United Financial Bancorp, Inc. (Form: 10-K, Received: 03/09/2015 17:11:01)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



þ	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the Fiscal Year Ended December 31, 2014



¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-35028

United Financial Bancorp, Inc.

(Exact name of registrant as specified in its charter)



Connecticut		27-3577029
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
45 Glastonbury Boulevard, Glastonbury, Connecticut		06033
(Address of principal executive offices)		(Zip Code)

(860) 291-3600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None



Title of Class		Name of each exchange where registered
Common Stock, no par value		NASDAQ Global Select Stock Market

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes. þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. ¨ Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12B-2 of the Exchange Act



Large accelerated filer ¨	Accelerated filer þ	Non-accelerated filer ¨	Smaller reporting company ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12B-2 of the Act). Yes ¨ No þ

The aggregate market value of voting and non-voting common equity held by non-affiliates of United Financial Bancorp, Inc. as of June 30, 2014 was $692.6 million based upon the closing price of $13.55 as of June 30, 2014 , the last business day of the registrant’s most recently completed second quarter. Directors and officers of the Registrant are deemed to be affiliates solely for the purposes of this calculation.

As of February 27, 2015 , there were 49,268,396 shares of Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement for its Annual Meeting of Stockholders, expected to be filed pursuant to Regulation 14A within 120 days after the end of the 2014 fiscal year, are incorporated by reference into Part III of this Report on Form 10-K.

United Financial Bancorp, Inc.

Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2014

Table of Contents



		Page No.

Part I

Forward-looking statements		3
Item 1.	Business	4
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	27
Item 4.	Mine Safety Disclosures	28

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	69
Item 8.	Financial Statements and Supplementary Data	71
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	142
Item 9A.	Controls and Procedures	142
Item 9B.	Other Information	142

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	143
Item 11.	Executive Compensation	143
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	143
Item 13.	Certain Relationships and Related Transactions, and Director Independence	143
Item 14.	Principal Accountant Fees and Services	143

Part IV
Item 15.	Exhibits and Financial Statement Schedules	144
Signatures		146

Part I

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements that are within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. These risks and uncertainties could cause our results to differ materially from those set forth in such forward-looking statements.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” “targeted” and similar expressions, and future or conditional verbs, such as “will,” “would,” “should,” “could” or “may” are intended to identify forward-looking statements but are not the only means to identify these statements.

Factors that have a material adverse effect on operations include, but are not limited to, the following:


•	Local, regional, national and international business or economic conditions may differ from those expected;


•	The effects of and changes in trade, monetary and fiscal policies and laws, including the U.S. Federal Reserve Board’s interest rate policies, may adversely affect our business;


•	The ability to increase market share and control expenses may be more difficult than anticipated;


•	Changes in government regulations (including those concerning taxes, banking, securities and insurance) may adversely affect us or our businesses, including those under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Basel III update to the Basel Accords;


•	Changes in accounting policies and practices, as may be adopted by regulatory agencies or the Financial Accounting Standards Board, may affect expected financial reporting;


•	Future changes in interest rates may reduce our profits which could have a negative impact on the value of our stock;


•	Technological changes and cyber-security matters;


•	Changes in demand for loan products, financial products and deposit flow could impact our financial performance;


•	The timely development and acceptance of new products and services and perceived overall value of these products and services by customers;


•	Adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio;


•	Strong competition within our market area may limit our growth and profitability;


•	We have opened and plan to open additional new branches and/or loan production offices which may not become profitable as soon as anticipated, if at all;


•	If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease;


•	Our stock value may be negatively affected by banking regulations and our Certificate of Incorporation restricting takeovers;


•	Changes in the level of non-performing assets and charge-offs;


•	Because we intend to continue to increase our commercial real estate and commercial business loan originations, our lending risk may increase, and downturns in the real estate market or local economy could adversely affect our earnings;


•	The trading volume in our stock is less than in larger publicly traded companies which can cause price volatility, hinder your ability to sell our common stock and may lower the market price of the stock;


•	We may not manage the risks involved in the foregoing as well as anticipated;


•	Our ability to attract and retain qualified employees; and


•	Severe weather, natural disasters, acts of God, war or terrorism and other external events could significantly impact our business.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K. Except as required by applicable law or regulation, management undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Item 1. Business

General

On April 30, 2014, Rockville Financial, Inc. (“Rockville”) completed its merger with United Financial Bancorp, Inc. (“Legacy United”) and changed its legal entity name to United Financial Bancorp, Inc. (the “Company,” “United,” “our,” “we” or “us”). In connection with this merger, Rockville Bank, the Company’s principal asset and wholly-owned subsidiary, completed its merger with Legacy United’s banking subsidiary, United Bank, and changed its name to United Bank (the “Bank”). Discussions throughout this report related to the merger with Legacy United are referred to as the “Merger.”

United Financial Bancorp, Inc., a publicly-owned registered bank holding company, is headquartered in Glastonbury, Connecticut and is a Connecticut corporation. The Company completed the “second-step” conversion from a mutual holding company structure to a stock holding company structure in March 2011. United’s common stock is traded on the NASDAQ Global Select Stock Exchange under the symbol “UBNK.”

The Company’s principal asset at December 31, 2014 is all of the outstanding capital stock of United Bank, a wholly-owned subsidiary of the Company. United had assets of $5.48 billion and equity of $602.4 million at December 31, 2014 . The Merger doubled our size, adding $2.40 billion of assets and $356.4 million of stockholders’ equity, in addition to expanding our branch network and footprint into the Springfield and Worcester regions of Massachusetts.

The Bank is a state-chartered stock savings bank organized in Connecticut in 1858. The Company, through United Bank, delivers financial services to individuals, families and businesses primarily throughout Connecticut and central and western Massachusetts through 56 banking offices, its commercial loan and mortgage loan production offices, 67 ATMs, telephone banking, mobile banking and its internet website (www.bankatunited.com). In addition to the Merger, the Company opened two new branch locations during 2014 in North Haven, Connecticut and East Hartford, Connecticut and is in the process of building a new branch office in Glastonbury, Connecticut. The Company closed four branch offices in connection with the Merger and has implemented a branch optimization strategy which includes the closure of five non-strategic branches in United's branch network.

Our business philosophy is to remain a community-oriented franchise and continue to focus on organic growth supplemented through acquisitions/mergers and provide superior customer service to meet the financial needs of the communities in which we operate. Current priorities are to continue efficiency improvements, grow fee income businesses including financial advisory and mortgage banking, expand our commercial real estate and commercial business lending activities and grow our deposit base.

Competition

The Company is subject to strong competition from banks and other financial institutions, including savings and loan associations, commercial banks, finance and mortgage companies, credit unions, consumer finance companies, brokerage firms and insurance companies. Certain of these competitors are larger financial institutions with substantially greater resources, lending limits, larger branch systems and a wider array of commercial banking services than United. Competition from both bank and non-bank organizations is expected to continue. Competition could intensify in the future as a result of industry consolidation, the increasing availability of products and services from non-banks, greater technological developments in the industry, and banking regulatory reform.

The Company faces substantial competition for deposits and loans throughout its market area. The primary factors in competing for deposits are interest rates, personalized services, the quality and range of financial services, convenience of office locations, automated services and office hours. Competition for deposits comes primarily from other savings institutions, commercial banks, credit unions, mutual funds and other investment alternatives. The primary factors in competing for loans are interest rates, loan origination fees, the quality and range of lending services and personalized service. Competition for origination of first mortgage loans comes primarily from other savings institutions, mortgage banking firms, mortgage brokers and commercial banks and from other non-traditional lending financial service providers such as internet based lenders and insurance and securities companies. Competition for deposits, for the origination of loans and for the provision of other financial services may limit the Company’s future growth.

Market Area

We operate in primarily suburban market areas throughout Connecticut and Massachusetts that have a stable population and household base. Currently, we maintain over 50 retail banking branches covering markets throughout Connecticut and Massachusetts, providing customers access to full-service banking opportunities including retail banking, consumer and commercial lending, private banking and financial advisory services. The Bank recently opened new branches in East Hartford, Connecticut, Hamden, Connecticut and North Haven, Connecticut and will open a new banking center in Glastonbury, Connecticut in 2015.

Our retail banking and lending offices are located in Connecticut throughout Hartford, New Haven, New London and Tolland Counties and in Massachusetts in West Springfield, Greater Springfield and Worcester regions. In addition, we maintain a limited service commercial loan production office and a mortgage loan origination office in New Haven County, now supported by two retail branches in Hamden and North Haven. Our market area in Connecticut is located in the north central part of the state including, in part, the eastern and western parts of the greater Hartford metropolitan area and the central part of New Haven County. Our market area in Massachusetts covers a wide geography in the western, eastern and central parts of the state.

Our Corporate Headquarters is located in Glastonbury, Connecticut, a suburb of Hartford. Our Connecticut and Massachusetts markets have a mix of industry groups and employment sectors, including services, wholesale/retail trade, construction and manufacturing as the basis of the local economy. The Company’s primary deposit gathering area consists of the communities and surrounding towns that are served by its branch network. Our primary lending area is much broader than our primary deposit gathering area and includes the entire state of Connecticut as well as central, western and eastern Massachusetts and to a lesser extent, other states outside our footprint, although most of the Company’s loans are made to borrowers in its primary deposit gathering area. In addition to our primary lending areas we have expanded lending activities to include an out-of-state regional commercial real estate lending program as well as mortgage banking and commercial banking loan production offices in eastern Massachusetts and Fairfield and Litchfield Counties, Connecticut.

Lending Activities

General

The Company’s lending activities are conducted principally in Connecticut and Massachusetts although we do lend throughout the Northeast and to a lesser extent certain Mid-Atlantic states and other select states. The Company originates commercial loans, commercial real estate loans, residential and commercial construction loans, residential real estate loans collateralized by one-to-four family residences, home equity lines of credit and fixed rate loans and other consumer loans. Loan originations totaled $1.09 billion in 2014 , consisting of commercial and retail production of $616.8 million and $469.2 million, respectively.

Real estate collateralized the majority of the Company’s secured loans as of December 31, 2014 , including loans classified as commercial loans. Interest rates charged on loans are affected principally by the Company’s current asset/liability strategy, the demand for such loans, the cost and supply of money available for lending purposes and the rates offered by competitors. These factors are, in turn, affected by general economic and credit conditions, monetary policies of the federal government, including the Federal Reserve Board, federal and state tax policies and budgetary matters.

The Bank’s Board of Directors (“Board”) approves the Lending Policy on an annual basis as well as on an interim basis as modifications are warranted. The Lending Policy addresses approval limits, appraisal requirements, debt service coverage ratios, loan concentration, loan to value and other matters relevant to sound and prudent loan underwriting.

Residential Mortgage Loans

A principal lending activity of the Bank is to originate loans secured by first mortgages on one-to-four family residences. The Bank originates residential real estate loans through commissioned mortgage loan officers throughout the state and retail bank branches within our branch footprint. Residential mortgages are generally underwritten according to Federal Home Loan Mortgage Association (“Freddie Mac”) and Federal National Mortgage Association (“Fannie Mae”) guidelines for loans they designate as “A” or “A-” (these are referred to as “conforming loans”). Private mortgage insurance is generally required for loans with loan-to-value ratios in excess of 80%. The Bank also originates loans above conforming loan amount limits, referred to as “jumbo loans.” The Bank may also sell loans to other secondary market investors, either on a servicing retained or servicing released basis. The Bank is an approved originator of loans for sale to Fannie Mae, Merrimack Mortgage Company, the Connecticut Housing Finance Authority (“CHFA”) and the Massachusetts Housing Finance Authority (“MHFA”).

Loan sales in the secondary market provide funds for additional lending and other banking activities. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent mortgagees, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. The Company sold $136.7 million and $220.5 million of residential mortgages into the secondary market in 2014 and 2013 , respectively.

The experience of our mortgage loan officers and their relationships with realtors has allowed the Company to successfully shift to a purchase market model from a refinancing model, with purchase volume constituting over 68% of 2014 volume, a 105% increase compared to 2013 purchase volume. The Company continues to enhance its production capacity, both in numbers of experienced mortgage loan officers, and in expanding into additional robust markets.

In January 2014 the Company announced the expansion of its mortgage lending market through the introduction of loan production offices in Fairfield and Litchfield Counties, Connecticut, and Eastern Massachusetts. The opening of these loan production offices has allowed the Company some diversification from the Hartford and West Springfield area markets. The Company continues to initiate actions to increase production capacity, while maintaining current processing expense, introducing further efficiencies and implementing the ability to sell to multiple investors.

The Company retains the ability to sell loans from portfolio when secondary market returns are attractive. Additionally, the Company is implementing multiple secondary options, in order to ensure maximum pricing on loan sales, when it is in our best interest to do so. Furthermore, we continue to move towards variable cost structures where possible through expansion of incentive base pay and investigation of mortgage loan sub servicing. As a result, we expect mortgage banking will continue to be a significant driver to the Company’s profits, although less so in future periods.

The Company offers adjustable rate (“ARM”) mortgages which do not contain negative amortization features. After an initial term of five to ten years, the rates on these loans generally reset every year based upon a contractual spread or margin above LIBOR. ARM loans reduce the Bank’s exposure to interest rate risk. However, adjustable rate mortgages generally pose credit risks different from the credit risks inherent in fixed rate loans primarily because as interest rates rise, the underlying debt service payments of the borrowers rise, thereby increasing the potential for default. The Company also has interest only loans, which at December 31, 2014 represent 1% of the total residential real estate portfolio. Interest only loans are underwritten at the fully amortized rate (to include principal and interest) and are subject to the same higher credit standards as jumbo loans. As a result, interest only loans originated have higher credit scores and lower loan to value ratios than the existing residential portfolio. At year-end 2014 , the Bank’s adjustable rate residential mortgage portfolio totaled $265.1 million.

The Company also originates loans to individuals for the construction and acquisition of personal residences. These loans generally provide for construction periods up to eighteen months followed by a permanent mortgage loan, and follow the Bank’s normal mortgage underwriting guidelines.

We also offer home equity loans and home equity lines of credit, both of which are secured by owner-occupied one-to-four family residences. At December 31, 2014 , the unadvanced amounts of home equity lines of credit totaled $321.3 million . Home equity loans are offered with fixed rates of interest and with terms up to 15 years. The loan-to-value ratio for our home equity loans and lines of credit is generally limited to no more than 90%. Our home equity lines of credit have ten year terms and adjustable rates of interest which are indexed to the prime rate, as reported in The Wall Street Journal . Interest rates on home equity lines of credit are generally limited to a maximum rate of 18% per annum.

Commercial Real Estate Loans

The Company makes commercial real estate loans throughout its market area for the purpose of acquiring, developing, constructing, improving or refinancing commercial real estate where the property is the primary collateral securing the loan, and the income generated from the property is the primary repayment source. Small office buildings, industrial facilities and retail facilities normally collateralize commercial real estate loans. This portfolio also includes commercial one-to-four family and multifamily properties. These properties are primarily located in Connecticut and Massachusetts, but also expand throughout the Northeast and certain Mid-Atlantic states through our regional commercial real estate lending (“Regional CRE”)program. Regional CRE program provides geographic diversification within the overall commercial real estate loan portfolio and the properties financed are high quality, income producing and have experienced sponsorships. Loans may generally be made with amortizations of up to 30 years and with interest rates that are fixed or adjust periodically. Most commercial mortgages are originated with final maturities of 20 years or less. The Bank generally requires that borrowers have debt service coverage ratios (the ratio of available cash flows before debt service to debt service) of at least 1.15 times. Loans at origination may be made up to 80% of appraised value. Generally, commercial mortgages require personal guarantees by the principals. Credit enhancements in the form of additional collateral or guarantees are normally considered for start-up businesses without a qualifying cash flow history. Among the reasons for management’s continued emphasis on commercial real estate lending is the

desire to invest in assets with yields which are generally higher than yields on one-to-four family residential mortgage loans, and are more sensitive to changes in market interest rates.

Commercial real estate lending generally poses a greater credit risk than residential mortgage lending to owner occupants. The repayment of commercial real estate loans depends on the business and financial condition of the borrower. Economic events and changes in government regulations, which the Company and its borrowers do not control, could have an adverse impact on the cash flows generated by properties securing commercial real estate loans and on the market value of such properties. Commercial properties tend to decline in value more rapidly than residential owner-occupied properties during economic recessions and individual loans on commercial properties tend to be larger than individual loans on residential properties. The Bank seeks to minimize these risks through strict adherence to its underwriting standards and portfolio management processes.

Construction Loans

The Company originates both residential and commercial construction loans. Typically loans are made to owner-borrowers who will occupy the properties (residential construction) and to licensed and experienced developers for the construction of single-family home developments (commercial construction). We extend loans to residential subdivision developers for the purpose of land acquisition, the development of infrastructure and the construction of homes.

Residential construction loans to owner-borrowers generally convert to a fully amortizing long-term mortgage loan upon completion of construction which generally is 12 to 36 months. Commercial construction loans generally have terms of 12 to 36 months. Some construction-to-permanent loans have fixed interest rates for the permanent portion, but the Company originates mostly adjustable rate construction loans. The proceeds of commercial construction loans are disbursed in stages and the terms may require developers to pre-sell a certain percentage of the properties they plan to build before the Company will advance any construction financing. Company officers, appraisers and/or independent engineers inspect each project’s progress before additional funds are disbursed to verify that borrowers have completed project phases.

Construction lending, particularly commercial construction lending, poses greater credit risk than mortgage lending to owner occupants. The repayment of commercial construction loans depends on the business and financial condition of the borrower and on the economic viability of the project financed. A number of borrowers have more than one construction loan outstanding with the Company at any one time. Economic events and changes in government regulations, which the Company and its borrowers do not control, could have an adverse impact on the value of properties securing construction loans and on the borrower’s ability to complete projects financed and, if not the borrower’s residence, sell them for amounts anticipated at the time the projects commenced. Construction lending contains a unique risk characteristic as loans are originated under market and economic conditions that may change between the time of origination and the completion and subsequent purchaser financing of the property.

Commercial Business Loans

Commercial loans primarily provide working capital, equipment financing, financing for leasehold improvements and financing for expansion. Commercial loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets and are generally supported by personal guarantees. Depending on the collateral used to secure the loans, commercial business loans are typically made up to 80% of the value of the loan collateral. A significant portion of the Bank’s commercial and industrial loans are also collateralized by real estate, but are not classified as commercial real estate loans because such loans are not made for the purpose of acquiring, developing, constructing, improving or refinancing the real estate securing the loan, nor is the repayment source income generated directly from such real property. The Company participates in a shared national credit (“SNC”) program, which engages in the participation and purchase of credits with other “supervised” unaffiliated banks or financial institutions, specifically loan syndications and participations. These loans generate earning assets to increase profitability of the Bank and diversify commercial loan portfolios by providing opportunities to participate in loans to borrowers in other regions or industries the Bank might otherwise have no access. The Company offers both term and revolving commercial loans. Term loans have either fixed or adjustable rates of interest and, generally, terms of between 3 and 7 years and amortize on the same basis.

Commercial business loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. We seek to minimize these risks through our underwriting standards and enhanced risk assessments, including a quarterly review of portions of the portfolio and a review of new commercial loans by the Chief Credit Officer.

At December 31, 2014 , the Company’s outstanding commercial loan portfolio totaled $613.6 million , or 15.7% , of our total loan portfolio and included the following business sectors: manufacturing, professional services, wholesale trade, retail trade, transportation, educational and health services, contractors and real estate rental and leasing. Industry concentrations are reported quarterly to the Board Risk Committee.

Installment and Collateral Loans

Installment and collateral loans totaled $5.8 million , or 0.1% , of our total loan portfolio at December 31, 2014 . Our installment and collateral loans generally consist of loans on new and used automobiles, including indirect automobile loans, loans collateralized by deposit accounts and unsecured personal loans. While the asset quality of these portfolios is currently strong, there is increased risk associated with auto and consumer loans during economic downturns as increased unemployment and inflationary costs may make it more difficult for some borrowers to repay their loans.

Credit Risk Management and Asset Quality

One of management’s key objectives has been and continues to be to maintain a high level of asset quality. United utilizes the following general practices to manage credit risk:


•	Limiting the amount of credit that individual lenders may extend;


•	Establishing a process for credit approval accountability;


•	Careful initial underwriting and analysis of borrower, transaction, market and collateral risks;


•	Established underwriting practices;


•	Ongoing servicing of the majority of individual loans and lending relationships;


•	Continuous monitoring of the transactions and portfolio, market dynamics and the economy;


•	Periodically reevaluating the Bank’s strategy and overall exposure to economic, market and other risks; and


•	Ongoing review of new commercial loans by the Chief Credit Officer.

Credit Administration is responsible for the completion of credit analyses for all loans above a specific threshold, for determining loan loss reserve adequacy and for preparing monthly and quarterly reports regarding the credit quality of the loan portfolio, which are submitted to senior management and the Board, to ensure compliance with the credit policy. In addition, Credit Administration and the Special Assets Team is responsible for managing non-performing and classified assets. On a quarterly basis, the criticized loan portfolio, which consists of commercial, commercial real estate and construction loans that are risk rated Special Mention or worse, are reviewed by management, focusing on the current status and strategies to improve the credit.

The loan review function is outsourced to a third party to provide an independent evaluation of the creditworthiness of the borrower and the appropriateness of the risk rating classifications. The findings are reported to Credit Administration and summary information is then presented to the Board Risk Committee. This review is supplemented with selected targeted internal reviews of the commercial loan portfolio. Various techniques are utilized to monitor indicators of credit deterioration in the portfolios of residential real estate mortgages and home equity lines and loans, including the periodic tracking and analysis of loans with an updated FICO score. LTV is determined on non-accrual loans through either an updated drive-by appraisal or, less frequently, the use of computerized market data and an estimate of current value.

Classified Assets

Under our internal risk rating system, we currently classify loans and other assets considered to be of lesser quality as “substandard,” “doubtful,” or “loss.” An asset is considered “substandard” if it is inadequately protected by either the current net worth or the repayment capacity of the obligor or by the collateral pledged, if any. “Substandard” assets include those characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as “loss” are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets that are individually reviewed for impairment are those that exhibit elevated risk characteristics that differentiate themselves from the homogeneous loan categories including certain loans classified as substandard, doubtful or loss.

The loan portfolio is reviewed on a regular basis to determine whether any loans require risk classification or reclassification. Not all classified assets constitute non-performing assets.

Investment Activities

The securities portfolio is managed to generate interest income, to implement interest rate risk management strategies, and to provide a readily available source of liquidity for balance sheet management. Investment decisions are made in accordance with the Company’s investment policy and include consideration of risk, return, duration, and portfolio concentrations. Compliance with the Company’s investment policy rests with the Chief Financial Officer. The Management Asset/Liability Committee (“ALCO”) meets monthly and reviews and approves investment strategies.

The Company may acquire, hold and transact in various types of investment securities in accordance with applicable federal regulations, state statutes and guidelines specified in the Company’s internal investment policy. Permissible bank investments include federal funds, commercial paper, repurchase agreements, interest-bearing deposits of federally insured banks, U.S. Treasury and government-sponsored agency debt obligations, including mortgage-backed securities and collateralized mortgage obligations, collateralized loan obligations, municipal securities, investment grade corporate debt, mutual funds, common and preferred equity securities, and Federal Home Loan Bank of Boston (“FHLBB”) stock.

Derivative Financial Instruments

The Company uses interest rate swap instruments for its own account and also offers them for sale to commercial customers that qualify for their own accounts, normally in conjunction with commercial loans offered by the Bank to these customers. At year-end 2014 , the Company held derivative financial instruments with a total notional amount of $405.8 million . The Company has a policy for managing its derivative financial instruments, and the policy and program activity are overseen by ALCO. Interest rate swap counterparties are limited to a select number of national financial institutions and qualifying commercial customers. Collateral may be required based on financial condition tests. The Company works with a third-party firm which assists in marketing swap transactions, documenting transactions, and providing information for bookkeeping and accounting purposes.

Sources of Funds

General

The Company uses deposits, repayments and prepayments of loans and securities, proceeds from sales of loans and securities, proceeds from maturing securities and borrowings to fund lending, investing and general operations.

Deposits

Deposits are the major source of funds for the Company’s lending and investment activities. Deposit accounts are the primary product and service interaction with the Bank’s customers. The Bank serves personal, commercial, non-profit, and municipal deposit customers. Most of the Bank’s deposits are generated from the areas surrounding its branch offices. The Bank offers a wide variety of deposit accounts with a range of interest rates and terms. The Bank also periodically offers promotional interest rates and terms for limited periods of time. The Bank’s deposit accounts consist of interest-bearing checking (“NOW”), non-interest-bearing checking, regular savings, money market savings and time deposits. The Bank emphasizes its transaction deposits – checking and NOW accounts for personal accounts and checking accounts promoted to businesses and municipalities. These accounts have the lowest marginal cost to the Bank and are also often a core account for a customer relationship. The Bank offers debit cards and other electronic fee producing payment services to transaction account customers. The Bank is promoting remote deposit capture devices so that commercial accounts can make deposits from their place of business. Savings accounts include traditional passbook, statement accounts and health savings accounts as well as money market savings accounts. The Bank’s time deposit accounts provide maturities from 3 months to 5 years. Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers. Deposit service fee income also includes other miscellaneous transaction and convenience services sold to customers through the branch system as part of an overall service relationship.

Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit pricing strategy is monitored weekly by the Retail Pricing Committee, monthly by the Management ALCO and quarterly by the Board Risk Committee. Deposit pricing is set weekly by the Bank’s Treasury Department. When setting deposit pricing, the Bank considers competitive market rates, FHLBB advance rates and rates on other sources of funds. Deposit rates and terms are based primarily on current operating strategies, market rates, liquidity requirements, rates paid by competitors and growth goals. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. To attract and retain deposits, we rely upon personalized customer service, marketing our products, long-standing relationships and competitive interest rates.

The Company is a member of the Certificate of Deposit Account Registry Service (“CDARS”) network. The Company uses CDARS to place customer funds into time deposits issued by other banks that are members of the CDARS network. This

occurs in increments less than FDIC insurance limits to ensure that customers are eligible for full FDIC insurance. We receive a reciprocal amount of deposits from other network members who do the same with their customer deposits. CDARS deposits are considered to be brokered deposits for banking regulatory purposes. We consider these reciprocal CDARS deposit balances to be in-market deposits as distinguished from out-of-market brokered deposits. The Company had $353.7 million brokered deposits at December 31, 2014 , $1.2 million of which are through participation in CDARS reciprocal deposit program.

Borrowings

The Bank is a member of the FHLBB and uses borrowings as an additional source of funding, particularly for daily cash management and for funding longer duration assets. FHLBB advances also provide more pricing and option alternatives for particular asset/liability needs. The FHLBB functions as a central reserve bank providing credit for member institutions. As an FHLBB member, the Company is required to own capital stock of the FHLBB, calculated periodically based primarily on its level of borrowings from the FHLBB. FHLBB borrowings are secured by a blanket lien on certain qualifying assets, principally the Bank’s residential mortgage loans. Advances are made under several different credit programs with different lending standards, interest rates, and range of maturities.

On September 23, 2014, the Company closed its public offering of $75.0 million of its 5.75% Subordinated Notes due October 1, 2024 (the “Notes”). The Notes were offered to the public at par. The Company plans to use the proceeds for general corporate purposes. Interest on the Notes are payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2015.

Additional funding sources are available through securities sold under agreements to repurchase, the Federal Reserve Bank (“FRB”), Federal Funds lines of credit and other wholesale funding providers.

Risk Management

United has a comprehensive Risk Management Program to identify, assess, mitigate, monitor, manage and report risk profiles inherent within the organization. United manages risk taking activities within the Board-approved risk framework through an enterprise-wide governance structure that outlines the responsibilities for risk management activities and oversight of the same. Risk management is fully integrated into the Strategic planning process and is a key participant in the approval process for all new activities. The Risk Management Committee, Risk Management Steering Committee and the Board Risk Committee oversee all of United’s risk-related matters. United’s Risk Management Steering Committee is chaired by United’s Chief Risk Officer and is comprised of members of the Executive Team and the Enterprise Risk Manager. The Risk Management Committee is chaired by United’s Chief Risk Officer and is comprised of Risk Division officers, an IT officer, and various members of line management.

As a regulated banking institution, United is examined periodically by federal and state banking authorities. The results of these examinations are presented to the full Board. Identified issues from such examinations are tracked by the Director of Internal Audit and compliance is reported to and reviewed by the Audit Committee. These examinations, in addition to the internal Compliance Department reports and Internal Audit reports, are reviewed by the Audit Committee. The Compensation Committee also incorporates risk considerations into executive incentive compensation plans.

The Chief Risk Officer, who reports to the Chief Executive Officer, is responsible for oversight of the Company’s Enterprise Risk Management framework, which includes but is not limited to credit risk, operational risk management, compliance programs, information security and risk policy. The Director of Treasury, who reports to the Chief Financial Officer, is responsible for overseeing market, liquidity and capital risk management activities and is closely monitored by the Chief Risk Officer. The Chief Credit Officer, who reports directly to the Chief Executive Officer, is responsible for overseeing credit risk as well as the Bank’s loan workout and recovery activities. The Director of Internal Audit, who reports directly to the Audit Committee, is responsible for providing an independent assessment of the quality of internal controls for the Company.

Credit Risk

United manages and controls risk in its loan and investment portfolios through established underwriting practices, adherence to consistent standards and utilization of various portfolio and transaction monitoring activities. Written credit policies are in place that include underwriting standards and guidelines, provide limits on exposure and establish various other standards as deemed necessary and prudent. Additional approval requirements and reporting are implemented to ensure proper identification, rationale and disclosure of policy exceptions.

Credit Risk Management policies and transaction approvals are managed under the supervision of the Chief Credit Officer and are independent of the loan production and Treasury areas. The credit risk function oversees the underwriting,

approval and portfolio management process, establishes and ensures adherence to credit policies and manages the collections and problem asset resolution activities in order to control and reduce classified and non-performing assets.

As part of the Credit Risk Management process, the Chief Risk Officer and Chief Credit Officer hold regular meetings with senior managers to report and discuss key credit risk topics, issues and policy recommendations affecting the Bank. Important findings regarding credit quality and trends within the loan and investment portfolios are regularly reported to the Board Risk Committee.

In addition to the Credit Risk Management team, there is an independent Credit Risk Review function, reporting to the Chief Risk Officer, that performs independent assessments of the risk ratings and credit underwriting process for the commercial loan portfolio. Credit Risk Review findings are reported to Executive Management and the Board by the Chief Risk Officer and the Chief Credit Officer.

Market Risk

Market risk refers to the risk of loss arising from adverse changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates and prices, such as equity prices. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. Due to the nature of its operations, United is primarily exposed to interest rate risk. Accordingly, United’s interest rate sensitivity is monitored on an ongoing basis by its ALCO and by its Board Risk Committee. ALCO’s primary goals are to manage interest rate risk to maximize earnings and net economic value in changing interest rate and business environments within previously approved Board risk limits.

Liquidity Risk

Liquidity risk refers to the ability of the Company to meet a demand for funds by converting assets into cash or cash equivalents and by increasing liabilities at acceptable costs. Liquidity management involves maintaining the ability to meet day-to-day and longer-term cash flow requirements of customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Liquidity sources include the amount of unencumbered or “free” investment portfolio securities the Bank owns, deposits, borrowings, cash flow from loan and investment principal payments and pre-payments and residential mortgage loan sales. The Company also requires funds for dividends to shareholders, repurchase of shares, potential acquisitions, and for general corporate purposes. Its sources of funds include dividends from the Bank, the issuance of equity and debt and borrowings from capital markets.

Both the Bank and the Company will maintain a level of liquidity necessary to achieve their business objectives under both normal and stressed conditions. Liquidity risk is monitored and managed by ALCO and reviewed regularly with the Board.

Capital Risk

United needs to maintain adequate capital in both normal and stressed environments to support its business objectives. ALCO monitors regulatory and tangible capital levels according to management targets and regulatory requirements and recommends capital conservation, generation and/or deployment strategies to the Board. ALCO also has responsibility for the Capital Management Plan and Contingent Liquidity Plan, and quarterly stress testing which are all reviewed with the Board Risk Committee. The Capital Management Plan and Contingent Liquidity Plan are approved annually by the Board.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. The definition includes the risk of loss from failure to comply with laws, ethical standards and contractual obligations and includes oversight of key operational risks including cash transfer risk. United’s Chief Risk Officer oversees the management and effectiveness of United’s risk management program. The Chief Risk Officer oversees the Compliance Program, the Bank Secrecy Act Program, and reviews the Community Reinvestment Act and Fair Lending Programs. The Chief Risk Officer is responsible for reporting on the adequacy of these risk management components and programs along with any issues or concerns to the Board.

Subsidiary Activities

United Bank, a Connecticut-chartered stock savings bank, is currently the only subsidiary of the Company and has the following wholly-owned subsidiaries.

United Bank Mortgage Company: Established in December 1998, and formerly known as The SBR Mortgage Company, United Bank Mortgage Company operates as United Bank’s “passive investment company” (“PIC”), which exempts it from Connecticut income tax under current law.

United Bank Investment Corp., Inc.: Formerly The Savings Bank of Rockville Investment Co.and established in January 1995, the entity, was established to maintain an ownership interest in Infinex Investments, Inc. (“Infinex”) a third-party, non-affiliated registered broker-dealer. Infinex provides broker-dealer services for a number of banks, to their customers, including the Bank’s customers through United Northeast Financial Advisors, Inc.

United Northeast Financial Advisors, Inc.: Formerly Rockville Financial Services, Inc. and established in May 2002, the entity currently offers brokerage and investment advisory services through a contract with Infinex. In addition, United Northeast Financial Advisors, Inc. offers customers a range of non-deposit investment products including mutual funds, debt, equity and government securities, retirement accounts, insurance products and fixed and variable annuities at all United Bank locations. United Northeast Financial Advisors, Inc. receives a portion of the commissions generated by Infinex from sales to customers. For the year ended December 31, 2014 , United Northeast Financial Advisors, Inc. received fees of $1.7 million through its relationship with Infinex.

United Bank Commercial Properties, Inc., United Bank Residential Properties, Inc.: Established in May 2009, United Bank Commercial Properties, Inc. (formerly Rockville Bank Commercial Properties, Inc.) and United Bank Residential Properties, Inc. (formerly Rockville Bank Residential Properties, Inc.) were established to hold certain real estate acquired through foreclosures.

United Bank Investment Sub, Inc.: Formerly Rockville Bank Investment Sub., Incl and established in December 2012, the entity was established to hold certain government guaranteed loans acquired in the secondary market.

UCB Securities Inc., II: Acquired in the merger of Rockville and Legacy United to hold certain investment securities which provide a tax advantage under current regulations.

UB Properties, LLC: A single member limited liability company, established in May 2014 with the merger of Rockville and Legacy United to hold certain real estate acquired through foreclosure.

Employees

At December 31, 2014 , the Company had 683 full-time equivalent employees consisting of 636 full-time and 89 part-time employees. None of the employees were represented by a collective bargaining group.

United maintains a comprehensive employee benefit program providing, among other benefits, group medical and dental insurance, life insurance, disability insurance, a pension plan, and an employee 401(k) investment plan. The pension plan was frozen effective December 31, 2012. Under the freeze, participants in the plan stopped earning additional benefits under the plan. The pension plan currently provides benefits for full-time employees hired before January 1, 2005. Effective January 1, 2014, the Company merged its Employee Stock Ownership Plan with its 401(k) Plan.

Management considers relations with its employees to be good. See Notes 15 and 16 of the Notes to Consolidated Financial Statements contained elsewhere within this report for additional information on certain benefit programs.

SUPERVISION AND REGULATION

General

United Bank is a Connecticut-chartered stock savings bank and is a wholly-owned subsidiary of United Financial Bancorp, Inc., a stock corporation. United Bank’s deposits are insured up to applicable limits by the FDIC through the Deposit Insurance Fund (“DIF”). United Bank is subject to extensive regulation by the Connecticut Banking Department, as its chartering agency, and by the Federal Deposit Insurance Corporation, as its deposit insurer. United Bank is required to file reports with, and is periodically examined by, the FDIC and the Connecticut Banking Department concerning its activities and financial condition. It must obtain regulatory approvals prior to entering into certain transactions, such as mergers. United Financial Bancorp, Inc., as a bank holding company, is subject to regulation by and is required to file reports with the Federal Reserve Bank of Boston. Any change in such regulations, whether by the Connecticut Banking Department, the FDIC or the FRB, could have a material adverse impact on United Bank or United Financial Bancorp, Inc.

Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the President of the United States signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). This new law significantly changes the historical bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare numerous studies and

reports for Congress. The federal agencies are given significant discretion in drafting the rules and regulations, and consequently, many of the details and much of the impacts of the Dodd-Frank Act may not be known for many months or years.

The Dodd-Frank Act requires minimum leverage (Tier I) and risk-based capital requirements for bank and savings and loan holding companies that are no less than those applicable to banks, which will exclude certain instruments that previously have been eligible for inclusion by bank holding companies as Tier I capital, such as trust preferred securities.

A provision of the Dodd-Frank Act eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest-bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse impact on our interest expense. The Dodd-Frank Act also broadens the base for FDIC deposit insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution, rather than deposits. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor for each account relationship category, retroactive to January 1, 2009. The legislation also increases the required minimum reserve ratio for the DIF, from 1.15% to 1.35% of insured deposits, and directs the FDIC to offset the effects of increased assessments on depository institutions with less than $10 billion in assets.

Under the Dodd-Frank Act we are required to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The Dodd-Frank Act also authorizes the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using our proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs and could increase our interest expense.

Connecticut Banking Laws And Supervision

Connecticut Banking Commissioner: The Commissioner regulates internal organization as well as the deposit, lending and investment activities of state chartered banks, including United Bank. The approval of the Commissioner is required for, among other things, the establishment of branch offices, including those in other states, and business combination transactions. The Commissioner conducts periodic examinations of Connecticut-chartered banks. The FDIC also regulates many of the areas regulated by the Commissioner, and federal law may limit some of the authority provided to Connecticut-chartered banks by Connecticut law.

Lending Activities: Connecticut banking laws grant banks broad lending authority. With certain limited exceptions, any one obligor under this statutory authority may not exceed 10% and 15%, respectively, of a bank’s capital and allowance for loan losses.

Dividends: The Bank may pay cash dividends out of its net profits. For purposes of this restriction, “net profits” represents the remainder of all earnings from current operations. Further, the total amount of all dividends declared by a savings bank in any year may not exceed the sum of a bank’s net profits for the year in question combined with its retained net profits from the preceding two years. Federal law also prevents an institution from paying dividends or making other capital distributions that, if by doing so, would cause it to become “undercapitalized.” The FDIC may limit a savings bank’s ability to pay dividends. No dividends may be paid to the Bank’s shareholder if such dividends would reduce stockholders’ equity below the amount of the liquidation account required by the Connecticut conversion regulations.

Powers: Connecticut law permits Connecticut chartered banks to sell insurance and fixed and variable rate annuities if licensed to do so by the applicable state insurance commissioner. With the prior approval of the Commissioner, Connecticut banks are also authorized to engage in a broad range of activities related to the business of banking, or that are financial in nature or that are permitted under the Bank Holding Company Act (“BHCA”) or the Home Owners’ Loan Act (“HOLA”), both

federal statutes, or the regulations promulgated as a result of these statutes. Connecticut banks are also authorized to engage in any activity permitted for a national bank or a federal savings association upon filing notice with the Commissioner unless the Commissioner disapproves the activity.

Assessments: Connecticut banks are required to pay annual assessments to the Connecticut Banking Department to fund the Department’s operations. The general assessments are paid pro-rata based upon a bank’s asset size.

Enforcement: Under Connecticut law, the Commissioner has extensive enforcement authority over Connecticut banks and, under certain circumstances, affiliated parties, insiders, and agents. The Commissioner’s enforcement authority includes cease and desist orders, fines, receivership, conservatorship, removal of officers and directors, emergency closures, dissolution and liquidation.

Federal Regulations

Capital Requirements: Under FDIC regulations, federally insured state-chartered banks that are not members of the Federal Reserve System (“state non-member banks”), such as United Bank, are required to comply with minimum leverage capital requirements. For an institution determined by the FDIC to not be anticipating or experiencing significant growth and to be, in general, a strong bank holding company, rated composite 1 under the Uniform Financial Institutions Ranking System established by the Federal Financial Institutions Examination Council, the minimum capital leverage requirement is a ratio of Tier I capital to total assets of 3%. For all other institutions, the minimum leverage capital ratio is 4%. Tier I capital is the sum of common stockholders’ equity, non-cumulative perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less intangible assets (except for certain servicing rights and credit card relationships) and certain other specified items.

The FDIC regulations require state non-member banks to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of regulatory capital to regulatory risk-weighted assets is referred to as a bank’s “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items (including recourse obligations, direct credit substitutes and residual interests) to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk. For example, under the FDIC’s risk-weighting system, cash and securities backed by the full faith and credit of the U.S. Government are given a 0% risk weight, loans secured by one-to-four family residential properties generally have a 50% risk weight, and commercial loans have a risk weighting of 100%.

State non-member banks such as United Bank, must maintain a minimum ratio of total capital to risk-weighted assets of 8%, of which at least one-half must be Tier I capital. Total capital consists of Tier I capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and certain other capital instruments, and a portion of the net unrealized gain on equity securities. The includible amount of Tier 2 capital cannot exceed the amount of the institution’s Tier I capital. Banks that engage in specified levels of trading activities are subject to adjustments in their risk-based capital calculation to ensure the maintenance of sufficient capital to support market risk.

The Federal Deposit Insurance Corporation Improvement Act (the “FDICIA”) required each federal banking agency to revise its risk-based capital standards for insured institutions to ensure that those standards take adequate account of interest-rate risk, concentration of credit risk, and the risk of nontraditional activities, as well as to reflect the actual performance and expected risk of loss on multi-family residential loans. The FDIC, along with the other federal banking agencies, has adopted a regulation providing that the agencies will take into account the exposure of a bank’s capital and economic value to changes in interest rate risk in assessing a bank’s capital adequacy. The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances.

As a bank holding company, United Financial Bancorp, Inc. is subject to capital adequacy guidelines for bank holding companies similar to those of the FDIC for state-chartered banks. United Financial Bancorp, Inc.’s stockholders’ equity exceeds these requirements.

The current U.S. federal bank regulatory agencies’ risk-based capital guidelines are based upon the 1988 capital accord (“Basel I”) of the Basel Committee on Banking Supervision (“Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors/regulators from the major industrialized countries that meet under the auspices of the Bank for International Settlements in Basel, Switzerland to develop broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply.

In 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, now officially identified by the Basel Committee as “Basel III.” Basel III, when implemented by the U.S. bank regulatory agencies and fully phased-in, will require bank holding companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity.

In July 2013, federal banking regulators approved final rules that implement changes to the regulatory capital framework for U.S. banks. The rules set minimum requirements for both the quantity and quality of capital held by community banking institutions. The final rule includes a new minimum ratio of common equity Tier 1 capital to risk weighted assets of 4.5%, raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6%, includes a minimum leverage ratio of 4% for all banking organizations and includes a minimum total capital to risk weighted assets ratio of 8%. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The phase-in period for the rules will begin for the Company on January 1, 2015, with full compliance with all of the final rules’ requirements phased in over a multi-year schedule. Management believes that the Company’s capital levels will remain characterized as “well-capitalized” under the new rules.

Prompt Corrective Regulatory Action: Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

The FDIC has adopted regulations to implement the prompt corrective action legislation. An institution is deemed to be “well-capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier I risk-based capital ratio of 6% or greater and a leverage ratio of 5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4% or greater, and generally a leverage ratio of 4% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a leverage ratio of less than 4%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%. As of December 31, 2014 , United Bank was a “well-capitalized” institution.

“Undercapitalized” banks must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. A bank’s compliance with such a plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

Transactions with Affiliates: Under current federal law, transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act (the “FRA”). In a holding company context, at a minimum, the parent holding company of a savings bank and any companies which are controlled by such parent holding company are affiliates of the savings bank. Generally, Section 23A limits the extent to which the savings bank or its subsidiaries may engage in “covered transactions” with any one affiliate to 10% of such savings bank’s capital stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to 20% of capital stock and surplus. The term “covered transaction” includes, among other things, the making of loans or other extensions of credit to an affiliate and the purchase of assets from an affiliate. Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, acceptances on letters of credit issued on behalf of an affiliate. Section 23B requires that covered transactions and a broad list of other specified transactions be on terms substantially the same, or no less favorable, to the savings bank or its subsidiary as similar transactions with non-affiliates.

Loans to Insiders: Further, Section 22(h) of the FRA restricts an institution with respect to loans to directors, executive officers, and principal stockholders (“insiders”). Under Section 22(h), loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Loans to insiders above specified amounts must receive the prior approval of the Board. Further, under Section 22(h), loans to

Directors, executive officers and principal stockholders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the bank’s employees and does not give preference to the insider over the employees. Section 22(g) of the FRA places additional limitations on loans to executive officers.

Enforcement: The FDIC has extensive enforcement authority over insured savings banks, including United Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices.

The FDIC has authority under Federal law to appoint a conservator or receiver for an insured bank under limited circumstances. The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an insured state non-member bank if that bank was “critically undercapitalized” on average during the calendar quarter beginning 270 days after the date on which the institution became “critically undercapitalized.” The FDIC may also appoint itself as conservator or receiver for an insured state non-member institution under specific circumstances on the basis of the institution’s financial condition or upon the occurrence of other events, including: (1) insolvency; (2) substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) existence of an unsafe or unsound condition to transact business; and (4) insufficient capital, or the incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment without federal assistance.

Insurance of Deposit Accounts

The FDIC has adopted a risk-based insurance assessment system. The FDIC assigns an institution to one of three capital categories based on the institution’s financial condition consisting of (1) well-capitalized, (2) adequately capitalized or (3) undercapitalized, and one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution’s primary federal regulator and information which the FDIC determines to be relevant to the institution’s financial condition and the risk posed to the deposit insurance funds. An institution’s assessment rate depends on the capital category and supervisory category to which it is assigned. Assessment rates for insurance fund deposits range from 2.5 basis points for the strongest institution to 45 basis points for the weakest. DIF members are also required to assist in the repayment of bonds issued by the Financing Corporation in the late 1980’s to recapitalize the Federal Savings and Loan Insurance Corporation.

As part of the Dodd-Frank bill, the FDIC insurance limit was permanently increased to $250,000 per depositor for each account relationship category. Unlimited deposit insurance coverage was available on all of the Bank’s non-interest–bearing deposit accounts through December 31, 2012, when the FDIC’s temporary program ended. Additionally, the FDIC approved a plan for rebuilding the DIF after several bank failures in 2008. The FDIC plan aims to rebuild the DIF within five years; the first assessment increase was a uniform seven basis points effective January 2009. For the years ended December 31, 2014, 2013 and 2012 , the total FDIC assessments were $1.2 million, $1.0 million and $1.2 million, respectively. The FDIC has exercised its authority to raise assessment rates in the past and may raise insurance premiums in the future. If such action is taken by the FDIC it could have an adverse effect on the earnings of the Company.

The FDIC may terminate insurance of deposits if it finds that the institution is in an unsafe or unsound condition to continue operations, has engaged in unsafe or unsound practices, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The management of the Company does not know of any practice, condition or violations that might lead to termination of deposit insurance.

Federal Reserve System

The FRB regulations require depository institutions to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The FRB regulations generally require that reserves be maintained against aggregate transaction accounts. The Company is in compliance with these requirements.

Federal Home Loan Bank System

The Bank is a member of the FHLBB, which is one of the regional Federal Home Loan Banks composing the Federal Home Loan Bank System. Each Federal Home Loan Bank serves as a central credit facility primarily for its member institutions. As a member of the FHLBB, we are required to acquire and hold shares of capital stock in the FHLBB. While the required percentages of stock ownership are subject to change by the FHLBB, the Company was in compliance with this requirement with an investment in FHLBB stock at December 31, 2014 and December 31, 2013 . The FHLBB repurchased

$2.3 million and $814,000 of excess capital stock from the Bank during 2014 and 2013, respectively, as part of an announced program in 2009 to repurchase $250 million of members’ excess stock.

Holding Company Regulation

General: As a bank holding company, United Financial Bancorp, Inc. is subject to comprehensive regulation and regular examinations by the Federal Reserve Board. The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices. Under Connecticut banking law, no person may acquire beneficial ownership of more than 10% of any class of voting securities of a Connecticut-chartered bank, or any bank holding company of such a bank, without prior notification of, and lack of disapproval by, the Connecticut Banking Commissioner.

Under Federal Reserve Board policy, a bank holding company must serve as a source of strength for its subsidiary bank. Under this policy, the Federal Reserve Board may require, and has required in the past, a holding company to contribute additional capital to an undercapitalized subsidiary bank. As a bank holding company, United Financial Bancorp, Inc. must obtain Federal Reserve Board approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or (iii) merging or consolidating with another bank holding company.

The Bank Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by FRB regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks. The list of activities permitted by the FRB includes, among other things: (i) operating a savings institution, mortgage company, finance company, credit card company or factoring company; (ii) performing certain data processing operations; (iii) providing certain investment and financial advice; (iv) underwriting and acting as an insurance agent for certain types of credit-related insurance; (v) leasing property on a full-payout, non-operating basis; (vi) selling money orders, travelers’ checks and United States savings bonds; (vii) real estate and personal property appraising; (viii) providing tax planning and preparation services; (ix) financing and investing in certain community development activities; and (x) subject to certain limitations, providing securities brokerage services for customers.

Dividends: The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Board’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The FRB also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve Board, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Bank holding companies are required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the consolidated net worth of the bank holding company. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve Board order or any condition imposed by, or written agreement with, the Federal Reserve Board.

Financial Modernization: The Gramm-Leach-Bliley Act permits greater affiliation among banks, securities firms, insurance companies, and other companies under a new type of financial services company known as a “financial holding company.” A financial holding company essentially is a bank holding company with significantly expanded powers. Financial holding companies are authorized by statute to engage in a number of financial activities previously impermissible for bank holding companies, including securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant banking activities. The act also permits the Federal Reserve Board and the Department of the Treasury to authorize additional activities for financial holding companies if they are “financial in nature” or “incidental” to financial activities. A bank holding company may become a financial holding company if each of its subsidiary banks is well-capitalized, well managed, and has at least a “Satisfactory” Community Reinvestment Act

rating. A financial holding company must provide notice to the Federal Reserve Board within 30 days after commencing activities previously determined by statute or by the Federal Reserve Board and Department of the Treasury to be permissible. United Financial Bancorp, Inc. has not submitted notice to the Federal Reserve Board of its intent to be deemed a financial holding company. However, it is not precluded from submitting a notice in the future should it wish to engage in activities only permitted to financial holding companies.

Miscellaneous Regulation

Sarbanes-Oxley Act of 2002: The Company is subject to the Sarbanes-Oxley Act of 2002 (the “Act”), which implements a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing. In general, the Sarbanes-Oxley Act mandated important new corporate governance and financial reporting requirements intended to enhance the accuracy and transparency of public companies’ reported financial results. It established new responsibilities for corporate chief executive officers, chief financial officers and audit committees in the financial reporting process, and it created a new regulatory body to oversee auditors of public companies. It backed these requirements with new SEC enforcement tools, increased criminal penalties for federal mail, wire and securities fraud, and created new criminal penalties for document and record destruction in connection with federal investigations. It also increased the opportunity for more private litigation by lengthening the statute of limitations for securities fraud claims and providing new federal corporate whistleblower protection.

Section 402 of the Act prohibits the extension of personal loans to directors and executive officers of issuers (as defined in the Sarbanes-Oxley Act). The prohibition, however, does not apply to loans advanced by an insured depository institution, such as the Company, that are subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act.

The Act also required that the various securities exchanges, including the NASDAQ Global Select Stock Market, prohibit the listing of the stock of an issuer unless that issuer complies with various requirements relating to their committees and the independence of their directors that serve on those committees.

Community Reinvestment Act: Under the Community Reinvestment Act (“CRA”), as amended as implemented by FDIC regulations, a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA does require the FDIC, in connection with its examination of a bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions. The CRA requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. United Bank’s latest FDIC CRA rating was “Satisfactory.”

Connecticut has its own statutory counterpart to the CRA which is also applicable to United Bank. The Connecticut version is generally similar to the CRA but utilizes a five-tiered descriptive rating system. Connecticut law requires the Commissioner to consider, but not be limited to, a bank’s record of performance under Connecticut law in considering any application by the bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution. United Bank’s most recent rating under Connecticut law was “Satisfactory.”

Consumer Protection And Fair Lending Regulations: The Company is subject to a variety of federal and Connecticut statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit. These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief. Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations.

The USA Patriot Act: On October 26, 2001, the USA PATRIOT Act was enacted. The Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The Act also requires the federal banking regulators to take into consideration the effectiveness of controls designed to combat money-laundering activities in determining whether to approve a merger or other acquisition application of an FDIC-insured institution. As such, if the Company or the Bank were to engage in a merger or other acquisition, the effectiveness of its anti-money-laundering controls would be considered as part of the application process. The Company has established policies, procedures and systems to comply with the applicable requirements of the law. The Patriot Act was reauthorized and modified with the enactment of the USA Patriot Improvement and Reauthorization Act of 2005.

Federal Securities Laws

United Financial Bancorp, Inc.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 and is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Based on the foregoing, it is anticipated that the resource allocation burdens to support Regulatory compliance will need to increase. This will require continued infrastructure build and may negatively impact profitability to a material degree.

TAXATION

Federal

General: The Company is subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. Our tax returns have not been audited in the past five years. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company.

Method of Accounting: For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its consolidated federal income tax returns.

Bad Debt Reserves: Prior to the Small Business Protection Act of 1996 (the “1996 Act”), United Financial Bancorp, Inc.’s subsidiary, United Bank was permitted to establish a reserve for bad debts and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at our taxable income. As a result of the 1996 Act, United Bank was required to use the specific charge-off method in computing its bad debt deduction beginning with its 1996 federal tax return. Savings institutions were required to recapture any excess reserves over those established as of December 31, 1987 (base year reserve). At December 31, 2014 , the subsidiary had no reserves subject to recapture in excess of its base year.

Taxable Distributions and Recapture: Bad debt reserves created prior to January 1, 1988 are subject to recapture into taxable income should the Bank fail to meet certain asset and definitional tests.

Alternative Minimum Tax: The Internal Revenue Code of 1986, as amended (the “Code”), imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (alternative minimum taxable income or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain AMT payments may be used as credits against regular tax liabilities in future years.

Net Operating Loss Carryovers: A corporation may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2014 , United Financial Bancorp, Inc. had net operating loss carryforwards of $594,000 for federal income tax purposes, which will begin to expire in 2023.

Corporate Dividends-Received Deduction: The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. The corporate dividends received deduction is 80.0% in the case of dividends received from corporations with which a corporate recipient does not file a consolidated tax return, and corporations which own less than 20.0% of the stock of a corporation distributing a dividend may deduct only 70.0% of dividends received or accrued on their behalf.

State

The Company reports income on a calendar year basis to the State of Connecticut and Massachusetts. Generally, the income of financial institutions in Connecticut, which is calculated based on federal taxable income subject to certain adjustments, is subject to Connecticut tax. The Company and the Bank are currently subject to the corporate business tax at 7.5% of taxable income, subject to a 20% surcharge in 2014.

In 1998, the State of Connecticut enacted legislation permitting the formation of passive investment companies by financial institutions. This legislation exempts qualifying passive investment companies from the Connecticut corporation business tax and excludes dividends paid from a passive investment company from the taxable income of the parent financial institution. United Bank established a passive investment company, United Bank Mortgage Company, in December 1998.

The Company believes it is in compliance with the state PIC requirements and that no Connecticut taxes are due from December 31, 1998 through December 31, 2014 ; however, the Company has not been audited by the Department of Revenue

Services for such periods. If the state were to determine that the PIC was not in compliance with statutory requirements, a material amount of taxes could be due. The State of Connecticut continues to be under pressure to find new sources of revenue, and therefore could enact legislation to eliminate the passive investment company exemption. If such legislation were enacted, United Financial Bancorp, Inc. would be subject to state income taxes in Connecticut.

The Company also reports income on a calendar year basis to Massachusetts. Generally, Massachusetts imposes a tax of 9.0% on income taxable for in Massachusetts although Massachusetts Security Corporations are taxed at 1.32%. Massachusetts taxable income is based on federal taxable income after modifications pursuant to state tax law.

The Company and the Bank are not currently under audit with respect to their income tax returns, and their state tax returns have not been audited for the past five years.

The Company also pays taxes in certain other states due to increased loan activity, and these taxes were immaterial to the Company’s results.

Securities and Exchange Commission Availability of Filings

United Financial Bancorp, Inc.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (“Exchange Act”) and is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act. Under Sections 13 and 15(d) of the Exchange Act, periodic and current reports must be filed or furnished with the SEC. You may read and copy any reports, statements or other information filed by United Financial Bancorp, Inc. with the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. United’s filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov. In addition, United makes available free of charge on its Investor Relations website (unitedfinancialinc.com) its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

Item 1A. Risk Factors

You should consider carefully the following risk factors in evaluating an investment in shares of our common stock. An investment in our common stock is subject to risks inherent in our business. Before making an investment decision, you should carefully consider the risks and uncertainties described below.

Risks Related to Our Business

We are subject to lending risk and could incur losses in our loan portfolio despite our underwriting practices.

United Bank originates commercial business loans, commercial real estate loans, consumer loans, and residential mortgage loans primarily within its market area. Commercial business loans, commercial real estate loans, and consumer loans may expose a lender to greater credit risk than loans secured by residential real estate in the current economic environment. In addition, commercial real estate and commercial business loans may also involve relatively large loan balances to individual borrowers or groups of borrowers. These loans also have a greater credit risk than residential real estate for the following reasons:


•	Commercial Business Loans. Repayment is generally dependent upon the successful operation of the borrower’s business.


•	Commercial Real Estate Loans. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.


•	Consumer Loans . Consumer loans are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage or loss.

While improving, the economic recovery has been slow with continued stagnation in the real estate market and local economy, which continues to adversely affect the value of the properties securing the loans or revenues from borrowers’ businesses, thereby increasing the risk of potential increases in non-performing loans. The decreases in real estate values have adversely affected the value of property used as collateral for our commercial and residential real estate loans. The stagnation in the economy and slow economic recovery may also have a negative effect on the ability of our commercial borrowers to make timely repayments of their loans, which could have an adverse impact on our earnings. If poor economic conditions continue to result in decreased demand for quality loans, our profits may decrease because our alternative investments may earn less income than loans. This market uncertainty may lead to a widespread reduction in general business activity. The resulting economic pressure brought to bear on consumers may adversely affect our business, financial condition, and results of operations.

All of these factors could have a material adverse effect on our financial condition and results of operations. See further discussion on the commercial loan portfolio in “Lending Activities” within “Item 7 -Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Annual Report on Form 10-K.

If United Bank’s allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. Previous declines in real estate values continue to impact the collateral values that secure our real estate loans. The impact of these declines on the original appraised values of secured collateral can be difficult to estimate. In determining the amount of the allowance for loan losses, we review our loss and delinquency experience on different loan categories, and we evaluate existing economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance, which would decrease our net income. Our allowance for loan losses amounted to 0.64% of total loans outstanding and 76.67% of non-performing loans at December 31, 2014 . Although we are unaware of any specific problems with our loan portfolio that would require any increase in our allowance at the present time, it may need to be increased further in the future, due to our emphasis on loan growth and on increasing our portfolio of commercial business and commercial real estate loans.

In addition, banking regulators and other outside third parties, periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs based on a myriad of factors and assumptions. Any increase in the allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our results of operations and financial condition.

Concentration of loans in our primary market area may increase risk

Our success is impacted by the general economic conditions in the geographic areas in which we operate, primarily Connecticut, and Central and Western Massachusetts. Accordingly, the local economic conditions in these markets have a significant impact on the ability of borrowers to repay loans. As such, a decline in real estate valuations in these markets would lower the value of the collateral securing those loans. In addition, a significant weakening in general economic conditions such as inflation, recession, unemployment, or other factors beyond our control could reduce our ability to generate new loans and increase default rates on those loans and otherwise negatively affect our financial results.

Future changes in interest rates may reduce our profits which could have a negative impact on the value of our stock.

Our ability to consistently make a profit from core operations largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between the interest income United Bank earns on its interest-earning assets, such as loans and securities, and the interest expense United Bank pays on its interest-bearing liabilities, such as deposits and borrowings. Increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. In addition, as market interest rates rise, we will have competitive pressures to increase the rates paid on deposits, which may result in a decrease in our net interest income.

In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A reduction in interest rates may result in increased prepayments of loans and mortgage-backed and related securities, as borrowers refinance their debt in order to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates earned on the prepaid loans or securities. Generally, the value of our investment securities fluctuates inversely with changes in interest rates. The result of any decreases in the fair value of our securities available for sale could then have an adverse affect on our stockholder’s equity or earnings if these devaluations are deemed permanent.

Continued or further declines in the value of certain investment securities could require write-downs, which would reduce our earnings.

The gross unrealized losses within our investment securities portfolio are due in part to an increase in credit spreads. We have concluded these unrealized losses are temporary in nature since they are not related to the underlying credit quality of the issuers or underlying assets, and we have the intent and ability to hold these investments for a time necessary to recover our cost at stated maturity (at which time, full payment is expected). However, a continued decline in the value of these securities due to deterioration in the underlying credit quality of the issuers or underlying assets or other factors could result in an other-than-temporary impairment write-down which would reduce our earnings.

The market price and trading volume of our common stock may be volatile.

The level of interest and trading in the Company’s stock depends on many factors beyond our control. The market price of our common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following: actual or anticipated fluctuations in operating results; changes in interest rates; changes in the legal or regulatory environment; press releases, announcements or publicity relating to the Company or its competitors or relating to trends in its industry; changes in expectations as to future financial performance, including financial estimates or recommendations by securities analysts and investors; future sales of our common stock; changes in economic conditions in our marketplace, general conditions in the U.S. economy, financial markets or the banking industry; and other developments affecting our competitors or us. These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance, and could prevent stockholders from selling their common stock at a desirable price.

In the past, stockholders have brought securities class action litigation against a company following periods of volatility in the market price of their securities. We could be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

Our success depends on our key personnel, including our executive officers, and the loss of key personnel could disrupt our business.

Our success depends on our ability to recruit and retain highly-skilled personnel. Competition for the very best people from our industry makes the hiring decision process complicated. Our ability to find seasoned individuals with specialized skill sets that match our needs, could prove difficult. The unexpected loss of services of one or more of the Company’s key personnel could have a material adverse impact on the business because we would lose the employee’s skills, knowledge of the market and years of industry experience and may have difficulty finding qualified replacement personnel.

United has opened new branches and expects to open additional new branches and loan production offices which may incur losses during their initial years of operation as they generate new deposit and loan portfolios.

The Company opened two new branch offices and three loan production offices in 2014. United intends to continue to explore opportunities to expand and eliminate non-strategic branches to better posture the Company to achieve greater operational efficiencies going forward. Losses are expected in connection with these new branches for some time, as the expenses associated with them are largely fixed and are typically greater than the income earned at the outset as the branches build up their customer bases.

Strong competition within United’s market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense and increasing. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater resources and lending limits than we have, and offer certain services that we do not or cannot provide. Our profitability depends upon our continued ability to compete successfully in our market area. The greater resources and deposit and loan products offered by our competitors may limit our ability to increase our interest-earning assets.

The Company continues to encounter technological change. Failure to understand and keep current on technological change could adversely affect our business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company provides product and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations.

Our controls and procedures may fail or be circumvented, which may result in a material adverse effect on our business.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to fraud in many aspects of the services and products that we provide.

We offer debit cards and credit cards to our banking customers and plan to expand our online banking and online account opening capabilities in 2015. Historically, we have experienced operational losses from fraud committed by third parties that steal credentials from our customers or merchants utilized by our customers. We have little ability to manage how merchants or our banking customers protect the credentials that our customers have to transact with us. When customers and merchants do not adequately protect customer account credentials, our risks and potential costs increase. As (a) our sales of these services and products expand, (b) those who are committing fraud become more sophisticated and more determined, and (c) our banking services and product offerings expand, our operational losses could increase.

Our information systems may experience an interruption or security breach.

We rely heavily on communications and information systems to conduct our business. Any failure or interruption of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the possible failure or interruption of our information systems, there can be no assurance that any such failure or interruption will not occur or, if they do occur, that they will be adequately addressed. A breach in security of our systems, including a breach resulting from our newer online capabilities such as mobile banking, increases the potential for fraud losses. The occurrence of any failure, interruption or security breach of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability.

We rely on third-party relationships to conduct our business, which subjects us to strategic, reputation, compliance and transaction (operational) risk.

We rely on third party service providers to leverage subject matter expertise and industry best practice, provide enhanced products and services, and reduce costs. Although there are benefits in entering into third party relationships with vendors, there are risks associated with such activities. When entering a third party relationship, the risks associated with that activity are not passed to the third party but remain our responsibility. Management and the Board of Directors are ultimately responsible for the activities conducted by vendors. To that end, Management is accountable for the review and evaluation of all new and existing vendor relationships. Management is responsible for ensuring that adequate controls are in place at United and our vendors to protect the bank and its customers from the risks associated with vendor relationships.

Increased risk most often arises from poor planning, oversight, and control on the part of the bank and inferior performance or service on the part of the third party, and may result in legal costs or loss of business. While we have implemented a vendor management program to actively manage the risks associated with the use of third party service providers, any problems caused by third party service providers could adversely affect our ability to deliver products and services to our customers and to conduct our business. Replacing third party vendors could also take a long period of time and result in increased expenses.

United faces cybersecurity risks, including “denial of service attacks,” “hacking” and “identity theft” that could result in the disclosure of confidential information, adversely affect United’s business or reputation and create significant legal and financial exposure.

United’s computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and United may not be able to anticipate or prevent all such attacks. United may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss. Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened and as a result the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for us. As an additional layer of protection, we have purchased network and privacy liability risk insurance coverage which includes digital asset loss, business interruption loss, network security liability, privacy liability, network extortion and data breach coverage.

Despite efforts to ensure the integrity of its systems, United will not be able to anticipate all security breaches of these types, and United may not be able to implement effective preventive measures against such security breaches. The techniques used by cyber criminals change frequently and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. Those parties may also attempt to fraudulently induce employees, customers or other users of United’s systems to disclose sensitive information in order to gain access to its data or that of its clients. These risks may increase in the future as the Company continues to increase its mobile-payment and other internet-based product offerings and expands its internal usage of web-based products and applications.

A successful penetration or circumvention of system security could cause serious negative consequences to United, including significant disruption of operations, misappropriation of confidential information of United or that of its customers, or damage to computers or systems of the Company or those of its customers and counterparties. A security breach could result in violations of applicable privacy and other laws, financial loss to United or to its customers, loss of confidence in United’s security measures, significant litigation exposure, and harm to United’s reputation, all of which could have a material adverse effect on the Company.

Mortgage banking income may experience significant volatility.

Mortgage banking income is highly influenced by the level and direction of mortgage interest rates which may influence secondary market spreads, and real estate and refinancing activity. In lower interest rate environments, the demand for mortgage loans and refinancing activity will tend to increase. This has the effect of increasing fee income, but could adversely impact the estimated fair value of our mortgage servicing rights as the rate of loan prepayments increase. In higher interest rate

environments, the demand for refinancing activity will generally be lower, and our inability to capture purchase mortgage market share may have the effect of decreasing fee income.

If the goodwill that the Company has recorded in connection with its mergers and acquisitions becomes impaired, it could have a negative impact on the Company’s profitability.

Applicable accounting standards require that the acquisition method of accounting be used for all business combinations. Under acquisition accounting, if the purchase price of an acquired company exceeds the fair value of the company’s net assets, the excess is carried on the acquirer’s balance sheet as goodwill. At December 31, 2014 , the Company had approximately $115.2 million of goodwill on its balance sheet reflecting the merger with Legacy United. Companies must evaluate goodwill for impairment at least annually. Write-downs of the amount of any impairment, if necessary, are to be charged to the results of operations in the period in which the impairment occurs. There can be no assurance that future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on United’s financial condition and results of operations.

Our ability to make opportunistic acquisitions is subject to significant risks, including the risk that regulators will not provide the requisite approvals.

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further our business strategy, including through participation in FDIC-assisted acquisitions or assumption of deposits from troubled institutions. Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all. Even if we obtain regulatory approval, these acquisitions could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, difficulties and costs associated with consolidation and streamlining inefficiencies, diversion of management’s attention from other business activities, changes in relationships with customers, and the potential loss of key employees. In addition, we may not be successful in identifying acquisition candidates, integrating acquired institutions, or preventing deposit erosion or loan quality deterioration at acquired institutions. Competition for acquisitions can be highly competitive, and we may not be able to acquire other institutions on attractive terms. There can be no assurance that we will be successful in completing or will even pursue future acquisitions, or if such transactions are completed, that we will be successful in integrating acquired businesses into operations. Our ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

A large portion of our loan portfolio is acquired and was not underwritten by us at origination.

At December 31, 2014, 42.3% of our loan portfolio was acquired and was not underwritten by us at origination, and therefore is not necessarily reflective of our historical credit risk experience. We performed extensive credit due diligence prior to each acquisition and marked the loans to fair value upon acquisition, with such fair valuation considering expected credit losses that existed at the time of acquisition. Additionally, we evaluate the expected cash flows of these loans on a quarterly basis. However, there is a risk that credit losses could be larger than currently anticipated, thus adversely affecting our earnings.

Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business.

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. In addition, such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We are exposed to risk of environmental liability when we take title to property.

In the course of our business, we may foreclose on and take title to real estate. As a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we become subject to significant environmental liabilities, our business, financial condition or results of operations could be adversely affected.

Risks Related to the Financial Services Industry

Our financial performance may be adversely affected by conditions in the financial markets and economic conditions generally.

Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, is highly dependent upon the business environment in the markets where we operate and in the United States as a whole. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, natural disasters or a combination of these or other factors.

Since mid-2007, market conditions have led to the failure or merger of a number of prominent financial institutions. Financial institution failures or near-failures have resulted in further losses as a consequence of defaults on securities issued by them and defaults under contracts entered into with such entities as counterparties. Despite recent stabilization in market conditions, there remains a risk of continued asset and economic deterioration, which may increase the cost and decrease the availability of liquidity.

There can be no assurance that national market and economic conditions will improve in the near term. Such conditions could adversely affect the credit quality of our loans, our results of operations and our financial condition.

Passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act will increase our operational and compliance costs.

On July 21, 2010, the President of the United States signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). This new law has significantly changed the current bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the rules and regulations. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation processes for most all of the financial services industry. Included in the many new safeguards are increases in capital standards, imposes clearing and margining requirements on derivative activities, and increases in general oversight authority. Specific to holding companies, it increases minimum leverage and risk-based capital requirements and phases out the ability to include certain securities Tier I capital.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau (“CFPB”) with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets. United Bank, as a bank with $10 billion or less in assets, will continue to be examined for compliance with the consumer laws by our primary bank regulators. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws. Various parts of this legislation have yet to be implemented, and therefore we cannot be certain when final rules affecting us will be issued or to gauge their potential impacts. When issued, they could have material and adverse impact on our operations; both from an increase in resource allocation for compliance as well as requiring a potential change to our business strategies. Also contained within the Dodd-Frank Act are provisions under the Volker Rule which restrict the ability to engage in certain trading and investing activities regarding collateralized loan obligations and corporate debt obligation securities. As such, we may have to divest such investments and incur yet to be determined financial impacts on our portfolios and operations.

A provision of the Dodd-Frank Act, which became effective one year after enactment, eliminated the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest-bearing checking accounts. Depending on competitive responses, this significant change to existing law will have an adverse impact on our interest expense.

The Dodd-Frank Act also broadens the base for FDIC deposit insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution, rather than deposits. The legislation also increases the required minimum reserve ratio for the Deposit Insurance Fund, from 1.15% to 1.35% and this ratio is currently being maintained of insured deposits, and directs the FDIC to offset the effects of increased assessments on depository

institutions with less than $10 billion in assets. We are generally unable to control or make advanced provision for premiums that we may be required to pay for FDIC insurance. Additional bank failures both on a local and regional level may require further increases to be absorbed by financial institutions with little advanced warning. These increase, when realized, will have a negative affect on earnings.

The Dodd-Frank Act requires publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and by authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

We operate in a highly regulated environment and our business may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by the Connecticut Banking Commissioner, as United Bank’s chartering authority, by the FDIC, as insurer of deposits, and by the Federal Reserve Board as the regulator of United Financial Bancorp, Inc. Such regulation and supervision govern the activities in which a financial institution and its holding company may engage and are intended primarily for the protection of the insurance fund and depositors. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, and their interpretations may result with including the imposition of restrictions on the operation of an institution, the classification of assets by the institution, and the adequacy of an institution’s allowance for loan losses. Inadvertent failure to comply with laws, regulations or policies could result in sanctions by the various agencies, civil money penalties and resultant reputational damage and this impact cannot be quantified.

Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, may have a material impact on our operations.

Item 1B . Unresolved Staff Comments

None.

Item 2 . Properties

At December 31, 2014 , the Company, headquartered in Glastonbury, Connecticut, conducted business throughout Connecticut, Western Massachusetts and the Worcester Massachusetts area as well as two loan production offices in the counties of Essex and Barnstable Massachusetts. The Company has 56 banking offices and 67 ATMs as well as seven loan production offices and is opening another loan production office in New Haven county in 2015. Of the 56 banking offices 12 are owned and 44 are leased. Branch lease expiration dates range from three years to twenty four years with renewal options of five to twenty years.

All existing Company properties are suitable for our business operations and currently meet the Company’s physical needs.

In addition to the increased number of branches added in 2014 from the Merger, the Company opened de novo branches in New Haven and Hartford counties and plans to open a de novo branch the second half of 2015 in Glastonbury, Connecticut, also in Hartford county. The Company also opened loan production offices in Sagamore Beach, Massachusetts and Fairfield, Connecticut in August 2014 and February 2014, respectively.

The aggregate net book value of premises and equipment was $57.7 million at December 31, 2014 .

For additional information regarding the Company’s Premises and Equipment, Net and Commitments and Contingencies, see Notes 7 and 20 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

In the ordinary course of business, we are involved in various threatened and pending legal proceedings. We believe that we are not a party to any pending legal, arbitration, or regulatory proceedings that would have a material adverse impact on our financial results or liquidity.

Item 4 . Mine Safety Disclosures

None.

Part II

Item 5 . Market For The Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .

Market Information

The Company’s Common Stock trades on the NASDAQ Global Select Stock Market under the symbol “UBNK.”

On February 27, 2015 , the intra-day high and low prices per share of common stock were $12.49 and $12.21, respectively.

The following table sets forth for each quarter of 2014 and 2013 the intra-day high and low prices per share and the dividends declared per share of common stock as reported by NASDAQ Global Select Stock Market.



	Common Stock Per Share
	Market Price				Dividends Declared
	High		Low		Dividends Declared
2014:
First Quarter	$	14.63	$	12.56	$	0.10
Second Quarter	14.31		12.21		0.10
Third Quarter	13.91		12.01		0.10
Fourth Quarter	14.67		12.66		0.10
2013:
First Quarter	$	13.26	$	12.53	$	0.10
Second Quarter	13.54		12.27		0.10
Third Quarter	13.50		12.83		0.10
Fourth Quarter	15.42		12.68		0.10

United had 7,652 holders of record of common stock and 49,268,396 shares outstanding on February 27, 2015 . The number of shareholders of record was determined by Broadridge Corporate Issuer Solutions, the Company’s transfer agent and registrar. Shareholders of record include closely held affiliates, which held approximately 3.5 million shares as of December 31, 2014 .

Such number of record holders does not reflect the number of persons or entities holding stock in nominee or “street” name through banks, brokerage firms, and other nominees.

Dividends

The Company began paying quarterly dividends in 2006 on its common stock and paid its 35 ^th consecutive dividend on February 17, 2015. In addition, the Company paid a special dividend of $0.16 per share in December 2012. The Company intends to continue to pay regular cash dividends to common stockholders; however, there can be no assurance as to future dividends because they are dependent on the Company’s future earnings, capital requirements, financial condition, and regulatory limitations. Dividends from the Bank have been a source of cash used by the Company to pay its dividends, and these dividends from the Bank are dependent on the Bank’s future earnings, capital requirements, and financial condition. The Bank paid the Company $13.3 million in dividends during the year ended December 31, 2014 .

See the section captioned “Supervision and Regulation” in Item 1 of this report and Note 17, “Regulatory Matters,” in the Consolidated Financial Statements for further information.

Recent Sale of Registered Securities; Use of Proceeds from Registered Securities

No registered securities were sold by United during the year ended December 31, 2014 .

Recent Sale of Unregistered Securities

No unregistered securities were sold by United during the year ended December 31, 2014 .

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information with respect to any purchases of shares of United common stock made by or on behalf of United or any affiliated purchaser for the quarter ended December 31, 2014 .



Period	Total Number of Shares Purchased	Average(1) Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
October 1 – 31, 2014	1,575,916	$	13.40	3,037,702	2,258,607
November 1 – 30, 2014	257,233	14.01		3,294,935	2,001,374
December 1 – 31, 2014	1,369,280	14.03		4,664,215	632,094
Total	3,202,429	$	13.71	4,664,215	632,094


(1)	Includes dealer commission expense to purchase the securities.

On March 2, 2012, the Company authorized the purchase of up to 2,951,250 shares, or 10% of the then outstanding stock, from time to time, subject to certain conditions. The Company completed this repurchase plan on May 20, 2013 at an average price of $13.17.

On May 17, 2013, the Company authorized a new stock repurchase program pursuant to which the Company may purchase up to 2,730,026 shares, or 10% of the then outstanding stock, from time to time, subject to market conditions. As of October 28, 2014, the Company had repurchased all of the shares authorized under this plan.

In October 2014, the Company announced that it has adopted a third share repurchase program which commenced upon the completion of the second authorization. The third repurchase program allows for the purchase of an additional 2,566,283 shares, or approximately 5% of outstanding shares. The Company has no intentions at this time to terminate this plan. As of December 31, 2014 , there were 632,094 maximum shares that may yet be purchased under this publicly announced plan.

Performance Graph:

The following graph compares the cumulative total return on the common stock for the period beginning December 31, 2009, through December 31, 2014 , with (i) the cumulative total return on the S&P 500 Index and (ii) the cumulative total return on the KBW Regional Banking Index (Ticker: KRX) for that period. The KBW Regional Banking Index (KRX) is an index consisting of 50 regional banks across the United States. This index is considered to be a good representation due to its equal weighting and diverse geographical exposure of the banking sector.

This graph assumes the investment of $100 on December 31, 2009 in our common stock. The graph assumes all dividends on UBNK stock, the S&P 500 Index and the KRX are reinvested.



	12/31/2009	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014
S&P 500 Total Return Index	100.0	115.1	117.5	136.3	180.4	205.1
KRX Total Return Index	100.0	120.4	114.2	129.3	189.9	194.6
UBNK	100.0	118.8	156.6	203.3	230.7	240.1

Item 6 . Selected Financial Data

Selected financial data for each of the years in the five-year period ended December 31, 2014 are set forth below. This information should be read in conjunction with the Consolidated Financial Statements and related Notes, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. On April 30, 2014, the Company acquired 100% of the outstanding common shares and completed its merger with Legacy United, adding $2.40 billion in assets, $2.16 billion in liabilities and $356.4 million in equity.



	At December 31,
	2014		2013		2012		2011		2010
(In thousands)
Selected Financial Condition Data:
Total assets	$	5,476,809	$	2,301,615	$	1,998,799	$	1,749,872	$	1,678,073
Available for sale securities	1,053,011		404,903		241,389		151,237		125,447
Held to maturity securities	15,368		13,830		6,084		9,506		13,679
Federal Home Loan Bank stock	31,950		15,053		15,867		17,007		17,007
Loans receivable, net	3,877,063		1,697,012		1,586,985		1,457,398		1,410,498
Cash and cash equivalents	86,952		45,235		35,315		40,985		60,708
Deposits	4,035,311		1,735,205		1,504,680		1,326,766		1,219,260
Mortgagors’ and investors’ escrow accounts	13,004		6,342		6,776		5,852		6,131
Advances from the Federal Home Loan Bank and other borrowings	777,314		240,228		143,106		65,882		261,423
Total stockholders’ equity	602,408		299,382		320,611		333,471		166,428
Allowance for loan losses	24,809		19,183		18,477		16,025		14,312
Non-performing loans(1)	32,358		13,654		16,056		12,610		12,360


(1)	Non-performing loans include loans for which the Bank does not accrue interest (non-accrual loans).



	For the Years Ended December 31,
(Dollars in thousands, except per share amounts)	2014			2013		2012(2)		2011		2010(1)
Selected Operating Data:
Interest and dividend income	$	155,879		$	77,517	$	77,952	$	75,580	$	75,699
Interest expense	18,007			10,460		10,944		17,471		22,161
Net interest income	137,872			67,057		67,008		58,109		53,538
Provision for loan losses	9,496			2,046		3,587		3,021		4,109
Net interest income after provision for loan losses	128,376			65,011		63,421		55,088		49,429
Non-interest income	16,605			17,051		14,707		14,759		9,404
Non-interest expense(3)	144,432			62,466		55,696		59,016		39,850
Income before income taxes	549			19,596		22,432		10,831		18,983
Income tax expense (benefit)	(6,233		)	5,369		6,635		3,739		6,732
Net income	$	6,782		$	14,227	$	15,797	$	7,092	$	12,251
Earnings per share:
Basic	$	0.16		$	0.55	$	0.57	$	0.25	$	0.44
Diluted	$	0.16		$	0.54	$	0.56	$	0.25	$	0.44
Dividends per share	$	0.40		$	0.40	$	0.52	$	0.27	$	0.25


(1)	Earnings and dividends per share data related to the year ended prior to the date of completion of the conversion (March 3, 2011) have been restated to give retroactive recognition to the exchange ratio applied in the conversion (1.5167).


(2)	Dividends per share included a $0.16 special dividend in the fourth quarter 2012.


(3)	Included in non-interest expense for 2014 and 2013 was merger and acquisition expense of $36.9 million and $2.1 million, respectively.



	At or For the Years Ended December 31,
	2014			2013			2012			2011			2010
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets	0.16		%	0.67		%	0.84		%	0.39		%	0.76		%
Return on average equity	1.28			4.67			4.83			2.30			7.48
Tax-equivalent net interest rate spread(1)	3.43			3.22			3.61			3.04			3.19
Tax-equivalent net interest margin(2)	3.54			3.37			3.81			3.40			3.49
Non-interest expense to average assets	3.37			2.93			2.94			3.28			2.48
Efficiency ratio(3)	91.01			74.27			68.16			80.99			63.31
Average interest-earning assets to average interest-bearing liabilities	123.60			129.37			133.85			134.88			120.68
Dividend payout ratio	265.51			73.47			91.00			99.13			37.01
Capital Ratios:
Capital to total assets at end of year	11.00			13.01			16.04			19.06			9.92
Average capital to average assets	12.37			14.28			17.30			17.12			10.21
Total capital to risk-weighted assets	12.55			17.68			21.86			25.43			13.73
Tier I capital to risk-weighted assets	11.89			16.58			20.64			24.26			12.62
Tier I capital to total average assets	9.10			13.47			16.51			19.51			10.39
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans	0.64			1.12			1.15			1.09			1.00
Allowance for loan losses as a percent of non-performing loans	76.67			140.50			115.08			127.08			115.79
Net charge-offs to average outstanding loans during the period	0.12			0.08			0.07			0.09			0.17
Non-performing loans as a percent of total loans	0.83			0.80			1.00			0.86			0.87
Non-performing loans as a percent of total assets	0.59			0.59			0.80			0.72			0.80
Other Data:
Book value per share	$	12.16		$	11.53		$	11.39		$	11.30		$	8.82
Tangible book value per share	$	9.65		$	11.49		$	11.35		$	11.26		$	8.76
Number of full service offices	53			19			18			18			18
Number of limited service offices	3			3			5			4			4


(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 non-interest expense divided by the sum of net interest income and non-interest income, excluding net gain or loss on limited partnerships. The ratio for 2014 and 2013 includes $36.9 million and $2.1 million, respectively, in merger and acquisition expense.

Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand United Financial Bancorp, Inc., our operations and our present business environment. We believe accuracy, transparency and clarity are the primary goals of successful financial reporting. We remain committed to transparency in our financial reporting, providing our stockholders with informative financial disclosures and presenting an accurate view of our financial disclosures, financial position and operating results.

MD&A is provided as a supplement to — and should be read in conjunction with — our Consolidated Financial Statements and the accompanying Notes thereto contained in Part II, Item 8, Financial Statements and Supplementary Data of this report. The following sections are included in MD&A:


•	Our Business — a general description of our business, our objectives and the challenges and risks of our business.


•	Critical Accounting Estimates — a discussion of accounting estimates that require critical judgments and estimates.


•	Operating Results — an analysis of our Company’s consolidated results of operations for the periods presented in our Consolidated Financial Statements.


•	Financial Condition, Liquidity and Capital Resources — an overview of financial condition and market and interest rate risk.

Our Business

Merger with Legacy United

On April 30, 2014, Rockville Financial, Inc. completed its merger with Legacy United. In connection with the merger, Rockville Financial, Inc. completed the following corporate actions:


•	Legacy United merged with and into Rockville Financial, Inc., which was the accounting acquirer and the surviving entity.


•	Rockville Financial, Inc. changed its legal entity name to United Financial Bancorp, Inc.


•	The Company’s common stock began trading on the NASDAQ Global Select Stock Exchange under the symbol “UBNK” upon consummation of the merger.


•	United Bank merged into Rockville Bank.


•	Rockville Bank changed its legal entity name to United Bank.

We refer to the transactions detailed above collectively as the “Merger”.

The Merger was a stock-for-stock transaction valued at $356.4 million based on the closing price of Rockville Financial, Inc. common stock on April 30, 2014. Under the terms of the Merger, each share of Legacy United was converted into the right to receive 1.3472 shares of Rockville Financial, Inc. common stock.

As of April 30, 2014, Legacy United had total assets of $2.44 billion, total net loans of $1.88 billion, total deposits of $1.94 billion and equity of $304.5 million. As part of the Merger the Company issued 26.7 million shares of common stock and recorded goodwill of $114.2 million and identifiable intangible assets of $10.6 million.

The Merger had a significant impact by more than doubling the assets and deposits of the former Rockville Financial, Inc., expanding the branch network and by entering into new markets – Western and Central Massachusetts as well as expanding our presence in Central Connecticut.

The Board of Directors of Rockville and Legacy United entered into the Merger after considering a number of factors, including, among others, the following:


•	The Board’s knowledge of the current and prospective environment in which Rockville and Legacy United operates;


•	The Board’s conclusion that the combined entity will have superior future earnings and prospects compared to the earnings and prospects of Rockville and Legacy United on a stand-alone basis; and


•	The Board’s view that the merger will allow for enhanced opportunities for the clients and customers of a combined entity.

Further information about the Merger can be found in Note 3 in the Notes to Consolidated Financial Statements located under Part II, Item 8, Financial Statements and Supplementary Data.

General

By assets, United Financial Bancorp, Inc. is the third largest publicly traded banking institution headquartered in Connecticut with consolidated assets of $ 5.48 billion and stockholders’ equity of $ 602.4 million at December 31, 2014 . United’s business philosophy is to operate as a community bank with local decision-making authority. The Company delivers

financial services to individuals, families, businesses and municipalities throughout Connecticut and Western and Central Massachusetts and the region through its 56 banking offices, its commercial loan and mortgage loan production offices, 69 ATMs, telephone banking, mobile banking and internet website ( www.bankatunited.com ).

The Company strives to remain a leader in meeting the financial service needs of the community and to provide superior customer service to the individuals and businesses in the market areas that it has served since 1858. United Bank is a community-oriented provider of traditional banking products and services to business organizations and individuals, offering products such as residential and commercial real estate loans, commercial business loans, consumer loans and a variety of deposit products. Our business philosophy is to remain a community-oriented franchise and continue to focus on providing superior customer service to meet the financial needs of the communities in which we operate. Current strategies include (1) continuing our residential mortgage lending activities; continuing to expand our commercial real estate and commercial business lending activities; and growing our deposit base (2) increasing the non-interest income component of total revenues through development of banking-related fee income and the sale of insurance and investment products (3) continuing to improve operating efficiencies and (4) expanding our banking network by pursuing new branch locations and making opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time.

The Company’s results of operations depend primarily on net interest income, which is the difference between the income earned on its loan and securities portfolios and its cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by the Company’s provision for loan losses, non-interest income and non-interest expense. Non-interest income primarily consists of fee income from depositors, gain on sale of loans, mortgage servicing income and loan sale income and increases in cash surrender value of bank-owned life insurance (“BOLI”). Non-interest expense consists principally of salaries and employee benefits, occupancy, service bureau fees, marketing, professional fees, FDIC insurance assessments, other real estate owned and other operating expenses. During 2014 non-interest expense was also significantly effected by merger and acquisition expenses.

Results of operations are also significantly affected by general economic and competitive conditions and changes in interest rates as well as government policies and actions of regulatory authorities. Future changes in applicable laws, regulations or government policies may materially affect the Company. Uncertainty and challenges surrounding future economic growth, consumer confidence, credit availability, competition and corporate earnings remain.

Our Objectives

The Company seeks to grow organically and through strategic mergers/acquisitions as well as to continually deliver superior value to its customers, stockholders, employees and communities through achievement of its core operating objectives which are to:


•	Expand our market area to increase core deposit relationships with a focus on checking, savings and money market accounts for personal, business and municipal depositors;


•	Build high quality, profitable loan portfolios using primarily organic growth and also purchase strategies, while also continuing to build efficiencies in its robust secondary mortgage banking business;


•	Build and diversify revenue streams through development of banking-related fee income; in particular through the expansion of its financial advisory services;


•	Maintain expense discipline and improve operating efficiencies;


•	Invest in technology to enhance superior customer service and products; and


•	Maintain a rigorous risk identification and management process.

Significant factors management reviews to evaluate achievement of the Company’s operating objectives and its operating results and financial condition include, but are not limited to: net income and earnings per share, return on tangible equity and assets, net interest margin, non-interest income, operating expenses related to total average assets and efficiency ratio, asset quality, loan and deposit growth, capital management, liquidity and interest rate sensitivity levels, customer service standards, market share and peer comparisons.

Challenges and Risks

As we look forward, management has identified five key challenges and risks that are likely to present challenges for near term performance:

Net interest income. The growth of net interest income is vital to our continued success and profitability. In 2014 our tax-equivalent net interest margin increased 17 basis points to 3.54% due to the effects of purchase accounting related to the merger. Our operating net interest margin, excluding the effect of purchase accounting, declined 15 basis points in 2014 reflecting the interest rate environment of low rates and the aggressive nature of competitors seeking yield and the effect of new

asset generation in addition to our focus of originating and purchasing variable rate and adjustable rate assets, having lower initial interest rates than fixed rate assets. The adjustable rate assets effected net interest margin, but better positions the Company for a rising interest rate environment. Further compression in the operating margin will depend on the continued origination and purchase of variable rate loans and the impact the interest rate environment has on new origination yields as well as scheduled amortization and prepayment of higher yielding portfolio assets which may drive down the portfolio yield. The Company’s ability to decrease the cost of funding relative to 2014 is diminished, and the cost will likely rise due to the inclusion of $75 million of subordinated debt issued in September 2014 and increased pressure of deposit pricing in our market area.

The risk associated with our deposit pricing strategy is a potential outflow of deposits to competitors in search of higher rates. We will continue to focus on enhancing and developing new products in a cost effective manner and believe that will help mitigate the risk of deposit outflow. We believe that we are well positioned to take advantage of the pricing opportunities in our lending area.

Maintaining credit quality and rigorous risk management. The national economy continued to improve through 2014. United continued to maintain its strong credit quality as delinquencies, non-performing loans and charge-offs generally outperform the average of our peer group. Our ratios of non-performing loans to total loans was 0.83% , total delinquencies to total loans was 1.74% and our allowance for loan losses to total loans was 0.64% at December 31, 2014 . Net loan charge-offs increased to $3.9 million for the year ended December 31, 2014 , an increase from $1.3 million for the year ended December 31, 2013 . We expect to be able to continue to maintain strong asset quality relative to industry levels as we have not historically experienced the severity of problems associated with the housing crisis nationally. Risk management oversight of operations is a critical component of our enterprise risk management framework.

Competition in the marketplace . United faces competition within the financial services industry from some well-established national and local companies. We expect loan and deposit competition to remain vigorous. However, we are poised to take advantage of the continuing industry consolidation in our market and consumers’ willingness to switch financial service providers because of their skepticism of “big banks.” Therefore, we must continue to recruit and retain the best talent, expand our product offerings, expand our market area, improve operating efficiencies and develop and maintain our brand to increase market share to benefit from these opportunities.

Regulatory Considerations . The banking industry continued to be impacted by regulatory changes during 2014 . These regulatory changes were made to ensure the long-term stability in the financial markets. The regulatory changes include rule writing to effect the passage of the Dodd-Frank Act in 2010 and new capital regulations related to Basel III. The financial reform legislation and any implementing rules that are ultimately issued could have adverse implications on the financial industry, the competitive environment, and our ability to conduct business. Management will have to apply additional resources to ensure compliance with all applicable provisions of the Dodd-Frank Act and any implementing rules, which may increase our costs of operations and adversely impact our earnings.

In June 2012, the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation approved three proposals that would amend the existing capital adequacy requirements of banks and bank holding companies. The three proposals would, among other things, implement the Basel III capital standards, as well as the standardized approach for almost all banking organizations in the United States. The proposal would increase the minimum levels of required capital, narrow the definition of capital, and place greater emphasis on common equity. The Basel III standardized proposal would modify the risk weights for various asset classes.

In July 2013, the three Federal bank regulatory agencies (the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation) approved the final Basel III rules that amended the existing capital adequacy requirements of banks and bank holding companies for smaller banks as defined. The new rules became effective for smaller banks and bank holding companies on January 15, 2015. The Company believes it will continue to exceed all expected well-capitalized regulatory requirements upon the implementation of Basel III.

In complying with new regulations, there can be no assurance that the Company will not be impacted in a way we cannot currently predict or mitigate, but we will continue to monitor the regulatory rulings and will work to execute the most beneficial course of action for the Company’s shareholders.

Managing Expansion, Growth, and Future Acquisitions. On April 30, 2014, the Company completed its acquisition of Legacy United and completed the systems conversion in October 2014. The Company plans to continue to grow in the future not only organically, but also through additional acquisitions. We anticipate this growth will expand our brand into new geographic markets as we implement our business model.

The success of this continued expansion depends on our ability to maintain and develop an infrastructure appropriate to support and integrate such growth. Also, our success depends on the acceptance by customers of us and our services in these new markets and, in the case of expansion through acquisitions, our success depends on many factors, including the long-term recruitment and retention of key personnel and acquired customer relationships. The profitability of our expansion strategy also depends on whether the income we generate in the new markets will offset the increased expenses of operating a larger entity with increased personnel, more branch locations and additional product offerings.

All five of these challenges and risks — growing the net interest income, maintaining credit quality and rigorous risk management, competition in the marketplace, regulatory considerations and Managing Expansion, Growth, and Future Acquisitions — have the potential to have a material adverse effect on United; however, we believe the Company is well positioned to appropriately address these challenges and risks.

See also Item 1A, Risk Factors in Part I of this report for additional information about risks and uncertainties facing United.

Critical Accounting Estimates

Our Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles. Our significant accounting policies are discussed in Note 1, of the Notes to Consolidated Financial Statements, and included in Item 8, Financial Statements and Supplementary Data, of this report. Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board.

Allowance For Loan Losses

Critical Estimates

We determined our allowance for loan losses by portfolio segment, which consists of residential real estate for loans collateralized by owner-occupied residential real estate, commercial real estate, construction, commercial business, and installment and collateral loans. We further segregate these portfolios between loans which are accounted for under the amortized cost method (referred to as “covered” loans) and loans acquired (referred to as “acquired” loans), as acquired loans were originally recorded at fair value, which included an estimate of lifetime credit losses, resulting in no carryover of the related allowance for loan losses. An allowance for loan losses on acquired loans is only established to the extent that there is deterioration in a loan exceeding the remaining credit loss established upon acquisition.

Covered loans

We establish our allowance for loan losses through a provision for credit losses. The level of the allowance for loan losses is based on our evaluation of the credit quality of our loan portfolio. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, and other factors that warrant recognition in determining our allowance for loan losses. We continue to monitor and modify the level of our allowance for loan losses to ensure it is adequate to cover losses inherent in our loan portfolio.

For our originated loans, our allowance for loan losses consists of the following elements: (i) valuation allowances based on net historical loan loss experience for similar loans with similar inherent risk characteristics and performance trends, adjusted, as appropriate, for qualitative risk factors specific to respective loan types; and (ii) specific valuation allowances based on probable losses on specifically identified impaired loans.

Impaired loans

For our originated loans, when current information and events indicate that it is probable that we will be unable to collect all amounts of principal and interest due under the original terms of a business, construction or commercial real estate loan greater than $100,000, such loan will be classified as impaired. Additionally, all loans modified in a troubled debt restructuring ("TDR") are considered impaired. The need for specific valuation allowances are determined for impaired loans and recorded as necessary. For impaired loans, we consider the fair value of the underlying collateral, less estimated costs to sell, if the loan is collateral dependent, or we use the present value of estimated future cash flows in determining the estimates of impairment and any related allowance for loan losses for these loans. Confirmed losses are charged off immediately. Prior to a loan becoming impaired, we typically would obtain an appraisal through our internal loan grading process to use as the basis for the fair value of the underlying collateral.

Commercial loan portfolio

We estimate the allowance for our commercial loan portfolio by applying a historic loss rate to loans based on their type and loan grade. This amount is then adjusted, as necessary, for qualitative considerations to reflect changes in underwriting, market or industry conditions, or based on changes in trends in the composition of the portfolio, including risk composition, seasoning, and underlying collateral. Our loan grading system is described in Footnote 6, “Loans Receivable and Allowance for Loan Losses” found in Part II, Item 8 of this report.

Consumer loan portfolio

We estimate the allowance for loan losses for our consumer loan portfolio by estimating the amount of loans that will eventually default based on their current delinquency severity. We then apply a loss rate to the amount of loans that we predict will default based on our historical net loss experience. This amount is then adjusted, as necessary, for qualitative considerations to reflect changes in underwriting, market or industry conditions or based on changes in trends in the composition of the portfolio, including risk composition, seasoning, and underlying collateral. Qualitative considerations include, but are not limited to, the evaluation of trends in property values and unemployment.

Acquired Loans

Acquired impaired loans

For our acquired impaired loans, our allowance for loan losses is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.

Acquired non-impaired loans

We establish our allowance for loan losses through a provision for credit losses based upon an evaluation process that is similar to our evaluation process used for covered loans. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition in determining our allowance for loan losses. To the extent there is deterioration after consideration of the remaining credit loss established at acquisition, an allowance for loan loss is provided to cover potential exposure.

Judgment and Uncertainties

We determine the adequacy of the allowance for loan losses by analyzing and estimating losses inherent in the portfolio. The allowance for loan losses contains uncertainties because the calculation requires management to use historical information as well as current economic data to make judgments on the adequacy of the allowance. As the allowance is affected by changing economic conditions and various external factors, it may impact the portfolio in a way currently unforeseen.

Effect if Actual Results Differ from Assumptions

Adverse changes in management’s assessment of the factors used to determine the allowance for loan losses could lead to additional provisions. Actual loan losses could differ materially from management’s estimates if actual losses and conditions differ significantly from the assumptions utilized. These factors and conditions include general economic conditions within United’s market, industry trends and concentrations, real estate and other collateral values, interest rates and the financial condition of the individual borrower. While management believes that it has established adequate specific and general allowances for probable losses on loans, actual results may prove different and the differences could be significant.

Other-Than-Temporary Impairment of Securities

Critical Estimates

The Company maintains a securities portfolio that is classified into two major categories: available for sale and held to maturity. Securities available for sale are recorded at estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Held to maturity securities are recorded at amortized cost. Management determines the classifications of a security at the time of its purchase.

Quarterly, securities with unrealized losses are reviewed as deemed appropriate to assess whether the decline in fair value is temporary or other-than-temporary. The assessment is to determine whether the decline in value is from company-specific events, industry developments, general economic conditions, credit losses on debt or other reasons. Declines in the fair value of securities below their cost or amortized cost that are deemed to be other-than-temporary are reflected in earnings for equity

securities and for debt securities that have an identified credit loss. Unrealized losses on debt securities beyond the identified credit loss component are reflected in other comprehensive income.

Judgments and Uncertainties

Significant judgment is involved in determining when a decline in fair value is other-than-temporary. The factors considered by management include, but are not limited to:


•	Percentage and length of time by which an issue is below book value;


•	Financial condition and near-term prospects of the issuer including their ability to meet contractual obligations in a timely manner;


•	Ratings of the security;


•	Whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions;


•	Whether the decline is due to interest rates and spreads or credit risk;


•	The value of underlying collateral; and


•	Our intent and ability to retain the investment for a period of time sufficient to allow for the anticipated recovery in the market value, or more likely than not, will be required to sell a debt security before its anticipated recovery which may not be until maturity.

Effect if Actual Results Differ from Assumptions

Adverse changes in management’s assessment of the factors used to determine that a security was not other-than-temporarily impaired could lead to additional impairment charges. A decline in fair value that we determined to be temporary could become other-than-temporary and warrant an impairment charge. Additionally, a security that had no apparent risk could be affected by a sudden or acute market condition and necessitate an impairment charge.

Income Taxes

Critical Estimates

Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. The Company uses the asset and liability method of accounting for income taxes in which deferred tax assets and liabilities are established for the temporary differences between the financial reporting basis and the tax basis of the Company’s asset and liabilities. The realization of the net deferred tax asset generally depends upon future levels of taxable income and the existence of prior years’ taxable income, to which “carry back” refund claims could be made. A valuation allowance is maintained for deferred tax assets that management estimates are more likely than not to be unrealizable based on available evidence at the time the estimate is made. Furthermore, tax positions that could be deemed uncertain are required to be disclosed and reserved for if it is is more likely than not that the position would not be sustained upon audit examination.

Judgment and Uncertainties

Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. Some judgments are subjective and involve estimates and assumptions about matters that are inherently uncertain. In determining the valuation allowance, we use historical and forecasted future operating results, based upon approved business plans, including a review of the eligible carryforward periods, tax planning opportunities and other relevant considerations. In determining the level of reserve needed for uncertain tax positions, we consider relevant current legislation and court rulings, among other authoritative items, to determine the level of exposure inherent in tax positions of the Company. Management believes that the accounting estimate related to the valuation allowance and uncertain tax positions are a critical accounting estimate because the underlying assumptions can change from period to period. For example, variances in future projected operating performance could result in a change in the valuation allowance and changes in tax legislation could result in the need for additional tax reserves.

Effect if Actual Results Differ from Assumptions

Should actual factors and conditions differ materially from those considered by management, the actual realization of the net deferred tax asset and tax positions taken could differ materially from the amounts recorded in the financial statements. If the Company is not able to realize all or part of our net deferred tax asset in the future or if a tax position is overturned by a taxing authority, an adjustment to the deferred tax asset valuation allowance would be charged to income tax expense in the period such determination was made.

Goodwill

Critical Estimates

The Company is required to record certain assets it has acquired, including identifiable intangible assets such as core deposit intangibles and goodwill, at fair value, which may involve making estimates based on third-party valuations, such as appraisals or internal valuations based on discounted cash flow analyses or other valuation techniques. The Company evaluates goodwill for impairment annually or whenever events or changes in circumstances indicate the carrying value of the goodwill may be impaired. We complete our impairment evaluation by performing internal valuation analysis, considering other publicly available market information and using an independent valuation firm, as appropriate.

When goodwill is evaluated for impairment, if the carrying amount exceeds the fair value, an impairment charge is recorded to income. The fair value is based on observable market prices, when practicable. Other valuation techniques may be used when market prices are unavailable, including estimated discounted cash flows and market multiples analyses. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. In the event of future changes in fair value, the Company may be exposed to an impairment charge that could be material.

In the fourth quarter of fiscal 2014, we completed our annual impairment testing of goodwill by performing an internal valuation analysis, and determined there was no impairment. Through year end, no events or circumstances subsequent to the annual testing date indicate that the carrying value of the Company’s goodwill may not be recoverable, therefore, no interim testing was required.

The carrying value of goodwill at December 31, 2014, was $115.2 million . For further discussion on goodwill see Note 3 of the Notes to Consolidated Financial Statements.

Judgment and Uncertainties

Fair value is determined using widely accepted valuation techniques, including estimated future cash flows, comparable transactions, control premium and market peers. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. It is our policy to conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations.

Effect if Actual Results Differ from Assumptions

If actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material. Management has evaluated the effect of lowering the estimated fair value of the reporting unit and determined that fair value as of December 31, 2014 would have to decline more than 15.0% before Step 2 of the impairment analysis would be required under accounting guidance for goodwill impairment.

Derivative Instruments and Hedging Activities

Critical Estimates

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. The fair values of interest rate swaps are determined using the standard methodology of netting the discounted future fixed cash receipts (or payment) and the expected variable cash payments (or receipts.) The variable cash payment (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rates curves.

Judgment and Uncertainties

Determining the fair value of interest rate derivatives requires the use of the standard market methodology of discounting the future expected cash receipts that would occur if variable interest rates rise based upon the forward swap curve assumption and netting the cash receipt against the contractual cash payment observed at the instrument’s effective date. The Company’s estimates of variable interest rates used in the calculation of projected receipts are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The Company further incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements and requirements for collateral transfer to secure the market value of the derivative instrument(s).

Effect if Actual Results Differ from Assumptions

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the derivatives utilize Level 3 inputs, such as estimates of the current credit spreads to evaluate the likelihood of default by itself and its counterparties. In adjusting the fair value of its derivative contracts for the effect of non-performance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Incorrect assumptions could result in an overstatement or understatement of the value of the derivative contract.

Operating Results

Income Statement Summary



								Change
	For the Years Ended December 31,							2014-2013					2013-2012
(In thousands)	2014			2013		2012		Amount			Percent		Amount			Percent
Net interest income	$	137,872		$	67,057	$	67,008	$	70,815		105.6	%	$	49		0.1	%
Provision for loan losses	9,496			2,046		3,587		7,450			364.1		(1,541		)	(43.0	)
Non-interest income	16,605			17,051		14,707		(446		)	(2.6	)	2,344			15.9
Non-interest expense	144,432			62,466		55,696		81,966			131.2		6,770			12.2
Income before income taxes	549			19,596		22,432		(19,047		)	(97.2	)	(2,836		)	(12.6	)
Income tax provision (benefit)	(6,233		)	5,369		6,635		(11,602		)	(216.1	)	(1,266		)	(19.1	)
Net income	$	6,782		$	14,227	$	15,797	$	(7,445	)	(52.3	)%	$	(1,570	)	(9.9	)%
Diluted earnings per share	$	0.16		$	0.54	$	0.56	$	(0.38	)	(70.4	)%	$	(0.02	)	(3.6	)%

Non-GAAP Financial Measures

The following is a reconciliation of Non-GAAP financial measures by major category for the years ended December 31, 2014 and 2013. A comparison to 2012 is not presented as non-GAAP measures did not have a significant impact on the Company for the year ended December 31, 2012.



	For the Years Ended December 31,
(In thousands)	2014			2013
Net income (GAAP)	$	6,782		$	14,227
Adjustments:
Net interest income
(Accretion)/amortization of loan mark	(6,665		)	—
Accretion/(amortization) of deposit mark	3,908			—
Accretion/(amortization) of borrowings mark	1,624			—
Net adjustment to net interest income	(12,197		)	—
Non-interest income
Net gain on sales of securities	(1,228		)	(585		)
Loss on fixed assets-branch optimization	670			—
Net adjustment to non-interest income	(558		)	(585		)
Non-interest expense
Merger and acquisition expense	(36,918		)	(2,141		)
Core deposit intangible amortization expense	(1,283		)	—
Amortization of fixed assets mark	(16		)	—
Effect of position eliminations	—			(561		)
Effect of branch lease termination agreement	(1,888		)	(809		)
Net adjustment to non-interest expense	(40,105		)	(3,511		)
Total adjustments	27,350			2,926
Income tax expense (benefit) adjustment	(7,403		)	(853		)
Operating net income (Non-GAAP)	$	26,729		$	16,300

The following table is a reconciliation of Non-GAAP financial measures for select average balances, interest income and expense, and average yields and cost.



	For the Year Ended December 31, 2014
	GAAP						Mark to Market								Operating
(In Thousands)	Average Balance		Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends			Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost
Total loans	$	3,108,422	$	133,011	4.28	%	$	(12,046	)	$	6,664		0.23	%	$	3,120,468	$	126,347	4.05	%
Total interest-earning assets	3,977,666		158,704		3.99		(12,046		)	6,664			0.18		3,989,712		152,040		3.81
Certificates of deposit	1,218,782		9,829		0.81		4,225			(3,908		)	(0.32	)	1,214,557		13,737		1.13
Federal Home Loan Bank advances	344,218		2,326		0.68		3,616			(1,648		)	(0.49	)	340,602		3,974		1.17
Other borrowings	127,381		2,122		1.67		(1,127		)	17			(0.01	)	128,508		2,105		1.68
Total interest-bearing liabilities	3,218,097		18,007		0.56		6,714			(5,539		)	(0.17	)	3,211,383		23,546		0.73

Tax-equivalent net interest margin					3.54														3.22

Earnings Summary

Comparison of 2014 and 2013

For the year ended December 31, 2014 , the Company recorded earnings of $6.8 million, or $0.16 per diluted share compared to $14.2 million and $0.54 per diluted share in 2013 . 2014 was largely defined by the Merger with Legacy United, which occurred on April 30, 2014. As shown in the tables above, our results for 2014 were significantly impacted by the Merger, both on a GAAP and operating basis. For the year ended December 31, 2014, one-time acquisition and merger expenses totaled $36.9 million, which were partially offset by an increase of $12.2 million in net interest income due to net accretion of fair value adjustments on interest-earning assets and interest-bearing liabilities. Also affecting 2014 earnings were charges of $2.6 million related to our branch optimization program implemented in the fourth quarter.

Excluding these non-GAAP measures, net income for the year ended December 31, 2014 would have been $26.7 million, an increase of $10.4 million, or 64%, compared to $16.3 million for the year ended December 31, 2013, also on a non-GAAP basis. The increase primarily consists of increases in net interest income of $58.6 million, offset by increases in the provision for loan losses of $7.5 million and non-interest expense of $41.9 million.

Net interest income increased primarily due to the increase in net average interest-earning assets of $301.2 million, which primarily reflects the effect of Merger. The Company’s tax-equivalent net interest margin for the year ended December 31, 2014 was 3.54%, an increase of 17 basis points over the prior year of 3.37%. Net interest income increased $72.6 million, or 106.8%, due to the combined effect of the ten basis point increase in the yield on interest-earning assets and the 11 basis point decrease in the rate paid on interest-bearing liabilities. Our operating basis net interest margin, which excludes the effect of fair value adjustments of $12.2 million, was 3.22%, a 15 basis point decline from the year ended December 31, 2013. While new loan growth was strong, the decline on an operating basis largely reflects the interest rate environment and aggressive nature of competitors.

The asset quality of our loan portfolio has remained strong, including the addition of loans acquired from Legacy United. Acquired loans were recorded at fair value with no carryover of the allowance for loan losses and, as such, some asset quality measures are not comparable between periods as a result. The allowance for loan losses to total loans ratio was 0.64% and 1.12%, the allowance for loan losses to non-performing loans ratio was 76.67% and 140.50%, and the ratio of non-performing loans to total loans was 0.83% and 0.80% at December 31, 2014 and December 31, 2013 , respectively. A provision for loan losses of $9.5 million was recorded for 2014 compared to $2.0 million for year ended December 31, 2013 . The Company completed a comprehensive review of the acquired loan portfolio by year-end and ensure a consistent application of risk ratings across the portfolio. We believe asset quality for the Company remains strong and stable.

The Company experienced a decrease in other income of $446,000 for the year ended December 31, 2014, compared to 2013. This decrease is driven primarily by a net loss recorded on limited partnership investments, which was mostly offset by increased service charges and fees due to the Merger and to a lesser extent, fee income produced by the Company’s investment advisory subsidiary and the Company’s loan level hedge program.

For the year ended December 31, 2014, non-interest expense increased $82.0 million over the 2013 comparative period and on an operating basis, non-interest expense increased $45.4 million. These increases primarily reflect higher operating costs due to our increased size as a result of the Merger, including increases in salaries and employee benefits, occupancy and equipment expense and service bureau fees.

Comparison of 2013 and 2012

For the year ended December 31, 2013, the Company recorded earnings of $14.2 million, or $0.54 per diluted share compared to $15.8 million and $0.56 per diluted share in 2012. The Company’s results were driven by commercial loan growth of 17%, deposit growth of 15%, increased service charges and fees, increased security income and continued strong asset quality.

The Company’s results reflect continued strong loan sales in the secondary market as gain on sale of loans increased $637,000 over the prior year even as the Company began to portfolio more loans on the balance sheet in the fourth quarter due to the narrowing of spreads in the secondary market. In 2013, the Company originated $282.4 million mortgage loans and recorded gains on sales of loans of $5.1 million. In 2012, the Company originated $293.5 million mortgage loans and recorded gains on sales of loans of $4.4 million. A strategic focus of the Company in 2013 was the expansion of the mortgage banking business to improve turn times, better execute sales, improve profitability on secondary market sales, and expand our suite of products. Local market and market spreads volatility will impact on-going decisions to portfolio newly originated mortgage loans or sell them in the secondary market which will in turn impact revenues derived from gains on sale of loans. Based on current market conditions, the Company expects to continue to portfolio residential mortgages in the first quarter of 2014.

However, we have recently seen spreads rising and with the expansion of mortgage production in Fairfield County and the Boston market, we anticipate loan sales will increase in the second quarter of 2014.

The Company’s tax-equivalent net interest margin for the year ended December 31, 2013 was 3.37%, a decrease of 40 basis points over the prior year of 3.77%. Net interest income was stable year over year increasing $49,000, or 0.1%, as the decrease in the yield on interest-earning assets of 49 basis points was offset by the increase in the average balance of interest-earning assets of $222.5 million and total interest-bearing liabilities increased $231.5 million as the yield on interest-bearing deposits decreased 15 basis points.

The growth in commercial loans and deposits was a strategic initiative of the Company in 2013. Average loans grew $93.0 million primarily due to increased balances in commercial real estate and commercial loans which grew $134.0 million during 2013. The expansion of the commercial banking team aided not only the growth of the commercial loan balances, but also the growth in commercial deposits due to the efforts of the private banking and cash management teams as municipal deposits totaled $166.0 million at year end, an increase of $79.0 million, or 90%, during 2013. Deposit growth was also enhanced by the opening of new offices in our West Hartford and New Haven markets.

Interest and dividends on securities increased $3.0 million from 2012 levels. The average balance of securities increased $130.3 million largely due to purchases of investment grade corporate bonds, collateralized loan obligations and collateralized mortgage obligations. The bond purchases represent an opportunity to shorten portfolio duration and add diversification to the security portfolio.

The asset quality of our loan portfolio has remained strong even as the leading economic indicators have provided mixed results as evidenced in part by the continued high unemployment and foreclosure rates throughout the country. The allowance for loan losses to total loans ratio was 1.12% and 1.15%, the allowance for loan losses to non-performing loans ratio was 140.55% and 115.08%, and the ratio of non-performing loans to total loans was 0.80% and 1.00% at December 31, 2013 and December 31, 2012, respectively. A provision for loan losses of $2.0 million was recorded for 2013 compared to $3.6 million for year ended December 31, 2012.

The Company experienced an increase in other income of $2.3 million. This increase is driven primarily by service charges and fees resulting from the Company’s initiative to begin offering a loan level hedge product to qualified customers and enhanced execution of its financial advisory services through its subsidiary, Rockville Financial Services, Inc. (“RFS”). The loan level hedge program was implemented during the first half of 2013 and resulted in total fee income of $658,000 for the year. The Company experienced strong growth in RFS, recording total fee income of $1.0 million an increase of $620,000, or 162%, from the 2012 results.

In summary, Rockville continued to post strong organic growth in targeted business lines. The Company’s financial condition remained strong as reflected in capital and asset quality measures. The Company will be aggressive in pursuing its strategic goals while practicing prudent risk management to achieve continued positive business momentum and success.

Average Balances, Net Interest Income, Average Yields/Costs and Rate/Volume Analysis:

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. A tax-equivalent yield adjustment of $2.8 million, $993,000, and $779,000 were made for years ended December 31, 2014, 2013 and 2012 , respectively. All average balances are daily average balances. Loans held for sale and non-accrual loans are included in the computation of interest-earning average balances, with non-accrual loans carrying a zero yield. The yields set forth above include the effect of deferred costs, discounts and premiums that are amortized or accreted to interest income or expense.



	2014							2013							2012
(Dollars in thousands)	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
Interest-earning assets:
Residential real estate loans	$	1,134,890		$	39,537	3.48	%	$	652,220		$	24,646	3.78	%	$	690,237		$	28,630	4.15	%
Commercial real estate loans	1,365,059			65,044		4.76		724,089			33,337		4.60		623,793			33,160		5.32
Construction loans	106,291			7,469		7.03		48,531			1,773		3.65		50,595			1,896		3.75
Commercial loans	492,035			20,549		4.18		197,499			7,867		3.98		163,825			7,331		4.48
Installment and collateral loans	10,147			412		4.06		2,581			129		5.01		3,481			184		5.29
Investment securities	809,305			25,203		3.11		348,627			10,619		3.05		218,369			7,373		3.38
Federal Home Loan Bank stock	24,097			404		1.68		15,222			59		0.39		16,079			82		0.51
Other interest-earning assets	35,842			86		0.24		30,143			80		0.27		29,999			75		0.25
Total interest-earning assets	3,977,666			158,704		3.99		2,018,912			78,510		3.89		1,796,378			78,731		4.38
Allowance for loan losses	(21,192		)					(18,664		)					(17,347		)
Non-interest-earning assets	329,652							133,409							112,530
Total assets	$	4,286,126						$	2,133,657						$	1,891,561
Interest-bearing liabilities:
NOW and money market accounts	$	1,109,625		3,293		0.30		$	596,580		1,772		0.30		$	486,701		1,387		0.28
Savings accounts(1)	418,091			437		0.10		225,379			142		0.06		206,978			263		0.13
Time deposits	1,218,782			9,829		0.81		541,148			6,078		1.12		523,134			7,084		1.35
Total interest-bearing deposits	2,746,498			13,559		0.49		1,363,107			7,992		0.59		1,216,813			8,734		0.72
Advances from the Federal Home Loan Bank of Boston	344,218			2,326		0.68		179,637			2,387		1.33		112,299			2,210		1.97
Other borrowings	127,381			2,122		1.67		17,842			81		0.45		—			—		—
Total interest-bearing liabilities	3,218,097			18,007		0.56		1,560,586			10,460		0.67		1,329,112			10,944		0.82
Non-interest-bearing deposits	503,398							238,803							211,207
Other liabilities	34,482							29,681							24,002
Total liabilities	3,755,977							1,829,070							1,564,321
Stockholders’ equity	530,149							304,587							327,240
Total liabilities and stockholders’equity	$	4,286,126						$	2,133,657						$	1,891,561
Tax-equivalent net interest income				140,697							68,050							67,787
Tax-equivalent net interest rate spread(2)						3.43	%						3.22	%						3.56	%
Net interest-earning assets(3)	$	759,569						$	458,326						$	467,266
Tax-equivalent net interest margin(4)						3.54	%						3.37	%						3.77	%
Average interest -earning assets to average interest-bearing liabilities	123.60		%					129.37		%					135.16		%
Less tax-equivalent adjustment				2,825							993							779
				$	137,872						$	67,057						$	67,008


(1)	Includes mortgagors’ and investors’ escrow accounts


(2)	Tax-equivalent net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.


(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.


(4)	Tax-equivalent net interest margin represents the annualized net interest income divided by average total interest-earning assets.

Rate Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the volume and rate columns. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.



	Year Ended 2014 Compared to 2013								Year Ended 2013 Compared to 2012
	Increase (Decrease) Due To								Increase (Decrease) Due To
(In thousands)	Volume		Rate			Net			Volume		Rate			Net
Interest and dividend income:
Loans receivable	$	63,255	$	2,004		$	65,259		$	4,160	$	(7,609	)	$	(3,449	)
Securities and other earning assets	14,407		528			14,935			4,026		(798		)	3,228
Total earning assets	77,662		2,532			80,194			8,186		(8,407		)	(221		)
Interest expense:
NOW and money market accounts	1,523		(2		)	1,521			329		56			385
Savings accounts	167		128			295			22		(143		)	(121		)
Time deposits	5,859		(2,108		)	3,751			237		(1,243		)	(1,006		)
Total interest-bearing deposits	7,549		(1,982		)	5,567			588		(1,330		)	(742		)
FHLBB Advances	1,487		(1,548		)	(61		)	386		(209		)	177
Other borrowed funds	1,422		619			2,041			81		—			81
Total interest-bearing liabilities	10,458		(2,911		)	7,547			1,055		(1,539		)	(484		)
Change in tax-equivalent net interest income	$	67,204	$	5,443		$	72,647		$	7,131	$	(6,868	)	$	263

Net Interest Income Analysis

Net interest income is the amount that interest and fees on earning assets (loans and investments) exceeds the cost of funds, interest paid to the Company’s depositors and interest on external borrowings. Net interest margin is the difference between the income on earning assets and the cost of interest-bearing funds as a percentage of average earning assets. Growth in net interest income has resulted mainly from the merger with Legacy United, combined with organic growth in interest-earning assets and liabilities.

Comparison of 2014 and 2013

As shown in the tables above, tax-equivalent net interest income increased $72.6 million for the year ended December 31, 2014 compared to the year ended December 31, 2013 . Additionally, the net interest margin increased 17 basis points to 3.54%, the yield on average earning assets increased ten basis points to 3.99%, and the cost of interest-bearing deposits declined 11 basis points to 0.56%, compared to the year ended December 31, 2013. This was mainly due to the significant increase in average earning assets and liabilities and a benefit of $12.2 million recognized during the year ended December 31, 2014 in net interest income related to fair value adjustments as a result of the Merger. The fair value adjustments reflect amortization and accretion of credit and interest rate marks on the acquired loans, time deposits and borrowings.

Excluding the benefit of the fair value adjustments of $12.2 million, the net interest margin and the yield on average earning assets would have declined 15 basis points and eight basis points, respectively and the cost of interest-bearing liabilities would have increased six basis points for the year ended December 31, 2014 compared to the year ended December 31, 2013.

Primarily reflecting the Merger, average earning assets increased $1.96 billion and average interest-bearing liabilities increased $1.66 billion for the year ended December 31, 2014, compared to the year ended December 31, 2013. The average balance of loans and investment securities increased $1.48 billion and $460.7 million, respectively, while the average balance of interest-bearing deposits increased $1.38 billion.

While the Company experienced organic loan growth, the increase in the average balance of loans primarily reflects the acquired loan portfolio. The average balance of total loans at December 31, 2014 was $3.11 billion and had an average yield of

4.28%. On an operating basis, the average yield on total loans was 4.05% for the year ended December 31, 2014. The average balance of commercial real estate loans totaled $1.37 billion at December 31, 2014, an increase of $641.0 million year over year. Residential real estate loans and commercial business loans were the other significant drivers of the increase in the average loan balance year over year, which increased $482.7 million and $294.5 million, respectively.

The average balance of investment securities increased $460.7 million for the year ended December 31, 2014 compared to the year ended December 31, 2013, while the average yield earned increased six basis points. Upon the acquisition of Legacy United’s investment securities portfolio, the Company took action to re-characterize the acquired portfolio to a position that was more closely aligned with the composition of the Rockville portfolio. The re-characterization involved the sale of longer dated investments, and the purchase of investments which will incrementally shorten the duration of the investment portfolio and that show favorable price movement to changes in rising interest rates. Further information about the re-characterization, can be found later in the document under the heading of Securities within Financial Condition, Liquidity and Capital Resources.

The average balance of interest-bearing liabilities increased $1.66 billion, to $3.22 billion for the year ended December 31, 2014, compared to the year ended December 31, 2013. For the year ended December 31, 2014, the average cost of total interest-bearing liabilities was 0.56%. On an operating basis, which excludes the benefit of fair value adjustment, the average cost would have increased to 0.73%.

Year over year, average balances of total interest-bearing deposits increased $1.38 billion and the average cost decreased 10 basis points, FHLBB advances increased $164.6 million, while the average cost decreased 65 basis points, other borrowings increased $109.5 million and the cost increased 122 basis points These increases were primarily due to balances acquired from Legacy United. The increase in FHLBB advances was additionally due to funding new loan growth and the increase other borrowings was also due to the Company’s issuance of $75.0 million ten year subordinated notes with a coupon rate of 5.75%.

Net interest income is affected by changes in interest rates, loan and deposit pricing strategies, competitive conditions, the volume and mix of interest-earning assets and interest-bearing liabilities as well as the level of non-performing assets. Therefore, the Company manages the risk of changes in interest rates on its net interest income through an Asset/Liability Management Committee and through related interest rate risk monitoring and management policies.

Comparison of 2013 and 2012

As shown in the tables above, tax-equivalent net interest income increased $263,000 for the year ended December 31, 2013 compared to the year ended December 31, 2012. The increase was primarily due to a) a $130.3 million increase in the average securities outstanding, which was partially offset by a rate reduction due to the addition of adjustable rate securities with lower initial yields; b) a $93.0 million increase in average loans outstanding, the impact of which was offset by a 48 basis point reduction in the average yield on loans; c) an increase of $214,000 in the tax-free income adjustment primarily from the addition of investments in municipal bonds; d) the shift in the mix on a percentage basis of deposit funding from higher cost time deposits to non-interest-bearing and lower cost core deposits. These increases were partially offset by the higher cost of borrowings driven by an $85.2 increase in average borrowed funds.

For the year ended December 31, 2013, the yield on average interest-earning assets decreased by 49 basis points, while the cost of average interest-bearing liabilities declined 15 basis points, compared to the year ended December 31, 2012. As a result of the decline in the yield of interest-earning assets outpacing the decline on interest-bearing liabilities, the tax-equivalent net interest margin decreased by 40 basis points to 3.37% for the year ended December 31, 2013, from 3.77% for the year ended December 31, 2012.

Provision for Loan Losses

The provision for loan losses is a charge to earnings in an amount sufficient to maintain the allowance for loan losses at a level deemed adequate by the Company. The level of the allowance is a critical accounting estimate, which is subject to uncertainty.

Management evaluates the adequacy of the allowance for loan losses on a quarterly basis. The adequacy of the loan loss allowance is based on such interrelated factors as the composition of the loan portfolio and its inherent risk characteristics, the level of non-performing loans and charge-offs, both current and historic, local economic and credit conditions, the direction of real estate values, and regulatory guidelines. The provision is charged against earnings in order to maintain an allowance for loan losses that reflects management’s best estimate of probable losses inherent in the loan portfolio at the balance sheet date.

Management recorded a provision of $ 9.5 million for the year ended December 31, 2014 . The primary factors that influenced management’s decision to record this provision were due to the ongoing assessment of estimated exposure on impaired loans and loan volume increases realized during the period. Impaired loans totaled $44.0 million at December 31, 2014 compared to $22.1 million at December 31, 2013 , an increase of $21.9 million or 98.6%, reflecting increases in nonaccrual loans of $18.7 million and troubled debt restructured loans of $5.6 million.

The repayment of these impaired loans is largely dependent upon the sale and value of collateral that may be impacted by current real estate conditions. At December 31, 2014 , the allowance for loan losses totaled $24.8 million, which represented 0.64% of total loans and 76.67% of non-performing loans compared to an allowance for loan losses of $19.2 million, which represented 1.12% of total loans and 140.50% of non-performing loans as of December 31, 2013 . The decrease in these ratios directly resulted from the effect of purchase accounting adjustments as there is no carryover of the allowance for loan losses on acquired loans.

Non-Interest Income Analysis

For the years ended December 31, 2014, 2013 and 2012 , non-interest income represented 10.8%, 20.3% and 17.9% of total revenues, respectively. The following is a summary of non-interest income by major category for the years presented:



Non-Interest Income
	For the Years Ended December 31,							Change
	For the Years Ended December 31,							2014-2013					2013-2012
(Dollars in thousands)	2014			2013		2012		Amount			Percent		Amount			Percent
Service charges and fees	$	14,473		$	7,935	$	6,480	$	6,538		82.4	%	$	1,455		22.5	%
Net gain from sales of securities	1,228			585		914		643			109.9		(329		)	(36.0	)
Net gain from sales of loans	3,148			5,054		4,417		(1,906		)	(37.7	)	637			14.4
BOLI income	3,042			2,092		1,920		950			45.4		172			9.0
Net loss on limited partnership investments	(4,224		)	—		—		(4,224		)	(100.0	)	—			—
Other income (loss)	(1,062		)	1,385		976		(2,447		)	(176.7	)	409			41.9
Total non-interest income	$	16,605		$	17,051	$	14,707	$	(446	)	(2.6	)%	$	2,344		15.9	%

Comparison of 2014 and 2013

As displayed in the above table, non-interest income decreased $446,000 for the year ended December 31, 2014. The changes from the prior year period are mainly due to the Merger and to the recognition of a $4.2 million loss related to a limited partnership investment made during the third quarter of 2014.

Service Charges and Fees : Service charges and fees were $14.5 million and $7.9 million for the year ended December 31, 2014 and 2013, respectively, an increase of $6.5 million from the comparable 2013 period and was directly related to the Merger. Categories that experienced the most significant increases were recorded in (a) loan servicing income resulting from increases in loan sales to the secondary market over the past year with servicing retained, (b) fee income produced by the Company’s investment advisory subsidiary, United Northeast Financial Advisors, Inc. and (c) NSF, ATM and overdraft fees, related to increased volume. The increase in the period was also bolstered by a $1.0 million increase in fee income produced by the Company’s loan level hedge program that is offered to certain commercial banking customers to facilitate their respective risk management strategies.

Net Gain From Sales of Securities : For the year ended December 31, 2014 , the Company realized a gain of $ 1.2 million versus a gain of $ 585,000 in the prior year. This increase is a result of the Company repositioning certain securities in the portfolio from non-Volcker compliant collateralized loan obligations (“CLOs”) to Volcker compliant CLOs, a reduction of geographic exposures in the municipal portfolio, and the sale of a corporate bond for which spread tightening had occurred. In addition, the Company took certain steps to align the securities portfolios of Rockville and Legacy United immediately upon the consummation of the Merger, which resulted in the Company recording approximately $542,000 in gains on the sale of securities.

Net Gain From Sales of Loans : Net gain from sales of loans was $ 3.1 million for the year ended December 31, 2014 , a decrease of $1.9 million, or (37.7%), from the year ended 2013 , due to a shift in the Company’s strategy regarding loan sales given the current interest rate environment, whereby the Company will retain loans which yield a higher contribution margin in portfolio versus a sell return. In addition, there was a 15% shift in originations from fixed rate to adjustable rate which are held

on the books versus being originated for sale. In 2014 the Company sold loans totaling $136.7 million as compared to $220.5 million of loans sold in 2013. While the sales level of loans was down in the current period, the Company was able to essentially record the same percentage gain on sale of 230 basis points in 2014 versus 229 basis points in 2013.

BOLI Income : The $950,000, or 45.4%, increase in BOLI is primarily due to the Merger as the Company recorded $1.1 million of income for the year ended December 31, 2014 from policies associated with Legacy United. Additionally, the increase was slightly enhanced due to the additional purchase of $4.0 million of BOLI by Rockville in May 2013. The increases were partially offset by a decline in the average yield earned on the BOLI policies as a result of current market interest rates.

Net Loss on Limited Partnership Investments : In conjunction with its merger with Legacy United, the Company acquired investments in partnerships, including low income housing tax credit and new markets housing tax credit partnerships. Additionally, in September 2014, the Company invested in a tax credit partnership associated with alternative energy as it allows the Company to receive cash flows and qualify for federal renewable energy tax benefits. The partnership investments are accounted for under the equity method of accounting. For the year ended December 31, 2014, the Company recorded $ 4.2 million in losses on limited partnership investments, approximately $4.0 million of which is related to the new tax credit partnership for alternative energy and a $176,000 loss is related to acquired investments in other partnerships. In conjunction with the $4.0 million loss realized on the new tax credit partnership, the Company recorded an offsetting benefit of $5.2 million as reflected in the tax provision for the year.

Other Income (Loss): The Company recorded a decrease in other income of $2.4 million for the year ended 2014 compared to the prior year. The decrease in 2014 compared to 2013 is primarily due to the change in the fair value recognized in net income for mortgage servicing rights, loss on the sale and writedown of fixed assets related to branch closures, and the increase in the credit value adjustment on borrower facing loan level hedges. These decreases were partially offset by the changes in value in rate lock commitments, gains on the sale of other real estate owned and an increase in miscellaneous income for a settlement on other real estate owned with a title insurance company.

Comparison of 2013 and 2012

Service Charges and Fees : Service charges and fees were $7.9 million and $6.5 million for the years ended December 31, 2013 and 2012, respectively, an increase of $1.5 million from the prior year. The increases were due primarily to (a) increases in loan servicing income due to the Company continuing to sell loans in the secondary market over the past year with servicing retained, (b) fees derived from the Company’s loan level hedge program that was implemented in the second quarter of 2013 that is offered to certain commercial customers to facilitate their respective risk management strategies, (c) increased revenue produced by the Company’s investment subsidiary, Rockville Financial Services, Inc. due to additional and more experienced financial advisors and more favorable market conditions as compared to the prior year which have boosted trading activity and higher sales of investment and insurance products, (d) increases in overdraft and check printing fees resulting primarily from the growth in commercial and to a lesser extent retail deposit accounts over the prior year. These increases were partially offset by reductions in loan origination fee income, previously provided by Rockville Bank Mortgage, Inc.

Net Gain From Sales of Securities : For the year ended December 31, 2013, the Company realized a gain of $585,000 versus a gain of $914,000 in the prior year. Periodically, the Company evaluates the portfolio for prepayment risk, as well as interest rate risk, and will act to reduce this exposure. Sales in the year ended 2013 reflect execution of this strategy. Sales of fast paying, lower market yielding securities in 2013 accounted for the majority of the gains on security sales. A loss on the sale of bonds in 2013 led to a reduction in the net gain from the sale of securities compared to 2012.

Net Gain From Sales of Loans : Net gain from sales of loans was $5.1 million for the year ended December 31, 2013, an increase of $637,000, or 14.4%, from the year ended 2012, due to an increase in the volume of mortgage loans sold combined with more favorable pricing in the secondary markets. During the second half of 2013, the rising interest rate environment has resulted in a lower spread on sales in the secondary market and slowed secondary sale activity after a prolonged period of historically low interest rates. However, overall, increased consumer activity in the secondary market for the year ended 2013 resulted in greater gains on sales than was experienced for the year ended 2012. Over the course of 2013, the Company has allocated more resources to its mortgage banking business with the hiring of mortgage loan officers and additional mortgage underwriters and processors, which is the primary driver for the increase in volume and has resulted in enhanced turn times, better execution of sales and improved profitability.

BOLI Income : The $172,000, or 9.0%, increase in BOLI is primarily due to the purchase of $25.0 million in BOLI policies towards the end of the first quarter of 2012, combined with a $4.0 million purchase in May 2013. The increase was partially offset by a decline in the average yield earned on the BOLI policies as a result of current market interest rates.

Other Income (Loss) : The Company recorded an increase in other income of $409,000 for the year ended 2013 compared to the prior year. The increase in 2013 compared to 2012 is primarily due to the impact of changing to the fair value method of recording mortgage servicing rights from the amortization method, which was partially offset by an increase in 2013 on the loss of disposal of fixed assets and to a business interruption insurance claim recorded in the first quarter of 2012.

Non-Interest Expense Analysis

For the years ended December 31, 2014, 2013 and 2012 , non-interest expense represented 3.37%, 2.93% and 2.94% of average assets, respectively. The following table is a summary of non-interest expense by major category for the years presented:



Non-Interest Expense
	For the Years Ended December 31,						Change
	For the Years Ended December 31,						2014-2013					2013-2012
(Dollars in thousands)	2014		2013		2012		Amount			Percent		Amount			Percent
Salaries and employee benefits	$	59,332	$	36,428	$	33,186	$	22,904		62.9	%	$	3,242		9.8	%
Occupancy and equipment	13,239		6,679		4,653		6,560			98.2		2,026			43.5
Service bureau fees	8,179		3,287		4,036		4,892			148.8		(749		)	(18.6	)
Professional fees	3,662		2,377		3,233		1,285			54.1		(856		)	(26.5	)
Marketing and promotions	2,296		476		412		1,820			382.4		64			15.5
FDIC insurance assessments	2,553		1,172		1,046		1,381			117.8		126			12.0
Other real estate owned	792		874		540		(82		)	(9.4	)	334			61.9
Core deposit intangible amortization	1,283		—		—		1,283			100.0		—			—
Merger and acquisition expense	36,918		2,141		—		34,777			1,624		2,141			100.0
Other	16,178		9,032		8,590		7,146			79.1		442			5.1
Total non-interest expense	$	144,432	$	62,466	$	55,696	$	81,966		131.2	%	$	6,770		12.2	%

Comparison of 2014 and 2013

For the year ended December 31, 2014 , non-interest expense increased $82.0 million to $144.4 million from $ 62.5 million for the year ended December 31, 2013 .

The Company experienced increases in all categories year over year except for other real estate owned. The largest increases were recorded in merger related expenses and salaries and employee benefits and to a lesser extent in occupancy and equipment, service bureau fees and other expenses. All of the categories that increased from the prior period were related to the Merger.

Salaries and Employee Benefits : Salaries and employee benefits represented the largest increase in non-interest expense after merger and acquisition expenses. Salaries and employee benefits was $59.3 million for the year ended December 31, 2014, an increase of $22.9 million from the comparable 2013 period. Salary expense was the primary reason for this increase as 421 employees from Legacy United were added to the payroll upon completion of the Merger. Other factors driving the increase included (a) new hires that were part of the restructured management team and the addition of new revenue producing commission-based mortgage loan officers, (b) increased commissions and incentives on product sales, (c) increased health care costs related to the Company’s self-insurance plan, and (d) to a lesser extent, general salary increases. These increases were partially offset by decreases in (a) pension costs due to the changes in the discount rate used in the calculation of the pension liability (b) to employee option and restricted stock expense (c) an increase in deferred compensation expense related to an increase in the average cost of originating a loan based on a cost study analysis conducted during the year and (d) decreased costs associated with the 401(k) and ESOP Plans as the Company merged the two Plans in January 2014.

Occupancy and Equipment Expense : Occupancy and equipment expense increased $ 6.6 million driven primarily by

the Company adding over 30 branches to our branch network with the Merger. Additionally, in the fourth quarter, the Company announced, under a branch optimization strategy, the closure of five non-strategic branches and recorded expenses related to the these branch closings. Approximately $6.2 million of the increase in occupancy and equipment expense year over year is attributable to the Legacy United branches.

Service Bureau Fees : Service bureau fees increased $ 4.9 million for the year ended December 31, 2014 compared to the 2013 period. The increase is primarily attributable to the Merger as the Company was operating under two platforms until system conversion date in October 2014. Approximately $2.5 million of the increase was directly related to operating two platforms. Non-merger expense increases were related to increases in ATM servicing fees, wide area network fees and other service bureau fees.

Professional Fees : Professional fees were $ 3.7 million and $ 2.4 million for the years ended December 31, 2014 and 2013 , respectively. The increase as compared to the prior year period is related to the Merger as the Company entered into certain consulting contracts as a result of the Merger, incurred additional expenses related to the external loan review given the increased size of the portfolio, legal expenses and recorded additional expenses for a review of the Company’s benefit plans.

Marketing and Promotions : Marketing and promotion expense was $2.3 million and $476,000 for the years ended December 31, 2014 and 2013, respectively, an increase of $1.9 million. The increase is attributable to the Company increasing print and media advertising for a new branding campaign and targeted promotional campaigns during the period.

FDIC Insurance Assessments : The expense for FDIC insurance assessments increased $1.4 million to $2.6 million at December 31, 2014 from $1.2 million at December 31, 2013. This increase is primarily attributable to the Merger as the Company’s assessment base increased approximately $2.8 million and to a lesser extent an increase in the assessment rate.

Core Deposit Intangible Amortization : The $1.3 million in core deposit intangible amortization for the year ended December 31, 2014 is directly attributable to the Merger. The Company is amortizing the core deposit intangible of $10.6 million over 10 years using the sum-of-the-years-digits method.

Merger and Acquisition Expense : Expenses related to the merger of the Company with Legacy United totaled $ 36.9 million for the year ended December 31, 2014 , compared to $ 2.1 million for the year ended December 31, 2013. Merger related expenses primarily included legal, accounting, consulting assistance, change in control payments, investment banker fees, system termination and conversion costs and accelerated vesting of equity awards.

Other Expenses : Other expense was $ 16.2 million and $ 9.0 million for the years ended December 31, 2014 and 2013 , respectively, an increase of $ 7.1 million . The increase is primarily due to the Merger which impacted several accounts in this category including: (a) office supplies and postage; (b) dues and subscriptions; (c) software maintenance expense; (d) property appraisals and credit reports related to increased loan volume; (e) collection expense; (f) directors fees; (g) telephone and (h) website expenses. These increases were partially offset by a decrease in directors restricted stock expense.

Income Tax Expense (Benefit) : The provision (benefit) for income taxes was $ (6.2) million for the year ended December 31, 2014 , compared to $ 5.4 million for the year ended December 31, 2013 . The decrease in the expense and the effective tax rate is primarily due to a lower income for the year as a result of expenses associated with the Merger of the Company and Legacy United in 2014 causing favorable permanent differences, such as BOLI and tax exempt income, to have a proportionately larger impact. Furthermore, the Company realized additional benefits of $5.6 million in 2014 related to tax credit investments. The decrease in the rate for these items is partially offset by unfavorable permanent differences related to non-deductible acquisition costs and compensation associated with the Merger.

Comparison of 2013 and 2012

For the year ended December 31, 2013, non-interest expense increased $6.8 million to $62.5 million from $55.7 million for the year ended December 31, 2012.

The increase in non-interest expense primarily reflects increases in salaries and employee benefits, merger related expenses, occupancy and equipment, other real estate owned expense and other expense partially offset by reductions in professional fees and service bureau fees.

Salaries and Employee Benefits : These increases were primarily due to (a) the higher level of full-time equivalent employees in the current period supporting the Company’s growth plan; (b) the increased commissions expense related to mortgage loan originations and product sales which was a significant contributor to the increase in 2013; (c) a higher average common stock price in 2013 versus 2012 which was the driver for increased expense for the ESOP; and (d) the effect of having the employees who joined the Bank in 2012 that became eligible for the 401(k) Plan and the Bank’s matching contribution increased significantly from 2012. These increases were partially offset by (e) decreased pension costs as the Company froze its noncontributory defined benefit and pension plan as of December 31, 2012, whereby participants in the plan stopped earning additional benefits under the plan; (f) decreased employee restricted stock expense; and (g) an increase in deferred compensation expense related to an increase in the average cost of originating a loan based on a cost study analysis conducted

during the year. Additionally, the increase for the year ended December 31, 2013 was impacted by costs incurred with position eliminations in the second quarter.

Occupancy and Equipment Expense : Occupancy and equipment expense increased $2.0 million driven primarily by the increased depreciation, rent and maintenance expense for the newly leased administration building and training center in Glastonbury, Connecticut, the new branch office in West Hartford, Connecticut and the commercial loan production offices in Glastonbury and Hamden, Connecticut. Additionally, the increase for the year ended December 31, 2013 was affected by the Company’s decision to close a retail branch facility in Enfield, CT in November 2013 representing the write down of unamortized leasehold improvements and a negotiated payment for the lease buyout.

It is expected that rent expense will increase again in 2014 due to the addition of new branch offices in Hamden and North Haven, Connecticut and the full year impact of the recently leased properties noted above. Additionally, the Company opened loan production offices in Fairfield, Connecticut and in the Boston, Massachusetts area in February 2014.

Service Bureau Fees : Service bureau fees decreased $749,000 for the year ended December 31, 2013 compared to the 2012 period. In June 2012 the Company renegotiated its service contract with its data processing vendor. The 2013 period reflects a full year’s benefit of the renegotiated contract which is the primary driver for the decrease year over year. The decrease was also impacted by classifying certain telephone expenses in other expenses in 2013 and fewer expenses incurred for ATM Servicing.

Professional Fees : Professional fees were $2.4 million and $3.2 million for the years ended December 31, 2013 and 2012, respectively. The decrease in professional fees was primarily in legal and consulting expenses as the Company’s projects that focused on potential growth opportunities and evaluation of the infrastructure and risk management needs necessary for the Company’s future growth were scaled back from 2012 levels. Professional fees related to the 2014 planned merger with United Financial Bancorp, Inc. appear in merger related expense below.

Other Real Estate Owned : Other real estate owned expense increased $334,000 to $874,000 for the year ended December 31, 2013 from $540,000 in the prior year. The increase in foreclosed commercial properties expense was the primary driver in the increase in addition to increased write-downs of new and existing OREO properties.

Merger Related Expense : Expenses related to the merger of the Company with United Financial Bancorp, Inc. announced on November 15, 2013 totaled $2.1 million for the year ended December 31, 2013. The Company expects that conversion and merger related charges resulting from the United merger will continue throughout 2014.

Other Expenses : Other expense was $9.0 million and $8.6 million for the year ended December 31, 2013 and 2012, respectively, an increase of $442,000. The increase is primarily due to (a) increased travel expenses; (b) dues and subscriptions; (c) software maintenance expense related to investments made in the loan origination area; (d) property appraisals and credit reports related to increased loan volume; (d) statement and mailing expenses for certain promotional events; (e) and an increase in the provision for off-balance sheet assets due to the increase in commercial construction loans. These increases were partially offset by decreases in recruiting expenses, other public company related expense, telephone expense related to the running of two networks simultaneously for a short period of time during the implementation of a new voice and data network in 2012 and charge-backs incurred on debit card transactions.

Income Tax Expense : The provision for income taxes was $5.4 million for the year ended December 31, 2013, compared to $6.6 million for the year ended December 31, 2012. The Company’s effective tax rate for the year ended December 31, 2013 was 27.4% down from 29.6% for year ended December 31, 2012. The decrease in the effective tax rate was due largely to the benefits of tax-exempt interest income from the purchase of various tax-free municipal bonds and an increase in the cash surrender value of bank-owned life insurance.

Financial Condition, Liquidity and Capital Resources

Summary

The Company had total assets of $ 5.48 billion and $ 2.30 billion at December 31, 2014 and 2013 , respectively, an increase of $3.18 billion, or 138.0%, primarily due to the acquired assets in the Merger of $2.44 billion. Excluding the impact of the acquired assets, total assets increased $732.7 million as of December 31, 2014 compared to December 31, 2013. The Company utilized deposit growth and additional advances from the Federal Home Loan Bank of Boston and other borrowings to fund this growth.

Total net loans of $ 3.88 billion , with an allowance for loan losses of $ 24.8 million at December 31, 2014 , increased $2.18 billion when compared to total net loans of $ 1.70 billion , with an allowance for loan losses of $ 19.2 million at December 31, 2013 , primarily due to the acquired loans in the Merger of $1.88 billion. Total deposits of $ 4.04 billion at December 31, 2014

increased $2.30 billion, or 132.6%, when compared to total deposits of $ 1.74 billion at December 31, 2013 , primarily due to the acquired deposits in the Merger of $1.94 billion. Non-interest-bearing deposits increased $335.8 million, or 125.9%, and interest-bearing deposits increased $1.96 billion, or 133.8%, during the period primarily due to the acquired non-interest bearing and interest-bearing deposits in the Merger of $333.2 million and $1.61 billion, respectively. The Company’s net loan-to-deposit ratio was 96.1% at December 31, 2014 , compared to 97.8% at December 31, 2013 . Additionally, on September 23, 2014, the Company closed its public offering of $75.0 million of its 5.75% Subordinated Notes due October 1, 2024. Proceeds were $73.7 million, net of issuance costs, which the Company plans to use for general corporate purposes.

At December 31, 2014 , total equity of $ 602.4 million , increased $303.0 million, or 101.2%, when compared to total equity of $ 299.4 million at December 31, 2013 . Changes in equity for the year ended December 31, 2014 consisted primarily of the issuance of 26.7 million shares related to the Merger which resulted in $356.4 million of additional shareholders’ equity, offset by share repurchases of $47.8 million and the elimination of Treasury shares, as well as decreases of $11.2 million and $1.7 million in retained earnings and other comprehensive income, respectively. At December 31, 2014 , the tangible common equity ratio was 8.9% compared to 13.0% at December 31, 2013 . See Note 17, “Regulatory Matters” in the Notes to Consolidated Financial Statements contained elsewhere in this report for information on the Bank and the Company’s regulatory capital levels and ratios.

Securities

The Company maintains a securities portfolio that is primarily structured to generate interest income, manage interest-rate sensitivity, and provide a source of liquidity for operating needs. The securities portfolio is managed in accordance with regulatory guidelines and established internal corporate investment policies.

The following table sets forth certain financial information regarding the amortized cost and fair value of the Company’s investment portfolio at the dates indicated.

Investment Securities



	At December 31,
	2014				2013				2012
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available for Sale:
U.S. Government and government-sponsored enterprise obligations	$	6,965	$	6,822	$	6,801	$	6,031	$	12,413	$	12,717
Government-sponsored residential mortgage-backed securities	165,199		167,419		96,708		95,662		87,769		91,144
Government-sponsored residential collateralized mortgage obligations	237,128		238,133		69,568		67,751		20,798		20,947
Government-sponsored commercial mortgage-backed securities	67,470		68,298		13,841		12,898		9,179		9,302
Government-sponsored commercial collateralized debt obligations	129,547		129,686		5,043		4,706		5,048		5,135
Asset-backed securities	181,198		178,755		107,699		106,536		11,193		11,200
Corporate debt securities	43,907		42,245		43,586		42,486		19,760		18,818
Obligations of states and political subdivisions	194,857		195,772		67,142		62,505		67,458		68,804
Marketable equity securities	25,709		25,881		6,101		6,328		3,068		3,322
Total available for sale	$	1,051,980	$	1,053,011	$	416,489	$	404,903	$	236,686	$	241,389
Held to Maturity:
Government-sponsored residential mortgage-backed securities	$	2,971	$	3,310	$	3,743	$	4,107	$	6,084	$	6,681
Obligations of states and political subdivisions	12,397		13,403		10,087		10,153		—		—
Total held to maturity securities	$	15,368	$	16,713	$	13,830	$	14,260	$	6,084	$	6,681

The Company’s securities portfolio totaled $1.07 billion at December 31, 2014 compared to $418.7 million at December 31, 2013 , an increase of $649.6 million. In connection with the Merger, we acquired securities of $352.5 million that were classified as available for sale. On a tax-equivalent basis, the yield in the securities portfolio for the years ended December 31, 2014 and 2013 was 3.11% and 3.05%, respectively.

Accounting guidance requires the Company to designate its securities as held to maturity, available for sale or trading depending on the Company’s intent regarding its investments at the time of purchase. The Company does not currently maintain a portfolio of trading securities. As of December 31, 2014 , $1.05 billion, or 98.6% of the portfolio, was classified as available for sale and $15.4 million of the portfolio was classified as held to maturity. The Company believes that the high concentration of securities available for sale allows flexibility in the day-to-day management of the overall investment portfolio, consistent with the objectives of optimizing profitability and mitigating interest rate risk. Securities available for sale are carried at fair value. Additional information about fair value measurements can be found in Notes 5, “Securities” and 14, “Fair Value Measurement” in the Notes to Consolidated Financial Statements contained elsewhere in this report.

The Company’s underlying investment strategy has been to use the portfolio as a source of interest income, a tool to manage interest rate risk and as a source of liquidity. During 2014, the Company focused its efforts on a barbell approach to purchases with the goal of improving relative price behavior of the portfolio in response to rising rates relative to longer duration investments. The Company continued to focus on portfolio diversification through the purchase of shorter duration investments such as floating rate collateralized loan obligations, asset-backed securities and shorter duration collateralized mortgage obligations and corporate bonds. The floating rate and shorter duration bonds were added to the portfolio in an effort to reduce the Company’s overall interest rate risk position and therefore overall portfolio price risk from potentially rising rates. This approach to investment purchases was made to supplement the earlier focus on slightly longer duration municipal security purchases. Additionally, pass through mortgage-backed securities and municipal securities have increased in price over the second half of 2014, due to the relative fall in long-term interest rates. Overall, in order to balance the portfolio’s price risk with favorable cash flow characteristics, the Company continues to evaluate collateralized mortgage obligations, asset- backed securities and other securities that help protect against price risk and extension risk, while providing more consistent cash flows.

During the year ended December 31, 2014, the available for sale securities portfolio increased by $648.1 million to $1.05 billion, representing 19% of total assets at year end 2014, from $404.9 million and 18% of total assets at December 31, 2013. The increase is largely reflective of continued execution of the barbell management strategy, with bond purchases focused on opportunities to shorten the investment portfolio duration and add diversification to the portfolio holdings. Portfolio activity during the year included bond repositioning with the CLO portfolio from non-Volcker compliant securities to Volcker compliant securities, a reduction of geographic exposures within the municipal bond portfolio a repositioning within the corporate bond portfolio for which spread tightening had occurred on existing holdings, and purchases of cash flowing government agency sponsored collateralized mortgage backed obligations. The Company limits purchases in the municipal bonds, collateralized loan obligations and non-guaranteed corporate bonds sectors to investment grade or better rating prior to purchase. Furthermore, the Company limits its exposure to position parameters and will review the impact on the portfolio from periodic issuer disclosures, as well as developing market trends.

Upon the acquisition of the Legacy United investment portfolio, Management took action to re-characterize the acquired portfolio to a position that was closely aligned with the earlier composition of the Rockville portfolio, which had been strategically structured under a barbell approach. The re-characterization of the portfolio involved the sale of longer dated investments, inclusive of $213.5 million in mortgage backed securities and the purchase of investments that are closely aligned with the Company’s barbell strategy of incrementally shortening the duration of the investment portfolio by purchasing investments that show favorable price movement to changes in rising interest rates. Under the re-characterization, the barbell strategy focused on shorter duration assets consisting of $58.5 million in floating rate Volcker compliant Collateralized Loan Obligations and $83.5 million in shorter duration cash flowing U.S. Government Agency Collateralized Mortgage Obligations, as well as $30.7 million of longer duration Municipal Bonds. Incremental portfolio growth for the year focused on the purchase of cash flowing securities inclusive of $119.5 million of fixed rate Government Sponsored Mortgage Backed Securities structured along the yield curve. The Company limits purchases in the municipal bonds, collateralized loan obligations, and non-guaranteed corporate bonds sectors to investment grade or better rating prior to purchase. Furthermore, the Company limits its exposure to position parameters and will review the impact on the portfolio from periodic issuer disclosures as well as developing market trends.

During the year ended December 31, 2014, the Company recorded no write-downs for other-than-temporary impairments of its securities. The Company held $448.3 million in securities that are in an unrealized loss position at December 31, 2014. Approximately $341.0 million of this total had been in an unrealized loss position for less than twelve months with the remaining $107.2 million in an unrealized loss position for twelve months or longer. These securities were evaluated by

management and were determined not to be other-than-temporarily impaired. The Company does not have the intent to sell these securities, and it is more-likely-than-not that it will not have to sell the securities before the recovery of their cost basis. To the extent that changes in interest rates, credit spread movements and other factors that influence the fair value of securities continue, the Company may be required to record additional impairment charges for other-than-temporary impairment in future periods. For additional information on the securities portfolio, see Note 5, “Securities” in the Notes to Consolidated Financial Statements contained elsewhere in this report.

The Company monitors investment exposures continuously, performs credit assessments based on market data available at the time of purchase and performs ongoing credit due diligence for all collateralized loan obligations, corporate bonds and municipal securities. The Company’s investment portfolio is regularly monitored for performance enhancements and interest rate risk profiles, with dynamic strategies implemented accordingly.

The composition and maturities of the investment securities portfolio at December 31, 2014 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. State agency and municipal obligations as well as common and preferred stock yields have not been adjusted to a tax-equivalent basis. Certain mortgage-backed securities have interest rates that are adjustable and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below.

Investment Maturity Schedule



	One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total Securities
(Dollars in thousands)	Fair Value		Weighted- Average Yield		Fair Value		Weighted- Average Yield		Fair Value		Weighted- Average Yield		Fair Value		Weighted- Average Yield		Fair Value		Weighted- Average Yield
December 31, 2014
Available for Sale
Debt Securities:
U.S . Government and government-sponsored enterprise obligations	$	—	—	%	$	—	—	%	$	491	2.09	%	$	6,331	2.58	%	$	6,822	2.54	%
Government-sponsored residential mortgage-backed securities	43		0.29		254		3.19		6,925		3.79		160,197		2.65		167,419		2.69
Government-sponsored residential collateralized debt obligations	—		—		58		2.65		123		0.92		237,952		2.43		238,133		2.43
Government-sponsored commercial mortgage-backed securities	—		—		—		—		44,176		2.29		24,122		3.20		68,298		2.61
Government-sponsored commercial collateralized debt obligations	—		—		—		—		4,991		2.38		124,695		2.65		129,686		2.64
Asset-backed securities	—		—		—		—		16,923		2.94		161,832		2.70		178,755		2.72
Corporate debt securities	50		0.83		6,979		2.49		25,931		3.20		9,285		4.50		42,245		3.36
Obligations for state and political subdivisions	210		3.73		2,727		2.21		9,763		2.63		183,072		3.96		195,772		3.87
Total debt securities	$	303	2.76	%	$	10,018	2.43	%	$	109,323	2.73	%	$	907,486	2.90	%	$	1,027,130	2.88	%
Held to Maturity
Debt securities:
Government-sponsored residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	657	4.21	%	$	2,653	4.91	%	$	3,310	4.77	%
Obligations of states and political subdivisions	—		—		—		—		1,215		2.39		12,188		4.10		13,403		3.95
Total debt securities	$	—			$	—			$	1,872	3.03	%	$	14,841	4.25	%	$	16,713	4.11	%

The Company has the ability to use the investment portfolio, as well as interest-rate financial instruments within internal policy guidelines, to hedge and manage interest-rate risk as part of its asset/liability strategy. See Note 13, “Derivatives and Hedging Activities” in the Notes to Consolidated Financial Statements contained elsewhere in this report for additional information concerning derivative financial instruments.

Bank-Owned Life Insurance

BOLI was $122.6 million and $64.5 million at December 31, 2014 and 2013 , respectively. The increase is primarily related to the acquired BOLI in the Merger of $55.1 million. The Company expects to benefit from the BOLI contracts as a result of the tax-free growth in cash surrender value and death benefits that are expected to be generated over time. The purchase of the life insurance policy results in an income-earning asset on the Consolidated Statements of Condition that provides monthly tax-free income to the Company. The largest risk to the BOLI program is credit risk of the insurance carriers. To mitigate this risk, quarterly credit reviews are completed on all carriers. BOLI is invested in the “general account” and “hybrid account” of quality insurance companies. Of the general account carriers, all were rated “AA-” or better by Standard and Poor’s at December 31, 2014 with the exception of one carrier that is rated sub-investment grade, representing

0.22% of the BOLI asset and 0.05% of Tier I capital. BOLI is included in the Consolidated Statements of Condition at its cash surrender value. Increases in BOLI’s cash surrender value are reported as a component of non-interest income in the Consolidated Statements of Net Income.

Lending Activities

The Company originates residential real estate loans secured by one-to-four family residences, commercial real estate loans, residential and commercial construction loans, commercial business loans, multi-family loans, home equity loans and lines of credit and other consumer loans primarily throughout Connecticut and Massachusetts, and to a lesser extent the Northeast and certain Mid-Atlantic states.

The following table summarizes the composition of the Company’s total loan portfolio as of the dates presented:

Loan Portfolio Analysis



	At December 31,
	2014					2013					2012					2011					2010
(Dollars in thousands)	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
Real estate loans:
Residential	$	1,413,739		36.3	%	$	634,447		37.0	%	$	683,195		42.6	%	$	680,702		46.2	%	$	719,925		50.6	%
Commercial	1,678,936			43.1		776,913			45.3		697,133			43.4		593,867			40.3		489,511			34.4
Construction	185,843			4.8		52,243			3.1		49,980			3.1		50,654			3.4		78,627			5.5
Commercial Business	613,596			15.7		247,932			14.5		171,632			10.7		143,475			9.8		130,303			9.1
Installment and collateral	5,752			0.1		2,257			0.1		2,751			0.2		4,231			0.3		5,921			0.4
Total loans	3,897,866			100.0	%	1,713,792			100.0	%	1,604,691			100.0	%	1,472,929			100.0	%	1,424,287			100.0	%
Net deferred loan costs and premiums	4,006					2,403					771					494					523
Allowance for loan losses	(24,809		)			(19,183		)			(18,477		)			(16,025		)			(14,312		)
Loans, net	$	3,877,063				$	1,697,012				$	1,586,985				$	1,457,398				$	1,410,498

As shown above, gross loans were $3.90 billion , up $2.18 billion, or 127.4%, at December 31, 2014 from December 31, 2013 . The amount of outstanding gross loans increased $1.88 billion, which includes $18.5 million of purchased credit impaired loans, as a direct result of the Merger on April 30, 2014. Excluding the Merger, the Company experienced increases in most major loan categories.

Residential real estate loans continue to represent a significant segment of the Company’s loan portfolio as of December 31, 2014 , comprising 36.3% of total loans. The increase of $779.3 million from December 31, 2013 primarily reflects acquired balances as well as organic growth. The Company had significant originations of both adjustable and fixed rate mortgages of $320.6 million during the year, and sold loans totaling $136.7 million in the secondary market. The Company currently sells the majority of all originated fixed rate residential real estate loans with terms of 30 years, but will also sell 10, 15 and 20 year loans depending on the circumstances. The strong mortgage origination activity resulted from low market interest rates, competitive pricing and continued expansion of the residential mortgage business program.

Commercial real estate loans increased $902.0 million from December 31, 2013 , as the Bank acquired approximately $800.0 million in the Merger, and has experienced increased demand for commercial real estate loans given the expansion of the commercial banking division and the current rate environment. Commercial real estate lending is done both in market, Connecticut and Massachusetts, and regionally. Regional commercial real estate lending started at the Bank at the end of 2005, is done throughout the Northeast and down into the Mid-Atlantic states. The properties financed are high quality, income producing; and with experienced sponsorships. The program provides geographic diversification within the overall CRE portfolio. At December 31, 2014 , regional commercial real estate loans totaled approximately $400.3 million, with all loans performing as agreed. Mid-sized businesses continue to look to community banks for relationship banking and personalized lending services.

Construction real estate loans totaled $185.8 million at December 31, 2014 , an increase of $133.6 million from December 31, 2013 . Construction real estate loans consist of residential construction and commercial construction. Residential real estate construction segment loans are made to individuals for home construction whereby the borrower owns the parcel of

land and the funds are advanced in stages until completion. Residential real estate construction loans totaled $13.2 million at December 31, 2014 compared to $6.2 million at December 31, 2013 .

Commercial real estate construction loans are made for developing commercial real estate properties such as office complexes, apartment buildings and residential subdivisions. Total commercial real estate construction loans totaled $172.6 million at December 31, 2014 , of which $50.2 million is residential use and $122.4 million is commercial use, compared to total commercial real estate construction loans of $46.0 million at December 31, 2013 .

The Company originates loans with interest reserves on certain commercial construction credits depending on various factors including, but not limited to, quality of credit, interest rate and project type. At December 31, 2014 , the Company had three non-performing commercial construction loan totaling $611,000, with no funded interest reserves.

The Company’s long term strategy continues to be that of building a larger percentage of the Company’s assets in commercial loans, including real estate and other business loans. In December 2014, the Company announced the acquisition and expansion of our commercial loan teams in the greater Springfield and Worcester markets. Commercial business loans increased $365.7 million from December 31, 2013 , primarily due to acquired balances of approximately $290.0 million and continued focus on business development efforts including production from the shared national credit (“SNC”) program. The program is managed by an experienced senior banker and provides high quality, floating rate loans. All loans are independently underwritten and approved by the Bank. At December 31, 2014 , the SNC portfolio totaled approximately $153.5 million.

Loan Maturity Schedule

The following table sets forth the loan maturity schedule at December 31, 2014 :



	Loans Maturing
(In thousands)	Within One Year		After One But Within Five Years		After Five Years		Total
Real estate loans:
Residential	$	10,446	$	80,829	$	1,322,464	$	1,413,739
Commercial	50,130		428,148		1,200,658		1,678,936
Construction	37,202		54,920		93,721		185,843
Commercial business loans	70,270		265,785		277,541		613,596
Installment and collateral loans	553		4,096		1,103		5,752
Total	$	168,601	$	833,778	$	2,895,487	$	3,897,866

Loans Contractually Due Subsequent to December 31, 2015

The following table sets forth the scheduled repayments of fixed and adjustable rate loans at December 31, 2014 that are contractually due after December 31, 2015:



	Due After December 31, 2015
(In thousands)	Fixed		Adjustable		Total
Real estate loans:
Residential	$	848,962	$	554,331	$	1,403,293
Commercial	649,944		978,862		1,628,806
Construction	71,252		77,389		148,641
Commercial business loans	129,995		413,331		543,326
Installment and collateral loans	4,680		519		5,199
Total	$	1,704,833	$	2,024,432	$	3,729,265

Asset Quality

United’s lending strategy focuses on direct relationship lending within its primary market area as the quality of assets underwritten is an important factor in the successful operation of a financial institution. Non-performing assets, loan delinquency and credit loss levels are considered to be key measures of asset quality. Management strives to maintain asset quality through its underwriting standards, servicing of loans and management of non-performing assets since asset quality is a key factor in the determination of the level of the allowance for loan losses. See Note 6, “Loans Receivable and Allowance for Loan Losses” contained elsewhere in this report for further information concerning the Allowance for Loan Losses.

The following table details asset quality ratios for the following periods:

Asset Quality Ratios



	At December 31, 2014		At December 31, 2013
Non-performing loans as a percentage of total loans	0.83	%	0.80	%
Non-performing loans as a percentage of total assets	0.59		0.59
Net charge-offs as a percentage of average loans	0.12		0.08
Allowance for loan losses as a percentage of total loans	0.64		1.12
Allowance for loan losses to non-performing loans	76.67		140.50

Non-performing Assets

Generally loans are placed on non-accrual if collection of principal or interest in full is in doubt, if the loan has been restructured, or if any payment of principal or interest is past due 90 days or more. A loan may be returned to accrual status if it has demonstrated sustained contractual performance for six continuous months or if all principal and interest amounts contractually due are reasonably assured of repayment within a reasonable period. There are, on occasion, circumstances that cause commercial loans to be placed in the 90 days and accruing category, for example, loans that are considered to be well secured and in the process of collection or renewal. At of December 31, 2014, loans totaling $4.8 million were past due greater than 90 days and still accruing. These loans represent Legacy United purchased credit impaired loans for which an accretable fair value interest mark is being recognized and one loan which is fully guaranteed by the U.S. Government.

The following table details non-performing assets for the periods presented:

Non-performing Assets



	At December 31, 2014					At December 31, 2013
(Dollars in thousands)	Amount			Percent		Amount			Percent
Non-accrual loans:
Real estate loans:
Residential	$	12,018		34.74	%	$	8,481		55.86	%
Commercial	10,663			30.82		656			4.32
Construction	611			1.77		1,518			10.00
Commercial business loans	4,872			14.08		1,259			8.29
Installment and collateral	25			0.07		3			0.02
Total non-accrual loans excluding TDRs	28,189			81.48		11,917			78.49
Troubled debt restructurings - non-accruing	4,169			12.05		1,737			11.45
Total non-performing loans	32,358			93.53		13,654			89.94
Other real estate owned	2,239			6.47		1,529			10.06
Total non-performing assets	$	34,597		100.00	%	$	15,183		100.00	%
Total non-performing loans to total loans	0.83		%			0.80		%
Total non-performing assets to total assets	0.63		%			0.66		%

As displayed in the above table, non-performing assets at December 31, 2014 increased to $ 34.6 million compared to $ 15.2 million at December 31, 2013 . The increase primarily reflects $17.5 million of non-accrual loans from our acquired portfolio as well as increases in both residential and commercial real estate TDR loans.

Purchased credit impaired loans are excluded from non-performing loans. Rather, these loans are deemed performing over their lives and to the extent they become 90 days past due, would be included in the Accruing Loans Past Due 90 Days or More table.

Residential real estate non-performing loans increased $3.5 million due to $3.8 million related to the acquired portfolio. While there was a slight decline in the legacy originated portfolio, current economic conditions continue to have an effect on customers’ ability to make loan payments. Loans in the residential non-performing category, including TDRs, total $14.0 million and represent 1.0% of the total residential portfolio. The Company continues to originate loans with strong credit characteristics and routinely updates non-performing loans in terms of FICO scores and LTV ratios. Through continued

heightened account monitoring, collections and workout efforts, the Bank is committed to mortgage solution programs designed to assist homeowners to remain in their homes. As has been its practice historically, the Company does not originate subprime loans.

The increases in commercial real estate and commercial business non-performing loans was also primarily due to the acquired portfolios, which represented $10.1 million and $3.6 million, respectively. The collateral values of non-performing loans have been updated and in several instances partial charge-offs have been processed to conform to current market values.

If non-accrual loans had been performing in accordance with their original terms, the Company would have recorded $1.0 million, $347,000 and $415,000 in additional interest income during the years ended December 31, 2014, 2013 and 2012 , respectively.

Troubled Debt Restructuring

Loans are considered restructured in a troubled debt restructuring when the Company has granted concessions to a borrower due to the borrower’s financial condition that it otherwise would not have considered. These concessions include modifications of the terms of the debt such as reduction of the stated interest rate other than normal market rate adjustments, extension of maturity dates, or reduction of principal balance or accrued interest. The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit the Company by increasing the ultimate probability of collection.

Restructured loans are classified as accruing or non-accruing based on management’s assessment of the collectibility of the loan. Loans which are already on non-accrual status at the time of the restructuring generally remain on non-accrual status for a minimum of six months before management considers such loans for return to accruing TDR status. Accruing restructured loans are placed into non-accrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term. Once a loan is classified as a TDR it retains that classification for the life of the loan; however, some TDRs may demonstrate acceptable performance allowing the TDR loan to be placed on accruing TDR status.

The following tables provide detail of TDR balances and activity for the periods presented:

Troubled Debt Restructuring Balances



	At December 31,
(In thousands)	2014		2013
Recorded investment in TDRs
Accrual status	$	11,638	$	8,479
Non-accrual status	4,169		1,737
Total recorded investment	$	15,807	$	10,216
Accruing TDRs performing under modified terms more than one year	$	1,919	$	1,302
TDR allocated reserves included in the balance of allowance for loan losses	380		—
Additional funds committed to borrowers in TDR status	210		—

The increase in TDRs of $5.6 million primarily reflects the addition of three larger construction relationships and 16 residential real estate loans. The increase was partially offset by paydowns and payoffs totaling $2.9 million and a partial charge-off related to a commercial real estate loan totaling $750,000.

Troubled Debt Restructuring By Loan Type



	At December 31,
(In thousands)	2014		2013
Real estate loans:
Residential	$	3,965	$	2,114
Commercial	8,852		6,791
Construction	1,998		1,120
Commercial business loans	971		165
Installment and collateral	21		26
Total	$	15,807	$	10,216

Troubled Debt Restructuring Activity



	Years Ended December 31,
(In thousands)	2014			2013
TDRs, beginning of period	$	10,216		$	3,760
Current year modifications	9,231			7,576
Paydowns/draws on existing TDRs, net	(2,890		)	(376		)
Charge-offs post modification	(750		)	—
Transfer to OREO	—			(744		)
TDRs, end of period	$	15,807		$	10,216

Delinquent Loans

The following table presents past due loans greater than 29 days past due by loan category as of the dates indicated:



	Delinquent Loans
	30-89 Days				90 Days and Over				Total
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent
At December 31, 2014
Real estate loans:
Residential	$	22,867	33.7	%	$	7,320	10.9	%	$	30,187	44.6	%
Commercial	11,701		17.2		9,509		14.0		21,210		31.2
Construction	1,630		2.4		695		1.0		2,325		3.4
Commercial business loans	6,594		9.7		7,486		11.0		14,080		20.7
Installment and collateral	34		0.1		12		—		46		0.1
Total	$	42,826	63.1	%	$	25,022	36.9	%	$	67,848	100.0	%
At December 31, 2013
Real estate loans:
Residential	$	8,001	51.7	%	$	4,262	27.6	%	$	12,263	79.3	%
Commercial	513		3.3		656		4.2		1,169		7.5
Construction	—		—		1,306		8.5		1,306		8.5
Commercial business loans	3		—		704		4.5		707		4.5
Installment and collateral	36		0.2		3		—		39		0.2
Total	$	8,553	55.2	%	$	6,931	44.8	%	$	15,484	100.0	%

At December 31, 2014 , loans reported as past due 90 days or more and still accruing totaled $4.8 million and represent Legacy United purchased credit impaired loans for which an accretable fair value interest mark is being recognized and one loan which is fully guaranteed by the U.S. Government. At December 31, 2013 , there were no loans contractually past due 90 days or more and still accruing interest.

As a percentage of total loans, loans between 30 and 90 days delinquent were 1.10% and 0.50% at December 31, 2014 and December 31, 2013 , respectively. The increase in delinquency at December 31, 2014 is primarily attributable to delinquencies in the acquired loan portfolio. All non-performing loans have been updated with a current appraised value, and if necessary, a reduction to carrying value has been made.

Potential Problem Loans

The Bank performs an internal analysis of the loan portfolio in order to identify and quantify loans with higher than normal risk. Loans having a higher risk profile are assigned a risk rating corresponding to the level of weakness identified in the loan. All loans risk rated Special Mention, Substandard or Doubtful are listed on the Bank’s “watchlist” and are reviewed by management not less than on a quarterly basis to assess the level of risk and to ensure that appropriate actions are being taken to minimize potential loss exposure. Loans identified as being Loss are normally fully charged off. In addition, the Bank maintains a listing of “classified loans” consisting of Substandard and Doubtful loans which totaled $85.8 million at December 31, 2014 and which are generally transferred to the Special Assets area for extra attention.

The Company closely monitors the watchlist for signs of deterioration to mitigate the growth in non-accrual loans. At December 31, 2014 , watchlist loans, inclusive of the “classified loans”, totaled $142.6 million, of which $98.7 million are not considered impaired. See the section titled Classified Assets in Part I, Item 1. Business found elsewhere in this report for further discussion on classification of potential problem loans.

Allowance for Loan Losses

The allowance for loan losses and the reserve for unfunded credit commitments are maintained at a level estimated by management to provide for probable losses inherent within the loan portfolio. Probable losses are estimated based upon a quarterly review of the loan portfolio, which includes historic default and loss experience, specific problem loans, risk rating profile, economic conditions and other pertinent factors which, in management’s judgment, warrant current recognition in the loss estimation process. The Company’s Board Risk Committee meets quarterly to review and conclude on the adequacy of the reserves, and to present their recommendation to the Board of Directors.

Management considers the adequacy of the allowance for loan losses a critical accounting estimate. The adequacy of the allowance for loan losses is subject to considerable assumptions and judgment used in its determination. Therefore, actual losses could differ materially from management’s estimate if actual conditions differ significantly from the assumptions utilized. These conditions include economic factors in the Company’s market and nationally, industry trends and concentrations, real estate values and trends, and the financial condition and performance of individual borrowers. While management believes the allowance for loan losses is adequate as of December 31, 2014 , actual results may prove different and the differences could be significant.

The Company’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely. The Company recognizes full or partial charge-offs on collateral dependent impaired loans when the collateral is deemed to be insufficient to support the carrying value of the loan. The Company does not recognize a recovery when an updated appraisal indicates a subsequent increase in value.

The Company had a loan loss allowance of $ 24.8 million , or 0.64% of total loans at December 31, 2014 as compared to a loan loss allowance of $ 19.2 million , or 1.12% of total loans at December 31, 2013 . The decrease in the ratio from December 31, 2013 primarily reflects the increase in loan portfolio due to the Merger, with no corresponding carryover of the allowance for loan losses. Management believes that the allowance for loan losses is adequate and consistent with asset quality indicators and that it represents the best estimate of probable losses inherent in the loan portfolio. There are three components for the allowance for loan loss calculation:

General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial and consumer. Due to the continued expansion and some more unique risk characteristics, the regional commercial real estate loans have been segmented from the total commercial real estate loan portfolio. The regional commercial real estate loans are located throughout the Northeast and Middle Atlantic states and tend to have above average debt service coverage and loan-to-value ratios. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels and trends in delinquencies; level and trend of charge-offs and recoveries; trends in volume and types of loans; effects of changes in risk selection and underwriting standards, experience and depth of lending teams; weighted-average risk rating trends; and national and local economic trends and conditions. The qualitative factors are determined based on the various risk characteristics of each loan segment.

For acquired loans accounted for under ASC 310-30, evidence of credit quality deterioration as of the purchase date may include statistics such as past due status, refreshed borrower credit scores and refreshed loan-to-value (“LTV”), some of which are not immediately available as of the purchase date. The Company continues to evaluate this information and other credit-related information as it becomes available. ASC 310-30 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from the Company’s initial investment in loans if those differences are attributable, at least in part, to a deterioration in credit quality.

Allocated component

The allocated component relates to loans that are classified as impaired. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining

impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Impairment is measured on a loan-by-loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Residential and consumer loans are evaluated for impairment if payments are 90 days or more delinquent. Updated property evaluations are obtained at time of impairment and serve as the basis for the loss allocation if foreclosure is probable or the loan is collateral dependent.

Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Unallocated component

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. The unallocated portion of the allowance for loan loss at December 31, 2014 decreased $136,000 compared to December 31, 2013 .

See Note 6, “Loans Receivable and Allowance for Loan Losses” in the Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report for a table providing the activity in the Company’s allowance for loan losses for the years ended December 31, 2014 and 2013 , by loan segment.

Schedule of Allowance for Loan Losses

The following table sets forth activity in the allowance for loan losses for the years indicated:



	At or For the Years Ended December 31,
(Dollars in thousands)	2014			2013			2012			2011			2010
Balance at beginning of year	$	19,183		$	18,477		$	16,025		$	14,312		$	12,539
Provision for loan losses	9,496			2,046			3,587			3,021			4,109
Charge-offs:
Real estate	(2,644		)	(1,206		)	(1,174		)	(1,071		)	(1,951		)
Commercial business loans	(1,406		)	(190		)	(132		)	(480		)	(391		)
Installment and collateral loans	(139		)	(124		)	(48		)	(37		)	(34		)
Total charge-offs	(4,189		)	(1,520		)	(1,354		)	(1,588		)	(2,376		)
Recoveries:
Real estate	175			137			150			261			11
Commercial business loans	97			18			52			6			10
Installment and collateral loans	47			25			17			13			19
Total recoveries	319			180			219			280			40
Net charge-offs	(3,870		)	(1,340		)	(1,135		)	(1,308		)	(2,336		)
Balance at end of year	$	24,809		$	19,183		$	18,477		$	16,025		$	14,312
Ratios:
Allowance for loan losses to non-performing loans at end of year	76.67		%	140.50		%	115.08		%	127.08		%	115.79		%
Allowance for loan losses to total loans outstanding at end of year	0.64		%	1.12		%	1.15		%	1.09		%	1.00		%
Net charge-offs to average loans outstanding	0.12		%	0.08		%	0.07		%	0.09		%	0.17		%

The allowance for loan losses at December 31, 2014 increased $5.6 million to $ 24.8 million as compared to December 31, 2013 year-end balance of $ 19.2 million . The Company provided $ 9.5 million of allowance for loan loss provisions in 2014 . The Company recorded total loan charge-offs of $4.2 million and recorded $319,000 of loan recoveries from previously charged-off loans. Net charge-offs for 2014 were $3.9 million , an increase of $2.5 million as compared to 2013

net charge-offs. A post-merger comprehensive review of the acquired loan portfolio was completed by year-end to ensure a consistent application of risk ratings across the entire portfolio. As a result, there was a higher level of charge-offs in the fourth quarter attributing to the year over year increase. In the opinion of Board Risk Committee and the Board, the allowance for loan losses at December 31, 2014 is sufficient to provide for probable losses inherent within the loan portfolio.

At December 31, 2014 , the allowance for loan losses was 0.64% of the total loan portfolio and 76.67% of total non-performing loans. This compares to an allowance of 1.12% of total loans and 140.50% of total non-performing loans at December 31, 2013 . The decrease in the ratio from December 31, 2013 primarily reflects the increase in loan portfolio due to the Merger, with no corresponding carryover of the allowance for loan losses.

Allocation of Allowance for Loan Losses: The following table sets forth the allowance for loan losses allocated by loan category, the percent of allowance in each category to total allowance, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.



	At December 31,
	2014						2013						2012
(Dollars in thousands)	Allowance for Loan Losses		% of Allowance for Loan Losses		% of Loans in Category of Total Loans		Allowance for Loan Losses		% of Allowance for Loan Losses		% of Loans in Category of Total Loans		Allowance for Loan Losses		% of Allowance for Loan Losses		% of Loans in Category of Total Loans
Real Estate:
Residential	$	7,927	31.95	%	36.27	%	$	6,396	33.34	%	37.02	%	$	6,194	33.52	%	42.57	%
Commercial	9,418		37.96		43.07		8,288		43.20		45.33		8,051		43.57		43.44
Construction	1,470		5.93		4.77		829		4.32		3.05		807		4.37		3.12
Commercial business	5,808		23.41		15.74		3,394		17.69		14.47		2,916		15.78		10.70
Installment and collateral	75		0.30		0.15		29		0.16		0.13		29		0.16		0.17
Unallocated allowance	111		0.45		—		247		1.29		—		480		2.60		—
Total allowance for loan losses	$	24,809	100.00	%	100.00	%	$	19,183	100.00	%	100.00	%	$	18,477	100.00	%	100.00	%



	At December 31,
	2011						2010
(Dollars in thousands)	Allowance for Loan Losses		% of Allowance for Loan Losses		% of Loans in Category of Total Loans		Allowance for Loan Losses		% of Allowance for Loan Losses		% of Loans in Category of Total Loans
Real Estate:
Residential	$	5,071	31.64	%	46.21	%	$	4,688	32.76	%	50.54	%
Commercial	6,694		41.77		40.32		5,469		38.21		34.37
Construction	1,286		8.02		3.44		1,653		11.55		5.52
Commercial business loans	2,515		15.70		9.74		2,296		16.04		9.15
Installment and collateral	49		0.31		0.29		81		0.57		0.42
Unallocated allowance	410		2.56		—		125		0.87		—
Total allowance for loan losses	$	16,025	100.00	%	100.00	%	$	14,312	100.00	%	100.00	%

The level of allowance for loan loss assigned to each loan category reflects management’s evaluation at December 31, 2014 of credit risks, loss experience, present economic conditions, unidentified losses and other factors that may be inherent in the loan portfolio.

Sources of Funds

The primary source of the Company’s cash flows, for use in lending and meeting its general operational needs, is deposits. Additional sources of funds are from Federal Home Loan Bank of Boston advances, reverse repurchase agreements, federal funds lines, loan and mortgage-backed securities repayments, securities sales proceeds and maturities, subordinated debt and earnings. While scheduled loan and securities repayments are a relatively stable source of funds, loan and investment

security prepayments and deposit inflows are influenced by prevailing interest rates and local economic conditions and are inherently uncertain.

Deposits

The Company offers a wide variety of deposit products to consumer, business and municipal customers. Deposit customers can access their accounts in a variety of ways including branch banking, ATM’s, internet banking, mobile banking and telephone banking. Effective advertising, direct mail, well-designed product offerings, customer service and competitive pricing policies have been successful in attracting and retaining deposits. A key strategic objective is to grow the base of checking customers by retaining existing relationships while attracting new customers.

Deposits provide an important source of funding for the Bank as well as an ongoing stream of fee revenue. The Company attempts to control the flow of funds in its deposit accounts according to its need for funds and the cost of alternative sources of funding. A Retail Pricing Committee meets weekly and a Management ALCO Committee meets monthly, to determine pricing and marketing initiatives. Actions of these committees influence the flow of funds primarily by the pricing of deposits, which is affected to a large extent by competitive factors in its market area and asset/liability management strategies.

The following table presents deposits by category as of the dates indicated:



	At December 31,
	2014		2013		$ Change		% Change
(Dollars in thousands)
Demand deposits	$	602,359	$	266,609	$	335,750	125.9	%
NOW accounts	300,101		153,750		146,351		95.2
Regular savings and club accounts	528,614		219,635		308,979		140.7
Money market and investment savings	1,047,302		524,638		522,664		99.6
Total core deposits	2,478,376		1,164,632		1,313,744		112.8
Time deposits	1,556,935		570,573		986,362		172.9
Total deposits	$	4,035,311	$	1,735,205	$	2,300,106	132.6	%

Total deposits amounted to $4.04 billion at December 31, 2014 , up $2.30 billion from December 31, 2013 . Core deposits increased $1.31 billion , or 112.8% , from prior year end reflecting balances of $1.94 billion acquired in the Merger and the Company’s strategy to increase core deposits and reduce rates paid on interest-bearing deposits, particularly on time deposits, in order to improve the net interest margin and the interest rate spread while continuing to build core relationships. This strategy included promoting commercial deposit and cash management deposit products, and competitive rate shorter term deposits and money market accounts in response to the competition within our marketplace.

Time deposits included brokered certificates of deposit of $241.9 million and $88.7 million at December 31, 2014 and 2013 , respectively. The Company utilizes out-of-market brokered time deposits as part of its overall funding program along with other sources. Excluding out-of-market brokered certificates of deposits, in-market time deposits totaled $1.32 billion at December 31, 2014 . United Bank is a member of the Certificate Deposit Account Registry Service network.

As of December 31, 2014 , the aggregate amount of outstanding time deposits in amounts greater than or equal to $100,000 was $724.0 million. The following table sets forth the maturity of those time deposits as of December 31, 2014 .

Time Deposit Maturities of $100,000 or More.



(In thousands)	At December 31, 2014
Three months or less	$	105,667
Over three months through six months	106,339
Over six months through one year	241,556
Over one year through three years	231,199
Over three years	39,231
Total	$	723,992

Borrowings

The Company also uses various types of short-term and long-term borrowings in meeting funding needs. While customer deposits remain the primary source for funding loan originations, management uses short-term and long-term borrowings as a supplementary funding source for loan growth and other liquidity needs when the cost of these funds are favorable compared to alternative funding, including deposits.

The following table presents borrowings by category as of the dates indicated:



	At December 31,
	2014		2013		$ Change		% Change
(Dollars in thousands)
FHLBB advances (1)	$	580,973	$	192,036	$	388,937	202.5	%
Subordinated debt (2)	79,288		—		79,288		100.0
Wholesale repurchase agreements	69,242		48,192		21,050		43.7
Customer repurchase agreements	41,335		—		41,335		100.0
Other	6,476		—		6,476		100.0
Total borrowings	$	777,314	$	240,228	$	537,086	223.6	%


(1)	FHLBB advances include $5.4 million purchase accounting mark adjustment


(2)	Subordinated debt includes $7.7 million acquired junior subordinated debt, net of mark to market adjustments of -$2.2 million, and $75 million Subordinated Notes, net of deferred costs associated of -$1.2 million

United Bank is a member of the Federal Home Loan Bank System, which consists of twelve district Federal Home Loan Banks, each subject to the supervision and regulation of the Federal Housing Finance Agency. Members are required to own capital stock in the FHLBB in order for the Bank to access advances and borrowings which are collateralized by certain home mortgages or securities of the U.S. Government and its agencies. The capital stock investment is restricted in that there is no market for it, and it can only be redeemed by the Federal Home Loan Bank of Boston.

Total Federal Home Loan Bank of Boston advances increased $383.5 million to $575.6 million at December 31, 2014 exclusive of the purchase accounting mark adjustment on the advances, compared to $192.0 million at December 31, 2013. This increase is a result of greater utilization of FHLBB advances at lower interest rates, combined with the growth in our core deposits, which assisted the Company in funding growth in our securities and loan portfolios, and in meeting other liquidity needs while effectively managing interest rate risk. At December 31, 2014, all of the Company’s outstanding FHLBB advances were at fixed coupons ranging from 0.21% to 7.15%, with an average cost of 0.84%. FHLBB borrowings represented 10.5% and 8.3% of assets at December 31, 2014 and 2013, respectively.

Borrowings under reverse purchase agreements totaled $69.2 million as of December 31, 2014. The outstanding borrowings consisted of five individual agreements with remaining terms of five years or less and a weighted-average cost of 1.07%. Retail repurchase agreements, which have a term of one day and are backed by the purchasers’ interest in certain U.S. Government or government-sponsored securities, totaled $41.3 million at December 31, 2014.

On September 23, 2014, the Company closed its public offering of $75.0 million of its 5.75% Subordinated Notes due October 1, 2024, in which the Company plans to use the proceeds from the notes for general corporate purposes.

Junior subordinated debentures totaling $7.7 million at December 31, 2014 were acquired through the Merger in the form of trust preferred securities.

Advances payable to the FHLBB include short-term advances with maturity dates of one year or less. The following table summarizes certain information concerning short-term FHLBB advances at and for the periods indicated:



	For the Years Ended December 31,
	2014			2013			2012
(In thousands)
Balance at end of period	$	432,000		$	118,112		$	61,000
Average amount outstanding during the period	205,044			104,037			53,500
Maximum amount outstanding at any month-end	432,000			171,000			77,000
Weighted-average interest rate during the period	0.47		%	0.33		%	0.59		%
Weighted-average interest rate at end of period	0.38		%	0.45		%	0.33		%

Liquidity and Capital Resources

Liquidity is the ability to meet cash needs at all times with available cash or by conversion of other assets to cash at a reasonable price and in a timely manner. The Company maintains liquid assets at levels the Company considers adequate to meet its liquidity needs. The Company adjusts its liquidity levels to fund loan commitments, repay its borrowings, fund deposit outflows, pay escrow obligations on all items in the loan portfolio and to fund operations. The Company also adjusts liquidity as appropriate to meet asset and liability management objectives.

The Company’s primary sources of liquidity are deposits, amortization and prepayment of loans, the sale in the secondary market of loans held for sale, maturities and sales of investment securities and other short-term investments, periodic pay downs of mortgage-backed securities, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. The Company sets the interest rates on our deposits to maintain a desired level of total deposits. In addition, the Company invests excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

A portion of the Company’s liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At December 31, 2014 , $ 87.0 million of the Company’s assets were invested in cash and cash equivalents compared to $ 45.2 million at December 31, 2013 . The Company’s primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit accounts, proceeds from residential loan sales and advances from the Federal Home Loan Bank of Boston.

Liquidity management is both a daily and longer-term function of business management. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Boston, which provide an additional source of funds. At December 31, 2014 , the Company had $575.6 million in advances from the Federal Home Loan Bank of Boston and an additional available borrowing limit of $243.2 million based on collateral requirements of the Federal Home Loan Bank of Boston inclusive of the line of credit. In addition, the Bank has relationships with brokered sweep deposit providers with outstanding balances of $111.8 million at December 31, 2014. Internal policies limit wholesale borrowings to 30% of total assets, or $1.64 billion, at December 31, 2014 . In addition, the Company has uncommitted federal funds lines of credit with five counterparties totaling $122.5 million at December 31, 2014 . No federal funds purchased were outstanding at December 31, 2014.

The Company has established access to the Federal Reserve Bank of Boston’s discount window through a borrower in custody agreement. As of December 31, 2014 , the Bank had pledged 27 commercial loans, with outstanding balances totaling $194.7 million. Based on the amount of pledged collateral, the Bank had available liquidity of $151.6 million.

At December 31, 2014 , the Company had outstanding commitments to originate loans of $128.8 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $775.0 million. At December 31, 2014 , time deposits scheduled to mature in less than one year totaled $1.06 billion. Based on prior experience, management believes that a significant portion of such deposits will remain with the Company, although there can be no assurance that this will be the case. In the event a significant portion of its deposits are not retained by the Company, it will have to utilize other funding sources, such as Federal Home Loan Bank of Boston advances in order to maintain its level of assets. Alternatively, we would reduce our level of liquid assets, such as our cash and cash equivalents in order to meet funding needs. In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal.

The main sources of liquidity at the parent company level are dividends from United Bank, and proceeds received from the Company’s issuance of $75.0 million of Subordinated Notes in September 2014. During 2014 and 2013 the Bank paid $13.3 million and $11.2 million, respectively, to the Company in dividends. The main uses of liquidity are payments of dividends to common stockholders, repurchase of United Financial’s common stock, and corporate operating expenses. There are certain restrictions on the payment of dividends by the Bank as discussed in the Supervision and Regulation section of “Item 1 - Business” found elsewhere in this report. See Note 17, “Regulatory Matters” for further information on dividend restrictions.

The Company and the Bank are subject to various regulatory capital requirements. As of December 31, 2014 , the Company and the Bank are categorized as “well-capitalized” under the regulatory framework for prompt corrective action. See Note 17, “Regulatory Matters” in the Notes to the Consolidated Financial Statements contained elsewhere in this report for discussion of capital requirements.

The liquidity position of the Company is continuously monitored and adjustments are made to balance between sources and uses of funds as deemed appropriate. Management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity, which if implemented would have a material adverse effect on the Company. The Company has a detailed liquidity contingency plan which is designed to respond to liquidity concerns in a prompt and comprehensive manner. It is designed to provide early detection of potential problems and details specific actions required to address liquidity stress scenarios.

Contractual Obligations and Commercial Commitments

The following tables present information indicating various obligations and commitments of the Company as of December 31, 2014 and the respective maturity dates. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any terms or covenants established in the contract and generally have fixed expiration dates or other termination clauses.

The following tables present information indicating various obligations and commitments made by the Company as of December 31, 2014 and the respective payment dates:



	Contractual Obligations
(In thousands)	Total		One Year or Less		More than One Year Through Three Years		More than Three Years Through Five Years		Over Five Years
Federal Home Loan Bank advances (1)	$	575,561	$	435,763	$	85,714	$	36,784	$	17,300
Interest expense payable on Federal Home Loan Bank advances	11,501		759		5,444		2,755		2,543
Leases (2)	103,472		5,048		10,220		10,382		77,822
Subordinated Notes (3)	82,732		—		—		—		82,732
Interest expense payable on Subordinated Notes	45,513		4,476		8,952		8,952		23,133
Core service provider (4)	17,104		4,659		9,318		3,127		—
Other (5)	1,146		96		209		223		618
Total Contractual Obligations	$	837,029	$	450,801	$	119,857	$	62,223	$	204,148


(1)	Secured under a blanket security agreement on qualifying assets, principally, mortgage loans.


(2)	Represents non-cancelable capital and operating leases for offices and office equipment.


(3)	Consists of $7.7 million of acquired junior subordinated debt maturing March 2036, and $75.0 million in Subordinated Notes due October 2024


(4)	Payments to the core service provider under the existing contract are primarily based on the volume of accounts served or the transactions processed. The expected payments shown in this table are based on an estimate of our current number of accounts to be served or transactions to be processed, but do not include any projection of the effect of pricing or volume changes.


(5)	Consists of estimated benefit payments over the next ten years to retirees under unfunded nonqualified pension plans.



	Other Commitments
(In thousands)	Total		One Year or Less		More than One Year Through Three Years		More than Three Years Through Five Years		Over Five Years
Real estate loan commitments(1)	$	114,761	$	114,761	$	—	$	—	$	—
Commercial business loan commitments(1)	14,005		14,005		—		—		—
Unused commercial business loan lines of credit	295,639		77,300		16,765		31,510		170,064
Unused home equity lines of credit(2)	321,346		7,894		27,172		31,027		255,253
Unused construction loans	144,118		31,788		32,707		9,766		69,857
Standby letters of credit	12,547		10,474		1,447		626		—
Unused checking overdraft lines of credit(3)	1,304		—		—		—		1,304
Total Other Commitments	$	903,720	$	256,222	$	78,091	$	72,929	$	496,478

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.”

Other Off-Balance Sheet Commitments

In conjunction with its merger with Legacy United, the Company acquired investments in partnerships, including low income housing tax credit and new markets housing tax credit partnerships. Additionally, in September 2014, the Company invested in a tax credit partnership associated with alternative energy. The net carrying balance of these investments totaled $13.5 million at December 31, 2014 and is included in other assets in the consolidated statement of condition. At December 31, 2014 , the Company was contractually committed under these limited partnership agreements to make additional capital contributions of approximately $1.8 million , which constitutes our maximum potential obligation to these partnerships. The Company makes additional investments in response to formal written requests, rather than a funding schedule. Funding requests are submitted when the partnerships plan to make additional investments.

Recently Issued Accounting Pronouncements

See Note 2, “Recent Accounting Pronouncements” to the Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on the Company’s Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Management of Market and Interest Rate Risk

General: The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, in general have longer contractual maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established a Risk Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Management monitors the level of interest rate risk on a regular basis and the Risk Committee meets at least quarterly to review our asset/liability policies and interest rate risk position.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. During the low interest rate environment that has existed in recent years, we have implemented the following strategies to manage our interest rate risk: (i) emphasizing adjustable rate loans including, adjustable rate one-to-four family, commercial and consumer loans, (ii) selling longer-term one-to-four family fixed rate mortgage loans in the secondary market, (iii) reducing and shortening the expected average life of the investment portfolio, (iv) a forward starting hedge strategy for future dated wholesale funding and (v) a loan level hedging program. These measures should serve to reduce the volatility of our future net interest income in different interest rate environments.

Quantitative Analysis:

Income Simulation: Simulation analysis is used to estimate our interest rate risk exposure at a particular point in time. Beginning June 30, 2013, the Company transitioned from a dynamic method that incorporated forecasted balance sheet growth assumptions to a static method in which a stable balance sheet (both size and mix) is projected throughout the modeling horizon. This adoption was made in a continued effort to align with regulatory best practices and to highlight the current level of risk in the Company’s positions without the effects of growth assumptions. We utilize the income simulation method to analyze our interest rate sensitivity position to manage the risk associated with interest rate movements. At least quarterly, our Risk Committee of the Board of Directors reviews the potential effect changes in interest rates could have on the repayment or repricing of rate sensitive assets and funding requirements of rate sensitive liabilities. Our most recent simulation uses projected repricing of assets and liabilities at December 31, 2014 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rate assumptions as well as deposit characterization assumptions can have a significant impact on interest income simulation results. Because of the large percentage of loans and mortgage-backed assets we hold, rising or falling interest rates may have a significant impact on the actual prepayment speeds of our mortgage related assets that may in turn effect our interest rate sensitivity position. When interest rates rise, prepayment speeds slow and the average

expected life of our assets would tend to lengthen more than the expected average life of our liabilities and therefore would most likely result in an increase to our liability sensitive position.



	Percentage Decrease in Estimated Net Interest Income Over 12 Months
300 basis point increase in rates	4.05	%
50 basis point decrease in rates	2.54	%

United Bank’s Asset/Liability policy currently limits projected changes in net interest income based on a matrix of projected total risk-based capital relative to the interest rate change for each twelve month period measured compared to the flat rate scenario. As a result, the higher a level of projected risk-based capital, the higher the limit of projected net interest income volatility the Company will accept. As the level of projected risk-based capital is reduced, the policy requires that net interest income volatility also is reduced, making the limit dynamic relative to the capital level needed to support it. These policy limits are re-evaluated on a periodic basis (not less than annually) and may be modified, as appropriate. Because of the liability-sensitivity of our balance sheet, income is projected to decrease if interest rates rise. Also included in the decreasing rate scenario is the assumption that further declines are reflective of a deeper recession as well as narrower credit spreads from Federal Open Market Committee actions. At December 31, 2014 , income at risk (i.e., the change in net interest income) decreased 4.05% and decreased 2.54% based on a 300 basis point average increase or a 50 basis point average decrease, respectively. While we believe the assumptions used are reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

Item 8. Financial Statements and Supplementary Data

UNITED FINANCIAL BANCORP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS




	Page No.
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	72
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	73
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Condition as of December 31, 2014 and 2013	75
Consolidated Statements of Net Income for the Years Ended December 31, 2014, 2013 and 2012	76
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 2012	77
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 2012	78
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012	79
Notes to Consolidated Financial Statements	81

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of United Financial Bancorp, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 , based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (1992). Based on that assessment, management concluded that, as of December 31, 2014 , the Company’s internal control over financial reporting is effective based on the criteria established in Internal Control — Integrated Framework (1992).

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been audited by Wolf & Company, P.C., an independent registered public accounting firm.




/s/ William H.W. Crawford, IV				/s/ Eric R. Newell

William H.W. Crawford, IV				Eric R. Newell
Chief Executive Officer				Executive Vice President, Chief Financial
and Director				Officer and Treasurer

Date: March 9, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders

United Financial Bancorp, Inc.

We have audited United Financial Bancorp, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014 , based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. United Financial Bancorp, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Also, because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), our audit of United Financial Bancorp, Inc.’s internal control over financial reporting included controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) and the Federal Financial Institutions Examination Council Instructions for Consolidated Reports of Condition and Income. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, United Financial Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 , based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the December 31, 2014 Consolidated Financial Statements of United Financial Bancorp, Inc. and subsidiaries and our report dated March 9, 2015 expressed an unqualified opinion.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 9, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON CONSOLIDATED FINANCIAL STATEMENTS

To the Board of Directors and Stockholders of

United Financial Bancorp, Inc.

We have audited the accompanying Consolidated Statements of Condition of United Financial Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2014 and 2013 , and the related Consolidated Statements of Net Income, Comprehensive Income, Changes in Stockholders’ Equity and Cash Flows for each of the years in the three-year period ended December 31, 2014 . These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of United Financial Bancorp, Inc. and subsidiaries as of December 31, 2014 and 2013 , and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), United Financial Bancorp, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 9, 2015 expressed an unqualified opinion on the effectiveness of United Financial Inc. and subsidiaries’ internal control over financial reporting.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 9, 2015

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Condition

December 31, 2014 and 2013



(In Thousands, Except Share Data)	2014			2013
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	43,416		$	20,308
Short-term investments	43,536			24,927
Total cash and cash equivalents	86,952			45,235
Available for sale securities-at fair value	1,053,011			404,903
Held to maturity securities-at amortized cost	15,368			13,830
Loans held for sale	8,220			422
Loans receivable (net of allowance for loan losses of $24,809 in 2014 and $19,183 in 2013)	3,877,063			1,697,012
Federal Home Loan Bank stock, at cost	31,950			15,053
Accrued interest receivable	14,212			5,706
Deferred tax asset-net	33,833			10,697
Premises and equipment-net	57,665			24,690
Goodwill	115,240			1,070
Core deposit intangible	9,302			—
Cash surrender value of bank-owned life insurance	122,622			64,470
Other real estate owned	2,239			1,529
Other assets	49,132			16,998
	$	5,476,809		$	2,301,615
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest-bearing	$	602,359		$	266,609
Interest-bearing	3,432,952			1,468,596
Total deposits	4,035,311			1,735,205
Mortgagors’ and investors’ escrow accounts	13,004			6,342
Advances from the Federal Home Loan Bank	580,973			192,036
Other borrowings	196,341			48,192
Accrued expenses and other liabilities	48,772			20,458
Total liabilities	4,874,401			2,002,233
Commitments and contingencies (notes 7 and 20)
Stockholders’ equity:
Preferred stock (no par value; 2,000,000 shares authorized; no shares issued)	—			—
Common stock (no par value; 60,000,000 shares authorized; 49,537,700 and 29,456,290 shares issued and 49,537,700 and 25,968,404 outstanding at December 31, 2014 and 2013, respectively)	514,189			243,776
Additional paid-in capital	16,007			15,808
Unearned compensation — ESOP	(6,150		)	(7,151		)
Retained earnings	84,852			96,078
Accumulated other comprehensive loss, net of tax	(6,490		)	(4,766		)
Treasury stock, at cost (3,487,886 shares at December 31, 2013)	—			(44,363		)
Total stockholders’ equity	602,408			299,382
	$	5,476,809		$	2,301,615

See accompanying notes to consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Net Income Years Ended December 31, 2014, 2013 and 2012

(In Thousands, Except Share Data)	2014			2013		2012
Interest and dividend income:
Loans	$	133,011		$	67,752	$	71,201
Securities-taxable interest	16,367			6,687		4,524
Securities-non-taxable interest	5,113			2,748		1,979
Securities-dividends	1,302			250		173
Interest-bearing deposits	86			80		75
Total interest and dividend income	155,879			77,517		77,952
Interest expense:
Deposits	13,559			7,992		8,734
Borrowed funds	4,448			2,468		2,210
Total interest expense	18,007			10,460		10,944
Net interest income	137,872			67,057		67,008
Provision for loan losses	9,496			2,046		3,587
Net interest income after provision for loan losses	128,376			65,011		63,421
Non-interest income:
Service charges and fees	14,473			7,935		6,480
Net gain from sales of loans	3,148			5,054		4,417
Bank-owned life insurance	3,042			2,092		1,920
Net gain from sales of securities	1,228			585		914
Net loss on limited partnership investments	(4,224		)	—		—
Other income (loss)	(1,062		)	1,385		976
Total non-interest income	16,605			17,051		14,707
Non-interest expense:
Salaries and employee benefits	59,332			36,428		33,186
Occupancy and equipment	13,239			6,679		4,653
Service bureau fees	8,179			3,287		4,036
Professional fees	3,662			2,377		3,233
Marketing and promotions	2,296			476		412
FDIC insurance assessments	2,553			1,172		1,046
Other real estate owned	792			874		540
Core deposit intangible amortization	1,283			—		—
Merger and acquisition expense	36,918			2,141		—
Other	16,178			9,032		8,590
Total non-interest expense	144,432			62,466		55,696
Income before income taxes	549			19,596		22,432
Provision (benefit) for income taxes	(6,233		)	5,369		6,635
Net income	$	6,782		$	14,227	$	15,797
Net income per share:
Basic	$	0.16		$	0.55	$	0.57
Diluted	$	0.16		$	0.54	$	0.56
Weighted-average shares outstanding:
Basic	42,829,094			26,061,942		27,796,116
Diluted	43,269,517			26,426,220		28,025,610

See accompanying notes to consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2014, 2013 and 2012



(In thousands)	2014			2013			2012
Net income	$	6,782		$	14,227		$	15,797
Other comprehensive income (loss):
Securities available for sale:
Unrealized holding gains (losses)	13,847			(15,704		)	1,689
Reclassification adjustment for gains realized in income(1)	(1,228		)	(585		)	(914		)
Net unrealized gains (losses)	12,619			(16,289		)	775
Tax effect - benefit (expense)	(4,430		)	5,701			(272		)
Net-of-tax amount - securities available for sale	8,189			(10,588		)	503
Interest rate swaps designated as cash flow hedges:
Unrealized gains (losses)	(8,385		)	7,537			(148		)
Tax effect - benefit (expense)	2,945			(2,638		)	52
Net-of-tax amount - interest rate swaps	(5,440		)	4,899			(96		)
Defined benefit pension plans:
Reclassification adjustment for losses recognized in net periodic benefit cost(2)	(277		)	784			1,236
Reclassification adjustment for prior service costs recognized in net periodic benefit cost (2)	—			—			(48		)
Prior service cost arising during the period	—			—			(80		)
Gains (losses) arising during the period	(6,460		)	5,842			2,380
Change in gains or losses and prior service costs	(6,737		)	6,626			3,488
Tax effect - benefit (expense)	2,427			(2,319		)	(1,220		)
Net-of-tax amount - pension plans	(4,310		)	4,307			2,268
Other post-retirement plans:
Reclassification adjustment for prior service costs recognized in net periodic benefit cost(3)	13			23			27
Reclassification adjustment for losses (gains) recognized in net periodic benefit cost(4)	(9		)	72			81
Prior service cost arising during the period	168			105			—
Gains (losses) arising during the period	(372		)	820			(68		)
Change in gains (losses) and prior service costs	(200		)	1,020			40
Tax effect - benefit (expense)	37			(357		)	(14		)
Net-of-tax amount - post-retirement plans	(163		)	663			26
Net-of-tax amount - pension and post-retirement plans	(4,473		)	4,970			2,294
Total other comprehensive income (loss)	(1,724		)	(719		)	2,701
Comprehensive income	$	5,058		$	13,508		$	18,498


(1)	Amounts are included in net gains on sales of securities in the Consolidated Statements of Net Income. Income tax expense associated with the reclassification adjustment for the years ended December 31, 2014, 2013 and 2012 was $442 , $205 and $320 , respectively.


(2)	Amounts are included in salaries and employee benefits in the Consolidated Statements of Net Income. Income tax expense (benefit) associated with the reclassification adjustment for the years ended December 31, 2014, 2013 and 2012 was $(100) , $274 and $433 , respectively.


(3)	Amounts are included in salaries and employee benefits in the Consolidated Statements of Net Income. Income tax expense associated with the reclassification adjustment for the years ended December 31, 2014, 2013 and 2012 was $7 , $8 and $9 , respectively.


(4)	Amounts are included in salaries and employee benefits in the Consolidated Statements of Net Income. Income tax expense (benefit) associated with the reclassification adjustment for the years ended December 31, 2014, 2013 and 2012 was $(3) , $25 and $28 , respectively.

See accompanying notes to consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2014, 2013 and 2012



(In thousands, except share data)	Common Stock					Additional Paid-in Capital			Unearned Compensation - ESOP			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Total Stockholders’ Equity
	Shares		Amount			Additional Paid-in Capital			Unearned Compensation - ESOP			Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Amount			Total Stockholders’ Equity
Balance at December 31, 2011	29,514,468		$	243,776		$	15,189		$	(9,453	)	$	90,707		$	(6,748	)	—		$	—		$	333,471
Comprehensive income	—		—			—			—			15,797			2,701			—		—			18,498
Share-based compensation expense	—		—			2,976			—			—			—			—		—			2,976
ESOP shares released or committed to be released	—		—			382			1,147			—			—			—		—			1,529
Cancellation of shares for tax withholding	(27,105	)	—			(276		)	—			—			—			—		—			(276		)
Reissuance of treasury shares for restricted stock grants	—		—			(4,686		)	—			(317		)	—			(426,005	)	4,999			(4		)
Reissuance of treasury shares for stock options exercised	—		—			(167		)	—			—			—			(50,005	)	586			419
Treasury stock purchased	—		—			—			—			—			—			1,806,476		(21,626		)	(21,626		)
Dividends declared ($0.52 per common share)	—		—			—			—			(14,376		)	—			—		—			(14,376		)
Balance at December 31, 2012	29,487,363		243,776			13,418			(8,306		)	91,811			(4,047		)	1,330,466		(16,041		)	320,611
Comprehensive income	—		—			—			—			14,227			(719		)	—		—			13,508
Adoption of MSR fair value accounting	—		—			—			—			502			—			—		—			502
Share-based compensation expense	—		—			2,665			—			—			—			—		—			2,665
ESOP shares released or committed to be released	—		—			552			1,155			—			—			—		—			1,707
ESOP Forfeiture	—		—			357			—			—			—			—		—			357
Cancellation of shares for tax withholding	(24,932	)	—			(357		)	—			—			—			—		—			(357		)
Reissuance of treasury shares for restricted stock grants	—		—			(633		)	—			(9		)	—			(53,834	)	642			—
Reissuance of treasury shares for stock options exercised	—		—			(259		)	—			—			—			(90,411	)	1,064			805
Treasury stock purchased	—		—			—			—			—			—			2,301,665		(30,028		)	(30,028		)
Forfeited unvested restricted stock	(6,141	)	—			—			—			—			—			—		—			—
Tax benefit from share-based awards	—		—			65			—			—			—			—		—			65
Dividends declared ($0.40 per common share)	—		—			—			—			(10,453		)	—			—		—			(10,453		)
Balance at December 31, 2013	29,456,290		$	243,776		$	15,808		$	(7,151	)	$	96,078		$	(4,766	)	3,487,886		$	(44,363	)	$	299,382
Comprehensive income	—		—			—			—			6,782			(1,724		)	—		—			5,058
Issuance of common stock for the acquisition of United Financial Bancorp, Inc.	26,706,401		356,365			—			—			—			—			—		—			356,365
Cancellation of treasury shares	(3,476,270	)	(44,226		)	—			—			—			—			(3,476,270	)	44,226			—
Common stock repurchased	(3,507,324	)	(47,772		)	—			—			—			—			—		—			(47,772		)
Share-based compensation expense	—		—			3,957			—			—			—			—		—			3,957
ESOP shares released or committed to be released	—		—			726			1,001			—			—			—		—			1,727
Shares issued for stock options exercised	321,058		4,530			(2,421		)	—			—			—			(11,616	)	137			2,246
Shares issued for restricted stock grants	138,482		1,889			(1,889		)	—			—			—			—		—			—
Cancellation of shares for tax withholding	(100,937	)	(373		)	(994		)	—			—			—			—		—			(1,367		)
Tax benefit from share-based awards	—		—			820			—			—			—			—		—			820
Dividends paid ($0.40 per common share)	—		—			—			—			(18,008		)	—			—		—			(18,008		)
Balance at December 31, 2014	49,537,700		$	514,189		$	16,007		$	(6,150	)	$	84,852		$	(6,490	)	—		$	—		$	602,408

See accompanying notes to consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2014, 2013 and 2012

(In thousands)	2014			2013			2012
Cash flows from operating activities:
Net income	$	6,782		$	14,227		$	15,797
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and discounts on investments, net	2,680			471			470
Accretion of intangible assets and purchase accounting marks, net	(10,899		)	—			—
Amortization of subordinated debt issuance costs	34			—			—
Share-based compensation expense	3,957			2,665			2,976
ESOP expense	1,727			1,707			1,529
Loss on extinguishment of debt	288			—			—
Tax benefit from share-based awards	(820		)	(65		)	—
Provision for loan losses	9,496			2,046			3,587
Net gain from sales of securities	(1,228		)	(585		)	(914		)
Goodwill impairment	—			—			79
Loans originated for sale	(145,124		)	(144,597		)	(126,700		)
Proceeds from sales of loans held for sale	140,474			154,521			125,825
Decrease (increase) in mortgage servicing asset	(138		)	3,051			274
Loss (gain) on sales of other real estate owned	(409		)	85			84
Net gain from sale of loans	(3,148		)	(5,054		)	(4,417		)
Loss on disposal of equipment	1,210			113			8
Write-downs of other real estate owned	213			287			183
Depreciation and amortization	3,762			2,383			1,379
Loss on limited partnerships	4,224			—			—
Loss due to lease terminations	1,888			—			—
Deferred income tax expense (benefit)	7,361			410			(1,858		)
Increase in cash surrender value of bank-owned life insurance	(3,042		)	(2,092		)	(1,920		)
Net change in:
Deferred loan fees and premiums	(1,603		)	(1,632		)	(276		)
Accrued interest receivable	(2,237		)	(844		)	(773		)
Other assets	(32,721		)	(1,977		)	808
Accrued expenses and other liabilities	7,507			(1,417		)	4,943
Net cash used in operating activities	(9,766		)	23,703			21,084
Cash flows from investing activities:
Proceeds from sales of available for sale securities	511,044			44,880			29,285
Proceeds from calls and maturities of available for sale securities	21,220			—			14,800
Principal payments on available for sale securities	61,425			26,862			33,393
Principal payments on held to maturity securities	783			2,373			3,468
Purchases of available for sale securities	(885,610		)	(245,609		)	(165,073		)
Purchases of held to maturity securities	(2,342		)	(10,093		)	—
Cash acquired from United Financial Bancorp, Inc.	25,410			—			—
Redemption of FHLBB stock	2,297			814			1,140
Purchase of FHLBB stock	(1,860		)	—			—
Proceeds from sale of other real estate owned	3,869			4,042			2,113
Proceeds from portfolio loan sales	—			70,715			—
Purchases of loans	(16,310		)	(14,142		)	(3,692		)
Loan originations, net of principal repayments	(303,274		)	(170,111		)	(131,424		)
Purchase of bank-owned life insurance	—			(4,008		)	(25,000		)
Proceeds from sale of equipment	327			—			8
Purchases of premises and equipment	(12,719		)	(7,108		)	(5,971		)
Net cash used in investing activities	(595,740		)	(301,385		)	(246,953		)

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Concluded) Years Ended December 31, 2014, 2013 and 2012

(In thousands)	2014			2013			2012
Cash flows from financing activities:
Net increase in non-interest-bearing deposits	2,550			27,685			32,508
Net increase in interest-bearing deposits	357,800			202,840			145,406
Net increase (decrease) in mortgagors’ and investors’ escrow accounts	4,604			(434		)	924
Net increase in short-term FHLBB advances	275,776			64,112			61,000
Repayments of long-term FHLBB advances	(6,076		)	(15,182		)	(7,026		)
Proceeds from long-term FHLBB advances	10,000			—			23,250
Repayments of FHLBB borrowings and penalty	(12,466		)	—			—
Net increase in other borrowings, excluding proceeds from 2014 subordinated debt issuance	4,860			48,192			—
Proceeds from issuance of subordinated debt, net of issuance costs	73,733			—			—
Proceeds from exercise of stock options	2,246			805			419
Common stock repurchased	(47,249		)	(30,028		)	(21,626		)
Cancellation of shares for tax withholding	(1,367		)	(357		)	(276		)
Tax benefit from share-based awards	820			65			—
Cash dividend paid on common stock	(18,008		)	(10,453		)	(14,376		)
ESOP forfeiture	—			357			—
Reissuance of treasury shares	—			—			(4		)
Net cash provided by financing activities	647,223			287,602			220,199
Net increase (decrease) in cash and cash equivalents	41,717			9,920			(5,670		)
Cash and cash equivalents - beginning of year	45,235			35,315			40,985
Cash and cash equivalents - end of year	$	86,952		$	45,235		$	35,315
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	21,824		$	10,465		$	10,860
Income taxes, net	3,599			7,017			5,311
Transfer of loans to other real estate owned	2,339			3,097			2,218
Increase (decrease) in due to broker, investment purchases	(4,855		)	1,758			1,386
Increase in due to broker, common stock buyback	523			—			—
Acquisition of noncash assets and liabilities:
Fair value of assets acquired	2,396,937			—			—
Fair value of liabilities assumed	2,154,713			—			—

See accompanying notes to consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements



Note 1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Financial Statement Presentation

On April 30, 2014, Rockville Financial, Inc. (“Rockville”) completed its merger with United Financial Bancorp, Inc. (“Legacy United”) and changed its legal entity name to United Financial Bancorp, Inc. (the “Company”). In connection with this merger, Rockville Bank, the Company’s principal asset and wholly-owned subsidiary, completed its merger with Legacy United’s banking subsidiary, United Bank, and changed its name to United Bank (the “Bank”). Discussions throughout this report related to the merger with Legacy United are referred to as the “Merger”.

The financial statements for prior periods do not reflect the operations of Legacy United.

The consolidated financial statements and the accompanying notes presented in this report include the accounts the Company, the Bank, and the Bank’s wholly-owned subsidiaries, United Bank Mortgage Company, United Bank Investment Corp., Inc., United Bank Commercial Properties, Inc., United Bank Residential Properties, Inc., United Northeast Financial Advisors, Inc., United Bank Investment Sub, Inc., UB Properties, LLC, and UCB Securities, Inc. II.

The Company is a bank holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Glastonbury, Connecticut and incorporated under the laws of Connecticut in 2004. At December 31, 2014 , the Company’s principal asset was all of the outstanding capital stock of United Bank, a wholly-owned subsidiary of the Company.

The Company, through United Bank and various subsidiaries, delivers financial services to individuals, families and businesses primarily throughout Connecticut and western Massachusetts and the surrounding regions through 56 banking offices, its commercial loan and mortgage loan production offices, 69 ATMs, telephone banking, mobile banking and its internet website (www.bankatunited.com).

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and to general practices in the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the realizability of deferred tax assets, the valuation of derivative instruments and hedging activities, the evaluation of securities for other-than-temporary impairment, and the valuation of assets/liabilities acquired in business combinations and review of goodwill for impairment.

Certain reclassifications have been made to prior periods’ consolidated financial statements to conform to the 2014 presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash equivalents. All significant intercompany transactions have been eliminated.

Common Share Repurchases

The Company is chartered in the state of Connecticut. Connecticut law does not provide for treasury shares, rather shares repurchased by the Company constitute authorized but unissued shares. GAAP states that accounting for treasury stock shall conform to state law. Therefore, the cost of shares repurchased by the Company has been allocated to common stock balances. Notwithstanding the foregoing, prior to January 1, 2014, the Consolidated Statement of Condition refers to repurchased shares as “treasury stock.”

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and short term investments with original maturities of three months or less.

Securities

Securities are classified at the time of purchase as “available for sale,” “held to maturity,” or “trading.” Classification is re-evaluated at each quarter end for consistency with corporate goals and objectives. Debt securities held to maturity are those which the Bank has the ability and intent to hold to maturity. Securities held to maturity are recorded at amortized cost. Amortized cost includes the amortization of premiums or accretion of discounts using the level yield method. Such amortization and accretion is included in interest income from securities. Securities classified as available for sale are recorded at fair value. Unrealized gains and losses, net of taxes, are calculated each reporting period and presented as a separate

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

component of other comprehensive income (“OCI”). Securities bought and held for the purpose of selling in the near term are classified as trading. Trading securities, if any, are recorded at fair value with calculated gains and losses recognized in non-interest income in the respective accounting period. The Company did not have a trading portfolio at December 31, 2014 and 2013 . Securities transferred from available for sale to held to maturity are recorded at fair value at the time of transfer. The respective gain or loss is reclassified as a separate component of OCI and amortized as an adjustment to interest income using the level yield method. The Company did not transfer any securities from available for sale to held to maturity during 2014, 2013 and 2012 . Upon the acquisition of the Legacy United investment portfolio, management took action to re-characterize the acquired portfolio to a position that was closely aligned with the composition of the Rockville portfolio. See Note 5 in the Notes to Consolidated Financial Statements for further information.

Securities are reviewed quarterly for other-than-temporary impairment (“OTTI”). All securities classified as held to maturity or available for sale that are in an unrealized loss position are evaluated for OTTI. The evaluation considers several factors including the amount of the unrealized loss, the period of time the security has been in a loss position and the financial condition and near-term prospects of the issuer and guarantor, where applicable. If the Company intends to sell the security or, if it is more likely than not the Company will be required to sell the security prior to recovery of its amortized cost basis, or for debt securities, the present value of expected cash flows is not sufficient to recover the entire amortized cost basis, the security is written down to fair value and the respective write-down is recorded in non-interest income in the Consolidated Statements of Net Income. If the Company does not intend to sell the security and if it is more likely than not that the Company will not be required to sell the security prior to recovery of its amortized cost basis, only the credit component of any impairment charge of a debt security would be recognized as a loss in non-interest income in the Consolidated Statements of Net Income. The remaining impairment would be recorded in OCI. A decline in the value of an equity security that is considered to have OTTI is recorded as a loss in non-interest income in the Consolidated Statements of Net Income.

Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Derivative Financial Instruments

Derivatives are recognized as either assets or liabilities and are recorded at fair value on the Company’s Consolidated Statements of Condition. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation. The Company’s hedging policies permit the use of various derivative financial instruments to manage interest rate risk or to hedge specified assets and liabilities. Derivatives executed with the same counterparty are generally subject to netting arrangements; however, fair value amounts recognized for derivatives and fair value amounts recognized for the right/obligation to reclaim/return cash collateral are not offset for financial reporting purposes.

To qualify for hedge accounting, derivatives must be highly effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. If derivative instruments are designated as fair value hedges, and such hedges are highly effective, both the change in the fair value of the hedge and the hedged item are included in current earnings. If derivative instruments are designated as cash flow hedges, fair value adjustments related to the effective portion are recorded in other comprehensive income and are reclassified to earnings when the hedged transaction is reflected in earnings. Ineffective portions of cash flow hedges are reflected in earnings as they occur. Actual cash receipts and/or payments and related accruals on derivatives related to hedges are recorded as adjustments to the interest income or interest expense associated with the hedged item. During the life of the hedge, the Company formally assesses whether derivatives designated as hedging instruments continue to be highly effective in offsetting changes in the fair value or cash flows of hedged items. If it is determined that a hedge has ceased to be highly effective, the Company will discontinue hedge accounting prospectively. At such time, previous adjustments to the carrying value of the hedged item are reversed into current earnings and the derivative instrument is reclassified to a trading position recorded at fair value.

For derivatives not designated as hedges, changes in fair value are recognized in earnings, in non-interest income.

Derivative Loan Commitments

Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. Loan commitments that are derivatives are recognized at fair value on the Consolidated Statements of Condition in other assets and other liabilities with changes in their fair values recorded in other non-interest income. Fair value is based on the value of servicing rights and the interest rate differential from the commitment

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

date to the current valuation date of the underlying mortgage loans. In estimating fair value, the Company assigns a probability to a loan commitment based on an expectation that it will be exercised and the loan will be funded.

Forward Loan Sale Commitments

To protect against the portfolio risks inherent in derivative loan commitments or rate locks associated with fixed rate residential lending, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans and long-term interest rate risk that may result from the exercise of the derivative loan commitments. Mandatory delivery contracts are accounted for as derivative instruments. Subsequent to inception, changes in the fair value of the loan commitment are recognized based on changes in the fair value of the underlying mortgage loan due to interest rate changes, changes in the probability the derivative loan commitment will be exercised, and the passage of time. In estimating fair value, the Company assigns a probability to a loan commitment based on an expectation that it will be exercised and the loan will be funded.

The Company estimates the fair value of its forward loan sales commitments using a methodology similar to that used for derivative loan commitments, excluding the valuation of servicing rights. Forward loan sale commitments are recognized at fair value on the Consolidated Statements of Condition in other assets and other liabilities with changes in fair value recorded in other non-interest income.

Federal Home Loan Bank Stock

The Bank, as a member of the Federal Home Loan Bank system, is required to maintain an investment in capital stock of the Federal Home Loan Bank of Boston (“FHLBB”) based primarily on its level of borrowings from the FHLBB. Based on redemption provisions of the FHLBB, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. FHLBB stock may be redeemed at par value five years following termination of FHLBB membership, subject to limitations which may be imposed by the FHLBB or its regulator, the Federal Housing Finance Board, to maintain capital adequacy of the FHLBB. While the Company currently has no intentions to terminate its FHLBB membership, the ability to redeem its investment in FHLBB stock would be subject to the conditions imposed by the FHLBB. The Bank reviews for impairment based on the ultimate recoverability of the cost basis in the FHLBB stock. Based on the capital adequacy and the liquidity position of the FHLBB, management believes there is no impairment related to the carrying amount of the Company’s FHLBB stock as of December 31, 2014 and 2013 .

Loans Held For Sale

The Company primarily classifies newly originated residential real estate mortgage loans as held for sale based on intent, which is determined when loans are rate locked. Residential real estate mortgage loans not designated as held for sale are retained based upon available liquidity, interest rate risk management and other business purposes. The Company has elected the fair value option pursuant to Accounting Standards Codification (“ASC”) 825, Financial Instruments , for closed loans intended for sale. The Company elected the fair value option in order to reduce certain timing differences and better match changes in fair values of the loans with changes in the fair value of the derivative forward loan sale contracts used to economically hedge them. Fair values are estimated using quoted loan market prices. Changes in the fair value of loans held for sale are recorded in earnings and are offset by changes in fair value related to forward sale commitments and interest rate lock commitments. Gains or losses on sales of loans are included in non-interest income. Direct loan origination costs and fees are deferred upon origination and are recognized as part of the gain or loss on the date of sale. Residential loans are sold by the Company without recourse. The Company currently sells these loans servicing retained, with the exception of limited volume of government production sold servicing released.

Loans

Loans we originate and intend to hold in our portfolio are stated at current unpaid principal balances, net of deferred loan origination costs and fees. Commitment fees for which the likelihood of exercise is remote are recognized over the loan commitment period on a straight-line basis. Loans that we acquired in the merger with Legacy United were recorded at fair value with no carryover of the related allowance for loan losses at the time of acquisition. Determining the fair value of the loans involved estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.

The Company’s loan portfolio includes residential real estate, commercial real estate, construction, commercial business and installment and collateral segments. Residential real estate loans include one-to-four family owner occupied first mortgages, second mortgages and equity lines of credit.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

A loan is classified as a troubled debt restructure (“TDR”) 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. All TDR loans are initially classified as impaired and generally remain impaired as TDRs for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring.

Interest and Fees on Loans

Interest on loans is accrued and included in interest 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. Past due status is based on the contractual payment terms of the loan.

Subsequent recognition of income occurs only to the extent payment is received subject to management’s assessment of the collectibility of the remaining interest and principal. A non-accrual loan is restored to accrual status when the loan is brought current, collectability of interest and principal is no longer in doubt and six months of continuous payments have been received.

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 loan’s yield utilizing the interest method over the contractual life of the loan.

Fair value acquisition adjustments are determined as of the date of acquisition based upon facts and circumstances, including the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Subsequent to acquisition, the fair value acquisition adjustments are generally amortized over the remaining life of the loan under the interest method, or a constant effective yield method. For ASC 310-30 loans, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”), the interest method is applicable to a loan or a pool of loans as determined by characteristics including but not limited to borrower type, loan purpose, geographic location and collateral type.

Allowance for Loan Losses

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense and represents management’s best estimate of probable losses incurred within the existing loan portfolio as of the balance sheet date. The level of the allowance reflects management’s view of trends in loan loss activity, current loan portfolio quality and present economic, political and regulatory conditions. Portions of the allowance may be allocated for specific loans; however, the allowance is available for any loan that is charged off.

The allowance is increased by provisions charged to earnings and by recoveries of amounts previously charged off, and is reduced by charge-offs on loans (or portions thereof) deemed to be uncollectible. Loan charge-offs are recognized when management believes the collectibility of the principal balance outstanding is unlikely. Full or partial charge-offs on collateral dependent impaired loans are generally recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

A methodology is used to systematically measure the amount of estimated loan loss exposure inherent in the loan portfolio for the purposes of establishing a sufficient allowance for loans losses, as further described below.

General component:

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the loan segments. Management uses a rolling average of historical losses based on a three-year loss history to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels and trends in delinquencies; level and trend of charge-offs and recoveries; trends in volume and types of loans; effects of changes in risk selection and underwriting standards, changes in risk selection and underwriting standards; experience and depth of lending weighted average risk rating; and national and local economic trends and conditions.

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Residential real estate – The Bank establishes maximum loan-to-value and debt-to-income ratios and minimum credit scores as an integral component of the underwriting criteria. Loans in these segments are collateralized by owner-occupied residential real estate and repayment is dependent on the income and credit quality of the individual borrower. Within the qualitative allowance factors, national and local economic trends including unemployment rates and potential declines in property value, are key elements reviewed as a component of establishing the appropriate allocation. Overall economic conditions, unemployment rates and housing price trends will influence the underlying credit quality of these segments.

Commercial real estate – Loans in this segment are primarily income-producing properties throughout Connecticut, western Massachusetts, and other select markets in the Northeast. The underlying cash flows generated by the properties could be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls annually, continually monitors the cash flows of these loans and performs stress testing.

Construction loans – Loans in this segment primarily include commercial real estate development and residential subdivision loans for which payment is derived from the sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial business loans – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy and its effect on business profitability and cash flow could have an effect on the credit quality in this segment.

Installment and collateral loans – Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

For acquired loans accounted for under ASC 310-30, our allowance for loan losses is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.

Allocated component:

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Residential and installment and collateral loans are evaluated for impairment if payments are 90 days or more delinquent. Updated property evaluations are obtained at time of impairment and serve as the basis for the loss allocation if foreclosure is probable or the loan is collateral dependent.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

When a loan is determined to be impaired the Company makes a determination if the repayment of the obligation is collateral dependent. As a majority of impaired loans are collateralized by real estate, appraisals on the underlying value of the property securing the obligation are utilized in determining the specific impairment amount that is allocated to the loan as a component of the allowance calculation. If the loan is collateral dependent, an updated appraisal is obtained within a short period of time from the date the loan is determined to be impaired; typically no longer than 30 days for a residential property and 90 days for a commercial real estate property. The appraisal and the appraised value are reviewed for adequacy and then further discounted for estimated disposition costs and the period of time until resolution, in order to determine the impairment amount. The Company updates the appraised value at least annually and on a more frequent basis if current market factors indicate a potential change in valuation.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The majority of the Company’s loans are collateralized by real estate located in central and eastern Connecticut and western Massachusetts in addition to a portion of the commercial real estate loan portfolio located in the Northeast region of the United States. Accordingly, the collateral value of a substantial portion of the Company’s loan portfolio and real estate acquired through foreclosure is susceptible to changes in market conditions in these areas.

Unallocated component:

The allowance for loan losses has been determined in accordance with GAAP, under which we are required to maintain an allowance for probable losses at the balance sheet date. We are responsible for the timely and periodic determination of the amount of the allowance required. We believe that our allowance for loan losses is adequate to cover specifically identifiable losses, as well as, estimated losses inherent in our portfolio that are probable, but not specifically identifiable.

While management regularly evaluates the adequacy of the allowance for loan losses, future additions to the allowance may be necessary based on changes in assumptions and economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Servicing

The Company services mortgage loans for others. Mortgage servicing assets are recognized at fair value as separate assets when rights are acquired through purchase or through sale of financial assets. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.

The Company’s servicing asset valuation is performed by an independent third party using a static valuation model representing a projection of a single interest rate/market environment into the future and discounting the resulting assumed cash flow back to present value. Discount rates, servicing costs, float earnings rates and delinquency information as well as the use of the medium PSA quotations provided by Security Industry and Financial Market Association are used to calculate the value of the servicing asset.

Capitalized servicing rights are reported in other assets and prior to January 1, 2013, were amortized into loan servicing fee income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Effective January 1, 2013, the Company adopted the fair value measurement for its servicing assets with changes in fair value recorded in other non-interest income (loss).

Other Real Estate Owned

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and is initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations, changes in the valuation allowance and any direct write-downs are included in non-interest expense. Gains and losses on the sale of other real estate owned are recorded in other income (loss) in the Consolidated Statements of Net Income.

Bank-Owned Life Insurance

Bank-owned life insurance (“BOLI”) represents life insurance on certain current and former employees who have consented to allow the Bank to be the beneficiary of those policies. BOLI is recorded as an asset at cash surrender value. Increases in the cash surrender value of the policies, as well as insurance proceeds received, are recorded in non-interest income and are not subject to income tax. Management reviews the credit quality and financial strength of the insurance carriers on a quarterly and annual basis. BOLI with any individual carrier is limited to 15% of capital plus reserves.

Transfers of Financial Assets

Transfers of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset 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

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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 Company 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.

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 3 to 39 1/2 years. Leasehold improvements are amortized over the shorter of the improvements’ estimated economic lives or the related lease terms excluding lease extension periods. Maintenance and repairs are expensed as incurred and improvements are capitalized.

Marketing and Promotions

Marketing and promotions costs are expensed as incurred.

Impairment of Long-Lived Assets Other Than Goodwill

Long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. If impairment is determined to exist, any related impairment loss is calculated based on fair value through a charge to non-interest expense. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. No write-downs of long-lived assets were recorded for any period presented herein.

Goodwill

Goodwill is recognized for the excess of the acquisition cost over the fair values of the net assets acquired. Goodwill is not amortized and is instead tested for impairment at least annually, or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying value. Any impairment write-down is charged to non-interest expense in the Consolidated Statements of Net Income. There was no goodwill impairment in 2014 and 2013 and $79,000 of goodwill impairment in 2012.

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. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. As of December 31, 2014, the Company had $252,000 of uncertain tax positions. There was no reserve for uncertain tax positions as of December 31, 2013.

Investments in Limited Partnerships

The Company evaluates investments including joint ventures, low income housing tax credit partnerships and other limited partnerships to determine whether consolidation is necessary. The Company applies the equity method of accounting to its investments in limited partnerships. The Company has interests in limited partnerships that own and operate affordable housing and rehabilitation projects as well as alternative energy projects. Investments in these projects serve as an element of the Bank’s compliance with the Community Reinvestment Act and in serving the interest of public welfare, and The Bank receives tax benefits in the form of deductions for operating losses and tax credits. The tax credits generally may be used to reduce taxes currently payable or may be carried back one year or forward 20 years to recapture or reduce taxes. The Company regularly evaluates the partnership investments for impairment. The tax credits are recorded in the years they become available

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

to reduce income taxes through the provision for income taxes, while basis adjustments under the equity method or impairment are recorded in loss on investments in limited partnerships on the consolidated statements of net income.

Pension and Other Post-Retirement Benefits

The Company has a noncontributory defined benefit pension plan that provides benefits for full-time employees hired before January 1, 2005, meeting certain requirements as to age and length of service. The benefits are based on years of service and average compensation, as defined. The Company’s funding policy is to contribute an amount needed to meet the minimum funding standards established by the Employee Retirement Security Act of 1974 (“ERISA”). The compensation cost of an employees’ pension benefit is recognized on the projected unit cost method over the employee’s approximate service period.

In 2012, the Company announced it would be hard-freezing its noncontributory defined benefit pension plan as of December 31, 2012. Under the hard-freeze, participants in the plan stopped earning additional benefits under the plan. The Company began providing additional benefits to these employees under the Bank’s 401(k) Plan as of January 1, 2013. See Note 16, “Pension Plans and Other Post-Retirement Benefits”, for further information on these benefits.

In addition to the qualified plan, the Company has supplemental retirement plans for certain key officers. These plans, which are nonqualified, were designed to offset the impact of changes in the pension plan that limit benefits for highly compensated employees under qualified pension plans.

The Company also provides certain health care and life insurance benefits for retired employees hired prior to March 1, 1993. 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 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.

Fair Values of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820, Fair Value Measurements and Disclosures , establishes a framework for measuring fair value and expands disclosures about fair value measurements. The required disclosures about fair value measurements have been included in Note 14, “Fair Value Measurement” in the Notes to Consolidated Financial Statements.

Earnings per Common Share

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. If rights to dividends on unvested options/awards are non-forfeitable, these unvested options/awards are considered outstanding in the computation of basic earnings per share. 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.

Unearned Employee Stock Ownership Plan (“ESOP”) shares are not considered outstanding for calculating basic and diluted earnings per common share. ESOP shares committed to be released are considered to be outstanding for purposes of the earnings per share computation. 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, are considered committed to be released.

ESOP

Unearned ESOP shares are shown as a reduction of stockholders’ equity and presented as unearned compensation - ESOP. During the period the ESOP shares are committed to be released, the Company recognizes compensation cost equal to the average fair value of the ESOP shares. When the shares are released, unearned common shares held by the ESOP are reduced by the cost of the ESOP shares released and the differential between the fair value and the cost is recorded in additional paid-in capital. 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 on the Company’s Consolidated Statements of Condition. Effective January 1, 2014, the Company merged its ESOP with its Defined Contribution Plan, or 401(k) Plan.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Share-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. These costs are recognized on a straight-line basis over the vesting period during which an employee is required to provide services in exchange for the award, the requisite service period. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted. When determining the estimated fair value of stock options granted, the Company utilizes various assumptions regarding the expected volatility of the stock price, estimated forfeitures using historical data on employee terminations, the risk-free interest rate for periods within the contractual life of the stock option, and the expected dividend yield that the Company expects over the expected life of the options granted. Reductions in compensation expense associated with forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted monthly based on actual forfeiture experience. The Company measures the fair value of the restricted stock using the closing market price of the Company’s common stock on the date of grant. The Company expenses the grant date fair value of the Company’s stock options and restricted stock with a corresponding increase in equity.

Off-balance Sheet Financial Instruments

In the ordinary course of business, the Company enters into off-balance sheet financial instruments, consisting primarily of credit related financial instruments. These financial instruments are recorded in the Consolidated Financial Statements when they are funded or related fees are incurred or received.

Segment Information

As a community oriented financial institution, substantially all of the Company’s 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 Company’s only operating segment for financial reporting purposes.



Note 2.	RECENT ACCOUNTING PRONOUNCEMENTS

Financial Statement Presentation - Extraordinary items. In January 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items which eliminates from U.S. GAAP the concept of an extraordinary item. The ASU was issued under the Simplification Initiative, an initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects intended to reduce costs and complexity without affecting the usefulness of the information reported. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The ASU is not expected to impact the Company’s Consolidated Financial Statements.

Debt Issuance - Hybrid Financial Instruments. In November 2014, the FASB issued ASU 2014-16: Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force) which provides guidance that requires all entities to use what is called the whole instrument approach to determine whether the nature of the host contract in a hybrid instrument issued in the form of a share is more akin to debt or to equity. The ASU clarifies that the existence or omission of any single feature does not determine the economic characteristics and risks of the host contact and an individual feature may be weighted more heavily in evaluation. The guidance is intended to reduce diversity in practice and applies to both public and nonpublic entities that issue or invest in hybrid instruments issued in the form of shares. The provisions in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments can be adopted using a modified or full retrospective approach. Early adoption is permitted with any adjustments reflected as of the beginning of the fiscal year. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Business Combinations - Pushdown Accounting. In November 2014, the FASB issued ASU No. 2014-17, Pushdown Accounting which provides guidance on when and how an acquired entity can apply pushdown accounting in its separate financial statements. Prior to this guidance, U.S. GAAP offered limited guidance for determining when pushdown accounting should be applied as it addresses accounting by the acquirer and not the acquired entity. In accordance with ASU 2014-17, U.S. GAAP now allows reporting entities to elect to apply pushdown accounting in certain business combinations. The provisions in the ASU take effect immediately on November 18, 2014, after which an acquired entity can elect to apply the guidance to future change-in-control events or to its most recent change-in-control event if financial statements for the period in which the change

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

occurred have not yet been issued. The ASU does not have a material impact to the Company’s Consolidated Financial Statements.

Financial Statement Presentation - Going Concern. In August 2014, the FASB issued ASU No. 2014-15, Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern which provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The ASU is not expected to impact the Company’s Consolidated Financial Statements.

Receivables - Troubled Debt Restructurings by Creditors. In August 2014, the FASB issued ASU No. 2014-14, Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure which clarifies the classification and measurement of a foreclosed mortgage loan guaranteed by the government and due to diversity in practice, specifically provides for when a mortgage loans should be derecognized and a separate receivable based on principal and interest expected upon foreclosure should be recognized. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. If ASU 2014-04 (discussed below) is already adopted, early adoption is permitted. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Transfers and Servicing. In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860) - Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU requires disclosure of information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements, as well as increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Compensation - Stock Compensation. In June 2014, FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The ASU requires a performance target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. The amendments in this ASU provide explicit guidance for those awards. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Receivables - Troubled Debt Restructurings by Creditors. In January 2014, FASB issued ASU No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40) - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure which clarifies when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real property recognized. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Investments - Equity Method and Joint Ventures. In January 2014, FASB issued ASU No. 2014-01, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects which provides guidance on accounting for investments in affordable housing projects that qualify for the low income housing credit. The guidance (a) amends the criteria for when investments in qualified affordable housing projects can be accounted for using a different method other than the equity method or cost and (b) identifies a proportional method as that different method. The provisions in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.



Note 3.	MERGER

The Company acquired 100% of the outstanding common shares and completed its merger with Legacy United on April 30, 2014. Legacy United’s principal subsidiary was a federally chartered savings bank headquartered in West Springfield, Massachusetts, which operated 35 branch locations, two express drive-up branches, and two loan production offices, primarily in the Springfield and Worcester regions of Massachusetts and in Central Connecticut. The Company entered into the Merger agreement based on its assessment of the anticipated benefits, including enhanced market share and expansion of its banking franchise. The Merger was accounted for as a purchase and, as such, was included in our results of operations from the date of

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

the Merger. The Merger was funded with shares of Rockville common stock and cash. As of the close of trading on April 30, 2014, all of the shareholders of Legacy United received 1.3472 shares of Rockville for each share of Legacy United common stock owned at that date. Total consideration paid at closing was valued at $356.4 million , based on the closing price of $13.16 of Rockville common stock, the value of Legacy United exercisable options and cash paid for fractional shares on April 30, 2014.

The following table summarizes the Merger which occurred on April 30, 2014.



(Dollars and shares in thousands)
				Transaction Related Items
Legacy United				Goodwill		Other Identifiable Intangibles		Shares Issued	Value of Legacy United Exercisable Options		Total Purchase Price
Balance at April 30, 2014
Assets		Equity
$	2,442,525	$	304,505	$	114,170	$	10,585	26,706	$	4,909	$	356,394

The transaction was accounted for using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations . Accordingly, the purchase price was allocated based on the estimated fair market values of the assets and liabilities acquired. Consideration paid and fair values of Legacy United’s assets acquired and liabilities assumed at the date of the merger are summarized in the following table:



(In thousands)
	Legacy United		Adjustments				As Recorded
Assets:
Cash and cash equivalents	$	25,439	$	—			$	25,439
Securities	351,836		668			a	352,504
Loans receivable, net	1,877,460		(13,583		)	b	1,863,877
Federal Home Loan Bank Stock	17,334		—				17,334
Current and deferred tax asset	21,443		2,616			c	24,059
Premises and equipment, net	25,126		(220		)	d	24,906
Goodwill	40,992		(40,992		)	e	—
Core deposit intangible	2,945		7,640			f	10,585
Cash surrender value of bank-owned life insurance	55,105		—				55,105
Other assets	24,845		(1,717		)	g	23,128
Total assets acquired	2,442,525		(45,588		)		2,396,937
Liabilities:
Deposits	1,936,553		7,112			h	1,943,665
Federal Home Loan Bank and other borrowings	186,133		6,434			i	192,567
Accrued expenses and other liabilities	15,334		3,147			j	18,481
Total liabilities assumed	2,138,020		16,693				2,154,713
Net assets acquired	$	304,505	$	(62,281	)		242,224
Consideration paid							356,394
Goodwill							$	114,170

Explanation of adjustments:


a.	Represents the adjustment of the book value of securities to their estimated fair values.


b.	Loans acquired were recorded at fair value without a carryover of the allowance for loan losses. Fair value was determined by segregating the loans based on common risk characteristics, using market participant assumptions in estimating cash flows expected to be collected, adjusting for an estimate of future credit losses and then applying a market-based discount rate to those cash flows.


c.	Represents adjustments for deferred tax effects related to fair value adjustments and other purchase accounting adjustments.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)


d.	Represents the adjustment of the book value of acquired branch premises and equipment, which includes capital leases, to their estimated fair values.


e.	Represents the write-off of Legacy United’s goodwill.


f.	Represents the fair value adjustment of the acquired core deposit base (total deposits less time deposits). The core deposit intangible will be amortized over an estimated life of 10 years based on the sum of the years’ digits method of amortization.


g.	Represents the fair value adjustment of investments in partnerships and other real estate owned.


h.	Represents the fair value adjustment of time deposits, which were valued using a discounted cash flow method. For non-brokered time deposits, the Company’s market rate as of the acquisition date was applied. Brokered time deposits were based on the National Average CD rates from bankrate.com.

Represents fair value adjustments for Federal Home Loan Bank of Boston (“FHLBB”) advances, trust preferred subordinated debentures, and capital lease obligations. Fair value of FHLBB advances was determined by calculating the contractual cash flows and discounting such cash flows based on the remaining terms and respective FHLBB regular rate for such borrowings, adjusted for prepayment and unwind costs. The fair value of the trust preferred subordinated debentures was determined using a comparable yield analysis.


j.	Represents fair value adjustments including operating lease obligations and other liabilities.

The Company expects that some adjustments of the estimated fair values assigned to the assets acquired and liabilities assumed at the acquisition date will be recorded or adjusted after December 31, 2014 , although such adjustments are not expected to be significant.

In connection with the acquisition, the Company recorded income of $11.0 million for the year ended December 31, 2014 (before tax) in purchase accounting adjustment amortization, including amortization of the core deposit intangible.

The goodwill associated with the acquisition of Legacy United is not tax deductible. In accordance with ASC 350, Intangibles – Goodwill and Other , goodwill will not be amortized, but will be subject to at least an annual impairment review.

The amortizing intangible asset associated with the acquisition consists of the core deposit intangible. The core deposit intangible is being amortized using the sum of the years’ digits method over its estimated life of 10 years . Information related to the core deposit intangible, including the estimated annual amortization expense, absent any impairment charges, is summarized below:



	(In thousands)

Balance at December 31, 2013	$	—
Acquisition of Legacy United	10,585
Accumulated amortization	(1,283		)
Balance at December 31, 2014	$	9,302

Estimated amortization expense for the years ending December 31,
2015	$	1,796
2016	1,604
2017	1,411
2018	1,219
2019	1,026
2020 and thereafter	2,246
Total remaining	$	9,302

The results of Legacy United are included in the results of the Company subsequent to April 30, 2014. The pro forma information below was determined by combining actual results for the Company and Legacy United, adjusted for items directly attributable to the Merger. The information is theoretical in nature and not necessarily indicative of future consolidated results of operations of the Company or the consolidated results of operations which would have resulted had the Company acquired

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

the stock of Legacy United during the periods presented. The Company’s unaudited pro forma Condensed Consolidated Statements of Net Income for the years ended December 31, 2014 and 2013 , assuming Legacy United had been acquired as of December 31, 2013 and 2012, respectively, are as follows (in thousands, except share and per share amounts):



(In thousands)	For the Years Ended December 31,
	2014			2013
Interest and dividend income	$	189,145		$	182,327
Interest expense	19,972			18,396
Net interest income	169,173			163,931
Provision for loan losses	10,096			6,138
Non-interest income	19,542			29,079
Non-interest expense	172,507			127,385
Income before income taxes	6,112			59,487
Provision (benefit) for income taxes	(4,329		)	17,440
Net income	$	10,441		$	42,047
Basic earnings per share	$	0.20		$	0.80
Diluted earnings per share	$	0.20		$	0.79
Weighted-average shares outstanding, basic	51,609,280			52,709,109
Weighted-average shares outstanding, diluted	52,049,703			53,468,861

The Company’s pro forma statements of net income for the year ended December 31, 2013 showed earnings per share of $0.79 compared to $0.20 per share for the year ended December 31, 2014 .

The reduction in the pro forma income for the year ended December 31, 2014 was primarily due to the inclusion of merger and acquisition expense of $36.9 million that are not included in the pro forma results for the year ended December 31, 2013 . The Company recorded certain merger-related costs in connection with legal fees, change in control payments, severance costs, shareholder expenses, system conversion, and other professional services.

The Company has determined that it is impractical to report the amounts of revenue and earnings of Legacy United since the acquisition date. Due to the integration of their operations with those of the Company, the Company does not record revenue and earnings separately for these operations. The revenue and earnings of these operations are included in the Consolidated Statements of Net Income.



Note 4.	RESTRICTIONS ON CASH AND DUE FROM BANKS

The Company is required to maintain a percentage of transaction account balances on deposit with the Federal Reserve Bank that was offset by the Company’s average vault cash. As of December 31, 2014 and 2013 , the Company was required to have cash and liquid assets of $22.7 million and $7.0 million , respectively, to meet these requirements. The Company is also required to maintain a reserve balance as part of their coin and currency contract with Bankers Bank Northeast. The required reserve amounted to $25,000 and $800,000 as of December 31, 2014 and 2013 , respectively.



Note 5.	SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of investment securities at December 31, 2014 and 2013 are as follows:

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2014
Available for sale:
Debt securities:
U.S. Government and government-sponsored enterprise obligations	$	6,965	$	94	$	(237	)	$	6,822
Government-sponsored residential mortgage-backed securities	165,199		2,379		(159		)	167,419
Government-sponsored residential collateralized debt obligations	237,128		1,365		(360		)	238,133
Government-sponsored commercial mortgage-backed securities	67,470		1,081		(253		)	68,298
Government-sponsored commercial collateralized debt obligations	129,547		737		(598		)	129,686
Asset-backed securities	181,198		272		(2,715		)	178,755
Corporate debt securities	43,907		35		(1,697		)	42,245
Obligations of states and political subdivisions	194,857		1,572		(657		)	195,772
Total debt securities	1,026,271		7,535		(6,676		)	1,027,130
Marketable equity securities, by sector:
Banks	22,645		277		(340		)	22,582
Industrial	109		76		—			185
Mutual funds	2,824		89		(3		)	2,910
Oil and gas	131		73		—			204
Total marketable equity securities	25,709		515		(343		)	25,881
Total available for sale securities	$	1,051,980	$	8,050	$	(7,019	)	$	1,053,011
Held to maturity:
Debt securities:
Government-sponsored residential mortgage-backed securities	$	2,971	$	339	$	—		$	3,310
Obligations of states and political subdivisions	12,397		1,006		—			13,403
Total held to maturity securities	$	15,368	$	1,345	$	—		$	16,713

December 31, 2013
Available for sale:
Debt securities:
U.S. Government and government-sponsored enterprise obligations	$	6,801	$	39	$	(809	)	$	6,031
Government-sponsored residential mortgage-backed securities	96,708		1,493		(2,539		)	95,662
Government-sponsored residential collateralized debt obligations	69,568		26		(1,843		)	67,751
Government-sponsored commercial mortgage-backed securities	13,841		—		(943		)	12,898
Government-sponsored commercial collateralized debt obligations	5,043		—		(337		)	4,706
Asset-backed securities	107,699		259		(1,422		)	106,536
Corporate debt securities	43,586		808		(1,908		)	42,486
Obligations of states and political subdivisions	67,142		—		(4,637		)	62,505
Total debt securities	410,388		2,625		(14,438		)	398,575
Marketable equity securities, by sector:
Banks	3,068		—		(21		)	3,047
Industrial	109		102		—			211
Mutual funds	2,793		68		(17		)	2,844
Oil and gas	131		95		—			226
Total marketable equity securities	6,101		265		(38		)	6,328
Total available for sale securities	$	416,489	$	2,890	$	(14,476	)	$	404,903
Held to maturity:
Debt securities:
Government-sponsored residential mortgage-backed securities	$	3,743	$	364	$	—		$	4,107
Obligations of states and political subdivisions	10,087		108		(42		)	10,153
Total held to maturity securities	$	13,830	$	472	$	(42	)	$	14,260

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

At December 31, 2014 , the net unrealized gain on securities available for sale of $1.0 million , net of income taxes of $374,000 , or $656,000 , was included in accumulated other comprehensive loss. At December 31, 2013 , the net unrealized loss on securities available for sale of $11.6 million , net of income taxes of $4.1 million , or $7.5 million , was included in accumulated other comprehensive loss.

The amortized cost and fair value of debt securities at December 31, 2014 by contractual maturities are presented below. Actual maturities may differ from contractual maturities because the securities may be called or repaid without any penalties. Because mortgage-backed securities require periodic principal paydowns, they are not included in the maturity categories in the following maturity summary.



	Available for Sale				Held to Maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity:
Within 1 year	$	260	$	260	$	—	$	—
After 1 year through 5 years	9,762		9,706		—		—
After 5 years through 10 years	36,399		36,185		1,206		1,215
After 10 years	199,308		198,688		11,191		12,188
	245,729		244,839		12,397		13,403
Government-sponsored mortgage-backed securities	165,199		167,419		2,971		3,310
Government-sponsored residential collateralized debt obligations	237,128		238,133		—		—
Government-sponsored commercial mortgage-backed securities	67,470		68,298		—		—
Government-sponsored commercial collateralized debt obligations	129,547		129,686		—		—
Asset-backed securities	181,198		178,755		—		—
Total debt securities	$	1,026,271	$	1,027,130	$	15,368	$	16,713

At December 31, 2014 , the Company had 219 encumbered securities, with a fair value of $336.3 million , pledged as derivative collateral and collateral for reverse repurchase borrowings. See Notes 11 and 13.

For the years ended December 31, 2014, 2013 and 2012 , proceeds from the sale of available for sale securities and gross realized gains and losses on the sale of available for sale securities are presented below:



	For the Years Ended December 31,
	2014		2013		2012
Proceeds from the sale of available for sale securities	$	511,044	$	44,880	$	29,285
Gross gains on the sale of available for sale securities	2,711		804		941
Gross losses on the sale of available for sale securities	1,483		219		27

As of December 31, 2014 , the Company did not have any material exposure to private-label mortgage-backed securities. The Company did not own any single security with an aggregate book value in excess of 10% of the Company’s stockholders’ equity at December 31, 2014 and 2013 .

The Company’s Management Investment Committee reviews state exposure in the obligations of states and political subdivisions portfolio on an ongoing basis. As of December 31, 2014 , the estimated fair value of this portfolio was $209.2 million , with no significant geographic exposure concentrations. Of the total revenue and general obligations of $209.2 million , $92.7 million were representative of general obligation bonds for which $71.8 million are general obligations of political subdivisions of the respective state, rather than general obligations of the state itself.

The following table summarizes gross unrealized losses and fair value, aggregated by category and length of time the securities have been in a continuous unrealized loss position, as of December 31, 2014 and 2013 :

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



	Less than 12 months					12 Months or More					Total
(In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
December 31, 2014
Available for sale:
Debt securities:
U.S. Government and government sponsored enterprise obligations	$	—	$	—		$	4,757	$	(237	)	$	4,757	$	(237	)
Government-sponsored residential mortgage-backed securities	1,492		(11		)	19,785		(148		)	21,277		(159		)
Government-sponsored residential collateralized debt obligations	35,769		(124		)	17,443		(236		)	53,212		(360		)
Government-sponsored commercial mortgage-backed securities	14,118		(15		)	16,337		(238		)	30,455		(253		)
Government-sponsored commercial collateralized debt obligations	62,477		(551		)	4,991		(47		)	67,468		(598		)
Asset-backed securities	128,808		(2,080		)	20,146		(635		)	148,954		(2,715		)
Corporate debt securities	30,634		(501		)	5,054		(1,196		)	35,688		(1,697		)
Obligations of states and political subdivisions	55,029		(419		)	18,568		(238		)	73,597		(657		)
Total debt securities	328,327		(3,701		)	107,081		(2,975		)	435,408		(6,676		)
Marketable equity securities	12,716		(340		)	140		(3		)	12,856		(343		)
Total	$	341,043	$	(4,041	)	$	107,221	$	(2,978	)	$	448,264	$	(7,019	)

December 31, 2013
Available for sale:
Debt securities:
U.S. Government and government sponsored enterprise obligations	$	4,184	$	(809	)	$	—	$	—		$	4,184	$	(809	)
Government-sponsored residential mortgage-backed securities	58,474		(2,539		)	—		—			58,474		(2,539		)
Government-sponsored residential collateralized debt obligations	56,339		(1,843		)	—		—			56,339		(1,843		)
Government-sponsored commercial mortgage-backed securities	12,899		(943		)	—		—			12,899		(943		)
Government-sponsored commercial collateralized debt obligations	4,707		(337		)	—		—			4,707		(337		)
Asset-backed securities	70,802		(1,422		)	—		—			70,802		(1,422		)
Corporate debt securities	17,567		(531		)	1,470		(1,377		)	19,037		(1,908		)
Obligations of states and political subdivisions	56,441		(3,967		)	6,064		(670		)	62,505		(4,637		)
Total debt securities	281,413		(12,391		)	7,534		(2,047		)	288,947		(14,438		)
Marketable equity securities:	3,047		(21		)	1,272		(17		)	4,319		(38		)
Total	$	284,460	$	(12,412	)	$	8,806	$	(2,064	)	$	293,266	$	(14,476	)

Of the securities summarized above as of December 31, 2014 , 155 issues had unrealized losses equaling 1.2% of the cost basis for less than twelve months and 78 issues had unrealized losses equaling 2.7% of the cost basis for twelve months or more. As of December 31, 2013 , 109 issues had unrealized losses for less than twelve months and 90 issues had losses for twelve months or more.

Management believes that no individual unrealized loss as of December 31, 2014 represents an other-than-temporary impairment, based on its detailed quarterly review of the securities portfolio. Among other things, the other-than-temporary impairment review of the investment securities portfolio focuses on the combined factors of percentage and length of time by which an issue is below book value as well as consideration of issuer specific (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral), broad market details and the

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Company’s intent to sell the security or if it is more likely than not that the Company will be required to sell the debt security before recovering its cost. The Company also considers whether the depreciation is due to interest rates or credit risk.

The following paragraphs outline the Company’s position related to unrealized losses in its investment securities portfolio at December 31, 2014 .

U.S. Government and government-sponsored enterprises . The unrealized losses on the Company’s U.S. Government and government-sponsored securities were caused by spread widening on the government curve for maturities of under 7 years to comparable government securities. The Company does not expect these securities to settle at a price less than the par value of the securities.

U.S. Government and government-sponsored collateralized mortgage obligations and commercial mortgage-backed securities. The unrealized losses on the Company’s U.S. Government and government-sponsored collateralized debt obligations and commercial mortgage backed securities were caused by the pickup of prepayment speeds given the overall drop in the government curve over the period, which encouraged further refinancing. The Company monitors this risk, and therefore, strives to minimize premiums within this security class. The Company does not expect these securities to settle at a price less than the par value of the securities.

Obligations of states and political subdivisions. The unrealized loss on obligations of states and political subdivisions relates to twenty securities, with no geographic concentration. The unrealized loss was due to a shift in certain parts of the municipal bond curve that resulted in a negative impact to the respective bonds’ pricing, relative to the time of purchase.

Corporate debt securities. The unrealized losses on corporate debt securities is primarily related to one pooled trust preferred security, Preferred Term Security XXVIII, Ltd (“PRETSL XXVIII”). The unrealized loss on this security is caused by the low interest rate environment because it reprices quarterly to the three month LIBOR and market spreads on similar securities have increased. No loss of principal or break in yield is projected. Based on the existing credit profile, management does not believe that this security will suffer from any credit related losses. The unrealized loss on the remainder of the corporate credit portfolio has been driven primarily by a steepening yield curve.

Asset-Backed Securities . The unrealized losses on the Company’s asset-backed securities were largely driven by increases in the spreads of the respective sectors’ asset classes over comparable securities. The majority of these securities have resetting coupons that adjust on quarterly basis and the market spreads on similar securities have increased. Based on the credit profiles and asset qualities of the individual securities, management does not believe that the securities will suffer from any credit related losses. The Company does not expect these securities to settle at a price less than the par value of the securities.

The Company will continue to review its entire portfolio for other-than-temporarily impaired securities with additional attention being given to high risk securities such as the one pooled trust preferred security that the Company owns.



Note 6.	LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

A summary of the Company’s loan portfolio at December 31, 2014 and 2013 is as follows:



	December 31,
(In thousands)	2014			2013
Real estate loans:
Residential	$	1,413,739		$	634,447
Commercial	1,678,936			776,913
Construction	185,843			52,243
Total real estate loans	3,278,518			1,463,603
Commercial business loans	613,596			247,932
Installment and collateral loans	5,752			2,257
Total loans	3,897,866			1,713,792
Net deferred loan costs and premiums	4,006			2,403
Allowance for loan losses	(24,809		)	(19,183		)
Loans — net	$	3,877,063		$	1,697,012

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

At December 31, 2014 , the Company had pledged $713.1 million and $194.7 million of eligible loan collateral to support available borrowing capacity at the FHLBB and FRB, respectively. See Note 11.

Acquired Loans: Gross loans acquired from the Legacy United merger totaled $1.88 billion . Acquired performing loans totaled $1.86 billion with a fair value of $1.83 billion . The Company’s best estimate at the acquisition date of contractual cash flows not expected to be collected on acquired performing loans was $29.1 million . Loans acquired and determined to be impaired totaled $18.5 million .

The impaired loans are accounted for in accordance with ASC 310-30. At December 31, 2014 , the net recorded carrying amount of loans accounted for under ASC 310-30 was $10.9 million and the aggregate outstanding principal balance was $19.0 million .

Information about the acquired loan portfolio subject to purchased credit impairment accounting guidance (ASC 310-30) as of April 30, 2014 is as follows:



(In thousands)
	April 30, 2014
Contractually required principal and interest at acquisition	$	18,540
Contractual cash flows not expected to be collected (nonaccretable)	(6,415		)
Expected cash flows at acquisition (1)	12,125
Interest component of expected cash flows (accretable)	(2,235		)
Fair value of acquired loans	$	9,890


(1)	Prepayments were not factored into the expected cash flows

The following table summarizes activity in the purchased accounting adjustments for purchased credit impaired acquired loans for the year ended December 31, 2014 .



(In thousands)
	2014
Balance at beginning of period	$	—
Acquisition	(8,650		)
Accretion	648
Paid off	13
Reclassification to/from nonaccretable balance	—
Balance at end of period	$	(7,989	)

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Allowance for Loan Losses . Changes in the allowance for loan losses for the years ended December 31, 2014, 2013 and 2012 are as follows:



(In thousands)	Residential Real Estate			Commercial Real Estate			Construction			Commercial Business			Installment and Collateral			Unallocated			Total
December 31, 2014
Balance, beginning of year	$	6,396		$	8,288		$	829		$	3,394		$	29		$	247		$	19,183
Provision (credit) for loan losses	3,250			1,880			641			3,723			138			(136		)	9,496
Loans charged off	(1,894		)	(750		)	—			(1,406		)	(139		)	—			(4,189		)
Recoveries of loans previously charged off	175			—			—			97			47			—			319
Balance, end of year	$	7,927		$	9,418		$	1,470		$	5,808		$	75		$	111		$	24,809
December 31, 2013
Balance, beginning of year	$	6,194		$	8,051		$	807		$	2,916		$	29		$	480		$	18,477
Provision (credit) for loan losses	876			382			272			650			99			(233		)	2,046
Loans charged off	(811		)	(145		)	(250		)	(190		)	(124		)	—			(1,520		)
Recoveries of loans previously charged off	137			—			—			18			25			—			180
Balance, end of year	$	6,396		$	8,288		$	829		$	3,394		$	29		$	247		$	19,183
December 31, 2012
Balance, beginning of year	$	5,071		$	6,694		$	1,286		$	2,515		$	49		$	410		$	16,025
Provision (credit) for loan losses	2,018			1,474			(360		)	374			11			70			3,587
Loans charged off	(1,042		)	(117		)	(122		)	(25		)	(48		)	—			(1,354		)
Recoveries of loans previously charged off	147			—			3			52			17			—			219
Balance, end of year	$	6,194		$	8,051		$	807		$	2,916		$	29		$	480		$	18,477

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Further information pertaining to the allowance for loan losses and impaired loans at December 31, 2014 and 2013 follows:



(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Installment and Collateral		Un- allocated		Total
December 31, 2014
Allowance related to loans individually evaluated and deemed impaired	$	28	$	316	$	33	$	882	$	—	$	—	$	1,259
Allowance related to loans collectively evaluated and not deemed impaired	7,899		9,102		1,437		4,710		75		111		23,334
Allowance related to loans acquired with deteriorated credit quality	—		—		—		216		—		—		216
Total allowance for loan losses	$	7,927	$	9,418	$	1,470	$	5,808	$	75	$	111	$	24,809

Loans deemed impaired	$	15,981	$	19,514	$	2,610	$	5,846	$	46	$	—	$	43,997
Loans not deemed impaired	1,397,758		1,654,917		180,548		604,055		5,706		—		3,842,984
Loans acquired with deteriorated credit quality	—		4,505		2,685		3,695		—		—		10,885
Total loans	$	1,413,739	$	1,678,936	$	185,843	$	613,596	$	5,752	$	—	$	3,897,866

December 31, 2013
Allowance related to loans individually evaluated and deemed impaired	$	94	$	—	$	—	$	—	$	—	$	—	$	94
Allowance related to loans collectively evaluated and not deemed impaired	6,302		8,288		829		3,394		29		247		19,089
Total allowance for loan losses	$	6,396	$	8,288	$	829	$	3,394	$	29	$	247	$	19,183

Loans deemed impaired	$	10,594	$	7,446	$	2,639	$	1,424	$	29	$	—	$	22,132
Loans not deemed impaired	623,853		769,467		49,604		246,508		2,228		—		1,691,660
Total loans	$	634,447	$	776,913	$	52,243	$	247,932	$	2,257	$	—	$	1,713,792

100

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Past Due and Non-Accrual Loans . The following is a summary of past due and non-accrual loans at December 31, 2014 and 2013 :



(In thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due		Past Due 90 Days or More and Still Accruing		Loans on Non- accrual
December 31, 2014
Real estate loans:
Residential	$	18,913	$	3,954	$	7,320	$	30,187	$	—	$	13,972
Commercial	7,734		3,967		9,509		21,210		2,361		12,514
Construction	1,403		227		695		2,325		84		611
Commercial business	2,782		3,812		7,486		14,080		2,307		5,217
Installment and collateral	34		—		12		46		—		44
Total	$	30,866	$	11,960	$	25,022	$	67,848	$	4,752	$	32,358
December 31, 2013
Real estate loans:
Residential	$	6,674	$	1,327	$	4,262	$	12,263	$	—	$	10,192
Commercial	513		—		656		1,169		—		656
Construction	—		—		1,306		1,306		—		1,518
Commercial business	3		—		704		707		—		1,259
Installment and collateral	15		21		3		39		—		29
Total	$	7,205	$	1,348	$	6,931	$	15,484	$	—	$	13,654

At December 31, 2014 , loans reported as past due 90 days or more and still accruing represent Legacy United purchased credit impaired loans for which an accretable fair value interest mark is being recognized and one loan which is fully guaranteed by the U.S. Government.

101

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Impaired Loans . The following is a summary of impaired loans with and without a valuation allowance as of December 31, 2014 and 2013 .



	December 31, 2014						December 31, 2013
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans without a valuation allowance:
Real estate loans:
Residential	$	15,233	$	17,143			$	9,991	$	11,565
Commercial	18,408		21,202				7,446		7,526
Construction	2,384		2,441				2,639		8,542
Commercial business loans	3,804		6,129				1,424		2,243
Installment and collateral loans	46		34				29		32
Total	39,875		46,949				21,529		29,908
Impaired loans with a valuation allowance:
Real estate loans:
Residential	748		892		$	28	603		667		$	94
Commercial	1,106		1,271		316		—		—		—
Construction	226		226		33		—		—		—
Commercial business loans	2,042		2,098		882		—		—		—
Total	4,122		4,487		1,259		603		667		94
Total impaired loans	$	43,997	$	51,436	$	1,259	$	22,132	$	30,575	$	94

102

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following is a summary of average recorded investment in impaired loans with and without a valuation allowance and interest income recognized on those loans for the years ended December 31, 2014, 2013 and 2012 .



	For the Year Ended December 31, 2014						For the Year Ended December 31, 2013
(In thousands)	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on a Cash Basis		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on a Cash Basis
Impaired loans without a valuation allowance:
Real estate loans:
Residential	$	11,593	$	384	$	355	$	8,671	$	391	$	391
Commercial	11,125		257		208		4,407		45		45
Construction	2,601		76		50		2,463		42		42
Commercial business loans	2,531		101		100		1,385		46		46
Installment and collateral loans	110		1		—		34		2		2
Total	27,960		819		713		16,960		526		526
Impaired loans with a valuation allowance:
Real estate loans:
Residential	1,128		67		46		1,328		41		41
Commercial	743		27		17		—		—		—
Construction	45		5		10		257		4		4
Commercial business loans	556		20		21		140		—		—
Installment and collateral loans	—		—		—		2		—		—
Total	2,472		119		94		1,727		45		45
	$	30,432	$	938	$	807	$	18,687	$	571	$	571

103

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



	For the Year Ended December 31, 2012
(In thousands)	Average Recorded Investment		Interest Income Recognized		Interest Income Recognized on a Cash Basis
Impaired loans without a valuation allowance:
Real estate loans:
Residential	$	8,408	$	411	$	411
Commercial	1,624		77		77
Construction	1,349		98		98
Commercial business loans	1,494		81		81
Installment and collateral loans	35		2		2
Total	12,910		669		669
Impaired loans with a valuation allowance:
Real estate loans:
Residential	1,225		26		26
Construction	99		18		18
Commercial business loans	210		18		18
Total	1,534		62		62
	$	14,444	$	731	$	731

No additional funds are committed to be advanced in connection with impaired loans.

Troubled Debt Restructurings . The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the restructuring constitutes a concession by the creditor and (ii) the debtor is experiencing financial difficulties. A troubled debt restructuring may include (i) a transfer from the debtor to the creditor of receivables from third parties, real estate, or other assets to satisfy fully or partially a debt, (ii) issuance or other granting of an equity interest to the creditor by the debtor to satisfy fully or partially a debt unless the equity interest is granted pursuant to existing terms for converting debt into an equity interest, and (iii) modifications of terms of a debt.

The following table provides detail of TDR balances for the periods presented:



(In thousands)	At December 31, 2014		At December 31, 2013
Recorded investment in TDRs:
Accrual status	$	11,638	$	8,479
Non-accrual status	4,169		1,737
Total recorded investment in TDRs	$	15,807	$	10,216
Accruing TDRs performing under modified terms more than one year	$	1,919	$	1,302
Specific reserves for TDRs included in the balance of allowance for loan losses	$	380	$	—
Additional funds committed to borrowers in TDR status	$	210	$	—

104

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Loans restructured as troubled debt restructurings during 2014 and 2013 are set forth in the following table:



	For the Year Ended December 31, 2014					For the Year Ended December 31, 2013
(Dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential real estate	16	$	2,497	$	2,497	8	$	1,129	$	1,129
Commercial real estate	6	1,450		1,450		4	6,541		6,541
Construction	15	4,161		4,161		3	521		521
Commercial business	8	1,121		1,121		2	61		61
Installment & collateral	1	2		2		2	26		26
Total troubled debt restructurings	46	$	9,231	$	9,231	19	$	8,278	$	8,278

The following table provides information on how loans were modified as TDRs:




	For the Year Ended December 31, 2014
(In thousands)	Extended Maturity		Adjusted Interest Rates		Adjusted Rate and Maturity		Payment Deferral		Other
Residential real estate	$	80	$	1,008	$	—	$	732	$	677
Commercial real estate	448		564		438		—		—
Construction	3,980		—		—		—		181
Commercial business	548		—		57		—		516
Installment and collateral	—		—		—		2		—
	$	5,056	$	1,572	$	495	$	734	$	1,374


	Year Ended December 31, 2013
(In thousands)	Extended Maturity		Adjusted Interest Rates		Adjusted Rate and Maturity		Payment Deferral		Other
Residential real estate	$	—	$	165	$	—	$	473	$	491
Commercial real estate	3,159		—		—		—		3,382
Construction	521		—		—		—		—
Commercial business	50		—		11		—		—
Installment and collateral	—		—		—		26		—
	$	3,730	$	165	$	11	499		$	3,873

Loans restructured as troubled debt restructurings during 2012 totaled $1.5 million consisting of five construction loans, for which the maturity term was extended

105

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Troubled debt restructurings that subsequently defaulted within twelve months of restructuring during the year ended December 31, 2014 and 2013 follows:



	For the Year Ended December 31, 2014			For the Year Ended December 31, 2013
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential real estate	—	$	—	3	$	408
Commercial real estate	2	3,360		—	—
Total troubled debt restructuring	2	$	3,360	3	$	408

The majority of restructured loans on non-accrual status as of December 31, 2014 were comprised of residential real estate loans and one commercial real estate loan compared to December 31, 2013, for which the majority was residential real estate loans. The financial impact of the trouble debt restructured loans has been minimal to date. Typically, residential loans are restructured with a modification and extension of the loan amortization and maturity at substantially the same interest rate as contained in the original credit extension. As part of the troubled debt restructuring process, the current value of the property is compared to the general ledger loan balance and if not fully supported, a write down is processed through the allowance for loan losses. Commercial real estate loans and commercial business loans also contain payment modification agreements and a like assessment of the underlying collateral value if the borrower’s cash flow may be inadequate to service the entire obligation.

Credit Quality Information. The Company utilizes a nine grade internal loan rating system for residential and commercial real estate, construction, commercial and installment and collateral loans as follows:

Loans rated 1 — 5: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6: Loans in this category are considered “special mention.” These loans reflect signs of potential weakness and are being closely monitored by management.

Loans rated 7: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 8: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 9: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

At the time of loan origination, a risk rating based on this nine point grading system is assigned to each loan based on the loan officer’s assessment of risk. For residential real estate and installment and collateral loans, the Company considers factors such as updated FICO scores, employment status, home prices, loan to value and geography. On an ongoing basis for portfolio monitoring purposes, the Company estimates the current value of property secured as collateral for both home equity and residential first mortgage lending products. Residential real estate and installment loans are pass rated unless their payment history reveals signs of deterioration, which may result in modifications to the original contractual terms. In situations which require modification to the loan terms, the internal loan grade will typically be reduced to substandard. More complex loans, such as commercial business loans and commercial real estate loans require that our internal credit area further evaluate the risk rating of the individual loan, with the credit area and Chief Credit Officer having final determination of the appropriate risk rating. These more complex loans and relationships receive an in-depth analysis and periodic review to assess the appropriate risk rating on a post-closing basis with changes made to the risk rating as the borrower’s and economic conditions warrant. The credit quality of the Company’s loan portfolio is reviewed by a third-party risk assessment firm on a quarterly basis and by the Company’s internal credit management function. The internal and external analysis of the loan portfolio is utilized to identify and quantify loans with higher than normal risk. Loans having a higher risk profile are assigned a risk rating corresponding to the level of weakness identified in the loan. All loans risk rated Special Mention, Substandard or Doubtful are reviewed by management not less than on a quarterly basis to assess the level of risk and to ensure that appropriate actions are being taken to minimize potential loss exposure. Loans identified as being loss are normally fully charged off.

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United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following table presents the Company’s loans by risk rating at December 31, 2014 and 2013 .



(In thousands)	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Installment and Collateral
December 31, 2014
Loans rated 1 — 5	$	1,396,866	$	1,606,420	$	174,629	$	570,808	$	5,488
Loans rated 6	1,981		28,616		4,652		21,589		—
Loans rated 7	14,892		43,900		6,562		21,154		264
Loans rated 8	—		—		—		45		—
Loans rated 9	—		—		—		—		—
	$	1,413,739	$	1,678,936	$	185,843	$	613,596	$	5,752
December 31, 2013
Loans rated 1 — 5	$	620,924	$	755,001	$	49,020	$	236,065	$	2,214
Loans rated 6	2,147		9,792		543		4,521		—
Loans rated 7	11,376		12,120		2,680		7,346		43
Loans rated 8	—		—		—		—		—
Loans rated 9	—		—		—		—		—
	$	634,447	$	776,913	$	52,243	$	247,932	$	2,257

Related Party Loans . 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, 2014 and 2013 are as follows:



(In thousands)	2014			2013
Balance, beginning of year	$	2,020		$	2,248
Loans related to parties who terminated service during the year	(948		)	(197		)
Additional loans and advances	2,848			426
Repayments	(198		)	(457		)
Balance, end of year	$	3,722		$	2,020

As of December 31, 2014 and 2013 , all related party loans were performing.

Related party loans were made on the same terms as those for comparable loans and transactions with unrelated parties, other than certain mortgage loans which were made to employees with over one year of service with the Company which have rates 0.50% below market rates at the time of origination.

Loan Servicing

The Company services certain residential and commercial loans for third parties. The aggregate principal balance of loans serviced for others was $559.1 million , $408.0 million and $238.1 million as of December 31, 2014, 2013 and 2012 , respectively. The balances of these loans are not included in the accompanying Consolidated Statements of Condition. During the years ended December 31, 2014, 2013 and 2012 , the Company received servicing fee income in the amount of $964,000 , $685,000 and $595,000 , respectively, which are included in service charges and fees in the Consolidated Statements of Net Income.

The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. At December 31, 2014 , the fair value of servicing rights was determined using pretax internal rates of return ranging from 8.4% to 10.4% and the Public Securities Association (“PSA”) Standard Prepayment model to estimate prepayments on the portfolio with an average prepayment speed of 187 . At December 31, 2013 the fair value of servicing rights was determined using pretax internal rates of return ranging from 8.1% to 10.1% and the Prepayment model to estimate prepayments on the portfolio with an average prepayment speed of 154 .

107

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Mortgage servicing rights are included in other assets in the Consolidated Statements of Condition. The following table summarizes mortgage servicing rights capitalized and amortized for the years ended December 31, 2014, 2013 and 2012 . Changes in the fair value of mortgage servicing rights are included in other income (loss) in the Consolidated Statements of Net Income.



	Years Ended December 31,
(In thousands)	2014			2013			2012
Mortgage servicing rights:
Balance at beginning of year	$	4,103		$	1,083		$	944
Cumulative effect of net change in accounting principle	—			471			—
Addition of Legacy United mortgage servicing rights	764			—			—
Change in fair value recognized in net income	(1,269		)	1,347			—
Issuances/additions	1,131			1,202			546
Amortization	—			—			(407		)
Balance at end of year	4,729			4,103			1,083
Valuation allowances:
Balance at beginning of year	—			(31		)	(166		)
Recoveries	—			31			135
Provisions	—			—			—
Balance at end of period	—			—			(31		)
Mortgage servicing assets, net	$	4,729		$	4,103		$	1,052
Fair value of mortgage servicing assets at end of year	$	4,729		$	4,103		$	1,554



Note 7.	PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2014 and 2013 are summarized as follows:



	At December 31,						Estimated Useful Life
(In thousands)	2014			2013			Estimated Useful Life
Land and improvements	$	950		$	487		0 - 15 years
Buildings	40,001			15,554			10 - 39.5 years
Furniture and equipment	27,618			12,188			3 - 10 years
Leasehold improvements	9,261			7,473			5 - 10 years
Assets under capitalized leases	4,902			—			5 - 10 years
Construction in progress	586			4,616
	83,318			40,318
Accumulated depreciation and amortization	(25,653		)	(15,628		)
Premises and equipment, net	$	57,665		$	24,690

Depreciation and amortization expense was $3.8 million , $2.4 million and $1.4 million for the years ended December 31, 2014, 2013 and 2012 , respectively.

Construction in progress at December 31, 2014 related to renovations on several of the Company’s offices and branches. The Company had construction commitments amounting to approximately $1.5 million at December 31, 2014 .



Note 8.	OTHER REAL ESTATE OWNED

Other real estate owned totaled $2.2 million at December 31, 2014 and consisted of $923,000 of commercial real estate properties and $1.2 million of residential real estate properties, which are held for sale. At December 31, 2013 , other real estate owned was $1.5 million and consisted of $466,000 of commercial real estate properties and $1.1 million of residential real estate properties. The increase in other real estate owned from the prior year is due to the acquisition of Legacy United. As a result of the Merger, $2.0 million in other real estate owned was acquired. Other income totaling $11,000 , $23,000 and $2,000 was generated in 2014, 2013 and 2012 , respectively, from the rental of other real estate owned property. Other real estate owned

108

operating expenses were $579,000 , $587,000 and $357,000 for the years ended December 31, 2014, 2013 and 2012 , respectively.

The following is a summary of the activity for other real estate owned:



	Years Ended December 31,
(In thousands)	2014			2013			2012
Balance at beginning of year	$	1,529		$	2,846		$	3,008
Additions	2,339			3,097			2,218
Acquisition of Legacy United	2,044			—			—
Write-downs	(213		)	(287		)	(183		)
Proceeds from sales	(3,869		)	(4,042		)	(2,113		)
Gain (loss) on sales	409			(85		)	(84		)
Balance at end of year	$	2,239		$	1,529		$	2,846



Note 9.	OTHER ASSETS

The components of Other Assets for the years ended December 31, 2014 and 2013 are summarized below:



	At December 31,
(In thousands)	2014		2013
Current tax receivable	$	14,391	$	1,951
Partnership investments	13,461		—
Mortgage servicing rights	4,729		4,103
Derivative assets	4,074		7,851
Investment receivable	2,762		112
Other	9,715		2,981
	$	49,132	$	16,998



Note 10.	DEPOSITS

Deposits at December 31, 2014 and 2013 were as follows:



	December 31,
(In thousands)	2014		2013
Demand and NOW	$	902,460	$	420,359
Regular savings and club accounts	528,614		219,635
Money market and investment savings	1,047,302		524,638
Time deposits	1,556,935		570,573
	$	4,035,311	$	1,735,205

Time deposits in denominations of $100,000 or more were $724.0 million and $309.5 million as of December 31, 2014 and 2013 , respectively.

109

Contractual maturities of time deposits as of December 31, 2014 are summarized below:



(In thousands)
2015	$	1,056,443
2016	323,516
2017	102,535
2018	54,402
2019	20,039
	$	1,556,935

Included in time deposits are brokered deposits which amounted to $241.9 million and $88.7 million at December 31, 2014 and 2013 , respectively. Included in money market deposits at December 31, 2014 and 2013 are brokered deposits of $111.8 million and $50.0 million , respectively.



Note 11.	BORROWINGS

Federal Home Loan Bank Advances

Contractual maturities and weighted-average rates of outstanding advances from the FHLBB as of December 31, 2014 and 2013 are summarized below:



	December 31, 2014				December 31, 2013
(Dollars in thousands)	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
2014	$	—	—	%	$	118,112	0.45	%
2015	435,763		0.38		35,000		2.28
2016	19,714		1.53		3,000		2.70
2017	66,000		2.72		33,000		2.56
2018	16,784		2.19		—		—
Thereafter	37,300		1.89		2,924		2.54
	$	575,561	0.84	%	$	192,036	1.21	%

The total carrying value of advances from the FHLBB at December 31, 2014 was $581.0 million , which includes a remaining fair value adjustment of $5.4 million on advances acquired in the Merger. At December 31, 2013 , the total balance of FHLBB advances was $192.0 million . At December 31, 2014 , eight advances totaling $41.0 million with interest rates ranging from 3.19% to 4.49% , which are scheduled to mature between 2017 and 2018 , are callable. Advances are collateralized by first mortgage loans and investment securities with an estimated eligible collateral value of $853.8 million and $272.6 million at December 31, 2014 and 2013 , respectively.

In addition to the outstanding advances, the Bank also has access to an unused line of credit with the FHLBB amounting to $10.0 million at December 31, 2014 and 2013 . In accordance with an agreement with the FHLBB, the qualified collateral must be free and clear of liens, pledges and have a discounted value equal to the aggregate amount of the line of credit and outstanding advances. At December 31, 2014 , the Bank could borrow immediately an additional $243.2 million from the FHLBB, inclusive of the line of credit.

The Bank is required to acquire and hold shares of capital stock in the FHLBB in an amount at least equal to the sum of 0.35% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, and up to 4.5% of its advances (borrowings) from the FHLBB. The carrying value of FHLBB stock approximates fair value based on the most recent redemption provisions of the stock. At December 31, 2014 , the Bank had $32.0 million in FHLBB capital stock.

Repurchase Agreements

The Company assumed wholesale reverse repurchase agreements in the Merger totaling $20.0 million with a weighted average interest rate of 2.59% and a weighted average term of 4.6 years at April 30, 2014. The Company also assumed retail repurchase agreements in the Merger, which primarily consist of transactions with commercial and municipal customers. The Company pledged investment securities as collateral for these borrowings.

110

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2014 and 2013 , advances outstanding under wholesale reverse repurchase agreements totaled $69.2 million and $48.2 million , respectively. The outstanding advances at December 31, 2014 consisted of five individual borrowings with remaining terms of 5 years or less and a weighted average cost of 1.07% . The outstanding advances at December 31, 2013 had a weighted average cost of 0.42% .

Retail repurchase agreements are for a term of one day and are backed by the purchasers’ interest in certain U.S. Government Agency securities or government-sponsored securities. As of December 31, 2014 , retail repurchase agreements totaled $41.3 million . The Company had no retail repurchase agreements at December 31, 2013.

Subordinated Debentures

The Company assumed junior subordinated debt as a result of the Merger in the form of trust preferred securities issued through a private placement offering with a face amount of $7.7 million . The Company recorded a fair value acquisition discount of $2.3 million on May 1, 2014. The remaining unamortized discount was $2.2 million at December 31, 2014 . This issue has a maturity date of March 15, 2036 and bears a floating rate of interest that reprices quarterly at the 3-month LIBOR rate plus 1.85% . The interest rate at December 31, 2014 was 2.11% . A special redemption provision allows the Company to redeem this issue at par on March 15, June 15, September 15, or December 15 of any year subsequent to March 15, 2011.

Other Borrowings

The Company acquired secured borrowings totaling $2.8 million in the Merger. These borrowings related to two transfers of financial assets that did not meet the definition of a participating interest and did not meet sale accounting criteria; therefore, they are accounted for as secured borrowings and classified as long-term debt on the Consolidated Statements of Condition. Subsequent to the Merger, one of the financial assets paid off and the remaining balance was $1.7 million at December 31, 2014 .

The Company has capital lease obligations for three of its leased banking branches, which were acquired in the Merger. At December 31, 2014 , the balance of capital lease obligations totaled $4.8 million . See Note 7 in th e Notes to Consolidated Financial Statements for further information.

Other Sources of Wholesale Funding

The Bank has relationships with brokered sweep deposit providers by which funds are deposited by the counterparties at the Bank’s request. Amounts outstanding under these agreements are reported as interest-bearing deposits and totaled $111.8 million at a cost of 0.47% at December 31, 2014 and $50.0 million at a cost of 0.50% at December 31, 2013 . The Bank maintains open dialogue with the brokered sweep providers and has the ability to increase the deposit balances upon request, up to certain limits based upon internal policy requirements.

Additionally, the Company has unused federal funds lines of credit with five counterparties totaling $122.5 million at December 31, 2014 .



	For the Years Ended December 31,
	2014			2013			2012
(In thousands)
Balance at end of period	$	432,000		$	118,112		$	61,000
Average amount outstanding during the period	205,044			104,037			53,500
Maximum amount outstanding at any month-end	432,000			171,000			77,000
Weighted-average interest rate during the period	0.47		%	0.33		%	0.59		%
Weighted-average interest rate at end of period	0.38		%	0.45		%	0.33		%



Note 12.	INCOME TAXES

The components of the income tax expense (benefit) for the years ended December 31, 2014, 2013 and 2012 are as follows:

111

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



(In thousands)	2014			2013		2012
Current tax provision (benefit)
Federal	$	(13,905	)	$	4,842	$	8,445
State	311			117		48
Total current	(13,594		)	4,959		8,493
Deferred tax provision (benefit)
Federal	7,482			410		(1,858		)
State	(121		)	—		—
Total deferred	7,361			410		(1,858		)
Total income tax expense (benefit)	$	(6,233	)	$	5,369	$	6,635

For the years ended December 31, 2014, 2013 and 2012 , the provision for income taxes differs from the amount computed by applying the statutory Federal income tax rate of 35% to pre-tax income for the following reasons:



	Years Ended December 31,
(In thousands)	2014			2013			2012
Provision for income tax at statutory rate	$	192		$	6,859		$	7,851
Increase (decrease) resulting from:
State income taxes, net of federal benefit	124			76			31
Increase in cash surrender value of bank-owned life insurance	(1,065		)	(732		)	(659		)
Dividend received deduction	(276		)	(24		)	(5		)
Tax exempt interest and disallowed interest expense	(1,740		)	(808		)	(600		)
Employee Stock Ownership Plan	153			193			—
Nondeductible acquisition costs	440			—			—
Excess parachute payments	1,615			—			—
Investment tax credits	(5,596		)	—			—
Other, net	(80		)	(195		)	17
Total provision (benefit) for income taxes	$	(6,233	)	$	5,369		$	6,635

112

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013 are presented below:



	December 31,
(In thousands)	2014			2013
Deferred tax assets:
Loans	$	17,086		$	7,836
Investment security losses	440			192
Net unrealized losses on securities available for sale	—			4,733
Net unrealized losses on interest rate swaps	390			—
Pension, deferred compensation and post-retirement liabilities	4,184			815
Stock incentive award plan	2,871			1,779
Deposits - purchase accounting adjustment	2,149			—
Accrued expenses	3,124			41
Tax credits	4,521			—
Borrowings - purchase accounting adjustment	1,254			—
State net operating loss	8,209			7,907
Federal net operating loss	595			—
Other	3,840			1,207
Gross deferred tax assets	48,663			24,510
Valuation allowance	(10,672		)	(9,786		)
Gross deferred tax assets, net of valuation allowance	37,991			14,724

Deferred tax liabilities:
Unrealized gains on securities	(455		)	—
Net unrealized gains on interest rate swaps	—			(3,018		)
Purchase accounting adjustments	(3,703		)	(414		)
Other	—			(595		)
Gross deferred tax liabilities	(4,158		)	(4,027		)
Net deferred tax asset	$	33,833		$	10,697

The Company assesses the realizability of our deferred tax assets and whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The Company considers projections of future taxable income during the periods in which deferred tax assets and liabilities are scheduled to reverse. Additionally, in determining the availability of operating loss carrybacks and other tax attributes, both projected future taxable income and tax planning strategies are considered in making this assessment. Based upon the level of our available historical taxable income, the opportunity for our net operating loss carrybacks, and projections for our future taxable income over the periods which our deferred tax assets are realizable, we believe it is more likely than not that we will realize the full federal benefit of these deductible differences at December 31, 2013 and 2014.

Net operating losses may be carried back to the preceding two taxable years for Federal income tax purposes and forward to the succeeding 20 taxable years for Federal and State income tax purposes, subject to certain limitations. At December 31, 2014 , the Company had net operating loss carryforwards of $ 595,000 for Federal income tax purposes, which will begin to expire in 2023. These losses, subject to an annual limitation, were obtained through our acquisition of Legacy United Bank. As of December 31, 2014 and 2013 , the Company had a valuation allowance of $ 10.7 million and $ 9.8 million , respectively, against its state deferred tax asset absent net operating loss carryforwards, in connection with the creation of a Connecticut Passive Investment Company pursuant to legislation enacted in 1998. As of December 31, 2014 and 2013 , the Company had $ 168.4 million and $162.2 million , respectively, in Connecticut net operating loss carryforwards that will begin to expire in 2023 and for which a 100% valuation allowance has been established. Under the Passive Investment Company legislation, Connecticut Passive Investment Companies are not subject to the Connecticut Corporate Business Tax and dividends paid by the passive investment company to the Company are exempt from the Connecticut Corporate Business Tax. The change in the valuation allowance was recognized through the effective tax rate.

113

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

We generated $ 6.6 million in Federal and State tax credits in 2014 associated with investment tax credits that arose in 2014 either obtained from the acquisition of Legacy United or through direct investment. The credits benefit is recognized through the effective tax rate in the year in which they became available. There were no tax credits generated in 2013.

Retained earnings at December 31, 2014 includes a contingency reserve for loan losses of approximately $3.8 million , which represents the tax positions that 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 $1.4 million at December 31, 2014 have not been recognized.

As of December 31, 2014 , there were $252,000 in uncertain tax positions related to federal and state income tax matters based upon tax positions that related to the current year. Prior to 2014, there were no material uncertain tax positions related to income tax matters. The Company records interest and penalties as part of income tax expense. No interest or penalties were recorded for the years ended December 31, 2014, 2013 and 2012 . The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2011 and after.



Note 13.	DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposure to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

Information about interest rate swap agreements and non-hedging derivative assets and liabilities as of December 31, 2014 and 2013 is as follows:

114

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



	Notional Amount		Weighted- Average Remaining Maturity	Weighted-Average Rate								Estimated Fair Value Net
				Received				Paid
	(In thousands)		(In years)									(In thousands)
December 31, 2014
Cash flow hedges:
Forward starting interest rate swaps on future borrowings	$	150,000	6.34	TBD		(1	)	2.45	%			$	(1,069	)
Interest rate swaps	25,000		2.41	0.23	%			0.90	%			72
Fair value hedges:
Interest rate swaps	35,000		2.72	1.04	%			0.24	%	(2	)	(82		)
Non-hedging derivatives:
Forward loan sale commitments	14,091		0.00									(14		)
Derivative loan commitments	8,839		0.00									213
Loan level swaps - dealer(3)	86,446		8.69	1.98	%			4.34	%			3,678
Loan level swaps - borrowers(3)	86,446		8.69	4.34	%			1.98	%			(3,678		)
Total	$	405,822										$	(880	)
December 31, 2013
Cash flow hedges:
Forward starting interest rate swaps on future borrowings	$	100,000	7.00	TBD		(1	)	2.40	%			$	7,389
Fair value hedges:
Interest rate swaps	20,000		4.02	1.10	%			0.22	%	(2	)	(183		)
Non-hedging derivatives:
Forward loan sale commitments	2,695		0.00									19
Derivative loan commitments	2,271		0.00									20
Loan level swaps - dealer(3)	25,205		8.52	2.04	%			4.58	%			(240		)
Loan level swaps - borrowers(3)	25,205		8.52	4.58	%			2.04	%			310
Total	$	175,376										$	7,315


(1)	The receiver leg of the cash flow hedges is floating rate and indexed to the 3-month USD-LIBOR-BBA, as determined two London banking days prior to the first day of each calendar quarter, commencing with the earliest effective trade. The earliest effective trade date for the cash flow hedges is July 1, 2015.


(2)	The paying leg is one month LIBOR plus a fixed spread ; above rate in effect as of December 31, 2014 .


(3)	The Company offers a loan level hedging product to qualifying commercial borrowers that seek to mitigate risk to rising interest rates. As such, the Company enters into equal and offsetting trades with dealer counterparties.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company has not recorded any hedge ineffectiveness since inception.

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Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company expects to reclassify $116,000 from accumulated other comprehensive loss to interest expense during the next 12 months.

The Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of 36 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

As of December 31, 2014 , the Company had six outstanding interest rate derivatives with a notional value of $175.0 million that were designated as cash flow hedges of interest rate risk.

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its fixed rate obligations due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the benchmark interest rate. Interest rate swaps designated as fair value hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable rate payments over the life of the agreements without the exchange of the underlying notional amount.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related derivatives. During the years ended December 31, 2014 and 2013 , amounts recognized as interest expense related to hedge ineffectiveness were negligible. The Company recognized a net reduction of interest income of approximately $24,000 and $66,000 for the years ended December 31, 2014 and 2013 related to net settlements on the derivatives.

As of December 31, 2014 , the Company had three outstanding interest rate derivatives with a notional of $35.0 million that were designated as fair value hedges of interest rate risk.

Non-Designated Hedges

Loan Level Interest Rate Swaps

Qualifying derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers, which the Company implemented during the second quarter of 2013. The Company executes interest rate derivatives with commercial banking customers to facilitate their respective risk management strategies. Those interest rate derivatives are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

As of December 31, 2014 , the Company had eleven borrower-facing interest rate swaps with an aggregate notional amount of $86.4 million and eleven broker-facing interest rate swaps also with an aggregate notional value amount of $86.4 million related to this program.

In the fourth quarter of 2014, the Company entered into a risk participation agreement with a counterparty related to a loan level interest rate swap with one of its commercial banking customers. This agreement was entered into in conjunction with a credit enhancement provided to the borrower by the counterparty. Therefore, if the borrower defaults, the counterparty is responsible for a percentage of the exposure. This risk participation agreement is a guarantee of performance on a derivative and accordingly, is recorded at fair value on the Company’s Consolidated Statements of Financial Condition. At December 31, 2014 , the notional amount of the risk participation agreement was $1.8 million and the fair value was $1,000 , reflecting the counterparty participation level of 46.9% .

Derivative Loan Commitments

The Company enters into mortgage loan commitments that are also referred to as derivative loan commitments, if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that these loans will subsequently be sold in the secondary market.

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Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases.

Forward Loan Sale Commitments

To protect against the price risk inherent in derivative loan commitments, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments.

With a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor to compensate the investor for the shortfall.

With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments.

Fair Values of Derivative Instruments on the Company’s Consolidated Statements of Financial Condition

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Statements of Condition as of December 31, 2014 and 2013 .



	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
(In thousands)	Balance Sheet Location	Dec 31, 2014		Dec 31, 2013		Balance Sheet Location	Dec 31, 2014		Dec 31, 2013
Derivatives designated as hedging instruments:
Interest rate swap - cash flow hedge	Other Assets	$	140	$	7,389	Other Liabilities	$	1,137	$	—
Interest rate swap - fair value hedge	Other Assets	34		5		Other Liabilities	116		188
Total derivatives designated as hedging instruments		$	174	$	7,394		$	1,253	$	188
Derivatives not designated as hedging instruments:
Forward loan sale commitment	Other Assets	$	7	$	19	Other Liabilities	$	21	$	—
Derivative loan commitment	Other Assets	213		20			—		—
Interest rate swap - with customers	Other Assets	3,678		310		Other Liabilities	3,678		—
Interest rate swap - with counterparties		—		—		Other Liabilities	—		240
Interest rate swap -risk participation agreement	Other Assets	1		—			—		—
Total derivatives not designated as hedging		$	3,899	$	349		$	3,699	$	240

Effect of Derivative Instruments in the the Company’s Consolidated Statements of Net Income and Changes in Stockholders’ Equity

The tables below present the effect of derivative instruments in the Company’s Consolidated Statements of Net Income and Changes in Stockholders’ Equity designated as hedging instruments for the years ended December 31, 2014, 2013 and 2012 . In June 2012, the Company entered their first interest rate swap to hedge the variable cash flows associated with a forecasted issuance of debt. No hedges were made by the Company prior to June 2012.

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Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) For the Years Ended December 31,
Derivatives in Cash Flow Hedging Relationships	2014			2013		2012
(In thousands)
Interest Rate Swaps	$	(8,386	)	$	7,537	$	(148	)




		Amount of Loss Recognized in Income on Derivatives For the Years Ended December 31,
Derivatives in Fair Value Hedging Relationships	Location on Gain (Loss) Recognized in Income
Derivatives in Fair Value Hedging Relationships	Location on Gain (Loss) Recognized in Income	2014			2013			2012
(In thousands)
Interest Rate Swaps	Interest income	$	101		$	(183	)	$	—
		Amount of Gain Recognized in Income on Hedged Items For the Years Ended December 31,
		2014			2013			2012
Interest Rate Swaps	Interest income	$	(101	)	$	183		$	—

The table below presents the effect of derivative instruments in Company’s Consolidated Statements of Net Income for derivatives not designated as hedging instruments for the years ended December 31, 2014, 2013 and 2012 .



	Amount of Gain (Loss) Recognized for the Years Ended December 31,
(In thousands)	2014			2013			2012
Derivatives not designated as hedging instruments:
Derivative loan commitment	$	193		$	(6	)	$	(101	)
Forward loan sale commitments	(33		)	(19		)	464
Interest rate swaps	(70		)	70			—
Interest rate swap - risk participation agreement	(1		)	—			—
	$	89		$	45		$	363

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness or fails to maintain a well-capitalized rating, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty. As of December 31, 2014 , there was no collateral posted by the counterparties to the Company related to these agreements, compared to $7.0 million at December 31, 2013 .

As of December 31, 2014 , the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.1 million . As of December 31, 2014 , the Company has minimum collateral posting thresholds with three of its derivative counterparties and has posted collateral with a market value of $4.0 million against its obligations under these agreements. A degree of netting occurs on occasions where the Company has exposure to a counterparty and the counterparty has exposure to the Company. If the Company had breached any of these provisions at December 31, 2014 , it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.

As of December 31, 2013 , the fair value of derivatives in a net asset position, which includes accrued interest but excludes any adjustment for non-performance risk, related to these agreements was $7.0 million .

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Note 14.	FAIR VALUE MEASUREMENT

Fair value estimates are made as of a specific point in time based on the characteristics of the assets and liabilities and relevant market information. The fair value estimates are measured within the fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1: Quoted prices are available in active markets for identical assets and liabilities as of the reporting date. The quoted price is not adjusted because of the size of the position relative to trading volume.

Level 2: Pricing inputs are observable for assets and liabilities, either directly or indirectly but are not the same as those used in Level 1. Fair value is determined through the use of models or other valuation methodologies.

Level 3: Pricing inputs are unobservable for assets and liabilities and include situations where there is little, if any, market activity and the determination of fair value requires significant judgment or estimation.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such instances, the determination of which category within the fair value hierarchy is appropriate for any given asset and liability is based on the lowest level of input that is significant to the fair value of the asset and liability.

When available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and could be material. Derived fair value estimates may not be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates for financial instrument fair value disclosures are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company.

Loans Held for Sale: The Company has elected the fair value option for its portfolio of residential real estate mortgage loans held for sale to reduce certain timing differences and better match changes in fair value of the loans with changes in the fair value of the derivative loan sale contracts used to economically hedge them.

The aggregate principal amount of the residential real estate mortgage loans held for sale was $8.1 million and $424,000 at December 31, 2014 and 2013 , respectively. The aggregate fair value of these loans as of the same dates was $8.2 million and $422,000 , respectively.

There were no residential real estate mortgage loans held for sale 90 days or more past due at December 31, 2014 and 2013 .

The following table presents the gains (losses) in fair value related to mortgage loans held for sale for the periods indicated. Changes in the fair value of mortgage loans held for sale are reported as a component of net gains from sales of loans in the Consolidated Statements of Net Income.



	Years Ended December 31,
(In thousands)	2014		2013
Mortgage loans held for sale	$	195	$	(2	)

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables detail the assets and liabilities carried at fair value on a recurring basis as of December 31, 2014 and 2013 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value. There were no transfers in and out of Level 1, Level 2 and Level 3 measurements during years ended December 31, 2014 and 2013 .



(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2014
Available for Sale Securities:
U.S. Government and government-sponsored enterprise obligations	$	6,822	$	—	$	6,822	$	—
Government-sponsored residential mortgage-backed securities	167,419		—		167,419		—
Government-sponsored residential collateralized debt obligations	238,133		—		238,133		—
Government-sponsored commercial mortgage-backed securities	68,298		—		68,298		—
Government-sponsored commercial collateralized debt obligations	129,686		—		129,686		—
Asset-backed securities	178,755		—		43,166		135,589
Corporate debt securities	42,245		—		40,627		1,618
Obligations of states and political subdivisions	195,772		—		195,772		—
Marketable equity securities	25,881		3,299		22,582		—
Total available for sale securities	$	1,053,011	$	3,299	$	912,505	$	137,207
Mortgage loan derivative assets	$	220	$	—	$	220	$	—
Mortgage loan derivative liabilities	21		—		21		—
Loans held for sale	8,220		—		8,220		—
Mortgage servicing rights	4,729		—		—		4,729
Interest rate swap assets	3,853		—		3,853		—
Interest rate swap liabilities	4,931		—		4,931		—
December 31, 2013
Available for Sale Securities:
U.S. Government and government-sponsored enterprise obligations	$	6,031	$	—	$	6,031	$	—
Government-sponsored residential mortgage-backed securities	95,662		—		95,662		—
Government-sponsored residential collateralized debt obligations	67,751		—		67,751		—
Government-sponsored commercial mortgage-backed securities	12,898		—		12,898		—
Government-sponsored commercial collateralized debt obligations	4,706		—		4,706		—
Asset-backed securities	106,536		—		35,095		71,441
Corporate debt securities	42,486		—		41,016		1,470
Obligations of states and political subdivisions	62,505		—		62,505		—
Marketable equity securities	6,328		3,280		2,996		52
Total available for sale securities	$	404,903	$	3,280	$	328,660	$	72,963
Mortgage loan derivative assets	$	39	$	—	$	39	$	—
Loans held for sale	422		—		422		—
Mortgage servicing rights	4,103		—		—		4,103
Interest rate swap assets	7,704		—		7,704		—
Interest rate swap liabilities	428		—		428		—

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The following table presents additional information about assets measured at fair value on a recurring basis for which the Company utilized Level 3 inputs to determine fair value.



	For the Years Ended December 31,
(In thousands)	2014			2013
Balance of available for sale securities, at beginning of period	$	72,963		$	8,312
Purchases	72,115			65,452
Principal payments	(6,915		)	(1,109		)
Total unrealized gains (losses) included in other comprehensive income	(956		)	308
Balance at end of period	$	137,207		$	72,963

Balance of mortgage servicing rights at beginning of period	$	4,103		$	1,052
Cumulative effect of change in accounting principle	—			502
Addition of Legacy United mortgage servicing rights	764			—
Issuances	1,131			1,202
Change in fair value recognized in net income	(1,269		)	1,347
Balance at end of period	$	4,729		$	4,103

The following valuation methodologies are used for assets that are recorded at fair value on a recurring basis.

Available for Sale Securities: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using an independent pricing service. Level 1 securities are those traded on active markets for identical securities including U.S. treasury securities, equity securities and mutual funds. Level 2 securities include U.S. Government agency obligations, U.S. Government-sponsored enterprises, mortgage-backed securities, obligations of states and political subdivisions, corporate and other debt securities. Level 3 securities include private placement securities and thinly traded equity securities. All fair value measurements are obtained from a third party pricing service and are not adjusted by management.

Matrix pricing is used for pricing most obligations of states and political subdivisions, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on securities relationships to other benchmark quoted securities. The grouping of securities is completed according to insurer, credit support, state of issuance and rating to incorporate additional spreads and municipal bond yield curves.

The valuation of the Company’s asset-backed securities is obtained from a third party pricing provider and is determined utilizing an approach that combines advanced analytics with structural and fundamental cash flow analysis based upon observed market based yields. The third party provider’s model analyzes each instrument’s underlying collateral given observable collateral characteristics and credit statistics to extrapolate future performance and project cash flows, by incorporating expectations of default probabilities, recovery rates, prepayment speeds, loss severities and a derived discount rate. The Company has determined that due to the liquidity and significance of unobservable inputs, that asset-backed securities are classified in Level 3 of the valuation hierarchy.

The Company holds one pooled trust preferred security. The security’s fair value is based on unobservable issuer-provided financial information and discounted cash flow models derived from the underlying structured pool and therefore is classified as Level 3.

Loans Held for Sale: The fair value of residential mortgage loans held for sale is estimated using quoted market prices for loans with similar characteristics provided by government-sponsored entities. Any changes in the valuation of mortgage loans held for sale is based upon the change in market interest rates between closing the loan and the measurement date and an immaterial portion attributable to changes in instrument-specific credit risk The Company has determined that loans held for sale are classified in Level 2 of the valuation hierarchy.

Mortgage Servicing Rights: A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are recorded monthly, effective January 1, 2013, (See Note 6, “Loans Receivable

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and Allowance for Loan Losses” in the Notes to Consolidated Financial Statements contained elsewhere in this report) as the cash flows derived from the valuation model change the fair value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

Derivatives: Derivative instruments related to commitments for loans to be sold are carried at fair value. Fair value is determined through quotes obtained from actively traded mortgage markets. Any change in fair value for rate lock commitments to the borrower is based upon the change in market interest rates between making the rate lock commitment and the measurement date and, for forward loan sale commitments to the investor, is based upon the change in market interest rates from entering into the forward loan sales contract and the measurement date. Both the rate lock commitments to the borrowers and the forward loan sale commitments to investors are derivatives pursuant to the requirements of FASB ASC 815-10; however, the Company has not designated them as hedging instruments. Accordingly, they are marked to fair value through earnings.

The Company’s intention is to sell the majority of its fixed rate mortgage loans with original terms of 30 years on a servicing retained basis as well as certain 10 , 15 and 20 year loans. The servicing value has been included in the pricing of the rate lock commitments. The Company estimates a fallout rate of approximately 11% based upon historical averages in determining the fair value of rate lock commitments. Although the use of historical averages is based upon unobservable data, the Company believes that this input is insignificant to the valuation and, therefore, has concluded that the fair value measurements meet the Level 2 criteria. The Company continually reassesses the significance of the fallout rate on the fair value measurement and updates the fallout rate accordingly.

Hedging derivatives include interest rate swaps as part of management’s strategy to manage interest rate risk. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy.

The following table presents additional quantitative information about assets measured at fair value on a recurring basis for which the Company utilized Level 3 inputs to determine fair value at December 31, 2014.



(Dollars in thousands)
	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Asset-backed securities	$	135,589	Discounted Cash Flow	Discount Rates	1.4% - 6.7% (4.7%)
				Cumulative Default %	7.4% - 32.6% (13.9%)
				Loss Given Default	2.0% - 64.6% (26.0%)

Corporate debt - pooled trust	$	1,618	Discounted Cash Flow	Discount Rate	8.0% (8.0%)
preferred security				Cumulative Default %	2.8% - 78.0% (15.3%)
				Loss Given Default	85% - 100% (89.8%)

Mortgage servicing rights	$	4,729	Discounted Cash Flow	Discount Rate	8.0% - 17.0% (9.4%)
				Cost to Service	$40 - $100 ($50.34)
				Float Earnings Rate	0.25% (0.25%)

Asset-backed securities : Given the level of market activity for the asset backed securities in the portfolio, the discount rates utilized in the fair value measurement were derived by analyzing current market yields for comparable securities and research reports issued by brokers and dealers in the financial services industry. Adjustments were then made for credit and structural differences between these types of securities. There is an inverse correlation between the discount rate and the fair value measurement. When the discount rate increases, the fair value decreases.

Other significant unobservable inputs to the fair value measurement of the asset backed securities in the portfolio included prospective defaults and recoveries. The cumulative default percentage represents the lifetime defaults assumed. The loss given default percentage represents the percentage of current and projected defaults assumed to be lost. There is an inverse

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correlation between the default percentages and the fair value measurement. When default percentages increase, the fair value decreases.

Corporate debt : Given the level of market activity the trust preferred securities in the form of collateralized debt obligation, the discount rate utilized in the fair value measurement were derived by analyzing current market yields for trust preferred securities of individual name issuers in the financial services industry. Adjustments were then made for credit and structural differences between these types of securities. There is an inverse correlation between the discount rate and the fair value measurement. When the discount rate increases, the fair value decreases.

Other significant unobservable inputs to the fair value measurement of the collateralized debt obligations included prospective defaults and recoveries. The cumulative default percentage represents the lifetime defaults assumed, excluding currently defaulted collateral and including all performing and currently deferring collateral. As a result, the cumulative default percentage also reflects assumptions of the possibility of currently deferring collateral curing and becoming current. The loss given default percentage represents the percentage of current and projected defaults assumed to be lost. There is an inverse correlation between the cumulative default and loss given default percentages and the fair value measurement. When default percentages increase, the fair value decreases.

Mortgage servicing rights : Given the low level of market activity in the MSR market and the general difficulty in price discovery, even when activity is at historic norms, the discount rate utilized in the fair value measurement was derived by analyzing recent and historical pricing for MSRs. Adjustments were then made for various loan and investor types underlying these MSRs. There is an inverse correlation between the discount rate and the fair value measurement. When the discount rate increases, the fair value decreases.

Other significant unobservable inputs to the fair value measurement of MSR’s include cost to service, an input that is not as simple as taking total costs and dividing by a number of loans. It is a figure informed by marginal cost and pricing for MSRs by competing firms, taking other assumptions into consideration. It is different for different loan types. There is an inverse correlation between the cost to service and the fair value measurement. When the cost assumption increase, the fair value decreases.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with generally accepted accounting principles; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following tables detail the assets carried at fair value on a non-recurring basis at December 31, 2014 and 2013 and indicate the fair value hierarchy of the valuation technique utilized by the Company to determine fair value. There were no liabilities measured at fair value on a non-recurring basis at December 31, 2014 and 2013 .



(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2014
Impaired loans	$	2,863	$	—	$	—	$	2,863
Other real estate owned	2,239		—		—		2,239
Total	$	5,102	$	—	$	—	$	5,102
December 31, 2013
Impaired loans	$	509	$	—	$	—	$	509
Other real estate owned	1,529		—		—		1,529
Total	$	2,038	$	—	$	—	$	2,038

The following is a description of the valuation methodologies used for certain assets that are recorded at fair value on a non-recurring basis.

Other Real Estate Owned: The Company classifies property acquired through foreclosure or acceptance of deed-in-lieu of foreclosure, as other real estate owned (“OREO”) in its financial statements. Upon foreclosure, the property securing the loan is recorded at fair value as determined by real estate appraisals less the estimated selling expense. Appraisals are based upon

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observable market data such as comparable sales within the real estate market. Assumptions are also made based on management’s judgment of the appraisals and current real estate market conditions and therefore these assets are classified as non-recurring Level 3 assets in the fair value hierarchy.

Impaired Loans : Accounting standards require that a creditor recognize the impairment of a loan if the present value of expected future cash flows discounted at the loan’s effective interest rate (or, alternatively, the observable market price of the loan or the fair value of the collateral) is less than the recorded investment in the impaired loan. Non-recurring fair value adjustments to collateral dependent loans are recorded, when necessary, to reflect partial write-downs and the specific reserve allocations based upon observable market price or current appraised value of the collateral less selling costs and discounts based on management’s judgment of current conditions. Based on the significance of management’s judgment, the Company records collateral dependent impaired loans as non-recurring Level 3 fair value measurements.

Gains (losses) on assets recorded at fair value at year-end on a non-recurring basis are as follows:



	For the Years Ended December 31,
(In thousands)	2014			2013			2012
Impaired loans	$	(1,865	)	$	(977	)	$	(470	)
Other real estate owned	405			(85		)	(84		)
Total	$	(1,460	)	$	(1,062	)	$	(554	)

Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used by management to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Cash and Cash Equivalents: Carrying value is assumed to represent fair value for cash and due from banks and short-term investments, which have original maturities of 90 days or less.

Securities: Refer to the above discussion on securities.

Loans Held for Sale: Refer to the above discussion on loans held for sale.

Loans Receivable - net: The fair value of the net loan portfolio is determined by discounting the estimated future cash flows using the prevailing interest rates and appropriate credit and prepayment risk adjustments as of period-end at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of non-performing loans is estimated using the Bank’s prior credit experience.

Federal Home Loan Bank of Boston (“FHLBB”) stock: FHLBB stock is a non-marketable equity security which is assumed to have a fair value equal to its carrying value due to the fact that it can only be redeemed by the FHLB Boston at par value.

Accrued Interest Receivable: Carrying value is assumed to represent fair value.

Derivative Assets: Refer to the above discussion on derivatives.

Mortgage Servicing Rights: Refer to the above discussion on mortgage servicing rights.

Deposits and Mortgagors’ and Investors’ Escrow Accounts: The fair value of demand, non-interest- bearing checking, savings and certain money market deposits is determined as the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the estimated future cash flows using rates offered for deposits of similar remaining maturities as of period-end.

FHLBB Advances and Other Borrowings: The fair value of borrowed funds is estimated by discounting the future cash flows using market rates for similar borrowings.

Derivative Liabilities: Refer to the above discussion on derivatives.

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Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2014 and 2013 , the carrying value and estimated fair values of the Company’s financial instruments are as described below.



(In thousands)	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
December 31, 2014
Financial assets:
Cash and cash equivalents	$	86,952	$	86,952	$	—	$	—	$	86,952
Available for sale securities	1,053,011		3,299		912,505		137,207		1,053,011
Held to maturity securities	15,368		—		16,713		—		16,713
Loans held for sale	8,220		—		8,220		—		8,220
Loans receivable-net	3,877,063		—		—		3,919,432		3,919,432
FHLBB stock	31,950		—		—		31,950		31,950
Accrued interest receivable	14,212		—		—		14,212		14,212
Derivative assets	4,073		—		4,073		—		4,073
Mortgage servicing rights	4,729		—		—		4,729		4,729
Financial liabilities:
Deposits	4,035,311		—		—		3,899,658		3,899,658
Mortgagors’ and investors’ escrow accounts	13,004		—		—		13,004		13,004
FHLBB advances and other borrowings	777,314		—		—		773,786		773,786
Derivative liabilities	4,952		—		4,952		—		4,952
December 31, 2013
Financial assets:
Cash and cash equivalents	$	45,235	$	45,235	$	—	$	—	$	45,235
Available for sale securities	404,903		3,280		328,660		72,963		404,903
Held to maturity securities	13,830		—		14,260		—		14,260
Loans held for sale	422		—		422		—		422
Loans receivable-net	1,697,012		—		—		1,702,686		1,702,686
FHLBB stock	15,053		—		—		15,053		15,053
Accrued interest receivable	5,706		—		—		5,706		5,706
Derivative assets	7,743		—		7,743		—		7,743
Mortgage servicing rights	4,103		—		—		4,103		4,103
Financial liabilities:
Deposits	1,735,205		—		—		1,626,071		1,626,071
Mortgagors’ and investors’ escrow accounts	6,342		—		—		6,342		6,342
FHLBB advances and other borrowings	240,228		—		—		242,458		242,458
Derivative liabilities	428		—		428		—		428

Certain financial instruments and all nonfinancial investments are exempt from disclosure requirements. Accordingly, the aggregate fair value of amounts presented above may not necessarily represent the underlying fair value of the Company.



Note 15.	SHARE-BASED COMPENSATION PLANS

The Company maintains and operates the Rockville Financial, Inc. 2006 Stock Incentive Award Plan (the “2006 Plan”) as approved by the Company’s Board and stockholders. The 2006 Plan allows the Company to use stock options, stock awards, stock appreciation rights and performance awards to attract, retain and reward performance of qualified employees and others who contribute to the success of the Company. Prior to the Company’s second-step stock offering effective March 3, 2011, the 2006 Plan allowed for the issuance of a maximum of 349,830 restricted stock shares and 874,575 stock options. After adjusting

125

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Notes to Consolidated Financial Statements — (Continued)

for the 1.5167 exchange ratio established as a result of the stock offering, as of December 31, 2014 , there were 16,314 restricted stock shares and 10,085 stock options that remain available for future grants under the Plan. There were 78,540 stock options granted from the Plan in 2014 .

The Company maintains and operates the Rockville Financial, Inc. 2012 Stock Incentive Award Plan (the “2012 Plan”) as approved by the Company’s Board and stockholders. The 2012 Plan allows the Company to use stock options, stock awards, stock appreciation rights and performance awards to attract, retain and reward performance of qualified employees and others who contribute to the success of the Company. The 2012 Plan allows for the issuance of a maximum of 684,395 restricted stock shares and 1,710,989 stock options. As of December 31, 2014 , there were 70,498 restricted stock shares and 206,703 stock options that remain available for future grants under the 2012 Plan. There were 138,482 restricted shares and 318,555 stock option awards granted from the 2012 Plan in 2014 . Of the restricted shares granted, 45,595 shares are performance vested.

In connection with the Merger, the Company assumed the following Legacy United share-based compensation plans: (a) United Financial Bancorp, Inc. 2006 Stock-Based Incentive Plan, (b) United Financial Bancorp, Inc. 2008 Equity Incentive Plan, (c) CNB Financial Corp. 2008 Equity Incentive Plan, and (d) CNB Amended and Restated Stock Option Plan collectively referred to as “the Legacy United Stock Plans.” As of December 31, 2014 , 375,494 shares remained available for future grants under the Legacy United Stock Plans.

Total employee and Director share-based compensation expense recognized for stock options and restricted stock was $1.4 million with a related tax benefit recorded of $500,000 and $2.5 million with a related tax benefit recorded of $885,000 , respectively, for the year ended December 31, 2014 . Of the total expense, the amount for Director share-based compensation expense recognized (in the Consolidated Statements of Net Income as other non-interest expense) was $301,000 , the amount for officer share-based compensation expense recognized (in the Consolidated Statements of Net Income as salaries and employee benefit expense) was $1.1 million and merger and acquisition expense recognized (in the Consolidated Statements of Net Income as non-interest expense) was $2.6 million reflecting Director and officer expense due to the accelerated vesting of stock options and restricted stock which occurred on the effective date of the Merger.

The fair values of stock option and restricted stock awards, measured at grant date, are amortized to compensation expense on a straight-line basis over the vesting period. The Company accelerates the recognition of compensation costs for 2006 Plan share-based awards granted to retirement-eligible employees and Directors and employees and Directors who become retirement-eligible prior to full vesting of the award because the Company’s incentive compensation plans allow for full vesting at the time an employee or Director retires. Share-based compensation granted to non-retirement-eligible individuals pursuant to the 2006 Plan and share-based compensation granted to all individuals pursuant to the 2012 Plan are expensed over the normal vesting period as established by each plan.

Total employee and Director share-based compensation expense recognized for stock options and restricted stock was $2.7 million , with a related tax benefit recorded of $921,000 , for the year ended December 31, 2013 , of which Director share-based compensation expense recognized (in the Consolidated Statements of Net Income as other non-interest expense) was $722,000 and officer share-based compensation expense recognized (in the Consolidated Statements of Net Income as salaries and benefits expense) was $1.9 million . The total charge of $2.7 million includes $357,000 related to 24,932 vested restricted shares used for income tax withholding payments on behalf of certain executives.

Total employee and Director share-based compensation expense recognized for stock options and restricted stock was $3.0 million, with a related tax benefit recorded of $1.0 million, for the year ended December 31, 2012 , of which Director share-based compensation expense recognized (in the Consolidated Statements of Net Income as other non-interest expense) was $692,000 and officer share-based compensation expense recognized (in the Consolidated Statements of Net Income as salaries and benefits expense) was $2.3 million. The total charge of $3.0 million includes $276,000 related to 27,105 vested restricted shares used for income tax withholding payments on behalf of certain executives.

126

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Notes to Consolidated Financial Statements — (Continued)

Stock Options:

The following table presents the activity related to the Company’s stock options outstanding, including options that have stock appreciation rights (“SARs”), as of and for the year ended December 31, 2014 :



	Number of Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2013	2,317,620		$	10.74
Granted	397,095		13.71
Registered shares associated with the Merger	1,291,793		9.36
Exercised	(563,346	)	9.63
Forfeited or expired	(52,693	)	13.73
Outstanding at December 31, 2014	3,390,469		$	10.70	5.9	$	12,414
Stock options vested and exercisable at December 31, 2014	3,062,967		$	10.38	5.5	$	12,202

On May 2, 2014, the Company registered 1,291,793 options at an exercise price of $9.36 per share (adjusted for the exchange ratio) pursuant to its Registration Statement on Form S-8 under which the Company assumed all outstanding fully vested stock options under the Legacy United Stock Plans, which include options that were granted as SARs. These options have terms expiring between 2014 and 2022. The Company also registered an additional 375,494 shares of common stock available for future awards under the Legacy United Stock Plans.

As of April 30, 2014, the effective time of the Merger, all outstanding Company stock options, including those held by directors and executive officers, became fully vested in accordance with the change in control provisions within the merger agreement. The expense related to the accelerated vesting recorded during the second quarter of 2014 totaled $1.1 million and was included in non-interest expenses as merger related expense.

The following table presents the unvested stock option activity for the year ended December 31, 2014 :



	Number of Shares		Weighted- Average Grant- Date Fair Value
Unvested as of December 31, 2013	979,920		$	1.73
Granted	397,095		1.95
Vested	(996,820	)	1.73
Forfeited, expired or canceled	(52,693	)	1.96
Unvested as of December 31, 2014	327,502		$	1.95

The aggregate fair value of stock options vested was $1.7 million and $850,000 for the years ended December 31, 2014 and 2013 , respectively. As of December 31, 2014 , the unrecognized cost related to the stock options awarded of $516,000 will be recognized over a weighted-average period of 3.6 years.

The Company used the Black-Scholes option pricing model for estimating the fair value of stock options granted. The weighted-average estimated fair values of stock option grants and the assumptions that were used in calculating such fair values were based on estimates at the date of grant as follows:

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Notes to Consolidated Financial Statements — (Continued)



	2014			2013			2012
Weighted per share average fair value of options granted	$	1.95		$	1.80		$	1.48
Assumptions:
Risk-free interest rate	1.94		%	1.61		%	0.91		%
Expected volatility	19.90		%	20.33		%	22.24		%
Expected dividend yield	2.92		%	3.03		%	3.27		%
Expected life of options granted	6.0 years			6.0 years			6.0 years

The expected volatility was determined using the Company’s historical trading volatility since the closing of the second-step conversion dated March 3, 2011. The Company estimates option forfeitures using historical data on employee terminations. The expected life of stock options granted represents the period of time that stock options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the stock option is based on the average five- and seven-year U.S. Treasury Note yield curve in effect at the date of grant. The expected dividend yield reflects an estimate of the dividends the Company expects to declare over the expected life of the options granted.

Stock options provide grantees the option to purchase shares of common stock at a specified exercise price and expire ten years from the date of grant.

Additional information regarding stock options outstanding as of December 31, 2014 , is as follows:



Options Outstanding					Exercisable Options
Weighted- Average Exercise Price ($)	Total Shares	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price ($)		Exercisable Shares	Weighted- Average Exercise Price ($)
6.00 – 6.99	118,525	2.4	$	6.09	118,525	$	6.09
7.00 – 7.99	245,089	2.8	7.67		245,089	7.67
8.00 – 8.99	350,405	2.0	8.66		350,405	8.66
9.00 – 9.99	511,968	2.1	9.27		511,968	9.27
10.00 – 10.99	1,095,944	7.2	10.97		1,095,944	10.97
11.00 – 11.99	236,347	4.2	11.58		236,347	11.58
12.00 – 12.99	123,260	8.0	12.79		123,260	12.79
13.00 – 13.99	708,931	9.0	13.47		381,427	13.27
	3,390,469	5.9	10.70		3,062,965	10.38

Restricted Stock:

Restricted stock provides grantees with rights to shares of common stock upon completion of a service period. During the restriction period, all shares are considered outstanding and dividends are paid on the restricted stock.

The following table presents the activity for restricted stock for the year ended December 31, 2014 :



	Number of Shares		Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2013	245,210		$	11.37
Granted	138,482		13.64
Vested	(259,156	)	11.49
Forfeited	—		—
Unvested as of December 31, 2014	124,536		$	13.66

The fair value of restricted shares that vested during the years ended December 31, 2014, 2013 and 2012 was $3.0 million , $2.0 million, and $830,000 , respectively. The weighted-average grant date fair value of restricted stock granted during the years ended December 31, 2014, 2013 and 2012 was $13.64 , $13.20 and $11.00 , respectively.

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Notes to Consolidated Financial Statements — (Continued)

As of April 30, 2014, the effective time of the merger, all outstanding Company restricted stock awards, including those held by directors and executive officers, became fully vested in accordance with the change in control provisions within the merger agreement. The expense related to the accelerated vesting recorded during the second quarter of 2014 was $1.5 million , and was included in non-interest expenses as merger related expense.

As of December 31, 2014 , there was $1.2 million of total unrecognized compensation cost related to unvested restricted stock which is expected to be recognized over a weighted-average period of 2.1 years.

Of the remaining unvested restricted stock, 48,157 shares will vest in 2015, 17,212 shares in 2016 and 59,167 shares will vest in 2017. All unvested restricted stock shares are expected to vest.

Employee Stock Ownership Plan:

As part of the reorganization and stock offering completed in 2005, the Company established an ESOP for eligible employees of the Bank, and authorized the Company to lend funds to the ESOP to purchase 699,659 or 3.6% of the shares issued in the initial public offering. Upon completion of the 2005 reorganization, the ESOP borrowed $4.4 million from the Company to purchase 437,287 shares of common stock. Additional shares of 59,300 and 203,072 were subsequently purchased by the ESOP in the open market at a total cost of $817,000 and $2.7 million in 2006 and 2005, respectively, with additional funds borrowed from the Company. The interest rate for the original ESOP loan was the prime rate plus one percent , or 4.25% as of December 31, 2014 . As the loan was repaid to the Company, shares were released from collateral and will be allocated to the accounts of the participants. There is no outstanding balance as the loan was paid in full on December 31, 2014 . Principal payments of $7.8 million have been made on the loan since inception. Dividends paid in 2014 totaling $42,000 on all unallocated ESOP shares were offset to the interest payable on the note owed by the Company.

As part of the second-step conversion and stock offering completed in 2011, the Bank authorized the Company to lend funds to the ESOP to purchase 684,395 shares, 276,017 shares of which were purchased during the initial public offering at a cost of $10.00 per share. In March 2011, the remaining shares totaling 408,378 were subsequently purchased by the ESOP in the open market at an average cost of $10.56 per share, or $4.3 million . The interest rate for the second ESOP loan is the prime rate plus one percent , or 4.25% as of December 31, 2014 . As of December 31, 2014 , the outstanding balance for the loan was $6.5 million , with a remaining term of 26 years. Principal payments of $570,000 have been made on the loan since inception. Dividends paid in 2014 totaling $246,000 on all unallocated ESOP shares were offset to the interest payable on the note owed by the Company.

The total ESOP expense was $1.7 million , $1.7 million and $1.5 million for the years ended December 31, 2014, 2013 and 2012 , respectively. At December 31, 2014 , there were 1.3 million allocated and 593,142 unallocated ESOP shares and the unallocated shares had an aggregate fair value of $8.5 million .

Effective January 1, 2014, the Company merged its ESOP with its Defined Contribution Plan, or 401(k). In lieu of employer matching cash contributions in 2014 to the 401(k) Plan, shares released from the pay down on the ESOP loans will be allocated to all participants in the 401(k) Plan. The Company is expected to experience cost savings on a go forward basis due to the merging of these two plans.



Note 16.	PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS

Defined Benefit, Supplemental and Other Post-retirement Plans

Legacy Rockville offered a noncontributory defined benefit pension plan through December 31, 2012 for eligible employees who met certain minimum service and age requirements hired before January 1, 2005. Pension plan benefits were based upon employee earnings during the period of credited service. The pension plan was frozen effective December 31, 2012. Employees hired on or after January 1, 2005 receive no benefits under the plan. All other employees will accrue no additional retirement benefits on or after January 1, 2013, and the amount of their qualified retirement income will not exceed the amount of benefits determined as of December 31, 2012.

The Company also has supplemental retirement plans (the “Supplemental Plans”) that provide benefits for certain key officers. Benefits under the Supplemental Plans are based on a predetermined formula and are reduced by other benefits. The liability arising from these plans is being accrued over the participants’ remaining periods of service so that at the expected retirement dates, the present value of the annual payments will have been expensed.

The Company also provides an unfunded post-retirement medical, health and life insurance benefit plan for retirees and employees hired prior to March 31, 1993.

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Notes to Consolidated Financial Statements — (Continued)

The following table sets forth changes in the benefit obligation, changes in plan assets and the funded status of the pension plans and post-retirement benefit plans for the years ended December 31, 2014, 2013 and 2012 :



	Qualified Pension Plan December 31,									Supplemental Executive Retirement Plans December 31,									Other Post- Retirement Benefits December 31,
(In thousands )	2014			2013			2012			2014			2013			2012			2014			2013			2012
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	24,224		$	27,226		$	27,073		$	1,191		$	1,199		$	1,065		$	1,926		$	2,547		$	2,531
Service cost	75			50			1,059			25			38			38			19			35			31
Interest cost	1,145			1,048			1,163			54			48			45			85			91			102
Plan participants’ contributions	—			—			—			—			—			—			26			26			28
Actuarial loss (gain)	6,460			(3,291		)	3,863			166			(159		)	79			271			(661		)	(10		)
Benefits paid and administration expenses	(1,333		)	(809		)	(782		)	(484		)	(28		)	(28		)	(109		)	(112		)	(135		)
Curtailments, settlements, special termination benefits	—			—			(5,150		)	416			93			—			—			—			—
Benefit obligation at end of year	$	30,571		$	24,224		$	27,226		$	1,368		$	1,191		$	1,199		$	2,218		$	1,926		$	2,547
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	26,258		$	22,782		$	20,782		$	—		$	—		$	—		$	—		$	—		$	—
Actual return on plan assets	1,594			4,285			2,782			—			—			—			—			—			—
Employer contributions	—			—			—			484			28			28			83			86			107
Plan participants’ contributions	—			—			—			—			—			—			26			26			28
Benefits paid and administration expenses	(1,333		)	(809		)	(782		)	(484		)	(28		)	(28		)	(109		)	(112		)	(135		)
Fair value of plan assets at end of year	$	26,519		$	26,258		$	22,782		$	—		$	—		$	—		$	—		$	—		$	—
Funded Status:
Overfunded (underfunded) at end of year	$	(4,052	)	$	2,034		$	(4,444	)	$	(1,368	)	$	(1,191	)	$	(1,199	)	$	(2,218	)	$	(1,926	)	$	(2,547	)
Amounts Recognized in the Consolidated Statements of Condition
Accrued expenses and other liabilities	$	(4,052	)	$	2,034		$	(4,444	)	$	(1,368	)	$	(1,191	)	$	(1,199	)	$	(2,218	)	$	(1,926	)	$	(2,547	)

The components of accumulated other comprehensive income related to pensions and other post-retirement benefits and related tax effects at December 31, 2014, 2013 and 2012 are summarized below:



	Qualified Pension Plan December 31,									Supplemental Executive Retirement Plans December 31,									Other Post- Retirement Benefits December 31,
(In thousands )	2014			2013			2012			2014			2013			2012			2014			2013			2012
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:
Prior service cost (credit)	$	—		$	—		$	—		$	92		$	273		$	401		$	—		$	—		$	—
Net loss	9,362			2,625			9,251			202			103			269			297			15			742
Total accumulated other comprehensive loss	9,362			2,625			9,251			294			376			670			297			15			742
Deferred tax asset	(3,278		)	(844		)	(3,172		)	(69		)	(131		)	(233		)	(97		)	(5		)	(252		)
Net impact on accumulated other comprehensive loss	$	6,084		$	1,781		$	6,079		$	225		$	245		$	437		$	200		$	10		$	490

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Notes to Consolidated Financial Statements — (Continued)

The following table sets forth the components of net periodic benefit costs and other amounts recognized in other comprehensive income (loss) for the retirement plans for the years ended December 31, 2014, 2013 and 2012 :



	Qualified Pension Plan									Supplemental Executive Retirement Plans									Other Post- Retirement Benefits
(In thousands)	2014			2013			2012			2014			2013			2012			2014			2013			2012
Components of Net Periodic Benefit Cost:
Service cost	$	75		$	50		$	1,059		$	25		$	38		$	38		$	19		$	35		$	31
Interest cost	1,145			1,048			1,163			54			48			45			85			91			102
Expected return on plan assets	(1,595		)	(1,734		)	(1,690		)	—			—			—			—			—			—
Amortization of net actuarial losses (gains)	(277		)	784			1,236			2			5			4			(10		)	66			77
Amortization of prior service cost (credit)	—			—			(48		)	12			23			27			—			—			—
Settlement charge	—			—			(80		)	651			199			—			—			—			—
Net periodic benefit cost	(652		)	148			1,640			744			313			114			94			192			210
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
Net loss (gain)	6,460			(5,842		)	(2,380		)	100			(159		)	79			271			(661		)	(11		)
Change in prior service cost (credit)	—			—			80			(168		)	(105		)	—			—			—			—
Amortization of net (loss) gain	277			(784		)	(1,236		)	(2		)	(6		)	(4		)	11			(66		)	(77		)
Amortization of prior service cost (credit)	—			—			48			(13		)	(23		)	(27		)	—			—			—
Total recognized in other comprehensive income (loss)	6,737			(6,626		)	(3,488		)	(83		)	(293		)	48			282			(727		)	(88		)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	6,085		$	(6,478	)	$	(1,848	)	$	661		$	20		$	162		$	376		$	(535	)	$	122

Amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during 2015 are $738,000 , $10,000 and $18,000 for the qualified pension plan, executive retirement plan and other post-retirement benefits plan, respectively.

Weighted-average assumptions used to determine pension benefit obligations at December 31, follow:



	Qualified Pension				Supplemental Retirement Plans				Other Post-Retirement Benefits
	2014		2013		2014		2013		2014		2013
Discount rate	3.85	%	4.80	%	3.70	%	4.70	%	3.70	%	4.55	%
Expected return on plan assets	7.00	%	7.25	%	—		—		—		—
Rate of compensation increase	—	%	—	%	4.00	%	4.00	%	4.00	%	4.00	%

Weighted-average assumptions used to determine net benefit pension expense for the years ended December 31 follow:



	Qualified Pension						Supplemental Retirement Plans						Other Post-Retirement Benefits
	2014		2013		2012		2014		2013		2012		2014		2013		2012
Discount rate	4.80	%	3.90	%	4.35	%	4.70	%	3.80	%	4.25	%	4.55	%	3.65	%	3.65	%
Expected return on plan assets	7.25	%	8.00	%	8.00	%	—		—		—		—		—		—
Rate of compensation increase	—	%	—	%	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%	4.00	%

The accumulated post-retirement benefit obligation for the other post-retirement benefits was $2.2 million and $1.9 million as of December 31, 2014 and 2013 , respectively.

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Notes to Consolidated Financial Statements — (Continued)

The Company does not intend to apply for the government subsidy under Medicare Part-D for post-retirement prescription drug benefits. Therefore, the impact of the subsidy is not reflected in the development of the liabilities for the plan. As of December 31, 2013, prescription drug benefits are included in the post-retirement benefits offered to employees hired prior to March 1, 1993.

The expected long-term rate of return is based on current and expected asset allocations, as well as the long-term historical risks and returns with each asset class within the plan portfolio. A lower expected rate of return on plan assets increases pension costs.

The discount rate assumption used to measure the post-retirement benefit obligations is set by reference to high-quality bond indices, as well as certain yield curves. The Citigroup Pension Liability Index was used as a benchmark. A higher discount rate decreases the present value of benefit obligations and decreases pension expense.

Assumed Healthcare Trend Rates

The Company’s accumulated other post-retirement benefit obligations 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 8.5% at December 31, 2014 . 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:



	1% Increase		1% Decrease
(In thousands)
Effect on post-retirement benefit obligation	$	297,723	$	(244,103	)
Effect on total service and interest	14,339		(11,783		)

Plan Assets

The fair value of major categories of pension plan assets as of December 31, 2014 and 2013 are as follows:



(In thousands)	Total Fair Value		Percent
December 31, 2014
Domestic equity funds	$	11,900	45	%
International equity funds	1,051		4
Fixed income funds	3,719		14
Domestic bond funds	7,996		30
International bond funds	790		3
Real estate REIT index funds	1,063		4
Total	$	26,519	100	%

December 31, 2013
Domestic equity funds	$	12,654	48	%
International equity funds	2,648		10
Fixed income funds	243		1
Domestic bond funds	7,832		30
International bond funds	1,824		7
Real estate REIT index funds	1,057		4
Total	$	26,258	100	%

All plan assets are measured at fair value in Level 1 based on quoted market prices in an active exchange market.

The Company’s investment goal is to obtain a competitive risk adjusted return on the Pension Plan assets commensurate with prudent investment practices and the plan’s responsibility to provide retirement benefits for its participants, retirees and their beneficiaries. The 2014 targeted allocation for equity securities, debt securities, real estate and cash was 43% , 39% , 4%

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Notes to Consolidated Financial Statements — (Continued)

and 14% , respectively. The Pension Plan’s investment policy does not explicitly designate allowable or prohibited investments; instead, it provides guidance regarding investment diversification and other prudent investment practices to limit the risk of loss. The Plan’s 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 portfolio’s strategic risk/return profile. Investments within each asset category are further diversified with regard to investment style and concentration of holdings.

Contributions

There were no contributions to the Qualified Pension Plan in 2014 and 2013. The Company does not expect to make any contributions to the Qualified Pension Plan in 2015. Contributions to the Supplemental Executive Retirement Plans (“SERP”) were $484,000 and $28,000 in 2014 and 2013 , respectively. Company contributions to the other post-retirement plans were $83,000 and $86,000 in 2014 and 2013 , respectively.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, expected to be paid are as follows:



(In thousands)	Qualified Pension Plan		Supplemental Executive Retirement Plans		Other Post- Retirement Benefits
Years Ending December 31,
2015	$	869	$	421	$	96
2016	932		28		102
2017	1,006		41		107
2018	1,117		41		108
2019	1,176		41		115
Years 2020-2024	7,032		265		618

Multi-Employer Defined Benefit Plan

As a result of the Merger, the Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Pentegra DB Plan”), a tax-qualified defined-benefit pension plan. The Pentegra DB Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multi-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan.

The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

The funded status (market value of plan assets divided by funding target) of the Pentegra DB Plan as of July 1, 2014 and 2013 was 120.4% and 111.6% , respectively, per the actuarial valuation reports. Market value of plan assets reflects contributions received through June 30, 2014.

The Company’s contributions to the Pentegra DB Plan will not be more than 5% of the total contributions to the Pentegra DB Plan. A $50,000 contribution, recorded as pension expense, was accrued in 2014 and paid in 2015. The Company will make the future required contributions and incur applicable pension expense going forward.

401(k) Plan

The Company has a tax-qualified 401(k) plan for the benefit of its eligible employees. Beginning January 1, 2005, the 401(k) Plan was amended to pay all employees, even those who do not contribute to the 401(k) Plan, an automatic 3% of pay “safe harbor” contribution that is fully vested to participants of the 401(k) Plan.

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Notes to Consolidated Financial Statements — (Continued)

For employees hired on or after January 1, 2005, the Company also will make a discretionary matching contribution equal to a uniform percentage of the amount of the salary reduction the employee elected to defer, which percentage will be determined each year by the Company.

In connection with the pension plan being frozen at December 31, 2012, the Company will provide additional benefits to the impacted employees by providing additional benefits to them through the 401(k) Plan beginning January 1, 2013 for a five year period. Effective January 1, 2014, the Company merged its Employee Stock Ownership Plan with its 401(k) Plan.

The Company recorded expenses of $515,000 , $1.5 million, and $838,000 to the plan for the years ended December 31, 2014, 2013 and 2012 , respectively.



Note 17.	REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. 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 Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2014 and 2013 that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2014 , 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 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since then that management believes have changed the Bank’s category. Prompt corrective provisions are not applicable to bank holding companies.

The following is a summary of the Bank’s regulatory capital amounts and ratios as of December 31, 2014 and 2013 compared to the FDIC’s requirements for classification as a well-capitalized institution and for minimum capital adequacy. Also included is a summary of United Financial Bancorp, Inc.’s regulatory capital and ratios as of December 31, 2014 and 2013 :

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Notes to Consolidated Financial Statements — (Continued)



	Actual				Minimum For Capital Adequacy Purposes				Minimum To Be Well- Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
United Bank:
December 31, 2014
Total capital to risk weighted assets	$	513,960	12.9	%	$	317,750	8.0	%	$	397,187	10.0	%
Tier 1 capital to risk weighted assets	487,713		12.3		158,864		4.0		238,296		6.0
Tier 1 capital to total average assets	487,713		9.3		210,221		4.0		262,776		5.0
December 31, 2013
Total capital to risk weighted assets	$	280,196	15.4	%	$	145,368	8.0	%	$	181,709	10.0	%
Tier 1 capital to risk weighted assets	260,241		14.3		72,693		4.0		109,040		6.0
Tier 1 capital to total average assets	260,241		11.6		89,893		4.0		112,367		5.0
United Financial Bancorp, Inc.:
December 31, 2014
Total capital to risk weighted assets	$	579,109	14.6	%	$	317,973	8.0	%	N/A		N/A
Tier 1 capital to risk weighted assets	477,862		12.0		159,022		4.0		N/A		N/A
Tier 1 capital to total average assets	477,862		9.1		210,049		4.0		N/A		N/A
December 31, 2013
Total capital to risk weighted assets	$	322,623	17.7	%	$	145,983	8.0	%	N/A		N/A
Tier 1 capital to risk weighted assets	302,668		16.6		73,020		4.0		N/A		N/A
Tier 1 capital to total average assets	302,668		13.5		89,879		4.0		N/A		N/A

Connecticut law restricts the amount of dividends that the Bank can pay based on net income included in retained earnings for the current year and the preceding two years. As of December 31, 2014 , $11.1 million was available for the payment of dividends.

Basel III

In July 2013, federal banking regulators approved final rules that implement changes to the regulatory capital framework for U.S. banks. The rules set minimum requirements for both the quantity and quality of capital held by community banking institutions. The final rule includes a new minimum ratio of common equity Tier 1 capital to risk weighted assets of 4.5%, raises the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6%, and includes a minimum leverage ratio of 4% for all banking organizations. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The phase-in period for the rules will begin for the Company on January 1, 2015, with full compliance with all of the final rules’ requirements phased in over a multi-year schedule. Management believes that the Company’s capital levels will remain characterized as “well-capitalized” under the new rules.

The following table provides a reconciliation of the Company’s total consolidated equity to the capital amounts for the Bank reflected in the preceding table:

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Notes to Consolidated Financial Statements — (Continued)



(In thousands)	December 31,
	2014			2013
Total consolidated equity	$	602,408		$	299,382
Adjustments:
Decrease (increase) in equity under United Financial Bancorp, Inc.	8,252			(42,427		)
Accumulated other comprehensive loss	6,490			4,766
Disallowed goodwill and other intangible assets	(121,637		)	(1,480		)
Disallowed deferred tax assets	(7,800		)	—
Tier 1 capital	487,713			260,241
Allowance for loan losses and off-balance sheet credit losses	26,141			19,851
Unrealized gains on available-for-sale securities includible in total risk-based capital	106			104
Total risk-based capital	$	513,960		$	280,196



Note 18.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive (loss) income, net of taxes, consist of the following:



(In thousands)	Net Unrealized Gain (Loss) on Benefit Plans			Net Unrealized Gain (Loss) on Available For Sale Securities			Net Unrealized Gain (Loss) on Interest Rate Swaps			Accumulated Other Comprehensive Loss
December 31, 2011	$	(9,300	)	$	2,552		$	—		$	(6,748	)
Change	2,294			503			(96		)	2,701
December 31, 2012	(7,006		)	3,055			(96		)	(4,047		)
Change	4,970			(10,588		)	4,899			(719		)
December 31, 2013	(2,036		)	(7,533		)	4,803			(4,766		)
Change	(4,473		)	8,189			(5,440		)	(1,724		)
December 31, 2014	$	(6,509	)	$	656		$	(637	)	$	(6,490	)



Note 19.	NET INCOME PER SHARE

The following table sets forth the calculation of basic and diluted net income per share for the years ended December 31, 2014, 2013 and 2012 :



	Years Ended December 31,
(In thousands, except share data)	2014		2013		2012
Net income	$	6,782	$	14,227	$	15,797
Adjusted weighted-average common shares outstanding	43,491,441		29,471,397		29,475,264
Less: average number of treasury shares	—		2,618,178		758,806
Less: average number of unvested ESOP award shares	662,347		791,277		920,342
Weighted-average basic shares outstanding	42,829,094		26,061,942		27,796,116
Dilutive effect of stock options	440,423		364,278		229,494
Weighted-average diluted shares	43,269,517		26,426,220		28,025,610
Net income per share:
Basic	$	0.16	$	0.55	$	0.57
Diluted	$	0.16	$	0.54	$	0.56

For the years ended December 31, 2014, 2013 and 2012 , respectively, 2.6 million , 1.9 million , and 1.7 million options were anti-dilutive and therefore excluded from the earnings per share calculation.

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Notes to Consolidated Financial Statements — (Continued)



Note 20.	COMMITMENTS AND CONTINGENCIES

Leases: The Company leases certain of its branches and other office facilities under non-cancelable capital and operating lease agreements. Many of these leases contain renewal options and escalation clauses which provide for increased rental expense. In addition to rental payments, the branch leases require payments for executory costs. The Company also leases certain equipment under non-cancelable operating leases.

Future minimum rental commitments under the terms of these leases, including option periods, by year and in the aggregate, are as follows as of December 31, 2014 :




(In thousands)
2015	$	5,048
2016	5,124
2017	5,096
2018	5,159
2019	5,223
Thereafter	77,822
	$	103,472

Total rental expense charged to operations for all cancelable and non-cancelable operating leases was $5.8 million , $2.6 million and $1.7 million for the years ended December 31, 2014, 2013 and 2012 , respectively. The rental expense increase in 2014 compared to 2013 was due largely to the addition of the Legacy United branch offices as a result of the Merger.

The Company, as a landlord, leases space to third party tenants under non-cancelable operating leases. In addition to base rent, the leases require payments for executory costs. Future minimum rental receivable under the non-cancelable leases are as follows as of December 31, 2014 :



(In thousands)
2015	$	446
2016	341
2017	133
	$	920

Rental income is recorded as a reduction to occupancy and equipment expense in the accompanying Consolidated Statements of Net Income and amounted to $407,000 , $318,000 and $318,000 for the years ended December 31, 2014, 2013 and 2012 , respectively.

Legal Matters: The Company is not involved in any legal proceedings deemed to be material as of December 31, 2014 , which have arisen in the normal course of business.

Financial Instruments With Off-Balance Sheet Risk: 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 through issuing standby letters of 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 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 defaults and the value of any existing collateral obligations is deemed worthless. The Company uses the same credit policies in making commitments 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, 2014 and 2013 :

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Notes to Consolidated Financial Statements — (Continued)



	December 31,
(In thousands)	2014		2013
Commitments to extend credit:
Commitment to grant loans	$	128,766	$	63,401
Undisbursed construction loans	144,118		80,345
Undisbursed home equity lines of credit	321,346		142,851
Undisbursed commercial lines of credit	295,639		116,004
Standby letters of credit	12,547		8,872
Unused checking overdraft lines of credit	1,304		39
	$	903,720	$	411,512

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 customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include residential and commercial property, accounts receivable, inventory, property, plant and equipment, deposits, and securities.

Other Commitments

In conjunction with its merger with Legacy United, the Company acquired investments in partnerships, including low income housing tax credit and new markets housing tax credit partnerships. Additionally, in September 2014, the Company invested in a tax credit partnership associated with alternative energy. The net carrying balance of these investments totaled $13.5 million at December 31, 2014 and is included in other assets in the consolidated statement of condition. At December 31, 2014 , the Company was contractually committed under these limited partnership agreements to make additional capital contributions of $1.8 million , which constitutes our maximum potential obligation to these partnerships. The Company makes additional investments in response to formal written requests, rather than a funding schedule. Funding requests are submitted when the partnerships plan to make additional investments.

138

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Notes to Consolidated Financial Statements — (Continued)



Note 21.	SELECTED QUARTERLY CONSOLIDATED INFORMATION (UNAUDITED)

The following table presents quarterly financial information of the Company for the years ended December 31, 2014 and 2013 :



	For the three months ended,
	December 31, 2014			September 30, 2014			June 30, 2014			March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013		March 31, 2013
(In thousands , except per share data)
Interest and dividend income	$	48,209		$	47,201		$	40,767		$	19,702	$	19,748	$	19,500	$	19,184	$	19,085
Interest expense	6,317			5,008			3,888			2,794		2,772		2,627		2,483		2,578
Net interest income	41,892			42,193			36,879			16,908		16,976		16,873		16,701		16,507
Provision for loan losses	4,333			2,633			2,080			450		720		532		403		391
Net interest income after provision for loan losses	37,559			39,560			34,799			16,458		16,256		16,341		16,298		16,116
Non-interest income	3,001			4,076			6,319			3,209		2,959		5,100		4,108		4,884
Other non-interest expense	45,076			34,922			46,177			18,257		17,175		14,763		15,858		14,670
Income before income taxes	(4,516		)	8,714			(5,059		)	1,410		2,040		6,678		4,548		6,330
Provision (benefit) for income taxes	(5,937		)	(1,271		)	512			463		283		2,058		1,249		1,779
Net income	$	1,421		$	9,985		$	(5,571	)	$	947	$	1,757	$	4,620	$	3,299	$	4,551
Earnings per share:
Basic	$	0.03		$	0.19		$	(0.13	)	$	0.04	$	0.07	$	0.18	$	0.13	$	0.17
Diluted	$	0.03		$	0.19		$	(0.13	)	$	0.04	$	0.07	$	0.18	$	0.12	$	0.17
Stock Price (per share):
High	$	14.67		$	13.91		$	14.31		$	14.63	$	15.42	$	13.50	$	13.54	$	13.26
Low	$	12.66		$	12.01		$	12.21		$	12.56	$	12.68	$	12.83	$	12.27	$	12.53

Subsequent to the completion of the Merger on April 30, 2014, the Company had significant increases in net interest income, non-interest income and non-interest expense.

In the first, second, third, and fourth quarters of 2014, the Company recorded merger and acquisition related expenses of $1.8 million , $20.9 million , $4.0 million , and $10.1 million , respectively. In the fourth quarter of 2013, the Company recorded $2.1 million in merger and acquisition related expenses.

139

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Notes to Consolidated Financial Statements — (Continued)



Note 22.	PARENT COMPANY FINANCIAL INFORMATION

The following represents the Company’s Condensed Statements of Condition as of December 31, 2014 and 2013 and Condensed Statements of Net Income and Cash Flows for the years ended December 31, 2014, 2013 and 2012 which should be read in conjunction with the Consolidated Financial Statements and related notes:

Condensed Statements of Condition



	At December 31,
(In thousands)	2014		2013
Assets:
Cash and due from banks	$	51,519	$	25,170
Investment in United Bank	610,660		256,956
Due from United Bank	15,677		10,282
Other assets	5,594		8,246
Total Assets	$	683,450	$	300,654
Liabilities and Stockholders’ Equity:
Accrued expenses and other liabilities	$	81,042	$	1,272
Stockholders’ equity	602,408		299,382
Total Liabilities and Stockholders’ Equity	$	683,450	$	300,654

Condensed Statements of Net Income



	For the Years Ended December 31,
(In thousands)	2014			2013			2012
Interest and dividend income:
Interest on investments	$	35		$	1		$	1
Interest expense	1,353			—			—
Net interest income (expense)	(1,318		)	1			1
Non-interest income	73			—			13
Non-interest expenses:
General and administrative	7,257			5,528			2,097
Total non-interest expense	7,257			5,528			2,097
Loss before tax benefit and equity in undistributed net income of United Bank	(8,502		)	(5,527		)	(2,083		)
Income tax benefit	2,566			1,602			613
Loss before equity in undistributed net income of United Bank	(5,936		)	(3,925		)	(1,470		)
Equity in undistributed net income of United Bank	12,718			18,152			17,267
Net income	$	6,782		$	14,227		$	15,797

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Notes to Consolidated Financial Statements — (Continued)

Condensed Statements of Cash Flows



	For the Years ended December 31,
(In thousands)	2014			2013			2012
Cash flows from operating activities:
Net income	$	6,782		$	14,227		$	15,797
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of purchase accounting marks, net	41			—			—
Amortization of subordinated debt issuance costs, net	34			—			—
Share-based compensation expense	3,957			2,665			2,976
ESOP expense	1,727			2,064			1,529
Undistributed income of United Bank	(12,718		)	(18,152		)	(17,267		)
Deferred tax provision	959			555			(846		)
Tax benefit of stock-based awards	(820		)	(65		)	—
Net change in:
Due from United Bank	(5,395		)	(850		)	(3,243		)
Other assets	3,582			(3,190		)	1,020
Accrued expenses and other liabilities	(1,831		)	1,124			(1,291		)
Net cash used in operating activities	(3,682		)	(1,622		)	(1,325		)
Cash flows from investing activities:
Dividends from United Bank	13,310			11,197			12,500
Cash acquired from United Financial Bancorp, Inc., net	6,546			—			—
Net cash provided by investing activities	19,856			11,197			12,500
Cash flows from financing activities:
Proceeds from debt offering, net of expenses	73,733			—			—
Common stock repurchased	(47,249		)	(30,028		)	(21,626		)
Proceeds from the exercise of stock options	2,246			805			419
Cancellation of shares for tax withholding	(1,367		)	(357		)	(276		)
Tax benefit of share-based awards	820			65			—
Cash dividends paid on common stock	(18,008		)	(10,453		)	(14,376		)
Cancellation of treasury shares	—			—			(4		)
Net cash provided by (used in) financing activities	10,175			(39,968		)	(35,863		)
Net increase (decrease) in cash and cash equivalents	26,349			(30,393		)	(24,689		)
Cash and cash equivalents — beginning of year	25,170			55,563			80,252
Cash and cash equivalents — end of year	$	51,519		$	25,170		$	55,563
Supplemental disclosures of cash flow information:
Cash paid for income taxes (net)	$	3,599		$	6,228		$	5,191

141

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with accountants on accounting and financial disclosure as defined in Item 304 of Regulation S-K.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control Over Financial Reporting:

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:


•	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;


•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and Directors; and


•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management’s assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2014 .

The Company’s independent registered public accounting firm has audited and issued a report on the Company’s internal control over financial reporting, which appears on page 73.

Item 9B. Other Information

Not applicable.

142

Part III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated into this Form 10-K by reference to the Company’s definitive proxy statement for its 2015 Annual Meeting of Shareholders, to be filed within 120 days following December 31, 2014 .

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

143

Part IV

Item 15. Exhibits, Financial Statements and Financial Statement Schedules

a) The Consolidated Financial Statements, including notes thereto, and financial schedules required in response to this item are set forth in Part II, Item 8 of this Form 10-K, and can be found on the following pages:



		Page No.
1	Consolidated Financial Statements
	Report of Management on Internal Control Over Financial Reporting	72
	Reports of Independent Registered Public Accounting Firm	73
	Consolidated Statements of Condition	75
	Consolidated Statements of Net Income	76
	Consolidated Statements of Comprehensive Income	77
	Consolidated Statements of Changes in Stockholders’ Equity	78
	Consolidated Statements of Cash Flows	79
	Notes to Consolidated Financial Statements	81



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, Item 8.



3	Exhibits:




	2.1		Amended and Restated Plan of Conversion and Reorganization (incorporated herein by reference to Exhibit 2.1 to the Registration Statement filed on the Form S-1 for Rockville Financial New, Inc. on September 16, 2010)
	2.2		Agreement and Plan of Merger by and between Rockville Financial, Inc. and United Financial Bancorp, Inc. (incorporated herein by reference to Exhibit 99.1 to the Current Report on the Company’s Form 8-K filed on November 15, 2013)
	3.1		Certificate of Incorporation of United Financial Bancorp, Inc. (incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 01, 2014)
	3.2		The Bylaws, as amended and restated, (incorporated herein by reference to Exhibit 3.2 to the Current Report on the Company’s Form 8-K filed on May 01, 2014)
	10.5		Supplemental Savings and Retirement Plan of United Bank as amended and restated effective December 31, 2007 (incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K filed for Rockville Financial, Inc. (now United Financial Bancorp, Inc.) filed on December 18, 2007)
	10.6		United Bank Officer Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.2.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 filed on March 31, 2006 (File No. 000-52139))
	10.9		United Bank Supplemental Executive Retirement Plan as amended and restated effective December 31, 2007 (incorporated herein by reference to Exhibit 10.9 to the Current Report on Form 8-K filed for Rockville Financial, Inc. (now United Financial Bancorp, Inc.) filed on December 18, 2007)
	10.10		United Financial Bancorp, Inc. 2006 Stock Incentive Award Plan (incorporated herein by reference to Appendix B in the Definitive Proxy Statement on Form 14A for Rockville Financial, Inc. (now United Financial Bancorp, Inc.) filed on July 3, 2006 (File No. 000-51239))
	10.11.2		Supplemental Executive Retirement Agreement of United Bank for William H.W. Crawford, IV effective December 26, 2012 (incorporated by reference to Exhibit 10.11.2 to the Current Report on the Company’s Form 8-K filed on January 2, 2013)
	10.11.4		On November 14, 2013, United Financial Bancorp, Inc. and its subsidiary United Bank entered into an Employment Agreement with William H.W. Crawford, IV effective on the date of the consummation of the Merger (incorporated by reference to Exhibit 10.11.4 to the Company’s Form 8-K filed on November 20, 2013)

144




	10.12		Supplemental Executive Retirement Agreement of United Bank for Mark A. Kucia effective December 6, 2010 (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 10, 2011)
	10.12.1		Employment Agreement as amended and restated by and among United Financial Bancorp, Inc., United Bank and Mark A. Kucia, effective January 9, 2012 (replaces former Exhibit 10.12.1) (incorporated herein by reference to Exhibit 10.12.1 to the Current Report on the Company’s Form 8-K filed on January 13, 2012)
	10.13		Employment Agreement by and among United Financial Bancorp, Inc., United Bank and Marino J. Santarelli effective January 9, 2012 (replaces former Exhibits 10.2 and 10.2.2) (incorporated herein by reference to Exhibit 10.2 to the Current Report on the Company’s Form 8-K filed on January 13, 2012)
	10.14		United Financial Bancorp, Inc. 2012 Stock Incentive Award Plan (incorporated herein by reference to Appendix A in the Definitive Proxy Statement on Form 14A for Rockville Financial, Inc. (now United Financial Bancorp, Inc.) filed on April 4, 2012 (File No. 0001193125-12-149948)
	10.16		On November 14, 2013, United Financial Bancorp, Inc. and its subsidiary United Bank entered into an Advisory Agreement with Richard B. Collins effective on the date of the consummation of the Merger (incorporated by reference to Exhibit 10.16 to the Company’s Form 8-K filed on November 20, 2013)
	10.17		Employment Agreement by and among United Financial Bancorp, Inc., United Bank and Eric R. Newell effective January 1, 2013 (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on March 14, 2014)
	10.18		Employment Agreement by and among United Financial Bancorp, Inc., United Bank and David Paulson effective February 19, 2014 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed on March 14, 2014)
	10.19		Form of United Financial Bancorp, Inc. Executive Change in Control Severance Plan, effective January 21, 2015 filed herewith
	14.		United Financial Bancorp, Inc., United Bank, Standards of Conduct Policy — Employees filed herewith
	21.		Subsidiaries of United Financial Bancorp, Inc. and United Bank filed herewith
	23.1		Consent of Independent Registered Public Accounting Firm, Wolf & Company, P.C. 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

	101.		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Condition; (ii) the Consolidated Statements of Net Income; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Changes in Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to Audited Consolidated Financial Statements filed herewith

145

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



United Financial Bancorp, Inc.

By:		/s/ William H.W. Crawford, IV
		William H.W. Crawford, IV
		Chief Executive Officer and Director

		and

By:		/s/ Eric R. Newell
		Eric R. Newell
		Executive Vice President, Chief
		Financial Officer and Treasurer

Date: March 9, 2015

146

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.




Signatures	Title	Date

/s/ William H.W. Crawford, IV	Chief Executive Officer and Director ( Principal Executive Officer )	March 9, 2015
William H.W. Crawford, IV

/s/ Eric R. Newell	Executive Vice President, Chief Financial Officer and Treasurer ( Principal Financial and Accounting Officer )	March 9, 2015
Eric R. Newell

/s/ Paula A. Aiello	Director	March 9, 2015
Paula A. Aiello

/s/ Michael A. Bars	Director	March 9, 2015
Michael A. Bars

/s/ Michael F. Crowley	Director	March 9, 2015
Michael f. Crowley

/s/ Kristen A. Johnson	Director	March 9, 2015
Kristen A. Johnson

/s/ Carol A. Leary	Director	March 9, 2015
Carol A. Leary

/s/ Raymond H. Lefurge, Jr.	Vice Chairman	March 9, 2015
Raymond H. Lefurge, Jr.

/s/ Stuart E. Magdefrau	Director	March 9, 2015
Stuart E. Magdefrau

/s/ Kevin E. Ross	Director	March 9, 2015
Kevin E. Ross

/s/ Robert A. Stewart, Jr.	Chairman	March 9, 2015
Robert A. Stewart, Jr.

147

EXHIBIT 10.19

UNITED FINANCIAL BANCORP, INC.

EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN

THIS EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN (this “ Plan ”) was established January 21, 2015 (the “ Effective Date ”) to provide for change of control benefits to certain eligible executives of United Financial Bancorp, Inc., a Connecticut corporation (the “ Company ”), United Bank and their affiliates in the circumstances described in this Plan.

1. General Eligibility . An executive is eligible for the benefits provided under this Plan (each such executive, referred to as the “ Participant ”) only if (i) the Compensation Committee (the “ Plan Administrator ”) of the Company’s Board of Directors (the “ Board ”) designates the executive as eligible to participate in the Plan and (ii) the Company provides the executive with a letter agreement (the “ Participation Letter ”) signed by a duly authorized officer of the Company confirming the executive’s eligibility for this Plan. The Participation Letter shall designate each executive as either a “Tier 1 Participant,” a “Tier 2 Participant” or a “Tier 3 Participant” in the Plan. As a condition to participation in the Plan, the Participant must counter-sign the Participation Letter within ten (10) days after it is provided to them, agreeing to be bound by all of the terms and conditions of this Plan. Subject to Section 2 of this Plan, the Committee may, in its sole discretion, terminate a Participant’s participation in the Plan upon written notice of such action.

2. Term; Termination; Amendments . The period of this Plan shall commence on the Effective Date and shall continue until terminated by the Board (the “ Term ”). No termination and no amendment to the Plan by the Board that reduces benefits and no action by the Committee to terminate a Participant’s participation in the Plan shall be effective until the one (1) year anniversary of the date that notice of such termination or amendment has been provided to any affected Participant; provided, that no such termination or amendment will be effective if a Change in Control (as defined below) occurs during the one (1) year notice period or if such termination or amendment is adopted during a Change in Control Protection Period (as defined below).

3. Termination During a Change in Control Protection Period . Subject to the conditions in Sections 6, 7 and 8 of this Plan, if the Participant’s employment is terminated within a Change in Control Protection Period, either (1) by the Company other than for Cause (as defined below) or (2) by the Participant for Good Reason (as defined below) then:

(a) The Participant shall be entitled to receive the following cash severance payments in a lump sum within ten (10) days following termination, subject to later payment if and as provided in Section 9:

(i) an amount equal to the applicable Change in Control Multiple times the sum of the Participant’s (x) then base salary (or, if greater, base salary for the year immediately preceding the Change in Control) plus (y) his or her target bonus for the fiscal year during which the termination occurs (or, if greater, for the year immediately preceding the Change in Control); and

(ii) an amount equal to a pro rata portion of the Participant’s target bonus for the fiscal year during which the termination occurs (or, if greater, for the year immediately preceding the Change in Control) based on the total number of days in the performance cycle that the Participant was employed by the Company.

(iii) a cash allowance for outplacement and job search activities in the amount of the lesser of ten (10) percent of the base salary used for purposes of (i) above or $25,000.

(b) The Participant shall be entitled to receive continued health insurance coverage for the Participant and his or her immediate family at no cost to the Participant for a period equal to eighteen (18) months following the date of termination of employment at no cost to the Participant; provided that such coverage shall cease on the date the Participant is eligible for medical coverage through another employer. At its sole discretion, the Company may satisfy this obligation by providing additional cash severance equal to the amount the Company would pay toward such coverage for an active employee and allowing Participant to enroll in such coverage via COBRA at their cost, or a cash subsidy to Participant equal to the cost of substantially identical coverage through an individual policy, in each case if (i) coverage under the Company’s plans cannot be provided pursuant to the terms of the Company’s group health plan(s), or (ii) coverage under the Company’s plans would result in the plan being discriminatory under the Internal Revenue Code (Section 105(h) or successor provision) or in an excise or penalty tax under any applicable law or regulation.

(c) The Participant shall also be entitled to receive such other compensation or benefits (other than severance benefits and a cash bonus for the year in which termination occurs) as are provided in accordance with the terms and conditions of any applicable plans and programs of the Company.

(d) The rights of a Participant upon a Change in Control in connection with outstanding equity awards shall be determined solely by reference to the terms and conditions of the applicable equity plan and the Participant’s award agreement thereunder.

4. Definitions . For purposes of this Plan, the following definitions shall apply:

(a) A termination for “ Cause ” shall mean termination on account of the occurrence of any of the following events:

(i) the Participant’s malfeasance or nonfeasance in the performance of the material duties or responsibilities of his or her position with the Company or any of its subsidiaries, or failure to timely carry out any material lawful and reasonable directive of the Company, in each case if not remedied within fifteen (15) days after receipt of written notice from the Company describing such malfeasance, nonfeasance or failure;

(ii) the Participant’s embezzlement or misappropriation of any material funds or property of the Company or any of its subsidiaries or of any material corporate opportunity of the Company or any of its subsidiaries;

(iii) the conduct by the Participant which is a material violation of this Plan or any other agreement between the Participant and the Company or any of its subsidiaries or affiliates in each case, that is not remedied within fifteen (15) days after receipt of written notice from the Company describing such conduct;

(iv) any material violation of any generally applicable written policy of the Company previously provided to the Participant, the terms of which provide that violation may be grounds for termination of employment in each case, that is not remedied within fifteen (15) days after receipt of written notice from the Company describing such conduct;

(v) the commission by the Participant of an act of fraud or willful misconduct or Participant’s gross negligence, in each case that has caused or is reasonably expected to result in material injury to the Company or any of its subsidiaries; or

(vi) the Participant’s conviction of any felony or of any misdemeanor involving moral turpitude.

Any termination for Cause of a Participant shall be effective only upon (i) a determination by the majority of the Board in good faith that Cause exists, (ii) receipt by the Participant of a notice in accordance with Section 13 stating in reasonable detail the facts and circumstances alleged to provide a basis for termination for Cause and (iii) the Participant has been given a reasonable opportunity to be heard by the Board (together with legal counsel) (such opportunity to be given within thirty (30) days of the Participant’s receipt of the notice set forth in (ii) above).

(b) A “ Change in Control ” of the Company shall be deemed to have occurred if, as the result of a single transaction or a series of transactions, the event set forth in any one of the following paragraphs shall have occurred:

(i) the Company merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result, with respect to the Company, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by “ Persons ^” as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act ^” ) who were stockholders of the Company immediately before the merger or consolidation;

(ii) any Person (other than any trustee or other fiduciary holding securities under an employee benefit plan of the Bank or the Company), becomes the “ Beneficial Owner ” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the resulting corporation representing 50% or more of the combined voting power of the resulting corporation’s then-outstanding securities;

(iii) during any period of twenty-four months (not including any period prior to the Effective Date of this Agreement), individuals who at the beginning of such period constitute the board of directors of the Company, and any new director (other than (A) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in subparagraphs (i), (ii) or (iv) hereof, (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control or (C) a director nominated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s securities) whose election by the board of directors of the Company or nomination for election by the Company’s stockholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets;

(c) “ Change in Control Multiple ” shall mean (x) two (2.0) times for a Tier 1 Participant, (2) one and one half (1.5) times for a Tier 2 Participant or (z) one (1.0) times for a Tier 3 Participant.

(d) “ Change in Control Protection Period ” shall mean (i) the twenty four (24) month period beginning on the date of any Change in Control occurring after the Effective Date and (ii) the six (6) month period prior to the date of any Change in Control, if the Participant is terminated during such six-month period and such termination (x) was at the request of a third party who had taken steps reasonably calculated or intended to effect a Change in Control or (y) otherwise arose in connection with or in anticipation of the Change in Control.

(e) “ Good Reason ” shall mean, for any termination that occurs during a Change in Control Protection Period, the occurrence of any one of the following without the Participant’s prior written consent:

(i) any material adverse alteration (including an adverse change to Participant’s upward reporting requirements) or material diminution in the Participant’s authority, duties or responsibilities as in effect immediately prior to the occurrence of a Change in Control (or, if any changes to such Participant’s authority, duties or responsibilities were made in connection with or in anticipation of the Change in Control, as in effect immediately prior to such changes;

(ii) a reduction in the Participant’s base salary or target bonus opportunity (as determined by the Compensation Committee in good faith), except as part of a reduction of less than ten percent (10%) that is applicable to all of the Company’s senior executives;

(iii) a relocation of the offices at which the Participant is principally employed, which relocation increases the distance between the Participant’s residence and such offices by more than thirty five (35) miles, but excluding required and appropriate travel on the Company’s business to an extent substantially consistent with the Participant’s business travel obligations prior to the Change in Control; or

(iv) the Company’s failure to obtain assumption of this Plan by a successor within ten (10) days of a Change in Control;

provided, however , that in each such case: (i) the Participant notifies the Company of the occurrence of Good Reason within sixty (60) days after the Participant becomes aware (or should have become aware) of the applicable facts and circumstances giving rise to the occurrence; (ii) the Company shall have the right, within thirty (30) days after receipt of such written notice (which shall set forth in reasonable detail the specific conduct of Company that constitutes Good Reason and the specific provision(s) of this Plan on which the Participant relies), to cure the event or circumstances giving rise to such Good Reason and, in the event of the Company so cures, such event or circumstances shall not constitute Good Reason hereunder; and (iii) if the Company fails to cure the event or circumstance giving rise to such Good Reason, the Participant resigns within thirty (30) days after the expiration of the thirty-day cure period. In any event, for a termination to be considered for Good Reason hereunder, the termination must occur no later than ninety (90) days after the initial existence of the condition alleged to give rise to Good Reason. A Good Reason termination shall be treated as an involuntary separation from service for purposes of Code Section 409A.

5. Disqualifying Terminations . Notwithstanding anything herein to the contrary, the Company will not be obligated to pay severance benefits to a Participant under this Plan if the Participant’s termination is the result of:

(i) a voluntary termination by the Participant (a separation, including a voluntary retirement, initiated by the Participant) other than for Good Reason;

(ii) the Company having terminated the Participant for Cause; or

(iv) the death or disability (as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) of the Participant.

6. Change in Control Best Payments Determination . In the event the benefits described in Section 3 (the “ CIC Severance Benefits ”), taken together with all other benefits payable to the Participant in connection with a Change in Control, could subject the Participant to an excise tax under Section 4999 of the Code (the “ Excise Tax ”), then notwithstanding the provisions of Section 3 the Company shall reduce the CIC Severance Benefits (the “ Benefit Reduction ”) under Section 3 by the amount necessary to result in the Participant not being subject to the Excise Tax if such reduction would result in the Participant’s “Net After Tax Amount” attributable to the CIC Severance Benefits described in Section 3 being greater than it would be if no Benefit Reduction was effected. In the event of any over or under reduction pursuant to the previous sentence, the amount of the Benefit Reduction shall be adjusted (and any additional payments by the Company or any required repayments by the Participant, as applicable, shall be promptly made) to the minimum amount necessary to result in the Participant not being subject to the Excise Tax. For this purpose “Net After Tax Amount” shall mean the net amount of CIC Severance Benefits the Participant is entitled to receive under this Plan after giving effect to all federal, state and local taxes which would be applicable to such payments, including, but not limited to, the Excise Tax. The determination of whether any such Benefit Reduction shall be effected shall be made by a nationally recognized public accounting firm, selected by the Company and reasonably acceptable to Participant, and such determination shall be binding on both the Participant and the Company.

7. Release . Notwithstanding anything in this Plan to the contrary, the receipt by the Participant of any payments or benefits under this Plan is further subject to the Participant executing, delivering and not revoking a release of claims in a form acceptable to the Company within twenty one (21) days (or forty five (45) days in the case of a group layoff) following termination, or all rights to payment or receipt of benefits hereunder lapse.

8. Compliance with Covenants . If a Participant, at any time before all payments or benefits due hereunder are paid, fails to comply with the Participant’s obligations under Sections 10 and 11 below, the Company may cease payment hereunder and any further amounts due shall be deemed a “disputed payment” for purposes of Code Section 409A-2(g) payable only as and if required as a result of the dispute resolution provisions in Section 19 hereof.

9. Protection of Company Property . The Participant acknowledges that his services in exchange for which certain promises made under this Plan are of a special, unique, unusual, extraordinary and intellectual character. In recognition of the foregoing, the Participant covenants and agrees as follows:

(a) No Disclosure or Use of Confidential Information . The Participant will not, at any time, communicate or divulge to or use for the benefit of himself or any other person, firm, association or corporation (other than the Company and its subsidiaries), without the prior written consent of the Company, any Confidential Information (as defined below) owned or used by the Company or any of its subsidiaries or affiliates that may be communicated to, acquired by or learned of by the Participant in the course of, or as a result of, his employment with the Company or any of its subsidiaries or affiliates. All Confidential Information relating to the business of the Company or any of its subsidiaries or affiliates which the Participant shall use or prepare or come into contact with shall become and remain the sole property of the Company or its subsidiaries or affiliates, as applicable. ” Confidential Information ” means information not generally known about the Company and its subsidiaries, affiliates, strategic partners, services and products, whether written or not, including information relating to research, development, purchasing, marketing plans, computer software or programs, any copyrightable material, trade secrets and proprietary information, including, but not limited to, information about their past, present and future financial condition, pricing strategy, prices, suppliers, cost information, business and marketing plans, the markets for their products, key personnel, past, present or future actual or threatened litigation, current and prospective customer lists, operational methods, acquisition plans, prospects, plans for future development and other business affairs and information about the Company and its subsidiaries, affiliates and strategic partners not readily available to the public. The Participant may disclose Confidential Information only to the extent it (i) becomes part of the public domain other than as a result of the Participant’s breach hereof or (ii) is required to be disclosed by applicable law or by order of any court of competent jurisdiction. If the Participant is required by applicable law or regulation or by legal process to disclose any Confidential Information, the Participant will provide the Company or any of its subsidiaries, affiliates or strategic partners with prompt notice thereof so as to enable the Company to seek an appropriate protective order.

(b) Non-Disparagement . The Participant will not, at any time, take any action or make any public statement, including, without limitation, statements to individuals, subsequent employers, vendors, clients, customers, suppliers or licensors or the news media, that would disparage, defame or place in a negative light, the Company, any of its subsidiaries or affiliates, or any of their respective officers, directors, employees, successors, business services or products; provided that nothing herein shall restrict the Participant from making statements in good faith that are required by applicable law, applicable regulatory process or by order of any court of competent jurisdiction.

(c) Return of Company Property, Records and Files . Upon the termination of the Participant’s employment at any time and for any reason, or at any other time the Company may so request, the Participant shall promptly deliver to the Company all of the property and equipment of the Company, its subsidiaries and affiliates (including any cell phones, credit cards, personal computers, etc.) and any and all documents, records and files, including any notes, memoranda, customer lists, reports or any and all other documents, including any copies thereof, whether in hard copy form or electronic form, which relate to the Company, its subsidiaries or affiliates, and/or their respective past and present officers, directors, employees, consultants, successors or assigns (collectively, the “ Company Property, Records and Files ”); it being expressly understood that, upon termination of the Participant’s employment at any time and for any reason, the Participant shall not be authorized to retain any of the Company Property, Records and Files, any copies thereof or excerpts therefrom.

10. Section 409A Matters .

(a) To the fullest extent applicable, amounts and other benefits payable under this Plan are intended to be exempt from the definition of “nonqualified deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), including the rulings, notices and other guidance issued by the Internal Revenue Service interpreting the same (collectively, “ Section 409A ”) in accordance with one or more of the exemptions available under Section 409A. This Plan shall be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent. In this regard, each such payment hereunder that may be treated as payable in the form of “a series of installment payments,” as defined in Treas. Reg. §1.409A-2(b)(2)(iii) shall be deemed a separate payment for purposes of Section 409A.

(b) Notwithstanding anything in this Plan or elsewhere to the contrary, if the Participant is a “ Specified Employee ” (within the meaning of Section 409A(a)(2)(B)(i) of the Code, as determined by the Compensation Committee) on the date of his termination of employment, and the Company reasonably determines that any amount or other benefit payable under this Plan on account of the Participant’s “separation from service,” within the meaning of Section 409A(a)(2)(A)(i) of the Code, constitutes nonqualified deferred compensation (after taking into account all exclusions applicable to such payments under Section 409A) that will violate the requirements of Section 409A(a)(2) if paid at the time specified in the Plan, then the payment thereof shall be postponed to and paid on the first business day after the expiration of six months from the date of Participant’s termination of employment or, if earlier, the date of the Participant’s death (the “ Delayed Payment Date ”), and the remaining amounts or benefits shall be paid at the times otherwise provided under this Plan. The Company and the Participant may agree to take other actions to avoid a violation of Section 409A at such time and in such manner as permitted under Section 409A. If this Section 13(c) requires a delay of any payment, such payment shall be accumulated and paid in a single lump sum on the Delayed Payment Date together with interest for the period of delay, compounded monthly, and calculated at the prime rate as set forth in the Eastern edition of the Wall Street Journal on the date of termination. If a benefit subject to the delayed payment rules of this Section 13(c) is to be provided other than by the payment of money to the Participant, then the Participant must first pay such amount (either to the Company or to the party the company would otherwise pay on the Participant’s behalf) to the Company of the full taxable value of the benefit and then, on the first business day following the Delayed Payment Date, the Company shall repay the Participant for the advance payments made by the Participant pursuant to the terms of this sentence which would otherwise not have been required of the Participant.

(c) The date of the Participant’s “separation from service,” as defined in Section 409A (and as determined by applying the default presumptions in Treas. Reg. §1.409A-1(h)(1)(ii)), shall be treated as the date of his termination of employment for purposes of determining the time of payment of any amount that becomes payable to the Participant hereunder upon his termination of employment and that is properly treated as a deferral of compensation subject to Section 409A after taking into account all exclusions applicable to such payment under Section 409A and for purposes of determining whether the Participant is a “Specified Employee” on the date of his termination of employment.

(d) Notwithstanding any provision of this Plan to the contrary, the time of payment of any awards that are subject to Section 409A as “nonqualified deferred compensation” and that vest on an accelerated basis pursuant to this Plan shall not be accelerated unless such acceleration is permissible under Section 409A.

11. No Duty to Mitigate; No Offset . The Company’s obligation to make the payments provided for in, and otherwise to perform its obligations under, this Plan shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Participant or others whether in respect of claims made under this Plan or otherwise; provided , that the Company shall have the right to offset any such payments against amounts owed by the Participant to the Company. In no event shall the Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts, benefits and other compensation payable or otherwise provided to the Participant under any of the provisions of this Plan, and (subject to the foregoing proviso) such amounts shall not be reduced, regardless of whether the Participant obtains other employment.

12. Forfeiture and Repayment. The Participant acknowledges and agrees that all compensation and benefits payable or otherwise provided under this Plan are subject to forfeiture and recoupment, may be modified, may be cancelled without payment and/or a demand for repayment of such compensation and benefits may be made upon the Participant on the basis of: (a) any provision of the Company’s forfeiture and recoupment policies in effect prior to the date of the Participant’s termination or (b) if such compensation or benefits are required to be forfeited or repaid to the Company pursuant to applicable law or regulatory requirements as in effect from time to time. Without limiting the generality of the foregoing, if the Board or any appropriate committee thereof determines that any fraud or intentional misconduct by the Participant was a significant contributing factor to the Company having to restate all or a portion of its financial statements, the Board or such committee may require reimbursement of any bonus or incentive compensation paid to the Participant, cause the cancellation of outstanding equity awards, and seek reimbursement of any gains realized by the Participant on the exercise of stock options, in each case to the extent that (i) the amount of the compensation was calculated based upon the achievement of financial results that were subsequently reduced due to a restatement and (ii) the amount of the compensation that would have been awarded had the financial results been properly reported would have been lower than the amount actually awarded.

13. Cooperation . Each Participant who receives a benefit under this Plan shall reasonably cooperate with the Company and its subsidiaries following a termination of employment in connection with a Change in Control and be reasonably available with respect to matters arising out of the Participant’s services to the Company and its subsidiaries.

14. Assignment; Binding Plan . The Company may assign this Plan to any successor or assign of the Company. This Plan is not assignable by the Participant and is binding on him or her and his or her executors and other legal representatives. This Plan shall bind the Company and its successors and assigns and inure to the benefit of the Participant and his or her heirs, executors, administrators, personal representatives, legatees or devisees. The Company shall assign this Plan to any entity that acquires substantially all of its assets or business.

15. Notice . All notices and other communications under this Plan shall be in writing and shall be given by hand, fax, overnight commercial courier or first class mail (certified or registered with return receipt requested), and shall be deemed to have been sufficiently given when received by the other party (regardless of the method of delivery, including, without limitation on the date of transmission thereof if sent by electronic facsimile transmission and delivery is confirmed), or if sent by registered or certified mail, postage and fees prepaid, on the earlier of the date of receipt or the fifth business day after mailing. Such notices shall be addressed as follows:

If to the Company: United Financial Bancorp, Inc.

45 Glastonbury Boulevard

Suite 200

Glastonbury, CT 06033

Attn: Chair, Compensation Committee


If to the Participant:	to the Participant’s address contained in the personnel records of the Company

Any party may change such party’s address for notices by notice duly given pursuant hereto.

16. Entire Plan . This Plan contains the entire agreement of the parties relating to the subject matter hereof and supersedes all oral or written prior discussions, agreements and understandings of every nature with respect thereto.

17. Waiver . The failure of any party hereto at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Plan, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Plan.

18. Withholding . Notwithstanding any other provision of this Plan, the Company may withhold from amounts payable under this Plan all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

19. Governing Law . This Plan is intended to be a “employee welfare benefit plan” or exempt as a “top hat” pension benefit plan under subject to the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) and shall be interpreted, administered and enforced in accordance with ERISA. It is expressly intended that ERISA preempt the application of state laws to this Plan to the maximum extent permitted by Section 514 of ERISA. To the extent that state law is applicable, this Plan shall be governed by and construed and enforced in accordance with the laws of the State of Connecticut that are applicable to contracts made and intended to be performed within the State, notwithstanding the principles of conflicts of law thereof or of any other jurisdiction to the contrary and without regard to wherein the Participant may reside, where the Company is located or its business conducted or where any violation of this Agreement occurs.

20. Dispute Resolution .

(a) Arbitration .

(i) The parties hereto agree that any and all disputes that may arise in connection with, arising out of or relating to this Plan shall be submitted to final and binding arbitration in Hartford County, Connecticut according to the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association at the time in effect. If there is any conflict between such rules and procedures and this Section 19, the provisions of this Section 19 shall prevail. The arbitration shall be conducted before a panel of three arbitrators, one to be selected by each of the parties and the third to be selected by the other two. The arbitrators may grant any remedy or relief, including, but not limited to, specific performance of a contract or contractual right and equitable or injunctive relief; provided, however, that the arbitrators shall have no authority to order a modification or amendment of this Agreement. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

(ii) This arbitration obligation extends to any and all claims that may arise by and between the parties hereto or their subsidiaries, affiliates, successors or assigns in connection with, arising out of or relating to this Plan, and expressly extends to, without limitation, claims or causes of action for wrongful termination, impairment of ability to compete in the open labor market, breach of an express or implied contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disability, loss of future earnings, and claims under any State constitution, the United States Constitution, and applicable state and federal fair employment laws, federal and state equal employment opportunity laws, and federal and state labor statutes and regulations, including, but not limited to, the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended, the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, ERISA, the Age Discrimination in Employment Act of 1967, as amended, and any other state or federal law.

(iii) The Participant understands that by participating in this Plan, the Participant is waiving his rights to have a court determine the Participant’s rights, including under federal, state or local statutes prohibiting employment discrimination, including sexual harassment and discrimination on the basis of age, race, color, religion, national origin, disability, veteran status or any other factor prohibited by governing law. THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY FOR ANY DISPUTES HEREUNDER.

(iv) Notwithstanding the foregoing, nothing in this Section 19 shall prevent the Company, its subsidiaries, affiliates, successors or assigns from exercising their right to bring an action in any court of competent jurisdiction for specific performance, injunctive or other equitable relief to compel the Participant to comply with its obligations under Section 9 of this Plan.

(b) Legal Fees . If any action is brought under this Section 19, the parties will bear the expense of deposits and advances required by the arbitrators in equal proportions, but such amounts shall be subject to recovery as an addition or offset to any award. For any action brought in connection with a termination of the Participant outside of the Change in Control Protection Period, the arbitrators may award to the prevailing party, as determined by the arbitrators, all costs, fees and expenses related to the arbitration which have been incurred by the prevailing party, including reasonable fees and expenses of attorneys, accountants and other professionals. For any action brought in connection with a termination during the Change in Control Protection Period in which the Participant prevails on at least one material claim at issue, the arbitrators shall award to the Participant the reasonable fees and expenses of attorneys incurred by the Participant in connection with any such claim on which the Participant has prevailed.

21. Survival . This Plan shall survive the termination of the Participant’s employment and the expiration of the Term to the extent necessary to give effect to its provisions. The existence of any claim or cause of action by the Participant against the Company shall not constitute and shall not be asserted as a defense to the enforcement by the Company of this Plan.

22. Severability . In case any one or more of the provisions contained in this Plan is, for any reason, held invalid in any respect, such invalidity shall not affect the validity of any other provision of this Plan, and such provision shall be deemed modified to the extent necessary to make it enforceable.

23. At Will Employment . The Participant and the Company acknowledge that the employment of the Participant by the Company is “at will” and nothing in this Plan shall be construed to create for any Participant any right of continued employment with the Company.

24. Due Authorization . The execution of this Plan has been duly authorized by the Company by all necessary corporate action.

25. Captions . The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of the Plan.

EXHIBIT 14.

UNITED FINANCIAL BANCORP, INC.

UNITED BANK

STANDARDS OF CONDUCT POLICY - EMPLOYEES

May 2014


I.	INTRODUCTION

The continued success of United Financial Bancorp, Inc., United Bank and United Bank’s 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.



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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 CEO, or an Officer designated by the CEO or, in the case of such interest or activity by the CEO, approved by the Chairman);


5)	infer sponsorship or support by the Bank (except as approved by the CEO, or an Officer designated by the CEO, or, in the case of such interest or activity by the CEO, 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 CEO, or an Officer designated by the CEO and obtain his permission or, in the case of the CEO, 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. Written materials should be submitted for prior review by the Employee’s supervisor.

If 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 CEO, or an Officer designated by the CEO or, in the case of the CEO, 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. The Bank is currently considered a “state contractor” under Connecticut campaign financing law. The financing law covers situations involving existing state contracts and situations in which the Bank has an outstanding response submitted in connection with a potential new state contract. For example, the Bank currently has a state contract with the Connecticut Development Authority regarding its loan programs. From time to time, there may be other state contracts. As a consequence, “principals” of the Bank are restricted on the types of campaign contributions they can make. Principals include the Directors of the Bank and the following employees: (1) the CEO and the President; (2) the Treasurer; (3) all Executive Vice Presidents; and (4) Officers with managerial or discretionary responsibility for a state contract. If you believe you may be such a person, please check with the Executive Vice President of Human Capital. Accordingly, such persons, AND THEIR SPOUSES AND DEPENDENT CHILDREN, are prohibited from making contributions to:



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(i) an exploratory committee or candidate committee established by a candidate for nomination or election to the office of Governor, Lieutenant Governor, Attorney General, State Comptroller, Secretary of the State or State Treasurer;

(ii) a political committee authorized to make contributions or expenditures to or for the benefit of such candidates; or

(iii) a party committee (state central or town committee).

Otherwise, 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 CEO, or an Officer designated by the CEO or in the case of any such gift to the CEO, the CEO, or an Officer designated by the CEO 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 also 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 $100.00 in value must be reported to and approved by the CEO, or an Officer designated by the CEO or, in the case of any such gift to the CEO, 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 Executive Vice President of Human Capital. Any gifts of more than $500 that are intangible in nature, such as meals, entertainment, accommodations, travel arrangements, and the like, must be reported and approved by the CEO, or an Officer designated by the CEO. 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.



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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, the Bank’s Vice President, Information Security or the Bank’s Vice President, Compliance 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.

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

United Financial Bancorp, Inc., and its wholly-owned subsidiary (collectively, the “Company”) are committed to preventing adverse employment action of any kind against employees of the Company who lawfully report information about (i) fraudulent activities within the Company (including wire fraud, mail fraud and bank fraud), (ii) violations of the Sarbanes-Oxley Act of 2002 pertaining to fraud against stockholders of the Company, (iii) questionable accounting, internal accounting controls or auditing matters of the Company, and (iv) conduct that violates the Company’s Standards of Conduct , or that causes reports and other public disclosures by the Company that are not full, fair and accurate. To advance this commitment, the Company has adopted a Whistleblower Protection Policy, maintained and approved by the Audit Committee. This Policy can be found on Ultipro and the Bank’s Intranet.



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XII.	SENIOR FINANCIAL OFFICER STANDARDS OF CONDUCT

United Financial Bancorp, 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 United 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 Executive Vice President of Human Capital (unless the subject matter involves such Executive 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.



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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 CEO, or an Officer designated by the CEO and Executive Vice President of Human Capital 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 Executive Vice President of Human Capital. 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 or retain in an electronic format.

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.



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UNITED FINANCIAL BANCORP, INC.

UNITED BANK

STANDARDS OF CONDUCT POLICY - EMPLOYEES

STATEMENT OF ACKNOWLEDGEMENT

I, ______________________________ , AN EMPLOYEE OF UNITED BANK AND/OR ITS PARENT, UNITED FINANCIAL BANCORP, INC. OR SUBSIDIARIES, HAVE REVIEWED AND UNDERSTAND THE STANDARDS OF CONDUCT POLICY - EMPLOYEES (INCLUDING THE EMPLOYMENT DISCLAIMER DESCRIBED IN SECTION XV.) AND HAVE COMPLIED, AND UNDERSTAND THAT I AM EXPECTED TO COMPLY WITH IT IN THE FUTURE.

IN ADDITION, I UNDERSTAND THAT IT IS MY RESPONSIBILITY TO DISCLOSE CONFLICTS OF INTEREST TO MY SUPERVISOR OR A MEMBER OF SENIOR MANAGEMENT. BY CHECKING THE APPROPRIATE STATEMENT BELOW, I ACKNOWLEDGE THAT I HAVE NO CONFLICTS OF INTEREST TO DISCLOSE AT THIS TIME; OR I HAVE ACTUAL OR POTENTIAL CONFLICTS OF INTEREST AND HAVE LISTED THEM BELOW.

______ I HAVE NO CONFLICTS OF INTEREST TO DISCLOSE


______	I HAVE THE FOLLOWING ACTUAL OR POTENTIAL CONFLICTS OF INTEREST TO


	DISCLOSE:




	DATE		SIGNATURE


			NAME, PLEASE PRINT



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UNITED FINANCIAL BANCORP, INC.

STANDARDS OF CONDUCT POLICY - SENIOR FINANCIAL OFFICERS

STATEMENT OF ACKNOWLEDGEMENT

I, ______________________________ , A SENIOR FINANCIAL OFFICER OF UNITED FINANCIAL BANCORP, INC., HAVE REVIEWED AND UNDERSTAND THE STANDARDS OF CONDUCT POLICY-SENIOR FINANCIAL OFFICERS (INCLUDING THE EMPLOYMENT DISCLAIMER DESCRIBED IN SECTION XV.) AND HAVE COMPLIED, AND UNDERSTAND THAT I AM EXPECTED TO COMPLY WITH IT IN THE FUTURE.




	DATE		SIGNATURE


			NAME, PLEASE PRINT



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EXHIBIT 21

SUBSIDIARIES OF UNITED FINANCIAL BANCORP, INC. AND UNITED BANK

Subsidiary of United Financial Bancorp, Inc .:

United Bank, a Connecticut chartered savings bank

Subsidiaries of United Bank:

United Northeast Financial Advisors, Inc., a Connecticut corporation

United Bank Mortgage Company, a Connecticut corporation

United Bank Investment Sub, Inc., a Connecticut corporation

United Bank Residential Properties, Inc., a Connecticut corporation

United Bank Commercial Properties, Inc., a Connecticut corporation

United Bank Investment Corp, Inc., a Connecticut corporation

UCB Securities Inc. II, a Massachusetts corporation

United Bank Properties, LLC, a Massachusetts Limited Liability Company

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-173469, 333-188296, 333-195641 and 333-198466 of our reports dated March 9, 2015 , relating to the Consolidated Financial Statements of United Financial Bancorp, Inc., and subsidiaries (collectively “the Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of United Financial Bancorp, Inc. for the year ended December 31, 2014 .

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 9, 2015

EXHIBIT 31.1

Certification

I, William H.W. Crawford, IV, certify that:

1. I have reviewed this Annual Report on Form 10-K of United Financial Bancorp, 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 registrant’s 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s 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

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.




March 9, 2015				/s/ William H.W. Crawford, IV
				William H.W. Crawford, IV
				Chief Executive Officer

EXHIBIT 31.2

Certification

I, Eric R. Newell, certify that:

1. I have reviewed this Annual Report on Form 10-K of United Financial Bancorp, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.




March 9, 2015				/s/ Eric R. Newell
				Eric R. Newell
				EVP, Chief Financial Officer and Treasurer

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of United Financial Bancorp, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014 , as filed with the Securities and Exchange Commission (the “Report”), I hereby certify pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

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 H.W. Crawford, IV
		William H.W. Crawford, IV
		Chief Executive Officer
		March 9, 2015

By:		/s/ Eric R. Newell
		Eric R. Newell
		EVP, Chief Financial Officer and Treasurer
		March 9, 2015

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 United Financial Bancorp, Inc. and will be retained by United Financial Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.