There is no performance benefit at all.
All local variables are allocated when the stack frame for the method is created, so it doesn't matter where in the method you declare them. It's only the scope of the variables that differ between the codes, and that is only information that the compiler uses at compile time.
Edit:
To verify that there is no difference, I compiled the two cases and examined the generated machine code, and it is identical for the two cases:
Declaring variables outside the loop:
for (int i = 0; i < numSmallPrimes; i++) {
00000000 push ebp
00000001 mov ebp,esp
00000003 sub esp,14h
00000006 mov dword ptr [ebp-4],ecx
00000009 mov dword ptr [ebp-14h],edx
0000000c cmp dword ptr ds:[004214A8h],0
00000013 je 0000001A
00000015 call 69133CFB
0000001a xor edx,edx
0000001c mov dword ptr [ebp-10h],edx
0000001f xor edx,edx
00000021 mov dword ptr [ebp-0Ch],edx
00000024 xor edx,edx
00000026 mov dword ptr [ebp-8],edx
00000029 xor edx,edx
0000002b mov dword ptr [ebp-10h],edx
0000002e nop
0000002f jmp 0000006D
smallPrime = smallPrimes[i];
00000031 mov eax,dword ptr [ebp-10h]
00000034 mov edx,dword ptr [ebp-14h]
00000037 cmp eax,dword ptr [edx+4]
0000003a jb 00000041
0000003c call 69136F00
00000041 mov eax,dword ptr [edx+eax*4+8]
00000045 mov dword ptr [ebp-8],eax
spGen = spHexGen[i];
00000048 mov eax,dword ptr [ebp-10h]
0000004b mov edx,dword ptr [ebp+8]
0000004e cmp eax,dword ptr [edx+4]
00000051 jb 00000058
00000053 call 69136F00
00000058 mov eax,dword ptr [edx+eax*4+8]
0000005c mov dword ptr [ebp-0Ch],eax
Console.WriteLine(smallPrime + spGen);
0000005f mov ecx,dword ptr [ebp-8]
00000062 add ecx,dword ptr [ebp-0Ch]
00000065 call 68819C90
for (int i = 0; i < numSmallPrimes; i++) {
0000006a inc dword ptr [ebp-10h]
0000006d mov eax,dword ptr [ebp-10h]
00000070 cmp eax,dword ptr [ebp-4]
00000073 jl 00000031
}
}
00000075 nop
00000076 mov esp,ebp
00000078 pop ebp
00000079 ret 4
Declaring variables inside the loop:
for (int i = 0; i < numSmallPrimes; i++) {
00000000 push ebp
00000001 mov ebp,esp
00000003 sub esp,14h
00000006 mov dword ptr [ebp-4],ecx
00000009 mov dword ptr [ebp-14h],edx
0000000c cmp dword ptr ds:[006314A8h],0
00000013 je 0000001A
00000015 call 68FB3C5B
0000001a xor edx,edx
0000001c mov dword ptr [ebp-8],edx
0000001f xor edx,edx
00000021 mov dword ptr [ebp-0Ch],edx
00000024 xor edx,edx
00000026 mov dword ptr [ebp-10h],edx
00000029 xor edx,edx
0000002b mov dword ptr [ebp-8],edx
0000002e nop
0000002f jmp 0000006D
int smallPrime = smallPrimes[i];
00000031 mov eax,dword ptr [ebp-8]
00000034 mov edx,dword ptr [ebp-14h]
00000037 cmp eax,dword ptr [edx+4]
0000003a jb 00000041
0000003c call 68FB6E60
00000041 mov eax,dword ptr [edx+eax*4+8]
00000045 mov dword ptr [ebp-0Ch],eax
int spGen = spHexGen[i];
00000048 mov eax,dword ptr [ebp-8]
0000004b mov edx,dword ptr [ebp+8]
0000004e cmp eax,dword ptr [edx+4]
00000051 jb 00000058
00000053 call 68FB6E60
00000058 mov eax,dword ptr [edx+eax*4+8]
0000005c mov dword ptr [ebp-10h],eax
Console.WriteLine(smallPrime + spGen);
0000005f mov ecx,dword ptr [ebp-0Ch]
00000062 add ecx,dword ptr [ebp-10h]
00000065 call 68699BF0
for (int i = 0; i < numSmallPrimes; i++) {
0000006a inc dword ptr [ebp-8]
0000006d mov eax,dword ptr [ebp-8]
00000070 cmp eax,dword ptr [ebp-4]
00000073 jl 00000031
}
}
00000075 nop
00000076 mov esp,ebp
00000078 pop ebp
00000079 ret 4