Rockville Financial Inc. in Connecticut reported record fourth-quarter income of $4 million, up 48% from a year earlier, as net interest income and noninterest income rose.

In a news release late Wednesday, the $1.8 billion-asset company said that its net interest income climbed16%, to $15.6 million, year over year due to lower funding costs that led to a 40-basis increase in its net interest margin from the same quarter a year earlier. The company reported a 19% increase in commercial loans year over, but overall loan volume rose just 3% due to a decline in construction loan balances and the sale of $37 million of residential mortgages during the fourth quarter.

The mortgage sale helped boost noninterest income by 17% in the quarter, to $3 million.

For the full year, earnings declined 42%, to $7.1 million, due primarily to a prepayment penalty it incurred by paying down $122.2 million of Federal Home Loan Bank of Boston advances during the second quarter. Additionally, salary and employee benefits increased in 2011 21%, to $24.2 million, as the company increased staffing in areas of risk management, information technology, finance, branch administration and commercial banking

Rockville converted from a mutual holding company to a 100% stock-owned company last year. Its shares were trading at $11.67 midday Thursday, up 1.7% from Wednesday's close.

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