þ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2005 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Connecticut | 30-0288470 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
25 Park Street, Rockville, Connecticut
(Address of principal executive officers) |
06066
(Zip Code) |
Title of Class | Name of each exchange where registered | |
Common Stock, no par value | National Association of Securities Dealers |
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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 Boards interest rate policies, may adversely
affect the Companys 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.
The Company may not manage the risks involved in the foregoing as well as
anticipated.
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At December 31,
2005
2004
2003
2002
2001
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in Thousands)
$
557,306
64.31
%
$
450,054
64.21
%
$
334,625
62.73
%
$
296,245
61.19
%
$
290,831
63.26
%
149,006
17.19
136,594
19.49
122,600
22.99
118,256
24.43
105,255
22.89
47,105
5.44
22,067
3.15
14,535
2.72
13,367
2.76
12,161
2.65
109,099
12.59
88,700
12.66
58,683
11.00
53,324
11.02
47,898
10.42
4,119
0.47
3,473
0.49
2,970
0.56
2,915
0.60
3,612
0.78
866,635
100.00
%
700,888
100.00
%
533,413
100.00
%
484,107
100.00
%
459,757
100.00
%
1,740
1,732
40
(1,358
)
(1,616
)
(8,675
)
(6,371
)
(4,971
)
(5,168
)
(4,949
)
$
859,700
$
696,249
$
528,482
$
477,581
$
453,192
(1)
Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.
(2)
Construction loans are reported net of undisbursed construction loans of $64.1
million, $23.0 million, $3.0 million, $5.1 million, and $3.5 million as of December 31,
2005, 2004, 2003, 2002 and 2001, respectively.
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Years Ended December 31,
2005
2004
2003
(In Thousands)
$
700,888
$
533,413
$
484,107
180,488
140,755
189,322
36,621
39,634
22,400
40,953
22,067
14,535
68,365
35,842
21,739
2,968
2,675
2,289
329,395
240,973
250,285
46,429
81,428
10,095
(210,077
)
(152,154
)
(165,653
)
(2,772
)
(45,421
)
165,747
167,475
49,306
$
866,635
$
700,888
$
533,413
(1)
Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.
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Loans Maturing
After One
Within One
But Within
After Five
Year
Five Year
Years
Total
(In Thousands)
$
235
$
17,524
$
539,547
$
557,306
3,567
24,204
121,235
149,006
4,750
19,691
22,664
47,105
23,028
35,992
50,079
109,099
109
2,678
1,332
4,119
$
31,689
$
100,089
$
734,857
$
866,635
Due After December 31, 2006
Fixed
Adjustable
Total
(In Thousands)
$
260,893
$
296,178
$
557,071
16,695
128,744
145,439
4,957
37,398
42,355
17,110
68,961
86,071
3,522
488
4,010
$
303,177
$
531,769
$
834,946
(1)
Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.
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Loans Delinquent For
Total
60-89 Days
90 Days and Over
Number
Amount
Number
Amount
Number
Amount
(Dollars in Thousands)
$
11
$
821
11
$
821
1
22
3
5,564
(2)
4
5,586
(2)
4
172
4
172
1
6
1
6
2
12
2
$
28
19
$
6,563
(2)
21
$
6,591
(2)
10
$
1,170
3
$
423
13
$
1,593
2
598
2
598
3
72
9
326
12
398
6
10
2
6
8
16
19
$
1,252
16
$
1,353
35
$
2,605
5
$
703
4
$
305
9
$
1,008
3
701
3
701
5
323
10
1,502
15
1,825
3
8
3
8
16
$
1,735
14
$
1,807
30
$
3,542
(1)
Residential mortgage loans include one-to-four family mortgage loans, home equity
loans, and home equity lines of credit.
(2)
Balance includes a $4.9 million loan that is fully guaranteed by the
United States Agriculture Department and was repaid in full in January 2006.
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At December 31,
2005
2004
2003
2002
2001
(Dollars in Thousands)
$
821
$
423
$
305
$
767
$
785
667
598
345
177
172
326
1,478
515
797
6
6
10
54
1,666
1,353
1,783
1,637
1,813
4,897
(4)
24
(3)
614
1,045
281
7,177
2,398
2,088
1,637
1,813
150
268
188
$
7,177
$
2,548
$
2,356
$
1,825
$
1,813
0.83
%
(5)
0.34
%
0.39
%
0.34
%
0.39
%
0.68
%
(6)
0.27
%
0.29
%
0.24
%
0.27
%
(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 $59,000 for the
year ended December 31, 2005.
(3)
The loan is fully guaranteed by the Small Business Administration.
(4)
Balance represents a loan that is fully guaranteed by the United States
Agriculture Department and was repaid in full in January 2006.
(5)
The ratio is 0.26% when excluding the $4.9 million fully guaranteed
United States Department of Agriculture loan that was past due 90 days and still
accruing as of December 31, 2005 which was repaid in full in January, 2006.
(6)
The ratio is 0.22% when excluding the $4.9 million fully guaranteed
United States Department of Agriculture loan that was past due 90 days and still
accruing as of December 31, 2005 which was repaid in full in January, 2006.
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At or For the Years Ended December 31,
2005
2004
2003
2002
2001
(Dollars in Thousands)
$
6,371
$
4,971
$
5,168
$
4,949
$
3,609
2,700
2,372
2,100
1,300
1,850
(228
)
(52
)
(591
)
(1,092
)
(2,086
)
(1,114
)
(484
)
(55
)
(20
)
(46
)
(35
)
(12
)
(646
)
(1,112
)
(2,360
)
(1,149
)
(548
)
31
75
7
45
21
209
55
53
21
10
10
10
3
2
7
250
140
63
68
38
(396
)
(972
)
(2,297
)
(1,081
)
(510
)
$
8,675
$
6,371
$
4,971
$
5,168
$
4,949
120.87
%
265.68
%
238.07
%
315.70
%
272.97
%
1.00
%
0.91
%
0.93
%
1.07
%
1.08
%
0.05
%
0.16
%
0.45
%
0.22
%
0.12
%
(1)
Real estate loans include one-to-four family residential mortgage loans, home
equity loans, home equity lines of credit, commercial real estate and construction
loans.
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At December 31,
2005
2004
2003
% of
% of Loans
% of
% of Loans
% of
% of Loans
Allowance
Allowance
in Category
Allowance
Allowance
in Category
Allowance
Allowance
in Category
for Loan
for Loan
to Total
for Loan
for Loan
to Total
for Loan
for Loan
to Total
Losses
Losses
Loans
Losses
Losses
Loans
Losses
Losses
Loans
(Dollars in Thousands)
$
1,035
11.93
%
64.31
%
$
914
14.35
%
64.21
%
$
706
14.20
%
62.73
%
3,459
39.88
17.19
2,667
41.85
19.49
2,217
44.60
22.99
707
8.15
5.44
331
5.20
3.15
218
4.39
2.72
1,541
17.76
12.59
1,469
23.06
12.66
1,457
29.31
11.00
27
0.31
0.47
21
0.33
0.49
18
0.36
0.56
1,906
21.97
969
15.21
355
7.14
$
8,675
100.00
%
100.00
%
$
6,371
100.00
%
100.00
%
$
4,971
100.00
%
100.00
%
At December 31,
2002
2001
% of
% of Loans
% of
% of Loans
Allowance
Allowance
in Category
Allowance
Allowance
in Category
for Loan
for Loan
to Total
for Loan
for Loan
to Total
Losses
Losses
Loans
Losses
Losses
Loans
(Dollars in Thousands)
$
624
12.07
%
61.19
%
$
125
2.53
%
63.26
%
2,296
44.43
24.43
1,140
23.03
22.89
199
3.85
2.76
49
0.99
2.65
1,953
37.79
11.02
951
19.22
10.42
31
0.60
0.60
26
0.52
0.78
65
1.26
2,658
53.71
$
5,168
100.00
%
100.00
%
$
4,949
100.00
%
100.00
%
(1)
Residential mortgage loans include one-to-four family mortgage loans,
home equity loans, and home equity lines of credit.
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At December 31,
2005
2004
2003
Amortized
Amortized
Amortized
Cost
Fair Value
Cost
Fair Value
Cost
Fair Value
(In Thousands)
$
1,974
$
1,973
$
1,994
$
1,984
$
1,996
$
2,006
35,999
35,493
24,160
24,053
27,501
27,759
57,324
56,371
67,290
67,359
52,386
52,745
18,975
18,980
28,384
29,289
30,019
32,035
984
1,016
1,434
1,506
1,540
1,611
11,456
14,975
8,310
11,490
8,105
11,115
241
241
326
326
326
326
$
126,953
$
129,049
$
131,898
$
136,007
$
121,873
$
127,597
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More than Five
More than One Year
Years through Ten
More than Ten
One Year or Less
through Five Years
Years
Years
Total Securities
Weighted
Weighted
Weighted
Weighted
Weighted
Fair
Average
Fair
Average
Fair
Average
Fair
Average
Fair
Average
Value
Yield
Value
Yield
Value
Yield
Value
Yield
Value
Yield
(Dollars in Thousands)
$
1,973
4.33
%
$
%
$
%
$
%
$
1,973
4.33
%
5,911
2.14
28,596
4.18
986
5.27
35,493
3.87
880
5.32
10,327
4.30
45,164
4.29
56,371
4.31
11,080
5.86
7,900
5.78
18,980
5.83
261
6.89
270
4.27
485
4.79
1,016
5.18
18,964
37,637
11,583
45,649
113,833
4.43
%
14,975
14,975
241
241
$
18,964
$
37,637
$
11,583
$
60,865
$
129,049
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At December 31,
2005
2004
2003
Weighted
Weighted
Weighted
Average
Average
Average
Balance
Percent
Rate
Balance
Percent
Rate
Balance
Percent
Rate
(Dollars in Thousands)
$
85,855
11.3
%
0.00
%
$
77,972
11.3
%
0.00
%
$
53,247
10.0
%
0.00
%
90,706
11.9
0.30
88,768
12.8
0.30
71,133
13.4
0.40
151,551
19.9
0.60
161,215
23.3
0.60
147,161
27.7
0.60
98,363
12.9
2.14
84,789
12.2
1.48
62,577
11.8
1.16
206
0.0
2.04
205
0.0
2.04
168
0.0
2.04
426,681
56.0
0.77
412,949
59.6
0.60
334,286
62.9
0.57
334,715
44.0
3.39
279,549
40.4
2.55
197,643
37.1
2.49
$
761,396
100.0
%
1.92
%
$
692,498
100.0
%
1.39
%
$
531,929
100.0
%
1.28
%
(In thousands)
$
8,277
32,506
39,976
11,213
5,676
$
97,648
At December 31,
2005
2004
2003
(In Thousands)
$
1,672
$
1,518
$
1,392
69,259
103,397
111,334
26,858
102,121
26,108
123,321
38,699
26,235
107,146
24,279
19,863
5,789
6,181
9,123
670
3,354
3,588
$
334,715
$
279,549
$
197,643
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Years Ended December 31,
2005
2004
2003
(In Thousands)
$
614,526
$
478,682
$
469,735
49,671
127,373
850
11,344
8,471
8,097
61,015
135,844
8,947
$
675,541
$
614,526
$
478,682
At or For the Years Ended December 31,
2005
2004
2003
(Dollars in Thousands)
$
131,104
$
128,062
$
115,230
122,828
106,134
105,703
130,867
118,015
105,153
4.21
%
4.33
%
4.64
%
4.29
%
4.21
%
4.42
%
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Year
Date of
Owned Or
Acquired
Lease
Location
Leased
Or Leased
Expiration
Rockville, CT
Own
1895
N/A
Coventry, CT
Lease
2005
2010
(4)
East Hartford, CT
Lease
2001
2006
East Windsor, CT
Lease
2001
2006
Ellington, CT
Lease
1987
2007
Enfield, CT
Lease
2001
2007
(4)
Enfield, CT
Own
1997
N/A
Manchester, CT
Lease
2001
2006
(3)
Manchester, CT
Lease
1996
2006
(3)
Rockville, CT
Own
1992
N/A
Somers, CT
Lease
1970
2008
South Windsor, CT
Own
2001
N/A
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Year
Date of
Owned Or
Acquired
Lease
Location
Leased
Or Leased
Expiration
South Windsor, CT
Lease
1985
2006
(4)
Suffield, CT
Own
2001
N/A
Tolland, CT
Lease
2004
2005
(5)
Vernon, CT
Lease
1978
2008
(4)
Glastonbury, CT
Lease
2005
2015
(4)
South Glastonbury, CT
Lease
2005
2010
(1)
Enfield, CT
Lease
2000
2010
(3)
Somers, CT
Lease
2004
2008
(4)
South Windsor, CT
Lease
2004
2007
Manchester, CT
Lease
2005
2006
Rockville, CT
Lease
2005
2006
Tolland, CT
Lease
2005
2010
(3)
Manchester, CT
Lease
2005
2010
(4)
(1)
The South Glastonbury branch was opened in January 2006.
(2)
Supermarket banking facility.
(3)
Has one (1) remaining renewal option for a five (5) year term.
(4)
Has two (2) remaining renewal options each for five (5) year terms.
(5)
The branch at 159 Merrow Road was operated using a temporary facility on
leased land across the street from bank owned property that management used to
construct a permanent branch site. In January 2006, the building was completed and
the branch moved to the new site and the temporary facility was returned to the
rental company.
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- F -1 -
- F -2 -
- F -3 -
- F -4 -
- F -5 -
- F -6 -
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- F -31 -
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- F -33 -
- F -34 -
- F -35 -
- F -36 -
- F -37 -
- 62 -
High
Low
$
12.68
$
9.72
15.79
12.00
14.00
12.67
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At December 31,
2005
2004
2003
2002
2001
(In Thousands)
$
1,056,169
$
889,913
$
712,018
$
687,195
$
671,312
129,049
136,007
127,597
118,795
146,476
8,498
7,412
6,069
6,069
5,572
859,700
696,249
528,482
477,581
453,192
24,786
(1)
23,611
22,100
28,454
43,056
50,477
761,396
692,498
531,929
514,295
487,502
4,794
3,979
3,349
3,298
2,848
130,867
118,015
105,153
105,283
111,405
150,905
(4)
68,526
65,917
58,722
53,047
8,675
6,371
4,971
5,168
4,949
7,177
(3)
2,398
2,088
1,637
1,813
(1)
In December 2002, the Company entered into a forward contract to sell mortgage
loans to a third party in early 2003. The fair value of the forward contract of
approximately $735,000 on December 31, 2002 was recognized in income during the year
ended December 31, 2002.
(2)
Non-performing loans include loans for which the Bank does not accrue
interest (nonaccrual loans), loans 90 days past due and still accruing interest and
renegotiated loans.
(3)
Balance includes a $4.9 million fully guaranteed United States Department
of Agriculture loan that was past due 90 days and still accruing as of December 31,
2005 which was repaid in full in January 2006.
(4)
The Company received proceeds of $83.6 million for the sale of 8,357,050
shares of its common stock, representing 43% of the outstanding common shares at
$10.00 per share to eligible account holders and employee benefit plans of the Bank
pursuant to subscription rights as set forth in the Plan. Reorganization costs of
$2.3 million were incurred in conducting the offering and were recorded as a
reduction of the proceeds from the shares sold in the reorganization.
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Years Ended December 31,
2005
2004
2003
2002
2001
(Dollars in Thousands, Except Per Share Amounts)
$
48,600
$
38,814
$
38,493
$
41,566
$
40,016
16,514
13,070
12,999
17,789
20,872
32,086
25,744
25,494
23,777
19,144
2,700
2,372
2,100
1,300
1,850
29,386
23,372
23,394
22,477
17,294
4,076
3,183
3,953
2,781
1,764
24,616
21,596
17,810
16,320
14,880
3,887
779
4,959
4,959
8,758
8,938
4,178
1,533
1,510
2,667
2,919
1,365
$
3,426
$
3,449
$
6,091
$
6,019
$
2,813
For the
period from
May 20, 2005
to December
31, 2005
$
1,669
$
.09
(1)
The earnings for the period prior to the mutual holding company reorganization
which was completed on May 20, 2005, were excluded when calculating the earnings
per share since shares of common stock were not issued until May 20, 2005;
therefore, per share information for prior periods is not meaningful.
Table of Contents
At or For the Years Ended December 31,
2005
2004
2003
2002
2001
0.36
%
0.43
%
0.86
%
0.89
%
0.48
%
2.88
5.14
9.67
10.87
5.27
3.10
3.15
3.48
3.38
2.96
3.49
3.40
3.78
3.72
3.44
2.95
2.72
2.64
2.43
2.53
78.82
74.65
63.13
61.45
71.17
68.07
74.65
60.48
61.45
71.17
121.51
114.71
115.08
112.06
112.85
14.29
7.70
9.26
8.55
7.90
12.35
8.43
8.93
8.23
9.09
20.44
11.82
13.93
13.25
12.99
19.26
10.70
12.89
12.12
11.83
14.34
7.28
8.54
8.07
7.85
1.00
0.91
0.93
1.07
1.08
120.87
265.68
238.07
315.70
272.97
0.05
0.16
0.45
0.22
0.12
0.83
0.34
0.39
0.34
0.39
0.68
0.27
0.29
0.24
0.27
13
12
10
10
10
4
4
4
5
5
(1)
Represents the difference between the weighted average yield on average
interest-earning assets and the weighted average cost of interest-bearing
liabilities.
(2)
Represents net interest income as a percent of average interest-earning
assets.
(3)
Represents noninterest expense divided by the sum of net interest income
and noninterest income.
(4)
The ratio at December 31, 2005 is 380.48 when excluding the $4.9 million
fully guaranteed United States Department of Agriculture loan that was past due 90
days and still accruing as of December 31, 2005, which was repaid in full in
January, 2006.
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Table of Contents
Years Ended
December 31,
2005
2004
$ Change
%
Change
(Dollars in Thousands)
$
32,086
$
25,744
$
6,342
24.6
%
2,700
2,372
(328
)
(13.8
)
4,076
3,183
893
28.1
3,887
(3,887
)
(100.0
)
24,616
21,596
(3,020
)
(14.0
)
4,959
4,959
0.0
1,533
1,510
(23
)
(1.5
)
$
3,426
$
3,449
$
(23
)
(0.7
)%
Table of Contents
Table of Contents
For the Years Ended
December 31, 2005
December 31, 2004
December 31, 2003
Interest
Interest
Interest
Average
and
Yield/
Average
and
Yield/
Average
and
Yield/
Balance
Dividends
Cost
Balance
Dividends
Cost
Balance
Dividends
Cost
(Dollars in Thousands)
$
778,358
$
42,997
5.52
%
$
600,150
$
33,146
5.52
%
$
503,567
$
32,197
6.39
%
128,180
5,144
4.01
129,769
5,275
4.06
142,719
5,895
4.13
8,214
359
4.37
6,614
188
2.84
6,069
183
3.02
3,383
100
2.96
20,208
205
1.01
22,763
218
0.96
918,135
48,600
5.29
756,741
38,814
5.13
675,118
38,493
5.70
46,662
38,394
30,341
$
964,797
$
795,135
$
705,459
$
177,726
1,956
1.10
$
145,578
1,278
0.88
$
127,417
1,194
0.94
163,673
997
0.61
154,138
937
0.61
143,508
1,178
0.82
288,609
8,346
2.89
251,802
6,223
2.47
207,968
5,692
2.74
630,008
11,299
1.79
551,518
8,438
1.53
478,893
8,064
1.68
2,780
45
1.62
2,072
33
1.59
2,061
33
1.60
122,828
5,170
4.21
106,134
4,599
4.33
105,703
4,902
4.64
755,616
16,514
2.19
%
659,724
13,070
1.98
%
586,657
12,999
2.22
%
90,043
68,372
55,808
845,659
728,096
642,465
119,138
67,039
62,994
$
964,797
$
795,135
$
705,459
$
32,086
$
25,744
$
25,494
3.10
%
3.15
%
3.48
%
$
162,519
$
97,017
$
88,461
3.49
%
3.40
%
3.78
%
121.51
%
114.71
%
115.08
%
(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.
Table of Contents
Year Ended
Year Ended
December 31, 2005
December 31, 2004
Compared to
Compared to
December 31, 2004
December 31, 2003
Increase (Decrease)
Increase (Decrease)
Due To
Due To
Volume
Rate
Net
Volume
Rate
Net
(Dollars in Thousands)
$
9,851
$
0
$
9,851
$
5,679
$
(4,730
)
$
949
(642
)
577
(65
)
(543
)
(85
)
(628
)
9,209
577
9,786
5,136
(4,815
)
321
318
360
678
164
(80
)
84
58
14
72
83
(324
)
(241
)
981
1,142
2,123
1,127
(596
)
531
1,357
1,516
2,873
1,374
(1,000
)
374
693
(122
)
571
20
(323
)
(303
)
2,050
1,394
3,444
1,394
(1,323
)
71
$
7,159
$
(817
)
$
6,342
$
3,742
$
(3,492
)
$
250
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Table of Contents
Years Ended
December 31,
2005
2004
$ Change
% Change
(Dollars in Thousands)
$
12,903
$
11,208
$
1,695
15.1
%
2,672
2,267
405
17.9
2,857
2,696
161
6.0
1,332
902
430
47.7
1,183
934
249
26.7
201
176
25
14.2
3,887
3,887
100.0
3,468
3,413
55
1.6
$
28,503
$
21,596
$
6,907
32.0
%
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Years Ended
December 31,
2005
2004
$ Change
% Change
(Dollars in Thousands)
$
373
$
319
$
54
16.9
%
383
410
(27
)
(6.6
)
251
233
18
7.7
281
225
56
24.9
212
205
7
3.4
177
156
21
13.5
127
130
(3
)
(2.3
)
157
145
12
8.3
1,507
1,590
(83
)
(5.2
)
$
3,468
$
3,413
$
55
1.6
%
Years Ended
December 31,
2004
2003
$ Change
%
Change
(Dollars in Thousands)
$
25,744
$
25,494
$
250
1.0
%
2,372
2,100
(272
)
(13.0
)
3,183
3,953
(770
)
(19.5
)
21,596
17,810
(3,786
)
(21.3
)
779
779
100.0
4,959
8,758
(3,799
)
(43.4
)
1,510
2,667
1,157
43.4
$
3,449
$
6,091
$
(2,642
)
(43.4
)%
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Table of Contents
Years Ended
December 31,
2004
2003
$ Change
% Change
(Dollars in Thousands)
$
11,208
$
8,799
$
2,409
27.4
%
2,267
2,107
160
7.6
2,696
2,688
8
0.3
902
874
28
3.2
934
617
317
51.4
176
301
(125
)
(41.5
)
779
(779
)
(100.0
)
3,413
2,424
989
40.8
$
21,596
$
18,589
$
3,007
16.2
%
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Years Ended
December 31,
2004
2003
$ Change
% Change
(Dollars in Thousands)
$
319
$
278
$
41
14.7
%
410
384
26
6.8
233
197
36
18.3
225
146
79
54.1
205
127
78
61.4
156
131
25
19.1
130
116
14
12.1
145
163
(18
)
(11.0
)
369
369
100.0
1,221
882
339
38.4
$
3,413
$
2,424
$
989
40.8
%
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Table of Contents
More than
One Year
Through
More than Three
One Year
Three
Years Through Five
Over Five
Total
or Less
Years
Years
Years
(Dollars in Thousands)
$
130,867
$
27,000
$
37,000
$
36,867
$
30,000
18,927
4,621
8,053
4,288
1,965
1,267
434
596
237
$
151,061
$
32,055
$
45,649
$
41,392
$
31,965
(1)
Secured under a blanket security agreement on qualifying assets, principally,
mortgage loans.
(2)
Represents non-cancelable operating leases for offices.
Table of Contents
More than
More than
One Year
Three
Through
Years
One Year
Three
Through
Over Five
Total
or Less
Years
Five Years
Years
(Dollars in Thousands)
$
39,544
$
20,083
$
$
$
19,461
12,420
2,000
1,735
8,500
185
17,127
5,663
9,073
2,391
82,119
193
3,069
2,734
76,123
64,143
10,630
32,310
9,213
11,990
98
98
10,107
5,118
4,989
$
225,558
$
43,687
$
51,176
$
22,838
$
107,857
General:
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract and generally
have fixed expiration dates or other termination clauses.
(1)
Commitments for loans are extended to customers for up to 180 days after
which they expire.
(2)
Unused portions of home equity lines of credit are available to the
borrower for up to 10 years.
(3)
Unused portion of checking overdraft lines of credit are available to
customers in good standing.
Table of Contents
Percentage Increase
(Decrease) in Estimated
Net Interest Income Over
12 Months
(4.2
)%
(7.3
)
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
TABLE
OF CONTENTS
Page
F - 1
F - 2
F - 3
F - 5
F - 6
F - 8
Table of Contents
Rockville Financial, Inc.
Rockville, Connecticut
March 31, 2006
Table of Contents
Table of Contents
2005
2004
2003
$
42,997
$
33,146
$
32,197
4,755
5,018
5,660
100
205
218
748
445
418
48,600
38,814
38,493
11,344
8,471
8,097
5,170
4,599
4,902
16,514
13,070
12,999
32,086
25,744
25,494
2,700
2,372
2,100
29,386
23,372
23,394
3,752
3,312
3,096
324
94
1,298
(223
)
(287
)
(154
)
4,076
3,183
3,953
12,903
11,208
8,799
2,672
2,267
2,107
2,857
2,696
2,688
1,332
902
874
1,183
934
617
201
176
301
3,887
779
3,468
3,413
2,424
28,503
21,596
18,589
4,959
4,959
8,758
1,533
1,510
2,667
$
3,426
$
3,449
$
6,091
Table of Contents
Consolidated Statements of Income Continued
For the Period
from May 20,
2005 to December
31, 2005
2004
2003
$
.09
N/A
N/A
18,973,282
N/A
N/A
Table of Contents
Common Stock
Unallocated
Accumulated
Additional
Common
Other
Total
Paid in
Shares Held
Retained
Comprehensive
Stockholders
Shares
Amount
Capital
by ESOP
Earnings
Income
Equity
$
$
$
$
57,798
$
923
$
58,721
6,091
6,091
1,492
1,492
(387
)
(387
)
7,196
63,889
2,028
65,917
3,449
3,449
(1,066
)
(1,066
)
226
226
2,609
67,338
1,188
68,526
10,689,250
8,357,050
81,299
81,299
388,700
3,950
3,950
(7,068
)
(7,068
)
213
700
913
3,426
3,426
(1,329
)
(1,329
)
1,188
1,188
3,285
19,435,000
$
85,249
$
213
$
(6,368
)
$
70,764
$
1,047
$
150,905
Table of Contents
Table of Contents
Consolidated Statements of Cash Flows (Continued)
Table of Contents
Note 1.
Mutual Holding Company Reorganization and Minority Stock Issuance
Rockville Financial, Inc., (the Company), a state-chartered mid-tier stock holding
company was formed on December 17, 2004 to reorganize Charter Oak Community Bank Corp.
from a state-chartered mutual holding company to a state-chartered two-tier mutual and
stock holding company. The Reorganization and Minority Stock Issuance Plan (the Plan)
adopted by the Companys, Charter Oak Community Bank Corp.s and Rockville Banks Board
of Directors was completed on May 20, 2005. Charter Oak Community Bank Corp.s name was
changed to Rockville Financial MHC, Inc. and 100% of the stock of its wholly-owned
subsidiary Rockville Bank (the Bank) was exchanged for 10,689,250 shares, or 55% of the
stock issued by the Company. Rockville Bank provides a full range of banking services to
consumer and commercial customers through its main office in Rockville and sixteen
branches located in Hartford and Tolland counties in Connecticut. The Banks deposits are
insured under the Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation.
The Company sold 8,357,050 shares of its common stock, representing 43% of the
outstanding common shares at $10.00 per share to eligible account holders and employee
benefit plans of the Bank pursuant to subscription rights as set forth in the Plan.
Reorganization costs of approximately $2.3 million were incurred in conducting the
offering and were recorded as a reduction of the proceeds from the shares sold in the
reorganization.
For a period of five years following completion of the Plan, no person, acting singly or
with an associate or group of persons acting in concert, shall directly, or indirectly,
offer to acquire or acquire the beneficial ownership of more than ten percent (10%) of
any class of an equity security of the Company without the prior approval of the
Connecticut Banking Commissioner.
As of December 31, 2005, the Company had not engaged in any business activities other
than owning the common stock of Rockville Bank. Rockville Financial MHC, Inc. does not
conduct any business activity other than owning a majority of the common stock of
Rockville Financial, Inc.
In connection with the stock offering, the Company established Rockville Bank Community
Foundation, Inc., a non-profit charitable organization dedicated to helping the
communities that the Bank serves. The Foundation was funded with a contribution of
388,700 shares of the Companys common stock, representing 2% of the outstanding common
shares. The stock donation resulted in a $3.9 million contribution expense being recorded
and an additional $63,000 deferred tax benefit was recognized as the basis of the
contribution for tax purposes equal to the stocks trading price on the first day of
trading which was higher than the initial issuance price used to record the contribution
expense.
As part of the reorganization and stock offering, the Company established an Employee
Stock Ownership Plan (ESOP) for eligible employees. Upon conversion, the ESOP borrowed
$4.4 million from the Company to purchase 437,287 shares of common stock, representing
2.2% of the outstanding common shares. The Bank intends to make annual contributions to
the ESOP adequate to fund the payment of regular debt service requirements attributable
to the indebtedness of the ESOP.
Note 2.
Basis of Presentation, Principles of Consolidation and Significant Accounting Policies
The consolidated financial statements and the accompanying notes presented in this
report include, subsequent to the formation of Rockville Financial, Inc., the accounts of
the Company and its wholly-owned subsidiary Rockville Bank, and the Banks wholly-owned
subsidiaries, The SBR Mortgage Company, The Savings Bank of Rockville Investment Company
and Rockville Financial Services, Inc. The consolidated financial statements prior to the
formation of Rockville Financial, Inc. are those of Charter Oak Community Bank Corp and
subsidiaries.
The consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). In the opinion of
management, all adjustments considered necessary for a fair presentation have been
included in the condensed
Table of Contents
financial statements. All significant intercompany accounts and transactions have been
eliminated in consolidation.
A description of the Companys significant accounting policies is presented below:
Use of Estimates:
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 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 managements
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.
Investment Securities:
Management determines the appropriate classification of
securities at the date individual investment securities are acquired, and the
appropriateness of such classification is reassessed at each statement of condition date.
Debt securities that management has the positive intent and ability to hold to maturity
are classified as held to maturity and recorded at amortized cost. Trading
securities, if any, are carried at fair value, with unrealized gains and losses
recognized in earnings. Securities not classified as held to maturity or trading,
including equity securities with readily determinable fair values, are classified as
available for sale and recorded at fair value, with unrealized gains and losses
excluded from earnings and reported in other comprehensive income. As of December 31,
2005 and 2004, all securities were classified as available for sale.
Purchase premiums and discounts are recognized in interest income using the interest
method over the expected terms of the securities. On a quarterly basis, the Company
reviews securities with unrealized depreciation for 12 or more consecutive months and
other securities with unrealized losses as deemed appropriate to assess whether the
decline in fair value is temporary or other than temporary. The Company judges whether
the decline in value is from company-specific events, industry developments, general
economic conditions or other reasons. Once 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 as realized losses. Gains and losses on the sale of securities are
recorded on the trade date and are determined using the specific identification method.
Loans Held for Sale:
Loans held for sale are those loans the Company has the intent to
sell in the foreseeable future, and are carried at the lower of aggregate cost or market
value. Net unrealized losses, if any, are recognized by a valuation allowance through a
charge to noninterest income. Realized gains and losses on the sale of loans are
recognized when risk of loss transfers. Should the Company decide to sell portfolio
loans, they are transferred to the held for sale account classification and recorded at
the lower of cost or fair value on the date the decision is made.
Loans Receivable:
Loans receivable are stated at current unpaid principal balances, net
of the allowance for loan losses and deferred loan origination fees, including loan
commitment fees, and loan purchase premiums. Commitment fees for which the likelihood of
exercise is remote are recognized over the loan commitment period on a straight-line
basis.
A loan is classified as a restructured loan when certain concessions have been made to
the original contractual terms, such as reductions of interest rates or deferral of
interest or principal payments due to the borrowers financial condition.
An impaired loan is measured based on the present value of expected future cash flows
discounted at the loans effective interest rate or, as a practical expedient, at the
loans observable market price or the fair value of the collateral if the loan is
collateral dependent. A loan is impaired when it is probable the Company will be unable
to collect all contractual principal and interest payments due in accordance with the
terms of the loan agreement.
Table of Contents
Management considers all nonaccrual loans and restructured loans to be impaired. In most
cases, loan payments less than 90 days past due, based on contractual terms, are
considered minor collection delays, and the related loans are generally not considered
impaired. The Company considers consumer installment loans to be pools of smaller
balance, homogenous loans that are collectively evaluated for impairment.
Allowance for Loan Losses:
The allowance for loan losses, a material estimate which
could change significantly in the near-term, is established as losses are estimated to
have occurred through provisions for losses charged against operations and is maintained
at a level that management considers adequate to absorb losses in the loan portfolio.
Managements judgment in determining the adequacy of the allowance is inherently
subjective and is based on a formula that considers past loan loss experience, known and
inherent losses and size of the loan portfolios, an assessment of current economic and
real estate market conditions, estimates of the current value of underlying collateral,
review of regulatory authority examination reports and other relevant factors, and an
allowance for impaired loans. Loans are charged against the allowance for loan losses
when management believes that the uncollectibility of principal is confirmed. Any
subsequent recoveries are credited to the allowance for loan losses when received. In
connection with the determination of the allowance for loan losses, management obtains
independent appraisals for significant properties, when considered necessary.
In accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan
, as
amended by SFAS No. 118,
Accounting by Creditors for Impairment of Loan-Income
Recognition and Disclosures
, an allowance is maintained for impaired loans to reflect the
difference, if any, between the principal balance of the loan and the present value of
the projected cash flows, observable fair value or collateral value. SFAS No. 114 defines
an impaired loan as a loan for which it is probable that the lender will not collect all
amounts due under the contractual terms of the loan.
The majority of the Companys loans are collateralized by real estate located in central
and eastern Connecticut. Accordingly, the collateral value of a substantial portion of
the Companys loan portfolio and real estate acquired through foreclosure is susceptible
to changes in market conditions.
Management believes that the allowance for loan losses is adequate. While management uses
available information to recognize losses on loans, future additions to the allowance or
write-downs may be necessary based on changes in economic conditions, particularly in
Hartford and Tolland counties in Connecticut. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the Companys
allowance for loan losses. Such agencies have the authority to require the Company to
recognize additions to the allowance or write-downs based on the agencies judgments
about information available to them at the time of their examination.
Bank Owned Life Insurance:
During the years ended December 31, 2004 and 2003, the Bank
purchased $2,000,000 and $6,000,000, respectively of Bank Owned Life Insurance (BOLI).
No purchases were made during 2005. The cash surrender value, net of any deferred
acquisition and surrender costs or loans is recorded as an asset. As of December 31, 2005
and 2004 there were no deferred acquisition costs, surrender costs or loans. There are no
restrictions on the use of any insurance proceeds the Company receives from BOLI.
Interest and Fees on Loans:
Interest on loans is accrued and included in operating
income based on contractual rates applied to principal amounts outstanding. Accrual of
interest is discontinued, and previously accrued income is reversed, when loan payments
are 90 days or more past due or when, in the judgment of management, collectibility of
the loan or loan interest becomes uncertain. Subsequent recognition of income occurs only
to the extent payment is received subject to managements assessment of the
collectibility of the remaining interest and principal. A nonaccrual loan is restored to
accrual status when it is no longer 90 days delinquent and collectibility of interest and
principal is no longer in doubt. Interest collected on nonaccrual loans and impaired
loans is recognized on the cash basis, only if in managements judgment all principal is
expected to be collected.
Loan origination fees and direct loan origination costs (including loan commitment fees)
are deferred, and the net amount is recognized as an adjustment of the related loans
yield utilizing the interest method over the contractual life of the loan.
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Transfers of Financial Assets:
Transfers of financial assets are accounted for as sales
when control over the assets has been surrendered. Control over transferred assets is
deemed to be surrendered when: (1) the assets have been isolated from the Company, (2)
the transferee obtains the right to pledge or exchange the transferred assets and no
condition both constrains the transferee from taking advantage of that right and provides
more than a trivial benefit for the transferor, and (3) the transferor does not maintain
effective control over the transferred assets through either: (a) an agreement that both
entitles and obligates the transferor to repurchase or redeem the assets before maturity
or (b) the ability to unilaterally cause the holder to return specific assets, other than
through a cleanup call.
Other Real Estate Owned:
Other real estate owned represents properties acquired through,
or in lieu of, loan foreclosure or other proceedings and is initially recorded at the
lower of the related loan balances less any specific allowance for loss, or fair value at
the date of foreclosure, which establishes a new cost basis. Subsequent to foreclosure,
the properties are held for sale and are carried at the lower of cost or fair value less
estimated costs of disposal. Any write-down to fair value at the time of acquisition is
charged to the allowance for loan losses. Properties are evaluated regularly to ensure
the recorded amounts are supported by current fair values, and a charge to operations is
recorded as necessary to reduce the carrying amount to fair value less estimated costs to
dispose. Revenue and expense from the operation of other real estate owned and the
provision to establish and adjust valuation allowances are included in operations. Costs
relating to the development and improvement of the property are capitalized, subject to
the limit of fair value of the collateral. Gains or losses are included in operations
upon disposal.
Premises and Equipment:
Premises and equipment are stated at cost, net of accumulated
depreciation and amortization. Depreciation is charged to operations using the
straight-line method over the estimated useful lives of the related assets which range
from three to 40 years. Leasehold improvements are amortized over the shorter of the
improvements estimated economic lives or the related lease terms. Gains and losses on
dispositions are recognized upon realization. Maintenance and repairs are expensed as
incurred and improvements are capitalized.
Impairment of Long-Lived Assets:
Long-lived assets that are held and used by the Company
are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If impairment is indicated by that
review, the asset is written down to its estimated fair value through a charge to
noninterest expense. No write-downs of long-lived assets were recorded for any period
presented herein.
Goodwill:
In connection with a branch acquisition, the Company recorded goodwill, which
represents the excess of the fair value of deposit liabilities assumed over the assets
received. Goodwill is not amortized and is evaluated for impairment annually. No
impairments were recorded during years ended December 31, 2005, 2004 and 2003.
Income Taxes:
The Company recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Deferred tax assets
are reduced by 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.
Pension and Other Post-Retirement Benefits:
The Company has a noncontributory defined
benefit pension plan that provides benefits for substantially all employees meeting
certain requirements as to age and length of service. The benefits are based on years of
service and average compensation, as defined. The Companys 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 the Employee
Retirement Security Act of 1974 (ERISA).
In addition to providing pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Participants become eligible for the
benefits if they retire after reaching age 62 with five or more years of service.
Benefits are paid in fixed amounts
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depending on length of service at retirement. The Company accrues for the estimated costs
of these benefits through charges to expense during the years that employees render
service; however, the Company does not fund this plan.
The Company accounts for Employee Stock Ownership Plan (ESOP) shares in accordance with
Statement of Position 93-6, Employers Accounting for Employee Stock Ownership Plans
(SOP 93-6). Under SOP 93-6, unearned ESOP shares are not considered outstanding for
calculating net income per common share and are shown as a reduction of shareholders
equity and presented as unearned common shares held by ESOP. During the period the ESOP shares are committed to be released, the Company recognizes compensation cost equal to
the fair value of the ESOP shares. When the shares are released, unearned common shares
held by ESOP are reduced by the cost of the ESOP shares released and the differential
between the fair value and the cost is charged to additional paid-in capital. In
accordance with SOP 93-6, the loan receivable from the ESOP to the Company is not
reported as an asset nor is the debt of the ESOP reported as a liability in the Companys
consolidated financial statements.
Related Party Transactions:
Directors and officers of the Company have been customers of
and have had transactions with the Bank, and it is expected that such persons will
continue to have such transactions in the future.
Federal Home Loan Bank Stock:
As a member of the Federal Home Loan Bank (FHLB), the
Bank is required to hold a certain amount of FHLB stock. The stock is considered to be a
non-marketable equity security and, accordingly, is recorded at cost.
Service Charges and Fee Income:
Service charges and fee income which are not included in
deferred loan fees are recorded on an accrual basis when earned.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers
all highly liquid debt instruments with an original maturity of three months or less to
be cash equivalents. The Company maintains amounts due from banks and Federal funds sold
that, at times, may exceed federally insured limits. The Company has not experienced any
losses from such concentrations.
Fair Values of Financial Instruments:
The following methods and assumptions were used by
the Company in estimating the fair value of its financial instruments:
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Earnings per Share:
Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings per Share sets forth computational, presentation and disclosure requirements
regarding basic and diluted earnings per share. When presented, basic earnings per share
excludes dilution and is computed by dividing income available to common stockholders by
the weighted-average number of shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
In accordance with SOP 93-6, unearned ESOP shares are not considered outstanding for
calculating basic and diluted net income per common share and ESOP shares committed to be
released are considered to be outstanding for purposes of the earnings per share
computation. Under SOP 93-6, ESOP shares that have not been legally released, but that
relate to employee services rendered during an accounting period (interim or annual)
ending before the related debt service payment is made, should be considered committed to
be released.
Earnings per share data is not presented in these consolidated financial statements prior
to the May 20, 2005 mutual holding company reorganization since shares of common stock
were not issued until May 20, 2005; therefore, per share information for prior periods is
not meaningful.
Segment Information:
As a community oriented financial institution, substantially all of
the Companys operations involve the delivery of loan and deposit products to customers.
Management makes operating decisions and assesses performance based on an ongoing review
of these community-banking operations, which constitutes the Companys only operating
segment for financial reporting purposes.
Note 3.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment
,
which will require compensation costs related to share-based payment transactions to be
recognized in the financial statements. With limited exceptions, the amount of
compensation cost will be measured based upon the grant-date fair value of the equity or
liability instruments issued. In addition, liability awards will be re-measured each
reporting period. Compensation cost will be recognized over the period that an employee
provides service in exchange for the award. Statement 123 (R) replaces FASB Statement
123,
Accounting for Stock-Based Compensation,
and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees.
SFAS No. 123 (R) is effective for the Company
as of January 1, 2006. The adoption of these new rules is not expected to have a material
impact on the Companys consolidated financial statements.
In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and 124-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.
The guidance in this FSP addresses the determination of when an investment is considered
impaired, whether that impairment is other than temporary, and the measurement of an
impairment loss. The FSP also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary impairments. The
guidance in this FSP amends FASB Statement No. 115,
Accounting for Certain Investments in
Debt and Equity Securities,
and FASB Statement No. 124,
Accounting for Certain
Investments Held by Not-for-Profit Organizations,
and adds a footnote to APB Opinion No.
18,
The Equity Method of Accounting for Investments in Common Stock.
The guidance in this
FSP nullifies certain requirements of EITF Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, and
supersedes
EITF Abstracts,
Topic D-44, Recognition of Other-Than-Temporary Impairment
upon the Planned Sale of a Security Whose Cost Exceeds Fair Value. The guidance in this
FSP is required to be applied to reporting periods beginning after December 15, 2005.
Accordingly, the Company has adopted the provisions of this FSP as of December 31, 2005
which did not have an impact on the Companys consolidated financial statements.
In December 2005, the FASB issued FSP Statement of Position (SOP) 94-6-1,
Terms of Loan
Products That May Give Rise to a Concentration of Credit Risk
, which addresses the
circumstances under which the terms of loan products give rise to such risk and the
disclosures or other accounting considerations that apply for entities that originate,
hold, guarantee, service, or invest in loan
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For the Period
from May 20, 2005
to December 31,
2005
$
1,669
19,435,000
(496,904
)
35,186
18,973,282
$
.09
Note 5.
RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company is required to maintain a percentage of transaction account balances on
deposit in non-interest earning reserves with the Federal Reserve Bank that was offset by
the Companys average vault cash. As of December 31, 2005 and 2004, the Company was
required to have cash and liquid assets of approximately $1.0 million and $1.2 million,
respectively, to meet these requirements. The Company maintains a compensating balance of
$600,000 to partially offset service fees charged by the Federal Reserve Bank. In
addition, as of December 31, 2005 and 2004, the Company maintained interest bearing cash
equivalents of $1.6 million and $1.3 million, respectively, with a vendor for clearing
purposes.
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Note 6.
AVAILABLE FOR SALE SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and approximate
fair values of available for sale investment securities at December 31, 2005 and 2004 are
as follows:
Amortized
Gross Unrealized
Fair
Cost
Gains
Losses
Value
December 31, 2005
(In Thousands)
$
1,974
$
$
1
$
1,973
35,999
3
509
35,493
57,324
137
1,090
56,371
18,975
127
122
18,980
984
32
1,016
115,256
299
1,722
113,833
11,456
3,764
245
14,975
241
241
$
126,953
$
4,063
$
1,967
$
129,049
At December 31, 2005, the net unrealized gain on securities available for sale of $2.1
million, net of income taxes of $713,000, or $1.4 million, is included in accumulated
other comprehensive income.
Amortized
Gross Unrealized
Fair
Cost
Gains
Losses
Value
December 31, 2004
(In Thousands)
$
1,994
$
$
10
$
1,984
24,160
11
118
24,053
67,290
465
396
67,359
28,384
905
29,289
1,434
72
1,506
123,262
1,453
524
124,191
8,310
3,341
161
11,490
326
326
$
131,898
$
4,794
$
685
$
136,007
At December 31, 2004, the net unrealized gain on securities available for sale of $4.1
million, net of income taxes of $1.4 million, or $2.7 million, is included in accumulated
other comprehensive income.
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The amortized cost and fair value of available for sale debt securities at December 31,
2005 by contractual maturities are presented below. Actual maturities of mortgage-backed
securities may differ from contractual maturities because the mortgages underlying the
securities may be called or repaid without any penalties. Because mortgage-backed
securities are not due at a single maturity date, they are not included in the maturity
categories in the following maturity summary.
December 31, 2005
Amortized Cost
Fair Value
(In Thousands)
$
19,121
$
18,964
37,078
36,757
1,263
1,256
470
485
57,932
57,462
57,324
56,371
$
115,256
$
113,833
Securities with a fair value of $2.0 million as of both December 31, 2005 and 2004 were
pledged to secure public deposits and U.S. Treasury tax and loan payments.
For the years ended December 31, 2005, 2004 and 2003, gross gains of $484,000, $388,000
and $1.6 million, respectively, and gross losses of $160,000, $294,000 and $255,000,
respectively, were realized on the sale of available for sale securities.
As of December 31, 2005 and 2004, the Company did not own any investment or
mortgage-backed securities of a single issuer, other than securities guaranteed by the
U.S. Government or its agencies, which had an aggregate book value in excess of 10% of
the Companys capital.
The Company had no securities classified as held to maturity or trading at December 31,
2005 and 2004. The Company does not currently use or maintain a trading account.
The following table summarizes gross unrealized losses and fair value, aggregated by
investment category and length of time the investments have been in a continuous
unrealized loss position, at December 31, 2005 and 2004:
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Loss
Value
Loss
Value
Loss
December 31, 2005
(In Thousands)
$
1,973
$
1
$
$
$
1,973
$
1
14,846
154
17,644
355
32,490
509
21,423
308
27,032
782
48,455
1,090
5,169
89
467
33
5,636
122
43,411
552
45,143
1,170
88,554
1,722
5,491
220
354
25
5,845
245
$
48,902
$
772
$
45,497
$
1,195
$
94,399
$
1,967
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Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Loss
Value
Loss
Value
Loss
December 31, 2004
(In Thousands)
$
1,984
$
10
$
$
$
1,984
$
10
15,894
118
15,894
118
24,170
275
7,657
121
31,827
396
42,048
403
7,657
121
49,705
524
1,881
144
80
17
1,961
161
$
43,929
$
547
$
7,737
$
138
$
51,666
$
685
December 31,
2005
2004
(In Thousands)
$
557,306
$
450,054
149,006
136,594
47,105
22,067
753,417
608,715
109,099
88,700
2,793
2,268
1,326
1,205
866,635
700,888
1,740
1,732
(8,675
)
(6,371
)
$
859,700
$
696,249
The Company services certain loans for third parties. The aggregate of loans serviced for
others approximated $23.1 million and $28.8 million as of December 31, 2005 and 2004,
respectively.
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At December 31, 2005 and 2004, the unpaid principal balances of loans placed on
nonaccrual status were approximately $1.7 million and $1.4 million, respectively. If
nonaccrual loans had been performing in accordance with their original terms, the Company
would have recorded approximately $59,000, $51,000 and $60,000 in additional interest
income during the years ended December 31, 2005, 2004 and 2003, respectively. As of
December 31, 2005 and 2004, there were no loans contractually past due 90 days or more
and still accruing interest except for one $4.9 million United States Department of
Agriculture loan outstanding as of December 31, 2005 that was fully guaranteed for its
principal and interest, which was repaid in full in January 2006.
The following information relates to impaired loans as of and for the years ended
December 31, 2005, 2004 and 2003:
2005
2004
2003
(In Thousands)
$
2,280
$
2,447
$
2,782
139
6
742
1,998
2,588
1,508
116
114
66
The Company has no commitments to lend additional funds to borrowers whose loans are
impaired.
The Companys lending activities are conducted principally in Connecticut. The Company
grants single-family and multi-family residential loans, commercial loans and a variety
of consumer loans. In addition, the Company grants loans for the construction of
residential homes, residential developments and land development projects.
The Company has established credit policies applicable to each type of lending activity
in which it engages. The Company evaluates the creditworthiness of each customer and, in
most cases, generally extends credit of up to 80% of the market value of the collateral
at the date of the credit extension, depending on the borrowers creditworthiness and the
type of collateral. The market value of the collateral is monitored on an ongoing basis
and additional collateral is obtained when warranted. Residential and commercial real
estate is the primary form of collateral. Other important forms of collateral are
business assets, time deposits and marketable securities. While collateral provides
assurance as a secondary source of repayment, the Company ordinarily requires the primary
source of repayment to be based on the borrowers ability to generate continuing cash
flows. Generally, one-to-four family residential mortgage loans are originated in amounts
up to 80% of the lesser of the appraised value or purchase price of the property, with
private mortgage insurance required on loans with a loan-to-value ratio in excess of 80%.
The Company does not make loans with a loan-to-value ratio in excess of 97% for loans
secured by single-family homes.
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Changes in the allowance for loan losses for the years ended December 31, 2005, 2004 and
2003 are as follows:
2005
2004
2003
(In Thousands)
$
6,371
$
4,971
$
5,168
2,700
2,372
2,100
(646
)
(1,112
)
(2,360
)
250
140
63
$
8,675
$
6,371
$
4,971
In the normal course of business, the Company grants loans to executive officers,
directors and other related parties. Changes in loans outstanding to such related parties
for the years ended December 31, 2005 and 2004 are as follows:
2005
2004
(In Thousands)
$
4,295
$
3,628
583
1,519
(472
)
(852
)
$
4,406
$
4,295
December 31,
2005
2004
(In Thousands)
$
144
$
144
9,644
6,724
9,116
8,175
2,507
1,536
21,411
16,579
10,094
9,197
$
11,317
$
7,382
Depreciation and amortization expense was $1.2 million, $1.2 million and $1.4 million for
the years ended December 31, 2005, 2004 and 2003, respectively.
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Note 9.
DEPOSITS
Deposits at December 31, 2005 and 2004 were as follows:
December 31,
2005
2004
(In Thousands)
$
176,561
$
166,740
151,551
161,215
98,363
84,789
206
205
334,715
279,549
$
761,396
$
692,498
Time deposits in denominations of $100,000 or more were
approximately $97.6 million and
$73.7 million as of December 31, 2005 and 2004, respectively.
Contractual maturities of time deposits as of December 31, 2005 are summarized below:
(In Thousands)
$
251,064
38,000
20,865
12,189
9,515
3,082
$
334,715
Deposit accounts of officers, directors, and other related parties aggregated
approximately $587,000 and $2.7 million at December 31, 2005 and 2004, respectively.
A summary of interest expense by account type for the years ended December 31, 2005, 2004
and 2003 is as follows:
2005
2004
2003
(In Thousands)
$
2,998
$
2,248
$
2,405
8,346
6,223
5,692
$
11,344
$
8,471
$
8,097
Note 10.
FEDERAL HOME LOAN BANK BORROWINGS AND STOCK
The Bank is a member of the Federal Home Loan Bank of Boston (FHLBB). At December
31, 2005 and 2004, the Bank had access to a pre-approved secured line of credit with the
FHLBB of $10.0 million, and the capacity to borrow up to a certain percentage of total
assets. In accordance with an agreement with the FHLBB, the qualified collateral must be
free and clear of liens, pledges and encumbrances. At December 31, 2005 and 2004, there
were no advances outstanding under the line of credit.
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At December 31, 2005 and 2004, outstanding advances from the FHLBB are as follows:
December 31,
2005
2004
(In Thousands)
$
$
7,000
5,000
3,000
2,000
17,000
5,000
5,000
5,000
5,000
5,000
5,000
2,000
2,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
10,000
10,000
7,000
7,000
7,000
7,000
2,000
2,000
5,000
5,000
5,000
5,000
867
1,015
10,000
10,000
5,000
5,000
5,000
5,000
8,000
5,000
2,000
2,000
5,000
5,000
$
130,867
$
118,015
The Bank is required to maintain an investment in capital stock of the FHLBB in an amount
equal to 4.5% of its outstanding advances. The carrying value of Federal Home Loan Bank
stock approximates fair value based on the redemption provisions of the FHLBB.
The following table sets forth information concerning balances and interest rates on our
Federal Home Loan Bank advances at the dates and for the periods indicated.
At or For the Years Ended December 31,
2005
2004
2003
(Dollars in Thousands)
$
131,104
$
128,062
$
115,230
122,828
106,134
105,703
130,867
118,015
105,153
4.21
%
4.33
%
4.64
%
4.29
%
4.21
%
4.42
%
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Note 11.
BENEFIT PLANS
Pension and Other Post-Retirement Benefits:
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 of
vesting service. The Companys 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 ERISA.
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 Company 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 aggregate accumulated benefit obligation for the
Supplemental Plans was $3.3 million
and $2.0 million as of December 31, 2005 and 2004, respectively and is not funded. The
aggregate accumulated benefit obligation for the pension and supplemental executive
retirement plans exceeded plan assets for the plan year ended December 31, 2003.
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.
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Pension Plans
Post-Retirement Benefits
Years Ended
Years Ended
Pension Plans
Post-Retirement Benefits
2005
2004
2003
2005
2004
2003
(In Thousands)
$
11,790
$
8,035
$
6,714
$
1,643
$
1,731
$
1,355
850
584
440
9
7
10
739
570
468
80
97
105
637
(563
)
105
1,821
1,386
751
(67
)
(70
)
369
(251
)
(224
)
(231
)
(78
)
(122
)
(108
)
2,002
(107
)
$
15,586
$
11,790
$
8,035
$
1,692
$
1,643
$
1,731
Change in Plan Assets
Pension Plans
Post-Retirement Benefits
2005
2004
2003
2005
2004
2003
(In Thousands)
$
7,102
$
5,301
$
4,241
$
$
$
898
494
484
(108
)
3,881
1,531
915
78
121
108
(251
)
(224
)
(231
)
(78
)
(121
)
(108
)
$
11,630
$
7,102
$
5,301
$
$
$
Table of Contents
Funded Status
Pension Plans
Post-Retirement Benefits
As of December 31,
As of December 31,
2005
2004
2003
2005
2004
2003
(In Thousands)
$
(3,956
)
$
(4,688
)
$
(2,733
)
$
(1,692
)
$
(1,643
)
$
(1,731
)
5,721
4,295
3,256
588
751
897
1,321
1,306
93
105
(2
)
(60
)
2,900
$
3,086
$
3,813
$
616
$
(999
)
$
(894
)
$
(894
)
Net amount recognized in the accompanying consolidated statements of condition consists
of:
Pension Plans
Post-Retirement Benefits
As of December 31,
As of December 31,
2005
2004
2005
2004
(In Thousands)
$
5,846
$
3,538
$
$
173
785
(3,268
)
(2,034
)
(999
)
(894
)
335
1,524
$
3,086
$
3,813
$
(999
)
$
(894
)
Information for accumulated benefit obligation in excess of the plan assets:
Pension Plans
Post-Retirement Benefits
As of December 31,
As of December 31,
2005
2004
2005
2004
(In Thousands)
$
15,586
$
11,790
$
$
13,104
10,283
1,692
1,643
11,630
7,102
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Components of Net Periodic Benefit Cost
Pension Plans
Post-Retirement Benefits
2005
2004
2003
2005
2004
2003
(In Thousands)
$
850
$
584
$
440
$
9
$
7
$
10
739
570
468
80
97
105
(838
)
(473
)
(415
)
335
327
224
46
75
102
622
226
10
(2
)
(58
)
(58
)
$
1,708
$
1,234
$
727
$
133
$
121
$
159
Weighted-average assumptions used to determine pension benefit obligations at December
31,
2005
2004
2003
6.00
%
6.00
%
6.25
%
4.00
%
4.00
%
4.00
%
Weighted average assumptions used to determine net benefit pension expense for the years
ended December 31,
2005
2004
2003
6.00
%
6.25
%
6.75
%
8.50
%
8.50
%
9.00
%
4.00
%
4.00
%
4.00
%
The expected long-term rate of return is based on the actual historical rates of return
of published indices that are used to measure the plans target assets allocation. The
historical rates are then discounted to consider fluctuations in the historical rates as
well as potential changes in the investment environment.
Assumed Healthcare Trend Rates
The Companys accumulated post-retirement benefit obligations, exclusive of pensions,
take into account certain cost-sharing provisions. The annual rate of increase in the
cost of covered benefits (i.e., healthcare cost trend rate) is assumed to be 9% at
December 31, 2005, 2004 and 2003, decreasing gradually to a rate of 4.5% at December 31,
2009. Assumed healthcare cost trend rates have a significant effect on the amounts
reported for the healthcare plans. A one percentage point change in the assumed
healthcare cost trend rate would have the following effects (dollars in thousands):
1%
1%
Increase
Decrease
$
171
$
(146
)
9
(7
)
Table of Contents
The Companys pension plan weighted-average asset allocations at December 31, 2005, 2004
and 2003, by asset category are as follows:
Asset Category
2005
2004
2003
61
%
62
%
67
%
36
36
33
3
2
100
%
100
%
100
%
The Companys investment goal is to obtain a competitive risk adjusted return on the
pension plan assets commensurate with prudent investment practices and the plans
responsibility to provide retirement benefits for its participants, retirees and their
beneficiaries. The Plans asset allocation targets are strategic and long-term in nature
and are designed to take advantage of the risk reducing impacts of asset class
diversification.
Plan assets are periodically rebalanced to their asset class targets to reduce risk and
to retain the portfolios strategic risk/return profile. Investments within each asset
category are further diversified with regard to investment style and concentration of
holdings.
The Company contributed $981,000 to the Pension Plan during the year ended December 31,
2005. The Company does not plan to contribute to the Pension Plan in 2006. The Company
expects to begin funding the supplemental retirement agreements and the SERPs in 2007.
The following benefit payments, which reflect expected future service, as appropriate,
are expected to be paid:
Pension
Plan
Post-Retirement Benefits
(In Thousands)
$
375
$
103
465
107
549
111
564
118
931
116
5,422
608
Phantom Stock Plan:
Effective January 1, 2004, the Company adopted the Rockville Bank
Phantom Stock Plan (the Plan), a non-qualified deferred compensation agreement that
provided for benefits for certain executive officers and directors of the Bank. The Plan
was amended and terminated on December 13, 2005. The Plan created hypothetical or
phantom shares valued in accordance with independent appraisals of Rockville Bank. If
the value of a phantom share increased from year to year, the participants in the Plan
earned a benefit, subject to vesting requirements, equivalent to the increase in value of
the phantom shares allocated to their accounts; however, the value of a participants
phantom shares could not increase more than 20% nor decrease more than 10% in any one
year. The Plan provided for an Option type of phantom share and a Retirement type.
Any increase in value of an Option phantom share awarded under the Plan was to be paid in
a lump sum on the fifth anniversary of the grant of such phantom share. The Retirement
phantom shares were to be paid upon retirement subject to vesting requirements.
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2005
2004
2003
(In Thousands)
$
3,208
$
1,059
$
2,415
(1,675
)
451
252
$
1,533
$
1,510
$
2,667
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The tax effects of temporary differences that give rise to significant components of the
deferred tax assets and deferred tax liabilities at December 31, 2005 and 2004 are
presented below:
December 31,
2005
2004
(In Thousands)
$
2,949
$
2,233
1,024
550
802
173
785
328
366
304
390
84
289
159
5,825
4,611
(713
)
(1,397
)
(1,505
)
(1,381
)
(106
)
(192
)
(84
)
(35
)
(2,408
)
(3,005
)
$
3,417
$
1,606
Undivided profits at December 31, 2005 includes a contingency reserve for loan losses of
approximately $1.2 million which represents the tax reserve balance existing at December
31, 1987, and is maintained in accordance with provisions of the Internal Revenue Code
applicable to mutual savings banks. Amounts transferred to the reserve have been claimed
as deductions from taxable income, and, if the reserve is used for purposes other than to
absorb losses on loans, a Federal income tax liability could be incurred. It is not
anticipated that the Company will incur a Federal income tax liability relating to this
reserve balance, and accordingly, deferred income taxes of approximately $408,000 at
December 31, 2005 have not been recognized.
Effective for taxable years commencing after December 31, 1998, financial services
institutions doing business in Connecticut are permitted to establish a passive
investment company (PIC) to hold and manage loans secured by real property. PICs are
exempt from Connecticut corporation business tax, and dividends received by the financial
services institutions from PICs are not taxable. In January 1999, the Bank established a
PIC as a wholly-owned subsidiary and transferred a portion of its residential mortgage
loan portfolio from the Bank to the PIC. A substantial portion of the Companys interest
income is now derived from the PIC, a state tax-exempt entity, and accordingly, there is
no provision for state income taxes subsequent to January 1999.
The Companys ability to continue to realize the tax benefits of the PIC is subject to
the PIC continuing to comply with all statutory requirements related to the operations of
the PIC. The Company believes it is in compliance with such requirements.
For the years ended December 31, 2005, 2004 and 2003, a reconciliation of the anticipated
income tax provision (computed by applying the Federal statutory income tax rate of 34%
to income before income tax expense), to the provision for income taxes as reported in
the statements of incomes is as follows:
Table of Contents
Years Ended December 31,
2005
2004
2003
(In Thousands)
$
1,686
$
1,686
$
2,978
(110
)
(99
)
(65
)
(38
)
(35
)
(22
)
(22
)
(24
)
(27
)
(18
)
(232
)
44
7
1
$
1,533
$
1,510
$
2,667
Note 13.
COMMITMENTS AND CONTINGENCIES
Leases:
The Company leases certain of its branch offices under operating lease
agreements which contain renewal options for periods up to fifteen years. In addition to
rental payments, the branch leases require payments for executory costs.
Future minimum rental commitments under the terms of these leases, by year and in the
aggregate, are as follows as of December 31, 2005:
(In Thousands)
$
434
332
264
160
77
$
1,267
The Company also leases certain equipment under non-cancelable operating leases which
have insignificant future minimum rental commitments. Total rental expense charged to
operations for all cancelable and non-cancelable operating leases approximated $527,000,
$479,000 and $325,000 for the years ended December 31, 2005, 2004 and 2003, respectively.
Employment and Change in Control Agreements:
The Bank and the Company entered into an employment agreement with the Banks President and
Chief Executive Officer ending December 31, 2009, which may be extended by agreement to
December 31, 2010. An employment agreement was also entered into with the Banks Chief
Operating Officer and was extended by the agreement of all parties on March 30, 2006 to
December 31, 2007. The Bank has also entered into three-year employment agreements with its
remaining Executive Officers, (each, an Executive Officer), which expire on December 31,
2007 and will be extended on an annual basis unless written notice of non-renewal is given
by the Human Resources Committee. The employment agreements generally provide for a base
salary and the continuation of certain benefits currently received and are reviewed
annually by the Human Resources Committee. Under certain specified circumstances, the
employment agreements require certain payments to be made for certain reasons other than
cause, including a change in control as defined in the agreement. However, such
employment may be terminated for cause, as defined, without incurring any continuing
obligations. If the Bank chooses to terminate these employment agreements for reasons other
than cause, or if the Executive Officer resigns from the Bank after specified circumstances
that would constitute good reason, as defined in the employment agreement, or, if the
Executive Officer dies, his or her beneficiary, would be entitled to receive a severance
benefit in the amount of three times the sum of his or her base salary and his or her
potential annual incentive compensation for the year of termination or, if higher, his or
her actual annual incentive compensation for the year prior to the year of termination,
payable in monthly installments over the 36 months following termination. In addition,
the Executive Officer will be entitled to a pro-rata portion of the annual incentive
compensation potentially payable to them for the year of termination; accelerated vesting
of any outstanding stock options, restricted stock or other stock awards; immediate
exercisability of any such options; and deemed satisfaction of any performance-based
objectives under any stock plan or other long-term incentive award. If the Executive
Officer elects to continue his or her health plan coverage under COBRA, the Bank will pay
the Executive Officer on a monthly basis the after-tax cost of such COBRA coverage. In
consideration for the compensation and benefits provided under their employment agreement,
the Executive Officers are prohibited from competing with the Bank and the Company during
the term of the employment agreements and for a period of two years following termination
of employment for any reason
The Bank and the Company has also entered into change in control agreements with four
additional senior officers (each, an Officer). Each change in control agreement had an
initial term ending December 31, 2005, which term was automatically extended January 1,
2006 and will be extended on each January 1
st
thereafter for one additional year
unless written notice is given by either party; provided, however, that no such notice by
the Bank or the Company will be effective if a change of control or potential change in
control has occurred prior to the date of such notice. If, following a change in control
of the Bank or the Company, the Officers employment is terminated without cause, or the
Officer voluntarily resigns upon the occurrence of circumstances specified in the
agreements constituting good reason, the Officer will receive a severance payment under the
agreement equal to two times the sum of the Officers annual base salary and their
potential annual incentive compensation for the year of termination or, if higher, their
actual annual incentive compensation for the year prior to the year of termination. The
Officer will also be entitled to a pro-rata portion of the annual incentive compensation
potentially payable to them for the year of termination; accelerated vesting of any
outstanding stock options, restricted stock or other stock awards; immediate exercisability
of any such options; and deemed satisfaction of any performance-based objectives under any
stock plan or other long-term incentive award. The Bank will also provide the Officer with
a cash allowance for outplacement assistance in the amount of 20% of their annual base
salary and annual incentive compensation taken into account for purposes of calculating the
severance payment described above for expenses incurred during the 24 months following
termination of employment. If the Officer elects to continue health plan coverage under
COBRA, the Bank will pay on a monthly basis the aftertax cost of such COBRA coverage.
The Bank and the Company has also entered into change in control and restrictive covenant
agreements with five lending officers (each a Lending Officer). Each change in control
and restrictive covenant agreement had an initial term ending December 31, 2005, and was
extended on January 1 and will be extended annually thereafter for one additional year
unless written notice is given by either party; provided, however, that no such notice by
the Bank or the Company will be effective if a change in control or potential change in
control has occurred prior to the date of such notice. If, following a change in control
of the Bank or the Company, the Lending Officers employment is terminated without cause,
or the Lending Officer voluntarily resigns upon the occurrence of circumstances specified
in the agreements constituting good reason, the Lending Officer will receive a severance
payment under the agreement equal to two times the sum of the Lending Officers annual base
salary and their potential annual incentive compensation for the year of termination or, if
higher, their actual annual incentive compensation for the year prior to the year of
termination. The Lending Officer will also be entitled to a pro-rata portion of the annual
incentive compensation potentially payable to them for the year of termination; accelerated
vesting of any outstanding stock options, restricted stock or other stock awards; immediate
exercisability of any such options; and deemed satisfaction of any performance-based
objectives under any stock plan or other long-term incentive award. The Bank will also
provide the Lending Officer with a cash allowance for outplacement assistance in the amount
of 20% of their annual base salary and annual incentive compensation taken into account to
calculate the severance payment described above for expenses incurred during the 24 months
following termination of employment. If the Lending Officer elects to continue health plan
coverage under COBRA, The Bank will pay on a monthly basis the after-tax cost of such COBRA
coverage.
Change in Control Severance Plan
The Bank and the Company adopted a Change in Control Severance Plan to provide benefits to
eligible employees upon a change in control of the Bank or the Company. Eligible employees
are those with a minimum of one year of service with the Bank as of the date of the change
in control. Generally, all eligible employees, other than officers who will enter into
separate employment or change in control or change in control and restrictive covenant
agreements with the Bank and the Company, will be eligible to participate in the plan.
Under the plan, if a change in control of the Bank or the Company occurs, eligible
employees who are terminated, or who terminate employment upon the occurrence of events
specified in the plan, within 24 months of the effective date of the change in control,
will be entitled to 1/26th of the sum of the employees annual base salary and his or her
potential annual incentive compensation for the year of termination or, if higher, his or
her actual annual incentive compensation for the year prior to the year of termination,
multiplied by the employees total years of service with the Bank. Subsidized COBRA
coverage will also be made available to such employees for a period of weeks equal to the
employees years of service with the Bank multiplied by two.
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 Companys financial condition, results of operations or
cash flows.
In 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 and undisbursed portions of construction
loans and involve, to varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the
Table of Contents
statements of financial condition. The contractual amounts of those instruments reflect
the extent of involvement the Company has in particular classes of financial instruments.
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 as it does for on-balance sheet
instruments. Off-balance sheet financial instruments whose contract amounts represent
credit risk are as follows at December 31, 2005 and 2004:
December 31,
2005
2004
(In Thousands)
$
51,964
$
25,046
64,143
22,993
82,119
59,229
17,127
44,049
10,107
4,121
98
71
$
225,558
$
155,509
Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Standby
letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. Since these commitments could expire without
being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customers 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 managements credit evaluation of the counterparty.
Collateral held varies but may include residential and commercial property, accounts
receivable, inventory, property, plant and equipment, deposits, and securities.
Note 14.
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
Companys financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of the Companys and the Banks
assets, liabilities, and certain off-balance sheet items, as calculated under regulatory
accounting practices. The Companys and the Banks capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the
Bank to maintain minimum amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and
of Tier I capital (as defined) to average assets (as defined). Management believes, as of
December 31, 2005, 2004 and 2003, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.
As of December 31, 2005, the most recent notification from the FDIC categorized the Bank
as well capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table below. There are no
conditions or events since then that management believes have changed the Banks
category.
The following is a summary of the Banks regulatory capital amounts and ratios as
December 31, 2005 and 2004 compared to the Federal Deposit Insurance Corporations
requirements for
Table of Contents
classification as a well-capitalized institution and for minimum capital adequacy. Also
included is a summary of Rockville Financial, Inc.s regulatory capital and ratios as of
December 31, 2005. The December 31, 2004 data is not relevant as the reorganization of
the Company was completed on May 20, 2005. Prior to the reorganization, the ratios for
the Bank were the same as Charter Oak Community Bank Corp.:
For Capital
Capitalized Under
Adequacy
Prompt Corrective
Actual
Purposes
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in Thousands)
$
117,882
15.5
%
$
60,842
8.0
%
$
76,053
10.0
%
108,898
14.3
30,461
4.0
45,692
6.0
108,898
10.6
41,094
4.0
51,367
5.0
$
69,509
11.8
%
$
47,125
8.0
%
$
58,906
10.0
%
62,942
10.7
23,530
4.0
35,295
6.0
62,942
7.3
34,489
4.0
43,111
5.0
$
156,000
20.4
%
$
61,176
8.0
%
$
76,471
10.0
%
147,016
19.3
30,470
4.0
45,704
6.0
147,016
14.3
41,123
4.0
51,404
5.0
The Company is also considered to be well capitalized under the regulatory framework
specified by the Federal Reserve. Actual and required ratios are not substantially
different from those shown above.
Connecticut law restricts the amount of dividends that the Bank can pay based on earnings
for the current year and the preceding two years. As of December 31, 2005, $13.0 million
was available for the payment of dividends.
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 Banks conversion in 1997 from a mutual
savings bank to a stock savings bank, and (2) the reorganization in 2005 of the Banks
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 Banks 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 Banks 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 Banks assets among its depositors
and the Companys stockholders in the unlikely event of the Banks complete liquidation,
and their function shall not operate to restrict the use or application of the equity
capital of the Company.
Table of Contents
15.
OTHER COMPREHENSIVE INCOME
Accumulated comprehensive income (loss) is comprised of the following at December
31, 2005 and 2004:
2005
2004
(In Thousands)
$
1,383
$
2,712
(336
)
(1,524
)
$
1,047
$
1,188
Other comprehensive income (loss) is as follows for the years ended December 31, 2005,
2004 and 2003:
Year Ended December 31, 2005
Before-Tax
Net-of-Tax
Amount
Taxes
Amount
(In Thousands)
$
(2,337
)
$
794
$
(1,543
)
324
(110
)
214
(2,013
)
684
(1,329
)
1,800
(612
)
1,188
$
(213
)
$
72
$
(141
)
Year Ended December 31, 2004
Before-Tax
Net-of-Tax
Amount
Taxes
Amount
(In Thousands)
$
(1,487
)
$
506
$
(981
)
(129
)
44
(85
)
(1,616
)
550
(1,066
)
311
(85
)
226
$
(1,305
)
$
465
$
(840
)
Table of Contents
Year Ended December 31, 2003
Before-Tax
Net-of-Tax
Amount
Taxes
Amount
(In Thousands)
$
1,250
$
(425
)
$
825
1,011
(344
)
667
2,261
(769
)
1,492
(587
)
200
(387
)
$
1,674
$
(569
)
$
1,105
Note 16.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE RISK
Financial Accounting Standards Board Statement No. 107,
Disclosures About Fair Value
of Financial Instruments
, requires disclosure of fair value information about financial
instruments, whether or not recognized in the statements of condition, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions used,
including the discount rates and estimates of future cash flows. In that regard, the
derived fair value estimates cannot by substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. Statement No. 107 excludes certain financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of the Company.
Management uses its best judgment in estimating the fair value of the Companys financial
instruments; however, there are inherent weaknesses in any estimation technique.
Therefore, for substantially all financial instruments, the fair value estimates
presented herein are not necessarily indicative of the amounts the Company could have
realized in a sales transaction at either December 31, 2005 or 2004. The estimated fair
value amounts for 2005 and 2004 have been measured as of their respective year ends, and
have not been reevaluated or updated for purposes of these consolidated financial
statements subsequent to those respective dates. As such, the estimated fair values of
these financial instruments subsequent to those respective reporting dates may be
different than the amounts reported at each year end.
The information presented should not be interpreted as an estimate of the fair value of
the entire Company since a fair value calculation is only required for a limited portion
of the Companys assets. Due to the wide range of valuation techniques and the degree of
subjectivity used in making the estimate, comparisons between the Companys disclosures
and those of other banks may not be meaningful.
Table of Contents
As of December 31, 2005 and 2004, the recorded book balances and estimated fair values of
the Companys financial instruments were:
December 31,
2005
2004
Recorded
Recorded
Book
Book
Balance
Fair Value
Balance
Fair Value
(In Thousands)
$
23,611
$
23,611
$
22,100
$
22,100
129,049
129,049
136,007
136,007
859,700
851,152
696,249
703,091
8,498
8,498
7,412
7,412
3,777
3,777
3,013
3,013
151,551
151,551
161,215
161,215
98,363
91,255
84,789
79,260
176,561
176,561
166,740
166,740
206
206
205
205
334,715
335,858
279,549
283,091
4,794
4,794
3,979
3,979
130,867
128,311
118,015
118,807
Off-Balance Sheet Instruments:
Loan commitments on which the committed interest
rate is less than the current market rate are insignificant at December 31, 2005 and
2004.
The Company assumes interest rate risk (the risk that general interest rate levels will
change) as a result of its normal operations. As a result, the fair values of the
Companys financial instruments will change when interest rate levels change and that
change may be either favorable or unfavorable to the Company. Management attempts to
match maturities of assets and liabilities to the extent believed necessary to minimize
interest rate risk. However, borrowers with fixed rate obligations are less likely to
prepay in a rising rate environment and more likely to prepay in a falling rate
environment. Conversely, depositors who are receiving fixed rates are more likely to
withdraw funds before maturity in a rising rate environment and less likely to do so in a
falling rate environment. Management monitors rates and maturities of assets and
liabilities and attempts to minimize interest rate risk by adjusting terms of new loans
and deposits and by investing in securities with terms that mitigate the Companys
overall interest rate risk.
Table of Contents
Note 17.
PARENT COMPANY FINANCIAL INFORMATION
The parent company, Rockville Financial, Inc., a state-chartered mid-tier stock
holding company was formed on December 17, 2004 to reorganize Charter Oak Community Bank
Corp. from a state-chartered mutual holding company to a state-chartered two-tier mutual
and stock holding company. It was inactive until it began operations on May 20, 2005
following the completion of the reorganization and the minority stock issuance. The
following represents the Parent Companys condensed statement of income as of December
31, 2005 and condensed statements of income and cash flows for the period May 20, 2005
through December 31, 2005 and should be read in conjunction with the consolidated
financial statements and related notes:
December 31,
2005
(In Thousands)
$
36,777
26
1,024
112,787
324
$
150,938
$
33
150,905
$
150,938
For the period
May 20, 2005 to
December 31,
2005
(In Thousands)
$
258
258
3,887
121
4,008
3,750
(1,275
)
(2,475
)
5,901
$
3,426
Table of Contents
For the period
May 20 through
December 31,
2005
(In Thousands)
$
3,426
3,950
(5,901
)
913
(1,024
)
(26
)
(325
)
33
1,046
(38,500
)
(38,500
)
81,299
(7,068
)
74,231
36,777
$
36,777
$
1,850
Table of Contents
For the three months ended,
December 31,
September 30,
June 30,
March 31,
December 31,
September 31,
June 30,
March 31,
2005
2005
2005
2005
2004
2004
2004
2004
(In Thousands)
$
13,553
$
12,238
$
11,791
$
11,018
$
10,666
$
9,922
$
9,316
$
8,910
4,855
4,084
3,808
3,767
3,667
3,382
3,020
3,001
8,698
8,154
7,983
7,251
6,999
6,540
6,296
5,909
650
450
850
750
550
795
525
502
8,048
7,704
7,133
6,501
6,449
5,745
5,771
5,407
1,102
1,088
991
895
942
630
898
713
3,887
6,566
6,023
5,908
6,119
5,649
5,232
5,797
4,918
2,584
2,769
(1,671
)
1,277
1,742
1,143
872
1,202
(772
)
(881
)
480
(360
)
(534
)
(344
)
(266
)
(366
)
$
1,812
$
1,888
$
(1,191
)
$
917
$
1,208
$
799
$
606
$
836
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Table of Contents
- 63 -
- 64 -
- 65 -
- 66 -
- 67 -
- 68 -
- 69 -
- 70 -
- 71 -
- 72 -
- 73 -
- 74 -
- 75 -
- 76 -
- 77 -
Director
Term to
Age
(1)
Since
(2)
Expire
Mr. Bars is a partner
with the law firm of
Kahan, Kerensky &
Capossela, LLP, a
general practice law
firm located in
Vernon, Connecticut.
50
2003
2008
Mr. Chilberg is the
Vice President and
majority owner of
Bergson Tire, Co.,
Inc., an automotive
tire retail business
and a manufacturer of
truck tire retreads,
located in Ellington,
Connecticut.
57
1999
2007
Mr. Engelson was, for
nineteen years, the
Supervisory Principal
of Center Road
Elementary School,
located in Vernon,
Connecticut, until he
retired in 2002. He
is currently an
Executive Director of
Hockanum Valley
Community Council,
Inc., a social service
agency, located in
Vernon, Connecticut.
62
1998
2006
Mr. Kerkin, Chairman
of the Board, was, for
10 years, the
Superintendent of
Schools for Vernon,
until he retired in
1992.
72
1992
2006
Mr. Lefurge is a
certified public
accountant. He is a
partner with the tax
and auditing services
firm of Lefurge &
Gilbert, PC, CPAs,
located in Vernon,
Connecticut, where he
also holds the
position of President.
56
2003
2009
Mr. Magdefrau is a
certified public
accountant, practicing
with the firm of
Magdefrau Renner &
Ciaffaglione LLC,
CPAs, located in
Vernon, Connecticut.
He was the founding
partner of the firm.
51
1995
2009
Mr. Mason was, for
over thirty years, the
owner, President and
Treasurer of L.
Bissell and Son Inc.,
an insurance agency,
located in Rockville,
Connecticut, until he
retired in 1995.
66
1989
2008
Table of Contents
Director
Term to
Age
(1)
Since
(2)
Expire
64
1981
2009
65
1980
2008
72
1999
2007
(1)
As of December 31, 2005.
(2)
The reported date is the date the individual became a director of
Rockville Bank, prior to the May 20, 2005 reorganization creating its current
holding company structure.
Name
Age
(1)
Position
64
President and Chief Executive Officer
66
Executive Vice President
41
Senior Vice President, Chief Financial Officer and Treasurer
47
Secretary
(1)
As of December 31, 2005.
Name
Age
(1)
Position
64
President and Chief Executive Officer
66
Chief Operating Officer
41
Senior Vice President, Chief Financial Officer and Treasurer
62
Senior Vice President, Senior Lending Officer
51
Senior Vice President, Retail Banking Officer
39
Senior Vice President, Human Resources and Organizational Development Officer
59
Senior Vice President, Chief Informational Officer
41
Senior Vice President, Marketing and Administrative Services Officer
(1)
As of December 31, 2005.
Table of Contents
Table of Contents
Summary Compensation Table
Long-Term
Annual Compensation
Compensation
All Other
Salary
Bonus
Payouts
Compensation
Named Executive Officer
Year
(1)
(2)
(3)
(4)
(5)(6)
2005
$
360,000
$
198,008
$
568,852
$
717,162
(7)(8)
2004
307,513
152,183
25,580
43,418
2003
258,901
139,423
24,645
27,682
2005
185,000
96,200
319,287
504,530
8)
2004
158,097
72,785
13,727
36,411
2003
137,839
65,835
12,811
14,435
2005
150,000
42,300
79,165
35,599
2004
130,708
51,775
10,570
2003
4,615
1,800
2005
144,000
64,296
54,713
34,146
2004
128,449
54,718
5,351
1,573
2003
110,776
56,785
9,637
11,109
2005
130,000
30,550
73,357
33,927
2004
111,675
47,229
9,956
460
2003
98,863
42,941
9,637
12,737
(1)
Does not include the aggregate amount of perquisites or other personal benefits,
which was less than $50,000 or 10% or the total annual salary and bonus reported.
(2)
In addition to the base salaries, amounts disclosed in this column
include amounts deferred under the Rockville Bank 401(k) Plan. Base salaries are
reviewed on an annual basis and may be increased in the future. Current annual
salaries are as follows: Mr. McGurk $378,000; Mr. Jeamel $206,000; Mr. White
$153,000; Mr. DeSimone $148,320; and Mr. Trachimowicz $130,000.
(3)
Amounts represent the dollar value of cash bonuses earned under the Short
Term Incentive Plan which was terminated effective January 1, 2005 and the Officer
Incentive Compensation Plan which was established effective January 1, 2005.
(4)
Amounts reported in 2003 and 2004 represent payments under the Executive
Group Incentive Plan which was terminated effective January 1, 2005. Payments made
in 2005 were made under the amended and then terminated Rockville Bank Phantom Stock
Plan.
Table of Contents
(5)
Includes employer contributions allocated under the 401(k) plan for the
2005 plan year of $6,300; $6,300; $6,143; $6,274; and $5,787, and employee stock
ownership plan allocations for the plan year 2005 with a market value of $24,377,
$23,751, $19,953, $17,163 and $17,326 for Mr. McGurk, Mr. Jeamel, Mr. White, Mr.
DeSimone, and Mr. Trachimowicz; respectively.
(6)
Includes $3,564; $4,877; $300; $1,857and $580 for the 2005 payment of
group term life insurance premiums for coverage in excess of $50,000 for Mr. McGurk,
Mr. Jeamel, Mr. White, Mr. DeSimone, and Mr. Trachimowicz; respectively.
(7)
Includes $2,718 for a 2005 car allowance for Mr. McGurk.
(8)
Includes $443,303 and $454,179 for benefits accrued under the
supplemental executive retirement plan, and $224,143 and $2,244 for benefits accrued
under the supplemental savings and retirement plan for Mr. McGurk and Mr. Jeamel,
respectively.
Table of Contents
Table of Contents
Table of Contents
Average
Years of Service
Annual Earnings
15
20
25
30
$
22,500
$
30,000
$
30,000
$
30,000
$
33,750
$
45,000
$
45,000
$
45,000
$
45,000
$
60,000
$
60,000
$
60,000
$
56,250
$
75,000
$
75,000
$
75,000
$
67,500
$
90,000
$
90,000
$
90,000
$
90,000
$
120,000
$
120,000
$
120,000
$
94,500
$
126,000
$
126,000
$
126,000
Name
Years of Service
20
15
2
3
10
(1)
Under the Internal Revenue Code, maximum annual benefits under the Retirement Plan are
limited to $170,000 and the annual average earnings for calculation purposes are limited to
$210,000 for the 2005 calendar year. Estimated annual benefits are computed on the basis
of a straight life annuity with ten years certain and are not subject to offset. Estimated
annual benefits are based on the benefit formula that applies for employees hired prior to
February 1, 1998 (3% x average annual earnings x years of service (maximum 20 years)). For
employees hired on or after February 1, 1998, a different benefit formula applies (2% x
average annual earnings x years of service (maximum 30 years)).
Table of Contents
Albert J. Kerkin, Jr.
Peter F. Olson
Betty R. Sullivan
Table of Contents
Table of Contents
Table of Contents
Number of Shares
Beneficially
Percent of Class
Name and Address of Beneficial Owner
Owned
(1)
(2)
10,689,250
(3)
55.00
%
20,000
(4)
*
40,000
(5)
*
30,000
(6)
*
20,000
(7)
*
30,000
(8)
*
28,000
(9)
*
10,000
(10)
*
40,000
(11)
*
10,000
(12)
*
43,459
(13)(14)
*
21,372
(14)
*
8,205
(14)
*
7,196
(14)
*
17,930
(14)(15)
*
377,840
1.94
%
*
Less than 1% of the common stock outstanding.
(1)
Based on information provided by the respective beneficial owners and on
filings with the Securities and Exchange Commission made pursuant to the Securities
Exchange Act of 1934.
(2)
Based on 19,435,000 shares of common stock issued and outstanding as of
December 31, 2005.
(3)
Based solely on information provided in a Schedule 13D filed with the SEC
by Rockville Financial MHC,
Inc. All shares are held with sole voting and dispositive power.
(4)
Shares held by law firm, Kahan, Kerensky & Capossela, LLP, of which Mr.
Bars is an equity partner.
(5)
Includes 13,605 shares held by his wife and 12,790 shares held by adult
children.
(6)
Includes 5,000 shares held by his wife and 10,000 shares held jointly with his
wife.
(7)
Shares held jointly with his wife.
(8)
Includes 13,000 shares held jointly with his wife and 7,000 shares held by his
wife.
(9)
Includes 9,000 shares held jointly with his wife, 3,000 shares held by an
adult child, 3,000 shares held by a minor child, and 3,000 shares held by East 84
Associates, LLC, of which Mr. Magdefrau is an equity partner.
(10)
Includes 5,000 shares held in the Thomas S. Mason Trust, of which Mr. Mason
is the trustee, and 5,000 shares held in the Susan C. Mason Trust, of which Mrs.
Mason is the trustee.
(11)
Includes 20,000 shares held by his wife.
(12)
Includes 5,000 shares held jointly with her husband.
(13)
Includes 15,000 shares held jointly with his wife.
(14)
Includes shares allocated to the account of the individuals under the
Rockville Bank Employee Stock Ownership Plan, with respect to each the individual
has vested shares and total shares as follows: Mr. McGurk 1,867 shares, all of
which are vested; Mr. Jeamel 1,820 shares, all of which are vested; Mr. White -
305 shares vested and 1,529 shares in total; Mr. DeSimone 526 shares vested and
1,315 shares in total; and Mr. Trachimowicz 1,327 shares, all of which are vested.
(15)
Includes 15,000 shares held jointly with his wife.
Table of Contents
December 31,
2005
2004
(In Thousands)
$
671
$
211
67
34
$
738
$
245
(1)
Includes $597,000 for services related to the Companys minority stock issuance
and related securities registration statement.
(2)
Service fees related to assurance and related services that are
reasonably related to the performance of the audit or the review of the financial
statements and are not reported as audit fees.
(3)
Includes fees for annual and short return tax preparation services and
estimating quarterly tax payments.
Page No
1.
Financial Statements
Report of Independent Registered Public Accounting Firm
F - 1
Consolidated Balance Sheets
F - 2
Consolidated Statements of Income
F - 3
Consolidated Statements of Changes in Stockholders Equity
F - 5
Consolidated Statements of Cash Flows
F - 6
Notes to Consolidated Financial Statements
F - 8
2.
Financial Statement Schedules
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X and all other schedules to the consolidated financial statements have
been omitted because they are either not required, are not applicable or are included
in the consolidated financial statements or notes thereto, which can be found in this
report in Part II, Items 7 and 8.
Table of Contents
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)
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)
10.2.1
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 filed herewith.
10.2.3
Rockville Bank Officer Incentive Compensation Plan filed herewith.
Table of Contents
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)
14
Standards of Conduct Policy for Senior Financial Officers filed herewith.
14.1.1
Standards of Conduct Policy for the Board of Directors filed herewith.
21.0
Subsidiaries of Rockville Financial, Inc. and Rockville Bank filed herewith.
23.1
Consent of Independent Registered Public Accounting Firm filed herewith.
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.
Table of Contents
Rockville Financial, Inc.
By:
/s/ William J. McGurk
William J. McGurk
President, Chief Executive Officer
and Director
and
By:
/s/ Gregory A. White
Gregory A. White
Senior Vice President, Chief
Financial Officer and Treasurer
Table of Contents
Signatures
Title
Date
President, Chief Executive Officer and Director
March 31, 2006
(
Principal Executive Officer
)
Senior Vice President, Chief
Financial Officer and
March 31, 2006
Treasurer
(
Principal Financial and Accounting Officer
)
Director
March 31, 2006
Director
March 31, 2006
Director
March 31, 2006
Chairman
March 31, 2006
Director
March 31, 2006
Director
March 31, 2006
Director
March 31, 2006
Director
March 31, 2006
Vice Chairman
March 31, 2006
EXHIBIT 10.2.2
FIRST AMENDMENT
TO THE SUPPLEMENTAL SAVINGS AND RETIREMENT PLAN OF
ROCKVILLE BANK
The Supplemental Savings and Retirement Plan of Rockville (the "Plan"), effective May 23, 2005, is amended effective December 13, 2005 as follows:
1. Section 2.05 of the Plan is amended to read in its entirety as follows:
"'Compensation' shall have the same meaning as provided in the 401(k) Plan, but without the limitation imposed by Section 401(a)(17) of the Code, including, however, amounts deferred by the Member under this Plan during a Plan Year and excluding any amounts paid during a Plan Year under any nonqualified deferred compensation plan within the meaning provided by Section 409A of the Code."
EXHIBIT 10.2.3
Rockville Bank
Officer Incentive Compensation Plan (OICP) Description for Fiscal 2006
I. Plan Purpose - The OICP is an annual, or short-term compensation plan specifically designed to encourage participants to produce results that enable The Bank to reach targeted levels of earnings performance for the fiscal year. The OICP provides participants with an opportunity to earn variable rewards that are contingent on the actual fiscal performance of the bank and the contribution that officers make toward that end. A significant portion of the overall annual cash compensation of participants comes from the OICP.
II. Performance Period - This is an annual plan that is linked with each fiscal year. This plan description describes the plan as designed for the period January 1, 2006 through December 31, 2006.
III. Plan Participants - All officers of The Bank are eligible to participate in the OICP. If an individual joins The Bank as an officer or is promoted to officer status before June 1 of the fiscal year, the incentive award is prorated for the amount of time worked during the plan year. Individuals that join the bank as an officer or are promoted to officer status after June 1 of the plan year are not eligible to participate in the OICP for that fiscal year.
IV. Participation Levels - Each participant has a target incentive level identified for the performance period. This is expressed as a percentage of base salary and a dollar amount. The target incentive is the amount that will be available if The Bank reaches the earnings target in the business plan. The HR Committee approves participation levels for the CEO and his/her direct reports and the CEO approves participation levels for other participating officers. The SVP HR maintains a record of the target level of performance for each participant and ensures that all participants are informed of their target awards and the plan provisions.
V. Plan Formula - The SVP HR and the EVP identify a threshold level of earnings performance that must be achieved before any incentive awards are made available. A target, or planned, level of earnings is also determined. This is the level of earnings that is established in the annual business plan. For FY 2006 the threshold level of performance is set at 75% of plan. At that point the targeted incentive pool will be 25% funded. As fiscal performance exceeds the threshold level, and increases in 1% increments, from 75% of plan to 90% of plan, an additional 1.67% of the target pool will be added at each 1% increase in plan. At 90% of plan the incentive pool will contain 50% of the target amount. As fiscal performance exceeds 90% of plan and increases in 1% increments to 100% of plan, an additional 5.00% of the target pool will be added at each 1% increase in plan. At the target level of fiscal performance, or 100% of plan, the incentive pool is sufficient for all participants to be eligible for their target awards. For Fiscal 2006, the incentive pool will be capped when the amount reaches the target level.
Individuals in certain roles, like Branch Managers and Commercial Lenders, have incentive arrangements based on production numbers for their respective branches and loan portfolios. The incentive awards for Branch managers are contingent on deposits, loans and Rockville Financial Services referrals for the branches they manage. The incentive awards for Commercial Lenders are contingent on CRE, C&I and commercial deposits. However, in order for Branch Managers and Commercial Lenders to be eligible for any incentive awards, The Bank must reach the threshold level of fiscal performance. The incentive for the Branch Managers and Commercial Lenders is then calculated from the performance of the branches and factors related to loan portfolios.
VI. Plan Communications - Following approval of the OICP by the HR Committee of the Board of Directors, the SVP HR ensures directly or through others that all participants are notified of their participation, target awards, the plan formula, how incentive awards are calculated and what they must do to positively influence the size of their awards. During the performance period the SVP and the CEO ensure that all participants are provided with periodic updates on the status of the OICP.
VII. Award Determination - As soon as practical, following the end of the fiscal year, the SVP HR the CFO, the EVP and the CEO determine the actual earnings performance of The Bank and calculate the incentive pool. The actual incentive pool is divided by the target incentive pool and this percentage is applied to the target awards of all participants to calculate the formula awards that are available depending on the personal performance of each officer.
Awards for Branch Managers and Commercial Lenders are calculated from the formulas established for each of those participants.
Managers appraise the performance of participants who report to them and use this information to identify the amount of the formula awards that will be paid. The SVP HR provides guidelines to managers to use in this determination. Managers submit their recommendations to the SVP HR who forwards them to the CEO for review.
The CEO and SVP HR present the recommended incentive award payments to the HR Committee of the Board of Directors for review and approval. As soon as the awards are approved, the SVP HR notifies participants of their incentive payments. This process follows the normal communications channels including functional managers.
VIII. Award Payments - As soon as practical following approval by the HR Committee of the Board of Directors and before March 15th of the year following the plan period, incentive awards are paid. The payments are made by separate check and specifically designated as incentive awards for the fiscal year.
IX. OICP Review -- Each year the CEO reviews the OICP and determines what modifications are needed for the coming year. The SVP HR ensures that all participants are informed about any changes in the program.
EXHIBIT 14
ROCKVILLE FINANCIAL INC.
ROCKVILLE BANK
STANDARDS OF CONDUCT POLICY - EMPLOYEES
I. INTRODUCTION
The continued success of Rockville Financial, Inc., Rockville Bank and its subsidiaries (hereinafter collectively referred to as the "Bank") depends in large part on the confidence and trust the public places in the Bank. Our Employees play a key role in helping preserve public trust by making sure that their behavior will serve to enhance, not diminish, that trust. We expect each Employee to monitor his/her personal conduct so as to ensure that the lawful interests of the Bank are placed above the Employee's personal interests.
The purpose of this Standards of Conduct Policy-Employees ("Policy") is to provide general guidance to our Employees on acceptable conduct in a number of areas, including conflicts of interest, outside activities and employment, political activities, the acceptance of gifts, and the treatment of confidential information. This Policy applies to all Employees of the Bank, including Employees who are out on approved leave of absence.
This Policy is not comprehensive. It provides guidance for carrying out your responsibilities on behalf of the Bank and observing the highest standards of ethical conduct. This Policy does not address every conceivable situation that may arise, and you are responsible for exercising sound judgment, applying ethical principles and raising questions when in doubt.
For purposes of this Policy, "Employee" means all current officers and full-time and part-time employees of the Bank, and "Immediate Family" means a parent, spouse, child, brother or sister of an Employee.
II. CONFLICTS OF INTEREST
A conflict of interest may arise when an Employee or an Employee's Immediate Family member has a financial or other interest in any company doing business with the Bank. Each Employee must manage his/her personal and business affairs so as to avoid situations that might lead to a conflict between self-interest and duty to the Bank, its Employees, and its customers. An Employee who discovers an actual or potential conflict of interest must disclose it immediately to his/her supervisor or to a member of senior management.
Employees may not process transactions or adjustments to deposit, loan or other accounts in which they or a member of their Immediate Family has a personal financial interest.
Customer relationships between the Bank and an Employee or members of the Employee's Immediate Family are not considered to be conflict of interest activities unless favoritism or unauthorized conduct is present.
III. INSIDER TRADING
Investments are an area in which a conflict of interest can very easily develop. As an Employee, you may, from time to time, have access to material, nonpublic information concerning the Bank, its customers or suppliers, or other companies. Under the Bank's Insider Trading Policy, an Employee may not purchase or sell securities of the Bank or any other company when the Employee is aware of any material nonpublic information about that company, no matter how the Employee learned of the information. This prohibition extends to "tipping" or otherwise providing material, non-public information to others who might make an investment decision on the basis of this information.
For purposes of this section, Employees should consider information "material" if a reasonable investor would consider it important in deciding whether to buy, sell or hold a company's securities (in other words, if the information is reasonably likely to have an effect on the price of the securities, whether such effect is positive or negative). Employees should consider information "nonpublic" if it is not generally available to the public or investment community.
IV. OUTSIDE ACTIVITIES AND EMPLOYMENT
A. Outside Financial Interests/Activities/Employment
Employees may not have an outside financial interest or activity (employment, consulting or volunteer) that will:
1) materially encroach on the time or attention which should be devoted to banking duties;
2) adversely affect the quality of work performed;
3) compete with the Bank's activities;
4) involve any use of the Bank's equipment, supplies or facilities (except as approved by the President or, in the case of such interest or activity by the president, approved by the Chairman;
5) infer sponsorship or support by the Bank (except as approved by the President, or, in the case of such interest or activity by the president, approved by the Chairman; or
6) potentially have an adverse affect on the good name of the Bank.
B. Outside Officer/Directorships
Before an Employee accepts a position as officer or director of a business, corporation, or a partnership in a for profit or not for profit organization, he/she must inform the President and obtain his permission or, in the case of the President, inform and obtain the permission of the Chairman.
C. Fees for Speaking or Writing Engagements
Employees are encouraged to make business speeches and write articles that will reflect favorably on them and the Bank. Permission for such engagements during normal banking hours should be obtained by the Employee ahead of time from the Employee's supervisor or, in the case of the President, from the Chairman. Written materials should be submitted for prior review by the Employee's supervisor or, in the case of the President, by the Chairman.
If such written articles and speeches are Bank-related, no fee should be accepted. If not Bank-related, a written article or speech shall be considered as outside employment and must, therefore, meet the requirements listed in the Outside Financial Interests/Activities/Employment section of this Policy.
V. POLITICAL ACTIVITIES
Employees are encouraged to keep themselves well informed concerning political issues and candidates, and to take an active interest in all such matters. In all cases, Employees participating in political activities do so as individuals and not as representatives of the Bank. To avoid any interpretation of Bank sponsorship or endorsement, an Employee should not use Bank stationery in mailed material or fund collections, nor should the Bank be identified in any advertisement or literature. Any Employee who wishes to run for an elective political office or to accept an appointment to a state or local government office should discuss the matter in advance with the Bank President or, in the case of the President, with the Chairman, in order to make certain that the duties of the office and the time away from the job will not conflict with the Bank's expectations relative to the Employee's performance.
It is illegal for an individual representing the Bank to make a gift, in cash or in kind, of the Bank's resources to any public office holder or person running for office.
Employees may not make donations of Bank funds or services to elected officials or candidates for office for the purpose of financing their election or running their political offices.
Nothing in this Policy shall in any way interfere with, or preclude, an individual from donating funds within legal bounds to a political party or candidate. However, such donations shall not be reimbursable in any manner by the Bank.
VI. GIFTS AND FEES FROM CUSTOMERS AND SUPPLIERS
The acceptance of gifts from customers or suppliers of the Bank may give rise to serious questions of business ethics and, at certain levels, is illegal. The following activities by Employees are, therefore, prohibited: (a) soliciting for themselves or a third party (other than the Bank itself) anything of value from anyone in return for any business, service or confidential information of the Bank; and (b) accepting anything of value (other than bona fide salary, wages and fees from the Bank) from anyone in connection with the business of the Bank, either before or after a transaction is discussed or consummated. This applies with respect to Bank customers and suppliers of products or services to the Bank, such as attorneys, real estate agents and insurance agents. No gifts of cash in any amount are acceptable. Gifts to Employees or members of their Immediate Family of securities, real property, or legacies under wills or trust instruments of customers must be disclosed to the President or in the case of any such gift to the President, the President shall make such disclosure to the Chairman as soon as practicable.
The Bank realizes, however, and the law allows that a "reasonable" standard of conduct permits an Employee to receive the normal amenities that facilitate the discussion of bona fide Bank business, such as business meals, entertainment activities, or special occasion gifts, but does not allow the receipt of benefits that serve no demonstrable business purpose. Acceptance is permissible where it is based on family or personal relationships existing independent of Bank business, where the benefit is available to the general public under the same conditions on which it is available to the Employee, or where the benefit would be paid by the Bank as a reasonable business expense if not paid for by another party.
Other circumstances where the acceptance of amenities by an Employee may be permissible include: (a) Acceptance of loans from other banks or financial institutions on customary terms to finance proper and usual activities of Employees, such as home mortgage loans, except where prohibited by law; (b) Acceptance of advertising or promotional material of reasonable value, such as pens, pencils, note pads, key chains, calendars and similar items; (c) Acceptance of discounts or rebates on merchandise or services that do not exceed those available to other customers; or (d) Acceptance of civic, charitable, educational, or religious organization awards for recognition of service and accomplishment.
Any gift of tangible goods of more than $50.00 in value must be reported to and approved by the President or, in the case of any such gift to the President, reported to and approved by the Chairman. If acceptance of the gift is not approved in writing, the gift must be returned or gifted to a charity of the Bank's choice with a letter explaining Bank policy, with a copy filed with the Bank's Senior Vice President of Human Resources. No specific dollar limit is established with respect to gifts that are intangible in nature, such as meals, entertainment, accommodations, travel arrangements, and the like. Employees should use discretion in accepting such intangible gifts, which must be of reasonable
value and provide an opportunity for facilitating bona fide business discussions or relationships. Any situation raising questions as to whether it is appropriate to accept an intangible gift should be discussed in advance with the Employee's supervisor.
VII. BORROWING FROM CUSTOMERS
Employees may not borrow from customers or suppliers of the Bank, other than recognized lending institutions.
VIII. CONFIDENTIAL INFORMATION
It is extremely important to the Bank that our Employees keep confidential certain information that they have access to in the course of their employment with the Bank, both during the time they are Employees and afterwards. Employees must comply with the following rules:
1. Confidential information of the Bank, its customers and suppliers acquired by an Employee through his/her employment with the Bank is to be used solely for Bank purposes. Such information may not be communicated to persons outside the Bank, or even to others in the Bank who do not need to know such information to discharge their official duties.
2. The discussion of confidential Employee information obtained by another Employee in the performance of Bank related activities is improper, except as it relates to the performance of Bank duties.
3. Financial information regarding the Bank shall not be released unless it has been published in reports to the public or otherwise made generally available to the public.
4. An Employee may be served with process from a court that requires the Employee to disclose confidential information concerning the Bank, its customers or suppliers, or another Employee. If this occurs, the Employee must immediately notify his/her supervisor, who shall arrange to seek the advice of legal counsel through the Bank and advise the Employee as to what action to take.
5. Any questions regarding whether particular information is confidential or the disclosure of confidential information should be reviewed with the Employee's supervisor or the Bank's Vice President, Compliance and Security Officer.
6. Employees who use the Bank's computers and facsimile machines are responsible for adhering to all policies, standards, and procedures to ensure that all data and business information are secure.
7. The Bank's E-Mail system and Internet access are business property and are not to be used in a manner that violates this Policy. The Bank reserves the right to enter, search and monitor the E-Mail or computer files of any Employee, without advance notice, for business purposes, including, without
limitation, to investigate theft, misappropriation of funds, disclosure of confidential business or proprietary information, personal abuse of the system, or for monitoring work flow or productivity.
8. The privacy and confidentiality of customer information is of critical importance to the Bank. Significant restrictions are placed on the Bank's use of customer information by the Gramm-Leach-Bliley Act. Employees must adhere to the privacy policy of the Bank as it may exist from time to time.
IX. PROTECTION AND PROPER USE OF BANK ASSETS
Employees should protect the Bank's assets and ensure that they are used efficiently for legitimate business purposes. Theft, carelessness, and waste have a direct impact on the Bank's profitability.
X. PUBLIC COMPANY DISCLOSURES
As a public company, it is of critical importance to ensure that all public disclosures are complete, timely and accurate and that they are provided in a manner that is fair and understandable. Employees are expected to take this responsibility seriously and use their best efforts to ensure that information that is compiled or maintained is accurate and complete, and that the Bank's internal and financial control processes are complied with.
XI. ACCOUNTING COMPLAINTS ("WHISTLEBLOWER POLICY")
Introduction
It is the policy of the Bank to comply with and require its employees to comply with appropriate accounting and internal accounting controls and maintain effective auditing. Every employee of the Bank has the responsibility to assist in meeting these legal and regulatory requirements.
The Bank's internal operating controls are intended to prevent, deter and remedy any violation of the applicable laws and regulations that relate to accounting and auditing controls and procedures. The Bank has a responsibility to investigate and report to appropriate governmental authorities, as required, any violations of applicable legal and regulatory requirements relating to accounting and auditing controls and procedures and the actions taken by the Bank to remedy such violations.
This Whistleblower Policy governs the process through which the Audit Committee of the Bank's Board of Directors can be notified of complaints regarding accounting, internal accounting controls or auditing matters. In addition, this Whistleblower Policy establishes a mechanism for responding to, and keeping records of, any such complaints.
Inappropriate Action or Behavior
The following are examples of actions or behavior that should be reported:
[ ] Fraud or deliberate error in the preparation, evaluation, review or audit of any financial statement or accounting records of the Bank.
[ ] Deviation from full and fair reporting of the Bank's financial condition.
[ ] Stealing or misappropriation of the Bank or its customers' funds or assets.
[ ] Deficiencies in or non-compliance with the Bank's internal accounting controls.
[ ] Misrepresentations or false statements.
[ ] Violation of Bank policy, regulation or law.
Reporting Responsibility and Procedures
Employees who become aware of any act or behavior described above have the right and responsibility to report such incidents to one or more of the following:
[ ] Senior Vice President of Human Resources* Kristen Johnson 1645 Ellington Road, South Windsor, CT 06074 Telephone number: (860) 291-3617 email address:
kjohnson1@rockvillebank.com
[ ] Chairman of Audit Committee of the Board of Directors* Thomas Mason 183 Reservoir Road, Vernon, CT 06066 Home Telephone Number: (860) 875-0527
If the Chairman of the Audit Committee of the Board of Directors is unavailable:
[ ] Vice Chairman of the Audit Committee of the Board of Directors* Stuart Magdefrau 7 Keynote Drive, Vernon, CT 06066 Office Telephone Number: (860) 875-8539
*IF THE ISSUE INVOLVES THE SENIOR VICE PRESIDENT LISTED ABOVE, YOU MUST BRING THE MATTER DIRECTLY TO THE ATTENTION OF THE CHAIRMAN OF THE AUDIT COMMITTEE, OR IN HIS ABSENCE, THE VICE CHAIRMAN OF THE AUDIT COMMITTEE.
The Chairman of the Audit Committee will be notified of all such complaints by any of the other individuals receiving such reports. A copy of any written complaint will be forwarded to the Chairman of the Audit Committee.
Employees may make such reports on an anonymous basis if they so choose.
The complaint should assure a clear understanding of the issues raised. The complaint should be factual rather than speculative or conclusory, and should contain as much specific information as possible to allow for proper assessment. The complaint describing an alleged violation or concern should be candid and set forth all of the information regarding the allegation or concern. In addition, all complaints must contain sufficient corroborating information to support the commencement of an investigation. An investigation may not be commenced if a complaint contains only unspecified or broad allegations of wrongdoing without appropriate informational support.
Confidentiality
All reports made under these procedures will be handled with the maximum degree of confidentiality, and information from the report will be shared only to the extent necessary to conduct a complete and fair investigation.
Non-retaliation
The reporting of such action or behavior that an employee reasonably believes is inappropriate is an important component of our business ethics. Employees making such reports will be free from any retribution, retaliation or adverse effect in their employment. The Bank does not tolerate retaliation; this is the Bank's promise in return for our employees' making such reports.
Any employee who discourages or prevents other employees from making such reports or seeking the help or assistance they need will be subject to disciplinary action, up to and including termination.
Investigation and Resolution of Complaints
All complaints will receive immediate attention and, if appropriate, an investigation will commence as soon as practical based on the risk assessment and exposure. As appropriate, resources from the Internal Audit, Human Resources, Security or any other necessary departments will be included to fully investigate the complaint. If necessary, legal counsel and/or the Bank's independent auditing firm will be involved in any investigation.
Where possible and appropriate, the employee filing the complaint will be contacted upon the completion of the investigation and informed of the resolution.
Reporting
On at least a quarterly basis, the Chairman of the Audit Committee will report to the Audit Committee the receipt of any such complaints and the current status of the investigation and disposition at the conclusion of the investigation.
Corrective Action
The Audit Committee, with the input of management, if requested, will determine the validity of a complaint and any corrective action, as appropriate. It is the responsibility of the Audit Committee to inform Bank management of any identified noncompliance with legal and regulatory requirements and to assure that management takes corrective action including, where appropriate, reporting any violation to the relevant federal or state regulatory authorities. Directors, officers and employees who are found to have violated any laws, governmental regulations or Bank policies will face appropriate, case-specified disciplinary action, which may include demotion or discharge.
Retention of Complaints and Documents
All complaints regarding accounting, internal accounting controls or auditing matters will remain confidential to the extent practicable. In addition, all written statements, along with the results of any investigations relating thereto, shall be retained by the Bank for the Audit Committee for a minimum of SIX years.
IT MAY BE ILLEGAL AND AGAINST THE BANK'S POLICY TO DESTROY ANY AUDIT RECORDS THAT MAY BE SUBJECT TO OR RELATED TO AN INVESTIGATION BY THE BANK OR ANY FEDERAL, STATE OR REGULATORY BODY.
Employee Communication
The "Whistleblower Policy" will be communicated to all employees annually, will be posted on the Bank's L: drive, incorporated into new employee orientation programs, Standards of Conduct training programs and the Employee Handbook. The Human Resources Department will be responsible for such communication.
XII. SENIOR FINANCIAL OFFICER STANDARDS OF CONDUCT
Rockville Financial, Inc, (hereinafter referred to as the "Company"), is committed to the highest standards of professional and ethical conduct. The purpose of this Standards of Conduct Policy - Senior Financial Officers ("Policy") is to promote honest and ethical behavior, proper disclosure of financial information in the Company's periodic reports, and compliance with applicable laws, rules and regulations by the Company's senior officers who have financial responsibility. This Policy applies to the Chief Executive Officer, the Chief Financial Officer and the Chief Accounting Officer ("Senior Financial Officers") of the Company and is intended to supplement the Standards of Conduct Policy - Employees ("Employee Policy") which is applicable to all employees generally.
Conduct
In performing his or her duties, each Senior Financial Officer will:
1. Engage in and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2. Avoid conflicts of interest and disclose any material transaction or relationship that reasonably could be expected to give rise to such a conflict, as required by the Employee Policy;
3. Take all reasonable measures to protect the confidentiality of material non-public information about the Company and its affiliates and their customers obtained or created in connection with the activities of the Senior Financial Officers, and prevent the unauthorized disclosure of such information unless required by applicable law or regulation, or legal or regulatory process;
4. Promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company and Rockville Bank file with, or submit to, the Securities and Exchange Commission, their federal and state bank regulatory agencies, and in other public communications;
5. Comply and take all reasonable steps to cause others to comply with applicable laws and governmental rules and regulations; and
6. Promptly report violation of this Policy through the Company's Whistleblower Policy described in the Standards of Conduct Policy-Employees.
Senior Financial Officers are prohibited from directly or indirectly taking any action to coerce, manipulate, mislead or fraudulently influence the independent public auditors of the Company or its affiliates for the purpose of rendering the Company's or its affiliates' financial statements misleading.
Amendments and Waivers of the Policy
This Policy shall be publicly available and may be amended or modified only by the Board of Directors.
Waivers of the provisions of this Policy are subject to special rules and may be made only with the approval of the Board of Directors. Any such waiver will be publicly disclosed in accordance with applicable law, regulations and NASDAQ listing requirements.
Compliance and Accountability
Senior Financial Officers will be held accountable for adherence to this Policy. The Audit Committee will assess compliance with this Policy, report material violations to the Board of Directors and make recommendations to the Board as to the appropriate action.
Each Senior Financial Officer is required to complete an Annual Statement of Acknowledgement regarding the Policy. This statement will be filed with the Corporate Secretary. Any questions regarding this Policy may be discussed with the Chairman of the Audit Committee.
XIII. REPORTING OF ILLEGAL OR UNETHICAL BEHAVIOR
Violations, or suspected violations of this Policy should be reported to the Senior Vice President of Human Resources (unless the subject matter involves such Senior Vice President, in which case the report should be made directly to the Chairman of the Audit Committee) who will conduct a confidential investigation and report her findings to the Audit Committee. Disciplinary action will be taken, where appropriate.
The Bank will not permit retaliation of any kind by or on behalf of the Bank and its employees, officers and directors against good faith reports or complaints of violations of this Policy or other illegal or unethical conduct.
XIV. AMENDMENTS AND WAIVERS OF THE POLICY
This Policy shall be publicly available and may be amended or modified by the Board of Directors and, with respect to the "Whistleblower Policy", only by the Audit Committee.
Waivers of the provisions of this Policy for employees below the Executive Vice President level may be made only with the written approval of both the President and Senior Vice President of Human Resources and will be reported to the Audit Committee.
Waivers involving executive officers and senior financial officers are subject to special rules and may be made only with the approval of the Board of Directors. Any such waiver will be publicly disclosed in accordance with applicable law, regulations and NASDAQ listing requirements.
XV. EMPLOYMENT DISCLAIMER
THIS POLICY DOES NOT AND IS NOT INTENDED TO CREATE EITHER AN EXPRESS OR IMPLIED CONTRACT OF EMPLOYMENT OR WARRANTY OF BENEFITS BETWEEN THE BANK AND ANY OR ALL OF ITS EMPLOYEES. EMPLOYMENT WITH THE BANK IS ON AT "AT WILL" BASIS. THIS MEANS THAT EACH EMPLOYEE'S EMPLOYMENT MAY BE TERMINATED WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE, AT ANY TIME, AT THE OPTION OF EITHER THE EMPLOYEE OR THE BANK.
XVI. CONCLUSION
Each Employee is expected to read and understand the contents of this Policy and to review it regularly in order to be alert to situations that could create a violation or a conflict of interest. Each Employee is expected to comply with this Policy in its present form and as it may be revised in the future. Any questions regarding this Policy may be discussed with the Senior Vice President of Human Resources. Disclosures of exceptions to the Policy to Senior Management should be recorded in writing and placed on file. Employees are also expected to become familiar and comply with other policies of the Bank as they are adopted from time to time, whether referenced in this Policy or not.
Each Employee is required to complete a Statement of Acknowledgement regarding this Policy, and may be required from time to time in the future to complete a new Statement of Acknowledgement. The Statement(s) of Acknowledgement will be filed in each Employee's personnel file.
Violation of this Policy may result in discipline, including but not limited to, a written warning, demotion or salary reduction, suspension with or without pay or dismissal for cause, depending on the seriousness of the violation.
ROCKVILLE FINANCIAL, INC.
ROCKVILLE BANK
STANDARDS OF CONDUCT POLICY - EMPLOYEES
STATEMENT OF ACKNOWLEDGEMENT
I,________________ , AN EMPLOYEE OF ROCKVILLE BANK AND/OR ITS PARENT, ROCKVILLE
FINANCIAL, INC. OR SUBSIDIARIES, HAVE REVIEWED AND UNDERSTAND THE STANDARDS OF
CONDUCT POLICY - EMPLOYEES (INCLUDING THE EMPLOYMENT DISCLAIMER DESCRIBED IN
SECTION XIV.) AND HAVE COMPLIED, AND UNDERSTAND THAT I AM EXPECTED TO COMPLY
WITH IT IN THE FUTURE.
__________________________ _________________________________ DATE SIGNATURE _________________________________ NAME, PLEASE PRINT |
ROCKVILLE FINANCIAL, INC.
STANDARDS OF CONDUCT POLICY - SENIOR FINANCIAL
OFFICERS
STATEMENT OF ACKNOWLEDGEMENT
I,________________, A SENIOR FINANCIAL OFFICER OF ROCKVILLE FINANCIAL, INC., HAVE REVIEWED AND UNDERSTAND THE STANDARDS OF CONDUCT POLICY-SENIOR FINANCIAL OFFICERS (INCLUDING THE EMPLOYMENT DISCLAIMER DESCRIBED IN SECTION V.) AND HAVE COMPLIED, AND UNDERSTAND THAT I AM EXPECTED TO COMPLY WITH IT IN THE FUTURE.
_______________________ _____________________________ DATE SIGNATURE _____________________________ NAME, PLEASE PRINT |
EXHIBIT 14.1.1
CHARTER OAK COMMUNITY BANK CORP.
ROCKVILLE FINANCIAL, INC.
ROCKVILLE BANK
STANDARDS OF CONDUCT POLICY - BOARD OF DIRECTORS
7 March 2005
I. INTRODUCTION
Rockville Financial, Inc., along with its parent company, Charter Oak Community Bank Corp. and its subsidiary, Rockville Bank and its subsidiaries (hereinafter collectively referred to as the "Bank") are committed to the highest standards of professional and ethical conduct. The purpose of this Standards of Conduct Policy - Board of Directors ("Policy") is to provide general guidance to members of the Board of Directors of the Bank on acceptable conduct in a number of areas, including conflicts of interest, the treatment of confidential information and specific policies. This Policy applies to all Directors of the Bank.
This Policy is not comprehensive. It provides guidance for carrying out your responsibilities on behalf of the Bank and observing the highest standards of ethical conduct. This Policy does not address every conceivable situation that may arise and you are responsible for exercising sound judgment, applying ethical principles and raising questions when in doubt.
II. CONFLICTS OF INTEREST
Any Director who has any financial interest, whether directly or indirectly through his/her spouse or in the name of his/her minor children, or who is aware of such interest of any parent, brother, sister or majority age child, in any contract, transaction or decision to which the Bank may become a party shall disclose such financial interest to the Board Chairman and shall not participate in any way in any discussion or decision making with respect to such contract, transaction or decision.
No Director of the Bank, except full time officers, may be employed for compensation by the Bank for any purpose. This prohibition does not apply to compensation received by a Director for his/her role as Director, Board Committee member, chair or the like.
It is expected that if a Director recognizes a potential conflict of interest, that the Director will immediately so notify the Board Chairman and will withdraw from any discussion and/or vote on the related issue. This should be noted in the minutes.
It is each Director's responsibility to address potential conflicts of interest, which do not surface through the normal processes. This may be brought to the attention of the Board Chairman or Bank President. Action taken may include asking an individual Director if he/she has a potential conflict, and if so, that he/she withdraw from discussion and vote. This will be so noted in the minutes.
III. GIFTS AND FEES FROM CUSTOMERS AND SUPPLIERS
The acceptance of gifts from customers or suppliers of the Bank may give rise to serious questions of business ethics and, at certain levels, is illegal. The following activities by Directors are, therefore, prohibited: (a) soliciting for themselves or a third party (other than the Bank itself) anything of value from anyone in return for any business, service or confidential information of the Bank; and (b) accepting anything of value (other than bona fide salary, wages and fees) from anyone in connection with the business of the Bank, either before or after a transaction is discussed or consummated. This applies with respect to Bank customers and suppliers to the Bank, such as attorneys, real estate agents and insurance agents. No gifts of cash in any amount are acceptable. Gifts to Directors or members of their Immediate Family of securities, real property, or legacies under wills or trust instruments of customers must be disclosed to the Bank President. "Immediate Family" means parent, spouse, child, brother or sister of the Director.
The Bank realizes, however, and the law allows that a "reasonable" standard of conduct permits a Director to receive the normal amenities that facilitate the discussion of bona fide Bank business, such as business meals, entertainment activities, or special occasion gifts, but does not allow the receipt of benefits that serve no demonstrable business purpose. Acceptance is permissible where it is based on family or personal relationships existing independent of Bank business, where the benefit is available to the general public under the same conditions on which it is available to the Director, or where the benefit would be paid by the Bank as a reasonable business expense if not paid for by another party.
Other circumstances where the acceptance of amenities by a Director may be permissible include: (a) Acceptance of loans from other banks or financial institutions on customary terms to finance proper and usual activities of Directors, such as home mortgage loans, except where prohibited by law; (b) Acceptance of advertising or promotional material of reasonable value, such as pens, pencils, note pads, key chains, calendars and similar items; (c) Acceptance of discounts or rebates on merchandise or services that do not exceed those available to other customers; or (d) Acceptance of civic, charitable, educational, or religious organization awards for recognition of service and accomplishment.
Any gift of tangible goods of more than $50.00 in value must be reported to and approved by the Bank President. If acceptance of the gift is not approved in writing, the gift must be returned or gifted to a charity of the Bank's choice with a letter explaining Bank policy, with a copy filed with the Bank's Corporate Secretary. No specific dollar limit is established with respect to gifts that are intangible in nature, such as meals, entertainment, accommodations, travel arrangements, and the like. Directors should use discretion in accepting such intangible gifts, which must be of reasonable value and provide an opportunity for facilitating bona fide business discussions or relationships. Any situation raising questions as to whether it is appropriate to accept an intangible gift should be discussed in advance with the Bank President.
IV. BORROWING FROM CUSTOMERS
Directors may not borrow from customers or suppliers of the Bank, other than recognized lending institutions.
V. CONFIDENTIAL INFORMATION
Each Director acknowledges the extreme importance of confidentiality with respect to the affairs of the Bank. In light of this acknowledgment, each Director agrees to keep confidential, during and after service on the Board, all information acquired pertaining to the Bank and any related activities in the course of membership on the Board. This commitment to confidentiality includes:
- Information regarding customers or suppliers.
- Information regarding the strategic plan, programs and progress toward meeting goals in the plan and the Bank's competitive position.
- Issues related to the Board's legal, ethical and regulatory responsibility for the oversight of the Bank. This includes information regarding appointment and reappointment of officers, information included in reports of examination, and statistical data about the Bank.
- Financial information including annual budgets, revenues, expenses, long term capital expenditure plans and equipment purchases, and information regarding the Bank's financial condition such as debt, liquidity, return on investment, profitability and other financial data.
- Performance of management, including evaluation data, compensation, contract and employment conditions, and top management succession plans.
It is particularly important that Directors recognize the sensitivity of information regarding strategic plans, capital decisions, real estate purchases, decisions regarding branches, mergers and other plans that may have an impact on the Bank's competitive position relative to other financial service organizations in the service area.
It is each Director's responsibility to address infractions of confidentiality by individual Directors or officers and to take action to remedy the problem. If infractions of confidentiality by individuals continue, they are to be referred to the Board Chairman or Bank President. It is the expectation that the Board Chairman refer the issue to the Nominating Committee and/or will recommend to the Board of Directors that the individual who has violated any of these provisions concerning confidential information be asked to resign or be removed.
VI. SPECIFIC POLICIES
Laws, regulations and policies ("Rules") specifically affecting the conduct of Directors of banking institutions are promulgated from time to time. Bank management will provide Directors with educational opportunities from time to time by which Directors may become acquainted with specific Rules. Such Rules include Regulation O, which restricts borrowings by Directors (and others), the Federal Bank Bribery Law, which restricts gifts and gratuities to Directors (and others) and Insider Trading Law, which restricts securities trading, based on non-public information. The Bank has separate "Regulation O Policy" and "Insider Trading Policy" which are applicable to all Directors and incorporated by reference in this Policy.
VII. ACCOUNTING COMPLAINTS
The Bank's policy is to comply with all financial reporting and accounting regulations applicable to the Bank. If any Director of the Bank has concerns or complaints regarding questionable accounting or auditing matters of the Bank, then he or she is encouraged to submit those concerns or complaints (anonymously, confidentially or otherwise) in accordance with the Bank's Whistleblower Policy described in the Standards of Conduct Policy-Employees. A confidential investigation will be conducted and appropriate action will be taken.
VIII. REPORTING OF ILLEGAL OR UNETHICAL BEHAVIOR
Violations, or suspected violations, of this Policy should be reported to the Chairman or Vice Chairman of the Board or the Bank President. The Board of Directors as a whole, excluding the Director in question, shall take appropriate action with respect to the failure of any Director to comply with this Policy.
The Bank will not permit retaliation of any kind by or on behalf of the Bank and its employees, officers and Directors against good faith reports or complaints of violations of this Policy or other illegal or unethical conduct.
IX. AMENDMENTS AND WAIVERS OF THE POLICY
This Policy may be amended or modified by the Board of Directors.
Waivers of the provisions of this Policy are subject to special rules and may be made only with the approval of the Board of Directors. Any such waiver will be publicly disclosed in accordance with applicable law, regulations and NASDAQ listing requirements.
X. CONCLUSION
Each Director is expected to read and understand the contents of this Policy in order to be alert to situations that could create a violation or a conflict of interest. Any questions regarding this Policy may be discussed with the Senior Vice President of Human Resources or the Bank President.
Each Director is required to complete an Annual Statement of Acknowledgement regarding the Policy. This statement will be filed with the Corporate Secretary.
CHARTER OAK COMMUNITY BANK CORP. ROCKVILLE FINANCIAL, INC. ROCKVILLE BANK STANDARDS OF CONDUCT POLICY - BOARD OF DIRECTORS STATEMENT OF ACKNOWLEDGEMENT I,_____________ , A DIRECTOR OF ROCKVILLE FINANCIAL, INC. AND/OR ITS PARENT COMPANY OR SUBSIDIARIES, HAVE REVIEWED AND UNDERSTAND THE STANDARDS OF CONDUCT POLICY - BOARD OF DIRECTORS AND HAVE COMPLIED, AND UNDERSTAND THAT I AM EXPECTED TO COMPLY WITH IT IN THE FUTURE. _____________________ _____________________________ DATE SIGNATURE _____________________________ NAME, PLEASE PRINT |
1. | I have reviewed this Annual Report on Form 10-K of Rockville Financial, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
(c) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
March 31, 2006 | /s/ William J. McGurk | |||
William J. McGurk | ||||
President and Chief Executive Officer | ||||
1. | I have reviewed this Annual Report on Form 10-K of Rockville Financial, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
(c) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
March 31, 2006 | /s/ Gregory A. White | |||
Gregory A. White | ||||
SVP, Chief Financial Officer and Treasurer | ||||
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
1.
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2.
The information contained in this Report fairly
presents, in all material respects, the consolidated
financial condition and results of the Company as of
and for the period covered by this Report.
By:
/s/ William J. McGurk
William J. McGurk
President and Chief Executive Officer
March 31, 2006
By:
/s/ Gregory A. White
Gregory A. White
SVP, Chief Financial Officer and
Treasurer
March 31, 2006
The forgoing certification is being furnished solely pursuant to
12 U.S.C. Section 1350 and is not being filed as part of the
Report or as a separate disclosure document.
Note: A signed original of this written statement required by
Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to
Rockville Financial, Inc. and will be retained by Rockville
Financial, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.