##### 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, 2006.
 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 o þ
 o þ




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Table of Contents
 Page No.Part I  FINANCIAL INFORMATIONItem 1. Interim Financial StatementsCondensed Consolidated Statements of Condition at June 30, 2006
and December 31, 2005 (unaudited)
    
    
    3Condensed Consolidated Statements of Income for the three and six months ended
June 30, 2006 and 2005 (unaudited)
    
    
    4Condensed Consolidated Statement of Changes in Shareholders Equity for the
six months ended June 30, 2006 (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2006 and 2005 (unaudited)
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 6. Exhibits
    
    
    32SIGNATURES
    
    
    34EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  Rockville Financial, Inc.
    
    
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Part I  FINANCIAL INFORMATION
 
 Item 1. Interim Financial Statements
 Rockville Financial, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Condition
 (In Thousands, Except Share Amounts)
(Unaudited)
 June 30, 2006
    
    
    December 31,2006
    
    
    2005ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    25,981
    
    
    $
    18,117Short-term investments
    
    
    1,931
    
    
    
    5,494Total cash and cash equivalents
    
    
    27,912
    
    
    
    23,611AVAILABLE FOR SALE SECURITIES-At fair value
    
    
    120,584
    
    
    
    129,049LOANS RECEIVABLE (Net of allowance for loan
losses of $9,264 in 2006 and $8,675 in 2005)
    
    
    954,866
    
    
    
    859,700FEDERAL HOME LOAN BANK STOCK
    
    
    9,836
    
    
    
    8,498ACCRUED INTEREST RECEIVABLE
    
    
    3,836
    
    
    
    3,777DEFERRED TAX ASSET-Net
    
    
    3,329
    
    
    
    3,417BANK PREMISES AND EQUIPMENT-Net
    
    
    12,508
    
    
    
    11,317GOODWILL
    
    
    1,070
    
    
    
    1,070CASH SURRENDER VALUE OF BANK OWNED LIFE INSURANCE
    
    
    8,778
    
    
    
    8,615OTHER ASSETS
    
    
    6,625
    
    
    
    7,115TOTAL
    
    $
    1,149,344
    
    
    $
    1,056,169LIABILITIES AND CAPITALLIABILITIESDeposits:Non-interest bearing
    
    $
    91,486
    
    
    $
    85,855Interest bearing
    
    
    757,126
    
    
    
    675,541Total deposits
    
    
    848,612
    
    
    
    761,396MORTGAGORS AND INVESTORS ESCROW ACCOUNTS
    
    
    2,807
    
    
    
    4,794ADVANCES FROM THE FEDERAL HOME LOAN BANK
    
    
    135,263
    
    
    
    130,867ACCRUED EXPENSES AND OTHER LIABILITIES
    
    
    8,258
    
    
    
    8,207Total liabilities
    
    
    994,940
    
    
    
    905,264COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock (no par value; 1,000,000 shares authorized;
no shares issued and outstanding)
    
    
    
    
    
    
    Common stock (no par value; 29,000,000 shares authorized;
19,435,000 shares issued and outstanding)
    
    
    85,249
    
    
    
    85,249Additional paid in capital
    
    
    361
    
    
    
    213Unallocated stock held by ESOP
    
    
    (6,835
    )
    
    
    (6,368
    )Retained earnings
    
    
    74,835
    
    
    
    70,764Accumulated other comprehensive income, net of tax
    
    
    794
    
    
    
    1,047Total capital
    
    
    154,404
    
    
    
    150,905TOTAL
    
    $
    1,149,344
    
    
    $
    1,056,169
  Rockville Financial, Inc.
    
    
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Rockville Financial, Inc.
 
 Condensed Consolidated Statements of Income
 (In Thousands, Except Share and Per Share Amounts)
 (Unaudited)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005INTEREST AND DIVIDEND INCOME:Loans
    
    $
    13,991
    
    
    $
    10,369
    
    
    $
    26,848
    
    
    $
    19,992Securities-interest
    
    
    1,215
    
    
    
    1,221
    
    
    
    2,452
    
    
    
    2,444Interest bearing deposits
    
    
    28
    
    
    
    27
    
    
    
    51
    
    
    
    45Securities-dividends
    
    
    98
    
    
    
    174
    
    
    
    308
    
    
    
    328Total interest and dividend income
    
    
    15,332
    
    
    
    11,791
    
    
    
    29,659
    
    
    
    22,809INTEREST EXPENSEDeposits
    
    
    4,450
    
    
    
    2,602
    
    
    
    8,249
    
    
    
    5,093Borrowed funds
    
    
    1,890
    
    
    
    1,206
    
    
    
    3,521
    
    
    
    2,482Total interest expense
    
    
    6,340
    
    
    
    3,808
    
    
    
    11,770
    
    
    
    7,575Net interest income
    
    
    8,992
    
    
    
    7,983
    
    
    
    17,889
    
    
    
    15,234PROVISION FOR LOAN LOSSES
    
    
    557
    
    
    
    850
    
    
    
    1,007
    
    
    
    1,600Net interest income after provision
for loan losses
    
    
    8,435
    
    
    
    7,133
    
    
    
    16,882
    
    
    
    13,634NONINTEREST INCOME:Service charges and fees
    
    
    1,027
    
    
    
    904
    
    
    
    1,914
    
    
    
    1,721Net gain from sale of securities
    
    
    64
    
    
    
    87
    
    
    
    178
    
    
    
    165Total noninterest income
    
    
    1,091
    
    
    
    991
    
    
    
    2,092
    
    
    
    1,886NONINTEREST EXPENSE:Salaries and employee benefits
    
    
    3,347
    
    
    
    3,189
    
    
    
    6,773
    
    
    
    6,246Service bureau fees
    
    
    724
    
    
    
    704
    
    
    
    1,429
    
    
    
    1,342Occupancy and equipment
    
    
    716
    
    
    
    633
    
    
    
    1,622
    
    
    
    1,374Professional fees
    
    
    322
    
    
    
    267
    
    
    
    572
    
    
    
    676Marketing and promotions
    
    
    296
    
    
    
    215
    
    
    
    514
    
    
    
    570Insurance and FDIC assessments
    
    
    50
    
    
    
    64
    
    
    
    104
    
    
    
    107Contribution to Rockville BankCommunity Foundation, Inc.
    
    
    
    
    
    
    3,887
    
    
    
    
    
    
    
    3,887Other
    
    
    899
    
    
    
    836
    
    
    
    1,870
    
    
    
    1,712Total noninterest expense
    
    
    6,354
    
    
    
    9,795
    
    
    
    12,884
    
    
    
    15,914INCOME (LOSS) BEFORE INCOME
TAXES
    
    
    3,172
    
    
    
    (1,671
    )
    
    
    6,090
    
    
    
    (394
    )(PROVISION FOR) BENEFIT FROM
INCOME TAXES
    
    
    (1,050
    )
    
    
    480
    
    
    
    (2,019
    )
    
    
    120NET INCOME (LOSS)
    
    $
    2,122
    
    
    $
    (1,191
    )
    
    $
    4,071
    
    
    $
    (274
    )
  Rockville Financial, Inc.
    
    
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Rockville Financial, Inc.
Condensed Consolidated Statements of Income  Continued
(Unaudited)
 For the
    
    
    
    
    
    For thePeriod from
    
    
    
    
    
    Period fromFor the Three
    
    May 20, 2005
    
    For the Six
    
    May 20, 2005Months Ended
    
    to June 30,
    
    Months Ended
    
    to June 30,June 30, 2006
    
    2005
    
    June 30, 2006
    
    2005Net income (loss) per share
(see Note 2):Basic and diluted
    
    $
    .11
    
    
    $
    (.11
    )
    
    $
    .22
    
    
    $
    (.11
    )Weighted average shares outstanding:Basic and diluted
    
    
    18,828,821
    
    
    
    18,997,713
    
    
    
    18,824,947
    
    
    
    18,997,713
  Rockville Financial, Inc.
    
    
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Rockville Financial, Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Stockholders Equity
 For the Six Months Ended June 30, 2006
 (In Thousands, Except Share Amounts)
 (Unaudited)
 Unallocated
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Common
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Shares Held
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Dollars
    
    
    Capital
    
    
    by ESOP
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance at January 1, 2006
    
    
    19,435,000
    
    
    $
    85,249
    
    
    $
    213
    
    
    $
    (6,368
    )
    
    $
    70,764
    
    
    $
    1,047
    
    
    $
    150,905Shares purchased for ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (817
    )
    
    
    
    
    
    
    
    
    
    
    (817
    )Compensation expense for ESOP
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    498Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,071
    
    
    
    
    
    
    
    4,071Change in net unrealized gain
on securities available for
sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (253
    )
    
    
    (253
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,818Balance at June 30, 2006
    
    
    19,435,000
    
    
    $
    85,249
    
    
    $
    361
    
    
    $
    (6,835
    )
    
    $
    74,835
    
    
    $
    794
    
    
    $
    154,404
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Rockville Financial, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
 (In Thousands)
 (Unaudited)
 For the Six Months EndedJune 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    4,071
    
    
    $
    (274
    )Adjustments to reconcile net income to net cash
provided by operating activities:Amortization and accretion of premiums and discounts
on investments  net
    
    
    99
    
    
    
    183Provision for loan losses
    
    
    1,007
    
    
    
    1,600Contribution to Rockville Bank Community Foundation, Inc.
    
    
    
    
    
    
    3,887Net gain from sale of securities
    
    
    (178
    )
    
    
    (165
    )Compensation expense for ESOP
    
    
    498
    
    
    
    254Depreciation and amortization
    
    
    643
    
    
    
    569Deferred income taxes
    
    
    220
    
    
    
    (734
    )Increase in cash surrender value of bank owned life insurance
    
    
    (163
    )
    
    
    (166
    )Change in assets and liabilities:Deferred loan fees and premiums
    
    
    (99
    )
    
    
    (151
    )Accrued interest receivable
    
    
    (59
    )
    
    
    (310
    )Other assets
    
    
    490
    
    
    
    1,302Accrued expenses and other liabilities
    
    
    51
    
    
    
    406Net cash provided by operating activities
    
    
    6,580
    
    
    
    6,401CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of available for sale securities
    
    
    2,150
    
    
    
    4,031Proceeds from maturities of available for sale securities
    
    
    7,250
    
    
    
    7,584Principal payments on available for sale
mortgage-backed securities
    
    
    7,378
    
    
    
    7,628Purchase of available for sale securities
    
    
    (8,620
    )
    
    
    (9,128
    )Purchase of Federal Home Loan Bank Stock
    
    
    (1,337
    )
    
    
    (1,086
    )Proceeds from sales of loans
    
    
    948
    
    
    
    Net increase in loans
    
    
    (97,022
    )
    
    
    (88,633
    )Purchases of bank premises and equipment
    
    
    (1,834
    )
    
    
    (1,076
    )Proceeds from the surrender of split dollar life insurance
    
    
    
    
    
    
    1,317Net cash used in investing activities
    
    
    (91,087
    )
    
    
    (79,363
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in non-interest bearing deposits
    
    
    5,631
    
    
    
    4,120Net increase in interest bearing deposits
    
    
    81,585
    
    
    
    20,026(Decrease) increase in mortgagors and investors escrow accounts
    
    
    (1,987
    )
    
    
    706Proceeds from Federal Home Loan Bank advances
    
    
    9,474
    
    
    
    Repayments of Federal Home Loan Bank advances
    
    
    (5,078
    )
    
    
    (13,766
    )Net proceeds from common stock offering
    
    
    
    
    
    
    81,299Acquisition of common stock for ESOP
    
    
    (817
    )
    
    
    (4,373
    )Net cash provided by financing activities
    
    
    88,808
    
    
    
    88,012NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    4,301
    
    
    
    15,050CASH AND CASH EQUIVALENTSBeginning of year
    
    
    23,611
    
    
    
    22,100CASH AND CASH EQUIVALENTSEnd of period
    
    $
    27,912
    
    
    $
    37,150SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid during period for:Interest
    
    $
    11,710
    
    
    $
    7,590Income taxes
    
    $
    1,936
    
    
    $
    400
  Rockville Financial, Inc.
    
    
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Rockville Financial, Inc. and Subsidiaries
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 1.
    
    Basis of Presentation and Principles of ConsolidationThe condensed consolidated interim financial statements and the accompanying notes
presented in this report include the accounts of Rockville Financial, Inc. and its
wholly-owned subsidiary Rockville Bank, and the Banks wholly-owned subsidiaries, The SBR
Mortgage Company, The Savings Bank of Rockville Investment Company and Rockville Financial
Services, Inc.The condensed 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 condensed financial
statements. All significant intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the three and six months ended June 30, 2006
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2006. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto included in the
Companys 2005 consolidated financial statements included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2005.The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 condensed 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, determination of pension
assumptions, the valuation of deferred tax assets and the evaluation of available for sale
securities for other than temporary impairment.2.
    
    Earnings Per ShareIncome earned during the year prior to May 20, 2005 is not included in the earning per
share calculation because the shares of the Companys common stock were not issued until May
20, 2005; therefore, per share information for prior periods is not meaningful.
 Rockville Financial, Inc.
    
    
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The following table sets forth the calculation of basic and diluted earnings per share for
the three and six months ended June 30, 2006 and the period from May 20, 2005 to June 30,
2005:
 For theThreeMonths
    
    
    For the SixEnded June
    
    
    Months Ended30, 2006
    
    
    June 30, 2006(Dollars in thousands,except per share information)Net income
    
    $
    2,122
    
    
    $
    4,071Weighted average shares outstanding
    
    
    19,435,000
    
    
    
    19,435,000Less: Unallocated weighted average
ESOP shares
    
    
    (699,659
    )
    
    
    (694,837
    )Plus: Committed ESOP Shares
    
    
    93,480
    
    
    
    84,784Basic and Diluted shares
    
    
    18,828,821
    
    
    
    18,824,947Earnings per share:Basic and Diluted
    
    $
    .11
    
    
    $
    .22
 For the Periodfrom May 20,2005 to June 30,2005(Dollars inthousands,except per shareinformation)Net loss
    
    $
    (2,031
    )Weighted average shares outstanding:Weighted average shares outstanding
    
    
    19,435,000Less: unearned ESOP shares
    
    
    (437,287
    )Basic and Diluted shares
    
    
    18,997,713Loss per share:Basic and Diluted
    
    $
    (.11
    )
 3.
    
    Stock-Based Compensation:On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No.
123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R eliminates the alternative
of applying the intrinsic value measurement provisions of Opinion 25 to stock compensation
awards issued to employees. SFAS 123R now requires companies to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date
estimated fair value of the award. That estimated cost will be recognized over the period
during which an employee is required to provide services in exchange for the award, known as
the requisite service period (usually the vesting period). SFAS 123R requires the use of the
Modified Prospective Application Method. Under this method SFAS 123R is applied to new
awards and to awards modified, repurchased or cancelled after the effective date.
Additionally, compensation cost for
 Rockville Financial, Inc.
    
    
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the portion of awards for which the requisite service has not been rendered (such as
unvested options) that are outstanding as of the date of adoption shall be recognized as the
remaining requisite services are rendered. The compensation cost relating to unvested awards
at the date of adoption shall be based on the grant-date estimated fair value of those
awards as calculated under the pro forma disclosure provisions of SFAS 123. The adoption of
these new rules did not impact the Companys condensed consolidated financial statements
since the Company had not issued any stock options or restricted stock as of the adoption
date.The Board of Directors of the Company approved the Rockville Financial, Inc. 2006 Stock
Incentive Award Plan (the Plan) on June 14, 2006. The Plan will not become effective
unless it is approved by the Companys shareholders on August 22, 2006. The Plan provides
for the grant of incentive stock options which satisfy the requirements of Section 422 of
the Internal Revenue Code (ISOs), non-qualified stock options which do not satisfy the
requirements for ISO treatment (NQSOs), stock appreciation rights (SARs), restricted
stock, restricted stock units and other stock-based awards
(Stock Awards) and performance shares and performance units (Performance Awards). No awards may be issued under the Plan
unless the Plan is approved by the Companys shareholders. The Plan as approved by the Board
of Directors limits the total amount of Company shares which may be used for Stock Awards to
349,830 shares and for ISOs, NQSOs and SARs to 874,575 shares. Upon approval of the Plan by
the Companys shareholders, the Company will reserve 1,224,405 shares of common stock for
issuance under the Plan. Shares of common stock to be issued under the Plan may be either
authorized but un-issued shares, or reacquired shares held by the Company in its treasury.
Any shares subject to a Stock Award which expires, terminates or is forfeited will again be
available for issuance under the Plan.4.
    
    Other Recent Accounting Pronouncements:In March 2006, the FASB issued SFAS No. 156, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities  an Amendment of FASB Statement No.140,
which requires that all separately recognized servicing rights be initially measured at fair
value, if practicable. For each class of separately recognized service assets and
liabilities, the Statement will permit an entity to choose either of the following
subsequent measurement methods: (1) amortize servicing assets or liabilities in proportion
to and over the period of estimated net servicing income or net servicing loss or (2) report
servicing assets or liabilities at fair value at each reporting date and report changes in
fair value in earnings in the period in which the changes occur. The Statement also
requires additional disclosures for all separately recognized servicing rights. The
Statement is effective for new transactions occurring and for subsequent measurement after
the first fiscal year that begins after September 15, 2006, which is January 1, 2007 for the
Company. The adoption of these rules is not expected to have a material impact on the
Companys consolidated financial statements.In July 2006, FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes
  An Interpretation of FASB Statement No. 109, was issued. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN No. 48 also
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return.
FIN No. 48 also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. The evaluation of a tax position
in accordance with FIN 48 is a two-step process. The first step is a recognition process
whereby the Company determines whether it is more likely than not that a tax position will
be sustained upon examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. In evaluating whether a tax
position has met the more-likely-than-not recognition threshold, the Company must presume
that the position will be examined by the appropriate taxing authority that has full
knowledge of all relevant information. The second step is a measurement process whereby a
tax position that meets the more-likely-than-not recognition threshold is calculated to
determine the amount of benefit to recognize in the financial statements. The tax position
is measured at the largest amount of benefit that is greater than 50% likely of being
realized upon ultimate settlement. The provisions of FIN No. 48 are effective for fiscal
years beginning after December 15, 2006. The Company has not yet quantified the impact of
the adoption of FIN No. 48.
 Rockville Financial, Inc.
    
    
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5.
    
    Benefit Plans:The Company sponsors a noncontributory defined benefit pension plan (the Pension
Plan) covering all full-time employees hired before January 1, 2005. Participants become
100% vested after five years of employment. The Companys funding policy is to contribute
annually the maximum amount that can be deducted for Federal income tax purposes, while
meeting the minimum funding standards established by the Employee Retirement Income Security
Act of 1974 (ERISA), as amended.The Company uses October 1 as the measurement date for its pension plan and January 1 for
its post-retirement benefit plan.In January 2004, the Bank entered into a supplemental retirement agreement with an executive
officer of the Bank. Additionally, effective December 1, 2004, the Bank adopted the
Supplemental Executive Retirement Plan (the SERP) covering two designated executive
officers of the Company. The SERP provides the two designated officers with a retirement
benefit equal to 70% of their respective average annual earnings, as defined.The Company also has supplemental retirement plans (the Supplemental Plans) that provide
benefits for certain key executive officers. The Supplemental Plans provide restorative
payments to certain executives who are prevented from receiving the full benefits
contemplated by the tax-qualified Retirement Plan, 401(k) Plan and Employee Stock Ownership
Plan. Benefits under the Supplemental Plans are based on a predetermined formula. The
benefits under the Supplemental Plans are reduced by other employee benefits. The liability
arising from the Supplemental Plans is being accrued over the participants remaining
periods of service so that at the expected retirement dates, the present value of the annual
payments will have been expensed.The Company also provides an unfunded post-retirement medical, health and life insurance
benefit plan for retirees and employees hired prior to March 1, 1993.The 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
 Pension Plans
    
    
    Post-Retirement BenefitsThree Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Service cost
    
    $
    200
    
    
    $
    200
    
    
    $
    3
    
    
    $
    2Interest cost
    
    
    222
    
    
    
    182
    
    
    
    23
    
    
    
    19Expected return on
plan assets
    
    
    (243
    )
    
    
    (210
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    124
    
    
    
    84
    
    
    
    16
    
    
    
    8Amortization of prior
service cost
    
    
    155
    
    
    
    155
    
    
    
    5
    
    
    
    Net periodic benefit cost
    
    $
    458
    
    
    $
    411
    
    
    $
    47
    
    
    $
    29
 Rockville Financial, Inc.
    
    
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Pension Plans
    
    
    Post-Retirement BenefitsSix Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Service cost
    
    $
    399
    
    
    $
    400
    
    
    $
    6
    
    
    $
    4Interest cost
    
    
    444
    
    
    
    364
    
    
    
    47
    
    
    
    39Expected return on
plan assets
    
    
    (487
    )
    
    
    (420
    )
    
    
    
    
    
    
    Amortization of net
actuarial losses
    
    
    248
    
    
    
    168
    
    
    
    31
    
    
    
    16Amortization of prior
service cost (benefits)
    
    
    310
    
    
    
    310
    
    
    
    10
    
    
    
    (1
    )Net periodic benefit cost
    
    $
    914
    
    
    $
    822
    
    
    $
    94
    
    
    $
    58
 No contributions have been made to the pension plan for the six months ended June 30, 2006.
During that same period, $44,000 was contributed to the post-retirement plan. The Company
anticipates contributing $1.0 million and an additional $59,000 during the year ended
December 31, 2006, to fund the pension and post-retirement benefit plans, respectively.401(k)Plan:The Company has a tax-qualified 401(k) plan for the benefit of its eligible
employees. Beginning January 1, 2005, the 401(k) Plan was amended to pay all employees, even
those who do not contribute to the 401(k) Plan, an automatic 3% of pay safe harbor
contribution that is fully vested instead of the matching contribution previously provided
to participants of the 401(k) Plan. The 401(k) expense for the six months ended June 30,
2006 and 2005 was $204,000 and $118,000, respectively.Employee Stock Ownership Plan:As part of the reorganization and stock offering completed
in May 2005, the Company established an Employee Stock Ownership Plan (ESOP) for eligible
employees of the Bank, and authorized the Company to lend the funds to the ESOP to purchase
699,659 or 3.6% of the shares issued in the initial public offering. Upon completion of the
reorganization, the ESOP borrowed $4.4 million from the Company to purchase 437,287 shares
of common stock. The 262,372 remaining authorized shares were subsequently purchased by the
ESOP in the open market at a cost of $3.5 million with additional funds borrowed from the
Company. The Bank intends to make annual contributions to the ESOP that will be adequate to
fund the payment of regular debt service requirements attributable to the indebtedness of
the ESOP.The interest rate for the ESOP loan is the prime rate plus one percent, or 9.25% as of June
30, 2006. As the loan is repaid to the Company, shares will be released from collateral and
will be allocated to the accounts of the participants. As of June 30, 2006, the outstanding
principal and interest due was $7.0 million, and principal payments of $861,000 have been
made on the loan since inception.ESOP expense for the six months ended June 30, 2006 and 2005 was $498,000 and $254,000,
respectively. At June 30, 2006, there were 69,477 allocated, 488 unallocated and 629,694
unreleased ESOP shares, and the unreleased shares had an aggregate fair value of $9.3
million.6.
    
    Other Comprehensive (Loss) Income:The following table summarizes the components of other comprehensive (loss) income and
the related tax effects for the three months and six months ended June 30, 2006 and 2005:
 Rockville Financial, Inc.
    
    
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##### Table of Contents



Three Months Ended June 30, 2006Before-Tax
    
    
    
    
    
    
    Net-of-TaxAmount
    
    
    Taxes
    
    
    Amount(In thousands)Unrealized losses arising during the period
    
    $
    (334
    )
    
    $
    114
    
    
    $
    (220
    )Add reclassification adjustment for net gain
from
sale of securities recognized in net income
    
    
    64
    
    
    
    (22
    )
    
    
    42Total other comprehensive loss
    
    $
    (270
    )
    
    $
    92
    
    
    $
    (178
    )
 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
 Six Months Ended June 30, 2006Before-Tax
    
    
    
    
    
    
    Net-of-TaxAmount
    
    
    Taxes
    
    
    Amount(In thousands)Unrealized losses arising during the period
    
    $
    (562
    )
    
    $
    192
    
    
    $
    (370
    )Add reclassification adjustment for net gain
from
sale of securities recognized in net income
    
    
    178
    
    
    
    (61
    )
    
    
    117Total other comprehensive loss
    
    $
    (384
    )
    
    $
    131
    
    
    $
    (253
    )
 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
    )
 7.
    
    Commitments and Contingencies:Financial Instruments With Off-Balance Sheet RiskIn the normal course of business, the Company is a party to financial instruments with
off-balance sheet risk to meet the financing needs of its customers. These financial
instruments include commitments to extend credit, undisbursed portions of construction
loans, unused commercial and consumer lines of credit and stand-by 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
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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.Financial instruments whose contract amounts represent credit risk are as follows at June
30, 2006 and December 31, 2005:
 June 30,
    
    
    December 31,2006
    
    
    2005(In thousands)Commitments to extend credit:Future loan commitments
    
    $
    68,687
    
    
    $
    51,964Undisbursed construction loans
    
    
    76,266
    
    
    
    64,143Undisbursed home equity lines of credit
    
    
    101,901
    
    
    
    82,119Undisbursed commercial lines of credit
    
    
    15,903
    
    
    
    17,127Standby letters of credit
    
    
    12,095
    
    
    
    10,107Unused checking overdraft lines of credit
    
    
    95
    
    
    
    98$
    274,947
    
    
    $
    225,558
 8.
    
    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.9.
    
    Regulatory Matters:The Company and the Bank are subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Companys financial
statements. The regulations require the Company and the Bank meet specific capital
guidelines that involve quantitative measures of the Companys and the Banks assets,
liabilities, and certain off-balance sheet items, as calculated under regulatory accounting
practices. The Companys and the Banks capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings, and other
factors. The Bank was classified at its most recent notification as well capitalized. At
June 30, 2006, the Company and the Bank exceeded all regulatory capital requirements and are
considered well capitalized under regulatory guidelines.The following is a summary of the Companys and the Banks regulatory capital amounts and
ratios as of June 30, 2006 and December 31, 2005 compared to the Federal Deposit Insurance
Corporations requirements for classification as a well-capitalized institution and for
minimum capital adequacy:
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)Rockville Bank:June 30, 2006Total capital to risk weighted assets
    
    $
    122,491
    
    
    
    14.1
    %
    
    $
    68,498
    
    
    
    8.0
    %
    
    $
    86,873
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    112,925
    
    
    
    13.0
    
    
    
    34,746
    
    
    
    4.0
    
    
    
    52,119
    
    
    
    6.0Tier I capital to total average assets
    
    
    112,925
    
    
    
    10.3
    
    
    
    43,854
    
    
    
    4.0
    
    
    
    54,818
    
    
    
    5.0
 Rockville Financial, Inc.
    
    
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To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)Rockville Bank:December 31, 2005Total capital to risk weighted assets
    
    $
    117,882
    
    
    
    15.5
    %
    
    $
    60,842
    
    
    
    8.0
    %
    
    $
    76,053
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    108,898
    
    
    
    14.3
    
    
    
    30,461
    
    
    
    4.0
    
    
    
    45,692
    
    
    
    6.0Tier I capital to total average assets
    
    
    108,898
    
    
    
    10.6
    
    
    
    41,094
    
    
    
    4.0
    
    
    
    51,367
    
    
    
    5.0Rockville Financial, Inc.:June 30, 2006Total capital to risk weighted assets
    
    $
    160,337
    
    
    
    18.4
    %
    
    $
    69,712
    
    
    
    8.0
    %
    
    $
    87,140
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    150,771
    
    
    
    17.3
    
    
    
    34,860
    
    
    
    4.0
    
    
    
    52,291
    
    
    
    6.0Tier I capital to total average assets
    
    
    150,771
    
    
    
    13.4
    
    
    
    45,006
    
    
    
    4.0
    
    
    
    56,258
    
    
    
    5.0Rockville Financial, Inc.:December 31, 2005Total capital to risk weighted assets
    
    $
    156,000
    
    
    
    20.4
    %
    
    $
    61,176
    
    
    
    8.0
    %
    
    $
    76,471
    
    
    
    10.0
    %Tier I capital to risk weighted assets
    
    
    147,016
    
    
    
    19.3
    
    
    
    30,470
    
    
    
    4.0
    
    
    
    45,704
    
    
    
    6.0Tier I capital to total average assets
    
    
    147,016
    
    
    
    14.3
    
    
    
    41,123
    
    
    
    4.0
    
    
    
    51,404
    
    
    
    5.0
 Connecticut law restricts the amount of dividends that the Bank can pay based on
earnings for the current year and the preceding two years.In accordance with Connecticut banking regulations, the Bank has established two liquidation
accounts (the Liquidation Accounts) for the benefit of its deposit account holders at,
respectively, the time of (1) the Banks conversion in 1997 from a mutual savings bank to a
stock savings bank, and (2) the reorganization in 2005 of the Banks single-tier mutual
holding company to its current structure with the Company as a mid-tier holding company with
public stockholders. Each of the Liquidation Accounts was established in an amount,
respectively, equal to the Banks equity capital as of the latest practicable date prior to
each of the above events, and each Liquidation Account will be maintained for ten (10) years
from its establishment. Each of the Liquidation Accounts is divided into sub-accounts
representing the respective amounts of the holders deposit accounts at the time of the
establishment of the amount of each Liquidation Account. Each of the Liquidation Accounts
is reduced in amount annually, as of the end of the Banks fiscal year, to reflect any
reduction in the balance in any deposit sub-account at that time from the balance at the
time of the previous measurement. Sub-account balances, and accordingly the amount of each
Liquidation Account, will never increase irrespective of any increase in the balances in the
respective deposit accounts. The function of the Liquidation Accounts is to establish
priorities for the distribution of the Banks assets among its depositors and the Companys
stockholders in the unlikely event of the Banks complete liquidation, and their function
shall not operate to restrict the use or application of the equity capital of the Company.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking StatementsThis Form 10-Q contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs
and expectations of the management of the Company and are subject to significant risks and
uncertainties. These risks and uncertainties could cause the Companys results to differ
materially from those set forth in such forward-looking statements.Forward-looking statements can be identified by the fact that they do not relate strictly to
historical or current facts. Words such as believes, anticipates, expects, intends,
plans, estimates, targeted and similar expressions, and future or conditional verbs,
such as will, would, should, could or may, are intended to identify
forward-looking statements but are not the only means to identify these statements.Forward-looking statements involve risks and uncertainties. Actual conditions, events or
results may differ materially from those contemplated by a forward-looking statement.
 Rockville Financial, Inc.
    
    
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##### Table of Contents



Factors that could cause this differencemany of which are beyond the Companys
controlinclude the following, without limitation:
 
    
    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.
    
    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 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 loans 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 be unable to leverage stock sale proceeds efficiently and effectively.
    
    The Company may not manage the risks involved in the foregoing as well as anticipated.
 Any forward-looking statements made by or on behalf of the Company in this Form 10-Q speak
only as of the date of this Form 10-Q. The Company does not undertake to update
forward-looking statements to reflect the impact of circumstances or events that arise after
the date the forward-looking statement was made. The reader should, however, consider any
further disclosures of a forward-looking nature the Company may make in future filings.OverviewRockville Financial, Inc. (the Company) is a state-chartered mid-tier stock holding
company formed on December 17, 2004. The Reorganization and Minority Stock Issuance Plan
(the Plan) adopted by the Companys and Rockville Banks Boards of Directors was completed
on May 20, 2005. Pursuant to the Plan, the Company became a mid-tier holding company.
Rockville Financial MHC, Inc. holds fifty-five percent of the Companys common stock, and
the Company holds all the common stock of Rockville Bank (the Bank). The Bank provides a
full range of banking services to consumer and commercial customers through its main office
in Rockville and seventeen branches located in Hartford and Tolland counties in Connecticut.
The Banks deposits are insured under the Bank Insurance Fund, which is administered by the
Federal Deposit Insurance Corporation.The Company strives to remain a leader in meeting the financial service needs of the local
community and to provide quality service to the individuals and businesses in the market
areas that it has served since 1858. Rockville Bank is a community-oriented provider of
traditional banking products and services to business organizations and individuals,
offering products such as residential and commercial real estate loans, consumer loans and a
variety of deposit products. Our business philosophy is to remain a community-oriented
franchise and to continue to focus on providing superior customer service to meet the
financial needs of the communities in which we operate. Current strategies include expanding
our banking network by pursuing new branch locations and branch acquisition opportunities in
our market area, continuing our residential mortgage lending activities which comprise a
majority of our loan portfolio and expanding our commercial real estate and commercial
business lending activities.
 Rockville Financial, Inc.
    
    
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##### Table of Contents



Critical Accounting PoliciesAllowance for Loan Losses:The allowance for loan losses is the amount estimated by
management as necessary to cover potential credit losses inherent in the loan portfolio at
the balance sheet date. The allowance is established through the provision for loan losses
which is charged against income. Management believes the policy is critical because
determination of the amount of the allowance involves significant judgments and assumptions.
There have been no significant changes to the methodology or approach to determining the
allowance for loan losses, since the beginning of 2003, and there are no plans to change the
methodology used.Management performs a quarterly evaluation of the adequacy of the allowance for loan losses
and presents the evaluation to both the Board Lending Committee and the Board of Directors.
In addition, the credit area of the Bank is responsible for the accuracy of loan risk
ratings and prepares an Asset Quality Report on a quarterly basis and provides summary
reports to the Board Lending Committee on a monthly basis. A variety of factors are
considered in establishing this estimate including, but not limited to, historical loss and
charge off data, current economic conditions, historical and current delinquency statistics,
geographic and industry concentrations, the adequacy of the underlying collateral, the
financial strength of our borrowers, results of internal and external loan reviews and other
relevant factors. This evaluation is inherently subjective as it requires material
estimates by management that may be susceptible to significant change.The analysis has two broad components: specific and general allocations. Specific
allocations are made for loans for which collection of contractual principal and interest is
uncertain. In such cases, the size of the specific allocation is measured by determining an
expected collection or, for collateral-dependent loans, the fair value of the collateral
adjusted for market conditions and selling expenses. The general allocation is determined
by segregating the remaining loans by type of loan, risk weighting (if applicable) and
payment history. Historical loss experience, delinquency trends, general economic conditions
and geographic and industry concentrations are also considered. This analysis establishes
factors that are applied to the loan groups to determine the amount of the general allowance
for loan losses. If the allowance for loan losses is too low, the Company may incur higher
provisions for loan losses in the future resulting in lower net income. If an estimate of
the allowance for loan losses is too high, we may experience lower provisions for loan
losses resulting in higher net income.Other than Temporary Impairment of Securities:On a quarterly basis, securities with
unrealized depreciation for twelve or more consecutive months and other securities with
unrealized losses are reviewed as deemed appropriate to assess whether the decline in fair
value is temporary or other than temporary. It is assessed whether the decline in value is
from company-specific events, industry developments, general economic conditions or other
reasons. After the reasons for the decline are identified, further judgments are required
as to whether those conditions are likely to reverse and, if so, whether that reversal is
likely to result in a recovery of the fair value of the investment in the near term. If it
is judged not to be near term, a charge is taken which results in a new cost basis.
Declines in the fair value of held to maturity and available for sale securities below their
cost that are deemed to be other than temporary are reflected in earnings.Management believes the policy for evaluating securities for other than temporary impairment
is critical because it involves significant judgments by management and could have a
material impact on our net income. As of June 30, 2006, there was an aggregate $1.3 million
of unrealized losses related to $31.8 million of securities in an unrealized loss position
for 12 or more consecutive months which management determined, based on current market
trends, the nature of the investments, industry analysis, and other evaluations, were not
other than temporarily impaired. The aggregate unrealized losses as of June 30, 2006 for
securities in an unrealized loss position for 12 or more consecutive months consisted of
$1.2 million and $92,000 in unrealized losses for debt securities and equity securities,
related to $31.6 million and $260,000 of debt and equity securities, respectively. The $1.2
million of aggregate unrealized loss for debt securities in an unrealized loss position for
12 or more consecutive months as of June 30, 2006 consisted primarily of mortgage-backed
securities. The unrealized losses on debt securities primarily result from increasing
interest rates. If managements judgment regarding impairment of these securities changes
in the future, it will reduce our net income accordingly.Income Taxes:We recognize income taxes under the asset and liability method. Under this
method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences
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between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that all or some portion of the deferred
tax assets will not be realized. The Company has not provided for Connecticut state income
taxes since December 31, 1998 because it has created and maintained a passive investment
company (PIC), as permitted by Connecticut law. The Company believes it is in compliance
with the state PIC requirements and that no state taxes are due from December 31, 1998
through June 30, 2006; however, the Company has not been audited by the Department of
Revenue Services for such periods. If the state were to determine that the PIC was not in
compliance with statutory requirements, a material amount of taxes could be due. Management
believes its tax policies and practices are critical because the determination of the tax
provision and current and deferred tax assets and liabilities have a material impact on our
net income and the carrying value of our assets. We have no plans to change the tax
recognition methodology in the future. If our estimated valuation allowance is too high or
too low it will affect our future net income. As of June 30, 2006, our net deferred tax
asset was $3.3 million and there was no valuation allowance.Pension and Other Post-Retirement Benefits:We have a noncontributory defined benefit
pension plan that provides benefits for substantially all employees hired before January 1,
2005 who meet certain requirements as to age and length of service. The benefits are based
on years of service and average compensation, as defined. Our funding policy is to
contribute annually the maximum amount that could be deducted for federal income tax
purposes, while meeting the minimum funding standards established by ERISA.In addition to providing pension benefits, we provide certain health care and life insurance
benefits for retired employees. Participants or eligible employees hired before March 1993
become eligible for the benefits if they retire after reaching age 62 with five or more
years of service. A fixed percent of annual costs are paid depending on length of service
at retirement. We accrue for the estimated costs of these other post-retirement benefits
through charges to expense during the years that employees render service; however, we do
not fund this plan.Management believes the policy for determining pension and other post-retirement benefit
expenses is critical because judgments are required with respect to the appropriate discount
rate, rate of return on assets, salary increases and other items. Management reviews and
updates the assumptions annually. If our estimate of pension and post-retirement expense is
too low we may experience higher expenses in the future reducing our net income. If our
estimate is too high, we may experience lower expenses in the future increasing our net
income.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
8.50%. 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 61% equity securities, 36% debt
securities and 3% 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 8.50% falls within a
range of reasonable long-term rate of return expectations for our pension plan assets.The accounting policies followed by the Company and its subsidiaries conform with accounting
principles generally accepted in the United States of America and with general practices
within the banking industry.Critical accounting policies are defined as those that are reflective of significant
judgments and uncertainties, and could potentially result in materially different results
under different assumptions and conditions. We believe that our most critical accounting
policies, which involve the most complex subjective decisions or assessments, relate to
income taxes, pension and other post-retirement benefits, the allowance for loan losses and
other than temporary impairment of investment securities.
 Rockville Financial, Inc.
    
    
    18




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##### Table of Contents



Comparison of Operating Results for the Three Months and Six Months Ended June 30, 2006 and
2005The Companys results of operations depend primarily on net interest income, which is the
difference between the interest income from earning assets, such as loans and investments,
and the interest expense incurred on interest-bearing liabilities, such as deposits and
other borrowings. The Company also generates noninterest income, including service charges
on deposit accounts, mortgage servicing income, bank owned life insurance income, safe
deposit box rental fees, brokerage fees, insurance commissions and other miscellaneous fees.
The Companys noninterest expense primarily consists of employee compensation and benefits,
occupancy, equipment, and other operating expenses. The Companys results of operations are
also affected by its provision for loan losses. The following discussion provides a summary
and comparison of the Companys operating results for the three and six months ended June
30, 2006 and 2005.Income Statement Summary
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change(In thousands)Net interest income
    
    $
    8,992
    
    
    $
    7,983
    
    
    $
    1,009
    
    
    $
    17,889
    
    
    $
    15,234
    
    
    $
    2,655Provision for loan losses
    
    
    557
    
    
    
    850
    
    
    
    293
    
    
    
    1,007
    
    
    
    1,600
    
    
    
    593Noninterest income
    
    
    1,091
    
    
    
    991
    
    
    
    100
    
    
    
    2,092
    
    
    
    1,886
    
    
    
    206Operating expenses
    
    
    6,354
    
    
    
    5,908
    
    
    
    (446
    )
    
    
    12,884
    
    
    
    12,027
    
    
    
    (857
    )Contribution to RockvilleCommunity Foundation
    
    
    
    
    
    
    3,887
    
    
    
    3,887
    
    
    
    
    
    
    
    3,887
    
    
    
    3,887Income (loss) before income taxes
    
    
    3,172
    
    
    
    (1,671
    )
    
    
    4,843
    
    
    
    6,090
    
    
    
    (394
    )
    
    
    6,484(Provision for) benefit from
income taxes
    
    
    (1,050
    )
    
    
    480
    
    
    
    (1,530
    )
    
    
    (2,019
    )
    
    
    120
    
    
    
    (2,139
    )Net income (loss)
    
    $
    2,122
    
    
    $
    (1,191
    )
    
    $
    3,313
    
    
    $
    4,071
    
    
    $
    (274
    )
    
    $
    4,345
 Net income increased by $3.3 million, to $2.1 million for the quarter ended June 30, 2006
from a net loss of $1.2 million for the same period in the prior year. The increase in net
income primarily resulted from a $1.0 million, or 12.6% increase in our net interest income,
a $293,000, or 34.5% decline in the provision for loan losses, a $100,000, or 10.1% increase
in noninterest income, a $3.4 million, or 35.1% decline in noninterest expense and a $1.5
million increase in the provision for income taxes. The decline in noninterest expense
relates to a $3.9 million expense recorded in the three months ended June 30, 2005 for a
contribution of the Companys common stock to Rockville Bank Community Foundation, Inc. in
connection with the Companys initial public offering. Excluding the effect of the prior
year stock contribution, net of related taxes, net income increased by $583,000 or 37.8% for
the three months ended June 30, 2006 compared to same period in the prior year.The $1.0 million increase in our net interest income is predominately due to a $38.7
million, or 24.7% increase in average net interest-earning assets, partially offset by a 20
basis point decline in our net interest margin due to the cost of interest-bearing
liabilities rising faster than our yield on interest-earning assets in the current rising
rate environment. Our net interest margin was 3.34% for the three months ended June 30,
2006. The increase in the average net interest-earning assets reflects the use of proceeds
from the May 2005 stock issuance in funding loan growth. The Federal Home Loan Bank of
Boston (FHLBB) revised its dividend schedule to delay the anticipated second quarter
dividend payment of $116,000 and indicated that it expects to pay a half-year dividend
payment in the third quarter but recognized that they can make no commitment as to the
payment of any future dividends.The $293,000 decline in the provision for loan losses are the result of our evaluation of
the required allowance amount based upon probable and reasonably estimable losses in our
loan portfolio.The $100,000 increase in noninterest income is principally due to a $123,000 increase in
service charges primarily due to a $59,000 increase in ATM fees as a result of increased
volume in debit card transactions and additions made to our ATM network and a $46,000
increase in overdraft fees due to the growth in checking accounts offset by a decline in the
net gains on sales of securities of $23,000.
 Rockville Financial, Inc.
    
    
    19




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##### Table of Contents



Excluding the $3.9 million foundation contribution expense recorded in the second quarter of
the prior year, noninterest expense increased $446,000 or 7.5%, for the three months ended
June 30, 2006 when compared to the same period in the prior year. The increase in
noninterest expense, excluding the foundation contribution, was primarily attributable to an
increase of $158,000 in salary and employee benefits, a $20,000 increase in service bureau
fees, an $83,000 increase in occupancy and equipment costs, a $55,000 increase in
professional fees, an $81,000 increase in marketing and promotions expense and a $63,000
increase in other noninterest expenses. The $158,000 increase in salary and employee
benefits reflects an increase of $290,000 in salary costs principally incurred in connection
with annual salary increases, the expansion of branch facilities and the commercial lending
division, an increase of $24,000 in other employee benefits, partially offset by a $156,000
reduction resulting from the discontinuance of our phantom stock plan in 2005. The $20,000
increase in service bureau fees is mainly due to an increase in core processing services.
The higher service costs are primarily attributable to the opening of a new branch in
January 2006, additions to our ATM network and the cost associated with increased processing
costs due to the overall growth experienced in loans, deposits and debit card processing.
The $83,000 increase in occupancy expense is largely due to increased costs of expanding our
branch and ATM network and completing construction of our Tolland branch office that was
previously operated from a temporary facility. The $55,000 increase in professional fees was
primarily due to increased costs associated with being a public company. The $81,000
increase in marketing expense for the three months ended June 30, 2006 compared to the same
period in the prior year is due to the timing of marketing programs.Net income increased by $4.3 million to $4.1 million for the six months ended June 30, 2006
from a net loss of $274,000 for the same period in the prior year. The net loss recorded in
the same period of the prior year primarily resulted from a $3.9 million stock contribution
made by the Company to Rockville Bank Community Foundation, Inc. in connection with the
initial public offering with a related tax benefit of $1.3 million. Excluding the impact of
the prior year stock contribution, net income increased by $1.6 million, or 67.7% and was
principally due to a $2.6 million, or 17.4% increase in our net interest income, a $593,000,
or 37.1% decline in the provision for loan losses, a $206,000, or 10.9% increase in
noninterest income and a $857,000, or 7.1% increase in noninterest expense and a $953,000,
or 89.5%, increase in the provision for income taxes.
 Rockville Financial, Inc.
    
    
    20




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##### Table of Contents



Net Interest Income Analysis:
 Average Balance Sheets, Interest and Yields/Costs:
 Three Months Ended June 30,2006
    
    
    2005InterestAverage
    
    
    Interest and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net
    
    $
    938,386
    
    
    $
    13,991
    
    
    
    5.96
    %
    
    $
    762,273
    
    
    $
    10,369
    
    
    
    5.44
    %Available for sale securities
    
    
    126,399
    
    
    
    1,313
    
    
    
    4.16
    
    
    
    128,408
    
    
    
    1,306
    
    
    
    4.07Federal Home Loan Bank stock
    
    
    9,629
    
    
    
    0
    
    
    
    0.00
    
    
    
    8,310
    
    
    
    89
    
    
    
    4.27Other earning assets
    
    
    2,345
    
    
    
    28
    
    
    
    4.78
    
    
    
    4,180
    
    
    
    27
    
    
    
    2.51Total interest-earning assets
    
    
    1,076,759
    
    
    
    15,332
    
    
    
    5.70
    
    
    
    903,171
    
    
    
    11,791
    
    
    
    5.22Noninterest-earning assets
    
    
    51,770
    
    
    
    
    
    
    
    
    
    
    
    47,436Total assets
    
    $
    1,128,529
    
    
    
    
    
    
    
    
    
    
    $
    950,607Interest-bearing liabilities:NOW and money market accounts
    
    $
    191,354
    
    
    
    738
    
    
    
    1.54
    
    
    $
    184,567
    
    
    
    508
    
    
    
    1.10Savings accounts
    
    
    143,477
    
    
    
    217
    
    
    
    0.60
    
    
    
    169,672
    
    
    
    257
    
    
    
    0.60Time deposits
    
    
    375,939
    
    
    
    3,478
    
    
    
    3.70
    
    
    
    273,234
    
    
    
    1,822
    
    
    
    2.67Total interest-bearing deposits
    
    
    710,770
    
    
    
    4,433
    
    
    
    2.49
    
    
    
    627,473
    
    
    
    2,587
    
    
    
    1.65Mortgagors and investors escrow accounts
    
    
    4,204
    
    
    
    17
    
    
    
    1.62
    
    
    
    3,648
    
    
    
    15
    
    
    
    1.60Advances from the Federal Home Loan Bank
    
    
    166,518
    
    
    
    1,890
    
    
    
    4.54
    
    
    
    115,455
    
    
    
    1,206
    
    
    
    4.18Total interest-bearing liabilities
    
    
    881,492
    
    
    
    6,340
    
    
    
    2.88
    %
    
    
    746,576
    
    
    
    3,808
    
    
    
    2.04
    %Noninterest-bearing liabilities
    
    
    93,079
    
    
    
    
    
    
    
    
    
    
    
    98,187Total liabilities
    
    
    974,571
    
    
    
    
    
    
    
    
    
    
    
    844,763Capital
    
    
    153,958
    
    
    
    
    
    
    
    
    
    
    
    105,844Total liabilities and capital
    
    $
    1,128,529
    
    
    
    
    
    
    
    
    
    
    $
    950,607Net interest income
    
    
    
    
    
    $
    8,992
    
    
    
    
    
    
    
    
    
    
    $
    7,983Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    2.82
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %Net interest-earning assets (2)
    
    $
    195,267
    
    
    
    
    
    
    
    
    
    
    $
    156,595Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.34
    %
    
    
    
    
    
    
    
    
    
    
    3.54
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    122.15
    %
    
    
    
    
    
    
    
    
    
    
    120.98
    %
 
 (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.
    
    
    21




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##### Table of Contents



Six Months Ended June 30,2006
    
    
    2005InterestAverage
    
    
    Interest and
    
    
    Yield/
    
    
    Average
    
    
    and
    
    
    Yield/Balance
    
    
    Dividends
    
    
    Cost
    
    
    Balance
    
    
    Dividends
    
    
    Cost(Dollars in thousands)Interest-earning assets:Loans receivable, net
    
    $
    909,926
    
    
    $
    26,848
    
    
    
    5.90
    %
    
    $
    738,711
    
    
    $
    19,992
    
    
    
    5.41
    %Available for sale securities
    
    
    127,596
    
    
    
    2,649
    
    
    
    4.15
    
    
    
    130,874
    
    
    
    2,608
    
    
    
    3.98Federal Home Loan Bank stock
    
    
    9,102
    
    
    
    111
    
    
    
    2.44
    
    
    
    7,925
    
    
    
    164
    
    
    
    4.13Other earning assets
    
    
    3,042
    
    
    
    51
    
    
    
    3.35
    
    
    
    3,714
    
    
    
    45
    
    
    
    2.42Total interest-earning assets
    
    
    1,049,666
    
    
    
    29,659
    
    
    
    5.65
    
    
    
    881,224
    
    
    
    22,809
    
    
    
    5.18Noninterest-earning assets
    
    
    51,265
    
    
    
    
    
    
    
    
    
    
    
    44,896Total assets
    
    $
    1,100,931
    
    
    
    
    
    
    
    
    
    
    $
    926,120Interest-bearing liabilities:NOW and money market accounts
    
    $
    190,226
    
    
    
    1,441
    
    
    
    1.52
    
    
    $
    180,177
    
    
    
    967
    
    
    
    1.07Savings accounts
    
    
    145,996
    
    
    
    440
    
    
    
    0.60
    
    
    
    167,259
    
    
    
    503
    
    
    
    0.60Time Deposits
    
    
    357,037
    
    
    
    6,342
    
    
    
    3.55
    
    
    
    276,603
    
    
    
    3,602
    
    
    
    2.60Total interest-bearing deposits
    
    
    693,259
    
    
    
    8,223
    
    
    
    2.37
    
    
    
    624,039
    
    
    
    5,072
    
    
    
    1.63Mortgagors and investors escrow accounts
    
    
    3,124
    
    
    
    26
    
    
    
    1.66
    
    
    
    2,755
    
    
    
    21
    
    
    
    1.52Advances from the Federal Home Loan Bank
    
    
    158,967
    
    
    
    3,521
    
    
    
    4.43
    
    
    
    121,867
    
    
    
    2,482
    
    
    
    4.07Total interest-bearing liabilities
    
    
    855,350
    
    
    
    11,770
    
    
    
    2.75
    %
    
    
    748,661
    
    
    
    7,575
    
    
    
    2.02
    %Noninterest-bearing liabilities
    
    
    92,621
    
    
    
    
    
    
    
    
    
    
    
    89,826Total liabilities
    
    
    947,971
    
    
    
    
    
    
    
    
    
    
    
    838,487Capital
    
    
    152,960
    
    
    
    
    
    
    
    
    
    
    
    87,633Total liabilities and capital
    
    $
    1,100,931
    
    
    
    
    
    
    
    
    
    
    $
    926,120Net interest income
    
    
    
    
    
    $
    17,889
    
    
    
    
    
    
    
    
    
    
    $
    15,234Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    2.90
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Net interest-earning assets (2)
    
    $
    194,316
    
    
    
    
    
    
    
    
    
    
    $
    132,563Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.41
    %
    
    
    
    
    
    
    
    
    
    
    3.46
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    122.72
    %
    
    
    
    
    
    
    
    
    
    
    117.71
    %
 
 (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.(4)
    
    Net interest margin represents the annualized net interest income divided by
average total interest-earning assets. Rockville Financial, Inc.
    
    
    22




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##### Table of Contents



Rate Volume Analysis
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    
    
    
    
    
    
    
    
    June 30, 2006Compared to
    
    
    
    
    
    
    
    
    
    
    Compared toJune 30, 2005
    
    
    June 30, 2005Increase (Decrease)
    
    
    
    
    
    
    Increase (Decrease)Due To
    
    
    
    
    
    
    Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(Dollars in thousands)Interest and dividend income:Loans receivable
    
    $
    2,558
    
    
    $
    1,064
    
    
    $
    3,622
    
    
    $
    4,938
    
    
    $
    1,918
    
    
    $
    6,856Securities interest, dividends &
income from other assets
    
    
    (25
    )
    
    
    (56
    )
    
    
    (81
    )
    
    
    (108
    )
    
    
    102
    
    
    
    (6
    )Total earning assets
    
    
    2,533
    
    
    
    1,008
    
    
    
    3,541
    
    
    
    4,830
    
    
    
    2,020
    
    
    
    6,850Interest expense:NOW and money market accounts
    
    
    19
    
    
    
    211
    
    
    
    230
    
    
    
    57
    
    
    
    417
    
    
    
    474Savings accounts
    
    
    (59
    )
    
    
    21
    
    
    
    (38
    )
    
    
    (81
    )
    
    
    23
    
    
    
    (58
    )Time deposits
    
    
    815
    
    
    
    841
    
    
    
    1,656
    
    
    
    1,214
    
    
    
    1,526
    
    
    
    2,740Total interest-bearing deposits
    
    
    775
    
    
    
    1,073
    
    
    
    1,848
    
    
    
    1,190
    
    
    
    1,966
    
    
    
    3,156FHLB Advances
    
    
    572
    
    
    
    112
    
    
    
    684
    
    
    
    805
    
    
    
    234
    
    
    
    1,039Total interest bearing liabilities
    
    
    1,347
    
    
    
    1,185
    
    
    
    2,532
    
    
    
    1,995
    
    
    
    2,200
    
    
    
    4,195Change in net interest income
    
    $
    1,186
    
    
    $
    (177
    )
    
    $
    1,009
    
    
    $
    2,835
    
    
    $
    (180
    )
    
    $
    2,655
 Net Interest Income
  Rockville Financial, Inc.
    
    
    23




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##### Table of Contents



Interest and Dividend Income
  Interest Expense:
  Provision for Loan Losses:
 Rockville Financial, Inc.
    
    
    24




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##### Table of Contents



Noninterest Income:
   Noninterest Expense:
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change(In thousands)Salaries and employee benefits
    
    $
    3,347
    
    
    $
    3,189
    
    
    $
    158
    
    
    $
    6,773
    
    
    $
    6,246
    
    
    $
    527Service bureau fees
    
    
    724
    
    
    
    704
    
    
    
    20
    
    
    
    1,429
    
    
    
    1,342
    
    
    
    87Occupancy and equipment
    
    
    716
    
    
    
    633
    
    
    
    83
    
    
    
    1,622
    
    
    
    1,374
    
    
    
    248Professional fees
    
    
    322
    
    
    
    267
    
    
    
    55
    
    
    
    572
    
    
    
    676
    
    
    
    (104
    )Marketing and promotions
    
    
    296
    
    
    
    215
    
    
    
    81
    
    
    
    514
    
    
    
    570
    
    
    
    (56
    )Insurance and FDICAssessments
    
    
    50
    
    
    
    64
    
    
    
    (14
    )
    
    
    104
    
    
    
    107
    
    
    
    (3
    )Contribution to Rockville BankCommunity Foundation, Inc.
    
    
    
    
    
    
    3,887
    
    
    
    (3,887
    )
    
    
    
    
    
    
    3,887
    
    
    
    (3,887
    )Other
    
    
    899
    
    
    
    836
    
    
    
    63
    
    
    
    1,870
    
    
    
    1,712
    
    
    
    158Total noninterest expense
    
    $
    6,354
    
    
    $
    9,795
    
    
    $
    (3,441
    )
    
    $
    12,884
    
    
    $
    15,914
    
    
    $
    (3,030
    )
  Rockville Financial, Inc.
    
    
    25




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change(In thousands)Directors fees
    
    $
    105
    
    
    $
    81
    
    
    $
    24
    
    
    $
    189
    
    
    $
    171
    
    
    $
    18Appraisal and credit report
    
    
    115
    
    
    
    124
    
    
    
    (9
    )
    
    
    234
    
    
    
    219
    
    
    
    15Telephone
    
    
    97
    
    
    
    57
    
    
    
    40
    
    
    
    128
    
    
    
    119
    
    
    
    9Postage
    
    
    88
    
    
    
    81
    
    
    
    7
    
    
    
    174
    
    
    
    134
    
    
    
    40Courier
    
    
    75
    
    
    
    51
    
    
    
    24
    
    
    
    158
    
    
    
    108
    
    
    
    50Dues and subscriptions
    
    
    44
    
    
    
    40
    
    
    
    4
    
    
    
    95
    
    
    
    83
    
    
    
    12Service charges
    
    
    35
    
    
    
    32
    
    
    
    3
    
    
    
    66
    
    
    
    65
    
    
    
    1Printing and forms
    
    
    53
    
    
    
    57
    
    
    
    (4
    )
    
    
    140
    
    
    
    85
    
    
    
    55Other
    
    
    287
    
    
    
    313
    
    
    
    (26
    )
    
    
    686
    
    
    
    728
    
    
    
    (42
    )Total other noninterest expense
    
    $
    899
    
    
    $
    836
    
    
    $
    63
    
    
    $
    1,870
    
    
    $
    1,712
    
    
    $
    158
 Income Tax Expense:
  Comparison of Financial Condition at June 30, 2006 and December 31, 2005
 Summary:
  Rockville Financial, Inc.
    
    
    26




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##### Table of Contents



Investment Securities:
 Lending Activities:
 Non-performing Assets:
 June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Nonaccrual loans:Residential(1)
    
    $
    446
    
    
    $
    821Commercial
    
    
    672
    
    
    
    667Commercial business loans
    
    
    42
    
    
    
    172Installment, collateral and other loans
    
    
    2
    
    
    
    6Total nonaccrual loans(2)
    
    
    1,162
    
    
    
    1,666Accruing loan past due 90 days or more(3)
    
    
    
    
    
    
    4,897Troubled debt restructurings
    
    
    403
    
    
    
    614Total non-performing loans
    
    
    1,565
    
    
    
    7,177Real estate owned
    
    
    
    
    
    
    Total non-performing assets
    
    $
    1,565
    
    
    $
    7,177Total non-performing loans to total loans
    
    
    0.16
    %
    
    
    0.83
    %Total non-performing loans to total assets
    
    
    0.14
    %
    
    
    0.68
    %Allowance for loan losses as a percent of total loans
    
    
    0.96
    %
    
    
    1.00
    %Allowance for loan losses as a percent of non-performing loans
    
    
    592.00
    %
    
    
    120.90
    %
 Rockville Financial, Inc.
    
    
    27




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##### Table of Contents



(1)
    
    Residential mortgage loans include one-to-four family mortgage loans, home
equity loans, and home equity lines of credit.(2)
    
    The amount of income that was contractually due but not recognized on
nonaccrual loans totaled $69,000 and $36,000 for the six months ended June 30, 2006 and
2005, respectively.(3)
    
    Balance represents a loan that is fully guaranteed by the United States
Agriculture Department and was repaid in full in January 2006.
 Allowance for Loan Losses:
 General Valuation Allowance
 Adversely Graded Loans
 Specific Allowance
     Rockville Financial, Inc.
    
    
    28




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##### Table of Contents



Deposits:
 Liquidity and Capital Resources:
       Rockville Financial, Inc.
    
    
    29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 General:
  Quantitative Analysis:
 Income Simulation:
 PercentageIncrease (Decrease) inEstimated NetInterest IncomeOver 12 Months200 basis point increase in rates
    
    
    0.2200 basis point decrease in rates
    
    
    (6.3
    )
 Rockville Financial, Inc.
    
    
    30




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##### Table of Contents



i.e.
 
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Controls:
 Rockville Financial, Inc.
    
    
    31




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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 3.1
    
    Certificate of Incorporation of Rockville Financial, Inc. (incorporated herein
by reference to Exhibit 3.1 to the Registration Statement on the Form S-1 filed
for Rockville Financial Inc., as amended, initially filed on December 17, 2004
(File No. 333-121421))3.2
    
    Bylaws of Rockville Financial, Inc. (incorporated herein by reference
to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed for Rockville Financial,
Inc. on May 13, 2005)3.3
    
    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 by and among Rockville Financial, Inc.,
Rockville Bank and William J. McGurk, effective May 20, 2005 (incorporated herein
by reference to Exhibit 10.4 to the Post Effective Amendment No. 1 to the
Registration Statement on Form S-1 of Rockville Financial, Inc. filed on April 22,
2005)10.1.1
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Joseph F. Jeamel, Jr., effective May 20, 2005 (incorporated herein by reference to
Exhibit 10.4.1 to the Post Effective Amendment No. 1 to the Registration Statement
on Form S-1 filed for Rockville Financial, Inc. filed on April 22, 2005)10.1.2
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Gregory A. White effective May 20, 2005 (incorporated herein by reference to
Exhibit 10.4.2 to the Post Effective Amendment No. 1 to the Registration Statement
filed on Form S-1 filed for Rockville Financial, Inc. filed on April 22, 2005)10.1.3
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Kristen A. Johnson, effective May 20, 2005 (incorporated herein by reference to
Exhibit 10.4.2 to the Post Effective Amendment No. 1 to the Registration Statement
filed on Form S-1 filed for Rockville Financial, Inc. filed on April 22, 2005)10.1.4
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Charles J. DeSimone, Jr., effective May 20, 2005 (incorporated herein by reference
to Exhibit 10.4.2 to the Post Effective Amendment No. 1 to the Registration
Statement filed on Form S-1 filed for Rockville Financial, Inc. filed on April 22,
2005)10.1.5
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Richard J. Trachimowicz, effective May 20, 2005 (incorporated herein by reference
to Exhibit 10.4.2 to the Post Effective Amendment No. 1 to the Registration
Statement filed on Form S-1 filed for Rockville Financial, Inc. filed on April 22,
2005)
 Rockville Financial, Inc.
    
    
    32




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##### Table of Contents



10.1.6
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Ratna Ray, effective May 20, 2005 (incorporated herein by reference to Exhibit
10.4.2 to the Post Effective Amendment No. 1 to the Registration Statement filed
on Form S-1 filed for Rockville Financial, Inc. filed on April 22, 2005)10.1.7
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Laurie A. Rosner, effective May 20, 2005 (incorporated herein by reference to
Exhibit 10.4.2 to the Post Effective Amendment No. 1 to the Registration Statement
filed on Form S-1 filed for Rockville Financial, Inc. filed on April 22, 2005)10.1.8
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Darlene S. White, effective June 7, 2006 (incorporated herein by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed for Rockville Financial, Inc.
filed on June 13, 2006)10.1.9
    
    Employment Agreement by and among Rockville Financial, Inc., Rockville Bank and
Christopher E. Buchholz, effective June 7, 2006 (incorporated herein by reference
to Exhibit 10.2 to the Current Report on Form 8-K filed for Rockville Financial,
Inc. filed on June 13, 2006)10.2.1
    
    Supplemental Savings and Retirement Plan of Rockville Bank (incorporated herein
by reference to Exhibit 10.13 to the Pre-Effective Amendment No. 1 to the
Registration Statement filed on Form S-1 filed for Rockville Financial, Inc. filed
on March 29, 2005)10.2.2
    
    First amendment to Exhibit 10.2.1, the Supplemental Savings and Retirement Plan
of Rockville Bank (incorporated herein by reference to Exhibit 10.2.2 to the
Companys Annual Report on Form 10-K for the year ended December 31, 2005 filed on
March 31, 2006).10.2.3
    
    Rockville Bank Officer Incentive Compensation Plan (incorporated herein by
reference to Exhibit 10.2.3 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2005 filed on March 31, 2006).10.2.4
    
    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)10.2.5
    
    Executive Split Dollar Life Insurance Agreement for Joseph F. Jeamel, Jr.
(incorporated herein by reference to Exhibit 10.11 to the Registration Statement
filed on Form S-1 filed for Rockville Financial, Inc. filed on December 17, 2004)10.2.6
    
    Rockville Bank Supplemental Executive Retirement Plan (incorporated herein by
reference to Exhibit 10.12 to the Registration Statement filed on Form S-1 filed
for Rockville Financial, Inc. filed on December 17, 2004)10.2.7
    
    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)14
    
    Standards of Conduct Policy for Senior Financial Officers
(incorporated herein by reference to Exhibit 14 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2005 filed on March 31, 2006).14.1.1
    
    Standards of Conduct Policy for the Board of Directors (incorporated herein by
reference to Exhibit 14.1.1 to the Companys Annual Report on Form 10-K for the
year ended December 31, 2005 filed on March 31, 2006).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
filed herewith.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
filed herewith.32.0
    
    Section 1350 Certification of the Chief Executive Officer and Chief
Financial Officer attached hereto.
 Rockville Financial, Inc.
    
    
    33




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##### Table of Contents



SIGNATURES
  Rockville Financial, Inc.By:
    
    /s/ Mr. William J. McGurk

Mr. William J. McGurkPresident and Chief Executive OfficerDate: August 11, 2006By:
    
    /s/ Mr. Gregory A. White

Mr. Gregory A. WhiteChief Financial Officer and TreasurerDate: August 11, 2006
 Rockville Financial, Inc.
    
    
    34