Dear Shareholder:

     We are pleased to inform you that your Company, Southern Connecticut Bancorp, Inc, and it’s wholly-owned subsidiary, The Bank of Southern Connecticut, have experienced an excellent year of improvement in growth and profitability during its third full year of operation.

     Total assets have grown to $81,694,743 from $56,386,040, up 45% for the year, and total deposits achieved a 24% increase from $47,273,875 to $58,700,377. The "free money" category, non interest bearing demand deposits, grew from $13,781,286 to $17,334,393 or 26%. The loan portfolio likewise grew from $40,818,718 to $49,763,952 or 22%.

     In addition, excellent progress was made on our operating performance during 2004; our third year of operation: Southern Connecticut Bancorp showed a loss of $98,284 for 2004 compared to a loss of $597,727 for 2003. The Bank of Southern Connecticut, however, earned a profit of $191,342 for year end 2004, an improvement of $676,469 in its earnings performance from year to year as the Bank had reported a loss of $485,127 in 2003.

      This substantial improvement in financial performance occurred in a year where management continued to build and invest in the infrastructure of both the Holding Company, and it’s wholly-owned subsidiary bank, while preparing for the opening of a second wholly-owned subsidiary bank, The Bank of Southeastern Connecticut to be headquartered in New London. Pending final regulatory approvals, it is anticipated that this bank will open sometime during the middle of 2005. The delay in the opening of The Bank of Southeastern Connecticut primarily has been due to the renovation problems at the New London headquarters at 15 Masonic Street.

     In addition to building our infrastructure and preparing for the opening of The Bank of Southeastern Connecticut in New London, we have placed a strong focus on meeting the requirements of the U.S. PATRIOT Act, the Bank Secrecy Act, the Gramm Leach Bliley Act. In addition, the Company has begun to prepare for the Sarbanes Oxley Act (section-404). The Company, however, did not incur any expenses in 2004 associated with the Sarbanes Oxley Act (section-404). The Company does anticipate incurring expenses in 2005 and beyond for the Sarbanes Oxley Act (section-404). The professional fees for your Company, including fees related to the above services and normal recurring services including legal, audit and consulting fees, amounted to $478,843 for 2004,and $307,423 in 2003.

     In line with our business model, the Holding Company will provide accounting, data processing and other operational services for both subsidiary banks, thereby effecting meaningful direct cost savings for both banks. As one component of this plan, both banks will share Chief Financial and Senior Operations Officers as those officers and their departmental operations were transferred to the Holding Company beginning January of the year 2005. Both banks will derive considerable cost benefit and economies of scale as each will be charged for those services on an allocated basis. Based on the allocation of cost, this centralized approach will optimize our operating efficiencies for both subsidiary banks driving greater profitability and value for our shareholders. Therefore, it is anticipated that the new subsidiary bank in New London, and any future bank subsidiaries, will benefit from substantial economies of scale and achieve profitability more quickly tha n the Company’s first bank subsidiary, The Bank of Southern Connecticut in New Haven.

 In June of 2004, the Company successfully completed a secondary public offering of 1,723,000 shares of common stock which provided the Company with $13,700,000 in additional equity capital after closing costs. The offering was led by A. G. Edwards and Sons, Inc. and was co-managed by Keefe, Bruyette & Woods, Inc., two of the premier investment banking companies in the United States. We have invested approximately $3.8 million of the proceeds of the completed offering in The Bank of Southern Connecticut during 2004 to fund expansion of its lending and investment activities. In addition we have future plans to invest approximately $6.0 million of the proceeds in The Bank of Southeastern Connecticut, following final approval of the Bank from the regulatory authorities, to fund its lending and investing activities, and to use approximately $2.75 million for branch expansion over the next 12 to 18 months. The remaining net proceeds will be retained for general corporate purposes to position us for further internal growth. The Company and its subsidiary banks will be amongst the strongest capitalized banks in Connecticut. Our financial strength positions Southern Connecticut Bancorp for anticipated growth from the New Haven metropolitan area towards the Rhode Island border in accordance with Management’s strategic plan.

     The early stage of our strategic plan is almost complete. A strong foundation is in place as we continue to grow and move ahead into the second phase of the plan. The growth of the Company has been accomplished in trying economic times as we opened for business on October 1, 2001, only 20 days after the tragic events of September 11, 2001. During this period, the economy was not operating on its best footing, and interest rates stayed at record lows for the last three years. These lower rates reduced the Bank’s yield on the asset side while we prudently built our loan portfolio to maximize shareholder value and minimize interest rate risk.

     Management had targeted a loan to deposit level of 80-90% in its original Strategic Plan in order to achieve and grow bottom line net income. The targeted level was reached as the Company achieved an 85% loan to deposit ratio at year end 2004. At the same time, our net interest margin finished 2004 at 4.62%, one of the state’s highest levels and well over the state average of 3.80%. Also at the same time, the Bank had a low level of past dues, charge offs and classified loans. The high net interest margin is a reflection of our Management team’s ability to provide "high touch" service, culture and philosophy of the Bank, a refusal to drive up the balance sheet by "buying" non profitable loan transactions, as well as the Bank’s ability to attract solid core demand deposit accounts and other low cost deposits.

     We are proud that over 700 businesses now conduct their banking business at The Bank of Southern Connecticut, demonstrating our ability to build an identifiable "brand" and "niche" as a highly reputable commercial bank serving small to medium size businesses, professionals and individuals with "high touch" service.

     The Bank of Southern Connecticut has a deposit mix with 44.4% in checking accounts. Of our total deposits, 29.6% are non-interest bearing demand deposits and 14.8% are interest bearing demand deposits. In contrast, Connecticut de novo banks average only 18.2% of their deposits in the non-interest bearing demand deposit category. Of the Bank’s total deposit base, 85.1% is considered "core deposits" with, in addition to the demand deposit categories, includes money market deposit accounts at 35.1% and low cost regular savings accounts at 5.6%, signifying that we have met our strategic plan goals and have found our niche on the liability funding side. Only 14.9% or $8,752,674 of total deposits are in the highest cost certificate of deposit category.

     On the asset side, there are additional indications of strategic success in the Bank’s loan portfolio; 92.6% of the loan portfolio consists of commercial and industrial loans of which 48% are at least partially secured by mortgages. In addition, construction loans represent 4.5% of the portfolio, and consumer loans represent 2.9% of the portfolio. In addition, approximately 48% of the Bank’s loans are written on a floating rate basis while no loan in the Bank has been written with more than a five year fixed rate, thus mitigating potential interest rate risk.

     Management and The Board of Directors took a conservative posture and positive step in bringing the allowance for loan losses from 1.02% to 1.49% at year end. In contrast, the Bank’s peer group in Connecticut maintains its allowance for loan loss at 1.20%. We felt that the timing for such a move was prudent because rising interest rate trends could affect the financial health of the small business arena that we serve. Chairman Alan Greenspan and the Federal Reserve System have raised interest rate indicators six times during the last eleven months in order to stave off any inflation in the economy. Based upon our evaluation of the loan portfolio, Management believes the allowance for loan losses of $752,394 or 1.49% of gross loans at December 31, 2004 is adequate, under prevailing economic conditions, to absorb losses on existing loans. At December 31, 2003, the allowance for loan loss was $421,144 or 1.02% of gross loans outstanding. The increase in the allowance is attributable to Management’s assessment of the relevant factors impacting the quality of the loan portfolio, particularly the increase in the Bank’s non-performing loans to approximately $227,000 in the fourth quarter of 2004.

During the second half of 2005, The Bank of Southern Connecticut plans to open a new full service banking office to be located at 51-53 West Main Street in Clinton. This branch location, pending the necessary regulatory approvals, will serve as The Bank of Southern Connecticut’s fourth banking office and is strategically located halfway between New Haven and New London.

     In relation to the eight de novo banks that currently operate in Connecticut, The Bank of Southern Connecticut’s financial performance is clearly in the upper echelon of its peer group based on the report produced by the Connecticut State Banking Department for de novo banks as of December 31, 2004. Specifically, these performance levels include equity capital, loans, deposits, profitability, net interest income per quarter, non interest income per quarter, loan loss provision, ROAA and ROAE. Of the eight banks in the peer group The Bank of Southern Connecticut ranks in the top two or three in several of these categories, despite the fact that several of the de novo banks have been in operation longer than The Bank of Southern Connecticut.

     In September, we welcomed one new Holding Company Director, Juan Miguel Salas-Romer, who replaced Juan Jose Alvarez de Lugo. Salas-Romer is an MBA graduate of Boston College and represents his family business interests. He is also a member of the Board of Directors of The Bank of Southern Connecticut and Chairman of the Holding Company’s Technology Committee. Mr. Salas-Romer resides in the New Haven area.

     Also in September, we welcomed Claire Gaudiani to the Board of Directors of The Bank of Southern Connecticut. Ms. Gaudiani is the former President of Connecticut College and is presently a faculty member of Yale University and New York University. She is also a former director of a regional bank and will chair the Bank’s Corporate Governance Committee.

     The Directors and Management of Southern Connecticut Bancorp have built a solid and sound foundation for the future growth and profitability of your Company. The strategy outlined prior to opening in October 1, 2001 is being executed according to plan. Our initial goal to operate a profitable commercial bank in metropolitan New Haven has been met, and our strategic plan to move on the coastal southern border of Connecticut along the Long Island Sound through New London to Rhode Island is underway. Phase one has been very successful and now phase two is in its inception with the planned opening of the de novo bank in New London, which will have its own brand identification in metropolitan New London.

     The operational infrastructure has been built for the Company and it’s subsidiaries. Costly new regulations have been and will continue to be addressed, most of which have been accomplished. The public has shown that it appreciates the "high touch" service that our Bank is rendering,and profitability has been achieved and is expected to improve.

     Management would like to especially thank the Directors for their unending support in assisting us to move forward with our successful plan. Also plaudits are in order for a dedicated, committed staff. Our goal is to continue to strive to create shareholder value.

     The Directors and Management of the Company would also like to thank our shareholders for their continued support and patience as we moved forward with our plan during the first three years of operation. We welcome you to visit us at any time and see your Company and its offices.

     Most sincerely,

THE BANK OF SOUTHERN CONNECTICUT
BOARD OF DIRECTORS
2003-2004
  

CarI R. Borrelli
Treasurer, All Brite Electric, Inc.

James S. Brownstein, Esq.
Kantrovitz & Brownstein

*Joseph V Ciaburri, Chairman & CEO
The Bank of Southern Connecticut

*Michael M. Ciaburri, President & COO
The Bank of Southern Connecticut

Claire Gaudiani
New York University

*Elmer F Laydon, Vice Chairman
Southern Connecticut Bancorp, Inc.
President, Laydon Construction Corp.

Janette J. Parker
Former Director, Connecticut Port Authority

W. Martyn Philpot, Jr., Esq.
Law Offices of Martyn Philpot, Jr.

Alfred J. Ranieri, Jr., MD

*Juan Miguel Salas-Romer
Investor

*Joshua H. Sandman
Vice President Deitsch Plastic Co., Inc.

*AIphonse F Spadaro, Jr.
Managing Partner, Levitsky & Berney PC.


*Also Director of Southern Connecticut Bancorp, Inc.

FINANCIAL HIGHLIGHTS

Bancorp Officers

Joseph V. Ciaburri, Chairman & Chief Executive Officer

Elmer F. Laydon, Vice Chairman

Michael M. Ciaburri, President & Chief Operating Officer

William F. Weaver, Vice President & Chief Financial Officer

Anthony M. Avellani, Vice President & Controller

Rosemarie A. Romano, Corporate Secretary


Bank Officers

Anthony M. Avellani, Vice President & Controller

Kelly A. Brereton, Operations Officer

Ann E. Chambers, Vice President, Commercial Lending

Neal Chorney, Vice President, Loan Review

Joseph V. Ciaburri, Chairman & CEO

Michael M. Ciaburri, President & COO

Thomas G. Hollinger, Vice President, Loan Administration, Loan Review

Kenneth A. Innocenzi, Vice President, Operations

Thomas W. Keefe, Vice President, Commercial Lending

Kathleen M. Mirto, Assistant Vice President, Branch Officer

Joseph R. Nuzzo, Vice President, Commercial Lending

Jorge L. Perez, Vice President, Commercial Lending

Rosemarie A. Romano, Associate Vice President, Executive Asst. to Chairman

S. John Severson, Vice President, Commercial Lending

C. James Walker, Vice President, Investment Banking

William F. Weaver, Vice President, Chief Financial Officer

Leonard J. Whitlock, Asst. Vice President, Branch Officer


Market Makers

A.G. Edwards & Sons, Inc.
Request for Annual Report to: Rosemarie A. Romano, Corporate Secretary
Bancorp stock is traded on the AMEX under the symbol: SSE