**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, 2006


**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:





**Common
                Stock, par value $0.01 per share**
            **NASDAQ
                Global Select Market**(Title
                of Class)
            Name
                of exchange on which registered





Securities
      Registered Pursuant to Section 12(g) of the Act:  **None**




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.YESxNOo





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 amendments 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 filero
            Accelerated
                filerx
            Non-accelerated
                filero


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 Securities
        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 08, 2007, 17,129,379 shares of the Registrant’s Common Stock were
      outstanding.





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 June 30, 2006, as reported by the NASDAQ Global Select Market, was
      approximately $96.5 million.





DOCUMENTS
      INCORPORATED BY REFERENCE





1.
      Proxy
      Statement for the Annual Meeting of Stockholders dated March 19, 2007 (Part
      III)










**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 that 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 53.6% 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.**




The
      Company sold 7,671,973 shares of common stock in its 2005 subscription offering
      for $10.00 per share. For a 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).




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
      that were not immediately contributed as capital in United Bank. The Company,
      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.




The
      Company’s 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




**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 twelve branch offices located in Feeding Hills, Holyoke,
      Huntington, Indian Orchard, Longmeadow, Ludlow, Springfield, Northampton and
      two
      offices in 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
      almost exclusively 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. We also
      maintain two financial services facilities that offers insurance and investment
      products and financial planning services; these facilities are located in West
      Springfield and Northampton. Our primary lending area is significantly broader
      that our deposit-gathering area and includes all of Hampden and Hampshire
      Counties in Western Massachusetts and Northern Connecticut. At December 31,
      2006, 95.69% 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 2005 **** population
      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 1.2% and 2.3%,
      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.




**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, 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, 2006,
      the
      latest date for which information is available, our market share of deposits
      represented 8.94% and 0.95% 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.




3


**Lending
      Activities**




Our
      principal lending activities are 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. No loans were held for sale at December 31, 2006 or 2005.
      One-
      to four-family residential real estate mortgage loans amounted to $319.1
      million, or 41.87% of our total loan portfolio at December 31, 2006, and home
      equity loans and lines of credit totaled $112.7 million or 14.79% of our loan
      portfolio. 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,
      2006, commercial real estate loans totaled $175.6 million, or 23.04% of our
      loan
      portfolio, construction mortgage loans totaled $54.8 million, or 7.19% of our
      loan portfolio, commercial and industrial loans totaled $69.8 million, or 9.15%
      of our loan portfolio and automobile loans totaled $24.5 million, or 3.21%
      of
      our loan portfolio. We also originate other consumer loans, including secured
      and unsecured personal loans, manufactured home, motorcycle and motor home
      loans, boat loans and pool and spa loans. At December 31, 2006, such loans
      totaled $5.7 million, or .75% of our loan portfolio.




4


***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,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent****(Dollars
                in thousands)****Types
                of loans:**Real
                estate loans:One-to
                four-family
            
            $
            319,108
            
            
            41.87
            %
            $
            285,236
            
            
            44.86
            %
            $
            256,134
            
            
            44.62
            %
            $
            233,131
            
            
            46.50
            %
            $
            208,911
            
            
            44.69
            %Commercial
            
            
            175,564
            
            
            23.04
            %
            
            150,099
            
            
            23.61
            %
            
            137,787
            
            
            24.00
            %
            
            117,766
            
            
            23.49
            %
            
            113,674
            
            
            24.32
            %Construction
            
            
            54,759
            
            
            7.19
            %
            
            28,872
            
            
            4.54
            %
            
            29,836
            
            
            5.20
            %
            
            26,625
            
            
            5.31
            %
            
            18,091
            
            
            3.87
            %Home
                equity
            
            
            112,739
            
            
            14.79
            %
            
            86,045
            
            
            13.53
            %
            
            74,700
            
            
            13.01
            %
            
            63,824
            
            
            12.73
            %
            
            64,289
            
            
            13.75
            %Commercial
                and industrial
            
            
            69,762
            
            
            9.15
            %
            
            59,591
            
            
            9.37
            %
            
            56,291
            
            
            9.81
            %
            
            37,863
            
            
            7.55
            %
            
            34,344
            
            
            7.35
            %Automobile
            
            
            24,456
            
            
            3.21
            %
            
            22,054
            
            
            3.47
            %
            
            17,460
            
            
            3.04
            %
            
            20,943
            
            
            4.18
            %
            
            27,001
            
            
            5.78
            %Other
                consumer
            
            
            5,725
            
            
            0.75
            %
            
            3,895
            
            
            0.61
            %
            
            1,862
            
            
            0.32
            %
            
            1,169
            
            
            0.23
            %
            
            1,194
            
            
            0.26
            %Total
                loans receivable
            
            $
            762,113
            
            
            100.00
            %
            $
            635,792
            
            
            100.00
            %
            $
            574,070
            
            
            100.00
            %
            $
            501,321
            
            
            100.00
            %
            $
            467,504
            
            
            100.00
            %Other
                items:Net
                deferred loan costs and fees
            
            
            1,285
            
            
            
            
            
            1,148
            
            
            
            
            
            923
            
            
            
            
            
            852
            
            
            
            
            
            802Allowance
                for loan losses
            
            
            (7,218
            )
            
            
            
            
            (6,382
            )
            
            
            
            
            (5,750
            )
            
            
            
            
            (5,095
            )
            
            
            
            
            (4,924
            )Total
                loans, net
            
            $
            756,180
            
            
            
            
            $
            630,558
            
            
            
            
            $
            569,243
            
            
            
            
            $
            497,078
            
            
            
            
            $
            463,382




5


***Loan
      Portfolio Maturities and Yields.*** The
      following table summarizes the scheduled repayments of our loan portfolio at
      December 31, 2006. 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****Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted****Average**
            
            
            
            **Average**
            
            
            
            **Average**
            
            
            
            **Average**
            
            
            
            **Average**
            
            
            
            **Average****Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate**
            
            **Amount**
            
            **Rate****(Dollars
                in thousands)****Due
                during the years****ending December
                31,**2007
            
            $
            21,018
            
            
            5.71
            %
            $
            7,879
            
            
            6.38
            %
            $
            21,117
            
            
            8.56
            %
            $
            35,783
            
            
            8.00
            %
            $
            8,826
            
            
            5.44
            %
            $
            94,623
            
            
            7.24
            %2008
                to 2011
            
            
            82,246
            
            
            5.81
            %
            
            32,645
            
            
            6.38
            %
            
            10,382
            
            
            6.75
            %
            
            23,414
            
            
            6.26
            %
            
            18,540
            
            
            4.99
            %
            
            167,227
            
            
            5.95
            %2012
                and beyond
            
            
            328,583
            
            
            6.01
            %
            
            135,040
            
            
            6.45
            %
            
            23,260
            
            
            5.91
            %
            
            10,565
            
            
            7.09
            %
            
            2,815
            
            
            7.98
            %
            
            500,263
            
            
            6.16
            %Total
            
            $
            431,847
            
            
            5.96
            %
            $
            175,564
            
            
            6.43
            %
            $
            54,759
            
            
            7.09
            %
            $
            69,762
            
            
            7.28
            %
            $
            30,181
            
            
            5.40
            %
            $
            762,113
            
            
            6.25
            %


____________________


(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, 2006 that are contractually due after
      December 31, 2007.




**Due
                After December 31, 2007****Fixed**
            
            **Adjustable**
            
            **Total****(In
                thousands)**Residential
                real estate (1)
            
            $
            341,716
            
            $
            69,113
            
            $
            410,829Commercial
                real estate
            
            
            62,910
            
            
            104,775
            
            
            167,685Construction
            
            
            30,280
            
            
            3,362
            
            
            33,642Commercial
                and industrial
            
            
            28,520
            
            
            5,459
            
            
            33,979Consumer
                and other
            
            
            21,355
            
            
            -
            
            
            21,355Total
                loans
            
            $
            484,781
            
            $
            182,709
            
            $
            667,490





____________________


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


6


***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, 2006, $319.1 million, or
      41.9% 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 $10.4 million of adjustable-rate one- to four-family residential
      loans during the fiscal year ended December 31, 2006, as compared to total
      originations of $71.2 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, 2006, $33.2 million, or 10.4% 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 of up to 30 years 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. Employee and insider 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.




7


***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, 2006, home equity loans
      and
      equity lines of credit totaled $112.7 million, or 14.79% of total loans.
      Additionally, at December 31, 2006, the unadvanced amounts of home equity lines
      of credit totaled $97.2 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* .
      We
      originated $67.9 million of home equity lines of credit during the fiscal year
      ended December 31, 2006, as compared to total originations of $51.4 million
      home
      equity lines of credit during the same period in 2005.




***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, 2006, commercial real estate mortgage loans totaled $175.6 million, which
      amounted to 23.04% 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 loans comply with our loan policy
      guidelines and with our current loans-to-one borrower limit for these types
      of
      loans which is generally 20% of our unimpaired capital and surplus and which,
      at
      December 31, 2006, was $22.2 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 when they are providing personal guarantees. 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, 2006 was a $6.3 million loan secured by commercial real estate
      located in Northern Connecticut. This loan was performing according to its
      terms
      at December 31, 2006.




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, 2006, residential construction loans
      amounted to $13.5 million, or 1.77% of total loans. At December 31, 2006, the
      additional unadvanced portion of these construction loans totaled $5.5
      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 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.




8


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 and 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, 2006, commercial construction loans totaled $41.3 million, or
      5.42%
      of total loans. At December 31, 2006, the largest outstanding commercial
      construction loan balance was for $6.1 million. It was secured by a retail
      development project located in our primary market area. This loan was performing
      according to its terms at December 31, 2006. At December 31, 2006, the
      additional unadvanced portion of these construction loans totaled $29.2
      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, 2006, we had $69.8 million in commercial
      and
      industrial loans, which amounted to 9.15% 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 is generally 20% of our unimpaired capital
      and
      surplus and which, at December 31, 2006, was $22.2 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 with a maximum term of ten years. 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 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, 2006,
      our largest commercial and industrial loan was a $1.8 million loan to a
      contracting company and was secured by business assets and real estate located
      in our primary market area. This loan was performing according to its terms
      at
      December 31, 2006.




9


***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, 2006, we had $24.5 million in automobile loans, which amounted
      to
      3.21% 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, manufactured housing, boat loans and pool and spa loans.
      Other
      consumer loans totaled $5.7 million, or 0.75% of our total loan portfolio at
      December 31, 2006.




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 relative customer demand for such loans, which is affected
      by
      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
      in the secondary market. No loans were held for sale at December 31, 2006 or
      2005. 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, 2006, we had $2.0 million in loan participation interests in which
      we were the lead bank and $8.8 million in loan participations in which we were
      not the lead bank.




At
      December 31, 2006, we were servicing loans sold in the amount of $36.9 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


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




**Years
                Ended December 31,****2006**
            
            **2005**
            
            **2004****(In
                thousands)**Total
                loans at beginning of period
            
            $
            635,792
            
            $
            574,070
            
            $
            501,321Loan
                originations:Residential
                mortgages (1)
            
            
            142,617
            
            
            118,449
            
            
            107,844Commercial
                mortgage
            
            
            51,141
            
            
            37,185
            
            
            55,553Construction
            
            
            59,719
            
            
            43,672
            
            
            51,841Commercial
                and industrial
            
            
            85,105
            
            
            73,006
            
            
            67,087Automobile
            
            
            13,702
            
            
            15,166
            
            
            8,606Other
                consumer
            
            
            4,712
            
            
            2,621
            
            
            1,314Total
                loans originated
            
            
            356,996
            
            
            290,099
            
            
            292,245




Sales
                  and loan principal repayment deductions:Principal
                  repayments
              
              
              232,266
              
              
              229,513
              
              
              214,713Loan
                  sales
              
              
              190
              
              
              170
              
              
              5,218Decrease
                  (increase) due to other items
              
              
              (1,781
              )
              
              (1,306
              )
              
              (435
              )Total
                  deductions
              
              
              230,675
              
              
              228,377
              
              
              219,496Net
                  loan activity
              
              
              126,321
              
              
              61,722
              
              
              72,749Total
                  loans at end of period
              
              $
              762,113
              
              $
              635,792
              
              $
              574,070




(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


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
      generally 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,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(Dollars
                in thousands)**Non-accrual
                loans:Residential
                mortgages (1)
            
            $
            20
            
            $
            1,016
            
            $
            1,383
            
            $
            772
            
            $
            132Commercial
                mortgages
            
            
            1,144
            
            
            141
            
            
            1,376
            
            
            455
            
            
            363Construction
            
            
            -
            
            
            113
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            123
            
            
            447
            
            
            1,025
            
            
            599
            
            
            475Automobile
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                consumer
            
            
            1
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                non-accrual loans
            
            
            1,288
            
            
            1,717
            
            
            3,784
            
            
            1,826
            
            
            970Accruing
                loans 90 days or more past due
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                non-performing loans
            
            
            1,288
            
            
            1,717
            
            
            3,784
            
            
            1,826
            
            
            970Other
                real estate owned
            
            
            562
            
            
            1,602
            
            
            0
            
            
            39
            
            
            66Total
                non-performing assets
            
            $
            1,850
            
            $
            3,319
            
            $
            3,784
            
            $
            1,865
            
            $
            1,036Ratios:Total
                non-performing loans to total loans
            
            
            0.17
            %
            
            0.27
            %
            
            0.66
            %
            
            0.36
            %
            
            0.21
            %Total
                non-performing loans to total assets
            
            
            0.13
            %
            
            0.19
            %
            
            0.49
            %
            
            0.25
            %
            
            0.16
            %




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


12


As
      noted
      in the above table, non-accrual loans amounted to approximately $1.3 million
      and
      $1.7 million at December
      31, 2006 and 2005 ,
      respectively. Additional interest income of approximately $71,000, $158,000,
      $110,000, $87,000 and $66,000 respectively, would have been recorded during
      the
      years ended December 31, 2006, 2005, 2004, 2003 and 2002 respectively, if the
      loans had performed in accordance with their original terms.




A
      loan is
      considered impaired when, based on current information and events, it is
      probable that the Company 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.





At
      December 31, 2006 and 2005, the recorded investment in impaired loans was $1,3
      million and $700,000 respectively, all of which were accounted for on a
      non-accrual basis. An allowance for loan losses was established on $1.3 million
      and $700,000 of the impaired loans at December 31, 2006 and 2005, respectively,
      which allowances amounted to $295,000 and $80,000 at the respective year-ends.
      The average balance of impaired loans was $2.1 million, $2.1 million and $1.4
      million for the years ended December 31, 2006, 2005 and 2004, respectively.
      Interest income recognized on impaired loans during 2006, 2005 and 2004 was
      not
      significant.




13


***Delinquent
      Loans*** .
      The
      following table sets forth our loan delinquencies by type, by amount and by
      percentage of total loans outstanding 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, 2006**Residential
                mortgages (1)
            
            
            19
            
            $
            1,354
            
            
            1
            
            $
            20
            
            
            20
            
            $
            1,374Commercial
                mortgage
            
            
            6
            
            
            524
            
            
            7
            
            
            1,144
            
            
            13
            
            
            1,668Construction
            
            
            1
            
            
            108
            
            
            -
            
            
            -
            
            
            1
            
            
            108Commercial
                and industrial
            
            
            6
            
            
            93
            
            
            4
            
            
            123
            
            
            10
            
            
            216Automobile
            
            
            13
            
            
            85
            
            
            -
            
            
            -
            
            
            13
            
            
            85Other
                consumer
            
            
            -
            
            
            -
            
            
            1
            
            
            1
            
            
            1
            
            
            1Total
            
            
            45
            
            $
            2,164
            
            
            13
            
            $
            1,288
            
            
            58
            
            $
            3,452**At
                December 31, 2005**Residential
                mortgages (1)
            
            
            9
            
            $
            855
            
            
            6
            
            $
            1,016
            
            
            15
            
            $
            1,871Commercial
                mortgage
            
            
            4
            
            
            546
            
            
            2
            
            
            141
            
            
            6
            
            
            687Construction
            
            
            -
            
            
            -
            
            
            1
            
            
            113
            
            
            1
            
            
            113Commercial
                and industrial
            
            
            1
            
            
            2
            
            
            6
            
            
            447
            
            
            7
            
            
            449Automobile
            
            
            1
            
            
            1
            
            
            -
            
            
            -
            
            
            1
            
            
            1Other
                consumer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            
            15
            
            $
            1,404
            
            
            15
            
            $
            1,717
            
            
            30
            
            $
            3,121**At
                December 31, 2004**Residential
                mortgages (1)
            
            
            1
            
            $
            53
            
            
            7
            
            $
            1,383
            
            
            8
            
            $
            1,436Commercial
                mortgage
            
            
            1
            
            
            114
            
            
            7
            
            
            1,376
            
            
            8
            
            
            1,490Construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            9
            
            
            330
            
            
            10
            
            
            1,025
            
            
            19
            
            
            1,355Automobile
            
            
            3
            
            
            13
            
            
            -
            
            
            -
            
            
            3
            
            
            13Other
                consumer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            
            14
            
            $
            510
            
            
            24
            
            $
            3,784
            
            
            38
            
            $
            4,294**At
                December 31, 2003**Residential
                mortgages (1)
            
            
            15
            
            $
            863
            
            
            7
            
            $
            772
            
            
            22
            
            $
            1,635Commercial
                mortgage
            
            
            5
            
            
            438
            
            
            2
            
            
            455
            
            
            7
            
            
            893Construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            11
            
            
            132
            
            
            9
            
            
            599
            
            
            20
            
            
            731Automobile
            
            
            11
            
            
            57
            
            
            -
            
            
            -
            
            
            11
            
            
            57Other
                consumer
            
            
            4
            
            
            4
            
            
            -
            
            
            -
            
            
            4
            
            
            4Total
            
            
            46
            
            $
            1,494
            
            
            18
            
            $
            1,826
            
            
            64
            
            $
            3,320**At
                December 31, 2002**Residential
                mortgages (1)
            
            
            26
            
            $
            1,001
            
            
            4
            
            $
            132
            
            
            30
            
            $
            1,133Commercial
                mortgage
            
            
            8
            
            
            1,112
            
            
            3
            
            
            363
            
            
            11
            
            
            1,475Construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            21
            
            
            778
            
            
            13
            
            
            475
            
            
            34
            
            
            1,253Automobile
            
            
            38
            
            
            201
            
            
            -
            
            
            -
            
            
            38
            
            
            201Other
                consumer
            
            
            1
            
            
            1
            
            
            -
            
            
            -
            
            
            1
            
            
            1Total
            
            
            94
            
            $
            3,093
            
            
            20
            
            $
            970
            
            
            114
            
            $
            4,063




(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 result in changes to expense after acquisition are expensed.
      At
      December 31, 2006, we had $562,000 of real estate owned.


14


***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
      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,**
              
              **At
                  December 31,****2006**
              
              **2005****(In
                  thousands)****Residential
                  Real Estate**(1)**:**Substandard
                  assets
              
              $
              1,252
              (2)
              $
              1,693**All
                  Other Loans:**Special
                  mention assets
              
              
              8,990
              (3)
              
              12,100Substandard
                  assets
              
              
              10,449
              
              
              8,189Doubtful
                  assets
              
              
              1,290
              
              
              1,153Loss
                  assets
              
              
              -
              
              
              -**Foreclosed
                  Assets:**Other
                  real estate owned
              
              
              562
              
              
              1,602Total
                  classified assets
              
              $
              21,981
              
              $
              23,135




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


(2)
            Includes
                thirteen 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.




**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, 2006 was maintained at a level
      that
      represents management’s best estimate of losses inherent in the loan portfolio.
      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 or deductions may
      be
      necessary if economic or other conditions in the future differ from the current
      environment.




15


In
      addition, as an integral part of their examination process, the Office of Thrift
      Supervision 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 Year Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(Dollars
                in thousands)**Balance
                at beginning of period
            
            $
            6,382
            
            $
            5,750
            
            $
            5,094
            
            $
            4,923
            
            $
            4,700Charge-offs:Residential
                mortgages (1)
            
            
            10
            
            
            -
            
            
            -
            
            
            -
            
            
            11Commercial
                mortgage
            
            
            -
            
            
            60
            
            
            -
            
            
            -
            
            
            46Construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            164
            
            
            377
            
            
            501
            
            
            116
            
            
            144Automobile
            
            
            1
            
            
            15
            
            
            46
            
            
            44
            
            
            59Other
                consumer
            
            
            11
            
            
            3
            
            
            11
            
            
            2
            
            
            6Total
                charge-offs
            
            
            186
            
            
            455
            
            
            558
            
            
            162
            
            
            266Recoveries:Residential
                mortgages (1)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1Commercial
                mortgage
            
            
            1
            
            
            -
            
            
            175
            
            
            24
            
            
            3Construction
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                and industrial
            
            
            47
            
            
            157
            
            
            32
            
            
            5
            
            
            54Automobile
            
            
            2
            
            
            6
            
            
            21
            
            
            -
            
            
            15Other
                consumer
            
            
            3
            
            
            7
            
            
            3
            
            
            10
            
            
            18Total
                recoveries
            
            
            53
            
            
            170
            
            
            231
            
            
            39
            
            
            91Net
                charge-offs
            
            
            (133
            )
            
            (285
            )
            
            (327
            )
            
            (123
            )
            
            (175
            )Provision
                for loan losses
            
            
            969
            
            
            917
            
            
            983
            
            
            294
            
            
            398Balance
                at end of period
            
            $
            7,218
            
            $
            6,382
            
            $
            5,750
            
            $
            5,094
            
            $
            4,923Ratios:Net
                charge-offs to average loans outstanding
            
            
            0.02
            %
            
            0.05
            %
            
            0.06
            %
            
            0.03
            %
            
            0.04
            %Allowance
                for loan losses to non-performing loans at end of period
            
            
            560.40
            %
            
            371.69
            %
            
            151.96
            %
            
            278.97
            %
            
            507.53
            %Allowance
                for loan losses to total loans at end of period
            
            
            0.95
            %
            
            1.00
            %
            
            1.00
            %
            
            1.02
            %
            
            1.05
            %




16


***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,****2006**
            
            **2005**
            
            **2004****Percent
                of**
            
            
            
            **Percent
                of**
            
            
            
            **Percent
                of****Loans
                in**
            
            
            
            **Loans
                in**
            
            
            
            **Loans
                in****Category
                to**
            
            
            
            **Category
                to**
            
            
            
            **Category
                to****Amount**
            
            **Total
                Loans**
            
            **Amount**
            
            **Total
                Loans**
            
            **Amount**
            
            **Total
                Loans****(Dollars
                in thousands)****At
                end of period allocated to:**Residential
                mortgages (1)
            
            $
            1,469
            
            
            56.66
            %
            $
            554
            
            
            58.40
            %
            $
            526
            
            
            57.63
            %Commercial
                mortgage
            
            
            2,588
            
            
            23.04
            %
            
            2,944
            
            
            23.61
            %
            
            3,217
            
            
            24.00
            %Construction
            
            
            1,255
            
            
            7.19
            %
            
            316
            
            
            4.54
            %
            
            259
            
            
            5.20
            %Commercial
                and industrial
            
            
            1,633
            
            
            9.15
            %
            
            2,487
            
            
            9.37
            %
            
            1,682
            
            
            9.81
            %Automobile
            
            
            220
            
            
            3.21
            %
            
            78
            
            
            3.47
            %
            
            60
            
            
            3.04
            %Other
                consumer
            
            
            53
            
            
            0.75
            %
            
            3
            
            
            0.61
            %
            
            6
            
            
            0.32
            %Total
                allowance
            
            $
            7,218
            
            
            100.00
            %
            $
            6,382
            
            
            100.00
            %
            $
            5,750
            
            
            100.00
            %







**At
                December 31,****2003**
            
            **2002****Percent
                of**
            
            
            
            **Percent
                of****Loans
                in**
            
            
            
            **Loans
                in****Category
                to**
            
            
            
            **Category
                to****Amount**
            
            **Total
                Loans**
            
            **Amount**
            
            **Total
                Loans****(Dollars
                in thousands)****At
                end of period allocated to:**Residential
                mortgages (1)
            
            $
            974
            
            
            59.23
            %
            $
            1,466
            
            
            58.44
            %Commercial
                mortgage
            
            
            2,304
            
            
            23.49
            %
            
            2,134
            
            
            24.32
            %Construction
            
            
            170
            
            
            5.31
            %
            
            205
            
            
            3.87
            %Commercial
                and industrial
            
            
            1,483
            
            
            7.55
            %
            
            835
            
            
            7.35
            %Automobile
            
            
            155
            
            
            4.18
            %
            
            272
            
            
            5.78
            %Other
                consumer
            
            
            8
            
            
            0.23
            %
            
            11
            
            
            0.26
            %Total
                allowance
            
            $
            5,094
            
            
            100.00
            %
            $
            4,923
            
            
            100.00
            %




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


17


**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 investment policy which is
      substantially identical to the Bank’s 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, 2006, consisted of $77.4 million in federal
      agency obligations, $3.3 million of corporate debt instruments, $285,000 of
      equity securities, consisting of Fannie Mae and Freddie Mac common and preferred
      stock, and $3.2 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, 2006, our mortgage-backed securities portfolio totaled $109.3 million.
      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.




***Government-Sponsored
      Enterprises.*** At
      December 31, 2006, our U.S. Government Agency securities portfolio totaled
      $77.4
      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.




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 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.




18


At
      December 31, 2006, our mortgage-backed securities totaled $109.3 million, or
      10.83% of total assets and 11.51% of interest earning assets. All of our
      mortgage-backed securities at December 31, 2006 were classified as
      available-for-sale. At December 31, 2006, 46.0% of the mortgage-backed
      securities were backed by adjustable-rate mortgage loans and 54.0% were backed
      by fixed-rate mortgage loans. The mortgage-backed securities portfolio had
      a
      weighted average yield of 4.34% at December 31, 2006. The estimated fair value
      of our mortgage-backed securities at December 31, 2006 was $109.3 million,
      which
      was $2.2 million less than the amortized cost of $111.5 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, 2006, our corporate bond portfolio totaled $3.3 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, 2006, our equity securities portfolio totaled $285,000, 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, 2006, our
      industrial revenue and municipal obligations portfolio totaled $3.2 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,****2006**
            
            **2005**
            
            **2004****Amortized
                Cost**
            
            **Fair
                Value**
            
            **Amortized
                Cost**
            
            **Fair
                Value**
            
            **Amortized
                Cost**
            
            **Fair
                Value****(In
                thousands)****Investment
                securities available-for-sale:**Government-sponsored
                enterprises
            
            $
            78,248
            
            $
            77,369
            
            $
            99,957
            
            $
            98,561
            
            $
            35,414
            
            $
            35,084Mortgage-backed
                securities
            
            
            111,481
            
            
            109,274
            
            
            117,259
            
            
            114,702
            
            
            102,209
            
            
            101,679Corporate
                debt obligations
            
            
            3,415
            
            
            3,309
            
            
            13,011
            
            
            12,930
            
            
            15,094
            
            
            15,291Equity
                securities
            
            
            293
            
            
            285
            
            
            294
            
            
            272
            
            
            294
            
            
            275Total
                available-for-sale
            
            $
            193,437
            
            $
            190,237
            
            $
            230,521
            
            $
            226,465
            
            $
            153,011
            
            $
            152,329**Investment
                securities held-to-maturity:**IRB
            
            $
            1,271
            
            $
            1,271
            
            $
            1,346
            
            $
            1,346
            
            $
            1,420
            
            $
            1,421Municipal
                bonds
            
            
            1,970
            
            
            1,956
            
            
            1,979
            
            
            1,952
            
            
            1,078
            
            
            1,077Total
                held-to-maturity
            
            $
            3,241
            
            $
            3,227
            
            $
            3,325
            
            $
            3,298
            
            $
            2,498
            
            $
            2,498




19


***Portfolio
      Maturities and Yields.*** The
      composition and maturities of the investment securities portfolio at December
      31, 2006 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.




**More
                than One Year**
            
            **More
                than Five Years****One
                Year or Less**
            
            **through
                Five Years**
            
            **through
                Ten Years**
            
            **More
                than Ten Years**
            
            **Total
                Securities****Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted****Amortized**
            
            **Average**
            
            **Amortized**
            
            **Average**
            
            **Amortized**
            
            **Average**
            
            **Amortized**
            
            **Average**
            
            **Amortized**
            
            **Average**
            
            **Fair****Cost**
            
            **Yield**
            
            **Cost**
            
            **Yield**
            
            **Cost**
            
            **Yield**
            
            **Cost**
            
            **Yield**
            
            **Cost**
            
            **Yield**
            
            **Value****(Dollars
                in thousands)****Investment
                securities available-for-sale:**Government-sponsored
                enterprises
            
            $
            30,114
            
            
            4.30
            %
            $
            30,296
            
            
            4.23
            %
            $
            17,838
            
            
            5.17
            %
            $
            -
            
            
            0.00
            %
            $
            78,248
            
            
            4.47
            %
            $
            77,369Mortgage-backed
                securities
            
            
            114
            
            
            4.01
            %
            
            26,915
            
            
            3.73
            %
            
            16,622
            
            
            4.22
            %
            
            67,830
            
            
            4.61
            %
            
            111,481
            
            
            4.34
            %
            
            109,274Corporate
                debt obligations
            
            
            1,470
            
            
            4.93
            %
            
            497
            
            
            4.34
            %
            
            497
            
            
            4.13
            %
            
            950
            
            
            4.96
            %
            
            3,414
            
            
            4.73
            %
            
            3,309Total
                available-for-sale
            
            $
            31,698
            
            
            4.33
            %
            $
            57,708
            
            
            4.00
            %
            $
            34,957
            
            
            4.70
            %
            $
            68,780
            
            
            4.61
            %
            $
            193,143
            
            
            4.40
            %
            $
            189,952**Investment
                securities held-to-maturity:**IRB
            
            $
            -
            
            
            0.00
            %
            $
            421
            
            
            5.00
            %
            $
            -
            
            
            0.00
            %
            $
            850
            
            
            4.00
            %
            $
            1,271
            
            
            4.33
            %
            $
            1,271Municipal
                bonds
            
            
            201
            
            
            1.76
            %
            
            891
            
            
            2.88
            %
            
            878
            
            
            3.63
            %
            
            -
            
            
            0.00
            %
            
            1,970
            
            
            3.10
            %
            
            1,956Total
                held-to-maturity
            
            $
            201
            
            
            1.76
            %
            $
            1,312
            
            
            3.56
            %
            $
            878
            
            
            3.63
            %
            $
            850
            
            
            4.00
            %
            $
            3,241
            
            
            3.58
            %
            $
            3,227




20


**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, 2006, $319.5
      million, or 46.6% of our deposit accounts were certificates of deposit, of
      which
      $282.0 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,****2006**
            
            **2005**
            
            **2004****Weighted**
            
            
            
            
            
            **Weighted**
            
            
            
            
            
            **Weighted****Average**
            
            
            
            
            
            **Average**
            
            
            
            
            
            **Average****Balance**
            
            **Percent**
            
            **Rate**
            
            **Balance**
            
            **Percent**
            
            **Rate**
            
            **Balance**
            
            **Percent**
            
            **Rate****(Dollars
                in thousands)****Deposit
                type:**Demand
            
            $
            97,190
            
            
            14.17
            %
            
            0.00
            %
            $
            93,301
            
            
            14.27
            %
            
            0.00
            %
            $
            86,246
            
            
            14.05
            %
            
            0.00
            %NOW
            
            
            37,523
            
            
            5.47
            %
            
            0.57
            %
            
            39,922
            
            
            6.11
            %
            
            0.25
            %
            
            39,917
            
            
            6.50
            %
            
            0.25
            %Regular
                savings
            
            
            65,475
            
            
            9.55
            %
            
            0.83
            %
            
            87,253
            
            
            13.35
            %
            
            0.83
            %
            
            139,754
            
            
            22.77
            %
            
            0.65
            %Money
                market
            
            
            164,463
            
            
            23.99
            %
            
            3.20
            %
            
            154,177
            
            
            23.59
            %
            
            2.93
            %
            
            94,586
            
            
            15.41
            %
            
            1.48
            %Retirement
            
            
            55,368
            
            
            8.07
            %
            
            4.11
            %
            
            52,694
            
            
            8.06
            %
            
            3.38
            %
            
            48,496
            
            
            7.90
            %
            
            2.71
            %Certificates
                of deposit
            
            
            265,667
            
            
            38.74
            %
            
            4.59
            %
            
            226,264
            
            
            34.62
            %
            
            3.59
            %
            
            204,673
            
            
            33.35
            %
            
            2.70
            %Total
                deposits
            
            $
            685,686
            
            
            100.00
            %
            
            2.99
            %
            $
            653,611
            
            
            100.00
            %
            
            2.54
            %
            $
            613,672
            
            
            100.00
            %
            
            1.51
            %




21


As
      of
      December 31, 2006, the aggregate amount of outstanding certificates of deposit
      in amounts greater than or equal to $100,000 was approximately $103.3 million.
      The following table sets forth the maturity of those certificates as of December
      31, 2006.




**At
                December 31,****2006****(In
                thousands)**Three
                months or less
            
            $
            34,924Over
                three months through six months
            
            
            38,264Over
                six months through one year
            
            
            20,554Over
                one year to three years
            
            
            6,196Over
                three years
            
            
            3,383Total
            
            $
            103,321





***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, 2006, we had Federal Home Loan Bank advances in the amount
      of
      $169.8 million, which represented 19.5% of total liabilities with a weighted
      average maturity of 4.5 years and a weighted average rate of 4.73%. As a member
      of the Federal Home Loan Bank of Boston, we can currently borrow up to
      approximately $319 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:




**2006**
            
            **2005**
            
            **2004****Weighted**
            
            
            
            **Weighted**
            
            
            
            **Weighted****Amount**
            
            **Average
                Rate**
            
            **Amount**
            
            **Average
                Rate**
            
            **Amount**
            
            **Average
                Rate****(Dollars
                in thousands)**Within
                1 year
            
            $
            65,000
            
            
            5.16
            %
            $
            13,799
            
            
            3.40
            %
            $
            16,000
            
            
            2.35
            %Over
                1 year to 2 years
            
            
            16,411
            
            
            5.06
            %
            
            10,000
            
            
            4.37
            %
            
            12,000
            
            
            3.23
            %Over
                2 years to 3 years
            
            
            13,000
            
            
            5.13
            %
            
            19,393
            
            
            4.95
            %
            
            -Over
                3 years to 4 years
            
            
            16,111
            
            
            3.20
            %
            
            -
            
            
            
            
            
            -Over
                4 years to 5 years
            
            
            39,184
            
            
            4.60
            %
            
            20,318
            
            
            3.19
            %
            
            22,247
            
            
            4.87
            %Over
                5 years
            
            
            20,100
            
            
            4.32
            %
            
            38,370
            
            
            4.02
            %
            
            36,447
            
            
            3.32
            %$
            169,806
            
            
            4.73
            %
            $
            101,880
            
            
            3.98
            %
            $
            86,694
            
            
            3.53
            %





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:




**For
                the Years Ended****December
                31,****2006**
            
            **2005**
            
            **2004****(In
                thousands)**Balance
                at year-end
            
            $
            10,425
            
            $
            8,434
            
            $
            4,317Average
                amount outstanding during year
            
            
            5,546
            
            
            5,572
            
            
            4,064Interest
                expense incurred during year
            
            
            167
            
            
            90
            
            
            39Maximum
                amount outstanding at any month-end
            
            
            10,425
            
            
            8,675
            
            
            6,015Average
                interest rate during the year
            
            
            3.01
            %
            
            1.62
            %
            
            0.96
            %Weighted
                average interest rate on year-end balances
            
            
            3.38
            %
            
            2.12
            %
            
            1.19
            %


22


**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, 2006, UCB Securities, Inc. had total
      assets of $60.2 million, all of which were qualifying securities under the
      applicable regulations.




**United
      Financial Services Group**




United
      Bank, through its division, United Financial Services Group, has a partnership
      with a registered broker-dealer, NFP Securities, Inc. In 2006, United Bank
      acquired Levine Financial Group in an effort to expand its customer base with
      increased opportunities to grow our market share and expand the financial
      services portion of business in the Northampton market. 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, 2006, we had 163 full-time employees and 35 part-time employees.
      Our employees are not represented by any collective bargaining group. Management
      believes that we have good relations with our employees.




SUPERVISION
      ANDREGULATION




**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.




23


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.




**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.*** Offices
      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, 2006, 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 and
      annual review by the Office of Thrift Supervision. 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, 2006, 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.




24


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, 2006, United
      Bank satisfied this test.




***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.




25


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 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 ensure 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.




26


***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 require 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.




27


At
      December 31, 2006, United Bank met the criteria for being considered
“well-capitalized.”




***Insurance
      for 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.




The
      Federal Deposit Insurance Reform Act of 2005 (Reform Act), enacted in February
      2006, increased the deposit insurance limit for certain retirement plan deposit
      accounts from $100,000 to $250,000. The basic insurance limit for other
      depositors - individuals, joint accountholders, businesses, government entities,
      and trusts - remains at $100,000. The Federal Deposit Insurance Corporation
      (FDIC) issued an interim rule to implement this increase in coverage and other
      provisions of the Reform Act pertaining to deposit insurance coverage effective
      April 1, 2006. The Federal Deposit Insurance Corporation (FDIC) issued a final
      rule effective January 1, 2007 implementing the aforementioned coverage increase
      and maintaining the required ratio of reserves to insured deposits at
      1.25%.





***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 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 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,
      2006, United Bank was in compliance with these reserve
      requirements.




**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 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.




28


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 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.




29


**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 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.




30


***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 Company’s initial public 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.




**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.




31


***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, 2006, our total federal pre-base year reserve was approximately
      $2.6 million. However, under current law, 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,
      2006, 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 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.




32


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.**
            **RISK
                FACTORS**





**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.




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, 2006, the fair value of our agency
      securities, mortgage-backed securities and corporate debt obligations, all
      classified as available for sale, totaled $190.0 million. Unrealized net losses
      on these available-for-sale securities totaled $3.2 million at December 31,
      2006
      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 income simulation models that estimates
      the change in United Bank’s net interest income over a range of interest rate
      scenarios. Net income at risk measures the risk of a decline in earnings due
      to
      potential short-term and long term changes in interest rates. At December 31,
      2006, 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 10.9% decrease in net interest income.




33


**Because
      We Intend to Increase Our Commercial Real Estate, Commercial Construction 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, 2006, our portfolio of commercial real estate loans totaled $175.6
      million, or 23.04% of our total loans, our portfolio of commercial construction
      loans totaled $41.3 million, or 5.41% of our total loans and our portfolio
      of
      commercial and industrial loans totaled $69.8 million, or 9.15% 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,
      commercial construction 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, commercial
      construction 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, 2006, loans secured by
      residential real estate, including home equity loans and lines of credit,
      represented 56.66% 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 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 .95% of total
      loans and 560.40% of non-performing loans at December 31, 2006. Material
      additions to our allowance could materially decrease our net income.




34


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.




**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 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 COMMENTS**Not
                applicable.





**ITEM
                2.**
            **PROPERTIES**





The
      following table provides certain information as of December 31, 2006 with
      respect to our main office located in West Springfield and our twelve other
      full
      service branch offices, our drive-up facility and our financial services
      facilities:




**Location**
            
            **Leased
                or Owned**
            
            **Year
                Acquired or Leased**
            
            **Square
                Footage**
            
            **Net
                Book Value of Real Property****(In
                thousands)****Main
                Office:**95
                Elm Street
            
            
            Owned
            
            
            1999
            
            
            46,147
            
            $
            1,363West
                Springfield, MA 01089




35





**Full
                Service Branches:**115
                State Street
            
            
            Leased
            
            
            (1
            )
            
            3,401
            
            
            112Springfield,
                MA 011031077
                St. James Avenue
            
            
            Owned
            
            
            2003
            
            
            8,354
            
            
            637Springfield,
                MA 01104459
                Main Street
            
            
            Leased
            
            
            (2
            )
            
            2,000
            
            
            —Indian
                Orchard, MA 01151528-530
                Center Street
            
            
            Owned
            
            
            2002
            
            
            3,000
            
            
            637Ludlow,
                MA 010561930
                Wilbraham Road
            
            
            Owned
            
            
            2001
            
            
            2,304
            
            
            647Springfield,
                MA 01129670
                Bliss Road
            
            
            Leased
            
            
            (3
            )
            
            1,652
            
            
            —Longmeadow,

                MA 011061325
                Springfield Street
            
            
            Leased
            
            
            (4
            )
            
            2,400
            
            
            —Feeding
                Hills, MA 01030180
                Main Street
            
            
            Leased
            
            
            (5
            )
            
            2,800
            
            
            254Northampton,
                MA 0106010
                Elm Street
            
            
            Owned
            
            
            1981
            
            
            8,500
            
            
            17Westfield,
                MA 01085168
                Southampton Road
            
            
            Leased
            
            
            (6
            )
            
            2,890
            
            
            —Westfield,
                MA 0108514
                Russell Road
            
            
            Owned
            
            
            2001
            
            
            720
            
            
            137Huntington,
                MA 010501830
                Northampton Street
            
            
            Owned
            
            
            1994
            
            
            6,409
            
            
            305Holyoke,
                MA 01040








**Other:**52
                Van Deene Avenue
            
            
            Owned
            
            
            2005
            (7)
            
            547
            
            
            720West
                Springfield, MA 0108933
                Westfield Street
            
            
            Owned
            
            
            2002
            (8)
            
            1,720
            
            
            1,232West
                Springfield, MA 01089140
                Main Street
            
            
            Leased
            
            
            2006
            (8,9)
            
            1,875
            
            
            —Northampton,
                MA 01060


_______________


(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 2011
                with a
                renewal option for five additional years.


(4)
            United
                Bank has a lease for a five-year period expiring in September 2010
                with a
                renewal option for five additional
                years.


(5)
            United
                Bank has a lease for a ten-year period expiring in April 2016 with
                two
                five-year renewal options.


36


(6)
            United
                Bank has a lease for a twenty-five year period expiring in March
                2031 with
                two five-year renewal options.


(7)
            This
                office is a drive-up facility only.


(8)
            This
                financial services facility offers insurance and investment products
                and
                financial planning services.


(9)
            United
                Bank has a lease for a two-year period expiring in November 2008
                with two
                two-year renewal options.





The
      net
      book value of our premises, land and equipment was $8.8 million at December
      31,
      2006 .





**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, 2006, we were not involved in any
      legal proceedings that were material to the Company’s financial condition or
      results of operations.




**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
                STOCKHOLDER********MATTERS
                AND ISSUER PURCHASES OF EQUITY
                SECURITIES**





(a) Our
      shares of common stock are traded on the Nasdaq Global Select Market under
      the
      symbol “UBNK”. The approximate number of holders of record of United Financial
      Bancorp, Inc.’s common stock as of March 5, 2007 was 3,976 including beneficial
      owners. The following table presents quarterly market information for United
      Financial Bancorp, Inc.’s common stock for the years ended December 31, 2006 and
      2005. United Financial Bancorp, Inc. began trading on the Nasdaq Global Select
      Market on July 13, 2005. Accordingly, no information prior to this date is
      available. The following information was provided by the Nasdaq Stock
      Market.




**Quarter****Ended**
            
            **High**
            
            **Low**
            
            **Dividends**March
                31, 2006
            
            $
            12.46
            
            $
            11.33
            
            $
            0.05June
                30, 2006
            
            
            13.31
            
            
            11.53
            
            
            0.05September
                30, 2006
            
            
            14.23
            
            
            12.11
            
            
            0.05December
                31, 2006
            
            
            14.97
            
            
            12.63
            
            
            0.05September
                30, 2005
            
            
            12.61
            
            
            11.06
            
            
            -December
                31, 2005
            
            
            12.00
            
            
            11.53
            
            
            -







Set
      forth
      hereunder is a stock performance graph comparing (a) the cumulative total return
      on the Common Stock for the period beginning on July 13, 2005 through December
      31, 2006, (b) the cumulative total return on stocks included in the SNL Thrift
      Index over such period, (c) the cumulative total return on stocks included
      in
      the Russell 2000 Index over such period, and (d) the cumulative total return
      on
      stocks included in the SNL MHC Thrift Index over such period.




The
      cumulative total return on the Common Stock was computed assuming the
      reinvestment of cash dividends during the period and is expressed in dollars
      based on an assumed initial investment of $100.




37







*Period
                Ended**Index*
            
            **07/13/05**
            
            **12/31/05**
            
            **03/31/06**
            
            **06/30/06**
            
            **09/30/06**
            
            **12/31/05**United
                Financial Bancorp, Inc.
            
            
            100.00
            
            
            98.13
            
            
            102.82
            
            
            114.23
            
            
            111.40
            
            
            119.32Russell
                2000
            
            
            100.00
            
            
            101.41
            
            
            115.54
            
            
            109.74
            
            
            110.22
            
            
            120.04SNL
                MHC Thrift Index
            
            
            100.00
            
            
            100.48
            
            
            109.31
            
            
            113.85
            
            
            124.47
            
            
            137.60SNL
                Thrift Index
            
            
            100.00
            
            
            100.76
            
            
            104.28
            
            
            108.60
            
            
            109.98
            
            
            117.45




On
      January 18, 2007, the Board of Directors of United Financial Bancorp, Inc.
      declared a cash dividend of $0.06 per share. The dividend will be payable on
      February 26, 2007 to shareholders of record as of February 12, 2007.




Dividend
      payments by United Financial Bancorp, Inc. are dependent primarily on cash
      flows
      from the investment portfolio and debt service payments from United Bank in
      connection with its 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.”




38


The
      following table provides certain information at December 31, 2006 with regard
      to
      compensation plans under which equity securities of the registrant are
      authorized for issuance:




Plan
                  Category
              Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights
              Weighted-average
                  exercise price of outstanding options, warrants and rights
              Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))(a)
              (b)
              (c)Equity
                  compensation plans approved by security holders
              756,500
              $12.88
              86,593Equity
                  compensation plans not approved by security holders
              -
              -
              -Total
              756,500
              $12.88
              86,593




(b)
            Not
                Applicable.




(c)
            The
                following table provides certain information with regard to shares
                repurchased by the Company in the fourth quarter of
                2006.





Period
            
            (a)
              Total
                Number of Shares (or Units) Purchased
            
            (b)
              Average
                Price Paid Per Share (or Unit)
            
            (c)
              Total
                Number of Shares (or Units) Purchased as Part of Publicly Announced
                Plans
                or Programs (1)
            
            (d)
              Maximum
                Number (or Approximate Dollar Value) of Shares (or Units) that May
                Yet Be
                Purchased Under the Plans or ProgramsOctober
                1 -31, 2006
            
            
            -
            
            $
            -
            
            
            -
            
            
            858,000November
                1 - 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            858,000December
                1 -31, 2006
            
            
            1,945
            
            
            13.76
            
            
            1,945
            
            
            856,055Total
            
            
            1,945
            
            $
            13.76
            
            
            1,945
            
            
            NA




39


**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,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)****Selected
                Financial Condition Data:**Total
                assets
            
            $
            1,009,433
            
            $
            906,513
            
            $
            772,008
            
            $
            737,424
            
            $
            623,563Cash
                and cash equivalents
            
            
            25,419
            
            
            15,843
            
            
            23,233
            
            
            16,144
            
            
            38,779Investment
                securities available-for-sale
            
            
            80,963
            
            
            111,763
            
            
            50,650
            
            
            73,191
            
            
            36,617Investment
                securities held-to-maturity
            
            
            3,241
            
            
            3,325
            
            
            2,498
            
            
            2,175
            
            
            737Mortgage-backed
                securities available-for-sale
            
            
            109,274
            
            
            114,702
            
            
            101,679
            
            
            123,774
            
            
            60,889Loans,
                net(1)
            
            
            756,180
            
            
            630,558
            
            
            569,243
            
            
            497,078
            
            
            463,383Deposits
            
            
            685,686
            
            
            653,611
            
            
            613,672
            
            
            594,748
            
            
            533,704FHLB
                advances
            
            
            169,806
            
            
            101,880
            
            
            86,694
            
            
            76,820
            
            
            29,889Repurchase
                agreements
            
            
            10,425
            
            
            8,434
            
            
            4,317
            
            
            4,218
            
            
            1,146Stockholders'
                equity
            
            
            137,711
            
            
            137,005
            
            
            62,255
            
            
            57,050
            
            
            52,612Non-performing
                assets(2)
            
            
            1,850
            
            
            3,319
            
            
            3,784
            
            
            1,865
            
            
            1,036





**Years
                Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)****Selected
                Operating Data:**Interest
                and dividend income
            
            $
            52,202
            
            $
            43,233
            
            $
            36,532
            
            $
            33,776
            
            $
            36,009Interest
                expense
            
            
            24,647
            
            
            16,206
            
            
            12,148
            
            
            11,583
            
            
            14,703Net
                interest income before provision for loan losses
            
            
            27,555
            
            
            27,027
            
            
            24,384
            
            
            22,193
            
            
            21,306Provision
                for loan losses
            
            
            969
            
            
            917
            
            
            983
            
            
            294
            
            
            398Net
                interest income after provision for loan losses
            
            
            26,586
            
            
            26,110
            
            
            23,401
            
            
            21,899
            
            
            20,908Non-interest
                income
            
            
            5,392
            
            
            5,020
            
            
            5,134
            
            
            5,703
            
            
            4,522Non-interest
                expense
            
            
            24,036
            
            
            24,112
            
            
            19,179
            
            
            17,785
            
            
            16,971Income
                before taxes
            
            
            7,942
            
            
            7,018
            
            
            9,356
            
            
            9,817
            
            
            8,459Income
                tax expense
            
            
            3,018
            
            
            2,649
            
            
            3,828
            
            
            3,917
            
            
            3,270Net
                income
            
            $
            4,924
            
            $
            4,369
            ^
            $
            5,528
            
            $
            5,900
            
            $
            5,189




40





**At
                or For the Years Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Selected
                Financial Ratios and Other Data:****Performance
                Ratios****(3)****:**Return
                on average assets
            
            
            0.51
            %
            
            0.51
            %*
            
            0.73
            %
            
            0.86
            %
            
            0.84
            %Return
                on average equity
            
            
            3.59
            %
            
            4.45
            %*
            
            9.25
            %
            
            10.72
            %
            
            10.47
            %Average
                equity to average assets
            
            
            14.35
            %
            
            11.42
            %
            
            7.87
            %
            
            8.07
            %
            
            8.03
            %Equity
                to total assets at end of period(3)
            
            
            13.64
            %
            
            15.11
            %
            
            8.06
            %
            
            7.74
            %
            
            8.44
            %Interest
                rate spread(4)
            
            
            2.23
            %
            
            2.77
            %
            
            3.03
            %
            
            3.12
            %
            
            3.23
            %Net
                interest margin(5)
            
            
            2.97
            %
            
            3.27
            %
            
            3.33
            %
            
            3.41
            %
            
            3.65
            %Average
                interest-earning assets to average interest-bearing
                liabilitites
            
            
            128.10
            %
            
            125.61
            %
            
            118.30
            %
            
            116.42
            %
            
            116.77
            %Total
                non-interest expense to average total assets
            
            
            2.51
            %
            
            2.81
            %*
            
            2.53
            %
            
            2.61
            %
            
            2.75
            %Efficiency
                ratio(6)
            
            
            72.95
            %
            
            75.25
            %*
            
            64.98
            %
            
            63.75
            %
            
            65.71
            %Dividend
                payout ratio
            
            
            5.74
            %
            
            NA
            
            
            NA
            
            
            NA
            
            
            NA**United
                Bank Regulatory Capital Ratios****(3,
                7)****:**Tier
                I (core) capital
            
            
            14.83
            %
            
            17.21
            %
            
            11.67
            %
            
            12.33
            %
            
            12.23
            %Tier
                I (leverage) capital
            
            
            10.82
            %
            
            11.71
            %
            
            8.11
            %
            
            7.76
            %
            
            8.25
            %Total
                capital
            
            
            15.86
            %
            
            18.28
            %
            
            12.76
            %
            
            13.43
            %
            
            13.40
            %**Asset
                Quality Ratios****(3)****:**Non-performing
                assets as a percent of total assets(2)
            
            
            0.18
            %
            
            0.37
            %
            
            0.49
            %
            
            0.25
            %
            
            0.17
            %Non-performing
                loans as a percent of total loans(2)
            
            
            0.17
            %
            
            0.27
            %
            
            0.66
            %
            
            0.36
            %
            
            0.21
            %Allowance
                for loan losses as a percent of total loans
            
            
            0.95
            %
            
            1.00
            %
            
            1.00
            %
            
            1.02
            %
            
            1.05
            %Allowance
                for loan losses as a percent of non-performing
                loans
            
            
            560.40
            %
            
            371.69
            %
            
            151.96
            %
            
            278.97
            %
            
            507.53
            %**Number
                of full service customer facilities**
            
            
            13
            
            
            11
            
            
            11
            
            
            11
            
            
            11





(1)
            The
                allowance for loan losses at December 31, 2006, 2005, 2004, 2003
                and 2002
                was $7.2 million, $6.4 million, $5.8 million, $5.1 million and $4.9
                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.


(7)
            Regulatory
                Capital Ratios are reported for the Bank only and do not include
                the
                consolidating effect of United Financial Bancorp,
                Inc.


^
            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.


*
            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 $528,000, or 2.2%,
      to
      $27.6 million for the year ended December 31, 2006 from $27.0 million for the
      year ended December 31, 2005. The primary reason for the improvement in our
      net
      interest income was a $97.7 million, or 11.4%, increase in our average interest
      earning assets, to $926.3 million for the year ended December 31, 2006,
      reflecting strong growth in loans. The favorable impact of the expansion in
      earning assets was offset to some extent by net interest margin compression
      of
      30 basis points to 2.97% for the year ended December 31, 2006 compared to 3.27%
      in the same period last year.




41


Our
      results of operations are also affected by our provision for loan losses,
      non-interest income and non-interest expense. Non-interest income 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. Non-interest expense consists primarily of compensation and
      employee benefits, data processing, occupancy, marketing and public relations,
      professional services, printing and office supplies, and other operating
      expenses. Our results 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 and valuation allowances associated
      with deferred tax assets.




***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. 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
      adjustments 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 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 problem loans 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 loans. 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.




42


***Valuation
      Allowance for deferred tax assets.*** The
      assessment of whether a valuation allowance for the Company’s deferred tax
      assets is required is also a critical accounting estimate. In assessing the
      realizability of deferred tax assets, management considers whether it is more
      likely than not that some portion or all of such assets will not be realized.
      This assessment is made each reporting period based upon an estimate of future
      taxable income during the periods in which existing temporary differences become
      deductible.





**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
      also intend to evaluate opportunities to expand into new markets, including
      Northern Connecticut. We cannot assure you that we will successfully implement
      our business strategy.




Highlights
      of our business strategy are as follows:




*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, 12 branch offices, two offsite ATMs
      and
      one drive-up facility.




*Expanding
      our Branch Network.* We
      currently operate from 13 full-service banking offices and a drive-up only
      facility. We also maintain two financial services facilities that offer
      insurance and investment products and financial planning services. We intend
      to
      evaluate new branch expansion opportunities, through acquisitions and *de
      novo* branching,
      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 and improving our net interest margin. 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 supplemented our existing staff of commercial loan officers, increased
      our
      credit analysis resources and enhanced the outside loan review process. We
      originated $108.3 million of commercial real estate and $28.9 million of
      commercial and industrial loans during the year ended December 31, 2006. At
      December 31, 2006, our commercial real estate and commercial and industrial
      loans totaled $175.6 million and $69.8 million, respectively. The additional
      capital raised from our initial public offering in 2005 has increased our
      commercial lending capacity by enabling us to originate more loans and loans
      with larger balances. Originating more commercial real estate and commercial
      and
      industrial loans exposes us to increased risks, as discussed in the Risk Factors
      section of this Form 10-K.




*Maintaining
      High Asset Quality.* We have
      emphasized maintaining strong asset quality by following conservative
      underwriting criteria and by originating loans secured primarily by real estate.
      We will continue to focus on maintaining high asset quality as we seek to expand
      our commercial lending activities. Our non-performing assets at December 31,
      2006 were $1.9 million, or 0.18% of total assets, and our net charge-offs were
      0.02% of our average loans outstanding for the year ended December 31, 2006.




43


*Increasing
      our Share of Lower-Cost Deposits.* We
      remain committed to gathering lower cost and more stable core deposits. We
      attract and retain core deposits with competitive products and rates, excellent
      customer service, a comprehensive marketing program and a well-established
      incentive-based cross-sales program. Our efforts to attract and retain core
      deposits have resulted in an increase in the total number of accounts. However,
      the increased number of accounts has not translated into increased balances
      during 2005 and 2006 as many customers have elected to shift transaction,
      savings and money market balances to higher yielding certificates of deposits.
      At December 31, 2006, consumer and commercial demand deposits comprised 14.17%
      of our total deposits, compared to 14.27% of our total deposits at December
      31,
      2005.




*Increasing
      and Diversifying our Sources of Non-interest Income.* In order
      to reduce our reliance on net interest income and the impact of market rates
      on
      our financial results, we have sought to diversify our revenue stream. In
      connection with our success in growing our deposit base, our fee income derived
      from deposits has increased. Through our Financial Services Group, a division
      of
      United Bank, we 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. In 2006 United Bank purchased Levine
      Securities in Northampton, Massachusetts in order to expand our market and
      capitalize on the establishment of a new branch. United Financial Services
      Group
      offers these services through its partnership with NFP Securities, Inc. We
      have
      also invested in bank-owned life insurance for certain executive officers and
      directors, providing another source of non-interest income through the
      recognition of the growing cash surrender value of this insurance over time.




**Comparison
      of Financial Condition at December 31, 2006 and 2005**




Total
      assets increased $102.9 million, or 11.4%, to $1.0 billion at December 31,
      2006
      from $906.5 million at December 31, 2005. The increase reflected substantial
      growth in net loans, partially offset by a decrease in securities available
      for
      sale. The growth in assets was partially funded by cash flows from the
      investment portfolio and increases in both deposits ($32.1 million) and Federal
      Home Loan Bank of Boston advances ($67.9 million). Securities available for
      sale
      decreased $36.2 million, or 15.8%, to $190.2 million at December 31, 2006 from
      $226.5 million at December 31, 2005 as management elected to use cash flows
      from
      the investment portfolio to fund loan growth. Total cash and cash equivalents
      increased $9.6 million, to $25.4 million at December 31, 2006, reflecting
      routine fluctuations in cash balances and the intentional accumulation of funds
      to support future loan growth.




Net
      loans
      increased $125.6 million, or 19.9%, to $756.2 million at December 31, 2006
      from
      $630.6 million at December 31, 2005. One- to four-family residential mortgage
      loans increased $33.9 million, or 11.9%, to $319.1 million at December 31,
      2006,
      reflecting continued strong demand in our primary market area given the stable
      real estate market and the relatively low interest rate environment. The
      increase was due to management’s decision to retain substantially all
      originations of residential mortgage loans in portfolio. Commercial real estate
      and commercial and industrial loans increased $25.5 million, or 17.0%, to $175.6
      million and $10.2 million, or 18.0%, to $69.8 million, respectively, as a result
      of stable economic conditions in our primary market area, competitive pricing,
      attractive products and services, established relationships, successful business
      development efforts and the hiring of additional commercial lenders to diversify
      our lending activities. Construction loans increased $25.9 million, or 89.7%,
      to
      $54.8 million due to strong demand for commercial and residential funding,
      successful business development efforts, the solid real estate market and the
      relatively low interest rate environment. A significant portion of these loans
      mature in less than two years and will either covert to permanent financing
      or
      pay-off in full. We continued to focus our efforts on growing the commercial
      real estate, commercial and industrial, and construction loan portfolios in
      order to improve net interest rate spread by increasing our origination of
      these
      generally higher-yielding loans. Home equity loans increased $26.7 million,
      or
      31.0%, reflecting strong consumer demand, a solid economy, an attractive product
      offering and competitive rates.




Total
      deposits increased $32.1 million, or 4.9%, to $685.7 million at December 31,
      2006 mainly due to an increase of $39.4 million in certificate of deposit
      balances. During the period, customer demand for deposits shifted from savings
      towards higher-yielding certificates of deposit accounts. Demand deposits grew
      $3.9 million, or 4.2%, due to increased marketing and promotional activity
      in an
      effort to attract new customers and retain existing funds. Money market account
      balances expanded $10.3 million, or 6.7%, reflecting strong customer demand,
      attractive products and competitive pricing. At December 31, 2006, core deposits
      totaled $364.7 million, or 49.3% of deposits.




44


Federal
      Home Loan Bank advances increased $67.9 million, or 66.7%, to $169.8
      million at December 31, 2006 from $101.9 million at December 31, 2005
      to fund balance sheet growth. We have used a portion of such advances to “match
      fund” certain fixed-rate residential and commercial real estate loans in order
      to reduce our interest rate risk. Repurchase agreements increased $2.0 million
      to $10.4 million at December 31, 2006 from $8.4 million at
      December 31, 2005, reflecting routine fluctuations in these overnight
      accounts.




Total
      stockholders’ equity increased $706,000, or 0.5%, to $137.7 million at December
      31, 2006 from $137.0 million at December 31, 2005. This increase
      reflected net income of $4.9 million for the year ended December 31, 2006,
      the
      equity offset to the recognition of $1.1 million in ESOP and stock-based
      compensation expenses and a $514,000 decrease in the net unrealized loss on
      securities available for sale. These items were offset to a large extent by
      share repurchases totaling $4.4 million and payment of cash dividends
      aggregating $1.5 million.




**Comparison
      of Operating Results for the Years Ended December 31, 2006 and
      2005**




***Net
      Income.*** Net
      income increased $555,000, or 12.7%, to $4.9 million for the year ended December
      31, 2006 from $4.4 million for the year ended December 31, 2005. The results
      for
      2006 reflected growth in average earning assets and non-interest income,
      somewhat mitigated by net interest margin compression and higher non-interest
      expenses, excluding the impact of a $3.6 million expense related to the
      contribution to fund the United Charitable Foundation in 2005. Excluding the
      effect of the charitable contribution, net income would have amounted to $6.6
      million in 2005.




***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.




45




**Years
                Ended December 31,****2006**
            
            **2005****Interest**
            
            
            
            
            
            **Interest****Average**
            
            **and**
            
            **Yield/**
            
            **Average**
            
            **and**
            
            **Yield/****Balance**
            
            **Dividends**
            
            **Cost**
            
            **Balance**
            
            **Dividends**
            
            **Cost****(Dollars
                in thousands)****Interest-earning
                assets:**Loans:Residential
                real estate
            
            $
            410,340
            
            $
            23,817
            
            
            5.80
            %
            $
            362,208
            
            $
            20,168
            
            
            5.57
            %Commercial
                real estate
            
            
            189,694
            
            
            12,485
            
            
            6.58
            %
            
            158,820
            
            
            9,781
            
            
            6.16
            %Commercial
                and industrial
            
            
            64,164
            
            
            4,595
            
            
            7.16
            %
            
            54,954
            
            
            3,525
            
            
            6.41
            %Consumer
                and other
            
            
            29,005
            
            
            1,441
            
            
            4.97
            %
            
            21,004
            
            
            1,066
            
            
            5.08
            %Total
                loans
            
            
            693,203
            
            
            42,338
            
            
            6.11
            %
            
            596,986
            
            
            34,540
            
            
            5.79
            %Investment
                securities
            
            
            213,430
            
            
            8,843
            
            
            4.14
            %
            
            207,301
            
            
            7,970
            
            
            3.84
            %Other
                interest-earning assets
            
            
            19,641
            
            
            1,021
            
            
            5.20
            %
            
            23,076
            
            
            723
            
            
            3.13
            %Total
                interest-earning assets
            
            
            926,274
            
            
            52,202
            
            
            5.64
            %
            
            827,363
            
            
            43,233
            
            
            5.23
            %Noninterest-earning
                assets
            
            
            30,280
            
            
            
            
            
            
            
            
            31,458Total
                assets
            
            $
            956,554
            
            
            
            
            
            
            
            $
            858,821**Interest-bearing
                liabilities:**Savings
                accounts
            
            $
            76,688
            
            
            638
            
            
            0.83
            %
            $
            93,550
            
            
            594
            
            
            0.63
            %Money
                market
            
            
            165,101
            
            
            5,125
            
            
            3.10
            %
            
            148,297
            
            
            3,099
            
            
            2.09
            %NOW
                accounts
            
            
            36,050
            
            
            103
            
            
            0.29
            %
            
            37,770
            
            
            200
            
            
            0.53
            %Certificates
                of deposit
            
            
            309,784
            
            
            12,829
            
            
            4.14
            %
            
            274,002
            
            
            8,407
            
            
            3.07
            %Total
                interest-bearing deposits
            
            
            587,623
            
            
            18,695
            
            
            3.18
            %
            
            553,619
            
            
            12,300
            
            
            2.22
            %FHLB
                advances
            
            
            127,397
            
            
            5,621
            
            
            4.41
            %
            
            96,743
            
            
            3,671
            
            
            3.79
            %Other
                interest-bearing liabilities
            
            
            8,049
            
            
            331
            
            
            4.11
            %
            
            8,339
            
            
            235
            
            
            2.82
            %Total
                interest-bearing liabilities
            
            
            723,069
            
            
            24,647
            
            
            3.41
            %
            
            658,701
            
            
            16,206
            
            
            2.46
            %Demand
                deposits
            
            
            92,644
            
            
            
            
            
            
            
            
            91,896Other
                noninterest-bearing liabilities
            
            
            3,618
            
            
            
            
            
            
            
            
            10,106Total
                liabilities
            
            
            819,331
            
            
            
            
            
            
            
            
            760,703Stockholders'
                equity
            
            
            137,223
            
            
            
            
            
            
            
            
            98,118Total
                liabilities and stockholders' equity
            
            $
            956,554
            
            
            
            
            
            
            
            $
            858,821Net
                interest income
            
            
            
            
            $
            27,555
            
            
            
            
            
            
            
            $
            27,027Interest
                rate spread(1)
            
            
            
            
            
            
            
            
            2.23
            %
            
            
            
            
            
            
            
            2.77
            %Net
                interest-earning assets(2)
            
            $
            203,205
            
            
            
            
            
            
            
            $
            168,662Net
                interest margin(3)
            
            
            
            
            
            
            
            
            2.97
            %
            
            
            
            
            
            
            
            3.27
            %Average
                interest-bearing assets to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            128.10
            %
            
            
            
            
            
            
            
            125.61
            %







(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.




***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.




46




**Years
                ended December 31,**
              **2006
                vs. 2005****Increase
                (Decrease) Due to****Volume**
            
            **Rate**
            
            **Net****(In
                thousands)****Interest-earning
                assets:**Loans:Residential
                real estate
            
            $
            2,766
            
            $
            883
            
            $
            3,649Commercial
                real estate
            
            
            1,998
            
            
            706
            
            
            2,704Commercial
                and industrial
            
            
            631
            
            
            439
            
            
            1,070Consumer
                and other
            
            
            397
            
            
            (22
            )
            
            375Total
                loans
            
            
            5,792
            
            
            2,006
            
            
            7,798Investment
                securities
            
            
            241
            
            
            632
            
            
            873Other
                interest-earning assets
            
            
            (87
            )
            
            385
            
            
            298Total
                interest-earning assets
            
            
            5,946
            
            
            3,023
            
            
            8,969**Interest-bearing
                liabilities:**Savings
                accounts
            
            
            (119
            )
            
            163
            
            
            44Money
                market accounts
            
            
            299
            
            
            1,727
            
            
            2,026NOW
                accounts
            
            
            (10
            )
            
            (87
            )
            
            (97
            )Certificates
                of deposit
            
            
            869
            
            
            3,553
            
            
            4,422Total
                interest-bearing deposits
            
            
            1,039
            
            
            5,356
            
            
            6,395FHLB
                advances
            
            
            1,288
            
            
            662
            
            
            1,950Other
                interest-bearing liabilities
            
            
            (8
            )
            
            104
            
            
            96Total
                interest-bearing liabilities
            
            
            2,319
            
            
            6,122
            
            
            8,441Change
                in net interest income
            
            $
            3,627
            
            $
            (3,099
            )
            $
            528




***Net
      Interest Income Before Provision for Loan Losses.*** Net
      interest income before provision for loan losses increased $528,000, or 2.0%,
      to
      $27.6 million for the year ended December 31, 2006 from $27.0 million for
      the comparable 2005 period reflecting growth in average earning assets,
      substantially offset by net interest margin compression. Net interest margin
      contracted 30 basis points to 2.97% for the year ended December 31, 2006
      compared to 3.27% for the same period in 2005. Net interest margin was affected
      by the flat yield curve, the increasingly competitive pricing conditions for
      loans and deposits, a shift in deposit demand towards higher-yielding money
      market and time deposit accounts, and the impact of increased short-term market
      interest rates on the cost to fund earning assets.




***Interest
      Income.*** Interest
      income increased $9.0 million, or 20.7%, to $52.2 million for the year ended
      December 31, 2006 from $43.2 million for the prior year period reflecting
      expansion in total average interest-earning asset balances and an increase
      in
      the yield on average interest-earning assets. Total average interest-earning
      asset balances increased $98.9 million, or 12.0%, to $926.3 million for the
      year ended December 31, 2006 due in large part to strong loan growth, mainly
      funded by proceeds from the Company’s initial public offering in July 2005,
      deposit growth and additional FHLB advances. Total average loans increased
      $96.2
      million, or 16.1%, to $693.2 million for the year ended December 31, 2006 as
      a
      result of solid origination activity, partially offset by prepayments and normal
      amortization. The yield on average interest-earning assets increased 41 basis
      points to 5.64% for the year ended December 31, 2006 due to the higher interest
      rate environment. The increase in market rates contributed to the repricing
      of a
      portion of the Company’s existing assets and to increased rates for new assets.
      Since a significant amount of the Company’s average interest earning assets are
      fixed rate and the impact of Federal Reserve Board actions was less pronounced
      on the long end of the yield curve, the effect of the increase in market rates
      was constrained.




47


***Interest
      Expense.*** Interest
      expense increased $8.4 million, or 52.1%, to $24.6 million for the year
      ended December 31, 2006 from $16.2 million for the prior year period due an
      increase in average interest-bearing liabilities and an increase in the rate
      paid for such liabilities. Average interest-bearing liabilities increased
      $64.4 million, or 9.8%, to $723.1 million for the year ended December
      31, 2006 reflecting growth in interest-bearing deposits and FHLB advances.
      Total
      average interest-bearing deposits increased $34.0 million, or 6.1%, to $587.6
      million for the year ended December 31, 2006 mainly attributable to growth
      in
      money market and certificate of deposit balances, partially offset by a
      reduction in savings balances. The decline in savings deposits was mainly
      attributable to a shift in market demand to money market and certificates of
      deposit products to take advantage of more attractive rates. Total average
      FHLB
      advances increased $30.7 million, or 33.4%, to $127.4 million to support loan
      growth. The average rate paid on interest-bearing liabilities increased 95
      basis
      points to 3.41% for the year ended December 31, 2006 reflecting interest rate
      increases initiated by the Federal Reserve Board. Since a large portion of
      the
      Company’s interest-bearing liabilities are short-term, the impact of the
      increase in market rates was significant.




***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. The provision for
      loan
      losses was $969,000 for the year ended December 31, 2006, as compared to a
      $917,000 provision for the year ended December 31, 2005. The modest increase
      in
      the provision in 2006 as compared to 2005 was due primarily to increases in
      substandard and doubtful classified loans and commercial real estate non-accrual
      loans, offset to some extent by decreases in residential and commercial
      non-accrual loans and net charge-offs. The allowance for loan losses was $7.2
      million, or 0.95% of loans outstanding at December 31, 2006, as compared to
      $6.4
      million, or 1.00% of loans outstanding at December 31, 2005.




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.




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.




***Non-interest
      Income.*** Non-interest income increased $372,000, or 7.4%, to $5.4 million for the
      year ended December 31, 2006 from $5.0 million for the same period last year
      reflecting growth in fee income on depositors’ accounts and financial services
      income, partially offset by a $222,000 loss from sales of investment securities
      in 2006. Fee income on depositors’ accounts rose $446,000 as a result of growth
      in transaction account balances and activity. Financial services income expanded
      $145,000 in connection with the purchase of the Levine business in the first
      quarter of 2006 and new accounts opened due to successful business development
      efforts. The sales of securities in the third quarter of 2006 were consummated
      to improve the yield on the portfolio and provide additional liquidity.




***Non-interest
      Expense.*** Non-interest expense in the prior year period was higher due in part to the
      $3.6
      million contribution to fund the United Charitable Foundation, non-interest
      expense increased $3.5 million, or 17.1%, to $24.0 million for the year
      ended December 31, 2006 from $20.5 million for the prior year period. Total
      salaries and benefits increased $1.7 million, or 15.4%, reflecting the cost
      of
      restricted stock and stock option grants awarded in 2006 under the Company’s
      Stock Based Incentive Plan, new employees hired to support the growth of the
      Company and two new branches opened in 2006, expenses totaling $198,000 incurred
      in connection with the separation package for the Company’s former Chief
      Financial Officer, and annual wage increases. Occupancy costs grew $298,000,
      or
      19.9%, principally attributable to two new branches opened in 2006 and new
      office space leased in connection with the acquisition of the Levine financial
      services business in the first quarter of 2006. Professional services costs
      increased $416,000, or 56.8%, mainly due to expenses related to being a public
      company, including compliance with Sarbanes-Oxley
      Section 404 ,
      audit
      and accounting, legal, consulting, investor-relations and NASDAQ listing
      expenses. Other non-interest expense expanded $954,000, or 30.1%, primarily
      due
      to increased costs associated with a larger loan, deposit and financials
      services account base, including printed materials, supplies, branch
      merchandising and postage, as well as new branches opened in 2006.




48


***Income
      Tax Expense*** .
      Income **** tax
      expense increased $369,000 to $3.0 million for the year ended December 31,
      2006
      as **** compared
      to $2.6 million for the same period in 2005, primarily attributable to higher
      income before taxes. The effective tax rate for the year ended December 31,
      2006
      was 38.0% compared to 37.8% in 2005.




**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 2005.




***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.




49




**Years
                Ended December 31,****2005**
            
            **2004****Interest**
            
            
            
            
            
            **Interest****Average**
            
            **and**
            
            **Yield/**
            
            **Average**
            
            **and**
            
            **Yield/****Balance**
            
            **Dividends**
            
            **Cost**
            
            **Balance**
            
            **Dividends**
            
            **Cost****(Dollars
                in thousands)****Interest-earning
                assets:**Loans:Residential
                real estate
            
            $
            362,208
            
            $
            20,168
            
            
            5.57
            %
            $
            328,157
            
            $
            17,627
            
            
            5.37
            %Commercial
                real estate
            
            
            158,820
            
            
            9,781
            
            
            6.16
            %
            
            144,434
            
            
            8,478
            
            
            5.87
            %Commercial
                and industrial
            
            
            54,954
            
            
            3,525
            
            
            6.41
            %
            
            45,527
            
            
            2,417
            
            
            5.31
            %Consumer
                and other
            
            
            21,004
            
            
            1,066
            
            
            5.08
            %
            
            20,453
            
            
            1,160
            
            
            5.67
            %Total
                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
            
            
            
            
            
            
            
            
            27,040Total
                assets
            
            $
            858,821
            
            
            
            
            
            
            
            $
            759,411**Interest-bearing
                liabilities:**Savings
                accounts
            
            $
            93,550
            
            
            594
            
            
            0.63
            %
            $
            93,955
            
            
            698
            
            
            0.74
            %Money
                market
            
            
            148,297
            
            
            3,099
            
            
            2.09
            %
            
            151,159
            
            
            1,710
            
            
            1.13
            %NOW
                accounts
            
            
            37,770
            
            
            200
            
            
            0.53
            %
            
            36,505
            
            
            90
            
            
            0.25
            %Certificates
                of deposit
            
            
            274,002
            
            
            8,407
            
            
            3.07
            %
            
            245,395
            
            
            6,497
            
            
            2.65
            %Total
                interest-bearing deposits
            
            
            553,619
            
            
            12,300
            
            
            2.22
            %
            
            527,014
            
            
            8,995
            
            
            1.71
            %FHLB
                advances
            
            
            96,743
            
            
            3,671
            
            
            3.79
            %
            
            85,413
            
            
            2,960
            
            
            3.47
            %Other
                interest-bearing liabilities
            
            
            8,339
            
            
            235
            
            
            2.82
            %
            
            6,729
            
            
            193
            
            
            2.87
            %Total
                interest-bearing liabilities
            
            
            658,701
            
            
            16,206
            
            
            2.46
            %
            
            619,156
            
            
            12,148
            
            
            1.96
            %Demand
                deposits
            
            
            91,896
            
            
            
            
            
            
            
            
            78,713Other
                noninterest-bearing liabilities
            
            
            10,106
            
            
            
            
            
            
            
            
            1,761Total
                liabilities
            
            
            760,703
            
            
            
            
            
            
            
            
            699,630Stockholders'
                equity
            
            
            98,118
            
            
            
            
            
            
            
            
            59,781Total
                liabilities and stockholders' equity
            
            $
            858,821
            
            
            
            
            
            
            
            $
            759,411Net
                interest income
            
            
            
            
            $
            27,027
            
            
            
            
            
            
            
            $
            24,384Interest
                rate spread(1)
            
            
            
            
            
            
            
            
            2.77
            %
            
            
            
            
            
            
            
            3.03
            %Net
                interest-earning assets(2)
            
            $
            168,662
            
            
            
            
            
            
            
            $
            113,215Net
                interest margin(3)
            
            
            
            
            
            
            
            
            3.27
            %
            
            
            
            
            
            
            
            3.33
            %Average
                interest-bearing assets to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            125.61
            %
            
            
            
            
            
            
            
            118.29
            %






(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.




***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.




50




**Years
                ended December 31,**
              **2005
                vs. 2004****Increase
                (Decrease) Due to****Volume**
            
            **Rate**
            
            **Net****(In
                thousands)****Interest-earning
                assets:**Loans:Residential
                real estate
            
            $
            1,879
            
            $
            663
            
            $
            2,542Commercial
                real estate
            
            
            872
            
            
            431
            
            
            1,303Commercial
                and industrial
            
            
            552
            
            
            556
            
            
            1,108Consumer
                and other
            
            
            26
            
            
            (121
            )
            
            (95
            )Total
                loans
            
            
            3,329
            
            
            1,529
            
            
            4,858Investment
                securities
            
            
            1,076
            
            
            312
            
            
            1,388Other
                interest-earning assets
            
            
            199
            
            
            256
            
            
            455Total
                interest-earning assets
            
            
            4,604
            
            
            2,097
            
            
            6,701**Interest-bearing
                liabilities:**Savings
                accounts
            
            
            (3
            )
            
            (48
            )
            
            (51
            )Money
                market accounts
            
            
            (18
            )
            
            1,406
            
            
            1,388NOW
                accounts
            
            
            3
            
            
            55
            
            
            58Certificates
                of deposit
            
            
            808
            
            
            1,102
            
            
            1,910Total
                interest-bearing deposits
            
            
            790
            
            
            2,515
            
            
            3,305FHLB
                advances
            
            
            414
            
            
            297
            
            
            711Other
                interest-bearing liabilities
            
            
            39
            
            
            3
            
            
            42Total
                interest-bearing liabilities
            
            
            1,243
            
            
            2,815
            
            
            4,058Change
                in net interest income
            
            $
            3,361
            
            $
            (718
            )
            $
            2,643




***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.




51


***Provision
      for Loan Losses.*** The
      provision for loan losses $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.




***Non-interest
      Income.*** Non-interest
      income decreased $114,000, or 2.2%, to $5.0 million for the year ended December
      31, 2005 from $5.1 million for the prior year. The reduction in non-interest
      income was primarily due to gains from sales of securities totaling $119,000
      in
      2004.




***Non-interest
      Expense.*** In 2005
      the Company contributed $3.6 million to establish and fund the new United
      Charitable Foundation. Excluding this contribution, non-interest expense
      increased $1.3 million, or 7.0%, to $20.5 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. Professional fees increase $386,000 reflecting higher audit and
      consulting fees. Other non-interest expense decreased $500,000 to $3.2 million
      from $3.7 million as a result of $694,000 of costs 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.




**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.




52


Net
      interest income at-risk measures the risk of a decline in earnings due to
      potential short-term and long term changes in interest rates. The table below
      represents an analysis of our IRR as measured by the estimated changes in NII
      over the following twelve months, resulting from an instantaneous and sustained
      parallel shift in the yield curve (+200 and -200 basis points) at December
      31,
      2006 and 2005.




**Net
                Interest Income At-Risk****Estimated
                Increase**
            
            **Estimated
                Increase****Change
                in Interest Rates**
            
            **(Decrease)
                in NII**
            
            **(Decrease)
                in NII**(Basis
                Points)
            
            (December
                31, 2006)
            
            (December
                31, 2005)-200
            
            12.1%
            
            0.4%Stable
            
            0.0%
            
            0.0%+200
            
            -10.9%
            
            -3.4%




The
      preceding income simulation analysis does not represent a forecast of NII and
      should not be relied upon as being indicative of expected operating results.
      These hypothetical estimates are based upon numerous assumptions, which are
      subject to change, including: the nature and timing of interest rate levels
      including the yield curve shape, prepayments on loans and securities, deposit
      decay rates, pricing decisions on loans and deposits, reinvestment/replacement
      of asset and liability cash flows, and others. Also, as market conditions vary
      from those assumed in the income simulation models, the actual results will
      differ reflecting prepayment/refinancing levels likely deviating from those
      assumed, the varying impact of interest rate changes on caps and floors embedded
      in adjustable rate loans, early withdrawal of deposits, changes in product
      preferences, and other internal/external variables.




**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. At December 31, 2006, our
      liquidity ratio was 27.01%.




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, 2006, cash and cash equivalents totaled $25.4
      million. Securities classified as available-for-sale, which provide additional
      sources of liquidity, totaled $190.2 million at December 31, 2006. In addition,
      at December 31, 2006, we had the ability to borrow a total of approximately
      $319
      million from the Federal Home Loan Bank of Boston. On that date, we had $169.8
      million in advances outstanding.




53




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, 2006, we had $42.6 million in loan commitments outstanding. In
      addition to commitments to originate loans, we had $135.4 million in unused
      lines of credit to borrowers. Certificates of deposit due within one year of
      December 31, 2006 totaled $282.0 million, or 41.1% 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, 2007. 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 2006, we originated $357.0 million of loans and purchased $47.8
      million of securities. In 2005, we originated $290.1 million of loans and
      purchased $124.9 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 $32.1
      million and $39.9 million for the years ended December 31, 2006 and 2005,
      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 $67.9 million and $15.2 million during the years ended December
      31,
      2006 and 2005, 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, 2006, United Bank exceeded all regulatory capital
      requirements. United Bank is considered “well-capitalized” under 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
      K, “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, 2006. 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.




54




**Payments
                Due by Period****Less
                Than**
            
            **One
                to Three**
            
            **Three
                to Five**
            
            **More
                than****One
                Year**
            
            **Years**
            
            **Years**
            
            **Five
                Years**
            
            **Total****Contractual
                Obligations:**Certificates
                of Deposit
            
            $
            282,025
            
            $
            27,988
            
            $
            9,501
            
            $
            -
            
            $
            319,514Federal
                Home Loan Bank advances
            
            
            65,000
            
            
            29,411
            
            
            55,295
            
            
            20,100
            
            
            169,806Repurchase
                Agreements
            
            
            10,425
            
            
            -
            
            
            -
            
            
            -
            
            
            10,425Standby
                letters of credit
            
            
            879
            
            
            -
            
            
            -
            
            
            -
            
            
            879Operating
                Leases
            
            
            498
            
            
            839
            
            
            589
            
            
            3,224
            
            
            8,677Total
            
            $
            358,827
            
            $
            58,238
            
            $
            65,385
            
            $
            23,324
            
            $
            509,301Commitments
                to extend credit
            
            $
            170,116
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            170,116







**Recent
      Accounting Pronouncements**




In
      July
      2006, the Financial Accounting Standards Board (“FASB”) released FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the
      accounting and reporting for income taxes where interpretation of the tax law
      may be uncertain. FIN 48 prescribes a comprehensive model for the financial
      statement recognition, measurement, presentation and disclosure of income tax
      uncertainties with respect to positions taken or expected to be taken in income
      tax returns. This standard is effective for the Company on January 1, 2007.
      The
      cumulative effect, if any, of applying FIN 48 will be recorded as an adjustment
      to the beginning balance of retained earnings. Management is in the process
      of
      completing its evaluation of the impact that adoption of FIN 48 may have but
      does not expect the adoption will have a material effect on the Company’s results
      of
      operations or financial position.




In
      September 2006, the SEC issued SAB 108 “Considering the Effects of Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements”. This SAB addresses quantifying the financial statement effect of
      misstatements, specifically, how the effects of prior year uncorrected errors
      must be considered in quantifying misstatements in the current year financial
      statements. This SAB is effective for fiscal years ending after
      November 15, 2006. Management has determined that the effect of SAB 108 on
      the Company’s financial statements is not material.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value,
      establishes a GAAP framework for measuring fair value, and expands financial
      statement disclosures about fair value measurements. SFAS 157 is effective
      for
      the Company on January 1, 2008 and is not expected to have a significant impact
      on the Company's financial statements.





In
      June 2006, the EITF released Issue 06-05, “Accounting for Purchases of Life
      Insurance-Determining the Amount That Could Be Realized in Accordance with
      FASB
      Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance”.
      On September 7, 2006, the EITF concluded that a policyholder should
      consider any additional amounts included in the contractual terms of the policy
      in determining the amount that could be realized under the insurance contract.
      Amounts that are recoverable by the policyholder at the discretion of the
      insurance company should be excluded from the amount that could be realized.
      Amounts that are recoverable by the policyholder in periods beyond one year
      from
      the surrender of the policy should be discounted utilizing an appropriate rate
      of interest. The effective date of EITF 06-05 is for fiscal years beginning
      after December 15, 2006. Management does not expect the implementation of
      the Interpretation will have a material effect on the Company’s results of
      operations or financial position.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS
      159"), which provides companies with an option to report selected financial
      assets and liabilities at fair value. The objective of SFAS 159 is to reduce
      both complexity in accounting for financial instruments and the volatility
      in
      earnings caused by measuring related assets and liabilities differently. SFAS
      159 establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities and to more easily understand the effect
      of the company’s choice to use fair value on its earnings. SFAS 159 also
      requires entities to display the fair value of the selected assets and
      liabilities on the face of the balance sheet. SFAS 159 does not eliminate
      disclosure requirements of other accounting standards, including fair value
      measurement disclosures in SFAS 157. This Statement is effective as of the
      beginning of an entity’s first fiscal year beginning after November 15, 2007.
      Early adoption is permitted as of the beginning of the previous fiscal year
      provided that the entity makes that choice in the first 120 days of that fiscal
      year and also elects to apply the provisions of Statement 157. Adoption of
      SFAS
      159 is not expected to have a material impact on the Company’s financial
      statements.


55


**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 SUPPLEMENTAL
                DATA**





INDEX
      TO
      FINANCIAL STATEMENTS





PageReport
                of Independent Registered Public Accounting Firm
            F-1Financial
                StatementsConsolidated
                Balance Sheets
            F-2Consolidated
                Statements of Earnings
            F-3Consolidated
                Statements of Stockholders’ Equityand
                Comprehensive Income
            F-4Consolidated
                Statements of Cash Flows
            F-5Notes
                to Consolidated Financial Statements
            F-6




56




Report
          of Independent Registered Public Accounting Firm
 
 
 Board
          of
          Directors
 United
          Financial Bancorp, Inc.
 
 
 We
          have
          audited the accompanying consolidated balance sheets of United Financial
          Bancorp, Inc. and subsidiary (the “Company”) as of December 31, 2006 and 2005,
          and the related statements of earnings, stockholders’ equity and comprehensive
          income, and cash flows for each of the three years in the period ended
          December
          31, 2006. These financial statements are the responsibility of the Company'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. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provide a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the consolidated financial statements referred to above present
          fairly,
          in all material respects, the financial position of United Financial Bancorp,
          Inc. and subsidiary as of December 31, 2006 and 2005, and the results of
          their
          operations and their cash flows for each of the three years in the period
          ended
          December 31, 2006 in conformity with accounting principles generally accepted
          in
          the United States of America.
 
 We
          also
          have audited, in accordance with the standards of the Public Company Accounting
          Oversight Board (United States), the effectiveness of the Company’s internal
          control over financial reporting as of December 31, 2006, based on criteria
          established in *Internal
          Control—Integrated Framework* issued
          by the Committee of Sponsoring Organizations of the Treadway Commission
          (COSO)
          and our report dated March 13, 2007 expressed an unqualified opinion on
          management’s assessment of the effectiveness of the Company’s internal control
          over financial reporting and an unqualified opinion on the effectiveness
          of the
          Company’s internal control over financial reporting.
 
 
 Boston,
          Massachusetts
 March
          13,
          2007
 
 F-1
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Consolidated
          Balance Sheets
 December
          31, 2006
          and
          2005
 (Dollars
          in thousands, except per share amounts)
  **December 31,**
                
                **December 31,****2006**
                
                **2005****ASSETS**Cash
                    and due from banks
                
                $
                15,459
                
                $
                15,841Interest-bearing
                    deposits
                
                
                9,960
                
                
                2Total
                    cash and cash equivalents
                
                
                25,419
                
                
                15,843Securities
                    available for sale, at fair value
                
                
                190,237
                
                
                226,465Securities
                    held to maturity, at amortized cost (fair value of $3,227
                    atDecember
                    31, 2006 and $3,298 at December 31, 2005)
                
                
                3,241
                
                
                3,325Loans,
                    net of allowance for loan losses of $7,218 at December 31,
                    2006and
                    $6,382 at December 31, 2005
                
                
                756,180
                
                
                630,558Other
                    real estate owned
                
                
                562
                
                
                1,602Accrued
                    interest receivable
                
                
                4,320
                
                
                3,928Deferred
                    tax asset, net
                
                
                2,851
                
                
                1,245Stock
                    in the Federal Home Loan Bank of Boston
                
                
                9,274
                
                
                6,588Banking
                    premises and equipment, net
                
                
                8,821
                
                
                8,236Bank-owned
                    life insurance
                
                
                6,304
                
                
                6,031Other
                    assets
                
                
                2,224
                
                
                2,692TOTAL
                    ASSETS
                
                $
                1,009,433
                
                $
                906,513**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Liabilities:Deposits:Interest-bearing
                
                $
                588,496
                
                $
                560,310Non-interest-bearing
                
                
                97,190
                
                
                93,301Total
                    deposits
                
                
                685,686
                
                
                653,611Federal
                    Home Loan Bank of Boston advances
                
                
                169,806
                
                
                101,880Repurchase
                    agreements
                
                
                10,425
                
                
                8,434Escrow
                    funds held for borrowers
                
                
                1,121
                
                
                1,129Accrued
                    expenses and other liabilities
                
                
                4,684
                
                
                4,454Total
                    liabilities
                
                
                871,722
                
                
                769,508Commitments
                    and contingencies (Note L)
                
                
                -
                
                
                -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 at December 31, 2006 and 2005
                
                
                172
                
                
                172Paid-in
                    capital
                
                
                75,520
                
                
                78,446Retained
                    earnings
                
                
                70,406
                
                
                66,944Unearned
                    compensation
                
                
                (5,772
                )
                
                (6,092
                )Treasury
                    stock, at cost (51,445 shares at December 31, 2006)
                
                
                (664
                )
                
                -Accumulated
                    other comprehensive loss, net of taxes
                
                
                (1,951
                )
                
                (2,465
                )Total
                    stockholders’ equity
                
                
                137,711
                
                
                137,005TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                1,009,433
                
                $
                906,513
 F-2
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Consolidated
          Statements of Earnings
 For
          the
          years ended December 31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 
 **2006**
                
                **2005**
                
                **2004**Interest
                    and dividend income:Loans
                
                $
                42,338
                
                $
                34,540
                
                $
                29,682Investments
                
                
                8,843
                
                
                7,970
                
                
                6,582Other
                    interest-earning assets
                
                
                1,021
                
                
                723
                
                
                268Total
                    interest and dividend income
                
                
                52,202
                
                
                43,233
                
                
                36,532Interest
                    expense:Deposits
                
                
                18,695
                
                
                12,300
                
                
                8,995Short-term
                    borrowings
                
                
                3,198
                
                
                1,675
                
                
                373Long-term
                    debt
                
                
                2,754
                
                
                2,231
                
                
                2,780Total
                    interest expense
                
                
                24,647
                
                
                16,206
                
                
                12,148Net
                    interest income before provision for loan losses
                
                
                27,555
                
                
                27,027
                
                
                24,384Provision
                    for loan losses
                
                
                969
                
                
                917
                
                
                983Net
                    interest income after provision for loan losses
                
                
                26,586
                
                
                26,110
                
                
                23,401Non-interest
                    income:Fee
                    income on depositors’ accounts
                
                
                4,190
                
                
                3,744
                
                
                3,683(Loss)
                    gain on sale of securities
                
                
                (222
                )
                
                3
                
                
                122Income
                    from bank-owned life insurance
                
                
                273
                
                
                326
                
                
                332Other
                    income
                
                
                1,151
                
                
                947
                
                
                997Total
                    non-interest income
                
                
                5,392
                
                
                5,020
                
                
                5,134Non-interest
                    expense:Salaries
                    and benefits
                
                
                12,888
                
                
                11,167
                
                
                9,564Occupancy
                    expenses
                
                
                1,792
                
                
                1,494
                
                
                1,453Marketing
                    expenses
                
                
                1,436
                
                
                1,386
                
                
                1,244Data
                    processing expenses
                
                
                2,474
                
                
                2,371
                
                
                2,681Contributions
                    and sponsorships
                
                
                174
                
                
                3,792
                
                
                192Professional
                    fees
                
                
                1,148
                
                
                732
                
                
                336Other
                    expenses
                
                
                4,124
                
                
                3,170
                
                
                3,709Total
                    non-interest expense
                
                
                24,036
                
                
                24,112
                
                
                19,179Income
                    before income taxes
                
                
                7,942
                
                
                7,018
                
                
                9,356Income
                    tax expense
                
                
                3,018
                
                
                2,649
                
                
                3,828NET
                    INCOME
                
                $
                4,924
                
                $
                4,369
                
                $
                5,528Earnings
                    per share:Basic
                
                $
                0.30
                
                
                NA
                
                
                NADiluted
                
                $
                0.30
                
                
                NA
                
                
                NAWeighted
                    average shares outstanding:Basic
                
                
                16,467,874
                
                
                NA
                
                
                NADiluted
                
                
                16,476,933
                
                
                NA
                
                
                NA
  The
          accompanying notes are an integral part of the consolidated financial
          statements.
  F-3
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Consolidated
          Statements of Stockholders’ Equity and Comprehensive Income
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands)
  **Accumulated****Common**
                
                
                
                
                
                
                
                
                
                
                
                **Other****Shares**
                
                **Common**
                
                **Paid-In**
                
                **Retained**
                
                **Unearned**
                
                **Treasury**
                
                **Comprehensive****Outstanding**
                
                **Stock**
                
                **Capital**
                
                **Earnings**
                
                **Compensation**
                
                **Stock**
                
                **Loss**
                
                **Total**Balances
                    at December 31, 2003
                
                
                -
                
                $
                -
                
                $
                -
                
                $
                57,289
                
                $
                -
                
                $
                -
                
                $
                (239
                )
                $
                57,050Impact
                    of reorganization
                
                
                
                
                
                
                
                
                
                
                
                (150
                )
                
                
                
                
                
                
                
                
                
                
                (150
                )Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                5,528
                
                
                
                
                
                
                
                
                
                
                
                5,528Net
                    unrealized loss on securities available for sale, net of reclassification
                    adjustments and taxes
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (173
                )
                
                (173
                )Total
                    comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,355Balances
                    at December 31, 2004
                
                
                -
                
                
                -
                
                
                -
                
                
                62,667
                
                
                -
                
                
                -
                
                
                (412
                )
                
                62,255Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                4,369
                
                
                -
                
                
                -
                
                
                -
                
                
                4,369Net
                    unrealized loss on securities available for sale, net of reclassification
                    adjustments and taxes
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,053
                )
                
                (2,053
                )Total
                    comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,316Issuance
                    of common stock, net of offering costs of $1,900
                
                
                7,671,973
                
                
                77
                
                
                74,745
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                74,822Issuance
                    of common stock to MHC
                
                
                9,189,922
                
                
                92
                
                
                -
                
                
                (92
                )
                
                -
                
                
                -
                
                
                -
                
                
                -Issuance
                    of common stock to UnitedCharitable
                    Foundation.
                
                
                344,100
                
                
                3
                
                
                3,646
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                3,649Shares
                    purchased for ESOP
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (6,413
                )
                
                -
                
                
                -
                
                
                (6,413
                )ESOP
                    shares committed to be released
                
                
                -
                
                
                -
                
                
                55
                
                
                -
                
                
                321
                
                
                -
                
                
                -
                
                
                376Balances
                    at December 31, 2005
                
                
                17,205,995
                
                
                172
                
                
                78,446
                
                
                66,944
                
                
                (6,092
                )
                
                -
                
                
                (2,465
                )
                
                137,005Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                4,924
                
                
                -
                
                
                -
                
                
                -
                
                
                4,924Net
                    unrealized gain on securities available for sale, net of reclassification
                    adjustments and taxes
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                514
                
                
                514Total
                    comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,438Cash
                    dividends declared ($0.20 per share)
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,462
                )
                
                -
                
                
                -
                
                
                -
                
                
                (1,462
                )Treasury
                    stock purchases
                
                
                (341,945
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (4,405
                )
                
                -
                
                
                (4,405
                )Reissuance
                    of treasury shares in connection with restricted stock
                    grants
                
                
                290,500
                
                
                -
                
                
                (3,741
                )
                
                -
                
                
                -
                
                
                3,741
                
                
                -
                
                
                -Stock-based
                    compensation
                
                
                -
                
                
                -
                
                
                728
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                728ESOP
                    shares committed to be released
                
                
                -
                
                
                -
                
                
                87
                
                
                -
                
                
                320
                
                
                -
                
                
                -
                
                
                407Balances
                    at December 31, 2006
                
                
                17,154,550
                
                $
                172
                
                $
                75,520
                
                $
                70,406
                
                $
                (5,772
                )
                $
                (664
                )
                $
                (1,951
                )
                $
                137,711
 
 The
          accompanying notes are an integral part of the consolidated financial
          statements.
  F-4
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Consolidated
          Statements of Cash Flows
 For
          the
          years ended December 31, 2006, 2005 and 2004
 (Dollars
          in thousands)
  **2006**
                
                **2005**
                
                **2004****Cash
                    flows from operating activities:**Net
                    income
                
                $
                4,924
                
                $
                4,369
                
                $
                5,528Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Provision
                    for loan losses
                
                
                969
                
                
                917
                
                
                983ESOP
                    expense
                
                
                407
                
                
                376
                
                
                -Stock-based
                    compensation
                
                
                728
                
                
                -
                
                
                -Contribution
                    to United Charitable Foundation
                
                
                -
                
                
                3,649
                
                
                -Amortization
                    of premiums and discounts
                
                
                308
                
                
                670
                
                
                1,062Depreciation
                    and amortization
                
                
                838
                
                
                667
                
                
                647Amortization
                    of intangible assets
                
                
                25
                
                
                -
                
                
                -Provision
                    for other real estate owned
                
                
                -
                
                
                -
                
                
                (21
                )Gain
                    on sales of loans
                
                
                (3
                )
                
                (2
                )
                
                (13
                )Net
                    loss (gain) on sale of property and equipment
                
                
                21
                
                
                (4
                )
                
                (2
                )Net
                    loss (gain) on sale of available for sale securities
                
                
                222
                
                
                (3
                )
                
                (122
                )Income
                    tax provision (benefit)
                
                
                (1,679
                )
                
                978
                
                
                (1
                )Increase
                    in cash surrender value of bank-owned life insurance
                
                
                (273
                )
                
                (326
                )
                
                (332
                )(Increase)
                    decrease in accrued interest receivable
                
                
                (392
                )
                
                (1,065
                )
                
                282Decrease
                    (increase) in other assets
                
                
                475
                
                
                (2,005
                )
                
                678(Decrease)
                    increase in accrued expenses and other liabilities
                
                
                (42
                )
                
                337
                
                
                469Net
                    cash provided by operating activities
                
                
                6,528
                
                
                8,558
                
                
                9,158**Cash
                    flows from investing activities:**Purchases
                    of securities available for sale
                
                
                (47,764
                )
                
                (124,036
                )
                
                (58,142
                )Proceeds
                    from sales of securities available for sale
                
                
                28,896
                
                
                2,597
                
                
                32,985Proceeds
                    from maturities and principal repayments of securities available
                    for
                    sale
                
                
                55,430
                
                
                44,127
                
                
                68,646Purchases
                    of securities held to maturity
                
                
                -
                
                
                (909
                )
                
                (404
                )Proceeds
                    from maturities and principal repayments of securities held to
                    maturity
                
                
                75
                
                
                75
                
                
                77Purchases
                    of Federal Home Loan Bank of Boston stock
                
                
                (2,686
                )
                
                (567
                )
                
                (2,072
                )Refund
                    of Cooperative Central Bank deposit
                
                
                -
                
                
                -
                
                
                1,522Proceeds
                    from sales of other real estate owned
                
                
                1,852
                
                
                -
                
                
                39Net
                    loan originations and principal repayments
                
                
                (127,570
                )
                
                (64,046
                )
                
                (78,428
                )Proceeds
                    from sales of loans
                
                
                170
                
                
                215
                
                
                5,314Purchases
                    of property and equipment
                
                
                (1,372
                )
                
                (1,245
                )
                
                (382
                )Cash
                    paid to acquire Levine Financial Group
                
                
                (100
                )
                
                -
                
                
                -Proceeds
                    from sale of property and equipment
                
                
                -
                
                
                16
                
                
                14Net
                    cash used in investing activities
                
                
                (93,069
                )
                
                (143,773
                )
                
                (30,831
                )**Cash
                    flows from financing activities:**Net
                    increase in deposits
                
                
                32,075
                
                
                39,938
                
                
                18,924Proceeds
                    of Federal Home Loan Bank of Boston advances
                
                
                133,000
                
                
                148,365
                
                
                185,714Repayments
                    of Federal Home Loan Bank of Boston advances
                
                
                (65,074
                )
                
                (133,179
                )
                
                (175,839
                )Net
                    increase in repurchase agreements
                
                
                1,991
                
                
                4,118
                
                
                98Net
                    increase (decrease) in escrow funds held for borrowers
                
                
                (8
                )
                
                174
                
                
                14Treasury
                    stock purchases
                
                
                (4,405
                )
                
                -
                
                
                -Cash
                    dividends paid
                
                
                (1,462
                )
                
                -
                
                
                -Proceeds
                    from stock offering subscriptions
                
                
                -
                
                
                74,822
                
                
                -Acquistion
                    of common stock by ESOP
                
                
                -
                
                
                (6,413
                )
                
                -Impact
                    of reorganization
                
                
                -
                
                
                -
                
                
                (150
                )Net
                    cash provided by financing activities
                
                
                96,117
                
                
                127,825
                
                
                28,761Increase
                    (decrease) in cash and cash equivalents
                
                
                9,576
                
                
                (7,390
                )
                
                7,088Cash
                    and cash equivalents at beginning of year
                
                
                15,843
                
                
                23,233
                
                
                16,145Cash
                    and cash equivalents at end of period
                
                $
                25,419
                
                $
                15,843
                
                $
                23,233**Supplemental
                    Disclosure of Cash Flow Information****:**Cash
                    paid during the period:Interest
                    on deposits and other borrowings
                
                $
                24,353
                
                $
                16,080
                
                $
                12,102Income
                    taxes - net
                
                
                3,882
                
                
                2,786
                
                
                2,635Transfer
                    of loans to other real estate owned
                
                
                562
                
                
                1,602
                
                
                -
 
 The
          accompanying notes are an integral part of the consolidated financial
          statements.
  F-5
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005, 2004 and 2003
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          A - REORGANIZATION** **AND
          CHANGE IN CORPORATE FORM**
 
 During
          2004, United Bank 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 its 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 United Charitable 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 realized 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 K)
 
 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-6
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **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 (the Bank). UCB
          Securities, Inc. is a subsidiary of the Bank and is engaged in buying,
          selling
          and holding of securities. All significant intercompany accounts and
          transactions have been eliminated in consolidation. These entities are
          collectively referred to herein as “the Company”.
 
 The
          accounting and reporting policies of the Company conform to accounting
          principles generally accepted in the United States of America (“U.S. GAAP”) and
          general practices within the banking industry.
 
 ***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 Company’s more significant accounting
          policies:
 
 ***Cash
          and Cash Equivalents***
 
 The
          Company 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-7
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2005, 2004 and 2003
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***Investment
          Securities***
 
 Debt
          securities that the Company 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 Company had no securities classified as trading at December 31, 2006
          and
          2005.
 
 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 Company 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-8
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements - Continued
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **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 Company 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.
 
 Determining
          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 Company to recognize additions to the allowance
          based
          on judgments different from those of management.
 
 A
          substantial portion of the Company’s loans are secured by real estate in Western
          Massachusetts. Accordingly, the ultimate collectibility of the Company’s loan
          portfolio is susceptible to changing conditions in this market
          area.
  F-9
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***Other
          intangible assets***
  Statement
          of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible
          Assets”, prescribes that other identifiable intangible assets are recorded at
          their estimated fair value and are amortized on a straight-line basis over
          their
          estimated useful lives. These assets are evaluated for impairment if
          circumstances suggest that their value may be impaired.
  ***Business
          segments***
 
 An
          operating segment is a component of a business for which separate financial
          information is available that is evaluated regularly by the chief operating
          decision-maker in deciding how to allocate resources and evaluate performance.
          The Company's operations are limited to financial services provided within
          the
          framework of a community bank, and decisions are based generally on specific
          market areas and or product offerings. Accordingly, based on the financial
          information which is presently evaluated by the Company's chief operating
          decision-maker, the Company operates in a single business segment.
 
 ***Off-balance
          sheet financial instruments***
 
 In
          the
          ordinary course of business, the Company enters into off-balance sheet
          financial
          instruments, consisting primarily of credit related financial instruments.
          These
          financial instruments are recorded in the consolidated financial statements
          when
          they are funded or related fees are incurred or received .
 
 ***Earnings
          Per Share***
 
 Earnings
          per share have been computed in accordance with SFAS No. 128,
“Earnings Per Share.” Basic earnings per share have been calculated by dividing
          net income by weighted average shares outstanding before any dilution and
          adjusted to exclude the weighted average number of unallocated shares held
          by
          the ESOP and unvested restricted stock awards. Diluted earnings per share
          have
          been calculated by dividing net income by weighted average shares outstanding
          after giving effect to the potential dilution that could occur if potential
          common shares were converted into common stock using the treasury stock
          method.
  F-10
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***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 value 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 Company 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.
 
 Asset
          retirement obligations are recognized at fair value when incurred. The
          Company
          recognizes a liability when the obligation is incurred - generally upon
          acquisition, construction, or development and (or) through the normal operation
          of the asset. In
          periods subsequent to initial measurement, the Company recognizes changes
          in the
          liability for an asset retirement obligation resulting from (a) the passage
          of time and (b) revisions to either the timing or the amount of the original
          estimate of undiscounted cash flows.
 
 An
          asset
          retirement obligation is recognized as a liability and measured at fair
          value.
          Because the liability is recorded at its fair value and not it’s ultimate
          settlement amount, increases in the liability’s carrying amount for accretion
          are recognized each period. The accretion expense is classified as an operating
          expense in the income statement. The Company also capitalizes the cost
          associated with its asset retirement obligations as part of the carrying
          amount
          of the associated long-lived assets. As part of the depreciable cost of
          the
          related long-lived assets, capitalized asset retirement costs are depreciated
          over their useful life.
  F-11
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***Pension
          Plan***
 
 The
          Company provides pension benefits for eligible employees through a
          multi-employer defined benefit plan sponsored by the Co-operative Banks
          Employees’ Retirement Association (CBERA). The Company’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 Company
          matches employee contributions up to 5% of an employee’s qualified compensation.
 
 ***Transfers
          of Financial Assets***
 Transfers
          of financial assets are accounted for as sales, when control over the assets
          has
          been surrendered. Control over transferred assets is deemed to be surrendered
          when (1) the assets have been isolated from the Company, (2) the transferee
          obtains the right (free of conditions that constrain it from taking advantage
          of
          that right) to pledge or exchange the transferred assets and (3) the Company
          does not maintain effective control over the transferred assets through
          an
          agreement to repurchase them before their maturity.
 
 ***Income
          Taxes***
 
 The
          Company 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 Company’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
          Company’s net deferred tax asset is supported by recoverable income taxes.
          Therefore, no valuation allowance was necessary at December 31, 2006 or
          2005 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.
  F-12
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
  **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***Stock
          Compensation Plan***
 
 The
          Company adopted SFAS No. 123R, “ Share-Based
          Payment” ,
          on
          January 1, 2006. SFAS 123R requires that the compensation cost associated
          with
          share-based payment transactions, such as stock options and restricted
          stock
          awards, be recognized in the financial statements over the requisite service
          (vesting) **** period.
          During the year ended December 31, 2006, the Company’s shareholders approved a
          stock based incentive plan, which is described in Note J.
 
 ***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. The Company uses the
          specific identification method to determine the cost of a security sold
          and the
          amount reclassified out of accumulated other comprehensive income into
          earnings.
 
 The
          components of other comprehensive income and related tax effects are as
          follows
          for the years ended December 31:
 
 **2006**
                
                **2005**
                
                **2004**Change
                    in unrealized holding gains (losses) on available for sale
                    securities
                
                $
                633
                
                $
                (3,371
                )
                $
                (180
                )Reclassification
                    adjustment for losses (gains) realized in income
                
                
                222
                
                
                (3
                )
                
                (122
                )Net
                    change in unrealized gains (losses)
                
                
                855
                
                
                (3,374
                )
                
                (302
                )Tax
                    effect
                
                
                341
                
                
                1,321
                
                
                129Other
                    comprehensive income (loss)
                
                $
                514
                
                $
                (2,053
                )
                $
                (173
                )
 
 ***Reclassifications***
  Amounts
          reported for prior periods are reclassified as necessary to be consistent
          with
          the current-period presentation.
  F-13
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**
 
 ***Advertising
          and public relations expense***
 
 Advertising,
          promotional and other business development costs are generally expensed
          as
          incurred. External costs incurred in producing media advertising are expensed
          the first time the advertising takes place. External costs relating to
          direct
          mailing costs are expensed in the period in which the direct mailings are
          sent.
 
 ***Recent
          Accounting Developments***
 
 In
          July
          2006, the Financial Accounting Standards Board (“FASB”) released FASB
          Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
          interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the
          accounting and reporting for income taxes where interpretation of the tax
          law
          may be uncertain. FIN 48 prescribes a comprehensive model for the financial
          statement recognition, measurement, presentation and disclosure of income
          tax
          uncertainties with respect to positions taken or expected to be taken in
          income
          tax returns. This standard is effective for the Company on January 1, 2007.
          The
          cumulative effect, if any, of applying FIN 48 will be recorded as an adjustment
          to the beginning balance of retained earnings. Management is in the process
          of completing its evaluation of the impact that adoption of FIN 48 may
          have but
          does not expect the adoption will have a material effect on the Company’s results
          of
          operations or financial position.
 
 In
          September 2006, the S ecurities
          and Exchange Commission issued Staff Accounting Bulletin (SAB) 108 “Considering
          the Effects of Prior Year Misstatements when Quantifying Misstatements
          in
          Current Year Financial Statements”. This SAB addresses quantifying the financial
          statement effect of misstatements, specifically, how the effects of prior
          year
          uncorrected errors must be considered in quantifying misstatements in the
          current year financial statements. This SAB is effective for fiscal years
          ending
          after November 15, 2006. The adoption of this SAB had no effect on the
          Company’s financial position, results of operations or cash flows.
 
 In
          September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” . SFAS
          157 defines fair value, establishes a U.S. GAAP framework for measuring
          fair
          value, and expands financial statement disclosures about fair value
          measurements. SFAS No.157 is effective for the Company on January 1, 2008
          and is
          not expected to have a significant impact on its financial
          statements.
  F-14
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concluded**
 
  In
          June 2006, the EITF released Issue 06-05, “Accounting for Purchases of Life
          Insurance-Determining the Amount That Could Be Realized in Accordance with
          FASB
          Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance”.
          On September 7, 2006, the EITF concluded that a policyholder should
          consider any additional amounts included in the contractual terms of the
          policy
          in determining the amount that could be realized under the insurance contract.
          Amounts that are recoverable by the policyholder at the discretion of the
          insurance company should be excluded from the amount that could be realized.
          Amounts that are recoverable by the policyholder in periods beyond one
          year from
          the surrender of the policy should be discounted utilizing an appropriate
          rate
          of interest. The effective date of EITF 06-05 is for fiscal years beginning
          after December 15, 2006. Management does not expect the implementation of
          the Interpretation will have a material effect on the Company’s results of
          operations or financial position.
 
 In
          February 2007, the FASB issued Statement of Financial Accounting Standards
          No.
          159, The Fair Value Option for Financial Assets and Financial Liabilities
          ("SFAS
          159"), which provides companies with an option to report selected financial
          assets and liabilities at fair value. The objective of SFAS 159 is to reduce
          both complexity in accounting for financial instruments and the volatility
          in
          earnings caused by measuring related assets and liabilities differently.
          SFAS
          159 establishes presentation and disclosure requirements designed to facilitate
          comparisons between companies that choose different measurement attributes
          for
          similar types of assets and liabilities and to more easily understand the
          effect
          of the company’s choice to use fair value on its earnings. SFAS 159 also
          requires entities to display the fair value of the selected assets and
          liabilities on the face of the balance sheet. SFAS 159 does not eliminate
          disclosure requirements of other accounting standards, including fair value
          measurement disclosures in SFAS 157. This Statement is effective as of
          the
          beginning of an entity’s first fiscal year beginning after November 15, 2007.
          Early adoption is permitted as of the beginning of the previous fiscal
          year
          provided that the entity makes that choice in the first 120 days of that
          fiscal
          year and also elects to apply the provisions of Statement 157. Adoption
          of SFAS
          159 is not expected to have a material impact on the Company’s results of
          operations or financial position.
  F-15
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **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**
                
                **Unrealized**
                
                **Unrealized**
                
                **Fair****Cost**
                
                **Gain**
                
                **Losses**
                
                **Value****Securities
                    Available for Sale**December
                    31, 2006:Government-sponsored
                    enterprises
                
                $
                78,248
                
                $
                4
                
                $
                (883
                )
                $
                77,369Mortgage-backed
                    securities
                
                
                111,481
                
                
                107
                
                
                (2,314
                )
                
                109,274Corporate
                    bonds
                
                
                3,415
                
                
                14
                
                
                (120
                )
                
                3,309Subtotal
                
                
                193,144
                
                
                125
                
                
                (3,317
                )
                
                189,952Marketable
                    equity securities
                
                
                294
                
                
                -
                
                
                (9
                )
                
                285Total
                
                $
                193,438
                
                $
                125
                
                $
                (3,326
                )
                $
                190,237December
                    31, 2005:Government-sponsored
                    enterprises
                
                $
                99,957
                
                $
                1
                
                $
                (1,397
                )
                $
                98,561Mortgage-backed
                    securities
                
                
                117,259
                
                
                102
                
                
                (2,659
                )
                
                114,702Corporate
                    bonds
                
                
                13,011
                
                
                54
                
                
                (135
                )
                
                12,930Subtotal
                
                
                230,227
                
                
                157
                
                
                (4,191
                )
                
                226,193Marketable
                    equity securities
                
                
                294
                
                
                -
                
                
                (22
                )
                
                272Total
                
                $
                230,521
                
                $
                157
                
                $
                (4,213
                )
                $
                226,465
   **Amortized**
                
                **Unrealized**
                
                **Unrealized**
                
                **Fair****Cost**
                
                **Gain**
                
                **Losses**
                
                **Value****Securities
                    Held to Maturity**December
                    31, 2006:IRB
                
                $
                1,271
                
                $
                -
                
                $
                -
                
                $
                1,271Municipal
                    bonds
                
                
                1,970
                
                
                4
                
                
                (18
                )
                
                1,956Total
                
                $
                3,241
                
                $
                4
                
                $
                (18
                )
                $
                3,227December
                    31, 2005:IRB
                
                $
                1,346
                
                $
                -
                
                $
                -
                
                $
                1,346Municipal
                    bonds
                
                
                1,979
                
                
                -
                
                
                (27
                )
                
                1,952Total
                
                $
                3,325
                
                $
                -
                
                $
                (27
                )
                $
                3,298
 
 The
          Company’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.
 
 As
          of
          December 31, 2006, the Bank has pledged securities with an amortized cost
          of
          $16,000 and a fair value of $15,807 to secure treasury, tax and loan deposits
          at
          the Federal Reserve Bank of Boston and to secure customers’ repurchase
          agreements. Additionally, there is a blanket lien on certain securities
          to
          collateralize borrowings from the Federal Home Loan Bank of Boston, as
          discussed
          further in Note G.
  F-16
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          C - INVESTMENT SECURITIES -Continued**
 
 Gross
          unrealized losses and fair values at December 31, 2006 and 2005 aggregated
          by investment category and the length of time that individual securities
          have
          been in a continuous unrealized loss position follow:
 
 **Less
                    than 12 months**
                
                **12
                    months or longer**
                
                **Total****Fair**
                
                **Unrealized**
                
                **Fair**
                
                **Unrealized**
                
                **Number of**
                
                **Fair**
                
                **Unrealized****Value**
                
                **Losses**
                
                **Value**
                
                **Losses**
                
                **Securities**
                
                **Value**
                
                **Losses****2006****:****Securities
                    Available for Sale**Government-sponsored
                    enterprises
                
                $
                1,239
                
                $
                (19
                )
                $
                62,182
                
                $
                (864
                )
                
                28
                
                $
                63,421
                
                $
                (883
                )Mortgage-backed
                    securities
                
                
                13,609
                
                
                (117
                )
                
                78,972
                
                
                (2,197
                )
                
                86
                
                
                92,581
                
                
                (2,314
                )Corporate
                    bonds
                
                
                -
                
                
                -
                
                
                1,841
                
                
                (120
                )
                
                4
                
                
                1,841
                
                
                (120
                )Marketable
                    equity securities
                
                
                -
                
                
                -
                
                
                285
                
                
                (9
                )
                
                2
                
                
                285
                
                
                (9
                )Total
                
                $
                14,848
                
                $
                (136
                )
                $
                143,280
                
                $
                (3,190
                )
                
                120
                
                $
                158,128
                
                $
                (3,326
                )**Securities
                    Held to Maturity**Municipal
                    bonds
                
                $
                212
                
                $
                (1
                )
                $
                1,207
                
                $
                (17
                )
                
                7
                
                $
                1,419
                
                $
                (18
                )Total
                
                $
                212
                
                $
                (1
                )
                $
                1,207
                
                $
                (17
                )
                
                7
                
                $
                1,419
                
                $
                (18
                )**2005****:****Securities
                    Available for Sale**Government-sponsored
                    enterprises
                
                $
                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
                )Total
                
                $
                125,112
                
                $
                (1,816
                )
                $
                86,546
                
                $
                (2,397
                )
                
                153
                
                $
                211,658
                
                $
                (4,213
                )**Securities
                    Held to Maturity**Municipal
                    bonds
                
                $
                1,365
                
                $
                (12
                )
                $
                587
                
                $
                (15
                )
                
                9
                
                $
                1,952
                
                $
                (27
                )Total
                
                $
                1,365
                
                $
                (12
                )
                $
                587
                
                $
                (15
                )
                
                9
                
                $
                1,952
                
                $
                (27
                )
 
 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.
          Management believes that the current unrealized loss position is related
          to the
          current interest rate environment. The Company 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.
  F-17
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          C - INVESTMENT SECURITIES - Concluded**
 
 Realized
          gains and losses and the proceeds from sales of securities available for
          sale
          are as follows for the years ended December 31:
 
 **2006**
                
                **2005**
                
                **2004**Proceeds
                    from sales
                
                $
                28,896
                
                $
                2,597
                
                $
                32,985Gross
                    gains
                
                
                56
                
                
                16
                
                
                122Gross
                    losses
                
                
                (278
                )
                
                (13
                )
                
                -
 
 The
          scheduled maturities of debt securities held to maturity and available
          for sale
          at December 31, 2006, 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.
 
 **At
                    December 31, 2006****Securities
                    Available for Sale**
                
                **Securities
                    Held to Maturity****Amortized**
                
                **Fair**
                
                **Amortized**
                
                **Fair****Cost**
                
                **Value**
                
                **Cost**
                
                **Value**Due
                    in one year or less
                
                $
                31,698
                
                $
                31,575
                
                $
                201
                
                $
                198Due
                    from one year to five years
                
                
                57,709
                
                
                56,174
                
                
                1,312
                
                
                1,299Due
                    from five years to ten years
                
                
                34,957
                
                
                34,081
                
                
                878
                
                
                880Due
                    after ten years
                
                
                68,780
                
                
                68,122
                
                
                850
                
                
                850$
                193,144
                
                $
                189,952
                
                $
                3,241
                
                $
                3,227
 
 Maturities
          are based on the final contractual payment dates, and do not reflect the
          impact
          of prepayments or early redemptions that may occur. Such
          securities have been classified within the category that represents the
          final
          maturity date.
  F-18
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          D - LOANS, NET**
 
 The
          components of loans are as follows at December 31:
 
 **December 31,**
                
                **December 31,****2006**
                
                **2005**One-to-four
                    family residential real estate
                
                $
                319,108
                
                $
                285,236Commercial
                    real estate
                
                
                175,564
                
                
                150,099Construction
                
                
                54,759
                
                
                28,872Home
                    equity loans
                
                
                112,739
                
                
                86,045Commercial
                    and industrial
                
                
                69,762
                
                
                59,591Consumer
                
                
                30,181
                
                
                25,949Total
                    loans
                
                
                762,113
                
                
                635,792Net
                    deferred loan costs and fees
                
                
                1,285
                
                
                1,148Allowance
                    for loan losses
                
                
                (7,218
                )
                
                (6,382
                )Loans,
                    net
                
                $
                756,180
                
                $
                630,558
 
 The
          Company’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 Company grants loans for the construction of residential
          homes,
          multi-family properties and commercial real estate properties. Most loans
          granted by the Company are collateralized by real estate. The ability and
          willingness of the single family residential, commercial 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.
  F-19
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          D - LOANS, NET - Continued**
 
 Nonaccrual
          loans amounted to approximately $1,288 and $1,717 at December
          31, 2006 and 2005 ,
          respectively. Additional interest income of approximately $71, $158 and
          $110
          would have been recorded during the years ended December 31, 2006, 2005
          and
          2004, respectively, if the loans had performed in accordance with their
          original
          terms.
 
 At
          December 31, 200 6
          and
          2005, the recorded investment in impaired loans was $1,288 and $700,
          respectively, all of which were accounted for on a non-accrual basis. An
          allowance for loan losses was established on $1,288 and $700 of the impaired
          loans at December 31, 2006 and 2005, respectively, which allowances
          amounted to $295 and $80 at the respective year-ends. The average balance
          of
          impaired loans was $2,076, $2,145 and $1,395 for the years ended December
          31,
          2006, 2005 and 2004, respectively. Interest income recognized on impaired
          loans
          during 2006, 2005 and 2004 was not significant.
 
 Certain
          officers and directors of the Company 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 Company’s lending activity with its directors and
          executive officers all of which was conducted with terms consistent with
          those
          offered to unrelated parties:
 
 **2006**
                
                **2005**Beginning
                    balance
                
                $
                1,373
                
                $
                1,359New
                    loans
                
                
                10
                
                
                335Repayments
                
                
                (409
                )
                
                (321
                )Ending
                    balance
                
                $
                974
                
                $
                1,373
 
 The
          Company does not presently originate loans for the purpose of reselling
          them in
          the secondary market but has sold residential mortgage loans from its portfolio.
          Loans serviced by the Company for others totaled $36,900 and $42,400 at
          December 31, 2006 and 2005, respectively. The balances of mortgage
          servicing rights related to such loans were insignificant at December 31,
          2006
          and 2005.
  F-20
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          D - LOANS, NET - Concluded**
 
 A
          summary
          of changes in the allowance for loan losses for the years ended December 31
          follows:
 
 **2006**
                
                **2005**
                
                **2004**Balance
                    at beginning of period
                
                $
                6,382
                
                $
                5,750
                
                $
                5,094Provision
                    for loan losses
                
                
                969
                
                
                917
                
                
                983Charge-offs
                
                
                (186
                )
                
                (455
                )
                
                (558
                )Recoveries
                
                
                53
                
                
                170
                
                
                231Balance
                    at end of period
                
                $
                7,218
                
                $
                6,382
                
                $
                5,750
 
 **NOTE
          E - BANKING PREMISES AND EQUIPMENT**
 
 The
          composition of banking premises and equipment is as follows at December
          31:
 
 **Estimated****2006**
                
                **2005**
                
                **Useful Lives**Land
                    and improvements
                
                $
                2,146
                
                $
                2,135Buildings
                    and improvements
                
                
                7,475
                
                
                7,309
                
                
                25
                    - 40 YearsLeasehold
                    improvements
                
                
                1,976
                
                
                1,708Furniture
                    and equipment
                
                
                2,271
                
                
                1,573
                
                
                5
                    Years13,868
                
                
                12,725Less
                    accumulated depreciation and amortization
                
                
                (5,047
                )
                
                (4,489
                )$
                8,821
                
                $
                8,236
 F-21
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          E - BANKING PREMISES AND EQUIPMENT- Concluded**
 
 The
          Company leases six of its branches, two ATM facilities and a financial
          services
          office. Rent expense for the years ended December 31, 2006, 2005 and 2004
          amounted to approximately $363, $259 and $231, respectively. The leases,
          which
          are noncancelable, expire at various dates through 2031. Future minimum
          rental
          commitments under the terms of leases are as follows:
 
 **Years
                    ending December 31,**2007
                
                $
                4982008
                
                
                4342009
                
                
                4052010
                
                
                3502011
                
                
                239Thereafter
                
                
                3,224Total
                    minimum lease payments
                
                $
                5,150
 
 
 **NOTE
          F - DEPOSITS**
 
 Deposit
          accounts by type are summarized as follows at December 31:
 
 **2006**
                
                **2005**Demand
                
                $
                97,190
                
                $
                93,301NOW
                
                
                37,523
                
                
                39,922Regular
                    savings
                
                
                65,475
                
                
                87,253Money
                    market
                
                
                164,463
                
                
                154,177Retirement
                
                
                55,368
                
                
                52,694Certificates
                    of deposit
                
                
                265,667
                
                
                226,264$
                685,686
                
                $
                653,611
 F-22
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          F - DEPOSITS- Concluded**
 
 Certificates
          of deposit with balances greater than or equal to $100 totaled $103,321
          and
          $90,597 at December
          31, 2006 and 2005 ,
          respectively. The FDIC generally insures deposit amounts up to $100, as
          defined
          in the applicable regulations. The maturity of those certificates as of
          December
          31, 2006 is as follows:
 
 **At****December 31,****2006**Three
                    months or less
                
                $
                34,924Over
                    three months through six months
                
                
                38,264Over
                    six months through one year
                
                
                20,554Over
                    one year to three years
                
                
                6,196Over
                    three years
                
                
                3,383Total
                
                $
                103,321
 
 The
          scheduled maturities of time deposits at December 31, 2006, are as
          follows:
 
 2007
                
                $
                282,0252008
                
                
                17,0892009
                
                
                10,8992010
                
                
                8,7382011
                
                
                763Total
                    time deposits
                
                $
                319,514
 
 Interest
          expense on deposits, classified by type, is as follows:
 
 **2006**
                
                **2005**
                
                **2004**NOW
                
                $
                103
                
                $
                148
                
                $
                90Regular
                    savings
                
                
                638
                
                
                647
                
                
                698Money
                    market
                
                
                5,125
                
                
                3,098
                
                
                1,710Retirement
                
                
                2,087
                
                
                1,900
                
                
                1,354Certificates
                    of deposit
                
                
                10,742
                
                
                6,507
                
                
                5,143Total
                
                $
                18,695
                
                $
                12,300
                
                $
                8,995
 F-23
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **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 amended capital structure, the Bank’s stock
          investment requirement is an amount equal to the sum of .35% of certain
          specified assets 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 and certain debt securities.
          The Bank’s unused borrowing capacity with the FHLBB, excluding its $12.4 million
          line of credit, was approximately $136,538 at December 31, 2006. At
          December 31, 2006, the Bank had no borrowing against the line of
          credit.
 
 Advances
          outstanding at December 31, 2006, 2005 and 2004 consisted of the following:
 
 **2006**
                
                **2005**
                
                **2004****Weighted**
                
                
                
                **Weighted**
                
                
                
                **Weighted****Amount**
                
                **Average
                    Rate**
                
                **Amount**
                
                **Average
                    Rate**
                
                **Amount**
                
                **Average
                    Rate**Within
                    1 year
                
                $
                65,000
                
                
                5.16
                %
                $
                13,799
                
                
                3.40
                %
                $
                16,000
                
                
                2.35
                %Over
                    1 year to 2 years
                
                
                16,411
                
                
                5.06
                %
                
                10,000
                
                
                4.37
                %
                
                12,000
                
                
                3.23
                %Over
                    2 years to 3 years
                
                
                13,000
                
                
                5.13
                %
                
                19,393
                
                
                4.95
                %
                
                -
                
                
                
                %Over
                    3 years to 4 years
                
                
                16,111
                
                
                3.20
                %
                
                -
                
                
                
                %
                
                -
                
                
                
                %Over
                    4 years to 5 years
                
                
                39,184
                
                
                4.60
                %
                
                20,318
                
                
                3.19
                %
                
                22,247
                
                
                4.87
                %Over
                    5 years
                
                
                20,100
                
                
                4.32
                %
                
                38,370
                
                
                4.02
                %
                
                36,447
                
                
                3.32
                %$
                169,806
                
                
                4.73
                %
                $
                101,880
                
                
                3.98
                %
                $
                86,694
                
                
                3.53
                %
 
 At
          December 31, 2006, advances in the amounts of $30,000 and $5,000 are callable
          at
          the option of the FHLBB during 2007 and 2009, respectively.
  F-24
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 ***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:
 
 **December
                    31,****2006**
                
                **2005**
                
                **2004**Balance
                    at year-end
                
                $
                10,425
                
                $
                8,434
                
                $
                4,317Average
                    amount outstanding during year
                
                
                5,546
                
                
                5,572
                
                
                4,064Interest
                    expense incurred during year
                
                
                167
                
                
                90
                
                
                39Maximum
                    amount outstanding at any month-end
                
                
                10,425
                
                
                8,675
                
                
                6,015Average
                    interest rate during the year
                
                
                3.01
                %
                
                1.62
                %
                
                0.96
                %Weighted
                    average interest rate at year-end balances
                
                
                3.38
                %
                
                2.12
                %
                
                1.19
                %
  **NOTE
          H - INCOME TAXES**
  Allocation
          of federal and state income taxes between current and deferred provisions
          is as
          follows:
  Years
                      Ended December 31,2006
                  
                  2005
                  
                  2004Current
                      tax provision:Federal
                  
                  $
                  3,618
                  
                  $
                  1,417
                  
                  $
                  2,970State
                  
                  
                  1,079
                  
                  
                  254
                  
                  
                  8594,697
                  
                  
                  1,671
                  
                  
                  3,829Deferred
                      tax provision (benefit):Federal
                  
                  
                  (1,289
                  )
                  
                  704
                  
                  
                  (1
                  )State
                  
                  
                  (390
                  )
                  
                  274
                  
                  
                  0(1,679
                  )
                  
                  978
                  
                  
                  (1
                  )$
                  3,018
                  
                  $
                  2,649
                  
                  $
                  3,828
  The
            reasons for the differences between the statutory federal income tax
            rate and
            the effective rates are summarized as follows:
 
 Years
                      Ended December 31,2006
                  
                  2005
                  
                  2004Statutory
                      tax rate
                  
                  
                  34.0
                  %
                  
                  34.0
                  %
                  
                  34.0
                  %Increase
                      (decrease) resulting from:State
                      taxes, net of federal tax benefit
                  
                  
                  5.7
                  %
                  
                  5.0
                  %
                  
                  6.1
                  %Other,
                      net
                  
                  
                  (1.7
                  %)
                  
                  (1.2
                  %)
                  
                  0.8
                  %Effective
                      tax rates
                  
                  
                  38.0
                  %
                  
                  39.0
                  %
                  
                  40.9
                  %
 F-25
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
          H - INCOME TAXES - Continued**
  The
            components of the net deferred tax asset are as follows:
 
 December
                      31,2006
                  
                  2005Deferred
                      tax asset:Federal
                  
                  $
                  4,744
                  
                  $
                  4,769State
                  
                  
                  1,548
                  
                  
                  1,5836,292
                  
                  
                  6,352Deferred
                      tax liability:Federal
                  
                  
                  (2,558
                  )
                  
                  (3,839
                  )State
                  
                  
                  (883
                  )
                  
                  (1,268
                  )(3,441
                  )
                  
                  (5,107
                  )Net
                      deferred tax asset
                  
                  $
                  2,851
                  
                  $
                  1,245
 
 The
            tax
            effects of each type of income and expense item that give rise to deferred
            taxes
            are as follows:
 
 2006
                  
                  2005Cash
                      basis of accounting
                  
                  $
                  29
                  
                  $
                  64Net
                      unrealized loss on securities available for sale
                  
                  
                  426
                  
                  
                  500Depreciation
                  
                  
                  492
                  
                  
                  376Deferred
                      expense
                  
                  
                  (1,044
                  )
                  
                  (858
                  )Allowance
                      for loan loss
                  
                  
                  2,955
                  
                  
                  2,598Employee
                      benefit plans
                  
                  
                  1,337
                  
                  
                  1,304Market
                      value adjustment - loans
                  
                  
                  (2,391
                  )
                  
                  (3,912
                  )Contribution
                      carryover
                  
                  
                  1,048
                  
                  
                  1,510Other
                  
                  
                  (1
                  )
                  
                  (337
                  )Net
                      deferred tax asset
                  
                  $
                  2,851
                  
                  $
                  1,245
 
 A
            summary
            of the change in the net deferred tax asset is as follows:
 
 2006
                  
                  2005Balance
                      at beginning of year
                  
                  $
                  1,245
                  
                  $
                  1,551Deferred
                      tax provision (benefit)
                  
                  
                  1,679
                  
                  
                  (978
                  )Change
                      in unrealized (loss) gain on securities available for sale
                  
                  
                  (73
                  )
                  
                  672Balance
                      at end of year
                  
                  $
                  2,851
                  
                  $
                  1,245
 F-26
 **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              H -** **INCOME
              TAXES - Concluded**
 
 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 (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.
 
 **NOTE
              I -** **EARNINGS
              PER SHARE**
 
 The
          calculation of earnings per common share and diluted earnings per common
          share
          for the year ended December 31, 2006 is presented below. Earnings per share
          are
          not applicable for years ended December 31, 2005 and 2004 since the Company
          completed its initial public offering on July 12, 2005.
 
 **Year
                    Ended****December 31,****2006**Net
                    income
                
                $
                4,924Weighted
                    average common shares applicable to basic EPS
                
                
                16,467,874Effect
                    of dilutive potential common shares(1,
                    2)
                
                
                9,059Weighted
                    average common shares applicable to diluted EPS
                
                
                16,476,933Earnings
                    per share:Basic
                
                $
                0.30Diluted
                
                $
                0.30
 (1)
                Options
                    to purchase 756,500 shares were outstanding but not included
                    in the
                    computation of diluted earnings per share because they were
                    antidulutive.
 (2)
                Includes
                    incremental shares related to stock options and restricted
                    stock.
 
 **NOTE
              J -** **STOCK-BASED
              INCENTIVE PLAN**
 
 The
          Company’s 2006 Stock-Based Incentive Plan (the “Incentive Plan”) was approved by
          shareholders at the Company’s Annual Meeting held on July 20, 2006. The
          Incentive Plan will remain in effect for a period of ten years and provides
          for
          the issuance of up to 1,180,330 shares of Company common stock pursuant
          to
          grants of incentive and non-statutory stock options,
  F-27
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              J -** **STOCK-BASED
              INCENTIVE PLAN - Continued**
 
 stock
          appreciation rights and restricted stock awards, provided that no more
          than
          337,237 shares may be issued as restricted stock awards, and no more than
          843,093 shares may be issued pursuant to the exercise of stock options.
          Employees and outside directors of the Company are eligible to receive
          awards
          under the Incentive Plan. The holders of restricted stock awards also have
          full
          voting rights beginning on the grant date. Upon the occurrence of an event
          constituting a change in control of the Company, as defined in the Incentive
          Plan, all stock options will become fully vested, and all stock awards
          then
          outstanding will vest free of restrictions.
 
 Under
          the
          Incentive Plan, stock options are granted at an exercise price equal to
          the fair
          value of the underlying shares at the date of grant and have a contractual
          life
          of ten years. Stock options vest based on continued service with the Company
          over the five year period following the grant date. Certain employees and
          directors are eligible for accelerated vesting based upon early retirement
          provisions in the plan. The compensation cost related to stock options
          is based
          upon the fair value for each option as of the date of the grant determined
          using
          the Black-Scholes option pricing model. The Black-Scholes model requires
          the
          Company to provide estimates of the expected term, volatility of the underlying
          stock, the stock’s dividend yield and the discount rate. The Company intends to
          use treasury shares to satisfy stock option exercises.
 
 The
          compensation cost related to restricted stock awards is based upon the
          Company’s
          stock price at the grant date. Restricted stock awards vest based upon
          continuous service with the Company over the five year period following
          the
          grant date. Certain employees and directors are eligible for accelerated
          vesting
          based upon early retirement provisions in the plan. During the vesting
          period,
          participants are entitled to dividends for all awards. Dividends on unvested
          stock awards are also recognized as compensation cost.
  F-28
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              J -** **STOCK-BASED
              INCENTIVE PLAN - Continued**
 
 A
          combined summary of activity in the Company’s Incentive Plan activity for the
          period ended December 31, 2006 is presented in the following table:
  Stock
                      Awards Outstanding
                  
                  Stock
                      Options OutstandingWeighted-
                  
                  
                  
                  Weighted-Shares
                  
                  
                  
                  Average
                  
                  
                  
                  AverageAvailable
                  
                  Number
                      of
                  
                  Grant
                  
                  Number
                      of
                  
                  Exercisefor
                      Grant
                  
                  Shares
                  
                  Price
                  
                  Shares
                  
                  PriceBalance
                      at December 31, 2005
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -New
                      Incentive Plan
                  
                  
                  1,180,330
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Granted
                  
                  
                  (1,047,000
                  )
                  
                  290,500
                  
                  
                  12.86
                  
                  
                  756,500
                  
                  
                  12.88Stock
                      options exercised
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      vested
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Forfeited
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Cancelled
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Balance
                      at December 31, 2006
                  
                  
                  133,330
                  
                  
                  290,500
                  
                  $
                  12.86
                  
                  
                  756,500
                  
                  $
                  12.88
  In
          2006,
          the Company granted 756,500 stock options and 290,500 restricted shares
          to
          certain directors and employees. The stock options had a weighted average
          value
          of $3.63 per share, with a total grant date fair value of $2,742. The restricted
          shares had a weighted average value of $12.86 per share, with a total grant
          date
          fair value of $3,735.
 
 The
          Company’s total compensation cost for shared-based payment arrangements was
          $729, including $15 of dividends on unvested stock. The Company also recorded
          a
          tax benefit of $219 in 2006 related to the recognition of the shared-based
          compensation expense. As of December 31, 2006, compensation costs related
          to
          nonvested awards totaling $5,763 million has not been recognized. These
          costs
          will be recognized over an estimated weighted average period of 4.2
          years.
 
 The
          following table presents the assumptions used to compute the fair value
          of
          options using the Black-Scholes option pricing model for stock options
          granted
          during 2006.
 
 Expected
                    term
                
                
                6.50
                    yearsVolatility
                
                
                25.00
                %Expected
                    dividend yield
                
                
                2.00
                %Weighted
                    average risk-free interest rate
                
                
                4.81
                %
 F-29
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements December 31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              J -** **STOCK-BASED
              INCENTIVE PLAN - Concluded**
 
 A
          summary
          of stock options outstanding and exercisable at December 31, 2006 is as
          follows:
 
 Stock
                    OptionsOutstanding
                
                ExercisableTotal
                    number of shares
                
                
                756,500
                
                
                -Weighted
                    average exercise price
                
                $
                12.88
                
                
                -Aggregate
                    intrinsic value
                
                $
                699
                
                
                -Weighted
                    average remaining contractual term
                
                
                9.6
                    years
                
                
                -
 
 **NOTE
              K -** **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 CBERA. The Bank’s contribution
          to the plan was $397, $394 and $397 for the years ended December 31, 2006,
          2005
          and 2004, respectively. 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. The contributions matched by the Bank
          were
          $307, $292 and $279 for the years ended December
          31, 2006, 2005 and 2004 ,
          respectively.
 
 In
          November 2006, the Company’s Board of Directors approved a plan to freeze
          benefits under this plan effective in April 2007.
 
 ***Supplemental
          Executive Retirement Plan***
 
 The
          Bank
          has entered into Supplemental Executive Retirement Plan (“SERP”) contracts with
          certain of its current and former 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 $1,626 and $1,471 at
          December
          31, 2006 and 2005, respectively, and is included in accrued expenses and
          other
          liabilities in the consolidated balance sheets. The expense for SERP contracts,
          excluding interest, was $162, $156 and $64 for the years ended December 31,
          2006, 2005 and 2004, respectively.
  F-30
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              K -** **EMPLOYEE
              BENEFIT PLANS- Continued**
 
 ***Incentive
          Plan***
 
 The
          Company 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 Company performance goals, subject to approval by the
          Board
          of Directors. Related expense amounted to $547, $832 and $544 for the years
          ended December 31, 2006, 2005 and 2004 respectively.
 
 ***Directors
          Fee Continuation Plan***
 
 The
          Company 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 Company 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, 2006 and 2005, the Company’s recorded
          liability for this plan amounted to $868 and $834, respectively, and is
          included in accrued expenses and other liabilities in the consolidated
          balance
          sheets .
          The
          expense associated with this plan was $59, $207, and $56 for the years
          ended
          December 31, 2006, 2005 and 2004, respectively.
 
 ***Employee
          Stock Ownership Plan***
  In
          connection with the Company’s 2005 stock offering, the Company established an
          Employee Stock Ownership Plan (“ESOP”) for the benefit of each employee that has
          reached the age of 21 and has completed at least 1,000 hours of service
          in the
          previous twelve-month period. The Company issued 641,301 shares of common
          stock
          to the ESOP in exchange for a twenty-year note. The loan amount was
          approximately $6,413 and was recorded as "Unearned Compensation" within
          stockholders' equity. The loan bears interest equal to the prime rate in
          effect
          at January 1 st of each
          year and provides for annual payments of principal and interest. In November
          2006, the Board of Directors voted to accelerate its Employee Stock Ownership
          Plan benefit from a twenty (20) year payout to a fifteen (15) year payout
          beginning in 2007 .
  F-31
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              K -** **EMPLOYEE
              BENEFIT PLANS- Concluded**
 
 The
          Bank
          has committed to make contributions to the ESOP sufficient to support the
          debt
          service of the loan. The loan is secured by the shares held by First Bankers
          Trust Company (“Trustee”) in a suspense account for allocation among the
          participants as the loan is paid. In connection with the release of shares
          from
          the suspense account, the Company reports compensation expense equal to
          the
          average market price of the shares. Total compensation expense applicable
          to the
          ESOP amounted to $406 and $376 for the years ended December 31, 2006 and
          2005,
          respectively.
  Shares
          held by the ESOP include the following:
 
 **December
                    31,****2006**
                
                **2005**Allocated
                
                
                32,065
                
                
                -Committed
                    to be released
                
                
                32,065
                
                
                32,065Unallocated
                
                
                577,171
                
                
                609,236641,301
                
                
                641,301
 
 Cash
          dividends received on allocated shares are allocated to participants and
          cash
          dividends received on shares held in suspense are used to fund the scheduled
          annual debt payment. The fair value of unallocated shares at December 31,
          2006
          and December 31, 2005 was $7,965 and $7,024, respectively.
 
 **NOTE
              L -** **COMMITMENTS
              AND CONTINGENCIES**
 
 ***Financial
          Instruments With Off-Balance Sheet Risk***
 
 The
          Company 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
          Company 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 Company 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
          Company has in particular classes of financial instruments *.*
 
 The
          Company’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 Company uses the same credit policies in making commitments
          and
          conditional obligations as it does for on-balance sheet
          instruments.
  F-32
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              L -** **COMMITMENTS
              AND CONTINGENCIES - Continued**
 
 Financial
          instruments with off-balance sheet risk at December 31, 2006 and 2005,
          are as
          follows:
 
 **2006**
                
                **2005**Unused
                    lines of credit
                
                $
                135,374
                
                $
                114,016Amounts
                    due mortgagors
                
                
                34,742
                
                
                16,833Standby
                    letters of credit
                
                
                879
                
                
                1,383Commitments
                    to originate loans
                
                
                42,551
                
                
                15,831
 
 Included
          in commitments to originate loans at December 31, 2006 and 2005 are fixed
          rate
          commitments in the amount of $15,316 and $9,465 at interest ranges of 5.25%
          to
          9.00% and 5.38% 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 Company 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 Company 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 Company 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, 2006 and 2005 exceeds 100%.
  F-33
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              L** ****** **-** **COMMITMENTS
              AND CONTINGENCIES - Concluded**
  ***Employment
          and change in control agreements***
 
 The
          Company has entered into a three-year employment agreement with its President
          and Chief Executive Officer expiring in 2010. This agreement generally
          provides
          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 .
 
 The
          Company also entered into three-year change in control agreements with
          certain
          executive 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. ****
 
 ***Litigation***
 
 The
          Company and its subsidiaries are subject to various legal actions arising
          in the
          normal course of business. At December 31, 2006, the Company was not involved
          in
          any material legal proceedings.
 
 **NOTE
              M -** **FAIR
              VALUE OF FINANCIAL INSTRUMENTS**
 
 The
          Company is required to provide supplemental financial statement disclosures
          of
          the estimated fair value of its financial instruments. Financial instruments
          including cash and cash equivalents, investment and mortgage-backed securities,
          loan, deposits, borrowings and certain off-balance sheet items such as
          loan
          commitments. Other assets significant to the Company, including bank premises
          and equipment, deferred tax assets, as well as core deposit and other intangible
          assets are not considered financial instruments and are excluded from the
          fair
          value disclosures. In addition, the tax ramifications related to the realization
          of unrealized gains and losses can have a significant effect on fair value
          estimates and have not been Considered in the estimates.
  F-34
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              M -** **FAIR
              VALUE OF FINANCIAL INSTRUMENTS - Continued**
 
 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.
 
 The
          following methods and assumptions were used by the Company 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.
 
 ***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.
  F-35
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 ((Dollars
          in thousands, except per share amounts)
 **NOTE
              M -** **FAIR
              VALUE OF FINANCIAL INSTRUMENTS - Continued**
 
 ***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.
 
 ***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 K, the fair value equals
          the
          carrying amounts which are not significant.
  F-36
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              M -** **FAIR
              VALUE OF FINANCIAL INSTRUMENTS - Concluded**
 
 The
          fair
          value of the Company’s financial instruments is as follows at December
          31:
 
 **2006**
                
                **2005****Carrying**
                
                **Estimated**
                
                **Carrying**
                
                **Estimated****Value**
                
                **Fair
                    Value**
                
                **Value**
                
                **Fair
                    Value****Financial
                    Assets:**Cash
                    and cash equivalents
                
                $
                25,419
                
                $
                25,419
                
                $
                15,843
                
                $
                15,843Securities
                    available for sale
                
                
                190,237
                
                
                190,237
                
                
                226,465
                
                
                226,465Securities
                    held to maturity
                
                
                3,241
                
                
                3,227
                
                
                3,325
                
                
                3,298Stock
                    in Federal Home Loan Bank of Boston
                
                
                9,274
                
                
                9,274
                
                
                6,588
                
                
                6,588Net
                    loans
                
                
                756,180
                
                
                733,196
                
                
                630,558
                
                
                630,288Accrued
                    interest receivable
                
                
                4,320
                
                
                4,320
                
                
                3,928
                
                
                3,928**Financial
                    Liabilities:**Deposits
                    (with no stated maturity)
                
                
                366,172
                
                
                366,172
                
                
                375,967
                
                
                375,967Time
                    deposits
                
                
                319,514
                
                
                318,916
                
                
                277,644
                
                
                279,309Federal
                    Home Loan Bank of Boston advances
                
                
                169,806
                
                
                167,051
                
                
                101,880
                
                
                98,946Accrued
                    interest payable
                
                
                695
                
                
                695
                
                
                400
                
                
                400Repurchase
                    agreements
                
                
                10,425
                
                
                10,425
                
                
                8,434
                
                
                8,434
 
 **NOTE
              N -** **STOCKHOLDERS’
              EQUITY**
 
 ***Regulatory
          Capital***
 
 The
          Bank
          is subject to various minimum regulatory capital standards promulgated
          by The
          Office of Thrift Supervision (“OTS”). Failure to meet minimum capital
          requirements can initiate certain mandatory and possibly additional
          discretionary, actions by regulators that, if undertaken, could have a
          direct
          material effect on the Bank’s financial statements. 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. United Financial Bancorp,
          Inc is
          not subject to capital guidelines.
 
 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%.
  F-37
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              N -** **STOCKHOLDERS’
              EQUITY - Concluded**
 
 As
          of
          December 31, 2006, 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.
 
 The
          Bank’s actual capital amounts and ratios, as well as minimum amounts and ratios
          required for capital adequacy are presented below:
  **To
                      Be Well Capitalized****For
                      Capital**
                  
                  **Under
                      Regulatory****Actual**
                  
                  **Adequacy
                      Purposes**
                  
                  **Framework****Amount**
                  
                  **Ratio**
                  
                  **Amount**
                  
                  **Ratio**
                  
                  **Amount**
                  
                  **Ratio****As
                      of December 31, 2006:**Total
                      Capital(to
                      Risk Weighted Assets)
                  
                  $
                  111,045
                  
                  
                  15.9%
                  >
                  $
                  56,000
                  >
                  
                  8.0%
                  >
                  $
                  70,000
                  >
                  
                  10.0%Tier
                      I (Core) Capital(to
                      Risk Weighted Assets)
                  
                  
                  103,827
                  
                  
                  14.8%
                  >
                  
                  28,000
                  >
                  
                  4.0%
                  >
                  
                  42,000
                  >
                  
                  6.0%Tier
                      I Leverage Capital(to
                      Average Total Assets)
                  
                  
                  103,827
                  
                  
                  10.8%
                  >
                  
                  38,380
                  >
                  
                  4.0%
                  >
                  
                  47,975
                  >
                  
                  5.0%**As
                      of December 31, 2005:**Total
                      Capital(to
                      Risk Weighted Assets)
                  
                  $
                  108,500
                  
                  
                  18.3%
                  >
                  $
                  47,475
                  >
                  
                  8.0%
                  >
                  $
                  59,343
                  >
                  
                  10.0%Tier
                      I (Core) Capital(to
                      Risk Weighted Assets)
                  
                  
                  102,117
                  
                  
                  17.2%
                  >
                  
                  23,737
                  >
                  
                  4.0%
                  >
                  
                  35,606
                  >
                  
                  6.0%Tier
                      I Leverage Capital(to
                      Average Total Assets)
                  
                  
                  102,117
                  
                  
                  11.7%
                  >
                  
                  34,873
                  >
                  
                  4.0%
                  >
                  
                  43,591
                  >
                  
                  5.0%
 ***Common
          Stock Repurchase Program***
 
 In
          November 2006, the Board of Directors approved a plan to repurchase up
          to 5%, or
          approximately 858,000 shares, of the Company’s common stock through open market
          purchases or privately negotiated transactions. Stock repurchases under
          the
          program are accounted for as treasury stock, carried at cost, and reflected
          as a
          reduction in stockholders’ equity. As of December 31, 2006, the Company
          repurchased 1,945 shares at a cost of approximately $27 under this
          plan.
  F-38
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              O -** **CONDENSED
              FINANCIAL STATEMENTS OF UNITED FINANCIAL BANCORP, INC.**
 The
          following are the condensed financial statements for United Financial Bancorp,
          Inc. (parent company only).
 
 **BALANCE
                    SHEETS****December
                    31,**
                
                **December
                    31,****2006**
                
                **2005****ASSETS**Cash
                    and due from banks
                
                $
                336
                
                $
                14Interest-bearing
                    deposits
                
                
                7,344
                
                
                -Total
                    cash and cash equivalents
                
                
                7,680
                
                
                14Investment
                    in Bank
                
                
                102,278
                
                
                99,816Securities
                    available for sale, at fair value
                
                
                21,441
                
                
                31,186ESOP
                    loan receivable
                
                
                5,891
                
                
                6,049Other
                    assets
                
                
                827
                
                
                113TOTAL
                    ASSETS
                
                $
                138,117
                
                $
                137,178**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Other
                    liabilities
                
                $
                406
                
                $
                173Stockholders’
                    equity
                
                
                137,711
                
                
                137,005TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                138,117
                
                $
                137,178
 
 **STATEMENTS
                    OF INCOME****Years
                    Ended December 31,****2006**
                
                **2005**
                
                **2004**Income:Investment
                    interest
                
                $
                1,258
                
                $
                617
                
                $
                -ESOP
                    loan interest
                
                
                439
                
                
                189
                
                
                -Loss
                    on sale of securities
                
                
                (9
                )
                
                -
                
                
                -Total
                    income
                
                
                1,688
                
                
                806
                
                
                -Expense:Charitable
                    contribution to Foundation
                
                
                -
                
                
                3,591
                
                
                -Professional
                    services
                
                
                958
                
                
                266
                
                
                -Other
                    expenses
                
                
                31
                
                
                63
                
                
                64Total
                    expense
                
                
                989
                
                
                3,920
                
                
                64Income
                    (loss) before income taxes and equity in undistributedearnings
                    in the Bank
                
                
                699
                
                
                (3,114
                )
                
                (64
                )Income
                    tax expense (benefit)
                
                
                235
                
                
                (894
                )
                
                (26
                )Income
                    (loss) before equity in undistributed earnings of the Bank
                
                
                464
                
                
                (2,220
                )
                
                (38
                )Equity
                    in undistributed earnings of the Bank
                
                
                4,460
                
                
                6,589
                
                
                5,566NET
                    INCOME
                
                $
                4,924
                
                $
                4,369
                
                $
                5,528
 F-39
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              P -** **CONDENSED
              FINANCIAL STATEMENTS OF UNITED FINANCIAL BANCORP, INC. -
              Concluded**
 
 **STATEMENTS
                    OF CASH FLOWS****Years
                    Ended December 31,****2006**
                
                **2005**
                
                **2004****Cash
                    flows from operating activities:**Net
                    income
                
                $
                4,924
                
                $
                4,369
                
                $
                5,528Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Equity
                    in undistributed earnings of the bank
                
                
                (4,460
                )
                
                (6,589
                )
                
                (5,566
                )Net
                    amortization of discounts and premiums
                
                
                (83
                )
                
                (46
                )
                
                -Net
                    loss on sale of available for sale securities
                
                
                9
                
                
                -
                
                
                -Increase
                    in deferred income taxes
                
                
                3
                
                
                255
                
                
                -Charitable
                    contribution to Foundation
                
                
                -
                
                
                3,649
                
                
                -Decrease
                    (increase) in accrued interest receivable
                
                
                57
                
                
                (322
                )
                
                -(Increase) in
                    other assets
                
                
                (717
                )
                
                (182
                )
                
                (26
                )Intercompany
                    payables and other liabilities
                
                
                233
                
                
                107
                
                
                19Net
                    cash (used in) provided by operating activities
                
                
                (34
                )
                
                1,241
                
                
                (45
                )**Cash
                    flows from investing activities:**Purchases
                    of securities available for sale
                
                
                (2,094
                )
                
                (32,963
                )
                
                -Proceeds
                    from sales of securities available for sale
                
                
                4,990
                
                
                -
                
                
                -Proceeds
                    from maturities and principal repayments of securities available
                    for
                    sale
                
                
                6,934
                
                
                1,676
                
                
                -Loan
                    to fund ESOP
                
                
                -
                
                
                (6,413
                )
                
                -Principal
                    payments on ESOP loan
                
                
                158
                
                
                364
                
                
                -Net
                    cash provided by (used in) investing activities
                
                
                9,988
                
                
                (37,336
                )
                
                -**Cash
                  flows from financing activities:**Initial funding
                    by Bank
                
                
                -
                
                
                -
                
                
                150Investment
                    in United Bank
                
                
                3,579
                
                
                (38,818
                )
                
                -Treasury
                    stock purchases
                
                
                (4,405
                )
                
                -
                
                
                -Cash
                    dividends paid
                
                
                (1,462
                )
                
                -
                
                
                -Net
                    proceeds from stock issuance
                
                
                -
                
                
                74,822
                
                
                150Net
                    cash (used in) provided by financing activities
                
                
                (2,288
                )
                
                36,004
                
                
                -Increase
                    (decrease) in cash and cash equivalents
                
                
                7,666
                
                
                (91
                )
                
                105Cash
                    and cash equivalents at beginning of year
                
                
                14
                
                
                105
                
                
                -Cash
                    and cash equivalents at end of year
                
                $
                7,680
                
                $
                14
                
                $
                105
 F-40
  **UNITED
          FINANCIAL BANCORP, INC. AND SUBSIDIARY**
 Notes
          to
          Consolidated Financial Statements - Continued
 December
          31, 2006, 2005 and 2004
 (Dollars
          in thousands, except per share amounts)
 **NOTE
              Q -** **QUARTERLY
              RESULTS OF OPERATIONS (UNAUDITED)**
 
 The
          following table summarizes the operating results on a quarterly basis for
          the
          years ended December 31, 2006 and 2005.
 
 **Three
                    Months Ended****March
                    31**
                
                **June
                    30**
                
                **September
                    30**
                
                **December
                    31****2006****:**Interest
                    income
                
                $
                12,147
                
                $
                12,625
                
                $
                13,494
                
                $
                13,936Interest
                    expense
                
                
                5,239
                
                
                5,860
                
                
                6,550
                
                
                6,998Net
                    interest income
                
                
                6,908
                
                
                6,765
                
                
                6,944
                
                
                6,938Provision
                    for loan losses
                
                
                162
                
                
                300
                
                
                165
                
                
                342Non-interest
                    income
                
                
                1,258
                
                
                1,441
                
                
                1,294
                
                
                1,399Non-interest
                    expense
                
                
                5,776
                
                
                5,836
                
                
                5,579
                
                
                6,845Income
                    before income taxes
                
                
                2,228
                
                
                2,070
                
                
                2,494
                
                
                1,150Income
                    tax expense
                
                
                873
                
                
                780
                
                
                981
                
                
                384Net
                    income
                
                $
                1,355
                
                $
                1,290
                
                $
                1,513
                
                $
                766Basic
                    earnings per share
                
                $
                0.08
                
                $
                0.08
                
                $
                0.09
                
                $
                0.05Diluted
                    earnings per share
                
                $
                0.08
                
                $
                0.08
                
                $
                0.09
                
                $
                0.05**2005****:**Interest
                    income
                
                $
                9,716
                
                $
                10,327
                
                $
                11,456
                
                $
                11,734Interest
                    expense
                
                
                3,369
                
                
                3,819
                
                
                4,249
                
                
                4,769Net
                    interest income
                
                
                6,347
                
                
                6,508
                
                
                7,207
                
                
                6,965Provision
                    for loan losses
                
                
                275
                
                
                275
                
                
                275
                
                
                92Non-interest
                    income
                
                
                1,135
                
                
                1,255
                
                
                1,324
                
                
                1,306Non-interest
                    expense
                
                
                4,937
                
                
                4,826
                
                
                8,623
                
                
                5,726Income
                    (loss) before income taxes
                
                
                2,270
                
                
                2,662
                
                
                (367
                )
                
                2,453Income
                    tax expense (benefit)
                
                
                904
                
                
                1,063
                
                
                (195
                )
                
                877Net
                    income (loss)
                
                $
                1,366
                
                $
                1,599
                
                $
                (172
                )
                $
                1,576Basic
                    earnings per share
                
                
                NA
                
                
                NA
                
                
                NA
                
                $
                0.10Diluted
                    earnings per share
                
                
                NA
                
                
                NA
                
                
                NA
                
                $
                0.10
  During
          the quarter ended December 31, 2006, non-interest expense increased $1.3
          million
          in comparison to the prior quarter mainly due to costs related to compliance
          with Sarbanes-Oxley
          Section 404 and a
          full quarter impact of awards granted in August in connection with the
          Company’s
          2006 Incentive Plan. The fourth quarter 2006 results were also impacted
          by a
          reduction in the Company’s effective tax rate to 33% from 39% in the prior
          quarter. The
          lower
          tax rate was largely due to the reversal of tax reserves which management
          concluded were no longer needed based on an assessment of known
          requirements.


F-41




**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)
            Management’s
                annual report on internal control over financial
                reporting.




Management
      of the Company is responsible for establishing and maintaining adequate internal
      control over financial reporting.




The
      Company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with accounting principles generally accepted in the United States of America.
      The Company’s internal control over financial reporting includes those policies
      and procedures that (i) pertain to the maintenance of records that, in
      reasonable detail, accurately and fairly reflect the transactions and
      dispositions of the assets of the Company; (ii) provide reasonable
      assurance that transactions are recorded as necessary to permit preparation
      of
      financial statements in accordance with accounting principles generally accepted
      in the United States of America, and that receipts and expenditures of the
      Company are being made only in accordance with authorizations of management
      and
      directors of the Company; and (iii) provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use, or disposition
      of the Company’s assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




Management
      assessed the effectiveness of the Company’s internal control over financial
      reporting as of December 31, 2006, based on the framework set forth by the
      Committee of Sponsoring Organizations of the Treadway Commission in *Internal
      Control—Integrated Framework* .
      Based
      on that assessment, management concluded that, as of December 31, 2006, the
      Company’s internal control over financial reporting is effective based on the
      criteria established in *Internal
      Control—Integrated Framework* .




Management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting as of December 31, 2006, has been audited by Grant Thornton LLP,
      an independent registered public accounting firm, as stated in their report
      appearing in item (c) below.


57





(c)
            Attestation
                report




Report
      of Independent Registered Public Accounting Firm








Board
      of
      Directors


United
      Financial Bancorp, Inc.








We
      have
      audited management's assessment, included in the accompanying Management’s
      Annual Report on Internal Control Over Financial Reporting, that United
      Financial Bancorp, Inc. and subsidiary (the “Company”) maintained effective
      internal control over financial reporting as of December 31, 2006, based on
      the
      criteria established in *Internal
      Control- Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      The Company's management is responsible for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting. Our responsibility is to express
      an
      opinion on management's assessment and an opinion on the effectiveness of the
      Company's internal control over financial reporting based on our
      audit.





We
      conducted our audit 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 effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management's assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company's internal control
      over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial
      statements.


58


Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, management’s assessment that the Company maintained effective internal
      control over financial reporting as of December 31, 2006, is fairly stated,
      in
      all material respects, based on the criteria established in COSO. Also, in
      our
      opinion, the Company maintained, in all material respects, effective internal
      control over financial reporting as of December 31, 2006, based on the criteria
      established in COSO.





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of United
      Financial Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, 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, 2006, and our report dated March 13, 2007 expressed an
      unqualified opinion on those financial statements.








Boston,
      Massachusetts


March
      13,
      2007


59





(d)
            Changes
                to 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.




**ITEM
                9B.**
            **OTHER
                INFORMATION**





Not
      Applicable.




**PART
      III**





**ITEM
                10.**
            **DIRECTORS
                , EXECUTIVE OFFICERS AND COPORATE
                GOVERNANCE**





The
      information required by this item is incorporated by reference to “Proposal 1 -
      Election of Directors” of the Company’s Proxy Statement for the 2007 Annual
      Meeting of Stockholders.




**ITEM
                11.**
            **EXECUTIVE
                COMPENSATION**





The
      information required by this item is incorporated by reference to the
“Compensation Committee” section of the Company’s Proxy Statement for the 2007
      Annual Meeting of Stockholders.




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





The
      information required by this item is incorporated by reference to the “Security
      Ownership of Certain Beneficial Owners” and “Compensation Committee Interlocks
      and Insider Participation” sections of the Company’s Proxy Statement for the
      2007 Annual Meeting of Stockholders.




**ITEM
                13.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR
                INDEPENDENCE**




The
      information required by this item is incorporated by reference to the
“Transactions with Certain Related Persons” section of the Company’s Proxy
      Statement for the 2007 Annual Meeting of Stockholders.




**ITEM
                14.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





The
      information required by this item is incorporated by reference to “Item 2 -
      Ratification of Appointment of Independent Registered Public Accounting Firm” of
      the Company’s Proxy Statement for the 2007 Annual Meeting of
      Stockholders.




**ITEM
                15.**
            **EXHIBITS
                AND FINANCIAL STATEMENT
                SCHEDULES**





(a)(1)
            Financial
                Statements





The
      following documents are filed as item 8 of this Form 10-K.





(A)
            Report
                of Independent Registered Public Accounting Firm





(B)
            Consolidated
                Balance Sheets - at December 31, 2006 and
                2005





(C)
            Consolidated
                Statements of Earnings - Years ended December 31, 2006, 2005 and
                2004


60





(D)
            Consolidated
                Statements of Stockholders’ Equity and Comprehensive Income - at December
                31, 2006, 2005 and 2004





(E)
            Consolidated
                Statements of Cash Flows - Years ended December 31, 2006, 2005 and
                2004





(F)
            Notes
                to Consolidated Financial
                Statements.





(a)(2)
            Financial
                Statement Schedules





None.





(b)
            Not
                applicable





(c)
            Not
                applicable





(a)(3)
            Exhibits





3.1
            Charter
                of United Financial Bancorp, Inc.
                (1)


3.2
            Resolution
                and Consent of Sole Stockholder Amending the Charter of United Financial
                Bancorp, Inc. (1)


3.3
            Bylaws
                of United Financial Bancorp, Inc.
                (2)


4
            Form
                of Common Stock Certificate of United Financial Bancorp, Inc.
                (1)


10.1
            Form
                of Employee Stock Ownership Plan
                (1)


10.2
            Executive
                Supplemental Compensation Agreement by and between United Bank and
                Richard
                B. Collins (1)


10.3
            Executive
                Supplemental Compensation Agreement by and between United Bank and
                Keith
                E. Harvey (1)


10.4
            Executive
                Supplemental Compensation Agreement by and between United Bank and
                John J.
                Patterson (1)


10.5
            United
                Bank 2004 and 2005 Incentive Plans
                (1)


10.6
            Deferred
                Income Agreement by and between United Bank and Donald G. Helliwell
                (1)


10.7
            Deferred
                Income Agreement by and between United Bank and Robert W. Bozenhard,
                Jr.
                (1)


10.8
            Deferred
                Income Agreement by and between United Bank and George W. Jones
                (1)


10.9
            Directors
                Fee Continuation Plan (1)


10.10
            Form
                of Employment Agreement by and between United Bank and Richard B.
                Collins
                (1)


10.11
            Form
                of Change in Control Agreement by and between United Bank and certain
                executive officers (1)


10.12
            United
                Bank 2006 Stock-Based Incentive Plan
                (3)


21
            Subsidiaries
                of Registrant (1)


23
            Consent
                of Independent Registered Public Accounting
                Firm.


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
            Statement
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002




_______________________________


(1)
            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.


(2)
            Incorporated
                by reference to the Form 10-Q of United Financial Bancorp, Inc. filed
                with
                the Securities and Exchange Commission on August 9,
                2006.


(3)
            Incorporated
                by reference to Appendix B of the Registrant’s definitive Proxy Statement
                for the Company’s 2006 Annual Meeting filed with the Securities and
                Exchange Commission on June 12,
                2006.


61


**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 15, 2007
              By:
              /s/
                  Richard B. CollinsRichard
                  B. CollinsChief
                  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,
              
              March
                  15, 2007Richard
                  B. Collins
              
              President
                  and Director (Principal Executive Officer)/s/
                  Mark A. Roberts
              
              Executive
                  Vice President and
              
              March
                  15, 2007Mark
                  A. Roberts
              
              Chief
                  Financial Officer (Principal Financial and Accounting
                  Officer)/s/
                  Robert W. Bozenhard, Jr.
              
              Chairman
                  of the Board
              
              March
                  15, 2007Robert
                  W. Bozenhard, Jr./s/
                  Michael F. Crowley
              
              Director
              
              March
                  15, 2007Michael
                  F. Crowley/s/
                  Carol Moore Cutting
              
              Director
              
              March
                  15, 2007Carol
                  Moore Cutting/s/
                  Carol A. Leary
              
              Director
              
              March
                  15, 2007Carol
                  A. Leary/s/
                  G. Todd Marchant
              
              Director
              
              March
                  15, 2007G.
                  Todd Marchant/s/
                  Kevin E. Ross
              
              Director
              
              March
                  15, 2007Kevin
                  E. Ross/s/
                  Robert A. Stewart, Jr.
              
              Director
              
              March
                  15, 2007Robert
                  A. Stewart, Jr./s/
                  Thomas H. Themistos
              
              Director
              
              March
                  15, 2007Thomas
                  H. Themistos/s/
                  Michael F. Werenski
              
              Director
              
              March
                  15, 2007Michael
                  F. Werenski




62