United Financial Bancorp, Inc. (Form: 10-K, Received: 03/07/2016 16:13:02)

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, 2015



¨	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, 2015 was $640.2 million based upon the closing price of $13.45 as of June 30, 2015 , 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 29, 2016 , there were 49,969,878 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 2015 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, 2015

Table of Contents



		Page No.

Part I

Forward-looking statements		4
Item 1.	Business	5
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
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	29
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
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	141
Item 9A.	Controls and Procedures	141
Item 9B.	Other Information	141

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	142
Item 11.	Executive Compensation	142
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	142
Item 13.	Certain Relationships and Related Transactions, and Director Independence	142
Item 14.	Principal Accountant Fees and Services	142

Part IV
Item 15.	Exhibits and Financial Statement Schedules	143
Signatures		145

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;


•	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 n 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.” 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.

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, 2015 is all of the outstanding capital stock of United Bank, a wholly-owned subsidiary of the Company. United had assets of $6.23 billion and equity of $625.5 million at December 31, 2015 .

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 in Connecticut and Massachusetts, including retail, commercial and consumer banking, as well as financial advisory services. United maintains 53 retail banking locations, commercial and mortgage loan production offices, and 63 ATMs. Personal and business banking customers also bank with United online through its website at www.bankatunited.com as well as its mobile and telephone banking channels. In 2015, the Bank consolidated five locations to optimize its branch network, including four branches in Massachusetts and one branch in Connecticut; opened a mortgage loan production office in Wellesley, Massachusetts; opened a new full-service banking location on Main Street in Glastonbury, Connecticut; and announced the formation of LH-Finance, a division of United Bank, a specialty marine finance business unit that will be based in Baltimore, Maryland, which will originate and underwrite floor plan loans on select premium global marine manufacturers and resulting retail loans.

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 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, larger 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, virtual services, 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 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.

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 Norfolk and Barnstable Counties 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 marine floor plan loans and other consumer loans. Loan originations totaled $1.58 billion in 2015 , consisting of commercial and retail production of $878.7 million and $705.7 million , respectively.

Real estate collateralized the majority of the Company’s secured loans as of December 31, 2015 , 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 $404.4 million and $136.7 million of residential mortgages into the secondary market in 2015 and 2014 , 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 57.7% of 2015 volume, a 58.0% increase compared to 2014 purchase volume.

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 Norfolk County, Massachusetts. In June 2015, the Company announced the opening of a loan production office in Barnstable County. 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 maintain 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. As a result, we expect mortgage banking will continue to contribute 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, ARM loans 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, 2015 represent 4% 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 2015 , the Bank’s ARM portfolio totaled $422.9 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, 2015 , the unadvanced amounts of home equity lines of credit totaled $320.1 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. In December 2015, the Company purchased a HELOC equity portfolio totaling $100.4 million and the balance outstanding at December 31, 2015 was $98.6 million. These loans are not serviced by the Company. The purchased HELOC portfolio is secured by second liens.

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, 2015 , the Company’s outstanding commercial loan portfolio totaled $603.3 million , or 13.1% , 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 $233.1 million , or 5.1% , of our total loan portfolio at December 31, 2015 . Our installment and collateral loans generally consist of loans on retail boats, HUD Title 1 loans, 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. During December 2015, the Company purchased two additional consumer loan portfolios consisting of marine retail loans and Title 1 home improvement loans. Total loans purchased were $229.2 million and $224.8 million was outstanding at December 31, 2015 . The marine retail loans are based on premium brands and the borrowers are financially strong. The Title 1 home improvement loans are 90% backed by the U.S. Department of Housing and Urban Development and consist of loans to install energy efficient upgrades to the borrowers’ one-to-four family residences.

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. The Company 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 the Chief Risk Officer and the Chief Credit Officer and the full report 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 2015 , the Company held derivative financial instruments with a total notional amount of $1.17 billion . 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. In 2015, the Bank introduced mobile check deposit services to customers with eligible accounts to allow for convenient and quick access to deposit checks directly into their accounts without visiting a branch. 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.

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 provides a central credit facility primarily for member institutions. As a 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 is using 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 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 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, financial intelligence, fraud 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 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 years ended December 31, 2015 , 2014 and 2013, United Northeast Financial Advisors, Inc. received fees of $1.8 million, $1.7 million and $1.0 million, respectively, 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., Inc. 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, 2015 , the Company had 697 full-time equivalent employees consisting of 651 full-time and 81 part-time employees. None of the employees were represented by a collective bargaining group.

The Company 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 16 and 17 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 FDIC, 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 (“FRB”). Any change in such regulations, whether by the Connecticut Banking Department, the FDIC or the FRB, could have a material adverse impact on the Bank or the Company.

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.

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 attorney generals the ability to enforce federal consumer protection laws.

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 expected that, at a minimum, the Dodd-Frank Act implications will continue to 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) across 17 risk-weighted categories ranging from 0% to 1250%, 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%, however, certain investment securities risk-weighted under the simplified supervisory formula approach can carry a risk weight up to 1250%.

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.

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 began for the Company on January 1, 2015, with full compliance with all of the final rules’ requirements phased in over a multi-year schedule. The Company’s capital levels 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, 2015 , 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. For the years ended December 31, 2015, 2014 and 2013 , the total FDIC assessments were $3.7 million , $2.6 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, 2015 and December 31, 2014 . For the year ended December 31, 2015, the Company purchased $19.2 million of FHLBB stock. The FHLBB did not repurchase excess capital stock from the Company during the year ended December 31, 2015 . The FHLBB repurchased $2.3 million of excess capital stock from the Company during 2014, 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. In March 2016, United Financial Bancorp, Inc. received approval from to the Federal Reserve Board of its intent to be deemed a financial holding company.

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. 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, 2015 , 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, 2015 , United Financial Bancorp, Inc. had net operating loss carryforwards of $1.8 million 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.

Currently, the Company is under examination with respect to its income tax return for the 2013 tax year.

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 2015 .

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, 2015 ; 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 is not currently under audit with respect to its state tax returns which 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 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 relatively stable, an economic slowdown, at the local and national level, is possible which could 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 could adversely affect the value of property used as collateral for our commercial and residential real estate loans. A stagnation in the economy coupled with a 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 were prolonged, it could result in decreased opportunities to make quality loans and our profits may decrease because our alternative investment opportunities may earn less income. The resultant 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 0.73% of total loans outstanding and 89.64% of non-performing loans at December 31, 2015 . 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. Our allowance for loan losses to total covered loans was 1.07% at December 31, 2015.

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.

Changes in interest rates could adversely affect our results of operations and financial condition

Our results of operations and financial condition could be significantly affected by changes in the level of interest rates and the steepness of the yield curve. Our financial results depend substantially on net interest income, which is the difference between the interest income that we earn on interest-earning assets and the interest expense we pay on interest-bearing liabilities. While we have modeled rising interest rate scenarios using historic data and such scenarios result in an increase in our net interest income, our interest-bearing liabilities may reprice or mature more quickly than modeled, thus resulting in a decrease in our net interest income. Further, a flatter yield curve than we modeled would also result in a decline net interest income.

Changes in interest rates also affect the value of our interest-earning assets and in particular our investment securities. Generally, the value of our investment securities fluctuates inversely with changes in interest rates. Decreases in the fair value of our investment securities, therefore, could have an adverse effect on our stockholders’ equity or our earnings if the decrease in fair value is deemed to be other than temporary.

Changes in interest rates may also affect the average life of our loans and mortgage related securities. Decreases in interest rates may cause an increase in prepayments of our loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. As prepayment speeds on mortgage related securities increase, the premium amortization increases prospectively, and additionally there would be an adjustment required under the application of the interest method of income recognition, and will therefore result in lower net interest income. Under these circumstances, we are also subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on our existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.

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 may 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 one new branch in 2015. 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 2016. Historically, we have experienced operational losses from fraud committed by third parties that obtain 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, 2015 , the Company had approximately $115.3 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, 2015 , 32.2% 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.

New lines of business or new products and services may subject us to additional risks.

United may, from time to time, implement new lines of business or offer new products and services within existing lines of business. There are risks and uncertainties associated with new lines of business or new products particularly in instances where

the markets are not fully developed. We may need to invest significant time and resources in developing and marketing new lines of business and/or new products and services. New lines of business and/or new products or services may not be implemented according to our initial schedule and price and profitability targets may not prove attainable. Other factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the implementation of new lines of business or development of new products or services could have a material adverse effect on our business, results of operations and financial condition.

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 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 gage 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 Volcker 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.

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, 2015 , the Company, headquartered in Glastonbury, Connecticut, conducted business throughout Connecticut and Massachusetts. The Company has 53 banking offices and 63 ATMs as well as seven loan production offices. Of the 53 banking offices 18 are owned and 35 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 2015, the Bank consolidated five locations, including four branches in Massachusetts and one branch in Connecticut; opened a mortgage loan production office in Wellesley, Massachusetts; opened a new full-service banking location on Main Street in Glastonbury, Connecticut. In January 2016, the Company leased an office in Baltimore, Maryland to house LH-Finance, a division of United Bank.

The aggregate net book value of premises and equipment was $54.8 million at December 31, 2015 .

For additional information regarding the Company’s Premises and Equipment, Net and Other Commitments and Contingencies, see Notes 8 and 21 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 29, 2016 , the intra-day high and low prices per share of common stock were $11.85 and $11.57, respectively.

The following table sets forth for each quarter of 2015 and 2014 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
2015:
First Quarter	$	14.47	$	12.00	$	0.10
Second Quarter	13.91		12.25		0.12
Third Quarter	13.87		12.14		0.12
Fourth Quarter	14.16		12.45		0.12
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

United had 7,400 holders of record of common stock and 49,969,878 shares outstanding on February 29, 2016 . The number of shareholders of record was determined by Broadridge Corporate Issuer Solutions, the Company’s transfer agent and registrar.

Dividends

The Company began paying quarterly dividends in 2006 on its common stock and paid its 39 ^th consecutive dividend on February 18, 2016. 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 declared a dividend in December 2015 of $30.9 million payable to the Company.

See the section captioned “Supervision and Regulation” in Item 1 of this report and Note 18, “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 the Company during the year ended December 31, 2015 .

Recent Sale of Unregistered Securities

No unregistered securities were sold by the Company during the year ended December 31, 2015 .

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The Company obtained approval for and initiated a third buyback plan on October 15, 2014. Under this plan, the Company was authorized to repurchase up to 2,566,283 shares, or 5% of the outstanding shares at the time the plan was approved and had a remaining authorization to purchase an additional 254,394 shares. On January 26, 2016, the Company’s Board of Directors approved a fourth share repurchase plan authorizing the Company to repurchase up to 2.5% of outstanding shares, or 1,248,536 shares. In connection with this authorization, the third share repurchase program was suspended and the remaining shares are no longer available for repurchase. There were no purchases of equity securities during the fourth quarter of 2015 made by or on behalf of the Company or any “affiliated purchaser”, as defined by Section 240.10b-18(a)(3) of the Securities and Exchange Act of 1934, of shares of the Company’s common stock.

Performance Graph:

The following graph compares the cumulative total return on the common stock for the period beginning December 31, 2010, through December 31, 2015 , 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, 2010 in our common stock. The graph assumes all dividends on UBNK stock, the S&P 500 Index and the KRX are reinvested.



	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015
S&P 500 Total Return Index	100.0	102.1	118.5	156.8	178.3	180.8
KRX Total Return Index	100.0	94.9	107.4	157.8	161.6	171.1
UBNK	100.0	131.8	171.1	194.2	202.2	187.8

Item 6 . Selected Financial Data

Selected financial data for each of the years in the five-year period ended December 31, 2015 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,
	2015		2014		2013		2012		2011
	(In thousands)
Selected Financial Condition Data:
Total assets	$	6,228,541	$	5,476,809	$	2,301,615	$	1,998,799	$	1,749,872
Available for sale securities	1,059,169		1,053,011		404,903		241,389		151,237
Held to maturity securities	14,565		15,368		13,830		6,084		9,506
Federal Home Loan Bank stock	51,196		31,950		15,053		15,867		17,007
Loans receivable, net	4,587,062		3,877,063		1,697,012		1,586,985		1,457,398
Cash and cash equivalents	95,176		86,952		45,235		35,315		40,985
Deposits	4,437,071		4,035,311		1,735,205		1,504,680		1,326,766
Advances from the Federal Home Loan Bank and other borrowings	1,099,020		777,314		240,228		143,106		65,882
Total stockholders’ equity	625,521		602,408		299,382		320,611		333,471
Allowance for loan losses	33,887		24,809		19,183		18,477		16,025
Non-performing loans(1)	37,802		32,358		13,654		16,056		12,610


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



	For the Years Ended December 31,
	2015		2014			2013		2012 (1)		2011
	(Dollars in thousands, except per share amounts)
Selected Operating Data:
Interest and dividend income	$	196,345	$	155,879		$	77,517	$	77,952	$	75,580
Interest expense	31,763		18,007			10,460		10,944		17,471
Net interest income	164,582		137,872			67,057		67,008		58,109
Provision for loan losses	13,005		9,496			2,046		3,587		3,021
Net interest income after provision for loan losses	151,577		128,376			65,011		63,421		55,088
Non-interest income	32,487		16,605			17,051		14,707		14,759
Non-interest expense (2)	128,195		144,432			62,466		55,696		59,016
Income before income taxes	55,869		549			19,596		22,432		10,831
Income tax expense (benefit)	6,229		(6,233		)	5,369		6,635		3,739
Net income	$	49,640	$	6,782		$	14,227	$	15,797	$	7,092
Earnings per share:
Basic	$	1.01	$	0.16		$	0.55	$	0.57	$	0.25
Diluted	$	1.00	$	0.16		$	0.54	$	0.56	$	0.25
Dividends per share	$	0.46	$	0.40		$	0.40	$	0.52	$	0.27


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


(2)	Included in non-interest expense for 2015, 2014 and 2013, was merger related expense of $1.6 million , $36.9 million and $2.1 million , respectively.



	At or For the Years Ended December 31,
	2015			2014			2013			2012			2011
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets	0.87		%	0.16		%	0.67		%	0.84		%	0.39		%
Return on average equity	8.08			1.28			4.67			4.83			2.30
Tax-equivalent net interest rate spread (1)	3.11			3.43			3.22			3.61			3.04
Tax-equivalent net interest margin (2)	3.23			3.54			3.37			3.81			3.40
Non-interest expense to average assets	2.25			3.37			2.93			2.94			3.28
Efficiency ratio (3)	60.11			91.01			74.27			68.16			80.99
Dividend payout ratio	46.28			265.51			73.47			91.00			99.13
Capital Ratios:
Capital to total assets at end of year	10.04			11.00			13.01			16.04			19.06
Average capital to average assets	10.79			12.37			14.28			17.30			17.12
Total capital to risk-weighted assets	12.53			14.57			17.68			21.86			25.43
Tier 1 capital to risk-weighted assets	10.33			12.02			16.58			20.64			24.26
Tier 1 capital to total average assets	8.87			9.10			13.47			16.51			19.51
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans	0.73			0.64			1.12			1.15			1.09
Allowance for loan losses as a percent of non-performing loans	89.64			76.67			140.50			115.08			127.08
Net charge-offs to average outstanding loans during the period	0.10			0.12			0.08			0.07			0.09
Non-performing loans as a percent of total loans	0.82			0.83			0.80			1.00			0.86
Non-performing assets as a percent of total assets	0.62			0.59			0.59			0.80			0.72
Other Data:
Book value per share	$	12.53		$	12.16		$	11.53		$	11.39		$	11.30
Tangible book value per share	$	10.07		$	9.65		$	11.49		$	11.35		$	11.26
Number of full service offices	52			53			19			18			18
Number of limited service offices	1			3			3			5			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)

The efficiency ratio represents the ratio of non-interest expense before other real estate owned expense, amortization of intangibles, and goodwill impairment, if any, as a percent of net interest income (fully taxable equivalent) and non-interest income, excluding gains from securities transactions, net loss on limited partnerships and other nonrecurring items. The ratio for 2015, 2014 and 2013 includes $1.6 million, $36.9 million and $2.1 million, respectively, in merger related 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

General

By assets, United Financial Bancorp, Inc. is the third largest publicly traded banking institution headquartered in Connecticut with consolidated assets of $6.23 billion and stockholders’ equity of $625.5 million at December 31, 2015 . 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 53 banking offices, its commercial loan and mortgage loan production offices, 63 ATMs, telephone banking, mobile banking and online banking ( www.bankatunited.com ).

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.

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) allocating capital to lending activities that are accretive to the Company’s return on assets and return on equity; continuing to acquire and support commercial clients through lending activities and cash management and deposit services which exhibit acceptable credit adjusted spreads; and growing our deposit base through acquisition of low cost deposits (2) increasing the non-interest income component of total revenues through development of banking-related fee income and the sale of investment products (3) continuing to improve operating efficiencies and maintain expense discipline and (4) developing products and services that expand our banking network through mobile and internet channels and making opportunistic whole or partial acquisitions of other banks, loans, 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 affected by merger related expenses. In the fourth quarter of 2015 the Company incurred $1.6 million in merger related expenses which pertained to the elimination of an executive position.

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.

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 2015 our tax-equivalent net interest margin decreased 31 basis points to 3.23% . This decrease was mostly due to lower yields in commercial portfolio from variable/floating rate originations. The Company continues to experience strong execution of interest rate swaps. The result of these loan-level hedges is that the Company originates more variable rate loans with lower yields; however, greater fee income is recognized at the time of the swap origination. Our operating net interest margin, excluding the effect of purchase accounting, declined 24 basis points in 2015 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 2015 is diminished and any improvement in the cost will be dependent on a more favorable deposit mix with more low cost demand deposit accounts.

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 2015. The Company 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 0.82% , total delinquencies to total loans was 0.89% and our allowance for loan losses to total loans was 0.73% at December 31, 2015 . Net loan charge-offs remained relatively flat at $3.9 million for the year ended December 31, 2015 . We expect to be able to continue to maintain strong asset

quality relative to industry levels. 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. 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, with full phase-in to be completed by January 1, 2019. The Company believes it will continue to exceed all expected well-capitalized regulatory requirements upon the complete phase-in 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’s primary growth will be organic but we may use acquisition to supplement organic growth. We anticipate this growth will expand our brand into new geographic markets as we implement our business model. During December 2015, the Company purchased three loan portfolios consisting of marine retail loans, home equity lines of credit and Title 1 home improvement loans. Gross loans purchased totaled $330.5 million, the outstanding balance at December 31, 2015 was $324.3 million.

These loans extend beyond our geographic footprint with quality borrowers that we would not be able to originate in our market area.

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, 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. The reserve for imprecision is an important part of the allowance and supports the loss that exists in emerging problem loans that cannot be fully quantified, and disposition costs that may be affected by conditions not fully understood at this time. The imprecision is needed to accommodate for multiple areas of exposure in the loan portfolio

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.At the time a loan becomes 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 7, “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

Goodwill represents the amount the Company paid as a result of acquisitions in excess of the related fair value of net assets acquired. 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 2015, 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, 2015 , was $115.3 million . For further discussion on goodwill see Note 4 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 no goodwill impairment was necessary for 2015 under Step 1 of the impairment analysis under accounting guidance for goodwill impairment and a Step 2 analysis was not considered necessary.

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,							2015-2014					2014-2013
	2015		2014			2013		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Net interest income	$	164,582	$	137,872		$	67,057	$	26,710		19.4	%	$	70,815		105.6	%
Provision for loan losses	13,005		9,496			2,046		3,509			37.0		7,450			364.1
Non-interest income	32,487		16,605			17,051		15,882			95.6		(446		)	(2.6	)
Non-interest expense	128,195		144,432			62,466		(16,237		)	(11.2	)	81,966			131.2
Income before income taxes	55,869		549			19,596		55,320			10,076.5		(19,047		)	(97.2	)
Income tax provision (benefit)	6,229		(6,233		)	5,369		12,462			(199.9	)	(11,602		)	(216.1	)
Net income	$	49,640	$	6,782		$	14,227	$	42,858		631.9		$	(7,445	)	(52.3	)
Diluted earnings per share	$	1.00	$	0.16		$	0.54	$	0.84		525.0	%	$	(0.38	)	(70.4	)%

Non-GAAP Financial Measures

The following is a reconciliation of Non-GAAP financial measures by major category for the years ended December 31, 2015 , 2014 , and 2013:



	For the Years Ended December 31,
	2015			2014			2013
	(In thousands)
Net income (GAAP)	$	49,640		$	6,782		$	14,227
Adjustments:
Net interest income
Accretion of loan mark	(7,570		)	(6,665		)	—
Accretion of deposit mark	3,209			3,908			—
Accretion of borrowings mark	1,874			1,624			—
Net adjustment to net interest income	(12,653		)	(12,197		)	—
Non-interest income
Net gain on sales of securities	(939		)	(1,228		)	(585		)
Loss on fixed assets-branch optimization	—			670			—
BOLI claim benefit	(219		)	—			—
Net adjustment to non-interest income	(1,158		)	(558		)	(585		)
Non-interest expense
Merger related expense	(1,575		)	(36,918		)	(2,141		)
Core deposit intangible amortization expense	(1,796		)	(1,283		)	—
Loan portfolio acquisition fees	(1,572		)	—			—
Amortization of fixed assets mark	(22		)	(16		)	—
Effect of position eliminations	—			—			(561		)
Effect of branch lease termination agreement	195			(1,888		)	(809		)
Net adjustment to non-interest expense	(4,770		)	(40,105		)	(3,511		)
Total adjustments	(9,041		)	27,350			2,926
Income tax expense (benefit) adjustment	3,609			(7,403		)	(853		)
Operating net income (Non-GAAP)	$	44,208		$	26,729		$	16,300

The following is a reconciliation of Non-GAAP financial measures for select average balances, interest income and expense, and average yields and cost for the years ended December 31, 2015 and 2014:



	For the Year Ended December 31, 2015
	GAAP						Mark to Market								Operating
	Average Balance		Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends			Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost
	(Dollars in Thousands)
Total loans	$	4,090,057	$	166,711	4.08	%	$	(11,571	)	$	7,570		0.20	%	$	4,101,628	$	159,141	3.88	%
Total interest-earning assets	5,278,157		202,262		3.83		(11,571		)	7,570			0.15		5,289,728		194,692		3.68
Certificates of deposit	1,577,739		13,940		0.88		3,674			(3,209		)	(0.21	)	1,574,065		17,149		1.09
Federal Home Loan Bank advances	664,665		4,749		0.71		4,472			(1,914		)	(0.30	)	660,193		6,663		1.01
Other borrowings	162,419		5,572		3.43		(1,796		)	40			0.07		164,215		5,532		3.36
Total interest-bearing liabilities	4,404,941		31,763		0.72		6,350			(5,082		)	(0.12	)	4,398,591		36,845		0.84

Tax-equivalent net interest margin					3.23														2.98



	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 2015 and 2014

For the year ended December 31, 2015 , the Company recorded earnings of $49.6 million , or $1.00 per diluted share compared to 2014 when the Company recorded $6.8 million in earnings or $0.16 per diluted share. 2015 was the first full year of operations for the Company and the impact of the Merger was significant due to an additional four months of activity. Additionally, as can be seen in the tables above, the Company (a) recorded $12.7 million in net accretion of fair value adjustments on interest-earning assets and interest-bearing liabilities, (b) incurred merger and acquisition expenses totaling $1.6 million primarily for a change in control payment related to an executive’s departure in the fourth quarter of 2015 and (c) recorded $1.8 million of expense for the amortization of the core deposit intangible.

The Company recorded strong organic loan growth during the year as well as participating in strategic loan portfolio purchases in the fourth quarter of 2015. Loan originations totaled $1.58 billion in 2015 compared to $1.09 billion in 2014. The loan portfolio purchases added $324.3 million of loans to the balance sheet as of December 31, 2015 and consisted of a specialty marine finance portfolio ($171.8 million) as well as two additional consumer portfolio purchases ($152.5 million) which supports the Company’s

efforts to geographically diversify and shift the composition of the loan portfolio into favorable consumer products with more favorable risk adjusted returns. The Company incurred $1.6 million in loan portfolio acquisition fees related to the loan portfolio purchases.

Excluding these non-GAAP measures, net income for the year ended December 31, 2015 would have been $44.2 million , an increase of $17.5 million , or 65.4% , compared to $26.7 million for the year ended December 31, 2014 . The increase consists of changes in net interest income, non-interest-income and non-interest-expense resulting from four additional months of activity in 2015 of the combined entity.

Net interest income increased primarily due to the increase in net average interest-earning assets of $1.30 billion , which primarily reflects organic loan growth and the loan portfolio purchases. The Company’s tax-equivalent net interest margin for the year ended December 31, 2015 was 3.23% , a decrease of 31 basis points over the prior year of 3.54% . Net interest income increased $26.7 million , or 19.4% compared to 2014. The increase in net interest income was primarily driven by an increase in the average balance of interest earning assets of $1.30 billion , offset by an increase in total interest bearing liabilities of $1.19 billion compared to 2014. Interest and dividend income increased by $43.6 million and the yield on interest earning assets decreased by 16 basis points mostly due to the decrease in yields on residential real estate, commercial real estate and construction loans due the current interest rate environment. These decreases were partially offset by increases in the yields commercial business loans and installment and collateral loans. Interest bearing liabilities increased to fund new loan growth and loan portfolio purchases. The cost of interest bearing liabilities increased $13.8 million and the yield increased 16 basis points. Our operating basis net interest margin, which excludes the effect of fair value adjustments of $12.7 million , was 2.98% , a 24 basis point decline from the year ended December 31, 2014 . 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 and the purchased portfolios. 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 0.73% and 0.64% , the allowance for loan losses to non-performing loans ratio was 89.64% and 76.67% , and the ratio of non-performing loans to total loans was 0.82% and 0.83% at December 31, 2015 and December 31, 2014 , respectively. A provision for loan losses of $13.0 million was recorded for 2015 compared to $9.5 million for year ended December 31, 2014 . The Bank continues to ensure consistent application of risk ratings across the entire portfolio. We believe asset quality for the Company remains strong and stable.

The Company experienced an increase in non-interest income of $15.9 million for the year ended December 31, 2015 , compared to 2014 . This increase is driven primarily by increases in service charges and fees, predominantly loan swap fee income and debit card fees. In addition, income from mortgage banking activities increased, which was driven primarily from increases on the gain on sale of loans as well as an increase in fair value recognized in net income for mortgage servicing rights.

For the year ended December 31, 2015 , non-interest expense decreased $16.2 million over the comparative period in 2014 . This decrease is primarily related to a decrease of $35.3 million in merger related expenses as compared to the prior 2014 period. The decrease was offset by increases in salaries and employee benefits, other expenses and professional fees reflecting higher operating costs due to our increased size as a result of the Merger.

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.

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 $5.9 million , $2.8 million , and $993,000 were made for years ended December 31, 2015, 2014 and 2013 , 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.



	For the Years Ended December 31,
	2015							2014							2013
	Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Interest-earning assets:
Residential real estate loans	$	1,508,370		$	50,859	3.37	%	$	1,134,890		$	39,537	3.48	%	$	652,220		$	24,646	3.78	%
Commercial real estate loans	1,776,407			77,710		4.37		1,365,059			65,044		4.76		724,089			33,337		4.60
Construction loans	172,257			7,942		4.61		106,291			7,469		7.03		48,531			1,773		3.65
Commercial loans	610,424			29,093		4.77		492,035			20,549		4.18		197,499			7,867		3.98
Installment and collateral loans	22,599			1,107		4.90		10,147			412		4.06		2,581			129		5.01
Investment securities	1,127,144			35,370		3.14		833,402			25,607		3.07		363,849			10,678		2.93
Other interest-earning assets	60,956			181		0.30		35,842			86		0.24		30,143			80		0.27
Total interest-earning assets	5,278,157			202,262		3.83		3,977,666			158,704		3.99		2,018,912			78,510		3.89
Allowance for loan losses	(28,483		)					(21,192		)					(18,664		)
Non-interest-earning assets	444,518							329,652							133,409
Total assets	$	5,694,192						$	4,286,126						$	2,133,657

Interest-bearing liabilities:
NOW and money market accounts	$	1,470,459		7,183		0.49		$	1,109,625		3,293		0.30		$	596,580		1,772		0.30
Savings accounts(1)	529,659			319		0.06		418,091			437		0.10		225,379			142		0.06
Time deposits	1,577,739			13,940		0.88		1,218,782			9,829		0.81		541,148			6,078		1.12
Total interest-bearing deposits	3,577,857			21,442		0.60		2,746,498			13,559		0.49		1,363,107			7,992		0.59
Advances from the FHLBB	664,665			4,749		0.71		344,218			2,326		0.68		179,637			2,387		1.33
Other borrowings	162,419			5,572		3.43		127,381			2,122		1.67		17,842			81		0.45
Total interest-bearing liabilities	4,404,941			31,763		0.72		3,218,097			18,007		0.56		1,560,586			10,460		0.67
Non-interest-bearing deposits	605,112							503,398							238,803
Other liabilities	69,646							34,482							29,681
Total liabilities	5,079,699							3,755,977							1,829,070
Stockholders’ equity	614,493							530,149							304,587
Total liabilities and stockholders’equity	$	5,694,192						$	4,286,126						$	2,133,657
Tax-equivalent net interest income				170,499							140,697							68,050
Tax-equivalent net interest rate spread(2)						3.11	%						3.43	%						3.22	%
Net interest-earning assets(3)	$	873,216						$	759,569						$	458,326
Tax-equivalent net interest margin(4)						3.23	%						3.54	%						3.37	%
Average interest -earning assets to average interest-bearing liabilities	119.82		%					123.60		%					129.37		%
Less tax-equivalent adjustment				5,917							2,825							993
				$	164,582						$	137,872						$	67,057


(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 2015 Compared to 2014								Year Ended 2014 Compared to 2013
	Increase (Decrease) Due To								Increase (Decrease) Due To
	Volume		Rate			Net			Volume		Rate			Net
	(In thousands)
Interest and dividend income:
Loans receivable	$	40,557	$	(6,857	)	$	33,700		$	63,255	$	2,004		$	65,259
Securities and other earning assets	9,278		580			9,858			14,407		528			14,935
Total earning assets	49,835		(6,277		)	43,558			77,662		2,532			80,194
Interest expense:
NOW and money market accounts	1,302		2,588			3,890			1,523		(2		)	1,521
Savings accounts	98		(216		)	(118		)	167		128			295
Time deposits	3,104		1,007			4,111			5,859		(2,108		)	3,751
Total interest-bearing deposits	4,504		3,379			7,883			7,549		(1,982		)	5,567
FHLBB Advances	2,282		141			2,423			1,487		(1,548		)	(61		)
Other borrowed funds	711		2,739			3,450			1,422		619			2,041
Total interest-bearing liabilities	7,497		6,259			13,756			10,458		(2,911		)	7,547
Change in tax-equivalent net interest income	$	42,338	$	(12,536	)	$	29,802		$	67,204	$	5,443		$	72,647

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 organic growth in interest-earning assets and liabilities as well as from the Merger. The Merger impacted 2015, the first full year for the combined entity, by having four additional months of activity as compared to 2014.

Comparison of 2015 and 2014

As shown in the tables above, tax-equivalent net interest income increased $29.8 million for the year ended December 31, 2015 compared to the year ended December 31, 2014 . Additionally, the net interest margin decreased 31 basis points to 3.23% , the yield on average earning assets decreased 16 basis points to 3.83% , and the cost of interest-bearing liabilities increased 16 basis points to 0.72% , compared to 0.56% for the year ended December 31, 2014 . This was mainly due to the significant increase in average earning assets and the benefit 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 $12.7 million , the net interest margin and the yield on average earning assets would have declined 24 basis points and 13 basis points, respectively, and the cost of interest-bearing liabilities would have increased 11 basis points for the year ended December 31, 2015 compared to the year ended December 31, 2014 .

Primarily reflecting loan growth, portfolio purchases and the merger, average earning assets increased $1.30 billion and average interest-bearing liabilities increased $1.19 billion for the year ended December 31, 2015 , compared to the year ended December 31, 2014 . Average interest bearing liabilities increased due to deposit growth and borrowings which were used to fund the loan growth and purchases. The average balance of loans and investment securities increased $981.6 million and $293.7 million , respectively, while the average balance of interest-bearing deposits increased $831.4 million .

The increase in the average balance of loans primarily reflects the loan growth. The average balance of total loans at December 31, 2015 was $4.09 billion and had an average yield of 4.08% . On an operating basis, the average yield on total loans was 3.88% for the year ended December 31, 2015 . The average balance of commercial real estate loans totaled $1.78 billion at December 31, 2015 , an increase of $411.3 million year over year. Primarily reflecting the loan portfolio purchases, residential real estate loans, construction loans, commercial business loans and installment and collateral loans were the other significant drivers of the increase in the average loan balance year over year, which increased $373.5 million , $118.4 million and $12.5 million , respectively.

The average balance of investment securities increased $293.7 million for the year ended December 31, 2015 compared to the year ended December 31, 2014 , while the average yield earned increased seven basis points. The majority of this increase resulted from new volume investments to keep the portfolio in line with targeted percentage of assets, coupled with the reinvestment of runoff cash flows of the portfolio.

The average balance of interest-bearing liabilities increased $1.19 billion to $4.40 billion for the year ended December 31, 2015 , compared to $3.22 billion at December 31, 2014 . For the year ended December 31, 2015 , the average cost of total interest-bearing liabilities was 0.72% , compared to 0.56% at December 31, 2014 . On an operating basis, which excludes the benefit of fair value adjustments, the average cost would have increased to 0.84% .

Year over year, average balances of total interest-bearing deposits increased $831.4 million and the average cost increased 11 basis points to 0.60% . FHLBB advances increased $320.4 million to $664.7 million , while the average cost increased three basis points to 0.71% for the year ended December 31, 2015 . Other borrowings increased $35.0 million and the cost increased 176 basis points for the year ended December 31, 2015 compared to 2014. These increases were primarily due to deposit growth in all categories. The increase in FHLBB advances was due to funding new loan growth and the increase in 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 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%.

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 $ 13.0 million for the year ended December 31, 2015 . 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 $56.3 million at December 31, 2015 compared to $44.0 million at December 31, 2014 , an increase of $12.3 million or 27.9% , reflecting increases in nonaccrual loans of $5.4 million and troubled debt restructured loans of $6.9 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, 2015 , the allowance for loan losses totaled $33.9 million , which represented 0.73% of total loans and 89.64% of non-performing loans compared to an allowance for loan losses of $24.8 million , which represented 0.64% of total loans and 76.67% of non-performing loans as of December 31, 2014 . The increase in these ratios directly resulted due to the movement of loans from the acquired portfolio to the covered portfolio.

Non-Interest Income Analysis

For the years ended December 31, 2015, 2014 and 2013 , non-interest income represented 16.5% , 10.8% and 20.3% 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,									2015-2014					2014-2013
	2015			2014			2013			Amount			Percent		Amount			Percent
	(Dollars in thousands)
Service charges and fees	$	21,040		$	13,509		$	7,250		$	7,531		55.7	%	$	6,259		86.3	%
Net gain from sales of securities	939			1,228			585			(289		)	(23.5	)	643			109.9
Income from mortgage banking activities	9,552			3,203			7,203			6,349			198.2		(4,000		)	(55.5	)
Bank owned life insurance income	3,616			3,042			2,092			574			18.9		950			45.4
Net loss on limited partnership investments	(3,136		)	(4,224		)	—			1,088			25.8		(4,224		)	—
Other income (loss)	476			(153		)	(79		)	629			411.1		(74		)	(93.7	)
Total non-interest income	$	32,487		$	16,605		$	17,051		$	15,882		95.6	%	$	(446	)	(2.6	)%

Comparison of 2015 and 2014

As displayed in the above table, non-interest income increased $15.9 million for the year ended December 31, 2015 as compared to the year ended December 31, 2014. The changes from the prior year period are mainly due to increases in service charge fees and income from mortgage banking activities.

Service Charges and Fees : Service charges and fees were $21.0 million and $13.5 million for the year ended December 31, 2015 and 2014 , respectively, an increase of $7.5 million from the comparable 2014 period. The most significant increases were recorded in loan swap fee income, account analysis fees, as well as debit card and ATM fees. These increases were a direct result of greater transactional volume. The loan swap fee income is generated as part of 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, 2015 , the Company realized a gain of $939,000 compared to a gain of $1.2 million in the prior year resulting from (a) the Company repositioning certain securities as these securities became punitive to capital to hold on a go-forward basis due to the regulatory changes, (b) sales on certain 15 year pass through mortgage-backed securities due to a change in the yield curve, (c) sales of municipal bonds that were expected to be called and (d) the result of odd lot clean-ups targeted at making the portfolio more efficient to manage from an operational perspective.

Income From Mortgage Banking Activities : Income from mortgage banking activities was $9.6 million for the year ended December 31, 2015 , an increase of $6.3 million , or 198.2% , from the year ended 2014 . This increase was driven primarily by (a) an increase in gains on sales of loans as the Company continued to record strong residential mortgage origination volume during the year, (b) the change in the fair value recognized in net income for mortgage servicing rights, and (c) increased loan servicing income resulting from increases in loan sales to the secondary market with servicing retained. These increases were partially offset by the net decrease in derivative rate lock commitments and forward loan sale contracts.

Bank Owned Life Insurance Income : BOLI income was $3.6 million for the year ended December 31, 2015, an increase of $574,000 , or 18.9% , from the year ended 2014. This increase is driven by gains from death benefits recorded in the fourth quarter of 2015 of $219,000, and the Merger as the Company recorded four more months of income of $479,000 from policies associated with Legacy United compared to the prior year period. These increases were partially offset by a decline in the average yield earned on BOLI policies as a result of current market interest rates.

Net Loss on Limited Partnership Investments : In conjunction with the 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 and March 2015, the Company invested in alternative energy tax credit partnerships, which 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, 2015 , the Company recorded $3.1 million in losses on limited partnership investments, approximately $1.5 million of which is related to tax credit partnerships for alternative energy, and $1.6 million of which is related to acquired investments in other partnerships. In conjunction with the loss realized on the tax credit partnerships, the Company recorded an offsetting benefit of $8.4 million as reflected in the tax provision for the year.

Other Income (Loss): The Company recorded an increase in other income of $629,000 for the year ended 2015 compared to the prior year. This increase year over year is primarily due to lower losses incurred on the sale and write-down of fixed assets

related to branch closures, as well as the increase in the credit value adjustments on borrower facing loan level hedges. These increases were partially offset by lower gains on the sale of other real estate owned.

Comparison of 2014 and 2013

Service Charges and Fees : Service charges and fees were $13.5 million and $7.3 million for the year ended December 31, 2014 and 2013, respectively, an increase of $6.2 million from the comparable 2013 period and was directly related to the Merger. Categories that experienced the most significant increases were recorded in fee income produced by the Company’s investment advisory subsidiary, United Northeast Financial Advisors, Inc. and 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.

Income From Mortgage Banking Activities : Income from mortgage banking activities was $3.2 million for the year ended December 31, 2014, a decrease of $4.0 million, or 55.5%, from the year ended 2013. Categories that experienced the most significant decreases were recorded in both mortgage servicing rights due to the change in the fair value recognized during the year, and net gain on sale of loans due to a shift in the Company’s strategy, whereby the Company retained loans yielding a higher contribution margin in the portfolio versus a sell return augmented by lower loan sales volumes. 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. The overall decrease in income from mortgage banking activities was partially offset by an increase in loan servicing income resulting from increases in loan sales to the secondary market over the past year with servicing retained, as well as gains on derivative loan commitments.

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 $74,000 for the year ended 2014 compared to the prior year. The decrease in 2014 compared to 2013 is primarily due to the loss on the sale and write-down 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 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.

Non-Interest Expense Analysis

For the years ended December 31, 2015, 2014 and 2013 , non-interest expense represented 2.25%, 3.37% and 2.93% 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,						2015-2014					2014-2013
	2015		2014		2013		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	67,469	$	59,332	$	36,428	$	8,137		13.7	%	$	22,904		62.9	%
Occupancy and equipment	15,442		13,239		6,679		2,203			16.6		6,560			98.2
Service bureau fees	6,728		8,179		3,287		(1,451		)	(17.7	)	4,892			148.8
Professional fees	6,317		3,662		2,377		2,655			72.5		1,285			54.1
Marketing and promotions	2,321		2,296		476		25			1.1		1,820			382.4
FDIC insurance assessments	3,692		2,553		1,172		1,139			44.6		1,381			117.8
Other real estate owned	237		792		874		(555		)	(70.1	)	(82		)	(9.4	)
Core deposit intangible amortization	1,796		1,283		—		513			40.0		1,283			—
Merger related expense	1,575		36,918		2,141		(35,343		)	(95.7	)	34,777			1,624.3
Other	22,618		16,178		9,032		6,440			39.8		7,146			79.1
Total non-interest expense	$	128,195	$	144,432	$	62,466	$	(16,237	)	(11.2	)%	$	81,966		131.2	%

Comparison of 2015 and 2014

For the year ended December 31, 2015 , non-interest expense decreased $16.2 million to $128.2 million from $ 144.4 million for the year ended December 31, 2014 .

The Company experienced increases in all categories year over year except for service bureau fees, other real estate owned, and merger related expenses. The largest increases were recorded in salaries and employee benefits, professional fees, and other expenses. All of the categories that increased from the prior period were related to the Merger as 2015 consisted of 12 months of the combined entity versus only eight months in 2014.

Salaries and Employee Benefits : Salaries and employee benefits represented the largest increase in non-interest expense. Salaries and employee benefits was $67.5 million for the year ended December 31, 2015 , an increase of $8.1 million from the comparable 2014 period. Salary expense was the primary reason for this increase as the additional employees from Legacy United that were added to the payroll upon completion of the Merger were captured for a full year rather than eight months. Other factors driving the increase included (a) new hires that were part of the restructured management team, enhanced and new business line teams, as well as the addition of new revenue producing commission-based mortgage loan officers and commercial loan officers, (b) higher payroll taxes related to the additional employees hired subsequent to the Merger, (c) increased employee incentives on product sales, (d) increased pension expenses, and (e) increased health care costs related to the Company’s self insurance plan. These increases were partially offset by (a) decreases in various other employee benefit expenses and b) increases in deferred expenses from originating loans, the average cost of which increases based on a cost study analysis, and an increase in originations.

Occupancy and Equipment Expense : Occupancy and equipment expense increased $ 2.2 million resulting from a larger branch network in 2015 as compared to 2014. The Company added over 30 branches to our branch network with the Merger. The major increases were in maintenance and repairs, depreciation, and personal property and real estate taxes due to the expanded network. These increases were partially offset by a decrease in expense related to the closure of five non-strategic branches that were accrued for in 2014.

Service Bureau Fees : Service bureau fees decreased $ 1.5 million for the year ended December 31, 2015 compared to the 2014 period. The decrease is primarily attributable to the Merger as the Company was operating under two platforms until system conversion date in October 2014. This decrease was partially offset by an increase in expenses associated with the deployment of EMV compliant debit and credit cards, which are more costly than the previous magnetic strip cards. It is anticipated that EMV cards will assist in mitigating potential fraud expenses.

Professional Fees : Professional fees were $ 6.3 million and $ 3.7 million for the years ended December 31, 2015 and 2014 , respectively. The increase as compared to the prior year period is mainly driven by consulting contracts associated with the acquisition of the purchased loan portfolios in the fourth quarter of 2015, as well as various engagements related to internal technology projects to improve efficiencies and operating leverage.

FDIC Insurance Assessments : The expense for FDIC insurance assessments increased $1.1 million to $3.7 million at December 31, 2015 from $2.6 million at December 31, 2014 . This increase is primarily attributable to the Company’s higher assessment base, which increased approximately $496.0 million, and to a lesser extent an increase in the assessment rate.

Core Deposit Intangible Amortization : The $513,000 increase in core deposit intangible amortization for the year ended December 31, 2015 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 Related Expense : Expenses related to the merger of the Company with Legacy United totaled $ 1.6 million for the year ended December 31, 2015 , compared to $ 36.9 million for the year ended December 31, 2014, a decrease of $35.3 million . Merger related expenses for 2015 were primarily the result of a change in control payment and associated expenses for an executive’s departure in the fourth quarter. No merger related expenses were recorded in the first three quarters of 2015.

Other Expenses : Other expense was $ 22.6 million and $ 16.2 million for the years ended December 31, 2015 and 2014 , respectively, an increase of $ 6.4 million . The increase is primarily due to increased transactions resulting from the Merger which impacted several accounts in this category including: (a) postage; (b) software maintenance expense; (c) telephone expense; (d) collection expense; and (e) debit card and ATM losses. Loan swap fees also contributed to the increase, as the Company entered into more of these types of agreements in 2015 as compared to the prior period. These increases were partially offset by a decrease in website expenses.

Income Tax Expense (Benefit) : The provision for income taxes was $ 6.2 million for the year ended December 31, 2015 , compared to a benefit of $ 6.2 million for the year ended December 31, 2014 . The increase in the tax expense is primarily due to the lower pre-tax income from the year in 2014 due to the Merger.

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 billion 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.

Financial Condition, Liquidity and Capital Resources

Summary

The Company had total assets of $ 6.23 billion and $ 5.48 billion at December 31, 2015 and 2014 , respectively. This increase of $751.7 million , or 13.7% , is primarily due to organic loan growth and loan portfolio purchases. The Company utilized deposits, including brokered deposits and additional advances from the FHLBB to fund this growth.

Total net loans of $ 4.59 billion , with an allowance for loan losses of $ 33.9 million at December 31, 2015 , increased $710.0 million when compared to total net loans of $ 3.88 billion , with an allowance for loan losses of $ 24.8 million at December 31, 2014 . While the Company experienced organic loan growth, the increase in the balance of loans primarily reflects the newly acquired loan portfolios. Total deposits of $ 4.44 billion at December 31, 2015 increased $401.8 million , or 10.0% , when compared to total deposits of $ 4.04 billion at December 31, 2014 . Non-interest-bearing deposits increased $69.6 million , or 11.6% , and interest-bearing deposits increased $332.1 million , or 9.7% , during the period. The increase in deposits is mainly due to growth in money market deposits and certificates of deposit and is reflective of the Company’s new product specials, the opening of new branches, and a continued focus on building commercial relationships. The Company’s net loan-to-deposit ratio was 103.4% at December 31, 2015 , compared to 96.1% at December 31, 2014 .

At December 31, 2015 , total equity of $ 625.5 million , increased $23.1 million , or 3.8% , when compared to total equity of $ 602.4 million for the same period in 2014. Changes in equity for the year ended December 31, 2015 consisted primarily of year to date net income offset by dividends paid to common shareholders, as well as decreases due to the change in market value on investment securities year over year. At December 31, 2015 , the return on average tangible common equity ratio was 10.4% compared to 1.7% at December 31, 2014 . See Note 18, “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,
	2015				2014				2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Available for Sale:
U.S. Government and government-sponsored enterprise obligations	$	10,159	$	10,089	$	6,965	$	6,822	$	6,801	$	6,031
Government-sponsored residential mortgage-backed securities	146,434		145,861		165,199		167,419		96,708		95,662
Government-sponsored residential collateralized mortgage obligations	287,515		286,967		237,128		238,133		69,568		67,751
Government-sponsored commercial mortgage-backed securities	21,144		20,965		67,470		68,298		13,841		12,898
Government-sponsored commercial collateralized debt obligations	128,617		128,972		129,547		129,686		5,043		4,706
Asset-backed securities	162,895		159,901		181,198		178,755		107,699		106,536
Corporate debt securities	62,356		59,960		43,907		42,245		43,586		42,486
Obligations of states and political subdivisions	201,217		201,115		194,857		195,772		67,142		62,505
Marketable preferred and equity securities	44,653		45,339		25,709		25,881		6,101		6,328
Total available for sale	$	1,064,990	$	1,059,169	$	1,051,980	$	1,053,011	$	416,489	$	404,903

Held to Maturity:
Government-sponsored residential mortgage-backed securities	$	2,205	$	2,449	$	2,971	$	3,310	$	3,743	$	4,107
Obligations of states and political subdivisions	12,360		13,234		12,397		13,403		10,087		10,153
Total held to maturity securities	$	14,565	$	15,683	$	15,368	$	16,713	$	13,830	$	14,260

The Company’s securities portfolio totaled $1.07 billion at both December 31, 2015 and December 31, 2014 . On a tax-equivalent basis, the yield in the securities portfolio for the years ended December 31, 2015 and 2014 was 3.14% and 3.07% , 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, 2015 , $1.06 billion , or 98.6% of the portfolio, was classified as available for sale and $14.6 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 both credit and interest rate risk. Securities available for sale are carried at fair value. Additional information about fair value measurements can be found in Notes 6, “Securities” and 15, “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 2015 , 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 short term rates and falling long term rates relative to purely longer duration investments. The Company also continued to focus on portfolio diversification through the purchase of shorter duration investments such as floating rate collateralized loan obligations, short term corporate bonds and preferred stocks, and shorter duration agency collateralized mortgage obligations. 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. Overall, in order to balance the portfolio’s price risk with favorable cash flow characteristics, the Company continues to evaluate short duration securities that help protect against price risk and extension risk, while providing more consistent cash flows.

During the year ended December 31, 2015 , the available for sale securities portfolio increased by $6.2 million to $1.06 billion , representing 17.0% of total assets at year end 2015 , from $1.05 billion and 19.2% of total assets at December 31, 2014 . The increase is largely reflective of continued maintenance of the barbell management strategy, with bond purchases focused on opportunities to shorten the investment portfolio duration and add diversification to the portfolio holdings while maintaining overall composition. Portfolio activity during the year included municipal bond repositioning in order to add call date diversity, the sale of securities that had a less than optimal risk rating, repositioning within the corporate bond portfolio for which spread tightening had occurred on several existing holdings, and the purchases of cash flowing agency collateralized mortgage backed obligations and pass throughs. The Company limits purchases in the municipal bonds, collateralized loan obligations and corporate 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. Incremental portfolio growth for the year primarily focused on the purchase of cash flowing securities inclusive of fixed rate Agency Mortgage Backed Securities structured along the yield curve, and to a lesser extent, on municipal bonds and corporates.

During the year ended December 31, 2015 , the Company recorded no write-downs for other-than-temporary impairments of its securities. The Company held $645.0 million in securities that are in an unrealized loss position at December 31, 2015 . $520.8 million of this total had been in an unrealized loss position for less than twelve months with the remaining $124.2 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 impairment charges for other-than-temporary impairment in future periods. For additional information on the securities portfolio, see Note 6, “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 exposures 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, 2015 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
	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
	(Dollars in thousands)
December 31, 2015
Available for Sale
Debt Securities:
U.S . Government and government-sponsored enterprise obligations	$	—	—	%	$	—	—	%	$	4,867	2.22	%	$	5,222	2.31	%	$	10,089	2.27	%
Government-sponsored residential mortgage-backed securities	—		—		6		2.43		19,292		2.21		126,563		2.45		145,861		2.42
Government-sponsored residential collateralized debt obligations	—		—		—		—		—		—		286,967		2.33		286,967		2.33
Government-sponsored commercial mortgage-backed securities	—		—		3,472		2.39		16,207		2.16		1,286		6.90		20,965		2.49
Government-sponsored commercial collateralized debt obligations	—		—		—		—		5,013		2.38		123,959		2.55		128,972		2.54
Asset-backed securities	—		—		—		—		75,302		3.27		84,599		3.18		159,901		3.22
Corporate debt securities	225		1.75		8,050		4.92		48,280		3.11		3,405		2.44		59,960		3.31
Obligations for state and political subdivisions	304		2.80		1,140		2.36		11,930		2.30		187,741		3.83		201,115		3.73
Total debt securities	$	529	2.36	%	$	12,668	4.00	%	$	180,891	2.90	%	$	819,742	2.82	%	$	1,013,830	2.85	%
Held to Maturity
Debt securities:
Government-sponsored residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	423	4.31	%	$	2,026	4.82	%	$	2,449	4.73	%
Obligations of states and political subdivisions	—		—		1,202		2.39		—		—		12,032		4.15		13,234		3.99
Total debt securities	$	—	—	%	$	1,202	2.39	%	$	423	4.31	%	$	14,058	4.24	%	$	15,683	4.10	%

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 14, “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”)

BOLI was $125.1 million and $122.6 million at December 31, 2015 and 2014 , respectively. The increase is predominantly attributable to earnings. 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 “A-” or better by at least one nationally recognized statistical rating organization (“NRSRO”) at December 31,

2015 with the exception of one carrier that is rated sub-investment grade, representing 0.22% of the BOLI asset and 0.05% of Tier 1 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 and purchases 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.

Loan Portfolio Analysis

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



	At December 31,
	2015					2014					2013					2012					2011
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Real estate loans:
Residential	$	1,611,197		34.9	%	$	1,413,739		36.3	%	$	634,447		37.0	%	$	683,195		42.6	%	$	680,702		46.2	%
Commercial	1,995,332			43.2		1,678,936			43.1		776,913			45.3		697,133			43.4		593,867			40.3
Construction	171,006			3.7		185,843			4.8		52,243			3.1		49,980			3.1		50,654			3.4
Commercial Business	603,332			13.1		613,596			15.7		247,932			14.5		171,632			10.7		143,475			9.8
Installment and collateral	233,064			5.1		5,752			0.1		2,257			0.1		2,751			0.2		4,231			0.3
Total loans	4,613,931			100.0	%	3,897,866			100.0	%	1,713,792			100.0	%	1,604,691			100.0	%	1,472,929			100.0	%
Net deferred loan costs and premiums	7,018					4,006					2,403					771					494
Allowance for loan losses	(33,887		)			(24,809		)			(19,183		)			(18,477		)			(16,025		)
Loans, net	$	4,587,062				$	3,877,063				$	1,697,012				$	1,586,985				$	1,457,398

As shown above, gross loans were $4.61 billion , an increase $716.1 million , or 18.4% , at December 31, 2015 from December 31, 2014 . The Company experienced increases in most major loan categories due to organic loan growth and the loan portfolio purchases late in December 2015.

Residential real estate loans continue to represent a significant segment of the Company’s loan portfolio as of December 31, 2015 , comprising 34.9% of total loans. The increase of $197.5 million from December 31, 2014 primarily reflects organic growth and the purchased portfolio. The Company had significant originations of both adjustable and fixed rate mortgages of $705.7 million during the year, and sold loans totaling $404.4 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 and competitive pricing.

Commercial real estate loans (“CRE”) increased $316.4 million from December 31, 2014 , as the Company has experienced increased demand for CRE loans given the expansion of the commercial banking division and the current rate environment. CRE 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 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, 2015 , regional CRE totaled approximately $561.1 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 $171.0 million at December 31, 2015 , a decrease of $14.8 million from December 31, 2014 . 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 $41.1 million at December 31, 2015 compared to $13.2 million at December 31, 2014 .

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 $129.9 million at

December 31, 2015 , of which $44.5 million is residential use and $85.4 million is commercial use, compared to total commercial real estate construction loans of $172.6 million at December 31, 2014 .

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, 2015 , the Company had fourteen non-performing commercial construction loans totaling $2.8 million , 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. Commercial business loans decreased $10.3 million from December 31, 2014 , primarily due to the successful completion and retirement of a significant project finance transaction in the third quarter of 2015, and the exit from certain sub-optimally underwritten loans in the purchased portfolio. Commercial business loans include the Shared National Credit program (“SNC”). The SNC 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, 2015 , the SNC portfolio totaled approximately $173.6 million.

Loan Maturity Schedule

The following table sets forth the loan maturity schedule at December 31, 2015 :



	Loans Maturing
	Within One Year		After One But Within Five Years		After Five Years		Total
	(In thousands)
Real estate loans:
Residential	$	28,518	$	64,980	$	1,517,699	$	1,611,197
Commercial	84,515		632,407		1,278,410		1,995,332
Construction	33,706		35,805		101,495		171,006
Commercial business loans	58,581		206,051		338,700		603,332
Installment and collateral loans	7,244		9,021		216,799		233,064
Total	$	212,564	$	948,264	$	3,453,103	$	4,613,931

Loans Contractually Due Subsequent to December 31, 2016

The following table sets forth the scheduled repayments of fixed and adjustable rate loans at December 31, 2015 that are contractually due after December 31, 2016 :



	Due After December 31, 2016
	Fixed		Adjustable		Total
	(In thousands)
Real estate loans:
Residential	$	786,860	$	795,819	$	1,582,679
Commercial	871,972		1,038,845		1,910,817
Construction	48,355		88,945		137,300
Commercial business loans	56,552		488,199		544,751
Installment and collateral loans	213,271		12,549		225,820
Total	$	1,977,010	$	2,424,357	$	4,401,367

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 7, “Loans Receivable and Allowance for Loan Losses” contained elsewhere in this report for further information concerning the Allowance for Loan Losses.

Asset Quality Ratios

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



	At December 31, 2015		At December 31, 2014
Non-performing loans as a percentage of total loans	0.82	%	0.83	%
Non-performing assets as a percentage of total assets	0.62	%	0.63	%
Net charge-offs as a percentage of average loans	0.10	%	0.12	%
Allowance for loan losses as a percentage of total loans	0.73	%	0.64	%
Allowance for loan losses to non-performing loans	89.64	%	76.67	%

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 in a troubled debt restructuring, 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 December 31, 2015 , loans totaling $307,000 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:



	At December 31, 2015					At December 31, 2014
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Non-accrual loans:
Real estate loans:
Residential	$	13,979		36.3	%	$	12,018		34.7	%
Commercial	11,504			29.8		10,663			30.8
Construction	2,808			7.3		611			1.8
Commercial business loans	3,898			10.1		4,872			14.1
Installment and collateral	2			—		25			0.1
Total non-accrual loans excluding TDRs	32,191			83.5		28,189			81.5
Troubled debt restructurings - non-accruing	5,611			14.6		4,169			12.1
Total non-performing loans	37,802			98.1		32,358			93.6
Other real estate owned	755			1.9		2,239			6.4
Total non-performing assets	$	38,557		100.0	%	$	34,597		100.0	%
Total non-performing loans to total loans	0.82		%			0.83		%
Total non-performing assets to total assets	0.62		%			0.63		%

As displayed in the above table, non-performing assets at December 31, 2015 increased to $ 38.6 million compared to $ 34.6 million at December 31, 2014 . The increase primarily reflects an increase in residential, construction and commercial real estate loans and increases in nonaccrual 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 $5.1 million due to increases in both nonaccrual loans of $2.0 million and nonaccrual TDRs of $1.6 million. 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. Current economic conditions continue to have an effect on customers’ ability to make loan payments. Residential nonaccrual loans at December 31, 2015, comprised of 215 loans with a balance of $14.0 million compared to 113 loans $12.0 million for the same period in 2014. 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 Company

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.

Commercial real estate non accrual loans increased $841,000 and commercial business non-performing loans decreased $974,000. 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. Non-accrual construction loans increased $2.2 million compared to $611,000 mainly due to a Legacy United participation construction loan which amounted to $1.4 million at December 31, 2015.

If non-accrual loans had been performing in accordance with their original terms, the Company would have recorded $1.5 million, $1.0 million, and $347,000 in additional interest income during the years ended December 31, 2015, 2014 and 2013 , respectively.

Troubled Debt Restructuring

Loans are considered restructured in a troubled debt restructuring (“TDR”) 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 collectability 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:



	At December 31,
	2015		2014
	(In thousands)
Recorded investment in TDRs
Accrual status	$	18,453	$	11,638
Non-accrual status	5,611		4,169
Total recorded investment	$	24,064	$	15,807
Accruing TDRs performing under modified terms more than one year	$	5,821	$	1,919
TDR allocated reserves included in the balance of allowance for loan losses	223		380
Additional funds committed to borrowers in TDR status	513		210

The increase in TDRs of $8.3 million primarily reflects $15.2 million in new TDR loans which primarily consisted of three large commercial business loans which were modified during the fourth quarter. In addition, 38 residential real estate TDR loans were added. The increase was partially offset by $6.3 million in pay downs and $561,000 in partial or full charge offs.

Troubled Debt Restructuring By Loan Type

The following tables provide detail of TDR by type for the periods indicated:



	At December 31,
	2015		2014
	(In thousands)
Real estate loans:
Residential	$	6,612	$	3,965
Commercial	6,456		8,852
Construction	1,853		1,998
Commercial business loans	9,138		971
Installment and collateral	5		21
Total	$	24,064	$	15,807

Troubled Debt Restructuring Activity

The following tables provide detail of TDR activity during the periods indicated:



	Years Ended December 31,
	2015			2014
	(In thousands)
TDRs, beginning of period	$	15,807		$	10,216
Current year modifications	15,167			9,231
Paydowns/draws on existing TDRs, net	(6,349		)	(2,890		)
Charge-offs post modification	(561		)	(750		)
TDRs, end of period	$	24,064		$	15,807

Delinquent Loans

The following table presents an age analysis of past due loans at December 31, 2015 and 2014 :



	Delinquent Loans
	30-89 Days				90 Days and Over				Total
	Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
At December 31, 2015
Real estate loans:
Residential	$	13,274	32.4	%	$	8,485	20.9	%	$	21,759	53.3	%
Commercial	6,743		16.5		6,024		14.7		12,767		31.2
Construction	663		1.6		2,135		5.2		2,798		6.8
Commercial business loans	792		1.9		2,804		6.8		3,596		8.7
Installment and collateral	20		—		8		—		28		—
Total	$	21,492	52.4	%	$	19,456	47.6	%	$	40,948	100.0	%
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, 2015 and 2014 , loans reported as past due 90 days or more and still accruing totaled $307,000 and $4.8 million , respectively 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.

As a percentage of total loans, loans between 30 and 90 days delinquent were 0.47% and 1.10% at December 31, 2015 and December 31, 2014 , respectively. The decrease in delinquency at December 31, 2015 is primarily attributed to a decrease in overall Bank delinquencies including decreases in commercial delinquencies. 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 $88.7 million at December 31, 2015 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, 2015 , watchlist loans, inclusive of the “classified loans”, totaled $157.6 million, of which $100.5 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, 2015 , 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 $ 33.9 million , or 0.73% of total loans at December 31, 2015 as compared to a loan loss allowance of $ 24.8 million , or 0.64% of total loans at December 31, 2014 . The increase in the ratio from December 31, 2014 primarily reflects the the movement of loans from the acquired portfolio to the covered portfolio. 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, 2015 amounted to $794,000 an increase of $683,000 compared to December 31, 2014 .

See Note 7, “Loans Receivable and Allowance for Loan Losses” in the Notes to the 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, 2015 and 2014 , 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,
	2015			2014			2013			2012			2011
	(Dollars in thousands)
Balance at beginning of year	$	24,809		$	19,183		$	18,477		$	16,025		$	14,312
Provision for loan losses	13,005			9,496			2,046			3,587			3,021
Charge-offs:
Real estate	(2,655		)	(2,644		)	(1,206		)	(1,174		)	(1,071		)
Commercial business loans	(2,513		)	(1,406		)	(190		)	(132		)	(480		)
Installment and collateral loans	(324		)	(139		)	(124		)	(48		)	(37		)
Total charge-offs	(5,492		)	(4,189		)	(1,520		)	(1,354		)	(1,588		)
Recoveries:
Real estate	623			175			137			150			261
Commercial business loans	839			97			18			52			6
Installment and collateral loans	103			47			25			17			13
Total recoveries	1,565			319			180			219			280
Net charge-offs	(3,927		)	(3,870		)	(1,340		)	(1,135		)	(1,308		)
Balance at end of year	$	33,887		$	24,809		$	19,183		$	18,477		$	16,025
Ratios:
Allowance for loan losses to non-performing loans at end of year	89.64		%	76.67		%	140.50		%	115.08		%	127.08		%
Allowance for loan losses to total loans outstanding at end of year	0.73		%	0.64		%	1.12		%	1.15		%	1.09		%
Net charge-offs to average loans outstanding	0.10		%	0.12		%	0.08		%	0.07		%	0.09		%

The allowance for loan losses at December 31, 2015 increased $9.1 million to $ 33.9 million as compared to the December 31, 2014 year-end balance of $ 24.8 million . The Company provided $ 13.0 million of allowance for loan loss provisions in 2015 . The Company recorded total loan charge-offs of $5.5 million and recorded $1.6 million of loan recoveries from previously charged-off loans. Net charge-offs for 2015 were $3.9 million , an increase of $57,000 as compared to 2014 net charge-offs. A comprehensive post-merger review of the acquired portfolio continues and hence the slightly higher level of charge off during the year. The Bank continues to ensure consistent application of risk ratings across the entire portfolio. Management believes the allowance for loan losses at December 31, 2015 is sufficient to provide for probable losses inherent within the loan portfolio.

At December 31, 2015 , the allowance for loan losses was 0.73% of the total loan portfolio and 89.64% of total non-performing loans. This compares to an allowance of 0.64% of total loans and 76.67% of total non-performing loans at December 31, 2014 . The increase in the ratio from December 31, 2014 primarily reflects the increase in loan portfolio due to the movement of loans from the acquired portfolio to the covered portfolio. The portfolio purchases have 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,
	2015						2014						2013
	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
	(Dollars in thousands)
Real Estate:
Residential	$	10,192	30.1	%	34.9	%	$	7,927	32.0	%	36.3	%	$	6,396	33.3	%	37.0	%
Commercial	15,033		44.4		43.2		9,418		38.0		43.1		8,288		43.2		45.3
Construction	1,895		5.6		3.7		1,470		5.9		4.8		829		4.3		3.1
Commercial business	5,827		17.2		13.1		5,808		23.4		15.7		3,394		17.7		14.5
Installment and collateral	146		0.4		5.1		75		0.3		0.1		29		0.2		0.1
Unallocated allowance	794		2.3		—		111		0.4		—		247		1.3		—
Total allowance for loan losses	$	33,887	100.0	%	100.0	%	$	24,809	100.0	%	100.0	%	$	19,183	100.0	%	100.0	%



	At December 31,
	2012						2011
	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
	(Dollars in thousands)
Real Estate:
Residential	$	6,194	33.5	%	42.6	%	$	5,071	31.6	%	46.2	%
Commercial	8,051		43.6		43.4		6,694		41.8		40.3
Construction	807		4.4		3.1		1,286		8.0		3.4
Commercial business	2,916		15.8		10.7		2,515		15.7		9.8
Installment and collateral	29		0.2		0.2		49		0.3		0.3
Unallocated allowance	480		2.5		—		410		2.6		—
Total allowance for loan losses	$	18,477	100.0	%	100.0	%	$	16,025	100.0	%	100.0	%

The level of allowance for loan loss assigned to each loan category reflects management’s evaluation at December 31, 2015 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 FHLBB 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, online 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.

Total deposits amounted to $4.44 billion at December 31, 2015 , up $401.8 million from December 31, 2014 . Core deposits increased $231.6 million, or 9.3%, from prior year end reflecting the Company’s strategy to increase core deposits 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.

The Bank has relationships with brokered sweet 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 $123.1 million at December 31, 2015, an increase of $11.3 million from December 31, 2014.

Time deposits included brokered certificates of deposit of $392.0 million and $241.9 million at December 31, 2015 and 2014 , 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 $1.36 billion at December 31, 2015 .

The following table presents information concerning average balances and weighted average interest rates on the Company’s deposits accounts for the years indicated:



	At December 31,
	2015						2014						2013
	Average Balance		% of Total Average Deposits		Weighted Average Rate		Average Balance		% of Total Average Deposits		Weighted Average Rate		Average Balance		% of Total Average Deposits		Weighted Average Rate
(Dollars in thousands)
Non-interest-bearing:
Demand accounts	$	605,112	14.46	%	0.00	%	$	503,398	15.49	%	0.00	%	$	238,803	14.91	%	0.00	%
Interest-bearing:
NOW accounts	315,217		7.54		0.13		236,935		7.29		0.15		158,804		9.91		0.14
Regular savings	529,659		12.66		0.06		418,091		12.86		0.10		225,379		14.07		0.06
Money market accounts	1,155,242		27.62		0.59		872,690		26.85		0.34		437,776		27.33		0.35
Time deposits	1,577,739		37.72		0.88		1,218,782		37.51		0.81		541,148		33.78		1.12
Total interest-bearing deposits	3,577,857		85.54		0.60	%	2,746,498		84.51		0.49	%	1,363,107		85.09		0.59	%
Total average deposits	$	4,182,969	100.00	%			$	3,249,896	100.00	%			$	1,601,910	100.00	%

Time Deposit Maturities of $250,000 or More

As of December 31, 2015 , the aggregate amount of outstanding time deposits in amounts greater than or equal to $250,000 was $253.7 million . The following table sets forth the maturity of those time deposits as of December 31, 2015 :



	At December 31, 2015
	(In thousands)
Three months or less	$	59,999
Over three months through six months	36,012
Over six months through one year	44,877
Over one year through three years	88,041
Over three years	24,780
Total	$	253,709

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,
	2015		2014		$ Change			% Change
	(Dollars in thousands)
FHLBB advances (1)	$	949,003	$	580,973	$	368,030		63.3	%
Subordinated debt (2)	79,489		79,288		201			0.3
Wholesale repurchase agreements	45,000		69,242		(24,242		)	(35.0	)
Customer repurchase agreements	19,278		41,335		(22,057		)	(53.4	)
Other	6,250		6,476		(226		)	(3.5	)
Total borrowings	$	1,099,020	$	777,314	$	321,706		41.4	%


(1)	FHLBB advances include $3.5 million and $5.4 million of purchase accounting discounts at December 31, 2015 and 2014, respectively.


(2)	Subordinated debt includes $7.7 million of acquired junior subordinated debt, net of mark to market discounts of $2.1 million and $2.2 million, and $75.0 million Subordinated Notes, net of associated deferred costs of $1.1 million and $1.2 million at December 31, 2015 and 2014, respectively.

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 FHLBB.

Total FHLBB advances increased $369.9 million to $945.5 million at December 31, 2015 , exclusive of the purchase accounting mark adjustment on the advances, compared to $575.6 million at December 31, 2014 . This increase is a result of greater utilization of FHLBB advances, combined with the growth in core deposits, which assisted the Company in funding loan portfolio growth and in meeting other liquidity needs while effectively managing interest rate risk. At December 31, 2015 , all of the Company’s outstanding FHLBB advances were at fixed coupons ranging from 0.32% to 7.15%, with an average cost of 0.95% . FHLBB borrowings represented 15.2% and 10.5% of assets at December 31, 2015 and 2014 , respectively.

Borrowings under wholesale purchase agreements totaled $45.0 million and $69.2 million as of December 31, 2015 and 2014, respectively. The outstanding borrowings consisted of three individual agreements with remaining terms of 3 years or less and a weighted-average cost of 1.51% . 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 $19.3 million and $41.3 million at December 31, 2015 and 2014, respectively.

Subordinated debentures totaled $79.5 million and $79.3 million at December 31, 2015 and 2014, respectively.

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,
	2015			2014			2013
	(In thousands)
Balance at end of period	$	445,000		$	362,000		$	110,000
Average amount outstanding during the period	327,833			204,750			82,500
Maximum amount outstanding at any month-end	445,000			362,000			150,000
Weighted-average interest rate during the period	0.35		%	0.23		%	0.23		%
Weighted-average interest rate at end of period	0.58		%	0.27		%	0.21		%

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, 2015 , $ 95.2 million of the Company’s assets were invested in cash and cash equivalents compared to $ 87.0 million at December 31, 2014 . 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 FHLBB.

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 FHLBB, which provide an additional source of funds. At December 31, 2015 , the Company had $945.5 million in advances from the FHLBB and an additional available borrowing limit of $265.1 million based on collateral requirements of the FHLBB inclusive of the line of credit. In addition, the Bank has relationships with brokered sweep deposit providers with outstanding balances of $123.1 million at December 31, 2015 . Internal policies limit wholesale borrowings to 40% of total assets, or $2.49 billion , at December 31, 2015 . In addition, the Company has uncommitted federal funds lines of credit with six counterparties totaling $137.5 million at December 31, 2015 . No federal funds purchased were outstanding at December 31, 2015 .

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, 2015 , the Bank had pledged 27 commercial loans, with outstanding balances totaling $185.0 million. Based on the amount of pledged collateral, the Bank had available liquidity of $144.0 million.

At December 31, 2015 , the Company had outstanding commitments to originate loans of $219.4 million and unfunded commitments under construction loans, lines of credit, stand-by letters of credit, and unused checking overdraft lines of credit of $743.5 million . At December 31, 2015 , 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 FHLBB 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 2015 and 2014 , the Bank paid $30.9 million and $13.3 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 18, “Regulatory Matters” for further information on dividend restrictions.

The Company and the Bank are subject to various regulatory capital requirements. As of December 31, 2015 , the Bank is categorized as “well-capitalized” under the regulatory framework for prompt corrective action. See Note 18, “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

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 contractual obligations and commitments made by the Company as of December 31, 2015 and the respective payment dates:



	Contractual Obligations
	Total		One Year or Less		More than One Year Through Three Years		More than Three Years Through Five Years		Over Five Years
	(In thousands)
Federal Home Loan Bank advances (1)	$	945,505	$	637,580	$	271,795	$	31,458	$	4,672
Interest expense payable on Federal Home Loan Bank advances	14,095		1,324		9,623		2,239		909
Leases (2)	44,990		5,145		9,318		8,481		22,046
Subordinated Notes (3)	82,732		—		—		—		82,732
Interest expense payable on Subordinated Notes	41,478		4,498		8,995		8,996		18,989
Core service provider (4)	12,445		4,659		7,786		—		—
Other (5)	1,544		128		279		302		835
Total Contractual Obligations	$	1,142,789	$	653,334	$	307,796	$	51,476	$	130,183


(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 under unfunded nonqualified pension plans.

The following tables present information indicating various commercial commitments made by the Company as of December 31, 2015 and the respective payment dates:



	Other Commitments
	Total		One Year or Less		More than One Year Through Three Years		More than Three Years Through Five Years		Over Five Years
	(In thousands)
Real estate loan commitments(1)	$	182,849	$	182,849	$	—	$	—	$	—
Commercial business loan commitments(1)	36,558		36,558		—		—		—
Undisbursed commercial lines of credit	302,700		97,784		30,832		37,352		136,732
Undisbursed home equity lines of credit(2)	320,140		5,396		20,943		31,630		262,171
Undisbursed construction loans	103,140		30,008		27,876		3,500		41,756
Standby letters of credit	9,477		7,498		1,666		133		180
Unused checking overdraft lines of credit(3)	1,293		—		—		—		1,293
Unused credit card lines	6,725		6,725		—		—		—
Total Other Commitments	$	962,882	$	366,818	$	81,317	$	72,615	$	442,132

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

The Company invests in partnerships, including low income housing tax credit, new markets housing tax credit, and alternative energy tax credit partnerships. The net carrying balance of these investments totaled $21.4 million at December 31, 2015 and is included in other assets in the consolidated statement of condition. At December 31, 2015 , the Company was contractually committed under these limited partnership agreements to make additional capital contributions of approximately $6.3 million , which constitutes our maximum potential obligation to these partnerships.

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. The Company models 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, 2015 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 a decrease to our asset sensitive position.



	Percentage Increase (Decrease) in Estimated Net Interest Income Over 12 Months
300 basis point increase in rates	3.10	%
50 basis point decrease in rates	(4.42	)%

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, 2015 , income at risk (i.e., the change in net interest income) increased 3.10% and decreased 4.42% 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, 2015 and 2014	75
Consolidated Statements of Net Income for the Years Ended December 31, 2015, 2014 and 2013	76
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2014 and 2013	77
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2015, 2014 and 2013	79
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013	80
Notes to Consolidated Financial Statements	82

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, 2015 , based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on that assessment, management concluded that, as of December 31, 2015 , the Company’s internal control over financial reporting is effective based on the criteria established in Internal Control — Integrated Framework (2013).

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 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
				Officer and Treasurer

Date: March 7, 2016

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’ (the “Company”) internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control — Integrated Framework (2013) 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. 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. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control — Integrated Framework (2013) 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, 2015 Consolidated Financial Statements of United Financial Bancorp, Inc. and subsidiaries and our report dated March 7, 2016 expressed an unqualified opinion.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 7, 2016

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, 2015 and 2014 , and the related Consolidated Statements of Net Income, Comprehensive Income (Loss), Changes in Stockholders’ Equity and Cash Flows for each of the years in the three-year period ended December 31, 2015 . 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, 2015 and 2014 , and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015 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, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 7, 2016 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 7, 2016

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Condition



	December 31,
	2015			2014
	(In thousands, except share data)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	47,602		$	43,416
Short-term investments	47,574			43,536
Total cash and cash equivalents	95,176			86,952
Available for sale securities-at fair value	1,059,169			1,053,011
Held to maturity securities-at amortized cost	14,565			15,368
Loans held for sale	10,136			8,220
Loans receivable (net of allowance for loan losses of $33,887 in 2015 and $24,809 in 2014)	4,587,062			3,877,063
Federal Home Loan Bank stock, at cost	51,196			31,950
Accrued interest receivable	15,740			14,212
Deferred tax asset-net	33,094			33,833
Premises and equipment-net	54,779			57,665
Goodwill	115,281			115,240
Core deposit intangible	7,506			9,302
Cash surrender value of bank-owned life insurance	125,101			122,622
Other real estate owned	755			2,239
Other assets	58,981			49,132
Total assets	$	6,228,541		$	5,476,809

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest-bearing	$	672,008		$	602,359
Interest-bearing	3,765,063			3,432,952
Total deposits	4,437,071			4,035,311
Mortgagors’ and investors’ escrow accounts	13,526			13,004
Advances from the Federal Home Loan Bank	949,003			580,973
Other borrowings	150,017			196,341
Accrued expenses and other liabilities	53,403			48,772
Total liabilities	5,603,020			4,874,401
Commitments and contingencies (notes 7, 8 and 21)
Stockholders’ equity:
Preferred stock (no par value; 2,000,000 shares authorized; no shares issued)	—			—
Common stock (no par value; 120,000,000 and 60,000,000 shares authorized; 49,941,428 and 49,537,700 shares issued and 49,941,428 and 49,537,700 outstanding at December 31, 2015 and 2014, respectively)	519,587			514,189
Additional paid-in capital	10,722			16,007
Unearned compensation — ESOP	(5,922		)	(6,150		)
Retained earnings	112,013			84,852
Accumulated other comprehensive loss, net of tax	(10,879		)	(6,490		)
Total stockholders’ equity	625,521			602,408
Total liabilities and stockholders’ equity	$	6,228,541		$	5,476,809

The accompanying notes are an integral part of these consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Net Income

	Years Ended December 31,
	2015			2014			2013
	(In thousands, except share data)
Interest and dividend income:
Loans	$	165,409		$	133,011		$	67,752
Securities-taxable interest	20,039			16,367			6,687
Securities-non-taxable interest	8,354			5,113			2,748
Securities-dividends	2,363			1,302			250
Interest-bearing deposits	180			86			80
Total interest and dividend income	196,345			155,879			77,517
Interest expense:
Deposits	21,442			13,559			7,992
Borrowed funds	10,321			4,448			2,468
Total interest expense	31,763			18,007			10,460
Net interest income	164,582			137,872			67,057
Provision for loan losses	13,005			9,496			2,046
Net interest income after provision for loan losses	151,577			128,376			65,011
Non-interest income:
Service charges and fees	21,040			13,509			7,250
Income from mortgage banking activities	9,552			3,203			7,203
Bank-owned life insurance income, including gain on death benefit	3,616			3,042			2,092
Gain on sales of securities, net	939			1,228			585
Net loss on limited partnership investments	(3,136		)	(4,224		)	—
Other income (loss)	476			(153		)	(79		)
Total non-interest income	32,487			16,605			17,051
Non-interest expense:
Salaries and employee benefits	67,469			59,332			36,428
Occupancy and equipment	15,442			13,239			6,679
Service bureau fees	6,728			8,179			3,287
Professional fees	6,317			3,662			2,377
Marketing and promotions	2,321			2,296			476
FDIC insurance assessments	3,692			2,553			1,172
Other real estate owned	237			792			874
Core deposit intangible amortization	1,796			1,283			—
Merger related expense	1,575			36,918			2,141
Other	22,618			16,178			9,032
Total non-interest expense	128,195			144,432			62,466
Income before income taxes	55,869			549			19,596
Provision (benefit) for income taxes	6,229			(6,233		)	5,369
Net income	$	49,640		$	6,782		$	14,227

Net income per share:
Basic	$	1.01		$	0.16		$	0.55
Diluted	$	1.00		$	0.16		$	0.54

Weighted-average shares outstanding:
Basic	48,912,807			42,829,094			26,061,942
Diluted	49,385,566			43,269,517			26,426,220

The accompanying notes are an integral part of these consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)



	Years Ended December 31,
	2015			2014			2013
	(In thousands)
Net income	$	49,640		$	6,782		$	14,227
Other comprehensive income (loss):
Securities available for sale:
Unrealized holding gains (losses)	(5,912		)	13,847			(15,704		)
Reclassification adjustment for gains realized in income (1)	(939		)	(1,228		)	(585		)
Net unrealized gains (losses)	(6,851		)	12,619			(16,289		)
Tax effect - benefit (expense)	2,462			(4,430		)	5,701
Net-of-tax amount - securities available for sale	(4,389		)	8,189			(10,588		)
Interest rate swaps designated as cash flow hedges:
Unrealized gains (losses)	(3,108		)	(8,385		)	7,537
Reclassification adjustment for losses recognized in interest expense (2)	12			—			—
Net unrealized gains (losses)	(3,096		)	(8,385		)	7,537
Tax effect - benefit (expense)	1,116			2,945			(2,638		)
Net-of-tax amount - interest rate swaps	(1,980		)	(5,440		)	4,899
Defined benefit pension plan:
Gains (losses) arising during the period	1,574			(6,460		)	5,842
Reclassification adjustment for losses (gains) recognized in net periodic benefit cost (3)	738			(277		)	784
Net gains (losses)	2,312			(6,737		)	6,626
Tax effect - benefit (expense)	(698		)	2,427			(2,319		)
Net-of-tax amount - pension plan	1,614			(4,310		)	4,307
Other post-retirement plans:
Gains (losses) arising during the period	532			(372		)	820
Reclassification adjustment for prior service costs recognized in net periodic benefit cost (4)	7			13			23
Reclassification adjustment for losses (gains) recognized in net periodic benefit cost (5)	21			(9		)	72
Prior service cost arising during the period	—			168			105
Change in gains (losses) and prior service costs	560			(200		)	1,020
Tax effect - benefit (expense)	(194		)	37			(357		)
Net-of-tax amount - post-retirement plans	366			(163		)	663
Net-of-tax amount - pension and post-retirement plans	1,980			(4,473		)	4,970
Total other comprehensive income (loss)	(4,389		)	(1,724		)	(719		)
Comprehensive income (loss)	$	45,251		$	5,058		$	13,508


(1)	Amounts are included in net gains from sales of securities in the Consolidated Statements of Net Income. Income tax expense associated with the reclassification adjustment for the years ended December 31, 2015, 2014 and 2013 was $338 , $442 and $205 , respectively.


(2)	Amounts are included in borrowed funds in the Consolidated Statements of Net Income in interest expense. Income tax benefit associated with the reclassification adjustment for the years ended December 31, 2015, 2014 and 2013 was $4 , $0 and $0 , respectively.


(3)	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, 2015, 2014 and 2013 was $(266) , $100 and $(274) , respectively.


(4)	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, 2015, 2014 and 2013 was $3 , $7 and $8 , respectively.


(5)	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, 2015, 2014 and 2013 was $(185) , $3 and $(25) , respectively.

The accompanying notes are an integral part of these consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2015, 2014 and 2013



	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
	(In thousands, except share data)
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 effects of 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 effects of share-based awards	—		—			820			—			—			—			—		—			820
Dividends declared ($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
Comprehensive income	—		—			—			—			49,640			(4,389		)	—		—			45,251
Common stock repurchased	(377,700	)	(5,171		)	—			—			—			—			—		—			(5,171		)
Share-based compensation expense	—		—			1,076			—			—			—			—		—			1,076
ESOP shares released or committed to be released	—		—			71			228			—			—			—		—			299
Shares issued for stock options exercised	545,148		7,281			(2,516		)	—			—			—			—		—			4,765
Shares issued for restricted stock grants	259,845		3,491			(3,491		)	—			—			—			—		—			—
Cancellation of shares for tax withholding	(22,430	)	(188		)	(123		)	—			—			—			—		—			(311		)
Tax effects of share-based awards	—		—			(317		)	—			—			—			—		—			(317		)
Forfeited unvested restricted stock	(1,135	)	(15		)	15			—			—			—			—		—			—
Dividends declared ($0.46 per common share)	—		—			—			—			(22,479		)	—			—		—			(22,479		)
Balance at December 31, 2015	49,941,428		$	519,587		$	10,722		$	(5,922	)	$	112,013		$	(10,879	)	—		$	—		$	625,521

The accompanying notes are an integral part of these consolidated financial statements.

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows

	Years Ended December 31,
	2015			2014			2013
	(In thousands)
Cash flows from operating activities:
Net income	$	49,640		$	6,782		$	14,227
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums and discounts on investments, net	5,041			2,680			471
Accretion of intangible assets and purchase accounting marks, net	(10,835		)	(10,899		)	—
Amortization of subordinated debt issuance costs	126			34			—
Share-based compensation expense	1,076			3,957			2,665
ESOP expense	299			1,727			1,707
Loss on extinguishment of debt	—			288			—
Tax effects of share-based awards	317			(820		)	(65		)
Provision for loan losses	13,005			9,496			2,046
Net gain from sales of securities	(939		)	(1,228		)	(585		)
Loans originated for sale	(406,960		)	(145,124		)	(144,597		)
Proceeds from sales of loans held for sale	405,044			137,326			149,467
Decrease (increase) in mortgage servicing asset	(2,345		)	(138		)	3,051
Loss (gain) on sales of OREO	(218		)	(409		)	85
Net change in mortgage banking fair value adjustment	39			(356		)	439
Loss on disposal of equipment	191			1,210			113
Write-downs of other real estate owned	118			213			287
Depreciation and amortization	5,340			3,762			2,383
Loss on limited partnerships	3,136			4,224			—
Loss (gain) on lease terminations	(195		)	1,888			—
Deferred income tax expense	3,582			7,361			410
Increase in cash surrender value of bank-owned life insurance	(3,397		)	(3,042		)	(2,092		)
Income recognized from death benefit on bank-owned life insurance	(219		)	—			—
Net change in:
Deferred loan fees and premiums	(3,013		)	(1,603		)	(1,632		)
Accrued interest receivable	(1,528		)	(2,237		)	(844		)
Other assets	(16,172		)	(33,243		)	(4,340		)
Accrued expenses and other liabilities	9,637			8,552			946
Net cash provided by (used in) operating activities	50,770			(9,599		)	24,142
Cash flows from investing activities:
Proceeds from sales of available for sale securities	280,564			511,044			44,880
Proceeds from calls and maturities of available for sale securities	16,655			21,220			—
Principal payments on available for sale securities	86,128			61,425			26,862
Principal payments on held to maturity securities	774			783			2,373
Purchases of available for sale securities	(398,794		)	(885,610		)	(245,609		)
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
Purchase of FHLBB stock	(19,246		)	(1,860		)	—
Proceeds from sale of other real estate owned	2,683			3,869			4,042
Proceeds from portfolio loan sales	—			—			70,715
Purchases of loans	(348,175		)	(16,310		)	(14,142		)
Loan originations, net of principal repayments	(366,495		)	(302,918		)	(170,550		)
Purchase of bank-owned life insurance	—			—			(4,008		)
Proceeds from bank-owned life insurance death benefit	1,158			—			—
Proceeds from sale of equipment	364			327			—
Purchases of premises and equipment	(3,593		)	(12,719		)	(7,108		)
Net cash used in investing activities	(747,977		)	(595,384		)	(301,824		)

United Financial Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Concluded)

	Years Ended December 31,
	2015			2014			2013
	(In thousands)
Cash flows from financing activities:
Net increase in non-interest-bearing deposits	69,649			2,550			27,685
Net increase in interest-bearing deposits	335,320			357,800			202,840
Net increase (decrease) in mortgagors’ and investors’ escrow accounts	522			4,604			(434		)
Net increase in short-term FHLBB advances	196,200			275,776			64,112
Repayments of long-term FHLBB advances	(8,056		)	(6,076		)	(15,182		)
Proceeds from long-term FHLBB advances	181,800			10,000			—
Repayments of FHLBB borrowings and penalty	—			(12,466		)	—
Net increase in other borrowings, excluding proceeds from subordinated debt issuance	(46,491		)	4,860			48,192
Proceeds from issuance of subordinated debt, net of issuance costs	—			73,733			—
Proceeds from exercise of stock options	4,765			2,246			805
Common stock repurchased	(5,171		)	(47,772		)	(30,028		)
Cancellation of shares for tax withholding	(311		)	(1,367		)	(357		)
Tax effects of share-based awards	(317		)	820			65
Cash dividend paid on common stock	(22,479		)	(18,008		)	(10,453		)
ESOP forfeiture	—			—			357
Net cash provided by financing activities	705,431			646,700			287,602
Net increase in cash and cash equivalents	8,224			41,717			9,920
Cash and cash equivalents - beginning of year	86,952			45,235			35,315
Cash and cash equivalents - end of year	$	95,176		$	86,952		$	45,235
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	36,532		$	21,824		$	10,465
Income taxes, net	(6,744		)	3,599			7,017
Transfer of loans to other real estate owned	1,099			2,339			3,097
Increase (decrease) in due to broker, investment purchases	(1,105		)	(4,855		)	1,758
Increase in due to broker, common stock buyback	(523		)	523			—
Acquisition of non-cash assets and liabilities:
Fair value of assets acquired	—			2,396,937			—
Fair value of liabilities assumed	—			2,154,713			—

The accompanying notes are an integral part of these 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 results of operations of Legacy United or assets acquired are included only from the dates of acquisition.

The consolidated financial statements and the accompanying notes presented in this report include the accounts of 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, 2015 , 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 53 banking offices, its commercial loan and mortgage loan production offices, 63 ATMs, telephone banking, mobile banking and its online 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 2015 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 December 31, 2014, the Consolidated Statements of Changes in Shareholders’ Equity 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 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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The Company did not have a trading portfolio at December 31, 2015 and 2014 . 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 2015, 2014 and 2013 . See Note 6 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 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. 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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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.

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, 2015 and 2014 .

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 a 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.

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 difficulties. 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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, collectability 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 collectability 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.

In recording the acquisition data fair values of acquired impaired loans, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). For changes in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the remaining lives of the loans.

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 collectability 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. There were no changes in the Company’s methodology pertaining to the general component of the allowance for loan losses during 2015.

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:

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

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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 secured or unsecured and repayment is dependent on the credit quality of the individual borrower. A significant portion of these loans are secured by boats.

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.

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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Unallocated component:

The allowance for loan losses has been determined in accordance with GAAP, under which the Company is required to maintain an allowance for probable losses at the balance sheet date. The Company is responsible for the timely and periodic determination of the amount of the allowance required. Management believes that the 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 at fair value, with changes in fair value recorded in income from mortgage banking activities.

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 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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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 reviewed 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 2015 , 2014 and 2013 .

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, 2015 and 2014 , the Company had $375,000 and $252,000 of uncertain tax positions, respectively. 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 Company 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 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

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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.

As of December 31, 2012, the Company froze its noncontributory defined benefit pension plan, at which time 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 17, “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 Compensation cost of an employee’s pension benefit is recognized on the projected unit credit method over the employee’s approximate service period. The aggregate cost method is utilized for funding purposes.

The Company accounts for its defined benefit pension plan using an actuarial model that allocates pension costs over the service period of employees in the plan. The Company accounts for the over-funded or under-funded status of its defined benefit plan as an asset or liability in its consolidated balance sheets and recognizes changes in the funded status in the year in which the changes occur through other comprehensive income or loss.

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 15, “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. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

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.

Employee Stock Ownership Plan

Unearned Employee Stock Ownership Plan (“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 Company’s guarantee to fund 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

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 Leases (Topic 842) . This ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts with Customers . The new leases standard represents a whole-sale change to lease accounting and will most likely result in significant implementation challenges during the transition period and beyond. The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (i.e. calendar periods beginning on January 1, 2019), and interim periods therein. Early adoption will be permitted for all entities. Management is currently analyzing the impact on the Company’s Consolidated Financial Statements.

Financial Instruments

In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires entities to carry all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies, at fair value through net income. This new requirement does not apply to investments that qualify for the equity method of accounting or to those that result in consolidation of these investments. The ASU supersedes current guidance and no longer requires equity securities with readily determinable fair value to be classified into categories (i.e. trading or available for sale). The ASU clarifies that when identifying observable price changes, an entity should consider relevant transactions “that are known or can reasonably be known“ and that an entity is not required to spend undue cost and effort to identify such transactions. The ASU also indicates that an entity should consider a security’s rights and obligations, such as voting rights, distribution rights and preferences, and conversion features, when evaluating whether the security issued by the same issuer is similar to the equity security held by the entity. The ASU further provides for the elimination of disclosure requirements related to financial instruments measured at amortized cost. For public business entities, the new standard will require disclosure of fair value using the exit price notion for all financial instruments measured at amortized cost. Pursuant to the ASU, recognition and measurement will take effect for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all entities, the ASU permits early adoption of the instrument-specific credit risk provision. Management is currently analyzing the impact on the Company’s Consolidated Financial Statements.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Business Combinations

In September 2015, the FASB issued ASU No. 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments which aims to simplify accounting for adjustments made to provisional amounts recognized in a business combination . The requirement per GAAP to retrospectively apply measurement-period adjustments to provisional amounts was eliminated. The new guidance requires that the acquiring company recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. In addition, an entity is required to present separately, on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not yet been made available for issuance. This ASU is not expected to have an impact on the Company’s Consolidated Financial Statements.

Revenue from Contracts

In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defer the effective date of ASU 2014-09 for all entities by one year. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016 including interim reporting periods within that reporting period. This ASU is not expected to have a significant impact on the Company’s Consolidated Financial Statements.

Intangibles-Goodwill and Other-Internal-Use Software

In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The ASU provides criteria for customers in a cloud computing arrangement to use to determine whether the arrangement includes a license of software. When a cloud computing arrangement includes a license of software, the customer will capitalize the fee attributable to the software license portion of the arrangement when the criteria for capitalization of internal-use software are met. When a cloud computing arrangement does not include a license of software, the customer will account for the arrangement as a service contract and expense the cost as the services are received. The ASU supersedes the guidance that required companies to analogize to lease accounting when determining the asset acquired in a software licensing arrangement. Entities may elect to adopt the ASU either prospectively for all arrangements entered into or materially modified after the effective date, or retrospectively. For public business entities, the standard is effective for annual and interim periods in fiscal years beginning after December 15, 2015. For all other entities, the standard is effective for annual periods beginning after December 15, 2015, and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted for all entities. Entities that elect prospective transition should disclose the nature of, and reason for, the change in accounting policy, the transition method, and a qualitative description of the financial statement line items affected by the change. Entities that elect retrospective transition should also disclose quantitative information about the effects of the accounting change. This information should include the cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the earliest period presented. This ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Interest-Imputation of Interest .

In April 2015, the FASB issued ASU No. 2015-03, ( Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). This ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



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 the results of operations from the date of 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 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	$	114,211	$	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. See the Company’s 2014 audited consolidated financial statements and notes thereto included in United Financial Bancorp, Inc.’s Annual Report on Form 10-K as of and for the year ended December 31, 2014 for additional information.



Note 4.	GOODWILL AND CORE DEPOSIT INTANGIBLES

The changes in the carrying amount of goodwill and core deposit intangible assets are summarized as follows:



	Goodwill		Core Deposit Intangible
	(In thousands)
Balance at December 31, 2013	$	1,070	$	—
Acquisition of Legacy United	114,170		10,585
Amortization expense	—		(1,283		)
Balance at December 31, 2014	$	115,240	$	9,302
Adjustments	41		—
Amortization expense	—		(1,796		)
Balance at December 31, 2015	$	115,281	$	7,506

Estimated amortization expense for the years ending December 31,
2016			$	1,604
2017			1,411
2018			1,219
2019			1,026
2020			834
2021 and thereafter			1,412
Total remaining			$	7,506

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 Company tests goodwill impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that impairment is possible. No impairment was recorded on goodwill for 2015 and 2014. 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 . Amortization expense of the core deposit intangible was $1.8 million and $1.3 million for the years ended December 31, 2015 and 2014 .



Note 5.	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, 2015 and 2014 , the Company was required to have cash

and liquid assets of $24.0 million and $22.7 million , respectively, to meet these requirements. The Company is also required to maintain a reserve balance as part of their correspondent relationship with Bankers Bank Northeast.



Note 6.	SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of investment securities at December 31, 2015 and 2014 are as follows:

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2015	(In thousands)
Available for sale:
Debt securities:
U.S. Government and government-sponsored enterprise obligations	$	10,159	$	13	$	(83	)	$	10,089
Government-sponsored residential mortgage-backed securities	146,434		731		(1,304		)	145,861
Government-sponsored residential collateralized debt obligations	287,515		855		(1,403		)	286,967
Government-sponsored commercial mortgage-backed securities	21,144		21		(200		)	20,965
Government-sponsored commercial collateralized debt obligations	128,617		626		(271		)	128,972
Asset-backed securities	162,895		43		(3,037		)	159,901
Corporate debt securities	62,356		91		(2,487		)	59,960
Obligations of states and political subdivisions	201,217		1,561		(1,663		)	201,115
Total debt securities	1,020,337		3,941		(10,448		)	1,013,830
Marketable equity securities, by sector:
Banks	41,558		1,099		(544		)	42,113
Industrial	109		34		—			143
Mutual funds	2,854		65		(4		)	2,915
Oil and gas	132		36		—			168
Total marketable equity securities	44,653		1,234		(548		)	45,339
Total available for sale securities	$	1,064,990	$	5,175	$	(10,996	)	$	1,059,169
Held to maturity:
Debt securities:
Government-sponsored residential mortgage-backed securities	$	2,205	$	244	$	—		$	2,449
Obligations of states and political subdivisions	12,360		884		(10		)	13,234
Total held to maturity securities	$	14,565	$	1,128	$	(10	)	$	15,683

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

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

At December 31, 2015 , the net unrealized loss on securities available for sale of $5.8 million , net of income taxes of $2.1 million , or $3.7 million , was included in accumulated other comprehensive loss. 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.

The amortized cost and fair value of debt securities at December 31, 2015 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
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Maturity:
Within 1 year	$	529	$	529	$	—	$	—
After 1 year through 5 years	9,340		9,190		1,193		1,202
After 5 years through 10 years	66,078		65,077		—		—
After 10 years	197,785		196,368		11,167		12,032
	273,732		271,164		12,360		13,234
Government-sponsored mortgage-backed securities	146,434		145,861		2,205		2,449
Government-sponsored residential collateralized debt obligations	287,515		286,967		—		—
Government-sponsored commercial mortgage-backed securities	21,144		20,965		—		—
Government-sponsored commercial collateralized debt obligations	128,617		128,972		—		—
Asset-backed securities	162,895		159,901		—		—
Total debt securities	$	1,020,337	$	1,013,830	$	14,565	$	15,683

At December 31, 2015 , the Company had 114 encumbered securities, with a fair value of $446.0 million , pledged as derivative collateral and collateral for reverse repurchase borrowings. See Notes 12 and 14.

For the years ended December 31, 2015, 2014 and 2013 , 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,
	2015		2014		2013
	(In thousands)
Proceeds from the sale of available for sale securities	$	280,564	$	511,044	$	44,880
Gross gains on the sale of available for sale securities	3,090		2,711		804
Gross losses on the sale of available for sale securities	2,151		1,483		219

As of December 31, 2015 , the Company did not have any 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, 2015 and 2014 .

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, 2015 , the estimated fair value of this portfolio was $214.4 million , with no significant geographic exposure concentrations. Of the total revenue and general obligations of $214.4 million , $101.9 million were representative of general obligation bonds for which $78.8 million are general obligations of political subdivisions of the respective state, rather than general obligations of the state itself.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, 2015 and 2014 :



	Less than 12 months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(In thousands)
December 31, 2015
Available for sale:
Debt securities:
U.S. Government and government sponsored enterprise obligations	$	4,867	$	(66	)	$	4,977	$	(17	)	$	9,844	$	(83	)
Government-sponsored residential mortgage-backed securities	107,142		(1,183		)	7,195		(121		)	114,337		(1,304		)
Government-sponsored residential collateralized debt obligations	152,278		(1,357		)	3,506		(46		)	155,784		(1,403		)
Government-sponsored commercial mortgage-backed securities	16,207		(200		)	—		—			16,207		(200		)
Government-sponsored commercial collateralized debt obligations	38,151		(221		)	3,496		(50		)	41,647		(271		)
Asset-backed securities	93,723		(1,233		)	49,462		(1,804		)	143,185		(3,037		)
Corporate debt securities	42,102		(797		)	6,720		(1,690		)	48,822		(2,487		)
Obligations of states and political subdivisions	47,878		(946		)	42,685		(717		)	90,563		(1,663		)
Total debt securities	502,348		(6,003		)	118,041		(4,445		)	620,389		(10,448		)
Marketable equity securities	18,449		(287		)	6,176		(261		)	24,625		(548		)
Total available for sale securities	$	520,797	$	(6,290	)	$	124,217	$	(4,706	)	$	645,014	$	(10,996	)

Held to Maturity:
Debt Securities:
Obligations of states and political subdivisions	$	1,104	$	(10	)	—		—			$	1,104	$	(10	)
Total held to maturity securities	$	1,104	$	(10	)	—		—			$	1,104	$	(10	)

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	)

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Of the securities summarized above as of December 31, 2015 , 146 issues had unrealized losses equaling 1.2% of the cost basis for less than twelve months and 96 issues had unrealized losses equaling 3.7% of the amortized cost basis for twelve months or more. As of December 31, 2014 , 155 issues had unrealized losses for less than twelve months and 78 issues had losses for twelve months or more.

Management believes that no individual unrealized loss as of December 31, 2015 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 information (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 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, 2015 :

U.S. Government and government-sponsored enterprises . The unrealized losses on the Company’s U.S. Government and government-sponsored securities were primarily caused by changes in interest rates and interest rate expectations. 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 increase in average prepayment speeds given the path of the government yield curve over the period. 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 securities with no geographic concentration. The unrealized loss was due to an upward shift in certain shorter parts of the municipal bond yield 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 primarily caused by the overall 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 general widening in credit spreads across the curve.

Asset-Backed Securities . The unrealized losses on the Company’s asset-backed securities were largely driven a general widening in credit spreads across the yield curve. 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.

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



Note 7.	LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES

A summary of the Company’s loan portfolio at December 31, 2015 and 2014 is as follows:



	December 31,
	2015			2014
	(In thousands)
Real estate loans:
Residential	$	1,611,197		$	1,413,739
Commercial	1,995,332			1,678,936
Construction	171,006			185,843
Total real estate loans	3,777,535			3,278,518
Commercial business loans	603,332			613,596
Installment and collateral loans	233,064			5,752
Total loans	4,613,931			3,897,866
Net deferred loan costs and premiums	7,018			4,006
Allowance for loan losses	(33,887		)	(24,809		)
Loans — net	$	4,587,062		$	3,877,063

At December 31, 2015 , the Company had pledged $978.2 million and $185.0 million of eligible loan collateral to support available borrowing capacity at the FHLBB and FRB, respectively. See Note 12.

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 . During December 2015, the Company purchased three loan portfolios consisting of marine finance consumer loans, Title 1 home improvement loans and home equity lines of credit. Gross loans purchased totaled $330.5 million , the outstanding balance of which at December 31, 2015 was $324.3 million .

The impaired loans are accounted for in accordance with ASC 310-30. At December 31, 2015 , the net recorded carrying amount of loans accounted for under ASC 310-30 was $6.3 million and the aggregate outstanding principal balance was $12.1 million .

The following table summarizes the activity in the non-accretable purchased accounting adjustments for purchased credit impaired acquired loans for the periods presented:



	For the Year Ended December 31,
	2015			2014
	(In thousands)
Balance at beginning of period	$	(7,989	)	$	—
Acquisitions	(3,674		)	(8,650		)
Accretion	223			648
Paid off	2,533			13
Reclassification to accretable	3,097			—
Balance at end of year	$	(5,810	)	$	(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, 2015, 2014 and 2013 are as follows:



	Residential Real Estate			Commercial Real Estate			Construction			Commercial Business			Installment and Collateral			Unallocated			Total
	(In thousands)
December 31, 2015
Balance, beginning of year	$	7,927		$	9,418		$	1,470		$	5,808		$	75		$	111		$	24,809
Provision (credit) for loan losses	3,155			6,291			891			1,693			292			683			13,005
Loans charged off	(1,171		)	(1,018		)	(466		)	(2,513		)	(324		)	—			(5,492		)
Recoveries of loans previously charged off	281			342			—			839			103			—			1,565
Balance, end of year	$	10,192		$	15,033		$	1,895		$	5,827		$	146		$	794		$	33,887
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

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, 2015 and 2014 follows:



	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Installment and Collateral		Unallocated		Total
	(In thousands)
December 31, 2015
Allowance related to loans individually evaluated and deemed impaired	$	74	$	—	$	147	$	121	$	—	$	—	$	342
Allowance related to loans collectively evaluated and not deemed impaired	10,118		15,033		1,748		5,531		146		794		33,370
Allowance related to loans acquired with deteriorated credit quality	—		—		—		175		—		—		175
Total allowance for loan losses	$	10,192	$	15,033	$	1,895	$	5,827	$	146	$	794	$	33,887

Loans deemed impaired	$	20,592	$	17,960	$	4,660	$	13,035	$	8	$	—	$	56,255
Loans not deemed impaired	1,590,605		1,975,349		166,346		588,982		230,061		—		4,551,343
Loans acquired with deteriorated credit quality	—		2,023		—		1,315		2,995		—		6,333
Total loans	$	1,611,197	$	1,995,332	$	171,006	$	603,332	$	233,064	$	—	$	4,613,931

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

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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, 2015 and 2014 :



	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
	(In thousands)
December 31, 2015
Real estate loans:
Residential	$	10,516	$	2,758	$	8,485	$	21,759	$	238	$	19,122
Commercial	4,054		2,689		6,024		12,767		—		11,620
Construction	214		449		2,135		2,798		—		2,808
Commercial business	526		266		2,804		3,596		66		4,244
Installment and collateral	17		3		8		28		3		8
Total	$	15,327	$	6,165	$	19,456	$	40,948	$	307	$	37,802
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

At December 31, 2015 , 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.

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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, 2015 and 2014 :



	December 31, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
Impaired loans without a valuation allowance:
Real estate loans:
Residential	$	19,315	$	22,829			$	15,233	$	17,143
Commercial	17,960		20,381				18,408		21,202
Construction	4,442		6,869				2,384		2,441
Commercial business loans	12,634		14,477				3,804		6,129
Installment and collateral loans	8		11				46		34
Total	54,359		64,567				39,875		46,949
Impaired loans with a valuation allowance:
Real estate loans:
Residential	1,277		1,292		$	74	748		892		$	28
Commercial	—		—		—		1,106		1,271		316
Construction	218		218		147		226		226		33
Commercial business loans	401		401		121		2,042		2,098		882
Total	1,896		1,911		342		4,122		4,487		1,259
Total impaired loans	$	56,255	$	66,478	$	342	$	43,997	$	51,436	$	1,259

The following is a summary of average recorded investment in impaired loans and interest income recognized on those loans for the years ended December 31, 2015, 2014 and 2013 :



	For the Year Ended December 31, 2015				For the Year Ended December 31, 2014				For the Year Ended December 31, 2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Impaired loans:
Real estate loans:
Residential	$	18,213	$	616	$	12,721	$	451	$	9,999	$	432
Commercial	18,424		694		11,868		284		4,407		45
Construction	3,784		299		2,646		81		2,720		46
Commercial business loans	7,835		431		3,087		121		1,525		46
Installment and collateral loans	24		—		110		1		36		2
Total	$	48,280	$	2,040	$	30,432	$	938	$	18,687	$	571

No additional funds are committed to be advanced in connection with impaired loans other than those noted below in conjunction with TDRs.

Troubled Debt Restructurings (“TDR”) . 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 TDR 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

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Notes to Consolidated Financial Statements — (Continued)

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:



	At December 31, 2015		At December 31, 2014
	(In thousands)
Recorded investment in TDRs:
Accrual status	$	18,453	$	11,638
Non-accrual status	5,611		4,169
Total recorded investment in TDRs	$	24,064	$	15,807
Accruing TDRs performing under modified terms more than one year	$	5,821	$	1,919
Specific reserves for TDRs included in the balance of allowance for loan losses	$	223	$	380
Additional funds committed to borrowers in TDR status	$	513	$	210

Loans restructured as TDRs during 2015 and 2014 are set forth in the following table:



	For the Year Ended December 31, 2015					For the Year Ended December 31, 2014
(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	38	$	4,632	$	4,642	16	$	2,497	$	2,497
Commercial real estate	2	791		791		6	1,450		1,450
Construction	2	564		564		15	4,161		4,161
Commercial business	8	9,180		9,680		8	1,121		1,121
Installment & collateral	—	—		—		1	2		2
Total TDRs	50	$	15,167	$	15,677	46	$	9,231	$	9,231

103

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

The following table provides information on how loans were modified as TDRs during the periods indicated:



	For the Year Ended December 31, 2015
	Extended Maturity		Adjusted Interest Rates		Adjusted Rate and Maturity		Payment Deferral		Other
	(In thousands)
Residential real estate	$	—	$	1,202	$	1,659	$	814	$	967
Commercial real estate	538		—		253		—		—
Construction	564		—		—		—		—
Commercial business	9,673		—		7		—		—
Total	$	10,775	$	1,202	$	1,919	$	814	$	967


	For the Year Ended December 31, 2014
	Extended Maturity		Adjusted Interest Rates		Adjusted Rate and Maturity		Payment Deferral		Other
	(In thousands)
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		—
Total	$	5,056	$	1,572	$	495	734		$	1,374

Loans restructured as TDRs during 2013 totaled $8.3 million consisting of 19 loans. The majority of the balance was concentrated in commercial real estate, consisting of four loans, for which the maturity was extended.

TDRs that subsequently defaulted within twelve months of restructuring during the years ended December 31, 2015 and 2014 follows:



	For the Year Ended December 31, 2015			For the Year Ended December 31, 2014
(Dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential real estate	5	$	769	—	$	—
Commercial real estate	2	806		2	3,360
Total troubled debt restructuring	7	$	1,575	2	$	3,360

The financial impact of the TDR 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 TDR process, the current value of the property is compared to the Company’s carrying value 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 is performed 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.

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Notes to Consolidated Financial Statements — (Continued)

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 impaired 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 fully charged off.

The following table presents the Company’s loans by risk rating at December 31, 2015 and 2014 :



	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Installment and Collateral
	(In thousands)
December 31, 2015
Loans rated 1 — 5	$	1,589,095	$	1,909,091	$	156,607	$	568,248	$	233,054
Loans rated 6	1,379		48,522		10,860		8,382		—
Loans rated 7	20,720		37,719		3,539		26,655		10
Loans rated 8	—		—		—		47		—
Loans rated 9	3		—		—		—		—
	$	1,611,197	$	1,995,332	$	171,006	$	603,332	$	233,064
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

105

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, 2015 and 2014 are as follows:



	2015			2014
	(In thousands)
Balance, beginning of year	$	3,722		$	2,020
Loans related to parties who terminated service during the year	(1,495		)	(948		)
Additional loans and advances	875			2,848
Repayments	(457		)	(198		)
Balance, end of year	$	2,645		$	3,722

As of December 31, 2015 and 2014 , 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 $863.7 million , $559.1 million and $408.0 million as of December 31, 2015, 2014 and 2013 , respectively. The balances of these loans are not included in the accompanying Consolidated Statements of Condition. During the years ended December 31, 2015, 2014 and 2013 , the Company received servicing fee income in the amount of $1.3 million , $964,000 and $685,000 , respectively, which are included in income from mortgage banking activity 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, 2015 , the fair value of servicing rights was determined using pretax internal rates of return ranging from 9.5% to 11.5% and the Public Securities Association (“PSA”) Standard Prepayment model to estimate prepayments on the portfolio with an average prepayment speed of 183 . 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 Prepayment model to estimate prepayments on the portfolio with an average prepayment speed of 187 .

Mortgage servicing rights (“MSRs”) are included in other assets in the Consolidated Statements of Condition. Changes in the fair value of MSRs are included in other income (loss) in the Consolidated Statements of Net Income. The following table summarizes MSRs capitalized and amortized for the years ended December 31, 2015, 2014 and 2013 :



	Years Ended December 31,
	2015			2014			2013
	(In thousands)
Mortgage servicing rights:
Balance at beginning of year	$	4,729		$	4,103		$	1,083
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	(586		)	(1,269		)	1,347
Issuances/additions	2,931			1,131			1,202
Balance at end of year	$	7,074		$	4,729		$	4,103

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United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



Note 8.	PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2015 and 2014 are summarized as follows:



	At December 31,						Estimated Useful Life
	2015			2014			Estimated Useful Life
	(In thousands)
Land and improvements	$	950		$	950		0 - 15 years
Buildings	40,375			40,001			10 - 39.5 years
Furniture and equipment	27,468			27,618			3 - 10 years
Leasehold improvements	8,961			9,261			5 - 10 years
Assets under capitalized leases	4,902			4,902			5 - 10 years
Construction in progress	—			586
	82,656			83,318
Accumulated depreciation and amortization	(27,877		)	(25,653		)
Premises and equipment, net	$	54,779		$	57,665

Depreciation and amortization expense was $5.3 million , $3.8 million and $2.4 million for the years ended December 31, 2015, 2014 and 2013 , respectively.

Construction in progress at December 31, 2014 related to renovations on several of the Company’s offices and branches.



Note 9.	OTHER REAL ESTATE OWNED

Other real estate owned (“OREO”) totaled $755,000 at December 31, 2015 and consisted of $604,000 of commercial real estate properties and $151,000 of residential real estate properties, which are held for sale. At December 31, 2014 , other real estate owned was $2.2 million and consisted of $923,000 of commercial real estate properties and $1.2 million of residential real estate properties. The decrease in OREO from the prior year is due to the sale of 12 properties. As a result of the Merger, $2.0 million in OREO was acquired. Other income totaling $3,000 , $11,000 and $23,000 was generated in 2015, 2014 and 2013 , respectively, from the rental of OREO property. OREO operating expenses were $127,000 , $579,000 and $587,000 for the years ended December 31, 2015, 2014 and 2013 , respectively.

The following is a summary of OREO activity for the dates indicated:



	Years Ended December 31,
	2015			2014			2013
	(In thousands)
Balance at beginning of year	$	2,239		$	1,529		$	2,846
Additions	1,099			2,339			3,097
Acquisition of Legacy United	—			2,044			—
Write-downs	(118		)	(213		)	(287		)
Proceeds from sales	(2,683		)	(3,869		)	(4,042		)
Gain (loss) on sales	218			409			(85		)
Balance at end of year	$	755		$	2,239		$	1,529

107

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



Note 10.	OTHER ASSETS

The components of Other Assets at December 31, 2015 and 2014 are summarized below:



	At December 31,
	2015		2014
	(In thousands)
Current tax receivable	$	4,770	$	14,391
Partnership investments	21,441		13,461
Mortgage servicing rights	7,074		4,729
Derivative assets	12,910		4,074
Investment receivable	20		2,762
Other	12,766		9,715
Total other assets	$	58,981	$	49,132



Note 11.	DEPOSITS

Deposits at December 31, 2015 and 2014 were as follows:



	December 31,
	2015		2014
	(In thousands)
Demand and NOW	$	1,019,161	$	902,460
Regular savings	508,377		528,614
Money markets	1,182,422		1,047,302
Time deposits	1,727,111		1,556,935
Total deposits	$	4,437,071	$	4,035,311

Time deposits in denominations of $250,000 or more were $253.7 million and $265.4 million as of December 31, 2015 and 2014 , respectively.

Contractual maturities of time deposits as of December 31, 2015 are summarized below:



	December 31, 2015
	(In thousands)
2016	$	1,061,959
2017	471,007
2018	95,520
2019	22,042
2020	76,583
	$	1,727,111

Included in time deposits are brokered deposits which amounted to $392.0 million and $241.9 million at December 31, 2015 and 2014 , respectively. Included in money market deposits at December 31, 2015 and 2014 are brokered deposits of $123.1 million and $111.8 million , respectively.

108



Note 12.	BORROWINGS

Federal Home Loan Bank Advances

Contractual maturities and weighted-average rates of outstanding advances from the FHLBB as of December 31, 2015 and 2014 are summarized below:



	December 31, 2015				December 31, 2014
	Amount		Weighted- Average Rate		Amount		Weighted- Average Rate
	(Dollars in thousands)
2015	$	—	—	%	$	435,763	0.38	%
2016	637,580		0.60		19,714		1.53
2017	151,000		1.76		66,000		2.72
2018	120,795		1.54		16,784		2.19
2019	20,000		1.63		20,000		1.63
Thereafter	16,130		2.21		17,300		2.19
	$	945,505	0.95	%	$	575,561	0.84	%

The total carrying value of advances from the FHLBB at December 31, 2015 was $949.0 million , which includes a remaining fair value adjustment of $3.5 million on advances acquired in the Merger. At December 31, 2014 , the carrying value of FHLBB advances was $581.0 million , which includes a remaining fair value adjustment of $5.4 million on advances acquired in the Merger. At December 31, 2015 , 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 by the FHLBB. Advances are collateralized by first mortgage loans and investment securities with an estimated eligible collateral value of $1.3 billion and $853.8 million at December 31, 2015 and 2014 , 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, 2015 and 2014 . 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, 2015 , the Bank could borrow immediately an additional $265.1 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 redemption provisions of the stock. At December 31, 2015 , the Bank had $51.2 million in FHLBB capital stock.

Repurchase Agreements

The following table presents the Company’s outstanding borrowings under repurchase agreements as of December 31, 2015 and December 31, 2014 :



	Remaining Contractual Maturity of the Agreements
	Overnight		Up to 1 Year		1 - 3 Years		Greater than 3 Years		Total
	(Dollars in thousands)
December 31, 2015
Repurchase Agreements
U.S. Treasury and agency securities	$	19,278	$	25,000	$	20,000	$	—	$	64,278

December 31, 2014
Repurchase Agreements
U.S. Treasury and agency securities	$	41,335	$	49,242	$	—	$	20,000	$	110,577

109

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2015 and 2014 , advances outstanding under wholesale reverse repurchase agreements totaled $45.0 million and $69.2 million , respectively. The outstanding advances at December 31, 2015 consisted of three individual borrowings with remaining terms of 3 years or less and a weighted average cost of 1.51% . The outstanding advances at December 31, 2014 had a weighted average cost of 1.07% .

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, 2015 , retail repurchase agreements totaled $19.3 million . The Company had $41.3 million of retail repurchase agreements at December 31, 2014.

Subordinated Debentures

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 is payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2015. The carrying value, net of issuance costs, totaled $73.9 million and $73.8 million at December 31, 2015 and 2014 , respectively.

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 $2.1 million and $2.2 million at December 31, 2015 and 2014, respectively. 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, 2015 was 2.46% . 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, 2015 .

The Company has capital lease obligations for three of its leased banking branches, which were acquired in the Merger. At December 31, 2015 , the balance of capital lease obligations totaled $4.5 million . See Note 8 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 $123.1 million at a cost of 0.45% at December 31, 2015 and $111.8 million at a cost of 0.47% at December 31, 2014 . 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 six counterparties totaling $137.5 million at December 31, 2015 .



Note 13.	INCOME TAXES

The components of the income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 are as follows:



	2015		2014			2013
	(In thousands)
Current tax provision (benefit)
Federal	$	1,302	$	(13,905	)	$	4,842
State	1,345		311			117
Total current	2,647		(13,594		)	4,959
Deferred tax provision (benefit)
Federal	3,275		7,482			410
State	307		(121		)	—
Total deferred	3,582		7,361			410
Total income tax expense (benefit)	$	6,229	$	(6,233	)	$	5,369

110

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

For the years ended December 31, 2015, 2014 and 2013 , 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,
	2015			2014			2013
	(In thousands)
Provision for income tax at statutory rate	$	19,554		$	192		$	6,859
Increase (decrease) resulting from:
State income taxes, net of federal benefit	1,074			124			76
Increase in cash surrender value of bank-owned life insurance	(1,266		)	(1,065		)	(732		)
Dividend received deduction	(471		)	(276		)	(24		)
Tax exempt interest and disallowed interest expense	(3,826		)	(1,740		)	(808		)
Employee Stock Ownership Plan	25			153			193
Nondeductible acquisition costs	—			440			—
Excess parachute payments	442			1,615			—
Investment tax credits	(8,649		)	(5,596		)	—
Other, net	(654		)	(80		)	(195		)
Total provision (benefit) for income taxes	$	6,229		$	(6,233	)	$	5,369

Effective income tax rate (benefit)	11.1		%	(11.4		)%	27.4		%

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014 are presented below:



	December 31,
	2015			2014
	(In thousands)
Deferred tax assets:
Loans	$	14,558		$	17,601
Investment security losses	150			440
Net unrealized losses on securities available for sale	2,107			—
Net unrealized losses on interest rate swaps	1,603			390
Pension, deferred compensation and post-retirement liabilities	2,723			4,279
Stock incentive award plan	2,044			2,871
Deposits - purchase accounting adjustment	891			2,149
Accrued expenses	8,043			3,124
Tax credits	3,539			5,116
Other	3,166			4,484
Gross deferred tax assets	38,824			40,454
Valuation allowance	(2,706		)	(2,463		)
Gross deferred tax assets, net of valuation allowance	36,118			37,991

Deferred tax liabilities:
Net unrealized gains on securities available for sale	—			(455		)
Other purchase accounting adjustments	(3,024		)	(3,703		)
Gross deferred tax liabilities	(3,024		)	(4,158		)
Net deferred tax asset	$	33,094		$	33,833

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

111

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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 available historical taxable income, the opportunity for the net operating loss carrybacks, and projections for the Company’s future taxable income over the periods which the Company’s deferred tax assets are realizable, the Company believes it is more likely than not that it will realize the full federal benefit of these deductible differences at December 31, 2015 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, 2015 , the Company had net operating loss carryforwards of $ 1.8 million for Federal income tax purposes, which will begin to expire in 2023. These losses, subject to an annual limitation, were obtained through the acquisition of Legacy United Bank. As of December 31, 2015 and 2014 , the Company had a valuation allowance of $ 2.7 million and $ 2.5 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, 2015 and 2014 , the Company had $ 174.3 million and $168.4 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.

For the year ended December 31, 2015 , the Company generated tax credits of $10.1 million . The Company generated approximately $ 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 credit benefit is recognized through the effective tax rate in the year in which they become available.

Retained earnings at December 31, 2015 includes a contingency reserve for loan losses of approximately $3.8 million , which represents the tax positions that existed 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, 2015 have not been recognized.

As of December 31, 2015 and 2014 , there were $375,000 and $252,000 in uncertain tax positions related to federal and state income tax matters based upon tax positions that related to the current year, respectively. 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, 2015, 2014 and 2013 . 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, 2012 and after.



Note 14.	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, 2015 and 2014 is as follows:

112

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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, 2015
Cash flow hedges:
Forward starting interest rate swaps on future borrowings	$	150,000	7.99	TBD		(1	)	2.46	%			$	(2,072	)
Interest rate swaps	280,000		2.65	0.46	%			1.28	%			(2,020		)
Fair value hedges:
Interest rate swaps	35,000		1.72	1.04	%			0.48	%	(2	)	24
Non-hedging derivatives:
Forward loan sale commitments	25,060		0.00									(13		)
Derivative loan commitments	9,403		0.00									223
Loan level swaps - dealer (3)	333,981		9.05	1.94	%			3.93	%			(12,059		)
Loan level swaps - borrowers (3)	333,981		9.05	3.93	%			1.94	%			12,152
Total	$	1,167,425										$	(3,765	)
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	)


(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 January 4, 2016.


(2)	The paying leg is one month LIBOR plus a fixed spread ; above rate in effect as of December 31, 2015 .


(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 cash flow hedges 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.

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 $1.9 million from accumulated other comprehensive loss to interest expense during the next 12 months.

113

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, 2015 , the Company had ten outstanding interest rate swaps with a notional value of $430.0 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, 2015 and 2014 , amounts recognized as interest expense related to hedge ineffectiveness were negligible. The net reduction of interest income was negligible for the year ended December 31, 2015 . The Company recognized a net reduction of interest income of approximately $24,000 for the year ended December 31, 2014 related to net settlements on the derivatives.

As of December 31, 2015 , the Company had three outstanding interest rate swaps 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, 2015 , the Company had fifty-one borrower-facing interest rate swaps with an aggregate notional amount of $334.0 million and fifty-one broker-facing interest rate swaps also with an aggregate notional value amount of $334.0 million related to this program.

As of December 31, 2015 , the Company had three risk participation agreements with two counterparties related to a loan level interest rate swap with three of its commercial banking customers. Of these agreements, two were entered into in conjunction with credit enhancements provided to the borrowers by the counterparties; therefore, if the borrowers default, the counterparties are responsible for a percentage of the exposure. During the third quarter of 2015, one agreement was entered into in conjunction with credit enhancements provided to the borrower by the Bank, whereby the Bank is responsible for a percentage of the exposure to the counterparty. At December 31, 2015 , the notional amount of this risk participation agreement was $6.3 million , reflecting the counterparty participation of 3.1% . The risk participation agreements are a guarantee of performance on a derivative and accordingly, are recorded at fair value on the Company’s Consolidated Statements of Condition. At December 31, 2015 , the notional amount of the remaining two risk participation agreements was $6.4 million , 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.

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.

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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, 2015 and 2014 :



	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
	Balance Sheet Location	Dec 31, 2015		Dec 31, 2014		Balance Sheet Location	Dec 31, 2015		Dec 31, 2014
		(In thousands)					(In thousands)
Derivatives designated as hedging instruments:
Interest rate swap - cash flow hedge	Other Assets	$	478	$	140	Other Liabilities	$	4,570	$	1,137
Interest rate swap - fair value hedge	Other Assets	50		34		Other Liabilities	26		116
Total derivatives designated as hedging instruments		$	528	$	174		$	4,596	$	1,253
Derivatives not designated as hedging instruments:
Forward loan sale commitment	Other Assets	$	7	$	7	Other Liabilities	$	20	$	21
Derivative loan commitment	Other Assets	223		213			—		—
Interest rate swap - with customers	Other Assets	12,152		3,678		Other Liabilities	—		—
Interest rate swap - with counterparties		—		—		Other Liabilities	12,059		3,816
Interest rate swap -risk participation agreement	Other Assets	—		1			—		—
Total derivatives not designated as hedging		$	12,382	$	3,899		$	12,079	$	3,837

Effect of Derivative Instruments in 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, 2015, 2014 and 2013 :




Derivatives Designated as Cash Flow Hedging Instruments	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) For the Years Ended December 31,
Derivatives Designated as Cash Flow Hedging Instruments	2015			2014			2013
	(In thousands)
Interest Rate Swaps	$	(3,108	)	$	(8,385	)	$	7,537

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Notes to Consolidated Financial Statements — (Continued)




Derivatives Designated as Cash Flow Hedging Instruments	Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) For the Years Ended December 31,
Derivatives Designated as Cash Flow Hedging Instruments	2015			2014		2013
	(In thousands)
Interest Rate Swaps	$	(12	)	$	—	$	—




		Amount of Gain (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	2015			2014			2013
		(In thousands)
Interest Rate Swaps	Interest income	$	106		$	101		$	(183	)

		Amount of Gain (Loss) Recognized in Income on Hedged Items For the Years Ended December 31,
		2015			2014			2013
		(In thousands)
Interest Rate Swaps	Interest income	$	(106	)	$	(101	)	$	183

The table below presents the effect of derivative instruments in the Company’s Consolidated Statements of Net Income for derivatives not designated as hedging instruments for the years ended December 31, 2015, 2014 and 2013 :



	Amount of Gain (Loss) Recognized for the Years Ended December 31,
	2015			2014			2013
	(In thousands)
Derivatives not designated as hedging instruments:
Derivative loan commitment	$	10		$	193		$	(6	)
Forward loan sale commitments	(1		)	(33		)	(19		)
Interest rate swaps	231			(70		)	70
Interest rate swap - risk participation agreement	—			(1		)	—
	$	240		$	89		$	45

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, 2015 and 2014 , there was no collateral posted by the counterparties to the Company related to these agreements, respectively.

As of December 31, 2015 , 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 $16.9 million . As of December 31, 2015 , the Company has minimum collateral posting thresholds with five of its derivative counterparties and has posted collateral with a market value of $16.4 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, 2015 , 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, 2015 and 2014 , 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 $2.1 million and $1.1 million , respectively.

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Notes to Consolidated Financial Statements — (Continued)



Note 15.	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 $9.8 million and $8.1 million at December 31, 2015 and 2014 , respectively. The aggregate fair value of these loans as of the same dates was $10.1 million and $8.2 million , respectively.

There were no residential real estate mortgage loans held for sale 90 days or more past due at December 31, 2015 and 2014 .

Changes in the fair value of mortgage loans held for sale are reported as a component of income from mortgage banking activities in the Consolidated Statements of Net Income. The following table presents the gains (losses) in fair value related to mortgage loans held for sale for the periods indicated:



	Years Ended December 31,
	2015			2014
	(In thousands)
Mortgage loans held for sale	$	(50	)	$	195

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, 2015 and 2014 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, 2015 and 2014 .

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Notes to Consolidated Financial Statements — (Continued)



	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2015
Available for Sale Securities:
U.S. Government and government-sponsored enterprise obligations	$	10,089	$	—	$	10,089	$	—
Government-sponsored residential mortgage-backed securities	145,861		—		145,861		—
Government-sponsored residential collateralized debt obligations	286,967		—		286,967		—
Government-sponsored commercial mortgage-backed securities	20,965		—		20,965		—
Government-sponsored commercial collateralized debt obligations	128,972		—		128,972		—
Asset-backed securities	159,901		—		15,388		144,513
Corporate debt securities	59,960		—		58,403		1,557
Obligations of states and political subdivisions	201,115		—		201,115		—
Marketable equity securities	45,339		3,227		42,112		—
Total available for sale securities	$	1,059,169	$	3,227	$	909,872	$	146,070
Mortgage loan derivative assets	$	230	$	—	$	230	$	—
Mortgage loan derivative liabilities	20		—		20		—
Loans held for sale	10,136		—		10,136		—
Mortgage servicing rights	7,074		—		—		7,074
Interest rate swap assets	12,680		—		12,680		—
Interest rate swap liabilities	16,655		—		16,655		—

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		—

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Notes to Consolidated Financial Statements — (Continued)

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,
	2015			2014
	(In thousands)
Balance of available for sale securities, at beginning of period	$	137,207		$	72,963
Purchases	10,794			72,115
Principal payments	(1,392		)	(6,915		)
Total unrealized gains (losses) included in other comprehensive income	(539		)	(956		)
Balance at end of period	$	146,070		$	137,207

Balance of mortgage servicing rights at beginning of period	$	4,729		$	4,103
Addition of Legacy United mortgage servicing rights	—			764
Issuances	2,931			1,131
Change in fair value recognized in net income	(586		)	(1,269		)
Balance at end of period	$	7,074		$	4,729

The following valuation methodologies are used for assets that are recorded at fair value on a recurring basis.

Available for Sale Securities: 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 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 (“MSR”) 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, 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.

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Notes to Consolidated Financial Statements — (Continued)

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, 2015 :



(Dollars in thousands)
	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Asset-backed securities	$	144,513	Discounted Cash Flow	Discount Rates	1.5% - 6.7% (5.5%)
				Cumulative Default %	6.1% - 11.8% (8.7%)
				Loss Given Default	1.8% - 3.9% (2.8%)

Corporate debt - pooled trust	$	1,557	Discounted Cash Flow	Discount Rate	7.0% (7.0%)
preferred security				Cumulative Default %	2.8% - 42.1% (12.2%)
				Loss Given Default	85% - 100% (94.2%)

Mortgage servicing rights	$	7,074	Discounted Cash Flow	Discount Rate	9.0% - 18.0% (10.5%)
				Cost to Service	$50 - $110 ($61.37)
				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 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 obligations, 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.

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Notes to Consolidated Financial Statements — (Continued)

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 : 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. There were no liabilities measured at fair value on a non-recurring basis at December 31, 2015 and 2014 . The following tables detail the assets carried at fair value on a non-recurring basis at December 31, 2015 and 2014 and indicate the fair value hierarchy of the valuation technique utilized by the Company to determine fair value:



	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
December 31, 2015
Impaired loans	$	2,096	$	—	$	—	$	2,096
Other real estate owned	755		—		—		755
Total	$	2,851	$	—	$	—	$	2,851

December 31, 2014
Impaired loans	$	2,863	$	—	$	—	$	2,863
Other real estate owned	2,239		—		—		2,239
Total	$	5,102	$	—	$	—	$	5,102

The following is a description of the valuation methodologies used for 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 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

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Notes to Consolidated Financial Statements — (Continued)

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,
	2015			2014			2013
	(In thousands)
Impaired loans	$	(274	)	$	(1,865	)	$	(977	)
Other real estate owned	(218		)	(409		)	(85		)
Total	$	(492	)	$	(2,274	)	$	(1,062	)

Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used by management to estimate the fair value of each additional 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.

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.

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.

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Notes to Consolidated Financial Statements — (Continued)

As of December 31, 2015 and 2014 , the carrying value and estimated fair values of the Company’s financial instruments are as described below:



	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(In thousands)
December 31, 2015
Financial assets:
Cash and cash equivalents	$	95,176	$	95,176	$	—	$	—	$	95,176
Available for sale securities	1,059,169		3,227		909,872		146,070		1,059,169
Held to maturity securities	14,565		—		15,683		—		15,683
Loans held for sale	10,136		—		10,136		—		10,136
Loans receivable-net	4,587,062		—		—		4,629,243		4,629,243
FHLBB stock	51,196		—		—		51,196		51,196
Accrued interest receivable	15,740		—		—		15,740		15,740
Derivative assets	12,910		—		12,910		—		12,910
Mortgage servicing rights	7,074		—		—		7,074		7,074
Financial liabilities:
Deposits	4,437,071		—		—		4,436,456		4,436,456
Mortgagors’ and investors’ escrow accounts	13,526		—		—		13,526		13,526
FHLBB advances and other borrowings	1,099,020		—		1,096,452		—		1,096,452
Derivative liabilities	16,675		—		16,675		—		16,675

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

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 16.	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

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contribute to the success of the Company. The 2006 Plan allows for the issuance of a maximum of 349,830 restricted stock shares and 1,326,467 stock options. There were no restricted shares or stock options granted from the Plan in 2015 .

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. There were 27,330 restricted shares and no stock option awards granted from the 2012 Plan in 2015 . None of the restricted shares granted 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.”

On October 29, 2015, a special meeting of stockholders was held and the shareholders approved the 2015 Omnibus Stock Incentive Plan (the “2015 Plan”). The 2015 Plan allows the Company to use stock options, stock awards, and performance awards to attract, retain and reward performance of qualified employees and others who contribute to the success of the Company. The 2015 Plan reserves a total of up to 4,050,000 shares (the “Cap”) of Company common stock for issuance upon the grant or exercise of awards made pursuant to the 2015 Plan. Of these shares, the Company may grant shares in the form of restricted stock, performance shares and other stock-based awards and may grant stock options. However, the number of shares issuable will be adjusted by a “fungible ratio” of 2.35 . This means that for each share award other than a stock option share or a stock appreciation right share, each 1 share awarded shall be deemed to be 2.35 shares awarded. The 2015 Plan became effective on October 29, 2015 by the approval of the Company’s shareholders, and upon shareholder approval no other awards may be granted from the 2006 Plan, the 2012 Plan, or the Legacy United Stock Plans. As of December 31, 2015, there were 3,503,590 awards remaining available for future grants under the 2015 Plan.

Total employee and Director share-based compensation expense recognized for stock options and restricted stock was $1.1 million with a related tax benefit recorded of $388,000 for the year ended December 31, 2015 . 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 $252,000 , the amount for officer share-based compensation expense recognized (in the Consolidated Statements of Net Income as salaries and employee benefit expense) was $707,000 , and merger and acquisition expense (in the Consolidated Statements of Net Income as non-interest expense) was $117,000 due to the acceleration of vesting as a result of an executive officer exercising a merger related change in control agreement.

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 $855,000 , 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 benefits 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 all outstanding stock options and restricted stock which occurred on the effective date of the Merger.

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.

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 and 2012 Plans 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. The 2015 Plan does not accelerate upon retirement. 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 and 2015 Plans are expensed over the normal vesting period as established by each plan.

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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, 2015 :



	Number of Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2014	3,390,469		$	10.70
Granted	—		—
Exercised	(678,363	)	9.75			2.4
Forfeited, expired, or canceled	(62,371	)	13.48
Outstanding at December 31, 2015	2,649,735		$	10.88	5.4	$	5.7
Stock options vested and exercisable at December 31, 2015	2,446,573		$	10.64	5.2	$	5.7

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.

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.

As of December 31, 2015 , the unrecognized cost related to the stock options awarded under the 2006 and 2012 Plans of $313,000 will be recognized over a weighted-average period of 2.7 years.

The Company used the Black-Scholes option pricing model for estimating the fair value of stock options granted. There were no stock options granted in 2015. The weighted-average estimated fair values of stock option grants and the assumptions that were used in calculating such fair values for the years 2014 and 2013 were based on estimates at the date of grant as follows:



	2014			2013
Weighted per share average fair value of options granted	$	1.95		$	1.80
Assumptions:
Risk-free interest rate	1.94		%	1.61		%
Expected volatility	19.90		%	20.33		%
Expected dividend yield	2.92		%	3.03		%
Expected life of options granted	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.

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.

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Notes to Consolidated Financial Statements — (Continued)

The following table presents the activity for unvested restricted stock for the year ended December 31, 2015 :



	Number of Shares		Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2014	124,536		$	13.66
Granted	259,845		13.08
Vested	(57,233	)	13.63
Forfeited	(1,135	)	13.22
Unvested as of December 31, 2015	326,013		$	13.20

The fair value of restricted shares that vested during the years ended December 31, 2015, 2014 and 2013 was $780,000 , $3.0 million, and $2.0 million, respectively. The weighted-average grant date fair value of restricted stock granted during the years ended December 31, 2015, 2014 and 2013 was $13.08 , $13.64 and $13.20 , respectively.

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, 2015 , there was $3.4 million of total unrecognized compensation cost related to unvested restricted stock which is expected to be recognized over a weighted-average period of 2.4 years.

Of the remaining unvested restricted stock, 99,811 shares will vest in 2016, 105,854 shares will vest in 2017 and 120,348 shares will vest in 2018. All unvested restricted stock shares are expected to vest.

Employee Stock Ownership Plan:

In connection with 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 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.

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 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 4.50% as of December 31, 2015 . As of December 31, 2015 , the outstanding balance for the loan was $6.3 million , with a remaining term of 25 years. Principal payments of $721,000 have been made on the loan since inception. Dividends paid in 2015 totaling $273,000 on all unallocated ESOP shares were offset to the interest payable on the note owed by the Company.

The total ESOP expense was $299,000 , $1.7 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013 , respectively. At December 31, 2015 , there were 114,066 allocated and 570,329 unallocated ESOP shares and the unallocated shares had an aggregate fair value of $7.3 million .

Effective January 1, 2014, the Company merged its ESOP with its Defined Contribution Plan, or 401(k). In addition to employer matching cash contributions 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.

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Notes to Consolidated Financial Statements — (Continued)



Note 17.	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 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 plan and post-retirement benefit plans for the years ended December 31, 2015, 2014 and 2013 :



	Qualified Pension Plan December 31,									Supplemental Executive Retirement Plans December 31,									Other Post- Retirement Benefits December 31,
	2015			2014			2013			2015			2014			2013			2015			2014			2013
	(In thousands )
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	30,571		$	24,224		$	27,226		$	1,368		$	1,191		$	1,199		$	2,218		$	1,926		$	2,547
Service cost	60			75			50			24			25			38			23			19			35
Interest cost	1,162			1,145			1,048			40			54			48			80			85			91
Plan participants’ contributions	—			—			—			—			—			—			28			26			26
Actuarial loss (gain)	(3,821		)	6,460			(3,291		)	(79		)	166			(159		)	(413		)	271			(661		)
Benefits paid and administration expenses	(857		)	(1,333		)	(809		)	(31		)	(484		)	(28		)	(95		)	(109		)	(112		)
Curtailments, settlements, special termination benefits	—			—			—			(393		)	416			93			—			—			—
Benefit obligation at end of year	$	27,115		$	30,571		$	24,224		$	929		$	1,368		$	1,191		$	1,841		$	2,218		$	1,926
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	26,519		$	26,258		$	22,782		$	—		$	—		$	—		$	—		$	—		$	—
Actual return (loss) on plan assets	(422		)	1,594			4,285			—			—			—			—			—			—
Employer contributions	—			—			—			424			484			28			67			83			86
Plan participants’ contributions	—			—			—			—			—			—			28			26			26
Benefits paid and administration expenses	(857		)	(1,333		)	(809		)	(31		)	(484		)	(28		)	(95		)	(109		)	(112		)
Settlements	—			—			—			(393		)	—			—			—			—			—
Fair value of plan assets at end of year	$	25,240		$	26,519		$	26,258		$	—		$	—		$	—		$	—		$	—		$	—
Funded Status:
Overfunded (underfunded) status at end of year	$	(1,875	)	$	(4,052	)	$	2,034		$	(929	)	$	(1,368	)	$	(1,191	)	$	(1,841	)	$	(2,218	)	$	(1,926	)
Amounts Recognized in the Consolidated Statements of Condition
Accrued expenses and other liabilities	$	(1,875	)	$	(4,052	)	$	2,034		$	(929	)	$	(1,368	)	$	(1,191	)	$	(1,841	)	$	(2,218	)	$	(1,926	)

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Notes to Consolidated Financial Statements — (Continued)

The components of accumulated other comprehensive loss related to pensions and other post-retirement benefits and related tax effects at December 31, 2015, 2014 and 2013 are summarized below:



	Qualified Pension Plan December 31,									Supplemental Executive Retirement Plans December 31,									Other Post- Retirement Benefits December 31,
	2015			2014			2013			2015			2014			2013			2015			2014			2013
	(In thousands )
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:
Prior service cost	$	—		$	—		$	—		$	85		$	92		$	273		$	—		$	—		$	—
Net loss (gain)	7,050			9,362			2,625			79			202			103			(134		)	297			15
Total accumulated other comprehensive loss (income)	7,050			9,362			2,625			164			294			376			(134		)	297			15
Deferred tax (asset) liability	(2,540		)	(3,278		)	(844		)	(59		)	(69		)	(131		)	48			(97		)	(5		)
Net impact on accumulated other comprehensive loss	$	4,510		$	6,084		$	1,781		$	105		$	225		$	245		$	(86	)	$	200		$	10

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, 2015, 2014 and 2013 :



	Qualified Pension Plan									Supplemental Executive Retirement Plans									Other Post- Retirement Benefits
	2015			2014			2013			2015			2014			2013			2015			2014			2013
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	60		$	75		$	50		$	24		$	25		$	38		$	23		$	19		$	35
Interest cost	1,162			1,145			1,048			40			54			48			80			85			91
Expected return on plan assets	(1,824		)	(1,595		)	(1,734		)	—			—			—			—			—			—
Amortization of net actuarial losses (gains)	738			(277		)	784			3			2			5			18			(10		)	66
Amortization of prior service cost	—			—			—			7			12			23			—			—			—
Settlement charge	—			—			—			39			651			199			—			—			—
Net periodic benefit cost (income)	136			(652		)	148			113			744			313			121			94			192

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
Net loss (gain)	(1,574		)	6,460			(5,842		)	(80		)	100			(159		)	(413		)	271			(661		)
Change in prior service cost (credit)	—			—			—			—			(168		)	(105		)	—			—			—
Amortization of net (loss) gain	(738		)	277			(784		)	(3		)	(2		)	(5		)	(18		)	10			(66		)
Amortization of prior service cost	—			—			—			(7		)	(12		)	(23		)	—			—			—
Loss recognized due to settlement	—			—			—			(39		)	—			—			—			—			—
Total recognized in other comprehensive income (loss)	(2,312		)	6,737			(6,626		)	(129		)	(82		)	(292		)	(431		)	281			(727		)
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(2,176	)	$	6,085		$	(6,478	)	$	(16	)	$	662		$	21		$	(310	)	$	375		$	(535	)

Amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during 2016 are $495,000 , $7,000 and $0 for the qualified pension plan, supplemental executive retirement plan and other post-retirement benefits plan, respectively.

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Notes to Consolidated Financial Statements — (Continued)

Weighted-average assumptions used to determine pension benefit obligations at December 31, follow:



	Qualified Pension				Supplemental Retirement Plans				Other Post-Retirement Benefits
	2015		2014		2015		2014		2015		2014
Discount rate	4.45	%	3.85	%	4.30	%	3.70	%	4.25	%	3.70	%
Expected return on plan assets	7.00	%	7.00	%	—	%	—	%	—	%	—	%
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
	2015		2014		2013		2015		2014		2013		2015		2014		2013
Discount rate	3.85	%	4.80	%	3.90	%	3.70	%	4.70	%	3.80	%	3.70	%	4.55	%	3.65	%
Expected return on plan assets	7.00	%	7.25	%	8.00	%	—	%	—	%	—	%	—	%	—	%	—	%
Rate of compensation increase	—	%	—	%	—	%	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 $1.8 million and $2.2 million as of December 31, 2015 and 2014 , respectively.

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 7% at December 31, 2015 . 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	$	2,039	$	(1,675	)
Effect on total service and interest	101		(80		)

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Notes to Consolidated Financial Statements — (Continued)

Plan Assets

The fair value of major categories of pension plan assets as of December 31, 2015 and 2014 are as follows:



	Total Fair Value		Percent
	(In thousands)
December 31, 2015
Fixed income funds	$	10,135	40	%
Domestic equity funds	7,557		30
International equity funds	4,572		18
Hedge funds	2,697		11
Money market funds	279		1
Total	$	25,240	100	%

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	%

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 2015 targeted allocation for fixed income, domestic equity securities, international equity securities, and hedge funds was 40% , 30% , 20% and 10% , 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 2015 and 2014. The Company does not expect to make any contributions to the Qualified Pension Plan in 2016.

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Notes to Consolidated Financial Statements — (Continued)

Estimated Future Benefit Payments

The benefit payments, which reflect expected future service, as appropriate, expected to be paid are as follows:



	Qualified Pension Plan		Supplemental Executive Retirement Plans		Other Post- Retirement Benefits
	(In thousands)
Years Ending December 31,
2016	$	930	$	28	$	100
2017	980		28		110
2018	1,060		41		100
2019	1,170		41		110
2020	1,300		41		110
Years 2021-2025	7,070		265		570

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, 2015 and 2014 was 114.4% and 120.4% , respectively, per the actuarial valuation reports. Market value of plan assets reflects contributions received through June 30, 2015.

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 made in 2015, and a $50,000 contribution 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.

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 provides additional benefits to the impacted employees defined benefit 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 $2.1 million , $515,000 , and $1.5 million related to the plan for the years ended December 31, 2015, 2014 and 2013 , respectively.

132

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



Note 18.	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, 2015 and 2014 that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2015 , 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, 2015 and 2014 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, 2015 and 2014 :



	Actual				Minimum For Capital Adequacy Purposes				Minimum To Be Well- Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
United Bank:
December 31, 2015
Total capital to risk weighted assets	$	558,969	11.2	%	$	398,552	8.0	%	$	498,190	10.0	%
Common equity tier 1 capital to risk weighted assets	523,786		10.5		224,266		4.5		323,940		6.5
Tier 1 capital to risk weighted assets	523,786		10.5		299,022		6.0		398,695		8.0
Tier 1 capital to total average assets	523,786		8.9		234,882		4.0		293,602		5.0

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

United Financial Bancorp, Inc.:
December 31, 2015
Total capital to risk weighted assets	$	628,915	12.5	%	$	401,542	8.0	%	N/A		N/A
Common equity tier 1 capital to risk weighted assets	518,732		10.3		225,972		4.5		N/A		N/A
Tier 1 capital to risk weighted assets	518,732		10.3		301,296		6.0		N/A		N/A
Tier 1 capital to total average assets	518,732		8.9		233,926		4.0		N/A		N/A

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

133

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Our ability to pay dividends to our stockholders is substantially dependent upon the Bank’s ability to pay dividends to the Company. The Federal Reserve guidance sets forth the supervisory expectation that bank holding companies will inform and consult with Federal Reserve staff in advance of issuing a dividend that exceeds earnings for the quarter and should not pay dividends in a rolling four quarter period in an amount that exceeds net income for that period. Federal law also prohibits the Bank from paying dividends that would be greater than its undivided profits after deducting statutory bad debt in excess of its allowance for loan losses. 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. 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, 2015 , $30.8 million was available for the payment of dividends. 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.

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 began 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:



	December 31,
	2015			2014
	(In thousands)
Total consolidated equity	$	625,521		$	602,408
Adjustments:
Decrease (increase) in equity under United Financial Bancorp, Inc.	5,054			8,252
Accumulated other comprehensive loss	10,879			6,490
Disallowed goodwill and other intangible assets	(116,816		)	(121,637		)
Disallowed deferred tax assets	(852		)	(7,800		)
Tier 1 capital	523,786			487,713
Allowance for loan losses and off-balance sheet credit losses	35,124			26,141
Unrealized gains on available-for-sale securities includible in total risk-based capital	59			106
Total risk-based capital	$	558,969		$	513,960



Note 19.	ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss, included in stockholders’ equity, are as follows:

134



	December 31, 2015			December 31, 2014
	(In thousands)
Benefit plans:
Unrecognized net actuarial loss	$	(7,080	)	$	(9,952	)
Tax effect	2,551			3,443
Net-of-tax amount	(4,529		)	(6,509		)
Securities available for sale:
Net unrealized gain (loss)	(5,821		)	1,030
Tax effect	2,088			(374		)
Net-of-tax amount	(3,733		)	656
Interest rate swaps:
Net unrealized loss	(4,092		)	(996		)
Tax effect	1,475			359
Net-of-tax amount	(2,617		)	(637		)
	$	(10,879	)	$	(6,490	)



Note 20.	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, 2015, 2014 and 2013 :



	Years Ended December 31,
(In thousands, except share data)	2015		2014		2013
Net income	$	49,640	$	6,782	$	14,227
Adjusted weighted-average common shares outstanding	49,495,381		43,491,441		29,471,397
Less: average number of treasury shares	—		—		2,618,178
Less: average number of unvested ESOP award shares	582,574		662,347		791,277
Weighted-average basic shares outstanding	48,912,807		42,829,094		26,061,942
Dilutive effect of stock options	472,759		440,423		364,278
Weighted-average diluted shares	49,385,566		43,269,517		26,426,220
Net income per share:
Basic	$	1.01	$	0.16	$	0.55
Diluted	$	1.00	$	0.16	$	0.54

For the years ended December 31, 2015, 2014 and 2013 , respectively, 638,000 , 328,000 , and 373,000 options were anti-dilutive and therefore excluded from the earnings per share calculation.



Note 21.	OTHER 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.

135

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, 2015 :




	(In thousands)
2016	$	5,145
2017	4,831
2018	4,487
2019	4,388
2020	4,093
Thereafter	22,046
	$	44,990

Total rental expense charged to operations for all cancelable and non-cancelable operating leases was $5.1 million , $5.8 million and $2.6 million for the years ended December 31, 2015, 2014 and 2013 , 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, 2015 :



	(In thousands)
2016	$	522
2017	522
2018	490
	$	1,534

Rental income is recorded as a reduction to occupancy and equipment expense in the accompanying Consolidated Statements of Net Income and amounted to $490,000 , $407,000 and $318,000 for the years ended December 31, 2015, 2014 and 2013 , respectively.

Legal Matters: The Company is involved in various legal proceedings that have arisen in the normal course of business. The Company is not involved in any legal proceedings deemed to be material as of December 31, 2015 .

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.

136

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

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, 2015 and 2014 :



	December 31,
	2015		2014
	(In thousands)
Commitments to extend credit:
Commitment to grant loans	$	219,407	$	128,766
Undisbursed construction loans	103,140		144,118
Undisbursed home equity lines of credit	320,140		321,346
Undisbursed commercial lines of credit	302,700		295,639
Standby letters of credit	9,477		12,547
Unused credit card lines	6,725		—
Unused checking overdraft lines of credit	1,293		1,304
Total	$	962,882	$	903,720

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

The Company invests in partnerships, including low income housing tax credit, new markets housing tax credit, and alternative energy tax credit partnerships. The net carrying balance of these investments totaled $21.4 million at December 31, 2015 and is included in other assets in the consolidated statement of condition. At December 31, 2015 , the Company was contractually committed under these limited partnership agreements to make additional capital contributions of $6.3 million , which constitutes our maximum potential obligation to these partnerships.

137

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)



Note 22.	SELECTED QUARTERLY CONSOLIDATED INFORMATION (UNAUDITED)

The Company’s quarterly results of operations were as follows:



	2015								2014
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter			Third Quarter			Second Quarter			First Quarter
	(In thousands, except per share data)
Interest and dividend income	$	49,714	$	49,625	$	48,711	$	48,295	$	48,209		$	47,201		$	40,767		$	19,702
Interest expense	9,021		7,982		7,808		6,952		6,317			5,008			3,888			2,794
Net interest income	40,693		41,643		40,903		41,343		41,892			42,193			36,879			16,908
Provision for loan losses	3,780		3,252		4,462		1,511		4,333			2,633			2,080			450
Net interest income after provision for loan losses	36,913		38,391		36,441		39,832		37,559			39,560			34,799			16,458
Non-interest income	8,463		7,818		9,371		6,835		3,001			4,076			6,319			3,209
Other non-interest expense	35,305		31,876		30,357		30,657		45,076			34,922			46,177			18,257
Income (loss) before income taxes	10,071		14,333		15,455		16,010		(4,516		)	8,714			(5,059		)	1,410
Provision (benefit) for income taxes	169		952		2,123		2,985		(5,937		)	(1,271		)	512			463
Net income (loss)	$	9,902	$	13,381	$	13,332	$	13,025	$	1,421		$	9,985		$	(5,571	)	$	947

Earnings per share:
Basic	$	0.20	$	0.27	$	0.27	$	0.27	$	0.03		$	0.19		$	(0.13	)	$	0.04
Diluted	$	0.20	$	0.27	$	0.27	$	0.26	$	0.03		$	0.19		$	(0.13	)	$	0.04
Stock Price (per share):
High	$	14.16	$	13.87	$	13.91	$	14.47	$	14.67		$	13.91		$	14.31		$	14.63
Low	$	12.45	$	12.14	$	12.25	$	12.00	$	12.66		$	12.01		$	12.21		$	12.56

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 related expenses of $1.8 million , $20.9 million , $4.0 million , and $10.1 million , respectively. There were no merger related expenses in the first three quarters of 2015, and $1.6 million in the fourth quarter of 2015.



Note 23.	PARENT COMPANY FINANCIAL INFORMATION

The following represents the Company’s Condensed Statements of Condition as of December 31, 2015 and 2014 and Condensed Statements of Net Income and Cash Flows for the years ended December 31, 2015, 2014 and 2013 which should be read in conjunction with the Consolidated Financial Statements and related notes:

138

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Condensed Statements of Condition



	At December 31,
	2015		2014
	(In thousands)
Assets:
Cash and due from banks	$	28,825	$	51,519
Investment in United Bank	630,575		610,660
Due from United Bank	9,374		15,677
Other assets	37,938		5,594
Total Assets	$	706,712	$	683,450
Liabilities and Stockholders’ Equity:
Accrued expenses and other liabilities	$	81,191	$	81,042
Stockholders’ equity	625,521		602,408
Total Liabilities and Stockholders’ Equity	$	706,712	$	683,450

Condensed Statements of Net Income



	For the Years Ended December 31,
	2015			2014			2013
	(In thousands)
Interest and dividend income:
Interest on investments	$	103		$	35		$	1
Interest expense	4,682			1,353			—
Net interest income (expense)	(4,579		)	(1,318		)	1
Non-interest income	434			73			—
Non-interest expenses:
General and administrative	4,714			7,257			5,528
Total non-interest expense	4,714			7,257			5,528
Loss before tax benefit and equity in undistributed net income of United Bank	(8,859		)	(8,502		)	(5,527		)
Income tax benefit	3,094			2,566			1,602
Loss before equity in undistributed net income of United Bank	(5,765		)	(5,936		)	(3,925		)
Equity in undistributed net income of United Bank	55,405			12,718			18,152
Net income	$	49,640		$	6,782		$	14,227

139

United Financial Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements — (Continued)

Condensed Statements of Cash Flows



	For the Years ended December 31,
	2015			2014			2013
	(In thousands)
Cash flows from operating activities:
Net income	$	49,640		$	6,782		$	14,227
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of purchase accounting marks, net	75			41			—
Amortization of subordinated debt issuance costs, net	127			34			—
Share-based compensation expense	1,076			3,957			2,665
ESOP expense	299			1,727			2,064
Undistributed income of United Bank	(55,405		)	(12,718		)	(18,152		)
Deferred tax provision	188			959			555
Tax benefit of stock-based awards	317			(820		)	(65		)
Net change in:
Due from United Bank	6,491			(5,395		)	(850		)
Other assets	(32,532		)	3,582			(3,190		)
Accrued expenses and other liabilities	(370		)	(1,831		)	1,124
Net cash used in operating activities	(30,094		)	(3,682		)	(1,622		)
Cash flows from investing activities:
Dividends from United Bank	30,913			13,310			11,197
Cash acquired from United Financial Bancorp, Inc., net	—			6,546			—
Net cash provided by investing activities	30,913			19,856			11,197
Cash flows from financing activities:
Proceeds from debt offering, net of expenses	—			73,733			—
Common stock repurchased	(5,171		)	(47,249		)	(30,028		)
Proceeds from the exercise of stock options	4,765			2,246			805
Cancellation of shares for tax withholding	(311		)	(1,367		)	(357		)
Tax benefit of share-based awards	(317		)	820			65
Cash dividends paid on common stock	(22,479		)	(18,008		)	(10,453		)
Net cash provided by (used in) financing activities	(23,513		)	10,175			(39,968		)
Net increase (decrease) in cash and cash equivalents	(22,694		)	26,349			(30,393		)
Cash and cash equivalents — beginning of year	51,519			25,170			55,563
Cash and cash equivalents — end of year	$	28,825		$	51,519		$	25,170
Supplemental disclosures of cash flow information:
Cash paid for income taxes (net)	$	(6,744	)	$	3,599		$	6,228

140

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, 2015 . 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, 2015 .

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.

141

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 2016 Annual Meeting of Shareholders, to be filed within 120 days following December 31, 2015 .

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

142

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 (Loss)	77
	Consolidated Statements of Changes in Stockholders’ Equity	79
	Consolidated Statements of Cash Flows	80
	Notes to Consolidated Financial Statements	82



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 1, 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 1, 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)

143




	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 1, 2016 (replaces former Exhibit 10.12.1) filed herewith
	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 as amended and restated by and among United Financial Bancorp, Inc., United Bank and Eric R. Newell, effective January 1, 2016 (replaces former Exhibit 10.17) filed herewith
	10.18		Employment Agreement as amended and restated by and among United Financial Bancorp, Inc., United Bank and David Paulson, effective January 1, 2016 (replaces former Exhibit 10.18) filed herewith
	10.19		Form of United Financial Bancorp, Inc. Executive Change in Control Severance Plan, effective January 21, 2015 (incorporated herein by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 9, 2015)
	10.20		United Financial Bancorp, Inc. 2015 Omnibus Stock Incentive Plan (incorporated herein by reference to Appendix A in the Definitive Proxy Statement on Form 14A for the Company filed September 8, 2015)
	14.0		United Financial Bancorp, Inc., United Bank, Standards of Conduct Policy Employees (incorporated herein by reference to Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed on March 9, 2015)
	21.0		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 (Loss); (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

144

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

By:		/s/ Eric R. Newell
		Eric R. Newell
		Executive Vice President, Chief
		Financial Officer and Treasurer

Date: March 7, 2016

145

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 ( Principal Executive Officer )	March 7, 2016
William H.W. Crawford, IV

/s/ Eric R. Newell	Executive Vice President, Chief Financial Officer and Treasurer ( Principal Financial and Accounting Officer )	March 7, 2016
Eric R. Newell

/s/ Paula A. Aiello	Director	March 7, 2016
Paula A. Aiello

/s/ Michael A. Bars	Director	March 7, 2016
Michael A. Bars

/s/ Michael F. Crowley	Director	March 7, 2016
Michael f. Crowley

/s/ Kristen A. Johnson	Director	March 7, 2016
Kristen A. Johnson

/s/ Carol A. Leary	Director	March 7, 2016
Carol A. Leary

/s/ Raymond H. Lefurge, Jr.	Vice Chairman	March 7, 2016
Raymond H. Lefurge, Jr.

/s/ Kevin E. Ross	Director	March 7, 2016
Kevin E. Ross

/s/ Robert A. Stewart, Jr.	Chairman	March 7, 2016
Robert A. Stewart, Jr.

146

EXHIBIT 10.17

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made effective January 1, 2016 (the “Effective Date”) by and between United Financial Bancorp, Inc. , a Connecticut corporation (the “Company”), United Bank (the “Bank”) and collectively with the Company, the “Employer”) and Eric R. Newell (“Executive”). The Company and Executive are collectively referred to herein as the “Parties,” and individually referred to as a “Party.”

RECITALS:

WHEREAS, the Company, the Bank and Executive mutually desire to enter into an employment agreement setting forth the terms and conditions of Executive’s employment with the Company.

NOW, THEREFORE , in consideration of the mutual covenants herein contained, it is AGREED as follows:

1. Purpose . The purpose of this Agreement is to set forth the terms and conditions of Executive’s employment with the Employer. This Agreement represents both Parties’ intentions with respect to the terms and conditions of Executive’s employment with the Employer.

2. Definitions . For the purposes of this Agreement, the following words shall have the following meanings:

“ Affiliate ” means any entity that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, another entity.

“ Annual Incentive Compensation Plan ” or “ AICP” means any Employer-sponsored annual incentive compensation cash bonus plan in which Executive participates, as in effect from time to time.

“ Annual Cash Compensation ” means the sum of (i) Executive’s Base Annual Salary at the rate in effect on Executive’s Date of Termination and (ii) Executive’s target AICP bonus opportunity for the calendar year in which Executive’s Date of Termination occurs; provided, however , that if the target bonus opportunity has not been established for such year, the AICP amount under this definition shall be calculated using the target bonus opportunity from the immediately preceding calendar year.

“ Base Annual Salary ” means Executive’s base annual salary as described in Section 5(a) hereof.

“ Board ” mean the board of directors of the Company and/or of the Bank, as the context requires and, where appropriate, includes any committee thereof.

“ Cause ” means termination on account of the occurrence of any of the following events:

(i) Executive’s malfeasance or nonfeasance in the performance of the material duties or responsibilities of his or her position with the Employer or any of its subsidiaries, or failure to timely carry out any material lawful and reasonable directive of the Employer, in each case if not remedied within fifteen (15) days after receipt of written notice from the Employer describing such malfeasance, nonfeasance or failure;

(ii) Executive’s embezzlement or misappropriation of any material funds or property of the Employer or any of its subsidiaries or of any material corporate opportunity of the Employer or any of its subsidiaries;

(iii) the conduct by Executive which is a material violation of this Agreement or any other agreement between Executive and the Employer 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 Employer describing such conduct;

(iv) any material violation of any generally applicable written policy of the Employer previously provided to Executive, 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 Employer describing such conduct;

(v) the commission by Executive of an act of fraud or willful misconduct or Executive’s gross negligence, in each case that has caused or is reasonably expected to result in material injury to the Employer or any of its subsidiaries; or

(vi) Executive’s conviction of any felony or of any misdemeanor involving moral turpitude.

Any termination for Cause of Executive shall be effective only upon (i) a determination by the majority of the Board in good faith that Cause exists, (ii) receipt by Executive of a notice in accordance with Section 12 stating in reasonable detail the facts and circumstances alleged to provide a basis for termination for Cause and (iii) Executive 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 Executive’s receipt of the notice set forth in (ii) above).

“ Change in Control ” shall be deemed to have occurred if, as the result of a single transaction or a series of transactions, an 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;

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Compensation Committee ” means the compensation committee of the Company Board.

“ Competing Business ” shall mean any entity (other than the Employer and its Affiliates) that is conducting business that is the same or substantially the same as the business of the Employer.

“ Confidential Information ” means information (i) disclosed to or known by Executive as a consequence of or through his employment with the Company; (ii) not generally known outside the Company; and (iii) which relates to any aspect of the Company, its Affiliates or their business. “Confidential Information” includes, but is not limited to, trade secrets, proprietary information, business plans, marketing plans, financial information, compensation and benefit information, cost and pricing information, customer contacts, suppliers, vendors, and information provided to the Company or its Affiliates by a third party under restrictions against disclosure or use by the Company, its Affiliates or others.

“ Date of Termination ” means the date of termination of Executive’s employment by the Company and that is a “Separation from Service” within the meaning of Code Section 409A, which means a termination of Executive’s employment with the Company (and its controlled group within the meaning of Treasury Regulation §1.409A-1(h)(3)); provided, however , that the Company and Executive reasonably anticipate that no further services will be performed after the termination date or that the level of bona fide services Executive will perform after such date (whether as an employee or an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period or the full period of service to the Company if Executive has been providing services to the Company for less than 36 months.

“ Disability ” or “ Disabled ” means any physical or mental incapacity, disease or affliction, as determined by a legally qualified medical practitioner selected by the Company which prevents Executive to a substantial degree from performing his obligations after reasonable accommodation from the Company.

“ Equity-Based Awards ” means stock options, restricted stock, restricted stock units, performance vesting stock, performance stock units, and any other award granted by the Company, which derives its value based upon the Company’s common stock, regardless whether such award is ultimately intended to be settled in stock or cash.

“ Good Reason ” means the occurrence of any one of the following without Executive’s prior written consent:

(i) any material adverse alteration (including an adverse change to Executive’s upward reporting requirements) or material diminution in Executive’s authority, duties or responsibilities under this Agreement;

(ii) a reduction in Executive’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 Employer’s senior executives;

(iii) a relocation of the offices at which Executive is principally employed, which relocation increases the distance between Executive’s residence and such offices by more than thirty five (35) miles; or

(iv) the Employer’s failure to obtain assumption of this Agreement by a successor.

“ Long Term Incentive Plan ” or “ LTIP ” means any plan of the Company pursuant to which Executive may receive Equity Based Awards or cash awards earned over a multi-year period, as in effect from time to time.

“ Post-Termination Period ” means the twenty four (24) month period following Executive’s Date of Termination.

“ Retirement ” means a termination of Executive’s employment under circumstances as shall constitute retirement from the Employer based on age and/or years of employment, as determined by the Board, in its sole discretion, in accordance with written policies adopted by the Board from time to time. In absence of the adoption of such policy, Executive’s resignation on or after attainment of age 65 shall be deemed to be “Retirement” for purposes of this Agreement.

“ Territory ” means any county in which the Bank maintains a business office.

3. Term . This Agreement shall become effective on the Effective Date and shall continue in effect through the second anniversary of the Effective Date, unless earlier terminated as hereinafter provided. Commencing on the second anniversary of the Effective Date and each anniversary of the Effective Date thereafter, the term of this Agreement shall automatically be extended for one (1) additional year unless, unless, no later than sixty (60) days prior to the applicable anniversary date, the Employer or Executive gives written notice to the other Party that such Party does not wish to extend the term of this Agreement, in which case this Agreement shall terminate on the applicable anniversary date.

4. Duties and Responsibilities . Commencing on the Effective Date of this Agreement, Executive shall diligently render his services to the Company as Executive Vice President, Chief Financial Officer in a manner customary for such officers or equivalent positions, and shall use his best efforts and good faith in fulfilling such responsibilities and in accomplishing such directives. Executive agrees to devote his full-time efforts, abilities, and attention to the business of the Company, and shall not engage in any activities which will interfere with such efforts. Executive shall well and faithfully serve the Company during the continuance of his employment hereunder and shall use his best efforts to promote the interests of the Company.

5. Compensation and Benefits . In return for the services to be provided by Executive pursuant to this Agreement, the Company agrees to pay Executive as follows:

(a) Base Annual Salary . Executive shall receive a Base Annual Salary annually of $317,000 payable in accordance with the Employer’s customary payroll practices. The annual salary to be paid by the Employer to Executive shall be reviewed at least annually and may from time to time be increased (but may not be decreased) any such increased amount shall then be referred to as “Base Annual Salary” for the purposes of this Agreement.

(b) Annual Incentive Compensation Plan . Executive shall be eligible to participate in any AICP, subject to the terms of the then applicable plan. AICP awards for each calendar year shall be payable in the following calendar year as determined by the Board or Compensation Committee.

(c) Long Term Incentive Plan . Executive shall participate in the Long Term Incentive Plan of the Company, as in effect from time to time, as determined by and on such terms approved by the Board or the Compensation Committee, in its sole discretion.

(d) Benefits . Executive shall be entitled to participate in the Company’s various employee benefit plans as the same may be constituted from time to time in the same manner as other senior management executives of the Company, subject to the terms and conditions of the plans, as same may be amended or terminated pursuant to their terms from time to time as determined by the Company in its sole discretion.

(e) Expenses . Executive shall be reimbursed by the Employer for all reasonable business expenses incurred by Executive in performance of his duties hereunder upon the submission of appropriate documentation for such expenses in accordance with the Employer’s policies then in effect.

(f) Leave . Executive will be provided with such vacation leave, sick leave and other paid time off as are provided generally to the Employer’s senior management executives. All time off must be taken in accordance with the Employer’s policy for senior management executives, as may be amended from time to time.

6. Termination .

(a) Death, Disability or Retirement . The Company may terminate Executive’s employment if he is Disabled for six (6) consecutive months or for a total of six (6) months during any 12-month period. Executive’s employment will be automatically terminated upon his death or Retirement.

(b) Termination for Cause . The Company may terminate Executive’s employment for Cause by written notice to Executive.

(c) Termination Without Cause . The Company may terminate Executive’s employment without Cause upon written notice to Executive.

(d) Termination by Executive Without Good Reason . Executive may terminate his employment upon 30 days’ written notice to the Company. In the event Executive terminates his employment in this manner, he shall remain in the Company’s employ subject to all terms and conditions of this Agreement for the entire 30-day period unless instructed otherwise by the Company in writing.

(e) Termination by Executive for Good Reason . Executive may terminate his employment for “Good Reason” by giving the Company advance written notice of such intent and the grounds thereof within a period not to exceed 30 days after the existence of the event constituting Good Reason. After Executive gives such notice, the Company shall have 30 days to correct the Good Reason event, and if the Company does not correct the Good Reason event within the prescribed time, Executive must terminate his employment within 61 days of the date of the event constituting Good Reason in order to be entitled to any benefits under Section 7(c) of this Agreement. In addition, once an event constitutes Good Reason, if the Company does not correct the event and if Executive does not give notice (as described above) and terminate his employment within 61 days of the event, such specific instance of the event shall no longer constitute Good Reason under this Agreement.

(f) Resignation of All Positions . Executive agrees that after any termination of his employment, he will tender his resignation from any position he may hold as an officer or director of the Company or any Affiliate.

7. Severance and Change in Control Payments and Benefits . Executive shall be entitled to the following compensation under the following circumstances:

(a) Death, Disability or Retirement . In the event Executive’s employment is terminated as a result of his death, Disability or Retirement, the following shall apply:

(i) Executive’s rights under any LTIP or any other executive compensation arrangement in which Executive then participates shall be determined in accordance with the controlling plan document and/or award agreements.

(ii) Any unpaid Base Annual Salary shall be paid through the Date of Termination in accordance with the Employer’s normal payroll practices.

(iii) Any unpaid AICP award for the calendar year preceding the calendar year which includes Executive’s Date of Termination shall be paid when the AICP awards for other participants are paid.

(iv) Executive’s award under any AICP to which he would otherwise be entitled in the calendar year which includes his Date of Termination shall be prorated for the period of his participation in the AICP during the relevant calendar year, and payable at the same time other participants in the AICP receive payment.

(v) Executive shall be reimbursed for all expenses incurred and in accordance with Section 5(e).

(vi) Executive shall be paid all accrued unused vacation in accordance with the Employer’s vacation policy, as amended from time to time.

(vii) Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time.

(viii) If Executive’s employment is terminated by reason of death of Disability, the Employer shall pay Executive (or, in the event of death, to Executive’s surviving spouse, a lump sum amount equal, on an after-tax basis, to the cost of continuation of group health coverage under COBRA for the maximum period allowable by law based upon the rates for such coverage in effect for Executive (and his dependents, if applicable) on the Date of Termination. Such amount shall be paid in a cash lump sum payment not later than ten (10) days following Executive’s Date of Termination.

(b) Termination for Cause or Without Good Reason . If Executive is terminated by the Employer for Cause or if Executive resigns or otherwise terminates without Good Reason, the following shall apply:

(i) No AICP award shall be paid for the calendar year which includes Executive’s Date of Termination.

(ii) Executive’s rights under any LTIP or any other executive compensation arrangement in which Executive then participates shall be determined in accordance with the controlling plan document and/or award agreements.

(iii) Executive’s unpaid Base Annual Salary shall be paid through to the Date of Termination in accordance with the Employer’s normal payroll practices.

(iv) Any unpaid AICP award for a calendar year preceding the calendar year of Executive’s Date of Termination shall be paid in accordance with the terms of the applicable AICP and when the AICP awards for other participants are paid.

(v) Executive shall be reimbursed for all expenses incurred in accordance with Section 5(e).

(vi) Executive shall be paid all accrued unused vacation in accordance with the Employer’s vacation policy, as amended from time to time.

(vii) Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time.

(c) Termination Without Cause or for Good Reason . In the event Executive’s employment with the Employer is terminated by the Employer without Cause or by the Executive for Good Reason, the following shall apply:

(i) Employer shall pay Executive an amount equal to the one and one-half (1 ½) times the Executive’s Annual Cash Compensation. Subject to Section 7(f), such amount shall be paid in a lump sum cash payment.

(iii) Executive’s unpaid Base Annual Salary shall be paid through his Date of Termination in accordance with the Company’s normal payroll practices.

(iv) Any unpaid AICP award for a year preceding the calendar year which includes the Executive’s Date of Termination shall be paid when the AICP awards for other participants are paid.

(v) The Employer shall pay Executive his award under any AICP in effect for the calendar year which includes his Date of Termination (A) calculated by reference to the level of attainment for the applicable performance criteria (financial, individual or otherwise) in effect for such calendar year, (B) on the basis of a deemed 12-month calendar year participation in the plan, and (C) at the same time other participants in the AICP receive payment.

(vi) Executive shall be reimbursed for all expenses incurred and in accordance with Section 5(e).

(vii) Executive shall be paid all accrued unused vacation in accordance with the Company’s vacation policy, as amended from time to time.

(viii) Executive shall be entitled to all benefits under Section 5(d) subject to the terms and conditions of the applicable plan documents and arrangements, as amended from time to time.

(ix) The Employer shall pay Executive a lump sum amount equal, on an after-tax basis, to the cost of group health and group life insurance coverage under the Employer’s plans for a period of 18 months based upon the rates for such coverage in effect for Executive (and his dependents, if applicable) on the Date of Termination. Such amount shall be paid in a cash lump sum payment at the same time payment under Section 7(c)(i) is made.

(d) Change in Control . Notwithstanding the foregoing subsections (a) - (c) of this Section 7 and in lieu thereof, if, within the period beginning with the effective date of a Change in Control and continuing through the second anniversary thereof, the Employer terminates Executive’s employment without Cause or Executive terminates his employment for Good Reason, then:

(i) Subject to Section 7(f), the Employer shall pay Executive a lump sum cash amount equal to three (3) times Executive’s Annual Cash Compensation.

(iii) Any unpaid AICP award for a year preceding the calendar year which includes the Executive’s Date of Termination shall be paid when the AICP awards for other participants are paid.

(iv) The Employer shall pay Executive his award under any AICP in effect for the calendar year which includes his Date of Termination (A) calculated on the basis of the Employer and Executive having fully met all performance criteria (financial, individual or otherwise) for a target bonus (which will not include any multiplier that may be applicable to result in a maximum bonus), (B) paid on the basis of a deemed 12-month calendar year participation in the plan, and (C) payable at the same time other participants in the plan receive payment.

(v) Executive shall be promptly reimbursed all reasonable business expenses incurred by him upon reasonable documentation and in accordance with the Employer’s policy prior to the date of the Change in Control.

(vi) The Employer shall pay Executive a lump sum amount equal, on an after-tax basis, to the cost of continuation of group health and group life insurance coverage under the Employer’s plans for a period of 36 months based upon the rates for such coverage in effect for Executive (and his dependents, if applicable) on the Date of Termination. Such amount shall be paid in a cash lump sum payment at the same time payment under Section 7(d)(i) is made.

(vii) If any payments are payable under this Section 7(d), in no event will any amounts be paid or payable under Sections 7(a)-(c).

(e) Potential Change in Control . Notwithstanding any other provision of this Agreement, if Executive’s employment is terminated by the Employer without Cause or by Executive for Good Reason and such termination without Cause or the act, circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change of Control and occurred after either a letter of intent or agreement with respect to such a transaction has been executed by the Company or a public announcement of a proposed transaction is made, (i) Executive shall be entitled to receive the payments described in Section 7(c) and (ii) in the event of the subsequent consummation of such transaction, Executive shall receive an additional payment equal to the difference between the payment paid or payable under Section 7(c) and the payment Executive would receive under

Section 7(d) had Executive’s termination without Cause or for Good Reason occurred on the effective date of the Change in Control. Section 7(f) shall apply separately with respect to any payment or payments made pursuant to this Section 7(e).

(f) Release of All Claims . Executive acknowledges and agrees that the Employer’s obligation to make any and all payments, other than the payment of any earned or accrued and unpaid Base Salary and accrued vacation, to which Executive may become entitled to receive under Section 7(c) or (d) is conditioned upon, and subject to, Executive’s execution of a release of claims (substantially in the form of Exhibit A attached hereto) becoming effective by the 60th day following the Employee’s termination of employment. To the extent such payments are not exempt from Code Section 409A pursuant to paragraph (j) below, and the 60-day period crosses two calendar years, the payment shall be made on the first payroll date in the second calendar year that occurs on or after the expiration of the release revocation period, regardless of the date the release is signed.

(g) Change in Control Best Payments Determination . In the event the payments and benefits described in this Section 7, taken together with all other payments benefits payable to Executive in connection with a Change in Control (together, the CIC Severance Benefits), could subject Executive to an excise tax under Section 4999 of the Code (the “Excise Tax”), then notwithstanding the provisions of Section 7 the Company shall reduce the CIC Severance Benefits (the “Benefit Reduction”) by the amount necessary to result in Executive not being subject to the Excise Tax if such reduction would result in Executive’s “Net After Tax Amount” attributable to the CIC Severance Benefits 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 Executive, as applicable, shall be promptly made) to the minimum amount necessary to result in Executive not being subject to the Excise Tax. For this purpose “Net After Tax Amount” shall mean the net amount of CIC Severance Benefits Executive is entitled to receive 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 Executive, and such determination shall be binding on both Executive and the Company. In the event the payments to the Executive are required to be reduced pursuant to this Section 7(g), the portions of the payments that would be paid in cash under this Agreement will be reduced first and before any non-cash payments.

(h) No Duty to Mitigate . Executive shall not be required to mitigate the amount of any payment or other benefit required to be paid to Executive pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned by Executive as a result of employment. The Employer’s obligation to make the payments provided for in this Agreement (including, but not limited to, the payments under Section 7(c) or (d)) and otherwise perform its obligations hereunder shall not be affected by any counterclaim, recoupment, defense or other claim, right or action which the Employer may have against Executive or others, exclusive of payroll withholdings required by law.

(i) Specified Employees . Notwithstanding any other provision herein, if Executive is a “Specified Employee” (as that term is defined in Code Section 409A) as of his Date of Termination, then any amounts under this Agreement which are payable upon his “Separation from Service” (within the meaning of Code Section 409A) and subject to the provisions of Code Section 409A and not otherwise excluded under Code Section 409A, shall not be paid until the first (1st) business day that is at least six (6) months after the date after Executive’s Date of Termination (the “Waiting Period”). Any payments that would have been made to Executive during the Waiting Period but for this Section 7(i) shall instead be made to Executive in the form of a lump sum payment on the date that payments commence pursuant to the preceding sentence with interest (calculated at the short-term applicable federal rate compounded semi-annually) on the amount not paid during the Waiting Period from the Date of Termination through the date of payment.

(j) Section 409A Exemptions . For purposes of Code Section 409A, each “payment” (as defined by Code Section 409A) made under this Agreement will be considered a “separate payment.” In addition, for purposes of Code Section 409A, each such payment will be deemed exempt from Code Section 409A to the fullest extent possible under (i) the “short-term deferral” exemption of Treasury Regulation § 1.409A-1((b)(4), and (ii) with respect to any additional amounts paid no later than the second (2nd) calendar year following the calendar year containing your Termination Date, the “involuntary separation” pay exemption of Treasury Regulation § 1.409A-1(b)(9)(iii), which are hereby incorporated by reference.

8. Non‑Competition, Non‑Solicitation, and Confidentiality . The Employer and Executive acknowledge and agree that while Executive is employed pursuant to this Agreement, the Company will give Executive access to Confidential Information of the Employer and its Affiliates. Executive will also be in contact with customers and potential customers of the Employer. In consideration of all of the foregoing, the Employer and Executive agree as follows:

(a) Non-Competition . Executive agrees that during the Executive’s employment by the Employer hereunder, and for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer), within the Territory, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, perform for any Competing Business any services which are the same as or essentially the same as the services the Executive provided for the Employer.

(b) Non-Solicitation of Customers . Executive agrees that during the Executive’s employment by the Employer hereunder, and in the event of the Executive’s Termination of Employment, regardless of the reason, for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer) on the Executive’s own behalf or in the service or on behalf of others, solicit, divert or appropriate or attempt to solicit, divert or appropriate, any business from any of the Employer’s customers, including prospective customers actively sought by the Employer, with whom the Executive has or had material contact during the last two (2) years of the Executive’s employment with Employer, for purposes of providing products or services that are competitive with those provided by the Employer.

(c) Non-Solicitation of Employees . Executive agrees that during the Executive’s employment by the Employer hereunder, and in the event of the Executive’s Termination of Employment, regardless of the reason, for the duration of the Post-Termination Period, the Executive will not (except on behalf of or with the prior written consent of the Employer) on the Executive’s own behalf or in the service or on behalf of others, solicit, recruit or hire away or attempt to solicit, recruit or hire away, any employee of the Employer with whom the Executive had material contact during the last two (2) years of the Executive’s employment, whether or not such employee is a full-time employee or a temporary employee of the Employer, such employment is pursuant to written agreement, for a determined period, or at will.

(d) Confidential Information . Executive further agrees that he will not, except as the Company may otherwise consent or direct in writing, reveal or disclose, sell, use, publish, or otherwise disclose to any third party any Confidential Information or proprietary information of the Company, or authorize anyone else to do these things at any time either during or subsequent to his employment with the Company. This Section 8(d) shall continue in full force and effect after termination of Executive’s employment and after the termination of this Agreement for any reason. Executive’s obligations under this Section 8(d) of this Agreement with respect to any specific Confidential Information and proprietary information shall cease when that specific portion of Confidential Information and proprietary information becomes publicly known, in its entirety and without combining portions of such information obtained separately. It is understood that such Confidential Information and proprietary information of the Company include matters that Executive conceives or develops, as well as matters Executive learns from other employees of the Company.

(e) Breach . Executive agrees that any breach of Sections 8(a), (b), (c), or (d), above cannot be remedied solely by money damages, and that in addition to any other remedies the Company may have, the Company is entitled to obtain injunctive relief against Executive. Nothing herein, however, shall be construed as limiting the Company’s right to pursue any other available remedy at law or in equity, including recovery of damages and termination of this Agreement.

(f) Independent Covenants . All covenants contained in this Section 9 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.

9. Return of Company Property . Executive agrees to execute and deliver such documents and take all other actions as the Company may request from time to time in order to effect the transfer and delivery to the Company of any of the Company’s or its Affiliate’s assets in the possession or subject to the control of Executive including, without limitation, the Company’s or its Affiliate’s computers, printers, books, records, files, databases, software, Confidential Information, and other documents in whatever form or medium and wherever located.

10. Assignment . This Agreement may be assigned by the Company, but cannot be assigned by Executive. An assignment of this Agreement by the Company shall not relieve the Company of any liability or obligation under this Agreement except any such assignment in connection with or as a result of a Change in Control (including, but not limited to, by operation of law).

11. Binding Agreement . The Parties acknowledge that this Agreement shall be binding upon and inure to the benefit of (a) Executive’s heirs, successors, personal representatives, and legal representatives and (b) any successor of the Company. Any such successor of the Company shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, “successor” shall include any person, firm, corporation, or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

12. Notices . All notices pursuant to this Agreement shall be in writing and sent certified mail, return receipt requested, by hand delivery or by overnight delivery service addressed as follows:

If to Executive:

Eric R. Newell

36 Backland Road

South Glastonbury, CT 06073

If to the Company:

United Bank

45 Glastonbury Boulevard

Glastonbury, CT 06033

Attention: Chief Executive Officer

13. Waiver . No waiver by either Party to this Agreement of any right to enforce any term or condition of this Agreement, or of any breach hereof, shall be deemed a waiver of such right in the future or of any other right or remedy available under this Agreement.

14. Severability . If any provision of this Agreement is determined to be void, invalid, unenforceable, or against public policy, such provisions shall be deemed severable from the Agreement, and the remaining provisions of the Agreement will remain unaffected and in full force and effect. Furthermore, any breach by the Company of any provision of this Agreement shall not excuse Executive’s compliance with the requirements of Sections 9, to the extent they are otherwise enforceable.

15. Arbitration . Except with respect to injunctive relief which may be sought by the Employer or Executive from a court in Hartford County, Connecticut, to which the Parties hereby submit to personal jurisdiction, the Parties agree to resolve any and all claims or controversies past, present, or future arising out of or relating to this Agreement, Executive’s employment and/or termination of employment with the Company to binding arbitration under the Federal Arbitration Act, before one neutral arbitrator in Glastonbury, Connecticut, under the American Arbitration Association (“AAA”) National Rules for the Resolution of Employment Disputes. If the Parties cannot agree on one arbitrator, a list of seven (7) arbitrators will be requested from AAA, and the arbitrator will be selected using alternate strikes with Executive striking first. The Parties further agree that (i) except as expressly awarded in arbitration and subject to Section 25 below, each party shall be responsible for its own expenses, including but not limited to attorneys’ fees in connection with the cost of the arbitration except that the fees of the arbitrators shall be shared equally by Executive and the Company, (ii) collective actions are not permissible unless agreed upon by the parties in writing, (iii) administrative proceedings under the National Labor Relations Act and Title VII of the Civil Rights Act are not precluded, (iv) the work of Executive involves interstate commerce, and (v) the award rendered by the arbitrator is final and binding, and judgment thereon may be entered in any court having jurisdiction thereof. The invalidity or unenforceability of any provision of this Section shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect; provided, however , that any claim the Company has for breach of the covenants contained in Section 9 of this Agreement shall not be subject to mandatory arbitration, and may be pursued in a court of law or equity.

16. Entire Agreement . The terms and provisions contained herein shall constitute the entire agreement between the Parties with respect to Executive’s employment with the Company during the time period covered by this Agreement. This Agreement replaces and supersedes any and all existing agreements entered into between Executive and the Company relating generally to the same subject matter including Executive’s prior employment agreement dated January 2, 2013.

17. Modification of Agreement . This Agreement may not be changed or modified or released or discharged or abandoned or otherwise terminated, in whole or in part, except by an instrument in writing signed by Executive and an authorized representative of the Employer.

18. Understand Agreement . Executive represents and warrants that he has read and understood each and every provision of this Agreement, acknowledges that he has obtained independent legal advice from attorneys of his choice, and confirms that Executive has freely and voluntarily entered into this Agreement.

19. Governing Law . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Connecticut without giving any effect to the conflict of laws provisions thereof.

20. Code Section 409A . The Parties agree that the Company may amend and/or operate this Agreement to be exempt from or to comply with Code Section 409A including, but not limited to, using the definitions or other terms required by Code Section 409A and including without limitation any notices, rulings, interpretations or regulations issued under Code Section 409A after the date hereof to avoid the application of penalty taxes under Code Section 409A. The Company and Executive shall cooperate in good faith for the adoption of such amendments and/or the operation of the Agreement to avoid the application of penalty taxes under Code Section 409A. The Parties agree that Executive shall have no right to specify the calendar year during which any payment hereunder shall be made.

21. No Guarantee of Tax Consequences . None of the Company nor any of its Affiliates or their officers, directors or employees guarantees or shall be responsible or liable for the federal, state, local, domestic and foreign, tax consequences to Executive respecting any payments or benefits provided to Executive under this Agreement, including but not limited to, any excise taxes that may be imposed under Code Section 409A. Executive acknowledges that the Company has advised him to consult his own counsel and/or tax advisor respecting all of the terms of this Agreement.

22. Withholding Taxes . The Employer may withhold from all salary, bonuses, or other benefits or payments under this Agreement all federal, state and local taxes as shall be required pursuant to any law or governmental ruling or regulation as reasonably determined by the Employer.

23. Legal Fees on Change in Control . If a Date of Termination occurs after a Change in Control occurs, the Company agrees, upon reasonable documentation, to reimburse to the full extent permitted by law, all legal fees and expenses which Executive, Executive’s legal representatives or Executive’s family may reasonably incur arising out of or in connection with any arbitration or litigation, if applicable, concerning the validity or enforceability of any provision of the Agreement, or any action by Executive, Executive’s legal representatives, or Executive’s family to enforce his or their rights under this Agreement if the Executive is the prevailing party in such action.

24. Regulatory Limitation .

(a) FDIC Golden Parachute Limitations . Notwithstanding anything contained in this Agreement to the contrary, no payments shall be made pursuant to this Agreement or otherwise in contravention of the requirements of Section 2[18(k)] of the Federal Deposit Insurance Act (the “FDIA”) (12 U.S.C. 1828(k)) and Part 359 of the FDIC Rules and Regulations, 12 C.F.R. 359 (collectively, the “FDIC Golden Parachute Restrictions”).

(b) Other Bank Regulatory Limitations . If the Executive is removed from office and/or permanently prohibited from participating in the conduct of the affairs of any depository institution by an order issued under Section 8(e) or 8(g) of the FDIA (12 U.S.C. 1818(e) and (g)), the Employer shall have the right to terminate all obligations of the Employer under this Agreement as of the effective date of such order, except for the payment of Base Annual Salary due and owing on the effective date of said order, and expense reimbursement incurred as of the effective date of termination. If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e) or 8(g) of the FDIA (12 U.S.C. 1818(e) and (g)), the Employer shall have the right to suspend all obligations of the Employer under this Agreement as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Employer shall reinstate prospectively any of its obligations which were suspended. If the FDIC is appointed receiver or conservator under Section 11(c) of the FDIA (12 U.S.C. 1821(c)) of the Company or any depositary institution controlled by the Company, the Employer shall have the right to terminate all obligations of the Employer under this Agreement as of the date of such receivership or conservatorship, other than any rights of the Executive that vested prior to such appointment. If the Employer is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but the vested rights of the parties shall not be affected. If the FDIC provides open bank assistance under Section 13(c) of the FDIA (12 U.S.C. 1823(c)) to the Company or any depository institution controlled by the Company, but excluding any such assistance provided to the industry generally, the Employer shall have the right to terminate all obligations of the Employer under this Agreement as of the date of such assistance, other than any rights of the Employee that vested prior to the FDIC action. If the FDIC requires a transaction under Section 13(f) or 13(k) of the FDIA (12 U.S.C. 1823(f) and (k)) by the Company or any depository institution controlled by the Company, the Employer shall have the right to terminate all obligations of the Employer under this

Agreement as of the date of such transaction, other than any rights of the Employee that vested prior to the transaction. Notwithstanding the foregoing provisions of this Section 24(b), any vested rights of the Executive may be subject to such modifications that are consistent with the authority of the FDIC.

(c) Regulatory Approval . Notwithstanding the timing for the payment of severance under this Agreement, no such payments shall be made or commence, as applicable, that require the concurrence or consent of the appropriate federal banking agency of the Employer pursuant to 12 C.F.R. Section 359 prior to the receipt of such concurrence or consent. Any payments suspended by operation of this Section 24(c) shall be paid in a lump sum within thirty (30) days following receipt of the concurrence or consent of the appropriate banking regulators of the Employer or as otherwise directed by such regulators.

(d) State Banking Limitations . All obligations under this Agreement are further subject to such conditions, restrictions, limitations and forfeiture provisions as may separately apply pursuant to any applicable state banking laws.

25. Apportionment of Obligations . The obligations for the payment of the amounts otherwise payable pursuant to this Agreement shall be apportioned between the Company and the Bank as they may agree from time to time in their sole discretion.

26. Counterparts . Any number of counterparts of this Agreement may be executed and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one instrument. This Agreement may be executed by portable document format (PDF) or facsimile signature which signature shall be binding upon the Parties.

[ Signature Page Follows ]

IN WITNESS WHEREOF , the Parties have executed this Agreement effective as of the Effective Date first written above.

UNITED FINANCIAL BANCORP, INC.

/s/ Kristen A. Johnson

Kristen A. Johnson, Chair of Compensation Committee

UNITED BANK

/s/ Kristen A. Johnson

Kristen A. Johnson, Chair of Compensation Committee

/s/ Eric R. Newell

Eric R. Newell, Executive

Exhibit A

RELEASE OF CLAIMS

This Release of Claims (the “Agreement”) is made and entered into by and among United Financial Bancorp, Inc. , a Connecticut corporation (the “ Company ”), United Bank (the “ Bank ” and collectively with the Company, the “Employer”), and _________________ (the “Executive”)

1. SEPARATION . Executive’s employment with the Employer will terminate on ______________ or such later date as may be determined by the parties (“Separation Date”). The parties acknowledge that Executive’s termination from employment will result in a “Separation from Service” as defined in Section 409A of the Internal Revenue Code. Executive further agrees that the Executive hereby resigns as an officer and director of the Employer and any related or affiliated entities as of the Separation Date.

2. CONSIDERATION . In consideration of the Executive’s decision to enter into this Agreement, the Employer will continue to employ Executive through the Separation Date and will provide Executive severance pay in accordance with the terms of the employment agreement between the Employer and the Executive dated ________________, 2015 (the “Employment Agreement”). federal, state and local tax withholdings and other legal deductions may be applied to the above payment as determined by the Employer in its sole discretion.

Whether or not Executive executes this Agreement, the Employer will pay Executive any and all wages for all hours worked up to and through the Separation Date within the appropriate time frame required by applicable law. If Executive fails or refuses to execute this Agreement, or if Executive revokes this Agreement as provided herein, Executive will not be entitled to the consideration set forth above.

3. FULL AND FINAL RELEASE .

(a) In consideration of the payments being provided to Executive above, Executive, for himself, his attorneys, heirs, executors, administrators, successors and assigns, fully, finally and forever releases and discharges the Bank and all other affiliated companies, as well as its and their successors, assigns, officers, owners, directors, agents, representatives, attorneys, and employees (all of whom are referred to throughout this Agreement as the “Releasees”), of and from all claims, demands, actions, causes of action, suits, damages, losses, and expenses, of any and every nature whatsoever, as a result of actions or omissions occurring through the date Executive signs this Agreement. Specifically included in this waiver and release are, among other things, any and all claims related to any severance pay plan, any and all claims related to Executive’s employment and separation from employment or otherwise, including without limitation: (1) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; (2) the Americans with Disabilities Act, as amended; (3) 42 U.S.C. §1981; (4) the Age Discrimination in Employment Act (29 U.S.C. §§621-624); (5) 29 U.S.C. §206(d)(1); (6) Executive Order 11246; (7) Executive Order 11141; (8) Section 503 of the Rehabilitation Act of 1973; (9) Executive Retirement Income Security Act (ERISA); (10) the Occupational Safety and Health Act; (11) the Worker Adjustment and Retraining Notification (WARN) Act; (12) the Family and Medical Leave Act and (14) other federal, state and local discrimination laws, including those of the State of Connecticut.

Executive further acknowledges that Executive is releasing, in addition to all other claims, any and all claims based on any tort, whistle-blower, personal injury, defamation, invasion of privacy or wrongful discharge theory; retaliatory discharge theory; any and all claims based on any oral, written or implied contract or on any contractual theory (including the Employment Agreement); any claims based on a severance pay plan; and all claims based on any other federal, state or local constitution, regulation, law (statutory or common), or other legal theory, as well as any and all claims for punitive, compensatory, and/or other damages, back pay, front pay, fringe benefits and attorneys’ fees, costs or expenses.

(b) Nothing in this Agreement, however, is intended to waive Executive’s entitlement to vested benefits under any other executive compensation or employee benefit plan or arrangement in which Executive participates or to which Executive is a party. Furthermore, the parties specifically agree that this release does not cover, and Executive expressly reserves, indemnification rights existing to the Executive as a current or former director and/or officer of the Employer under the Articles and Bylaws of the Employer and pursuant to applicable law and in accordance with any D&O policy existing for former officers and directors of the Employer. Finally, the above release does not waive claims that Executive could make, if available, for unemployment or workers’ compensation or claims that cannot be released by private agreement.

(c) Executive understands that this Agreement does not bar the Executive from filing a complaint and/or charge with any appropriate federal, state, or local government agency or cooperating with said agency in its investigation. Executive

agrees, however, that the Executive shall not be entitled to receive any relief or recovery (monetary or otherwise) in connection with any complaint or charge brought against the Releasees, without regard as to who brought said complaint or charge.

4. ADVICE OF COUNSEL . Executive acknowledges that the Executive has been and is hereby advised by the Employer to consult with an attorney in regard to this matter. Executive understands that Executive is responsible for the costs of any such legal services incurred in connection with such consultation.

5. POST-EMPLOYMENT COOPERATION . Executive agrees to fully cooperate with the Employer in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Employer which relate to events or occurrences that transpired or which failed to transpire while Executive was employed by the Employer. Executive also agrees to cooperate fully with the Employer in connection with any internal investigation or review, or any investigation or review by any federal, state or local regulatory authority, relating to events or occurrences that transpired or failed to transpire while Executive was employed by the Employer. Executive’s full cooperation in connection with such matters shall include, but not be limited to, providing information to counsel, being available to meet with counsel to prepare for discovery or trial and acting as a witness on behalf of the Employer at a mutually convenient times.

6. NO OTHER CLAIMS . Executive represents that Executive has not filed, nor assigned to others the right to file, nor are there currently pending, any complaints, charges or lawsuits against the Releasees with any governmental agency or any court or in any arbitration forum.

7. NON-DISPARAGEMENT . Executive agrees that Executive has not (including during the time period while this Agreement was under consideration by Executive) and will not make statements to clients, customers and suppliers of the Employer or to other members of the public that are in any way disparaging or negative towards the Employer, the Employer’s products or services, or the Employer’s representatives or employees.

The Employer will advise the members of its Boards of Directors and all executive officers of the Employer (collectively, the “Persons to be Advised”) that they should not make public statements that are in any way disparaging or negative towards the Executive. The Employer will advise the Persons to be Advised that a non-disparagement agreement is in effect, and will use reasonable efforts to enforce compliance with this Agreement. Notwithstanding the foregoing agreement, the parties hereto recognize and acknowledge that the Employer will not be liable for statements between the Employer and its independent auditors or statements necessary to comply with applicable law.

8. NON-ADMISSION OF LIABILITY OR WRONGFUL CONDUCT . This Agreement shall not be construed as an admission by the Employer of any liability or acts of wrongdoing or discrimination, nor shall it be considered to be evidence of such liability, wrongdoing, or discrimination.

9. RETURN OF PROPERTY . Executive acknowledges, understands, and agrees that Executive will turn over to _________________ all documents, files, memoranda, records, Employer Information (as defined in the Employment Agreement), credit cards, records, books, manuals, computer equipment, computer software, pagers, cellular phones, facsimile machines, PDAs, keys and electronic keys or access cards into the building and any other equipment or documents, and all other physical or electronic property of similar type that Executive received from the Employer and/or that Executive used in the course of his employment with the Employer and that are the property of the Employer. Executive agrees that Executive will not delete, destroy or erase any data stored on or associated with such property, including but not limited to data stored on computers, servers, phones, or other electronic devices. Executive further agrees to return to _______________ any and all hard copies of any documents which are the subject of a document preservation notice or other legal hold and to notify ______________________ of the location of any electronic documents which are subject to a legal hold.

10. CONFIDENTIALITY . The nature and terms of this Agreement are strictly confidential and they have not been and shall not be disclosed by Executive at any time to any person (including the Employer’s employees) except Executive’s lawyer, accountant, or immediate family without the prior written consent of an officer of the Employer, except as necessary in any legal proceedings directly related to the provisions and terms of this Agreement, to prepare and file income tax forms, or pursuant to court order after reasonable notice to the Employer. Executive may disclose that Executive is subject to an agreement not to disclose trade secrets and confidential information where necessary to comply with such confidentiality agreement. Executive agrees that Executive is responsible for informing these persons of the confidential nature of this Agreement and that any breach of this confidentiality provision by any of these persons shall be deemed a breach by Executive.

11. GOVERNING LAW . This Agreement shall be interpreted under the laws of the State of Connecticut.

12. SEVERABILITY . The provisions of this Agreement are severable, and if any part of this Agreement except Paragraphs 3, 5 or 7 are found by a court of law to be unenforceable, the remainder of the Agreement will continue to be valid and effective, and the court is authorized to amend relevant provisions of the Agreement to carry out the intent of the parties to the extent legally permissible. If Paragraph 3, 5 or 7 is found by a court of competent jurisdiction to be unenforceable, the parties agree to seek a determination by the court as to the rights of the parties, including whether Executive is entitled under those circumstances and the relevant law to retain the benefits paid to Executive under this Agreement.

13. SOLE AND ENTIRE AGREEMENT . This Agreement and the Employment Agreement set forth the entire agreement between the parties with respect to the subject matters covered by this Agreement and the Employment Agreement; provided however, that all continuing obligations of confidentiality, non-competition or non-solicitation under the Employment Agreement shall survive . Any other prior agreements between or directly involving the parties to the Agreement and the Employment Agreement with respect to the subject matters covered by this Agreement and the Employment Agreement are superseded by the terms of this Agreement and the Employment Agreement and thus are rendered null and void.

14. NO OTHER PROMISES . Executive affirms that the only consideration for his signing this Agreement is that set forth in Paragraph 2 that no other promise or agreement of any kind has been made to or with Executive by any person or entity to cause Executive to execute this document, and that Executive fully understands the meaning and intent of this Agreement, including but not limited to, its final and binding effect.

15. NO VIOLATION OF THE LAW . Executive represents and acknowledges that Executive is unaware of any conduct, actions or inactions by the Employer or anyone employed by the Employer which would violate any federal, state or local law, any common law, or any rule promulgated by any administrative body. Executive further acknowledges that Executive has disclosed to ____________________ any relevant facts known to Executive of any conduct which violates any Employer policy or standard.

16. LEGALLY BINDING AGREEMENT . Executive understands and acknowledges that this Agreement contains a full and final release of claims against the Employer; and that Executive has agreed to its terms knowingly, voluntarily, and without intimidation, coercion or pressure.

17. ADVICE OF COUNSEL / CONSIDERATION AND REVOCATION PERIODS . Executive hereby acknowledges and agrees that this Agreement and the termination of Executive’s employment and all actions taken in connection therewith are in compliance with the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth herein shall be applicable, without limitation, to any claims brought under these Acts. Executive acknowledges that the Executive has been and is hereby advised by the Employer to consult with an attorney in regard to this matter. Executive understands that Executive is responsible for the costs of any such legal services incurred in connection with such consultation. Executive further acknowledges that Executive has been given more than twenty-one (21) days from the time that Executive receives this Agreement to consider whether to sign it. Executive shall have seven (7) days from the date Executive signs this Agreement to revoke the Agreement. To revoke, Executive must ensure that written notice is delivered to ______________________________________________, by the end of the day on the seventh calendar day after Executive signs this Agreement. If Executive does not revoke this Agreement within seven (7) days of signing, this Agreement will become final and binding on the day following such seven (7) day period.

This Agreement includes a release of all known and unknown claims through the date of this Agreement. Executive should carefully consider all of its provisions before signing it. Executive’s signature below indicates Executive’s understanding and agreement with all of the terms in this Agreement.

IN WITNESS WHEREOF , the Parties have executed this Agreement effective as of ______________.

UNITED FINANCIAL BANCORP, INC.

___________________________________________

UNITED BANK

__________________________________________

___________________________________________

Executive

EXHIBIT 10.18

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made effective January 1, 2016 (the “Effective Date”) by and between United Financial Bancorp, Inc. , a Connecticut corporation (the “Company”), United Bank (the “Bank”) and collectively with the Company, the “Employer”) and David C. Paulson (“Executive”). The Company and Executive are collectively referred to herein as the “Parties,” and individually referred to as a “Party.”