10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2011

OR

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

For the transition period from to

Commission File No. 333-171913

First Connecticut Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	45-1496206
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
One Farm Glen Boulevard, Farmington, CT	06032
(Address of Principal Executive Offices)	(Zip Code)

(860) 676-4600

(Registrant’s telephone number)

N/A

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days.    YES   x     NO   o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  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 August 15, 2011, there were 17,880,200 shares of First Connecticut Bancorp, Inc. common stock, par value $0.01, outstanding.

First Connecticut Bancorp, Inc.

Table of Contents

		Page
Part I.	Financial Information
Item 1. Consolidated Financial Statements
	Consolidated Statements of Condition at June 30, 2011 (unaudited) and December 31, 2010	1
	Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (unaudited)	2
	Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2011 (unaudited)	3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited)	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	61
Part II. Other Information
Item 1.	Legal Proceedings	61
Item1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	62
Item 4.	(Removed and Reserved)	62
Item 5.	Other Information	62
Item 6.	Exhibits	62
Signatures		64
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

	June 30, 2011			December 31, 2010
(Dollars in thousands)	(Unaudited)
Assets
Cash and due from banks	$	29,034		$	18,608
Federal funds sold		209,628			-
Cash and cash equivalents		238,662			18,608
Securities held-to-maturity, at amortized cost		3,621			3,672
Securities available-for-sale, at fair value		135,823			163,008
Loans held for sale		1,191			862
Loans, net		1,177,571			1,157,917
Premises and equipment, net		21,159			21,907
Federal Home Loan Bank of Boston stock, at cost		7,449			7,449
Accrued income receivable		4,063			4,227
Bank-owned life insurance		20,005			19,657
Deferred income taxes		13,691			11,408
Prepaid expenses and other assets		9,034			7,915
Total assets	$	1,632,269		$	1,416,630
Liabilities and Stockholders’ Equity
Deposits
Interest-bearing	$	1,003,367		$	958,319
Noninterest-bearing		173,297			150,186
		1,176,664			1,108,505
FHLB advances		68,000			71,000
Repurchase agreement borrowings		21,000			21,000
Mortgagors’ escrow accounts		11,043			9,717
Repurchase liabilities		57,472			84,029
Accrued expenses and other liabilities		35,043			27,386
Total liabilities		1,369,222			1,321,637
Commitments and contingencies		-			-
Stockholders’ Equity
Common stock, $0.01 par value, 30,000,000 shares
authorized, 17,880,200 shares issued and outstanding		179			-
Additional paid-in-capital		174,751			-
Unallocated common stock held by ESOP		(3,337	)		-
Retained earnings		93,884			97,513
Accumulated other comprehensive loss		(2,430	)		(2,520	)
Total stockholders’ equity		263,047			94,993
Total liabilities and stockholders’ equity	$	1,632,269		$	1,416,630

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

1

First Connecticut Bancorp, Inc.

Consolidated Statements of Operations (Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(Dollars in thousands, except Per Share data)	2011			2010		2011			2010
Interest income
Interest and fees on loans
Mortgage	$	10,595		$	10,460	$	21,143		$	20,837
Other		3,536			3,353		7,148			6,546
Interest and dividends on investments
United States Government and agency obligations		360			1,053		795			2,369
Other bonds		54			58		106			115
Corporate stocks		207			244		274			340
Other interest income		58			24		75			34
Total interest income		14,810			15,192		29,541			30,241
Interest expense
Deposits		1,954			1,962		3,906			4,101
Interest on borrowed funds		531			511		1,056			1,057
Interest on repo borrowings		179			175		358			358
Interest on repurchase liabilities		96			87		220			184
Total interest expense		2,760			2,735		5,540			5,700
Net interest income		12,050			12,457		24,001			24,541
Provision for allowance for loan losses		300			600		600			1,200
Net interest income after provision for loan losses		11,750			11,857		23,401			23,341
Noninterest income
Fees for customer services		860			752		1,647			1,426
Net gain on loans sold		199			-		345			24
Brokerage and insurance fee income		10			108		134			215
Bank-owned life insurance income		174			184		348			298
Other		50			96		100			164
Total noninterest income		1,293			1,140		2,574			2,127
Noninterest expense
Salaries and employee benefits		7,473			5,674		14,041			10,959
Occupancy expense		1,094			1,020		2,331			2,059
Furniture and equipment expense		990			951		1,965			1,851
FDIC assessment		529			408		1,070			816
Marketing		658			682		1,131			1,171
Contribution to Farmington Bank Community Foundation, Inc.		6,877			-		6,877			-
Other operating expenses		2,306			1,735		4,173			3,265
Total noninterest expense		19,927			10,470		31,588			20,121
(Loss) Income before income taxes		(6,884	)		2,527		(5,613	)		5,347
Income tax (benefit) expense		(2,239	)		810		(1,984	)		1,727
Net (loss) income	$	(4,645	)	$	1,717	$	(3,629	)	$	3,620
Net loss per share (See Note 2):
Basic and Diluted (1)	$	(0.26	)		N/A		N/A			N/A
Weighted average shares outstanding:
Basic and Diluted		17,581,225			N/A		N/A			N/A
Pro forma net (loss) earnings per share (2):
Basic and Diluted	$	(0.26	)		0.10		(0.21	)		0.21

(1)=	Net loss per share reflects earnings for the period from June 29, 2011, the date the Company completed a Plan of Conversion and Reorganization to June 30, 2011.
(2)=	Pro forma net (loss) earnings 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.

2

First Connecticut Bancorp, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

													Accumulated Other
													Comprehensive (Loss) Income
													Unrealized		Related to
							Unallocated						Gain on		Employee Benefits
					Additional		Common						Securities		Plans,
	Common Stock				Paid in		Shares Held			Retained			Available-		Net of
For the Six Months Ended June 30, 2011	Shares		Amount		Capital		by ESOP			Earnings			for-Sale		Tax Effect			Total
(Dollars in thousands)
Balance at December 31, 2010		-	$	-	$	-	$	-		$	97,513		$	1,111	$	(3,631	)	$	94,993
Issuance of common stock for initial public offering, net of expenses of $4.1 million (Note 1)		17,192,500		172		167,628		-			-			-		-			167,800
Issuance of common stock to Farmington Bank Community Foundation, Inc. including additional tax benefit due to higher basis for tax purposes		687,700		7		7,123		-			-			-		-			7,130
Purchase of common stock for Employee Stock Ownership Plan “ESOP”		-		-		-		(3,348	)		-			-		-			(3,348	)
ESOP shares committed to be released		-		-		-		11			-			-		-			11
Comprehensive (loss) income:
Net loss		-		-		-		-			(3,629	)		-		-			(3,629	)
Change in accumulated other comprehensive loss related to employee benefit plans, net of tax effects		-		-		-		-			-			-		71			71
Increase in unrealized gain on available-for-sale securities, net of tax effects		-		-		-		-			-			19		-			19
Total comprehensive loss																			(3,539	)
Balance at June 30, 2011		17,880,200	$	179	$	174,751	$	(3,337	)	$	93,884		$	1,130	$	(3,560	)	$	263,047

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

3

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended
	June 30,
(Dollars in thousands)	2011			2010
Cash flows from operating activities
Net (loss) income	$	(3,629	)	$	3,620
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision for allowance for loan losses		600			1,200
Provision for off-balance sheet commitments		5			(8	)
Provision for depreciation and amortization		1,549			1,440
Amortization of ESOP expense		11			-
Contribution of stock to Farmington Bank Community Foundation, Inc.		6,877			-
Loans originated for sale		(20,975	)		(3,230	)
Proceeds from the sale of loans held for sale		20,129			3,254
Net gain on loans sold		(345	)		(24	)
Accretion and amortization of investment security discounts and premiums, net		(63	)		125
Amortization and accretion of loan fees and discounts, net		(129	)		(215	)
Decrease (increase) in accrued income receivable		164			(22	)
Deferred income tax benefit		(2,077	)		-
Increase in cash surrender value of bank-owned life insurance		(348	)		(298	)
Increase in prepaid expenses and other assets		(1,262	)		(1,357	)
Increase in accrued expenses and other liabilities		7,760			5,087
Net cash provided by operating activities		8,267			9,572
Cash flow from investing activities
Maturities of securities held-to-maturity		260			-
Sales and maturities of securities available-for-sale		174,320			43,276
Purchases of securities held-to-maturity		(209	)		(259	)
Purchases of securities available-for-sale		(147,043	)		(40,659	)
Loan originations, net of principal repayments		(19,263	)		(61,029	)
Proceeds from sale of foreclosed real estate		143			-
Purchases of bank-owned life insurance		-			(5,007	)
Purchases of premises and equipment		(801	)		(2,799	)
Net cash provided by (used in) investing activities		7,407			(66,477	)
Cash flows from financing activities
Proceeds from common stock offering, net of offering cost		167,800			-
Purchase of common stock for ESOP		(3,348	)		-
Net decrease in borrowings		(3,000	)		(2,000	)
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts		110,814			92,754
Net decrease in certificates of deposit		(42,655	)		(20,118	)
Net (decrease) increase in repurchase liabilities		(26,557	)		3,564
Change in mortgagors’ escrow accounts		1,326			945
Net cash provided by financing activities		204,380			75,145
Net increase in cash and cash equivalents		220,054			18,240
Cash and cash equivalents at beginning of period		18,608			28,299
Cash and cash equivalents at end of period	$	238,662		$	46,539
Supplemental disclosure of cash flow information
Cash paid for interest	$	5,538		$	2,790
Cash paid for income taxes		850			1,075
Loans transferred to other real estate owned		-			128

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

4

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1.   Nature of Operations and Basis of Presentation

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.

In connection with the Conversion and Reorganization, the Company established Farmington Bank Community Foundation, Inc., a non-profit charitable organization dedicated to helping the communities the Bank serves. The Foundation was funded with a contribution of 687,700 shares of the Company’s common stock, representing 4% of the outstanding shares.  The stock donation resulted in a $6.9 million contribution expense being recorded and an additional $253,000 deferred tax benefit was recognized as the basis of the contribution for tax purposes is equal to the stock’s trading price on the first day of trading which was higher than the initial issuance price used to record the contribution expense.

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 sold in the offering.  As of June 30, 2011, the ESOP purchased 300,000 shares of common stock at a cost of $3.3 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 (formerly known as Farmington Savings 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 sixteen 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 for Connecticut income tax purposes that was established to service and hold loans collateralized by real property; Village Investments, Inc. which holds the Company’s investment in Infinex Financial Services, a registered broker-dealer; the Village Corp., Limited, a subsidiary that holds certain real estate; 28 Main Street Corp., presently inactive; Village Management Corp., presently inactive and Village Square Holdings, Inc., a subsidiary that holds certain bank premises and other real estate.

5

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Basis of Financial Statement Presentation

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  The Company has condensed or omitted certain information and footnote disclosures normally included in the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America pursuant to such rules and regulations.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. All significant intercompany transactions and balances have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2010 included in the Company’s S-1/A filed on May 16, 2011.  The results of operations for the interim periods are not necessarily indicative of the results for the full year.

In preparing the consolidated financial statements, management is required to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition and revenues and expenses for the interim period.  Actual results could differ significantly from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, investment security other-than-temporary impairment judgments and investment security valuation.

Recent Accounting Pronouncements

ASU No. 2011-02, “Receivables (Topic 310) — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” On April 5, 2011, the FASB issued ASU No. 2011-02 to clarify when a loan modification or restructuring is considered a troubled debt restructuring (“TDR”). The changes apply to a lender that modifies a receivable covered by Subtopic 310-40, “Receivables—Troubled Debt Restructurings by Creditors.” In evaluating whether a restructuring constitutes a TDR, a creditor must separately conclude that both of the following exist: (i) the restructuring constitutes a concession and (ii) the debtor is experiencing financial difficulties. A creditor may determine that a debtor is experiencing financial difficulties, even though the debtor is not currently in default, if the creditor determines it is probable that the debtor would default on its payments for any of its debts in the foreseeable future without the loan modification. Lenders who determine that they are making a concession on the terms of the loan to a borrower who is having financial problems should follow the guidance found in ASU No. 2011-02. The guidance on identifying and disclosing TDRs is effective for interim and annual reporting periods beginning on or after June 15, 2011 and applies retrospectively to restructurings occurring on or after the beginning of the year. The guidance on measuring the impairment of a receivable restructured in a troubled debt restructuring is effective on a prospective basis. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements.

6

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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 is currently evaluating the impact of the adoption of this accounting standards update on its consolidated financial statements and does not expect the application of this guidance will have a significant impact as the Company has been accounting for its repurchase agreements as secured financing.

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 is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic 220, an entity has 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 choices, 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. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this update do 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. The amendments in this update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements and related disclosures.

7

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

2.   Earnings Per Share

Basic net (loss) income per common share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed in a manner similar to basic net income (loss) per common share except that the weighted-average number of common shares outstanding is 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 quarter ended June 30, 2011. 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 (loss) 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 period from June 29, 2011 to June 30, 2011:

	For the Period from June 29, 2011 to June 30, 2011
(Dollars in thousands, except Per Share data):
Net loss	$	(4,494	)
Weighted-average common shares		17,581,225
Net loss per common share:
Basic and Diluted	$	(0.26	)

8

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

3.   Investment Securities

Investment securities are summarized as follows:

	June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	97,991	$	7	$	-		$	97,998
U.S. Government agency obligations		5,000		12		-			5,012
Government sponsored residential mortgage-backed securities		24,220		1,589		(6	)		25,803
Corporate debt securities		1,000		86		-			1,086
Trust preferred debt securities		44		-		-			44
Preferred equity securities		2,100		216		(221	)		2,095
Marketable equity securities		398		11		(3	)		406
Mutual funds		3,358		21		-			3,379
Total securities available-for-sale	$	134,111	$	1,942	$	(230	)	$	135,823
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	9	$	-	$	-		$	9
Municipal debt securities		612		-		-			612
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,621	$	-	$	-		$	3,621
	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	112,973	$	2	$	-		$	112,975
U.S. Government agency obligations		11,004		76		-			11,080
Government sponsored residential mortgage-backed securities		30,516		1,780		(2	)		32,294
Corporate debt securities		1,000		52		-			1,052
Trust preferred debt securities		44		-		-			44
Preferred equity securities		2,110		43		(293	)		1,860
Marketable equity securities		398		10		(2	)		406
Mutual funds		3,280		17		-			3,297
Total securities available-for-sale	$	161,325	$	1,980	$	(297	)	$	163,008
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	9	$	-	$	-			9
Municipal debt securities		663		-		-			663
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,672	$	-	$	-		$	3,672

9

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table summarizes gross unrealized losses and fair value, aggregated by investment category and length of time the investments have been in a continuous unrealized loss position at June 30, 2011 and December 31, 2010:

	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
June 30, 2011
Available-for-sale:
Government sponsored residential mortgage-backed securities	$	918	$	(6	)	$	-	$	-		$	918	$	(6	)
Preferred equity securities		-		-			1,779		(221	)		1,779		(221	)
Marketable equity securities		-		-			4		(3	)		4		(3	)
Total	$	918	$	(6	)	$	1,783	$	(224	)	$	2,701	$	(230	)
December  31, 2010
Available-for-sale:
Government sponsored residential mortgage-backed securities	$	-	$	-		$	335	$	(2	)	$	335	$	(2	)
Preferred equity securities		95		(5	)		1,722		(288	)		1,817		(293	)
Marketable equity securities		-		-			5		(2	)		5		(2	)
Total	$	95	$	(5	)	$	2,062	$	(292	)	$	2,157	$	(297	)

Management believes that no individual unrealized loss as of June 30, 2011 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 (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral), broad market details and the Company’s intent to sell the security or if it is more likely than not that the Company will be required to sell the debt security before recovering its cost.  The Company also considers whether the depreciation is due to interest rates or credit risk.

The unrealized losses on preferred equity securities relate to one preferred equity security that is rated Baa2 by Moody’s as of June 30, 2011. This security has been in a loss position for 12 months or more. 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 and six months ended June 30, 2011 and 2010, the Company recorded no other-than-temporary impairment charges.

There were no realized losses or gains for the three and six month periods ended June 30, 2011 and 2010.

10

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The amortized cost and estimated market value of debt securities at June 30, 2011 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties:

	June 30, 2011
	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	$	97,991	$	97,998	$	612	$	612
Due after one year through five years		5,000		5,012		-		-
Due after five years through ten years		1,000		1,086		-		-
Due after ten years		44		44		3,000		3,000
Mortgage-backed securities		24,220		25,803		9		9
Total debt  securities	$	128,255	$	129,943	$	3,621	$	3,621

The Company, as a member of the Federal Home Loan Bank of Boston (FHLBB), owned $7.4 million of FHLBB capital stock at June 30, 2011 and December 31, 2010, which is equal to its FHLBB capital stock requirement.

4.   Loans and Allowance for Loan Losses

Loans consisted of the following:

	June 30, 2011			December 31, 2010
(Dollars in thousands)
Real estate
Residential	$	466,754		$	453,557
Commercial		369,102			361,838
Construction		44,050			46,623
Installment		11,987			12,597
Commercial		121,153			112,535
Collateral		1,984			1,941
Home equity line of credit		85,666			81,837
Demand		173			227
Revolving credit		78			84
Resort		90,210			105,215
Total loans		1,191,157			1,176,454
Less:
Allowance for loan losses		(15,912	)		(20,734	)
Net deferred loan costs		2,326			2,197
Loans, net	$	1,177,571		$	1,157,917

11

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

A summary of changes in the allowance for loan losses for the three and six months ended June 30, 2011 and 2010 are as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(Dollars in thousands)	2011			2010			2011			2010
Balance at beginning of period	$	20,562		$	15,812		$	20,734		$	16,316
Provision for loan losses		300			600			600			1,200
Charge-offs		(4,963	)		(245	)		(5,439	)		(1,376	)
Recoveries		13			2			17			29
Balance at end of period	$	15,912		$	16,169		$	15,912		$	16,169

Changes in the allowance for loan losses by segments for the three months ended June 30, 2011 are as follows:

	For the Three Months Ended June 30, 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	$	3,559	$	(69	)	$	-	$	(6	)	$	3,484
Commercial		6,244		-			-		256			6,500
Construction		785		-			-		(183	)		602
Installment		81		-			1		(4	)		78
Commercial		1,743		-			10		105			1,858
Collateral		-		-			-		-			-
Home equity line of credit		565		-			-		64			629
Demand		1		-			2		(2	)		1
Revolving credit		-		(14	)		-		15			1
Resort		7,179		(4,880	)		-		(39	)		2,260
Unallocated		405		-			-		94			499
	$	20,562	$	(4,963	)	$	13	$	300		$	15,912

12

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Changes in the allowance for loan losses by segments for the six months ended June 30, 2011 are as follows:

	For the Six Months Ended June 30, 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	$	(332	)	$	-	$	760		$	3,484
Commercial		7,726		-			-		(1,226	)		6,500
Construction		524		-			-		78			602
Installment		115		(5	)		1		(33	)		78
Commercial		1,564		(169	)		10		453			1,858
Collateral		-		-			-		-			-
Home equity line of credit		558		(25	)		-		96			629
Demand		3		-			6		(8	)		1
Revolving credit		-		(28	)		-		29			1
Resort		7,188		(4,880	)		-		(48	)		2,260
Unallocated		-		-			-		499			499
	$	20,734	$	(5,439	)	$	17	$	600		$	15,912

13

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table lists the allocation of the allowance by impairment methodology and by loan segment at June 30, 2011 and December 31, 2010:

Loans individually evaluated for impairment:
	June 30, 2011				December 31, 2010
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate Loans
Residential	$	11,134	$	495	$	7,001	$	358
Commercial		14,240		257		14,211		260
Construction		564		54		897		-
Installment		-		-		-		-
Commercial		2,459		34		2,795		-
Collateral		-		-		-		-
Home Equity line of credit		1,873		41		1,228		48
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		-		-		4,880		4,880
Total	$	30,270	$	881	$	31,012	$	5,546

Loans collectively evaluated for impairment:
	June 30, 2011				December 31, 2010
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate Loans
Residential	$	457,675	$	2,989	$	448,553	$	2,698
Commercial		354,900		6,243		347,625		7,466
Construction		43,467		548		45,715		524
Installment		11,987		79		12,597		115
Commercial		119,088		1,824		110,057		1,564
Collateral		1,984		-		1,941		-
Home Equity line of credit		83,793		588		80,609		510
Demand		173		1		227		3
Revolving Credit		78		-		84		-
Resort		90,068		2,260		100,231		2,308
Total	$	1,163,213	$	14,532	$	1,147,639	$	15,188
Unallocated		-		499		-		-
Total	$	1,193,483	$	15,912	$	1,178,651	$	20,734

14

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of loan delinquencies at recorded investment values at June 30, 2011 and December 31, 2010:

	June 30, 2011
																	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 Loans
Residential		8	$	1,172		3	$	1,042		14	$	9,069		25		11,283	$	-
Commercial		3		697		-		-		9		6,130		12		6,827		-
Construction		-		-		1		1		1		564		2		565		-
Installment		4		114		3		74		2		64		9		252		-
Commercial		1		46		-		-		7		719		8		765		-
Collateral		8		60		1		35		-		-		9		95		-
Home Equity Line of Credit		1		100		-		-		5		1,481		6		1,581		-
Demand		-		-		-		-		1		25		1		25		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		25	$	2,189		8	$	1,152		39	$	18,052		72	$	21,393	$	-
	December 31, 2010
																	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 Loans
Residential		6	$	1,273		6	$	4,624		10	$	4,128		22	$	10,025	$	-
Commercial		2		456		2		793		6		3,160		10		4,409		-
Construction		-		-		-		-		2		897		2		897		-
Installment		4		25		-		-		5		98		9		123		-
Commercial		5		456		-		-		10		761		15		1,217		-
Collateral		4		42		-		-		-		-		4		42		-
Home Equity Line of Credit		2		100		1		24		5		1,843		8		1,967		-
Demand		-		-		-		-		1		25		1		25		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		23	$	2,352		9	$	5,441		39	$	10,912		71	$	18,705	$	-

15

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. Non-performing assets were:

(Dollars in thousands)	June 30, 2011		December 31, 2010
Nonaccrual loans:
Real estate Loans
Residential	$	9,352	$	5,209
Commercial		5,844		3,693
Construction		564		898
Installment		110		124
Commercial		874		862
Collateral		-		-
Home Equity Line of Credit		1,930		2,031
Demand		25		25
Revolving Credit		-		-
Resort		-		4,880
Total nonaccruing loans		18,699		17,722
Loans 90 days past due and still accruing		-		-
Real estate owned		95		238
Total nonperforming assets	$	18,794	$	17,960

16

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of impaired loans at June 30, 2011:

	June 30, 2011
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Real estate Loans
Residential	$	5,510	$	5,555	$	-
Commercial		7,831		8,820		-
Construction		-		-		-
Installment		-		-		-
Commercial		2,421		2,420		-
Collateral		-		-		-
Home Equity Line of Credit		1,099		1,099		-
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		16,861		17,894		-
Impaired loans with a valuation allowance:
Real estate Loans
Residential		5,624		5,939		495
Commercial		6,409		6,408		257
Construction		564		810		54
Installment		-		-		-
Commercial		38		172		34
Collateral		-		-		-
Home Equity Line of Credit		774		870		41
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		13,409		14,199		881
Total impaired loans	$	30,270	$	32,093	$	881

17

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at December 31, 2010:

	December 31, 2010
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Real estate Loans
Residential	$	2,710	$	2,703	$	-
Commercial		7,974		8,982		-
Construction		897		1,143		-
Installment		-		-		-
Commercial		2,795		2,803		-
Collateral		-		-		-
Home Equity Line of Credit		999		999		-
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		15,375		16,630		-
Impaired loans with a valuation allowance:
Real estate Loans
Residential		4,291		4,306		358
Commercial		6,237		6,237		260
Construction		-		-		-
Installment		-		-		-
Commercial		-		-		-
Collateral		-		-		-
Home Equity Line of Credit		229		300		48
Demand		-		-		-
Revolving Credit		-		-		-
Resort		4,880		4,880		4,880
Total		15,637		15,723		5,546
Total impaired loans	$	31,012	$	32,353	$	5,546

Troubled Debt Restructures

A loan is considered a troubled debt restructuringwhen 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 regular basis and at calendar year-end reporting period per our policy.

18

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents information on loans whose terms had been modified in a troubled debt restructuring (“TDR”) at June 30, 2011 and December 31, 2010:

	June 30, 2011
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Balance of Loans		Number of Loans		Balance of Loans		Number of Loans		Balance of Loans
Real estate
Residential		4	$	1,351		4	$	5,128		8	$	6,479
Commercial		2		2,216		4		4,559		6		6,775
Construction		-		-		1		564		1		564
Installment		-		-		-		-		-		-
Commercial		1		300		1		147		2		447
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		7	$	3,867		11	$	11,397		18	$	15,264
	December 31, 2010
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate
Residential		5	$	4,449		2	$	697		7	$	5,146
Commercial		5		10,544		3		2,449		8		12,993
Construction		-		-		2		897		2		897
Installment		-		-		-		-		-		-
Commercial		5		1,932		1		146		6		2,078
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		1		4,880		1		4,880
Total		15	$	16,925		10	$	10,068		25	$	26,993

19

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Credit Quality Information

At the time of loan origination, a risk rating based on a nine point grading system is assigned to each commercial-related loan based on the loan officer’s and management’s assessment of the risk associated with each particular loan. This risk assessment is based on an in depth analysis of a variety of factors. More complex loans and larger commitments require 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 recent 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 affirm our rating accuracy and opine on the overall credit quality of our loan portfolio. The examination 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.

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.

20

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the Company’s loans by risk rating at June 30, 2011 and December 31, 2010:

	June 30, 2011
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate Loans
Residential	$	454,992	$	1,286	$	10,476	$	-	$	466,754
Commercial		325,891		8,479		34,732		-		369,102
Construction		40,495		3,555		-		-		44,050
Installment		11,765		112		110		-		11,987
Commercial		100,027		7,178		13,948		-		121,153
Collateral		1,976		8		-		-		1,984
Home Equity Line of Credit		83,124		432		2,110		-		85,666
Demand		148		-		25		-		173
Revolving Credit		78		-		-		-		78
Resort		70,676		5,637		13,897		-		90,210
Total Loans	$	1,089,172	$	26,687	$	75,298	$	-	$	1,191,157
	December 31, 2010
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate Loans
Residential	$	442,255	$	2,025	$	9,277	$	-	$	453,557
Commercial		306,720		13,418		29,037		-		349,175
Construction		51,454		1,611		6,221		-		59,286
Installment		12,452		13		132		-		12,597
Commercial		92,015		5,833		14,687		-		112,535
Collateral		1,933		8		-		-		1,941
Home Equity Line of Credit		79,468		277		2,092		-		81,837
Demand		202		-		25		-		227
Revolving Credit		84		-		-		-		84
Resort		84,981		-		20,234		-		105,215
Total Loans	$	1,071,564	$	23,185	$	81,705	$	-	$	1,176,454

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.

21

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Related Party Loans

During the regular course of its business, the Company makes loans to its executive officers, Directors and other related parties.  These related party loans totaled $597,000 and $831,000 at June 30, 2011 and December 31, 2010, 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 June 30, 2011 and December 31, 2010.  As of June 30, 2011, the Company’s access to a pre-approved unsecured line of credit with a bank increased to $20.0 million from $10.0 million at December 31, 2010, which was undrawn at June 30, 2011 and December 31, 2010.  During 2011, the Company entered into a $3.5 million unsecured line of credit agreement with a bank which expires on October 31, 2011.  The Company maintains a balance of $262,500 with the bank to avoid fees associated with the above line.  The line was undrawn at June 30, 2011.

During 2010, the Company entered into the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $86.1 million on an overnight basis as of June 30, 2011 and was undrawn at June 30, 2011 and December 31, 2010. The funding arrangement was collateralized by $120.9 million in pledged commercial real estate loans as of June 30, 2011.

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 $68.0 million and $71.0 million at June 30, 2011 and December 31, 2010, respectively.  Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $451.3 million and $439.7 million at June 30, 2011 and December 31, 2010, 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 and up to 4.5% of its advances (borrowings) from the FHLBB. The carrying value of FHLBB stock approximates fair value based on the redemption provisions of the stock.

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 totaling $25.0 million.  Outstanding borrowings totaled $21.0 million at June 30, 2011 and December 31, 2010.

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 $57.5 million and $84.0 million as of June 30, 2011 and December 31, 2010, respectively. They are secured by the Company’s investment in specific issues of U.S. Treasury obligations, U.S. Government agency obligations and Government sponsored residential mortgage-backed securities with a market value of $76.3 million and $79.0 million as of June 30, 2011 and December 31, 2010, respectively.

22

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

6.   Deposits

 Deposits consisted of the following:

	June 30, 2011		December 31, 2010
(Dollars in thousands)
Noninterest-bearing demand deposits	$	173,297	$	150,186
Interest-bearing
NOW accounts		241,077		217,151
Money market		206,580		158,232
Savings accounts		144,409		129,122
Time deposits		411,022		453,677
Club accounts		279		137
Total deposits	$	1,176,664	$	1,108,505

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 June 30,						Three Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Service cost	$	172		$	142		$	15		$	13
Interest cost		264			256			34			35
Expected return on plan assets		(269	)		(248	)		-			-
Amortization:
(Gain) loss		98			66			-			-
Transition obligation		-			-			-			-
Prior service cost		(31	)		(31	)		(12	)		(12	)
Net periodic benefit cost	$	234		$	185		$	37		$	36
	Pension Benefits						Other Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Service cost	$	344		$	284		$	30		$	26
Interest cost		528			512			68			70
Expected return on plan assets		(538	)		(496	)		-			-
Amortization:
(Gain) loss		196			132			-			-
Transition obligation		-			-			-			-
Prior service cost		(62	)		(62	)		(24	)		(24	)
Net periodic benefit cost	$	468		$	370		$	74		$	72

23

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company expects to contribute $1.0 million to the qualified defined benefit plan for the year ended December 31, 2011. Since the supplemental plan and the postretirement benefit plans are unfunded, the expected employer contributions for the year ending December 31, 2011 will be equal to the Company’s estimated future benefit payment liabilities totaling approximately $331,000 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 June 30, 2011, the loan had an outstanding balance of $3.3 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 and six months ended June 30, 2011 was $11,000.

Shares held by the ESOP include the following as of June 30, 2011:

Allocated	-
Committed to be released	1,025
Unallocated	298,975
	300,000

The fair value of unallocated ESOP shares was $3.3 million at June 30, 2011.

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 June 30, 2011, the Company maintained a cash balance of $2,000,000 with PNC Bank and pledged a mortgage backed security with a fair value of $281,000 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 June 30, 2011, the Company’s agreement would require PNC Bank to secure any outstanding receivable in excess of $10.0 million.

24

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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;

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

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

The Company is in compliance with the above provisions as of June 30, 2011.

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:

				June 30, 2011							December 31, 2010
	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		17	$	51,839	$	1,357			9	$	42,289	$	1,771
Commercial loan customer interest rate swap position	Other Liabilities		7		26,543		(911	)		10		44,779		(1,497	)
Counterparty interest rate swap position	Other Liabilities		24		78,382		(446	)		19		87,068		(274	)

25

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:

	Three Months Ended June 30,
	2011								2010
	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	$	505		$	-	$	505		$	295		$	-	$	295
Counterparty interest rate swap position		(505	)		-		(505	)		(295	)		-		(295	)
Total	$	-		$	-	$	-		$	-		$	-	$	-
	Six Months Ended June 30,
	2011								2010
	Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income		Net Impact			Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income		Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position	$	1,076		$	-	$	1,076		$	589		$	-	$	589
Counterparty interest rate swap position		(1,076	)		-		(1,076	)		(589	)		-		(589	)
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 June 30, 2011, outstanding rate locks totaled approximately $8.5 million and outstanding commitments to sell residential mortgage loans totaled approximately $8.4 million.  Forward sales, which include mandatory forward commitments of approximately $6.4 million at June 30, 2011, 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.

26

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:

	June 30,		December 31,
	2011		2010
(Dollars in thousands)
Approved loan commitments	$	59,402	$	26,409
Approved resort commitments		-		19,000
Unadvanced portion of construction loans		18,522		20,290
Unadvanced portion of resort loans		26,347		23,602
Unused lines for home equity loans		83,866		80,410
Unused revolving lines of credit		369		355
Unused commercial letters of credit		10,801		9,885
Unused commercial lines of credit		54,550		54,048
	$	253,857	$	233,999

Financial instruments with off-balance sheet risk had a valuation allowance of $246,000 and $242,000 as of June 30, 2011 and December 31, 2010, 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 June 30, 2011 and December 31, 2010, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

27

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 and six months ended June 30, 2011 or during the year ended December 31, 2010.

28

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 June 30, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 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	$	97,998	$	97,998	$	-	$	-
U.S. Goverment agency obligations		5,012		-		5,012		-
Government sponsored residential mortgage-backed securities		25,803		-		25,803		-
Corporate debt securities		1,086		-		1,086		-
Trust preferred debt securities		44		-		-		44
Preferred equity securities		2,095		-		2,095		-
Marketable equity securities		406		116		290		-
Mutual funds		3,379		-		3,379		-
Securities available-for-sale		135,823		98,114		37,665		44
Interest rate swap derivative		1,357		-		1,357		-
Forward loan sales commitments		46		-		-		46
Total	$	137,226	$	98,114	$	39,022	$	90
Liabilities
Interest rate swap derivative	$	1,357	$	-	$	1,357	$	-
Derivative loan commitments		67		-		-		67
Total	$	1,424	$	-	$	1,357	$	67

29

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, 2010 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	December 31, 2010
			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	$	112,975	$	112,975	$	-	$	-
U.S. Goverment agency obligations		11,080		-		11,080		-
Government sponsored residential mortgage-backed securities		32,294		-		32,294		-
Corporate debt securities		1,052		-		1,052		-
Trust preferred debt securities		44		-		-		44
Preferred equity securities		1,860		-		1,860		-
Marketable equity securities		406		116		290		-
Mutual funds		3,297		-		3,297		-
Securities available for sale		163,008		113,091		49,873		44
Interest rate swap derivative		1,771		-		1,771		-
Total	$	164,779	$	113,091	$	51,644	$	44
Liabilities
Interest rate swap derivative	$	1,771	$	-	$	1,771	$	-
Total	$	1,771	$	-	$	1,771	$	-

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 June 30,				For the Three Months Ended June 30,
	2011		2010		2011			2010
(Dollars in thousands)
Balance at beginning of period	$	44	$	67	$	51		$	-
Transfer into Level 3		-		-		-			-
Accretion		-		-		-			-
Paydowns		-		-		-			-
Total losses (gains) - (realized/unrealized):
Included in earnings		-		-		(30	)		-
Included in other comprehensive income		-		-		-			-
Purchases		-		-		-			-
Sales/Proceeds		-		-		-			-
Balance at the end of period	$	44	$	67	$	21		$	-

30

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	Securities Available for Sale					Derivative and Forward Loan Sales Commitments, Net
	For the Six Months Ended June 30,					For the Six Months Ended June 30,
	2011		2010			2011		2010
(Dollars in thousands)
Balance at beginning of period	$	44	$	90		$	-	$	-
Transfer into Level 3		-		-			-		-
Accretion		-		(23	)		-		-
Paydowns		-		-			-		-
Total losses - (realized/unrealized):
Included in earnings		-		-			21		-
Included in other comprehensive income		-		-			-		-
Purchases		-		-			-		-
Sales/Proceeds		-		-			-		-
Balance at the end of period	$	44	$	67		$	21	$	-

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 June 30, 2011 and December 31, 2010, 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”) 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.

31

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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.

The following table details the financial instruments carried at fair value on a nonrecurring basis at June 30, 2011 and December 31, 2010 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 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	$	-	$	-	$	551
Loans held for sale		-		1,191		-
Impaired loans		-		-		29,389
Other real estate owned		-		-		95
	December 31, 2010
	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	$	-	$	-	$	457
Loans held for sale		-		862		-
Impaired loans		-		-		25,466
Other real estate owned		-		-		238

32

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:

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.

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 June 30, 2011 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.

33

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

11.  Fair Value of Financial Instruments

FASB ASC 825-10, Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated statements of condition, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.  FASB ASC 825-10 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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 year 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.

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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.

ASC 825-10 defines the fair value of demand deposits as the amount payable on demand and prohibits adjusting fair value for any value derived from retaining those deposits for an expected future period of time.  That component is commonly referred to as a deposit base intangible.  This intangible asset is neither considered in the above fair value amounts nor is it recorded as an intangible asset in the consolidated statements of condition.

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents a comparison of the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
(Dollars in thousands)
Financial assets
Cash and due from banks	$	29,034	$	29,034	$	18,608	$	18,608
Federal funds sold		209,628		209,628		-		-
Securities held-to-maturity		3,621		3,621		3,672		3,672
Securities available-for-sale		135,823		135,823		163,008		163,008
Loans held for sale		1,191		1,191		862		862
Loans		1,191,157		1,205,700		1,176,454		1,179,012
Federal Home Loan Bank stock		7,449		7,449		7,449		7,449
Accrued interest receivable		4,063		4,063		4,227		4,227
Financial liabilities
Deposits
Noninterest-bearing demand deposits		173,297		173,297		150,186		150,186
Savings accounts		144,409		144,409		129,122		129,122
Money market		206,580		206,580		158,232		158,232
Time deposits		411,022		413,600		453,677		456,147
NOW accounts		241,077		241,077		217,151		217,151
Club accounts		279		279		137		137
FHLB advances		68,000		70,862		71,000		72,779
Repurchase agreement borrowings		21,000		22,712		21,000		20,939
Mortgagors’ escrow accounts		11,043		11,043		9,717		9,717
Repurchase liabilities		57,472		57,472		84,029		84,029
On-balance sheet derivative financial instruments
Forward loan sales commitments:
Assets		67		67		-		-
Liabilities		-		-		-		-
Interest rate swap derivative liability:
Assets		1,357		1,357		1,771		1,771
Liabilities		1,357		1,357		1,771		1,771
Derivative loan commitments
Assets		-		-		-		-
Liabilities		46		46		-		-

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

12.  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 June 30, 2011 and December 31, 2010, 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 June 30, 2011 -
Total Capital (to Risk Weighted Assets)	$	195,991		17.93	%	$	87,447		8.00	%	$	109,309		10.00	%
Tier I Capital (to Risk Weighted Assets)		182,285		16.68			43,713		4.00			65,570		6.00
Tier I Capital (to Average Assets)		182,285		11.99			60,812		4.00			76,015		5.00
At December 31, 2010 -
Total Capital (to Risk Weighted Assets)	$	110,772		10.27	%	$	86,309		8.00	%	$	107,886		10.00	%
Tier I Capital (to Risk Weighted Assets)		97,194		9.01			43,155		4.00			64,732		6.00
Tier I Capital (to Average Assets)		97,194		6.47			60,078		4.00			75,097		5.00
First Connecticut Bancorp, Inc.:
At June 30, 2011 -
Total Capital (to Risk Weighted Assets)	$	279,229		25.46	%	$	87,862		8.00	%	$	109,828		10.00	%
Tier I Capital (to Risk Weighted Assets)		265,477		24.20			43,925		4.00			65,887		6.00
Tier I Capital (to Average Assets)		265,477		17.48			60,759		4.00			75,949		5.00
At December 31, 2010 -
Total Capital (to Risk Weighted Assets)	$	110,872		10.28	%	$	86,309		8.00	%	$	107,886		10.00	%
Tier I Capital (to Risk Weighted Assets)		97,294		9.02			43,155		4.00			64,732		6.00
Tier I Capital (to Average Assets)		97,294		6.48			60,097		4.00			75,121		5.00

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

13.  Other Comprehensive Income

The following table represents the components of comprehensive income and other comprehensive income for the six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Net (loss) income	$	(4,645	)	$	1,717		$	(3,629	)	$	3,620
Other comprehensive (loss) income, before tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		131			(55	)		29			(97	)
Less: reclassification adjustment for gains (losses) included in net income		-			-			-			-
Net change in unrealized gains (losses)		131			(55	)		29			(97	)
Change related to employee benefit plans		53			15			107			30
Other comprehensive income (loss), before tax		184			(40	)		136			(67	)
Income tax expense (benefit)		62			(14	)		46			(23	)
Other comprehensive income (loss), net of tax		122			(26	)		90			(44	)
Comprehensive (loss) income	$	(4,523	)	$	1,691		$	(3,539	)	$	3,576

14.  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.

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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.

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

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

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● 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 is expected to result in dramatic regulatory changes that will affect the industry in general, and impact our competitive position in ways that can’t 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.

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 16 full service branch offices and 4 limited services offices, including our main office, located throughout Hartford County, Connecticut. Farmington Bank provides a diverse range of commercial and consumer services to businesses, individuals and governments across Central Connecticut.

Our Business Strategy

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;

● increasing 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

● continuing our efforts to control non-interest expenses.

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Critical Accounting Policies

The accounting policies followed by us conform with the accounting principles generally accepted in the United States of America and general practices within the banking industry. 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 includes classes for commercial real estate construction and residential development, commercial real estate, construction, commercial and consumer. 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 during the six months ended June 30, 2011.

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 generally 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.

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Commercial real estate – Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains financial information annually 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 is 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 is 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, will 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 generally underwritten with a loan-to-value ratio generally limited to no more than 90%, 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, will have an effect on the credit quality in this segment.

Resort – Loans in this segment include direct receivable, inventory, pre-sale, homeowner association and acquisition & development loans to timeshare developer / operators and participations in timeshare loans originated by experienced timeshare lending institutions, and originates and sells 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 no acquisition & development loans, and a limited amount of inventory loans, homeowner association loans, and pre-sale loans. Receivable loans 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, will have an effect on the credit quality in this segment.

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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 either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. 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 $500,000 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 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 initially 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 the second quarter of 2011, 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 placing further stress on the Company’s borrowers and resulting in increases in charge-offs, delinquencies and non-performing loans and lower valuations for the Company’s impaired loans, which could in turn 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.

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Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis. Marketable equity and debt securities are classified as either trading, available-for-sale, or held-to-maturity (applies only to debt securities). Management determines the appropriate classifications of securities at the time of purchase. At June 30, 2011 and December 31, 2010, we had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which we have the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.

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

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

In December 1999, we created and have since maintained a “passive investment company” (“PIC”), as permitted by Connecticut law. At June 30, 2011 there were no material uncertain tax positions related to federal and state income tax matters. We are currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2007 through 2009.   If the state taxing authority were to determine that the PIC was not in compliance with statutory requirements, a material amount of taxes could be due.

As of June 30, 2011, management believes it is more likely than not that the deferred tax assets will be realized through future reversals of existing taxable temporary differences. As of June 30, 2011, our net deferred tax asset was $13.7 million and there was no valuation allowance.

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. Our funding policy is to contribute annually the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Income Security Act of 1974.

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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 these 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.

Recent Accounting Pronouncements

ASU No. 2011-02, “Receivables (Topic 310) — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” On April 5, 2011, the FASB issued ASU No. 2011-02 to clarify when a loan modification or restructuring is considered a troubled debt restructuring (“TDR”). The changes apply to a lender that modifies a receivable covered by Subtopic 310-40, “Receivables—Troubled Debt Restructurings by Creditors.” In evaluating whether a restructuring constitutes a TDR, a creditor must separately conclude that both of the following exist: (i) the restructuring constitutes a concession and (ii) the debtor is experiencing financial difficulties. A creditor may determine that a debtor is experiencing financial difficulties, even though the debtor is not currently in default, if the creditor determines it is probable that the debtor would default on its payments for any of its debts in the foreseeable future without the loan modification. Lenders who determine that they are making a concession on the terms of the loan to a borrower who is having financial problems should follow the guidance found in ASU No. 2011-02. The guidance on identifying and disclosing TDRs is effective for interim and annual reporting periods beginning on or after June 15, 2011 and applies retrospectively to restructuring occurring on or after the beginning of the year. The guidance on measuring the impairment of a receivable restructured in a troubled debt restructuring is effective on a prospective basis. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements.

45

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 is currently evaluating the impact of the adoption of this accounting standards update on its consolidated financial statements and does not expect the application of this guidance will have a significant impact as the Company has been accounting for its repurchase agreements as secured financing.

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 is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic 220, an entity has 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 choices, 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. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this update do 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. The amendments in this update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements and related disclosures.

46

Comparison of Financial Condition at June 30, 2011 and December 31, 2010

Our total assets increased $215.6 million, or 15.2%, to $1.6 billion at June 30, 2011, from $1.4 billion at December 31, 2010, primarily due to a $220.0 million increase in cash and cash equivalents.  Our cash and cash equivalents increased $220.0 million, or 1182.6%, when comparing June 30, 2011 to December 31, 2010 primarily as a result of a $68.2 million increase in deposits and the net proceeds from our June 2011 public offering totaling $167.8 million.

Our investment portfolio totaled $139.4 million, or 8.5% of total assets, and $166.7 million, or 11.8% of total assets, respectively, at June 30, 2011 and December 31, 2010. Available-for-sale investment securities decreased $27.2 million, or 16.7%, to $135.8 million at June 30, 2011 from $163.0 million at December 31, 2010, primarily due to maturities totaling $168.0 million of U.S. Treasury obligations and a decrease of $6.3 million from principal repayments, partially offset by purchases of $147.0 million of U.S. Treasury obligations. At June 30, 2011 and December 31, 2010, respectively, the securities available-for-sale portfolio was comprised of $103.0 million and $124.1 million in U.S. treasury obligations and U.S. government agency obligations, $25.8 million and $32.3 million in government sponsored residential mortgage-backed securities, $1.1 million and $1.1 million in corporate debt securities, $44,000 and $44,000 in trust preferred debt securities, $406,000 and $406,000 in marketable equity securities, $3.4 million and $3.3 million in mutual funds and $2.1 million and $1.9 million in preferred equity securities.  Securities held-to-maturity were $3.6 million and $3.7 million at June 30, 2011 and December 31, 2010, respectively.

The net unrealized gains on securities available-for-sale, on a pre-tax basis, increased by $29,000 to $1.7 million at June 30, 2011. The increase in the net unrealized gains on investment securities available-for-sale reflects an increase in unrealized gains and a decrease in unrealized losses for our preferred equity securities partially offset by the net decline in the net unrealized gains on government sponsored residential mortgage-backed securities that occurred during the first six months of 2011.  At June 30, 2011 and December 31, 2010, respectively, our available-for-sale investment securities portfolio gross unrealized losses equaled $230,000 and $297,000, of which $224,000 and $292,000, 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 receivable remained stable at June 30, 2011 at $1.2 billion compared to December 31, 2010 due to our implementation of operational strategies to maintain our well capitalized designation with federal and state banking regulatory agencies.  The loan portfolio consisted of $466.8 million and $453.6 million in residential real estate loans, $369.1 million and $361.8 million in commercial real estate loans, $44.0 million and $46.6 million in construction loans, $12.0 million and $12.6 million in installment loans, $121.2 million and $112.5 million in commercial loans, $85.7 million and $81.8 million in home equity lines of credit loans, $90.2 million and $105.2 million in resort (timeshare) loans and $2.2 million and $2.3 million in collateral, demand and revolving credit loans at June 30, 2011 and December 31, 2010, respectively.

The allowance for loan losses decreased $4.8 million to $15.9 million at June 30, 2011 from $20.7 million at December 31, 2010 due to a $4.9 million fully impaired resort loan being charged-off in the second quarter of 2011.  Impaired loans decreased to $30.3 million as of June 30, 2011 from $31.0 million as of December 31, 2010.  Non-performing loans increased to $18.7 million at June 30, 2011 from $17.7 million as of December 31, 2010. At June 30, 2011, the allowance for loan losses represented 1.34% of total loans and 85.1% of non-performing loans, compared to 1.76% of total loans and 117.0% of non-performing loans as of December 31, 2010. Net charge-offs for the six months ended June 30, 2011 were $5.4 million, or 0.92%, compared to net charge-offs for the six months ended June 30, 2010 of $1.3 million, or 0.25%, to average loans outstanding for the respective period. The increase was primarily due to a $4.9 million fully impaired resort loan charged-off in the second quarter of 2011.  Loan delinquencies 30 days and greater at June 30, 2011 increased $2.7 million to $21.4 million from $18.7 million at December 31, 2010. The increase in past due loans is primarily due to weak economic conditions leading to stress on cash flows of our borrowers primarily with our commercial real estate portfolio.

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Prepaid expenses and other assets increased $1.1 million to $9.0 million at June 30, 2011 from $7.9 million at December 31, 2010 primarily due to a $800,000 increase in current tax receivable, an increase of $1.1 million in an interest rate swap derivative receivable offset by a $1.0 million decrease in prepaid FDIC assessments.

Deposits increased $68.2 million, or 6.1%, to $1.2 billion at June 30, 2011 from $1.1 billion at December 31, 2010. Interest-bearing deposits grew $45.0 million, or 4.7%, to $1.0 billion at June 30, 2011 from $958.3 million at December 31, 2010.  Noninterest-bearing demand deposits totaled $173.3 million at June 30, 2011, an increase of $23.1 million from December 31, 2010 due to our continued efforts to obtain more individual and commercial account relationships.  At June 30, 2011 and December 31, 2010, respectively, interest-bearing deposits consisted of $241.1 million and $217.2 million in NOW accounts, $206.6 million and $158.2 million in money market accounts, $144.4 million and $129.1 million in savings accounts, $411.0 million and $453.7 million in time deposits and $279,000 and $137,000 in club accounts. The $45.0 million increase in interest-bearing deposits from December 31, 2010 to June 30, 2011 was due to the opening of our 16th branch located in West Hartford, CT during the second quarter and an increase in overall deposits as we continue to grow our customer base.  Our weighted-average rate paid on deposits outstanding for the six months ended June 30, 2011 declined 12 basis points to 0.78% from .90% when compared to the same period in the prior year.

Federal Home Loan Bank advances decreased $3.0 million, or 4.2%, to $68.0 million at June 30, 2011 from $71.0 million at December 31, 2010.  Our repurchase liabilities decreased $26.6 million to $57.7 million at June 30, 2011 from $84.0 million at December 31, 2010 primarily due to fluctuations in cash flows in our business checking customers using our repurchase swap product where excess funds are swept daily into a collateralized account.

Total stockholders’ equity increased $168.1 million, or 176.9%, to $263.0 million at June 30, 2011 compared to $95.0 million at December 31, 2010 primarily due to proceeds received from our initial public offering, which net of expenses of $4.1 million, totaled $167.8 million.

Summary of Operating Results for the Three Months Ended June 30, 2011 and 2010

The following discussion provides a summary and comparison of our operating results for the three months ended June 30, 2011 and 2010.

	For the Three Months Ended June 30,
	2011			2010		$ Change			% Change
(Dollars in thousands)
Net interest income	$	12,050		$	12,457	$	(407	)		(3.3	)%
Provision for loan losses		300			600		(300	)		(50.0	)%
Non-interest income		1,293			1,140		153			13.4	%
Non-interest expense		19,927			10,470		9,457			90.3	%
(Loss) income before taxes		(6,884	)		2,527		(9,411	)		(372.4	)%
Income tax (benefit) expense		(2,239	)		810		(3,049	)		(376.4	)%
Net (loss) income	$	(4,645	)	$	1,717	$	(6,362	)		(370.5	)%

For the quarter ended June 30, 2011, net income decreased by $6.4 million to a net loss of $4.6 million compared to net income of $1.7 million for the quarter end June 30, 2010. The decrease in net income primarily resulted from a $6.9 million contribution to our charitable foundation, Farmington Bank Community Foundation, Inc. and $851,000 incurred to complete the phase out of the Phantom Stock Plan.  Excluding the $6.9 million foundation contribution, the $851,000 expensed to complete the phase out the Phantom Stock Plan and the related tax benefit of $2.6 million, net income would have been $454,000, a decrease of $1.3 million compared to the quarter end June 30, 2010 which was primarily due to an increase in salaries and employee benefits as we continue to expand the services we offer our existing and new customers and the opening of three new branches over the past 13 months.

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Comparison of Operating Results for the Three Months Ended June 30, 2011 and 2010

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 June 30, 2011, interest and dividend income decreased $382,000, or 2.5%, to $14.8 million from $15.2 million for the same period in the prior year.  Our average interest-earning assets for the quarter ended June 30, 2011, grew by $181.6 million, or 14.4%, to $1.4 billion from $1.3 billion for the same period last year, while the yield on average interest-earning assets decreased 71 basis points to 4.12% from 4.83%. A decline of $17.7 million in the average balance of securities for the quarter ended June 30, 2011 when compared to the quarter ended June 30, 2010, coupled with a 259 basis point decline in the yield on the securities portfolio resulted in a $734,000 or 54.2%, reduction in the interest and dividends on investments. The decline in yield was primarily due to the sale of $36.1 million of appreciated Government sponsored residential mortgage-backed securities that occurred in September and December 2010 that were partially 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. Interest income on loans receivable increased $318,000 or 2.3%, to $14.1 million for the quarter ended June 30, 2011 from $13.8 million for the same period in the prior year due to an increase of $110.6 million or 10.3%, in the average balance of loans receivable, partially offset by a 37 basis point decline in the weighted average yield. Other interest income earned on federal funds sold and other short-term investments remained relatively unchanged for the three months ended June 30, 2011 and 2010.

 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.

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	Three Months Ended June 30,
	2011								2010
			Interest and								Interest and
	Average Balance		Dividends			Yield/Cost			Average Balance		Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,186,674	$	14,131			4.78	%	$	1,076,026	$	13,813			5.15	%
Securities		143,277		621			1.74	%		125,583		1,355			4.33	%
Federal Home Loan Bank of Boston stock		7,449		-			0.00	%		7,449		-			0.00	%
Fed Funds and other earning assets		105,095		58			0.22	%		51,869		24			0.19	%
Total interest-earning assets		1,442,495		14,810			4.12	%		1,260,927		15,192			4.83	%
Noninterest-earning assets		76,585								68,311
Total assets	$	1,519,080							$	1,329,238
Interest-bearing liabilities:
NOW accounts	$	245,649	$	178			0.29	%	$	234,714	$	249			0.43	%
Money market		204,711		543			1.06	%		148,302		283			0.77	%
Savings accounts		153,806		76			0.20	%		131,784		66			0.20	%
Certificates of deposit		421,766		1,157			1.10	%		428,213		1,364			1.28	%
Total interest-bearing deposits		1,025,932		1,954			0.76	%		943,013		1,962			0.83	%
Advances from the Federal Home Loan Bank		68,005		531			3.13	%		61,187		511			3.35	%
Repurchase Agreement Borrowing		21,000		179			3.42	%		21,000		175			3.34	%
Repurchase liabilities		63,577		96			0.61	%		50,536		87			0.69	%
Total interest-bearing liabilities		1,178,514		2,760			0.94	%		1,075,736		2,735			1.02	%
Noninterest-bearing deposits		210,582								133,175
Other noninterest-bearing liabilities		28,213								23,075
Total liabilities		1,417,309								1,231,986
Capital		101,771								97,252
Total liabilities and capital	$	1,519,080							$	1,329,238
Net interest income			$	12,050							$	12,457
Net interest rate spread (1)							3.18	%							3.81	%
Net interest-earning assets (2)	$	263,981							$	185,191
Net interest margin (3)							3.35	%							3.96	%
Average interest-earning assets to average interest-bearing liabilities				122.40	%							117.22	%

(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.

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Rate Volume Analysis

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

	Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans receivable, net	$	1,066		$	(748	)	$	318
Investment securities		235			(969	)		(734	)
Federal Home Loan Bank of Boston stock		-			-			-
Fed Funds and other interest-earning assets		29			5			34
Total interest-earning assets		1,330			(1,712	)		(382	)
Interest-bearing liabilities:
NOW accounts		13			(84	)		(71	)
Money market		135			125			260
Savings accounts		10			-			10
Certificates of deposit		(19	)		(188	)		(207	)
Total interest-bearing deposits		139			(147	)		(8	)
Advances from the Federal Home Loan Bank		36			(16	)		20
Repurchase agreement borrowing		-			4			4
Repurchase liabilities		9			-			9
Total interest-bearing liabilities		184			(159	)		25
Increase (decrease) in net interest income	$	1,146		$	(1,553	)	$	(407	)

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 $12.1 million for the quarter ended June 30, 2011, compared to $12.5 million for the same period in 2010. The $407,000, or 3.3%, decrease in net interest income was primarily due to a $382,000, or 2.5%, decrease in interest income.  Average interest-earning assets increased by $181.6 million, or 14.4%, to $1.4 billion during the quarter ended June 30, 2011 when compared to the same period in the prior year. Average interest-bearing liabilities increased $102.8 million, or 9.6%, to $1.2 billion at June 30, 2011 when compared to June 30, 2010.   Our net interest rate spread decreased 63 basis points to 3.18% during 2011 from 3.81% for 2010, primarily due to a 71 basis point decline in the weighted average yield of interest-earning assets to 4.12% for the quarter ended June 30, 2011 from 4.83% for the quarter ended June 30, 2010.

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Interest Expense: Interest expense for the quarter ended June 30, 2011 remained relatively stable at $2.8 million from $2.7 million for the same period in the prior year even though our average interest-bearing deposits grew $82.9 million or 8.8% over the same period in the prior year.  This primarily resulted from a 7 basis points decline in the average cost of interest-bearing deposits to 0.76% for the three months ended June 30, 2011 from 0.83% for the three months ended June 30, 2010.  The decrease in the cost of funds was primarily due to the impact that the sustained low interest rate environment had on our NOW accounts and time deposits which resulted in a decrease of 14 basis points and 18 basis points, respectively, during the three months ended June 30, 2011 over the same period in the prior year, offset by a 29 basis point increase in money markets due to promotional rates run in connection with the opening of our 3 new branches.  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 a competitive rate and reduced our rate concession practices for customers who did not utilize multiple bank services.

Average outstanding advances from the Federal Home Loan Bank of Boston were $68.0 million for the quarter ended June 30, 2011, an increase of $6.8 million when compared to the same period ended in the prior year. The average rate paid on these borrowings was 3.13% for the three months ended June 30, 2011 or 22 basis points lower than the average rate of 3.35% for the three months ended June 30, 2010. The decrease in the average rate for Federal Home Loan Bank borrowings resulted from the maturity of $14.0 million of higher-cost borrowings that were replaced with $20.0 million of lower-cost borrowings during 2010.

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 $300,000 for the three months ended June 30, 2011 which is a decline of $300,000 from the provision of $600,000 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 June 30, 2011, the allowance for loan losses totaled $15.9 million, or 1.3% of total loans and 85.1% of non-performing loans, compared to an allowance for loan losses of $20.7 million, which represented 1.8% of total loans and 117.0% of non-performing loans at December 31, 2010.  

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).

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The following table summarizes noninterest income for the three months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011		2010		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	860	$	752	$	108			14.4	%
Net gain on loans sold		199		-		199			100.0	%
Brokerage and insurance fee income		10		108		(98	)		(90.7	)%
Bank owned life insurance income		174		184		(10	)		(5.4	)%
Other		50		96		(46	)		(47.9	)%
Total noninterest income	$	1,293	$	1,140	$	153			13.4	%

Noninterest income increased by $153,000 to $1.3 million for the three months ended June 30, 2011 compared to the same period ended June 30, 2010.  Fees for customer services increased $108,000 or 14.4% primarily due to increases of $48,000 in debit card transactions as a result of our three new branches opening and an increase in customer accounts and $51,000 increase in cash management service fees.  A $199,000 gain on the sale of fixed-rate residential mortgage loans was recognized as a result of the continuation of our secondary market residential lending program initiated during the third quarter of 2010.  Brokerage and insurance fee income decreased $98,000 or 91.7% to $10,000 for the three months ended June 30, 2011 as a result of establishing a new broker relationship in the beginning of 2011.

Noninterest Expense: The following table summarizes noninterest expense for the three months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011		2010		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	7,473	$	5,674	$	1,799			31.7	%
Occupancy expense		1,094		1,020		74			7.3	%
Furniture and equipment expense		990		951		39			4.1	%
FDIC assessment		529		408		121			29.7	%
Marketing		658		682		(24	)		(3.5	)%
Contribution to Farmington Bank Community Foundation, Inc.		6,877		-		6,877			100.0	%
Other operating expenses		2,306		1,735		571			32.9	%
Total noninterest expense	$	19,927	$	10,470	$	9,457			90.3	%

Noninterest expense increased $9.5 million or 90.3% to $19.9 million for the three months ended June 30, 2011 compared to $10.5 million for the same period ended June 30, 2010.  Salaries and employee benefits expense increased $1.8 million which was mainly attributable to $851,000 incurred to phase out the Phantom Stock Plan and the addition of 48 full time equivalent employees to support our three new branches, our commercial lending, accounting and loan workout areas and the implementation of cash management, government banking and a small business lending department.  We incurred FDIC assessments of $529,000 for the three months ended June 30, 2011, representing a $121,000 increase compared to the same period ended June 30, 2010 primarily due to the growth in our deposit base.  As part of our initial public offering in June 2011, we contributed $6.9 million worth of stock to our foundation as we look to continue to grow our relationships within the communities we serve.  Other operating expenses increased $571,000 to $2.3 million primarily due to an increase in professional and consulting fees totaling approximately $462,000 to assist in our Bank’s growth and other various increases in operating costs for the three months ended June 30, 2011 compared to the same period ended June 30, 2010.

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Income Tax (Benefit) Expense: Income tax benefit for the quarter ended June 30, 2011 was $2.2 million due to the tax treatment for the $6.9 million contribution to our foundation compared to an $810,000 income tax provision for the quarter ended June 30, 2010.

Summary of Operating Results for the Six Months Ended June 30, 2011 and 2010

The following discussion provides a summary and comparison of our operating results for the six months ended June 30, 2011 and 2010.

	For the Six Months Ended June 30,
	2011			2010		$ Change			% Change
(Dollars in thousands)
Net interest income	$	24,001		$	24,541	$	(540	)		(2.2	)%
Provision for loan losses		600			1,200		(600	)		(50.0	)%
Non-interest income		2,574			2,127		447			21.0	%
Non-interest expense		31,588			20,121		11,467			57.0	%
(Loss) income before taxes		(5,613	)		5,347		(10,960	)		(205.0	)%
Income tax (benefit) expense		(1,984	)		1,727		(3,711	)		(214.9	)%
Net (loss) income	$	(3,629	)	$	3,620	$	(7,249	)		(200.2	)%

For the six months ended June 30, 2011, net income decreased by $7.2 million to a net loss of $3.6 million compared to net income of $3.6 million for the six months ended June 30, 2010. The decrease in net income primarily resulted from a $6.9 million contribution to our charitable foundation, Farmington Bank Community Foundation, Inc. and $851,000 incurred to complete the phase out the Phantom Stock Plan.  Excluding the $6.9 million foundation contribution, the $851,000 incurred to complete the phase out the Phantom Stock Plan and the related tax benefit of $2.6 million, net income would have been $1.5 million, a decrease of $2.1 million compared to the six months ended June 30, 2010 primarily due to an increase in salaries and employee benefits as we continue to expand the services we offer our existing and new customers and the opening of three new branches over the past 13 months.

Comparison of Operating Results for the Six Months Ended June 30, 2011 and 2010

Interest and Dividend Income: For the six months ended June 30, 2011, interest and dividend income decreased $700,000, or 2.3%, to $29.5 million from $30.2 million for the same period in the prior year.  Our average interest-earning assets for the six months ended June 30, 2011, grew by $176.2 million, or 14.2%, to $1.4 billion from $1.2 billion for the same period last year, while the yield on average interest-earning assets decreased 72 basis points to 4.21% from 4.93%. An increase of $23.5 million in the average balance of securities for the six months ended June 30, 2011 when compared to the six months ended June 30, 2010, offset by a 288 basis point decline in the yield resulted in a $1.7 million or 58.6%, reduction in the interest and dividends on investments. The decline in yield was primarily due to the sale of $16.0 million of appreciated Government sponsored residential mortgage-backed securities that occurred in December 2010 and were partially replaced by lower yielding U.S. Treasury obligations in order to assist the Company in retaining a “well capitalized” status with federal and state banking agencies. Interest income on loans receivable increased $908,000, or 3.3%, to $28.3 million for the six months ended June 30, 2011 from $27.4 million for the same period in the prior year due to an increase of $118.4 million, or 11.1%, in the average balance of loans receivable, partially offset by a 36 basis point decline in the weighted average yield. Other interest income earned on federal funds sold and other short-term investments remained relatively unchanged for the six months ended June 30, 2011 and 2010.

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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.

	Six Months Ended June 30,
	2011								2010
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,184,335	$	28,291			4.82	%	$	1,065,962	$	27,383			5.18	%
Securities		152,052		1,169			1.55	%		128,559		2,824			4.43	%
Federal Home Loan Bank of Boston stock		7,449		6			0.16	%		7,449		-			0.00	%
Fed Funds and other earning assets		69,775		75			0.22	%		35,477		34			0.19	%
Total interest-earning assets		1,413,611		29,541			4.21	%		1,237,447		30,241			4.93	%
Noninterest-earning assets		72,482								63,889
Total assets	$	1,486,093							$	1,301,336
Interest-bearing liabilities:
NOW accounts	$	242,804	$	361			0.30	%	$	206,933	$	470			0.46	%
Money market		192,225		955			1.00	%		147,399		594			0.81	%
Savings accounts		146,967		145			0.20	%		129,111		126			0.20	%
Certificates of deposit		431,628		2,445			1.14	%		431,777		2,911			1.36	%
Total interest-bearing deposits		1,013,624		3,906			0.78	%		915,220		4,101			0.90	%
Advances from the Federal Home Loan Bank		68,052		1,056			3.13	%		64,446		1,057			3.31	%
Repurchase Agreement Borrowing		21,000		358			3.44	%		21,000		358			3.44	%
Repurchase liabilities		72,798		220			0.61	%		52,632		184			0.70	%
Total interest-bearing liabilities		1,175,474		5,540			0.95	%		1,053,298		5,700			1.09	%
Noninterest-bearing deposits		183,484								127,961
Other noninterest-bearing liabilities		27,719								23,528
Total liabilities		1,386,677								1,204,787
Capital		99,416								96,549
Total liabilities and capital	$	1,486,093							$	1,301,336
Net interest income			$	24,001							$	24,541
Net interest rate spread (1)							3.26	%							3.84	%
Net interest-earning assets (2)	$	238,137							$	184,149
Net interest margin (3)							3.42	%							4.00	%
Average interest-earning assets to average interest-bearing liabilities				120.26	%							117.48	%

(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.

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Rate Volume Analysis

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

	Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans receivable, net	$	2,518		$	(1,610	)	$	908
Investment securities		613			(2,268	)		(1,655	)
Federal Home Loan Bank of Boston stock		-			6			6
Fed Funds and other interest-earning assets		36			5			41
Total interest-earning assets		3,167			(3,867	)		(700	)
Interest-bearing liabilities:
NOW accounts		132			(241	)		(109	)
Money market		198			163			361
Savings accounts		19			-			19
Certificates of deposit		(1	)		(465	)		(466	)
Total interest-bearing deposits		348			(543	)		(195	)
Advances from the Federal Home Loan Bank		(6	)		5			(1	)
Repurchase agreement borrowing		-			-			-
Repurchase liabilities		121			(85	)		36
Total interest-bearing liabilities		463			(623	)		(160	)
Increase (decrease) in net interest income	$	2,704		$	(3,244	)	$	(540	)

Net Interest Income:  Net interest income before the provision for loan losses was $24.0 million for the six months ended June 30, 2011, compared to $24.5 million for the same period in 2010. The $540,000, or 2.2%, decrease in net interest income was primarily due to a $677,000, or 2.2%, decrease in interest income.  Average interest-earning assets increased by $176.2 million, or 14.2%, to $1.41 billion during the period June 30, 2011 when compared to the same period in the prior year. Average interest-bearing liabilities increased $122.2 million, or 11.6%, to $1.2 billion during the six months ended June 30, 2011 when compared to the same period in 2010.   Our net interest rate spread decreased 58 basis points to 3.26% during 2011 from 3.84% for 2010, primarily due to a 72 basis point decline in the weighted average cost of interest-earning assets to 4.21% for the six months ended June 30, 2011 from 4.93% for the six months ended June 30, 2010.

Interest Expense: Interest expense for the six months ended June 30, 2011 decreased $160,000, or 2.8%, to $5.5 million from $5.7 million for the same period in the prior year even though our average interest-bearing deposits grew $98.4 million, or 10.8%, over the same period in the prior year.  This primarily resulted from a 12 basis points decline in the average cost of interest-bearing deposits to 0.78% for the six months ended June 30, 2011 from 0.90% for the six months ended June 30, 2010.  The decrease in the cost of funds was primarily due to the impact that the sustained low interest rate environment had on our NOW accounts and time deposits which resulted in a decrease of 16 basis points and 22 basis points, respectively, during the six months ended June 30, 2011 over the same period in the prior year, offset by a 19 basis point increase in money markets due to promotional rates run in connection with the opening of our three new branches.  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 a competitive rate and reduced our rate concession practices for customers who did not utilize multiple bank services.

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Average outstanding advances from the Federal Home Loan Bank of Boston were $68.1 million for the six months ended June 30, 2011, an increase of $3.6 million when compared to the same period ended in the prior year. The average rate paid on these borrowings was 3.13% for the six months ended June 30, 2011 or 18 basis points lower than the average rate of 3.31% for the six months ended June 30, 2010. The decrease in the average rate for Federal Home Loan Bank borrowings resulted from the maturity of higher cost advances.

Provision for Loan Losses:  Management recorded a provision for loan losses of $600,000 for the six months ended June 30, 2011 which is a decline of $600,000 from the provision of $1.2 million 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.

Noninterest Income:

The following table summarizes noninterest income for the six months ended June 30, 2011 and 2010:

	For the Six Months Ended June 30,
	2011		2010		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	1,647	$	1,426	$	221			15.5	%
Net gain on loans sold		345		24		321			1337.5	%
Brokerage and insurance fee income		134		215		(81	)		(37.7	)%
Bank owned life insurance income		348		298		50			16.8	%
Other		100		164		(64	)		(39.0	)%
Total noninterest income	$	2,574	$	2,127	$	447			21.0	%

Noninterest income increased by $447,000 to $2.6 million for the six months ended June 30, 2011 compared to the same period ended June 30, 2010.  Fees for customer services increased $221,000 or 15.5% primarily due to increases of $90,000 in debit card transactions as a result of our three new branches opening and an increase in customer accounts and $91,000 in cash management service fees.  The gain on the sale of fixed-rate residential mortgage loans increased by $321,000 to $345,000 compared to a $24,000 gain during the same period in 2010 as a result of the continuation of our secondary market residential lending program initiated during the third quarter of 2010.  Brokerage and insurance fee income decreased $81,000, or 37.7%, to $134,000 for the six months ended June 30, 2011 as a result of establishing a new relationship for providing brokerage and investment advisory services to customers during the six months ended June 30, 2011.  Income earned on bank-owned life insurance increased $50,000 as a result of our purchase of $5.0 million in additional insurance policies during the past year.

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Noninterest Expense: The following table summarizes noninterest expense for the six months ended June 30, 2011 and 2010:

	For the Six Months Ended June 30,
	2011		2010		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	14,041	$	10,959	$	3,082			28.1	%
Occupancy expense		2,331		2,059		272			13.2	%
Furniture and equipment expense		1,965		1,851		114			6.2	%
FDIC assessment		1,070		816		254			31.1	%
Marketing		1,131		1,171		(40	)		(3.4	)%
Contribution to Farmington Bank Community Foundation, Inc.		6,877		-		6,877			100.0	%
Other operating expenses		4,173		3,265		908			27.8	%
Total noninterest expense	$	31,588	$	20,121	$	11,467			57.0	%

Noninterest expense increased $11.5 million, or 57.0%, to $31.6 million for the six months ended June 30, 2011 compared to $20.1 million for the same period ended June 30, 2010.  Salary and employee benefits expense increased $3.1 million which was mainly attributable to $851,000 incurred to phase out the phantom stock plan and the addition of 48 full time equivalent employees to support our three new branches, our commercial lending, accounting and loan workout areas and the implementation of cash management, government banking and a small business lending department.  Occupancy expense increased $272,000, or 13.2%, to $2.3 million based on approximately $223,000 in costs associated with our three new branches which all opened in the past 13 months and increases in rent and maintenance at our corporate and other branch locations.  We incurred FDIC assessments of $1.1 million for the six months ended June 30, 2011, representing a $254,000 increase compared to the same period ended June 30, 2010 primarily due to the growth in our deposit base.  As part of our initial public stock offering in June 2011, we contributed $6.9 million worth of stock to our foundation as we look to continue to grow our relationships within the communities we serve.  Other operating expenses increased $908,000 to $4.2 million primarily due to an increase in professional and consulting fees totaling approximately $619,000 to assist in our Bank’s growth and other various increases in operating costs for the six months ended June 30, 2011 compared to the same period ended June 30, 2010.

Income Tax (Benefit) Expense: Income tax benefit for the six months ended June 30, 2011 was $2.0 million due to the tax treatment for the $6.9 million contribution to our foundation compared to a $1.7 million income tax provision for the six months ended June 30, 2010.

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. Also, 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 totaling $167.8 million 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 June 30, 2011.

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A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2011, $238.7 million of our assets were invested in cash and cash equivalents, of this amount, $167.8 million represented the net proceeds from our stock offering in June 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 six months ended June 30, 2011, loan originations and purchases, net of collected principal and loan sales, totaled $19.3 million.  Cash received from maturities of investment securities totaled $174.6 million for the six months ended June 30, 2011. We purchased $147.0 million of available-for-sale investment securities primarily in U.S treasury obligations during the six months ended June 30, 2011.

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBB, which provides an additional source of funds. At June 30, 2011, we had $68.0 million in advances from the FHLBB and an additional available borrowing limit of $196.4 million based on collateral requirements of the FHLBB. Internal policies limit borrowings to 25.0% of total assets or $408.4 million at June 30, 2011.   Other sources of funds include access to a pre-approved unsecured line of credit with a Bank for $20.0 million, which was undrawn at June 30, 2011.  During 2010, we entered into the Federal Reserve Bank’s discount window loan collateral program that enables us to borrow up to $86.1 million on an overnight basis as of June 30, 2011. The funding arrangement was collateralized by $120.9 million in pledged commercial real estate loans as of June 30, 2011. During 2011, the Company entered into a $3.5 million unsecured line of credit agreement with a bank which expires on October 31, 2011.

We had outstanding commitments to originate loans of $59.4 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $194.5 million at June 30, 2011. At June 30, 2011 and December 31, 2010, time deposits scheduled to mature in less than one year totaled $310.9 million and $362.7 million, respectively. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as FHLBB advances, brokered deposits, our $20.0 million unsecured line of credit with PNC Bank, our $8.8 million secured line of credit with the FHLBB or our $87.8 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.

Our total risk weighted capital to risk weighted assets increased from 10.28% at December 31, 2010 to 25.46% at June 30, 2011, which is above the 10.0% minimum total risk-based capital ratio that the federal and state banking regulations require us to maintain in order to be considered well capitalized. During the first six months in 2011, we were able to maintain our capital levels by purchasing zero-risk weighted investments and making certain other strategic operational decisions until our initial public offering was completed. The $167.8 million net proceeds from the stock offering has significantly strengthened our capital levels allowing us to aggressively pursue our strategic initiatives.

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 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, beginning in mid-2010, we began selling the majority 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 that 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 June 30, 2011, income at risk (i.e., the change in net interest income) increased 12.0% and 16.1% based on a 300 basis point and 400 basis point average increase, respectively, and decreased 0.8% based on a 100 basis point decrease.  The following table depicts the percentage increase and/or decrease in estimated net interest income over twelve months based on the three scenarios run during the three month period ended June 30, 2011:

	Percentage Decrease in Estimated Net Interest Income Over 12 Months
300 basis point increase		12.0	%
400 basis point increase		16.1	%
100 basis point decrease		(0.8	)%

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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 S-1/A filed on May 16, 2011.

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

(a) Not applicable.

(b) On June 29, 2011, First Connecticut Bancorp, Inc. completed its initial public offering in connection with its Plan of Conversion and Reorganization (“Plan”).  As part of the Plan, First Connecticut Bancorp, Inc. converted from a non-stock holding company form of organization to a stock holding company form of organization.  Pursuant to the Registration Statement on Form S-1/A dated May 16, 2011, 17,192,500 shares of First Connecticut Bancorp, Inc. were sold for a purchase price of $10.00 per share.  In connection with the stock offering, the Company established Farmington Bank Community Foundation, Inc., a non-profit charitable organization dedicated to helping the communities the Bank serves. The Foundation was funded with a contribution of 687,700 shares of the Company’s common stock, representing 4% of the outstanding shares.  As a result of completion of the offering, 17,880,200 shares of First Connecticut Bancorp, Inc. common stock were outstanding as of June 30, 2011.

A total of $167.8 million, net of expenses of $4.1 million, was raised in our initial public offering.  Keefe, Bruyette & Woods, Inc. (“KBW”) was engaged to assist in the marketing of our common stock.  For their services, KBW received fees totaling $2.0 million.  Other significant expenses included accounting fees of $803,000, legal fees of $600,000, word processing and printing fees of $243,000 and interest paid on stock order refunds totaling $22,000.

Fifty percent of the net proceeds or $83.9 million, of the stock offering was contributed to Farmington Bank.  As part of the reorganization, Farmington Bank established an Employee Stock Ownership Plan (“ESOP”) for eligible employees. The ESOP borrowed $14.3 million from the Company to purchase up to 1,430,416 shares or 8% of the Company’s common stock sold in the offering in the open market.

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Initially, both First Connecticut Bancorp, Inc and Farmington Bank have invested the net proceeds from the initial public offering in overnight investments.  Current strategies include increasing our focus on commercial lending and continuing to expand commercial banking operations, continuing to focus on consumer and residential lending, which comprises a significant portion of our portfolio and 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.

First Connecticut Bancorp, Inc. common stock is quoted on the NASDAQ Global Select Stock Market under the symbol “FBNK”.

(c) On June 30, 2011, 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
June 29 - 30, 2011	$	300,000	11.16	300,000	1,130,416

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. [Removed and Reserved]

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following exhibits are either filed as part of this report or are incorporated herein by reference:

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).

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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).

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.

63

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FIRST CONNECTICUT BANCORP, INC.
Date: August 15, 2011	/s/ John J. Patrick
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer
Date: August 15, 2011	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer
Date: August 15, 2011	/s/ Kimberly Rozanski Ruppert
	Kimberly Rozanski Ruppert
	Senior Vice President and Principal Accounting Officer

64 

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

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

I, John J. Patrick, certify that:

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

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

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

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

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

b) 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

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

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

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

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

Date: August 15, 2011	/s/ John J. Patrick
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

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

I, Gregory A. White, certify that:

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

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

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

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

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

b) 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

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

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

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

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

Date: August 15, 2011	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

I, John J. Patrick, Chief Executive Officer and President of First Connecticut Bancorp, Inc., a Maryland corporation (the “Company”), certify in my capacity as an officer of the Company that I have reviewed the quarterly report on Form 10-Q for the three and six month periods ended June 30, 2011 (the “Report”) and that to the best of their knowledge:

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

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

Date: August 15, 2011	/s/ John J. Patrick
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer

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

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

I, Gregory A. White, Executive Vice President and Chief Financial Officer of First Connecticut Bancorp, Inc., a Maryland corporation (the “Company”), certify in my capacity as an officer of the Company that I have reviewed the quarterly report on Form 10-Q for the three and six month periods ended June 30, 2011 (the “Report”) and that to the best of their knowledge:

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

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

Date: August 15, 2011	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

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

XML



Consolidated Statements of Condition (Parentheticals) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Statement Of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	17,880,200	17,880,200
Common stock, shares outstanding	17,880,200	17,880,200

XML



Consolidated Statements of Operations (USD $) In Thousands, except Share data	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Interest income
Mortgage	$ 10,595		$ 10,460		$ 21,143		$ 20,837
Other	3,536		3,353		7,148		6,546
Interest and dividends on investments
United States Government and agency obligations	360		1,053		795		2,369
Other bonds	54		58		106		115
Corporate stocks	207		244		274		340
Other interest income	58		24		75		34
Total interest income	14,810		15,192		29,541		30,241
Interest expense
Deposits	1,954		1,962		3,906		4,101
Interest on borrowed funds	531		511		1,056		1,057
Interest on repo borrowings	179		175		358		358
Interest on repurchase liabilities	96		87		220		184
Total interest expense	2,760		2,735		5,540		5,700
Net interest income	12,050		12,457		24,001		24,541
Provision for allowance for loan losses	300		600		600		1,200
Net interest income after provision for loan losses	11,750		11,857		23,401		23,341
Noninterest income
Fees for customer services	860		752		1,647		1,426
Net gain on loans sold	199				345		24
Brokerage and insurance fee income	10		108		134		215
Bank-owned life insurance income	174		184		348		298
Other	50		96		100		164
Total noninterest income	1,293		1,140		2,574		2,127
Noninterest expense
Salaries and employee benefits	7,473		5,674		14,041		10,959
Occupancy expense	1,094		1,020		2,331		2,059
Furniture and equipment expense	990		951		1,965		1,851
FDIC assessment	529		408		1,070		816
Marketing	658		682		1,131		1,171
Contribution of stock to Farmington Bank Community Foundation, Inc.	6,877				6,877
Other operating expenses	2,306		1,735		4,173		3,265
Total noninterest expense	19,927		10,470		31,588		20,121
(Loss) Income before income taxes	(6,884)		2,527		(5,613)		5,347
Income tax (benefit) expense	(2,239)		810		(1,984)		1,727
Net (loss) income	$ (4,645)		$ 1,717		$ (3,629)		$ 3,620
Net loss per share (See Note 2):
Basic and Diluted (1) (in dollars per share)	$ (0.26)	[1]		[1]		[1]		[1]
Weighted average shares outstanding:
Basic and Diluted (in shares)	17,581,225
Pro forma net (loss) earnings per share (2):
Basic and Diluted (in dollars per share)	$ (0.26)	[2]	$ 0.10	[2]	$ (0.21)	[2]	$ 0.21	[2]

[1] Net loss per share reflects earnings for the period from June 29, 2011, the date the Company completed a Plan of Conversion and Reorganization to June 30, 2011.

[2] Pro forma net (loss) earnings 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.

XML



Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 15, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	First Connecticut Bancorp, Inc.
Entity Central Index Key	0001511198
Trading Symbol	fbnk
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		17,880,200
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

XML



Credit Arrangements

6 Months Ended

Jun. 30, 2011

Debt Disclosure [Abstract]

Credit Arrangements

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 June 30, 2011 and December 31, 2010.  As of June 30, 2011, the Company’s access to a pre-approved unsecured line of credit with a bank increased to $20.0 million from $10.0 million at December 31, 2010, which was undrawn at June 30, 2011 and December 31, 2010.  During 2011, the Company entered into a $3.5 million unsecured line of credit agreement with a bank which expires on October 31, 2011.  The Company maintains a balance of $262,500 with the bank to avoid fees associated with the above line.  The line was undrawn at June 30, 2011.

During 2010, the Company entered into the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $86.1 million on an overnight basis as of June 30, 2011 and was undrawn at June 30, 2011 and December 31, 2010. The funding arrangement was collateralized by $120.9 million in pledged commercial real estate loans as of June 30, 2011.

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 $68.0 million and $71.0 million at June 30, 2011 and December 31, 2010, respectively.  Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $451.3 million and $439.7 million at June 30, 2011 and December 31, 2010, 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 and up to 4.5% of its advances (borrowings) from the FHLBB. The carrying value of FHLBB stock approximates fair value based on the redemption provisions of the stock.

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 totaling $25.0 million.  Outstanding borrowings totaled $21.0 million at June 30, 2011 and December 31, 2010.

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 $57.5 million and $84.0 million as of June 30, 2011 and December 31, 2010, respectively. They are secured by the Company’s investment in specific issues of U.S. Treasury obligations, U.S. Government agency obligations and Government sponsored residential mortgage-backed securities with a market value of $76.3 million and $79.0 million as of June 30, 2011 and December 31, 2010, respectively.

XML



Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 and six months ended June 30, 2011 or during the year ended December 31, 2010.

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 June 30, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 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	$	97,998	$	97,998	$	-	$	-
U.S. Goverment agency obligations		5,012		-		5,012		-
Government sponsored residential mortgage-backed securities		25,803		-		25,803		-
Corporate debt securities		1,086		-		1,086		-
Trust preferred debt securities		44		-		-		44
Preferred equity securities		2,095		-		2,095		-
Marketable equity securities		406		116		290		-
Mutual funds		3,379		-		3,379		-
Securities available-for-sale		135,823		98,114		37,665		44
Interest rate swap derivative		1,357		-		1,357		-
Forward loan sales commitments		46		-		-		46
Total	$	137,226	$	98,114	$	39,022	$	90
Liabilities
Interest rate swap derivative	$	1,357	$	-	$	1,357	$	-
Derivative loan commitments		67		-		-		67
Total	$	1,424	$	-	$	1,357	$	67

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, 2010 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	December 31, 2010
			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	$	112,975	$	112,975	$	-	$	-
U.S. Goverment agency obligations		11,080		-		11,080		-
Government sponsored residential mortgage-backed securities		32,294		-		32,294		-
Corporate debt securities		1,052		-		1,052		-
Trust preferred debt securities		44		-		-		44
Preferred equity securities		1,860		-		1,860		-
Marketable equity securities		406		116		290		-
Mutual funds		3,297		-		3,297		-
Securities available for sale		163,008		113,091		49,873		44
Interest rate swap derivative		1,771		-		1,771		-
Total	$	164,779	$	113,091	$	51,644	$	44
Liabilities
Interest rate swap derivative	$	1,771	$	-	$	1,771	$	-
Total	$	1,771	$	-	$	1,771	$	-

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 June 30,				For the Three Months Ended June 30,
	2011		2010		2011			2010
(Dollars in thousands)
Balance at beginning of period	$	44	$	67	$	51		$	-
Transfer into Level 3		-		-		-			-
Accretion		-		-		-			-
Paydowns		-		-		-			-
Total losses (gains) - (realized/unrealized):
Included in earnings		-		-		(30	)		-
Included in other comprehensive income		-		-		-			-
Purchases		-		-		-			-
Sales/Proceeds		-		-		-			-
Balance at the end of period	$	44	$	67	$	21		$	-

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	Securities Available for Sale					Derivative and Forward Loan Sales Commitments, Net
	For the Six Months Ended June 30,					For the Six Months Ended June 30,
	2011		2010			2011		2010
(Dollars in thousands)
Balance at beginning of period	$	44	$	90		$	-	$	-
Transfer into Level 3		-		-			-		-
Accretion		-		(23	)		-		-
Paydowns		-		-			-		-
Total losses - (realized/unrealized):
Included in earnings		-		-			21		-
Included in other comprehensive income		-		-			-		-
Purchases		-		-			-		-
Sales/Proceeds		-		-			-		-
Balance at the end of period	$	44	$	67		$	21	$	-

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 June 30, 2011 and December 31, 2010, 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”) 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.

The following table details the financial instruments carried at fair value on a nonrecurring basis at June 30, 2011 and December 31, 2010 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 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	$	-	$	-	$	551
Loans held for sale		-		1,191		-
Impaired loans		-		-		29,389
Other real estate owned		-		-		95
	December 31, 2010
	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	$	-	$	-	$	457
Loans held for sale		-		862		-
Impaired loans		-		-		25,466
Other real estate owned		-		-		238

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.

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 June 30, 2011 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.

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Nature of Operations and Basis of Presentation

6 Months Ended

Jun. 30, 2011

Accounting Policies [Abstract]

Nature of Operations and Basis of Presentation

1.   Nature of Operations and Basis of Presentation

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.

In connection with the Conversion and Reorganization, the Company established Farmington Bank Community Foundation, Inc., a non-profit charitable organization dedicated to helping the communities the Bank serves. The Foundation was funded with a contribution of 687,700 shares of the Company’s common stock, representing 4% of the outstanding shares.  The stock donation resulted in a $6.9 million contribution expense being recorded and an additional $253,000 deferred tax benefit was recognized as the basis of the contribution for tax purposes is equal to the stock’s trading price on the first day of trading which was higher than the initial issuance price used to record the contribution expense.

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 sold in the offering.  As of June 30, 2011, the ESOP purchased 300,000 shares of common stock at a cost of $3.3 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 (formerly known as Farmington Savings 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 sixteen 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 for Connecticut income tax purposes that was established to service and hold loans collateralized by real property; Village Investments, Inc. which holds the Company’s investment in Infinex Financial Services, a registered broker-dealer; the Village Corp., Limited, a subsidiary that holds certain real estate; 28 Main Street Corp., presently inactive; 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, 2010 included in the Company’s S-1/A filed on May 16, 2011.  The results of operations for the interim periods are not necessarily indicative of the results for the full year.

In preparing the consolidated financial statements, management is required to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition and revenues and expenses for the interim period.  Actual results could differ significantly from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, investment security other-than-temporary impairment judgments and investment security valuation.

Recent Accounting Pronouncements

ASU No. 2011-02, “Receivables (Topic 310) — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” On April 5, 2011, the FASB issued ASU No. 2011-02 to clarify when a loan modification or restructuring is considered a troubled debt restructuring (“TDR”). The changes apply to a lender that modifies a receivable covered by Subtopic 310-40, “Receivables—Troubled Debt Restructurings by Creditors.” In evaluating whether a restructuring constitutes a TDR, a creditor must separately conclude that both of the following exist: (i) the restructuring constitutes a concession and (ii) the debtor is experiencing financial difficulties. A creditor may determine that a debtor is experiencing financial difficulties, even though the debtor is not currently in default, if the creditor determines it is probable that the debtor would default on its payments for any of its debts in the foreseeable future without the loan modification. Lenders who determine that they are making a concession on the terms of the loan to a borrower who is having financial problems should follow the guidance found in ASU No. 2011-02. The guidance on identifying and disclosing TDRs is effective for interim and annual reporting periods beginning on or after June 15, 2011 and applies retrospectively to restructurings occurring on or after the beginning of the year. The guidance on measuring the impairment of a receivable restructured in a troubled debt restructuring is effective on a prospective basis. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements.

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 is currently evaluating the impact of the adoption of this accounting standards update on its consolidated financial statements and does not expect the application of this guidance will have a significant impact as the Company has been accounting for its repurchase agreements as secured financing.

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 is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under the amendments to Topic 220, an entity has 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 choices, 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. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this update do 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. The amendments in this update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. The Company is currently evaluating the impact of the adoption of this accounting standards update on the Company’s consolidated financial statements and related disclosures.

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Pension and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2011

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefit Plans

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 June 30,						Three Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Service cost	$	172		$	142		$	15		$	13
Interest cost		264			256			34			35
Expected return on plan assets		(269	)		(248	)		-			-
Amortization:
(Gain) loss		98			66			-			-
Transition obligation		-			-			-			-
Prior service cost		(31	)		(31	)		(12	)		(12	)
Net periodic benefit cost	$	234		$	185		$	37		$	36
	Pension Benefits						Other Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Service cost	$	344		$	284		$	30		$	26
Interest cost		528			512			68			70
Expected return on plan assets		(538	)		(496	)		-			-
Amortization:
(Gain) loss		196			132			-			-
Transition obligation		-			-			-			-
Prior service cost		(62	)		(62	)		(24	)		(24	)
Net periodic benefit cost	$	468		$	370		$	74		$	72

The Company expects to contribute $1.0 million to the qualified defined benefit plan for the year ended December 31, 2011. Since the supplemental plan and the postretirement benefit plans are unfunded, the expected employer contributions for the year ending December 31, 2011 will be equal to the Company’s estimated future benefit payment liabilities totaling approximately $331,000 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 June 30, 2011, the loan had an outstanding balance of $3.3 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 and six months ended June 30, 2011 was $11,000.

Shares held by the ESOP include the following as of June 30, 2011:

Allocated	-
Committed to be released	1,025
Unallocated	298,975
	300,000

The fair value of unallocated ESOP shares was $3.3 million at June 30, 2011.

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Regulatory Matters

6 Months Ended

Jun. 30, 2011

Regulatory Matters Disclosure [Abstract]

Regulatory Matters

12.  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 June 30, 2011 and December 31, 2010, 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 June 30, 2011 -
Total Capital (to Risk Weighted Assets)	$	195,991		17.93	%	$	87,447		8.00	%	$	109,309		10.00	%
Tier I Capital (to Risk Weighted Assets)		182,285		16.68			43,713		4.00			65,570		6.00
Tier I Capital (to Average Assets)		182,285		11.99			60,812		4.00			76,015		5.00
At December 31, 2010 -
Total Capital (to Risk Weighted Assets)	$	110,772		10.27	%	$	86,309		8.00	%	$	107,886		10.00	%
Tier I Capital (to Risk Weighted Assets)		97,194		9.01			43,155		4.00			64,732		6.00
Tier I Capital (to Average Assets)		97,194		6.47			60,078		4.00			75,097		5.00
First Connecticut Bancorp, Inc.:
At June 30, 2011 -
Total Capital (to Risk Weighted Assets)	$	279,229		25.46	%	$	87,862		8.00	%	$	109,828		10.00	%
Tier I Capital (to Risk Weighted Assets)		265,477		24.20			43,925		4.00			65,887		6.00
Tier I Capital (to Average Assets)		265,477		17.48			60,759		4.00			75,949		5.00
At December 31, 2010 -
Total Capital (to Risk Weighted Assets)	$	110,872		10.28	%	$	86,309		8.00	%	$	107,886		10.00	%
Tier I Capital (to Risk Weighted Assets)		97,294		9.02			43,155		4.00			64,732		6.00
Tier I Capital (to Average Assets)		97,294		6.48			60,097		4.00			75,121		5.00

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

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 June 30, 2011, the Company maintained a cash balance of $2,000,000 with PNC Bank and pledged a mortgage backed security with a fair value of $281,000 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 June 30, 2011, 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;

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

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

The Company is in compliance with the above provisions as of June 30, 2011.

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:

				June 30, 2011							December 31, 2010
	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		17	$	51,839	$	1,357			9	$	42,289	$	1,771
Commercial loan customer interest rate swap position	Other Liabilities		7		26,543		(911	)		10		44,779		(1,497	)
Counterparty interest rate swap position	Other Liabilities		24		78,382		(446	)		19		87,068		(274	)

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:

	Three Months Ended June 30,
	2011								2010
	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	$	505		$	-	$	505		$	295		$	-	$	295
Counterparty interest rate swap position		(505	)		-		(505	)		(295	)		-		(295	)
Total	$	-		$	-	$	-		$	-		$	-	$	-
	Six Months Ended June 30,
	2011								2010
	Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income		Net Impact			Interest Income Recorded in Interest Income			MTM (Loss) Gain Recorded in Noninterest Income		Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position	$	1,076		$	-	$	1,076		$	589		$	-	$	589
Counterparty interest rate swap position		(1,076	)		-		(1,076	)		(589	)		-		(589	)
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 June 30, 2011, outstanding rate locks totaled approximately $8.5 million and outstanding commitments to sell residential mortgage loans totaled approximately $8.4 million.  Forward sales, which include mandatory forward commitments of approximately $6.4 million at June 30, 2011, 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.

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Deposits

6 Months Ended

Jun. 30, 2011

Banking and Thrift [Abstract]

Deposits

6.   Deposits

 Deposits consisted of the following:

	June 30, 2011		December 31, 2010
(Dollars in thousands)
Noninterest-bearing demand deposits	$	173,297	$	150,186
Interest-bearing
NOW accounts		241,077		217,151
Money market		206,580		158,232
Savings accounts		144,409		129,122
Time deposits		411,022		453,677
Club accounts		279		137
Total deposits	$	1,176,664	$	1,108,505

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Consolidated Statement of Changes in Stockholders' Equity (Parentheticals) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Statement Of Stockholders Equity [Abstract]
Expenses related to Issuance of common stock for initial public offering (in dollars)	$ 4.1

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Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share [Abstract]

Earnings Per Share

2.   Earnings Per Share

Basic net (loss) income per common share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed in a manner similar to basic net income (loss) per common share except that the weighted-average number of common shares outstanding is 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 quarter ended June 30, 2011. 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 (loss) 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 period from June 29, 2011 to June 30, 2011:

	For the Period from June 29, 2011 to June 30, 2011
(Dollars in thousands, except Per Share data):
Net loss	$	(4,494	)
Weighted-average common shares		17,581,225
Net loss per common share:
Basic and Diluted	$	(0.26	)

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Investment Securities

6 Months Ended

Jun. 30, 2011

Investments, Debt and Equity Securities [Abstract]

Investment Securities

3.   Investment Securities

Investment securities are summarized as follows:

	June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	97,991	$	7	$	-		$	97,998
U.S. Government agency obligations		5,000		12		-			5,012
Government sponsored residential mortgage-backed securities		24,220		1,589		(6	)		25,803
Corporate debt securities		1,000		86		-			1,086
Trust preferred debt securities		44		-		-			44
Preferred equity securities		2,100		216		(221	)		2,095
Marketable equity securities		398		11		(3	)		406
Mutual funds		3,358		21		-			3,379
Total securities available-for-sale	$	134,111	$	1,942	$	(230	)	$	135,823
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	9	$	-	$	-		$	9
Municipal debt securities		612		-		-			612
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,621	$	-	$	-		$	3,621
	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	112,973	$	2	$	-		$	112,975
U.S. Government agency obligations		11,004		76		-			11,080
Government sponsored residential mortgage-backed securities		30,516		1,780		(2	)		32,294
Corporate debt securities		1,000		52		-			1,052
Trust preferred debt securities		44		-		-			44
Preferred equity securities		2,110		43		(293	)		1,860
Marketable equity securities		398		10		(2	)		406
Mutual funds		3,280		17		-			3,297
Total securities available-for-sale	$	161,325	$	1,980	$	(297	)	$	163,008
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	9	$	-	$	-			9
Municipal debt securities		663		-		-			663
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,672	$	-	$	-		$	3,672

The following table summarizes gross unrealized losses and fair value, aggregated by investment category and length of time the investments have been in a continuous unrealized loss position at June 30, 2011 and December 31, 2010:

	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
June 30, 2011
Available-for-sale:
Government sponsored residential mortgage-backed securities	$	918	$	(6	)	$	-	$	-		$	918	$	(6	)
Preferred equity securities		-		-			1,779		(221	)		1,779		(221	)
Marketable equity securities		-		-			4		(3	)		4		(3	)
Total	$	918	$	(6	)	$	1,783	$	(224	)	$	2,701	$	(230	)
December  31, 2010
Available-for-sale:
Government sponsored residential mortgage-backed securities	$	-	$	-		$	335	$	(2	)	$	335	$	(2	)
Preferred equity securities		95		(5	)		1,722		(288	)		1,817		(293	)
Marketable equity securities		-		-			5		(2	)		5		(2	)
Total	$	95	$	(5	)	$	2,062	$	(292	)	$	2,157	$	(297	)

Management believes that no individual unrealized loss as of June 30, 2011 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 (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral), broad market details and the Company’s intent to sell the security or if it is more likely than not that the Company will be required to sell the debt security before recovering its cost.  The Company also considers whether the depreciation is due to interest rates or credit risk.

The unrealized losses on preferred equity securities relate to one preferred equity security that is rated Baa2 by Moody’s as of June 30, 2011. This security has been in a loss position for 12 months or more. 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 and six months ended June 30, 2011 and 2010, the Company recorded no other-than-temporary impairment charges.

There were no realized losses or gains for the three and six month periods ended June 30, 2011 and 2010.

The amortized cost and estimated market value of debt securities at June 30, 2011 by contractual maturity are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties:

	June 30, 2011
	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	$	97,991	$	97,998	$	612	$	612
Due after one year through five years		5,000		5,012		-		-
Due after five years through ten years		1,000		1,086		-		-
Due after ten years		44		44		3,000		3,000
Mortgage-backed securities		24,220		25,803		9		9
Total debt  securities	$	128,255	$	129,943	$	3,621	$	3,621

The Company, as a member of the Federal Home Loan Bank of Boston (FHLBB), owned $7.4 million of FHLBB capital stock at June 30, 2011 and December 31, 2010, which is equal to its FHLBB capital stock requirement.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2011

Financial Instrument [Abstract]

Fair Value of Financial Instruments

11.  Fair Value of Financial Instruments

FASB ASC 825-10, Fair Value of Financial Instruments , requires disclosure of fair value information about financial instruments, whether or not recognized in the consolidated statements of condition, for which it is practicable to estimate that value.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.  FASB ASC 825-10 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

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 year 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.

ASC 825-10 defines the fair value of demand deposits as the amount payable on demand and prohibits adjusting fair value for any value derived from retaining those deposits for an expected future period of time.  That component is commonly referred to as a deposit base intangible.  This intangible asset is neither considered in the above fair value amounts nor is it recorded as an intangible asset in the consolidated statements of condition.

The following table presents a comparison of the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
(Dollars in thousands)
Financial assets
Cash and due from banks	$	29,034	$	29,034	$	18,608	$	18,608
Federal funds sold		209,628		209,628		-		-
Securities held-to-maturity		3,621		3,621		3,672		3,672
Securities available-for-sale		135,823		135,823		163,008		163,008
Loans held for sale		1,191		1,191		862		862
Loans		1,191,157		1,205,700		1,176,454		1,179,012
Federal Home Loan Bank stock		7,449		7,449		7,449		7,449
Accrued interest receivable		4,063		4,063		4,227		4,227
Financial liabilities
Deposits
Noninterest-bearing demand deposits		173,297		173,297		150,186		150,186
Savings accounts		144,409		144,409		129,122		129,122
Money market		206,580		206,580		158,232		158,232
Time deposits		411,022		413,600		453,677		456,147
NOW accounts		241,077		241,077		217,151		217,151
Club accounts		279		279		137		137
FHLB advances		68,000		70,862		71,000		72,779
Repurchase agreement borrowings		21,000		22,712		21,000		20,939
Mortgagors’ escrow accounts		11,043		11,043		9,717		9,717
Repurchase liabilities		57,472		57,472		84,029		84,029
On-balance sheet derivative financial instruments
Forward loan sales commitments:
Assets		67		67		-		-
Liabilities		-		-		-		-
Interest rate swap derivative liability:
Assets		1,357		1,357		1,771		1,771
Liabilities		1,357		1,357		1,771		1,771
Derivative loan commitments
Assets		-		-		-		-
Liabilities		46		46		-		-

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2011

Receivables [Abstract]

Loans and Allowance for Loan Losses

4.   Loans and Allowance for Loan Losses

Loans consisted of the following:

	June 30, 2011			December 31, 2010
(Dollars in thousands)
Real estate
Residential	$	466,754		$	453,557
Commercial		369,102			361,838
Construction		44,050			46,623
Installment		11,987			12,597
Commercial		121,153			112,535
Collateral		1,984			1,941
Home equity line of credit		85,666			81,837
Demand		173			227
Revolving credit		78			84
Resort		90,210			105,215
Total loans		1,191,157			1,176,454
Less:
Allowance for loan losses		(15,912	)		(20,734	)
Net deferred loan costs		2,326			2,197
Loans, net	$	1,177,571		$	1,157,917

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(Dollars in thousands)	2011			2010			2011			2010
Balance at beginning of period	$	20,562		$	15,812		$	20,734		$	16,316
Provision for loan losses		300			600			600			1,200
Charge-offs		(4,963	)		(245	)		(5,439	)		(1,376	)
Recoveries		13			2			17			29
Balance at end of period	$	15,912		$	16,169		$	15,912		$	16,169

Changes in the allowance for loan losses by segments for the three months ended June 30, 2011 are as follows:

	For the Three Months Ended June 30, 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	$	3,559	$	(69	)	$	-	$	(6	)	$	3,484
Commercial		6,244		-			-		256			6,500
Construction		785		-			-		(183	)		602
Installment		81		-			1		(4	)		78
Commercial		1,743		-			10		105			1,858
Collateral		-		-			-		-			-
Home equity line of credit		565		-			-		64			629
Demand		1		-			2		(2	)		1
Revolving credit		-		(14	)		-		15			1
Resort		7,179		(4,880	)		-		(39	)		2,260
Unallocated		405		-			-		94			499
	$	20,562	$	(4,963	)	$	13	$	300		$	15,912

Changes in the allowance for loan losses by segments for the six months ended June 30, 2011 are as follows:

	For the Six Months Ended June 30, 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	$	(332	)	$	-	$	760		$	3,484
Commercial		7,726		-			-		(1,226	)		6,500
Construction		524		-			-		78			602
Installment		115		(5	)		1		(33	)		78
Commercial		1,564		(169	)		10		453			1,858
Collateral		-		-			-		-			-
Home equity line of credit		558		(25	)		-		96			629
Demand		3		-			6		(8	)		1
Revolving credit		-		(28	)		-		29			1
Resort		7,188		(4,880	)		-		(48	)		2,260
Unallocated		-		-			-		499			499
	$	20,734	$	(5,439	)	$	17	$	600		$	15,912

The following table lists the allocation of the allowance by impairment methodology and by loan segment at June 30, 2011 and December 31, 2010:

Loans individually evaluated for impairment:
	June 30, 2011				December 31, 2010
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate Loans
Residential	$	11,134	$	495	$	7,001	$	358
Commercial		14,240		257		14,211		260
Construction		564		54		897		-
Installment		-		-		-		-
Commercial		2,459		34		2,795		-
Collateral		-		-		-		-
Home Equity line of credit		1,873		41		1,228		48
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		-		-		4,880		4,880
Total	$	30,270	$	881	$	31,012	$	5,546

Loans collectively evaluated for impairment:
	June 30, 2011				December 31, 2010
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate Loans
Residential	$	457,675	$	2,989	$	448,553	$	2,698
Commercial		354,900		6,243		347,625		7,466
Construction		43,467		548		45,715		524
Installment		11,987		79		12,597		115
Commercial		119,088		1,824		110,057		1,564
Collateral		1,984		-		1,941		-
Home Equity line of credit		83,793		588		80,609		510
Demand		173		1		227		3
Revolving Credit		78		-		84		-
Resort		90,068		2,260		100,231		2,308
Total	$	1,163,213	$	14,532	$	1,147,639	$	15,188
Unallocated		-		499		-		-
Total	$	1,193,483	$	15,912	$	1,178,651	$	20,734

The following is a summary of loan delinquencies at recorded investment values at June 30, 2011 and December 31, 2010:

	June 30, 2011
																	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 Loans
Residential		8	$	1,172		3	$	1,042		14	$	9,069		25		11,283	$	-
Commercial		3		697		-		-		9		6,130		12		6,827		-
Construction		-		-		1		1		1		564		2		565		-
Installment		4		114		3		74		2		64		9		252		-
Commercial		1		46		-		-		7		719		8		765		-
Collateral		8		60		1		35		-		-		9		95		-
Home Equity Line of Credit		1		100		-		-		5		1,481		6		1,581		-
Demand		-		-		-		-		1		25		1		25		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		25	$	2,189		8	$	1,152		39	$	18,052		72	$	21,393	$	-
	December 31, 2010
																	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 Loans
Residential		6	$	1,273		6	$	4,624		10	$	4,128		22	$	10,025	$	-
Commercial		2		456		2		793		6		3,160		10		4,409		-
Construction		-		-		-		-		2		897		2		897		-
Installment		4		25		-		-		5		98		9		123		-
Commercial		5		456		-		-		10		761		15		1,217		-
Collateral		4		42		-		-		-		-		4		42		-
Home Equity Line of Credit		2		100		1		24		5		1,843		8		1,967		-
Demand		-		-		-		-		1		25		1		25		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		23	$	2,352		9	$	5,441		39	$	10,912		71	$	18,705	$	-

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

(Dollars in thousands)	June 30, 2011		December 31, 2010
Nonaccrual loans:
Real estate Loans
Residential	$	9,352	$	5,209
Commercial		5,844		3,693
Construction		564		898
Installment		110		124
Commercial		874		862
Collateral		-		-
Home Equity Line of Credit		1,930		2,031
Demand		25		25
Revolving Credit		-		-
Resort		-		4,880
Total nonaccruing loans		18,699		17,722
Loans 90 days past due and still accruing		-		-
Real estate owned		95		238
Total nonperforming assets	$	18,794	$	17,960

The following is a summary of impaired loans at June 30, 2011:

	June 30, 2011
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Real estate Loans
Residential	$	5,510	$	5,555	$	-
Commercial		7,831		8,820		-
Construction		-		-		-
Installment		-		-		-
Commercial		2,421		2,420		-
Collateral		-		-		-
Home Equity Line of Credit		1,099		1,099		-
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		16,861		17,894		-
Impaired loans with a valuation allowance:
Real estate Loans
Residential		5,624		5,939		495
Commercial		6,409		6,408		257
Construction		564		810		54
Installment		-		-		-
Commercial		38		172		34
Collateral		-		-		-
Home Equity Line of Credit		774		870		41
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		13,409		14,199		881
Total impaired loans	$	30,270	$	32,093	$	881

The following is a summary of information pertaining to impaired loans at December 31, 2010:

	December 31, 2010
			Unpaid
	Recorded		Principal		Related
(Dollars in thousands)	Investment		Balance		Allowance
Impaired loans without a valuation allowance:
Real estate Loans
Residential	$	2,710	$	2,703	$	-
Commercial		7,974		8,982		-
Construction		897		1,143		-
Installment		-		-		-
Commercial		2,795		2,803		-
Collateral		-		-		-
Home Equity Line of Credit		999		999		-
Demand		-		-		-
Revolving Credit		-		-		-
Resort		-		-		-
Total		15,375		16,630		-
Impaired loans with a valuation allowance:
Real estate Loans
Residential		4,291		4,306		358
Commercial		6,237		6,237		260
Construction		-		-		-
Installment		-		-		-
Commercial		-		-		-
Collateral		-		-		-
Home Equity Line of Credit		229		300		48
Demand		-		-		-
Revolving Credit		-		-		-
Resort		4,880		4,880		4,880
Total		15,637		15,723		5,546
Total impaired loans	$	31,012	$	32,353	$	5,546

Troubled Debt Restructures

A loan is considered a troubled debt restructuringwhen 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 regular basis and at calendar year-end reporting period per our policy.

The following table presents information on loans whose terms had been modified in a troubled debt restructuring (“TDR”) at June 30, 2011 and December 31, 2010:

	June 30, 2011
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Balance of Loans		Number of Loans		Balance of Loans		Number of Loans		Balance of Loans
Real estate
Residential		4	$	1,351		4	$	5,128		8	$	6,479
Commercial		2		2,216		4		4,559		6		6,775
Construction		-		-		1		564		1		564
Installment		-		-		-		-		-		-
Commercial		1		300		1		147		2		447
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		7	$	3,867		11	$	11,397		18	$	15,264
	December 31, 2010
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate
Residential		5	$	4,449		2	$	697		7	$	5,146
Commercial		5		10,544		3		2,449		8		12,993
Construction		-		-		2		897		2		897
Installment		-		-		-		-		-		-
Commercial		5		1,932		1		146		6		2,078
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		1		999		1		999
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		1		4,880		1		4,880
Total		15	$	16,925		10	$	10,068		25	$	26,993

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 recent 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 affirm our rating accuracy and opine on the overall credit quality of our loan portfolio. The examination 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.

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.

The following table presents the Company’s loans by risk rating at June 30, 2011 and December 31, 2010:

	June 30, 2011
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate Loans
Residential	$	454,992	$	1,286	$	10,476	$	-	$	466,754
Commercial		325,891		8,479		34,732		-		369,102
Construction		40,495		3,555		-		-		44,050
Installment		11,765		112		110		-		11,987
Commercial		100,027		7,178		13,948		-		121,153
Collateral		1,976		8		-		-		1,984
Home Equity Line of Credit		83,124		432		2,110		-		85,666
Demand		148		-		25		-		173
Revolving Credit		78		-		-		-		78
Resort		70,676		5,637		13,897		-		90,210
Total Loans	$	1,089,172	$	26,687	$	75,298	$	-	$	1,191,157
	December 31, 2010
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real Estate Loans
Residential	$	442,255	$	2,025	$	9,277	$	-	$	453,557
Commercial		306,720		13,418		29,037		-		349,175
Construction		51,454		1,611		6,221		-		59,286
Installment		12,452		13		132		-		12,597
Commercial		92,015		5,833		14,687		-		112,535
Collateral		1,933		8		-		-		1,941
Home Equity Line of Credit		79,468		277		2,092		-		81,837
Demand		202		-		25		-		227
Revolving Credit		84		-		-		-		84
Resort		84,981		-		20,234		-		105,215
Total Loans	$	1,071,564	$	23,185	$	81,705	$	-	$	1,176,454

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.

Related Party Loans

During the regular course of its business, the Company makes loans to its executive officers, Directors and other related parties.  These related party loans totaled $597,000 and $831,000 at June 30, 2011 and December 31, 2010, respectively.  All related party loans were performing according to their credit terms.

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Legal Actions

6 Months Ended

Jun. 30, 2011

Loss Contingency [Abstract]

Legal Actions

14.  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.

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Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands, except Share data	Common Stock	Additional Paid In Capital.	Unallocated Common Shares Held By Esop	Retained Earnings	Accumulated Other Comprehensive (Loss) Income - Unrealized Gain On Securities Available-For-Sale	Accumulated Other Comprehensive (Loss) Income - Related To Employee Benefits Plans, Net Of Tax Effect	Total
Balance at Dec. 31, 2010				$ 97,513	$ 1,111	$ (3,631)	$ 94,993
Balance (shares) at Dec. 31, 2010
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for initial public offering, net of expenses of $4.1 million (Note 1)	172	167,628					167,800
Issuance of common stock for initial public offering (in shares)	17,192,500
Issuance of common stock to Farmington Bank Community Foundation, Inc. including additional tax benefit due to higher basis for tax purposes	7	7,123					7,130
Issuance of common stock to Farmington Bank Community Foundation (shares)	687,700
Purchase of common stock for Employee Stock Ownership Plan			(3,348)				(3,348)
ESOP shares committed to be released			11				11
Comprehensive (loss) income:
Net (loss) income				(3,629)			(3,629)
Change in accumulated other comprehensive loss related to employee benefit plans, net of tax effects						71	71
Increase in unrealized gain on available-for-sale securities, net of tax effects					19		19
Total comprehensive loss							(3,539)
Balance at Jun. 30, 2011	$ 179	$ 174,751	$ (3,337)	$ 93,884	$ 1,130	$ (3,560)	$ 263,047
Balance (shares) at Jun. 30, 2011	17,880,200

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Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net (loss) income	$ (3,629)	$ 3,620
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision for allowance for loan losses	600	1,200
Provision for off-balance sheet commitments	5	(8)
Provision for depreciation and amortization	1,549	1,440
Amortization of ESOP expense	11
Contribution of stock to Farmington Bank Community Foundation, Inc.	6,877
Loans originated for sale	(20,975)	(3,230)
Proceeds from the sale of loans held for sale	20,129	3,254
Net gain on loans sold	(345)	(24)
Accretion and amortization of investment security discounts and premiums, net	(63)	125
Amortization and accretion of loan fees and discounts, net	(129)	(215)
Decrease (increase) in accrued income receivable	164	(22)
Deferred income tax benefit	(2,077)
Increase in cash surrender value of bank-owned life insurance	(348)	(298)
Increase in prepaid expenses and other assets	(1,262)	(1,357)
Increase in accrued expenses and other liabilities	7,760	5,087
Net cash provided by operating activities	8,267	9,572
Cash flow from investing activities
Maturities of securities held-to-maturity	260
Sales and maturities of securities available-for-sale	174,320	43,276
Purchases of securities held-to-maturity	(209)	(259)
Purchases of securities available-for-sale	(147,043)	(40,659)
Loan originations, net of principal repayments	(19,263)	(61,029)
Proceeds from sale of foreclosed real estate	143
Purchases of bank-owned life insurance		(5,007)
Purchases of premises and equipment	(801)	(2,799)
Net cash provided by (used in) investing activities	7,407	(66,477)
Cash flows from financing activities
Proceeds from common stock offering, net of offering cost	167,800
Purchase of common stock for ESOP	(3,348)
Net decrease in borrowings	(3,000)	(2,000)
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts	110,814	92,754
Net decrease in certificates of deposit	(42,655)	(20,118)
Net (decrease) increase in repurchase liabilities	(26,557)	3,564
Change in mortgagors' escrow accounts	1,326	945
Net cash provided by financing activities	204,380	75,145
Net increase in cash and cash equivalents	220,054	18,240
Cash and cash equivalents at beginning of period	18,608	28,299
Cash and cash equivalents at end of period	238,662	46,539
Supplemental disclosure of cash flow information
Cash paid for interest	5,538	2,790
Cash paid for income taxes	850	1,075
Loans transferred to other real estate owned		$ 128

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Financial Instruments with Off-Balance Sheet Risk

6 Months Ended

Jun. 30, 2011

Financial Instruments With Off-Balance Sheet Risk Disclosure [Abstract]

Financial Instruments with Off-Balance Sheet Risk

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:

	June 30,		December 31,
	2011		2010
(Dollars in thousands)
Approved loan commitments	$	59,402	$	26,409
Approved resort commitments		-		19,000
Unadvanced portion of construction loans		18,522		20,290
Unadvanced portion of resort loans		26,347		23,602
Unused lines for home equity loans		83,866		80,410
Unused revolving lines of credit		369		355
Unused commercial letters of credit		10,801		9,885
Unused commercial lines of credit		54,550		54,048
	$	253,857	$	233,999

Financial instruments with off-balance sheet risk had a valuation allowance of $246,000 and $242,000 as of June 30, 2011 and December 31, 2010, 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 June 30, 2011 and December 31, 2010, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

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Other Comprehensive Income

6 Months Ended

Jun. 30, 2011

Equity [Abstract]

Other Comprehensive Income

13.  Other Comprehensive Income

The following table represents the components of comprehensive income and other comprehensive income for the six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
(Dollars in thousands)
Net (loss) income	$	(4,645	)	$	1,717		$	(3,629	)	$	3,620
Other comprehensive (loss) income, before tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		131			(55	)		29			(97	)
Less: reclassification adjustment for gains (losses) included in net income		-			-			-			-
Net change in unrealized gains (losses)		131			(55	)		29			(97	)
Change related to employee benefit plans		53			15			107			30
Other comprehensive income (loss), before tax		184			(40	)		136			(67	)
Income tax expense (benefit)		62			(14	)		46			(23	)
Other comprehensive income (loss), net of tax		122			(26	)		90			(44	)
Comprehensive (loss) income	$	(4,523	)	$	1,691		$	(3,539	)	$	3,576

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Consolidated Statements of Condition (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Cash and due from banks	$ 29,034	$ 18,608
Federal funds sold	209,628
Cash and cash equivalents	238,662	18,608
Securities held-to-maturity, at amortized cost	3,621	3,672
Securities available-for-sale, at fair value	135,823	163,008
Loans held for sale	1,191	862
Loans, net	1,177,571	1,157,917
Premises and equipment, net	21,159	21,907
Federal Home Loan Bank of Boston stock, at cost	7,449	7,449
Accrued income receivable	4,063	4,227
Bank-owned life insurance	20,005	19,657
Deferred income taxes	13,691	11,408
Prepaid expenses and other assets	9,034	7,915
Total assets	1,632,269	1,416,630
Liabilities and Stockholders' Equity
Interest-bearing	1,003,367	958,319
Noninterest-bearing	173,297	150,186
Total Domestic Deposits	1,176,664	1,108,505
FHLB advances	68,000	71,000
Repurchase agreement borrowings	21,000	21,000
Mortgagors' escrow accounts	11,043	9,717
Repurchase liabilities	57,472	84,029
Accrued expenses and other liabilities	35,043	27,386
Total liabilities	1,369,222	1,321,637
Commitments and contingencies
Common stock, $0.01 par value, 30,000,000 shares authorized, 17,880,200 shares issued and outstanding	179
Additional paid-in-capital	174,751
Unallocated common stock held by ESOP	(3,337)
Retained earnings	93,884	97,513
Accumulated other comprehensive loss	(2,430)	(2,520)
Total stockholders' equity	263,047	94,993
Total liabilities and stockholders' equity	$ 1,632,269	$ 1,416,630