |                   |   | 990    |             |   |   | -                    |   |   |   | 82 |   |
| Commercial business                         |   |               | 116    |   |                   |   | 201    |             |   |   | -                    |   |   |   | 116 |   |
| Consumer                                    |   |               | 51     |   |                   |   | 51     |             |   |   | -                    |   |   |   | 51 |   |
| Total                                       |   |               | 4,974  |   |                   |   | 5,967  |             |   |   | -                    |   |   |   | 3,447 |   |
|                                        |   |               |   |   |                   |   |   |             |   |   |                 |   |   |   |   |   |
| Impaired loans with valuation allowance:    |   |               |   |   |                   |   |   |             |   |   |                 |   |   |   |   |   |
| Real Estate:                                |   |               |   |   |                   |   |   |             |   |   |                 |   |   |   |   |   |
| Residential 1 to 4 family                   |   |               | 556    |   |                   |   | 556    |             |   |   | 212                  |   |   |   | 556 |   |
| Multi-family and commercial                 |   |               | 4,656  |   |                   |   | 4,656  |             |   |   | 290                  |   |   |   | 922 |   |
| Total                                       |   |               | 5,212  |   |                   |   | 5,212  |             |   |   | 502                  |   |   |   | 1,478 |   |
|                                        |   |               |   |   |                   |   |   |             |   |   |                 |   |   |   |   |   |
| Total impaired loans                        |   | $                  | 10,186 |   |                   | $      | 11,179 |             |   | $      | 502                  |   |   | $ | 4,925 |   |

|                                          |   | Years Ended December 31, |   |
|-----------------------------------------------|--------|--------------------------|--------|
|                                          |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                          |   | (In Thousands)           |   |
| Average recorded investment in impaired loans |   | $                        | 6,629  |   |   | $ | 7,808 |   |   | $ | 9,407 |   |
| Interest income recognized on impaired loans  |   | $                        | 165    |   |   | $ | 65 |   |   | $ | 27 |   |
| Cash interest received on impaired loans      |   | $                        | 295    |   |   | $ | 99 |   |   | $ | 74 |   |

|   | o | Pass (Ratings 1-4):  Loans in these categories are considered low to average risk. |
|--------|---|----------------------------------------------------------------------------------------------|

|   | o | Special Mention (Rating 5): Loans in this category are starting to show signs of potential weakness and are being closely monitored by management. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|   | o | Substandard (Rating 6): Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged.  There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Doubtful (Rating 7):  Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Loss (Rating 8): Loans in this category are considered uncollectible and of such little value that their continuance as loans is not warranted. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------|

|            |   | Real Estate Loans        |    |   | Consumer               |   |    | Commercial Business |   |   |       |   |
|-----------------|--------|--------------------------|---------|--------|------------------------|--------|---------|---------------------|--------|--------|------------|--------|
|            |   | Residential1 to 4 Family |    |   | Multi-familyCommercial |   |    | Construction        |   |   | HomeEquity |   |   | Other |   |   | SBA &USDA |   |   | Other |   |   | TotalLoans |   |
|            |   | (In Thousands)           |    |
| Not Rated       |   | $                        | -       |   |                   | $      | -       |                |   | $      | -          |   |   | $ | - |   |   | $ | - |   |   | $ | 116,492 |   |   | $ | - |   |   | $ | 116,492 |   |
| Pass            |   |                     | 267,023 |   |                   |   | 134,484 |                |   |   | 6,504      |   |   |   | 25,483 |   |   |   | 3,166 |   |   |   | - |   |   |   | 20,105 |   |   |   | 456,765 |   |
| Special Mention |   |                     | 834     |   |                   |   | 16,260  |                |   |   | 366        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,896 |   |   |   | 20,356 |   |
| Substandard     |   |                     | 3,066   |   |                   |   | 9,271   |                |   |   | 82         |   |   |   | 50 |   |   |   | 1 |   |   |   | - |   |   |   | 3,239 |   |   |   | 15,709 |   |
| Doubtful        |   |                     | -       |   |                   |   | -       |                |   |   | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 70 |   |   |   | 70 |   |
| Loss            |   |                     | -       |   |                   |   | -       |                |   |   | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total           |   | $                        | 270,923 |   |                   | $      | 160,015 |                |   | $      | 6,952      |   |   | $ | 25,533 |   |   | $ | 3,167 |   |   | $ | 116,492 |   |   | $ | 26,310 |   |   | $ | 609,392 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                    |   | Years Ended December 31, |   |
|-----------------------------------------|--------|--------------------------|--------|
|                                    |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                    |   | (In Thousands)           |   |
| Balance at beginning of year            |   | $                        | 740    |   |   | $ | 423 |   |   | $ | 421 |   |
| Additions                               |   |                     | 439    |   |   |   | 475 |   |   |   | 116 |   |
| Amortization                            |   |                     | (202   | ) |   |   | (158 | ) |   |   | (114 | ) |
| Balance at end of year                  |   | $                        | 977    |   |   | $ | 740 |   |   | $ | 423 |   |
| Fair value of mortgage servicing assets |   | $                        | 1,456  |   |   | $ | 1,113 |   |   | $ | 700 |   |

|                                                                      |   | Years Ended December 31, |   |
|---------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                      |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                                                      |   | (In Thousands)           |   |
| Net loss (gain) from sales or write-downs of other real estate owned, net |   | $                        | 534    |   |   | $ | (16 | ) |   | $ | (10 | ) |
| Other real estate expense, net of rental income                           |   |                     | 296    |   |   |   | 145 |   |   |   | 113 |   |
| Expense from other real estate operations, net                            |   | $                        | 830    |   |   | $ | 129 |   |   | $ | 103 |   |

|                                      |   | December 31,   |    |
|-------------------------------------------|--------|----------------|---------|
|                                      |   | 2010           |    |   | 2009 |   |
|                                      |   | (In Thousands) |    |
| Land                                      |   | $              | 2,098   |   |   | $ | 2,098 |   |
| Buildings                                 |   |           | 6,077   |   |   |   | 6,043 |   |
| Leasehold improvements                    |   |           | 7,786   |   |   |   | 7,736 |   |
| Furniture and equipment                   |   |           | 11,388  |   |   |   | 10,711 |   |
| Construction in process                   |   |           | 21      |   |   |   | - |   |
|                                      |   |           | 27,370  |   |   |   | 26,588 |   |
| Accumulated depreciation and amortization |   |           | (15,247 | ) |   |   | (13,622 | ) |
| Premises and equipment, net               |   | $              | 12,123  |   |   | $ | 12,966 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                         |   | Years Ended December 31, |   |
|------------------------------|--------|--------------------------|--------|
|                         |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                         |   | (In Thousands)           |   |
| Balance at beginning of year |   | $                        | 4,131  |   |   | $ | 4,188 |   |   | $ | 643 |   |
| Additions                    |   |                     | -      |   |   |   | - |   |   |   | 3,545 |   |
| Impairment                   |   |                     | (37    | ) |   |   | (57 | ) |   |   | - |   |
| Balance at end of year       |   | $                        | 4,094  |   |   | $ | 4,131 |   |   | $ | 4,188 |   |

|                         |   | Years Ended December 31, |   |
|------------------------------|--------|--------------------------|--------|
|                         |   | 2010                     |   |   | 2009 |   |
|                         |   | (In Thousands)           |   |
| Core deposit intangible      |   | $                        | 159    |   |   | $ | 159 |   |
| Accumulated amortization     |   |                     | (127   | ) |   |   | (95 | ) |
| Core deposit intangible, net |   | $                        | 32     |   |   | $ | 64 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                                                        |   | December 31,   |    |
|-------------------------------------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                                                        |   | 2010           |    |   | 2009 |   |
|                                                                                                        |   | (In Thousands) |    |
| Noninterest-bearing demand deposits                                                                         |   | $              | 66,845  |   |   | $ | 65,407 |   |
|                                                                                                        |   |           |    |   |   |   |   |   |
| Interest-bearing accounts:                                                                                  |   |           |    |   |   |   |   |   |
| NOW and money market accounts                                                                               |   |           | 247,811 |   |   |   | 220,759 |   |
| Savings accounts                                                                                            |   |           | 56,495  |   |   |   | 61,312 |   |
| Certificates of deposit (1)                                                                                 |   |           | 289,563 |   |   |   | 311,309 |   |
| Total interest-bearing accounts                                                                             |   |           | 593,869 |   |   |   | 593,380 |   |
| Total deposits                                                                                              |   | $              | 660,714 |   |   | $ | 658,787 |   |
| _________                                                                                                   |   |           |    |   |   |   |   |   |
| (1)Includes brokered deposits of $4.1 million and $1.5 million at December 31, 2010 and 2009, respectively. |

|                          |   | (In Thousands) |    |
|-------------------------------|--------|----------------|---------|
| 2011                          |   | $              | 124,332 |   |
| 2012                          |   |           | 67,010  |   |
| 2013                          |   |           | 63,674  |   |
| 2014                          |   |           | 11,906  |   |
| 2015                          |   |           | 19,878  |   |
| Thereafter                    |   |           | 2,763   |   |
| Total certificates of deposit |   | $              | 289,563 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                          |   | Years Ended December 31, |   |
|-------------------------------|--------|--------------------------|--------|
|                          |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                          |   | (In Thousands)           |   |
| NOW and money market accounts |   | $                        | 1,618  |   |   | $ | 2,189 |   |   | $ | 3,149 |   |
| Savings accounts (1)          |   |                     | 295    |   |   |   | 408 |   |   |   | 668 |   |
| Certificates of deposit (2)   |   |                     | 7,524  |   |   |   | 10,586 |   |   |   | 11,921 |   |
| Total                         |   | $                        | 9,437  |   |   | $ | 13,183 |   |   | $ | 15,738 |   |

| (1) | Includes interest expense on mortgagors' and investors' escrow accounts. |
|-----|--------------------------------------------------------------------------|

| (2) | Includes interest expense on brokered deposits. |
|-----|-------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                  |   | FHLB                   |    |   | Subordinated |   |   |   |   |
|-----------------------|--------|------------------------|---------|--------|--------------|--------|--------|--------|--------|
|                  |   | Advances               |    |   | Debt         |   |   | Total  |   |
|                  |   | (Dollars in Thousands) |    |
| 2011                  |   | $                      | 11,000  |   |         | $      | -      |   |   | $ | 11,000 |   |
| 2012                  |   |                   | 29,100  |   |         |   | -      |   |   |   | 29,100 |   |
| 2013 (1)              |   |                   | 23,000  |   |         |   | -      |   |   |   | 23,000 |   |
| 2014 (2)              |   |                   | 28,000  |   |         |   | -      |   |   |   | 28,000 |   |
| 2015                  |   |                   | 16,069  |   |         |   | -      |   |   |   | 16,069 |   |
| Thereafter (3)        |   |                   | 7,000   |   |         |   | 8,248  |   |   |   | 15,248 |   |
| Total                 |   | $                      | 114,169 |   |         | $      | 8,248  |   |   | $ | 122,417 |   |
| Weighted average rate |   |                   | 3.63    | %      |         |   | 4.14   | %      |   |   | 3.66 | % |

|   | (1) | Includes FHLB advance of $2.0 million that is callable during 2011. |
|--------|-----|---------------------------------------------------------------------|

|   | (2) | Includes FHLB advance of $4.0 million that is puttable during 2012. |
|--------|-----|---------------------------------------------------------------------|

|   | (3) | Includes FHLB advances of $3.0 million and $2.0 million that are callable during 2011 and 2013, respectively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                          |   | Years Ended December 31, |   |
|-----------------------------------------------|--------|--------------------------|--------|
|                                          |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                          |   | (In Thousands)           |   |
| Current income tax provision (benefit):       |   |                     |   |   |   |   |   |   |   |
| Federal                                       |   | $                        | 1,648  |   |   | $ | (252 | ) |   | $ | 1,509 |   |
| State                                         |   |                     | 20     |   |   |   | 12 |   |   |   | 1 |   |
| Total current income tax provision (benefit)  |   |                     | 1,668  |   |   |   | (240 | ) |   |   | 1,510 |   |
|                                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Deferred income tax (benefit) provision:      |   |                     |   |   |   |   |   |   |   |   |   |   |
| Federal                                       |   |                     | (355   | ) |   |   | 275 |   |   |   | (2,870 | ) |
| Total deferred income tax (benefit) provision |   |                     | (355   | ) |   |   | 275 |   |   |   | (2,870 | ) |
| Total income tax provision (benefit)          |   | $                        | 1,313  |   |   | $ | 35 |   |   | $ | (1,360 | ) |

|                                             |   | Years Ended December 31, |   |
|--------------------------------------------------|--------|--------------------------|--------|
|                                             |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                             |   | (Dollars in Thousands)   |   |
| Income tax provision (benefit) at statutory rate |   | $                        | 1,467  |   |   | $ | 160 |   |   | $ | (1,439 | ) |
| Increase (decrease) resulting from:              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Dividends received deduction                     |   |                     | (3     | ) |   |   | (10 | ) |   |   | (33 | ) |
| Bank-owned life insurance                        |   |                     | (99    | ) |   |   | (199 | ) |   |   | (103 | ) |
| Tax-exempt income                                |   |                     | (13    | ) |   |   | (15 | ) |   |   | (7 | ) |
| Compensation and employee benefit plans          |   |                     | 61     |   |   |   | 72 |   |   |   | 72 |   |
| Nondeductible expenses                           |   |                     | 6      |   |   |   | 6 |   |   |   | 7 |   |
| Valuation allowance                              |   |                     | (90    | ) |   |   | 21 |   |   |   | 118 |   |
| State taxes, net of federal tax benefit          |   |                     | 13     |   |   |   | 8 |   |   |   | - |   |
| Other                                            |   |                     | (29    | ) |   |   | (8 | ) |   |   | 25 |   |
| Total income tax provision (benefit)             |   | $                        | 1,313  |   |   | $ | 35 |   |   | $ | (1,360 | ) |
|                                             |   |                     |   |   |   |   |   |   |   |   |   |   |
| Effective tax rate                               |   |                     | 30.4   | % |   |   | 7.4 | % |   |   | 32.1 | % |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                  |   | Years Ended December 31, |   |
|-------------------------------------------------------|--------|--------------------------|--------|
|                                                  |   | 2010                     |   |   | 2009 |   |
|                                                  |   | (In Thousands)           |   |
| Deferred tax assets:                                  |   |                     |   |   |   |   |
| Allowance for loan losses                             |   | $                        | 1,753  |   |   | $ | 1,764 |   |
| Unrealized losses on available for sale securities    |   |                     | 1,949  |   |   |   | 2,770 |   |
| Unrealized losses on trading securities               |   |                     | 475    |   |   |   | - |   |
| Depreciation of premises and equipment                |   |                     | 839    |   |   |   | 756 |   |
| Other-than-temporary impairment                       |   |                     | 820    |   |   |   | 1,369 |   |
| Charitable contribution carry-forward                 |   |                     | -      |   |   |   | 93 |   |
| Deferred compensation                                 |   |                     | 1,775  |   |   |   | 1,524 |   |
| Employee benefit plans                                |   |                     | 322    |   |   |   | 391 |   |
| Capital loss carry-forward                            |   |                     | 30     |   |   |   | 5 |   |
| Interest receivable on nonaccrual loans               |   |                     | 185    |   |   |   | 160 |   |
| Deferred other real estate owned expenses             |   |                     | 124    |   |   |   | - |   |
| Net unrealized loss on derivative instruments         |   |                     | 44     |   |   |   | - |   |
| Other                                                 |   |                     | 270    |   |   |   | 166 |   |
| Total deferred tax assets                             |   |                     | 8,586  |   |   |   | 8,998 |   |
| Less valuation allowance                              |   |                     | (49    | ) |   |   | (139 | ) |
| Total deferred tax assets, net of valuation allowance |   |                     | 8,537  |   |   |   | 8,859 |   |
|                                                  |   |                     |   |   |   |   |   |   |
| Deferred tax liabilities:                             |   |                     |   |   |   |   |   |   |
| Unrealized gains on available for sale securities     |   |                     | 1,421  |   |   |   | 1,539 |   |
| Goodwill and other intangibles                        |   |                     | 201    |   |   |   | 100 |   |
| Deferred loan costs                                   |   |                     | 854    |   |   |   | 890 |   |
| Mortgage servicing asset                              |   |                     | 332    |   |   |   | 252 |   |
| Total deferred tax liabilities                        |   |                     | 2,808  |   |   |   | 2,781 |   |
| Deferred tax asset, net                               |   | $                        | 5,729  |   |   | $ | 6,078 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|       |   | (In Thousands) |   |
|------------|--------|----------------|--------|
|       |   |           |   |
| 2011       |   | $              | 304    |   |
| 2012       |   |           | 318    |   |
| 2013       |   |           | 333    |   |
| 2014       |   |           | 349    |   |
| 2015       |   |           | 366    |   |
| Thereafter |   |           | 1,645  |   |
| Total      |   | $              | 3,315  |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                             |   | December 31,           |    |
|----------------------------------|--------|------------------------|---------|
|                             |   | 2010                   |    |   | 2009 |   |
|                             |   | (Dollars In Thousands) |    |
| Allocated                        |   |                   | 155,306 |   |   |   | 133,485 |   |
| Committed to be allocated        |   |                   | 32,295  |   |   |   | 32,295 |   |
| Unallocated                      |   |                   | 290,660 |   |   |   | 322,955 |   |
| Total shares                     |   |                   | 478,261 |   |   |   | 488,735 |   |
| Fair value of unallocated shares |   | $                      | 2,567   |   |   | $ | 1,696 |   |

| Expected term (years)         |   |   | 10.00 |   |
|-------------------------------|--------|--------|-------|--------|
| Expected dividend yield       |   |   | 1.50  | %      |
| Expected volatility           |   |   | 38.98 | %      |
| Risk-free interest rate       |   |   | 3.70  | %      |
| Fair value of options granted |   | $      | 2.29  |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                     |   | Shares |    |   | WeightedAverageExercisePrice |   |   | WeightedAverageRemainingContractualTerm (in years) |   |
|------------------------------------------|--------|--------|---------|--------|------------------------------|--------|--------|----------------------------------------------------|--------|
|                                     |   |   |    |   |                         |   |   |                                               |   |
| Options outstanding at beginning of year |   |   | 447,750 |   |                         | $      | 10.34  |                                               |   |   |   |
| Options granted                          |   |   | 70,000  |   |                         |   | 5.10   |                                               |   |   |   |
| Options forfeited                        |   |   | (21,000 | )      |                         |   | 11.62  |                                               |   |   |   |
| Options outstanding at end of year       |   |   | 496,750 |   |                         | $      | 9.55   |                                               |   |   | 5.18 |   |
| Options exercisable at end of year       |   |   | 414,150 |   |                         | $      | 10.21  |                                               |   |   | 4.47 |   |

|                                            |   | Shares |    |   | WeightedAverageGrantDate FairValue |   |
|-------------------------------------------------|--------|--------|---------|--------|------------------------------------|--------|
|                                            |   |   |    |   |                               |   |
| Unvested restricted shares at beginning of year |   |   | 51,449  |   |                               | $      | 9.06 |   |
| Restricted shares granted                       |   |   | -       |   |                               |   | - |   |
| Restricted shares vested                        |   |   | (44,249 | )      |                               |   | 9.86 |   |
| Restricted shares forfeited                     |   |   | -       |   |                               |   | - |   |
| Unvested restricted shares at end of year       |   |   | 7,200   |   |                               | $      | 4.17 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                    |   | December 31,   |   |
|-----------------------------------------|--------|----------------|--------|
|                                    |   | 2010           |   |   | 2009 |   |
|                                    |   | (In Thousands) |   |
| Commitments to extend credit:           |   |           |   |   |   |   |
| Future loan commitments                 |   | $              | 10,166 |   |   | $ | 8,648 |   |
| Undisbursed construction loans          |   |           | 6,708  |   |   |   | 9,843 |   |
| Undisbursed home equity lines of credit |   |           | 21,106 |   |   |   | 18,733 |   |
| Undisbursed commercial lines of credit  |   |           | 12,239 |   |   |   | 12,390 |   |
| Overdraft protection lines              |   |           | 1,311  |   |   |   | 1,425 |   |
| Standby letters of credit               |   |           | 115    |   |   |   | 784 |   |
| Total commitments                       |   | $              | 51,645 |   |   | $ | 51,823 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|       |   | (In Thousands) |   |
|------------|--------|----------------|--------|
|       |   |           |   |
| 2011       |   | $              | 1,381  |   |
| 2012       |   |           | 1,280  |   |
| 2013       |   |           | 1,063  |   |
| 2014       |   |           | 994    |   |
| 2015       |   |           | 835    |   |
| Thereafter |   |           | 6,178  |   |
| Total      |   | $              | 11,731 |   |

|   |   | (In Thousands) |   |
|--------|--------|----------------|--------|
|   |   |           |   |
| 2011   |   | $              | 44     |   |
| 2012   |   |           | 19     |   |
| 2013   |   |           | 10     |   |
| Total  |   | $              | 73     |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                         |   | Years Ended December 31, |   |
|------------------------------|--------|--------------------------|--------|
|                         |   | 2010                     |   |   | 2009 |   |
|                         |   | (In Thousands)           |   |
| Balance at beginning of year |   | $                        | 2,148  |   |   | $ | 1,983 |   |
| Additions                    |   |                     | 125    |   |   |   | 613 |   |
| Repayments                   |   |                     | (235   | ) |   |   | (448 | ) |
| Balance at end of year       |   | $                        | 2,038  |   |   | $ | 2,148 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                            |   |   |   |   | For CapitalAdequacy |   |   | To Be WellCapitalized UnderPrompt Corrective |   |
|---------------------------------|--------|--------|--------|--------|---------------------|--------|--------|----------------------------------------------|--------|
| December 31, 2010               |   | Actual |   |   | Purposes            |   |   | Action Provisions                            |   |
| (Dollars in Thousands)          |   | Amount |   |   | Ratio               |   |   | Amount                                       |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                            |   |   |   |   |                |   |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital Ratio  |   | $      | 75,823 |   |                |   | 15.34  | %                                            |   | $ | 39,543 |   |   |   | 8.00 | % |   | $ | 49,428 |   |   |   | 10.00 | % |
| Tier I Risk-based Capital Ratio |   |   | 71,173 |   |                |   | 14.40  |                                         |   |   | 19,770 |   |   |   | 4.00 |   |   |   | 29,655 |   |   |   | 6.00 |   |
| Tier I Capital Ratio            |   |   | 71,173 |   |                |   | 7.81   |                                         |   |   | 36,452 |   |   |   | 4.00 |   |   |   | 45,565 |   |   |   | 5.00 |   |
| Tangible Equity Ratio           |   |   | 71,173 |   |                |   | 7.81   |                                         |   |   | 13,670 |   |   |   | 1.50 |   |   |   | N/A |   |   |   | N/A |   |

| December 31, 2009               |   | Actual |   |   | For CapitalAdequacyPurposes |   |   | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |   |
|---------------------------------|--------|--------|--------|--------|-----------------------------|--------|--------|---------------------------------------------------------------|--------|
| (Dollars in Thousands)          |   | Amount |   |   | Ratio                       |   |   | Amount                                                        |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                            |   |   |   |   |                        |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital Ratio  |   | $      | 74,095 |   |                        |   | 14.30  | %                                                             |   | $ | 41,452 |   |   |   | 8.00 | % |   | $ | 51,815 |   |   |   | 10.00 | % |
| Tier I Risk-based Capital Ratio |   |   | 69,201 |   |                        |   | 13.36  |                                                          |   |   | 20,719 |   |   |   | 4.00 |   |   |   | 31,078 |   |   |   | 6.00 |   |
| Tier I Capital Ratio            |   |   | 69,201 |   |                        |   | 8.02   |                                                          |   |   | 34,514 |   |   |   | 4.00 |   |   |   | 43,143 |   |   |   | 5.00 |   |
| Tangible Equity Ratio           |   |   | 69,201 |   |                        |   | 8.02   |                                                          |   |   | 12,943 |   |   |   | 1.50 |   |   |   | N/A |   |   |   | N/A |   |

|                                                        |   | December 31,   |   |
|-------------------------------------------------------------|--------|----------------|--------|
|                                                        |   | 2010           |   |   | 2009 |   |
|                                                        |   | (In Thousands) |   |
| Total capital per consolidated financial statements         |   | $              | 81,104 |   |   | $ | 77,462 |   |
| Holding company equity not available for regulatory capital |   |           | (5,313 | ) |   |   | (5,468 | ) |
| Accumulated losses on available for sale securities         |   |           | 1,057  |   |   |   | 2,295 |   |
| Intangible assets                                           |   |           | (3,853 | ) |   |   | (3,997 | ) |
| Disallowed deferred tax asset                               |   |           | (1,822 | ) |   |   | (1,091 | ) |
| Total tier 1 capital                                        |   |           | 71,173 |   |   |   | 69,201 |   |
| Adjustments for total capital:                              |   |           |   |   |   |   |   |   |
| Allowance for loan and credit losses                        |   |           | 4,650  |   |   |   | 4,894 |   |
| Total capital per regulatory reporting                      |   | $              | 75,823 |   |   | $ | 74,095 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                               |   | December 31, 2010 |   |
|------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                               |   | Before Tax        |   |   | Tax |   |   | Net of Tax |   |
|                                                                               |   | Amount            |   |   | Effects |   |   | Amount |   |
|                                                                               |   | (In Thousands)    |   |
| Securities:                                                                        |   |              |   |   |   |   |   |   |   |
| Unrealized holding losses on available for sale securities                         |   | $                 | (87    | ) |   | $ | 29 |   |   | $ | (58 | ) |
| Credit portion of OTTI losses recognized in net income                             |   |              | 492    |   |   |   | (167 | ) |   |   | 325 |   |
| Noncredit portion of OTTI losses on available for sale securities                  |   |              | 1,554  |   |   |   | (528 | ) |   |   | 1,026 |   |
| Reclassification adjustment for gains realized in net income                       |   |              | (878   | ) |   |   | 299 |   |   |   | (579 | ) |
| Unrealized holding gains on available for sale securities,  net of taxes |   |              | 1,081  |   |   |   | (367 | ) |   |   | 714 |   |
| Derivative instrument:                                                             |   |              |   |   |   |   |   |   |   |   |   |   |
| Change in fair value of effective cash flow hedging derivative                     |   |              | (129   | ) |   |   | 44 |   |   |   | (85 | ) |
| Other comprehensive income                                                         |   | $                 | 952    |   |   | $ | (323 | ) |   | $ | 629 |   |

|                                                                               |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                               |   | Before Tax        |   |   | Tax |   |   | Net of Tax |   |
|                                                                               |   | Amount            |   |   | Effects |   |   | Amount |   |
|                                                                               |   | (In Thousands)    |   |
| Securities:                                                                        |   |              |   |   |   |   |   |   |   |
| Unrealized holding gains on available for sale securities                          |   | $                 | 5,622  |   |   | $ | (1,831 | ) |   | $ | 3,791 |   |
| Credit portion of OTTI losses recognized in net income                             |   |              | 228    |   |   |   | (77 | ) |   |   | 151 |   |
| Noncredit portion of OTTI losses on available for sale securities                  |   |              | (666   | ) |   |   | 226 |   |   |   | (440 | ) |
| Reclassification adjustment for gains realized in net income                       |   |              | (285   | ) |   |   | 97 |   |   |   | (188 | ) |
| Unrealized holding gains on available for sale securities,  net of taxes |   | $                 | 4,899  |   |   | $ | (1,585 | ) |   | $ | 3,314 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                              |   | December 31, 2010 |   |
|-------------------------------------------------------------------|--------|-------------------|--------|
|                                                              |   | Before Tax        |   |   | Tax |   |   | Net of Tax |   |
|                                                              |   | Amount            |   |   | Effects |   |   | Amount |   |
|                                                              |   | (In Thousands)    |   |
| Net unrealized losses on securities                               |   | $                 | (1,599 | ) |   | $ | 544 |   |   | $ | (1,055 | ) |
| Noncredit portion of OTTI losses on available for sale securities |   |              | 48     |   |   |   | (16 | ) |   |   | 32 |   |
| Net unrealized loss on effective cash flow hedging derivative     |   |              | (129   | ) |   |   | 44 |   |   |   | (85 | ) |
|                                                              |   |              |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive loss                              |   | $                 | (1,680 | ) |   | $ | 572 |   |   | $ | (1,108 | ) |

|                                                              |   | December 31, 2009 |   |
|-------------------------------------------------------------------|--------|-------------------|--------|
|                                                              |   | Before Tax        |   |   | Tax |   |   | Net of Tax |   |
|                                                              |   | Amount            |   |   | Effects |   |   | Amount |   |
|                                                              |   | (In Thousands)    |   |
| Net unrealized losses on securities                               |   | $                 | (1,992 | ) |   | $ | 597 |   |   | $ | (1,395 | ) |
| Noncredit portion of OTTI losses on available for sale securities |   |              | (1,506 | ) |   |   | 512 |   |   |   | (994 | ) |
|                                                              |   |              |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive loss                              |   | $                 | (3,498 | ) |   | $ | 1,109 |   |   | $ | (2,389 | ) |

|   | o | Cash and cash equivalents. The carrying amounts of cash and short-term instruments approximate the fair values based on the short-term nature of the assets. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Trading securities.  The Company holds two securities designated as trading securities.  The determination of the fair value for these securities is determined based on a discounted cash flow methodology.  Certain inputs to the fair value calculation are unobservable and management determined that since an orderly and active market for these securities did not exist, the securities meet the definition of Level 3 securities. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|   | o | Securities available for sale.  Included in the available for sale category are both debt and equity securities.  The securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market.  Securities measured at fair value in Level 2 are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. The Company utilizes Interactive Date Corporation (“IDC”), a third-party, nationally-recognized pricing service to estimate fair value measurements for the majority of its portfolio.  The pricing service evaluates each asset class based on relevant market information considering observable data, but these prices do not represent binding quotes.  The fair value prices on all investments are reviewed for reasonableness by management.  Securities measured at fair value in Level 3 include collateralized debt obligations that are backed by trust preferred securities issued by banks, thrifts and insurance companies. Management determined that an orderly and active market for these securities and similar securities did not exist based on a significant reduction in trading volume and widening spreads relative to historical levels. The Company estimates future cash flows discounted using a rate management believes is representative of current market conditions.  Factors in determining the discount rate include the current level of deferrals and/or defaults, changes in credit rating and the financial condition of the debtors within the underlying securities, broker quotes for securities with similar structure and credit risk, interest rate movements and pricing for new issuances. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Federal Home Loan Bank stock.  The carrying value of FHLB stock approximates fair value based on the redemption provisions of the FHLB. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Loans held for sale.  The fair value of loans held for sale is estimated using quoted market prices. |
|--------|---|----------------------------------------------------------------------------------------------------------------|

|   | o | Loans receivable.  For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values.  The fair value of fixed-rate loans are estimated by discounting the future cash flows using the rates at the end of the period in which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Accrued interest receivable.  The carrying amount of accrued interest approximates fair value. |
|--------|---|----------------------------------------------------------------------------------------------------------|

|   | o | Deposits.  The fair value of demand deposits, negotiable orders of withdrawal, regular savings, certain money market deposits and mortgagors’ and investors’ escrow accounts is the amount payable on demand at the reporting date.  The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities to a schedule of aggregated expected maturities on such deposits. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Federal Home Loan Bank advances.  The fair value of the advances is estimated using a discounted cash flow calculation that applies current FHLB interest rates for advances of similar maturity to a schedule of maturities of such advances. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Junior subordinated debt owed to unconsolidated trust.  Rates currently available for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Interest rate swap agreement.  The fair value of the Company’s interest rate swap is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of the derivative.  The pricing analysis is based on observable inputs for the contractual term of the derivative, including the period to maturity and interest rate curves. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|   | o | Forward loan sale commitments and derivative loan commitments.  Forward loan sale commitments and derivative loan commitments are based on the fair values of the underlying mortgage loans and the probability of such commitments being exercised.  Significant management judgment and estimation is required in determining these fair value measurements. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | o | Off-balance sheet instruments.  Fair values for off-balance sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standings. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | December 31, 2010 |   |
|---------------------------------------------------------------|--------|-------------------|--------|
|                                                          |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                                                          |   | (In Thousands)    |   |
| Assets:                                                       |   |              |   |   |   |   |   |   |   |   |   |   |
| Trading securities                                            |   | $                 | -      |   |   | $ | - |   |   | $ | 248 |   |   | $ | 248 |   |
| U.S. Government and agency obligations                        |   |              | 1,025  |   |   |   | 22,558 |   |   |   | - |   |   |   | 23,583 |   |
| Government-sponsored enterprises                              |   |              | -      |   |   |   | 29,993 |   |   |   | - |   |   |   | 29,993 |   |
| Mortgage-backed securities                                    |   |              | -      |   |   |   | 101,024 |   |   |   | - |   |   |   | 101,024 |   |
| Corporate debt securities                                     |   |              | -      |   |   |   | 14,717 |   |   |   | - |   |   |   | 14,717 |   |
| Collateralized debt obligations                               |   |              | -      |   |   |   | - |   |   |   | 2,532 |   |   |   | 2,532 |   |
| Obligations of state and political subdivisions               |   |              | -      |   |   |   | 6,905 |   |   |   | - |   |   |   | 6,905 |   |
| Tax-exempt securities                                         |   |              | -      |   |   |   | 144 |   |   |   | - |   |   |   | 144 |   |
| Foreign government securities                                 |   |              | -      |   |   |   | 100 |   |   |   | - |   |   |   | 100 |   |
| Equity securities                                             |   |              | 299    |   |   |   | 739 |   |   |   | - |   |   |   | 1,038 |   |
| Forward loan sale commitments and derivative loan commitments |   |              | -      |   |   |   | - |   |   |   | 163 |   |   |   | 163 |   |
| Total assets                                                  |   | $                 | 1,324  |   |   | $ | 176,180 |   |   | $ | 2,943 |   |   | $ | 180,447 |   |
|                                                          |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                  |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forward loan sale commitments and derivative loan commitments |   | $                 | -      |   |   | $ | - |   |   | $ | 184 |   |   | $ | 184 |   |
| Interest rate swap agreement                                  |   |              | -      |   |   |   | 129 |   |   |   | - |   |   |   | 129 |   |
| Total liabilities                                             |   | $                 | -      |   |   | $ | 129 |   |   | $ | 184 |   |   | $ | 313 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                            |   | December 31, 2009 |   |
|-------------------------------------------------|--------|-------------------|--------|
|                                            |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                                            |   | (In Thousands)    |   |
| U.S. Government and agency obligations          |   | $                 | 1,939  |   |   | $ | 34,290 |   |   | $ | - |   |   | $ | 36,229 |   |
| Government-sponsored enterprises                |   |              | -      |   |   |   | 14,035 |   |   |   | - |   |   |   | 14,035 |   |
| Mortgage-backed securities                      |   |              | -      |   |   |   | 111,514 |   |   |   | - |   |   |   | 111,514 |   |
| Corporate debt securities                       |   |              | -      |   |   |   | 7,321 |   |   |   | - |   |   |   | 7,321 |   |
| Collateralized debt obligations                 |   |              | -      |   |   |   | - |   |   |   | 5,038 |   |   |   | 5,038 |   |
| Obligations of state and political subdivisions |   |              | -      |   |   |   | 5,131 |   |   |   | - |   |   |   | 5,131 |   |
| Tax-exempt securities                           |   |              | -      |   |   |   | 3,219 |   |   |   | - |   |   |   | 3,219 |   |
| Foreign government securities                   |   |              | -      |   |   |   | 100 |   |   |   | - |   |   |   | 100 |   |
| Equity securities                               |   |              | 247    |   |   |   | 728 |   |   |   | - |   |   |   | 975 |   |
| Total assets                                    |   | $                 | 2,186  |   |   | $ | 176,338 |   |   | $ | 5,038 |   |   | $ | 183,562 |   |

|                                                                        |   | Assets                        |   |   | Liabilities                                      |   |
|-----------------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------------------------------------------------|--------|
|                                                                        |   | CollateralizedDebtObligations |   |   | Derivatives andForward Loan SaleCommitments, Net |   |
|                                                                        |   | (In Thousands)                |   |
| Balance at January 1, 2009                                                  |   | $                             | 5,392  |   |                                             | $      | - |   |
| Transfers to/from Level 3                                                   |   |                          | -      |   |                                             |   | - |   |
| Impairment charges included in net income                                   |   |                          | (150   | )      |                                             |   | - |   |
| Decrease in fair value of securities included in other comprehensive income |   |                          | (204   | )      |                                             |   | - |   |
| Balance at December 31, 2009                                                |   |                          | 5,038  |   |                                             |   | - |   |
| Transfers to/from Level 3                                                   |   |                          | -      |   |                                             |   | 21 |   |
| Decrease in fair value of securities included in net income                 |   |                          | (408   | )      |                                             |   | - |   |
| Decrease in fair value of securities included in other comprehensive income |   |                          | (1,850 | )      |                                             |   | - |   |
| Balance at December 31, 2010                                                |   | $                             | 2,780  |   |                                             | $      | 21 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                    |   | At December 31, 2010 |   |   | Year Ended December 31, 2010 |   |
|-------------------------|--------|----------------------|--------|--------|------------------------------|--------|
|                    |   | Level 1              |   |   | Level 2                      |   |   | Level 3 |   |   | Total Losses |   |
|                    |   | (In Thousands)       |   |
| Impaired loans          |   | $                    | -      |   |                         | $      | - |   |   | $ | 1,198 |   |   | $ | 800 |   |
| Other real estate owned |   |                 | -      |   |                         |   | - |   |   |   | 1,285 |   |   |   | 326 |   |
| Goodwill                |   |                 | -      |   |                         |   | - |   |   |   | 2,540 |   |   |   | 37 |   |
| Total assets            |   | $                    | -      |   |                         | $      | - |   |   | $ | 5,023 |   |   | $ | 1,163 |   |

|                    |   | At December 31, 2009 |   |   | Year Ended December 31, 2009 |   |
|-------------------------|--------|----------------------|--------|--------|------------------------------|--------|
|                    |   | Level 1              |   |   | Level 2                      |   |   | Level 3 |   |   | Total Losses |   |
|                    |   | (In Thousands)       |   |
| Impaired loans          |   | $                    | -      |   |                         | $      | - |   |   | $ | 700 |   |   | $ | 267 |   |
| Other real estate owned |   |                 | -      |   |                         |   | - |   |   |   | 3,680 |   |   |   | - |   |
| Goodwill                |   |                 | -      |   |                         |   | - |   |   |   | 910 |   |   |   | 57 |   |
| Total assets            |   | $                    | -      |   |                         | $      | - |   |   | $ | 5,290 |   |   | $ | 324 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                       |   | December 31, 2010 |    |   | December 31, 2009 |   |
|----------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                                                                       |   | Carrying          |    |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                                                                       |   | Amount            |    |   | Value             |   |   | Amount |   |   | Value |   |
|                                                                       |   | (In Thousands)    |    |
| Financial Assets:                                                          |   |              |    |   |              |   |   |   |   |   |   |   |
| Noninterest-bearing deposits                                               |   | $                 | 11,204  |   |              | $      | 11,204 |   |   | $ | 12,889 |   |   | $ | 12,889 |   |
| Interest-bearing deposits                                                  |   |              | 2,287   |   |              |   | 2,287 |   |   |   | 2,350 |   |   |   | 2,350 |   |
| Federal funds sold                                                         |   |              | 64,830  |   |              |   | 64,830 |   |   |   | 8,965 |   |   |   | 8,965 |   |
| Trading securities                                                         |   |              | 248     |   |              |   | 248 |   |   |   | - |   |   |   | - |   |
| Available for sale securities                                              |   |              | 180,036 |   |              |   | 180,036 |   |   |   | 183,562 |   |   |   | 183,562 |   |
| Loans held for sale                                                        |   |              | 7,371   |   |              |   | 7,460 |   |   |   | 396 |   |   |   | 396 |   |
| Loans receivable, net                                                      |   |              | 606,214 |   |              |   | 608,935 |   |   |   | 607,692 |   |   |   | 609,155 |   |
| Federal Home Loan Bank stock                                               |   |              | 8,388   |   |              |   | 8,388 |   |   |   | 8,388 |   |   |   | 8,388 |   |
| Accrued interest receivable                                                |   |              | 3,113   |   |              |   | 3,113 |   |   |   | 3,341 |   |   |   | 3,341 |   |
| Forward loan sale commitments and derivative loan commitments              |   |              | 163     |   |              |   | 163 |   |   |   | - |   |   |   | - |   |
|                                                                       |   |              |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                                                     |   |              |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Savings deposits                                                           |   |              | 56,495  |   |              |   | 56,495 |   |   |   | 61,312 |   |   |   | 61,312 |   |
| Demand deposits, negotiable orders of withdrawal and money market accounts |   |              | 314,656 |   |              |   | 314,656 |   |   |   | 286,166 |   |   |   | 286,166 |   |
| Certificates of deposit                                                    |   |              | 289,563 |   |              |   | 293,035 |   |   |   | 311,309 |   |   |   | 315,777 |   |
| Mortgagors' and investors' escrow accounts                                 |   |              | 3,425   |   |              |   | 3,425 |   |   |   | 3,591 |   |   |   | 3,591 |   |
| Federal Home Loan Bank advances                                            |   |              | 114,169 |   |              |   | 118,799 |   |   |   | 116,100 |   |   |   | 118,693 |   |
| Junior subordinated debt owed to unconsolidated trust                      |   |              | 8,248   |   |              |   | 6,115 |   |   |   | 8,248 |   |   |   | 5,734 |   |
| Forward loan sale commitments and derivative loan commitments              |   |              | 184     |   |              |   | 184 |   |   |   | - |   |   |   | - |   |
| Interest rate swap agreement                                               |   |              | 129     |   |              |   | 129 |   |   |   | - |   |   |   | - |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                           |   | (Dollars in Thousands) |   |
|------------------------------------------------|--------|------------------------|--------|
| Notional amount                                |   | $                      | 8,000  |   |
|                                           |   |                   |   |   |
| Weighted average fixed pay rate                |   |                   | 2.44   | % |
|                                           |   |                   |   |   |
| Weighted average variable receive rate         |   |                   | 0.30   | % |
|                                           |   |                   |   |   |
| Weighted average maturity in years             |   |                   | 5.0    |   |
|                                           |   |                   |   |   |
| Unrealized loss relating to interest rate swap |   | $                      | 129    |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

| Condensed Balance Sheets                               |   | December 31, |   |
|--------------------------------------------------------|--------|--------------|--------|
| (In Thousands)                                         |   | 2010         |   |   | 2009 |   |
|                                                   |   |         |   |   |   |   |
| Assets:                                                |   |         |   |   |   |   |
| Cash and cash equivalents                              |   | $            | 2,315  |   |   | $ | 3,583 |   |
| Available for sale securities                          |   |         | 6,430  |   |   |   | 5,378 |   |
| Investment in Savings Institute Bank and Trust Company |   |         | 75,791 |   |   |   | 71,994 |   |
| Other assets                                           |   |         | 5,114  |   |   |   | 4,768 |   |
| Total assets                                           |   | $            | 89,650 |   |   | $ | 85,723 |   |
|                                                   |   |         |   |   |   |   |   |   |
| Liabilities and Shareholders' Equity:                  |   |         |   |   |   |   |   |   |
| Liabilities                                            |   | $            | 8,546  |   |   | $ | 8,261 |   |
| Shareholders' equity                                   |   |         | 81,104 |   |   |   | 77,462 |   |
| Total liabilities and shareholders' equity             |   | $            | 89,650 |   |   | $ | 85,723 |   |

| Condensed Statements of Operations                                              |   | Years Ended December 31, |   |
|---------------------------------------------------------------------------------|--------|--------------------------|--------|
| (In Thousands)                                                                  |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                                                            |   |                     |   |   |   |   |   |   |   |
| Interest and dividends on investments                                           |   | $                        | 128    |   |   | $ | 203 |   |   | $ | 432 |   |
| Other income                                                                    |   |                     | 223    |   |   |   | 365 |   |   |   | 188 |   |
| Total income                                                                    |   |                     | 351    |   |   |   | 568 |   |   |   | 620 |   |
|                                                                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                                              |   |                     | 492    |   |   |   | 532 |   |   |   | 728 |   |
| (Loss) income before income taxes and equity in undistributed net income (loss) |   |                     | (141   | ) |   |   | 36 |   |   |   | (108 | ) |
|                                                                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Income tax (benefit) provision                                                  |   |                     | (136   | ) |   |   | 10 |   |   |   | (35 | ) |
| (Loss) income before equity in indistributed net income (loss) of subsidiary    |   |                     | (5     | ) |   |   | 26 |   |   |   | (73 | ) |
|                                                                            |   |                     |   |   |   |   |   |   |   |   |   |   |
| Equity in undistributed net income (loss) of subsidiary                         |   |                     | 3,008  |   |   |   | 409 |   |   |   | (2,800 | ) |
| Net income (loss)                                                               |   | $                        | 3,003  |   |   | $ | 435 |   |   | $ | (2,873 | ) |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

| Condensed Statements of Cash Flows                                                       |   | Years Ended December 31, |   |
|------------------------------------------------------------------------------------------|--------|--------------------------|--------|
| (In Thousands)                                                                           |   | 2010                     |   |   | 2009 |   |   | 2008 |   |
|                                                                                     |   |                     |   |   |   |   |   |   |   |
| Cash flows from operating activities:                                                    |   |                     |   |   |   |   |   |   |   |
| Net income (loss)                                                                        |   | $                        | 3,003  |   |   | $ | 435 |   |   | $ | (2,873 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |                     |   |   |   |   |   |   |   |   |   |   |
| Equity in undistributed (income) loss of subsidiary                                      |   |                     | (3,008 | ) |   |   | (409 | ) |   |   | 2,800 |   |
| Excess tax expense from share-based payment arrangements                                 |   |                     | -      |   |   |   | 43 |   |   |   | 6 |   |
| Deferred income taxes                                                                    |   |                     | 72     |   |   |   | 624 |   |   |   | 1,685 |   |
| Other, net                                                                               |   |                     | (10    | ) |   |   | (692 | ) |   |   | (707 | ) |
| Cash provided by operating activities                                                    |   |                     | 57     |   |   |   | 1 |   |   |   | 911 |   |
|                                                                                     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                    |   |                     |   |   |   |   |   |   |   |   |   |   |
| Purchase of available for sale securities                                                |   |                     | (4,900 | ) |   |   | (3,013 | ) |   |   | (5,995 | ) |
| Proceeds from maturities of available for sale securities                                |   |                     | 4,000  |   |   |   | 2,388 |   |   |   | 6,700 |   |
| Proceeds from sale of available for sale securities                                      |   |                     | 10     |   |   |   | 2,000 |   |   |   | 2,036 |   |
| Other, net                                                                               |   |                     | 783    |   |   |   | (937 | ) |   |   | (1,985 | ) |
| Cash (used in) provided by investing activities                                          |   |                     | (107   | ) |   |   | 438 |   |   |   | 756 |   |
|                                                                                     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                    |   |                     |   |   |   |   |   |   |   |   |   |   |
| Treasury stock purchased                                                                 |   |                     | (74    | ) |   |   | (68 | ) |   |   | (2,626 | ) |
| Cash dividends on common stock                                                           |   |                     | (375   | ) |   |   | - |   |   |   | (665 | ) |
| Excess tax expense from share-based payment arrangements                                 |   |                     | -      |   |   |   | (43 | ) |   |   | (6 | ) |
| Stock offering costs                                                                     |   |                     | (769   | ) |   |   | - |   |   |   | - |   |
| Other, net                                                                               |   |                     | -      |   |   |   | (122 | ) |   |   | (6 | ) |
| Cash used in financing activities                                                        |   |                     | (1,218 | ) |   |   | (233 | ) |   |   | (3,303 | ) |
|                                                                                     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net change in cash and cash equivalents                                                  |   |                     | (1,268 | ) |   |   | 206 |   |   |   | (1,636 | ) |
|                                                                                     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of year                                           |   |                     | 3,583  |   |   |   | 3,377 |   |   |   | 5,013 |   |
|                                                                                     |   |                     |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of year                                                 |   | $                        | 2,315  |   |   | $ | 3,583 |   |   | $ | 3,377 |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

|                                                                   |   | Year Ended December 31, 2010         |   |   | Year Ended December 31, 2009 |   |
|------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------|--------|
|                                                                   |   | Fourth                               |   |   | Third                        |   |   | Second |   |   | First |   |   | Fourth |   |   | Third |   |   | Second |   |   | First |   |
|                                                                   |   | Quarter                              |   |   | Quarter                      |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |
|                                                                   |   | (In Thousands, Except Share Amounts) |   |
| Interest and dividend income                                           |   | $                                    | 9,732  |   |                         | $      | 9,876 |   |   | $ | 10,058 |   |   | $ | 10,209 |   |   | $ | 10,458 |   |   | $ | 10,723 |   |   | $ | 11,176 |   |   | $ | 11,028 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                       |   |                                 | 3,158  |   |                         |   | 3,357 |   |   |   | 3,530 |   |   |   | 3,779 |   |   |   | 4,298 |   |   |   | 4,681 |   |   |   | 4,876 |   |   |   | 5,006 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest and dividend income                                       |   |                                 | 6,574  |   |                         |   | 6,519 |   |   |   | 6,528 |   |   |   | 6,430 |   |   |   | 6,160 |   |   |   | 6,042 |   |   |   | 6,300 |   |   |   | 6,022 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                                              |   |                                 | 210    |   |                         |   | 270 |   |   |   | 252 |   |   |   | 170 |   |   |   | 200 |   |   |   | 700 |   |   |   | 1,440 |   |   |   | 490 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net interest and dividend income after provision for loan losses |   |                                 | 6,364  |   |                         |   | 6,249 |   |   |   | 6,276 |   |   |   | 6,260 |   |   |   | 5,960 |   |   |   | 5,342 |   |   |   | 4,860 |   |   |   | 5,532 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income                                                     |   |                                 | 2,610  |   |                         |   | 2,525 |   |   |   | 2,937 |   |   |   | 2,613 |   |   |   | 2,682 |   |   |   | 2,684 |   |   |   | 2,671 |   |   |   | 2,144 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expenses                                                   |   |                                 | 7,542  |   |                         |   | 7,674 |   |   |   | 8,165 |   |   |   | 8,137 |   |   |   | 7,759 |   |   |   | 7,607 |   |   |   | 8,445 |   |   |   | 7,594 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                      |   |                                 | 1,432  |   |                         |   | 1,100 |   |   |   | 1,048 |   |   |   | 736 |   |   |   | 883 |   |   |   | 419 |   |   |   | (914 | ) |   |   | 82 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax provision (benefit)                                         |   |                                 | 473    |   |                         |   | 262 |   |   |   | 335 |   |   |   | 243 |   |   |   | 263 |   |   |   | 41 |   |   |   | (295 | ) |   |   | 26 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                      |   | $                                    | 959    |   |                         | $      | 838 |   |   | $ | 713 |   |   | $ | 493 |   |   | $ | 620 |   |   | $ | 378 |   |   | $ | (619 | ) |   | $ | 56 |   |
|                                                                   |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share:                                    |   |                                 |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   | $                                    | 0.08   |   |                         | $      | 0.07 |   |   | $ | 0.06 |   |   | $ | 0.04 |   |   | $ | 0.05 |   |   | $ | 0.03 |   |   | $ | (0.05 | ) |   | $ | - |   |
| Diluted                                                                |   | $                                    | 0.08   |   |                         | $      | 0.07 |   |   | $ | 0.06 |   |   | $ | 0.04 |   |   | $ | 0.05 |   |   | $ | 0.03 |   |   | $ | (0.05 | ) |   | $ | - |   |

----

| SI FINANCIAL GROUP, INC.                   |
|--------------------------------------------|
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| DECEMBER 31, 2010, 2009 AND 2008           |

----