##### 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 June 30, 2010.
 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
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Table of Contents
 Page
 Part I  FINANCIAL INFORMATIONItem 1. Interim Financial Statements  UnauditedConsolidated Statements of Condition as of June 30, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Income for the three months and six months ended June 30, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2010
    
    
    6Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009
    
    
    7Notes to Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    38Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Removed and Reserved
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    43ExhibitsEX-31.1EX-31.2EX-32
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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Condition
 (In Thousands Except Share Amounts)
(Unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCASH AND CASH EQUIVALENTS:Cash and due from banks
    
    $
    19,277
    
    
    $
    18,507Short-term investments
    
    
    259
    
    
    
    800Total cash and cash equivalents
    
    
    19,536
    
    
    
    19,307AVAILABLE FOR SALE SECURITIES-At fair value
    
    
    114,047
    
    
    
    102,751HELD TO MATURITY SECURITIES-At amortized cost
    
    
    16,747
    
    
    
    19,074LOANS RECEIVABLE (Net of allowance for loan
losses of $13,144 in 2010 and $12,539 in 2009)
    
    
    1,383,036
    
    
    
    1,361,019FEDERAL HOME LOAN BANK STOCK, at cost
    
    
    17,007
    
    
    
    17,007ACCRUED INTEREST RECEIVABLE
    
    
    4,553
    
    
    
    4,287DEFERRED TAX ASSET-Net
    
    
    10,516
    
    
    
    10,608PREMISES AND EQUIPMENT-Net
    
    
    15,232
    
    
    
    15,863GOODWILL
    
    
    1,149
    
    
    
    1,070CASH SURRENDER VALUE OF BANK-OWNED LIFE INSURANCE
    
    
    10,267
    
    
    
    10,076OTHER REAL ESTATE OWNED
    
    
    2,953
    
    
    
    3,061PREPAID FDIC ASSESSMENTS
    
    
    4,602
    
    
    
    5,884OTHER ASSETS
    
    
    2,369
    
    
    
    1,127$
    1,602,014
    
    
    $
    1,571,134LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIES:DEPOSITS:Non-interest-bearing
    
    $
    157,377
    
    
    $
    150,484Interest-bearing
    
    
    993,002
    
    
    
    978,624Total deposits
    
    
    1,150,379
    
    
    
    1,129,108MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    5,175
    
    
    
    6,385ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    272,501
    
    
    
    263,802ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    11,575
    
    
    
    14,411Total liabilities
    
    
    1,439,630
    
    
    
    1,413,706COMMITMENTS AND CONTINGENCIES (Note 12)STOCKHOLDERS EQUITY:Preferred stock (no par value; 1,000,000 shares authorized; no shares
issued and outstanding in 2010 and 2009)
    
    
    
    
    
    
    Common stock (no par value; 29,000,000 shares authorized;
19,551,938 and 19,554,774 shares issued and outstanding at June 30, 2010 and
December 31, 2009, respectively.)
    
    
    85,249
    
    
    
    85,249Additional paid-in capital
    
    
    4,354
    
    
    
    4,082Unearned compensation  ESOP
    
    
    (3,828
    )
    
    
    (4,178
    )Treasury stock, at cost (698,826 at June 30, 2010 and December 31, 2009)
    
    
    (9,663
    )
    
    
    (9,663
    )Retained earnings
    
    
    87,027
    
    
    
    82,971Accumulated other comprehensive loss, net of tax
    
    
    (755
    )
    
    
    (1,033
    )Total stockholders equity
    
    
    162,384
    
    
    
    157,428$
    1,602,014
    
    
    $
    1,571,134
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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Income
 (In Thousands, Except Share Data)
(Unaudited)
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009INTEREST AND DIVIDEND INCOME:Loans
    
    $
    17,357
    
    
    $
    17,424
    
    
    $
    34,998
    
    
    $
    34,743Securities-interest
    
    
    1,145
    
    
    
    1,590
    
    
    
    2,342
    
    
    
    3,478Securities-dividends
    
    
    115
    
    
    
    100
    
    
    
    218
    
    
    
    217Interest-bearing deposits
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    Total interest and dividend income
    
    
    18,620
    
    
    
    19,114
    
    
    
    37,561
    
    
    
    38,438INTEREST EXPENSE:Deposits
    
    
    2,853
    
    
    
    5,181
    
    
    
    5,853
    
    
    
    10,632Borrowed funds
    
    
    2,608
    
    
    
    2,632
    
    
    
    5,151
    
    
    
    5,242Total interest expense
    
    
    5,461
    
    
    
    7,813
    
    
    
    11,004
    
    
    
    15,874Net interest income
    
    
    13,159
    
    
    
    11,301
    
    
    
    26,557
    
    
    
    22,564PROVISION FOR LOAN LOSSES
    
    
    909
    
    
    
    304
    
    
    
    1,812
    
    
    
    603Net interest income after provision
for loan losses
    
    
    12,250
    
    
    
    10,997
    
    
    
    24,745
    
    
    
    21,961NON-INTEREST INCOME:Total other-than-temporary impairment losses on equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (357
    )Service charges and fees
    
    
    1,992
    
    
    
    1,244
    
    
    
    3,234
    
    
    
    2,479Net gain from sales of securities
    
    
    
    
    
    
    867
    
    
    
    188
    
    
    
    936Net gain from sales of loans
    
    
    364
    
    
    
    289
    
    
    
    523
    
    
    
    328Other income
    
    
    9
    
    
    
    182
    
    
    
    107
    
    
    
    187Total non-interest income
    
    
    2,365
    
    
    
    2,582
    
    
    
    4,052
    
    
    
    3,573NON-INTEREST EXPENSE:Salaries and employee benefits
    
    
    4,831
    
    
    
    4,560
    
    
    
    9,621
    
    
    
    9,382Service bureau fees
    
    
    987
    
    
    
    958
    
    
    
    1,986
    
    
    
    1,972Occupancy and equipment
    
    
    1,055
    
    
    
    1,049
    
    
    
    2,182
    
    
    
    2,197Professional fees
    
    
    368
    
    
    
    357
    
    
    
    758
    
    
    
    701Marketing and promotions
    
    
    397
    
    
    
    362
    
    
    
    671
    
    
    
    618FDIC assessments
    
    
    401
    
    
    
    1,138
    
    
    
    801
    
    
    
    1,499Other real estate owned
    
    
    99
    
    
    
    
    
    
    
    467
    
    
    
    Other
    
    
    1,254
    
    
    
    1,291
    
    
    
    2,541
    
    
    
    2,450Total non-interest expense
    
    
    9,392
    
    
    
    9,715
    
    
    
    19,027
    
    
    
    18,819INCOME BEFORE INCOME TAXES
    
    
    5,223
    
    
    
    3,864
    
    
    
    9,770
    
    
    
    6,715PROVISION FOR INCOME TAXES
    
    
    1,759
    
    
    
    1,270
    
    
    
    3,452
    
    
    
    2,205NET INCOME
    
    $
    3,464
    
    
    $
    2,594
    
    
    $
    6,318
    
    
    $
    4,510
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Rockville Financial, Inc. and Subsidiaries
Consolidated Statements of Income  Concluded
(In Thousands, Except Share Data)
(Unaudited)
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income per share
(see Note 2):Basic
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.24Diluted
    
    
    0.19
    
    
    
    0.14
    
    
    
    0.34
    
    
    
    0.24Weighted average shares outstanding:Basic
    
    
    18,518,289
    
    
    
    18,460,548
    
    
    
    18,519,002
    
    
    
    18,451,232Diluted
    
    
    18,538,049
    
    
    
    18,460,548
    
    
    
    18,530,557
    
    
    
    18,451,232
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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Stockholders Equity
(In Thousands, Except Share Data)
 (Unaudited)
 AccumulatedAdditional
    
    
    Unearned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Compensation
    
    
    Retained
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    - ESOP
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    EquityBalance at December 31, 2009
    
    
    19,554,774
    
    
    $
    85,249
    
    
    $
    4,082
    
    
    $
    (4,178
    )
    
    $
    82,971
    
    
    
    698,826
    
    
    $
    (9,663
    )
    
    $
    (1,033
    )
    
    $
    157,428Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,318Net unrealized gain on securities
available for sale, net of
reclassification adjustments and tax
effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    83Change in accumulated other
comprehensive loss related to employee
benefit plans, net of reclassification
adjustments and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    195Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,596Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    254ESOP shares released or committed to be
released
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398Cancellation of shares for tax withholding
    
    
    (2,836
    )
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Dividends paid ($0.12 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,262
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,262
    )Balance at June 30, 2010
    
    
    19,551,938
    
    
    $
    85,249
    
    
    $
    4,354
    
    
    $
    (3,828
    )
    
    $
    87,027
    
    
    
    698,826
    
    
    $
    (9,663
    )
    
    $
    (755
    )
    
    $
    162,384
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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
(In Thousands)
 Unaudited)
 For the Six MonthsEnded June 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    6,318
    
    
    $
    4,510Adjustments to reconcile net income to net cash provided by
operating activities:Amortization and accretion of premiums and discounts on
investments, net
    
    
    (89
    )
    
    
    (93
    )Share-based compensation expense
    
    
    254
    
    
    
    670Amortization of ESOP Expense
    
    
    398
    
    
    
    266Provision for loan losses
    
    
    1,812
    
    
    
    603Net gain from sales of securities
    
    
    (188
    )
    
    
    (936
    )Other-than-temporary impairment of securities
    
    
    
    
    
    
    357Loans originated for sale
    
    
    (26,122
    )
    
    
    (24,813
    )Proceeds from sales of loans
    
    
    26,122
    
    
    
    19,283Loss on sale of OREO
    
    
    91
    
    
    
    Depreciation and amortization
    
    
    741
    
    
    
    816Loss on disposal of equipment
    
    
    1
    
    
    
    Deferred income tax benefit
    
    
    (149
    )
    
    
    (518
    )Increase in cash surrender value of bank-owned life insurance
    
    
    (191
    )
    
    
    (180
    )Net change in:Deferred loan fees and premiums
    
    
    (1
    )
    
    
    486Accrued interest receivable
    
    
    (266
    )
    
    
    (36
    )Other assets
    
    
    40
    
    
    
    (254
    )Accrued expenses and other liabilities
    
    
    (2,639
    )
    
    
    1,635Net cash provided by operating activities
    
    
    6,132
    
    
    
    1,796CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    399
    
    
    
    21,171Proceeds from calls and maturities of available for sale securities
    
    
    470
    
    
    
    500Principal payments on available for sale mortgage-backed securities
    
    
    11,243
    
    
    
    14,233Principal payments on held to maturity mortgage-backed securities
    
    
    2,360
    
    
    
    2,509Principal payments on available for sale securities
    
    
    12
    
    
    
    23Purchases of available for sale securities
    
    
    (22,957
    )
    
    
    (546
    )Proceeds from sale of OREO
    
    
    682
    
    
    
    Capitalized OREO costs
    
    
    (105
    )
    
    
    Purchase of loans
    
    
    (82
    )
    
    
    (2,529
    )Loan originations, net of principal payments
    
    
    (24,306
    )
    
    
    (33,133
    )Purchases of premises and equipment
    
    
    (87
    )
    
    
    (532
    )Net cash (used in) provided by investing activities
    
    
    (32,371
    )
    
    
    1,696
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Rockville Financial, Inc. and Subsidiaries
Consolidated Statements of Cash Flows  Concluded
(In Thousands)
 (Unaudited)
 For the Six MonthsEnded June 30,2010
    
    
    2009CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    21,271
    
    
    
    66,674Net (decrease) increase in mortgagors and investors escrow accounts
    
    
    (1,210
    )
    
    
    560Net decrease in short-term Federal Home Loan Bank advances
    
    
    (7,000
    )
    
    
    (63,000
    )Proceeds from long-term Federal Home Loan Bank advances
    
    
    20,800
    
    
    
    5,000Repayments of long-term Federal Home Loan Bank advances
    
    
    (5,101
    )
    
    
    (7,095
    )Common stock repurchased
    
    
    
    
    
    
    (198
    )Cancellation of shares for tax withholding
    
    
    (30
    )
    
    
    (34
    )Cash dividends paid on common stock
    
    
    (2,262
    )
    
    
    (1,886
    )Net cash provided by financing activities
    
    
    26,468
    
    
    
    21NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    229
    
    
    
    3,513CASH AND CASH EQUIVALENTSBeginning of period
    
    
    19,307
    
    
    
    14,901CASH AND CASH EQUIVALENTSEnd of period
    
    $
    19,536
    
    
    $
    18,414SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest
    
    $
    10,990
    
    
    $
    15,899Income taxes
    
    
    5,050
    
    
    
    2,100Transfer of loans to other real estate owned
    
    
    560
    
    
    
    Goodwill recognition from subsidiary acquisition
    
    
    79
    
    
    
    Transfer to fixed assets from subsidiary acquisition
    
    
    23
    
    
    
    
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Rockville Financial, Inc. and Subsidiaries
 
 Notes to Unaudited Consolidated Financial Statements
 1.
    
    Basis of Presentation and Principles of ConsolidationThe 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 Commercial Foreclosed Properties, Inc., Rockville Residential
Foreclosed Properties, Inc., Rockville Financial Services, Inc. and Rockville Bank Mortgage,
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 all of 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 six months ended June 30, 2010 are
not necessarily indicative of the results that may be expected for the year ending December
31, 2010. These interim consolidated financial statements should be read in conjunction with
the Companys 2009 consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2009.The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the financial statements and
the reported amounts of income and expenses during the reporting periods. Operating results
in the future could vary from the amounts derived from managements estimates and
assumptions. Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses, pension and
other post-retirement benefits, share-based compensation expense, valuation of deferred tax
assets and the evaluation of investment securities for other-than-temporary impairment.2.
    
    Earnings Per ShareThe following table sets forth the calculation of basic and diluted earnings per share
for the three and six months ended June 30, 2010 and 2009:
 For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except share data)Net income
    
    $
    3,464
    
    
    $
    2,594
    
    
    $
    6,318
    
    
    $
    4,510Weighted-average basic
shares
outstanding
    
    
    18,518,289
    
    
    
    18,460,548
    
    
    
    18,519,002
    
    
    
    18,451,232Diluted effect of stock
options
    
    
    19,760
    
    
    
    
    
    
    
    11,555
    
    
    
    Weighted-average diluted
shares
    
    
    18,538,049
    
    
    
    18,460,548
    
    
    
    18,530,557
    
    
    
    18,451,232Earnings per share:Basic
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.24Diluted
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.24
 9




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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. For the
three and six month period ended June 30, 2010 and 2009, the Companys common stock
equivalents relate solely to stock options granted and outstanding. Stock options that
would have an anti-dilutive effect on earnings per share are excluded from the calculation.
For the three and six months ended June 30, 2010, options to purchase 426,115 and 434,300
shares, respectively, of common stock were not considered in the computation of potential
common shares for the purpose of diluted EPS as the strike price of the options was above
the Companys average market price during the quarter.3.
    
    Recent Accounting PronouncementsReceivables, Topic 310:In July 2010, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) No. 2010-20, Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective
of this Update is for an entity to provide disclosures that facilitate financial statement
users evaluation of (1) the nature of credit risk inherent in the entitys portfolio of
financing receivables (2) how that risk is analyzed and assessed in arriving at the
allowance for credit losses (3) the changes and reasons for those changes in the allowance
for credit losses. For public entities, the disclosures as of the end of a reporting
period are effective for interim and annual reporting periods ending on or after December
15, 2010 and the disclosures about activity that occurs during a reporting period are
effective for interim and annual reporting periods beginning on or after December 15, 2010.Fair Value Measurements and Disclosures, Topic 820: In January 2010, FASB issued ASU No
2010-06 which provides guidance that requires more robust disclosures about (1) the
different classes of assets and liabilities measured at fair value, (2) the valuation
techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4)
the transfers between Levels 1, 2, and 3. This guidance was effective for the Company on
January 1, 2010, and did not have a material impact on the Companys consolidated
financial statements.Transfers of Financial Assets, Topic 860:In June 2009, the FASB issued ASU No. 2009-16
which requires entities to provide more information about sales of securitized financial
assets and similar transactions, particularly if the seller retains some risk in the
assets. The guidance eliminates the concept of a qualifying special-purpose entity, changes
the requirements for the derecognition of financial assets, and enhances the disclosure
requirements for sellers of the assets. This guidance was effective for the Company on
January 1, 2010 and did not have a material impact on the Companys consolidated financial
statements.4.
    
    Fair Value MeasurementsThe Company groups its assets and liabilities generally measured at fair value in
three levels based upon a three-tier hierarchy based on the markets in which the assets
and liabilities are traded and the reliability of the assumptions used to determine fair
value. The fair value hierarchy is as follows:
 Level 1:
    
    Quoted prices are available in active markets for identical
investments as of the reporting date. The quoted price is not adjusted because of the
size of the position relative to trading volume.Level 2:
    
    Pricing inputs are observable for the asset or liability, either directly or
indirectly but are not the same as those used in Level 1. Fair value is determined
through the use of models or other valuation methodologies.Level 3:
    
    Pricing inputs are unobservable for the assets and liabilities and
include situations where there is little, if any, market activity and the
determination of fair value requires significant judgment or estimation.The inputs used to measure fair value may fall into different levels of the fair
value hierarchy. In such instances, the determination of which category within the
fair value hierarchy is appropriate for any given asset or liability is based on
the lowest level of input that is significant to the fair value of the asset or
liability.
 Items Measured at Fair Value on a Recurring Basis:The following valuation methodologies
are used for assets that are recorded at fair value on a recurring basis. There were no
liabilities recorded at fair value on a recurring basis.Available for Sale Securities: Investment securities available for sale are
recorded at fair value on a recurring basis. Fair value measurement is based upon quoted
prices, if available. If quoted prices are not available, fair values are measured using
an independent pricing service. Level 1 securities are those traded on active markets
 10




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##### Table of Contents



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, corporate and other debt
securities. Level 3 securities include private placement securities and thinly traded
equity securities.
 Assets Recorded at Fair Value on a Recurring Basis:
 Fair Value MeasurementsAt June 30, 2010Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(In thousands)Available for Sale Securities:U.S. Government and government-sponsored
enterprise obligations
    
    $
    29,150
    
    
    $
    2,009
    
    
    $
    27,141
    
    
    $
    Residential mortgage-backed securities
    
    
    65,500
    
    
    
    
    
    
    
    65,500
    
    
    
    Corporate debt securities
    
    
    4,720
    
    
    
    
    
    
    
    4,720
    
    
    
    Other debt securities
    
    
    254
    
    
    
    
    
    
    
    254
    
    
    
    Marketable equity securities
    
    
    14,423
    
    
    
    14,350
    
    
    
    
    
    
    
    73Total Assets Measured at Fair Value
    
    $
    114,047
    
    
    $
    16,359
    
    
    $
    97,615
    
    
    $
    73
 Fair Value MeasurementsAt December 31, 2009Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableTotal Fair
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(In thousands)Available for Sale Securities:U.S. Government and government-sponsored
enterprise obligations
    
    $
    7,052
    
    
    $
    2,018
    
    
    $
    5,034
    
    
    $
    Residential mortgage-backed securities
    
    
    75,967
    
    
    
    
    
    
    
    75,967
    
    
    
    Corporate debt securities
    
    
    4,656
    
    
    
    
    
    
    
    4,656
    
    
    
    Other debt securities
    
    
    731
    
    
    
    
    
    
    
    731
    
    
    
    Marketable equity securities
    
    
    14,345
    
    
    
    14,272
    
    
    
    
    
    
    
    73Total Assets Measured at Fair Value
    
    $
    102,751
    
    
    $
    16,290
    
    
    $
    86,388
    
    
    $
    73
   Six Months Ended June 30,Investment Securities Available for Sale:
    
    2010
    
    
    2009For the six months ended June 30, 2010
    
    (In thousands)Balance of recurring Level 3 assets at December 31, 2009
    
    $
    73
    
    
    $
    2,114Total gains or losses (realized/unrealized):Included in earnings-realized
    
    
    
    
    
    
    Included in earnings-unrealized
    
    
    
    
    
    
    Included in other comprehensive income
    
    
    
    
    
    
    478Purchases, sales, issuances and settlements, net
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    (241
    )Balance of recurring Level 3 assets at June 30, 2010
    
    $
    73
    
    
    $
    2,351
 11




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Items Measured at Fair Value on a Non-Recurring Basis:
   Other Real Estate Owned:
 Impaired Loans
 Assets Recorded at Fair Value on a Non-recurring Basis:
  Fair Value Measurements At June 30, 2010using:Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    Significant
    
    
    ThreeIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    Months Ended
    
    
    Six Months EndedAssets
    
    
    Inputs
    
    
    Inputs
    
    
    June 30, 2010 -
    
    
    June 30, 2010 -Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total Losses
    
    
    Total Losses(In thousands)Other real estate owned
    
    $
    2,953
    
    
    $
    
    
    
    $
    
    
    
    $
    2,953
    
    
    $
    
    
    
    $
    Impaired loans
    
    
    7,067
    
    
    
    
    
    
    
    
    
    
    
    7,067
    
    
    
    (941
    )
    
    
    (1,444
    )Total Assets Measured
at Fair Value
    
    $
    10,020
    
    
    $
    
    
    
    $
    
    
    
    $
    10,020
    
    
    $
    (941
    )
    
    $
    (1,444
    )
 12




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##### Table of Contents



Fair Value Measurements At June 30, 2009using:Quoted Pricesin ActiveMarkets for
    
    
    Other
    
    
    Significant
    
    
    ThreeIdentical
    
    
    Observable
    
    
    Unobservable
    
    
    Months Ended
    
    
    Six Months EndedAssets
    
    
    Inputs
    
    
    Inputs
    
    
    June 30, 2009 -
    
    
    June 30, 2009 -Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total Losses
    
    
    Total Losses(In thousands)Impaired loans
    
    $
    6,696
    
    
    $
    
    
    
    $
    
    
    
    $
    6,696
    
    
    $
    
    
    
    $
    Total Assets
Measured at Fair
Value
    
    $
    6,696
    
    
    $
    
    
    
    $
    
    
    
    $
    6,696
    
    
    $
    
    
    
    $
    
   June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    CarryingValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value(In thousands)Financial assets:Cash and cash equivalents
    
    $
    19,536
    
    
    $
    19,536
    
    
    $
    19,307
    
    
    $
    19,307Available for sale securities
    
    
    114,047
    
    
    
    114,047
    
    
    
    102,751
    
    
    
    102,751Held to maturity securities
    
    
    16,747
    
    
    
    18,066
    
    
    
    19,074
    
    
    
    20,011Loans receivable-net
    
    
    1,383,036
    
    
    
    1,393,817
    
    
    
    1,361,019
    
    
    
    1,360,789FHLBB stock
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007
    
    
    
    17,007Accrued interest receivable
    
    
    4,553
    
    
    
    4,553
    
    
    
    4,287
    
    
    
    4,287Financial liabilities:Deposits
    
    
    1,150,379
    
    
    
    1,143,474
    
    
    
    1,129,108
    
    
    
    1,135,815Mortgagors and investorsescrow accounts
    
    
    5,175
    
    
    
    5,175
    
    
    
    6,385
    
    
    
    6,385Advances from FHLBB
    
    
    272,501
    
    
    
    289,527
    
    
    
    263,802
    
    
    
    276,619
 13




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##### Table of Contents



5. Investment Securities
  Amortized
    
    
    Gross Unrealized
    
    
    Gross UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueJune 30, 2010
    
    (In thousands)Available for sale:Debt securities:U.S. Government and government-
sponsored enterprise obligations
    
    $
    29,002
    
    
    $
    148
    
    
    $
    
    
    
    $
    29,150Government-sponsored residential
mortgage-backed
securities
    
    
    61,348
    
    
    
    4,153
    
    
    
    1
    
    
    
    65,500Corporate debt securities
    
    
    5,881
    
    
    
    
    
    
    
    1,161
    
    
    
    4,720Other debt securities
    
    
    250
    
    
    
    4
    
    
    
    
    
    
    
    254Total debt securities
    
    
    96,481
    
    
    
    4,305
    
    
    
    1,162
    
    
    
    99,624Marketable equity securities, by sector:Banks
    
    
    1,256
    
    
    
    2,496
    
    
    
    9
    
    
    
    3,743Consumer and household products
    
    
    1,134
    
    
    
    18
    
    
    
    56
    
    
    
    1,096Food and beverage service
    
    
    1,151
    
    
    
    166
    
    
    
    83
    
    
    
    1,234Government-sponsored enterprises
    
    
    283
    
    
    
    6
    
    
    
    125
    
    
    
    164Healthcare/pharmaceutical
    
    
    387
    
    
    
    
    
    
    
    80
    
    
    
    307Industrial
    
    
    695
    
    
    
    129
    
    
    
    53
    
    
    
    771Integrated utilities
    
    
    742
    
    
    
    20
    
    
    
    4
    
    
    
    758Mutual funds
    
    
    2,644
    
    
    
    116
    
    
    
    
    
    
    
    2,760Oil and gas
    
    
    754
    
    
    
    460
    
    
    
    23
    
    
    
    1,191Technology/Semiconductor
    
    
    228
    
    
    
    44
    
    
    
    
    
    
    
    272Telecommunications
    
    
    661
    
    
    
    35
    
    
    
    74
    
    
    
    622Transportation
    
    
    294
    
    
    
    15
    
    
    
    24
    
    
    
    285Other industries
    
    
    1,030
    
    
    
    234
    
    
    
    44
    
    
    
    1,220Total marketable equity securities
    
    
    11,259
    
    
    
    3,739
    
    
    
    575
    
    
    
    14,423Total available for sale
    
    $
    107,740
    
    
    $
    8,044
    
    
    $
    1,737
    
    
    $
    114,047
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueJune 30, 2010
    
    (In thousands)Held to maturity:Government-sponsored
residential
mortgage-backed
securities
    
    $
    16,747
    
    
    $
    1,319
    
    
    $
    
    
    
    $
    18,066Total held to maturity
    
    $
    16,747
    
    
    $
    1,319
    
    
    $
    
    
    
    $
    18,066
 14




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##### Table of Contents



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




---



##### Table of Contents



Available for Sale
    
    
    Held to MaturityAmortized
    
    
    
    
    
    
    Amortized
    
    
    FairCost
    
    
    Fair Value
    
    
    Cost
    
    
    Value(In thousands)Maturity:Within 1 year
    
    $
    2,107
    
    
    $
    2,109
    
    
    $
    
    
    
    $
    After 1 but within 5 years
    
    
    7,959
    
    
    
    7,915
    
    
    
    
    
    
    
    After 5 but within 10 years
    
    
    22,245
    
    
    
    22,375
    
    
    
    
    
    
    
    After 10 years
    
    
    2,822
    
    
    
    1,725
    
    
    
    
    
    
    
    35,133
    
    
    
    34,124
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    61,348
    
    
    
    65,500
    
    
    
    16,747
    
    
    
    18,066$
    96,481
    
    
    $
    99,624
    
    
    $
    16,747
    
    
    $
    18,066
     Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossJune 30, 2010
    
    (In thousands)Available for sale:Government-sponsored
residential mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    $
    39
    
    
    $
    1
    
    
    $
    39
    
    
    $
    1Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    4,620
    
    
    
    1,161
    
    
    
    4,620
    
    
    
    1,161Total debt securities
    
    
    
    
    
    
    
    
    
    
    4,659
    
    
    
    1,162
    
    
    
    4,659
    
    
    
    1,162Marketable equity securities
    
    
    2,502
    
    
    
    404
    
    
    
    707
    
    
    
    171
    
    
    
    3,209
    
    
    
    575Total
    
    $
    2,502
    
    
    $
    404
    
    
    $
    5,366
    
    
    $
    1,333
    
    
    $
    7,868
    
    
    $
    1,737
 16




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##### Table of Contents



Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Unrealized LossDecember 31, 2009
    
    (In thousands)Available for sale:U.S. Government and
government-sponsored
enterprises
    
    $
    2,018
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    2,018
    
    
    $
    1Government-sponsored
residential mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    1
    
    
    
    58
    
    
    
    1Corporate debt
    
    
    
    
    
    
    
    
    
    
    4,556
    
    
    
    1,223
    
    
    
    4,556
    
    
    
    1,223Total debt securities
    
    
    2,018
    
    
    
    1
    
    
    
    4,614
    
    
    
    1,224
    
    
    
    6,632
    
    
    
    1,225Marketable equity securities
    
    
    1,097
    
    
    
    184
    
    
    
    1,099
    
    
    
    112
    
    
    
    2,196
    
    
    
    296Total
    
    $
    3,115
    
    
    $
    185
    
    
    $
    5,713
    
    
    $
    1,336
    
    
    $
    8,828
    
    
    $
    1,521
  U.S. Government and government-sponsored enterprises and mortgage-backed securities
 Corporate Debt Securities.
 Marketable Equity Securities.
   17




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##### Table of Contents



6.
    
    Loans Receivable and Allowance for Loan LossesA summary of the Companys loan portfolio is as follows:
 June 30, 2010
    
    
    December 31, 2009(In thousands)Real estate loans:Residential
    
    $
    747,421
    
    
    $
    754,838Commercial
    
    
    449,534
    
    
    
    426,028Construction
    
    
    63,778
    
    
    
    71,078Commercial business loans
    
    
    127,758
    
    
    
    113,240Installment, collateral and
other loans
    
    
    7,058
    
    
    
    7,742Total loans
    
    
    1,395,549
    
    
    
    1,372,926Net deferred loan costs and
premiums
    
    
    631
    
    
    
    632Allowance for loan losses
    
    
    (13,144
    )
    
    
    (12,539
    )Loans, net
    
    $
    1,383,036
    
    
    $
    1,361,019
 Non-performing Assets:The table below sets forth the amounts and categories of our
non-performing assets at the dates indicated. Once a loan is 90 days delinquent or either
the borrower or the loan collateral experiences an event that makes collectibility suspect,
the loan is placed on non-accrual status. Our policies require six months of continuous
payments in order for the loan to be removed from non-accrual status.
 June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Non-accrual loans:Residential real estate(1)
    
    $
    4,031
    
    
    $
    3,106Commercial real estate
    
    
    6,507
    
    
    
    2,242Construction
    
    
    3,208
    
    
    
    6,630Commercial business loans
    
    
    614
    
    
    
    61Installment, collateral and other loans
    
    
    6
    
    
    
    7Total non-accrual loans(2)
    
    
    14,366
    
    
    
    12,046Accruing loan past due 90 days or more
    
    
    
    
    
    
    Troubled debt restructurings
    
    
    
    
    
    
    Total non-performing loans
    
    
    14,366
    
    
    
    12,046Other real estate owned
    
    
    2,953
    
    
    
    3,061Total non-performing assets
    
    $
    17,319
    
    
    $
    15,107Total non-performing loans to total loans
    
    
    1.03
    %
    
    
    0.88
    %Total non-performing loans to total assets
    
    
    0.90
    %
    
    
    0.77
    %Allowance for loan losses as a percent of total loans
    
    
    0.94
    %
    
    
    0.91
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    91.49
    %
    
    
    104.09
    %
 
 (1)
    
    Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.(2)
    
    The amount of income that was contractually due but not recognized on
non-accrual loans totaled $201,000 and $237,000 at June 30, 2010 and December 31,
2009, respectively. 18




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##### Table of Contents



For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Balance, beginning of period
    
    $
    13,418
    
    
    $
    12,850
    
    
    $
    12,539
    
    
    $
    12,553Provision for loan losses
    
    
    909
    
    
    
    304
    
    
    
    1,812
    
    
    
    603Loans charged-off
    
    
    (1,188
    )
    
    
    (215
    )
    
    
    (1,219
    )
    
    
    (222
    )Recoveries of loans previously charged off
    
    
    5
    
    
    
    121
    
    
    
    12
    
    
    
    126Balance, end of period
    
    $
    13,144
    
    
    $
    13,060
    
    
    $
    13,144
    
    
    $
    13,060
 Management has established the allowance for loan loss for the period ending June 30, 2010
based on the current risk assessment and level of loss that is believed to exist within the
portfolio. This level of reserve is deemed an appropriate estimate of probable loan losses
inherent in the loan portfolio as of June 30, 2010 based upon the analysis conducted and
given the portfolio composition, delinquencies, charge offs and risk rating changes
experienced during the first two quarters of 2010 and the five-year evaluation period
utilized in the analysis. Based on the qualitative assessment of the portfolio and in
thorough consideration of non-performing loans, management believes that the allowance for
loan losses properly supports the level of associated loss and risk.
 7.
    
    Other Real Estate OwnedOther real estate owned was $3.0 million as of June 30, 2010 compared to $3.1 million
at December 31, 2009. Other real estate owned consisted of $2.3 million of commercial real
estate properties and $720,000 of residential real estate properties which are held for sale
at June 30, 2010. Other real estate owned expenses were $99,000 and $467,000 for the quarter
and six months ended June 30, 2010, respectively. There was no other real estate owned at
or during the six months ended June 30, 2009.
 8.
    
    Benefit PlansThe amounts related to the Pension Plan, Supplemental Plans and the SERPs are reflected
in the tables that follow as Pension Plans.
 Components of Net Periodic Benefit Cost
 Other Post-RetirementPension Plans
    
    
    BenefitsThree Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Service cost
    
    $
    208
    
    
    $
    223
    
    
    $
    4
    
    
    $
    3Interest cost
    
    
    319
    
    
    
    309
    
    
    
    30
    
    
    
    26Expected return on
plan assets
    
    
    (365
    )
    
    
    (262
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    139
    
    
    
    239
    
    
    
    15
    
    
    
    6Amortization of prior
service cost
    
    
    (9
    )
    
    
    81
    
    
    
    5
    
    
    
    5Net periodic benefit cost
    
    $
    292
    
    
    $
    590
    
    
    $
    54
    
    
    $
    40
 19




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##### Table of Contents



Pension Plans
    
    
    Other Post-Retirement BenefitsSix Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Service cost
    
    $
    415
    
    
    $
    459
    
    
    $
    8
    
    
    $
    5Interest cost
    
    
    637
    
    
    
    617
    
    
    
    61
    
    
    
    53Expected return on
plan assets
    
    
    (729
    )
    
    
    (525
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    279
    
    
    
    478
    
    
    
    30
    
    
    
    13Amortization of prior
service cost
    
    
    (18
    )
    
    
    159
    
    
    
    9
    
    
    
    10Net periodic benefit cost
    
    $
    584
    
    
    $
    1,188
    
    
    $
    108
    
    
    $
    81
 For the three months ended June 30, 2010, the Company contributed $22,000 to the
post-retirement benefit plan. The Company anticipates contributing an additional $94,000 in
the remaining six months of 2010 to the post-retirement benefit plan.
 The Company contributed $900,000 to the Pension Plan in the first six months of 2010 and
expects no additional contribution in the remaining six months of 2010.
 The Company contributes to the 401(k) Plan, an automatic 3% of pay safe harbor
contribution for all employees that is fully vested. The 401(k) expense for the three months
ended June 30, 2010 and 2009 was $116,000 and $99,000, respectively. For the six months
ended June 30, 2010 and 2009, 401(k) contribution expense totaled $248,000 and $198,000,
respectively.
 While management believes the assumptions used to estimate expenses related to pension and
other post-retirement benefits are reasonable and appropriate, actual experience may
significantly differ. The pension expense is calculated based upon a number of actuarial
assumptions, including an expected long-term rate of return on our Pension Plan assets of
8.25% and a discount rate of 6.00% for the year ending December 31, 2010. In developing our
expected long-term rate of return assumption, we evaluated input from our actuary and
investment consultant, including their review of asset class return expectations as well as
long-term inflation assumptions, and their review of historical returns based on the current
target asset allocations of 62% equity securities, 33% debt securities and 5% real estate.
We regularly review our asset allocation and periodically rebalance our investments when
considered appropriate. While all future forecasting contains some level of estimation
error, we continue to believe that 8.25% falls within a range of reasonable long-term rate
of return expectations for our pension plan assets. The Company recognizes the funded status
of defined benefit plans in its consolidated statement of condition and measures its plan
assets and benefit obligations as of the date of the Companys fiscal year-end statement of
financial position.
 9.
    
    Share-Based CompensationThe Company maintains and operates the Rockville Financial, Inc. 2006 Stock Incentive
Award Plan (the Plan) as approved by the Companys Board of Directors and stockholders.
The Plan allows the Company to use stock options, stock awards, stock appreciation rights
and performance awards to attract, retain and reward performance of qualified employees and
others who contribute to the success of the Company. The Plan allows for the issuance of a
maximum of 349,830 restricted stock shares and 874,575 stock options. As of June 30, 2010,
there were 31,907 restricted stock shares and 416,700 stock options that remain available
for future grants under the Plan. There were no awards granted in 2010.
 Total employee and Director share-based compensation expense recognized for stock options
and restricted stock was $137,000 and $254,000 with a related tax benefit recorded of
$48,000 and $89,000 for the three and six months ended June 30, 2010 of which Director
share-based compensation expense recognized (in the consolidated statement of income as
other non-interest expense) was $59,000 and $126,000, respectively and officer share-based
compensation expense recognized (in the consolidated statement of income as salaries and
benefit expense) was $78,000 and $128,000, respectively. The total charge of $254,000 for
the six months ended June 30, 2010 includes $30,000 related to 2,836 vested restricted
shares used for income tax withholding on behalf of certain executives which occurred in the
first six months of 2010.
 20




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##### Table of Contents



Stock Options:The following table presents the activity related to stock options under the
Plan for the six months ended June 30, 2010:
 Weighted Average
    
    
    AggregateWeighted
    
    
    Remaining
    
    
    IntrinsicStock
    
    
    Average
    
    
    Contractual Term
    
    
    ValueOptions
    
    
    Exercise Price
    
    
    (in years)
    
    
    (In thousands)Stock options outstanding at December 31, 2009
    
    
    445,875
    
    
    $
    13.18Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Stock options outstanding at June 30, 2010
    
    
    445,875
    
    
    $
    13.18
    
    
    
    7.5
    
    
    $
    337Options exercisable at June 30, 2010
    
    
    363,155
    
    
    $
    13.72
    
    
    
    7.3
    
    
    $
    
 The aggregate fair value of vested options was $91,000 and $225,000 for the six months
ended June 30, 2010 and 2009, respectively.
 As of June 30, 2010, the unrecognized cost related to the stock options awarded of $203,000
will be recognized over a weighted-average period of 2.2 years.
 The Company uses the Black-Scholes option pricing model for estimating the fair value of
stock options granted. No options were granted during 2010.
 Restricted Stock:Restricted stock provides grantees with rights to shares of common stock
upon completion of a service period. During the restriction period, all shares are
considered outstanding and dividends are paid on the restricted stock. The following table
presents the activity for restricted stock for the six months ended June 30, 2010:
 Weighted AverageNumber
    
    
    Grant-Dateof Shares
    
    
    Fair ValueUnvested as of December 31, 2009
    
    
    41,695
    
    
    $
    13.47Granted
    
    
    
    
    
    
    Vested
    
    
    (9,950
    )
    
    
    12.50Forfeited
    
    
    
    
    
    
    Unvested as of June 30, 2010
    
    
    31,745
    
    
    $
    13.78
 The fair value of restricted shares that vested during the six months ended June 30,
2010 and 2009 was $124,000 and $136,000, respectively. There were no shares of restricted
stock granted during the six months ended June 30, 2010. As of June 30, 2010, there was
$265,000 of total unrecognized compensation cost related to unvested restricted stock which
is expected to be recognized over a weighted-average period of 1.5 years.
 Of the remaining unvested restricted stock, 13,495 shares will vest in 2010, 7,950 shares in
2011, 5,600 in 2012, and 4,700 in 2013. All unvested restricted stock shares are expected to
vest.
 10.
    
    Income Taxes
 As of June 30, 2010 and December 31, 2009, there were no material uncertain tax
positions related to federal and state income tax matters. The Company is currently open to
audit under the statute of limitations by the Internal Revenue Service and state taxing
authorities for the years ended December 31, 2006 through 2009.
 As of June 30, 2010 and December 31, 2009, the Company has not accrued any interest and
penalties related to certain tax positions.
 21




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##### Table of Contents



11. Accumulated Other Comprehensive (Loss) Income
 Components of accumulated other comprehensive (loss) income, net of taxes, consist of
the following:
 Net Unrealized GainMinimum Pension
    
    
    on Available For
    
    
    Accumulated OtherLiability
    
    
    Sale Securities
    
    
    Comprehensive Loss(In thousands)December 31, 2009
    
    $
    (5,049
    )
    
    $
    4,016
    
    
    $
    (1,033
    )Change
    
    
    195
    
    
    
    83
    
    
    
    278June 30, 2010
    
    $
    (4,854
    )
    
    $
    4,099
    
    
    $
    (755
    )
 The following table summarizes other comprehensive income and the related tax effects for
the six months ended June 30, 2010:
 June 30, 2010(In thousands)Net income
    
    $
    6,318Unrealized gain on securities available for sale
    
    
    221Income tax provision
    
    
    (138
    )Net unrealized gain on securities available for sale
    
    
    83Benefit plans amortization
    
    
    300Income tax provision
    
    
    (105
    )Net benefit plans amortization
    
    
    195Total other comprehensive income, net of tax
    
    
    278Total comprehensive income
    
    $
    6,596
 12.
    
    Commitments and ContingenciesFinancial Instruments With Off-Balance Sheet Risk
 In the normal course of business, the Company is a party to financial instruments with
off-balance sheet commitments to extend credit, undisbursed portions of construction loans,
unused commercial and consumer lines of credit and standby letters of credit. Commitments
generally have fixed expiration dates or other termination clauses and may require payment
of a fee by the customer. Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third party. Since these
commitments could expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. These commitments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts recognized in
the statements of financial condition. The contractual amounts of commitments to extend
credit represent the amounts of potential accounting loss should the contract be fully drawn
upon, the customer default, and the value of any existing collateral obligations become
worthless as it may for on-balance sheet instruments. The Company evaluates each customers
creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on managements credit
evaluation.
 22




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##### Table of Contents



Financial instruments whose contract amounts represent credit risk are as follows:
 June 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Commitments to extend credit:Commitments to grant loans
    
    $
    70,849
    
    
    $
    36,650Undisbursed construction loans
    
    
    62,716
    
    
    
    86,492Undisbursed home equity lines of credit
    
    
    135,237
    
    
    
    125,511Undisbursed commercial lines of credit
    
    
    57,656
    
    
    
    57,713Standby letters of credit
    
    
    10,679
    
    
    
    10,555Unused checking overdraft lines of credit
    
    
    95
    
    
    
    94$
    337,232
    
    
    $
    317,015
 Legal Matters: The Company is involved in various legal proceedings which have arisen in
the normal course of business. Management believes that resolution of these matters will not
have a material effect on the Companys financial condition or results of operations.
 13.
    
    Regulatory Matters
 The Company and the Bank are subject to various regulatory capital requirements
administered by Federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Companys financial
statements. The regulations require the Company and the Bank meet specific capital
guidelines that involve quantitative measures of the Companys and the Banks assets,
liabilities, and certain off-balance sheet items, as calculated under regulatory accounting
practices. The Companys and the Banks capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings, and other
factors. At June 30, 2010, the Bank exceeded all regulatory capital requirements and is
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 June 30, 2010 and December 31, 2009 compared to the Federal Deposit Insurance
Corporations requirements for classification as a well-capitalized institution and for
minimum capital adequacy:
 23




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##### Table of Contents



Minimum To Be WellMinimum For Capital
    
    
    Capitalized UnderAdequacy
    
    
    Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)Rockville Bank:June 30, 2010Total capital to risk weighted assets
    
    $
    165,854
    
    
    
    13.2
    %
    
    $
    100,518
    
    
    
    8.0
    %
    
    $
    125,647
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    152,037
    
    
    
    12.1
    
    
    
    50,260
    
    
    
    4.0
    
    
    
    75,390
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    152,037
    
    
    
    9.6
    
    
    
    63,283
    
    
    
    4.0
    
    
    
    79,104
    
    
    
    5.0December 31, 2009Total capital to risk weighted assets
    
    $
    158,870
    
    
    
    13.1
    %
    
    $
    96,976
    
    
    
    8.0
    %
    
    $
    121,220
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets
    
    
    145,654
    
    
    
    12.0
    
    
    
    48,488
    
    
    
    4.0
    
    
    
    72,732
    
    
    
    6.0Tier 1 capital to total average assets
    
    
    145,654
    
    
    
    9.3
    
    
    
    62,478
    
    
    
    4.0
    
    
    
    78,097
    
    
    
    5.0Rockville Financial, Inc.:June 30, 2010Total capital to risk weighted assets
    
    $
    175,743
    
    
    
    14.0
    %
    
    $
    100,496
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital to risk weighted assets
    
    
    161,926
    
    
    
    12.9
    
    
    
    50,249
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier 1 capital to total average assets
    
    
    161,926
    
    
    
    10.3
    
    
    
    62,823
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ADecember 31, 2009Total capital to risk weighted assets
    
    $
    170,559
    
    
    
    14.1
    %
    
    $
    96,978
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ATier 1 capital to risk weighted assets
    
    
    157,343
    
    
    
    13.0
    
    
    
    48,489
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ATier 1 capital to total average assets
    
    
    157,343
    
    
    
    10.1
    
    
    
    62,028
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A
 Connecticut law restricts the amount of dividends that the Bank can pay based on
earnings for the current year and the preceding two years. As of June 30, 2010, $14.5
million is available for payment of dividends.
 A reconciliation of the Companys capital to regulatory capital is as follows:
 June 30, 2010
    
    
    December 31, 2009(In thousands)Total capital per financial statements
    
    $
    162,384
    
    
    $
    157,428Accumulated other comprehensive loss
    
    
    755
    
    
    
    1,033Intangible assets
    
    
    (1,149
    )
    
    
    (1,070
    )Servicing assets
    
    
    (64
    )
    
    
    (48
    )Total Tier 1 capital
    
    
    161,926
    
    
    
    157,343Allowance for loan and other losses includible in Tier 2capital
    
    
    13,817
    
    
    
    13,216Total capital per regulatory reporting
    
    $
    175,743
    
    
    $
    170,559
 
 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.
 24




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##### Table of Contents




    
    Local, regional and national business or economic conditions may differ from
those expected.
    
    The effects of and changes in trade, monetary and fiscal policies and laws,
including the U.S. Federal Reserve Boards interest rate policies, may adversely
affect our business.
    
    The ability to increase market share and control expenses may be more difficult
than anticipated.
    
    Changes in laws and regulatory requirements (including those concerning taxes,
banking, securities and insurance) may adversely affect us or our businesses.
    
    Changes in accounting policies and practices, as may be adopted by regulatory
agencies, the Public Company Accounting Oversight Board or the Financial Accounting
Standards Board, may affect expected financial reporting.
    
    Future changes in interest rates may reduce our profits which could have a
negative impact on the value of our stock.
    
    We are subject to lending risk and could incur losses in our loan portfolio
despite our underwriting practices. Changes in real estate values could also
increase our lending risk.
    
    Changes in demand for loan products, financial products and deposit flow could
impact our financial performance.
    
    Strong competition within our market area may limit our growth and profitability.
    
    We may not manage the risks involved in the foregoing as well as anticipated.
    
    If our allowance for loan losses is not sufficient to cover actual loan losses,
our earnings could decrease.
    
    Our stock value may be negatively affected by federal regulations restricting
takeovers and our mutual holding company structure.
    
    Persons who purchase our stock will own a minority of Rockville Financial, Inc.s
common stock and will not be able to exercise voting control over most matters put
to a vote of stockholders.
    
    Further implementation of our stock benefit plans could increase our costs, which
could reduce our income.
    
    Because we intend to continue to increase our commercial real estate and
commercial business loan originations, our lending risk may increase, and downturns
in the real estate market or local economy could adversely affect our earnings.
    
    The trading volume in our stock is less than in larger publicly traded companies
which can cause price volatility, hinder the ability to sell our common stock and
may lower the market price of the stock.
    
    The Emergency Economic Stabilization Act (EESA) of 2008 has and may continue to
have a significant impact on the banking industry. The Dodd-Frank Wall Street
Reform and Consumer Protection Act was signed into law on July 21, 2010 and is
expected to result in dramatic regulatory changes that will affect the industry in
general, and impact the Companys competitive position in ways that cant be
predicted at this time.
  Overview
  25




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Critical Accounting Policies
   Allowance for Loan Losses:
    26




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##### Table of Contents



Other-than-Temporary Impairment of Securities:
 Income Taxes:
  Pension and Other Post-retirement Benefits:
   27




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##### Table of Contents



Share-based Compensation:
 Comparison of Operating Results for the Three and Six Months Ended June 30, 2010 and 2009
  Income Statement Summary
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In thousands)Net interest income
    
    $
    13,159
    
    
    $
    11,301
    
    
    $
    1,858
    
    
    $
    26,557
    
    
    $
    22,564
    
    
    $
    3,993Provision for loan losses
    
    
    909
    
    
    
    304
    
    
    
    605
    
    
    
    1,812
    
    
    
    603
    
    
    
    1,209Non-interest income
    
    
    2,365
    
    
    
    2,582
    
    
    
    (217
    )
    
    
    4,052
    
    
    
    3,573
    
    
    
    479Non-interest expense
    
    
    9,392
    
    
    
    9,715
    
    
    
    (323
    )
    
    
    19,027
    
    
    
    18,819
    
    
    
    208Income before income taxes
    
    
    5,223
    
    
    
    3,864
    
    
    
    1,359
    
    
    
    9,770
    
    
    
    6,715
    
    
    
    3,055Provision for income taxes
    
    
    1,759
    
    
    
    1,270
    
    
    
    489
    
    
    
    3,452
    
    
    
    2,205
    
    
    
    1,247Net income
    
    $
    3,464
    
    
    $
    2,594
    
    
    $
    870
    
    
    $
    6,318
    
    
    $
    4,510
    
    
    $
    1,808
   28




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et Interest Income Analysis
 Average Balance Sheets, Interest and Yields/Costs:
 Three Months Ended June 30,2010
    
    
    2009Interest and
    
    
    Yield/
    
    
    
    
    
    
    Interest andAverage Balance
    
    
    Dividends
    
    
    Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Yield/ Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,361,615
    
    
    $
    17,357
    
    
    
    5.10
    %
    
    $
    1,327,508
    
    
    $
    17,424
    
    
    
    5.25
    %Investment securities
    
    
    122,359
    
    
    
    1,260
    
    
    
    4.12
    
    
    
    145,801
    
    
    
    1,690
    
    
    
    4.64Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    
    
    
    
    
    
    
    
    17,007
    
    
    
    
    
    
    
    Other earning assets
    
    
    13,797
    
    
    
    3
    
    
    
    0.09
    
    
    
    784
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    1,514,778
    
    
    
    18,620
    
    
    
    4.92
    
    
    
    1,491,100
    
    
    
    19,114
    
    
    
    5.13Non-interest-earning assets
    
    
    67,480
    
    
    
    
    
    
    
    
    
    
    
    59,520Total assets
    
    $
    1,582,258
    
    
    
    
    
    
    
    
    
    
    $
    1,550,620Interest-bearing liabilities:NOW and money market accounts
    
    $
    351,897
    
    
    
    388
    
    
    
    0.44
    
    
    $
    307,102
    
    
    
    702
    
    
    
    0.91Savings accounts (5)
    
    
    163,487
    
    
    
    146
    
    
    
    0.36
    
    
    
    139,274
    
    
    
    159
    
    
    
    0.46Time deposits
    
    
    481,623
    
    
    
    2,319
    
    
    
    1.93
    
    
    
    528,984
    
    
    
    4,320
    
    
    
    3.27Total interest-bearing deposits
    
    
    997,007
    
    
    
    2,853
    
    
    
    1.14
    
    
    
    975,360
    
    
    
    5,181
    
    
    
    2.12Advances from the Federal Home Loan Bank
    
    
    259,508
    
    
    
    2,608
    
    
    
    4.02
    
    
    
    290,023
    
    
    
    2,632
    
    
    
    3.63Total interest-bearing liabilities
    
    
    1,256,515
    
    
    
    5,461
    
    
    
    1.74
    %
    
    
    1,265,383
    
    
    
    7,813
    
    
    
    2.47
    %Non-interest-bearing liabilities
    
    
    163,065
    
    
    
    
    
    
    
    
    
    
    
    136,004Total liabilities
    
    
    1,419,580
    
    
    
    
    
    
    
    
    
    
    
    1,401,387Stockholders equity
    
    
    162,678
    
    
    
    
    
    
    
    
    
    
    
    149,233Total liabilities and stockholders equity
    
    $
    1,582,258
    
    
    
    
    
    
    
    
    
    
    $
    1,550,620Net interest income
    
    
    
    
    
    $
    13,159
    
    
    
    
    
    
    
    
    
    
    $
    11,301Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %Net interest-earning assets (3)
    
    $
    258,263
    
    
    
    
    
    
    
    
    
    
    $
    225,717Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    3.03
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.55
    %
    
    
    
    
    
    
    
    
    
    
    117.84
    %
 
 (1)
    
    Includes loans held for sale.(2)
    
    Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents the annualized net interest income divided by average
total interest-earning assets.(5)
    
    Includes mortgagors and investors escrow accounts. 29




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##### Table of Contents



Six Months Ended June 30,2010
    
    
    2009Interest and
    
    
    Yield/
    
    
    
    
    
    
    Interest andAverage Balance
    
    
    Dividends
    
    
    Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Yield/ Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net (1)
    
    $
    1,359,526
    
    
    $
    34,998
    
    
    
    5.15
    %
    
    $
    1,319,911
    
    
    $
    34,743
    
    
    
    5.26
    %Investment securities
    
    
    120,860
    
    
    
    2,560
    
    
    
    4.24
    
    
    
    153,957
    
    
    
    3,695
    
    
    
    4.80Federal Home Loan Bank stock
    
    
    17,007
    
    
    
    
    
    
    
    
    
    
    
    17,007
    
    
    
    
    
    
    
    Other earning assets
    
    
    7,316
    
    
    
    3
    
    
    
    0.08
    
    
    
    711
    
    
    
    
    
    
    
    Total interest-earning assets
    
    
    1,504,709
    
    
    
    37,561
    
    
    
    4.99
    
    
    
    1,491,586
    
    
    
    38,438
    
    
    
    5.15Non-interest-earning assets
    
    
    66,684
    
    
    
    
    
    
    
    
    
    
    
    59,501Total assets
    
    $
    1,571,393
    
    
    
    
    
    
    
    
    
    
    $
    1,551,087Interest-bearing liabilities:NOW and money market accounts
    
    $
    346,874
    
    
    
    793
    
    
    
    0.46
    
    
    $
    296,108
    
    
    
    1,439
    
    
    
    0.97Savings accounts (5)
    
    
    156,983
    
    
    
    274
    
    
    
    0.35
    
    
    
    133,518
    
    
    
    326
    
    
    
    0.49Time deposits
    
    
    483,414
    
    
    
    4,786
    
    
    
    1.98
    
    
    
    529,323
    
    
    
    8,867
    
    
    
    3.35Total interest-bearing deposits
    
    
    987,271
    
    
    
    5,853
    
    
    
    1.19
    
    
    
    958,949
    
    
    
    10,632
    
    
    
    2.22Advances from the Federal Home Loan Bank
    
    
    262,882
    
    
    
    5,151
    
    
    
    3.92
    
    
    
    310,535
    
    
    
    5,242
    
    
    
    3.38Total interest-bearing liabilities
    
    
    1,250,153
    
    
    
    11,004
    
    
    
    1.76
    %
    
    
    1,269,484
    
    
    
    15,874
    
    
    
    2.50
    %Non-interest-bearing liabilities
    
    
    160,141
    
    
    
    
    
    
    
    
    
    
    
    133,541Total liabilities
    
    
    1,410,294
    
    
    
    
    
    
    
    
    
    
    
    1,403,025Stockholders Equity
    
    
    161,099
    
    
    
    
    
    
    
    
    
    
    
    148,062Total liabilities and stockholders
equity
    
    $
    1,571,393
    
    
    
    
    
    
    
    
    
    
    $
    1,551,087Net interest income
    
    
    
    
    
    $
    26,557
    
    
    
    
    
    
    
    
    
    
    $
    22,564Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    2.65
    %Net interest-earning assets (3)
    
    $
    254,556
    
    
    
    
    
    
    
    
    
    
    $
    222,102Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    
    
    
    
    3.03
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.36
    %
    
    
    
    
    
    
    
    
    
    
    117.50
    %
 
 (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. 30




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##### Table of Contents



Rate-Volume Analysis
  Three Months Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    June 30, 2010Compared to
    
    
    Compared toJune 30, 2009
    
    
    June 30, 2009Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)Due To
    
    
    
    
    
    
    Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In thousands)Interest and dividend income:Loans receivable
    
    $
    562
    
    
    $
    (629
    )
    
    $
    (67
    )
    
    $
    1,011
    
    
    $
    (756
    )
    
    $
    255Securities interest, dividends &
income from other assets
    
    
    (114
    )
    
    
    (313
    )
    
    
    (427
    )
    
    
    (581
    )
    
    
    (551
    )
    
    
    (1,132
    )Total earning assets
    
    
    448
    
    
    
    (942
    )
    
    
    (494
    )
    
    
    430
    
    
    
    (1,307
    )
    
    
    (877
    )Interest expense:NOW and money market accounts
    
    
    90
    
    
    
    (404
    )
    
    
    (314
    )
    
    
    214
    
    
    
    (860
    )
    
    
    (646
    )Savings accounts
    
    
    25
    
    
    
    (38
    )
    
    
    (13
    )
    
    
    51
    
    
    
    (103
    )
    
    
    (52
    )Time deposits
    
    
    (359
    )
    
    
    (1,642
    )
    
    
    (2,001
    )
    
    
    (714
    )
    
    
    (3,367
    )
    
    
    (4,081
    )Total interest-bearing deposits
    
    
    (244
    )
    
    
    (2,084
    )
    
    
    (2,328
    )
    
    
    (449
    )
    
    
    (4,330
    )
    
    
    (4,779
    )FHLB Advances
    
    
    (292
    )
    
    
    268
    
    
    
    (24
    )
    
    
    (868
    )
    
    
    777
    
    
    
    (91
    )Total interest-bearing liabilities
    
    
    (536
    )
    
    
    (1,816
    )
    
    
    (2,352
    )
    
    
    (1,317
    )
    
    
    (3,553
    )
    
    
    (4,870
    )Change in net interest income
    
    $
    984
    
    
    $
    874
    
    
    $
    1,858
    
    
    $
    1,747
    
    
    $
    2,246
    
    
    $
    3,993
 Net Interest Income:
   31




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##### Table of Contents



Interest and Dividend Income:
  Interest Expense:
  Provision for Loan Losses:
 32




---



##### Table of Contents



Potential problem loans:
  Non-interest Income:
   33




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##### Table of Contents



Non-interest Expense:The following table summarizes non-interest expense for the
three and six months ended June 30, 2010 and 2009:
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In thousands)Salaries and employee benefits
    
    $
    4,831
    
    
    $
    4,560
    
    
    $
    271
    
    
    $
    9,621
    
    
    $
    9,382
    
    
    $
    239Service bureau fees
    
    
    987
    
    
    
    958
    
    
    
    29
    
    
    
    1,986
    
    
    
    1,972
    
    
    
    14Occupancy and equipment
    
    
    1,055
    
    
    
    1,049
    
    
    
    6
    
    
    
    2,182
    
    
    
    2,197
    
    
    
    (15
    )Professional fees
    
    
    368
    
    
    
    357
    
    
    
    11
    
    
    
    758
    
    
    
    701
    
    
    
    57Marketing and promotions
    
    
    397
    
    
    
    362
    
    
    
    35
    
    
    
    671
    
    
    
    618
    
    
    
    53FDIC assessments
    
    
    401
    
    
    
    1,138
    
    
    
    (737
    )
    
    
    801
    
    
    
    1,499
    
    
    
    (698
    )Other real estate owned
    
    
    99
    
    
    
    
    
    
    
    99
    
    
    
    467
    
    
    
    
    
    
    
    467Other
    
    
    1,254
    
    
    
    1,291
    
    
    
    (37
    )
    
    
    2,541
    
    
    
    2,450
    
    
    
    91Total non-interest expense
    
    $
    9,392
    
    
    $
    9,715
    
    
    $
    (323
    )
    
    $
    19,027
    
    
    $
    18,819
    
    
    $
    208
 Non-interest expense decreased $323,000, or 3.3%, to $9.4 million for the three months
ended June 30, 2010 compared to $9.7 million for the same period in the prior year. Salary
and employee benefits expense increased $271,000 which was mainly attributable to increases
in salary expense of $475,000, health insurance of $53,000 and ESOP expense of $35,000
which were offset by reductions in pension and retirement expense of $326,000.
Additionally, the number of full-time equivalent employees increased to 216 as of June 30,
2010 compared to 214 as of June 30, 2009. Service bureau fees increased $29,000 as the
result of higher ATM servicing fees of $8,000 and other service bureau fees of $32,000
offset by $10,000 of reductions in wide-area network servicing fees. Occupancy and
equipment expense was slightly higher due to increases in rent expense of $38,000 and
janitorial service and supplies expense of $29,000 which was offset by reductions in
depreciation expense of $44,000 and utilities expense of $17,000. Professional fees
increased $10,000 due to increases in consulting fees of $29,000 and external audit and
legal fees of $9,000 which were offset by reductions in internal audit fees of $28,000.
Marketing and promotions expense was $35,000 higher mainly due to an increase in radio
advertising of $46,000 which was offset by reductions in other mediums and promotions. The
decrease in FDIC assessments resulted from a one-time special assessment of $700,000
incurred in the second quarter of 2009. Other real estate owned expense totaling $99,000
consisted of $59,000 of residential properties and $40,000 of commercial properties. There
was no other real estate owned expense in the second quarter of 2009. Other expense
declined $37,000 mainly due to reductions in printing and forms expense of $81,000,
Directors fees of $44,000 and collections expense of $33,000 which were offset by
increased provision expense for off balance sheet items of $64,000 and all other expense of
$57,000.
 Non-interest expense increased $208,000, or 1.1%, to $19.0 million for the six months ended
June 30, 2010 compared to $18.8 million for the same period in the prior year. Salary and
employee benefits expense increased $239,000 which was mainly attributable to increases in
salary expense of $844,000, health insurance of $79,000, 401k contribution expense of
$51,000, employee bonus expense of $38,000, temporary help expense of $30,000 and ESOP
expense of $29,000 which were offset by reductions in pension and retirement expense of
$601,000 and stock incentive award incentives of $242,000. The increase in the discount
rate for the qualified pension plan expense is one of the key reasons for the overall
decrease in the 2010 pension and retirement expense. Stock incentive award expense
decreased due to the absence of new 2010 incentive awards. Service bureau fees increased
$14,000 as the result of higher ATM servicing fees of $11,000 and service bureau fees of
$51,000 offset by $48,000 of reductions in wide-area network servicing fees. Occupancy and
equipment expense was slightly lower due to reductions in depreciation expense of $71,000
and utilities expense of $25,000 which was offset by increases in maintenance expense of
$34,000, rent expense of $23,000 and janitorial service and supplies expense of $27,000.
Professional fees increased $57,000 due to increases in consulting fees of $121,000
resulting from additional loan review documentation, possible branch expansion and human
resource related issues which were offset by reductions in audit fees of $58,000 and legal
fees of $6,000. Marketing and promotions expense increased $53,000 due to an increase in
radio and television advertising. The decrease in FDIC assessments resulted from a
one-time special assessment of $700,000 incurred in 2009. Other real estate owned expense
totaling $467,000 consisted of $135,000 of residential properties and $332,000 of
commercial properties. There was no other real estate owned property in the first six
months of 2009. Other expense increased $91,000 as shown in the table below.
 34




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##### Table of Contents



The following table summarizes significant components of other non-interest expense for the
three and six months ended June 30, 2010 and 2009:
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In thousands)Telephone
    
    $
    63
    
    
    $
    43
    
    
    $
    20
    
    
    $
    110
    
    
    $
    84
    
    
    $
    26Postage
    
    
    99
    
    
    
    91
    
    
    
    8
    
    
    
    211
    
    
    
    190
    
    
    
    21Collections
    
    
    94
    
    
    
    127
    
    
    
    (33
    )
    
    
    257
    
    
    
    190
    
    
    
    67Directors fees
    
    
    161
    
    
    
    205
    
    
    
    (44
    )
    
    
    333
    
    
    
    397
    
    
    
    (64
    )Courier services
    
    
    80
    
    
    
    82
    
    
    
    (2
    )
    
    
    156
    
    
    
    164
    
    
    
    (8
    )Mortgage loan servicing
    
    
    65
    
    
    
    72
    
    
    
    (7
    )
    
    
    136
    
    
    
    153
    
    
    
    (17
    )Mortgage appraisal / credit reports
    
    
    89
    
    
    
    95
    
    
    
    (6
    )
    
    
    152
    
    
    
    175
    
    
    
    (23
    )Off balance sheet provision expense
    
    
    20
    
    
    
    (44
    )
    
    
    64
    
    
    
    (4
    )
    
    
    (38
    )
    
    
    34Dues and subscriptions
    
    
    55
    
    
    
    44
    
    
    
    11
    
    
    
    105
    
    
    
    120
    
    
    
    (15
    )Printing and forms
    
    
    51
    
    
    
    132
    
    
    
    (81
    )
    
    
    154
    
    
    
    172
    
    
    
    (18
    )Other
    
    
    477
    
    
    
    444
    
    
    
    33
    
    
    
    931
    
    
    
    843
    
    
    
    88Total other non-interest expense
    
    $
    1,254
    
    
    $
    1,291
    
    
    $
    (37
    )
    
    $
    2,541
    
    
    $
    2,450
    
    
    $
    91
 Income Tax Provision:Income tax provision increased $489,000 to $1.8 million for the
three months ended June 30, 2010 as compared to $1.3 million for the same period in the
prior year. Year to date income tax provision is $3.5 million, an increase of $1.2 million
from the same period last year. Income taxes are provided on an interim basis using the
estimated annual effective tax rate. The effective tax rate was 35.3% and 32.8% of pretax
income for the six months ended June 30, 2010 and 2009, respectively.
 Comparison of Financial Condition at June 30, 2010 and December 31, 2009
 Summary:The Companys total assets increased $30.9 million, or 2.0%, to $1.60 billion
at June 30, 2010, from $1.57 billion at December 31, 2009, primarily due to a $22.0
million, or 1.6%, increase in loans receivable, an increase of available for sale
securities of $11.3 million, or 11.0%, which was partially offset by a reduction of $2.3
million, or 12.2%, in held to maturity securities. Cash and cash equivalents increased
$229,000 to $19.5 million at June 30, 2010. In the first quarter of 2009, the Company began
selling residential mortgages in the secondary market to Freddie Mac. During the first six
months of 2010, the Company sold $26.1 million of loans originated for sale in the
secondary market. At June 30, 2010, there were no loans held for sale.
 Deposits increased $21.3 million, or 1.9%, from December 31, 2009, to $1.15 billion at June
30, 2010. Interest-bearing deposits grew $14.4 million in the first six months of 2010 to
$993.0 million from $978.6 million at December 31, 2009. Non-interest-bearing deposits
totaled $157.4 million at June 30, 2010, an increase of $6.9 million from year end 2009.
Federal Home Loan Bank advances increased $8.7 million, or 3.3%, to $272.5 million at June
30, 2010 from $263.8 million at December 31, 2009.
 Total stockholders equity increased $5.0 million, or 3.2%, to $162.4 million at June 30,
2010 compared to $157.4 million at December 31, 2009. This was due to increased retained
earnings of $4.1 million, consisting of $6.3 million of net income offset by dividend
payments totaling $2.2 million. Also contributing to the increase in equity was an
increase in additional paid-in capital of $272,000, a decrease of $278,000 in the
accumulated other comprehensive loss, net of tax, and a reduction in unallocated stock held
by the ESOP totaling $350,000.
 Investment Securities:At June 30, 2010, the Companys investment portfolio of $130.8
million, or 8.2% of total assets, consisted of available for sale securities of $114.0
million and held to maturity securities of $16.7 million. The increase in available for
sale securities of $11.3 million from year end was mainly due to the purchase of $22.0
million of U.S. Government-sponsored enterprise investments offset by $11.2 million of
principal payments of government-sponsored enterprise mortgage-backed securities. At June
30, 2010, the available for sale securities portfolio was comprised of $29.2 million in
U.S. Government and U.S. Government-sponsored enterprise securities, $4.7 million in
corporate bonds, $254,000 in municipal bonds, $65.5 million in U.S. Government-sponsored
mortgage-backed securities and $14.4 million in marketable equity securities. The net
unrealized gains on available for sale securities increased $220,000 to $6.3 million at
June 30, 2010 from $6.1 million at December 31, 2009. The increase in the net unrealized
gains on investment securities available for
 35




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##### Table of Contents



sale reflects the positive impact that decreasing long-term investment market rates had on
the debt securities portfolio during the first six months of 2010. The held to maturity
securities portfolio had an amortized cost of $16.7 million comprised of U.S.
Government-sponsored mortgage-backed securities that had a fair market value of $18.1
million at June 30, 2010. Principal payments totaling $2.4 million were made in held to
maturity securities during the six months ended June 30, 2010; there were no purchases.
 Lending Activities:Net loans receivable increased $22.0 million to $1.38 billion at June
30, 2010. The increase was primarily due to increases in commercial real estate of $23.5
million and commercial business loans of $14.5 million. Residential real estate loans
decreased $7.4 million to $747.4 million due to the Companys decision to sell fixed rate
residential loans in the secondary market as a result of the historically low market rates.
Real estate construction loans decreased $7.3 million to $63.8 million from year end. As
of June 30, 2010 and December 31, 2009, commercial business loans consisted of $21.9
million and $22.8 million, respectively, of loans fully guaranteed by the United States
Department of Agriculture.
 Deposits:Deposits increased $21.3 million to $1.15 billion at June 30, 2010 compared to
$1.13 billion at December 31, 2009. At June 30, 2010, non-interest-bearing deposits were
$157.4 million, an increase of $6.9 million and interest-bearing deposits were $993.0
million, an increase of $14.4 million, compared to December 31, 2009. Money market and
investment savings account balances were $240.2 million, an increase of $5.5 million,
regular savings and club account balances were $160.5 million, an increase of $16.7
million, and NOW account balances were $111.8 million, an increase of $3.7 million as
compared to December 31, 2009. Certificates of deposit balances were $480.5 million, a
decrease of $11.5 million in the first six months of 2010 compared to year end resulting
from deposit runoff and lower average market rates. At June 30, 2010, core deposits were
$669.9 million, an increase of $32.7 million compared to December 31, 2009. The Company
has been promoting competitive rate shorter-term time deposits and money market accounts in
response to the competition within our marketplace to maintain existing market share and to
fund loan growth and reduce borrowings.
 Liquidity and Capital Resources:The Company maintains liquid assets at levels the Company
considers adequate to meet its liquidity needs. The Company adjusts its liquidity levels to
fund loan commitments, repay its borrowings, fund deposit outflows, pay escrow obligations
on all items in the loan portfolio and to fund operations. The Company also adjusts
liquidity as appropriate to meet asset and liability management objectives.
 The Companys primary sources of liquidity are deposits, amortization and prepayment of
loans, the sale in the secondary market of loans held for sale, maturities and sales of
investment securities and other short-term investments, periodic pay downs of
mortgage-backed securities, and earnings and funds provided from operations. While
scheduled principal repayments on loans are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by market interest rates,
economic conditions, and rates offered by our competition. The Company sets the interest
rates on our deposits to maintain a desired level of total deposits. In addition, the
Company invests excess funds in short-term interest-earning assets, which provide liquidity
to meet lending requirements.
 A portion of the Companys liquidity consists of cash and cash equivalents, which are a
product of our operating, investing and financing activities. At June 30, 2010, $19.5
million of the Companys assets were invested in cash and cash equivalents compared to
$19.3 million at December 31, 2009. The Companys primary sources of cash are principal
repayments on loans, proceeds from the calls and maturities of investment securities,
increases in deposit accounts, proceeds from residential loan sales and advances from the
Federal Home Loan Bank of Boston.
 For the six months ended June 30, 2010, net loans receivable increased $22.0 million due to
increased levels of commercial real estate and commercial business loans. Total net loan
originations declined $8.8 million from the same period last year. The Company purchased
$23.0 million of available for sale investment securities during the six months ended June
30, 2010. Sales of available for sale securities in the first six months of 2010 were
$399,000. The Company received $11.2 million in net principal reductions on available for
sale mortgage-backed securities and $2.4 million in principal payments on held to maturity
securities during the six months ended June 30, 2010. Calls and maturities of investment
securities during the six months ended June 30, 2010 totaled $470,000.
 Liquidity management is both a daily and longer-term function of business management. If
the Company requires funds beyond its ability to generate them internally, borrowing
agreements exist with the Federal Home Loan Bank of Boston, which provide an additional
source of funds. At June 30, 2010, the Company had $272.5 million in advances from the
Federal Home Loan Bank of Boston and an additional available borrowing limit of
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$134.3 million based on collateral requirements of the Federal Home Loan Bank of Boston.
Internal policies limit borrowings to 30% of total assets, or $480.6 million at June 30,
2010.
 At June 30, 2010, the Company had outstanding commitments to originate loans of $70.8
million and unfunded commitments under construction loans, lines of credit and stand-by
letters of credit of $266.4 million. At June 30, 2010, time deposits scheduled to mature in
less than one year totaled $307.0 million. Based on prior experience, management believes
that a significant portion of such deposits will remain with the Company, although there
can be no assurance that this will be the case. In the event a significant portion of its
deposits are not retained by the Company, it will have to utilize other funding sources,
such as Federal Home Loan Bank of Boston advances in order to maintain its level of assets.
Alternatively, we would reduce our level of liquid assets, such as our cash and cash
equivalents in order to meet funding needs. In addition, the cost of such deposits may be
significantly higher if market interest rates are higher or there is an increased amount of
competition for deposits in our market area at the time of renewal.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:The majority of the Companys assets and liabilities are monetary in nature.
Consequently, our most significant form of market risk is interest rate risk. The Companys
assets, consisting primarily of mortgage loans, in general have longer contractual
maturities than our liabilities, consisting primarily of deposits. As a result, a principal
part of our business strategy is to manage interest rate risk and reduce the exposure of
our net interest income to changes in market interest rates. Accordingly, the Board of
Directors has established an Asset/Liability Committee which is responsible for evaluating
the interest rate risk inherent in our assets and liabilities, for determining the level of
risk that is appropriate given the Companys business strategy, operating environment,
capital, liquidity and performance objectives, and for managing this risk consistent with
the guidelines approved by the Board of Directors. Management monitors the level of
interest rate risk on a regular basis and the Asset/Liability Committee meets at least
quarterly to review our asset/liability policies and interest rate risk position.
 The Company has sought to manage our interest rate risk in order to minimize the exposure
of our earnings and capital to changes in interest rates. During the low interest rate
environment that has existed in recent years, we have implemented the following strategies
to manage our interest rate risk: (i) emphasizing adjustable rate loans including,
adjustable rate one-to-four family, commercial and consumer loans, (ii) reducing and
shortening the expected average life of the investment portfolio, and (iii) periodically
lengthening the term structure of our borrowings from the Federal Home Loan Bank of Boston.
Additionally, in the first quarter of 2009, the Company began selling fixed rate
residential mortgages to the secondary market. These measures should serve to reduce the
volatility of our future net interest income in different interest rate environments.
 Quantitative Analysis
 Income Simulation:Simulation analysis is an estimate of the Companys interest rate risk
exposure at a particular point in time. It is a dynamic method in that it incorporates our
forecasted balance sheet growth assumptions under the different interest rate scenarios
tested. The Company utilizes the income simulation method to analyze our interest rate
sensitivity position to manage the risk associated with interest rate movements. At least
quarterly, our Asset/Liability Committee reviews the potential effect changes in interest
rates could have on the repayment or repricing of rate sensitive assets and funding
requirements of rate sensitive liabilities. The Companys most recent simulation uses
projected repricing of assets and liabilities at June 30, 2010 on the basis of contractual
maturities, anticipated repayments and scheduled rate adjustments. Prepayment rate
assumptions can have a significant impact on interest income simulation results. Because of
the large percentage of loans and mortgage-backed securities it holds, rising or falling
interest rates may have a significant impact on the actual prepayment speeds of the
Companys mortgage related assets that may in turn affect its interest rate sensitivity
position. When interest rates rise, prepayment speeds slow and the average expected life of
the Companys assets would tend to lengthen more than the expected average life of its
liabilities and therefore would most likely result in a decrease to the Companys asset
sensitive position.
 Percentage Decrease in EstimatedNet Interest IncomeOver 12 Months400 basis point increase in rates
    
    
    0.17
    %50 basis point decrease in rates
    
    
    0.61
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Rockville Banks Asset/Liability policy currently limits projected changes in net interest
income to a maximum variance of (5%) for every 100 basis point interest rate change
measured over a twelve-month and a twenty-four month period when compared to the flat rate
scenario. In addition, the Companys policy limits change in return on assets (ROA) by a
maximum of (15) basis points for every 100 basis point interest rate change when compared
to the flat rate scenario, or the change will be limited to 20% of the flat rate scenario
ROA (for every 100 basis point interest rate change), whichever is less. These policy
limits are re-evaluated on a periodic basis (not less than annually) and may be modified,
as appropriate. Because of the slight asset-sensitivity of the Companys balance sheet,
income is projected to decrease more if interest rates fall. Also included in the
decreasing rate scenario is the assumption that further declines are reflective of a deeper
recession as well as narrower credit spreads from Federal Market intervention. At June 30,
2010, income at risk (i.e., the change in net interest income) decreased 0.17% and
decreased 0.61% based on a 400 basis point average increase or a 50 basis point average
decrease, respectively. At June 30, 2010, return on assets is modeled to decrease by 5
basis points and increase 8 basis points based on a 400 basis point increase or a 50 basis
point decrease, respectively. While we believe the assumptions used are reasonable, there
can be no assurance that assumed prepayment rates will approximate actual future
mortgage-backed security and loan repayment activity.
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:Our disclosure controls and
procedures are designed to ensure that information the Company must disclose in its reports
filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange
Act), is recorded, processed, summarized, and reported on a timely basis. Our management
has evaluated, with the participation and under the supervision of our chief executive
officer (CEO) and chief financial officer (CFO), the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
as of the end of the period covered by this report. Based on this evaluation, our CEO and
CFO have concluded that, as of such date, the Companys disclosure controls and procedures
are effective in ensuring that information relating to the Company, including its
consolidated subsidiaries, required to be disclosed in reports that it files under the
Exchange Act is (1) recorded, processed, summarized and reported within time periods
specified in the SECs rules and forms, and (2) accumulated and communicated to our
management, including our CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure.
 Changes in Internal Controls:During the quarter under report, there was no change in the
Companys internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act ) that has materially affected, or is reasonably likely to materially affect,
the Companys internal control over financial reporting.
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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A.
    Risk Factors
  Form 10-K
  Dodd-Frank Dodd-Frank Dodd-Frank Dodd-Frank
  Dodd-Frank Dodd-Frank
  Dodd-Frank
  Dodd-Frank
  Dodd-Frank Dodd-Frank
  Dodd-Frank
  Dodd-Frank
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity SecuritiesPeriod
    
    Total Number of
Shares Purchased
    
    
    Average Price 
Paid per Share
    
    
    Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or 
Programs
    
    
    Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or
Programs (1)4/1/10  4/30/10
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    674,7185/1/10  5/31/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    674,7186/1/10  6/30/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    674,718Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    674,718
 
 (1)
    
    Effective January 2008, the Company adopted a plan to repurchase of up to 978,400
of our outstanding shares of common stock on the open market. At June 30, 2010 there
were 674,718 shares available to be purchased under this program. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
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##### Table of Contents



Item 6. Exhibits
 3.1
    
    Certificate of Incorporation of Rockville Financial, Inc. (incorporated herein
by reference to Exhibit 3.1 to the Registration Statement on the Form S-1 filed
for Rockville Financial Inc., as amended, initially filed on December 17, 2004
(File No. 333-121421))3.2
    
    Bylaws of Rockville Financial, Inc. (incorporated herein by reference
to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed for Rockville Financial,
Inc. on May 13, 2005 (File No. 000-51239))3.2.1
    
    Amendment dated December 12, 2007 to the Bylaws of Rockville
Financial, Inc. (incorporated herein by reference to Exhibit 3.2 to the Current
Report on the Companys Form 8-K filed on December 12, 2007 (File No. 000-51239))3.2.2
    
    Amendment and restatement dated February 13, 2008 to the Bylaws of
Rockville Financial, Inc. (incorporated herein by reference to Exhibit 3.2 to the
Current Report on the Companys Form 8-K filed on February 14, 2008 (File No.
000-51239))3.3
    
    Form of Common Stock Certificate of Rockville Financial, Inc.
(incorporated herein by reference to Exhibit 4 to the Registration Statement on
the Form S-1 filed for Rockville Financial, Inc., as amended, initially filed on
December 17, 2004 (File No. 333-121421))10.1
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and William J. McGurk, effective January 1, 2009
(incorporated herein by reference to Exhibit 10.1 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.2
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and Joseph F. Jeamel, Jr., effective January 1,
2009 (incorporated herein by reference to Exhibit 10.2 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.3
    
    Change-in-Control and Restricted Covenant Agreement by and among
Rockville Financial, Inc., Rockville Bank and John T. Lund, effective January 2,
2009 (incorporated herein by reference to Exhibit 10.3 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.4
    
    First Amendment to the Employment Agreement by and among Rockville
Financial, Inc. and Rockville Bank and Christopher E. Buchholz as amended and
restated effective as of April 13, 2009 (incorporated herein by reference to
Exhibit 10.4 to the Current Report on the Companys Form 10-Q filed on May 11,
2009 (File No. 000-51239))10.5
    
    Employment Agreement as amended and restated by and among Rockville
Financial, Inc., Rockville Bank and Richard J. Trachimowicz, effective January 1,
2009 (incorporated herein by reference to Exhibit 10.5 to the Annual Report on the
Companys Form 10-K for the year ended December 31, 2008 filed on March 11, 2009
(File No. 000-51239))10.6
    
    Supplemental Savings and Retirement Plan of Rockville Bank as amended
and restated effective December 31, 2007 (incorporated herein by reference to
Exhibit 10.5 to the Current Report on Form 8-K filed for Rockville Financial, Inc.
filed on December 18, 2007 (File No. 000-51239))10.7
    
    Rockville Bank Officer Incentive Compensation Plan (incorporated
herein by reference to Exhibit 10.2.3 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2005 filed on March 31, 2006 (File No. 000-51239))10.8
    
    Rockville Bank Supplemental Executive Retirement Agreement for Joseph
F. Jeamel, Jr. (incorporated herein by reference to Exhibit 10.9 to the
Registration Statement filed on Form S-1 filed for Rockville Financial, Inc. filed
on December 17, 2004 (File No. 333-121421))10.8.1
    
    First Amendment to the Supplemental Executive Retirement Agreement for Joseph F.
Jeamel, Jr. (incorporated herein by reference to Exhibit 10.7.1 to the Current
Report on Form 8-K filed for Rockville Financial, Inc. filed on December 18, 2007
(File No. 000-51239))
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##### Table of Contents



10.9
    
    Executive Split Dollar Life Insurance Agreement for Joseph F. Jeamel,
Jr. (incorporated herein by reference to Exhibit 10.11 to the Registration
Statement filed on Form S-1 filed for Rockville Financial, Inc. filed on December
17, 2004 (File No. 333-121421))10.10
    
    Rockville Bank Supplemental Executive Retirement Plan as amended and
restated effective December 31, 2007 (incorporated herein by reference to Exhibit
10.9 to the Current Report on Form 8-K filed for Rockville Financial, Inc. filed
on December 18, 2007(File No. 000-51239))10.11
    
    Rockville Financial, Inc. 2006 Stock Incentive Award Plan
(incorporated herein by reference to Appendix B in the Definitive Proxy Statement
on Form 14A for Rockville Financial, Inc. filed on July 3, 2006 (File No.
000-51239))31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
filed herewith32.0
    
    Section 1350 Certification of the Chief Executive Officer and Chief
Financial Officer attached hereto
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SIGNATURES
   By:
    /s/ John T. LundJohn T. LundSVP, Chief Financial Officer and Treasurer  43