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 September 30, 2013

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   x     NO   o

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

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o

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

As of November 4, 2013, there were 16,456,142 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 September 30, 2013 (unaudited) and December 31, 2012	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (unaudited)	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (unaudited)	3
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2013 (unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	65
Part II. Other Information
Item 1.	Legal Proceedings	66
Item1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults upon Senior Securities	66
Item 4.	Mine Safety Disclosure	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
Signatures		69
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

First Connecticut Bancorp, Inc.

Consolidated Statements of Condition (Unaudited)

	September 30, 2013			December 31, 2012
(Dollars in thousands)
Assets
Cash and cash equivalents	$	50,323		$	50,641
Securities held-to-maturity, at amortized cost		3,002			3,006
Securities available-for-sale, at fair value		120,382			138,241
Loans held for sale		5,357			9,626
Loans, net		1,712,507			1,520,170
Premises and equipment, net		21,013			19,967
Federal Home Loan Bank of Boston stock, at cost		8,383			8,939
Accrued income receivable		4,579			4,415
Bank-owned life insurance		38,255			37,449
Deferred income taxes		16,095			15,682
Prepaid expenses and other assets		12,305			14,810
Total assets	$	1,992,201		$	1,822,946
Liabilities and Stockholders’ Equity
Deposits
Interest-bearing	$	1,272,352		$	1,082,869
Noninterest-bearing		278,275			247,586
		1,550,627			1,330,455
Federal Home Loan Bank of Boston advances		104,000			128,000
Repurchase agreement borrowings		21,000			21,000
Repurchase liabilities		50,432			54,187
Accrued expenses and other liabilities		38,606			47,782
Total liabilities		1,764,665			1,581,424
Commitments and contingencies		-			-
Stockholders’ Equity
Common stock, $0.01 par value, 30,000,000 shares authorized;
18,035,335 shares issued and 16,416,427 shares outstanding
at September 30, 2013 and 18,076,971 shares issued and
17,714,481 shares outstanding at December 31, 2012		181			181
Additional paid-in-capital		174,817			172,247
Unallocated common stock held by ESOP		(14,014	)		(14,806	)
Treasury stock, at cost (1,618,908 shares at September 30, 2013
and 362,490 shares at December 31, 2012)		(23,053	)		(4,860	)
Retained earnings		95,873			94,890
Accumulated other comprehensive loss		(6,268	)		(6,130	)
Total stockholders’ equity		227,536			241,522
Total liabilities and stockholders’ equity	$	1,992,201		$	1,822,946

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

1

First Connecticut Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
(Dollars in thousands, except per share data)
Interest income
Interest and fees on loans
Mortgage	$	12,381		$	11,460		$	35,721		$	33,452
Other		3,199			3,927			9,746			11,675
Interest and dividends on investments
United States Government and agency obligations		103			234			344			749
Other bonds		59			87			177			205
Corporate stocks		62			69			188			209
Other interest income		2			3			13			63
Total interest income		15,806			15,780			46,189			46,353
Interest expense
Deposits		1,914			1,644			5,446			5,042
Federal Home Loan Bank of Boston advances		383			499			1,253			1,442
Repurchase agreement borrowings		181			179			532			540
Repurchase liabilities		45			71			136			189
Total interest expense		2,523			2,393			7,367			7,213
Net interest income		13,283			13,387			38,822			39,140
Provision for allowance for loan losses		215			215			870			1,065
Net interest income after provision for loan losses		13,068			13,172			37,952			38,075
Noninterest income
Fees for customer services		1,230			950			3,309			2,666
Net gain on sales of investments		304			-			340			-
Net gain on loans sold		625			687			4,244			1,216
Brokerage and insurance fee income		37			34			110			91
Bank owned life insurance income		303			326			1,015			966
Other		(264	)		148			(271	)		497
Total noninterest income		2,235			2,145			8,747			5,436
Noninterest expense
Salaries and employee benefits		8,571			10,243			26,160			25,286
Occupancy expense		1,175			1,108			3,541			3,396
Furniture and equipment expense		998			1,120			3,115			3,331
FDIC assessment		341			255			943			828
Marketing		423			509			1,627			1,868
Other operating expenses		2,602			3,670			7,978			7,958
Total noninterest expense		14,110			16,905			43,364			42,667
Income (loss) before income taxes		1,193			(1,588	)		3,335			844
Income tax expense (benefit)		292			(519	)		819			91
Net income (loss)	$	901		$	(1,069	)	$	2,516		$	753
Net earnings (loss) per share (See Note 3):
Basic and Diluted	$	0.06		$	(0.07	)	$	0.16		$	0.05
Weighted average shares outstanding:
Basic and Diluted		15,445,082			16,471,023			15,894,357			16,647,253

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

2

First Connecticut Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
(Dollars in thousands)
Net income (loss)	$	901		$	(1,069	)	$	2,516		$	753
Other comprehensive (loss) income, before tax
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during the period		(839	)		48			(973	)		(17	)
Less: reclassification adjustment for gains included in net income		304			-			340			-
Net change in unrealized (losses) gains		(535	)		48			(633	)		(17	)
Change related to employee benefit plans		141			133			424			398
Other comprehensive (loss) income, before tax		(394	)		181			(209	)		381
Income tax (benefit) expense		(134	)		61			(71	)		129
Other comprehensive (loss) income, net of tax		(260	)		120			(138	)		252
Comprehensive income (loss)	$	641		$	(949	)	$	2,378		$	1,005

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)

									Unallocated									Accumulated
	Common Stock					Additional			Common									Other
	Shares					Paid in			Shares Held			Treasury			Retained			Comprehensive
	Outstanding			Amount		Capital			by ESOP			Stock			Earnings			Income (Loss)			Total
(Dollars in thousands)
Balance at December 31, 2012		17,714,481		$	181	$	172,247		$	(14,806	)	$	(4,860	)	$	94,890		$	(6,130	)	$	241,522
ESOP shares released and committed to be released		-			-		237			792			-			-			-			1,029
Cash dividend paid ($0.09 per common share)		-			-		-			-			-			(1,533	)		-			(1,533	)
Treasury stock acquired		(1,257,468	)		-		-			-			(18,193	)		-			-			(18,193	)
Stock options exercised		1,050			-		-			-			14			-			-			14
Cancellation of shares for tax withholding		(41,636	)		-		(570	)		-			(14	)		-			-			(584	)
Tax benefit on restricted stock		-			-		49			-			-			-			-			49
Share based compensation expense		-			-		2,854			-			-			-			-			2,854
Net income		-			-		-			-			-			2,516			-			2,516
Other comprehensive loss		-			-		-			-			-			-			(138	)		(138	)
Balance at September 30, 2013		16,416,427		$	181	$	174,817		$	(14,014	)	$	(23,053	)	$	95,873		$	(6,268	)	$	227,536

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

4

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,
(Dollars in thousands)	2013			2012
Cash flows from operating activities
Net income	$	2,516		$	753
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for allowance for loan losses		870			1,065
Provision for off-balance sheet commitments		24			55
Depreciation and amortization		2,293			2,558
Amortization of ESOP expense		1,029			935
Share based compensation expense		2,854			3,255
Gain on sale of investment		(304	)		-
Loans originated for sale		(148,299	)		(29,229	)
Proceeds from the sale of loans held for sale		156,812			26,915
Loss on sale of premises and equipment		2			367
Loss (gain) on fair value adjustment for mortgage banking derivatives		319			(177	)
Net gain on loans sold		(4,244	)		(1,216	)
Loss on sale of foreclosed real estate		55			8
Tax benefit on restricted stock		49			-
Accretion and amortization of investment security discounts and premiums, net		(43	)		(111	)
Amortization and accretion of loan fees and discounts, net		204			(724	)
Decrease in accrued income receivable		(164	)		(317	)
Deferred income tax		(340	)		(243	)
Increase in cash surrender value of bank-owned life insurance		(906	)		(966	)
Decrease (increase) in prepaid expenses and other assets		2,134			(4,516	)
(Decrease) increase in accrued expenses and other liabilities		(8,991	)		3,328
Net cash provided by operating activities		5,870			1,740
Cash flow from investing activities
Maturities of securities held-to-maturity		4			209
Maturities, calls and principal payments of securities available-for-sale		233,578			243,392
Purchases of securities available-for-sale		(216,007	)		(233,982	)
Loan originations, net of principal repayments		(193,693	)		(191,784	)
Redemption (purchases) of Federal Home Loan Bank of Boston stock, net		556			(607	)
Purchases of bank-owned life insurance		-			(6,000	)
Proceeds from bank-owned life insurance		100			-
Proceeds from sale of premises and equipment		-			3,513
Proceeds from sale of foreclosed real estate		494			393
Purchases of premises and equipment		(3,341	)		(4,290	)
Net cash used in investing activities		(178,309	)		(189,156	)
Cash flows from financing activities
Purchase of common stock for ESOP		-			(5,376	)
Net (decrease) increase in borrowings		(24,000	)		62,200
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts		220,236			108,202
Net decrease  in certificates of deposit		(64	)		(26,897	)
Net (decrease) increase in repurchase liabilities		(3,755	)		1,630
Cancellation of shares for tax withholding		(570	)		(407	)
Repurchase of common stock		(18,193	)		(7,597	)
Cash dividend paid		(1,533	)		(1,614	)
Net cash provided by financing activities		172,121			130,141
Net decrease in cash and cash equivalents		(318	)		(57,275	)
Cash and cash equivalents at beginning of period		50,641			90,296
Cash and cash equivalents at end of period	$	50,323		$	33,021
Supplemental disclosure of cash flow information
Cash paid for interest	$	7,329		$	7,144
Cash paid for income taxes		4,285			6
Loans transferred to other real estate owned		282			1,285

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.  During 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.  On May 30, 2013, the Company completed its repurchase of 1,788,020 shares at a cost of $24.9 million, of which 486,947 shares were reissued as part of the 2012 Stock Incentive Plan.  On June 21, 2013, the Company received regulatory approval to repurchase up to an additional 1,676,452 shares, or 10% of its current outstanding common stock.  As of September 30, 2013, the Company has repurchased 317,885 of these shares at a cost of $4.5 million.  Repurchased shares are held as treasury stock and are available for general corporate purposes.

On September 5, 2012, the Company registered 2,503,228 shares to be reserved for issuance to the First Connecticut Bancorp, Inc. 2012 Stock Incentive Plan.

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

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

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

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, 2012 included in the Company’s 10-K filed on March 18, 2013.  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.

Correction of Immaterial Error Related to Prior Period

During the quarter ended September 30, 2013, the Company identified an error related to the accounting for certain deferred loan costs and fees in the previously reported results for the quarter ended June 30, 2013. The Company determined that the error was due to processing errors that produced system generated entries to net gain on loans sold. The error also affected interest, fees and costs associated with mortgage loans sold. The Company reviewed the impact of this error on the prior period in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 99, Materiality, and determined that the error was immaterial to previously reported amounts contained in its quarterly filing. In accordance with SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, the consolidated financial statements as of and for the three and six months ended June 30, 2013 have been revised in this filing and will be revised in the Company’s Form 10-Q for the period ending June 30, 2014.

The following tables summarize the effect of the correction of the error on the Company’s consolidated statement of operations for the three and six months ended June 30, 2013 and on the Company’s consolidated statement of condition as of June 30, 2013.

	Three Months Ended June 30, 2013							Six Months Ended June 30, 2013
	Balance as reported		Correction of error			Balance as revised		Balance as reported		Correction of error			Balance as revised
(Dollars in thousands, except per share data)
Interest income
Interest and fees on loans
Mortgage	$	11,917	$	(45	)	$	11,872	$	23,385	$	(45	)	$	23,340
Total interest income		15,381		(45	)		15,336		30,428		(45	)		30,383
Noninterest income
Net gain on loans sold		1,739		(150	)		1,589		3,769		(150	)		3,619
Total noninterest income		3,124		(150	)		2,974		6,662		(150	)		6,512
Income before income taxes		1,245		(195	)		1,050		2,337		(195	)		2,142
Income tax expense		308		(60	)		248		587		(60	)		527
Net income		937		(135	)		802		1,750		(135	)		1,615
Net earnings per share:
Basic and Diluted	$	0.06	$	(0.01	)	$	0.05	$	0.11	$	(0.01	)	$	0.10

7

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	June 30, 2013
	Balance as reported		Correction of error			Balance as revised
(Dollars in thousands)
Assets
Loans, net	$	1,588,275	$	(195	)	$	1,588,080
Prepaid expenses and other assets		12,298		60			12,358
Total assets		1,845,251		(135	)		1,845,116
Liabilities and Stockholders’ Equity
Stockholders' Equity
Retained earnings		95,605		(135	)		95,470
Total stockholders’ equity		231,315		(135	)		231,180
Total liabilities and stockholders’ equity		1,845,251		(135	)		1,845,116

Investment Securities

Marketable equity and debt securities are classified as either trading, available for sale, or held to maturity (applies only to debt securities).  Management determines the appropriate classifications of securities at the time of purchase.  At September 30, 2013 and December 31, 2012, the Company had no debt or equity securities classified as trading.  Held to maturity securities are debt securities for which the Company has the ability and intent to hold until maturity.  All other securities not included in held to maturity are classified as available for sale.  Held to maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts.  Premiums and discounts on debt securities are amortized or accreted into interest income over the term of the securities using the level yield method.  Available for sale securities are recorded at fair value.  Unrealized gains and losses, net of the related tax effect, on available for sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.  Further information relating to the fair value of securities can be found within Note 4 of the Notes to Consolidated Financial Statements.  In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 320-Debt and Equity Securities, a decline in market value of a debt security below amortized cost that is deemed other-than-temporary is charged to earnings for the credit related other-than-temporary impairment (“OTTI”), resulting in the establishment of a new cost basis for the security, while the non-credit related OTTI is recognized in other comprehensive income if there is no intent or requirement to sell the security. The securities portfolio is reviewed on a quarterly basis for the presence of other-than-temporary impairment. If an equity security is deemed other-than-temporary impaired, the full impairment is considered to be credit-related and a charge to earnings would be recorded.  Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis.

Loans Held for Sale

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

8

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Loans

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

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

Interest on loans is accrued and recognized in interest income based on contractual rates applied to principal amounts outstanding. Accrual of interest is discontinued, and previously accrued income is reversed, when loan payments are 90 days or more past due or when, in the judgment of management, collectability of the loan or loan interest becomes uncertain. Loans may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within a reasonable period and there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with contractual terms involving payment of cash or cash equivalents. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. If a residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort loan is on non-accrual status cash payments are applied towards the reduction of principal.  If loans are considered impaired but accruing, cash payments are applied first to interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

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

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

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

Allowance for Loan Losses

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

9

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

General component:

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort.  Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development 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 and nonaccrual loans; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no material changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the nine months ended September 30, 2013.

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

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

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

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

10

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

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

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

Resort – Loans in this segment include direct receivable 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. Receivable loans, which account for 87% of the resort portfolio at September 30, 2013, 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.  The Company has exited the resort financing market with a residual portfolio remaining.

Allocated component:

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

11

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

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

Unallocated component:

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

During 2013, we have started to see a slight improvement in the real estate markets and the overall economic conditions which have led to an improvement in collateral values and cash flows of borrowers.  The stabilization of these economic conditions have led to improvements in charge-offs, delinquencies and non-performing loans and improved valuations for the Company’s impaired loans as of September 30, 2013.  The economy is still very fragile and uncertain.  If the current trend reverses itself, it could impact significant estimates such as the allowance for loan losses and the effect could be material.

Reclassifications

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

12

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Recent Accounting Pronouncements

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” to improve the transparency of reporting these reclassifications. ASU No. 2013-02 does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements. ASU No. 2013-02 requires an entity to disaggregate the total change of each component of other comprehensive income (e.g., unrealized gains or losses on available-for-sale investment securities) and separately present reclassification adjustments and current period other comprehensive income. The provisions of ASU No. 2013-02 also requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., unrealized gains or losses on available-for-sale investment securities) and the income statement line item affected by the reclassification (e.g., realized gains (losses) on sales of investment securities). If a component is not required to be reclassified to net income in its entirety (e.g., amortization of defined benefit plan items), entities would instead cross reference to the related note to the financial statements for additional information (e.g., pension footnote). ASU No. 2013-02 is effective for interim and annual reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on the Company’s financial condition or results of operations.

In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” (“ASU No. 2013-01”). ASU No. 2013-01 clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities,” and that ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the ASC or subject to a master netting arrangement or similar agreement. ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The adoption of ASU 2013-01 did not have an effect on the Company’s consolidated statement of condition or results of operations.

2.   Restrictions on Cash and Due from Banks

The Company is required to maintain a percentage of transaction account balances on deposit in non-interest-earning reserves with the Federal Reserve Bank that was offset by the Company’s average vault cash. The Company also is required to maintain cash balances to collateralize the Company’s position with certain third parties.  The Company was required to have cash and liquid assets of approximately $5.9 million and $11.9 million to meet these requirements at September 30, 2013 and December 31, 2012.

13

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

3.   Earnings Per Share

Basic net earnings 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 year. Diluted net earnings per common share is computed in a manner similar to basic net earnings 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 equivalents were issued during the year.  Unvested restricted stock are participating securities and are considered outstanding and included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share since the shares participate in dividends and the right to dividends are non-forfeitable.  Losses are not allocated to participating securities since there is not a contractual obligation to participate in the net loss.  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 earnings per common share.

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

		Three Months Ended September 30,						Nine Months Ended September 30,
		2013			2012			2013			2012
(Dollars in thousands, except per share data):
Net income (loss)		$	901		$	(1,069	)	$	2,516		$	753
Weighted-average shares outstanding			18,040,414			17,935,809			18,060,462			17,898,872
Less:	Average unallocated ESOP shares		(1,184,134	)		(1,279,385	)		(1,207,737	)		(1,189,368	)
	Average treasury stock		(1,411,198	)		(185,401	)		(958,368	)		(62,251	)
Weighted-average basic shares outstanding			15,445,082			16,471,023			15,894,357			16,647,253
Plus:	Dilutive stock options		-			-			-			-
Weighted-average diluted shares outstanding			15,445,082			16,471,023			15,894,357			16,647,253
Net earnings (loss) per share:
	Basic and Diluted	$	0.06		$	(0.07	)	$	0.16		$	0.05

14

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

4.   Investment Securities

Investment securities are summarized as follows:

	September 30, 2013
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	101,000	$	4	$	-		$	101,004
Government sponsored residential mortgage-backed securities		10,450		446		-			10,896
Corporate debt securities		2,975		138		-			3,113
Preferred equity securities		2,100		-		(404	)		1,696
Marketable equity securities		108		34		(2	)		140
Mutual funds		3,678		-		(145	)		3,533
Total securities available-for-sale	$	120,311	$	622	$	(551	)	$	120,382
Held-to-maturity
Government sponsored residential
mortgage-backed securities	$	2	$	-	$	-		$	2
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,002	$	-	$	-		$	3,002
	December 31, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
Available-for-sale
Debt securities:
U.S. Treasury obligations	$	118,984	$	5	$	(9	)	$	118,980
Government sponsored residential
mortgage-backed securities		9,803		800		-			10,603
Corporate debt securities		2,958		195		-			3,153
Preferred equity securities		2,100		19		(333	)		1,786
Marketable equity securities		108		27		(3	)		132
Mutual funds		3,585		2		-			3,587
Total securities available-for-sale	$	137,538	$	1,048	$	(345	)	$	138,241
Held-to-maturity
Government sponsored residential
mortgage-backed securities	$	6	$	-	$	-		$	6
Trust preferred debt security		3,000		-		-			3,000
Total securities held-to-maturity	$	3,006	$	-	$	-		$	3,006

15

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 September 30, 2013 and December 31, 2012:

	September 30, 2013
			Less than 12 Months					12 Months or More					Total
					Gross					Gross					Gross
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Securities		Value		Loss			Value		Loss			Value		Loss
Preferred equity securities		1	$	-	$	-		$	1,596	$	(404	)	$	1,596	$	(404	)
Marketable equity securities		1		-		-			5		(2	)		5		(2	)
Mutual funds		1		2,814		(145	)		-		-			2,814		(145	)
		3	$	2,814	$	(145	)	$	1,601	$	(406	)	$	4,415	$	(551	)
	December 31, 2012
			Less than 12 Months					12 Months or More					Total
					Gross					Gross					Gross
	Number of		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Securities		Value		Loss			Value		Loss			Value		Loss
U.S. Treasury obligations		4	$	52,985	$	(9	)	$	-	$	-		$	52,985	$	(9	)
Preferred equity securities		1		-		-			1,667		(333	)		1,667		(333	)
Marketable equity securities		1		-		-			4		(3	)		4		(3	)
		6	$	52,985	$	(9	)	$	1,671	$	(336	)	$	54,656	$	(345	)

Management believes that no individual unrealized loss as of September 30, 2013 represents an other-than-temporary impairment, based on its detailed review of the securities portfolio.  The Company has no intent to sell nor is it more likely than not that the Company will be required to sell any of the securities contained in the table during the period of time necessary to recover the unrealized losses, which may be until maturity.

The unrealized loss on preferred equity securities in a loss position for 12 months or more relates to one preferred equity security that is rated Ba2 by Moody’s as of September 30, 2013.  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.

There were realized gains on sales of securities available for sale totaling $36,000 and $304,000 for the three and nine months ended September 30, 2013, respectively.  There were no realized gains or losses on sales of securities available for sale for the three and nine months ended September 30, 2012.

16

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The amortized cost and estimated market value of debt securities at September 30, 2013 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:

	September 30, 2013
	Available-for-Sale				Held-to-Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
(Dollars in thousands)
Due in one year or less	$	101,000	$	101,004	$	-	$	-
Due after one year through five years		2,975		3,113		-		-
Due after five years through ten years		-		-		-		-
Due after ten years		-		-		3,000		3,000
Government sponsored residential mortgage-backed securities		10,450		10,896		2		2
	$	114,425	$	115,013	$	3,002	$	3,002

The Company, as a member of the Federal Home Loan Bank of Boston (FHLBB), owned $8.4 million and $8.9 million of FHLBB capital stock at September 30, 2013 and December 31, 2012, respectively, which is equal to its FHLBB capital stock requirement.

5.   Loans and Allowance for Loan Losses

Loans consisted of the following:

	September 30,			December 31,
	2013			2012
(Dollars in thousands)
Real estate
Residential	$	674,804		$	620,991
Commercial		585,628			473,788
Construction		90,033			64,362
Installment		4,671			6,719
Commercial		213,103			192,210
Collateral		1,819			2,086
Home equity line of credit		147,026			142,543
Demand		-			25
Revolving credit		78			65
Resort		9,849			31,232
Total loans		1,727,011			1,534,021
Less:
Allowance for loan losses		(17,678	)		(17,229	)
Net deferred loan costs		3,174			3,378
Loans, net	$	1,712,507		$	1,520,170

17

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

A summary of changes in the allowance for loan losses for the three and nine months ended September 30, 2013 and 2012 are as follows:

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
(Dollars in thousands)	2013			2012			2013			2012
Balance at beginning of period	$	17,505		$	17,927		$	17,229		$	17,533
Provision for loan losses		215			215			870			1,065
Charge-offs		(51	)		(258	)		(450	)		(898	)
Recoveries		9			36			29			220
Balance at end of period	$	17,678		$	17,920		$	17,678		$	17,920

Changes in the allowance for loan losses by loan segment for the three and nine months ended September 30, 2013 and 2012 are as follows:

	For the Three Months Ended September 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,728	$	(9	)	$	3	$	39		$	3,761
Commercial		8,012		-			-		(230	)		7,782
Construction		1,138		-			-		94			1,232
Installment		57		-			-		(5	)		52
Commercial		2,999		(26	)		3		314			3,290
Collateral		-		-			-		-			-
Home equity line of credit		1,401		-			-		28			1,429
Demand		-		-			-		-			-
Revolving credit		-		(16	)		3		13			-
Resort		170		-			-		(38	)		132
Unallocated		-		-			-		-			-
	$	17,505	$	(51	)	$	9	$	215		$	17,678
	For the Three Months Ended September 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	$	3,771	$	(206	)	$	4	$	476		$	4,045
Commercial		7,691		-			1		75			7,767
Construction		632		-			-		194			826
Installment		66		(3	)		1		20			84
Commercial		2,920		(33	)		27		(220	)		2,694
Collateral		-		-			-		-			-
Home equity line of credit		1,400		-			-		37			1,437
Demand		-		-			-		-			-
Revolving credit		-		(16	)		3		13			-
Resort		1,447		-			-		(564	)		883
Unallocated		-		-			-		184			184
	$	17,927	$	(258	)	$	36	$	215		$	17,920

18

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	For the Nine Months Ended September 30, 2013
	Balance at beginning of period		Charge-offs			Recoveries		Provision for (Reduction) loan losses			Balance at end of period
(Dollars in thousands)
Real estate
Residential	$	3,778	$	(384	)	$	3	$	364		$	3,761
Commercial		8,105		-			-		(323	)		7,782
Construction		760		-			-		472			1,232
Installment		77		-			-		(25	)		52
Commercial		2,654		(26	)		12		650			3,290
Collateral		-		-			-		-			-
Home equity line of credit		1,377		-			-		52			1,429
Demand		-		-			-		-			-
Revolving credit		-		(40	)		14		26			-
Resort		456		-			-		(324	)		132
Unallocated		22		-			-		(22	)		-
	$	17,229	$	(450	)	$	29	$	870		$	17,678
	For the Nine Months Ended September 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	$	(337	)	$	9	$	1,499		$	4,045
Commercial		8,755		(454	)		4		(538	)		7,767
Construction		590		-			-		236			826
Installment		92		(9	)		4		(3	)		84
Commercial		2,140		(33	)		192		395			2,694
Collateral		-		-			-		-			-
Home equity line of credit		1,295		(19	)		-		161			1,437
Demand		-		-			-		-			-
Revolving credit		-		(46	)		11		35			-
Resort		1,787		-			-		(904	)		883
Unallocated		-		-			-		184			184
	$	17,533	$	(898	)	$	220	$	1,065		$	17,920

19

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 September 30, 2013 and December 31, 2012:

Loans individually evaluated for impairment:
	September 30, 2013				December 31, 2012
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate
Residential	$	11,220	$	324	$	10,695	$	340
Commercial		21,349		56		17,546		126
Construction		187		-		1,179		6
Installment		35		9		7		-
Commercial		8,120		1,254		5,313		476
Collateral		-		-		-		-
Home equity line of credit		388		-		491		-
Demand		-		-		-		-
Revolving Credit		-		-		-		-
Resort		1,288		-		1,626		1
Total	$	42,587	$	1,643	$	36,857	$	949
Loans collectively evaluated for impairment:
	September 30, 2013				December 31, 2012
	Total		Reserve Allocation		Total		Reserve Allocation
(Dollars in thousands)
Real estate
Residential	$	666,737	$	3,437	$	613,343	$	3,438
Commercial		564,348		7,726		456,109		7,979
Construction		89,846		1,232		63,124		754
Installment		4,636		43		6,712		77
Commercial		204,935		2,036		187,466		2,178
Collateral		1,819		-		2,086		-
Home equity line of credit		146,638		1,429		142,056		1,377
Demand		-		-		25		-
Revolving Credit		78		-		65		-
Resort		8,561		132		29,556		455
Total	$	1,687,598	$	16,035	$	1,500,542	$	16,258
Unallocated		-		-		-		22
Total	$	1,730,185	$	17,678	$	1,537,399	$	17,229

20

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of loan aging at recorded investment values at September 30, 2013 and December 31, 2012:

	September 30, 2013
	30-59 Days				60-89 Days				> 90 Days								Past Due 90 Days or More and Still Accruing
(Dollars in thousands)	Past Due				Past Due				Past Due				Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount
Real estate
Residential		14	$	2,793		4	$	1,297		20	$	8,314		38	$	12,404	$	-
Commercial		1		126		-		-		2		920		3		1,046		-
Construction		-		-		-		-		1		187		1		187		-
Installment		1		19		-		-		2		47		3		66		-
Commercial		1		274		1		10		5		583		7		867		-
Collateral		3		13		-		-		-		-		3		13		-
Home equity line of credit		2		218		-		-		3		223		5		441		-
Demand		1		8		-		-		-		-		1		8		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		23	$	3,451		5	$	1,307		33	$	10,274		61	$	15,032	$	-
	December 31, 2012
	30-59 Days				60-89 Days				> 90 Days								Past Due 90 Days or More and Still Accruing
(Dollars in thousands)	Past Due				Past Due				Past Due				Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount
Real estate
Residential		17	$	3,080		6	$	1,663		16	$	7,803		39	$	12,546	$	-
Commercial		-		-		1		349		2		925		3		1,274		-
Construction		-		-		-		-		1		419		1		419		-
Installment		1		14		-		-		2		73		3		87		-
Commercial		2		1,435		1		66		6		585		9		2,086		-
Collateral		7		57		-		-		-		-		7		57		-
Home equity line of credit		1		75		2		94		3		379		6		548		-
Demand		1		6		-		-		2		40		3		46		-
Revolving Credit		-		-		-		-		-		-		-		-		-
Resort		-		-		-		-		-		-		-		-		-
Total		29	$	4,667		10	$	2,172		32	$	10,224		71	$	17,063	$	-

21

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

	September 30,		December 31,
(Dollars in thousands)	2013		2012
Nonaccrual loans:
Real estate
Residential	$	9,729	$	9,194
Commercial		920		925
Construction		187		419
Installment		169		157
Commercial		2,292		2,351
Collateral		-		-
Home equity line of credit		590		711
Demand		-		25
Revolving Credit		-		-
Resort		-		-
Total nonaccruing loans		13,887		13,782
Loans 90 days past due and still accruing		-		-
Other real estate owned		282		549
Total nonperforming assets	$	14,169	$	14,331

22

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at September 30, 2013:

											Cash-basis
			Unpaid				Average		Interest		Interest
	Recorded		Principal		Related		Recorded		Income		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized		Recognized
Impaired loans without
a valuation allowance:
Real estate
Residential	$	5,630	$	6,140	$	-	$	4,974	$	16	$	12
Commercial		16,238		15,733		-		6,776		540		538
Construction		-		-		-		-		-		-
Installment		7		7		-		5		-		-
Commercial		5,135		5,415		-		3,238		137		136
Collateral		-		-		-		-		-		-
Home equity line of credit		388		508		-		480		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		-		-		-
Total		27,398		27,803		-		15,473		693		686
Impaired loans with
a valuation allowance:
Real estate
Residential		5,590		6,019		324		6,199		43		43
Commercial		5,111		5,799		56		11,614		256		255
Construction		187		433		-		303		-		-
Installment		28		28		9		22		-		-
Commercial		2,985		2,787		1,254		3,978		54		54
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,288		1,287		-		1,097		40		40
Total		15,189		16,353		1,643		23,213		393		392
Total impaired loans	$	42,587	$	44,156	$	1,643	$	38,686	$	1,086	$	1,078

23

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of information pertaining to impaired loans at December 31, 2012:

											Cash-basis
			Unpaid				Average		Interest		Interest
	Recorded		Principal		Related		Recorded		Income		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized		Recognized
Impaired loans without a valuation allowance:
Real estate
Residential	$	4,061	$	4,495	$	-	$	3,929	$	10	$	10
Commercial		2,787		2,973		-		6,048		315		304
Construction		760		761		-		592		18		18
Installment		-		-		-		-		-		-
Commercial		1,986		1,985		-		3,918		184		178
Collateral		-		-		-		-		-		-
Home equity line of credit		491		569		-		494		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		-		-		-		56		26		26
Total		10,085		10,783		-		15,037		553		536
Impaired loans with a valuation allowance:
Real estate
Residential		6,634		6,882		340		6,864		78		68
Commercial		14,759		14,753		126		11,594		818		814
Construction		419		664		6		226		-		-
Installment		7		7		-		4		-		-
Commercial		3,327		3,339		476		2,111		86		78
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		1,626		1,624		1		1,736		32		32
Total		26,772		27,269		949		22,535		1,014		992
Total impaired loans	$	36,857	$	38,052	$	949	$	37,572	$	1,567	$	1,528

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.

24

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The recorded investment balance of TDRs approximated $26.2 million and $29.7 million at September 30, 2013 and December 31, 2012, respectively. At September 30, 2013 and December 31, 2012, the majority of the Company’s TDRs are on accrual status. TDRs on accrual status were $19.1 million and $22.1 million while TDRs on nonaccrual status were $7.1 million and $7.6 million at September 30, 2013 and December 31, 2012, respectively. At September 30, 2013, 100% of the accruing TDRs have been performing in accordance with the restructured terms.  At September 30, 2013 and December 31, 2012, the allowance for loan losses included specific reserves of $1.6 million and $889,000 related to TDRs, respectively. For the nine months ended September 30, 2013 and 2012, the Bank had charge-offs totaling $293,000 and $271,000, respectively, related to portions of TDRs deemed to be uncollectible.  The amount of additional funds available to borrowers in TDR status was $402,000 and $872,000 at September 30, 2013 and December 31, 2012, respectively. The Bank in very rare circumstances may provide additional funds to borrowers in TDR status.

The following tables present information on loans whose terms had been modified in a troubled debt restructuring at September 30, 2013 and December 31, 2012:

	September 30, 2013
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate
Residential		4	$	1,185		6	$	4,908		10	$	6,093
Commercial		12		11,621		-		-		12		11,621
Construction		-		-		1		187		1		187
Installment		2		35		-		-		2		35
Commercial		7		4,923		5		1,814		12		6,737
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		2		197		2		197
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		2		1,288		-		-		2		1,288
Total		27	$	19,052		14	$	7,106		41	$	26,158
	December 31, 2012
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
(Dollars in thousands)	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
Real estate
Residential		3	$	1,068		6	$	5,264		9	$	6,332
Commercial		12		16,381		-		-		12		16,381
Construction		2		999		1		419		3		1,418
Installment		1		7		-		-		1		7
Commercial		7		2,043		6		1,867		13		3,910
Collateral		-		-		-		-		-		-
Home equity line of credit		-		-		-		-		-		-
Demand		-		-		-		-		-		-
Revolving Credit		-		-		-		-		-		-
Resort		2		1,626		-		-		2		1,626
Total		27	$	22,124		13	$	7,550		40	$	29,674

25

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 nine months ended September 30, 2013 and 2012:

	For the Three Months Ended September 30, 2013						For the Nine Months Ended September 30, 2013
(Dollars in thousands)	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)		Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification (1)
Trouble Debt Restructurings:
Real estate
Residential		-	$	-	$	-		3	$	588	$	569
Commercial		-		-		-		2		1,725		1,713
Construction		-		-		-		1		187		187
Installment		-		-		-		2		36		35
Commercial		1		51		52		7		5,704		6,004
Home equity line of credit		-		-		-		2		244		197
Total		1	$	51	$	52		17	$	8,484	$	8,705
(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.

	For the Three Months Ended September 30, 2012						For the Nine Months Ended September 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		-	$	-	$	-		2	$	579	$	571
Commercial		2		844		844		7		9,149		9,130
Construction		-		-		-		1		242		240
Installment		-		-		-		1		7		7
Commercial		4		1,348		1,342		9		3,221		2,924
Total		6	$	2,192	$	2,186		20	$	13,198	$	12,872
(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 tables provide 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 concessions for the three and nine months ended September 30, 2013 and 2012:

	For the Three Months Ended September 30, 2013
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Commercial		1	$	-	$	-	$	-	$	52	$	52
Total		1	$	-	$	-	$	-	$	52	$	52

26

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

	For the Nine Months Ended September 30, 2013
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		3	$	-	$	-	$	228	$	341	$	569
Commercial		2		1,577		-		-		136		1,713
Construction		1		-		-		-		187		187
Installment		2		-		-		35		-		35
Commercial		7		5,849		-		-		155		6,004
Home equity line of credit		2		-		-		14		183		197
Total		17	$	7,426	$	-	$	277	$	1,002	$	8,705
	For the Three Months Ended September 30, 2012
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Commercial		2	$	844	$	-	$	-	$	-	$	844
Commercial		4		1,342		-		-		-		1,342
Total		6	$	2,186	$	-	$	-	$	-	$	2,186
	For the Nine Months Ended September 30, 2012
(Dollars in thousands)	Number of Modifications		Extended Maturity		Adjusted Interest Rates		Combination of Rate and Maturity		Other		Total
Real estate
Residential		2	$	-	$	114	$	-	$	457	$	571
Commercial		7		2,598		3,301		-		3,231		9,130
Construction		1		240		-		-		-		240
Installment		1		-		7		-		-		7
Commercial		9		2,758		-		166		-		2,924
Total		20	$	5,596	$	3,422	$	166	$	3,688	$	12,872

A TDR is considered to be in re-default once it is more than 30 days past due following a modification.  There were no loans that defaulted and had been modified as a TDR during the 12 month period preceding the default date during the nine months ended September 30, 2013.  The following table shows loans modified as a TDR during the 12 month period preceding the default date during the three and nine months ended September 30, 2012

	For the Three Months Ended  September 30, 2012				For the Nine Months Ended  September 30, 2012
(Dollars in thousands)	Number of Loans		Recorded Investment (1)		Number of Loans		Recorded Investment (1)
Real estate
Residential		1	$	1,115		1	$	1,115
Commercial		3		110		3		110
Total		4	$	1,225		4	$	1,225
(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.

27

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Credit Quality Information

At the time of loan origination, a risk rating based on a nine point grading system is assigned to each commercial-related loan based on the loan officer’s and management’s assessment of the risk associated with each particular loan. This risk assessment is based on an in depth analysis of a variety of factors. More complex loans and larger commitments require that our internal credit risk management department further evaluate the risk rating of the individual loan or relationship, with credit risk management having final determination of the appropriate risk rating. These more complex loans and relationships receive ongoing periodic review to assess the appropriate risk rating on a post-closing basis with changes made to the risk rating as the borrower’s and economic conditions warrant. Our risk rating system is designed to be a dynamic system and we grade loans on a “real time” basis. The Company places considerable emphasis on risk rating accuracy, risk rating justification, and risk rating triggers. Our risk rating process has been enhanced with our 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.

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.

28

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the Company’s loans by risk rating at September 30, 2013 and December 31, 2012:

	September 30, 2013
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate
Residential	$	662,100	$	1,386	$	11,318	$	-	$	674,804
Commercial		557,671		8,235		19,722		-		585,628
Construction		83,843		-		6,190		-		90,033
Installment		4,401		48		222		-		4,671
Commercial		194,925		5,183		11,336		1,659		213,103
Collateral		1,811		-		8		-		1,819
Home equity line of credit		145,113		1,003		910		-		147,026
Demand		-		-		-		-		-
Revolving Credit		78		-		-		-		78
Resort		8,562		-		1,287		-		9,849
Total Loans	$	1,658,504	$	15,855	$	50,993	$	1,659	$	1,727,011
	December 31, 2012
(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate
Residential	$	606,998	$	2,425	$	11,568	$	-	$	620,991
Commercial		434,183		24,902		14,703		-		473,788
Construction		60,293		770		3,299		-		64,362
Installment		6,481		53		185		-		6,719
Commercial		171,776		10,125		10,020		289		192,210
Collateral		2,086		-		-		-		2,086
Home equity line of credit		140,723		704		1,116		-		142,543
Demand		-		-		25		-		25
Revolving Credit		65		-		-		-		65
Resort		29,596		12		1,624		-		31,232
Total Loans	$	1,452,201	$	38,991	$	42,540	$	289	$	1,534,021

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

29

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 $604,000 and $716,000 at September 30, 2013 and December 31, 2012, respectively.  All related party loans were performing according to their credit terms.

6.        Credit Arrangements

The Company has access to a pre-approved line of credit with the Federal Home Loan Bank of Boston (“FHLBB”) for $8.8 million, which was undrawn at September 30, 2013 and December 31, 2012.  The Company has access to a pre-approved unsecured line of credit with a bank totaling $20.0 million, which was undrawn at September 30, 2013 and December 31, 2012.  The Company has access to a $3.5 million unsecured line of credit agreement with a bank which expires on August 31, 2014.  The Company maintains a cash balance of $262,500 with the bank to avoid fees associated with the above line.  The line was undrawn at September 30, 2013 and December 31, 2012.

The Company participates in the Federal Reserve Bank’s discount window loan collateral program that enables the Company to borrow up to $82.1 million and $93.9 million on an overnight basis at September 30, 2013 and December 31, 2012, respectively, and was undrawn as of September 30, 2013 and December 31, 2012. The funding arrangement was collateralized by $127.3 million and $145.8 million in pledged commercial real estate loans as of September 30, 2013 and December 31, 2012, respectively.

FHLBB advances totaled $104.0 million and $128.0 million at September 30, 2013 and December 31, 2012, respectively.  Advances from the FHLBB are collateralized by first mortgage loans with an estimated eligible collateral value of $659.2 million and $602.2 million at September 30, 2013 and December 31, 2012, respectively. The Company has available borrowings of $312.5 million and $294.3 million at September 30, 2013 and December 31, 2012, respectively, subject to collateral requirements of the FHLBB. The Company is required to acquire and hold shares of capital stock in the FHLBB in an amount at least equal to the sum of 0.35% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or up to 4.5% of its advances (borrowings) from the FHLBB. The carrying value of FHLBB stock approximates fair value based on the redemption provisions of the stock.

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.

The Bank has a Master Repurchase Agreement borrowing facility with a broker.  Borrowings under the Master Repurchase Agreement are secured by the Company’s investments in certain treasury bill securities with a fair value of $24.0 million and cash of $451,000 at September 30, 2013. Outstanding borrowings totaled $21.0 million at September 30, 2013 and December 31, 2012.

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 $50.4 million and $54.2 million at September 30, 2013 and December 31, 2012, respectively. They are secured by the Company’s investment in specific issues of U.S. Treasury obligations and Government sponsored residential mortgage-backed securities with a market value of $60.2 million and $84.3 million as of September 30, 2013 and December 31, 2012, respectively.

30

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

7.   Deposits

Deposit balances at September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013		December 31, 2012
(Dollars in thousands)
Noninterest-bearing demand deposits	$	278,275	$	247,586
Interest-bearing
NOW accounts		339,350		227,205
Money market		386,682		317,030
Savings accounts		187,040		179,290
Time deposits		359,280		359,344
Total interest-bearing deposits		1,272,352		1,082,869
Total deposits	$	1,550,627	$	1,330,455

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.  As of September 30, 2013 and December 31, 2012, we have no reciprocal deposits.

8.   Pension and Other Postretirement Benefit Plans

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

	Pension Benefits						Other Postretirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,
	2013			2012			2013			2012
(Dollars in thousands)
Service cost	$	-		$	125		$	25		$	16
Interest cost		238			271			32			35
Expected return on plan assets		(284	)		(259	)		-			-
Amortization:
Loss		144			169			11			-
Prior service cost		-			(31	)		(13	)		(12	)
Net periodic benefit cost	$	98		$	275		$	55		$	39
	Pension Benefits						Other Postretirement Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
(Dollars in thousands)
Service cost	$	-		$	375		$	76		$	46
Interest cost		714			815			96			103
Expected return on plan assets		(851	)		(777	)		-			-
Amortization:
Loss		430			507			32			-
Prior service cost		-			(94	)		(38	)		(36	)
Net periodic benefit cost	$	293		$	826		$	166		$	113

31

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

On December 27, 2012, the Company announced the freezing of the non-contributory defined-benefit pension plan and certain defined benefit postretirement plans as of February 28, 2013.  All benefits under these plans were frozen as of that date and no additional benefits shall accrue.  As a result, the Company recognized a $1.5 million reduction in pension and defined postretirement benefit expenses related to unrecognized prior service costs for the year ended December 31, 2012.

The Company expects to contribute a total of $1.4 million to the qualified defined benefit plan for the year ended December 31, 2013.  Since the supplemental plan and the postretirement benefit plans are unfunded, the Company accrues for the estimated costs of these plans through charges to expense during the year that employees render service. The Company makes contributions to cover the current benefits paid under these plans.

Employee Stock Ownership Plan

As part of the reorganization, the Company established the ESOP to provide eligible employees the opportunity to own Company stock.  The Company provided a loan to the Farmington Bank Employee Stock Ownership Plan Trust in the amount needed to purchase up to 1,430,416 shares of the Company’s common stock in the open market subsequent to the initial public offering.  The loan bears an interest rate equal to the Wall Street Journal Prime Rate plus one percentage point, adjusted annually, and provides for annual payments of interest and principal over the 15 year term of the loan.  At September 30, 2013, the loan had an outstanding balance of $14.8 million and an interest rate of 4.25%.  The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan.  The loan is secured by the unallocated shares purchased.  The ESOP compensation expense was $1.0 million and $935,000 for the nine months ended September 30, 2013 and 2012, respectively.

Shares held by the ESOP include the following as of September 30, 2013:

Allocated	190,722
Committed to be released	71,325
Unallocated	1,168,369
	1,430,416

The fair value of unallocated ESOP shares was $17.2 million at September 30, 2013.

9.   Stock Incentive Plan

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

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

32

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company classifies share-based compensation for employees within “Salaries and employee benefits” and share-based payments for outside directors within “Other operating expenses” in the consolidated statement of operations.  For the three months ended September 30, 2013 and 2012, the Company recorded $750,000 and $3.3 million of share-based compensation expense, respectively, comprised of $314,000 and $1.3 million of stock option expense, respectively and $436,000 and $2.0 million of restricted stock expense, respectively.  For the nine months ended September 30, 2013 and 2012, the Company recorded $2.9 million and $3.3 million of share-based compensation expense, respectively, comprised of $1.1 million and $1.3 million of stock option expense, respectively and $1.7 million and $2.0 million of restricted stock expense, respectively.  Expected future compensation expense relating to the 985,307 non-vested options outstanding at September 30, 2013, is $3.4 million over the remaining vesting period of 2.95 years. Expected future compensation expense relating to the 400,325 non-vested restricted shares at September 30, 2013, is $5.1 million over the remaining vesting period of 2.93 years.

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

Weighted-average assumptions for the nine months ended September 30, 2013 and 2012:

	2013			2012
Weighted per share average fair value of options granted	$	3.86		$	3.50
Weighted-average assumptions:
Risk-free interest rate		1.53	%		0.82	%
Expected volatility		31.36	%		33.69	%
Expected dividend yield		1.70	%		1.78	%
Weighted-average dividend yield		0.80% - 2.71	%		0.86% - 2.89	%
Expected life of options granted	6.0 years			6.0 years

The following is a summary of the Company’s stock option activity and related information for its option grants for the nine months ended September 30, 2013.

	Number of Stock Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2012		1,696,357		$	12.95
Granted		26,750			14.48
Exercised		(1,050	)		12.95
Forfeited		(2,400	)		12.95
Outstanding at September 30, 2013		1,719,657		$	12.97		8.51	$	2,953
Exercisable at September 30, 2013		734,350

33

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following is a summary of the status of the Company’s restricted stock for the nine months ended September 30, 2013.

	Number of Restricted Stock			Weighted-Average Grant Date  Fair Value
Unvested at December 31, 2012		572,167		$	12.95
Granted		-			-
Vested		(171,842	)		12.95
Forfeited		-			-
Unvested at September 30, 2013		400,325		$	12.95

10.   Derivative Financial Instruments

Non-Hedge Accounting Derivatives/Non-designated Hedges:

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

For every variable interest rate swap agreement entered into with a commercial customer, the Company simultaneously enters into a fixed rate interest rate swap agreement with a correspondent bank, agreeing to pay a fixed income stream and receive a variable interest rate swap. The Company is required to collateralize the fair value of its derivative liability.

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

The interest rate swap derivatives executed with our customers and our counterparties, are marked to market and are included with prepaid expenses and other assets and accrued expenses and other liabilities on our consolidated statements of condition at fair value.

34

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The Company had the following outstanding interest rate swaps that were not designated for hedge accounting:

				September 30, 2013							December 31, 2012
(Dollars in thousands)	Consolidated Balance Sheet Location	# of Instruments		Notional Amount		Estimated Fair Values			# of Instruments		Notional Amount		Estimated Fair Values
Commercial loan customer
interest rate swap position	Other Assets		30	$	96,913	$	4,366			35	$	105,828	$	8,379
Commercial loan customer
interest rate swap position	Other Liabilities		14		53,197		(2,116	)		2		7,731		(24	)
Counterparty interest
rate swap position	Other Liabilities		44		150,110		(2,250	)		37		113,559		(8,355	)

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 September 30,
	2013									2012
(Dollars in thousands)	Interest Income			MTM (Loss) Gain			Net Impact			Interest Income			MTM (Loss) Gain			Net Impact
Commercial loan customer
interest rate swap position	$	(835	)	$	56		$	(779	)	$	642		$	620		$	1,262
Counterparty interest
rate swap position		835			(56	)		779			(642	)		(620	)		(1,262	)
Total	$	-		$	-		$	-		$	-		$	-		$	-

	For The Nine Months Ended September 30,
	2013									2012
(Dollars in thousands)	Interest Income			MTM (Loss) Gain			Net Impact			Interest Income			MTM (Loss) Gain			Net Impact
Commercial loan customer
interest rate swap position	$	(2,223	)	$	(4,013	)	$	(6,236	)	$	1,763		$	2,282		$	4,045
Counterparty interest
rate swap position		2,223			4,013			6,236			(1,763	)		(2,282	)		(4,045	)
Total	$	-		$	-		$	-		$	-		$	-		$	-

35

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Mortgage Banking Derivatives

Certain derivative instruments, primarily forward sales of mortgage loans and mortgage-backed securities (“MBS”) are utilized by the Company in its efforts to manage risk of loss associated with its mortgage loan commitments and mortgage loans held for sale. Prior to closing and funding certain single-family residential mortgage loans, an interest-rate lock commitment is generally extended to the borrower. During the period from commitment date to closing date, the Company is subject to the risk that market rates of interest may change. If market rates rise, investors generally will pay less to purchase such loans resulting in a reduction in the gain on sale of the loans or, possibly, a loss. In an effort to mitigate such risk, forward delivery sales commitments, under which the Company agrees to deliver whole mortgage loans to various investors or issue MBS, are established. At September 30, 2013, the notional amount of outstanding rate locks totaled approximately $17.3 million and the notional amount of outstanding commitments to sell residential mortgage loans totaled approximately $19.7 million.  Forward sales, which include mandatory forward commitments, notional amount totaled approximately $13.1 million at September 30, 2013; establish the price to be received upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk. There is, however, still certain execution risk specifically related to the Company’s ability to close and deliver to its investors the mortgage loans it has committed to sell.

11.     Financial Instruments with Off-Balance Sheet Risk

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

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

	September 30, 2013		December 31, 2012
(Dollars in thousands)
Approved loan commitments	$	71,861	$	14,761
Unadvanced portion of construction loans		47,697		61,923
Unadvanced portion of resort loans		4,959		2,768
Unused lines for home equity loans		160,716		146,078
Unused revolving lines of credit		362		402
Unused commercial letters of credit		3,840		8,462
Unused commercial lines of credit		164,716		135,379
	$	454,151	$	369,773

Financial instruments with off-balance sheet risk had a valuation allowance of $419,000 and $394,000 as of September 30, 2013 and December 31, 2012, 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.

36

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

At September 30, 2013 and December 31, 2012, the Company had no off-balance sheet special purpose entities and participated in no securitizations of assets.

12.    Fair Value Measurements

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information.  In accordance with FASB ASC 820-10, the fair value estimates are measured within the fair value hierarchy.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under FASB ASC 820-10 are described as follows:

Basis of Fair Value Measurement

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

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

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

When available, quoted market prices are used.  In other cases, fair values are based on estimates using present value or other valuation techniques.  These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, and estimates of future cash flows, future expected loss experience and other factors.  Changes in assumptions could significantly affect these estimates.  Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not financial instruments.  Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of the Company. There are no transfers between levels during the three and nine months ended September 30, 2013 or during the year ended December 31, 2012.

37

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 September 30, 2013 and December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

	September 30, 2013
(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	$	101,004	$	101,004	$	-	$	-
Government sponsored residential mortgage-backed securities		10,896		-		10,896		-
Corporate debt securities		3,113		-		3,113		-
Preferred equity securities		1,696		-		1,696		-
Marketable equity securities		140		140		-		-
Mutual funds		3,533		-		3,533		-
Securities available-for-sale		120,382		101,144		19,238		-
Interest rate swap derivative		4,366		-		4,366		-
Derivative loan commitments		383		-		-		383
Total	$	125,131	$	101,144	$	23,604	$	383
Liabilities
Interest rate swap derivative	$	4,366	$	-	$	4,366	$	-
Forward loan sales commitments		215		-		-		215
Total	$	4,581	$	-	$	4,366	$	215

	December 31, 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	$	118,980	$	118,980	$	-	$	-
Government sponsored residential mortgage-backed securities		10,603		-		10,603		-
Corporate debt securities		3,153		-		3,153		-
Preferred equity securities		1,786		-		1,786		-
Marketable equity securities		372		132		240		-
Mutual funds		3,587		-		3,587		-
Securities available-for-sale		138,481		119,112		19,369		-
Interest rate swap derivative		8,379		-		8,379		-
Derivative loan commitments		450		-		-		450
Forward loan sales commitments		38		-				38
Total	$	147,348	$	119,112	$	27,748	$	488
Liabilities
Interest rate swap derivative	$	8,379	$	-	$	8,379	$	-
Total	$	8,379	$	-	$	8,379	$	-

38

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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					For the Three Months Ended
	September 30,					September 30,
	2013		2012			2013			2012
(Dollars in thousands)
Balance, at beginning of period	$	-	$	37		$	491		$	124
Paydowns		-		(37	)		-			-
Total (loss) gain - (realized/unrealized):
Included in earnings		-		-			(323	)		9
Balance, at the end of period	$	-	$	-		$	168		$	133
	Securities Available-for-Sale					Derivative and Forward Loan Sales Commitments, Net
	For the Nine Months Ended					For the Nine Months Ended
	September 30,					September 30,
		2013		2012			2013			2012
(Dollars in thousands)
Balance, at beginning of period	$	-	$	42		$	488		$	(44	)
Paydowns		-		(42	)		-			-
Total (loss) gain - (realized/unrealized):
Included in earnings		-		-			(320	)		177
Balance, at the end of period	$	-	$	-		$	168		$	133

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring basis at September 30, 2013:

				Significant				Weighted Average
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs			Inputs
Derivative and forward loan sales commitments, net	$	168	Discounted cash flows	embedded servicing value		1.25	%		1.25	%

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.

39

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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

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

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

The following table details the financial instruments carried at fair value on a nonrecurring basis at September 30, 2013 and December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

September 30, 2013

December 31, 2012

Quoted Prices in

Significant

Significant

Quoted Prices in

Significant

Significant

Active Markets for

Observable

Unobservable

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Inputs

Identical Assets

Inputs

Inputs

(Level 1)

(Level 2)

(Level 3)

(Level 1)

(Level 2)

(Level 3)

(Dollars in thousands)

Impaired loans

$

-

$

-

$

40,944

$

-

$

-

$

35,908

Other real estate owned

-

-

282

-

-

549

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.

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

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 September 30, 2013 is the result of either sufficient cash flow or sufficient collateral coverage, or previous charge off amount that reduced the book value of the loan to an amount equal to or below the fair value of the collateral. Impaired loans are measured based on either collateral values supported by appraisals, observed market prices or where potential losses have been identified and reserved accordingly. Updated appraisals are obtained at least annually for impaired loans $250,000 or greater. Management performs a quarterly review of the valuation of impaired loans and considers the current market and collateral conditions for collateral dependent loans when estimating their fair value for purposes of determining whether an allowance for loan losses is necessary for impaired loans.  When assessing the collateral coverage for an impaired loan, management discounts appraisals based upon the age of the appraisal, anticipated selling charges and any other costs needed to prepare the collateral for sale to determine its net realizable value.

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

The following table present the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2013:

				Significant		Weighted Average Inputs
(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs
Mortgage servicing rights	$	3,260	Discounted cash flows	Prepayment speed	0% - 29%		8.8	%
				Discount rate	n/a		8.0	%
Impaired loans	$	40,944	Appraisals	Discount for dated appraisal	0% - 20%		10.0	%
				Discount for costs to sell	8% - 15%		11.5	%
Other real estate owned	$	282	Appraisals	Discount for costs to sell	8% - 10%		9.0	%

41

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Disclosures about Fair Value of Financial Instruments

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

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

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

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

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.

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, this 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.

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of September 30, 2013 and December 31, 2012.  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. 

		September 30, 2013				December 31, 2012
				Estimated				Estimated
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy Level	Amount		Value		Amount		Value
(Dollars in thousands)
Financial assets
Securities held-to-maturity	Level 2	$	3,002	$	3,002	$	3,006	$	3,006
Securities available-for-sale	See previous table		120,382		120,382		138,481		138,481
Loans	Level 3		1,727,011		1,728,547		1,534,021		1,563,430
Loans held-for-sale	Level 2		5,357		5,523		9,626		9,833
Mortgage servicing rights	Level 3		2,888		3,260		1,327		1,709
Federal Home Loan Bank of Boston stock	Level 2		8,383		8,383		8,939		8,939
Financial liabilities
Deposits
Noninterest-bearing demand deposits	Level 1		278,275		278,275		247,586		247,586
NOW accounts	Level 1		339,350		339,350		227,205		227,205
Money market	Level 1		386,682		386,682		317,030		317,030
Savings accounts	Level 1		187,040		187,040		179,290		179,290
Time deposits	Level 2		359,280		361,914		359,344		363,156
FHLB advances	Level 2		104,000		105,040		128,000		130,062
Repurchase agreement borrowings	Level 2		21,000		22,281		21,000		22,819
Repurchase liabilities	Level 2		50,432		50,432		54,187		54,189
On-balance sheet derivative financial instruments
Forward loan sales commitments:
Assets	Level 3		-		-		38		38
Liabilities	Level 3		215		215		-		-
Interest rate swap derivative liability:
Assets	Level 2		4,366		4,366		8,379		8,379
Liabilities	Level 2		4,366		4,366		8,379		8,379
Derivative loan commitments:
Assets	Level 3		383		383		450		450

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First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

13.           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 September 30, 2013 and December 31, 2012, 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 September 30, 2013
Total Capital (to Risk Weighted Assets)	$	206,960		13.29	%	$	124,581		8.00	%	$	155,726		10.00	%
Tier I Capital (to Risk Weighted Assets)		188,863		12.13			62,280		4.00			93,419		6.00
Tier I Capital (to Average Assets)		188,863		9.88			76,463		4.00			95,578		5.00
At December 31, 2012
Total Capital (to Risk Weighted Assets)	$	203,344		14.44	%	$	112,656		8.00	%	$	140,820		10.00	%
Tier I Capital (to Risk Weighted Assets)		185,743		13.19			56,328		4.00			84,493		6.00
Tier I Capital (to Average Assets)		185,743		10.44			71,166		4.00			88,957		5.00
First Connecticut Bancorp, Inc.:
At September 30, 2013
Total Capital (to Risk Weighted Assets)	$	251,385		16.12	%	$	124,757		8.00	%	$	155,946		10.00	%
Tier I Capital (to Risk Weighted Assets)		233,288		14.96			62,376		4.00			93,565		6.00
Tier I Capital (to Average Assets)		233,288		12.18			76,613		4.00			95,767		5.00
At December 31, 2012
Total Capital (to Risk Weighted Assets)	$	264,987		18.78	%	$	112,881		8.00	%	$	141,101		10.00	%
Tier I Capital (to Risk Weighted Assets)		247,364		17.53			56,444		4.00			84,665		6.00
Tier I Capital (to Average Assets)		247,364		13.88			71,286		4.00			89,108		5.00

14.           Legal Actions

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

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

Forward-Looking Statements

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

● statements of our goals, intentions and expectations;

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

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

● estimates of our risks and future costs and benefits.

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

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

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

● 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.

45

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

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

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

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

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

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

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

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

General

Established in 1851, Farmington Bank is a full-service, community bank with 21 full service branch offices and 4 limited services offices, including our main office, located throughout Hartford County, Connecticut.  Farmington Bank provides a diverse range of commercial and consumer services to businesses, individuals and governments across central Connecticut.

Our Business Strategy

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

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

● 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;

46

● 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;

● 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, employee stock ownership plan and earnings per share. 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.  All reserves are available to cover any losses regardless of how they are allocated.

General component: The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort.  Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development 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 during the three and nine months ended September 30, 2013.

47

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 or purchase 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, may have an effect on the credit quality in this segment.

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

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

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

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

48

Resort – Loans in this segment include 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. Receivable loans, which account for 87% of the resort portfolio at September 30, 2013, 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 consumer 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.  The Company has exited the resort financing market with a residual portfolio remaining.

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

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

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

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

During 2013, we have started to see a slight improvement in the real estate markets and the overall economic conditions which have led to an improvement in collateral values and cash flows of borrowers.  The stabilization of these economic conditions have led to improvements in charge-offs, delinquencies and non-performing loans and improved valuations for the Company’s impaired loans as of September 30, 2013.  The economy is still uncertain.  If the current trend reverses itself, it could impact significant estimates such as the allowance for loan losses and the effect could be material.

49

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 September 30, 2013 and December 31, 2012, we had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which we have the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.

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

Income Taxes: The Company uses the estimated annual effective tax rate method in computing its interim tax provision.  Under this method, items deemed to be unusual or infrequent or that cannot be reliably estimated, are excluded from the annual effective tax rate calculation and are treated discretely in the period the item is reported.

In accordance with the asset and liability method of accounting for income taxes, deferred taxes and liabilities are determined based on the difference between the financial statement carrying amounts and the tax basis of the assets and liabilities using enacted tax rates.   A valuation allowance is established when it is more likely than not that deferred tax assets will not be realized.

The following table provides a comparative summary of the income tax provision and effective tax rate on continuing operations for the three and nine months ended September 30, 2013 and 2012:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
(Dollars in thousands)
Provision (benefit) for income taxes	$	292		$	(519	)	$	819		$	91
Effective tax rate on continuing operations		24.5	%		32.7	%		24.6	%		10.8	%

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The rate differs from the statutory rate of 34.0% primarily due to the tax effects associated with bank-owned life insurance,  the employee stock ownership plan, dividends received and tax-exempt income.  Discrete items had a nominal impact on the effective tax rate on pretax income from continuing operations for the periods presented.

The Company has a charitable contribution carryforward of $7.0 million which expires on December 31, 2016.  The deduction for charitable contributions is subject to limitation under the Internal Revenue Code.   The Company expects to fully utilize the charitable contribution carryforward based on the generation of future taxable income and tax planning strategies.  The Company continues to assess the realization of this deferred tax asset on a quarterly basis.  A change in expected future taxable income or tax planning strategies may require a valuation allowance at a future date.

During 2012, an examination by the Internal Revenue Service for the year 2011 was completed and an unrecognized tax benefit of $984,000 was reversed upon payment.   The effective tax rate on continuing operations included a nominal tax benefit from the settlement of the examination that was treated as a discrete item.

Pension and Other Post-retirement Benefits: On December 27, 2012, the Company announced the freezing of the non-contributory defined-benefit pension plan and certain other postretirement benefit plans as of February 28, 2013.  All benefits under these plans will be frozen as of that date and no additional benefits shall accrue.

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

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

Employee Stock Ownership Plan (“ESOP”): The Company accounts for its ESOP in accordance with FASB ASC 718-40, Compensation – Stock Compensation. Under this guidance, unearned ESOP shares are not considered outstanding and are shown as a reduction of stockholders’ equity as unearned compensation. The Company will recognize compensation cost equal to the fair value of the ESOP shares during the periods in which they are committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, this difference will be credited or debited to equity. The Company will receive a tax deduction equal to the cost of the shares released to the extent of the principal pay down 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.

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Stock Incentive Plan: During August 2012, the Company implemented the First Connecticut Bancorp, Inc. 2012 Stock Incentive Plan to provide for issuance or granting of shares of common stock for stock options or restricted stock. The Company applies ASC 718, Compensation – Stock Compensation, and has recorded stock-based employee compensation cost using the fair value method. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Management estimated the expected life of the options using the simplified method allowed under SAB No. 107. The risk-free rate was determined utilizing the treasury yield for the expected life of the option contract.

Earnings Per Share: Basic net earnings (loss) per share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is computed in a manner similar to basic net earnings (loss) per 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 equivalents were issued during the period.  Unvested restricted stock are participating securities and are considered outstanding and included in the weighted-average number of shares outstanding for purposes of calculating both basic and diluted earnings per common share since the shares participate in dividends and the right to dividends are non-forfeitable.  Losses are not allocated to participating securities since there is not a contractual obligation to participate in the net loss.  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 earnings (loss) per share.

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Comparison of Financial Condition at September 30, 2013 and December 31, 2012

Our total assets increased $169.3 million or 9.3% at September 30, 2013 to $2.0 billion compared to December 31, 2012 reflecting a $192.3 million increase in loans offset by a $17.9 million decrease in securities available for sale.  Deposits increased $220.2 million and FHLB advances decreased $24.0 million.

Our investment portfolio totaled $123.4 million or 6.2% of total assets, and $141.2 million or 7.7% of total assets at September 30, 2013 and December 31, 2012, respectively. Available-for-sale investment securities totaled $120.4 million at September 30, 2013 compared to $138.2 million at December 31, 2012.  Securities held-to-maturity totaled $3.0 million at September 30, 2013 and December 31, 2012.  The Company purchases short term U.S. Treasury and agency securities in order to meet municipal and repurchase agreement pledge requirements and to minimize interest rate risk during the sustained low interest rate environment.

The net unrealized gains on securities available-for-sale, on a pre-tax basis, decreased by $632,000 to $71,000 at September 30, 2013 compared to December 31, 2012.  As of September 30, 2013 and December 31, 2012, our available-for-sale investment securities portfolio gross unrealized losses equaled $551,000 and $345,000, respectively, of which $406,000 and $336,000, respectively, were from securities that had been in a loss position of twelve months or more. Management has no intent to sell nor is it more likely than not that Management will be required to sell any of the securities in a loss position during the period of time necessary to recover the unrealized losses, which may be until maturity.

Net loans increased $192.4 million or 12.7% at September 30, 2013 to $1.7 billion compared to December 31, 2012 primarily driven by increases in the commercial real estate, commercial construction and residential loan segments which, combined, increased $216.7 million, offset by a $21.4 million decrease in resort loans as we continue to exit the resort financing market.  At September 30, 2013 and December 31, 2012, respectively, the loan portfolio consisted of $674.8 million and $621.0 million in residential real estate loans, $585.6 million and $473.8 million in commercial real estate loans, $90.0 million and $64.4 million in construction loans, $213.1 million and $192.2 million in commercial loans, $147.0 million and $142.5 million in home equity lines of credit, $9.8 million and $31.2 million in resort loans and $6.6 million and $8.9 million in installment, collateral, demand and revolving credit loans.

The allowance for loan losses increased $449,000 or 2.6% to $17.7 million at September 30, 2013 from $17.2 million at December 31, 2012.  Impaired loans increased $5.7 million to $42.6 million at September 30, 2013 from $36.9 million at December 31, 2012.  Non-accrual loans increased $105,000 to $13.9 million at September 30, 2013 compared to $13.8 million at December 31, 2012.  At September 30, 2013, the allowance for loan losses represented 1.02% of total loans and 127.30% of non-performing loans, compared to 1.12% of total loans and 125.01% of non-performing loans as of December 31, 2012. Net charge-offs for the nine months ended September 30, 2013 were $421,000 or 0.04% (annualized), compared to net charge-offs for the nine months ended September 30, 2012 of $678,000 or 0.07% (annualized) of average loans outstanding.  Loan delinquencies 30 days and greater decreased $2.0 million to $15.0 million at September 30, 2013 compared to December 31, 2012 driven largely by decreases in delinquencies in the residential portfolio.

Deposits increased $220.2 million or 16.5% at September 30, 2013 compared to December 31, 2012, primarily due to continued growth in checking accounts, municipal deposits and branch openings.  Checking accounts grew by 11.4% or 3,976 net new accounts for the nine months ended September 30, 2013.

Federal Home Loan Bank of Boston advances decreased $24.0 million to $104.0 million, primarily due to a decrease in overnight borrowings at September 30, 2013 compared to December 31, 2012.

53

Stockholders’ equity decreased $14.0 million to $227.5 million compared to December 31, 2013 primarily due to the $18.2 million repurchase of common stock at an average stock price of $14.47 offset by $2.5 million in net income.  The Company paid cash dividends totaling $1.5 million or $0.09 per share as of September 30, 2013.  On May 30, 2013, the Company completed the repurchase of 1,788,020 shares at a cost of $24.9 million, of which 486,947 shares were reissued as part of the 2012 Stock Incentive Plan.  On June 21, 2013, the Company received regulatory approval to repurchase up to an additional 1,676,452 shares, or 10% of its current outstanding common stock.  During the three months ended September 30, 2013, the Company has repurchased 317,885 shares at an average price per share of $14.25 at a cost of $4.5 million.  Repurchased shares are held as treasury stock and are available for general corporate purposes.

Summary of Operating Results for the Three Months Ended September 30, 2013 and 2012

The following discussion provides a summary and comparison of our operating results for the three months ended September 30, 2013 and 2012.

	For the Three Months Ended September 30,
	2013		2012			$ Change			% Change
(Dollars in thousands)
Net interest income	$	13,283	$	13,387		$	(104	)		(0.8	)%
Provision for loan losses		215		215			-			-
Noninterest income		2,235		2,145			90			4.2
Noninterest expense		14,110		16,905			(2,795	)		(16.5	)
Income (loss) before taxes		1,193		(1,588	)		2,781			175.1
Income tax (benefit) expense		292		(519	)		811			156.3
Net income (loss)	$	901	$	(1,069	)	$	1,970			184.3	%

For the quarter ended September 30, 2013, net income increased by $2.0 million to $901,000 compared to a net loss of $1.1 million for the quarter ended September 30, 2012. The increase in net income was driven by a decrease in noninterest expense due to expense related to our 2012 Stock Incentive Plan (the “Plan”) implemented in August 2012 and a loss recognized on the sale of non-strategic property for the quarter ended September 30, 2012.

Comparison of Operating Results for the Three Months Ended September 30, 2013 and 2012

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 Income: For the quarter ended September 30, 2013, interest and dividend income remained flat at $15.8 million compared to the quarter ended September 30, 2012, primarily due to an increase in interest income in the commercial and residential portfolios driven by increased loan originations in the period offset by a $759,000 decrease in interest income on the resort loan portfolio as we continue our planned exit of the resort financing market and a $167,000 decrease in investment income.  The yield on average interest-earning assets decreased 36 basis points to 3.50% for the quarter ended September 30, 2013 from 3.86% for the quarter ended September 30, 2012.  The decline was due to a 43 basis points decrease in the yield on total average net loans to 3.75% offset by a $188.3 million or 12.9% increase in total average net loans and a 43 basis points decrease in securities to 0.65% as a result of maturing, called and prepaying securities being replaced by lower yielding securities compared to the quarter ended September 30, 2012.

54

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.

	For The Three Months Ended September 30,
	2013								2012
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans, net	$	1,648,948	$	15,580			3.75	%	$	1,460,686	$	15,387			4.18	%
Securities		131,602		216			0.65	%		141,367		380			1.07	%
Federal Home Loan Bank of Boston stock		8,383		8			0.38	%		7,671		10			0.52	%
Federal funds and other earning assets		3,288		2			0.24	%		10,317		3			0.12	%
Total interest-earning assets		1,792,221		15,806			3.50	%		1,620,041		15,780			3.86	%
Noninterest-earning assets		122,566								116,100
Total assets	$	1,914,787							$	1,736,141
Interest-bearing liabilities:
NOW accounts	$	303,882	$	180			0.24	%	$	207,763	$	100			0.19	%
Money market		371,614		794			0.85	%		280,572		498			0.70	%
Savings accounts		185,732		79			0.17	%		172,494		67			0.15	%
Certificates of deposit		356,994		861			0.96	%		361,648		979			1.07	%
Total interest-bearing deposits		1,218,222		1,914			0.62	%		1,022,477		1,644			0.64	%
Federal Home Loan Bank of Boston advances		74,101		383			2.05	%		112,850		499			1.75	%
Repurchase agreement borrowings		21,000		181			3.42	%		21,000		179			3.38	%
Repurchase liabilities		57,187		45			0.31	%		73,268		71			0.38	%
Total interest-bearing liabilities		1,370,510		2,523			0.73	%		1,229,595		2,393			0.77	%
Noninterest-bearing deposits		272,621								216,205
Other noninterest-bearing liabilities		39,810								43,965
Total liabilities		1,682,941								1,489,765
Stockholders’ equity		231,846								246,376
Total liabilities and stockholders’ equity	$	1,914,787							$	1,736,141
Net interest income			$	13,283							$	13,387
Net interest rate spread (1)							2.77	%							3.09	%
Net interest-earning assets (2)	$	421,711							$	390,446
Net interest margin (3)							2.94	%							3.28	%
Average interest-earning assets to average interest-bearing liabilities				130.77	%							131.75	%

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

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

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

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Rate Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The 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 September 30, 2013 Compared to Three Months Ended September 30, 2012
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans, net	$	953		$	(760	)	$	193
Investment securities		(23	)		(141	)		(164	)
Federal Home Loan Bank of Boston stock		1			(3	)		(2	)
Federal funds and other interest-earning assets		2			(3	)		(1	)
Total interest-earning assets		933			(907	)		26
Interest-bearing liabilities:
NOW accounts		52			28			80
Money market		182			114			296
Savings accounts		12			-			12
Certificates of deposit		(13	)		(105	)		(118	)
Total interest-bearing deposits		233			37			270
Advances from the Federal Home Loan Bank		(208	)		92			(116	)
Repurchase agreement borrowing		-			2			2
Repurchase liabilities		(10	)		(16	)		(26	)
Total interest-bearing liabilities		15			115			130
(Decrease) increase in net interest income	$	918		$	(1,022	)	$	(104	)

Net Interest Income:  Net interest income is determined by the interest rate spread (i.e., the difference between the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities) and the relative amounts of interest-earning assets and interest-bearing liabilities. Net interest income before the provision for loan losses was $13.3 million for the quarter ended September 30, 2013, compared to $13.4 million for the quarter ended September 30, 2012.  The slight decrease in net interest income was primarily due to a decrease in interest income on the resort loan portfolio as we continue our planned exit of the resort financing market and a $167,000 decrease in investment income offset by an increase in interest income in the commercial and residential portfolios driven by increased loan originations in the period.  Resort loan interest income was $156,000 and $915,000 for the three months ended September 30, 2013 and 2012, respectively.  The yield on average interest-earning assets decreased 36 basis points to 3.50% for the quarter ended September 30, 2013 from 3.86% for the quarter ended September 30, 2012.  The decline was due to a 43 basis points decrease in the yield on total average net loans to 3.75% offset by a $188.3 million or 12.9% increase in total average net loans and a 43 basis points decrease in securities to 0.65% as a result of maturing, called and prepaying securities being replaced by lower yielding securities compared to the quarter ended September 30, 2012.  The cost of average interest-earning liabilities decreased 4 basis points to 0.73% for the quarter ended September 30, 2013 reflecting lower funding costs.  Net interest margin decreased 34 basis points to 2.94% for the quarter ended September 30, 2013 compared to 3.28% for the quarter ended September 30, 2012 due to a low rate environment and a $39.9 million decline in the resort loan portfolio.

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Interest Expense: Interest expense for the quarter ended September 30, 2013 increased $130,000 or 5.4% to $2.5 million from $2.4 million for the quarter ended September 30, 2012.  The increase in interest expense resulted primarily from a $140.9 million increase in the average balance of interest-bearing liabilities offset by a 4 basis point decline in the average cost of interest-bearing liabilities to 0.73% for the quarter ended September 30, 2013 from 0.77% for the quarter ended September 30, 2012.   The average balance of certificates of deposit decreased $4.7 million compared to the prior year quarter with a decrease in yield of 11 basis points to 0.96% for the three months ended September 30, 2013.

Provision for Loan Losses: The allowance for loan losses is maintained at a level management determines to be appropriate to absorb estimated credit losses that are both probable and reasonably estimable at the dates of the financial statements. Management evaluates the adequacy of the allowance for loan losses on a quarterly basis and charges any provision for loan losses needed to current operations. The assessment considers historical loss experience, historical and current delinquency statistics, the loan portfolio segment and the amount of loans in the loan portfolio, the financial strength of the borrowers, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions and other credit quality indicators.  Although the commercial real estate (“CRE”) portfolio grew a net $52.0 million during the three months ended September 30, 2013, the CRE provision decreased for the quarter due to improving asset quality indicators including improvements in the CRE weighted average risk rating, a decrease in CRE delinquencies to total loans and an increase in the percent of current criticized/classified CRE loans.

Management recorded a provision for loan losses of $215,000 for the quarters ended September 30, 2013 and 2012.  The provision recorded is based upon management’s analysis of the allowance for loan losses necessary to absorb the estimated credit losses in the loan portfolio for the period.

At September 30, 2013, the allowance for loan losses totaled $17.7 million, or 1.02% of total loans and 127.3% of non-accrual loans, compared to an allowance for loan losses of $17.2 million which represented 1.12% of total loans and 125.01% of non-accrual loans at December 31, 2012. 

Noninterest Income: Sources of noninterest income primarily include banking service charges on deposit accounts, brokerage and insurance fees, bank-owned life insurance, net gain on loans sold and mortgage banking income.

The following table summarizes noninterest income for the three months ended September 30, 2013 and 2012:

	For the Three Months Ended September 30,
	2013			2012		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	1,230		$	950	$	280			29.5	%
Net gain on sales of investments		304			-		304			100.0
Net gain on loans sold		625			687		(62	)		(9.0	)
Brokerage and insurance fee income		37			34		3			8.8
Bank owned life insurance income		303			326		(23	)		(7.1	)
Other		(264	)		148		(412	)		(278.4	)
Total noninterest income	$	2,235		$	2,145	$	90			4.2	%

Non-interest income increased $90,000 to $2.2 million for the three months ended September 30, 2013 compared to the same period in the prior year.  Fees for customer services increased $280,000 or 29.5% driven by increased volume due to deposit growth.  The Company recognized a $304,000 gain on sales of investments.  Gain on sale of fixed-rate residential mortgage loans decreased $62,000 to $625,000 compared to $687,000 for the quarter ended September 30, 2012 due to an overall decrease in volume and compressed margins in our secondary market residential lending program.  Other income decreased $412,000 primarily due to a $331,000 decrease in mortgage banking derivatives and a $95,000 increase in amortization of mortgage servicing rights.

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Noninterest Expense: The following table summarizes noninterest expense for the three months ended September 30, 2013 and 2012:

	For the Three Months Ended September 30,
	2013		2012		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	8,571	$	10,243	$	(1,672	)		(16.3	)%
Occupancy expense		1,175		1,108		67			6.0
Furniture and equipment expense		998		1,120		(122	)		(10.9	)
FDIC assessment		341		255		86			33.7
Marketing		423		509		(86	)		(16.9	)
Other operating expenses		2,602		3,670		(1,068	)		(29.1	)
Total noninterest expense	$	14,110	$	16,905	$	(2,795	)		(16.5	)%

Non-interest expense decreased $2.8 million or 16.5% to $14.1 million for the three months ended September 30, 2013 compared to $16.9 million in the same period in the prior year  primarily due to recognizing $3.0 million in stock compensation expense in the third quarter of 2012 related to the implementation of the 2012 Stock Incentive Plan (the “Plan”).  Salaries and employee benefits decreased $1.7 million primarily due to stock compensation expense related the Plan, excluding the stock compensation expense related to the Plan, salaries and benefits remained relatively flat.  Furniture and equipment expense decreased $122,000 to $998,000 for the quarter ended September 30, 2013 primarily due to software maintenance contracts not being renewed as part of our core banking system conversion which was completed in May 2013.  Marketing decreased $86,000 to $423,000 for the quarter ended September 30, 2013 due to general expense control initiatives.  Other operating expenses decreased $1.1 million to $2.6 million compared to $3.7 million for the quarter ended September 30, 2012.  The increase was primarily due to both the initial vesting of directors’ stock compensation expense related to the Plan and a $394,000 loss on the sale of non-strategic properties in the third quarter of 2012.

Income Tax Expense: Income taxes increased $811,000 to a tax expense of $292,000 in the third quarter of 2013 compared to a tax benefit of $519,000 in the third quarter of 2012.

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Summary of Operating Results for the Nine Months Ended September 30, 2013 and 2012

The following discussion provides a summary and comparison of our operating results for the nine months ended September 30, 2013 and 2012.

	For the Nine Months Ended September 30,
	2013		2012		$ Change			% Change
(Dollars in thousands)
Net interest income	$	38,822	$	39,140	$	(318	)		(0.8	)%
Provision for loan losses		870		1,065		(195	)		(18.3	)
Noninterest income		8,747		5,436		3,311			60.9
Noninterest expense		43,364		42,667		697			1.6
Income before taxes		3,335		844		2,491			295.1
Income tax expense		819		91		728			800.0
Net income	$	2,516	$	753	$	1,763			234.1	%

For the nine months ended September 30, 2013, net income increased by $1.8 million to a net income of $2.5 million compared to a net income of $753,000 for the nine months ended September 30, 2012. The increase in net income was driven by an increase in noninterest income due to an increase in volume of our secondary market residential lending program offset by increases in noninterest expense and income tax expense.

Comparison of Operating Results for the Nine Months Ended September 30, 2013 and 2012

Interest Income: For the nine months ended September 30, 2013, interest and dividend income decreased slightly to $46.2 million from $46.4 million for the nine months ended September 30, 2012, primarily due to a $2.3 million decrease in resort income as we continue our planned exit of the resort financing market and a $164,000 decrease in investment income offset by an increase in interest income in the commercial and residential portfolios driven by increased loan originations.  Resort loan income was $721,000 and $3.0 million for the nine months ended September 30, 2013 and 2012, respectively.  The yield on average interest-earning assets decreased 37 basis points to 3.58% for the nine months ended September 30, 2013 from 3.95% for the nine months ended September 30, 2012.  The decline was due to a 52 basis points decrease in the yield on total average net loans to 3.84% offset by a $204.3 million or 14.8% increase in total average net loans and a 39 basis points decrease in securities to 0.73% as a result securities being called, maturing or prepaying and being replaced by lower yielding securities compared to the nine months ended September 30, 2012.

59

 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.

	For The Nine Months Ended September 30,
	2013								2012
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
(Dollars in thousands)
Interest-earning assets:
Loans, net	$	1,583,569	$	45,467			3.84	%	$	1,379,256	$	45,127			4.36	%
Securities		124,507		684			0.73	%		134,943		1,135			1.12	%
Federal Home Loan Bank of Boston stock		8,524		25			0.39	%		7,393		28			0.50	%
Federal funds and other earning assets		9,513		13			0.18	%		41,579		63			0.20	%
Total interest-earning assets		1,726,113		46,189			3.58	%		1,563,171		46,353			3.95	%
Noninterest-earning assets		121,440								116,811
Total assets	$	1,847,553							$	1,679,982
Interest-bearing liabilities:
NOW accounts	$	268,482	$	466			0.23	%	$	205,776	$	272			0.18	%
Money market		354,291		2,105			0.79	%		271,051		1,530			0.75	%
Savings accounts		180,490		237			0.18	%		169,491		192			0.15	%
Certificates of deposit		355,934		2,638			0.99	%		370,514		3,048			1.10	%
Total interest-bearing deposits		1,159,197		5,446			0.63	%		1,016,832		5,042			0.66	%
Federal Home Loan Bank of Boston advances		74,386		1,253			2.25	%		79,708		1,442			2.41	%
Repurchase agreement borrowings		21,000		532			3.39	%		21,000		540			3.43	%
Repurchase liabilities		53,106		136			0.34	%		64,864		189			0.39	%
Total interest-bearing liabilities		1,307,689		7,367			0.75	%		1,182,404		7,213			0.81	%
Noninterest-bearing deposits		256,830								207,456
Other noninterest-bearing liabilities		45,931								40,404
Total liabilities		1,610,450								1,430,264
Stockholders’ equity		237,103								249,718
Total liabilities and stockholders’ equity	$	1,847,553							$	1,679,982
Net interest income			$	38,822							$	39,140
Net interest rate spread (1)							2.83	%							3.14	%
Net interest-earning assets (2)	$	418,424							$	380,767
Net interest margin (3)							3.01	%							3.34	%
Average interest-earning assets to average interest-bearing liabilities
				132.00	%							132.20	%

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

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

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

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Rate Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The 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.

	Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans, net	$	1,780		$	(1,440	)	$	340
Investment securities		(75	)		(376	)		(451	)
Federal Home Loan Bank of Boston stock		7			(10	)		(3	)
Federal funds and other interest-earning assets		(45	)		(5	)		(50	)
Total interest-earning assets		1,667			(1,831	)		(164	)
Interest-bearing liabilities:
NOW accounts		102			92			194
Money market		496			79			575
Savings accounts		45			-			45
Certificates of deposit		(117	)		(293	)		(410	)
Total interest-bearing deposits		526			(122	)		404
Advances from the Federal Home Loan Bank		(106	)		(83	)		(189	)
Repurchase agreement borrowing		-			(8	)		(8	)
Repurchase liabilities		(53	)		-			(53	)
Total interest-bearing liabilities		367			(213	)		154
(Decrease) increase in net interest income	$	1,300		$	(1,618	)	$	(318	)

Net Interest Income:  Net interest income before the provision for loan losses was $38.8 million for the nine months ended September 30, 2013, compared to $39.1 million for the nine months ended September 30, 2012.  The slight decrease in net interest income was primarily due to a $2.3 million decrease in interest income on the resort loan portfolio as we continue our planned exit of the resort financing market and a $164,000 decrease in investment income offset by an increase interest income on mortgage loans driven by an increase in loan originations in the commercial and residential portfolios during the period.  Resort loan interest income was $721,000 and $3.0 million for the nine months ended September 30, 2013 and 2012, respectively.  The yield on average interest-earning assets decreased 37 basis points to 3.58% for the nine months ended September 30, 2013 from 3.95% for the nine months ended September 30, 2012.  The decline was due to a 52 basis points decrease in the yield on total average net loans to 3.84% offset by a $204.3 million or 14.8% increase in total average net loans and a 39 basis points decrease in securities to 0.73% as a result of maturing securities being replaced by lower yielding securities compared to the nine months ended September 30, 2012.  The cost of average interest-earning liabilities decreased 6 basis points to 0.75% for the nine months ended September 30, 2013 reflecting lower funding costs.  Net interest margin decreased 33 basis points to 3.01% for the nine months ended September 30, 2013 compared to 3.34% for the nine months ended September 30, 2012 due to the low rate environment and a $39.9 million decline in the resort loan portfolio.

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Interest Expense: Interest expense for the nine months ended September 30, 2013 increased slightly to $7.4 million compared to $7.2 million for the nine months ended September 30, 2012.  The cost of interest-bearing liabilities decreased 6 basis points to 0.75% for the nine months ended September 30, 2013.  Time deposit interest expense decreased $410,000 due to an 11 basis point decrease in the yield to 0.99% offset by increases in NOW and money market interest expense of $194,000 and $575,000, respectively, due to increases in average balances for the nine months ended September 30, 2013 compared to the same period in the prior year.  Interest expense related to advances from the Federal Home Loan Bank of Boston and Repurchase liabilities decreased $189,000 or 16 basis points and $53,000 or 5 basis points, respectively compared to the same period in the prior year.

Provision for Loan Losses:  Management recorded a provision for loan losses of $870,000 for the nine months ended September 30, 2013 compared to $1.2 million for the nine months ended September 30, 2012.  The provision recorded is based upon management’s analysis of the allowance for loan losses necessary to absorb the estimated credit losses in the loan portfolio for the period.

At September 30, 2013, the allowance for loan losses represented 1.02% of total loans and 127.30% of non-performing loans, compared to 1.12% of total loans and 125.01% of non-performing loans as of December 31, 2012. Net charge-offs for the nine months ended September 30, 2013 were $421,000 or 0.04% (annualized), compared to net charge-offs for the nine months ended September 30, 2012 of $678,000 or 0.07% (annualized) of average loans outstanding.

Noninterest Income: Sources of noninterest income primarily include banking service charges on deposit accounts, brokerage and insurance fees, bank-owned life insurance and mortgage banking income.

The following table summarizes noninterest income for the nine months ended September 30, 2013 and 2012:

	For the Nine Months Ended September 30,
	2013			2012		$ Change			% Change
(Dollars in thousands)
Fees for customer services	$	3,309		$	2,666	$	643			24.1	%
Net gain on sales of investments		340			-		340			100.0
Net gain on loans sold		4,244			1,216		3,028			249.0
Brokerage and insurance fee income		110			91		19			20.9
Bank owned life insurance income		1,015			966		49			5.1
Other		(271	)		497		(768	)		(154.5	)
Total noninterest income	$	8,747		$	5,436	$	3,311			60.9	%

Non-interest income increased $3.3 million or 60.9% to $8.7 million for the nine months ended September 30, 2013 compared to the same period in the prior year.  Fees for customer services increased $643,000 or 24.1% driven by increased volume due to deposit growth.  The Company recognized a $340,000 net gain on sales of investments.  Gain on sale of fixed-rate residential mortgage loans increased $3.0 million to $4.2 million compared to $1.2 million for the nine months ended September 30, 2012 due to an expansion in our secondary market residential lending program.  Other income decreased $768,000 primarily due to a $495,000 decrease in mortgage banking derivatives and a $279,000 increase in amortization of mortgage servicing rights due to an increase in loan volume.

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Noninterest Expense: The following table summarizes noninterest expense for the nine months ended September 30, 2013 and 2012:

	For the Nine Months Ended September 30,
	2013		2012		$ Change			% Change
(Dollars in thousands)
Salaries and employee benefits	$	26,160	$	25,286	$	874			3.5	%
Occupancy expense		3,541		3,396		145			4.3
Furniture and equipment expense		3,115		3,331		(216	)		(6.5	)
FDIC assessment		943		828		115			13.9
Marketing		1,627		1,868		(241	)		(12.9	)
Other operating expenses		7,978		7,958		20			0.3
Total noninterest expense	$	43,364	$	42,667	$	697			1.6	%

Non-interest expense increased $697,000 or 1.6% to $43.4 million for the nine months ended September 30, 2013 compared to $42.7 million in the same period in the prior year. Salaries and employee benefits increased $874,000, primarily due to increases in compensation and other salary related costs to support our strategic growth reflective of an increase in headcount and a $633,000 stock compensation expense related to the accelerated vesting of stock compensation due to the passing of a key executive partially offset by a decrease in pension expense of $570,000 as the pension plans were frozen at the end of 2012.  Furniture and equipment expense decreased $216,000 to $3.1 million for the nine months ended September 30, 2013 primarily due to software maintenance contracts not being renewed as part of our core banking system conversion which was completed in May 2013.  Marketing decreased $241,000 to $1.6 million and other operating expenses remained flat for the nine months ended September 30, 2013 due to general expense control initiatives.

Income Tax Expense: Income taxes increased $728,000 to $819,000 for the nine months ended September 30, 2013 from $91,000 for the nine months ended September 30, 2012.

Liquidity and Capital Resources:

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

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

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At September 30, 2013, $50.3 million of our assets were invested in cash and cash equivalents compared to $50.6 million at December 31, 2012. Our primary sources of cash are principal repayments on loans, proceeds from the maturities of investment securities, increases in deposit accounts, proceeds from residential loan sales and advances from FHLBB.

For the nine months ended September 30, 2013 and 2012, loan originations and purchases, net of collected principal and loan sales, totaled $193.7 million and $191.8 million, respectively.  Cash received from the sales and maturities of investment securities totaled $233.6 million and $243.6 million for the nine months ended September 30, 2013 and 2012, respectively.  We purchased $216.0 million and $234.0 million of available-for-sale investment securities during the nine months ended September 30, 2013 and 2012, respectively.

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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 September 30, 2013, we had $104.0 million in advances from the FHLBB and an additional available borrowing limit of $312.5 million, compared to $128.0 million in advances and an additional available borrowing limit of $294.3 million at December 31, 2012, subject to collateral requirements of the FHLBB. Internal policies limit borrowings to 25.0% of total assets, or $498.0 million and $455.7 million at September 30, 2013 and December 31, 2012, respectively. Other sources of funds include access to a pre-approved unsecured line of credit with PNC Bank for $20.0 million, our $8.8 million secured line of credit with the FHLBB and our $3.5 million unsecured line of credit with a bank which were all undrawn at September 30, 2013.  The Federal Reserve Bank’s discount window loan collateral program enables us to borrow up to $82.1 million on an overnight basis as of September 30, 2013. The funding arrangement was collateralized by $127.3 million in pledged commercial real estate loans as of September 30, 2013.

We had outstanding commitments to originate loans of $71.9 million and $14.8 million and unfunded commitments under construction loans, lines of credit and stand-by letters of credit of $382.3 million and $355.0 million at September 30, 2013 and December 31, 2012, respectively. At September 30, 2013 and December 31, 2012, time deposits scheduled to mature in less than one year totaled $244.4 million and $239.8 million, respectively. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as FHLBB advances, brokered deposits, our $20.0 million unsecured line of credit with PNC Bank, our $8.8 million secured line of credit with the FHLBB, our $3.5 million unsecured line of credit with a bank or our $82.1 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.

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

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

At September 30, 2013, income at risk (i.e., the change in net interest income) increased 5.53% and 3.71% and decreased 4.90% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively. At December 31, 2012, income at risk (i.e., the change in net interest income) increased 7.3% and 6.2% and decreased 4.9% based on a 300 basis point increase, a 400 basis point increase and a 100 basis point decrease, respectively, 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 September 30, 2013			At December 31, 2012
300 basis point increase		5.53	%		7.31	%
400 basis point increase		3.71	%		6.23	%
100 basis point decrease		(4.90	)%		(4.89	)%

Item 4. Controls and Procedures

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

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

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Part II. Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes in the “Risk Factors” from those previously disclosed in the Form 10-K filed on March 18, 2013.

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

(a)	Not applicable.
(b)	Not applicable.
(c)	During the quarter ending September 30, 2013, the Company made the following repurchases of common stock:

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2013		17,022	$	14.06		18,022		1,658,430
August 1-31, 2013		123,903		14.42		141,925		1,534,527
September 1-30, 2013		176,960		14.15		318,885		1,357,567

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

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Not Applicable

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Item 6. Exhibits

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

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

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

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

10.1 Phantom Stock Plan of Farmington Bank (filed as Exhibit 10.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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: November 12, 2013	/s/ John J. Patrick, Jr.
	John J. Patrick, Jr.
	Chairman, President and Chief Executive Officer
Date: November 12, 2013	/s/ Gregory A. White
	Gregory A. White
	Executive Vice President and Chief Financial Officer
Date: November 12, 2013	/s/ Kimberly Rozanski Ruppert
	Kimberly Rozanski Ruppert
	Senior Vice President and Principal Accounting Officer

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