UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly Report- Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

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

For the transition period from to

Commission File No. 333-171913

First Connecticut Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland		45-1496206
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

One Farm Glen Boulevard, Farmington, CT		06032
(Address of Principal Executive Offices)		(Zip Code)

(860) 676-4600

(Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

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 requirements for the past 90 days. YES x NO o.

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x

Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

As of July 28, 2014, there were 16,072,637 shares of First Connecticut Bancorp, Inc. common stock, par value $0.01, outstanding.

First Connecticut Bancorp, Inc.

Table of Contents

		Page

Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Statements of Financial Condition at June 30, 2014 (unaudited) and December 31, 2013	1

	Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013 (unaudited)	2

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013 (unaudited)	3

	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2014 (unaudited)	4

	Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (unaudited)	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65

Item 4.	Controls and Procedures	66

Part II. Other Information

Item 1.	Legal Proceedings	66

Item1A.	Risk Factors	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 3.	Defaults upon Senior Securities	66

Item 4.	Mine Safety Disclosure	67

Item 5.	Other Information	67

Item 6.	Exhibits	67

Signatures		69

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

First Connecticut Bancorp, Inc.

Consolidated Statements of Financial Condition (Unaudited)


	June 30,			December 31,
	2014			2013
(Dollars in thousands, except share and per share data)
Assets
Cash and cash equivalents	$	50,778		$	38,799
Securities held-to-maturity, at amortized cost		12,715			12,983
Securities available-for-sale, at fair value		160,784			150,886
Loans held for sale		4,576			3,186
Loans, net		1,930,502			1,800,987
Premises and equipment, net		20,072			20,619
Federal Home Loan Bank of Boston stock, at cost		17,724			13,136
Accrued income receivable		5,133			4,917
Bank-owned life insurance		39,120			38,556
Deferred income taxes		14,756			14,884
Prepaid expenses and other assets		11,549			11,075
Total assets	$	2,267,709		$	2,110,028
Liabilities and Stockholders’ Equity
Deposits
Interest-bearing	$	1,314,863		$	1,205,042
Noninterest-bearing		315,916			308,459
		1,630,779			1,513,501
Federal Home Loan Bank of Boston advances		291,000			259,000
Repurchase agreement borrowings		21,000			21,000
Repurchase liabilities		55,326			50,816
Accrued expenses and other liabilities		38,335			33,502
Total liabilities		2,036,440			1,877,819
Stockholders’ Equity
Common stock, $0.01 par value, 30,000,000 shares authorized; 18,035,335 shares issued and 16,072,637 shares outstanding at June 30, 2014 and 18,035,335 shares issued and 16,457,642 shares outstanding at December 31, 2013		181			181
Additional paid-in-capital		177,431			175,766
Unallocated common stock held by ESOP		(13,218	)		(13,747	)
Treasury stock, at cost (1,962,698 shares at June 30, 2014 and 1,577,693 shares at December 31, 2013)		(28,577	)		(22,599	)
Retained earnings		99,386			96,832
Accumulated other comprehensive loss		(3,934	)		(4,224	)
Total stockholders’ equity		231,269			232,209
Total liabilities and stockholders’ equity	$	2,267,709		$	2,110,028

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

First Connecticut Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
(Dollars in thousands, except share and per share data)
Interest income
Interest and fees on loans
Mortgage	$	13,875	$	11,872		$	27,303	$	23,340
Other		3,573		3,233			6,781		6,547
Interest and dividends on investments
United States Government and agency obligations		218		102			407		241
Other bonds		81		59			139		118
Corporate stocks		105		64			198		126
Other interest income		2		6			6		11
Total interest income		17,854		15,336			34,834		30,383
Interest expense
Deposits		1,711		1,827			3,405		3,532
Federal Home Loan Bank of Boston advances		368		401			687		870
Repurchase agreement borrowings		179		180			356		351
Repurchase liabilities		32		41			72		91
Total interest expense		2,290		2,449			4,520		4,844
Net interest income		15,564		12,887			30,314		25,539
Provision for loan losses		410		256			915		655
Net interest income after provision for loan losses		15,154		12,631			29,399		24,884
Noninterest income
Fees for customer services		1,317		1,097			2,508		2,079
Gain on sales of investments		-		36			-		36
Net gain on loans sold		317		1,589			439		3,619
Brokerage and insurance fee income		49		41			93		73
Bank owned life insurance income		281		303			563		712
Other		102		(67	)		225		128
Total noninterest income		2,066		2,999			3,828		6,647
Noninterest expense
Salaries and employee benefits		8,638		8,555			16,926		17,589
Occupancy expense		1,209		1,126			2,558		2,366
Furniture and equipment expense		1,106		1,099			2,124		2,117
FDIC assessment		321		311			649		602
Marketing		509		610			887		1,204
Other operating expenses		2,471		2,854			5,070		5,376
Total noninterest expense		14,254		14,555			28,214		29,254
Income before income taxes		2,966		1,075			5,013		2,277
Income tax expense		776		256			1,331		572
Net income	$	2,190	$	819		$	3,682	$	1,705
Net earnings per share (See Note 3):
Basic	$	0.15	$	0.05		$	0.24	$	0.11
Diluted		0.14		0.05			0.24		0.11
Dividends per share		0.04		0.03			0.07		0.06

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

First Connecticut Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
(Dollars in thousands)
Net income	$	2,190	$	819		$	3,682	$	1,705
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		161		(482	)		297		(134	)
Less: reclassification adjustment for gains included in net income		-		36			-		36
Net change in unrealized gains (losses)		161		(446	)		297		(98	)
Change related to pension and other postretirement benefit plans		86		148			142		283
Other comprehensive income (loss), before tax		247		(298	)		439		185
Income tax expense (benefit)		84		(101	)		149		63
Other comprehensive income (loss), net of tax		163		(197	)		290		122
Comprehensive income	$	2,353	$	622		$	3,972	$	1,827

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

First Connecticut Bancorp, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

								Unallocated									Accumulated
	Common Stock					Additional		Common									Other			Total
	Shares					Paid in		Shares Held			Treasury			Retained			Comprehensive			Stockholders’
	Outstanding			Amount		Capital		by ESOP			Stock			Earnings			Income (Loss)			Equity
(Dollars in thousands, except share data)
Balance at December 31, 2013		16,457,642			181		175,766		(13,747	)		(22,599	)		96,832			(4,224	)		232,209
ESOP shares released and committed to be released		-			-		212		529			-			-			-			741
Cash dividend paid ($0.07 per common share)		-			-		-		-			-			(1,128	)		-			(1,128	)
Treasury stock acquired		(385,005	)		-		-		-			(5,978	)		-			-			(5,978	)
Tax benefits from stock-based compensation		-			-		9		-			-			-			-			9
Share based compensation expense		-			-		1,444		-			-			-			-			1,444
Net income		-			-		-		-			-			3,682			-			3,682
Other comprehensive income		-			-		-		-			-			-			290			290
Balance at June 30, 2014		16,072,637		$	181	$	177,431	$	(13,218	)	$	(28,577	)	$	99,386		$	(3,934	)	$	231,269

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

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
(Dollars in thousands)	2014			2013
Cash flows from operating activities
Net income	$	3,682		$	1,705
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		915			655
Provision for off-balance sheet commitments		3			25
Depreciation and amortization		1,578			1,465
Provision for foreclosed real estate		(5	)		-
Amortization of ESOP expense		741			678
Share based compensation expense		1,444			2,101
Gain on sale of investments		-			(36	)
Loans originated for sale		(30,308	)		(119,819	)
Proceeds from the sale of loans held for sale		29,357			128,160
Gain on fair value adjustment for mortgage banking derivatives		(2	)		(4	)
Impairment losses on alternative investments		41			103
(Gain) loss on foreclosed real estate		(2	)		84
Loss on sale of premises and equipment		-			2
Net gain on loans sold		(439	)		(3,619	)
Accretion and amortization of investment security discounts and premiums, net		(40	)		(37	)
Amortization and accretion of loan fees and discounts, net		(371	)		1,342
(Increase) decrease in accrued income receivable		(216	)		12
Deferred income tax		(3	)		(248	)
Increase in cash surrender value of bank-owned life insurance		(564	)		(603	)
(Increase) decrease in prepaid expenses and other assets		(373	)		2,259
Increase (decrease) in accrued expenses and other liabilities		4,855			(8,391	)
Net cash provided by operating activities		10,293			5,834
Cash flow from investing activities
Maturities of securities held-to-maturity		5,268			3
Maturities, calls and principal payments of securities available-for-sale		178,511			151,469
Purchases of securities held-to-maturity		(5,000	)		-
Purchases of securities available-for-sale		(188,072	)		(126,059	)
Loan originations, net of principal repayments		(130,494	)		(70,189	)
(Purchases) redemption of Federal Home Loan Bank of Boston stock, net		(4,588	)		556
Proceeds from bank-owned life insurance		-			100
Proceeds from sale of foreclosed real estate		401			233
Purchases of premises and equipment		(1,031	)		(2,267	)
Net cash used in investing activities		(145,005	)		(46,154	)
Cash flows from financing activities
Increase (decrease) in Federal Home Loan Bank of Boston advances		32,000			(76,750	)
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts		123,137			126,441
Net decrease in certificates of deposit		(5,859	)		(4,577	)
Net increase (decrease) in repurchase liabilities		4,510			(3,925	)
Excess tax benefits from stock-based compensation		9			-
Cancellation of shares for tax withholding		-			(161	)
Repurchase of common stock		(5,978	)		(13,664	)
Cash dividend paid		(1,128	)		(1,035	)
Net cash provided by financing activities		146,691			26,329
Net increase (decrease) in cash and cash equivalents		11,979			(13,991	)
Cash and cash equivalents at beginning of period		38,799			50,641
Cash and cash equivalents at end of period	$	50,778		$	36,650

Supplemental disclosure of cash flow information
Cash paid for interest	$	4,526		$	4,662
Cash paid for income taxes		2			4,282
Loans transferred to other real estate owned		434			282

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

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1.	Summary of Significant Accounting Policies

Organization and Business

On June 29, 2011, the Boards of Directors of Farmington Bank, a Connecticut stock savings bank (the “Bank”), First Connecticut Bancorp, Inc., a Maryland-chartered corporation (the “Company”), First Connecticut Bancorp, Inc., a Connecticut-chartered nonstock corporation and mutual holding company (the “MHC”) and Farmington Holdings, Inc., a Connecticut-chartered corporation (the “Mid-Tier”) completed a Plan of Conversion and Reorganization whereby: (1) the MHC converted from the mutual holding company form of organization to the stock holding company form of organization, (2) the Company sold shares of common stock of the Company in a subscription offering, and (3) the Company contributed shares of Company common stock equal to 4.0% of the shares sold in the subscription offering to the Farmington Bank Community Foundation, Inc. (the “Conversion and Reorganization”). First Connecticut Bancorp, Inc. sold 17,192,500 shares of its common stock to eligible stock holders at $10.00 per share for proceeds of $167.8 million, net of offering costs of $4.1 million. On June 29, 2011, with the completion of the Conversion and Reorganization, First Connecticut Bancorp, Inc. is 100% owned by public shareholders and the MHC and the Mid-Tier ceased to exist.

As part of the reorganization, the Company established an Employee Stock Ownership Plan (“ESOP”) for eligible employees. The Company loaned the ESOP the amount needed to purchase up to 1,430,416 shares or 8.0% of the Company’s common stock issued in the offering. The ESOP completed its purchase of 1,430,416 shares of common stock at a cost of $16.9 million. The Bank makes annual contributions adequate to fund the payment of regular debt service requirements attributable to the indebtedness of the ESOP.

On July 2, 2012, the Company received regulatory approval to repurchase up to 1,788,020 shares, or 10% of its current outstanding common stock. On May 30, 2013, the Company completed its repurchase of 1,788,020 shares at a cost of $24.9 million, of which 486,947 shares were reissued as part of the 2012 Stock Incentive Plan. On June 21, 2013, the Company received regulatory approval to repurchase up to an additional 1,676,452 shares, or 10% of its current outstanding common stock. As of June 30, 2014, the Company has repurchased 752,475 of these shares at a cost of $11.2 million. Repurchased shares are held as treasury stock and are available for general corporate purposes.

The consolidated financial statements include the accounts of First Connecticut Bancorp, Inc. and its wholly-owned subsidiary, Farmington Bank, (collectively, the “Company”). Significant inter-company accounts and transactions have been eliminated in consolidation.

First Connecticut Bancorp, Inc.’s only subsidiary is Farmington Bank. Farmington Bank’s main office is located in Farmington, Connecticut. Farmington Bank operates twenty-two full service branch offices and four limited services offices in central Connecticut. Farmington Bank’s primary source of income is interest accrued on loans to customers, which include small and middle market businesses and individuals residing within Farmington Bank’s service area.

Wholly-owned subsidiaries of Farmington Bank include Farmington Savings Loan Servicing, Inc., a passive investment company that was established to service and hold loans collateralized by real property; Village Investments, Inc. presently inactive; the Village Corp., Limited, a subsidiary that held certain real estate; 28 Main Street Corp., a subsidiary that holds residential other real estate owned; Village Management Corp., a subsidiary that held commercial other real estate owned and Village Square Holdings, Inc., a subsidiary that holds certain bank premises and other real estate.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Basis of Financial Statement Presentation

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. All significant intercompany transactions and balances have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2013 included in the Company’s 10-K filed on March 17, 2014. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

In preparing the consolidated financial statements, management is required to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition and revenues and expenses for the interim period. Actual results could differ significantly 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, investment security other-than-temporary impairment judgments and investment security valuation.

Investment Securities

Marketable equity and debt securities are classified as either trading, available-for-sale, or held-to-maturity (applies only to debt securities). Management determines the appropriate classifications of securities at the time of purchase. At June 30, 2014 and December 31, 2013, the Company had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which the Company has the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts on debt securities are amortized or accreted into interest income over the term of the securities using the level yield method. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized. Further information relating to the fair value of securities can be found within Note 4 of the Notes to Consolidated Financial Statements. In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 320- “Debt and Equity Securities”, a decline in market value of a debt security below amortized cost that is deemed other-than-temporary is charged to earnings for the credit related other-than-temporary impairment (“OTTI”), resulting in the establishment of a new cost basis for the security, while the non-credit related OTTI is recognized in other comprehensive income if there is no intent or requirement to sell the security. The securities portfolio is reviewed on a quarterly basis for the presence of other-than-temporary impairment. If an equity security is deemed other-than-temporarily impaired, the full impairment is considered to be credit-related and a charge to earnings would be recorded. Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of amortized cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold on the trade date.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Loans

The Company’s loan portfolio segments include residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity lines of credit, demand, revolving credit and resort. Construction includes classes for commercial and residential construction.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. When loans are prepaid, sold or participated out, the unamortized portion is recognized as income or expense at that time.

Interest on loans is accrued and recognized 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. Loans may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within a reasonable period and there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with contractual terms involving payment of cash or cash equivalents. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. If a residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort loan is on non-accrual status cash payments are applied towards the reduction of principal. If loans are considered impaired but accruing, cash payments are applied first to interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

The policy for determining past due or delinquency status for all loan portfolio segments is based on the number of days past due or the contractual terms of the loan. A loan is considered delinquent when the customer does not make their payments due according to their contractual terms. Generally, a loan can be demanded at any time if the loan is delinquent or if the borrower fails to meet any other agreed upon terms and conditions.

On a quarterly basis, our loan policy requires that we evaluate for impairment all commercial real estate, construction, commercial and resort loan segments that are classified as non-accrual, loans secured by real property in foreclosure or are otherwise likely to be impaired, non-accruing residential and installment loan segments greater than $100,000 and all troubled debt restructurings.

Nonperforming loans consist of non-accruing loans, non-accruing loans identified as trouble debt restructurings and loans past due more than 90 days and still accruing interest.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses inherent in the loan portfolio as of the statement of condition date. The allowance for loan losses consists of a formula allowance following FASB ASC 450 – “Contingencies” and FASB ASC 310 – “Receivables”. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components, as further described below. All reserves are available to cover any losses regardless of how they are allocated.

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, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort. Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development, residential subdivision construction and residential owner occupied construction loans. 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/trends in delinquencies and nonaccrual loans; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no material changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the six months ended June 30, 2014.

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 – Residential real estate loans are generally originated in amounts up to 95.0% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80.0%. The Company does not grant subprime loans. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. Typically, all fixed-rate residential mortgage loans are underwritten pursuant to secondary market underwriting guidelines which include minimum FICO standards. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate – Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, may have an effect on the credit quality in this segment. Management generally obtains rent rolls and other financial information, as appropriate on an annual basis and continually monitors the cash flows of these loans.

Construction loans – Loans in this segment include commercial construction loans, real estate subdivision development loans to developers, licensed contractors and builders for the construction and development of commercial real estate projects and residential properties. 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. In addition, construction subdivision loans and commercial and residential construction loans to contractors and developers entail additional risks as compared to single-family residential mortgage lending to owner-occupants. These loans typically involve large loan balances concentrated in single borrowers or groups of related borrowers. Real estate subdivision development loans to developers, licensed contractors and builders are generally speculative real estate development loans for which payment is derived from sale of the property. Credit risk may be affected by cost overruns, time to sell at an adequate price, and market conditions. Construction financing is generally considered to involve a higher degree of credit risk than longer-term financing on improved, owner-occupied real estate. Residential construction credit quality may be impacted by the overall health of the economy, including unemployment rates and housing prices.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Installment, Collateral, Demand and Revolving Credit – Loans in these segments include installment, demand, revolving credit and collateral loans, principally to customers residing in our primary market area with acceptable credit ratings. Our installment and collateral consumer loans generally consist of loans on new and used automobiles, loans collateralized by deposit accounts and unsecured personal loans. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment. Excluding collateral loans which are fully collateralized by a deposit account, repayment for loans in these segments is dependent on the credit quality of the individual borrower.

Commercial – 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 resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Home equity line of credit – Loans in this segment include home equity loans and lines of credit underwritten with a loan-to-value ratio generally limited to no more than 80%, including any first mortgage. Our home equity lines of credit have ten-year terms and adjustable rates of interest which are indexed to the prime rate. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.

Resort – The remaining portfolio consists of direct receivable loans outside the Northeast which are amortizing to their contractual obligations. The Company has exited the resort financing market with a residual portfolio remaining.

Allocated component:

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial real estate, construction, commercial and resort loans by the present value of expected cash flows discounted at the effective interest rate; the fair value of the collateral, if applicable; or the observable market price for the loan. 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. The Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement or they are nonaccrual loans with outstanding balances greater than $100,000.

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. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Management updates the analysis quarterly. The assumptions used in appraisals are reviewed for appropriateness. Updated appraisals or valuations are obtained as needed or adjusted to reflect the estimated decline in the fair value based upon current market conditions for comparable properties.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”). All TDRs are classified as impaired.

Unallocated component:

An unallocated component is maintained, when needed, 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 Company’s Loan Policy allows management to utilize a high and low range of 0.0% to 5.0% of our total allowance for loan losses when establishing an unallocated allowance, when considered necessary. The unallocated allowance is used to provide for an unidentified loss that may exist in emerging problem loans that cannot be fully quantified or may be affected by conditions not fully understood as of the balance sheet date. There was no unallocated allowance at June 30, 2014 and December 31, 2013.

Pension and Other Postretirement Benefit Plans

On December 27, 2012, the Company announced it froze the non-contributory defined-benefit pension plan and certain other postretirement benefit plans as of February 28, 2013. All benefits under these plans were frozen as of that date and no additional benefits accrued.

The Company has a non-contributory defined benefit pension plan that provides benefits for substantially all employees hired before January 1, 2007 who meet certain requirements as to age and length of service. The benefits are based on years of service and average compensation, as defined in the Plan Document. The Company’s funding policy is to contribute annually the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Security Act of 1974.

In addition to providing pension benefits, we provide certain health care and life insurance benefits for retired employees. Participants or eligible employees hired before January 1, 1993 become eligible for the benefits if they retire after reaching age 62 with fifteen or more years of service. A fixed percent of annual costs are paid depending on length of service at retirement. The Company accrues for the estimated costs of these other post-retirement benefits through charges to expense during the years that employees render service. The Company makes contributions to cover the current benefits paid under this plan. The Company believes the policy for determining pension and other post-retirement benefit expenses is critical because judgments are required with respect to the appropriate discount rate, rate of return on assets, salary increases and other items. The Company reviews and updates the assumptions annually. If the Company’s estimate of pension and post-retirement expense is too low it may experience higher expenses in the future, reducing its net income. If the Company’s estimate is too high, it may experience lower expenses in the future, increasing its net income.

Income Taxes

Deferred income taxes are provided for differences arising in the timing of income and expenses for financial reporting and for income tax purposes. Deferred income taxes and tax benefits 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 basis. 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 Company provides a deferred tax asset valuation allowance for the estimated future tax effects attributable to temporary differences and carryforwards when realization is determined not to be more likely than not.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

FASB ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Pursuant to FASB ASC 740-10, the Company examines its financial statements, its income tax provision and its federal and state income tax returns and analyzes its tax positions, including permanent and temporary differences, as well as the major components of income and expense to determine whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties arising from income tax settlements as part of its provision for income taxes.

Recent Accounting Pronouncements

In January 2014, the FASB issued ASU No. 2014-04 “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”, an amendment to clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar agreement. In addition, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure in accordance with local requirements of the applicable jurisdiction. ASU 2014-04 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. An entity can elect to adopt the amendments using either a modified retrospective method or a prospective transition method. Early adoption is permitted. The adoption of ASU 2014-04 is expected to have no impact on the Company’s financial condition or results of operations.

In January 2014, the FASB issued ASU No. 2014-01, ”Accounting for Investments in Qualified Affordable Housing Projects”, which permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional method, the investment should be accounted for as an equity method investment or a cost method investment. The decision to apply the proportional amortization method of accounting is an accounting policy decision that should be applied consistently to all qualifying affordable housing project investments rather than a decision to be applied to individual investments. This amendment should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. ASU 2014-01 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. The adoption of ASU 2014-01 is expected to have no impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606).” The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. Early application is not permitted. The Company is assessing the impact of ASU 2014-09 on its accounting and disclosures.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In June 2014, the FASB issued ASU No. 2014-11, “Transfers and Servicing (Topic 860) - Repurchase to Maturity Transactions, Repurchase Financings, and Disclosures”, which aligns the accounting for repurchase to maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. ASU 2014-11 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. In addition the disclosure of certain transactions accounted for as a sale is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods, and the disclosure for transactions accounted for as secured borrowings is required for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is prohibited. The Company is assessing the impact of ASU 2014-11 on its accounting and disclosures.

2.	Restrictions on Cash and Due from Banks

The Company is required to maintain a percentage of transaction account balances on deposit in non-interest-earning reserves with the Federal Reserve Bank, offset by the Company’s average vault cash. The Company also is required to maintain cash balances to collateralize the Company’s position with certain third parties. The Company had cash and liquid assets of approximately $6.7 million and $5.0 million to meet these requirements at June 30, 2014 and December 31, 2013.

3.	Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share:


		Three Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
(Dollars in thousands, except per share data):
Net income		$	2,190		$	819		$	3,682		$	1,705
Less:	Dividends to participating shares		(16	)		(16	)		(28	)		(32	)
	Income allocated to participating shares		(41	)		(10	)		(68	)		(21	)
Net income allocated to common stockholders		$	2,133		$	793		$	3,586		$	1,652

Weighted-average shares outstanding			18,035,335			18,064,539			18,035,335			18,070,652

Less:	Average unallocated ESOP shares		(1,112,637	)		(1,205,641	)		(1,124,420	)		(1,219,735	)
	Average treasury stock		(1,920,957	)		(1,084,513	)		(1,800,137	)		(728,709	)
	Average unvested restricted stock		(400,325	)		(533,767	)		(400,325	)		(534,828	)
Weighted-average basic shares outstanding			14,601,416			15,240,618			14,710,453			15,587,380

Plus:	Average dilutive shares		106,056			-			103,113			-
Weighted-average diluted shares outstanding			14,707,472			15,240,618			14,813,566			15,587,380

Net earnings per share (1):
	Basic	$	0.15		$	0.05		$	0.24		$	0.11
	Diluted	$	0.14		$	0.05		$	0.24		$	0.11

(1) Certain per share amounts may not appear to reconcile due to rounding.

For the six months ended June 30, 2014 and 2013, respectively, 46,250 and 1,704,907 options were anti-dilutive and therefore excluded from the earnings per share calculation.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

4.	Investment Securities

Investment securities are summarized as follows:


	June 30, 2014
			Recognized in OCI							Not Recognized in OCI
			Gross		Gross					Gross		Gross
	Amortized		Unrealized		Unrealized			Carrying		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	103,992	$	2	$	(3	)	$	103,991	$	-	$	-		$	103,991
U.S. Government agency obligations		40,024		55		(15	)		40,064		-		-			40,064
Government sponsored residential mortgage-backed securities		7,712		360		-			8,072		-		-			8,072
Corporate debt securities		2,995		114		-			3,109		-		-			3,109
Preferred equity securities		2,100		3		(367	)		1,736		-		-			1,736
Marketable equity securities		108		54		(2	)		160		-		-			160
Mutual funds		3,773		-		(121	)		3,652		-		-			3,652
Total securities available-for-sale	$	160,704	$	588	$	(508	)	$	160,784	$	-	$	-		$	160,784
Held-to-maturity
U.S. Government agency obligations	$	9,715	$	-	$	-		$	9,715	$	185	$	-		$	9,900
Government sponsored residential mortgage-backed securities		-		-		-			-		-		-			-
Trust preferred debt security		3,000		-		-			3,000		-		-			3,000
Total securities held-to-maturity	$	12,715	$	-	$	-		$	12,715	$	185	$	-		$	12,900

	December 31, 2013
			Recognized in OCI							Not Recognized in OCI
			Gross		Gross					Gross		Gross
	Amortized		Unrealized		Unrealized			Carrying		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	126,000	$	3	$	(3	)	$	126,000	$	-	$	-		$	126,000
U.S. Government agency obligations		7,006		-		(84	)		6,922		-		-			6,922
Government sponsored residential mortgage-backed securities		9,199		417		-			9,616		-		-			9,616
Corporate debt securities		2,982		122		-			3,104		-		-			3,104
Preferred equity securities		2,100		-		(531	)		1,569		-		-			1,569
Marketable equity securities		108		42		(2	)		148		-		-			148
Mutual funds		3,710		-		(183	)		3,527		-		-			3,527
Total securities available-for-sale	$	151,105	$	584	$	(803	)	$	150,886	$	-	$	-		$	150,886
Held-to-maturity
U.S. Government agency obligations	$	5,000	$	-	$	-		$	5,000	$	-	$	(70	)	$	4,930
Government sponsored residential mortgage-backed securities		4,983		-		-			4,983		-		(27	)		4,956
Trust preferred debt security		3,000		-		-			3,000		-		-			3,000
Total securities held-to-maturity	$	12,983	$	-	$	-		$	12,983	$	-	$	(97	)	$	12,886

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes gross unrealized losses and fair value, aggregated by investment category and length of time the investments have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013:


	June 30, 2014
			Less than 12 Months					12 Months or More					Total
					Gross					Gross					Gross
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Securities		Value		Loss			Value		Loss			Value		Loss
Available-for-sale:
U.S. Treasury obligations		2	$	21,995	$	(3	)	$	-	$	-		$	21,995	$	(3	)
U.S. Government agency obligations		2		14,996		(15	)		-		-			14,996		(15	)
Preferred equity securities		1		-		-			1,633		(367	)		1,633		(367	)
Marketable equity securities		1		-		-			5		(2	)		5		(2	)
Mutual funds		1		-		-			3,653		(121	)		3,653		(121	)
		7		36,991		(18	)		5,291		(490	)		42,282		(508	)

	December 31, 2013
			Less than 12 Months					12 Months or More					Total
					Gross					Gross					Gross
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Securities		Value		Loss			Value		Loss			Value		Loss
Available-for-sale:
U.S. Treasury obligations		6	$	63,994	$	(3	)	$	-	$	-		$	63,994	$	(3	)
U.S. Government agency obligations		1		6,923		(84	)		-		-			6,923		(84	)
Preferred equity securities		2		98		(2	)		1,471		(529	)		1,569		(531	)
Marketable equity securities		1		-		-			5		(2	)		5		(2	)
Mutual funds		1		3,527		(183	)		-		-			3,527		(183	)
		11		74,542		(272	)		1,476		(531	)		76,018		(803	)
Held-to-maturity
U.S. Government agency obligations		1		4,930		(70	)		-		-			4,930		(70	)
Government sponsored residential mortgage-backed securities		1		4,956		(27	)		-		-			4,956		(27	)
		2		9,886		(97	)		-		-			9,886		(97	)
Total investment securities in an unrealized loss position		13	$	84,428	$	(369	)	$	1,476	$	(531	)	$	85,904	$	(900	)

Management believes that no individual unrealized loss as of June 30, 2014 represents an other-than-temporary impairment (“OTTI”), based on its detailed review of the securities portfolio. The Company has no intent to sell nor is it more likely than not that the Company will be required to sell any of the securities in a loss position during the period of time necessary to recover the unrealized losses, which may be until maturity.

The following summarizes the conclusions from our OTTI evaluation for those security types that incurred significant gross unrealized losses as of June 30, 2014:

Preferred equity securities - The unrealized loss on preferred equity securities in a loss position for 12 months or more relates to one preferred equity security. This investment is in a global financial institution. When estimating the recovery period for securities in an unrealized loss position, management utilizes analyst forecasts, earnings assumptions and other company-specific financial performance metrics. In addition, this assessment incorporates general market data, industry and sector cycles and related trends to determine a reasonable recovery period. Management evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment. Management concluded that the preferred equity security is not other-than-temporarily impaired at June 30, 2014.

Mutual funds - The unrealized loss on mutual funds in a loss position for 12 months or more relates to one mutual fund. The mutual fund seeks to invest in geographically specific debt securities located in portions of the United States designated by fund shareholders. The fund invests primarily in high quality debt securities and other debt instruments supporting the affordable housing industry in areas of the United States designated by fund shareholders. When estimating the recovery period for securities in an unrealized loss position, management utilizes analyst forecasts, earnings assumptions and other fund-specific financial performance metrics. In addition, this assessment incorporates general market data, industry and sector cycles and related trends to determine a reasonable recovery period. Management evaluated the near-term prospects of the fund in relation to the severity and duration of the impairment. Management concluded that the mutual fund is not other-than-temporarily impaired at June 30, 2014.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company recorded no other-than-temporary impairment charges to the investment securities portfolios for the three and six months ended June 30, 2014 and 2013.

There were no gross realized gains on sales of securities available-for-sale for the three and six months ended June 30, 2014. There were gross realized gains on sales of securities available-for-sale totaling $36,000 for the three and six months ended June 30, 2013.

As of June 30, 2014 and December 31, 2013, U.S. Treasury, U.S. Government agency obligations and Government sponsored residential mortgage-backed securities with a fair value of $113.3 million and $116.7 million, respectively, were pledged as collateral for loan derivatives, public funds, repurchase liabilities and repurchase agreement borrowings.

The amortized cost and estimated market value of debt securities at June 30, 2014 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties:


	June 30, 2014
	Available-for-Sale				Held-to-Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
(Dollars in thousands)
Due in one year or less	$	105,987	$	105,992	$	-	$	-
Due after one year through five years		41,024		41,172		-		-
Due after five years through ten years		-		-		-		-
Due after ten years		-		-		3,000		3,000
Government sponsored residential mortgage-backed securities		7,712		8,072		9,715		9,900
	$	154,723	$	155,236	$	12,715	$	12,900

Federal Home Loan Bank of Boston (“FHLBB”) Stock

The Company, as a member of the FHLBB, owned $17.7 million and $13.1 million of FHLBB capital stock at June 30, 2014 and December 31, 2013, respectively, which is equal to its FHLBB capital stock requirement. The Company evaluated its FHLBB capital stock for potential other-than-temporary impairment at June 30, 2014. Capital adequacy, credit ratings, the value of the stock, overall financial condition of both the FHLB system and FHLBB as well as current economic factors was analyzed in the impairment analysis. The Company concluded that its position in FHLBB capital stock is not other-than-temporarily impaired as of June 30, 2014.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Alternative Investments

Alternative investments, which totaled $2.3 million and $2.4 million at June 30, 2014 and December 31, 2013, respectively, are included in other assets in the accompanying Consolidated Statements of Financial Condition. The Company’s alternative investments include certain non-public funds, which include limited partnerships, an equity fund and membership stocks. These investments are held at cost and evaluated for potential other-than-temporary impairment at June 30, 2014. The Company recognized a $41,000 other-than-temporary impairment charge in its limited partnerships for the six months ended June 30, 2014, included in other noninterest income in the accompanying condensed Consolidated Statements of Operations. See a further discussion of fair value in Note 13 - Fair Value Measurements. The Company recognized profit distributions in its limited partnerships of $27,000 and $91,000 for the six months ended June 30, 2014 and 2013, respectively. These amounts are included in other non-interest income in the accompanying condensed Consolidated Statements of Operations. The Company has $517,000 in unfunded commitments remaining for its alternative investments as of June 30, 2014.

5.	Loans and Allowance for Loan Losses

Loans consisted of the following:


	June 30,			December 31,
	2014			2013
(Dollars in thousands)
Real estate:
Residential	$	749,124		$	693,046
Commercial		686,299			633,764
Construction		69,047			78,191
Installment		3,850			4,516
Commercial		277,483			252,032
Collateral		1,480			1,600
Home equity line of credit		156,625			151,606
Demand		-			85
Revolving credit		75			94
Resort		1,068			1,374
Total loans		1,945,051			1,816,308

Allowance for loan losses		(17,912	)		(18,314	)
Net deferred loan costs		3,363			2,993
Loans, net	$	1,930,502		$	1,800,987

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Changes in the allowance for loan losses by segments for the three and six months ended June 30, 2014 and 2013 are as follows:


	For the Three Months Ended June 30, 2014
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate:
Residential	$	3,760	$	(123	)	$	1	$	(7	)	$	3,631
Commercial		8,601		-			1		180			8,782
Construction		927		-			-		(27	)		900
Installment		42		(3	)		-		2			41
Commercial		2,847		(1	)		6		237			3,089
Collateral		-		-			-		-			-
Home equity line of credit		1,453		-			-		15			1,468
Demand		-		-			-		-			-
Revolving credit		-		(12	)		2		10			-
Resort		1		-			-		-			1
Unallocated		-		-			-		-			-
	$	17,631	$	(139	)	$	10	$	410		$	17,912

	For the Three Months Ended June 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate:
Residential	$	3,901	$	(81	)	$	-	$	(92	)	$	3,728
Commercial		7,926		-			-		86			8,012
Construction		847		-			-		291			1,138
Installment		64		-			-		(7	)		57
Commercial		2,990		-			4		5			2,999
Collateral		-		-			-		-			-
Home equity line of credit		1,393		-			-		8			1,401
Demand		-		-			-		-			-
Revolving credit		-		(12	)		6		6			-
Resort		211		-			-		(41	)		170
Unallocated		-		-			-		-			-
	$	17,332	$	(93	)	$	10	$	256		$	17,505

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)


	For the Six Months Ended June 30, 2014
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,647	$	(262	)	$	1	$	245		$	3,631
Commercial		8,253		(93	)		1		621			8,782
Construction		1,152		-			-		(252	)		900
Installment		48		(3	)		-		(4	)		41
Commercial		3,746		(955	)		13		285			3,089
Collateral		-		-			-		-			-
Home equity line of credit		1,465		-			-		3			1,468
Demand		-		-			-		-			-
Revolving credit		-		(26	)		7		19			-
Resort		3		-			-		(2	)		1
Unallocated		-		-			-		-			-
	$	18,314	$	(1,339	)	$	22	$	915		$	17,912

	For the Six Months Ended June 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,778	$	(375	)	$	-	$	325		$	3,728
Commercial		8,105		-			-		(93	)		8,012
Construction		760		-			-		378			1,138
Installment		77		-			-		(20	)		57
Commercial		2,654		-			9		336			2,999
Collateral		-		-			-		-			-
Home equity line of credit		1,377		-			-		24			1,401
Demand		-		-			-		-			-
Revolving credit		-		(24	)		11		13			-
Resort		456		-			-		(286	)		170
Unallocated		22		-			-		(22	)		-
	$	17,229	$	(399	)	$	20	$	655		$	17,505

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table lists the allocation of the allowance by impairment methodology and by loan segment at June 30, 2014 and December 31, 2013:


	June 30, 2014				December 31, 2013
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)	Total		Reserve Allocation		Total		Reserve Allocation
Loans individually evaluated for impairment:
Real estate:
Residential	$	12,477	$	374	$	12,225	$	360
Commercial		20,848		183		21,143		62
Construction		187		-		187		-
Installment		223		8		215		9
Commercial		6,666		407		4,096		1,243
Collateral		-		-		-		-
Home equity line of credit		423		-		538		-
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		1,068		1		1,219		-
		41,892		973		39,623		1,674


Loans collectively evaluated for impairment:
Real estate:
Residential	$	740,389	$	3,257	$	683,966	$	3,287
Commercial		665,120		8,599		612,517		8,191
Construction		68,860		900		78,004		1,152
Installment		3,627		33		4,301		39
Commercial		270,769		2,682		247,888		2,503
Collateral		1,480		-		1,600		-
Home equity line of credit		156,202		1,468		151,068		1,465
Demand		-		-		85		-
Revolving Credit		75		-		94		-
Resort		-		-		155		3
		1,906,522		16,939		1,779,678		16,640
Total	$	1,948,414	$	17,912	$	1,819,301	$	18,314

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of loan delinquencies at recorded investment values at June 30, 2014 and December 31, 2013:


	June 30, 2014
	30-59 Days				60-89 Days				> 90 Days								Past Due 90 Days or More
(Dollars in thousands)	Past Due				Past Due				Past Due				Total				and Still
	Number		Amount		Number		Amount		Number		Amount		Number		Amount		Accruing
Real estate:
Residential		6	$	1,228		6	$	808		19	$	8,584		31	$	10,620	$	-
Commercial		-		-		-		-		4		2,170		4		2,170		-
Construction		-		-		-		-		1		187		1		187		-
Installment		1		3		-		-		4		75		5		78		-
Commercial		3		327		1		38		6		958		10		1,323		-
Collateral		7		57		-		-		-		-		7		57		-
Home equity line of credit		2		74		1		283		6		459		9		816		-
Demand		1		6		-		-		-		-		1		6		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		20	$	1,695		8	$	1,129		40	$	12,433		68	$	15,257	$	-

	December 31, 2013
	30-59 Days				60-89 Days				> 90 Days								Past Due 90 Days or More
(Dollars in thousands)	Past Due				Past Due				Past Due				Total				and Still
	Number		Amount		Number		Amount		Number		Amount		Number		Amount		Accruing
Real estate:
Residential		9	$	2,586		8	$	1,600		20	$	8,518		37	$	12,704	$	-
Commercial		1		231		-		-		1		827		2		1,058		-
Construction		-		-		-		-		1		187		1		187		-
Installment		-		-		-		-		2		47		2		47		-
Commercial		1		5		-		-		6		584		7		589		-
Collateral		2		9		-		-		-		-		2		9		-
Home equity line of credit		1		283		1		183		5		441		7		907		-
Demand		1		10		-		-		-		-		1		10		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		15	$	3,124		9	$	1,783		35	$	10,604		59	$	15,511	$	-

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Nonperforming assets consist of non-accruing loans including non-accruing loans identified as troubled debt restructurings, loans past due more than 90 days and still accruing interest and other real estate owned. The following table lists nonperforming assets at:


	June 30,		December 31,
(Dollars in thousands)	2014		2013
Nonaccrual loans:
Real estate:
Residential	$	10,266	$	10,599
Commercial		2,170		827
Construction		187		187
Installment		78		162
Commercial		1,327		2,285
Collateral		-		-
Home equity line of credit		624		740
Demand		-		-
Revolving Credit		-		-
Resort		-		-
Total nonaccruing loans		14,652		14,800
Loans 90 days past due and still accruing		-		-
Other real estate owned		434		393
Total nonperforming assets	$	15,086	$	15,193

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at June 30, 2014 and December 31, 2013:


	June 30, 2014						December 31, 2013
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Real estate:
Residential	$	7,399	$	7,942	$	-	$	6,900	$	7,442	$	-
Commercial		15,689		18,526		-		18,463		18,649		-
Construction		187		433		-		187		433		-
Installment		195		195		-		187		187		-
Commercial		3,561		3,709		-		1,268		1,307		-
Collateral		-		-		-		-		-		-
Home equity line of credit		423		546		-		538		658		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		27,454		31,351		-		27,543		28,676		-

Impaired loans with a valuation allowance:
Real estate:
Residential		5,078		5,595		374		5,325		5,804		360
Commercial		5,159		2,597		183		2,680		2,679		62
Construction		-		-		-		-		-		-
Installment		28		28		8		28		28		9
Commercial		3,105		4,031		407		2,828		2,888		1,243
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,068		1,068		1		1,219		1,218		-
Total		14,438		13,319		973		12,080		12,617		1,674
Total impaired loans	$	41,892	$	44,670	$	973	$	39,623	$	41,293	$	1,674

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes average recorded investment and interest income recognized on impaired loans:


			Three Months		Six Months				Three Months		Six Months
			Ended		Ended				Ended		Ended
	June 30,		June 30,		June 30,		June 30,		June 30,		June 30,
	2014		2014		2014		2013		2013		2013
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(Dollars in thousands)	Investment		Recognized		Recognized		Investment		Recognized		Recognized
Impaired loans without a valuation allowance:
Real estate:
Residential	$	6,895	$	20	$	43	$	4,254	$	1	$	1
Commercial		16,844		174		429		3,762		45		82
Construction		140		-		-		380		-		-
Installment		143		3		7		-		-		-
Commercial		3,658		27		84		2,988		60		96
Collateral		-		-		-		-		-		-
Home equity line of credit		470		-		-		506		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		28,150		224		563		11,890		106		179

Impaired loans with a valuation allowance:
Real estate:
Residential		5,275		7		27		6,712		24		41
Commercial		4,080		15		47		13,733		223		470
Construction		47		-		-		377		-		-
Installment		28		-		-		17		-		-
Commercial		2,717		30		53		3,702		23		40
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,175		8		19		1,199		16		29
Total		13,322		60		146		25,740		286		580
Total impaired loans	$	41,472	$	284	$	709	$	37,630	$	392	$	759

There was no interest income recognized on a cash basis method of accounting for the three and six months ended June 30, 2014 and 2013.

Troubled Debt Restructuring

A loan is considered a troubled debt restructuring (“TDR”) when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower in modifying or renewing the loan the Company would not otherwise consider. In connection with troubled debt restructurings, terms may be modified to fit the ability of the borrower to repay in line with their current financial status, which may include a reduction in the interest rate to market rate or below, a change in the term or movement of past due amounts to the back-end of the loan or refinancing. A loan is placed on non-accrual status upon being restructured, even if it was not previously, unless the modified loan was current for the six months prior to its modification and we believe the loan is fully collectable in accordance with its new terms. The Company’s policy to restore a restructured loan to performing status is dependent on the receipt of regular payments, generally for a period of six months and one calendar year-end. All troubled debt restructurings are classified as impaired loans and are reviewed for impairment by management on a quarterly basis per Company policy.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The recorded investment balance of TDRs approximated $25.0 million and $23.4 million at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014 and December 31, 2013, the majority of the Company’s TDRs are on accrual status. TDRs on accrual status were $18.2 million and $15.8 million while TDRs on nonaccrual status were $6.8 million and $7.6 million at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014, 100% of the accruing TDRs have been performing in accordance with the restructured terms. At June 30, 2014 and December 31, 2013, the allowance for loan losses included specific reserves of $721,000 and $1.6 million related to TDRs, respectively. For the six months ended June 30, 2014 and 2013, the Bank had charge-offs totaling $982,000 and $293,000, respectively, related to portions of TDRs deemed to be uncollectible. The Bank in very rare circumstances may provide additional funds to borrowers in TDR status. The amount of additional funds available to borrowers in TDR status was $219,000 and $332,000 at June 30, 2014 and December 31, 2013, respectively.

The following tables present information on loans whose terms had been modified in a troubled debt restructuring at June 30, 2014 and December 31, 2013:


	June 30, 2014
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate:
Residential		12	$	2,419		9	$	5,618		21	$	8,037
Commercial		9		10,005		-		-		9		10,005
Construction		-		-		1		187		1		187
Installment		4		223		-		-		4		223
Commercial		9		4,475		5		787		14		5,262
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		2		197		2		197
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1		1,068		-		-		1		1,068
Total		35	$	18,190		17	$	6,789		52	$	24,979


	December 31, 2013
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate:
Residential		6	$	1,814		8	$	5,285		14	$	7,099
Commercial		12		11,509		-		-		12		11,509
Construction		-		-		1		187		1		187
Installment		3		215		-		-		3		215
Commercial		6		1,033		5		1,799		11		2,832
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		3		307		3		307
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		2		1,219		-		-		2		1,219
Total		29	$	15,790		17	$	7,578		46	$	23,368

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following tables include the recorded investment and number of modifications for modified loans. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured for the three and six months ended June 30, 2014 and 2013:


	For the Three Months Ended June 30, 2014						For the Six Months Ended June 30, 2014
(Dollars in thousands)	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)		Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)
Trouble Debt Restructurings:
Real estate
Residential		2	$	278	$	278		9	$	1,463	$	1,450
Installment		1		17		17		1		17		17
Commercial		2		283		283		4		3,763		3,759
Total		5	$	578	$	578		14	$	5,243	$	5,226


	For the Three Months Ended June 30, 2013						For the Six Months Ended June 30, 2013
(Dollars in thousands)	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)		Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)
Trouble Debt Restructurings:
Real estate
Residential		-	$	-	$	-		3	$	588	$	570
Commercial		2		1,726		1,725		2		1,725		1,725
Construction		1		187		187		1		187		187
Installment		1		29		29		2		36		35
Commercial		5		2,026		2,025		6		5,653		5,603
Home equity line of credit		-		-		-		2		244		200
Total		9	$	3,968	$	3,966		16	$	8,433	$	8,320

(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. TDRs fully paid off, charged-off or foreclosed upon by period end are not included.

The following table provides TDR loans that were modified by means of extended maturity, below market adjusted interest rates, a combination of rate and maturity, or by other means including covenant modifications, forbearance and/or the concessions and borrowers discharged in bankruptcy for the three and six months ended June 30, 2014 and 2013.


	For the Three Months Ended June 30, 2014
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		2	$	-	$	-	$	-	$	278	$	278
Installment		1		-		-		-		17		17
Commercial		2		241		-		-		42		283
Total		5	$	241	$	-	$	-	$	337	$	578


	For the Six Months Ended June 30, 2014
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		9	$	-	$	-	$	-	$	1,450	$	1,450
Installment		1		-		-		-		17		17
Commercial		4		2,621		-		-		1,138		3,759
Total		14	$	2,621	$	-	$	-	$	2,605	$	5,226

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)


	For the Three Months Ended June 30, 2013
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Commercial		2	$	1,577	$	-	$	-	$	148	$	1,725
Construction		1		-		-		-		187		187
Installment		1		-		-		29		-		29
Commercial		5		1,919		-		-		106		2,025
Total		9	$	3,496	$	-	$	29	$	441	$	3,966


	For the Six Months Ended June 30, 2013
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		3	$	-	$	-	$	231	$	339	$	570
Commercial		2		1,577		-		-		148		1,725
Construction		1		-		-		-		187		187
Installment		2		-		-		35		-		35
Commercial		6		5,497		-		-		106		5,603
Home equity line of credit		2		-		-		14		186		200
Total		16	$	7,074	$	-	$	280	$	966	$	8,320

A TDR is considered to be in re-default once it is more than 30 days past due following a modification. The following loans defaulted and had been modified as a TDR during the twelve month period preceding the default date during the three and six months ended June 30, 2014.


	For the Three Months Ended				For the Six Months Ended
	June 30, 2014				June 30, 2014
(Dollars in thousands)	Number of Loans		Recorded Investment (1)		Number of Loans		Recorded Investment (1)
Real estate
Residential		1	$	498		2	$	711
Commercial		2		454		2		454
Total		3	$	952		4	$	1,165

(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. TDRs fully paid off, charged-off or foreclosed upon by period end are not included.

There were no loans that defaulted and had been modified as a TDR during the twelve month period preceding the default date during the three and six months ended June 30, 2013.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Credit Quality Information

At the time of loan origination, a risk rating based on a nine point grading system is assigned to each commercial-related loan based on the loan officer’s and management’s assessment of the risk associated with each particular loan. This risk assessment is based on an in depth analysis of a variety of factors. More complex loans and larger commitments require the Company’s internal credit risk management department further evaluate the risk rating of the individual loan or relationship, with credit risk management having final determination of the appropriate risk rating. These more complex loans and relationships receive ongoing 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 Company’s risk rating system is designed to be a dynamic system and we grade loans on a “real time” basis. The Company places considerable emphasis on risk rating accuracy, risk rating justification, and risk rating triggers. The Company’s risk rating process has been enhanced with its implementation of industry-based risk rating “cards.” The cards are used by the loan officers and promote risk rating accuracy and consistency on an institution-wide basis. Most loans are reviewed annually as part of a comprehensive portfolio review conducted by management and/or by an independent loan review firm. More frequent reviews of loans rated low pass, special mention, substandard and doubtful are conducted by the credit risk management department. The Company utilizes an independent loan review consulting firm to review its rating accuracy and the overall credit quality of its loan portfolio. The review is designed to provide an evaluation of the portfolio with respect to risk rating profile as well as with regard to the soundness of individual loan files. The individual loan reviews include an analysis of the creditworthiness of obligors, via appropriate key ratios and cash flow analysis and an assessment of collateral protection. The consulting firm conducts two loan reviews per year aiming at a 65.0% or higher commercial and industrial loans and commercial real estate portfolio penetration. Summary findings of all loan reviews performed by the outside consulting firm are reported to the board of directors and senior management of the Company upon completion.

The Company utilizes a nine point risk rating scale as follows:

Risk Rating Definitions

Residential and consumer loans are not rated unless they are 45 days or more delinquent, in which case, depending on past-due days, they will be rated 6, 7 or 8.

Loans rated 1 – 5:

Commercial loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6:

Residential, Consumer and Commercial loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 7:

Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors 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 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.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the Company’s loans by risk rating at June 30, 2014 and December 31, 2013:


	June 30, 2014
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate:
Residential	$	736,046	$	1,073	$	12,005	$	-	$	749,124
Commercial		665,383		7,230		13,686		-		686,299
Construction		63,847		134		5,066		-		69,047
Installment		3,502		47		301		-		3,850
Commercial		263,293		2,817		10,716		657		277,483
Collateral		1,480		-		-		-		1,480
Home equity line of credit		154,976		861		788		-		156,625
Demand		-		-		-		-		-
Revolving Credit		75		-		-		-		75
Resort		-		-		1,068		-		1,068
Total Loans	$	1,888,602	$	12,162	$	43,630	$	657	$	1,945,051

	December 31, 2013
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate:
Residential	$	680,111	$	1,089	$	11,846	$	-	$	693,046
Commercial		608,289		7,023		18,452		-		633,764
Construction		72,022		-		6,169		-		78,191
Installment		4,251		50		215		-		4,516
Commercial		237,755		970		11,659		1,648		252,032
Collateral		1,600		-		-		-		1,600
Home equity line of credit		149,781		719		1,106		-		151,606
Demand		85		-		-		-		85
Revolving Credit		94		-		-		-		94
Resort		156		-		1,218		-		1,374
Total Loans	$	1,754,144	$	9,851	$	50,665	$	1,648	$	1,816,308

The Company places considerable emphasis on the early identification of problem assets, problem-resolution and minimizing loss exposure. Delinquency notices are mailed monthly to all delinquent borrowers, advising them of the amount of their delinquency. Residential and consumer lending borrowers are typically given 30 days to pay the delinquent payments or to contact us to make arrangements to bring the loan current over a longer period of time. Generally, if a residential or consumer lending borrower fails to bring the loan current within 90 days from the original due date or to make arrangements to cure the delinquency over a longer period of time, the matter is referred to legal counsel and foreclosure or other collection proceedings are initiated. The Company may consider forbearance or a loan restructuring in certain circumstances where a temporary loss of income is the primary cause of the delinquency, and if a reasonable plan is presented by the borrower to cure the delinquency in a reasonable period of time after his or her income resumes. Problem or delinquent borrowers in our commercial real estate, commercial business and resort portfolios are handled on a case-by-case basis, typically by our Special Assets Department. Appropriate problem-resolution and workout strategies are formulated based on the specific facts and circumstances.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Mortgage Servicing Rights

The Company services residential real estate mortgage loans that it has sold without recourse to third parties. The carrying value of mortgage servicing rights was $3.2 million and $3.1 million at June 30, 2014 and December 31, 2013, respectively. The fair value of mortgage servicing rights approximated $3.6 million at June 30, 2014 and December 31, 2013. Total loans sold with servicing rights retained were $21.8 million and $117.5 million for the six months ended June 30, 2014 and 2013, respectively. The net gain on loans sold totaled $439,000 and $3.6 million for the six months ended June 30, 2014 and 2013, respectively, and is included in the accompanying condensed Consolidated Statements of Operations.

The principal balance of loans serviced for others, which are not included in the accompanying Consolidated Statements of Financial Condition totaled $310.6 million and $299.0 million at June 30, 2014 and December 31, 2013, respectively. Loan servicing fees for others totaling $375,000 and $258,000 for the six months ended June 30, 2014 and 2013, respectively, and is included as a component of other noninterest income in the accompanying condensed Consolidated Statements of Operations.

Related Party Loans

During the regular course of its business, the Company makes loans to its executive officers, Directors and other related parties. These related party loans totaled $980,000 and $647,000 at June 30, 2014 and December 31, 2013, respectively. All related party loans were performing according to their credit terms.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

6.	Credit Arrangements

The Company has access to a pre-approved line of credit with the Federal Home Loan Bank of Boston (“FHLBB”) for $8.8 million, which was undrawn at June 30, 2014 and December 31, 2013. The Company has access to a pre-approved unsecured line of credit with a financial institution totaling $20.0 million, which was undrawn at June 30, 2014 and December 31, 2013. The Company has access to a $3.5 million unsecured line of credit agreement with a bank which expires on August 31, 2014. The line was undrawn at June 30, 2014 and December 31, 2013. The Company maintains a cash balance of $262,500 with the bank to avoid fees associated with the above line.

In accordance with an agreement with the FHLBB, the Company is required to maintain qualified collateral, as defined in the FHLBB Statement of Credit Policy, free and clear of liens, pledges and encumbrances, as collateral for the advances, if any, and the preapproved line of credit. The Company is in compliance with these collateral requirements.

FHLBB advances totaled $291.0 million and $259.0 million at June 30, 2014 and December 31, 2013, respectively. Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $731.7 million and $677.4 million at June 30, 2014 and December 31, 2013, respectively. The Company has available borrowings of $193.2 million and $190.6 million at June 30, 2014 and December 31, 2013, respectively, subject to collateral requirements of the FHLBB. The Company 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, or 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.

The Company participates in the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $97.3 million and $80.5 million on an overnight basis at June 30, 2014 and December 31, 2013, respectively, and was undrawn as of June 30, 2014 and December 31, 2013. The funding arrangement was collateralized by $149.5 million and $124.7 million in pledged commercial real estate loans as of June 30, 2014 and December 31, 2013, respectively.

The Bank has a Master Repurchase Agreement borrowing facility with a broker. Borrowings under the Master Repurchase Agreement are secured by the Company’s investments in certain treasury bill securities with a fair value of $24.0 million and cash of $203,000. Outstanding borrowings totaled $21.0 million at June 30, 2014 and December 31, 2013.

The Bank offers overnight repurchase liability agreements to commercial or municipal customers whose excess deposit account balances are swept daily into collateralized repurchase liability accounts. The overnight repurchase liability agreements do not contain master netting arrangements. The Bank had repurchase liabilities outstanding of $55.3 million and $50.8 million at June 30, 2014 and December 31, 2013, respectively. They are secured by the Company’s investment in specific issues of U.S. Treasury obligations, Government sponsored residential mortgage-backed securities and U.S. Government agency obligations with a market value of $62.6 million and $71.3 million as of June 30, 2014 and December 31, 2013, respectively.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Deposits

Deposit balances are as follows:

	June 30,		December 31,
	2014		2013
(Dollars in thousands)
Noninterest-bearing demand deposits	$	315,916	$	308,459
Interest-bearing
NOW accounts		377,570		285,392
Money market		401,694		387,225
Savings accounts		202,970		193,937
Time deposits		332,629		338,488
Total interest-bearing deposits		1,314,863		1,205,042
Total deposits	$	1,630,779	$	1,513,501

Time certificates of deposit in denominations of $100,000 or more approximated $154.2 million and $147.7 million at June 30, 2014 and December 31, 2013, respectively.

At June 30, 2014, the scheduled maturities of time deposits were as follows:

(Dollars in thousands)
Years ending December 31,
2014	$	165,907
2015		87,817
2016		50,000
2016		16,417
2017		7,861
Thereafter		4,627
Total time deposits	$	332,629

The Company has established a relationship to participate in a reciprocal deposit program with other financial institutions as a service to its customers. This program provides enhanced FDIC insurance to participating customers. As of June 30, 2014 and December 31, 2013, there have been no reciprocal deposits.

8.	Pension and Other Postretirement Benefit Plans

The following tables set forth the components of net periodic pension and benefit costs.


	Pension Benefits						Other Postretirement Benefits
	Three Months Ended June 30,						Three Months Ended June 30,
	2014			2013			2014			2013
(Dollars in thousands)
Service cost	$	-		$	-		$	15		$	26
Interest cost		256			239			37			32
Expected return on plan assets		(335	)		(283	)		-			-
Amortization:
Loss		76			140			5			10
Prior service cost		-			-			(13	)		(12	)
Net periodic benefit cost	$	(3	)	$	96		$	44		$	56

	Pension Benefits						Other Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
(Dollars in thousands)
Service cost	$	-		$	-		$	30		$	51
Interest cost		511			476			73			64
Expected return on plan assets		(670	)		(567	)		-			-
Amortization:
Loss		153			286			9			21
Prior service cost		-			-			(25	)		(25	)
Net periodic benefit cost	$	(6	)	$	195		$	87		$	111

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

On December 27, 2012, the Company announced it would freeze the non-contributory defined-benefit pension plan and certain defined benefit postretirement plans as of February 28, 2013. All benefits under these plans were frozen as of that date and no additional benefits will accrue.

The Company expects to contribute a total of $1.5 million to the qualified defined benefit plan for the year ended December 31, 2014. Since the supplemental plan and the postretirement benefit plans are unfunded, the Company accrues for the estimated costs of these plans through charges to expense during the year that employees render service. The Company makes contributions to cover the current benefits paid under these plans.

Employee Stock Ownership Plan

As part of the reorganization, the Company established the ESOP to provide eligible employees the opportunity to own Company stock. The Company provided a loan to the Farmington Bank Employee Stock Ownership Plan Trust in the amount needed to purchase up to 1,430,416 shares of the Company’s common stock in the open market subsequent to the initial public offering. The loan bears an interest rate equal to the Wall Street Journal Prime Rate plus one percentage point, adjusted annually, and provides for annual payments of interest and principal over the 15 year term of the loan. At June 30, 2014, the loan had an outstanding balance of $13.9 million and an interest rate of 4.25%. The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan. The loan is secured by the unallocated shares purchased. The ESOP compensation expense was $740,000 and $678,000 for the six months ended June 30, 2014 and 2013, respectively.

Shares held by the ESOP include the following as of June 30, 2014:

Allocated			286,083
Committed to be released			47,289
Unallocated			1,097,044
			1,430,416

The fair value of unallocated ESOP shares was $17.6 million at June 30, 2014.

9.	Stock Incentive Plan

In August 2012, the Company implemented the First Connecticut Bancorp, Inc. 2012 Stock Incentive Plan (the “Plan”). The Plan provides for a total of 2,503,228 shares of common stock for issuance upon the grant or exercise of awards. The Plan allows for the granting of 1,788,020 non-qualified stock options and 715,208 shares of restricted stock.

In accordance with generally accepted accounting principles for Share-Based Payments, the Company expenses the fair value of all share-based compensation grants over the requisite service periods. Stock options granted vested 20% immediately and will vest 20% at each annual anniversary of the grant date through 2016 and expire ten years after grant date. The Company recognizes compensation expense for the fair values of these awards, which vest on a straight-line basis over the requisite service period of the awards. Restricted shares granted vested 20% immediately and will vest 20% at each annual anniversary of the grant date through 2016. The product of the number of shares granted and the grant date market price of the Company’s common stock determines the fair value of restricted shares under the Company’s restricted stock plan. The Company recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period for the entire award.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company classifies share-based compensation for employees within “Salaries and employee benefits” and share-based payments for outside directors within “Other operating expenses” in the consolidated statement of operations. For the six months ended June 30, 2014 and 2013, the Company recorded $1.4 million and $2.1 million of share-based compensation expense, respectively, comprised of $587,000 and $790,000 of stock option expense, respectively and $857,000 and $1.3 million of restricted stock expense, respectively. Expected future compensation expense relating to the 996,007 non-vested options outstanding at June 30, 2014, is $2.6 million over the remaining vesting period of 2.24 years. Expected future compensation expense relating to the 400,325 non-vested restricted shares at June 30, 2014, is $3.7 million over the remaining vesting period of 2.19 years.

The fair value of the options awarded is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on the Company’s historical volatility and the historical volatility of a peer group as the Company does not have reliably determined stock price for the period needed that is at least equal to its expected term and the Company’s recent historical volatility may not reflect future expectations. The peer group consisted of financial institutions located in New England and the Mid-Atlantic regions of the United States based on whose common stock is traded on a national securities exchange, asset size, tangible capital ratio and earnings factors. The expected term of options granted is derived from using the simplified method due to the Company not having sufficient historical share option experience upon which to estimate an expected term. The risk-free rate is based on the grant date for a traded zero-coupon U.S. Treasury bond with a term equal to the option’s expected term.

Weighted-average assumptions for the six months ended June 30, 2014 and 2013:

	2014			2013
Weighted per share average fair value of options granted	$	4.27		$	3.99
Weighted-average assumptions:
Risk-free interest rate		1.90	%		1.12	%
Expected volatility		30.56	%		32.35	%
Expected dividend yield		1.89	%		1.67	%
Weighted-average dividend yield		1.09% - 2.51	%		0.80% - 2.71	%
Expected life of options granted	6.0 years			6.0 years

The following is a summary of the Company’s stock option activity and related information for its option grants for the six months ended June 30, 2014.

	Number of Stock Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2013		1,629,857		$	12.98
Granted		21,500			16.39
Exercised		-			-
Forfeited		(4,100	)		14.63
Outstanding at June 30, 2014		1,647,257		$	13.02		8.21	$	4,984

Exercisable at June 30, 2014		651,250

No options were exercised for the six months ended June 30, 2014 and 2013.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of the status of the Company’s restricted stock for the six months ended June 31, 2014.

	Number of Restricted Stock		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2013		400,325	$	12.95
Granted		-		-
Vested		-		-
Forfeited		-		-
Unvested at June 30, 2014		400,325	$	12.95

10.	Derivative Financial Instruments

Non-Hedge Accounting Derivatives/Non-designated Hedges:

The Company does not use derivatives for trading or speculative purposes. Interest rate swap derivatives not designated as hedges are offered to certain qualifying commercial customers and to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting under FASB ASC 815, “Derivatives and Hedging”. The interest rate swap agreements enable these customers to synthetically fix the interest rate on variable interest rate loans. The customers pay a variable rate and enter into a fixed rate swap agreement with the Company. The credit risk associated with the interest rate swap derivatives executed with these customers is essentially the same as that involved in extending loans and is subject to the Company’s normal credit policies. The Company obtains collateral, if needed, based upon its assessment of the customers’ credit quality. Generally, interest rate swap agreements are offered to “pass” rated customers requesting long-term commercial loans or commercial mortgages in amounts generally of at least $1.0 million. The interest rate swap agreement with our customers is cross-collateralized by the loan collateral. The interest rate swap agreements do not have any embedded interest rate caps or floors.

For every variable interest rate swap agreement entered into with a commercial customer, the Company simultaneously enters into a fixed rate interest rate swap agreement with a correspondent bank, agreeing to pay a fixed income stream and receive a variable interest rate swap. The Company is party to master netting agreements with its correspondent banks; however, the Company does not offset assets and liabilities for financial statement presentation purposes. The master netting agreements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of cash is received or posted by the counterparty with the net liability position, in accordance with contract thresholds. As of June, 2014, the Company maintained a cash balance of $4.0 million with a correspondent bank to collateralize its position. As of June 30, 2014, the Company has an agreement with a correspondent bank to secure any outstanding receivable in excess of $10.0 million.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Credit-risk-related Contingent Features

The Company’s agreements with its derivative counterparties, contain the following provisions:

●

if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations;

●

if the Company fails to maintain its status as a well/adequately capitalized institution, then the counterparty could terminate the derivative positions, and the Company would be required to settle its obligations under the agreements;

●

if the Company fails to maintain a specified minimum leverage ratio, then the Company could be declared in default on its derivative obligations; and

●

if a specified event or condition occurs that materially changes the Company’s creditworthiness in an adverse manner, it may be required to fully collateralize its obligations under the derivative instrument.

The Company is in compliance with the above provisions as of June 30, 2014.

The Company has established a derivatives policy which sets forth the parameters for such transactions (including underwriting guidelines, rate setting process, maximum maturity, approval and documentation requirements), as well as identifies internal controls for the management of risks related to these hedging activities (such as approval of counterparties, limits on counterparty credit risk, maximum loan amounts, and limits to single dealer counterparties).

The interest rate swap derivatives executed with our customers and our counterparties, are marked to market and are included with prepaid expenses and other assets and accrued expenses and other liabilities on the condensed consolidated Statements of Financial Condition at fair value. The Company had the following outstanding interest rate swaps that were not designated for hedge accounting:

		June 30, 2014							December 31, 2013
(Dollars in thousands)	Consolidated Balance Sheet Location	# of Instruments		Notional Amount		Estimated Fair Values			# of Instruments		Notional Amount		Estimated Fair Values

Commercial loan customer
interest rate swap position	Other Assets		31	$	94,978	$	4,622			22	$	66,635	$	3,238

Commercial loan customer
interest rate swap position	Other Liabilities		13		50,760		(4,681	)		22		82,535		(3,294	)

Counterparty interest
rate swap position	Other Liabilities		44		145,738		59			44		149,170		56

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company recorded the changes in the fair value of non-hedge accounting derivatives as a component of other noninterest income except for interest received and paid which is reported in interest income in the accompanying condensed consolidated statements of operations as follows:

	For The Three Months Ended June 30,
	2014									2013
	Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income			Net Impact			Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income			Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position	$	(860	)	$	1,048		$	188		$	702		$	(3,061	)	$	(2,359	)

Counterparty interest rate swap position		860			(1,048	)		(188	)		(702	)		3,061			2,359
Total	$	-		$	-		$	-		$	-		$	-		$	-

	For The Six Months Ended June 30,
		2014									2013
	Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income			Net Impact			Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income			Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position	$	(1,715	)	$	1,384		$	(331	)	$	1,378		$	(3,975	)	$	(2,597	)

Counterparty interest rate swap position		1,715			(1,384	)		331			(1,378	)		3,975			2,597
Total	$	-		$	-		$	-		$	-		$	-		$	-

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Offsetting of Financial Assets and Liabilities

The following table presents the potential effect of rights of setoff associated with the Company’s recognized financial assets and liabilities at June 30, 2014 and December 31, 2013:

	June 30, 2014
							Gross Amounts Not Offset in the Statement of Financial Condition
	Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Securities Collateral Received		Cash Collateral Received		Net Amount
(Dollars in thousands)
Interest rate swap derivatives	$	4,622	$	-	$	4,622	$	-	$	-	$	4,000	$	622
Total	$	4,622	$	-	$	4,622	$	-	$	-	$	4,000	$	622

	June 30, 2014
							Gross Amounts Not Offset in the Statement of Financial Condition
	Gross Amount of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Securities Collateral Pledged		Cash Collateral Pledged		Net Amount
(Dollars in thousands)
Interest rate swap derivatives	$	4,681	$	-	$	4,681	$	-	$	-	$	4,000	$	681
Repurchase agreement
borrowings		21,000		-		21,000		-		21,000		-		-
Total	$	25,681	$	-	$	25,681	$	-	$	21,000	$	4,000	$	681

	December 31, 2013
							Gross Amounts Not Offset in the Statement of Financial Condition
	Gross Amount of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Securities Collateral Received		Cash Collateral Received		Net Amount
(Dollars in thousands)
Interest rate swap derivatives	$	3,238	$	-	$	3,238	$	-	$	-	$	2,000	$	1,238
Total	$	3,238	$	-	$	3,238	$	-	$	-	$	2,000	$	1,238

	December 31, 2013
							Gross Amounts Not Offset in the Statement of Financial Condition
	Gross Amount of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Securities Collateral Pledged		Cash Collateral Pledged		Net Amount
(Dollars in thousands)
Interest rate swap derivatives	$	3,294	$	-	$	3,294	$	-	$	-	$	2,000	$	1,294
Repurchase agreement
borrowings		21,000		-		21,000		-		21,000		-		-
Total	$	24,294	$	-	$	24,294	$	-	$	21,000	$	2,000	$	1,294

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Mortgage Banking Derivatives

Certain derivative instruments, primarily forward sales of mortgage loans and mortgage-backed securities (“MBS”) are utilized by the Company in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest-rate lock commitment is generally extended to the borrower. During the period from commitment date to closing date, the Company is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans resulting in a reduction in the gain on sale of the loans or, possibly, a loss. In an effort to mitigate such risk, forward delivery sales commitments, under which the Company agrees to deliver whole mortgage loans to various investors or issue MBS, are established. At June 30, 2014, the notional amount of outstanding rate locks totaled approximately $11.6 million and the notional amount of outstanding commitments to sell residential mortgage loans totaled approximately $11.3 million. Forward sales, which include mandatory forward commitments, notional amount totaled approximately $9.0 million at June 30, 2014; establish the price to be received upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk. There is, however, still certain execution risk specifically related to the Company’s ability to close and deliver to its investors the mortgage loans it has committed to sell.

11.	Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and unused lines of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statement of condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Financial instruments whose contract amounts represent credit risk are as follows:

	June 30,		December 31,
	2014		2013
(Dollars in thousands)
Approved loan commitments	$	60,065	$	25,667
Unadvanced portion of construction loans		40,317		64,599
Unused lines for home equity loans		174,843		163,255
Unused revolving lines of credit		385		354
Unused commercial letters of credit		3,384		3,910
Unused commercial lines of credit		187,151		153,673
	$	466,145	$	411,458

Financial instruments with off-balance sheet risk had a valuation allowance of $439,000 and $436,000 as of June 30, 2014 and December 31, 2013, respectively.

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. Since many of the commitments are expected to 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 is primarily residential property and commercial assets.

At June 30, 2014 and December 31, 2013, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

12.	Significant Group Concentrations of Credit Risk

The Company primarily grants commercial, residential and consumer loans to customers located within its primary market area in the state of Connecticut. The majority of the Company’s loan portfolio is comprised of commercial and residential mortgages. The Company has no negative amortization or option adjustable rate mortgage loans.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

13.	Fair Value Measurements

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. In accordance with FASB ASC 820-10, 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 under FASB ASC 820-10 are described as follows:

●

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

●

Level 2 - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability;

●

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. 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, and estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot 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 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. There are no transfers between levels during the six months ended June 30, 2014 and 2013.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following is a description of the valuation methodologies used for instruments measured at fair value:

Securities Available-for-Sale: Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models. Level 1 securities are those traded on active markets for identical securities including U.S. treasury obligations, U.S. Government agency obligations and marketable equity securities. Level 2 securities include U.S. government agency obligations, government-sponsored residential mortgage-backed securities, corporate debt securities, preferred equity securities and mutual funds. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the respective securities are classified as level 3 and reliance is placed upon internally developed models and management judgment and evaluation for valuation. The Company had no Level 3 securities at June 30, 2014 and December 31, 2013.

The Company utilizes a third party, nationally-recognized pricing service (“pricing service”); subject to review by management, to estimate fair value measurements for the majority of its investment securities portfolio. The pricing service evaluates each asset class based on relevant market information considering observable data that may include dealer quotes, reported trades, market spreads, cash flows, the U.S. Treasury yield curve, the LIBOR swap yield curve, trade execution data, market prepayment speeds, credit information and the bond’s terms and conditions, among other things. The fair value prices on all investment securities are reviewed for reasonableness by management. Also, management assessed the valuation techniques used by the pricing service based on a review of their pricing methodology to ensure proper pricing and hierarchy classifications. Management employs procedures to monitor the pricing service’s assumptions and establishes processes to challenge the pricing service’s valuations that appear unusual or unexpected.

Interest Rate Swap Derivatives: The fair values of interest rate swap agreements are calculated using a discounted cash flow approach and utilize observable inputs such as the LIBOR swap curve, effective date, maturity date, notional amount, stated interest rate and are classified within Level 2 of the valuation hierarchy. Such derivatives are basic interest rate swaps that do not have any embedded interest rate caps and floors.

Forward loan sale commitments and derivative loan commitments: Forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Significant management judgment and estimation is required in determining these fair value measurements therefore are classified within Level 3 of the valuation hierarchy.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table details the financial instruments carried at fair value on a recurring basis as of June 30, 2014 and December 31, 2013 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 2014
			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs


(Dollars in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
U.S. Treasury obligations	$	103,991	$	103,991	$	-	$	-
U.S. Government agency obligations		40,064		40,064		-		-
Government sponsored residential mortgage-backed securities		8,072		-		8,072		-
Corporate debt securities		3,109		-		3,109		-
Preferred equity securities		1,736		-		1,736		-
Marketable equity securities		160		160		-		-
Mutual funds		3,652		-		3,652		-
Securities available-for-sale		160,784		144,215		16,569		-
Interest rate swap derivative		4,622		-		4,622		-
Derivative loan commitments		149		-		-		149
Total	$	165,555	$	144,215	$	21,191	$	149

Liabilities
Interest rate swap derivative	$	4,681	$	-	$	4,681	$	-
Forward loan sales commitments		99		-		-		99
Total	$	4,780	$	-	$	4,681	$	99

	December 31, 2013
			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs


(Dollars in thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
U.S. Treasury obligations	$	126,000	$	126,000	$	-	$	-
U.S. Government agency obligations		6,922		6,922		-		-
Government sponsored residential mortgage-backed securities		9,616		-		9,616		-
Corporate debt securities		3,104		-		3,104		-
Preferred equity securities		1,569		-		1,569		-
Marketable equity securities		148		148		-		-
Mutual funds		3,527		-		3,527		-
Securities available-for-sale		150,886		133,070		17,816		-
Interest rate swap derivative		3,238		-		3,238		-
Derivative loan commitments		36		-		-		36
Forward loan sales commitments		11		-				11
Total	$	154,171	$	133,070	$	21,054	$	47

Liabilities
Interest rate swap derivative	$	3,294	$	-	$	3,294	$	-
Total	$	3,294	$	-	$	3,294	$	-

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents additional information about assets measured at fair value for which the Company has utilized Level 3 inputs.


	Derivative and Forward Loan Sales Commitments, Net
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014		2013
(Dollars in thousands)
Balance, at beginning of period	$	96		$	494		$	47	$	488
Total realized gain:
Included in earnings		(46	)		(3	)		3		3
Balance, at the end of period	$	50		$	491		$	50	$	491

The following tables present the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013:


June 30, 2014
				Significant
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Input

Derivative and forward loan sales commitments, net	$	50	Adjusted quoted prices in active markets	Embedded servicing value	1.16%

December 31, 2013
				Significant
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Input

Derivative and forward loan sales commitments, net	$	47	Adjusted quoted prices in active markets	Embedded servicing value	1.25%

The embedded servicing value represents the value assigned for mortgage servicing rights and based on management’s judgment. When the embedded servicing value increases or decreases there is a direct correlation with fair value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

The following table details the financial instruments carried at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:


	June 30, 2014						December 31, 2013
	Quoted Prices in		Significant		Significant		Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable		Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs		Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
(Dollars in thousands)
Impaired loans	$	-	$	-	$	2,882	$	-	$	-	$	5,910
Other real estate owned		-		-		208		-		-		277
Mortgage servicing rights		-		-		-		-		-		1,970

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a description of the valuation methodologies used for instruments measured on a non-recurring basis:

Mortgage Servicing Rights: A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The fair value of servicing rights is 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 only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. As such, measurement at fair value is on a nonrecurring basis. 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.

Loans Held for Sale: Loans held for sale are accounted for at the lower of cost or market and are considered to be recognized at fair value when recorded at below cost. The fair value of loans held for sale is based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.

Impaired Loans: Impaired loans for which repayment of the loan is expected to be provided solely by the value of the underlying collateral are considered collateral dependent and are valued based on the estimated fair value of such collateral using Level 3 inputs based on customized discounting criteria.

Other Real Estate Owned: The Company classifies property acquired through foreclosure or acceptance of deed-in-lieu of foreclosure as other real estate owned in its financial statements. Upon foreclosure, the property securing the loan is written down to fair value less selling costs. The write down is based upon the difference between the appraised value and the book value. Appraisals are based on observable market data such as comparable sales within the real estate market, however assumptions made in determining comparability are unobservable and therefore these assets are classified as Level 3 within the valuation hierarchy.

The following tables present the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013:


June 30, 2014
				Significant			Weighted Average Inputs
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs		Weighted Average Inputs
Impaired loans	$	2,882	Appraisals	Discount for dated appraisal		0% - 20%		10.0	%
				Discount for costs to sell		8% - 15%		11.5	%

Other real estate owned	$	208	Appraisals	Discount for costs to sell		8% - 10%		9.0	%

December 31, 2013
				Significant			Weighted Average Inputs
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs		Weighted Average Inputs
Mortgage servicing rights	$	1,970	Discounted cash flows	Prepayment speed		0% - 29%		9.2	%
				Discount rate		n/a		7.8	%

Impaired loans	$	5,910	Appraisals	Discount for dated appraisal		0% - 20%		10.0	%
				Discount for costs to sell		8% - 15%		11.5	%

Other real estate owned	$	277	Appraisals	Discount for costs to sell		8% - 10%		9.0	%

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:

Cash and cash equivalents: The carrying amounts reported in the statement of condition for cash and cash equivalents approximate those assets’ fair values.

Investment in Federal Home Loan Bank of Boston (“FHLBB”) stock: FHLBB stock does not have a readily determinable fair value and is assumed to have a fair value equal to its carrying value. Ownership of FHLBB stock is restricted to the FHLBB, and can only be purchased and redeemed at par value.

Alternative Investments: The Company accounts for its percentage ownership of alternative investment funds at cost, subject to impairment testing. These are non-public investments which include limited partnerships, an equity fund and membership stocks. These alternative investments totaled $2.3 million and $2.4 million at June 30, 2014 and December 31, 2013, respectively. The Company recognized a $41,000 other-than-temporary impairment charge in its limited partnerships for the six months ended June 30, 2014, included in other noninterest income in the accompanying condensed Consolidated Statements of Operations. The Company has $517,000 in unfunded commitments remaining for its alternative investments as of June 30, 2014.

Loans: In general, discount rates used to calculate values for loan products were based on the Company’s pricing at the respective period end and included appropriate adjustments for expected credit losses. A higher discount rate was assumed with respect to estimated cash flows associated with nonaccrual loans. Projected loan cash flows were adjusted for estimated credit losses. However, such estimates made by the Company may not be indicative of assumptions and adjustments that a purchaser of the Company’s loans would seek.

Deposits: The fair values disclosed for demand deposits and savings accounts (e.g., interest and noninterest checking and passbook savings) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities of time deposits.

Borrowed funds: The fair value for borrowed funds, including FHLBB advances and repurchase borrowings, are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rate for similar types of agreements.

Repurchase liability: Repurchase liabilities represent a short-term customer sweep account product. Because of the short-term nature of these liabilities, the carrying amount approximates its fair value.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2014 and December 31, 2013. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.


		June 30, 2014				December 31, 2013
				Estimated				Estimated
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy Level	Amount		Value		Amount		Value
(Dollars in thousands)
Financial assets
Securities held-to-maturity	Level 2	$	12,715	$	12,900	$	12,983	$	12,886
Securities available-for-sale	See previous table		160,784		160,784		150,886		150,886
Loans	Level 3		1,945,051		1,936,984		1,816,308		1,803,424
Loans held-for-sale	Level 2		4,576		4,686		3,186		3,188
Mortgage servicing rights	Level 3		3,172		3,594		3,146		3,596
Federal Home Loan Bank of Boston stock	Level 2		17,724		17,724		13,136		13,136
Alternative investments	Level 3		2,344		2,337		2,352		2,778
Interest rate swap derivatives	Level 2		4,622		4,622		3,238		3,238
Forward loan sales commitments	Level 3		-		-		36		36
Derivative loan commitments	Level 3		149		149		11		11

Financial liabilities
Deposits other than time deposits	Level 1		1,298,150		1,298,150		1,175,013		1,175,013
Time deposits	Level 2		332,629		335,327		338,488		341,395
Federal Home Loan Bank of Boston advances	Level 2		291,000		291,486		259,000		259,765
Repurchase agreement borrowings	Level 2		21,000		21,813		21,000		21,992
Repurchase liabilities	Level 2		55,326		55,326		50,816		50,816
Interest rate swap derivatives	Level 2		4,681		4,681		3,294		3,294
Forward loan sales commitments	Level 3		99		99		-		-

14.	Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on their 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 their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classifications are also subject to quantitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations) and of Tier I capital (as defined in the regulations) to average assets (as defined in the regulations).

Management believes, as of June 30, 2014 and December 31, 2013 that the Company and the Bank meet all capital adequacy requirements to which they are subject. The Federal Deposit Insurance Corporation categorizes the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action as of June 30, 2014. To be categorized as well capitalized, the Company and the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution’s category.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table provides information on the capital amounts and ratios for the Company and the Bank:


	Actual					Minimum Required for Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio

Farmington Bank:
At June 30, 2014
Total Capital (to Risk Weighted Assets)	$	213,297		12.29	%	$	138,843		8.00	%	$	173,553		10.00	%
Tier I Capital (to Risk Weighted Assets)		194,946		11.23			69,438		4.00			104,156		6.00
Tier I Capital (to Average Assets)		194,946		8.90			87,616		4.00			109,520		5.00

At December 31, 2013
Total Capital (to Risk Weighted Assets)	$	209,174		12.76	%	$	131,144		8.00	%	$	163,929		10.00	%
Tier I Capital (to Risk Weighted Assets)		190,424		11.62			65,550		4.00			98,326		6.00
Tier I Capital (to Average Assets)		190,424		9.28			82,079		4.00			102,599		5.00

First Connecticut Bancorp, Inc.:
At June 30, 2014
Total Capital (to Risk Weighted Assets)	$	253,117		14.56	%	$	139,075		8.00	%	$	173,844		10.00	%
Tier I Capital (to Risk Weighted Assets)		234,766		13.51			69,509		4.00			104,263		6.00
Tier I Capital (to Average Assets)		234,766		10.70			87,763		4.00			109,704		5.00

At December 31, 2013
Total Capital (to Risk Weighted Assets)	$	254,509		15.50	%	$	131,359		8.00	%	$	164,199		10.00	%
Tier I Capital (to Risk Weighted Assets)		235,759		14.36			65,671		4.00			98,507		6.00
Tier I Capital (to Average Assets)		235,759		11.47			82,218		4.00			102,772		5.00

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

15.	Other Comprehensive Income

The following table presents a reconciliation of the changes in components of other comprehensive income for periods indicated, including the amount of income tax expense allocated to each component of other comprehensive income:


	For the Three Months Ended June 30, 2014
	Pre Tax Amount			Tax Expense			After Tax Amount
(Dollars in thousands)
Unrealized gains (losses) on available-for-sale securities	$	161		$	(55	)	$	106
Less: net security gains reclassified into other noninterest income		-			-			-
Net change in fair value of securities available-for-sale		161			(55	)		106
Reclassification adjustment for prior service costs and net gain included in net periodic pension costs (1)		86			(29	)		57
Total other comprehensive income (loss)		247			(84	)		163

	For the Three Months Ended June 30, 2013
	Pre Tax Amount			Tax Expense			After Tax Amount
(Dollars in thousands)
Unrealized (losses) gains on available-for-sale securities	$	(482	)	$	164		$	(318	)
Less: net security gains (losses) reclassified into other noninterest income		36			(12	)		24
Net change in fair value of securities available-for-sale		(446	)		152			(294	)
Reclassification adjustment for prior service costs and net gain included in net periodic pension costs (1)		148			(51	)		97
Total other comprehensive (loss) income		(298	)		101			(197	)

	For the Six Months Ended June 30, 2014
	Pre Tax Amount			Tax Expense			After Tax Amount
(Dollars in thousands)
Unrealized gains (losses) on available-for-sale securities	$	297		$	(101	)	$	196
Less: net security gains reclassified into other noninterest income		-			-			-
Net change in fair value of securities available-for-sale		297			(101	)		196
Reclassification adjustment for prior service costs and net gain included in net periodic pension costs (1)		142			(48	)		94
Total other comprehensive income (loss)		439			(149	)		290

	For the Six Months Ended June 30, 2013
	Pre Tax Amount			Tax Expense			After Tax Amount
(Dollars in thousands)
Unrealized (losses) gains on available-for-sale securities	$	(134	)	$	46		$	(88	)
Less: net security gains (losses) reclassified into other noninterest income		36			(12	)		24
Net change in fair value of securities available-for-sale		(98	)		34			(64	)
Reclassification adjustment for prior service costs and net gain included in net periodic pension costs (1)		283			(97	)		186
Total other comprehensive income (loss)		185			(63	)		122

(1)	Amounts are included in salaries and employee benefits in the unaudited Consolidated Statements of Income.

16.	Legal Actions

The Company and its subsidiary are involved in various legal proceedings which have arisen in the normal course of business. The Company believes there are no pending actions that will have a material adverse effect on the consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains “forward-looking statements.” You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the asset quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

Local, regional and national business or economic conditions may differ from those expected.

●

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

●

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

●

Changes in laws and regulatory requirements (including those concerning taxes, banking, securities and insurance) may adversely affect us or our business.

●

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

●

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

●

We are subject to lending risk and could incur losses in our loan portfolio despite our underwriting practices. Changes in real estate values could also increase our lending risk.

●

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

●

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

●

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 federal regulations and articles of incorporation provisions restricting takeovers.

●

Implementation of stock benefit plans will increase our costs, which will reduce our income.

●

The Dodd-Frank Act was signed into law on July 21, 2010 and has resulted in dramatic regulatory changes that affects the industry in general, and may impact our competitive position in ways that cannot be predicted at this time.

●

The Emergency Economic Stabilization Act (“EESA”) of 2008 has and may continue to have a significant impact on the banking industry.

●

The increased cost of maintaining or the Company’s ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators.

●

Changes to the amount and timing of proposed common stock repurchases.

●

Computer systems on which we depend could fail or experience a security breach, implementation of new technologies may not be successful; and our ability to anticipate and respond to technological changes can affect our ability to meet customer needs.

●

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

Any forward-looking statements made by or on behalf of us in this Form 10-Q speak only as of the date of this Form 10-Q. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made. The reader should, however, consider any further disclosures of a forward-looking nature we may make in future filings. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

General

Established in 1851, Farmington Bank is a full-service, community bank with 22 full service branch offices and 4 limited services offices, including our main office, located throughout Hartford County, Connecticut. Farmington Bank provides a diverse range of commercial and consumer services to businesses, individuals and governments across central Connecticut.

Our business strategy is to operate as a well-capitalized and profitable community bank for businesses, individuals and local governments, with an ongoing commitment to provide quality customer service.

●

Maintaining a strong capital position in excess of the well-capitalized standards set by our banking regulators to support our current operations and future growth. The FDIC’s requirement for a “well-capitalized” bank is a total risk-based capital ratio of 10.0% or greater. As of June 30, 2014 our total risk-based capital ratio was 14.56%.

●

Increasing our focus on commercial lending and continuing to expand commercial banking operations. We will continue to focus on commercial lending and the origination of commercial loans using prudent lending standards. We plan to continue to grow our commercial lending portfolio, while enhancing our complementary business products and services.

●

Continuing to focus on residential and consumer lending in conjunction with our secondary market residential lending program. We offer traditional residential and consumer lending products and plan to continue to build a strong residential and consumer lending program that supports our secondary market residential lending program. Under our expanding secondary market residential lending program, we may sell a portion of our fixed rate residential originations while retaining the loan servicing function and mitigating our interest rate risk.

●

Maintaining asset quality and prudent lending standards. We will continue to originate all loans utilizing prudent lending standards in an effort to maintain strong asset quality. While our delinquencies and charge-offs have decreased, we continue to diligently manage our collection function to minimize loan losses and non-performing assets. We will continue to employ sound risk management practices as we continue to expand our lending portfolio.

●

Expanding our existing products and services and developing new products and services to meet the changing needs of consumers and businesses in our market area. We will continue to evaluate our consumer and business customers’ needs to ensure that we continue to offer relevant, up-to-date products and services.

●

Continuing to control non-interest expenses. As part of our strategic plan, we have implemented several programs designed to control costs. We monitor our expense ratios and plan to reduce our efficiency ratio by controlling expenses and increasing net interest income and noninterest income. We plan to continue to evaluate and improve the effectiveness of our business processes and our efficiency, utilizing information technology when possible.

●

Taking advantage of acquisition opportunities that are consistent with our strategic growth plans. We intend to continue to evaluate opportunities to acquire other financial institutions and financial service related businesses in our current market area or contiguous market areas that will enable us to enhance our existing products and services and develop new products and services. We have no specific plans, agreements or understandings with respect to any expansion or acquisition opportunities.

Critical Accounting Policies

The accounting policies followed by us conform with the accounting principles generally accepted in the United States of America. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies, which involve the most complex subjective decisions or assessments, relate to allowance for loan losses, other-than-temporary impairment of investment securities, income taxes and pension and other post-retirement benefits. The following is a description of our critical accounting policies and an explanation of the methods and assumptions underlying their application.

Allowance for Loan Losses: The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses inherent in the loan portfolio as of the statement of condition date. The allowance for loan losses consists of a formula allowance following FASB ASC 450 – Contingencies and FASB ASC 310 – Receivables. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

General component:

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:

Home equity line of credit – Loans in this segment include home equity loans and lines of credit underwritten with a loan-to-value ratio generally limited to no more than 80.0%, including any first mortgage. Our home equity lines of credit have ten-year terms and adjustable rates of interest which are indexed to the prime rate. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.

Allocated component:

Unallocated component:

Other-than-Temporary Impairment of Securities: In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 320-Debt and Equity Securities, a decline in market value of a debt security below amortized cost that is deemed other-than-temporary is charged to earnings for the credit related other-than-temporary impairment (“OTTI”) resulting in the establishment of a new cost basis for the security, while the non-credit related OTTI is recognized in other comprehensive income if there is no intent or requirement to sell the security. Management reviews the securities portfolio on a quarterly basis for the presence of OTTI. An assessment is made as to whether the decline in value results from company-specific events, industry developments, general economic conditions, credit losses on debt or other reasons. After the reasons for the decline are identified, further judgments are required as to whether those conditions are likely to reverse and, if so, whether that reversal is likely to result in a recovery of the fair value of the investment in the near term. If it is judged not to be near-term, a charge is taken which results in a new cost basis. Credit related OTTI for debt securities is recognized in earnings while non-credit related OTTI is recognized in other comprehensive income if there is no intent to sell or will not be required to sell the security. If an equity security is deemed other-than-temporarily impaired, the full impairment is considered to be credit-related and a charge to earnings would be recorded. Management believes the policy for evaluating securities for other-than-temporary impairment is critical because it involves significant judgments by management and could have a material impact on our net income.

Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis. Marketable equity and debt securities are classified as either trading, available-for-sale, or held-to-maturity (applies only to debt securities). Management determines the appropriate classifications of securities at the time of purchase. At June 30, 2014 and December 31, 2013, we had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which we have the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.

Premiums and discounts on debt securities are amortized or accreted into interest income over the term of the securities using the level yield method.

Income Taxes: Deferred income taxes are provided for differences arising in the timing of income and expenses for financial reporting and for income tax purposes. Deferred income taxes and tax benefits 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 basis. 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. We provide a deferred tax asset valuation allowance for the estimated future tax effects attributable to temporary differences and carryforwards when realization is determined not to be more likely than not. We adopted the provisions of FASB ASC 740-10, “Accounting for Uncertainty in Income Taxes”, on January 1, 2007. FASB ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Pursuant to FASB ASC 740-10, we examine our financial statements, our income tax provision and our federal and state income tax returns and analyze our tax positions, including permanent and temporary differences, as well as the major components of income and expense, to determine whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. We recognize interest and penalties arising from income tax settlements as part of our provision for income taxes.

As part of the Plan of Conversion and Reorganization completed on June 29, 2011, the Company contributed shares of Company common stock to the Farmington Bank Community Foundation, Inc. This contribution resulted in a charitable contribution deduction for federal income tax purposes. Use of that charitable contribution deduction is limited under Federal tax law to 10% of federal taxable income without regard to charitable contributions, net operating losses, and dividend received deductions. Annually, a corporation is permitted to carry over to the five succeeding tax years, contributions that exceeded the 10% limitation, but also subject to the maximum annual limitation. As a result, approximately $6.1 million of charitable contribution carryforward remains at June 30, 2014 resulting in a deferred tax asset of approximately $2.1 million. The Company believes it is more likely that not that this carryforward will be utilized before expiration in 2016. Therefore, no valuation allowance has been recorded against this deferred tax asset. Some of this charitable contribution carryforward could expire unutilized if the Company does not generate sufficient taxable income over the next three years. The Company monitors the need for a valuation allowance on a quarterly basis.

In December 1999, we created and have since maintained a “passive investment company” (“PIC”), as permitted by Connecticut law. At June 30, 2014 there were no material uncertain tax positions related to federal and state income tax matters. We are currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2010 through 2013. If the state taxing authority were to determine that the PIC was not in compliance with statutory requirements, a material amount of taxes could be due.

As of June 30, 2014, management believes it is more likely than not that the deferred tax assets will be realized through future reversals of existing taxable temporary differences. As of June 30, 2014, our net deferred tax asset was $14.8 million and there was no valuation allowance.

Pension and Other Postretirement Benefits: On December 27, 2012, the Company announced it froze the non-contributory defined-benefit pension plan and certain other postretirement benefit plans as of February 28, 2013. All benefits under these plans were frozen as of that date and no additional benefits accrued.

We have a noncontributory defined benefit pension plan that provides benefits for substantially all employees hired before January 1, 2007 who meet certain requirements as to age and length of service. The benefits are based on years of service and average compensation, as defined in the Plan Document. Our funding policy is to contribute annually the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Security Act of 1974.

In addition to providing pension benefits, we provide certain health care and life insurance benefits for retired employees. Participants or eligible employees hired before January 1, 1993 become eligible for the benefits if they retire after reaching age 62 with fifteen or more years of service. A fixed percent of annual costs are paid depending on length of service at retirement. We accrue for the estimated costs of these other post-retirement benefits through charges to expense during the years that employees render service. We make contributions to cover the current benefits paid under this plan. Management believes the policy for determining pension and other post-retirement benefit expenses is critical because judgments are required with respect to the appropriate discount rate, rate of return on assets, salary increases and other items. Management reviews and updates the assumptions annually. If our estimate of pension and post-retirement expense is too low we may experience higher expenses in the future, reducing our net income. If our estimate is too high, we may experience lower expenses in the future, increasing our net income.

Comparison of Financial Condition at June 30, 2014 and December 31, 2013

Our total assets increased $157.7 million or 7.5%, to $2.3 billion at June 30, 2014, from $2.1 billion at December 31, 2013, primarily due to an increase of $129.5 million in loans and $9.9 million in securities available-for-sale.

Our investment portfolio totaled $173.5 million or 7.7% of total assets, and $163.9 million or 7.8% of total assets at June 30, 2014 and December 31, 2013, respectively. The Company purchases short term U.S. Treasury and agency securities in order to meet municipal and repurchase agreement pledge requirements and to minimize interest rate risk during the sustained low interest rate environment.

Net loans increased $129.5 million or 7.2% at June 30, 2014 to $1.9 billion compared to December 31, 2013 primarily driven by increases in commercial and residential real estate. The allowance for loan losses decreased $402,000 to $17.9 million at June 30, 2014 from $18.3 million at December 31, 2013. At June 30, 2014, the allowance for loan losses represented 0.92% of total loans and 122.25% of non-performing loans, compared to 1.01% of total loans and 123.74% of non-performing loans as of December 31, 2013.

Total liabilities increased $158.6 million, to $2.0 billion at June 30, 2014 compared to $1.9 billion at December 31, 2013, primarily due to an increase in deposits and offset by a decrease in FHLBB advances. Deposits increased $117.3 million or 7.7% to $1.6 billion at June 30, 2014 due to increases in municipal deposits, checking accounts and de novo branch openings as we continue to develop and grow relationships in the geographical areas we serve. Federal Home Loan Bank of Boston advances increased $32.0 million to $291.0 million at June 30, 2014 from $259.0 million at December 31, 2013 as we funded our organic loan and securities growth with FHLBB advances and deposits.

Stockholders’ equity decreased $940,000 to $231.3 million at June 30, 2014 compared to December 31, 2013 primarily due to the repurchase of 385,005 shares of common stock at an average price per share of $15.53 at a cost of $6.0 million, offset by $3.7 million in net income. The Company paid cash dividends totaling $1.1 million or $0.07 per share as of June 30, 2014. Repurchased shares are held as treasury stock and are available for general corporate purposes.

Net Interest Income Analysis: Average Balance Sheets, Interest and Yields/Costs

The following tables present the average balance sheets, average yields and costs and certain other information for the years indicated therein. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans and loans held for sale were included in the computation of average loan balances. The yields set forth below include the effect of net deferred costs and premiums that are amortized to interest income or expense.


	For The Three Months Ended June 30,
	2014								2013
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans, net	$	1,890,132	$	17,448			3.70	%	$	1,577,559	$	15,105			3.84	%
Securities		167,250		355			0.85	%		115,280		216			0.75	%
Federal Home Loan Bank of Boston stock		14,744		49			1.33	%		8,383		9			0.43	%
Federal funds and other earning assets		3,567		2			0.22	%		14,317		6			0.17	%
Total interest-earning assets		2,075,693		17,854			3.45	%		1,715,539		15,336			3.59	%
Noninterest-earning assets		118,056								120,888
Total assets	$	2,193,749							$	1,836,427

Interest-bearing liabilities:
NOW accounts	$	332,597	$	185			0.22	%	$	266,905	$	151			0.23	%
Money market		414,774		754			0.73	%		354,914		725			0.82	%
Savings accounts		204,217		42			0.08	%		184,307		73			0.16	%
Certificates of deposit		335,391		730			0.87	%		354,381		878			0.99	%
Total interest-bearing deposits		1,286,979		1,711			0.53	%		1,160,507		1,827			0.63	%
Federal Home Loan Bank of Boston advances		259,980		368			0.57	%		68,660		401			2.34	%
Repurchase agreement borrowings		21,000		179			3.42	%		21,000		180			3.44	%
Repurchase liabilities		53,159		32			0.24	%		46,539		41			0.35	%
Total interest-bearing liabilities		1,621,118		2,290			0.57	%		1,296,706		2,449			0.76	%
Noninterest-bearing deposits		303,473								257,670
Other noninterest-bearing liabilities		36,891								46,233
Total liabilities		1,961,482								1,600,609
Stockholders’ equity		232,267								235,818
Total liabilities and stockholders’ equity	$	2,193,749							$	1,836,427

Net interest income			$	15,564							$	12,887
Net interest rate spread (1)							2.88	%							2.83	%
Net interest-earning assets (2)	$	454,575							$	418,833
Net interest margin (3)							3.01	%							3.01	%
Average interest-earning assets to average interest-bearing liabilities				128.04	%							132.30	%

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

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

(3) Net interest margin represents 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 total 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.


	Three Months Ended June 30,
	2014 vs. 2013
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans, net	$	2,869		$	(526	)	$	2,343
Investment securities		111			28			139
Federal Home Loan Bank of Boston stock		11			29			40
Federal funds and other interest-earning assets		(7	)		3			(4	)
Total interest-earning assets		2,984			(466	)		2,518

Interest-bearing liabilities:
NOW accounts		34			-			34
Money market		75			(46	)		29
Savings accounts		14			(45	)		(31	)
Certificates of deposit		(47	)		(101	)		(148	)
Total interest-bearing deposits		76			(192	)		(116	)
Advances from the Federal Home Loan Bank		(45	)		12			(33	)
Repurchase agreement borrowing		-			(1	)		(1	)
Repurchase liabilities		3			(12	)		(9	)
Total interest-bearing liabilities		34			(193	)		(159	)
Increase (decrease) in net interest income	$	2,950		$	(273	)	$	2,677

Summary of Operating Results for the Three Months Ended June 30, 2014 and 2013

The following discussion provides a summary and comparison of our operating results for the three months ended June 30, 2014 and 2013:


	For the Three Months Ended June 30,
	2014		2013		$ Change			% Change
(Dollars in thousands)
Net interest income	$	15,564	$	12,887	$	2,677			20.8	%
Provision for loan losses		410		256		154			60.2
Noninterest income		2,066		2,999		(933	)		(31.1	)
Noninterest expense		14,254		14,555		(301	)		(2.1	)
Income before taxes		2,966		1,075		1,891			175.9
Income tax expense		776		256		520			203.1
Net income	$	2,190	$	819	$	1,371			167.4	%

For the three months ended June 30, 2014, net income increased $1.4 million compared to the three months ended June 30, 2013. The increase in net income was driven by an increase in net interest income due to organic loan growth, a $383,000 decrease in other operating expenses offset by a decrease in the secondary market residential lending program.

Comparison of Operating Results for the three months ended June 30, 2014 and 2013

Our results of operations depend primarily on net interest income, which is the difference between the interest income on earning assets, such as loans and investments, and the interest expense incurred on interest-bearing liabilities, such as deposits and borrowings. We also generate noninterest income; including service charges on deposit accounts, gain on sale of securities, mortgage banking activities, bank-owned life insurance income, brokerage fees, insurance commissions and other miscellaneous fees. Our noninterest expense primarily consists of salary and employee benefits, occupancy expense, furniture and equipment expenses, FDIC assessments, marketing and other general and administrative expenses. Our results of operations are also affected by our provision for loan losses.

Net Interest Income: Net interest income is determined by the interest rate spread (i.e., the difference between the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest income before the provision for loan losses was $15.6 million and $12.9 million for the three months ended June 30, 2014 and 2013, respectively. Net interest income increased primarily due to a $312.6 million increase in the average loan balance despite a 14 basis point decrease in the yield on loans. The yield on average interest-earning assets decreased 14 basis points to 3.45% for the second quarter of 2014 from 3.59% for the prior year quarter. The decline was primarily due to a 14 basis points decrease in the yield on total average net loans to 3.70%. The cost of average interest-bearing liabilities decreased 19 basis points to 0.57% for the second quarter of 2014 reflecting lower funding costs for municipal deposits and a decrease in FHLBB advance costs due to an increase in short-term advances which carry lower rates. Net interest margin was 3.01% for both quarters. Excluding resort and prepayment penalty fee income for both quarters, the net interest margin would have been 2.97% and 2.98% in the second quarters of 2014 and 2013, respectively.

Interest expense for the second quarter of 2014 decreased $159,000 or 6.5% totaling $2.3 million from $2.4 million in the prior year quarter. The decrease in interest expense resulted from lower funding costs for municipal deposits and a decrease in FHLBB advance costs due to an increase in short-term advances which carry lower rates. Average balances of noninterest-bearing deposits grew at a rate of 18%, while total average interest-bearing deposits grew at a rate of 11% for the second quarter in 2014 compared to the prior year quarter.

Provision for Loan Losses: The allowance for loan losses is maintained at a level management determines to be appropriate to absorb estimated credit losses that are both probable and reasonably estimable at the dates of the financial statements. Management evaluates the adequacy of the allowance for loan losses on a quarterly basis and charges any provision for loan losses needed to current operations. The assessment considers historical loss experience, historical and current delinquency statistics, the loan portfolio segment and the amount of loans in the loan portfolio, the financial strength of the borrowers, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions and other credit quality indicators.

Management recorded a provision for loan losses of $410,000 and $256,000 for the three months ended June 30, 2014 and 2013, respectively. The provision recorded is based upon management’s analysis of the allowance for loan losses necessary to absorb the estimated credit losses in the loan portfolio for the period. Net charge-offs in the second quarter of 2014 were $128,000 or 0.03% to average loans (annualized) compared to $83,000 or 0.02% to average loans (annualized) in the prior year quarter.

At June 30, 2014, the allowance for loan losses totaled $17.9 million, or 0.92% of total loans and 122.25% of non-accrual loans, compared to an allowance for loan losses of $18.3 million, or 1.01% of total loans and 123.74% of non-accrual loans at December 31, 2013.

Noninterest Income: The following table summarizes noninterest income for the three months ended June 30, 2014 and 2013:


	For the Three Months Ended June 30,
	2014		2013			$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	1,317	$	1,097		$	220			20.1	%
Net gain on sales of investments		-		36			(36	)		(100.0	)
Net gain on loans sold		317		1,589			(1,272	)		(80.1	)
Brokerage and insurance fee income		49		41			8			19.5
Bank owned life insurance income		281		303			(22	)		(7.3	)
Other		102		(67	)		169			252.2
Total noninterest income	$	2,066	$	2,999		$	(933	)		(31.1	) %

Noninterest income decreased $933,000 to $2.1 million for the second quarter in 2014 compared to $3.0 million for the prior year quarter. Fees for customer services increased $220,000 or 20.1% due to an increase in volume. Gain on sale of fixed-rate residential mortgage loans decreased $1.3 million to $317,000 for the second quarter in 2014 compared to $1.6 million for the prior year quarter due to an overall decrease in volume and margins in our secondary market residential lending program. Other income increased $169,000 primarily due a $103,000 loans held for sale valuation adjustment recorded in the second quarter of 2013 and a $47,000 increase in servicing fees in the second quarter of 2014 compared to the prior year quarter.

Noninterest Expense: The following table summarizes noninterest expense for the three months ended June 30, 2014 and 2013:


	For the Three Months Ended June 30,
	2014		2013		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	8,638	$	8,555	$	83			1.0	%
Occupancy expense		1,209		1,126		83			7.4
Furniture and equipment expense		1,106		1,099		7			0.6
FDIC assessment		321		311		10			3.2
Marketing		509		610		(101	)		(16.6	)
Other operating expenses		2,471		2,854		(383	)		(13.4	)
Total noninterest expense	$	14,254	$	14,555	$	(301	)		(2.1	) %

Noninterest expense decreased $301,000 to $14.3 million in the second quarter of 2014 compared to the prior year quarter. Marketing expense decreased $101,000 or 17% compared to the prior year quarter primarily due to general expense control initiatives. Other operating expenses decreased $383,000 as a result of incurring a loss on the sale of an OREO property and costs associated with our core banking system conversion in the prior year quarter.

Income Tax Expense: Income tax expense was $776,000 in the second quarter of 2014 compared to $256,000 in the prior year quarter.

Net Interest Income Analysis: Average Balance Sheets, Interest and Yields/Costs


	For The Six Months Ended June 30,
	2014								2013
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans, net	$	1,855,044	$	34,084			3.71	%	$	1,550,337	$	29,887			3.89	%
Securities		163,975		657			0.81	%		120,783		468			0.78	%
Federal Home Loan Bank of Boston stock		13,944		87			1.26	%		8,595		17			0.40	%
Federal funds and other earning assets		3,580		6			0.34	%		12,675		11			0.18	%
Total interest-earning assets		2,036,543		34,834			3.45	%		1,692,390		30,383			3.62	%
Noninterest-earning assets		122,770								121,227
Total assets	$	2,159,313							$	1,813,617

Interest-bearing liabilities:
NOW accounts	$	342,458	$	382			0.22	%	$	250,489	$	286			0.23	%
Money market		411,983		1,438			0.70	%		345,486		1,311			0.77	%
Savings accounts		198,710		97			0.10	%		177,825		158			0.18	%
Certificates of deposit		335,836		1,488			0.89	%		355,396		1,777			1.01	%
Total interest-bearing deposits		1,288,987		3,405			0.53	%		1,129,196		3,532			0.63	%
Federal Home Loan Bank of Boston advances		220,968		687			0.63	%		74,531		870			2.35	%
Repurchase agreement borrowings		21,000		356			3.42	%		21,000		351			3.37	%
Repurchase liabilities		57,151		72			0.25	%		51,031		91			0.36	%
Total interest-bearing liabilities		1,588,106		4,520			0.57	%		1,275,758		4,844			0.77	%
Noninterest-bearing deposits		301,557								248,804
Other noninterest-bearing liabilities		36,758								48,979
Total liabilities		1,926,421								1,573,541
Stockholders’ equity		232,892								240,076
Total liabilities and stockholders’ equity	$	2,159,313							$	1,813,617

Net interest income			$	30,314							$	25,539
Net interest rate spread (1)							2.88	%							2.85	%
Net interest-earning assets (2)	$	448,437							$	416,632
Net interest margin (3)							3.00	%							3.04	%
Average interest-earning assets to average interest-bearing liabilities				128.24	%							132.66	%

	(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
	(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
	(3) Net interest margin represents net interest income divided by average total interest-earning assets.

Rate Volume Analysis


	Six Months Ended June 30,
	2014 vs. 2013
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans, net	$	5,503		$	(1,306	)	$	4,197
Investment securities		189			-			189
Federal Home Loan Bank of Boston stock		16			54			70
Federal funds and other interest-earning assets		17			(22	)		(5	)
Total interest-earning assets		5,725			(1,274	)		4,451

Interest-bearing liabilities:
NOW accounts		96			-			96
Money market		209			(82	)		127
Savings accounts		36			(97	)		(61	)
Certificates of deposit		(95	)		(194	)		(289	)
Total interest-bearing deposits		246			(373	)		(127	)
Advances from the Federal Home Loan Bank		(294	)		111			(183	)
Repurchase agreement borrowing		-			5			5
Repurchase liabilities		5			(24	)		(19	)
Total interest-bearing liabilities		(43	)		(281	)		(324	)
Increase (decrease) in net interest income	$	5,768		$	(993	)	$	4,775

Summary of Operating Results for the Six Months Ended June 30, 2014 and 2013

The following discussion provides a summary and comparison of our operating results for the six months ended June 30, 2014 and 2013:


	For the Six Months Ended June 30,
	2014		2013		$ Change			% Change
(Dollars in thousands)
Net interest income	$	30,314	$	25,539	$	4,775		18.7	%
Provision for loan losses		915		655		260		39.7
Noninterest income		3,828		6,647		(2,819	)	(42.4	)
Noninterest expense		28,214		29,254		(1,040	)	(3.6	)
Income before taxes		5,013		2,277		2,736		120.2
Income tax expense		1,331		572		759		132.7
Net income	$	3,682	$	1,705	$	1,977		116.0	%

For the six months ended June 30, 2014, net income increased $2.0 million compared to the six months ended June 30, 2013. The increase in net income was driven by an increase in net interest income due to organic loan growth, a $663,000 salary and employment benefits decrease in noninterest expense offset by a decrease in the secondary market residential lending program.

Comparison of Operating Results for the six months ended June, 2014 and 2013

Net Interest Income: Net interest income is determined by the interest rate spread (i.e., the difference between the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest income before the provision for loan losses was $30.3 million and $25.5 million for the six months ended June 30, 2014 and 2013, respectively. Net interest income increased primarily due to a $304.7 million increase in the average loan balance despite an 18 basis point decrease in the yield on loans. The yield on average interest-earning assets decreased 17 basis points to 3.45% for the six months ended June 30, 2014 from 3.62% for the six months ended June 30, 2013. The decline was primarily due to an 18 basis points decrease in the yield on total average net loans to 3.71%. The cost of average interest-bearing liabilities decreased 20 basis points to 0.57% for the six months ended June 30, 2014 reflecting lower funding costs for certificates of deposit and a decrease in FHLBB advance costs due to an increase in short-term advances which carry lower rates. Net interest margin decreased 4 basis points to 3.00% for the six months ended June 30, 2014 compared to 3.04% for the six months ended June 30, 2013 due to a $17.6 million decline in the average balance of the resort portfolio offset by an increase in prepayment penalty fees. Excluding resort and prepayment penalty fee income for both periods, the net interest margin would have been 2.98% and 3.00% for the six months ended June 30, 2014 and 2013, respectively.

Interest expense for the six months ended June 30, 2014 decreased $324,000 or 6.7% totaling $4.5 million from $4.8 million in the six months ended June 30, 2013. The decrease in interest expense resulted from lower funding costs for municipal deposits and a decrease in FHLBB advance costs due to an increase in short-term advances which carry lower rates. Average balances of noninterest-bearing deposits grew at a rate of 21%, while total average interest-bearing deposits grew at a rate of 14% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Management recorded a provision for loan losses of $915,000 and $655,000 for the six months ended June 30, 2014 and 2013, respectively. The provision recorded is based upon management’s analysis of the allowance for loan losses necessary to absorb the estimated credit losses in the loan portfolio for the period. Net charge-offs totaled $1.3 million and $379,000 for the six months ended June 30, 2014 and 2013, respectively. One commercial loan relationship represented the majority of the charge-off in 2014 which was fully reserved in prior years.

Noninterest Income: The following table summarizes noninterest income for the six months ended June 30, 2014 and 2013:

	For the Six Months Ended June 30,
	2014		2013		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	2,508	$	2,079	$	429			20.6	%
Net gain on sales of investments		-		36		(36	)		100.0
Net gain on loans sold		439		3,619		(3,180	)		(87.9	)
Brokerage and insurance fee income		93		73		20			27.4
Bank owned life insurance income		563		712		(149	)		(20.9	)
Other		225		128		97			75.8
Total noninterest income	$	3,828	$	6,647	$	(2,819	)		(42.4	) %

Noninterest income decreased $2.8 million to $3.8 million for the six months ended June 30, 2014 compared to $6.6 million for the six months ended June 30, 2013. Fees for customer services increased $429,000 or 20.6% due to an increase in volume. Gain on sale of fixed-rate residential mortgage loans decreased $3.2 million to $439,000 for the six months ended June 30, 2014 compared to $3.6 million for the six months ended June 30, 2013 due to an overall decrease in volume and margins in our secondary market residential lending program. Bank owned life insurance income decreased $149,000 due to decreases in policy payouts and income earned for the six months ended June 30, 2014. Other income increased $97,000 primarily due a $118,000 increase in servicing fees and a $103,000 decrease in loans held for sale valuation adjustment offset by a $71,000 decrease in swap derivative income for the six months ended June 30, 2014.

Noninterest Expense: The following table summarizes noninterest expense for the six months ended June 30, 2014 and 2013:

	For the Six Months Ended June 30,
	2014		2013		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	16,926	$	17,589	$	(663	)		(3.8	) %
Occupancy expense		2,558		2,366		192			8.1
Furniture and equipment expense		2,124		2,117		7			0.3
FDIC assessment		649		602		47			7.8
Marketing		887		1,204		(317	)		(26.3	)
Other operating expenses		5,070		5,376		(306	)		(5.7	)
Total noninterest expense	$	28,214	$	29,254	$	(1,040	)		(3.6	) %

Noninterest expense, excluding $633,000 in accelerated vesting of stock compensation due to the passing of a key executive in the six months ended June 30, 2013, decreased $407,000 to $28.2 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2014. Salaries and employee benefits, excluding $633,000 in accelerated vesting of stock compensation, decreased $30,000 to $16.9 million for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Occupancy expense increased $192,000 as a result of de novo branch openings over the past twelve months. Marketing expense decreased $317,000 or 26% compared to the six months ended June 30, 2013 primarily due to general expense control initiatives. Other operating expenses decreased $306,000 compared to the six months ended June 30, 2013. Other operating expenses were higher for the six months ended June 30, 2013 as a result of incurring a loss on the sale of an OREO property and costs associated with our core banking system conversion.

Income Tax Expense: Income tax expense was $1.3 million and $572,000 for the six months ended June 30, 2014 and 2013, respectively.

Liquidity and Capital Resources:

We maintain liquid assets at levels we consider adequate to meet our liquidity needs. We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows, fund operations and pay escrow obligations on items in our loan portfolio. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, principal repayment 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 competitors. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2014, $50.8 million of our assets were invested in cash and cash equivalents compared to $38.8 million at December 31, 2013. Our primary sources of cash are principal repayments on loans, proceeds from the maturities of investment securities, increases in deposit accounts, proceeds from residential loan sales and advances from FHLBB.

For the six months ended June 30, 2014 and 2013, loan originations and purchases, net of collected principal and loan sales, totaled $130.5 million and $70.2 million, respectively. Cash received from the sales and maturities of investment securities totaled $183.8 million and $151.5 million for the six months ended June 30, 2014 and 2013, respectively. We purchased $188.1 million and $126.1 million of available-for-sale investment securities during the six months ended June 30, 2014 and 2013, respectively.

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBB, which provides an additional source of funds. At June 30, 2014, we had $291.0 million in advances from the FHLBB and an additional available borrowing limit of $193.2 million, compared to $259.0 million in advances from the FHLBB and an additional available borrowing limit of $190.6 million at December 31, 2013, subject to collateral requirements of the FHLBB. Internal policies limit borrowings to 25.0% of total assets, or $566.9 million and $527.5 million at June 30, 2014 and December 31, 2013, respectively. Other sources of funds include access to a pre-approved unsecured line of credit with PNC Bank for $20.0 million, our $8.8 million secured line of credit with the FHLBB and our $3.5 million unsecured line of credit with a bank which were all undrawn at June 30, 2014. The Federal Reserve Bank’s discount window loan collateral program enables us to borrow up to $97.3 million on an overnight basis as of June 30, 2014. The funding arrangement was collateralized by $149.5 million in pledged commercial real estate loans as of June 30, 2014.

We had outstanding commitments to originate loans of $60.1 million and $25.7 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $406.0 million and $385.8 million at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014 and December 31, 2013, time deposits scheduled to mature in less than one year totaled $231.6 million and $227.6 million, respectively. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as FHLBB advances, brokered deposits, our $20.0 million unsecured line of credit with PNC Bank, our $8.8 million secured line of credit with the FHLBB, our $3.5 million unsecured line of credit with a bank or our $97.3 million overnight borrowing arrangement with the Federal Reserve Bank in order to maintain our 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 if there is an increased amount of competition for deposits in our market area at the time of renewal.

Item 3.

Quantitative and Qualitative Disclosures About Market 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 loans and available-for-sale investment securities, generally 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 an asset/liability committee which is responsible for (i) evaluating the interest rate risk inherent in our assets and liabilities, (ii) determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives and (iii) managing this risk consistent with the guidelines approved by our board of directors. Management monitors the level of interest rate risk on a regular basis and the asset/liability 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 commercial and consumer loans, (ii) maintaining a short average life investment portfolio and (iii) periodically lengthening the term structure of our borrowings from the FHLBB. Additionally, we sell a portion of our fixed-rate residential mortgages to the secondary market. These measures should serve to reduce the volatility of our future net interest income in different interest rate environments.

Quantitative Analysis: An economic value of equity and an income simulation analysis are used to estimate our interest rate risk exposure at a particular point in time. We are most reliant on the income simulation method as it is a dynamic method in that it incorporates our forecasted balance sheet growth assumptions under the different interest rate scenarios tested. We utilize the income simulation method to analyze our interest rate sensitivity position and to manage the risk associated with interest rate movements. At least quarterly, our asset/liability committee reviews the potential effect that changes in interest rates could have on the repayment or repricing of rate sensitive assets and the funding requirements of rate sensitive liabilities. Our most recent simulation uses projected repricing of assets and liabilities on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rate assumptions can have a significant impact on interest income simulation results. Because of the large percentage of loans and mortgage-backed securities 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 would therefore alter our existing interest rate risk position.

Our asset/liability policy currently limits projected changes in net interest income to a maximum variance of (4.0%, 8.0%, 10.0%, 12.0% and 18.0%) assuming a 100, 200, 300, 400 or 500 basis point interest rate shock, respectively, as measured over a 12 month period when compared to the flat rate scenario.

The following table depicts the percentage increase and/or decrease in estimated net interest income over twelve months based on the scenarios run during each of the periods presented:

	Percentage Increase (Decrease) in Estimated Net Interest Income Over 12 Months
	At June 30, 2014			At December 31, 2013
200 basis point increase		0.49	%		2.38	%
300 basis point increase		(2.03	) %		0.79	%
400 basis point increase		(6.24	) %		(2.03	) %
100 basis point decrease		(5.05	) %		(5.22	) %

Item 4.

Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

During the second quarter of 2013, we implemented and completed a core banking system conversion. This conversion has resulted in the modification of certain business processes and internal controls impacting financial reporting, among other things, improving user access security and automating a number of accounting, back office and reporting processes and activities. Management will continue to evaluate the operating effectiveness of related key controls during subsequent periods.

Part II. Other Information

Item 1.

Legal Proceedings

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s consolidated financial statements.

Item 1A.

Risk Factors

There have been no material changes in the “Risk Factors” from those previously disclosed in the Form 10-K filed on March 17, 2014.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Not applicable.

(b)

Not applicable.

(c)

During the quarter ending June 30, 2014, the Company made the following repurchases of common stock:

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1-30, 2014		49,937	$	15.55		671,116		1,005,336
May 1-31, 2014		81,359		15.46		752,475		923,977
June 1-30, 2014		-		-		752,475		923,977

On June 21, 2013, the Company received regulatory approval to repurchase up to 1,676,452 shares, or 10% of its current outstanding common stock. Repurchased shares will be held as treasury stock and will be available for general corporate purposes.

Item 3.

Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits

3.1

Amended and Restated Certificate of Incorporation of First Connecticut Bancorp, Inc. (filed as Exhibit 3.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

3.2

Bylaws of First Connecticut Bancorp, Inc. (filed as Exhibit 3.2 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

3.2.1

Amended and Restated Bylaws of First Connecticut Bancorp, Inc. (filed as Exhibit 3.2.1 to the Form 8-K filed for the Company on October 29, 2013, and incorporated herein by reference).

4.1

Form of Common Stock Certificate of First Connecticut Bancorp, Inc. (filed as Exhibit 4.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.2

Supplemental Executive Retirement Plan of Farmington Bank (filed as Exhibit 10.2 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.3

Voluntary Deferred Compensation Plan for Directors and Key Employees (filed as Exhibit 10.3 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.4

First Amendment to Voluntary Deferred Compensation Plan for Directors and Key Employees (filed as Exhibit 10.4 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.4.1

Second Amendment to Voluntary Deferred Compensation Plan for Directors and Key Employees (filed as Exhibit 10.4.1 to the Form 10-K for the year ended December 31, 2012 filed on March 18, 2013, and incorporated herein by reference).

10.5

Voluntary Deferred Compensation Plan for Key Employees (filed as Exhibit 10.5 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.6

Life Insurance Premium Reimbursement Agreement between Farmington Bank and John J. Patrick, Jr. (filed as Exhibit 10.6 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.7

Life Insurance Premium Reimbursement Agreement between Farmington Bank and Gregory A. White (filed as Exhibit 10.7 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.8

Farmington Savings Bank Defined Benefit Employees’ Pension Plan, as amended (filed as Exhibit 10.8 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.8.1

Farmington Savings Bank Defined Benefit Employees’ Pension Plan, as amended (filed as Exhibit 10.8.1 to the Form 10-K for the year ended December 31, 2012 filed on March 18, 2013, and incorporated herein by reference).

10.9

Annual Incentive Compensation Plan (filed as Exhibit 10.9 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.9.1

Amended Annual Incentive Compensation Plan (filed as Exhibit 10.9.1 to the Form 10-K for the year ended December 31, 2013 filed on March 17, 2014, and incorporated herein by reference)

10.10

Supplemental Retirement Plan Participation Agreement between John J. Patrick, Jr. and Farmington Bank (filed as Exhibit 10.10 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.11

Supplemental Retirement Plan Participation Agreement between Michael T. Schweighoffer and Farmington Bank (filed as Exhibit 10.11 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.12

Supplemental Retirement Plan Participation Agreement between Gregory A. White and Farmington Bank (filed as Exhibit 10.12 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

10.13

Employment Agreement among First Connecticut Bancorp, Inc., Farmington Bank and John J. Patrick, Jr. (filed as Exhibit 10.1 Employment Agreement on Form 8-K for the Company on April 24, 2012 and incorporated herein by reference).

10.13.1

Employment Agreement First Amendment among First Connecticut Bancorp, Inc., Farmington Bank and John J. Patrick, Jr. (filed as Exhibit 10.13.1 to the current report on the Form 8-K filed for the Company on February 28, 2013, as amended, and incorporated herein by reference).

10.14

Life Insurance Premium Reimbursement Agreement between Farmington Bank and Michael T. Schweighoffer (filed as Exhibit 10.14 to the Form 10-Q filed for the Company on May 15, 2012, and incorporated herein by reference).

10.15

First Connecticut Bancorp, Inc. 2012 Stock Incentive Plan (Incorporated by reference to Appendix A in the Definitive Proxy Statement on Form 14A filed on June 6, 2012 and amended on July 2, 2012 (File No. 001-35209-12890818 and 12960688).

21.1

Subsidiaries of First Connecticut Bancorp, Inc. and Farmington Bank (filed as Exhibit 21.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Company’s Chief Executive Officer.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Company’s Chief Financial Officer.

32.1

Written Statement pursuant to 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Company’s Chief Executive Officer.

32.2

Written Statement pursuant to 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Company’s Chief Financial Officer.

101

Interactive data files pursuant to Rule 405 of Regulation S-t: (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Consolidated Financial Statements tagged as blocks of text and in detail.*

As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934.

SIGNATURES

Pursuant to the requirements 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.


	FIRST CONNECTICUT BANCORP, INC.

Date: August 8, 2014	/s/ John J. Patrick, Jr.
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer

Date: August 8, 2014	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

Date: August 8, 2014	/s/ Kimberly Rozanski Ruppert
	Kimberly Rozanski Ruppert
	Senior Vice President and Principal Accounting Officer

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John J. Patrick, certify that:

I have reviewed this Quarterly Report on Form 10-Q of First Connecticut Bancorp, Inc., a Maryland corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 8, 2014	/s/ John J. Patrick, Jr.
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Gregory A. White, certify that:

I have reviewed this Quarterly Report on Form 10-Q of First Connecticut Bancorp, Inc., a Maryland corporation;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 8, 2014	/s/ Gregory A White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

I, John J. Patrick, Chief Executive Officer and President of First Connecticut Bancorp, Inc., a Maryland corporation (the “Company”), certify in my capacity as an officer of the Company that I have reviewed the quarterly report on Form 10-Q for the three months ended June 30, 2014 (the “Report”) and that to the best of my knowledge:

the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 8, 2014	/s/ John J. Patrick, Jr.
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

I, Gregory A. White, Executive Vice President and Chief Financial Officer of First Connecticut Bancorp, Inc., a Maryland corporation (the “Company”), certify in my capacity as an officer of the Company that I have reviewed the quarterly report on Form 10-Q for the three months ended June 30, 2014 (the “Report”) and that to the best of my knowledge:

the Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 8, 2014	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

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