##### 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, 2010.
 Commission File Number: 000-51239
 ROCKVILLE FINANCIAL, INC.
 (Exact name of registrant as specified in its charter)
 Connecticut
    
    30-0288470(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 25 Park Street, Rockville, Connecticut
    
    06066(Address of principal executive offices)
    
    (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, 2010
and December 31, 2009
    
    
    3Consolidated Statements of Income for the three months ended
March 31, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the three months
ended March 31, 2010
    
    
    6Consolidated Statements of Cash Flows for the three months ended
March 31, 2010 and 2009
    
    
    7Notes to Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults Upon Senior Securities
    
    
    36Item 4. Removed and Reserved
    
    
    36Item 5. Other Information
    
    
    36Item 6. Exhibits
    
    
    37SIGNATURES
    
    
    39EX-31.1EX-31.2EX-32
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Rockville Financial, Inc. and Subsidiary  Consolidated Statements of Condition
(In Thousands Except Share Amounts)  (Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCASH AND CASH EQUIVALENTS:Cash and due from banks
    
    $
    15,460
    
    
    $
    18,507Short-term investments
    
    
    3,818
    
    
    
    800Total cash and cash equivalents
    
    
    19,278
    
    
    
    19,307AVAILABLE FOR SALE SECURITIES-At fair value
    
    
    99,460
    
    
    
    102,751HELD TO MATURITY SECURITIES-At amortized cost
    
    
    18,027
    
    
    
    19,074LOANS RECEIVABLE (Net of allowance for loan
losses of $13,418 in 2010 and $12,539 in 2009)
    
    
    1,354,531
    
    
    
    1,361,019FEDERAL HOME LOAN BANK STOCK, at cost
    
    
    17,007
    
    
    
    17,007ACCRUED INTEREST RECEIVABLE
    
    
    4,634
    
    
    
    4,287DEFERRED TAX ASSET-Net
    
    
    10,758
    
    
    
    10,608PREMISES AND EQUIPMENT-Net
    
    
    15,538
    
    
    
    15,863GOODWILL
    
    
    1,149
    
    
    
    1,070CASH SURRENDER VALUE OF BANK-OWNED LIFE INSURANCE
    
    
    10,170
    
    
    
    10,076OTHER REAL ESTATE OWNED
    
    
    3,131
    
    
    
    3,061PREPAID FDIC ASSESSMENTS
    
    
    4,965
    
    
    
    5,884OTHER ASSETS
    
    
    1,792
    
    
    
    1,127$
    1,560,440
    
    
    $
    1,571,134LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:DEPOSITS:Non-interest-bearing
    
    $
    142,070
    
    
    $
    150,484Interest-bearing
    
    
    986,376
    
    
    
    978,624Total deposits
    
    
    1,128,446
    
    
    
    1,129,108MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    3,565
    
    
    
    6,385ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    253,752
    
    
    
    263,802ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    14,571
    
    
    
    14,411Total liabilities
    
    
    1,400,334
    
    
    
    1,413,706COMMITMENTS AND CONTINGENCIES (Note 12)STOCKHOLDERS EQUITY:Preferred stock (no par value; 1,000,000 shares authorized; no shares
issued and outstanding in 2010 and 2009)
    
    
    
    
    
    
    Common stock (no par value; 29,000,000 shares authorized;
19,552,791 and 19,554,774 shares issued and outstanding at March 31, 2010 and
December 31, 2009, respectively.)
    
    
    85,249
    
    
    
    85,249Additional paid in capital
    
    
    4,209
    
    
    
    4,082Unearned compensation  ESOP
    
    
    (4,003
    )
    
    
    (4,178
    )Treasury stock, at cost (698,826 at March 31, 2010 and December 31, 2009)
    
    
    (9,663
    )
    
    
    (9,663
    )Retained earnings
    
    
    84,694
    
    
    
    82,971Accumulated other comprehensive loss, net of tax
    
    
    (380
    )
    
    
    (1,033
    )Total stockholders equity
    
    
    160,106
    
    
    
    157,428$
    1,560,440
    
    
    $
    1,571,134
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Rockville Financial, Inc. and Subsidiary
 
 Consolidated Statements of Income

(In Thousands, Except Share Data)
(Unaudited)
 For the Three Months EndedMarch 31,2010
    
    
    2009INTEREST AND DIVIDEND INCOME:Loans
    
    $
    17,641
    
    
    $
    17,319Securities-interest
    
    
    1,197
    
    
    
    1,888Securities-dividends
    
    
    103
    
    
    
    117Total interest and dividend income
    
    
    18,941
    
    
    
    19,324INTEREST EXPENSE:Deposits
    
    
    3,000
    
    
    
    5,451Borrowed funds
    
    
    2,543
    
    
    
    2,610Total interest expense
    
    
    5,543
    
    
    
    8,061Net interest income
    
    
    13,398
    
    
    
    11,263PROVISION FOR LOAN LOSSES
    
    
    903
    
    
    
    299Net interest income after provision
for loan losses
    
    
    12,495
    
    
    
    10,964NON-INTEREST INCOME:Total other-than-temporary impairment of equity securities
    
    
    
    
    
    
    (357
    )Services charges and fees
    
    
    1,242
    
    
    
    1,243Net gain from sale of securities
    
    
    188
    
    
    
    69Net gain from sales of loans
    
    
    159
    
    
    
    39Other income (loss)
    
    
    98
    
    
    
    (3
    )Total non-interest income
    
    
    1,687
    
    
    
    991NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    4,790
    
    
    
    4,822Service bureau fees
    
    
    999
    
    
    
    1,014Occupancy and equipment
    
    
    1,127
    
    
    
    1,148Professional fees
    
    
    390
    
    
    
    344Marketing and promotions
    
    
    274
    
    
    
    256FDIC assessments
    
    
    400
    
    
    
    361Other real estate owned
    
    
    368
    
    
    
    Other
    
    
    1,287
    
    
    
    1,159Total non-interest expense
    
    
    9,635
    
    
    
    9,104INCOME BEFORE INCOME TAXES
    
    
    4,547
    
    
    
    2,851PROVISION FOR INCOME TAXES
    
    
    1,693
    
    
    
    935NET INCOME
    
    $
    2,854
    
    
    $
    1,916
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Rockville Financial, Inc.
Consolidated Statements of Income  Concluded
(Unaudited)
 For the Three Months Ended March 31,2010
    
    
    2009Net income per share (see Note 2):Basic
    
    $
    0.15
    
    
    $
    0.10Diluted
    
    
    0.15
    
    
    
    0.10Weighted average shares outstanding:Basic
    
    
    18,516,964
    
    
    
    18,441,812Diluted
    
    
    18,520,314
    
    
    
    18,441,812
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Rockville Financial, Inc. and Subsidiary
 
 Consolidated Statement of Changes in Stockholders Equity
(In Thousands, Except Share Date)
(Unaudited)
 Additional
    
    
    Unearned
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedOther
    
    
    TotalCommon Stock
    
    
    Paid in
    
    
    Compensation
    
    
    Retained
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital


    
    
    - ESOP

    
    
Earnings

    
    
    Shares
    
    
    Amount
    
    
Loss

    
    
    EquityBalance at December 31, 2009
    
    
    19,554,774
    
    
    $
    85,249
    
    
    $
    4,082
    
    
    $
    (4,178
    )
    
    $
    82,971
    
    
    
    698,826
    
    
    $
    (9,663
    )
    
    $
    (1,033
    )
    
    $
    157,428Cumulative effect of adjustment to
retained earnings relating to impairment
of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,854
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,854Net unrealized gain on securities
available for sale, net of
reclassification adjustments and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    556
    
    
    
    556Change in accumulated other
comprehensive loss related to employee
benefit plans, net of reclassification
adjustments and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    97Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,507Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136ESOP shares released or committed to be
released
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Cancellation of shares for tax withholding
    
    
    (1,983
    )
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Dividends paid ($0.06 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,131
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,131
    )Balance at March 31, 2010
    
    
    19,552,791
    
    
    $
    85,249
    
    
    $
    4,209
    
    
    $
    (4,003
    )
    
    $
    84,694
    
    
    
    698,826
    
    
    $
    (9,663
    )
    
    $
    (380
    )
    
    $
    160,106
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Rockville Financial, Inc. and Subsidiary
 
 Consolidated Statements of Cash Flows

(In Thousands)  Unaudited)
 For the Three MonthsEnded March 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,854
    
    
    $
    1,916Adjustments to reconcile net income to net cash provided by
operating activities:Amortization and accretion of premiums and discounts on
investments, net
    
    
    (34
    )
    
    
    (46
    )Share-based compensation expense
    
    
    136
    
    
    
    384Amortization of ESOP Expense
    
    
    186
    
    
    
    175Provision for loan losses
    
    
    903
    
    
    
    299Net gain from sales of securities
    
    
    (188
    )
    
    
    (69
    )Other-than-temporary impairment of securities
    
    
    
    
    
    
    357Loans originated for sale
    
    
    (8,633
    )
    
    
    (4,326
    )Proceeds from sales of loans
    
    
    8,633
    
    
    
    2,271Gains on sale of OREO
    
    
    (1
    )
    
    
    Depreciation and amortization
    
    
    379
    
    
    
    409Loss on disposal of equipment
    
    
    1
    
    
    
    Deferred income tax benefit
    
    
    (187
    )
    
    
    (566
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (94
    )
    
    
    (89
    )Net change in:Deferred loan fees and premiums
    
    
    (45
    )
    
    
    305Accrued interest receivable
    
    
    (347
    )
    
    
    (323
    )Other assets
    
    
    254
    
    
    
    (253
    )Accrued expenses and other liabilities
    
    
    (94
    )
    
    
    341Net cash provided by operating activities
    
    
    3,723
    
    
    
    785CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    399
    
    
    
    285Proceeds from calls and maturities of available for sale securities
    
    
    
    
    
    
    500Principal payments on available for sale mortgage-backed securities
    
    
    
    
    
    
    6,551Principal payments on held to maturity mortgage-backed securities
    
    
    1,063
    
    
    
    1,047Principal payments on available for sale securities
    
    
    4,891
    
    
    
    Purchases of available for sale securities
    
    
    (952
    )
    
    
    (12
    )Proceeds from sale of portfolio loans
    
    
    
    
    
    
    191Proceeds from sale of OREO
    
    
    39
    
    
    
    Purchase of loans
    
    
    (82
    )
    
    
    (2,529
    )Principal loan payments (loan originations), net
    
    
    5,604
    
    
    
    (39,524
    )Purchases of premises and equipment
    
    
    (31
    )
    
    
    (499
    )Net cash provided by (used in) investing activities
    
    
    10,931
    
    
    
    (33,990
    )
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Rockville Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows  Concluded
(In Thousands)
(Unaudited)
 For the Three MonthsEnded March 31,2010
    
    
    2009CASH FLOWS FROM FINANCING ACTIVITIES:Net (decrease) increase in deposits
    
    
    (662
    )
    
    
    34,537Net decrease in mortgagors and investors escrow accounts
    
    
    (2,820
    )
    
    
    (2,440
    )Net (decrease) increase in short-term Federal Home Loan Bank
advances
    
    
    (15,000
    )
    
    
    10,000Proceeds from long-term Federal Home Loan Bank advances
    
    
    5,000
    
    
    
    Repayments of long-term Federal Home Loan Bank advances
    
    
    (50
    )
    
    
    (7,047
    )Common stock repurchased
    
    
    
    
    
    
    (198
    )Cancellation of shares for tax withholding
    
    
    (20
    )
    
    
    Cash dividends paid on common stock
    
    
    (1,131
    )
    
    
    (943
    )Net cash (used) provided by financing activities
    
    
    (14,683
    )
    
    
    33,909NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALTENTS
    
    
    (29
    )
    
    
    704CASH AND CASH EQUIVALENTSBeginning of period
    
    
    19,307
    
    
    
    14,901CASH AND CASH EQUIVALENTSEnd of period
    
    $
    19,278
    
    
    $
    15,605SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest
    
    $
    5,530
    
    
    $
    8,109Income taxes
    
    
    1,550
    
    
    
    901Transfer of loans to other real estate owned
    
    
    108
    
    
    
    Goodwill recognition from subsidiary acquisition
    
    
    79
    
    
    
    Transfer to fixed assets from subsidiary acquisition
    
    
    24
    
    
    
    
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Rockville Financial, Inc. and Subsidiaries
 
 Notes to Unaudited Consolidated Financial Statements
 1. Basis of Presentation and Principles of Consolidation
    2. Earnings Per Share
  For the Three MonthsEnded March 31,2010
    
    
    2009Net income (in thousands)
    
    $
    2,854
    
    
    $
    1,916Weighted-average basic shares outstanding
    
    
    18,516,964
    
    
    
    18,441,812Dilutive effect of stock options
    
    
    3,350
    
    
    
    Weighted-average diluted shares
    
    
    18,520,314
    
    
    
    18,441,812Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.10Diluted
    
    $
    0.15
    
    
    $
    0.10
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3. Recent Accounting Pronouncements
 Fair Value Measurements and Disclosures, ASC Topic 820
 Transfers of Financial Assets, Topic 860:
 4. Fair Value Measurements
  Level 1:
    
    Quoted prices are available in active markets for identical
investments 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:
 Available for Sale Securities:
 10




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Assets Recorded at Fair Value on a Recurring Basis:
 Fair Value MeasurementsAt March 31, 2010,Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Description
    
    (In thousands)Available for Sale Securities:U.S. Government and government-sponsored
enterprise obligations
    
    $
    7,065
    
    
    $
    2,014
    
    
    $
    5,051
    
    
    $
    Residential mortgage-backed securities
    
    
    71,291
    
    
    
    
    
    
    
    71,291
    
    
    
    Corporate debt securities
    
    
    4,636
    
    
    
    
    
    
    
    4,636
    
    
    
    Other debt securities
    
    
    728
    
    
    
    
    
    
    
    728
    
    
    
    Marketable equity securities
    
    
    15,740
    
    
    
    15,667
    
    
    
    
    
    
    
    73Total Assets Measured at Fair Value
    
    $
    99,460
    
    
    $
    17,681
    
    
    $
    81,706
    
    
    $
    73
 Fair Value MeasurementsAt December 31, 2009,Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Description
    
    (In thousands)Available for Sale Securities:U.S. Government and government-sponsored
enterprise obligations
    
    $
    7,052
    
    
    $
    2,018
    
    
    $
    5,034
    
    
    $
    Residential mortgage-backed securities
    
    
    75,967
    
    
    
    
    
    
    
    75,967
    
    
    
    Corporate debt securities
    
    
    4,656
    
    
    
    
    
    
    
    4,656
    
    
    
    Other debt securities
    
    
    731
    
    
    
    
    
    
    
    731
    
    
    
    Marketable equity securities
    
    
    14,345
    
    
    
    14,272
    
    
    
    
    
    
    
    73Total Assets Measured at Fair Value
    
    $
    102,751
    
    
    $
    16,290
    
    
    $
    86,388
    
    
    $
    73
     For the three months ended March 31, 2010
    
    (In thousands)Balance of recurring Level 3 assets at December 31, 2009
    
    $
    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 March 31, 2010
    
    $
    73
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For the three months ended March 31, 2009
    
    (In thousands)Balance of recurring Level 3 assets at December 31, 2008
    
    $
    2,114Total gains or losses (realized/unrealized):Included in earnings-realized
    
    
    Included in earnings-unrealized
    
    
    Included in other comprehensive income
    
    
    (355
    )Purchases, sales, issuances and settlements, net
    
    
    (8
    )Transfers in and/or out of Level 3
    
    
    (241
    )Balance of recurring Level 3 assets at March 31, 2009
    
    $
    1,510
 Items Measured at Fair Value on a Non-Recurring Basis:
   Impaired Loans
 Assets Recorded at Fair Value on a Non-recurring Basis:
  Fair Value Measurements At March 31, 2010 using;(In thousands)Quoted Pricesin ActiveMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    Total Losses(In thousands)Impaired loans
    
    $
    7,788
    
    
    $
    
    
    
    $
    
    
    
    $
    7,788
    
    
    $
    (884
    )Total Assets Measured at Fair Value
    
    $
    7,788
    
    
    $
    
    
    
    $
    
    
    
    $
    7,788
    
    
    $
    (884
    )
 12




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##### Table of Contents



Fair Value Measurements At December 31, 2009 using;(In thousands)Quoted Pricesin ActiveMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    Total Losses(In thousands)Impaired loans
    
    $
    5,473
    
    
    $
    
    
    
    $
    
    
    
    $
    5,473
    
    
    $
    (381
    )Total Assets
Measured at Fair
Value
    
    $
    5,473
    
    
    $
    
    
    
    $
    
    
    
    $
    5,473
    
    
    $
    (381
    )
   March 31, 2010
    
    December 31, 2009Carrying
    
    
    
    
    
    Carrying(In thousands)
    
    Value
    
    Fair Value
    
    Value
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    19,278
    
    
    $
    19,278
    
    
    $
    19,307
    
    
    $
    19,307Available for sale securities
    
    
    99,460
    
    
    
    99,460
    
    
    
    102,751
    
    
    
    102,751Held to maturity securities
    
    
    18,027
    
    
    
    19,055
    
    
    
    19,074
    
    
    
    20,011Loans receivable-net
    
    
    1,354,531
    
    
    
    1,354,273
    
    
    
    1,361,019
    
    
    
    1,360,789FHLBB stock
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007Accrued interest receivable
    
    
    4,634
    
    
    
    4,634
    
    
    
    4,287
    
    
    
    4,287Financial liabilities:Deposits
    
    
    1,128,446
    
    
    
    1,135,374
    
    
    
    1,129,108
    
    
    
    1,135,815Mortgagors and investors
escrow accounts
    
    
    3,565
    
    
    
    3,565
    
    
    
    6,385
    
    
    
    6,385Advances from FHLBB
    
    
    253,752
    
    
    
    267,711
    
    
    
    263,802
    
    
    
    276,619
 13




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##### Table of Contents



5. Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMarch 31, 2010
    
    (In thousands)Available for sale:Debt securities:U.S. Government and government-
sponsored enterprise obligations
    
    $
    7,012
    
    
    $
    53
    
    
    $
    
    
    
    $
    7,065Government-sponsored residential
mortgage-backed
securities
    
    
    67,676
    
    
    
    3,616
    
    
    
    1
    
    
    
    71,291Corporate debt securities
    
    
    5,874
    
    
    
    
    
    
    
    1,239
    
    
    
    4,635Other debt securities
    
    
    722
    
    
    
    7
    
    
    
    
    
    
    
    729Total debt securities
    
    
    81,284
    
    
    
    3,676
    
    
    
    1,240
    
    
    
    83,720Marketable equity securities, by sector:Banks
    
    
    1,256
    
    
    
    2,828
    
    
    
    8
    
    
    
    4,076Consumer and household products
    
    
    1,134
    
    
    
    68
    
    
    
    13
    
    
    
    1,189Food and beverage service
    
    
    1,151
    
    
    
    180
    
    
    
    48
    
    
    
    1,283Government-sponsored enterprises
    
    
    283
    
    
    
    298
    
    
    
    
    
    
    
    581Healthcare/pharmaceutical
    
    
    387
    
    
    
    
    
    
    
    31
    
    
    
    356Industrial
    
    
    695
    
    
    
    184
    
    
    
    26
    
    
    
    853Integrated utilities
    
    
    742
    
    
    
    50
    
    
    
    
    
    
    
    792Mutual funds
    
    
    2,633
    
    
    
    74
    
    
    
    
    
    
    
    2,707Oil and gas
    
    
    754
    
    
    
    439
    
    
    
    
    
    
    
    1,193Technology/Semiconductor
    
    
    228
    
    
    
    93
    
    
    
    
    
    
    
    321Telecommunications
    
    
    661
    
    
    
    68
    
    
    
    40
    
    
    
    689Transportation
    
    
    294
    
    
    
    21
    
    
    
    1
    
    
    
    314Other industries
    
    
    1,030
    
    
    
    372
    
    
    
    16
    
    
    
    1,386Total marketable equity securities
    
    
    11,248
    
    
    
    4,675
    
    
    
    183
    
    
    
    15,740Total available for sale
    
    $
    92,532
    
    
    $
    8,351
    
    
    $
    1,423
    
    
    $
    99,460
  Held to maturity:Government-sponsored
residential
mortgage-backed
securities
    
    $
    18,027
    
    
    $
    1,028
    
    
    $
    
    
    
    $
    19,055Total held to maturity
    
    $
    18,027
    
    
    $
    1,028
    
    
    $
    
    
    
    $
    19,055
 14




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##### Table of Contents



Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueDecember 31, 2009
    
    (In thousands)Available for sale:Debt securities:U.S. Government and
government-sponsored enterprise
obligations
    
    $
    7,017
    
    
    $
    36
    
    
    $
    1
    
    
    $
    7,052Government-sponsored residential
mortgage-backed securities
    
    
    72,537
    
    
    
    3,431
    
    
    
    1
    
    
    
    75,967Corporate debt securities
    
    
    5,879
    
    
    
    
    
    
    
    1,223
    
    
    
    4,656Other debt securities
    
    
    722
    
    
    
    9
    
    
    
    
    
    
    
    731Total debt securities
    
    
    86,155
    
    
    
    3,476
    
    
    
    1,225
    
    
    
    88,406Marketable equity securities, by sector:Banks
    
    
    1,256
    
    
    
    2,470
    
    
    
    173
    
    
    
    3,553Consumer and household products
    
    
    839
    
    
    
    40
    
    
    
    17
    
    
    
    862Food and beverage service
    
    
    948
    
    
    
    158
    
    
    
    41
    
    
    
    1,065Government-sponsored enterprises
    
    
    284
    
    
    
    217
    
    
    
    
    
    
    
    501Healthcare/pharmaceutical
    
    
    387
    
    
    
    3
    
    
    
    19
    
    
    
    371Industrial
    
    
    639
    
    
    
    134
    
    
    
    13
    
    
    
    760Integrated utilities
    
    
    742
    
    
    
    69
    
    
    
    
    
    
    
    811Mutual funds
    
    
    2,621
    
    
    
    62
    
    
    
    
    
    
    
    2,683Oil and gas
    
    
    754
    
    
    
    353
    
    
    
    12
    
    
    
    1,095Technology/Semiconductor
    
    
    342
    
    
    
    173
    
    
    
    
    
    
    
    515Telecommunications
    
    
    354
    
    
    
    
    
    
    
    15
    
    
    
    339Transportation
    
    
    313
    
    
    
    190
    
    
    
    
    
    
    
    503Other industries
    
    
    1,030
    
    
    
    263
    
    
    
    6
    
    
    
    1,287Total marketable equity securities
    
    
    10,509
    
    
    
    4,132
    
    
    
    296
    
    
    
    14,345Total securities available for sale
    
    $
    96,664
    
    
    $
    7,608
    
    
    $
    1,521
    
    
    $
    102,751
  Held to
maturity:Government-sponsored
residential
mortgage-backed
securities
    
    $
    19,074
    
    
    $
    937
    
    
    $
    
    
    
    $
    20,011Total held
to maturity
    
    $
    19,074
    
    
    $
    937
    
    
    $
    
    
    
    $
    20,011
  15




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##### Table of Contents



Available for Sale
    
    
    Held to MaturityAmortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(In thousands)Maturity:Within 1 year
    
    $
    2,113
    
    
    $
    2,114
    
    
    $
    
    
    
    $
    After 1 but within 5 years
    
    
    7,955
    
    
    
    7,965
    
    
    
    
    
    
    
    After 5 but within 10 years
    
    
    721
    
    
    
    729
    
    
    
    
    
    
    
    After 10 years
    
    
    2,819
    
    
    
    1,621
    
    
    
    
    
    
    
    13,608
    
    
    
    12,429
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    67,676
    
    
    
    71,291
    
    
    
    18,027
    
    
    
    19,055$
    81,284
    
    
    $
    83,720
    
    
    $
    18,027
    
    
    $
    19,055
     Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossMarch 31, 2010
    
    (In thousands)Available for sale:Government-sponsored
residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    $
    45
    
    
    $
    1
    
    
    $
    45
    
    
    $
    1Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    4,536
    
    
    
    1,239
    
    
    
    4,536
    
    
    
    1,239Total debt securities
    
    
    
    
    
    
    
    
    
    
    4,581
    
    
    
    1,240
    
    
    
    4,581
    
    
    
    1,240Marketable equity securities
    
    
    2,052
    
    
    
    60
    
    
    
    755
    
    
    
    123
    
    
    
    2,807
    
    
    
    183Total
    
    $
    2,052
    
    
    $
    60
    
    
    $
    5,336
    
    
    $
    1,363
    
    
    $
    7,388
    
    
    $
    1,423
 16




---



##### Table of Contents



Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized

    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossDecember 31, 2009
    
    (In thousands)Available for sale:U.S. Government and
government-sponsored
enterprises
    
    $
    2,018
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    2,018
    
    
    $
    1Government-sponsored
residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    1
    
    
    
    58
    
    
    
    1Corporate debt
    
    
    
    
    
    
    
    
    
    
    4,556
    
    
    
    1,223
    
    
    
    4,556
    
    
    
    1,223Total debt securities
    
    
    2,018
    
    
    
    1
    
    
    
    4,614
    
    
    
    1,224
    
    
    
    6,632
    
    
    
    1,225Marketable equity securities
    
    
    1,097
    
    
    
    184
    
    
    
    1,099
    
    
    
    112
    
    
    
    2,196
    
    
    
    296Total
    
    $
    3,115
    
    
    $
    185
    
    
    $
    5,713
    
    
    $
    1,336
    
    
    $
    8,828
    
    
    $
    1,521
  U.S. Government and government-sponsored enterprises and Mortgage-backed securities
 Corporate Debt Securities.
 Marketable Equity Securities.
   17




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##### Table of Contents



6. Loans Receivable and Allowance for Loan Losses
  March 31, 2010
    
    
    December 31, 2009(In thousands)Real estate loans:Residential
    
    $
    748,648
    
    
    $
    754,838Commercial
    
    
    430,819
    
    
    
    426,028Construction
    
    
    66,407
    
    
    
    71,078Commercial business loans
    
    
    114,249
    
    
    
    113,240Installment, collateral and other
loans
    
    
    7,239
    
    
    
    7,742Total loans
    
    
    1,367,362
    
    
    
    1,372,926Net deferred loan costs and premiums
    
    
    587
    
    
    
    632Allowance for loan losses
    
    
    (13,418
    )
    
    
    (12,539
    )Loans, net
    
    $
    1,354,531
    
    
    $
    1,361,019
 Non-performing Assets:
 March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Non-accrual loans:Residential real estate(1)
    
    $
    3,712
    
    
    $
    3,106Commercial real estate
    
    
    3,608
    
    
    
    2,242Construction
    
    
    6,629
    
    
    
    6,630Commercial business loans
    
    
    621
    
    
    
    61Installment, collateral and other loans
    
    
    7
    
    
    
    7Total non-accrual loans(2)
    
    
    14,577
    
    
    
    12,046Accruing loan past due 90 days or more
    
    
    
    
    
    
    Troubled debt restructurings
    
    
    
    
    
    
    Total non-performing loans
    
    
    14,577
    
    
    
    12,046Other real estate owned
    
    
    3,131
    
    
    
    3,061Total non-performing assets
    
    $
    17,708
    
    
    $
    15,107Total non-performing loans to total loans
    
    
    1.07
    %
    
    
    0.88
    %Total non-performing loans to total assets
    
    
    0.93
    %
    
    
    0.77
    %Allowance for loan losses as a percent of total loans
    
    
    0.98
    %
    
    
    0.91
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    92.05
    %
    
    
    104.09
    %
 
 (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 $828,000 and $237,000 at March 31, 2010 and December 31,
2009, respectively. 18




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##### Table of Contents



Changes in the allowance for loan losses for the three months ended March 31, 2010
and 2009 are as follows:
 For the Three MonthsEnded March 31,2010
    
    
    2009(In thousands)Balance, beginning of period
    
    $
    12,539
    
    
    $
    12,553Provision for loan losses
    
    
    903
    
    
    
    299Loans charged-off
    
    
    (31
    )
    
    
    (7
    )Recoveries of loans previously charged off
    
    
    7
    
    
    
    5Balance, end of period
    
    $
    13,418
    
    
    $
    12,850
 Based on the qualitative assessment of the portfolio and in thorough consideration of
non-performing loans, management believes that the allowance for loan and lease losses
properly supports the level of associated loss and risk.
 7.
    
    Other Real Estate OwnedOther real estate owned was $3.1 million as of March 31, 2010 and December 31, 2009.
Other real estate owned consisted entirely of commercial real estate properties which are
held for sale at March 31, 2010. Other real estate owned expenses were $368,000 for the
quarter ended March 31, 2010. There was no other real estate owned at or during the quarter
ended March 31, 2009.
 8.
    
    Benefit PlansThe amounts related to the Pension Plan, Supplemental Plans and the SERPs are reflected
in the tables that follow as Pension Plans.
 Components of Net Periodic Benefit Cost
 Other Post-RetirementPension Plans
    
    
    BenefitsThree Months Ended March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Service cost
    
    $
    207
    
    
    $
    236
    
    
    $
    4
    
    
    $
    2Interest cost
    
    
    319
    
    
    
    308
    
    
    
    30
    
    
    
    27Expected return on
plan assets
    
    
    (365
    )
    
    
    (263
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    140
    
    
    
    239
    
    
    
    15
    
    
    
    7Amortization of prior
service cost
    
    
    (9
    )
    
    
    78
    
    
    
    5
    
    
    
    5Net periodic benefit cost
    
    $
    292
    
    
    $
    598
    
    
    $
    54
    
    
    $
    41
 For the three months ended March 31, 2010, the Company contributed $22,000 to the
post-retirement benefit plan. The Company anticipates contributing an additional $117,000 in
the remaining nine months of 2010 to the post-retirement benefit plan.The Company did not contribute to the Pension Plan in the first quarter of 2010 but does
plan to contribute $900,000 to the Pension Plan in the remaining nine months of 2010.The 401(k) Plan pays all employees, even those who do not contribute to the 401(k) Plan, an
automatic 3% of pay safe harbor contribution that is fully vested. The 401(k) expense for
the three months ended March 31, 2010 and 2009 was $133,000 and $99,000, respectively.
 19




---



##### Table of Contents



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, 2010. 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
financial position.
 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. The Plan allows for the issuance of a
maximum of 349,830 restricted stock shares and 874,575 stock options. As of March 31, 2010,
there were 31,907 restricted stock shares and 416,700 stock options that remain available
for future grants under the Plan. There were no awards granted in 2010.Total employee and Director share-based compensation expense recognized for stock options
and restricted stock was $136,000, with a related tax benefit recorded of $48,000 for the
three months ended March 31, 2010 of which Director share-based compensation expense
recognized (in the consolidated statement of income as other non-interest expense) was
$67,000 and officer share-based compensation expense recognized (in the consolidated
statement of income as salaries and benefit expense) was $69,000. The total charge of
$136,000 for the three months ended March 31, 2010 includes $20,000 related to 1,983 vested
restricted shares used for income tax withholding on behalf of certain executives which
occurred in the first quarter of 2010.Stock Options:The following table presents the activity related to stock options under the
Plan for the three months ended March 31, 2010:
 Weighted Average
    
    AggregateWeighted
    
    Remaining
    
    IntrinsicStock
    
    Average
    
    Contractual Term
    
    ValueOptions
    
    Exercise Price
    
    (in years)
    
    (In thousands)Stock options outstanding at December 31, 2009
    
    
    445,875
    
    
    $
    13.18Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Stock options outstanding at March 31, 2010
    
    
    445,875
    
    
    $
    13.18
    
    
    
    7.7
    
    
    $
    398Options exercisable at March 31, 2010
    
    
    359,655
    
    
    $
    13.75
    
    
    
    7.6
    
    
    $
    
 The aggregate fair value of vested options was $85,000 and $225,000 for the three
months ended March 31, 2010 and 2009, respectively.As of March 31, 2010, the unrecognized cost related to the stock options awarded of $230,000
will be recognized over a weighted-average period of 2.4 years.The Company uses the Black-Scholes option pricing model for estimating the fair value of
stock options granted. No options were granted during 2010. The weighted average estimated
fair values of 2009 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:
 20




---



##### Table of Contents



2009Weighted average per share fair value of options
granted
    
    $
    3.05Assumptions:Risk free interest rate
    
    
    2.23
    %Expected volatility
    
    
    39.85
    %Expected dividend yield
    
    
    2.16
    %Expected life of options granted
    
    6 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 stock has only been publicly traded since May 23, 2005.The Company estimates option forfeitures using historical data on participant
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 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.The Company plans to use Treasury stock to satisfy future stock option exercises.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, 2010:
 Weighted AverageNumber
    
    
    Grant-of Shares
    
    
    Date Fair ValueUnvested as of December 31, 2009
    
    
    41,695
    
    
    $
    13.47Granted
    
    
    
    
    
    
    Vested
    
    
    (7,950
    )
    
    
    11.17Forfeited
    
    
    
    
    
    
    Unvested as of March 31, 2010
    
    
    33,745
    
    
    $
    14.02
 The fair value of restricted shares that vested during the three months ended March 31,
2010 and 2009 was $89,000 and $136,000, respectively. There were no shares of restricted
stock granted during the three months ended March 31, 2010. As of March 31, 2010, there was
$345,000 of total unrecognized compensation cost related to unvested restricted stock which
is expected to be recognized over a weighted-average period of 1.6 years.Of the remaining unvested restricted stock, 15,495 shares will vest in 2010, 7,950 shares in
2011, 7,950 in 2012, and 2,350 in 2013. All unvested restricted stock shares are expected to
vest.
 10.
    
    Income TaxesAs of March 31, 2010 and December 31, 2009, 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 ended December 31, 2006 through 2009.As of March 31, 2010 and December 31, 2009, the Company has not accrued any interest and
penalties related to certain tax positions.
 21




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##### Table of Contents



11.
    
    Accumulated Other Comprehensive (Loss) IncomeComponents of accumulated other comprehensive (loss) income, net of taxes, consist of
the following:
 Minimum
    
    
    Unrealized Gain onPension
    
    
    Available-For-Sale
    
    
    Accumulated OtherLiability
    
    
    Securities
    
    
    Comprehensive Loss(In thousands)December 31, 2009
    
    $
    (5,049
    )
    
    $
    4,016
    
    
    $
    (1,033
    )Change
    
    
    97
    
    
    
    556
    
    
    
    653March 31, 2010
    
    $
    (4,952
    )
    
    $
    4,572
    
    
    $
    (380
    )
 The following table summarizes other comprehensive income and the related tax effects for
the three months ended March 31, 2010 and 2009:
 Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    2,854
    
    
    $
    1,916Unrealized gain (loss) on securities
available for sale
    
    
    1,031
    
    
    
    (67
    )Realized (gains) losses on securities
    
    
    (188
    )
    
    
    288Income tax provision
    
    
    (287
    )
    
    
    (75
    )Net unrealized gain on securities
available for sale
    
    
    556
    
    
    
    146Benefit plans amortization
    
    
    150
    
    
    
    329Income tax provision
    
    
    (53
    )
    
    
    (112
    )Net benefit plans amortization
    
    
    97
    
    
    
    217Total other comprehensive income,
net of tax
    
    
    653
    
    
    
    363Total comprehensive income
    
    $
    3,507
    
    
    $
    2,279
 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 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.
 22




---



##### Table of Contents



Financial instruments whose contract amounts represent credit risk are as follows at March
31, 2010 and December 31, 2009:
 March 31,
    
    
    December 31,2010
    
    
    2009(In thousands)Commitments to extend credit:Commitments to grant loans
    
    $
    78,475
    
    
    $
    36,650Undisbursed construction loans
    
    
    75,820
    
    
    
    86,492Undisbursed home equity lines of credit
    
    
    130,411
    
    
    
    125,511Undisbursed commercial lines of credit
    
    
    54,742
    
    
    
    57,713Standby letters of credit
    
    
    10,633
    
    
    
    10,555Unused checking overdraft lines of credit
    
    
    93
    
    
    
    94$
    350,174
    
    
    $
    317,015
 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, 2010, the Bank exceeded all regulatory capital requirements and are
considered well capitalized under regulatory guidelines.The following is a summary of the Companys and the Banks regulatory capital amounts and
ratios as of March 31, 2010 and December 31, 2009 compared to the Federal Deposit Insurance
Corporations requirements for classification as a well-capitalized institution and for
minimum capital adequacy:
 23




---



##### Table of Contents



Minimum To BeWell CapitalizedMinimum For Capital
    
    UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Rockville
Bank:March 31, 2010Total capital to risk weighted assets
    
    $
    162,583
    
    
    
    13.4
    %
    
    $
    97,394
    
    
    
    8.0
    %
    
    $
    121,743
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    148,513
    
    
    
    12.2
    
    
    
    48,697
    
    
    
    4.0
    
    
    
    73,039
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    148,513
    
    
    
    9.5
    
    
    
    62,383
    
    
    
    4.0
    
    
    
    77,979
    
    
    
    5.0December 31, 2009Total capital to risk weighted assets
    
    $
    158,870
    
    
    
    13.1
    %
    
    $
    96,976
    
    
    
    8.0
    %
    
    $
    121,220
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    145,654
    
    
    
    12.0
    
    
    
    48,488
    
    
    
    4.0
    
    
    
    72,732
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    145,654
    
    
    
    9.3
    
    
    
    62,478
    
    
    
    4.0
    
    
    
    78,097
    
    
    
    5.0Rockville Financial, Inc.:March 31, 2010Total capital to risk weighted assets
    
    $
    173,354
    
    
    
    14.2
    %
    
    $
    97,394
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital to risk weighted assets
    
    
    159,284
    
    
    
    13.1
    
    
    
    48,697
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier 1 capital to total average assets
    
    
    159,284
    
    
    
    10.2
    
    
    
    62,368
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ADecember 31, 2009Total capital to risk weighted assets
    
    $
    170,559
    
    
    
    14.1
    %
    
    $
    96,978
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital to risk weighted assets
    
    
    157,343
    
    
    
    13.0
    
    
    
    48,489
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier 1 capital to total average assets
    
    
    157,343
    
    
    
    10.1
    
    
    
    62,028
    
    
    
    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, 2010, $11.0
million is available for payment of dividends.A reconciliation of the Companys capital to regulatory capital is as follows:
 March 31, 2010
    
    
    December 31, 2009(In thousands)Total capital per financial statements
    
    $
    160,106
    
    
    $
    157,428Accumulated other comprehensive loss
    
    
    380
    
    
    
    1,033Intangible assets
    
    
    (1,149
    )
    
    
    (1,070
    )Servicing assets
    
    
    (53
    )
    
    
    (48
    )Total Tier 1 capital
    
    
    159,284
    
    
    
    157,343Allowance for loan and other losses
includible in Tier 2 capital
    
    
    14,070
    
    
    
    13,216Total capital per regulatory reporting
    
    $
    173,354
    
    
    $
    170,559
 24




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##### Table of Contents



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.
    
    Persons who purchase our stock will own a minority of Rockville Financial, Inc.s
common stock and will not be able to exercise voting control over most matters put
to a vote of stockholders.
    
    Further implementation of our stock benefit plans could increase our costs, which
could 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 trading volume in our stock is less than in larger publicly traded companies
which can cause price volatility, hinder the ability to sell our common stock and
may lower the market price of the stock.
    
    The Emergency Economic Stabilization Act (EESA) of 2008 has and may continue to
have a significant impact on the banking industry. Legislation currently proposed
at the national level is
 25




---



##### Table of Contents



expected to result in dramatic regulatory changes that will
effect the industry in general, and impact the Companys competitive position in
ways that cant be predicted at this time.
  Overview
   Critical Accounting Policies
   Allowance for Loan Losses:
   26




---



##### Table of Contents



Potential problem loans:
  Other-than-Temporary Impairment of Securities:
 Income Taxes:
  27




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##### Table of Contents



Pension and Other Post-retirement Benefits:
   Stock Compensation:
 Comparison of Operating Results for the Three Months Ended March 31, 2010 and 2009
  Income Statement Summary
 For the Three Months EndedMarch 31,2010
    
    
    2009
    
    
    Change(in thousands)Net interest income
    
    $
    13,398
    
    
    $
    11,263
    
    
    $
    2,135Provision for loan losses
    
    
    903
    
    
    
    299
    
    
    
    604Non-interest income
    
    
    1,687
    
    
    
    991
    
    
    
    696Non-interest expense
    
    
    9,635
    
    
    
    9,104
    
    
    
    531Income before income taxes
    
    
    4,547
    
    
    
    2,851
    
    
    
    1,696Income tax provision
    
    
    1,693
    
    
    
    935
    
    
    
    758Net income
    
    $
    2,854
    
    
    $
    1,916
    
    
    $
    938
  28




---



##### Table of Contents



Net Interest Income Analysis
 Average Balance Sheets, Interest and Yields/Costs:
 Three Months Ended March 31,2010
    
    
    2009Interest and
    
    
    Yield/
    
    
    
    
    
    
    Interest and
    
    
    Yield/Average Balance
    
    
    Dividends
    
    
    Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,356,843
    
    
    $
    17,641
    
    
    
    5.20
    %
    
    $
    1,312,229
    
    
    $
    17,319
    
    
    
    5.28
    %Investment securities
    
    
    119,345
    
    
    
    1,300
    
    
    
    4.36
    
    
    
    162,203
    
    
    
    2,005
    
    
    
    4.94Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    
    
    
    
    
    
    
    
    17,007
    
    
    
    
    
    
    
    Other earning assets
    
    
    762
    
    
    
    
    
    
    
    
    
    
    
    638
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    1,493,957
    
    
    
    18,941
    
    
    
    5.07
    
    
    
    1,492,077
    
    
    
    19,324
    
    
    
    5.18Non-interest-earning assets
    
    
    66,449
    
    
    
    
    
    
    
    
    
    
    
    59,483Total assets
    
    $
    1,560,406
    
    
    
    
    
    
    
    
    
    
    $
    1,551,560Interest-bearing liabilities:NOW and money market accounts
    
    $
    341,796
    
    
    
    404
    
    
    
    0.47
    
    
    $
    284,991
    
    
    
    738
    
    
    
    1.04Savings accounts (5)
    
    
    150,406
    
    
    
    128
    
    
    
    0.34
    
    
    
    127,697
    
    
    
    167
    
    
    
    0.52Time deposits
    
    
    485,227
    
    
    
    2,468
    
    
    
    2.03
    
    
    
    529,665
    
    
    
    4,546
    
    
    
    3.43Total interest-bearing deposits
    
    
    977,429
    
    
    
    3,000
    
    
    
    1.23
    
    
    
    942,353
    
    
    
    5,451
    
    
    
    2.31Advances from the Federal Home Loan Bank
    
    
    266,294
    
    
    
    2,543
    
    
    
    3.82
    
    
    
    331,274
    
    
    
    2,610
    
    
    
    3.15Total interest-bearing liabilities
    
    
    1,243,723
    
    
    
    5,543
    
    
    
    1.78
    %
    
    
    1,273,627
    
    
    
    8,061
    
    
    
    2.53
    %Non-interest-bearing liabilities
    
    
    157,181
    
    
    
    
    
    
    
    
    
    
    
    131,055Total liabilities
    
    
    1,400,904
    
    
    
    
    
    
    
    
    
    
    
    1,404,682Stockholders equity
    
    
    159,502
    
    
    
    
    
    
    
    
    
    
    
    146,878Total liabilities and stockholders equity
    
    $
    1,560,406
    
    
    
    
    
    
    
    
    
    
    $
    1,551,560Net interest income
    
    
    
    
    
    $
    13,398
    
    
    
    
    
    
    
    
    
    
    $
    11,263Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    2.65
    %Net interest-earning assets (3)
    
    $
    250,234
    
    
    
    
    
    
    
    
    
    
    $
    218,450Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.59
    %
    
    
    
    
    
    
    
    
    
    
    3.02
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.12
    %
    
    
    
    
    
    
    
    
    
    
    117.15
    %
 
 (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. 29




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##### Table of Contents



Rate-Volume Analysis
  Three Months Ended March 31, 2010Compared to March 31, 2009Increase (Decrease) Due ToVolume
    
    
    Rate
    
    
    Net(In thousands)Interest and dividend income:Loans receivable
    
    $
    566
    
    
    $
    (244
    )
    
    $
    322Securities interest, dividends and
income from other earning assets
    
    
    (432
    )
    
    
    (273
    )
    
    
    (705
    )Total earning assets
    
    
    134
    
    
    
    (517
    )
    
    
    (383
    )Interest expense:NOW and money market
accounts
    
    
    128
    
    
    
    (462
    )
    
    
    (334
    )Savings accounts
    
    
    27
    
    
    
    (66
    )
    
    
    (39
    )Time deposits
    
    
    (354
    )
    
    
    (1,724
    )
    
    
    (2,078
    )Total interest-bearing deposits
    
    
    (199
    )
    
    
    (2,252
    )
    
    
    (2,451
    )FHLB Advances
    
    
    (565
    )
    
    
    498
    
    
    
    (67
    )Total interest-bearing liabilities
    
    
    (764
    )
    
    
    (1,754
    )
    
    
    (2,518
    )Change in net interest income
    
    $
    898
    
    
    $
    1,237
    
    
    $
    2,135
 Net Interest Income:
  30




---



##### Table of Contents



Interest and Dividend Income:
 Interest Expense:
 Provision for Loan Losses:
 Non-interest Income:
 31




---



##### Table of Contents



Non-interest Expense:
 Three MonthsEnded March 31,2010
    
    
    2009
    
    
    Change(In thousands)Salaries and employee benefits
    
    $
    4,790
    
    
    $
    4,822
    
    
    $
    (32
    )Service bureau fees
    
    
    999
    
    
    
    1,014
    
    
    
    (15
    )Occupancy and equipment
    
    
    1,127
    
    
    
    1,148
    
    
    
    (21
    )Professional fees
    
    
    390
    
    
    
    344
    
    
    
    46Marketing and promotions
    
    
    274
    
    
    
    256
    
    
    
    18FDIC assessments
    
    
    400
    
    
    
    361
    
    
    
    39Other
    
    
    1,655
    
    
    
    1,159
    
    
    
    496Total non-interest expense
    
    $
    9,635
    
    
    $
    9,104
    
    
    $
    531
   Three MonthsEnded March 31,2010
    
    
    2009
    
    
    Change(In thousands)Directors fees
    
    $
    171
    
    
    $
    192
    
    
    $
    (21
    )Collections
    
    
    163
    
    
    
    62
    
    
    
    101Other real estate owned
    
    
    368
    
    
    
    
    
    
    
    368Dues and subscriptions
    
    
    50
    
    
    
    76
    
    
    
    (26
    )Printing and forms
    
    
    103
    
    
    
    40
    
    
    
    63Other
    
    
    800
    
    
    
    789
    
    
    
    11Total other non-interest expense
    
    $
    1,655
    
    
    $
    1,159
    
    
    $
    496
  Income Tax Provision:
 32




---



##### Table of Contents



Comparison of Financial Condition at March 31, 2010 and December 31, 2009
 Summary:
   Investment Securities:
 Lending Activities:
 Deposits:
 33




---



##### Table of Contents



Liquidity and Capital Resources:
      
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:
  34




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##### Table of Contents



Quantitative Analysis
 Income Simulation:
 PercentageDecrease in Estimated NetInterest IncomeOver 12 Months400 basis point increase in rates
    
    0.90%50 basis point decrease in rates
    
    4.57
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 35




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##### Table of Contents



Changes in Internal Controls:
 
 Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity Securities
 Total Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares that May YetPart of Publicly
    
    
    Be Purchased UnderTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    the Plans orPeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Programs
    
    
    Programs (1)1/1/10  1/31/10
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    674,7182/1/10  2/28/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    674,7183/1/10  3/31/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    674,718Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    674,718
 
 (1)
    
    Effective January 2008, the Company adopted a plan to repurchase of up to 978,400
of our outstanding shares of common stock on the open market. At March 31, 2010 there
were 674,718 shares available to be purchased under this program. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  36




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##### Table of Contents



Item 6. Exhibits
 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., as amended, initially filed on December 17, 2004
(File No. 333-121421))3.2
    
    Bylaws of Rockville Financial, Inc. (incorporated herein by reference
to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed for Rockville Financial,
Inc. on May 13, 2005 (File No. 000-51239))3.2.1
    
    Amendment dated December 12, 2007 to the Bylaws of Rockville
Financial, Inc. (incorporated herein by reference to Exhibit 3.2 to the Current
Report on the Companys Form 8-K filed on December 12, 2007 (File No. 000-51239))3.2.2
    
    Amendment and restatement dated February 13, 2008 to the Bylaws of
Rockville Financial, Inc. (incorporated herein by reference to Exhibit 3.2 to the
Current Report on the Companys Form 8-K filed on February 14, 2008 (File No.
000-51239))3.3
    
    Form of Common Stock Certificate of Rockville Financial, Inc.
(incorporated herein by reference to Exhibit 4 to the Registration Statement on
the Form S-1 filed for Rockville Financial, Inc., as amended, initially filed on
December 17, 2004 (File No. 333-121421))10.1
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and William J. McGurk, effective January 1, 2009
(incorporated herein by reference to Exhibit 10.1 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.2
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and Joseph F. Jeamel, Jr., effective January 1,
2009 (incorporated herein by reference to Exhibit 10.2 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.3
    
    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 the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.4
    
    First Amendment to the Employment Agreement by and among Rockville
Financial, Inc. and Rockville Bank and Christopher E. Buchholz as amended and
restated effective as of April 13, 2009 (incorporated herein by reference to
Exhibit 10.4 to the Current Report on the Companys Form 10-Q filed on May 11,
2009 (File No. 000-51239))10.5
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and Richard J. Trachimowicz, effective January 1,
2009 (incorporated herein by reference to Exhibit 10.5 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.6
    
    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 (File No. 000-51239))10.7
    
    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. 000-51239))10.8
    
    Rockville Bank Supplemental Executive Retirement Agreement for Joseph
F. Jeamel, Jr. (incorporated herein by reference to Exhibit 10.9 to the
Registration Statement filed on Form S-1 filed for Rockville Financial, Inc. filed
on December 17, 2004 (File No. 333-121421))10.8.1
    
    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
(File No. 000-51239))
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10.9
    
    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))10.10
    
    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(File No. 000-51239))10.11
    
    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))31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
filed herewith32.0
    
    Section 1350 Certification of the Chief Executive Officer and Chief
Financial Officer attached hereto
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##### Table of Contents



SIGNATURES
  Rockville Financial, Inc.By:
    /s/ John T. LundJohn T. LundSVP, Chief Financial Officer and Treasurer  39