A MESSAGE FROM THE PRESIDENT

Growing Relationships:

I am pleased to present the 2006 Annual Report to the shareholders of SI Financial Group, Inc. Thanks to the continued implementation of our strategic business plan, new branch offices accelerated our growth into the attractive Southeastern Connecticut market area. We anticipate that continued growth from these, and the other recently opened and relocated offices, will contribute positively to the overall financial performance of the Bank in the future.

Net income for the year ended December 31, 2006 was $2.8 million, or $0.24 basic and $0.23 diluted earnings per common share, compared to $3.4 million, or $0.28 basic and diluted earnings per common share, for the year ended December 31, 2005.   Lower net income for 2006 was primarily due to higher operating expenses associated with branch expansion and compression of the net interest margin caused by an increase of the cost of funds.

Although narrowing interest margins persisted in 2006, net interest income rose 3.4% to close the year at $22.5 million.  The Company continues to position its balance sheet in an effort to mitigate the impact of the current interest rate environment and to plan for the return to more favorable market rates.

Noninterest income increased $1.9 million to $8.3 million for the year ended December 31, 2006 compared to $6.3 million for 2005. Wealth management fees increased $2.1 million, due primarily to the November 2005 acquisition of SI Trust Servicing, the Bank’s third-party trust servicing operation headquartered in Rutland, Vermont.

Total assets grew $65.2 million, or 9.4%, to $757.0 million from $691.9 million at December 31, 2005.  Contributing to this growth were increases in residential and commercial mortgage loans of $43.0 million and $17.7 million, respectively, resulting in net loan growth approaching last year’s record achievement.  Despite the rising competition for customer deposits, the Bank experienced an increase in deposits of $29.4 million, or 5.8%, which included an increase predominately in certificates of deposit accounts of $34.4 million. The expansion of branch offices, including our East Lyme and Gales Ferry, Connecticut locations, as well as attractive grand-opening promotional rates, contributed to the increase in deposits.

As in 2005, our new branch offices opened during 2006 continue to incorporate the LifeStyle Lobby™, the proprietary interior environment concept that elaborates on differentiating Savings Institute Bank & Trust from its retail competitors.  Towards the close of 2006, the Bank further differentiated itself as the first community bank in New England to introduce an internet-based checking product. Marketed as e.SI Checking™, our internet-based checking account brings both savings and interest to our customers’ checking accounts, while reducing servicing costs for the bank.

On a different note, I am pleased to report that the SI Financial Group Foundation awarded grants to 14 important community organizations, and further contributed to over 40 charitable causes during 2006.   The Foundation boldly asserted our shared commitment to the communities we serve by growing 2006 contributions by more than 30% over the prior year.

2006 has been a busy year of not only growing our numbers, but also growing both the retail and commercial relationships that will sustain our growth in the future.  For this, I pause and reflect with appreciation upon those who continue to make our forward progress possible.  With that in mind, let me thank our shareholders and customers for entrusting us with their financial assets. It is a privilege and responsibility we take to heart every day.  Let me also thank our Board of Directors and management team for their ongoing commitment and leadership contributions to the effective deployment of our strategic growth initiatives. Last, but certainly not least, let me thank all my colleagues, both back-office and in-branch, who do so much to ensure that all our customers “feel good” at a place where they can “Bank Smart”.

Rheo A. Brouillard

President and Chief Executive Officer