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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549

FORM 10-K

|   |                                                                                           
|-- | ------------------------------------------------------------------------------------------
|x  | Annual
  Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934    
|   | For the
  Fiscal Year Ended December 31, 2005                                             
|OR
|o  | Transition
  Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|   |                                                                                           
|   | For the
  transition period from _______________ to ______________________                

| |                                                        | 
| | ------------------------------------------------------ | 
| | Commission File No. 000-51369                          | 
| |                                                        | 
| | United Financial Bancorp, Inc.                         | 
| |                                                        | 
| | (Exact name of registrant as specified in its charter) | 

|                                                                 |  |                                          
|---------------------------------------------------------------- |  | -----------------------------------------
|Federal                                                          |  | 83-0395247                               
|                                                                 |  |                                          
|(State or other jurisdiction of
  incorporation or organization) |  | (I.R.S. Employer
  Identification Number)
|                                                                 |  |                                          
|95 Elm Street, West Springfield, Massachusetts                   |  | 01089                                    
|                                                                 |  |                                          
|(Address
  of Principal Executive Offices)                       |  | Zip Code                                 

|                               
|-------------------------------
|(413) 787-1700                 
|                               
|(Registrants telephone number)

|                                                              |  |                                        
|------------------------------------------------------------- |  | ---------------------------------------
|Securities
  Registered Pursuant to Section 12(b) of the Act: |  | None                                   
|                                                              |  |                                        
|Securities
  Registered Pursuant to Section 12(g) of the Act: |  | Common Stock, par value $0.01 per share
|                                                              |  |                                        
|                                                              |  | (Title of
Class)                       

Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such requirements
for the past 90 days. YES x     NO o.

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. x.

Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large
accelerated filer o          Accelerated
filer o          Non-accelerated
filer x

Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES o     NO x

Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. YES o     NO x

Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES o     NO x

As
of March 30, 2006, there were issued and outstanding 17,205,995 shares of the
Registrants Common Stock.

The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant, computed by reference to the last sale price
on December 31, 2005, as reported by the Nasdaq National Market, was
approximately $79.8 million.

DOCUMENTS
INCORPORATED BY REFERENCE

None

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PART
I

ITEM
1.          BUSINESS

Forward Looking Statements

This
Annual Report contains certain forward-looking statements that may be
identified by the use of words such as believe, expect, anticipate,
should, planned, estimated and potential. Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition, results of operations and business that are subject to
various factors which could cause actual results to differ materially from
these estimates and most other statements that are not historical in nature.
These factors include, but are not limited to, general and local economic
conditions, changes in interest rates, deposit flows, demand for mortgage, and
other loans, real estate values, competition, changes in accounting principles,
policies, or guidelines, changes in legislation or regulation, and other
economic, competitive, governmental, regulatory, and technological factors
affecting our operations, pricing products and services.

United Mutual Holding Company

United
Mutual Holding Company is a federally chartered mutual holding company and
currently owns 53.4% of the outstanding shares of common stock of United
Financial Bancorp, Inc. (the Company). United Mutual Holding Company has not
engaged in any significant business activity other than owning a majority of
the outstanding shares of common stock of the Company, and does not intend to
expand its business activities. So long as United Mutual Holding Company
exists, it will own a majority of the voting stock of the Company. The
executive office of United Mutual Holding Company is located at 95 Elm Street,
West Springfield, Massachusetts 01089, and its telephone number is (413)
787-1700. United Mutual Holding Company is subject to comprehensive regulation
and examination by the Office of Thrift Supervision.

United Financial Bancorp, Inc.

Since
being formed in 2004, the Companys only business activities has been the
holding of all of the issued and outstanding shares of the common stock of
United Bank and investing proceeds received from our initial public offering.
The Company sold 7,672,153 shares of common stock in a subscription offering
for $10.00 per share. The proceeds of the offering were used to purchase
Federal Agency securities. For a further discussion of the initial public
offering, see the Companys Prospectus as filed on May 31, 2005 with the
Securities and Exchange Commission pursuant to Rule 424(b)(3) of the Rules and
Regulations of the Securities Act of 1933 (File Number 333-123371).

United
Financial Bancorp, Inc., as the holding company of United Bank, is authorized
to pursue other business activities permitted by applicable laws and
regulations for savings and loan holding companies, which may include the
acquisition of banking and financial services companies. At the present time we
have no plans for any mergers or acquisitions of other banks, or other
diversification of the activities of the Company.

Our
cash flow depends on earnings from the investment of the net proceeds of the
stock offering we retained, and any dividends received from United Bank. The
Company neither owns nor leases any property, but instead uses the premises,
equipment and furniture of United Bank. At the present time, we employ as
officers only certain persons who are also officers of United Bank. However, we
use the support staff of United Bank from time to time. These persons are not
separately compensated by the Company. The Company may hire additional
employees, as appropriate, to the extent it expands its business in the future.

2

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United Bank

General

Our
principal business consists of attracting retail deposits from the general
public in the areas surrounding our main office in West Springfield,
Massachusetts, and our ten branch offices located in Feeding Hills, Holyoke,
Huntington, Indian Orchard, Longmeadow, Ludlow, Springfield and Westfield,
Massachusetts, and investing those deposits, together with funds generated from
operations, in one- to four-family residential mortgage loans as well as in
home equity loans and lines of credit, commercial real estate loans,
construction loans, commercial and industrial loans, automobile loans, other
consumer loans, and investment securities. We originate loans primarily for
investment. Occasionally, we will also enter into loan participations. Our
revenues are derived principally from interest on loans and securities. We also
generate revenues from fees and service charges and other income. Our primary
sources of funds are deposits, borrowings and principal and interest payments
on loans and securities.

Our
website address is www.bankatunited.com. Information on our website should not
be considered a part of this Annual Report.

Market Area

We
are headquartered in West Springfield, Massachusetts. Our primary deposit
gathering area is concentrated in the communities surrounding our main office
located in West Springfield and our ten other branch offices located in the
communities of Feeding Hills, Holyoke, Huntington, Indian Orchard, Longmeadow,
Ludlow, Springfield and Westfield, Massachusetts. We also maintain a drive-up
only facility and a financial services facility that offers insurance and
investment products and financial planning services, both of which facilities
are located in West Springfield. Our primary lending area is significantly
broader that our deposit-gathering area and includes all of Hampden and
Hampshire Counties in western Massachusetts. At December 31, 2005, 56.83% of
our mortgage loan portfolio consisted of loans secured by real estate located
in Hampden and Hampshire Counties, Massachusetts.

The
city of West Springfield is largely suburban and is located in the Pioneer
Valley near the intersection of U.S. Interstates 90 (the Massachusetts
Turnpike) and 91. Interstate 90 is the major east-west highway that transverses
Massachusetts. Interstate 91 is the major north-south highway that runs
directly through the heart of New England. West Springfield is located
approximately 90 miles west of Boston, Massachusetts, 70 miles southeast of
Albany, New York and 30 miles north of Hartford, Connecticut. According to a
recent census report, West Springfields estimated 2005 population was
approximately 28,000 and the estimated 2005population
for Hampden and Hampshire Counties was 462,000 and 156,000, respectively.
During the past five years, the populations of Hampden and Hampshire Counties
increased by 1.2% and 2.8%, respectively, while the population of the
Commonwealth of Massachusetts increased by 1.2%. During the same period, the
number of households in Hampden and Hampshire Counties increased by 1.20% and
2.32%, respectively.

The
economy in our primary market area has benefited from the presence of large
employers such as the University of Massachusetts, Baystate Health System,
MassMutual Financial Group, Big Y Foods, Inc., Yankee Candle, Friendly Ice
Cream Corporation, Hasbro Games, Verizon and Top-Flite Golf Company. Other
employment and economic activity is provided by financial institutions, eight
other colleges and universities, five other hospitals and a variety of
wholesale and retail trade businesses. In 2005, per capita income for Hampden
and Hampshire Counties was $22,925 and $24,188, respectively, and the median
household income was $44,944 and $51,132, respectively. The December 2005
unemployment rate for Hampden County of 5.5% was higher than the comparable
Massachusetts rate and higher than the United States rate, while the
unemployment rate for Hampshire County of 3.4% was lower than the comparable
Massachusetts and United States unemployment rates of 4.5% and 4.9%,
respectively. At December 31, 2005 the unemployment rates for Hampden and
Hampshire Counties December were 5.0% and 3.0%, respectively.

Competition

We
face intense competition within our market area both in making loans and
attracting deposits. Our market area has a high concentration of financial
institutions including large money center and regional banks,

3

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community
banks and credit unions. Some of our competitors offer products and services
that we currently do not offer, such as trust services and private banking. As
of June 30, 2005, the latest date for which information is available, our
market share of deposits represented 10.24% and 0.82% of deposits in Hampden
and Hampshire Counties, Massachusetts, respectively.

Our
competition for loans and deposits comes principally from commercial banks,
savings and co-operative institutions, mortgage banking firms and credit
unions. We face additional competition for deposits from short-term money
market funds, brokerage firms, mutual funds and insurance companies. Our
primary focus is to build and develop profitable customer relationships across
all lines of business while maintaining our role as a community bank.

Lending Activities

Our
principal lending activity is the origination of first mortgage loans for the
purchase or refinancing of one- to four-family residential real property, as
well as the origination of commercial real estate and commercial and industrial
loans. We do not originate loans for the purpose of reselling them in the
secondary market, although we have sold some loans, primarily long-term
fixed-rate residential loans, in the secondary market, while retaining the
servicing rights on those loans. No loans were held for sale at December 31,
2005 or 2004. One- to four-family residential real estate mortgage loans,
including home equity loans and lines of credit, amounted to $371.3 million, or
58.40% of our total loan portfolio at December 31, 2005. In addition to
mortgage real estate and home equity loans, we also offer commercial real
estate loans, construction loans, commercial and industrial loans, automobile
loans and other consumer loans. At December 31, 2005, commercial real estate
loans totaled $150.1 million, or 23.61% of our loan portfolio, construction
mortgage loans totaled $28.9 million, or 4.54% of our loan portfolio,
commercial and industrial loans totaled $59.6 million, or 9.37% of our loan
portfolio and automobile loans, totaled $22.1 million, or 3.47% of our loan
portfolio. We also originate other consumer loans, including secured and
unsecured personal loans, motorcycle and motor home loans, boat loans and pool
and spa loans. At December 31, 2005, such loans totaled $3.9 million, or 0.61%
of our loan portfolio.

4

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Loan
Portfolio Composition.The following table sets
forth the composition of our loan portfolio by type of loan as of the dates
indicated.

|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|------------------------------ |  | ------------------------ | ------- | ------- |  | ------ | - | ------- | ------- | ------ |  | ------- | - | ------ | ------- | ------- |  | ------ | - | ------- | ------- | - |  | ------ | - | - | ------- | - |  | ------ | -
|                               |  | At December 31,          |        
|                               |  |                          |        
|                               |  | 2005                     |         | 2004    |  | 2003   |   | 2002    |         | 2001   | 
|                               |  |                          |         |         |  |        |   |         |         |        | 
|                               |  | Amount                   |         | Percent |  | Amount |   | Percent |         | Amount |  | Percent |   | Amount |         | Percent |  | Amount |   | Percent |        
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |        
|                               |  | (Dollars
  in thousands) |        
|Types of
Loans:                |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Mortgage loans:                |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Residential (1)                |  | $                        | 371,281 |         |  | 58.40  | % | $       | 330,834 |        |  | 57.63   | % | $      | 296,955 |         |  | 59.24  | % | $       | 273,200 |   |  | 58.44  | % | $ | 266,063 |   |  | 58.52  | %
|Commercial                     |  |                          | 150,099 |         |  | 23.61  |   |         | 137,787 |        |  | 24.00   |   |        | 117,766 |         |  | 23.49  |   |         | 113,674 |   |  | 24.31  |   |   | 106,282 |   |  | 23.38  |  
|Construction                   |  |                          | 28,872  |         |  | 4.54   |   |         | 29,836  |        |  | 5.20    |   |        | 26,625  |         |  | 5.31   |   |         | 18,091  |   |  | 3.87   |   |   | 19,919  |   |  | 4.38   |  
|Commercial and
industrial      |  |                          | 59,591  |         |  | 9.37   |   |         | 56,291  |        |  | 9.81    |   |        | 37,863  |         |  | 7.55   |   |         | 34,344  |   |  | 7.35   |   |   | 29,957  |   |  | 6.59   |  
|Automobile                     |  |                          | 22,054  |         |  | 3.47   |   |         | 17,460  |        |  | 3.04    |   |        | 20,943  |         |  | 4.18   |   |         | 27,001  |   |  | 5.77   |   |   | 31,213  |   |  | 6.86   |  
|Other consumer                 |  |                          | 3,895   |         |  | .61    |   |         | 1,862   |        |  | 0.32    |   |        | 1,169   |         |  | 0.23   |   |         | 1,194   |   |  | 0.26   |   |   | 1,249   |   |  | 0.27   |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Total loans
receivable         |  | $                        | 635,792 |         |  | 100.00 | % | $       | 574,070 |        |  | 100.00  | % | $      | 501,321 |         |  | 100.00 | % | $       | 467,504 |   |  | 100.00 | % | $ | 454,683 |   |  | 100.00 | %
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Other items:                   |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Net deferred loan costs
(fees) |  |                          | 1,148   |         |  |        |   |         | 923     |        |  |         |   |        | 852     |         |  |        |   |         | 802     |   |  |        |   |   | 645     |   |  |        |  
|Allowance for loan
losses      |  |                          | (6,382  | )       |  |        |   |         | (5,750  | )      |  |         |   |        | (5,095  | )       |  |        |   |         | (4,924  | ) |  |        |   |   | (4,701  | ) |  |        |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  
|Total loans receivable,
net    |  | $                        | 630,558 |         |  |        |   | $       | 569,243 |        |  |         |   | $      | 497,078 |         |  |        |   | $       | 463,382 |   |  |        |   | $ | 450,627 |   |  |        |  
|                               |  |                          |         |         |  |        |   |         |         |        |  |         |   |        |         |         |  |        |   |         |         |   |  |        |   |   |         |   |  |        |  

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|   
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

5

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Loan Portfolio
Maturities and Yields.The following table
summarizes the scheduled repayments of our loan portfolio at December 31, 2005.
Demand loans, loans having no stated repayment schedule or maturity, and
overdraft loans are reported as being due in one year or less.

|                                         |  |                        |         |                         |      |              |  |                             |         |                    |      |                           |  |        |        |                            |      |        |  |                           |        |        |      |                           |  |   |        |  |      |   |  |   |         |  |      |  
|---------------------------------------- |  | ---------------------- | ------- | ----------------------- | ---- | ------------ |  | --------------------------- | ------- | ------------------ | ---- | ------------------------- |  | ------ | ------ | -------------------------- | ---- | ------ |  | ------------------------- | ------ | ------ | ---- | ------------------------- |  | - | ------ |  | ---- | - |  | - | ------- |  | ---- | -
|                                         |  | Residential(1)         |         | Commercial Real Estate  |      | Construction |  | Commercial and
  Industrial |         | Consumer and Other |      | Total                    
|                                         |  |                        |         |                         |      |              |  |                             |         |                    |      |                          
|                                         |  | Amount                 |         | Weighted
  Average Rate |      | Amount       |  | Weighted
  Average
  Rate   |         | Amount             |      | Weighted
  Average
  Rate |  | Amount |        | Weighted
  Average 
  Rate |      | Amount |  | Weighted
  Average
  Rate |        | Amount |      | Weighted
  Average
  Rate
|                                         |  |                        |         |                         |      |              |  |                             |         |                    |      |                           |  |        |        |                            |      |        |  |                           |        |        |      |                          
|                                         |  | (Dollars in thousands)
|Due During the Years
Ending December 31, |  |                        |         |                         |      |              |  |                             |         |                    |      |                           |  |        |        |                            |      |        |  |                           |        |        |      |                           |  |   |        |  |      |   |  |   |         |  |      |  
|2006                                     |  | $                      | 16,045  |                         | 5.66 | %            |  | $                           | 6,726   |                    | 6.18 | %                         |  | $      | 12,177 |                            | 8.57 | %      |  | $                         | 31,916 |        | 7.34 | %                         |  | $ | 7,611  |  | 8.69 | % |  | $ | 74,475  |  | 7.21 | %
|2007 to 2010                             |  |                        | 68,118  |                         | 5.69 |              |  |                             | 30,063  |                    | 6.18 |                           |  |        | 3,807  |                            | 7.40 |        |  |                           | 18,590 |        | 6.06 |                           |  |   | 16,560 |  | 5.35 |   |  |   | 137,138 |  | 5.85 |  
|2011 and beyond                          |  |                        | 287,118 |                         | 5.80 |              |  |                             | 113,310 |                    | 6.29 |                           |  |        | 12,888 |                            | 5.76 |        |  |                           | 9,085  |        | 6.56 |                           |  |   | 1,778  |  | 6.99 |   |  |   | 424,179 |  | 5.95 |  
|                                         |  |                        |         |                         |      |              |  |                             |         |                    |      |                           |  |        |        |                            |      |        |  |                           |        |        |      |                           |  |   |        |  |      |   |  |   |         |  |      |  
|Total                                    |  | $                      | 371,281 |                         | 5.77 | %            |  | $                           | 150,099 |                    | 6.26 | %                         |  | $      | 28,872 |                            | 7.16 | %      |  | $                         | 59,591 |        | 6.82 | %                         |  | $ | 25,949 |  | 6.82 | % |  | $ | 635,792 |  | 6.08 | %
|                                         |  |                        |         |                         |      |              |  |                             |         |                    |      |                           |  |        |        |                            |      |        |  |                           |        |        |      |                           |  |   |        |  |      |   |  |   |         |  |      |  

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|   
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

The
following table sets forth the scheduled repayments of fixed- and
adjustable-rate loans at December 31, 2005 that are contractually due after
December 31, 2006.

|                             |  |                             |         |            |   |         |  |   |         | 
|---------------------------- |  | --------------------------- | ------- | ---------- | - | ------- |  | - | ------- | 
|                             |  | Due After December 31, 2006 |        
|                             |  |                             |        
|                             |  | Fixed                       |         | Adjustable |   | Total   | 
|                             |  |                             |         |            |   |         | 
|                             |  | (In thousands)              |        
|Residential
  real estate(1) |  | $                           | 281,314 |            | $ | 73,922  |  | $ | 355,236 | 
|Commercial
  real estate     |  |                             | 64,852  |            |   | 78,522  |  |   | 143,374 | 
|Construction                 |  |                             | 11,365  |            |   | 5,329   |  |   | 16,694  | 
|Commercial
  and industrial  |  |                             | 20,727  |            |   | 6,947   |  |   | 27,674  | 
|Consumer and
  other         |  |                             | 18,339  |            |   |        |  |   | 18,339  | 
|                             |  |                             |         |            |   |         |  |   |         | 
|                             |  |                             |         |            |   |         |  |   |         | 
|Total loans                  |  | $                           | 396,597 |            | $ | 164,720 |  | $ | 561,317 | 
|                             |  |                             |         |            |   |         |  |   |         | 

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|   
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

6

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One-
to Four-Family Residential Loans. Our primary
lending activity consists of the origination of one- to four-family residential
mortgage loans substantially all of which are secured by properties located in
our primary market area. At December 31, 2005, $285.3 million, or 44.87% of our
loan portfolio, consisted of one- to four-family residential mortgage loans. We
generally retain for our portfolio substantially all loans that we originate.
One- to four-family mortgage loan originations are generally obtained from our
in-house loan representatives, from existing or past customers, through
advertising, and through referrals from local builders, real estate brokers,
and attorneys and are underwritten pursuant to United Banks policies and
standards. Generally, one- to four-family residential mortgage loans are
originated in amounts up to 80% of the lesser of the appraised value or
purchase price of the property, with private mortgage insurance required on
loans with a loan-to-value ratio in excess of 80%. We generally will not make
loans with a loan-to-value ratio in excess of 95%.

Fixed-rate
mortgage loans are originated for terms of up to 30 years. Generally,
fixed-rate residential mortgage loans are underwritten according to Fannie Mae guidelines,
policies and procedures. We also offer adjustable-rate mortgage loans for one-
to four-family properties, with an interest rate based on the weekly average
yield on U.S. Treasuries adjusted to a constant maturity of one-year, which
adjust either annually or every three years from the outset of the loan or
which adjusts annually after a five-, seven- or ten-year initial fixed-rate
period. We originated $6.9 million of adjustable-rate one- to four-family
residential loans during the fiscal year ended December 31, 2005, as compared
to total originations of $68.8 million one- to four-family residential loans
during the same period. Our adjustable-rate mortgage loans generally provide
for maximum rate adjustments of 2% per adjustment, with a lifetime maximum
adjustment up to 6%, regardless of the initial rate. Our adjustable-rate
mortgage loans amortize over terms of up to 30 years.

Adjustable-rate
mortgage loans decrease the risk associated with changes in market interest
rates by periodically repricing, but involve other risks because, as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same time, the
marketability of the underlying collateral may be adversely affected by higher
interest rates. Upward adjustment of the contractual interest rate is also
limited by the maximum periodic and lifetime interest rate adjustments
permitted by our loan documents and, therefore, the effectiveness of adjustable-rate
mortgage loans may be limited during periods of rapidly rising interest rates.
At December 31, 2005, $31.1 million, or 4.89% of our one- to four-family
residential loans, had adjustable-rates of interest.

In
an effort to provide financing for low- and moderate-income home buyers, we
offer a variety of programs to qualified borrowers. These programs include
Veterans Administration (VA), Federal Housing Administration (FHA),
Massachusetts Housing Financing Agency (MHFA) and several other programs that
we have developed in-house. These loans are offered with fixed-rates of
interest, terms of up to 30 years and are secured by one-to four-family
residential properties. All of these loans are originated using agency
underwriting guidelines. These loans may be originated in amounts with
loan-to-value ratios up to 100%. Private mortgage insurance is required
for loans with loan-to-value ratios of over 80%. We also offer our own
first-time homebuyer loans to qualified individuals. These loans are offered
with terms and fixed or adjustable rates of interest, which may be discounted,
and the applicant may not be required to pay certain loan origination fees.

We
also offer our employees who satisfy certain criteria and our general
underwriting standards fixed- or adjustable- rate loan products with reduced
interest rates, application and loan origination fees and costs. Employee loans
adhere to all other terms and conditions contained in the loan policy.

All
residential mortgage loans that we originate include due-on-sale clauses,
which give us the right to declare a loan immediately due and payable in the
event that, among other things, the borrower sells or otherwise disposes of the
real property subject to the mortgage and the loan is not repaid. Regulations
limit the amount that a savings bank may lend relative to the appraised value
of the real estate securing the loan, as determined by an appraisal of the
property at the time the loan is originated. All borrowers are required to obtain
title insurance for the benefit of United Bank. We also require homeowners
insurance and fire and casualty insurance and, where circumstances warrant,
flood insurance on properties securing real estate loans.

Home
Equity Loans and Home Equity Lines of Credit. We
also offer home equity loans and home equity lines of credit, both of which are
secured by one- to four-family residences, substantially all of which are
located in our primary market area. At December 31, 2005, home equity loans and
equity lines of credit totaled $86.0 million,

7

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or 13.53% of
total loans. Additionally, at December 31, 2005, the unadvanced amounts of home
equity lines of credit totaled $79.3 million. The underwriting standards
utilized for home equity loans and equity lines of credit include a
determination of the applicants credit history, an assessment of the
applicants ability to meet existing obligations and payments on the proposed
loan and the value of the collateral securing the loan. The combined (first and
second mortgage liens) loan-to-value ratio for home equity loans and equity
lines of credit is generally limited to 80%. Home equity loans are offered with
fixed and adjustable-rates of interest and with terms of up to 20 years. Our
home equity lines of credit have adjustable-rates of interest, which are
indexed to the prime rate, as reported in The
Wall Street Journal.

Commercial
Real Estate Loans. We originate commercial real
estate loans that are generally secured by five or more unit apartment
buildings, industrial properties and properties used for business purposes such
as small office buildings, hotels, motels, recreational and retail facilities
primarily located in our primary market area. At December 31, 2005, commercial
real estate mortgage loans totaled $150.1 million, which amounted to 23.61% of
total loans. Our real estate underwriting policies generally provide that such
loans may be made in amounts of up to 85% of the appraised value of the
property, provided such loan complies with our loan policy guidelines and with
our current loans-to-one borrower limit for these types of loans which,
pursuant to permission received from the Office of Thrift Supervision, is
generally 20% of our unimpaired capital and surplus and which, at December 31,
2005, was $21.7 million. Our commercial real estate loans may be made with
terms of up to 25 years and are offered with interest rates that are fixed or
adjust periodically and are generally indexed to the prime rate as reported in The Wall Street Journal. In reaching a
decision on whether to make a commercial real estate loan, we consider the net
operating income of the property, the borrowers expertise and credit history,
and the profitability of the underlying business and the value of the underlying
property. In addition, with respect to real estate rental properties, we will
also consider the term of the lease and the quality of the tenants. We
generally require that the properties securing these real estate loans have
debt service coverage ratios (the ratio of earnings before debt service to debt
service) of at least 1.2 times. Environmental surveys are generally required
for commercial real estate loans. Generally, commercial real estate loans made
to corporations, partnerships and other business entities require personal
guarantees by the principals.

A
commercial borrowers financial information is monitored on an ongoing basis by
requiring periodic financial statement updates, payment history reviews and
periodic face-to-face meetings with the borrower. We require commercial
borrowers to provide annually updated financial statements and federal tax
returns. These requirements also apply to the individual principals of our
commercial borrowers. We also require borrowers with rental investment property
to provide an annual report of income and expenses for the property, including
a tenant list and copies of leases, as applicable. The largest commercial real
estate loan in our portfolio at December 31, 2005 was a $6.4 million loan
secured by commercial real estate located in Northern Connecticut. This loan
was performing according to its terms at December 31, 2005.

Loans
secured by commercial real estate, including multi-family properties, generally
involve larger principal amounts and a greater degree of risk than one- to
four-family residential mortgage loans. Because payments on loans secured by
commercial real estate are often dependent on successful operation or
management of the properties, repayment of such loans may be affected by
adverse conditions in the real estate market or the economy.

Construction
Loans.We also originate construction loans for
the development of one- to four-family residential properties located in our
primary market area. Residential construction loans are generally offered to
experienced local developers operating in our primary market area and to
individuals for the construction of their personal residences. At December 31,
2005, residential construction loans amounted to $11.4 million, or 1.79% of
total loans. At December 31, 2005, the additional unadvanced portion of these
construction loans totaled $5.0 million.

Our
residential construction loans generally provide for the payment of interest
only during the construction phase, which is usually 12 months. In the case of
construction loans to individuals for the construction of their primary
residences, our policies require that the loan convert to a permanent mortgage
loan at the end of the construction phase. Residential construction loans can
be made with a maximum loan-to-value ratio of 90%, provided that the borrower
obtains private mortgage insurance on the loan if the loan balance exceeds 80%
of the

8

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appraised
value or sales price, whichever is less, of the secured property. Residential
construction loans are generally made on the same terms as our one- to
four-family mortgage loans.

We
also make construction loans for commercial development projects. The projects
include multi-family, apartment, industrial, retail and office buildings. These
loans generally have an interest-only phase during construction then convert to
permanent financing. We generally require that a commitment for permanent
financing be in place prior to closing the construction loan. The maximum
loan-to-value ratio limit applicable to these loans is generally 80%. At
December 31, 2005, commercial construction loans totaled $17.5 million, or
2.75% of total loans. At December 31, 2005, the largest outstanding commercial
construction loan balance was for $2.5 million. It is secured by a residential
condominium development project located in our primary market area. This loan
was performing according to its terms at December 31, 2005. At December 31,
2005, the additional unadvanced portion of these construction loans totaled
$11.8 million.

We
also originate land loans to local individuals, contractors and developers for
the purpose of making improvements thereon, or for the purpose of developing
the land for sale. Loans to individuals are secured by a lien on the property,
have loan-to-value ratios that are limited to 70% of the value of the land
(based on the lower of the acquisition price or the appraised value of the
land) and are written with a fixed interest rate. These loans are offered with
a term of up to three years in which only interest is required to be paid each
month. A balloon payment for the principal plus any accrued interest is due at
the end of the three-year period. Land loans to developers are limited to a 65%
loan-to-value ratio. The interest rate can be fixed or floating and the term
can be for up to three years. Our land loans are generally secured by property
in our primary market area. We require title insurance and, if applicable, a
hazardous waste survey reporting that the land is free of hazardous or toxic
waste.

Before
making a commitment to fund a construction loan, we require an appraisal on the
property by an independent licensed appraiser. We generally also review and
inspect each property before disbursement of funds during the terms of the
construction loan. Loan proceeds are disbursed after inspection based on the
percentage of completion method.

Construction
and development financing is generally considered to involve a higher degree of
credit risk than long-term financing on improved, owner-occupied real estate.
Risk of loss on a construction loan depends largely upon the accuracy of the
initial estimate of the value of the property at completion of construction
compared to the estimated cost (including interest) of construction and other
assumptions. If the estimate of construction cost proves to be inaccurate, we
may be required to advance funds beyond the amount originally committed in
order to protect the value of the property. Additionally, if the estimate of
value proves to be inaccurate, we may be confronted with a project, when
completed, having a value that is insufficient to assure full repayment.

Commercial
and Industrial Loans. Commercial and industrial
loans have been a substantial part of our lending operations for a number of
years. At December 31, 2005, we had $59.6 million in commercial and industrial
loans, which amounted to 9.37% of total loans. We make commercial and
industrial loans primarily in our market area to a variety of professionals,
sole proprietorships and small and mid-sized businesses. Commercial and
industrial lending products include term loans and revolving lines of credit.
The maximum amount of a commercial and industrial loan is limited by our
loans-to-one-borrower limit which, pursuant to permission received from the
Office of Thrift Supervision, is generally 20% of our unimpaired capital and
surplus and which, at December 31, 2005, was $21.7 million. Such loans are
generally used for longer-term working capital purposes such as purchasing
equipment or furniture. Commercial and industrial loans are made with either
adjustable or fixed-rates of interest. The interest rates for commercial loans
are based on the prime rate, as published in The
Wall Street Journal.

When
making commercial and industrial loans, we consider the financial strength of
the borrower, our lending history with the borrower, the debt service
capabilities of the borrower, the projected cash flows of the business and the
value and type of the collateral. Commercial and industrial loans are generally
secured by a variety of collateral, primarily accounts receivable, inventory,
equipment, savings instruments and readily marketable securities. In addition,
we usually require the business principals to execute personal guarantees.

Commercial
and industrial loans generally have greater credit risk than residential
mortgage loans. 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

9

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ascertainable,
commercial and industrial loans generally are made on the basis of the
borrowers ability to repay the loan from the cash flow of the borrowers
business. As a result, the availability of funds for the repayment of
commercial and industrial loans may depend substantially on the success of the
business itself. Further, any collateral securing the loans may depreciate over
time, may be difficult to appraise and may fluctuate in value. We seek to
minimize these risks through our underwriting standards. At December 31, 2005,
our largest commercial and industrial loan was a $4.9 million loan to a manufacturing
company and secured by business assets and real estate located in our primary
market area. This loan was performing according to its terms at December 31,
2005.

Automobile
and Other Consumer Loans. We offer direct
automobile loans with terms of up to 60 months. For new cars, our lending
policy provides that the amount financed should not exceed 100% of the gross
selling price of the vehicle. For used cars, our lending policy provides that
the amount of the loan should not exceed the loan value of the vehicle, as
established by industry guides. The interest rates offered are the same for new
and used automobile loans. Full insurance coverage must be maintained on the
financed vehicle and United Bank must be named loss payee on the policy. At
December 31, 2005, we had $22.1 million in automobile loans, which amounted to
3.47% of the total loans.

We
offer a variety of other consumer loans, principally to United Bank customers
residing in our primary market area with acceptable credit ratings. Our other
consumer loans generally consist of secured and unsecured personal loans,
motorcycle and motor home loans, boat loans and pool and spa loans. Other
consumer loans totaled $3.9 million, or 0.61% of our total loan portfolio at
December 31, 2005.

Consumer
loans entail greater risk than do residential mortgage loans, particularly in
the case of loans that are unsecured or secured by rapidly depreciating assets
such as automobiles, motorcycles, motor homes and boats. In these cases, any
repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of the
greater likelihood of damage, loss or depreciation. In addition, consumer loan
collections depend on the borrowers continuing financial stability, and thus
are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy.

Loan
Originations, Sales, Participations and Servicing of Loans.Lending
activities are conducted primarily by our loan personnel operating at our main
and branch office locations. All loans originated by us are underwritten
pursuant to our policies and procedures. We originate both fixed-rate and
adjustable-rate loans. Our ability to originate fixed or adjustable-rate loans
is dependent upon the relative customer demand for such loans, which is
affected by the current and expected future levels of market interest rates.

Generally,
we retain in our portfolio virtually all loans that we originate, although we
have sold longer-term, fixed-rate one- to four-family residential mortgage
loans into the secondary market. Sales totaling $170,000 in residential
mortgage loans occurred in 2005. No loans were held for sale at December 31,
2005 or 2004. Historically, we have retained the servicing rights on the
mortgage loans sold to Fannie Mae and the Massachusetts Housing Financing
Authority.

From
time-to-time, we will also participate in loans, sometimes as the lead
lender. Whether we are the lead lender or not, we underwrite our participation
portion of the loan according to our own underwriting criteria and procedures.
At December 31, 2005, we had $3.8 million in loan participation interests in
which we were the lead bank and $8.1 million in loan participations in which we
were not the lead bank.

At
December 31, 2005, we were servicing loans sold in the amount of $42.4 million.
Loan servicing includes collecting and remitting loan payments, accounting for
principal and interest, contacting delinquent mortgagors, supervising
foreclosures and property dispositions in the event of unremedied defaults,
making certain insurance and tax payments on behalf of the borrowers and
generally administering the loans.

10

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The
following table shows our loan originations, sales and repayment activities for
the years indicated.

|                                       |  |                          |         |      |   |         |   |   |         | 
|-------------------------------------- |  | ------------------------ | ------- | ---- | - | ------- | - | - | ------- | 
|                                       |  | Years Ended December 31, |        
|                                       |  |                          |        
|                                       |  | 2005                     |         | 2004 |   | 2003    |  
|                                       |  |                          |         |      |   |         |  
|                                       |  | (In thousands)           |        
|                                      
|Total loans at beginning of
  period   |  | $                        | 574,070 |      | $ | 501,321 |   | $ | 467,504 | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Loan originations:                     |  |                          |         |      |   |         |   |   |         | 
|Residential(1)                         |  |                          | 118,449 |      |   | 107,844 |   |   | 141,425 | 
|Commercial
mortgage                    |  |                          | 37,185  |      |   | 55,553  |   |   | 24,108  | 
|Construction                           |  |                          | 43,672  |      |   | 51,841  |   |   | 48,185  | 
|Commercial and
industrial              |  |                          | 73,006  |      |   | 67,087  |   |   | 56,519  | 
|Automobile                             |  |                          | 15,166  |      |   | 8,606   |   |   | 8,942   | 
|Other
consumer                         |  |                          | 2,621   |      |   | 1,314   |   |   | 1,800   | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Total loans
originated                 |  |                          | 290,099 |      |   | 292,245 |   |   | 280,979 | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Sales and loan principal
  repayments: |  |                          |         |      |   |         |   |   |         | 
|Deduct:                                |  |                          |         |      |   |         |   |   |         | 
|Principal
repayments                   |  |                          | 229,513 |      |   | 214,713 |   |   | 236,337 | 
|Loan
sales                             |  |                          | 170     |      |   | 5,218   |   |   | 10,611  | 
|Decrease
(increase) due to other items |  |                          | (1,306  | )    |   | (435    | ) |   | 214     | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Total
deductions                       |  |                          | 228,377 |      |   | 219,496 |   |   | 247,162 | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Net loan activity                      |  |                          | 61,722  |      |   | 72,749  |   |   | 33,817  | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|                                       |  |                          |         |      |   |         |   |   |         | 
|Total loans at end of
  period         |  | $                        | 635,792 |      | $ | 574,070 |   | $ | 501,321 | 
|                                       |  |                          |         |      |   |         |   |   |         | 




(1)          Includes
one- to four-family loans and home equity loans and lines of credit.


Loan Approval
Procedures and
Authority. United Banks lending activities follow written,
non-discriminatory underwriting standards and loan origination procedures
established by United Banks Board of Directors. The loan approval process is
intended to assess the borrowers ability to repay the loan, the viability of
the loan, and the adequacy of the value of the property that will secure the
loan. To assess the borrowers ability to repay, we review the employment and
credit history and information on the historical and projected income and
expenses of borrowers.

United
Banks policies and loan approval limits are established by the Board of
Directors. The Board of Directors has delegated authority to United Banks Chief
Lending Officer to review and assign lending authorities to certain individuals
of United Bank (ranging from senior management to senior loan underwriter) (the
Designated Individuals) to consider and approve loans within their designated
authority. Loans in amounts above the authorized limits of the Designated
Individuals and loans outside of the designated authority of the Designated
Individuals require the approval of United Banks Loan Committee. The Loan
Committee consists of six of our
directors, including our Chief Executive Officer. All loans that are approved
by the Designated Individuals are still reviewed and ratified by the Loan
Committee and the Board of Directors on a monthly basis.

All
residential mortgage loans (one- to four-family loans, home equity loans, home
equity lines of credit and residential construction loans) may be approved by
certain of the Designated Individuals in amounts up to the annually adjusted
Fannie Mae and Freddie Mac secondary market conforming loan limits (Conforming
Loans). Residential mortgage loans in excess of the Conforming Loan limit and
up to $1.0 million may be approved by any two of either United Banks Chief
Executive Officer, Chief Financial Officer or Senior Vice President of
Residential Lending. Residential loans in excess of $1.0 million must be
approved by any two of the senior executive officers listed above and United
Banks Loan Committee.

All
commercial real estate, commercial construction loans and commercial and
industrial loans in amounts up to $500,000 may be approved by certain of the
Designated Individuals. All such loans in excess of $500,000, or additional
extensions of credit to existing commercial borrowers that result in liability
in excess of $500,000, must be approved by United Banks Loan Committee. All home
equity loans and home equity lines of credit up to $350,000 may be approved by
certain of the Designated Individuals. All home equity loans and home equity
lines of credit in excess of $350,000 must be approved by the Loan Committee.

11

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All
consumer loans in amounts up to $100,000 may be approved by certain of the
Designated Individuals.  All consumer
loans in excess of $100,000 must be approved by the Loan Committee.

We
generally require appraisals of all real property securing loans, except for
home equity loans and equity lines of credit, in which case we may use the tax
assessed value of the property securing such loans.  Appraisals are performed by independent licensed appraisers.  All appraisers
are approved by the Loan
Committee annually.  We require fire and
extended coverage insurance in amounts at least equal to the principal amount
of the loan.

Non-performing and
Problem Assets

We
commence collection efforts when a loan becomes ten days past due with
system-generated reminder notices. Subsequent late charge and delinquent
notices are issued and the account is monitored on a regular basis thereafter.
Personal, direct contact with the borrower is attempted early in the collection
process as a courtesy reminder and later to determine the reason for the
delinquency and to safeguard our collateral. When a loan is more than 60 days
past due, the credit file is reviewed and, if deemed necessary, information is
updated or confirmed and collateral re-evaluated.  We make every effort to contact the borrower and develop a plan
of repayment to cure the delinquency.  A
summary report of all loans 30 days or more past due is reported to the Board
of Directors.  If no repayment plan is
in process, the file is referred to counsel for the commencement of foreclosure
or other collection efforts.

Loans
are placed on non-accrual status when they are more than 90 days
delinquent.  When loans are placed on a
non-accrual status, unpaid accrued interest is fully reversed.

Non-Performing
Assets.The
table below sets forth the amounts and categories of our non-performing assets
at the dates indicated.  At each date
presented, we had no troubled debt restructurings (loans for which a portion of
interest or principal has been forgiven and loans modified at interest rates
materially less than current market rates).

|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|--------------------------------------------- |  | ---------------------- | ----- | ---- | - | ----- | - | ---- | ----- | ---- | - | ----- | - | - | ----- | -
|                                              |  | At December 31,        |      
|                                              |  |                        |      
|                                              |  | 2005                   |       | 2004 |   | 2003  |   | 2002 |       | 2001 |  
|                                              |  |                        |       |      |   |       |   |      |       |      |  
|                                              |  | (Dollars in thousands) |      
|Non-accrual
  loans:                          |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Residential
mortgages(1)                      |  | $                      | 1,016 |      | $ | 1,383 |   | $    | 772   |      | $ | 132   |   | $ | 25    |  
|Commercial
mortgages                          |  |                        | 141   |      |   | 1,376 |   |      | 455   |      |   | 363   |   |   | 631   |  
|Construction                                  |  |                        | 113   |      |   |      |   |      |      |      |   |      |   |   |      |  
|Commercial
and industrial                     |  |                        | 447   |      |   | 1,025 |   |      | 599   |      |   | 475   |   |   | 100   |  
|Automobile                                    |  |                        |      |      |   |      |   |      |      |      |   |      |   |   |      |  
|Other
consumer                                |  |                        |      |      |   |      |   |      |      |      |   |      |   |   |      |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Total
non-accrual loans                       |  | $                      | 1,717 |      | $ | 3,784 |   | $    | 1,826 |      | $ | 970   |   | $ | 756   |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Accruing
  loans 90 days or more past due:    |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Residential
mortgages(1)                      |  | $                      |      |      | $ |      |   | $    |      |      | $ |      |   | $ | 68    |  
|Commercial
mortgages                          |  |                        |      |      |   |      |   |      |      |      |   |      |   |   | 463   |  
|Construction                                  |  |                        |      |      |   |      |   |      |      |      |   |      |   |   |      |  
|Commercial
and industrial                     |  |                        |      |      |   |      |   |      |      |      |   |      |   |   | 25    |  
|Automobile                                    |  |                        |      |      |   |      |   |      |      |      |   |      |   |   | 1     |  
|Other
consumer                                |  |                        |      |      |   |      |   |      |      |      |   |      |   |   |      |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Total loans
90 days or more past due          |  | $                      |      |      | $ |      |   | $    |      |      | $ |      |   | $ | 557   |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Total
  non-performing loans                  |  |                        | 1,717 |      |   | 3,784 |   | $    | 1,826 |      | $ | 970   |   |   | 1,313 |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Other real
  estate owned                     |  |                        | 1,602 |      |   |      |   |      | 39    |      |   | 66    |   |   | 45    |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Total
non-performing assets                   |  | $                      | 3,319 |      | $ | 3,784 |   | $    | 1,865 |      | $ | 1,036 |   | $ | 1,358 |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Allowance
  allocated to non-performing loans |  | $                      | 80    |      | $ | 489   |   | $    | 154   |      | $ | 101   |   | $ | 286   |  
|                                              |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Ratios:                                       |  |                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Total
non-performing loans to total loans     |  |                        | 0.27  | %    |   | 0.66  | % |      | 0.36  | %    |   | 0.21  | % |   | 0.29  | %
|Total
non-performing loans to total assets    |  |                        | 0.19  |      |   | 0.49  |   |      | 0.25  |      |   | 0.16  |   |   | 0.22  |  
|Total
non-performing assets to total assets   |  |                        | 0.37  |      |   | 0.49  |   |      | 0.25  |      |   | 0.17  |   |   | 0.23  |  

---

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

12

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As
noted in the above table, our non-accrual loans decreased from December 31,
2004 to December 31, 2005.  The
decrease in non-accrual loans reflected the resolution of several large loans
which were in a non-accrual status at December 31, 2004.  Additional interest
income of approximately $158,000,$110,000 and, $88,000 respectively would have
been recorded during the years ended December 31, 2005, 2004 and 2003,
respectively, if the loans had performed in accordance with their original
terms.

Delinquent
Loans. The following table sets forth our loan
delinquencies by type, by amount and by percentage of type at the dates
indicated.

|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|------------------------- |  | ---------------------- | -- | ---------------- | - | ------ |  | ------ | -- | ------ | - | ------ |  |  | --- |  | - | ----- | 
|                          |  | Loans Delinquent For   |    |                  |  
|                          |  |                        |    |                  |  
|                          |  | 60-89 Days             |    | 90 Days and Over |   | Total  | 
|                          |  |                        |    |                  |   |        | 
|                          |  | Number                 |    | Amount           |   | Number |  | Amount |    | Number |   | Amount | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        | 
|                          |  | (Dollars in thousands) |   
|                         
|At December
31, 2005      |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Residential
mortgage(1)   |  |                        | 9  |                  | $ | 855    |  |        | 6  |        | $ | 1,016  |  |  | 15  |  | $ | 1,871 | 
|Commercial
mortgage       |  |                        | 4  |                  |   | 546    |  |        | 2  |        |   | 140    |  |  | 6   |  |   | 686   | 
|Construction              |  |                        |   |                  |   |       |  |        | 1  |        |   | 113    |  |  | 1   |  |   | 113   | 
|Commercial
and industrial |  |                        | 1  |                  |   | 2      |  |        | 6  |        |   | 447    |  |  | 7   |  |   | 449   | 
|Automobile                |  |                        | 1  |                  |   | 1      |  |        |   |        |   |       |  |  | 1   |  |   | 1     | 
|Other
consumer            |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Total                     |  |                        | 15 |                  | $ | 1,404  |  |        | 15 |        | $ | 1,716  |  |  | 30  |  | $ | 3,119 | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|At December
31, 2004      |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Residential
mortgage(1)   |  |                        | 1  |                  | $ | 53     |  |        | 7  |        | $ | 1,383  |  |  | 8   |  | $ | 1,436 | 
|Commercial
mortgage       |  |                        | 1  |                  |   | 114    |  |        | 7  |        |   | 1,376  |  |  | 8   |  |   | 1,490 | 
|Construction              |  |                        |   |                  |   |       |  |        |    |        |   |        |  |  |    |  |   |      | 
|Commercial
and industrial |  |                        | 9  |                  |   | 330    |  |        | 10 |        |   | 1,025  |  |  | 19  |  |   | 1,355 | 
|Automobile                |  |                        | 3  |                  |   | 13     |  |        |   |        |   |       |  |  | 3   |  |   | 13    | 
|Other
consumer            |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Total                     |  |                        | 14 |                  | $ | 510    |  |        | 24 |        | $ | 3,784  |  |  | 38  |  | $ | 4,294 | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|At December
31, 2003      |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Residential
mortgage(1)   |  |                        | 15 |                  | $ | 863    |  |        | 7  |        | $ | 772    |  |  | 22  |  | $ | 1,635 | 
|Commercial
mortgage       |  |                        | 5  |                  |   | 438    |  |        | 2  |        |   | 455    |  |  | 7   |  |   | 893   | 
|Construction              |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|Commercial
and industrial |  |                        | 11 |                  |   | 132    |  |        | 9  |        |   | 599    |  |  | 20  |  |   | 731   | 
|Automobile                |  |                        | 11 |                  |   | 57     |  |        |   |        |   |       |  |  | 11  |  |   | 57    | 
|Other
consumer            |  |                        | 4  |                  |   | 4      |  |        |   |        |   |       |  |  | 4   |  |   | 4     | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Total                     |  |                        | 46 |                  | $ | 1,494  |  |        | 18 |        | $ | 1,826  |  |  | 64  |  | $ | 3,320 | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|At December
31, 2002      |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Residential
mortgage(1)   |  |                        | 26 |                  | $ | 1,001  |  |        | 4  |        | $ | 132    |  |  | 30  |  | $ | 1,133 | 
|Commercial
mortgage       |  |                        | 8  |                  |   | 1,112  |  |        | 3  |        |   | 363    |  |  | 11  |  |   | 1,475 | 
|Construction              |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|Commercial
and industrial |  |                        | 21 |                  |   | 778    |  |        | 13 |        |   | 475    |  |  | 34  |  |   | 1,253 | 
|Automobile                |  |                        | 38 |                  |   | 201    |  |        |   |        |   |       |  |  | 38  |  |   | 201   | 
|Other
consumer            |  |                        | 1  |                  |   | 1      |  |        |   |        |   |       |  |  | 1   |  |   | 1     | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Total                     |  |                        | 94 |                  | $ | 3,093  |  |        | 20 |        | $ | 970    |  |  | 114 |  | $ | 4,063 | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|At December
31, 2001      |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Residential
mortgage(1)   |  |                        | 18 |                  | $ | 748    |  |        | 2  |        | $ | 25     |  |  | 20  |  | $ | 773   | 
|Commercial
mortgage       |  |                        | 10 |                  |   | 1,526  |  |        | 5  |        |   | 631    |  |  | 15  |  |   | 2,157 | 
|Construction              |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|Commercial
and industrial |  |                        | 18 |                  |   | 395    |  |        | 6  |        |   | 100    |  |  | 24  |  |   | 495   | 
|Automobile                |  |                        | 26 |                  |   | 108    |  |        | 1  |        |   | 966    |  |  | 27  |  |   | 1,074 | 
|Other
consumer            |  |                        |   |                  |   |       |  |        |   |        |   |       |  |  |    |  |   |      | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 
|Total                     |  |                        | 72 |                  | $ | 2,777  |  |        | 14 |        | $ | 1,722  |  |  | 86  |  | $ | 4,499 | 
|                          |  |                        |    |                  |   |        |  |        |    |        |   |        |  |  |     |  |   |       | 



---

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

Other
Real Estate Owned.  Other real estate acquired by us as a result of foreclosure or by
deed in lieu of foreclosure is classified as real estate owned until sold.  When property is acquired it is recorded at
the lower of cost or fair market value
at the date of foreclosure, establishing a new cost basis.  Holding costs and declines in fair value

13

---



result in
changes to expense after acquisition are expensed. At December 31, 2005, we had
$1,602 of real estate owned of which $1,400 of properties were under contract
with closings expected to be completed in the first quarter of 2006.

Classified
Assets.Office of Thrift Supervision
regulations provide that loans and other assets of lesser quality should be
classified as substandard, doubtful or loss assets.  An asset is considered
substandard if it
is inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Substandard assets include
those characterized by the distinct possibility that we will sustain some
loss if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the
weaknesses present make collection or liquidation in full, on the basis of
currently existing facts, conditions, and values, highly questionable and
improbable. Assets classified as loss are those considered uncollectible
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.  We classify an asset as special mention if
the asset has a potential weakness that warrants managements close
attention.  While such assets are not
impaired, management has concluded that if the potential weakness in the asset
is not addressed, the value of the asset may deteriorate, adversely affecting
the repayment of the asset.

We
are required to establish general allowances for loan losses in an amount
deemed prudent by management for loans classified substandard or doubtful, as
well as for other problem loans.
General allowances represent loss allowances which have been established
to recognize the inherent losses associated with lending activities, but which,
unlike specific allowances, have not been allocated to particular problem
assets.  When we classify problem assets
as loss, we are required either to establish a specific allowance for losses
equal to 100% of the amount of the asset so classified or to charge off such
amount.  Our determination as to the
classification of our assets and the amount of our valuation allowances is subject
to review by the Office of Thrift Supervision
which can order the establishment of additional general or specific loss
allowances.

The
following table shows the aggregate amounts of our classified assets at the
date indicated for both loans and foreclosed assets.  The amount of assets classified as substandard in the table
includes 17 commercial lending relationships, 4 of which are not current.

|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|------------------------------------------------ |  | ---------------------- | - | ---------------------- | --- |  |  | - | ------ |  | 
|                                                 |  | At December 31,
  2005 |   | At December 31,
  2004 |    
|                                                 |  |                        |   |                        |    
|                                                 |  | (In thousands)         |  
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|Residential Real Estate (1):                     |  |                        |   |                        |     |  |  |   |        |  | 
|Substandard
  assets                             |  |                        | $ | 1,693                  | (2) |  |  | $ | 1,577  |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|All Other Loans:                                 |  |                        |   |                        |     |  |  |   |        |  | 
|Special
  mention assets                         |  |                        |   | 12,100                 | (3) |  |  |   | 3,927  |  | 
|Substandard
  assets                             |  |                        |   | 8,189                  |     |  |  |   | 13,539 |  | 
|Doubtful
  assets                                |  |                        |   | 1,153                  |     |  |  |   | 348    |  | 
|Loss assets                                      |  |                        |   |                       |     |  |  |   |       |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|Foreclosed Assets:                               |  |                        |   |                        |     |  |  |   |        |  | 
|Other real
  estate owned                        |  |                        |   | 1,602                  |     |  |  |   |       |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|Total
  classified assets                        |  |                        | $ | 23,135                 |     |  |  | $ | 19,391 |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 
|Allowance
  allocated to total classified assets |  |                        | $ | 2,362                  |     |  |  | $ | 2,358  |  | 
|                                                 |  |                        |   |                        |     |  |  |   |        |  | 



---

|    |                                                                                                  
|--- | -------------------------------------------------------------------------------------------------
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.                  
|    |                                                                                                  
|(2) | Includes
  nine residential loans, five of which are in foreclosure or liquidation
  proceedings.
|    |                                                                                                  
|(3) | Includes eleven commercial lending
  relationships.                                              

The
loan portfolio is reviewed on a regular basis to determine whether any loans
require classification in accordance with applicable regulations.  Not all classified assets constitute
non-performing assets.

14

---



Allowance for Loan Losses

Our
allowance for loan losses is maintained at a level necessary to absorb loan
losses that are both probable and reasonably estimable.  Management, in determining the allowance for
loan losses, considers the losses inherent in our loan portfolio and changes in
the nature and volume of loan activities, along with the general economic and
real estate market conditions.  A
description of our methodology in establishing our allowance for loan losses is
set forth in the section Critical Accounting PoliciesAllowance for Loan
Losses. The allowance for loan losses as of December 31, 2005 was maintained
at a level that represents managements best estimate of losses inherent in the
loan portfolio, and such losses were both probable and reasonably estimable. However,
this analysis process is inherently subjective, as it requires us to make
estimates that are susceptible to revisions as more information becomes
available.  Although we believe that we
have established the allowance at levels to absorb probable and estimable
losses, future additions may be necessary if economic or other conditions in
the future differ from the current environment.

In
addition, as an integral part of their examination process, the Office of
Thrift Supervision will and Federal Deposit Insurance Corporation has authority
to periodically review our allowance for loan losses.  Such agencies may require that we recognize additions to the
allowance based on their judgments of information available to them at the time
of their examination.

Allowance
for Loan Losses.  The following table sets forth
activity in our allowance for loan losses for the years indicated.

|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|-------------------------------------------------------------------- |  | -------------------------------------- | ------ | ---- | - | ------ | - | ---- | ------ | ---- | - | ------ | - | - | ------ | -
|                                                                     |  | At or For the Years Ended December 31, |       
|                                                                     |  |                                        |       
|                                                                     |  | 2005                                   |        | 2004 |   | 2003   |   | 2002 |        | 2001 |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |  
|                                                                     |  | (Dollars in thousands)                 |       
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Balance at beginning of
year                                         |  | $                                      | 5,750  |      | $ | 5,094  |   | $    | 4,923  |      | $ | 4,701  |   | $ | 4,521  |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Charge-offs:                                                         |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Residential
mortgages(1)                                             |  |                                        |       |      |   |       |   |      |       |      |   | 11     |   |   | 16     |  
|Commercial
mortgages                                                 |  |                                        | 60     |      |   |       |   |      |       |      |   | 46     |   |   | 160    |  
|Construction                                                         |  |                                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Commercial
and industrial                                            |  |                                        | 377    |      |   | 501    |   |      | 116    |      |   | 144    |   |   | 225    |  
|Automobile                                                           |  |                                        | 15     |      |   | 46     |   |      | 44     |      |   | 59     |   |   | 36     |  
|Other
consumer                                                       |  |                                        | 3      |      |   | 11     |   |      | 2      |      |   | 6      |   |   | 13     |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Total
charge-offs                                                    |  |                                        | 455    |      |   | 558    |   |      | 162    |      |   | 266    |   |   | 450    |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Recoveries:                                                          |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Residential
mortgages(1)                                             |  |                                        |       |      |   |       |   |      |       |      |   | 1      |   |   |       |  
|Commercial
mortgages                                                 |  |                                        |       |      |   | 175    |   |      | 24     |      |   | 3      |   |   |       |  
|Construction                                                         |  |                                        |       |      |   |       |   |      |       |      |   |       |   |   |       |  
|Commercial
and industrial                                            |  |                                        | 157    |      |   | 32     |   |      | 5      |      |   | 54     |   |   | 7      |  
|Automobile                                                           |  |                                        | 6      |      |   | 21     |   |      |       |      |   | 15     |   |   | 2      |  
|Other
consumer                                                       |  |                                        | 7      |      |   | 3      |   |      | 10     |      |   | 18     |   |   | 7      |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Total
recoveries                                                     |  |                                        | 170    |      |   | 231    |   |      | 39     |      |   | 91     |   |   | 16     |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Net charge-offs                                                      |  |                                        | (285   | )    |   | (328   | ) |      | (123   | )    |   | (175   | ) |   | (434   | )
|Provision for loan
losses                                            |  |                                        | 917    |      |   | 983    |   |      | 294    |      |   | 398    |   |   | 614    |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Balance at end of
year                                               |  | $                                      | 6,382  |      | $ | 5,750  |   | $    | 5,094  |      | $ | 4,924  |   | $ | 4,701  |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|                                                                     |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Ratios:                                                              |  |                                        |        |      |   |        |   |      |        |      |   |        |   |   |        |  
|Net charge-offs to average
loans outstanding                         |  |                                        | 0.05   | %    |   | 0.06   | % |      | 0.03   | %    |   | 0.04   | % |   | 0.10   | %
|Allowance for loan losses to
non-performing
  loans at end of period |  |                                        | 371.70 |      |   | 151.96 |   |      | 279.03 |      |   | 507.63 |   |   | 358.04 |  
|Allowance for loan losses to
total loans at
  end of period          |  |                                        | 1.00   |      |   | 1.00   |   |      | 1.02   |      |   | 1.05   |   |   | 1.03   |  



---

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

15

---



Allocation
of Allowance for Loan Losses.The
following table sets forth the allowance for loan losses allocated by loan
category, the total loan balances by category, and the percent of loans in each
category to total loans at the dates indicated.  The allowance for loan losses allocated to each category is not
necessarily indicative of future losses in any particular category and does not
restrict the use of the allowance to absorb losses in other categories.

|                                 |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |   |   |       |  |  |        |   |  |        |  
|-------------------------------- |  | ---------------------- | ----- | --------------------------------------------- |  | ------------------------------------------------- | - | ------ | ------ | --------------------------------------------- | - | ------------------------------------------------- |  | ------ | ------ | --------------------------------------------- |  | ------------------------------------------------- | - | - | ----- |  |  | ------ | - |  | ------ | -
|                                 |  | At December 31,        |      
|                                 |  |                        |      
|                                 |  | 2005                   |       | 2004                                          |  | 2003                                              |  
|                                 |  |                        |       |                                               |  |                                                   |  
|                                 |  | Amount                 |       | Percent of
  Allowance to
  Total
  Allowance |  | Percent of
  Loans in
  Category to
  Total Loans |   | Amount |        | Percent of
  Allowance to
  Total
  Allowance |   | Percent of
  Loans in
  Category to
  Total Loans |  | Amount |        | Percent of
  Allowance to
  Total
  Allowance |  | Percent of
  Loans in
  Category to
  Total Loans |  
|                                 |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |  
|                                 |  | (Dollars in thousands) |      
|At end of period allocated
  to: |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |   |   |       |  |  |        |   |  |        |  
|Residential
mortgages(1)         |  | $                      | 554   |                                               |  | 8.68                                              | % |        | 58.40  | %                                             | $ | 526                                               |  |        | 9.15   | %                                             |  | 57.63                                             | % | $ | 974   |  |  | 19.12  | % |  | 59.23  | %
|Commercial mortgages             |  |                        | 2,944 |                                               |  | 46.13                                             |   |        | 23.61  |                                               |   | 3,217                                             |  |        | 55.95  |                                               |  | 24.00                                             |   |   | 2,304 |  |  | 45.22  |   |  | 23.49  |  
|Construction                     |  |                        | 316   |                                               |  | 4.95                                              |   |        | 4.54   |                                               |   | 259                                               |  |        | 4.50   |                                               |  | 5.20                                              |   |   | 170   |  |  | 3.34   |   |  | 5.31   |  
|Commercial and
industrial        |  |                        | 2,487 |                                               |  | 38.97                                             |   |        | 9.37   |                                               |   | 1,682                                             |  |        | 29.25  |                                               |  | 9.81                                              |   |   | 1,483 |  |  | 29.11  |   |  | 7.55   |  
|Automobile                       |  |                        | 78    |                                               |  | 1.22                                              |   |        | 3.47   |                                               |   | 60                                                |  |        | 1.04   |                                               |  | 3.04                                              |   |   | 155   |  |  | 3.04   |   |  | 4.18   |  
|Other consumer                   |  |                        | 3     |                                               |  | 0.05                                              |   |        | 0.61   |                                               |   | 6                                                 |  |        | 0.10   |                                               |  | 0.32                                              |   |   | 9     |  |  | 0.18   |   |  | 0.23   |  
|                                 |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |   |   |       |  |  |        |   |  |        |  
|                                 |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |   |   |       |  |  |        |   |  |        |  
|Total allowance                  |  | $                      | 6,382 |                                               |  | 100.00                                            | % |        | 100.00 | %                                             | $ | 5,750                                             |  |        | 100.00 | %                                             |  | 100.00                                            | % | $ | 5,095 |  |  | 100.00 | % |  | 100.00 | %
|                                 |  |                        |       |                                               |  |                                                   |   |        |        |                                               |   |                                                   |  |        |        |                                               |  |                                                   |   |   |       |  |  |        |   |  |        |  

|                               |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |   |  |   |       |  |  |  |        |   |  |  |  |        |   | 
|------------------------------ |  | ---------------------- | ----- | --------------------------------------------- |  | --------------------------------------------- | ------ | ------ |  | --------------------------------------------- |  | ------------------------------------------------- | - |  | - | ----- |  |  |  | ------ | - |  |  |  | ------ | - | 
|                               |  | At December 31,        |      
|                               |  |                        |      
|                               |  | 2002                   |       | 2001                                          | 
|                               |  |                        |       |                                               | 
|                               |  | Amount                 |       | Percent of
  Allowance to
  Total
  Allowance |  | Percent of
  Loans in Category to Total Loans |        | Amount |  | Percent of
  Allowance to
  Total
  Allowance |  | Percent of
  Loans in
  Category to
  Total Loans |  
|                               |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |  
|                               |  | (Dollars in thousands) |      
|At end of period allocated
to: |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |   |  |   |       |  |  | 
|Residential
mortgages(1)       |  | $                      | 1,466 |                                               |  |                                               | 29.77  | %      |  |                                               |  | 58.44                                             | % |  | $ | 1,284 |  |  |  | 27.31  | % |  |  |  | 58.52  | % | 
|Commercial
mortgages           |  |                        | 2,134 |                                               |  |                                               | 43.34  |        |  |                                               |  | 24.32                                             |   |  |   | 2,290 |  |  |  | 48.71  |   |  |  |  | 23.37  |   | 
|Construction                   |  |                        | 205   |                                               |  |                                               | 4.16   |        |  |                                               |  | 3.87                                              |   |  |   | 208   |  |  |  | 4.42   |   |  |  |  | 4.38   |   | 
|Commercial
and industrial      |  |                        | 835   |                                               |  |                                               | 16.96  |        |  |                                               |  | 7.35                                              |   |  |   | 617   |  |  |  | 13.12  |   |  |  |  | 6.59   |   | 
|Automobile                     |  |                        | 272   |                                               |  |                                               | 5.52   |        |  |                                               |  | 5.78                                              |   |  |   | 290   |  |  |  | 6.17   |   |  |  |  | 6.86   |   | 
|Other
consumer                 |  |                        | 12    |                                               |  |                                               | 0.24   |        |  |                                               |  | 0.26                                              |   |  |   | 12    |  |  |  | 0.26   |   |  |  |  | 0.27   |   | 
|                               |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |   |  |   |       |  |  |  |        |   |  |  |  |        |   | 
|                               |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |   |  |   |       |  |  |  |        |   |  |  |  |        |   | 
|Total allowance                |  | $                      | 4,924 |                                               |  |                                               | 100.00 | %      |  |                                               |  | 100.00                                            | % |  | $ | 4,701 |  |  |  | 100.00 | % |  |  |  | 100.00 | % | 
|                               |  |                        |       |                                               |  |                                               |        |        |  |                                               |  |                                                   |   |  |   |       |  |  |  |        |   |  |  |  |        |   | 

---

|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Includes
  one- to four-family loans and home equity loans and lines of credit.

16

---



Investments

United
Banks Board of Directors is responsible for adopting our investment
policy.  The investment policy is
reviewed annually by management and any changes to the policy are recommended
to and subject to the approval of the Board of Directors.  Authority to make investments under the
approved investment policy guidelines is delegated to appropriate officers.
While general investment strategies are developed and authorized by the
Board of Directors, the execution of specific actions primarily rests with
United Banks Chief Financial Officer. He is both responsible for ensuring that
the guidelines and requirements included in the investment policy are followed
and that all securities are considered prudent for investment.  He and United Banks Treasurer or his/her
designee, under his/her direction is authorized to execute investment
transactions (purchases and sales) up to $5 million per transaction (up to $10
million, in the case of mutual fund transactions) without prior approval and within the scope of the established
investment policy.  All investment
transactions are reviewed and ratified or approved (as the case may be) at
regularly scheduled meetings of the Board of Directors.  Any investment that, subsequent to its
purchase, fails to meet the guidelines of the policy is reported to the Board
of Directors at its next meeting where the Board decides whether to hold or
sell the investment.

The
Companys Board of Directors has adopted an identical investment policy.  Any references herein to the Bank also
apply to the Company.

Federally
chartered savings banks have authority to invest in various types of assets,
including U.S. Treasury obligations, securities of various federal agencies,
mortgage-backed securities, certain certificates of deposit of insured
financial institutions, overnight and short-term loans to other banks,
corporate debt instruments, and Fannie Mae and Freddie Mac equity securities.  United Financial Bancorp, Inc., as a
federally chartered mid-tier stock holding company, may invest in equity
securities subject to certain limitations.

The
investment policy requires that all securities transactions be conducted in a
safe and sound manner.  Investment decisions
must be based upon a thorough analysis of each security instrument to determine
its quality and inherent risks, fit within United Banks overall
asset/liability management objectives, effect on its risk-based capital
measurement and prospects for yield and/or appreciation.  The investment policy provides that United
Bank may invest in U.S. treasury notes, U.S. and state agency securities,
mortgage-backed securities, corporate debt securities, commercial paper and
other conservative investment opportunities.

Our
investment portfolio at December 31, 2005, consisted of $98.6 million in
federal agency obligations, $12.9 million of corporate debt instruments,
$272,000 of equity securities, consisting of Fannie Mae and Freddie Mac common
and preferred stock, and $3.3 million of industrial revenue and municipal
bonds.  We also invest in
mortgage-backed securities, all of which are guaranteed by the United States
Government or agencies or government sponsored enterprises.  At December 31, 2005, our mortgage-backed
securities portfolio totaled $114.7 million, or 12.65% of total assets.
Securities can be classified as held-to-maturity or available-for-sale at the
date of purchase. We generally classify our investment securities as
available-for-sale.

U.S.
Government and Federal Agency Obligations.  At December 31, 2005, our U.S. Government
and federal agency securities portfolio totaled $98.6 million, all of which was
classified as available-for-sale.  While
these securities generally provide lower yields than other investments in our
securities investment portfolio, we maintain these investments, to the extent
appropriate, for liquidity purposes, as collateral for borrowings and for
prepayment protection.

Mortgage-Backed
Securities.We
purchase mortgage-backed securities insured or guaranteed by Fannie Mae,
Freddie Mac or Ginnie Mae.  We invest in
mortgage-backed securities to achieve positive interest rate spreads with
minimal administrative expense, and to lower our credit risk as a result of the
guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.  Our investment policy also authorizes the
investment in collateralized mortgage obligations (CMOs), also insured or
issued by Freddie Mac, Fannie Mae and Ginnie Mae, although we currently do not
hold any CMOs in our portfolio.

Mortgage-backed
securities are created by the pooling of mortgages and the issuance of a
security with an interest rate that is less than the interest rate on the
underlying mortgages.  Mortgage-backed
securities typically represent a participation interest in a pool of
single-family or multi-family mortgages, although we focus our

17

---



investments on
mortgage-backed securities backed by one- to four-family mortgages.  The issuers of such securities (generally
U.S. government agencies and government sponsored enterprises, including Fannie
Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in
the form of securities to investors such as us, and guarantee the payment of principal
and interest to investors.
Mortgage-backed securities generally yield less than the loans that
underlie such securities because of the cost of payment guarantees and credit
enhancements.  However, mortgage-backed
securities are usually more liquid than individual mortgage loans and may be
used to collateralize our specific liabilities and obligations.

At
December 31, 2005, our mortgage-backed securities totaled $114.7 million, or
12.65% of total assets and 13.30% of interest earning assets. All of our
mortgage-backed securities at December 31, 2005 were classified as
available-for-sale. At December 31, 2005, 49.52% of the mortgage-backed
securities were backed by adjustable-rate mortgage loans and 50.48% were backed
by fixed-rate mortgage loans.  The
mortgage-backed securities portfolio had a weighted average yield of 5.29% at
December 31, 2005.  The estimated fair
value of our mortgage-backed securities at December 31, 2005 was $114.7
million, which is $2.6 million less than the amortized cost of $117.3
million.  Investments in mortgage-backed
securities involve a risk that actual prepayments may differ from estimated
prepayments over the life of the security, which may require adjustments to the
amortization of any premium or accretion of any discount relating to such
instruments thereby changing the net yield on such securities.  There is also reinvestment risk associated
with the cash flows from such securities or if such securities are redeemed by
the issuer.  In addition, the market
value of such securities may be adversely affected by changes in interest
rates.

Corporate
Bonds.  At
December 31, 2005, our corporate bond portfolio totaled $12.9 million, all of
which was classified as available-for-sale. The industries represented by our
corporate bond issuers include technology, services, consumer and
financial.  Although corporate bonds may
offer higher yields than U.S. Treasury or agency securities of comparable
duration, corporate bonds also have a higher risk of default due to possible
adverse changes in the credit-worthiness of the issuer.  In order to mitigate this risk, our
investment policy requires that corporate debt obligations be rated in one of
the four highest categories by a nationally recognized rating service.  We may invest up to 5% of consolidated
assets in corporate debt obligations and up to $1,000,000 in any one issuer.

Marketable
Equity Securities.  At December 31, 2005, our equity securities portfolio totaled
$272,000, or less than 1% of our total assets, all of which were classified as
available-for-sale. The portfolio consisted of Fannie Mae and Freddie Mac
common and preferred stock.  Investments
in equity securities involve risk as they are not insured or guaranteed
investments and are affected by stock market fluctuations.  Such investments are carried at their fair
value and fluctuation in the fair value of such investments directly affects
our net capital position.

Municipal
Obligations and Industrial Revenue Bonds.  Municipal obligations are securities issued
by states, counties and municipalities or their agencies.  The industrial revenue bonds in our
portfolio are issued by the Massachusetts Health and Educational Facilities
Authority, an independent public
authority created by Massachusetts to assist nonprofit organizations to borrow
funds through tax-exempt bond issuances. Our investment policy requires
that the municipal obligations be rated within the first four rating categories
by Standard & Poors or Moodys. At December 31, 2005, our industrial
revenue and municipal obligations portfolio totaled $3.3 million, all of which
was classified as held-to-maturity.

The
following table sets forth the amortized cost and fair value of our securities
portfolio at the dates indicated.

|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|------------------------------------------------ |  | --------------- | ------- | ---------- | - | -------------- |  | ---------- | ------- | -------------- | - | ---------- |  | - | ------- |  | - | ------- | 
|                                                 |  | At December 31, |        
|                                                 |  |                 |        
|                                                 |  | 2005            |         | 2004       |   | 2003           | 
|                                                 |  |                 |         |            |   |                | 
|                                                 |  | Amortized Cost  |         | Fair Value |   | Amortized Cost |  | Fair Value |         | Amortized Cost |   | Fair Value | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            | 
|                                                 |  | (In thousands)  |        
|Investment securities available-for-sale:        |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|U.S. Government and federal
agency
  obligations |  | $               | 99,957  |            | $ | 98,561         |  | $          | 35,414  |                | $ | 35,084     |  | $ | 56,526  |  | $ | 56,462  | 
|Mortgage-backed
securities                       |  |                 | 117,259 |            |   | 114,702        |  |            | 102,209 |                |   | 101,679    |  |   | 124,660 |  |   | 123,773 | 
|Corporate debt
obligations                       |  |                 | 13,011  |            |   | 12,930         |  |            | 15,094  |                |   | 15,291     |  |   | 15,764  |  |   | 16,337  | 
|Mutual funds                                     |  |                 |        |            |   |               |  |            |        |                |   |           |  |   |        |  |   |        | 
|Equity securities                                |  |                 | 294     |            |   | 272            |  |            | 294     |                |   | 275        |  |   | 394     |  |   | 393     | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|Total
available-for-sale                         |  | $               | 230,521 |            | $ | 226,465        |  | $          | 153,011 |                | $ | 152,329    |  | $ | 197,344 |  | $ | 196,965 | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|Investment securities
held-to-maturity:          |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|Industrial revenue
bonds                         |  | $               | 1,346   |            | $ | 1,346          |  | $          | 1,420   |                | $ | 1,421      |  | $ | 1,498   |  | $ | 1,498   | 
|Municipal bonds                                  |  |                 | 1,979   |            |   | 1,952          |  |            | 1,078   |                |   | 1,077      |  |   | 677     |  |   | 677     | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 
|Total
held-to-maturity                           |  | $               | 3,325   |            | $ | 3,298          |  | $          | 2,498   |                | $ | 2,498      |  | $ | 2,175   |  | $ | 2,175   | 
|                                                 |  |                 |         |            |   |                |  |            |         |                |   |            |  |   |         |  |   |         | 

18

---



Portfolio
Maturities and Yields.The
composition and maturities of the investment securities portfolio at December
31, 2005 are summarized in the following table.  Maturities are based on the final contractual payment dates, and
do not reflect the impact of prepayments or early redemptions that may
occur.

|                                               |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|---------------------------------------------- |  | ---------------------- | ------ | ------------------------------ | ---- | ------------------------------ |  | -------------------------- | ------ | ---------------- | ---- | --------------------------- |  | ---------------- | ------ | --------------------------- | ---- | ---------------- |  | ---------- | ------ | -------------------------- | ---- | - |  | - | ------- |  | - | ------- |  | ---- | -
|                                               |  | One Year or Less       |        | One Year through Five 
  Years |      | Five Years through Ten
  Years |  | More than Ten Years        |        | Total Securities
|                                               |  |                        |        |                                |      |                                |  |                            |        |                 
|                                               |  | Carrying
  Value       |        | Weighted
  Average
  Yield     |      | Carrying
  Value               |  | Weighted
  Average
  Yield |        | Carrying
  Value |      | Weighted
  Average 
  Yield |  | Carrying
  Value |        | Weighted
  Average 
  Yield |      | Carrying
  Value |  | Fair Value |        | Weighted
  Average
  Yield
|                                               |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                           
|                                               |  | (Dollars in thousands)
|Investment
  securities available-for-sale:    |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|U.S. Government and federal
agency obligations |  | $                      | 16,749 |                                | 4.59 | %                              |  | $                          | 60,861 |                  | 4.85 | %                           |  | $                | 20,952 |                             | 5.36 | %                |  | $          |       |                            | 0.00 | % |  | $ | 98,561  |  | $ | 98,561  |  | 4.91 | %
|Mortgage-backed
securities                     |  |                        | 137    |                                | 3.93 |                                |  |                            | 31,151 |                  | 5.05 |                             |  |                  | 23,872 |                             | 5.24 |                  |  |            | 59,542 |                            | 5.45 |   |  |   | 114,702 |  |   | 114,702 |  | 5.29 |  
|Corporate debt
obligations                     |  |                        | 9,552  |                                | 4.83 |                                |  |                            | 1,965  |                  | 4.86 |                             |  |                  | 456    |                             | 5.18 |                  |  |            | 956    |                            | 4.89 |   |  |   | 12,931  |  |   | 12,930  |  | 4.85 |  
|Equity securities                              |  |                        | 272    |                                | 5.48 |                                |  |                            | 272    |                  | 272  |                             |  |                  | 5.48   |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|                                               |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|Total
available-for-sale                       |  |                        | 26,438 |                                | 4.67 | %                              |  |                            | 93,977 |                  | 4.91 | %                           |  |                  | 45,279 |                             | 5.30 | %                |  |            | 60,770 |                            | 5.44 | % |  |   | 226,465 |  |   | 226,465 |  | 5.10 | %
|                                               |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|Investment securities
held-to-maturity:        |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|Industrial revenue
bonds                       |  |                        |       |                                |      |                                |  |                            | 445    |                  | 5.00 | %                           |  |                  |       |                             | 0.00 | %                |  |            | 900    |                            | 4.00 | % |  |   | 1,346   |  |   | 1,346   |  | 4.33 | %
|Municipal bonds                                |  |                        |       |                                |      |                                |  |                            | 966    |                  | 2.62 |                             |  |                  | 1,014  |                             | 3.55 |                  |  |            |       |                            | 0.00 |   |  |   | 1,979   |  |   | 1,952   |  | 3.10 |  
|                                               |  |                        |        |                                |      |                                |  |                            |        |                  |      |                             |  |                  |        |                             |      |                  |  |            |        |                            |      |   |  |   |         |  |   |         |  |      |  
|Total
held-to-maturity                         |  |                        |       |                                |      |                                |  |                            | 1,411  |                  | 3.37 | %                           |  |                  | 1,014  |                             | 3.55 |                  |  |            | 900    |                            | 4.00 | % |  |   | 3,325   |  |   | 3,298   |  | 3.63 | %

19

---



Sources of Funds

General.Deposits have
traditionally been the primary source of funds for use in lending and
investment activities.  We also use
borrowings, primarily Federal Home Loan Bank advances, to supplement cash flow
needs, to lengthen the maturities of liabilities for interest rate risk
management purposes and to manage the cost of funds.  In addition, funds are derived from scheduled loan payments,
investment maturities, loan prepayments, retained earnings and income on other
earning assets.  While scheduled loan
payments and income on earning assets are relatively stable sources of funds,
deposit inflows and outflows can vary widely and are influenced by prevailing
interest rates, market conditions and levels of competition.

Deposits. Our deposits are generated primarily from
residents and businesses within our primary market area.  We offer a selection of deposit accounts,
including demand accounts, NOW accounts, money market accounts, savings
accounts, retirement accounts and certificates of deposit.Deposit
account terms vary, with the principal differences being the minimum balance
required, the amount of time the funds must remain on deposit and the interest
rate.  We currently do not accept
brokered deposits, although we have the authority to do so.

Interest
rates paid, maturity terms, service fees and withdrawal penalties are
established on a periodic basis.
Deposit rates and terms are based primarily on current operating
strategies and market rates, liquidity requirements, rates paid by competitors
and growth goals. Personalized customer service, long-standing relationships
with customers and an active marketing program are relied upon to attract and
retain deposits.

The
flow of deposits is influenced significantly by general economic conditions,
changes in money market and other prevailing interest rates and
competition.  The variety of deposit
accounts offered allows us to be competitive in obtaining funds and responding
to changes in consumer demand.  Based on
experience, we believe that our deposits are relatively stable.  However, the ability to attract and maintain
deposits, and the rates paid on these deposits, have been and will continue to
be significantly affected by market conditions.  At December 31, 2005, $277.6 million, or 42.5% of our deposit
accounts were certificates of deposit, of which $196.1 million had maturities
of one year or less.

The
following table sets forth the distribution of total deposits by account type,
at the dates indicated.

|                                     |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                           |  |   |         |  |  |        |   |      |  
|------------------------------------ |  | ---------------------- | ------- | ------- |  | ------------------------- | - | ------- | - | ------- | - | ------------------------- |  | ------- | ------ | ------- | ---- | ------------------------- |  | - | ------- |  |  | ------ | - | ---- | -
|                                     |  | At December 31,       
|                                     |  |                       
|                                     |  | 2005                   |         | 2004    |  | 2003                     
|                                     |  |                        |         |         |  |                          
|                                     |  | Balance                |         | Percent |  | Weighted
  Average
  Rate |   | Balance |   | Percent |   | Weighted
  Average
  Rate |  | Balance |        | Percent |      | Weighted
  Average
  Rate
|                                     |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                          
|                                     |  | (Dollars in thousands)
|Deposit type:                        |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                           |  |   |         |  |  |        |   |      |  
|Non-interest bearing demand
accounts |  | $                      | 93,301  |         |  | 14.27                     | % |        | % |         | $ | 86,246                    |  |         | 14.06  | %       |     | %                         |  | $ | 73,677  |  |  | 12.39  | % |     | %
|NOW accounts                         |  |                        | 39,922  |         |  | 6.11                      |   | .25     |   |         |   | 39,917                    |  |         | 6.51   |         | 0.25 |                           |  |   | 37,435  |  |  | 6.29   |   | 0.25 |  
|Money market accounts                |  |                        | 154,177 |         |  | 23.59                     |   | 2.93    |   |         |   | 139,754                   |  |         | 22.77  |         | 1.48 |                           |  |   | 141,374 |  |  | 23.77  |   | 1.12 |  
|Regular savings
accounts             |  |                        | 87,253  |         |  | 13.35                     |   | .83     |   |         |   | 94,586                    |  |         | 15.41  |         | 0.65 |                           |  |   | 88,919  |  |  | 14.95  |   | 0.64 |  
|Retirement accounts                  |  |                        | 52,694  |         |  | 8.06                      |   | 3.38    |   |         |   | 48,496                    |  |         | 7.90   |         | 2.71 |                           |  |   | 48,941  |  |  | 8.23   |   | 2.93 |  
|Certificates of
deposit              |  |                        | 226,264 |         |  | 34.62                     |   | 3.59    |   |         |   | 204,673                   |  |         | 33.35  |         | 2.70 |                           |  |   | 204,402 |  |  | 34.37  |   | 2.66 |  
|                                     |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                           |  |   |         |  |  |        |   |      |  
|                                     |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                           |  |   |         |  |  |        |   |      |  
|Total
deposits                       |  | $                      | 653,611 |         |  | 100.00                    | % | 2.33    | % |         | $ | 613,672                   |  |         | 100.00 | %       | 1.57 | %                         |  | $ | 594,748 |  |  | 100.00 | % | 1.54 | %
|                                     |  |                        |         |         |  |                           |   |         |   |         |   |                           |  |         |        |         |      |                           |  |   |         |  |  |        |   |      |  

20

---



As
of December 31, 2005, the aggregate amount of outstanding certificates of
deposit in amounts greater than or equal to $100,000 was approximately $90.6
million. The following table sets forth the maturity of those certificates as
of December 31, 2005.

|                                       |  |                         |   |        |  | 
|-------------------------------------- |  | ----------------------- | - | ------ |  | 
|                                       |  | At 
  December 31, 2005 |  
|                                       |  |                         |  
|                                       |  | (In thousands)          |  
|                                       |  |                         |  
|Three months
  or less                 |  |                         | $ | 19,556 |  | 
|Over three
  months through six months |  |                         |   | 6,935  |  | 
|Over six
  months through one year     |  |                         |   | 37,666 |  | 
|Over one
  year to three years         |  |                         |   | 18,101 |  | 
|Over three years                       |  |                         |   | 8,339  |  | 
|                                       |  |                         |   |        |  | 
|Total                                  |  |                         | $ | 90,597 |  | 
|                                       |  |                         |   |        |  | 

Borrowings. Our borrowings
consist of advances from the
Federal Home Loan Bank of Boston and collateralized repurchase agreements with
securities brokers and our customers. As of December 31, 2005, we had Federal
Home Loan Bank advances in the amount of $101.9 million, which represented
13.24% of total liabilities with a weighted average maturity of 4.5 years and a
weighted average rate of 3.98%. As a member of the Federal Home Loan Bank of Boston, we can currently borrow up to
approximately $209 million from the Federal Home Loan Bank.

The
following table sets forth information concerning balances and interest rates
on our Federal Home Loan Bank advances at and for the periods shown:

|                          |  |        |         |                         |      |        |  |                         |        |        |      |                          |  |   |        |  |      |   | 
|------------------------- |  | ------ | ------- | ----------------------- | ---- | ------ |  | ----------------------- | ------ | ------ | ---- | ------------------------ |  | - | ------ |  | ---- | - | 
|                          |  | 2005   |         | 2004                    |      | 2003   | 
|                          |  |        |         |                         |      |        | 
|                          |  |        |         |                         |      |        | 
|                          |  | Amount |         | Weighted
  Average Rate |      | Amount |  | Weighted
  Average Rate |        | Amount |      | Weighted 
  Average Rate | 
|                          |  |        |         |                         |      |        |  |                         |        |        |      |                          | 
|                          |  |        |         |                         |      |        |  |                         |        |        |      |                          |  |   |        |  |      |   | 
|Within 1
  year           |  | $      | 13,799  |                         | 3.40 | %      |  | $                       | 16,000 |        | 2.35 | %                        |  | $ | 17,000 |  | 1.25 | % | 
|Over 1 year
  to 2 years  |  |        | 10,000  |                         | 4.37 |        |  |                         | 12,000 |        | 3.23 |                          |  |   |       |  |      |   | 
|Over 2 years
  to 3 years |  |        | 19,393  |                         | 4.95 |        |  |                         |       |        |      |                          |  |   |       |  |      |   | 
|Over 3 years
  to 4 years |  |        |        |                         |      |        |  |                         |       |        |      |                          |  |   |       |  |      |   | 
|Over 4 years
  to 5 years |  |        | 20,318  |                         | 3.19 |        |  |                         | 22,247 |        | 4.87 |                          |  |   | 24,978 |  | 4.81 |   | 
|Over 5 years              |  |        | 38,370  |                         | 4.02 |        |  |                         | 36,447 |        | 3.32 |                          |  |   | 34,842 |  | 3.37 |   | 
|                          |  |        |         |                         |      |        |  |                         |        |        |      |                          |  |   |        |  |      |   | 
|                          |  | $      | 101,880 |                         | 3.98 | %      |  | $                       | 86,694 |        | 3.53 | %                        |  | $ | 76,820 |  | 3.37 | % | 
|                          |  |        |         |                         |      |        |  |                         |        |        |      |                          |  |   |        |  |      |   | 

Securities
sold under agreements to repurchase are funds borrowed from customers on an
overnight basis that are secured by U.S. Government agency obligations. The
amount of securities collateralizing the agreements to repurchase remains in
securities and the obligation to repurchase securities sold is reflected as a
liability on our consolidated balance sheets. The following table summarizes
our repurchase agreements at and for the periods shown:

|                                                |  |                                        |       |      |   |       |   |   |       |  
|----------------------------------------------- |  | -------------------------------------- | ----- | ---- | - | ----- | - | - | ----- | -
|                                                |  | At or For the Years Ended December
31, |      
|                                                |  |                                        |      
|                                                |  | 2005                                   |       | 2004 |   | 2003  |  
|                                                |  |                                        |       |      |   |       |  
|                                                |  | (Dollars in thousands)                 |      
|                                                |  |                                        |       |      |   |       |   |   |       |  
|Balance at
  end of period                      |  | $                                      | 8,434 |      | $ | 4,317 |   | $ | 4,218 |  
|Average
  balance during year                   |  |                                        | 5,572 |      |   | 4,064 |   |   | 3,744 |  
|Maximum
  outstanding at any month end          |  |                                        | 8,675 |      |   | 6,015 |   |   | 4,942 |  
|Weighted
  average interest rate at end of year |  |                                        | 2.12  | %    |   | 1.19  | % |   | 0.90  | %
|Average
  interest rate during year             |  |                                        | 1.62  | %    |   | 0.96  | % |   | 0.88  | %

21

---



Subsidiary Activities

UCB
Securities, Inc. is a wholly owned subsidiary of United Bank established in
1998 as a Massachusetts security corporation for the purpose of buying, selling
and holding investment securities on its own behalf. The income earned on UCB
Securities, Inc.s investment securities is subject to a significantly lower
rate of state tax than that assessed on income earned on investment securities
maintained at United Bank. At December 31, 2005, UCB Securities, Inc. had total
assets of $58.6 million, all of which were qualifying securities under the
applicable regulations.

United Financial Services Group

In
2002, United Bank, through its division, United Financial Services Group,
formed an alliance with Baystate Financial Services, LLC and its registered
broker-dealer, New England Securities. Together they offer United Bank
customers a complete range of non-deposit investment products and financial
planning services, including mutual funds, debt, equity and government
securities, insurance products, fixed and variable annuities, financial
planning for individual and commercial customers and estate planning services.
United Bank receives a portion of the commissions generated by United Financial
Services from sales to customers.

Expense and Tax Allocation

United
Bank has entered into an agreement with United Financial Bancorp, Inc. and
United Mutual Holding Company to provide them with certain administrative
support services for compensation not less than the fair value of the services
provided. In addition, United Bank and United Financial Bancorp, Inc. have
entered into an agreement to establish a method for allocating and for
reimbursing the payment of their consolidated tax liability.

Personnel

As
of December 31, 2005, we had 149 full-time employees and 33 part-time
employees. Our employees are not represented by any collective bargaining
group. Management believes that we have good relations with our employees.

SUPERVISION AND REGULATION

General

United
Bank is examined and supervised by the Office of Thrift Supervision and is
subject to examination by the Federal Deposit Insurance Corporation. This
regulation and supervision establishes a comprehensive framework of activities
in which an institution may engage and is intended primarily for the protection
of the Federal Deposit Insurance Corporations deposit insurance funds and
depositors. Under this system of federal regulation, financial institutions are
periodically examined to ensure that they satisfy applicable standards with
respect to their capital adequacy, assets, management, earnings, liquidity and
sensitivity to market interest rates. Following completion of its examination,
the federal agency critiques the institutions operations and assigns its
rating (known as an institutions CAMELS rating). Under federal law, an
institution may not disclose its CAMELS rating to the public. United Bank also
is a member of and owns stock in the Federal Home Loan Bank of Boston, which is
one of the twelve regional banks in the Federal Home Loan Bank System. United
Bank also is regulated to a lesser extent by the Board of Governors of the
Federal Reserve System, governing reserves to be maintained against deposits
and other matters. The Office of Thrift Supervision examines United Bank and
prepares reports for the consideration of its Board of Directors on any
operating deficiencies. United Banks relationship with its depositors and
borrowers also is regulated to a great extent by federal law and, to a much
lesser extent, state law, especially in matters concerning the ownership of
deposit accounts and the form and content of United Banks mortgage documents.

Any
change in these laws or regulations, whether by the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision or Congress, could have a
material adverse impact on United Financial Bancorp, Inc. and United Bank and
their operations.

22

---



Federal Banking Regulation

Business
Activities. A federal savings bank derives its
lending and investment powers from the Home Owners Loan Act, as amended, and
the regulations of the Office of Thrift Supervision. Under these laws and
regulations, United Bank may invest in mortgage loans secured by residential
real estate without limitations as a percentage of assets and non-residential
real estate loans which may not in the aggregate exceed 400% of capital,
commercial business loans up to 20% of assets in the aggregate and consumer
loans up to 35% of assets in the aggregate, certain types of debt securities
and certain other assets. United Bank also may establish subsidiaries that may
engage in activities not otherwise permissible for United Bank, including real
estate investment and securities and insurance brokerage.

Capital
Requirements. Office of Thrift Supervision
regulations require savings banks to meet three minimum capital standards: a 4%
core capital ratio, a 4% leverage ratio (3% for savings banks receiving the
highest rating on the CAMELS rating system) and an 8% risk-based capital ratio.

The
risk-based capital standard for savings banks requires the maintenance of 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, are multiplied by a risk-weight factor of 0% to 100%, assigned by the
Office of Thrift Supervision, based on the risks believed inherent in the type
of asset. Core 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 46% of net unrealized gains on
available-for-sale equity securities with readily determinable fair values.
Overall, the amount of supplementary capital included as part of total capital
cannot exceed 100% of core capital. Additionally, a savings bank that retains
credit risk in connection with an asset sale may be required to maintain
additional regulatory capital because of the recourse back to the savings bank.
United Bank does not typically engage in asset sales.

At
December 31, 2005, United Banks capital exceeded all applicable requirements.

Loans-to-One
Borrower. Generally, a federal savings bank may
not make a loan or extend credit to a single or related group of borrowers in
excess of 15% of unimpaired capital and surplus. In the case of United Bank and
in connection with its charter conversion to a federally chartered savings
bank, the Office of Thrift Supervision has permitted United Bank to maintain a
loans-to-one borrower limit of 20% of unimpaired capital and surplus, subject
to certain conditions. An additional amount may be loaned, equal to 10% of
unimpaired capital and surplus, if the loan is secured by readily marketable
collateral, which generally does not include real estate. As of December 31,
2005, United Bank was in compliance with the loans-to-one borrower limitations.

Qualified
Thrift Lender Test. As a federal savings bank,
United Bank must satisfy the qualified thrift lender, or QTL, test. Under the
QTL test, United Bank must maintain at least 65% of its portfolio assets in
qualified thrift investments in at least nine of the most recent 12-month
period. Portfolio assets generally means total assets of a savings
institution, less the sum of specified liquid assets up to 20% of total assets,
goodwill and other intangible assets, and the value of property used in the
conduct of the savings banks business.

Qualified
thrift investments include various types of loans made for residential and
housing purposes, investments related to such purposes, including certain
mortgage-backed and related securities, and loans for personal, family,
household and certain other purposes up to a limit of 20% of portfolio assets.
Qualified thrift investments also include 100% of an institutions credit
card loans, education loans and small business loans. United Bank also may
satisfy the QTL test by qualifying as a domestic building and loan
association as defined in the Internal Revenue Code.

A
savings bank that fails the qualified thrift lender test must either convert to
a bank charter or operate under specified restrictions. At December 31, 2005,
United Bank satisfied this test.

23

---



Capital
Distributions. Office of Thrift Supervision
regulations govern capital distributions by a federal savings bank, which
include cash dividends, stock repurchases and other transactions charged to the
capital account. A savings banks must file an application for approval of a
capital distribution if:

|  |                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the total capital
  distributions for the applicable calendar year exceed the sum of the
  associations net income for that year to date plus the associations
  retained net income for the preceding two years;
|  |                                                                                                                                                                                                                    
| | the association would not
  be at least adequately capitalized following the distribution;                                                                                                                         
|  |                                                                                                                                                                                                                    
| | the distribution would
  violate any applicable statute, regulation, agreement or Office of Thrift
  Supervision-imposed condition; or                                                                             
|  |                                                                                                                                                                                                                    
| | the association is not
  eligible for expedited treatment of its filings.                                                                                                                                          

Even
if an application is not otherwise required, every savings bank that is a
subsidiary of a holding company must still file a notice with the Office of
Thrift Supervision at least 30 days before the Board of Directors declares a
dividend or approves a capital distribution.

The
Office of Thrift Supervision may disapprove a notice or application if:

|  |                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------
| | the association would be
  undercapitalized following the distribution;                                    
|  |                                                                                                            
| | the proposed capital
  distribution raises safety and soundness concerns; or                               
|  |                                                                                                            
| | the capital distribution
  would violate a prohibition contained in any statute, regulation or
  agreement.

In
addition, the Federal Deposit Insurance Act provides that an insured depository
institution shall not make any capital distribution, if after making such
distribution the institution would be undercapitalized.

Liquidity.
A federal savings bank is required to maintain a sufficient amount of liquid
assets to ensure its safe and sound operation.

Community
Reinvestment Act and Fair Lending Laws. All
savings banks have a responsibility under the Community Reinvestment Act and
related regulations of the Office of Thrift Supervision to help meet the credit
needs of their communities, including low- and moderate-income neighborhoods.
In connection with its examination of a federal savings bank, the Office of
Thrift Supervision is required to assess the associations record of compliance
with the Community Reinvestment Act. In addition, the Equal Credit Opportunity
Act and the Fair Housing Act prohibit lenders from discriminating in their
lending practices on the basis of characteristics specified in those statutes.
An associations failure to comply with the provisions of the Community
Reinvestment Act could, at a minimum, result in denial of certain corporate
applications such as branches or mergers, or in restrictions on its activities.
The failure to comply with the Equal Credit Opportunity Act and the Fair
Housing Act could result in enforcement actions by the Office of Thrift
Supervision, as well as other federal regulatory agencies and the Department of
Justice. United Bank received a satisfactory Community Reinvestment Act
rating in its most recent federal examination

Privacy
Standards. Effective July 2001, financial
institutions, including United Bank, became subject to FDIC regulations
implementing the privacy protection provisions of the Gramm-Leach-Bliley Act.
These regulations require United Bank to disclose its privacy policy, including
identifying with whom it shares non-public personnel information to customers
at the time of establishing the customer relationship and annually thereafter.

The
regulations also require United Bank to provide its customers with initial and
annual notices that accurately reflect its privacy policies and practices. In
addition, United Bank is required to provide its customers with the ability to
opt-out of having United Bank share their non-public personal information
with unaffiliated

24

---



third parties
before it can disclose such information, subject to certain exceptions. The
implementation of these regulations did not have a material adverse effect on
United Bank. The Gramm-Leach-Bliley Act also provides for the ability of each
state to enact legislation that is more protective of consumers personal
information. We cannot predict whether Massachusetts may enact such legislation
or what impact, if any, it would have if enacted.

In
February 2001, the FDIC and other federal banking agencies adopted guidelines
establishing standards for safeguarding customer information to implement
certain provisions of the Gramm-Leach-Bliley Act. The guidelines describe the
agencies expectations for the creation, implementation and maintenance of an
information security program, which would include administrative, technical and
physical safeguards appropriate to the size and complexity of the institution
and the nature and scope of its activities. The standards set forth in the
guidelines are intended to insure the security and confidentiality of customer
records and information, protect against any anticipated threats or hazards to
the security or integrity of such records and protect against unauthorized
access to or use of such records or information that could result in
substantial harm or inconvenience to any customer. United Bank has implemented
these guidelines and such implementation did not have a material adverse effect
on our operations.

Transactions
with Related Parties. A federal savings banks
authority to engage in transactions with its affiliates is limited by Office of
Thrift Supervision regulations and by Sections 23A and 23B of the Federal
Reserve Act and its implementing Regulation W. An affiliate is a company that
controls, is controlled by, or is under common control with an insured
depository institution such as United Bank. United Financial Bancorp, Inc. is
an affiliate of United Bank. In general, loan transactions between an insured
depository institution and its affiliate are subject to certain quantitative
and collateral requirements. In this regard, transactions between an insured
depository institution and its affiliate are limited to 10% of the
institutions unimpaired capital and unimpaired surplus for transactions with
any one affiliate and 20% of unimpaired capital and unimpaired surplus for
transactions in the aggregate with all affiliates. Collateral in specified
amounts ranging from 100% to 130% of the amount of the transaction must usually
be provided by affiliates in order to receive loans from the association. In
addition, Office of Thrift Supervision regulations prohibit a savings bank from
lending to any of its affiliates that are engaged in activities that are not
permissible for bank holding companies and from purchasing the securities of
any affiliate, other than a subsidiary. Finally, transactions with affiliates
must be consistent with safe and sound banking practices, not involve
low-quality assets and be on terms that are as favorable to the institution as
comparable transactions with non-affiliates. The Office of Thrift Supervision
requires savings banks to maintain detailed records of all transactions with
affiliates.

United
Banks authority to extend credit to its directors, executive officers and 10%
shareholders, as well as to entities controlled by such persons, is currently
governed by the requirements of Sections 22(g) and 22(h) of the FRA and
Regulation O of the Federal Reserve Board. Among other things, these provisions
require that extensions of credit to insiders (i) be made on terms that are
substantially the same as, and follow credit underwriting procedures that are
not less stringent than, those prevailing for comparable transactions with
unaffiliated persons and that do not involve more than the normal risk of
repayment or present other unfavorable features, and (ii) not exceed certain
limitations on the amount of credit extended to such persons, individually and
in the aggregate, which limits are based, in part, on the amount of United
Banks capital. In addition, extensions of credit in excess of certain limits
must be approved by United Banks Board of Directors.

Enforcement.
The Office of Thrift Supervision has primary enforcement responsibility over
federal savings institutions and has the authority to bring enforcement action
against all institution-affiliated parties, including stockholders, and
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 by the Office of Thrift Supervision may range from
the issuance of a capital directive or cease and desist order, to removal of
officers and/or directors of the institution and the appointment of a receiver
or conservator. Civil penalties cover a wide range of violations and actions, and
range up to $25,000 per day, unless a finding of reckless disregard is made, in
which case penalties may be as high as $1 million per day. The Federal Deposit
Insurance Corporation also has the authority to terminate deposit insurance or
to recommend to the Director of the Office of Thrift Supervision that
enforcement action 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 action under specified circumstances.

25

---



Standards
for Safety and Soundness. Federal law requires
each federal banking agency to prescribe certain standards for all insured
depository institutions. These standards relate to, among other things,
internal controls, information systems and audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, compensation,
and other operational and managerial standards as the agency deems appropriate.
The federal banking agencies adopted Interagency Guidelines Prescribing
Standards for Safety and Soundness to implement the safety and soundness
standards required under federal law. 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. The guidelines address internal controls and information systems,
internal audit systems, credit underwriting, loan documentation, interest rate
risk exposure, asset growth, compensation, fees and benefits. If the
appropriate federal banking agency determines that an institution fails to meet
any standard prescribed by the guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve compliance
with the standard. If an institution fails to meet these standards, the
appropriate federal banking agency may require the institution to submit a
compliance plan.

Prompt
Corrective Action Regulations. Under the prompt
corrective action regulations, the Office of Thrift Supervision is required and
authorized to take supervisory actions against undercapitalized savings banks.
For this purpose, a savings bank is placed in one of the following five
categories based on the associations capital:

|  |                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------
| | well-capitalized (at least
  5% leverage capital, 6% Tier 1 risk-based capital and 10% total risk-based
  capital);                 
|  |                                                                                                                                     
| | adequately capitalized (at
  least 4% leverage capital, 4% Tier 1 risk-based capital and 8% total
  risk-based capital);            
|  |                                                                                                                                     
| | undercapitalized (less
  than 8% total risk-based capital, 4% Tier 1 risk-based capital or 3% leverage
  capital);                  
|  |                                                                                                                                     
| | significantly
  undercapitalized (less than 6% total risk-based capital, 3% Tier 1 risk-based
  capital or 3% leverage capital); and
|  |                                                                                                                                     
| | critically
  undercapitalized (less than 2% tangible capital).                                                                      

Generally,
the banking regulator is required to appoint a receiver or conservator for an
association that is critically undercapitalized within specific time frames.
The regulations also provide that a capital restoration plan must be filed with
the Office of Thrift Supervision within 45 days of the date an association
receives notice that it is undercapitalized, significantly undercapitalized
or critically undercapitalized. The criteria for an acceptable capital
restoration plan include, among other things, the establishment of the
methodology and assumptions for attaining adequately capitalized status on an
annual basis, procedures for ensuring compliance with restrictions imposed by
applicable federal regulations, the identification of the types and levels of
activities the savings bank will engage in while the capital restoration plan
is in effect, and assurances that the capital restoration plan will not
appreciably increase the current risk profile of the savings bank. Any holding
company for the savings bank required to submit a capital restoration plan must
guarantee the lesser of: an amount equal to 5% of savings banks assets at the
time it was notified or deemed to be under capitalized by the Office of Thrift
Supervision, or the amount necessary to restore the savings bank to adequately
capitalized status. This guarantee remains in place until the Office of Thrift
Supervision notifies the savings bank that it has maintained adequately
capitalized status for each of four consecutive calendar quarters, and the
Office of Thrift Supervision has the authority to requirement payment and
collect payment under the guarantee. Failure by a holding company to provide
the required guarantee will result in certain operating restrictions on the
savings bank, such as restrictions on the ability to declare and pay dividends,
pay executive compensation and management fees, and increase assets or expand
operations. The Office of Thrift Supervision may also take any one of a number
of discretionary supervisory actions against undercapitalized associations,
including the issuance of a capital directive and the replacement of senior
executive officers and directors.

At
December 31, 2005, United Bank met the criteria for being considered
well-capitalized.

26

---



Insurance
of Deposit Accounts. Deposit accounts in United Bank are insured by the Federal
Deposit Insurance Corporation, generally up to a maximum of $100,000 per separately
insured depositor. United Banks deposits therefore are subject to Federal
Deposit Insurance Corporation deposit insurance assessments. The Federal
Deposit Insurance Corporation has adopted a risk-based system for determining
deposit insurance assessments. The Federal Deposit Insurance Corporation is
authorized to raise the assessment rates as necessary to maintain the required
ratio of reserves to insured deposits of 1.25%. In addition, all Federal
Deposit Insurance Corporation-insured institutions must pay assessments to the
Federal Deposit Insurance Corporation at an annual rate of approximately .02%
of insured deposits to fund interest payments on bonds maturing in 2017 issued
by a federal agency to recapitalize the predecessor to the Savings Association
Insurance Fund.

On
February 15, 2006, federal legislation to reform federal deposit insurance was
enacted. This new legislation requires, among other things, the merger of the
Savings Association Insurance Fund and the Bank Insurance Fund into a unified
insurance deposit fund and an increase in the amount of federal deposit
insurance coverage from $100,000 to $130,000 (with a cost of living adjustment
to become effective in five years). The Act also requires the reserve ratio to
be modified to provide for a range between 1.15% and 1.40% of estimated insured
deposits. The new legislation requires the FDIC to issue regulations
implementing the law. The changes required by the law will not become effective
until final regulations have been issued, which must be no later than 270 days
from the date of the enactment of the legislation.

Prohibitions
Against Tying Arrangements. Federal savings banks
are prohibited, subject to some exceptions, from extending credit to or
offering any other service, or fixing or varying the consideration for such
extension of credit or service, on the condition that the customer obtain some
additional service from the institution or its affiliates or not obtain
services of a competitor of the institution.

Federal
Home Loan Bank System. United Bank is a member of
the Federal Home Loan Bank System, which consists of 12 regional Federal Home
Loan Banks. The Federal Home Loan Bank System provides a central credit
facility primarily for member institutions. As a member of the Federal Home
Loan Bank of Boston (FHLBB), United Bank is required to invest in stock of the FHLBB, until April 2004, in an
amount which was
the greater of .3% of its total assets, 1% of its outstanding home loans or 5%
of its outstanding advances from the FHLBB. In April 2004, the FHLBB amended
its capital structure at which time the Banks FHLBB stock was converted to
Class B stock. Such stock is redeemable at par value five years after filing
for a redemption or upon termination of membership. The FHLBB may, but is not
obligated to, repurchase Class B stock prior to expiration of the five
year redemption notice. Under the new capital structure, the Banks stock
investment requirement is an amount equal to the sum of .35% of certain specified
assets (such assets totaled $296,332 at December 31, 2005) plus 4.5% of
the Banks advances and certain other specified items.

Federal Reserve System

The
Federal Reserve Board regulations require savings banks to maintain
noninterest-earning reserves against their transaction accounts, such as
negotiable order of withdrawal and regular checking accounts. At December 31,
2005, United Bank was in compliance with these reserve requirements.

Internet Banking

Technological
developments are significantly altering the ways in which most companies,
including financial
institutions, conduct their business. The growth of the Internet is prompting
banks to reconsider business strategies and adopt alternative distribution and
marketing systems. The federal bank regulatory agencies have conducted seminars
and published materials targeted to various aspects of internet banking, and
have indicated their intention to reevaluate their regulations to ensure that
they encourage banks efficiency and competitiveness consistent with safe and
sound banking practices. We cannot assure you that the bank regulatory agencies
will adopt new regulations that will not materially affect any of our internet
operations or restrict any such further operations.

The USA PATRIOT Act

The
USA PATRIOT Act gives the federal government new powers to address terrorist
threats through enhanced domestic security measures, expanded surveillance
powers, increased information sharing and broadened

27

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anti-money
laundering requirements. Certain provisions of the Act impose affirmative
obligations on a broad range of financial institutions, including savings
banks, like United Bank. These obligations include enhanced anti-money
laundering programs, customer identification programs and regulations relating
to private banking accounts or correspondence accounts in the United States for
non-United States persons or their representatives (including foreign
individuals visiting the United States). The Act also requires the federal
banking regulators to take into consideration the effectiveness of controls
designed to combat money-laundering activities in determining whether to
approve a merger or other acquisition application of an FDIC-insured
institution. As such, if the Company or United Bank were to engage in a merger
or other acquisition, the effectiveness of its anti-money-laundering controls
would be considered as part of the application process. United Bank has
established policies, procedures and systems to comply with the applicable
requirements of the law.

The
federal banking agencies have begun to implement regulations pursuant to the
USA PATRIOT Act. These regulations would require financial institutions to
adopt the policies and procedures contemplated by the USA PATRIOT Act.

Sarbanes-Oxley Act of 2002

The
Sarbanes-Oxley Act of 2002 (the Act), which implemented legislative reforms
intended to address corporate and accounting fraud, was enacted in July 2002.
In addition to the establishment of a new accounting oversight board that
enforces auditing, quality control and independence standards and is funded by
fees from all publicly traded companies, the Act places certain restrictions on
the scope of services that may be provided by accounting firms to their public
company audit clients. Any non-audit services being provided to a public
company audit client will require preapproval by the companys audit committee.
In addition, the Act makes certain changes to the requirements for partner
rotation after a period of time. The 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. In addition, under the Act, counsel will be required
to report evidence of a material violation of the securities laws or a breach
of fiduciary duty by a company to its chief executive officer or its chief
legal officer, and, if such officer does not appropriately respond, to report
such evidence to the audit committee or other similar committee of the Board of
Directors or the board itself.

Under
the Act, longer prison terms will apply to corporate executives who violate
federal securities laws; the period during which certain types of suits can be
brought against a company or its officers is extended; and bonuses issued to
top executives prior to 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. In
addition, a provision directs that civil penalties levied by the Securities and
Exchange Commission as a result of any judicial or administrative action under
the Act be deposited to a fund for the benefit of harmed investors. The Federal
Accounts for Investor Restitution provision also requires the Securities and
Exchange Commission to develop methods of improving collection rates. The
legislation accelerates the time frame for disclosures by public companies, as
they must immediately disclose any material changes in their financial
condition or operations. Directors and executive officers must also provide
information for most changes in ownership in a companys securities within two
business days of the change.

The
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. Audit Committee members must be
independent and are absolutely barred from accepting consulting, advisory or
other compensatory fees from the issuer. In addition, 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.
Under the Act, a companys registered public accounting firm is prohibited from
performing statutorily mandated audit services for a company if such companys
chief executive officer, chief financial officer, comptroller, chief accounting
officer or any person serving in equivalent positions had been employed by such
firm and participated in the audit of such company during the one-year period
preceding the audit initiation date. The Act also prohibits any officer or
director of a company or any other person acting under their direction from
taking any action to fraudulently influence, coerce, manipulate or mislead any
independent accountant engaged in the audit of the

28

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companys
financial statements for the purpose of rendering the financial statements
materially misleading. The Act also requires the Securities and Exchange
Commission to prescribe rules requiring inclusion of any internal control
report and assessment by management in the annual report to shareholders. The
Act requires the companys registered public accounting firm that issues the
audit report to attest to and report on managements assessment of the
companys internal controls.

Holding Company Regulation

General.
United Mutual Holding Company and United Financial Bancorp, Inc. are
non-diversified savings and loan holding companies within the meaning of the
Home Owners Loan Act. As such, United Mutual Holding Company and United
Financial Bancorp, Inc. are registered with the Office of Thrift Supervision
and subject to Office of Thrift Supervision regulations, examinations,
supervision and reporting requirements. In addition, the Office of Thrift
Supervision has enforcement authority over United Financial Bancorp, Inc. and
United Mutual Holding Company, and their 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 the subsidiary savings
institution. As federal corporations, United Financial Bancorp, Inc. and United
Mutual Holding Company are generally not subject to state business organization
laws.

Permitted
Activities. Pursuant to Section 10(o) of the Home
Owners Loan Act and Office of Thrift Supervision regulations and policy, a
mutual holding company and a federally chartered mid-tier holding company such
as United Financial Bancorp, Inc. may engage in the following activities: (i)
investing in the stock of a savings bank; (ii) acquiring a mutual association
through the merger of such association into a savings bank subsidiary of such
holding company or an interim savings bank subsidiary of such holding company;
(iii) merging with or acquiring another holding company, one of whose
subsidiaries is a savings bank; (iv) investing in a corporation, the capital
stock of which is available for purchase by a savings bank under federal law or
under the law of any state where the subsidiary savings bank or banks share
their home offices; (v) furnishing or performing management services for a
savings bank subsidiary of such company; (vi) holding, managing or liquidating
assets owned or acquired from a savings subsidiary of such company; (vii)
holding or managing properties used or occupied by a savings bank subsidiary of
such company; (viii) acting as trustee under deeds of trust; (ix) any other
activity (A) that the Federal Reserve Board, by regulation, has determined to
be permissible for bank holding companies under Section 4(c) of the Bank
Holding Company Act of 1956, unless the Director, by regulation, prohibits or
limits any such activity for savings and loan holding companies; or (B) in
which multiple savings and loan holding companies were authorized (by
regulation) to directly engage on March 5, 1987; (x) any activity permissible
for financial holding companies under Section 4(k) of the Bank Holding Company
Act, including securities and insurance underwriting; and (xi) purchasing,
holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such savings and loan holding company
is approved by the Director. If a mutual holding company acquires or merges
with another holding company, the holding company acquired or the holding
company resulting from such merger or acquisition may only invest in assets and
engage in activities listed in (i) through (xi) above, and has a period of two
years to cease any nonconforming activities and divest any nonconforming
investments.

The
Home Owners Loan Act prohibits a savings and loan holding company, including
United Financial Bancorp, Inc. and United Mutual Holding Company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
another savings institution or holding company thereof, without prior written
approval of the Office of Thrift Supervision. It also prohibits the acquisition
or retention of, with certain exceptions, more than 5% of a nonsubsidiary
company engaged in activities other than those permitted by the Home Owners
Loan Act, or acquiring or retaining control of an institution that is not
federally insured. In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision must consider the
financial and managerial resources, future prospects of the company and
institution involved, the effect of the acquisition on the risk to the federal
deposit insurance fund, 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, subject to two exceptions: (i) the
approval of interstate supervisory acquisitions by savings and loan holding
companies; and (ii) the acquisition of a savings institution in another state
if the laws of the state of the target savings institution

29

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specifically
permit such acquisitions. The states vary in the extent to which they permit
interstate savings and loan holding company acquisitions.

Waivers
of Dividends by United Mutual Holding Company.
Office of Thrift Supervision regulations require United Mutual Holding Company
to notify the Office of Thrift Supervision of any proposed waiver of its
receipt of dividends from United Financial Bancorp, Inc. 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 subsidiary savings
association, and (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. Under Office of Thrift Supervision
regulations, our public stockholders would not be diluted because of any
dividends waived by United Mutual Holding Company (and waived dividends would
not be considered in determining an appropriate exchange ratio) in the event
United Mutual Holding Company converts to stock form.

Conversion
of United
Mutual Holding Company to Stock Form.
Office of Thrift Supervision regulations permit United Mutual Holding Company
to convert from the mutual form of organization to the capital stock form of
organization (a Conversion Transaction). 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 stock holding company would be formed as the
successor to United Financial Bancorp, Inc. (the New Holding Company), United
Mutual Holding Companys corporate existence would end, and certain depositors
of United Bank 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 United Mutual Holding Company (Minority
Stockholders) would be automatically converted into a number of shares of
common stock of the New Holding Company determined pursuant to an exchange
ratio that ensures that Minority Stockholders own the same percentage of common
stock in the New Holding Company as they owned in United Financial Bancorp,
Inc. immediately prior to the Conversion Transaction. Under Office of Thrift
Supervision regulations, Minority Stockholders would not be diluted because of
any dividends waived by United Mutual Holding Company (and waived dividends
would not be considered in determining an appropriate exchange ratio), in the
event United Mutual Holding Company converts to stock form. The total number of
shares held by Minority Stockholders after a Conversion Transaction also would
be increased by any purchases by Minority Stockholders in the offering
conducted as part of the Conversion Transaction.

Any
Conversion Transaction would require the approval of a majority of the
outstanding shares of United Financial Bancorp, Inc. common stock held by
Minority Stockholders and approval of a majority of the votes held by
depositors of United Bank, with depositors entitled to cast one vote per $100
on deposit at United Bank (up to a maximum of 1,000 votes).

Federal Securities Laws

United
Financial Bancorp, Inc. common stock is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934. United Financial
Bancorp, Inc. is 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 shares of common stock issued
in the offering does not cover the resale of those shares. Shares of common
stock purchased by persons who are not affiliates of United Financial Bancorp,
Inc. may be resold without registration. Shares purchased by an affiliate of
United Financial Bancorp, Inc. will be subject to the resale restrictions of
Rule 144 under the Securities Act of 1933. If United Financial Bancorp, Inc.
meets the current public information requirements of Rule 144 under the
Securities Act of 1933, each affiliate of United Financial Bancorp, Inc. 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 the outstanding
shares of United Financial Bancorp, Inc., or the average weekly volume of
trading in the shares during the preceding four calendar weeks. In the future,
United Financial Bancorp, Inc. may permit affiliates to have their shares
registered for sale under the Securities Act of 1933.

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TAXATION

Federal Taxation

General. United
Financial Bancorp, Inc. and United Bank are subject to federal income taxation
in the same general manner as other corporations, with some exceptions
discussed below. Neither United Financial Bancorp, Inc.s nor United Banks
federal tax returns are currently under audit, and neither entity has been
audited during the past five years. The following discussion of federal
taxation is intended only to summarize certain pertinent federal income tax
matters and is not a comprehensive description of the tax rules applicable to
United Financial Bancorp, Inc. or United Bank.

Method
of Accounting.For federal income tax purposes, United
Financial Bancorp, Inc. currently reports its income and expenses on the
accrual method of accounting and uses a tax year ending December 31 for filing
its federal and state income tax returns.

Bad
Debt Reserves.Historically, United Bank has been
subject to special provisions in the tax law regarding allowable tax bad debt
deductions and related reserves. Tax law changes were enacted in 1996, pursuant
to the Small Business Protection Act of 1996 (the 1996 Act), that eliminated
the use of the percentage of taxable income method for tax years after 1995 and
required recapture into taxable income over a six year period all bad debt
reserves accumulated after 1988. United Bank recaptured its reserves
accumulated after 1988 over the six-year period ended December 31, 2001.

Currently,
the United Financial Bancorp, Inc. consolidated group uses the specific charge
off method to account for bad debt deductions for income tax purposes.

Taxable
Distributions and Recapture. Prior to the 1996 Act, bad
debt reserves created prior to November 1, 1988 were subject to recapture into
taxable income should United Bank fail to meet certain thrift asset and
definitional tests.

At
December 31, 2005, our total federal pre-base year reserve was approximately
$6.3 million. However, under current law, pre-base year reserves remain subject
to recapture should United Bank make certain non-dividend distributions,
repurchase any of its stock, pay dividends in excess of tax earnings and
profits, or cease to maintain a bank charter.

Alternative
Minimum Tax. The Internal Revenue Code of 1986, as
amended (the Code) imposes an alternative minimum tax (AMT) at a rate of
20% on a base of regular taxable income plus certain tax preferences
(alternative minimum taxable income or AMTI). The AMT is payable to the
extent such AMTI is in excess of an exemption amount and the AMT exceeds the
regular income tax. Net operating losses can offset no more than 90% of AMTI.
Certain payments of alternative minimum tax may be used as credits against
regular tax liabilities in future years. United Financial Bancorp, Inc. and
United Bank have not been subject to the alternative minimum tax and have no
such amounts available as credits for carryover.

Net
Operating Loss Carryovers. A financial institution
may carry back net operating losses to the preceding two taxable years and
forward to the succeeding 20 taxable years. At December 31, 2005, United Bank
had no net operating loss carryforwards for federal income tax purposes.

Corporate
Dividends-Received Deduction. United Financial Bancorp,
Inc. may exclude from its federal taxable income 100% of dividends received
from United Bank as a wholly owned subsidiary. The corporate dividends-received
deduction is 80% when the dividend is received from a corporation having at
least 20% of its stock owned by the recipient corporation. A 70%
dividends-received deduction is available for dividends received from
corporations owning less than 20% by the recipient corporation.

State Taxation

For
Massachusetts income tax purposes, a consolidated tax return cannot be filed.
Instead, United Financial Bancorp, Inc., United Bank, and each of their
subsidiaries file separate annual income tax returns. United

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Banks state tax returns, as
well as those of its subsidiaries, are not currently under audit, and have not
been audited during the past five years.

United
Bank files Massachusetts financial institution income tax returns and is
subject to an annual Massachusetts tax at a rate of 10.5% of its net income.
Massachusetts net income is defined as gross income, other than 95% of
dividends received in any taxable year beginning on or after January 1, 1999
from or on account of the ownership of any class of stock if the institution
owns 15% or more of the voting stock of the institution paying the dividend,
less the deductions, but not the credits allowable under the provisions of the
Internal Revenue Code, as amended and in effect for the taxable year. The
dividends must meet the qualifications under Massachusetts law. Deductions with
respect to the following items, however, shall be allowed except as otherwise
provided: (a) dividends received, except as otherwise provided; (b) losses
sustained in other taxable years; (c) taxes on or measured by income, franchise
taxes measured by net income, franchise taxes for the privilege of doing
business and capital stock taxes imposed by any state; or (d) the deduction
allowed by section 168(k) of the Code.

United
Financial Bancorp, Inc. is required to file a Massachusetts income tax return
and is generally subject to a state income tax rate that is the same rate as
the tax rate for financial institutions in Massachusetts.

United
Banks subsidiary, UCB Securities, Inc., is taxed as a Massachusetts security
corporation, and is subject to a state tax rate of 1.32% of its gross income.

|         |            
|-------- | -----------
|ITEM 1A. | RISKFACTORS

Future Changes in Interest Rates Could Reduce
Our Profits

Our
ability to make a profit largely depends on our net interest income, which
could be negatively affected by changes in interest rates. Net interest income
is the difference between:

| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | the interest income we
  earn on our interest-earning assets, such as loans and securities; and    
| |   |                                                                                                    
| |  | the interest expense we
  pay on our interest-bearing liabilities, such as deposits and borrowings.

The
rates we earn on our assets and the rates we pay on our liabilities are
generally fixed for a contractual period of time. Like many savings
institutions, our liabilities generally have shorter contractual maturities
than our assets. This imbalance can create significant earnings volatility,
because market interest rates change over time. In a period of rising interest
rates, the interest income earned on our assets may not increase as rapidly as
the interest paid on our liabilities. In a period of declining interest rates,
the interest income earned on our assets may decrease more rapidly than the
interest paid on our liabilities, as borrowers prepay mortgage loans, and
mortgage-backed securities and callable investment securities are called or
prepaid thereby requiring us to reinvest those cash flows at lower interest
rates. See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Management of Market Risk.

In
addition, changes in interest rates can affect the average life of loans and
mortgage-backed and related securities. A reduction in interest rates results
in increased prepayments of loans and mortgage-backed and related securities,
as borrowers refinance their debt in order to reduce their borrowing costs.
This creates reinvestment risk, which is the risk that we may not be able to
reinvest prepayments at rates that are comparable to the rates we earned on the
prepaid loans or securities. Additionally, increases in interest rates may
decrease loan demand and/or make it more difficult for borrowers to repay
adjustable-rate loans.

As
of December 31, 2005, we were servicing loans sold to third parties totaling
$42.4 million, and the mortgage servicing rights associated with such loans had
a book value, at such date, of $162,000. Generally, the value of mortgage
servicing rights increases as interest rates rise and decreases as interest
rates fall, because the estimated life and estimated income from the underlying
loans increase with rising interest rates and decrease with falling interest
rates.

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Changes
in interest rates also affect the current fair value of our interest-earning
securities portfolio. Generally, the value of securities moves inversely with
changes in interest rates. At December 31, 2005, the fair value of our agency
securities, mortgage-backed securities and corporate debt obligations, all classified
as available for sale, totaled $226.4 million. Unrealized net losses on these
available-for-sale securities totaled $4.2 million at December 31, 2005 and are
reported as a separate component of stockholders equity. Further decreases in
the fair value of securities available for sale in future periods would have an
adverse effect on stockholders equity.

We
evaluate interest rate sensitivity using a model prepared by the Office of
Thrift Supervision that estimates the change in United Banks net portfolio
value over a range of interest rate scenarios. Net portfolio value is the
discounted present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. At September 30, 2005, the latest date for which
such information is available, in the event of an immediate 200 basis point
increase in interest rates, the model projects that we would experience a $28.6
million, or 23%, decrease in net portfolio value.

Because We Intend to Increase Our Commercial
Real Estate and Commercial and Industrial Loan Originations, Our Lending Risk
Will Increase and Downturns in the Real Estate Market or Local Economy Could
Adversely Affect Our Earnings.

At
December 31, 2005, our portfolio of commercial real estate loans totaled $150.1
million, or 23.61% of our total loans, and our portfolio of commercial and
industrial loans totaled $59.6 million, or 9.37% of our total loans. These
loans have increased as a percentage of our total loan portfolio in recent
years. These loans generally have more risk than one- to four-family
residential mortgage loans. Because the repayment of commercial real estate and
commercial and industrial loans depends on the successful management and
operation of the borrowers properties or related businesses, repayment of such
loans can be affected by adverse conditions in the real estate market or the
local economy. Many of our borrowers also have more than one commercial real
estate or commercial and industrial loan outstanding with us. Consequently, an
adverse development with respect to one loan or one credit relationship can
expose us to significantly greater risk of loss compared to an adverse
development with respect to a one- to four-family residential mortgage loan.
Finally, if we foreclose on a commercial real estate or commercial and
industrial loan, our holding period for the collateral, if any, typically is
longer than for one- to four-family residential mortgage loans because there
are fewer potential purchasers of the collateral. Because we plan to continue
to increase our originations of these loans, it may be necessary to increase
the level of our allowance for loan losses because of the increased risk
characteristics associated with these types of loans. Any such increase to our
allowance for loan losses would adversely affect our earnings.

If Economic Conditions
Deteriorate, Our Results of Operations and Financial Condition Could Be
Adversely Affected as Borrowers Ability to Repay Loans Declines and the Value
of the Collateral Securing Our Loans Decreases.

Our
financial results may be adversely affected by changes in prevailing economic
conditions, including decreases in real estate values, changes in interest
rates which may cause a decrease in interest rate spreads, adverse employment
conditions, the monetary and fiscal policies of the federal government and
other significant external events. Particularly, in recent years, the prices of
real estate have significantly increased in our market area. Because we
originate a significant number of mortgage loans secured by residential real
estate, decreases in real estate values could adversely affect the value of
property used as collateral for such loans. At December 31, 2005, loans secured
by residential real estate, including home equity loans and lines of credit,
represented 58.40% of our total loans. Adverse changes in the economy also may
have a negative effect on the ability of our borrowers to make timely
repayments of their loans, which would have an adverse impact on our earnings.
As of December 31, 2005, the unemployment rates in Hampden and Hampshire
Counties, Massachusetts were 5.5% and 3.4%, respectively. At that same date,
the Massachusetts unemployment rate was 4.5%.

Strong Competition Within Our Market Area May
Limit Our Growth and Profitability.

Competition
in the banking and financial services industry is intense. In our market area,
we compete with commercial banks, savings and cooperative institutions,
mortgage brokerage firms, credit unions, finance companies, mutual funds,
insurance companies, and brokerage and investment banking firms operating
locally and elsewhere. Some of our competitors have substantially greater
resources and lending limits than we have, have

33

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greater name
recognition and market presence that benefit them in attracting business, and
offer certain services that we do not or cannot provide. In addition, larger
competitors may be able to price loans and deposits more aggressively than we
do. Our profitability depends upon our continued ability to successfully
compete in our market area. The greater resources and deposit and loan products
offered by some of our competitors may limit our ability to increase our
interest-earning assets.

If Our Allowance for Loan Losses is Not
Sufficient to Cover Actual Loan Losses, Our Earnings Could Decrease.

We
make various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. In determining the amount of the allowance for loan losses, we
review our loans and our loss and delinquency experience, and we evaluate
economic conditions. If our assumptions are incorrect, our allowance for loan
losses may not be sufficient to cover losses inherent in our loan portfolio,
resulting in additions to our allowance. Our allowance for loan losses was
1.00% of total loans and 371.70% of non-performing loans at December 31, 2005.
Material additions to our allowance could materially decrease our net income.

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. Any increase in our allowance for loan losses or loan
charge-offs as required by these regulatory authorities may have a material
adverse effect on our financial condition and results of operations.

The Implementation of Stock-Based Incentive
Plans May Dilute Your Ownership Interest.

We intend to
adopt a stock-based incentive plan. This stock-based incentive plan will provide for grants of
stock options and restricted common stock awards. The number of options granted
or shares awarded under the plan may not exceed 4.90% and 1.96%, respectively,
of the Companys outstanding shares (including shares issued to United Mutual
Holding Company and to United Charitable Foundation). The number of options
granted or shares awarded under the plan, when aggregated with any subsequently
adopted stock-based benefit plans (exclusive of any shares held by any employee
stock ownership plan), may not exceed 25% of the number of shares of common
stock held by persons other than United Mutual Holding Company. The stock-based
incentive plan is subject to approval by the Companys stockholders.

Public Stockholders Own a Minority of United Financial
Bancorp, Inc.s Common Stock and Are Not Able to Exercise Voting Control Over
Most Matters Put to a Vote of Stockholders.

Public
stockholders own a minority of the outstanding shares of United Financial
Bancorp, Inc.s common stock. As a result, stockholders other than United
Mutual Holding Company are not able to exercise voting control over most
matters put to a vote of stockholders. United Mutual Holding Company owns a
majority of United Financial Bancorp, Inc.s common stock and, through its
Board of Directors, is able to exercise voting control over most matters put to
a vote of stockholders. The same directors and certain officers who manage
United Financial Bancorp, Inc. and United Bank also manage United Mutual
Holding Company. Further, these same directors and officers own an aggregate of
0.81% of the shares of United Financial Bancorp, Inc.s common stock, thereby
further reducing the voting control of public stockholders who own a minority
of the outstanding shares. The only matters as to which stockholders other than
United Mutual Holding Company are able to exercise voting control include any
proposal to implement a stock-based incentive plan or for a second-step stock
conversion. In addition, United Mutual Holding Company may exercise its voting
control to prevent a sale or merger transaction in which stockholders could
receive a premium for their shares.

Office of Thrift Supervision Policy on Remutualization
Transactions Could Prohibit Acquisition of United Financial Bancorp, Inc.,
Which May Lower Our Stock Price.

Current
Office of Thrift Supervision regulations permit a mutual holding company subsidiary
to be acquired by a mutual institution or a mutual holding company in a
so-called remutualization transaction. The possibility of a remutualization
transaction and the successful completion of a small number of remutualization
transactions where significant premiums have been paid to minority stockholders
has resulted in some takeover

34

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speculation
for mutual holding companies, which may be reflected in the per share price of
mutual holding companies common stock. 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 the mutual interests of the mutual
holding company and as raising issues concerning the effect on the mutual
interests of the acquiring entity. Under certain circumstances, the Office of
Thrift Supervision intends to give these issues special scrutiny and to reject
applications providing 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 per-share stock price may be adversely affected.

|           |                                             
|---------- | --------------------------------------------
|ITEM
  1B. | UNRESOLVED
  STAFF COMMENTSNot
  applicable.
|           |                                             
|ITEM
  2.  | PROPERTIES                                  

The
following table provides certain information as of December 31, 2005 with
respect to our main office located in West Springfield and our ten other full
service branch offices, our drive-up facility and our financial services
facility:

|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|--------------------------------------------------------------- |  | ----------------- |  | ------------------------- | -------- | -------------- | ------ | --------------------------------- |  | -------------- | 
|Location                                                        |  | Leased or
  Owned |  | Year Acquired
  or Leased |          | Square Footage |        | Net Book Value
  of Real Property
|                                                                |  |                   |  |                           |          |                |        |                                  
|                                                                |  |                   |  |                           |          |                |        |                                   |  | (In thousands)
|Main Office:95
  Elm Street
  West Springfield, MA 01089        |  | Owned             |  |                           | 1999     |                | 46,147 |                                   |  | $1,602         | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|Full Service Branches:115
  State StreetSpringfield,
  MA 01103 |  | Leased            |  |                           | (1)      |                | 3,401  |                                   |  | 144            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|1077 St. James Avenue
  Springfield, MA 01104                   |  | Owned             |  |                           | 2003     |                | 8,354  |                                   |  | 884            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|459 Main Street
  Indian Orchard, MA 01151                      |  | Leased            |  |                           | (2)      |                | 2,000  |                                   |  |               | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|528-530 Center Street
  Ludlow, MA 01056                        |  | Owned             |  |                           | 2002     |                | 3,000  |                                   |  | 1,065          | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|1930 Wilbraham Road
  Springfield, MA 01129                     |  | Owned             |  |                           | 2001     |                | 2,304  |                                   |  | 769            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|670 Bliss Road
  Longmeadow, MA 01106                           |  | Leased            |  |                           | (3)      |                | 1,652  |                                   |  | 13             | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|1325 Springfield Street
  Feeding Hills, MA 01030               |  | Leased            |  |                           | (4)      |                | 2,400  |                                   |  | 3              | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|10 Elm Street
  Westfield, MA 01085                             |  | Owned             |  |                           | 1981     |                | 8,500  |                                   |  | 390            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|14 Russell
  RoadHuntington,
  MA 01050                         |  | Owned             |  |                           | 2001     |                | 720    |                                   |  | 175            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|1830 Northampton Street
  Holyoke, MA 01040                     |  | Owned             |  |                           | 1994     |                | 6,409  |                                   |  | 642            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|Other:52
  Van Deene Avenue
  West Springfield, MA 01089        |  | Owned             |  |                           | 2005 (5) |                | 547    |                                   |  | 760            | 
|                                                                |  |                   |  |                           |          |                |        |                                   |  |                | 
|33 Westfield Street
  West Springfield, MA 01089                |  | Owned             |  |                           | 2002 (6) |                | 1,720  |                                   |  | 1,108          | 

---

|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | United Bank
  has a lease for a five-year period expiring in June 2010 with a renewal
  option for five additional years.                                                                              
|    |                                                                                                                                                                                                        
|(2) | United Bank
  has a lease for a five-year period expiring in May 2008 with two five-year
  renewal options.                                                                                            
|    |                                                                                                                                                                                                        
|(3) | United Bank
  has a lease for a five-year period expiring in September 2006 with a renewal
  option for five additional years. Notice of our intent to renew for
  additional five years has been sent.
|    |                                                                                                                                                                                                        
|(4) | United Bank
  has a lease for a five year period expiring in September 2010 with a renewal
  option for five additional years.                                                                         
|    |                                                                                                                                                                                                        
|(5) | This office
  is a drive-up facility only.                                                                                                                                                             
|    |                                                                                                                                                                                                        
|(6) | This
  financial services facility offers insurance and investment products and
  financial planning services.                                                                                         

35

---



The net book
value of our premises, land and equipment was $8.2 million at December 31,
2005.

|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

The
Company and its subsidiaries are subject to various legal actions arising in
the normal course of business. At December 31, 2005, we were not involved in
any legal proceedings.

|        |                                                      
|------- | -----------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
  HOLDERS

During
the fourth quarter of the fiscal year covered by this report, the Company did
not submit any matters to the vote of security holders.

PART II

|          |                                                                                                              
|--------- | -------------------------------------------------------------------------------------------------------------
|ITEM
  5. | MARKET
  FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

(a)
Our shares of common stock are traded on the Nasdaq National Market under the
symbol UBNK. The approximate number of holders of record of United Financial
Bancorp, Inc.s common stock as of December 31, 2005 was 2,400. Certain shares
of United Financial Bancorp, Inc. are held in nominee or street name and
accordingly, the number of beneficial owners of such shares is not known or
included in the foregoing number. The following table presents quarterly market
information for United Financial Bancorp, Inc.s common stock for the period
ended December 31, 2005. United Financial Bancorp, Inc. began trading on the
Nasdaq National Market on July 13, 2005. Accordingly, no information prior to
this date is available. The following information was provided by the Nasdaq
Stock Market.

|                                   |  |      |       |     |   |           |  |   |   | 
|---------------------------------- |  | ---- | ----- | --- | - | --------- |  | - | - | 
|Fiscal 2005                        |  | High |       | Low |   | Dividends | 
|                                   |  |      |       |     |   |           | 
|Quarter
  ended September 30, 2005 |  | $    | 12.61 |     | $ | 11.06     |  | $ |  | 
|                                   |  |      |       |     |   |           |  |   |   | 
|Quarter
  ended December 31, 2005  |  |      | 12.00 |     |   | 11.53     |  |   |  | 

On January
19, 2006, the Board of Directors of United Financial Bancorp,
Inc. declared an initial cash dividend of $0.05 per share. The dividend will be
payable on February 27, 2006 to shareholders of record as of February 13, 2006.

Dividend
payments by United Financial Bancorp, Inc. are dependent primarily on dividends
it receives from United Bank, because United Financial Bancorp, Inc. will have
no source of income other than dividends from United Bank, earnings from the
investment of proceeds from the sale of shares of common stock retained by
United

36

---



Financial
Bancorp, Inc., and interest payments with respect to United Financial Bancorp,
Inc.s loan to the Employee Stock Ownership Plan.

For
a discussion of United Banks ability to pay dividends, see Supervision and
RegulationFederal Banking Regulation.

At
December 31, 2005, there were no compensation plans under which equity
securities of United Financial Bancorp, Inc. were authorized for issuance other
than the Employee Stock Ownership Plan.

(b)
Not Applicable.

(c)
Not Applicable.

|          |                        
|--------- | -----------------------
|ITEM
  6. | SELECTED FINANCIAL DATA

The
summary information presented below at or for each of the fiscal years
presented is derived in part from the consolidated financial statements of
United Financial Bancorp, Inc. The following information is only a summary, and
should be read in conjunction with our consolidated financial statements and
notes included elsewhere in this Annual Report.

|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|------------------------------------------------------ |  | ------------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                                                       |  | At December 31,          |        
|                                                       |  |                          |        
|                                                       |  | 2005                     |         | 2004 |   | 2003    |  | 2002 |         | 2001 |  
|                                                       |  |                          |         |      |   |         |  |      |         |      |  
|                                                       |  | (In thousands)           |        
|Selected Financial Condition
Data:                     |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Total assets                                           |  | $                        | 906,513 |      | $ | 772,008 |  | $    | 737,424 |      | $ | 623,563 |  | $ | 591,390 | 
|Cash and cash
equivalents                              |  |                          | 15,843  |      |   | 23,233  |  |      | 16,144  |      |   | 38,779  |  |   | 29,762  | 
|Investment securities
available-for-sale               |  |                          | 111,763 |      |   | 50,650  |  |      | 73,191  |      |   | 36,617  |  |   | 46,815  | 
|Investment securities
held-to-maturity                 |  |                          | 3,325   |      |   | 2,498   |  |      | 2,175   |      |   | 737     |  |   | 544     | 
|Mortgage-backed securities
  available-for-sale        |  |                          | 114,702 |      |   | 101,679 |  |      | 123,774 |      |   | 60,889  |  |   | 41,299  | 
|Trading account
securities                             |  |                          |        |      |   |        |  |      |        |      |   |        |  |   | 2,454   | 
|Loans,
net(1)                                          |  |                          | 630,558 |      |   | 569,243 |  |      | 497,078 |      |   | 463,383 |  |   | 450,627 | 
|Deposits                                               |  |                          | 653,611 |      |   | 613,672 |  |      | 594,748 |      |   | 533,704 |  |   | 489,362 | 
|FHLB advances                                          |  |                          | 101,880 |      |   | 86,694  |  |      | 76,820  |      |   | 29,889  |  |   | 49,048  | 
|Repurchase agreements                                  |  |                          | 8,434   |      |   | 4,317   |  |      | 4,218   |      |   | 1,146   |  |   | 1,832   | 
|Stockholders
equity                                   |  |                          | 137,005 |      |   | 62,255  |  |      | 57,050  |      |   | 52,612  |  |   | 46,192  | 
|Non-performing
assets(2)                               |  |                          | 3,319   |      |   | 3,784   |  |      | 1,865   |      |   | 1,036   |  |   | 1,358   | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|                                                       |  | Years Ended December 31, |        
|                                                       |  |                          |        
|                                                       |  | 2005                     |         | 2004 |   | 2003    |  | 2002 |         | 2001 |  
|                                                       |  |                          |         |      |   |         |  |      |         |      |  
|                                                       |  | (In thousands)           |        
|Selected Operating
Data:                               |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Interest and dividend
income                           |  | $                        | 43,233  |      | $ | 36,532  |  | $    | 33,776  |      | $ | 36,009  |  | $ | 38,277  | 
|Interest expense                                       |  |                          | 16,206  |      |   | 12,148  |  |      | 11,583  |      |   | 14,703  |  |   | 18,686  | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Net interest income before
provision for
  loan losses |  |                          | 27,027  |      |   | 24,384  |  |      | 22,193  |      |   | 21,306  |  |   | 19,591  | 
|Provision for loan
losses                              |  |                          | 917     |      |   | 983     |  |      | 294     |      |   | 398     |  |   | 614     | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Net interest income after
provision for
  loan losses  |  |                          | 26,110  |      |   | 23,401  |  |      | 21,899  |      |   | 20,908  |  |   | 18,977  | 
|Non-interest income                                    |  |                          | 5,360   |      |   | 5,134   |  |      | 5,703   |      |   | 4,522   |  |   | 4,517   | 
|Non-interest expense                                   |  |                          | 24,452  | *    |   | 19,179  |  |      | 17,785  |      |   | 16,971  |  |   | 15,602  | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Income before taxes                                    |  |                          | 7,018   |      |   | 9,356   |  |      | 9,817   |      |   | 8,459   |  |   | 7,892   | 
|Income tax expense                                     |  |                          | 2,649   |      |   | 3,828   |  |      | 3,917   |      |   | 3,270   |  |   | 3,078   | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Net income                                             |  | $                        | 4,369   |      | $ | 5,528   |  | $    | 5,900   |      | $ | 5,189   |  | $ | 4,814   | 
|                                                       |  |                          |         |      |   |         |  |      |         |      |   |         |  |   |         | 

*Excluding
the effect of a $3,591 charitable contribution ($2,199 after taxes) to fund the
newly-formed
United Charitable Foundation, net income in 2005 would have amounted to $6,568.

37

---



|                                                                          |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|------------------------------------------------------------------------- |  | -------------------------------------- | -- | ---- | ------ | ---- |  | ------ | - | ---- | ------ | - |  | ------ | - | 
|                                                                          |  | At or For the Years Ended December 31, |   
|                                                                          |  |                                        |   
|                                                                          |  | 2005                                   |    | 2004 |        | 2003 |  | 2002   |   | 2001 |       
|                                                                          |  |                                        |    |      |        |      |  |        |   |      |       
|Selected Financial Ratios
and Other Data:                                 |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|                                                                          |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Performance
Ratios(3):                                                    |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Return on average
assets                                                  |  | 0.51                                   | %* |      | 0.73   | %    |  | 0.86   | % |      | 0.84   | % |  | 0.85   | % | 
|Return on average
equity                                                  |  | 4.45                                   | *  |      | 9.25   |      |  | 10.72  |   |      | 10.47  |   |  | 10.81  |   | 
|Average equity to average
interest-earning
  assets                       |  | 11.86                                  |    |      | 8.16   |      |  | 8.45   |   |      | 8.37   |   |  | 8.27   |   | 
|Equity to total assets at end
of period(3)                                |  | 15.11                                  |    |      | 8.06   |      |  | 7.74   |   |      | 8.44   |   |  | 7.81   |   | 
|Interest rate spread
(4)                                                  |  | 2.77                                   |    |      | 3.03   |      |  | 3.12   |   |      | 3.23   |   |  | 3.11   |   | 
|Net interest margin
(5)                                                   |  | 3.27                                   |    |      | 3.33   |      |  | 3.41   |   |      | 3.65   |   |  | 3.67   |   | 
|Average interest-earning assets
to average
  interest-bearing liabilities |  | 125.49                                 |    |      | 118.30 |      |  | 116.42 |   |      | 116.77 |   |  | 116.02 |   | 
|Total noninterest expense to
average total
  assets                       |  | 2.85                                   | *  |      | 2.53   |      |  | 2.61   |   |      | 2.75   |   |  | 2.77   |   | 
|Efficiency ratio
(6)                                                      |  | 75.50                                  | %* |      | 64.97  | %    |  | 63.75  | % |      | 65.71  | % |  | 64.72  | % | 
|                                                                          |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Regulatory Capital
Ratios(3):                                             |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Tier I (core) capital                                                     |  | 17.21                                  | %  |      | 11.67  | %    |  | 12.33  | % |      | 12.23  | % |  | 11.58  | % | 
|Tier I (leverage)
capital                                                 |  | 11.63                                  |    |      | 8.11   |      |  | 7.76   |   |      | 8.25   |   |  | 7.80   |   | 
|Total capital                                                             |  | 18.28                                  |    |      | 12.76  |      |  | 13.43  |   |      | 13.40  |   |  | 12.75  |   | 
|                                                                          |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Asset Quality
Ratios(3):                                                  |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Non-performing assets as a
percent of total
  assets(2)                   |  | 0.37                                   | %  |      | 0.49   | %    |  | 0.25   | % |      | 0.17   | % |  | 0.23   | % | 
|Non-performing loans as a
percent of total
  loans(2)                     |  | 0.27                                   |    |      | 0.66   |      |  | 0.36   |   |      | 0.21   |   |  | 0.29   |   | 
|Allowance for loan losses as a
percent of
  total loans                   |  | 1.00                                   |    |      | 1.00   |      |  | 1.02   |   |      | 1.05   |   |  | 1.03   |   | 
|Allowance for loan losses as a
percent of
  non-performing loans(2)       |  | 371.91                                 | %  |      | 151.96 | %    |  | 279.03 | % |      | 507.63 | % |  | 358.04 | % | 
|                                                                          |  |                                        |    |      |        |      |  |        |   |      |        |   |  |        |   | 
|Number of full service
customer facilities                                |  | 11                                     |    |      | 11     |      |  | 11     |   |      | 11     |   |  | 10     |   | 

---

|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The allowance for loan
  losses at December 31, 2005, 2004, 2003, 2002 and 2001 was $6.4 million, $5.8
  million, $5.1 million, $4.9 million and $4.7 million, respectively.                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                        
|(2) | Non-performing assets
  consist of non-performing loans and foreclosed real estate owned (REO).
  Non-performing loans consist of non-accrual and accruing loans 90 days or
  more overdue, while REO consists of real estate acquired through foreclosure
  and real estate acquired by acceptance of a deed-in-lieu of foreclosure.
|    |                                                                                                                                                                                                                                                                                                                                        
|(3) | Asset Quality Ratios and Regulatory Capital Ratios and the equity to
  total assets ratio are end of period ratios. With the exception of end of
  period ratios, all ratios are based on average monthly balances during the
  indicated periods and are annualized where appropriate.                                              
|    |                                                                                                                                                                                                                                                                                                                                        
|(4) | The interest rate spread represents the difference between
  weighted-average yield on interest-earning assets and the weighted-average
  cost of interest-bearing liabilities.                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                        
|(5) | The net interest margin represents net interest income as a percent
  of average interest-earning assets.                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                        
|(6) | The efficiency ratio represents non-interest expense divided by the
  sum of net interest income and non-interest income.                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                        
|*   | Exclusive of the
  contribution to the United Charitable Foundation in 2005, return on average
  assets, return on average equity, total non- interest expense to average
  total assets, and efficiency ratio would have been 0.76%, 6.70%, 2.43% and
  64.41%, respectively.                                                         

|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Our
results of operations depend primarily on our net interest income. Net interest
income is the difference between the interest income we earn on our
interest-earning assets, consisting primarily of loans, investment securities
(including mortgage-backed securities, other securities and corporate and
municipal bonds) and other interest-earning assets (primarily cash and cash
equivalents), and the interest paid on our interest-bearing liabilities,
consisting primarily of savings accounts, money market accounts, transaction
accounts, certificates of deposit and Federal Home Loan Bank advances. Net
interest income before provision for loan losses increased $2.6 million, or
10.8 %, to $27.0 million for the year ended December 31, 2005 from $24.4
million for the year ended December 31, 2004. The primary reason for the
improvement in our net interest income was a $95.0 million, or 13.0%, increase
in our average interest earning assets, to $827.4 million for the year ended
December 31, 2005, reflecting the impact of the net proceeds of the initial
public offering and net deposit growth.

Our
results of operations also are affected by our provisions for loan losses,
noninterest income and noninterest expense. Noninterest income currently
consists primarily of deposit account fees, financial services fees, increases
in cash value-insurance, gains and losses on the sale of securities and
miscellaneous other income. Noninterest expense currently consists primarily of
compensation and employee benefits, data processing, occupancy, marketing and
public relations, printing and office supplies, and other operating expenses.
Our results

38

---



of operations
also may be affected significantly by general and local economic and
competitive conditions, changes in market interest rates, governmental policies
and actions of regulatory authorities.

Critical Accounting Policies

Critical
accounting policies are those that involve significant judgments and
assumptions by management and that have, or could have, a material impact on
our income or the carrying value of our assets. Our critical accounting
policies are those related to our allowance for loan losses.

Allowance
for Loan Losses. The allowance for loan losses is the amount estimated by management
as necessary to cover credit losses inherent in the loan portfolio at the
balance sheet date. The allowance is established through the provision for loan
losses which is charged against income. In determining the allowance for loan
losses, management makes significant estimates and has identified this policy
as one of our most critical. The methodology for determining the allowance for
loan losses is considered a critical accounting policy by management due to the
high degree of judgment involved, the subjectivity of the assumptions utilized
and the potential for changes in the economic environment that could result in
changes to the amount of the recorded allowance for loan losses.

As
a substantial amount of our loan portfolio is collateralized by real estate,
appraisals of the underlying value of property securing loans and discounted
cash flow valuations of properties are critical in determining the amount of
the allowance required for specific loans. Assumptions for appraisals and
discounted cash flow valuations are instrumental in determining the value of
properties. Overly optimistic assumptions or negative changes to assumptions
could significantly affect the valuation of a property securing a loan and the
related allowance determined. The assumptions supporting such appraisals and
discounted cash flow valuations are carefully reviewed by management to
determine that the resulting values reasonably reflect amounts realizable on
the related loans.

Management
performs a quarterly evaluation of the adequacy of the allowance for loan
losses. We consider a variety of factors in establishing this estimate
including, but not limited to, current economic conditions, delinquency
statistics, geographic and industry concentrations, the adequacy of the
underlying collateral, the financial strength of the borrower, results of
internal loan reviews and other relevant factors. This evaluation is inherently
subjective as it requires material estimates by management that may be
susceptible to significant change based on changes in economic and real estate
market conditions.

The
evaluation has a specific and general component. The specific component relates
to loans that are delinquent or otherwise identified as a problem loan through
the application of our loan review process and our loan grading system. All
such loans are evaluated individually, with principal consideration given to
the value of the collateral securing the loan. Specific allowances are
established as required by this analysis. The general component is determined
by segregating the remaining loans by type of loan, risk weighting (if
applicable) and payment history. We also analyze historical loss experience,
delinquency trends, general economic conditions and geographic and industry
concentrations. This analysis establishes factors that are applied to the loan
groups to determine the amount of the general component of the allowance for
loan losses.

Actual
loan losses may be significantly more than the allowances we have established
which could have a material negative effect on our financial results.

Business Strategy

Our
business strategy is to operate as a well-capitalized and profitable community
bank dedicated to providing exceptional personal service to our individual and
business customers. Over the past several years, we have emphasized the
origination of commercial and industrial loans and loans secured by commercial
real estate, and we intend to increase our origination of these loans in the
future. In addition, we intend to expand our branch network in our primary
market area, which consists of Hampden and Hampshire Counties, Massachusetts.
We cannot assure you that we will successfully implement our business strategy.

Highlights
of our business strategy are as follows:

39

---



Remaining a Community-Oriented Financial
Institution. We were established in 1882 and have been
operating continuously since that time, growing through internal growth and a
series of five mutual-to-mutual business combinations that occurred between
1960 and 1994. We have been, and continue to be, committed to meeting the
financial needs of the communities in which we operate, and we are dedicated to
providing quality personal service to our customers. We provide a broad range
of individualized consumer and business financial services from our main
office, ten branch offices and drive-up facility.

Expanding our Branch Network.
We currently operate from 11 full-service banking offices and a drive-up only
facility. We also maintain a financial services facility that offers insurance
and investment products and financial planning services. We intend to evaluate
new branch expansion opportunities, through acquisitions and de novobranching, to expand our presence
within and outside our primary market area, including Northern Connecticut, and
our current business plan calls for the acquisition and establishment of
additional branch offices. In addition, we intend to evaluate acquisitions of
other financial institutions, as opportunities present themselves.

Increasing our Commercial Real Estate and
Commercial and Industrial Lending. We intend to
continue to increase our origination of higher-yielding commercial real estate
and commercial and industrial loans as a means of increasing our interest
income. These loans also are generally originated with rates that are fixed for
five years or less, which assists us in managing our interest rate risk. In
support of this initiative we have recently supplemented our existing staff of
commercial loan officers and intend to increase our resources of credit
analysis and outside loan review. We originated $37.2 million of commercial
real estate and $73.0 million of commercial and industrial loans during the
year ended December 31, 2005. At December 31, 2005, our commercial real estate
and commercial and industrial loans totaled $150.1 million and $59.6 million,
respectively. The additional capital raised in the offering will increase our
commercial lending capacity by enabling us to originate more loans and loans
with larger balances. This will permit us to serve commercial borrowers with
larger lending needs. Originating more commercial real estate and commercial
and industrial loans exposes us to increased risks, as discussed in the Risk
Factors section of this prospectus.

Maintaining High Asset Quality.
We have emphasized maintaining strong asset quality by following conservative
underwriting criteria, and primarily originating loans secured by real estate.
We will continue to emphasize high asset quality as we expand the scope of our
lending practices. Our non-performing assets at December 31, 2005 were $3.3
million, or 0.37% of total assets, and our net charge-offs were 0.05% of our
average loans outstanding for the year ended December 31, 2005.

Increasing our Share of Lower-Cost Deposits.
Our deposit gathering over the past few years has been characterized by a
deliberate shift away from relatively high cost and volatile certificates of
deposit to lower cost and more stable core deposits. This effort has enabled us
to largely fund loan growth while maintaining a reasonable cost of funds. We
attract core deposits with a targeted marketing program, a well established
incentive-based cross-sales program and competitive rates. We intend to amplify
these efforts to continue to attract core deposits as a prime funding source.
At December 31, 2005, consumer and commercial demand deposits comprised 14.27%
of our total deposits, compared to 14.06% of our total deposits at December 31,
2004.

Increasing and Diversifying our Sources of
Non-interest Income. As we have increased our deposit
accounts, we have increased the level of non-interest income derived from fees
on these accounts. In addition, we have invested in bank-owned life insurance
on certain of our officers and directors, which has increased our non-interest
income through the growing cash surrender value of this insurance over time.
Finally, in 2002, we established United Financial Services Group as a division
of United Bank to offer United Bank customers and others a complete range of
non-deposit investment products and financial planning services, including
mutual funds, debt, equity and government securities, insurance products, fixed
and variable annuities, financial planning for individual and commercial
customers and estate planning services. The sale of these services generates
non-interest income and helps to reduce the exposure of our net income to
changes in market interest rates. United Financial Services Group offers these
services through Baystate Financial Services, LLC and its registered
broker-dealer, New England Securities.

40

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Comparison of Financial Condition at December
31, 2005 and 2004

Total
assets increased $134.5 million, or 17.4%, to $906.5 million at December 31,
2005 from $772.0 million at December 31, 2004. The increase reflected
substantial growth in net loans and in securities available for sale, partially
offset by a decrease in cash and cash equivalents. The growth in assets was
partially funded by increases in both deposits ($39.9 million) and Federal Home
Loan Bank of Boston advances ($15.2 million), as well as the net proceeds of
the initial public offering of stock ($68.4 million).

Net
loans increased $61.3 million, or 10.8%, to $630.6 million at December 31, 2005
from $569.2 million at December 31, 2004. One- to four-family residential
mortgage loans increased $40.4 million, or 12.2%, to $371.3 million at December
31, 2005, reflecting continued strong demand in our primary market area for
residential mortgage loans, given the continued low interest rate environment
for fixed rate loans. The increase also reflected managements decision to
retain substantially all originations of residential mortgage loans in
portfolio. Commercial real estate loans and commercial and industrial loans
increased $12.3 million, or 8.9%, and $3.3 million, or 5.9%, respectively,
reflecting strengthening economic conditions in our primary market area as well
as our continued efforts to diversify our lending activities and improve our
net interest rate spread by increasing our origination of these generally
higher-yielding loans. At December 31, 2005, commercial real estate loans and
commercial and industrial loans represented 23.80% and 9.40%, respectively, of
our total loan portfolio compared to 24.00% and 9.81%, respectively, at
December 31, 2004. Construction loans decreased $964,000, or 3.3%, to $28.8
million at December 31, 2005,

Securities
available for sale increased $74.1 million, or 48.7%, to $226.5 million at
December 31, 2005 from $152.3 million at December 31, 2004. This
significant growth and the relative increase in shorter-term securities
resulted largely from the completion of the Companys initial public offering,
which raised $68.4 in investable funds.Mortgage-backed securities
increased $13.0 million during 2005 to $114.7 million at December 31, 2005 from
$101.7 million at December 31, 2004.

Total
cash and cash equivalents decreased $7.4 million, to $15.8 million at December
31, 2005, reflecting routine fluctuations in cash balances.

Total
deposits increased $40.0 million, or 6.5%, to $653.6 million at December 31,
2005. The increase reflected substantial growth in our interest bearing deposit
accounts, consisting of money market accounts, certificates of deposit, regular
savings accounts, and NOW accounts, which increased to $560.3 million at
December 31, 2005 from $527.4 million at December 31, 2004. Federal Home Loan
Bank advances increased $15.2 million, or 17.5%, to $101.9 million at December
31, 2005. We have used such advances to match fund a substantial portion of
our residential mortgage loans, as well as a portion of our commercial real
estate and commercial and industrial loans, in order to reduce our interest
rate risk. Repurchase agreements increased $4.1 million or 95.4% to $8.4
million at December 31, 2005 compared to $4.3 million at December 31, 2004.

Total
stockholders equity increased $74.8 million, or 120.0%, to $137.0 million at
December 31, 2005. The Company received $68.4 million of net proceeds in
the offering, selling 7.7 million shares of common stock at $10 per share. In
addition, stockholders equity was positively affected by net income of $4.4
million for the year ended December 31, 2005, which was partially offset by
accumulated other comprehensive loss, net of taxes, of $2.5 million, due to unrealized losses on securities
available for sale. The
other comprehensive losses due to unrealized losses on securities available for
sale were due to changes in interest rates since the securities were purchased;
management has concluded that none of the securities have impairments that are
other than temporary.

Comparison of Operating Results for the Years
Ended December 31, 2005 and 2004

Net
Income. Net income decreased $1.2 million, or
21.0%, to $4.4 million for the year ended December 31, 2005 from $5.5 million for
the year ended December 31, 2004. The decrease primarily resulted from a one-time after-tax expense of $2.2 million, which was
incurred to
establish and fund the newly formed United Charitable Foundation.Excluding
the effect of the charitable contribution, net income would have amounted to
$6.6 million or 19% greater than 2004. This increase was attributable largely
to the investment of the proceeds of the initial public offering during the
last six months of the year.

41

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Net
Interest Income Before Provision for Loan Losses. Net
interest income before provision for loan losses increased $2.6 million, or
10.8%, to $27.0 million for the year ended December 31, 2005. The increase
reflected a $95.0 million, or 13.0%, increase in our interest-earning assets,
which was partially offset by a 26 basis point decline in our net interest rate
spread to 2.77% for the year ended December 31, 2005 from 3.03% for the year
ended December 31, 2004. The reduction in the net interest rate spread was at
least partially attributable to the flattening of the yield curve wherein
short-term interest rates generally increased while longer-term rates remained
essentially flat during 2005.

Interest
Income. Interest income increased $6.7 million, or
18.3%, to $43.2 million for the year ended December 31, 2005 from $36.5 million
for the prior year. The increase resulted from the $95.0 million, or 13.0%,
increase in the average balance of interest-earning assets, coupled with the 24
basis point increase in the average yield on such assets to 5.23% for the year
ended December 31, 2005 from 4.99% for the prior year. Interest earned on
investment securities increased $1.4 million, or 21.1%, to $8.0 million for the
year ended December 31, 2005, from $6.6 million for the year ended December 31,
2004. The increase reflected the increased average balance in such securities
of $28.3 million, or 15.8%, as well as the higher yield on such securities to
3.84% from 3.68%. Interest income attributable to loans increased $4.9 million,
or 16.4%, to $34.5 million for the year ended December 31, 2005 from $29.7
million for the year ended December 31, 2004. The increase in interest earned
on loans was due to the $58.4 million, or 10.8%, increase in the average
balance of loans, coupled with the 28 basis point increase in the yields earned
on such loans to 5.79% from 5.51%, as the continued strong demand for
residential financing in our primary market area resulted in our loan
originations more than offsetting loan prepayments.

Interest
Expense.Interest expense increased $4.1 million,
or 33.4%, to $16.2 million for the year ended December 31, 2005 from $12.1
million for the year ended December 31, 2004. The increase in interest expense
was due to the $40.2 million, or 6.4%, increase in the average balance of
interest-bearing liabilities to $659.3 million for the year ended December 31,
2005 from $619.1 million for the year ended December 31, 2004, combined with
the increase in the average cost of such liabilities to 2.46% for the year
ended December 31, 2005 from 1.96% for the prior year. The interest paid on
deposits increased by $3.3 million, or 36.7%, reflecting an increase in the
average cost of such deposits to 2.22% from 1.71% due to the rising interest
rate environment, while the average balance of such deposits increased by $26.6
million, or 5.0%, as we continued to expand deposit balances to fund loan
growth. Interest paid on Federal Home Loan Bank advances increased by $711,000,
or 24.0%, reflecting an increase in the average balance of such advances to
$96.7 million for the year ended December 31, 2005 from $85.4 million for the
prior year, coupled with the increase in the average cost of such advances to
3.79% from 3.47%. We have increased the use of such advances to match fund
loans, particularly residential mortgage loans.

Provision
for Loan Losses.We establish provisions for loan
losses, which are charged to operations, at a level necessary to absorb known
and inherent losses that are both probable and reasonably estimable at the date
of the financial statements. In evaluating the level of the allowance for loan
losses, management considers historical loss experience, the types of loans and
the amount of loans in the loan portfolio, adverse situations that may affect
the borrowers ability to repay, the estimated value of any underlying
collateral, peer group information and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available or as
future events occur. After an evaluation of these factors, management made a
provision of $917,000 for the year ended December 31, 2005, as compared to a
$983,000 provision for the year ended December 31, 2004. The modest decrease in
the provision in 2005 as compared to 2004 was due primarily to a decrease in
adversely classified loans and in non-performing loans in 2005 as compared to
2004. The allowance for loan losses was $6.4 million, or 1.00% of loans
outstanding at December 31, 2005, as compared to $5.8 million, or 1.00% of
loans outstanding at December 31, 2004.

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,and establishes the
provision for loan losses based on the factors set forth in the preceding
paragraph. Historically, our loan portfolio has primarily consisted of one- to
four-family residential mortgage loans. However, our current business plan
calls for increases in commercial real estate and commercial and industrial
loans. As management evaluates the allowance for loan losses, the increased
risk associated with larger non-homogenous commercial real estate and
commercial and industrial loans may result in larger additions to the allowance
for loan losses in future periods.

42

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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. In addition, the Office of Thrift
Supervision, as an integral part of its examination process, will periodically
review our allowance for loan losses. Such agency may require us to recognize
adjustments to the allowance, based on its judgments about information
available to it at the time of its examination.

Noninterest
Income.Noninterest income increased $226,000, or
4.4%, to $5.4 million for the year ended December 31, 2005 from $5.1 million
for the prior year. This growth in noninterest income was primarily due to an
increase in fee income on depositors accounts to $4.1 million for the year ended
December 31, 2005 from $3.7 million for the prior year, reflecting additional
deposit accounts in 2005 as compared to 2004 and reduced waivers of fees on
deposit accounts. This increase was partially offset by a $119,000 reduction in
gains on the sales of securities.

Noninterest
Expense. Noninterest expense increased $5.3
million, or 27.5%, to $24.5 million for the year ended December 31, 2005 from
$19.2 million for the prior year. Salaries and employee benefits increased to
$11.2 million from $9.6 million, reflecting higher staffing levels, principally
in the commercial lending area, as well as average annual salary increases of
3.3%. Occupancy expense increased to $1.5 million from $1.4 million, reflecting
lease renewals at higher rates and purchases of additional facilities.
Contributions and sponsorships increased $3.6 million reflecting the
contribution to the new United Charitable Foundation. Professional fees
increase $386,000 reflecting higher audit and consulting fees. Other
noninterest expense, which includes postage, telephone, printing and office
supplies decreased to $3.2 million from $3.7 million. The principal component
of this decrease was $693,000 incurred in 2004 in connection with our
reorganization into the mutual holding company structure and the conversion of
United Bank to a federally chartered savings bank (including the change of the
name of the bank).

Income
Tax Expense.Income tax expense decreased to $2.6
million for the year ended December 31, 2005 from $3.8 million for the prior
year. The effective tax rate was 37.8% and 40.9% for 2005 and 2004,
respectively. The lower effective tax rate in 2005 reflected the higher
proportion of our pre-tax income earned at UCB Securities, Inc., our security
corporation, whose earnings are taxed by Massachusetts at a lower rate than
United Bank.

Comparison of Operating Results for the Years
Ended December 31, 2004 and 2003

Net
Income. Net income decreased $372,000, or 6.3%, to
$5.5 million for the year ended December 31, 2004 from $5.9 million for the
year ended December 31, 2003. The decrease primarily resulted from lower
noninterest income, higher noninterest expense and higher provision for loan
losses, partially offset by increased net interest income.

Net
Interest Income Before Provision for Loan Losses. Net
interest income before provision for loan losses increased $2.1 million, or
9.3%, to $24.6 million for the year ended December 31, 2004. The increase
reflected an $81.4 million, or 12.5%, increase in our interest earning assets,
which was partially offset by an 11 basis point decline in our net interest
rate spread to 3.06% for the year ended December 31, 2004 from 3.17% for the
year ended December 31, 2003. The reduction in the net interest rate spread was
at least partially attributable to the flattening of the yield curve wherein
short-term interest rates generally increased while longer-term rates remained
essentially flat during 2004. This trend has continued into 2005.

Interest
Income. Interest income increased $2.7 million, or
7.8%, to $36.8 million for the year ended December 31, 2004 from $34.1 million
for the prior year. The increase resulted from the $81.4 million, or 12.5%,
increase in the average balance of interest-earning assets, which more than
offset the 22 basis point decrease in the average yield on such assets to 5.02%
for the year ended December 31, 2004 from 5.24% for the prior year. Interest
earned on investment securities increased $1.9 million, or 39.6%, to $6.6 million
for the year ended December 31, 2004, from $4.7 million for the year ended
December 31, 2003. The increase reflected the increased average balance in such
securities of $37.5 million, or 26.5%, as well as the higher yield on such
securities to 3.68% from 3.33%. Interest income attributable to loans increased
a modest $852,000 or 2.9%, to $30.0 million for the year

43

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ended December
31, 2004 from $29.1 million for the year ended December 31, 2003. The slight
increase in interest earned on loans was due to the $51.0 million, or 10.5%,
increase in the average balance of loans, which more than offset the 41 basis
point decrease in the yields earned on such loans to 5.56% from 5.97%, as the
continued low market interest rate environment combined with strong demand for
residential financing in our primary market area resulted in our loan
originations more than offsetting loan prepayments.

Interest
Expense.Interest expense increased $565,000 or
4.9%, to $12.1 million for the year ended December 31, 2004 from $11.6 million
for the year ended December 31, 2003. The increase in interest expense was due
to the $59.9 million, or 10.7%, increase in the average balance of
interest-bearing liabilities to $619.1 million for the year ended December 31,
2004 from $559.2 million for the year ended December 31, 2003, which more than
offset the decrease in the average cost of such liabilities to 1.96% for the
year ended December 31, 2004 from 2.07% for the prior year. The interest paid
on deposits decreased by $265,000 or 2.9%, reflecting a decrease in the average
cost of such deposits to 1.71% from 1.87% due to the continued low market
interest rate environment, while the average balance of such deposits increased
by $31.8 million, or 6.4%, as we continued to expand deposit balances to fund
loan growth. The interest paid on savings accounts, money market and NOW
accounts, certificates of deposit and other interest-bearing deposits all
decreased, as the lower average cost more than offset the higher average
balances of each category of deposits. Interest paid on Federal Home Loan Bank
advances increased by $809,000 or 37.6%, reflecting an increase in the average
balance of such advances to $85.4 million for the year ended December 31, 2004
from $57.7 million for the prior year, which more than offset a decrease in the
average cost of such advances to 3.47% from 3.73%. We have increased the use of
such advances to match fund loans, particularly residential mortgage loans.

Provision
for Loan Losses.Management made a provision of
$982,700 for the year ended December 31, 2004, as compared to a $294,000
provision for the year ended December 31, 2003. The increase in the provision
in 2004 as compared to 2003 was due primarily to the higher proportion of
commercial real estate loans and commercial and industrial loans, higher
adversely classified loans (up 87.8%) and higher non-performing loans (up
107.2%) in 2004 as compared to 2003. The increase in adversely classified loans
reflected our classification of a lending relationship totaling $8.0 million;
although the loan is performing in accordance with its terms, the underlying
business is not currently profitable. The increase in non-performing loans
reflected a $1.3 million commercial and industrial loan to a borrower in the
process of liquidation, and a $500,000 residential mortgage loan, which is in
foreclosure. The allowance for loan losses was $5.8 million, or 1.00% of loans
outstanding at December 31, 2004, as compared to $5.1 million, or 1.02% of
loans outstanding at December 31, 2003.

Noninterest
Income.Noninterest income decreased $446,000 or
8.3%, to $4.9 million for the year ended December 31, 2004 from $5.4 million
for the prior year. The decrease reflected lower gain on sale of loans, which
decreased to $14,000 for the year ended December 31, 2004 from $78,000 for the
prior year. While we do not originate loans for the purpose of resale, we have
sold loans into the secondary mortgage market. During 2004, we sold a pool of
loans with a principal balance of approximately $5.2 million, while in 2003, we
sold pools of loans with principal balances of approximately $10.4 million.
Gain on the sale of investment securities decreased to $122,000 for the year
ended December 31, 2004 from $531,000 for the prior year, reflecting less
attractive pricing for these investment securities in the higher interest rate
environment that prevailed in 2004. These decreases in noninterest income were
partially offset by an increase in fee income on depositors accounts to $3.7
million for the year ended December 31, 2004 from $3.4 million for the prior
year, reflecting additional deposit accounts in 2004 as compared to 2003 and
reduced waivers of fees on deposit accounts.

Noninterest
Expense. Noninterest expense increased $1.4
million, or 8.0%, to $19.2 million for the year ended December 31, 2004 from
$17.8 million for the prior year. Salaries and employee benefits increased to
$10.1 million from $9.9 million, reflecting higher staffing levels, principally
in the commercial lending area, as well as average annual salary increases of
3.3%. Occupancy expense increased to $1.5 million from $1.4 million, reflecting
lease renewals at higher rates and purchases of additional facilities. Data
processing expense increased to $2.7 million from $2.4 million due primarily to
volume related factors. Other noninterest expense, which includes
contributions, postage, telephone, printing and office supplies increased to
$3.4 million from $2.7 million. The principal component of this increase was
$693,000 incurred in 2004 in connection with our reorganization into the mutual
holding company structure and the conversion of United Bank to a federally
chartered savings bank (including the change of the name of the bank).

44

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Income
Tax Expense.Income tax expense decreased to $3.8
million for the year ended December 31, 2004 from $3.9 million for the prior
year. The effective tax rate was 40.9% and 39.9% for 2004 and 2003,
respectively. The higher effective tax rate in 2004 reflected the higher
proportion of our interest-earning assets held at United Bank compared to UCB
Securities, Inc., our security corporation, whose earnings are taxed by
Massachusetts at a lower rate.

Average
balances and yields. The following table sets
forth average balance sheets, average yields and costs, and certain other
information for the periods indicated. No tax-equivalent yield adjustments were
made, as the effect thereof was not material. All average balances are daily
average balances. Non-accrual loans were included in the computation of average
balances, but have been reflected in the table as loans carrying a zero yield.

|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|------------------------------------------------------------------------- |  | ------------------------ | ------- | -------------------------- | - | -------------- |  | ----------------- | ------ | -------------------------- | - | ------------- |  | - | ------ |  |  | ------ | -
|                                                                          |  | Years Ended December 31, |        
|                                                                          |  |                          |        
|                                                                          |  | 2005                     |         | 2004                       |  
|                                                                          |  |                          |         |                            |  
|                                                                          |  | Average
  Balance        |         | Interest
  and
  Dividends |   | Yield/ 
  Cost |  | Average
  Balance |        | Interest
  and
  Dividends |   | Yield/
  Cost | 
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               | 
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Interest-earning assets:                                                  |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Loans                                                                     |  | $                        | 596,986 |                            | $ | 34,540         |  |                   | 5.79   | %                          | $ | 538,571       |  | $ | 29,682 |  |  | 5.51   | %
|Investment
securities                                                     |  |                          | 207,301 |                            |   | 7,970          |  |                   | 3.84   |                            |   | 179,036       |  |   | 6,582  |  |  | 3.68   |  
|Other
interest-earning assets                                             |  |                          | 23,076  |                            |   | 723            |  |                   | 3.13   |                            |   | 14,764        |  |   | 268    |  |  | 1.82   |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total interest-earning assets                                             |  |                          | 827,363 |                            |   | 43,233         |  |                   | 5.23   |                            |   | 732,371       |  |   | 36,532 |  |  | 4.99   |  
|Noninterest-earning assets                                                |  |                          | 31,458  |                            |   |                |  |                   |        |                            |   | 27,040        |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total assets                                                              |  | $                        | 858,821 |                            |   |                |  |                   |        |                            | $ | 759,411       |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Interest-bearing liabilities:                                             |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Savings
accounts                                                          |  | $                        | 93,477  |                            |   | 647            |  |                   | 0.69   |                            | $ | 93,900        |  |   | 698    |  |  | 0..74  |  
|Money
market/NOW accounts                                                 |  |                          | 186,067 |                            |   | 3,246          |  |                   | 1.74   |                            |   | 187,664       |  |   | 1,800  |  |  | 0.96   |  
|Certificates of deposit                                                   |  |                          | 274,002 |                            |   | 8,407          |  |                   | 3.07   |                            |   | 245,395       |  |   | 6,497  |  |  | 2.65   |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total interest-bearing deposits                                           |  |                          | 553,546 |                            |   | 12,300         |  |                   | 2.22   |                            |   | 526,959       |  |   | 8,995  |  |  | 1.71   |  
|FHLB
advances                                                             |  |                          | 96,743  |                            |   | 3,671          |  |                   | 3.79   |                            |   | 85,413        |  |   | 2,960  |  |  | 3.47   |  
|Other
interest-bearing liabilities                                        |  |                          | 9,038   |                            |   | 235            |  |                   | 2.60   |                            |   | 6,732         |  |   | 193    |  |  | 2.91   |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total interest-bearing liabilities                                        |  |                          | 659,327 |                            |   | 16,206         |  |                   | 2.46   |                            |   | 619,105       |  |   | 12,148 |  |  | 1.96   |  
|Noninterest-bearing liabilities                                           |  |                          | 101,376 |                            |   |                |  |                   |        |                            |   | 80,525        |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total liabilities                                                         |  |                          | 760,703 |                            |   |                |  |                   |        |                            |   | 699,630       |  |   |        |  |  |        |  
|Stockholders equity                                                      |  |                          | 98,118  |                            |   |                |  |                   |        |                            |   | 59,781        |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Total liabilities and stockholders equity                                |  | $                        | 858,821 |                            |   |                |  |                   |        |                            | $ | 759,411       |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Net
interest income                                                       |  |                          |         |                            | $ | 27,027         |  |                   |        |                            |   |               |  | $ | 24,384 |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Interest
rate spread(1)                                                   |  |                          |         |                            |   |                |  |                   | 2.77   | %                          |   |               |  |   |        |  |  | 3.03   | %
|Net
interest-earning assets(2)                                            |  | $                        | 168,735 |                            |   |                |  |                   |        |                            | $ | 113,267       |  |   |        |  |  |        |  
|                                                                          |  |                          |         |                            |   |                |  |                   |        |                            |   |               |  |   |        |  |  |        |  
|Net
interest margin(3)                                                    |  |                          |         |                            |   |                |  |                   | 3.27   | %                          |   |               |  |   |        |  |  | 3.33   | %
|Average
interest-earning assets to average
  interest-bearing liabilities |  |                          |         |                            |   |                |  |                   | 125.49 | %                          |   |               |  |   |        |  |  | 118.30 | %

|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|------------------------------------------------------------------------- |  | ------------------------ | ------- | -------------------------- | - | ------------- |  |  | ------ | -
|                                                                          |  | Years Ended December 31, |        
|                                                                          |  |                          |        
|                                                                          |  | 2003                     |        
|                                                                          |  |                          |        
|                                                                          |  | Average
  Balance        |         | Interest
  and
  Dividends |   | Yield/
  Cost | 
|                                                                          |  |                          |         |                            |   |               | 
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Interest-earning assets:                                                  |  |                          |         |                            |   |               |  |  |        |  
|Loans                                                                     |  | $                        | 487,579 |                            | $ | 28,742        |  |  | 5.89   | %
|Investment
securities                                                     |  |                          | 141,554 |                            |   | 4,714         |  |  | 3.33   |  
|Other
interest-earning assets                                             |  |                          | 21,881  |                            |   | 320           |  |  | 1.45   |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total interest-earning assets                                             |  |                          | 651,014 |                            |   | 33,776        |  |  | 5.19   |  
|Noninterest-earning assets                                                |  |                          | 31,188  |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total assets                                                              |  | $                        | 682,202 |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Interest-bearing liabilities:                                             |  |                          |         |                            |   |               |  |  |        |  
|Savings
accounts                                                          |  | $                        | 85,570  |                            |   | 796           |  |  | 0.93   |  
|Money
market/NOW accounts                                                 |  |                          | 186,118 |                            |   | 1,883         |  |  | 1.01   |  
|Certificates of deposit                                                   |  |                          | 223,463 |                            |   | 6,581         |  |  | 2.95   |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total interest-bearing deposits                                           |  |                          | 495,151 |                            |   | 9,260         |  |  | 1.87   |  
|FHLB
advances                                                             |  |                          | 57,675  |                            |   | 2,151         |  |  | 3.73   |  
|Other
interest-bearing liabilities                                        |  |                          | 6,363   |                            |   | 172           |  |  | 2.70   |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total interest-bearing liabilities                                        |  |                          | 559,189 |                            |   | 11,583        |  |  | 2.07   |  
|Noninterest-bearing liabilities                                           |  |                          | 67,973  |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total liabilities                                                         |  |                          | 627,162 |                            |   |               |  |  |        |  
|Stockholders equity                                                      |  |                          | 55,040  |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Total liabilities and stockholders equity                                |  | $                        | 682,202 |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Net
interest income                                                       |  |                          |         |                            | $ | 22,193        |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Interest
rate spread(1)                                                   |  |                          |         |                            |   |               |  |  | 3.12   | %
|Net
interest-earning assets(2)                                            |  | $                        | 91,826  |                            |   |               |  |  |        |  
|                                                                          |  |                          |         |                            |   |               |  |  |        |  
|Net
interest margin(3)                                                    |  |                          |         |                            |   |               |  |  | 3.41   | %
|Average
interest-earning assets to average
  interest-bearing liabilities |  |                          |         |                            |   |               |  |  | 116.42 | %

| |     |                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (1) | Net interest
  rate spread represents the difference between the yield on average interest-earning
  assets and the cost of average interest-bearing liabilities.
| |     |                                                                                                                                                                  
| | (2) | Net
  interest-earning assets represents total interest-earning assets less total
  interest-bearing liabilities.                                                
| |     |                                                                                                                                                                  
| | (3) | Net interest
  margin represents net interest income divided by average total
  interest-earning assets.                                                         

45

---



Rate/Volume Analysis

The
following table presents the effects of changing rates and volumes on our net
interest income for the periods indicated. 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). The net column represents the sum of the
prior columns. For purposes of this table, changes attributable to both rate
and volume, which cannot be segregated, have been allocated proportionately,
based on the changes due to rate and the changes due to volume.

|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|---------------------------------- |  | ---------------------------------------- | ----- | ------------------------------------- | - | -------------------------- | - | ------ | ----- | ---- | - | ----- | - | - | ------ | - | - | ----- | -
|                                   |  | Years Ended December 31,
  2005 vs. 2004 |       | Years Ended December 31,2004 vs. 2003 |  
|                                   |  |                                          |       |                                       |  
|                                   |  | Increase (Decrease) Due to               |       |                                       |   | Increase (Decrease) Due to |   |        |      
|                                   |  |                                          |       |                                       |   |                            |   |        |      
|                                   |  | Volume                                   |       | Rate                                  |   | Net                        |   | Volume |       | Rate |   | Net   |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |  
|                                   |  | (In thousands)                           |      
|Interest-earning assets:           |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Loans                              |  | $                                        | 3,329 |                                       | $ | 1,529                      |   | $      | 4,858 |      | $ | 2,488 |   | $ | (1,548 | ) | $ | 940   |  
|Investment securities              |  |                                          | 1,076 |                                       |   | 312                        |   |        | 1,388 |      |   | 1,461 |   |   | 405    |   |   | 1,866 |  
|Other interest-earning assets      |  |                                          | 199   |                                       |   | 256                        |   |        | 455   |      |   | (118  | ) |   | 68     |   |   | (50   | )
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Total interest-earning assets      |  |                                          | 4,604 |                                       |   | 2,097                      |   |        | 6,701 |      |   | 3,831 |   |   | (1,075 | ) |   | 2,756 |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Interest-bearing liabilities:      |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Savings accounts                   |  |                                          | (3    | )                                     |   | (48                        | ) |        | (51   | )    |   | 72    |   |   | (170   | ) |   | (98   | )
|Money market/NOW accounts          |  |                                          | (15   | )                                     |   | 1,461                      |   |        | 1,446 |      |   | 17    |   |   | (100   | ) |   | (83   | )
|Certificates of deposit            |  |                                          | 808   |                                       |   | 1,102                      |   |        | 1,910 |      |   | 614   |   |   | (698   | ) |   | (84   | )
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Total interest-bearing deposits    |  |                                          | 790   |                                       |   | 2,515                      |   |        | 3,305 |      |   | 703   |   |   | (968   | ) |   | (265  | )
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|FHLB Advances                      |  |                                          | 414   |                                       |   | 297                        |   |        | 711   |      |   | 971   |   |   | (162   | ) |   | 809   |  
|Other interest-bearing liabilities |  |                                          | 61    |                                       |   | (19                        | ) |        | 42    |      |   | (47   | ) |   | 68     |   |   | 21    |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Total interest-bearing liabilities |  |                                          | 1,258 |                                       |   | 2,800                      |   |        | 4,058 |      |   | 1,627 |   |   | (1,062 | ) |   | 565   |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  
|Change in
net interest income      |  | $                                        | 3,346 |                                       | $ | (703                       | ) | $      | 2,643 |      | $ | 2,204 |   | $ | (13    | ) | $ | 2,191 |  
|                                   |  |                                          |       |                                       |   |                            |   |        |       |      |   |       |   |   |        |   |   |       |  

Management of Market Risk

General.
The majority of our assets and liabilities are monetary in nature.
Consequently, our most significant form of market risk is interest rate risk.
Our assets, consisting primarily of mortgage loans, have longer maturities than
our liabilities, consisting primarily of deposits. As a result, a principal
part of our business strategy is to manage interest rate risk and reduce the
exposure of our net interest income to changes in market interest rates.
Accordingly, our Board of Directors has established an Asset/Liability
Management Committee which is responsible for evaluating the interest rate risk
inherent in our assets and liabilities, for determining the level of risk that
is appropriate, given our business strategy, operating environment, capital,
liquidity and performance objectives, and for managing this risk consistent
with the guidelines approved by the Board of Directors. With the assistance of
an interest rate risk management consultant, senior management monitors the
level of interest rate risk on a regular basis and the Asset/Liability
Management Committee generally meets at least on a monthly basis to review our
asset/liability policies and interest rate risk position.

We
have sought to manage our interest rate risk in order to minimize the exposure
of our earnings and capital to changes in interest rates. As part of our
ongoing asset-liability management, we currently use the following strategies
to manage our interest rate risk: (i) using alternative funding sources, such
as advances from the Federal Home Loan Bank of Boston, to match fund longer-term
one- to four-family residential mortgage loans; (ii) investing in variable-rate
mortgage-backed securities; (iii) continued emphasis on increasing core
deposits; (iv) offering adjustable-rate and shorter-term commercial real estate
loans and commercial and industrial loans; and (v) offering a variety of
consumer loans, which typically have shorter-terms. Shortening
the average maturity of our interest-earning assets by increasing our
investments in shorter-term loans and securities, as well as loans and
securities with variable rates of interest, helps to better match the
maturities and interest rates of our assets and liabilities, thereby reducing
the exposure of our net interest income to changes in market interest rates. By following these strategies,
we believe that we are well-positioned to react to increases in market interest
rates.

Net
Portfolio Value. The Office of Thrift Supervision requires the
computation of amounts by which the net present value of an institutions cash
flow from assets, liabilities and off balance sheet items (the institutions
net

46

---



portfolio
value or NPV) would change in the event of a range of assumed changes in
market interest rates.  The Office of
Thrift Supervision provides all institutions that file a Consolidated
Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report
with an interest rate sensitivity report of net portfolio value.  The Office of Thrift Supervision simulation
model uses a discounted cash flow analysis and an option-based pricing approach
to measuring the interest rate sensitivity of net portfolio value.  Historically, the Office of Thrift
Supervision model estimated the economic value of each type of asset, liability
and off-balance sheet contract under the assumption that the United States
Treasury yield curve increases or decreases instantaneously by 100 to 300 basis
points in 100 basis point increments.
However, given the current low level of market interest rates, we did
not prepare a NPV calculation for an interest rate decrease of greater than 100
basis points.  A basis point equals one-hundredth
of one percent, and 100 basis points equals one percent.  An increase in interest rates from 3% to 4%
would mean, for example, a 100 basis point increase in the Change in Interest
Rates column below.  The Office of
Thrift Supervision provides us the results of the interest rate sensitivity
model, which is based on information we provide to the Office of Thrift
Supervision to estimate the sensitivity of our net portfolio value.

The
table below, sets forth, as of September 30, 2005, the latest date for which
such data is available, the estimated changes in our net portfolio value that
would result from the designated instantaneous changes in the United States
Treasury yield curve.  Computations of
prospective effects of hypothetical interest rate changes are based on numerous
assumptions, including relative levels of market interest rates, loan
prepayments and deposit decay, and should not be relied upon as indicative of
actual results.  This data is for United
Bank and its subsidiary only and does not include any yield curve changes in
the assets of United Financial Bancorp, Inc.

|                                                |  |                        |                 |                                          |                                        |                                                        |   |  |     |    |  |       |   |  |      |  
|----------------------------------------------- |  | ---------------------- | --------------- | ---------------------------------------- | -------------------------------------- | ------------------------------------------------------ | - |  | --- | -- |  | ----- | - |  | ---- | -
|Change in
  Interest Rates
  (basis points) (1) |  | Estimated
  NPV (2)    |                 | Estimated
  Increase
  (Decrease in NPV) |                                        | NPV as a
  Percentage of
  Present Value of Assets (3) |  
|                                                |  |                        |                 |                                         
|                                                |  |                        | NPV Ratio
  (4) |                                          | Increase
  (Decrease)
  (basis points) |                                                       
|                                                |  |                        |                 |                                          |                                       
|                                                |  | Amount                 |                 | Percent                                  |                                        |                                                        |  
|                                                |  |                        |                 |                                          |                                        |                                                        |   |  |     |    | 
|                                                |  | (Dollars in thousands) |                 |                                          |                                        |                                                        |   |  |    
|                                                |  |                        |                 |                                          |                                        |                                                        |   |  |     |    |  |       |   |  |      |  
|+300                                            |  | $                      | 80,643          |                                          | $                                      | (42,812                                                | ) |  | (35 | )% |  | 9.66  | % |  | (420 | )
|+200                                            |  |                        | 94,825          |                                          |                                        | (28,629                                                | ) |  | (23 | )  |  | 11.12 |   |  | (275 | )
|+100                                            |  |                        | 109,496         |                                          |                                        | (13,958                                                | ) |  | (11 | )  |  | 12.56 |   |  | (131 | )
|0                                               |  |                        | 123,454         |                                          |                                        | 13.86                                                  |   |  |     |    |  |       |   |  |      |  
|-100                                            |  |                        | 132,091         |                                          |                                        | 8,637                                                  |   |  | 7   |    |  | 14.61 |   |  | 74   |  



---

|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(1) | Assumes an
  instantaneous uniform change in interest rates at all maturities.                                          
|   
|(2) | NPV is the
  discounted present value of expected cash flows from assets, liabilities and
  off-balance sheet contracts.
|   
|(3) | Present
  value of assets represents the discounted present value of incoming cash
  flows on interest-earning assets.  
|   
|(4) | NPV Ratio
  represents NPV divided by the present value of assets.                                                      

The
table above indicates that at September 30, 2005, in the event of a 100 basis
point decrease in interest rates, we would experience a 7% increase in net
portfolio value.  In the event of a 300
basis point increase in interest rates, we would experience a 35% decrease in
net portfolio value.  These changes in
net portfolio value are within the limitations established in our asset and
liability management policies.

Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement.  Modeling changes in
net portfolio value require making certain assumptions that may or may not
reflect the manner in which actual yields and costs respond to changes in
market interest rates.  In this regard,
the net portfolio value table presented assumes that the composition of our
interest-sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and assumes that a particular
change in interest rates is reflected uniformly across the yield curve
regardless of the duration or repricing of specific assets and liabilities.  Accordingly, although the net portfolio
value table provides an indication of our interest rate risk exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
our net interest income and will differ from actual results.

47

---



Liquidity and Capital Resources

Liquidity
is the ability to meet current and future financial obligations of a short-term
nature.  Our primary sources of funds
consist of deposit inflows, loan repayments and maturities and sales of
securities. 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.  Our Asset/Liability
Management Committee is responsible for establishing and monitoring our
liquidity targets and strategies in order to ensure that sufficient liquidity
exists for meeting the borrowing needs of our customers as well as
unanticipated contingencies.  We seek to
maintain a liquidity ratio of 10% or greater.
For the year ended December 31, 2005, our liquidity ratio averaged
34.67%.

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
and short- and intermediate-term securities.

Our
most liquid assets are cash and cash equivalents. The levels of these assets
are dependent on our operating, financing, lending and investing activities
during any given period. At December 31, 2005, cash and cash equivalents
totaled $15.8 million.  Securities
classified as available-for-sale, which provide additional sources of
liquidity, totaled $226.5 million at December 31, 2005. In addition, at December
31, 2005, we had the ability to borrow a total of approximately $209 million
from the Federal Home Loan Bank of Boston.
On that date, we had $107.5 million in advances outstanding.

Our
cash flows are derived from operating activities, investing activities and
financing activities as reported in our Consolidated Statements of Cash Flows
included in our Consolidated Financial Statements.

At
December 31, 2005, we had $14.5 million in loan commitments outstanding. In
addition to commitments to originate loans, we had $114 million in unused lines
of credit to borrowers. Certificates of deposit due within one year of December
31, 2005 totaled $196.1 million, or 30.0% 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 Federal Home Loan Bank advances.
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 December 31, 2006. 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.

Our
primary investing activities are the origination of loans and the purchase of
securities. In 2005, we originated $290.0 million of loans and purchased $124.9
million of securities.  In 2004, we
originated $292.2 million of loans and purchased $58.6 million of securities.

Financing
activities consist primarily of activity in deposit accounts and Federal Home
Loan Bank advances.  We experienced a
net increase in total deposits of $39.9 million and $18.9 million for the years
ended December 31, 2005 and 2004, 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.

Liquidity
management is both a daily and long-term function of business management.  If we require funds beyond our ability to
generate them internally, borrowing agreements exist with the Federal Home Loan
Bank of Boston, which provide an additional source of funds.  Federal Home Loan Bank advances reflected
net increases of $15.2 million and $9.9 million during the years ended December
31, 2005 and 2004, respectively.
Federal Home Loan Bank advances have primarily been used to fund loan
demand and to purchase securities.  Our
current asset/liability management strategy has been to match-fund
longer-term one- to four-family residential mortgage loans, with Federal Home
Loan Bank advances.

United
Bank is subject to various regulatory capital requirements, 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 December 31, 2005, United Bank exceeded all regulatory capital
requirements. United Bank is considered well-capitalized under

48

---



regulatory
guidelines. See Supervision and RegulationFederal Banking RegulationCapital
Requirements and Note L of the Notes to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements and Aggregate
Contractual Obligations

Commitments.As
a financial services provider, we routinely are a party to various financial
instruments with off-balance-sheet risks, such as commitments to extend credit,
standby letters of credit and unused lines of credit.  While these contractual obligations represent our future cash
requirements, a significant portion of commitments to extend credit may expire
without being drawn upon.  Such
commitments are subject to the same credit policies and approval process
accorded to loans made by us.  We
consider commitments to extend credit in determining our allowance for loan
losses.  For additional information, see
Note J, Commitments, to our Consolidated Financial Statements.

Contractual
Obligations.
In the ordinary course of our operations, we enter into certain
contractual obligations.  Such
obligations include operating leases for premises and equipment.

The
following table summarizes our significant fixed and determinable contractual
obligations and other funding needs by payment date at December 31, 2005.  The payment amounts represent those amounts
due to the recipient and do not include any unamortized premiums or discounts
or other similar carrying amount adjustments.

|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 
|--------------------------------- |  | ---------------------- | ----------------- |  | - | ---------------------- |  | - | ----------------------- |  | - | ---------------------- |  | - | ------- | 
|                                  |  | Payments Due by Period |                  
|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 
|Contractual Obligations           |  |                        | Less thanOne Year |  |   | One to
  Three
  Years |  |   | Three to
  Five
  Years |  |   | More than
  Five Years |  |   | Total   | 
|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 
|                                  |  | (In thousands)         |                  
|                                 
|Certificates
  of Deposit         |  | $                      | 196,099           |  | $ | 59,911                 |  | $ | 21,625                  |  | $ |                       |  | $ | 277,635 | 
|Federal Home
  Loan Bank advances |  |                        | 13,799            |  |   | 29,393                 |  |   | 20,318                  |  |   | 38,371                 |  |   | 101,880 | 
|Repurchase
  Agreements           |  |                        | 8,434             |  |   |                       |  |   |                        |  |   |                       |  |   | 8,434   | 
|Standby
  letters of credit       |  |                        | 1,225             |  |   | 158                    |  |   |                        |  |   |                       |  |   | 1,383   | 
|Operating
  leases                |  |                        | 216               |  |   | 273                    |  |   | 179                     |  |   |                       |  |   | 668     | 
|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 
|Total                             |  | $                      | 219,773           |  | $ | 89,735                 |  | $ | 42,122                  |  | $ | 38,371                 |  | $ | 390,001 | 
|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 
|Commitments
  to extend credit    |  | $                      | 145,343           |  | $ |                       |  | $ |                        |  | $ |                       |  | $ | 145,343 | 
|                                  |  |                        |                   |  |   |                        |  |   |                         |  |   |                        |  |   |         | 

Recent
Accounting Pronouncements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At its March
  2004 meeting, the Emerging Issues Task Force (EITF) reached a consensus on
  EITF Issue No. 03-1, Meaning of Other-than-Temporary Impairment and Its
  Application to Certain Investments (EITF 03-1), that prescribes guidance
  to be used to determine when an investment in debt and equity securities is
  considered impaired, whether the impairment is other than temporary and the
  measurement of an impaired loss. EITF 03-1 also specifies certain
  disclosures for investment securities that are impaired at the balance sheet
  date but for which an other-than-temporary impairment has not been
  recognized.  These disclosures are
  included herein in Note C to the consolidated financial statements.  In November 2005, the FASB issued a staff
  position (FSP) with implementation guidance for impairment measurement and
  recognition, which became effective for reporting periods beginning after
  December 15, 2005 with earlier application permitted.  The guidance in the FSP is not expected to
  have any effect on the Companys financial condition or results of
  operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | In December
  2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payments,
  (SFAS No. 123(R)), which became effective as of July 1, 2005.  United
  Bank does not currently have any outstanding share-based compensation
  arrangements.  In the likely event
  that such arrangements are approved in the future (see Note O to the
  consolidated financial statement), the applicability of SFAS No.123(R) would
  have an effect on the Companys results of operations, the materiality of
  which is currently unknown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

49

---



Impact of
Inflation and Changing Prices

The
consolidated financial statements and related notes of United Financial Bancorp,
Inc. have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP).  GAAP generally requires the measurement of financial position and
operating results in terms of historical dollars without consideration for
changes in the relative purchasing power of money over time due to
inflation.  The impact of inflation is
reflected in the increased cost of our operations.  Unlike industrial companies, our assets and liabilities are
primarily monetary in nature.  As a
result, changes in market interest rates have a greater impact on performance
than the effects of inflation.

|         |                                                          
|-------- | ---------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK

For
information regarding market risk see Item 7- Managements Discussion and
Analysis of Financial Conditions and Results of Operation.

|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The
Financial Statements are included in Part III, Item 15 of this Form 10-K.

|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not
Applicable.

|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

| |     |                                                    
| | --- | ---------------------------------------------------
| | (a) | Evaluation
  of disclosure controls and procedures.

Under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the fiscal year (the Evaluation Date). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective in timely alerting them to the material information relating to us
(or our consolidated subsidiaries) required to be included in our periodic SEC
filings.

| |     |                                
| | --- | -------------------------------
| | (b) | Changes in
  internal controls.

There
were no significant changes made in our internal controls during the period
covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.

See
the Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION

Not
Applicable.

50

---



PART
III

|         |                                                     
|-------- | ----------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE
  REGISTRANT

The
information required by this Item will be filed with the Securities and
Exchange Commission by an amendment to this Annual Report on Form 10-K.

|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

The
information required by this Item will be filed with the Securities and
Exchange Commission by an amendment to this Annual Report on Form 10-K.

|         |                                                                                               
|-------- | ----------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The
information required by this Item will be filed with the Securities and
Exchange Commission by an amendment to this Annual Report on Form 10-K.

|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

The
information required by this Item will be filed with the Securities and
Exchange Commission by an amendment to this Annual Report on Form 10-K.

|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
information required by this Item will be filed with the Securities and
Exchange Commission by an amendment to this Annual Report on Form 10-K.

|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

| |        |                       
| | ------ | ----------------------
| | (a)(1) | Financial
  Statements

| |                                                                |     |                                                                                                                            
| | -------------------------------------------------------------- | --- | ---------------------------------------------------------------------------------------------------------------------------
| | The
  following documents are filed as part of this Form 10-K.
| |                                                                |     |                                                                                                                            
| |                                                                | (A) | Report of
  Independent Registered Public Accounting Firm                                                                  
| |                                                                |     |                                                                                                                            
| |                                                                | (B) | Consolidated
  Balance Sheets - at December 31, 2005 and 2004                                                              
| |                                                                |     |                                                                                                                            
| |                                                                | (C) | Consolidated
  Statements of Earnings - Years ended December 31, 2005, 2004 and 2003                                       
| |                                                                |     |                                                                                                                            
| |                                                                | (D) | Consolidated
  Statements of Shareholders Equity and Comprehensive Income - Years ended
  December 31, 2005, 2004 and 2003
| |                                                                |     |                                                                                                                            
| |                                                                | (E) | Consolidated
  Statements of Cash Flows - Years ended December 31, 2005, 2004 and 2003                                     
| |                                                                |     |                                                                                                                            
| |                                                                | (F) | Notes to
  Consolidated Financial Statements.                                                                              

| |        |                                
| | ------ | -------------------------------
| | (a)(2) | Financial
  Statement Schedules
| |        |                                
| |        | None.                          
| |        |                                
| | (a)(3) | Exhibits                       

|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|3.1 | Charter of
  United Financial Bancorp, Inc.*                                                          
|   
|3.2 | Resolution
  and Consent of Sole Stockholder Amending the Charter of United Financial
  Bancorp, Inc.*

51

---



|      |                                                                                                                                   
|----- | ----------------------------------------------------------------------------------------------------------------------------------
|3.3   | Bylaws of
  United Financial Bancorp, Inc.*                                                                                       
|     
|4     | Form of
  Common Stock Certificate of United Financial Bancorp, Inc.*                                                             
|     
|10.1  | Form of
  Employee Stock Ownership Plan*                                                                                          
|     
|10.2  | Executive
  Supplemental Compensation Agreement by and between United Bank and Richard B.
  Collins*                              
|     
|10.3  | Executive
  Supplemental Compensation Agreement by and between United Bank and Keith E.
  Harvey*                                 
|     
|10.4  | Executive
  Supplemental Compensation Agreement by and between United Bank and John J.
  Patterson*                               
|     
|10.5  | Restated
  Executive Supplemental Compensation Agreement by and between United Bank and
  Donald F.X. Lynch*                      
|     
|10.6  | United Bank
  2004 and 2005 Incentive Plans*                                                                                      
|     
|10.7  | Deferred
  Income Agreement by and between United Bank and Donald G. Helliwell*                                                   
|     
|10.8  | Deferred
  Income Agreement by and between United Bank and Robert W. Bozenhard, Jr.*                                              
|     
|10.9  | Deferred
  Income Agreement by and between United Bank and George W. Jones*                                                       
|     
|10.10 | Directors
  Fee Continuation Plan*                                                                                                
|     
|10.11 | Form of
  Employment Agreement by and between United Bank and Richard B. Collins*                                                 
|     
|10.12 | Form of
  Change in Control Agreement by and between United Bank and certain executive
  officers*                                
|     
|13    | Portions of
  Annual Report to Stockholders                                                                                       
|     
|14    | Code of
  Ethics                                                                                                                  
|     
|21    | Subsidiaries
  of Registrant*                                                                                                     
|     
|31.1  | Certification
  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002                            
|     
|31.2  | Certification
  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
  of 2002                            
|     
|32    | Certification
  of Chief Executive Officer and Chief Financial Officer pursuant to Section
  906 of the Sarbanes-Oxley Act of 2002



---

|  |                                                                                                                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Incorporated
  by reference to the Registration Statement on Form S-1 of United Financial
  Bancorp, Inc. (file no. 333-123371), originally filed with the Securities and
  Exchange Commission on March 16, 2005.

52

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|      |                |  |                                  |                                                   | 
|----- | -------------- |  | -------------------------------- | ------------------------------------------------- | 
|      |                |  | UNITED
  FINANCIAL BANCORP, INC. |                                                  
|     
|Date: | March 30, 2006 |  | By:                              | /s/ Richard B. Collins                            | 
|      |                |  |                                  |                                                   | 
|      |                |  |                                  | Richard B. Collins                                | 
|      |                |  |                                  | Chief Executive Officer,
  President and Director | 
|      |                |  |                                  | (Duly Authorized
  Representative)                | 

Pursuant
to the requirements of the Securities Exchange of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|                               |  |                                                        |  |                 
|------------------------------ |  | ------------------------------------------------------ |  | ----------------
|Signatures                     |  | Title                                                  |  | Date            
|                               |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Richard B. Collins         |  | Chief Executive Officer,
  President and               |  | March
  30, 2006
|                               |  | Director (Principal Executive Officer)                 |  |                 
|Richard B. Collins             |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Donald F.X. Lynch          |  | Executive Vice President
  and Chief Financial Officer |  | March
  30, 2006
|                               |  | (Principal Financial and Accounting Officer)           |  |                 
|Donald F. X. Lynch             |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Robert W. Bozenhard,
  Jr. |  | Chairman of the Board                                  |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Robert W. Bozenhard, Jr.       |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Michael F. Crowley         |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Michael F. Crowley             |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Carol Moore Cutting        |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Carol Moore Cutting            |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Donald G. Helliwell        |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Donald G. Helliwell            |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ George W. Jones            |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|George W. Jones                |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Carol A. Leary             |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Carol A. Leary                 |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ G. Todd Marchant           |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|G. Todd Marchant               |  |                                                        |  |                 
|                               |  |                                                        |  |                 
|/s/ Kevin E. Ross              |  | Director                                               |  | March
  30, 2006
|                               |  |                                                        |  |                 
|Kevin E. Ross                  |  |                                                        |  |                 

53

---



|                           |  |          |  |                 
|-------------------------- |  | -------- |  | ----------------
|/s/ Robert A. Stewart, Jr. |  | Director |  | March
  30, 2006
|                           |  |          |  |                 
|Robert A. Stewart, Jr.     |  |          |  |                 
|                           |  |          |  |                 
|/s/ Thomas H. Themistos    |  | Director |  | March
  30, 2006
|                           |  |          |  |                 
|Thomas H. Themistos        |  |          |  |                 
|                           |  |          |  |                 
|                           |  |          |  |                 
|/s/ Michael F. Werenski    |  | Director |  | March
  30, 2006
|                           |  |          |  |                 
|Michael F. Werenski        |  |          |  |                 

54

---



UNITED
FINANCIAL BANCORP, INC.

INDEX TO
FINANCIAL STATEMENTS

|                                                          |                                                                                |     
|--------------------------------------------------------- | ------------------------------------------------------------------------------ | ----
|                                                          |                                                                                |     
|                                                          |                                                                                |     
|                                                          |                                                                                | Page
|                                                          |                                                                                |     
|                                                          |                                                                                |     
|Report of Independent Registered Public
  Accounting Firm | F-2                                                                           
|                                                          |                                                                                |     
|Financial Statements                                      |                                                                               
|                                                          |                                                                                |     
|                                                          | Consolidated Balance
  Sheets                                                  | F-3 
|                                                          |                                                                                |     
|                                                          | Consolidated Statements
  of Earnings                                          | F-4 
|                                                          |                                                                                |     
|                                                          | Consolidated Statements
  of Stockholders
  Equity and
  Comprehensive Income | F-5 
|                                                          |                                                                                |     
|                                                          | Consolidated Statements
  of Cash Flows                                        | F-6 
|                                                          |                                                                                |     
|                                                          | Notes to Consolidated
  Financial Statements                                   | F-8 

All Schedules are omitted as the required information
is either not applicable or is included in the financial statements or related
notes.

F-1

---



Report of Independent
Registered Public Accounting Firm

Board of
DirectorsUnited
Financial Bancorp, Inc.

We
have audited the accompanying consolidated balance sheets of United Financial
Bancorp, Inc. and subsidiary (the Bank) as of December 31, 2005 and 2004, and
the related consolidated statements of earnings, stockholders equity and
comprehensive income and cash flows for each of the three years in the period
ended December 31, 2005.  These
financial statements are the responsibility of the Banks management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement.  The Bank is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting.  Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Banks internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 United Financial
Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.

| |                       
| | ----------------------
| | /s/ GRANT
THORNTON LLP

Boston,
Massachusetts
January 27, 2006
(except for Note O, as to which the
  date is February 16, 2006)

F-2

---



|                                                
|------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY   
|Consolidated Balance Sheets                     
|December 31, 2005 and 2004                      
|(Dollars in thousands, except per share amounts)
|                                                

|                                                                                                                                          |  |              |         |              |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------ | - | ------- | -
|                                                                                                                                          |  | December 31, |         | December 31, |  
|                                                                                                                                          |  | 2005         |         | 2004         |  
|                                                                                                                                          |  |              |         |              |  
|ASSETS                                                                                                                                    |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Cash and due from banks                                                                                                                   |  | $            | 15,841  |              | $ | 15,772  |  
|Interest bearing deposits                                                                                                                 |  |              | 2       |              |   | 7,180   |  
|Liquidity and cash funds                                                                                                                  |  |              |        |              |   | 281     |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Total cash and
cash
  equivalents                                                                                                         |  |              | 15,843  |              |   | 23,233  |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Securities available for sale, at
 fair value                                                                                             |  |              | 226,465 |              |   | 152,329 |  
|Securities to
be held to
  maturity, at amortized cost (fair value $3,298 in 2005 and $2,498 in 2004)                                     |  |              | 3,325   |              |   | 2,498   |  
|Loans, net of
allowance for
  loan losses of $6,382 in 2005 and $5,750 in 2004                                                            |  |              | 630,558 |              |   | 569,243 |  
|Other real estate owned                                                                                                                   |  |              | 1,602   |              |   |        |  
|Accrued interest receivable                                                                                                               |  |              | 3,928   |              |   | 2,862   |  
|Deferred tax asset, net                                                                                                                   |  |              | 1,245   |              |   | 1,551   |  
|Stock in the Federal Home Loan Bank of
  Boston                                                                                           |  |              | 6,588   |              |   | 6,021   |  
|Banking premises and equipment, net                                                                                                       |  |              | 8,236   |              |   | 7,671   |  
|Bank-owned life insurance                                                                                                                 |  |              | 6,031   |              |   | 5,705   |  
|Other assets                                                                                                                              |  |              | 2,692   |              |   | 895     |  
|                                                                                                                                          |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|TOTAL
ASSETS                                                                                                                              |  | $            | 906,513 |              | $ | 772,008 |  
|                                                                                                                                          |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                      |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Liabilities:                                                                                                                              |  |              |         |              |   |         |  
|Deposits:                                                                                                                                 |  |              |         |              |   |         |  
|Interest
bearing                                                                                                                          |  | $            | 560,310 |              | $ | 527,426 |  
|Non-interest
bearing                                                                                                                      |  |              | 93,301  |              |   | 86,246  |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Total
deposits                                                                                                                            |  |              | 653,611 |              |   | 613,672 |  
|Federal Home Loan Bank of Boston advances                                                                                                 |  |              | 101,880 |              |   | 86,694  |  
|Repurchase agreements                                                                                                                     |  |              | 8,434   |              |   | 4,317   |  
|Escrow funds held for borrowers                                                                                                           |  |              | 1,129   |              |   | 954     |  
|Accrued expenses and other liabilities                                                                                                    |  |              | 4,454   |              |   | 4,116   |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Total
liabilities                                                                                                                         |  |              | 769,508 |              |   | 709,753 |  
|                                                                                                                                          |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|Stockholders equity:                                                                                                                     |  |              |         |              |   |         |  
|Preferred
stock, par value $0.01
  per share, authorized 5,000,000 shares; none issued                                                    |  |              |        |              |   |        |  
|Common stock,
par value $0.01
  per share, authorized 60,000,000 shares; 17,205,995 shares issued in 2005 and
  100 shares issued in 2004 |  |              | 172     |              |   |        |  
|Paid-in capital                                                                                                                           |  |              | 78,446  |              |   |        |  
|Retained earnings                                                                                                                         |  |              | 66,944  |              |   | 62,667  |  
|Unearned ESOP shares                                                                                                                      |  |              | (6,092  | )            |   |        |  
|Accumulated other comprehensive loss, net
  of taxes                                                                                      |  |              | (2,465  | )            |   | (412    | )
|                                                                                                                                          |  |              |         |              |   |         |  
|Total
stockholders equity                                                                                                                |  |              | 137,005 |              |   | 62,255  |  
|                                                                                                                                          |  |              |         |              |   |         |  
|                                                                                                                                          |  |              |         |              |   |         |  
|TOTAL
LIABILITIES AND
  STOCKHOLDERS EQUITY                                                                                              |  | $            | 906,513 |              | $ | 772,008 |  
|                                                                                                                                          |  |              |         |              |   |         |  

The
accompanying notes are an integral part of the consolidated financial
statements.

F-3

---



|                                                    
|----------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY       
|Consolidated Statements of Earnings                 
|For the years ended December 31, 2005, 2004 and 2003
|(Dollars in thousands)                              
|                                                    

|                                                         |  |      |        |      |   |        |  |   |        | 
|-------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|                                                         |  | 2005 |        | 2004 |   | 2003   | 
|                                                         |  |      |        |      |   |        | 
|Interest and
dividend income:                            |  |      |        |      |   |        |  |   |        | 
|Loans                                                    |  | $    | 34,540 |      | $ | 29,682 |  | $ | 28,742 | 
|Investments                                              |  |      | 7,970  |      |   | 6,582  |  |   | 4,714  | 
|Other
interest-earning assets                            |  |      | 723    |      |   | 268    |  |   | 320    | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Total interest
and dividend income                       |  |      | 43,233 |      |   | 36,532 |  |   | 33,776 | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Interest
expense:                                        |  |      |        |      |   |        |  |   |        | 
|Interest on
deposits                                     |  |      | 12,300 |      |   | 8,995  |  |   | 9,261  | 
|Interest on
short-term borrowings                        |  |      | 1,675  |      |   | 373    |  |   | 157    | 
|Interest on
long-term debt                               |  |      | 2,231  |      |   | 2,780  |  |   | 2,165  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Total interest
expense                                   |  |      | 16,206 |      |   | 12,148 |  |   | 11,583 | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Net interest
income before provision for
    loan losses |  |      | 27,027 |      |   | 24,384 |  |   | 22,193 | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Provision for
loan losses                                |  |      | 917    |      |   | 983    |  |   | 294    | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Net interest
income after provision for
    loan losses  |  |      | 26,110 |      |   | 23,401 |  |   | 21,899 | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Non-interest
income:                                     |  |      |        |      |   |        |  |   |        | 
|Fee income on
depositors accounts                       |  |      | 4,084  |      |   | 3,683  |  |   | 3,434  | 
|Net gain on
sale of securities                           |  |      | 3      |      |   | 122    |  |   | 531    | 
|Income from
bank-owned life insurance                    |  |      | 326    |      |   | 332    |  |   | 359    | 
|Other
income                                             |  |      | 947    |      |   | 997    |  |   | 1,379  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Total
non-interest income                                |  |      | 5,360  |      |   | 5,134  |  |   | 5,703  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Non-interest
expense:                                    |  |      |        |      |   |        |  |   |        | 
|Salaries and
benefits                                    |  |      | 11,181 |      |   | 9,564  |  |   | 9,123  | 
|Occupancy
expenses                                       |  |      | 1,494  |      |   | 1,453  |  |   | 1,377  | 
|Marketing
expenses                                       |  |      | 1,386  |      |   | 1,244  |  |   | 1,198  | 
|Data processing
expenses                                 |  |      | 2,711  |      |   | 2,681  |  |   | 2,371  | 
|Contributions
and sponsorships                           |  |      | 3,791  |      |   | 192    |  |   | 134    | 
|Professional
fees                                        |  |      | 722    |      |   | 336    |  |   | 240    | 
|Other
expenses                                           |  |      | 3,167  |      |   | 3,709  |  |   | 3,342  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Total
non-interest expense                               |  |      | 24,452 |      |   | 19,179 |  |   | 17,785 | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Income
    before income taxes                           |  |      | 7,018  |      |   | 9,356  |  |   | 9,817  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Income tax
expense                                       |  |      | 2,649  |      |   | 3,828  |  |   | 3,917  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|NET
INCOME                                               |  | $    | 4,369  |      | $ | 5,528  |  | $ | 5,900  | 
|                                                         |  |      |        |      |   |        |  |   |        | 
|Basic and
diluted earnings per share                     |  |      | NM     |      |   | NA     |  |   | NA     | 

NM - Not meaningful

NA -  Not
applicable

The accompanying notes are an integral part
of the consolidated financial statements.

F-4

---



|                                                                          
|--------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY                             
|Consolidated Statements of Stockholders
  Equity and Comprehensive
Income
|December 31, 2005, 2004 and 2003                                          
|(Dollars in thousands)                                                    
|                                                                          

|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | -------------- | --- | --------------- | - | ------------------- |  | ------------------------- | ------ | ----------------------------------------------- | - | ------ | - | - | ------ | - | - | ------- | -
|                                                                                                           |  | Common
  Stock |     | Paid-In Capital |   | Retained
  Earnings |  | Unearned 
  ESOP
  Shares |        | Accumulated 
  Other 
  Comprehensive 
  (Loss) |   | Total  |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |  
|Balances at
December 31, 2002                                                                              |  | $              |    |                 | $ |                    |  | $                         | 51,390 |                                                 | $ |       |   | $ | 1,223  |   | $ | 52,613  |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Net
income                                                                                                 |  |                |    |                 |   |                    |  |                           | 5,900  |                                                 |   |       |   |   |       |   |   | 5,900   |  
|Net unrealized
loss on securities available for sale, net of
  reclassification adjustment and tax effects |  |                |    |                 |   |                    |  |                           |       |                                                 |   |       |   |   | (1,462 | ) |   | (1,462  | )
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Total
comprehensive income                                                                                 |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   | 4,438   |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Balances at
December 31, 2003                                                                              |  |                |    |                 |   |                    |  |                           | 57,290 |                                                 |   |       |   |   | (239   | ) |   | 57,051  |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Impact of
reorganization                                                                                   |  |                |    |                 |   |                    |  |                           | (150   | )                                               |   |       |   |   |       |   |   | (150    | )
|Net
income                                                                                                 |  |                |    |                 |   |                    |  |                           | 5,527  |                                                 |   |       |   |   |       |   |   | 5,527   |  
|Net unrealized
loss on securities available for sale, net of
  reclassification adjustment and tax effects |  |                |    |                 |   |                    |  |                           |       |                                                 |   |       |   |   | (173   | ) |   | (173    | )
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Total
comprehensive income                                                                                 |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   | 5,354   |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Balances at
December 31, 2004                                                                              |  |                |    |                 |   |                    |  |                           | 62,667 |                                                 |   |       |   |   | (412   | ) |   | 62,255  |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Net
income                                                                                                 |  |                |    |                 |   |                    |  |                           | 4,369  |                                                 |   |       |   |   |       |   |   | 4,369   |  
|Net unrealized
loss on securities available for sale, net of
  reclassification adjustment and tax effects |  |                |    |                 |   |                    |  |                           |       |                                                 |   |       |   |   | (2,053 | ) |   | (2,053  | )
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Total
comprehensive income                                                                                 |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   | 2,316   |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Issuance of
common stock, net of offering costs of $1,900                                                  |  |                | 77  |                 |   | 74,745              |  |                           |       |                                                 |   |       |   |   |       |   |   | 74,822  |  
|Issuance of
common stock to MHC                                                                            |  |                | 92  |                 |   |                    |  |                           | (92    | )                                               |   |       |   |   |       |   |   |        |  
|Issuance of
common stock to United Charitable Foundation                                                   |  |                | 3   |                 |   | 3,646               |  |                           |       |                                                 |   |       |   |   |       |   |   | 3,649   |  
|Shares
purchased for ESOP                                                                                  |  |                |    |                 |   |                    |  |                           |       |                                                 |   | (6,413 | ) |   |       |   |   | (6,413  | )
|ESOP shares
allocated                                                                                      |  |                |    |                 |   | 55                  |  |                           |       |                                                 |   | 321    |   |   |       |   |   | 376     |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  
|Balances at
December 31, 2005                                                                              |  | $              | 172 |                 | $ | 78,446              |  | $                         | 66,944 |                                                 | $ | (6,092 | ) | $ | (2,465 | ) | $ | 137,005 |  
|                                                                                                           |  |                |     |                 |   |                     |  |                           |        |                                                 |   |        |   |   |        |   |   |         |  

The accompanying notes are an integral part
of the consolidated financial statements.

F-5

---



|                                                      
|------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY         
|Consolidated
  Statements of Cash Flows               
|For the
  years ended December 31, 2005, 2004 and 2003
|(Dollars in thousands)                                
|                                                      

|                                                                                            |  |      |          |      |   |         |   |   |          |  
|------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | ------- | - | - | -------- | -
|                                                                                            |  | 2005 |          | 2004 |   | 2003    |  
|                                                                                            |  |      |          |      |   |         |  
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|Cash flows
  from operating activities:                                                     |  |      |          |      |   |         |   |   |          |  
|Net
income                                                                                  |  | $    | 4,369    |      | $ | 5,528   |   | $ | 5,900    |  
|Adjustments to
reconcile net
  income to net cash provided by operating activities:         |  |      |          |      |   |         |   |   |          |  
|Provision for
loan losses                                                                   |  |      | 917      |      |   | 983     |   |   | 294      |  
|Stock
contribution to United
  Charitable Foundation                                        |  |      | 3,441    |      |   | ­      |   |   |         |  
|ESOP
expense                                                                                |  |      | 376      |      |   | ­      |   |   |         |  
|Amortization
of premiums and
  discounts                                                    |  |      | 670      |      |   | 1,062   |   |   | 1,037    |  
|Provision for
other real
  estate owned                                                     |  |      |         |      |   | (21     | ) |   |         |  
|Depreciation
and amortization                                                               |  |      | 667      |      |   | 647     |   |   | 616      |  
|Deferred
(prepaid) income tax
  expense                                                     |  |      | 978      |      |   | (1      | ) |   | 1,524    |  
|Net gain on
sale of available
  for sale securities                                         |  |      | (3       | )    |   | (122    | ) |   | (531     | )
|Gain on sale
of loans                                                                       |  |      | (2       | )    |   | (13     | ) |   | (78      | )
|Net (gain)
loss on sale of
  property and equipment                                         |  |      | (4       | )    |   | (2      | ) |   | 20       |  
|(Increase)
decrease in accrued
  interest receivable                                        |  |      | (1,065   | )    |   | 282     |   |   | (575     | )
|Increase in
cash surrender
  value of life insurance                                        |  |      | (326     | )    |   | (332    | ) |   | (359     | )
|(Increase)
decrease in other
  assets                                                       |  |      | (1,797   | )    |   | 678     |   |   | (817     | )
|Increase
(decrease) in accrued
  expenses and other liabilities                             |  |      | 337      |      |   | 469     |   |   | (1,625   | )
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|Net cash
provided by operating
  activities                                                 |  |      | 8,558    |      |   | 9,158   |   |   | 5,406    |  
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|Cash flows
  from investing activities:                                                     |  |      |          |      |   |         |   |   |          |  
|Purchases of
securities
  available for sale                                                |  |      | (124,036 | )    |   | (58,142 | ) |   | (228,095 | )
|Proceeds from
sales,
  maturities and principal repayments of securities available for sale |  |      | 46,724   |      |   | 101,631 |   |   | 126,375  |  
|Purchase of
securities to be
  held to maturity                                             |  |      | (909     | )    |   | (404    | ) |   | (1,494   | )
|Proceeds from
maturities and
  principal repayments of securities to be held to maturity    |  |      | 75       |      |   | 77      |   |   | 56       |  
|Purchases of
Federal Home Loan
  Bank of Boston stock                                       |  |      | (567     | )    |   | (2,072  | ) |   | (734     | )
|Refund of
Cooperative Central
  Bank deposit                                                |  |      |         |      |   | 1,522   |   |   |         |  
|Proceeds from
sales of other
  real estate owned                                            |  |      |         |      |   | 39      |   |   | 45       |  
|Net loan
originations and
  principal collections                                           |  |      | (64,046  | )    |   | (78,428 | ) |   | (44,332  | )
|Proceeds from
sales of loans                                                                |  |      | 215      |      |   | 5,314   |   |   | 10,403   |  
|Purchases of
property and
  equipment                                                       |  |      | (1,245   | )    |   | (382    | ) |   | (1,732   | )
|Proceeds from
sale of property
  and equipment                                              |  |      | 16       |      |   | 14      |   |   | 420      |  
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|                                                                                            |  |      |          |      |   |         |   |   |          |  
|Net cash used
in investing
  activities                                                     |  |      | (143,773 | )    |   | (30,831 | ) |   | (139,088 | )

The accompanying notes are an integral part
of the consolidated financial statements.

F-6

---



|                                                      
|------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY         
|Consolidated
  Statements of Cash Flows - Continued   
|For the
  years ended December 31, 2005, 2004 and 2003
|(Dollars in thousands)                                
|                                                      

|                                                             |  |      |          |      |   |          |   |   |         |  
|------------------------------------------------------------ |  | ---- | -------- | ---- | - | -------- | - | - | ------- | -
|                                                             |  | 2005 |          | 2004 |   | 2003     |  
|                                                             |  |      |          |      |   |          |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Cash flows from financing activities:                        |  |      |          |      |   |          |   |   |         |  
|Net increase
in deposits                                     |  | $    | 39,938   |      | $ | 18,924   |   | $ | 61,044  |  
|Net increase
(decrease) in
  repurchase agreements           |  |      | 4,118    |      |   | 98       |   |   | 3,073   |  
|Net increase
(decrease) in
  escrow funds held for borrowers |  |      | 174      |      |   | 14       |   |   |        |  
|Proceeds of
FHLBB advances                                   |  |      | 148,365  |      |   | 185,714  |   |   | 51,500  |  
|Repayments of
FHLBB advances                                 |  |      | (133,179 | )    |   | (175,839 | ) |   | (4,569  | )
|Proceeds of
sale of common
  stock, net                      |  |      | 74,822   |      |   |         |   |   |        |  
|Acquisition of
common stock by
  ESOP                        |  |      | (6,413   | )    |   |         |   |   |        |  
|Impact of
reorganization                                     |  |      |         |      |   | (150     | ) |   |        |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Net cash
provided by financing
  activities                  |  |      | 127,825  |      |   | 28,761   |   |   | 111,048 |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Increase (decrease) in cash and cash equivalents             |  |      | (7,390   | )    |   | 7,088    |   |   | (22,634 | )
|                                                             |  |      |          |      |   |          |   |   |         |  
|Cash and cash equivalents at beginning of year               |  |      | 23,233   |      |   | 16,145   |   |   | 38,779  |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Cash and cash equivalents at end of year                     |  | $    | 15,843   |      | $ | 23,233   |   | $ | 16,145  |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Supplemental Disclosure of Cash Flow
  Information:          |  |      |          |      |   |          |   |   |         |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Cash paid during the year:                                   |  |      |          |      |   |          |   |   |         |  
|Interest on deposits and other borrowings                    |  | $    | 16,080   |      | $ | 12,102   |   | $ | 11,484  |  
|Income taxes  net                                           |  |      | 2,786    |      |   | 2,635    |   |   | 4,314   |  
|                                                             |  |      |          |      |   |          |   |   |         |  
|Transfer of loans to other real estate owned                 |  |      | 1,602    |      |   |         |   |   |        |  

The accompanying notes are an integral part
of the consolidated financial statements.

F-7

---



|                                             
|---------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
|Notes to
  Consolidated Financial Statements 
|December 31,
  2005, 2004 and 2003           
|(Dollars in thousands)                       
|                                             
|                                             

NOTE A 
REORGANIZATION AND CHANGE IN CORPORATE FORM


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During 2004, the Company received both regulatory and depositor
  approval to reorganize from a state-chartered cooperative bank to a
  multi-tier federally-chartered holding company. As a result, United Financial
  Bancorp, Inc., a stock holding company, was formed to be the parent company
  of United Bank (the Bank) and United Mutual Holding Company (MHC), a mutual
  holding company, was formed to be the parent company of United Financial
  Bancorp, Inc. Included in non-interest expenses in the accompanying statement
  of earnings for the year ended December 31, 2004 are related reorganization
  expenses of $693.                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In December 2004, the Board of Directors of United Mutual Holding
  Company adopted a plan pursuant to which United Financial Bancorp, Inc.(the
  Company) intended to sell up to 49% of its common stock to eligible Bank
  depositors and, if necessary, to the general public. The Companys initial
  public offering concluded on July 12, 2005 after the receipt of regulatory
  approval. The Company raised $74,822 in the offering, selling 7.7 million
  shares of common stock at $10 per share. This represented 44.6% of the stock
  issued. In addition, 344,100 shares or 2.0% of the shares outstanding were
  contributed to the newly formed United Charitable Foundation (the
  Foundation) to further support the Banks ongoing commitment to the
  community. United Mutual Holding Company holds the remaining 53.4% of the
  outstanding shares.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company established the Foundation in connection with the
  reorganization and funded it with 344,100 shares of the Companys common
  stock. This contribution resulted in the recognition of expense equal to
  $3,441 based on the offering price of $10 per share. The Company expects to
  realize an additional tax benefit of $208 that was recorded as an increase to
  stockholders equity because the basis for the contribution for tax purposes
  was based on the trading price of Company stock on its first day of trading.                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In addition, the Banks Board of Directors adopted an Employee Stock
  Ownership Plan (the ESOP) which purchased 8%, or 641,300 shares, in the
  initial public offering financed by a loan from the Company. (See Note I)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The reorganization to a mutual holding company structure has been
  accounted for as a change in corporate form with the historic basis of the
  Banks assets, liabilities and equity unchanged as a result. Subsequent to
  the stock offering, the existing liquidation rights of the Banks depositors
  were transferred with records to be maintained to ensure such rights receive
  statutory priority in the event of a complete mutual-to-stock conversion or
  in the more unlikely event of the Banks liquidation.                                                                                                                                                                                                                                                                                                                                           

F-8

---



|                                             
|---------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
|Notes to
  Consolidated Financial Statements 
|December 31,
  2005, 2004 and 2003           
|(Dollars in thousands)                       
|                                             
|                                             

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES


| |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The consolidated financial statements
  include the accounts of United Financial Bancorp, Inc. and its wholly-owned
  subsidiary United Bank. UCB Securities, Inc. is a subsidiary of the Bank and
  is engaged in the buying and selling or the holding of securities. All
  significant intercompany accounts and transactions have been eliminated in
  consolidation. These entities are collectively referred to herein as the
  Bank.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The accounting and reporting policies of the Bank conform to
  accounting principles generally accepted in the United States of America
  (U.S. GAAP) and general practices within the banking industry.                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Certain amounts in the 2004 and 2003
  financial statements have been reclassified to conform to the 2005
  presentation.                                                                                                                                                                                                                                                                                                                    

Use of Estimates

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In preparing consolidated financial
  statements in conformity with accounting principles generally accepted in the
  United States of America, management is required to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and
  disclosures of contingent assets and liabilities as of the date of the
  balance sheet and reported amounts of revenues and expenses during the
  reporting period. Actual results could differ from those estimates. Material
  estimates that are particularly susceptible to significant change are the
  determination of the allowance for loan losses and the valuation allowance
  for the deferred tax asset.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The following is a description of the
  Banks more significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Cash and Cash
Equivalents

| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank classifies cash and due from banks, interest bearing
  deposits in other banks and overnight funds sold as cash and cash equivalents
  as these liquid assets have original maturities of 90 days or less.

F-9

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        
|                                                        

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  Continued


Investment
Securities

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Debt securities that the Bank has the
  positive intent and ability to hold to maturity are classified as held to
  maturity and reported at amortized cost; debt and equity securities that are
  bought and held principally for the purpose of selling in the near term are
  classified as trading and reported at fair value, with unrealized gains and
  losses included in earnings; and debt and equity securities not classified as
  either held to maturity or trading are classified as available for sale and
  reported at fair value, with unrealized gains and losses excluded from
  earnings and reported in accumulated other comprehensive income (loss), net
  of taxes, as a separate component of stockholders equity. The Bank had no
  securities classified as trading at December 31, 2005 and 2004.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Premiums and discounts on investment
  securities are amortized or accreted into income on the level yield method
  over the life of the investments. If a decline in the fair value of an
  investment security below its cost is judged to be other-than-temporary the
  cost basis of the investment security is written down to fair value as a new
  cost basis and the amount of the write-down is included in the results of
  operations. Gains and losses on the sale of investment securities are
  recognized at the time of sale on a specific identification basis.                                                                                                                                                                                                                                                

Loans

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Real estate mortgage loans and other loans are stated at their unpaid principal
  balance net of unearned loan fees and costs and the allowance for loan
  losses. The Bank does not originate loans for the purpose of resale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Interest on most loans is included in
  income as earned based upon interest rates applied to unpaid principal using
  the simple interest method. Accrual of interest on loans is discontinued when
  in the judgment of management the collectibility of principal or interest
  becomes doubtful or when a loan becomes contractually past due 90 days with
  respect to principal or interest. The accrual of interest on some loans,
  however, may continue even though they are 90 days past due if management
  deems it appropriate, provided that the loans are well secured and in the
  process of collection. When a loan is placed on nonaccrual status, all
  interest previously accrued is reversed against current period interest
  income. Interest subsequently received on nonaccrual loans is either applied
  against principal or recorded as income according to managements judgment as
  to the collectibility of principal. Interest accruals are resumed on such
  loans only when they are brought fully current as to principal and interest
  and when, in the judgment of management, the loans are estimated to be fully
  collectible.

F-10

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        
|                                                        

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  Continued


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loan origination and commitment fees and
  certain direct loan origination costs are deferred and the net amount is
  amortized over the contractual term of the loan as an adjustment of yield.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | A loan is considered impaired when, based
  on current information and events, it is probable that the Bank will be
  unable to collect the scheduled payments of principal or interest when due
  according to the contractual terms of the loan agreement. Factors considered
  by management in determining impairment include payment status, collateral
  value, and the probability of collecting scheduled principal and interest
  payments when due. Loans that experience insignificant payment delays and
  payment shortfalls generally are not classified as impaired. Impairment is
  measured on a loan-by-loan basis for commercial and construction loans by
  either the present value of expected future cash flows discounted at the
  loans effective interest rate, the loans obtainable market price, or the
  fair value of the collateral if the loan is collateral dependent.

Allowance for Loan
Losses

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The allowance for loan losses is maintained
  at a level determined by management to be adequate to absorb probable losses
  based on an evaluation of known and inherent losses in the portfolio. The
  adequacy of the allowance for loan losses is evaluated on a quarterly basis
  by management. Factors considered in evaluating the adequacy of the allowance
  include prior loss experience, current economic conditions and their effect
  on borrowers, the character and size of the loan portfolio, trends in
  nonperforming loans and delinquency rates and the performance of individual loans
  in relation to contractual terms. Loan losses are charged against the
  allowance when management believes that the collectibility of the principal
  is unlikely and recoveries are credited to the allowance when received.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Arriving at an appropriate level for the
  allowance for loan losses necessarily involves a high degree of judgment.
  While management uses available information to recognize losses on loans,
  future additions to the allowance may be necessary. In addition, various
  regulatory agencies, as an integral part of their examination process,
  periodically review the allowance for loan losses. Such agencies may require
  the Bank to recognize additions to the allowance based on judgments different
  from those of management.                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | A substantial portion of the Banks loans
  are secured by real estate in Western Massachusetts. Accordingly, the
  ultimate collectibility of the Banks loan portfolio is susceptible to
  changing conditions in this market area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-11

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        
|                                                        

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  Continued


Earnings Per Share

| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Earnings per share (EPS) for the periods presented herein are
  either not applicable or not meaningful as the Bank did not issue any shares
  (other than a nominal number of shares upon its reorganization - See Note A)
  until it became a public company in July 2005.

Other Real Estate
Owned

| |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Other real estate owned (OREO) is
  comprised of properties acquired through foreclosure proceedings or
  acceptance of a deed in lieu of foreclosure. Losses arising from the
  acquisition of such properties are charged against the allowance for loan
  losses. Operating expenses are charged to current period operations as
  incurred. Gains and losses upon disposition are reflected in income as
  realized.
| |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Foreclosed assets held for sale are
  recorded at the lower of fair value less estimated costs to sell or cost.
  Subsequent changes in the fair valuation of the foreclosed assets are
  reflected as a valuation allowance.                                                                                                                                                                                             

Banking Premises and
Equipment

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Banking premises and equipment are stated
  at cost less accumulated depreciation. Depreciation is computed for financial
  reporting purposes on the straight-line method over the estimated useful life
  of each type of asset. Leasehold improvements are amortized on the
  straight-line method over the shorter of the lease term, including
  consideration of renewal options, or estimated useful life of the asset. The
  cost of maintenance and repairs is charged against income as incurred.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Bank reviews for impairment of
  long-lived assets whenever events or changes in circumstances indicate that
  the carrying amount of an asset may not be recoverable.                                                                                                                                                                                                                                                                                                                                 

F-12

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        
|                                                        

NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  Continued


Pension Plan

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank provides pension benefits for
  eligible employees through a multi-employer defined benefit plan sponsored by
  the Co-operative Banks Employees Retirement Association (CBERA). The Banks
  policy is to expense related pension costs based on assessments by CBERA. The
  Bank has also established a defined contribution plan for eligible employees.
  The Bank matches employee contributions up to 5% of an employees qualified
  compensation.

Income Taxes

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank recognizes income taxes under the
  asset and liability method. Under this method, deferred tax assets and
  liabilities are established for the tax consequences attributable to the
  temporary differences between the financial statement carrying amount and the
  tax basis of the Banks assets and liabilities and certain tax carryforwards
  at enacted tax rates. Deferred tax expense (benefit) is the result of changes
  in deferred tax assets and liabilities. A valuation allowance is recorded
  against deferred tax assets when management deems a portion of the asset to
  be more likely than not unrealizable. The Banks valuation allowance is
  reviewed and adjustments are made to the valuation allowance based on
  managements judgments relating to the realizability of the deferred tax
  asset. It is managements belief, that it is more likely than
  not, that the reversal of deferred tax liabilities and results of future
  operations will generate sufficient taxable income to realize the deferred
  tax assets. In addition, the Banks net deferred tax asset is supported by
  recoverable income taxes. Therefore, no valuation allowance was necessary at
  December 31, 2005 or 2004 for deferred tax assets. It should be noted,
  however, that factors beyond managements control, such as the general state
  of the economy and real estate values, can affect future levels of taxable
  income and that no assurance can be given that sufficient taxable income will
  be generated to fully absorb gross deductible temporary differences.

Advertising

| |                                                     
| | ----------------------------------------------------
| | The Bank expenses all advertising costs as incurred.

Comprehensive
Income

| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Accounting principles generally require that recognized revenue,
  expenses, gains and losses be included in net income. Although certain
  changes in assets and liabilities, such as unrealized gains and losses on
  available for sale securities, are reported as a separate component of
  stockholders equity such items, along with net income, are components of
  comprehensive income.

F-13

---



UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements  Continued
December 31, 2005, 2004 and 2003
(Dollars in thousands)

|
|
|

NOTE B 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Comprehensive
Income

| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | The components of other comprehensive income and
  related tax effects are as follows for the years ended December 31:

|                                                                       |  |      |        |      |   |      |   |   |        |  
|---------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ---- | - | - | ------ | -
|                                                                       |  | 2005 |        | 2004 |   | 2003 |  
|                                                                       |  |      |        |      |   |      |  
|                                                                       |  |      |        |      |   |      |  
|Change in unrealized
  holding losses on available for sale securities |  | $    | (3,371 | )    | $ | (180 | ) | $ | (1,834 | )
|Reclassification adjustment
  for gains realized in income             |  |      | (3     | )    |   | (122 | ) |   | (531   | )
|                                                                       |  |      |        |      |   |      |   |   |        |  
|Net change in unrealized
  losses                                      |  |      | (3,374 | )    |   | (302 | ) |   | (2,365 | )
|                                                                       |  |      |        |      |   |      |   |   |        |  
|Tax effect                                                             |  |      | 1,321  |      |   | 129  |   |   | 903    |  
|                                                                       |  |      |        |      |   |      |   |   |        |  
|                                                                       |  |      |        |      |   |      |   |   |        |  
|Net-of-tax amount                                                      |  | $    | (2,053 | )    | $ | (173 | ) | $ | (1,462 | )
|                                                                       |  |      |        |      |   |      |   |   |        |  

Reclassifications

| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Amounts reported for prior
  periods are reclassified as necessary to be consistent with the
  current-period presentation.

Recent Accounting
Developments

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At its March 2004 meeting, the Emerging Issues Task
  Force (EITF) reached a consensus on EITF Issue No. 03-1, Meaning of
  Other-than-Temporary Impairment and Its Application to Certain Investments
  (EITF 03-1), that prescribes guidance to be used to determine when an
  investment in debt and equity securities is considered impaired, whether the
  impairment is other than temporary and the measurement of an impaired loss.
  EITF 03-1 also specifies certain disclosures for investment securities that
  are impaired at the balance sheet date but for which an other-than-temporary
  impairment has not been recognized. These disclosures are included herein in
  Note C to the consolidated financial statements. In November 2005, the FASB
  issued a staff position (FSP) with implementation guidance for impairment
  measurement and recognition which became effective for reporting periods
  beginning after December 15, 2005 with earlier application permitted. The
  guidance in the FSP is not expected to have any effect on the Banks financial
  condition or results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In December, 2004, the FASB issued SFAS No. 123
  (Revised 2004), Share-Based Payments, (SFAS No. 123(R)), which became
  effective as of July 1, 2005. The Bank does not currently have any
  outstanding share-based compensation arrangements. In the likely event that
  such arrangements are approved in the future (see Note O), the applicability
  of SFAS No.123(R) would have an effect on the Banks results of operations
  the materiality of which is currently unknown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-14

---



UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements  Continued
December 31, 2005, 2004 and 2003
(Dollars in thousands)

|
|
|

NOTE C 
INVESTMENT SECURITIES

| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | The amortized cost and fair values of securities classified
  as available for sale and held to maturity are as follows:

|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|----------------------------- |  | ---------------- | ------- | ------------------ | - | ------------------- |  | ---------- | ------ | - | - | ------- | 
|                              |  | Amortized
  Cost |         | Unrealized
  Gains |   | Unrealized
  Losses |  | Fair Value |       
|                              |  |                  |         |                    |   |                     |  |            |       
|Securities Available for Sale |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|December 31, 2005:            |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|Federal agency obligations    |  | $                | 99,957  |                    | $ | 1                   |  | $          | (1,397 | ) | $ | 98,561  | 
|Mortgage-backed securities    |  |                  | 117,259 |                    |   | 102                 |  |            | (2,659 | ) |   | 114,702 | 
|Corporate bonds               |  |                  | 13,011  |                    |   | 54                  |  |            | (135   | ) |   | 12,930  | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|Subtotal                      |  |                  | 230,227 |                    |   | 157                 |  |            | (4,191 | ) |   | 226,193 | 
|Marketable equity securities  |  |                  | 294     |                    |   |                    |  |            | (22    | ) |   | 272     | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|                              |  | $                | 230,521 |                    | $ | 157                 |  | $          | (4,213 | ) | $ | 226,465 | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|December 31, 2004:            |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|Federal agency obligations    |  | $                | 35,414  |                    | $ | 4                   |  | $          | (334   | ) | $ | 35,084  | 
|Mortgage-backed securities    |  |                  | 102,209 |                    |   | 397                 |  |            | (927   | ) |   | 101,679 | 
|Corporate bonds               |  |                  | 15,094  |                    |   | 255                 |  |            | (58    | ) |   | 15,291  | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|Subtotal                      |  |                  | 152,717 |                    |   | 656                 |  |            | (1,319 | ) |   | 152,054 | 
|Marketable equity securities  |  |                  | 294     |                    |   |                    |  |            | (19    | ) |   | 275     | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 
|                              |  | $                | 153,011 |                    | $ | 656                 |  | $          | (1,338 | ) | $ | 152,329 | 
|                              |  |                  |         |                    |   |                     |  |            |        |   |   |         | 

|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|----------------------------------- |  | ---------------- | ----- | ------------------ | - | ------------------- |  | ---------- | --- | - | - | ----- | 
|                                    |  | Amortized
  Cost |       | Unrealized
  Gains |   | Unrealized
  Losses |  | Fair Value |    
|                                    |  |                  |       |                    |   |                     |  |            |    
|Securities to be Held to
  Maturity |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|December 31, 2005:                  |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|Industrial revenue bonds            |  | $                | 1,346 |                    | $ |                    |  | $          |    |   | $ | 1,346 | 
|Municipal bonds                     |  |                  | 1,979 |                    |   |                    |  |            | (27 | ) |   | 1,952 | 
|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|                                    |  | $                | 3,325 |                    | $ |                    |  | $          | (27 | ) | $ | 3,298 | 
|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|December 31, 2004:                  |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|Industrial revenue bonds            |  | $                | 1,420 |                    | $ |                    |  | $          |    |   | $ | 1,420 | 
|Municipal bonds                     |  |                  | 1,078 |                    |   | 3                   |  |            | (3  | ) |   | 1,078 | 
|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 
|                                    |  | $                | 2,498 |                    | $ | 3                   |  | $          | (3  | ) | $ | 2,498 | 
|                                    |  |                  |       |                    |   |                     |  |            |     |   |   |       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Banks portfolio of mortgage-backed securities,
which represent interests in pools of residential mortgage loans, consists
solely of securities issued by the Federal Home Loan Mortgage Corporation
(Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the
Government National Mortgage Association (Ginnie Mae), all of which are federal
government owned or sponsored agencies.

F-15

---



UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements  Continued
December 31, 2005, 2004 and 2003
(Dollars in thousands)

|
|
|

NOTE C 
INVESTMENT SECURITIES -Continued

| |                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest on Freddie Mac mortgage-backed securities
  is guaranteed by Freddie Mac. Principal and interest on Fannie Mae
  mortgage-backed securities is guaranteed by Fannie Mae. Principal and
  interest on Ginnie Mae mortgage-backed securities is guaranteed by the
  federal government.
| |                                                                                                                                                                                                                                                                                               
| | As of December 31, 2005, the Bank has pledged
  securities with a book value of $11,000 and a fair value of $10,861 to secure
  treasury, tax and loan deposits at the Federal Reserve Bank of Boston and to
  secure customers repurchase agreements.                                       
| |                                                                                                                                                                                                                                                                                               
| | Gross unrealized losses and fair values at December
  31, 2005 and 2004 aggregated by investment category and the length of time
  that individual securities have been in a continuous unrealized loss position
  follows:                                                                   

|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|--------------------------------- |  | ------------------- | ------- | ------------------- | - | ---------- | - | ------------------- | ------ | ---------------------- | - | ---------- | - | ------------------- | --- |  | - | ------- |  | - | ------ | -
|                                  |  | Less than 12 months |         | 12 months or longer |   | Total      |  
|                                  |  |                     |         |                     |   |            |  
|                                  |  | Fair Value          |         | Unrealized
  Losses |   | Fair Value |   | Unrealized
  Losses |        | Number of
  Securities |   | Fair Value |   | Unrealized
  Losses |    
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |    
|2005                              |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|Securities Available for Sale     |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|Federal
agency obligations        |  | $                   | 69,298  |                     | $ | (765       | ) | $                   | 28,519 |                        | $ | (632       | ) |                     | 50  |  | $ | 97,817  |  | $ | (1,397 | )
|Mortgage-backed securities        |  |                     | 53,636  |                     |   | (976       | ) |                     | 54,052 |                        |   | (1,683     | ) |                     | 88  |  |   | 107,688 |  |   | (2,659 | )
|Corporate
bonds                   |  |                     | 2,078   |                     |   | (74        | ) |                     | 3,803  |                        |   | (61        | ) |                     | 13  |  |   | 5,881   |  |   | (135   | )
|Marketable
equity securities      |  |                     | 100     |                     |   | (1         | ) |                     | 172    |                        |   | (21        | ) |                     | 2   |  |   | 272     |  |   | (22    | )
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|                                  |  | $                   | 125,112 |                     | $ | (1,816     | ) | $                   | 86,546 |                        | $ | (2,397     | ) |                     | 153 |  | $ | 211,658 |  | $ | (4,213 | )
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|Securities to be Held to Maturity |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|Municipal
Bonds                   |  | $                   | 1,365   |                     | $ | (12        | ) | $                   | 587    |                        | $ | (15        | ) |                     | 9   |  | $ | 1,952   |  | $ | (27    | )
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  
|                                  |  | $                   | 1,365   |                     | $ | (12        | ) | $                   | 587    |                        | $ | (15        | ) |                     | 9   |  | $ | 1,952   |  | $ | (27    | )
|                                  |  |                     |         |                     |   |            |   |                     |        |                        |   |            |   |                     |     |  |   |         |  |   |        |  

|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|--------------------------------- |  | ------------------- | ------ | ------------------- | - | ---------- | - | ----------------- | ------ | -------------------- | - | ---------- | - | ----------------- | -- |  | - | ------- |  | - | ------ | -
|                                  |  | Less than 12 months |        | 12 months or longer |   | Total      |  
|                                  |  |                     |        |                     |   |            |  
|                                  |  | Fair Value          |        | Unrealized Losses   |   | Fair Value |   | Unrealized Losses |        | Number of Securities |   | Fair Value |   | Unrealized Losses |   
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |   
|2004                              |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|Securities Available for Sale     |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|Federal
agency obligations        |  | $                   | 27,095 |                     | $ | (265       | ) | $                 | 4,986  |                      | $ | (69        | ) |                   | 17 |  | $ | 32,081  |  | $ | (334   | )
|Mortgage-backed securities        |  |                     | 27,570 |                     |   | (210       | ) |                   | 54,923 |                      |   | (717       | ) |                   | 56 |  |   | 82,493  |  |   | (927   | )
|Corporate
bonds                   |  |                     | 773    |                     |   | (1         | ) |                   | 3,426  |                      |   | (57        | ) |                   | 9  |  |   | 4,199   |  |   | (58    | )
|Marketable
equity securities      |  |                     |       |                     |   |           |   |                   | 274    |                      |   | (19        | ) |                   | 2  |  |   | 274     |  |   | (19    | )
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|                                  |  | $                   | 55,438 |                     | $ | (476       | ) | $                 | 63,609 |                      | $ | (862       | ) |                   | 84 |  | $ | 119,047 |  | $ | (1,338 | )
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|Securities to be Held to Maturity |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|Municipal
Bonds                   |  | $                   | 401    |                     | $ | (1         | ) | $                 | 200    |                      | $ | (2         | ) |                   | 1  |  | $ | 602     |  | $ | (3     | )
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  
|                                  |  | $                   | 401    |                     | $ | (1         | ) | $                 | 200    |                      | $ | (2         | ) |                   | 1  |  | $ | 602     |  | $ | (3     | )
|                                  |  |                     |        |                     |   |            |   |                   |        |                      |   |            |   |                   |    |  |   |         |  |   |        |  

F-16

---



|                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY
  Notes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                    

NOTE C 
INVESTMENT SECURITIES  Continued

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Management has evaluated the
  securities in the preceding tables and concluded that none of these
  securities have experienced impairments that are other-than temporary. In its
  evaluation, management considered the types of securities, including if the
  securities were U.S. Government issued, and the credit rating on the
  securities.  Most of the securities
  that are in an unrealized loss position are in a loss position due to changes
  in interest rates since the securities were purchased.  Management has the ability to hold these
  securities until the earlier of maturity or a market price recovery and
  currently has no plans to dispose of any of these securities.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Realized gains and losses and
  the proceeds from sales of securities available for sale are as follows for
  the years ended December 31:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                    |  |      |       |      |   |        |  |   |        |  
|------------------- |  | ---- | ----- | ---- | - | ------ |  | - | ------ | -
|                    |  | 2005 |       | 2004 |   | 2003   | 
|                    |  |      |       |      |   |        | 
|                    |  |      |       |      |   |        | 
|Proceeds from sales |  | $    | 2,597 |      | $ | 69,703 |  | $ | 91,625 |  
|Gross gains         |  |      | 16    |      |   | 122    |  |   | 532    |  
|Gross losses        |  |      | (13   | )    |   |       |  |   | (1     | )
|                    |  |      |       |      |   |        |  |   |        |  

| |                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The scheduled maturities of
  debt securities to be held to maturity and securities available for sale at
  December 31, 2005, are shown below.
  Expected maturities may differ from contractual maturities because
  issuers may have the right to call or prepay obligations with or without call
  or prepayment penalties.



|                                  |  |                               |         |                                   |   |                |  |            |       |  |   |       | 
|--------------------------------- |  | ----------------------------- | ------- | --------------------------------- | - | -------------- |  | ---------- | ----- |  | - | ----- | 
|                                  |  | Securities Available for Sale |         | Securities to be Held to Maturity |  
|                                  |  |                               |         |                                   |  
|                                  |  |                               |         |                                   |  
|                                  |  | Amortized Cost                |         | Fair Value                        |   | Amortized Cost |  | Fair Value |      
|                                  |  |                               |         |                                   |   |                |  |            |      
|Due in one year or less           |  | $                             | 26,644  |                                   | $ | 26,438         |  | $          |      |  | $ |      | 
|Due from one year to five
  years |  |                               | 95,807  |                                   |   | 93,977         |  |            | 1,411 |  |   | 1,394 | 
|Due from five to ten years        |  |                               | 46,227  |                                   |   | 45,279         |  |            | 1,014 |  |   | 1,004 | 
|Due after ten years               |  |                               | 61,548  |                                   |   | 60,498         |  |            | 900   |  |   | 900   | 
|                                  |  |                               |         |                                   |   |                |  |            |      
|                                  |  | $                             | 230,226 |                                   | $ | 226,192        |  | $          | 3,325 |  | $ | 3,298 | 
|                                  |  |                               |         |                                   |   |                |  |            |      

| | Mortgage-backed securities may
  not become due at a single maturity date.
  Such securities have been classified within the category that
  represents the final maturity date.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17

---



|                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY
  Notes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                    

NOTE D 
LOANS, NET

The components of loans are as
  follows at December 31:

|                                         |  |      |         |      |   |         |  
|---------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                         |  | 2005 |         | 2004 |  
|                                         |  |      |         |      |  
|                                         |  |      |         |      |  
|Real estate - Residential (1-4
  family) |  | $    | 371,281 |      | $ | 330,834 |  
|- Commercial                             |  |      | 150,099 |      |   | 137,787 |  
|Construction                             |  |      | 28,872  |      |   | 29,836  |  
|Commercial and industrial                |  |      | 59,591  |      |   | 56,291  |  
|Consumer                                 |  |      | 25,949  |      |   | 19,322  |  
|                                         |  |      |         |      |   |         |  
|                                         |  |      |         |      |  
|                                         |  |      | 635,792 |      |   | 574,070 |  
|Other
Items:                             |  |      |         |      |   |         |  
|Net deferred
loan costs                  |  |      | 1,148   |      |   | 923     |  
|Allowance for
loan losses                |  |      | (6,382  | )    |   | (5,750  | )
|                                         |  |      |         |      |   |         |  
|                                         |  | $    | 630,558 |      | $ | 569,243 |  
|                                         |  |      |         |      |   |         |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Banks lending activities
  are conducted principally in Western Massachusetts.  The Bank grants single family and multi-family residential
  loans, commercial real estate loans, commercial loans, and a variety of consumer
  loans.  In addition, the Bank grants
  loans for the construction of residential homes, multi-family properties and
  commercial real estate properties.
  Most loans granted by the Bank are collateralized by real estate.  The ability and willingness of the single
  family residential and consumer borrowers to honor their repayment
  commitments is generally dependent on the level of overall economic activity
  within the borrowers geographic areas and real estate values.  The ability and willingness of commercial
  real estate and construction loan borrowers to honor their repayment
  commitments is generally dependent on the health of the real estate economic
  sector in the borrowers geographic areas and the general economy.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Nonaccrual loans amounted to
  approximately $1,717 and $3,784 at December 31, 2005 and 2004, respectively.  Additional interest income of approximately $158,
$110 and $88
  would have been recorded during the years ended December 31, 2005, 2004 and
  2003, respectively, if the loans had performed in accordance with their
  original terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | At December 31, 2005 and 2004, the recorded
  investment in impaired loans was $700 and $2,401, respectively, all of which
  were accounted for on a non-accrual basis. An allowance for loan losses was
  established on $700 and $2,401 of the impaired loans at December 31,
  2005 and 2004, respectively, which allowances amounted to $80 and $461 at the
  respective year-ends. The average balances of impaired loans were $2,145,
  $1,395 and $992 for the years ended December 31, 2005, 2004 and 2003, respectively.  Interest income recognized on impaired
  loans during 2005, 2004 and 2003 was not significant.                                                                                                                                                                                                                                                                                                                                                                      

F-18

---



|                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY
  Notes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                    

NOTE D 
LOANS, NET - Continued

| |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain officers and directors
  of the Bank and certain corporations and individuals related to such persons
  incurred indebtedness, in the form of loans, as customers.  These loans were made on substantially the
  same terms, including interest rates and collateral, as those prevailing at
  the time or comparable transactions with other customers and did not involve
  more than the normal risk of collectibility.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The following table summarizes
  the Banks lending activity with its directors and executive officers all of
  which was conducted with terms consistent with those offered to unrelated
  parties:                                                                                                                                                                                                                              

|                  |  |      |        |      |   |        |  
|----------------- |  | ---- | ------ | ---- | - | ------ | -
|                  |  | 2005 |        | 2004 |  
|                  |  |      |        |      |  
|Beginning balance |  | $    | 4,835  |      | $ | 4,257  |  
|New loans         |  |      | 1,933  |      |   | 1,741  |  
|Repayments        |  |      | (1,995 | )    |   | (1,163 | )
|                  |  |      |        |      |   |        |  
|Ending balance    |  | $    | 4,773  |      | $ | 4,835  |  
|                  |  |      |        |      |   |        |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank does not presently originate loans for the
  purpose of reselling them in the secondary market but has sold residential
  mortgage loans from its portfolio. Loan sales totaled $,-0-, $5,200 and
  $10,600 for the years ended December 31, 2005, 2004 and 2003,
  respectively.  Loans serviced by the
  Bank for others totaled $42,400 and $52,200 at December 31, 2005 and
  2004, respectively. The balances of mortgage servicing rights related to such
  loans were insignificant at December 31, 2005 and 2004.

F-19

---



|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|--------------------------------------------------------
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        

NOTE D  LOANS, NET - Continued

A summary of changes in the allowance for loan losses for the years
ended December 31 follows:

| |                           |  |      |       |      |   |       |   |   |       |  
| | ------------------------- |  | ---- | ----- | ---- | - | ----- | - | - | ----- | -
| |                           |  | 2005 |       | 2004 |   | 2003  |  
| |                           |  |      |       |      |   |       |  
| |                           |  |      |       |      |   |       |   |   |       |  
| | Beginning balance         |  | $    | 5,750 |      | $ | 5,094 |   | $ | 4,923 |  
| |                           |  |      |       |      |   |       |   |   |       |  
| | Provision for loan losses |  |      | 917   |      |   | 983   |   |   | 294   |  
| | Charge-offs               |  |      | (455  | )    |   | (558  | ) |   | (162  | )
| | Recoveries                |  |      | 170   |      |   | 231   |   |   | 39    |  
| |                           |  |      |       |      |   |       |   |   |      
| |                           |  |      |       |      |   |       |   |   |       |  
| | Ending balance            |  | $    | 6,382 |      | $ | 5,750 |   | $ | 5,094 |  
| |                           |  |      |       |      |   |       |   |   |       |  

NOTE E  BANKING PREMISES AND EQUIPMENT

The composition of banking premises and equipment is as follows at
December 31:

| |                                                |  |      |        |      |   |                           |   |               |  | 
| | ---------------------------------------------- |  | ---- | ------ | ---- | - | ------------------------- | - | ------------- |  | 
| |                                                |  | 2005 |        | 2004 |   | Estimated 
  Useful Lives |  
| |                                                |  |      |        |      |   |                           |  
| |                                                |  |      |        |      |   |                           |   |               | 
| | Land                                           |  | $    | 2,135  |      | $ | 1,813                     |   |               | 
| | Buildings                                      |  |      | 7,099  |      |   | 6,527                     |   | 25  40 Years | 
| | Leasehold improvements                         |  |      | 2,176  |      |   | 2,019                     |   |               | 
| | Furniture and equipment                        |  |      | 6,280  |      |   | 6,098                     |   | 5  7
  Years | 
| |                                                |  |      |        |      |   |                           |   |               | 
| |                                                |  |      | 17,690 |      |   | 16,457                    |   |               | 
| | Less accumulated depreciation and amortization |  |      | (9,454 | )    |   | (8,786                    | ) |               | 
| |                                                |  |      |        |      |   |                           |   |               | 
|
| |                                                |  | $    | 8,236  |      | $ | 7,671                     |   |               | 
| |                                                |  |      |        |      |   |                           |   |               | 

The Bank leases five of its branches and two ATM facilities. Rent
expense for the years ended December 31, 2005, 2004 and 2003 amounted to
approximately $259, $231 and $283, respectively. The leases, which are
noncancelable, expire at various dates through 2010. Future minimum rental
commitments under the terms of operating leases are as follows:

| |                              |  |   |     | 
| | ---------------------------- |  | - | --- | 
| | Years ending December 31,    |  |   |     | 
| |                              |  |   |     | 
| | 2006                         |  | $ | 216 | 
| | 2007                         |  |   | 151 | 
| | 2008                         |  |   | 122 | 
| | 2009                         |  |   | 112 | 
| | 2010                         |  |   | 67  | 
| |                              |  |   |     | 
|
| | Total minimum lease payments |  | $ | 668 | 
| |                              |  |   |     | 

F-20

---



|UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|--------------------------------------------------------
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        

NOTE F  DEPOSITS

Deposit accounts by type are summarized
as follows at December 31:

| |                   |   |         |         |      |         |         |  | 
| | ----------------- | - | ------- | ------- | ---- | ------- | ------- |  | 
| |                   |   | 2005    |         | 2004 |         |        
| |                   |   |         |         |      |         |         | 
| | Type              |   |         |         |      |         |         |  | 
| | Demand            |   | $       | 93,301  |      | $       | 86,246  |  | 
| | NOW               |   |         | 39,922  |      |         | 39,917  |  | 
| | Regular
Savings   |   |         | 87,253  |      |         | 94,586  |  | 
| | Money
Market      |   |         | 154,177 |      |         | 139,754 |  | 
| | Retirement        |   |         | 52,694  |      |         | 48,496  |  | 
| | Term
Certificates |   |         | 226,264 |      |         | 204,673 |  | 
| |                   |   |         |         |      |         |         |  | 
| |                   | $ | 653,611 |         | $    | 613,672 |         | 
| |                   |   |         |         |      |         |         | 

| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certificates of deposit with balances greater than or equal to $100
  totaled $90,597 and $74,877 at December 31, 2005 and 2004, respectively. The FDIC generally insures
  deposit amounts up to $100, as defined in the applicable regulations.

| |                                        |  |                       |        | 
| | -------------------------------------- |  | --------------------- | ------ | 
| |                                        |  | AtDecember 31,
  2005 |       
| |                                        |  |                       |        | 
|
| | Three months or
less                   |  | $                     | 19,556 | 
| | Over three months
through six
  months |  |                       | 6,935  | 
| | Over six months
through one
  year     |  |                       | 37,666 | 
| | Over one year to
three years           |  |                       | 18,101 | 
| | Over three
years                       |  |                       | 8,339  | 
| |                                        |  |                       |        | 
|
| | Total                                  |  | $                     | 90,597 | 
| |                                        |  |                       |        | 

The scheduled maturities of time deposits at December 31, 2005, are as
follows:

| |                           |  |   |        
| | ------------------------- |  | - | -------
| | Years
ending December 31, |  |   |        
| |                           |  |   |        
| |                           |  |   |        
| | 2006                      |  | $ | 196,099
| | 2007                      |  |   | 44,968 
| | 2008                      |  |   | 14,943 
| | 2009                      |  |   | 11,055 
| | 2010                      |  |   | 10,570 
| |                           |  |   |        
| | Total time
deposits       |  | $ | 277,635
| |                           |  |   |        

Interest expense on deposits, classified
by type, is as follows:

| |                   |  |   |        |  |   |       |  |   |       | 
| | ----------------- |  | - | ------ |  | - | ----- |  | - | ----- | 
| |                   |  |   | 2005   |  |   | 2004  |  |   | 2003  | 
| |                   |  |   |        |  |   |       |  |   |       | 
| | Type              |  |   |        |  |   |       |  |   |       | 
| | NOW               |  | $ | 148    |  | $ | 90    |  | $ | 89    | 
| | Regular
Savings   |  |   | 647    |  |   | 698   |  |   | 796   | 
| | Money
Market      |  |   | 3,098  |  |   | 1,710 |  |   | 1,795 | 
| | Retirement        |  |   | 1,900  |  |   | 1,354 |  |   | 1,541 | 
| | Term
Certificates |  |   | 6,507  |  |   | 5,143 |  |   | 5,040 | 
| |                   |  |   |        |  |   |       |  |   |       | 
| |                   |  | $ | 12,300 |  | $ | 8,995 |  | $ | 9,261 | 
| |                   |  |   |        |  |   |       |  |   |       | 

F-21

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY           
|Notes to
  Consolidated Financial Statements  Continued
|December 31,
  2005, 2004 and 2003                      
|(Dollars in thousands)                                  
|                                                        

NOTE G  BORROWINGS

Federal
Home Loan Bank Advances

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank is a member of the Federal Home Loan Bank of Boston (FHLBB)
  and as such, it was required to invest in stock of the FHLBB, until April
  2004, in an amount which was the greater of .3% of its total assets, 1% of
  its outstanding home loans or 5% of its outstanding advances from the FHLBB.
  In April 2004, the FHLBB amended its capital structure at which time the
  Banks FHLBB stock was converted to Class B stock. Such stock is redeemable
  at par value five years after filing for a redemption or upon termination of
  membership. The FHLBB may, but is not obligated to, repurchase Class B
  stock prior to expiration of the five year redemption notice. Under the new
  capital structure, the Banks stock investment requirement is an amount equal
  to the sum of .35% of certain specified assets (such assets totaled $292,470
  at December 31, 2005) plus 4.5% of the Banks advances and certain other
  specified items.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The FHLBB is
  authorized to make advances to its members subject to such regulations and
  limitations as its Board of Directors may prescribe. The Banks advances are
  secured by its FHLBB stock and a blanket lien on certain qualified
  collateral, primarily one-to four-family first mortgage loans. The Banks
  unused borrowing capacity with the FHLBB was approximately $107,500 at
  December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Advances outstanding at December 31, 2005, 2004 and 2003 consisted of
  the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                          |  |        |         |      |                          |      |        |  |   |                          |  |        |      |   |                          |   |        |  |  |      |   | 
|------------------------- |  | ------ | ------- | ---- | ------------------------ | ---- | ------ |  | - | ------------------------ |  | ------ | ---- | - | ------------------------ | - | ------ |  |  | ---- | - | 
|                          |  | 2005   |         | 2004 |                          | 2003 |       
|                          |  |        |         |      |                          |      |       
|                          |  | Amount |         |      | Weighted 
  Average Rate |      | Amount |  |   | Weighted 
  Average Rate |  | Amount |      |   | Weighted 
  Average Rate |  
|                          |  |        |         |      |                          |      |        |  |   |                          |  |        |      |   |                          |  
|                          |  |        |         |      |                          |      |        |  |   |                          |  |        |      |   |                          |   |        |  |  |     
|Within 1
  year           |  | $      | 13,799  |      |                          | 3.40 | %      |  | $ | 16,000                   |  |        | 2.35 | % |                          | $ | 17,000 |  |  | 1.25 | % | 
|Over 1 year
  to 2 years  |  |        | 10,000  |      |                          | 4.37 |        |  |   | 12,000                   |  |        | 3.23 |   |                          |   |       |  |  |      |   | 
|Over 2 years
  to 3 years |  |        | 19,393  |      |                          | 4.95 |        |  |   |                         |  |        |      |   |                          |   |       |  |  |      |   | 
|Over 3 years
  to 4 years |  |        |        |      |                          |      |        |  |   |                         |  |        |      |   |                          |   |       |  |  |      |   | 
|Over 4 years
  to 5 years |  |        | 20,318  |      |                          | 3.19 |        |  |   | 22,247                   |  |        | 4.87 |   |                          |   | 24,978 |  |  | 4.81 |   | 
|Over 5 years              |  |        | 38,370  |      |                          | 4.02 |        |  |   | 36,447                   |  |        | 3.32 |   |                          |   | 34,842 |  |  | 3.37 |   | 
|                          |  |        |         |      |                          |      |        |  |   |                          |  |        |      |   |                          |   |        |  |  |      |   | 
|                          |  | $      | 101,880 |      |                          | 3.98 | %      |  | $ | 86,694                   |  |        | 3.53 | % |                          | $ | 76,820 |  |  | 3.37 | % | 
|                          |  |        |         |      |                          |      |        |  |   |                          |  |        |      |   |                          |   |        |  |  |      |   | 

Advances totaling $26,000 are
callable at the option of the FHLBB.

F-22

---



|                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARYNotes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                 

NOTE G 
BORROWINGS - Continued

Repurchase
Agreements

| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Securities sold under agreements to repurchase are
  funds borrowed from customers on an overnight basis that are secured by U.S.
  Government agency obligations. The following table summarizes repurchase
  agreement activity for the years indicated:

|                                                    |  |                            |       |      |   |       |   |   |       |  
|--------------------------------------------------- |  | -------------------------- | ----- | ---- | - | ----- | - | - | ----- | -
|                                                    |  | Years Ended
  December 31, |      
|                                                    |  |                            |      
|                                                   
|                                                    |  | 2005                       |       | 2004 |   | 2003  |  
|                                                    |  |                            |       |      |   |       |  
|Balance at year-end                                 |  | $                          | 8,434 |      | $ | 4,317 |   | $ | 4,218 |  
|Average amount outstanding during year              |  |                            | 5,572 |      |   | 4,064 |   |   | 3,744 |  
|Interest expense incurred during year               |  |                            | 90    |      |   | 39    |   |   | 33    |  
|Maximum amount outstanding at any month-end         |  |                            | 8,675 |      |   | 6,015 |   |   | 4,942 |  
|Weighted average interest rate during the year      |  |                            | 1.62  | %    |   | .96   | % |   | .88   | %
|Weighted average interest rate on year-end balances |  |                            | 2.12  | %    |   | 1.19  | % |   | 1.79  | %

NOTE H 
INCOME TAXES

The components of income tax expense
consist of the following for the years ended:

|                     |  |         |       |          |   |       |   |   |       | 
|-------------------- |  | ------- | ----- | -------- | - | ----- | - | - | ----- | 
|                     |  | Current |       | Deferred |   | Total |  
|                     |  |         |       |          |   |       |  
|                    
|December 31,
  2005: |  |         |       |          |   |       |   |   |       | 
|Federal              |  | $       | 1,417 |          | $ | 704   |   | $ | 2,121 | 
|State                |  |         | 254   |          |   | 274   |   |   | 528   | 
|                     |  |         |       |          |   |       |   |   |       | 
|                     |  | $       | 1,671 |          | $ | 978   |   | $ | 2,649 | 
|                     |  |         |       |          |   |       |   |   |       | 
|December 31,
  2004: |  |         |       |          |   |       |   |   |       | 
|Federal              |  | $       | 2,970 |          | $ | (1    | ) | $ | 2,969 | 
|State                |  |         | 859   |          |   |      |   |   | 859   | 
|                     |  |         |       |          |   |       |   |   |       | 
|                     |  | $       | 3,829 |          | $ | (1    | ) | $ | 3,828 | 
|                     |  |         |       |          |   |       |   |   |       | 
|December 31,
  2003: |  |         |       |          |   |       |   |   |       | 
|Federal              |  | $       | 1,774 |          | $ | 1,133 |   | $ | 2,907 | 
|State                |  |         | 619   |          |   | 391   |   |   | 1,010 | 
|                     |  |         |       |          |   |       |   |   |       | 
|                     |  | $       | 2,393 |          | $ | 1,524 |   | $ | 3,917 | 
|                     |  |         |       |          |   |       |   |   |       | 

F-23

---



|                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARYNotes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                 

NOTE H 
INCOME TAXES  Continued

The differences between the effective tax
rates and the statutory Federal income tax rate are summarized as follows:

|                                               |  |      |      |      |  |      |   |  |      |   
|---------------------------------------------- |  | ---- | ---- | ---- |  | ---- | - |  | ---- | --
|                                               |  | 2005 |      | 2004 |  | 2003 |  
|                                               |  |      |      |      |  |      |  
|                                              
|Statutory
  federal income tax rate            |  |      | 34.0 | %    |  | 34.0 | % |  | 34.0 | % 
|                                               |  |      |      |      |  |      |   |  |      |   
|Increase
  (decrease) resulting from:          |  |      |      |      |  |      |   |  |      |   
|State income
taxes, net of Federal tax benefit |  |      | 5.0  | %    |  | 6.1  | % |  | 6.8  | % 
|Other,
net                                     |  |      | (1.2 | )%   |  | .8   | % |  | (.9  | )%
|                                               |  |      |      |      |  |      |   |  |      |   
|                                               |  |      |      |      |  |      |   |  |      |   
|Effective
  tax rate                           |  |      | 37.8 | %    |  | 40.9 | % |  | 39.9 | % 
|                                               |  |      |      |      |  |      |   |  |      |   

Significant
components of the Banks deferred tax assets and liabilities are as follows at
December 31:

|                                       |  |      |       |      |   |       | 
|-------------------------------------- |  | ---- | ----- | ---- | - | ----- | 
|                                       |  | 2005 |       | 2004 |  
|                                       |  |      |       |      |  
|Deferred
  tax asset:                  |  |      |       |      |   |       | 
|Allowance
  for loan losses            |  | $    | 2,598 |      | $ | 2,353 | 
|Charitable
  contribution carryforward |  |      | 1,510 |      |   |      | 
|Deferred
  compensation                |  |      | 1,304 |      |   | 852   | 
|Depreciation
  and amortization        |  |      | 376   |      |   | 252   | 
|Interest
  on nonaccrual loans         |  |      | 64    |      |   | 50    | 
|Unrealized
  loss on securities        |  |      | 500   |      |   | 51    | 
|                                       |  |      |       |      |   |       | 
|                                       |  |      |       |      |   |       | 
|Total
  deferred tax asset             |  |      | 6,352 |      |   | 3,558 | 
|                                       |  |      |       |      |   |       | 
|                                       |  |      |       |      |   |       | 
|Deferred
  tax liabilities:            |  |      |       |      |   |       | 
|Deferred
  gain-servicing rights       |  |      | 66    |      |   | 81    | 
|Market
  value adjustment on loans     |  |      | 3,912 |      |   | 1,024 | 
|Deferred
  loan origination costs      |  |      | 858   |      |   | 827   | 
|Other                                  |  |      | 271   |      |   | 75    | 
|                                       |  |      |       |      |   |       | 
|                                       |  |      |       |      |   |       | 
|Total
  deferred tax liability         |  |      | 5,107 |      |   | 2,007 | 
|                                       |  |      |       |      |   |       | 
|                                       |  |      |       |      |   |       | 
|Net
  deferred tax asset               |  | $    | 1,245 |      | $ | 1,551 | 
|                                       |  |      |       |      |   |       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The charitable contribution carryforward may be
  carried forward until 2009 and is limited to 10% of taxable income each year.
  Based on an assessment of the likely ranges of taxable income during the
  carryforward period, management believes that it is more likely than not it
  will fully utilize tax deductions for this item.                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Banks base year reserve (reserve as of December
  31, 1995) will not be recaptured unless the reserve is used for purposes
  other than for loan losses, such as in a distribution in liquidation or
  otherwise. Accordingly, the Bank has not recorded a deferred tax liability of
  approximately $2,600 relating to approximately $6,200 of cumulative tax
  deductions generated prior to December 31, 1995.

F-24

---



|                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARYNotes to Consolidated
Financial Statements 
  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                 

NOTE I  EMPLOYEE BENEFIT PLANS

Retirement Plans

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank
  provides pension benefits for all of its eligible employees through
  membership in a multi-employer defined benefit plan of the Co-operative Banks
  Employees Retirement Association. Under the plan, retirement benefits are
  based on years of service and the highest average compensation. In addition,
  employees make voluntary contributions to a defined contribution plan. These
  contributions are matched by the Bank up to a maximum of 5% of the employees
  qualified salary and provide retirement benefits to the employee in addition
  to those available under the Banks participation in the multi-employer
  defined benefit plan. Expense for both plans was $686, $676 and $520 for the
  years ended December 31, 2005, 2004 and 2003, respectively.

Supplemental Executive Retirement
Plan

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank has
  entered into Supplemental Executive Retirement Plan (SERP) contracts with
  certain of its officers. The estimated amount to be paid under each contract
  is accrued over the executives active employment from the time the contract
  is signed to the date of full eligibility. The liability associated with
  these SERP contracts was $1,471 and $1,331 at December 31, 2005 and 2004,
  respectively, and is included in accrued expenses and other liabilities in
  the consolidated balance sheets. The expense for SERP contracts was $156, $64
  and $129 for the years ended December 31, 2005, 2004 and 2003,
  respectively.

Incentive Plan

| |                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank
  maintains an incentive plan in which employees are eligible to participate.
  The incentive plan provides for awards based on the achievement of both
  individual and Bank performance goals, subject to approval by the Board of
  Directors. Expense amounted to $832, $544 and $722 for the years ended
  December 31, 2005, 2004 and 2003, respectively.

Directors
Fee Continuation Plan

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank
  sponsors a Directors Fee Continuation Plan under which a Director will
  annually receive $15 ($24 for former chairpersons) for ten years beginning
  upon attaining the normal retirement date. The benefit is reduced for
  directors serving fewer than 15 years. In the event of the participants
  death prior to receiving the full benefits of the plan, any unpaid benefits
  will be paid to the beneficiary. The Bank recognizes expense under this plan
  on a ratable basis such that the present value of the liability is fully
  accrued at each directors normal retirement date. At December 31, 2005 and
  2004, the Banks recorded liability for this plan amounted to $834 and $642,
  respectively. The expense associated with this plan was $207, $56, and $65
  for the years ended December 31, 2005, 2004 and 2003, respectively.

F-25

---



|                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
  
  Notes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                     

|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE I  EMPLOYEE BENEFITS - Continued             
|                                                   
|Employee
  Stock Ownership Plan                    
|                                                   
|                                                    | In
  connection with the stock offering, the Company established an ESOP for the
  benefit of its employees. The Company issued 641,301 shares of common stock
  to the ESOP in exchange for a twenty-year note of approximately $6,413, which
  has been recorded as Unearned ESOP shares within stockholders equity.
  During 2005, 1/20th of the ESOP shares were released and allocated
  to participants. As shares are released from collateral, the Company reports
  compensation expense equal to the current market price of the shares. ESOP
  compensation expense included in salaries and benefits was $376 for the year
  ended December 31, 2005.                                                                                                                                            
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE J  COMMITMENTS                               
|                                                   
|Financial
  Instruments With Off-Balance Sheet Risk
|                                                   
|                                                    | The Bank is
  party to financial instruments with off-balance sheet risk in the normal
  course of business to meet the financing needs of its customers. These
  financial instruments include commitments to originate loans and standby
  letters of credit. The Bank does not record a liability for the fair value of
  the obligation undertaken in issuing standby letters of credit unless it
  becomes probable that the Bank would have to perform under the guarantee.
  These instruments involve, to varying degrees, elements of credit and
  interest rate risk in excess of the amount recognized in the consolidated
  balance sheets. The contract or notional amounts of those instruments reflect
  the extent of involvement the Bank has in particular classes of financial
  instruments.
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                    | The Banks
  exposure to credit loss in the event of nonperformance by the other party to
  the financial instrument for loan commitments and standby letters of credit
  is represented by the contractual or notional amounts of those instruments.
  The Bank uses the same credit policies in making commitments and conditional
  obligations as it does for on-balance sheet instruments.                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                    | Financial
instruments with off-balance sheet risk at December 31, 2005 and 2004, are as
follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                 |  |      |         |      |   |        | 
|-------------------------------- |  | ---- | ------- | ---- | - | ------ | 
|                                 |  | 2005 |         | 2004 |  
|                                 |  |      |         |      |  
|                                
|Unused lines of credit           |  | $    | 114,016 |      | $ | 96,064 | 
|Amounts due mortgagors           |  |      | 16,833  |      |   | 22,240 | 
|Standby letters of credit        |  |      | 1,383   |      |   | 1,442  | 
|Commitments to originate
  loans |  |      | 14,494  |      |   | 10,888 | 

F-26

---



|                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
  Notes to Consolidated Financial Statements  Continued
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                  

|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE J  COMMITMENTS - Continued
|                                
|                                 | Included in
  commitments to originate loans at December 31, 2005 and 2004 are fixed rate
  commitments in the amount of $9,465 and $7,870 at interest ranges of 5.375%
  to 7.25% and 4.75% to 7.25%, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                 | 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 generally
  have fixed expiration dates or other termination clauses and may require
  payment of a fee. Since many of the commitments are expected to expire
  without being drawn upon, the total commitment amounts do not necessarily
  represent future cash requirements. The Bank evaluates each customers
  creditworthiness on a case-by-case basis. The amount of collateral obtained,
  if deemed necessary by the Bank upon extension of credit, is based on
  managements credit evaluation.                                                                                
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                 | Standby
  letters of credit are conditional commitments issued by the Bank to guarantee
  the performance of a customer to a third party. Those guarantees are
  primarily issued to support public and private borrowing arrangements,
  including commercial paper, bond financing and similar transactions. The
  credit risk involved in issuing letters of credit is essentially the same as
  that involved in extending loan facilities to customers. The Bank holds
  residential or commercial real estate, accounts receivable, inventory and
  equipment as collateral supporting those commitments for which collateral is
  deemed necessary. The extent of collateral held for those commitments at
  December 31, 2005 and 2004 exceeds 100%.
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                 | Employment and change in control agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                 | During 2005,
  the Bank entered into a three-year employment agreement with its President
  and Chief Executive Officer and certain other executives. This agreement
  generally provide for a base salary and the continuation of certain benefits
  currently received. Annually the Bank may extend the agreement for an
  additional year. Under certain specified circumstances, the employment
  agreement requires certain payments to be made for certain reasons other than
  cause, including a change in control as defined in the agreement. However,
  such employment may be terminated for cause, as defined, without incurring
  any continuing obligations.                                                                              
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                 | During 2005,
  the Bank also entered into three-year change in control agreements with
  certain officers, none of whom are covered by an employment agreement. The
  change in control agreements are renewable on an annual basis and generally
  provide a severance payment and the continuation of certain benefits
  currently received following a change in control as defined in the
  agreements.                                                                                                                                                                                                                                                                                                                                               

F-27

---



|                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND SUBSIDIARY
  
  Notes to Consolidated Financial Statements  Continued 
  December 31, 2005, 2004 and 2003
  (Dollars in thousands)
|                                                                                                                                                                      

|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE K  FAIR VALUE OF FINANCIAL INSTRUMENTS
|                                            
|                                             | Fair value
  estimates are made at a specific point in time, based on relevant market
  information and information about the financial instrument. These estimates
  do not reflect any premium or discount that could result from offering for
  sale at one time the Banks entire holdings of a particular financial instrument.
  Because a market may not readily exist for a significant portion of the
  Banks financial instruments, fair value estimates are based on judgments
  regarding future expected loss experience, current economic conditions, risk
  characteristics of various financial instruments, and other factors. These
  estimates are subjective in nature and involve uncertainties and matters of
  significant judgment and therefore cannot be determined with precision.
  Changes in assumptions could significantly affect the estimates.
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                             | Fair value
  estimates are based on existing on- and off-balance sheet financial
  instruments without attempting to estimate the value of anticipated future
  business and the value of assets and liabilities that are not considered
  financial instruments. Other significant assets and liabilities that are not
  considered financial assets or liabilities and, therefore, are not valued
  pursuant to SFAS 107 include premises and equipment and real estate acquired
  by foreclosure. In addition, the tax ramifications related to the realization
  of the unrealized gains and losses can have a significant effect on fair
  value estimates and have not been considered in the estimates.                                                                                                                                                                   
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                             | The
  following methods and assumptions were used by the Bank in estimating fair
  values of its financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Cash and
  Cash Equivalents                 
|                                            
|                                             | For cash and
  short term investments having maturities of 90 days or less, the carrying
  amounts reported in the balance sheets approximate fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Investment
  Securities and FHLBB Stock     
|                                            
|                                             | The fair
  value of securities to be held to maturity and securities available for sale
  is estimated based on quoted market prices, where available. If quoted market
  prices are not available, fair values are based on quoted market prices of comparable
  instruments. Ownership of Federal Home Loan Bank of Boston stock is
  restricted to member banks; therefore, the stock is not traded. The estimated
  fair value of Federal Home Loan Bank of Boston stock is equal to its carrying
  value, which represents the price at which the FHLBB is obligated to redeem
  its stock.                                                                                                                                                                                                                                                                                 

F-28

---



|                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------
|UNITED
FINANCIAL BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements  Continued 
December 31, 2005, 2004 and 2003
(Dollars in thousands)
|                                                                                                                                                             

|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE K  FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
|                                                        
|Loans                                                   
|                                                        
|                                                         | For
  variable-rate residential and commercial loans that reprice frequently and
  which have no significant change in credit risk, fair values are based on
  carrying values. The fair values for certain mortgage loans (e.g. one-to-four
  family residential) and other consumer loans are based on quoted market
  prices of similar loans sold in conjunction with securitization transactions,
  adjusted for differences in loan characteristics.                                                                                                                                                              
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Accrued
  Interest Receivable and Payable               
|                                                        
|                                                         | The carrying
  value of accrued interest receivable on investments and loans and accrued
  interest payable on deposits and borrowings, included in other liabilities,
  approximates their fair values.                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Deposits                                                
|                                                        
|                                                         | The fair
  value of deposits with no stated maturity, such as demand deposits, NOW,
  regular savings, and money market deposit accounts, is equal to the amount
  payable on demand. The fair value estimates do not include the benefit that
  results from the generally lower cost of funding provided by the deposit
  liabilities compared to the cost of borrowing funds in the market. The fair
  value estimate of time deposits is based on the discounted value of
  contractual cash flows. The discount rate is estimated using the rates
  currently offered for deposits of similar remaining maturities.
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Federal
  Home Loan Bank of Boston Advances             
|                                                        
|                                                         | The fair
  value estimate of the borrowings from the Federal Home Loan Bank of Boston is
  determined by discounting the anticipated future cash payments by using the
  rates currently available to the Bank for debt with similar terms and
  remaining maturities.                                                                                                                                                                                                                                                                                                                                                  
|                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Repurchase
  Agreements                                 
|                                                        
|                                                         | Securities
  sold under agreements to repurchase generally mature within one to four days
  from transaction date and, accordingly, the fair value of these agreements
  approximates their recorded balance.                                                                                                                                                                                                                                                                                                                                                                                                           

F-29

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE K 
FAIR VALUE OF FINANCIAL INSTRUMENTS  Continued

Off-Balance Sheet
Instruments

| |                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fair value of
  off-balance-sheet mortgage lending commitments are based on fees currently
  charged to enter into similar agreements, taking into account the remaining
  terms of the agreements and the counterparties credit standing.  In the case of the commitments discussed
  in Note J, the fair value equals the carrying amounts which are not
  significant.
| | The fair value of the Banks
  financial instruments are as follows at December 31:                                                                                                                                                                                                                                                                                       

|                                          |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|----------------------------------------- |  | ---------------- | ------- | ---------------------- | - | ---------------- |  | ---------------------- | ------- |  | - | ------- | 
|                                          |  | 2005             |         | 2004                   |  
|                                          |  |                  |         |                        |  
|                                          |  | Carrying
  Value |         | Estimated
  Fair Value |   | Carrying
  Value |  | Estimated
  Fair Value |        
|                                          |  |                  |         |                        |   |                  |  |                        |        
|Financial Assets:                         |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|Cash and cash
equivalents                 |  | $                | 15,843  |                        | $ | 15,843           |  | $                      | 23,233  |  | $ | 23,233  | 
|Securities available for
sale             |  |                  | 226,465 |                        |   | 226,465          |  |                        | 152,329 |  |   | 152,329 | 
|Securities to be held to
maturity         |  |                  | 3,325   |                        |   | 3,298            |  |                        | 2,498   |  |   | 2,498   | 
|Stock in Federal Home Loan Bank
of Boston |  |                  | 6,588   |                        |   | 6,588            |  |                        | 6,021   |  |   | 6,021   | 
|Net loans                                 |  |                  | 630,558 |                        |   | 630,288          |  |                        | 569,243 |  |   | 568,096 | 
|Accrued interest
receivable               |  |                  | 3,928   |                        |   | 3,928            |  |                        | 2,862   |  |   | 2,862   | 
|                                          |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|Financial
Liabilities:                    |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|Deposits (with no stated
maturity)        |  |                  | 375,967 |                        |   | 375,967          |  |                        | 362,382 |  |   | 362,382 | 
|Time deposits                             |  |                  | 277,644 |                        |   | 279,309          |  |                        | 251,290 |  |   | 255,648 | 
|Federal Home Loan Bank of
Boston advances |  |                  | 101,880 |                        |   | 98,946           |  |                        | 86,694  |  |   | 85,746  | 
|Accrued interest
payable                  |  |                  | 400     |                        |   | 400              |  |                        | 274     |  |   | 274     | 
|Repurchase agreements                     |  |                  | 8,434   |                        |   | 8,434            |  |                        | 4,317   |  |   | 4,317   | 

NOTE L 
REGULATORY CAPITAL

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Bank is subject to various
  minimum regulatory capital standards promulgated by the federal banking
  agencies.  Prior to the Banks
  conversion to a federal savings bank, these capital standards were based on
  FDIC guidelines.  Beginning in 2004,
  the Bank became subject to OTS capital guidelines.  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 its
  financial statements.  Under capital
  adequacy guidelines and the regulatory framework for prompt corrective
  action, the Bank must meet specific capital guidelines that involve
  quantitative measures of the Banks assets, liabilities, and certain
  off-balance-sheet items as calculated under regulatory accounting
  practices.  The Banks capital amounts
  and classification are also subject to qualitative judgments by the
  regulators about components, risk weightings, and other factors.  The Company is not subject to capital
  guidelines.

F-30

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE L 
REGULATORY CAPITAL  Continued

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The minimum capital standards
  of the OTS generally require the maintenance of regulatory capital sufficient
  to meet each of three tests, hereinafter described as the total risk-based
  capital requirement, the Tier I risk-based capital requirement and the Tier I
  or leverage capital requirement.  The
  Tier I risk-based and Tier I leverage capital requirements provide for
  minimum core capital (tangible capital plus certain forms of supervisory
  goodwill and other qualifying intangible assets) generally equal to 4.0% of
  risk-weighted assets and to 4.0% of adjusted total assets, respectively,
  except for those banks with the highest examination rating and acceptable
  levels of risk.  The risk-based
  capital requirement provides for the maintenance of core capital plus general
  loss allowances equal to 8.0% of risk-weighted assets.  In computing risk-weighted assets, the
  Bank multiplies the value of each asset on its balance sheet by a defined
  risk-weighting factor, e.g., one- to four-family residential loans carry a
  risk-weighted factor of 50%.
| | As of December 31, 2005, the
  most recent notification from the OTS categorized the Bank as well
  capitalized under the regulatory framework for prompt corrective action. To
  be categorized as adequately capitalized the Bank must maintain minimum
  ratios as set forth in the accompanying table.  There are no conditions or events since that notification that
  management believes have changed the institutions category.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|--------------------------------------------------- |  | ------ | ------- | ------------------------------- |  | ----------------------------------------------------- | - | ----- | ------ | ------ | - | ----- | - | --- | ------ |  | - | ---- | -
|                                                    |  | Actual |         | For Capital
  Adequacy Purposes |  | To Be Well Capitalized
  Under Regulatory
  Framework |  
|                                                    |  |        |         |                                 |  |                                                       |  
|                                                    |  | Amount |         | Ratio                           |  | Amount                                                |   | Ratio |        | Amount |   | Ratio |  
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|As of December 31,
2005:                            |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Total
  Capital(to Risk Weighted Assets)            |  | $      | 108,500 |                                 |  | 18.3                                                  | % | 3 $   | 47,475 |        | 3 | 8.0   | % | 3 $ | 59,343 |  | 3 | 10.0 | %
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Tier I (Core) Capital(to
  Risk Weighted Assets)    |  |        | 102,117 |                                 |  | 17.2                                                  | % | 3     | 23,737 |        | 3 | 4.0   | % | 3   | 35,606 |  | 3 | 6.0  | %
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Tier I Leverage Capital(to
  Adjusted Total Assets) |  |        | 102,117 |                                 |  | 11.6                                                  | % | 3     | 35,110 |        | 3 | 4.0   | % | 3   | 43,888 |  | 3 | 5.0  | %
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|As of December 31,
2004:                            |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Total
  Capital(to Risk Weighted Assets)            |  | $      | 68,285  |                                 |  | 12.8                                                  | % | 3 $   | 42,879 |        | 3 | 8.0   | % | 3 $ | 53,598 |  | 3 | 10.0 | %
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Tier I (Core) Capital(to
  Risk Weighted Assets)    |  |        | 62,535  |                                 |  | 11.7                                                  | % | 3     | 21,439 |        | 3 | 4.0   | % | 3   | 32,159 |  | 3 | 6.0  | %
|                                                    |  |        |         |                                 |  |                                                       |   |       |        |        |   |       |   |     |        |  |   |      |  
|Tier I Leverage Capital(to
  Adjusted Total Assets) |  |        | 62,535  |                                 |  | 8.1                                                   | % | 3     | 30,935 |        | 3 | 4.0   | % | 3   | 38,626 |  | 3 | 5.0  | %

F-31

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE M 
CONDENSED FINANCIAL STATEMENTS OF 
UNITED FINANCIAL BANCORP, INC.

| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company was formed to serve as the stock holding
  company for United Bank pursuant to the mutual holding company
  reorganization. The financial statements presented herein as of and for the
  year ended December 31, 2004 are those of United Bank as a federal mutual
  savings bank. The following are the condensed financial statements for the
  Company (parent company only).

BALANCE SHEETS

|                                                      |  |   |                     |  |                     |        |  | 
|----------------------------------------------------- |  | - | ------------------- |  | ------------------- | ------ |  | 
|                                                      |  |   | December
  31, 2005 |  | December
  31, 2004 |       
|                                                      |  |   |                     |  |                     |       
|ASSETS                                                |  |   |                     |  |                     |        | 
|Cash and due from banks                               |  | $ | 14                  |  | $                   | 105    | 
|Investment in Bank                                    |  |   | 99,816              |  |                     | 62,143 | 
|Securities available for sale,
  at fair market value |  |   | 31,186              |  |                     |       | 
|ESOP loan receivable                                  |  |   | 6,049               |  |                     |       | 
|Other assets                                          |  |   | 113                 |  |                     | 26     | 
|                                                      |  |   |                     |  |                     |        | 
|TOTAL
ASSETS                                          |  | $ | 137,178             |  | $                   | 62,274 | 
|                                                      |  |   |                     |  |                     |        | 
|                                                      |  |   |                     |  |                     |        | 
|LIABILITIES AND STOCKHOLDERS EQUITY                  |  |   |                     |  |                     |        | 
|Other liabilities                                     |  | $ | 173                 |  | $                   | 19     | 
|Stockholders equity                                  |  |   | 137,005             |  |                     | 62,255 | 
|                                                      |  |   |                     |  |                     |        | 
|TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY            |  | $ | 137,178             |  | $                   | 62,274 | 
|                                                      |  |   |                     |  |                     |        | 

STATEMENTS OF INCOME

|                                                                            |  |                          |        |   |      |       |   | 
|--------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | ----- | - | 
|                                                                            |  | Years ended December 31, |       
|                                                                            |  |                          | 2005   |   | 2004 |      
|                                                                            |  |                          |        |   |      |      
|                                                                            |  |                          |        |   |      |       |  
|Income                                                                      |  |                          |        |   |      |       |  
|Investment interest                                                         |  | $                        | 617    |   | $    |      |  
|ESOP loan interest                                                          |  |                          | 189    |   |      |      |  
|                                                                            |  |                          |        |   |      |       |  
|TOTAL
INCOME                                                                |  |                          | 806    |   |      |      |  
|                                                                            |  |                          |        |   |      |       |  
|                                                                            |  |                          |        |   |      |       |  
|Expense                                                                     |  |                          |        |   |      |       |  
|Charitable contribution to
  Foundation                                     |  |                          | 3,591  |   |      |      |  
|Professional services                                                       |  |                          | 266    |   |      |      |  
|Other expenses                                                              |  |                          | 63     |   |      | 64    |  
|                                                                            |  |                          |        |   |      |       |  
|TOTAL
EXPENSE                                                               |  |                          | 3,920  |   |      | 64    |  
|                                                                            |  |                          |        |   |      |       |  
|                                                                            |  |                          |        |   |      |       |  
|Loss before income taxes and
equity in undistributed earnings in the
  Bank |  |                          | (3,114 | ) |      | (64   | )
|Income tax benefit                                                          |  |                          | (894   | ) |      | (26   | )
|                                                                            |  |                          |        |   |      |       |  
|LOSS BEFORE
  EQUITY IN UNDISTRIBUTED EARNINGS OF THE BANK                  |  |                          | (2,220 | ) |      | (38   | )
|EQUITY IN
  UNDISTRIBUTED EARNINGS OF THE BANK                              |  |                          | 6,589  |   |      | 5,566 |  
|                                                                            |  |                          |        |   |      |       |  
|NET INCOME                                                                  |  | $                        | 4,369  |   | $    | 5,528 |  
|                                                                            |  |                          |        |   |      |       |  

F-32

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE M 
CONDENSED FINANCIAL STATEMENTS OF 
UNITED FINANCIAL BANCORP, INC.  Continued

STATEMENTS OF
CASH FLOWS

|                                                                                     |  |                           |         |      |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------------- | ------- | ---- | - | ------ | -
|                                                                                     |  | Years
  ended December 31 |        
|                                                                                     |  | 2005                      |         | 2004 |  
|                                                                                     |  |                           |         |      |  
|                                                                                     |  |                           |         |      |   |        |  
|Cash flows from operating
  activities:                                              |  |                           |         |      |   |        |  
|Net
income                                                                           |  | $                         | 4,369   |      | $ | 5,528  |  
|Adjustments to
reconcile net income to cash provided by operating
  activities:      |  |                           |         |      |   |        |  
|Equity in
undistributed earnings of the Bank                                         |  |                           | (6,589  | )    |   | (5,566 | )
|Net
amortization of discounts and premiums                                           |  |                           | (46     | )    |   |       |  
|Increase in
  deferred income taxes                                                  |  |                           | 255     |      |   |       |  
|Charitable
  contribution to Foundation                                              |  |                           | 3,441   |      |   |       |  
|Accrued
interest
  receivable                                                        |  |                           | (322    | )    |   |       |  
|Decrease
  (increase) in other assets                                                |  |                           | 26      |      |   | (26    | )
|Intercompany
  payables and other liabilities                                        |  |                           | 107     |      |   | 19     |  
|                                                                                     |  |                           |         |      |   |        |  
|Net cash
  provided by operating activities                                          |  |                           | 1,241   |      |   | (45    | )
|                                                                                     |  |                           |         |      |   |        |  
|Cash flows from investing
  activities:                                              |  |                           |         |      |   |        |  
|Purchases of
  securities available for sale                                         |  |                           | (32,963 | )    |   |       |  
|Proceeds from
  maturities and principal repayments of securities available for sale |  |                           | 1,676   |      |   |       |  
|Loan to fund
  ESOP                                                                  |  |                           | (6,413  | )    |   |       |  
|Principal
  payments on ESOP loan                                                    |  |                           | 364     |      |   |       |  
|Net cash used
in
  investing activities                                              |  |                           | (37,336 | )    |   |       |  
|                                                                                     |  |                           |         |      |   |        |  
|Cash flows from financing
  activities:                                              |  |                           |         |      |   |        |  
|Initial funding
  by Bank                                                            |  |                           |        |      |   | 150    |  
|Investment in
  United Bank                                                          |  |                           | (38,818 | )    |   |       |  
|Net proceeds
  from stock issuance                                                   |  |                           | 74,822  |      |   |       |  
|                                                                                     |  |                           |         |      |   |        |  
|Net cash
  provided by financing activities                                          |  |                           | 36,004  |      |   | 150    |  
|                                                                                     |  |                           |         |      |   |        |  
|Increase (decrease) in cash and cash equivalents                                     |  |                           | (91     | )    |   | 105    |  
|                                                                                     |  |                           |         |      |   |        |  
|Cash and cash equivalents at beginning of year                                       |  |                           | 105     |      |   |       |  
|                                                                                     |  |                           |         |      |   |        |  
|                                                                                     |  |                           |         |      |   |        |  
|Cash and cash equivalents at end of year                                             |  | $                         | 14      |      | $ | 105    |  
|                                                                                     |  |                           |         |      |   |        |  

F-33

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE N 
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | The following table summarizes the operating results
  on a quarterly basis for the years ended December 31, 2005, 2004 and 2003.

|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|---------------------------- |  | ------------------ | ----- | ------- | - | ------------ |  | ----------- | ------ | - | - | ------ | 
|                             |  | Three Months Ended |      
|                             |  |                    |      
|                             |  | March 31           |       | June 30 |   | September 30 |  | December 31 |       
|                             |  |                    |       |         |   |              |  |             |       
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|2005:                        |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Interest income              |  | $                  | 9,716 |         | $ | 10,327       |  | $           | 11,456 |   | $ | 11,734 | 
|Interest expense             |  |                    | 3,369 |         |   | 3,819        |  |             | 4,249  |   |   | 4,769  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Net interest
  income        |  |                    | 6,347 |         |   | 6,508        |  |             | 7,207  |   |   | 6,965  | 
|Provision for loan losses    |  |                    | 275   |         |   | 275          |  |             | 275    |   |   | 92     | 
|Non-interest income          |  |                    | 1,225 |         |   | 1,326        |  |             | 1,413  |   |   | 1,397  | 
|Non-interest expense         |  |                    | 5,027 |         |   | 4,897        |  |             | 8,711  |   |   | 5,816  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Income (loss)
  before taxes |  |                    | 2,270 |         |   | 2,662        |  |             | (366   | ) |   | 2,454  | 
|Income taxes                 |  |                    | 904   |         |   | 1,063        |  |             | (194   | ) |   | 877    | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Net income (loss)            |  | $                  | 1,366 |         | $ | 1,599        |  | $           | (172   | ) | $ | 1,576  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|2004:                        |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Interest income              |  | $                  | 8,905 |         | $ | 8,835        |  | $           | 9,262  |   | $ | 9,530  | 
|Interest expense             |  |                    | 2,934 |         |   | 2,935        |  |             | 3,057  |   |   | 3,222  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Net interest
  income        |  |                    | 5,971 |         |   | 5,900        |  |             | 6,205  |   |   | 6,308  | 
|Provision for loan losses    |  |                    | 113   |         |   | 113          |  |             | 113    |   |   | 645    | 
|Non-interest income          |  |                    | 1,202 |         |   | 1,248        |  |             | 1,329  |   |   | 1,356  | 
|Non-interest expense         |  |                    | 4,969 |         |   | 4,800        |  |             | 4,625  |   |   | 4,785  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Income before
  income taxes |  |                    | 2,091 |         |   | 2,235        |  |             | 2,796  |   |   | 2,234  | 
|Income taxes                 |  |                    | 830   |         |   | 893          |  |             | 1,129  |   |   | 976    | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 
|Net income                   |  | $                  | 1,261 |         | $ | 1,342        |  | $           | 1,667  |   | $ | 1,258  | 
|                             |  |                    |       |         |   |              |  |             |        |   |   |        | 

During the quarter ended
December 31, 2005, the Bank decreased its provision for loan losses by $183
from the amount provided in each of the previous three quarters in 2005.  This decrease is primarily due to lower
adversely classified loans and lower nonperforming loans.  Included in the third quarter results was a one-time after-tax expense
of $2.2 million which was incurred to establish and fund the new United
Charitable Foundation. Excluding this charge for the charitable foundation, net income would have been $2.0 million for
the three month period.

F-34

---



|                                                        
|--------------------------------------------------------
|UNITED FINANCIAL BANCORP, INC. AND
  SUBSIDIARY         
|Notes to Consolidated Financial Statements 
  Continued
|December 31, 2005, 2004 and 2003                        
|(Dollars in thousands)                                  
|                                                        

NOTE O  SUBSEQUENT EVENTS

On
January 19, 2006, the Board
of Directors declared an initial cash dividend of $0.05 per share.  The dividend is payable on February 27, 2006
to shareholders of record as of February 13, 2006.  This is the first cash dividend for the Company since the
completion of its minority stock offering on July 12, 2005.  United
Mutual Holding Company has filed a notice with the Office of Thrift Supervision
of its intent to waive the receipt of dividends paid on the shares it owns of
the Company.  The waiver is subject to
the Office of Thrift Supervision not objecting to it.

On February 16, 2006, the Companys Board of Directors approved the
adoption of a stock-based incentive plan that would provide for grants of stock
options and restricted common stock awards.
The number of options granted or shares awarded under the plan may not
exceed 4.90% and 1.96%, respectively, of the Companys outstanding shares
(including shares issued to United Mutual Holding Company and to United
Charitable Foundation).  The number of
options granted or shares awarded under the plan, when aggregated with any subsequently
adopted stock-based benefit plans (exclusive of any shares held by the ESOP),
may not exceed 25% of the number of shares of common stock held by persons
other than United Mutual Holding Company.
The stock-based incentive plan is subject to approval by the Companys
stockholders.

F-35

---