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Public Offering Registration - NAUGATUCK VALLEY FINANCIAL CORP - 6-18-2004

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As filed with the Securities and Exchange Commission on June 18, 2004 Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Naugatuck Valley Financial Corporation and Naugatuck Valley Savings and Loan, S.B. Employee Savings Plan
(Exact name of registrant as specified in its charter) United States (State or Other Jurisdiction of Incorporation or Organization) 6035 (Primary Standard Industrial Classification Code Number) 333 Church Street Naugatuck, Connecticut 06770 (860) 720-5000 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) John C. Roman President and Chief Executive Officer Naugatuck Valley Financial Corporation 333 Church Street Naugatuck, Connecticut 06770 (203) 720-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Douglas P. Faucette, Esquire Victor L. Cangelosi, Esquire Muldoon Murphy Faucette & Aguggia LLP 5101 Wisconsin Avenue, N.W. Washington, D.C. 20016 (202) 362-0840 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  To Be Applied For (IRS Employer Identification No.)

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. Calculation of Registration Fee 



Title of Each Class of Securities to be Registered

Amount to be Registered

Proposed Maximum Offering Price Per Unit

Proposed Maximum Aggregate Offering Price(1)

Amount of Registration Fee

Common Stock $.01 par value Participation Interests (1) (2) (3) (4)

2,975,625 Shares(2) (3)

$10.00 —

$29,756,250 $

$3,771 (4)

Includes shares to be issued to the Naugatuck Valley Savings and Loan Foundation, a private foundation. Estimated solely for the purpose of calculating the registration fee. In addition, pursuant to Rule 416(c) under the Securities Act, this registration statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein. The securities of Naugatuck Valley Financial Corporation to be purchased by Naugatuck Valley Savings and Loan, S.B. Employee Savings Plan are included in the amount shown for common stock. Accordingly, no separate fee is required for the participation interests. In accordance with Rule 457(h) of the Securities Act, as amended, the registration fee has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such Plan.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

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INTERESTS IN NAUGATUCK VALLEY SAVINGS AND LOAN 401(k) PROFIT SHARING PLAN AND TRUST AND OFFERING OF SHARES OF NAUGATUCK VALLEY FINANCIAL CORPORATION COMMON STOCK ($.01 PAR VALUE)
This prospectus supplement relates to the offer and sale to participants in the Naugatuck Valley Savings and Loan 401(k) Profit Sharing Plan and Trust of participation interests and shares of common stock of Naugatuck Valley Financial Corporation in connection with the Company’s initial public offering. 401(k) Plan participants may now direct the trustee of the 401(k) Plan to use their current account balances to subscribe for and purchase shares of Naugatuck Valley Financial Corporation common stock through the Naugatuck Valley Financial Corporation Stock Fund. Based upon the value of the 401(k) Plan assets as of , 2004, the trustee of the 401(k) Plan may purchase up to shares of Naugatuck Valley Financial Corporation common stock, assuming a purchase price of $10.00 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest all or a portion of their 401(k) Plan accounts in Naugatuck Valley Financial Corporation common stock. The prospectus dated , 2004 of Naugatuck Valley Financial Corporation, which we have attached to this prospectus supplement, includes detailed information regarding the offering of shares of Naugatuck Valley Financial Corporation common stock and the financial condition, results of operations and business of Naugatuck Valley Savings and Loan. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference. Please refer to “Risk Factors” beginning on page of the prospectus. Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, nor any other state or federal agency or any state securities commission, has approved or disapproved these securities. Any representation to the contrary is a criminal offense. These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. This prospectus supplement may be used only in connection with offers and sales by Naugatuck Valley Financial Corporation of interests or shares of common stock under the 401(k) Plan to employees of Naugatuck Valley Savings and Loan. No one may use this prospectus supplement to re-offer or resell interests or shares of common stock acquired through the 401(k) Plan. You should rely only on the information contained in this prospectus supplement and the attached prospectus. Neither Naugatuck Valley Financial Corporation, Naugatuck Valley Mutual, MHC, Naugatuck Valley Savings and Loan nor the 401(k) Plan have authorized anyone to provide you with information that is different. This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock shall under any circumstances imply that there has been no change in the affairs of Naugatuck Valley Savings and Loan or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement. The date of this Prospectus Supplement is , 2004.

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THE OFFERING Securities Offered Election to Purchase Naugatuck Valley Financial Corporation Common

1 1 1

Stock in the Reorganization and Stock Offering Value of Participation Interests Method of Directing Transfer Time for Directing Transfer Irrevocability of Transfer Direction Purchase Price of Naugatuck Valley Financial Corporation Common Stock Nature of a Participant’s Interest in Naugatuck Valley Financial Corporation Common Stock Voting and Tender Rights of Naugatuck Valley Financial Corporation Common Stock DESCRIPTION OF THE 401(k) PLAN Introduction Eligibility and Participation Contributions Under the 401(k) Plan Limitations on Contributions 401(k) Plan Investments Benefits Under the 401(k) Plan Withdrawals and Distributions from the 401(k) Plan ADMINISTRATION OF THE 401(K) PLAN Trustee Reports to 401(k) Plan Participants Plan Administrator Amendment and Termination Merger, Consolidation or Transfer Federal Income Tax Consequences Restrictions on Resale SEC Reporting and Short-Swing Profit Liability LEGAL OPINION

1 2 2 2 2 2 2 3 3 3 3 4 5 7 7 8 8 8 8 9 9 9 10 11 11

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THE OFFERING Securities Offered The securities offered in connection with this prospectus supplement are participation interests in the 401(k) Plan. Assuming a purchase price of $10.00 per share, the trustee may acquire up to shares of Naugatuck Valley Financial Corporation common stock for the Naugatuck Valley Financial Corporation Stock Fund. The interests offered under this prospectus supplement are conditioned on the completion of the Reorganization and Stock Offering of Naugatuck Valley Savings and Loan. Certain subscription rights and purchase limitations also govern your investment in the Naugatuck Valley Financial Corporation Stock Fund in connection with the Reorganization and Stock Offering. See: Persons Who Can Order Stock in the Offering” and “Purchase Limitations” in the prospectus attached to this prospectus supplement for further discussion of these subscription rights and purchase limitations. This prospectus supplement contains information regarding the 401(k) Plan. The attached prospectus contains information regarding the Reorganization and Stock Offering and the financial condition, results of operations and business of Naugatuck Valley Savings and Loan. The address of the principal executive office of Naugatuck Valley Savings and Loan is 333 Church Street, Naugatuck, Connecticut 06770. The telephone number of Naugatuck Valley Savings and Loan is (203) 720-5000. Election to Purchase Naugatuck Valley Financial Corporation Common Stock in the Reorganization and Stock Offering In connection with the Reorganization and Stock Offering of Naugatuck Valley Savings and Loan, you may direct the trustee of the 401(k) Plan to transfer all or part of the funds that represent your current beneficial interest in the assets of the 401(k) Plan to the Naugatuck Valley Financial Corporation Stock Fund. The 401(k) Plan trustee will subscribe for Naugatuck Valley Financial Corporation common stock offered for sale in connection with the Reorganization and Stock Offering in accordance with each participant’s direction. If there is not enough common stock in the Reorganization and Stock Offering to fill all subscriptions, the common stock will be apportioned and the trustee for the 401(k) Plan may not be able to purchase all of the common stock you requested. In such a case, if you elect, the trustee will purchase shares in the open market on your behalf, after the Reorganization and Stock Offering, to fulfill your initial request. The trustee may make such purchases at prices higher than the initial public offering price. All plan participants are eligible to direct a transfer of funds to the Naugatuck Valley Financial Corporation Stock Fund. However, transfer directions are subject to subscription rights and purchase priorities. Your order for shares in the Stock Offering will be filled based on your subscription rights. Naugatuck Valley Financial Corporation has granted rights to subscribe for shares of Naugatuck Valley Financial Corporation common stock to the following persons in the following order of priority: (1) persons with $50 or more on deposit at Naugatuck Valley Savings and Loan as of April 30, 2003; (2) the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan; (3) persons with $50 or more on deposit at Naugatuck Valley Savings and Loan as of , 2004; and (4) Naugatuck Valley Savings and Loan’s depositors as of . If you fall into one of the above subscription offering categories, you have subscription rights to purchase shares of common stock in the offering and you may use funds in your 401(k) Plan account to pay for your purchase of shares of Naugatuck Valley Financial Corporation common stock. Value of Participation Interests As of , 2004, the market value of the assets of the 401(k) Plan equaled approximately $ . The plan administrator has informed each participant of the value of his or her beneficial interest in the 401(k) Plan. The value of 401(k) Plan assets represents past contributions made to the 401(k) Plan on your behalf, plus or minus earnings or losses on the contributions, less previous withdrawals and loans. 1

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Method of Directing Transfer The last two pages of this prospectus supplement contain a form for you to direct a transfer to the Naugatuck Valley Financial Corporation Stock Fund (the “Investment Form”). If you wish to transfer all, or part, in multiples of not less than 1%, of your beneficial interest in the assets of the 401(k) Plan to the Naugatuck Valley Financial Corporation Stock Fund, you should complete the Investment Form. If you do not wish to make such an election at this time, you do not need to take any action. The minimum investment in the Naugatuck Valley Financial Corporation Stock Fund during the initial public offering is $250.00. Time for Directing Transfer You must submit your direction to transfer amounts to the Naugatuck Valley Financial Corporation Stock Fund in connection with the Reorganization and Stock Offering by the deadline of 5:00 p.m. on , 2004. You should return the Investment Form to Kathleen A. McPadden in the Human Resources Department. Irrevocability of Transfer Direction You cannot change your direction to transfer amounts credited to your account under the 401(k) Plan to the Naugatuck Valley Financial Corporation Stock Fund prior to the completion of the Reorganization and Stock Offering. Following the closing of the Reorganization and Stock offering and the initial purchase of shares in the Naugatuck Valley Financial Corporation Stock Fund, you may change your investment directions, in accordance with the terms of the 401(k) Plan. Purchase Price of Naugatuck Valley Financial Corporation Common Stock The trustee will use the funds transferred to the Naugatuck Valley Financial Corporation Stock Fund to purchase shares of Naugatuck Valley Financial Corporation common stock in the Reorganization and Stock Offering. The trustee will pay the same price for shares of Naugatuck Valley Financial Corporation common stock as all other persons who purchase shares of Naugatuck Valley Financial Corporation common stock in the offering. If there is not enough common stock in the offering to fill all subscriptions, the common stock will be apportioned and the trustee for the 401(k) Plan may not be able to purchase all of the common stock you requested. If you elect, the trustee will purchase shares on your behalf after the Reorganization and Stock Offering in the open market, to fulfill your initial request. The trustee may make such purchases at prices higher or lower than the $10.00 offering price. Nature of a Participant’s Interest in Naugatuck Valley Financial Corporation Common Stock The trustee will hold Naugatuck Valley Financial Corporation common stock in the name of the 401(k) Plan. The trustee will credit shares of common stock acquired at your direction to your account under the 401(k) Plan. Therefore, the investment designations of other 401(k) Plan participants should not affect earnings on your 401(k) Plan account. Voting and Tender Rights of Naugatuck Valley Financial Corporation Common Stock The trustee generally will exercise voting and tender rights attributable to all Naugatuck Valley Financial Corporation common stock held by the Naugatuck Valley Financial Corporation Stock Fund, as directed by participants with interests in the Naugatuck Valley Financial Corporation Stock Fund. With respect to each matter as to which holders of Naugatuck Valley Financial Corporation common stock have a right to vote, you will have voting instruction rights that reflect your proportionate interest in the Naugatuck Valley Financial Corporation Stock Fund. The number of shares of Naugatuck Valley Financial Corporation common stock held in the Naugatuck Valley Financial Corporation Stock Fund voted for and against each matter will be proportionate to the number of voting instruction rights exercised. If there is a tender offer for Naugatuck Valley Financial Corporation common stock, the 401(k) Plan allots each participant a number of tender instruction rights reflecting the participant’s proportionate 2

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interest in the Naugatuck Valley Financial Corporation Stock Fund. The percentage of shares of Naugatuck Valley Financial Corporation common stock held in the Naugatuck Valley Financial Corporation Stock Fund that will be tendered will be the same as the percentage of the total number of tender instruction rights exercised in favor of the tender offer. The remaining shares of Naugatuck Valley Financial Corporation common stock held in the Naugatuck Valley Financial Corporation Stock Fund will not be tendered. The 401(k) Plan provides that participants will exercise their voting instruction rights and tender instruction rights on a confidential basis. DESCRIPTION OF THE 401(k) PLAN Introduction Naugatuck Valley Savings and Loan originally adopted the 401(k) Plan effective May 1, 1997. The 401(k) Plan was subsequently amended and restated, most recently, effective January 1, 2002. Naugatuck Valley Savings and Loan intends for the 401(k) Plan to comply, in form and in operation, with all applicable provisions of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended, or “ERISA.” Naugatuck Valley Savings and Loan may change the 401(k) Plan from time to time in the future to ensure continued compliance with these laws. Naugatuck Valley Savings and Loan may also amend the 401(k) Plan from time to time in the future to add, modify, or eliminate certain features of the plan, as it sees fit. Federal law provides you with various rights and protections as a participant in the 401(k) Plan, which is governed by ERISA. However, the Pension Benefit Guaranty Corporation does not guarantee your benefits under the 401(k) Plan. Reference to Full Text of the Plan. The following portions of this prospectus supplement summarize the material provisions of the 401(k) Plan. Naugatuck Valley Savings and Loan qualifies this summary in its entirety by reference to the full text of the 401(k) Plan. You may obtain copies of the full 401(k) Plan document including any amendments to the plan and a summary plan description for the 401(k) Plan, by contacting Kathleen A. McPadden in the Human Resources Department. You should carefully read the 401(k) Plan documents to understand your rights and obligations under the plan. Eligibility and Participation Eligible employees of Naugatuck Valley Savings and Loan who have attained age 21 and completed 6 months of employment with Naugatuck Valley Savings and Loan may begin to make pre-tax salary deferrals into the 401(k) Plan as of the January 1st or July 1st coinciding with or earlier of next following the date they have satisfied the eligibility requirements. As of Plan. , 2004, of the employees of Naugatuck Valley Savings and Loan participated in the 401(k)

Contributions Under the 401(k) Plan Employee Pre-Tax Salary Deferrals. Subject to certain IRS limitations, the 401(k) Plan permits each participant to make pre-tax salary deferrals to the 401(k) Plan each payroll period of up to 100% of the participant’s pay. For purposes of the 401(k) Plan, a participant’s “pay” is defined as a participant’s wages, tips, and other compensation reportable on IRS Form W-2, including salary elective deferrals and excluding compensation paid while not a participant in the 401(k) Plan. Participants may change their rate of pre-tax deferrals on the first day of January and July by completing a form and submitting it to the Human Resources Department. Naugatuck Valley Savings and Loan Matching Contributions. The 401(k) Plan provides that Naugatuck Valley Savings and Loan will make matching contributions on behalf of each participant equal to a discretionary percentage of a participant’s elective deferrals to the 401(k) Plan. Naugatuck Valley Savings and Loan makes matching contributions only for those participants who make elective deferrals to 3

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the 401(k) Plan. If a participant stops making deferrals to the 401(k) Plan, Naugatuck Valley Savings and Loan will cease its matching contributions on the participant’s behalf. Naugatuck Valley Savings and Loan Discretionary Contributions. Naugatuck Valley Savings and Loan, in its sole discretion, may also make additional discretionary contributions, in amounts specified by the Board of Directors of Naugatuck Valley Savings and Loan. These discretionary contributions are allocated to each participant in the 401(k) Plan who is actively employed by Naugatuck Valley Savings and Loan on the last business day of the Plan Year and has completed a year of service for Naugatuck Valley Savings and Loan during the Plan Year. Rollover Contributions. Naugatuck Valley Savings and Loan allows employees who receive a distribution from a previous employer’s tax-qualified employee benefit plan to deposit that distribution into a Rollover Contribution account under the 401(k) Plan, provided the rollover contribution satisfies IRS requirements. Limitations on Contributions Limitation on Employee Salary Deferrals. Although the 401(k) Plan permits you to defer up to 100% of your pay, by law your total deferrals under the 401(k) Plan, together with similar plans, may not exceed $13,000 for 2004. Employees who are age 50 and over may also make additional, “catch-up” contributions to the plan, up to a maximum of $3,000 for 2004. The Internal Revenue Service periodically increases these limitations. A participant who exceeds these limitations must include any excess deferrals in gross income for federal income tax purposes in the year of deferral. In addition, the participant must pay federal income taxes on any excess deferrals when distributed by the 401(k) Plan to the participant, unless the plan distributes the excess deferrals and any related income no later than the first April 15th following the close of the taxable year in which the participant made the excess deferrals. Any income on excess deferrals distributed before such date is treated, for federal income tax purposes, as earned and received by the participant in the taxable year of the distribution. Limitation on Annual Additions and Benefits. As required by the Internal Revenue Code, the 401(k) Plan provides that the total amount of contributions and forfeitures (annual additions) credited to a participant during any year under all defined contribution plans of Naugatuck Valley Savings and Loan (including the 401(k) Plan and the proposed Naugatuck Valley Savings and Loan Employee Stock Ownership Plan) may not exceed the lesser of 100% of the participant’s annual compensation or $41,000 for 2004. Limitation on Plan Contributions for Highly Compensated Employees. Special provisions of the Internal Revenue Code limit the amount of pre-tax and matching contributions that may be made to the 401(k) Plan in any year on behalf of highly compensated employees, in relation to the amount of pre-tax and matching contributions made by or on behalf of all other employees eligible to participate in the 401(k) Plan. If pre-tax and matching contributions exceed these limitations, the plan must adjust the contribution levels for highly compensated employees. In general, a highly compensated employee includes any employee who (1) was a five percent owner of the sponsoring employer at any time during the year or the preceding year, or (2) had compensation for the preceding year in excess of $90,000 and, if the sponsoring employer so elects, was in the top 20% of employees by compensation for such year. The preceding dollar amount applies for 2004, and may be adjusted periodically by the IRS. Top-Heavy Plan Requirements. If the 401(k) Plan is a Top-Heavy Plan for any calendar year, Naugatuck Valley Savings and Loan may be required to make certain minimum contributions to the 401(k) Plan on behalf of non-key employees. In general, the 401(k) Plan will be treated as a “Top-Heavy Plan” for any calendar year if, as of the last day of the preceding calendar year, the aggregate balance of the accounts of Key Employees exceeds 60% of the aggregate balance of the accounts of all employees 4

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under the plan. A Key Employee is generally any employee who, at any time during the calendar year or any of the four preceding years, is:

(1) an officer of Naugatuck Valley Savings and Loan whose annual compensation exceeds $130,000; (2) a 5% owner of the employer, meaning an employee who owns more than 5% of the outstanding stock of Naugatuck Valley Financial Corporation, or who owns stock that possesses more than 5% of the total combined voting power of all stock of Naugatuck Valley Financial Corporation; or (3) a 1% owner of the employer, meaning an employee who owns more than 1% of the outstanding stock of Naugatuck Valley Financial Corporation, or who owns stock that possesses more than 1% of the total combined voting power of all stock of Naugatuck Valley Financial Corporation, and whose annual compensation exceeds $150,000. The foregoing dollar amounts are for 2004. 401(k) Plan Investments Assets in the 401(k) Plan Trust are currently invested in the funds specified below. The annual percentage return on these funds (net of fees) for the prior three years was:

Equity Funds

2003

2002

2001

ING VP International Value Portfolio — Class R Janus Aspen Series Worldwide Growth Portfolio — Institutional Shares AIM V.I. Capital Appreciation Fund — Series I Shares FTVIP Franklin Small Cap Value Securities Fund — Class 2 ING Baron Small Cap Growth Portfolio — Initial Class Lord Abbett Mid-Cap Value Portfolio — Class VC Fidelity VIP Contrafund Portfolio — Initial Class ING T. Rowe Price Growth Equity Portfolio — Initial Class ING VP Index Plus LargeCap Portfolio — Class R Lord Abbett Growth and Income Portfolio — Class VC Calvert Social Balanced Portfolio ING VP Strategic Allocation Balanced Portfolio — Class R ING VP Strategic Allocation Growth Portfolio — Class R ING VP Strategic Allocation Income Portfolio — Class R ING PIMCO Total Return Portfolio — Initial Class ING Fixed Account ING VP Money Market Portfolio — Class R

%

%

%

* VP refers to Variable Portfolio * VI refers to Variable Insurance * VIP refers to Variable Insurance Product Fund ING VP International Value Portfolio — Class R. Investments primarily in foreign companies with market capitalizations greater than $1 billion, but may hold up to 25 percent of assets in companies with smaller market capitalization. Applies the technique of “value investment” by seeking stocks that research indicates are priced below their long-term value. Janus Aspen Series Worldwide Growth Portfolio — Institutional Shares. Seeks long-term growth of capital in a manner consistent with the preservation of capital. 5

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AIM V.I. Capital Appreciation Fund — Series I Shares. Seeks growth of capital by investing principally in common stocks of companies the portfolio managers believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. FTVIP Franklin Small Cap Value Securities Fund — Class 2. Seeks long-term total return. The fund normally invests at least 80 percent of its net assets in investments of small capitalization companies. ING Baron Small Cap Growth Portfolio — Initial Class. Seeks capital appreciation. Investments primarily (at least 80 percent of total assets under normal circumstances) in securities of small companies with market values under $2.5 billion as measured at the time of purchase. Lord Abbett Mid-Cap Value Portfolio — Class VC. Seeks capital appreciation through investments, primarily in equity securities, which are believed to be undervalued in the marketplace. Fidelity VIP Contrafund Portfolio — Initial Class. Seeks long-term capital appreciation and normally invests primarily in common stocks of companies whose value it believes is not fully recognized by the public. ING T. Rowe Price Growth Equity Portfolio — Initial Class. Seeks long-term capital growth, and secondarily, increasing dividend income. Invests primarily (at least 80 percent of net assets under normal circumstances) in common stocks. The Portfolio concentrates its investments in growth companies. ING VP Index Plus LargeCap Portfolio — Class R. Seeks to outperform the total return performance of the standard & Poor’s 500 Composite Index (S&P 500), while maintaining a market level of risk. Lord Abbett Growth and Income Portfolio — Class VC. Seeks long-term growth of capital and income without excessive fluctuations in market value. Calvert Social Balanced Portfolio. Seeks to achieve a competitive total return through an actively managed nondiversified portfolio of stocks, bonds and money market instruments which offer income and capital growth opportunity and which satisfy the investment and social criteria for the Portfolio. ING VP Strategic Allocation Balanced Portfolio — Class R. Seeks to provide total return (i.e., income and capital appreciation, both realized and unrealized). ING VP Strategic Allocation Growth Portfolio — Class R. Seeks to provide capital appreciation for investors seeking capital appreciation who generally have an investment horizon exceeding 15 years and a high level of risk tolerance. ING VP Strategic Allocation Income Portfolio — Class R. Seeks to provide total return consistent with preservation of capital for investors primarily seeking total return consistent with capital preservation who generally have an investment horizon exceeding five years and a low level of risk tolerance. ING PIMCO Total Return Portfolio — Initial Class. Seeks maximum total return, consistent with capital preservation and prudent investment management. ING Fixed Account. Stability of principal is the primary objective of this investment option. The ING Fixed Account guarantees a minimum rate of interest for the life of the contract, and may credit a higher interest rate, from time to time. ING VP Money Market Portfolio — Class R. Seeks to provide high current return, consistent with preservation of capital and liquidity, through investment in high-quality money market instruments. The 401(k) Plan now offers the Naugatuck Valley Financial Corporation Stock Fund as an additional choice to the investment alternatives described above. The Naugatuck Valley Financial Corporation Stock Fund invests primarily in the common stock of Naugatuck Valley Financial Corporation. Participants in the 401(k) Plan may direct the trustee to invest all or a portion of their 401(k) Plan account balances in the Naugatuck Valley Financial Corporation Stock Fund. 6

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The Naugatuck Valley Financial Corporation Stock Fund consists of investments in the common stock of Naugatuck Valley Financial Corporation made on the effective date of the Reorganization and Stock Offering. Each participant’s proportionate undivided beneficial interest in the Naugatuck Valley Financial Corporation Stock Fund is measured by units. The daily unit value is calculated by determining the market value of the common stock held and adding to that any cash held by the trustee. This total will be divided by the number of units outstanding to determine the unit value of the Naugatuck Valley Financial Corporation Stock Fund. Upon payment of a cash dividend, the trustee will determine the unit value prior to distributing the dividend. The trustee may use the dividend to purchase shares of Naugatuck Valley Financial Corporation common stock. The Trustee will, to the extent practicable, use amounts held in the Naugatuck Valley Financial Corporation Stock Fund to purchase shares of the common stock. Pending investment in the common stock, assets held in the Naugatuck Valley Financial Corporation Stock Fund will be placed in bank deposits and other short-term investments. As of the date of this prospectus supplement, no shares of Naugatuck Valley Financial Corporation common stock have been issued or are outstanding, and there is no established market for Naugatuck Valley Financial Corporation common stock. Accordingly, there is no record of the historical performance of the Naugatuck Valley Financial Corporation Stock Fund. Performance of the Naugatuck Valley Financial Corporation Stock Fund depends on a number of factors, including the financial condition and profitability of Naugatuck Valley Savings and Loan and general stock market conditions. Once you have submitted your Investment Form, you may not change your investment directions until after the completion of the Reorganization and Stock Offering. After the Reorganization and Stock Offering, you may change your investment directions in accordance with the terms of the 401(k) Plan. Benefits Under the 401(k) Plan Vesting. All participants are 100% vested in their pre-tax salary deferral and matching contribution account balances in the 401(k) Plan. This means that participants have a non-forfeitable right to these funds and any earnings on the funds at all times. Plan participants vest in their discretionary contributions (if any) at a rate of 20% after the first two years of employment and 20% each additional year thereafter. Withdrawals and Distributions from the 401(k) Plan Withdrawals Before Termination of Employment. You may receive in-service distributions from the 401(k) Plan under limited circumstances in the form hardship withdrawals and participant loans. In order to qualify for a hardship withdrawal, you must have an immediate and substantial need to meet certain expenses and have no other reasonably available resources to meet the financial need. If you qualify for a hardship distribution, the trustee will make the distribution proportionately from the investment funds in which you have invested your account balances. Participant loans are approved by the 401(k) Plan Administrator. If you qualify for a participant loan, the trustee will make a distribution proportionately from the investment funds in which you have invested your account balances. You may obtain information on the participant loan program from the Human Resources Department. Distribution Upon Retirement or Disability. The standard form of benefit upon retirement or disability is a lump sum payment. However, if the value of a participant’s accounts under the 401(k) Plan exceeds $5,000, the participant may elect to defer the lump sum payment until after retirement. However, the IRS requires that participants receive at least a portion of their plan accounts by the April 1st of the calendar year following the calendar year in which they retire (or terminate service due to a disability) or the calendar year in which they reach age 70 1/2. Participants may also choose to roll over all or a portion of their plan accounts to an Individual Retirement Account (IRA), or to another employer’s qualified plan, if the other employer’s plan permits rollover contributions. 7

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Distribution Upon Death. A participant’s designated beneficiary will receive the full value of a participant’s accounts under the 401(k) Plan upon the participant’s death. If the participant did not make a valid election regarding the form of payment prior to death, the beneficiary will receive a lump sum payment as soon as administratively possible. If the participant made a valid payment election, or was otherwise scheduled to receive a deferred lump sum payment, the beneficiary will generally receive a lump sum payment on the date elected by the participant. Under certain circumstances, however, payment may be made on an earlier date. Distribution Upon Termination for Any Other Reason. If your 401(k) Plan accounts total $5,000 or less, you will receive a lump sum payment as soon as administratively possible after your termination of employment. If the value of your 401(k) Plan accounts exceeds $5,000, you will receive a lump sum payment on your normal retirement date. However, you may elect to receive the value of your vested accounts in a lump sum payment prior to your normal retirement date. You may also request that the trustee transfer the value of your accounts to an Individual Retirement Account (IRA) or to another employer’s qualified plan, if the other employer’s plan permits rollover contributions. Nonalienation of Benefits. Except with respect to federal income tax withholding, and as provided for under a qualified domestic relations order, benefits payable under the 401(k) Plan will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to benefits payable under the 401(k) Plan will be void. Applicable federal tax law requires the 401(k) Plan to impose substantial restrictions on your right to withdraw amounts held under the plan before your termination of employment with Naugatuck Valley Savings and Loan. Federal law may also impose an excise tax on withdrawals from the 401(k) Plan before you attain 59 1/2 years of age, regardless of whether the withdrawal occurs during your employment with Naugatuck Valley Savings and Loan or after your termination of employment. ADMINISTRATION OF THE 401(k) PLAN Trustee The trustee of the 401(k) Plan is the named fiduciary of the 401(k) Plan for purposes of ERISA. The board of directors of Naugatuck Valley Savings and Loan appoints the trustee to serve at its pleasure. The board of directors has appointed as the trustee for the Naugatuck Valley Financial Corporation Stock Fund. The trustee receives, holds and invests the contributions to the 401(k) Plan in trust and distributes them to participants and beneficiaries in accordance with the terms of the 401(k) Plan and the directions of the plan administrator. The trustee is responsible for the investment of the trust assets, as directed by the participants. Reports to 401(k) Plan Participants The plan administrator furnishes participants quarterly statements that show the balance in their accounts as of the statement date, contributions made to their accounts during that period and any additional adjustments required to reflect earnings or losses. Plan Administrator Naugatuck Valley Savings and Loan currently acts as plan administrator for the 401(k) Plan. The plan administrator handles the following administrative functions: interpreting the provisions of the plan, prescribing procedures for filing applications for benefits, preparing and distributing information explaining the plan, maintaining plan records, books of account and all other data necessary for the proper administration of the plan, preparing and filing all returns and reports required by the U.S. Department of 8

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Labor and the IRS and making all required disclosures to participants, beneficiaries and others under ERISA. Amendment and Termination Naugatuck Valley Savings and Loan expects to continue the 401(k) Plan indefinitely. Nevertheless, Naugatuck Valley Savings and Loan may terminate the 401(k) Plan at any time. If Naugatuck Valley Savings and Loan terminates the 401(k) Plan in whole or in part, all affected participants become fully vested in their accounts, regardless of other provisions of the 401(k) Plan. Naugatuck Valley Savings and Loan reserves the right to make, from time to time, changes which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries. Naugatuck Valley Savings and Loan may amend the plan, however, as necessary or desirable, in order to comply with ERISA or the Internal Revenue Code. Merger, Consolidation or Transfer If the 401(k) Plan merges or consolidates with another plan or transfers the trust assets to another plan, and either the 401(k) Plan or the other plan is subsequently terminated, the 401(k) Plan requires that you receive a benefit immediately after the merger, consolidation or transfer that would equal or exceed the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer, if the 401(k) Plan had terminated at that time. Federal Income Tax Consequences The following summarizes only briefly the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences of the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, applicable state and local income tax laws may have different tax consequences than the federal income tax laws. 401(k) Plan participants should consult a tax advisor with respect to any transaction involving the 401(k) Plan, including any distribution from the 401(k) Plan. As a “tax-qualified retirement plan,” the Internal Revenue Code affords the 401(k) Plan certain tax advantages, including the following:

(1) The sponsoring employer may take an immediate tax deduction for the amount contributed to the plan each year; (2) participants pay no current income tax on amounts contributed by the employer on their behalf; and (3) earnings of the plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments. Naugatuck Valley Savings and Loan administers the 401(k) Plan to comply in operation with the requirements of the Internal Revenue Code as of the applicable effective date of any change in the law. If Naugatuck Valley Savings and Loan should receive an adverse determination letter from the IRS regarding the 401(k) Plan’s tax exempt status, all participants would generally recognize income equal to their vested interests in the 401(k) Plan, the participants would not be permitted to transfer amounts distributed from the 401(k) Plan to an Individual Retirement Account or to another qualified retirement plan, and Naugatuck Valley Savings and Loan would be denied certain tax deductions taken in connection with the 401(k) Plan. Lump Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant qualifies as a lump sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59 1/2; and consists of the balance credited to the participant under this plan and all other profit sharing plans, if any, 9

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maintained by Naugatuck Valley Savings and Loan. The portion of any lump sum distribution included in taxable income for federal income tax purposes consists of the entire amount of the lump sum distribution, less the amount of after-tax contributions, if any, made to any other profit-sharing plans maintained by Naugatuck Valley Savings and Loan, if the distribution includes those amounts. Naugatuck Valley Financial Corporation Common Stock Included in Lump Sum Distribution. If a lump sum distribution includes Naugatuck Valley Financial Corporation common stock, the distribution generally is taxed in the manner described above. The total taxable amount is reduced, however, by the amount of any net unrealized appreciation on Naugatuck Valley Financial Corporation common stock; that is, the excess of the value of Naugatuck Valley Financial Corporation common stock at the time of the distribution over the cost or other basis of the securities to the trust. The tax basis of Naugatuck Valley Financial Corporation common stock, for purposes of computing gain or loss on a subsequent sale, equals the value of Naugatuck Valley Financial Corporation common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Naugatuck Valley Financial Corporation common stock, to the extent of the net unrealized appreciation at the time of distribution, is long-term capital gain, regardless of how long you hold the Naugatuck Valley Financial Corporation common stock, or the “holding period.” Any gain on a subsequent sale or other taxable disposition of Naugatuck Valley Financial Corporation common stock that exceeds the amount of net unrealized appreciation upon distribution is considered long-term capital gain, regardless of the holding period. Any gain on a subsequent sale or other taxable disposition of Naugatuck Valley Financial Corporation common stock that exceeds the amount of net unrealized appreciation at the time of distribution is considered either short-term or long-term capital gain, depending upon the length of the holding period. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed under IRS regulations. We have provided you with a brief description of the material federal income tax aspects of the 401(k) Plan that are generally applicable under the Internal Revenue Code. We do not intend this description to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the 401(k) Plan. Accordingly, you should consult a tax advisor concerning the federal, state and local tax consequences of participating in and receiving distributions from the 401(k) Plan. Restrictions on Resale Any “affiliate” of Naugatuck Valley Financial Corporation under Rules 144 and 405 of the Securities Act of 1933, as amended, who receives a distribution of common stock under the 401(k) Plan, may re-offer or resell such shares only under a registration statement filed under the Securities Act of 1933, as amended, assuming the availability of a registration statement, or under Rule 144 or some other exemption from these registration requirements. An “affiliate” of Naugatuck Valley Savings and Loan is someone who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, Naugatuck Valley Savings and Loan. Generally, a director, principal officer or major shareholder of a corporation is deemed to be an “affiliate” of that corporation. Any person who may be an “affiliate” of Naugatuck Valley Savings and Loan may wish to consult with counsel before transferring any common stock they own. In addition, participants should consult with counsel regarding the applicability to them of Section 16 of the Securities Exchange Act of 1934, as amended, which may restrict the sale of Naugatuck Valley Financial Corporation common stock acquired under the 401(k) Plan or other sales of Naugatuck Valley Financial Corporation common stock. Persons who are not deemed to be “affiliates” of Naugatuck Valley Savings and Loan at the time of resale may resell freely any shares of Naugatuck Valley Financial Corporation common stock distributed to them under the 401(k) Plan, either publicly or privately, without regard to the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, or compliance with the restrictions and conditions contained in the exemptions available under federal law. A person deemed an “affiliate” of Naugatuck Valley Savings and Loan at the time of a proposed resale may publicly resell common stock 10

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only under a “re-offer” prospectus or in accordance with the restrictions and conditions contained in Rule 144 of the Securities Act of 1933, as amended, or some other exemption from registration, and may not use this prospectus in connection with any such resale. In general, Rule 144 restricts the amount of common stock which an affiliate may publicly resell in any three-month period to the greater of one percent of Naugatuck Valley Financial Corporation common stock then outstanding or the average weekly trading volume reported on the Nasdaq Stock Market during the four calendar weeks before the sale. Affiliates may sell only through brokers without solicitation and only at a time when Naugatuck Valley Financial Corporation is current in filing all required reports under the Securities Exchange Act of 1934, as amended. SEC Reporting and Short-Swing Profit Liability Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on officers, directors and persons who beneficially own more than ten percent of public companies such as Naugatuck Valley Financial Corporation Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the filing of reports of beneficial ownership. Within ten days of becoming a person required to file reports under Section 16(a), such person must file a Form 3 reporting initial beneficial ownership with the Securities and Exchange Commission. Such persons must also report periodically certain changes in beneficial ownership involving the allocation or reallocation of assets held in their 401(k) Plan accounts, either on a Form 4 within two days after a transaction, or annually on a Form 5 within 45 days after the close of a company’s fiscal year. In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by Naugatuck Valley Financial Corporation of profits realized from the purchase and sale or sale and purchase of its common stock within any six-month period by any officer, director or person who beneficially owns more than ten percent of the common stock. The SEC has adopted rules that exempt many transactions involving the 401(k) Plan from the “short-swing” profit recovery provisions of Section 16(b). The exemptions generally involve restrictions upon the timing of elections to buy or sell employer securities for the accounts of any officer, director or person who beneficially owns more than ten percent of the common stock. Except for distributions of the common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons who are subject to Section 16(b) may be required, under limited circumstances involving the purchase of common stock within six months of the distribution, to hold the shares of common stock distributed from the 401(k) Plan for six months after the distribution date. LEGAL OPINION The validity of the issuance of the common stock of Naugatuck Valley Financial Corporation will be passed upon by Muldoon Murphy Faucette & Aguggia LLP, Washington, D.C. Muldoon Murphy Faucette & Aguggia LLP acted as special counsel for Naugatuck Valley Savings and Loan in connection with the Stock Offering. 11

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NAUGATUCK VALLEY SAVINGS AND LOAN 401(k) PROFIT SHARING PLAN AND TRUST INVESTMENT FORM Name of Plan Participant:

Social Security Number:

1. Instructions. In connection with the offering to the public of the common stock of Naugatuck Valley Savings and Loan 401(k) Profit Sharing Plan and Trust (the “Plan”) now permits participants to direct their current Plan account balances into a new fund: the Naugatuck Valley Financial Corporation Stock Fund (“Employer Stock Fund”). The percentage of a participant’s account transferred at the direction of the participant into the Employer Stock Fund will be used to purchase shares of common stock of Naugatuck Valley Financial Corporation (the “Common Stock”). To direct a transfer of all or a part of the funds credited to your accounts to the Employer Stock Fund, you should complete and file this form with the Human Resources Department no later than 10 days prior to the expiration date of the stock offering. A representative for the Plan Administrator will retain a copy of this form and return a copy to you. If you need any assistance in completing this form, please contact Kathleen A. McPadden at (203) 720-5000, ext. 209. If you do not complete and return this form to the Human Resources Department by 5:00 p.m. on , 2004, the funds credited to your accounts under the Plan will continue to be invested in accordance with your prior investment directions, or in accordance with the terms of the Plan if no investment directions have been provided. 2. Investment Directions. I hereby authorize the Plan Administrator to direct the Trustees to invest the following percentages (in multiples of not less than 5%) of my 401(k) Plan account balance in the Employer Stock Fund:

Equity Funds

%

ING VP International Value Portfolio — Class R Janus Aspen Series Worldwide Growth Portfolio — Institutional Shares AIM V.I. Capital Appreciation Fund — Series I Shares FTVIP Franklin Small Cap Value Securities Fund — Class 2 ING Baron Small Cap Growth Portfolio — Initial Class Lord Abbett Mid-Cap Value Portfolio — Class VC Fidelity VIP Contrafund Portfolio — Initial Class ING T. Rowe Price Growth Equity Portfolio — Initial Class ING VP Index Plus LargeCap Portfolio — Class R Lord Abbett Growth and Income Portfolio — Class VC Calvert Social Balanced Portfolio ING VP Strategic Allocation Balanced Portfolio — Class R ING VP Strategic Allocation Growth Portfolio — Class R ING VP Strategic Allocation Income Portfolio — Class R ING PIMCO Total Return Portfolio — Initial Class ING Fixed Account ING VP Money Market Portfolio — Class R Note: The total percentage of directed investments, above, may not exceed 100%

—% —% —% —% —% —% —% —% —% —% —%

—%

—%

If there is not enough Common Stock in the stock offering to fill my subscription pursuant to the investment directions above, I hereby instruct the Plan Trustee to purchase shares of Common Stock in the open market after the Reorganization and Stock Offering to the extent necessary to fulfill my investment directions indicated on this form. I understand that if I do not direct the Trustee by checking the box below, the excess funds will be invested in the same manner as new deposits have been directed.

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

Yes, I direct the Trustee to purchase stock in the open market, if necessary.

3. Purchaser Information. The ability of participants in the Plan to purchase Common Stock and to direct their current account balances into the Employer Stock Fund is based upon the participant’s subscription rights. Please indicate your status.   

Check here if you had $50.00 or more on deposit with Naugatuck Valley Savings and Loan as of April 30, 2003. Check here if you had $50.00 or more on deposit with Naugatuck Valley Savings and Loan as of Check here if you had $50 or more on deposit with Naugatuck Valley Savings and Loan as of , 2004. , 2004.

4. Acknowledgment of Participant. I understand that this Investment Form shall be subject to all of the terms and conditions of the Plan. I acknowledge that I have received a copy of the Prospectus and the Prospectus Supplement.

Signature of Participant

-----------------------------------Date

----------------------------------------------------------------------------------------------------------------------------- --Acknowledgment of Receipt by Administrator. This Investment Form was received by the Plan Administrator and will become effective on the date noted below.

By: -----------------------------------Date THE PARTICIPATION INTERESTS REPRESENTED BY THE COMMON STOCK OFFERED HEREBY ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE BANK INSURANCE FUND OR THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND ARE NOT GUARANTEED BY NAUGATUCK VALLEY FINANCIAL CORPORATION, NAUGATUCK VALLEY MUTUAL, MHC, OR NAUGATUCK VALLEY SAVINGS AND LOAN. THE COMMON STOCK IS SUBJECT TO AN INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL INVESTED. Minimum Stock Purchase is $250.00 Maximum Stock Purchase is $ PLEASE COMPLETE AND RETURN TO KATHLEEN A. MCPADDEN IN THE HUMAN RESOURCES DEPARTMENT AT NAUGATUCK VALLEY SAVINGS AND LOAN BY 5:00 P.M. ON , 2004.

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PROSPECTUS

Naugatuck Valley Financial Corporation
(Proposed Holding Company for Naugatuck Valley Savings and Loan)

Up to 2,472,500 Shares of Common Stock

Naugatuck Valley Financial Corporation is offering common stock for sale in connection with the reorganization of Naugatuck Valley Savings and Loan, S.B. into the mutual holding company form of organization. The shares we are offering represent 43% of the outstanding common stock of Naugatuck Valley Financial. Naugatuck Valley Savings and Loan will form Naugatuck Valley Financial to own Naugatuck Valley Savings and Loan as part of the reorganization. Naugatuck Valley Mutual Holding Company, the federally chartered mutual holding company parent to be formed by Naugatuck Valley Savings and Loan, will own 55% of the outstanding common stock of Naugatuck Valley Financial. As part of the reorganization, we also intend to contribute 2% of the common stock issued in the reorganization to the Naugatuck Valley Savings and Loan Foundation, a charitable foundation we will form in connection with the reorganization. We have applied to have our common stock listed for trading on the Nasdaq National Market under the symbol “NVSL.”

If you are or were a depositor of Naugatuck Valley Savings and Loan: • You may have priority rights to purchase shares of common stock. If you are a participant in the Naugatuck Valley Savings and Loan, S.B. Employee Savings Plan: • You may direct that all or part of your current account balances in this plan be invested in shares of common stock. • You will be receiving separately a supplement to this prospectus that describes your rights under this plan. If you fit none of the categories above, but are interested in purchasing shares of our common stock: • You may have an opportunity to purchase shares of common stock after priority orders are filled. We are offering up to 2,472,500 shares of common stock for sale on a best efforts basis, subject to certain conditions. We must sell a minimum of 1,827,500 shares to complete the offering. We may sell up to 2,843,375 shares without resoliciting subscribers because of regulatory considerations, demand for the shares or changes in market conditions. The offering is expected to terminate at 10:00 a.m., Eastern Time, on [Expiration Date]. We may extend this expiration date without notice to you until [Extension Date #1] , unless the Office of Thrift Supervision approves a later date, which will not be beyond [Extension Date #2]. Ryan Beck & Co., Inc. will use its best efforts to assist us in our selling efforts, but is not required to purchase any of the common stock being offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering. All shares are offered for sale at a price of $10.00 per share. The minimum purchase is 25 shares. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond [Extension Date #1]. If the offering is extended beyond [Extension Date #1] , subscribers will have the right to modify or rescind their purchase orders. Funds received before completion of the offering will be held in an escrow account at Naugatuck Valley Savings and Loan and will earn interest at our passbook rate. If we terminate the offering, or if we extend the offering beyond [Extension Date #1] and you rescind your order, we will promptly return your funds with interest at our passbook rate.

We expect our directors and executive officers, together with their associates, to subscribe for 875,000 shares, which equals 3.89% of the shares that will be sold in the offering at the midpoint of the offering range and issued to our charitable foundation. OFFERING SUMMARY Price Per Share: $10.00
Minimum Maximum Maximum As Adjusted

Number of shares Gross offering proceeds Estimated offering expenses Estimated net proceeds Estimated net proceeds per share

$ $ $ $

1,827,500 18,275,000 777,000 17,498,000 9.57

$ $ $ $

2,472,500 24,725,000 837,000 23,888,000 9.66

$ $ $ $

2,843,375 28,433,750 850,000 27,583,750 9.70

This investment involves a degree of risk, including the possible loss of principal. Please read “Risk Factors” beginning on page .

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Neither the Securities and Exchange Commission, the Office of Thrift Supervision nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

Ryan Beck & Co.
The date of this prospectus is , 2004

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[map of Connecticut showing office locations of Naugatuck Valley Savings and Loan appears here] (map of Connecticut to come)

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TABLE OF CONTENTS

Questions and Answers about the Stock Offering Summary Risk Factors A Warning About Forward-Looking Statements Selected Financial and Other Data Use of Proceeds Our Dividend Policy Market for the Common Stock Capitalization Regulatory Capital Compliance Pro Forma Data Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation Our Business Management’s Discussion and Analysis of Results of Operations and Financial Condition Our Management Subscriptions by Executive Officers and Directors The Reorganization and Stock Offering The Naugatuck Valley Savings and Loan Foundation Regulation and Supervision Federal and State Taxation Restrictions on Acquisition of Naugatuck Valley Financial and Naugatuck Valley Savings and Loan Description of Naugatuck Valley Financial Capital Stock Transfer Agent and Registrar Registration Requirements Legal and Tax Opinions Experts Where You Can Find More Information Index to Financial Statements of Naugatuck Valley Savings and Loan

ii 1 15 20 21 23 24 24 26 28 29 37 38 46 73 82 83 102 105 113 115 118 119 119 119 119 119 121

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QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING The following are answers to frequently asked questions. You should read this entire prospectus, including “Risk Factors” beginning on page . The sections entitled “Summary” and “The Reorganization and Stock Offering” beginning on page and page , respectively, provide detailed information about the stock offering.

Q. A.

What will happen as a result of Naugatuck Valley Savings and Loan’s reorganization? Naugatuck Valley Savings and Loan is undergoing a transaction referred to as a mutual holding company reorganization. In addition, in connection with the reorganization, Naugatuck Valley Savings and Loan is undergoing a charter conversion. Currently, Naugatuck Valley Savings and Loan is a Connecticut-chartered mutual (meaning no stockholders) savings bank. As a result of the reorganization and charter conversion, Naugatuck Valley Savings and Loan will become a federally chartered stock savings bank in the mutual holding company structure with two holding companies. Naugatuck Valley Savings and Loan will form a new federally chartered stock holding company, Naugatuck Valley Financial, that will sell 43% of its common stock to the public and the Naugatuck Valley Savings and Loan employee stock ownership plan and will issue 55% of its common stock to Naugatuck Valley Mutual, a mutual holding company to be formed by Naugatuck Valley Savings and Loan. As part of the reorganization, we also intend to contribute 2% of the common stock issued in the reorganization to the Naugatuck Valley Savings and Loan Foundation, a charitable foundation we will form. After the reorganization, Naugatuck Valley Financial will own 100% of Naugatuck Valley Savings and Loan’s common stock. Will the reorganization affect my deposit accounts or loans? No. The reorganization will not affect the balance or terms of deposit or loan accounts and deposits will continue to be federally insured by the Federal Deposit Insurance Corporation up to the maximum legal limits. Deposit accounts are not being converted to stock. How many shares of stock are being offered for sale and at what price? We are offering for sale up to 2,472,500 shares of common stock at a price of $10.00 per share. We must sell at least 1,827,500 shares. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, the independent appraiser determines the market value of Naugatuck Valley Savings and Loan has increased, we may sell up to 2,843,375 shares without giving you further notice or the opportunity to change or cancel your order. Who may purchase shares of common stock in the offering? Rights to subscribe for common stock have been granted under our plan of reorganization to the following persons in the following descending order of priority: 1. Naugatuck Valley Savings and Loan depositors with $50.00 or more on deposit as of April 30, 2003; 2. Our tax-qualified employee stock benefit plans, including our employee stock ownership plan; 3. Naugatuck Valley Savings and Loan depositors with $50.00 or more on deposit as of [Supplemental ERD] ; and 4. Naugatuck Valley Savings and Loan depositors as of [Voting RD] . If the above persons do not subscribe for all of the shares offered for sale, we may offer the remaining shares in a community offering to the general public, giving preference to people who reside in Fairfield and New Haven Counties, Connecticut. i

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What factors should I consider when deciding whether to purchase shares of stock in this offering? There are many important factors for you to consider before making an investment decision. You should read this entire prospectus, including the “Risk Factors” section, before making your investment decision. Will I be charged a commission? No. You will not be charged a commission or fee to purchase shares in the offering. How much stock may I buy? The minimum order is 25 shares. Generally, the individual purchase limitation is $150,000 of common stock (which equals 15,000 shares) in the subscription offering, and no person, either alone or together with associates and persons acting in concert with such person, may purchase more than $200,000 of common stock (which equals 20,000 shares) in all categories of the offering combined. Will my stock be insured by deposit insurance or guaranteed by any government agency? No. Unlike insured deposit accounts at Naugatuck Valley Savings and Loan, our common stock, like other common stock, will not be insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. When is the deadline for subscribing for stock? We must receive at our Stock Information Center a properly signed and completed order form with the required payment no later than 10:00 a.m., Eastern Time, on [Expiration Date]. Delivery of a stock order form may be made by: (1) mail, using the order reply envelope provided, (2) overnight delivery to the Stock Information Center address noted on the stock order form, or (3) hand-delivery to the Stock Information Center located at the main office of Naugatuck Valley Savings and Loan. Order forms may not be delivered to our branch offices. Can I change my mind after I place my stock order? No. Once we receive your order, you cannot cancel or change it. How can I pay for the stock? You have two options described on the order form: (1) you can pay by personal or bank check or money order; or (2) you can authorize a withdrawal from Naugatuck Valley Savings and Loan deposit accounts without checkwriting privileges. There will be no penalty for early withdrawal of certificate accounts. The amount(s) designated by you must be available within your account(s) at the time we receive the stock order form. Funds will not be withdrawn prior to completion of the offering period, but a hold will be placed on the dollar amounts designated, so the amounts will not be available to you for checkwriting or other purposes. May I obtain a loan from Naugatuck Valley Savings and Loan to pay for my stock? No. Federal law prohibits Naugatuck Valley Savings and Loan from knowingly loaning funds to purchase stock in the offering. You may not submit a check on a Naugatuck Valley Savings and Loan line of credit as payment for shares. However, another financial institution may loan you money. Can I subscribe for stock using funds in my individual retirement account at Naugatuck Valley Savings and Loan? You might be able to use IRA funds, however using them for this type of purchase requires special arrangements and additional processing time. If you are interested in using IRA funds held at Naugatuck Valley Savings and Loan or elsewhere, please promptly call the Stock Information Center for assistance. Your ability to use retirement funds may depend on timing constraints and, possibly, limitations imposed by the IRA trustee. ii

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Q. A.

Does Naugatuck Valley Financial plan to pay dividends on the common stock? Yes. After the offering, we intend to adopt a policy of paying regular cash dividends, but we have not yet decided on the amount or frequency of payments or when payments may begin. How do I sell my stock after I purchase it? After the shares begin trading, you may contact a firm offering investment services in order to buy or sell shares. We have applied to list our stock for trading on the Nasdaq National Market under the trading symbol “NVSL.” We cannot assure you that you will be able to sell your shares at or above the $10.00 per share offering price. What happens if there are not enough shares of stock to fill all orders? If there is an oversubscription, then you might not receive any or all of the shares you ordered. We will allocate shares in the order of priority established in our plan of reorganization. Orders received in the subscription offering will have priority. If we are unable to fill your order, or can only fill your order in part, you will receive an appropriate refund, with interest. If you paid by check or money order, we will issue you a refund/interest check. If you paid by authorizing withdrawal from your Naugatuck Valley Savings and Loan deposit account(s), we will only withdraw the funds necessary to pay for the shares you receive. Unused funds, along with accrued interest, will remain in your account(s). Who can help answer any other questions I might have about the stock offering? We encourage you to read this prospectus. You may direct questions to our Stock Information Center at ( ) . You may also visit our Stock Information Center, which is located at our main office, 333 Church Street, Naugatuck, Connecticut. The Stock Information Center is open Monday through Friday, except for bank holidays, from : a.m. to : p.m., Eastern Time. Our branches will not have offering materials and cannot accept order forms. iii

Q. A.

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SUMMARY This summary highlights selected information from this document and may not contain all the information that is important to you. To understand the stock offering fully, you should read this entire document carefully. In certain instances where appropriate, the terms “we,” “us” and “our” refer collectively to Naugatuck Valley Mutual, Naugatuck Valley Financial and Naugatuck Valley Savings and Loan or any of these entities, depending on the context. For assistance, please contact our Stock Information Center at ( ) . The Companies

Naugatuck Valley Mutual Holding Company 333 Church Street Naugatuck, Connecticut 06770 (203) 720-5000

Naugatuck Valley Mutual will be formed upon completion of the reorganization. After completion of the reorganization, Naugatuck Valley Mutual will become our federally chartered mutual holding company parent and will own 55% of Naugatuck Valley Financial’s common stock. So long as Naugatuck Valley Mutual exists, it will own a majority of the voting stock of Naugatuck Valley Financial. Naugatuck Valley Mutual is not currently an operating company. Naugatuck Valley Mutual will have no stockholders and depositors of Naugatuck Valley Savings and Loan will become members of Naugatuck Valley Mutual. We do not expect that Naugatuck Valley Mutual will engage in any business activity other than owning a majority of the common stock of Naugatuck Valley Financial. This offering is made by Naugatuck Valley Financial. Naugatuck Valley Financial will be formed upon completion of the reorganization. After completion of the reorganization, Naugatuck Valley Financial will become our federally chartered mid-tier stock holding company. Naugatuck Valley Financial is not currently an operating company. After the reorganization, Naugatuck Valley Financial will own all of Naugatuck Valley Savings and Loan’s capital stock and will direct, plan and coordinate Naugatuck Valley Savings and Loan’s business activities. In the future, Naugatuck Valley Financial might also acquire or organize other operating subsidiaries, including other financial institutions or financial services companies, although it currently has no specific plans or agreements to do so. Naugatuck Valley Savings and Loan is a community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses within our market area. We engage primarily in the business of attracting deposits from the general public and using such funds to originate loans. We emphasize the origination of loans secured by first mortgages on owner-occupied, residential real estate. To a lesser extent, we originate other types of real estate loans, commercial loans and consumer loans. We currently operate from our main office in Naugatuck, Connecticut and four branch offices in New Haven and Fairfield Counties. At March 31, 2004, we had total assets of $242.1 million, deposits of $187.5 million and total capital of $21.7 million.

Naugatuck Valley Financial Corporation 333 Church Street Naugatuck, Connecticut 06770 (203) 720-5000

Naugatuck Valley Savings and Loan, S.B 333 Church Street Naugatuck, Connecticut 06770 (203) 720-5000

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Our Operating Strategy (page

)

Our mission is to operate and grow a profitable community-oriented financial institution serving primarily retail customers and small businesses in our market area. After the reorganization, we plan to continue our strategy of: • operating as an independent community-oriented financial institution; • expanding our branch network and upgrading our existing branches; • pursuing opportunities to increase and diversify lending in our market area; • applying conservative underwriting practices to maintain the high quality of our loan portfolio; • managing our net interest margin and interest rate risk; • increasing core deposits; and • increasing noninterest income.

The Reorganization

Description of the Reorganization (page )

Currently, we are a Connecticut-chartered mutual savings bank with no stockholders. Our board of corporators currently has the right to vote on certain matters such as the election of directors. The mutual holding company reorganization and charter conversion process that we are now undertaking involves a series of transactions by which we will convert our organization from the state-chartered mutual form of organization to the federally chartered mutual holding company form of organization. In the mutual holding company structure, Naugatuck Valley Savings and Loan will be a federally chartered stock savings bank and all of its stock will be owned by Naugatuck Valley Financial. In addition, 45% of Naugatuck Valley Financial’s stock will be owned by the public, our employee stock ownership plan and our charitable foundation and 55% of Naugatuck Valley Financial’s stock will be owned by Naugatuck Valley Mutual. Our depositor members on the closing date of the reorganization will become members of Naugatuck Valley Mutual and will have similar voting rights in Naugatuck Valley Mutual as the board of corporators currently has in Naugatuck Valley Savings and Loan.

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After the reorganization, our ownership structure will be as follows:

Our normal business operations will continue without interruption during the reorganization and the same officers and directors who currently serve us will continue to serve us after the reorganization. Reasons for the Reorganization (page ) Our primary reasons for the reorganization are to:

• structure our business in a form that will enable us to access capital markets; • permit us to control the amount of capital being raised to enable us to prudently deploy the proceeds of the offering; • support future lending and growth; • enhance our ability to attract and retain qualified directors, management and other employees through stock-based compensation plans; and • support future branching activities and/or the acquisition of other financial institutions or financial services companies or their assets. We expect to open a branch in Seymour, Connecticut in the fourth quarter of 2004. We have signed an agreement for the purchase of a parcel of land in Southbury, Connecticut where we expect to open a branch by the third quarter of 2005. We have also leased property in Shelton, Connecticut where we expect to relocate our current Shelton branch by the fourth quarter of 2005. Although we are interested in finding new possible branch locations, we do not have any other specific plans or arrangements for further expansion and we do not now have any specific acquisition plans. Purchase Price The purchase price is $10.00 per share. We determined this per share price in order to achieve as wide a distribution of stock as possible. You will not pay a commission to buy any shares in the offering. We are offering for sale between 1,827,500 and 2,472,500 shares of common stock in this offering. With regulatory approval, we may increase the number of shares to be sold to 2,843,375 shares

Number of Shares to be Sold

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without giving you further notice or the opportunity to change or cancel your order. The Office of Thrift Supervision will consider the level of subscriptions, our financial condition and results of operations and changes in market conditions in connection with a request to increase the offering size. How We Determined the Offering Range (page ) The offering range is based on an independent appraisal of Naugatuck Valley Savings and Loan by Keller & Company, Inc., an appraisal firm experienced in appraisals of savings institutions. Keller & Company’s estimate of our market value was based in part upon our financial condition and results of operations and the effect of the capital raised in this offering. Keller & Company’s appraisal, dated as of May 21, 2004, estimated our pro forma market value on a fully converted basis to be between $42,500,000 and $57,500,000, with a midpoint of $50,000,000. Subject to regulatory approval, we may increase the pro forma market value on a fully converted basis to $66,125,000 without notice to you. Based on the sale of 43% of our common stock in the offering, Keller & Company estimated the pro forma market value of our common stock being offered to be between $18,275,000 and $24,725,000, with a midpoint of $21,500,000. Subject to regulatory approval, we may increase the pro forma market value of our common stock being offered to $28,433,750 without notice to you. The independent appraisal does not indicate market value. We cannot guarantee that anyone who purchases shares in the offering will be able to sell their shares at or above the $10.00 purchase price. The Office of Thrift Supervision will consider the appraisal and may require adjustments to the ratio and/or appraisal value. The following table summarizes the fully converted pricing ratios as of May 21, 2004 and price to pro forma per share data for us. Fully converted equivalent ratios and data assume the sale of 100% of the company’s stock to the public. See “Pro Forma Data” for a description of the assumptions we used in making these calculations.
Fully Converted Equivalent Pro Forma Price To Price To Core Earnings Book Value Per Share Per Share

Peer group company trading multiples Average Median Naugatuck Valley Financial upon issuance of 100% of its stock for the twelve months ended March 31, 2004 Minimum Maximum
Mutual Holding Company Trading Multiples

17.78x 16.97x

120.40 % 117.58 %

24.11x 32.17x

70.93 % 78.08 %

Two measures that some investors use to analyze whether a stock might be a good investment are the ratio of the offering price to the issuer’s “book value” and the ratio of the offering price to the issuer’s annual core net income. Keller & Company, in preparing its appraisal, and our Board of Directors, in approving the appraisal, considered these ratios, among other factors. Book value is the same as total equity and represents the difference between the issuer’s assets and liabilities. Keller & Company’s appraisal also incorporates an analysis of a peer group of publicly traded mutual holding companies that Keller & Company considered comparable to us.

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The following table summarizes mutual holding company trading multiples as of May 21, 2004 and price to pro forma per share data for us. See “Pro Forma Data” for a description of the assumptions we used in making these calculations.
Price to Core Earnings Per Share Price To Book Value Per Share

National mutual holding company trading multiples Average(1) Median(1) Naugatuck Valley Financial upon sale of 43% of its stock for the three months ended March 31, 2004 Minimum Maximum Naugatuck Valley Financial upon sale of 43% of its stock for the year ended December 31, 2003 Minimum Maximum

32.52x 29.46x

198.92 % 181.22 %

27.78x 35.71x

116.41 % 137.17 %

24.39x 33.33x

117.92 % 138.70 %

(1) The information for national mutual holding companies may not be meaningful for investors because it presents average and median information for mutual holding companies that may have issued a different percentage of their stock in their offerings than the 43% that we are offering. In addition, stock repurchases also affect the ratios to a greater

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or lesser degree depending upon repurchase activity. Additionally, many factors that historically have affected pricing for mutual holding companies may not impact our trading price. See “Summary — After-Market Performance Information Provided By Independent Appraiser” and “Risk Factors — As a result of the amount of capital we are raising, we expect our return on equity and our stock price performance to be negatively affected.” After-Market Performance Information Provided by Independent Appraiser As part of its appraisal, Keller & Company provided the following information to our Board of Directors and to the Office of Thrift Supervision. The table presents for all mutual holding company minority stock issuances and mutual-to-stock conversions from January 1, 2003 to May 21, 2004 the average and median percentage stock price appreciation from the initial stock trading date to the dates presented in the table. We did not consider this data particularly relevant to the appraisal given that the information relates to stock price appreciation experienced by other companies that sold in different market conditions. In addition, these companies may have no similarities to Naugatuck Valley Savings and Loan with regard to the market in which Naugatuck Valley Savings and Loan competes, earnings quality and growth potential, among other factors. This table is not intended to be indicative of how our stock price may perform. Many factors affect stock price appreciation, including, but not limited to, the factors set forth below. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the Risk Factors beginning on page .

Average Percentage Stock Price Appreciation from Year of Initial Trading Date Number of Transactions After One Day After One Week After One Month Through May 21, 2004 IPO Price

Median Percentage Stock Price Appreciation from IPO Price After One Day After One Week After One Month Through May 21, 2004

2004 2003

10 13

23.90 % 34.69

24.91 % 35.28

20.00 % 36.53

12.51 % 42.50

23.10 % 20.00

27.50 % 23.10

15.10 % 25.00

15.30 % 47.00

While stock prices of other institutions that have engaged in similar transactions have, on average, increased for the periods presented, we cannot assure you that our stock price will appreciate the same amount, if at all. We also cannot assure you that our stock price will not trade below $10.00 per share, as has been the case for some reorganized and converted thrift institutions. In addition, the transactions underlying the data occurred primarily during a falling interest rate environment, during which market prices for financial institutions typically increase. If interest rates continue to rise, our net interest income and the value of our assets could be reduced, negatively affecting our stock price. See “Risk Factors — Rising interest rates may hurt our profits and asset value.” The increase in a company’s stock price is subject to various factors, including the amount of proceeds a company raises (see “Risk Factors — As a result of the amount of capital we are raising, we expect our return on equity and our stock price performance to be negatively affected” ), the quality of management and management’s ability to deploy proceeds (such as through investments, the acquisition of other financial institu-

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tions or other businesses, the payment of dividends and common stock repurchases). See “Risk Factors — We have broad discretion in allocating the proceeds of the offering. Our failure to effectively utilize such proceeds would reduce our profitability.” In addition, stock prices may be affected by general market conditions, the interest rate environment, the market for financial institutions and merger or acquisition transactions, the presence of professional and other investors who purchase stock on speculation, regulatory developments, as well as other unforeseeable events not necessarily in the control of management. Finally, you should be aware that historically savings associations could be acquired within a three year period following a full conversion. Regulatory restrictions now generally prohibit a holding company regulated by the Office of Thrift Supervision, like us, from being acquired within three years following its full conversion from mutual to stock form, which may also have a negative impact on stock price performance. We carefully reviewed the information that Keller & Company provided us through the appraisal process, but did not make any determinations regarding whether or not prior mutual holding company minority stock issuances have been undervalued on a price to book basis, nor did we draw any conclusions regarding how the historical data reflected above may have an impact on the appraisal. Instead, we hired Keller & Company to help us understand the regulatory process and to advise us as to how much capital we would likely be required to raise in the offering under the Office of Thrift Supervision’s appraisal guidelines. Our ability to control the amount of capital we will raise is limited by the regulatory framework established by the Office of Thrift Supervision, which requires that we hire an independent appraiser and permit the independent appraiser to arrive at a value without undue influence from outside parties, including us. We fully complied with the Office of Thrift Supervision’s guidelines and permitted Keller & Company to arrive at the appraised value independently, which we also understood would be subject to Office of Thrift Supervision review and approval. Keller & Company is an independent appraisal firm expert in the appraisal guidelines of the Office of Thrift Supervision and considered all factors that may appropriately be considered under the Office of Thrift Supervision’s appraisal guidelines when arriving at our appraised value. Our Board of Directors recognize the duty of care it owes to Naugatuck Valley Savings and Loan and its depositors to proceed with the reorganization transaction in an informed manner and with the best interests of Naugatuck Valley Savings and Loan and its depositors paramount in its deliberations and decision making. We worked closely with Keller & Company to understand the methodology used by Keller & Company and to consider the appropriateness of the assumptions used by Keller & Company in determining the appraised value with the understanding that assuming the assumptions used were appropriate and the methodology employed was consistent with the Office of Thrift Supervision’s appraisal guidelines, the appraisal, once approved by the Office of Thrift Supervision, would fairly estimate our pro forma market value.

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The Board has a business plan that reflects how we could deploy the net proceeds in a prudent manner consistent with safety and soundness principles. Possible Change in Offering Range (page ) Keller & Company’s independent appraisal will be updated before the reorganization is completed. If the pro forma market value of the common stock being offered at that time is either below $18,275,000 or above $28,433,750, we will notify subscribers, who will have the opportunity to confirm, modify or cancel their order. Each subscriber would be required to affirmatively confirm or modify his or her order within a specified resolicitation period or else it would be cancelled. If we are unable to sell at least the number of shares at the minimum of the offering range, as the range may be amended, the reorganization would be terminated and all subscriptions would be cancelled and funds returned promptly with interest. We are conducting the reorganization under the terms of our plan of reorganization. We cannot complete the reorganization and related offering unless:

Conditions to Completing the Reorganization and Charter Conversion

• the plan of reorganization is approved by at least a majority of votes eligible to be cast by depositors of Naugatuck Valley Savings and Loan; • we sell at least the minimum number of shares offered; and • we receive the final approval of the Office of Thrift Supervision to complete the reorganization and offering. We are conducting the charter conversion under the terms of our plan of charter conversion. We cannot complete the charter conversion unless: • the plan of charter conversion is approved by at least two-thirds of our board of corporators; • we receive the final approval of the Office of Thrift Supervision to complete the charter conversion; and • we receive the final approval of the State of Connecticut Department of Banking to complete the charter conversion. Naugatuck Valley Savings and Loan Foundation (page ) To continue our long-standing commitment to our local communities, we intend to establish a charitable foundation, the Naugatuck Valley Savings and Loan Foundation, as a non-stock Delaware corporation in connection with the reorganization. We will fund the foundation with 2% of the shares of our common stock issued in the reorganization. Based on the purchase price of $10.00 per share, we would fund the foundation with $1.0 million of common stock at the midpoint of the offering. Our contribution to the foundation would reduce net earnings by $660,000, after tax, in the year in which the foundation is established, which is expected to be fiscal 2004. The Naugatuck Valley Savings and Loan Foundation will make grants and donations to non-profit and community groups and projects located within our market area. The amount of common stock that we would offer for sale would be greater if the stock offering were to be completed without the formation of the Naugatuck Valley Savings and Loan Foundation. The establishment of the foundation requires the affirmative vote of a majority of the votes eligible to be cast by our depositors. For a further discussion of

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the financial impact of the foundation, including its effect on those who purchase shares in the offering, see “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation.” Benefits of the Reorganization to Management (page ) We intend to adopt the following benefit plans and employment agreements:

• Employee Stock Ownership Plan. We intend to establish an employee stock ownership plan that will purchase 3.6% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. We will allocate these shares to our employees over a period of 15 years in proportion to their compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan. • Stock-Based Incentive Plan. We intend to implement a stock-based incentive plan no earlier than six months after the reorganization. Approval of this plan by a majority of the total votes eligible to be cast by our stockholders, other than by Naugatuck Valley Mutual, will be required. Under this plan, we may award stock options and shares of restricted stock to key employees and directors. Shares of restricted stock, in an amount up to 3.21% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be awarded at no cost to the recipient. Stock options, in an amount up to 8.03% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be granted at an exercise price equal to 100% of the fair market value of our common stock on the option grant date. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan. We have not yet decided if we intend to expense any stock options that we may grant. However, the Financial Accounting Standards Board has issued an exposure draft of a new accounting standard that would require expensing of stock options beginning in fiscal 2005. If this standard is adopted or, if we decide to expense options, it would negatively affect net income. • Employment and Change in Control Agreements. We intend to enter into a three-year employment agreement with John C. Roman, our President and Chief Executive Officer. We also intend to enter into two- and three-year change in control agreements with several senior executive officers. These agreements will provide for severance benefits if the executives are terminated following a change in control involving us, such as an acquisition of Naugatuck Valley Financial. Based solely on current cash compensation and excluding any benefits that would be payable under any employee benefit plan, if a change in control occurred, and we terminated all officers covered by the employment agreements and the change in control agreements, the total payments due under the employment agreements and the change in control agreements would equal approximately $ million and $ , respectively.

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• Employee Severance Compensation Plan. This plan will provide severance benefits to eligible employees if there is a change in control involving us. Based solely on current cash compensation and excluding any benefits that would be payable under any employee benefit plan, if a change in control occurred, and we terminated all employees, the total payment due under the employee severance compensation plan would equal approximately $ million. The following table summarizes at the maximum of the offering range the total number and value of the shares of common stock that the employee stock ownership plan expects to acquire and the total value of all restricted stock awards that are expected to be available under the stock-based incentive plan. The table does not include a value for the options because their exercise price would be equal to the fair market value of the common stock on the day that the options are granted. As a result, financial gains can be realized on an option only if the market price of the common stock increases above the price at which the option is granted.
Number of Shares to be Granted or Purchased As a % of At Common Maximum Stock of Outstanding Offering After Range Reorganization

Total Estimated Value of Grants(1)

Employee stock ownership plan Restricted stock awards Stock options Total

207,000 184,805 461,725 853,530

3.60 % 3.21 8.03 14.84 %

$

2,070,000 1,848,050 — 3,918,160

$

(1) Assumes the value of our common stock is $10.00 per share. Ultimately, the value of the grants will depend on the actual trading price of our common stock, which depends on numerous factors. There can be no assurance that our stock price will appreciate in the same manner as other mutual holding companies, if at all. See “Summary — After-Market Performance Information Provided by Independent Appraiser” and “Risk Factors — As a result of the amount of capital we are raising, we expect our return on equity and our stock price performance to be negatively affected” for more information regarding factors that could negatively affect our stock appreciation. Tax Consequences (page ) As a general matter, the reorganization will not be a taxable transaction for purposes of federal or state income taxes to us or to persons who receive or exercise subscription rights. Our special counsel, Muldoon Murphy Faucette & Aguggia LLP, has issued an opinion to us that, among other items, for federal income tax purposes: • the reorganization will qualify as a tax free reorganization and no gain or loss will be recognized by us as a result of the reorganization;

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• no gain or loss will be recognized by our account holders upon the issuance to them of deposit accounts in Naugatuck Valley Savings and Loan immediately after the reorganization; • it is more likely than not that the fair market value of the rights to subscribe for shares of our common stock is zero and, accordingly, that no income will be realized by our depositors upon the issuance or exercise of the subscription rights; • it is more likely than not that the tax basis to the purchasers in the offering will be the amount paid for our common stock, and that the holding period for shares of common stock will begin on the date of completion of the offering; and • the holding period for shares of common stock purchased in the community offering or syndicated community offering will begin on the day after the date of the purchase. We have also received an opinion from Snyder & Haller, P.C. stating that, assuming the reorganization does not result in any federal income tax liability to us, or our account holders, implementation of the plan of reorganization will not result in any Connecticut income tax liability to those entities or persons. See “The Reorganization and Stock Offering — Material Income Tax Consequences.”

The Offering
We have granted rights to subscribe for our shares of common stock in a “subscription offering” to the following persons in the following order of priority: 1. Persons with $50 or more on deposit at Naugatuck Valley Savings and Loan as of April 30, 2003. 2. Our employee stock ownership plan, which provides retirement benefits to our employees. 3. Persons with $50 or more on deposit at Naugatuck Valley Savings and Loan as of [Supplemental ERD]. 4. Naugatuck Valley Savings and Loan’s depositors as of [Voting Record Date]. We may offer shares not sold in the subscription offering to the general public in a community offering. People who are residents of New Haven and Fairfield Counties, Connecticut, will have first preference to purchase shares in a community offering. The community offering, if held, may begin concurrently, during or immediately after the end of the subscription offering. If we receive subscriptions for more shares than are to be sold in this offering, we may be unable to fill or partially fill your order. Shares will be allocated first to categories in the subscription offering under a formula outlined in the plan of reorganization and as described in “The Reorganization and Stock Offering.” Deadline for Ordering Stock (page ) The offering will end at 10:00 a.m., Eastern Time, on [Expiration Date]. We must receive at our Stock Information Center a properly signed and completed order form with the required

Persons Who Can Order Stock in the Offering (page )

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payment no later than 10:00 a.m., Eastern Time, on [Expiration Date]. You may submit your order form using the enclosed return envelope, by bringing your order form to the Stock Information Center or by overnight delivery to the address noted on the order form. Order forms may not be delivered to our branch offices. Purchase Limitations (page ) Our plan of reorganization establishes limitations on the purchase of stock in the offering. These limitations include the following: The minimum purchase is 25 shares. No individual may purchase more than $150,000 of common stock (which equals 15,000 shares). If any of the following persons purchase stock, their purchases when combined with your purchases cannot exceed $200,000 of common stock (which equals 20,000 shares): • Your spouse or relatives of you or your spouse living in your house; • Companies, trusts or other entities in which you have a controlling interest or hold a position; or • Other persons who may be acting in concert with you. Subject to the Office of Thrift Supervision’s approval, we may increase or decrease the purchase limitations at any time. How to Purchase Common Stock (page ) If you want to place an order for shares in the offering, you must complete an original stock order form and send it to us together with full payment. You must sign the certification that is on the reverse side of the stock order form. Once we receive your order, you cannot cancel or change it. We may, in our sole discretion, reject orders received in the community offering either in whole or in part. You may pay for shares in the subscription offering or the community offering in the following ways: • By personal or bank check or money order made payable to Naugatuck Valley Financial Corporation; or • By authorizing withdrawal from a deposit account without checkwriting privileges at Naugatuck Valley Savings and Loan. To use funds in an Individual Retirement Account at Naugatuck Valley Savings and Loan, you may not authorize direct withdrawal on the order forms. You must transfer your funds to an unaffiliated institution able to hold self-directed IRAs. Please promptly contact the Stock Information Center for assistance with IRA related orders. Checks and money orders will be deposited upon receipt. We will pay interest on your funds submitted by check or money order at the rate we pay on passbook accounts from the date we receive your funds until the offering is completed or terminated. All funds authorized for withdrawal from deposit accounts with

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us will remain in the accounts and continue to earn interest at the applicable account rate and will be withdrawn upon completion of the offering. A hold will be placed on those funds when your stock order is received, making the designated funds otherwise unavailable to you during the offering period. If, as a result of a withdrawal from a certificate of deposit, the balance falls below the minimum balance requirement, the remaining funds will earn interest at our passbook rate. There will be no early withdrawal penalty for withdrawals from certificates of deposit used to pay for stock. Subscription Rights Are Not Transferable Delivery of Stock Certificates You are not allowed to transfer or sell your subscription rights and we will act to ensure that you do not do so. We will not accept any stock orders that we believe involve the transfer of subscription rights. Certificates representing shares of common stock sold in the offering will be mailed to the persons entitled to the certificates at the certificate registration address noted on the order form as soon as practicable following consummation of the offering. It is possible that, until certificates for the common stock are delivered to purchasers, purchasers might not be able to sell the shares of common stock which they ordered, even though the common stock will have begun trading. The following table summarizes how we will use the proceeds of this offering, based on the sale of shares at the minimum and maximum of the offering range.
1,827,500 2,472,500 Shares at Shares at $10.00 $10.00 Per Share Per Share (In thousands)

How We Will Use the Proceeds of this Offering (page )

Offering proceeds Less: offering expenses Net offering proceeds Less: Proceeds contributed to Naugatuck Valley Savings and Loan Proceeds used for loan to employee stock ownership plan Proceeds to Naugatuck Valley Mutual Proceeds remaining for Naugatuck Valley Financial

$ 18,275 777 17,498

$ 24,725 837 23,888

8,749 1,530 100

11,944 2,070 100

$

7,119

$

9,774

We may use the portion of the proceeds that we do not contribute to Naugatuck Valley Savings and Loan to, among other things, invest in securities, pay cash dividends or buy back shares of common stock, subject to regulatory restrictions. Naugatuck Valley Savings and Loan may use the portion of the proceeds that it receives to fund new loans, open or acquire new branches, invest in securities and expand its business activities. We may also use the proceeds of the offering to diversify our

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business and acquire other companies, although we have no specific plans to do so at this time. Purchases by Directors and Executive Officers (page ) We expect that our directors and executive officers, together with their associates, will subscribe for 875,000 shares, which equals 3.89% of the shares that would be sold in the offering at the midpoint of the offering range and issued to our charitable foundation. Directors and executive officers will pay the same $10.00 per share price as everyone else who purchases shares in the offering.

Market for Naugatuck Valley Financial We have applied to list our common stock for trading on the Nasdaq National Market under the symbol “NVSL.” Ryan Beck & Co. currently intends to become a market maker in the common stock and will Common Stock (page ) assist us in obtaining additional market makers. After shares of the common stock begin trading, you may contact a firm offering investment services in order to buy or sell shares. Naugatuck Valley Financial’s Dividend After the reorganization, we intend to adopt a policy of paying regular cash dividends, but have not yet decided on the amount or frequency of payments or when payments may begin. Based upon our estimate Policy (page ) of offering expenses and other assumptions described in “ Pro Forma Data,” we expect to have between $7.1 million and $9.8 million in net proceeds, at the minimum and the maximum of the offering, respectively, that, subject to annual earnings and expenses, we could potentially use to pay dividends. Possible Conversion of Naugatuck Valley Mutual to Stock Form (page ) In the future, Naugatuck Valley Mutual may convert from the mutual (meaning no stockholders) to capital stock form of organization, in a transaction commonly known as a “second-step conversion.” In a second-step conversion, members of Naugatuck Valley Mutual would have subscription rights to purchase common stock of Naugatuck Valley Financial or its successor, and the public stockholders of Naugatuck Valley Financial would be entitled to exchange their shares of common stock for an equal percentage of shares of the converted Naugatuck Valley Mutual. This percentage may be adjusted to reflect any assets owned by Naugatuck Valley Mutual. Naugatuck Valley Financial’s public stockholders, therefore, would own approximately the same percentage of the resulting entity as they owned before the second-step conversion. We have no current plan to undertake a second-step conversion transaction. To ensure that you receive a prospectus at least 48 hours before the offering deadline, we may not mail prospectuses any later than five days before such date or hand-deliver any prospectuses later than two days before that date. Stock order forms may only be distributed with or preceded by a prospectus. Subscription rights expire at 10:00 a.m., Eastern Time, on [Expiration Date] , whether or not we have located each person entitled to such rights. If you have any questions regarding the offering or our reorganization, please call the Stock Information Center at ( ) . You may also visit our Stock Information Center, which is located at our main office in Naugatuck, Connecticut. The Stock Information Center is open Monday through Friday, except for bank holidays, from 9:30 a.m. to 4:00 p.m., Eastern Time.

Delivery of Prospectus

Stock Information Center

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RISK FACTORS You should consider carefully the following risk factors before purchasing Naugatuck Valley Financial common stock. Our increased emphasis on commercial and construction lending and the unseasoned nature of these loans may expose us to increased lending risks and could impact the level of our allowance for loan losses. Since December 31, 2000, our commercial real estate, commercial business and residential construction loan portfolio has increased $26.4 million, or 335.0% and at March 31, 2004, $34.3 million, or 18.4%, of our loan portfolio consisted of these real estate, construction and commercial business loans. We intend to continue to emphasize these types of lending. These types of loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential mortgage loans because repayment of the loans often depends on the successful operation of the property, the income stream of the borrowers for commercial business loans and for construction loans, the accuracy of the estimate of the property’s value at completion of construction and the estimated cost of construction. These factors can be impacted by many variables including economic events beyond the borrowers’ control. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Also, many of our commercial and construction borrowers have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan. Because of our planned continued emphasis on commercial and construction lending and the unseasoned nature of many of these loans, we may determine it necessary to increase the level of our allowance for loan losses. We make various judgments about the collectibility of our loans, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for our loans. In determining the amount of the allowance for loan losses, we review our loans and our loan loss and delinquency experience, and we evaluate economic conditions. However, as a result of our recent expansion, a significant portion of our commercial and construction loans are unseasoned, with the risk that these loans may not have had sufficient time to perform to properly indicate the potential magnitude of losses. If our judgments are incorrect, our allowance for loan losses may not be sufficient to cover future losses, which will result in additions to our allowance through increased provisions for loan losses. In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs. Increased provisions for loan losses would increase our expenses and reduce our profits. Finally, during our recent expansion, we have also experienced a historically low interest rate environment. Our unseasoned adjustable rate loans have not, therefore, been subject to a rising interest rate environment which could cause them to adjust to their maximum interest rate level. Such an increase could increase collection risks resulting from potentially higher payment obligations by the borrower. Rising interest rates may hurt our profits and asset value. Interest rates are at historically low levels, but have risen recently. If interest rates continue to rise, our net interest income likely would be reduced since, due to the generally shorter terms of interest-bearing liabilities, interest expense paid on interest-bearing liabilities, such as deposits and borrowings, increase more quickly than interest income earned on interest-earning assets, such as loans and investments. In addition, rising interest rates may hurt our income because they may reduce the demand for new loans, the demand for refinancing loans and the interest and fee income earned on such loans and refinancings. If there is an increasing interest rate environment, our interest rate spread and net interest margin could be compressed, which would have a negative effect on our profitability until our loan portfolio reprices with higher rates. 15

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Changes in interest rates also affect the value of our interest-earning assets, and in particular our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as separate component of equity. Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on shareholders’ equity. If we do not achieve profitability on new branches, the new branches may negatively impact our earnings. We have received regulatory approval for a new branch in Seymour, Connecticut which we expect will open in the fourth quarter of 2004. We have also signed an agreement for the purchase of a parcel of land in Southbury, Connecticut where we expect to open a new branch by the third quarter of 2005. We intend to continue to pursue opportunities to pursue expansion of our branch network, as well as to upgrade our current branch facilities. We cannot assure you that our this branch expansion strategy and our branch upgrading will be accretive to our earnings, or that it will be accretive to earnings within a reasonable period of time. Numerous factors contribute to the performance of a new branch, such as a suitable location, qualified personnel and an effective marketing strategy. Additionally, it takes time for a new branch to generate significant deposits and make sufficient loans to produce enough income to offset expenses, some of which, like salaries and occupancy expense, are relatively fixed costs. In addition to branch employees, we will hire lending and other employees to support our expanded infrastructure. As a result of the amount of capital we are raising, we expect our return on equity and our stock price performance to be negatively affected. We are raising net proceeds of up to $27.6 million at the maximum, as adjusted, of the offering. The amount of capital we are raising may have several consequences, including the following: • Return on equity may decline. Return on equity, which equals net income divided by average equity, is a ratio that many investors use to compare the performance of a particular company with other companies. For the three months ended March 31, 2004, our annualized return on average equity was 6.99%. For the year ended December 31, 2003, our return on average equity was 8.45%. These returns are lower than returns on equity for comparable publicly traded companies. The net proceeds from the reorganization will significantly increase our equity capital, which will further decrease our return on equity, which on a pro forma basis at the midpoint of the offering is 3.47% for the three months ended March 31, 2004 (annualized) and 4.28% for the year ended December 31, 2003 compared to a 7.30% median for our peer group. It will take time for us to fully use the new capital in our business operations to increase net income. Consequently, you should not expect a competitive return on equity in the near future. • Stock price may decline. Failure to achieve a competitive return on equity might make an investment in our common stock unattractive to some investors and might cause our common stock to trade at lower prices than comparable companies with higher returns on equity. See “Pro Forma Data” for an illustration of the financial impact of this offering. Additional expenses following the reorganization may reduce our profitability and stockholders’ equity. Following the reorganization, our noninterest expense is likely to increase as a result of the financial accounting, legal and various other additional expenses usually associated with operating as a public company, which will adversely affect our profitability and stockholders’ equity. In addition, we will recognize additional annual material employee compensation and benefit expenses stemming from the shares granted to employees and executives under new benefit plans. We cannot predict the actual amount of these new expenses because applicable accounting practices require that they be based on the fair market value of the shares of common stock at specific points in the future. We would recognize expenses for our employee stock ownership plan when shares are committed to be released to participants’ accounts and would recognize expenses for restricted stock awards over the vesting period of the awards. These expenses in the first year following the reorganization have been estimated to be approximately $335,000 at 16

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the maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data” assuming the $10.00 per share offering price as fair market value. Actual expenses, however, may be higher or lower, depending on the then-prevailing price of our common stock. In addition, proposed changes in accounting guidelines may require us to recognize expenses relating to stock option grants. For further discussion of these plans, see “Our Management — Benefit Plans.” Strong competition within our market area could hurt our profits and slow growth. Although we consider ourselves competitive in the Greater Naugatuck Valley, which we consider our market area, we face intense competition both in making loans and attracting deposits. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income. Some of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to compete successfully in our market area. For more information about our market area and the competition we face, see “Our Business — Market Area” and “Our Business — Competition.” We have broad discretion in allocating the proceeds of the offering. Our failure to effectively utilize such proceeds would reduce our profitability. We intend to contribute approximately 50% of the net proceeds of the offering to Naugatuck Valley Savings and Loan. We expect to use a portion of the net proceeds to fund the employee stock ownership plan’s purchases of shares in the offering and to capitalize Naugatuck Valley Mutual. We may use the remaining net proceeds to pay dividends to shareholders, repurchase common stock, purchase investment securities, finance the acquisition of other financial institutions or other businesses that are related to banking, or for other general corporate purposes. Naugatuck Valley Savings and Loan may use the proceeds it receives to fund new loans, purchase investment securities, establish or acquire new branches, acquire financial institutions or other businesses that are related to banking, or for general corporate purposes. We have not allocated specific amounts of proceeds for any of these purposes, and we will have significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively would reduce our profitability. Issuance of shares for benefit programs may dilute your ownership interest. We intend to adopt a stock-based incentive plan following the offering. If our stockholders approve the new stock-based incentive plan, we intend to issue shares to our officers and directors through this plan. If the restricted stock awards under the stock-based incentive plan are funded from authorized but unissued stock, your ownership interest in shares held by persons other than Naugatuck Valley Mutual could be diluted by up to approximately 6.66%, assuming awards of common stock equal to 3.21% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, are awarded under the plan. If the shares issued upon the exercise of stock options under the stock-based incentive plan are issued from authorized but unissued stock, your ownership interest in shares held by persons other than Naugatuck Valley Mutual could be diluted by up to approximately 15.15%, assuming stock option grants equal to 8.03% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, are granted under the plan. See “Pro Forma Data” and “Our Management — Benefit Plans.” Naugatuck Valley Mutual will own a majority of our common stock and will be able to exercise voting control over most matters put to a vote of stockholders, including preventing sale or merger transactions you may like or a second-step conversion by Naugatuck Valley Mutual. Naugatuck Valley Mutual will own a majority of our common stock after the reorganization and, through its Board of Directors, will be able to exercise voting control over most matters put to a vote of 17

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stockholders. The same directors and officers will manage Naugatuck Valley Financial, Naugatuck Valley Savings and Loan and Naugatuck Valley Mutual. As a federally chartered mutual holding company, the Board of Directors of Naugatuck Valley Mutual must ensure that the interests of depositors of Naugatuck Valley Savings and Loan are represented and considered in matters put to a vote of stockholders of Naugatuck Valley Financial. Therefore, the votes cast by Naugatuck Valley Mutual may not be in your personal best interests as a stockholder. For example, Naugatuck Valley Mutual may exercise its voting control to prevent a sale or merger transaction in which stockholders could receive a premium for their shares, prevent a second-step conversion transaction by Naugatuck Valley Mutual or defeat a stockholder nominee for election to the Board of Directors of Naugatuck Valley Financial. The matters as to which stockholders other than Naugatuck Valley Mutual will be able to exercise voting control are limited and include any proposal to implement a stock-based incentive plan. In addition, Office of Thrift Supervision regulations prohibit, for three years following the completion of a stock offering by a company such as Naugatuck Valley Financial, the acquisition of more than 10% of any class of equity security of the company without the prior approval of the Office of Thrift Supervision. Even after this three-year period, Office of Thrift Supervision regulations would likely prevent an acquisition of Naugatuck Valley Financial other than by another mutual holding company. Office of Thrift Supervision policy on remutualization transactions could prohibit the merger or an acquisition of us, which may lower our stock price. Current Office of Thrift Supervision regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction. The possibility of a remutualization transaction has recently resulted in a degree of takeover speculation for mutual holding companies which is reflected in the stock prices of mutual holding companies. However, the Office of Thrift Supervision has issued a policy statement indicating that it views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity and as raising issues concerning the effect on the mutual members of the acquiring entity. Under certain circumstances, the Office of Thrift Supervision intends to give these issues special scrutiny and reject applications for the remutualization of a mutual holding company unless the applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are not warranted in the particular case. Should the Office of Thrift Supervision prohibit or otherwise restrict these transactions in the future, our stock price may be adversely affected. We have no current plans to undertake a remutualization transaction. The contribution to the Naugatuck Valley Savings and Loan Foundation will hurt our profits for fiscal year 2004 and means that a stockholder’s ownership interest will be up to 4.44% less after the contribution. We intend to contribute 2% of the shares of our common stock issued in the reorganization to the Naugatuck Valley Savings and Loan Foundation. This contribution will be an additional operating expense and will reduce net income during the fiscal year in which the Naugatuck Valley Savings and Loan Foundation is established, which is expected to be the year ending December 31, 2004. Based on the pro forma assumptions, the contribution to the Naugatuck Valley Savings and Loan Foundation would reduce net earnings by $660,000 at the midpoint of the offering, after tax, in fiscal year 2004. In addition, purchasers of shares in the offering will have their ownership and voting interests diluted by up to 4.44% at the close of the offering when we contribute the shares of our common stock to the Naugatuck Valley Savings and Loan Foundation. For a further discussion regarding the effect of the contribution to the charitable foundation, see “Pro Forma Data” and “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation.” Our contribution to the Naugatuck Valley Savings and Loan Foundation may not be tax deductible, which could hurt our profits. We believe that our contribution to the Naugatuck Valley Savings and Loan Foundation, valued at $1.0 million at the midpoint of the offering, pre-tax, will be deductible for federal income tax purposes. 18

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However, we do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution. In addition, even if the contribution is tax deductible, we may not have sufficient profits to be able to use the deduction fully. Failure to approve the Naugatuck Valley Savings and Loan Foundation may materially affect our pro forma market value, which may delay the completion of the reorganization. The establishment and funding of the foundation as part of the reorganization is subject to the approval of our depositors. If our depositors approve the reorganization, but not the foundation, we may determine to complete the reorganization without the establishment of the foundation and may do so without amending the plan of reorganization or obtaining any further vote of our depositors. Keller & Company, which performed the appraisal of us on which this offering is based, has informed us that our value would be greater if we did not form the charitable foundation and fund it with shares of our common stock. Therefore, if our depositors do not approve the foundation, our pro forma market value will increase. If our pro forma market value increases above $28,433,750 for any reason, all subscribers will be resolicited and given the chance to change or cancel their orders. A resolicitation would delay the completion of the stock offering. Our stock price may decline when trading commences. We cannot guarantee that if you purchase shares in the offering that you will be able to sell them at or above the $10.00 offering price. After the shares of our common stock begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions of Naugatuck Valley Financial, and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, have recently experienced substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded. There may be a limited market for our common stock, which may lower our stock price. We have applied to list our shares of common stock for trading on the Nasdaq National Market. We cannot guarantee that the shares will be regularly traded. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock on short notice and the sale of a large number of shares at one time could temporarily depress the market price. We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations. We are subject to extensive government regulation, supervision and examination. Such regulation, supervision and examination govern the activities in which we may engage, and is intended primarily for the protection of the deposit insurance fund and our depositors. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. 19

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A WARNING ABOUT FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward-looking statements include: • statements of our goals, intentions and expectations; • statements regarding our business plans, prospects, growth and operating strategies; • statements regarding the quality of our loan and investment portfolios; and • estimates of our risks and future costs and benefits. These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors: • general economic conditions, either nationally or in our market area, that are worse than expected; • changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments; • increased competitive pressures among financial services companies; • changes in consumer spending, borrowing and savings habits; • legislative or regulatory changes that adversely affect our business; • adverse changes in the securities markets; and • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies or the Financial Accounting Standards Board. Forward-looking statements that we make in this prospectus and in other public statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Consequently, no forward-looking statement can be guaranteed. 20

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SELECTED FINANCIAL AND OTHER DATA The summary financial information presented below is derived in part from our financial statements. The following is only a summary and you should read it in conjunction with the financial statements and notes beginning on page F-1. The information at December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002 and 2001 is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at December 31, 2001, 2000 and 1999 for the years ended December 31, 2000 and 1999 is derived in part from audited consolidated financial statements that do not appear in this prospectus. The operating data for the three months ended March 31, 2004 and 2003 was not audited, but, in the opinion of our management, reflects all adjustments necessary for a fair presentation. No adjustments were made other than normal recurring entries. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results of operations that may be expected for the entire year.

At March 31, 2004

At December 31, 2003 2002 (In thousands) 2001 2000 1999

Financial Condition Data: Total assets Securities held-to-maturity Securities available-for-sale Loans receivable, net Cash and cash equivalents Deposits FHLB advances Total capital

$ 242,148 2,511 30,403 182,311 11,918 187,474 30,138 21,656
For the Three Months Ended March 31, 2004 2003

$ 243,956 1,561 37,166 180,378 9,775 183,455 34,990 21,217

$ 227,998 1,364 32,512 166,046 18,158 173,231 31,119 19,850

$ 201,105 596 20,407 158,456 12,643 156,662 23,372 17,497

$ 177,449 723 12,132 145,831 11,242 136,452 22,036 15,984

$ 169,710 1,004 11,784 138,171 10,748 131,153 21,690 14,135

2003

2002 (In thousands)

Year Ended December 31, 2001

2000

1999

Operating Data: Interest and dividend income Interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income Noninterest expense Income before provision for income taxes Provision for income taxes Net income

$ 3,026 936 2,090 —

$ 3,256 1,172 2,084 45

$ 12,644 4,241 8,403 45

$ 13,178 5,299 7,879 231

$ 12,631 6,178 6,453 80

$ 12,318 5,923 6,395 73

$ 11,358 5,272 6,086 110

2,090 333 1,879

2,039 257 1,650

8,358 1,115 6,845

7,648 972 5,820

6,373 743 5,392

6,322 601 4,497

5,976 523 4,157

544 166 $ 378 $

646 217 429 $

2,628 822 1,806 $

2,800 880 1,920 $

1,724 542 1,182 $

2,426 807 1,619 $

2,342 1,513 829

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At or For the Three Months Ended March 31, 2004 2003

2003

At or For the Year Ended December 31, 2002 2001 2000

1999

Performance Ratios(1): Return on average assets Return on average equity Interest rate spread(2) Net interest margin(3) Noninterest expense to average assets Efficiency ratio(4) Average interest-earning assets to average interest-bearing liabilities Capital Ratios: Total capital to risk-weighted assets Tier I capital to risk-weighted assets Tier I capital to average assets Total equity to total assets Asset Quality Ratios: Allowance for loan losses as a percent of total loans Allowance for loan losses as a percent of nonperforming loans Net charge-offs to average loans outstanding during the period Nonperforming loans as a percent of total loans Nonperforming assets as a percent of total assets Other Data: Number of: Deposit accounts Full service customer service facilities

0.63 % 6.99 3.72 3.77 3.16 77.20 102.93 16.26 15.01 8.83 8.84

0.76 % 8.45 3.81 3.92 2.94 70.21 104.77 16.27 15.02 8.59 8.74

0.77 % 8.59 3.77 3.85 2.94 71.62 103.69 16.21 14.96 8.64 8.70

0.91 % 10.23 3.77 3.90 2.75 65.20 105.20 15.37 14.12 8.30 8.71

0.65 % 6.95 3.50 3.71 2.96 74.43 105.87 14.74 13.47 8.40 8.70

0.96 % 10.71 3.78 3.98 2.68 63.58 105.57 15.50 14.25 8.83 9.01

0.50 % 5.98 3.64 3.88 2.49 62.01 107.34 15.13 13.88 8.25 8.33

0.98 213.31 — 0.46 0.40

1.17 206.17 0.02 0.57 0.44

0.99 199.78 0.13 0.50 0.46

1.19 162.91 0.05 0.73 0.58

1.16 144.66 (0.02 ) 0.80 0.72

1.18 171.14 0.18 0.69 0.65

1.38 130.22 0.34 1.06 1.11

22,481 5

22,295 5

22,447 5

22,059 4

21,823 3

21,228 3

20,713 3

(1) (2)

Performance ratios for the three months ended March 31, 2004 and 2003 are annualized. Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities. Represents net interest income as a percent of average interest-earning assets. Represents noninterest expense divided by the sum of net interest income and noninterest income, excluding gains or losses on the sale of securities. 22

(3) (4)

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USE OF PROCEEDS The following table shows how we intend to use the net proceeds of the offering. The actual net proceeds will depend on the number of shares of common stock sold in the offering and the actual expenses of the offering. Payments for shares made through withdrawals from deposit accounts will reduce our deposits and will not result in the receipt of new funds for investment. See “Pro Forma Data” for the assumptions used to arrive at these amounts.

1,827,500 Shares at $10.00 Per Share

2,150,000 2,472,500 Shares at Shares at $10.00 $10.00 Per Per Share Share (In thousands)

2,843,375 Shares at $10.00 Per Share

Offering proceeds Less: estimated offering expenses Net offering proceeds Less: Proceeds contributed to Naugatuck Valley Savings and Loan Proceeds used for loan to employee stock ownership plan Proceeds to Naugatuck Valley Mutual Proceeds remaining for Naugatuck Valley Financial

$ 18,275 777 17,498

$ 21,500 807 20,693

$ 24,725 837 23,888

$ 28,434 850 27,584

8,749 1,530 100 $ 7,119 $

10,347 1,800 100 8,446 $

11,944 2,070 100 9,774

13,792 2,381 100 $ 11,311

We may use the proceeds we retain from the offering: • to invest in securities; • to pay dividends to stockholders; • to repurchase shares of our common stock, subject to regulatory restrictions; • to finance the possible acquisition of financial institutions or other businesses that are related to banking; and • for general corporate purposes. Under current Office of Thrift Supervision regulations, we may not repurchase shares of our common stock during the first year following the reorganization, except to fund stock-based benefit plans or, with prior regulatory approval, when extraordinary circumstances exist. Naugatuck Valley Savings and Loan may use the proceeds that it receives from the offering, which is shown in the table above as the amount contributed to Naugatuck Valley Savings and Loan: • to fund new loans; • to invest in securities; • to finance the possible expansion of its business activities, including developing or acquiring new branch locations; and • for general corporate purposes. We may need regulatory approvals to engage in some of the activities listed above. We currently have no specific plans or agreements regarding any expansion activities or acquisitions other than the following branch office openings and relocations that are already underway and subject to regulatory approval:

• we expect to open a branch in Seymour, Connecticut in the fourth quarter of 2004; • we have signed an agreement for the purchase of a parcel of land in Southbury, Connecticut where we expect to open a branch by the third quarter of 2005; and 23

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• we recently leased property in Shelton, Connecticut where we expect to relocate our current Shelton branch by the fourth quarter of 2005. We do not have any other specific plans for the investment of the proceeds of this offering. For a discussion of our business reasons for undertaking the reorganization, see “The Reorganization and Stock Offering — Reasons for the Reorganization.” OUR DIVIDEND POLICY Following the reorganization, we intend to adopt a policy of paying regular cash dividends, but we have not decided on the amount or frequency of payments or when the payments may begin. In addition, we may declare and pay periodic special cash dividends in addition to, or in lieu of, regular cash dividends. In determining whether to declare or pay any dividends, whether regular or special, we will take into account our financial condition and results of operations, tax considerations, capital requirements, industry standards, and economic conditions. The regulatory restrictions that affect the payment of dividends by Naugatuck Valley Savings and Loan to Naugatuck Valley Financial discussed below will also be considered. We cannot guarantee that we will pay dividends or that, if paid, we will not reduce or eliminate dividends in the future. Based upon our estimate of offering expenses and other assumptions described in “Pro Forma Data, ” we expect to have between $7.1 million and $9.8 million in net proceeds, at the minimum and the maximum of the offering, respectively, that, subject to annual earnings and expenses, we could potentially use to pay dividends. If we pay dividends to our shareholders, we also will be required to pay dividends to Naugatuck Valley Mutual, unless Naugatuck Valley Mutual elects to waive the receipt of dividends. We anticipate that Naugatuck Valley Mutual will waive receipt of any dividends that we may pay. Any decision to waive dividends will be subject to regulatory approval. Under Office of Thrift Supervision regulations, public shareholders would not be diluted in a “second-step conversion” transaction by Naugatuck Valley Mutual as a result of any dividends waived by Naugatuck Valley Mutual. See “Regulation and Supervision — Holding Company Regulation.” Naugatuck Valley Financial will not be subject to Office of Thrift Supervision regulatory restrictions on the payment of dividends. However, its ability to pay dividends may depend, in part, upon dividends it receives from Naugatuck Valley Savings and Loan because it initially will have no source of income other than dividends from Naugatuck Valley Savings and Loan and earnings from the investment of the net proceeds from the offering that it retains. Office of Thrift Supervision regulations limit dividends and other distributions by Naugatuck Valley Savings and Loan. In addition, Naugatuck Valley Savings and Loan may not make a distribution that would constitute a return of capital during the three-year term of the business plan submitted in connection with the offering. Naugatuck Valley Savings and Loan may not make a capital distribution if, after making the distribution, it would be undercapitalized. See “Regulation and Supervision — Regulation of Federal Savings Associations — Limitation on Capital Distributions.” Any payment of dividends by Naugatuck Valley Savings and Loan that would be deemed to be drawn out of Naugatuck Valley Savings and Loan’s bad debt reserves would require Naugatuck Valley Savings and Loan to pay federal income taxes at the then current income tax rate on the amount deemed distributed. See “Federal and State Taxation — Federal Income Taxation” and note 9 of the notes to financial statements included in this prospectus. We do not contemplate any distribution by Naugatuck Valley Savings and Loan that would result in this type of tax liability. MARKET FOR THE COMMON STOCK We have not previously issued common stock. Upon completion of the reorganization, we expect that our shares of common stock will trade on the Nasdaq National Market under the symbol “NVSL.” Ryan Beck & Co. intends to become a market maker in our common stock following the reorganization. Ryan Beck & Co. also will assist us in obtaining other market makers after the reorganization. We cannot assure 24

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you that other market makers will be obtained or that an active and liquid trading market for the common stock will develop or, if developed, will be maintained. The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold. There can be no assurance that persons purchasing the common stock will be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should have a long-term investment intent and should recognize that there may be a limited trading market in the common stock. 25

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CAPITALIZATION The following table presents the historical capitalization of Naugatuck Valley Savings and Loan at March 31, 2004 and the capitalization of Naugatuck Valley Financial reflecting the reorganization (referred to as “pro forma” information). The pro forma capitalization gives effect to the assumptions listed under “Pro Forma Data,” based on the sale of the number of shares of common stock indicated in the table. This table does not reflect the issuance of additional shares under the proposed stock-based incentive plan. A change in the number of shares to be issued in the reorganization may materially affect pro forma capitalization. We are offering our common stock on a best efforts basis. We must sell a minimum of 1,827,500 shares to complete the offering.

Naugatuck Valley Savings and Loan Capitalization at March 31, 2004

Naugatuck Valley Financial Pro Forma Capitalization Based Upon the Sale of 1,827,500 Shares at $10.00 Per Share 2,150,000 Shares at $10.00 Per Share (In thousands) 2,472,500 Shares at $10.00 Per Share 2,843,375 Shares at $10.00 Per Share

Deposits(1) Advances from Federal Home Loan Bank Total deposits and borrowed funds Stockholders’ equity: Preferred stock: 1,000,000 shares, $.01 par value per share, authorized; none issued or outstanding Common stock: 25,000,000, $.01 par value per share, authorized; specified number of shares assumed to be issued and outstanding Additional paid-in capital Retained earnings(2) Net unrealized gain on available-for-sale securities, net Plus: shares issued to the Foundation Less: Capitalization of Naugatuck Valley Mutual Foundation contribution expense, net(3) Common stock acquired by employee stock ownership plan(4) Common stock to be acquired by stock-based incentive plan(5) Total stockholders’ equity

$

187,474 30,138

$ 187,474 30,138

$ 187,474 30,138

$ 187,474 30,138

$ 187,474 30,138

$

217,612

$ 217,612

$ 217,612

$ 217,612

$ 217,612

$

—

$

—

$

—

$

—

$

—

— — 21,325 331 —

43 17,455 21,325 331 850

50 20,643 21,325 331 1,000

58 23,830 21,325 331 1,150

66 27,518 21,325 331 1,323

— —

(100 ) (561 )

(100 ) (660 )

(100 ) (759 )

(100 ) (873 )

— — $ 21,656 $

(1,530 ) (1,366 ) 36,447 $

(1,800 ) (1,607 ) 39,182 $

(2,070 ) (1,848 ) 41,917 $

(2,381 ) (2,125 ) 45,084

(1)

Does not reflect withdrawals from deposit accounts for the purchase of common stock in the offering. Withdrawals to purchase common stock will reduce pro forma deposits by the amounts of the withdrawals. 26

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(2) (3)

Retained earnings are restricted by applicable regulatory capital requirements. Represents the expense, net of tax, of the contribution of common stock to the Naugatuck Valley Savings and Loan Foundation based on an estimated tax rate of 34.0%. The realization of the tax benefit is limited annually to 10% of our annual taxable income. However, for federal and state tax purposes, we can carry forward any unused portion of the deduction for five years following the year in which the contribution is made. Assumes that 3.60% of the common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be acquired by the employee stock ownership plan in the reorganization with funds borrowed from Naugatuck Valley Financial. Under generally accepted accounting principles, the amount of common stock to be purchased by the employee stock ownership plan represents unearned compensation and is, accordingly, reflected as a reduction of capital. As shares are released to plan participants’ accounts, a corresponding reduction in the charge against capital will occur. Since the funds are borrowed from Naugatuck Valley Financial, the borrowing will be eliminated in consolidation and no liability or interest expense will be reflected in the consolidated financial statements of Naugatuck Valley Financial. See “Our Management — Benefit Plans — Employee Stock Ownership Plan.” Assumes the purchase in the open market at $10.00 per share, under the proposed stock-based incentive plan, of a number of shares equal to 3.21% of the shares of common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. The shares are reflected as a reduction of stockholders’ equity. The stock-based incentive plan will be submitted to shareholders for approval at a meeting following the reorganization. See “Risk Factors — Issuance of shares for benefit programs may dilute your ownership interest,” “Pro Forma Data” and “Our Management — Benefit Plans — Future Stock-Based Incentive Plan.” 27

(4)

(5)

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REGULATORY CAPITAL COMPLIANCE At March 31, 2004, Naugatuck Valley Savings and Loan was subject to, and exceeded, the regulatory capital requirements of the Federal Deposit Insurance Corporation. See note 10 to the notes to the financial statements. Following the reorganization, Naugatuck Valley Savings and Loan will be subject to the regulatory capital requirements of the Office of Thrift Supervision. The following table presents Naugatuck Valley Savings and Loan’s capital position relative to the regulatory capital requirements of the Office of Thrift Supervision at March 31, 2004, on a historical and a pro forma basis, assuming that Naugatuck Valley Savings and Loan was subject to the regulatory capital requirements at March 31, 2004. The table reflects receipt by Naugatuck Valley Savings and Loan of 50% of the net proceeds of the offering. For purposes of the table, the amount expected to be borrowed by the employee stock ownership plan and the cost of the shares expected to be awarded under the stock-based incentive plan as restricted stock are deducted from pro forma regulatory capital. For a discussion of the assumptions underlying the pro forma capital calculations presented below, see “Use of Proceeds,” “Capitalization” and “Pro Forma Data.” The definitions of the terms used in the table are those provided in the capital regulations issued by the Office of Thrift Supervision. For a discussion of the capital standards applicable to Naugatuck Valley Savings and Loan, see “Regulation and Supervision — Regulation of Federal Savings Associations — Capital Requirements.”
Pro Forma at March 31, 2004 Minimum of Offering Range 1,827,500 Shares at $10.00 Per Share Percent of Amount Assets Midpoint of Offering Range 2,150,000 Shares at $10.00 Per Share Percent of Amount Assets (Dollars in thousands) Maximum of Offering Range 2,472,500 Shares at $10.00 Per Share Percent of Amount Assets 15% Above Maximum of Offering Range 2,843,375 Shares at $10.00 Per Share Percent of Amount Assets

Historical at March 31, 2004 Percent of Amount Assets(1) Generally accepted accounting principles capital Tangible Capital: Capital level(2) Requirement Excess Core Capital: Capital level(2) Requirement Excess Total Risk-Based Capital: Total risk-based capital(3) Requirement Excess

$ 21,656 $ 21,044 3,628 $ 17,416

8.9 % 8.7 % 1.5 7.2 %

$ 27,509 $ 26,897 3,716 $ 23,182

11.1 % 10.9 % 1.5 9.4 %

$ 28,596 $ 27,984 3,732 $ 24,252

11.5 % 11.2 % 1.5 9.7 %

$ 29,683 $ 29,071 3,748 $ 25,322

11.9 % 11.6 % 1.5 % 10.1 %

$ 31,943 $ 30,331 3,769 $ 26,564

12.3 % 12.1 % 1.5 10.6 %

$ 21,044 9,675 $ 11,369

8.7 % 4.0 4.7 %

$ 26,897 9,909 $ 16,989

10.9 % 4.0 6.9 %

$ 27,984 9,952 $ 18,032

11.2 % 4.0 7.2 %

$ 29,071 9,996 $ 19,075

11.6 % 4.0 7.6 %

$ 30,331 10,046 $ 20,285

12.1 % 4.0 8.1 %

$ 22,797 11,218 $ 11,578

16.3 % 8.0 8.3 %

$ 28,650 11,312 $ 17,338

20.3 % 8.0 12.3 %

$ 29,737 11,329 $ 18,407

21.0 % 8.0 13.0 %

$ 30,823 11,347 $ 19,477

21.7 % 8.0 13.7 %

$ 32,084 11,367 $ 20,771

22.6 % 8.0 14.6 %

(1)

Tangible capital and core capital levels are shown as a percentage of adjusted total assets of $242.1 million. Risk-based capital levels are shown as a percentage of risk-weighted assets of $140.2 million. A portion of the net unrealized gains on available-for-sale securities accounts for the difference between capital calculated under generally accepted accounting principles and each of tangible capital and core capital. See note 10 to the notes to financial statements for additional information. Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk-weighting. 28

(2)

(3)

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PRO FORMA DATA The following tables show information about our net income and stockholders’ equity (“book value”) reflecting the reorganization based on the sale of common stock at the minimum of the offering range, the midpoint of the offering range, the maximum of the offering range and 15% above the maximum of the offering range. The actual net proceeds from the sale of the common stock cannot be determined until the reorganization is completed. Net proceeds indicated in the following tables are based upon the following assumptions: • All shares of stock will be sold in the subscription and community offerings; • Our employee stock ownership plan will purchase a number of shares equal to 3.60% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, with a loan from Naugatuck Valley Financial that will be repaid in equal installments over 15 years; • Total expenses of the offering, including fees and expenses paid to Ryan Beck & Co., will be $837,000 at the maximum of the offering; and • We will make a charitable contribution of 2% of the shares of our common stock issued in the reorganization to the Naugatuck Valley Savings and Loan Foundation, with an assumed value of $10.00 per share. Actual expenses may vary from this estimate, and the fees paid will depend upon whether a syndicate of broker-dealers or other means is necessary to sell the shares, and other factors. Pro forma net income for the three months ended March 31, 2004 and the year ended December 31, 2003 has been calculated as if the reorganization was completed at the beginning of each period, and the net proceeds had been invested at 1.25% for the three months ended March 31, 2004 and for the year ended December 31, 2003, which represents the three-year treasury rate. A pro forma after-tax return of 0.83% is used for both the three months ended March 31, 2004 and the year ended December 31, 2003, after giving effect to a combined federal and state income tax rate of 34.0%. Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the number of shares of common stock indicated in the tables. When reviewing the following tables you should consider the following: • The final column gives effect to a 15% increase in the offering range, which may occur without any further notice, if Keller & Company increases its appraisal to reflect the results of this offering, changes in our financial condition or results of operations or changes in market conditions after the offering begins. See “The Reorganization and Stock Offering — How We Determined the Offering Range and the $10.00 Purchase Price.” • Since funds on deposit with us may be withdrawn to purchase shares of common stock, the amount of funds available to us for investment will be reduced by the amount of such withdrawals. The pro forma tables do not reflect withdrawals from deposit accounts. • Historical per share amounts have been computed as if the shares of common stock expected to be issued in the reorganization had been outstanding at the beginning of the period covered by the table. However, neither historical nor pro forma stockholders’ equity has been adjusted to reflect the investment of the estimated net proceeds from the sale of the shares in the offering, the additional employee stock ownership plan expense or the proposed stock-based incentive plan. • Pro forma stockholders’ equity (“pro forma book value”) represents the difference between the stated amounts of our assets and liabilities. Pro forma book value amounts do not represent fair market values or amounts available for distribution to shareholders in the unlikely event of liquidation. The amounts shown do not reflect the federal income tax consequences of the 29

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restoration to income of our special bad debt reserves for income tax purposes, which would be required in the unlikely event of liquidation. See “Federal and State Taxation.” • The amounts shown as pro forma stockholders’ equity per share do not represent possible future price appreciation of our common stock. • The amounts shown do not account for the shares to be reserved for issuance upon the exercise of stock options that may be granted under our proposed stock-based incentive plan, which requires shareholder approval at a meeting following the reorganization. Under the stock-based incentive plan, an amount equal to 3.21% of the common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be reserved for future issuance upon the exercise of options to be granted under the plan. The following pro forma data, which are based on our historical capital at March 31, 2004 and December 31, 2003, and our historical net income for the three months ended March 31, 2004 and year ended December 31, 2003, may not represent the actual financial effects of the reorganization or our operating results after the reorganization. The pro forma data rely exclusively on the assumptions outlined above and in the notes to the pro forma tables. The pro forma data do not represent the fair market value of our common stock, the current fair market value of our assets or liabilities, or the amount of money that would be available for distribution to shareholders if we are liquidated after the reorganization. We are offering our common stock on a best efforts basis. We must sell a minimum of 1,827,500 shares to complete the offering. 30

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Three Months Ended March 31, 2004 Minimum of Offering Range 1,827,500 Shares at $10.00 Per Share Midpoint of Maximum of Offering Offering Range Range 2,150,000 2,472,500 Shares at Shares at $10.00 Per $10.00 Per Share Share (Dollars in thousands, except per share amounts) 15% Above Maximum of Offering Range 2,843,375 Shares at $10.00 Per Share

Gross proceeds Less: estimated expenses Estimated net proceeds Less: cash to Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4) Net investable proceeds Pro Forma Net Income: Pro forma net income(2): Historical Pro forma income on net investable proceeds Less: pro forma employee stock ownership plan adjustments(1)(4) Less: pro forma stock-based incentive plan adjustments(3)(4)(6) Pro forma net income Pro forma net income per share(2): Historical Pro forma income on net investable proceeds Less: pro forma employee stock ownership plan adjustments(1)(4) Less: pro forma stock-based incentive plan adjustments(3)(4)(6) Pro forma net income per share Offering price as a multiple of pro forma net income per share Number of shares used to calculate pro forma net income per share(5) Pro Forma Stockholders’ Equity: Pro forma stockholders’ equity (book value): Historical Estimated net proceeds Plus: shares issued to the foundation Less: after-tax cost of foundation Less: capitalization of Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4)(6) Pro forma stockholders’ equity

$

18,275 (777 ) 17,498 (100 ) (1,530 ) (1,366 )

$

21,500 (807 ) 20,693 (100 ) (1,800 ) (1,607 )

$

24,725 (837 ) 23,888 (100 ) (2,070 ) (1,848 )

$

28,434 (850 ) 27,584 (100 ) (2,381 ) (2,125 )

$

14,502

$

17,186

$

19,870

$

22,978

$

378 30 (17 ) (45 )

$

378 35 (20 ) (53 )

$

378 41 (23 ) (61 )

$

378 47 (26 ) (70 )

$

346

$

340

$

335

$

329

$

0.09 0.01 — (0.01 )

0.08 0.01 — (0.01 ) $ 0.08 $

0.07 0.01 — (0.01 ) 0.07 $

0.06 0.01 — (0.01 ) 0.06

$

0.09

27.78 x 4,099,550

31.25 x 4,823,000

35.71 x 5,546,450

41.67 x 6,378,418

$

21,656 17,498 850 (561 ) (100 ) (1,530 ) (1,366 )

$

21,656 20,693 1,000 (660 ) (100 ) (1,800 ) (1,607 )

$

21,656 23,888 1,150 (759 ) (100 ) (2,070 ) (1,848 )

$

21,656 27,584 1,323 (873 ) (100 ) (2,381 ) (2,125 )

$

36,447

$

39,182

$

41,917

$

45,084

Pro forma stockholders’ equity per share: Historical Estimated net proceeds Plus: shares issued to the foundation Less: after-tax cost of foundation Less: capitalization of Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4)(6) Pro forma stockholders’ equity per share Offering price as a percentage of pro forma stockholders’ equity per share Number of shares used to calculate pro forma stockholders’ equity per share

$

5.10 4.12 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

4.33 4.14 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

3.77 4.15 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

3.28 4.17 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

8.59

$

7.84

$

7.29

$

6.82

116.41 % 4,250,000 31

127.55 % 5,000,000

137.17 % 5,750,000

146.63 % 6,612,500

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Year Ended December 31, 2003 Minimum of Offering Range 1,827,500 Shares at $10.00 Per Share Midpoint of Maximum of Offering Offering Range Range 2,150,000 2,472,500 Shares at Shares at $10.00 Per $10.00 Per Share Share (Dollars in thousands, except per share amounts) 15% Above Maximum of Offering Range 2,843,375 Shares at $10.00 Per Share

Gross proceeds Less: estimated expenses Estimated net proceeds Less: cash to Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4) Net investable proceeds Pro Forma Net Income: Pro forma net income(2): Historical Pro forma income on net investable proceeds Less: pro forma employee stock ownership plan adjustments(1)(4) Less: pro forma stock-based incentive plan adjustments(3)(4)(6) Pro forma net income Pro forma net income per share(2): Historical Pro forma income on net investable proceeds Less: pro forma employee stock ownership plan adjustments(1)(4) Less: pro forma stock-based incentive plan adjustments(3)(6) Pro forma net income per share Offering price as a multiple of pro forma net income per share Number of shares used to calculate pro forma net income per share(5) Pro Forma Stockholders’ Equity: Pro forma stockholders’ equity (book value): Historical Estimated net proceeds Plus: shares issued to the foundation Less: after-tax cost of foundation Less: capitalization of Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4)(6) Pro forma stockholders’ equity(6)

$

18,275 (777 ) 17,498 (100 ) (1,530 ) (1,366 )

$

21,500 (807 ) 20,693 (100 ) (1,800 ) (1,607 )

$

24,725 (837 ) 23,888 (100 ) (2,070 ) (1,848 )

$

28,434 (850 ) 27,548 (100 ) (2,381 ) (2,125 )

$

14,502

$

17,186

$

19,870

$

22,978

1,806 120 (67 ) (180 ) $ 1,679 $

1,806 142 (79 ) (212 ) 1,657 $

1,806 164 (91 ) (244 ) 1,635 $

1,806 190 (105 ) (281 ) 1,610

$

0.44 0.03 (0.02 ) (0.04 )

0.37 0.03 (0.02 ) (0.04 ) $ 0.34 $

0.33 0.03 (0.02 ) (0.04 ) 0.30 $

0.28 0.03 (0.02 ) (0.04 ) 0.25

$

0.41

24.39 x 4,107,200

29.41 x 4,832,000

33.33 x 5,556,800

40.00x 6,390,320

$

21,217 17,498 850 (561 ) (100 ) (1,530 ) (1,366 )

$

21,217 20,693 1,000 (660 ) (100 ) (1,800 ) (1,607 )

$

21,217 23,888 1,150 (759 ) (100 ) (2,070 ) (1,848 )

$

21,217 27,584 1,323 (873 ) (100 ) (2,381 ) (2,125 )

$

36,008

$

38,743

$

41,478

$

44,645

Pro forma stockholders’ equity per share: Historical Estimated net proceeds Plus: shares issued to the foundation Less: after-tax cost of foundation Less: capitalization of Naugatuck Valley Mutual Less: common stock acquired by employee stock ownership plan(1)(4) Less: common stock to be acquired by stock-based incentive plan(3)(4)(6) Pro forma stockholders’ equity per share Offering price as a percentage of pro forma stockholders’ equity per share Number of shares used to calculate pro forma stockholders’ equity per share

$

4.99 4.12 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

4.24 4.14 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

3.69 4.15 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

3.21 4.17 0.20 (0.13 ) (0.02 ) (0.36 ) (0.32 )

$

8.48

$

7.75

$

7.21

$

6.75

117.92 % 4,250,000 32

129.03 % 5,000,000

138.70 % 5,750,000

148.15 % 6,612,500

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(1)

Assumes that the employee stock ownership plan will acquire an amount of stock equal to 3.60% of the shares of common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. The employee stock ownership plan will borrow the funds to acquire these shares from the net offering proceeds that Naugatuck Valley Financial will retain. The amount of this borrowing has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. This borrowing will have an interest rate equal to the prime rate as published in The Wall Street Journal , which is currently %. Naugatuck Valley Savings and Loan intends to make contributions to the employee stock ownership plan in amounts at least equal to the principal and interest requirement of the debt. As the debt is paid down, stockholders’ equity will be increased. The payment of the employee stock ownership plan debt is based upon equal installments of principal over a 15 year period, assuming a combined federal and state income tax rate of 34.0%. Interest income that Naugatuck Valley Financial will earn on the loan will offset the interest paid on the loan by Naugatuck Valley Savings and Loan. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. Applicable accounting principles require that compensation expense for the employee stock ownership plan be based upon shares committed to be released and that unallocated shares be excluded from earnings per share computations. The valuation of shares committed to be released would be based upon the average market value of the shares during the year, which, for purposes of this calculation, was assumed to be equal to the $10.00 per share purchase price. See “Our Management — Benefit Plans — Employee Stock Ownership Plan.” Does not give effect to the non-recurring expense that will be recognized in fiscal 2004 as a result of the contribution of common stock to the Naugatuck Valley Savings and Loan Foundation. The following table shows the estimated after-tax expense associated with the contribution to the Naugatuck Valley Savings and Loan Foundation, as well as pro forma net income and pro forma net income per share assuming the contribution to the Naugatuck Valley Savings and Loan Foundation was expensed during the periods presented. The pro forma data assumes that we will realize 100% of the income tax benefit as a result of the contribution to the Naugatuck Valley Savings and Loan Foundation based on a 34.0% tax rate. The realization of the tax benefit is limited annually to 10% of our annual taxable income. However, for federal and state tax purposes, we can carry forward any unused portion of the deduction for five years following the year in which the contribution is made.
Minimum of Offering Range Midpoint Maximum of Offering of Offering Range Range (Dollars in thousands, except per share amounts) 15% Above Maximum of Offering Range

(2)

After-tax expense of contribution to foundation: Three months ended March 31, 2004 Year ended December 31, 2003 Pro forma net income: Three months ended March 31, 2004 Year ended December 31, 2003 Pro forma net income per share: Three months ended March 31, 2004 Year ended December 31, 2003

$

561 561

$

660 660

$

759 759

$

873 873

$

(215 ) 1,118

$

(320 ) 997

$

(424 ) 876

$

(544 ) 737

$ (0.05 ) 0.27

$ (0.07 ) 0.21

$ (0.08 ) 0.16

$ (0.09 ) 0.12

(3)

In calculating the pro forma effect of the restricted stock awards, it is assumed that the required shareholder approval has been received, that we acquired the shares used to fund the awards (3.21% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation) at the beginning of the respective period in open market purchases at the $10.00 per share purchase price, that 20% of the amount contributed was an amortized expense during 33

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the period, and that the combined federal and state income tax rate is 34.0%. We may fund the stock-based incentive plan through the purchase of common stock in the open market by a trust established in connection with the plan or from authorized, but unissued, shares of common stock. The issuance of authorized but unissued shares of the common stock instead of open market purchases would dilute the ownership interests of existing shareholders, other than Naugatuck Valley Mutual, by approximately 6.66%.

For purposes of the pro forma tables, shares of restricted stock issued under the stock-based incentive plan vest 20% per year and compensation expense is recognized on a straight-line basis over each vesting period. If the fair market value per share is greater than $10.00 per share on the date shares are awarded under the stock-based incentive plan, total stock-based incentive plan expense would be greater. The total estimated expense was multiplied by 20%, which is the total percent of shares for which expense is recognized in the first year. The following table shows the estimated pro forma net income and stockholders’ equity per share if restricted shares awarded under the stock-based incentive plan were authorized but unissued shares instead of repurchased shares. The table also shows the estimated pre-tax stock-based incentive plan expense. The number of shares used to calculate pro forma net income per share in the following table is the total number of shares issued at the indicated point in the offering range, minus the number of shares sold to the employee stock ownership plan assumed not to be committed to be released within one year following the reorganization and plus the number of shares that may be awarded as restricted stock under the planned stock-based incentive plan. The number of shares used to calculate pro forma stockholders’ equity per share in the following table is the total number of shares issued at the indicated point in the offering range, plus the number of shares that may be awarded as restricted stock under the planned stock-based incentive plan.
Minimum of Offering Range Midpoint of Maximum Offering of Offering Range Range (Dollars in thousands, except per share data) 15% Above Maximum of Offering Range

Pro forma net income per share: Three months ended March 31, 2004 Year ended December 31, 2003 Number of shares used to calculate pro forma net income per share: At March 31, 2004 At December 31, 2003 Pro forma stockholders’ equity per share: At March 31, 2004 At December 31, 2003 Number of shares used to calculate pro forma stockholders’ equity per share: At March 31, 2004 At December 31, 2003 Pre-tax stock-based incentive plan expense: Three months ended March 31, 2004 Year ended December 31, 2003

$

0.08 0.38

$

0.07 0.32

$

0.06 0.27

$

0.05 0.23

4,236,145 4,243,795

4,983,700 4,992,700

5,731,255 5,741,605

6,590,944 6,602,846

$

8.62 8.52

$

7.90 7.82

$

7.37 7.30

$

6.92 6.85

4,386,595 4,386,595

5,160,700 5,160,700

5,934,805 5,934,805

6,825,026 6,825,026

$

68 273

$

80 32

$

92 369

$

106 425

(4)

Assumes the value of our common stock is $10.00 per share for purposes of determining the total estimated value of the common stock

acquired by the employee stock ownership plan and the restricted stock awards. (5) The following table shows how we derived the number of shares used to calculate pro forma net income per share. 34

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Minimum of Offering Range

Midpoint of Offering Range

Maximum of Offering Range

15% Above Maximum of Offering Range

Three Months Ended March 31, 2004: Shares issued in the reorganization Less: shares purchased by the employee stock ownership plan Plus: shares committed to be released by the employee stock ownership plan Number of shares used to calculate pro forma net income per share

4,250,000

5,000,000

5,750,000

6,612,500

153,000

180,000

207,000

238,050

2,550

3,000

3,450

3,968

4,099,550

4,823,000

5,546,450

6,378,418

Year Ended December 31, 2003: Shares issued in the reorganization Less: shares purchased by the employee stock ownership plan Plus: shares committed to be released by the employee stock ownership plan Number of shares used to calculate pro forma net income per share

4,250,000

5,000,000

5,750,000

6,612,500

153,000

180,000

207,000

238,050

10,200

12,000

13,800

15,870

4,107,200

4,832,000

5,556,800

6,390,320

(6)

In calculating the pro forma effect of the stock-based incentive plan, no effect has been given to any shares that may be reserved for issuance upon the exercise of stock options that may be granted under the stock-based incentive plan. The number of options available under the stock-based incentive plan will be equal to 8.03% of the number of shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. The issuance of authorized but unissued shares of common stock instead of shares repurchased in the open market would dilute the ownership interests of existing stockholders, other than Naugatuck Valley Mutual, by approximately 15.15%. 35

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The following table shows the estimated pro forma net income and stockholders’ equity per share if shares for stock issued as a result of the exercise of stock options were authorized but unissued shares instead of repurchased shares.
Minimum of Offering Range Midpoint of Offering Range Maximum of Offering Range 15% Above Maximum of Offering Range

Pro forma net income per share: Three months ended March 31, 2004 Year ended December 31, 2003 Number of shares used to calculate pro forma net income per share: Three months ended March 31, 2004 Year ended December 31, 2003 Pro forma stockholders’ equity per share: At March 31, 2004 At December 31, 2003 Number of shares used to calculate pro forma stockholders’ equity per share: Three months ended March 31, 2004 Year ended at December 31, 2003

$

0.08 0.38

$

0.07 0.32

$

0.06 0.27

$

0.05 0.23

4,440,825 4,448,475

5,224,500 5,233,500

6,008,175 6,018,525

6,909,402 6,921,304

$

7.94 7.84

$

7.25 7.17

$

6.75 6.68

$

6.31 6.25

4,591,275 4,591,275

5,401,500 5,401,500 36

6,211,725 6,211,725

7,143,484 7,143,484

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COMPARISON OF INDEPENDENT VALUATION AND PRO FORMA FINANCIAL INFORMATION WITH AND WITHOUT THE FOUNDATION As set forth in the following table, if we do not establish and fund the Naugatuck Valley Savings and Loan Foundation as part of the offering, Keller & Company estimates that our pro forma valuation would be greater, which would increase the amount of common stock offered for sale. If the Naugatuck Valley Savings and Loan Foundation were not established, there is no assurance that the updated appraisal that Keller & Company will prepare at the closing of the reorganization would conclude that our pro forma market value would be the same as the estimate set forth in the table below. The updated appraisal will be based on the facts and circumstances existing at closing time, including, among other things, market and economic conditions. The information presented in the following table is for comparative purposes only. It assumes that the reorganization was completed at March 31, 2004, based on the assumptions set forth under “Pro Forma Data.”
At the Minimum of Estimated Valuation Range With No Foundation Foundation Estimated offering amount(1) Estimated pro forma valuation Pro forma total assets Pro forma total liabilities Pro forma stockholders’ equity Pro forma net income Pro forma stockholders’ equity per share Pro forma net income per share Pro Forma Pricing Ratios: Offering price as a percentage of pro forma stockholders’ equity Offering price as a multiple of pro forma net income per share (annualized) Offering price to assets Pro Forma Financial Ratios: Return on assets (annualized) Return on stockholders’ equity (annualized) Stockholders’ equity to total assets $ 18,275 42,500 256,650 220,203 36,447 346 8.59 0.09 $ 19,775 43,945 258,030 220,492 37,538 347 8.54 0.09 At the Midpoint of At the Maximum of Estimated Valuation Estimated Valuation Range Range With No With No Foundation Foundation Foundation Foundation (Dollars in thousands, except per share amounts) $ 21,500 $ 23,265 $ 24,725 $ 26,755 50,000 51,700 57,500 59,455 259,334 260,958 262,018 263,885 220,152 220,492 220,101 220,492 39,182 40,466 41,917 43,393 340 342 335 336 7.84 0.08 7.83 0.08 7.29 0.07 7.30 0.08 At the Maximum, as Adjusted, of Estimated Valuation Range With No Foundation Foundation $ 28,434 66,125 265,126 220,042 45,084 329 6.82 0.06 $ 30,768 68,373 267,273 220,492 46,781 330 6.84 0.07

116.41 %

117.07 %

127.55 %

127.76 %

137.17 %

137.01 %

146.63 %

146.15 %

27.78 15.17

27.78 17.02

31.25 17.43

31.25 17.86

35.71 19.57

35.71 22.52

41.67 21.93

41.67 25.57

0.54 3.80 14.20

0.54 3.70 14.55

0.52 3.47 15.11

0.52 3.38 15.51

0.51 3.20 16.00

0.51 3.10 16.44

0.50 2.92 17.00

0.49 2.82 17.50

(1) (2)

Based on independent valuation prepared by Keller & Company as of May 21, 2004. Does not give effect to the non-recurring expense that will be recognized in fiscal 2004 as a result of the contribution of common stock to the Naugatuck Valley Savings and Loan Foundation. 37

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OUR BUSINESS General Naugatuck Valley Financial will be organized as a federal corporation at the direction of Naugatuck Valley Savings and Loan upon completion of the reorganization. As a result of the reorganization, Naugatuck Valley Savings and Loan will be a wholly owned subsidiary of Naugatuck Valley Financial. Upon completion of the reorganization, Naugatuck Valley Financial’s business activity will be the ownership of the outstanding capital stock of Naugatuck Valley Savings and Loan and management of the investment of offering proceeds retained from the reorganization. Initially, Naugatuck Valley Financial will neither own nor lease any property but will instead use the premises, equipment and other property of Naugatuck Valley Savings and Loan with the payment of appropriate rental fees, as required by applicable law and regulations. In the future, Naugatuck Valley Financial may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so. Naugatuck Valley Savings and Loan was formed as a Connecticut state-chartered mutual savings and loan association in 1922 under the name Naugatuck Building and Loan. Naugatuck Valley Savings and Loan changed its name to Savings and Loan Association of Naugatuck, Inc. in 1951 and again changed its name to Naugatuck Valley Savings and Loan Association, Inc. in 1974. On January 24, 2003, Naugatuck Valley Savings and Loan converted its charter from a Connecticut state-chartered mutual savings and loan association to a Connecticut state-chartered mutual savings bank. As part of its charter conversion, Naugatuck Valley Savings and Loan changed its name to Naugatuck Valley Savings and Loan, S.B. We operate as a community-oriented financial institution offering traditional financial services to consumers and businesses in our market area. We attract deposits from the general public and use those funds to originate one-to four-family, multi-family and commercial real estate, construction, commercial business and consumer loans, which we primarily hold for investment. Our website address is www.nvsl.com. Information on our website should not be considered a part of this prospectus. Market Area We are headquartered in Naugatuck, Connecticut, which is located in south-western Connecticut approximately six miles south of Waterbury and 26 miles north of Bridgeport. In addition to our main office, we operate four branch offices in the Greater Naugatuck Valley which we consider our market area. The Greater Naugatuck Valley encompasses the communities in the central and lower Naugatuck Valley regions. The population surrounding our main office in Naugatuck and our branch office in Derby is larger than the rest of our market area with average to above average growth. The other communities in our market area are generally smaller, however, have average to strong population growth. The residents of these communities display lower affluent to mid-scale demographics, with the exception of the Shelton market which is dominated by upper affluent. The economy in our market area is primarily oriented to the service, retail, construction, and manufacturing industries. The major employers in the area include Hershey Foods Corporation (Peter Paul Division), Wal-Mart, Coca-Cola Bottling Co. and Pitney Bowes. Competition We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the several financial institutions operating in our market area and, to a lesser extent, from other financial service companies, such as brokerage firms, credit unions and insurance companies. We also face competition for investors’ funds from money market funds and other corporate and government securities. In addition, banks owned by Bank of America Corporation, Wachovia Corporation and J.P. Morgan Chase & Co., all of which are large super-regional bank holding companies, also operate in our market area. These institutions are significantly larger than us and, therefore, have significantly greater resources. 38

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Our competition for loans comes primarily from financial institutions in our market area and, to a lesser extent, from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered the barriers to enter new market areas, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit our growth in the future. Lending Activities General. Our loan portfolio consists primarily of one- to four-family residential mortgage loans. To a lesser extent, our loan portfolio includes multi-family and commercial real estate loans, construction loans commercial business loans and consumer loans. Substantially all of our loans are made within Connecticut. One- to Four-Family Residential Loans. Our primary lending activity is the origination of mortgage loans to enable borrowers to purchase or refinance existing homes or to construct new residential dwellings in our market area. We offer fixed-rate and adjustable-rate mortgage loans with terms up to 30 years. Borrower demand for adjustable-rate loans versus fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment and the effect each has on our interest rate risk. The loan fees charged, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions. We offer fixed rate loans with terms of either 15, 20 or 30 years. Our adjustable-rate mortgage loans are based on either a 15, 20 or 30 year amortization schedule and interest rates and payments on our adjustable-rate mortgage loans adjust annually after either a one, three, five or seven year initial fixed period. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate typically equal to 2.75% above the one-year constant maturity Treasury index. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan. Due to historically low interest rate levels, borrowers generally have preferred fixed-rate loans in recent years. While we anticipate that our adjustable-rate loans will better offset the adverse effects on our net interest income of an increase in interest rates as compared to fixed-rate mortgages, the increased mortgage payments required of adjustable-rate loans in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits. While one- to four-family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding 39

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loans. As interest rates declined and remained low over the past few years, we have experienced high levels of loan repayments and refinancings. We generally do not make conventional loans with loan-to-value ratios exceeding 97% and generally make loans with a loan-to-value ratio in excess of 80% only when secured by first liens on owner-occupied one-to four-family residences. Loans with loan-to-value ratios in excess of 80% generally require private mortgage insurance or additional collateral. We require all properties securing mortgage loans to be appraised by a Board-approved independent appraiser. We require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, or flood insurance for loans on property located in a flood zone, before closing the loan. In an effort to provide financing for first-time buyers, we offer a first-time home buyers program. We offer fixed-rate residential mortgage loans through this program to qualified individuals and originate the loans using modified underwriting guidelines. Multi-Family and Commercial Real Estate Loans. We offer fixed rate and adjustable-rate mortgage loans secured by multi-family and commercial real estate. Our multi-family and commercial real estate loans are generally secured by condominiums, apartment buildings, single-family subdivisions and owner-occupied properties used for businesses. We intend to continue to grow this segment of our loan portfolio. We originate multi-family and commercial real estate loans for terms generally up to 20 years. Interest rates and payments on adjustable-rate loans adjust every one, three or five years. Interest rates and payment on our adjustable rate loans generally are adjusted to a rate typically equal to 3% above the one-year, three-year or five-year constant maturity Treasury index. There are no adjustment period or lifetime interest rate caps. Loan amounts generally do not exceed 80% of the appraised value. Loans secured by multi-family and commercial real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Of primary concern in multi-family and commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on multi-family and commercial real estate loans. In reaching a decision on whether to make a multi-family or commercial real estate loan, we consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. We require either an environmental survey or impaired property insurance for all multi-family and commercial real estate loans. Construction Loans. We originate loans to individuals to finance the construction of residential dwellings for personal use. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually nine months. At the end of the construction phase, the loan converts to a permanent mortgage loan. Loans generally can be made with a maximum loan to value ratio of 80% of the appraised value with a maximum term of 30 years. The largest outstanding residential construction loan at March 31, 2004 was $350,000, $298,000 of which was outstanding. This loan was performing according to its terms at March 31, 2004. We also make commercial construction loans for commercial development projects, including condominiums, apartments buildings, single family subdivisions, as well as owner-occupied properties used for business. These loans provide for payment of interest only during the construction phase and may, in the case of an apartment or commercial building, convert to a permanent mortgage loan or, in the case of a single family subdivision or construction or builder loan, be paid in full with the sale of the property after construction is complete. In the case of a commercial construction loan, the construction period may be from nine months to two years. Loans are generally made to a maximum of 80% of the appraised value as determined by an appraisal of the property made by an independent licensed appraiser. We also require an inspection of the property before disbursement of funds during the term of the construction loan for both residential and commercial construction loans. The 40

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largest outstanding commercial construction loan at March 31, 2004 was $3.2 million, of which $906,000 was outstanding. This loan was performing according to its terms at March 31, 2004. We originate land loans to individuals on approved residential building lots for personal use for terms of up to 20 years and to a maximum loan-to-value ratio of 75% of the lower of the appraisal value or purchase price. Our land loans adjust annually after a five year initial fixed period. Interest rates are equal to 3.75% above the one-year constant maturity Treasury index. We also originate loans to local contractors and developers for the purpose of making improvements to, and on, approved subdivisions and condominium projects within two years of the date of the original loan. Such loans generally are written with a maximum loan-to-value ratio of 80% of the lower of the appraised value or purchase price of the land. These loans adjust when and as the index changes at a rate that is generally equal to the prime rate as published in The Wall Street Journal plus 1%. We require title insurance and, if applicable, a hazardous waste survey reporting that the land is free of hazardous or toxic waste. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a project having a value which is insufficient to assure full repayment. As a result of the foregoing, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest. If we are forced to foreclose on a project before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. Commercial Business Loans. We make commercial business loans to a variety of professionals, sole proprietorships and small businesses primarily in our market area. We offer a variety of commercial lending products. These loans are typically secured, primarily by business assets. These loans are originated with maximum loan-to-value ratios of 75% of the value of the personal property. We originate one- to seven-year term loans for the acquisition of equipment or business expansion, lines of credit for seasonal financing needs and demand loans for short term financing needs with specific repayment sources. Commercial business loans are usually written at variable rates which use the prime rate as published in The Wall Street Journal as an index and, depending on the qualifications of the borrower, a 0.5% to 3.0% margin is added. These rates will change when and as the index rate changes without caps. Fixed-rate loans are written at market rates determined at the time the loan is granted and are based on the length of the term and qualifications of the borrower. Our largest commercial business loan relationship was a $569,000 loan secured primarily by business assets, including drilling equipment, trucks and commercial real estate. This loan was performing according to its original terms at March 31, 2004. When making commercial business loans, we consider the financial statements of the borrower, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, and viability of the industry in which the customer operates and the value of the collateral. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. Consumer Loans. We offer a variety of consumer loans, primarily second mortgage loans and home equity lines of credit, and, to a much lesser extent, loans secured by passbook or certificate accounts, 41

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automobiles and unsecured loans. Unsecured loans generally have a maximum borrowing limit of $5,000 and a maximum term of three years. The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loans. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount. Second mortgage loans have fixed rates of interest for terms of up to 15 years. These loans are originated with maximum loan-to-value ratios of 80% of the appraised value of the property. Home equity lines of credit have adjustable rates of interest that are indexed to the prime rate as published in The Wall Street Journal for terms of up to 10 years. These loans are originated with maximum loan-to-value ratios of 80% of the value of the appraised value of the property and we require that we have a second lien position on the property. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. Loan Originations, Purchases and Sales. Loan originations come from a number of sources. The primary source of loan originations are our in-house loan originators, and to a lesser extent, local mortgage brokers, advertising and referrals from customers. We occasionally purchase loans or participation interests in loans. Historically, we have originated loans for investment purposes only. However, as the low interest rate environment continued, we determined to consider loan sales as part of our interest rate risk management efforts. Beginning in 2002, we began selling some of the longer-term fixed-rate loans that we originate. We sell these loans in the secondary market based on prevailing market interest rate conditions, an analysis of the composition and risk of the loan portfolio, liquidity needs and interest rate risk management goals. Generally, loans are sold without recourse and with servicing retained. We sold $1.9 million, $8.9 million and $7.0 million of loans in the three months ended March 31, 2004 and the years ended December 31, 2003 and 2002, respectively. We did not sell any loans in 2001. We occasionally sell participation interests in loans. Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our Board of Directors and management. For one- to four-family loans and owner occupied residential construction loans, two members of the mortgage loan committee, one of whom must be the President and Chief Executive Officer or a vice president, may approve loans up to $333,700 and a majority of the members of the Board loan committee must approve loans over $333,700. For unsecured commercial business loans, a majority of the members of the Board must approve loans over $500,000 and two members of the Board of Directors loan committee must approve loans over $200,000 and up to $500,000. For secured commercial loans and commercial construction loans, a majority of the members of the Board must approve loans over $1.0 million and two members of the Board of Directors loan committee must approve loans over $500,000 and up to $1.0 million. The Board of Directors must approve all consumer loans over $150,000. Various bank personnel have been delegated authority to approve smaller commercial loans and consumer loans. Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of our stated capital and reserves. At March 31, 2004, our regulatory limit on loans to one borrower was $3.5 million. At that date, our largest lending relationship was $3.3 million and included residential mortgage, home equity lines of credit and 42

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construction loans, all of which were performing according to the original repayment terms at March 31, 2004. Loan Commitments. We issue commitments for fixed-rate and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers and generally expire in 45 days or less. Delinquencies. When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status. We make initial contact with the borrower when the loan becomes 15 days past due. If payment is not then received by the 30th day of delinquency, additional letters and phone calls generally are made. We send a letter notifying the borrower that we will commence foreclosure proceedings if the loan is not brought current within 91 days. When the loan becomes 91 days past due, we generally commence foreclosure proceedings against any real property that secures the loan or attempt to repossess any personal property that secures a consumer loan. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. We may consider loan workout arrangements with certain borrowers under certain circumstances. Management informs the Board of Directors on a monthly basis of the amount of loans delinquent more than 90 days, all loans in foreclosure and all foreclosed and repossessed property that we own. Investment Activities We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also may invest a portion of our assets in corporate securities and mutual funds. We also are required to maintain an investment in Federal Home Loan Bank of Boston stock. At March 31, 2004, our investment portfolio consisted primarily of U.S. government and agency securities with maturities of five years or less, mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae with stated final maturities of 30 years or less, collateralized mortgage obligations, and insured certificates of deposit at other financial institutions. Our investment objectives are to provide and maintain liquidity, to maintain a balance of high quality, diversified investments to minimize risk, to provide collateral for pledging requirements, to establish an acceptable level of interest rate risk, to provide an alternate source of low-risk investments when demand for loans is weak, and to generate a favorable return. Our Board of Directors has the overall responsibility for our investment portfolio, including approval of our investment policy and appointment of our Asset/Liability Committee. The Asset/Liability Committee is responsible for approval of investment strategies and monitoring of investment performance. Our Executive Vice President is the designated investment officer and is responsible for the daily investment activities and is authorized to make investment decisions consistent with our investment policy. The Asset/Liability Committee meets regularly with the Executive Vice President and President and Chief Executive Officer in order to review and determine investment strategies and transactions. Deposit Activities and Other Sources of Funds General. Deposits and loan repayments are the major sources of our funds for lending and other investment purposes. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions. Deposit Accounts. The vast majority of our depositors are residents of the State of Connecticut. Deposits are attracted from within our primary market area through the offering of a broad selection of deposit instruments, including NOW accounts, checking accounts, money market accounts, regular savings accounts, club savings accounts, certificate accounts and various retirement accounts. Generally, we do not 43

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utilize brokered funds. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, profitability to us, matching deposit and loan products and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our current strategy is to offer competitive rates, and even higher rates on long-term deposits, but not be the market leader in every type and maturity. Borrowings. We borrow from the Federal Home Loan Bank of Boston to supplement our supply of lendable funds and to meet deposit withdrawal requirements. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank of Boston and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the Federal Home Loan Bank’s assessment of the institution’s creditworthiness. Under its current credit policies, the Federal Home Loan Bank generally limits advances to 25% of a member’s assets, and short-term borrowings of less than one year may not exceed 10% of the institution’s assets. The Federal Home Loan Bank determines specific lines of credit for each member institution. In addition, we occasionally borrow short-term from correspondent banks to cover temporary cash needs. Properties We conduct our business through our main office and branch offices. The following table sets forth certain information relating to these facilities at March 31, 2004.

Location

Year Opened/ Acquired

Net Book Value at March 31, 2004

Square Footage (Dollars in thousands)

Owned/ Leased

Date of Lease Expiration

Main Office: 333 Church Street Naugatuck, Connecticut 06770 Branches: 1009 New Haven Road Naugatuck, Connecticut 06770 127 South Main Street Beacon Falls, Connecticut 06403 860 Bridgeport Avenue Shelton, Connecticut 06484 49 Pershing Drive Derby, Connecticut 06418 Other Properties: 1007 New Haven Road Naugatuck, Connecticut 06770 249 West Street(4) Seymour, Connecticut 06483 135 South Main Street(5) Beacon Falls, Connecticut 06403

1996

$ 2,775

23,000

Owned

—

2001 1997 2001 2003

1,368 205 69 268

3,300 960 725 1,950

Owned Owned Leased Leased

— — 2006 (1) 2013 (2)

1974 2002 2003

42 367 147

1,725 N/A N/A

Leased Owned Owned

2014 (3) — —

(1) (2)

We have an option to renew this lease for one additional ten-year period. We have an option to renew this lease for three additional five-year periods. 44

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(3)

Former branch site. We have an option to renew this lease for two additional ten-year periods. This property has been leased to a subtenant under a lease that expires in 2006. The tenant has an option to renew this lease for one additional five-year period. This property is a future branch site. Construction commenced in June 2004. This property is designated for future parking, additional access and future expansions of our Beacon Falls branch.

(4) (5)

Personnel At March 31, 2004, we had 68 full-time employees and 12 part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good. Legal Proceedings Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. Subsidiaries Naugatuck Valley Mortgage Servicing Corporation, established in 1999 under Connecticut law, is a subsidiary of Naugatuck Valley Savings and Loan and is a passive investment corporation organized in order to take advantage of certain tax benefits. Its primary business is to service mortgage loans which we have originated and subsequently transferred to Naugatuck Valley Mortgage Servicing. At March 31, 2004, Naugatuck Valley Mortgage Servicing had $152.2 million in assets. 45

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the financial statements and notes to the financial statements that appear at the end of this prospectus. Overview Income. We have two primary sources of pre-tax income. The first is net interest income, which is the difference between interest income, the income that we earn on our loans and investments, and interest expense, the interest that we pay on our deposits and borrowings. To a much lesser extent, we also recognize pre-tax income from fee and service charges, which is the compensation we receive from providing products and services. Our primary non-interest income comes from service charges on deposit accounts. We also earn income from bank owned life insurance, sales of loans and investments and service charge income from investment advisory services, ATM charges and other services. Expenses. The expenses we incur in operating our business consist of compensation, taxes and benefits, office occupancy, computer processing fees, federal insurance premiums, and other expenses. Compensation, taxes and benefits consist primarily of the salaries and wages paid to our employees and directors, payroll taxes and expenses for retirement and other employee benefits. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of lease payments, real estate taxes, depreciation charges, maintenance, and costs of utilities. Computer processing fees includes fees paid to our third-party data processing servicer and our network security expenses. Federal insurance premiums are payments we make to the Federal Deposit Insurance Corporation for insurance of our deposit accounts. Other expenses include expenses for attorneys, accountants and consultants, advertising, telephone, charitable contributions, insurance, office supplies, postage and other miscellaneous operating activities. Critical Accounting Policies We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider the following to be critical accounting policies: allowance for loan losses and deferred income taxes. Allowance for Loan Losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. We engage an independent review of our commercial loan portfolio annually and adjust our loan ratings based upon this review. In addition, our regulatory authorities as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. See notes 1 and 4 of the notes to the financial statements included in this prospectus. 46

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Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed continually as regulatory and business factors change. See note 9 of the notes to the financial statements in this prospectus. Operating Strategy Our mission is to operate and grow a profitable community-oriented financial institution serving primarily retail customers and small businesses in our market area. After the reorganization, we plan to continue our strategy of: • operating as an independent community-oriented financial institution; • expanding our branch network and upgrading our existing branches; • pursuing opportunities to increase and diversify lending in our market area; • applying conservative underwriting practices to maintain the high quality of our loan portfolio; • managing our net interest margin and interest rate risk; • increasing core deposits; and • increasing noninterest income Operating as an independent community-oriented financial institution We have a long tradition of focusing on the needs of consumers and small sized businesses in our community and being an active corporate citizen. Unlike some large banks, our decisions are made locally, we have many long time branch employees, and customers have access to senior management. In recent years, we have upgraded our computer systems and expanded our customer service initiatives. In addition to standard conveniences such as ATMs, we offer extended hours, Internet banking, bill payment, and a “voice response” inquiry phone line. We deliver personalized service and respond with flexibility to customer needs. We believe our community orientation is attractive to our customers and distinguishes us from the large regional banks that operate in our market area and we intend to maintain this focus as we grow. We are pleased that the reorganization provides a good opportunity for us to establish the Naugatuck Valley Savings and Loan Foundation as a means of enhancing our long-standing commitment to our local communities. The foundation will be funded with our common stock and will make grants and donations to non-profit and community groups and projects.

Expanding our branch network and upgrading our existing branches In 2000, our branch network consisted of three locations. At that time, we recognized an opportunity to prudently expand to the south. As a result of bank mergers over time, a number of communities ceased to enjoy the services of community banking on both a personal and small business level. In an effort to bring community banking back to the Greater Naugatuck Valley, and in order to take advantage of the expansion of commuting patterns in southwest Connecticut, we expanded our branch network through de novo branching. In June 2001 and February 2003, we opened two new branches in Shelton and Derby, Connecticut, respectively. These profitable branches helped us to increase our low-cost core deposit base. Additionally, our lending programs have benefitted from our presence in Shelton. We intend to increase our presence in the Greater Naugatuck Valley by opening branches in Seymour and Southbury, Connecticut, which we expect to open 47

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in the fourth quarter of 2004 and the third quarter of 2005, respectively. In addition to branching, we have focused on upgrading existing facilities. In 2001, we moved a branch to a larger building, and we have leased and acquired properties to be used to relocate a branch next year and to expand another branch in 2005. We intend to continue to pursue opportunities to upgrade our current branch facilities and to pursue expansion in the Greater Naugatuck Valley in future years through de novo branching and branch acquisitions, and we also may consider exploring expansion opportunities in surrounding counties. Pursuing Opportunities to Increase and Diversify Lending in Our Market Area Our loan portfolio has increased $37.3 million, or 25.0%, since December 31, 2000. In particular, since December 31, 2000, our commercial real estate, commercial business and construction loan portfolio has increased $26.4 million, or 335.0%, and at March 31, 2004 was 18.4% of our total loan portfolio. During this period, we have increased our presence in our market area by expanding our branch network and have taken advantage of the significant growth in both residential and commercial real estate development in parts of our market area. With the additional capital raised in the offering, we expect to continue to expand all of our lending activities and, in particular, intend to continue to pursue the larger lending relationships associated with commercial real estate and construction lending opportunities. We plan to hire additional lending personnel to assist us with this expansion.

Applying Conservative Underwriting Practices to Maintain the Quality of Our Loan Portfolio We believe that high asset quality is a key to long-term financial success. We have sought to grow and diversify the portfolio, while maintaining a high level of asset quality and moderate credit risk, using underwriting standards which we believe are conservative and diligent monitoring and collection efforts. At March 31, 2004, our nonperforming loans (loans which are 90 or more days delinquent) were 0.46% of our total loan portfolio and 0.35% of our total assets.

Managing our Net Interest Margin and Interest Rate Risk We intend to continue to maximize our net interest margin through the aggressive pursuit of high quality loans in our market area. We will focus especially on the growth of commercial loans because they typically have high yields which increases our net interest margin. Additionally, commercial loans also typically are written with variable rates which reduces our interest rate risk exposure in a rising interest rate environment. Our investment portfolio has been deployed primarily into variable rate instruments or instruments with relatively short maturities with the goal of managing interest rate risk.

Increasing Core Deposits Retail deposits are our primary source of funds for investing and lending. We have been successful in increasing our core deposits, which include checking accounts and all other deposit account types except certificates of deposit. Core deposits are generally lower cost to us than certificates of deposit, and they are generally less sensitive to withdrawal when interest rates fluctuate. At December 31, 2001, core deposits represented 42.7% of deposits and, at March 31, 2004, this percentage had increased to 53.9%. By offering a variety of deposit products and providing exceptional customer service, we seek to attract and maintain deposits. Additionally, we believe that our expanding branch network has and will contribute to increasing core deposits.

Increasing Noninterest Income Our profits rely heavily on the spread between the interest earned on loans and investments and interest paid on deposits and borrowings. In order to decrease our reliance on interest rate spread income we have pursued initiatives to increase noninterest income. During the third quarter of 2003, we began offering investment advisory services through a third party registered broker-dealer and purchased key executive life insurance policies, from which we derive income. These new initiatives accounted for 23.7% 48

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of noninterest income during the three months ended March 31, 2004. We intend to continue to pursue initiatives to increase noninterest income. Balance Sheet Loans. Our primary lending activity is the origination of loans secured by real estate primarily located in our market area. We originate real estate loans secured by one- to four-family residential homes and, to a much lesser extent, we originate multi-family and commercial real estate and construction loans. At March 31, 2004, real estate loans totaled $160.1 million, or 85.8% of total loans compared to $159.7 million, or 86.3% of total loans at December 31, 2003 and $149.3 million, or 88.0% of total loans at December 31, 2002. Real estate loans have increased since December 31, 2001 due to historically low interest rates, our expanding branch network and significant growth in both residential and commercial real estate development, which we believe is attributable to the availability of lower cost land and expansion of commuting patterns in southwest Connecticut. The largest segment of our real estate loans is one- to four-family residential loans. At March 31, 2004, these loans totaled $130.1 million and represented 81.2% of real estate loans and 69.7% of total loans compared to $131.4 million, which represented 82.2% of real estate loans and 71.0% of total loans, at December 31, 2003. One- to four-family residential loans decreased $1.3 million, or 0.9%, from December 31, 2003 to March 31, 2004 and decreased $781,000, or 0.6%, from December 31, 2002 to December 31, 2003, reflecting a large volume of loan originations offset by loan repayments and sales of fixed-rate residential loans. In periods of low and falling interest rates, loan demand increased, but repayments of loans also increase as borrowers refinance in order to benefit from lower available interest rates. As the low interest rate environment continued during these periods, we determined to sell fixed-rate loans as part of our interest rate risk management efforts. Multi-family and commercial real estate loans is the second largest segment of our real estate loan portfolio. This portfolio was $15.3 million and represented 9.5% of real estate loans and 8.2% of total loans at March 31, 2004 compared to $14.3 million, which represented 8.9% of real estate loans and 7.7% of total loans, at December 31, 2003. Multi-family and commercial real estate loans increased $1.0 million, or 7.1%, for the three months ended March 31, 2004 and $4.0 million, or 38.8%, in the year ended December 31, 2003 due to significant new development within parts of our market area and increased market share. We also originate construction loans secured by residential and commercial real estate. This portfolio was $14.8 million and represented 9.2% of real estate loans and 7.9% of total loans at March 31, 2004 compared to $14.1 million, which represented 8.8% of real estate loans and 7.6% of total loans at December 31, 2003. Construction loans increased $696,000, or 4.9%, for the three months ended March 31, 2004 and $7.2 million, or 104.6%, in the year ended December 31, 2003 primarily due to significant new development within parts of our market area and increased market share. We originate commercial business loans secured by business assets other than real estate, such as business equipment, inventory and accounts receivable and letters of credit. Commercial business loans totaled $4.2 million, and represented 2.3% of total loans at March 31, 2004 and December 31, 2003. We also originate a variety of consumer loans, including second mortgage loans, home equity lines of credit, loans secured by savings accounts and automobiles. Consumer loans totaled $22.4 million and represented 12.0% of total loans at March 31, 2004 compared to $21.1 million, which represented 11.4% of total loans at December 31, 2003. The $1.3 million, or 6.2%, increase for the three months ended March 31, 2004 and the $2.4 million, or 12.6%, increase for the 2003 fiscal year was due to targeted increased marketing activities and competitive pricing on our home equity products. 49

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The following table sets forth the composition of our loan portfolio at the dates indicated.
At December 31, At March 31, 2004 Amount Percent Real estate loans: One- to four-family Construction Multi-family and commercial real estate Total real estate loans Commercial business loans Consumer loans: Savings accounts Personal Automobile Home equity Total consumer loans Total loans Less: Allowance for loan losses Undisbursed construction loans Deferred loan origination fees Loans receivable, net 2003 Amount Percent 2002 2001 Amount Percent Amount Percent (Dollars in thousands) 132,134 6,888 77.85 % 4.06 126,482 6,526 78.07 % 4.03 2000 Amount Percent

1999 Amount Percen

130,057 14,790

69.65 % 7.92

131,353 14,094

70.98 % 7.62

123,170 4,762

82.41 % 3.19

122,452 3,078

86.4 2.1

15,281

8.18

14,273

7.71

10,285

6.06

7,172

4.43

2,599

1.74

773

0.5

160,128

85.75

159,720

86.31

149,307

87.97

140,180

86.52

130,531

87.34

126,303

89.1

4,215 585 183 121 21,508

2.26 0.31 0.10 0.06 11.52

4,240 592 139 143 20,212

2.29 0.32 0.08 0.08 10.92

1,693 519 153 181 17,873

1.00 0.31 0.09 0.11 10.53

875 738 116 291 19,815

0.54 0.46 0.07 0.18 12.23

520 596 126 508 17,170

0.35 0.40 0.08 0.34 11.49

194 644 361 518 13,696

0.1

0.4 0.2 0.3 9.6

22,397 186,740

12.00 100.00 %

21,086 185,046

11.40 100.00 %

18,726 169,726

11.03 100.00 %

20,960 162,015

12.94 100.00 %

18,400 149,451

12.31 100.00 %

15,219 141,716

10.7

100.0

1,811 2,191 427

1,810 2,519 339

1,994 1,168 518

1,856 1,071 632

1,749 1,260 611

1,935 988 622

$ 182,311

$ 180,378

$ 166,046

$ 158,456

$ 145,831

$ 138,171

The following table sets forth certain information at March 31, 2004 regarding the dollar amount of loans repricing or maturing during the periods indicated. The table does not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated maturity are reported as due in one year or less.

Real Estate Loans

Commercial Business Loans (In thousands)

Consumer Loans

Total Loans

One year or less More than one year to five years More than five years Total

$

30,085 14,998 115,045

$ 2,740 1,406 69 $ 4,215

$ 14,256 1,442 6,699 $ 22,397

$

47,081 17,846 121,813

$ 160,128

$ 186,740

50

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The following table sets forth the dollar amount of all loans at March 31, 2004 that are due after March 31, 2005 and have either fixed interest rates or floating or adjustable interest rates. The amounts shown below exclude applicable loans in process, nonperforming loans and deferred loan fees, net.

Fixed-Rates

Floating or Adjustable-Rates (In thousands)

Total

Real estate loans: One- to four-family Construction Multi-family and commercial Commercial business loans Consumer loans Total

$

99,941 5,505 1,814 810 7,991

$

13,509 520 8,754 665 150 23,598

$ 113,450 6,025 10,568 1,475 8,141 $ 139,659

$ 116,061

$

The following table shows loan origination activity during the periods indicated.

Three Months Ended March 31, 2004 2003 (In thousands)

2003

Year Ended December 31, 2002

2001

Total loans at beginning of period Loans originated: Real estate loans: One- to four-family Construction Multi-family and commercial Commercial business loans Consumer loans Total loans originated Loans purchased Deduct: Real estate loan principal repayments Loan sales Other repayments Net loan activity Total loans at end of period

$ 185,046

$ 169,726

$ 169,726

$ 162,015

$ 149,451

5,701 2,812 590 978 3,621

15,066 3,088 622 582 1,931

64,689 13,489 5,365 3,196 14,307

41,395 7,844 3,823 976 10,255

35,053 7,722 8,266 970 10,626

13,702 —

21,289 —

101,046 —

64,293 —

62,637 —

(7,116 ) (1,927 ) (2,965 ) 1,694 $ 186,740

(12,381 ) (1,564 ) (3,481 ) 3,863 $ 173,589

(67,857 ) (8,851 ) (9,018 ) 15,320 $ 185,046

(35,560 ) (6,971 ) (14,051 ) 7,711 $ 169,726

(35,591 ) — (14,482 ) 12,564 $ 162,015

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for the probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional reserves are needed a provision for loan losses is charged against earnings. The recommendations for increases or decreases to the allowance are presented by management to the Board of Directors. The allowance for loan losses is established to recognize the inherent losses associated with lending activities. Loss and risk factors are based on our historical loss experience and industry averages and may be adjusted for significant factors that in management’s judgment affect the collectibility of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending area, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, specific

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industry conditions within portfolio segments, recent loss experience in particular segments of the portfolio, duration of the current business cycle, and bank regulatory examination results. Our methodology for assessing the appropriateness of the allowance for loan losses consists of the following procedures. The loan portfolio is segregated first between passed and classified assets. Passed Assets. Our assets designated as pass or bankable with care by our internal classification system are aggregated by loan category and an allowance percentage is assigned based on estimated inherent losses associated with each type of lending. Our passed and bankable with care assets are loans for which the borrower is established and represents a reasonable credit risk. Classified Assets. Our assets classified as special mention, substandard or doubtful by our internal classification system are individually evaluated by management and an allowance percentage, increasing as the probability of loss increases, is assigned to each classified asset based on the collateral value and loan balance. The level of the allowance percentage is further dependent on whether the loan is secured by real estate, secured by assets other than real estate or unsecured. Loans classified as loss are charged off and the real estate is transferred to real estate owned. The loss factors which are presently used to determine the reserve level were updated in 2003 based on various risk factors such as type of loan, collateral and loss history. These factors are subject to ongoing evaluation to ensure their relevance in the current economic environment. When we determine that a loan is troubled and where, based on current information and events, it is probable that we will not be able to collect all amounts due, we classify as loss any excess of the recorded investment in the loan over its fair market value less the estimated cost to sell the asset, and we classify as substandard the remainder. We identify loans which may require charge off as a loss by reviewing all delinquent loans, significant credits, loans classified as substandard, doubtful, loss, or special mention by our internal classification system, and other loans that management may have concerns about collectibility, such as loans to a specific industry. For individually reviewed loans, a borrower’s inability to service a credit according to the contractual terms based on the borrower’s cash flow and or a shortfall in collateral value would result in the recording of a charge off of the loan or the portion of the loan that was impaired. Our banking regulators, as an integral part of their examination process, periodically review our allowance for loan losses. The examinations may require us to make additional provisions for loan losses based on judgments different from ours. In addition, we engage an independent consultant to review our commercial loan portfolio and make recommendations based on their review as to the classification of specific credits in the portfolio. At March 31, 2004, our allowance for loan losses represented 0.98% of total gross loans and 213.31% of nonperforming loans. The allowance for loan losses remained at $1.8 million from December 31, 2003 to March 31, 2004 due to the decrease in delinquent loans and nonperforming loans. At December 31, 2003, our allowance for loan losses represented 1.0% of total gross loans and 199.8% of nonperforming loans. The allowance for loan losses decreased from $2.0 million at December 31, 2002 to $1.8 million at December 31, 2003 due to charge-offs of $265,000 offset by a provision for loan losses of $45,000 that reflected decreased delinquencies and nonperforming loans. The increase in charge-offs was primarily due to a one time charge, required by the Federal Deposit Insurance Corporation, to write down to market value loans for which we had previously established specific reserves. The allowance for loan losses increased from $1.9 million at December 31, 2001 to $2.0 million at December 31, 2002 due primarily to a provision for loan losses of $231,000. The increase in the provision for loan losses in 2002 was primarily due to the increase in net charge-offs and the expansion of the commercial loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could 52

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be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that regulators, in reviewing our loan portfolio, will not request us to increase our allowance for loan losses. In addition, because further events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations. Summary of Loan Loss Experience. The following table sets forth an analysis of the allowance for loan losses for the periods indicated. Where specific loan loss allowances have been established, any difference between the loss allowance and the amount of loss realized has been charged or credited to current income.

Three Months Ended March 31, 2004 2003

2003

Year Ended December 31, 2002 2001 (Dollars in thousands)

2000

1999

Allowance at beginning of period Provision for loan losses Less: Charge offs: Real estate loans Commercial business loans Consumer loans Total charge-offs Plus: Recoveries: Real estate loans Commercial business loans Consumer loans Total recoveries Net charge-offs (recoveries) Allowance at end of period Allowance to nonperforming loans Allowance to total loans outstanding at the end of the period Net charge-offs (recoveries) to average loans outstanding during the period

$

1,810 — — — — —

$

1,994 45 49 — 1 50

$

1,994 45 265 — 2 267

$

1,856 231 112 — 5 117

$

1,749 80 28 — 3 31

$

1,935 72 280 — 1 281

$

2,276 110 465 — 5 470

1 — — 1 (1 ) 1,811 213.31 %

17 — — 17 33 2,006 206.17 %

38 — — 38 229 1,810 199.78 %

23 — 1 24 93 1,994 162.91 %

57 — 1 58 (27 ) 1,856 144.66 %

23 — — 23 258 1,749 171.14 %

18 — 1 19 451 1,935 130.22 %

$

$

$

$

$

$

$

0.98 %

1.17 %

0.99 %

1.19 %

1.16 % ) (0.02 %

1.18 %

1.38 %

—%

0.02 % 53

0.13 %

0.05 %

0.18 %

0.34 %

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The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.
At December 31, At March 31, 2004 % of Allowance to Total Allowance 48.37 % 6.52 15.02 4.14 13.58 12.37 % of Loans in Category to Total Loans 69.65 % 7.92 8.18 2.26 11.99 — 2003 % of Allowance to Total Amount Allowance (Dollars in thousands) $ 902 49.83 % 110 6.08 271 42 232 253 14.97 2.32 12.82 13.98 % of Loans in Category to Total Loans 70.98 % 7.62 7.71 2.29 11.40 — 2002 % of Allowance to Total Allowance 77.28 % 1.25 4.91 0.45 3.91 12.19 % of Loans in Category to Total Loans 77.85 % 4.06 6.06 1.00 11.03 —

Amount One- to four-family Construction Multi-family and commercial real estate Commercial business Consumer loans Unallocated Total allowance for loan losses $ 876 118 272 75 246 224

Amount $ 1,541 25 98 9 78 243

$ 1,811

100.00 %

100.00 %

$ 1,810

100.00 %

100.00 %

$ 1,994

100.00 %

100.00 %

2001 % of Allowance to Total Allowance 87.98 % 2.37 1.99 0.22 4.47 2.96 % of Loans in Category to Total Loans 78.07 % 4.03 4.43 0.54 12.93 —

At December 31, 2000 % of Allowance to Total Amount Allowance (Dollars in thousands) $ 1,586 90.68 % 15 0.86 14 3 62 69 0.80 0.17 3.54 3.95 % of Loans in Category to Total Loans 82.41 % 3.19 1.74 0.35 12.31 —

1999 % of Allowance to Total Allowance 95.04 % 0.47 0.21 0.16 4.13 — % of Loans in Category to Total Loans 86.41 % 2.17 0.55 0.14 10.73 —

Amount One- to four-family Construction Multi-family and commercial real estate Commercial business Consumer loans Unallocated Total allowance for loan losses $ 1,633 44 37 4 83 55

Amount $ 1,839 9 4 3 80 —

$ 1,856

100.00 %

100.00 %

$ 1,749

100.00 %

100.00 %

$ 1,935

100.00 %

100.00 %

Nonperforming and Classified Assets. When a loan becomes 90 days delinquent, the loan is placed on nonaccrual status at which time the accrual of interest ceases, the interest previously accrued to income is reversed and the loan is placed on a cash basis. Payments on a nonaccrual loan are applied to the outstanding principal and interest as determined at the time of collection of the loan. We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at the lower of its cost, which is the unpaid balance of the loan, or fair market value at the date of foreclosure. Holding costs and declines in fair value after acquisition of the property are charged against income. Nonperforming assets totaled $980,000, or 0.4% of total assets, at March 31, 2004, which was a decrease of $134,000, or 12.0%, from December 31, 2003. Nonaccrual loans accounted for 86.6% of the total nonperforming assets at March 31, 2004. At March 31, 2004, $107,000 of the allowance for loan losses was related to nonaccrual real estate loans. Nonperforming assets totaled $1.1 million, or 0.5% of total assets, at December 31, 2003, which was a decrease of $218,000, or 7.9%, from $1.3 million, or 0.6% of total assets, at December 31, 2002. Nonaccrual loans accounted for 81.3% of the total nonperforming assets at December 31, 2003 and 91.8% of nonperforming assets at December 31, 2002. At December 31, 2003, $98,000 of the allowance for loan 54

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losses was related to nonaccrual real estate loans. At December 31, 2002, $294,000 of the allowance for loan losses was related to nonaccrual real estate loans. Under current accounting guidelines, a loan is defined as impaired when, based on current information and events, it is probable that the creditor will be unable to collect all amounts due under the contractual terms of the loan agreement. We consider one- to four-family mortgage loans and consumer loans to be homogeneous and only evaluate them for impairment separately when they are delinquent or classified. Other loans are evaluated for impairment on an individual basis. At March 31, 2004, three loans having an aggregate balance of $209,000 were considered impaired and $189,000 of these loans were on nonaccrual status. The following table provides information with respect to our nonperforming assets at the dates indicated. We did not have any troubled debt restructurings or any accruing loans past due 90 days or more at the dates presented.

At March 31, 2004

At December 31, 2003 2002 2001 (Dollars in thousands) 2000 1999

Nonaccrual loans: One- to four-family Multi-family and commercial real estate Commercial business Consumer Total Real estate owned Total nonperforming assets Total nonperforming loans to total loans Total nonperforming loans to total assets Total nonperforming assets to total assets

$

609 240 — — 849 131

$

500 315 15 76 906 208

$ 1,041 117 — 66 1,224 108 $ 1,332

$ 1,217 — — 66 1,283 160 $ 1,443

$

985 — — 37 1,022 136

$ 1,386 — — 100 1,486 391 $ 1,877

$

980

$ 1,114

$ 1,158

0.46 % 0.35 % 0.40 %

0.50 % 0.37 % 0.46 %

0.73 % 0.54 % 0.58 %

0.80 % 0.64 % 0.72 %

0.69 % 0.58 % 0.65 %

1.06 % 0.88 % 1.11 %

Other than discussed above, there are no other loans at March 31, 2004 that we have serious doubts about the ability of the borrowers to comply with the present loan repayment terms. Interest income that would have been recorded for the three months ended March 31, 2004 and for the year ended December 31, 2003 had nonaccruing loans been current according to their original terms amounted to $44,400 and $50,100, respectively. There was no interest related to nonaccrual loans included in interest income for the three months ended March 31, 2004 and for the year ended December 31, 2003. Federal regulations require us to regularly review and classify our assets. In addition, our regulators have the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful, we must establish a general allowance for loan losses. If we classify an asset as loss, we must charge off such amount. 55

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The following table shows the aggregate amounts of our classified assets at the dates indicated.

At March 31, 2004

At December 31, 2003 (In thousands) 2002

Special mention assets Substandard assets Doubtful assets Loss assets Total classified assets

$ 1,784 2,595 21 2 $ 4,402

$ 1,020 2,745 23 — $ 3,788

$ 1,125 2,756 — — $ 3,881

Of the $2.6 million of substandard assets at March 31, 2004, $849,000 are nonaccrual loans. The substandard assets of $2.7 million at December 31, 2003, and $2.8 million at December 31, 2002 include $906,000 and $1.2 million, respectively, in nonaccrual loans. At March 31, 2004, all loans included in the $1.8 million special mention assets were current. Delinquencies. The following table provides information about delinquencies in our loan portfolios at the dates indicated.

At December 31, At March 31, 2004 30-59 60-89 Days Days Past Due Past Due 2003 30-59 Days Past Due 60-89 30-59 Days Days Past Due Past Due (In thousands) 2002 60-89 Days Past Due 30-59 Days Past Due 2001 60-89 Days Past Due

One- to four-family Multi-family and commercial real estate Commercial business Consumer loans Total

$ 693 — 103 1 $ 797

$ 770 — — 75 $ 845

$

999 272 20 61

$ 670 62 — 75 $ 807

$

931 — — 138

$ 715 — — 40 $ 755

$ 1,100 116 — 113 $ 1,329

$ 249 — — 16 $ 265

$ 1,352

$ 1,069

Securities. Our securities portfolio consists primarily of U.S. Government and agency obligations as well as mortgage-backed securities with maturities of 30 years or less. Securities decreased by $5.8 million in the three months ended March 31, 2004 due to the sale and maturity of securities to fund loan demand. Securities increased by $4.8 million during 2003 as a result of funds generated due to deposit inflows exceeding loan demand and due to the sale of fixed-rate mortgages. All of our mortgage-backed securities were issued either by Ginnie Mae, Fannie Mae or Freddie Mac. In addition, our securities portfolio includes interest bearing balances (certificates of deposits) at other institutions. The interest bearing balances are all held-to-maturity and all mature within five years. 56

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The following table sets forth the carrying values and fair values of our securities portfolio at the dates indicated.

At December 31, At March 31, 2004 Amortized Fair Cost Value 2003 Amortized Cost Fair Amortized Value Cost (In thousands) 2002 Fair Value Amortized Cost 2001 Fair Value

Available-for-sale securities: U.S. Government and agency obligations Mortgage-backed securities Collateralized mortgage obligations Held-to-maturity securities: U.S. Government and agency obligations Interest bearing balances Collateralized mortgage obligations Total

$ 14,965 10,255 4,683

$ 15,505 10,201 4,697

$ 22,861 7,865 6,031

$ 23,356 7,748 6,062

$ 19,912 2,482 9,044

$ 20,876 2,512 9,124

$ 16,961 1,524 1,504

$ 17,374 1,508 1,525

706 1,805 — $ 32,414

731 1,805 — $ 32,939

706 855 — $ 38,318

722 855 — $ 38,743

699 665 — $ 32,802

730 665 — $ 33,907

451 — 145 $ 20,585

465 — 146 $ 21,018

At March 31, 2004, we did not own any securities, other than U.S. Government and agency securities, that had an aggregate book value in excess of 10% of our equity at that date. The following table sets forth the maturities and weighted average yields of securities at March 31, 2004. Certain mortgage-backed securities and collateralized mortgage obligations have adjustable interest rates and reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. At March 31, 2004, mortgage-backed securities and collateralized mortgage obligations with adjustable rates totaled $12.0 million.
More than One Year to Five Years Weighted Carrying Average Value Yield More than Five Years to Ten Years Weighted Carrying Average Value Yield (Dollars in thousands)

Less Than One Year Weighted Carrying Average Value Yield Available-for-sale securities: U.S. Government and agency obligations Mortgage-backed securities Collateralized mortgage obligations Total available-for-sale securities Held-to-maturity securities: U.S. Government and agency obligations Interest bearing balances Total held-to-maturity securities Total

More than Ten Years Weighted Carrying Average Value Yield

Total Carrying Value Weighted Average Yield

$ 2,380 — —

5.92 % — —

$ 10,134 — —

4.95 % — —

$ 2,991 1,968 —

3.89 % 3.50 —

$

— 8,233 4,697

—% 3.91 4.16

$ 15,505 10,201 4,697

4.89 % 3.84 4.16

2,380

5.92

10,134

4.95

4,959

3.75

12,930

4.00

30,403

4.43

— 190

— 1.55

706 1,615

3.85 2.84

— —

— —

706 1,805

3.85 2.71

190 $ 2,570

1.55 5.59 %

2,321 $ 12,455

3.15 4.61 %

— $ 4,959 3.75 %

— $ 12,930 4.00 %

2,511 $ 32,914

3.03 4.32 %

Bank Owned Life Insurance. During 2003, we purchased life insurance policies on certain key executives. We record bank owned life insurance as an asset at the lower of its cash surrender value or the amount that can be realized. 57

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Deposits. Our primary source of funds are retail deposit accounts held primarily by individuals and businesses within our market area. The deposit base is comprised of certificate accounts, regular savings accounts, checking and NOW accounts and money market savings accounts. At March 31, 2004, brokered deposits totaled $99,000. Total deposits increased $4.0 million or 2.2% in the three months ended March 31, 2004. During that time period, certificate accounts increased 0.3%, regular savings accounts increased by 3.7%, checking and NOW accounts increased by 5.0% and money market deposit accounts increased by 2.7%. These increases in our deposit accounts, primarily core deposit accounts, are primarily due to our new Derby branch, which opened in February 2003, advertising and competitive interest rates. The following table sets forth the balances of our deposit products at the date indicated.

At March 31, 2004

At December 31, 2003 (In thousands) 2002 2001

Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total

$

86,431 41,672 34,368 25,003

$

86,192 40,185 32,723 24,355

$

89,283 36,835 28,346 18,767

$

89,700 32,744 22,898 11,320

$ 187,474

$ 183,455

$ 173,231

$ 156,662

The following table indicates the amount of jumbo certificate accounts by time remaining until maturity at March 31, 2004. Jumbo certificate accounts require minimum deposits of $100,000.

Maturity Period

Certificate Accounts (In thousands)

Three months or less Over three through six months Over six through twelve months Over twelve months Total

$

5,698 1,852 2,082 8,029

$ 17,661

The following table sets forth the certificate accounts classified by rates at the dates indicated.

At March 31, 2004

At December 31, 2003 (In thousands) 2002 2001

0.00 - 0.99% 1.00 - 1.99 2.00 - 2.99 3.00 - 3.99 4.00 - 4.99 5.00 - 5.99 6.00 - 6.99 Total

$ 17,117 32,664 13,871 13,940 7,871 968 — $ 86,431

$ 15,170 34,215 14,026 12,953 8,546 1,282 — $ 86,192

$

— 25,103 28,029 10,705 15,749 4,830 4,867

$

— — 16,667 24,479 26,404 10,713 11,437

$ 89,283

$ 89,700

58

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The following table sets forth the amount and maturities of certificate accounts at March 31, 2004.

Amount Due More Than One Year to Two Years More More Than Than Two Years to Three to Three Years Four Years (Dollars in thousands) More Than Four Years Percent of Total Certificate Accounts

Less Than One Year

Total

0.00 - 0.99% 1.00 - 1.99 2.00 - 2.99 3.00 - 3.99 4.00 - 4.99 5.00 - 5.99 6.00 - 6.99 Total

$ 17,097 26,187 6,264 1,701 1,265 24 — $ 52,538

$

19 5,948 3,191 1,748 1,469 944 —

$

— 530 3,072 408 1,491 — —

$

— — 234 4,725 3,472 — —

$

— — 1,109 5,359 174 — —

$ 17,116 32,665 13,870 13,941 7,871 968 — $ 86,431

19.80 % 37.79 16.05 16.13 9.11 1.12 — 100.00 %

$ 13,319

$ 5,501

$ 8,431

$ 6,642

The following table sets forth the savings activity for the periods indicated.

Three Months Ended March 31, 2004 2003

2003 (In thousands)

Year Ended December 31, 2002

2001

Beginning balance Increase before interest credited Interest credited Net increase in savings deposits Ending balance

$ 183,455 3,449 570

$ 173,231 5,548 819

$ 173,231 7,376 2,848

$ 156,662 12,655 3,914

$ 136,452 15,105 5,105

4,019 $ 187,474

6,367 $ 179,598

10,224 $ 183,455

16,569 $ 173,231

20,210 $ 156,662

Borrowings. We borrow funds from the Federal Home Loan Bank of Boston during periods of low liquidity to match fund increases in our fixed-rate mortgage portfolio and to provide long-term fixed-rate funding with the goal of decreasing our exposure to an increase in interest rates. In addition, we occasionally borrow short-term from correspondent banks to cover temporary cash needs. At March 31, 2004, we had the ability to borrow a total of $2.0 million from a correspondent bank, none of which was borrowed at such date. The following table presents certain information regarding our Federal Home Loan Bank advances during the periods and at the dates indicated.

Three Months Ended March 31, 2004 2003

Year Ended December 31, 2003 2002 (Dollars in thousands)

2001

Maximum amount of advances outstanding at any month end during the period Average advances outstanding during the period Weighted average interest rate during the period Balance outstanding at end of period Weighted average interest rate at end of period

$ 30,475 30,635 4.78 % $ 30,138 4.77 %

$ 27,531 27,584 5.12 % $ 27,531 5.05 %

$ 34,990 27,765 5.02 % $ 34,990 4.37 %

$ 31,119 24,376 5.68 % $ 31,119 4.65 %

$ 23,372 16,488 6.51 % $ 23,372 5.12 %

Capital. Total capital increased by $439,000, or 2.1%, to $21.7 million at March 31, 2004 from $21.2 million at December 31, 2003. Total capital increased $1.4 million, or 6.9%, to $21.2 million at December 31, 2002 from $19.9 million at December 31, 2002. Our average equity to average assets ratio 59

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was 9.08% at March 31, 2004 compared to 9.04% at December 31, 2003 and 9.02 at December 31, 2002. Total capital has increased since December 31, 2002 primarily due to increases in net income. Comparison of Operating Results for the Three Months Ended March 31, 2004 and March 31, 2003

Overview
Three Months Ended March 31, 2003 (Dollars in thousands)

2004

% Change

Net income Return on average assets (annualized) Return on average equity (annualized)

$ 378 0.63 % 6.99 %

$ 429 0.76 % 8.45 %

(11.89 )% (17.11 )% (17.28 )%

Net income decreased primarily due to an increase in noninterest expense, partially offset by an increase in noninterest income. Net Interest Income. Net interest income for the three months ended March 31, 2004 increased $6,000, or 2.9%, compared to the same period in 2003. The primary reason for the increase in net interest income for the three month period was a decrease in the average cost of funds partially offset by a decrease in the average yield. Interest and dividend income for the three months ended March 31, 2004 was $3.0 million, compared to $3.3 million for the three months ended March 31, 2003, a decrease of $230,000, or 7.1%. Substantially all of the decrease in interest income resulted from a decrease in the average yield on interest-earning assets of 66 basis points from 6.12% to 5.46% due primarily to a decline in market interest rates. The effect of the lower rate environment on interest and dividend income was partially offset by an increase in average interest earning assets of $9.1 million, or 4.3%, from $212.7 million at March 31, 2003 to $221.8 million at March 31, 2004. The increase in the average balance was primarily due to growth in the loan portfolio. Interest expense for the three months ended March 31, 2004 was $936,000 compared to $1.2 million for the three months ended March 31, 2003, a decrease of $236,000, or 20.1%. This decrease resulted from a decrease of 57 basis points in the rate paid on interest bearing liabilities to 1.74% from 2.31% due to a decline in market interest rates. The decrease was partially offset by a 3.6% increase of $7.3 million in the average balance of interest bearing liabilities to $215.5 million for the three months ended March 31, 2004 from $203.0 million for the same period in March 31, 2003. The increase in the average interest bearing liabilities was due to increases in all regular savings and money market savings deposit accounts and in advances from Federal Home Loan Bank. Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends, the total dollar of interest expense and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the 60

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periods presented. For purposes of this table, average balances have been calculated using the average of daily balances and nonaccrual loans are included in average balances only.
Three Months Ended March 31, At March 31, 2004 Average Balance 2004 Interest and Yield/ Dividends Cost (Dollars in thousands) Average Balance 2003 Interest and Dividends Yield/ Cost

Yield/Cost

Interest-earning assets: Loans Fed Funds sold Investment securities Federal Home Loan Bank stock Total interest-earning assets Noninterest-earning assets Total assets Interest-bearing liabilities: Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total interest-bearing deposits FHLB advances Total interest-bearing liabilities Noninterest-bearing liabilities Total liabilities Capital Total liabilities and capital Net interest income Interest rate spread Net interest margin Average interest-earning assets to average interest-bearing liabilities

5.74 % 0.90 3.91 2.15

$ 182,960 4,991 32,091 1,757

$ 2,695 11 310 10

5.89 % 0.88 3.86 2.28

$ 170,527 6,888 33,733 1,561

$ 2,877 19 347 13

6.75 % 1.10 4.11 3.33

5.32

221,799 16,423 $ 238,222

3,026

5.46

212,709 11,727 $ 224,436

3,256

6.12

2.15 0.39 0.16 0.91

$

86,163 42,178 31,662 24,854

$

453 47 15 55

2.10 0.45 0.19 0.89

$

90,105 38,378 28,011 18,940

$

656 73 28 62

2.91 0.76 0.40 1.31

1.22 4.77

184,857 30,635

570 366

1.23 4.78

175,434 27,584

819 353

1.87 5.12

1.71

215,492 1,090 216,582 21,640 $ 238,222

936

1.74

203,018 1,118 204,136 20,300 $ 224,436

1,172

2.31

$ 2,090 3.61 3.73 3.72 3.77

$ 2,084 3.81 3.92

102.40 %

102.93 %

104.77 %

Rate/ Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to changes in 61

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both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume. The net column represents the sum of the prior columns.
Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 Increase (Decrease) Due to Volume Rate (In thousands)

Net

Interest income: Loans Fed Funds sold Investment securities Federal Home Loan Bank stock Total interest income Interest expense: Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total deposit expense FHLBB advances Total interest expense Net interest income

$ 246 (5 ) (16 ) 2 227 (28 ) 6 (2 ) 186 162 33 195 $ 32

$ (428 ) (3 ) (21 ) (5 ) (457 ) (175 ) (32 ) (11 ) (193 ) (411 ) (20 ) (431 ) $ (26 )

$ (182 ) (8 ) (37 ) (3 ) (230 ) (203 ) (26 ) (13 ) (7 ) (249 ) 13 (236 ) $ 6

Provision for Loan Losses. We did not record a provision for loan losses for the three months ended March 31, 2004. We recorded a $45,000 provision for the three months ended March 31, 2003. The lack of a provision in 2004 reflected lower charge-offs, decreased nonperforming assets and improved asset quality ratios. An analysis of the changes in the allowance for loan losses is presented under “— Allowance for Loan Losses and Asset Quality.” Noninterest Income. The following table summarizes noninterest income for the three months ended March 31, 2004 and 2003.

Three Months Ended March 31, 2004 2003 (Dollars in thousands)

% Change

Loan fees and service charges Income from bank owned life insurance Gain on sale of mortgages Gain on sale of investments Income from investment advisory services, net Other income Total

$ 211 48 5 24 31 14 $ 333

$ 221 — 17 — — 19 $ 257

(4.52 )% N/A (70.59 )% N/A N/A (26.32 )% 29.57 %

Noninterest income increased primarily as a result of an increase in income from bank owned life insurance, gains on the sale of investments and income from investment advisory services. In the third quarter of 2003, we began offering investment advisory services through a third party registered broker-dealer and purchased life insurance policies, from which we derive income, on certain key executives. 62

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Noninterest Expense. The following table summarizes noninterest expense for the three months ended March 31, 2004 and 2003.

Three Months Ended March 31, 2004 2003 (Dollars in thousands)

% Change

Compensation, taxes and benefits Office occupancy Computer processing Federal insurance premiums (Gain) loss on foreclosed real estate, net Other expenses Total

$ 1,122 283 146 7 (32 ) 353 $ 1,879

$

885 270 115 7 4 369

26.78 % 4.81 26.96 — (900.00 ) (4.34 ) 13.88

$ 1,650

Compensation, taxes and benefits increased due to salary increases and additional compensation related to an increase in employees, the resulting payroll taxes and increased pension expense. The increase in employees is primarily the result of the opening of our Derby branch office in February 2003. As we continue to pursue branch expansion opportunities, we expect to hire additional employees resulting in an increase in compensation, taxes and benefits in future periods. Costs of computer processing increased due to the additional services related to the new Derby branch, as well as increased costs of maintaining high levels of security. Income Taxes. Income taxes decreased as a result of a decrease in earnings. The effective tax rate for the three months ended March 31, 2004 was 30.5% compared with 33.6% for the same period in 2003. The decrease in the effective tax rate is the result of an increase in tax exempt income for the three months ended March 31, 2004. Results of Operations for the Years Ended December 31, 2003, 2002 and 2001

Overview
2003 2002 (Dollars in thousands) 2001 % Change 2003/2002 %Change 2002/2001

Net income Return on average assets Return on average equity

$ 1,806 0.77 % 8.59 %

$ 1,920 0.91 % 10.23 %

$ 1,182 0.65 % 6.95 %

(5.94 )% (15.38 )% (16.03 )%

62.44 % 40.00 % 47.19 %

2003 v. 2002. Net income decreased primarily due to an increase in noninterest expense, partially offset by an increase in net interest income and noninterest income. Noninterest expense increased primarily as a result of higher compensation, taxes and benefits expense. 2002 v. 2001. Net income increased primarily due to increases in net interest income and noninterest income offset by an increase in noninterest expense. Net interest income increased primarily as a result a higher volume of interest earning assets and a decrease in the cost of funds.

Net Interest Income 2003 v. 2002. Net interest income increased $524,000, or 6.7%, to $8.4 million for 2003. The increase in net interest income for 2003 was primarily attributable to a higher volume of interest earning assets and a decrease in the cost of funds. Total interest and dividend income for 2003 was $12.6 million, compared to $13.2 million for 2002, a decrease of $534,000, or 4.1%. Substantially all of the decrease in interest income resulted from a decrease 63

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in the average yield on interest earning assets of 74 basis points from 6.53% to 5.79% due primarily to a decline in market interest rates. The effect of the lower rate environment on interest and dividend income was partially offset by an increase in average interest earning assets of $16.6 million, or 8.2%, from $202.0 million in 2002 to $218.5 million in 2003. The increase in the average balance primarily occurred in investment securities. Interest expense for 2003 was $4.2 million compared to $5.3 million for 2002, a decrease of $1.1 million, or 20.0%. This decrease resulted from a 75 basis point decrease in the rate paid on interest bearing liabilities to 2.01% in 2003 from 2.76% in 2002 due to a decline in market interest rates, partially offset by a 9.8% increase in the average balance of interest bearing liabilities of $18.9 million to $210.8 million in 2003 from $191.9 million in 2002. The increase in the average interest bearing liabilities was due to increases in regular savings, checking and money market savings accounts and in advances from the Federal Home Loan Bank. 2002 v. 2001. Net interest income increased $1.4 million, or 22.1% to $7.9 million for 2002. The increase in net interest income in 2002 was primarily attributable to a higher volume of interest earning assets and a decrease in the cost of funds. Total interest income for 2002 was $13.2 million, compared to $12.6 million for 2001, an increase of $547,000, or 4.3%. Substantially all of the increase in interest income resulted from an increase in average interest earning assets of $28.2 million, or 16.2%, from $173.8 million in 2001 to $202.0 million in 2002. The increase in the average balance primarily occurred in loans and investment securities. The effect of the increase in interest earning assets was partially offset by a decrease in the average yield of 74 basis points from 7.27% in 2001 to 6.53% in 2002 due primarily to a decline in market interest rates. Interest expense for 2002 was $5.3 million compared to $6.2 million for 2001, a decrease of $879,000, or 14.2%. This decrease resulted from a 100 basis point decrease in the rate paid on interest bearing liabilities to 2.76% in 2002 from 3.76% in 2001, due to a decline in market interest rates, and was partially offset by a 16.9% increase in the average balance of interest bearing liabilities of $27.8 million to $191.9 million in 2002 from $164.1 million in 2001. The increase in the average interest bearing liabilities was primarily due to increases in money market savings accounts, certificates accounts and advances from the Federal Home Loan Bank. 64

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Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends, the total dollar amount of interest expense and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. For purposes of this table, average balances have been calculated using the average of daily balances and nonaccrual loans are included in average balances only.

Average Balance

2003 Interest and Dividends

Yield/ Cost

Year Ended December 31, 2002 Interest Average and Balance Dividends (Dollars in thousands)

Yield/ Cost

Average Balance

2001 Interest and Dividends

Yield/ Cost

Interest-earning assets: Loans Fed Funds sold Investment securities Federal Home Loan Bank stock Total interest-earning assets Noninterest-earning assets Total assets Interest-bearing liabilities: Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total interest-bearing deposits FHLB advances Total interest-bearing liabilities Noninterest-bearing liabilities Total liabilities Capital Total liabilities and capital Net interest income Interest rate spread Net interest margin Average interest-earning assets to average interest-bearing liabilities

$ 171,796 6,024 39,150 1,562

$ 11,052 64 1,480 48

6.43 % $ 169,396 1.06 3,549 3.78 27,606 3.07 1,404

$ 11,841 56 1,230 51

6.99 % $ 153,867 1.58 2,507 4.46 16,083 3.63 1,322

$ 11,630 99 823 79

7.5 3.9 5.1

5.9

218,532 14,534 $ 233,066

12,644

5.79

201,955 9,852 $ 211,807

13,178

6.53

173,779 8,229 $ 182,008

12,631

7.2

$

89,938 40,905 30,544 21,599

$

2,315 229 81 223

2.57 0.56 0.27 1.03

$

89,205 37,412 25,887 15,099

$

3,185 381 99 249

3.57 1.02 0.38 1.65

$

84,393 34,284 19,902 9,084

$

4,254 516 140 195

5.0 1.5

0.7

2.1

182,986 27,765

2,848 1,393

1.56 5.02

167,603 24,376

3,914 1,385

2.34 5.68

147,663 16,488

5,105 1,073

3.4 6.5

210,751

4,241

2.01

191,979

5,299

2.76

164,151

6,178

3.7

1,285 212,036 21,030 $ 233,066 $ 8,403 3.77 3.85

1,064 193,043 18,764 $ 211,807 $ 7,879 3.77 3.90

841 164,992 17,016 $ 182,008 $ 6,453

3.5 3.7

103.69 %

105.20 %

105.8

Rate/ Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to changes in

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both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume. The net column represents the sum of the prior columns.
2003 Compared to 2002 Increase (Decrease) Due to Volume Rate 2002 Compared to 2001 Increase (Decrease) Due to Volume Rate

Net (In thousands)

Net

Interest income: Loans Fed Funds sold Investment securities Federal Home Loan Bank stock Total interest income Interest expense: Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total deposit expense FHLBB advances Total interest expense Net interest income

$ 171 15 392 8 586 26 40 9 (198 )

$

(960 ) (7 ) (142 ) (11 ) (1,120 ) (896 ) (192 ) (27 ) 172

$

(789 ) 8 250 (3 ) (534 ) (870 ) (152 ) (18 ) (26 )

$

828 97 497 5 1,426 260 53 88 83

$

(617 ) (140 ) (90 ) (33 ) (879 ) (1,329 ) (188 ) (129 ) (29 )

$

211 (43 ) 407 (28 ) 547 (1,069 ) (135 ) (41 ) 54

(123 ) 50

(943 ) (42 )

(1,066 ) 8

484 425

(1,675 ) (113 )

(1,191 ) 312

(72 ) $ 658 $

(986 ) (134 ) $

(1,058 ) 524 $

908 518 $

(1,787 ) 908 $

(879 ) 1,426

Provision for Loan Losses 2003 v. 2002. The provision for loan losses in 2003 was $45,000 compared to $231,000 in 2002. During 2003, management determined to reduce the provision for loan losses based on the decrease in nonperforming loans and improved asset quality ratios. As a result of the decrease in nonperforming loans, and despite the decrease in the provision for loan losses, the percentage of the allowance for loan losses to nonperforming loans increased. 2002 v. 2001. The provision for loan losses in 2002 was $231,000 compared to $80,000 in 2001. The provision was increased during 2002 as a result of the increase in net charge-offs during 2002. In addition, we deemed it prudent to increase the provision for loan losses given the expansion of our commercial loan portfolio. An analysis of the changes in the allowance for loan losses is presented under “— Allowance for Loan Losses and Asset Quality.” 66

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Noninterest Income. The following table shows the components of noninterest income and the percentage changes from 2003 to 2002 and from 2002 to 2001.

2003

2002 (Dollars in thousands)

2001

% Change 2003/2002

% Change 2002/2001

Loan fees and service charges Income from bank owned life insurance Gain on sale of mortgages Gain on sale of investments Income from investment advisory services, net Other income Total

$

851 133 14 1 45 71

$ 793 — 100 3 — 76 $ 972

$ 673 — — — — 70 $ 743

7.31 % N/A (86.00 ) (66.67 ) N/A (6.58 ) 14.71

17.83 % — N/A N/A — 8.57 30.82

$ 1,115

During the third quarter of 2003, we began offering investment advisory services through a third party broker-dealer and purchased life insurance policies, from which we derive income, on certain key executives. In 2002, we sold long-term residential mortgage loans, servicing retained, in an effort to manage interest rate risk. Noninterest Expense. The following table shows the components of noninterest expense and the percentage changes from 2003 to 2002 and from 2002 to 2001.

2003

2002 (Dollars in thousands)

2001

% Change 2003/2002

% Change 2002/2001

Compensation, taxes and benefits Office occupancy Computer processing Federal insurance premiums Loss on foreclosed real estate, net Other expenses Total

$ 4,024 1,041 507 28 2 1,243 $ 6,845

$ 3,304 877 446 28 51 1,114 $ 5,820

$ 3,181 737 395 26 9 1,044 $ 5,392

21.79 % 18.70 13.68 — (96.08 ) 11.58 17.61

3.87 % 19.00 12.91 7.69 466.67 6.70 7.94

2003 v. 2002. Compensation taxes and benefits increased due to salary increases, benefits increases and additional compensation related to new employees and resulting payroll taxes. The increase in employees is primarily the result of the opening of the Derby branch office. As we continue to pursue branch expansion opportunities, we expect to hire additional employees resulting in an increase in compensation, taxes and benefits in future periods. Office occupancy and computer processing increased primarily as a result of the opening of the Derby branch office. 2002 v. 2001. Salary and employee benefits increased due to salary increases and compensation related to an increase in employees and resulting payroll taxes. Office occupancy increased as a result of the opening of the Shelton branch office.

Income Taxes 2003 v. 2002. Income taxes decreased due to a lower level of taxable income. The effective tax rate for 2003 was 31.3% compared to 31.4% for 2002. 2002 v. 2001. Income taxes increased due to a higher level of taxable income. The effective tax rate for 2002 and 2001 was 31.4%. 67

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Market Risk Analysis Qualitative Aspects of Market Risk. Our most significant form of market risk is interest rate risk. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between assets and liability maturities (or rate adjustment periods), while maintaining an acceptable interest rate spread, by originating adjustable-rate mortgage loans for retention in our loan portfolio, variable-rate home equity lines and variable-rate commercial loans and by purchasing variable-rate investments and investments with expected maturities of less than 10 years. Beginning in 2002, we began selling some of the fixed-rate loans that we originate. We sell our longer term fixed-rate one- to four-family mortgage loans in the secondary market based on prevailing market interest rate conditions, an analysis of the composition and risk of the loan portfolio, liquidity needs and interest rate risk management goals. Generally, loans are sold without recourse and with servicing retained. We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of off-balance sheet derivative financial instruments. Our Asset/ Liability Committee communicates, coordinates and controls all aspects of asset/liability management. The committee establishes and monitors the volume and mix of assets and funding sources with the objective of managing assets and funding sources. Quantitative Aspects of Market Risk. We have used gap analysis to quantify our exposure to interest rate risk. Gap analysis sets forth the cumulative maturity distribution of interest-earning assets and interest-bearing liabilities. Gap analysis quantifies the time periods in which interest-earning assets and interest-bearing liabilities will mature or may reprice (rate adjustment) in accordance with their contractual terms. However, it does not necessarily indicate the impact of general interest rate movements on our net interest yield because the repricing of various categories of assets and liabilities is discretionary and subject to competitive and other pressures. Additionally, certain assets, such as adjustable-rate loans, have features that restrict adjustments to interest rates both on a short-term basis and over the life of the asset. Further, in the event of changes in interest rates, prepayments and early withdrawal levels would likely deviate significantly from those assumed in the gap analysis. As a result, various assets and liabilities indicated as repricing within the same period may, in fact, reprice at different times and at different rate levels. It should also be noted that gap analysis reflects certain assumptions regarding the categorization of assets and liabilities and represents a one-day position; in fact, variations occur daily as we adjust our interest rate sensitivity throughout the year. The following table sets forth the cumulative maturity distribution of interest-earning assets and interest-bearing liabilities at March 31, 2004, the interest rate sensitivity gap, the cumulative interest rate 68

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sensitivity gap, the cumulative interest rate sensitivity gap ratio and the cumulative interest rate sensitivity gap to total assets. The distribution of savings deposits without maturities is based on historical experience.
March 31, 2004 Within Six Months 6 Months to One Year 1-3 Years 3-5 Years (Dollars in thousands) 5-10 Years Over 10 Years

Total

Interest-earning assets: Fixed-rate mortgage loans Adjustable-rate mortgage loans Other loans Investment securities and interest-earning deposits Total interest-earning assets Interest-bearing liabilities: Regular savings and NOW accounts Money market accounts Certificate accounts FHLB advances Total interest-bearing liabilities Interest rate sensitivity gap Cumulative interest rate sensitivity gap Cumulative interest rate sensitivity gap ratio Interest rate sensitivity gap to total assets Ratio of cumulative interest rate sensitivity gap to total assets

$

2 4,042 30,749

$

5 4,199 3,015

$

208 3,153 5,695

$

1,134 3,704 5,237

$

7,263 8,362 6,076

$ 102,247 — 1,559

$ 110,859 23,460 52,421

7,491

5,076

12,320

1,634

4,987

906

32,414

42,284

12,295

21,376

11,799

26,688

104,712

219,154

— 25,003 35,665 3,650

— — 16,874 1,750

— — 18,819 6,250

— — 15,073 8,878

— — — 9,610

76,040 — — —

76,040 25,003 86,431 30,138

64,318 $ (22,034 )

$

18,624 (6,329 )

$

25,069 (3,693 )

23,951 $ (12,152 )

$

9,610 17,078

$

76,040 28,672

$

217,612 1,542

$ (22,034 )

$ (28,363 )

$ (32,056 )

$ (44,208 )

$ (27,130 )

$

1,542

65.74 % (9.10 )%

65.80 % (2.61 )%

70.32 % (1.53 )%

66.50 % (5.02 )%

80.84 % 7.05 %

100.71 % 11.84 %

(9.10 )%

(11.71 )%

(13.24 )%

(18.26 )%

(11.20 )%

0.64 %

A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and a gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, an institution with a negative gap position would tend to have its interest-bearing liabilities repricing upward at a rate faster than its interest-earning assets which may negatively affect the growth of its net interest income. During a period of falling interest rates, an institution with a negative gap would tend to have its interest-bearing liabilities repricing downward at a faster rate than its interest-earning assets which may positively affect the growth of its net interest income. Given our existing liquidity position and our ability to sell securities from our available-for-sale portfolio, we believe that our negative gap position will have no material adverse effect on our liquidity position. The ratios set forth in the table above are within the Board of Directors’ approved parameters. Liquidity and Capital Resources Liquidity is the ability to meet current and future short-term financial obligations. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of investment 69

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securities and advances from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Each quarter we project liquidity availability and demands on this liquidity for the next 90 days. We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits, Federal funds and short- and intermediate-term U.S. Government agency obligations. Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At March 31, 2004, cash and cash equivalents totaled $11.9 million, including Federal funds of $5.7 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $30.4 million at March 31, 2004. At March 31, 2004, we had arranged overnight lines of credit of $2.5 million with the Federal Home Loan Bank of Boston. At March 31, 2004, we had no overnight advances outstanding. In addition, at March 31, 2004 we had ability to borrow $2.0 million from a correspondent bank. We had no advances outstanding on this line at March 31, 2004. At March 31, 2004, we had $13.7 million in unused line availability on home equity lines of credit, $11.3 million in unadvanced commercial lines, $3.5 million in mortgage commitments, $3.0 million in commercial mortgage loan commitments, $2.2 million in unadvanced construction mortgage commitments, $1.6 million in letters of credit, and $72,000 in overdraft line of credit availability. Certificates of deposit due within one year of March 31, 2004 totaled $52.5 million, or 28% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and lines of credit. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2005. We believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Historically, we have remained highly liquid, with our liquidity position increasing substantially over the past two fiscal years. We have no material commitments or demands that are likely to affect our liquidity other than as set forth below. Consequently, the Board intends to make additional investments in intermediate-term mortgage-backed securities, government agency securities, and certificates of deposit to increase interest income. In the event loan demand were to increase at a pace greater than expected, or any unforeseen demand or commitment were to occur, we would access our borrowing capacity with the Federal Home Loan Bank of Boston. The following table presents certain of our contractual obligations at March 31, 2004.

Contractual Obligations

Total

Less than 1 Year

Payments Due By Period 1-3 Years (In thousands)

3-5 Years

More than 5 Years

Long-term debt obligations Operating lease obligations Total

$ 30,138 670 $ 30,808

$ 5,012 117 $ 5,129

$ 10,346 189 $ 10,535

$ 9,767 124 $ 9,891

$ 5,013 240 $ 5,253

Our primary investing activities are the origination of loans and the purchase of securities. For the three months ended March 31, 2004 we originated $13.7 million of loans and purchased $4.9 million of securities. In 2003, we originated $101.0 million of loans and purchased $20.5 million of securities. In 2002, we originated $64.3 million of loans and purchased $20.8 million of securities. In 2001, we originated $62.6 million of loans and purchased $20.5 million of securities. 70

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Financing activities consist primarily of activity in deposit accounts and in Federal Home Loan Bank advances. We experienced a net increase in total deposits of $4.0 million, $10.2 million, $16.6 million and $20.2 million for the three months ended March 31, 2004 and the years ended December 31, 2003, 2002 and 2001, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to increase core deposit relationships. Occasionally, we offer promotional rates on certain deposit products in order to attract deposits. We experienced a decrease in Federal Home Loan Bank advances of $4.9 million for the three months ended March 31, 2004 and increases in Federal Home Loan Bank advances of $3.9 million and $7.7 million for the years ended December 31, 2003 and 2002. At March 31, 2004, we were subject to the regulatory capital requirements of the Federal Deposit Insurance Corporation, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2004, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. After the reorganization, we will be subject to the regulatory capital requirements of the Office of Thrift Supervision. See “Regulation and Supervision — Regulation of Federal Savings Association,” “Regulatory Capital Compliance” and note 10 of the notes to the financial statements. The capital from the reorganization will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations will be enhanced by the capital from the reorganization, resulting in increased net interest-earning assets and net income. However, the large increase in equity resulting from the capital raised in the offering will, initially, have an adverse impact on our, return on equity. Off-Balance Sheet Arrangements In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, lines of credit and letters of credit. See note 13 of the notes to the financial statements. For the three months ended March 31, 2004 and the year ended December 31, 2003, we engaged in no off-balance-sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows. Impact of Recent Accounting Pronouncements In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. Interpretation No. 45 requires a guarantor entity at the inception of a guarantee covered by the measurement provisions of the interpretation, to record a liability for the fair value of the obligation undertaken in issuing the guarantee. In addition, Interpretation No. 45 elaborates on previously existing disclosure requirements for most guarantees, including loan guarantees such a standby letters of credit. We did not have financial letters of credit at December 31, 2003 and March 31, 2004. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123”. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of 71

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accounting for stock-based employee compensation and the effect of the method used on reported results. We have not completed an analysis of the potential effects of this statement on our financial statements. In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” Interpretation No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns, or both. Interpretation No. 46 also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. The consolidation requirements of Interpretation No. 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain other disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. We have not established any variable interest entities. The adoption of Interpretation No. 46 did not have material effect on our financial statements. In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” which clarifies certain implementation issues raised by constituents and amends Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to include the conclusions reached by the Financial Accounting Standards Board on certain Financial Accounting Standards Board Staff Implementation Issues that, while inconsistent with Statement 133’s discussion of financial guarantee contracts and the application of the shortcut method to an interest rate swap agreement that includes an embedded option and amends other pronouncements. The guidance in Statement 149 is effective for new contracts entered into or modified after June 30, 2003 and for hedging relationships designated after that date, except for the following: guidance incorporated from FASB Staff Implementation Issues that was effective for periods beginning before June 15, 2003 should continue to be applied according to the effective dates in those issues; and guidance relating to forward purchase and sale agreements involving “when-issued” securities should be applied to both existing contracts and new contracts entered into after June 30, 2003. The adoption of Statement of Financial Accounting Standards No. 149 did not have a material effect on our financial statements. In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which changes the classification in the statement of financial position of certain common financial instruments from either equity or mezzanine presentation to liabilities and requires an issuer of those financial statements to recognize changes in fair value or redemption amount, as applicable, in earnings. Statement of Financial Accounting Standards No. 150 requires an issuer to classify certain financial instruments as liabilities, including mandatorily redeemable preferred and common stocks. Statement of Financial Accounting Standards No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and, with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003 (July 1, 2003 as to Naugatuck Valley Savings and Loan). The adoption of Statement of Financial Accounting Standards No. 150 did not have a material effect on our financial statements. Effect of Inflation and Changing Prices We have prepared the financial statements and related financial data presented in this prospectus in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on our performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. 72

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OUR MANAGEMENT Directors Initially, the Board of Directors of Naugatuck Valley Financial and Naugatuck Valley Mutual will consist of all current directors of Naugatuck Valley Savings and Loan. The Board of Directors of Naugatuck Valley Financial and Naugatuck Valley Mutual will be elected to terms of three years, approximately one-third of whom are elected annually. Our Board of Directors is presently composed of eight members who are elected for terms of three years, approximately one-third of whom are elected annually. All of the directors are independent under the current listing standards of the Nasdaq Stock Market, except for John C. Roman and Jane H. Walsh who we employ as officers. Information regarding the directors is provided below. Unless otherwise stated, each person has held his or her current occupation for the last five years. Ages presented are as of March 31, 2004. The following directors have terms ending in 2005:

Carlos S. Batista is a Vice President of Bristol Babcock, Inc., a manufacturer and world-wide supplier of products and services in the oil, gas, water, wastewater, process control and power industries. Age 54. Director since 1999. John C. Roman will serve as the President and Chief Executive Officer of Naugatuck Valley Financial and Naugatuck Valley Mutual. Mr. Roman has been President and Chief Executive Officer of Naugatuck Valley Savings and Loan since September 1999 and previously was the Vice President and Chief Lending Officer of Naugatuck Valley Savings and Loan. Age 50. Director since 1999. Camilo P. Vieira is a consultant with, and previously served as the President of CM Property Management, a property management firm. Mr. Vieira previously served with IBM Corp. as a project and financial manager for over 30 years. Age 60. Director since 2002. The following directors have terms ending in 2006:

Richard M. Famiglietti has been the owner of CM Property Management, a property management firm since 2002. Previously, Mr. Famiglietti was a Vice President of sales for Naugatuck Glass Company, a glass fabricator. Age 56. Director since 2000. Ronald D. Lengyel will serve as the Chairman of the Board of Directors of Naugatuck Valley Financial and Naugatuck Valley Mutual and currently is the Chairman of the Board of Naugatuck Valley Savings and Loan. Mr. Lengyel previously served as President and Chief Executive Officer of Naugatuck Valley Savings and Loan before his retirement in September 1999. Mr. Lengyel is a director of Connecticut Water Service, Inc. Age 65. Director since 1971. The following directors have terms ending in 2007:

James A. Mengacci has been the owner of James A. Mengacci Associates LLC, a consulting firm, since 1999 and a partner in Allied Capital Management, LLC, a marketing and investment firm, since 1999. Mr. Mengacci previously was the Secretary and Treasurer of Fitzgerald Funeral Home, Inc. Age 46. Director since 1988. Michael S. Plude is a certified public accountant and the managing partner of Kaskie Plude & Co., an accounting firm, located in Monroe, Connecticut. Mr. Plude previously was an accountant with Pricewaterhouse. Age 44. Director since 2003. Jane H. Walsh will serve as Senior Vice President of Naugatuck Valley Financial and Naugatuck Valley Mutual. Ms. Walsh has been Senior Vice President of Naugatuck Valley Savings and Loan since 2000. Ms. Walsh has served with Naugatuck Valley Savings and Loan for over 30 years. Age 60. Director since 2001. 73

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Executive Officers Our executive officers are elected annually by the Board of Directors and serve at the Board’s discretion. The executive officers of Naugatuck Valley Financial and Naugatuck Valley Mutual will be, and the executive officers of Naugatuck Valley Savings and Loan, are:

Name

Position

John C. Roman

Dominic J. Alegi, Jr.

Jane H. Walsh William C. Nimons Lee R. Schlesinger

President and Chief Executive Officer of Naugatuck Valley Financial, Naugatuck Valley Mutual and Naugatuck Valley Savings and Loan Executive Vice President of Naugatuck Valley Financial, Naugatuck Valley Mutual and Naugatuck Valley Savings and Loan Senior Vice President of Naugatuck Valley Financial, Naugatuck Valley Mutual and Naugatuck Valley Savings and Loan Senior Vice President of Naugatuck Valley Financial, Naugatuck Valley Mutual and Naugatuck Valley Savings and Loan Vice President and Controller of Naugatuck Valley Financial, Naugatuck Valley Mutual and Naugatuck Valley Savings and Loan

Below is information regarding the executive officers who are not also directors. Unless otherwise stated, each executive officer has held his or her current position for at least the last five years. Ages presented are as of March 31, 2004. Dominic J. Alegi, Jr. will serve as Executive Vice President of Naugatuck Valley Financial and Naugatuck Valley Mutual. Mr. Alegi has been Executive Vice President of Naugatuck Valley Savings and Loan since 1989. Mr. Alegi has served with Naugatuck Valley Savings and Loan for over 34 years. Age 58. William C. Nimons will serve as Senior Vice President of Naugatuck Valley Financial and Naugatuck Valley Mutual. Mr. Nimons has been Senior Vice President of Naugatuck Valley Savings and Loan since 2001. Mr. Nimons previously was the Manager — Network Management of Prudential Real Estate and Relocation, a real estate and relocation firm and was an Executive Vice President at Shelton Savings Bank. Age 56. Lee R. Schlesinger will serve as Vice President and Controller of Naugatuck Valley Financial and Naugatuck Valley Mutual. Mr. Schlesinger has been Vice President and Controller of Naugatuck Valley Savings and Loan since 2003. Mr. Schlesinger has served with Naugatuck Valley Savings and Loan for over 21 years. Age 43. Meetings and Committees of the Board of Directors of Naugatuck Valley Savings and Loan Naugatuck Valley Savings and Loan conducts business through meetings of its Board of Directors and its committees. During the year ended December 31, 2003, the Board of Directors of Naugatuck Valley Savings and Loan held 18 regular meetings and 78 special meetings. Naugatuck Valley Savings and Loan’s Board of Directors has standing Audit, Human Resource and Gain Share, and Nominating Committees, among others. The Audit Committee, consisting of Messrs. Famiglietti, Lengyel and Plude, is responsible for developing and monitoring internal audit and compliance programs. The committee also receives and reviews all the reports and findings and other information presented to them by Naugatuck Valley Savings 74

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and Loan’s officers regarding financial reporting policies and practices. Mr. Famiglietti is the Audit Committee Chairman. This committee met four times during the year ended December 31, 2003. The Human Resource and Gain Share Committee, consisting of Messrs. Famiglietti, Roman, Lengyel and Vieira, determines annual grade and salary levels for employees and establishes personnel policies. Mr. Famiglietti is the Human Resource and Gain Share Committee Chairman. This committee met eight times during the year ended December 31, 2003. The Nominating Committee, consisting of all directors, is responsible for the annual selection of management’s nominees for election as directors. Mr. Mengacci is the Nominating Committee Chairman. This committee met twice in 2003 to nominate the individuals for election at the 2004 annual meeting. In addition, the Board of Directors has Budget, Marketing, Building/Alternate Site, Loan, Information Technology, Mortgage and Mortgage Review Committees. Committees of the Board of Directors of Naugatuck Valley Financial In connection with our formation, the following committees will be established:

The Audit Committee will consist of Messrs. Famiglietti, Lengyel and Plude and be responsible for ensuring that we maintain reliable accounting policies and financial reporting processes and reviewing the work of our independent accountants and internal auditors to determine their effectiveness. Mr. Famiglietti will be the Audit Committee Chairman. Each member of the Audit Committee is independent in accordance with the listing standards of the Nasdaq Stock Market. The Board of Directors has determined that Mr. Plude is an audit committee financial expert under the rules of the Securities and Exchange Commission. The Compensation Committee will consist of Messrs. Famiglietti, Lengyel and Vieira and be responsible for determining annual grade and salary levels for our employees and establishing our personnel policies. Mr. Famiglietti will be the Compensation Committee Chairman. Each member of the Compensation Committee is independent in accordance with the listing standards of the Nasdaq Stock Market. The Nominating Committee will consist of all directors, except Mr. Roman and Ms. Walsh, and be responsible for the annual selection of management’s nominees for election as directors and developing and implementing policies and practices relating to corporate governance, including implementation of and monitoring adherence to our corporate governance policy. Mr. Mengacci will be the Nominating Committee Chairman. Each member of the Nominating Committee is independent in accordance with the listing standards of the Nasdaq Stock Market. Each of the committees listed above will operate under a written charter, which will govern its composition, responsibilities and operations. Corporate Governance Policies and Procedures In addition to establishing committees of the Board of Directors, we will also adopt several policies to govern the activities of both us and Naugatuck Valley Savings and Loan, including a corporate governance policy and a code of business conduct and ethics. The corporate governance policy will set forth: • the duties and responsibilities of each director; • the composition, responsibilities and operation of the Board of Directors; • the establishment and operation of Board committees; • succession planning; • appointing an independent lead director and convening executive sessions of independent directors; 75

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• the Board of Directors’ interaction with management and third parties; and • the evaluation of the performance of the Board of Directors and of the chief executive officer. The code of business conduct and ethics, which will apply to all employees, officers and directors, will address conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. In addition, the code of business conduct and ethics will be designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations. Directors’ Compensation Fees. Each non-employee director of Naugatuck Valley Savings and Loan receives an annual retainer of $7,500. The Chairman of the Board of Directors receives an annual retainer of $11,500. In addition, each non-employee director receives $500 per Board meeting attended and $400 per committee meeting attended. The Chairman of the Board of Directors also receives $400 per month for his service as Asset/Liability Committee liaison. Each non-employee director of Naugatuck Valley Financial will receive a quarterly retainer of $500 and each member of the Naugatuck Valley Financial Audit Committee will receive $400 per meeting attended. Director Retirement Policy. Naugatuck Valley Savings and Loan maintains a retirement benefits policy for certain non-employee directors. Under the policy, any person who served as a director on January 1, 2000, who has attained the age of 68 on or by that date and who has served on the Board for at least 10 years as of the time he or she attains age 70, becomes eligible for an annual retirement benefit. The annual retirement benefit for these directors equals the total amounts paid to all non-employee directors during the calendar year preceding the director’s retirement date and dividing that number by the number of non-employee directors for that year. For all other directors who have served on the Board for at least 10 years as of the time he or she attains age 70, the director’s annual retirement benefit equals the total amounts paid to all non-employee directors during the calendar year preceding the director’s retirement date and dividing that number by the number of non-employee directors for that year and then multiplying that result by 60%. These annual retirement benefits are payable to each director in semi-annual installments for five years. In the event the director dies before receiving each of the semi-annual installments, his or her beneficiary will receive the remaining installments that would have been to the director but for his or her death. Executive Compensation Summary Compensation Table. The following information is provided for John C. Roman, our President and Chief Executive Officer, and Dominic J. Alegi, Jr., our Executive Vice President. Messrs. Roman and Alegi are the only executive officers of Naugatuck Valley Savings and Loan who received salary and bonus totaling $100,000 or more during the year ended December 31, 2003.

Annual Compensation(1) Name and Position Year Salary Bonus All Other Compensation(2)

John C. Roman President and Chief Executive Officer Dominc J. Alegi, Jr. Executive Vice President

2003 2002 2001 2003 2002 2001

$ 138,131 128,494 116,813 $ 94,208 91,464 87,946

$ 20,592 17,131 13,813 $ 14,658 12,981 10,441

$

$

4,028 2,215 1,682 2,848 1,728 1,384

(1)

Does not include the aggregate amount of perquisites or other personal benefits, which was less than $50,000 or 10% of the total annual salary and bonus reported. Represents matching contributions under the 401(k) Plan. 76

(2)

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Employment Agreements. Upon completion of the offering, Naugatuck Valley Savings and Loan will enter into an amended and restated employment agreement with John C. Roman. Naugatuck Valley Financial will also be a party to the employment agreement with Mr. Roman. Naugatuck Valley Savings and Loan and Naugatuck Valley Financial will enter into the agreement to help ensure that they maintain a stable and competent management base after the offering. The continued success of Naugatuck Valley Financial and Naugatuck Valley Savings and Loan depends to a significant degree on the skills and competence of Mr. Roman. The employment agreement will provide for a three-year term. The term of the employment agreement may be renewed on an annual basis after review and extension by the respective Board of Directors. The employment agreement establishes a base salary of $ . The Boards of Directors will review Mr. Roman’s base salary each year in order to consider any appropriate changes. In addition to base salary, the employment agreement will provide for, among other things, participation in stock-based benefit plans and fringe benefits applicable to the executive. The employment agreement will provide that Naugatuck Valley Savings and Loan and Naugatuck Valley Financial may terminate the executive’s employment for cause, as described in the employment agreements, at any time. If Naugatuck Valley Savings and Loan or Naugatuck Valley Financial terminates the executive’s employment for reasons other than for cause, or if the executive resigns from Naugatuck Valley Savings and Loan or Naugatuck Valley Financial after specified circumstances that would constitute constructive termination, the executive or, if he dies, his beneficiary, would be entitled to receive an amount equal to the remaining base salary payments due for the remaining term of the employment agreement and the contributions that would have been made on his behalf to any employee benefit plans of Naugatuck Valley Savings and Loan and Naugatuck Valley Financial during the remaining term of the employment agreement. Naugatuck Valley Savings and Loan would also continue and/or pay for the executive’s life, health and dental coverage for the remaining term of the employment agreement. The executive must agree not to compete with Naugatuck Valley Savings and Loan or Naugatuck Valley Financial for one year following their termination of employment other than in connection with a change in control. Under the employment agreement, if the executive voluntarily (upon circumstances discussed in the agreement) or involuntarily terminates employment following a change in control of Naugatuck Valley Savings and Loan or Naugatuck Valley Financial, the executive or, if the executive dies, the executive’s beneficiary, would receive a severance payment equal to the greater of: (1) the payments due for the remaining term of the agreement; or (2) three times the average of the five preceding taxable years’ annual compensation. Naugatuck Valley Savings and Loan would also continue the executive’s life, health, and dental coverage for 36 months following termination of employment. Section 280G of the Internal Revenue Code provides that severance payments that equal or exceed three times the individual’s base amount are deemed to be “excess parachute payments” if they are contingent upon a change in control. Individuals receiving excess parachute payments are subject to a 20% excise tax on the amount of the payment in excess of the base amount, and the employer would not be entitled to deduct such amount. The agreements limit payments made to the executive in connection with a change in control to amounts that will not exceed the limits imposed by Section 280G. Naugatuck Valley Savings and Loan or Naugatuck Valley Financial will pay or reimburse the executive for all reasonable costs and legal fees paid or incurred by the executive in any dispute or question of interpretation relating to the employment agreement if the executive is successful on the merits in a legal judgment, arbitration or settlement. The employment agreement also provides that Naugatuck Valley Savings and Loan and Naugatuck Valley Financial will indemnify Mr. Roman to the fullest extent legally allowable. Change in Control Agreements. Upon completion of the offering, Naugatuck Valley Savings and Loan will enter into change in control agreements with certain individuals, including Mr. Alegi, Ms. Walsh, Mr. Nimons and Mr. Schlesinger. Each change in control agreement will have either a two- or three-year term, subject to renewal by the Board of Directors on an annual basis. Mr. Alegi, Ms. Walsh 77

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and Mr. Nimons will have three-year agreements and Mr. Schlesinger will have a two-year agreement. If, following a change in control of Naugatuck Valley Savings and Loan or Naugatuck Valley Financial, Naugatuck Valley Savings and Loan or Naugatuck Valley Financial or their successors terminates the employment of an individual who has entered into a change in control agreement for reasons other than for cause, or if the individual voluntarily resigns upon the occurrence of circumstances specified in the agreements, the officer will receive a severance payment under the agreements equal to two or three times, based on the term of the agreement, the officer’s average annual compensation for the five most recent taxable years. Naugatuck Valley Savings and Loan will also continue health and welfare benefit coverage for 24 or 36 months, based on the term of the agreement, following termination of employment. If a change in control of Naugatuck Valley Financial or Naugatuck Valley Savings and Loan occurred, and Naugatuck Valley Savings and Loan terminated all officers covered by change in control agreements, the total payments due under the agreements, based solely on current cash compensation and excluding any benefits that would be payable under any employee benefit plans, would equal approximately $ . The agreements limit payments made to the executives in connection with a change in control to amounts that will not exceed the limits imposed by Section 280G. Death Benefit Agreements. Naugatuck Valley Savings and Loan has entered into death benefit agreements with certain employees, including Mr. Roman, Mr. Alegi, and Mr. Schlesinger. Under these agreements, each employee’s beneficiaries become entitled to a single lump sum payment of $25,000 upon the employee’s death. Employee Severance Compensation Plan. In connection with the offering, Naugatuck Valley Savings and Loan expects to adopt the Naugatuck Valley Savings and Loan Employee Severance Compensation Plan to provide severance benefits to eligible employees whose employment terminates in connection with a change in control of Naugatuck Valley Savings and Loan or Naugatuck Valley Financial. Employees become eligible for severance benefits under the plan if they have a minimum of [one year of service] with Naugatuck Valley Savings and Loan. Individuals who enter into employment or change in control agreements with Naugatuck Valley Savings and Loan or Naugatuck Valley Financial will not participate in the severance plan. Under the severance plan, if, within [24 months] of a change in control, Naugatuck Valley Savings and Loan or Naugatuck Valley Financial or their successors terminate an employee’s employment or if the individual voluntarily terminates employment upon the occurrence of events specified in the severance plan, then that individual will receive a severance payment equal to one month’s compensation for each year of service with Naugatuck Valley Savings and Loan, up to a maximum payment equal to 24 months of compensation. Based solely on 2003 cash compensation and assuming that a change in control had occurred at March 31, 2004, and all eligible employees became entitled to receive severance payments, the aggregate payments due under the severance plan would equal approximately $ . Benefit Plans 401(k) Savings Plan. Naugatuck Valley Savings and Loan maintains the Naugatuck Valley Savings and Loan S.B. Employee Savings Plan, a tax-qualified defined contribution plan with a 401(k) feature, for employees of Naugatuck Valley Savings and Loan who are 21 years of age and have completed six months of service. Eligible employees may contribute a portion of their compensation to the plan on a pre-tax basis, subject to certain limitations imposed by the Internal Revenue Code of 1986, as amended. For 2004, the maximum dollar limit any individual may contribute to the plan is $13,000; provided, however, that participants over age 50 may contribute an additional $3,000 per year. Each year, Naugatuck Valley Savings and Loan may make a discretionary matching contributions on behalf of participant who have made deferrals under the plan. Naugatuck Valley Savings and Loan also has the authority to make discretionary profit sharing contributions under the plan for the benefit of eligible participants. Participants vest in their profit sharing contributions at a rate of 20% per year following two years of service. Participants are always 100% vested in their salary deferrals. The plan has an individual account for each participant’s contributions and allows each participant to direct the investment of his or her account in a variety of investment funds. In connection with the 78

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offering, the plan will add an additional investment alternative, the Naugatuck Valley Financial Stock Fund. The Naugatuck Valley Financial Stock Fund will permit participants to invest up to 100% of their deferrals in Naugatuck Valley Financial common stock. A participant who elects to purchase common stock in the offering through the plan will receive the same subscription priority and be subject to the same individual purchase limitations as if the participant had elected to make such purchase using other funds. See “The Reorganization and Stock Offering — Subscription Offering and Subscription Rights” and “— Limitations on Purchases of Shares.” The plan will purchase common stock for participants in the offering, to the extent that shares are available. [After the offering, the plan will purchase shares in open market transactions. Participants may direct the stock fund trustee on the voting of shares purchased for their plan accounts. The trustee will use dividends paid on shares held in the stock fund to purchase additional shares.] Retirement Plan. Naugatuck Valley Savings and Loan participates in the Financial Institutions Retirement Fund (the “Retirement Plan”) to provide retirement benefits for eligible employees. Employees are eligible to participate in the Retirement Plan after the completion of six months of employment and the attainment of age 21. The formula for normal retirement benefits payable annually under the Retirement Plan is 1.5% of the average of the participant’s highest five years of compensation multiplied by the participant’s years of benefit service. Participants generally have no vested interest in Retirement Plan benefits prior to the completion of five years of service. Following the completion of five years of vesting service, or in the event of a participant’s attainment of age 65, death or termination of employment due to disability, a participant will become 100% vested in the accrued benefit under the Retirement Plan. The table below reflects the annual pension benefit payable to a participant assuming various levels of earnings and years of service. The amounts of benefits paid under the Retirement Plan are not reduced for any social security benefit payable to participants. As of March 31, 2004, [executives] had credited years of service of [number] years, respectively.

Final Average Earnings

15

20

Years of Benefit Service 25

30

35

$ 50,000 75,000 100,000 125,000 150,000 Employee Stock Ownership Plan. In connection with the offering, the Board of Directors of Naugatuck Valley Savings and Loan has adopted an employee stock ownership plan for eligible employees of Naugatuck Valley Savings and Loan. [Eligible employees who are 21 years old and employed by Naugatuck Valley Savings and Loan as of the closing date of the offering begin participating in the plan as of that date.] Thereafter, new employees of Naugatuck Valley Savings and Loan who are 21 years old and have been credited with at least [six months] of service with Naugatuck Valley Savings and Loan will be eligible to participate in the employee stock ownership plan as of the first entry date following their completion of the plan’s eligibility requirements. It is anticipated that Naugatuck Valley Savings and Loan will engage an independent third party trustee to purchase 3.60% of the shares issued in the reorganization including shares issued to Naugatuck Valley Mutual and our charitable foundation on behalf of the employee stock ownership plan. This would range between 153,000 shares, assuming 1,827,500 shares are sold in the offering, and 207,000 shares, assuming 2,472,500 shares are sold in the offering. If 2,843,375 shares are sold in the offering, the employee stock ownership plan will purchase 238,050 shares. It is anticipated that the employee stock ownership plan will fund its purchase in the offering through a loan from Naugatuck Valley Financial. The loan will equal 100% of the aggregate purchase price of the common stock. The loan to the employee stock ownership plan will be repaid principally from Naugatuck Valley Savings and Loan’s contributions to 79

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the employee stock ownership plan and dividends payable on common stock held by the employee stock ownership plan over the anticipated 15 year term of the loan. The interest rate for the employee stock ownership plan loan is expected to be the prime rate as published in The Wall Street Journal on the closing date of the offering. See “Pro Forma Data.” In any plan year, Naugatuck Valley Savings and Loan may make additional discretionary contributions (beyond those necessary to satisfy the loan obligation) to the employee stock ownership plan for the benefit of plan participants in either cash or shares of common stock, which may be acquired through the purchase of outstanding shares in the market or from individual stockholders or which constitute authorized but unissued shares or shares held in treasury by Naugatuck Valley Financial. The timing, amount, and manner of discretionary contributions will be affected by several factors, including applicable regulatory policies, the requirements of applicable laws and regulations, and market conditions. Naugatuck Valley Savings and Loan’s contributions to the employee stock ownership plan are not fixed, so benefits payable under the employee stock ownership plan cannot be estimated. Shares purchased by the employee stock ownership plan with the proceeds of the employee stock ownership plan loan will be held in a suspense account and released on a pro rata basis as the loan is repaid. Discretionary contributions to the employee stock ownership plan and shares released from the suspense account will be allocated among participants on the basis of each participant’s proportional share of compensation. After two years of service, participants will vest in the benefits allocated under the employee stock ownership plan at a rate of [20%] per year for each year of continuous service with Naugatuck Valley Savings and Loan over a -year period. A participant will become fully vested at retirement, upon death or disability, upon a change in control or upon termination of the employee stock ownership plan. Benefits are generally distributable upon a participant’s separation from service. Any unvested shares that are forfeited upon a participant’s termination of employment will be reallocated among the remaining plan participants. Plan participants will be entitled to direct the plan trustee on how to vote common stock credited to their accounts. The trustee will vote all allocated shares held in the employee stock ownership plan as instructed by the plan participants and unallocated shares and allocated shares for which no instructions are received will be voted in the same ratio on any matter as those shares for which instructions are given, subject to the fiduciary responsibilities of the trustee. Under applicable accounting requirements, compensation expense for a leveraged employee stock ownership plan is recorded at the fair market value of the employee stock ownership plan shares when committed to be released to participants’ accounts. See “Pro Forma Data.” The employee stock ownership plan must meet certain requirements of the Internal Revenue Code and the Employee Retirement Income Security Act. Naugatuck Valley Savings and Loan intends to request a favorable determination letter from the Internal Revenue Service regarding the tax-qualified status of the employee stock ownership plan. Naugatuck Valley Savings and Loan expects to receive a favorable determination letter, but cannot guarantee that it will. Future Stock-Based Incentive Plan. Following the offering, Naugatuck Valley Financial plans to adopt a stock-based incentive plan that will provide for grants of stock options and restricted stock. Shares of restricted stock, in an amount up to 3.21% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be awarded at no cost to the recipient. Stock options, in an amount up to 8.03% of the shares issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation, will be granted at an exercise price equal to 100% of the fair market value of our common stock on the option grant date. Naugatuck Valley Financial may fund the stock-based incentive plan through the purchase of common stock in the open market by a trust established in connection with the plan or from authorized, but unissued, shares of Naugatuck Valley Financial common stock. The acquisition of additional 80

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authorized, but unissued, shares by the stock-based incentive plan after the offering would dilute the interests of existing shareholders. See “Pro Forma Data.” Naugatuck Valley Financial will grant stock options at an exercise price equal to 100% of the fair market value of the stock on the date of grant. Naugatuck Valley Financial will grant restricted stock awards at no cost to recipients. Restricted stock awards and stock options generally vest ratably over a five-year period, but Naugatuck Valley Financial may also make vesting contingent upon the satisfaction of certain conditions, such as performance goals, established by the Board of Directors or the committee charged with administering the plan provided, however, that no such award will vest more rapidly than 20% in any given year. All outstanding awards will accelerate and become fully vested upon a change in control of Naugatuck Valley Financial. No earlier than six months after the reorganization, Naugatuck Valley Financial will submit the stock-based incentive plan to shareholders for their approval, at which time Naugatuck Valley Financial will provide shareholders with detailed information about the plan. Transactions with Naugatuck Valley Savings and Loan Loans and Extensions of Credit. The Sarbanes-Oxley Act of 2002 generally prohibits us from making loans to our executive officers and directors, but it contains a specific exemption from such prohibition for loans made by Naugatuck Valley Savings and Loan to our executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. Naugatuck Valley Savings and Loan is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public, except for loans made under a benefit program generally available to all other employees and that does not give preference to any executive officer or director over any other employee. In addition, loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to the person and his or her related interests, are in excess of the greater of $25,000 or 5% of Naugatuck Valley Savings and Loan’s capital and surplus, up to a maximum of $500,000, must be approved in advance by a majority of the disinterested members of the Board of Directors. See “Regulation and Supervision — Regulation of Federal Savings Associations — Transactions with Related Parties.” The aggregate amount of loans to our executive officers and directors was $1.1 million at March 31, 2004, or approximately 2.65% of pro forma stockholders’ equity assuming that 2,472,500 shares are sold in the offering. These loans were performing according to their original terms at March 31, 2004. Indemnification for Directors and Officers Our bylaws provide that we will indemnify all of our officers, directors and employees to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer. Such indemnification may include the advancement of funds to pay for or reimburse reasonable expenses incurred by an indemnified party to the fullest extent permitted under federal law. Indemnification shall be made only if: (i) final judgment on the merits is in his or her favor; or (ii) in case of settlement, final judgment against him or her, or final judgment in his or her favor, other than on the merits, if a majority of our disinterested directors determine that he or she was acting in good faith within the scope of his or her employment or authority as he or she could reasonably have perceived it under the circumstances and for a purpose he or she could reasonably have believed under the circumstances was in our best interest. However, no indemnification shall be made unless we give the Office of Thrift Supervision at least 60 days notice of our intention to make such indemnification. No such 81

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indemnification shall be made if the Office of Thrift Supervision advises us in writing, within such notice period, of its objection thereto. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons by our bylaws or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS The following table presents certain information as to the approximate purchases of common stock by our directors and executive officers, including their associates, if any, as defined by applicable regulations. No individual has entered into a binding agreement to purchase these shares and, therefore, actual purchases could be more or less than indicated. Directors and executive officers and their associates may not purchase more than 31% in the aggregate of the shares sold in the offering and issued to our charitable foundation. For purposes of the following table, sufficient shares are assumed to be available to satisfy subscriptions in all categories.

Proposed Purchases of Stock in the Offering Number of Shares Dollar Amount Percent of Shares at Minimum of Offering Range(1) Percent of Shares at Maximum of Offering Range(1)

Name

Dominic J. Alegi, Jr. Carlos S. Batista Richard M. Famiglietti Ronald D. Lengyel William C. Nimons James A. Mengacci Michael S. Plude John C. Roman Lee R. Schlesinger Camilo P. Vieira Jane H. Walsh All directors and executive officers as a group (11 persons)

10,000 11,000 10,000 2,500 10,000 15,000 5,500 7,000 5,000 3,000 8,500

$ 100,000 110,000 100,000 25,000 100,000 150,000 55,000 70,000 50,000 30,000 85,000

0.52 % 0.58 0.52 0.13 0.52 0.78 0.26 0.37 0.26 0.16 0.44

0.39 % 0.43 0.39 0.10 0.39 0.58 0.21 0.27 0.19 0.12 0.33

87,500

$ 875,000

4.58 %

3.38 %

(1)

Includes shares of common stock to be issued to the Naugatuck Valley Savings and Loan Foundation. 82

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THE REORGANIZATION AND STOCK OFFERING The Board of Directors of Naugatuck Valley Savings and Loan has approved the plan of reorganization. The plan of reorganization also must be approved by the depositors of Naugatuck Valley Savings and Loan. A special meeting of depositors has been called for this purpose. The Office of Thrift Supervision has conditionally approved the plan of reorganization; however, such approval does not constitute a recommendation or endorsement of the plan of reorganization by the agency. General On May 17, 2004, the Board of Directors of Naugatuck Valley Savings and Loan unanimously adopted the plan of reorganization and minority stock issuance, pursuant to which Naugatuck Valley Savings and Loan will reorganize into a two-tiered mutual holding company. This structure is called a two-tier structure because it will have two levels of holding companies. After the reorganization, Naugatuck Valley Financial will be the mid-tier stock holding company and Naugatuck Valley Mutual will be the top-tier mutual holding company. Under the terms of the plan of reorganization, Naugatuck Valley Financial will own all of the stock of Naugatuck Valley Savings and Loan and Naugatuck Valley Mutual will own at least a majority of Naugatuck Valley Financial’s stock. Naugatuck Valley Mutual will have no stockholders and depositors of Naugatuck Valley Savings and Loan will become members of Naugatuck Valley Mutual. The reorganization also includes the offering by Naugatuck Valley Financial of up to 43% of its common stock to qualifying depositors of Naugatuck Valley Savings and Loan in a subscription offering and, if necessary, to members of the general public through a community offering and/or a syndicate community offering. The completion of the offering depends on market conditions and other factors beyond our control. We can give no assurance as to the length of time that will be required to complete the sale of the common stock. If we experience delays, significant changes may occur in the independent appraisal, which would require a change in the offering range. A change in the offering range would result in a change in the net proceeds realized from the sale of the common stock. If the reorganization is terminated, Naugatuck Valley Savings and Loan would be required to charge all reorganization expenses against current income. The Office of Thrift Supervision approved the plan of reorganization, subject to, among other things, approval of the plan of reorganization by Naugatuck Valley Savings and Loan’s depositors. The plan of reorganization also provides for the establishment of the Naugatuck Valley Savings and Loan Foundation and our funding of the foundation with 2% of the shares of common stock issued in the reorganization. The establishment of the Naugatuck Valley Savings and Loan Foundation is subject to a separate vote of Naugatuck Valley Savings and Loan’s depositors. The special meeting of Naugatuck Valley Savings and Loan’s depositors has been called for these purposes on , 2004. After the reorganization, our ownership structure will be as follows:

The following is a brief summary of the pertinent aspects of the reorganization. A copy of the plan of reorganization is available from Naugatuck Valley Savings and Loan upon request and is available for inspection at the offices of Naugatuck Valley Savings and Loan and at the Office of Thrift Supervision. The plan of reorganization is also filed as an exhibit to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.” 83

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Reasons for the Reorganization After considering the advantages and disadvantages of the reorganization, the Board of Directors of Naugatuck Valley Savings and Loan unanimously approved the reorganization as being in the best interest of Naugatuck Valley Savings and Loan and its depositors. The Board of Directors concluded that the reorganization offers a number of advantages that will be important to our future growth and performance and that outweigh the disadvantages of the reorganization. The reorganization will result in the raising of additional capital, which will support our future lending and operational growth and may also support possible future branching activities or the acquisition of other financial institutions or financial service companies or their assets. As a mutual holding company with a mid-tier stock holding company, we will have greater flexibility in structuring mergers and acquisitions, including giving us the ability to use stock as a form of merger consideration. Our current mutual structure, by its nature, limits any ability to offer any common stock as consideration in a merger or acquisition. Our new mutual holding company structure will enhance our ability to compete with other bidders when acquisition opportunities arise by better enabling us to offer stock or cash consideration, or a combination of the two. Since we will not be offering all of our common stock for sale in the offering, the reorganization will result in less capital raised in comparison to a standard mutual-to-stock conversion. Therefore, the reorganization permits us to control the amount of capital being raised and enables us to prudently deploy the proceeds of the offering. The reorganization, however, also will allow us to raise additional capital in the future because a majority of our common stock will be available for sale in the event of a conversion of Naugatuck Valley Mutual to stock form. The reorganization will afford our directors, officers and employees the opportunity to become stockholders, which we believe to be an effective performance incentive and an effective means of attracting and retaining qualified personnel. The reorganization also will provide our customers and local community members with an opportunity to acquire our stock. The disadvantages of the reorganization considered by Naugatuck Valley Savings and Loan’s Board of Directors are the additional expense and effort of operating as a public company listed on the Nasdaq Stock Market, the inability of stockholders other than Naugatuck Valley Mutual to obtain majority ownership of Naugatuck Valley Financial and Naugatuck Valley Savings and Loan, which may result in the perpetuation of our management and Board of Directors, and the corporate ownership and regulatory policies relating to the mutual holding company structure that may be adopted periodically which may have an adverse impact on stockholders other than Naugatuck Valley Mutual. A majority of our voting stock will be owned by Naugatuck Valley Mutual, which will be controlled by its Board of Directors. While this structure will permit management to focus on our long-term business strategy for growth and capital redeployment without undue pressure from stockholders, it will also serve to perpetuate our existing management and directors. Naugatuck Valley Mutual will be able to elect all the members of our Board of Directors, and will be able to control the outcome of most matters presented to our stockholders for resolution by vote. The matters as to which stockholders other than Naugatuck Valley Mutual will be able to exercise voting control are limited and include any proposal to implement a stock-based incentive plan. No assurance can be given that Naugatuck Valley Mutual will not take action adverse to the interests of other stockholders. For example, Naugatuck Valley Mutual could prevent the sale of control of Naugatuck Valley Financial, or defeat a candidate for our Board of Directors or other proposals put forth by stockholders. This reorganization does not preclude the conversion of Naugatuck Valley Mutual from the mutual to stock form of organization in the future. No assurance can be given when, if ever, Naugatuck Valley Mutual will convert to stock form or what conditions the Office of Thrift Supervision or other regulatory agencies may impose on such a transaction. See “Risk Factors” and “Summary — Possible Conversion of Naugatuck Valley Mutual to Stock Form.” Description of the Plan of Reorganization Following receipt of all required regulatory approvals and approval of the plan of reorganization by Naugatuck Valley Savings and Loan’s depositors, the reorganization will be effected as follows or in any 84

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other manner approved by the Office of Thrift Supervision that is consistent with the purposes of the plan of reorganization and applicable laws and regulations: • Naugatuck Valley Savings and Loan will organize an interim federal savings bank (“Interim One”) as a wholly owned subsidiary; • Interim One will organize Naugatuck Valley Financial as a wholly owned subsidiary; • Interim One will then organize an interim federal savings bank (“Interim Two”) as a wholly owned subsidiary; • Naugatuck Valley Savings and Loan will convert its charter to a federal stock savings bank charter and Interim One will exchange its charter for a federal mutual holding company charter to become Naugatuck Valley Mutual; • sequentially with step 4, Interim Two will merge with and into Naugatuck Valley Savings and Loan with Naugatuck Valley Savings and Loan in stock form surviving as a subsidiary of Naugatuck Valley Mutual; • former members of Naugatuck Valley Savings and Loan will become members of Naugatuck Valley Mutual; and • Naugatuck Valley Mutual will contribute 100% of the issued common stock of Naugatuck Valley Savings and Loan to Naugatuck Valley Financial. Contemporaneously with the reorganization, we will offer for sale up to 43% of our common stock representing up to 43% of the pro forma market value of Naugatuck Valley Savings and Loan on a fully converted basis. Naugatuck Valley Savings and Loan intends to capitalize Naugatuck Valley Mutual with $100,000. As a result of the reorganization, Naugatuck Valley Savings and Loan will be organized in stock form and will be wholly owned by Naugatuck Valley Financial. The legal existence of Naugatuck Valley Savings and Loan will not terminate as a result of the reorganization. Instead, Naugatuck Valley Savings and Loan in stock form will be a continuation of Naugatuck Valley Savings and Loan in mutual form. All property of Naugatuck Valley Savings and Loan, including its right, title and interest in all property of any kind and nature, interest and asset of every conceivable value or benefit then existing or pertaining to Naugatuck Valley Savings and Loan, or which would inure to Naugatuck Valley Savings and Loan immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed, will vest in Naugatuck Valley Savings and Loan in stock form. Naugatuck Valley Savings and Loan in stock form will have, hold and enjoy the same in its right and fully and to the same extent as the same was possessed, held and enjoyed by Naugatuck Valley Savings and Loan in the mutual form. Naugatuck Valley Savings and Loan in stock form will continue to have, succeed to and be responsible for all the rights, liabilities and obligations of Naugatuck Valley Savings and Loan in the mutual form and will maintain its headquarters and operations at Naugatuck Valley Savings and Loan’s present locations. The plan of reorganization also provides that we will establish and fund the Naugatuck Valley Savings and Loan Foundation. See “The Naugatuck Valley Savings and Loan Foundation.” Effects of Reorganization on Deposits, Borrowers and Members Continuity. While the reorganization is being accomplished, the normal business of Naugatuck Valley Savings and Loan will continue without interruption, including being regulated by the Office of Thrift Supervision, its primary regulator, and the Federal Deposit Insurance Corporation. After reorganization, Naugatuck Valley Savings and Loan will continue to provide services for depositors and borrowers under current policies by its present management and staff. The directors of Naugatuck Valley Savings and Loan at the time of reorganization will serve as directors of Naugatuck Valley Savings and Loan after the reorganization. The Board of Directors of 85

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Naugatuck Valley Financial and Naugatuck Valley Mutual will be composed solely of the individuals who serve on the Board of Directors of Naugatuck Valley Savings and Loan. All officers of Naugatuck Valley Savings and Loan at the time of reorganization will retain their positions after the reorganization. Deposit Accounts and Loans. The reorganization will not affect any deposit accounts or borrower relationships with Naugatuck Valley Savings and Loan. All deposit accounts in Naugatuck Valley Savings and Loan after the reorganization will continue to be insured up to the legal maximum by the Federal Deposit Insurance Corporation in the same manner as such deposit accounts were insured immediately before the reorganization. The reorganization will not change the interest rate or the maturity of deposits at Naugatuck Valley Savings and Loan. After the reorganization, each depositor of Naugatuck Valley Savings and Loan will have both a deposit account in Naugatuck Valley Savings and Loan and a pro rata ownership interest in the equity of Naugatuck Valley Mutual based upon the balance in the depositor’s account. This ownership interest is tied to the depositor’s account, has no tangible market value separate from the deposit account and may only be realized in the event of a liquidation of Naugatuck Valley Mutual. Any depositor who opens a deposit account obtains a pro rata ownership interest in the equity of Naugatuck Valley Mutual without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives the balance in the account but receives nothing for his or her ownership interest in the equity of Naugatuck Valley Mutual, which is lost to the extent that the balance in the account is reduced. Consequently, depositors of Naugatuck Valley Mutual have no way to realize the value of their ownership interest in Naugatuck Valley Mutual, except in the unlikely event that Naugatuck Valley Mutual is liquidated. After the reorganization, all loans of Naugatuck Valley Savings and Loan will retain the same status that they had before the reorganization. The amount, interest rate, maturity and security for each loan will remain as they were contractually fixed before the reorganization. Effect on Voting Rights of Members. After the reorganization, direction of Naugatuck Valley Savings and Loan will continue to be under the control of its Board of Directors. As the holder of all of the outstanding common stock of Naugatuck Valley Savings and Loan, we will have exclusive voting rights with respect to any matters concerning Naugatuck Valley Savings and Loan requiring stockholder approval, including the election of directors. After the reorganization, Naugatuck Valley Financial stockholders will have exclusive voting rights with respect to any matters concerning Naugatuck Valley Financial that requires stockholder approval. By virtue of its ownership of a majority of the outstanding shares of common stock of Naugatuck Valley Financial, Naugatuck Valley Mutual will be able to control the outcome of most matters presented to the stockholders for resolution by vote. As a federally chartered mutual holding company, Naugatuck Valley Mutual will have no authorized capital stock and, therefore, no stockholders. Holders of deposit accounts of Naugatuck Valley Savings and Loan will become members of Naugatuck Valley Mutual. Such persons will be entitled to vote on all questions requiring action by the members of Naugatuck Valley Mutual, including the election of directors of Naugatuck Valley Mutual. In addition, all persons who become depositors of Naugatuck Valley Savings and Loan following the reorganization will have membership rights with respect to Naugatuck Valley Mutual. Borrowers do not currently have membership rights in connection with any borrowings and will not receive any membership rights after the reorganization. Effect on Liquidation Rights. In the unlikely event of a complete liquidation of Naugatuck Valley Savings and Loan before the completion of the reorganization, each depositor would receive a pro rata share of any assets of Naugatuck Valley Savings and Loan remaining after payment of expenses and satisfaction of claims of all creditors. Each depositor’s pro rata share of such liquidating distribution would be in the same proportion as the value of such depositor’s deposit account was to the total value of all deposit accounts in Naugatuck Valley Savings and Loan at the time of liquidation. 86

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Upon a complete liquidation of Naugatuck Valley Savings and Loan after the reorganization, each depositor would have a claim as a creditor of the same general priority as the claims of all other general creditors of Naugatuck Valley Savings and Loan. However, except as described below, a depositor’s claim would be solely for the amount of the balance in such depositor’s deposit account plus accrued interest. Such depositor would not have an interest in the value or assets of Naugatuck Valley Savings and Loan above that amount. Instead, the holder of Naugatuck Valley Savings and Loan’s common stock ( i.e. , Naugatuck Valley Financial) would be entitled to any assets remaining upon a liquidation of Naugatuck Valley Savings and Loan. Upon a complete liquidation of Naugatuck Valley Financial, our stockholders, including Naugatuck Valley Mutual, would be entitled to receive our remaining assets, following payment of all debts, liabilities and all claims of greater priority. If liquidation of Naugatuck Valley Mutual occurs following completion of the reorganization, all depositors of Naugatuck Valley Savings and Loan at that time will be entitled, pro rata, to the value of their deposit accounts, to a distribution of any assets of Naugatuck Valley Mutual remaining after payment of all debts and claims of creditors. There are no plans to liquidate Naugatuck Valley Savings and Loan, Naugatuck Valley Financial or Naugatuck Valley Mutual in the future. Subscription Offering and Subscription Rights Under the plan of reorganization, we have granted rights to subscribe for our common stock to the following persons in the following order of priority: • Persons with deposits in Naugatuck Valley Savings and Loan with balances aggregating $50 or more (“qualifying deposits”) as of April 30, 2003 (“eligible account holders”). For this purpose, deposit accounts include all savings, time and demand accounts. • Our tax-qualified benefit plans, including our employee stock ownership plan. • Persons with qualifying deposits in Naugatuck Valley Savings and Loan as of [Supplemental ERD] (“supplemental eligible account holders”). • Persons with deposits in Naugatuck Valley Savings and Loan as of [Voting RD] (“other members”). The amount of common stock that any person may purchase will depend on the availability of the common stock after satisfaction of all subscriptions having prior rights in the subscription offering and to the maximum and minimum purchase limitations set forth in the plan of reorganization. See “ — Limitations on Purchases of Shares.” All persons sharing a qualifying joint account will be counted as a single depositor for purposes of determining the maximum amount that may be subscribed for by individuals and persons exercising subscription rights through qualifying accounts registered to the same address will be subject to the overall purchase limitation. Category 1: Eligible Account Holders. Subject to the $200,000 overall purchase limitation as described below under “ — Limitations on Purchases of Shares, ” each eligible account holder has the right to subscribe for up to the greater of: • $150,000 of common stock (which equals 15,000 shares); • one-tenth of 1% of the total offering of common stock to persons other than Naugatuck Valley Mutual; or • 15 times the product, rounded down to the next whole number, obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the eligible account holder and the denominator is the total amount of qualifying deposits of all eligible account holders. 87

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If there are insufficient shares to satisfy all subscriptions by eligible account holders, shares first will be allocated so as to permit each subscribing eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated to each remaining subscribing eligible account holder whose subscription remains unfilled in the proportion that the amounts of his or her respective qualifying deposits bear to the total qualifying deposits of all remaining eligible account holders whose subscriptions remain unfilled. Subscription rights of eligible account holders who are also executive officers or directors of Naugatuck Valley Savings and Loan or their associates will be subordinated to the subscription rights of other eligible account holders to the extent attributable to increased deposits in Naugatuck Valley Savings and Loan in the one-year period preceding April 30, 2003. To ensure a proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which such eligible account holder had an ownership interest at April 30, 2003. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation. Category 2: Tax-Qualified Employee Benefit Plans. Our tax-qualified employee benefit plans have the right to purchase up to 10% of the shares of common stock sold in the offering and issued to our charitable foundation, which totals 4.5% of the common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. As a tax-qualified employee benefit plan, our employee stock ownership plan intends to purchase 3.60% of the shares of common stock issued in the reorganization, including shares issued to Naugatuck Valley Mutual and our charitable foundation. Subscriptions by the employee stock ownership plan will not be aggregated with shares of common stock purchased by any other participants in the offering, including subscriptions by our officers and directors, for the purpose of applying the purchase limitations in the plan of reorganization. If we increase the number of shares offered in the reorganization above the maximum of the offering range, the employee stock ownership plan will have a first priority right to purchase any shares exceeding that amount up to 10% of the common stock sold in the offering and issued to our charitable foundation. If the plan’s subscription is not filled in its entirety, the employee stock ownership plan may purchase shares in the open market or may purchase shares directly from us with the approval of the Office of Thrift Supervision. Category 3: Supplemental Eligible Account Holders. Subject to the $200,000 overall purchase limitation as described below under “— Limitations on Purchases of Shares, ” each supplemental eligible account holder has the right to subscribe for up to the greater of: • $150,000 of common stock (which equals 15,000 shares); • one-tenth of 1% of the total offering of common stock to persons other than Naugatuck Valley Mutual; or • 15 times the product, rounded down to the next whole number, obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the supplemental eligible account holder and the denominator is the total amount of qualifying deposits of all supplemental eligible account holders. If eligible account holders and the employee stock ownership plan subscribe for all of the shares, no shares will be available for supplemental eligible account holders. If shares are available for supplemental eligible account holders but there are insufficient shares to satisfy all subscriptions by supplemental eligible account holders, shares first will be allocated so as to permit each subscribing supplemental eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among each remaining subscribing supplemental eligible account holder whose subscription remains unfilled in the proportion that the amounts of his or her respective qualifying deposits bear to the total qualifying deposits of all remaining supplemental eligible account holders whose subscriptions remain unfilled. 88

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To ensure a proper allocation of stock, each supplemental eligible account holder must list on his or her stock order form all deposit accounts in which such supplemental eligible account holder had an ownership interest at [Supplemental ERD]. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation. Category 4: Other Members. Subject to the $200,000 overall purchase limitation, each other member has the right to purchase up to the greater of $150,000 of common stock (which equals 15,000 shares) or one-tenth of 1% of the total offering of common stock to persons other than Naugatuck Valley Mutual. If eligible account holders, the employee stock ownership plan and supplemental eligible account holders subscribe for all of the shares, no shares will be available for other members. If shares are available for other members but there are not sufficient shares to satisfy all subscriptions by other members, shares first will be allocated so as to permit each subscribing other member, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing other members in the proportion that each other member’s subscription bears to the total subscriptions of all such subscribing other members whose subscriptions remain unfilled. To ensure a proper allocation of stock, each other member must list on his or her stock order form all deposit accounts in which such other member had an ownership interest at April 30, 2003. Failure to list an account or loan, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation. Expiration Date for the Subscription Offering. The subscription offering, and all subscription rights under the plan of reorganization, is expected to terminate at 10:00 a.m., Eastern Time, on [Expiration Date]. We will not accept orders for common stock in the subscription offering received after that time. We will make reasonable attempts to provide a prospectus and related offering materials to holders of subscription rights; however, all subscription rights will expire on the expiration date, as extended, whether or not we have been able to locate each person entitled to subscription rights. We may extend the expiration date without notice to you until [Extension Date #1] , unless the Office of Thrift Supervision approves a later date, which will not be beyond [Extension Date #2]. Office of Thrift Supervision regulations require that we complete the sale of common stock within 45 days after the close of the subscription offering. If the sale of the common stock is not completed within that period, all funds received will be returned promptly with interest at our passbook rate and all deposit account withdrawal authorizations will be canceled unless we receive approval of the Office of Thrift Supervision to extend the time for completing the offering. If regulatory approval of an extension of the time period has been granted, we will notify all subscribers of the extension and of the duration of any extension that has been granted, and subscribers will have the right to modify or rescind their purchase orders. If we do not receive an affirmative response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be returned promptly with interest, or withdrawal authorizations will be canceled. No single extension can exceed 90 days, and all extensions in the aggregate may not last beyond [Extension Date #2]. Persons in Non-Qualified States. We will make reasonable efforts to comply with the securities laws of all states in the United States in which persons entitled to subscribe for stock under the plan of reorganization reside. However, we are not required to offer stock in the subscription offering to any person who resides in a foreign country or who resides in a state of the United States in which (1) only a small number of persons otherwise eligible to subscribe for shares of common stock reside; (2) the granting of subscription rights or the offer or sale of shares to such person would require that we or our officers or directors register as a broker, dealer, salesman or selling agent under the securities laws of the state, or register or otherwise qualify the subscription rights or common stock for sale or qualify as a foreign corporation or file a consent to service of process; or (3) we determine that compliance with that state’s securities laws would be impracticable for reasons of cost or otherwise. Restrictions on Transfer of Subscription Rights and Shares. Subscription rights are nontransferable. You may not transfer, or enter into any agreement or understanding to transfer, the legal or beneficial 89

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ownership of your subscription rights issued under the plan of reorganization or the shares of common stock to be issued upon exercise of your subscription rights. Your subscription rights may be exercised only by you and only for your own account. If you exercise your subscription rights, you will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding regarding the sale or transfer of such shares. Federal regulations also prohibit any person from offering, or making an announcement of an offer or intent to make an offer, to purchase such subscription rights or shares of common stock before the completion of the reorganization. If you sell or otherwise transfer your rights to subscribe for common stock in the subscription offering or subscribe for common stock on behalf of another person, you may forfeit those rights and face possible further sanctions and penalties imposed by the Office of Thrift Supervision or another agency of the U.S. Government. We will pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights and will not honor orders known by us to involve the transfer of such rights. Community Offering To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, we may offer shares in a community offering to the following persons in the following order of priority: • Natural persons and trusts of natural persons who are residents of Fairfield and New Haven Counties, Connecticut; and • Members of the general public to whom we deliver a prospectus. We will consider persons residing in one of the specified counties if they occupy a dwelling in the county and establish an ongoing physical presence in the county that is not merely transitory in nature. We may utilize depositor or loan records or other evidence provided to us to make a determination as to whether a person is a resident. In all cases, the determination of residence status will be made by us in our sole discretion. Purchasers in the community offering are eligible to purchase up to $150,000 of common stock (which equals 15,000 shares). If not enough shares are available to fill orders of natural persons and trusts of natural persons, the available shares will be allocated first to each such subscriber whose order we accept in an amount equal to the lesser of 100 shares or the number of shares subscribed for by each such subscriber, if possible. After that, unallocated shares will be allocated among subscribers whose orders remain unsatisfied in the same proportion that the unfilled order of each such subscriber bears to the total unfilled orders of all such subscribers. If oversubscription occurs among members of the general public, the allocation procedures described above will apply. The community offering, if held, may commence concurrently with or subsequent to the subscription offering, is expected to terminate with the subscription offering and must terminate no later than 45 days after the close of the subscription offering unless extended by us, with approval of the Office of Thrift Supervision. If we receive regulatory approval for an extension of the offering beyond [Extension Date #2] , all subscribers will be notified of the extension and of the duration of any extension that has been granted, and will have the right to confirm, increase, decrease or rescind their orders. If we do not receive an affirmative response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be promptly returned with interest. The opportunity to subscribe for shares of common stock in the community offering is subject to our right to reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order. 90

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Syndicated Community Offering The plan of reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering through a syndicate of registered broker-dealers to be formed and managed by Ryan Beck & Co. acting as our agent. Neither Ryan Beck & Co. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, Ryan Beck & Co. has agreed to use its best efforts in the sale of shares in any syndicated community offering. We have not selected any particular broker-dealers to participate in a syndicated community offering. The syndicated community offering must terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with approval of the Office of Thrift Supervision. See “— Community Offering” above for a discussion of rights of subscribers in the event an extension is granted. The opportunity to subscribe for shares of common stock in the syndicated community offering is subject to our right to reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order. Purchasers in the syndicated community offering are eligible to purchase up to $150,000 of common stock (which equals 15,000 shares). The syndicated community offering will be conducted in accordance with certain Securities and Exchange Commission rules applicable to best efforts offerings. Generally under those rules, Ryan Beck & Co., a broker-dealer, will deposit funds it receives prior to closing from interested investors into a separate non-interest bearing bank account. If and when all the conditions for the closing are met, funds for common stock sold by Ryan Beck & Co. in the syndicated community offering will be promptly delivered to us. If the offering is consummated, but some or all of an interested investor’s funds are not accepted by us, those funds will be returned to the interested investor promptly, without interest. If the offering is not consummated, funds in the account will be promptly returned, without interest, to the potential investor. Normal customer ticketing will be used for order placement. In the syndicated community offering, subscription agreements will not be used. If we are unable to find purchasers from the general public for all unsubscribed shares, we will make other purchase arrangements, if feasible. Other purchase arrangements must be approved by the Office of Thrift Supervision and may provide for purchases for investment purposes by directors, officers, their associates and other persons in excess of the limitations provided in the plan of reorganization and in excess of the proposed director purchases discussed earlier, although no purchases are currently intended. If other purchase arrangements cannot be made, the plan of reorganization will terminate. Marketing Arrangements We have retained Ryan Beck as our financial and marketing advisor to consult with and to advise Naugatuck Valley Financial, and to assist Naugatuck Valley Financial, on a best efforts basis, in the distribution of the shares of common stock in the offering. The services that Ryan Beck will provide include, but are not limited to: • managing the Stock Information Center and training the employees of Naugatuck Valley Financial who will perform ministerial functions in the subscription offering and community offering; • soliciting orders for common stock and assisting interested stock subscribers; and • assisting in soliciting proxy votes of depositors. For its services, Ryan Beck will receive an advisory and marketing fee of 1% (the aggregate amount of this fee shall not exceed $230,000) of the aggregate dollar amount of the common stock sold in the subscription and community offerings to persons other than the employee stock ownership plan and directors, officers and employees of Naugatuck Valley Savings and Loan or their immediate families. If 91

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Ryan Beck sells common stock through a group of broker-dealers in a syndicated community offering, it will be paid a fee equal to 1.0% of the dollar amount of total shares sold in the syndicated community offering, which fee along with the fee payable to selected dealers (which may include Ryan Beck) shall not exceed 6.0% of aggregate syndicated community offering sales. Ryan Beck will also be reimbursed for its allocable expenses not to exceed $15,000 without our consent and its legal fees in an amount not to exceed $40,000. Naugatuck Valley Financial and Naugatuck Valley Savings and Loan have agreed to indemnify Ryan Beck against certain claims or liabilities, including liabilities under the Securities Act of 1933, as amended, and will contribute to payments Ryan Beck may be required to make in connection with any such claims or liabilities. A Stock Information Center will be established at our office located at our main office at 333 Church Street, Naugatuck, Connecticut 06770. We will rely on Rule 3a4-1 of the Securities Exchange Act of 1934 and sales of common stock will be conducted within the requirements of this rule, so as to permit officers, directors and employees to participate in the sale of common stock in those states where the law permits. Our officers, directors and employees will not be compensated directly or indirectly by the payment of commissions or other remuneration in connection with his or her participation in the sale of common stock. Ryan Beck has not prepared a report or opinion constituting recommendations or advice to us in connection with the stock offering. In addition, Ryan Beck has expressed no opinion as to the prices at which the common stock to be offered in the stock offering may trade. Description of Sales Activities; Stock Information Center We will offer the common stock in the subscription offering and community offering principally by the distribution of this prospectus and through activities conducted at our Stock Information Center. At all times, registered representatives of Ryan Beck & Co. will manage the Stock Information Center. The Stock Information Center is open Monday through Friday, except for bank holidays, from 9:30 a.m. to 4:00 p.m., Eastern Time. The phone number is . Our officers and employees may participate in the offering in clerical capacities, providing administrative support in effecting sales transactions or, when permitted by state securities laws, answering questions of a mechanical nature relating to the proper execution of the order form. Our officers may answer questions regarding our business when permitted by state securities laws. Other questions of our depositors and other prospective purchasers, including questions as to the advisability or nature of the investment, will be directed to employees of Ryan Beck & Co. Our officers and employees have been instructed not to solicit offers to purchase common stock or provide advice regarding the purchase of common stock. None of our officers, directors or employees will be compensated, directly or indirectly, for any activities in connection with the offer or sale of securities issued in the reorganization. None of our personnel participating in the offering is registered or licensed as a broker or dealer or an agent of a broker or dealer. Our personnel will assist in the above-described sales activities under an exemption from registration as a broker or dealer provided by Rule 3a4-1 promulgated under the Securities Exchange Act of 1934. Rule 3a4-1 generally provides that an “associated person of an issuer” of securities will not be deemed a broker solely by reason of participation in the sale of securities of the issuer if the associated person meets certain conditions. These conditions include, but are not limited to, that the associated person participating in the sale of an issuer’s securities not be compensated in connection with the offering at the time of participation, that the person not be associated with a broker or dealer and that the person observe certain limitations on his or her participation in the sale of securities. For purposes of this exemption, “associated person of an issuer” is defined to include any person who is a director, officer or employee of the issuer or a company that controls, is controlled by or is under common control with the issuer. Procedure for Purchasing Shares in the Subscription and Community Offerings Use of Order Forms. To purchase shares in the offering, you must submit a properly completed and executed order form to be received by us by 10:00 a.m., Eastern Time, on [Expiration Date]. Your 92

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order form must be accompanied by full payment for all of the shares subscribed for or include appropriate authorization in the spaces provided on the order form for withdrawal of full payment from a Naugatuck Valley Savings and Loan deposit account or accounts without checkwriting privileges. Our interpretation of the terms and conditions of the plan of reorganization and of the acceptability of the order forms will be final. In order to ensure that your stock purchase eligibility and priority are properly identified, you must list all accounts on the order form, giving all names in each account, the account number and the approximate account balance as of the appropriate eligibility date. We will strive to identify your ownership in all accounts, but cannot guarantee we will identity all accounts in which you have an ownership interest. We need not accept order forms that are received after the expiration of the subscription offering or community offering, as the case may be, or that are executed defectively or that are received without full payment or without appropriate withdrawal instructions. In addition, we are not obligated to accept orders submitted on photocopied or facsimilied stock order forms. We have the right to waive or permit the correction of incomplete or improperly executed order forms, but do not represent that we will do so. Under the plan of reorganization, our interpretation of the terms and conditions of the plan of reorganization and of the order form will be final. Once received, an executed order form may not be modified, amended or rescinded without our consent unless the reorganization has not been completed within 45 days after the end of the subscription offering or the offering range has been amended to below the minimum or above the maximum, as adjusted, of the offering range. The reverse side of the order form contains a regulatorily mandated certification form. We will not accept order forms where the certification form is not executed. By executing and returning the certification form, you will be certifying that you received this prospectus and acknowledging that the common stock is not a deposit account and is not insured or guaranteed by the federal government. You also will be acknowledging that you received disclosure concerning the risks involved in this offering. The certification form could be used as support to show that you understand the nature of this investment. To ensure that each purchaser receives a prospectus at least 48 hours before the end of the offering, as required by Rule 15c2-8 under the Securities Exchange Act of 1934, no prospectus will be mailed any later than five days before that date or hand delivered any later than two days before that date. Execution of the order form will confirm receipt or delivery under Rule 15c2-8. Order forms will be distributed only when preceded or accompanied by a prospectus. Payment for Shares and Delivery of Order Forms. Payment for subscriptions may be made by personal check, bank check or money order, or by authorization of withdrawal from a Naugatuck Valley Savings and Loan deposit accounts without checkwriting privileges. Appropriate means by which withdrawals may be authorized are provided on the order form. No wire transfers, Naugatuck Valley Savings and Loan lines of credit checks or third party checks will be accepted. Payments made by cash or check must be available in the account and will be immediately cashed and placed in our escrow account. Interest will be paid on payments at our passbook rate from the date payment is received at the Stock Information Center until the completion or termination of the reorganization. If payment is made by authorization of withdrawal from deposit accounts, the funds authorized to be withdrawn from a deposit account will remain in the accounts and will continue to accrue interest at the contractual rates until completion or termination of the reorganization, but a hold will be placed on the funds, making them unavailable to the depositor during the offering period. When the reorganization is completed, the funds received in the offering will be used to purchase the shares of common stock ordered and account withdrawals will be made for the purchase of shares. The shares of common stock issued in the reorganization cannot and will not be insured by the Federal Deposit Insurance Corporation or any other government agency. If the reorganization is not consummated for any reason, all funds submitted will be promptly refunded with interest as described above. If a subscriber authorizes us to withdraw the amount of the aggregate purchase price of the stock from his or her deposit account, we will do so as of the effective date of reorganization, though the account must contain the full amount necessary for payment at the time the subscription order is received. 93

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We will waive any applicable penalties for early withdrawal from certificate accounts. If the remaining balance in a certificate account is reduced below the applicable minimum balance requirement at the time funds are withdrawn, the certificate will be canceled at the time of the withdrawal, without penalty, and the remaining balance will earn interest at our passbook rate. You may submit your order form and payment by mail using the return envelope provided, by bringing your order form to our Stock Information Center, or by overnight delivery to the indicated address on the order form. Order forms may not be delivered to Naugatuck Valley Savings and Loan branches. Once tendered, an order form cannot be modified or revoked without our consent. You may not designate on the order form that you wish funds to be withdrawn from a Naugatuck Valley Savings and Loan individual retirement account (IRA). By regulation, our IRAs do not permit investment in our common stock. A depositor interested in using his or her IRA funds to purchase common stock must do so through a self-directed IRA. Since we do not offer those accounts, we will allow a depositor to make a trustee-to-trustee transfer of Naugatuck Valley Savings and Loan IRA funds to a trustee offering a self-directed IRA program such as a brokerage firm of your choice or the Stock Information Center can assist you to locate a trustee. There will be no early withdrawal or Internal Revenue Service interest penalties for transfers. The new trustee would hold the common stock in a self-directed account in the same manner as we now hold the depositor’s IRA funds. An annual administrative fee may be payable to the new trustee. Depositors interested in using funds in an IRA with us to purchase common stock should contact the Stock Information Center promptly. Whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds. If you can, the necessary forms may be forwarded for execution and returned before the offering ends. Federal laws and regulations require that officers, directors and 10% shareholders who use self-directed IRA funds to purchase shares of common stock in the subscription offering, make purchases for the exclusive benefit of IRAs. The employee stock ownership plan will not be required to pay for the shares subscribed for at the time it subscribes, but rather may pay for shares of common stock subscribed for upon the completion of the reorganization; provided that there is in force from the time of its subscription until the completion of the reorganization, a loan commitment from an unrelated financial institution or from us to lend to the employee stock ownership plan, at that time, the aggregate purchase price of the shares for which it subscribed. How We Determined the Offering Range and the $10.00 Purchase Price Federal regulations require that the aggregate purchase price of the securities sold in connection with the reorganization be based upon our estimated pro forma value on a fully converted basis ( i.e. , taking into account the expected receipt of proceeds from the sale of securities in the offering), as determined by an independent appraisal. We have retained Keller & Company, Inc., which is experienced in the evaluation and appraisal of financial institutions, to prepare the independent appraisal. Keller & Company will receive fees totaling $20,000 for its appraisal services, plus reasonable out-of-pocket expenses incurred in connection with the appraisal. We have agreed to indemnify Keller & Company under certain circumstances against liabilities and expenses, including legal fees, arising out of, related to, or based upon the reorganization. Keller & Company prepared the appraisal taking into account the pro forma impact of the offering. For its analysis, Keller & Company undertook substantial investigations to learn about our business and operations. We supplied financial information, including annual financial statements, information on the composition of assets and liabilities, and other financial schedules. In addition to this information, Keller & Company reviewed our reorganization and stock issuance applications as filed with the Office of Thrift Supervision and our registration statement as filed with the Securities and Exchange Commission. Furthermore, Keller & Company visited our facilities and had discussions with our management. Keller & Company did not perform a detailed individual analysis of the separate components of our assets and liabilities. We did not impose any limitations on Keller & Company in connection with its appraisal. 94

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In connection with its appraisal, Keller & Company reviewed the following factors, among others: • the economic make-up of our primary market area; • our financial performance and condition in relation to publicly traded companies that Keller & Company deemed comparable to us; • the specific terms of the offering of our common stock; • the pro forma impact of the additional capital raised in the offering; • our proposed dividend policy; • conditions of securities markets in general; and • the market for thrift institution common stock in particular. Consistent with Office of Thrift Supervision appraisal guidelines, Keller & Company’s analysis utilized three selected valuation procedures, the price/book method, the price/core earnings method, and price/assets method, all of which are described in its report. Keller & Company’s appraisal report is filed as an exhibit to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.” Keller & Company placed the greatest emphasis on the price/core earnings and price/book methods in estimating pro forma market value. Keller & Company compared the pro forma price/book and price/core earnings ratios for Naugatuck Valley Financial to the same ratios for a peer group of comparable companies. The peer group consisted of ten publicly traded companies based in the New England, Mid-Atlantic and Midwestern United States. The peer group included companies with: • average assets of $462.9 million; • average nonperforming assets of 0.38% of total assets; • average loans of 72.56% of total assets; • average equity of 11.52% of total assets; and • average income of 0.83% of average assets. On the basis of the analysis in its report, Keller & Company has advised us that, in its opinion, as of May 21, 2004, our estimated pro forma market value on a fully converted basis was within the valuation range of $42,500,000 and $57,500,000 with a midpoint of $50,000,000 and that, based on our intention to offer for sale 43% of our shares outstanding, the estimated pro forma market value of our shares of common stock, was within the valuation range of $18,275,000 to $24,725,000 with a midpoint of $21,500,000. As a result, we established the offering range of $18,275,000 to $24,725,000, with a midpoint of $21,500,000. Our Board of Directors reviewed Keller & Company’s appraisal report, including the methodology and the assumptions used by Keller & Company, and determined that the offering range was reasonable and adequate. Based on the $10.00 per share offering price, the estimated number of shares issued in the reorganization will be between 4,250,000 and 5,750,000, with a midpoint of 5,000,000 and the estimated number of shares sold in the offering will be between 1,827,500 and 2,472,500 with a midpoint of 2,150,000. We determined the purchase price of $10.00 per share taking into account, among other factors, the requirement under Office of Thrift Supervision regulations that the common stock be offered in a manner that will achieve the widest distribution of the stock and desired liquidity in the common stock after the reorganization. Since the outcome of the offering relates in large measure to market conditions at the time of sale, it is not possible for us to determine the exact number of shares that we will issued at this time. The offering range may be amended, with the approval of the Office of Thrift Supervision, if necessitated by developments following the date of the appraisal in, among other things, market conditions, our financial condition or operating results, regulatory guidelines or national or local economic conditions. 95

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If, upon completion of the subscription offering, at least the minimum number of shares are subscribed for, Keller & Company, after taking into account factors similar to those involved in its prior appraisal, will determine its estimate of our pro forma market value as of the close of the subscription offering. No shares will be sold unless Keller & Company confirms that, to the best of its knowledge and judgment, nothing of a material nature has occurred that would cause it to conclude that the actual total purchase price of the shares on and the offering range is decreased below $18,275,000 or above $28,433,750, an aggregate basis was materially incompatible with its appraisal. If, however, the facts do not justify that statement, the offering may be canceled or it may be extended with a new offering range or new subscription, community and syndicated community offerings may be held. Under those circumstances, subscribers would have the right to confirm, modify or cancel their subscriptions within a specified period of time or else their subscription would be cancelled. If a subscriber does not respond during the resolicitation period, his or her subscriptions will be cancelled and subscription funds will be returned promptly with interest, and holds on funds authorized for withdrawal from deposit accounts will be released or reduced. In formulating its appraisal, Keller & Company relied upon the truthfulness, accuracy and completeness of all documents we furnished to it. Keller & Company also considered financial and other information from regulatory agencies, other financial institutions, and other public sources, as appropriate. While Keller & Company believes this information to be reliable, Keller & Company does not guarantee the accuracy or completeness of the information and did not independently verify the financial statements and other data provided by us or independently value our assets or liabilities. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any kind as to the advisability of voting to approve the plan of reorganization or of purchasing shares of common stock. Moreover, because the appraisal must be based on many factors that change periodically, there is no assurance that purchasers of shares in the offering will be able to sell shares after the reorganization at prices at or above the $10.00 offering price per share. Copies of the appraisal report of Keller & Company, including any amendments to the report, and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at our main office and the other locations specified under “Where You Can Find More Information.” Limitations on Purchases of Shares In addition to the purchase limitations described above under “ — Subscription Offering and Subscription Rights,” “ — Community Offering” and “ —Syndicated Community Offering,” the plan of reorganization provides for the following purchase limitations: • The minimum purchase is 25 shares. • The aggregate amount of our outstanding common stock owned or controlled by persons other than Naugatuck Valley Mutual at the close of the offering shall be less than 50% of our total outstanding common stock. • Except for our tax-qualified employee benefit plans which may purchase up to 10% of the common stock sold in the offering and issued to our charitable foundation, no person, either alone or together with associates of or persons acting in concert with such person, may purchase in the aggregate more than $200,000 of common stock (which equals 20,000 shares). This overall purchase limitation is subject to increase as described below. • The aggregate amount of common stock acquired in the offering, plus in all prior issuances, by any non-tax-qualified employee plan or any management person and his or her associates, exclusive of any shares of common stock acquired by such plan or management person and his or her associates in the secondary market, shall not exceed 4.9% of the outstanding shares of common stock at the conclusion of the offering. 96

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• The aggregate amount of common stock or preferred stock acquired in the offering, plus in all prior issuances, by any non-tax-qualified employee plan or any management person and his or her associates, exclusive of any common stock acquired by such plan or management person and his or her associates in the secondary market, shall not exceed 4.9% of our stockholders’ equity at the conclusion of the offering. • The aggregate amount of common stock acquired in the offering, plus in all prior issuances, by any one or more tax-qualified employee plans, exclusive of any shares of common stock acquired by such plans in the secondary market, shall not exceed 4.9% of the outstanding shares of common stock at the conclusion of the offering. • The aggregate amount of common stock or preferred stock acquired in the offering, plus in all prior issuances, by one or more tax-qualified employee plans, exclusive of any shares of common stock acquired by such plans in the secondary market, shall not exceed 4.9% of our stockholders’ equity at the conclusion of the offering. • The aggregate amount of common stock acquired in the offering, plus in all prior issuances, by all of our stock benefit plans, other than employee stock ownership plans, shall not exceed 25% of the outstanding common stock held by persons other than Naugatuck Valley Mutual. • The aggregate amount of common stock acquired in the offering, plus in all prior issuances, by all non-tax-qualified employee plans or management persons and their associates, exclusive of any common stock acquired by such plans or management persons and their associates in the secondary market, shall not exceed 31% of the outstanding shares of common stock held by persons other than Naugatuck Valley Mutual at the conclusion of the offering. • The aggregate amount of common stock acquired in the offering, plus in all prior issuances, by all non-tax-qualified employee plans or management persons and their associates, exclusive of any common stock acquired by such plans or management persons and their associates in the secondary market, shall not exceed 31% of our stockholders’ equity held by persons other than Naugatuck Valley Mutual at the conclusion of the offering. We may, in our sole discretion, increase the individual or aggregate purchase limitation to up to 5% of the shares of common stock sold in the offering. We do not intend to increase the maximum purchase limitation unless market conditions warrant an increase in the maximum purchase limitation and the sale of a number of shares in excess of the minimum of the offering range. If we decide to increase the purchase limitations, persons who subscribed for the maximum number of shares of common stock will be given the opportunity to increase their subscriptions accordingly, subject to the rights and preferences of any person who has priority subscription rights. We, in our discretion, also may give other large subscribers the right to increase their subscriptions. The plan of reorganization defines “acting in concert” to mean knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement or understanding; or a combination or pooling of voting or other interests in the securities of an issuer for a common purpose under any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party. We may presume that certain persons are acting in concert based upon, among other things, joint account relationships and the fact that persons may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to other companies. For purposes of the plan of reorganization, our directors are not deemed to be acting in concert solely by reason of their Board membership. The plan of reorganization defines “associate,” with respect to a particular person, to mean: • any corporation or organization other than Naugatuck Valley Mutual, Naugatuck Valley Financial or Naugatuck Valley Savings and Loan or a majority-owned subsidiary of Naugatuck Valley 97

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Mutual, Naugatuck Valley Financial or Naugatuck Valley Savings and Loan of which a person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities; • any trust or other estate in which a person has a substantial beneficial interest or as to which a person serves as trustee or in a similar fiduciary capacity; and • any relative or spouse of a person, or any relative of a spouse, who either has the same home as a person or who is a director or officer of Naugatuck Valley Mutual, Naugatuck Valley Financial or Naugatuck Valley Savings and Loan or any of their subsidiaries. For example, a corporation of which a person serves as an officer would be an associate of that person and, therefore, all shares purchased by the corporation would be included with the number of shares that the person could purchase individually under the purchase limitations described above. We have the right in our sole discretion to reject any order submitted by a person whose representations we believe to be false or who we otherwise believe, either alone or acting in concert with others, is violating or circumventing, or intends to violate or circumvent, the terms and conditions of the plan of reorganization. Directors and officers are not treated as associates of each other solely by virtue of holding such positions. We have the sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.” Delivery of Certificates Certificates representing the common stock sold in the offering and checks representing only refund and/or interest paid on subscriptions made by check or money order will be mailed to investors at the certificate registration address noted on the stock order form as soon as practicable following completion of the reorganization. We will hold any certificates returned as undeliverable until claimed by the persons legally entitled to the certificates or otherwise disposed of in accordance with applicable law. Until certificates for common stock are available and delivered to subscribers, subscribers may not be able to sell their shares, even though trading of the common stock will have commenced. Restrictions on Repurchase of Stock Under Office of Thrift Supervision regulations, we may not for a period of one year from the date of the completion of the reorganization repurchase any of our common stock from any person, except (1) in an offer made to all shareholders to repurchase the common stock on a pro rata basis, approved by the Office of Thrift Supervision, (2) the repurchase of qualifying shares of a director, or (3) repurchases to fund restricted stock plans or tax-qualified employee stock benefit plans. Where extraordinary circumstances exist, the Office of Thrift Supervision may approve the open market repurchase of up to 5% of our common stock during the first year following the reorganization. To receive such approval, we must establish compelling and valid business purposes for the repurchase to the satisfaction of the Office of Thrift Supervision. Furthermore, repurchases of any common stock are prohibited if they would cause Naugatuck Valley Savings and Loan’s regulatory capital to be reduced below the amount required for reorganization the regulatory capital requirements imposed by the Office of Thrift Supervision. Restrictions on Transfer of Shares After the Reorganization Applicable to Officers and Directors Common stock purchased in the offering will be freely transferable, except for shares purchased by our directors and executive officers. Shares of common stock purchased by our directors and executive officers may not be sold for a period of one year following the reorganization, except upon the death of the shareholder or unless approved by the Office of Thrift Supervision. Shares purchased by these persons in the open market after the reorganization will be free of this restriction. Shares of common stock issued to directors and executive officers will bear a legend giving appropriate notice of the restriction and, in addition, we will give appropriate instructions to our transfer agent with respect to the restriction on transfers. Any shares issued 98

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to directors and executive officers as a stock dividend, stock split or otherwise with respect to restricted common stock will be similarly restricted. Persons affiliated with us, including our directors and executive officers, received subscription rights based only on their deposits with Naugatuck Valley Savings and Loan as account holders. While this aspect of the reorganization makes it difficult, if not impossible, for insiders to purchase stock for the explicit purpose of meeting the minimum of the offering, any purchases made by persons affiliated with us for the explicit purpose of meeting the minimum of the offering must be made for investment purposes only, and not with a view towards redistribution. Furthermore, as set forth above, Office of Thrift Supervision regulations restrict sales of common stock purchased in the offering by directors and executive officers for a period of one year following the reorganization. Purchases of outstanding shares of our common stock by directors, officers, or any person who becomes an executive officer or director after adoption of the plan of reorganization, and their associates, during the three-year period following the reorganization may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to the purchase of stock under stock benefit plans. We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the common stock to be sold in the offering and issued to our charitable foundation. This registration does not cover the resale of the shares. Shares of common stock purchased by persons who are not affiliates of us may be resold without registration. Shares purchased by an affiliate of us will have resale restrictions under Rule 144 of the Securities Act. If we meet the current public information requirements of Rule 144, each affiliate of us who complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of certain other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares or the average weekly volume of trading in the shares during the preceding four calendar weeks. We may make future provision to permit affiliates to have their shares registered for sale under the Securities Act of 1933 under certain circumstances. Material Income Tax Consequences Although the reorganization may be effected in any manner approved by the Office of Thrift Supervision that is consistent with the purposes of the plan of reorganization and applicable law, regulations and policies, it is intended that the reorganization will be effected through a merger. Completion of the reorganization is conditioned upon prior receipt of either a ruling or an opinion of counsel with respect to federal tax laws, and either a ruling or an opinion with respect to Connecticut tax laws, that no gain or loss will be recognized by Naugatuck Valley Savings and Loan, Naugatuck Valley Financial or Naugatuck Valley Mutual as a result of the reorganization or by account holders receiving subscription rights, except to the extent, if any, that subscription rights are deemed to have fair market value on the date such rights are issued. We believe that the tax opinions summarized below address all material federal income tax consequences that are generally applicable to Naugatuck Valley Savings and Loan, Naugatuck Valley Financial and Naugatuck Valley Mutual and persons receiving subscription rights. Muldoon Murphy Faucette & Aguggia LLP has issued an opinion to Naugatuck Valley Savings and Loan that, for federal income tax purposes: • the reorganization will constitute a reorganization under Internal Revenue Code section 368(a)(1)(F), and Naugatuck Valley Savings and Loan (in either its mutual form (the “Mutual Bank”) or its stock form (the “Stock Bank”) will recognize no gain or loss as a result of the reorganization; • the basis of each asset of the Mutual Bank received by the Stock Bank in the reorganization will be the same as the Mutual Bank’s basis for such asset immediately before the reorganization; 99

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• the holding period of each asset of the Mutual Bank received by the Stock Bank in the reorganization will include the period during which such asset was held by the Mutual Bank before the reorganization; • for purposes of Internal Revenue Code section 381(b), the Stock Bank will be treated as if there had been no reorganization and, accordingly, the taxable year of the Mutual Bank will not end on the effective date of the reorganization and the tax attributes of the Mutual Bank (subject to application of Internal Revenue Code sections 381, 382, and 384) will be taken into account by the Stock Bank as if the reorganization had not occurred; • the Mutual Bank’s members will recognize no gain or loss upon their constructive receipt of shares of the Stock Bank common stock solely in exchange for their mutual ownership interest in the Mutual Bank; • no gain or loss will be recognized by members of the Mutual Bank upon the issuance to them of deposits in the Stock Bank in the same dollar amount as their deposits in the Mutual Bank; • with respect to the members of the Mutual Bank’s exchange of the stock of the Stock Bank constructively received for the mutual ownership interests in Naugatuck Valley Mutual, the exchange will qualify as an exchange of property for stock under Internal Revenue Code section 351, the initial stockholders of the Stock Bank will recognize no gain or loss upon the constructive transfer to Naugatuck Valley Mutual of the shares of the Stock Bank they constructively received and Naugatuck Valley Mutual will recognize no gain or loss upon its receipt of the common stock of the Stock Bank in exchange for mutual ownership interests in the Mutual Bank; • with respect to Naugatuck Valley Mutual’s transfer of 100% of the common stock of the Stock Bank to Naugatuck Valley Financial, Naugatuck Valley Financial will recognize no gain or loss upon its transfer of 100% of the common stock of the Stock Bank from Naugatuck Valley Mutual and Naugatuck Valley Mutual will recognize no gain or loss upon its transfer of 100% of the common stock of the Stock Bank from Naugatuck Valley Mutual to Naugatuck Valley Financial; • it is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of Naugatuck Valley Financial to be issued to eligible account holders, supplemental eligible account holders and other members is zero and, accordingly, that no income will be realized by eligible account holders, supplemental eligible account holders and other members upon the issuance to them of the subscription rights or upon the exercise of the subscription rights; • it is more likely than not that the tax basis to the holders of shares of common stock purchased in the reorganization pursuant to the exercise of the subscription rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of completion of the reorganization; and • the holding period for shares of common stock purchased in the community offering or syndicated community offering will begin on the day after the date of the purchase. The opinions set forth in the 9th and 10th bullet points above are based on the position that the subscription rights do not have any market value when they are distributed or exercised. Whether subscription rights have a market value for federal income tax purposes is a question of fact, depending upon all relevant facts and circumstances. According to our counsel, the Internal Revenue Service will not issue rulings on whether subscription rights have a market value. Counsel has also advised us that they are unaware of any instance in which the Internal Revenue Service has taken the position that nontransferable subscription rights issued by a converting financial institution have a market value. Counsel also noted that the subscription rights will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the recipients the right only to purchase our common stock at a price equal to its 100

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estimated fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock. Unlike a private letter ruling issued by the Internal Revenue Service, an opinion of counsel is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached in the opinion. If there is a disagreement, no assurance can be given that the conclusions reached in an opinion of counsel would be sustained by a court if contested by the Internal Revenue Service. Naugatuck Valley Savings and Loan has also received an opinion from Snyder & Haller, P.C., Hartford, Connecticut, that, assuming the reorganization does not result in any federal income tax liability to Naugatuck Valley Savings and Loan, its account holders, or Naugatuck Valley Financial, implementation of the plan of reorganization will not result in any Connecticut income tax liability to those entities or persons. The opinions of Muldoon Murphy Faucette & Aguggia LLP and Snyder & Haller, P.C., are filed as exhibits to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.” Interpretation, Amendment and Termination To the extent permitted by law, all interpretations by us of the plan of reorganization will be final; however, such interpretations have no binding effect on the Office of Thrift Supervision. The plan of reorganization provides that, if deemed necessary or desirable, we may substantively amend the plan of reorganization as a result of comments from regulatory authorities or otherwise, without the further approval of our members. Completion of the reorganization requires the sale of all shares of the common stock within 24 months following approval of the plan of reorganization by our members. If this condition is not satisfied, the plan of reorganization will be terminated and we will continue our business in the mutual form of organization. We may terminate the plan of reorganization at any time. 101

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THE NAUGATUCK VALLEY SAVINGS AND LOAN FOUNDATION General. In furtherance of our commitment to our local community, the plan of reorganization provides that we will establish the Naugatuck Valley Savings and Loan Foundation as a non-stock Delaware corporation in connection with the reorganization. The foundation will be funded with our common stock, as described below. By further enhancing our visibility and reputation in our local community, we believe that the foundation will enhance the long-term value of our community banking franchise. The reorganization presents us with a unique opportunity to provide a substantial and continuing benefit to our community and to receive the associated tax benefits, without any significant cash outlay by us. Purpose of the Charitable Foundation. Although we intend to continue to emphasize community lending and community activities following the stock offering, such activities are not our sole corporate purpose. The Naugatuck Valley Savings and Loan Foundation will be dedicated completely to community activities and the promotion of charitable causes, and may be able to support such activities in manners that are not presently available to us. We believe that the Naugatuck Valley Savings and Loan Foundation will enable us to assist the communities within our market area in areas beyond community development and lending and will enhance our current activities under the Community Reinvestment Act. We further believe that the funding of the Naugatuck Valley Savings and Loan Foundation with our common stock will allow our community to share in our potential growth and success long after the stock offering. The Naugatuck Valley Savings and Loan Foundation will accomplish that goal by providing for continued ties between it and us, thereby forming a partnership within the communities in which we operate. We do not expect the contribution to the Naugatuck Valley Savings and Loan Foundation to take the place of our traditional community lending and charitable activities. For the three months ended March 31, 2004 and the year ended December 31, 2003, we contributed $23,000 and $50,000, respectively, to community organizations. We expect to continue making charitable contributions within our community. In connection with the closing of the reorganization, we intend to contribute to the Naugatuck Valley Savings and Loan Foundation 100,000 shares of our common stock, at the midpoint of the offering, valued at $1.0 million based on the offering price of $10.00 per share. Structure of the Charitable Foundation. The Naugatuck Valley Savings and Loan Foundation will be incorporated under Delaware law as a non-stock corporation. The Naugatuck Valley Savings and Loan Foundation’s Certificate of Incorporation will provide that the Naugatuck Valley Savings and Loan Foundation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of the Internal Revenue Code. The Certificate of Incorporation will further provide that no part of the net earnings of the foundation will inure to the benefit of, or be distributable to, its directors, officers or members. We have selected three of our current directors, Messrs. Lengyel, Mengacci and Roman, to serve on the initial Board of Directors of the foundation. As required by OTS regulations, we also will select one additional person to serve on the initial Board of Directors who will not be one of our officers or directors and who will have experience with local charitable organizations and grant making. While there are no plans to change the size of the initial Board of Directors during the year following the completion of the reorganization, following the first anniversary of the reorganization, the foundation may alter the size and composition of its Board of Directors. For five years after the reorganization, one seat on the foundation’s Board of Directors will be reserved for a person from our local community who has experience with local community charitable organizations and grant making and who is not one of our officers, directors or employees, and one seat on the foundation’s Board of Directors will be reserved for one of our directors. The Board of Directors of the Naugatuck Valley Savings and Loan Foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, directors of the Naugatuck Valley Savings and Loan Foundation will 102

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always be bound by their fiduciary duty to advance the foundation’s charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the foundation is established. The directors of the Naugatuck Valley Savings and Loan Foundation also will be responsible for directing the activities of the foundation, including the management and voting of our common stock held by the foundation. However, as required by OTS regulations, all shares of common stock held by the Naugatuck Valley Savings and Loan Foundation must be voted in the same ratio as all other shares of the common stock on all proposals considered by our shareholders. The Naugatuck Valley Savings and Loan Foundation’s place of business will be located at our administrative offices. The Board of Directors of the Naugatuck Valley Savings and Loan Foundation will appoint such officers and employees as may be necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and the OTS regulations governing transactions between us and the foundation. The Naugatuck Valley Savings and Loan Foundation will receive working capital from: (1) any dividends that may be paid on our common stock in the future; (2) within the limits of applicable federal and state laws, loans collateralized by the common stock; or (3) the proceeds of the sale of any of the common stock in the open market from time to time. As a private foundation under Section 501(c)(3) of the Internal Revenue Code, the Naugatuck Valley Savings and Loan Foundation will be required to distribute annually in grants or donations a minimum of 5% of the average fair market value of its net investment assets. One of the conditions imposed on the gift of common stock by us is that the amount of common stock that may be sold by the Naugatuck Valley Savings and Loan Foundation in any one year shall not exceed 5% of the average market value of the assets held by the Naugatuck Valley Savings and Loan Foundation, except where the Board of Directors of the foundation determines that the failure to sell an amount of common stock greater than such amount would result in a long-term reduction of the value of its assets and/or would otherwise jeopardize its capacity to carry out its charitable purposes. Tax Considerations. Our independent tax advisor has advised us that an organization created for the above purposes should qualify as a Section 501(c)(3) exempt organization under the Internal Revenue Code and should be classified as a private foundation. The Naugatuck Valley Savings and Loan Foundation will submit a timely request to the Internal Revenue Service to be recognized as an exempt organization. As long as the Naugatuck Valley Savings and Loan Foundation files its application for tax-exempt status within 15 months from the date of its organization, and provided the Internal Revenue Service approves the application, its effective date as a Section 501(c)(3) organization will be the date of its organization. Our independent tax advisor, however, has not rendered any advice on whether the Naugatuck Valley Savings and Loan Foundation’s tax exempt status will be affected by the regulatory requirement that all shares of our common stock held by the Naugatuck Valley Savings and Loan Foundation must be voted in the same ratio as all other outstanding shares of common stock on all proposals considered by our shareholders. We are authorized under federal law to make charitable contributions. We believe that the stock offering presents a unique opportunity to establish and fund a charitable foundation given the substantial amount of additional capital being raised. In making such a determination, we considered the dilutive impact of the contribution of common stock to the Naugatuck Valley Savings and Loan Foundation on the amount of common stock to be sold in the offering. See “Capitalization,” “Regulatory Capital Compliance,” and “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation.” The amount of the contribution will not adversely impact our financial condition. We therefore believe that the amount of the charitable contribution is reasonable given our pro forma capital position and does not raise safety and soundness concerns. We have received an opinion from our independent tax advisor that our contribution of our stock to the Naugatuck Valley Savings and Loan Foundation should not constitute an act of self-dealing and that we should be entitled to a deduction in the amount of the fair market value of the stock at the time of the contribution less the nominal amount that the Naugatuck Valley Savings and Loan Foundation is required to pay us for such stock. We are permitted to deduct only an amount equal to 10% of our annual taxable 103

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income in any one year. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to the Naugatuck Valley Savings and Loan Foundation. We estimate that substantially all of the contribution should be deductible over the six-year period. However, we do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the foundation. Furthermore, even if the contribution is deductible, we may not have sufficient earnings to be able to use the deduction in full. We do not expect to make any further contributions to the Naugatuck Valley Savings and Loan Foundation within the first five years following the initial contribution, unless such contributions would be deductible under the Internal Revenue Code. Any such decisions would be based on an assessment of, among other factors, our financial condition at that time, the interests of our shareholders and depositors, and the financial condition and operations of the foundation. Although we have received an opinion from our independent tax advisor that we should be entitled to a deduction for the charitable contribution, there can be no assurances that the Internal Revenue Service will recognize the Naugatuck Valley Savings and Loan Foundation as a Section 501(c)(3) exempt organization or that the deduction will be permitted. In such event, our contribution to the Naugatuck Valley Savings and Loan Foundation would be expensed without tax benefit, resulting in a reduction in earnings in the year in which the Internal Revenue Service makes such a determination. As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are exempt from federal and state income taxation. However, investment income, such as interest, dividends and capital gains, is generally taxed at a rate of 2.0%. Within four and one-half months after the close of its fiscal year, the Naugatuck Valley Savings and Loan Foundation will be required to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundation’s managers and a concise statement of the purpose of each grant. Regulatory Conditions Imposed on the Charitable Foundation. Office of Thrift Supervision regulations will impose the following conditions on the establishment of the Naugatuck Valley Savings and Loan Foundation: • the Office of Thrift Supervision can examine the foundation; • the foundation must comply with all supervisory directives imposed by the Office of Thrift Supervision; • the foundation must provide annually to the Office of Thrift Supervision a copy of the annual report that the foundation submits to the IRS; • the foundation must operate according to written policies adopted by its Board of Directors, including a conflict of interest policy; • the foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and • the foundation must vote its shares in the same ratio as all of the other shares voted on each proposal considered by our shareholders. In addition, within six months of completing the reorganization, the Naugatuck Valley Savings and Loan Foundation must submit to the Office of Thrift Supervision a three-year operating plan. Additionally, the establishment and funding of the Naugatuck Valley Savings and Loan Foundation must be separately approved by at least a majority of the total number of votes eligible to be cast by depositors of Naugatuck Valley Savings and Loan at the special meeting of members. Consummation of the reorganization and related offering of common stock is not conditioned upon depositors’ approval of the charitable foundation. Failure to approve the charitable foundation may, however, materially increase our pro forma market value. See “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation.” 104

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REGULATION AND SUPERVISION General Naugatuck Valley Savings and Loan is subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, as its primary federal regulator, and the Federal Deposit Insurance Corporation, as its deposits insurer. Naugatuck Valley Savings and Loan is a member of the Federal Home Loan Bank System and its deposit accounts are insured up to applicable limits by the Savings Association Insurance Fund managed by the Federal Deposit Insurance Corporation. Naugatuck Valley Savings and Loan must file reports with the Office of Thrift Supervision and the Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the Office of Thrift Supervision and, under certain circumstances, the Federal Deposit Insurance Corporation to evaluate Naugatuck Valley Savings and Loan’s safety and soundness and compliance with various regulatory requirements. This regulatory structure is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on our operations. Naugatuck Valley Financial and Naugatuck Valley Mutual, as savings and loan holding companies, will be required to file certain reports with, will be subject to examination by, and otherwise will have to comply with the rules and regulations of the Office of Thrift Supervision. Naugatuck Valley Financial will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws. Certain of the regulatory requirements that are or will be applicable to Naugatuck Valley Savings and Loan, Naugatuck Valley Financial and Naugatuck Valley Mutual are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on Naugatuck Valley Savings and Loan, Naugatuck Valley Financial and Naugatuck Valley Mutual and is qualified in its entirety by reference to the actual statutes and regulations. Regulation of Federal Savings Associations Business Activities. Federal law and regulations, primarily the Home Owners’ Loan Act and the regulations of the Office of Thrift Supervision, govern the activities of federal savings banks, such as Naugatuck Valley Savings and Loan. These laws and regulations delineate the nature and extent of the activities in which federal savings banks may engage. In particular, certain lending authority for federal savings banks, e.g. , commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets. Branching. Federal savings banks are authorized to establish branch offices in any state or states of the United States and its territories, subject to the approval of the Office of Thrift Supervision. Capital Requirements. The Office of Thrift Supervision’s capital regulations require federal savings institutions to meet three minimum capital standards: a 1.5% tangible capital to total assets ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The Office of Thrift Supervision regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank. 105

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The risk-based capital standard requires federal savings institutions to maintain Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in the type of asset. Core (Tier 1) capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. The Office of Thrift Supervision also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular circumstances. At March 31, 2004, Naugatuck Valley Savings and Loan met each of these capital requirements. Prompt Corrective Regulatory Action. The Office of Thrift Supervision is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. Generally, a savings institution that has a ratio of total capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.” A savings institution that has a total risk-based capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and a savings institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.” Subject to a narrow exception, the Office of Thrift Supervision is required to appoint a receiver or conservator within specified time frames for an institution that is “critically undercapitalized.” An institution must file a capital restoration plan with the Office of Thrift Supervision within 45 days of the date it receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. “Significantly undercapitalized” and “critically undercapitalized” institutions are subject to more extensive mandatory regulatory actions. The Office of Thrift Supervision could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Loans to One Borrower. Federal law provides that savings institutions are generally subject to the limits on loans to one borrower applicable to national banks. A savings institution may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral. Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the Office of Thrift Supervision determines that a savings institution fails to meet any standard prescribed by the guidelines, the Office of Thrift Supervision may require the institution to submit an acceptable plan to achieve compliance with the standard. 106

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Limitation on Capital Distributions. Office of Thrift Supervision regulations impose limitations upon all capital distributions by a savings institution, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and the prior approval of the Office of Thrift Supervision is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under Office of Thrift Supervision regulations ( i.e. , generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the Office of Thrift Supervision. If an application is not required, the institution must still provide prior notice to the Office of Thrift Supervision of the capital distribution if, like Naugatuck Valley Savings and Loan, it is a subsidiary of a holding company. If Naugatuck Valley Savings and Loan’s capital were ever to fall below its regulatory requirements or the Office of Thrift Supervision notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution that would otherwise be permitted by the regulation, if the agency determines that such distribution would constitute an unsafe or unsound practice. Qualified Thrift Lender Test. Federal law requires savings institutions to meet a qualified thrift lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least 9 months out of each 12 month period. A savings institution that fails the qualified thrift lender test is subject to certain operating restrictions and may be required to convert to a bank charter. Recent legislation has expanded the extent to which education loans, credit card loans and small business loans may be considered “qualified thrift investments.” At March 31, 2004, Naugatuck Valley Savings and Loan met the qualified thrift lender test. Transactions with Related Parties. Federal law limits Naugatuck Valley Savings and Loan’s authority to lend to, and engage in certain other transactions with (collectively, “covered transactions”), “affiliates” ( e.g ., any company that controls or is under common control with an institution, including Naugatuck Valley Financial, Naugatuck Valley Mutual and their non-savings institution subsidiaries). The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings institution. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institution’s capital and surplus. Loans and other specified transactions with affiliates are required to be secured by collateral in an amount and of a type described in federal law. The purchase of low quality assets from affiliates from making loans is generally prohibited. Transactions with affiliates must be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary. The Sarbanes-Oxley Act of 2002 generally prohibits a company from making loans to its executive officers and directors. However, that act contains a specific exception for loans by a depository institution to its executive officers and directors in compliance with federal banking laws. Under such laws, Naugatuck Valley Savings and Loan’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited. The law restricts both the individual and aggregate amount of loans Naugatuck Valley Savings and Loan may make to insiders based, in part, on Naugatuck Valley Savings and Loan’s capital position and requires certain Board approval procedures to be followed. Such loans must be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an 107

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exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. There are additional restrictions applicable to loans to executive officers. Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal savings institutions and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to appointment of a receiver or conservator or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases. The Federal Deposit Insurance Corporation has authority to recommend to the Director of the Office of Thrift Supervision that enforcement action to be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations. Assessments. Federal savings banks are required to pay assessments to the Office of Thrift Supervision to fund its operations. The general assessments, paid on a semi-annual basis, are based upon the savings institution’s total assets, including consolidated subsidiaries, as reported in the institution’s latest quarterly thrift financial report. Insurance of Deposit Accounts. Naugatuck Valley Savings and Loan is a member of the Savings Association Insurance Fund. The Federal Deposit Insurance Corporation maintains a risk-based assessment system by which institutions are assigned to one of three categories based on their capitalization and one of three subcategories based on examination ratings and other supervisory information. An institution’s assessment rate depends upon the categories to which it is assigned. Assessment rates for Savings Association Insurance Fund member institutions are determined semi-annually by the Federal Deposit Insurance Corporation and currently range from zero basis points of assessable deposits for the healthiest institutions to 27 basis points of assessable deposits for the riskiest. The Federal Deposit Insurance Corporation has authority to increase insurance assessments. A material increase in Savings Association Insurance Fund insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Naugatuck Valley Savings and Loan. Management cannot predict what insurance assessment rates will be in the future. In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize the predecessor to the Savings Association Insurance Fund. During the year ended March 31, 2004, Financing Corporation payments for Savings Association Insurance Fund members averaged 1.56 basis points of assessable deposits. The Federal Deposit Insurance Corporation may terminate an institution’s insurance of deposits upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Deposit Insurance Corporation or the Office of Thrift Supervision. The management of Naugatuck Valley Savings and Loan does not know of any practice, condition or violation that might lead to termination of deposit insurance. Federal Home Loan Bank System. Naugatuck Valley Savings and Loan is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions. Naugatuck Valley Savings and Loan, as a member of the Federal Home Loan Bank, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank in an amount at least equal to 1.0% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the Federal Home Loan Bank, whichever is greater. Naugatuck 108

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Valley Savings and Loan was in compliance with this requirement with an investment in Federal Home Loan Bank stock at March 31, 2004 of $1.8 million. The Federal Home Loan Banks are required to provide funds for the resolution of insolvent thrifts in the late 1980s and to contribute funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and could also result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. If dividends were reduced, or interest on future Federal Home Loan Bank advances increased, our net interest income would likely also be reduced. Community Reinvestment Act. Under the Community Reinvestment Act, as implemented by Office of Thrift Supervision regulations, a savings association has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community Reinvestment Act. The Community Reinvestment Act requires the Office of Thrift Supervision, in connection with its examination of a savings association, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. The Community Reinvestment Act requires public disclosure of an institution’s rating and requires the Office of Thrift Supervision to provide a written evaluation of an association’s Community Reinvestment Act performance utilizing a four-tiered descriptive rating system. Naugatuck Valley Savings and Loan received a “Satisfactory” rating as a result of its most recent Community Reinvestment Act assessment. Holding Company Regulation General. Naugatuck Valley Financial and Naugatuck Valley Mutual will be savings and loan holding companies within the meaning of federal law. As such, they will be registered with the Office of Thrift Supervision and will be subject to Office of Thrift Supervision regulations, examinations, supervision, reporting requirements and regulations concerning corporate governance and activities. In addition, the Office of Thrift Supervision will have enforcement authority over Naugatuck Valley Financial and Naugatuck Valley Mutual and their non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to Naugatuck Valley Savings and Loan. Restrictions Applicable to Mutual Holding Companies. According to federal law and Office of Thrift Supervision regulations, a mutual holding company, such as Naugatuck Valley Mutual, may generally engage in the following activities: (1) investing in the stock of insured depository institutions and acquiring them by means of a merger or acquisition; (2) investing in a corporation the capital stock of which may be lawfully purchased by a savings association under federal law; (3) furnishing or performing management services for a savings association subsidiary of a savings and loan holding company; (4) conducting an insurance agency or escrow business; (5) holding, managing or liquidating assets owned or acquired from a savings association subsidiary of the savings and loan holding company; (6) holding or managing properties used or occupied by a savings association subsidiary of the savings and loan holding company; (7) acting as trustee under deed or trust; (8) any activity permitted for multiple savings and loan holding companies by Office of Thrift Supervision regulations; (9) any activity permitted by the Board of Governors of the Federal Reserve System for bank holding companies and financial holding companies; and (10) any activity permissive for service corporations. Recent legislation, which authorized mutual holding companies to engage in activities permitted for financial holding companies, expanded the authorized activities. Financial holding companies may engage in a broad array of financial services activities, including insurance and securities. 109

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Federal law prohibits a savings and loan holding company, including a federal mutual holding company, from directly or indirectly, or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings institution, or its holding company, without prior written approval of the Office of Thrift Supervision. Federal law also prohibits a savings and loan holding company from acquiring or retaining control of a depository institution that is not insured by the Federal Deposit Insurance Corporation. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors. The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, except: (1) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (2) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions. If the savings institution subsidiary of a savings and loan holding company fails to meet the qualified thrift lender test set, the holding company must register with the Federal Reserve Board as a bank holding company within one year of the savings institution’s failure to so qualify. Stock Holding Company Subsidiary Regulation. The Office of Thrift Supervision has adopted regulations governing the two-tier mutual holding company form of organization and subsidiary stock holding companies that are controlled by mutual holding companies. We have adopted this form of organization and it will be in place after the proposed offering. Naugatuck Valley Financial is the stock holding company subsidiary of Naugatuck Valley Mutual. Naugatuck Valley Financial is only permitted to engage in activities that are permitted for Naugatuck Valley Mutual subject to the same restrictions and conditions. Waivers of Dividends by Naugatuck Valley Mutual. Office of Thrift Supervision regulations require Naugatuck Valley Mutual to notify the Office of Thrift Supervision if it proposes to waive receipt of our dividends from Naugatuck Valley Financial. The Office of Thrift Supervision reviews dividend waiver notices on a case-by-case basis, and, in general, does not object to any such waiver if: (i) the waiver would not be detrimental to the safe and sound operation of the savings association; (ii) the mutual holding company’s Board of Directors determines that such waiver is consistent with such directors’ fiduciary duties to the mutual holding company’s members; (iii) for as long as the savings association subsidiary is controlled by the mutual holding company, the dollar amount of dividends waived by the mutual holding company is considered as a restriction on the retained earnings of the savings association, which restriction, if material, is disclosed in the public financial statements of the savings association as a note to the financial statements; (iv) the amount of any dividend waived by the mutual holding company is available for declaration as a dividend solely to the mutual holding company, and, in accordance with SFAS 5, where the savings association determines that the payment of such dividend to the mutual holding company is probable, an appropriate dollar amount is recorded as a liability; and (v) the amount of any waived dividend is considered as having been paid by the savings association in evaluating any proposed subsequent dividend under Office of Thrift Supervision capital distribution regulations. We anticipate that Naugatuck Valley Mutual will waive dividends that Naugatuck Valley Financial may pay, if any. Conversion of Naugatuck Valley Mutual to Stock Form. Office of Thrift Supervision regulations permit Naugatuck Valley Mutual to convert from the mutual form of organization to the capital stock form of organization. There can be no assurance when, if ever, a conversion transaction will occur, and the Board of Directors has no current intention or plan to undertake a conversion transaction. In a conversion transaction a new holding company would be formed as our successor, Naugatuck Valley Mutual’s corporate existence would end, and certain depositors of Naugatuck Valley Savings and Loan would receive the right to subscribe for additional shares of the new holding company. In a conversion transaction, each share of common stock held by stockholders other than Naugatuck Valley Mutual would 110

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be automatically converted into a number of shares of common stock of the new holding company based on an exchange ratio determined at the time of conversion that ensures that stockholders other than Naugatuck Valley Mutual own the same percentage of common stock in the new holding company as they owned in us immediately before conversion. Under Office of Thrift Supervision regulations, stockholders other than Naugatuck Valley Mutual would not be diluted because of any dividends waived by Naugatuck Valley Mutual (and waived dividends would not be considered in determining an appropriate exchange ratio), in the event Naugatuck Valley Mutual converts to stock form. The total number of shares held by stockholders other than Naugatuck Valley Mutual after a conversion transaction also would be increased by any purchases by stockholders other than Naugatuck Valley Mutual in the stock offering conducted as part of the conversion transaction. Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Office of Thrift Supervision if any person (including a company), or group acting in concert, seeks to acquire “control” of a savings and loan holding company or savings association. An acquisition of “control” can occur upon the acquisition of 10% or more of the voting stock of a savings and loan holding company or savings institution or as otherwise defined by the Office of Thrift Supervision. Under the Change in Bank Control Act, the Office of Thrift Supervision has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan holding company. Remutualization Transactions. Current Office of Thrift Supervision regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction. However, the Office of Thrift Supervision has issued a policy statement indicating that it views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity and as raising issues concerning the effect on the mutual members of the acquiring entity. Under certain circumstances, the Office of Thrift Supervision intends to give these issues special scrutiny and reject applications for the remutualization of a mutual holding company unless the applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are not warranted in the particular case. Federal Securities Laws We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the common stock to be issued pursuant to the offering. Upon completion of the offering, our common stock will continue to be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. We will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. The registration, under the Securities Act of 1933, of the shares of common stock to be sold in the offering and issued to our charitable foundation does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of us may be resold without registration. Shares purchased by an affiliate of us will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If we meet the current public information requirements of Rule 144, each affiliate of us that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares, or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, we may permit affiliates to have their shares registered for sale under the Securities Act of 1933. Sarbanes-Oxley Act of 2002 On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002, which implemented legislative reforms intended to address corporate and accounting fraud. The Sarbanes-Oxley Act restricts 111

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the scope of services that may be provided by accounting firms to their public company audit clients and any non-audit services being provided to a public company audit client will require preapproval by the company’s audit committee. In addition, the Sarbanes-Oxley Act requires chief executive officers and chief financial officers, or their equivalent, to certify to the accuracy of periodic reports filed with the Securities and Exchange Commission, subject to civil and criminal penalties if they knowingly or willingly violate this certification requirement. Under the Sarbanes-Oxley Act, bonuses issued to top executives before restatement of a company’s financial statements are now subject to disgorgement if such restatement was due to corporate misconduct. Executives are also prohibited from insider trading during retirement plan “blackout” periods, and loans to company executives (other than loans by financial institutions permitted by federal rules and regulations) are restricted. The legislation accelerates the time frame for disclosures by public companies and changes in ownership in a company’s securities by directors and executive officers. The Sarbanes-Oxley Act also increases the oversight of, and codifies certain requirements relating to audit committees of public companies and how they interact with the company’s “registered public accounting firm.” Among other requirements, companies must disclose whether at least one member of the committee is a “financial expert” (as such term is defined by the Securities and Exchange Commission) and if not, why not. Although we anticipate that we will incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, management does not expect that such compliance will have a material impact on our results of operations or financial condition. Privacy Requirements of the GLBA The Gramm-Leach-Bliley Act of 1999 provided for sweeping financial modernization for commercial banks, savings banks, securities firms, insurance companies, and other financial institutions operating in the United States. Among other provisions, the Gramm-Leach-Bliley Act places limitations on the sharing of consumer financial information with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of personal financial information with unaffiliated third parties. Anti-Money Laundering On October 26, 2001, in response to the events of September 11, 2001, the President of the United States signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”). The USA PATRIOT Act significantly expands the responsibilities of financial institutions, including savings and loan associations, in preventing the use of the U.S. financial system to fund terrorist activities. Title III of the USA PATRIOT Act provides for a significant overhaul of the U.S. anti-money laundering regime. Among other provisions, it requires financial institutions operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations. We have established policies and procedures to ensure compliance with the USA PATRIOT Act’s provisions, and the impact of the USA PATRIOT Act on our operations has not been material. 112

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Other Regulations Interest and other charges collected or contracted for by Naugatuck Valley Savings and Loan are subject to state usury laws and federal laws concerning interest rates. Naugatuck Valley Savings and Loan’s loan operations are also subject to federal laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of Naugatuck Valley Savings and Loan also are subject to the: • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and • Check Clearing for the 21st Century Act (also known as “Check 21”), which, effective October 28, 2004, gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check. FEDERAL AND STATE TAXATION Federal Income Taxation General. We report our income on a fiscal year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns have been either audited or closed under the statute of limitations through tax year 2000. For its 2003 year, Naugatuck Valley Savings and Loan’s maximum federal income tax rate was 34%. Bad Debt Reserves. For fiscal years beginning before June 30, 1996, thrift institutions that qualified under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by interests in real property improved or to be improved, under the percentage of taxable income method or the experience method. The reserve for nonqualifying loans was computed using the experience method. Federal legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable income method for tax years beginning after 1995 and require savings institutions to recapture or take into income certain portions of their accumulated bad debt reserves. Approximately 113

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$1.8 million of our accumulated bad debt reserves would not be recaptured into taxable income unless Naugatuck Valley Savings and Loan makes a “non-dividend distribution” to Naugatuck Valley Savings and Loan as described below. Distributions. If Naugatuck Valley Savings and Loan makes “non-dividend distributions” to us, the distributions will be considered to have been made from Naugatuck Valley Savings and Loan’s unrecaptured tax bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the “non-dividend distributions,” and then from Naugatuck Valley Savings and Loan’s supplemental reserve for losses on loans, to the extent of those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves, will be included in Naugatuck Valley Savings and Loan’s taxable income. Non-dividend distributions include distributions in excess of Naugatuck Valley Savings and Loan’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of Naugatuck Valley Savings and Loan’s current or accumulated earnings and profits will not be so included in Naugatuck Valley Savings and Loan’s taxable income. The amount of additional taxable income triggered by a non-dividend is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Therefore, if Naugatuck Valley Savings and Loan makes a non-dividend distribution to us, approximately one and one-half times the amount of the distribution not in excess of the amount of the reserves would be includable in income for federal income tax purposes, assuming a 34% federal corporate income tax rate. Naugatuck Valley Savings and Loan does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves. State Taxation Naugatuck Valley Mutual, Naugatuck Valley Financial and its subsidiaries are subject to the Connecticut corporation business tax. Naugatuck Valley Mutual, Naugatuck Valley Financial and its subsidiaries will be eligible to file a combined Connecticut income tax return and will pay the larger of the regular corporation business tax (income tax) or a capital stock tax, but no less than a nominal minimum tax. The Connecticut corporation business tax is based on the federal taxable income before net operating loss and special deductions of Naugatuck Valley Mutual, Naugatuck Valley Financial and its subsidiaries and makes certain modifications to federal taxable income to arrive at Connecticut taxable income. Connecticut taxable income is multiplied by the state tax rate (7.5% for 2003) to arrive at Connecticut income tax. Connecticut capital stock tax is computed as the average value of our issued and outstanding capital stock, including treasury stock at par or face value, fractional shares, scrip certificates convertible into stock and amounts received on capital stock subscriptions plus the average value of its surplus and undivided profit and the average value of its surplus reserves less the average value of any deficit carried on its balance sheets and the average value of any stock it owns in private corporations, including treasury shares. The average capital calculated so computed is then multiplied by the Connecticut capital tax rate of 0.31% per dollar not to exceed $1 million. In May 1998 the State of Connecticut enacted legislation permitting the formation of passive investment company subsidiaries by financial institutions. This legislation exempts qualifying passive investment companies from the Connecticut corporation business tax and excludes dividends paid from a passive investment company from the taxable income of the parent financial institution. Naugatuck Valley Savings and Loan’s formation of a passive investment company in September 1999 is expected to substantially eliminate the state income tax expense of Naugatuck Valley Mutual, Naugatuck Valley Financial and its subsidiaries. See “Our Business — Subsidiaries” for a discussion of Naugatuck Valley Savings and Loan’s passive investment company. However, we will remain liable for the capital stock tax. The State of Connecticut continues to be under pressure to find new sources of revenue, and therefore 114

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could propose legislation to eliminate the passive investment company exemption. If such legislation were enacted, we would be subject to state income taxes in Connecticut. RESTRICTIONS ON ACQUISITION OF NAUGATUCK VALLEY FINANCIAL AND NAUGATUCK VALLEY SAVINGS AND LOAN General Naugatuck Valley Savings and Loan’s plan of reorganization provides that Naugatuck Valley Savings and Loan will be reorganized from a Connecticut state-chartered mutual savings bank into a federal mutual holding company structure and includes the adoption of a federal stock charter and bylaws for Naugatuck Valley Financial. Certain provisions in our charter and bylaws may have antitakeover effects. In addition, provisions in Naugatuck Valley Savings and Loan’s charter and bylaws may also have anti-takeover effects. Finally, regulatory restrictions may make it more difficult for persons or companies to acquire control of us. Mutual Holding Company Structure Following the reorganization, we will own all of the issued and outstanding common stock of Naugatuck Valley Savings and Loan. Naugatuck Valley Mutual will own a majority of the issued and outstanding common stock of Naugatuck Valley Financial. As a result, management of Naugatuck Valley Mutual is able to exert voting control over Naugatuck Valley Financial and Naugatuck Valley Savings and Loan and will restrict the ability of our minority stockholders to effect a change of control of management. Naugatuck Valley Mutual, as long as it remains in the mutual form of organization, will control a majority of our voting stock. Charter and Bylaws of Naugatuck Valley Financial Although our Board of Directors is not aware of any effort that might be made to obtain control of us after the offering, the Board of Directors believed it appropriate to adopt certain provisions permitted by federal regulations that may have the effect of deterring a future takeover attempt that is not approved by our Board of Directors. The following description of these provisions is only a summary and does not provide all of the information contained in our charter and bylaws. See “Additional Information” as to where to obtain a copy of these documents. Limitation on Voting Rights. Our charter provides that, for a period of five years from the date of the reorganization, no person, except Naugatuck Valley Mutual or a tax-qualified employee stock benefit plan of ours, may directly or indirectly acquire the beneficial ownership of more than 10% of any class of an equity security of ours. If shares are acquired in excess of 10%, those shares will be considered “excess shares” and will not be counted as shares entitled to vote.

Board of Directors. Classified Board. Our Board of Directors is divided into three classes, each of which contains approximately one-third of the number of directors. The stockholders elect one class of directors each year for a term of three years. The classified Board makes it more difficult and time consuming for a stockholder group to fully use its voting power to gain control of the Board of Directors without the consent of the incumbent Board of Directors. Filling of Vacancies; Removal. The bylaws provide that any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by a vote of a majority of the directors then in office. A person elected to fill a vacancy on the Board of Directors will serve until the next election of directors. Our bylaws provide that a director may be removed from the Board of Directors before the expiration of his or her term only for cause and only upon the vote of a 115

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majority of the outstanding shares of voting stock. These provisions make it more difficult for stockholders to remove directors and replace them with their own nominees. Qualification. The bylaws provide that no person will be eligible to serve on the Board of Directors who has in the past 10 years been subject to a supervisory action by a financial regulatory agency that involved dishonesty or breach of trust or other bad actions, has been convicted of a crime involving dishonesty or breach of trust that is punishable by a year or more in prison, or is currently charged with such a crime, or has been found by a regulatory agent or a court to have breached a fiduciary duty involving personal profit or committed a wilful violation of any law governing banking securities or insurance. These provisions may prevent stockholders from nominating themselves or persons of their choosing for election to the Board of Directors. Stockholder Action by Written Consent; Special Meetings of Stockholders. Our stockholders must act only through an annual or special meeting or by unanimous written consent. Our charter provides that for a period of five years following the reorganization, special meetings of stockholders relating to a change in control of us or amendments to our charter may be called only upon direction of the Board of Directors. Subject to this restriction, the bylaws provide that holders of not less than 10% of our outstanding shares may request the calling of a special meeting. At a special meeting, stockholders may consider only the business specified in the notice of meeting given by us. The provisions of our charter and bylaws limiting stockholder action by written consent and calling of special meetings of stockholders may have the effect of delaying consideration of a stockholder proposal until the next annual meeting, unless a special meeting is called at the request of a majority of the Board of Directors or holders of not less than 10% of our outstanding shares. These provisions also would prevent the holders of a majority of common stock from unilaterally using the written consent procedure to take stockholder action. Advance Notice Provisions for Stockholder Nominations and Proposals. Our bylaws establish an advance notice procedure for stockholders to nominate directors or bring other business before an annual meeting of stockholders. A person may not be nominated for election as a director unless that person is nominated by or at the direction of our Board of Directors or by a stockholder who has given appropriate notice to us before the meeting. Similarly, a stockholder may not bring business before an annual meeting unless the stockholder has given us appropriate notice of the stockholder’s intention to bring that business before the meeting. Our Secretary must receive notice of the nomination or proposal not less than 30 days before the annual meeting. A stockholder who desires to raise new business must provide us with certain information concerning the nature of the new business, the stockholder and the stockholder’s interest in the business matter. Similarly, a stockholder wishing to nominate any person for election as a director must provide us with certain information concerning the nominee and the proposing stockholder. Advance notice of nominations or proposed business by stockholders gives our Board of Directors time to consider the qualifications of the proposed nominees, the merits of the proposals and, to the extent deemed necessary or desirable by our Board of Directors, to inform stockholders and make recommendations about those matters. Authorized but Unissued Shares of Capital Stock. Following the reorganization, we will have authorized but unissued shares of common and preferred stock. Our charter authorizes the Board of Directors to establish one or more series of preferred stock and, for any series of preferred stock, to determine the terms and rights of the series, including voting rights, conversion rates, and liquidation preferences. Although such shares of common and preferred stock could be issued by the Board of Directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, it is anticipated that such uses will be unlikely given that Naugatuck Valley Mutual must always own a majority of our common stock. Restrictions in Naugatuck Valley Savings and Loan’s Charter and Bylaws Although the Board of Directors of Naugatuck Valley Savings and Loan is not aware of any effort that might be made to obtain control of Naugatuck Valley Savings and Loan after the offering, the Board of Directors believed it appropriate to adopt provisions permitted by federal law to protect the interests of 116

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the institution and its stockholders from any hostile takeover. These provisions may, indirectly, inhibit a change in control of us, as Naugatuck Valley Savings and Loan’s sole stockholder. Naugatuck Valley Savings and Loan’s stockholders will not be permitted to cumulate their votes in the election of directors. Furthermore, Naugatuck Valley Savings and Loan’s bylaws provide for the election of three classes of directors to staggered terms. In addition, Naugatuck Valley Savings and Loan’s charter provides that, for a period of five years from the date of the reorganization, no person except Naugatuck Valley Financial and Naugatuck Valley Mutual or a tax-qualified employee stock benefit plan of Naugatuck Valley Financial or Naugatuck Valley Savings and Loan, may directly or indirectly acquire the beneficial ownership of more than 10% of any class of Naugatuck Valley Savings and Loan’s equity securities. Additionally, special meetings of stockholders related to changes in control of Naugatuck Valley Savings and Loan or amendments to its charter may only be called upon direction of the Board of Directors for a period of five years from the date of the reorganization. Naugatuck Valley Savings and Loan’s charter and bylaws also contain other provisions to protect the interests of the institution including a requirement that vacancies on the Board of Directors be filled by a majority vote of the Board of Directors, eligibility requirements for directors, and establishes advance notice procedures for stockholders to nominate directors or bring other business before the stockholders. In addition, the charter provides for the issuance of shares of preferred stock on terms, including conversion and voting rights, as may be determined by Naugatuck Valley Savings and Loan’s Board of Directors without stockholder approval. Although Naugatuck Valley Savings and Loan has no arrangements, understandings or plans at the present time for the issuance or use of the shares of undesignated preferred stock authorized, the Board of Directors believes that the availability of such shares will provide Naugatuck Valley Savings and Loan with increased flexibility in structuring possible future financings and acquisitions and in meeting other corporate needs that may arise. If a proposed merger, tender offer or other attempt to gain control of Naugatuck Valley Savings and Loan occurs of which management does not approve, the Board of Directors can authorize the issuance of one or more series of preferred stock with rights and preferences which could impede the completion of such a transaction. An effect of the possible issuance of such preferred stock, therefore, may be to deter a future takeover attempt. The Board of Directors does not intend to issue any preferred stock except on terms which the Board of Directors deems to be in the best interest of Naugatuck Valley Savings and Loan and its then existing stockholders. Regulatory Restrictions Office of Thrift Supervision Regulations. Office of Thrift Supervision regulations provide that for a period of three years following the date of the completion of the reorganization, no person, acting singly or together with associates in a group of persons acting in concert, will directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of our class of our equity securities without the prior written approval of the Office of Thrift Supervision. Where any person, directly or indirectly, acquires beneficial ownership of more than 10% of our class of any equity securities without the prior written approval of the Office of Thrift Supervision, the securities beneficially owned by such person in excess of 10% will not be voted by any person or counted as voting shares in connection with any matter submitted to the stockholders for a vote, and will not be counted as outstanding for purposes of determining the affirmative vote necessary to approve any matter submitted to the stockholders for a vote. Remutualization Transactions. Current Office of Thrift Supervision regulations permit a mutual holding company to be acquired by a mutual institution in a remutualization transaction. However, the Office of Thrift Supervision has issued a policy statement indicating that it views remutualization transactions as raising significant issues concerning disparate treatment of minority stockholders and mutual members of the target entity and as raising issues concerning the effect on the mutual members of the acquiring entity. Under certain circumstances, the Office of Thrift Supervision intends to give these issues special scrutiny and reject applications for the remutualization of a mutual holding company unless the applicant can clearly demonstrate that the Office of Thrift Supervision’s concerns are not warranted in the particular case. 117

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Change in Bank Control Act. The acquisition of 10% or more of our outstanding common stock may trigger the provisions of the Change in Bank Control Act. The Office of Thrift Supervision has also adopted a regulation under the Change in Bank Control Act which generally requires persons who at any time intend to acquire control of a federally chartered savings association or its holding company, to provide 60 days prior written notice and certain financial and other information to the Office of Thrift Supervision. The 60-day notice period does not commence until the information is deemed to be substantially complete. Control for these purposes exists in situations in which the acquiring party has voting control of at least 25% of any class of our voting stock or the power to direct our management or policies. However, under Office of Thrift Supervision regulations, control is presumed to exist where the acquiring party has voting control of at least 10% of any class of our voting securities if specified “control factors” are present. The statute and underlying regulations authorize the Office of Thrift Supervision to disapprove a proposed acquisition on certain specified grounds. DESCRIPTION OF NAUGATUCK VALLEY FINANCIAL CAPITAL STOCK Our common stock will represent nonwithdrawable capital, will not be an account of any type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency. General We are authorized to issue 25,000,000 shares of our common stock having a par value of $.01 per share and 1,000,000 shares of preferred stock having a par value of $.01 per share. Each share of our common stock will have the same relative rights as, and will be identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock, as required by the plan of reorganization, all stock will be duly authorized, fully paid and nonassessable. We will not issue any shares of preferred stock in the reorganization. Common Stock Dividends. We can pay dividends if, as and when declared by our Board of Directors. The payment of dividends is limited by law and applicable regulation. See “Our Dividend Policy. ” The holders of our common stock will be entitled to receive and share equally in dividends as may be declared by the Board of Directors out of funds legally available for dividends. If we issue preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock with respect to dividends. Voting Rights. After the reorganization, the holders of our common stock will possess exclusive voting rights in us. They will elect our Board of Directors and act on other matters as are required to be presented to them under federal law or as are otherwise presented to them by the Board of Directors. Except as discussed in “Restrictions on Acquisition of Naugatuck Valley Financial and Naugatuck Valley Savings and Loan,” each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. If we issue preferred stock, holders of our preferred stock may also possess voting rights. Liquidation. If there is any liquidation, dissolution or winding up of Naugatuck Valley Savings and Loan, as the holder of Naugatuck Valley Savings and Loan’s capital stock, we would be entitled to receive all of Naugatuck Valley Savings and Loan’s assets available for distribution after payment or provision for payment of all debts and liabilities of Naugatuck Valley Savings and Loan, including all deposit accounts and accrued interest. Upon our liquidation, dissolution or winding up, the holders of our common stock would be entitled to receive all of our assets available for distribution after payment or provision for payment of all its debts and liabilities. If we issue preferred stock, the preferred stockholders may have a priority over the holders of the common stock upon liquidation or dissolution. 118

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Preemptive Rights; Redemption. Holders of our common stock will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be redeemed. Preferred Stock We will not issue any preferred stock in the reorganization and we have no current plans to issue any preferred stock after the reorganization. Preferred stock may be issued with designations, powers, preferences and rights as the Board of Directors may from time to time determine. The Board of Directors can, without stockholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock will be , .

REGISTRATION REQUIREMENTS We have registered our common stock with the Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934, as amended, and will not deregister our common stock for a period of at least three years following the offering. As a result of registration, the proxy and tender offer rules, insider trading reporting and restrictions, annual and periodic reporting and other requirements of that statute will apply. LEGAL AND TAX OPINIONS The legality of our common stock has been passed upon for us by Muldoon Murphy Faucette & Aguggia LLP, Washington, D.C. Muldoon Murphy Faucette & Aguggia LLP has consented to the references to their opinion in this prospectus. Certain legal matters will be passed upon for Ryan Beck & Co. by Thacher Proffitt & Wood LLP, Washington, D.C. EXPERTS Our consolidated financial statements at December 31, 2003 and 2002 and for the three years ended December 31, 2003 are included in this prospectus and in the registration statement in reliance upon the report of Snyder & Haller, P.C., Hartford, Connecticut, independent certified public accountants, included elsewhere in this prospectus, and upon the authority of said firm as experts in accounting and auditing. Keller & Company, Inc. has consented to the summary in this prospectus of its report to us setting forth its opinion as to our estimated pro forma market value, as converted, and to the use of its name and statements with respect to it appearing in this prospectus. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, that registers the common stock offered in the stock offering, including the shares to be contributed to the Naugatuck Valley Savings and Loan Foundation. The registration statement, including the exhibits, contains additional relevant information about us and our common stock. The rules and regulations of the Securities and Exchange Commission allow us to omit certain information included in the registration statement from this prospectus. You may read and copy the registration statement at the Securities and Exchange Commission’s public reference room at 450 Fifth Street, N.W., Washington, D.C. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the Securities and Exchange Commission’s public reference rooms. The registration statement also is available to the public from commercial document retrieval services and at 119

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the Internet World Wide Website maintained by the Securities and Exchange Commission at http://www.sec.gov . Naugatuck Valley Savings and Loan has filed an application for approval of the plan of reorganization and minority stock issuance with the Office of Thrift Supervision. This prospectus omits certain information contained in the application. The applications may be inspected, without charge, at the offices of the Office of Thrift Supervision, 1700 G Street, NW, Washington, D.C. 20552 and at the offices of the Regional Director of the Office of Thrift Supervision at the Northeast Regional Office of the Office of Thrift Supervision, Harborside Financial Center, Plaza 5, Suite 1600, Jersey City, New Jersey 07311. A copy of the plan of reorganization and minority stock issuance and our charter and bylaws are available without charge from us. 120

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS NAUGATUCK VALLEY SAVINGS AND LOAN
Page

Independent Auditors’ Report Consolidated Statements of Financial Condition as of March 31, 2004 (unaudited) and December 31, 2003 and 2002 Consolidated Statements of Income for the Three Months Ended March 31, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001 Consolidated Statements of Changes in Capital Accounts for the Three Months Ended March 31, 2004 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001 Notes to Consolidated Financial Statements ***

F-1

F-2

F-3

F-4

F-5 F-6

All schedules are omitted as the required information either is not applicable or is included in the financial statements or related notes. Separate financial statements for Naugatuck Valley Financial have not been included in this prospectus because Naugatuck Valley Financial, which has engaged only in organizational activities to date, has no significant assets, contingent or other liabilities, revenues or expenses. 121

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[LETTERHEAD OF SNYDER & HALLER, P.C.]
Report of Independent Registered Public Accounting Firm To The Board of Directors Naugatuck Valley Savings and Loan, S.B. We have audited the accompanying consolidated statements of financial condition of Naugatuck Valley Savings and Loan, S.B. and subsidiary as of December 31, 2003, and 2002, and the related consolidated statements of income, changes in capital accounts and cash flows for each of the years in the three year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Companies Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Naugatuck Valley Savings and Loan, S.B. and subsidiary at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

Hartford, Connecticut January 9, 2004 (except as to Note 14, which is as of May 17, 2004) F-1

Consolidated Statements of Financial Condition (In Thousands)

March 31, 2004 (Unaudited)

December 31, 2003 (Audited) 2002

ASSETS Cash and due from depository institutions Investment in federal funds Investment securities Loans receivable, net Accrued income receivable Foreclosed real estate, net Premises and equipment, net Deferred income taxes Bank owned life insurance asset

$

6,207 5,711 32,914 182,311 1,029 131 6,209 395 4,782

$

4,752 5,023 38,727 180,378 1,071 208 6,119 427 4,734

$

5,038 13,120 33,876 166,046 1,045 108 6,126 371 —

Other assets Total assets LIABILITIES AND CAPITAL ACCOUNTS Liabilities Deposits Advances from Federal Home Loan Bank of Boston Mortgagors’ escrow accounts Other liabilities Total liabilities Capital accounts Retained earnings Accumulated other comprehensive income Total capital Total liabilities and capital accounts See notes to consolidated financial statements. F-2

2,459 $ 242,148

2,517 $ 243,956

2,268 $ 227,998

$ 187,474 30,138 1,530 1,350 220,492 21,325 331 21,656 $ 242,148

$ 183,455 34,990 2,634 1,660 222,739 20,947 270 21,217 $ 243,956

$ 173,231 31,119 2,362 1,436 208,148 19,141 709 19,850 $ 227,998

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Consolidated Statements of Income (In Thousands)

Three Months Ended March 31, 2004 (Unaudited) 2003 2003

Year Ended December 31, 2002 (Audited) 2001

Interest and dividend income Interest on loans Interest and dividends on investments and deposits Total interest income Interest expense Interest on deposits Interest on borrowed funds Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income Loan fees and service charges Income from bank owned life insurance Gain on sale of mortgages Gain on sale of investments Income from investment advisory services, net Other income Total noninterest income Noninterest expense Compensation, taxes and benefits Office occupancy Computer processing Federal insurance premiums (Gain) loss on foreclosed real estate, net Other expenses Total noninterest expense Income before provision for income taxes Provision for income taxes Net Income

$ 2,695 331 3,026 570 366 936 2,090 — 2,090 211 48 5 24 31 14 333 1,122 283 146 7 (32 ) 353 1,879 544 166 $ 378

$ 2,877 379 3,256 819 353 1,172 2,084 45 2,039 221 — 17 — — 19 257 885 270 115 7 4 369 1,650 646 217 $ 429

$ 11,052 1,592 12,644 2,848 1,393 4,241 8,403 45 8,358 851 133 14 1 45 71 1,115 4,024 1,041 507 28 2 1,243 6,845 2,628 822 $ 1,806

$ 11,841 1,337 13,178 3,914 1,385 5,299 7,879 231 7,648 793 — 100 3 — 76 972 3,304 877 446 28 51 1,114 5,820 2,800 880 $ 1,920

$ 11,630 1,001 12,631 5,105 1,073 6,178 6,453 80 6,373 673 — — — — 70 743 3,181 737 395 26 9 1,044 5,392 1,724 542 $ 1,182

See notes to consolidated financial statements. F-3

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Consolidated Statements of Changes in Capital Accounts For the Three Months Ended March 31, 2004 and 2003 (unaudited) and the Years Ended December 31, 2003, 2002 and 2001 (In Thousands)

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Total

Balance at December 31, 2000 Comprehensive income Net income Other comprehensive income Total comprehensive income Balance at December 31, 2001 Comprehensive income Net income Other comprehensive income Total comprehensive income Balance at December 31, 2002 Comprehensive income Net income Other comprehensive loss Total comprehensive income Balance at December 31, 2003 Comprehensive income Net income Other comprehensive income Total comprehensive income Balance at March 31, 2004 Balance at December 31, 2002 Comprehensive income Net income Other comprehensive loss Total comprehensive income Balance at March 31, 2003 See notes to consolidated financial statements.

$ 16,039 1,182 —

$

(54 ) — 330

$ 15,985 1,182 330 1,512

17,221 1,920 —

276 — 433

17,497 1,920 433 2,353

19,141 1,806 —

709 — (439 )

19,850 1,806 (439 ) 1,367

20,947 378 —

270 — 61

21,217 378 61 439

$ 21,325 $ 19,141 429 —

$ $

331 709 — (78 )

$ 21,656 $ 19,850 429 (78 ) 351

$ 19,570

$

631

$ 20,201

F-4

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Consolidated Statements of Cash Flows (In Thousands)

Three Months Ended March 31, 2004 (Unaudited) 2003 2003

Year Ended December 31, 2002 (Audited) 2001

Cash flows from operating activities Net income Adjustments to reconcile net income to cash provided by operating activities: Provision for loan losses Depreciation and amortization expense Provision for deferred taxes Net gain on sale of real estate owned Gain on sale of mortgages Gain on sale of investments Decrease (increase) in accrued income receivable Increase (decrease) in deferred loan fees Increase in bank owned life insurance asset Decrease (increase) in other assets (Decrease) increase in other liabilities Net cash provided by operating activities Cash flows from investing activities Proceeds from maturities of available-for-sale securities Proceeds from maturities of held-to-maturity securities Purchase of available-for-sale securities Purchase of held-to-maturity securities Loan originations net of principal payments Proceeds from the sale of loans Proceeds from the sale of foreclosed real estate Purchase of property and equipment Purchase of bank owned life insurance asset Net cash provided (used) by investing activities Cash flows from financing activities Net change in time deposits Net change in other deposit accounts Advances from Federal Home Loan Bank Repayment of Advances from Federal Home Loan Bank Net change in mortgagors’ escrow accounts Net cash provided (used) by financing activities Increase (Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

$

378

$

429

$

1,806

$

1,920

$

1,182

— 165 1 (37 ) (5 ) (24 ) 42 87 (48 ) 50 (311 ) 298

45 154 6 — (17 ) — (74 ) 20 — 83 (67 ) 579

45 662 171 (53 ) (14 ) (1 ) (27 ) (178 ) (133 ) (283 ) 224 2,219

231 588 (98 ) (6 ) (100 ) (3 ) (14 ) (114 ) — (438 ) (86 ) 1,880

80 463 (179 ) (18 ) — — (38 ) 21 — (86 ) 461 1,886

10,878 — (4,029 ) (950 ) (3,947 ) 1,932 114 (216 ) — 3,782 239 3,780 650 (5,502 ) (1,104 ) (1,937 ) 2,143 9,775 $ 11,918

4,668 100 (7,565 ) (291 ) (5,316 ) 1,581 — (395 ) (1,200 ) (8,418 ) 1,766 4,601 3,403 (5,828 ) (1,003 ) 2,939 (4,900 ) 18,158 $ 13,258 $

14,395 450 (19,838 ) (647 ) (23,355 ) 8,865 258 (497 ) (4,600 ) (24,969 ) (3,091 ) 13,316 13,903 (10,032 ) 271 14,367 (8,383 ) 18,158 9,775 $

8,363 144 (20,091 ) (749 ) (14,733 ) 7,071 113 (1,110 ) — (20,992 ) (416 ) 16,985 12,750 (5,003 ) 311 24,627 5,515 12,643 18,158 $

12,215 578 (20,061 ) (452 ) (12,871 ) — 139 (1,715 ) — (22,167 ) 10,824 9,386 12,000 (10,664 ) 136 21,682 1,401 11,242 12,643

See notes to consolidated financial statements. F-5

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 1. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Naugatuck Valley Savings & Loan, S.B. (“the Bank”) and its wholly-owned subsidiary, Naugatuck Valley Mortgage Servicing Corporation. Significant intercompany accounts and transactions have been eliminated in consolidation. Business The Bank provides a full range of personal banking services to individual and small business customers located primarily in Naugatuck, Connecticut and the immediate surrounding vicinity. It is subject to competition from other financial institutions throughout the region. The Bank is also subject to the regulations of certain state and federal agencies and undergoes periodic examinations by those regulatory authorities. The Bank owns the Naugatuck Valley Mortgage Servicing Corporation, which qualifies and operates as a Connecticut passive investment company pursuant to legislation. Charter Conversion In January, 2003, the Bank converted from a state-chartered savings and loan to a state-chartered savings bank. As a result, the Bank is subject to direct oversight by the Federal Deposit Insurance Corporation instead of the Office of Thrift Supervision. The Bank remains a mutual institution. Basis of Presentation The accounting and reporting policies of the Bank and its subsidiary conform to generally accepted accounting principles in the United States of America and to general practices within the thrift industry. Such policies have been followed on a consistent basis. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and income and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the reserve for losses on loans and the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans. While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowance may be necessary based on changes in economic conditions, particularly in Connecticut. Investment securities Investments are accounted for in accordance with the intent of management at the time of purchase. If management has the intent and the Bank has the ability at the time of purchase to hold debt securities until maturity, they are classified as held-to-maturity. These securities are carried at historical cost adjusted for the amortization of premiums and accretion of discounts, which are recognized as adjustments to interest income. Securities to be held for indefinite periods of time are classified as available-for-sale and are carried at fair value with unrealized gains and losses reported as a separate component of capital net of estimated income taxes. F-6

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 The Bank has no securities held for trading. Gains or losses on the sales of securities are recognized at trade date utilizing the specific identification method. Loans receivable and allowance for loan losses Loans receivable are stated at unpaid principal balance less loans in process, deferred loan fees, and allowances for loan losses. Uncollected interest on loans receivable is accrued as earned based on rates applied to principal amounts outstanding. Recognition of income on the accrual basis is discontinued when there is sufficient question as to the collectibility of the interest. In these cases, the interest previously accrued to income is reversed, and the loans are placed on the cash basis. Loan origination fees and certain direct loan origination costs are being deferred and the net amount amortized on a level-yield basis as an adjustment to the related loan yield over its contractual life. Unamortized net fees are recognized upon early repayment of the loans. The allowance for loan losses is established by a provision charged to earnings and is maintained at a level considered adequate to provide for potential loan losses based on management’s evaluation of known and inherent risks in the loan portfolio. When a loan or portion of a loan is considered uncollectible, it is charged against the allowance for loan losses. Recoveries of loans previously charged-off are credited to the allowance when collected. Management makes regular evaluations of the loan portfolio to determine the adequacy of the level of the allowance for loan losses. Numerous factors are considered in the evaluation, including a review of certain borrowers’ current financial status and credit standing, available collateral, loss experience in relation to outstanding loans, the overall loan portfolio quality, management’s judgment regarding prevailing and anticipated economic conditions, and other relevant factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Foreclosed real estate Real estate properties acquired through loan foreclosure and other partial or total satisfaction of problem loans are carried at the lower of fair value or the related loan balance at the date of foreclosure. Valuations are periodically performed by management and an allowance for losses is established if the carrying value of a property subsequently exceeds its fair value less estimated disposal costs. Losses arising at the time of acquisition of such properties are charged against the allowance for loan losses. Subsequent write-downs in the carrying value and expenses incurred to maintain the properties are charged to expense. Premises and equipment Premises and equipment are stated at cost less accumulated depreciation computed on the straight-line method at rates based on estimated useful lives. F-7

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 1. Summary of Significant Accounting Policies - (Continued) Expenditures for replacements or major improvements are capitalized. Expenditures for normal maintenance and repairs are charged to expense as incurred. Upon the sale or retirement of premises and equipment, the cost and accumulated depreciation are removed from their respective accounts and any gain or loss is included in income. Computation of fair values The calculation of fair value estimates of financial instruments is dependent upon certain subjective assumptions and involves significant uncertainties. Changes in assumptions could significantly affect the estimates. These estimates do not reflect any possible tax ramifications, estimated transaction costs or any premium or discount that could result from offering the Bank’s entire holdings of a particular financial instrument. The following methods and assumptions were utilized by the Bank in estimating the fair values of its on-balance sheet financial instruments: Cash and cash equivalents - The carrying amounts reported in the statement of financial condition approximate these assets’ fair value. Investment securities - Fair values for investment securities are based on quoted market prices where available. If quoted market prices are not available, fair values are based on market prices for comparable instruments. Loans receivable - For variable rate loans that reprice frequently and without significant change in credit risk, fair values are based on carrying values. The fair value of other loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The fair value of nonaccrual loans was estimated using the estimated fair values of the underlying collateral. Deposits liabilities - The fair values of non-interest-bearing demand and savings deposits are, by definition, equal to the amount payable on demand at the reporting date, i.e., their carrying amounts. Fair values for time certificates of deposit are estimated using a discounted cash flow technique that applies interest rates currently being offered to a schedule of aggregated expected monthly maturities on time deposits. Advances from Federal Home Loan Bank of Boston - Fair values are estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rates for similar types of borrowing arrangements. Mortgagors’ escrow accounts - The carrying amounts reported in the statement of financial condition approximate the fair value of the mortgagors’ escrow accounts. Income taxes The Bank accounts for certain income and expense items differently for financial reporting purposes than for income tax purposes. Provisions for deferred taxes are being made in recognition of these temporary differences. Reclassification The financial statements for the prior year have been reclassified to conform with changes in the current financial statement presentation. F-8

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 2. Statement of Cash Flows For purposes of reporting cash flows, cash and cash equivalents include cash and amounts due from depository institutions and investments in federal funds. Supplemental Disclosures

Three Months Ended March 31, (In thousands) 2004 2003 (Unaudited) 2003

Year Ended December 31, 2002 (Audited) 2001

Non-cash investing activities: Transfer of loans to foreclosed real estate Cash paid during the year for: Interest Income taxes 3. Investment Securities

$ — $ 928 —

$

—

$

305

$

55

$

166

$ 1,164 —

$ 4,244 701

$ 5,298 931

$ 6,181 740

A summary of investment securities at March 31, 2004 and December 31, 2003 and 2002 follows:

March 31, 2004 (Unaudited) Estimated Carrying Market Amount Value

December 31, 2003 (Audited) Estimated Market Carrying Value Amount 2002

(In thousands)

Carrying Amount

Estimated Market Value

Available-for-sale securities Held-to-maturity securities Total investment securities

$ 30,403 2,511 $ 32,914

$ 30,403 2,536 $ 32,939

$ 37,166 1,561 $ 38,727

$ 37,166 1,577 $ 38,743

$ 32,512 1,364 $ 33,876

$ 32,512 1,395 $ 33,907

For the three months ended March 31, 2004, the Bank realized gross gains of $37,477 and gross losses of $13,689. For the year ended December 31, 2003 the Bank realized gross gains of $6,213 and gross losses of $5,377 on sales of investment securities. The Bank realized gross gains of $2,812 on sales of investment securities during the year ended December 31, 2002. At March 31, 2004, December 31, 2003 and 2002 securities with a carrying value of $700,000, and market values of $731,304, $730,271 and $729,691, respectively, were pledged as collateral to secure municipal deposits. F-9

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 3. Investment Securities - (Continued) At March 31, 2004 the composition of the investment portfolio with remaining maturities was:

Gross Unrealized (In thousands) Amortized Cost Basis Gain (Unaudited) Loss Estimated Value

Available-for-sale securities: US government and agency obligations From one through five years From five through ten years Mortgage-backed securities Total available-for-sale securities Held-to-maturity securities: US government and agency obligations From one through five years Corporate debt From one through five years Total held-to-maturity securities

$ 11,965 3,000 14,938 $ 29,903

$ 549 — 30 $ 579

$ — (9 ) (70 ) $ (79 )

$ 12,514 2,991 14,898 $ 30,403

$

706 1,805

$ 25 — $ 25

$ — — $ —

$

731 1,805

$

2,511

$

2,536

The Bank has certain investment securities in which the market value of the security is less than the cost of the security. Management believes that these unrealized losses are temporary and are the result of changes in market interest rates. At March 31, 2004, these securities had an aggregate market value of $12,483,000 which resulted in unrealized losses of $78,975. The following is a summary of the market value and related unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2004.

Securities in Continuous Unrealized Loss Position Less Than 12 Months Number of Securities Market Value Unrealized Loss

(Dollars in thousands)

US government and agency obligations Mortgage-backed securities Total securities in unrealized loss position F-10

2 7 9

$

2,991 9,492

$ $

(9 ) (70 ) (79 )

$ 12,483

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 At December 31, 2003, the composition of the investment portfolio was:

Gross Unrealized (In thousands) Amortized Cost Basis Gain (Audited) Loss Estimated Value

Available-for-sale securities: US government and agency obligations Mortgage-backed securities Total available-for-sale securities Held-to-maturity securities: US government and agency obligations Corporate debt Total held-to-maturity securities

$ 22,861 13,896 $ 36,757

$ 583 38 $ 621

$

(88 ) (124 )

$ 23,356 13,810 $ 37,166

$ (212 )

$ $

706 855 1,561

$ 17 — $ 17

$ $

(1 ) — (1 )

$ $

722 855 1,577

At December 31, 2002, the composition of the investment portfolio was:

Gross Unrealized (In thousands) Amortized Cost Basis Gain (Audited) Loss Estimated Value

Available-for-sale securities: US government and agency obligations Mortgage-backed securities Total available-for-sale securities Held-to-maturity securities: US government and agency obligations Corporate debt Total held-to-maturity securities

$ 19,912 11,526 $ 31,438 $ $ F-11 699 665 1,364

$

964 116

$— (6 ) $ (6 ) $— — $—

$ 20,876 11,636 $ 32,512 $ $ 730 665 1,395

$ 1,080 $ $ 31 — 31

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 4. Loans Receivable A summary of loans receivable at March 31, 2004, December 31, 2003 and 2002 is as follows:

(In thousands)

March 31, 2004 (Unaudited)

December 31, 2003 (Audited) 2002

Loans secured by first mortgages on real estate: Conventional: Fixed rate mortgage loans Adjustable rate mortgage loans Construction loans Commercial loans Loans on savings accounts Personal, auto and property improvement loans Less: Allowance for loan losses Undisbursed construction loans Deferred loan origination fees Loans receivable, net Weighted average yield

$ 105,933 22,361 6,025 30,024 585 21,812 186,740 1,811 2,191 427 $ 182,311 5.74 %

$ 107,858 21,913 6,621 27,568 592 20,494 185,046 1,810 2,519 339 $ 180,378 5.81 %

$ 107,968 23,623 4,540 14,869 519 18,207 169,726 1,994 1,168 518 $ 166,046 6.58 %

The Bank’s lending activities are conducted principally in the Naugatuck Valley area of Connecticut. The Bank’s investment in loans includes both adjustable and fixed rate loans. At March 31, 2004, and December 31, 2003 and 2002 the composition of the Bank’s investment in fixed rate loans was as follows:

Fixed Rate March 31, 2004 (Unaudited) December 31, 2003 (Audited) 2002

Term to Maturity (In thousands)

Less than 1 year 1 - 3 years 3 - 5 years 5 - 10 years 10 - 20 years Over 20 years Total loans at fixed rates

$

5,853 1,320 2,010 13,607 50,268 48,856

$

6,563 674 2,159 12,543 51,341 49,768

$

4,567 843 2,078 10,327 36,470 64,378

$ 121,914 F-12

$ 123,048

$ 118,663

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 Adjustable rate loans have interest rate adjustment limitations and are generally indexed to one year, three year or five year treasury notes, or prime rate. At March 31, 2004, and December 31, 2003 and 2002 the Bank had the following adjustable rate loans:

Adjustable Rate March 31, 2004 (Unaudited) December 31, 2003 (Audited) 2002

Rate Adjustment (In thousands)

Less than 1 year 1 - 3 years 3 - 5 years 5 - 7 years Over 7 years Total loans at adjustable rates

$ 41,228 6,736 7,780 8,682 400 $ 64,826

$ 37,956 8,159 7,989 7,574 320 $ 61,998

$ 34,486 7,113 5,378 4,085 — $ 51,062

Nonperforming loans totaled approximately $849,000, $906,000 and $1,224,000 at March 31, 2004, December 31, 2003 and 2002, respectively. These loans, primarily delinquent 90 days or more, were accounted for on a nonaccrual basis. The amount of income that was contractually due but not recognized on nonperforming loans totaled approximately $44,400, $50,100 and $128,000 in 2004, 2003 and 2002, respectively. The recorded investment in loans that are considered to be impaired by the Bank was $208,949, $118,234 and $763,255 at March 31, 2004, and December 31, 2003 and 2002 respectively. $189,057, $96,542 and $619,804 of these loans were accounted for on a nonaccrual basis as of March 31, 2004, and December 31, 2003 and 2002, respectively. The allowance for loan losses related to these impaired investments was $31,555 at March 31, 2004 compared with $16,462 at December 31, 2003 and $269,225 at December 31, 2002. Transactions in the allowance for loan losses account were as follows:

Three Months Ended March 31, (In thousands) 2004 (Unaudited) 2003 2003

Year Ended December 31, 2002 (Audited) 2001

Balance at beginning of year Provision for loan losses Loans written off, net of recoveries Balance at end of year

$ 1,810 — 1 $ 1,811

$ 1,994 45 (33 ) $ 2,006 F-13

$ 1,994 45 (229 ) $ 1,810

$ 1,856 231 (93 ) $ 1,994

$ 1,749 80 27 $ 1,856

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 4. Loans Receivable - (Continued) In the ordinary course of business, the Bank makes loans to directors, officers and employees on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers who are not directors, officers or employees. The amounts of these loans were approximately $1,370,000 at March 31, 2004, compared with $1,411,000 and $946,000 and December 31, 2003 and 2002, respectively. The Bank services loans for other financial institutions and agencies. These loans are originated by the Bank and then sold. The Bank continues to service these loans and remits the payments received to the purchasing institution. At March 31, 2004 and 2003, the amounts of these loans were approximately $13,517,000 and $9,252,000 respectively, compared with $12,056,000, $8,158,000 and $1,617,000 at December 31, 2003, 2002 and 2001, respectively. 5. Premises and Equipment Premises and equipment are summarized as follows:

(In thousands)

March 31, 2004 (Unaudited)

December 31, 2003 (Audited) 2002

Banking offices and branch buildings Furniture and equipment Land Leasehold improvements Accumulated depreciation and amortization Premises and equipment, net

$

4,687 1,917 1,012 699 8,315 (2,106 )

$

4,516 1,872 1,012 699 8,099 (1,980 )

$

4,504 1,837 1,012 399 7,752 (1,626 )

$

6,209

$

6,119

$

6,126

Depreciation and amortization expense is computed using the straight-line method over the estimated useful life of an asset. Estimated useful lives range from three to ten years for furniture and equipment, 39 years for the banking offices, and the initial lease term for leasehold improvements. Land is not depreciated. Depreciation and amortization expenses were $126,351 and $117,886 for the three months ended March 31, 2004 and 2003 compared with $503,425, $436,091, and $355,812 for the years ended December 31, 2003, 2002 and 2001, respectively. F-14

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 At December 31, 2003, future minimum rental income and lease payment expense were expected to be:

(In thousands)

Income

Expense

(Audited)

2004 2005 2006 2007 2008 Thereafter Total future minimum rents 6. Other Assets

$ 31 31 26 — — — $ 88

$ 110 112 78 55 56 255 $ 666

In October, 2002, the Financial Accounting Standards Board (“FASB) issued Statement of Financial Accounting Standard (“SFAS”) No. 147, “ Acquisitions of Certain Financial Institutions ”. This standard removes the accounting for certain branch acquisitions from the scope of SFAS No. 72, “ Accounting for Certain Acquisitions of Banking or Thrift Institutions" . For branch acquisitions completed before October, 2002, SFAS No. 147 requires that the carrying amount of any intangible asset which meets certain recognition criteria be accounted for separately and not be reclassified as goodwill. The standard indicates these assets are to be accounted for in accordance with SFAS No. 141, “ Business Combinations ”, and continue to be amortized. The Bank adopted SFAS No. 147 as of its October 1, 2002 (its effective date), and determined its intangible asset met the recognition criteria of the Standards. Accordingly, the Bank is continuing to amortize the intangible asset. At March 31, 2004 the remaining intangible asset is $281,000 compared with $289,430 and $323,150, at December 31, 2003 and 2002, respectively. The intangible is being amortized on the straight-line basis over a 15 year period. Amortization expense was $8,430 for each of the three months ended March 31, 2004 and 2003, and $33,720 for each of the years ended December 31, 2003, 2002 and 2001. F-15

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 7. Deposits Deposits and weighted average rates at March 31, 2004 and December 31, 2003 and 2002 are summarized as follows:

March 31, 2004 (Unaudited) Weighted Average Cost

December 31, 2003 (Audited) Weighted Average Cost Weighted Average Cost 2002

(In thousands)

Amount

Amount

Amount

Certificate accounts Regular savings accounts Checking and NOW accounts Money market savings accounts Total deposits

$

86,431 41,672 34,368 25,003

2.15 % 0.35 % 0.25 % 0.91 % 1.24 %

$

86,192 40,185 32,723 24,355

2.19 % 0.40 % 0.25 % 0.85 % 1.27 %

$

89,283 36,835 28,346 18,767

3.16 % 0.75 % 0.50 % 1.40 % 2.02 %

$ 187,474

$ 183,455

$ 173,231

The aggregate amount of individual certificate accounts of $100,000 or more at March 31, 2004, and December 31, 2003 and 2002 was approximately $17,661,000, $16,983,000 and $16,345,000 respectively. At the end of the period, the remaining maturities for certificate accounts were:

(In thousands)

March 31, 2004 (Unaudited)

December 31, 2003 (Audited) 2002

Certificate accounts maturing in: Under 12 months 12 to 36 months Over 36 months Total certificate accounts 8. Advances from Federal Home Loan Bank of Boston

$ 52,538 18,820 15,073 $ 86,431

$ 52,466 20,049 13,677 $ 86,192

$ 67,722 9,966 11,595 $ 89,283

The Bank has an agreement with Federal Home Loan Bank of Boston (“FHLBB”) providing for future credit availability of up to twenty times the amount of FHLBB stock held by the Bank, not to exceed 30% of its total assets. The Bank held $1,757,000 in Federal Home Loan Bank stock at March 31, 2004 and December 31, 2003. In additional to the outstanding advances, the Bank has a $2,540,000 line of credit available from FHLBB and a $2,000,000 line of credit available from another correspondent bank. F-16

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 FHLBB advances are secured by a blanket lien on the Bank’s assets. Outstanding advances with calendar-year maturity dates and weighted average cost of funds were as follows:

(In thousands)

March 31, 2004 (Unaudited) Weighted Average Cost

December 31, 2003 (Audited) Weighted Average Cost Weighted Average Cost 2002

Year of Maturity

Amount Due

Amount Due

Amount Due

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total advances 9. Income Taxes

$

— 5,012 5,123 5,223 6,828 2,939 2,380 703 657 684 579 10

— 4.92 % 5.59 % 5.07 % 4.47 % 4.36 % 4.16 % 4.01 % 4.09 % 4.09 % 4.13 % 3.94 % 4.77 %

$

— 9,864 5,123 5,223 6,828 2,939 2,380 703 657 684 579 10

— 3.41 % 5.59 % 5.07 % 4.47 % 4.36 % 4.16 % 4.01 % 4.09 % 4.09 % 4.13 % 3.94 % 4.37 %

$

9,112 4,270 4,336 4,406 5,978 1,555 1,462 — — — — —

3.31 % 5.63 % 5.92 % 5.31 % 4.57 % 5.00 % 4.38 % — — — — — 4.65 %

$ 30,138

$ 34,990

$ 31,119

Retained earnings at March 31, 2004 and December 31, 2003 includes approximately $755,000 for which no provision for Federal income tax has been made. This amount represents aggregate allocations of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses will create income for tax purposes only, which will be subjected to the then current corporate income tax rate. The Bank’s fully-owned subsidiary, the Naugatuck Valley Mortgage Servicing Corporation, qualifies and operates as a Connecticut passive investment company pursuant to legislation. Because the subsidiary earns income from passive investments which is exempt from Connecticut Corporation Business Tax and its dividends to the Bank are exempt from state tax, the Bank no longer expects to incur state income tax expense. F-17

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 9. Income Taxes - (Continued) Federal income taxes receivable and payable included in the balance sheet were:

(In thousands)

March 31, 2004 (Unaudited)

December 31, 2003 2002 (Audited)

Current tax receivable (payable) Deferred tax receivable Reserve for loan losses Post-retirement benefits Deferred income Depreciation Total deferred tax receivable Deferred tax payable Available-for-sale securities Depreciation Other items Total deferred tax payable Net deferred tax receivable

$

(140 )

$

26

$

(24 )

$

327 229 147 — 703

$ 340 246 117 — 703 $ (139 ) (110 ) (27 ) (276 ) $ 427

$ 314 254 177 21 766 $ (365 ) — (30 ) (395 ) $ 371

$

(170 ) (117 ) (21 ) (308 )

$

395

Deferred income taxes reflect the impact of “temporary differences” between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Principle items making up the deferred income tax provision include the provision for loan losses, accelerated tax depreciation and deferred mortgage fee income. The Bank records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not, that some or all of the deferred tax assets will not be realized. The Bank believes that all deferred tax assets will be realized in the future and that no valuation allowance is necessary. F-18

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 The provision for income tax expense for the three months ended March 31, 2004 and 2003, and the years ended December 31, 2003, 2002, and 2001 consists of:

Three Months Ended March 31, (In thousands) 2004 2003 2003

Year Ended December 31, 2002 (Audited) 2001

(Unaudited)

Current income tax expense Deferred income tax expense (benefit), due to: Post retirement benefits Reserve for loan losses Depreciation Deferred income Other items Total deferred income tax expense (benefit) Provision for income taxes

$ 165 17 13 7 (30 ) (6 ) 1 $ 166

$ 211 16 (13 ) (14 ) 9 8 6 $ 217

$ 651 8 (26 ) 131 60 (2 ) 171 $ 822

$ 978 36 (151 ) (21 ) 39 (1 ) (98 ) $ 880

$ 721 (84 ) (67 ) (12 ) (8 ) (8 ) (179 ) $ 542

A reconcilement of the statutory federal income tax rate applied to income before income taxes with the income tax provision is as follows:

(In thousands)

Three Months Ended 2004 2003 (Unaudited)

2003

Year Ended 2002 (Audited)

2001

Income tax expense at statutory rate of 34% Increase (decrease) in income tax expense due to: Changes in tax bad debt base year reserves Income exempt from income tax Other items, net Provision for income taxes

$ 185 — (16 ) (3 ) $ 166 F-19

$ 220 — — (3 ) $ 217

$ 894 (28 ) (46 ) 2 $ 822

$ 952 (74 ) — 2 $ 880

$ 586 (46 ) — 2 $ 542

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 10. Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios of 4.00% for Tier 1 capital to average assets, 4.00% for Tier 1 capital to risk-weighted assets, and 8.00% for total risk-based capital to risk-weighted assets. As of March 31, 2004 the Bank meets all capital requirements to which it is subject. At March 31, 2004 the Bank’s capital ratios were considered well capitalized for regulatory purposes. To be categorized as well capitalized, the Bank must maintain a Tier 1 capital to average assets ratio of 5.00%, a Tier 1 capital to risk-based ratio of at least 6.00%; and a total risk-based capital to risk-weighted assets ratio of at least 10.00%. There have been no subsequent conditions or events which management believes have changed the Bank’s status. Prior to its charter-conversion (see note 1), the Bank was subject to capital requirements established by The Office of Thrift Supervision (OTS). Under the regulations in effect at December 31, 2002, the Bank was required to maintain a minimum ratio of tangible capital to total adjusted assets of 1.50%; a minimum ratio of Tier 1 (core) capital to total adjusted assets of 4.00%; a minimum ratio of Tier I capital to risk-weighted assets of 4.00% and a minimum ratio of total (core and supplementary) capital to risk-weighted assets of 8.00%. At December 31, 2002, the Bank’s capital ratios were considered well capitalized for regulatory purposes. The following is a summary of the Bank’s actual capital as computed under the standards established by the FDIC and the OTS at March 31, 2004, and December 31, 2003 and 2002, respectively.

March 31, 2004 (In thousands) Amount (Unaudited) Ratio Amount

December 31, 2003 Ratio (Audited) Amount 2002 Ratio

Tier I Capital (to Average Assets in 2004 and 2003, and to Adjusted Total Assets in 2002) Tier I Risk-Based Capital (to Risk-Weighted Assets) Total Risk-Based Capital (to Risk-Weighted Assets) Tangible Equity Capital (to Tangible Assets)

$ 21,044 21,044 22,797 NA

8.83 % 15.01 % 16.26 % NA F-20

$ 20,658 20,658 22,372 NA

8.64 % 14.96 % 16.21 % NA

$ 18,818 18,818 20,487 18,818

8.30 % 14.12 % 15.37 % 8.30 %

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 11. Retirement Benefits Pension Plan The Bank participates in a multi-employer defined benefit pension plan covering all of its full time (as defined) employees who have been employed by the Bank for more than six months and are at least twenty-one years of age. Benefits under this plan become fully vested after five years of service. The Bank’s net pension cost for the period is the amount of contributions due. Total pension expense was $94,604 and $73,353 for the three months ended March 31, 2004 and 2003 compared with $335,300, $225,899 and $205,135 for the years ended December 31, 2003, 2002 and 2001. Current valuations of the Bank’s allocation of the plan’s pooled assets are not available. Defined Contribution Plan The Bank has a defined contribution 401(k) plan for eligible employees. During 2003, the plan was amended and restated to comply with various legislative acts, collectively referred to as “ GUST ”. As amended, the 401(k) plan permits participants to contribute the maximum percentage allowable subject to limits provided by the new law. The Bank provides 50% matching of employee contributions, with a maximum contribution on up to 6% of the employee’s salary. The Bank’s contribution vests over a 6 year graded vesting schedule. The Bank’s contribution to the plan was $17,836 and $15,657 for the three months ended March 31, 2004 and 2003 compared with $58,675, $23,000, and $23,434 for the years ended December 31, 2003, 2002 and 2001, respectively. Directors Retirement Plan The Bank sponsors a retirement and benefits plan for non-employee directors who attain age 70 and meet certain other qualifying criteria. Annual retirement benefits for qualifying individuals are payable in ten semi-annual installments. The plan is unfunded. Accrued expenses for the three months ended March 31, 2004 and 2003 were $3,035 and $4,560 respectively. Accrued expense for the years ended December 31, 2003, 2002 and 2001 were $29,665, $106,882, and $264,563 respectively. Healthcare Benefits In addition to providing pension benefits, the Bank provides certain health care benefits to retired employees. Substantially all of the Bank’s employees may become eligible for those benefits. The Bank’s policy is to accrue the expected cost of providing those benefits during the years that the employee renders the necessary service. Accrued expense (benefit) for the years ended December 31, 2003, 2002 and 2001 were $53,991, $(105,015), and $30,789. F-21

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 12. Comprehensive Income For the three months ended March 31, 2004 and 2003, and the years ended December 31, 2003, 2002 and 2001, the Bank’s comprehensive income was:

Three Months Ended March 31, (In thousands) 2004 2003 2003

Year Ended December 31, 2002 (Audited) 2001

(Unaudited)

Net income Other comprehensive income (loss): Unrealized gain (loss) on securities available for sale Reclassification adjustment for gains realized in net income Other comprehensive income (loss) before tax expense Income tax expense (benefit) related to items of other comprehensive income (loss) Other comprehensive income (loss) net of tax Total Comprehensive Income 13. Financial Instruments

$ 378 117 (24 ) 93 32 61 $ 439

$ 429 (118 ) — (118 ) (40 ) (78 ) $ 351

$ 1,806 (664 ) (1 ) (665 ) (226 ) (439 ) $ 1,367

$ 1,920 659 (3 ) 656 223 433 $ 2,353

$ 1,182 500 — 500 170 330 $ 1,512

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheet. The following table summarizes these financial instruments and other commitments and contingent liabilities as of March 31, 2004 and December 31, 2003 and 2002:

(In thousands)

March 31, 2004 (Unaudited)

December 31, 2003 (Audited) 2002

Commitments to extend credit: Loan commitments Unused lines of credit Amounts due mortgagors on construction loans Amounts due on commercial loans Commercial letters of credit Commitments to sell loans F-22

$

6,467 13,760 2,191 11,349 1,563 —

$

7,754 13,478 2,519 7,569 545 —

$ 10,986 14,650 1,168 4,017 599 491

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments are principally collateralized by mortgages on real estate, generally have fixed expiration dates or other termination clauses and may require payment of fees. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The estimated fair value of the Bank’s financial instruments follows:

March 31, 2004 (Unaudited) Carrying Amount Estimated Fair Value Carrying Amount

December 31, 2003 (Audited) Estimated Fair Value Carrying Amount Estimated Fair Value 2002

(In thousands)

Financial assets Cash and cash equivalents Investment securities Loans receivable, net Accrued income receivable Financial Liabilities Deposits Federal Home Loan Bank advances Mortgagors’ escrow accounts

$

11,918 32,914 182,311 1,029

$

11,918 32,939 184,399 1,029

$

9,775 38,727 180,378 1,071

$

9,775 38,743 184,572 1,071

$

18,158 33,876 166,046 1,045

$

18,158 33,907 174,464 1,045

$ 187,474 30,138 1,530

$ 188,517 31,027 1,530

$ 183,455 34,990 2,634

$ 184,636 35,944 2,634

$ 173,231 31,119 2,362

$ 174,276 32,556 2,362

14. Mutual Holding Company Reorganization and Minority Stock Issuance (unaudited) On May 17, 2004, the Board of Directors of the Bank unanimously adopted both a Plan of Reorganization and Minority Stock Issuance (the “Plan of Reorganization”) and a Plan of Charter Conversion. Pursuant to the Plan of Charter Conversion, the Bank will convert from a Connecticut-chartered mutual savings bank to a federal mutual savings bank. As soon as practicable after the completion of the charter conversion and pursuant to the Plan of Reorganization, the Bank will: (i) convert to a stock savings bank as the successor to the Bank in its current mutual form; (ii) organize a Stock Holding Company as a federally chartered corporation that will own 100% of the common stock of the Stock Bank; and (iii) organize a Mutual Holding Company as a federally chartered mutual holding company that will own at least 51% of the common stock of the Stock Holding Company so long as the Mutual Holding Company remains in existence. The Stock Bank will succeed to the business and operations of the Bank in its mutual form and the Stock Holding Company will sell a minority interest in its common stock in a public stock offering. F-23

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Notes to Consolidated Financial Statements Three Months Ended March 31, 2004 and 2003 (unaudited) and Years Ended December 31, 2003, 2002 and 2001 14. Mutual Holding Company Reorganization and Minority Stock Issuance (unaudited) - (Continued) The Plan of Reorganization must be approved by the Office of Thrift Supervision and by the Bank’s depositors. The Plan of Charter Conversion must be approved by the Office of Thrift Supervision, the Banking Commissioner of the State of Connecticut and the Bank’s Board of Corporators. Following the completion of the reorganization, all depositors who had membership or liquidation rights with respect to the Bank as of the effective date of the reorganization will continue to have such rights solely with respect to the Mutual Holding Company so long as they continue to hold deposit accounts with the Bank. In addition, all persons who become depositors of the Bank subsequent to the reorganization will have such membership and liquidation rights with respect to the Mutual Holding Company. The Stock Holding Company plans to offer to the public shares of common stock representing a minority ownership of the estimated pro forma market value of the Bank as determined by an independent appraisal. The Mutual Holding Company will maintain the majority ownership of the Stock Holding Company. Cost incurred in connection with the offering will be recorded as a reduction of the proceeds from the offering. If the transaction is not consummated, all costs incurred in connection with the transaction will be expensed. At March 31, 2004, no reorganization costs had been included in other assets. F-24

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You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this prospectus to any person or in any jurisdiction in which an offer or solicitation is not authorized or in which the person making an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make an offer or solicitation in those jurisdictions. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

(Proposed Holding Company for Naugatuck Valley Savings and Loan) Up to 2,472,500 Shares (Anticipated Maximum) COMMON STOCK Par Value $0.01 per share

PROSPECTUS

Ryan Beck & Co.
, 2004 These securities are not deposits or accounts and are not federally insured or guaranteed. Until or 25 days after commencement of the syndicated community offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus when acting as underwriters and with respect to their unsold allotments of subscriptions.

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution SEC filing fee(1) OTS filing fee OTS and Connecticut Charter Conversion Fees Connecticut filing fee NASD filing fee(1) Stock Market listing fee EDGAR, printing, postage and mailing Legal fees and expenses (including underwriter’s counsel fees) Accounting fees and expenses Appraiser’s fees and expenses Business Plan fees and expenses Marketing fees and expenses(1) Reorganization agent fees and expenses Transfer agent and registrar fees and expenses Certificate printing Miscellaneous Total $ 3,771 14,400 10,000 2,500 3,475 100,000 100,000 230,000 52,000 20,000 20,000 230,000 25,000 20,000 10,000 8,854

$ 850,000

(1)

Estimated expenses based on the registration of 2,975,625 shares at $10.00 per share. Indemnification of Directors and Officers

Item 14.

In accordance with federal law, Article XII of the Registrant’s Bylaws provide as follows: ARTICLE XII. INDEMNIFICATION The Subsidiary Holding Company shall indemnify all officers, directors and employees of the Subsidiary Holding Company, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Subsidiary Holding Company, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements. 1

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Item 15. None.

Recent Sales of Unregistered Securities

Item 16.

Exhibits and Financial Statement Schedules

The exhibits and financial statement schedules filed as a part of this registration statement are as follows: (a) List of Exhibits (filed herewith unless otherwise noted)

1 .1 1 .2 2 .1 3 .1 3 .2 4 .1 5 .1 8 .1 8 .2 10 .1 10 .2 10 .3 10 .4 10 .5 10 .6 10 .7 10 .8 10 .9 10 .10 10 .11 23 .1 23 .2 23 .3 24 .1 99 .1 99 .2 99 .3 99 .4

Engagement Letter between Naugatuck Valley Savings and Loan, S.B. and Ryan Beck & Co. Draft Form of Agency Agreement* Plan of Reorganization and Minority Stock Issuance Charter of Naugatuck Valley Financial Corporation Bylaws of Naugatuck Valley Financial Corporation Specimen Stock Certificate of Naugatuck Valley Financial Corporation Form of Opinion of Muldoon Murphy Faucette & Aguggia LLP re: Legality Form of Opinion of Muldoon Murphy Faucette & Aguggia LLP re: Federal Tax Matters Form of Opinion of Snyder & Haller, P.C. re: State Tax Matters Form of Naugatuck Valley Savings and Loan Employee Stock Ownership Plan and Trust Agreement Form of ESOP Loan Documents Form of Naugatuck Valley Financial Corporation and Naugatuck Valley Savings and Loan Employment Agreement Form of Naugatuck Valley Savings and Loan Change in Control Agreement Naugatuck Valley Savings and Loan Directors’ Retirement Plan Naugatuck Valley Savings and Loan Employee Savings Plan Form of Naugatuck Valley Savings and Loan Supplemental Executive Retirement Plan Form of Naugatuck Valley Savings and Loan Employee Severance Compensation Plan Naugatuck Valley Savings and Loan, S.B. Death Benefit Agreement with John C. Roman Naugatuck Valley Savings and Loan, S.B. Death Benefit Agreement with Dominic J. Alegi, Jr. Naugatuck Valley Savings and Loan, S.B. Death Benefit Agreement with Lee R. Schlesinger Consent of Muldoon Murphy Faucette & Aguggia LLP Consent of Snyder & Haller, P.C. Consent of Keller & Company, Inc. Powers of Attorney Appraisal Report of Keller & Company, Inc.(P) Marketing Materials* Subscription Order Form and Instructions* Draft of Naugatuck Valley Savings and Loan Foundation Gift Instrument

(P) *

The supporting financial schedules are filed in paper pursuant to Rule 202 of Regulation S-T. To be filed by amendment. (b) Financial Statement Schedules

All schedules have been omitted as not applicable or not required under the rules of Regulation S-X. 2

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Item 17.

Undertakings

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3

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SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Borough of Naugatuck, State of Connecticut, on June 15, 2004.

NAUGATUCK VALLEY FINANCIAL CORPORATION (IN ORGANIZATION)

By: /s/ JOHN C. ROMAN John C. Roman President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Name

Title

Date

/s/ JOHN C. ROMAN John C. Roman /s/ LEE R. SCHLESINGER Lee R. Schlesinger /s/ RONALD D. LENGYEL Ronald D. Lengyel /s/ CARLOS S. BATISTA Carlos S. Batista /s/ RICHARD M. FAMIGLIETTI Richard M. Famiglietti /s/ JAMES A. MENGACCI James A. Mengacci /s/ MICHAEL S. PLUDE Michael S. Plude /s/ CAMILO P. VIEIRA Camilo P. Vieira /s/ JANE H. WALSH Jane H. Walsh

President, Chief Executive Officer and Director

June 15, 2004

Vice President and Controller (principal accounting and financial officer) Chairman of the Board

June 15, 2004

June 15, 2004

Director

June 15, 2004

Director

June 15, 2004

Director

June 15, 2004

Director

June 15, 2004

Director

June 15, 2004

Director

June 15, 2004

4

EXHIBIT 1.1 CONFIDENTIAL April 27, 2004 Mr. John C. Roman President & Chief Executive Officer Naugatuck Valley Savings and Loan, S.B. 333 Church Street Naugatuck, CT 06770 Re: Proposed Mutual Holding Company Formation - Subscription Enhancement & Administrative Services Dear Mr. Roman: Ryan Beck & Co., Inc. ("RBCO") is pleased to submit this engagement letter setting forth the terms of the proposed engagement between RBCO and Naugatuck Valley Savings and Loan, S.B., (the "Institution" or the "Company") in connection with the potential corporate reorganization of the Institution and sale of common stock by the Institution. 1. BACKGROUND ON RYAN BECK Ryan Beck & Co., Inc. was organized in 1946 and is one of the nation's leading investment bankers for financial institutions. The firm is a registered broker-dealer with the Securities and Exchange Commission, a member of the National Association of Securities Dealers, Inc., Securities Industry Association and a member of the Securities Investor Protection Corporation. RBCO's Financial Institutions Group represents one of the largest such groups devoted solely to financial institution matters in the country. 2. MUTUAL HOLDING COMPANY FORMATION AND STOCK OFFERING The Institution is considering the reorganization into a two-tier mutual holding company structure by forming a mutual holding company and middle-tier holding company ("Holding Company") pursuant to applicable regulations. The common stock (the "Common Stock") would be offered in a subscription offering with any remaining shares sold in a community offering (collectively the "Offering"). In connection therewith, the Institution's Board of Directors would adopt a stock issuance plan (the "Plan") whereby shares of Common Stock would be offered for sale in the Offering. In connection with the Offering, RBCO would propose to act as financial advisor to the Institution with respect to the Plan and selling agent/manager with respect to the Offering of the shares of Common Stock in the Offering. Specific terms of services shall be set forth in a definitive agency

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 2 agreement (the "Definitive Agreement") between RBCO and the Institution to be executed on the date the offering document is declared effective by the appropriate regulatory authorities. 3. SERVICES TO BE PROVIDED BY RYAN BECK a. Advisory Services - Thorough planning is essential to a successful offering. RBCO serves as lead coordinator of the financial advisory, marketing and logistic efforts necessary to prepare for an offering. Our actions are intended to clearly define responsibilities and timetables, while avoiding costly surprises. We assume responsibility for the initial preparation of marketing materials--saving you time and legal expense. Moreover, as your investment banker, RBCO, will evaluate the financial, marketing and regulatory issues involved in the Offering. Our specific responsibilities include: - Advise with respect to business planning issues in preparation for a public offering; - Advise with respect to the choice of charter and form of organization; - Review and advise with respect to the Plan; - Review and provide input with respect to the Business Plan to be prepared in connection with the Offering; - Participate in drafting the Prospectus and assist in obtaining all requisite regulatory approvals; - Review and provide to the Board of Directors on the adequacy of the appraisal process; - Develop a marketing plan for the Offering including direct mail, advertising, community meetings and telephone solicitation; - Provide specifications and assistance in selecting data processing assistance, printer and other professionals; - Develop an operating plan for the Stock Sale Center (the "Center"); - Provide a list of equipment and supplies needed for the Center; - Draft marketing materials including letters, brochures, slide show script and advertisements; and - Assist in arranging market-makers for post-reorganization trading. b. Administrative Services and Stock Sale Center Management - RBCO will manage all aspects of the Offering. A successful Offering requires an enormous amount of attention to detail. Working knowledge and familiarity with the law and "lore" of bank regulators, Securities and Exchange Commission and NASD is essential. RBCO's experience in managing many thrift reorganizations and mutual holding company minority stock offerings will minimize the burden on your management and disruption to normal banking business. At the same time, our legal, accounting and regulatory background ensures that details are attended to in a professional fashion. An Offering requires accurate and timely record keeping and reporting. Furthermore, customer inquiries must be handled professionally and accurately. The Center centralizes all data and work effort relating to the Offering.

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 3 RBCO will supervise and administer the Center. We will train Center staff to help record stock orders, answer customer inquiries and handle special situations as they arise. Center activities include the following: - Provide experienced on-site registered representatives to minimize disruption of day-to-day business; - Identify and organize space for the Center, the focal point of sales and proxy solicitation activity; - Administer the Center. All substantive stock and proxy related matters will be handled by employees of RBCO; - Organize and implement all proxy solicitation efforts (if applicable); - Prepare procedures for processing proxies, stock orders and cash, and for handling requests for information; - RBCO will outsource all Offering agent/data processing/transfer agent functions. The cost of such services will be borne by the Institution and are subject to separate agreement. RBCO will provide the Institution with the proposed agreements for such services prior to the execution of such agreements by RBCO or the Institutions; - Provide scripts, training and guidance for the telephone team in soliciting proxies and in the stock sales telemarketing effort; - Educate the Institution's directors, officers and employees about the Reorganization and Offering, their roles and relevant securities laws; - Train branch managers and customer - contact employees on the proper response to stock purchase inquiries; - Train and supervise Center staff assisting with proxy and order processing; - Prepare daily sales reports for management and ensure funds received balance to such reports; - Coordinate functions with the data processing agent, printer, transfer agent, stock certificate printer and other professionals; - Design and implement procedures for handling IRA and Keogh orders; and - Provide post-offering subscriber assistance and management of the pro-ration process. c. Securities Marketing Services - RBCO uses various sales techniques including direct mail, advertising, community investor meetings, telephone solicitation, and if necessary, selling group formation. The sales approach is tailored to fit your specific situation. Our techniques are designed to attract a stockholder base comprised largely of community oriented individuals loyal to the Institution. Our specific actions include: - Assign licensed registered representatives from our staff to work at the Center to solicit orders on behalf of the Institution from eligible prospects who have been targeted as likely and desirable stockholders by RBCO with the concurrence of the Institution; - Assist management in developing a list of potential investors who are viewed as priority prospects;

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 4 - Respond to inquiries concerning the Offering and investment opportunities; - Organize, coordinate and participate in community informational meetings. These meetings are intended to both relieve customer anxiety and attract potential investors. The meetings generate widespread publicity for the Offering while providing local exposure of the Institution and promoting favorable stockholder relations; - Supervise and conduct a telemarketing campaign to identify prospects from among the Institution's customer base; - Continually advise management on market conditions and the community's responsiveness to the Offering; and - If appropriate assemble a selling group of selected local broker-dealers to assist in selling stock during the offering. In so doing, prepare broker "fact sheets" and arrange "road shows" for the purpose of stimulating local interest in the stock and informing the brokerage community of the particulars of the Offering. 4. COMPENSATION a. For its services hereunder, the Institution will pay to RBCO a total inclusive Advisory and Marketing fee of 1%. (However, the aggregate amount of this fee shall not exceed $230,000) For stock sold by a group of NASD member firms (which will include RBCO) pursuant to a syndicated community offering solely managed by RBCO (the "Selling Group"), a fee equal to one percent (1.00%), which fee along with the fee payable directly by the Company to selected dealers shall not exceed six percent (6.00%) in the aggregate. In consultation with RBCO, the Institution shall be authorized to determine which NASD member firms participate in the syndicated community offering and the extent of their participation. RBCO will not commence sales of the stock through members of the Selling Group without the specific prior approval of the Company. Such fees (less the amount of any advance payments) are to be paid to RBCO at the closing of the Offering. The Institution will pay RBCO $25,000 upon execution of this letter which will be applied to any fees due hereunder, including fees payable pursuant to subparagraph (b) below. If, pursuant to a resolicitation undertaken by the Institution, RBCO is required to provide significant additional services, the parties shall mutually agree to the dollar amount of the additional compensation due (if any). No fees shall be paid to RBCO on stock sold to board, management and employees of the Institution and to any employee stock ownership plan or any other benefit plan of the Institution. b. If, after adoption of the Plan, (i) the Plan is abandoned or terminated by the Institution; (ii) the Offering is not consummated by March 31, 2006; (iii) RBCO terminates this relationship because there has been a material adverse change in the financial condition or operations of the Institution since December 31, 2003; or (iv) immediately prior to commencement of the Offering, RBCO terminates this relationship because in its opinion, which shall have been formed in good faith after reasonable determination and consideration of all relevant factors, there has been a failure to satisfactorily disclose all relevant information in the disclosure documents or the existence of market conditions which might render the sale of the shares by the Institution hereby

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 5 contemplated inadvisable; RBCO shall not be entitled to the fees set forth above under subparagraph (a) but in addition to reimbursement of its reasonable out-of-pocket expenses as set forth in paragraph 7 below, shall be entitled to receive for its advisory and administrative services a fee of $25,000. 5. MARKET MAKING If applicable, RBCO agrees to use its best efforts to maintain a market and to solicit other broker-dealers to make a market in the Common Stock after the Offering so that there are at least three market makers for the Common Stock after the Offering. 6. DOCUMENTS The Institution and its counsel will complete, file with the appropriate regulatory authorities and, as appropriate, amend from time to time, the information to be contained in the Institution's applications to banking and securities regulators and any related exhibits thereto. In this regard, the Institution and its counsel will prepare a prospectus and any other necessary disclosure documents relating to the offering of the Common Stock in conformance with applicable rules and regulations. As the Institution's financial advisor, RBCO will in conjunction with counsel, conduct an examination of the relevant documents and records of the Institution and will make such other reasonable investigation as deemed necessary and appropriate under the circumstances. The Institution agrees to make all such documents, records and other information deemed necessary by RBCO, or its counsel, available to them upon reasonable request. RBCO's counsel will prepare, subject to the approval of the Institution's counsel, the Definitive Agreement. RBCO's counsel shall be selected by RBCO, subject to the approval of the Institution. 7. EXPENSES AND REIMBURSEMENT The Institution will bear all of its expenses in connection with the Reorganization and the Offering of its Common Stock including, but not limited to, the Institution's attorney fees, NASD filing fees, "blue sky" legal fees, expenses for appraisal, auditing and accounting services, advertising expenses, printing expenses, "road show" expenses, syndicate related expenses, temporary personnel expenses and the preparation of stock certificates. In the event RBCO incurs such expenses on behalf of the Institution, the Institution shall pay or reimburse RBCO for such reasonable fees and expenses regardless of whether the Reorganization is successfully completed. RBCO will not incur any single expense of more than $1,000, pursuant to this paragraph without the prior approval of the Institution. The Institution also agrees to reimburse RBCO for reasonable out-of-pocket expenses, including legal fees and expenses, incurred by RBCO in connection with the services contemplated hereunder. RBCO will not incur legal fees (excluding the out-of-pocket expenses of counsel) in excess of $40,000 without the approval of the Institution. RBCO will not incur reimbursable direct out-of-pocket expenses in excess of $15,000 without the consent of the Institution. The parties acknowledge, however, that such cap may be increased by the mutual consent of the Institution and RBCO in the

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 6 event of any material delay in the Offering which would require an update of the financial information in tabular form contained in the Prospectus for a period later than that set forth in the original Prospectus filing. Not later than three days before closing, we will provide you with a detailed accounting of all reimbursable expenses to be paid at closing. 8. BLUE SKY To the extent required by applicable state law, RBCO and the Institution will need to obtain or confirm exemptions, qualifications or registration of the Common Stock under applicable state securities laws and NASD policies. The cost of such legal work and related filing fees will be paid by the Institution to the law firm furnishing such legal work. The Institution will cause the counsel performing such services to prepare a Blue Sky memorandum related to the Offering including RBCO's participation therein and shall furnish RBCO a copy thereof addressed to RBCO or upon which such counsel shall state RBCO may rely. 9. AVAILABILITY OF "STARS" PROGRAM As an additional service to the Institution, RBCO will make available for a period of 1 year following the completion of the Offering, advisory services through the RBCO Strategic Advisory Services ("STARS") program. The undersigned will serve as the senior relationship manager for this program. If the Institution elects to avail itself of the STARS program, RBCO will meet with the Institution at its request. RBCO also will provide opinions and recommendations, upon request, for the areas covered below: Valuation Analysis Merger and Acquisition Planning and Analysis Merger and Acquisition Trends Planning, Forecasting & Competitive Strategy Capital, Asset & Liability Structure & Management Stock Repurchase Programs Dividend Policy Dividend Reinvestment Programs Market Development and Sponsorship of Bank Securities Financial Disclosure Financial Relations Financial Reports Branch Sales and Purchases Stock Benefit Plan Analysis and Advisory Stockholder & Investor Relations Presentations & Programs Fairness Opinions Scanning of Potential Acquisition Candidates Based on Published Statement Information (This screening does not extend to any in-depth merger and acquisition analyses or studies which are available under RBCO's normal fee schedule, and does not include retention of RBCO by the Institution for any specific merger/acquisition situation.)

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 7 If the Institution elects to utilize the STARS program RBCO will waive the regular retainer fee and hourly charges for this program for the first year. The Institution also will reimburse RBCO's reasonable out-of-pocket expenses incurred in conjunction with the performance of these services. Such out-of-pocket expenses shall include travel, legal and other miscellaneous expenses. RBCO will not incur any single expense in excess of $1,000 pursuant to this paragraph without the prior approval of the Institution. 10. INDEMNIFICATION The Definitive Agreement will provide for indemnification of the type usually found in underwriting agreements as to certain liabilities, including liabilities under the Securities Act of 1933. The Institution also agrees to defend, indemnify and hold harmless RBCO and its officers, directors, employees and agents against all claims, losses, actions, judgments, damages or expenses, including but not limited to reasonable attorneys' fees, arising solely out of the engagement described herein, except that such indemnification shall not apply to RBCO's own bad faith, willful misconduct or gross negligence. 11. CONFIDENTIALITY To the extent consistent with legal requirements and except as otherwise set forth in the Prospectus, all information given to RBCO by the Institution, unless publicly available or otherwise available to RBCO without restriction to breach of any confidentiality agreement ("Confidential Information"), will be held by RBCO in confidence and will not be disclosed to anyone other than RBCO's agents without the Institution's prior approval or used for any purpose other than those referred to in this engagement letter. Upon any termination of its engagement, RBCO shall promptly deliver to the Institution all materials specifically produced for it and will return to the Institution all Confidential Information provided to RBCO during the course of its engagement hereunder. 12. NASD MATTERS RBCO has an obligation to file certain documents and to make certain representations to the National Association of Security Dealers ("NASD") in connection with the Offering. The Institution agrees to cooperate with RBCO and provide such information as may be necessary for RBCO to comply with all NASD requirements applicable to it in connection with its participation as contemplated herein in the Offering. RBCO is and will remain through completion of the Offering a member in a good standing of the NASD and will comply with all applicable NASD requirements. 13. OBLIGATIONS (a) Except as set forth below, this engagement letter is merely a statement of intent. While RBCO and the Institution agree in principle to the contents hereof and propose to proceed promptly and in good faith to work out the arrangements with respect to the Offering, any legal obligations

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 8 between RBCO and the Institution shall be only: (i) those set forth herein in paragraphs 2, 3 and 4 regarding services and payments; (ii) those set forth in paragraph 7 regarding reimbursement for certain expenses; (iii) those set forth in paragraph 10 regarding indemnification; (iv) those set forth in paragraph 11 regarding confidentiality; and (v) as set forth in a duly negotiated and executed Definitive Agreement. (b) The obligation of RBCO to enter into the Definitive Agreement shall be subject to there being, in RBCO's opinion, which shall have been formed in good faith after reasonable determination and consideration of all relevant factors: (i) no material adverse change in the condition or operation of the Institution; (ii) satisfactory disclosure of all relevant information in the disclosure documents and a determination that the sale of stock is reasonable given such disclosures; (iii) no market conditions which might render the sale of the shares by the Institution hereby contemplated inadvisable; and (iv) agreement that the price established by the independent appraiser is reasonable in the then prevailing market conditions. 14. INDEPENDENT CONTRACTOR; NO FIDUCIARY DUTY The Company acknowledges and agrees that it is a sophisticated business enterprise and that RBCO has been retained pursuant to this Agreement to act as financial advisor to the Company solely with respect to the matters set forth herein. In such capacity, RBCO shall act as an independent contractor, and any duties of RBCO arising out of this engagement pursuant to this Agreement shall be contractual in nature and shall be owed solely to the Company. Each party disclaims any intention to impose any fiduciary duty on the other. 15. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts executed and to be wholly performed therein without giving effects to its conflicts of laws principles or rules. Any dispute here under shall be brought in a court in the State of New Jersey. 16. WAIVER OF TRAIL BY JURY EACH OF RBCO AND THE COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT.

Mr. John C. Roman Naugatuck Valley Savings and Loan, S.B. Page 9 Please acknowledge your agreement to the foregoing by signing in the place provided below and returning one copy of this letter to our office together with the retainer payment in the amount of $25,000. We look forward to working with you. RYAN BECK & CO., INC.
BY: /s/ Mark B. Cohen --------------------------------Mark B. Cohen Managing Director

Accepted and Agreed to This 28 Day of April, 2004 NAUGATUCK VALLEY SAVINGS AND LOAN, S.B.
BY: /s/ John C. Roman --------------------------------John C. Roman President & Chief Executive Officer

Cc: Douglas P. Faucette Victor Cangelosi

EXHIBIT 2.1 PLAN OF REORGANIZATION AND MINORITY STOCK ISSUANCE NAUGATUCK VALLEY SAVINGS AND LOAN, S.B. NAUGATUCK, CONNECTICUT Adopted as of May 17, 2004 and Amended and Restated as of June 15, 2004

TABLE OF CONTENTS
PAGE ---1 2 6 11 12 13 14 14 15 15 17 20 22 23 23 23 24 24

1. 2. 3. 3A. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

Introduction.................................................................. Definitions................................................................... General Procedure for the Reorganization...................................... Establishment and Funding of Charitable Foundation............................ Total Number of Shares and Purchase Price of Conversion Stock................. Subscription Rights of Eligible Account Holders (First Priority).............. Subscription Rights of Tax-qualified Employee Stock Benefit Plans (Second Priority).................................................... Subscription Rights of Supplemental Eligible Account Holders (Third Priority)........................................................... Subscription Rights of Other Members (Fourth Priority)........................ Community Offering, Syndicated Community Offering and Other Offerings............................................................ Limitations on Subscriptions and Purchases of Conversion Stock................ Timing of Subscription Offering; Manner of Exercising Subscription Rights and Order Forms..................................................... Payment for Conversion Stock.................................................. Account Holders in Nonqualified States or Foreign Countries................... Voting Rights of Shareholders................................................. Transfer of Deposit Accounts.................................................. Requirements Following Conversion for Registration, Market Making and Stock Exchange Listing..................................................... Directors and Officers of the Bank............................................

i

18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

Requirements for Stock Purchases by Directors and Officers Following the Reorganization............................................... Restrictions on Transfer of Stock............................................. Restrictions on Voting Holding Company Stock.................................. Adoption of Federal Stock Charter and Bylaws.................................. Tax Rulings or Opinions....................................................... Stock Compensation Plans...................................................... Dividend and Repurchase Restrictions on Stock................................. Payment of Fees to Brokers.................................................... Effective Date................................................................ Amendment or Termination of the Plan.......................................... Interpretation of the Plan....................................................

24 24 25 25 25 26 26 26 27 27 27

ii

1. INTRODUCTION. For purposes of this section, all capitalized terms have the meanings ascribed to them in Section 2. The Board of Directors of the Bank has unanimously adopted this Plan of Reorganization and Minority Stock Issuance pursuant to which the Bank will reorganize into a mutual holding company structure under the laws of the United States. This Plan is being adopted in connection with the Bank's adoption of a separate Plan of Charter Conversion pursuant to which the Bank will convert from a Connecticut-chartered mutual savings bank to a federal mutual savings bank. It is intended that the Charter Conversion will occur immediately or as soon as practicable prior to the Reorganization. As a result, this Plan has been drafted and should be interpreted assuming the Bank is in the federal mutual savings bank form of organization and the Charter Conversion has been consummated. As part of the Reorganization and in accordance with this Plan, a mutual holding company to be known as Naugatuck Valley Mutual Holding Company (the "MHC") will be established, as well as Naugatuck Valley Financial Corporation (the "Holding Company"), which will be a federal corporation. In addition, a federally-chartered stock savings bank, which will be named Naugatuck Valley Savings and Loan, will also be established. The Holding Company will be a majority-owned subsidiary of the MHC at all times so long as the MHC remains in existence, and the Bank will be a wholly-owned subsidiary of the Holding Company. The Plan also provides that non-transferable subscription rights to purchase up to 49.9% of the common stock of the Holding Company ("Conversion Stock") shall be granted to certain deposit account holders of the Bank pursuant to the Plan and in accordance with the regulations of the OTS. This Reorganization and the Offerings will permit the Bank to control the amount of capital being raised to enable the Bank to more prudently deploy the proceeds, while at the same time enabling the Bank to: (1) support future lending and operational growth, including branching activities and acquisitions of other financial institutions or financial services companies; (2) increase its ability to render services to the communities it serves; (3) compete more effectively with commercial banks and other financial institutions for new business opportunities; and (4) increase its equity capital base and access the capital markets when needed. In furtherance of the Bank's commitment to its community, the Plan provides for the establishment of a charitable foundation as part of the Reorganization and Offerings. The charitable foundation is intended to complement the Bank's existing community reinvestment activities in a manner that will allow the Bank's local communities to share in the growth and profitability of the Holding Company and the Bank over the long term. Consistent with the Bank's goal, the Holding Company intends to donate to the charitable foundation immediately following the Offerings a number of shares of its authorized but unissued Holding Company Common Stock in an amount up to 2% of the Holding Company Common Stock issued in the Offerings and to the MHC in the Reorganization. 1

This Plan is subject to the approval of the OTS and must be adopted by at least a majority of the total number of outstanding votes eligible to be cast by Voting Members at the Special Meeting. 2. DEFINITIONS. As used in this Plan, the terms set forth below have the following meaning: ACTING IN CONCERT means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement or understanding; or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. A person or company which acts in concert with another Person or company ("other party") shall also be deemed to be acting in concert with any Person who is also acting in concert with that other party, except that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated and participants or beneficiaries of any such Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert solely as a result of their common interests as participants or beneficiaries. When Persons act together for such purpose, their group is deemed to have acquired their stock. The determination of whether a group is Acting in Concert shall be made solely by the Board of Directors of the Bank or by Officers designated by such Board and may be based on any evidence upon which the Board or such designees chooses to rely, including, without limitation, joint account relationships or the fact that such Persons have filed joint Schedules 13D or Schedules 13G with the SEC with respect to other companies. Directors of the Holding Company, the Bank and the MHC shall not be deemed to be Acting in Concert solely as a result of their membership on any such board or boards. ACTUAL PURCHASE PRICE means the price per share at which the Conversion Stock is ultimately sold by the Holding Company in the Offerings in accordance with the terms hereof. AFFILIATE means a Person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. ASSOCIATE, when used to indicate a relationship with any Person, means (i) savings association, a corporation or organization (other than the MHC, the Holding Company, the Bank or a majority-owned subsidiary of the MHC, the Holding Company or the Bank) of which such Person is a senior officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person 2

serves as trustee or in a similar fiduciary capacity, provided, however, that such term shall not include any Tax-Qualified Employee Stock Benefit Plan in which such Person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person or who is a director or officer of the MHC, the Holding Company or the Bank or any of their subsidiaries. BANK means Naugatuck Valley Savings and Loan, S.B., a Connecticut-chartered mutual savings bank, or Naugatuck Valley Savings and Loan, a federally-chartered mutual savings bank, as the context of this Plan requires. BANK BENEFIT PLANS includes, but is not limited to, Tax Qualified Employee Stock Benefit Plans and Non-Tax Qualified Employee Stock Benefit Plans. BANK COMMON STOCK means the common stock of the Bank, par value $1.00 per share, which stock will not be insured by the FDIC or any other governmental authority, all of which will be held by the Holding Company. CHARTER CONVERSION means the conversion of the Bank's charter from a Connecticut state-chartered mutual savings bank charter to a federally chartered mutual savings bank charter. CODE means the Internal Revenue Code of 1986, as amended. COMMUNITY OFFERING means the offering for sale by the Holding Company of any shares of Conversion Stock not subscribed for in the Subscription Offering to such Persons within or without counties of Fairfield and New Haven Counties, Connecticut as may be selected by the Holding Company and the Bank in their sole discretion and to whom a copy of the Prospectus is delivered by or on behalf of the Holding Company. CONTROL (including the terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. CONVERSION STOCK means the Holding Company Common Stock to be issued to the MHC, to be contributed by the Holding Company to the Foundation and to be sold by the Holding Company in the Offerings pursuant to the Plan. The Conversion Stock will not be insured by the FDIC or any other governmental authority. DEPOSIT ACCOUNT means any withdrawable account as defined in Section 561.42 of the Rules and Regulations of the OTS, including a demand account as defined in Section 561.16 of the Rules and Regulations of the OTS. ELIGIBLE ACCOUNT HOLDER means any Person holding a Qualifying Deposit on the Eligibility Record Date for purposes of determining Subscription Rights. 3

ELIGIBILITY RECORD DATE means the date for determining Eligible Account Holders and is the close of business on April 30, 2003. ESOP means a Tax Qualified Employee Stock Benefit Plan adopted by the MHC, Holding Company or the Bank in connection with the Reorganization, the purpose of which shall be to acquire capital stock of the Holding Company, including Conversion Stock. ESTIMATED PRICE RANGE means the range of the estimated aggregate pro forma market value of the total number of shares of Conversion Stock to be issued in the Offerings, as determined by the Independent Appraiser in accordance with Section 4 hereof. FOUNDATION means a charitable foundation that will qualify as an exempt organization under Section 501(c)(3) of the Code the establishment and funding of which is contemplated by Section 3A herein. FDIC means the Federal Deposit Insurance Corporation or any successor thereto. HOLDING COMPANY means Naugatuck Valley Financial Corporation, a stock corporation to be organized under the laws of the United States. Upon completion of the Reorganization, the Holding Company shall hold all of the outstanding capital stock of the Bank. HOLDING COMPANY COMMON STOCK means the common stock of the Holding Company, par value $.01 per share, which stock cannot and will not be insured by the FDIC or any other governmental authority. INDEPENDENT APPRAISER means the independent investment banking or financial consulting firm retained by the Holding Company and the Bank to prepare an appraisal of the estimated pro forma market value of the Conversion Stock. INITIAL PURCHASE PRICE means the price per share to be paid initially by Participants for shares of Conversion Stock subscribed for in the Subscription Offering and by Persons for shares of Conversion Stock ordered in the Community Offering and/or Syndicated Community Offering. MANAGEMENT PERSON means any Officer or director of the Bank or any Affiliate of the Bank and any person Acting in Concert with such Officer or director. MEMBER means any Person qualifying as a member of the Bank in accordance with its federal mutual charter and bylaws adopted in connection with the Plan of Charter Conversion, or any Person who would qualify as a member of the Bank in accordance with such federal mutual charter and bylaws but for the fact that such federal mutual charter and bylaws are not yet effective with the OTS, as the context of this Plan requires, and the 4

laws of the United States, and any Person qualifying as a member of the MHC in accordance with the mutual charter and bylaws and the laws of the United States. MHC means Naugatuck Valley MHC, a company organized under the laws of the United States. Upon completion of the Reorganization, the MHC shall hold at least 50.1% of the outstanding Holding Company Common Stock. MINORITY STOCKHOLDER means any owner of the Holding Company's Common Stock other than the MHC and the Foundation. OFFERINGS mean the offering of Conversion Stock to Persons other than the MHC and the Foundation in the Subscription Offering, the Community Offering and the Syndicated Community or Public Offering. OFFICER means the president, chief executive officer, vice-president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer and any other person performing similar functions with respect to any organization whether incorporated or unincorporated. ORDER FORM means the form or forms to be provided by the Holding Company, containing all such terms and provisions as set forth in Section 11 hereof, to a Participant or other Person by which Conversion Stock may be ordered in the Offerings. OTHER MEMBER means a Voting Member who is not an Eligible Account Holder or a Supplemental Eligible Account Holder. OTS means the Office of Thrift Supervision or any successor thereto. PARTICIPANT means any Eligible Account Holder, Tax-Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holder or Other Member, but does not include the MHC or the Foundation. PERSON means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a limited liability partnership, a trust, an unincorporated organization or a government or any political subdivision thereof. PLAN and PLAN OF REORGANIZATION mean this Plan of Reorganization and Minority Stock Issuance as adopted by the Board of Directors of the Bank and any amendment hereto approved as provided herein. PROSPECTUS means the one or more documents to be used in offering the Conversion Stock in the Offerings. PROXY STATEMENT means the document used to solicit approval of the Plan and the funding of the Foundation by Voting Members. 5

PUBLIC OFFERING means an underwritten firm commitment offering to the public through one or more underwriters. QUALIFYING DEPOSIT means the aggregate balance of all Deposit Accounts in the Bank of (i) an Eligible Account Holder at the close of business on the Eligibility Record Date, provided such aggregate balance is not less than $50, and (ii) a Supplemental Eligible Account Holder at the close of business on the Supplemental Eligibility Record Date, provided such aggregate balance is not less than $50. REORGANIZATION means the reorganization of the Bank into the MHC and the organization of the Holding Company as a subsidiary of the MHC and the Stock Bank as a subsidiary of the Holding Company pursuant to this Plan. STOCK BANK means the federally chartered stock savings bank resulting from the conversion of the Bank to stock form pursuant to this Plan. SEC means the Securities and Exchange Commission. SPECIAL MEETING means the Special Meeting of Members of the Bank called for the purpose of soliciting the Members' approval of this Plan and the funding of the Foundation, including any adjournments or postponents of such meeting. SUBSCRIPTION OFFERING means the offering of the Conversion Stock to Participants. SUBSCRIPTION RIGHTS mean nontransferable rights to subscribe for Conversion Stock granted to Participants pursuant to the terms of this Plan. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER means any Person, except directors and Officers of the Bank and their Associates, holding a Qualifying Deposit at the close of business on the Supplemental Eligibility Record Date. SUPPLEMENTAL ELIGIBILITY RECORD DATE, if applicable, means the date for determining Supplemental Eligible Account Holders and shall be required if the Eligibility Record Date is more than 15 months prior to the date of the approval of the Plan by the OTS. If applicable, the Supplemental Eligibility Record Date shall be the last day of the calendar quarter preceding OTS approval of the Plan. SYNDICATED COMMUNITY OFFERING means the offering for sale by a syndicate of broker-dealers to the general public of shares of Conversion Stock not purchased in the Subscription Offering and the Community Offering. TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLAN means any defined benefit plan or defined contribution plan, such as an employee stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which is established for the benefit of the 6

employees of the MHC, the Holding Company and/or the Bank and any Affiliate thereof and which, with its related trust, meets the requirements to be "qualified" under Section 401 of the Code as from time to time in effect. A "Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or defined contribution stock benefit plan that is not so qualified. VOTING MEMBER means a Person who at the close of business on the Voting Record Date is entitled to vote as a Member of the Bank in accordance with its federal mutual charter and bylaws adopted in connection with the Plan of Charter Conversion. VOTING RECORD DATE means the date or dates for determining the eligibility of Members to vote at the Special Meeting. 3. GENERAL PROCEDURE FOR REORGANIZATION. (1) Organization of the Holding Companies and the Bank The Reorganization will occur immediately or as soon as practicable after the Charter Conversion. The Reorganization will be effected as follows: (i) the Bank will organize an interim stock savings bank as a wholly owned subsidiary ("Interim One"); (ii) Interim One will organize a stock corporation as a wholly owned subsidiary ("Holding Company"); (iii) Interim One will organize an interim federal savings bank as a wholly owned subsidiary ("Interim Two"); (iv) the Bank will convert its charter to a federal stock savings bank charter and Interim One will exchange its charter for a federal mutual holding company charter to become the MHC; (v) sequentially with step (iv), Interim Two will merge with and into the Stock Bank with the Stock Bank as the resulting institution; (vi) former members of the Bank will become members of the MHC; (vii) MHC will contribute 100% of the issued common stock of the Stock Bank to the Holding Company; and (viii) the Holding Company will issue a majority of its common stock to the MHC. Contemporaneously with the Reorganization, the Holding Company will offer for sale in the Offerings shares of Holding Company Common Stock representing up to 49.9% the pro forma market value of the Holding Company and the Bank. Upon the consummation of the Reorganization, the legal existence of the Bank will not terminate, but the MHC will be a continuation of the Bank. All assets, rights, obligations and liabilities of whatever nature of the Bank that are not expressly retained by the MHC shall be transferred to the Stock Bank as part of the Reorganization. All property of the Bank (not expressly retained by the MHC), including its right, title and interest in all property of whatsoever kind and nature, interest and asset of every conceivable value or benefit then existing or pertaining to the Bank, or which would inure to the Bank immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed, will vest in the MHC and will then be transferred to the Stock Bank. The Stock Bank will have, hold and enjoy the same in its right and fully and to the same extent as the same was possessed, held and enjoyed by the Bank. The Stock Bank will continue to have, succeed to and be responsible for all the rights, liabilities and obligations the 7

Bank had when it was in mutual form and will maintain its headquarters and operations at the Bank's present locations. Upon consummation of the Reorganization, substantially all of the assets and liabilities (including the savings accounts, demand accounts, tax and loan accounts, United States Treasury general accounts, or United States Treasury Time Deposit Accounts, as defined in the OTS regulations) of the Bank that are not expressly retained by the MHC shall become the assets and liabilities of the Stock Bank, which will thereupon become an operating savings association subsidiary of the Holding Company and of the MHC. The Bank will apply to the OTS to have the Holding Company receive or retain (as the case may be) up to 50% of the net proceeds of the Stock Offering, or such other amount as may be determined by the Board of Directors. The Stock Bank may distribute additional capital to the Holding Company following the Reorganization, subject to the OTS regulations governing capital distributions. The Board of Director of the Bank also intend to take all necessary steps to establish the Foundation and to fund the Foundation in the manner set forth in Section 3A hereof. (b) Effect on Deposit Accounts and Borrowings Each deposit account in the Bank on the effective date of the Reorganization will remain a deposit account in the Stock Bank in the same amount and upon the same terms and conditions, and will continue to be federally insured up to the legal maximum by the FDIC in the same manner as each deposit account existed in the Bank immediately prior to the Reorganization. Upon consummation of the Reorganization, all loans and other borrowings from the Bank shall retain the same status with the Stock Bank after the Reorganization as they had with the Bank immediately prior to the Reorganization. (3) The Bank Upon completion of the Reorganization, the Stock Bank will be authorized to exercise any and all powers, rights and privileges of, and will be subject to all limitations applicable to, capital stock savings associations under federal law and regulations. A copy of the proposed charter and bylaws of the Stock Bank is attached hereto as EXHIBIT A and made a part of this Plan. The Reorganization will not result in any reduction of the amount of retained earnings and general loss reserves will be accounted for by the MHC, the Holding Company and the Stock Bank on a consolidated basis in accordance with generally accepted accounting principles. The initial members of the Board of Directors of the Stock Bank will be the members of the existing Board of Directors of the Bank. The Stock Bank will be wholly-owned by the Holding Company. The Holding Company will be wholly-owned by its stockholders who will consist of the MHC and, initially, the persons who purchase Conversion Stock. Upon the effective date of the Reorganization, the voting and membership rights of Members will be transferred to the MHC, subject to the conditions specified below. 8

(4) The Holding Company The Holding Company will be authorized to exercise any and all powers, rights and privileges, and will be subject to all limitations applicable to savings and loan holding companies and mutual holding companies under federal law and regulations. The initial members of the Board of Directors of the Holding Company will be appointed by the Bank. Thereafter, the voting stockholders of the Holding Company will elect approximately one-third of the Holding Company's directors annually. A copy of the proposed charter and bylaws of the Holding Company is attached hereto as EXHIBIT B and made a part of this Plan. The Holding Company will have the power to issue shares of Holding Company Common Stock to persons other than the MHC. However, so long as the MHC is in existence, the MHC will be required to own at least a majority of the Holding Company Common Stock. The Holding Company may issue any amount of non-voting stock to persons other than the MHC. The Holding Company will be authorized to undertake one or more minority stock offerings of less than 50% in the aggregate of the total outstanding Holding Company Common Stock, and the Holding Company intends to offer for sale up to 49.9% of Holding Company Common Stock in the Offerings. (5) The Mutual Holding Company As a mutual corporation, the MHC will have no stockholders. The members of the MHC will have exclusive voting authority as to all matters requiring a vote of members under the charter of the MHC. Persons who have membership rights with respect to the Bank under its existing charter immediately prior to the Reorganization shall continue to have such rights solely with respect to the MHC after Reorganization so long as such persons remain depositors of the Stock Bank after the Reorganization. In addition, all persons who become depositors of the Stock Bank following the Reorganization will have membership rights with respect to the MHC. The rights and powers of the MHC will be defined by the MHC's charter and bylaws as attached hereto as EXHIBIT C and by the statutory and regulatory provisions applicable to savings and loan holding companies and mutual holding companies. In particular, the MHC shall be subject to the limitations and restrictions imposed on savings and loan holding companies by Section 10(o)(5) of the Home Owners' Loan Act of 1933, as amended. The initial members of the Board of Directors of the MHC will be the existing Board of Directors of the Bank. Thereafter, approximately one-third of the directors of the MHC will be elected annually by the members of the MHC who will consist of the former Members of the Bank and all persons who become depositors of the Stock Bank after the Reorganization. (6) Charters and Bylaws Copies of the proposed charter and bylaws of the Stock Bank, the Holding Company and the MHC are attached hereto as EXHIBIT A, EXHIBIT B AND EXHIBIT C, respectively, and made a part of this Plan. By their approval of this Plan, the Voting Members 9

shall have approved and adopted the charter and bylaws of the Stock Bank, the Holding Company and the MHC. The total shares of Holding Company Common Stock authorized under the Holding Company charter will exceed the shares of Holding Company Common Stock to be issued to the MHC and the Minority Stockholders in the Reorganization. (g) Rights of Owners of the MHC Following the Reorganization, all persons who had membership or liquidation rights with respect to the Bank as of the effective date of the Reorganization will continue to have such rights solely with respect to the MHC. All existing proxies granted by members of the Bank to the Board of Directors of the Bank shall automatically become proxies granted to the Board of Directors of the MHC; provided, however, such proxies may not be voted by the Board of Directors of the Bank at the Special Meeting. In addition, all persons who become depositors of the Stock Bank subsequent to the Reorganization also will have membership and liquidation rights with respect to the MHC. In each case, no person who ceases to be the holder of a Deposit Account with the Stock Bank shall have any membership or liquidation rights with respect to the MHC. (h) Conversion of MHC to Stock Form Following the completion of the Reorganization, the MHC may elect to convert to stock form in accordance with applicable law and regulation (a "Conversion Transaction"). There can be no assurance when, if ever, a Conversion Transaction will occur, and the Board of Directors has no present intent or plan to undertake a Conversion Transaction. If the Conversion Transaction does not occur, the MHC will continue to own a majority of the Holding Company Common Stock of the Holding Company. In a Conversion Transaction, the MHC would merge with and into the Stock Bank or the Holding Company (at the discretion of the MHC), and certain depositors of the Stock Bank would receive the right to subscribe for a number of shares of common stock of the new stock holding company formed in connection with the Conversion Transaction, as determined by the formula set forth in the following paragraphs. The additional shares of Holding Company Common Stock of the new Holding Company issued in the Conversion Transaction would be sold at their aggregate pro forma market value determined by an independent appraisal. Any Conversion Transaction shall be fair and equitable to Minority Stockholders. In any Conversion Transaction, Minority Stockholders, if any, will be entitled to maintain the same percentage ownership interest in the new Holding Company after the Conversion Transaction as their ownership interest in the Holding Company immediately prior to the Conversion Transaction (i.e., the Minority Ownership Interest), subject only to the adjustments (if required by federal or state law, regulation, or regulatory policy) to reflect the market value of assets of the MHC (other than common stock of the Holding Company). At the sole discretion of the Board of Directors of the MHC and the Holding Company, a Conversion Transaction may be effected in any other manner necessary to qualify 10

the Conversion Transaction as a tax-free reorganization under applicable federal and state tax laws, provided such Conversion Transaction does not diminish the rights and ownership interest of Minority Stockholders as set forth in the preceding paragraphs. A Conversion Transaction would require the approval of applicable federal regulators, and would be presented to a vote of the members of the MHC. Under current OTS policy, if a Conversion Transaction were to occur, the transaction would require the approval of a majority of the holders of the Holding Company Common Stock, other than the MHC. In addition, federal regulatory policy requires that in any Conversion Transaction the members of the MHC will be accorded the same stock purchase priorities as if the MHC were a mutual savings association converting to stock form. (i) Applications and Regulatory and Member Approval The Bank will take the necessary steps to prepare and file the Notice of Reorganization and Application for Approval of a Minority Stock Issuance, including the Plan, together with all requisite material, with the OTS for approval. The Bank also will cause copies of the Plan to be made available at each office of the Bank for inspection by Members. Once the Notice of Reorganization and Application for Approval of a Minority Stock Issuance are filed, the Bank will cause to be published, in accordance with the requirements of applicable regulations of the OTS, notice of the filing with the OTS of the Notice of Reorganization and Application for Approval of a Minority Stock Issuance, and will post notice of the filing of the Notice of Reorganization and Application for Approval of a Minority Stock Issuance in each office of the Bank. Promptly following receipt of requisite approval of the OTS, this Plan and the funding of the Foundation will be submitted to the Voting Members for their consideration and approval at the Special Meeting. The Bank shall mail to all Voting Members as of the Voting Record Date, at their last known address appearing on the records of the Bank, a proxy statement describing the Plan and the funding of the Foundation which will be submitted to a vote of the Voting Members at the Special Meeting. If the Plan and the funding of the Foundation are approved by the affirmative vote of a majority of the total number of votes eligible to be cast by Voting Members at the Special Meeting, the Bank shall take all other necessary organizational steps pursuant to applicable laws and regulations to amend its charter and bylaws to authorize the issuance of its capital stock to the Holding Company and to fund the Foundation at the time the Reorganization is consummated. As soon as practicable after the adoption of the Plan by the Board of Directors of the Bank, the proposed Board of Directors of the Holding Company shall adopt the Plan by at least a two-thirds vote. The proposed Board of Directors of the Holding Company shall cause to be submitted to the OTS such applications as may be required for approval of the Holding Company's acquisition of the Bank and a Registration Statement to the SEC to register the Conversion Stock under the Securities Act of 1933, as amended. The proposed Board of Directors of the Holding Company shall also register the Conversion Stock under any applicable state securities laws, subject to Section 13 hereof. Upon registration and after the receipt of all 11

required regulatory approvals, the Conversion Stock shall be first offered for sale in a Subscription Offering to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account Holders, if applicable, and Other Members. It is anticipated that any shares of Conversion Stock remaining unsold after the Subscription Offering will be sold through a Community Offering, a Syndicated Community Offering and/or a Public Offering. The purchase price per share for the Conversion Stock shall be a uniform price determined in accordance with Section 4 hereof. The Holding Company shall purchase all of the capital stock of the Bank with an amount of the net proceeds received by the Holding Company from the sale of Conversion Stock as shall be determined by the Boards of Directors of the Holding Company and the Bank and as shall be approved by the OTS. (j) Expenses The Holding Company and the Bank may retain and pay for the services of financial and other advisors and investment bankers to assist in connection with any or all aspects of the Reorganization, including in connection with the Subscription Offering, Community Offering and/or any Syndicated Community Offering or Public Offering, the payment of fees to brokers and investment bankers for assisting Persons in completing and/or submitting Order Forms. All fees, expenses, retainers and similar items shall be reasonable. 3A. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION. As part of the Reorganization, the Bank intends to establish a charitable foundation that will qualify as an exempt organization under Section 501(c)(3) of the Code and to donate to the Foundation from authorized but unissued shares of Holding Company Common Stock, an amount up to 2% of the number of shares of Holding Company Common Stock issued in the Offerings and to the MHC in the Reorganization. The Foundation is being formed in connection with the Reorganization to complement the Bank's existing community reinvestment activities and to share with the Bank's local community a part of the Bank's financial success as a locally headquartered, community minded, financial services institution. The funding of the Foundation with Holding Company Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Holding Company and the Bank over the long-term. The Foundation will be dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within its local community of not less than 5% of the average fair value of Foundation assets each year, less certain expenses. To serve the purposes for which it was formed and maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a limited portion of the Holding Company Common Stock contributed to it by the Holding Company. The Board of Directors of the Foundation will be comprised of individuals who are Officers and/or Directors of the Holding Company or the Bank. Additionally, for at least five years after the Foundation's organization, one member of the Foundation's Board of Directors must be a member of the local community that is not an officer, director or employee of the 12

MHC, the Holding Company, the Bank or any of its Affiliates and who has experience with local charitable organizations and grant making. The Board of Directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation. 4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK. (a) The aggregate price at which shares of Conversion Stock shall be sold in the Offerings shall be based on a pro forma valuation of the aggregate market value of the Conversion Stock prepared by the Independent Appraiser. The valuation shall be based on financial information relating to the Holding Company and the Bank, market, financial and economic conditions, a comparison of the Holding Company and the Bank with selected publicly-held financial institutions and holding companies and with comparable financial institutions and holding companies and such other factors as the Independent Appraiser may deem to be important, including, but not limited to, the projected operating results and financial condition of the Holding Company and Bank. The valuation shall be stated in terms of an Estimated Price Range, the maximum of which shall generally be no more than 15% above the average of the minimum and maximum of such price range and the minimum of which shall generally be no more than 15% below such average. The valuation shall be updated during the pendency of the Reorganization as market and financial conditions warrant and as may be required by the OTS. (b) Based upon the independent valuation, the Boards of Directors of the Holding Company and the Bank shall fix the Initial Purchase Price and the number of shares of Conversion Stock to be offered in the Subscription Offering, Community Offering and/or Syndicated Community Offering. The purchase price per share for the Holding Company Common Stock shall be a uniform price determined in accordance with applicable OTS rules and regulations. The Actual Purchase Price and the total number of shares of Conversion Stock to be issued in the Offerings shall be determined by the Boards of Directors of the Holding Company and the Bank upon conclusion of the Offerings in consultation with the Independent Appraiser and any financial advisor or investment banker retained by the Holding Company and the Bank in connection with such Offerings. (c) Subject to the approval of the OTS, the Estimated Price Range may be increased or decreased to reflect market, financial and economic conditions prior to completion of the Reorganization or to fill the Order of the Tax-Qualified Employee Stock Benefit Plans, and under such circumstances the Holding Company and the Bank may increase or decrease the total number of shares of Conversion Stock to be issued in the Reorganization to reflect any such change. Notwithstanding anything to the contrary contained in this Plan, no resolicitation of subscribers shall be required and subscribers shall not be permitted to modify or cancel their subscriptions unless the gross proceeds from the sale of the Conversion Stock in the Offerings are less than the minimum or more than 15% above the maximum of the Estimated Price Range set forth in the Prospectus. In the event of an increase in the total number of shares offered in the 13

Offerings due to an increase in the Estimated Price Range, the priority of share allocation shall be as set forth in this Plan. 5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY). (a) Each Eligible Account Holder shall receive, as first priority and without payment, Subscription Rights to purchase up to the greater of (i) $150,000 of Conversion Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Conversion Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Eligible Account Holders, in each case subject to Sections 10 and 13 hereof. (b) In the event of an oversubscription for shares of Conversion Stock pursuant to Section 5(a), available shares shall be allocated among subscribing Eligible Account Holders so as to permit each such Eligible Account Holder, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any available shares remaining after each subscribing Eligible Account Holder has been allocated the lesser of the number of shares subscribed for or 100 shares shall be allocated among the subscribing Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the Qualifying Deposit of each such subscribing Eligible Account Holder bears to the total Qualifying Deposits of all such subscribing Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued. Subscription Rights of Eligible Account Holders who are also directors or Officers of the Holding Company or the Bank and their Associates shall be subordinated to those of other Eligible Account Holders to the extent that they are attributable to increased deposits during the one-year period preceding the Eligibility Record Date. 14

6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS (SECOND PRIORITY). Tax-Qualified Employee Stock Benefit Plans shall receive, without payment, Subscription Rights to purchase in the aggregate up to 10% of the Holding Company Common Stock issued in the Offerings and contributed to the Foundation, including any shares of Holding Company Common Stock to be issued as a result of an increase in the Estimated Price Range after commencement of the Subscription Offering and prior to completion of the Reorganization. The subscription rights granted to Tax-Qualified Employee Stock Benefit Plans shall be subject to the availability of shares of Conversion Stock after taking into account the shares of Conversion Stock purchased by Eligible Account Holders; provided, however, that in the event that the total number of shares of Conversion Stock is increased to any amount greater than the number of shares representing the maximum of the Estimated Price Range as set forth in the Prospectus ("Maximum Shares"), the ESOP shall have a priority right to purchase any such shares exceeding the Maximum Shares up to an aggregate of 10% of Holding Company Common Stock issued in the Offerings and contributed to the Foundation. Shares of Conversion Stock purchased by any individual participant ("Plan Participant") in a Tax-Qualified Employee Stock Benefit Plan using funds therein pursuant to the exercise of subscription rights granted to such Participant in his individual capacity as an Eligible Account Holder and/or supplemental Eligible Account Holder and/or purchases by such Plan Participant in the Community Offering shall not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of calculating the maximum amount of Conversion Stock that Tax-Qualified Employee Stock Benefit Plans may purchase pursuant to the first sentence of this Section 6 if the individual Plan Participant controls or directs the investment authority with respect to such account or subaccount. Consistent with applicable laws and regulations and policies and practices of the OTS, the Tax-Qualified Employee Stock Benefit Plans may use funds contributed by the Holding Company or the Bank and/or borrowed from an independent financial institution to exercise such Subscription Rights, and the Holding Company and the Bank may make scheduled discretionary contributions thereto, provided that such contributions do not cause the Holding Company or the Bank to fail to meet any applicable regulatory capital requirement. The Tax-Qualified Employee Stock Benefit Plans shall not be deemed to be an Associate or Affiliate of or Person Acting in Concert with any Management Person. 7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY). (a) In the event that the Eligibility Record Date is more than 15 months prior to the date of the OTS approval, then, and only in that event, a Supplemental Eligibility Record Date shall be set and each Supplemental Eligible Account Holder shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $150,000 of Conversion Stock in the Subscription Offering (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering and (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Conversion Stock 15

offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Supplemental Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Supplemental Eligible Account Holders, in each case subject to Sections 10 and 13 hereof and the availability of shares of Conversion Stock for purchase after taking into account the shares of Conversion Stock purchased by Eligible Account Holders and Tax-Qualified Employee Stock Benefit Plans through the exercise of Subscription Rights under Sections 5 and 6 hereof. (b) In the event of an oversubscription for shares of Conversion Stock pursuant to Section 7(a), available shares shall be allocated among subscribing Supplemental Eligible Account Holders so as to permit each such Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation (including the number of shares, if any, allocated in accordance with Section 5(a)) equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of their respective Qualifying Deposits bears to the total amount of the Qualifying Deposits of all such subscribing Supplemental Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued. 8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY). (a) Each Other Member shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $150,000 of Conversion Stock in the Subscription Offering (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering) and (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, subject to Sections 10 and 13 hereof and the availability of shares of Conversion Stock for purchase after taking into account the shares of Conversion Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans and Supplemental Eligible Account Holders, if any, through the exercise of Subscription Rights under Sections 5, 6 and 7 hereof. (b) If, pursuant to this Section 8, Other Members subscribe for a number of shares of Conversion Stock in excess of the total number of shares of Conversion Stock remaining, available shares shall be allocated among subscribing Other Members so as to permit each such Other Member, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Other Members whose subscriptions remain unsatisfied on a pro rata basis in the same proportion as each such Other Member's subscription bears to the total subscriptions of all such subscribing Other Members, provided that no fractional shares shall be issued. 9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING, PUBLIC OFFERING AND OTHER OFFERINGS. 16

(a) If less than the total number of shares of Conversion Stock are sold in the Subscription Offering, it is anticipated that all remaining shares of Conversion Stock shall, if practicable, be sold in a Community Offering. Subject to the requirements set forth herein, the manner in which the Conversion Stock is sold in the Community Offering shall have as the objective the achievement of the widest possible distribution of such stock. (b) In the event of a Community Offering, all shares of Conversion Stock which are not subscribed for in the Subscription Offering shall be offered for sale by means of a direct community marketing program, which may provide for the use of brokers, dealers or investment banking firms experienced in the sale of financial institution securities. Any available shares in excess of those not subscribed for in the Subscription Offering will be available for purchase by members of the general public to whom a Prospectus is delivered by the Holding Company or on its behalf, with preference given first to natural persons and trusts of natural persons residing in Fairfield and New Haven counties, Connecticut ("Preferred Subscribers"). (c) A Prospectus and Order Form shall be furnished to such Persons as the Holding Company and the Bank may select in connection with the Community Offering, and each order for Conversion Stock in the Community Offering shall be subject to the absolute right of the Holding Company and the Bank to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable following completion of the Community Offering. Available shares will be allocated first to each Preferred Subscriber whose order is accepted in an amount equal to the lesser of 100 shares or the number of shares subscribed for by each such Preferred Subscriber, if possible. Thereafter, unallocated shares shall be allocated among the Preferred Subscribers whose accepted orders remain unsatisfied in the same proportion that the unfilled order bears to the total unfilled orders of all Preferred Subscribers whose accepted orders remain unsatisfied, provided that no fractional shares shall be issued. If there are any shares remaining after all accepted orders by Preferred Subscribers have been satisfied, such remaining shares shall be allocated to other members of the general public who purchase in the Community Offering, applying the same allocation described above for Preferred Subscribers. (d) The amount of Conversion Stock that any Person may purchase in the Community Offering shall not exceed $150,000 of Conversion Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Conversion Stock or decreased to less than $150,000, subject to any required regulatory approval but without the further approval of Members or the resolicitation of subscribers; and provided further that to the extent applicable, and subject to the preferences set forth in Section 9(b) and (c) of this Plan and the limitations on purchases of Conversion Stock set forth in this Section 9(d) and Section 10 of this Plan, orders for Conversion Stock in the Community Offering shall first be filled to a maximum of 2% of the total number of shares of Conversion Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Bank may commence the Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering, and the Community Offering must be 17

completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Bank with any required regulatory approval. (e) Subject to such terms, conditions and procedures as may be determined by the Holding Company and the Bank, all shares of Conversion Stock not subscribed for in the Subscription Offering or ordered in the Community Offering may be sold by a syndicate of broker-dealers to the general public in a Syndicated Community Offering. Each order for Conversion Stock in the Syndicated Community Offering shall be subject to the absolute right of the Holding Company and the Bank to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable after completion of the Syndicated Community Offering. The amount of Conversion Stock that any Person may purchase in the Syndicated Community Offering shall not exceed $150,000 of Conversion Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Conversion Stock or decreased to less than $150,000, subject to any required regulatory approval but without the further approval of Members or the resolicitation of subscribers; and provided further that, to the extent applicable, and subject to the limitations on purchases of Conversion Stock set forth in this Section 9(e) and Section 10 of this Plan, orders for Conversion Stock in the Syndicated Community Offering shall first be filled to a maximum of 2% of the total number of shares of Conversion Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Bank may commence the Syndicated Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering and/or Community Offering, and the Syndicated Community Offering must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Bank with any required regulatory approval. (f) The Holding Company and the Bank may sell any shares of Conversion Stock remaining following the Subscription Offering, Community Offering and/or the Syndicated Community Offering in a Public Offering. The provisions of Section 10 hereof shall not be applicable to the sales to underwriters for purposes of the Public Offering but shall be applicable to sales by the underwriters to the public. The price to be paid by the underwriters in such an offering shall be equal to the Actual Purchase Price less an underwriting discount to be negotiated among such underwriters and the Bank and the Holding Company, subject to any required regulatory approval or consent. (g) If for any reason a Syndicated Community Offering or Public Offering of shares of Conversion Stock not sold in the Subscription Offering and the Community Offering cannot be effected, or in the event that any insignificant residue of shares of Conversion Stock is not sold in the Subscription Offering, Community Offering or Syndicated Community Offering, the Holding Company and the Bank shall use their best efforts to obtain other purchasers for such shares in such manner and upon such conditions as may be satisfactory to the OTS. 18

10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION STOCK. The following limitations shall apply to all purchases of Holding Company Common Stock in the Offerings: (1) The aggregate amount of outstanding Holding Company Common Stock owned or controlled by persons other than the MHC at the close of the Offerings shall be less than 50% of all outstanding Holding Company Common Stock. (b) Except in the case of Tax-Qualified Employee Stock Benefit Plans in the aggregate, as set forth in Section 10(h) hereof, and certain Eligible Account Holders and Supplemental Eligible Account Holders, as set forth in Sections 5(a)(ii) and (iii) and 7(a)(ii) and (iii) hereof, and in addition to the other restrictions and limitations set forth herein, the maximum amount of Holding Company Common Stock that any Person, any Person together with any Associates, or Persons otherwise Acting in Concert may, directly or indirectly, subscribe for or purchase in the Offerings, shall not exceed $200,000 of Conversion Stock in the Subscription Offering. (c) No Person may purchase fewer than 25 shares of Holding Company Common Stock in the Offerings, to the extent such shares are available; provided, however, that if the Actual Purchase Price is greater than $20.00 per share, such minimum number of shares shall be adjusted so that the aggregate Actual Purchase Price for such minimum shares will not exceed $500.00. (d) The aggregate amount of Holding Company Common Stock acquired in the Offerings, plus all prior issuances by the Holding Company, by any Non-Tax-Qualified Employee Stock Benefit Plan or any Management Person and his or her Associates, exclusive of any shares of Holding Company Common Stock acquired by such plan or Management Person and his or her Associates in the secondary market, shall not exceed 4.9% of the outstanding shares of Holding Company Common Stock at the conclusion of the Offerings. In calculating the number of shares held by any Management Person and his or her Associates under this paragraph, shares held by any Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan of the Holding Company or the Bank that are attributable to such Person shall not be counted. (e) The aggregate amount of Holding Company Common Stock or preferred stock acquired in the Offerings, plus all prior issuances by the Holding Company, by any Non-Tax-Qualified Employee Stock Benefit Plan or any Management Person and his or her Associates, exclusive of any Holding Company Common Stock acquired by such plan or Management Person and his or her Associates in the secondary market, shall not exceed 4.9% of the stockholders' equity of the Holding Company at the conclusion of the Offerings. In calculating the number of shares held by any Management Person and his or her Associates under this paragraph, shares held by any Tax-Qualified Employee Stock 19

Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan of the Holding Company or the Bank that are attributable to such Person shall not be counted. (f) The aggregate amount of Holding Company Common Stock acquired in the Offerings, plus all prior issuances by the Holding Company, by any one or more Tax-Qualified Employee Stock Benefit Plans, exclusive of any shares of Holding Company Common Stock acquired by such plans in the secondary market, shall not exceed 4.9% of the outstanding shares of Holding Company Common Stock at the conclusion of the Offerings. (g) The aggregate amount of Holding Company Common Stock or preferred stock acquired in the Offerings, plus all prior issuances by the Holding Company, by one or more Tax-Qualified Employee Stock Benefit Plans, exclusive of any shares of Holding Company Common Stock acquired by such plans in the secondary market, shall not exceed 4.9% of the stockholders' equity of the Holding Company at the conclusion of the Offerings. (h) The aggregate amount of Holding Company Common Stock acquired in the Offerings, plus all prior issuances by the Holding Company, by all stock benefit plans of the Holding Company or the Bank, other than employee stock ownership plans, shall not exceed 25% of the outstanding Holding Company Common Stock held by persons other than the MHC. (i) The aggregate amount of Holding Company Common Stock acquired in the Offerings, plus all prior issuances by the Holding Company, by all Non-Tax-Qualified Employee Stock Benefit Plans or Management Persons and their Associates, exclusive of any Holding Company Common Stock acquired by such plans or Management Persons and their Associates in the secondary market, shall not exceed 31% of the outstanding shares of Holding Company Common Stock, held by persons other than that MHC, at the conclusion of the Offerings. In calculating the number of shares held by Management Persons and their Associates under this paragraph or paragraph j. below, shares held by any Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan that are attributable to such persons shall not be counted. (j) The aggregate amount of Holding Company Common Stock or preferred stock acquired in the Offerings, plus all prior issuances by the Holding Company, by all Non-Tax-Qualified Employee Stock Benefit Plans or Management Persons and their Associates, exclusive of any Holding Company Common Stock acquired by such plans or Management Persons and their Associates in the secondary market, shall not exceed 31% of the stockholders' equity of the Holding Company, held by persons other than MHC, at the conclusion of the Offerings. 20

(k) For purposes of the foregoing limitations and the determination of Subscription Rights, (i) directors, Officers and employees of the Holding Company, the Bank or their subsidiaries shall not be deemed to be Associates or a group Acting in Concert solely as a result of their capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the individual trustees or beneficiaries of any such plan for purposes of determining compliance with the limitations set forth in Section 10(b) hereof, and (iii) shares purchased by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an individual in an account in such plan in which the individual has the right to direct the investment, including any plan of the Bank qualified under Section 401(k) of the Code, shall be aggregated and included in that individual's purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan. (l) Subject to any required regulatory approval and the requirements of applicable laws and regulations, but without further approval of the Members or resolicitation of subscribers, the Holding Company and the Bank may increase or decrease any of the individual or aggregate purchase limitations set forth herein to a percentage which does not exceed 5% of the total offering of shares of Holding Company Common Stock in the Offerings whether prior to, during or after the Subscription Offering, Community Offering and/or Syndicated Community Offering. In the event that an individual purchase limitation is increased after commencement of the Subscription Offering or any other offering, the Holding Company and the Bank shall permit any Person who subscribed for the maximum number of shares of Conversion Stock to purchase an additional number of shares, so that such Person shall be permitted to subscribe for the then maximum number of shares permitted to be subscribed for by such Person, subject to the rights and preferences of any Person who has priority Subscription Rights. In the event that any of the individual or aggregate purchase limitations are decreased after commencement of the Subscription Offering or any other offering, the orders of any Person who subscribed for more than the new purchase limitation shall be decreased by the minimum amount necessary so that such Person shall be in compliance with the then maximum number of shares permitted to be subscribed for by such Person. (m) The Holding Company and the Bank shall have the right to take all such action as they may, in their sole discretion, deem necessary, appropriate or advisable in order to monitor and enforce the terms, conditions, limitations and restrictions contained in this Section 10 and elsewhere in this Plan and the terms, conditions and representations contained in the Order Form, including, but not limited to, the absolute right (subject only to any necessary regulatory approvals or concurrences) to reject, limit or revoke acceptance of any subscription or order and to delay, terminate or refuse to consummate any sale of Conversion Stock that they believe might violate, or is designed to, or is any part of a plan to, evade or circumvent such terms, conditions, limitations, restrictions and representations. Any such action shall be final, conclusive and binding on all persons, and the Holding Company and the Bank and their respective Boards shall be free from any liability to any Person on account of any such action. 21

11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION RIGHTS AND ORDER FORMS. (a) The Offerings shall be conducted in compliance with 12 C.F.R. Part 563g and, to the extent applicable, Form OC. The Subscription Offering may be commenced concurrently with or at any time after the mailing of the Proxy Statement. The Subscription Offering may be closed before the Special Meeting, provided that the offer and sale of the Conversion Stock shall be conditioned upon the approval of the Plan by the Voting Members at the Special Meeting. (b) The exact timing of the commencement of the Subscription Offering shall be determined by the Holding Company and the Bank in consultation with the Independent Appraiser and any financial or advisory or investment banking firm retained by them in connection with the Reorganization. The Holding Company and the Bank may consider a number of factors, including, but not limited to, their current and projected future earnings, local and national economic conditions, and the prevailing market for stocks in general and stocks of financial institutions in particular. The Holding Company and the Bank shall have the right to withdraw, terminate, suspend, delay, revoke or modify any such Subscription Offering, at any time and from time to time, as they in their sole discretion may determine, without liability to any Person, subject to compliance with applicable securities laws and any necessary regulatory approval or concurrence. (c) The Holding Company and the Bank shall, promptly after the SEC has declared the Registration Statement, which includes the Prospectus, effective and all required regulatory approvals have been obtained, distribute or make available the Prospectus, together with Order Forms for the purchase of Conversion Stock, to all Participants for the purpose of enabling them to exercise their respective Subscription Rights, subject to Section 13 hereof. To the extent permitted by applicable law and regulation, the Holding Company and the Bank may elect to mail a Prospectus and Order Form only to those Participants who request such materials by returning a postage-paid card to the Holding Company and the Bank by a date specified in the letter informing them of their Subscription Rights. Under such circumstances, the Subscription Offering shall not be closed prior to the expiration of 30 days after the mailing by the Holding Company and the Bank of the postage-paid card to Participants. (d) A single Order Form for all Deposit Accounts maintained with the Bank by an Eligible Account Holder and any Supplemental Eligible Account Holder may be furnished, irrespective of the number of Deposit Accounts maintained with the Bank on the Eligibility Record Date and Supplemental Eligibility Record Date, respectively. No person holding a Subscription Right may exceed any otherwise applicable purchase limitation by submitting multiple orders for Conversion Stock. Multiple orders are subject to adjustment, as appropriate, on a pro rata basis and deposit balances will be divided equally among such orders in allocating shares in the event of an oversubscription. (e) The recipient of an Order Form shall have no less than 20 days and no more than 45 days from the date of mailing of the Order Form (with the exact termination date to be set forth on the Order Form) to properly complete and execute the Order Form and deliver it to the 22

Holding Company and the Bank. The Holding Company and the Bank may extend such period by such amount of time as they determine is appropriate. Failure of any Participant to deliver a properly executed Order Form to the Holding Company and the Bank, along with full payment (or authorization for full payment by withdrawal) for the shares of Conversion Stock subscribed for, within the time limits prescribed, shall be deemed a waiver and release by such person of any rights to subscribe for shares of Conversion Stock. Each Participant shall be required to confirm to the Holding Company and the Bank by executing an Order Form that such Person has fully complied with all of the terms, conditions, limitations and restrictions in the Plan. (f) The Holding Company and the Bank shall have the absolute right, in their sole discretion and without liability to any Participant or other Person, to reject any Order Form, including, but not limited to, any Order Form that is (i) improperly completed or executed; (ii) not timely received; (iii) not accompanied by the proper and full payment (or authorization of withdrawal for full payment) or, in the case of institutional investors in the Community Offering, not accompanied by an irrevocable order together with a legally binding commitment to pay the full amount of the purchase price prior to 48 hours before the completion of the Offerings; or (iv) submitted by a Person whose representations the Holding Company and the Bank believe to be false or who they otherwise believe, either alone, or Acting in Concert with others, is violating, evading or circumventing, or intends to violate, evade or circumvent, the terms and conditions of the Plan. Furthermore, in the event Order Forms (i) are not delivered and are returned to the Bank by the United States Postal Service or the Bank is unable to locate the addressee, or (ii) are not mailed pursuant to a "no mail" order placed in effect by the account holder, the Subscription Rights of the person to which such rights have been granted will lapse as though such person failed to return the contemplated Order Form within the time period specified thereon. The Holding Company and the Bank may, but will not be required to, waive any irregularity on any Order Form or may require the submission of corrected Order Forms or the remittance of full payment for shares of Conversion Stock by such date as they may specify. The interpretation of the Holding Company and the Bank of the terms and conditions of the Order Forms shall be final and conclusive. 23

12. PAYMENT FOR CONVERSION STOCK. (a) Payment for shares of Conversion Stock subscribed for by Participants in the Subscription Offering and payment for shares of Conversion Stock ordered by Persons in the Community Offering shall be equal to the Initial Purchase Price multiplied by the number of shares that are being subscribed for or ordered, respectively. Such payment may be made in cash, if delivered in person, or by check or money order at the time the Order Form is delivered to the Bank. The Bank, in its sole and absolute discretion, may also elect to receive payment for shares of Conversion Stock by wire transfer. In addition, the Holding Company and the Bank may elect to provide Participants and/or other Persons who have a Deposit Account with the Bank the opportunity to pay for shares of Conversion Stock by authorizing the Bank to withdraw from such Deposit Account an amount equal to the aggregate Initial Purchase Price of such shares. Payment may also be made by a Participant using funds held for such Participant's benefit by a Bank Benefit Plan to the extent that such plan allows participants or any related trust established for the benefit of such participants to direct that some or all of their individual accounts or sub-accounts be invested in Conversion Stock. If the Actual Purchase Price is less than the Initial Purchase Price, the Bank shall refund the difference to all Participants and other Persons, unless the Holding Company and the Bank choose to provide Participants and other Persons the opportunity on the Order Form to elect to have such difference applied to the purchase of additional whole shares of Conversion Stock. If the Actual Purchase Price is more than the Initial Purchase Price, the Bank shall reduce the number of shares of Conversion Stock ordered by Participants and other Persons and refund any remaining amount which is attributable to a fractional share interest, unless the Bank chooses to provide Participants and other Persons the opportunity to increase the Actual Purchase Price submitted by them. (b) Notwithstanding the above, if the Tax-Qualified Employee Stock Benefit Plans subscribe for shares during the Subscription Offering, such plans will not be required to pay for the shares at the time they subscribe but rather may pay for such shares of Holding Company Common Stock subscribed for by such plans at the Actual Purchase Price upon consummation of the Offerings, provided that, in the case of the ESOP, there is in force from the time of its subscription until the consummation of the Offerings, a loan commitment to lend to the ESOP, at such time, the aggregated price of the shares for which it subscribed. (c) If a Participant or other Person authorizes the Bank to withdraw the amount of the Initial Purchase Price from his or her Deposit Account, the Bank shall have the right to make such withdrawal or to freeze funds equal to the aggregate Initial Purchase Price upon receipt of the Order Form. Notwithstanding any regulatory provisions regarding penalties for early withdrawals from certificate accounts, the Bank may allow payment by means of withdrawal from certificate accounts without the assessment of such penalties. In the case of an early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if any applicable minimum balance requirement ceases to be met. In such case, the remaining balance will earn interest at the regular passbook rate. However, where any applicable minimum balance is maintained in such certificate account, the rate of return on the balance of the certificate account shall remain the same as prior to such early withdrawal. This waiver of 24

the early withdrawal penalty applies only to withdrawals made in connection with the purchase of Conversion Stock and is entirely within the discretion of the Holding Company and the Bank. (d) The Bank shall pay interest, at not less than the passbook rate, for all amounts paid in cash, by check or money order to purchase shares of Conversion Stock in the Subscription Offering and the Community Offering from the date payment is received until the date the Reorganization is completed or terminated. (e) The Holding Company will not offer or sell any of the Holding Company Common Stock proposed to be issued to any Person whose purchase would be financed by funds loaned, directly or indirectly, to the Person by the Bank. (f) Each share of Conversion Stock shall be non-assessable upon payment in full of the Actual Purchase Price. 13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES. The Holding Company and the Bank shall make reasonable efforts to comply with the securities laws of all jurisdictions in the United States in which Participants reside. However, no Participant will be offered or receive any Conversion Stock under the Plan if such Participant resides in a foreign country or resides in a jurisdiction of the United States with respect to which all of the following apply: (a) there are few Participants otherwise eligible to subscribe for shares under this Plan who reside in such jurisdiction; (b) the granting of Subscription Rights or the offer or sale of shares of Conversion Stock to such Participants would require any of the Holding Company or the Bank or their respective directors and Officers, under the laws of such jurisdiction, to register as a broker-dealer, salesman or selling agent or to register or otherwise qualify the Conversion Stock for sale in such jurisdiction, or any of the Holding Company or the Bank would be required to qualify as a foreign corporation or file a consent to service of process in such jurisdiction; and (c) such registration, qualification or filing in the judgment of the Holding Company and the Bank would be impracticable or unduly burdensome for reasons of cost or otherwise. 14. VOTING RIGHTS OF SHAREHOLDERS. Following consummation of the Reorganization, voting rights with respect to the Bank shall be held and exercised exclusively by the Holding Company as holder of all of the Bank's outstanding voting capital stock, voting rights with respect to the Holding Company shall be held and exercised exclusively by the holders of the Holding Company's voting capital stock, and voting rights with respect to the MHC shall be held and exercised exclusively by its eligible members. 15. TRANSFER OF DEPOSIT ACCOUNTS. 25

Each Deposit Account in the Bank at the time of the consummation of the Reorganization shall become, without further action by the holder, a Deposit Account in the Bank equivalent in withdrawable amount to the withdrawal value (as adjusted to give effect to any withdrawal made for the purchase of Conversion Stock), and subject to the same terms and conditions (except as to voting and liquidation rights) as such Deposit Account in the Bank immediately preceding consummation of the Reorganization. Holders of Deposit Accounts in the Bank shall not, as such holders, have any voting rights. 16. REQUIREMENTS FOLLOWING REORGANIZATION FOR REGISTRATION, MARKET MAKING AND STOCK EXCHANGE LISTING. In connection with the Reorganization, the Holding Company shall register the Holding Company Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, and shall undertake not to deregister such stock for a period of three years thereafter. The Holding Company also shall use its best efforts to (i) encourage and assist a market maker to establish and maintain a market for the Holding Company Common Stock, and (ii) list the Holding Company Common Stock on a national or regional securities exchange or to have quotations for such stock disseminated on the Nasdaq Stock Market. 17. DIRECTORS AND OFFICERS OF THE BANK. Each person serving as a director or Officer of the Bank at the effective time of the Reorganization shall continue to serve as a director or Officer of the Bank for the balance of the term for which the person was elected prior to the Reorganization, and until a successor is elected and qualified. 18. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE REORGANIZATION. For a period of three years following the Reorganization, the directors and Officers of the Holding Company and the Bank and their Associates may not purchase, without the prior written approval of the OTS, Holding Company Common Stock except from a broker-dealer registered with the SEC. This prohibition shall not apply, however, to (i) a negotiated transaction and involving more than 1% of the outstanding Holding Company Common Stock, and (ii) purchases of stock made by and held by any Tax-Qualified Employee Stock Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified Employee Stock Benefit Plan following the receipt of shareholder approval of such plan) even if such Holding Company Common Stock may be attributable to individual Officers or directors and their Associates. The foregoing restriction on purchases of Holding Company Common Stock shall be in addition to any restrictions that may be imposed by federal and state securities laws. 26

19. RESTRICTIONS ON TRANSFER OF STOCK. All shares of Conversion Stock which are purchased by Persons other than directors and Officers of the Holding Company or the Bank shall be transferable without restriction. Shares of Conversion Stock purchased by directors and Officers of the Holding Company or the Bank and their Associates on original issue from the Holding Company (by subscription or otherwise) shall be subject to the restriction that such shares shall not be sold or otherwise disposed of for value for a period of one year following the date of purchase, except for any disposition of such shares following the death of the original purchaser. The shares of Conversion Stock issued by the Holding Company to such directors and Officers shall bear the following legend giving appropriate notice of such one-year restriction: "The shares of stock evidenced by this Certificate are restricted as to transfer for a period of one year from the date of this Certificate pursuant to Part 575 of the Rules and Regulations of the Office of Thrift Supervision. These shares may not be transferred during such one-year period without a legal opinion of counsel for the Company that said transfer is permissible under the provisions of applicable law and regulation. This restrictive legend shall be deemed null and void after one year from the date of this Certificate." In addition, the Holding Company shall give appropriate instructions to the transfer agent for the Holding Company Common Stock with respect to the applicable restrictions relating to the transfer of restricted stock. Any shares issued at a later date as a stock dividend, stock split or otherwise with respect to any such restricted stock shall be subject to the same holding period restrictions as may then be applicable to such restricted stock. The foregoing restriction on transfer shall be in addition to any restrictions on transfer that may be imposed by federal and state securities laws. 20. RESTRICTIONS ON VOTING HOLDING COMPANY COMMON STOCK. The Charter of the Holding Company shall provide that in no event shall any record owner of any outstanding shares of Holding Company Common Stock who beneficially owns in excess of 10% of such outstanding shares, except the MHC, shall be entitled or permitted to any vote in respect to any shares held in excess of 10%. In addition, the Charter and Bylaws of the Holding Company will include provisions that eliminate cumulative voting for the election of directors and prohibit persons other than the Board of Directors of the Holding Company from calling special meetings of the stockholders of the Holding Company. 21. ADOPTION OF FEDERAL STOCK CHARTER AND BYLAWS. 27

As part of the Reorganization, the Bank shall take all appropriate steps to adopt a federal stock charter and bylaws to authorize the issuance of capital stock and otherwise to read in a form consistent with a federally chartered stock form savings bank. 22. TAX RULINGS OR OPINIONS. Consummation of the Reorganization is conditioned upon prior receipt by the Holding Company and the Bank of either a ruling or an opinion of counsel with respect to federal tax laws, and either a ruling or an opinion with respect to Connecticut tax laws, to the effect that consummation of the transactions contemplated hereby will not result in a taxable reorganization under the provisions of the applicable codes or otherwise result in any adverse tax consequences to the Holding Company and the Bank or to account holders receiving Subscription Rights before or after the Reorganization, except in each case to the extent, if any, that Subscription Rights are deemed to have fair market value on the date such rights are issued. 23. STOCK COMPENSATION PLANS. (a) The Holding Company and the Bank are authorized to adopt Tax-Qualified Employee Stock Benefit Plans in connection with the Reorganization, including without limitation an employee stock ownership plan. (b) Subsequent to the Reorganization, the Holding Company and the Bank are authorized to adopt Non-Tax Qualified Employee Stock Benefit Plans, including without limitation, stock option plans and restricted stock plans, provided however that, with respect to any such plan, the total number of shares of common stock for which options may be granted and the total amount of common stock granted as restricted stock must not exceed limitations set forth in Section 10 hereof. In addition, any such plan implemented during the one-year period subsequent to the date of consummation of the Reorganization: (i) shall be disclosed in the proxy solicitation materials for the Special Meeting of Members and in the Prospectus; (ii) in the case of stock option plans and employee recognition or grant plans, shall be submitted for approval by the holders of the Holding Company Common Stock no earlier than six months following consummation of the Reorganization; and (iii) shall comply with all other applicable requirements of the OTS. (c) Existing, as well as any newly-created, Tax-Qualified Employee Stock Benefit Plans may purchase shares of Conversion Stock in the Offerings, to the extent permitted by the terms of such benefit plans and this Plan. (d) The Holding Company and the Bank are authorized to enter into employment or severance agreements with their executive officers. 24. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK. The Holding Company may not declare or pay a cash dividend on its Holding Company Common Stock if the effect thereof would cause the regulatory capital of the Bank to be reduced 28

below the amount required under Section 567.2 of the Regulations. Otherwise, the Holding Company may declare dividends or make other capital distributions in accordance with Section 563b.520 of the Regulations. Following completion of the Offerings, the Holding Company may repurchase its Holding Company Common Stock consistent with Section 563b.510 and Section 563b.515 of the Regulations relating to stock repurchases, as long as such repurchases do not cause the regulatory capital of the Bank to be reduced below the amount required under Section 567.2 of the Regulations. The MHC may from time to time purchase Holding Company Common Stock. Subject to any notice or approval requirements of the OTS under the Regulations, the MHC may waive its right to receive dividends declared by the Holding Company. 25. PAYMENT OF FEES TO BROKERS. The Bank may elect to offer to pay fees on a per share basis to securities brokers who assist purchasers of Conversion Stock in the Offerings. 26. EFFECTIVE DATE. The effective date of the Reorganization shall be the date of the closing of the sale of all shares of Conversion Stock. The closing of the sale of all shares of Conversion Stock sold in the Offerings shall occur simultaneously and shall be conditioned upon the prior receipt of all requisite regulatory and other approvals. 27. AMENDMENT OR TERMINATION OF THE PLAN. If deemed necessary or desirable by the Board of Directors of the Bank, this Plan may be substantively amended, as a result of comments from regulatory authorities or otherwise, at any time prior to the solicitation of proxies from Members to vote on the Plan and at any time thereafter with the concurrence of the OTS. Any amendment to this Plan made after approval by the Members with the concurrence of the OTS shall not necessitate further approval by the Members unless otherwise required by the OTS. This Plan shall terminate if the sale of all shares of Conversion Stock is not completed within 24 months from the date of the Special Meeting. Prior to the earlier of the Special Meeting, this Plan may be terminated by the Board of Directors of the Bank without approval of the OTS; after the Special Meeting, the Board of Directors may terminate this Plan only with the approval of the OTS. 28. INTERPRETATION OF THE PLAN. All interpretations of this Plan and application of its provisions to particular circumstances by a majority of each of the Boards of Directors of the Holding Company and Bank shall be final, subject to the authority of the OTS. 29

NAUGATUCK VALLEY SAVINGS AND LOAN CHARTER SECTION 1. CORPORATE TITLE. The full corporate title of the savings bank is Naugatuck Valley Savings and Loan (the "Bank"). SECTION 2. OFFICE. The home office shall be located in the Borough of Naugatuck, Connecticut. SECTION 3. DURATION. The duration of the Bank is perpetual. SECTION 4. PURPOSE AND POWERS. The purpose of the Bank is to pursue any or all of the lawful objectives of a Federal savings bank chartered under section 5 of the Home Owners' Loan Act and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision (the "OTS"). SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the capital stock that the Bank has the authority to issue is five thousand (5,000), of which four (4,000) shares shall be common stock, par value $1.00 per share, and of which one thousand (1,000) shares shall be serial preferred stock, par value $1.00 per share. The shares may be issued from time to time as authorized by the Board of Directors without the approval of the shareholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Bank. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Bank), labor, or services actually performed for the Bank, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the Board of Directors of the Bank, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Bank that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance. Except for the shares issued in the initial organization of the Bank or in connection with the conversion of the Bank from the mutual to stock form of capitalization, no shares of capital stock (including shares issuable upon conversion, exchange or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the Bank other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share provided, that this restriction on voting separately by class or series shall not apply: (i) to any provision that would authorize the holders of preferred stock, voting as a class or series, to elect some members of the Board of Directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock; (ii) to any provision that would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Bank with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Bank if the preferred stock is exchanged for securities of such other corporation; provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the OTS, or the Federal Deposit Insurance Corporation; (iii) to any amendment that would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment that increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving bank in a merger or consolidation for the Bank, shall not be considered to be such an adverse change. A description of the different classes and series (if any) of the Bank's capital stock and a statement of the designations, and the relative rights, preferences, and limitations of the shares of each class of and series (if any) of capital stock are as follows: A. COMMON STOCK. Except as provided in this Section 5 (or in any supplementary sections hereto) the holders of the common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no right to cumulate votes in an election of directors. Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to payment of dividends, the full amount of dividends and of sinking fund, retirement fund, or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends. In the event of any liquidation, dissolution, or winding up of the Bank, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Bank available for distribution remaining after: (i) payment or provision for 2

payment of the Bank's debts and liabilities; (ii) distributions or provision for distributions in settlement of its liquidation account; and (iii) distributions or provision for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Bank. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock. B. PREFERRED STOCK. The Bank may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series: (i) the distinctive serial designation and the number of shares constituting such series; (ii) the dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s), the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends; (iii) the voting powers, full or limited, if any, of shares of such series; (iv) whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed; (v) the amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Bank; (vi) whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund; (vii) whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Bank and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (viii) the price or other consideration for which the shares of such series shall be issued; and (ix) whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock. 3

Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series. The Board of Directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series and, within the limitations set forth in this section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established. Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the Board of Directors, the Bank shall file with the Secretary of the OTS a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof. SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the Bank shall not be entitled to preemptive rights with respect to any shares of the Bank that may be issued. SECTION 7. DIRECTORS. The Bank shall be under the direction of a Board of Directors. The authorized number of directors, as stated in the Bank's bylaws, shall not be fewer than five (5) nor more than fifteen (15), except when a greater or lesser number is approved by the Director of the OTS, or his or her delegate. SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding anything contained in the Bank's charter and or bylaws to the contrary, for a period of five (5) years from the date of completion of an initial minority stock offering of shares of common stock of Naugatuck Valley Financial Corporation, the following provisions shall apply: A. BENEFICIAL OWNERSHIP LIMITATION. No person shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than ten percent (10%) of any class of an equity security of the Bank. This limitation shall not apply to Naugatuck Valley Mutual Holding Company or Naugatuck Valley Financial Corporation, a transaction in which the Bank forms a holding company without change in the respective beneficial ownership interests of its stockholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of shares by a tax-qualified employee stock benefit plan that is exempt from the approval requirements under 574.3(c)(1)(vii) of the OTS's regulations. In the event shares are acquired in violation of this Section 8, all shares beneficially owned by any person in excess of ten percent (10%) shall be considered "excess shares" and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the stockholders for a vote. For the purposes of this Section 8, the following definitions apply. 4

(A) The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the Bank. (B) The term "offer" includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value. (C) The term "acquire" includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise. (D) The term "security" includes non_transferable subscription rights issued pursuant to a plan of stock issuance as well as a "security" as defined in 15 U.S.C. ss. 78c(a)(10). (E) The term "acting in concert" means (i) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangements, whether written or otherwise. B. CALL FOR SPECIAL MEETINGS. Special meetings of stockholders relating to changes in control of the Bank or amendments to its charter shall be called only upon direction of the Board of Directors. SECTION 9. DEPOSIT ACCOUNTS. In any situation in which the priority of the accounts of the Bank is in controversy, all such accounts shall, to the extent of their withdrawable value, be debts of the Bank having at least as high a priority as the claims of general creditors of the Bank not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the Bank. SECTION 10. AMENDMENT OF CHARTER. Except as provided in Section 5 hereof, no amendment, addition, alteration, change, or repeal of this charter shall be made, unless such is first proposed by the Board of Directors of the Bank, approved by the stockholders by a majority of the total votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the OTS. 5

NAUGATUCK VALLEY SAVINGS AND LOAN
Attest: ----------------------------Bernadette A. Mole Secretary of the Bank By: -----------------------------------John C. Roman President and Chief Executive Officer

OFFICE OF THRIFT SUPERVISION
Attest: ----------------------------Secretary of the Office of Thrift Supervision By: -----------------------------------Director of the Office of Thrift Supervision

Effective Date: 6

NAUGATUCK VALLEY SAVINGS AND LOAN BYLAWS ARTICLE I - HOME OFFICE The home office of Naugatuck Valley Savings and Loan (the "Bank") shall be located at 333 Church Street, Naugatuck, Connecticut, in the County of New Haven, in the State of Connecticut. ARTICLE II - SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. All annual and special meetings of shareholders shall be held at the home office of the Bank or at such other convenient place as the Board of Directors may determine. SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the Bank for the election of directors and for the transaction of any other business of the Bank shall be held annually within 150 days after the end of the Bank's fiscal year on such date as the Board of Directors may determine. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision (the "OTS") or the Federal Stock Charter of the Bank, may be called at any time by the chairman of the board, the president, or a majority of the Board of Directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of ten percent or more of all the outstanding capital stock of the Bank entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered at the home office of the Bank addressed to the chairman of the board, the president, or the secretary. SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be conducted by the chairman of the annual or special meeting in accordance with the written procedures agreed to by the Board of Directors. The Board of Directors shall designate, when present, either the chairman of the board or one of its members to preside at such meetings. SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Bank as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders' meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting

adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken. SECTION 6. FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment. SECTION 7. VOTING LISTS. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Bank shall make a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Bank and shall be subject to inspection by any shareholder of record or the shareholder's agent at any time during usual business hours for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the Board of Directors may elect to follow the procedures prescribed in Section 552.6(d) of the OTS's regulations as now or hereafter in effect. SECTION 8. QUORUM. A majority of the outstanding shares of the Bank entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to constitute less than a quorum. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors. SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the Board of 2

Directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest. SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When ownership stands in the name of two or more persons, in the absence of written directions to the Bank to the contrary, at any meeting of the shareholders of the Bank, any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree. SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Bank if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither treasury shares of its own stock held by the Bank nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Bank, shall be voted at any meeting, or counted in determining the total number of outstanding shares at any given time for purposes of any meeting. SECTION 12. INSPECTORS OF ELECTION. In advance of any meeting of shareholders, the Board of Directors may appoint any person other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the Board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the Board of Directors in advance of the meeting or at the meeting by the chairman of the board or the president. Unless otherwise prescribed by regulations of the OTS, the duties of such inspectors shall include: determining the number of shares of stock and the voting power of each share, the shares 3

represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders. SECTION 13. NOMINATING COMMITTEE. The Board of Directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Bank. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Bank at least five days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Bank. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon. SECTION 14. NEW BUSINESS. Any new business to be taken up at the annual meeting of shareholders shall be stated in writing and filed with the secretary of the Bank at least five days before the date of the annual meeting, and all business so stated, proposed and filed shall be considered at the annual meeting; but no other proposal shall be acted upon the annual meeting. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. SECTION 15. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter thereof. 4

ARTICLE III - BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the Bank shall be under the direction of its Board of Directors. The Board of Directors shall annually elect a chairman of the board from among its members and, when present, the chairman of the board shall preside at its meetings. If the chairman of the board is not present, the directors present shall select one of its members to preside at its meetings. SECTION 2. NUMBER AND TERM. The Board of Directors shall consist of eight (8) members and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually. SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The Board of Directors may provide by resolution, the time and place, for holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of conference telephone or similar communications device by which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes. SECTION 4. QUALIFICATION. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Bank unless the Bank is a wholly owned subsidiary of a holding company. SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board or one-third of the directors. The persons authorized to call special meetings of the Board of Directors may fix any place, within the Bank's normal lending territory, as the place for holding any special meeting of the Board of Directors called by such persons. Members of the Board of Directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person for all purposes. SECTION 6. NOTICE. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the Bank receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. 5

SECTION 7. QUORUM. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6 of this Article III. SECTION 8. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is prescribed by regulation of the OTS or by these bylaws. SECTION 9. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors. SECTION 10. RESIGNATION. Any director may resign at any time by sending a written notice of such resignation to the home office of the Bank addressed to the chairman of the board. Unless otherwise specified, such resignation shall take effect upon receipt thereof by the chairman of the board. More than three consecutive absences from regular meetings of the Board of Directors, unless excused by resolution of the Board of Directors, shall automatically constitute a resignation, effective when such resignation is accepted by the Board of Directors. SECTION 11. VACANCIES. Any vacancy occurring on the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the Board of Directors for a term of office continuing only until the next election of directors by the shareholders. SECTION 12. COMPENSATION. Directors, as such, may receive a stated fee for their services. By resolution of the Board of Directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the Board of Directors may determine. SECTION 13. PRESUMPTION OF ASSENT. A director of the Bank who is present at a meeting of the Board of Directors at which action on any bank matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Bank within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders called expressly for that purpose, any director may be removed for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections 6

thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. For purposes of this section, removal for cause includes, as defined in 12 C.F.R. Section 563.39, or any successor regulation enacted by the OTS, "personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, [or a] willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order." SECTION 15. INTEGRITY OF DIRECTORS. A person is not qualified to serve as director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. SECTION 16. AGE LIMITATION. No person 70 years of age shall be eligible for election, reelection, appointment, or reappointment to the board of the Bank. No director shall serve as such beyond the annual meeting of the Bank following the director becoming 70. This age limitation does not apply to an advisory director. ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES SECTION 1. APPOINTMENT. The Board of Directors, by resolution adopted by a majority of the full board, may designate the chief executive officer and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed by law or regulation. SECTION 2. AUTHORITY. The executive committee, when the Board of Directors is not in session, shall have and may exercise all of the authority of the Board of Directors, except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the Board of Directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Bank, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Bank otherwise than in the usual and regular course of its business; a voluntary dissolution of the Bank; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest. SECTION 3. TENURE. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the 7

Board of Directors following his or her designation and until a successor is designated as a member of the executive committee. SECTION 4. MEETINGS. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting. SECTION 5. QUORUM. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee. SECTION 7. VACANCIES. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full Board of Directors. SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full Board of Directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Bank. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. SECTION 9. PROCEDURE. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure, which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the Board of Directors for its information at the meeting held next after the proceedings shall have occurred. SECTION 10. OTHER COMMITTEES. The Board of Directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Bank and may prescribe the duties, constitution, and procedures thereof. ARTICLE V - OFFICERS SECTION 1. POSITIONS. The officers of the Bank shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the Board of Directors. The Board of Directors may also designate the Chairman of the Board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller. The Board of Directors 8

may designate one or more vice presidents as executive vice president or senior vice president. The Board of Directors may also elect or authorize the appointment of such other officers as the business of the Bank may require. The officers shall have such authority and perform such duties as the Board of Directors may from time to time authorize or determine. In the absence of action by the Board of Directors, the officers shall have such powers and duties as generally pertain to their respective offices. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Bank shall be elected annually at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer's death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The Board of Directors may authorize the Bank to enter into an employment contract with any officer in accordance with regulations of the Office; but no such contract shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 3 of this Article V. SECTION 3. REMOVAL. Any officer may be removed by the Board of Directors whenever, in its judgment, the best interests of the Bank will be served thereby, but such removal, other than for cause, shall be without prejudice to any contractual rights, if any, of the person so removed. For purposes of this section, removal for cause includes, as defined in 12 C.F.R. Section 563.39 or any successor regulation enacted by the Office, removal because of the officer's "personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, [or, a] willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order." SECTION 4. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 5. REMUNERATION. The remuneration of the officers shall be fixed from time to time by the Board of Directors. 9

ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. To the extent permitted by regulations of the Office, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the Board of Directors may authorize any officer, employee or agent of the Bank to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Bank. Such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the Bank and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Bank shall be signed by one or more officers, employees, or agents of the Bank in such manner as shall from time to time be determined by the Board of Directors. SECTION 4. DEPOSITS. All funds of the Bank not otherwise employed shall be deposited from time to time to the credit of the Bank in any duly authorized depositories as the Board of Directors may select. ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of capital stock of the Bank shall be in such form as shall be determined by the Board of Directors and approved by the Office. Such certificates shall be signed by the chief executive officer or by any other officer of the Bank authorized by the Board of Directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the Bank itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Bank. All certificates surrendered to the Bank for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Bank as the Board of Directors may prescribe. SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of the Bank shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Bank. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name the shares of capital stock stand on the books of the Bank shall be deemed by the Bank to be the owner for all purposes. 10

ARTICLE VIII - FISCAL YEAR The fiscal year of the Bank shall end on the 31st day of December of each year. The appointment of accountants shall be subject to annual ratification by the shareholders. ARTICLE IX - DIVIDENDS Subject only to the terms of the Bank's charter and the regulations and orders of the Office, the Board of Directors may, from time to time, declare, and the Bank may pay, dividends on its outstanding shares of capital stock. ARTICLE X - CORPORATE SEAL The Board of Directors shall provide a Bank seal, which shall be two concentric circles between which shall be the name of the Bank. The year of incorporation or an emblem may appear in the center. ARTICLE XI - AMENDMENTS These bylaws may be amended in a manner consistent with regulations of the OTS and shall be effective after: (i) approval of the amendment by a majority vote of the authorized Board of Directors, or by a majority vote of the votes cast by the shareholders of the Bank at any legal meeting; and (ii) receipt of any applicable regulatory approval. If the Bank fails to meet its quorum requirements solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws. ARTICLE XII - INDEMNIFICATION The Bank shall indemnify all officers, directors and employees of the Bank, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Bank, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements. 11

FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER FOR NAUGATUCK VALLEY FINANCIAL CORPORATION SECTION 1. CORPORATE TITLE. The full corporate title of the MHC subsidiary holding company is Naugatuck Valley Financial Corporation (the "Holding Company"). SECTION 2. DOMICILE The domicile of the Holding Company is in the Borough of Naugatuck, in the State of Connecticut. SECTION 3. DURATION. The duration of the Holding Company is perpetual. SECTION 4. PURPOSE AND POWERS. The purpose of the Holding Company is to pursue any or all of the lawful objectives of a federal mutual holding company chartered under Section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision ("OTS"). SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the capital stock which the Holding Company has authority to issue is twenty-six million shares (26,000,000), of which twenty-five million shares (25,000,000) shall be common stock, par value $.01 per share, and of which one million shares (1,000,000) shall be preferred stock, par value $.01 per share. The shares may be issued from time to time as authorized by the Board of Directors without further approval of shareholders except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Holding Company. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted), labor, or services actually performed for the Holding Company, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such 1

property, labor, or services, as determined by the Board of Directors of the Holding Company, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Holding Company that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance. Except for the initial offering of shares of the Holding Company, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the Holding Company other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting. Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share: provided, that this restriction on voting separately by class or series shall not apply: (i) To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the Board of Directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock; (ii) To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Holding Company with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Holding Company if the preferred stock is exchanged for securities of such other corporation; provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the OTS or the Federal Deposit Insurance Corporation; (iii) To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving Holding Company in a merger or consolidation for the Holding Company, shall not be considered to be such an adverse change. 2

A description of the different classes and series (if any) of the Holding Company's capital stock and a statement of the designations, and the relative rights, preferences, and limitations of the shares of each class of and series (if any) of capital stock are as follows: A. Common Stock. Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of the common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no right to cumulate votes in an election of directors. Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to the payment of dividends, the full amount of dividends and of sinking fund, or retirement fund, or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends. In the event of any liquidation, dissolution, or winding up of the Holding Company, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Holding Company available for distribution remaining after: (i) payment or provision for payment of the Holding Company's debts and liabilities; (ii) distributions or provision for distributions in settlement of a liquidation account; and (iii) distributions or provision for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Holding Company. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock. B. Preferred Stock. The Holding Company may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series: 3

(a) The distinctive serial designation and the number of shares constituting such series; (b) The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s) the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends; (c) The voting powers, full or limited, if any, of the shares of such series; (d) Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed; (e) The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Holding Company; (f) Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund; (g) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Holding Company and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (h) The price or other consideration for which the shares of such series shall be issued; and (i) Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock. Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series. The Board of Directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series, and, within the limitations set forth in this 4

section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established. Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the Board of Directors, the Holding Company shall file with the Secretary to the OTS a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof. SECTION 6. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding anything contained in the Holding Company's charter or bylaws to the contrary, for a period of five years from the date of an initial minority stock offering of shares of common stock of the Holding Company, the following provisions shall apply: A. Beneficial Ownership Limitation. No person other than Naugatuck Valley Mutual Holding Company shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of any class of any equity security of the Holding Company. This limitation shall not apply to a transaction in which the Holding Company forms a holding company in conjunction with conversion, or thereafter, if such formation is without change in the respective beneficial ownership interests of the Holding Company's shareholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of shares by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under Section 574.3(c)(1)(vi) of the OTS's Regulations. In the event shares are acquired in violation of this Section 6, all shares beneficially owned by any person in excess of 10 percent shall be considered "excess shares" and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the shareholders for a vote. For the purposes of this Section 6, the following definitions apply: (i) The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the Holding Company. 5

(ii) The term "offer" includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value. (iii) The term "acquire" includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise. (iv) The term "acting in concert" means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. B. Call for Special Meetings. Special meetings of shareholders relating to changes in control of the Holding Company or amendments to its charter shall be called only at the direction of the Board of Directors. SECTION 7. PREEMPTIVE RIGHTS. Holders of the capital stock of the Holding Company are not entitled to preemptive rights with respect to any shares of the Holding Company that may be issued. SECTION 8. DIRECTORS. The Holding Company shall be under the direction of a Board of Directors. The authorized number of directors, as stated in the Holding Company's bylaws, shall be not be fewer than five nor more than 15 except when a greater or lesser number is approved by the Director of the OTS, or his or her delegate. SECTION 9. AMENDMENT OF CHARTER. Except as provided in Section 5, no amendment, addition, alteration, change, or repeal of this charter shall be made, unless such is proposed by the Board of Directors of the Holding Company, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise is required, and approved or preapproved by the OTS. 6

NAUGATUCK VALLEY FINANCIAL CORPORATION
Attest: __________________________ Bernadette A. Mole Corporate Secretary Attest: __________________________ Secretary Office of Thrift Supervision _______________________________________ John C. Roman President and Chief Executive Officer Office of Thrift Supervision By: _____________________________

EFFECTIVE DATE: _______________________

7

BYLAWS OF NAUGATUCK VALLEY FINANCIAL CORPORATION ARTICLE I. HOME OFFICE The home office of Naugatuck Valley Financial Corporation (the "Subsidiary Holding Company") is 333 Church Street, Naugatuck, in the County of New Haven, in the State of Connecticut. ARTICLE II. SHAREHOLDERS Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Subsidiary Holding Company or at such other convenient place as the board of directors may determine. Section 2. Annual Meeting. A meeting of the shareholders of the Subsidiary Holding Company for the election of directors and for the transaction of any other business of the Subsidiary Holding Company shall be held annually within 150 days after the end of the Subsidiary Holding Company's fiscal year on such date as the board of directors may determine. Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision ("OTS") or the Federal Stock Charter of the Subsidiary Holding Company, may be called at any time by the chairman of the board, the president or a majority of the board of directors, and shall be called by the chairman of the board, the president or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the Subsidiary Holding Company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the Subsidiary Holding Company addressed to the chairman of the board, the president or the secretary. Section 4. Conduct of Meetings. Annual and special meetings shall be conducted by the person designated by the board of directors to preside at such meetings in accordance with the written procedures agreed to by the board of directors. The board of directors shall designate, when present, either the chairman of the board or such other person as designated by the board of directors to preside at such meetings. Section 5. Notice of Meetings. Written notice stating the place, day and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, the secretary or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be 1

delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Subsidiary Holding Company as of the record date prescribed in Section 6 of this Article II, with postage prepaid. When any shareholders' meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken. Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment. Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Subsidiary Holding Company shall make a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Subsidiary Holding Company and shall be subject to inspection by any shareholder of record or the shareholder's agent at any time during usual business hours, for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder's agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the board of directors may elect to follow the procedures prescribed in Section 552.6(d) of the OTS's Regulations as now or hereafter in effect. Section 8. Quorum. A majority of the outstanding shares of the Subsidiary Holding Company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the 2

withdrawal of enough shareholders to constitute less than a quorum. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors. Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest. Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Subsidiary Holding Company to the contrary, at any meeting of the shareholders of the Subsidiary Holding Company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree. Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Subsidiary Holding Company if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. 3

Neither treasury shares of its own stock held by the Subsidiary Holding Company, nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Subsidiary Holding Company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting. Section 12. Inspectors of Election. In advance of any meeting of shareholders, the board of directors may appoint any persons other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting, or at the meeting by the chairman of the board or the president. Unless otherwise prescribed by regulations of the OTS, the duties of such inspectors shall include: determining the number of shares of stock and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders. Section 13. Nominating Committee. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Subsidiary Holding Company. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Subsidiary Holding Company at least 30 days prior to the date of the annual meeting; provided, however, that in the event that less than 40 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed or such public disclosure was made. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Subsidiary Holding Company. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon. 4

Section 14. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary at least 30 days before the date of the annual meeting; provided, however, that in the event that less than 40 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed or such public disclosure was made, and all business so stated, proposed and filed shall be considered at the annual meeting so long as such business relates to a proper subject matter for shareholder action. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least 30 days before the meeting, such proposal shall be laid over for action at an adjourned, special or annual meeting of the shareholders taking place 30 days or more thereafter. A shareholder's notice to the secretary shall set forth as to each matter the shareholder proposed to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and (b) the name and address of such shareholder and the class and number of shares of the Subsidiary Holding Company which are owned of record or beneficially by such shareholder. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. Section 15. Informal Action by Shareholders. Any action required to be taken at a meeting of shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III. BOARD OF DIRECTORS Section 1. General Powers. The business and affairs of the Subsidiary Holding Company shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and, when present, the chairman of the board shall preside at its meetings. If the chairman of the board is not present, the board shall select one of its members to preside at its meeting. Section 2. Number and Term. The board of directors shall consist of eight (8) members and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually. Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone 5

or similar communications device through which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes. Section 4. Qualification. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Subsidiary Holding Company unless the Subsidiary Holding Company is a wholly owned subsidiary of a holding company. Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board or by one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by such persons. Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear and speak to each other. Such participation shall constitute presence in person for all purposes. Section 6. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram, or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram or when the Subsidiary Holding Company receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 7. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6 of this Article III. Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the OTS or by these bylaws. Section 9. Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors. 6

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Subsidiary Holding Company addressed to the chairman of the board. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors. Section 11. Vacancies. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders. Section 12. Compensation. Directors, as such, may receive a stated fee for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for actual attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for actual attendance at committee meetings as the board of directors may determine. Section 13. Presumption of Assent. A director of the Subsidiary Holding Company who is present at a meeting of the board of directors at which action on any Subsidiary Holding Company matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Subsidiary Holding Company within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action. Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the Charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. Section 15. Integrity of Directors. A person is not qualified to serve as a director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order 7

for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. Section 16. Age Limitation. No person 70 years of age shall be eligible for election, reelection, appointment, or reappointment to the board of the Subsidiary Holding Company. No director shall serve as such beyond the annual meeting of the Subsidiary Holding Company following the director becoming 70. This age limitation does not apply to an advisory director. ARTICLE IV. EXECUTIVE AND OTHER COMMITTEES Section 1. Appointment. The board of directors, by resolution adopted by a majority of the full board, may designate the chief executive officer and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation. Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the Charter or bylaws of the Subsidiary Holding Company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease or other disposition of all or substantially all of the property and assets of the Subsidiary Holding Company otherwise than in the usual and regular course of its business; a voluntary dissolution of the Subsidiary Holding Company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest. Section 3. Tenure. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee. Section 4. Meetings. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need 8

be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting. Section 5. Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. Section 6. Action Without a Meeting. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee. Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors. Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Subsidiary Holding Company. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred. Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committees composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Subsidiary Holding Company and may prescribe the duties, constitution and procedures thereof. ARTICLE V. OFFICERS Section 1. Positions. The officers of the Subsidiary Holding Company shall be a chief executive officer, a president, one or more vice presidents, a secretary and a treasurer or comptroller, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment 9

of such other officers as the business of the Subsidiary Holding Company may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices. Section 2. Election and Term of Office. The officers of the Subsidiary Holding Company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer's death, resignation or removal in the manner hereinafter provided. Election or appointment of an officer, employee or agent shall not of itself create contractual rights. The board of directors may authorize the Subsidiary Holding Company to enter into an employment contract with any officer in accordance with regulations of the OTS; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V. Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the Subsidiary Holding Company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors. ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. To the extent permitted by regulations of the OTS, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the Subsidiary Holding Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Subsidiary Holding Company. Such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Subsidiary Holding Company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances. 10

Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Subsidiary Holding Company shall be signed by one or more officers, employees or agents of the Subsidiary Holding Company in such manner as shall from time to time be determined by the board of directors. Section 4. Deposits. All funds of the Subsidiary Holding Company not otherwise employed shall be deposited from time to time to the credit of the Subsidiary Holding Company in any duly authorized depositories as the board of directors may select. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Subsidiary Holding Company shall be in such form as shall be determined by the board of directors and approved by the OTS. Such certificates shall be signed by the chief executive officer or by any other officer of the Subsidiary Holding Company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the Subsidiary Holding Company itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Subsidiary Holding Company. All certificates surrendered to the Subsidiary Holding Company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Subsidiary Holding Company as the board of directors may prescribe. Section 2. Transfer of Shares. Transfer of shares of capital stock of the Subsidiary Holding Company shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Subsidiary Holding Company. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the Subsidiary Holding Company shall be deemed by the Subsidiary Holding Company to be the owner for all purposes. 11

ARTICLE VIII. FISCAL YEAR The fiscal year of the Subsidiary Holding Company shall end on December 31 of each year. The appointment of accountants shall be subject to annual ratification by the shareholders. ARTICLE IX. DIVIDENDS Subject to the terms of the Subsidiary Holding Company's Charter and the regulations and orders of the OTS, the board of directors may, from time to time, declare, and the Subsidiary Holding Company may pay, dividends on its outstanding shares of capital stock. ARTICLE X. CORPORATE SEAL The board of directors shall provide a Subsidiary Holding Company seal, which shall be two concentric circles between which shall be the name of the Subsidiary Holding Company. The year of incorporation or an emblem may appear in the center. ARTICLE XI. AMENDMENTS These bylaws may be amended in a manner consistent with regulations of the OTS and shall be effective after: (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the Subsidiary Holding Company at any legal meeting, and (ii) receipt of any applicable regulatory approval. When the Subsidiary Holding Company fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws. ARTICLE XII. INDEMNIFICATION The Subsidiary Holding Company shall indemnify all officers, directors and employees of the Subsidiary Holding Company, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Subsidiary Holding Company, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements. 12

FEDERAL MUTUAL HOLDING COMPANY CHARTER FOR NAUGATUCK VALLEY MUTUAL HOLDING COMPANY Section 1. Corporate title. The name of the mutual holding company hereby chartered is Naugatuck Valley Mutual Holding Company (the "Mutual Company"). Section 2. Duration. The duration of the Mutual Company is perpetual. Section 3. Purpose and powers. The purpose of the Mutual Company is to pursue any or all of the lawful objectives of a federal mutual savings and loan holding company chartered under section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all of the express, implied, and incidental powers conferred thereby and all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision (the "OTS"). Section 4. Capital. The Mutual Company shall have no capital stock. Section 5. Members. All holders of the savings, demand or other authorized accounts of Naugatuck Valley Savings and Loan (the "Bank") are members of the Mutual Company. With respect to all questions requiring action by the members of the Mutual Company, each holder of an account in the Bank shall be permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of the member's account. No member, however, shall cast more than 1,000 votes. All accounts shall be nonassessable. Section 6. Directors. The Mutual Company shall be under the direction of a board of directors. The authorized number of directors shall not be fewer than five nor more than fifteen, as fixed in the Mutual Company's bylaws, except that the number of directors may be decreased to a number less than five or increased to a number greater than fifteen with the prior approval of the Director of the OTS or his or her delegate. Section 7. Capital, surplus, and distribution of earnings. The Mutual Company shall distribute net earnings to account holders of the Bank on such basis and in accordance with such terms and conditions as may from time to time be authorized by the Director of the OTS; provided, however, that the Mutual Company may establish minimum-balance requirements for account holders to be eligible for distribution of earnings. All holders of accounts of the Bank shall be entitled to equal distribution of assets of the Mutual Company, pro rata to the value of their accounts in the Bank, in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Mutual Company.

Section 8. Amendment of Charter. Adoption of any pre-approved charter amendment shall be effective after such pre-approved amendment has been submitted to and approved by the members at a legal meeting. Any other amendment, addition, change or repeal of this charter must be approved by the OTS prior to approval by the members at a legal meeting, and shall be effective upon filing with the OTS in accordance with regulatory procedures.
Attest: ________________________________ Bernadette A. Mole Corporate Secretary Attest: ________________________________ Secretary Office of Thrift Supervision NAUGATUCK VALLEY MUTUAL HOLDING COMPANY _____________________________________ John C. Roman President and Chief Executive Officer Office of Thrift Supervision By:__________________________________

EFFECTIVE DATE:______________________

2

BYLAWS OF NAUGATUCK VALLEY MUTUAL HOLDING COMPANY 1. Annual meeting of members. The annual meeting of the members of the Mutual Company for the election of directors and for the transaction of any other business of the Mutual Company shall be held, as designated by the board of directors, at a location within the state that constitutes the principal place of business of the Mutual Company, or at any other convenient place the board of directors may designate, on a day and time that is within 150 days after the end of the Mutual Company's fiscal year. At each annual meeting, the officers shall make a full report of the financial condition of the Mutual Company and of its progress for the preceding year and shall outline a program for the succeeding year. Annual meetings shall be conducted by the chairman of the annual meeting in accordance with the written procedures agreed to by the board of directors. 2. Special meetings of members. Special meetings of the members of the Mutual Company may be called at any time by the president or the majority of the board of directors and shall be called by the president or the secretary upon the written request of members of record, holding in the aggregate at least 10% or more of the voting capital of the Mutual Company. For purposes of this Section 2, "voting capital" shall mean the maximum number of votes eligible to be cast at a legal meeting of members as determined at the most recent practicable date. Such written request shall state the purpose of the meeting and shall be delivered at the principal place of business of the Mutual Company addressed to the chairman of the board. The business which may be brought before and acted upon at any special meeting shall be limited to those matters specified by the board of directors or, in the case of a special meeting called by the members pursuant to this Section 2, those matters specified by such members in the written request delivered to the chairman of the board or the secretary. Special meetings shall be conducted by the chairman of the special meeting in accordance with written procedures agreed to by the board of directors. 3. Notice of meeting of members. Notice of each annual or special meeting shall be either published once a week for the two successive calendar weeks (in each instance on any day of the week) immediately prior to the week in which such meeting shall convene, in a newspaper printed in the English language and of general circulation in the city or county in which the principal place of business of the Mutual Company is located, or mailed postage-prepaid at least 15 days and not more than 45 days prior to the date on which such meeting shall convene, to each of its members of record at the last address appearing on the books of the Mutual Company. Such notice shall state the name of the Mutual Company, the place of the meeting, the date and time when it shall convene, and the matters to be considered. A similar notice shall be posted in a conspicuous place in each of the offices of the Naugatuck Valley Savings and Loan (the "Bank") during the 14 days immediately preceding the date on which such meeting shall convene. If any member, in person or by authorized attorney, shall waive in writing notice of any meeting of members, notice thereof need not be given to such member. When any 1

meeting is adjourned for 30 days or more, notice of the adjournment and reconvening of the meeting shall be given as in the case of the original meeting. 4. Fixing of record date. For the purpose of determining members entitled to notice of or to vote at any meeting of members or any adjournment thereof, or in order to make a determination of members for any other proper purpose, the board of directors shall fix in advance a record date for any such determination of members. Such date shall be not more than 60 days nor fewer than 10 days prior to the date on which the action, requiring such determination of members, is to be taken. The member entitled to participate in any such action shall be the member of record on the books of the Mutual Company on such record date. The number of votes which each member shall be entitled to cast at any meeting of the members shall be determined from the books of the Mutual Company as of such record date. Any member of such record date who ceases to be a member prior to such meeting shall not be entitled to vote at that meeting. The same determination shall apply to any adjourned meeting. 5. Member quorum. Any number of members present and voting, represented in person or by proxy, at a regular or special meeting of the members shall constitute a quorum. A majority of all votes cast at any meeting of the members shall determine any question, unless otherwise required by regulation. Directors, however, are elected by a plurality of the votes cast at an election of directors. At any adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally called. Members present at a duly constituted meeting may continue to transact business until adjournment. 6. Voting by proxy. Voting at any annual or special meeting of the members may be by proxy pursuant to the rules and regulations of the Office of Thrift Supervision (the "OTS"), provided, that no proxies shall be voted at any meeting unless such proxies shall have been placed on file with the secretary of the Mutual Company, for verification, prior to the convening of such meeting. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the member. All proxies with a term greater than eleven months or solicited at the expense of the Mutual Company must run to the board of directors as a whole, or to a committee appointed by a majority of such board. Accounts held by an administrator, executor, guardian, conservator or receiver may be voted in person or by proxy by such person. Accounts held by a trustee may be voted by such trustee either in person or by proxy, in accordance with the terms of the trust agreement, but no trustee shall be entitled to vote accounts without a transfer or such accounts into the trustee name. Accounts held in trust in an IRA or Keogh Account, however, may be voted by the Mutual Company if no other instructions are received. Joint accounts shall be entitled to no more than 1,000 votes, and any owner may cast all the votes unless the Mutual Company has otherwise been notified in writing. 7. Communication between members. Communication between members shall be subject to any applicable rules or regulations of the OTS. No member, however, shall have the right to inspect or copy any portion of any books or records of the Mutual Company or the Bank containing: (i) a list of 2

depositors in or borrowers from the Bank; (ii) their addresses; (iii) individual deposit or loan balances or records; or (iv) any data from which such information could reasonably be constructed. 8. Number of directors. The number of directors of the Mutual Company shall be eight (8), except where authorized by the OTS. Each director shall be a member of the Mutual Company. Directors shall be elected for periods of one to three years and until their successors are elected and qualified, but if a staggered board is chosen, provision shall be made for the election of approximately one-third or one-half of the board each year, as appropriate. 9. Meetings of the board. The board of directors shall meet at least annually at the principal place of business of the Mutual Company at an hour and date fixed by resolution of the board, provided that the place of meeting may be changed by the directors. Special meetings of the board may be held at any place specified in a notice of such meeting and shall be called by the secretary upon the written request of the chairman of the board or of three directors. All special meetings shall be held upon at least 24 hours written notice to each director unless notice is waived in writing before or after such meeting. Such notice shall state the place, date, time, and purposes of such meeting. A majority of the authorized directors shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board. Action may be taken without a meeting if unanimous written consent is obtained for such action. Members of the board of directors may participate in meetings by means of conference telephone or in similar communications equipment by which all persons participating in the meeting can hear and speak to each other. The meetings shall be under the direction of a chairman, appointed annually by the board, or in the absence of the chairman, the meetings shall be under the direction of another member designated by the Board. Regular and special meetings of the board shall be conducted in accordance with the rules determined by the chairman. 10. Officers, employees and agents. Annually at the meeting of the board of directors of the Mutual Company following the annual meeting of the members of the Mutual Company, the board of directors shall elect a president, one or more vice presidents, a secretary, officer and a treasurer or comptroller; Provided, that the offices of president and secretary may not be held by the same person and a vice president may also be the treasurer or comptroller. The board may appoint such additional officers, employees and agents as it may from time to time determine, including a chief executive officer. The board of directors may also designate the chairman of the board as an officer. The term of office of all officers shall be one year or until their respective successors are elected and qualified. Any officer may be removed at any time by the board with or without cause, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed. In the absence of designation from time to time of powers and duties by the board, the officers shall have such powers and duties as generally pertain to their respective offices. 3

11. Vacancies, resignation or removal of directors. Members of the Mutual Company shall elect directors by ballot; provided, that in the event of a vacancy on the board between meetings of members, the board of directors may, by their affirmative vote, fill such vacancy, even if the remaining directors constitute less than a quorum. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the members. Any director may resign at any time by sending a written notice of such resignation to the office of the Mutual Company delivered to the secretary. Unless otherwise specified therein such resignation shall take effect upon receipt by the secretary. More than three consecutive absences from regular meetings of the board, unless excused by resolution of the board, shall automatically constitute a resignation, effective when such resignation is accepted by the board. At a meeting of members called expressly for that purpose, directors or the entire board may be removed, only with cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. 12. Integrity of Directors. A person is not qualified to serve as a director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. 13. Powers of the board. The board of directors shall have the power: (a) By resolution, to appoint from among its members and remove an executive committee, which committee shall have and may exercise the powers of the board between the meetings of the board, but no such committee shall have the authority of the board to amend the charter or bylaws, adopt a plan of merger, consolidation, dissolution, or provide for the disposition of all or substantially all of the property and assets of the Mutual Company. Such committee shall not operate to relieve the board, or any member thereof, of any responsibility imposed by law; (b) To appoint and remove by resolution the members of such other committees as may be deemed necessary and prescribe the duties thereof; (c) To fix the compensation of directors, officers, and employees; and to remove any officer or employee at any time with or without cause; 4

(d) To extend leniency and indulgence to borrowing members who are in distress and generally to compromise and settle any debts and claims; (e) To limit payments on capital which may be accepted; (f) To reject an application for an account or membership; and (g) To exercise any and all of the powers of the Mutual Company not expressly reserved by the charter to the members. 14. Execution of instruments, generally. All documents and instruments or writings of any nature shall be signed, executed, verified, acknowledged, and delivered by such officers, agents, or employees of the Mutual Company or any one of them and in such manner as from time to time may be determined by resolution of the board. All notes, drafts, acceptances, checks, endorsements, and all evidences of indebtedness of the Mutual Company whatsoever shall be signed by such officer or officers or such agent or agents of the Mutual Company and in such manner as the board may from time to time determine. Endorsements for deposit to the credit of the Mutual Company in any of its duly authorized depositories shall be made in such manner as the board may from time to time determine. Proxies to vote with respect to shares or accounts of other associations or stock of other corporations owned by, or standing in the name of, the Mutual Company may be executed and delivered from time to time on behalf of the Mutual Company by the president and the secretary of the Mutual Company or by any other persons so authorized by the board. 15. Nominating committee. The chairman, at least 30 days prior to the date of each annual meeting, shall appoint a nominating committee of three persons who are members of the Mutual Company. Such committee shall make nominations for directors in writing and deliver to the secretary such written nominations at least 15 days prior to the date of the annual meeting, which nominations shall then be posted in a prominent place in the principal place of business for the 15-day period prior to the date of the annual meeting, except in the case of a nominee substituted as a result of death or other incapacity. Provided such committee is appointed and makes such nominations, no nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by members are made in writing and delivered to the secretary of the Mutual Company at least 10 days prior to the date of the annual meeting, which nominations shall then be posted in a prominent place in the principal place of business for the 10-day period prior to the date of the annual meeting, except in the case of a nominee substituted as a result of death or other incapacity. Ballots bearing the names of all persons nominated by the nominating committee and by other members prior to the annual meeting shall be provided for use by the members at the annual meeting. If at any time the chairman shall fail to appoint such nominating committee, or the nominating committee shall fail or refuse to act at least 15 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any member and shall be voted upon. 5

16. New business. Any new business to be taken up at the annual meeting, including any proposal to increase or decrease the number of directors of the Mutual Company, shall be stated in writing and filed with the secretary of the Mutual Company at least 30 days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any member may make any other proposal at the annual meeting and the same may be discussed and considered; but unless stated in writing and filed with the secretary 30 days before the meeting, such proposal shall be laid over for action at an adjourned, special, or regular meeting of the members taking place at least 30 days thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of the reports of officers and committees, but in connection with such reports no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. 17. Seal. The seal shall be two concentric circles between which shall be the name of the Mutual Company. The year of incorporation, the word "incorporated," or an emblem may appear in the center. 18. Indemnification. The Mutual Company shall indemnify all officers, directors and employees of the Mutual Company, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Mutual Company, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements. 19. Amendment. Adoption of any bylaw amendment pursuant to Section 544.5 of the OTS's regulations, as long as consistent with applicable law, rules and regulations, and which adequately addresses the subject and purpose of the stated bylaw section, shall be effective after: (i) approval of the amendment by a majority vote of the authorized board, or by a vote of the members of the Mutual Company at a legal meeting, and (ii) receipt of any applicable regulatory approval. When the Mutual Company fails to meet its quorum requirement, solely due to vacancies on the board, the bylaws may be amended by an affirmative vote of a majority of the sitting board. 20. Age Limitation. No person 70 years of age shall be eligible for election, reelection, appointment, or reappointment to the board of the Mutual Company. No director shall serve as such beyond the annual meeting of the Mutual Company following the director becoming 70. This age limitation does not apply to an advisory director. 6

EXHIBIT 3.1 FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER FOR NAUGATUCK VALLEY FINANCIAL CORPORATION SECTION 1. CORPORATE TITLE. The full corporate title of the MHC subsidiary holding company is Naugatuck Valley Financial Corporation (the "Holding Company"). SECTION 2. DOMICILE The domicile of the Holding Company is in the Borough of Naugatuck, in the State of Connecticut. SECTION 3. DURATION. The duration of the Holding Company is perpetual. SECTION 4. PURPOSE AND POWERS. The purpose of the Holding Company is to pursue any or all of the lawful objectives of a federal mutual holding company chartered under Section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o), and to exercise all the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision ("OTS"). SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the capital stock which the Holding Company has authority to issue is twenty-six million shares (26,000,000), of which twenty-five million shares (25,000,000) shall be common stock, par value $.01 per share, and of which one million shares (1,000,000) shall be preferred stock, par value $.01 per share. The shares may be issued from time to time as authorized by the Board of Directors without further approval of shareholders except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Holding Company. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted), labor, or services actually performed for the Holding Company, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such 1

property, labor, or services, as determined by the Board of Directors of the Holding Company, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Holding Company that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance. Except for the initial offering of shares of the Holding Company, no shares of capital stock (including shares issuable upon conversion, exchange, or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the Holding Company other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting. Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share: provided, that this restriction on voting separately by class or series shall not apply: (i) To any provision which would authorize the holders of preferred stock, voting as a class or series, to elect some members of the Board of Directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock; (ii) To any provision which would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Holding Company with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Holding Company if the preferred stock is exchanged for securities of such other corporation; provided, that no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the OTS or the Federal Deposit Insurance Corporation; (iii) To any amendment which would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment which increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving Holding Company in a merger or consolidation for the Holding Company, shall not be considered to be such an adverse change. 2

A description of the different classes and series (if any) of the Holding Company's capital stock and a statement of the designations, and the relative rights, preferences, and limitations of the shares of each class of and series (if any) of capital stock are as follows: A. Common Stock. Except as provided in this Section 5 (or in any supplementary sections thereto) the holders of the common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by such holder and there shall be no right to cumulate votes in an election of directors. Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to the payment of dividends, the full amount of dividends and of sinking fund, or retirement fund, or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends. In the event of any liquidation, dissolution, or winding up of the Holding Company, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Holding Company available for distribution remaining after: (i) payment or provision for payment of the Holding Company's debts and liabilities; (ii) distributions or provision for distributions in settlement of a liquidation account; and (iii) distributions or provision for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Holding Company. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock. B. Preferred Stock. The Holding Company may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series: 3

(a) The distinctive serial designation and the number of shares constituting such series; (b) The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s) the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends; (c) The voting powers, full or limited, if any, of the shares of such series; (d) Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed; (e) The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Holding Company; (f) Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund; (g) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Holding Company and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange; (h) The price or other consideration for which the shares of such series shall be issued; and (i) Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock. Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series. The Board of Directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series, and, within the limitations set forth in this 4

section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established. Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the Board of Directors, the Holding Company shall file with the Secretary to the OTS a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof. SECTION 6. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding anything contained in the Holding Company's charter or bylaws to the contrary, for a period of five years from the date of an initial minority stock offering of shares of common stock of the Holding Company, the following provisions shall apply: A. Beneficial Ownership Limitation. No person other than Naugatuck Valley Mutual Holding Company shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of any class of any equity security of the Holding Company. This limitation shall not apply to a transaction in which the Holding Company forms a holding company in conjunction with conversion, or thereafter, if such formation is without change in the respective beneficial ownership interests of the Holding Company's shareholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of shares by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under Section 574.3(c)(1)(vi) of the OTS's Regulations. In the event shares are acquired in violation of this Section 6, all shares beneficially owned by any person in excess of 10 percent shall be considered "excess shares" and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the shareholders for a vote. For the purposes of this Section 6, the following definitions apply: (i) The term "person" includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the Holding Company. 5

(ii) The term "offer" includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value. (iii) The term "acquire" includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise. (iv) The term "acting in concert" means (a) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (b) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. B. Call for Special Meetings. Special meetings of shareholders relating to changes in control of the Holding Company or amendments to its charter shall be called only at the direction of the Board of Directors. SECTION 7. PREEMPTIVE RIGHTS. Holders of the capital stock of the Holding Company are not entitled to preemptive rights with respect to any shares of the Holding Company that may be issued. SECTION 8. DIRECTORS. The Holding Company shall be under the direction of a Board of Directors. The authorized number of directors, as stated in the Holding Company's bylaws, shall be not be fewer than five nor more than 15 except when a greater or lesser number is approved by the Director of the OTS, or his or her delegate. SECTION 9. AMENDMENT OF CHARTER. Except as provided in Section 5, no amendment, addition, alteration, change, or repeal of this charter shall be made, unless such is proposed by the Board of Directors of the Holding Company, approved by the shareholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise is required, and approved or preapproved by the OTS. 6

NAUGATUCK VALLEY FINANCIAL CORPORATION
Attest: ____________________________ Bernadette A. Mole Corporate Secretary Attest: __________________________ Secretary Office of Thrift Supervision _____________________________________ John C. Roman President and Chief Executive Officer Office of Thrift Supervision By: __________________________

EFFECTIVE DATE:______________________

7

EXHIBIT 3.2 BYLAWS OF NAUGATUCK VALLEY FINANCIAL CORPORATION ARTICLE I. HOME OFFICE The home office of Naugatuck Valley Financial Corporation (the "Subsidiary Holding Company") is 333 Church Street, Naugatuck, in the County of New Haven, in the State of Connecticut. ARTICLE II. SHAREHOLDERS Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Subsidiary Holding Company or at such other convenient place as the board of directors may determine. Section 2. Annual Meeting. A meeting of the shareholders of the Subsidiary Holding Company for the election of directors and for the transaction of any other business of the Subsidiary Holding Company shall be held annually within 150 days after the end of the Subsidiary Holding Company's fiscal year on such date as the board of directors may determine. Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision ("OTS") or the Federal Stock Charter of the Subsidiary Holding Company, may be called at any time by the chairman of the board, the president or a majority of the board of directors, and shall be called by the chairman of the board, the president or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the Subsidiary Holding Company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the Subsidiary Holding Company addressed to the chairman of the board, the president or the secretary. Section 4. Conduct of Meetings. Annual and special meetings shall be conducted by the person designated by the board of directors to preside at such meetings in accordance with the written procedures agreed to by the board of directors. The board of directors shall designate, when present, either the chairman of the board or such other person as designated by the board of directors to preside at such meetings. Section 5. Notice of Meetings. Written notice stating the place, day and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, the secretary or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be 1

delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Subsidiary Holding Company as of the record date prescribed in Section 6 of this Article II, with postage prepaid. When any shareholders' meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken. Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment. Section 7. Voting Lists. At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Subsidiary Holding Company shall make a complete list of the shareholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Subsidiary Holding Company and shall be subject to inspection by any shareholder of record or the shareholder's agent at any time during usual business hours, for a period of 20 days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder's agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the board of directors may elect to follow the procedures prescribed in Section 552.6(d) of the OTS's Regulations as now or hereafter in effect. Section 8. Quorum. A majority of the outstanding shares of the Subsidiary Holding Company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the 2

withdrawal of enough shareholders to constitute less than a quorum. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors. Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest. Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Subsidiary Holding Company to the contrary, at any meeting of the shareholders of the Subsidiary Holding Company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree. Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Subsidiary Holding Company if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. 3

Neither treasury shares of its own stock held by the Subsidiary Holding Company, nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Subsidiary Holding Company, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting. Section 12. Inspectors of Election. In advance of any meeting of shareholders, the board of directors may appoint any persons other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting, or at the meeting by the chairman of the board or the president. Unless otherwise prescribed by regulations of the OTS, the duties of such inspectors shall include: determining the number of shares of stock and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders. Section 13. Nominating Committee. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Subsidiary Holding Company. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Subsidiary Holding Company at least 30 days prior to the date of the annual meeting; provided, however, that in the event that less than 40 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed or such public disclosure was made. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Subsidiary Holding Company. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon. 4

Section 14. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary at least 30 days before the date of the annual meeting; provided, however, that in the event that less than 40 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed or such public disclosure was made, and all business so stated, proposed and filed shall be considered at the annual meeting so long as such business relates to a proper subject matter for shareholder action. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least 30 days before the meeting, such proposal shall be laid over for action at an adjourned, special or annual meeting of the shareholders taking place 30 days or more thereafter. A shareholder's notice to the secretary shall set forth as to each matter the shareholder proposed to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and (b) the name and address of such shareholder and the class and number of shares of the Subsidiary Holding Company which are owned of record or beneficially by such shareholder. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided. Section 15. Informal Action by Shareholders. Any action required to be taken at a meeting of shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE III. BOARD OF DIRECTORS Section 1. General Powers. The business and affairs of the Subsidiary Holding Company shall be under the direction of its board of directors. The board of directors shall annually elect a chairman of the board from among its members and, when present, the chairman of the board shall preside at its meetings. If the chairman of the board is not present, the board shall select one of its members to preside at its meeting. Section 2. Number and Term. The board of directors shall consist of eight (8) members and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually. Section 3. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of a conference telephone 5

or similar communications device through which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes. Section 4. Qualification. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Subsidiary Holding Company unless the Subsidiary Holding Company is a wholly owned subsidiary of a holding company. Section 5. Special Meetings. Special meetings of the board of directors may be called by or at the request of the chairman of the board or by one-third of the directors. The persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by such persons. Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear and speak to each other. Such participation shall constitute presence in person for all purposes. Section 6. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram, or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram or when the Subsidiary Holding Company receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 7. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6 of this Article III. Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the OTS or by these bylaws. Section 9. Action Without a Meeting. Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors. 6

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Subsidiary Holding Company addressed to the chairman of the board. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board. More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors. Section 11. Vacancies. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected to serve until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders. Section 12. Compensation. Directors, as such, may receive a stated fee for their services. By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for actual attendance at each regular or special meeting of the board of directors. Members of either standing or special committees may be allowed such compensation for actual attendance at committee meetings as the board of directors may determine. Section 13. Presumption of Assent. A director of the Subsidiary Holding Company who is present at a meeting of the board of directors at which action on any Subsidiary Holding Company matter is taken shall be presumed to have assented to the action taken unless his dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Subsidiary Holding Company within five days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action. Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the Charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. Section 15. Integrity of Directors. A person is not qualified to serve as a director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order 7

for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. Section 16. Age Limitation. No person 70 years of age shall be eligible for election, reelection, appointment, or reappointment to the board of the Subsidiary Holding Company. No director shall serve as such beyond the annual meeting of the Subsidiary Holding Company following the director becoming 70. This age limitation does not apply to an advisory director. ARTICLE IV. EXECUTIVE AND OTHER COMMITTEES Section 1. Appointment. The board of directors, by resolution adopted by a majority of the full board, may designate the chief executive officer and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation. Section 2. Authority. The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to: the declaration of dividends; the amendment of the Charter or bylaws of the Subsidiary Holding Company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease or other disposition of all or substantially all of the property and assets of the Subsidiary Holding Company otherwise than in the usual and regular course of its business; a voluntary dissolution of the Subsidiary Holding Company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest. Section 3. Tenure. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee. Section 4. Meetings. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need 8

be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting. Section 5. Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. Section 6. Action Without a Meeting. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee. Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors. Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Subsidiary Holding Company. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective. Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred. Section 10. Other Committees. The board of directors may by resolution establish an audit, loan, or other committees composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Subsidiary Holding Company and may prescribe the duties, constitution and procedures thereof. ARTICLE V. OFFICERS Section 1. Positions. The officers of the Subsidiary Holding Company shall be a chief executive officer, a president, one or more vice presidents, a secretary and a treasurer or comptroller, each of whom shall be elected by the board of directors. The board of directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller. The board of directors may designate one or more vice presidents as executive vice president or senior vice president. The board of directors may also elect or authorize the appointment 9

of such other officers as the business of the Subsidiary Holding Company may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices. Section 2. Election and Term of Office. The officers of the Subsidiary Holding Company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer's death, resignation or removal in the manner hereinafter provided. Election or appointment of an officer, employee or agent shall not of itself create contractual rights. The board of directors may authorize the Subsidiary Holding Company to enter into an employment contract with any officer in accordance with regulations of the OTS; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V. Section 3. Removal. Any officer may be removed by the board of directors whenever in its judgment the best interests of the Subsidiary Holding Company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed. Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the board of directors. ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. To the extent permitted by regulations of the OTS, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the Subsidiary Holding Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Subsidiary Holding Company. Such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Subsidiary Holding Company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors. Such authority may be general or confined to specific instances. 10

Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Subsidiary Holding Company shall be signed by one or more officers, employees or agents of the Subsidiary Holding Company in such manner as shall from time to time be determined by the board of directors. Section 4. Deposits. All funds of the Subsidiary Holding Company not otherwise employed shall be deposited from time to time to the credit of the Subsidiary Holding Company in any duly authorized depositories as the board of directors may select. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Subsidiary Holding Company shall be in such form as shall be determined by the board of directors and approved by the OTS. Such certificates shall be signed by the chief executive officer or by any other officer of the Subsidiary Holding Company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the Subsidiary Holding Company itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Subsidiary Holding Company. All certificates surrendered to the Subsidiary Holding Company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Subsidiary Holding Company as the board of directors may prescribe. Section 2. Transfer of Shares. Transfer of shares of capital stock of the Subsidiary Holding Company shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Subsidiary Holding Company. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name shares of capital stock stand on the books of the Subsidiary Holding Company shall be deemed by the Subsidiary Holding Company to be the owner for all purposes. 11

ARTICLE VIII. FISCAL YEAR The fiscal year of the Subsidiary Holding Company shall end on December 31 of each year. The appointment of accountants shall be subject to annual ratification by the shareholders. ARTICLE IX. DIVIDENDS Subject to the terms of the Subsidiary Holding Company's Charter and the regulations and orders of the OTS, the board of directors may, from time to time, declare, and the Subsidiary Holding Company may pay, dividends on its outstanding shares of capital stock. ARTICLE X. CORPORATE SEAL The board of directors shall provide a Subsidiary Holding Company seal, which shall be two concentric circles between which shall be the name of the Subsidiary Holding Company. The year of incorporation or an emblem may appear in the center. ARTICLE XI. AMENDMENTS These bylaws may be amended in a manner consistent with regulations of the OTS and shall be effective after: (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the Subsidiary Holding Company at any legal meeting, and (ii) receipt of any applicable regulatory approval. When the Subsidiary Holding Company fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws. ARTICLE XII. INDEMNIFICATION The Subsidiary Holding Company shall indemnify all officers, directors and employees of the Subsidiary Holding Company, and their heirs, executors and administrators, to the fullest extent permitted under federal law against all expenses and liabilities reasonably incurred by them in connection with or arising out of any action, suit or proceeding in which they may be involved by reason of their having been a director or officer of the Subsidiary Holding Company, whether or not they continue to be a director or officer at the time of incurring such expenses or liabilities, such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys' fees and the cost of reasonable settlements. 12

COMMON STOCK COMMON STOCK CERTIFICATE NO. SHARES NAUGATUCK VALLEY FINANCIAL CORPORATION ORGANIZED UNDER THE LAWS OF THE UNITED STATES [SPECIMEN] is the owner of: FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK $0.01 PAR VALUE PER SHARE OF NAUGATUCK VALLEY FINANCIAL CORPORATION A SUBSIDIARY STOCK HOLDING COMPANY ORGANIZED UNDER THE LAWS OF THE UNITED STATES. The shares represented by this certificate are transferable only on the stock transfer books of Naugatuck Valley Financial Corporation (the "Company") by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Charter of the Company and any amendments thereto (copies of which are on file with the Corporate Secretary of the Company), to all of which provisions the holder by acceptance hereof, assents. The shares evidenced by this certificate are not of an insurable type and are not insured by the Federal Deposit Insurance Corporation. IN WITNESS WHEREOF, NAUGATUCK VALLEY FINANCIAL CORPORATION has caused this certificate to be executed by the signatures of its duly authorized officers and has caused its corporate seal to be hereunto affixed. Dated: [SEAL] President and Chief Executive Officer Corporate Secretary

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM TEN ENT as tenants in common UNIF GIFTS MIN ACT _____ custodian ______ (Cust) (Minor) under Uniform Gifts to Minors Act -------------------(State)

as tenants by the entireties

JT TEN

- as joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list. For value received __________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER OF ASSIGNEE

PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE. __________________________________________________ SHARES OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ______________________________________________________________________________, ATTORNEY, TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED BANK WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ------------------------------------------------------------------NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15

EXHIBIT 5.1 , 2004 Board of Directors Naugatuck Valley Financial Corporation 333 Church Street Naugatuck, Connecticut 06770 Re: Registration Statement on Form S-1 Gentlemen: We have acted as special counsel for Naugatuck Valley Financial Corporation, a federally chartered stock holding company (the "Company"), in connection with the registration statement on Form S-1 (the "Registration Statement") initially filed on __________, 2004, by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), and the regulations promulgated thereunder. The Registration Statement relates to the proposed issuance by the Company of up to __________ shares ("Offered Shares") of common stock, $0.01 par value per share, of the Company ("Common Stock") in a subscription offering, a community offering and a syndicated community offering (the "Offerings") pursuant to the Plan of Reorganization and Minority Stock Issuance adopted by Naugatuck Valley Savings and Loan, S.B. (the "Bank"). The Registration Statement also relates to the proposed issuance by the Company of up to __________ shares of Common Stock to Naugatuck Valley Savings and Loan Foundation, a privately-owned charitable foundation to be formed in connection with the transaction. The issuances are both pursuant to the Plan of Reorganization and Minority Stock Issuance, as amended and restated. In the preparation of this opinion, we have examined originals or copies identified to our satisfaction of: (i) the Company's charter to be filed with the Office of Thrift Supervision (the "Charter"); (ii) the Company's Bylaws; (iii) the Registration Statement, including the prospectus contained therein and the exhibits thereto; (iv) certain resolutions of the Organizer of the Company relating to the issuance of the Common Stock being registered under the Registration Statement; (v) the Plan of Reorganization and Minority Stock Issuance; (vi) the trust agreement for the Bank's employee stock ownership plan ("ESOP") and the form of loan agreement between the Company and the ESOP; (vii) the form of stock certificate approved by the Organizer of the Company to represent shares of

Board of Directors Naugatuck Valley Financial Corporation , 2004 Page 2 Common Stock; and (viii) the gift instrument whereby shares of Common Stock will be contributed to Naugatuck Valley Savings and Loan Foundation. We have also examined originals or copies of such documents, corporate records, certificates of public officials and other instruments, and have conducted such other investigations of law and fact, as we have deemed necessary or advisable for purposes of our opinion. In our examination, we have assumed, without verification, the genuineness of all signatures, the authenticity of all documents and instruments submitted to us as originals, the conformity to the originals of all documents and instruments submitted to us as certified or conformed copies, the correctness of all certificates, and the accuracy and completeness of all records, documents, instruments and materials made available to us by the Company. Our opinion is limited to the matters set forth herein, and we express no opinion other than as expressly set forth herein. In rendering the opinion set forth below, we do not express any opinion concerning law other than federal law. Our opinion is expressed as of the date hereof and is based on laws currently in effect. Accordingly, the conclusions set forth in this opinion are subject to change in the event that any laws should change or be enacted in the future. We are under no obligation to update this opinion or to otherwise communicate with you in the event of any such change. For purposes of this opinion, we have assumed that, prior to the issuance of any shares, (i) the Registration Statement, as finally amended, will have become effective under the Act and (ii) the reorganization of the Bank will have become effective. Based upon and subject to the foregoing, it is our opinion that upon the due adoption by the Organizer of the Company (or authorized committee thereof) of a resolution fixing the number of shares of Common Stock to be sold in the Offerings and contributed to Naugatuck Valley Savings and Loan Foundation, such shares when issued and sold, or contributed in the case of Naugatuck Valley Savings and Loan Foundation, in the manner described in the Registration Statement, or in the accordance with the gift instrument in the case of Naugatuck Valley Savings and Loan Foundation, will be validly issued, fully paid and nonassessable. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the Bank's Notice of Mutual Holding Company Reogranziation on Form MHC-1 (the "Form MHC-1") and Application Form MHC-2 (the "Form MHC-2) to the Office of Thrift Supervision, and to the reference to our firm under the heading "Legal and Tax Opinions" in the prospectus which is part of the Registration Statement as such may be amended or supplemented, or incorporated by reference in any Registration Statement covering additional shares of Common Stock to be issued or sold under the Plan of Reorganization and Minority Stock Issuance that is filed pursuant to Rule 462(b) of the Act, and to the reference to our firm in the Form MHC-1 and Form MHC-2. In giving such consent, we do not

Board of Directors Naugatuck Valley Financial Corporation , 2004 Page 3 hereby admit that we are experts or are otherwise within the category of persons whose consent is required under Section 7 of the Act or the rules or regulations of the Securities and Exchange Commission thereunder. Very truly yours, MULDOON MURPHY FAUCETTE & AGUGGIA LLP

EXHIBIT 8.1 __________, 2004 Board of Directors Naugatuck Valley Financial Corporation 333 Church Street Naugatuck, Connecticut 06770 Dear Board Members: You have asked our opinion regarding certain federal income tax consequences of the proposed transactions (collectively, the "Reorganization and Charter Conversion"), more fully described below, pursuant to which Naugatuck Valley Savings and Loan, S.B. (the "Bank") will (i) convert from a Connecticut-chartered mutual savings bank to a federal mutual savings bank (the "Charter Conversion") and (ii) the federal savings bank will reorganize into the federally chartered mutual holding company structure (the "Reorganization"). We are rendering this opinion pursuant to Section 22 of the Plan of Reorganization and Minority Stock Issuance ("Plan of Reorganization") and Section 6 of the Plan of Charter Conversion. As used in this letter, "Mutual State Savings Bank" refers to the Bank before the Charter Conversion, Mutual Federal Savings Bank" refers to the Bank after the Charter Conversion and before the Reorganization and "Stock Savings Bank" refers to the Savings Bank after the Reorganization. All other capitalized terms used but not defined in this letter shall have the meanings assigned to them in the Plan of Reorganization and Plan of Charter Conversion. The Reorganization and Charter Conversion will be effected, pursuant to the Plan of Reorganization and Plan of Charter Conversion, as follows: (i) the Mutual State Saving Bank will exchange its Connecticut charter for a federal mutual savings bank charter; (ii) the Mutual Federal Savings Bank will organize an interim federal stock savings bank as a wholly owned subsidiary ("Interim One"); (iii) Interim One will organize a stock corporation as a wholly owned subsidiary ("Naugatuck Valley Financial Corporation"); (iv) Interim One will organize an interim federal stock savings bank as a wholly owned

Board of Directors __________, 2004 Page 2 subsidiary ("Interim Two"); (v) the Mutual Federal Savings Bank will convert its charter to a federal stock savings bank charter to become the Stock Savings Bank (the "Conversion") and Interim One will exchange its charter for a federal mutual holding company charter to become the "Mutual Holding Company"; (vi) sequentially with step (iv), Interim Two will merge with and into Stock Savings Bank with Stock Savings Bank as the resulting institution; (vii) 100% of the issued common stock of the Stock Savings Bank will be transferred to the Mutual Holding Company in exchange for membership interests in Mutual Federal Savings Bank which are conveyed to the Mutual Holding Company; and (viii) the Mutual Holding Company will transfer 100% of the issued common stock of the Stock Savings Bank to Naugatuck Valley Financial Corporation in a capital distribution. Simultaneously with the Reorganization, Naugatuck Valley Financial Corporation will offer to sell additional shares of its common stock pursuant to the Plan of Reorganization, with priority subscription rights granted in descending order as follows: (i) to depositors of the Bank with deposits having an aggregate account balance of at least fifty dollars on April 30, 2003 ("Eligible Account Holders"); (ii) to tax-qualified employee benefit plans of the Bank; (iii) to depositors of the Bank with deposits having an aggregate account balance of at least fifty dollars on the last day of the calendar quarter preceding the Office of Thrift Supervision's approval of the Reorganization ("Supplemental Eligible Account Holders"); (iv) to other depositors of the Bank who do not already have subscription rights pursuant to (i) through (iii), above ("Other Members"); and (v) to members of the general public. In connection with the opinions expressed below, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Reorganization, Plan of Charter Conversion, the Prospectus, and of such corporate records of the parties to the Reorganization as we have deemed appropriate. We have also relied, without independent verification, upon the representations of the Bank included in a Certificate of Representations dated __________, 2004. We have assumed that

Board of Directors __________, 2004 Page 3 such representations are true and that the parties to the Reorganization and Charter Conversion will act in accordance with the Plan of Reorganization and the Plan of Charter Conversion. We express no opinion concerning the effects, if any, of variations from the foregoing. In issuing the opinions set forth below, we have referred solely to existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury Regulations thereunder, current administrative rulings, notices, procedures and court decisions. Such laws, regulations, administrative rulings, notices and procedures and court decisions are subject to change at any time. Any such change could affect the continuing validity of the opinions set forth below. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof. Based on and subject to the foregoing, it is our opinion that for federal income tax purposes, under current tax law: (a) With regard to the Charter Conversion: (1) The Charter Conversion will constitute a reorganization under Section 368(a)(1)(F) of the Code; and (2) The Bank, in either its status as the Mutual State Savings Bank or the Mutual Federal Savings Bank, will recognize no gain or loss as a result of the Charter Conversion. (b) With regard to the Conversion: (1) the Conversion will constitute a reorganization under section 368(a)(1)(F) of the Code, and the Savings Bank (in either its status as a Mutual Federal Savings Bank or Stock Savings Bank) will recognize no gain or loss as a result of the Conversion; (2) the basis of each asset of Mutual Federal Savings Bank held by Stock Savings Bank immediately after the Conversion will be the same as Mutual Federal Savings Bank's basis for such asset immediately prior to the Conversion; (3) the holding period of each asset of Mutual Federal Savings Bank held by Stock Savings Bank immediately after the Conversion will include the period during which such asset was held by Mutual Federal Savings Bank prior to the Conversion;

Board of Directors __________, 2004 Page 4 (4) for purposes of Code section 381(b), Stock Savings Bank will be treated as if there had been no reorganization and, accordingly, the taxable year of the Mutual Federal Savings Bank will not end on the effective date of the Conversion and the tax attributes of Mutual Federal Savings Bank (subject to application of Code Sections 381, 382 and 384), including Mutual Federal Savings Bank's bad debt reserves and earnings and profits, will be taken into account by Stock Savings Bank as if the Conversion had not occurred; (5) Mutual Federal Savings Bank's members will recognize no gain or loss upon their constructive receipt of shares of Stock Savings Bank common stock, pursuant to the Conversion, solely in exchange for their mutual ownership interest (i.e., liquidation and voting rights) in Mutual Federal Savings Bank; and (6) Mutual Federal Savings Bank's members will recognize no gain or loss upon the issuance to them of deposits in Stock Savings Bank in the same dollar amount and upon the same terms as their deposits in Mutual Federal Savings Bank. (c) With regard to the Exchange: (1) the Exchange will qualify as an exchange of property for stock under Code section 351; (2) the initial shareholders of Stock Savings Bank (the former Mutual Federal Savings Bank members) will recognize no gain or loss upon the constructive transfer to the Mutual Holding Company of the shares of Stock Savings Bank common stock they constructively received in the Conversion solely in exchange for mutual ownership interests (i.e., liquidation and voting rights) in the Mutual Holding Company; and (3) the Mutual Holding Company will recognize no gain or loss upon its receipt from the shareholders of Stock Savings Bank of shares of Stock Savings Bank common stock solely in exchange for membership interests in the Mutual Holding Company. (d) With regard to the Mutual Holding Company's transfer of 100% of the common stock of Stock Savings Bank to Naugatuck Valley Financial Corporation: (1) Naugatuck Valley Financial Corporation will recognize no gain or loss upon its receipt of 100% of the common stock of Stock Savings Bank from the Mutual Holding Company; and

Board of Directors __________, 2004 Page 5 (2) the Mutual Holding Company will recognize no gain or loss upon its transfer of 100% of the common stock of Stock Savings Bank from the Mutual Holding Company. (e) With regard to those who hold subscription rights: (1) it is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of Naugatuck Valley Financial Corporation to be issued to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members is zero (the "Subscription Right") and, accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members upon the issuance to them of the Subscription Rights (Section 356(a) of the Code) or upon the exercise of the Subscription Rights (Rev. Rul. 56-572, 1956-2 C.B. 182); (2) it is more likely than not that the tax basis to the holders of shares of common stock purchased in the offering pursuant to the exercise of the Subscription Rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of completion of the Reorganization (Section 1012 of the Code); and (3) the holding period for shares of common stock purchased in the Community Offering or Syndicated Community Offering will begin on the day after the date of the purchase (Section 1223(6) of the Code). The opinions set forth in (e)(1) and (e)(2) above are based on the position that the subscription rights do not have any market value at the time of distribution or at the time they are exercised. Whether subscription rights have a market value for federal income tax purposes is a question of fact, depending upon all relevant facts and circumstances. The Internal Revenue Service will not issue rulings on whether subscription rights have a market value. We are unaware of any instance in which the Internal Revenue Service has taken the position that nontransferable subscription rights issued by a converting financial institution have a market value. The subscription rights will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the recipients the right only to purchase Naugatuck Valley Financial Corporation common stock at a price equal to its estimated fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock. We believe that it is more likely than not (i.e., that there is a more than a 50% likelihood) that the subscription rights have no market value for federal income tax purposes. This opinion is given solely for the benefit of the parties to the Plan of Reorganization, the Plan of Charter Conversion, the shareholders of Stock Savings Bank and Eligible Account Holders, Supplemental

Board of Directors __________, 2004 Page 6 Eligible Account Holders and other investors who purchase pursuant to the Plan of Reorganization, and may not be relied upon by any other party or entity or referred to in any document without our express written consent. We consent to the filing of this opinion as an exhibit to the Forms MHC-1, MHC-2 and H-(e)1-S filed with the Office of Thrift Supervision and as an exhibit to the registration statement on Form S-1 filed by Naugatuck Valley Financial Corporation with the Securities and Exchange Commission in connection with the Reorganization , and to the reference thereto in the prospectus included in the registration statement on Form S-1 under the headings "The Reorganization and Stock Issuance- Material Income Tax Consequences" and "Legal and Tax Opinions." In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. Very truly yours, MULDOON MURPHY FAUCETTE & AGUGGIA LLP

[LETTERHEAD OF SNYDER & HALLER, P.C.] EXHIBIT 8.2 [DRAFT] CONNECTICUT BUSINESS TAX OPINION ___________, 2004 Board of Directors Naugatuck Valley Financial Corporation 333 Church Street Naugatuck, Connecticut 06770 Dear Board Members: You have requested our opinion regarding certain Connecticut income tax consequences of the proposed transaction (collectively, the "Reorganization and Charter Conversion"), more fully described below, pursuant to which Naugatuck Valley Savings and Loan, S.B. (the "Bank") will (i) convert from a Connecticut-chartered mutual savings bank to a federal mutual savings bank (the "Charter Conversion") and (ii) the federal savings bank will reorganize into the federally chartered mutual holding company structure (the "Reorganization"). We are rendering this opinion pursuant to Section 22 of the Plan of Reorganization and Minority Stock Issuance (the "Plan of Reorganization") and Section 6 of the Plan of Charter Conversion. As used in this letter, "Mutual State Savings Bank" refers to the Bank before the Charter Conversion, "Mutual Federal Savings Bank" refers to the Bank after the Charter Conversion and before the Reorganization, and "Stock Savings Bank" refers to the Bank after the Reorganization. All other capitalized terms used but not defined in this letter shall have the meanings assigned to them in the Plan of Reorganization and Plan of Conversion. The proposed transaction and its federal income tax consequences are described in an opinion letter dated __________, 2004, from Muldoon Murphy & Faucette LLP (the "Federal Opinion Letter") stating that the: (a) The Bank, in either its status as the Mutual State Savings Bank or the Mutual Federal Savings Bank, will recognize no gain or loss as a result of the Charter Conversion; (b) the Savings Bank (in either its status as a Mutual Federal Savings Bank or Stock Savings Bank) will recognize no gain or loss as a result of the Reorganization;

(c) the basis of each asset of Mutual Federal Savings Bank held by Stock Savings Bank immediately after the Reorganization will be the same as Mutual Federal Savings Bank's basis for such asset immediately prior to the Reorganization; (d) the holding period of each asset of Mutual Federal Savings Bank held by Stock Savings Bank immediately after the Reorganization will include the period during which such asset was held by Mutual Federal Savings Bank prior to the Reorganization; (e) the initial shareholders of Stock Savings Bank (the former Mutual Federal Savings Bank members) will recognize no gain or loss upon the constructive transfer to the Mutual Holding Company of the shares of Stock Savings Bank common stock that they constructively received in the Reorganization solely in exchange for mutual ownership interests (i.e., liquidation and voting rights) in the Mutual Holding Company; (f) the Mutual Holding Company will recognize no gain or loss upon its receipt from the shareholders of Stock Savings Bank of shares of Stock Savings Bank common stock solely in exchange for membership interests in the Mutual Holding Company; (g) Naugatuck Valley Financial Corporation will recognize no gain or loss upon its receipt of 100% of the common stock of Stock Savings Bank from the Mutual Holding Company; (h) the Mutual Holding Company will recognize no gain or loss upon its transfer of 100% of the common stock of Stock Savings Bank from Mutual Holding Company; and (i) it is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of Naugatuck Valley Financial Corporation to be issued to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members is zero (the "Subscription Right") and, accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members upon issuance to them of the Subscription Rights. The facts, assumptions and representations and the federal tax consequences set forth in the Federal Opinion Letter are incorporated in this opinion letter by reference as if fully set forth herein. References and abbreviations used in the Federal Opinion Letter are also used herein. In connect with the opinions expressed below, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Reorganization, Plan of Charter Conversion, the Prospectus, and of such corporate records of the parties to the Reorganization as we have deemed appropriate. We have also relied, without independent verification, upon the representations of the Bank included in a Certificate of Representation dated ___________, 2004. We have assumed that such representations are true and that the parties to the Reorganization and Charter Conversion will act in accordance with the Plan of Reorganization and the Plan of Charter Conversion. We express no opinion concerning the effects, if any, of variations from the foregoing. Page 2

OPINION Based on the foregoing, we are of the opinion that, for purposes of the Connecticut Corporate Business Tax only: 1. No gross income, gain or loss will be recognized by the Bank (either Mutual State Savings Bank or Mutual Federal Savings Bank ), or Mutual Holding Company, as a result of the Reorganization and Charter Conversion. Pursuant to Section 12-213(a)(9) of the General Statutes, Connecticut taxable gross income is based on income as calculated pursuant to the Internal Revenue Code of 1986, as amended (the "Code"). 2. The basis and holding period of each asset of Mutual Federal Savings Bank held by Stock Savings Bank immediately after the Reorganization will be the same as Mutual Federal Savings Bank's basis and holding period for such asset immediately prior to the Reorganization. 3. No gross income, gain or loss will be recognized by any entity or natural person holding a deposit account with the Bank as a result of the non-transferable subscription rights to purchase the common stock of Naugatuck Valley Financial Corporation in accordance with the Plan of Reorganization provided that the non-transferable subscription rights have no value as set forth in the Federal Tax Opinion of Muldoon Murphy Faucette & Aguggia LLP With respect to the Connecticut tax treatment of the Reorganization, we do not express an opinion as to the sales and use, property, conveyance, or any other non-income tax consequences thereof. We base our opinion upon the General Statutes and the Code, the regulations issued thereunder, and relevant administrative interpretations and judicial precedents as of the date hereof. There can be no assurance that positions contrary to those set forth in our opinion may not be taken by the Connecticut Department of Revenue Services or that a court considering the issues would not make a determination contrary or inconsistent with our opinions. Also, if there is any change in the applicable law or regulations, or administrative or judicial interpretations thereof, any or all of the opinions expressed herein may become in applicable. We undertake no responsibility to update this opinion if such events occur. No opinions should be inferred as to any other matters or as to the tax treatment of the transactions that we do not specifically address. We express no opinion as to other Connecticut laws or as to factual or legal matters other than as set forth herein. This opinion is given solely for the benefit of the parties to the Plan of Reorganization, the Plan of Charter Conversion, the shareholders of Stock Savings Bank and Eligible Account Holders, Supplemental Eligible Account Holders, and other investors who purchase shares pursuant to the Plan of Reorganization, and may not be relied upon by any other party or entity or referred to in any document without our express written consent. Page 3

We consent to the filing of this opinion as an exhibit to Forms MHC-1, MHC-2 and H-(e)1-S filed with the Office of Thrift Supervision and as an exhibit to the registration statement on Form S-1 filed by Naugatuck Valley Financial Corporation with the Securities and Exchange Commission in connection with the Reorganization, and to the reference thereto in the prospectus included in the registration statement on Form S-1 under the headings "The Reorganization and Stock Issuance - Material Income Tax Consequences" and "Legal and Tax Opinions." In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. Very truly yours, Page 4

EXHIBIT 10.1 FORM OF NAUGATUCK VALLEY SAVINGS AND LOAN EMPLOYEE STOCK OWNERSHIP PLAN EFFECTIVE AS OF [DATE]

NAUGATUCK VALLEY SAVINGS AND LOAN EMPLOYEE STOCK OWNERSHIP PLAN CERTIFICATION I, John C. Roman, President and Chief Executive Officer of Naugatuck Valley Savings and Loan hereby certify that the attached Naugatuck Valley Savings and Loan Employee Stock Ownership Plan, effective [date], was adopted at a duly held meeting of the Board of Directors of the Bank.
ATTEST: _______________________ NAUGATUCK VALLEY SAVINGS AND LOAN By: _____________________________________ John C. Roman President and Chief Executive Officer Date:____________________________________

NAUGATUCK VALLEY SAVINGS AND LOAN EMPLOYEE STOCK OWNERSHIP PLAN

TABLE OF CONTENTS
Section 1 - Introduction........................................................ Section 2 - Definitions......................................................... Section 3 - Eligibility and Participation....................................... Section 4 - Contributions....................................................... Section 5 - Plan Accounting..................................................... Section 6 - Vesting and Forfeitures............................................. Section 7 - Distributions....................................................... Section 8 - Voting of Company Stock and Tender Offers........................... Section 9 - The Committee and Plan Administration............................... Section 10 - Rules Governing Benefit Claims .................................... Section 11 - The Trust.......................................................... Section 12 - Adoption, Amendment and Termination................................ Section 13 - General Provisions................................................. Section 14 - Top-Heavy Provisions............................................... 1 1 8 10 12 18 20 25 26 29 30 31 33 34

SECTION 1 INTRODUCTION SECTION 1.01 NATURE OF THE PLAN. Effective as of [date] (the "Effective Date"), Naugatuck Valley Savings and Loan (the "Bank") hereby establishes the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan (the "Plan") to enable Eligible Employees (as defined in Section 2.01(o) of the Plan) to acquire stock ownership interests in Naugatuck Valley Financial Corporation (the "Company"), the holding company of the Bank. The Bank intends this Plan to be a tax-qualified stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and an employee stock ownership plan within the meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest primarily in the common stock of the Company, which stock constitutes "qualifying employer securities" within the meaning of Section 407(d)(5) of ERISA and Sections 409(l) and 4975(e)(8) of the Code. Accordingly, the Plan and Trust Agreement (as defined in Section 2.01(mm) of the Plan) shall be interpreted and applied in a manner consistent with the Bank's intent for it to be a tax-qualified plan designed to invest primarily in qualifying employer securities. The Plan reflects certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). The provisions related to EGTRRA are intended as good faith compliance with EGTRRA and the guidance issued thereunder. To the extent any provision of the Plan was operated according to an effective date earlier than as required by law, then such date shall be the effective date with respect to that provision of the Plan. SECTION 1.02 EMPLOYERS AND AFFILIATES. The Bank and each of its Affiliates (as defined in Section 2.01(c) of the Plan) that, with the consent of the Bank, adopt the Plan pursuant to the provisions of Section 12.01 of the Plan are collectively referred to as the "Employers" and individually as an "Employer." The Plan shall be treated as a single plan with respect to all participating Employers. SECTION 2 DEFINITIONS SECTION 2.01 DEFINITIONS. In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms "he," "his," and "him," shall refer to a Participant or Beneficiary, as the case may be, and, except as otherwise provided, or unless the context otherwise requires, the capitalized terms shall have the following meanings: (a) "ACCOUNT" or "ACCOUNTS" mean a Participant's or Beneficiary's Company Stock Account and/or his Other Investments Account, as the context so requires. 1

(b) "ACQUISITION LOAN" means a loan or other extension of credit, including an installment obligation to a "party in interest" (as defined in Section 3(14) of ERISA) incurred by the Trustee in connection with the purchase of Company Stock. (c) "AFFILIATE" means any corporation, trade or business, which, at the time of reference, is together with the Bank, a member of a controlled group of corporations, a group of trades or businesses (whether or not incorporated) under common control, or an affiliated service group, as described in Sections 414(b), 414(c), and 414(m) of the Code, respectively, or any other organization treated as a single employer with the Bank under Section 414(o) of the Code; provided, however, that, where the context so requires, the term "Affiliate" shall be construed to give full effect to the provisions of Sections 409(l)(4) and 415(h) of the Code. (d) "BANK" means Naugatuck Valley Savings and Loan, and any entity that succeeds to the business of the Naugatuck Valley Savings and Loan and adopts this Plan in accordance with the provisions of Section 12.02 of the Plan, or by written agreement assumes the obligations of the Plan. (e) "BENEFICIARY" means the person(s) entitled to receive benefits under the Plan following a Participant's death, pursuant to Section 7.03 of the Plan. (f) "CHANGE IN CONTROL" means any one of the following events occurs: (i) Merger: The Company merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation; (ii) Acquisition of Significant Share Ownership: The Company files, or is required to file, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company's voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities; (iii) Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company's Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company's Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of 2

the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or (iv) Sale of Assets: The Company sells to a third party all or substantially all of its assets. Notwithstanding anything in this Plan to the contrary, in no event shall the conversion of the Bank from the mutual to stock form (including, without limitation, the formation of a stock holding company), or the reorganization of the Bank into the mutual holding company form of organization, constitute a "Change in Control" for purposes of this Plan. (g) "CODE" means the Internal Revenue Code of 1986, as amended. (h) "COMMITTEE" means the individual(s) responsible for the administration of the Plan in accordance with Section 9 of the Plan. (i) "COMPANY" means Naugatuck Valley Financial Corporation and any entity which succeeds to the business of Naugatuck Valley Financial Corporation. (j) "COMPANY STOCK" means shares of the voting common stock or preferred stock, meeting the requirements of Section 409 of the Code and Section 407(d)(5) of ERISA, issued by the Company or its Affiliates. (k) "COMPANY STOCK ACCOUNT" means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund invested in Company Stock. (l) "COMPENSATION" means: [(i) AN EMPLOYEE'S BASE COMPENSATION AS REPORTED ON FORM W-2 FOR FEDERAL TAX PURPOSES AND PAID DURING THE PLAN YEAR BY THE EMPLOYER. (ii) COMPENSATION SHALL ALSO INCLUDE THE AMOUNTS OF ANY EMPLOYER CONTRIBUTIONS MADE PURSUANT TO A SALARY REDUCTION AGREEMENT ENTERED INTO BY THE PARTICIPANT AND NOT INCLUDIBLE IN THE GROSS INCOME OF THE EMPLOYEE UNDER SECTIONS 125, 132(f), 402(e)(3), 402(h), 403(b), 414(h) OR 457 OF THE CODE.] A Participant's Compensation shall not exceed $200,000 (as periodically adjusted pursuant to Section 401(a)(17) of the Code). If the Plan Year for which a Participant's Compensation is measured is less than twelve (12) calendar months, then the amount of Compensation taken into account for such Plan Year shall be the adjusted amount for such Plan Year, as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code, multiplied by a fraction, the numerator of which is the number of months taken into account for such Plan Year and the denominator of which is twelve (12). In 3

determining the dollar limitation hereunder, Compensation received from an Affiliate shall be recognized as Compensation. (m) "DISABILITY" means a physical or mental condition of a Participant resulting from bodily injury, disease, or mental disorder which renders the Participant incapable of continuing any gainful occupation and which condition constitutes total disability under the federal Social Security Act. The Disability of a Participant shall be determined by the Plan Administrator, in its sole discretion. (n) "EFFECTIVE DATE" means [DATE]. (o) "ELIGIBLE EMPLOYEE" means any Employee who is not precluded from participating in the Plan by reason of the provisions of Section 3.02 of the Plan. (p) "EMPLOYEE" means any person who is actually performing services for the Employer or an Affiliate in a common-law, employer-employee relationship as determined under Sections 31.3121(d)-1, 31.3306(i)-1, or 31.3401(c)-1 of the Treasury Regulations and any "Leased Employee" as defined in Section 3.02(b) of this Plan. (q) "EMPLOYER" or "EMPLOYERS" means the Bank and any of its Affiliates that adopt the Plan in accordance with the provisions of Section 12.01 of the Plan, and any entity which succeeds to the business of the Bank or its Affiliates and which adopts the Plan in accordance with the provisions of Section 12.02 of the Plan, or by written agreement assumes the obligations under the Plan. (r) "ENTRY DATE" means [JANUARY 1ST OR JULY 1ST] coinciding with or next following the date the Employee satisfies the requirements for participation under Section 3.01 of the Plan. (s) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (t) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (u) "FINANCED SHARES" means shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan, which shall constitute "qualifying employer securities" under Section 409(l) of the Code and any shares of Company Stock received upon conversion or exchange of such shares. (v) "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, for a particular Plan Year, satisfies one of the following conditions: (i) was a "5-percent owner" (as defined in Section 414(q)(2) of the Code) during the year or the preceding year, or (ii) for the preceding year, had "compensation" (as defined in Section 414(q)(4) of the Code) from the Bank and its Affiliates exceeding $90,000 (as periodically adjusted pursuant to Section 414(q)(1) of the Code). 4

(w) "HOURS OF SERVICE" means: (i) Each hour for which an Employee is paid, or entitled to payment, for performing duties for the Employer during the applicable computation period. (ii) Each hour for which an Employee is paid, or entitled to payment, for a period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Notwithstanding the preceding sentence, no credit shall be given to the Employee for: (A) more than 501 hours under this clause (ii) because of any single continuous period in which the Employee performs no duties (whether or not such period occurs in a single computation period); (B) an hour for which the Employee is directly or indirectly paid, or entitled to payment, because of a period in which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker's or workmen's compensation, unemployment, or disability insurance laws; or (C) an hour or a payment which solely reimburses the Employee for medical or medically-related expenses incurred by the Employee. (iii) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer; provided, however, that hours credited under either clause (i) or (ii) above shall not also be credited under this clause (iii). Crediting of hours for back pay awarded or agreed to with respect to periods described in clause (ii) above will be subject to the limitations set forth in that clause. The crediting of Hours of Service shall be determined by the Committee in accordance with the rules set forth in Section 2530.200b-2 of the regulations prescribed by the Department of Labor, which rules shall be consistently applied with respect to all Employees within the same job classification. If an Employer finds it impracticable to count actual Hours of Service for any class or group of non-hourly Employees, each Employee in that class or group shall be credited with 45 Hours of Service for each weekly period in which he has at least one Hour of Service. However, an Employee shall be credited with Hours of Service only for his normal working hours during a paid absence. Hours of Service shall be credited for employment with an Affiliate. For purposes of determining whether an Employee has incurred a One Year Break in Service and for vesting and participation purposes, if an Employee begins a maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the Code, his Hours of Service shall include the 5

Hours of Service that would have been credited to him if he had not been so absent (or 45 Hours of Service for each week of such absence if the actual Hours of Service cannot be determined). An Employee shall be credited for such Hours of Service (up to a maximum of 501 Hours of Service) in the Plan Year in which his absence begins (if such crediting will prevent him from incurring a One Year Break in Service in such Plan Year) or, in all other cases, in the following Plan Year. An absence from employment for maternity or paternity reasons means an absence: (i) by reason of pregnancy of the Employee, (ii) by reason of the birth of a child of the Employee, (iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. (x) "LATER RETIREMENT DATE" means the first day of the month coincident with or next following a Participant's date of actual retirement which occurs after his Normal Retirement Date. (y) "LOAN SUSPENSE ACCOUNT" means that portion of the Trust Fund consisting of Company Stock acquired with an Acquisition Loan which has not yet been allocated to the Participants' Accounts. (z) "NORMAL RETIREMENT AGE" means the later of a Participant's [ATTAINMENT OF AGE 65 OR THE FIFTH (5TH) ANNIVERSARY OF THE FIRST DAY OF THE PLAN YEAR IN WHICH THE PARTICIPANT COMMENCED PARTICIPATION IN THE PLAN.] (aa) "NORMAL RETIREMENT DATE" means the first day of the month coincident with or next following the Participant's attainment of Normal Retirement Age. (bb) "ONE YEAR BREAK IN SERVICE" means a twelve (12) consecutive month period during which the Participant does not complete more than 500 Hours of Service. (cc) "OTHER INVESTMENTS ACCOUNT" means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund, other than Company Stock. (dd) "PARTICIPANT" means any Eligible Employee who has become a Participant in accordance with Section 3.01 of the Plan or any other person with an Account balance under the Plan. (ee) "PLAN" means this Naugatuck Valley Savings and Loan Employee Stock Ownership Plan, as amended from time to time. 6

(ff) "PLAN YEAR" means the calendar year. (gg) "RECOGNIZED ABSENCE" means a period for which: (i) an Employer grants an Employee a leave of absence for a limited period of time, but only if an Employer grants such leaves of absence on a nondiscriminatory basis to all Eligible Employees; or (ii) an Employee is temporarily laid off by an Employer because of a change in the business conditions of the Employer; or (iii) an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 and the Uniformed Services Employment and Reemployment Rights Act of 1994. (hh) "RETIREMENT DATE" means a Participant's Normal or Later Retirement Date, whichever is applicable. (ii) "SERVICE" means employment with the Bank or an Affiliate. (jj) "TERMINATION OF SERVICE" means the earlier of (a) the date on which an Employee's Service is terminated by reason of his resignation, retirement, discharge, death or Disability or (b) the first anniversary of the date on which such Employee's service is terminated for disability of a short-term nature or any other reason. Service in the Armed Forces of the United States shall not constitute a Termination of Service but shall be considered to be a period of employment by the Employer provided (i) such military service is caused by war or other emergency or the Employee is required to serve under the laws of conscription in time of peace, (ii) the Employee returns to employment with the Employer within six (6) months following discharge from such military service and (iii) such Employee is reemployed by the Employer at a time when the Employee had a right to reemployment at his former position or substantially similar position upon separation from such military duty in accordance with seniority rights as protected under the laws of the United States. A leave of absence granted to an Employee by the Employer shall not constitute a Termination of Service provided that the Participant returns to the active service of the Employer at the expiration of any such period for which leave has been granted. Notwithstanding the foregoing, an Employee who is absent from service with the Employer beyond the first anniversary of the first date of his absence for maternity or paternity reasons set forth in Section 2.01 of the Plan shall incur a Termination of Service for purposes of the Plan on the second anniversary of the date of such absence. (kk) "TREASURY REGULATIONS" mean the regulations promulgated by the Department of the Treasury under the Code. (ll) "TRUST" means the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan Trust created in connection with the establishment of the Plan. 7

(mm) "TRUST AGREEMENT" means the trust agreement establishing the Trust. (nn) "TRUST FUND" means the assets held in the Trust for the benefit of Participants and their Beneficiaries. (oo) "TRUSTEE" means the trustee or trustees from time to time in office under the Trust Agreement. (pp) "VALUATION DATE" means the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Trust Fund and adjust Participants' Accounts accordingly. (qq) "VALUATION PERIOD" means the period following a Valuation Date and ending with the next Valuation Date. (rr) "YEAR OF SERVICE" shall mean a Plan Year in which an Employee is credited with at least [1,000 HOURS OF SERVICE.] SECTION 3 ELIGIBILITY AND PARTICIPATION SECTION 3.01 PARTICIPATION. (a) All Eligible Employees who [PARTICIPATE IN THE BANK'S 401(k) PLAN ON THE DATE THE COMPANY FIRST ISSUES COMMON STOCK PURSUANT TO ITS REORGANIZATION FROM A MUTUAL SAVINGS AND LOAN ASSOCIATION TO A MUTUAL HOLDING COMPANY (THE "REORGANIZATION DATE") SHALL ENTER THE PLAN AND BECOME PARTICIPANTS ON THE EARLIER OF THE EFFECTIVE DATE OR THE DATE ON WHICH THE ELIGIBLE EMPLOYEE FIRST PERFORMED AN HOUR OF SERVICE FOR AN EMPLOYER.] (b) An Eligible Employee who is first employed by an Employer after the Reorganization Date shall become a Participant in the Plan upon satisfying the following requirements: [(i) THE ELIGIBLE EMPLOYEE IS AT LEAST 21 YEARS OF AGE; AND (ii) THE ELIGIBLE EMPLOYEE HAS BEEN EMPLOYED BY THE EMPLOYER FOR SIX MONTHS.] (c) An Eligible Employee who has satisfied the eligibility requirements of Section 3.01(b) shall enter the Plan and become a Participant on the earlier of the Effective Date or the Entry Date coincident with or next following the date he satisfies such requirements. 8

SECTION 3.02 CERTAIN EMPLOYEES INELIGIBLE. The following Employees are ineligible to participate in the Plan: (a) Employees covered by a collective bargaining agreement between the Employer and the Employee's collective bargaining representative if: (i) retirement benefits have been the subject of good faith bargaining between the Employer and the representative, and (ii) the collective bargaining agreement does not expressly provide that Employees of such unit be covered under the Plan; (b) Employees who are nonresident aliens and who receive no earned income from an Employer which constitutes income from sources within the United States; and (c) Employees of an Affiliate of the Bank that has not adopted the Plan pursuant to Sections 12.01 or 12.02 of the Plan. SECTION 3.03 TRANSFER TO AND FROM ELIGIBLE EMPLOYMENT. (a) If an Employee ineligible to participate in the Plan by reason of Section 3.02 of the Plan transfers to employment as an Eligible Employee, he shall enter the Plan as of the later of: (i) the first Entry Date after the date of transfer, or (ii) the first Entry Date on which he could have become a Participant pursuant to Section 3.01 of the Plan. (b) If a Participant transfers to an employment position that makes him ineligible to participate in the Plan as of the date of such transfer, he shall cease active participation in the Plan as of such date and his transfer shall be treated for all purposes under the Plan in the same manner as any other termination of Service. SECTION 3.04 PARTICIPATION AFTER REEMPLOYMENT. (a) If an Employee incurs a One Year Break in Service prior to satisfying the eligibility requirements of Section 3.01 of the Plan, Service prior to such One Year Break in Service shall be disregarded and the Employee must satisfy the eligibility requirements of Section 3.01 as a new Employee. (b) If an Employee incurs a One Year Break in Service after satisfying the eligibility requirements of Section 3.01 of the Plan and again performs an Hour of Service, the Employee shall receive credit for Service prior to his One Year Break in Service and 9

shall be eligible to participate in the Plan immediately upon reemployment, provided the Employee is not excluded from participation under the provisions of Section 3.02 of the Plan. SECTION 3.05 PARTICIPATION NOT GUARANTEE OF EMPLOYMENT. Participation in the Plan does not constitute a guarantee or contract of employment and will not give any Employee the right to be retained in the employ of the Bank or any of its Affiliates nor any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the Plan. SECTION 4 CONTRIBUTIONS SECTION 4.01 EMPLOYER CONTRIBUTIONS. (a) DISCRETIONARY CONTRIBUTIONS. Each Plan Year, each Employer, in its discretion, may make a contribution to the Trust. Each Employer making a contribution for any Plan Year under this Section 4.01(a) will contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the Employer shall determine by resolution. Notwithstanding the Employer's discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code. (b) EMPLOYER CONTRIBUTIONS FOR ACQUISITION LOANS. Each Plan Year, the Employers shall, subject to any regulatory prohibitions, contribute an amount of cash sufficient to enable the Trustee to discharge any indebtedness incurred with respect to an Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers' obligation to make contributions under this Section 4.01(b) shall be reduced to the extent of any investment earnings attributable to such contributions and any cash dividends paid with respect to Company Stock held by the Trustee in the Loan Suspense Account. If there is more than one Acquisition Loan, the Employers shall designate the one to which any contribution pursuant to this Section 4.01(b) is to be applied. SECTION 4.02 LIMITATIONS ON CONTRIBUTIONS. In no event shall an Employer's contribution(s) made under Section 4.01 of the Plan for any Plan Year exceed the lesser of: (a) The maximum amount deductible under Section 404 of the Code by that Employer as an expense for Federal income tax purposes; and (b) The maximum amount which can be credited for that Plan Year in accordance with the allocation limitation provisions of Section 5.05 of the Plan. 10

SECTION 4.03 ACQUISITION LOANS. The Trustee may incur Acquisition Loans from time to time to finance the acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, shall not be payable in demand, except in the event of default, and shall be primarily for the benefit of Participants and Beneficiaries of the Plan. An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired and any other Plan assets which are permissible securities within the provisions of Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Trust assets. Any pledge of Financed Shares must provide for the release of shares so pledged on a basis equal to the principal and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), paid by the Trustee on the Acquisition Loan. The released Financed Shares shall be allocated to Participants' Accounts in accordance with the provisions of Sections 5.04 or 5.08 of the Plan, whichever is applicable. Payment of principal and interest on any Acquisition Loan shall be made by the Trustee only from the Employer contributions paid in cash to enable the Trustee to repay such loan in accordance with Section 4.01(b) of the Plan, from earnings attributable to such contributions, and any cash dividends received by the Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan (including contributions, earnings and dividends received during or prior to the year of repayment less such payments in prior years), whether or not allocated. Financed Shares shall initially be credited to the Loan Suspense Account and shall be transferred for allocation to the Company Stock Accounts of Participants only as payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants' Company Stock Account for each Plan Year shall be based on the ratio that the payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan for that Plan Year bears to the sum of the payments of principal and interest on the Acquisition Loan for that Plan Year plus the total remaining payment of principal and interest projected (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.05 of the Plan. SECTION 4.04 CONDITIONS AS TO CONTRIBUTIONS. In addition to the provisions of Section 12.03 of the Plan for the return of an Employer's contributions in connection with a failure of the Plan to qualify initially under the Code, any amount contributed by an Employer due to a good faith mistake of fact, or based upon a good faith but erroneous determination of its deductibility under Section 404 of the Code, shall be returned to the Employer within one year after the date on which the Employer originally made such contribution, or within one year after its nondeductibility has been finally determined. However, the amount to be returned shall be reduced to take account of any adverse investment 11

experience within the Trust in order that the balance credited to each Participant Account is not less than it would have been if the contribution had never been made by the Employer. SECTION 4.05 EMPLOYEE CONTRIBUTIONS. Employee contributions are neither required nor permitted under the Plan. SECTION 4.06 ROLLOVER CONTRIBUTIONS. Rollover contributions to the Plan of assets from other tax-qualified retirement plans are not permitted under the Plan. SECTION 4.07 TRUSTEE-TO-TRUSTEE TRANSFERS. Trustee-to-trustee transfers of assets from other tax-qualified retirement plans are not permitted under the Plan. SECTION 5 PLAN ACCOUNTING SECTION 5.01 ACCOUNTING FOR ALLOCATIONS. The Committee shall establish the Accounts (and sub-accounts, if deemed necessary) for each Participant, and the accounting procedures for the purpose of making allocations to Participants' Accounts as provided for in this Section 5. The Committee shall maintain adequate records of the cost basis of shares of Company Stock allocated to each Participant's Company Stock Account. The Committee also shall keep separate records of Financed Shares attributable to each Acquisition Loan and of contributions made by the Employers (and any earnings thereon) made for the purpose of enabling the Trustee to repay any Acquisition Loan. From time to time, the Committee may modify its accounting procedures for the purpose of achieving equitable and nondiscriminatory allocations among the Accounts of Participants, in accordance with the provisions of this Section 5 and the applicable requirements of the Code and ERISA. In accordance with Section 9 of the Plan, the Committee may delegate the responsibility for maintaining Accounts and records. SECTION 5.02 MAINTENANCE OF PARTICIPANTS' COMPANY STOCK ACCOUNTS. As of each Valuation Date, the Committee shall adjust the Company Stock Account of each Participant to reflect activity during the Valuation Period as follows: (a) First, charge to each Participant's Company Stock Account all distributions and payments made to the Participant that have not been previously charged; (b) Next, credit to each Participant's Company Stock Account the shares of Company Stock, if any, that have been purchased with amounts from the Participant's Other Investments 12

Account, and adjust such Other Investments Account in accordance with the provisions of Section 5.03 of the Plan; (c) Next, credit to each Participant's Company Stock Account the shares of Company Stock representing contributions made by the Employers in the form of Company Stock and the number of Financed Shares released from the Loan Suspense Account under Section 4.03 of the Plan that are to be allocated and credited as of that date in accordance with the provisions of Section 5.04 of the Plan; and (d) Finally, credit to each Participant's Company Stock Account the shares of Company Stock released from the Loan Suspense Account that are to be allocated in accordance with the provisions of Section 5.09 of the Plan. SECTION 5.03 MAINTENANCE OF PARTICIPANTS' OTHER INVESTMENTS ACCOUNTS. Except as otherwise provided for under Section 5.08 of the Plan, as of each Valuation Date, the Committee shall adjust the Other Investments Account of each Participant to reflect activity during the Valuation Period as follows: (a) First, charge to each Participant's Other Investments Account all distributions and payments made to the Participant that have not previously been charged; (b) Next, if Company Stock is purchased with assets from a Participant's Other Investments Account, charge the Participant's Other Investments Account accordingly; (c) Next, subject to the dividend provisions of Section 5.09 of the Plan, credit to the Other Investments Account of each Participant any cash dividends paid to the Trustee on shares of Company Stock held in that Participant's Company Stock Account (as of the record date for such cash dividends) and dividends paid on shares of Company Stock held in the Loan Suspense Account that have not been used to repay any Acquisition Loan. Subject to the provisions of Section 5.09 of the Plan, cash dividends that have not been used to repay any Acquisition Loan and have been credited to a Participant's Other Investments Account shall be applied by the Trustee to purchase shares of Company Stock, which shares shall then be credited to the Company Stock Account of such Participant. The Participant's Other Investments Account shall then be charged by the amount of cash used to purchase such Company Stock. In addition, any earnings on: (i) Participants' Other Investments Accounts will be allocated to Accounts, pro rata, based on Participants' Other Investments Account balances as of the first day of the Valuation Period, and (ii) the Loan Suspense Account, other than dividends used to repay the Acquisition Loan, will be allocated to Participants' Other Investments Accounts, pro rata, based on their Other Investments Account balances as of the first day of the Valuation Period; 13

(d) Next, allocate and credit the Employer contributions made pursuant to Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan, in accordance with Section 5.04 of the Plan. Such amount shall then be used to repay any Acquisition Loan and such Participant's Other Investments Account shall be charged accordingly; and (e) Finally, allocate and credit the Employer contributions (other than amounts contributed to repay an Acquisition Loan) that are made in cash (or property other than Company Stock) for the Plan Year to the Other Investments Account of each Participant in accordance with Section 5.04 of the Plan. SECTION 5.04 ALLOCATION AND CREDITING OF EMPLOYER CONTRIBUTIONS. (a) Except as otherwise provided for in Sections 5.08 and 5.09 of the Plan, as of the Valuation Date for each Plan Year: (i) Company Stock released from the Loan Suspense Account for that year and shares of Company Stock contributed directly to the Plan shall be allocated and credited to each Active Participant's (as defined in paragraph (b) of this Section 5.04) Company Stock Account based on the ratio that each Active Participant's Compensation bears to the aggregate Compensation of all Active Participants for the Plan Year, and then (ii) The cash contributions not used to repay an Acquisition Loan and any other property contributed for that year shall be allocated and credited to each Active Participant's Other Investments Account based on the ratio determined by comparing each Active Participant's Compensation while a Participant to the aggregate Compensation of all Active Participants for the Plan Year. (b) For purposes of this Section 5.04, the term "Active Participant" means those Eligible Employees who: (i) are employed on the last day of the Plan Year [AND HAVE COMPLETED 1,000 HOURS OF SERVICE DURING THE PLAN YEAR]; or (ii) terminated employment during the Plan Year by reason of death, Disability, or attainment of their Normal or Later Retirement Date. SECTION 5.05 LIMITATIONS ON ALLOCATIONS. (a) IN GENERAL. Subject to the provisions of this Section 5.05, Section 415 of the Code shall be incorporated by reference into the terms of the Plan. No allocation shall be made under Section 5.04 of the Plan that would result in a violation of Section 415 of the Code. (b) CODE SECTION 415 COMPENSATION. For purposes of this Section 5.05, Compensation shall be adjusted to reflect the general rule of Section 1.415-2(d) of the Treasury Regulations. 14

(c) LIMITATION YEAR. The "limitation year" (within the meaning of Section 415 of the Code) shall be the calendar year. (d) MULTIPLE DEFINED CONTRIBUTION PLANS. In any case where a Participant also participates in another defined contribution plan of the Bank or its Affiliates, the appropriate committee of such other plan shall first reduce the after-tax contributions under any such plan, shall then reduce any elective deferrals under any such plan subject to Section 401(k) of the Code, shall then reduce all other contributions under any other such plan and, if necessary, shall then reduce contributions under this Plan. (e) EXCESS ALLOCATIONS. If, after applying the allocation provisions under Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would otherwise result in a violation of Section 415 of the Code, the Committee shall allocate and reallocate employer contributions to other Participants in the Plan for the limitation year or, if such allocation and reallocation causes the limitations of Section 415 of the Code to be exceeded, shall hold excess amounts in an unallocated suspense account for allocation in a subsequent Plan Year in accordance with Section 1.415-6(b)(6)(i) of the Treasury Regulations. Such suspense account, if permitted, will be credited before any allocation of contributions for subsequent limitation years. (f) ALLOCATIONS PURSUANT TO SECTION 5.08. For purposes of this Section 5.05, no amount credited to any Participant's Account pursuant to Section 5.08 of the Plan shall be counted as an "annual addition" for purposes of Section 415 of the Code. In the event any amount cannot be allocated to Affected Participants (as defined in Section 5.08 of the Plan) under the Plan pursuant to Section 5.08 of the Plan in the year of a Change in Control, the amount which may not be so allocated in the year of the Change in Control shall be treated in accordance with paragraph (e) of this Section 5.05. SECTION 5.06 OTHER LIMITATIONS. Aside from the limitations set forth in Section 5.05 of the Plan, in no event shall more than one-third of the Employer contributions to the Plan be allocated to the Accounts of Highly Compensated Employees. In order to ensure that such allocations are not made, the Committee shall, beginning with the Participants whose Compensation exceeds the limit then in effect under Section 401(a)(17) of the Code, reduce the amount of Compensation of such Highly Compensated Employees on a pro-rata basis per individual that would otherwise be taken into account for purposes of allocating benefits under Section 5.04 of the Plan. If, in order to satisfy this Section 5.06, any such Participant's Compensation must be reduced to an amount that is lower than the Compensation amount of the next highest paid (based on such Participant's Compensation) Highly Compensated Employee (the "breakpoint amount"), then, for purposes of allocating benefits under Section 5.04 of the Plan, the Compensation of all concerned Participants shall be reduced to an amount not to exceed such breakpoint amount. 15

SECTION 5.07 LIMITATIONS AS TO CERTAIN SECTION 1042 TRANSACTIONS. To the extent that a shareholder of Company Stock sells qualifying Company Stock to the Plan and elects (with the consent of the Bank) nonrecognition of gain under Section 1042 of the Code, no portion of the Company Stock purchased in such nonrecognition transaction (or other dividends or other income attributable thereto) may accrue or be allocated during the nonallocation period (the ten (10) year period beginning on the later of the date of the sale of the qualified Company Stock, or the date of the Plan allocation attributable to the final payment of an Acquisition Loan incurred in connection with such sale) for the benefit of: (a) the selling shareholder; (b) the spouse, brothers or sisters (whether by the whole or half blood), ancestors or lineal descendants of the selling shareholder or descendant referred to in (a) above; or (c) any other person who owns, after application of Section 318(a) of the Code, more than twenty-five percent (25%) of: (i) any class of outstanding stock of the Company or any Affiliate, or (ii) the total value of any class of outstanding stock of the Company or any Affiliate. For purposes of this Section 5.07, Section 318(a) of the Code shall be applied without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the Code. SECTION 5.08 ALLOCATIONS UPON TERMINATION PRIOR TO SATISFACTION OF ACQUISITION LOAN. (a) Notwithstanding any other provision of the Plan, in the event of a Change in Control, the Plan shall terminate as of the effective date of the Change in Control and, as soon as practicable thereafter, the Trustee shall repay in full any outstanding Acquisition Loan. In connection with such repayment, the Trustee shall: (i) apply cash, if any, received by the Plan in connection with the transaction constituting a Change in Control, with respect to the unallocated shares of Company Stock acquired with the proceeds of the Acquisition Loan, and (ii) to the extent additionally required to effect the repayment of the Acquisition Loan, obtain cash through the sale of any stock or security received by the Plan in connection with such transaction, with respect to such unallocated shares of Company Stock. After repayment of the Acquisition Loan, all remaining shares of Company Stock held in the Loan Suspense Account, all other stock or securities, and any cash proceeds from the sale or other disposition of any shares of Company Stock held in the Loan Suspense Account, shall be allocated among the Accounts of all Participants who were employed by an Employer on the date immediately preceding the effective date of the Change in Control. Such allocations of shares or cash proceeds shall be credited as earnings for purposes of Section 5.05 of the Plan and Section 415 of the Code, as of the effective date of the Change in Control, to the Account of each Participant who is either in active Service with an Employer, or is on a Recognized Absence, on the date immediately preceding the effective date of the Change of Control (each an "Affected 16

Participant"), in proportion to the opening balances in their Company Stock Accounts as of the first day of the current Valuation Period. As of the effective date of a Change in Control, all Participant Accounts shall be fully vested and nonforfeitable. (b) In the event of a termination of the Plan in connection with a Change in Control, this Section 5.08 shall have no force and effect unless the price paid for the Company Stock in connection with a Change in Control is greater than the average basis of the unallocated Company Stock held in the Loan Suspense Account as of the date of the Change in Control. SECTION 5.09 DIVIDENDS. (a) STOCK DIVIDENDS. Dividends on Company Stock which are received by the Trustee in the form of additional Company Stock shall be retained in the portion of the Trust Fund consisting of Company Stock, and shall be allocated among the Participants' Accounts and the Loan Suspense Account in accordance with their holdings of the Company Stock on which the dividends have been paid. (b) CASH DIVIDENDS ON ALLOCATED SHARES. Dividends on Company Stock credited to Participants' Accounts which are received by the Trustee in the form of cash shall, at the direction of the Bank, either: (i) be credited to Participants' Accounts in accordance with Section 5.03 of the Plan and invested as part of the Trust Fund; (ii) be distributed immediately to the Participants; (iii) be distributed to the Participants within ninety (90) days of the close of the Plan Year in which paid; or (iv) be used to repay principal and interest on the Acquisition Loan used to acquire Company Stock on which the dividends were paid. In addition to the alternatives specified in the preceding paragraph regarding the treatment of cash dividends paid with respect to shares of Company Stock credited to Participants' Accounts, if authorized by the Committee for the Plan Year, a Participant may elect that cash dividends paid on Company Stock credited to the Participant's Account shall either be: (i) paid to the Plan, reinvested in Company Stock and credited to the Participant's Account; (ii) distributed in cash to the Participant; or (iii) distributed to the Participant within ninety (90) days of the close of the Plan Year in which paid. 17

Dividends subject to an election under this paragraph (and any Company Stock acquired therewith pursuant to a Participant's election) shall at all times be fully vested. To the extent the Committee authorizes dividend elections pursuant to this paragraph, the Committee shall establish policies and procedures relating to Participant elections and, if applicable, the reinvestment of cash dividends in Company Stock, which are consistent with guidance issued under Section 404(k) of the Code. (c) CASH DIVIDENDS ON UNALLOCATED SHARES. Dividends on Company Stock held in the Loan Suspense Account received by the Trustee in the form of cash shall be applied as soon as practicable to payments of principal and interest under the Acquisition Loan incurred with the purchase of Company Stock. (d) FINANCED SHARES. Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to Company Stock shall be allocated under Sections 5.03 and 5.04 of the Plan as follows: (i) First, Financed Shares with a fair market value at least equal to the dividends paid with respect to the Company Stock allocated to Participants' Accounts shall be allocated among and credited to the Accounts of such Participants, pro rata, according to the number of shares of Company Stock held in such accounts on the date the dividend is declared by the Company; and (ii) Next, any remaining Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to Company Stock held in the Loan Suspense Account shall be allocated among and credited to the Accounts of all Participants, pro rata, according to each Participant's Compensation. SECTION 6 VESTING AND FORFEITURES SECTION 6.01 DEFERRED VESTING IN ACCOUNTS. (a) [A PARTICIPANT SHALL VEST IN HIS ACCOUNTS IN ACCORDANCE WITH THE FOLLOWING SCHEDULE:
YEARS OF SERVICE ---------------LESS THAN TWO (2) YEARS TWO (2) YEARS THREE (3) YEARS FOUR (4) YEARS FIVE (5) YEARS SIX (6) YEARS VESTED PERCENTAGE ----------------0% 20% 40% 60% 80% 100%]

(b) For purposes of determining a Participant's Years of Service under this Section 6.01, a Participant must be credited employment with the Bank or an Affiliate shall be deemed employment with the Employer. For purposes of determining a Participant's vested 18

percentage in his Accounts, [ALL YEARS OF SERVICE SHALL BE INCLUDED, BEGINNING WITH THE EMPLOYEE'S INITIAL SERVICE WITH THE EMPLOYER.] SECTION 6.02 IMMEDIATE VESTING IN CERTAIN SITUATIONS. (a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become fully vested in his Accounts upon the earlier of: (i) termination of the Plan or upon the permanent and complete discontinuance of contributions by the Employer to the Plan; provided, however, that in the event of a partial termination of the Plan, the interest of each Participant shall fully vest only with respect to that part of the Plan which is terminated; (ii) Termination of Service on or after the Participant's Normal or Later Retirement Date; (iii) a Change in Control; or (iv) Termination of Service by reason of death or Disability. SECTION 6.03 TREATMENT OF FORFEITURES. (a) If a Participant who is not fully vested in his Accounts terminates employment, that portion of his Accounts in which he is not vested shall be forfeited upon the earlier of: (i) the date the Participant receives a distribution of his entire vested benefits under the Plan, or (ii) the date at which the Participant incurs five (5) consecutive One Year Breaks in Service. (b) If a Participant who has terminated employment and has received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer prior to incurring five (5) consecutive One Year Breaks in Service, he shall have the portion of his Accounts which was previously forfeited restored to his Accounts, provided he repays to the Trustee within five (5) years of his subsequent employment date an amount equal to the previous distribution. The amount restored to the Participant's Account shall be credited to his Account as of the last day of the Plan Year in which the Participant repays the distributed amount to the Trustee and the restored amount shall come from other Employees' forfeitures and, if such forfeitures are insufficient, from a special contribution by the Employer for that year. If a Participant's employment terminates prior to his Account having become vested, such Participant shall be deemed to have received a distribution of his entire vested interest as of the Valuation Date next following his termination of employment. 19

(c) If a Participant who has terminated employment but has not received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer subsequent to incurring five (5) consecutive One Year Breaks in Service, any undistributed balance of his Accounts from his prior participation which was not forfeited shall be maintained as a fully vested subaccount within his Account. (d) If a portion of a Participant's Account is forfeited, assets other than Company Stock must be forfeited before any Company Stock may be forfeited. (e) Forfeitures shall be reallocated among the other Participants in the Plan. SECTION 6.04 ACCOUNTING FOR FORFEITURES. A forfeiture shall be charged to the Participant's Account as of the first day of the first Valuation Period in which the forfeiture becomes certain pursuant to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of the Plan, a forfeiture shall be added to the contributions of the terminated Participant's Employer which are to be credited to other Participants pursuant to Section 5 as of the last day of the Plan Year in which the forfeiture becomes certain. SECTION 6.05 VESTING UPON REEMPLOYMENT. If a Participant incurs a One Year Break in Service and again performs an Hour of Service, such Participant shall receive credit, for purposes of Section 6.01 of the Plan, for his Years of Service prior to his One Year Break in Service. SECTION 7 DISTRIBUTIONS SECTION 7.01 DISTRIBUTION OF BENEFIT UPON A TERMINATION OF EMPLOYMENT. (a) A Participant whose employment terminates for any reason shall receive the entire vested portion of his Accounts in a single payment on a date selected by the Committee; provided, however, that such date shall be on or before the 60th day after the end of the Plan Year in which the Participant's employment terminated. The benefits from that portion of the Participant's Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment. Subject to the provisions of Section 7.05 of the Plan, if the Committee so provides, a Participant may elect that his benefits be distributed to him in the form of either Company Stock, cash, or some combination thereof. (b) Notwithstanding paragraph (a) of this Section 7.01, if the balance credited to a Participant's Accounts exceeds, at the time such benefit was distributable, $5,000, his benefits shall not be paid before the latest of his 65th birthday or the tenth anniversary of the year in which he commenced participation in the Plan, unless he elects an early payment date in a written election filed with the Committee. Such an election is not valid unless it is made after the Participant has received the required notice under Section 20

1.411(a)-11(c) of the Treasury Regulations that provides a general description of the material features of a lump sum distribution and the Participant's right to defer receipt of his benefits under the Plan. The notice shall be provided no less than 30 days and no more than 90 days before the first day on which all events have occurred which entitle the Participant to such benefit. Written consent of the Participant to the distribution generally may not be made within 30 days of the date the Participant receives the notice and shall not be made more than 90 days from the date the Participant receives the notice. However, a distribution may be made less than 30 days after the notice provided under Section 1.411(a)-11(c) of the Treasury Regulations is given, if: (i) the Committee clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. A Participant may modify such an election at any time, provided any new benefit payment date is at least 30 days after a modified election is delivered to the Committee. SECTION 7.02 MINIMUM DISTRIBUTION REQUIREMENTS. With respect to all Participants, other than those who are "5% owners" (as defined in Section 416 of the Code), benefits shall be paid on the required beginning date which is no later than the April 1st of the later of: (i) the calendar year following the calendar year in which the Participant attains age 70-1/2, or (ii) the calendar year in which the Participant retires. With respect to all Participants who are 5% owners within the meaning of Section 416 of the Code, such Participants' benefits shall be paid no later than the April 1st of the calendar year following the calendar year in which the Participant attains age 70-1/2. SECTION 7.03 BENEFITS ON A PARTICIPANT'S DEATH. (a) If a Participant dies before his benefits are paid pursuant to Section 7.01 of the Plan, the balance credited to his Accounts shall be paid to his Beneficiary in a single distribution on or before the 60th day after the end of the Plan Year in which the Participant died. If the Participant has not named a Beneficiary or his named Beneficiary should not survive him, then the balance in his Accounts shall be paid to his estate. The benefits from that portion of the Participant's Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment. (b) If a married Participant dies before his benefit payments begin, then, unless he has specifically elected otherwise, the Committee shall cause the balance in his Accounts to 21

be paid to his spouse, as Beneficiary. A married Participant may name an individual other than his spouse as Beneficiary provided that such election is accompanied by the spouse's written consent which must: (i) acknowledge the effect of the election; (ii) explicitly provide either that the designated Beneficiary may not subsequently be changed by the Participant without the spouse's further consent or that it may be changed without such consent; and (iii) must be witnessed by the Committee, its representative, or a notary public. This requirement shall not apply if the Participant establishes to the Committee's satisfaction that the spouse may not be located. (c) The Committee shall, from time to time, take whatever steps it deems appropriate to keep informed of each Participant's marital status. Each Employer shall provide the Committee with the most reliable information in the Employer's possession regarding its Participants' marital status, and the Committee may, in its discretion, require a notarized affidavit from any Participant as to his marital status. The Committee, the Plan, the Trustee, and the Employers shall be fully protected and discharged from any liability to the extent of any benefit payments made as a result of the Committee's good faith and reasonable reliance upon information obtained from a Participant as to the Participant's marital status. SECTION 7.04 DELAY IN BENEFIT DETERMINATION. If the Committee is unable to determine the benefits payable to a Participant or Beneficiary on or before the latest date prescribed for payment pursuant to this Section 7, the benefits shall in any event be paid within 60 days after they can first be determined. SECTION 7.05 OPTIONS TO RECEIVE AND SELL COMPANY STOCK. (a) Unless ownership of virtually all Company Stock is restricted to active Employees and qualified retirement plans for the benefit of Employees pursuant to the certificates of incorporation or by-laws of the Employers issuing Company Stock, a terminated Participant or the Beneficiary of a deceased Participant may instruct the Committee to distribute the Participant's entire vested interest in his Accounts in the form of Company Stock. In that event, the Committee shall apply the Participant's vested interest in his Other Investments Account to purchase sufficient Company Stock to make the required distribution. (b) Any Participant who receives Company Stock pursuant to this Section 7.05, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant's death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of 22

the Code, shall have the right to require the Employer which issued the Company Stock to purchase the Company Stock for its current fair market value (hereinafter referred to as the "put right"). The put right shall be exercisable by written notice to the Committee during the first 60 days after the Company Stock is distributed by the Plan, and, if not exercised in that period, during the first 60 days in the following Plan Year after the Committee has communicated to the Participant its determination as to the Company Stock's current fair market value. If the put right is exercised, the Trustee may, if so directed by the Committee in its sole discretion, assume the Employer's rights and obligations with respect to purchasing the Company Stock. However, the put right shall not apply to the extent that the Company Stock, at the time the put right would otherwise be exercisable, may be sold on an established market in accordance with federal and state securities laws and regulations. (c) With respect to a put right, the Employer or the Trustee, as the case may be, may elect to pay for the Company Stock in equal periodic installments, not less frequently than annually, over a period not longer than five (5) years from the 30th day after the put right is exercised pursuant to paragraph (b) of this Section 7.05, with adequate security and interest at a reasonable rate on the unpaid balance, all such terms to be set forth in a promissory note delivered to the seller with normal terms as to acceleration upon any uncured default. (d) Nothing contained in this Section 7.05 shall be deemed to obligate any Employer to register any Company Stock under any federal or state securities law or to create or maintain a public market to facilitate the transfer or disposition of any Company Stock. The put right described in this Section 7.05 may only be exercised by a person described in paragraph (b) of this Section 7.05, and may not be transferred with any Company Stock to any other person. As to all Company Stock purchased by the Plan in exchange for any Acquisition Loan, the put right must be nonterminable. The put right for Company Stock acquired through an Acquisition Loan shall continue with respect to such Company Stock after the Acquisition Loan is repaid or the Plan ceases to be an employee stock ownership plan. Except as provided above, in accordance with the provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no Company Stock acquired with the proceeds of an Acquisition Loan may be subject to any put, call or other option or buy-sell or similar arrangement while held by, and when distributed from, the Plan, whether or not the Plan is then an employee stock ownership plan. SECTION 7.06 RESTRICTIONS ON DISPOSITION OF COMPANY STOCK. Except in the case of Company Stock which is traded on an established market, a Participant who receives Company Stock pursuant to this Section 7, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant's death or incompetency, divorce or separation from the Participant, or a rollover distribution described in Section 402(c) of the Code, shall, prior to any sale or other transfer of the Company Stock to any other person, first offer the Company Stock to the issuing Employer and to the Plan at its current fair market value. This restriction shall apply to any transfer, whether voluntary, involuntary, or by operation of law, and whether for consideration or gratuitous. Either the Employer or the 23

Trustee may accept the offer within 14 days after it is delivered. Any Company Stock distributed by the Plan shall bear a conspicuous legend describing the right of first refusal under this Section 7.06, as applicable, as well as any other restrictions upon the transfer of the Company Stock imposed by federal and state securities laws and regulations. SECTION 7.07 DIRECT TRANSFER OF ELIGIBLE PLAN DISTRIBUTIONS. (a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee (as defined below) may elect to have any portion of an eligible rollover distribution (as defined below) paid directly to an eligible retirement plan (as defined below) specified by the distributee in a direct rollover (as defined below). A "distributee" includes a Participant or former Participant. In addition, the Participant's or former Participant's surviving spouse and the Participant's or former Participant's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. For purposes of this Section 7.07 a "direct rollover" is a payment by the Plan to the eligible retirement plan specified by the distributee. (b) To effect such a direct transfer, the distributee must notify the Committee that a direct rollover is desired and provide to the Committee sufficient information regarding the eligible retirement plan to which the payment is to be made. Such notice shall be made in such form and at such time as the Committee may prescribe. Upon receipt of such notice, the Committee shall direct the Trustee to make a trustee-to-trustee transfer of the eligible rollover distribution to the eligible retirement plan so specified. (c) For purposes of this Section 7.07, an "eligible rollover distribution" shall have the meaning set forth in Section 402(c)(4) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not inconsistent with the above references, an eligible rollover distribution shall mean any distribution of all or any portion of the Participant's Account, except that such term shall not include any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made (i) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and a designated Beneficiary, or (ii) for a period of ten years or more. Further, the term "eligible rollover distribution" shall not include any distribution required to be made under Section 401(a)(9) of the Code or, the portion of any distribution that is not includible in gross income (determined without regard to the exclusions for net unrealized appreciation with respect to Company Stock). To the extent applicable under the Plan, "eligible rollover distributions" shall also not include any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code. (d) For purposes of this Section 7.07, an "eligible retirement plan" shall have the meaning set forth in Section 402(c)(8) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not consistent with the above references, an eligible retirement plan shall mean: (i) an individual retirement account described in 24

Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) an annuity or annuity plan described in Section 403(a) or Section 403(b) of the Code, (iv) a qualified trust described in Section 401(a) of the Code, or (v) a governmental plan under Section 457 of the Code that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan means an individual retirement account or individual retirement annuity. SECTION 8 VOTING OF COMPANY STOCK AND TENDER OFFERS SECTION 8.01 VOTING OF COMPANY STOCK. (a) IN GENERAL. The Trustee shall generally vote all shares of Company Stock held in the Trust in accordance with the provisions of this Section 8.01. (b) ALLOCATED SHARES. Shares of Company Stock which have been allocated to Participants' Accounts shall be voted by the Trustee in accordance with the Participants' written instructions. (c) UNINSTRUCTED AND UNALLOCATED SHARES. Shares of Company Stock which have been allocated to Participants' Accounts but for which no written instructions have been received by the Trustee regarding voting shall be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Shares of unallocated Company Stock shall also be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Notwithstanding the preceding two sentences, all shares of Company Stock which have been allocated to Participants' Accounts and for which the Trustee has not timely received written instructions regarding voting and all unallocated shares of Company Stock must be voted by the Trustee in a manner determined by the Trustee to be solely in the best interests of the Participants and Beneficiaries. (d) VOTING PRIOR TO ALLOCATION. In the event no shares of Company Stock have been allocated to Participants' Accounts at the time Company Stock is to be voted, each Participant shall be deemed to have one share of Company Stock allocated to his Accounts for the sole purpose of providing the Trustee with voting instructions. (e) PROCEDURE AND CONFIDENTIALITY. Whenever such voting rights are to be exercised, the Employers, the Committee, and the Trustee shall see that all Participants and Beneficiaries are provided with the same notices and other materials as are provided to other holders of the Company Stock, and are provided with adequate opportunity to deliver their instructions to the Trustee regarding the voting of Company Stock allocated to their Accounts or deemed allocated to their Accounts for purposes of voting. The 25

instructions of the Participants with respect to the voting of shares of Company Stock shall be confidential. SECTION 8.02 TENDER OFFERS. In the event of a tender offer, Company Stock shall be tendered by the Trustee in the same manner set forth in Section 8.01 of the Plan regarding the voting of Company Stock. SECTION 9 THE COMMITTEE AND PLAN ADMINISTRATION SECTION 9.01 IDENTITY OF THE COMMITTEE. The Committee shall consist of three or more individuals selected by the Bank. Any individual, including a director, trustee, shareholder, officer, or Employee of an Employer, shall be eligible to serve as a member of the Committee. The Bank shall have the power to remove any individual serving on the Committee at any time without cause upon ten (10) days' written notice to such individual and any individual may resign from the Committee at any time without reason upon ten (10) days' written notice to the Bank. The Bank shall notify the Trustee of any change in membership of the Committee. SECTION 9.02 AUTHORITY OF COMMITTEE. (a) The Committee shall be the "plan administrator" within the meaning of ERISA and shall have exclusive responsibility and authority to control and manage the operation and administration of the Plan, including the interpretation and application of its provisions, except to the extent such responsibility and authority are otherwise specifically: (i) allocated to the Bank, the Employers, or the Trustee under the Plan and Trust Agreement; (ii) delegated in writing to other persons by the Bank, the Employers, the Committee, or the Trustee; or (iii) allocated to other parties by operation of law. (b) The Committee shall have exclusive responsibility regarding decisions concerning the payment of benefits under the Plan. (c) The Committee shall have full investment responsibility with respect to the Investment Fund except to the extent, if any, specifically provided for in the Trust Agreement. (d) In the discharge of its duties, the Committee may employ accountants, actuaries, legal counsel, and other agents (who also may be employed by an Employer or the Trustee in the same or some other capacity) and may pay such individuals reasonable compensation 26

and expenses for their services rendered with respect to the operation or administration of the Plan, to the extent such payments are not otherwise prohibited by law. SECTION 9.03 DUTIES OF COMMITTEE. (a) The Committee shall keep whatever records may be necessary in connection with the maintenance of the Plan and shall furnish to the Employers whatever reports may be required from time to time by the Employers. The Committee shall furnish to the Trustee whatever information may be necessary to properly administer the Trust. The Committee shall see to the filing with the appropriate government agencies of all reports and returns required with respect to the Plan under ERISA, the Code and other applicable laws and regulations. (b) The Committee shall have exclusive responsibility and authority with respect to the Plan's holdings of Company Stock and shall direct the Trustee in all respects regarding the purchase, retention, sale, exchange, and pledge of Company Stock and the creation and satisfaction of any Acquisition Loan to the extent such responsibilities are not set forth in the Trust Agreement. (c) The Committee shall at all times act consistently with the Bank's long-term intention that the Plan, as an employee stock ownership plan, be invested primarily in Company Stock. Subject to the direction of the Committee with respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of the Plan, and subject to the provisions of Sections 7.05 and 11.04 of the Plan as to Participants' rights under certain circumstances to have their Accounts invested in Company Stock or in assets other than Company Stock, the Committee shall determine, in its sole discretion, the extent to which assets of the Trust shall be used to repay any Acquisition Loan, to purchase Company Stock, or to invest in other assets selected by the Committee or an investment manager. No provision of the Plan relating to the allocation or vesting of any interests in Company Stock or investments other than Company Stock shall restrict the Committee from changing any holdings of the Trust Fund, whether the changes involve an increase or a decrease in the Company Stock or other assets credited to Participants' Accounts. In determining the proper extent of the Trust Fund's investment in Company Stock, the Committee shall be authorized to employ investment counsel, legal counsel, appraisers, and other agents and to pay their reasonable compensation and expenses to the extent such payments are not prohibited by law. (d) If the valuation of any Company Stock is not established by reported trading on a generally recognized public market, then the Committee shall have the exclusive authority and responsibility to determine the value of the Company Stock for all purposes under the Plan. Such value shall be determined as of each Valuation Date and on any other date as of which the Trustee purchases or sells Company Stock in a manner consistent with Section 4975 of the Code and the Treasury Regulations issued thereunder. The Committee shall use generally accepted methods of valuing stock of similar corporations for purposes of arm's length business and investment transactions, and in this connection the Committee shall obtain, and shall be protected in relying upon, the 27

valuation of Company Stock as determined by an independent appraiser (as defined in Section 401(a)(28)(c) of the Code). SECTION 9.04 COMPLIANCE WITH ERISA AND THE CODE. The Committee shall perform all acts necessary to ensure the Plan's compliance with ERISA and the Code. Each individual member of the Committee shall discharge his duties in good faith and in accordance with the applicable requirements of ERISA and the Code. SECTION 9.05 ACTION BY COMMITTEE. All actions of the Committee shall be governed by the affirmative vote of a majority of the total number of Committee members. The members of the Committee may meet informally and may take any action without meeting as a group. SECTION 9.06 EXECUTION OF DOCUMENTS. Any instrument to be executed by the Committee may be signed by any member of the Committee. SECTION 9.07 ADOPTION OF RULES. The Committee shall adopt such rules and regulations of uniform applicability as it deems necessary or appropriate for the proper operation, administration and interpretation of the Plan. SECTION 9.08 RESPONSIBILITIES TO PARTICIPANTS. The Committee shall determine which Employees qualify to participate in the Plan. The Committee shall furnish to each Eligible Employee whatever summary plan descriptions, summary annual reports, and other notices and information that may be required under ERISA. The Committee also shall determine when a Participant or his Beneficiary qualifies for the payment of benefits under the Plan. The Committee shall furnish to each such Participant or Beneficiary whatever information is required under ERISA or the Code (or is otherwise appropriate) to enable the Participant or Beneficiary to make whatever elections may be available pursuant to Section 7, and the Committee shall provide for the payment of benefits in the proper form and amount from the Trust. The Committee may decide in its sole discretion to permit modifications of elections and to defer or accelerate benefits to the extent consistent with the terms of the Plan, applicable law, and the best interests of the individuals concerned. SECTION 9.09 ALTERNATIVE PAYEES IN EVENT OF INCAPACITY. If the Committee finds at any time that an individual qualifying for benefits under this Plan is a minor or is incompetent, the Committee may direct the benefits to be paid, in the case of a minor, to his parents, his legal guardian, a custodian for him under the Uniform Transfers to Minors Act, or the person having actual custody of him, or, in the case of an incompetent, to his spouse, his legal guardian, or the person having actual custody of him. The Committee and the Trustee 28

shall not be obligated to inquire as to the actual use of the funds by the person receiving them under this Section 9.09, and any such payment shall completely discharge the obligations of the Plan, the Trustee, the Committee, and the Employers to the extent of the payment. SECTION 9.10 INDEMNIFICATION BY EMPLOYERS. Except as separately agreed upon in writing, the Committee, and any member or employee of the Committee, shall be indemnified and held harmless by the Employers, jointly and severally, to the fullest extent permitted by law, against any and all costs, damages, expenses, and liabilities reasonably incurred by or imposed upon the Committee or such individual in connection with any claim made against the Committee or such individual, or in which the Committee or such individual may be involved by reason of being, or having been, the Committee, or a member or employee of the Committee, to the extent such amounts are not paid by insurance. SECTION 9.11 ABSTENTION BY INTERESTED MEMBER. Any member of the Committee who is also a Participant in the Plan shall take no part in any determination specifically relating to his own participation or benefits under the Plan, unless an abstention would render the Committee incapable of acting on the matter. SECTION 10 RULES GOVERNING BENEFIT CLAIMS SECTION 10.01 CLAIM FOR BENEFITS. Any Participant or Beneficiary who qualifies for the payment of benefits shall file a claim for benefits with the Committee on a form provided by the Committee. The claim, including any election of an alternative benefit form, shall be filed at least 30 days before the date on which the benefits are to begin. If a Participant or Beneficiary fails to file a claim by the 30th day before the date on which benefits become payable, he shall be presumed to have filed a claim for payment for the Participant's benefits in the standard form prescribed by Section 7 of the Plan. SECTION 10.02 NOTIFICATION BY COMMITTEE. Within 90 days after receiving a claim for benefits (or within 180 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary within 90 days after receiving the claim for benefits), the Committee shall notify the Participant or Beneficiary whether the claim has been approved or denied. If the Committee denies a claim in any respect, the Committee shall set forth in a written notice to the Participant or Beneficiary: (a) each specific reason for the denial; (b) specific references to the pertinent Plan provisions on which the denial is based; 29

(c) a description of any additional material or information which could be submitted by the Participant or Beneficiary to support his claim, with an explanation of the relevance of such information; and (d) an explanation of the claims review procedures set forth in Section 10.03 of the Plan. SECTION 10.03 CLAIMS REVIEW PROCEDURE. Within 60 days after a Participant or Beneficiary receives notice from the Committee that his claim for benefits has been denied in any respect, he may file with the Committee a written notice of appeal setting forth his reasons for disputing the Committee's determination. In connection with his appeal, the Participant or Beneficiary or his representative may inspect or purchase copies of pertinent documents and records to the extent not inconsistent with other Participants' and Beneficiaries' rights of privacy. Within 60 days after receiving a notice of appeal from a prior determination (or within 120 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary and his representative within 60 days after receiving the notice of appeal), the Committee shall furnish to the Participant or Beneficiary and his representative, if any, a written statement of the Committee's final decision with respect to his claim, including the reasons for such decision and the particular Plan provisions upon which it is based. SECTION 11 THE TRUST SECTION 11.01 CREATION OF TRUST FUND. All amounts received under the Plan from an Employer and investments shall be held in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement. The benefits described in this Plan shall be payable only from the assets of the Trust Fund. Neither the Bank, any other Employer, its board of directors or trustees, its stockholders, its officers, its employees, the Committee, nor the Trustee shall be liable for payment of any benefit under this Plan except from the Trust Fund. SECTION 11.02 COMPANY STOCK AND OTHER INVESTMENTS. The Trust Fund held by the Trustee shall be divided into Company Stock and investments other than Company Stock. The Trustee shall have no investment responsibility for the portion of the Trust Fund consisting of Company Stock, but shall accept any Employer contributions made in the form of Company Stock, and shall acquire, sell, exchange, distribute, and otherwise deal with and dispose of Company Stock in accordance with the instructions of the Committee. SECTION 11.03 ACQUISITION OF COMPANY STOCK. From time to time the Committee may, in its sole discretion, direct the Trustee to acquire Company Stock from the issuing Employer or from shareholders, including shareholders who are or have been Employees, Participants, or fiduciaries with respect to the Plan. The Trustee shall 30

pay for such Company Stock no more than its fair market value, which shall be determined conclusively by the Committee pursuant to Section 9.03(d) of the Plan. The Committee may direct the Trustee to finance the acquisition of Company Stock through an Acquisition Loan subject to the provisions of Section 4.03 of the Plan. SECTION 11.04 PARTICIPANTS' OPTION TO DIVERSIFY. The Committee shall establish a procedure under which each Participant may, during the first five years of a certain six-year period, elect to have up to 25 percent of the value of his Accounts committed to alternative investment options within an "Investment Fund." For the sixth year in this period, the Participant may elect to have up to 50 percent of the value of his Accounts committed to other investments. The six-year period shall begin with the Plan Year following the first Plan Year in which the Participant has both reached age 55 and completed 10 years of participation in the Plan; a Participant's election to diversify his Accounts must be made within the 90-day period immediately following the last day of each of the six Plan Years. The Committee shall see that the Investment Fund includes a sufficient number of investment options to comply with Section 401(a)(28)(B) of the Code. The Committee may, in its discretion, permit a transfer of a portion of the Participant's Accounts to the Naugatuck Valley Savings and Loan Profit Sharing and 401(k) Plan in order to satisfy this Section 11.04, provided such investments comply with Section 401(a)(28)(B) of the Code and such transfer is not otherwise prohibited under the Code or ERISA. The Trustee shall comply with any investment directions received from Participants in accordance with the procedures adopted from time to time by the Committee under this Section 11.04. SECTION 12 ADOPTION, AMENDMENT AND TERMINATION SECTION 12.01 ADOPTION OF PLAN BY OTHER EMPLOYERS. With the consent of the Bank, any entity may become a participating Employer under the Plan by: (a) taking such action as shall be necessary to adopt the Plan; (b) becoming a party to the Trust Agreement establishing the Trust Fund; and (c) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to the entity's Employees. SECTION 12.02 ADOPTION OF PLAN BY SUCCESSOR. In the event that any Employer shall be reorganized by way of merger, consolidation, transfer of assets or otherwise, so that an entity other than an Employer shall succeed to all or substantially all of the Employer's business, the successor entity may be substituted for the Employer under the Plan by adopting the Plan and becoming a party to the Trust Agreement. Contributions by the Employer shall be automatically suspended from the effective date of any such 31

reorganization until the date upon which the substitution of the successor entity for the Employer under the Plan becomes effective. If, within 90 days following the effective date of any such reorganization, the successor entity shall not have elected to become a party to the Plan, or if the Employer shall adopt a plan of complete liquidation other than in connection with a reorganization, the Plan shall be automatically terminated with respect to Employees of the Employer as of the close of business on the 90th day following the effective date of the reorganization, or as of the close of business on the date of adoption of a plan of complete liquidation, as the case may be. SECTION 12.03 PLAN ADOPTION SUBJECT TO QUALIFICATION. Notwithstanding any other provision of the Plan, the adoption of the Plan and the execution of the Trust Agreement are conditioned upon their being determined initially by the Internal Revenue Service to meet the qualification requirements of Section 401(a) of the Code, so that the Employers may deduct currently for federal income tax purposes their contributions to the Trust and so that the Participants may exclude the contributions from their gross income and recognize income only when they receive benefits. In the event that this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code, the Plan may be amended retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure qualification under Section 401(a) of the Code. If this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code either as originally adopted or as amended, each Employer's contributions to the Trust under this Plan (including any earnings thereon) shall be returned to it and this Plan shall be terminated. In the event that this Plan is amended after its initial qualification, and the Plan, as amended, is held by the Internal Revenue Service not to qualify under Section 401(a) of the Code, the amendment may be modified retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure approval of the amendment under Section 401(a) of the Code. SECTION 12.04 RIGHT TO AMEND OR TERMINATE. (a) The Bank intends to continue this Plan as a permanent program. However, each participating Employer separately reserves the right to suspend, supersede, or terminate the Plan at any time and for any reason, as it applies to that Employer's Employees, and the Bank reserves the right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at any time and for any reason, as it applies to the Employees of all Employers. (b) No amendment, suspension, supersession, merger, consolidation, or termination of the Plan shall reduce any Participant's or Beneficiary's proportionate interest in the Trust Fund, or shall divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. Except as is required for purposes of compliance with the Code or ERISA, neither the provisions of Section 5.04 relating to the crediting of contributions, forfeitures and shares of Company Stock released from the Loan Suspense Account, nor any other provision of the Plan relating to the allocation of benefits to Participants, may 32

be amended more frequently than once every six months. Moreover, there shall not be any transfer of assets to a successor plan or merger or consolidation with another plan unless, in the event of the termination of the successor plan or the surviving plan immediately following such transfer, merger, or consolidation, each participant or beneficiary would be entitled to a benefit equal to or greater than the benefit he would have been entitled to if the plan in which he was previously a participant or beneficiary had terminated immediately prior to such transfer, merger, or consolidation. Following a termination of this Plan by the Bank, the Trustee shall continue to administer the Trust and pay benefits in accordance with the Plan and the Committee's instructions. (c) In the event of a Change in Control, the Plan shall be terminated and allocations made to Participants in accordance with the provisions of Section 5.08 of the Plan. SECTION 13 GENERAL PROVISIONS SECTION 13.01 NONASSIGNABILITY OF BENEFITS. The interests of Participants and other persons entitled to benefits under the Plan shall not be subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or transferred. The prohibitions set forth in this Section 13.01 shall also apply to any judgment, decree, or order (including approval of a property or settlement agreement) which relates to the provision of child support, alimony, or property rights to a present or former spouse, child, or other dependent of a Participant pursuant to a domestic relations order, unless such judgment, decree or order is determined to be a "qualified domestic relations order" as defined in Section 414(p) of the Code. SECTION 13.02 LIMIT OF EMPLOYER LIABILITY. The liability of the Employers with respect to Participants and other persons entitled to benefits under the Plan shall be limited to making contributions to the Trust from time to time, in accordance with Section 4 of the Plan. SECTION 13.03 PLAN EXPENSES. All expenses incurred by the Committee or the Trustee in connection with administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent the expenses have not been paid or assumed by the Employer. SECTION 13.04 NONDIVERSION OF ASSETS. Except as provided in Sections 5.05 and 12.03 of the Plan, under no circumstances shall any portion of the Trust Fund be diverted to or used for any purpose other than the exclusive benefit of Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. 33

SECTION 13.05 SEPARABILITY OF PROVISIONS. If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan. SECTION 13.06 SERVICE OF PROCESS. The agent for the service of process upon the Plan shall be the Chairman of the Board of the Bank and the Trustee, or such other person as may be designated from time to time by the Bank. SECTION 13.07 GOVERNING LAW. The Plan is established under, and its validity, construction and effect shall be governed by the laws of the State of Connecticut to the extent those laws are not preempted by federal law, including the provisions of ERISA. SECTION 13.08 SPECIAL RULES FOR PERSONS SUBJECT TO SECTION 16(b) REQUIREMENTS. Notwithstanding anything herein to the contrary, any former Participant who is subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, who becomes eligible to again participate in the Plan, may not become a Participant prior to the date that is six months from the date such former Participant terminated participation in the Plan. In addition, any person subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934 Act receiving a distribution of Company Stock from the Plan must hold such Company Stock for a period of six months, commencing with the date of distribution. However, this restriction will not apply to Company Stock distributions made in connection with death, retirement, Disability or termination of employment, or made pursuant to the terms of a qualified domestic relations order. SECTION 13.09 MILITARY SERVICE. Notwithstanding any other provision of this Plan to the contrary, contributions, benefits and Service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. SECTION 14 TOP-HEAVY PROVISIONS SECTION 14.01 TOP-HEAVY PROVISIONS. If, as of the last day of the first Plan Year, or thereafter, if as of the day next preceding the beginning of any Plan Year (the "Determination Date"), the Plan is a "top-heavy plan" (determined in accordance with the provisions of Section 416(g) of the Code), that is, the aggregate present value of the accrued benefits and account balances of all "Key Employees" (within the meaning of Section 416(i) of the Code, and for this purpose using the definition of 34

Compensation, as modified under Section 5.05(b) of the Plan) and their Beneficiaries, exceeds sixty percent (60%) of the aggregate present value of the accrued benefits and account balances of all employees and their beneficiaries, the provision specified in this Section 14 will automatically become effective as of the first day of the Plan Year. This calculation shall be made in accordance with Section 416(g) of the Code, taking into consideration plans which are considered part of the Aggregation Group. The term "Aggregation Group" shall include each plan of the Bank or any of its Affiliates that includes a Key Employee and each plan of the Bank or any of its Affiliates that allows the Plan to meet the requirements of Section 401(a)(4) of the Code or Section 410 of the Code and may include any other plan of the Bank or any of its Affiliates, if the Aggregation Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code. SECTION 14.02 PLAN MODIFICATIONS UPON BECOMING TOP-HEAVY. (a) MINIMUM ACCRUALS. Section 5.04 of the Plan will be modified to provide that the aggregate amount of Employer contributions allocated in each Plan Year to the Accounts of each Participant who is a non-Key Employee (as defined under Section 416(i)(1) of the Code), and who is employed by an Employer as of the last day of the Plan Year, may not be less than the lesser of: (i) three percent of his Compensation for the Plan Year; and (ii) a percentage of his Compensation equal to the largest percentage obtained by dividing the sum of the amount credited to the Accounts of any Key Employee by that Key Employee's Compensation. (b) The preceding provision will remain in effect for the period in which the Plan is top-heavy. If, for any particular year thereafter, the Plan is no longer top-heavy, the provisions contained in this Section 14.02 shall cease to apply, except that any previously vested portion of any Account balance shall remain nonforfeitable. 35

FORM OF TRUST AGREEMENT BETWEEN NAUGATUCK VALLEY SAVINGS AND LOAN AND

FOR THE NAUGATUCK VALLEY SAVINGS AND LOAN EMPLOYEE STOCK OWNERSHIP PLAN TRUST

CONTENTS
Page ---1

Section 1 Section 2

Creation of Trust.................................. Investment of Trust Fund and Administrative Powers of the Trustee............................................ Compensation and Indemnification of Trustee and Payment of Expenses and Taxes.......................................... Records and Valuation.............................. Instructions from Committee........................ Change of Trustee.................................. Miscellaneous......................................

2

Section 3

7 9 10 11 11

Section 4 Section 5 Section 6 Section 7

This TRUST AGREEMENT dated ______________, 2004, between NAUGATUCK VALLEY SAVINGS AND LOAN with its administrative office at 333 Church Street, Naugatuck, CT 06770 (hereinafter called the "Bank"), and__________________________ with its administrative office at___________________________ (hereinafter called the "Trustee"). W I T N E S S E T H T H A T: WHEREAS, the Bank has approved and adopted an employee stock ownership plan for the benefit of its employees, the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan (hereinafter called the "Plan"); and WHEREAS, the Bank has authorized the execution of this Trust Agreement and has appointed________________________ as Trustee of the Trust Fund created pursuant to the Plan; and WHEREAS,____________________________ has agreed to act as Trustee and to hold and administer the assets of the Plan in accordance with the terms of this Trust Agreement. NOW, THEREFORE, the Bank and the Trustee agree as follows: Section 1. Creation of Trust 1.1 Trustee shall serve as Trustee of the Trust Fund created in accordance with and in furtherance of the Plan, and shall serve as Trustee until their removal or resignation in accordance with Section 6. 1.2 Trust Fund The Trustee hereby agrees to accept contributions from the Employer as defined in the Plan and amounts transferred from other qualified retirement plans from time to time in accordance with the terms of the Plan. All such property and contributions, together with income thereon and increments thereto, shall constitute the "Trust Fund" to be held in accordance with the terms of the Trust Agreement. 1.3 Incorporation of Plan An instrument entitled "Naugatuck Valley Savings and Loan Employee Stock Ownership Plan" is incorporated herein by reference, and this Trust Agreement shall be interpreted consistently with that Plan. All words and phrases defined in that Plan shall have the same meaning when used in this Trust Agreement. 1.4 Name The name of this trust shall be "Naugatuck Valley Savings and Loan Employee Stock Ownership Plan Trust." 1.5 Nondiversion of Assets In no event shall any part of the corpus or income of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan, except to the extent that assets may be returned to the Employer in accordance with the Plan where the Plan fails to qualify initially under Section 401(a) of the Internal Revenue Code (the "Code"), or

where they are attributable to contributions made by mistake of fact or in excess of the deductibility allowed under the Code. Section 2. Investment of Trust Fund and Administrative Powers of the Trustee 2.1 Bank Stock and Other Investments The basic investment policy of the Plan shall be to invest primarily in Bank Stock of the Employer for the exclusive benefit of the Participants and their Beneficiaries. The Committee shall have full and complete investment authority and responsibility with respect to the purchase, retention, sale, exchange, and pledge of Bank Stock and the payment of Stock Obligations, and the Trustee shall not deal in any way with Bank Stock except in accordance with their obligations pursuant to this Trust Agreement and the written instructions of the Committee. The Trustee shall invest, or keep invested, all or a portion of the Trust Fund in Bank Stock, and shall pay Stock Obligations out of assets of the Trust Fund, as instructed from time to time by the Committee. The Trustee shall invest any balance of the Trust Fund (the "Investment Fund") in such other property as the Committee, in its sole discretion, shall deem advisable, subject to any delegation of such investment responsibility pursuant to Section 2.2. Nothing contained herein shall provide investment discretion authority or any like kind responsibility in regard to the assets of the Trust Fund. In connection with instructions to acquire Bank Stock, the Trustee may purchase newly issued or outstanding Bank Stock from the Employer or any other holders of Bank Stock, including Participants, Beneficiaries, and Plan fiduciaries. All purchases and sales of Stock shall be made by the Trustee at fair market value as determined by the Committee in good faith and in accordance with any applicable requirements under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Such purchases may be made with assets of the Trust Fund, with funds borrowed for this purpose (with or without guarantees of repayment to the lender by the Employer), or by any combination of the foregoing. Notwithstanding any other provision of this Trust Agreement or the Plan, neither the Committee nor the Trustee shall make any purchase, sale, exchange, investment, pledge, valuation, or loan, or take any other action involving those assets for which they are responsible which (i) is inconsistent with the policy of the Plan and Trust, (ii) is inconsistent with the prudence and diversification requirements set forth in Sections 404(a)(1)(B) and (C) of ERISA (to the extent such requirements apply to an employee stock ownership plan and trust), (iii) is prohibited by Section 406 or 407 of ERISA, or (iv) would impair the qualification of the Plan or the exemption of the Trust under Sections 401 and 501, respectively, of the Code. 2.2 Delegation of Investment Responsibility The Committee may, by written notice and in accordance with the Plan, direct the Trustee to segregate any portion or all of the Investment Fund into one or more separate accounts for each of which full investment responsibility will be delegated to an investment manager appointed in such notice pursuant to Section 402(c)(3) of ERISA (hereinafter a "Manager"). For any separate account where the Trustee is to maintain custody of the assets, the Trustee and the Manager shall agree upon procedures for the transmittal 2

of investment instructions from the Manager to the Trustee, and the Trustee may provide the Manager with such documents as may be necessary to authorize the Manager to effect transactions directly on behalf of the segregated account. Further, the Committee may, by written notice and in accordance with the Plan, direct the Trustee to segregate any portion or all of the Investment Fund into one or more separate accounts for each of which full investment responsibility will be delegated to an insurance company through one or more group annuity contracts, deposit administration contracts, or similar contracts, which may provide for investments in any commingled separate accounts established under such contracts. An insurance company shall be a Manager with respect to any amounts held under such a contract except to the extent the insurer's assets are not deemed assets of the Plan and Trust Fund pursuant to Section 401(b)(2) of ERISA. The allocation of amounts held under such a contract among the insurer's general account and one or more individual or commingled separate accounts shall be determined by the Committee except as otherwise agreed by the Committee and the insurer. Any Manager shall have all of the powers given to the Trustee pursuant to Section 2.3 with respect to the portion of the Trust Fund committed to its investment discretion and control. The Trustee shall be responsible for the safekeeping of any assets which remain in their custody, but in no event shall the Trustee be under any duty to question or make any inquiry or suggestion regarding the action or inaction of a Manager or an insurer or the advisability of acquiring, retaining, or disposing of any asset of a segregated account. The Employer shall indemnify and hold the Trustee harmless from any and all costs, damages, expenses, and liabilities which the Trustee may incur by reason of any action taken or omitted to be taken by the Trustee upon directions from the Committee, a Manager, or an insurer pursuant to this Section 2.2. 2.3 Trustee Powers In addition to and not by way of limitation upon the fiduciary powers granted to it by law, the Trustee shall have the following specific powers, subject to the limitations set forth in Section 2.1: 2.3-1 to receive, hold, manage, invest and reinvest the money or other property which constitutes the Trust Fund, without distinction between principal and income; 2.3-2 to hold funds uninvested temporarily, provided it is a period of time that is not unreasonable, without liability for interest thereon, and to deposit funds in one or more savings or similar accounts with any banks and savings and loan associations which are insured by an instrumentality of the federal government, including the Trustee if it is such an institution; 2.3-3 at the direction of the Committee, to invest or reinvest the whole or any portion of the money or other property which constitutes the Trust Fund in such common or preferred stocks, investment trust shares, mutual funds, commingled trust funds, partnership interests, bonds, notes, or other evidences of indebtedness, and real and personal property as the Trustee in their absolute judgment and discretion may deem to be for the best interests of the Trust Fund, 3

regardless of nondiversification to the extent that such nondiversification is clearly prudent, and regardless of whether any such investment or property is authorized by law regarding the investment of trust funds, of a wasting asset nature, temporarily nonincome producing, or within or without the United States; 2.3-4 to invest in common and preferred stocks, bonds, notes, or other obligations of any corporation or business enterprise in which an Employer or its owners may own an interest; 2.3-5 at the direction of the Committee, to exchange any investment or property, real or personal, for other investments or properties at such time and upon such terms as the Trustee shall deem proper; 2.3-6 at the direction of the Committee, to sell, transfer, convey or otherwise dispose of any investment or property, real or personal, for cash or on credit, in such manner and upon such terms and conditions as the Trustee shall deem advisable, and no person dealing with the Trustee shall be under any duty to inquire as to the validity, expediency, or propriety of any such sale or as to the application of the purchase money paid to the Trustee; 2.3-7 to hold any investment or property in the name of the Trustee, with or without the designation of any fiduciary capacity, or in the name of a nominee, or unregistered, or in such other form that title may pass by delivery; provided, however, that the Trustee's records always show that such investment or property belongs to the Trust Fund and the Trustee shall not be relieved hereby of its responsibility to maintain safe custody of such investment or property; 2.3-8 to organize one or more corporations to hold, manage, or liquidate any property, including real estate, owned or acquired by the Trust Fund if in the sole discretion of the Trustee the organization of such corporation or corporations is for the best interests of the Trust and the Plan Participants and Beneficiaries; 2.3-9 to extend the time for payment of, to modify, to renew, or to release security from any mortgage, note or other evidence of indebtedness, or to take advantage of or waive any default; to foreclose mortgages and bid on property under foreclosure or to take title to property by conveyance in lieu of foreclosure, either with or without the payment of additional consideration; 2.3-10 to vote in person or by proxy all stocks and other securities having voting privileges; to exercise or refrain from exercising any option or privilege with respect to stocks and other securities, including any right or privilege to subscribe for or otherwise to acquire stocks and other securities; or to sell any such right or privilege; to assent to and join in any plan of refinance, merger, consolidation, reorganization or liquidation of any corporation or other enterprise in which this Trust may have an interest, to deposit stocks and other securities with any committee formed to effectuate the same, to pay any expense incidental thereto, to exchange stocks and other securities for those which may be issued pursuant to any such plan, and to retain 4

as an investment the stocks and other securities received by the Trustee; and to deposit any investment in a voting trust; notwithstanding the preceding, Participants and Beneficiaries shall be entitled to direct the manner in which stock allocated to their respective accounts are to be voted on all matters. All stock which has been allocated to Participants' Accounts for which the Trustee has received no written direction and all unallocated Employer securities will be voted by the Trustee in direct proportion to all Participants' directions received and solely in the interest of the Participants and Beneficiaries. Whenever such voting rights are to be exercised, the Employer, the Committee and the Trustee shall see that all Participants and Beneficiaries are provided with adequate opportunity to deliver their instructions to the Trustee regarding voting of stock allocated to their accounts. The instructions of the Participants with respect to the voting of allocated shares hereunder shall be confidential; 2.3-11 to abandon any property, real or personal, which the Trustee shall consider to be worthless or not of sufficient value to warrant its keeping or protecting; to abstain from the payment of taxes, water rents, assessments, repairs, maintenance, and upkeep of any such property; to permit any such property to be lost by tax sale or other proceedings, and to convey any such property for a nominal consideration or without consideration; 2.3-12 to borrow money from the Employer or from others (including the Trustee), and to enter into installment contracts, for the purchase of Stock upon such terms and conditions and at such reasonable rates of interest as the Committee may deem to be advisable, to issue its promissory notes as Trustee to evidence such debt, to secure the payment of such notes by pledging any property of the Trust Fund, and to authorize the holders of any such notes to pledge them to secure obligations of the holders and in connection therewith to repledge any assets of the Trust as security therefor; provided that, with respect to any extension of credit to the Trust involving, as a lender or guarantor, the Employer or other "disqualified person" within the meaning of Section 4975(e)(2) of the Code -(a) each loan or installment contract is primarily for the benefit of Participants and Beneficiaries of the Plan; (b) any interest on a loan or installment contract does not exceed a reasonable rate; (c) the proceeds of any loan shall be used only to acquire Stock, to repay the loan, or to repay a previous loan meeting these conditions, and the subject of any installment contract shall be only the Trust's purchase of Stock; (d) any collateral pledged to a creditor by the Trustee shall consist only of qualifying employer securities as that term is defined under Section 4975(e)(8) of the Code and the creditor shall have no recourse against the Trust Fund except with respect to the collateral (although the creditor may have recourse against an Employer as guarantor); (e) payments with respect to a loan or installment contract shall be made only from those amounts contributed by the Employer to the Trust Fund, from amounts earned on such contributions, and from cash dividends received on unallocated Stock held by the Trust as collateral for such an obligation; and 5

(f) upon the payment of any portion of balance due on a loan or upon any installment payment, a proportionate part of any qualified employer securities originally pledged as collateral for such indebtedness shall be released from encumbrance in accordance with Section 4.2 of the Plan and the Committee shall at least annually advise the Trustee of the number of shares of Stock so released and the proper allocation of such shares under the terms of the Plan; 2.3-13 to manage and operate any real property which shall at any time constitute an asset of the Trust Fund; to make repairs, alterations, and improvements thereto; to insure such property against loss by fire or other casualty; to lease or grant options for the sale of such property, which lease or option may be for a period of time which may extend beyond the life of this Trust; and to take any other action or enter into any other contract respecting such property which is consistent with the best interests of the Trust; 2.3-14 to pay any and all reasonable and normal expenses incurred in connection with the exercise of any power, right, authority or discretion granted herein, and, upon prior notice to the Bank, to employ and compensate agents, investment counsel, custodians, actuaries, attorneys, and accountants in such connection; 2.3-15 to employ and consult with any legal counsel, who also may be counsel to an Employer or the Administrator, with respect to the meaning or construction of this Trust Agreement, the extent of the Trustee's obligations and duties hereunder, and whether the Trustee should take or decline to take a particular action hereunder, and the Trustee shall be fully protected with respect to any action taken or omitted by such Trustee in good faith pursuant to such advice; 2.3-16 to defend any action or proceeding instituted against the Trust Fund, to institute any action on behalf of the Trust Fund, and to compromise or submit to arbitration any dispute concerning the Trust Fund; 2.3-17 to make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; 2.3-18 to commingle the Trust Fund created pursuant hereto, in whole or in part, in a single trust with all or any portion of any other trust fund, assigning an undivided interest to each such commingled trust fund, provided that such commingled trust is itself exempt from taxation pursuant to Section 501(a) of the Code, or its successor Section; and provided further that the trust agreement governing such commingled trust shall be deemed incorporated by reference in the Plan; 2.3-19 where two or more trusts governed by this Trust Agreement have an undivided interest in any property, to credit the income from such property to such trusts in proportion to 6

their undivided interests, and when non pro rata distributions of property or money are made from such trusts, to make appropriate adjustments to the undivided fractional interests of such trusts; 2.3-20 to invest all or any portion of the Trust Fund in one or more group annuity contracts, deposit administration contracts, and other such contracts with insurance companies, including any commingled separate accounts established under such contracts; 2.3-21 generally, with respect to all cash, stocks and other securities, and property, both real and personal, received or held in the Trust Fund by the Trustee, to exercise all the same rights and powers as are or may be lawfully exercised by persons owning cash, or stocks and other securities, or such property in their own right; and to do all other acts, whether or not expressly authorized, which it may deem necessary or proper for the protection of the Trust Fund; and 2.3-22 whenever more than two persons shall qualify to act as co-Trustee, to exercise and perform every power (including discretionary powers), authority or duty by the concurrence of a majority of them the same effect as if all had joined therein, except that the unanimous vote of such persons shall be necessary to determine the number (one or more) and identity of persons who may sign checks, make withdrawals from financial institutions, have access to safe deposit boxes, or direct the sale of trust assets and the disposition of the proceeds. 2.4 Brokerage If permitted in writing by the Committee the Trustee shall have the power and authority, to be exercised in their sole discretion at any time and from time to time, to issue and place orders for the purchase or sale of securities with qualified brokers and dealers. Such orders may be placed with such qualified brokers and/or dealers who also provide investment information or other research or statistical services to the Trustee in its capacity as a fiduciary or investment manager for other clients. Section 3. Compensation and Indemnification of Trustee and Payment of Expenses and Taxes 3.1 Fees and Expenses from Fund In consideration for rendering services pursuant to this Trust Agreement the Trustee shall be paid fees in accordance with the Trustee's fee schedule as in effect from time to time. Fee changes resulting in fee increases shall be effective upon not less than 30 days' notice to the Bank. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable attorneys' fees, incurred in the administration of the Trust created hereby. Fees and expenses shall be allocated to Participants' Accounts, if any, unless paid directly by the Employer. All compensation and expenses of the Trustee shall be paid out of the Trust Fund or by the Employer as specified in the Plan. If and to the extent the Trust Fund shall not be sufficient, such compensation and expenses shall be paid by the Employer upon demand. If payment is due but not paid by the Employer, such amount shall be paid from the assets of the Trust Fund. The Trustee is hereby empowered to withdraw all such 7

compensation and expenses which are 60 days past due from the Trust Fund, and, in furtherance thereof, liquidate any assets of the Trust Fund, without further authorization or direction from or by any person. Notwithstanding the foregoing, in the event any officer or director of Naugatuck Valley Savings and Loan serves as trustee of the Plan, no compensation shall be paid to the officer or director in exchange for his or her services as trustee. 3.2 Indemnification Notwithstanding any other provision of this Trust Agreement, any individual designated as a trustee hereunder shall be indemnified and held harmless by the Employer to the fullest extent permitted by law against any and all costs, damages, expenses and liabilities including, but not limited to attorneys' fees and disbursements reasonably incurred by or imposed upon such individual in connection with any claim made against him or in which he may be involved by reason of his being, or having been, a trustee hereunder, to the extent such amounts are not satisfied by insurance maintained by the Employer, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee by reason of any action so taken. Further, any corporate trustee and its officers, directors and agents may be indemnified and held harmless by the Employer to the fullest extent permitted by law against any and all costs, damages, expenses and liabilities including, but not limited to, attorneys' fees and disbursements reasonably incurred by or imposed upon such persons and/or corporation in connection with any claim made against it or them or in which such persons and/or corporation may be involved by reason of its being, or having been, a trustee hereunder as may be agreed between the Employer and such trustee, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee by reason of any action so taken. 3.3 Expenses All expenses of administering the Trust and the Plan, whether incurred by the Trustee or the Committee, shall be paid by the Trustee from the Trust Fund to the extent such expenses shall not have been assumed by the Employer. 3.4 Taxes All taxes that may be levied or assessed upon or in respect of the Trust Fund shall be paid from the Trust Fund. The Trustee shall notify the Committee of any proposed or final assessments of taxes and may assume that any such taxes are lawfully levied or assessed unless the Committee advises it in writing to the contrary within fifteen days after receiving the above notice from the Trustee. In such case, the Trustee, if requested by the Committee in writing, shall contest the validity of such taxes in any manner deemed appropriate by the Committee; the Employer may itself contest the validity of any such taxes, in which case the Committee shall so notify the Trustee and the Trustee shall have no responsibility or liability respecting such contest. If either party to this Agreement contests any such proposed levy or assessments, the other party shall provide such information and cooperation as the party conducting the contest shall reasonably request. 8

Section 4. Records and Valuation 4.1 Records The Trustee, and any investment manager appointed pursuant to Section 2.2, shall maintain accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions made by it with respect to the Trust Fund, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by the Committee and the Employer. 4.2 Valuation From time to time upon the request of the Committee, but at least annually as of the last day of each Plan Year, the Trustee shall prepare a balance sheet of the Investment Fund in accordance with the Plan and shall deliver copies of the balance sheet to the Committee and the Employer. 4.3 Discharge of Trustee Ninety days after the filing of any balance sheet under Section 4.2 or any accounting under Section 6, the Trustee shall be forever released and discharged from any liability or accountability other than for gross negligence or wilful misconduct on the part of the Trustee to anyone with respect to the transactions shown or reflected in such balance sheet or accounting, except with respect to any acts or transactions as to which the Committee, within such ninety-day period, files written objections with the Trustee. The written approval of the Committee of any balance sheet or accounting so filed by the Trustee, or the Committee's failure to file written objections within ninety days, shall be a settlement of such balance sheet or accounting as against all persons, and shall forever release and discharge the Trustee from any liability of accountability to anyone with respect to the transactions shown or reflected in such balance sheet or accounting other than liability arising out of the Trustee's gross negligence or wilful misconduct. If a statement of objections is filed by the Committee and the Committee is satisfied that its objections should be withdrawn or if the balance sheet or accounting is adjusted to its satisfaction, the Committee shall indicate its approval of the balance sheet or accounting in a written statement filed with the Trustee and the Trustee shall be forever released and discharged from any liability of accountability to anyone in accordance with the immediately preceding sentence. If an objection is not settled by the Committee and the Trustee, the Trustee may start a proceeding for a judicial settlement of the balance sheet or accounting in any court of competent jurisdictions; the only parties that need be joined in such a proceeding are the Trustee, the Committee, the Employer and any other parties whose participation is required by law. 4.4 Right to Judicial Settlement Nothing in this Agreement shall prevent the Trustee from having its account settled by a court of competent jurisdiction at any time. The only parties that need be joined in any such proceeding are the Employer, the Committee, the Trustee and any other parties whose participation is required by law. 9

Section 5. Instructions from Committee. 5.1 Certification of Members of the Committee. From time to time the Bank shall certify to the Trustee in writing the names of the individuals comprising the Committee and shall furnish to the Trustee specimens of their signatures and the signatures of their agents, if any. The Trustee shall be entitled to presume that the identities of such individuals and their agents are unchanged until it receives a certification from the Bank notifying it of any changes. 5.2 Instructions to Trustee. (a) The Trustee shall pay benefits and administrative expenses under the Plan only when it receives (and in accordance with) written instructions of the Committee indicating the amount of the payment and the name and address of the recipient in accordance with the terms of the Plan. The Trustee need not inquire into whether any payment the Committee instructs the Trustee to make is consistent with the terms of the Plan or applicable law or otherwise proper. Any payment made by the Trustee in accordance with such instructions shall be a complete discharge and acquittance to the Trustee. If the Committee advises the Trustee that benefits have become payable with respect to a Participant's interest in the Trust Fund but does not instruct the Trustee as to the manner of payment, the Trustee shall hold the Participant's interest in the Trust until the Trustee receives written instructions from the Committee as to the manner of payment. The Trustee shall not pay benefits from the Trust Fund without such instructions, even though it may be informed from other sources, including, without limitation, a Participant or Beneficiary, that benefits are payable under the Plan. The Trustee shall have no responsibility to determine when, to whom or in what amount benefits and expenses are payable under the Plan. Further, the Trustee shall have no power, authority or duty to interpret the Plan or inquire into the decisions or determinations of the Committee, or to question the instructions given to it by the Committee. If the Committee so directs, the Trustee shall segregate amounts payable with respect to the interest in the Plan of any Participant and administer them separately from the rest of the Trust Fund in accordance with the Committee's instructions. (b) The Trustee may require the Committee to certify in writing that any payment of benefits or expenses it instructs the Trustee to make pursuant to Section 5.2(a) above is: (i) in accordance with the terms of the Plan and/or (ii) one which the Committee is authorized by the Plan and any other applicable instruments to direct and/or (iii