UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 10-Q
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x
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Quarterly Report-Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended September 30, 2012
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OR
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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First Connecticut Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
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Maryland
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45-1496206
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification Number)
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One Farm Glen Boulevard, Farmington, CT
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06032
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x |
Smaller reporting company
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o |
Page
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Part I. Financial Information
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Item 1.
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Consolidated Financial Statements
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Consolidated Statements of Condition at September 30, 2012 (unaudited) and December 31, 2011
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1
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Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited)
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2
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Consolidated Statements of Comprehensive Loss (Income) for the nine months ended September 30, 2012 and 2011 (unaudited)
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3
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Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2012 (unaudited)
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4
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)
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5
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Notes to Unaudited Consolidated Financial Statements
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6
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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42
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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62
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Item 4.
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Controls and Procedures
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64
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Part II. Other Information
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Item 1.
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Legal Proceedings
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64
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Item1A.
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Risk Factors
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65
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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65
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Item 3.
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Defaults upon Senior Securities
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65
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Item 4.
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Mine Safety Disclosure
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65
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Item 5.
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Other Information
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65
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Item 6.
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Exhibits
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65
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Signatures
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67
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Exhibit 31.1
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Exhibit 31.2
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Exhibit 32.1
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Exhibit 32.2
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Part I. Financial Information
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Item 1. Consolidated Financial Statements
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First Connecticut Bancorp, Inc.
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Consolidated Statements of Condition
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September 30, 2012
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December 31, 2011
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(Dollars in thousands)
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(Unaudited)
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|||||||
Assets
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||||||||
Cash and due from banks
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$ | 33,021 | $ | 40,296 | ||||
Federal funds sold
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- | 50,000 | ||||||
Cash and cash equivalents
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33,021 | 90,296 | ||||||
Securities held-to-maturity, at amortized cost
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3,007 | 3,216 | ||||||
Securities available-for-sale, at fair value
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125,854 | 135,170 | ||||||
Loans held for sale
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4,569 | 1,039 | ||||||
Loans, net
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1,485,275 | 1,295,177 | ||||||
Premises and equipment, net
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19,231 | 21,379 | ||||||
Federal Home Loan Bank of Boston stock, at cost
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8,056 | 7,449 | ||||||
Accrued income receivable
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4,502 | 4,185 | ||||||
Bank-owned life insurance
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37,348 | 30,382 | ||||||
Deferred income taxes
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14,038 | 13,907 | ||||||
Prepaid expenses and other assets
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21,232 | 15,450 | ||||||
Total assets
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$ | 1,756,133 | $ | 1,617,650 | ||||
Liabilities and Stockholders’ Equity
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Deposits
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Interest-bearing
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$ | 1,036,523 | $ | 981,057 | ||||
Noninterest-bearing
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221,464 | 195,625 | ||||||
1,257,987 | 1,176,682 | |||||||
Federal Home Loan Bank of Boston advances
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125,200 | 63,000 | ||||||
Repurchase agreement borrowings
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21,000 | 21,000 | ||||||
Repurchase liabilities
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66,096 | 64,466 | ||||||
Accrued expenses and other liabilities
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43,651 | 40,522 | ||||||
Total liabilities
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1,513,934 | 1,365,670 | ||||||
Commitments and contingencies
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- | - | ||||||
Stockholders’ Equity
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Common stock, $0.01 par value, 30,000,000 shares authorized; 18,076,971 shares issued and 17,986,596 shares outstanding
at September 30, 2012; 17,880,200 shares issued and outstanding at December 31, 2011
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181 | 179 | ||||||
Additional paid-in-capital
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171,419 | 174,836 | ||||||
Unallocated common stock held by ESOP
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(15,073 | ) | (10,490 | ) | ||||
Treasury stock, at cost (90,375 shares at September 30, 2012)
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(1,174 | ) | - | |||||
Retained earnings
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92,076 | 92,937 | ||||||
Accumulated other comprehensive loss
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(5,230 | ) | (5,482 | ) | ||||
Total stockholders’ equity
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242,199 | 251,980 | ||||||
Total liabilities and stockholders’ equity
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$ | 1,756,133 | $ | 1,617,650 |
First Connecticut Bancorp, Inc.
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Consolidated Statements of Operations (Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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|||||||||||||||
2012
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2011
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2012
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2011
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(Dollars in thousands, except per share data)
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Interest income
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Interest and fees on loans
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Mortgage
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$ | 11,460 | $ | 10,573 | $ | 33,452 | $ | 31,716 | ||||||||
Other
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3,927 | 3,531 | 11,675 | 10,679 | ||||||||||||
Interest and dividends on investments
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United States Government and agency obligations
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234 | 309 | 749 | 1,104 | ||||||||||||
Other bonds
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87 | 34 | 205 | 140 | ||||||||||||
Corporate stocks
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69 | 68 | 209 | 206 | ||||||||||||
Other interest income
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3 | 144 | 63 | 219 | ||||||||||||
Total interest income
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15,780 | 14,659 | 46,353 | 44,064 | ||||||||||||
Interest expense
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Deposits
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1,644 | 1,886 | 5,042 | 5,792 | ||||||||||||
Interest on borrowed funds
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499 | 519 | 1,442 | 1,575 | ||||||||||||
Interest on repo borrowings
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179 | 182 | 540 | 540 | ||||||||||||
Interest on repurchase liabilities
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71 | 85 | 189 | 305 | ||||||||||||
Total interest expense
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2,393 | 2,672 | 7,213 | 8,212 | ||||||||||||
Net interest income
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13,387 | 11,987 | 39,140 | 35,852 | ||||||||||||
Provision for allowance for loan losses
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215 | 300 | 1,065 | 900 | ||||||||||||
Net interest income after provision for loan losses
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13,172 | 11,687 | 38,075 | 34,952 | ||||||||||||
Noninterest income
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Fees for customer services
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950 | 852 | 2,666 | 2,499 | ||||||||||||
Net gain on sales of investment
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- | 89 | - | 89 | ||||||||||||
Net gain on loans sold
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687 | 284 | 1,216 | 629 | ||||||||||||
Brokerage and insurance fee income
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34 | 30 | 91 | 164 | ||||||||||||
Bank owned life insurance income
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326 | 177 | 966 | 525 | ||||||||||||
Other
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148 | 296 | 497 | 532 | ||||||||||||
Total noninterest income
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2,145 | 1,728 | 5,436 | 4,438 | ||||||||||||
Noninterest expense
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Salaries and employee benefits
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10,243 | 7,065 | 25,286 | 21,106 | ||||||||||||
Occupancy expense
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1,108 | 1,129 | 3,396 | 3,460 | ||||||||||||
Furniture and equipment expense
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1,120 | 1,038 | 3,331 | 3,003 | ||||||||||||
FDIC assessment
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255 | 56 | 828 | 1,126 | ||||||||||||
Marketing
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509 | 505 | 1,868 | 1,636 | ||||||||||||
Contribution to Farmington Bank Community Foundation, Inc.
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- | - | - | 6,877 | ||||||||||||
Other operating expenses
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3,670 | 2,152 | 7,958 | 6,325 | ||||||||||||
Total noninterest expense
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16,905 | 11,945 | 42,667 | 43,533 | ||||||||||||
Income before income taxes
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(1,588 | ) | 1,470 | 844 | (4,143 | ) | ||||||||||
Income tax (benefit) expense
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(519 | ) | 427 | 91 | (1,557 | ) | ||||||||||
Net (loss) income
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$ | (1,069 | ) | $ | 1,043 | $ | 753 | $ | (2,586 | ) | ||||||
Net (loss) earnings per share (1) (See Note 2):
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Basic and Diluted
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$ | (0.07 | ) | $ | 0.06 | $ | 0.05 | $ | (0.20 | ) | ||||||
Weighted average shares outstanding:
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Basic and Diluted | 16,471,023 | 17,244,019 | 16,647,253 | 17,254,646 | ||||||||||||
Pro forma net loss per share (2):
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Basic and Diluted
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N/A | N/A | N/A | $ | (0.15 | ) |
(1)=
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Net loss per share for the nine months ended September 30, 2011 reflects earnings for the period from June 29, 2011, the date the Company completed a Plan of Conversion and Reorganization to September 30, 2011.
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(2)=
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Pro forma net loss per share assumes the Company’s shares are outstanding for all periods prior to the completion of the Plan of Conversion and Reorganization on June 29, 2011.
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First Connecticut Bancorp, Inc.
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Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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|||||||||||||||
2012
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2011
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2012
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2011
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(Dollars in thousands)
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Net (loss) income
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$ | (1,069 | ) | $ | 1,043 | $ | 753 | $ | (2,586 | ) | ||||||
Other comprehensive income (loss), before tax
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Unrealized gains (losses) on securities:
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Unrealized holding gains (losses) arising during the period
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48 | (632 | ) | (17 | ) | (603 | ) | |||||||||
Less: reclassification adjustment for gains included in net income
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- | 89 | - | 89 | ||||||||||||
Net change in unrealized gains (losses)
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48 | (543 | ) | (17 | ) | (514 | ) | |||||||||
Change related to employee benefit plans
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133 | 55 | 398 | 162 | ||||||||||||
Other comprehensive income (loss), before tax
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181 | (488 | ) | 381 | (352 | ) | ||||||||||
Income tax expense (benefit)
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61 | (165 | ) | 129 | (119 | ) | ||||||||||
Other comprehensive income (loss), net of tax
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120 | (323 | ) | 252 | (233 | ) | ||||||||||
Comprehensive (loss) income
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$ | (949 | ) | $ | 720 | $ | 1,005 | $ | (2,819 | ) |
First Connecticut Bancorp, Inc.
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Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
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Unallocated
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Accumulated
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Common Stock
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Additional
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Common
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Other
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Shares
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Paid in
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Shares Held
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Treasury
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Retained
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Comprehensive
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Outstanding
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Amount
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Capital
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by ESOP
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Stock
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Earnings
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(Loss) Income
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Total
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(Dollars in thousands)
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Balance at December 31, 2011
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17,880,200 | $ | 179 | $ | 174,836 | $ | (10,490 | ) | $ | - | $ | 92,937 | $ | (5,482 | ) | $ | 251,980 | |||||||||||||||
Purchase of common stock for Employee Stock Ownership Plan (“ESOP”)
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- | - | - | (5,376 | ) | - | - | - | (5,376 | ) | ||||||||||||||||||||||
ESOP shares released and committed to be released
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- | - | 142 | 793 | - | - | - | 935 | ||||||||||||||||||||||||
Additional tax benefit related to the issuance of common stock to the Farmington Bank
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Community Foundation, Inc.
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- | - | 18 | - | - | - | - | 18 | ||||||||||||||||||||||||
Cash dividend paid ($0.09 per common share)
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- | - | - | - | - | (1,614 | ) | - | (1,614 | ) | ||||||||||||||||||||||
Treasury stock acquired
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(577,322 | ) | - | - | - | (7,597 | ) | - | - | (7,597 | ) | |||||||||||||||||||||
Treasury stock issued for restricted stock
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486,947 | - | (6,423 | ) | - | 6,423 | - | - | - | |||||||||||||||||||||||
Issuance of common stock for restricted stock
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228,261 | 2 | (2 | ) | - | - | - | - | - | |||||||||||||||||||||||
Cancellation of shares for tax withholding
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(31,490 | ) | - | (407 | ) | - | - | - | - | (407 | ) | |||||||||||||||||||||
Share based compensation expense
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- | - | 3,255 | - | - | - | - | 3,255 | ||||||||||||||||||||||||
Net income
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- | - | - | - | - | 753 | - | 753 | ||||||||||||||||||||||||
Other comprehensive income
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- | - | - | - | - | - | 252 | 252 | ||||||||||||||||||||||||
Balance at September 30, 2012
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17,986,596 | $ | 181 | $ | 171,419 | $ | (15,073 | ) | $ | (1,174 | ) | $ | 92,076 | $ | (5,230 | ) | $ | 242,199 |
First Connecticut Bancorp, Inc.
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Consolidated Statements of Cash Flows (Unaudited)
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Nine Months Ended
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September 30,
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||||||||
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2012
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2011
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||||||
(Dollars in thousands)
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||||||||
Cash flows from operating activities
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Net income (loss)
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$ | 753 | $ | (2,586 | ) | |||
Adjustments to reconcile net income to net cash provided by operating activities:
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Provision for allowance for loan losses
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1,065 | 900 | ||||||
Provision for off-balance sheet commitments
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55 | 34 | ||||||
Depreciation and amortization
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2,558 | 2,310 | ||||||
Gain on sale of investments
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- | (89 | ) | |||||
Amortization of ESOP expense
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935 | 533 | ||||||
Share based compensation expense
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3,255 | - | ||||||
Contribution of stock to Farmington Bank Community Foundation, Inc.
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- | 6,877 | ||||||
Loans originated for sale
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(29,229 | ) | (39,048 | ) | ||||
Proceeds from the sale of loans held for sale
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26,915 | 38,899 | ||||||
Loss on sale of foreclosed real estate
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8 | - | ||||||
Loss on sale of premises and equipment
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(367 | ) | - | |||||
Net gain on loans sold
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(1,216 | ) | (629 | ) | ||||
Accretion and amortization of investment security discounts and premiums, net
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(111 | ) | (94 | ) | ||||
Amortization and accretion of loan fees and discounts, net
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(724 | ) | (106 | ) | ||||
(Increase) decrease in accrued income receivable
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(317 | ) | 390 | |||||
Deferred income tax
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(243 | ) | (2,077 | ) | ||||
Increase in cash surrender value of bank-owned life insurance
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(966 | ) | (525 | ) | ||||
Increase in prepaid expenses and other assets
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(4,838 | ) | (5,156 | ) | ||||
Increase in accrued expenses and other liabilities
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3,473 | 6,892 | ||||||
Net cash provided by operating activities
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1,006 | 6,525 | ||||||
Cash flow from investing activities
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||||||||
Maturities of securities held-to-maturity
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209 | 260 | ||||||
Sales, maturities and calls of securities available-for-sale
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243,392 | 304,013 | ||||||
Purchases of securities held-to-maturity
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- | (209 | ) | |||||
Purchases of securities available-for-sale
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(233,982 | ) | (302,080 | ) | ||||
Loan originations, net of principal repayments
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(191,784 | ) | (53,677 | ) | ||||
Purchases of Federal Home Loan Bank of Boston stock, net
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(607 | ) | - | |||||
Purchases of bank-owned life insurance
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(6,000 | ) | - | |||||
Proceeds from sale of premises and equipment
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3,513 | - | ||||||
Proceeds from sale of foreclosed real estate
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393 | 144 | ||||||
Purchases of premises and equipment
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(3,556 | ) | (1,368 | ) | ||||
Net cash used in investing activities
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(188,422 | ) | (52,917 | ) | ||||
Cash flows from financing activities
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||||||||
Proceeds from common stock offering, net of offering cost
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- | 167,800 | ||||||
Purchase of common stock for ESOP
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(5,376 | ) | (9,725 | ) | ||||
Net increase (decrease) in borrowings
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62,200 | (8,000 | ) | |||||
Net increase in demand deposits, NOW accounts, savings accounts and money market accounts
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108,202 | 172,352 | ||||||
Net decrease in certificates of deposit
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(26,897 | ) | (42,338 | ) | ||||
Net increase (decrease) in repurchase liabilities
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1,630 | (11,751 | ) | |||||
Cancellation of shares for tax withholding
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(407 | ) | - | |||||
Repurchase of common stock
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(7,597 | ) | - | |||||
Cash dividend paid
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(1,614 | ) | - | |||||
Net cash provided by financing activities
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130,141 | 268,338 | ||||||
Net (decrease) increase in cash and cash equivalents
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(57,275 | ) | 221,946 | |||||
Cash and cash equivalents at beginning of period
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90,296 | 18,608 | ||||||
Cash and cash equivalents at end of period
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$ | 33,021 | $ | 240,554 | ||||
Supplemental disclosure of cash flow information
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||||||||
Cash paid for interest
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$ | 7,144 | $ | 8,223 | ||||
Cash paid for income taxes
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6 | 854 | ||||||
Loans transferred to other real estate owned
|
1,285 | 148 |
First Connecticut Bancorp, Inc.
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Notes to Consolidated Financial Statements (Unaudited)
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1.
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Summary of Significant Accounting Policies
Organization and Business
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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.
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As part of the reorganization, the Company established an Employee Stock Ownership Plan (“ESOP”) for eligible employees. The Company loaned the ESOP the amount needed to purchase up to 1,430,416 shares or 8.0% of the Company’s common stock issued in the offering. As of September 30, 2012, the ESOP completed its purchase of 1,430,416 shares of common stock at a cost of $16.9 million. The Bank makes annual contributions adequate to fund the payment of regular debt service requirements attributable to the indebtedness of the ESOP.
|
|
On July 2, 2012, the Company received regulatory approval to repurchase up to 1,788,020 shares, or 10% of its current outstanding common stock. As of September 30, 2012 the Company has repurchased 577,322 shares at a cost of $7.6 million, of which 486,947 shares were reissued as part of the 2012 Stock Incentive Plan. Repurchased shares will be held as treasury stock and will be available for general corporate purposes.
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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.
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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.
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First Connecticut Bancorp, Inc.’s only subsidiary is Farmington Bank. Farmington Bank’s main office is located in Farmington, Connecticut. Farmington Bank operates eighteen full service branch offices and four limited services offices in central Connecticut. Farmington Bank’s primary source of income is interest received on loans to customers, which include small and middle market businesses and individuals residing within Farmington Bank’s service area.
|
|
Wholly-owned subsidiaries of Farmington Bank include Farmington Savings Loan Servicing, Inc., a passive investment company that was established to service and hold loans collateralized by real property; Village Investments, Inc. presently inactive; the Village Corp., Limited, a subsidiary that 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.
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First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
Basis of Financial Statement Presentation | |
The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. All significant intercompany transactions and balances have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2011 included in the Company’s 10-K filed on March 28, 2012. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
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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.
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Reclassifications
|
|
Amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the current year presentation.
|
|
Recent Accounting Pronouncements
|
|
In December 2011, the FASB issued ASU No. 2011-11, “Disclosures About Offsetting Assets and Liabilities.” This project began as an attempt to converge the offsetting requirements under U.S. GAAP and IFRS. However, as the Boards were not able to reach a converged solution with regards to offsetting requirements, the Boards developed convergent disclosure requirements to assist in reconciling differences in the offsetting requirements under U.S. GAAP and IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. ASU No. 2011-11 also requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. ASU No. 2011-11 is effective for interim and annual reporting periods beginning on or after January 1, 2013. As the provisions of ASU No. 2011-11 only impact the disclosure requirements related to the offsetting of assets and liabilities, the adoption will have no impact on the Company’s consolidated financial statements.
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First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income.” The provisions of ASU No. 2011-05 allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. Under either method, entities are required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. ASU No. 2011-05 also eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity but does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU No. 2011-05 was effective for the Company’s interim reporting period beginning on or after January 1, 2012, with retrospective application required. In December 2011, the FASB issued ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” The provisions of ASU No. 2011-12 defer indefinitely the requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. ASU No. 2011-12, which shares the same effective date as ASU No. 2011-05, does not defer the requirement for entities to present components of comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company adopted the provisions of ASU No. 2011-05 and ASU No. 2011-12 effective March 31, 2012.
|
|
ASU No. 2011-04, “Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” In May 2011, the FASB issued ASU No. 2011-04 which superseded most of the accounting guidance currently found in Topic 820 of FASB’s ASC. The amendments improved comparability of fair value measurements presented and disclosed in financial statements prepared with GAAP and International Financial Reporting Standards (“IFRS”). The amendments also clarified the application of existing fair value measurement requirements. These amendments include (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and (3) disclosing quantitative information about the unobservable inputs used within the Level 3 hierarchy. The Company adopted the provisions of ASU No. 2011-04 effective January 1, 2012 and has been applied prospectively. The fair value measurement provisions of ASU No. 2011-04 had no impact on the Company’s consolidated financial statements. See Note 11 to the consolidated financial statements for the enhanced disclosures required by ASU No. 2011-04.
|
|
ASU No. 2011-03, “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements.” In April 2011, the FASB issued ASU No. 2011-03 to clarify the determination of whether an entity may or may not recognize a sale upon transfer of financial assets subject to repurchase agreements. The changes remove from the assessment of effective control: (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance implementation guidance related to that criterion. As a result, it is anticipated that most repurchase agreements will not qualify for derecognition from the transferor’s financial statements. The Company adopted the provisions of ASU No. 2011-03 effective December 31, 2011. As the Company accounted for all of its repurchase agreements as collateralized financing arrangements prior to the adoption of ASU No. 2011-03, the adoption had no impact on the Company’s consolidated financial statements.
|
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
2.
|
Earnings Per Share
|
Basic net earnings (loss) per common share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is computed in a manner similar to basic net earnings (loss) per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. 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. As such, net losses were not allocated to the participating securities in the calculation of basic and diluted net loss per share for the three months ended September 30, 2012. 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 common share.
|
|
Earnings per share data is not presented in these consolidated financial statements prior to June 29, 2011 since shares of common stock were not issued until June 29, 2011; therefore, per share information for prior periods is not meaningful. Pro forma earnings per share are reported in the Consolidated Statements of Operations which assume the shares of the Company issued on June 29, 2011 are outstanding for all periods presented.
|
|
The following table sets forth the calculation of basic and diluted earnings per share for the three months ended September 30, 2012 and 2011 and for the nine months ended September 30, 2012 and for the period from June 29, 2011 to September 30, 2011:
|
For the Nine
|
||||||||||||||||
For the Three Months Ended
|
Months Ended
|
For the Period from
|
||||||||||||||
September 30,
|
September 30,
|
June 29, 2011 to
|
||||||||||||||
2012
|
2011
|
2012
|
September 30, 2011
|
|||||||||||||
(Dollars in thousands, except Per Share data):
|
||||||||||||||||
Net (loss) income
|
$ | (1,069 | ) | 1,043 | $ | 753 | $ | (3,451 | ) | |||||||
Weighted-average shares outstanding
|
17,935,809 | 17,880,200 | 17,898,872 | 17,880,200 | ||||||||||||
Less: Average unallocated ESOP shares
|
(1,279,385 | ) | (636,181 | ) | (1,189,368 | ) | (625,554 | ) | ||||||||
Average treasury stock
|
(185,401 | ) | - | (62,251 | ) | - | ||||||||||
Weighted-average basic shares outstanding
|
16,471,023 | 17,244,019 | 16,647,253 | 17,254,646 | ||||||||||||
Weighted-average diluted shares outstanding
|
16,471,023 | 17,244,019 | 16,647,253 | 17,254,646 | ||||||||||||
Net (loss) earnings per share:
|
||||||||||||||||
Basic
|
$ | (0.07 | ) | $ | 0.06 | $ | 0.05 | $ | (0.20 | ) | ||||||
Diluted
|
$ | (0.07 | ) | $ | 0.06 | $ | 0.05 | $ | (0.20 | ) |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
3.
|
Investment Securities
|
Investment securities are summarized as follows:
|
September 30, 2012 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
(Dollars in thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Available-for-sale
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
U.S. Treasury obligations
|
$ | 91,983 | $ | 3 | $ | (5 | ) | $ | 91,981 | |||||||
U.S. Government agency obligations
|
12,000 | 13 | - | 12,013 | ||||||||||||
Government sponsored residential mortgage-backed securities
|
11,952 | 975 | (1 | ) | 12,926 | |||||||||||
Corporate debt securities
|
2,952 | 204 | - | 3,156 | ||||||||||||
Preferred equity securities
|
2,100 | 18 | (315 | ) | 1,803 | |||||||||||
Marketable equity securities
|
348 | 37 | (3 | ) | 382 | |||||||||||
Mutual funds
|
3,551 | 42 | - | 3,593 | ||||||||||||
Total securities available-for-sale
|
$ | 124,886 | $ | 1,292 | $ | (324 | ) | $ | 125,854 | |||||||
Held-to-maturity
|
||||||||||||||||
Government sponsored residential mortgage-backed securities
|
$ | 7 | $ | - | $ | - | $ | 7 | ||||||||
Trust preferred debt security
|
3,000 | - | - | 3,000 | ||||||||||||
Total securities held-to-maturity
|
$ | 3,007 | $ | - | $ | - | $ | 3,007 | ||||||||
December 31, 2011 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
(Dollars in thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Available-for-sale
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
U.S. Treasury obligations
|
$ | 80,999 | $ | - | $ | - | $ | 80,999 | ||||||||
U.S. Government agency obligations
|
27,003 | 12 | (9 | ) | 27,006 | |||||||||||
Government sponsored residential mortgage-backed securities
|
19,254 | 1,302 | (11 | ) | 20,545 | |||||||||||
Corporate debt securities
|
1,000 | 175 | - | 1,175 | ||||||||||||
Trust preferred debt securities
|
42 | - | - | 42 | ||||||||||||
Preferred equity securities
|
2,100 | 112 | (639 | ) | 1,573 | |||||||||||
Marketable equity securities
|
348 | 22 | (4 | ) | 366 | |||||||||||
Mutual funds
|
3,439 | 25 | - | 3,464 | ||||||||||||
Total securities available-for-sale
|
$ | 134,185 | $ | 1,648 | $ | (663 | ) | $ | 135,170 | |||||||
Held-to-maturity
|
||||||||||||||||
Government sponsored residential mortgage-backed securities
|
$ | 7 | $ | - | $ | - | $ | 7 | ||||||||
Municipal debt securities
|
209 | - | - | 209 | ||||||||||||
Trust preferred debt security
|
3,000 | - | - | 3,000 | ||||||||||||
Total securities held-to-maturity
|
$ | 3,216 | $ | - | $ | - | $ | 3,216 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
Less than 12 Months
|
12 Months or More
|
Total | ||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
(Dollars in thousands)
|
Value
|
Loss
|
Value
|
Loss
|
Value
|
Loss
|
||||||||||||||||||
September 30, 2012
|
||||||||||||||||||||||||
Available-for-sale:
|
||||||||||||||||||||||||
U.S. Treasury obligations
|
$ | 27,990 | $ | (5 | ) | $ | - | $ | - | $ | 27,990 | $ | (5 | ) | ||||||||||
Government sponsored residential mortgage-backed securities
|
- | - | 32 | (1 | ) | 32 | (1 | ) | ||||||||||||||||
Preferred equity securities
|
- | - | 1,685 | (315 | ) | 1,685 | (315 | ) | ||||||||||||||||
Marketable equity securities
|
- | - | 3 | (3 | ) | 3 | (3 | ) | ||||||||||||||||
$ | 27,990 | $ | (5 | ) | $ | 1,720 | $ | (319 | ) | $ | 29,710 | $ | (324 | ) | ||||||||||
Less than 12 Months
|
12 Months or More
|
Total | ||||||||||||||||||||||
Gross
|
Gross
|
Gross
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
(Dollars in thousands)
|
Value
|
Loss
|
Value
|
Loss
|
Value
|
Loss
|
||||||||||||||||||
December 31, 2011
|
||||||||||||||||||||||||
Available-for-sale:
|
||||||||||||||||||||||||
U.S. Government agency obligations
|
$ | 16,994 | $ | (9 | ) | $ | - | $ | - | $ | 16,994 | $ | (9 | ) | ||||||||||
Government sponsored residential mortgage-backed securities
|
776 | (9 | ) | 124 | (2 | ) | 900 | (11 | ) | |||||||||||||||
Preferred equity securities
|
87 | (13 | ) | 1,374 | (626 | ) | 1,461 | (639 | ) | |||||||||||||||
Marketable equity securities
|
- | - | 3 | (4 | ) | 3 | (4 | ) | ||||||||||||||||
$ | 17,857 | $ | (31 | ) | $ | 1,501 | $ | (632 | ) | $ | 19,358 | $ | (663 | ) |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
September 30, 2012 | ||||||||||||||||
Available-for-Sale |
Held-to-Maturity
|
|||||||||||||||
Estimated
|
Estimated
|
|||||||||||||||
Amortized |
Market
|
Amortized
|
Market
|
|||||||||||||
Cost |
Value
|
Cost
|
Value
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Due in one year or less
|
$ | 91,983 | $ | 91,981 | $ | - | $ | - | ||||||||
Due after one year through five years
|
14,452 | 14,580 | - | - | ||||||||||||
Due after five years through ten years
|
500 | 589 | - | - | ||||||||||||
Due after ten years
|
- | - | 3,000 | 3,000 | ||||||||||||
Government sponsored residential mortgage-backed securities
|
11,952 | 12,926 | 7 | 7 | ||||||||||||
$ | 118,887 | $ | 120,076 | $ | 3,007 | $ | 3,007 |
September 30,
|
December 31,
|
||||||||
2012
|
2011
|
||||||||
(Dollars in thousands)
|
|||||||||
Real estate
|
|||||||||
Residential
|
$ | 605,794 | $ | 503,361 | |||||
Commercial
|
448,684 | 408,169 | |||||||
Construction
|
54,909 | 46,381 | |||||||
Installment
|
7,372 | 10,333 | |||||||
Commercial
|
196,813 | 154,300 | |||||||
Collateral
|
2,161 | 2,348 | |||||||
Home equity line of credit
|
134,314 | 109,771 | |||||||
Demand
|
25 | 41 | |||||||
Revolving credit
|
86 | 90 | |||||||
Resort
|
49,760 | 75,363 | |||||||
Total loans
|
1,499,918 | 1,310,157 | |||||||
Less:
|
|||||||||
Allowance for loan losses
|
(17,920 | ) | (17,533 | ) | |||||
Net deferred loan costs
|
3,277 | 2,553 | |||||||
Loans, net
|
$ | 1,485,275 | $ | 1,295,177 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
|||||||||||||||
(Dollars in thousands)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Balance at beginning of period
|
$ | 17,927 | $ | 15,912 | $ | 17,533 | $ | 20,734 | ||||||||
Provision for loan losses
|
215 | 300 | 1,065 | 900 | ||||||||||||
Charge-offs
|
(258 | ) | (122 | ) | (898 | ) | (5,561 | ) | ||||||||
Recoveries
|
36 | 4 | 220 | 21 | ||||||||||||
Balance at end of period
|
$ | 17,920 | $ | 16,094 | $ | 17,920 | $ | 16,094 |
For the Three Months Ended September 30, 2012 | ||||||||||||||||||||
Balance at
|
Provision for
|
|||||||||||||||||||
beginning of
|
(Reduction)
|
Balance at
|
||||||||||||||||||
period |
Charge-offs
|
Recoveries
|
loan losses
|
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 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
For the Nine Months Ended September 30, 2012 | ||||||||||||||||||||
Balance at
|
Provision for
|
|||||||||||||||||||
beginning of
|
(Reduction)
|
Balance at
|
||||||||||||||||||
period
|
Charge-offs
|
Recoveries
|
loan losses
|
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 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
September 30, 2012
|
December 31, 2011
|
|||||||||||||||
Reserve
|
Reserve
|
|||||||||||||||
(Dollars in thousands)
|
Total
|
Allocation
|
Total
|
Allocation
|
||||||||||||
Real estate
|
||||||||||||||||
Residential
|
$ | 10,395 | $ | 723 | $ | 10,632 | $ | 459 | ||||||||
Commercial
|
17,771 | 147 | 17,660 | 1,245 | ||||||||||||
Construction
|
484 | 13 | 994 | 34 | ||||||||||||
Installment
|
7 | - | - | - | ||||||||||||
Commercial
|
6,016 | 362 | 8,099 | 17 | ||||||||||||
Collateral
|
- | - | - | - | ||||||||||||
Home equity line of credit
|
1,494 | 455 | 1,555 | 455 | ||||||||||||
Demand
|
- | - | - | - | ||||||||||||
Revolving Credit
|
- | - | - | - | ||||||||||||
Resort
|
1,696 | 1 | 2,054 | 1 | ||||||||||||
Total
|
$ | 37,863 | $ | 1,701 | $ | 40,994 | $ | 2,211 | ||||||||
Loans collectively evaluated for impairment:
|
||||||||||||||||
September 30, 2012
|
December 31, 2011
|
|||||||||||||||
Reserve
|
Reserve
|
|||||||||||||||
(Dollars in thousands)
|
Total
|
Allocation
|
Total
|
Allocation
|
||||||||||||
Real estate
|
||||||||||||||||
Residential
|
$ | 598,401 | $ | 3,322 | $ | 494,949 | $ | 2,415 | ||||||||
Commercial
|
430,878 | 7,620 | 390,466 | 7,510 | ||||||||||||
Construction
|
54,479 | 813 | 45,346 | 556 | ||||||||||||
Installment
|
7,365 | 84 | 10,333 | 92 | ||||||||||||
Commercial
|
191,260 | 2,332 | 146,755 | 2,123 | ||||||||||||
Collateral
|
2,161 | - | 2,348 | - | ||||||||||||
Home equity line of credit
|
132,824 | 982 | 108,219 | 840 | ||||||||||||
Demand
|
25 | - | 41 | - | ||||||||||||
Revolving Credit
|
86 | - | 90 | - | ||||||||||||
Resort
|
47,853 | 882 | 73,169 | 1,786 | ||||||||||||
Total
|
$ | 1,465,332 | $ | 16,035 | $ | 1,271,716 | $ | 15,322 | ||||||||
Unallocated
|
- | 184 | - | - | ||||||||||||
Total
|
$ | 1,503,195 | $ | 17,920 | $ | 1,312,710 | $ | 17,533 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
September 30, 2012 | ||||||||||||||||||||||||||||||||||||
Past Due 90
|
||||||||||||||||||||||||||||||||||||
30-59 Days
|
60-89 Days
|
> 90 Days
|
Days or More
|
|||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
Past Due
|
Past Due |
Past Due
|
Total |
and Still
|
|||||||||||||||||||||||||||||||
Number
|
Amount
|
Number
|
Amount
|
Number
|
Amount
|
Number
|
Amount
|
Accruing
|
||||||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||||||||||||||
Residential
|
15 | $ | 4,334 | 5 | $ | 977 | 18 | $ | 8,345 | 38 | $ | 13,656 | $ | - | ||||||||||||||||||||||
Commercial
|
2 | 172 | - | - | 2 | 919 | 4 | 1,091 | - | |||||||||||||||||||||||||||
Construction
|
- | - | - | - | 1 | 484 | 1 | 484 | - | |||||||||||||||||||||||||||
Installment
|
2 | 43 | - | - | 3 | 84 | 5 | 127 | - | |||||||||||||||||||||||||||
Commercial
|
1 | 3 | 4 | 166 | 3 | 528 | 8 | 697 | - | |||||||||||||||||||||||||||
Collateral
|
11 | 96 | - | - | - | - | 11 | 96 | - | |||||||||||||||||||||||||||
Home equity line of credit
|
1 | 9 | 3 | 93 | 5 | 1,526 | 9 | 1,628 | - | |||||||||||||||||||||||||||
Demand
|
1 | 10 | - | - | 1 | 25 | 2 | 35 | - | |||||||||||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Resort
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Total
|
33 | $ | 4,667 | 12 | $ | 1,236 | 33 | $ | 11,911 | 78 | $ | 17,814 | $ | - | ||||||||||||||||||||||
December 31, 2011 | ||||||||||||||||||||||||||||||||||||
Past Due 90
|
||||||||||||||||||||||||||||||||||||
30-59 Days
|
60-89 Days
|
> 90 Days
|
Days or More | |||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
Past Due
|
Past Due
|
Past Due
|
Total |
and Still
|
|||||||||||||||||||||||||||||||
Number
|
Amount
|
Number
|
Amount
|
Number
|
Amount
|
Number
|
Amount
|
Accruing
|
||||||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||||||||||||||
Residential
|
12 | $ | 2,955 | 4 | $ | 730 | 17 | $ | 7,926 | 33 | $ | 11,611 | $ | - | ||||||||||||||||||||||
Commercial
|
1 | 963 | - | - | 9 | 2,934 | 10 | 3,897 | - | |||||||||||||||||||||||||||
Construction
|
- | - | - | - | 2 | 484 | 2 | 484 | - | |||||||||||||||||||||||||||
Installment
|
5 | 22 | 1 | 78 | 2 | 63 | 8 | 163 | - | |||||||||||||||||||||||||||
Commercial
|
- | - | - | - | 8 | 802 | 8 | 802 | - | |||||||||||||||||||||||||||
Collateral
|
9 | 70 | - | - | - | - | 9 | 70 | - | |||||||||||||||||||||||||||
Home equity line of credit
|
3 | 204 | - | - | 6 | 1,555 | 9 | 1,759 | - | |||||||||||||||||||||||||||
Demand
|
1 | 16 | - | - | 1 | 25 | 2 | 41 | - | |||||||||||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Resort
|
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Total
|
31 | $ | 4,230 | 5 | $ | 808 | 45 | $ | 13,789 | 81 | $ | 18,827 | $ | - |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
September 30,
|
December 31,
|
|||||||
(Dollars in thousands)
|
2012
|
2011
|
||||||
Nonaccrual loans:
|
||||||||
Real estate
|
||||||||
Residential
|
$ | 8,936 | $ | 9,224 | ||||
Commercial
|
919 | 2,934 | ||||||
Construction
|
484 | 484 | ||||||
Installment
|
173 | 209 | ||||||
Commercial
|
988 | 956 | ||||||
Collateral
|
- | - | ||||||
Home equity line of credit
|
1,715 | 1,669 | ||||||
Demand
|
25 | 25 | ||||||
Revolving Credit
|
- | - | ||||||
Resort
|
- | - | ||||||
Total nonaccruing loans
|
13,240 | 15,501 | ||||||
Loans 90 days past due and still accruing
|
- | - | ||||||
Real estate owned
|
1,246 | 302 | ||||||
Total nonperforming assets
|
$ | 14,486 | $ | 15,803 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 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
|
$ | 2,753 | $ | 2,840 | $ | - | $ | 4,013 | $ | 9 | $ | 9 | ||||||||||||
Commercial
|
4,181 | 4,362 | - | 7,692 | 266 | 255 | ||||||||||||||||||
Construction
|
- | - | - | 530 | 8 | 8 | ||||||||||||||||||
Installment
|
- | - | - | 4 | - | - | ||||||||||||||||||
Commercial
|
4,136 | 4,137 | - | 5,263 | 163 | 157 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
495 | 569 | - | 511 | - | - | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
- | - | - | 90 | 13 | 13 | ||||||||||||||||||
Total
|
11,565 | 11,908 | - | 18,103 | 459 | 442 | ||||||||||||||||||
Impaired loans with a valuation allowance:
|
||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
7,642 | 8,209 | 723 | 6,764 | 62 | 53 | ||||||||||||||||||
Commercial
|
13,590 | 13,586 | 147 | 9,979 | 571 | 570 | ||||||||||||||||||
Construction
|
484 | 730 | 13 | 242 | - | - | ||||||||||||||||||
Installment
|
7 | 7 | - | 2 | - | - | ||||||||||||||||||
Commercial
|
1,880 | 1,915 | 362 | 1,463 | 50 | 48 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
999 | 999 | 455 | 999 | - | - | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
1,696 | 1,694 | 1 | 1,809 | 31 | 31 | ||||||||||||||||||
Total
|
26,298 | 27,140 | 1,701 | 21,258 | 714 | 702 | ||||||||||||||||||
Total impaired loans
|
$ | 37,863 | $ | 39,048 | $ | 1,701 | $ | 39,361 | $ | 1,173 | $ | 1,144 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
December 31, 2011 | ||||||||||||||||||||||||
Cash-basis
|
||||||||||||||||||||||||
Unpaid
|
Average
|
Interest
|
Interest
|
|||||||||||||||||||||
Recorded
|
Principal
|
Related
|
Recorded
|
Income
|
Income
|
|||||||||||||||||||
(Dollars in thousands)
|
Investment
|
Balance
|
Allowance
|
Investment
|
Recognized
|
Recognized
|
||||||||||||||||||
Impaired loans without a valuation allowance:
|
||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
$ | 4,397 | $ | 4,733 | $ | - | $ | 5,042 | $ | 425 | $ | 425 | ||||||||||||
Commercial
|
9,362 | 9,542 | - | 8,925 | 363 | 363 | ||||||||||||||||||
Construction
|
510 | 510 | - | 128 | 7 | 7 | ||||||||||||||||||
Installment
|
- | - | - | - | - | - | ||||||||||||||||||
Commercial
|
7,366 | 7,356 | - | 4,806 | 230 | 228 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
556 | 627 | - | 844 | 7 | 7 | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
136 | 134 | - | 34 | - | - | ||||||||||||||||||
Total
|
22,327 | 22,902 | - | 19,779 | 1,032 | 1,030 | ||||||||||||||||||
Impaired loans with a valuation allowance:
|
||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
6,235 | 6,504 | 459 | 5,876 | 61 | 61 | ||||||||||||||||||
Commercial
|
8,298 | 9,390 | 1,245 | 7,613 | 611 | 611 | ||||||||||||||||||
Construction
|
484 | 730 | 34 | 574 | - | - | ||||||||||||||||||
Installment
|
- | - | - | - | - | - | ||||||||||||||||||
Commercial
|
733 | 746 | 17 | 398 | 22 | 22 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
999 | 999 | 455 | 814 | 2 | 2 | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
1,918 | 1,916 | 1 | 1,700 | 16 | 16 | ||||||||||||||||||
Total
|
18,667 | 20,285 | 2,211 | 16,975 | 712 | 712 | ||||||||||||||||||
Total impaired loans
|
$ | 40,994 | $ | 43,187 | $ | 2,211 | $ | 36,754 | $ | 1,744 | $ | 1,742 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 2012 | ||||||||||||||||||||||||
TDRs on Accrual Status
|
TDRs on Nonaccrual Status
|
Total TDRs
|
||||||||||||||||||||||
Number of
|
Recorded
|
Number of
|
Recorded
|
Number of
|
Recorded
|
|||||||||||||||||||
(Dollars in thousands)
|
Loans
|
Investment
|
Loans
|
Investment
|
Loans
|
Investment
|
||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
3 | $ | 1,069 | 6 | $ | 5,274 | 9 | $ | 6,343 | |||||||||||||||
Commercial
|
13 | 16,851 | - | - | 13 | 16,851 | ||||||||||||||||||
Construction
|
- | - | 1 | 484 | 1 | 484 | ||||||||||||||||||
Installment
|
1 | 7 | - | - | 1 | 7 | ||||||||||||||||||
Commercial
|
9 | 4,075 | 5 | 460 | 14 | 4,535 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
- | - | 1 | 999 | 1 | 999 | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
2 | 1,696 | - | - | 2 | 1,696 | ||||||||||||||||||
Total
|
28 | $ | 23,698 | 13 | $ | 7,217 | 41 | $ | 30,915 |
December 31, 2011 | ||||||||||||||||||||||||
TDRs on Accrual Status
|
TDRs on Nonaccrual Status
|
Total TDRs
|
||||||||||||||||||||||
Number of
|
Recorded
|
Number of
|
Recorded
|
Number of
|
Recorded
|
|||||||||||||||||||
(Dollars in thousands)
|
Loans
|
Investment
|
Loans
|
Investment
|
Loans
|
Investment
|
||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
3 | $ | 1,075 | 5 | $ | 5,072 | 8 | $ | 6,147 | |||||||||||||||
Commercial
|
10 | 13,760 | 2 | 1,254 | 12 | 15,014 | ||||||||||||||||||
Construction
|
1 | 510 | 1 | 484 | 2 | 994 | ||||||||||||||||||
Installment
|
- | - | - | - | - | - | ||||||||||||||||||
Commercial
|
10 | 6,116 | - | - | 10 | 6,116 | ||||||||||||||||||
Collateral
|
- | - | - | - | - | - | ||||||||||||||||||
Home equity line of credit
|
- | - | 1 | 999 | 1 | 999 | ||||||||||||||||||
Demand
|
- | - | - | - | - | - | ||||||||||||||||||
Revolving Credit
|
- | - | - | - | - | - | ||||||||||||||||||
Resort
|
2 | 2,054 | - | - | 2 | 2,054 | ||||||||||||||||||
Total
|
26 | $ | 23,515 | 9 | $ | 7,809 | 35 | $ | 31,324 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
For the Three Months Ended September 30, 2012
|
For the Nine Months Ended September 30, 2012
|
|||||||||||||||||||||||
Recorded
|
Recorded
|
|||||||||||||||||||||||
Investment
|
Recorded
|
Investment
|
Recorded
|
|||||||||||||||||||||
Number of
|
Prior to
|
Investment After
|
Number of
|
Prior to
|
Investment After
|
|||||||||||||||||||
(Dollars in thousands)
|
Modifications
|
Modification
|
Modification (1)
|
Modifications
|
Modification
|
Modification (1)
|
||||||||||||||||||
Troubled 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 |
For the Three Months Ended September 30, 2011
|
For the Nine Months Ended September 30, 2011
|
|||||||||||||||||||||||
Recorded
|
Recorded
|
|||||||||||||||||||||||
Investment
|
Recorded
|
Investment
|
Recorded
|
|||||||||||||||||||||
Number of
|
Prior to
|
Investment After
|
Number of
|
Prior to
|
Investment After
|
|||||||||||||||||||
(Dollars in thousands)
|
Modifications
|
Modification
|
Modification (1)
|
Modifications
|
Modification
|
Modification (1)
|
||||||||||||||||||
Troubled Debt Restructurings:
|
||||||||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
2 | $ | 3,647 | $ | 3,647 | 6 | $ | 5,822 | $ | 5,686 | ||||||||||||||
Commercial
|
5 | 7,057 | 7,049 | 5 | 7,057 | 7,049 | ||||||||||||||||||
Commercial
|
2 | 3,659 | 3,609 | 5 | 5,100 | 4,999 | ||||||||||||||||||
Total
|
9 | $ | 14,363 | $ | 14,305 | 16 | $ | 17,979 | $ | 17,734 |
(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 | ||||||||||||||||||||||||
Adjusted
|
Combination
|
|||||||||||||||||||||||
Number of
|
Extended
|
Interest
|
of Rate and
|
|||||||||||||||||||||
(Dollars in thousands)
|
Modifications
|
Maturity
|
Rates
|
Maturity
|
Other
|
Total
|
||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Commercial
|
2 | 844 | - | - | - | 844 | ||||||||||||||||||
Commercial
|
4 | 1,342 | - | - | - | 1,342 | ||||||||||||||||||
Total
|
6 | $ | 2,186 | $ | - | $ | - | $ | - | $ | 2,186 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
For The Three Months Ended September 30, 2011 | ||||||||||||||||||||||||
Adjusted
|
Combination
|
|||||||||||||||||||||||
Number of
|
Extended
|
Interest
|
of Rate and
|
|||||||||||||||||||||
(Dollars in thousands)
|
Modifications
|
Maturity
|
Rates
|
Maturity
|
Other
|
Total
|
||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
2 | $ | - | $ | - | $ | - | $ | 3,647 | $ | 3,647 | |||||||||||||
Commercial
|
5 | 3,746 | - | 3,303 | - | 7,049 | ||||||||||||||||||
Commercial
|
2 | 3,516 | - | - | 93 | 3,609 | ||||||||||||||||||
Total
|
9 | $ | 7,262 | $ | - | $ | 3,303 | $ | 3,740 | $ | 14,305 | |||||||||||||
For the Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||
Adjusted
|
Combination
|
|||||||||||||||||||||||
Number of
|
Extended
|
Interest
|
of Rate and
|
|||||||||||||||||||||
(Dollars in thousands)
|
Modifications
|
Maturity
|
Rates
|
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 | |||||||||||||
For the Nine Months Ended September 30, 2011 | ||||||||||||||||||||||||
Adjusted
|
Combination
|
|||||||||||||||||||||||
Number of
|
Extended
|
Interest
|
of Rate and
|
|||||||||||||||||||||
(Dollars in thousands)
|
Modifications |
Maturity
|
Rates
|
Maturity
|
Other
|
Total
|
||||||||||||||||||
Real estate
|
||||||||||||||||||||||||
Residential
|
6 | $ | - | $ | 124 | $ | - | $ | 5,562 | $ | 5,686 | |||||||||||||
Commercial
|
5 | 3,746 | - | 3,303 | - | 7,049 | ||||||||||||||||||
Commercial
|
5 | 3,726 | - | 1,180 | 93 | 4,999 | ||||||||||||||||||
Total
|
16 | $ | 7,472 | $ | 124 | $ | 4,483 | $ | 5,655 | $ | 17,734 |
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30, 2012
|
September 30, 2012
|
|||||||||||||||
Number of
|
Recorded
|
Number of
|
Recorded
|
|||||||||||||
(Dollars in thousands)
|
Loans
|
Investment (1)
|
Loans
|
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.
|
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
Loans rated 1 – 5: |
Commercial loans in these categories are considered “pass” rated loans with low to average risk.
|
Loans rated 6: | Residential, Consumer and Commercial loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management. |
Loans rated 7: | Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected. |
Loans rated 8: | Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. |
Loans rated 9: | Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted. |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 2012 | ||||||||||||||||||||
(Dollars in thousands)
|
Pass
|
Special Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||
Real estate
|
||||||||||||||||||||
Residential
|
$ | 593,044 | $ | 2,222 | $ | 10,528 | $ | - | $ | 605,794 | ||||||||||
Commercial
|
410,081 | 20,899 | 17,704 | - | 448,684 | |||||||||||||||
Construction
|
49,184 | 882 | 4,843 | - | 54,909 | |||||||||||||||
Installment
|
7,143 | 49 | 180 | - | 7,372 | |||||||||||||||
Commercial
|
172,450 | 11,485 | 12,584 | 294 | 196,813 | |||||||||||||||
Collateral
|
2,161 | - | - | - | 2,161 | |||||||||||||||
Home equity line of credit
|
131,605 | 744 | 1,965 | - | 134,314 | |||||||||||||||
Demand
|
- | - | 25 | - | 25 | |||||||||||||||
Revolving Credit
|
86 | - | - | - | 86 | |||||||||||||||
Resort
|
42,495 | 5,571 | 1,694 | - | 49,760 | |||||||||||||||
Total Loans
|
$ | 1,408,249 | $ | 41,852 | $ | 49,523 | $ | 294 | $ | 1,499,918 | ||||||||||
December 31, 2011 | ||||||||||||||||||||
(Dollars in thousands)
|
Pass
|
Special Mention
|
Substandard
|
Doubtful
|
Total
|
|||||||||||||||
Real estate
|
||||||||||||||||||||
Residential
|
$ | 490,805 | $ | 2,079 | $ | 10,477 | $ | - | $ | 503,361 | ||||||||||
Commercial
|
370,688 | 14,480 | 23,001 | - | 408,169 | |||||||||||||||
Construction
|
42,492 | 200 | 3,689 | - | 46,381 | |||||||||||||||
Installment
|
10,051 | 66 | 216 | - | 10,333 | |||||||||||||||
Commercial
|
135,953 | 3,020 | 15,327 | - | 154,300 | |||||||||||||||
Collateral
|
2,348 | - | - | - | 2,348 | |||||||||||||||
Home equity line of credit
|
107,421 | 432 | 1,918 | - | 109,771 | |||||||||||||||
Demand
|
16 | - | 25 | - | 41 | |||||||||||||||
Revolving Credit
|
90 | - | - | - | 90 | |||||||||||||||
Resort
|
57,093 | 5,885 | 12,385 | - | 75,363 | |||||||||||||||
Total Loans
|
$ | 1,216,957 | $ | 26,162 | $ | 67,038 | $ | - | $ | 1,310,157 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
5.
|
Credit Arrangements
|
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
6.
|
Deposits
|
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Amount
|
Amount
|
|||||||
(Dollars in thousands)
|
||||||||
Noninterest-bearing demand deposits
|
$ | 221,464 | $ | 195,625 | ||||
Interest-bearing
|
||||||||
NOW accounts
|
220,490 | 189,577 | ||||||
Money market
|
285,540 | 247,693 | ||||||
Savings accounts
|
171,516 | 157,913 | ||||||
Time deposits
|
358,977 | 385,874 | ||||||
Total deposits
|
$ | 1,257,987 | $ | 1,176,682 |
7.
|
Pension and Other Postretirement Benefit Plans
|
Pension Benefits
|
Other Postretirement Benefits
|
|||||||||||||||
Three Months Ended September 30,
|
Three Months Ended September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 125 | $ | 173 | $ | 16 | $ | 15 | ||||||||
Interest cost
|
271 | 265 | 35 | 34 | ||||||||||||
Expected return on plan assets
|
(259 | ) | (270 | ) | - | - | ||||||||||
Amortization:
|
||||||||||||||||
Loss
|
169 | 96 | - | - | ||||||||||||
Transition obligation
|
- | - | - | - | ||||||||||||
Prior service cost
|
(31 | ) | (32 | ) | (12 | ) | (12 | ) | ||||||||
Net periodic benefit cost
|
$ | 275 | $ | 232 | $ | 39 | $ | 37 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
Pension Benefits
|
Other Postretirement Benefits
|
|||||||||||||||
Nine Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Service cost
|
$ | 375 | $ | 517 | $ | 46 | $ | 45 | ||||||||
Interest cost
|
815 | 793 | 103 | 102 | ||||||||||||
Expected return on plan assets
|
(777 | ) | (808 | ) | - | - | ||||||||||
Amortization:
|
||||||||||||||||
Loss
|
507 | 292 | - | - | ||||||||||||
Transition obligation
|
- | - | - | - | ||||||||||||
Prior service cost
|
(94 | ) | (94 | ) | (36 | ) | (36 | ) | ||||||||
Net periodic benefit cost
|
$ | 826 | $ | 700 | $ | 113 | $ | 111 |
Allocated
|
95,361 | ||||
Committed to be released
|
71,391 | ||||
Unallocated
|
1,263,664 | ||||
1,430,416 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
8.
|
Stock Incentive Plan
|
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 2012
|
|||||
Weighted per share average fair value of options granted
|
$ | 3.50 | |||
Assumptions:
|
|||||
Risk-free interest rate
|
0.82 | % | |||
Expected volatility
|
33.69 | % | |||
Expected dividend yield
|
1.78 | % | |||
Expected life of options granted
|
6.0 years
|
Weighted-Average
|
||||||||||||||||
Remaining
|
Aggregate
|
|||||||||||||||
Number of
|
Weighted-Average
|
Contractual Term
|
Intrinsic Value
|
|||||||||||||
Stock Options
|
Exercise Price
|
(in years)
|
(in thousands)
|
|||||||||||||
Outstanding at December 31, 2011
|
- | $ | - | |||||||||||||
Granted
|
1,698,157 | 12.95 | ||||||||||||||
Exercised
|
- | - | ||||||||||||||
Forfeited
|
- | - | ||||||||||||||
Outstanding at September 30, 2012
|
1,698,157 | $ | 12.95 | 9.94 | $ | 951 | ||||||||||
Exercisable at September 30, 2012
|
339,630 |
Number of
|
Weighted-Average
|
||||||||
Restricted
|
Grant Date
|
||||||||
Stock
|
Fair Value
|
||||||||
Unvested at December 31, 2011
|
- | $ | - | ||||||
Granted
|
715,208 | 12.95 | |||||||
Vested
|
(143,041 | ) | 12.95 | ||||||
Forfeited
|
- | - | |||||||
Unvested at September 30, 2012
|
572,167 | $ | 12.95 |
9.
|
Derivative Financial Instruments
|
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
● | if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations; | |
● | if the Company fails to maintain its status as a well/adequately capitalized institution, then the counterparty could terminate the derivative positions, and the Company would be required to settle its obligations under the agreements; | |
● | if the Company fails to maintain a specified minimum leverage ratio, then the Company could be declared in default on its derivative obligations; and | |
● | if a specified event or condition occurs that materially changes the Company’s creditworthiness in an adverse manner, it may be required to fully collateralize its obligations under the derivative instrument. |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 2012
|
December 31, 2011
|
|||||||||||||||||||||||||
Consolidated
|
Estimated
|
Estimated
|
||||||||||||||||||||||||
Balance Sheet
|
# of
|
Notional
|
Fair
|
# of
|
Notional
|
Fair
|
||||||||||||||||||||
Location
|
Instruments
|
Amount
|
Values
|
Instruments
|
Amount
|
Values
|
||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||
Commercial loan customer
|
||||||||||||||||||||||||||
interest rate swap position
|
Other Assets
|
36 | $ | 110,020 | $ | 9,094 | 28 | $ | 83,897 | $ | 6,812 | |||||||||||||||
Counterparty interest
|
||||||||||||||||||||||||||
rate swap position
|
Other Liabilities
|
36 | 110,020 | (9,094 | ) | 28 | 83,897 | (6,812 | ) |
For The Three Months Ended September 30, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
MTM (Loss)
|
MTM (Loss)
|
|||||||||||||||||||||||
Interest Income
|
Gain Recorded
|
Interest Income
|
Gain Recorded
|
|||||||||||||||||||||
Recorded in |
in Noninterest
|
Recorded in |
in Noninterest
|
|||||||||||||||||||||
Interest Income
|
Income
|
Net Impact
|
Interest Income
|
Income |
Net Impact
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Commercial loan customer interest rate swap position
|
$ | 642 | $ | - | $ | 642 | $ | 525 | $ | - | $ | 525 | ||||||||||||
Counterparty interest rate swap position
|
(642 | ) | - | (642 | ) | (525 | ) | - | (525 | ) | ||||||||||||||
Total
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
For The Nine Months Ended September 30, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
MTM (Loss)
|
MTM (Loss)
|
|||||||||||||||||||||||
Interest Income
|
Gain Recorded
|
Interest Income
|
Gain Recorded
|
|||||||||||||||||||||
Recorded in
|
in Noninterest
|
Recorded in
|
in Noninterest
|
|||||||||||||||||||||
Interest Income
|
Income
|
Net Impact
|
Interest Income
|
Income
|
Net Impact
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Commercial loan customer interest rate swap position
|
$ | 1,763 | $ | - | $ | 1,763 | $ | 1,601 | $ | - | $ | 1,601 | ||||||||||||
Counterparty interest rate swap position
|
(1,763 | ) | - | (1,763 | ) | (1,601 | ) | - | (1,601 | ) | ||||||||||||||
Total
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30,
|
December 31,
|
||||||||
2012
|
2011
|
||||||||
(Dollars in thousands)
|
|||||||||
Approved loan commitments
|
$ | 73,278 | $ | 21,483 | |||||
Unadvanced portion of construction loans
|
67,103 | 23,268 | |||||||
Unadvanced portion of resort loans
|
3,873 | 4,950 | |||||||
Unused lines for home equity loans
|
137,155 | 106,430 | |||||||
Unused revolving lines of credit
|
379 | 365 | |||||||
Unused commercial letters of credit
|
8,773 | 9,925 | |||||||
Unused commercial lines of credit
|
125,384 | 100,585 | |||||||
$ | 415,945 | $ | 267,006 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
|
● |
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).
|
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
September 30, 2012 | ||||||||||||||||
Quoted Prices in
|
Significant
|
Significant
|
||||||||||||||
Active Markets for
|
Observable
|
Unobservable
|
||||||||||||||
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||||
(Dollars in thousands)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets
|
||||||||||||||||
U.S. Treasury obligations
|
$ | 91,981 | $ | 91,981 | $ | - | $ | - | ||||||||
U.S. Government agency obligations
|
12,013 | - | 12,013 | - | ||||||||||||
Government sponsored residential mortgage-backed securities
|
12,926 | - | 12,926 | - | ||||||||||||
Corporate debt securities
|
3,156 | - | 3,156 | - | ||||||||||||
Preferred equity securities
|
1,803 | - | 1,803 | - | ||||||||||||
Marketable equity securities
|
382 | 142 | 240 | - | ||||||||||||
Mutual funds
|
3,593 | - | 3,593 | - | ||||||||||||
Securities available-for-sale
|
125,854 | 92,123 | 33,731 | - | ||||||||||||
Interest rate swap derivative
|
9,094 | - | 9,094 | - | ||||||||||||
Derivative loan commitments
|
322 | - | - | 322 | ||||||||||||
Total
|
$ | 135,270 | $ | 92,123 | $ | 42,825 | $ | 322 | ||||||||
Liabilities
|
||||||||||||||||
Interest rate swap derivative
|
$ | 9,094 | $ | - | $ | 9,094 | $ | - | ||||||||
Forward loan sales commitments
|
189 | - | - | 189 | ||||||||||||
Total
|
$ | 9,283 | $ | - | $ | 9,094 | $ | 189 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
December 31, 2011 | ||||||||||||||||
Quoted Prices in
|
Significant
|
Significant
|
||||||||||||||
Active Markets for
|
Observable
|
Unobservable
|
||||||||||||||
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||||
(Dollars in thousands)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Assets
|
||||||||||||||||
U.S. Treasury obligations
|
$ | 80,999 | $ | 80,999 | $ | - | $ | - | ||||||||
U.S. Government agency obligations
|
27,006 | - | 27,006 | - | ||||||||||||
Government sponsored residential mortgage-backed securities
|
20,545 | - | 20,545 | - | ||||||||||||
Corporate debt securities
|
1,175 | - | 1,175 | - | ||||||||||||
Trust preferred debt securities
|
42 | - | - | 42 | ||||||||||||
Preferred equity securities
|
1,573 | - | 1,573 | - | ||||||||||||
Marketable equity securities
|
366 | 126 | 240 | - | ||||||||||||
Mutual funds
|
3,464 | - | 3,464 | - | ||||||||||||
Securities available-for-sale
|
135,170 | 81,125 | 54,003 | 42 | ||||||||||||
Interest rate swap derivative
|
6,812 | - | 6,812 | - | ||||||||||||
Total
|
$ | 141,982 | $ | 81,125 | $ | 60,815 | $ | 42 | ||||||||
Liabilities
|
||||||||||||||||
Interest rate swap derivative
|
$ | 6,812 | $ | - | $ | 6,812 | $ | - | ||||||||
Forward loan sales commitments
|
5 | - | - | 5 | ||||||||||||
Derivative loan commitments
|
39 | - | - | 39 | ||||||||||||
Total
|
$ | 6,856 | $ | - | $ | 6,812 | $ | 44 |
Derivative and Forward Loan
|
||||||||||||||||
Securities Available for Sale
|
Sales Commitments, Net
|
|||||||||||||||
For the Three Months Ended
|
For the Three Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Balance, at beginning of period
|
$ | 37 | $ | 44 | $ | 124 | $ | 21 | ||||||||
Paydowns
|
(37 | ) | (2 | ) | - | - | ||||||||||
Total gains - (realized/unrealized):
|
||||||||||||||||
Included in earnings
|
- | - | 9 | 53 | ||||||||||||
Balance, at the end of period
|
$ | - | $ | 42 | $ | 133 | $ | 74 |
First Connecticut Bancorp, Inc. |
Notes to Consolidated Financial Statements (Unaudited) |
Derivative and Forward Loan
|
||||||||||||||||
Securities Available for Sale
|
Sales Commitments, Net
|
|||||||||||||||
For the Nine Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Balance, at beginning of period
|
$ | 42 | $ | 44 | $ | (44 | ) | $ | - | |||||||
Paydowns
|
(42 | ) | (2 | ) | - | - | ||||||||||
Total gains - (realized/unrealized):
|
||||||||||||||||
Included in earnings
|
- | - | 177 | 74 | ||||||||||||
Balance, at the end of period
|
$ | - | $ | 42 | $ | 133 | $ | 74 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
|
|
Certain assets and liabilities are measured at fair value on a non-recurring basis in accordance with generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.
|
|
The following table details the financial instruments carried at fair value on a nonrecurring basis at September 30, 2012 and December 31, 2011 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:
|
September 30, 2012
|
||||||||||||
Quoted Prices in
|
Significant
|
Significant
|
||||||||||
Active Markets for
|
Observable
|
Unobservable
|
||||||||||
Identical Assets
|
Inputs
|
Inputs
|
||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Mortgage servicing rights
|
$ | - | $ | - | $ | 785 | ||||||
Loans held for sale
|
- | 4,569 | - | |||||||||
Impaired loans
|
- | - | 36,162 | |||||||||
Other real estate owned
|
- | - | 1,246 | |||||||||
December 31, 2011
|
||||||||||||
Quoted Prices in
|
Significant
|
Significant
|
||||||||||
Active Markets for
|
Observable
|
Unobservable
|
||||||||||
Identical Assets
|
Inputs
|
Inputs
|
||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||
(Dollars in thousands)
|
||||||||||||
Mortgage servicing rights
|
$ | - | $ | - | $ | 594 | ||||||
Loans held for sale
|
- | 1,039 | - | |||||||||
Impaired loans
|
- | - | 38,783 | |||||||||
Other real estate owned
|
- | - | 302 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
The following is a description of the valuation methodologies used for instruments measured at fair value:
|
|
Mortgage Servicing Rights: A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. As such, measurement at fair value is on a nonrecurring basis. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.
|
|
Loans Held for Sale: Loans held for sale are accounted for at the lower of cost or market. The fair value of loans held for sale are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.
|
|
Impaired Loans: Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral-dependent loans calculated in accordance with FASB ASC 310-10 when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or other assumptions. Estimates of fair value based on collateral are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Any impaired loan for which no specific valuation allowance was necessary at September 30, 2012 is the result of either sufficient cash flow or sufficient collateral coverage, or previous charge off amount that reduced the book value of the loan to an amount equal to or below the fair value of the collateral. Impaired loans are measured based on either collateral values supported by appraisals, observed market prices or where potential losses have been identified and reserved accordingly. Updated appraisals are obtained at least annually for impaired loans $250,000 or greater. Management performs a quarterly review of the valuation of impaired loans and considers the current market and collateral conditions for collateral dependent loans when estimating their fair value for purposes of determining whether an allowance for loan losses is necessary for impaired loans. When assessing the collateral coverage for an impaired loan, management discounts appraisals based upon the age of the appraisal, anticipated selling charges and any other costs needed to prepare the collateral for sale to determine its net realizable value.
|
|
Other Real Estate Owned: The Company classifies property acquired through foreclosure or acceptance of deed-in-lieu of foreclosure as other real estate owned in its financial statements. Upon foreclosure, the property securing the loan is written down to fair value less selling costs. The writedown is based upon the difference between the appraised value and the book value. Appraisals are based on observable market data such as comparable sales within the real estate market, however assumptions made in determining comparability are unobservable and therefore these assets are classified as Level 3 within the valuation hierarchy.
|
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at September 30, 2012:
|
(Dollars in thousands)
|
Fair Value
|
Valuation Methodology
|
Significant
Unobservable Inputs |
Range of Inputs
|
|||||||
Mortgage servicing rights
|
$ | 785 |
Discounted cash flows
|
Prepayment speed
|
6.5% - 8.7% | ||||||
Discount rate
|
23.0% - 30.7% | ||||||||||
Impaired loans
|
$ | 36,162 |
Appraisals
|
Discount for dated appraisal
|
0% - 20% | ||||||
Discount for costs to sell
|
8% - 15% | ||||||||||
Other real estate owned
|
$ | 1,246 |
Appraisals
|
Discount for costs to sell
|
8% - 10% |
Disclosures about Fair Value of Financial Instruments
|
|
The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:
|
|
Cash and cash equivalents: The carrying amounts reported in the statement of condition for cash and cash equivalents approximate those assets’ fair values.
|
|
Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
|
|
Investment in Federal Home Loan Bank of Boston ("FHLBB") stock: FHLBB stock does not have a readily determinable fair value which 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.
|
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
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.
|
|
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, 2012 and December 31, 2011. 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, 2012
|
December 31, 2011
|
|||||||||||||||||
|
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
|
$ | 3,007 | $ | 3,007 | $ | 3,216 | $ | 3,216 | |||||||||
Securities available-for-sale
|
See previous table
|
125,854 | 125,854 | 135,170 | 135,170 | |||||||||||||
Loans
|
Level 3
|
1,499,918 | 1,530,940 | 1,310,157 | 1,333,262 | |||||||||||||
Financial liabilities
|
||||||||||||||||||
Deposits | ||||||||||||||||||
Noninterest-bearing demand deposits | Level 1 | 221,464 | 221,464 | 195,625 | 195,625 | |||||||||||||
NOW accounts | Level 1 | 220,490 | 220,490 | 189,577 | 189,577 | |||||||||||||
Money market | Level 1 | 285,540 | 285,540 | 247,693 | 247,693 | |||||||||||||
Savings accounts | Level 1 | 171,516 | 171,516 | 157,913 | 157,913 | |||||||||||||
Time deposits | Level 2 | 358,977 | 361,924 | 385,874 | 389,857 | |||||||||||||
Federal Home Loan Bank of Boston advances
|
Level 2
|
125,200 | 127,671 | 63,000 | 65,812 | |||||||||||||
Repurchase agreement borrowings
|
Level 2
|
21,000 | 22,970 | 21,000 | 22,963 | |||||||||||||
Repurchase liabilities
|
Level 2
|
66,096 | 66,098 | 64,466 | 64,466 | |||||||||||||
On-balance sheet derivative | ||||||||||||||||||
financial instruments | ||||||||||||||||||
Forward loan sales commitments: | ||||||||||||||||||
Liabilities | Level 3 | 189 | 189 | 5 | 5 | |||||||||||||
Interest rate swap derivative:
|
||||||||||||||||||
Assets | Level 2 | 9,094 | 9,094 | 6,812 | 6,812 | |||||||||||||
Liabilities
|
Level 2 | 9,094 | 9,094 | 6,812 | 6,812 | |||||||||||||
Derivative loan commitments: | ||||||||||||||||||
Assets | Level 3 | 322 | 322 | - | - | |||||||||||||
Liabilities | Level 3 | - | - | 39 | 39 |
First Connecticut Bancorp, Inc.
|
Notes to Consolidated Financial Statements (Unaudited)
|
12.
|
Regulatory Matters
|
Capital guidelines of the Federal Reserve Board and the Federal Deposit Insurance Corporation (“FDIC”) require the Company and the Bank to maintain certain minimum ratios, as set forth below. At September 30, 2012 and December 31, 2011, the Company and the Bank were deemed to be “well capitalized” under the regulations of the Federal Reserve Board and the FDIC, respectively, and in compliance with the applicable capital requirements.
|
|
The following table presents the actual capital amounts and ratios for the Company and the Bank:
|
Actual
|
Minimum Required
for Capital
Adequacy Purposes
|
To Be Well
Capitalized Under
Prompt Corrective
Action
|
||||||||||||||||||||||
(Dollars in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
Farmington Bank:
|
||||||||||||||||||||||||
At September 30, 2012 -
|
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets)
|
$ | 199,871 | 14.49 | % | $ | 110,350 | 8.00 | % | $ | 137,937 | 10.00 | % | ||||||||||||
Tier I Capital (to Risk Weighted Assets)
|
182,622 | 13.24 | 55,173 | 4.00 | 82,759 | 6.00 | ||||||||||||||||||
Tier I Capital (to Average Assets)
|
182,622 | 10.53 | 69,372 | 4.00 | 86,715 | 5.00 | ||||||||||||||||||
At December 31, 2011 -
|
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets)
|
$ | 196,763 | 16.20 | % | $ | 97,167 | 8.00 | % | $ | 121,459 | 10.00 | % | ||||||||||||
Tier I Capital (to Risk Weighted Assets)
|
181,550 | 14.95 | 48,575 | 4.00 | 72,863 | 6.00 | ||||||||||||||||||
Tier I Capital (to Average Assets)
|
181,550 | 10.97 | 66,199 | 4.00 | 82,748 | 5.00 | ||||||||||||||||||
First Connecticut Bancorp, Inc.:
|
||||||||||||||||||||||||
At September 30, 2012 -
|
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets)
|
$ | 264,565 | 19.15 | % | $ | 110,523 | 8.00 | % | $ | 138,154 | 10.00 | % | ||||||||||||
Tier I Capital (to Risk Weighted Assets)
|
247,283 | 17.90 | 55,259 | 4.00 | 82,888 | 6.00 | ||||||||||||||||||
Tier I Capital (to Average Assets)
|
247,283 | 14.24 | 69,462 | 4.00 | 86,827 | 5.00 | ||||||||||||||||||
At December 31, 2011 -
|
||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets)
|
$ | 272,365 | 22.38 | % | $ | 97,360 | 8.00 | % | $ | 121,700 | 10.00 | % | ||||||||||||
Tier I Capital (to Risk Weighted Assets)
|
257,152 | 21.13 | 48,680 | 4.00 | 73,020 | 6.00 | ||||||||||||||||||
Tier I Capital (to Average Assets)
|
257,152 | 15.51 | 66,319 | 4.00 | 82,899 | 5.00 |
13.
|
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.
|
●
|
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.
|
●
|
Local, regional and national business or economic conditions may differ from those expected.
|
|
●
|
The effects of and changes in trade, monetary and fiscal policies and laws, including the U.S. Federal Reserve Board’s interest rate policies, may adversely affect our business.
|
|
●
|
The ability to increase market share and control expenses may be more difficult than anticipated.
|
|
●
|
Changes in laws and regulatory requirements (including those concerning taxes, banking, securities and insurance) may adversely affect us or our business.
|
|
●
|
Changes in accounting policies and practices, as may be adopted by regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board, may affect expected financial reporting.
|
|
●
|
Future changes in interest rates may reduce our profits which could have a negative impact on the value of our stock.
|
|
●
|
We are subject to lending risk and could incur losses in our loan portfolio despite our underwriting practices. Changes in real estate values could also increase our lending risk.
|
|
●
|
Changes in demand for loan products, financial products and deposit flow could impact our financial performance.
|
|
●
|
Strong competition within our market area may limit our growth and profitability.
|
|
●
|
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.
|
|
●
|
Our stock value may be negatively affected by federal regulations and articles of incorporation provisions restricting takeovers.
|
●
|
Implementation of stock benefit plans will increase our costs, which will reduce our income.
|
|
●
|
The Dodd-Frank Act was signed into law on July 21, 2010 and has resulted in dramatic regulatory changes that affects the industry in general, and may impact our competitive position in ways that cannot be predicted at this time.
|
|
●
|
The Emergency Economic Stabilization Act (“EESA”) of 2008 has and may continue to have a significant impact on the banking industry.
|
|
●
|
The increased cost of maintaining or the Company’s ability to maintain adequate liquidity and capital, based on the requirements adopted by the Basel Committee on Banking Supervision and U.S. regulators.
|
|
●
|
Changes to the amount and timing of proposed common stock repurchases.
|
|
●
|
We may not manage the risks involved in the foregoing as well as anticipated.
|
●
|
maintaining a strong capital position in excess of the well-capitalized standards set by our banking regulators to support our current operations and future growth;
|
|
●
|
continuing our focus on commercial lending and continuing to expand commercial banking operations;
|
|
●
|
continuing to focus on consumer and residential lending;
|
|
●
|
maintaining asset quality and prudent lending standards;
|
|
●
|
expanding our existing products and services and developing new products and services to meet the changing needs of consumers and businesses in our market area;
|
|
●
|
continuing expansion through de novo branching with a current goal of adding two to three de novo branches each year for so long as the deposit and loan generating environment continues to be favorable;
|
●
|
increase consumer, small business and commercial deposit transaction account portfolio to grow customer base and have more non-interest bearing source of funds;
|
|
●
|
expand electronic banking delivery capability and usage to complement our de novo branch strategy and provide customer access 24/7;
|
|
●
|
taking advantage of acquisition opportunities that are consistent with our strategic growth plans; and
|
|
●
|
continuing our efforts to control non-interest expenses.
|
Allowance for Loan Losses
|
|
The allowance for loan losses is maintained at a level believed adequate by management to absorb potential losses inherent in the loan portfolio as of the statement of condition date. The allowance for loan losses consists of a formula allowance following FASB ASC 450 – Contingencies and FASB ASC 310 – Receivables. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
|
|
The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components, as further described below.
|
|
General component:
|
|
The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort. Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development and residential subdivision construction loans. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no material changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses for the nine months ended September 30, 2012.
|
The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:
|
|
Residential real estate – Residential real estate loans are generally originated in amounts up to 95.0% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80.0%. The Company does not grant subprime loans. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. Typically, all fixed-rate residential mortgage loans are underwritten pursuant to secondary market underwriting guidelines which include minimum FICO standards. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.
|
|
Commercial real estate – Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, may have an effect on the credit quality in this segment. Management generally obtains rent rolls and other financial information, as appropriate on an annual basis and continually monitors the cash flows of these loans.
|
|
Construction loans – Loans in this segment include commercial construction loans, real estate subdivision development loans, to developers, licensed contractors and builders for the construction and development of commercial real estate projects and residential properties. Construction lending contains a unique risk characteristic as loans are originated under market and economic conditions that may change between the time of origination and the completion and subsequent purchaser financing of the property. In addition, construction subdivision loans and commercial and residential construction loans to contractors and developers entail additional risks as compared to single-family residential mortgage lending to owner-occupants. These loans typically involve large loan balances concentrated in single borrowers or groups of related borrowers. Real estate subdivision development loans to developers, licensed contractors and builders for the construction are generally speculative real estate development loans for which payment is derived from sale of the property. Credit risk may be affected by cost overruns, time to sell at an adequate price, and market conditions. Construction financing is generally considered to involve a higher degree of credit risk than longer-term financing on improved, owner-occupied real estate. Residential construction credit quality may be impacted by the overall health of the economy, including unemployment rates and housing prices.
|
|
Installment, Collateral, Demand and Revolving Credit – Loans in these segments include installment, demand, revolving credit and collateral loans, principally to customers residing in our primary market area with acceptable credit ratings. Our installment and collateral consumer loans generally consist of loans on new and used automobiles, loans collateralized by deposit accounts and unsecured personal loans. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment. Excluding collateral loans which are fully collateralized by a deposit account, repayment for loans in these segments are dependent on the credit quality of the individual borrower.
|
|
Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
|
|
Home equity line of credit – Loans in this segment include home equity loans and lines of credit underwritten with a loan-to-value ratio generally limited to no more than 80%, including any first mortgage. Our home equity lines of credit have ten-year terms and adjustable rates of interest which are indexed to the prime rate. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.
|
Resort – Loans in this segment include direct receivable 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 97% of the resort portfolio at September 30, 2012, are typically underwritten utilizing a lending formula in which loan advances are based on a percentage of eligible consumer notes. In addition, these loans generally contain provisions for recourse to the developer, the obligation of the developer to replace defaulted notes, and parameters with respect to minimum FICO scores or average weighted FICO scores of the portfolio of pledged notes. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment.
|
|
Allocated component:
|
|
The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial real estate, construction, commercial and resort loans by the present value of expected cash flows discounted at the effective interest rate; the fair value of the collateral, if applicable; or the observable market price for the loan. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. The Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement or they are nonaccrual loans with outstanding balances of $100,000 or more.
|
|
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Management updates the analysis quarterly. The assumptions used in appraisals are reviewed for appropriateness. Updated appraisals or valuations are obtained as needed or adjusted to reflect the estimated decline in the fair value based upon current market conditions for comparable properties.
|
|
The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring (“TDR”). All TDRs are classified as impaired.
|
Unallocated component:
|
|
An unallocated component is maintained, when needed, to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. The Company’s Loan Policy allows management to utilize a high and low range of 0.0% to 5.0% of our total allowance for loan losses when establishing an unallocated allowance, when considered necessary. The unallocated allowance is used to provide for an unidentified loss that may exist in emerging problem loans that cannot be fully quantified or may be affected by conditions not fully understood as of the balance sheet date.
|
|
Beginning in 2007 and continuing in 2012, softening real estate markets and generally weak economic conditions have lead to declines in collateral values and stress on the cash flows of borrowers. These adverse economic conditions could continue throughout 2012, and may negatively impact the Company’s borrowers, resulting in increases in charge-offs, delinquencies and non-performing loans and lower valuations for the Company’s impaired loans. This in turn, could impact significant estimates such as the allowance for loan losses and the effect could be material.
|
|
Other-than-Temporary Impairment of Securities: In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 320-Debt and Equity Securities, a decline in market value of a debt security below amortized cost that is deemed other-than-temporary is charged to earnings for the credit related other-than-temporary impairment (“OTTI”) resulting in the establishment of a new cost basis for the security, while the non-credit related OTTI is recognized in other comprehensive income if there is no intent or requirement to sell the security. Management reviews the securities portfolio on a quarterly basis for the presence of OTTI. An assessment is made as to whether the decline in value results from company-specific events, industry developments, general economic conditions, credit losses on debt or other reasons. After the reasons for the decline are identified, further judgments are required as to whether those conditions are likely to reverse and, if so, whether that reversal is likely to result in a recovery of the fair value of the investment in the near term. If it is judged not to be near-term, a charge is taken which results in a new cost basis. Credit related OTTI for debt securities is recognized in earnings while non-credit related OTTI is recognized in other comprehensive income if there is no intent to sell or will not be required to sell the security. If an equity security is deemed other-than-temporarily impaired, the full impairment is considered to be credit-related and a charge to earnings would be recorded. Management believes the policy for evaluating securities for other-than-temporary impairment is critical because it involves significant judgments by management and could have a material impact on our net income.
|
|
Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis. Marketable equity and debt securities are classified as either trading, available-for-sale, or held-to-maturity (applies only to debt securities). Management determines the appropriate classifications of securities at the time of purchase. At September 30, 2012 and December 31, 2011, we had no debt or equity securities classified as trading. Held-to-maturity securities are debt securities for which we have the ability and intent to hold until maturity. All other securities not included in held-to-maturity are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Available-for-sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized.
|
|
Premiums and discounts on debt securities are amortized or accreted into interest income over the term of the securities using the level yield method. |
Income Taxes: Deferred income taxes are provided for differences arising in the timing of income and expenses for financial reporting and for income tax purposes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides a deferred tax asset valuation allowance for the estimated future tax effects attributable to temporary differences and carryforwards when realization is determined not to be more likely than not.
|
|
FASB ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Pursuant to FASB ASC 740-10, the Company examines its financial statements, its income tax provision and its federal and state income tax returns and analyzes its tax positions, including permanent and temporary differences, as well as the major components of income and expense to determine whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties arising from income tax settlements as part of its provision for income taxes.
|
|
Pension and Other Post-retirement Benefits: We have a noncontributory defined benefit pension plan that provides benefits for substantially all employees hired before January 1, 2007 who meet certain requirements as to age and length of service. The benefits are based on years of service and average compensation, as defined in the Plan Document. Our funding policy is to contribute an amount that would not exceed the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Security Act of 1974.
|
|
In addition to providing pension benefits, we provide certain health care and life insurance benefits for retired employees. Participants or eligible employees hired before January 1, 1993 become eligible for the benefits if they retire after reaching age 62 with fifteen or more years of service. A fixed percent of annual costs are paid depending on length of service at retirement. We accrue for the estimated costs of these other post-retirement benefits through charges to expense during the years that employees render service. We make contributions to cover the current benefits paid under this plan. Management believes the policy for determining pension and other post-retirement benefit expenses is critical because judgments are required with respect to the appropriate discount rate, rate of return on assets, salary increases and other items. Management reviews and updates the assumptions annually. If our estimate of pension and post-retirement expense is too low we may experience higher expenses in the future, reducing our net income. If our estimate is too high, we may experience lower expenses in the future, increasing our net income.
|
|
Employee Stock Ownership Plan (“ESOP”): The Company accounts for its ESOP in accordance with FASB ASC 718-40, Compensation – Stock Compensation. Under this guidance, unearned ESOP shares are not considered outstanding and are shown as a reduction of stockholders’ equity as unearned compensation. The Company will recognize compensation cost equal to the fair value of the ESOP shares during the periods in which they are committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, this difference will be credited or debited to equity. The Company will receive a tax deduction equal to the cost of the shares released to the extent of the principal paydown on the loan by the ESOP. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a liability in the Company’s consolidated financial statements.
|
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 adopted 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.
|
|
The fair value of the stock option grants was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
Risk-free interest rate
|
0.82%
|
|
Expected volatility
|
33.69%
|
|
Expected dividend yield
|
1.78%
|
|
Expected life of options granted
|
6.0 years
|
Earnings Per Share: Basic net earnings (loss) per common share is calculated by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is computed in a manner similar to basic net earnings (loss) per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. 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 (loss) per common share.
|
For the Three Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Net interest income
|
$ | 13,387 | $ | 11,987 | $ | 1,400 | 11.7 | % | ||||||||
Provision for loan losses
|
215 | 300 | (85 | ) | (28.3 | ) | ||||||||||
Noninterest income
|
2,145 | 1,728 | 417 | 24.1 | ||||||||||||
Noninterest expense
|
16,905 | 11,945 | 4,960 | 41.5 | ||||||||||||
(Loss) income before taxes
|
(1,588 | ) | 1,470 | (3,058 | ) | (208.0 | ) | |||||||||
Income tax (benefit) expense
|
(519 | ) | 427 | (946 | ) | (221.5 | ) | |||||||||
Net (loss) income
|
$ | (1,069 | ) | $ | 1,043 | $ | (2,112 | ) | (202.5 | )% |
Three Months Ended September 30,
|
||||||||||||||||||||||||
2012
|
2011
|
|||||||||||||||||||||||
Average Balance
|
Interest and Dividends
|
Yield/Cost
|
Average Balance
|
Interest and Dividends
|
Yield/Cost
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans, net
|
$ | 1,460,686 | $ | 15,387 | 4.18 | % | $ | 1,193,273 | $ | 14,104 | 4.74 | % | ||||||||||||
Securities
|
141,607 | 380 | 1.06 | % | 155,241 | 405 | 1.05 | % | ||||||||||||||||
Federal Home Loan Bank of Boston stock
|
7,671 | 10 | 0.52 | % | 7,449 | 6 | 0.32 | % | ||||||||||||||||
Federal funds and other earning assets
|
10,317 | 3 | 0.12 | % | 253,677 | 144 | 0.23 | % | ||||||||||||||||
Total interest-earning assets
|
1,620,281 | 15,780 | 3.86 | % | 1,609,640 | 14,659 | 3.65 | % | ||||||||||||||||
Noninterest-earning assets
|
115,860 | 64,673 | ||||||||||||||||||||||
Total assets
|
$ | 1,736,141 | $ | 1,674,313 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
NOW accounts
|
$ | 207,763 | $ | 100 | 0.19 | % | $ | 289,658 | $ | 155 | 0.21 | % | ||||||||||||
Money market
|
280,572 | 498 | 0.70 | % | 217,295 | 528 | 0.97 | % | ||||||||||||||||
Savings accounts
|
172,494 | 67 | 0.15 | % | 148,380 | 60 | 0.16 | % | ||||||||||||||||
Certificates of deposit
|
361,648 | 979 | 1.07 | % | 415,279 | 1,143 | 1.10 | % | ||||||||||||||||
Total interest-bearing deposits
|
1,022,477 | 1,644 | 0.64 | % | 1,070,612 | 1,886 | 0.71 | % | ||||||||||||||||
Advances from the Federal Home Loan Bank
|
112,850 | 499 | 1.75 | % | 66,207 | 519 | 3.14 | % | ||||||||||||||||
Repurchase agreement borrowings
|
21,000 | 179 | 3.38 | % | 21,000 | 182 | 3.48 | % | ||||||||||||||||
Repurchase liabilities
|
73,268 | 71 | 0.38 | % | 72,471 | 85 | 0.47 | % | ||||||||||||||||
Total interest-bearing liabilities
|
1,229,595 | 2,393 | 0.77 | % | 1,230,290 | 2,672 | 0.87 | % | ||||||||||||||||
Noninterest-bearing deposits
|
216,205 | 152,092 | ||||||||||||||||||||||
Other noninterest-bearing liabilities
|
43,965 | 30,774 | ||||||||||||||||||||||
Total liabilities
|
1,489,765 | 1,413,156 | ||||||||||||||||||||||
Stockholders’ equity
|
246,376 | 261,157 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity
|
$ | 1,736,141 | $ | 1,674,313 | ||||||||||||||||||||
Net interest income
|
$ | 13,387 | $ | 11,987 | ||||||||||||||||||||
Net interest rate spread (1)
|
3.09 | % | 2.78 | % | ||||||||||||||||||||
Net interest-earning assets (2)
|
$ | 390,686 | $ | 379,350 | ||||||||||||||||||||
Net interest margin (3)
|
3.28 | % | 2.99 | % | ||||||||||||||||||||
Average interest-earning assets
|
||||||||||||||||||||||||
to average interest-bearing liabilities
|
131.77 | % | 130.83 | % |
(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.
|
Three Months Ended September 30, 2012 Compared to
Three Months Ended September 30, 2011
|
||||||||||||
(Dollars in thousands)
|
Volume
|
Rate
|
Total Increase (Decrease)
|
|||||||||
Interest-earning assets:
|
||||||||||||
Loans, net
|
$ | 2,716 | $ | (1,433 | ) | $ | 1,283 | |||||
Investment securities
|
(25 | ) | - | (25 | ) | |||||||
Federal Home Loan Bank of Boston stock
|
- | 4 | 4 | |||||||||
Federal funds and other interest-earning assets
|
(93 | ) | (48 | ) | (141 | ) | ||||||
Total interest-earning assets
|
2,598 | (1,477 | ) | 1,121 | ||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW accounts
|
(35 | ) | (20 | ) | (55 | ) | ||||||
Money market
|
(1,336 | ) | 1,306 | (30 | ) | |||||||
Savings accounts
|
7 | - | 7 | |||||||||
Certificates of deposit
|
(140 | ) | (24 | ) | (164 | ) | ||||||
Total interest-bearing deposits
|
(1,504 | ) | 1,262 | (242 | ) | |||||||
Advances from the Federal Home Loan Bank
|
(52 | ) | 32 | (20 | ) | |||||||
Repurchase agreement borrowings
|
- | (3 | ) | (3 | ) | |||||||
Repurchase liabilities
|
1 | (15 | ) | (14 | ) | |||||||
Total interest-bearing liabilities
|
(1,555 | ) | 1,276 | (279 | ) | |||||||
Increase (decrease) in net interest income
|
$ | 4,153 | $ | (2,753 | ) | $ | 1,400 |
For the Three Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Fees for customer services
|
$ | 950 | $ | 852 | $ | 98 | 11.5 | % | ||||||||
Net gain on sale of investments
|
- | 89 | (89 | ) | (100.0 | ) | ||||||||||
Net gain on loans sold
|
687 | 284 | 403 | 141.9 | ||||||||||||
Brokerage and insurance fee income
|
34 | 30 | 4 | 13.3 | ||||||||||||
Bank owned life insurance income
|
326 | 177 | 149 | 84.2 | ||||||||||||
Other
|
148 | 296 | (148 | ) | (50.0 | ) | ||||||||||
Total noninterest income
|
$ | 2,145 | $ | 1,728 | $ | 417 | 24.1 | % |
For the Three Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Salaries and employee benefits
|
$ | 10,243 | $ | 7,065 | $ | 3,178 | 45.0 | % | ||||||||
Occupancy expense
|
1,108 | 1,129 | (21 | ) | (1.9 | ) | ||||||||||
Furniture and equipment expense
|
1,120 | 1,038 | 82 | 7.9 | ||||||||||||
FDIC assessment
|
255 | 56 | 199 | 355.4 | ||||||||||||
Marketing
|
509 | 505 | 4 | 0.8 | ||||||||||||
Other operating expenses
|
3,670 | 2,152 | 1,518 | 70.5 | ||||||||||||
Total noninterest expense
|
$ | 16,905 | $ | 11,945 | $ | 4,960 | 41.5 | % |
For the Nine Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Net interest income
|
$ | 39,140 | $ | 35,852 | $ | 3,288 | 9.2 | % | ||||||||
Provision for loan losses
|
1,065 | 900 | 165 | 18.3 | ||||||||||||
Noninterest income
|
5,436 | 4,438 | 998 | 22.5 | ||||||||||||
Noninterest expense
|
42,667 | 43,533 | (866 | ) | (2.0 | ) | ||||||||||
Income (loss) before taxes
|
844 | (4,143 | ) | 4,987 | (120.4 | ) | ||||||||||
Income tax expense (benefit)
|
91 | (1,557 | ) | 1,648 | (105.8 | ) | ||||||||||
Net income (loss)
|
$ | 753 | $ | (2,586 | ) | $ | 3,339 | (129.1 | )% |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Average
|
Interest and
|
Average
|
Interest and
|
|||||||||||||||||||||
Balance
|
Dividends
|
Yield/Cost
|
Balance
|
Dividends
|
Yield/Cost
|
|||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||
Loans, net
|
$ | 1,379,256 | $ | 45,127 | 4.36 | % | $ | 1,175,749 | $ | 42,395 | 4.82 | % | ||||||||||||
Securities
|
135,183 | 1,135 | 1.12 | % | 153,127 | 1,434 | 1.25 | % | ||||||||||||||||
Federal Home Loan Bank of Boston stock
|
7,393 | 28 | 0.50 | % | 7,449 | 16 | 0.29 | % | ||||||||||||||||
Federal funds and other earning assets
|
41,579 | 63 | 0.20 | % | 131,640 | 219 | 0.22 | % | ||||||||||||||||
Total interest-earning assets
|
1,563,411 | 46,353 | 3.95 | % | 1,467,965 | 44,064 | 4.01 | % | ||||||||||||||||
Noninterest-earning assets
|
116,571 | 81,552 | ||||||||||||||||||||||
Total assets
|
$ | 1,679,982 | $ | 1,549,517 | ||||||||||||||||||||
Interest-bearing liabilities:
|
||||||||||||||||||||||||
NOW accounts
|
$ | 205,776 | $ | 272 | 0.18 | % | $ | 258,593 | $ | 516 | 0.27 | % | ||||||||||||
Money market
|
271,051 | 1,530 | 0.75 | % | 200,673 | 1,483 | 0.99 | % | ||||||||||||||||
Savings accounts
|
169,491 | 192 | 0.15 | % | 147,443 | 205 | 0.19 | % | ||||||||||||||||
Certificates of deposit
|
370,514 | 3,048 | 1.10 | % | 426,118 | 3,588 | 1.13 | % | ||||||||||||||||
Total interest-bearing deposits
|
1,016,832 | 5,042 | 0.66 | % | 1,032,827 | 5,792 | 0.75 | % | ||||||||||||||||
Advances from the Federal Home Loan Bank
|
79,708 | 1,442 | 2.41 | % | 67,430 | 1,575 | 3.12 | % | ||||||||||||||||
Repurchase agreement borrowings
|
21,000 | 540 | 3.43 | % | 21,000 | 540 | 3.44 | % | ||||||||||||||||
Repurchase liabilities
|
64,864 | 189 | 0.39 | % | 72,688 | 305 | 0.56 | % | ||||||||||||||||
Total interest-bearing liabilities
|
1,182,404 | 7,213 | 0.81 | % | 1,193,945 | 8,212 | 0.92 | % | ||||||||||||||||
Noninterest-bearing deposits
|
207,456 | 172,905 | ||||||||||||||||||||||
Other noninterest-bearing liabilities
|
40,404 | 28,750 | ||||||||||||||||||||||
Total liabilities
|
1,430,264 | 1,395,600 | ||||||||||||||||||||||
Stockholders’ equity
|
249,718 | 153,917 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity
|
$ | 1,679,982 | $ | 1,549,517 | ||||||||||||||||||||
Net interest income
|
$ | 39,140 | $ | 35,852 | ||||||||||||||||||||
Net interest rate spread (1)
|
3.14 | % | 3.09 | % | ||||||||||||||||||||
Net interest-earning assets (2)
|
$ | 381,007 | $ | 274,020 | ||||||||||||||||||||
Net interest margin (3)
|
3.33 | % | 3.27 | % | ||||||||||||||||||||
Average interest-earning assets
|
||||||||||||||||||||||||
to average interest-bearing liabilities
|
132.22 | % | 122.95 | % |
(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.
|
Nine Months Ended September 30, 2012 Compared
|
||||||||||||
to Nine Months Ended September 30, 2011
|
||||||||||||
Total Increase
|
||||||||||||
(Dollars in thousands)
|
Volume
|
Rate
|
(Decrease)
|
|||||||||
Interest-earning assets:
|
||||||||||||
Loans, net
|
$ | 6,085 | $ | (3,353 | ) | $ | 2,732 | |||||
Investment securities
|
(149 | ) | (150 | ) | (299 | ) | ||||||
Federal Home Loan Bank of Boston stock
|
- | 12 | 12 | |||||||||
Federal funds and other interest-earning assets
|
(137 | ) | (19 | ) | (156 | ) | ||||||
Total interest-earning assets
|
5,799 | (3,510 | ) | 2,289 | ||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW accounts
|
(101 | ) | (143 | ) | (244 | ) | ||||||
Money market
|
167 | (120 | ) | 47 | ||||||||
Savings accounts
|
9 | (22 | ) | (13 | ) | |||||||
Certificates of deposit
|
(466 | ) | (74 | ) | (540 | ) | ||||||
Total interest-bearing deposits
|
(391 | ) | (359 | ) | (750 | ) | ||||||
Advances from the Federal Home Loan Bank
|
437 | (570 | ) | (133 | ) | |||||||
Repurchase agreement borrowings
|
- | - | - | |||||||||
Repurchase liabilities
|
(35 | ) | (81 | ) | (116 | ) | ||||||
Total interest-bearing liabilities
|
11 | (1,010 | ) | (999 | ) | |||||||
Increase (decrease) in net interest income
|
$ | 5,788 | $ | (2,500 | ) | $ | 3,288 |
For the Nine Months Ended September 30, | ||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Fees for customer services
|
$ | 2,666 | $ | 2,499 | $ | 167 | 6.7 | % | ||||||||
Net gain on sale of investments
|
- | 89 | (89 | ) | (100.0 | ) | ||||||||||
Net gain on loans sold
|
1,216 | 629 | 587 | 93.3 | ||||||||||||
Brokerage and insurance fee income
|
91 | 164 | (73 | ) | (44.5 | ) | ||||||||||
Bank owned life insurance income
|
966 | 525 | 441 | 84.0 | ||||||||||||
Other
|
497 | 532 | (35 | ) | (6.6 | ) | ||||||||||
Total noninterest income
|
$ | 5,436 | $ | 4,438 | $ | 998 | 22.5 | % |
For the Nine Months Ended September 30,
|
||||||||||||||||
2012
|
2011
|
$ Change
|
% Change
|
|||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Salaries and employee benefits
|
$ | 25,286 | $ | 21,106 | $ | 4,180 | 19.8 | % | ||||||||
Occupancy expense
|
3,396 | 3,460 | (64 | ) | (1.8 | ) | ||||||||||
Furniture and equipment expense
|
3,331 | 3,003 | 328 | 10.9 | ||||||||||||
FDIC assessment
|
828 | 1,126 | (298 | ) | (26.5 | ) | ||||||||||
Marketing
|
1,868 | 1,636 | 232 | 14.2 | ||||||||||||
Contribution to Farmington Bank
|
||||||||||||||||
Community Foundation, Inc.
|
- | 6,877 | (6,877 | ) | (100.0 | ) | ||||||||||
Other operating expenses
|
7,958 | 6,325 | 1,633 | 25.8 | ||||||||||||
Total noninterest expense
|
$ | 42,667 | $ | 43,533 | $ | (866 | ) | (2.0 | )% |
Percentage Increase (Decrease) in Estimated Net
Interest Income Over 12 Months
|
||||||||
At September 30, 2012 |
|
At December 31, 2011
|
||||||
300 basis point increase
|
6.11 | % | 8.86 | % | ||||
400 basis point increase
|
4.90 | % | 11.36 | % | ||||
100 basis point decrease
|
(5.21 | )% | (3.90 | )% |
(a)
|
Not applicable.
|
|
(b)
|
Not applicable.
|
|
(c)
|
During the quarter ending September 30, 2012, 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, 2012
|
126,737 | $ | 13.25 | 126,737 | 1,661,283 | |||||||||||
August 1-31, 2012
|
363,210 | $ | 13.17 | 489,947 | 1,298,073 | |||||||||||
September 1-30, 2012
|
87,375 | $ | 12.99 | 577,322 | 1,210,698 |
On July 2, 2012, the Company received regulatory approval to repurchase up to 1,788,020 shares, or 10% of its current outstanding common stock. Repurchased shares will be held as treasury stock and will be available for general corporate purposes.
|
3.1
|
Amended and Restated Certificate of Incorporation of First Connecticut Bancorp, Inc. (filed as Exhibit 3.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
3.2
|
Bylaws of First Connecticut Bancorp, Inc. (filed as Exhibit 3.2 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
4.1
|
Form of Common Stock Certificate of First Connecticut Bancorp, Inc. (filed as Exhibit 4.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.1
|
Phantom Stock Plan of Farmington Bank (terminated) (filed as Exhibit 10.1 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.2
|
Supplemental Executive Retirement Plan of Farmington Bank (filed as Exhibit 10.2 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.3
|
Voluntary Deferred Compensation Plan for Directors and Key Employees (filed as Exhibit 10.3 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.4
|
First Amendment to Voluntary Deferred Compensation Plan for Directors and Key Employees (filed as Exhibit 10.4 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.5
|
Voluntary Deferred Compensation Plan for Key Employees (filed as Exhibit 10.5 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.6
|
Life Insurance Premium Reimbursement Agreement between Farmington Bank and John J. Patrick, Jr. (filed as Exhibit 10.6 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.7
|
Life Insurance Premium Reimbursement Agreement between Farmington Bank and Gregory A. White (filed as Exhibit 10.7 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.8
|
Farmington Savings Bank Defined Benefit Employees’ Pension Plan, as amended (filed as Exhibit 10.8 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.9
|
Annual Incentive Compensation Plan (filed as Exhibit 10.9 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.10
|
Supplemental Retirement Plan Participation Agreement between John J. Patrick, Jr. and Farmington Bank (filed as Exhibit 10.10 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.11
|
Supplemental Retirement Plan Participation Agreement between Michael T. Schweighoffer and Farmington Bank (filed as Exhibit 10.11 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.12
|
Supplemental Retirement Plan Participation Agreement between Gregory A. White and Farmington Bank (filed as Exhibit 10.12 to the Registration Statement on the Form S-1 filed for the Company on January 28, 2011, as amended, and incorporated herein by reference).
|
10.13
|
Employment Agreement among First Connecticut Bancorp, Inc., Farmington Bank and John J. Patrick, Jr. (filed as Exhibit 10.1 Employment Agreement on Form 8-K for the Company on April 24, 2012 and incorporated herein by reference).
|
10.14
|
Life Insurance Premium Reimbursement Agreement between Farmington Bank and Michael T. Schweighoffer (filed as Exhibit 10.14 to the Form 10-K 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) Consolidated Statements of Comprehensive Income (iv) the Consolidated Statement of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Consolidated Financial Statements tagged as blocks of text and in detail.*
|
*
|
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934.
|
FIRST CONNECTICUT BANCORP, INC.
|
||
Date: November 14, 2012
|
/s/ John J. Patrick, Jr.
|
|
John J. Patrick, Jr.
|
||
Chairman, President and Chief Executive Officer
|
||
Date: November 14, 2012
|
/s/ Gregory A. White
|
|
Gregory A. White
|
||
Executive Vice President and Chief Financial Officer
|
||
Date: November 14, 2012
|
/s/ Kimberly Rozanski Ruppert
|
|
Kimberly Rozanski Ruppert
|
||
Senior Vice President and Principal Accounting Officer
|