Company Quick10K Filing
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First Connecticut Bancorp
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-10-01 M&A, Shareholder Rights, Control, Officers, Amend Bylaw, Exhibits
8-K 2018-09-25 Shareholder Vote, Other Events, Exhibits
8-K 2018-08-28
8-K 2018-07-18
8-K 2018-06-19 Other Events, Exhibits
8-K 2018-06-18 Enter Agreement, Exhibits
8-K 2018-05-22
8-K 2018-05-14
8-K 2018-05-09
8-K 2018-04-18
8-K 2018-04-02
8-K 2018-02-27
8-K 2018-01-24
8-K 2018-01-23
8-K 2018-01-05
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FBNK 2018-06-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 tv499696_ex31-1.htm
EX-31.2 tv499696_ex31-2.htm
EX-32.1 tv499696_ex32-1.htm
EX-32.2 tv499696_ex32-2.htm

First Connecticut Bancorp Earnings 2018-06-30

FBNK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tv499696_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q 

 

x

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

 

For the quarterly period ended June 30, 2018

 

OR

 

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

 

For the transition period from              to             

 

Commission File No. 333-171913

 

 

First Connecticut Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

     
Maryland   45-1496206

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

   
One Farm Glen Boulevard, Farmington, CT   06032
(Address of Principal Executive Offices)   (Zip Code)

 

(860) 676-4600

(Registrant’s telephone number)

 

N/A

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

 

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES   x     NO   ¨

 

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

 

Large accelerated filer    ¨   Accelerated filer   x
           
Non-accelerated filer    ¨   Smaller reporting company   ¨
           
Emerging growth company    ¨        

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

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

 

As of July 23, 2018, there were 16,036,214 shares of First Connecticut Bancorp, Inc. common stock, par value $0.01, outstanding.

 

 

 

 

 

First Connecticut Bancorp, Inc.

 

Table of Contents

 

    Page
     
Part I. Financial Information  
     
Item 1.   Consolidated Financial Statements  
     
  Consolidated Statements of Financial Condition at June 30, 2018 (unaudited) and December 31, 2017 1
     
  Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017 (unaudited) 2
     
  Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017 (unaudited) 3
     
  Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2018 and 2017 (unaudited) 4
     
  Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited) 5
     
  Notes to Unaudited Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 69
     
Item 4. Controls and Procedures 70
     
Part II. Other Information  
     
Item 1. Legal Proceedings 70
     
Item1A. Risk Factors 70
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 73
     
Item 3. Defaults upon Senior Securities 73
     
Item 4. Mine Safety Disclosure 73
     
Item 5. Other Information 73
     
Item 6. Exhibits 74
     
Signatures   77

 

Exhibit 31.1    
Exhibit 31.2    
Exhibit 32.1    
Exhibit 32.2    

 

 

 

 

First Connecticut Bancorp, Inc.

Consolidated Statements of Financial Condition (Unaudited)

 

   June 30,   December 31, 
(Dollars in thousands, except share and per share data)  2018   2017 
        
Assets          
Cash and due from banks  $36,028   $33,320 
Interest bearing deposits with other institutions   940    2,030 
Total cash, cash equivalents and restricted cash   36,968    35,350 
Debt securities held-to-maturity, at amortized cost   86,981    74,985 
Debt securities available-for-sale, at fair value   98,010    80,358 
Loans held for sale   5,331    5,295 
Loans (1)   2,923,386    2,748,081 
Allowance for loan losses   (22,672)   (22,448)
Loans, net   2,900,714    2,725,633 
Premises and equipment, net   16,965    16,845 
Federal Home Loan Bank of Boston stock, at cost   22,195    15,537 
Accrued income receivable   9,913    8,979 
Bank-owned life insurance   58,193    57,511 
Deferred income taxes, net   7,724    7,662 
Prepaid expenses and other assets   32,844    26,895 
Total assets  $3,275,838   $3,055,050 
           
Liabilities and Stockholders' Equity          
Deposits          
Interest-bearing  $1,965,487   $1,960,672 
Noninterest-bearing   478,319    473,428 
    2,443,806    2,434,100 
Federal Home Loan Bank of Boston advances   457,457    255,458 
Repurchase agreement borrowings   -    10,500 
Repurchase liabilities   40,374    34,496 
Accrued expenses and other liabilities   52,337    48,037 
Total liabilities   2,993,974    2,782,591 
           
Commitments and contingencies (Note 18)   -    - 
           
Stockholders' Equity          
           
Common stock, $0.01 par value, 30,000,000 shares authorized; 17,946,190 shares issued and 16,012,664 shares outstanding at June 30, 2018 and 17,947,647 shares issued and 15,952,946 shares outstanding at December 31, 2017   181    181 
Additional paid-in-capital   186,776    185,779 
Unallocated common stock held by ESOP   (9,043)   (9,539)
Treasury stock, at cost (1,933,526 shares at June 30, 2018 and 1,994,701 shares at December 31, 2017)   (28,802)   (29,620)
Retained earnings   140,228    131,887 
Accumulated other comprehensive loss   (7,476)   (6,229)
Total stockholders' equity   281,864    272,459 
Total liabilities and stockholders' equity  $3,275,838   $3,055,050 

 

(1)Loans include net deferred loan costs of $5.9 million and $5.1 million at June 30, 2018 and December 31, 2017, respectively.

 

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

 

 1 

 

 

First Connecticut Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(Dollars in thousands, except share and per share data)  2018   2017   2018   2017 
                
Interest income                    
Interest and fees on loans                    
Mortgage  $21,560   $18,056   $41,487   $35,614 
Other   5,672    5,209    11,137    10,156 
Interest and dividends on investments                    
United States Government and agency obligations   954    598    1,751    1,072 
Other bonds   -    7    -    14 
Corporate stocks   258    216    499    415 
Other interest income   27    30    60    57 
Total interest income   28,471    24,116    54,934    47,328 
                     
Interest expense                    
Deposits   4,702    3,026    9,041    5,937 
Federal Home Loan Bank of Boston advances   1,771    1,164    2,890    2,113 
Repurchase agreement borrowings   -    96    74    191 
Repurchase liabilities   7    7    16    14 
Total interest expense   6,480    4,293    12,021    8,255 
Net interest income   21,991    19,823    42,913    39,073 
Provision for loan losses   69    710    534    1,035 
Net interest income after provision for loan losses   21,922    19,113    42,379    38,038 
Noninterest income                    
Fees for customer services   1,718    1,572    3,375    3,078 
Net gain on loans sold   341    711    629    1,127 
Brokerage and insurance fee income   63    55    121    105 
Bank owned life insurance income   341    598    682    917 
Other   799    940    1,600    1,814 
Total noninterest income   3,262    3,876    6,407    7,041 
Noninterest expense                    
Salaries and employee benefits   9,704    9,848    19,476    18,986 
Occupancy expense   1,315    1,187    2,644    2,500 
Furniture and equipment expense   947    985    1,895    1,969 
FDIC assessment   422    410    846    838 
Marketing   767    708    1,372    1,275 
Other operating expenses   3,864    2,740    7,025    5,462 
Total noninterest expense   17,019    15,878    33,258    31,030 
Income before income taxes   8,165    7,111    15,528    14,049 
Income tax expense   1,435    2,109    2,787    3,954 
Net income  $6,730   $5,002   $12,741   $10,095 
                     
Net earnings per share (See Note 3):                    
Basic  $0.44   $0.33   $0.83   $0.67 
Diluted   0.42    0.32    0.80    0.64 
Dividends per share   0.17    0.12    0.33    0.23 

 

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

 

 2 

 

 

First Connecticut Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(Dollars in thousands)  2018   2017   2018   2017 
                
Net income  $6,730   $5,002   $12,741   $10,095 
Other comprehensive (loss) income, before tax                    
Unrealized losses on debt securities:                    
Unrealized holding (losses) gains arising during the period (1)   (271)   41    (686)   178 
Less: reclassification adjustment for gains  included in net income   -    -    -    - 
Net change in unrealized (losses) gains   (271)   41    (686)   178 
Change related to pension and other postretirement benefit plans   149    162    298    325 
Other comprehensive (loss) income, before tax   (122)   203    (388)   503 
Income tax (benefit) expense   (44)   72    (101)   178 
Other comprehensive (loss) income, net of tax   (78)   131    (287)   325 
Comprehensive income  $6,652   $5,133   $12,454   $10,420 

 

(1)The Company adopted ASU 2016-01 effective January 1, 2018 which requires equity securities to be measured at fair value with changes in fair value recoginized in net income. The prior period includes changes in the fair value of equity securities recognized in other comprehensive income.

 

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

 

 3 

 

 

First Connecticut Bancorp, Inc.

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

 

 

               Unallocated           Accumulated     
   Common Stock   Additional   Common           Other   Total 
   Shares       Paid in   Shares Held   Treasury   Retained   Comprehensive   Stockholders' 
(Dollars in thousands, except share data)  Outstanding   Amount   Capital   by ESOP   Stock   Earnings   Loss   Equity 
                                
Balance at December 31, 2016   15,897,698   $181   $184,111   $(10,567)  $(30,400)  $123,541   $(6,690)  $260,176 
ESOP shares released and  committed to be released   -    -    639    514    -    -    -    1,153 
Cash dividend paid ($0.23 per common share)   -    -    -    -    -    (3,664)   -    (3,664)
Stock options exercised   41,850    -    (21)   -    588    -    -    567 
Share based compensation expense   3,066    -    142    -    42    -    -    184 
Net income   -    -    -    -    -    10,095    -    10,095 
Other comprehensive income   -    -    -    -    -    -    325    325 
Balance at June 30, 2017   15,942,614   $181   $184,871   $(10,053)  $(29,770)  $129,972   $(6,365)  $268,836 
                                         
Balance at December 31, 2017   15,952,946   $181   $185,779   $(9,539)  $(29,620)  $131,887   $(6,229)  $272,459 
ESOP shares released and  committed to be released   -    -    746    496    -    -    -    1,242 
Cash dividend paid ($0.33 per common share)   -    -    -    -    -    (5,274)   -    (5,274)
Stock options exercised   54,194    -    (70)   -    780    -    -    710 
Cancellation of shares for tax withholding   (1,457)   -    (38)   -    -    -    -    (38)
Share based compensation expense   6,981    -    359    -    38    -    -    397 
Net income   -    -    -    -    -    12,741    -    12,741 
Reclassification of disproportionate tax effects resulting from the Tax Cuts and Jobs Act of 2017 pursuant to ASU 2018-02   -    -    -    -    -    1,275    (1,275)   - 
Reclassification of cumulative effect adjustment per ASU 2016-01   -    -    -    -    -    (401)   315    (86)
Other comprehensive loss   -    -    -    -    -    -    (287)   (287)
Balance at June 30, 2018   16,012,664   $181   $186,776   $(9,043)  $(28,802)  $140,228   $(7,476)  $281,864 

 

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

 

 4 

 

 

First Connecticut Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

 

 

   Six Months Ended June 30, 
  2018   2017 
(Dollars in thousands)        
Cash flows from operating activities          
Net income  $12,741   $10,095 
Adjustments to reconcile net income to net cash provided by    operating activities:          
Provision for loan losses   534    1,035 
Provision for (reversal of) off-balance sheet commitments   58    (92)
Depreciation and amortization   927    1,020 
Amortization of ESOP expense   1,242    1,153 
Share based compensation expense   397    184 
Amortization of mortgage servicing rights   464    451 
Writedown on foreclosed real estate   451    - 
Loans originated for sale   (55,181)   (52,634)
Proceeds from the sale of loans held for sale   55,774    54,494 
(Gain) loss on fair value adjustment for mortgage banking derivatives   (3)   51 
Impairment losses on alternative investments   -    10 
Loss on fair value adjustment for equity securities   94    - 
Net gain on loans sold   (629)   (1,127)
Net amortization (accretion) of investment security discounts and premiums   78    (23)
Change in net deferred loan fees and costs   (862)   (525)
Increase in accrued income receivable   (934)   (507)
Deferred income tax   (47)   647 
Increase in cash surrender value of bank-owned life insurance   (682)   (645)
Increase in prepaid expenses and other assets   (4,755)   (4,200)
Increase (decrease) in accrued expenses and other liabilities   4,504    (3,287)
Net cash provided by operating activities   14,171    6,100 
Cash flows from investing activities          
Maturities, calls and principal payments of debt securities held-to-maturity   1,979    5,115 
Maturities, calls and principal payments of debt securities available-for-sale   28,993    16,302 
Purchases of debt securities held-to-maturity   (13,972)   (22,709)
Purchases of debt securities available-for-sale   (47,412)   (25,024)
Loan originations, net of principal repayments   (176,917)   (119,145)
Purchases of Federal Home Loan Bank of Boston stock, net   (6,658)   (3,205)
Purchase of bank-owned life insurance   -    (5,000)
Proceeds from bank-owned life insurance   -    569 
Purchases of premises and equipment   (1,047)   (627)
Net cash used in investing activities   (215,034)   (153,724)
Cash flows from financing activities          
Net proceeds from Federal Home Loan Bank of Boston advances   201,999    102,401 
Decrease in repurchase agreement borrowings   (10,500)   - 
Net (decrease) increase in demand deposits, NOW accounts,      savings accounts and money market accounts   (28,965)   6,365 
Net increase in time deposits   38,671    23,549 
Net increase in repurchase liabilities   5,878    17,234 
Stock options exercised   710    567 
Cancellation of shares for tax withholding   (38)   - 
Cash dividend paid   (5,274)   (3,664)
Net cash provided by financing activities   202,481    146,452 
Net increase (decrease) in cash, cash equivalents and restricted cash   1,618    (1,172)
Cash, cash equivalents and restricted cash at beginning of period   35,350    47,723 
Cash, cash equivalents and restricted cash at end of period  $36,968   $46,551 
           
Supplemental disclosure of cash flow information          
Loans transferred to other real estate owned  $2,164   $- 

 

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

 

 5 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

1.Summary of Significant Accounting Policies

 

Organization and Business

 

First Connecticut Bancorp, Inc. is a Maryland-chartered bank holding company that wholly owns its only subsidiary, Farmington Bank (collectively with its subsidiary, the “Company”). Farmington Bank's main office is located in Farmington, Connecticut. Farmington Bank is a full-service, community bank with 25 branch locations throughout central Connecticut and western Massachusetts, offering commercial and residential lending as well as wealth management services. Farmington Bank's primary source of income is interest accrued on loans to customers, which include small and middle market businesses and individuals residing primarily in Connecticut and western Massachusetts. However, the Bank will selectively lend to borrowers in other northeastern states.

 

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

 

On June 21, 2013, the Company received regulatory approval to repurchase up to 1,676,452 shares, or 10% of its current outstanding common stock. Repurchased shares are held as treasury stock and are available for general corporate purposes. The Company has 600,945 shares remaining available to be repurchased at June 30, 2018.

 

Merger

 

On June 19, 2018, the Company announced its entry into a definitive Agreement and Plan of Merger with People’s United Financial, Inc. ("People's United"), pursuant to which the Company will merge with and into People's United. Completion of the transaction is subject to customary closing conditions, including receipt of regulatory approvals and the approval of the Company’s shareholders.

 

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, 2017 included in the Company’s 10-K filed on March 9, 2018. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

 

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

 

 6 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Investment Securities

 

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

 

Loans Held for Sale

 

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

 

Loans

 

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

 

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

 

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

 

 7 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

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

 

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

 

Nonperforming assets consist of non-accruing loans including non-accruing loans identified as troubled debt restructurings, loans past due more than 90 days and still accruing interest and other real estate owned.

 

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

 

General component:

 

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial, home equity line of credit and other. Construction loans include classes for commercial investment real estate construction, commercial owner occupied construction, residential development, residential subdivision construction and residential owner occupied construction loans. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies and nonaccrual loans; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no material changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the six months ended June 30, 2018.

 

 8 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

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. All 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 originated to finance income-producing properties throughout the northeastern states. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, may have an effect on the credit quality in this segment. Management generally obtains rent rolls and other financial information, as appropriate on an annual basis and continually monitors the cash flows of these loans.

 

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

 

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 a 9 year 10 month draw period followed by a 20 year amortization period 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.

 

Other – Includes installment, collateral, demand, revolving credit and resort loans to customers with acceptable credit ratings residing primarily in our market area.  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.  The resort portfolio consists of a direct receivable loan outside the Northeast which is amortizing to its contractual obligations.  The Bank has exited the resort financing market with a residual portfolio remaining.

 

 9 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

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 and commercial 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 greater than $100,000.

 

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. There was no unallocated allowance at June 30, 2018 and December 31, 2017.

 

Troubled Debt Restructuring

 

A loan is considered a troubled debt restructuring (“TDR”) when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower in modifying or renewing the loan the Company would not otherwise consider. In connection with troubled debt restructurings, terms may be modified to fit the ability of the borrower to repay in line with their current financial status, which may include a reduction in the interest rate to market rate or below, a change in the term or movement of past due amounts to the back-end of the loan or refinancing. A loan is placed on non-accrual status upon being restructured, even if it was not previously, unless the modified loan was current for the six months prior to its modification and we believe the loan is fully collectable in accordance with its new terms. The Company’s policy to restore a restructured loan to performing status is dependent on the receipt of regular payments, generally for a period of six months and one calendar year-end. All troubled debt restructurings are classified as impaired loans and are reviewed for impairment by management on a quarterly basis per Company policy.

 

 10 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Foreclosed Real Estate

 

Real estate acquired through foreclosure comprises properties acquired in partial or total satisfaction of problem loans. The properties are acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. At the time these properties are foreclosed, the properties are initially recorded at the fair value at the date of foreclosure less estimated selling costs. Losses arising at the time of acquisition of such properties are charged against the allowance for loan losses. Subsequent loss provisions are charged to the foreclosed real estate valuation allowance and expenses incurred to maintain the properties are charged to noninterest expense. Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and a charge to operations is recorded as necessary to reduce the carrying amount to fair value less estimated costs to dispose. Revenue and expense from the operation of other real estate owned and the provision to establish and adjust valuation allowances are included in noninterest expenses. Costs relating to the development and improvement of the property are capitalized, subject to the limit of fair value of the collateral. In the Consolidated Statements of Financial Condition, total prepaid expenses and other assets include foreclosed real estate of $1.7 million and $-0- as of June 30, 2018 and December 31, 2017, with no specific valuation allowance. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction totaled $1.7 million at June 30, 2018.

 

Pension and Other Postretirement Benefit Plans

 

The Company’s non-contributory defined-benefit pension plan and certain defined benefit postretirement plans were frozen as of February 28, 2013 and no additional benefits will accrue.

 

The Company has a non-contributory 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. The Company’s funding practice is to meet the minimum funding standards established by the Employee Retirement Income Security Act of 1974.

 

In addition to providing pension benefits, we provide certain health care and life insurance benefits for retired employees. Participants or eligible employees hired before January 1, 1993 become eligible for the benefits if they retire after reaching age 62 with fifteen or more years of service. A fixed percent of annual costs are paid depending on length of service at retirement. The Company accrues for the estimated costs of these other post-retirement benefits through charges to expense during the years that employees render service. The Company makes contributions to cover the current benefits paid under this plan. The Company 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 and other items. The Company reviews and updates the assumptions annually. If the Company’s estimate of pension and post-retirement expense is too low it may experience higher expenses in the future, reducing its net income. If the Company’s estimate is too high, it may experience lower expenses in the future, increasing its net income.

 

 11 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Income Taxes

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act”) was enacted. Substantially all of the provisions of the Tax Act are effective for taxable years beginning after December 31, 2017. The most significant change in the Tax Act that impacts the Company is the reduction in the corporate federal income tax rate from 35% to 21%. ASC Topic 740, Income Taxes, requires the tax effects of changes in tax laws to be recognized in the period in which the law is enacted or December 22, 2017 for the Tax Act. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were re-measured based upon the new tax rate resulting in a charge of $5.0 million to income tax expense in the fourth quarter of 2017.

 

The staff of the US Securities and Exchange Commission (SEC) has recognized the complexity of reflecting the impacts of the Tax Act, and on December 22, 2017 issued guidance in Staff Accounting Bulletin 118 (SAB 118) which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.

 

The Company has completed or has made a reasonable estimate for the measurement and accounting of certain effects of the Tax Act which have been reflected in the December 31, 2017 consolidated financial statements. The accounting for these completed and provisional items increased the 2017 deferred income tax provision by $5.0 million for the year ending December 31, 2017 and decreased the accumulated deferred income tax asset by $5.0 million at December 31, 2017. As noted above, the most significant impact resulted from a reduction in the corporate income tax rate to 21%. The items reflected as provisional amounts include the impact of the Tax Act on deferred tax assets and liabilities including the expensing of certain depreciable assets, the impact of certain compensation deduction limitations and similar items.

 

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.

 

 12 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Revenue Recognition

 

Revenue from Contracts with Customers Accounting Standards Codification ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

 

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, such as interest and fee income on loans, interest and dividends on investments, net gain on loans sold, gain on sale of investments, mortgage servicing fees and swap fees. Revenue generating transactions subject to ASC 606 are fees for customer service and brokerage and insurance fees, which are presented in the Consolidated Statements of Income as components of noninterest income, as follows:

 

Fees for customer service: The Company enters into depository agreements with deposit customers whereby the customer is provided with custody services of deposited funds and access to deposited funds. Fees are charged to deposit customers – such as debit card fees; NSF or overdraft protection fees; return item fees; stop payment fees; wire fees; ATM surcharge fees; safe deposit box rental fees; credit card advance fees, etc. Revenue is recognized when the Company’s performance obligation is completed, which is generally monthly, for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations is generally received at the time the performance obligations are satisfied.

 

Brokerage and insurance fees: The Company receives fees from a third party broker dealer as part of a revenue-sharing agreement for fees earned from customers that the Company refers to the third party. These fees are paid to the Company by the third party on a monthly basis and recognized as the Company’s performance obligation is satisfied.

 

Reclassifications

 

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

 

Accounting Standards Adopted in 2018

 

In August 2015, the FASB issued Accounting Standards Update “ASU” No. 2015-14 "Revenue from Contracts with Customers (Topic 606)." In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an original effective date for annual reporting periods beginning after December 15, 2016. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods and interim periods within those annual periods beginning after December 15, 2017. The amendments can be applied retrospectively to each prior reporting period or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the adoption of the new guidance did not have a material impact on revenue most closely associated with financial instruments, including interest income and expense. The Company's fees for customer services, brokerage and insurance fee income items are within the scope of the ASU 2014-09. The timing of the Company's revenue recognition regarding these items did not materially change. The Company adopted ASU No. 2014-09 effective January 1, 2018, utilizing the modified retrospective approach which did not result in a cumulative effect adjustment to opening retained earnings and added additional disclosures related to revenue recognition in Note 1 Summary of Significant Accounting Policies.

 

 13 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments—Overall (Topic 825-10): "Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 amends the guidance on the classification and measurement of financial instruments. Some of the amendments in ASU 2016-01 include the following: 1) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and 4) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value; among others. For public business entities, the amendments of ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU No. 2016-01 effective January 1, 2018 utilizing the modified retrospective approach which resulted in a $401,000 cumulative effect adjustment to opening retained earnings related to unrealized losses on equity securities previously recorded in accumulated other comprehensive loss.

 

In August 2016, the FASB issued ASU No. 2016-15 “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 provides cash flow statement classification guidance for certain transactions including how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance is effective for public business entities for annual years beginning after December 15, 2017, and interim periods within those fiscal years and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company adopted ASU 2016-15 effective January 1, 2018 and it did not have a material impact on its accounting and disclosures.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash”. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash. Restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption of ASU 2016-18 requires a retrospective transition method applied to each period presented. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2016-18 effective January 1, 2018 and it did not have a material impact on its accounting and disclosures.

 

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments also allow only the service cost component to be eligible for capitalization when applicable. The guidance is effective for public business entities for annual years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU 2017-07 effective January 1, 2018 and it did not have a material impact on its accounting and disclosures. The Company elected to apply the practical expedient and use the amounts disclosed in Note 9 to the consolidated financial statements included in Part I, Item 1 of the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017 as the estimation basis for applying the retrospective presentation requirements of the standard.

 

 14 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

   Three Months Ended
June 30, 2017
   Impact of
Adoption of ASU
   Three Months Ended
June 30, 2017
 
(Dollars in thousands)  As previously reported   2017-07   As reported 
               
Noninterest expense               
Salaries and employee benefits  $10,036   $(188)  $9,848 
Other operating expenses   2,552    188    2,740 

 

   Six Months Ended
June 30, 2017
   Impact of
Adoption of ASU
   Six Months Ended
June 30, 2017
 
(Dollars in thousands)  As previously reported   2017-07   As reported 
               
Noninterest expense               
Salaries and employee benefits  $19,363   $(377)  $18,986 
Other operating expenses   5,085    377    5,462 

 

In May 2017, the FASB issued ASU No. 2017-09 “Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting.” ASU 2017-09 provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The guidance is effective for public business entities for annual years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied on a prospective basis to an award modified on or after the adoption date. The Company adopted ASU 2017-09 effective January 1, 2018 and it did not have a material impact on its accounting and disclosures.

 

In February 2018, the FASB issued ASU No. 2018-02,”Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the reduction of the federal corporate income tax rate pursuant to enactment of the Tax Cuts and Jobs Act. The guidance is effective for public business entities for annual years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Entities electing the reclassification are required to apply the guidance either at the beginning of the period of adoption or retrospectively for all periods impacted. The Company early adopted this standard effective January 1, 2018 and reclassified $1,275,000 to opening retained earnings that was recorded to income tax expense due to re-measuring from 35% to 21% the federal taxes on the accumulated other comprehensive loss components related to available-for-sale, held-to-maturity securities and pension.

 

Accounting Standards Pending Adoption

 

In February 2016, the FASB issued ASU No. 2016-02 "Leases (Topic 842)." ASU 2016-02 supersedes Topic 840, Leases. This ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Some of the provisions in ASU 2016-02 include the following: 1) requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease), 2) requires lessor accounting to be updated to align with certain changes to the lessee model and the new revenue recognition standard, 3) an arrangement contains an embedded lease if property, plant, or equipment is explicitly or implicitly identified and its use is controlled by the customer, 4) in certain circumstances, the lessee is required to remeasure the lease payments, and 5) requires extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. For public business entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is assessing the impact of ASU 2016-02 on its accounting and disclosures.

 

 15 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments - Credit Losses (Topic 326)" requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. This ASU also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for public business entities for annual periods beginning after December 31, 2019, including interim periods within those fiscal years. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Management has established an internal committee to manage the implementation of ASU 2016-13. The committee is led by the Company’s Chief Financial Officer and Chief Risk Officer and includes representatives of the Bank’s loan operations, credit administration, accounting and technology departments. The committee has reviewed, evaluated and selected a third-party software solution and is currently in the process of identifying and gathering the necessary historical data. The committee is currently analyzing the provisions of the ASU and published regulatory guidance.

 

2.Restrictions on Cash and Due from Banks

 

The Company is required to maintain a percentage of transaction account balances on deposit in non-interest-earning reserves with the Federal Reserve Bank, offset by the Company’s average vault cash. The Company also is required to maintain cash balances to collateralize the Company’s position with certain third parties. The Company had cash and liquid assets of approximately $9.0 million and $9.2 million to meet these requirements at June 30, 2018 and December 31, 2017, respectively. The Company classifies restrictions on cash within “Cash, Cash Equivalents and Restricted Cash” in the Consolidated Statements of Financial Condition.

 

 16 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

3.Earnings Per Share

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
(Dollars in thousands, except per share data):  2018   2017   2018   2017 
                    
Net income  $6,730   $5,002   $12,741   $10,095 
Less:  Dividends to participating shares   (9)   (3)   (18)   (6)
Income allocated to participating shares   (14)   (6)   (22)   (8)
Net income allocated to common stockholders  $6,707   $4,993   $12,701   $10,081 
                     
Weighted-average shares issued   18,000,464    17,975,345    17,992,650    17,967,541 
                     
Less:  Average unallocated ESOP shares   (731,459)   (826,559)   (742,937)   (838,298)
Average treasury stock   (1,954,096)   (2,013,898)   (1,965,705)   (2,021,628)
Average unvested restricted stock   (54,274)   (27,698)   (46,014)   (19,894)
Weighted-average basic shares outstanding   15,260,635    15,107,190    15,237,994    15,087,721 
                     
Plus: Average dilutive shares   681,836    683,922    683,533    653,779 
Weighted-average diluted shares outstanding   15,942,471    15,791,112    15,921,527    15,741,500 
                     
Net earnings per share (1):                    
Basic  $0.44   $0.33   $0.83   $0.67 
Diluted  $0.42   $0.32   $0.80   $0.64 

 

(1)Certain per share amounts may not appear to reconcile due to rounding.

 

For the three months ended June 30, 2018 and 2017, respectively, 8,293 and 785 options were anti-dilutive and therefore excluded from the earnings per share calculation.

 

 17 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

4.Investment Securities

 

Debt Securities

 

Debt securities have been classified in the consolidated financial statements as available-for-sale or held-to-maturity. The amortized cost of debt securities and their approximate fair values at June 30, 2018 and December 31, 2017 are as follows:

 

   June 30, 2018 
       Recognized in OCI       Not Recognized in OCI     
       Gross   Gross       Gross   Gross     
   Amortized   Unrealized   Unrealized   Carrying   Unrealized   Unrealized   Fair 
(Dollars in thousands)  Cost   Gains   Losses   Value   Gains   Losses   Value 
Available-for-sale                                   
U.S. Treasury obligations  $11,847   $33   $(97)  $11,783   $-   $-   $11,783 
U.S. Government agency obligations   59,000    -    (587)   58,413    -    -    58,413 
Government sponsored residential   mortgage-backed securities   28,015    85    (286)   27,814        -        -    27,814 
Total debt securities available-for-sale  $98,862   $118   $(970)  $98,010   $-   $-   $98,010 
Held-to-maturity                                   
U.S. Treasury obligations  $4,991   $-   $-   $4,991   $-   $(100)  $4,891 
U.S. Government agency obligations   51,956    -    -    51,956    -    (1,137)   50,819 
Government sponsored residential   mortgage-backed securities   30,034    -    -    30,034    -    (771)   29,263 
Total debt securities held-to-maturity  $86,981   $-   $-   $86,981   $-   $(2,008)  $84,973 

 

   December 31, 2017 
       Recognized in OCI       Not Recognized in OCI     
       Gross   Gross       Gross   Gross     
   Amortized   Unrealized   Unrealized   Carrying   Unrealized   Unrealized   Fair 
(Dollars in thousands)  Cost   Gains   Losses   Value   Gains   Losses   Value 
Available-for-sale                                   
U.S. Treasury obligations  $11,847   $79   $(17)  $11,909   $-   $-   $11,909 
U.S. Government agency obligations   66,000    -    (344)   65,656    -    -    65,656 
Government sponsored residential   mortgage-backed securities   2,677    116    -    2,793       -     -    2,793 
Total debt securities available-for-sale  $80,524   $195   $(361)  $80,358   $-   $-   $80,358 
Held-to-maturity                                   
U.S. Treasury obligations  $4,991   $-   $-   $4,991   $-   $-   $4,991 
U.S. Government agency obligations   37,982    -    -    37,982    -    (432)   37,550 
Government sponsored residential   mortgage-backed securities   32,012    -    -    32,012    29    (28)   32,013 
Total debt securities held-to-maturity  $74,985   $-   $-   $74,985   $29   $(460)  $74,554 

 

 18 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following tables summarize debt securities with gross unrealized losses and fair value, aggregated by investment category and length of time the investments have been in a continuous unrealized loss position at June 30, 2018 and December 31, 2017:

 

   June 30, 2018 
       Less than 12 Months   12 Months or More   Total 
   Number of       Gross       Gross       Gross 
   Debt   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
(Dollars in thousands)  Securities   Value   Loss   Value   Loss   Value   Loss 
Available-for-sale                                   
U.S. Treasury obligations   1   $4,903   $(97)  $-   $-   $4,903   $(97)
U.S. Government agency obligations   9    25,653    (347)   32,760    (240)   58,413    (587)
Government sponsored residential   mortgage-backed securities   5    25,389    (286)   -    -    25,389    (286)
    15   $55,945   $(730)  $32,760   $(240)  $88,705   $(970)
Held-to-maturity                                   
U.S. Treasury obligations   1   $4,891   $(100)  $-   $-   $4,891   $(100)
U.S. Government agency obligations   8    45,905    (1,050)   4,914    (87)   50,819    (1,137)
Government sponsored residential   mortgage-backed securities   7    29,263    (771)   -    -    29,263    (771)
    16   $80,059   $(1,921)  $4,914   $(87)  $84,973   $(2,008)
Total debt securities in an unrealized  loss position   31   $136,004   $(2,651)  $37,674   $(327)  $173,678   $(2,978)

 

   December 31, 2017 
       Less than 12 Months   12 Months or More   Total 
   Number of       Gross       Gross       Gross 
   Debt   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
(Dollars in thousands)  Securities   Value   Loss   Value   Loss   Value   Loss 
Available-for-sale                                   
U.S. Treasury obligations   1   $4,984   $(17)  $-   $-   $4,984   $(17)
U.S. Government agency obligations   10    18,927    (73)   46,729    (271)   65,656    (344)
    11   $23,911   $(90)  $46,729   $(271)  $70,640   $(361)
Held-to-maturity                                   
U.S. Government agency obligations   6   $32,614   $(368)  $4,935   $(64)  $37,549   $(432)
Government sponsored residential   mortgage-backed securities   4    16,963    (28)   -    -    16,963    (28)
    10   $49,577   $(396)  $4,935   $(64)  $54,512   $(460)
Total debt securities in an unrealized  loss position   21   $73,488   $(486)  $51,664   $(335)  $125,152   $(821)

 

Management evaluates debt securities for other than temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

 

Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the debt securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe that any of the securities are impaired due to reasons of credit quality. Accordingly, as of June 30, 2018, management believes that the unrealized losses detailed in the previous table are temporary and no other than temporary impairment loss has been recognized in the Company’s Consolidated Statements of Income.

 

The Company recorded no other-than-temporary impairment charges to the debt securities portfolios for the six months ended June 30, 2018 and 2017.

 

As of June 30, 2018 and December 31, 2017, U.S. Treasury, U.S. Government agency obligations and Government sponsored residential mortgage-backed securities with a fair value of $71.3 million and $93.3 million, respectively, were pledged as collateral for loan derivatives, public funds, repurchase liabilities and repurchase agreement borrowings.

 

 19 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The amortized cost and estimated fair value of debt securities at June 30, 2018 and December 31, 2017 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or repayment penalties:

 

   June 30, 2018 
   Available-for-Sale   Held-to-Maturity 
       Estimated       Estimated 
   Amortized   Fair   Amortized   Fair 
(Dollars in thousands)  Cost   Value   Cost   Value 
                    
Due in one year or less  $33,000   $32,760   $-   $- 
Due after one year through five years   37,847    37,436    37,991    37,103 
Due after five years through ten years   -    -    18,956    18,607 
Due after ten years   -    -    -    - 
Government sponsored residential   mortgage-backed securities   28,015    27,814    30,034    29,263 
   $98,862   $98,010   $86,981   $84,973 

 

   December 31, 2017 
   Available-for-Sale   Held-to-Maturity 
       Estimated       Estimated 
   Amortized   Fair   Amortized   Fair 
(Dollars in thousands)  Cost   Value   Cost   Value 
                    
Due in one year or less  $28,000   $27,919   $-   $- 
Due after one year through five years   49,847    49,646    30,991    30,640 
Due after five years through ten years   -    -    11,982    11,901 
Due after ten years   -    -    -    - 
Government sponsored residential   mortgage-backed securities   2,677    2,793    32,012    32,013 
   $80,524   $80,358   $74,985   $74,554 

 

Federal Home Loan Bank of Boston (“FHLBB”) Stock

 

The Company, as a member of the FHLBB, owned $22.2 million and $15.5 million of FHLBB capital stock at June 30, 2018 and December 31, 2017, respectively, which is equal to its FHLBB capital stock requirement. The Company evaluated its FHLBB capital stock for potential other-than-temporary impairment at June 30, 2018. Capital adequacy, credit ratings, the value of the stock, overall financial condition of the FHLB system and FHLBB as well as current economic factors were analyzed in the impairment analysis. The Company concluded that its position in FHLBB capital stock is not other-than-temporarily impaired at June 30, 2018.

 

Equity Securities

 

The Company held equity securities with fair values of $6.9 million at June 30, 2018 and December 31, 2017, included in other assets in the accompanying Consolidated Statements of Financial Condition. During the six months ended June 30, 2018, the Company recognized a realized loss of $94,000 on the equity securities held at June 30, 2018, which was recorded in “Other noninterest income” within the Consolidated Statements of Income. There were no sales of equity securities during the six months ended June 30, 2018 and 2017.

 

 20 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Alternative Investments

 

Alternative investments, which totaled $2.1 million at June 30, 2018 and December 31, 2017, respectively, are included in other assets in the accompanying Consolidated Statements of Financial Condition. The Company’s alternative investments include investments in certain non-public funds, which include limited partnerships, an equity fund and membership stocks. These investments are held at cost and were evaluated for potential other-than-temporary impairment at June 30, 2018. The Company recognized a $-0- and $10,000 other-than-temporary impairment charge on its limited partnerships for the for the six months ended June 30, 2018 and 2017, respectively, included in other noninterest income in the accompanying Consolidated Statements of Income. The Company recognized profit distributions in its limited partnerships of $11,000 and $240,000 for the six months ended June 30, 2018 and 2017, respectively. See a further discussion of fair value in Note 15 - Fair Value Measurements. The Company has $1.6 million in unfunded commitments remaining for its alternative investments as of June 30, 2018.

 

5.Loans and Allowance for Loan Losses

 

Loans consisted of the following:

 

   June 30,   December 31, 
(Dollars in thousands)  2018   2017 
          
Real estate:          
Residential  $1,141,015   $989,366 
Commercial   1,085,903    1,063,755 
Construction   94,615    90,059 
Commercial   435,034    429,116 
Home equity line of credit   155,853    165,070 
Other   5,039    5,650 
Total loans   2,917,459    2,743,016 
Net deferred loan costs   5,927    5,065 
Loans   2,923,386    2,748,081 
Allowance for loan losses   (22,672)   (22,448)
Loans, net  $2,900,714   $2,725,633 

 

 21 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

Changes in the allowance for loan losses by segments are as follows:

 

   For the Three Months Ended June 30, 2018 
(Dollars in thousands)  Balance at
beginning of
 period
   Charge-offs   Recoveries   Provision for
(Reduction of)
loan losses
   Balance at
end of period
 
                         
Real estate:                         
Residential  $4,505   $(5)  $1   $160   $4,661 
Commercial   12,047    -    -    (154)   11,893 
Construction   891    -    -    (46)   845 
Commercial   3,990    -    14    9    4,013 
Home equity line of credit   1,148    (1)   -    83    1,230 
Other   39    (34)   8    17    30 
   $22,620   $(40)  $23   $69   $22,672 

 

   For the Three Months Ended June 30, 2017 
(Dollars in thousands)  Balance at
beginning of
period
   Charge-offs   Recoveries   Provision for
(Reduction of)
loan losses
   Balance at
end of period
 
                         
Real estate:                         
Residential  $4,247   $(2)  $1   $8   $4,254 
Commercial   11,240    -    2    391    11,633 
Construction   518    -    -    133    651 
Commercial   3,915    -    -    162    4,077 
Home equity line of credit   1,380    -    -    (1)   1,379 
Other   49    (29)   6    17    43 
   $21,349   $(31)  $9   $710   $22,037 

 

 22 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

   For the Six Months Ended June 30, 2018 
(Dollars in thousands)  Balance at
beginning of
period
   Charge-offs   Recoveries   Provision for
(Reduction of)
loan losses
   Balance at
end of period
 
                         
Real estate:                         
Residential  $4,137   $(205)  $1   $728   $4,661 
Commercial   11,963    -    -    (70)   11,893 
Construction   785    -    -    60    845 
Commercial   4,155    (14)   14    (142)   4,013 
Home equity line of credit   1,364    (55)   -    (79)   1,230 
Other   44    (69)   18    37    30 
   $22,448   $(343)  $33   $534   $22,672 

 

   For the Six Months Ended June 30, 2017 
(Dollars in thousands)  Balance at
beginning of
period
   Charge-offs   Recoveries   Provision for
(Reduction of)
loan losses
   Balance at
end of period
 
                         
Real estate:                         
Residential  $4,134   $(33)  $1   $152   $4,254 
Commercial   11,131    (111)   2    611    11,633 
Construction   425    -    -    226    651 
Commercial   4,400    (322)   -    (1)   4,077 
Home equity line of credit   1,398    -    -    (19)   1,379 
Other   41    (80)   16    66    43 
   $21,529   $(546)  $19   $1,035   $22,037 

 

 23 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following table lists the allocation of the allowance by impairment methodology and by loan segment at June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
       Reserve       Reserve 
(Dollars in thousands)  Total   Allocation   Total   Allocation 
Loans individually evaluated for impairment:                    
Real estate:                    
Residential  $11,276   $115   $12,971   $130 
Commercial   8,385    -    8,521    - 
Construction   4,532    -    4,532    - 
Commercial   1,850    18    1,076    38 
Home equity line of credit   1,900    -    2,585    - 
Other   871    6    509    6 
    28,814    139    30,194    174 
                     
Loans collectively evaluated for impairment:                    
Real estate:                    
Residential  $1,136,776   $4,546   $982,626   $4,007 
Commercial   1,076,491    11,893    1,054,122    11,963 
Construction   90,083    845    85,527    785 
Commercial   433,139    3,995    427,986    4,117 
Home equity line of credit   153,953    1,230    162,485    1,364 
Other   4,130    24    5,141    38 
    2,894,572    22,533    2,717,887    22,274 
Total  $2,923,386   $22,672   $2,748,081   $22,448 

 

 24 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following is a summary of loan delinquencies at recorded investment values at June 30, 2018 and December 31, 2017:

 

   June 30, 2018 
   30-59 Days   60-89 Days   > 90 Days       Past Due 90
Days or More
 
   Past Due   Past Due   Past Due   Total   and Still 
(Dollars in thousands)  Number   Amount   Number   Amount   Number   Amount   Number   Amount   Accruing 
Real estate:                                               
Residential   14   $2,472    12   $2,678    9   $1,702    35   $6,852   $- 
Commercial   2    349    -    -    -    -    2    349    - 
Construction   -    -    -    -    1    4,532    1    4,532    - 
Commercial   2    130    2    23    -    -    4    153    - 
Home equity line of credit   1    37    2    486    3    314    6    837           - 
Other   7    65    2    8    1    1    10    74    - 
Total   26   $3,053    18   $3,195    14   $6,549    58   $12,797   $- 

 

   December 31, 2017 
   30-59 Days   60-89 Days   > 90 Days       Past Due 90
Days or More
 
   Past Due   Past Due   Past Due   Total   and Still 
(Dollars in thousands)  Number   Amount   Number   Amount   Number   Amount   Number   Amount   Accruing 
Real estate:                                             
Residential   13   $2,445    9   $1,874    20   $7,317    42   $11,636   $- 
Commercial   1    67    -    -    -    -    1    67    - 
Construction   -    -    -    -    1    4,532    1    4,532    - 
Commercial   -    -    1    22    1    38    2    60    - 
Home equity line of credit   2    223    1    48    4    584    7    855             - 
Other   7    74    -    -    3    30    10    104    - 
Total   23   $2,809    11   $1,944    29   $12,501    63   $17,254   $- 

 

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

 

   June 30,   December 31, 
(Dollars in thousands)  2018   2017 
Nonaccrual loans:          
Real estate:          
Residential  $6,268   $9,401 
Commercial   57    67 
Construction   4,532    4,532 
Commercial   651    775 
Home equity line of credit   392    963 
Other   25    54 
Total nonaccruing loans   11,925    15,792 
Loans 90 days past due and still accruing   -    - 
Other real estate owned   1,713    - 
Total nonperforming assets  $13,638   $15,792 

 

 25 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following is a summary of information pertaining to impaired loans at June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
       Unpaid           Unpaid     
   Recorded   Principal   Related   Recorded   Principal   Related 
(Dollars in thousands)  Investment   Balance   Allowance   Investment   Balance   Allowance 
Impaired loans without  a valuation allowance:                              
Real estate:                              
Residential  $9,740   $10,409   $-   $11,923   $14,119   $- 
Commercial   8,385    8,420    -    8,521    8,555    - 
Construction   4,532    4,532    -    4,532    4,532    - 
Commercial   1,832    2,121    -    1,038    1,303    - 
Home equity line of credit   1,900    1,928    -    2,585    2,642    - 
Other   848    870    -    485    504    - 
Total   27,237    28,280    -    29,084    31,655    - 
                               
Impaired loans with  a valuation allowance:                              
Real estate:                              
Residential   1,536    1,597    115    1,048    1,066    130 
Commercial   -    -    -    -    -    - 
Construction   -    -    -    -    -    - 
Commercial   18    19    18    38    62    38 
Home equity line of credit   -    -    -    -    -    - 
Other   23    23    6    24    24    6 
Total   1,577    1,639    139    1,110    1,152    174 
Total impaired loans  $28,814   $29,919   $139   $30,194   $32,807   $174 

 

 26 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following table summarizes average recorded investment and interest income recognized on impaired loans:

 

       Three Months   Six Months       Three Months   Six Months 
       Ended   Ended       Ended   Ended 
   June 30,   June 30,   June 30,   June 30,   June 30,   June 30, 
   2018   2018   2018   2017   2017   2017 
   Average   Interest   Interest   Average   Interest   Interest 
   Recorded   Income   Income   Recorded   Income   Income 
(Dollars in thousands)  Investment   Recognized   Recognized   Investment   Recognized   Recognized 
Impaired loans without  a valuation allowance:                              
Real estate:                              
Residential  $10,798   $61   $93   $11,566   $31   $58 
Commercial   8,487    95    190    9,677    96    192 
Construction   4,532    -    -    4,579    -    - 
Commercial   1,476    11    24    1,590    5    8 
Home equity line of credit   2,254    21    42    1,927    11    21 
Other   574    6    11    648    7    14 
Total   28,121    194    360    29,987    150    293 
                               
Impaired loans with  a valuation allowance:                              
Real estate:                              
Residential   1,127    10    20    1,181    7    14 
Commercial   -    -    -    2,151    17    51 
Construction   -    -    -    -    -    - 
Commercial   49    -    -    229    -    - 
Home equity line of credit   10    -    -    -    -    - 
Other   24    -    -    25    -    - 
Total   1,210    10    20    3,586    24    65 
Total impaired loans  $29,331   $204   $380   $33,573   $174   $358 

 

There was no interest income recognized on a cash basis method of accounting for the six months ended June 30, 2018 and 2017.

 

 27 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following tables present information on loans whose terms had been modified in a troubled debt restructuring at June 30, 2018 and December 31, 2017:

 

   June 30, 2018 
   TDRs on Accrual Status   TDRs on Nonaccrual Status   Total TDRs 
(Dollars in thousands)  Number of
Loans
   Recorded
Investment
   Number of
Loans
   Recorded
Investment
   Number of
Loans
   Recorded
Investment
 
Real estate:                              
Residential   22   $4,482    11   $1,824    33   $6,306 
Commercial   2    611    -    -    2    611 
Construction   -    -    1    4,532    1    4,532 
Commercial   3    1,197    4    634    7    1,831 
Home equity line of credit   14    1,555    2    58    16    1,613 
Other   6    864    1    8    7    872 
Total   47   $8,709    19   $7,056    66   $15,765 

 

   December 31, 2017 
   TDRs on Accrual Status   TDRs on Nonaccrual Status   Total TDRs 
(Dollars in thousands)  Number of
Loans
   Recorded
Investment
   Number of
Loans
   Recorded
Investment
   Number of
Loans
   Recorded
Investment
 
Real estate:                        
Residential   18   $3,025    12   $3,854    30   $6,879 
Commercial   2    621    -    -    2    621 
Construction   -    -    1    4,532    1    4,532 
Commercial   2    300    5    776    7    1,076 
Home equity line of credit   14    1,731    1    309    15    2,040 
Other   5    495    1    13    6    508 
Total   41   $6,172    20   $9,484    61   $15,656 

 

The recorded investment balance of TDRs were $15.8 million and $15.7 million at June 30, 2018 and December 31, 2017, respectively. TDRs on accrual status were $8.7 million and $6.2 million while TDRs on nonaccrual status were $7.1 million and $9.5 million at June 30, 2018 and December 31, 2017, respectively. At June 30, 2018, 100% of the accruing TDRs have been performing in accordance with the restructured terms. At June 30, 2018 and December 31, 2017, the allowance for loan losses included specific reserves of $120,000 and $172,000 related to TDRs, respectively. For the six months ended June 30, 2018 and 2017, the Bank had charge-offs totaling $-0- and $35,000, respectively, related to portions of TDRs deemed to be uncollectible. The Bank may provide additional funds to borrowers in TDR status. The amount of additional funds available to borrowers in TDR status was $1.3 million and $107,000 at June 30, 2018 and December 31, 2017, respectively.

 

 28 

 

 

First Connecticut Bancorp, Inc.

Notes to Consolidated Financial Statements (Unaudited)

 

 

The following tables include the recorded investment and number of modifications for modified loans. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured for the three and six months ended June 30, 2018 and 2017:

 

   For the Three Months Ended June 30, 2018   For the Three Months Ended June 30, 2017 
(Dollars in thousands)  Number of
Modifications
   Recorded
Investment
Prior to
Modification
   Recorded
Investment
After
Modification (1)
   Number of
Modifications
   Recorded
Investment
Prior to
Modification
   Recorded
Investment
After
Modification (1)
 
Troubled Debt Restructurings:                              
Real estate:                              
Residential   3   $747   $747    2   $357   $357 
Home equity line of credit   -    -    -    1    96    96 
Total   3   $747   $747   $3   $453   $453 

 

   For the Six Months Ended June 30, 2018   For the Six Months Ended June 30, 2017 
(Dollars in thousands)  Number of
Modifications
   Recorded
Investment
Prior to
Modification
   Recorded
Investment
After
Modification (1)
   Number of
Modifications
   Recorded
Investment
Prior to
Modification
  

Recorded

Investment
After
Modification (1)

 
Troubled Debt Restructurings:                              
Real estate:                              
Residential   6   $1,133   $1,130    6   $953   $946 
Construction   1    4,532    4,532    -    -    - 
Commercial   2    551    902    -    -