##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 10 or 15(d) of the Securities Exchange Act of 1934 for
the quarterly period ended June 30, 2005.
 Commission File Number: 000-51239
 ROCKVILLE FINANCIAL, INC.
 (Exact name of registrant as specified in its charter)
 Connecticut
    
    30-0288470(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)25 Park Street, Rockville, Connecticut
    
    06066(Address of principal executive officers)
    
    (Zip Code)
 (860) 291-3600
(Registrants telephone number, including area code)
  þ o
  o þ
  Common Stock (no par value)
    
    19,435,000Class
    
    Shares Outstanding at August 15, 2005




---



Table of Contents
  
 PagePart I  FINANCIAL INFORMATIONItem 1. Interim Financial StatementsCondensed Consolidated Statements of Condition at June 30, 2005
and December 31, 2004 (unaudited)
    
    
    3Condensed Consolidated Statements of Income for the three and six months ended
June 30, 2005 and 2004 (unaudited)
    
    
    4Condensed Consolidated Statements of Changes in Capital and Stockholders Equity
for the six months ended June 30, 2005 and 2004 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2005 and 2004 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33Part II  OTHER INFORMATIONItem 6. Exhibits
    
    
    34SIGNATURES
    
    
    35EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  Rockville Financial, Inc.
    
    
    
    2




---



##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1. Interim Financial Statements:
 Rockville Financial, Inc.
 
 Condensed Consolidated Statements of Condition
(In Thousands)
 June 30,
    
    December 31,2005
    
    2004(Unaudited)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    35,684
    
    
    $
    18,652Short-term investments
    
    
    1,466
    
    
    
    3,448Total cash and cash equivalents
    
    
    37,150
    
    
    
    22,100AVAILABLE FOR SALE SECURITIESAt fair value
    
    
    124,680
    
    
    
    136,007LOANS RECEIVABLE (Net of allowance for loan
losses of $7,670 in 2005 and $6,371 in 2004)
    
    
    783,433
    
    
    
    696,249FEDERAL HOME LOAN BANK STOCK
    
    
    8,498
    
    
    
    7,412ACCRUED INTEREST RECEIVABLE
    
    
    3,323
    
    
    
    3,013DEFERRED TAX ASSET
    
    
    2,809
    
    
    
    1,606BANK PREMISES AND EQUIPMENTNet
    
    
    7,889
    
    
    
    7,382GOODWILL
    
    
    1,070
    
    
    
    1,070CASH SURRENDER VALUE OF BANK OWNED LIFE INSURANCE
    
    
    8,456
    
    
    
    8,290OTHER ASSETS
    
    
    4,165
    
    
    
    6,784TOTAL
    
    $
    981,473
    
    
    $
    889,913LIABILITIES AND CAPITALLIABILITIESDeposits:Non-interest bearing
    
    $
    82,092
    
    
    $
    77,972Interest bearing
    
    
    634,552
    
    
    
    614,526Total deposits
    
    
    716,644
    
    
    
    692,498MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    4,685
    
    
    
    3,979ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    104,249
    
    
    
    118,015ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    7,555
    
    
    
    6,895Total liabilities
    
    
    833,133
    
    
    
    821,387COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock (no par value; 1,000,000 shares authorized;
no shares issued and outstanding at June 30, 2005)
    
    
    
    
    
    
    Common stock (no par value; 29,000,000 shares authorized;
19,435,000 shares issued and outstanding at June 30, 2005)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    85,249
    
    
    
    Unallocated stock held by ESOP
    
    
    (4,373
    )
    
    
    Retained earnings
    
    
    67,064
    
    
    
    67,338Accumulated other comprehensive income, net of tax
    
    
    400
    
    
    
    1,188Total stockholders equity
    
    
    148,340
    
    
    
    68,526TOTAL
    
    $
    981,473
    
    
    $
    889,913
  Rockville Financial, Inc.
    
    
    
    3




---



##### Table of Contents



Rockville Financial, Inc.
 
 Condensed Consolidated Statements of Income
(In Thousands)
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(Unaudited)INTEREST AND DIVIDEND INCOME:Loans
    
    $
    10,369
    
    
    $
    7,942
    
    
    $
    19,992
    
    
    $
    15,512Securities-interest
    
    
    1,221
    
    
    
    1,230
    
    
    
    2,444
    
    
    
    2,436Interest bearing deposits
    
    
    27
    
    
    
    57
    
    
    
    45
    
    
    
    110Securities-dividends
    
    
    174
    
    
    
    87
    
    
    
    328
    
    
    
    168Total interest and dividend income
    
    
    11,791
    
    
    
    9,316
    
    
    
    22,809
    
    
    
    18,226INTEREST EXPENSEDeposits
    
    
    2,602
    
    
    
    2,013
    
    
    
    5,093
    
    
    
    3,882Borrowed funds
    
    
    1,206
    
    
    
    1,007
    
    
    
    2,482
    
    
    
    2,139Total interest expense
    
    
    3,808
    
    
    
    3,020
    
    
    
    7,575
    
    
    
    6,021Net interest income
    
    
    7,983
    
    
    
    6,296
    
    
    
    15,234
    
    
    
    12,205PROVISION FOR LOAN LOSSES
    
    
    850
    
    
    
    525
    
    
    
    1,600
    
    
    
    1,027Net interest income after provision
for loan losses
    
    
    7,133
    
    
    
    5,771
    
    
    
    13,634
    
    
    
    11,178NONINTEREST INCOME:Service charges and fees
    
    
    904
    
    
    
    811
    
    
    
    1,721
    
    
    
    1,499Net gain from sale of securities
    
    
    87
    
    
    
    87
    
    
    
    165
    
    
    
    112Total noninterest income
    
    
    991
    
    
    
    898
    
    
    
    1,886
    
    
    
    1,611NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    3,189
    
    
    
    2,744
    
    
    
    6,246
    
    
    
    5,257Service bureau fees
    
    
    704
    
    
    
    498
    
    
    
    1,342
    
    
    
    1,054Occupancy and equipment
    
    
    633
    
    
    
    700
    
    
    
    1,374
    
    
    
    1,425Professional fees
    
    
    267
    
    
    
    216
    
    
    
    676
    
    
    
    421Marketing and promotions
    
    
    215
    
    
    
    374
    
    
    
    570
    
    
    
    532Insurance and FDIC assessments
    
    
    64
    
    
    
    27
    
    
    
    107
    
    
    
    85Contribution to Rockville Bank
Community Foundation, Inc.
    
    
    3,887
    
    
    
    
    
    
    
    3,887
    
    
    
    Other
    
    
    836
    
    
    
    1,238
    
    
    
    1,712
    
    
    
    1,941Total noninterest expense
    
    
    9,795
    
    
    
    5,797
    
    
    
    15,914
    
    
    
    10,715(LOSS) INCOME BEFORE INCOME
TAXES
    
    
    (1,671
    )
    
    
    872
    
    
    
    (394
    )
    
    
    2,074BENEFIT FROM (PROVISION FOR)
INCOME TAXES
    
    
    480
    
    
    
    (266
    )
    
    
    120
    
    
    
    (632
    )NET (LOSS) INCOME
    
    $
    (1,191
    )
    
    $
    606
    
    
    $
    (274
    )
    
    $
    1,442
  Rockville Financial, Inc.
    
    
    
    4




---



##### Table of Contents



Rockville Financial, Inc.
 Condensed
Consolidated Statements of Income  Continued
 For the Period
    
    For the Three
    
    For the Period
    
    For the Sixfrom May 20,
    
    Months
    
    from May 20,
    
    Months2005 to June
    
    Ended June
    
    2005 to June
    
    Ended June30, 2005
    
    30, 2004
    
    30, 2005
    
    30, 2004Net loss per share (see Note 3):Basic
    
    $
    (.01
    )
    
    
    N/A
    
    
    
    (.01
    )
    
    
    N/ADiluted
    
    $
    (.01
    )
    
    
    N/A
    
    
    
    (.01
    )
    
    
    N/AWeighted average shares outstanding:Basic
    
    
    18,997,713
    
    
    
    N/A
    
    
    
    18,997,713
    
    
    
    N/ADiluted
    
    
    18,997,713
    
    
    
    N/A
    
    
    
    18,997,713
    
    
    
    N/A
  Rockville Financial, Inc.
    
    
    
    5




---



##### Table of Contents



Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Stockholders Equity
For the Six Months Ended June 30, 2005 and 2004
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
 Common StockUnallocate
    
    
    
    
    
    AccumulatedAdditional
    
    Common
    
    
    
    
    
    Other
    
    TotalPaid-in
    
    Shares Held
    
    Retained
    
    Comprehensive
    
    StockholdersShares
    
    Dollars
    
    Capital
    
    by ESOP
    
    Earnings
    
    Income
    
    EquitySix months ended June 30, 2005:Balance at January 1, 2005
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    67,338
    
    
    $
    1,188
    
    
    $
    68,526Issuance of common stock to
Rockville Financial MHC, Inc.
    
    
    10,689,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock, net of
expenses of $2.3 million (Note 1)
    
    
    8,357,050
    
    
    
    
    
    
    
    81,299
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,299Issuance of common stock to
Rockville Bank Community,
Foundation, Inc., including
additional tax benefit due to higher
basis for tax purposes
    
    
    388,700
    
    
    
    
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,950Shares purchased for ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,373
    )
    
    
    
    
    
    
    
    
    
    
    (4,373
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (274
    )
    
    
    
    
    
    
    (274
    )Change in net unrealized gain on
securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (788
    )
    
    
    (788
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    (1,062
    )Balance at June 30, 2005
    
    
    19,435,000
    
    
    $
    
    
    
    $
    85,249
    
    
    $
    (4,373
    )
    
    $
    67,064
    
    
    $
    400
    
    
    $
    148,340Six months ended June 30, 2004:Balance at January 1, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    63,890
    
    
    $
    2,027
    
    
    $
    65,917Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,442
    
    
    
    
    
    
    
    1,442Change in net unrealized gain on
securities available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    (1,627
    )
    
    
    (1,627
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185
    )Balance at June 30, 2004
    
    
    
    
    
    $
    
    

    
    $
    
    
    
    $
    
    
    
    $
    65,332
    
    
    $
    400
    
    
    $
    65,732
  Rockville Financial, Inc.
    
    
    
    6




---



##### Table of Contents



Rockville Financial, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
(In Thousands)
 For the Six Months EndedJune 30,2005
    
    2004(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (274
    )
    
    $
    1,442Adjustments to reconcile net (loss) income to net cash
provided by operating activities:Amortization and accretion of premiums and discounts
on investments  net
    
    
    183
    
    
    
    348Provision for loan losses
    
    
    1,600
    
    
    
    1,027Contribution to Rockville Bank Community Foundation, Inc.
    
    
    3,887
    
    
    
    Net gain from sale of securities
    
    
    (165
    )
    
    
    (112
    )Depreciation and amortization
    
    
    569
    
    
    
    674Deferred income taxes
    
    
    (734
    )
    
    
    (190
    )Increase in cash surrender value of bank owned life insurance
    
    
    (166
    )
    
    
    (129
    )Change in assets and liabilities:Deferred loan fees and premiums
    
    
    (151
    )
    
    
    (1,320
    )Accrued interest receivable
    
    
    (310
    )
    
    
    (58
    )Other assets
    
    
    1,302
    
    
    
    (14
    )Accrued expenses and other liabilities
    
    
    660
    
    
    
    8,318Net cash provided by operating activities
    
    
    6,401
    
    
    
    9,986CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    4,031
    
    
    
    1,343Proceeds from maturities of available for sale securities
    
    
    7,584
    
    
    
    10,065Principal payments on available for sale mortgage-backed
securities
    
    
    7,628
    
    
    
    8,535Purchase of available for sale securities
    
    
    (9,128
    )
    
    
    (31,345
    )Purchase of Federal Home Loan Bank Stock
    
    
    (1,086
    )
    
    
    Net increase in loans
    
    
    (88,633
    )
    
    
    (71,542
    )Purchases of bank premises and equipment
    
    
    (1,076
    )
    
    
    (427
    )Proceeds
from the surrender of Split Dollar life insurance
    
    
    1,317
    
    
    
    Net cash used in investing activities
    
    
    (79,363
    )
    
    
    (83,371
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in non-interest bearing deposits
    
    
    4,120
    
    
    
    12,339Net increase in interest bearing deposits
    
    
    20,026
    
    
    
    85,013Increase (decrease) in mortgagors and investors escrow accounts
    
    
    706
    
    
    
    (801
    )Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    7,000Repayments of Federal Home Loan Bank advances
    
    
    (13,766
    )
    
    
    (23,068
    )Net proceeds from common stock offering
    
    
    81,299
    
    
    
    Acquisition of common stock by ESOP
    
    
    (4,373
    )
    
    
    Net cash provided by financing activities
    
    
    88,012
    
    
    
    80,483NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    15,050
    
    
    
    7,098CASH AND
CASH EQUIVALENTS  Beginning of year
    
    
    22,100
    
    
    
    28,454CASH AND
CASH EQUIVALENTS  End of period
    
    $
    37,150
    
    
    $
    35,552SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during the period for:Interest
    
    $
    7,590
    
    
    $
    6,105Income taxes
    
    
    400
    
    
    
    500
  Rockville Financial, Inc.
    
    
    
    7




---



##### Table of Contents



Rockville Financial, Inc. and Subsidiaries
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 1. Mutual Holding Company Reorganization and Minority Stock Issuance
       Employers Accounting for Employee Stock Ownership Plans
 Rockville Financial, Inc.
    
    
    
    8




---



##### Table of Contents



2. Basis of Presentation and Principles of Consolidation
    3. Earnings Per Share
 Earnings per Share
 Rockville Financial, Inc.
    
    
    
    9




---



##### Table of Contents



For thePeriod fromMay 20, 2005to June 30,2005(Dollars in thousandsexcept share information)Net loss
    
    $
    (2,031
    )Weighted average shares outstanding:Weighted average shares outstanding
    
    
    19,435,000Less: unearned ESOP shares
    
    
    (437,287
    )Basic shares
    
    
    18,997,713Diluted shares
    
    
    18,997,713Earnings per share:Basic
    
    $
    (.01
    )Diluted
    
    $
    (.01
    )
 4. Recent Accounting Pronouncements
 Share-Based Payment Accounting for
Stock-Based Compensation, Accounting for Stock Issued to
Employees.
 Exchanges of Nonmonetary Assets,
 Rockville Financial, Inc.
    
    
    
    10




---



##### Table of Contents



Accounting Changes, Reporting Accounting Changes in Interim Financial
Statements,
 5. Available for Sale Investment Securities:
  Amortized
    
    Gross Unrealized
    
    FairJune 30, 2005
    
    Cost
    
    Gains
    
    Losses
    
    Value(In thousands)Available for sale:U.S. Government and agency obligations
    
    $
    1,998
    
    
    $
    
    
    
    $
    9
    
    
    $
    1,989U.S. Government sponsored enterprises
    
    
    24,999
    
    
    
    1
    
    
    
    221
    
    
    
    24,779Mortgage-backed securities
    
    
    59,555
    
    
    
    320
    
    
    
    364
    
    
    
    59,511Corporate debt securities
    
    
    22,035
    
    
    
    367
    
    
    
    8
    
    
    
    22,394Other debt securities
    
    
    1,431
    
    
    
    62
    
    
    
    
    
    
    
    1,493Total debt securities
    
    
    110,018
    
    
    
    750
    
    
    
    602
    
    
    
    110,166Marketable equity securities
    
    
    11,421
    
    
    
    3,161
    
    
    
    394
    
    
    
    14,188Non-marketable equity securities
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    326$
    121,765
    
    
    $
    3,911
    
    
    $
    996
    
    
    $
    124,680
 Amortized
    
    Gross Unrealized
    
    FairDecember 31, 2004
    
    Cost
    
    Gains
    
    Losses
    
    Value(In thousands)Available for sale:U.S. Government and agency obligations
    
    $
    1,994
    
    
    $
    
    
    
    $
    10
    
    
    $
    1,984U.S. Government sponsored enterprises
    
    
    24,160
    
    
    
    11
    
    
    
    118
    
    
    
    24,053Mortgage-backed securities
    
    
    67,291
    
    
    
    464
    
    
    
    396
    
    
    
    67,359Corporate debt securities
    
    
    28,384
    
    
    
    905
    
    
    
    
    
    
    
    29,289Other debt securities
    
    
    1,434
    
    
    
    72
    
    
    
    
    
    
    
    1,506Total debt securities
    
    
    123,263
    
    
    
    1,452
    
    
    
    524
    
    
    
    124,191Marketable equity securities
    
    
    8,309
    
    
    
    3,341
    
    
    
    160
    
    
    
    11,490Non-marketable equity securities
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    326$
    131,898
    
    
    $
    4,793
    
    
    $
    684
    
    
    $
    136,007
  Rockville Financial, Inc.
    
    
    
    11




---



##### Table of Contents



June 30, 2005
    
    Less Than 12 Months
    
    12 Months or More
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedFair Value
    
    Loss
    
    Fair Value
    
    Loss
    
    Fair Value
    
    Loss(In thousands)Available for sale:U.S. Government and agency
obligations
    
    $
    994
    
    
    $
    5
    
    
    $
    995
    
    
    $
    4
    
    
    $
    1,989
    
    
    $
    9U.S. Government sponsored
enterprises
    
    
    17,885
    
    
    
    114
    
    
    
    5,893
    
    
    
    107
    
    
    
    23,778
    
    
    
    221Mortgage-backed securities
    
    
    8,655
    
    
    
    32
    
    
    
    24,129
    
    
    
    332
    
    
    
    32,784
    
    
    
    364Corporate debt securities
    
    
    1,102
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    1,102
    
    
    
    8Total debt securities
    
    
    28,636
    
    
    
    159
    
    
    
    31,017
    
    
    
    443
    
    
    
    59,653
    
    
    
    602Marketable equity securities
    
    
    6,403
    
    
    
    369
    
    
    
    65
    
    
    
    25
    
    
    
    6,468
    
    
    
    394Total
    
    $
    35,039
    
    
    $
    528
    
    
    $
    31,082
    
    
    $
    468
    
    
    $
    66,121
    
    
    $
    996
 December 31, 2004
    
    Less Than 12 Months
    
    12 Months or More
    
    TotalUnrealized
    
    
    
    
    
    Unrealized
    
    
    
    
    
    UnrealizedFair Value
    
    Loss
    
    Fair Value
    
    Loss
    
    Fair Value
    
    Loss(In thousands)Available for sale:U.S. Government and agency
obligations
    
    $
    1,984
    
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    1,984
    
    
    $
    10U.S. Government sponsored
enterprises
    
    
    15,894
    
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    15,894
    
    
    
    118Mortgage-backed securities
    
    
    24,170
    
    
    
    275
    
    
    
    7,657
    
    
    
    121
    
    
    
    31,827
    
    
    
    396Total debt securities
    
    
    42,048
    
    
    
    403
    
    
    
    7,657
    
    
    
    121
    
    
    
    49,705
    
    
    
    524Marketable equity securities
    
    
    1,881
    
    
    
    143
    
    
    
    80
    
    
    
    17
    
    
    
    1,961
    
    
    
    160Total
    
    $
    43,929
    
    
    $
    546
    
    
    $
    7,737
    
    
    $
    138
    
    
    $
    51,666
    
    
    $
    684
  Rockville Financial, Inc.
    
    
    
    12




---



##### Table of Contents



6. Loans Receivable and Allowance for Loan Losses:
  June 30,
    
    December 31,2005
    
    2004(Dollars in thousands)Real estate loans:Residential
    
    $
    504,975
    
    
    
    63.9
    %
    
    $
    450,054
    
    
    
    64.2
    %Commercial
    
    
    145,760
    
    
    
    18.5
    %
    
    
    136,594
    
    
    
    19.5
    %Construction
    
    
    26,853
    
    
    
    3.4
    %
    
    
    22,067
    
    
    
    3.1
    %677,588
    
    
    
    
    
    
    
    608,715Commercial business loans
    
    
    108,184
    
    
    
    13.7
    %
    
    
    88,700
    
    
    
    12.7
    %Installment loans
    
    
    2,235
    
    
    
    0.3
    %
    
    
    2,268
    
    
    
    0.3
    %Collateral loans
    
    
    1,213
    
    
    
    0.2
    %
    
    
    1,205
    
    
    
    0.2
    %Total loans
    
    
    789,220
    
    
    
    100.0
    %
    
    
    700,888
    
    
    
    100.0
    %Net deferred loan costs and premiums
    
    
    1,883
    
    
    
    
    
    
    
    1,732Allowance for loan losses
    
    
    (7,670
    )
    
    
    
    
    
    
    (6,371
    )Loans, net
    
    $
    783,433
    
    
    
    
    
    
    $
    696,249
  At or For the Three Months
    
    At or For the Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004(In thousands)Allowance, beginning of the
period
    
    $
    6,789
    
    
    $
    5,115
    
    
    $
    6,371
    
    
    $
    4,971Provision for loan losses
    
    
    850
    
    
    
    525
    
    
    
    1,600
    
    
    
    1,027Loans charged-off
    
    
    (14
    )
    
    
    (11
    )
    
    
    (355
    )
    
    
    (377
    )Recoveries of loans previously
charged off
    
    
    45
    
    
    
    13
    
    
    
    54
    
    
    
    21Balance, end of period
    
    $
    7,670
    
    
    $
    5,642
    
    
    $
    7,670
    
    
    $
    5,642
 Rockville Financial, Inc.
    
    
    
    13




---



##### Table of Contents



7. DEPOSITS
  June 30,
    
    December 31,2005
    
    2004(Dollars in thousands)Demand deposits
    
    $
    82,092
    
    
    
    11.5
    %
    
    $
    77,972
    
    
    
    11.3
    %NOW accounts
    
    
    101,877
    
    
    
    14.2
    %
    
    
    88,768
    
    
    
    12.8
    %Regular savings
    
    
    169,779
    
    
    
    23.6
    %
    
    
    161,215
    
    
    
    23.3
    %Money market and investment savings
    
    
    94,983
    
    
    
    13.3
    %
    
    
    84,789
    
    
    
    12.2
    %Club accounts
    
    
    706
    
    
    
    0.1
    %
    
    
    205
    
    
    
    0.0
    %Total transaction accounts
    
    
    449,437
    
    
    
    62.7
    %
    
    
    412,949
    
    
    
    59.6
    %Certificates of deposit
    
    
    267,207
    
    
    
    37.3
    %
    
    
    279,549
    
    
    
    40.4
    %Total deposits
    
    $
    716,644
    
    
    
    100.0
    %
    
    $
    692,498
    
    
    
    100.0
    %
   For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    2005
    
    2004(In thousands)Savings and demand deposits
    
    $
    779
    
    
    $
    537
    
    
    $
    1,492
    
    
    $
    1,044Time deposits
    
    
    1,823
    
    
    
    1,476
    
    
    
    3,601
    
    
    
    2,838$
    2,602
    
    
    $
    2,013
    
    
    $
    5,093
    
    
    $
    3,882
 8. Borrowings:
   Rockville Financial, Inc.
    
    
    
    14




---



##### Table of Contents



9. Benefit Plans:
    Components of Net Periodic Benefit Cost
 Pension Plans
    
    Post-Retirement BenefitsThree Months Ended June 30,2005
    
    2004
    
    2005
    
    2004(In thousands)Service cost
    
    $
    200
    
    
    $
    141
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    182
    
    
    
    139
    
    
    
    19
    
    
    
    24Expected return on
plan assets
    
    
    (210
    )
    
    
    (118
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    84
    
    
    
    82
    
    
    
    8
    
    
    
    19Amortization of prior
service cost (benefits)
    
    
    155
    
    
    
    2
    
    
    
    
    
    
    
    (15
    )Net periodic benefit cost
    
    $
    411
    
    
    $
    246
    
    
    $
    29
    
    
    $
    30
 Pension Plans
    
    Post-Retirement BenefitsSix Months Ended June 30,2005
    
    2004
    
    2005
    
    2004(In thousands)Service cost
    
    $
    400
    
    
    $
    282
    
    
    $
    4
    
    
    $
    4Interest cost
    
    
    364
    
    
    
    278
    
    
    
    39
    
    
    
    48Expected return on
plan assets
    
    
    (420
    )
    
    
    (236
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    168
    
    
    
    164
    
    
    
    16
    
    
    
    38Amortization of prior
service cost (benefits)
    
    
    310
    
    
    
    4
    
    
    
    (1
    )
    
    
    (30
    )Net periodic benefit cost
    
    $
    822
    
    
    $
    492
    
    
    $
    58
    
    
    $
    60
  Rockville Financial, Inc.
    
    
    
    15




---



##### Table of Contents



10. Other Comprehensive (Loss) Income:
  Three Months Ended June 30, 2005Before-Tax
    
    
    
    
    
    Net-of-TaxAmount
    
    Taxes
    
    Amount(In thousands)Unrealized gains arising during the period
    
    $
    536
    
    
    $
    (183
    )
    
    $
    353Add reclassification adjustment for net gain
from
sale of securities recognized in net income
    
    
    87
    
    
    
    (29
    )
    
    
    58Total other comprehensive income
    
    $
    623
    
    
    $
    (212
    )
    
    $
    411
 Three Months Ended June 30, 2004Before-Tax
    
    
    
    
    
    Net-of-TaxAmount
    
    Taxes
    
    Amount(In thousands)Unrealized losses arising during the period
    
    $
    (3,264
    )
    
    $
    1,109
    
    
    $
    (2,155
    )Add reclassification adjustment for net gain
from
sale of securities recognized in net income
    
    
    87
    
    
    
    (29
    )
    
    
    58Total other comprehensive loss
    
    $
    (3,177
    )
    
    $
    1,080
    
    
    $
    (2,097
    )
 Six Months Ended June 30, 2005Before-Tax
    
    
    
    
    
    Net-of-TaxAmount
    
    Taxes
    
    Amount(In thousands)Unrealized losses arising during the period
    
    $
    (1,359
    )
    
    $
    462
    
    
    $
    (897
    )Add reclassification adjustment for net gain

from
sale of securities recognized in net income
    
    
    165
    
    
    
    (56
    )
    
    
    109Total other comprehensive loss
    
    $
    (1,194
    )
    
    $
    406
    
    
    $
    (788
    )
 Six Months Ended June 30, 2004Before-Tax
    
    
    
    
    
    Net-of-TaxAmount
    
    Taxes
    
    Amount(In thousands)Unrealized losses arising during the period
    
    $
    (2,577
    )
    
    $
    876
    
    
    $
    (1,701
    )Add reclassification adjustment for net gain
from
sale of securities recognized in net income
    
    
    112
    
    
    
    (38
    )
    
    
    74Total other comprehensive loss
    
    $
    (2,465
    )
    
    $
    838
    
    
    $
    (1,627
    )
 Rockville Financial, Inc.
    
    
    
    16




---



##### Table of Contents



11. Commitments and Contingencies:
 Financial Instruments With Off-Balance Sheet Risk:
   June 30,
    
    December 31,2005
    
    2004(In thousands)Commitments to extend credit:Future loan commitments
    
    $
    37,007
    
    
    $
    25,046Undisbursed construction loans
    
    
    36,077
    
    
    
    22,993Undisbursed home equity lines of credit
    
    
    69,640
    
    
    
    59,229Undisbursed commercial lines of credit
    
    
    38,140
    
    
    
    44,049Standby letters of credit
    
    
    4,264
    
    
    
    4,121Unused checking overdraft lines of credit
    
    
    79
    
    
    
    71$
    185,207
    
    
    $
    155,509
 12. Legal Matters:
  13. Regulatory Matters:
  Rockville Financial, Inc.
    
    
    
    17




---



##### Table of Contents



To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsRockville Bank at June 30, 2005
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital to risk weighted assets
    
    $
    111,745
    
    
    
    16.8
    %
    
    $
    53,149
    
    
    
    8.0
    %
    
    $
    66,436
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    103,862
    
    
    
    15.6
    
    
    
    26,563
    
    
    
    4.0
    
    
    
    39,845
    
    
    
    6.0Tier I capital to total average assets
    
    
    103,862
    
    
    
    11.0
    
    
    
    37,906
    
    
    
    4.0
    
    
    
    47,382
    
    
    
    5.0
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveRockville Bank
    
    Actual
    
    Purposes
    
    Action Provisionsat December 31, 2004
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital to risk weighted assets
    
    $
    69,509
    
    
    
    11.9
    %
    
    $
    47,125
    
    
    
    8.0
    %
    
    $
    58,906
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    62,942
    
    
    
    10.7
    
    
    
    23,530
    
    
    
    4.0
    
    
    
    35,295
    
    
    
    6.0Tier I capital to total average assets
    
    
    62,942
    
    
    
    7.3
    
    
    
    34,489
    
    
    
    4.0
    
    
    
    43,111
    
    
    
    5.0
 14. Income Taxes:
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
    
    
    Local, regional and national business or economic conditions may differ from
those expected.
    
    The effects of and changes in trade, monetary and fiscal policies and laws,
including the U.S. Federal Reserve Boards interest rate policies, may adversely
affect the Companys business.
 Rockville Financial, Inc.
    
    
    
    18




---



##### Table of Contents




    
    The timeliness of development and acceptance of new products and services may
be different than anticipated.
    
    Technological changes instituted by the Company and by persons who may affect
the Companys business may be more difficult to accomplish or more expensive than
anticipated or may have unforeseen consequences.
    
    The ability to increase market share and control expenses may be more difficult
than anticipated.
    
    Competitive pressures among financial services companies may increase
significantly.
    
    Changes in laws and regulatory requirements (including those concerning taxes,
banking, securities and insurance) may adversely affect the Company or its
businesses.
    
    Changes in accounting policies and practices, as may be adopted by regulatory
agencies, the Public Company Accounting Oversight Board and the Financial
Accounting Standards Board, may affect expected financial reporting.
    
    The costs, effects and outcomes of litigation may adversely affect the Company
or its businesses.
    
    The Company may not manage the risks involved in the foregoing as well as
anticipated.
  Critical Accounting Policies
   Overview
  Rockville Financial, Inc.
    
    
    
    19




---



##### Table of Contents



Comparison of Operating Results for the Three Months and Six Months Ended June 30, 2005 and
2004
  Earnings Summary:
 Rockville Financial, Inc.
    
    
    
    20




---



##### Table of Contents



Income Statement Summary
 For the ThreeMonths
    
    
    
    
    
    For the Six MonthsEnded June 30,
    
    
    
    
    
    Ended June 30,2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    Change(In thousands)Net interest income
    
    $
    7,983
    
    
    $
    6,296
    
    
    $
    1,687
    
    
    $
    15,234
    
    
    $
    12,205
    
    
    $
    3,029Provision for Loan Losses
    
    
    850
    
    
    
    525
    
    
    
    325
    
    
    
    1,600
    
    
    
    1,027
    
    
    
    573Noninterest income
    
    
    991
    
    
    
    898
    
    
    
    93
    
    
    
    1,886
    
    
    
    1,611
    
    
    
    275Operating expenses
    
    
    5,908
    
    
    
    5,797
    
    
    
    111
    
    
    
    12,027
    
    
    
    10,715
    
    
    
    1,312Contribution to Rockville
Community Foundation
    
    
    3,887
    
    
    
    
    
    
    
    3,887
    
    
    
    3,887
    
    
    
    
    
    
    
    3,887(Loss) income before income taxes
    
    
    (1,671
    )
    
    
    872
    
    
    
    (2,543
    )
    
    
    (394
    )
    
    
    2,074
    
    
    
    (2,468
    )Benefit from (provision for)
income taxes
    
    
    480
    
    
    
    (266
    )
    
    
    746
    
    
    
    120
    
    
    
    (632
    )
    
    
    752Net (loss) income
    
    $
    (1,191
    )
    
    $
    606
    
    
    $
    (1,797
    )
    
    $
    (274
    )
    
    $
    1,442
    
    
    $
    (1,716
    )
 Rockville Financial, Inc.
    
    
    
    21




---



##### Table of Contents



Net Interest Income Analysis:
 Average Balance Sheets, Interest and Yields/Costs:
 Three Months Ended June 302005
    
    2004InterestAverage
    
    Interest and
    
    Yield/
    
    Average
    
    and
    
    Yield/Balance
    
    Dividends
    
    Cost
    
    Balance
    
    Dividends
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net
    
    $
    762,273
    
    
    $
    10,369
    
    
    
    5.44
    %
    
    $
    568,005
    
    
    $
    7,942
    
    
    
    5.59
    %Available for sale securities
    
    
    128,408
    
    
    
    1,306
    
    
    
    4.07
    
    
    
    126,153
    
    
    
    1,285
    
    
    
    4.08Federal Home Loan Bank stock
    
    
    8,310
    
    
    
    89
    
    
    
    4.27
    
    
    
    6,069
    
    
    
    32
    
    
    
    2.14Other earning assets
    
    
    4,180
    
    
    
    27
    
    
    
    2.51
    
    
    
    29,319
    
    
    
    57
    
    
    
    .77Total interest-earning assets
    
    
    903,171
    
    
    
    11,791
    
    
    
    5.22
    
    
    
    729,546
    
    
    
    9,316
    
    
    
    5.11Noninterest-earning assets
    
    
    47,436
    
    
    
    
    
    
    
    
    
    
    
    34,919Total assets
    
    $
    950,607
    
    
    
    
    
    
    
    
    
    
    $
    764,465Interest-bearing liabilities:NOW and money market accounts
    
    $
    184,567
    
    
    
    508
    
    
    
    1.10
    
    
    $
    141,835
    
    
    
    292
    
    
    
    0.82Savings accounts
    
    
    169,672
    
    
    
    257
    
    
    
    0.60
    
    
    
    155,194
    
    
    
    234
    
    
    
    0.60Certificates of deposit
    
    
    273,234
    
    
    
    1,822
    
    
    
    2.67
    
    
    
    243,958
    
    
    
    1,476
    
    
    
    2.42Total interest-bearing deposits
    
    
    627,473
    
    
    
    2,587
    
    
    
    1.65
    
    
    
    540,987
    
    
    
    2,002
    
    
    
    1.48Mortgagors and investors escrow accounts
    
    
    3,648
    
    
    
    15
    
    
    
    1.60
    
    
    
    2,816
    
    
    
    11
    
    
    
    1.60Advances from the Federal Home Loan Bank
    
    
    115,455
    
    
    
    1,206
    
    
    
    4.18
    
    
    
    90,493
    
    
    
    1,007
    
    
    
    4.45Total interest-bearing liabilities
    
    
    746,576
    
    
    
    3,808
    
    
    
    2.04
    %
    
    
    634,296
    
    
    
    3,020
    
    
    
    1.90
    %Noninterest-bearing liabilities
    
    
    98,187
    
    
    
    
    
    
    
    
    
    
    
    63,551Total liabilities
    
    
    844,763
    
    
    
    
    
    
    
    
    
    
    
    697,847Capital
    
    
    105,844
    
    
    
    
    
    
    
    
    
    
    
    66,618Total liabilities and capital
    
    $
    950,607
    
    
    
    
    
    
    
    
    
    
    $
    764,465Net interest income
    
    
    
    
    
    $
    7,983
    
    
    
    
    
    
    
    
    
    
    $
    6,296Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Net interest-earning assets (2)
    
    $
    156,595
    
    
    
    
    
    
    
    
    
    
    $
    95,250Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.54
    %
    
    
    
    
    
    
    
    
    
    
    3.45
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.98
    %
    
    
    
    
    
    
    
    
    
    
    115.02
    %
 
 (1)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities.(2)
    
    Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.(3)
    
    Net interest margin represents the annualized net interest income divided by
average total interest-earning assets. Rockville Financial, Inc.
    
    
    
    22




---



##### Table of Contents



Six Months Ended June 302005
    
    2004InterestAverage
    
    Interest and
    
    Yield/
    
    Average
    
    and
    
    Yield/Balance
    
    Dividends
    
    Cost
    
    Balance
    
    Dividends
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net
    
    $
    738,711
    
    
    $
    19,992
    
    
    
    5.41
    %
    
    $
    552,001
    
    
    $
    15,512
    
    
    
    5.62
    %Available for sale securities
    
    
    130,874
    
    
    
    2,608
    
    
    
    3.98
    
    
    
    125,527
    
    
    
    2,539
    
    
    
    4.05Federal Home Loan Bank stock
    
    
    7,925
    
    
    
    164
    
    
    
    4.13
    
    
    
    6,069
    
    
    
    65
    
    
    
    2.15Other earning assets
    
    
    3,714
    
    
    
    45
    
    
    
    2.42
    
    
    
    28,677
    
    
    
    110
    
    
    
    0.77Total interest-earning assets
    
    
    881,224
    
    
    
    22,809
    
    
    
    5.18
    
    
    
    712,274
    
    
    
    18,226
    
    
    
    5.12Noninterest-earning assets
    
    
    44,896
    
    
    
    
    
    
    
    
    
    
    
    35,615Total assets
    
    $
    926,120
    
    
    
    
    
    
    
    
    
    
    $
    747,889Interest-bearing liabilities:NOW and money market accounts
    
    $
    180,177
    
    
    
    967
    
    
    
    1.07
    
    
    $
    137,069
    
    
    
    574
    
    
    
    0.84Savings accounts
    
    
    167,259
    
    
    
    503
    
    
    
    0.60
    
    
    
    150,221
    
    
    
    454
    
    
    
    0.60Certificates of deposit
    
    
    276,603
    
    
    
    3,602
    
    
    
    2.60
    
    
    
    234,709
    
    
    
    2,837
    
    
    
    2.42Total interest-bearing deposits
    
    
    624,039
    
    
    
    5,072
    
    
    
    1.63
    
    
    
    521,999
    
    
    
    3,865
    
    
    
    1.48Mortgagors and investors escrow accounts
    
    
    2,755
    
    
    
    21
    
    
    
    1.52
    
    
    
    2,090
    
    
    
    17
    
    
    
    1.63Advances from the Federal Home Loan Bank
    
    
    121,867
    
    
    
    2,482
    
    
    
    4.07
    
    
    
    96,445
    
    
    
    2,139
    
    
    
    4.44Total interest-bearing liabilities
    
    
    748,661
    
    
    
    7,575
    
    
    
    2.02
    %
    
    
    620,534
    
    
    
    6,021
    
    
    
    1.94
    %Noninterest-bearing liabilities
    
    
    89,826
    
    
    
    
    
    
    
    
    
    
    
    60,618Total liabilities
    
    
    838,487
    
    
    
    
    
    
    
    
    
    
    
    681,152Capital
    
    
    87,633
    
    
    
    
    
    
    
    
    
    
    
    66,737Total liabilities and capital
    
    $
    926,120
    
    
    
    
    
    
    
    
    
    
    $
    747,889Net interest income
    
    
    
    
    
    $
    15,234
    
    
    
    
    
    
    
    
    
    
    $
    12,205Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %Net interest-earning assets (2)
    
    $
    132,563
    
    
    
    
    
    
    
    
    
    
    $
    91,740Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.46
    %
    
    
    
    
    
    
    
    
    
    
    3.43
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    117.71
    %
    
    
    
    
    
    
    
    
    
    
    114.78
    %
 
 (1)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities.(2)
    
    Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.(3)
    
    Net interest margin represents the annualized net interest income divided by
average total interest-earning assets. Rockville Financial, Inc.
    
    
    
    23




---



##### Table of Contents



Rate Volume Analysis
  Three Months Ended
    
    Six Months EndedJune 30, 2005
    
    June 30, 2005Compared to
    
    Compared toJune 30, 2004
    
    June 30, 2004Increase (Decrease)
    
    
    
    
    
    Increase (Decrease)Due To
    
    
    
    
    
    Due ToVolume
    
    Rate
    
    Net
    
    Volume
    
    Rate
    
    Net(Dollars in thousands)Interest and dividend income:Loans receivable
    
    $
    4,579
    
    
    $
    (2,152
    )
    
    $
    2,427
    
    
    $
    6,122
    
    
    $
    (1,642
    )
    
    $
    4,480Securities interest, dividends &
income from other assets
    
    
    (232
    )
    
    
    280
    
    
    
    48
    
    
    
    (679
    )
    
    
    782
    
    
    
    103Total earning assets
    
    
    4,347
    
    
    
    (1,872
    )
    
    
    2,475
    
    
    
    5,443
    
    
    
    (860
    )
    
    
    4,583Interest expense:NOW and money market accounts
    
    
    135
    
    
    
    80
    
    
    
    215
    
    
    
    211
    
    
    
    183
    
    
    
    394Savings accounts
    
    
    27
    
    
    
    
    
    
    
    27
    
    
    
    54
    
    
    
    
    
    
    
    54Certificates of deposit
    
    
    276
    
    
    
    71
    
    
    
    347
    
    
    
    538
    
    
    
    225
    
    
    
    763Total interest-bearing deposits
    
    
    438
    
    
    
    151
    
    
    
    589
    
    
    
    803
    
    
    
    408
    
    
    
    1,211FHLB Advances
    
    
    248
    
    
    
    (49
    )
    
    
    199
    
    
    
    803
    
    
    
    (460
    )
    
    
    343Total interest bearing liabilities
    
    
    686
    
    
    
    102
    
    
    
    788
    
    
    
    1,606
    
    
    
    (52
    )
    
    
    1,554Change in net interest income
    
    $
    3,661
    
    
    $
    (1,974
    )
    
    $
    1,687
    
    
    $
    3,837
    
    
    $
    (808
    )
    
    $
    3,029
 Net Interest Income
  Interest and Dividend Income
 Rockville Financial, Inc.
    
    
    
    24




---



##### Table of Contents



Interest Expense:
 Provision for Loan Losses:
 NonInterest Income:
  NonInterest Expense:
 Rockville Financial, Inc.
    
    
    
    25




---



##### Table of Contents



Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    Change(In thousands)Salaries and employee benefits
    
    $
    3,189
    
    
    $
    2,744
    
    
    $
    445
    
    
    $
    6,246
    
    
    $
    5,257
    
    
    $
    989Service bureau fees
    
    
    704
    
    
    
    498
    
    
    
    206
    
    
    
    1,342
    
    
    
    1,054
    
    
    
    288Occupancy and equipment
    
    
    633
    
    
    
    700
    
    
    
    (67
    )
    
    
    1,374
    
    
    
    1,425
    
    
    
    (51
    )Professional fees
    
    
    267
    
    
    
    216
    
    
    
    51
    
    
    
    676
    
    
    
    421
    
    
    
    255Marketing and promotions
    
    
    215
    
    
    
    374
    
    
    
    (159
    )
    
    
    570
    
    
    
    532
    
    
    
    38Insurance and FDIC
Assessments
    
    
    64
    
    
    
    27
    
    
    
    37
    
    
    
    107
    
    
    
    85
    
    
    
    22Contribution to Rockville BankCommunity Foundation, Inc.
    
    
    3,887
    
    
    
    
    
    
    
    3,887
    
    
    
    3,887
    
    
    
    
    
    
    
    3,887Other
    
    
    836
    
    
    
    1,238
    
    
    
    (402
    )
    
    
    1,712
    
    
    
    1,941
    
    
    
    (231
    )Total noninterest expense
    
    $
    9,795
    
    
    $
    5,797
    
    
    $
    3,998
    
    
    $
    15,914
    
    
    $
    10,715
    
    
    $
    5,197
   Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    Change(In thousands)Directors fees
    
    $
    81
    
    
    $
    86
    
    
    $
    (5
    )
    
    $
    171
    
    
    $
    154
    
    
    $
    17Appraisal and credit report
    
    
    124
    
    
    
    160
    
    
    
    (36
    )
    
    
    219
    
    
    
    201
    
    
    
    18Telephone
    
    
    57
    
    
    
    68
    
    
    
    (11
    )
    
    
    119
    
    
    
    123
    
    
    
    (4
    )Postage
    
    
    81
    
    
    
    45
    
    
    
    36
    
    
    
    134
    
    
    
    116
    
    
    
    18Courier
    
    
    51
    
    
    
    67
    
    
    
    (16
    )
    
    
    108
    
    
    
    118
    
    
    
    (10
    )Dues and subscriptions
    
    
    40
    
    
    
    30
    
    
    
    10
    
    
    
    83
    
    
    
    79
    
    
    
    4Service charges
    
    
    32
    
    
    
    32
    
    
    
    
    
    
    
    65
    
    
    
    65
    
    
    
    Printing and forms
    
    
    57
    
    
    
    20
    
    
    
    37
    
    
    
    85
    
    
    
    41
    
    
    
    44Other
    
    
    313
    
    
    
    730
    
    
    
    (417
    )
    
    
    728
    
    
    
    1,044
    
    
    
    (316
    )Total other noninterest expense
    
    $
    836
    
    
    $
    1,238
    
    
    $
    (402
    )
    
    $
    1,712
    
    
    $
    1,941
    
    
    $
    (229
    )
 Rockville Financial, Inc.
    
    
    
    26




---



##### Table of Contents



Income Tax Expense:
 Comparison of Financial Condition at June 30, 2005 and December 31, 2004
 Summary:
   Investment Securities:
  Rockville Financial, Inc.
    
    
    
    27




---



##### Table of Contents



June 30, 2005
    
    December 31, 2004Percent
    
    
    
    
    
    
    
    
    
    PercentAmortized
    
    Fair
    
    of
    
    Amortized
    
    Fair
    
    ofCost
    
    Value
    
    Portfolio
    
    Cost
    
    Value
    
    Portfolio(Dollars in thousands)Available for sale:U.S. Government and agency obligations
    
    $
    1,998
    
    
    $
    1,989
    
    
    
    1.5
    %
    
    $
    1,994
    
    
    $
    1,984
    
    
    
    1.5
    %U.S. Government sponsored enterprises
    
    
    24,999
    
    
    
    24,779
    
    
    
    19.9
    
    
    
    24,160
    
    
    
    24,053
    
    
    
    17.7Mortgage-backed securities
    
    
    59,555
    
    
    
    59,511
    
    
    
    47.7
    
    
    
    67,291
    
    
    
    67,359
    
    
    
    49.5Corporate debt securities
    
    
    22,035
    
    
    
    22,394
    
    
    
    18.0
    
    
    
    28,384
    
    
    
    29,289
    
    
    
    21.5Other debt securities
    
    
    1,431
    
    
    
    1,493
    
    
    
    1.2
    
    
    
    1,434
    
    
    
    1,506
    
    
    
    1.1Total debt securities
    
    
    110,018
    
    
    
    110,166
    
    
    
    88.3
    
    
    
    123,263
    
    
    
    124,191
    
    
    
    91.3Marketable equity securities
    
    
    11,421
    
    
    
    14,188
    
    
    
    11.4
    
    
    
    8,309
    
    
    
    11,490
    
    
    
    8.5Non-marketable equity securities
    
    
    326
    
    
    
    326
    
    
    
    0.3
    
    
    
    326
    
    
    
    326
    
    
    
    0.2$
    121,765
    
    
    $
    124,680
    
    
    
    100.0
    %
    
    $
    131,898
    
    
    $
    136,007
    
    
    
    100.0
    %
 Lending Activities:
  June 30,
    
    December 31,Loan Category
    
    2005
    
    2004(Dollars in thousands)Real estate loans:Residential
    
    $
    504,975
    
    
    
    64.0
    %
    
    $
    450,054
    
    
    
    64.2
    %Commercial
    
    
    145,760
    
    
    
    18.5
    
    
    
    136,594
    
    
    
    19.5Construction
    
    
    26,853
    
    
    
    3.4
    
    
    
    22,067
    
    
    
    3.1Commercial business loans
    
    
    108,184
    
    
    
    13.6
    
    
    
    88,700
    
    
    
    12.7Installment loans
    
    
    2,235
    
    
    
    0.3
    
    
    
    2,268
    
    
    
    0.3Collateral loans
    
    
    1,213
    
    
    
    0.2
    
    
    
    1,205
    
    
    
    0.2Total loans
    
    
    789,220
    
    
    
    100.0
    %
    
    
    700,888
    
    
    
    100.0
    %Net deferred loan fees and premiums
    
    
    1,883
    
    
    
    
    
    
    
    1,732Allowance for loan losses
    
    
    (7,670
    )
    
    
    
    
    
    
    (6,371
    )Loans, net
    
    $
    783,433
    
    
    
    
    
    
    $
    696,249
  Rockville Financial, Inc.
    
    
    
    28




---



##### Table of Contents



Non-performing Assets:
 June 30,
    
    December 31,2005
    
    2004(Dollars in thousands)Non-accrual loans:Residential(1)
    
    $
    610
    
    
    $
    423Commercial
    
    
    416
    
    
    
    598Commercial business loans
    
    
    80
    
    
    
    326Installment, collateral and other loans
    
    
    16
    
    
    
    6Total non-accrual loans(2)
    
    
    1,122
    
    
    
    1,353Accruing loan past due 90 days or more
    
    
    
    
    
    
    Troubled debt restructurings
    
    
    1,081
    
    
    
    1,045Total non-performing loans
    
    
    2,203
    
    
    
    2,398Real estate owned
    
    
    
    
    
    
    150Total non-performing assets
    
    $
    2,203
    
    
    $
    2,548Total non-performing loans to total loans
    
    
    0.28
    %
    
    
    0.34
    %Total non-performing loans to total assets
    
    
    0.24
    %
    
    
    0.27
    %Allowance for loan losses as a percent of total loans
    
    
    0.97
    %
    
    
    0.91
    %Allowance for loan losses as a percent of non-performing loans
    
    
    348.16
    %
    
    
    265.68
    %
 
 (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 $36,000 and $44,000 for the three months ended June 30, 2005
and June 30, 2004, respectively. Allowance for Loan Losses:
 General Valuation Allowance
 Adversely Graded Loans
 Specific Allowance
 Rockville Financial, Inc.
    
    
    
    29




---



##### Table of Contents



Deposits:
 June 30,
    
    December 31,2005
    
    2004(Dollars in thousands)Demand deposits
    
    $
    82,092
    
    
    
    11.4
    %
    
    $
    77,972
    
    

    
    11.3
    %NOW accounts
    
    
    101,877
    
    
    
    14.2
    
    
    
    88,768
    
    
    
    12.8Regular savings
    
    
    169,779
    
    
    
    23.7
    
    
    
    161,215
    
    
    
    23.3Money market
and investment savings
    
    
    94,983
    
    
    
    13.3
    
    
    
    84,789
    
    
    
    12.2Club accounts
    
    
    706
    
    
    
    0.1
    
    
    
    205
    
    
    
    0.0Total transaction accounts
    
    
    449,437
    
    
    
    62.7
    
    
    
    412,949
    
    
    
    59.6Certificates of deposit
    
    
    267,207
    
    
    
    37.3
    
    
    
    279,549
    
    
    
    40.4Total deposits
    
    $
    716,644
    
    
    
    100.0
    %
    
    $
    692,498
    
    
    
    100.0
    %
 Rockville Financial, Inc.
    
    
    
    30




---



##### Table of Contents



Liquidity and Capital Resources:
        Rockville Financial, Inc.
    
    
    
    31




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:
  Quantitative Analysis:
 Income Simulation:
 Percentage Increase(Decrease) in EstimatedNet Interest IncomeOver 12 Months300 basis point increase in
rates
    
    
    (6.4
    )%200 basis point decrease in
rates
    
    
    (9.4
    )
 Rockville Financial, Inc.
    
    
    
    32




---



##### Table of Contents



i.e.
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Controls:
 Rockville Financial, Inc.
    
    
    
    33




---



##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 6. Exhibits
             Rockville Financial, Inc.
    
    
    
    34




---



##### Table of Contents



SIGNATURES
  Rockville Financial, Inc.By:
    
    /s/ William J. McGurkWilliam J. McGurkPresident and Chief Executive OfficerDate:
    
    August 15, 2005By:
    
    /s/ Gregory A. WhiteGregory A. WhiteChief Financial Officer and TreasurerDate:
    
    August 15, 2005
 Rockville Financial, Inc.
    
    
    
    35