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, 2012

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 8, 2012, there were 17,538,328 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, 2012 (unaudited) and December 31, 2011	1
	Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 (unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2012 and 2011 (unaudited)	3
	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2012 (unaudited)	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	62
Part II. Other Information
Item 1.	Legal Proceedings	62
Item1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosure	63
Item 5.	Other Information	63
Item 6.	Exhibits	63
Signatures		65
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, 2012			December 31, 2011
(Dollars in thousands)	(Unaudited)
Assets
Cash and due from banks	$	36,727		$	40,296
Federal funds sold		-			50,000
Cash and cash equivalents		36,727			90,296
Securities held-to-maturity, at amortized cost		3,007			3,216
Securities available-for-sale, at fair value		130,386			135,170
Loans held for sale		1,667			1,039
Loans, net		1,415,732			1,295,177
Premises and equipment, net		21,514			21,379
Federal Home Loan Bank of Boston stock, at cost		7,137			7,449
Accrued income receivable		4,174			4,185
Bank-owned life insurance		37,022			30,382
Deferred income taxes		13,735			13,907
Prepaid expenses and other assets		16,330			15,450
Total assets	$	1,687,431		$	1,617,650
Liabilities and Stockholders’ Equity
Deposits
Interest-bearing	$	994,923		$	981,057
Noninterest-bearing		223,820			195,625
		1,218,743			1,176,682
Federal Home Loan Bank of Boston advances		91,000			63,000
Repurchase agreement borrowings		21,000			21,000
Repurchase liabilities		67,534			64,466
Accrued expenses and other liabilities		41,049			40,522
Total liabilities		1,439,326			1,365,670
Commitments and contingencies		-			-
Stockholders’ Equity
Common stock, $0.01 par value, 30,000,000 shares authorized, 17,880,200 shares issued and outstanding at June 30, 2012 and December 31, 2011		179			179
Additional paid-in-capital		174,929			174,836
Unallocated common stock held by ESOP		(15,340	)		(10,490	)
Retained earnings		93,687			92,937
Accumulated other comprehensive loss		(5,350	)		(5,482	)
Total stockholders’ equity		248,105			251,980
Total liabilities and stockholders’ equity	$	1,687,431		$	1,617,650

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 June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
(Dollars in thousands, except per share data)
Interest income
Interest and fees on loans
Mortgage	$	10,882	$	10,595		$	21,992	$	21,143
Other		3,859		3,536			7,748		7,148
Interest and dividends on investments
United States Government and agency obligations		249		360			515		795
Other bonds		60		54			118		106
Corporate stocks		70		71			140		138
Other interest income		26		58			60		75
Total interest income		15,146		14,674			30,573		29,405
Interest expense		.
Deposits		1,643		1,954			3,398		3,906
Interest on borrowed funds		462		531			943		1,056
Interest on repo borrowings		181		179			361		358
Interest on repurchase liabilities		61		96			118		220
Total interest expense		2,347		2,760			4,820		5,540
Net interest income		12,799		11,914			25,753		23,865
Provision for allowance for loan losses		520		300			850		600
Net interest income after provision for loan losses		12,279		11,614			24,903		23,265
Noninterest income
Fees for customer services		900		860			1,716		1,647
Net gain on loans sold		431		199			529		345
Brokerage and insurance fee income		32		10			57		134
Bank owned life insurance income		321		174			640		348
Other		322		186			377		236
Total noninterest income		2,006		1,429			3,319		2,710
Noninterest expense
Salaries and employee benefits		7,619		7,473			15,043		14,041
Occupancy expense		1,098		1,094			2,288		2,331
Furniture and equipment expense		1,112		990			2,211		1,965
FDIC assessment		294		529			573		1,070
Marketing		753		658			1,359		1,131
Contribution to Farmington Bank Community Foundation, Inc.		-		6,877			-		6,877
Other operating expenses		2,285		2,306			4,316		4,173
Total noninterest expense		13,161		19,927			25,790		31,588
Income before income taxes		1,124		(6,884	)		2,432		(5,613	)
Provision for (benefit from) income taxes		293		(2,239	)		610		(1,984	)
Net income (loss)	$	831	$	(4,645	)	$	1,822	$	(3,629	)
Net income (loss) per share (See Note 2):
Basic and Diluted (1):	$	0.05	$	(0.26	)	$	0.11		N/A
Weighted average shares outstanding:
Basic and Diluted		16,686,810		17,581,225			16,735,892		N/A
Pro forma net loss per share (2):
Basic and Diluted		N/A	$	(0.26	)		N/A	$	(0.21	)

(1)= Net loss per share for the three months ended June 30, 2011, 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 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 Statements of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
(Dollars in thousands)
Net income (loss)	$	831		$	(4,645	)	$	1,822		$	(3,629	)
Other comprehensive income (loss), before tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period		(318	)		131			(65	)		29
Less: reclassification adjustment for gains (losses) included in net income		-			-			-			-
Net change in unrealized gains (losses)		(318	)		131			(65	)		29
Change related to employee benefit plans		133			53			265			107
Other comprehensive income (loss), before tax		(185	)		184			200			136
Income tax provision (benefit)		(63	)		62			68			46
Other comprehensive income (loss), net of tax		(122	)		122			132			90
Comprehensive income (loss)	$	709		$	(4,523	)	$	1,954		$	(3,539	)

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

3

First Connecticut Bancorp, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

																	Accumulated Other
																	Comprehensive (Loss) Income
																	Unrealized Gain				Related to
									Unallocated								on Securities				Employee Benefits
						Additional			Common								Available-for-Sale,				Plans,
	Common Stock					Paid in			Shares Held				Retained				Net of				Net of
	Shares		Amount			Capital			by ESOP				Earnings				Tax Effect				Tax Effect				Total
(Dollars in thousands)
Balance at December 31, 2011		17,880,200		$	179		$	174,836		$	(10,490	)		$	92,937			$	650			$	(6,132	)		$	251,980
Purchase of common stock for Employee Stock Ownership Plan “ESOP”		-			-			-			(5,376	)			-				-				-				(5,376	)
ESOP shares released and committed to be released		-			-			93			526				-				-				-				619
Cash dividend paid ($0.06 per common share)		-			-			-			-				(1,072	)			-				-				(1,072	)
Net income		-			-			-			-				1,822				-				-				1,822
Other comprehensive income		-			-			-			-				-				(43	)			175				132
Balance at June 30, 2012		17,880,200			179			174,929			(15,340	)			93,687				607				(5,957	)			248,105

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

4

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended
	June 30,
	2012			2011
(Dollars in thousands)
Cash flows from operating activities
Net income (loss)	$	1,822		$	(3,629	)
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for allowance for loan losses		850			600
Provision for off-balance sheet commitments		12			5
Depreciation and amortization		1,626			1,549
Amortization of ESOP expense		619			11
Contribution of stock to Farmington Bank Community Foundation, Inc.		-			6,877
Loans originated for sale		(18,105	)		(20,975	)
Proceeds from the sale of loans held for sale		18,006			20,129
Loss on sale of foreclosed real estate		18			-
Gain on sale of land		(28	)		-
Net gain on loans sold		(529	)		(345	)
Accretion and amortization of investment security discounts and premiums, net		(53	)		(63	)
Amortization and accretion of loan fees and discounts, net		(670	)		(129	)
Deferred income tax		104			(2,077	)
Decrease in accrued income receivable		11			164
Increase in cash surrender value of bank-owned life insurance		(640	)		(348	)
Increase in prepaid expenses and other assets		(806	)		(1,262	)
Increase in accrued expenses and other liabilities		781			7,760
Net cash provided by operating activities		3,018			8,267
Cash flow from investing activities
Maturities of securities held-to-maturity		209			260
Sales, maturities and calls of securities available-for-sale		142,743			174,320
Purchases of securities held-to-maturity		-			(209	)
Purchases of securities available-for-sale		(137,972	)		(147,043	)
Redemption of Federal Home Loan Bank of Boston stock		312			-
Loan originations, net of principal repayments		(120,921	)		(19,263	)
Purchases of bank-owned life insurance		(6,000	)		-
Proceeds from sale of land		249			-
Proceeds from sale of foreclosed real estate		94			143
Purchases of premises and equipment		(1,982	)		(801	)
Net cash (used in) provided by investing activities		(123,268	)		7,407
Cash flows from financing activities
Proceeds from common stock offering, net of offering cost		-			167,800
Purchase of common stock for ESOP		(5,376	)		(3,348	)
Net increase (decrease) in borrowings		28,000			(3,000	)
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts		65,141			112,140
Net decrease in certificates of deposit		(23,080	)		(42,655	)
Net increase (decrease) in repurchase liabilities		3,068			(26,557	)
Cash dividend paid		(1,072	)		-
Net cash provided by financing activities		66,681			204,380
Net (decrease) increase in cash and cash equivalents		(53,569	)		220,054
Cash and cash equivalents at beginning of period		90,296			18,608
Cash and cash equivalents at end of period	$	36,727		$	238,662
Supplemental disclosure of cash flow information
Cash paid for interest	$	4,790		$	5,538
Cash paid for income taxes		6			850
Loans transferred to other real estate owned		246			-

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

5

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1.  Summary of Significant Accounting Policies

Organization and Business

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

As part of the reorganization, the Company established an Employee Stock Ownership Plan (“ESOP”) for eligible employees. The Company loaned the ESOP the amount needed to purchase up to 1,430,416 shares or 8.0% of the Company’s common stock issued in the offering.  As of June 30, 2012, the ESOP completed its purchase of 1,430,416 shares of common stock at a cost of $16.9 million. The Bank makes annual contributions adequate to fund the payment of regular debt service requirements attributable to the indebtedness of the ESOP.

On July 2, 2012, the Company received regulatory approval to repurchase up to 1,788,020 shares, or 10% of its current outstanding common stock.  Repurchased shares will be held as treasury stock and will be available for general corporate purposes.

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

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

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

6

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

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.

Reclassifications

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

Recent Accounting Pronouncements

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

7

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

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 superseded most of the accounting guidance currently found in Topic 820 of FASB’s ASC. The amendments improved comparability of fair value measurements presented and disclosed in financial statements prepared with GAAP and International Financial Reporting Standards (“IFRS”). The amendments also clarified 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 Company adopted the provisions of ASU No. 2011-04 effective January 1, 2012 and has been applied prospectively.  The fair value measurement provisions of ASU No. 2011-04 had no impact on the Company’s consolidated financial statements.  See Note 10 to the consolidated financial statements for the enhanced disclosures required by ASU No. 2011-04.

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. The Company adopted the provisions of ASU No. 2011-03 effective December 31, 2011.  As the Company accounted for all of its repurchase agreements as collateralized financing arrangements prior to the adoption of ASU No. 2011-03, the adoption had no impact on the Company’s Consolidated Financial Statements.

8

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

2.  Earnings Per Share

Basic net income per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed in a manner similar to basic net income per common share except that the weighted-average number of common shares outstanding 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 period. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted income per common share.

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

The following table sets forth the calculation of basic and diluted earnings per common share for the three and six months ended June 30, 2012 and for the period from June 29, 2011 to June 30, 2011:

	For the Three		For the Six		For the Period from
	Months Ended		Months Ended		June 29, 2011 to
	June 30, 2012		June 30, 2012		June 30, 2011
(Dollars in thousands, except Per Share data):
Net income (loss)	$	831	$	1,822	$	(4,494	)
Weighted-average common shares		16,686,810		16,735,892		17,581,225
Net income (loss) per common share:
Basic and Diluted	$	0.05	$	0.11	$	(0.26	)

9

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

3. Investment Securities

Investment securities are summarized as follows:

	June 30, 2012
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	93,985	$	2	$	(2	)	$	93,985
U.S. Government agency obligations		12,000		18		-			12,018
Government sponsored residential mortgage-backed securities		14,536		1,105		(2	)		15,639
Corporate debt securities		2,946		197		-			3,143
Trust preferred debt securities		37		-		-			37
Preferred equity securities		2,100		81		(529	)		1,652
Marketable equity securities		348		33		(4	)		377
Mutual funds		3,515		20		-			3,535
Total securities available-for-sale	$	129,467	$	1,456	$	(537	)	$	130,386
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	7	$	-	$	-		$	7
Municipal debt securities		-		-		-			-
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,007	$	-	$	-		$	3,007
	December 31, 2011
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	80,999	$	-	$	-		$	80,999
U.S. Government agency obligations		27,003		12		(9	)		27,006
Government sponsored residential mortgage-backed securities		19,254		1,302		(11	)		20,545
Corporate debt securities		1,000		175		-			1,175
Trust preferred debt securities		42		-		-			42
Preferred equity securities		2,100		112		(639	)		1,573
Marketable equity securities		348		22		(4	)		366
Mutual funds		3,439		25		-			3,464
Total securities available-for-sale	$	134,185	$	1,648	$	(663	)	$	135,170
Held-to-maturity
Government sponsored residential mortgage-backed securities	$	7	$	-	$	-		$	7
Municipal debt securities		209		-		-			209
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,216	$	-	$	-		$	3,216

10

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, 2012 and December 31, 2011:

	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
June 30, 2012
Available-for-sale:
U.S. Treasury obligations	$	34,990	$	(2	)	$	-	$	-		$	34,990	$	(2	)
Government sponsored residential mortgage-backed securities		-		-			56		(2	)		56		(2	)
Preferred equity securities		98		(3	)		1,474		(526	)		1,572		(529	)
Marketable equity securities		-		-			3		(4	)		3		(4	)
	$	35,088	$	(5	)	$	1,533	$	(532	)	$	36,621	$	(537	)

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

Management believes that no individual unrealized loss as of June 30, 2012 represents an other-than-temporary impairment, based on its detailed quarterly review of the securities portfolio. Among other things, the other-than-temporary impairment review of the investment securities portfolio focuses on the combined factors of percentage and length of time an issue is below book value as well as consideration of issuer specific factors (present value of cash flows expected to be collected, issuer rating changes and trends, credit worthiness and review of underlying collateral, if applicable). The Company also considers whether or not it has the intent to sell the security prior to maturity as well as the extent to which the unrealized loss is attributable to changes in interest rates.

The unrealized loss on preferred equity securities in a loss position for 12 months or more primarily relates to one preferred equity security that is rated Baa2 by Moody’s as of June 30, 2012. A detailed review of the preferred equity security was completed by management and procedures included an analysis of their most recent financial statements and management concluded that the preferred equity security is not other-than-temporarily impaired.

The Company has no intent to sell nor is it more likely than not that the Company will be required to sell any of the securities contained in the table during the period of time necessary to recover the unrealized losses, which may be until maturity.

11

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

During the three and six months ended June 30, 2012 and 2011, the Company recorded no other-than-temporary impairment charges.

There were no realized gains or losses for the six months ended June 30, 2012 and 2011, respectively.

The amortized cost and estimated market value of debt securities at June 30, 2012 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties:

	June 30, 2012
	Available-for-Sale						Held-to-Maturity
		Amortized Cost		Estimated Market Value			Amortized Cost			Estimated Market Value
(Dollars in thousands)
Due in one year or less		$	93,985		$	93,985		$	-		$	-
Due after one year through five years			14,446			14,573			-			-
Due after five years through ten years			500			588			-			-
Due after ten years			37			37			3,000			3,000
Government sponsored residential mortgage-backed securities			14,536			15,639			7			7
		$	123,504		$	124,822		$	3,007		$	3,007

The Company, as a member of the Federal Home Loan Bank of Boston (FHLBB), owned $7.1 million and $7.4 million of FHLBB capital stock at June 30, 2012 and December 31, 2011, respectively, which is equal to its FHLBB capital stock requirement.

12

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

4.            Loans and Allowance for Loan Losses

Loans consisted of the following:

	June 30, 2012			December 31, 2011
(Dollars in thousands)
Real estate
Residential	$	576,228		$	503,361
Commercial		423,939			408,169
Construction		48,084			46,381
Installment		8,121			10,333
Commercial		180,653			154,300
Collateral		2,165			2,348
Home equity line of credit		126,377			109,771
Demand		25			41
Revolving credit		89			90
Resort		64,755			75,363
Total loans		1,430,436			1,310,157
Less:
Allowance for loan losses		(17,927	)		(17,533	)
Net deferred loan costs		3,223			2,553
Loans, net	$	1,415,732		$	1,295,177

13

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, 2012 and 2011 are as follows:

	For the Three Months Ended June 30,							For the Six Months Ended June 30,
(Dollars in thousands)	2012				2011			2012			2011
Balance at beginning of period		$	17,727		$	20,562		$	17,533		$	20,734
Provision for loan losses			520			300			850			600
Charge-offs			(492	)		(4,963	)		(640	)		(5,439	)
Recoveries			172			13			184			17
Balance at end of period		$	17,927		$	15,912		$	17,927		$	15,912

Changes in the allowance for loan losses by segments for the three months ended June 30, 2012 are as follows:

	For the Three Months Ended June 30, 2012
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,192	$	(70	)	$	5	$	644		$	3,771
Commercial		8,529		(405	)		3		(436	)		7,691
Construction		582		-			-		50			632
Installment		76		-			-		(10	)		66
Commercial		2,253		-			161		506			2,920
Collateral		-		-			-		-			-
Home equity line of credit		1,315		-			-		85			1,400
Demand		-		-			-		-			-
Revolving credit		-		(17	)		3		14			-
Resort		1,650		-			-		(203	)		1,447
Unallocated		130		-			-		(130	)		-
	$	17,727	$	(492	)	$	172	$	520		$	17,927

14

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, 2012 are as follows:

	For the Six Months Ended June 30, 2012
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	2,874	$	(131	)	$	5	$	1,023		$	3,771
Commercial		8,755		(454	)		3		(613	)		7,691
Construction		590		-			-		42			632
Installment		92		(6	)		3		(23	)		66
Commercial		2,140		-			165		615			2,920
Collateral		-		-			-		-			-
Home equity line of credit		1,295		(19	)		-		124			1,400
Demand		-		-			-		-			-
Revolving credit		-		(30	)		8		22			-
Resort		1,787		-			-		(340	)		1,447
	$	17,533	$	(640	)	$	184	$	850		$	17,927

15

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, 2012 and December 31, 2011:

Loans individually evaluated for impairment:

	June 30, 2012				December 31, 2011
(Dollars in thousands)	Total		Reserve Allocation		Total		Reserve Allocation
Real estate
Residential	$	11,148	$	840	$	10,632	$	459
Commercial		17,971		191		17,660		1,245
Construction		726		-		994		34
Installment		7		-		-		-
Commercial		6,304		343		8,099		17
Collateral		-		-		-		-
Home equity line of credit		1,494		455		1,555		455
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		1,871		1		2,054		1
Total	$	39,521	$	1,830	$	40,994	$	2,211

Loans collectively evaluated for impairment:

	June 30, 2012				December 31, 2011
(Dollars in thousands)	Total		Reserve Allocation		Total		Reserve Allocation
Real estate
Residential	$	567,882	$	2,931	$	494,949	$	2,415
Commercial		405,943		7,500		390,466		7,510
Construction		47,313		632		45,346		556
Installment		8,114		66		10,333		92
Commercial		174,941		2,577		146,755		2,123
Collateral		2,165		-		2,348		-
Home equity line of credit		124,888		945		108,219		840
Demand		25		-		41		-
Revolving Credit		89		-		90		-
Resort		62,778		1,446		73,169		1,786
Total	$	1,394,138	$	16,097	$	1,271,716	$	15,322
Unallocated		-		-		-		-
Total	$	1,433,659	$	17,927	$	1,312,710	$	17,533

16

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, 2012 and December 31, 2011:

	June 30, 2012
																	Past Due 90 Days or More and Still Accruing
(Dollars in thousands)	30-59 Days Past Due				60-89 Days Past Due				> 90 Days Past Due				Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount
Real estate
Residential		10	$	1,840		1	$	203		22	$	8,658		33	$	10,701	$	-
Commercial		-		-		-		-		4		1,275		4		1,275		-
Construction		-		-		-		-		1		484		1		484		-
Installment		2		10		3		35		2		54		7		99		-
Commercial		2		190		-		-		4		740		6		930		-
Collateral		5		82		-		-		-		-		5		82		-
Home equity line of credit		1		98		1		70		5		1,526		7		1,694		-
Demand		-		-		-		-		1		25		1		25		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		20	$	2,220		5	$	308		39	$	12,762		64	$	15,290	$	-

	December 31, 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
Residential		12	$	2,955		4	$	730		17	$	7,926		33	$	11,611	$	-
Commercial		1		963		-		-		9		2,934		10		3,897		-
Construction		-		-		-		-		2		484		2		484		-
Installment		5		22		1		78		2		63		8		163		-
Commercial		-		-		-		-		8		802		8		802		-
Collateral		9		70		-		-		-		-		9		70		-
Home equity line of credit		3		204		-		-		6		1,555		9		1,759		-
Demand		1		16		-		-		1		25		2		41		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		31	$	4,230		5	$	808		45	$	13,789		81	$	18,827	$	-

17

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

(Dollars in thousands)	June 30, 2012		December 31, 2011
Nonaccrual loans:
Real estate
Residential	$	8,658	$	9,224
Commercial		1,275		2,934
Construction		484		484
Installment		145		209
Commercial		1,244		956
Collateral		-		-
Home equity line of credit		1,647		1,669
Demand		25		25
Revolving Credit		-		-
Resort		-		-
Total nonaccruing loans		13,478		15,501
Loans 90 days past due and still accruing		-		-
Real estate owned		376		302
Total nonperforming assets	$	13,854	$	15,803

18

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at June 30, 2012:

	June 30, 2012
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash-basis Interest Income Recognized
Impaired loans without a valuation allowance:
Real estate
Residential	$	3,709	$	3,842	$	-	$	4,631	$	8	$	8
Commercial		8,110		8,427		-		9,281		216		206
Construction		726		971		-		530		8		8
Installment		7		7		-		4		-		-
Commercial		4,060		4,060		-		5,941		115		112
Collateral		-		-		-		-		-		-
Home equity line of credit		495		569		-		469		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		104		104		-		90		2		2
Total		17,211		17,980		-		20,946		349		336
Impaired loans with a valuation allowance:
Real estate
Residential		7,439		8,045		840		6,348		46		37
Commercial		9,861		9,860		191		8,908		324		322
Construction		-		-		-		262		-		-
Installment		-		-		-		-		-		-
Commercial		2,244		2,257		343		1,188		32		30
Collateral		-		-		-		-		-		-
Home equity line of credit		999		999		455		999		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,767		1,765		1		1,385		30		30
Total		22,310		22,926		1,830		19,090		432		419
Total impaired loans	$	39,521	$	40,906	$	1,830	$	40,036	$	781	$	755

19

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

	December 31, 2011
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Cash-basis Interest Income Recognized
Impaired loans without a valuation allowance:
Real estate
Residential	$	4,397	$	4,733	$	-	$	5,042	$	425	$	425
Commercial		9,362		9,542		-		8,925		363		363
Construction		510		510		-		128		7		7
Installment		-		-		-		-		-		-
Commercial		7,366		7,356		-		4,806		230		228
Collateral		-		-		-		-		-		-
Home equity line of credit		556		627		-		844		7		7
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		136		134		-		34		-		-
Total		22,327		22,902		-		19,779		1,032		1,030
Impaired loans with a valuation allowance:
Real estate
Residential		6,235		6,504		459		5,876		61		61
Commercial		8,298		9,390		1,245		7,613		611		611
Construction		484		730		34		574		-		-
Installment		-		-		-		-		-		-
Commercial		733		746		17		398		22		22
Collateral		-		-		-		-		-		-
Home equity line of credit		999		999		455		814		2		2
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,918		1,916		1		1,700		16		16
Total		18,667		20,285		2,211		16,975		712		712
Total impaired loans	$	40,994	$	43,187	$	2,211	$	36,754	$	1,744	$	1,742

Troubled Debt Restructuring

A loan is considered a troubled debt restructuring (“TDR”) when we, for economic or legal reasons related to the borrower’s financial difficulties, grant a concession to the borrower in modifying or renewing the loan that we would not otherwise consider. In connection with troubled debt restructurings, terms may be modified to fit the ability of the borrower to repay in line with their current financial status, which may include a reduction in the interest rate to market rate or below, a change in the term or movement of past due amounts to the back-end of the loan or refinancing. A loan is placed on non-accrual status upon being restructured, even if it was not previously, unless the modified loan was current for the six months prior to its modification and we believe the loan is fully collectable in accordance with its new terms. Our policy to restore a restructured loan to performing status is dependent on the receipt of regular payments, generally for a period of six months and one calendar year-end. All troubled debt restructurings are classified as impaired loans and are reviewed for impairment by management on a quarterly basis per our policy.  Management has reviewed the potential TDR population under ASU No. 2011-02, to affirm the classification presented herewith.

20

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The recorded investment balance of TDRs approximated $31.1 million and $31.3 million at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012 and December 31, 2011, the majority of the Company’s TDRs are on accrual status. TDRs on accrual status were $24.9 million and $23.5 million while TDRs on nonaccrual status were $6.2 million and $7.8 million at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012, 100% of the accruing TDRs have been performing in accordance with the restructured terms.  At June 30, 2012 and December 31, 2011, the allowance for loan losses included specific reserves of $1.6 million and $2.0 million related to TDRs, respectively. For the six months ended June 30, 2012 and 2011, the Bank had charge-offs totaling $217,000 and $5.0 million, respectively, related to portions of TDRs deemed to be uncollectible.  The amount of additional funds available to borrowers in TDR status was $754,000 and $1.8 million at June 30, 2012 and December 31, 2011, respectively. The Bank in very rare circumstances may provide additional funds to borrowers in TDR status.

The following table presents information on loans whose terms had been modified in a troubled debt restructuring at June 30, 2012 and December 31, 2011:

	June 30, 2012
	TDRs on Accrual Status					TDRs on Nonaccrual Status					Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
Real estate
Residential		4		$	2,186		5		$	4,221		9		$	6,407
Commercial		12			16,692		-			-		12			16,692
Construction		1			241		1			484		2			725
Installment		1			7		-			-		1			7
Commercial		8			3,906		5			468		13			4,374
Collateral		-			-		-			-		-			-
Home equity line of credit		-			-		1			999		1			999
Demand		-			-		-			-		-			-
Revolving Credit		-			-		-			-		-			-
Resort		2			1,871		-			-		2			1,871
Total		28		$	24,903		12		$	6,172		40		$	31,075

	December 31, 2011
	TDRs on Accrual Status					TDRs on Nonaccrual Status					Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment			Number of Loans		Recorded Investment			Number of Loans		Recorded Investment
Real estate
Residential		3		$	1,075		5		$	5,072		8		$	6,147
Commercial		10			13,760		2			1,254		12			15,014
Construction		1			510		1			484		2			994
Installment		-			-		-			-		-			-
Commercial		10			6,116		-			-		10			6,116
Collateral		-			-		-			-		-			-
Home equity line of credit		-			-		1			999		1			999
Demand		-			-		-			-		-			-
Revolving Credit		-			-		-			-		-			-
Resort		2			2,054		-			-		2			2,054
Total		26		$	23,515		9		$	7,809		35		$	31,324

21

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following tables include the recorded investment and number of modifications for modified loans. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured for the three and six months ended June 30, 2012:

	For the Three Months Ended June 30, 2012								For the Six Months Ended June 30, 2012
(Dollars in thousands)	Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification (1)			Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification (1)
Trouble Debt Restructurings:
Real estate
Residential		1		$	462		$	462		2		$	579		$	577
Commercial		5			8,305			8,305		5			8,305			8,305
Construction		-			-			-		1			242			241
Installment		-			-			-		1			7			7
Commercial		4			169			169		6			2,372			2,084
Total		10		$	8,936		$	8,936		15		$	11,505		$	11,214

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

The following table provides TDR loans that were modified by means of extended maturity, below market adjusted interest rates, a combination of rate and maturity, or by other means including covenant modifications, forbearance and/or the concessions for the three and six months ended June 30, 2012.

	For The Three Months Ended June 30, 2012
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		1	$	-	$	-	$	-	$	462	$	462
Commercial		5		1,754		3,301		-		3,250		8,305
Commercial		4		-		-		169		-		169
Total		10	$	1,754	$	3,301	$	169	$	3,712	$	8,936

	For the Six Months Ended June 30, 2012
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		2	$	-	$	115	$	-	$	462	$	577
Commercial		5		1,754		3,301		-		3,250		8,305
Construction		1		241		-		-		-		241
Installment		1		-		7		-		-		7
Commercial		6		1,915		-		169		-		2,084
Total		15	$	3,910	$	3,423	$	169	$	3,712	$	11,214

22

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

A loan is considered to be in default once it is more than 30 days past due following a modification. There were no loans modified as a TDR that defaulted during the three and six months ended June 30, 2012, and within twelve months of their modification date.

Credit Quality Information

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

23

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

Risk Rating Definitions

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

Loans rated 1 – 5:	Commercial loans in these categories are considered “pass” rated loans with low to average risk.
Loans rated 6:	Residential, Consumer and Commercial loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.
Loans rated 7:	Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
Loans rated 8:	Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
Loans rated 9:	Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

24

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the Company’s loans by risk rating at June 30, 2012 and December 31, 2011:

	June 30, 2012
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate
Residential	$	562,814	$	2,557	$	10,857	$	-	$	576,228
Commercial		381,136		24,060		18,743		-		423,939
Construction		44,488		752		2,844		-		48,084
Installment		7,880		58		183		-		8,121
Commercial		158,091		8,796		13,468		298		180,653
Collateral		2,165		-		-		-		2,165
Home equity line of credit		123,756		655		1,966		-		126,377
Demand		-		-		25		-		25
Revolving Credit		89		-		-		-		89
Resort		48,281		14,605		1,869		-		64,755
Total Loans	$	1,328,700	$	51,483	$	49,955	$	298	$	1,430,436

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

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

25

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 $728,000 and $561,000 at June 30, 2012 and December 31, 2011, respectively.  All related party loans were performing according to their credit terms.

5.   Credit Arrangements

The Company has access to a pre-approved line of credit with the Federal Home Loan Bank of Boston (“FHLBB”) for $8.8 million, which was undrawn at June 30, 2012 and December 31, 2011.  The Company has access to a pre-approved unsecured line of credit with a bank totaling $20.0 million, which was undrawn at June 30, 2012 and December 31, 2011.  The Company has access to a $3.5 million unsecured line of credit agreement with a bank which expires on December 31, 2012.  The Company maintains a balance of $262,500 with the bank to avoid fees associated with the above line.  The line was undrawn at June 30, 2012 and December 31, 2011.

The Company participates in the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $79.8 million and $84.6 million on an overnight basis at June 30, 2012 and December 31, 2011, respectively, and was undrawn as of June 30, 2012 and December 31, 2011. The funding arrangement was collateralized by $125.8 million and $119.4 million in pledged commercial real estate loans as of June 30, 2012 and December 31, 2011, respectively.

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

FHLBB advances totaled $91.0 million and $63.0 million at June 30, 2012 and December 31, 2011, respectively.  Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $558.1 million and $486.3 million at June 30, 2012 and December 31, 2011, respectively. The Company is required to acquire and hold shares of capital stock in the FHLBB in an amount at least equal to the sum of 0.35% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or up to 4.5% of its advances (borrowings) from the FHLBB. The carrying value of FHLBB stock approximates fair value based on the redemption provisions of the stock.

The Bank has a Master Repurchase Agreement borrowing facility with a broker.  Borrowings under the Master Repurchase Agreement are secured by the Company’s investments in certain treasury bill securities with a fair value of $25.0 million and cash of $451,000.  Outstanding borrowings totaled $21.0 million at June 30, 2012 and December 31, 2011.

The Bank offers overnight repurchase liability agreements to commercial or municipal customers whose excess deposit account balances are swept daily into collateralized repurchase liability accounts. The Bank had repurchase liabilities outstanding of $67.5 million and $64.5 million at June 30, 2012 and December 31, 2011, respectively. They are secured by the Company’s investment in specific issues of U.S. Treasury obligations, Government sponsored residential mortgage-backed securities and U.S. Government agency obligations with a market value of $77.6 million and $79.2 million as of June 30, 2012 and December 31, 2011, respectively.

26

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

6. Deposits

Deposits consisted of the following:

	June 30, 2012		December 31, 2011
	Amount		Amount
(Dollars in thousands)
Noninterest-bearing demand deposits	$	223,820	$	195,625
Interest-bearing
NOW accounts		181,464		189,577
Money market		272,287		247,693
Savings accounts		178,378		157,913
Time deposits		362,794		385,874
Total deposits	$	1,218,743	$	1,176,682

We had no brokered deposits as of June 30, 2012 and December 31, 2011; however, we have established a relationship to participate in a reciprocal deposit program with other financial institutions as a service to our customers. This program provides enhanced FDIC insurance to participating customers.

7. Pension and Other Postretirement Benefit Plans

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

	Pension Benefits						Other Postretirement Benefits
	Three Months Ended June 30,						Three Months Ended June 30,
	2012			2011			2012			2011
(Dollars in thousands)
Service cost	$	125		$	172		$	15		$	15
Interest cost		272			264			34			34
Expected return on plan assets		(265	)		(269	)		-			-
Amortization:
Loss		169			98			-			-
Transition obligation		-			-			-			-
Prior service cost		(32	)		(31	)		(12	)		(12	)
Net periodic benefit cost	$	269		$	234		$	37		$	37

	Pension Benefits						Other Postretirement Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
(Dollars in thousands)
Service cost	$	250		$	344		$	30		$	30
Interest cost		544			528			68			68
Expected return on plan assets		(518	)		(538	)		-			-
Amortization:
Loss		338			196			-			-
Transition obligation		-			-			-			-
Prior service cost		(63	)		(62	)		(24	)		(24	)
Net periodic benefit cost	$	551		$	468		$	74		$	74

27

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company contributed a total of $1.0 million to the qualified defined benefit plan for the period ended June 30, 2012.  Since the supplemental plan and the postretirement benefit plans are unfunded, the expected employer contributions for the year ending December 31, 2012 will be equal to the Company’s estimated future benefit payment liabilities less any participant contributions.

As part of the reorganization, the Company established the ESOP to provide eligible employees the opportunity to own Company stock.  The Company provided a loan to the Farmington Bank Employee Stock Ownership Plan Trust in the amount needed to purchase up to 1,430,416 shares of the Company’s common stock in the open market subsequent to the initial public offering.  The loan bears an interest rate equal to the Wall Street Journal Prime Rate plus one percentage point, adjusted annually, and provides for annual payments of interest and principal over the 15 year term of the loan.  At June 30, 2012, the loan had an outstanding balance of $15.7 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, 2012 was $309,000 and $619,000, respectively.

Shares held by the ESOP include the following as of June 30, 2012:

Allocated	95,361
Committed to be released	47,420
Unallocated	1,287,635
	1,430,416

The fair value of unallocated ESOP shares was $17.4 million at June 30, 2012.

8. Derivative Financial Instruments

Non-Hedge Accounting Derivatives/Non-designated Hedges:

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

For every variable interest rate swap agreement entered into with a commercial customer, the Company simultaneously enters into a fixed rate interest rate swap agreement with a correspondent bank, 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, 2012, the Company maintained a cash balance of $9.0 million with PNC Bank and pledged a mortgage backed security with a fair value of $89,000 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, 2012, the Company’s agreement would require PNC Bank to secure any outstanding receivable in excess of $10.0 million.

28

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, 2012.

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

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

					June 30, 2012									December 31, 2011
	Consolidated							Estimated									Estimated
	Balance Sheet	# of			Notional			Fair				# of		Notional			Fair
	Location		Instruments		Amount			Values				Instruments		Amount			Values
(Dollars in thousands)
Commercial loan customer interest rate swap position	Other Assets			33		$	101,539		$	8,474			28		$	83,897		$	6,812
Counterparty interest rate swap position	Other Liabilities			33			101,539			(8,474	)		28			83,897			(6,812	)

29

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

	For The Three Months Ended June 30,
	2012									2011
					MTM (Loss)									MTM (Loss)
	Interest Income				Gain Recorded						Interest Income			Gain Recorded
	Recorded in				in Noninterest						Recorded in			in Noninterest
	Interest Income				Income		Net Impact				Interest Income			Income		Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position		$	572		$	-	$	572			$	505		$	-	$	505
Counterparty interest rate swap position			(572	)		-		(572	)			(505	)		-		(505	)
Total		$	-		$	-	$	-			$	-		$	-	$	-

	For The Six Months Ended June 30,
	2012									2011
					MTM (Loss)									MTM (Loss)
	Interest Income				Gain Recorded						Interest Income			Gain Recorded
	Recorded in				in Noninterest						Recorded in			in Noninterest
	Interest Income				Income		Net Impact				Interest Income			Income		Net Impact
(Dollars in thousands)
Commercial loan customer interest rate swap position		$	1,121		$	-	$	1,121			$	1,076		$	-	$	1,076
Counterparty interest rate swap position			(1,121	)		-		(1,121	)			(1,076	)		-		(1,076	)
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, 2012, outstanding rate locks totaled approximately $9.0 million and outstanding commitments to sell residential mortgage loans totaled approximately $10.1 million.  Forward sales, which include mandatory forward commitments of approximately $6.3 million at June 30, 2012, establish the price to be received upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk. There is, however, still certain execution risk specifically related to the Company’s ability to close and deliver to its investors the mortgage loans it has committed to sell.

30

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, 2012		December 31, 2011
(Dollars in thousands)
Approved loan commitments	$	41,892	$	21,483
Unadvanced portion of construction loans		34,999		23,268
Unadvanced portion of resort loans		8,109		4,950
Unused lines for home equity loans		130,250		106,430
Unused revolving lines of credit		380		365
Unused commercial letters of credit		9,251		9,925
Unused commercial lines of credit		114,322		100,585
	$	339,203	$	267,006

Financial instruments with off-balance sheet risk had a valuation allowance of $325,000 and $270,000 as of June 30, 2012 and December 31, 2011, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the counterparty.  Collateral held is primarily residential property and commercial assets.

At June 30, 2012 and December 31, 2011, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

31

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 six months ended June 30, 2012 or during the year ended December 31, 2011.

32

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, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 2012
(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury obligations	$	93,985	$	93,985	$	-	$	-
U.S. Government agency obligation		12,018		-		12,018		-
Government sponsored residential mortgage-backed securities		15,639		-		15,639		-
Corporate debt securities		3,143		-		3,143		-
Trust preferred debt securities		37		-		-		37
Preferred equity securities		1,652		-		1,652		-
Marketable equity securities		377		137		240		-
Mutual funds		3,535		-		3,535		-
Securities available-for-sale		130,386		94,122		36,227		37
Interest rate swap derivative		8,474		-		8,474		-
Derivative loan commitments		134		-		-		134
Total	$	138,994	$	94,122	$	44,701	$	171
Liabilities
Interest rate swap derivative	$	8,474	$	-	$	8,474	$	-
Forward loan sales commitments		10		-		-		10
Total	$	8,484	$	-	$	8,474	$	10

33

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

	December 31, 2011
(Dollars in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury obligations	$	80,999	$	80,999	$	-	$	-
U.S. Government agency obligations		27,006		-		27,006		-
Government sponsored residential mortgage-backed securities		20,545		-		20,545		-
Corporate debt securities		1,175		-		1,175		-
Trust preferred debt securities		42		-		-		42
Preferred equity securities		1,573		-		1,573		-
Marketable equity securities		366		126		240		-
Mutual funds		3,464		-		3,464		-
Securities available-for-sale		135,170		81,125		54,003		42
Interest rate swap derivative		6,812		-		6,812		-
Total	$	141,982	$	81,125	$	60,815	$	42
Liabilities
Interest rate swap derivative	$	6,812	$	-	$	6,812	$	-
Forward loan sales commitments		5		-		-		5
Derivative loan commitments		39		-		-		39
Total	$	6,856	$	-	$	6,812	$	44

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

	Securities Available for Sale					Derivative and Forward Loan Sales Commitments, Net
	For the Three Months Ended June 30,					For the Three Months Ended June 30,
	2012			2011		2012			2011
(Dollars in thousands)
Balance, at beginning of period	$	40		$	44	$	(28	)	$	51
Paydowns		(3	)		-		-			-
Total gains (losses) - (realized/unrealized):
Included in earnings		-			-		152			(30	)
Balance, at the end of period	$	37		$	44	$	124		$	21

34

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,
	2012			2011		2012			2011
(Dollars in thousands)
Balance, at beginning of period	$	42		$	44	$	(44	)	$	-
Paydowns		(5	)		-		-			-
Total gains - (realized/unrealized):
Included in earnings		-			-		168			21
Balance, at the end of period	$	37		$	44	$	124		$	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, 2012 and December 31, 2011, the Company did not use the pricing service for its Level 3 securities, which consisted of pooled trust preferred debt securities.  Therefore, management obtained a price by using a discounted cash flows analysis and a market bid indication.

The Company utilizes a third party, nationally-recognized pricing service (“pricing service”), subject to review by management, to estimate fair value measurements for almost 100% of its investment securities portfolio.  The pricing service evaluates each asset class based on relevant market information considering observable data that may include dealer quotes, reported trades, market spreads, cash flows, the U.S. Treasury yield curve, the LIBOR swap yield curve, trade execution data, market prepayment speeds, credit information and the bond’s terms and conditions, among other things.  The fair value prices on all investment securities are reviewed for reasonableness by management.  Also, management assessed the valuation techniques used by the pricing service based on a review of their pricing methodology to ensure proper hierarchy classifications.

Interest Rate Swap Derivative Receivable and Liability: The Company’s derivative positions are valued using proprietary models that use as their basis readily observable market parameters and are classified within Level 2 of the valuation hierarchy.  Such derivatives are basic interest rate swaps that do not have any embedded interest rate caps and floors.  

Forward loan sale commitments and derivative loan commitments: Forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. Significant management judgment and estimation is required in determining these fair value measurements. Derivatives that are valued based upon models with significant unobservable market parameters and that are normally traded less actively or have trade activity that is one way are classified within Level 3 of the valuation hierarchy.

35

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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, 2012 and December 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	June 30, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(Dollars in thousands)
Mortgage servicing rights	$	-	$	-	$	607
Loans held for sale		-		1,667		-
Impaired loans		-		-		37,691
Other real estate owned		-		-		376
	December 31, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(Dollars in thousands)
Mortgage servicing rights	$	-	$	-	$	594
Loans held for sale		-		1,039		-
Impaired loans		-		-		38,783
Other real estate owned		-		-		302

36

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, 2012 is the result of either sufficient cash flow or sufficient collateral coverage, or previous charge off amount that reduced the book value of the loan to an amount equal to or below the fair value of the collateral. Impaired loans are measured based on either collateral values supported by appraisals, observed market prices or where potential losses have been identified and reserved accordingly. Updated appraisals are obtained at least annually for impaired loans $250,000 or greater. Management performs a quarterly review of the valuation of impaired loans and considers the current market and collateral conditions for collateral dependent loans when estimating their fair value for purposes of determining whether an allowance for loan losses is necessary for impaired loans.  When assessing the collateral coverage for an impaired loan, management discounts appraisals based upon the age of the appraisal, anticipated selling charges and any other costs needed to prepare the collateral for sale to determine its net realizable value.

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

37

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at June 30, 2012:

(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
Mortgage servicing rights	$	607	Discounted cash flows	Prepayment speed	6.5% - 8.7%
				Discount rate	23.0% - 30.7%
Impaired loans	$	37,691	Appraisals	Discount for dated appraisal	0% - 20%
				Discount for costs to sell	8% - 15%
Other real estate owned	$	376	Appraisals	Discount for costs to sell	8% - 10%

Disclosures about Fair Value of Financial Instruments

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

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

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

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

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

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

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.

38

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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:  The fair values of interest rate swap agreements are calculated using a discounted cash flow approach and utilize observable inputs such as the LIBOR swap curve, effective date, maturity date, notional amount, and stated interest rate.

Derivative Loan Commitments:  The fair values of derivative loan commitments are calculated based on the value of the underlying loan, which in turn is based on quoted prices for similar loans in the secondary market. However, the value is adjusted by a factor which considers the likelihood that the loan in a lock position will ultimately close. This factor, the closing ratio, is derived from the Company’s internal data and is adjusted using significant management judgment.

Forward Loan Sale Commitments:  Forward loan sale commitments are primarily based on quoted prices from the secondary market based on the settlement date of the contracts, interpolated or extrapolated, if necessary, to estimate a fair value as of the end of the reporting period.

Forward Loan Sale Commitments: Forward loan sale commitments are primarily based on quoted prices from the secondary market based on the settlement date of the contracts, interpolated or extrapolated, if necessary, to estimate a fair value as of the end of the reporting period.

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of June 30, 2012 and December 31, 2011.  This table excludes financial instruments for which the carrying amount approximates fair value.  For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. 

		June 30, 2012				December 31, 2011
	Fair Value Hierarchy Level	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
(Dollars in thousands)
Financial assets
Securities held-to-maturity	See previous table	$	3,007	$	3,007	$	3,216	$	3,216
Securities available-for-sale	See previous table		130,386		130,386		135,170		135,170
Loans	Level 3		1,430,436		1,455,101		1,310,157		1,333,262
Financial liabilities
Deposits
Noninterest-bearing demand deposits	Level 1		223,820		223,820		195,625		195,625
NOW accounts	Level 1		181,464		181,464		189,577		189,577
Money market	Level 1		272,287		272,287		247,693		247,693
Savings accounts	Level 1		178,378		178,378		157,913		157,913
Time deposits	Level 2		362,794		366,435		385,874		389,857
FHLB advances	Level 2		91,000		93,646		63,000		65,812
Repurchase agreement borrowings	Level 2		21,000		22,836		21,000		22,963
Repurchase liabilities	Level 2		67,534		67,537		64,466		64,466
On-balance sheet derivative financial instruments:
Forward loan sales commitments:
Assets	Level 3		-		-		-		-
Liabilities	Level 3		10		10		5		5
Interest rate swap derivative:
Assets	Level 2		8,474		8,474		6,812		6,812
Liabilities	Level 2		8,474		8,474		6,812		6,812
Derivative loan commitments:
Assets	Level 3		134		134		-		-
Liabilities	Level 3		-		-		39		39

39

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 11. Regulatory Matters

Capital guidelines of the Federal Reserve Board and the Federal Deposit Insurance Corporation (“FDIC”) require the Company and the Bank to maintain certain minimum ratios, as set forth below.  At June 30, 2012 and December 31, 2011, the Company and the Bank were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the FDIC, respectively, and in compliance with the applicable capital requirements.

The following table presents the actual capital amounts and ratios for the Company and the Bank:

	Actual					Minimum Required for Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Farmington Bank:
At June 30, 2012 -
Total Capital (to Risk Weighted Assets)	$	200,023		15.18	%	$	105,414		8.00	%	$	131,767		10.00	%
Tier I Capital (to Risk Weighted Assets)		183,533		13.93			52,702		4.00			79,052		6.00
Tier I Capital (to Average Assets)		183,533		11.04			66,497		4.00			83,122		5.00
At December 31, 2011 -
Total Capital (to Risk Weighted Assets)	$	196,763		16.20	%	$	97,167		8.00	%	$	121,459		10.00	%
Tier I Capital (to Risk Weighted Assets)		181,550		14.95			48,575		4.00			72,863		6.00
Tier I Capital (to Average Assets)		181,550		10.97			66,199		4.00			82,748		5.00
First Connecticut Bancorp, Inc.:
At June 30, 2012 -
Total Capital (to Risk Weighted Assets)	$	269,717		20.43	%	$	105,616		8.00	%	$	132,020		10.00	%
Tier I Capital (to Risk Weighted Assets)		253,194		19.18			52,804		4.00			79,206		6.00
Tier I Capital (to Average Assets)		253,194		15.21			66,586		4.00			83,233		5.00
At December 31, 2011 -
Total Capital (to Risk Weighted Assets)	$	272,365		22.38	%	$	97,360		8.00	%	$	121,700		10.00	%
Tier I Capital (to Risk Weighted Assets)		257,152		21.13			48,680		4.00			73,020		6.00
Tier I Capital (to Average Assets)		257,152		15.51			66,319		4.00			82,899		5.00

  12. Legal Actions

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

40

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

Forward-Looking Statements

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

● statements of our goals, intentions and expectations;

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

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

● estimates of our risks and future costs and benefits.

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

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

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

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

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

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

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

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

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

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

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

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

● Our stock value may be negatively affected by federal regulations and articles of incorporation provisions restricting takeovers.

41

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

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

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

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

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

General

Established in 1851, Farmington Bank is a full-service, community bank with 18 full service branch offices and 4 limited services offices, including our main office, located throughout Hartford County, Connecticut. Farmington Bank is expecting to open its 19th full service branch in South Windsor, Connecticut during the fourth quarter of 2012. Farmington Bank provides a diverse range of commercial and consumer services to businesses, individuals and governments across central Connecticut.

Our Business Strategy

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

  ● maintaining a strong capital position in excess of the well-capitalized standards set by our banking regulators to support our current operations and future growth;

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

  ● continuing to focus on consumer and residential lending;

  ● maintaining asset quality and prudent lending standards;

  ● expanding our existing products and services and developing new products and services to meet the changing needs of consumers and businesses in our market area;

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

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

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

42

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

  ● continuing our efforts to control non-interest expenses.

Critical Accounting Policies

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

Allowance for Loan Losses

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

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

General component:

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort.  Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development and residential subdivision construction loans. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no material changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses for the six months ended June 30, 2012.

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

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

43

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

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

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

Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

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

Resort – Loans in this segment include direct receivable and inventory loans, loans to timeshare developer / operators and participations in timeshare loans originated by experienced timeshare lending institutions, which originate and sell timeshare participations to other lending institutions. Lending to this industry is generally done on a nationwide basis, as the majority of timeshare operators are located outside of the Northeast. The Company currently owns a limited amount of inventory loans. Receivable loans, which account for 95% of the resort portfolio at June 30, 2012, are typically underwritten utilizing a lending formula in which loan advances are based on a percentage of eligible consumer notes. In addition, these loans generally contain provisions for recourse to the developer, the obligation of the developer to replace defaulted notes, and parameters with respect to minimum FICO scores or average weighted FICO scores of the portfolio of pledged notes. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.

44

Allocated component:

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

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Management updates the analysis quarterly. The assumptions used in appraisals are reviewed for appropriateness. Updated appraisals or valuations are obtained as needed or adjusted to reflect the estimated decline in the fair value based upon current market conditions for comparable properties.

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

45

Unallocated component:

An unallocated component is maintained, when needed, to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. The Company’s Loan Policy allows management to utilize a high and low range of 0.0% to 5.0% of our total allowance for loan losses when establishing an unallocated allowance, when considered necessary. The unallocated allowance is used to provide for an unidentified loss that may exist in emerging problem loans that cannot be fully quantified or may be affected by conditions not fully understood as of the balance sheet date.

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

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

Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis. Marketable equity and debt securities are classified as either trading, available-for-sale, or held-to-maturity (applies only to debt securities). Management determines the appropriate classifications of securities at the time of purchase. At June 30, 2012 and December 31, 2011, we had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which we have the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.

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

46

Income Taxes:  Deferred income taxes are provided for differences arising in the timing of income and expenses for financial reporting and for income tax purposes.  Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The Company provides a deferred tax asset valuation allowance for the estimated future tax effects attributable to temporary differences and carryforwards when realization is determined not to be more likely than not.

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

Pension and Other Post-retirement Benefits: We have a noncontributory defined benefit pension plan that provides benefits for substantially all employees hired before January 1, 2007 who meet certain requirements as to age and length of service. The benefits are based on years of service and average compensation, as defined in the Plan Document. Our funding policy is to contribute an amount that would not exceed the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Security Act of 1974.

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

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

47

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. The Company had no dilutive or anti-dilutive common shares outstanding 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.

48

Comparison of Financial Condition at June 30, 2012 and December 31, 2011

Total assets increased $69.8 million or 4.3%, to $1.7 billion at June 30, 2012, from $1.6 billion at December 31, 2011, primarily due to a $120.6 million increase in loans and $6.7 million increase in bank-owned life insurance, offset by a $53.6 million decrease in cash and cash equivalents and a $4.8 million decrease in securities.  Cash and cash equivalents decreased $53.6 million to $36.7 million at June 30, 2012 compared to $90.3 million at December 31, 2011 primarily as a result of a $120.6 million increase in loans offset by $42.1 million increase in deposits.  Federal Home Loan Bank of Boston advances increased $28.0 million to $91.0 million at June 30, 2012 compared to $63.0 million at December 31, 2011.

Our investment portfolio totaled $133.4 million or 7.9% of total assets and $138.4 million or 8.6% of total assets at June 30, 2012 and December 31, 2011, respectively. Available-for-sale investment securities totaled $130.4 million at June 30, 2012 compared to $135.2 million at December 31, 2011, a decrease of $4.8 million primarily due to lower collateral requirements for our municipal deposits and commercial repurchase agreements.  The Company purchases short-term U.S. Treasury and agency securities in order to meet municipal deposit and commercial repurchase agreement collateral requirements and to minimize interest rate risk during the sustained low interest rate environment.

The net unrealized gains on securities available-for-sale, on a pre-tax basis, decreased by $66,000 to $1.5 million at June 30, 2012. As of June 30, 2012 and December 31, 2011, our available-for-sale investment securities portfolio gross unrealized losses equaled $537,000 and $663,000, respectively, of which $532,000 and $632,000, respectively, were from securities that had been in a loss position of twelve months or more. Management does not believe that the unrealized loss represents an other-than-temporary impairment.

Net loans increased $120.6 million or 9.3% at June 30, 2012 to $1.4 billion compared to $1.3 billion at December 31, 2011 due to our continued focus on residential and commercial lending.  Our residential and commercial portfolios increased $133.3 million, offset by a $10.6 million decrease in resort loans as we are gradually exiting the resort financing market.  At June 30, 2012 and December 31, 2011, respectively, the loan portfolio consisted of $576.2 million and $503.4 million in residential real estate loans, $423.9 million and $408.2 million in commercial real estate loans, $48.1 million and $46.4 million in construction loans, $180.7 million and $154.3 million in commercial loans, $126.4 million and $109.8 million in home equity lines of credit loans, $64.8 million and $75.4 million in resort loans and $10.4 million and $12.8 million in installment, collateral, demand and revolving credit loans.

The allowance for loan losses had a slight increase to $17.9 million at June 30, 2012 from $17.5 million at December 31, 2011.  Impaired loans decreased $1.5 million to $39.5 million as of June 30, 2012 from $41.0 million as of December 31, 2011.  Non-performing loans decreased to $13.5 million at June 30, 2012 from $15.5 million at December 31, 2011. At June 30, 2012, the allowance for loan losses represented 1.25% of total loans and 133.01% of non-performing loans, compared to 1.34% of total loans and 113.11% of non-performing loans as of December 31, 2011. Net charge-offs for the six months ended June 30, 2012 were $456,000 or 0.07%, compared to net charge-offs for the same period in the prior year of $5.4 million or 0.92% of average loans outstanding. Loan delinquencies 30 days and greater decreased $3.5 million at June 30, 2012 to $15.3 million compared to $18.8 million at December 31, 2011.  We take a proactive approach in working with customers to help ensure that they remain current on their loans.  Past due loans are primarily in our residential portfolio and are due to weak economic conditions leading to stress on cash flows of our borrowers.

Bank-owned life insurance increased $6.6 million to $37.0 million at June 30, 2012 from $30.4 million at December 31, 2011 primarily due to the purchase of an additional $6.0 million in bank-owned life insurance.

Deposits increased $42.1 million or 3.6% to $1.2 billion at June 30, 2012 compared to December 31, 2011. Interest-bearing deposits grew $13.9 million to $1.0 billion and noninterest-bearing demand deposits totaled $223.8 million at June 30, 2012, an increase of $28.2 million or 14.4% from December 31, 2011.  Total deposits increased $64.7 million compared to December 31, 2011, excluding municipal deposits, with the majority coming from small business accounts, savings accounts and accounts related to the opening of our 18th branch in Bloomfield, Connecticut in May 2012.  Municipal deposits were $97.5 million and $120.2 million at June 30, 2012 and December 31, 2011, respectively.

49

Total stockholders’ equity decreased $3.9 million to $248.1 million at June 30, 2012 compared to $252.0 million at December 31, 2011 primarily due to $5.4 million of common stock purchased by the Employee Stock Ownership Plan (“ESOP”) and cash dividends totaling $1.1 million paid to our stockholders, offset by $1.8 million net income for the six months ended June 30, 2012.

Summary of Operating Results for the Three Months Ended June 30, 2012 and 2011

The following discussion provides a summary and comparison of our operating results for the three months ended June 30, 2012 and 2011.

	For the Three Months Ended June 30,
	2012		2011			$ Change			% Change
(Dollars in thousands)
Net interest income	$	12,799	$	11,914		$	885			7.4	%
Provision for loan losses		520		300			220			73.3
Noninterest income		2,006		1,429			577			40.4
Noninterest expense		13,161		19,927			(6,766	)		(34.0	)
Income (loss) before taxes		1,124		(6,884	)		8,008			(116.3	)
Income tax provision		293		(2,239	)		2,532			(113.1	)
Net income (loss)	$	831	$	(4,645	)	$	5,476			(117.9	) %

Net income totaled $831,000 for the quarter ended June 30, 2012, an increase of $5.5 million compared to a net loss of $4.6 million for the quarter ended June 30, 2011. The increase in net income resulted from increases in net interest income and noninterest income, a decrease in noninterest expense primarily due to incurring $851,000 in the phasing out the Phantom Stock Plan and $6.9 million expense related to the funding of Farmington Bank Community Foundation, Inc. during the second quarter of 2011, offset by an increase in the provision for loan losses.  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 $454,000 for the quarter ended June 30, 2011, an increase of $377,000 for the quarter ended June 30, 2012.

50

Comparison of Operating Results for the Three Months Ended June 30, 2012 and 2011

Our results of operations depend primarily on net interest income, which is the difference between the interest income from earning assets, such as loans and investments, and the interest expense incurred on interest-bearing liabilities, such as deposits and borrowings. We also generate noninterest income, including service charges on deposit accounts, mortgage servicing income, bank-owned life insurance income, safe deposit box rental fees, brokerage fees, insurance commissions and other miscellaneous fees. Our noninterest expense primarily consists of employee compensation and benefits, occupancy and equipment costs and other noninterest expenses. Our results of operations are also affected by our provision for loan losses.

Interest and Dividend Income: For the quarter ended June 30, 2012, interest and dividend income increased $472,000, or 3.2%, to $15.1 million from $14.7 million for the quarter ended June 30, 2011, driven by growth in average interest-earning assets.  Our average interest-earning assets for the quarter ended June 30, 2012, grew by $104.4 million, or 7.2%, to $1.5 billion from $1.4 billion for the same period last year, while the yield on average interest-earning assets decreased 15 basis points to 3.93% from 4.08%. Interest income on loans receivable increased $610,000 to $14.7 million for the quarter ended June 30, 2012 from $14.1 million for the quarter ended June 30, 2011 due to an increase of $173.7 million or 14.6%, in the average balance of loans receivable, partially offset by a 43 basis point decline in the weighted average yield.  A decrease of $12.0 million in the average balance of securities for the quarter ended June 30, 2012 when compared to the quarter ended June 30, 2011, combined with a 23 basis point decline in the yield on the securities portfolio resulted in a $115,000 or 23.7%, reduction in the interest and dividends on investments.

51

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

The following tables present the average balance sheets, average yields and costs and certain other information for the periods indicated therein. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero percent yield. The yields set forth below include the effect of net deferred costs and premiums that are amortized to interest income or expense.  Yields and rates have been annualized.

	Three Months Ended June 30,
	2012								2011
			Interest								Interest
	Average		and						Average		and
	Balance		Dividends			Yield/Cost			Balance		Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans receivable, net	$	1,360,401	$	14,741			4.35	%	$	1,186,674	$	14,131			4.78	%
Securities		131,309		370			1.13	%		143,277		485			1.36	%
Federal Home Loan Bank of Boston stock		7,137		9			0.51	%		7,449		-			0.00	%
Fed Funds and other earning assets		48,049		26			0.22	%		105,095		58			0.22	%
Total interest-earning assets		1,546,896		15,146			3.93	%		1,442,495		14,674			4.08	%
Noninterest-earning assets		117,486								76,585
Total assets	$	1,664,382							$	1,519,080
Interest-bearing liabilities:
NOW accounts	$	204,611	$	83			0.16	%	$	245,649	$	178			0.29	%
Money market		270,157		488			0.72	%		204,711		543			1.06	%
Savings accounts		174,321		64			0.15	%		153,806		76			0.20	%
Certificates of deposit		368,006		1,008			1.10	%		421,766		1,157			1.10	%
Total interest-bearing deposits		1,017,095		1,643			0.65	%		1,025,932		1,954			0.76	%
Advances from the Federal Home Loan Bank		62,869		462			2.95	%		68,005		531			3.13	%
Repurchase Agreement Borrowing		21,000		181			3.46	%		21,000		179			3.42	%
Repurchase liabilities		63,166		61			0.39	%		63,577		96			0.61	%
Total interest-bearing liabilities		1,164,130		2,347			0.81	%		1,178,514		2,760			0.94	%
Noninterest-bearing deposits		210,874								210,582
Other noninterest-bearing liabilities		38,273								28,213
Total liabilities		1,413,277								1,417,309
Capital		251,105								101,771
Total liabilities and capital	$	1,664,382							$	1,519,080
Net interest income			$	12,799							$	11,914
Net interest rate spread (1)							3.12	%							3.14	%
Net interest-earning assets (2)	$	382,766							$	263,981
Net interest margin (3)							3.32	%							3.31	%
Average interest-earning assets to average interest-bearing liabilities				132.88	%							122.40	%

(1)	Net interest rate spread represents the difference betw een 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.

52

Rate Volume Analysis

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

	Three Months Ended June 30, 2012 Compared to
	Three Months Ended June 30, 2011
							Total Increase
(Dollars in thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Loans receivable, net	$	1,582		$	(972	)	$	610
Investment securities		(46	)		(69	)		(115	)
Federal Home Loan Bank of Boston stock		-			9			9
Fed Funds and other interest-earning assets		(31	)		(1	)		(32	)
Total interest-earning assets		1,505			(1,033	)		472
Interest-bearing liabilities:
NOW accounts		(27	)		(68	)		(95	)
Money market		10,336			(10,391	)		(55	)
Savings accounts		8			(20	)		(12	)
Certificates of deposit		(149	)		-			(149	)
Total interest-bearing deposits		10,168			(10,479	)		(311	)
Advances from the Federal Home Loan Bank		(43	)		(26	)		(69	)
Repurchase agreement borrowing		-			2			2
Repurchase liabilities		(1	)		(34	)		(35	)
Total interest-bearing liabilities		10,124			(10,537	)		(413	)
Increase (decrease) in net interest income	$	(8,619	)	$	9,504		$	885

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 $12.8 million for the quarter ended June 30, 2012, compared to $11.9 million for the quarter ended June 30, 2011.  The $885,000, or 7.4%, increase in net interest income was primarily due to a $610,000, or 4.3%, increase in interest and fees on loans, a $413,000 or 15.0% decrease in interest expense offset by a decrease of $138,000 or 25.4% in interest and dividends on investments and other interest earning assets. Average interest-earning assets increased by $104.4 million, or 7.2%, to $1.5 billion for the quarter ended June 30, 2012 when compared to the quarter ended June 30, 2011. Total average interest-bearing liabilities remained stable at $1.2 billion at June 30, 2012 and 2011. Our net interest rate spread decreased 2 basis points to 3.12% during the quarter ended June 30, 2012 from 3.14% for the quarter ended June 30, 2011.  Net interest margin was 3.32% for the quarter ended June 30, 2012 compared to 3.31% for the quarter ended June 30, 2011.

53

Interest Expense: Interest expense for the quarter ended June 30, 2012 decreased $413,000 or 15.0% to $2.3 million from $2.8 million for the same period in the prior year as our total average interest-bearing liabilities remained relatively unchanged at $1.2 billion offset by a 13 basis points or 15.0% decline to 81 basis points in the total average cost of interest-bearing liabilities for the quarter ended June 30, 2012 compared to 94 basis points for the quarter ended June 30, 2011.  The decline in the total average cost of interest-bearing deposits was largely attributable to our implementation of a more disciplined pricing strategy for time deposits where we reduced short-term rates, maintained longer-term rates at competitive rates and reduced our rate concession practices for customers who did not utilize multiple bank services.

Provision for Loan Losses: The allowance for loan losses is maintained at a level management determined to be appropriate to absorb estimated credit losses that are both probable and reasonably estimable at the dates of the financial statements. Management evaluates the adequacy of the allowance for loan losses on a quarterly basis and charges any provision for loan losses needed to current operations. The assessment considers historical loss experience, historical and current delinquency statistics, the loan portfolio segments 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 $520,000 for the quarter ended June 30, 2012 which is an increase of $220,000 from the provision of $300,000 recorded during the quarter ended June 30, 2011.  The increase in the provision was in part due to growth in our residential and commercial loan portfolios.  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 as of June 30, 2012.

At June 30, 2012, the allowance for loan losses totaled $17.9 million, or 1.25% of total loans and 133.01% of non-performing loans, compared to an allowance for loan losses of $17.5 million, which represented 1.34% of total loans and 113.11% of non-performing loans at December 31, 2011.  

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

54

The following table summarizes noninterest income for the three months ended June 30, 2012 and 2011:

	Three Months Ended June 30,
	2012		2011		$ Change		% Change
(Dollars in thousands)
Fees for customer services	$	900	$	860	$	40		4.7	%
Net gain on loans sold		431		199		232		116.6
Brokerage and insurance fee income		32		10		22		220.0
Bank owned life insurance income		321		174		147		84.5
Other		322		186		136		73.1
Total noninterest income	$	2,006	$	1,429	$	577		40.4	%

Non-interest income totaled $2.0 million for the second quarter of 2012, an increase of $577,000, or 40.4%, as compared to the second quarter of 2011. The change in non-interest income was primarily attributable to higher net gains from sales of loans which totaled $431,000 for the second quarter of 2012, an increase of $232,000, or 116.6%, as compared to the second quarter of 2011. Bank owned life insurance increased $147,000 reflecting income earned from the purchase of additional insurance within the past twelve months and other noninterest income increased $136,000 as a result of the gains from mortgage banking derivatives.

Noninterest Expense: The following table summarizes noninterest expense for the three months ended June 30, 2012 and 2011:

	Three Months Ended June 30,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	7,619	$	7,473	$	146			2.0	%
Occupancy expense		1,098		1,094		4			0.4
Furniture and equipment expense		1,112		990		122			12.3
FDIC assessment		294		529		(235	)		(44.4	)
Marketing		753		658		95			14.4
Contribution to Farmington Bank Community Foundation, Inc.		-		6,877		(6,877	)		(100.0	)
Other operating expenses		2,285		2,306		(21	)		(0.9	)
Total noninterest expense	$	13,161	$	19,927	$	(6,766	)		(34.0	)%

Non-interest expense totaled $13.2 million for the quarter ended June 30, 2012, down by $6.8 million, or 34.0%, from the quarter ended June 30, 2011. The operating results for the second quarter of 2011 included a $6.9 million expense related to the funding of Farmington Bank Community Foundation, Inc. and $851,000 expense incurred in the phasing out the Phantom Stock Plan; excluding the Foundation and Phantom Stock expense, non-interest expense increased by $962,000, or 7.9%.  Salaries and employee benefits increased $146,000 to $7.6 million compared to $7.5 million for the quarter ended June 30, 2011.  Excluding the $851,000 incurred to phase out the Phantom Stock Plan for the quarter ended June 30, 2011, salaries and employee benefits increased $997,000 for the quarter ended June 30, 2012. The increase was due to supporting our branch openings, providing the resources to sustain our strategic growth and $297,000 related to our Employee Stock Ownership Plan (ESOP).  Furniture and equipment expense increased $122,000 to $1.1 million compared to $1.0 million for the quarter ended June 30, 2011 primarily due to the three branch openings within the past twelve months.  Marketing expense increased $95,000 in part due to the grand opening of our 18th branch in May 2012 and an increase in sponsorships to expand the Bank’s brand within the communities we serve.  These items were partially offset by a $235,000 or 44.4% decrease in FDIC premium expense, which reflects the positive impact of the new assessment calculation that became effective on April 1, 2011.

55

Income Tax Provision: Income tax expense increased $2.5 million to $293,000 for the quarter ended June 30, 2012 from a tax benefit of $2.2 million for the quarter ended June 30, 2011 primarily due to the tax treatment for the $6.9 million expense related to the funding of Farmington Bank Community Foundation, Inc.

Summary of Operating Results for the Six Months Ended June 30, 2012 and 2011

The following discussion provides a summary and comparison of our operating results for the six months ended June 30, 2012 and 2011.

	For the Six Months Ended June 30,
	2012		2011			$ Change			% Change
(Dollars in thousands)
Net interest income	$	25,753	$	23,865		$	1,888			7.9	%
Provision for loan losses		850		600			250			41.7
Noninterest income		3,319		2,710			609			22.5
Noninterest expense		25,790		31,588			(5,798	)		(18.4	)
Income (loss) before taxes		2,432		(5,613	)		8,045			(143.3	)
Income tax provision		610		(1,984	)		2,594			(130.7	)
Net income (loss)	$	1,822	$	(3,629	)	$	5,451			(150.2	)%

Net income totaled $1.8 million for the six months ended June 30, 2012, an increase of $5.4 million compared to a net loss of $3.6 million for the six months ended June 30, 2011.  The increase in net income primarily resulted from increases in net interest income and noninterest income and a decrease in noninterest expense as a result of incurring a $6.9 million expense funding the Farmington Bank Community Foundation, Inc. and $851,000 incurred to complete the phase out the Phantom Stock Plan during the six months ended June 30, 2011.  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 for the six month ended June 30, 2011, an increase of $322,000 primarily due to an increase in net interest income offset by an increase in salaries and employee benefits as we continue to expand the services we offer our existing and new customers, the opening of three new branches over the past twelve months and incurring a $608,000 increase in Employee Stock Ownership Plan (“ESOP”) expense for the six months ended June 30, 2012.

Comparison of Operating Results for the Six Months Ended June 30, 2012 and 2011

Interest and Dividend Income: For the six months ended June 30, 2012, interest and dividend income increased $1.2 million, or 4.0%, to $30.6 million from $29.4 million for the same period in the prior year.  Our average interest-earning assets for the six months ended June 30, 2012, grew by $121.1 million, or 8.6%, to $1.5 billion from $1.4 billion for the same period last year due reflecting growth in our loan portfolio, while the yield on average interest-earning assets decreased 19 basis points to 4.00% from 4.19%. Interest income on loans receivable increased $1.4 million, or 5.1%, to $29.7 million for the six months ended June 30, 2012 from $28.3 million for the same period in the prior year due to an increase of $153.8 million, or 13.0%, in the average balance of loans receivable, partially offset by a 36 basis point decline in the weighted average yield to 4.46%. In addition to adding new loans at lower rates to our portfolio, the continuous decline in the current rate environment has led our commercial and residential customers to refinance and modify their current loans.  A decrease of $20.1 million in the average balance of securities for the six months ended June 30, 2012 to $131.9 million compared to the same period last year and a 22 basis point decline in the yield to 1.15% resulted in a $278,000 or 26.9%, reduction in the interest and dividends on investments.

56

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,
	2012								2011
			Interest								Interest
	Average		and						Average		and
	Balance		Dividends			Yield/Cost			Balance		Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans receivable, net	$	1,338,093	$	29,740			4.46	%	$	1,184,335	$	28,291			4.82	%
Securities		131,935		755			1.15	%		152,052		1,033			1.37	%
Federal Home Loan Bank of Boston stock		7,253		18			0.50	%		7,449		6			0.16	%
Fed Funds and other earning assets		57,381		60			0.21	%		69,775		75			0.22	%
Total interest-earning assets		1,534,662		30,573			4.00	%		1,413,611		29,405			4.19	%
Noninterest-earning assets		116,931								72,482
Total assets	$	1,651,593							$	1,486,093
Interest-bearing liabilities:
NOW accounts	$	204,771	$	172			0.17	%	$	242,804	$	361			0.30	%
Money market		266,238		1,032			0.78	%		192,225		955			1.00	%
Savings accounts		167,973		125			0.15	%		146,967		145			0.20	%
Certificates of deposit		374,996		2,069			1.11	%		431,628		2,445			1.14	%
Total interest-bearing deposits		1,013,978		3,398			0.67	%		1,013,624		3,906			0.78	%
Advances from the Federal Home Loan Bank		62,955		943			3.00	%		68,052		1,056			3.13	%
Repurchase Agreement Borrow ing		21,000		361			3.45	%		21,000		358			3.44	%
Repurchase liabilities		60,617		118			0.39	%		72,798		220			0.61	%
Total interest-bearing liabilities		1,158,550		4,820			0.83	%		1,175,474		5,540			0.95	%
Noninterest-bearing deposits		203,033								183,484
Other noninterest-bearing liabilities		38,603								27,719
Total liabilities		1,400,186								1,386,677
Stockholders’ equity		251,407								99,416
Total liabilities and stockholders’ equity	$	1,651,593							$	1,486,093
Net interest income			$	25,753							$	23,865
Net interest rate spread (1)							3.17	%							3.24	%
Net interest-earning assets (2)	$	376,112							$	238,137
Net interest margin (3)							3.37	%							3.39	%
Average interest-earning assets to average interest-bearing liabilities				132.46	%							120.26	%

(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.

57

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, 2012 Compared to Six
	Months Ended June 30, 2011
							Total Increase
(Dollars in thousands)	Volume			Rate			(Decrease)
Interest-earning assets:
Loans receivable, net	$	3,459		$	(2,010	)	$	1,449
Investment securities		(139	)		(139	)		(278	)
Federal Home Loan Bank of Boston stock		-			12			12
Fed Funds and other interest-earning assets		(13	)		(2	)		(15	)
Total interest-earning assets		3,307			(2,139	)		1,168
Interest-bearing liabilities:
NOW accounts		(52	)		(137	)		(189	)
Money market		167			(90	)		77
Savings accounts		14			(34	)		(20	)
Certificates of deposit		(287	)		(89	)		(376	)
Total interest-bearing deposits		(158	)		(350	)		(508	)
Advances from the Federal Home Loan Bank		(69	)		(44	)		(113	)
Repurchase agreement borrowing		-			3			3
Repurchase liabilities		(28	)		(74	)		(102	)
Total interest-bearing liabilities		(255	)		(465	)		(720	)
Increase (decrease) in net interest income	$	3,562		$	(1,674	)	$	1,888

Net Interest Income:  Net interest income before the provision for loan losses was $25.8 million for the six months ended June 30, 2012, compared to $23.9 million for the same period in 2011. The $1.9 million, or 7.9%, increase in net interest income was primarily due to a $1.4 million, or 5.1%, increase in interest and fees on loans, a $720,000 or 13.0% decrease in interest expense offset by a decrease of $281,000 or 25.2% in interest and dividends on investments. Average interest-earning assets increased by $121.1 million, or 8.6%, to $1.5 billion for the six months ended June 30, 2012 when compared to the same period in the prior year. Average interest-bearing liabilities remained stable at $1.2 billion at June 30, 2012 and 2011. Our net interest rate spread decreased 7 basis points to 3.17% during the six months ended June 30, 2012 from 3.24% for the six months ended June 30, 2011, primarily due to a 19 basis point decline in the weighted average yield of interest-earning assets to 4.00% for the six months ended June 30, 2012 from 4.19% for the six months ended June 30, 2011 offset by a decline in the cost of interest bearing liabilities.

Interest Expense: Interest expense for the six months ended June 30, 2012 decreased $720,000, or 13.0%, to $4.8 million from $5.5 million for the same period in the prior year as our average interest-bearing deposits remained flat at $1.0 billion compared to the same period in the prior year.  This primarily resulted from an 11 basis points decline in the average cost of interest-bearing deposits to 0.67% for the six months ended June 30, 2012 from 0.78% for the six months ended June 30, 2011. 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 money market accounts which resulted in a decrease of 13 basis points and 22 basis points, respectively, during the six months ended June 30, 2012 over the same period in the prior year.  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.

58

Average outstanding advances from the Federal Home Loan Bank of Boston were $63.0 million for the six months ended June 30, 2012 a decrease of $5.1 million when compared to the same period ended in the prior year. The average rate paid on these borrowings was 3.00% for the six months ended June 30, 2012 or 13 basis points lower than the average rate of 3.13% for the six months ended June 30, 2011.  Average repurchase liabilities were $60.6 million for the six months ended June 30, 2012 a decrease of $12.2 million when compared to the same period ended in the prior year. The average rate paid was 0.39% for the six months ended June 30, 2012 or 22 basis points lower than the average rate of 0.61% for the six months ended June 30, 2011.

Provision for Loan Losses:  Management recorded a provision for loan losses of $850,000 for the six months ended June 30, 2012 which is an increase of $250,000 from the provision of $600,000 recorded during the same period last year.  The increase in the provision was in part due to growth in our residential and commercial loan portfolios.  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, 2012 and 2011:

	Six Months Ended June 30,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	1,716	$	1,647	$	69			4.2	%
Net gain on loans sold		529		345		184			53.3
Brokerage and insurance fee income		57		134		(77	)		(57.5	)
Bank owned life insurance income		640		348		292			83.9
Other		377		236		141			59.7
Total noninterest income	$	3,319	$	2,710	$	609			22.5	%

Non-interest income totaled $3.3 million for the six months ended June 30, 2012, an increase of $609,000, or 22.5%, as compared to the $2.7 million for the six months ended June 30, 2011. The change in non-interest income was partially attributable to higher net gains from sales of loans which totaled $529,000 for the six months ended June 30, 2012, an increase of $184,000, or 53.3%, as compared to $345,000 for the six months ended June 30, 2011. Bank owned life insurance increased $292,000 reflecting income earned from the purchase of additional insurance within the past twelve months and other noninterest income increased $141,000 as a result of the gains from mortgage banking derivatives.

59

Noninterest Expense: The following table summarizes noninterest expense for the six months ended June 30, 2012 and 2011:

	Six Months Ended June 30,
	2012		2011		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	15,043	$	14,041	$	1,002			7.1	%
Occupancy expense		2,288		2,331		(43	)		(1.8	)
Furniture and equipment expense		2,211		1,965		246			12.5
FDIC assessment		573		1,070		(497	)		(46.4	)
Marketing		1,359		1,131		228			20.2
Contribution to Farmington Bank Community Foundation, Inc.		-		6,877		(6,877	)		(100.0	)
Other operating expenses		4,316		4,173		143			3.4
Total noninterest expense	$	25,790	$	31,588	$	(5,798	)		(18.4	)%

Non-interest expense totaled $25.8 million for the six months ended June 30, 2012, down $5.8 million, or 18.4%, from the six months ended June 30, 2011. The operating results for the six months ended June 30, 2011 included a $6.9 million expense related to the funding of Farmington Bank Community Foundation, Inc. and an $851,000 expense incurred in the phasing out the Phantom Stock Plan; excluding the Foundation and Phantom Stock expense, non-interest expense increased by $1.9 million, or 8.1%.  Salaries and employee benefits increased $1.0 million to $15.0 million compared to $14.0 million for the six months ended June 30, 2011.  Excluding the $851,000 incurred to phase out the Phantom Stock Plan for the six months ended June 30, 2011, salaries and employee benefits increased $1.9 million primarily due to annual wage increases and an increase in the bonus accrual, $608,000 related to our Employee Stock Ownership Plan (“ESOP”), our three branch openings within the past twelve months and providing the resources to sustain our strategic growth. Furniture and equipment expense increased $246,000 to $2.2 million compared to $2.0 million for the six months ended June 30, 2011 primarily due to the three branch openings within the past twelve months.  Marketing expense increased $228,000 in part due to the grand opening of our 18th branch in May and an increase in sponsorships to expand the Bank’s brand within the communities we serve.  These items were partially offset by a $497,000 or 46.4% decrease in FDIC premium expense, which reflects the positive impact of the new assessment calculation that became effective on April 1, 2011.

Income Tax Provision: Income tax provision increased $2.6 million to $610,000 for the six months ended June 30, 2012 from a tax benefit of $2.0 million for the six months ended June 30, 2011 primarily due to the tax treatment for the $6.9 million expense related to the funding of Farmington Bank Community Foundation, Inc.

Liquidity and Capital Resources:

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

Our primary sources of liquidity are deposits, principal repayment and prepayment of loans, the sale in the secondary market of loans held for sale, maturities and sales of investment securities and other short-term investments, periodic pay downs of mortgage-backed securities, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions and rates offered by our competitors. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

60

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, 2012, $36.7 million of our assets were invested in cash and cash equivalents compared to $90.3 million at December 31, 2011. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit accounts, proceeds from residential loan sales and advances from FHLBB.

For the six months ended June 30, 2012, loan originations and purchases, net of collected principal and loan sales, totaled $121.0 million.  Cash received from the sales and maturities of investment securities totaled $143.0 million and we purchased $138.0 million of available-for-sale investment securities during the six month ended June 30, 2012.

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBB, which provides an additional source of funds. At June 30, 2012, we had $91.0 million in advances from the FHLBB and an additional available borrowing limit of $276.2 million, subject to collateral requirements of the FHLBB. Internal policies limit borrowings to 25.0% of total deposits, or $304.7 million at June 30, 2012. Other sources of funds include access to a pre-approved unsecured line of credit with PNC Bank for $20.0 million, our $8.8 million secured line of credit with the FHLBB and our $3.5 million unsecured line of credit with a bank which were all undrawn at June 30, 2012.  The Federal Reserve Bank’s discount window loan collateral program enables us to borrow up to $79.8 million on an overnight basis as of June 30, 2012. The funding arrangement was collateralized by $125.8 million in pledged commercial real estate loans as of June 30, 2012.

We had outstanding commitments to originate loans of $41.9 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $297.3 million at June 30, 2012. At June 30, 2012, time deposits scheduled to mature in less than one year totaled $237.1 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as FHLBB advances, brokered deposits, our $20.0 million unsecured line of credit with PNC Bank, our $8.8 million secured line of credit with the FHLBB, our $3.5 million unsecured line of credit with a bank or our $79.8 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.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

General: The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of loans and available-for-sale investment securities, generally have longer contractual maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our board of directors has established an asset/liability committee which is responsible for (i) evaluating the interest rate risk inherent in our assets and liabilities, (ii) determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives and (iii) managing this risk consistent with the guidelines approved by our board of directors. Management monitors the level of interest rate risk on a regular basis and the asset/liability committee meets at least quarterly to review our asset/liability policies and interest rate risk position.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. During the low interest rate environment that has existed in recent years, we have implemented the following strategies to manage our interest rate risk: (i) emphasizing adjustable rate loans, including adjustable rate one-to-four family, commercial and consumer loans, (ii) reducing and shortening the expected average life of the investment portfolio and (iii) periodically lengthening the term structure of our borrowings from the FHLBB. Additionally, we sell a portion of our fixed-rate residential mortgages to the secondary market. These measures should serve to reduce the volatility of our future net interest income in different interest rate environments.

61

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

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

At June 30, 2012, income at risk (i.e., the change in net interest income) increased 7.8% and 7.5% and decreased 5.3% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively. At December 31, 2011, income at risk (i.e., the change in net interest income) increased 8.9% and 11.4% and decreased 3.9% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively.  The following table depicts the percentage increase and/or decrease in estimated net interest income over twelve months based on the scenarios run during each of the years presented:

	Percentage Increase (Decrease) in Estimated Net Interest Income Over 12 Months
	At June 30,			At December
	2012			31, 2011
300 basis point increase		7.75	%		8.86	%
400 basis point increase		7.47	%		11.36	%
100 basis point decrease		(5.34	)%		(3.90	)%

Item 4.          Controls and Procedures

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

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

Part II. Other Information

Item 1.          Legal Proceedings

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

62

Item 1A. Risk Factors

There have been no material changes in the “Risk Factors” from those previously disclosed in the Form 10-K filed on March 28, 2012.

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

(a) Not applicable.

(b) Not applicable.

(c) During the quarter ending June 30, 2012, the Employee Stock Ownership Plan made the following purchases of the Company’s stock:

							(d) Maximum Number
	(a) Total				(c) Total Number of		(or Approximate Dollar
	Number of		(b) Average		Shares (or Units)		Value) of Shares (or
	Shares (or		Price Paid		Purchased as Part of		Units) that May Yet Be
	Units)		per Share (or		Publicly Announced		Purchased Under the
Period	Purchased		Unit)		Plans or Programs		Plans or Programs
April 1-30, 2012		23,969	$	12.87		1,256,809		173,607
May 1-31, 2012		88,778		13.06		1,345,587		84,829
June 1-30, 2012		84,829		13.01		1,430,416		-

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Not Applicable

Item 6. Exhibits

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

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

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

10.1 Phantom Stock Plan of Farmington Bank (terminated) (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).

63

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

101 Interactive data files pursuant to Rule 405 of Regulation S-t: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) 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.

64

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 10, 2012	/s/ John J. Patrick, Jr.
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer
Date: August 10, 2012	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer

65