##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2011.
 Commission File Number: 001-35028
 ROCKVILLE FINANCIAL, INC.
 (Exact name of registrant as specified in its charter)
 Connecticut
(State or other jurisdiction of incorporation or organization)
    
    27-3577029
(I.R.S. Employer Identification No.)25 Park Street, Rockville, Connecticut
(Address of principal executive offices)
    
    06066
(Zip Code)
 (860) 291-3600
(Registrants telephone number, including area code)
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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Table of Contents
 PagePart I  FINANCIAL INFORMATIONItem 1. Interim Financial Statements  UnauditedConsolidated Statements of Condition as of March 31, 2011
and December 31, 2010
    
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2011 and 2010
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the three months
ended March 31, 2011
    
    
    6Consolidated Statements of Cash Flows for the three months ended
March 31, 2011 and 2010
    
    
    7Notes to Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    32Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    45Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    46Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults Upon Senior Securities
    
    
    46Item 4. Removed and Reserved
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    47SIGNATURES
    
    
    50ExhibitsEX-31.1EX-31.2EX-32
  2




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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Condition  (In Thousands, Except Share Amounts)  (Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETS:CASH AND CASH EQUIVALENTS:Cash and due from banks
    
    $
    44,578
    
    
    $
    16,692Short-term investments
    
    
    185,086
    
    
    
    44,016Total cash and cash equivalents
    
    
    229,664
    
    
    
    60,708AVAILABLE FOR SALE SECURITIES-At fair value
    
    
    173,346
    
    
    
    125,447HELD TO MATURITY SECURITIES-At amortized cost
    
    
    12,239
    
    
    
    13,679LOANS HELD FOR SALE
    
    
    374
    
    
    
    380LOANS RECEIVABLE (Net of allowance for loan
losses of $15,026 in 2011 and $14,312 in 2010)
    
    
    1,417,323
    
    
    
    1,410,498FEDERAL HOME LOAN BANK STOCK, at cost
    
    
    17,007
    
    
    
    17,007ACCRUED INTEREST RECEIVABLE
    
    
    4,670
    
    
    
    4,176DEFERRED TAX ASSET-Net
    
    
    11,245
    
    
    
    11,327PREMISES AND EQUIPMENT-Net
    
    
    14,741
    
    
    
    14,912GOODWILL
    
    
    1,149
    
    
    
    1,149CASH SURRENDER VALUE OF BANK-OWNED LIFE INSURANCE
    
    
    10,552
    
    
    
    10,459OTHER REAL ESTATE OWNED
    
    
    716
    
    
    
    990PREPAID FDIC ASSESSMENTS
    
    
    3,402
    
    
    
    3,875OTHER ASSETS
    
    
    3,398
    
    
    
    3,466$
    1,899,826
    
    
    $
    1,678,073LIABILITIES AND STOCKHOLDERS EQUITY:LIABILITIES:DEPOSITS:Non-interest-bearing
    
    $
    165,341
    
    
    $
    168,736Interest-bearing
    
    
    1,083,705
    
    
    
    1,050,524Total deposits
    
    
    1,249,046
    
    
    
    1,219,260MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    3,495
    
    
    
    6,131ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    251,418
    
    
    
    261,423AVAILABLE
FOR SALE SECURITIES PAYABLE
    
    
    46,720
    
    
    
    940ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    13,073
    
    
    
    23,891TOTAL LIABILITIES
    
    
    1,563,752
    
    
    
    1,511,645COMMITMENTS AND CONTINGENCIES (Note 12)STOCKHOLDERS EQUITY:Preferred stock (no par value; 2,000,000 and 1,000,000 shares authorized; no shares issued and
outstanding)
    
    
    
    
    
    
    Common stock (no par value; 60,000,000 shares authorized;
29,501,170 and 29,653,088 shares issued and 29,501,170 and 28,610,081 outstanding at March 31,
2011 and December 31, 2010, respectively.(1)
    
    
    243,776
    
    
    
    85,249Additional paid-in capital
    
    
    14,634
    
    
    
    4,789Unearned compensation  ESOP
    
    
    (10,317
    )
    
    
    (3,478
    )Treasury stock, at cost (1,043,007 shares at December 31, 2010)(1)
    
    
    
    
    
    
    (9,495
    )Retained earnings
    
    
    88,398
    
    
    
    90,645Accumulated other comprehensive income loss
    
    
    (417
    )
    
    
    (1,282
    )TOTAL STOCKHOLDERS EQUITY
    
    
    336,074
    
    
    
    166,428$
    1,899,826
    
    
    $
    1,678,073
 
 (1)
    
    Share amounts related to periods prior to the date of completion of the conversion (March 3, 2011) have been restated to give retroactive recognition to
the exchange ratio applied in the conversion (1.5167).  3




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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Operations  (In Thousands, Except Share Data)  (Unaudited)
 For the Three MonthsEnded March 31,2011
    
    
    2010INTEREST AND DIVIDEND INCOME:Loans
    
    $
    17,535
    
    
    $
    17,641Securities-interest
    
    
    1,049
    
    
    
    1,197Securities-dividends
    
    
    130
    
    
    
    103Interest-bearing deposits
    
    
    15
    
    
    
    Total interest and dividend income
    
    
    18,729
    
    
    
    18,941INTEREST EXPENSE:Deposits
    
    
    2,911
    
    
    
    3,000Borrowed funds
    
    
    2,423
    
    
    
    2,543Total interest expense
    
    
    5,334
    
    
    
    5,543Net interest income
    
    
    13,395
    
    
    
    13,398PROVISION FOR LOAN LOSSES
    
    
    752
    
    
    
    903Net interest income after provision
for loan losses
    
    
    12,643
    
    
    
    12,495NON-INTEREST INCOME:Total other-than-temporary impairment losses on
equity securities
    
    
    (29
    )
    
    
    Service charges and fees
    
    
    1,596
    
    
    
    1,242Net gain from sales of securities
    
    
    
    
    
    
    188Net gain from sales of loans
    
    
    59
    
    
    
    159Other income
    
    
    62
    
    
    
    98Total non-interest income
    
    
    1,688
    
    
    
    1,687NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    5,671
    
    
    
    4,790Service bureau fees
    
    
    1,059
    
    
    
    999Occupancy and equipment
    
    
    1,166
    
    
    
    1,127Professional fees
    
    
    684
    
    
    
    390Marketing and promotions
    
    
    324
    
    
    
    274FDIC assessments
    
    
    514
    
    
    
    400Other real estate owned
    
    
    59
    
    
    
    368Contribution to Rockville Bank Foundation, Inc.
    
    
    5,043
    
    
    
    Other
    
    
    1,424
    
    
    
    1,287Total non-interest expense
    
    
    15,944
    
    
    
    9,635(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (1,613
    )
    
    
    4,547INCOME TAX (BENEFIT) EXPENSE
    
    
    (591
    )
    
    
    1,693NET (LOSS) INCOME
    
    $
    (1,022
    )
    
    $
    2,854
   4




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Rockville Financial, Inc. and Subsidiaries

Consolidated Statements of Operations  Concluded

(In Thousands, Except Share Data)
(Unaudited)
 For the Three MonthsEnded March 31,2011
    
    
    2010(1)Net (loss) income per share
(see Note 2):Basic
    
    $
    (0.04
    )
    
    $
    0.10Diluted
    
    $
    (0.04
    )
    
    $
    0.10Weighted average shares outstanding:Basic
    
    
    29,049,681
    
    
    
    28,084,679Diluted
    
    
    29,049,681
    
    
    
    28,089,760
 
 (1)
    
    Share and per share amounts related to periods prior to the date of
completion of the conversion (March 3, 2011) have been restated to give retroactive
recognition to the exchange ratio applied in the conversion (1.5167).  5




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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Stockholders Equity  (In Thousands, Except Share Data)  (Unaudited)
 AccumulatedAdditional
    
    
    Unearned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Compensation
    
    
    Retained
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    - ESOP
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    EquityBalance at December 31, 2010
    
    
    19,551,057
    
    
    $
    85,249
    
    
    $
    4,789
    
    
    $
    (3,478
    )
    
    $
    90,645
    
    
    
    687,682
    
    
    $
    (9,495
    )
    
    $
    (1,282
    )
    
    $
    166,428Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,022
    )Net unrealized gain on securities
available for sale, net of
reclassification adjustments and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    755
    
    
    
    755Change in accumulated other
comprehensive loss related to employee
benefit plans, net of reclassification
adjustments and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    110Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )Cancel Rockville Financial MHC, Inc. shares
    
    
    (10,689,250
    )
    
    
    
    
    
    
    9,685
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,685Treasury shares retired
    
    
    (687,682
    )
    
    
    (9,495
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (687,682
    )
    
    
    9,495
    
    
    
    
    
    
    
    Exchange of common stock @ 1.5167 shares
per common share
    
    
    4,222,539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fractional share distribution
    
    
    (2,226
    )
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )Proceeds from stock offering, net of
offering costs
    
    
    17,109,886
    
    
    
    168,044
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168,044Purchase of common stock by ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,071
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,071
    )Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112ESOP shares released or committed to be
released
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    323Cancellation of shares for tax withholding
    
    
    (3,154
    )
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )Dividends paid ($0.065 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,225
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,225
    )Balance at March 31, 2011
    
    
    29,501,170
    
    
    $
    243,776
    
    
    $
    14,634
    
    
    $
    (10,317
    )
    
    $
    88,398
    
    
    
    
    
    
    $
    
    
    
    $
    (417
    )
    
    $
    336,074
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##### Table of Contents



Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows  (In Thousands)
 Unaudited)
 For the Three MonthsEnded March 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (1,022
    )
    
    $
    2,854Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Amortization and accretion of premiums and discounts on
investments, net
    
    
    
    
    
    
    (34
    )Share-based compensation expense
    
    
    112
    
    
    
    136Amortization of ESOP Expense
    
    
    323
    
    
    
    186Provision for loan losses
    
    
    752
    
    
    
    903Net gain from sales of securities
    
    
    
    
    
    
    (188
    )Other-than-temporary impairment of securities
    
    
    29
    
    
    
    Loans originated for sale
    
    
    (4,971
    )
    
    
    (8,633
    )Proceeds from sales of loans
    
    
    4,977
    
    
    
    8,633Loss (gain) on sale of OREO
    
    
    32
    
    
    
    (1
    )Depreciation and amortization
    
    
    340
    
    
    
    379Loss on disposal of equipment
    
    
    2
    
    
    
    1Deferred income tax benefit
    
    
    (383
    )
    
    
    (187
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (92
    )
    
    
    (94
    )Net change in:Deferred loan fees and premiums
    
    
    (96
    )
    
    
    (45
    )Accrued interest receivable
    
    
    (494
    )
    
    
    (347
    )Prepaid FDIC assessment
    
    
    473
    
    
    
    919Other assets
    
    
    68
    
    
    
    (665
    )Accrued expenses and other liabilities
    
    
    (11,589
    )
    
    
    (94
    )Net cash (used in) provided by operating activities
    
    
    (11,539
    )
    
    
    3,723CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    
    
    
    
    399Principal payments on available for sale mortgage-backed securities
    
    
    4,700
    
    
    
    Principal payments on held to maturity mortgage-backed securities
    
    
    1,442
    
    
    
    1,063Principal payments on available for sale securities
    
    
    100
    
    
    
    4,891Purchases of available for sale securities
    
    
    (4,850
    )
    
    
    (952
    )Proceeds from sale of OREO
    
    
    426
    
    
    
    39Purchase of loans
    
    
    
    
    
    
    (82
    )Loan originations (principal payments), net
    
    
    (7,665
    )
    
    
    5,604Purchases of premises and equipment
    
    
    (171
    )
    
    
    (31
    )Net cash (used in) provided by investing activities
    
    
    (6,018
    )
    
    
    10,931
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Rockville Financial, Inc. and Subsidiaries

Consolidated Statements of Cash Flows  Concluded

(In Thousands)
(Unaudited)
 For the Three MonthsEnded March 31,2011
    
    
    2010CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits
    
    
    39,471
    
    
    
    (662
    )Net decrease in mortgagors and investors escrow accounts
    
    
    (2,636
    )
    
    
    (2,820
    )Net decrease in short-term Federal Home Loan Bank advances
    
    
    
    
    
    
    (15,000
    )Proceeds from long-term Federal Home Loan Bank advances
    
    
    
    
    
    
    5,000Repayments of long-term Federal Home Loan Bank advances
    
    
    (10,005
    )
    
    
    (50
    )Common stock purchase by ESOP
    
    
    (7,071
    )
    
    
    Proceeds from stock offering, net of offering costs
    
    
    168,044
    
    
    
    Fractional shares paid
    
    
    (22
    )
    
    
    Cancellation of shares for tax withholding
    
    
    (43
    )
    
    
    (20
    )Cash dividends paid on common stock
    
    
    (1,225
    )
    
    
    (1,131
    )Net cash provided by (used in) financing activities
    
    
    186,513
    
    
    
    (14,683
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    168,956
    
    
    
    (29
    )CASH AND CASH EQUIVALENTSBeginning of period
    
    
    60,708
    
    
    
    19,307CASH AND CASH EQUIVALENTSEnd of period
    
    $
    229,664
    
    
    $
    19,278SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest
    
    $
    5,350
    
    
    $
    5,530Income taxes
    
    
    200
    
    
    
    1,550Transfer of loans to other real estate owned
    
    
    184
    
    
    
    108Goodwill recognition from subsidiary acquisition
    
    
    
    
    
    
    79Transfer to fixed assets from subsidiary acquisition
    
    
    
    
    
    
    24Cancellation of Rockville Financial MHC, Inc. shares
    
    
    9,685
    
    
    
    Due to broker
    
    
    46,720
    
    
    
    
  8




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Rockville Financial, Inc. and Subsidiaries
 
 Notes to Unaudited Consolidated Financial Statements
 1.
    
    Basis of Presentation and Principles of Consolidation
 On March 3, 2011, Rockville Financial, Inc., (the Company), completed the
second-step conversion of Rockville Bank (the Bank) from a mutual holding company
structure to a stock holding company structure (the Conversion) pursuant to a Plan of
Conversion and Reorganization (the Plan). As part of the conversion, New Rockville
Financial, Inc. succeeded Rockville Financial, Inc as the stock holding company of Rockville
Bank, and Rockville Financial MHC, Inc. was dissolved. Upon completion of the Conversion,
the Company became the holding company for the Bank and acquired ownership of all the issued
and outstanding shares of the Banks common stock. In connection with the Conversion,
17,109,886 shares of common stock of the Company (the Common Stock) were sold in a
subscription offering to certain depositors of the Bank and its employee stock ownership
plan for $10.00 per share, or $171,099,000 in the aggregate (the Offering) net of offering
costs of $3,055,000. In accordance with the Plan, 1.5167 shares of Common Stock (without
taking into consideration cash issued in lieu of fractional shares) were issued in exchange
for each outstanding share of common stock of the Companys predecessor, also named
Rockville Financial, Inc. (Old RFI), the former state-chartered mid-tier holding company
for the Bank, held by persons other than Rockville Financial MHC, Inc., the mutual holding
company that owned the majority of Old RFIs common stock. New Rockville Financial, Inc.
changed its name to Rockville Financial, Inc. effective March 3, 2011.The conversion was accounted for as reorganization with no change to the historical basis of
Rockville Financial, Inc.s assets, liabilities, and equity. All references to the number of
shares outstanding for purposes of calculating per share amounts are restated to give
retroactive recognition to the exchange ratio applied in the conversion.The consolidated interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP) for
interim financial information and with the instructions to SEC Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included in the interim consolidated
financial statements. The results of operations for the three months ended March 31, 2011
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2011. These interim consolidated financial statements should be read in
conjunction with the Companys 2010 consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010.The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the financial statements and
the reported amounts of income and expenses during the reporting periods. Operating results
in the future could vary from the amounts derived from managements estimates and
assumptions. Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses, pension and
other post-retirement benefits, share-based compensation expense, valuation of deferred tax
assets and the evaluation of investment securities for other-than-temporary impairment.
 9




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##### Table of Contents



2.
    
    Earnings Per Share
 The following table sets forth the calculation of basic and diluted earnings per share
for the three months ended March 31, 2011 and 2010:
 For the Three MonthsEnded March 31,(In thousands, except share data)
    
    2011
    
    
    2010Net (loss) income
    
    $
    (1,022
    )
    
    $
    2,854Weighted-average basic shares
outstanding
    
    
    29,049,681
    
    
    
    28,084,679Diluted effect of stock options
    
    
    
    
    
    
    5,081Weighted-average diluted
shares
    
    
    29,049,681
    
    
    
    28,089,760Earnings (loss) per share:Basic
    
    $
    (0.04
    )
    
    $
    0.10Diluted
    
    $
    (0.04
    )
    
    $
    0.10
 Share and per share amounts related to periods prior to the date of completion of the
conversion (March 3, 2011) have been restated to give retroactive recognition to the
exchange ratio applied in the conversion (1.5167). Treasury shares for 2010 and unallocated
common shares held by the ESOP for 2011 and 2010 are not included in the weighted-average
number of common shares outstanding for either basic or diluted earnings per share
calculations. Unvested restricted shares are included in the weighted-average number of
common shares outstanding for basic earnings per share calculations. For the three months
ended March 31, 2011 and 2010, the Companys common stock equivalents relate solely to stock
options granted and outstanding. Stock options that would have an anti-dilutive effect on
earnings per share are excluded from the calculation. For the three months ended March 31,
2011, options to purchase 890,792 shares, of common stock were not considered in the
computation of potential common shares for the purpose of diluted EPS as the Company
recorded a loss for the quarter. For the three months ended March 31, 2010, options to
purchase 676,259 shares of common stock were not considered in the computation of potential
common shares for the purpose of diluted EPS as the effect of the including them would have
been anti-dilutive.
 3.
    
    Recent Accounting Pronouncements
 Receivables, Topic 310:In April 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) No. 2011-02, A Creditors Determination
of Whether a Restructuring Is a Troubled Debt Restructuring. This ASU clarifies the
guidance on a creditors evaluation of whether it has granted a concession and whether a
debtor is experiencing financial difficulties for purposes of determining whether a
restructuring constitutes a troubled debt restructuring. This guidance is effective for the
Company for the first interim period beginning after June 15, 2011 but will be applied
retrospectively to January 1, 2011 for the Companys 2011 annual report. It is not expected
to have a material impact on the Companys consolidated financial statements.Receivables, Topic 310:In January 2011, the FASB issued ASU No. 2011-01, Deferral of the
Effective Date of Disclosures about Troubled Debt Restructurings in ASU No. 2010-20 (see
below). This ASU delays the effective date of the disclosures about troubled debt
restructurings in ASU 2010-20. ASU No. 2011-02 (above) clarifies the guidance of what
constitutes a troubled debt restructuring. It is not expected to have a material impact on
the Companys consolidated financial statements.Receivables, Topic 310:In July 2010, the FASB issued ASU No. 2010-20, Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective
of this Update is for an entity to provide disclosures that facilitate financial statement
users evaluation of (1) the nature of credit risk inherent in the entitys portfolio of
financing receivables, (2) how that risk is analyzed and assessed in arriving at the
allowance for credit losses, and, (3) the changes and reasons for those changes in the
allowance for credit losses. For public entities, the disclosures as of the end of a
reporting period are effective for interim and annual reporting periods ending on or after
December 15, 2010 and the disclosures about activity that occurs during a
 10




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##### Table of Contents



reporting period are effective for interim and annual reporting periods beginning on or
after December 15, 2010. The Company has incorporated the end of reporting period
disclosures in the December 31, 2010 consolidated financial statements. The disclosures
about activity are incorporated into the March 31, 2011 consolidated financial statements
and have significantly increased the Companys loan disclosures.
 4.
    
    Fair Value MeasurementsThe Company groups its assets and liabilities generally measured at fair value in
three levels based upon a three-tier hierarchy based on the markets in which the assets
and liabilities are traded and the reliability of the assumptions used to determine fair
value. The fair value hierarchy is as follows:
 Level 1:
    
    Quoted prices are available in active markets for identical assets as
of the reporting date. The quoted price is not adjusted because of the size of the
position relative to trading volume.Level 2:
    
    Pricing inputs are observable for the asset or liability, either directly or
indirectly but are not the same as those used in Level 1. Fair value is determined
through the use of models or other valuation methodologies.Level 3:
    
    Pricing inputs are unobservable for the assets and liabilities and
include situations where there is little, if any, market activity and the
determination of fair value requires significant judgment or estimation.The inputs used to measure fair value may fall into different levels of the fair
value hierarchy. In such instances, the determination of which category within the
fair value hierarchy is appropriate for any given asset or liability is based on
the lowest level of input that is significant to the fair value of the asset or
liability.
 Items Measured at Fair Value on a Recurring Basis:The following valuation methodologies
are used for assets that are recorded at fair value on a recurring basis. There were no
liabilities recorded at fair value on a recurring basis.Available for Sale Securities: Investment securities available for sale are
recorded at fair value on a recurring basis. Fair value measurement is based upon quoted
prices, if available. If quoted prices are not available, fair values are measured using
an independent pricing service that are not adjusted by management. Level 1 securities are
those traded on active markets for identical securities including U.S. treasury debt
securities, equity securities and mutual funds. Level 2 securities include U.S. government
agency obligations, U.S. government-sponsored enterprise obligations, mortgage-backed
securities and corporate debt securities. Level 3 securities include private placement
securities and thinly traded equity securities.Assets Recorded at Fair Value on a Recurring Basis:
 Fair Value MeasurementsAt March 31, 2011Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(In thousands)Available for Sale Securities:U.S. Government and
government-sponsored enterprise
obligations
    
    $
    50,941
    
    
    $
    3,014
    
    
    $
    47,927
    
    
    $
    Government-sponsored
residential mortgage-backed
securities
    
    
    100,109
    
    
    
    
    
    
    
    100,109
    
    
    
    Corporate debt securities
    
    
    4,396
    
    
    
    
    
    
    
    4,396
    
    
    
    Marketable equity securities
    
    
    17,900
    
    
    
    17,827
    
    
    
    
    
    
    
    73Total
    
    $
    173,346
    
    
    $
    20,841
    
    
    $
    152,432
    
    
    $
    73
 11




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##### Table of Contents



Fair Value MeasurementsAt December 31, 2010Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(In thousands)Available for Sale Securities:U.S. Government and
government-sponsored enterprise
obligations
    
    $
    34,327
    
    
    $
    3,017
    
    
    $
    31,310
    
    
    $
    Government-sponsored
residential mortgage-backed
securities
    
    
    70,390
    
    
    
    
    
    
    
    70,390
    
    
    
    Corporate debt securities
    
    
    4,008
    
    
    
    
    
    
    
    4,008
    
    
    
    Marketable equity securities
    
    
    16,722
    
    
    
    16,649
    
    
    
    
    
    
    
    73Total
    
    $
    125,447
    
    
    $
    19,666
    
    
    $
    105,708
    
    
    $
    73
 There were no transfers in or out of Level 1 and Level 2 for the three months ended
March 31, 2011 and 2010.
 The changes in Level 3 assets measured at fair value on a recurring basis are as
follows:
 Three Months Ended March 31,2011
    
    
    2010(In thousands)Investment Securities Available for Sale:Balance of recurring Level 3 assets at beginning of period
    
    $
    73
    
    
    $
    73Total gains or losses (realized/unrealized):Included in earnings-realized
    
    
    
    
    
    
    Included in earnings-unrealized
    
    
    
    
    
    
    Included in other comprehensive income
    
    
    
    
    
    
    Purchases, sales, issuances and settlements, net
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    Balance of recurring Level 3 assets at end of period
    
    $
    73
    
    
    $
    73
 Items Measured at Fair Value on a Non-Recurring Basis:The Company may also be required, from time to time, to measure certain other assets at
fair value on a non-recurring basis in accordance with generally accepted accounting
principles. These adjustments to fair value usually result from application of
lower-of-cost-or-market accounting or write-downs of individual assets.The following is a description of the valuation methodologies used for certain assets that
are recorded at fair value on a non-recurring basis.Other Real Estate Owned: The Company classifies property acquired through
foreclosure or acceptance of deed-in-lieu of foreclosure as other real estate owned in its
financial statements. Upon foreclosure, the property securing the loan is recorded at fair
value as determined by real estate appraisals less the estimated selling expense.
Appraisals are based upon observable market data such as comparable sales within the real
estate market; however, assumptions made are based on managements judgment of the
appraisals and current real estate market conditions and therefore these assets are
classified as non-recurring Level 3 assets in the fair value hierarchy.Impaired Loans: Accounting standards require that a creditor recognize the
impairment of a loan if the present value of expected future cash flows discounted at the
loans effective interest rate (or, alternatively, the observable market price of the loan
or the fair value of the collateral) is less than the recorded investment in the impaired
loan. Non-recurring fair value adjustments to collateral dependent loans are recorded,
when necessary, to reflect partial charge-offs and specific reserves based upon observable
market price or current appraised value of the collateral less costs and discounts based
on managements judgment of current conditions. Based on the significance of managements
judgment, the Company records impaired loans as non-recurring Level 3 fair value
measurements.
 12




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##### Table of Contents



Assets Recorded at Fair Value on a Non-recurring Basis:The following table presents information related to the Companys assets measured at fair
value on a non-recurring basis at March 31, 2011 and December 31, 2010:
 Fair Value Measurements AtMarch 31, 2011, using:Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    Significant
    
    
    Total LossesIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    for the threeTotal
    
    
    Assets
    
    
    Inputs
    
    
    Inputs
    
    
    months endedFair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    March 31, 2011(In thousands)Other real estate owned
    
    $
    716
    
    
    $
    
    
    
    $
    
    
    
    $
    716
    
    
    $
    Impaired loans
    
    
    3,510
    
    
    
    
    
    
    
    
    
    
    
    3,818
    
    
    
    (308
    )Total
    
    $
    4,226
    
    
    $
    
    
    
    $
    
    
    
    $
    4,534
    
    
    $
    (308
    )
 Fair Value Measurements AtDecember 31, 2010, using:Quoted Pricesin Active
    
    
    
    
    
    
    
    
    
    
    Total LossesMarkets for
    
    
    Other
    
    
    Significant
    
    
    for the yearIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    endedTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    Inputs
    
    
    December 31,Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2011(In thousands)Other real estate owned
    
    $
    990
    
    
    $
    
    
    
    $
    
    
    
    $
    990
    
    
    $
    Impaired loans
    
    
    2,648
    
    
    
    
    
    
    
    
    
    
    
    4,004
    
    
    
    (1,356
    )Total
    
    $
    3,638
    
    
    $
    
    
    
    $
    
    
    
    $
    4,994
    
    
    $
    (1,356
    )
 There were no liabilities reported at fair value on a non-recurring basis on the
consolidated statement of condition at March 31, 2011 or December 31, 2010.
 13




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##### Table of Contents



Fair Value of Financial Instruments:
 As of March 31, 2011 and December 31, 2010, the carrying value and estimated fair values of
the Companys financial instruments are as follows.
 March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    
    
    
    
    CarryingValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value(In thousands)Financial assets:Cash and cash equivalents
    
    $
    229,664
    
    
    $
    229,664
    
    
    $
    60,708
    
    
    $
    60,708Available for sale securities
    
    
    173,346
    
    
    
    173,346
    
    
    
    125,447
    
    
    
    125,447Held to maturity securities
    
    
    12,239
    
    
    
    13,092
    
    
    
    13,679
    
    
    
    14,638Loans held for sale
    
    
    374
    
    
    
    374
    
    
    
    380
    
    
    
    380Loans receivable-net
    
    
    1,417,323
    
    
    
    1,433,484
    
    
    
    1,410,498
    
    
    
    1,415,387FHLBB stock
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007Accrued interest receivable
    
    
    4,670
    
    
    
    4,670
    
    
    
    4,176
    
    
    
    4,176Financial liabilities:Deposits
    
    
    1,249,046
    
    
    
    1,227,918
    
    
    
    1,219,260
    
    
    
    1,200,517Mortgagors and investors escrow accounts
    
    
    3,495
    
    
    
    3,495
    
    
    
    6,131
    
    
    
    6,131Advances from FHLBB
    
    
    251,418
    
    
    
    264,856
    
    
    
    261,423
    
    
    
    274,557
 Certain financial instruments and all nonfinancial investments are exempt from disclosure
requirements. Accordingly, the aggregate fair value amounts presented herein may not
necessarily represent the underlying fair value of the Company.
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##### Table of Contents



5. Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMarch 31, 2011
    
    (In thousands)Available for sale:Debt securities:U.S. Government and government-
sponsored enterprise obligations
    
    $
    51,842
    
    
    $
    1
    
    
    $
    902
    
    
    $
    50,941Government-sponsored residential
mortgage-backed
securities
    
    
    96,972
    
    
    
    3,213
    
    
    
    76
    
    
    
    100,109Corporate debt securities
    
    
    5,902
    
    
    
    9
    
    
    
    1,515
    
    
    
    4,396Total debt securities
    
    
    154,716
    
    
    
    3,223
    
    
    
    2,493
    
    
    
    155,446Marketable equity securities, by sector:Banks
    
    
    1,256
    
    
    
    3,559
    
    
    
    9
    
    
    
    4,806Consumer and household products
    
    
    1,134
    
    
    
    103
    
    
    
    35
    
    
    
    1,202Food and beverage service
    
    
    1,134
    
    
    
    433
    
    
    
    
    
    
    
    1,567Government-sponsored enterprises
    
    
    283
    
    
    
    513
    
    
    
    
    
    
    
    796Healthcare/pharmaceutical
    
    
    387
    
    
    
    2
    
    
    
    14
    
    
    
    375Industrial
    
    
    695
    
    
    
    411
    
    
    
    
    
    
    
    1,106Integrated utilities
    
    
    742
    
    
    
    111
    
    
    
    10
    
    
    
    843Mutual funds
    
    
    2,677
    
    
    
    88
    
    
    
    
    
    
    
    2,765Oil and gas
    
    
    754
    
    
    
    750
    
    
    
    
    
    
    
    1,504Technology/Semiconductor
    
    
    228
    
    
    
    150
    
    
    
    
    
    
    
    378Telecommunications
    
    
    661
    
    
    
    82
    
    
    
    1
    
    
    
    742Transportation
    
    
    294
    
    
    
    80
    
    
    
    
    
    
    
    374Other industries
    
    
    1,017
    
    
    
    442
    
    
    
    17
    
    
    
    1,442Total marketable equity securities
    
    
    11,262
    
    
    
    6,724
    
    
    
    86
    
    
    
    17,900Total available for sale
    
    $
    165,978
    
    
    $
    9,947
    
    
    $
    2,579
    
    
    $
    173,346Held to maturity:Debt securities:Government-sponsored
residential
mortgage-backed
securities
    
    $
    12,239
    
    
    $
    853
    
    
    $
    
    
    
    $
    13,092
 At March 31, 2011, the net unrealized gain on securities available for sale of $7.4
million, net of income taxes of $2.6 million, or $4.8 million, is included in
accumulated other comprehensive loss.
 15




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedDecember 31, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Available for sale:Debt securities:U.S. Government and
government-sponsored enterprise
obligations
    
    $
    35,018
    
    
    $
    
    
    
    $
    691
    
    
    $
    34,327Government-sponsored residential
mortgage-backed securities
    
    
    67,047
    
    
    
    3,358
    
    
    
    15
    
    
    
    70,390Corporate debt securities
    
    
    5,895
    
    
    
    
    
    
    
    1,887
    
    
    
    4,008Total debt securities
    
    
    107,960
    
    
    
    3,358
    
    
    
    2,593
    
    
    
    108,725Marketable equity securities, by sector:Banks
    
    
    1,256
    
    
    
    3,366
    
    
    
    9
    
    
    
    4,613Consumer and household products
    
    
    1,134
    
    
    
    67
    
    
    
    24
    
    
    
    1,177Food and beverage service
    
    
    1,151
    
    
    
    326
    
    
    
    30
    
    
    
    1,447Government-sponsored enterprises
    
    
    283
    
    
    
    58
    
    
    
    63
    
    
    
    278Healthcare/pharmaceutical
    
    
    387
    
    
    
    
    
    
    
    44
    
    
    
    343Industrial
    
    
    695
    
    
    
    313
    
    
    
    20
    
    
    
    988Integrated utilities
    
    
    742
    
    
    
    93
    
    
    
    
    
    
    
    835Mutual funds
    
    
    2,666
    
    
    
    100
    
    
    
    
    
    
    
    2,766Oil and gas
    
    
    754
    
    
    
    608
    
    
    
    
    
    
    
    1,362Technology/Semiconductor
    
    
    228
    
    
    
    142
    
    
    
    
    
    
    
    370Telecommunications
    
    
    662
    
    
    
    103
    
    
    
    5
    
    
    
    760Transportation
    
    
    294
    
    
    
    57
    
    
    
    
    
    
    
    351Other industries
    
    
    1,030
    
    
    
    420
    
    
    
    18
    
    
    
    1,432Total marketable equity securities
    
    
    11,282
    
    
    
    5,653
    
    
    
    213
    
    
    
    16,722Total securities available for sale
    
    $
    119,242
    
    
    $
    9,011
    
    
    $
    2,806
    
    
    $
    125,447Held to maturity:Debt securities:Government-sponsored
residential
mortgage-backed
securities
    
    $
    13,679
    
    
    $
    959
    
    
    $
    
    
    
    $
    14,638
 At December 31, 2010, the net unrealized gain on securities available for sale of $6.2
million, net of income taxes of $2.2 million, or $4.0 million, is included in accumulated
other comprehensive loss.
 The amortized cost and fair value of debt securities at March 31, 2011 by contractual
maturities are presented below. Actual maturities may differ from contractual maturities
because the securities may be called or repaid without any penalties. Because
mortgage-backed securities are not due at a single maturity date, they are not included in
the maturity categories in the following maturity summary.
 Available for Sale
    
    
    Held to MaturityFair
    
    
    Amortized
    
    
    FairAmortized Cost
    
    
    Value
    
    
    Cost
    
    
    Value(In thousands)Maturity:Within 1 year
    
    $
    3,014
    
    
    $
    3,014
    
    
    $
    
    
    
    $
    After 1 but within 5 years
    
    
    31,300
    
    
    
    31,077
    
    
    
    
    
    
    
    After 5 but within 10 years
    
    
    20,598
    
    
    
    19,929
    
    
    
    
    
    
    
    After 10 years
    
    
    2,832
    
    
    
    1,317
    
    
    
    
    
    
    
    57,744
    
    
    
    55,337
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    96,972
    
    
    
    100,109
    
    
    
    12,239
    
    
    
    13,092$
    154,716
    
    
    $
    155,446
    
    
    $
    12,239
    
    
    $
    13,092
 16




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##### Table of Contents



At March 31, 2011, securities with a fair value of $3.0 million were pledged to secure
public deposits and U.S. Treasury, tax and loan payments.
 For the three months ended March 31, 2011, there were no gains on the sales of available
for sale securities; there were gains of $188,000 for the same period last year.
 As of March 31, 2011, the Company did not own any investment or mortgage-backed securities
of a single issuer, other than securities guaranteed by the U.S. Government or
government-sponsored enterprises, which had an aggregate book value in excess of 10% of the
Companys stockholders equity.
 The following tables summarize gross unrealized losses and fair value, aggregated by
investment category and length of time the investments have been in a continuous unrealized
loss position, as of March 31, 2011 and December 31, 2010:
 Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossMarch 31, 2011
    
    (In thousands)Available for sale:U.S. Government and
government-sponsored
enterprise obligations
    
    $
    45,528
    
    
    $
    902
    
    
    $
    
    
    
    $
    
    
    
    $
    45,528
    
    
    $
    902Government-sponsored
residential mortgage-backed
securities
    
    
    22,224
    
    
    
    75
    
    
    
    30
    
    
    
    1
    
    
    
    22,254
    
    
    
    76Corporate debt securities
    
    
    99
    
    
    
    1
    
    
    
    1,317
    
    
    
    1,514
    
    
    
    1,416
    
    
    
    1,515Total debt securities
    
    
    67,851
    
    
    
    978
    
    
    
    1,347
    
    
    
    1,515
    
    
    
    69,198
    
    
    
    2,493Marketable equity securities
    
    
    650
    
    
    
    71
    
    
    
    75
    
    
    
    15
    
    
    
    725
    
    
    
    86Total
    
    $
    68,501
    
    
    $
    1,049
    
    
    $
    1,422
    
    
    $
    1,530
    
    
    $
    69,923
    
    
    $
    2,579
 Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossDecember 31, 2010
    
    (In thousands)Available for sale:U.S. Government and
government-sponsored
enterprises
    
    $
    34,327
    
    
    $
    691
    
    
    $
    
    
    
    $
    
    
    
    $
    34,327
    
    
    $
    691Government-sponsored
residential mortgage-backed
securities
    
    
    5,046
    
    
    
    14
    
    
    
    30
    
    
    
    1
    
    
    
    5,076
    
    
    
    15Corporate debt
    
    
    
    
    
    
    
    
    
    
    3,908
    
    
    
    1,887
    
    
    
    3,908
    
    
    
    1,887Total debt securities
    
    
    39,373
    
    
    
    705
    
    
    
    3,938
    
    
    
    1,888
    
    
    
    43,311
    
    
    
    2,593Marketable equity securities
    
    
    1,097
    
    
    
    152
    
    
    
    624
    
    
    
    61
    
    
    
    1,721
    
    
    
    213Total
    
    $
    40,470
    
    
    $
    857
    
    
    $
    4,562
    
    
    $
    1,949
    
    
    $
    45,032
    
    
    $
    2,806
 Of the securities summarized above as of March 31, 2011, 30 issues have unrealized losses
for less than twelve months and 4 issues had unrealized losses for twelve months or more.
As of December 31, 2010, 9 issues had unrealized losses for less than twelve months and 13
issues had losses for twelve months or more.
 U.S. Government and Government-sponsored Enterprises and Mortgage-backed Securities. The
unrealized losses on the Companys U.S. Government and government-sponsored securities were
caused by increases in the rate spread to comparable treasury securities. The Company does
not expect these securities to settle at a price less than the amortized cost basis of the
investments. Because the Company does not intend to sell the investments and it is not more
likely than not that the Company will be required to sell the investments before the
recovery of their amortized cost basis, which may be maturity, the Company does not consider
these investments to be other-than-temporarily impaired at March 31, 2011.
 17




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##### Table of Contents



Corporate Debt Securities.The unrealized losses on corporate debt securities relate to one
AA+ rated corporate bond and one pooled trust preferred security, Preferred Term Security
XXVIII, Ltd (PRETSL XXVIII). The unrealized losses on these securities are caused by the low
interest rate environment because they reprice quarterly to three month LIBOR and market
spreads on similar securities have increased. Yields on these securities are 0.44% and 0.71%
versus coupon rates at purchase of 5.05% and 5.27%, respectively. No loss of principal or
break in yield is projected. Based on the existing credit profile, management does not
believe that these investments will suffer from any credit related losses. Because the
Company does not intend to sell the investments and it is not more likely than not that the
Company will be required to sell the investments before recovery of their amortized cost
basis, which may be maturity, the Company does not consider these investments to be
other-than-temporarily impaired at March 31, 2011.
 Marketable Equity Securities.The Companys investments in marketable equity securities
consist of common stock, preferred stock and mutual funds. The unrealized losses are spread
out among several industries with no concentration in any one security. Management evaluated
the near-term prospects of the issuers and the Companys ability and intent to hold the
investments for a reasonable period of time sufficient for an anticipated recovery of fair
value. The Company does not consider these investments to be other-than-temporarily impaired
at March 31, 2011.
 The Company will continue to review its entire portfolio for other-than-temporarily impaired
securities with additional attention being given to high risk securities such as the one
pooled trust preferred security that the Company owns.
 Management believes the policy for evaluating securities for other-than-temporary impairment
is critical because it involves significant judgments by management and could have a
material impact on our operations.6.
    
    Loans Receivable and Allowance for Loan Losses
 A summary of the Companys loan portfolio is as follows:
 March 31, 2011
    
    
    December 31, 2010(In thousands)Real estate loans:Residential
    
    $
    715,153
    
    
    $
    719,925Commercial
    
    
    498,725
    
    
    
    489,511Construction
    
    
    78,488
    
    
    
    78,627Commercial business loans
    
    
    134,082
    
    
    
    130,303Installment and collateral loans
    
    
    5,409
    
    
    
    5,921Total loans
    
    
    1,431,857
    
    
    
    1,424,287Net deferred loan costs and premiums
    
    
    492
    
    
    
    523Allowance for loan losses
    
    
    (15,026
    )
    
    
    (14,312
    )Loans, net
    
    $
    1,417,323
    
    
    $
    1,410,498
 18




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##### Table of Contents



The following information relates to impaired loans as of and for the periods ended
March 31, 2011 and December 31, 2010:
 March 31, 2011
    
    
    December 31, 2010(In thousands)Recorded investment in impaired loans for which
there is a related allowance for loan losses
    
    $
    4,437
    
    
    $
    2,233Recorded investment in impaired loans for which
there is no related allowance for loan losses
    
    
    8,593
    
    
    
    10,127Total impaired loans
    
    $
    13,030
    
    
    $
    12,360Valuation allowance related to impaired loans
    
    $
    569
    
    
    $
    358Average recorded investment in impaired loans
    
    $
    12,695
    
    
    $
    13,112Interest income recognized on impaired loans on
a cash basis
    
    $
    118
    
    
    $
    343
 The Company has no commitments to lend additional funds to borrowers whose loans are
impaired.Credit Quality InformationThe Company utilizes a nine grade internal loan rating system for residential and commercial
real estate, construction, commercial and installment and other loans as follows:Loans rated 1  5: Loans in these categories are considered pass rated loans with
low to average risk.Loans rated 6: Loans in this category are considered special mention. These loans are
starting to show signs of potential weakness and are being closely monitored by management.Loans rated 7: Loans in this category are considered substandard. Generally, a
loan is considered substandard if it is inadequately protected by the current net worth and
paying capacity of the obligor and/or the collateral pledged. There is a distinct
possibility that the Company will sustain some loss if the weakness is not corrected.Loans rated 8: Loans in this category are considered doubtful. Loans classified as
doubtful have all the weaknesses inherent in those classified substandard with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of
currently existing facts, highly questionable and improbable.Loans rated 9: Loans in this category are considered uncollectible (loss) and of such
little value that their continuance as loans is not warranted.At the time of loan origination, a risk rating based on this nine point grading system is
assigned to each loan based on the loan officers assessment of risk. More complex loans,
such as commercial business loans and commercial real estate loans, require that our
internal independent credit area further evaluate the risk rating of the individual loan,
with the credit area having final determination of the appropriate risk rating. These more
complex loans and relationships receive an in-depth analysis and periodic review to assess
the appropriate risk rating on a post-closing basis with changes made to the risk rating as
the borrowers and economic conditions warrant. The credit quality of the Companys loan
portfolio is reviewed by a third-party risk assessment firm on a semi-annual basis and by
the Companys internal credit management function. The internal and external analysis of the
loan portfolio is utilized to identify and quantify loans with higher than normal risk.
Loans having a higher risk profile are assigned a risk rating corresponding to the level of
weakness identified in the loan. All loans risk rated Special Mention, Substandard or
Doubtful are reviewed by management on a quarterly basis to assess the level of risk and to
ensure that appropriate actions are being taken to minimize potential loss exposure. Loans
identified as being Loss are normally fully charged off.
 19




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##### Table of Contents



The following table presents the Companys loans by risk rating at March 31, 2011 and
December 31, 2010.
 Residential
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    InstallmentReal Estate
    
    
    Real Estate
    
    
    Construction
    
    
    Commercial
    
    
    and Collateral(In thousands)March 31, 2011Loans rated 1 - 5
    
    $
    705,613
    
    
    $
    460,804
    
    
    $
    70,591
    
    
    $
    128,884
    
    
    $
    5,366Loans rated 6
    
    
    1,729
    
    
    
    22,373
    
    
    
    2,981
    
    
    
    1,786
    
    
    
    10Loans rated 7
    
    
    7,741
    
    
    
    15,548
    
    
    
    4,916
    
    
    
    2,747
    
    
    
    33Loans rated 8
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    665
    
    
    
    Loans rated 9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    715,153
    
    
    $
    498,725
    
    
    $
    78,488
    
    
    $
    134,082
    
    
    $
    5,409
 Residential
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    InstallmentReal Estate
    
    
    Real Estate
    
    
    Construction
    
    
    Commercial
    
    
    and Collateral(In thousands)December 31, 2010Loans rated 1 - 5
    
    $
    711,949
    
    
    $
    451,723
    
    
    $
    70,647
    
    
    $
    125,280
    
    
    $
    5,876Loans rated 6
    
    
    2,047
    
    
    
    22,838
    
    
    
    2,960
    
    
    
    1,869
    
    
    
    11Loans rated 7
    
    
    5,929
    
    
    
    14,950
    
    
    
    5,020
    
    
    
    3,154
    
    
    
    34Loans rated 8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans rated 9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    719,925
    
    
    $
    489,511
    
    
    $
    78,627
    
    
    $
    130,303
    
    
    $
    5,921
 All loans rated 9 have been fully written-off.The Companys lending activities are conducted principally in Connecticut. The Company
grants single-family and multi-family residential loans, commercial loans and a variety of
consumer loans. In addition, the Company grants loans for the construction of residential
homes, residential developments and land development projects. The ultimate repayment of
these loans is dependent on the borrowers credit worthiness, the local economy and, for
real estate loans, the local real estate market.
 20




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##### Table of Contents



Changes in the allowance for loan losses are as follows for the periods indicated:
 For the Three
    
    
    For the ThreeMonths Ended
    
    
    Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010(In thousands)Balance, beginning of period
    
    $
    14,312
    
    
    $
    12,539Provision for loan losses:Real estate
    
    
    425
    
    
    
    846Commercial
    
    
    74
    
    
    
    124Consumer
    
    
    2
    
    
    
    1Unallocated
    
    
    251
    
    
    
    (68
    )Loans charged-off:Real estate
    
    
    (80
    )
    
    
    Commercial
    
    
    
    
    
    
    (25
    )Consumer
    
    
    (8
    )
    
    
    (6
    )Recoveries of loans previously
charged-off:Real estate
    
    
    47
    
    
    
    2Commercial
    
    
    1
    
    
    
    1Consumer
    
    
    2
    
    
    
    4Balance, end of period
    
    $
    15,026
    
    
    $
    13,418
 Further information pertaining to the allowance for loan losses and impaired loans at March
31, 2011 and December 31, 2010 follows:
 Residential Real
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    Installment andMarch 31, 2011
    
    Estate
    
    
    Real Estate
    
    
    Construction
    
    
    Commercial
    
    
    Collateral
    
    
    Unallocated
    
    
    Total(In thousands)Amount of allowance
for loan losses
for loans deemed to
be impaired
    
    $
    269
    
    
    $
    75
    
    
    $
    
    
    
    $
    216
    
    
    $
    9
    
    
    $
    
    
    
    $
    569Amount of allowance
for loan losses for
loans not deemed to
be impaired
    
    
    4,651
    
    
    
    5,492
    
    
    
    1,672
    
    
    
    2,190
    
    
    
    75
    
    
    
    377
    
    
    
    14,457Loans deemed to be
impaired
    
    
    6,812
    
    
    
    2,967
    
    
    
    2,171
    
    
    
    1,047
    
    
    
    33
    
    
    
    
    
    
    
    13,030Loans not deemed to
be impaired
    
    
    708,341
    
    
    
    495,758
    
    
    
    76,317
    
    
    
    133,035
    
    
    
    5,376
    
    
    
    
    
    
    
    1,418,827
 Residential Real
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    Installment andDecember 31, 2010
    
    Estate
    
    
    Real Estate
    
    
    Construction
    
    
    Commercial
    
    
    Collateral
    
    
    Unallocated
    
    
    Total(In thousands)Amount of allowance
for loan losses
for loans deemed to
be impaired
    
    $
    156
    
    
    $
    21
    
    
    $
    
    
    
    $
    176
    
    
    $
    5
    
    
    $
    
    
    
    $
    358Amount of allowance
for loan losses for
loans not deemed to
be impaired
    
    
    4,532
    
    
    
    5,448
    
    
    
    1,653
    
    
    
    2,120
    
    
    
    76
    
    
    
    125
    
    
    
    13,954Loans deemed to be
impaired
    
    
    5,976
    
    
    
    2,990
    
    
    
    2,646
    
    
    
    714
    
    
    
    34
    
    
    
    
    
    
    
    12,360Loans not deemed to
be impaired
    
    
    713,949
    
    
    
    486,521
    
    
    
    75,981
    
    
    
    129,589
    
    
    
    5,887
    
    
    
    
    
    
    
    1,411,927
 21




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##### Table of Contents



The following is a summary of past due and non-accrual loans at March 31, 2011 and
December 31, 2010:
 Past Due 90 Days or30-59 Days Past
    
    
    
    
    
    
    Greater than 89
    
    
    
    
    
    
    More and StillMarch 31, 2011
    
    Due
    
    
    60-89 Days Past Due
    
    
    Days Past Due
    
    
    Total Past Due
    
    
    Accruing
    
    
    Loans on Non-accrual(In thousands)Real estate loans:Residential
    
    $
    8,154
    
    
    $
    941
    
    
    $
    3,402
    
    
    $
    12,497
    
    
    $
    
    
    
    $
    6,812Commercial
    
    
    
    
    
    
    
    
    
    
    1,798
    
    
    
    1,798
    
    
    
    
    
    
    
    2,967Construction
    
    
    47
    
    
    
    
    
    
    
    2,171
    
    
    
    2,218
    
    
    
    
    
    
    
    2,171Commercial business loans
    
    
    3,714
    
    
    
    318
    
    
    
    71
    
    
    
    4,103
    
    
    
    
    
    
    
    1,047Installment and collateral loans
    
    
    1
    
    
    
    
    
    
    
    33
    
    
    
    34
    
    
    
    
    
    
    
    33Total
    
    $
    11,916
    
    
    $
    1,259
    
    
    $
    7,475
    
    
    $
    20,650
    
    
    $
    
    
    
    $
    13,030
 Past Due 90 Days or30-59 Days Past
    
    
    
    
    
    
    Greater than 89
    
    
    
    
    
    
    More and StillDecember 31, 2010
    
    Due
    
    
    60-89 Days Past Due
    
    
    Days Past Due
    
    
    Total Past Due
    
    
    Accruing
    
    
    Loans on Non-accrual(In thousands)Real estate loans:Residential
    
    $
    7,899
    
    
    $
    1,634
    
    
    $
    2,952
    
    
    $
    12,485
    
    
    $
    
    
    
    $
    5,976Commercial
    
    
    
    
    
    
    
    
    
    
    2,347
    
    
    
    2,347
    
    
    
    
    
    
    
    2,990Construction
    
    
    1,101
    
    
    
    187
    
    
    
    2,646
    
    
    
    3,934
    
    
    
    
    
    
    
    2,646Commercial business loans
    
    
    200
    
    
    
    119
    
    
    
    445
    
    
    
    764
    
    
    
    
    
    
    
    714Installment and collateral
    
    
    11
    
    
    
    4
    
    
    
    34
    
    
    
    49
    
    
    
    
    
    
    
    34Total
    
    $
    9,211
    
    
    $
    1,944
    
    
    $
    8,424
    
    
    $
    19,579
    
    
    $
    
    
    
    $
    12,360
 22




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##### Table of Contents



The following is a summary of impaired loans with and without a valuation allowance as of
March 31, 2011.
 March 31, 2011InterestUnpaid
    
    
    
    
    
    
    Average
    
    
    Interest
    
    
    IncomeRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    Income
    
    
    Recognized on aInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    Recognized
    
    
    Cash Basis(In thousands)Impaired loans without a
valuation allowance:Real estate loans:Residential
    
    $
    4,868
    
    
    $
    4,868
    
    
    $
    
    
    
    $
    4,836
    
    
    $
    51
    
    
    $
    51Commercial
    
    
    1,170
    
    
    
    1,170
    
    
    
    
    
    
    
    1,782
    
    
    
    36
    
    
    
    36Construction
    
    
    2,171
    
    
    
    2,171
    
    
    
    
    
    
    
    2,409
    
    
    
    
    
    
    
    Commercial business loans
    
    
    382
    
    
    
    382
    
    
    
    
    
    
    
    330
    
    
    
    8
    
    
    
    8Installment and collateral
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    5Total
    
    
    8,593
    
    
    
    8,593
    
    
    
    
    
    
    
    9,362
    
    
    
    95
    
    
    
    95Impaired loans with a
valuation allowance:Real estate loans:Residential
    
    
    1,675
    
    
    
    1,944
    
    
    
    269
    
    
    
    1,557
    
    
    
    18
    
    
    
    18Commercial
    
    
    1,722
    
    
    
    1,797
    
    
    
    75
    
    
    
    1,196
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business loans
    
    
    449
    
    
    
    665
    
    
    
    216
    
    
    
    551
    
    
    
    4
    
    
    
    4Installment and collateral
    
    
    22
    
    
    
    31
    
    
    
    9
    
    
    
    29
    
    
    
    1
    
    
    
    1Total
    
    
    3,868
    
    
    
    4,437
    
    
    
    569
    
    
    
    3,333
    
    
    
    23
    
    
    
    23Total
    
    $
    12,461
    
    
    $
    13,030
    
    
    $
    569
    
    
    $
    12,695
    
    
    $
    118
    
    
    $
    118
 23




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##### Table of Contents



Non-performing Assets:The table below sets forth the amounts and categories of our
non-performing assets at the dates indicated. Once a loan is 90 days delinquent or either
the borrower or the loan collateral experiences an event that makes collectibility suspect,
the loan is placed on non-accrual status. A loan is classified as a troubled debt
restructuring if we grant a concession to the borrower due to the borrowers financial
difficulties. Concessions may include reducing an interest rate to below market terms,
extending the maturity date with an interest rate lower than the existing contractual rate,
capitalizing past due interest or granting partial forgiveness of indebtedness.
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Non-performing assets:Residential real estate(1)
    
    $
    5,331
    
    
    $
    4,638Commercial real estate
    
    
    2,653
    
    
    
    2,675Construction
    
    
    2,171
    
    
    
    2,646Commercial business loans
    
    
    382
    
    
    
    714Installment and other loans
    
    
    33
    
    
    
    34Total non-accrual loans(2)
    
    
    10,570
    
    
    
    10,707Accruing loan past due 90 days or more
    
    
    
    
    
    
    Troubled debt restructurings
    
    
    2,460
    
    
    
    1,653Total non-performing loans
    
    
    13,030
    
    
    
    12,360Other real estate owned
    
    
    716
    
    
    
    990Total non-performing assets
    
    $
    13,746
    
    
    $
    13,350Total non-performing loans to total loans
    
    
    0.91
    %
    
    
    0.87
    %Total non-performing assets to total assets
    
    
    0.72
    %
    
    
    0.80
    %Allowance for loan losses as a percent of total loans
    
    
    1.05
    %
    
    
    1.00
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    115.32
    %
    
    
    115.79
    %
 
 (1)
    
    Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.(2)
    
    The amount of income that was contractually due but not recognized on
non-accrual loans totaled $704,000 and $677,000 at March 31, 2011 and December 31,
2010, respectively. Management has established the allowance for loan loss in accordance with GAAP for the
period ending March 31, 2011 based on the current risk assessment and level of loss that is
believed to exist within the portfolio. This level of reserve is deemed an appropriate
estimate of probable loan losses inherent in the loan portfolio as of March 31, 2011 based
upon the analysis conducted and given the portfolio composition, delinquencies, charge offs
and risk rating changes experienced during the first quarter of 2011 and the five-year
evaluation period utilized in the analysis. Based on the qualitative assessment of the
portfolio and in thorough consideration of non-performing loans, management believes that
the allowance for loan losses properly supports the level of associated loss and risk.Loan ServicingThe Company services certain loans for third parties. The aggregate of loans serviced for
others was $121.7 million and $120.5 million as of March 31, 2011 and December 31, 2010,
respectively. The balances of these loans are not included in the accompanying consolidated
statements of condition.The risks inherent in mortgage servicing assets relate primarily to changes in prepayments
that result from shifts in mortgage interest rates. The fair value of servicing rights was
determined using pretax internal rates of return ranging from 8.0% to 10.0% and the Public
Securities Association (PSA) Standard Prepayment model to estimate prepayments on the
portfolio with an average prepayment speed of 257%.
 24




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##### Table of Contents



Mortgage servicing assets are included in other assets on the statements of condition. The
activity for the three months ended March 31, 2011 and 2010 is as follows:
 For the Three Months Ended March 31,2011
    
    
    2010(In thousands)Mortgage servicing rights:Balance at beginning of period
    
    $
    858
    
    
    $
    475Additions
    
    
    48
    
    
    
    497Amortization
    
    
    (53
    )
    
    
    (114
    )Balance, end
of period
    
    
    853
    
    
    
    858Valuation
allowances:Balance at beginning of period
    
    
    
    
    
    
    Write-downs
    
    
    (21
    )
    
    
    Balance, end
of period
    
    
    (21
    )
    
    
    Mortgage
servicing assets, net
     
    $
    832
    
    
    $
    858Fair value of mortgage
servicing assets at end of
period
    
    $
    1,052
    
    
    $
    1,011
 7.
    
    Other Real Estate OwnedOther real estate owned was $716,000 as of March 31, 2011 compared to $990,000 at
December 31, 2010. Other real estate owned consisted of $588,000 of commercial real estate
properties and $128,000 of residential real estate properties which are held for sale at
March 31, 2011. Other income totaling $3,000 was generated in
the first quarter of 2011 from
the rental of other real estate owned property. Other real estate owned expenses were
$59,000 and $368,000 for the quarters ended March 31, 2011 and 2010, respectively.The following is a summary of the activity for other real estate owned:
 For the Three MonthsEnded March 31,2011
    
    
    2010(In thousands)Balance, beginning of period
    
    $
    990
    
    
    $
    3,061Additions
    
    
    184
    
    
    
    108Proceeds from sales
    
    
    (426
    )
    
    
    (39
    )(Loss) gain on sales
    
    
    (32
    )
    
    
    1Balance, end of period
    
    $
    716
    
    
    $
    3,131
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##### Table of Contents



8.
    
    Benefit PlansThe following information pertains to the Companys benefit plans. The amounts related
to the Pension Plan, Supplemental Plans and the SERPs are reflected in the tables that
follow as Pension Plans. The amounts related to the Companys post-retirement medical,
health and life insurance benefit plans for retirees and employees hired prior to March 1,
1993 are reflected in the tables that follow as Other Post-Retirement Benefits.Components of Net Periodic Benefit Cost
 Other Post-RetirementPension Plans
    
    
    BenefitsThree Months Ended March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(In thousands)Service cost
    
    $
    215
    
    
    $
    207
    
    
    $
    5
    
    
    $
    4Interest cost
    
    
    340
    
    
    
    319
    
    
    
    31
    
    
    
    30Expected return on
plan assets
    
    
    (418
    )
    
    
    (365
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    140
    
    
    
    140
    
    
    
    19
    
    
    
    15Amortization of prior
service cost (benefit)
    
    
    (2
    )
    
    
    (9
    )
    
    
    2
    
    
    
    5Net periodic benefit cost
    
    $
    275
    
    
    $
    292
    
    
    $
    57
    
    
    $
    54
 For the three months ended March 31, 2011, the Company contributed $27,000 to the
post-retirement benefit plan. The Company anticipates contributing an additional $118,000 in
the remaining nine months of 2011 to the post-retirement benefit plan.The Company contributed $800,000 to the Pension Plan in April 2011 and expects no more
contributions in the remaining nine months of 2011.The Company contributes to the 401(k) Plan, an automatic 3% of pay safe harbor
contribution for all employees that are fully vested. The 401(k) expense for the three
months ended March 31, 2011 and 2010 was $151,000 and $133,000, respectively.While management believes the assumptions used to estimate expenses related to pension and
other post-retirement benefits are reasonable and appropriate, actual experience may
significantly differ. The pension expense is calculated based upon a number of actuarial
assumptions, including an expected long-term rate of return on our Pension Plan assets of
8.25% and a discount rate of 6.00% for the year ending December 31, 2011. In developing our
expected long-term rate of return assumption, we evaluated input from our actuary and
investment consultant, including their review of asset class return expectations as well as
long-term inflation assumptions, and their review of historical returns based on the current
target asset allocations of 62% equity securities, 33% debt securities and 5% real estate.
We regularly review our asset allocation and periodically rebalance our investments when
considered appropriate. While all future forecasting contains some level of estimation
error, we continue to believe that 8.25% falls within a range of reasonable long-term rate
of return expectations for our pension plan assets. The Company recognizes the funded status
of defined benefit plans in its consolidated statement of condition and measures its plan
assets and benefit obligations as of the date of the Companys fiscal year-end statement of
condition.9.
    
    Share-Based CompensationThe Company maintains and operates the Rockville Financial, Inc. 2006 Stock Incentive
Award Plan (the Plan) as approved by the Companys Board of Directors and stockholders.
The Plan allows the Company to use stock options, stock awards, stock appreciation rights
and performance awards to attract, retain and reward performance of qualified employees and
others who contribute to the success of the Company. Prior to the
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Companys second-step stock offering effective March 3, 2011, the Plan allowed for the
issuance of a maximum of 349,830 restricted stock shares and 874,575 stock options. After
adjusting for the 1.5167 exchange ratio established as a result of the stock offering, as of
March 31, 2011, there were 24,406 restricted stock shares and 417,438 stock options that
remain available for future grants under the Plan. There were 6,166 restricted shares and
44,685 stock options awards granted in 2011.Total employee and Director share-based compensation expense recognized for stock options
and restricted stock was $112,000, with a related tax benefit recorded of $39,000, for the
three months ended March 31, 2011 of which Director share-based compensation expense
recognized (in the consolidated statement of operations as other non-interest expense) was
$15,000, and officer share-based compensation expense recognized (in the consolidated
statement of operations as salaries and benefit expense) was $97,000. The quarter ended
March 31, 2011 includes $47,000 related to 3,542 vested restricted shares used for income
tax withholding on behalf of certain executives which occurred in the first three months of
2011.Stock Options:The following table presents the activity related to stock options under the
Plan for the three months ended March 31, 2011:
 Weighted Average
    
    
    AggregateWeighted
    
    
    Remaining
    
    
    IntrinsicStock
    
    
    Average
    
    
    Contractual Term
    
    
    ValueOptions
    
    
    Exercise Price
    
    
    (in years)
    
    
    (In thousands)Stock options outstanding at December 31, 2010(1)
    
    
    846,107
    
    
    $
    8.44Granted
    
    
    44,685
    
    
    
    10.54Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Stock options outstanding at March 31, 2011
    
    
    890,792
    
    
    $
    8.54
    
    
    
    7.2
    
    
    $
    6,946Options exercisable at March 31, 2011
    
    
    702,089
    
    
    $
    8.73
    
    
    
    6.8
    
    
    $
    
 
 (1)
    
    The December 31, 2010 number of shares and weighted average price have
been restated to reflect an exchange rate of 1.5167 related to the Companys second-step
stock offering. The aggregate fair value of vested options was $122,000 and $85,000 for the three months
ended March 31, 2011 and 2010, respectively. As of March 31, 2011, the unrecognized cost
related to the stock options awarded of $467,000 will be recognized over a weighted-average
period of 3.1 years.The Company uses the Black-Scholes option pricing model for estimating the fair value of
stock options granted. The weighted-average estimated fair values of 2011 stock option
grants and the assumptions that were used in calculating such fair values were based on
estimates at the date of grant as follows:
 2011Weighted per share average fair value of options
granted
    
    $
    4.14Assumptions:Risk-free interest rate
    
    
    2.35
    %Expected volatility
    
    
    49.77
    %Expected dividend yield
    
    
    2.47
    %Expected life of options granted
    
    6.0 years
 The expected volatility was determined using both the Companys historical trading
volatility as well as the historical volatility of an index published by SNL Financial for
mutual holding companys common stock over the expected average life of the options. The
index was used as the Companys previous structure was as a mutual holding company and the
stock has been publicly traded since May 23, 2005.The Company estimates option forfeitures using historical data on employee terminations.The expected life of stock options granted represents the period of time that stock options
granted are expected to be outstanding.The risk-free interest rate for periods within the contractual life of the stock option is
based on the average five-and seven-year U.S. Treasury Note yield curve in effect at the
date of grant.The expected dividend yield reflects an estimate of the dividends the Company expects to
declare over the expected life of the options granted.Stock options provide grantees the option to purchase shares of common stock at a specified
exercise price and expire ten years from the date of grant.
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Restricted Stock:Restricted stock provides grantees with rights to shares of common stock
upon completion of a service period. During the restriction period, all shares are
considered outstanding and dividends are paid on the restricted stock. The following table
presents the activity for restricted stock for the three months ended March 31, 2011:
 Weighted AverageNumber
    
    
    Grant-Dateof Shares
    
    
    Fair ValueUnvested as of December 31, 2010(1)
    
    
    41,916
    
    
    $
    7.27Granted
    
    
    6,166
    
    
    
    10.54Vested
    
    
    (13,287
    )
    
    
    7.66Forfeited
    
    
    
    
    
    
    Unvested as of March 31, 2011
    
    
    34,795
    
    
    $
    7.71
 
 (1)
    
    The December 31, 2010 number of shares and weighted average price have
been restated to reflect an exchange rate of 1.5167 related to the Companys second-step
stock offering. The fair value of restricted shares that vested during the three months ended March 31, 2011
and 2010 was $102,000 and $89,000, respectively. There were 6,166 shares of restricted
stock granted during the three months ended March 31, 2011. As of March 31, 2011, there was
$240,000 of total unrecognized compensation cost related to unvested restricted stock which
is expected to be recognized over a weighted-average period of 2.7 years.Of the remaining unvested restricted stock, 3,562 shares will vest in 2011, 16,848 shares in
2012, 8,357 shares in 2013, 4,795 shares in 2014 and 1,233 in 2015. All unvested restricted
stock shares are expected to vest.10.
    
    Income TaxesAs of March 31, 2011 and December 31, 2010, there were no material uncertain tax
positions related to federal and state income tax matters. The Company is currently open to
audit under the statute of limitations by the Internal Revenue Service and state taxing
authorities for the years after December 31, 2006.As of March 31, 2011 and December 31, 2010, the Company has not accrued any interest and
penalties related to certain tax positions.
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11.
    
    Accumulated Other Comprehensive LossComponents of accumulated other comprehensive loss, net of taxes, consist of the
following:
 Net Unrealized GainMinimum Pension
    
    
    on Available For
    
    
    Accumulated OtherLiability
    
    
    Sale Securities
    
    
    Comprehensive Loss(In thousands)December 31, 2010
    
    $
    (5,315
    )
    
    $
    4,033
    
    
    $
    (1,282
    )Change
    
    
    110
    
    
    
    755
    
    
    
    865March 31, 2011
    
    $
    (5,205
    )
    
    $
    4,788
    
    
    $
    (417
    )
 The following table summarizes comprehensive income and the related tax effects for the
three months ended March 31, 2011:
 Three Months EndedMarch 31, 2011(In thousands)Net loss
    
    $
    (1,022
    )Unrealized gain on securities available for sale
    
    
    1,161Income tax provision
    
    
    406Net unrealized gain on securities available for sale
    
    
    755Benefit plan amortization
    
    
    169Income tax provision
    
    
    59Net benefit plan amortization
    
    
    110Total other comprehensive income, net of tax
    
    
    865Total comprehensive loss
    
    $
    (157
    )
 12.
    
    Commitments and ContingenciesFinancial Instruments With Off-Balance Sheet RiskIn the normal course of business, the Company is a party to financial instruments with
off-balance sheet risk including commitments to extend credit, undisbursed portions of
construction loans, unused commercial and consumer lines of credit and standby letters of
credit. Commitments generally have fixed expiration dates or other termination clauses and
may require payment of a fee by the customer. Standby letters of credit are conditional
commitments issued by the Company to guarantee the performance of a customer to a third
party. Since these commitments could expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. These commitments involve, to
varying degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the statements of financial condition. The contractual amounts of commitments
to extend credit represent the amounts of potential accounting loss should the contract be
fully drawn upon, the customer default, and the value of any existing collateral obligations
become worthless as it may for on-balance sheet instruments. The Company evaluates each
customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on managements credit
evaluation.
 29




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##### Table of Contents



Financial instruments whose contract amounts represent credit risk are as follows:
 March 31,
    
    
    December 31,2011
    
    
    2010(In thousands)Commitments to extend credit:Commitments to grant loans
    
    $
    37,568
    
    
    $
    68,993Undisbursed construction loans
    
    
    84,173
    
    
    
    87,544Undisbursed home equity lines of credit
    
    
    155,092
    
    
    
    143,904Undisbursed commercial lines of credit
    
    
    58,803
    
    
    
    60,587Standby letters of credit
    
    
    10,428
    
    
    
    10,368Unused checking overdraft lines of credit
    
    
    89
    
    
    
    94Total
    
    $
    346,153
    
    
    $
    371,490
 Legal Matters: The Company is involved in various legal proceedings which have arisen in
the normal course of business. Management believes that resolution of these matters will not
have a material effect on the Companys financial condition or results of operations.13.
    
    Regulatory MattersThe Company and the Bank are subject to various regulatory capital requirements
administered by Federal banking agencies. 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 Companys financial
statements. The regulations require the Company and the Bank meet specific capital
guidelines that involve quantitative measures of the Companys and the Banks assets,
liabilities, and certain off-balance sheet items, as calculated under regulatory accounting
practices. The Companys and the Banks capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings, and other
factors. At March 31, 2011, the Bank exceeded all regulatory capital requirements and is
considered well capitalized under regulatory guidelines.
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The following is a summary of the Companys and the Banks regulatory capital amounts and
ratios as of March 31, 2011 and December 31, 2010 compared to the Federal Deposit Insurance
Corporations requirements for classification as a well-capitalized institution and for
minimum capital adequacy:
 Minimum To Be WellMinimum For Capital
    
    
    Capitalized UnderAdequacy
    
    
    Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Rockville Bank:March 31, 2011Total capital to risk weighted assets
    
    $
    254,746
    
    
    
    18.6
    %
    
    $
    109,333
    
    
    
    8.0
    %
    
    $
    136,666
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    239,345
    
    
    
    17.5
    
    
    
    54,676
    
    
    
    4.0
    
    
    
    82,014
    
    
    
    6.0Tier I capital to adjusted total average assets
    
    
    239,345
    
    
    
    13.3
    
    
    
    72,201
    
    
    
    4.0
    
    
    
    90,251
    
    
    
    5.0December 31, 2010Total capital to risk weighted assets
    
    $
    167,793
    
    
    
    12.7
    %
    
    $
    105,530
    
    
    
    8.0
    %
    
    $
    131,913
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    153,090
    
    
    
    11.6
    
    
    
    52,744
    
    
    
    4.0
    
    
    
    79,116
    
    
    
    6.0Tier I capital to adjusted total average assets
    
    
    153,090
    
    
    
    9.1
    
    
    
    67,515
    
    
    
    4.0
    
    
    
    84,394
    
    
    
    5.0Rockville Financial, Inc.:March 31, 2011Total capital to risk weighted assets
    
    $
    350,660
    
    
    
    25.7
    %
    
    $
    109,368
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier I capital to risk weighted assets
    
    
    335,259
    
    
    
    24.5
    
    
    
    54,669
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier I capital to adjusted total average assets
    
    
    335,259
    
    
    
    18.2
    
    
    
    73,562
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ADecember 31, 2010Total capital to risk weighted assets
    
    $
    181,178
    
    
    
    13.7
    %
    
    $
    105,566
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier I capital to risk weighted assets
    
    
    166,475
    
    
    
    12.6
    
    
    
    52,765
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier I capital to adjusted total average assets
    
    
    166,475
    
    
    
    10.4
    
    
    
    64,090
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A
 Connecticut law restricts the amount of dividends that the Bank can pay based on
earnings for the current year and the preceding two years. As of March 31, 2011, $21.0
million is available for payment of dividends.A reconciliation of the Companys capital to regulatory capital is as follows:
 March 31, 2011
    
    
    December 31, 2010(In thousands)Total capital per financial statements
    
    $
    336,074
    
    
    $
    166,428Accumulated other comprehensive loss
    
    
    417
    
    
    
    1,282Intangible assets
    
    
    (1,149
    )
    
    
    (1,149
    )Servicing assets
    
    
    (83
    )
    
    
    (86
    )Total Tier 1 capital
    
    
    335,259
    
    
    
    166,475Allowance for loan and other losses includible in Tier 2
capital
    
    
    15,401
    
    
    
    14,703Total capital per regulatory reporting
    
    $
    350,660
    
    
    $
    181,178
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
     
    
    Local, regional and national business or economic conditions may differ from
those expected.
    
    The effects of and changes in trade, monetary and fiscal policies and laws,
including the U.S. Federal Reserve Boards interest rate policies, may adversely
affect our business.
    
    The ability to increase market share and control expenses may be more difficult
than anticipated.
    
    Changes in laws and regulatory requirements (including those concerning taxes,
banking, securities and insurance) may adversely affect us or our businesses.
    
    Changes in accounting policies and practices, as may be adopted by regulatory
agencies, the Public Company Accounting Oversight Board or the Financial Accounting
Standards Board, may affect expected financial reporting.
    
    Future changes in interest rates may reduce our profits which could have a
negative impact on the value of our stock.
    
    We are subject to lending risk and could incur losses in our loan portfolio
despite our underwriting practices. Changes in real estate values could also
increase our lending risk.
    
    Changes in demand for loan products, financial products and deposit flow could
impact our financial performance.
    
    Strong competition within our market area may limit our growth and profitability.
    
    We may not manage the risks involved in the foregoing as well as anticipated.
    
    If our allowance for loan losses is not sufficient to cover actual loan losses,
our earnings could decrease.
    
    Our stock value may be negatively affected by federal regulations restricting
takeovers and our mutual holding company structure.
    
    Further implementation of our stock benefit plans could increase our costs, which
will reduce our income.
    
    Because we intend to continue to increase our commercial real estate and
commercial business loan originations, our lending risk may increase, and downturns
in the real estate market or local economy could adversely affect our earnings.
    
    The Emergency Economic Stabilization Act (EESA) of 2008 has and may continue to
have a significant impact on the banking industry. The Dodd-Frank Wall Street
Reform and Consumer Protection Act was signed into law on July 21, 2010 and is
expected to result in dramatic regulatory changes that will affect the industry in
general, and impact the Companys competitive position in ways that cant be
predicted at this time.
  32




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Overview
   Critical Accounting Policies
   Allowance for Loan Losses:
 General component:
    33




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##### Table of Contents



Allocated component:
    Unallocated component:
    34




---



##### Table of Contents



Other-than-Temporary Impairment of Securities:
 Income Taxes:
  35




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Pension and Other Post-retirement Benefits:
   Share-based Compensation:
 Comparison of Operating Results for the Three Months Ended March 31, 2011 and 2010
  Income Statement Summary
 For the Three Months EndedMarch 31,2011
    
    
    2010
    
    
    Change(In thousands)Net interest income
    
    $
    13,395
    
    
    $
    13,398
    
    
    $
    (3
    )Provision for loan losses
    
    
    752
    
    
    
    903
    
    
    
    (151
    )Non-interest income
    
    
    1,688
    
    
    
    1,687
    
    
    
    1Non-interest expense
    
    
    15,944
    
    
    
    9,635
    
    
    
    6,309(Loss) income before income taxes
    
    
    (1,613
    )
    
    
    4,547
    
    
    
    (6,160
    )Income tax (benefit) provision
    
    
    (591
    )
    
    
    1,693
    
    
    
    (2,284
    )Net (loss) income
    
    $
    (1,022
    )
    
    $
    2,854
    
    
    $
    (3,876
    )
  36




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Net Interest Income Analysis
 Average Balance Sheets, Interest and Yields/Costs:
 37




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010Interest and
    
    
    Yield/
    
    
    
    
    
    
    Interest andAverage Balance
    
    
    Dividends
    
    
    Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Yield/ Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,414,634
    
    
    $
    17,535
    
    
    
    4.96
    %
    
    $
    1,356,843
    
    
    $
    17,641
    
    
    
    5.20
    %Investment securities
    
    
    137,819
    
    
    
    1,166
    
    
    
    3.38
    
    
    
    119,345
    
    
    
    1,300
    
    
    
    4.36Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    13
    
    
    
    0.31
    
    
    
    17,007
    
    
    
    
    
    
    
    Other earning assets
    
    
    156,992
    
    
    
    15
    
    
    
    0.04
    
    
    
    762
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    1,726,452
    
    
    
    18,729
    
    
    
    4.34
    
    
    
    1,493,957
    
    
    
    18,941
    
    
    
    5.07Non-interest-earning assets
    
    
    113,814
    
    
    
    
    
    
    
    
    
    
    
    66,449Total assets
    
    $
    1,840,266
    
    
    
    
    
    
    
    
    
    
    $
    1,560,406Interest-bearing liabilities:NOW and money market accounts
    
    $
    345,363
    
    
    
    357
    
    
    
    0.41
    
    
    $
    341,796
    
    
    
    404
    
    
    
    0.47Savings accounts (5)
    
    
    167,331
    
    
    
    118
    
    
    
    0.28
    
    
    
    150,406
    
    
    
    128
    
    
    
    0.34Time deposits
    
    
    551,217
    
    
    
    2,436
    
    
    
    1.77
    
    
    
    485,227
    
    
    
    2,468
    
    
    
    2.03Total interest-bearing deposits
    
    
    1,063,911
    
    
    
    2,911
    
    
    
    1.09
    
    
    
    977,429
    
    
    
    3,000
    
    
    
    1.23Advances from the Federal Home Loan Bank
    
    
    254,953
    
    
    
    2,423
    
    
    
    3.80
    
    
    
    266,294
    
    
    
    2,543
    
    
    
    3.82Total interest-bearing liabilities
    
    
    1,318,864
    
    
    
    5,334
    
    
    
    1.62
    %
    
    
    1,243,723
    
    
    
    5,543
    
    
    
    1.78
    %Non-interest-bearing liabilities
    
    
    301,733
    
    
    
    
    
    
    
    
    
    
    
    157,181Total liabilities
    
    
    1,620,597
    
    
    
    
    
    
    
    
    
    
    
    1,400,904Stockholders equity
    
    
    219,669
    
    
    
    
    
    
    
    
    
    
    
    159,502Total liabilities and stockholders equity
    
    $
    1,840,266
    
    
    
    
    
    
    
    
    
    
    $
    1,560,406Net interest income
    
    
    
    
    
    $
    13,395
    
    
    
    
    
    
    
    
    
    
    $
    13,398Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.72
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %Net interest-earning assets (3)
    
    $
    407,588
    
    
    
    
    
    
    
    
    
    
    $
    250,234Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.10
    %
    
    
    
    
    
    
    
    
    
    
    3.59
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    130.90
    %
    
    
    
    
    
    
    
    
    
    
    120.12
    %
 
 (1)
    
    Includes loans held for sale.(2)
    
    Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of
average interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents the annualized net interest income divided by average
total interest-earning assets.(5)
    
    Includes mortgagors and investors escrow accounts. Rate-Volume Analysis
  38




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##### Table of Contents



Three Months EndedMarch 31, 2011Compared toMarch 31, 2010Increase (Decrease)Due ToVolume
    
    
    Rate
    
    
    Net(in thousands)Interest and dividend income:Loans receivable
    
    $
    735
    
    
    $
    (841
    )
    
    $
    (106
    )Securities interest, dividends &
income from other assets
    
    
    984
    
    
    
    (1,090
    )
    
    
    (106
    )Total earning assets
    
    
    1,719
    
    
    
    (1,931
    )
    
    
    (212
    )Interest expense:NOW and money market accounts
    
    
    4
    
    
    
    (51
    )
    
    
    (47
    )Savings accounts
    
    
    13
    
    
    
    (23
    )
    
    
    (10
    )Time deposits
    
    
    313
    
    
    
    (345
    )
    
    
    (32
    )Total interest-bearing deposits
    
    
    330
    
    
    
    (419
    )
    
    
    (89
    )FHLB Advances
    
    
    (108
    )
    
    
    (12
    )
    
    
    (120
    )Total interest-bearing liabilities
    
    
    222
    
    
    
    (431
    )
    
    
    (209
    )Change in net interest income
    
    $
    1,497
    
    
    $
    (1,500
    )
    
    $
    (3
    )
 Net Interest Income:
    39




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##### Table of Contents



Interest and Dividend Income:
 Interest Expense:
 Provision for Loan Losses:
 Potential problem loans:
  40




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##### Table of Contents



Non-interest Income:
   Non-interest Expense:
 Three MonthsEnded March 31,2011
    
    
    2010
    
    
    Change(In thousands)Salaries and employee benefits
    
    $
    5,671
    
    
    $
    4,790
    
    
    $
    881Service bureau fees
    
    
    1,059
    
    
    
    999
    
    
    
    60Occupancy and equipment
    
    
    1,166
    
    
    
    1,127
    
    
    
    39Professional fees
    
    
    684
    
    
    
    390
    
    
    
    294Marketing and promotions
    
    
    324
    
    
    
    274
    
    
    
    50FDIC assessments
    
    
    514
    
    
    
    400
    
    
    
    114Other real estate owned
    
    
    59
    
    
    
    368
    
    
    
    (309
    )Contribution to Rockville Bank Foundation
    
    
    5,043
    
    
    
    
    
    
    
    5,043Other
    
    
    1,424
    
    
    
    1,287
    
    
    
    137Total non-interest expense
    
    $
    15,944
    
    
    $
    9,635
    
    
    $
    6,309
  41




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##### Table of Contents



Three MonthsEnded March 31,2011
    
    
    2010
    
    
    Change(In thousands)Telephone
    
    $
    53
    
    
    $
    48
    
    
    $
    5Postage
    
    
    132
    
    
    
    113
    
    
    
    19Collections
    
    
    79
    
    
    
    163
    
    
    
    (84
    )Directors fees and stock expense
    
    
    153
    
    
    
    171
    
    
    
    (18
    )Courier services
    
    
    74
    
    
    
    76
    
    
    
    (2
    )Mortgage loan servicing
    
    
    53
    
    
    
    71
    
    
    
    (18
    )Mortgage appraisal / credit reports
    
    
    118
    
    
    
    64
    
    
    
    54Dues and subscriptions
    
    
    58
    
    
    
    50
    
    
    
    8Printing and forms
    
    
    72
    
    
    
    103
    
    
    
    (31
    )Other
    
    
    632
    
    
    
    428
    
    
    
    204Total other non-interest expense
    
    $
    1,424
    
    
    $
    1,287
    
    
    $
    137
 Income Tax Provision:
  Comparison of Financial Condition at March 31, 2011 and December 31, 2010
 Summary:
   42




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##### Table of Contents



Investment Securities:
 Lending Activities:
 Deposits:
 Liquidity and Capital Resources:
   43




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:
  Quantitative Analysis
 Income Simulation:
 44




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##### Table of Contents



Percentage Increase(Decrease) inEstimatedNet Interest IncomeOver 12 Months400 basis point increase in rates
    
    
    9.31
    %50 basis point decrease in rates
    
    
    (1.85
    )
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Controls:
 
 Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  45




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##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
      Repurchase of Equity Securities During 2011:
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  46




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##### Table of Contents



Item 6. Exhibits
 2.1
    
    Amended and Restated Plan of Conversion and Reorganization (incorporated
herein by reference to Exhibit 2.1 to the Registration Statement filed on the Form
S-1 for Rockville Financial, Inc. on September 16, 2010)3.1
    
    Certificate of Incorporation of Rockville Financial, Inc.
(incorporated herein by reference to Exhibit 3.1 to the Registration Statement on
the Form S-1 filed for Rockville Financial, Inc. on September 16, 2010)3.1.1
    
    Amendment of Certificate of Incorporation of Rockville Financial,
Inc. (incorporated herein by reference to Exhibit 3.1.1 to the Registration
Statement on the Form S-1 filed for Rockville Financial, Inc. on September 16,
2010)3.2
    
    Bylaws of Rockville Financial, Inc. (incorporated herein by reference
to Exhibit 3.2 to the Registration Statement on the Form S-1 filed for Rockville
Financial, Inc. on September 16, 2010)4.1
    
    Form of Common Stock Certificate of Rockville Financial, Inc.
(incorporated herein by reference to Exhibit 4.1 to the Registration Statement on
the Form S-1 filed for Rockville Financial, Inc. on September 16, 2010)10.1
    
    Advisory Agreement entered into by and between Rockville Bank and William J.
McGurk (incorporated herein by reference to Exhibit 10.1 to the Current Report on
the Companys Form 8-K filed on January 26, 2011)10.2
    
    Employment Agreement by and among Rockville Financial, Inc.,
Rockville Bank and John T. Lund, effective January 4, 2010 (incorporated herein by
reference to Exhibit 3.1 to the Current Report on the Companys Form 8-K filed on
January 7, 2010)10.2.1.
    
    Supplemental Executive Retirement Agreement of Rockville Bank for John T. Lund
effective December 6, 2010 (incorporated by reference to Exhibit 10.3.1 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2010 filed on
March 10, 2011)10.2.2
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and John L. Lund, effective January 1, 2011
(incorporated herein by reference to Exhibit 10.15 to the Current Report on the
Companys Form 8-K filed on January 10, 2011)10.2.3
    
    Change-in-Control and Restricted Covenant Agreement by and among Rockville
Financial, Inc., Rockville Bank and John T. Lund, effective January 2, 2009
(incorporated herein by reference to Exhibit 10.3 to the Annual Report on
Rockville Financial, Inc.s Form 10-K for the year ended December 31, 2008 filed
on March 11, 2009 (File No. 000-51239))10.3
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank Christopher E. Buchholz, effective January 1, 2011
(incorporated herein by reference to Exhibit 10.3 to the Current Report on the
Companys Form 8-K filed on January 10, 2011)
 47




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##### Table of Contents



10.4
    
    Employment Agreement as amended and restated by and among
Rockville Financial, Inc., Rockville Bank and Richard J. Trachimowicz, effective
January 1, 2009 (incorporated by reference to Exhibit 10.5 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2008 filed on March 11, 2009)10.4.1
    
    Rockville Bank Extension Notice Agreement by and among Rockville Financial,
Inc., Rockville Bank and Richard J. Trachimowicz, effective January 1, 2010
(incorporated by reference to Exhibit 10.5.1 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2009 filed on March 10, 2010)10.4.2
    
    Supplemental Executive Retirement Agreement of Rockville Bank for Richard J.
Trachimowicz effective December 6, 2010 (incorporated by reference to Exhibit
10.5.2 to the Companys Annual Report on Form 10-K for the year ended December 31,
2010 filed on March 10, 2011)10.4.3
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and Richard J. Trachimowicz, effective January 1,
2011 (incorporated herein by reference to Exhibit 10.5 to the Current Report on
the Companys Form 8-K filed on January 10, 2011)10.5
    
    Supplemental Savings and Retirement Plan of Rockville Bank as amended
and restated effective December 31, 2007 (incorporated herein by reference to
Exhibit 10.5 to the Current Report on Form 8-K filed for Rockville Financial, Inc.
filed on December 18, 2007)10.6
    
    Rockville Bank Officer Incentive Compensation Plan (incorporated
herein by reference to Exhibit 10.2.3 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2005 filed on March 31, 2006 (File No. 000-52139))10.7
    
    Rockville Bank Supplemental Executive Retirement Agreement for Joseph
F. Jeamel, Jr. (incorporated herein by reference to Exhibit 10.8 to the
Registration Statement filed on Form S-1 filed for Rockville Financial New, Inc.
on September 16, 2010)10.7.1
    
    First Amendment to the Supplemental Executive Retirement Agreement for Joseph F.
Jeamel, Jr. (incorporated herein by reference to Exhibit 10.7.1 to the Current
Report on Form 8-K filed for Rockville Financial, Inc. filed on December 18, 2007)10.8
    
    Executive Split Dollar Life Insurance Agreement for Joseph F. Jeamel,
Jr. (incorporated herein by reference to Exhibit 10.11 to the Registration
Statement filed on Form S-1 filed for Rockville Financial, Inc. filed on December
17, 2004 (File No. 333-121421))10.9
    
    Rockville Bank Supplemental Executive Retirement Plan as amended and
restated effective December 31, 2007 (incorporated herein by reference to Exhibit
10.9 to the Current Report on Form 8-K filed for Rockville Financial, Inc. filed
on December 18, 2007)10.10
    
    Rockville Financial, Inc. 2006 Stock Incentive Award Plan
(incorporated herein by reference to Appendix B in the Definitive Proxy Statement
on Form 14A for Rockville Financial, Inc. filed on July 3, 2006 (File No.
000-51239))10.11
    
    Employment Agreement by and among Rockville Financial, Inc.,
Rockville Bank and William H.W. Crawford IV, effective January 3, 2011
(incorporated herein by reference to Exhibit 10.15 to the Current Report on the
Companys Form 8-K filed on January 6, 2011)10.12
    
    Supplemental Executive Retirement Agreement of Rockville Bank for
Mark A. Kucia effective December 6, 2010 (incorporated by reference to Exhibit
10.13 to the Companys Annual Report on Form 10-K for the year ended December 31,
2010 filed on March 10, 2011)10.12.1
    
    Employment Agreement as amended and restated by and among Rockville Financial,
Inc., Rockville Bank and Mark A. Kucia, effective January 1, 2011(incorporated by
reference to Exhibit 10.13.1 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2010 filed on March 10, 2011)
 48




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##### Table of Contents



14
    
    Rockville Financial, Inc., Rockville Bank, Standards of Conduct
Policy  Employees (incorporated herein by reference to Exhibit 14 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2007 filed on
March 17, 2008)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer filed
herewith.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
filed herewith.32.0
    
    Section 1350 Certification of the Chief Executive Officer and Chief
Financial Officer attached hereto
 49




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##### Table of Contents



SIGNATURES
  Rockville Financial, Inc.By:
    /s/ John T. LundJohn T. LundSVP, Chief Financial Officer and Treasurer  50