Dear Friends,

What does it take to be a successful community bank? Satisfied customers, motivated professional employees, and strong financial performance are absolute necessities. Chelsea Groton Bank has another imperative that is woven into the fabric of our culture which is an enduring commitment to community. 2006 was a year that exemplified our dedication to and our achievements in all of these measures of success as a community bank.

No bank or business can survive without the goodwill of their customers. That is why we regularly conduct informal surveys. This year’s results were full of positive reinforcement from our customers, including a favorite comment from a new loan customer - "Chelsea Groton rocks!" We were also pleased to be able to highlight a number of our local business customers in a series of testimonial ads this past summer. We love being able to share the real experiences and reactions of our customers. It is gratifying to know that they really do feel good about banking with us.

The people who work diligently every day to keep our customers happy and our bottom line strong are our great team of employees. Their dedication to Chelsea Groton Bank, each other, and our community has placed us as one of the Hartford Business Journal’s "Best Places to Work in Connecticut" for the second consecutive year. It is because we have the best people that Chelsea Groton is one of the best places to work.

Chelsea Groton enjoyed a solid financial year in 2006. The bank’s net interest income increased to a total of $23.7 million. As a result, net interest income as a percentage of average assets finished the year at a strong 3.61%. This was an exceptional accomplishment, especially with regard to the average of our peers.

With the addition of $5.2 million of net income, our capital grew to a record $104.0 million, which was an increase of 6.3% from the prior year. Our capital level of 14.8% provides the foundation for future growth, long-term stability and reliability for our customers.

We continued to see strong production in all segments of lending in 2006. This included $50.1 million of production in consumer loans, $51.6 million in commercial, and $55.8 million in residential mortgages. These production levels fueled growth across all areas of the loan portfolio. The total loan portfolio grew by approximately $22 million to a new high of $486 million. Our great staff is to be commended for attaining this new record.

We have worked diligently over the last several years to develop strong business relationships. Chelsea Groton has enjoyed tremendous success in attracting new commercial accounts which have frequently come as a result of enthusiastic referrals from our existing customers. Our overall deposit growth was 5.4% in 2006 and total deposits ended the year at an all-time high of $554.8 million.

I am proud to report that, in 2006, the Federal Deposit Insurance Corporation (FDIC) honored us with their highest ranking for Community Reinvestment. This "Outstanding" designation was based upon our lending, service, and investment in our community. The FDIC specifically cited our work addressing the credit needs of our communities, especially of those customers with low and moderate income levels and those with small businesses. Our levels of volunteerism, monetary donations, and community education also drew praise.

We believe in our communities and we show it by investing in them. The Chelsea Groton Foundation awarded 53 grants totaling approximately $123,000 this past year. Chelsea Groton Bank made donations, in addition to the foundation, bringing total monies committed in our communities to well over $300,000 in 2006.

For a third year, our Community Education program has brought "Money Smart" financial education classes to hundreds of high school students within New London County schools. Classes were also taught at Three Rivers Community College and the Women’s Center of Southeastern Connecticut. Important identity theft and fraud avoidance information was delivered to area seniors in special financial security sessions. As always, all the materials, time and expertise were given free of charge to the schools and organizations.

While staying true to our mission and offering superior customer service, we continually strive to educate our youth, protect our customers and aid those in need. We endeavor to stay connected and to always give back to our communities. We value our people, our customers, and our region and know that they are the core of Chelsea Groton’s success. We appreciate your support and trust that we will be woven into your future and the future of our area for many years to come.

Sincerely,

Duncan C. Stoddard,
President and CEO