##### 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 September 30, 2009.
 Commission File Number: 000-51239
 ROCKVILLE FINANCIAL, INC.
 (Exact name of registrant as specified in its charter)
 Connecticut
(State or other jurisdiction of incorporation or organization)
    
    30-0288470
(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(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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Table of Contents
 PagePart I  FINANCIAL INFORMATIONItem 1.
    
    Interim Financial Statements  UnauditedConsolidated Statements of Condition as of September 30, 2009
and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three and nine
months ended September 30, 2009 and 2008
    
    
    4Consolidated Statement of Changes in Stockholders Equity for
the nine months ended September 30, 2009
    
    
    6Consolidated Statements of Cash Flows for the nine months ended
September 30, 2009 and 2008
    
    
    7Notes to Consolidated Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    26Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4.
    
    Controls and Procedures
    
    
    41Part II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    42Item 1A.
    
    Risk Factors
    
    
    42Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 3.
    
    Defaults Upon Senior Securities
    
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    42Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    44SIGNATURES
    
    
    46EX-31.1EX-31.2EX-32
  Rockville Financial, Inc.
    
    2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1. Interim Financial Statements:
 
 Rockville Financial, Inc. and Subsidiary  Consolidated Statements of Condition
(In Thousands Except Share Amounts)
(Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCASH AND CASH EQUIVALENTS:Cash and due from banks
    
    $
    16,011
    
    
    $
    14,607Short-term investments
    
    
    1,005
    
    
    
    294Total cash and cash equivalents
    
    
    17,016
    
    
    
    14,901AVAILABLE FOR SALE SECURITIES-At fair value
    
    
    107,761
    
    
    
    141,250HELD TO MATURITY SECURITIES-At amortized cost
    
    
    20,314
    
    
    
    24,138LOANS HELD FOR SALE
    
    
    124
    
    
    
    LOANS RECEIVABLE (Net of allowance for loan
losses of $12,610 in 2009 and $12,553 in 2008)
    
    
    1,355,264
    
    
    
    1,291,791FEDERAL HOME LOAN BANK STOCK
    
    
    17,007
    
    
    
    17,007ACCRUED INTEREST RECEIVABLE
    
    
    4,667
    
    
    
    4,636DEFERRED TAX ASSETNet
    
    
    11,000
    
    
    
    11,476PREMISES AND EQUIPMENTNet
    
    
    16,191
    
    
    
    16,405GOODWILL
    
    
    1,070
    
    
    
    1,070CASH SURRENDER VALUE OF BANK OWNED LIFE INSURANCE
    
    
    9,979
    
    
    
    9,705OTHER REAL ESTATE OWNED
    
    
    2,155
    
    
    
    OTHER ASSETS
    
    
    1,857
    
    
    
    694TOTAL
    
    $
    1,564,405
    
    
    $
    1,533,073LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDEPOSITS:Non-interest bearing
    
    $
    131,311
    
    
    $
    116,113Interest-bearing
    
    
    994,343
    
    
    
    926,395Total deposits
    
    
    1,125,654
    
    
    
    1,042,508MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    3,169
    
    
    
    6,077ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    265,851
    
    
    
    322,882ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    16,724
    
    
    
    15,829Total liabilities
    
    
    1,411,398
    
    
    
    1,387,296COMMITMENTS AND CONTINGENCIES (Note 11)STOCKHOLDERS EQUITY:Preferred stock (no par value; 1,000,000 shares authorized;
no shares issued and outstanding)
    
    
    
    
    
    
    Common stock (no par value; 29,000,000 shares authorized;
19,555,655 shares and 19,568,284 shares issued and outstanding (includes 142,560 shares and
156,780 shares of unvested restricted stock) at September 30, 2009 and December 31, 2008,
respectively
    
    
    85,249
    
    
    
    85,249Additional paid-in capital
    
    
    3,963
    
    
    
    3,380Unallocated common shares held by ESOP (419,795 shares at September 30, 2009 and December 31,
2008)
    
    
    (4,510
    )
    
    
    (5,035
    )Treasury stock, at cost (698,826 shares and 695,253 shares at September 30, 2009 and December 31,
2008, respectively)
    
    
    (9,663
    )
    
    
    (9,709
    )Retained earnings
    
    
    80,948
    
    
    
    75,985Accumulated other comprehensive loss, net of tax
    
    
    (2,980
    )
    
    
    (4,093
    )Total stockholders equity
    
    
    153,007
    
    
    
    145,777TOTAL
    
    $
    1,564,405
    
    
    $
    1,533,073
  Rockville Financial, Inc.
    
    3




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Rockville Financial, Inc. and Subsidiary
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008INTEREST AND DIVIDEND INCOME:Loans, including fees
    
    $
    17,222
    
    
    $
    17,266
    
    
    $
    51,965
    
    
    $
    50,662Securities-interest
    
    
    1,359
    
    
    
    2,057
    
    
    
    4,837
    
    
    
    5,434Interest-bearing deposits
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    33Securities-dividends
    
    
    102
    
    
    
    352
    
    
    
    319
    
    
    
    1,433Total interest and dividend income
    
    
    18,684
    
    
    
    19,676
    
    
    
    57,122
    
    
    
    57,562INTEREST EXPENSE:Deposits
    
    
    4,807
    
    
    
    5,688
    
    
    
    15,439
    
    
    
    19,174Borrowed funds
    
    
    2,577
    
    
    
    2,784
    
    
    
    7,819
    
    
    
    7,204Total interest expense
    
    
    7,384
    
    
    
    8,472
    
    
    
    23,258
    
    
    
    26,378Net interest income
    
    
    11,300
    
    
    
    11,204
    
    
    
    33,864
    
    
    
    31,184PROVISION FOR LOAN LOSSES:
    
    
    700
    
    
    
    700
    
    
    
    1,303
    
    
    
    949Net interest income after provision
for loan losses
    
    
    10,600
    
    
    
    10,504
    
    
    
    32,561
    
    
    
    30,235NON-INTEREST INCOME (LOSS):Service charges and fees
    
    
    1,376
    
    
    
    1,430
    
    
    
    3,874
    
    
    
    4,068Net gain from sale of securities
    
    
    
    
    
    
    129
    
    
    
    936
    
    
    
    401Other-than-temporary impairment losses
on securities
    
    
    
    
    
    
    (11,514
    )
    
    
    (357
    )
    
    
    (12,670
    )Net gain from sales of loans
    
    
    328
    
    
    
    
    
    
    
    656
    
    
    
    Other
    
    
    105
    
    
    
    
    
    
    
    273
    
    
    
    Total non-interest income (loss)
    
    
    1,809
    
    
    
    (9,955
    )
    
    
    5,382
    
    
    
    (8,201
    )NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    4,710
    
    
    
    4,083
    
    
    
    14,092
    
    
    
    13,649Service bureau fees
    
    
    952
    
    
    
    943
    
    
    
    2,924
    
    
    
    2,810Occupancy and equipment
    
    
    1,127
    
    
    
    1,062
    
    
    
    3,324
    
    
    
    3,095Professional fees
    
    
    202
    
    
    
    377
    
    
    
    903
    
    
    
    1,142Marketing and promotions
    
    
    149
    
    
    
    294
    
    
    
    767
    
    
    
    1,041Insurance and FDIC assessments
    
    
    394
    
    
    
    178
    
    
    
    1,933
    
    
    
    522Other
    
    
    1,308
    
    
    
    1,296
    
    
    
    3,718
    
    
    
    3,674Total non-interest expense
    
    
    8,842
    
    
    
    8,233
    
    
    
    27,661
    
    
    
    25,933INCOME (LOSS) BEFORE INCOME TAXES
    
    
    3,567
    
    
    
    (7,684
    )
    
    
    10,282
    
    
    
    (3,899
    )PROVISION (BENEFIT) FOR INCOME TAXES
    
    
    1,227
    
    
    
    (2,382
    )
    
    
    3,432
    
    
    
    (1,145
    )NET INCOME (LOSS)
    
    $
    2,340
    
    
    $
    (5,302
    )
    
    $
    6,850
    
    
    $
    (2,754
    )
  Rockville Financial, Inc.
    
    4




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Rockville Financial, Inc. and Subsidiary
Consolidated Statements of Operations  Concluded
(Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss) per share
(see Note 2):Basic
    
    $
    0.13
    
    
    $
    (0.29
    )
    
    $
    0.37
    
    
    $
    (0.15
    )Diluted
    
    
    0.13
    
    
    
    (0.29
    )
    
    
    0.37
    
    
    
    (0.15
    )Weighted average shares outstanding:Basic
    
    
    18,477,974
    
    
    
    18,399,413
    
    
    
    18,460,244
    
    
    
    18,510,707Diluted
    
    
    18,497,155
    
    
    
    18,399,413
    
    
    
    18,466,638
    
    
    
    18,510,707
  Rockville Financial, Inc.
    
    5




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##### Table of Contents



Rockville Financial, Inc. and Subsidiary
Consolidated Statement of Changes in Stockholders Equity
(In Thousands, Except Share and per share Amounts)
(Unaudited)
 UnallocatedCommon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid in
    
    
    Held by
    
    
    Retained
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    ESOP
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    (Loss) Income
    
    
    EquityBalance at December 31, 2008
    
    
    19,568,284
    
    
    $
    85,249
    
    
    $
    3,380
    
    
    $
    (5,035
    )
    
    $
    75,985
    
    
    
    695,253
    
    
    $
    (9,709
    )
    
    $
    (4,093
    )
    
    $
    145,777Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,850Change in net unrealized gain on
securities available for sale, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,493
    
    
    
    1,493Change in accumulated other
comprehensive income related to
employee benefit plans, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    654
    
    
    
    654Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,997Common stock repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    (198
    )
    
    
    
    
    
    
    (198
    )Stock compensation expense
    
    
    (9,200
    )
    
    
    
    
    
    
    769
    
    
    
    525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,294Treasury stock issued
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    
    
    
    
    (92
    )
    
    
    (16,427
    )
    
    
    244
    
    
    
    
    
    
    
    Cancellation of shares for tax withholding
    
    
    (3,429
    )
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )Dividends paid, $0.15 per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,829
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,829
    )Cumulative effect adjustment of a change
in accounting principle, the adoption of
FSP FAS 115-2 and FAS 124-2 (ASC 320)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,034
    
    
    
    
    
    
    
    
    
    
    
    (1,034
    )
    
    
    Balance at September 30, 2009
    
    
    19,555,655
    
    
    $
    85,249
    
    
    $
    3,963
    
    
    $
    (4,510
    )
    
    $
    80,948
    
    
    
    698,826
    
    
    $
    (9,663
    )
    
    $
    (2,980
    )
    
    $
    153,007
  Rockville Financial, Inc.
    
    6




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##### Table of Contents



Rockville Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows  Unaudited
(In Thousands)
 For the Nine MonthsEnded September 30,2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    6,850
    
    
    $
    (2,754
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Amortization and accretion of premiums and discounts on
investments, net
    
    
    (127
    )
    
    
    (38
    )Stock compensation expense
    
    
    1,294
    
    
    
    2,133Provision for loan losses
    
    
    1,303
    
    
    
    949Net gain from sale of securities
    
    
    (936
    )
    
    
    (401
    )Other-than-temporary impairment of securities
    
    
    357
    
    
    
    12,670Loans originated for sale
    
    
    (38,902
    )
    
    
    Proceeds from sales of loans held for sale
    
    
    38,778
    
    
    
    Depreciation and amortization
    
    
    1,212
    
    
    
    1,115Deferred income tax benefit
    
    
    (630
    )
    
    
    (4,189
    )Increase in cash surrender value of bank owned life insurance
    
    
    (274
    )
    
    
    (291
    )Net change in other assets and liabilities:Deferred loan fees and premiums
    
    
    649
    
    
    
    180Accrued interest receivable
    
    
    (31
    )
    
    
    (802
    )Other assets
    
    
    (874
    )
    
    
    1,756Accrued expenses and other liabilities
    
    
    1,886
    
    
    
    345Net cash provided by operating activities
    
    
    10,555
    
    
    
    10,673CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    21,171
    
    
    
    5,620Proceeds from calls and maturities of available for sale securities
    
    
    500
    
    
    
    11,000Principal payments on available for sale securities
    
    
    20,543
    
    
    
    14,219Principal payments on held to maturity securities
    
    
    3,881
    
    
    
    1,420Purchase of available for sale securities
    
    
    (6,055
    )
    
    
    (54,980
    )Purchase of held to maturity securities
    
    
    
    
    
    
    (25,949
    )Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    (5,151
    )Proceeds from sale of loans
    
    
    
    
    
    
    8,300Purchase of loans
    
    
    (2,529
    )
    
    
    Net increase in loans
    
    
    (65,051
    )
    
    
    (143,844
    )Purchases of premises and equipment
    
    
    (1,046
    )
    
    
    (2,475
    )Net cash used in investing activities
    
    
    (28,586
    )
    
    
    (191,840
    )(Continued)
 Rockville Financial, Inc.
    
    7




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##### Table of Contents



Rockville Financial, Inc. and Subsidiary
Consolidated Statements of Cash Flows  Concluded
(Unaudited)
 For the Nine MonthsEnded September 30,2009
    
    
    2008CASH FLOWS FROM FINANCING ACTIVITIES:Common stock repurchased
    
    
    (198
    )
    
    
    (3,905
    )Net increase in non-interest bearing deposits
    
    
    15,198
    
    
    
    14,592Net increase in interest-bearing deposits
    
    
    67,948
    
    
    
    30,129Net decrease in mortgagors and investors escrow accounts
    
    
    (2,908
    )
    
    
    (2,674
    )Net (decrease) increase in short-term FHLB advances
    
    
    (51,000
    )
    
    
    95,000Proceeds from longterm FHLB advances
    
    
    8,112
    
    
    
    67,320Repayments of Federal Home Loan Bank advances
    
    
    (14,143
    )
    
    
    (20,133
    )Cancellation of shares for tax withholding
    
    
    (34
    )
    
    
    Cash dividends paid on common stock
    
    
    (2,829
    )
    
    
    (2,853
    )Net cash provided by financing activities
    
    
    20,146
    
    
    
    177,476NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    2,115
    
    
    
    (3,691
    )CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    14,901
    
    
    
    23,998CASH AND CASH EQUIVALENTS  End of period
    
    $
    17,016
    
    
    $
    20,307SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during the period for:Interest
    
    $
    23,345
    
    
    $
    26,289Income taxes
    
    
    3,100
    
    
    
    1,751Transfer of loans to other real estate owned
    
    
    2,155
    
    
    
    
  Rockville Financial, Inc.
    
    8




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##### Table of Contents



Rockville Financial, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
 1. Basis of Presentation and Principles of Consolidation
 The consolidated interim financial statements and the accompanying notes presented in
this report include the accounts of Rockville Financial, Inc., its wholly-owned subsidiary
Rockville Bank, and the Banks wholly-owned subsidiaries, The SBR Mortgage Company, The SBR
Investment Corp., Rockville Bank Commercial Properties, Inc., Rockville Bank Residential
Properties, Inc., Rockville Financial Services, Inc. Rockville Financial, Inc. (the
Company) is a state-chartered mid-tier stock holding company formed on December 17, 2004.
Rockville Financial MHC, Inc. holds fifty-five percent of the Companys common stock, and
the Company holds of all the common stock of Rockville Bank (the Bank).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 nine months ended September 30,
2009 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2009. These interim consolidated financial statements should be read in
conjunction with the Companys 2008 consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.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 assumptions, stock compensation expense, uncertain tax positions, deferred
tax assets and the evaluation of investment securities for other-than-temporary impairment.
 2. Earnings Per Share
 The following table sets forth the calculation of basic and diluted earnings per share
for the three and nine months ended September 30, 2009 and 2008:
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except share and per share data)Net income (loss)
    
    $
    2,340
    
    
    $
    (5,302
    )
    
    $
    6,850
    
    
    $
    (2,754
    )Weighted-average basic shares
outstanding(1)
    
    
    18,477,974
    
    
    
    18,399,413
    
    
    
    18,460,244
    
    
    
    18,510,707Diluted effect of stock options
    
    
    19,181
    
    
    
    
    
    
    
    6,394
    
    
    
    Weighted-average diluted
shares(1)
    
    
    18,497,155
    
    
    
    18,399,413
    
    
    
    18,466,638
    
    
    
    18,510,707Earnings (loss) per share:Basic
    
    $
    0.13
    
    
    $
    (0.29
    )
    
    $
    0.37
    
    
    $
    (0.15
    )Diluted
    
    $
    0.13
    
    
    $
    (0.29
    )
    
    $
    0.37
    
    
    $
    (0.15
    )
 Rockville Financial, Inc.
    
    9




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##### Table of Contents



(1)
    
    Weighted-average shares outstanding for 2008 have been adjusted retrospectively
for restricted shares that were determined to be participating in accordance with
Financial Accounting Standards Board Staff Position EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1)(ASC 718). Treasury shares and unallocated common shares held by the ESOP 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. The 2008
shares outstanding of basic and dilutive shares were restated to comply with FSP EITF
03-6-1. For the three and nine month periods ended September 30, 2009, the Companys common
stock equivalents relate solely to stock options issued and
outstanding. Stock options that would have a dilutive effect on
diluted earnings per share are excluded from the calculation. For the
quarter ended September 30, 2009 and for the nine months ended
September 30, 2009, the number of shares excluded from the EPS
calculation were 426,694 and 405,259, respectively.
 3. Recent Accounting Pronouncements
 In June 2009, the FASB issued Financial Accounting Standard No. 168, The FASB
Accounting Standards
CodificationTM(ASC) and the Hierarchy of Generally
Accepted Accounting Principles  a replacement of FASB Statement No. 162 (FAS 168).In
addition, in June 2009, the FASB issued Accounting Standards Update No. 2009-01, ASC Topic
205  Generally Accepted Accounting Principles  amendments based on Statement of
Financial Accounting Standards No. 168  The FASB Accounting Standards
CodificationTMand the Hierarchy of Generally Accepted Accounting Principles
(ASU 2009-1). Both FAS 168 and ASU 2009-1 recognize the FASB Accounting Standards
CodificationTM as the source of authoritative U.S. generally accepted accounting
principles to be utilized by nongovernmental entities. FAS 168 and ASU 2009-1 are effective
for interim and annual periods ending after September 15, 2009.
 In May 2009, the FASB issued SFAS No. 165 Subsequent Events(SFAS No. 165) (ASC Topic 855).
SFAS No. 165 establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or are
available to be issued. The statement sets forth (1) the period after the balance sheet
date during which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial statements; (2) the
circumstances under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements and (3) the disclosure that an entity
should make about events or transactions that occurred after the balance sheet date. SFAS
No. 165 is effective for fiscal years and interim periods ending after June 15, 2009, and
shall be applied prospectively. The Company adopted this statement as of June 30, 2009 and
such adoption did not have an impact on the results of operations or financial position.
 In April 2009, the FASB issued FSP No. 115-2 (FSP 115-2), Recognition and Presentation of
Other-Than-Temporary Impairments(ASC Topic 320). FSP 115-2 amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more operational
and to improve the presentation and disclosure of other-than-temporary impairments on debt
and equity securities in the financial statements. FSP 115-2 does not amend existing
recognition and measurement guidance related to other-than-temporary impairments of equity
securities. FSP 115-2 is effective for interim and annual reporting periods ending after
June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The
Company applied the guidance contained in FSP 115-2 effective in January 2009 resulting in
a cumulative effect adjustment of $1.0 million ($1.6 million before taxes) that increased
retained earnings and increased accumulated other comprehensive loss.
 In April 2009, the FASB issued FSP No. 157-4 (FSP 157-4), Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly(ASC Topic 820). FSP 157-4 provides
additional guidance for estimating fair value in accordance with FASB Statement No. 157,
Fair Value Measurements, when the volume and level of activity for the asset or liability
have significantly decreased. This FSP also includes guidance on identifying circumstances
that indicate a transaction is not orderly. FSP 157-4 emphasizes that even if there has
been a significant decrease in the volume and level of activity for the asset or liability
and regardless of the valuation technique(s) used, the objective of a fair value
measurement remains the same. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between
market participants at the measurement date under current market conditions. FSP 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009, and shall be
applied prospectively.
 Rockville Financial, Inc.
    
    10




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##### Table of Contents



In April 2009, the FASB issued FSP No. 107-1 (FSP 107-1), Interim Disclosures about Fair
Value of Financial Instruments(ASC Topic 270). This FSP amends FASB Statement No. 107,
Disclosures about Fair Value of Financial Instruments, to require disclosures about fair
value of financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial information at
interim reporting periods. FSP 107-1 was effective for interim reporting periods ending
after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.
The adoption of this pronouncement did not have a material impact on the Companys
consolidated financial statements.
 In December 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) No. 132(R)-1, Employers Disclosures about Postretirement Benefit Plan
Assets (FSP 132(R)-1)(ASC Topic 715). This FASB staff position amends FASB Statement No.
132 to provide guidance on an employers disclosures about plan assets of a defined benefit
pension or other postretirement plan. FSP FAS 132(R)-1 requires disclosure of the fair
value of each major category of plan assets for pension plans and other postretirement
benefit plans. This FASB staff position becomes effective for the Company for the fiscal
year ending December 31, 2009. The Company is currently evaluating the impact of adopting
FSP FAS 132(R)-1 on the consolidated financial statements, but it is not expected to have a
material impact.
 In June 2008, the FASB issued Staff Position No. EITF 03-6-1 (FSP 03-6-1), Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities(ASC Topic 718), which addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and, therefore, need to
be included in the earnings allocation in computing earnings per share under the two-class
method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings Per Share. FSP
03-6-1 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period earnings per
share data presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings and selected financial data) to conform with the
provisions of FSP 03-6-1. Early application is not permitted. The adoption of FSP 03-6-1
did not have a material impact on the Companys consolidated financial statements.
 In April 2008, the FASB issued FSP No. 142-3 (FSP 142-3), Determination of the Useful
Life of Intangible Assets(ASC Topic 350). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). The intent of FSP 142-3 is to improve
the consistency between the useful life of a recognized intangible asset under SFAS No. 142
and the period of expected cash flows used to measure the fair value of the asset under
SFAS 141(R), Business Combinations, and other U.S. generally accepted accounting
principles. FSP 142-3 was effective January 1, 2009. The adoption of this pronouncement did
not have a material impact on the Companys consolidated financial statements.
 In March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133(ASC Topic
815). The Statement requires enhanced disclosures about an entitys derivative and hedging
activities and thereby improves the transparency of financial reporting. Entities are
required to provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are accounted for
under Statement 133 and its related interpretations, and (c) how derivative instruments and
related hedged items affect an entitys financial position, financial performance, and cash
flows. The Statement was effective January 1, 2009. The adoption of this pronouncement did
not have a material impact on the Companys consolidated financial statements.
 In December 2007, the FASB issued SFAS No. 141(revised 2007) (SFAS 141R), Business
Combinations(ASC Topic 805). The Statement requires that all business combinations be
accounted for under the acquisition method. The Statement requires that the assets,
liabilities and noncontrolling interests of a business combination be measured at fair
value at the acquisition date. The acquisition date is defined as the date an acquirer
obtains control of the entity, which is typically the closing date. The Statement requires
that all acquisition and restructuring related costs be expensed as incurred and that any
contingent consideration be measured at fair value and recorded as either
equity or a liability with the liability remeasured at fair value in subsequent periods.
The Statement was effective January 1, 2009. The adoption of this pronouncement
did not have a material impact on the Companys consolidated financial statements.
 Rockville Financial, Inc.
    
    11




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##### Table of Contents



In December 2007, the FASB issued SFAS No. 160 (SFAS 160), Noncontrolling Interests in
Consolidated FinancialStatementsan amendment to ARB No. 51(ASC Topic 810). The
Statement requires that a noncontrolling interest (formerly minority interest) be measured
at fair value at the acquisition date and be presented in the equity section on the balance
sheet. The Statement requires that purchases or sales of equity interests that do not
result in a change in control be accounted for as equity transactions with no resulting
gain or loss. If control is lost, the noncontrolling interest is remeasured to fair value
and a gain or loss is recorded. The Statement was effective January 1, 2009. The adoption
of this pronouncement did not have a material impact on the Companys consolidated
financial statements.
 4. Fair Value Measurements
 SFAS 157, Fair Value Measurements,(ASC 820) defines fair value, establishes a
framework for measuring the fair value of assets and liabilities based upon a three-tier
hierarchy, and expands disclosures about fair value measurements but does not expand the
use of fair value in any new circumstances. The fair value hierarchy is as follows:
 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. In recent
cases, 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 and 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
independent pricing models. 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 enterprises, mortgage-backed securities and corporate debt securities. Level 3
securities include thinly traded equity securities and a private placement security.
 Assets Recorded at Fair Value on a Recurring Basis:
 Fair Value MeasurementsAt September 30, 2009, Using:(In thousands)Quoted Prices in Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Total Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available for Sale Securities
    
    $
    107,761
    
    
    $
    15,836
    
    
    $
    89,949
    
    
    $
    1,976Total Assets Measured at Fair Value
    
    $
    107,761
    
    
    $
    15,836
    
    
    $
    89,949
    
    
    $
    1,976
 Rockville Financial, Inc.
    
    12




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##### Table of Contents



Fair Value MeasurementsAt December 31, 2008, Using:(In thousands)Quoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Total Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available for Sale Securities
    
    $
    141,250
    
    
    $
    14,958
    
    
    $
    124,178
    
    
    $
    2,114Total Assets Measured at Fair Value
    
    $
    141,250
    
    
    $
    14,958
    
    
    $
    124,178
    
    
    $
    2,114
 The changes in Level 3 assets measured at fair value on a recurring basis for the nine
months ended September 30, 2009 and the year ended December 31, 2008 are summarized in the
following tables:
 Investment Securities Available-for-Sale:
 For the nine months ended September 30, 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
    
    
    103Purchases, sales, issuances and settlements, net
    
    
    Transfers in and/or out of Level 3
    
    
    (241
    )Balance of recurring Level 3 assets at September 30, 2009
    
    $
    1,976
 For the nine months ended September 30, 2008
    
    (In thousands)Balance of recurring Level 3 assets at December 31, 2007
    
    $
    308Total gains or losses (realized/unrealized):Included in earnings-realized
    
    
    Included in earnings-unrealized
    
    
    (1,073
    )Included in other comprehensive income
    
    
    426Purchases, sales, issuances and settlements, net
    
    
    (8
    )Transfers in and/or out of Level 3
    
    
    2,440Balance of recurring Level 3 assets at September 30, 2008
    
    $
    2,093
 Items Measured at Fair Value on a Non-Recurring Basis:The following is a description of the valuation methodologies used for certain assets that
are recorded at fair value on a non-recurring basis:Impaired loans: FASB Statement No. 114 (SFAS 114) (ASC 310) Accounting by
Creditors for an Impairment of a Loan(ASC 310) requires 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 write-downs based upon observable market price or current
appraised value of the collateral. The Company records impaired loans as non-recurring
Level 3 fair value measurements.
 Rockville Financial, Inc.
    
    13




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Assets Recorded at Fair Value on a Non-recurring Basis:
  Fair Value MeasurementsAt September 30, 2009, Using:(In thousands)Quoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Impaired Loans
    
    $
    9,821
    
    
    
    $ 
    

    $ 



    $
    9,821Total Assets Measured at Fair Value
    
    $
    9,821
    
    
    
    $ 
    

    $ 
    
    
    $
    9,821
 Fair Value MeasurementsAt September 30, 2008, Using:(In thousands)Quoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsDescription
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Impaired Loans
    
    $
    6,621
    
    
    
    $ 
    

    $ 



    $
    6,621Total Assets Measured at Fair Value
    
    $
    6,621
    
    
    
    $ 
    

    $ 
    
    
    $
    6,621
   September 30, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    Carrying(In thousands)
    
    Value
    
    Fair Value
    
    Value
    
    Fair ValueFinancial assets:Cash and cash equivalents
    
    $
    17,016
    
    
    $
    17,016
    
    
    $
    14,901
    
    
    $
    14,901Available for sale securities
    
    
    107,761
    
    
    
    107,761
    
    
    
    141,250
    
    
    
    141,250Held to maturity securities
    
    
    20,314
    
    
    
    21,464
    
    
    
    24,138
    
    
    
    25,069Loans receivable-net(1)
    
    
    1,355,388
    
    
    
    1,348,767
    
    
    
    1,291,791
    
    
    
    1,286,887FHLBB stock
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007Accrued interest receivable
    
    
    4,667
    
    
    
    4,667
    
    
    
    4,636
    
    
    
    4,636Financial liabilities:Regular savings
    
    
    134,103
    
    
    
    134,103
    
    
    
    121,527
    
    
    
    121,527Money market and investment savings
    
    
    224,829
    
    
    
    224,829
    
    
    
    188,110
    
    
    
    188,110Demand and NOW
    
    
    235,241
    
    
    
    235,241
    
    
    
    203,056
    
    
    
    203,056Club accounts
    
    
    1,033
    
    
    
    1,033
    
    
    
    227
    
    
    
    227Time deposits
    
    
    530,448
    
    
    
    536,037
    
    
    
    529,588
    
    
    
    538,262Mortgagors and investors escrow accounts
    
    
    3,169
    
    
    
    3,169
    
    
    
    6,077
    
    
    
    6,077Advances from FHLBB
    
    
    265,851
    
    
    
    281,763
    
    
    
    322,882
    
    
    
    335,043
 
 (1)
    
    Loans receivable-net includes loans held for sale Rockville Financial, Inc.
    
    14




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5. Investment Securities
  Amortized
    
    
    Gross UnrealizedSeptember 30, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Available for sale:U.S. Government and agency obligations
    
    $
    6,999
    
    
    $
    61
    
    
    $
    
    
    
    $
    7,060Residential mortgage-backed securities
    
    
    77,490
    
    
    
    3,834
    
    
    
    2
    
    
    
    81,322Corporate debt securities
    
    
    5,884
    
    
    
    
    
    
    
    1,145
    
    
    
    4,739Other debt securities
    
    
    723
    
    
    
    11
    
    
    
    
    
    
    
    734Total debt securities
    
    
    91,096
    
    
    
    3,906
    
    
    
    1,147
    
    
    
    93,855Marketable equity securities
    
    
    10,502
    
    
    
    3,670
    
    
    
    266
    
    
    
    13,906Total available for sale
    
    $
    101,598
    
    
    $
    7,576
    
    
    $
    1,413
    
    
    $
    107,761Held to maturity:Residential mortgage-backed securities
    
    $
    20,314
    
    
    $
    1,150
    
    
    $
    
    
    
    $
    21,464Total held to maturity
    
    $
    20,314
    
    
    $
    1,150
    
    
    $
    
    
    
    $
    21,464
 Amortized
    
    
    Gross UnrealizedDecember 31, 2008
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Available for sale:U.S. Government and agency obligations
    
    $
    2,031
    
    
    $
    17
    
    
    $
    
    
    
    $
    2,048Residential mortgage-backed securities
    
    
    117,517
    
    
    
    3,222
    
    
    
    344
    
    
    
    120,395Corporate debt securities
    
    
    4,831
    
    
    
    56
    
    
    
    
    
    
    
    4,887Other debt securities
    
    
    725
    
    
    
    14
    
    
    
    
    
    
    
    739Total debt securities
    
    
    125,104
    
    
    
    3,309
    
    
    
    344
    
    
    
    128,069Marketable equity securities
    
    
    10,437
    
    
    
    3,011
    
    
    
    508
    
    
    
    12,940Other equity securities
    
    
    241
    
    
    
    
    
    
    
    
    
    
    
    241Total available for sale
    
    $
    135,782
    
    
    $
    6,320
    
    
    $
    852
    
    
    $
    141,250Held to maturity:Residential mortgage-backed securities
    
    $
    24,138
    
    
    $
    931
    
    
    $
    
    
    
    $
    25,069Total held to maturity
    
    $
    24,138
    
    
    $
    931
    
    
    $
    
    
    
    $
    25,069
  Rockville Financial, Inc.
    
    15




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Available for Sale
    
    
    Held to MaturitySeptember 30, 2009
    
    
    September 30, 2009Amortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(In thousands)Maturity:Within 1 year
    
    $
    2,001
    
    
    $
    2,002
    
    
    $
    
    
    
    $
    After 1 but within 5
    
    
    8,046
    
    
    
    7,894
    
    
    
    
    
    
    
    After 5 but within 10 years
    
    
    723
    
    
    
    734
    
    
    
    
    
    
    
    After 10 years
    
    
    2,836
    
    
    
    1,903
    
    
    
    
    
    
    
    13,606
    
    
    
    12,533
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    77,490
    
    
    
    81,322
    
    
    
    20,314
    
    
    
    21,464$
    91,096
    
    
    $
    93,855
    
    
    $
    20,314
    
    
    $
    21,464
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedSeptember 30, 2009
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss(In thousands)Available for sale:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    192
    
    
    $
    2
    
    
    $
    192
    
    
    $
    2Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    4,639
    
    
    
    1,145
    
    
    
    4,639
    
    
    
    1,145Total debt securities
    
    
    
    
    
    
    
    
    
    
    4,831
    
    
    
    1,147
    
    
    
    4,831
    
    
    
    1,147Marketable equity securities
    
    
    1,583
    
    
    
    145
    
    
    
    1,046
    
    
    
    121
    
    
    
    2,629
    
    
    
    266Total
    
    $
    1,583
    
    
    $
    145
    
    
    $
    5,877
    
    
    $
    1,268
    
    
    $
    7,460
    
    
    $
    1,413
 Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2008
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss(In thousands)Available for sale:Mortgage-backed securities
    
    $
    13,188
    
    
    $
    331
    
    
    $
    368
    
    
    $
    13
    
    
    $
    13,556
    
    
    $
    344Total debt securities
    
    
    13,188
    
    
    
    331
    
    
    
    368
    
    
    
    13
    
    
    
    13,556
    
    
    
    344Marketable equity
securities
    
    
    4,135
    
    
    
    460
    
    
    
    44
    
    
    
    48
    
    
    
    4,179
    
    
    
    508Total
    
    $
    17,323
    
    
    $
    791
    
    
    $
    412
    
    
    $
    61
    
    
    $
    17,735
    
    
    $
    852
 Mortgage-backed securities
 Corporate
Debt Securities.
 Rockville Financial, Inc.
    
    16




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Marketable Equity Securities.
     Rockville Financial, Inc.
    
    17




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6. Loans Receivable and Allowance for Loan Losses
  September 30, 2009
    
    
    December 31, 2008(In thousands)Real estate loans:Residential
    
    $
    752,722
    
    
    $
    746,041Commercial
    
    
    418,104
    
    
    
    351,474Construction
    
    
    76,686
    
    
    
    89,099Commercial business loans
    
    
    111,193
    
    
    
    106,684Installment, collateral and
other loans
    
    
    8,401
    
    
    
    9,629Total loans
    
    
    1,367,106
    
    
    
    1,302,927Net deferred loan costs and
premiums
    
    
    768
    
    
    
    1,417Allowance for loan losses
    
    
    (12,610
    )
    
    
    (12,553
    )Loans, net
    
    $
    1,355,264
    
    
    $
    1,291,791
 Non-performing Assets:
 September 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Nonaccrual loans:Residential real estate(1)
    
    $
    3,635
    
    
    $
    2,607Commercial real estate
    
    
    5,707
    
    
    
    2,726Construction
    
    
    6,104
    
    
    
    4,385Commercial business loans
    
    
    56
    
    
    
    334Installment, collateral and other loans
    
    
    14
    
    
    
    11Total nonaccrual loans(2)
    
    
    15,516
    
    
    
    10,063Accruing loan past due 90 days or more
    
    
    
    
    
    
    Troubled debt restructurings
    
    
    
    
    
    
    372Total non-performing loans
    
    
    15,516
    
    
    
    10,435Real estate owned
    
    
    2,155
    
    
    
    Total non-performing assets
    
    $
    17,671
    
    
    $
    10,435Total non-performing loans to total loans
    
    
    1.13
    %
    
    
    0.80
    %Total non-performing assets to total assets
    
    
    1.13
    %
    
    
    0.68
    %Allowance for loan losses as a percent of total loans
    
    
    0.92
    %
    
    
    0.96
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    81.27
    %
    
    
    120.30
    %
 
 (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
nonaccrual loans totaled $459,000 and $237,000 at September 30, 2009 and December 31,
2008, respectively. Rockville Financial, Inc.
    
    18




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##### Table of Contents



For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Balance, beginning of period
    
    $
    13,060
    
    
    $
    10,915
    
    
    $
    12,553
    
    
    $
    10,620Provision for loan losses
    
    
    700
    
    
    
    700
    
    
    
    1,303
    
    
    
    949Loans charged-off
    
    
    (1,156
    )
    
    
    (405
    )
    
    
    (1,378
    )
    
    
    (498
    )Recoveries of loans previously charged off
    
    
    6
    
    
    
    10
    
    
    
    132
    
    
    
    149Balance, end of period
    
    $
    12,610
    
    
    $
    11,220
    
    
    $
    12,610
    
    
    $
    11,220
  Rockville Financial, Inc.
    
    19




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##### Table of Contents



7. Benefit Plans
  Components of Net Periodic Benefit Cost
 Pension Plans
    
    
    Post-Retirement BenefitsThree Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Service cost
    
    $
    223
    
    
    $
    218
    
    
    $
    3
    
    
    $
    2Interest cost
    
    
    310
    
    
    
    276
    
    
    
    27
    
    
    
    25Expected return on
plan assets
    
    
    (263
    )
    
    
    (334
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    239
    
    
    
    92
    
    
    
    6
    
    
    
    5Amortization of prior
service cost
    
    
    81
    
    
    
    78
    
    
    
    5
    
    
    
    4Net periodic benefit cost
    
    $
    590
    
    
    $
    330
    
    
    $
    41
    
    
    $
    36
 Pension Plans
    
    
    Post-retirement BenefitsNine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Service cost
    
    $
    682
    
    
    $
    652
    
    
    $
    8
    
    
    $
    7Interest cost
    
    
    927
    
    
    
    847
    
    
    
    80
    
    
    
    74Expected return on
plan assets
    
    
    (788
    )
    
    
    (1,002
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    717
    
    
    
    316
    
    
    
    19
    
    
    
    14Amortization of prior
service cost
    
    
    240
    
    
    
    234
    
    
    
    15
    
    
    
    14Amount recognized due to
settlement
    
    
    
    
    
    
    118
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    1,778
    
    
    $
    1,165
    
    
    $
    122
    
    
    $
    109
    Rockville Financial, Inc.
    
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8. Stock-Based Compensation
   Stock Options:
 Weighted Average
    
    
    AggregateWeighted
    
    
    Remaining
    
    
    IntrinsicStock
    
    
    Average
    
    
    Contractual Term
    
    
    ValueOptions
    
    
    Exercise Price
    
    
    (in years)
    
    
    (In thousands)Stock options outstanding at December 31, 2008
    
    
    342,125
    
    
    $
    14.74Granted
    
    
    126,250
    
    
    
    9.24Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (22,500
    )
    
    
    14.70Stock options outstanding at September 30, 2009
    
    
    445,875
    
    
    $
    13.18
    
    
    
    8.2
    
    
    $
    191Options exercisable at September 30, 2009
    
    
    325,340
    
    
    $
    14.09
    
    
    
    7.9
    
    
    $
    
    Rockville Financial, Inc.
    
    21




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##### Table of Contents



2009
    
    
    2008Weighted average per share fair value of
options granted
    
    $
    3.05
    
    
    $
    2.72Assumptions:Risk free interest rate
    
    
    2.23
    %
    
    
    3.24
    %Expected volatility
    
    
    39.85
    %
    
    
    22.11
    %Expected dividend yield
    
    
    2.16
    %
    
    
    1.67
    %Expected life of options granted
    
    6 years
    
    6 years
        Restricted Stock:
  Weighted AverageNumber
    
    
    Grant-of Shares
    
    
    Date Fair ValueUnvested as of December 31, 2008
    
    
    67,580
    
    
    $
    15.23Granted
    
    
    16,427
    
    
    
    9.24Vested
    
    
    (12,627
    )
    
    
    10.46Forfeited
    
    
    (9,200
    )
    
    
    13.57Unvested as of September 30, 2009
    
    
    62,180
    
    
    $
    14.86
   9. Income Taxes
   Rockville Financial, Inc.
    
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##### Table of Contents



10.
    
    Accumulated Other Comprehensive (Loss) IncomeComponents of accumulated other comprehensive (loss) income, net of taxes, consist of
the following:
 Unrealized Gain
    
    
    AccumulatedMinimum
    
    
    on Available
    
    
    OtherPension
    
    
    -For-Sale
    
    
    ComprehensiveLiability
    
    
    Securities
    
    
    (Loss) Income(In thousands)December 31, 2008
    
    $
    (7,702
    )
    
    $
    3,609
    
    
    $
    (4,093
    )Change
    
    
    654
    
    
    
    1,493
    
    
    
    2,147Cumulative effect
adjustment of a
change in accounting
principle, the
adoption of FSP FAS
115-2 (ASC 320)
    
    
    
    
    
    
    (1,034
    )
    
    
    (1,034
    )September 30, 2009
    
    $
    (7,048
    )
    
    $
    4,068
    
    
    $
    (2,980
    )
 The following table summarizes other comprehensive income and the related tax effects for
the three and nine months ended September 30, 2009 and 2008:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Unrealized gain (loss) on
securities available for sale
    
    
    1,471
    
    
    
    (10,315
    )
    
    
    2,841
    
    
    
    (13,891
    )Realized losses (gains) on securities
    
    
    
    
    
    
    11,385
    
    
    
    (579
    )
    
    
    12,269Income tax provision (expense) benefit
    
    
    (500
    )
    
    
    (364
    )
    
    
    (769
    )
    
    
    551Net unrealized gain (loss) on securities
available for sale
    
    
    971
    
    
    
    706
    
    
    
    1,493
    
    
    
    (1,071
    )Amortization of unamortized benefit plans
    
    
    331
    
    
    
    180
    
    
    
    991
    
    
    
    824Income tax provision (expense)
    
    
    (112
    )
    
    
    (61
    )
    
    
    (337
    )
    
    
    (280
    )Net amortization of unamortized benefit
plans
    
    
    218
    
    
    
    119
    
    
    
    654
    
    
    
    544Total other comprehensive income (loss),
net of tax
    
    
    1,190
    
    
    
    825
    
    
    
    2,147
    
    
    
    (527
    )Total comprehensive income (loss)
    
    $
    3,530
    
    
    $
    (4,477
    )
    
    $
    8,997
    
    
    $
    (3,281
    )
 11.
    
    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.
 Rockville Financial, Inc.
    
    23




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##### Table of Contents



Financial instruments whose contract amounts represent credit risk are as follows at
September 30, 2009 and December 31, 2008:
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Commitments to extend credit:Future loan commitments
    
    $
    51,262
    
    
    $
    48,743Undisbursed construction loans
    
    
    70,116
    
    
    
    93,905Undisbursed home equity lines of credit
    
    
    122,411
    
    
    
    113,725Undisbursed commercial lines of credit
    
    
    53,351
    
    
    
    58,605Standby letters of credit
    
    
    10,827
    
    
    
    12,231Unused checking overdraft lines of credit
    
    
    95
    
    
    
    112$
    308,062
    
    
    $
    327,321
 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.12.
    
    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. The Bank was classified at its most recent notification as well capitalized. At
September 30, 2009, 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 September 30, 2009 and December 31, 2008 compared to the Federal Deposit
Insurance Corporations requirements for classification as a well-capitalized institution
and for minimum capital adequacy:
 Rockville Financial, Inc.
    
    24




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##### Table of Contents



To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Rockville Bank:September 30, 2009Total capital to risk weighted assets
    
    $
    155,971
    
    
    
    13.0
    %
    
    $
    95,982
    
    
    
    8.0
    %
    
    $
    119,978
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    142,695
    
    
    
    11.9
    
    
    
    47,965
    
    
    
    4.0
    
    
    
    71,947
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    142,695
    
    
    
    9.3
    
    
    
    61,374
    
    
    
    4.0
    
    
    
    76,718
    
    
    
    5.0Rockville Bank:December 31, 2008Total capital to risk weighted assets
    
    $
    147,898
    
    
    
    12.8
    %
    
    $
    92,436
    
    
    
    8.0
    %
    
    $
    115,545
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    134,621
    
    
    
    11.7
    
    
    
    46,024
    
    
    
    4.0
    
    
    
    69,036
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    134,621
    
    
    
    8.8
    
    
    
    61,191
    
    
    
    4.0
    
    
    
    76,489
    
    
    
    5.0Rockville Financial, Inc.:September 30, 2009Total capital to risk weighted assets
    
    $
    168,148
    
    
    
    14.0
    %
    
    $
    96,085
    
    
    
    8.0
    %
    
    
    n/a
    
    
    
    n/aTier 1 capital to risk weighted assets
    
    
    154,872
    
    
    
    12.9
    
    
    
    48,022
    
    
    
    4.0
    
    
    
    n/a
    
    
    
    n/aTier 1 capital to total average assets
    
    
    154,872
    
    
    
    10.0
    
    
    
    61,949
    
    
    
    4.0
    
    
    
    n/a
    
    
    
    n/aRockville Financial, Inc.:December 31, 2008Total capital to risk weighted assets
    
    $
    162,068
    
    
    
    14.2
    %
    
    $
    91,306
    
    
    
    8.0
    %
    
    
    n/a
    
    
    
    n/aTier 1 capital to risk weighted assets
    
    
    148,791
    
    
    
    12.9
    
    
    
    46,137
    
    
    
    4.0
    
    
    
    n/a
    
    
    
    n/aTier 1 capital to total average assets
    
    
    148,791
    
    
    
    10.4
    
    
    
    57,227
    
    
    
    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 September 30, 2009, $13.6
million was available for payment of dividends.A reconciliation of the Companys capital to regulatory capital is as follows:
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Total capital per financial statements
    
    $
    153,007
    
    
    $
    145,777Accumulated other comprehensive loss
    
    
    2,980
    
    
    
    4,093Intangible assets
    
    
    (1,070
    )
    
    
    (1,070
    )Servicing assets
    
    
    (45
    )
    
    
    (9
    )Total Tier 1 capital
    
    
    154,872
    
    
    
    148,791Allowance for loan and other losses
includible capital
    
    
    13,276
    
    
    
    13,277Total capital per regulatory reporting
    
    $
    168,148
    
    
    $
    162,068
 13.
    
    SUBSEQUENT EVENTSOn September 21, 2009, the Company entered into an agreement to purchase the assets of
Family Choice Mortgage Company, a privately held Massachusetts mortgage origination
corporation operating in Massachusetts and Connecticut. The acquisition is to expand the
Banks mortgage origination business. The transaction is expected to close in the first
quarter of 2010.
 Rockville Financial, Inc.
    
    25




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##### Table of Contents



Management evaluated all events or transactions that occurred after September 30, 2009 up
through November 9, 2009, the date the Company issued these financial statements. During
this period, the Company did not have any material recognized or unrecognized subsequent
events.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking StatementsThis Form 10-Q contains forward-looking statements that are within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are based upon the
current beliefs and expectations of our management and are subject to significant risks and
uncertainties. These risks and uncertainties could cause our results to differ materially
from those set forth in such forward-looking statements.Forward-looking statements can be identified by the fact that they do not relate strictly
to historical or current facts. Words such as believes, anticipates, expects,
intends, plans, estimates, targeted and similar expressions, and future or
conditional verbs, such as will, would, should, could or may are intended to
identify forward-looking statements but are not the only means to identify these
statements.Forward-looking statements involve risks and uncertainties. Actual conditions, events or
results may differ materially from those contemplated by a forward-looking statement.Factors that could cause this difference  many of which are beyond our control  include
without limitation the following:
 
    
    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.
    
    We recently opened new branches which may not become profitable as soon as
anticipated, if at all.
    
    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 might not be able to exercise voting control over most
matters put to a vote of stockholders.
    
    When we declare dividends on our common stock, Rockville Financial MHC, Inc.
might be prohibited from waiving the receipt of dividends by current Federal
Reserve Board policy.
 Rockville Financial, Inc.
    
    26




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##### Table of Contents




    
    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 is expected to have a
profound effect on the financial services industry. The effect of programs
developed under EESA, including the Troubled Asset Recovery and Capital Purchase
Programs in which we presently have no intention to participate, could
dramatically change the competitive environment in which we operate.
 Any forward-looking statements made by or on behalf of us in this Form 10-Q speak only as
of the date of this Form 10-Q. We do not undertake to update forward-looking statements to
reflect the impact of circumstances or events that arise after the date the forward-looking
statement was made. The reader should; however, consult any further disclosures of a
forward-looking nature we may make in future filings.OverviewRockville Financial, Inc. (the Company) is a state-chartered mid-tier stock holding
company formed on December 17, 2004. Rockville Financial MHC, Inc. holds fifty-five percent
of the Companys common stock, and the Company holds all the common stock of Rockville Bank
(the Bank). The Companys common stock trades on the NASDAQ Global Select Stock Market
under the symbol RCKB. The closing price on September 30, 2009 was $10.75 per share. The
Bank provides a full range of banking services to consumer and commercial customers through
its main office in Rockville and twenty one branches located in Hartford, New London and
Tolland Counties in Connecticut. The Banks deposits are insured under the Deposit
Insurance Fund, which is administered by the Federal Deposit Insurance Corporation.In September 2009, the Company opened a special needs limited branch on the premises of
South Windsor High School and services the needs of students and faculty of the school.
The purpose of establishing the branch is to provide students with financial education in
bank operations, principles of financial management and the benefits of saving for the
future. The Company strives to remain a leader in meeting the financial service needs of
the local community and to provide quality service to the individuals and businesses in the
market areas that it has served since 1858. Rockville Bank is a community-oriented provider
of traditional banking products and services to business organizations and individuals,
offering products such as residential and commercial real estate loans, consumer loans and
a variety of deposit products. Our business philosophy is to remain a community-oriented
franchise and continue to focus on providing superior customer service to meet the
financial needs of the communities in which we operate. Current strategies include
expanding our banking network by pursuing new branch locations and branch acquisition
opportunities in our market area, continuing our residential mortgage lending activities
which comprise a majority of our loan portfolio and expanding our commercial real estate
and commercial business lending activities.Critical Accounting PoliciesThe accounting policies followed by the Company and its subsidiaries conform with
accounting principles generally accepted in the United States of America and with general
practices within the banking industry.Critical accounting policies are defined as those that are reflective of significant
judgments and uncertainties, and could potentially result in materially different results
under different assumptions and conditions. We believe that our most critical accounting
policies, which involve the most complex subjective decisions or assessments, relate to
allowance for loan losses, derivative financial instruments, other-than-temporary
impairment of investment securities, income taxes, pension and other post-retirement
benefits and stock compensation.
 Rockville Financial, Inc.
    
    27




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##### Table of Contents



Allowance for Loan Losses:The allowance for loan losses is the amount estimated
by management as necessary to cover probable credit losses inherent in the loan portfolio
at the balance sheet date. The allowance is established through the provision for loan
losses which is charged against income. Management believes the policy is critical because
determination of the amount of the allowance involves significant judgments and
assumptions.Management performs a quarterly evaluation of the adequacy of the allowance for loan losses
and presents the evaluation to both the Board Lending Committee and the Board of Directors.
In addition, the credit area of the Bank is responsible for the accuracy of loan risk
ratings and prepares an Asset Quality Report on a quarterly basis and provides summary
reports to the Board Lending Committee on a monthly basis. A variety of factors are
considered in establishing this estimate including, but not limited to, historical loss and
charge off data, current economic conditions, historical and current delinquency
statistics, geographic and industry concentrations, the adequacy of the underlying
collateral, the financial strength of our borrowers, results of internal and external loan
reviews and other relevant factors. This evaluation is inherently subjective as it requires
material estimates by management that may be susceptible to significant change.The analysis has two components: specific and general allowances. The specific allowance
relates to loans classified as impaired where an allowance is measured by determining an
expected shortfall in collection or, for collateral-dependent loans, the shortfall of the
fair value of the collateral adjusted for market conditions and selling expenses compared
to the outstanding loan balance. The general allowance is determined by segregating the
remaining loans by type of loan, risk weighting (if applicable) and payment history.
Historical loss experience, delinquency trends, general economic conditions and geographic
and industry concentrations are also considered. This analysis establishes factors that are
applied to the loan groups to determine the amount of this component of the allowance.Other-than-Temporary Impairment of Securities:On a quarterly basis, securities with
unrealized losses are reviewed as deemed appropriate to assess whether the decline in fair
value is temporary or other-than-temporary. It is assessed whether the decline in value is
from company-specific events, industry developments, general economic conditions, credit
losses on debt or other reasons. After the reasons for the decline are identified, further
judgments are required as to whether those conditions are likely to reverse and, if so,
whether that reversal is likely to result in a recovery of the fair value of the investment
in the near term. If it is judged not to be near term, a charge is taken which results in a
new cost basis. Declines in the fair value of available for sale securities below their
cost that are deemed to be other-than-temporary are reflected in earnings for equity
securities and for debt securities that have a credit component to their unrealized loss.
Debt securities with a non-credit component to their unrealized loss are reflected in other
comprehensive income. Held to maturity securities are comprised of US government agency
securities with no unrealized losses at September 30, 2009. 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 net
income.Income Taxes:The Company recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Deferred tax assets are reduced by
an allowance when, in the opinion of management, it is more likely than not that all or
some portion of the deferred tax assets will not be realized. The Company has not provided
for Connecticut state income taxes since December 31, 1998 because it has created and
maintained a passive investment company (PIC), as permitted by Connecticut law. The
Company believes it is in compliance with the state PIC requirements and that no state
taxes are due from December 31, 1999 through September 30, 2009; however, the Company has
not been audited by the Department of Revenue Services for such periods. If the state were
to determine that the PIC was not in compliance with statutory requirements, a material
amount of taxes could be due. As of September 30, 2009, management believes it is more
likely than not that the deferred tax assets will be realized through future reversals of
existing taxable temporary differences. As of September 30, 2009, our net deferred tax
asset was $11.0 million and there was no valuation allowance.Pension and Other Post-retirement Benefits:We have a noncontributory defined benefit
pension plan that provides benefits for substantially all employees hired before January 1,
2005 who meet
 Rockville Financial, Inc.
    
    28




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##### Table of Contents



Stock Compensation:
 Comparison of Operating Results for the Three and Nine Months Ended September 30, 2009 and
2008
  Rockville Financial, Inc.
    
    29




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##### Table of Contents



Income Statement Summary
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(In thousands)Net interest income
    
    $
    11,300
    
    
    $
    11,204
    
    
    $
    96
    
    
    $
    33,864
    
    
    $
    31,184
    
    
    $
    2,680Provision for loan losses
    
    
    700
    
    
    
    700
    
    
    
    
    
    
    
    1,303
    
    
    
    949
    
    
    
    354Non-interest income (loss)
    
    
    1,809
    
    
    
    (9,955
    )
    
    
    11,764
    
    
    
    5,382
    
    
    
    (8,201
    )
    
    
    13,583Non-interest expense
    
    
    8,842
    
    
    
    8,233
    
    
    
    609
    
    
    
    27,661
    
    
    
    25,933
    
    
    
    1,728Income (loss) before income
taxes
    
    
    3,567
    
    
    
    (7,684
    )
    
    
    11,251
    
    
    
    10,282
    
    
    
    (3,899
    )
    
    
    14,181Income tax provision (benefit)
    
    
    1,227
    
    
    
    (2,382
    )
    
    
    3,609
    
    
    
    3,432
    
    
    
    (1,145
    )
    
    
    4,577Net income (loss)
    
    $
    2,340
    
    
    $
    (5,302
    )
    
    $
    7,642
    
    
    $
    6,850
    
    
    $
    (2,754
    )
    
    $
    9,604
   Net Interest Income Analysis
 Average Balance Sheets, Interest and Yields/Costs:
 Rockville Financial, Inc.
    
    30




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##### Table of Contents



Three Months Ended September 30,2009
    
    
    2008Average
    
    
    Interest and
    
    
    Yield/
    
    
    Average
    
    
    Interest and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,334,786
    
    
    $
    17,222
    
    
    
    5.16
    %
    
    $
    1,215,459
    
    
    $
    17,266
    
    
    
    5.68
    %Investment securities
    
    
    128,723
    
    
    
    1,461
    
    
    
    4.54
    
    
    
    184,930
    
    
    
    2,316
    
    
    
    5.01Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    
    
    
    
    
    
    
    
    14,748
    
    
    
    93
    
    
    
    2.52Other earning assets
    
    
    1,709
    
    
    
    1
    
    
    
    0.23
    
    
    
    1,611
    
    
    
    1
    
    
    
    0.25Total interest-earning assets
    
    
    1,482,225
    
    
    
    18,684
    
    
    
    5.04
    
    
    
    1,416,748
    
    
    
    19,676
    
    
    
    5.56Non-interest-earning assets
    
    
    59,772
    
    
    
    
    
    
    
    
    
    
    
    60,549Total assets
    
    $
    1,541,997
    
    
    
    
    
    
    
    
    
    
    $
    1,477,297Interest-bearing liabilities:NOW and money market accounts
    
    $
    322,846
    
    
    
    578
    
    
    
    0.72
    
    
    $
    264,788
    
    
    
    1,218
    
    
    
    1.84Savings accounts (5)
    
    
    136,585
    
    
    
    149
    
    
    
    0.44
    
    
    
    128,973
    
    
    
    204
    
    
    
    0.63Time deposits
    
    
    529,702
    
    
    
    4,080
    
    
    
    3.08
    
    
    
    493,085
    
    
    
    4,266
    
    
    
    3.46Total interest-bearing deposits
    
    
    989,133
    
    
    
    4,807
    
    
    
    1.94
    
    
    
    886,846
    
    
    
    5,688
    
    
    
    2.57Advances from the Federal Home Loan Bank
    
    
    256,485
    
    
    
    2,577
    
    
    
    4.02
    
    
    
    313,480
    
    
    
    2,784
    
    
    
    3.55Total interest-bearing liabilities
    
    
    1,245,618
    
    
    
    7,384
    
    
    
    2.37
    %
    
    
    1,200,326
    
    
    
    8,472
    
    
    
    2.82
    %Non-interest-bearing liabilities
    
    
    143,844
    
    
    
    
    
    
    
    
    
    
    
    123,415Total liabilities
    
    
    1,389,462
    
    
    
    
    
    
    
    
    
    
    
    1,323,741Stockholders equity
    
    
    152,535
    
    
    
    
    
    
    
    
    
    
    
    153,556Total liabilities and stockholders
equity
    
    $
    1,541,997
    
    
    
    
    
    
    
    
    
    
    $
    1,477,297Net interest income
    
    
    
    
    
    $
    11,300
    
    
    
    
    
    
    
    
    
    
    $
    11,204Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.67
    %
    
    
    
    
    
    
    
    
    
    
    2.74
    %Net interest-earning assets (3)
    
    $
    236,607
    
    
    
    
    
    
    
    
    
    
    $
    216,422Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.05
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    119.00
    %
    
    
    
    
    
    
    
    
    
    
    118.03
    %
 
 (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. Rockville Financial, Inc.
    
    31




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##### Table of Contents



Nine Months Ended September 30,2009
    
    
    2008Average
    
    
    Interest and
    
    
    Yield/
    
    
    Average
    
    
    Interest and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,325,770
    
    
    $
    51,965
    
    
    
    5.23
    %
    
    $
    1,164,667
    
    
    $
    50,662
    
    
    
    5.80
    %Investment securities
    
    
    145,453
    
    
    
    5,156
    
    
    
    4.73
    
    
    
    169,189
    
    
    
    6,490
    
    
    
    5.11Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    
    
    
    
    
    
    
    
    12,868
    
    
    
    377
    
    
    
    3.91Other earning assets
    
    
    1,048
    
    
    
    1
    
    
    
    0.13
    
    
    
    2,704
    
    
    
    33
    
    
    
    1.63Total interest-earning assets
    
    
    1,489,278
    
    
    
    57,122
    
    
    
    5.11
    
    
    
    1,349,428
    
    
    
    57,562
    
    
    
    5.69Non-interest-earning assets
    
    
    58,746
    
    
    
    
    
    
    
    
    
    
    
    58,053Total assets
    
    $
    1,548,024
    
    
    
    
    
    
    
    
    
    
    $
    1,407,481Interest-bearing liabilities:NOW and money market accounts
    
    $
    305,119
    
    
    
    2,017
    
    
    
    0.88
    
    
    $
    243,214
    
    
    
    3,581
    
    
    
    1.96Savings accounts (5)
    
    
    134,551
    
    
    
    475
    
    
    
    0.47
    
    
    
    128,521
    
    
    
    614
    
    
    
    0.64Time deposits
    
    
    529,451
    
    
    
    12,947
    
    
    
    3.26
    
    
    
    515,159
    
    
    
    14,979
    
    
    
    3.88Total interest-bearing deposits
    
    
    969,121
    
    
    
    15,439
    
    
    
    2.12
    
    
    
    886,894
    
    
    
    19,174
    
    
    
    2.88Advances from the Federal Home Loan Bank292,320
    
    
    
    7,819
    
    
    
    3.57
    
    
    
    247,506
    
    
    
    7,204
    
    
    
    3.88Total interest-bearing liabilities
    
    
    1,261,441
    
    
    
    23,258
    
    
    
    2.46
    %
    
    
    1,134,400
    
    
    
    26,378
    
    
    
    3.10
    %Non-interest-bearing liabilities
    
    
    137,014
    
    
    
    
    
    
    
    
    
    
    
    116,978Total liabilities
    
    
    1,398,455
    
    
    
    
    
    
    
    
    
    
    
    1,251,378Stockholders Equity
    
    
    149,569
    
    
    
    
    
    
    
    
    
    
    
    156,103Total liabilities and stockholders
equity
    
    $
    1,548,024
    
    
    
    
    
    
    
    
    
    
    $
    1,407,481Net interest income
    
    
    
    
    
    $
    33,864
    
    
    
    
    
    
    
    
    
    
    $
    31,184Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.65
    %
    
    
    
    
    
    
    
    
    
    
    2.59
    %Net interest-earning assets (3)
    
    $
    227,837
    
    
    
    
    
    
    
    
    
    
    $
    215,028Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.03
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.06
    %
    
    
    
    
    
    
    
    
    
    
    118.96
    %
 
 (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. Rockville Financial, Inc.
    
    32




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##### Table of Contents



Rate-Volume Analysis
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Compared to
    
    
    Compared toSeptember 30, 2008
    
    
    September 30, 2008Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)Due To
    
    
    
    
    

    
    Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In thousands)Interest and dividend income:Loans receivable
    
    $
    6,527
    
    
    $
    (6,571
    )
    
    $
    (44
    )
    
    $
    4,574
    
    
    $
    (3,271
    )
    
    $
    1,303Securities interest, dividends &
income from other assets
    
    
    (577
    )
    
    
    (371
    )
    
    
    (948
    )
    
    
    (741
    )
    
    
    (1,002
    )
    
    
    (1,743
    )Total earning assets
    
    
    5,950
    
    
    
    (6,942
    )
    
    
    (992
    )
    
    
    3,833
    
    
    
    (4,273
    )
    
    
    (440
    )Interest expense:NOW and money market accounts
    
    
    358
    
    
    
    (998
    )
    
    
    (640
    )
    
    
    1,342
    
    
    
    (2,906
    )
    
    
    (1,564
    )Savings accounts
    
    
    13
    
    
    
    (68
    )
    
    
    (55
    )
    
    
    30
    
    
    
    (169
    )
    
    
    (139
    )Time deposits
    
    
    390
    
    
    
    (576
    )
    
    
    (186
    )
    
    
    430
    
    
    
    (2,462
    )
    
    
    (2,032
    )Total interest-bearing deposits
    
    
    761
    
    
    
    (1,642
    )
    
    
    (881
    )
    
    
    1,802
    
    
    
    (5,537
    )
    
    
    (3,735
    )FHLB Advances
    
    
    (746
    )
    
    
    539
    
    
    
    (207
    )
    
    
    1,113
    
    
    
    (498
    )
    
    
    615Total interest-bearing liabilities
    
    
    15
    
    
    
    (1,103
    )
    
    
    (1,088
    )
    
    
    2,915
    
    
    
    (6,035
    )
    
    
    (3,120
    )Change in net interest income
    
    $
    5,935
    
    
    $
    (5,839
    )
    
    $
    96
    
    
    $
    918
    
    
    $
    1,762
    
    
    $
    2,680
 Net Interest Income:
  Rockville Financial, Inc.
    
    33




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##### Table of Contents



Interest and Dividend Income:
  Interest Expense:
 Rockville Financial, Inc.
    
    34




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##### Table of Contents



Provision for Loan Losses:
 Non-interest Income:
   Rockville Financial, Inc.
    
    35




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##### Table of Contents



Non-interest
Expense:
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(In thousands)Salaries and employee benefits
    
    $
    4,710
    
    
    $
    4,083
    
    
    $
    627
    
    
    $
    14,092
    
    
    $
    13,649
    
    
    $
    443Service bureau fees
    
    
    952
    
    
    
    943
    
    
    
    9
    
    
    
    2,924
    
    
    
    2,810
    
    
    
    114Occupancy and equipment
    
    
    1,127
    
    
    
    1,062
    
    
    
    65
    
    
    
    3,324
    
    
    
    3,095
    
    
    
    229Professional fees
    
    
    202
    
    
    
    377
    
    
    
    (175
    )
    
    
    903
    
    
    
    1,142
    
    
    
    (239
    )Marketing and promotions
    
    
    149
    
    
    
    294
    
    
    
    (145
    )
    
    
    767
    
    
    
    1,041
    
    
    
    (274
    )Insurance and FDIC
Assessments
    
    
    394
    
    
    
    178
    
    
    
    216
    
    
    
    1,933
    
    
    
    522
    
    
    
    1,411Other
    
    
    1,308
    
    
    
    1,296
    
    
    
    12
    
    
    
    3,718
    
    
    
    3,674
    
    
    
    44Total non-interest expense
    
    $
    8,842
    
    
    $
    8,233
    
    
    $
    609
    
    
    $
    27,661
    
    
    $
    25,933
    
    
    $
    1,728
   Rockville Financial, Inc.
    
    36




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(In thousands)Directors fees
    
    $
    177
    
    
    $
    209
    
    
    $
    (32
    )
    
    $
    574
    
    
    $
    631
    
    
    $
    (57
    )Telephone
    
    
    48
    
    
    
    54
    
    
    
    (6
    )
    
    
    132
    
    
    
    155
    
    
    
    (23
    )Postage
    
    
    106
    
    
    
    100
    
    
    
    6
    
    
    
    296
    
    
    
    281
    
    
    
    15Courier
    
    
    85
    
    
    
    73
    
    
    
    12
    
    
    
    249
    
    
    
    256
    
    
    
    (7
    )Dues and subscriptions
    
    
    40
    
    
    
    49
    
    
    
    (9
    )
    
    
    160
    
    
    
    169
    
    
    
    (9
    )Service charges
    
    
    43
    
    
    
    51
    
    
    
    (8
    )
    
    
    147
    
    
    
    131
    
    
    
    16Printing and forms
    
    
    82
    
    
    
    77
    
    
    
    5
    
    
    
    254
    
    
    
    298
    
    
    
    (44
    )Other
    
    
    727
    
    
    
    683
    
    
    
    44
    
    
    
    1,906
    
    
    
    1,753
    
    
    
    153Total other non-interest expense
    
    $
    1,308
    
    
    $
    1,296
    
    
    $
    12
    
    
    $
    3,718
    
    
    $
    3,674
    
    
    $
    44
   Income Tax Expense:
  Rockville Financial, Inc.
    
    37




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##### Table of Contents



Comparison of Financial Condition at September 30, 2009 and December 31, 2008
 Summary:
   Investment Securities:
 Lending Activities:
 Rockville Financial, Inc.
    
    38




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##### Table of Contents



Deposits:
 Liquidity and Capital Resources:
       Rockville Financial, Inc.
    
    39




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:
  Quantitative Analysis
 Income Simulation:
 PercentageDecrease in EstimatedNetInterest IncomeOver 12 Months400 basis point increase in rates
    
    
    (11.41
    )%50 basis point decrease in rates
    
    
    (2.68
    )
 Rockville Financial, Inc.
    
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Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Controls:
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Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
    
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c)
    
    The following table provides information about repurchases of common stock by the
Company during the quarter ended September 30, 2009:
 Issuer Purchases of Equity SecuritiesTotal 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)7/1/09  7/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    674,7188/1/09  8/31/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    674,7189/1/09  9/30/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 September 30, 2009
there were 674,718 shares available to be purchased under this program. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Company held its annual meeting of shareholders on April 21, 2009 (Annual
Meeting).
 (b)
    
    Raymond H. Lefurge, Jr., Stuart E. Magdefrau and William J. McGurk were
re-elected as directors with a four-year term at the Annual Meeting. The other
continuing directors are: Michael A. Bars, C. Perry Chilberg, David A. Engelson,
Pamela J. Guenard, Joseph F. Jeamel, Jr., Thomas S.
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Mason, Peter F. Olson, Rosemarie
Novello Papa and Richard M. Tkacz. In accordance with the Companys bylaws, Raymond H.
Lefurge, Jr. remained the Chairman of the Board.
 (c)
    
    There were 18,842,510 shares of Common Stock eligible to be voted at the
Annual Meeting and 16,996,305 shares were represented at the meeting by the holders
thereof, which constituted a quorum. The items voted upon at the Annual Meeting were
as follows:
 1.
    
    Election of directors (Proposal 1):
 Director:
    
    For:
    
    Withheld:Raymond H. Lefurge, Jr.
    
    
    16,754,439
    
    
    
    241,866Stuart E. Magdefrau
    
    
    16,761,183
    
    
    
    235,122William J. McGurk
    
    
    15,936,879
    
    
    
    1,059,426
 There were no abstentions or broker non-votes for any of these nominees.2.
    
    Ratification of Appointment of Wolf & Company P.C. as
independent auditors of the Company for fiscal year ending December 31, 2009 (Proposal 2):
 For:
    
    Against:
    
    Abstain:16,876,441
    
    21,459
    
    
    

    98,405
 
 Item 5. Other Information
  Rockville Financial, Inc.
    
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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)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)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)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)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)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)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)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)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)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)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)
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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)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)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)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)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.
 Rockville Financial, Inc.
    
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SIGNATURES
  Rockville Financial, Inc.By:
    /s/ John T. LundJohn T. LundSVP, Chief Financial Officer and Treasurer  Rockville Financial, Inc.
    
    46