First Connecticut Bancorp, Inc. (Form: 10-Q, Received: 05/15/2012 16:25:22)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended March 31, 2012

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)

(Registrant’s telephone number)

(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 o NO x

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	o

Non-accelerated filer	x	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 May15, 2012, there were 17,880,200 shares of First Connecticut Bancorp, Inc. common stock, par value $0.01, outstanding.

First Connecticut Bancorp, Inc.

		Page

Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Statements of Condition at March 31, 2012 (unaudited) and December 31, 2011	1

	Consolidated Statements of Income for the three months ended March 31, 2012 and 2011 (unaudited)	2

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011 (unaudited)	3

	Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2012 (unaudited)	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (unaudited)	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	56

Part II. Other Information

Item 1.	Legal Proceedings	56

Item1A.	Risk Factors	56

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3.	Defaults Upon Senior Securities	57

Item 4.	Mine Safety Disclosure	57

Item 5.	Other Information	57

Item 6.	Exhibits	57

Signatures		59

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Part I. Financial Information

Item 1. Consolidated Financial Statements

First Connecticut Bancorp, Inc.

Consolidated Statements of Condition

	March 31, 2012			December 31, 2011
(Dollars in thousands)	(Unaudited)
Assets
Cash and due from banks	$	38,280		$	40,296
Federal funds sold		93,000			50,000
Cash and cash equivalents		131,280			90,296
Securities held-to-maturity, at amortized cost		3,216			3,216
Securities available-for-sale, at fair value		115,956			135,170
Loans held for sale		3,408			1,039
Loans, net		1,326,107			1,295,177
Premises and equipment, net		21,293			21,379
Federal Home Loan Bank of Boston stock, at cost		7,137			7,449
Accrued income receivable		4,304			4,185
Bank-owned life insurance		36,701			30,382
Deferred income taxes		13,672			13,907
Prepaid expenses and other assets		14,155			15,450
Total assets	$	1,677,229		$	1,617,650
Liabilities and Stockholders ’ Equity
Deposits
Interest-bearing	$	1,033,981		$	981,057
Noninterest-bearing		215,602			195,625
		1,249,583			1,176,682
Federal Home Loan Bank of Boston advances		63,000			63,000
Repurchase agreement borrowings		21,000			21,000
Repurchase liabilities		55,713			64,466
Accrued expenses and other liabilities		37,737			40,522
Total liabilities		1,427,033			1,365,670

Commitments and contingencies		-			-

Stockholders ’ Equity
Common stock, $0.01 par value, 30,000,000 shares authorized, 17,880,200 shares issued and outstanding at March 31, 2012 and December 31, 2011		179			179
Additional paid-in-capital		174,884			174,836
Unallocated common stock held by ESOP		(13,031	)		(10,490	)
Retained earnings		93,392			92,937
Accumulated other comprehensive loss		(5,228	)		(5,482	)
Total stockholders ’ equity		250,196			251,980
Total liabilities and stockholders’ equity	$	1,677,229		$	1,617,650

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

First Connecticut Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	Three Months Ended
	March 31,
	2012		2011
(Dollars in thousands, except per share data)
Interest income
Interest and fees on loans
Mortgage	$	11,110	$	10,548
Other		3,889		3,612
Interest and dividends on investments
United States Government and agency obligations		266		435
Other bonds		58		52
Corporate stocks		70		67
Other interest income		34		17
Total interest income		15,427		14,731
Interest expense
Deposits		1,755		1,952
Interest on borrowed funds		481		525
Interest on repo borrowings		180		179
Interest on repurchase liabilities		57		124
Total interest expense		2,473		2,780
Net interest income		12,954		11,951
Provision for allowance for loan losses		330		300
Net interest income after provision for loan losses		12,624		11,651
Noninterest income
Fees for customer services		816		787
Net gain on loans sold		98		146
Brokerage and insurance fee income		25		124
Bank owned life insurance income		319		174
Other		55		50
Total noninterest income		1,313		1,281
Noninterest expense
Salaries and employee benefits		7,424		6,568
Occupancy expense		1,190		1,237
Furniture and equipment expense		1,099		975
FDIC assessment		279		541
Marketing		606		473
Other operating expenses		2,031		1,867
Total noninterest expense		12,629		11,661
Income before income taxes		1,308		1,271
Provision for income taxes		317		255
Net income	$	991	$	1,016

Net income per share (See Note 2):
Basic and Diluted	$	0.06		N/A

Weighted average shares outstanding:
Basic and Diluted		16,784,974		N/A

Pro forma net income per share (1):
Basic and Diluted		N/A	$	0.06

(1)=	Pro forma net income per share assumes the Company’s shares are outstanding for all periods prior to the completion of the Plan of Conversion and Reorganization on June 29, 2011.

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 March 31,
	2012		2011
(Dollars in thousands)
Net income	$	991	$	1,016
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		253		(102	)
Less: reclassification adjustment for gains (losses) included in net income		-		-
Net change in unrealized gains (losses)		253		(102	)
Change related to employee benefit plans		132		54
Other comprehensive income (loss), before tax		385		(48	)
Income tax expense (benefit)		131		(16	)
Other comprehensive income (loss), net of tax		254		(32	)

Comprehensive income	$	1,245	$	984

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

First Connecticut Bancorp, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

													Accumulated Other
													Comprehensive (Loss) Income
													Unrealized Gain		Related to
							Unallocated						on Securities		Employee Benefits
					Additional		Common						Available-for-Sale,		Plans,
	Common Stock				Paid in		Shares Held			Retained			Net of		Net of
	Shares		Amount		Capital		by ESOP			Earnings			Tax Effect		Tax Effect			Total
(Dollars in thousands)

Balance at December 31, 2011		17,880,200	$	179	$	174,836	$	(10,490	)	$	92,937		$	650	$	(6,132	)	$	251,980
Purchase of common stock for Employee Stock Ownership Plan “ ESOP ”		-		-		-		(2,804	)		-			-		-			(2,804	)
ESOP shares committed to be released		-		-		48		263			-			-		-			311
Cash dividend paid ($0.03 per common share)		-		-		-		-			(536	)		-		-			(536	)
Net income		-		-		-		-			991			-		-			991
Other comprehensive income		-		-		-		-			-			167		87			254
Balance at March 31, 2012		17,880,200		179		174,884		(13,031	)		93,392			817		(6,045	)		250,196

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

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended
	March 31,
	2012			2011
(Dollars in thousands)

Cash flows from operating activities
Net income	$	991		$	1,016
Adjustments to reconcile net income to net cash used in operating activities:
Provision for allowance for loan losses		330			300
Provision for off-balance sheet commitments		12			10
Depreciation and amortization		806			777
Amortization of ESOP expense		311			-
Loans originated for sale		(9,365	)		(7,591	)
Proceeds from the sale of loans held for sale		7,094			7,354
Net gain on loans sold		(98	)		(146	)
Accretion and amortization of investment security discounts and premiums, net		(17	)		(42	)
Amortization and accretion of loan fees and discounts, net		(378	)		(124	)
Deferred income tax		104			-
(Increase) decrease in accrued income receivable		(119	)		73
Increase in cash surrender value of bank-owned life insurance		(319	)		(173	)
Decrease (increase) in prepaid expenses and other assets		1,141			(2,228	)
(Decrease) increase in accrued expenses and other liabilities		(2,664	)		615
Net cash used in operating activities		(2,171	)		(159	)

Cash flow from investing activities
Sales, maturities and calls of securities available-for-sale		93,438			96,419
Purchases of securities available-for-sale		(73,955	)		(76,019	)
Redemption of Federal Home Loan Bank of Boston stock		312			-
Loan originations, net of principal repayments		(30,822	)		773
Purchases of bank-owned life insurance		(6,000	)		-
Proceeds from sale of foreclosed real estate		94			-
Purchases of premises and equipment		(720	)		(611	)
Net cash (used in) provided by investing activities		(17,653	)		20,562

Cash flows from financing activities

Purchase of common stock for ESOP		(2,804	)		-
Net decrease in borrowings		-			(3,000	)
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts		85,404			79,803
Net decrease in certificates of deposit		(12,503	)		(26,529	)
Net decrease in repurchase liabilities		(8,753	)		(13,820	)
Cash dividend paid		(536	)		-
Net cash provided by financing activities		60,808			36,454

Net increase in cash and cash equivalents		40,984			56,857
Cash and cash equivalents at beginning of period		90,296			18,608
Cash and cash equivalents at end of period	$	131,280		$	75,465

Supplemental disclosure of cash flow information
Cash paid for interest	$	2,451		$	2,777
Cash paid for income taxes		6			-

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. As of March 31, 2012, the ESOP purchased 1,232,840 shares of common stock at a cost of $14.3 million. The Bank intends to make annual contributions adequate to fund the payment of regular debt service requirements attributable to the indebtedness of the ESOP.

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 seventeen full service branch offices and four limited services offices in central Connecticut. Farmington Bank’s primary source of income is interest received 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 holds certain real estate; 28 Main Street Corp., a subsidiary that holds residential other real estate owned; Village Management Corp., presently inactive and Village Square Holdings, Inc., a subsidiary that holds certain bank premises and other real estate.

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, 2011 included in the Company’s 10-K filed on March 28, 2012. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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.

Amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the current year presentation.

Recent Accounting Pronouncements

ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.” In April 2011, the FASB issued ASU No. 2011-03 to clarify the determination of whether an entity may or may not recognize a sale upon transfer of financial assets subject to repurchase agreements. The changes remove from the assessment of effective control: (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance implementation guidance related to that criterion. As a result, it is anticipated that most repurchase agreements will not qualify for derecognition from the transferor’s financial statements. This change is effective for the Company’s interim and annual reporting periods beginning on or after December 15, 2011 and will be applied prospectively to new transactions or modifications of existing transactions after the effective date. The Company adopted the provisions of ASU No. 2011-03 prospectively for transactions or modifications of existing transactions that occurred on or after January 1, 2012. As the Company accounted for all of its repurchase agreements as collateralized financing arrangements prior to the adoption of ASU No. 2011-03, the adoption had no impact on the Company’s Consolidated Financial Statements.

ASU No. 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” In May 2011, the FASB issued ASU No. 2011-04 which will supersede most of the accounting guidance currently found in Topic 820 of FASB’s ASC. The amendments will improve comparability of fair value measurements presented and disclosed in financial statements prepared with GAAP and International Financial Reporting Standards (“IFRS”). The amendments also clarify the application of existing fair value measurement requirements. These amendments include (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and (3) disclosing quantitative information about the unobservable inputs used within the Level 3 hierarchy. The guidance is effective for the Company’s interim and annual periods beginning after December 15, 2011 and will be applied prospectively. The Company adopted the provisions of ASU No. 2011-04 effective January 1, 2012. The fair value measurement provisions of ASU No. 2011-04 had no impact on the Company’s consolidated financial statements. See Note 10 to the consolidated financial statements for the enhanced disclosures required by ASU No. 2011-04.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The provisions of ASU No. 2011-05 allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. Under either method, entities are required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. ASU No. 2011-05 also eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU No. 2011-05 was effective for the Company’s interim reporting period beginning on or after January 1, 2012, with retrospective application required. In December 2011, the FASB issued ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” The provisions of ASU No. 2011-12 defer indefinitely the requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. ASU No. 2011-12, which shares the same effective date as ASU No. 2011-05, does not defer the requirement for entities to present components of comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company adopted the provisions of ASU No. 2011-05 and ASU No. 2011-12 which resulted in a new statement of comprehensive income for the interim period ended March 31, 2012. The adoption of ASU No. 2011-05 and ASU No. 2011-12 had no impact on the Company’s consolidated statements of income and condition.

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures About Offsetting Assets and Liabilities.” This project began as an attempt to converge the offsetting requirements under U.S. GAAP and IFRS. However, as the Boards were not able to reach a converged solution with regards to offsetting requirements, the Boards developed convergent disclosure requirements to assist in reconciling differences in the offsetting requirements under U.S. GAAP and IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. ASU No. 2011-11 also requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. ASU No. 2011-11 is effective for interim and annual reporting periods beginning on or after January 1, 2013. As the provisions of ASU No. 2011-11 only impact the disclosure requirements related to the offsetting of assets and liabilities, the adoption will have no impact on the Company’s consolidated financial statements.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

2. Earnings Per Share

Basic net income per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed in a manner similar to basic net income per common share except that the weighted-average number of common shares outstanding i s increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock (i.e. stock options) were issued during the period. The Company had no dilutive or anti-dilutive common shares outstanding during the year. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted income per common share.

Earnings per share data is not presented in these consolidated financial statements prior to June 29, 2011 since shares of common stock were not issued until June 29, 2011; therefore, per share information for prior periods is not meaningful. Pro forma earnings per share are reported in the Consolidated Statements of Operations which assume the shares of the Company issued on June 29, 2011 are outstanding for all periods presented.

The following table sets forth the calculation of basic and diluted earnings per common share for the three months ended March 31, 2012:

	For the Three Months Ended March 31, 2012

(Dollars in thousands, except Per Share data):

Net income	$	991

Weighted-average common shares		16,784,974

Net income per common share:
Basic and Diluted	$	0.06

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

3. Investment Securities

Investment securities are summarized as follows:

	March 31, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	71,988	$	-	$	(5	)	$	71,983
U.S. Government agency obligations		17,000		18		(15	)		17,003
Government sponsored residential mortgage-backed securities		16,825		1,249		(2	)		18,072
Corporate debt securities		2,940		196		-			3,136
Trust preferred debt securities		40		-		-			40
Preferred equity securities		2,100		124		(376	)		1,848
Marketable equity securities		348		30		(3	)		375
Mutual funds		3,478		21		-			3,499
Total securities available-for-sale	$	114,719	$	1,638	$	(401	)	$	115,956
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	7	$	-	$	-		$	7
Municipal debt securities		209		-		-			209
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,216	$	-	$	-		$	3,216

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	80,999	$	-	$	-		$	80,999
U.S. Government agency obligations		27,003		12		(9	)		27,006
Government sponsored residential mortgage-backed securities		19,254		1,302		(11	)		20,545
Corporate debt securities		1,000		175		-			1,175
Trust preferred debt securities		42		-		-			42
Preferred equity securities		2,100		112		(639	)		1,573
Marketable equity securities		348		22		(4	)		366
Mutual funds		3,439		25		-			3,464
Total securities available-for-sale	$	134,185	$	1,648	$	(663	)	$	135,170
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	7	$	-	$	-		$	7
Municipal debt securities		209		-		-			209
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,216	$	-	$	-		$	3,216

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 March 31, 2012 and December 31, 2011:

	Less than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Loss			Value		Loss			Value		Loss
March 31, 2012
Available-for-sale:
U.S. Treasury obligations	$	43,988	$	(5	)	$	-	$	-		$	43,988	$	(5	)
U.S. Government agency obligations		6,985		(15	)		-		-			6,985		(15	)
Government sponsored residential mortgage-backed securities		-		-			85		(2	)		85		(2	)
Preferred equity securities		99		(1	)		1,625		(375	)		1,724		(376	)
Marketable equity securities		-		-			4		(3	)		4		(3	)
	$	51,072	$	(21	)	$	1,714	$	(380	)	$	52,786	$	(401	)

	Less than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Loss			Value		Loss			Value		Loss
December 31, 2011
Available-for-sale:
U.S. Government agency obligations	$	16,994	$	(9	)	$	-	$	-		$	16,994	$	(9	)
Government sponsored residential mortgage-backed securities		776		(9	)		124		(2	)		900		(11	)
Preferred equity securities		87		(13	)		1,374		(626	)		1,461		(639	)
Marketable equity securities		-		-			3		(4	)		3		(4	)
	$	17,857	$	(31	)	$	1,501	$	(632	)	$	19,358	$	(663	)

Management believes that no individual unrealized loss as of March 31, 2012 represents an other-than-temporary impairment, based on its detailed quarterly review of the securities portfolio. Among other things, the other-than-temporary impairment review of the investment securities portfolio focuses on the combined factors of percentage and length of time an issue is below book value as well as consideration of issuer specific factors (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral, if applicable). The Company also considers whether or not it has the intent to sell the security prior to maturity as well as the extent to which the unrealized loss is attributable to changes in interest rates.

The unrealized loss on preferred equity securities in a loss position for 12 months or more primarily relates to one preferred equity security that is rated Baa2 by Moody’s as of March 31, 2012. A detailed review of the preferred equity security was completed by management and procedures included an analysis of their most recent financial statements and management concluded that the preferred equity security is not other-than-temporarily impaired.

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 contained in the table during the period of time necessary to recover the unrealized losses, which may be until maturity.

During the three months ended March 31, 2012 and 2011, the Company recorded no other-than-temporary impairment charges.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

There were no realized gains or losses for the three months ended March 31, 2012 and 2011, respectively.

The amortized cost and estimated market value of debt securities at March 31, 2012 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:

	March 31, 2012
	Available-for-Sale				Held-to-Maturity
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
(Dollars in thousands)
Due in one year or less	$	71,988	$	71,983	$	209	$	209
Due after one year through five years		19,440		19,554		-		-
Due after five years through ten years		500		585		-		-
Due after ten years		40		40		3,000		3,000
Government sponsored residential mortgage-backed securities		16,825		18,072		7		7
	$	108,793	$	110,234	$	3,216	$	3,216

The Company, as a member of the Federal Home Loan Bank of Boston (FHLBB), owned $7.1 million and $7.4 million of FHLBB capital stock at March 31, 2012 and December 31, 2011, respectively, which is equal to its FHLBB capital stock requirement.

4. Loans and Allowance for Loan Losses

Loans consisted of the following:

	March 31, 2012			December 31, 2011
(Dollars in thousands)
Real estate
Residential	$	530,368		$	503,361
Commercial		411,450			408,169
Construction		42,310			46,381
Installment		9,095			10,333
Commercial		160,179			154,300
Collateral		2,549			2,348
Home equity line of credit		115,081			109,771
Demand		25			41
Revolving credit		73			90
Resort		69,773			75,363
Total loans		1,340,903			1,310,157
Less:
Allowance for loan losses		(17,727	)		(17,533	)
Net deferred loan costs		2,931			2,553
Loans, net	$	1,326,107		$	1,295,177

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

A summary of changes in the allowance for loan losses for the three months ended March 31, 2012 and 2011 are as follows:

	For the Three Months Ended March 31,
(Dollars in thousands)	2012			2011
Balance at beginning of period	$	17,533		$	20,734
Provision for loan losses		330			300
Charge-offs		(148	)		(476	)
Recoveries		12			4
Balance at end of period	$	17,727		$	20,562

Changes in the allowance for loan losses by segments for the three months ended March 31, 2012 are as follows:

	For the Three Months Ended March 31, 2012
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	2,874	$	(61	)	$	-	$	379		$	3,192
Commercial		8,755		(49	)		-		(177	)		8,529
Construction		590		-			-		(8	)		582
Installment		92		(6	)		3		(13	)		76
Commercial		2,140		-			4		109			2,253
Collateral		-		-			-		-			-
Home equity line of credit		1,295		(19	)		-		39			1,315
Demand		-		-			-		-			-
Revolving credit		-		(13	)		5		8			-
Resort		1,787		-			-		(137	)		1,650
Unallocated		-		-			-		130			130
	$	17,533	$	(148	)	$	12	$	330		$	17,727

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Changes in the allowance for loan losses by segments for the three months ended March 31, 2011 are as follows:

	For the Three Months Ended March 31, 2011
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,056	$	(263	)	$	-	$	766		$	3,559
Commercial		7,726		-			-		(1,482	)		6,244
Construction		524		-			-		261			785
Installment		115		(5	)		-		(29	)		81
Commercial		1,564		(169	)		-		348			1,743
Collateral		-		-			-		-			-
Home equity line of credit		558		(25	)		-		32			565
Demand		3		-			4		(6	)		1
Revolving credit		-		(14	)		-		14			-
Resort		7,188		-			-		(9	)		7,179
Unallocated		-		-			-		405			405
	$	20,734	$	(476	)	$	4	$	300		$	20,562

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 March 31, 2012 and December 31, 2011:

Loans individually evaluated for impairment:

	March 31, 2012				December 31, 2011
(Dollars in thousands)	Total		Reserve Allocation		Total		Reserve Allocation
Real estate
Residential	$	10,933	$	458	$	10,632	$	459
Commercial		17,279		1,096		17,660		1,245
Construction		883		-		994		34
Installment		7		-		-		-
Commercial		6,482		26		8,099		17
Collateral		-		-		-		-
Home equity line of credit		1,495		455		1,555		455
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		1,975		1		2,054		1
Total	$	39,054	$	2,036	$	40,994	$	2,211

Loans collectively evaluated for impairment:

	March 31, 2012				December 31, 2011
(Dollars in thousands)	Total		Reserve Allocation		Total		Reserve Allocation
Real estate
Residential	$	521,950	$	2,734	$	494,949	$	2,415
Commercial		394,164		7,433		390,466		7,510
Construction		41,412		582		45,346		556
Installment		9,088		76		10,333		92
Commercial		154,252		2,227		146,755		2,123
Collateral		2,549		-		2,348		-
Home equity line of credit		113,591		860		108,219		840
Demand		25		-		41		-
Revolving Credit		73		-		90		-
Resort		67,676		1,649		73,169		1,786
Total	$	1,304,780	$	15,561	$	1,271,716	$	15,322
Unallocated		-		130		-		-
Total	$	1,343,834	$	17,727	$	1,312,710	$	17,533

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of loan delinquencies at recorded investment values at March 31, 2012 and December 31, 2011:

	March 31, 2012

(Dollars in thousands)	30-59 Days Past Due				60-89 Days Past Due				> 90 Days Past Due					Total				Past Due 90 Days or More and Still Accruing
(Dollars in thousands)	30-59 Days Past Due				60-89 Days Past Due				> 90 Days Past Due					Total
	Number		Amount		Number		Amount		Number		Amount			Number		Amount
Real estate
Residential		13	$	2,252		2	$	885		22	$	8,404			37	$	11,541	$	-
Commercial		-		-		1		109		7		3,594			8		3,703		-
Construction		-		-		-		-		1		484			1		484		-
Installment		3		49		-		-		1		42			4		91		-
Commercial		-		-		1		21		6		799			7		820		-
Collateral		8		57		-		-		-		-			8		57		-
Home equity line of credit		1		40		-		-		4		1,487			5		1,527		-
Demand		-		-		-		-		1		25			1		25		-
Revolving Credit		-		-		-		-		-		-			-		-		-
Resort		-		-		-		-		-		-			-		-		-
Total		25	$	2,398		4	$	1,015		42	$	14,835			71	$	18,248	$	-

	December 31, 2011

(Dollars in thousands)	30-59 Days Past Due				60-89 Days Past Due				> 90 Days Past Due				Total					Past Due 90 Days or More and Still Accruing
(Dollars in thousands)	30-59 Days Past Due				60-89 Days Past Due				> 90 Days Past Due				Total
	Number		Amount		Number		Amount		Number		Amount			Number		Amount
Real estate
Residential		12	$	2,955		4	$	730		17	$	7,926			33	$	11,611	$	-
Commercial		1		963		-		-		9		2,934			10		3,897		-
Construction		-		-		-		-		2		484			2		484		-
Installment		5		22		1		78		2		63			8		163		-
Commercial		-		-		-		-		8		802			8		802		-
Collateral		9		70		-		-		-		-			9		70		-
Home equity line of credit		3		204		-		-		6		1,555			9		1,759		-
Demand		1		16		-		-		1		25			2		41		-
Revolving Credit		-		-		-		-		-		-			-		-		-
Resort		-		-		-		-		-		-			-		-		-
Total		31	$	4,230		5	$	808		45	$	13,789			81	$	18,827	$	-

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Nonperforming assets consist of non-accruing loans and loans past due more than 90 days and still accruing interest and other real estate owned. Nonperforming assets were:

(Dollars in thousands)	March 31, 2012		December 31, 2011
Nonaccrual loans:
Real estate
Residential	$	9,526	$	9,224
Commercial		3,595		2,934
Construction		484		484
Installment		150		209
Commercial		950		956
Collateral		-		-
Home equity line of credit		1,608		1,669
Demand		25		25
Revolving Credit		-		-
Resort		-		-
Total nonaccruing loans		16,338		15,501
Loans 90 days past due and still accruing		-		-
Real estate owned		148		302
Total nonperforming assets	$	16,486	$	15,803

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of impaired loans at March 31, 2012:

	March 31, 2012
											Cash-basis
			Unpaid				Average		Interest		Interest
	Recorded		Principal		Related		Recorded		Income		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized		Recognized
Impaired loans without a valuation allowance:
Real estate
Residential	$	5,194	$	5,558	$	-	$	5,081	$	8	$	8
Commercial		9,113		9,453		-		9,211		108		98
Construction		883		972		-		348		5		5
Installment		7		7		-		2		-		-
Commercial		5,489		5,483		-		5,531		68		66
Collateral		-		-		-		-		-		-
Home equity line of credit		496		569		-		620		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		120		118		-		64		1		1
Total		21,302		22,160		-		20,857		190		178

Impaired loans with a valuation allowance:
Real estate
Residential		5,739		6,101		458		5,894		8		5
Commercial		8,166		9,261		1,096		8,045		140		140
Construction		-		-		-		403		-		-
Installment		993		1,007		26		-		-		-
Commercial		-		-		-		637		9		9
Collateral		999		999		455		-		-		-
Home equity line of credit		-		-		-		943		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,855		1,854		1		943		15		15
Total		17,752		19,222		2,036		16,865		172		169
Total impaired loans	$	39,054	$	41,382	$	2,036	$	37,722	$	362	$	347

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at December 31, 2011:

	December 31, 2011
											Cash-basis
			Unpaid				Average		Interest		Interest
	Recorded		Principal		Related		Recorded		Income		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized		Recognized
Impaired loans without a valuation allowance:
Real estate
Residential	$	4,397	$	4,733	$	-	$	5,042	$	425	$	425
Commercial		9,362		9,542		-		8,925		363		363
Construction		510		510		-		128		7		7
Installment		-		-		-		-		-		-
Commercial		7,366		7,356		-		4,806		230		228
Collateral		-		-		-		-		-		-
Home equity line of credit		556		627		-		844		7		7
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		136		134		-		34		-		-
Total		22,327		22,902		-		19,779		1,032		1,030

Impaired loans with a valuation allowance:
Real estate
Residential		6,235		6,504		459		5,876		61		61
Commercial		8,298		9,390		1,245		7,613		611		611
Construction		484		730		34		574		-		-
Installment		-		-		-		-		-		-
Commercial		733		746		17		398		22		22
Collateral		-		-		-		-		-		-
Home equity line of credit		999		999		455		814		2		2
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,918		1,916		1		1,700		16		16
Total		18,667		20,285		2,211		16,975		712		712
Total impaired loans	$	40,994	$	43,187	$	2,211	$	36,754	$	1,744	$	1,742

Troubled Debt Restructuring

A loan is considered a troubled debt restructuring (“TDR”) when we, for economic or legal reasons related to the borrower’s financial difficulties, grant a concession to the borrower in modifying or renewing the loan that we 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. Our 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 our policy. Management has reviewed the potential TDR population under ASU No. 2011-02, to affirm the classification presented herewith.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The recorded investment balance of TDRs approximated $29.4 million and $31.3 million at March 31, 2012 and December 31, 2011, respectively. At March 31, 2012 and December 31, 2011, the majority of the Company’s TDRs are on accrual status. TDRs on accrual status were $21.7 million and $23.5 million while TDRs on nonaccrual status were $7.7 million and $7.8 million at March 31, 2012 and December 31, 2011, respectively. At March 31, 2012, 96% of the accruing TDRs have been performing in accordance with the restructured terms. At March 31, 2012 and December 31, 2011, the allowance for loan losses included specific reserves of $1.8 million and $2.0 million related to TDRs, respectively. For the three months ended March 31, 2012 and 2011, the Bank had charge-offs totaling $68,000 and $90,000, respectively, related to portions of TDRs deemed to be uncollectible. The amount of additional funds available to borrowers in TDR status was $943,000 and $1.8 million at March 31, 2012 and December 31, 2011, respectively. The Bank in very rare circumstances may provide additional funds to borrowers in TDR status.

The following table presents information on loans whose terms had been modified in a troubled debt restructuring at March 31, 2012 and December 31, 2011:

	March 31, 2012
	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		3	$	1,073		5	$	4,888		8	$	5,961
Commercial		10		13,838		3		1,339		13		15,177
Construction		1		242		1		484		2		726
Installment		1		7		-		-		1		7
Commercial		10		4,545		-		-		10		4,545
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		2		1,975		-		-		2		1,975
Total		27	$	21,680		10	$	7,710		37	$	29,390

	December 31, 2011
	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		3	$	1,075		5	$	5,072		8	$	6,147
Commercial		10		13,760		2		1,254		12		15,014
Construction		1		510		1		484		2		994
Installment		-		-		-		-		-		-
Commercial		10		6,116		-		-		10		6,116
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		2		2,054		-		-		2		2,054
Total		26	$	23,515		9	$	7,809		35	$	31,324

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 months ended March 31, 2012 and 2011:

	For the Three Months Ended March 31, 2012						For the Three Months Ended March 31, 2011
(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		1	$	118	$	118		3	$	2,051	$	2,051
Commercial		1		153		153		-		-		-
Construction		1		242		242		-		-		-
Installment		1		7		7		-		-		-
Commercial		2		2,199		2,199		3		1,442		1,442
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		6	$	2,719	$	2,719		6	$	3,493	$	3,493

(1)	The period end balances are inclusive of all partial paydowns and charge-offs since the modification date.

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 for the three months ended March 31, 2012 and 2011.

	For The Three Months Ended March 31, 2012
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		1	$	-	$	118	$	-	$	-	$	118
Commercial		1		-		-		-		153		153
Construction		1		242		-		-		-		242
Installment		1		-		7		-		-		7
Commercial		2		2,199		-		-		-		2,199
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		6	$	2,441	$	125	$	-	$	153	$	2,719

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	For The Three Months Ended March 31, 2011
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		3	$	-	$	-	$	-	$	2,051	$	2,051
Commercial		-		-		-		-		-		-
Construction		-		-		-		-		-		-
Installment		-		-		-		-		-		-
Commercial		3		130		-		1,312		-		1,442
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		6	$	130	$	-	$	1,312	$	2,051	$	3,493

A loan is considered to be in default once it is more than 30 days past due following a modification. There were no loans that defaulted and had been modified in a TDR during the 12 month period preceding the default date as of March 31, 2012.

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 that our 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. Our 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. Our risk rating process has been enhanced with our implementation of industry-based risk rating “cards.” The cards are used by our 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 our independent loan review firm. More frequent reviews of loans rated low pass, special mention, substandard and doubtful are conducted by our credit risk management department. We utilize an independent loan review consulting firm to review our rating accuracy and the overall credit quality of our 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 our board of directors and senior management upon completion.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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 March 31, 2012 and December 31, 2011:

	March 31, 2012
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate
Residential	$	516,900	$	2,248	$	11,220	$	-	$	530,368
Commercial		373,974		19,217		17,141		1,118		411,450
Construction		38,812		744		2,754		-		42,310
Installment		8,874		65		156		-		9,095
Commercial		143,092		3,357		13,730		-		160,179
Collateral		2,549		-		-		-		2,549
Home equity line of credit		112,583		601		1,897		-		115,081
Demand		-		-		25		-		25
Revolving Credit		73		-		-		-		73
Resort		52,312		5,683		11,778		-		69,773
Total Loans	$	1,249,169	$	31,915	$	58,701	$	1,118	$	1,340,903

	December 31, 2011
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate
Residential	$	490,805	$	2,079	$	10,477	$	-	$	503,361
Commercial		370,688		14,480		23,001		-		408,169
Construction		42,492		200		3,689		-		46,381
Installment		10,051		66		216		-		10,333
Commercial		135,953		3,020		15,327		-		154,300
Collateral		2,348		-		-		-		2,348
Home equity line of credit		107,421		432		1,918		-		109,771
Demand		16		-		25		-		41
Revolving Credit		90		-		-		-		90
Resort		57,093		5,885		12,385		-		75,363
Total Loans	$	1,216,957	$	26,162	$	67,038	$	-	$	1,310,157

Our senior management 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. When a loan becomes more than 30 days delinquent, we send a letter advising the borrower of the 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. We 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)

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 $739,000 and $561,000 at March 31, 2012 and December 31, 2011, respectively. All related party loans were performing according to their credit terms.

5. 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 March 31, 2012 and December 31, 2011. The Company has access to a pre-approved unsecured line of credit with a bank totaling $20.0 million, which was undrawn at March 31, 2012 and December 31, 2011. The Company has access to a $3.5 million unsecured line of credit agreement with a bank which expires on December 31, 2012. The Company maintains a balance of $262,500 with the bank to avoid fees associated with the above line. The line was undrawn at March 31, 2012 and December 31, 2011.

The Company participates in the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $93.4 million and $84.6 million on an overnight basis at March 31, 2012 and December 31, 2011, respectively, and was undrawn as of March 31, 2012 and December 31, 2011. The funding arrangement was collateralized by $136.5 million and $119.4 million in pledged commercial real estate loans as of March 31, 2012 and December 31, 2011, respectively.

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 $63.0 million at March 31, 2012 and December 31, 2011. Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $512.2 million and $486.3 million at March 31, 2012 and December 31, 2011, respectively. 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 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 $25.0 million and cash of $451,000. Outstanding borrowings totaled $21.0 million at March 31, 2012 and December 31, 2011.

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 Bank had repurchase liabilities outstanding of $55.7 million and $64.5 million at March 31, 2012 and December 31, 2011; 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 $61.4 million and $79.2 million as of March 31, 2012 and December 31, 2011, respectively.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Deposits consisted of the following:

	March 31, 2012		December 31, 2011
	Amount		Amount
(Dollars in thousands)
Noninterest-bearing demand deposits	$	215,602	$	195,625
Interest-bearing
NOW accounts		221,204		189,577
Money market		272,876		247,693
Savings accounts		166,530		157,913
Time deposits		373,371		385,874
Total deposits	$	1,249,583	$	1,176,682

We had no brokered deposits as of March 31, 2012 and December 31, 2011; however, we have established a relationship to participate in a reciprocal deposit program with other financial institutions as a service to our customers. This program provides enhanced FDIC insurance to participating customers.

7. 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 March 31,						Three Months Ended March 31,
	2012			2011			2012			2011
(Dollars in thousands)
Service cost	$	125		$	172		$	15		$	15
Interest cost		272			264			34			34
Expected return on plan assets		(253	)		(269	)		-			-
Amortization:
Loss		169			98			-			-
Transition obligation		-			-			-			-
Prior service cost		(31	)		(31	)		(12	)		(12	)
Net periodic benefit cost	$	282		$	234		$	37		$	37

The Company expects to contribute a total of $1.0 million to the qualified defined benefit plan for the year ended December 31, 2012. Since the supplemental plan and the postretirement benefit plans are unfunded, the expected employer contributions for the year ending December 31, 2012 will be equal to the Company’s estimated future benefit payment liabilities less any participant contributions.

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 March 31, 2012, the loan had an outstanding balance of $13.1 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 for the three months ended March 31, 2012 was $311,000.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Shares held by the ESOP include the following as of March 31, 2012:

Allocated			-
Committed to be released			119,071
Unallocated			1,113,769
			1,232,840

The fair value of unallocated ESOP shares was $14.7 million at March 31, 2012.

8. 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 our 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 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, PNC Bank, agreeing to pay a fixed income stream and receive a variable interest rate swap. The Company is required to collateralize the fair value of its derivative liability. As of March 31, 2012, the Company maintained a cash balance of $7.9 million with PNC Bank and pledged a mortgage backed security with a fair value of $129,000 to collateralize our position. The Company’s agreement with PNC Bank will require PNC Bank to collateralize their position at an agreed upon threshold based upon their investor rating at the time should the Company’s liability to them ever become a receivable. As of March 31, 2012, the Company’s agreement would require PNC Bank to secure any outstanding receivable in excess of $10.0 million.

Credit-risk-related Contingent Features

The Company’s agreement with PNC Bank, its derivative counterparty, contains 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;

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

●

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 March 31, 2012.

The Company has established a derivative 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 counterparty, PNC Bank, are marked to market and are included with prepaid expenses and other assets and accrued expenses and other liabilities on our consolidated statements of condition at fair value. The Company had the following outstanding interest rate swaps that were not designated for hedge accounting:

				March 31, 2012							December 31, 2011
	Consolidated Balance Sheet Location	# of Instruments		Notional Amount		Estimated Fair Values			# of Instruments		Notional Amount		Estimated Fair Values

(Dollars in thousands)

Commercial loan customer interest rate swap position	Other Assets		29	$	84,342	$	5,844			28	$	83,897	$	6,812

Commercial loan customer interest rate swap position	Other Liabilities		2		5,669		(65	)		-		-		-

Counterparty interest rate swap position	Other Liabilities		31		90,011		(5,779	)		28		83,897		(6,812	)

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 consolidated statements of operations as follows:

	For The Three Months Ended March 31,
	2012								2011
	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	$	549		$	-	$	549		$	571		$	-	$	571

Counterparty interest rate swap position		(549	)		-		(549	)		(571	)		-		(571	)
Total	$	-		$	-	$	-		$	-		$	-	$	-

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 March 31, 2012, outstanding rate locks totaled approximately $7.2 million and outstanding commitments to sell residential mortgage loans totaled approximately $6.2 million. Forward sales, which include mandatory forward commitments of approximately $4.6 million at March 31, 2012, 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.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

9. 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:

	March 31, 2012		December 31, 2011
(Dollars in thousands)
Approved loan commitments	$	31,238	$	21,483
Unadvanced portion of construction loans		24,731		23,268
Unadvanced portion of resort loans		6,401		4,950
Unused lines for home equity loans		115,801		106,430
Unused revolving lines of credit		398		365
Unused commercial letters of credit		8,823		9,925
Unused commercial lines of credit		91,845		100,585
	$	279,237	$	267,006

Financial instruments with off-balance sheet risk had a valuation allowance of $283,000 and $270,000 as of March 31, 2012 and December 31, 2011, 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.

At March 31, 2012 and December 31, 2011, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

10. 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:

Basis of Fair Value Measurement

●

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).

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 three months ended March 31, 2012 or during the year ended December 31, 2011.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table details the financial instruments carried at fair value on a recurring basis as of March 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	March 31, 2012
			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	$	71,983	$	71,983	$	-	$	-
U.S. Government agency obligations		17,003		-		17,003		-
Government sponsored residential mortgage-backed securities		18,072		-		18,072		-
Corporate debt securities		3,136		-		3,136		-
Trust preferred debt securities		40		-		-		40
Preferred equity securities		1,848		-		1,848		-
Marketable equity securities		375		135		240		-
Mutual funds		3,499		-		3,499		-
Securities available-for-sale		115,956		72,118		43,798		40
Interest rate swap derivative		5,844		-		5,844		-
Forward loan sales commitments		5		-		-		5
Total	$	121,805	$	72,118	$	49,642	$	45

Liabilities
Interest rate swap derivative	$	5,844	$	-	$	5,844	$	-
Derivative loan commitments		33		-		-		33
Total	$	5,877	$	-	$	5,844	$	33

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 December 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	December 31, 2011
			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	$	80,999	$	80,999	$	-	$	-
U.S. Government agency obligations		27,006		-		27,006		-
Government sponsored residential mortgage-backed securities		20,545		-		20,545		-
Corporate debt securities		1,175		-		1,175		-
Trust preferred debt securities		42		-		-		42
Preferred equity securities		1,573		-		1,573		-
Marketable equity securities		366		126		240		-
Mutual funds		3,464		-		3,464		-
Securities available-for-sale		135,170		81,125		54,003		42
Interest rate swap derivative		6,812		-		6,812		-
Total	$	141,982	$	81,125	$	60,815	$	42

Liabilities
Interest rate swap derivative	$	6,812	$	-	$	6,812	$	-
Forward loan sales commitments		5		-		-		5
Derivative loan commitments		39		-		-		39
Total	$	6,856	$	-	$	6,812	$	44

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

	Securities Available for Sale					Derivative and Forward Loan Sales Commitments, Net
	For the Three Months Ended March 31,					For the Three Months Ended March 31,
	2012			2011		2012			2011

(Dollars in thousands)
Balance, at beginning of period	$	42		$	44	$	(44	)	$	-
Paydowns		(2	)		-		-			-
Total losses - (realized/unrealized):
Included in earnings		-			-		16			51
Balance, at the end of period	$	40		$	44	$	(28	)	$	51

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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 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. Level 3 securities include trust preferred debt securities. At March 31, 2012 and December 31, 2011, the Company did not use the pricing service for its Level 3 securities, which consisted of pooled trust preferred debt securities. Therefore, management obtained a price by using a discounted cash flows analysis and a market bid indication.

The Company utilizes a third party, nationally-recognized pricing service (“pricing service”), subject to review by management, to estimate fair value measurements for almost 100% 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 hierarchy classifications.

Interest Rate Swap Derivative Receivable and Liability: The Company’s derivative positions are valued using proprietary models that use as their basis readily observable market parameters 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. Derivatives that are valued based upon models with significant unobservable market parameters and that are normally traded less actively or have trade activity that is one way are classified within Level 3 of the valuation hierarchy.

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.

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table details the financial instruments carried at fair value on a nonrecurring basis at March 31, 2012 and December 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	March 31, 2012
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
(Dollars in thousands)
Mortgage servicing rights	$	-	$	-	$	478
Loans held for sale		-		3,408		-
Impaired loans		-		-		37,018
Other real estate owned		-		-		148

	December 31, 2011
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
(Dollars in thousands)
Mortgage servicing rights	$	-	$	-	$	594
Loans held for sale		-		1,039		-
Impaired loans		-		-		38,783
Other real estate owned		-		-		302

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

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. The fair value of loans held for sale are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics .

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans: Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated in accordance with FASB ASC 310-10 when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or other assumptions. Estimates of fair value based on collateral are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Any impaired loan for which no specific valuation allowance was necessary at March 31, 2012 is the result of either sufficient cash flow or sufficient collateral coverage, or previous charge off amount that reduced the book value of the loan to an amount equal to or below the fair value of the collateral. Impaired loans are measured based on either collateral values supported by appraisals, observed market prices or where potential losses have been identified and reserved accordingly. Updated appraisals are obtained at least annually for impaired loans $250,000 or greater. Management performs a quarterly review of the valuation of impaired loans and considers the current market and collateral conditions for collateral dependent loans when estimating their fair value for purposes of determining whether an allowance for loan losses is necessary for impaired loans. When assessing the collateral coverage for an impaired loan, management discounts appraisals based upon the age of the appraisal, anticipated selling charges and any other costs needed to prepare the collateral for sale to determine its net realizable value.

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 writedown 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 table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at March 31, 2012:

(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
Mortgage servicing rights	$	478	Discounted cash flows	Prepayment speed	6.5% - 8.7%
				Discount rate	23.0% - 30.7%

Impaired loans	$	37,018	Appraisals	Discount for dated appraisal	0% - 20%
			Appraisals	Discount for costs to sell	8% - 15%

Other real estate owned	$	148	Appraisals	Discount for costs to sell	8% - 10%

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 securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Investment in Federal Home Loan Bank of Boston stock : The fair value of stock in the Federal Home Loan Bank of Boston is assumed to approximate its cost.

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.

Accrued interest: The carrying amount of accrued interest approximates its fair value.

Interest Rate Swap Derivative Receivable: Interest rate swap derivatives not designated as hedges are measured at fair value.

Forward Loan Sale Commitments: Forward loan sale commitments derivatives not designated as hedges are measured at fair value.

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 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.

Interest Rate Swap Derivative Liability: Interest rate swap derivatives not designated as hedges are measured at fair value.

Derivative Loan Commitments: Interest rate lock commitments not designated as hedges are measured at 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 March 31, 2012 and December 31, 2011. This table excludes financial instruments for which the carrying amount approximates fair value. 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. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.

		March 31, 2012				December 31, 2011
	Fair Value Hierarchy Level	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
(Dollars in thousands)
Financial assets
Securities held-to-maturity	See previous table	$	3,216	$	3,216	$	3,216	$	3,216
Securities available-for-sale	See previous table		115,956		115,956		135,170		135,170
Loans	Level 3		1,340,903		1,364,135		1,310,157		1,333,262

Financial liabilities
Time deposits	Level 2		373,371		377,257		385,874		389,857
FHLB advances	Level 2		63,000		65,713		63,000		65,812
Repurchase agreement borrowings	Level 2		21,000		22,796		21,000		22,963
Repurchase liabilities	Level 2		55,713		55,717		64,466		64,466

On-balance sheet derivative financial instruments
Forward loan sales commitments:
Assets	Level 3		5		5		-		-
Liabilities	Level 3		-		-		5		5
Interest rate swap derivative liability:
Assets	Level 2		5,844		5,844		6,812		6,812
Liabilities	Level 2		5,844		5,844		6,812		6,812
Derivative loan commitments
Assets	Level 3		-		-		-		-
Liabilities	Level 3		33		33		39		39

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

11. Regulatory Matters

Capital guidelines of the Federal Reserve Board and the Federal Deposit Insurance Corporation (“FDIC”) require the Company and the Bank to maintain certain minimum ratios, as set forth below. At March 31, 2012 and December 31, 2011, the Company and the Bank were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the FDIC, respectively, and in compliance with the applicable capital requirements.

The following table presents the actual 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 March 31, 2012 -
Total Capital (to Risk Weighted Assets)	$	198,229		16.02	%	$	98,991		8.00	%	$	123,738		10.00	%
Tier I Capital (to Risk Weighted Assets)		182,733		14.77			49,488		4.00			74,231		6.00
Tier I Capital (to Average Assets)		182,733		11.17			65,437		4.00			81,796		5.00

At December 31, 2011 -
Total Capital (to Risk Weighted Assets)	$	196,763		16.20	%	$	97,167		8.00	%	$	121,459		10.00	%
Tier I Capital (to Risk Weighted Assets)		181,550		14.95			48,575		4.00			72,863		6.00
Tier I Capital (to Average Assets)		181,550		10.97			66,199		4.00			82,748		5.00

First Connecticut Bancorp, Inc.:

At March 31, 2012 -
Total Capital (to Risk Weighted Assets)	$	270,785		21.84	%	$	99,189		8.00	%	$	123,986		10.00	%
Tier I Capital (to Risk Weighted Assets)		255,289		20.59			49,595		4.00			74,392		6.00
Tier I Capital (to Average Assets)		255,289		15.58			65,543		4.00			81,928		5.00

At December 31, 2011 -
Total Capital (to Risk Weighted Assets)	$	272,365		22.38	%	$	97,360		8.00	%	$	121,700		10.00	%
Tier I Capital (to Risk Weighted Assets)		257,152		21.13			48,680		4.00			73,020		6.00
Tier I Capital (to Average Assets)		257,152		15.51			66,319		4.00			82,899		5.00

12. Legal Actions

The Company and its subsidiaries 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.

	●	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, consult 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 17 full service branch offices and 4 limited services offices, including our main office, located throughout Hartford County, Connecticut. Farmington Bank is expecting to open its 18 th full service branch in Bloomfield, Connecticut during the second quarter of 2012. Farmington Bank provides a diverse range of commercial and consumer services to businesses, individuals and governments across Central Connecticut.

Our Business Strategy

Our business strategy is to operate as a well-capitalized and profitable community bank for businesses, individuals and governments. Our branch franchise extends throughout Hartford County with lending throughout the State of Connecticut. The key elements of our operating strategy include:

●

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;

●

continuing our focus on commercial lending and continuing to expand commercial banking operations;

●

continuing to focus on consumer and residential lending;

●

maintaining asset quality and prudent lending standards;

●

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;

●

continuing expansion through de novo branching with a current goal of adding two to three de novo branches each year for so long as the deposit and loan generating environment continues to be favorable;

●

taking advantage of acquisition opportunities that are consistent with our strategic growth plans; and

●

increase consumer, small business and commercial deposit transaction account portfolio to grow customer base and have more non-interest bearing source of funds;

●

expand electronic banking delivery capability and usage to complement our de novo branch strategy and provide customer access 24/7;

●

continuing our efforts to control non-interest expenses.

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, 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.

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.

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, residential development and residential subdivision 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; 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 for the three months ended March 31, 2012.

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 for the construction 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.

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 are 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 – Loans in this segment include direct receivable and inventory loans, loans to timeshare developer / operators and participations in timeshare loans originated by experienced timeshare lending institutions, which originate and sell timeshare participations to other lending institutions. Lending to this industry is generally done on a nationwide basis, as the majority of timeshare operators are located outside of the Northeast. The Company currently owns a limited amount of inventory loans. Receivable loans, which account for 94% of the resort portfolio at March 31, 2012, are typically underwritten utilizing a lending formula in which loan advances are based on a percentage of eligible consumer notes. In addition, these loans generally contain provisions for recourse to the developer, the obligation of the developer to replace defaulted notes, and parameters with respect to minimum FICO scores or average weighted FICO scores of the portfolio of pledged notes. 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:

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 of $100,000 or more.

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.

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.

Beginning in 2007 and continuing in 2012, softening real estate markets and generally weak economic conditions have lead to declines in collateral values and stress on the cash flows of borrowers. These adverse economic conditions could continue throughout 2012, and may negatively impact the Company’s borrowers, resulting in increases in charge-offs, delinquencies and non-performing loans and lower valuations for the Company’s impaired loans. This in turn, could impact significant estimates such as the allowance for loan losses and the effect could be material.

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 March 31, 2012 and December 31, 2011, 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. 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.

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.

Pension and Other Post-retirement Benefits: 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 an amount that would not exceed 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.

Employee Stock Ownership Plan (“ESOP”): The Company accounts for its ESOP in accordance with FASB ASC 718-40, Compensation – Stock Compensation . Under this guidance, unearned ESOP shares are not considered outstanding and are shown as a reduction of stockholders’ equity as unearned compensation. The Company will recognize compensation cost equal to the fair value of the ESOP shares during the periods in which they are committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, this difference will be credited or debited to equity. The Company will receive a tax deduction equal to the cost of the shares released to the extent of the principal paydown on the loan by the ESOP. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a liability in the Company’s consolidated financial statements.

Earnings Per Share : Basic earnings per share (“EPS”) excludes dilution and is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common shares (such as stock options and unvested restricted stock) were issued during the period. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for either basic or diluted earnings per share calculations.

Comparison of Financial Condition at March 31, 2012 and December 31, 2011

Our total assets increased $59.6 million or 3.7%, to $1.7 billion at March 31, 2012, from $1.6 billion at December 31, 2011, primarily due to a $41.0 million increase in cash and cash equivalents, a $30.9 million increase in loans and $6.3 million increase in bank-owned life insurance, offset in part by a $19.2 million decrease in securities available-for-sale. Our cash and cash equivalents increased $41.0 million when comparing March 31, 2012 to December 31, 2011 primarily as a result of a $72.9 million increase in deposits offset by a $30.9 million increase in loans.

Our investment portfolio totaled $119.2 million or 7.1% of total assets and $138.4 million or 8.6% of total assets at March 31, 2012 and December 31, 2011, respectively. Available-for-sale investment securities totaled $116.0 million at March 31, 2012 compared to $135.2 million at December 31, 2011, a decrease of $19.2 million primarily due to decreases in U.S. Treasury securities and U.S. Government Agency obligations as a result of lower collateral requirements for our municipal deposits and commercial repurchase agreements. The Company purchases short term U.S. Treasury and agency securities in order to meet municipal deposit and commercial repurchase agreement collateral requirements and to minimize interest rate risk during the sustained low interest rate environment.

The net unrealized gains on securities available-for-sale, on a pre-tax basis, increased by $252,000 to $1.2 million at March 31, 2012. The increase in the net unrealized gains on investment securities available-for-sale primarily reflects a decrease of $275,000 in the net unrealized losses on our preferred equity securities. As of March 31, 2012 and December 31, 2011, our available-for-sale investment securities portfolio gross unrealized losses equaled $401,000 and $663,000, respectively, of which $380,000 and $632,000, respectively, were from securities that had been in a loss position of twelve months or more. Management does not believe that the unrealized loss represents an other-than-temporary impairment.

Net loans increased $30.9 million or 2.4% at March 31, 2012 to $1.3 billion due to our continued focus on residential and commercial lending which combined increased $37.4 million, offset by a $5.6 million decrease in resort loans as we are gradually exiting the resort financing market. At March 31, 2012 and December 31, 2011, respectively, the loan portfolio consisted of $530.4 million and $503.4 million in residential real estate loans, $411.4 million and $408.2 million in commercial real estate loans, $42.3 million and $46.4 million in construction loans, $160.2 million and $154.3 million in commercial loans, $115.0 million and $109.8 million in home equity lines of credit loans, $69.8 million and $75.4 million in resort loans and $11.8 million and $12.8 million in installment, collateral, demand and revolving credit loans.

The allowance for loan losses had a slight increase to $17.7 million at March 31, 2012 from $17.5 million at December 31, 2011. Impaired loans decreased $1.9 million to $39.1 million as of March 31, 2012 from $41.0 million as of December 31, 2011. Non-performing loans increased to $16.3 million at March 31, 2012 from $15.5 million at December 31, 2011. At March 31, 2012, the allowance for loan losses represented 1.32% of total loans and 108.50% of non-performing loans, compared to 1.34% of total loans and 113.11% of non-performing loans as of December 31, 2011. Net charge-offs for three months ended were $136,000 or 0.04%, compared to net charge-offs for the same period in the prior year of $472,000 or 0.16% of average loans outstanding for the respective periods. Loan delinquencies 30 days and greater decreased $579,000 at March 31, 2012 to $18.3 million compared to $18.8 million at December 31, 2011. We take a proactive approach in working with customers to help ensure that they remain current on their loans. Past due loans are primarily in our residential and commercial real estate portfolios and are due to weak economic conditions leading to stress on cash flows of our borrowers.

Bank-owned life insurance increased $6.3 million to $36.7 million at March 31, 2012 from $30.4 million at December 31, 2011 primarily due to the purchase of an additional $6.0 million in bank-owned life insurance to offset costs incurred in connection with compensation plans.

Deposits increased $72.9 million or 6.2% to $1.2 billion at March 31, 2012 compared to December 31, 2011. Interest-bearing deposits grew $52.9 million to $1.0 billion and noninterest-bearing demand deposits totaled $215.6 million at March 31, 2012, an increase of $20.0 million or 10.2% from December 31, 2011 due to deepening our relationships with our existing customers and our continued efforts to obtain more individual and commercial account relationships. The $52.9 million increase in interest-bearing deposits at March 31, 2012 from December 31, 2011 was primarily due to $28.2 million increase in municipal deposits, the opening of our 17th branch in Wethersfield, CT and an increase in overall deposits as we continue to grow our customer base.

Total stockholders’ equity decreased $1.8 million to $250.2 million at March 31, 2012 compared to $252.0 million at December 31, 2011 primarily due to $3.0 million of common stock purchased by our ESOP offset by $991,000 net income for the three months ended March 31, 2012.

Summary of Operating Results for the Three Months Ended March 31, 2012 and 2011

The following discussion provides a summary and comparison of our operating results for the three months ended March 31, 2012 and 2011.

	For the Three Months Ended March 31,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Net interest income	$	12,954	$	11,951	$	1,003			8.4	%
Provision for loan losses		330		300		30			10.0
Noninterest income		1,313		1,281		32			2.5
Noninterest expense		12,629		11,661		968			8.3
Income before taxes		1,308		1,271		37			2.9
Income tax provision		317		255		62			24.3
Net income	$	991	$	1,016	$	(25	)		(2.5	)%

For the quarter ended March 31, 2012, net income decreased by $25,000 to a net income of $991,000 compared to net income of $1.0 million for the quarter end March 31, 2011. The decrease in net income primarily resulted from an increase in net interest and non-interest income offset by an increase in the income tax provision and an increase non-interest expense which was primarily due to an increase in salaries and employee benefits as we continue to add staff to expand the services we offer our existing and new customers.

Comparison of Operating Results for the Three Months Ended March 31, 2012 and 2011

Our results of operations depend primarily on net interest income, which is the difference between the interest income from 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, mortgage servicing income, bank-owned life insurance income, safe deposit box rental fees, brokerage fees, insurance commissions and other miscellaneous fees. Our noninterest expense primarily consists of employee compensation and benefits, occupancy and equipment costs and other noninterest expenses. Our results of operations are also affected by our provision for loan losses.

Interest and Dividend Income: For the quarter ended March 31, 2012, interest and dividend income increased $696,000, or 4.7%, to $15.4 million from $14.7 million for the same period in the prior year. Our average interest-earning assets for the quarter ended March 31, 2012, grew by $156.9 million, or 11.5%, to $1.5 billion from $1.4 billion for the same period last year, while the yield on average interest-earning assets decreased 32 basis points to 4.06% from 4.38%. Interest income on loans receivable increased $839,000 to $15.0 million for the quarter ended March 31, 2012 from $14.2 million for the same period in the prior year due to an increase of $152.4 million or 13.1%, in the average balance of loans receivable, partially offset by a 37 basis point decline in the weighted average yield. A decrease of $28.4 million in the average balance of securities for the quarter ended March 31, 2012 when compared to the quarter ended March 31, 2011, offset with a 22 basis point decline in the yield on the securities portfolio resulted in a $163,000 or 29.7%, reduction in the interest and dividends on investments. The decline in yield was primarily due to the sale of higher yielding appreciated Government sponsored residential mortgage-backed securities that were replaced by lower yielding U.S. Treasury obligations in order to assist the Company in retaining a “well capitalized” risk-based capital ratio status with federal and state banking agencies during the first half of 2011.

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 periods 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 were included in the computation of average balances, but have been reflected in the table as loans carrying a zero percent yield. The yields set forth below include the effect of net deferred costs and premiums that are amortized to interest income or expense. Yields and rates have been annualized.

	Three Months Ended March 31,
	2012								2011
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)

Interest-earning assets:
Loans receivable, net	$	1,315,786	$	14,999			4.57	%	$	1,163,411	$	14,160			4.94	%
Securities		132,561		385			1.16	%		160,924		548			1.38	%
Federal Home Loan Bank of Boston stock		7,370		9			0.49	%		7,449		6			0.33	%
Fed Funds and other earning assets		66,714		34			0.20	%		33,731		17			0.20	%
Total interest-earning assets		1,522,431		15,427			4.06	%		1,365,515		14,731			4.38	%
Noninterest-earning assets		116,374								87,224
Total assets	$	1,638,805							$	1,452,739

Interest-bearing liabilities:
NOW accounts	$	204,932	$	89			0.17	%	$	239,925	$	183			0.31	%
Money market		262,320		544			0.83	%		179,600		412			0.93	%
Savings accounts		161,626		61			0.15	%		140,055		69			0.20	%
Certificates of deposit		381,985		1,061			1.11	%		441,597		1,288			1.18	%
Total interest-bearing deposits		1,010,863		1,755			0.70	%		1,001,177		1,952			0.79	%
Advances from the Federal Home Loan Bank		63,042		481			3.06	%		68,100		525			3.13	%
Repurchase Agreement Borrowing		21,000		180			3.44	%		21,000		179			3.46	%
Repurchase liabilities		58,067		57			0.39	%		82,122		124			0.61	%
Total interest-bearing liabilities		1,152,972		2,473			0.86	%		1,172,399		2,780			0.96	%
Noninterest-bearing deposits		195,192								155,790
Other noninterest-bearing liabilities		38,932								27,515
Total liabilities		1,387,096								1,355,704
Stockholders ’ equity		251,709								97,035
Total liabilities and stockholders’ equity	$	1,638,805							$	1,452,739

Net interest income			$	12,954							$	11,951
Net interest rate spread (1)							3.20	%							3.42	%
Net interest-earning assets (2)	$	369,459							$	193,116
Net interest margin (3)							3.41	%							3.55	%
Average interest-earning assets to average interest-bearing liabilities				132.04	%							116.47	%

(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 March 31, 2012 Compared to Three Months Ended March 31, 2011
	Volume			Rate			Total Increase (Decrease)
Interest-earning assets:
Loans receivable, net	$	1,966		$	(1,127	)	$	839
Investment securities		(93	)		(70	)		(163	)
Federal Home Loan Bank of Boston stock		-			3			3
Fed Funds and other interest-earning assets		17			-			17
Total interest-earning assets		1,890			(1,194	)		696

Interest-bearing liabilities:
NOW accounts		(25	)		(69	)		(94	)
Money market		178			(46	)		132
Savings accounts		6			(14	)		(8	)
Certificates of deposit		(159	)		(68	)		(227	)
Total interest-bearing deposits		-			(197	)		(197	)
Advances from the Federal Home Loan Bank		(44	)		-			(44	)
Repurchase agreement borrowing		1			-			1
Repurchase liabilities		(28	)		(39	)		(67	)
Total interest-bearing liabilities		(71	)		(236	)		(307	)

Increase (decrease) in net interest income	$	1,961		$	(958	)	$	1,003

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 $13.0 million for the quarter ended March 31, 2012, compared to $12.0 million for the same period in 2011. The $1.0 million, or 8.4%, increase in net interest income was primarily due to an $839,000, or 5.9%, increase in interest and fees on loans, a $307,000 or 11.0% decrease in interest expense offset by a decrease of $143,000 or 4.7% in interest and dividends on investments. Average interest-earning assets increased by $156.9 million, or 11.5%, to $1.5 billion during the quarter ended March 31, 2012 when compared to the same period in the prior year. Average interest-bearing liabilities remained stable at $1.0 billion at March 31, 2012 and 2011. Our net interest rate spread decreased 22 basis points to 3.20% during the quarter ended March 31, 2012 from 3.42% for the quarter ended March 31, 2011, primarily due to a 32 basis point decline in the weighted average yield of interest-earning assets to 4.06% for the quarter ended March 31, 2012 from 4.38% for the quarter ended March 31, 2011.

Interest Expense: Interest expense for the quarter ended March 31, 2012 decreased $307,000 or 11.0% to $2.5 million from $2.8 million for the same period in the prior year as our average interest-bearing liabilities remained relatively unchanged at $1.2 billion offset by a 10 basis points or 11.0% decline to 86 basis points in the average cost of interest-bearing liabilities for the three months ended March 31, 2012 compared to 96 basis points for the three months ended March 31, 2011. The decline in the average cost of interest-bearing liabilities was largely attributable to our implementation of a more disciplined pricing strategy for time deposits where we reduced short-term rates, maintained longer-term rates at competitive rates and reduced our rate concession practices for customers who did not utilize multiple bank services.

Provision for Loan Losses: The allowance for loan losses is maintained at a level management determined 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 $330,000 for the three months ended March 31, 2012 which is an increase of $30,000 from the provision of $300,000 recorded during the same period last year. 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.

At March 31, 2012, the allowance for loan losses totaled $17.7 million, or 1.32% of total loans and 108.50% of non-performing loans, compared to an allowance for loan losses of $17.5 million, which represented 1.34% of total loans and 113.11% of non-performing loans at December 31, 2011.

Noninterest Income: Sources of noninterest income primarily include banking service charges on deposit accounts, brokerage and insurance fees, bank-owned life insurance and mortgage servicing income. Other-than-temporary impairment of securities, if any, are also included in noninterest income (loss).

The following table summarizes noninterest income for the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	816	$	787	$	29			3.7	%
Net gain on loans sold		98		146		(48	)		(32.9	)
Brokerage and insurance fee income		25		124		(99	)		(79.8	)
Bank owned life insurance income		319		174		145			83.3
Other		55		50		5			10.0
Total noninterest income	$	1,313	$	1,281	$	32			2.5	%

Non-interest income remained flat for the three months ended March 31, 2012 at $1.3 million compared to the same period in the prior year. Bank owned life insurance income increased $145,000 reflecting the purchase of additional insurance within the past twelve months offset by decreases in brokerage and insurance fee income and a decrease in net gain on loans sold.

Noninterest Expense: The following table summarizes noninterest expense for the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	7,424	$	6,568	$	856			13.0	%
Occupancy expense		1,190		1,237		(47	)		(3.8	)
Furniture and equipment expense		1,099		975		124			12.7
FDIC assessment		279		541		(262	)		(48.4	)
Marketing		606		473		133			28.1
Other operating expenses		2,031		1,867		164			8.8
Total noninterest expense	$	12,629	$	11,661	$	968			8.3	%

Non-interest expense increased $968,000 or 8.3%, to $12.6 million for the three months ended March 31, 2012 compared to $11.7 million in the same period in the prior year. Salaries and employee benefits increased $856,000 or 13.0%, primarily due to annual wage increases, $311,000 related to our Employee Stock Ownership Plan (“ESOP”) and the addition of 19 full time equivalent employees to support our growth strategy and our 2 new branches that opened within the past twelve months. Marketing expense increased $133,000 or 28.1% to $606,000 in part due to the grand opening of our 17th branch in January and an increase in sponsorships to expand the Bank’s brand within the communities we serve. Other operating expenses increased $164,000 to $2.0 million due to expenses related to becoming a publicly traded company and other various increases in operating costs for the three month ended March 31, 2012 compared to the same period in the prior year. These items were partially offset by a $262,000 or 48.4% decrease in FDIC premium expense, which reflects the positive impact of the new assessment calculation that became effective on April 1, 2011.

Income Tax Expense: Income taxes increased $62,000 or 24.3%, to $317,000 for the three months ended March 31, 2012 from $255,000 in the same period last year primarily due to the higher projected annual income before taxes for 2012 compared to 2011.

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. In addition to our primary sources of liquidity, the net proceeds from our stock offering will enable us to maintain higher liquidity levels and provide us with sufficient sources of liquidity to satisfy our short and long-term liquidity needs as of March 31, 2012.

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At March 31, 2012, $131.3 million of our assets were invested in cash and cash equivalents compared to $90.3 million at December 31, 2011. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit accounts, proceeds from residential loan sales and advances from FHLBB.

For the three months ended March 31, 2012, loan originations and purchases, net of collected principal and loan sales, totaled $30.8 million. Cash received from the sales and maturities of investment securities totaled $93.4 million and we purchased $74.0 million of available-for-sale investment securities during the three month ended March 31, 2012.

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 March 31, 2012, we had $63.0 million in advances from the FHLBB and an additional available borrowing limit of $222.0 million, subject to collateral requirements of the FHLBB. Internal policies limit borrowings to 25.0% of total assets, or $419.3 million at March 31, 2012. 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 March 31, 2012. The Federal Reserve Bank’s discount window loan collateral program enables us to borrow up to $93.4 million on an overnight basis as of March 31, 2012. The funding arrangement was collateralized by $136.5 million in pledged commercial real estate loans as of March 31, 2012.

We had outstanding commitments to originate loans of $31.2 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $248.0 million at March 31, 2012. At March 31, 2012, time deposits scheduled to mature in less than one year totaled $248.8 million. 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 $93.4 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 loans, including adjustable rate one-to-four family, commercial and consumer loans, (ii) reducing and shortening the expected average life of the 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 therefore would most likely result in a decrease to our asset sensitive position.

Our asset/liability policy currently limits projected changes in net interest income to a maximum variance of (5.0%,10.0% and 15.0%) assuming a 100, 200 or 300 basis point interest rate shock, respectively, as measured over a 12 month period when compared to the flat rate scenario.

At March 31, 2012, income at risk (i.e., the change in net interest income) increased 8.3% and 10.7% and decreased 4.2% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively. At December 31, 2011, income at risk (i.e., the change in net interest income) increased 8.9% and 11.4% and decreased 3.9% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively. 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 years presented:

	Percentage Increase (Decrease) in Estimated Net Interest Income Over 12 Months
	At March 31, 2012			At December 31, 2011
300 basis point increase		8.33	%		8.86	%
400 basis point increase		10.71	%		11.36	%
100 basis point decrease		(4.17	)%		(3.90	)%

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.

There were no significant changes made in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) or in other factors that could significantly affect the Company’s internal controls over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 28, 2012.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Not applicable.

(b)

Not applicable.

(c)

During the quarter ending March 31, 2012, the Employee Stock Ownership Plan made the following purchases of the Company’s 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
January 1-31, 2012		202,800	$	13.47		1,227,336		203,080
February 1-29, 2012		2,220		13.14		1,229,556		200,860
March 1-31, 2012		3,284		12.95		1,232,840		197,576

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).

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).

10.1

Phantom Stock Plan of Farmington Bank (filed as Exhibit 10.1 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).

10.5

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).

10.9

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).

10.10

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).

10.14

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).

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 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: May 15, 2012		/s/ John J. Patrick, Jr.
		John J. Patrick, Jr.
		Chairman, President and Chief Executive Officer

Date: May 15, 2012		/s/ Gregory A. White
		Gregory A. White
		Executive Vice President and Chief Financial Officer

Date: May 15, 2012		/s/ Kimberly Rozanski Ruppert
		Kimberly Rozanski Ruppert
		Senior Vice President and Principal Accounting Officer

Life Insurance Premium Reimbursement Agreement

This Life Insurance Premium Reimbursement Agreement (this “Agreement”) is made and entered into as of April 14, 2011 (the “Effective Date”), by and between Farmington Bank, with its principal administrative office at 32 Main St., Farmington, CT (together with its successors and assigns, the “Bank”) and Michael T. Schweighoffer (“Executive”).

In consideration of the mutual covenants herein contained and implied, the sufficiency of which is acknowledged by each party, the Bank and the Executive agree as follows:

The Bank shall reimburse Executive, through an annual tax-adjusted bonus as described herein, for the cost of an individual supplemental life insurance policy to be purchased and owned by Executive during the period of his employment with the Bank, beginning on the effective date of this Agreement. The individual supplemental life insurance policy shall provide: (a) pre-retirement, one million dollars ($1,000,000) of term coverage and (b) post-retirement, two hundred fifty thousand dollars ($250,000) cash value. Notwithstanding the foregoing, the Bank may, in its discretion, provide the levels of insurance required under this Section through the Bank’s group insurance policy, in which case the Bank shall not be obligated to reimburse executive for individual coverage under this Agreement

2.	In order to receive payment, the Executive shall submit to the Bank, no later than 30 days after the last day of the calendar year in which the expenses were incurred by the Executive, documentation of his payment of any premiums described in paragraph 1.

The tax-adjusted bonus payable to the Executive hereunder shall be equal to the total amount of premiums that have been paid and timely documented by the Executive under paragraphs 1 and 2 above, increased by forty percent (40%). The tax-adjusted bonus shall be paid no later than March 15 of the calendar year following the calendar year in which the expenses were incurred by the Executive.

4.	Any insurance policy acquired or maintained by the Executive with respect to which premiums may be reimbursed under this Agreement shall be owned by the Executive (or his designee) free and clear of any interest of the Bank.

5.	The Executive recognizes that the compensation to be paid under this Agreement is subject compensation from employment and the Bank shall withhold required income taxes, FICA and FUTA taxes and the like from each such payment.

6.	To the extent that this Agreement creates an employee benefit plan under the Employee Income Retirement Security Act of 1974, as amended, the Bank shall be the plan administrator and the following shall apply:

(a) In the event that the Executive or his legal representative (hereinafter, the “Claimant”) asserts a right to a benefit under this Agreement which has not been received, in whole or part, the Claimant must file with the Bank a claim for such benefit on forms provided by the Bank. The Bank shall render its decision on the claim within 90-days after receipt of the claim. If special circumstances apply, the 90-day period may be extended by additional 90-days, provided written notice of the extension is given to the Claimant during the 90-day period and such notice indicates the special circumstances requiring an extension of time and date by which the Bank expects to render its decision on the claim. If the Bank wholly or partially denies the claim, the Bank shall provide written notice to the Claimant within the time limitations of this Section 7. Such notice shall set forth:

(i) the specific reasons for the denial of the claim;

(ii) specific reference to pertinent provisions of the Agreement on which the denial is based;

(iii) a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary;

(iv) a description of the Agreement’s claims procedures, and the time limitations applicable to such procedures; and

(v) a statement of the Claimant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended if the claim denial is appealed to the Bank pursuant to Section 6(b) and the Bank fully or partially denies the claim pursuant to Section 6(c).

(b) A Claimant whose application for benefits is denied in whole or in part may request a full and fair review of the decision denying the claim by filing, in accordance with such procedures as the Bank may reasonably establish, a written appeal which sets forth the documents, records and other information relating to the claim within 60 days after receipt of the notice of the denial by the Bank. In connection with such appeal and upon request by the Claimant, a Claimant may review (or receive free copies of) all documents, records or other information relevant to the Claimant’s claim for benefit, all in accordance with such procedures as the Bank may reasonably establish. If a Claimant fails to file an appeal within such 60-day period, he or she shall have no further right to appeal, but such failure shall not prevent the Claimant from bringing a civil action for the purpose of determining or enforcing the claim.

(c) A decision by the Bank on the appeal shall include a review by the Bank that takes into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial claim determination. The Bank shall render its decision on the appeal no later than 60 days after the receipt by the Bank of the appeal. If special circumstances apply, the 60-day period may be extended by an additional 60 days, provided written notice of the extension is given to the Claimant during the initial 60-day period and such notice indicates the special circumstances requiring an extension of time and the date by which the Bank expects to render its decision on the claim on appeal. If the Bank wholly or partly denies the claim on appeal, the Bank shall provide written notice to the Claimant within the time limitations of this Paragraph. Such notice shall set forth:

(i) the specific reasons for the denial of the claim;

(ii) specific reference to pertinent provisions of the Agreement on which the denial is based;

(iii) a statement of the Claimant’s right to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits; and

(iv) a Statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

(d) The claims review procedure set forth in this Section 6 shall not apply to any claim which the Executive or any beneficiary may have pursuant to any policy of life insurance issued by a life insurance Bank. This procedure relaters solely to payments under this Agreement.

The benefits provided by this Agreement constitute a mere promise by the Bank to make payments in the future and the rights of the Executive hereunder shall be those of a general unsecured creditor of the Bank. Nothing contained herein shall be construed to create a trust of any kind or to render the Bank a fiduciary with respect to the Executive. The Bank shall not be required to maintain any fund or segregate any amount or in any other way currently fund the future payment of any benefit provided under the Agreement, and nothing contained herein shall be construed to give the Executive or any other person any right to any specific assets of the Bank or of any other person.

8.	This Agreement shall be construed under the laws of the state of Connecticut, except to the extent preempted by the Employee Retirement Income Security Act of 1974, as amended.

9.	The Bank reserves the right to amend or terminate this Agreement, and the benefits provided hereunder, at any time upon notice to the Executive.

10.

Neither the Executive nor any beneficiary shall have any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments hereunder, which payments and the right thereto are expressly declared to be nonassignable and nontransferable. Notwithstanding the foregoing, in the event that the Bank shall effect a reorganization, consolidate with or merge into any other entity, or transfer all or substantially all of its properties or assets to any other entity where the Bank shall not be the surviving entity or effectively control the surviving entity, the Bank shall require such entity to assume and carry out all of the Bank’s obligations under this Agreement.

11.	This Agreement shall bind the Executive and the Bank and their respective beneficiaries, heirs, legal representatives, successors and assigns.

12.

It is the intent of the parties that this Agreement and all payments made hereunder comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and other guidance thereunder. All reimbursements under this Agreement shall be paid no later than March 15th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred. No such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	FARMINGTON BANK


	By:	/s/ Lee D. Nordstrom
	Name:	Lee D. Nordstrom
	Title:	SVP Human Resources


	EXECUTIVE:
	/s/ Michael T. Schweighoffer
	Michael T. Schweighoffer

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;

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; and

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: May 15, 2012		/s/ John J. Patrick, Jr.
		John J. Patrick, Jr.
		Chairman, President and Chief Executive Officer

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: May 15, 2012		/s/ Gregory A. White
		Gregory A. White
		Executive Vice President and Chief Financial Officer

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 March 31, 2012 (the “Report”) and that to the best of their knowledge:

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