Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Organization and Business | ' |
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 December 31, 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. |
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On July 2, 2012, the Company received regulatory approval to repurchase up to 1,788,020 shares, or 10% of its current outstanding common stock. On May 30, 2013, the Company completed its repurchase of 1,788,020 shares at a cost of $24.9 million, of which 486,947 shares were reissued as part of the 2012 Stock Incentive Plan. On June 21, 2013, the Company received regulatory approval to repurchase up to an additional 1,676,452 shares, or 10% of its current outstanding common stock. As of December 31, 2013, the Company has repurchased 367,470 of these shares at a cost of $5.3 million. Repurchased shares are held as treasury stock and are 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 twenty-one full service branch offices and four limited services offices in central Connecticut. Farmington Bank opened its 22nd branch office in January 2014 completing its strategic de novo branch expansion. Farmington Bank’s primary source of income is interest accrued on loans to customers, which include small and middle market businesses and individuals residing within Farmington Bank’s service area. |
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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. |
Basis of Financial Statement Presentation | ' |
Basis of Financial Statement Presentation |
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The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated in consolidation. |
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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. |
Correction of Immaterial Error Related to Prior Periods | ' |
Correction of Immaterial Errors Related to Prior Periods |
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During the year ended December 31, 2013, the Company identified an error related to the accounting for its alternative investments. The Company determined that distributions from the net accumulated earnings of certain funds within the alternative investment portfolio were not recorded as income, as required by ASC Topic 325, “Other Investments”, but were recorded as a reduction of the investment balance. As a result of the error, the Company’s non-interest income and other assets were misstated, as well as income tax expense and deferred income taxes. The Company also recorded the credit risk valuation on customer swaps for all prior periods and reclassified salary costs initially capitalized in the Company’s reorganization in 2011 from stockholders’ equity to compensation expense. The Company reclassified an alternative investment in securities available-for-sale to prepaid expenses and other assets in 2012 and 2011. The Company reviewed the impact of these errors on the prior periods in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 99, Materiality, and determined that the errors, individually and in the aggregate, are immaterial to previously reported amounts contained in its periodic reports. Accordingly, the Company has revised its Consolidated Balance Sheet for the year ended December 31, 2012 and its Consolidated Statements of Operations for the years ended December 31, 2012 and 2011. An adjustment of $0.5 million was made to opening retained earnings as of January 1, 2010 to reflect the cumulative effect of the error on years prior to 2010. The effects of recording the immaterial corrections had no net impact on cash provided by or used in the operating, financing or investing activities on the Consolidated Statement of Cash Flows. |
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The effects of recording the immaterial corrections in the Consolidated Balance Sheet as of December 31, 2012 and 2011 and the Consolidated Statements of Operations for the years ended December 31, 2012 and 2011, and for fiscal 2013 quarterly filings to be reported in subsequent periodic filings and presented in Note 19, Quarterly Results of Operations are as follows: |
| | For the Years Ended December 31, | | | | | | | | | |
| | 2012 | | 2011 | | | | | | | | |
| | As Previously | | | As Revised | | | As Previously | | | As Revised | | | | | | | | | |
Reported | Reported | | | | | | | | |
(Dollars in thousands) | | | | | | | | | | | | | | | | | | | | |
Consolidated statements of condition information: | | | | | | | | | | | | | | | | | | |
Securities available-for-sale, at fair value | | $ | 138,481 | | | $ | 138,241 | | | $ | 135,170 | | | $ | 134,930 | | | | | | | | | |
Deferred income taxes | | | 15,682 | | | | 15,541 | | | | 13,907 | | | | 13,691 | | | | | | | | | |
Prepaid expenses and other assets | | | 14,570 | | | | 15,158 | | | | 15,450 | | | | 16,073 | | | | | | | | | |
Total assets | | | 1,822,946 | | | | 1,823,153 | | | | 1,617,650 | | | | 1,618,129 | | | | | | | | | |
Other liabilities | | | 47,782 | | | | 47,716 | | | | 40,522 | | | | 40,482 | | | | | | | | | |
Total liabilities | | | 1,581,424 | | | | 1,581,358 | | | | 1,365,670 | | | | 1,365,630 | | | | | | | | | |
Additional paid-in-capital | | | 172,247 | | | | 172,386 | | | | 174,836 | | | | 174,975 | | | | | | | | | |
Retained earnings | | | 94,890 | | | | 95,006 | | | | 92,937 | | | | 93,269 | | | | | | | | | |
Total stockholders’ equity | | | 241,522 | | | | 241,795 | | | | 251,980 | | | | 252,499 | | | | | | | | | |
Total liabilities and stockholders’ equity | | | 1,822,946 | | | | 1,823,153 | | | | 1,617,650 | | | | 1,618,129 | | | | | | | | | |
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| | For the Years Ended December 31, | | | | | | | | |
| | 2012 | | | 2011 | | | | | | | | | |
| | As Previously | | | As Revised | | | As Previously | | | As Revised | | | | | | | | | |
Reported | Reported | | | | | | | | |
(Dollars in thousands, except per share data) | | | | | | | | | | | | | | | | | | | | |
Consolidated statements of operations information: | | | | | | | | | | | | | | | | | | |
Other noninterest income | | $ | 965 | | | $ | 736 | | | $ | 659 | | | $ | 496 | | | | | | | | | |
Total noninterest income | | | 9,490 | | | | 9,261 | | | | 5,688 | | | | 5,525 | | | | | | | | | |
Salaries and employee benefits | | | 32,828 | | | | 32,856 | | | | 28,605 | | | | 28,742 | | | | | | | | | |
Total noninterest expense | | | 56,078 | | | | 56,106 | | | | 56,312 | | | | 56,450 | | | | | | | | | |
Net income (loss) before taxes | | | 5,264 | | | | 5,007 | | | | (6,515 | ) | | | (6,816 | ) | | | | | | | | |
Income tax expense (benefit) | | | 1,341 | | | | 1,300 | | | | (2,475 | ) | | | (2,577 | ) | | | | | | | | |
Net income (loss) | | | 3,923 | | | | 3,707 | | | | (4,040 | ) | | | (4,239 | ) | | | | | | | | |
Net earnings (loss) per share: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | | 0.24 | | | | 0.22 | | | | (0.29 | ) | | | (0.29 | ) | | | | | | | | |
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| | For the Three Months | | | For the Three Months | | | For the Three Months Ended | |
| | Ended March 31, 2013 | | | Ended June 30, 2013 | | | 30-Sep-13 | |
| | (unaudited) | | | (unaudited) | | | (unaudited) | |
| | As Previously | | | | | | As Previously | | | | | | As Previously | | | | |
| | Reported | | | As Revised | | | Reported | | | As Revised | | | Reported | | | As Revised | |
(Dollars in thousands, except per share data) | | | | | | | | | | | | | | | | | | |
Consolidated statements of condition information: | | | | | | | | | | | | | | | | |
Deferred income taxes | | $ | 15,810 | | | $ | 15,632 | | | $ | 15,918 | | | $ | 15,732 | | | $ | 16,095 | | | $ | 15,926 | |
Prepaid expenses and other assets | | | 14,416 | | | | 14,880 | | | | 12,358 | | | | 12,808 | | | | 12,305 | | | | 12,788 | |
Total assets | | | 1,799,392 | | | | 1,799,689 | | | | 1,845,116 | | | | 1,845,440 | | | | 1,992,201 | | | | 1,992,517 | |
Other liabilities | | | 40,078 | | | | 40,019 | | | | 39,105 | | | | 39,068 | | | | 38,606 | | | | 38,594 | |
Total liabilities | | | 1,556,523 | | | | 1,556,475 | | | | 1,613,936 | | | | 1,613,899 | | | | 1,764,665 | | | | 1,764,653 | |
Retained earnings | | | 95,172 | | | | 95,521 | | | | 95,470 | | | | 95,831 | | | | 95,873 | | | | 96,200 | |
Total stockholders’ equity | | | 242,869 | | | | 243,214 | | | | 231,180 | | | | 231,541 | | | | 227,536 | | | | 227,864 | |
Total liabilities and stockholders’ equity | | | 1,799,392 | | | | 1,799,689 | | | | 1,845,116 | | | | 1,845,440 | | | | 1,992,201 | | | | 1,992,517 | |
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Consolidated statements of operations information: | | | | | | | | | | | | | | | | | | | | | |
Other noninterest income | | | 85 | | | | 197 | | | | (92 | ) | | | (68 | ) | | | (264 | ) | | | (316 | ) |
Total noninterest income | | | 3,538 | | | | 3,648 | | | | 2,974 | | | | 2,999 | | | | 2,235 | | | | 2,182 | |
Net income before taxes | | | 1,092 | | | | 1,202 | | | | 1,050 | | | | 1,075 | | | | 1,193 | | | | 1,140 | |
Income tax expense | | | 279 | | | | 316 | | | | 248 | | | | 256 | | | | 292 | | | | 275 | |
Net income before taxes | | | 813 | | | | 886 | | | | 802 | | | | 819 | | | | 901 | | | | 865 | |
Net earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.06 | | | | 0.06 | |
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Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
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The Company defines cash and cash equivalents for consolidated cash flow purposes as cash due from banks, federal funds sold and money market funds. Cash flows from loans and deposits are reported net. The balances of cash and due from banks, federal funds sold and money market funds, at times, may exceed federally insured limits. The Company has not experienced any losses from such concentrations. |
Investment Securities | ' |
Investment Securities |
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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 December 31, 2013 and 2012, the Company had no debt or equity securities classified as trading. Held to maturity securities are debt securities for which the Company has the ability and intent to hold until maturity. All other securities not included in held to maturity are classified as available for sale. Held to maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts on debt securities are amortized or accreted into interest income over the term of the securities using the level yield method. Available for sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale securities are excluded from earnings and are reported in accumulated other comprehensive income, a separate component of equity, until realized. Further information relating to the fair value of securities can be found within Note 4 of the Notes to Consolidated Financial Statements. In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 320- “Debt and Equity Securities”, a decline in market value of a debt security below amortized cost that is deemed other-than-temporary is charged to earnings for the credit related other-than-temporary impairment (“OTTI”), resulting in the establishment of a new cost basis for the security, while the non-credit related OTTI is recognized in other comprehensive income if there is no intent or requirement to sell the security. The securities portfolio is reviewed on a quarterly basis for the presence of other-than-temporary impairment. If an equity security is deemed other-than-temporarily impaired, the full impairment is considered to be credit-related and a charge to earnings would be recorded. Gains and losses on sales of securities are recognized at the time of sale on a specific identification basis. |
Federal Home Loan Bank of Boston Stock | ' |
Federal Home Loan Bank of Boston Stock |
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The Company, which is a member of the Federal Home Loan Bank system, is required to maintain an investment in capital stock of the Federal Home Loan Bank of Boston (“FHLBB”). Based on redemption provisions of the FHLBB, the stock has no quoted market value and is carried at cost. At its discretion, the FHLBB may declare dividends on the stock. On February 23, 2012, the FHLBB notified its members it will begin repurchasing capital stock in excess of what is required from its members. The FHLBB repurchased $312,000 of capital stock from the Company on March 9, 2012. The Bank reviews for impairment based on the ultimate recoverability of the cost basis in the FHLBB stock. As of December 31, 2013 and 2012, no impairment has been recognized. |
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Loans Held for Sale | ' |
Loans Held for Sale |
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Loans originated and intended for sale in the secondary market are carried at the lower of amortized cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold on the trade date. |
Loans | ' |
Loans |
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The Company’s loan portfolio segments include residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity lines of credit, demand, revolving credit and resort. Construction includes classes for commercial and residential construction. |
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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. |
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Interest on loans is accrued and recognized in interest income based on contractual rates applied to principal amounts outstanding. Accrual of interest is discontinued, and previously accrued income is reversed, when loan payments are 90 days or more past due or when, in the judgment of management, collectability of the loan or loan interest becomes uncertain. Loans may be returned to accrual status when all principal and interest amounts contractually due (including arrearages) are reasonably assured of repayment within a reasonable period and there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in accordance with contractual terms involving payment of cash or cash equivalents. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. If a residential real estate, commercial real estate, construction, installment, commercial, collateral, home equity line of credit, demand, revolving credit and resort loan is on non-accrual status cash payments are applied towards the reduction of principal. If loans are considered impaired but accruing, cash payments are applied first to interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. |
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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. |
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On a quarterly basis, our loan policy requires that we evaluate for impairment all commercial real estate, construction, commercial and resort loan segments that are classified as non-accrual, loans secured by real property in foreclosure or are otherwise likely to be impaired, non-accruing residential and installment loan segments greater than $100,000 and all troubled debt restructurings. |
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Nonperforming loans consist of non-accruing loans, non-accruing loans identified as trouble debt restructurings and loans past due more than 90 days and still accruing interest. |
Allowance for Loan Losses | ' |
Allowance for Loan Losses |
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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. |
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The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components, as further described below. All reserves are available to cover any losses regardless of how they are allocated. |
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General component: |
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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, 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 year ended December 31, 2013. |
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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: |
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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. |
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Commercial real estate – Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties 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. |
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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. |
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Installment, Collateral, Demand and Revolving Credit – Loans in these segments include installment, demand, revolving credit and collateral loans, principally to customers residing in our primary market area with acceptable credit ratings. Our installment and collateral consumer loans generally consist of loans on new and used automobiles, loans collateralized by deposit accounts and unsecured personal loans. The overall health of the economy, including unemployment rates and housing prices, may have an effect on the credit quality in this segment. Excluding collateral loans which are fully collateralized by a deposit account, repayment for loans in these segments is dependent on the credit quality of the individual borrower. |
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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. |
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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. |
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Resort – The remaining portfolio consists of direct receivable loans outside the Northeast which are amortizing to their contractual obligations. The Company has exited the resort financing market with a residual portfolio remaining. |
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Allocated component: |
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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 greater than $100,000. |
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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. |
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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. |
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Unallocated component: |
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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 an unallocated allowance of $-0- and $22,000 at December 31, 2013 and 2012, respectively. |
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Mortgage Servicing Rights | ' |
Mortgage Servicing Rights |
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The Company capitalizes mortgage servicing rights for loans originated and then sold with servicing retained based on the fair market value on the origination date. The cost basis of mortgage servicing rights is amortized on a straight-line basis over the period of estimated net servicing revenue and such amortization is included in the consolidated statements of income as a reduction of mortgage servicing fee income. Mortgage servicing rights are evaluated for impairment by comparing their aggregate carrying amount to their fair value. An independent appraisal of the fair value of the Company’s mortgage servicing rights is obtained annually and is used by management to evaluate the reasonableness of the fair value estimates. Management reviews the independent appraisal and performs procedures to determine appropriateness. Impairment is recognized as an adjustment to mortgage servicing rights and mortgage servicing income. |
Bank Owned Life Insurance | ' |
Bank Owned Life Insurance |
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Bank owned life insurance (“‘BOLI”) represents life insurance on certain employees who have consented to allow the Company to be the beneficiary of those policies. BOLI is recorded as an asset at cash surrender value. Increases in the cash value of the policies, as well as insurance proceeds received, are recorded in other non-interest income and are not subject to income tax. |
Foreclosed Real Estate | ' |
Foreclosed Real Estate |
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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 lower of the related loan balance less any specific allowance for loss or 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 $393,000 and $549,000 as of December 31, 2013 and 2012, respectively. |
Premises and Equipment | ' |
Premises and Equipment |
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Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to ten years for furniture and equipment and five to forty years for premises. Leasehold improvements are amortized on a straight-line basis over the term of the respective leases, including renewal options, or the estimated useful lives of the improvements, whichever is shorter. Routine holding costs are charged to expense as incurred, while significant improvements are capitalized. |
Derivative Financial Instruments | ' |
Derivative Financial Instruments |
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Interest rate swap derivatives not designated as hedges are offered to certain qualifying commercial customers and to manage the Company’s exposure to interest rate movements and do not meet the hedge accounting parameters under FASB ASC 815 “Derivatives and Hedging”. Derivative financial instruments are recognized as assets and liabilities on the consolidated balance sheet and measured at fair value. Changes in the fair value of derivatives not designated in hedging relationships are recognized directly in earnings. |
Pension and Other Postretirement Benefit Plans | ' |
Pension and Other Postretirement Benefit Plans |
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On December 27, 2012, the Company announced it froze the non-contributory defined-benefit pension plan and certain other postretirement benefit plans as of February 28, 2013. All benefits under these plans were frozen as of that date and no additional benefits accrued. |
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We have 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. Our funding policy is to contribute annually the maximum amount that could be deducted for federal income tax purposes, while meeting the minimum funding standards established by the Employee Retirement Security Act of 1974. |
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In addition to providing pension benefits, we provide certain health care and life insurance benefits for retired employees. Participants or eligible employees hired before January 1, 1993 become eligible for the benefits if they retire after reaching age 62 with fifteen or more years of service. A fixed percent of annual costs are paid depending on length of service at retirement. We accrue for the estimated costs of these other post-retirement benefits through charges to expense during the years that employees render service. We make contributions to cover the current benefits paid under this plan. Management believes the policy for determining pension and other post-retirement benefit expenses is critical because judgments are required with respect to the appropriate discount rate, rate of return on assets, salary increases and other items. Management reviews and updates 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. |
Repurchase Liabilities | ' |
Repurchase Liabilities |
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Repurchase agreements are accounted for as secured borrowings since the Company maintains effective control over the transferred securities and the transfer meets the other criteria for such accounting. Securities are sold to a counterparty with an agreement to repurchase the same or substantially the same security at a specified price and date. The Company has repurchase agreements with commercial or municipal customers that are offered as a commercial banking service. Customer repurchase agreements are for a term of one day and are backed by the purchasers’ interest in certain U.S. Treasury Bills or other U.S. Government securities. Obligations to repurchase securities sold are reflected as a liability in the Consolidated Statements of Financial Condition. The Company does not record transactions of repurchase agreements as sales. The securities underlying the repurchase agreements remain in the available-for-sale investment securities portfolio. |
Transfers of Financial Assets | ' |
Transfers of Financial Assets |
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Transfers of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets. |
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During the normal course of business, the Company may transfer a portion of a financial asset, for example, a participation loan or the government guaranteed portion of a loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan. |
Fee Income | ' |
Fee Income |
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Fee income for customer services which are not deferred are recorded on an accrual basis when earned. |
Advertising Costs | ' |
Advertising Costs |
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Advertising costs are expensed as incurred. |
Income Taxes | ' |
Income Taxes |
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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. |
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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. |
Employee Stock Ownership Plan ("ESOP") | ' |
Employee Stock Ownership Plan (“ESOP”) |
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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 | ' |
Stock Incentive Plan |
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During August 2012, the Company implemented the First Connecticut Bancorp, Inc. 2012 Stock Incentive Plan to provide for issuance or granting of shares of common stock for stock options or restricted stock. The Company applies ASC 718, Compensation – “Stock Compensation”, and has recorded stock-based employee compensation cost using the fair value method. Management estimated the fair values of all option grants using the Black-Scholes option-pricing model. Management estimated the expected life of the options using the simplified method allowed under SAB No. 107. The risk-free rate was determined utilizing the treasury yield for the expected life of the option contract. |
Earnings Per Share | ' |
Earnings Per Share |
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Earnings per common share is computed under the two-class method. Basic earnings per common share is computed by dividing net earnings allocated to common stockholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Non-vested restricted stock awards are participating securities as they have non-forfeitable rights to dividends or dividend equivalents. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock options for common stock using the treasury stock method. Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share. A reconciliation of the weighted-average shares used in calculating basic earnings per common share and the weighted-average common shares used in calculating diluted earnings per common share is provided in Note 3 - Earnings Per Share. |
Segment Reporting | ' |
Segment Reporting |
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The Company’s only business segment is Community Banking. For the years ended December 31, 2013, 2012 and 2011, this segment represented all the revenues and income of the consolidated group and therefore is the only reported segment as defined by FASB ASC 820, “Segment Reporting”. |
Related Party Transactions | ' |
Related Party Transactions |
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Directors and executive officers of the Company and its subsidiary and their associates have been customers of and have had transactions with the Company, and management expects that such persons will continue to have such transactions in the future. See Note 5 of the Notes to Consolidated Financial Statements for further information with respect to loans to related parties. |
Reclassifications | ' |
Reclassifications |
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Amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the current year presentation. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
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In January 2014, the FASB issued ASU No. 2014-04 “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”, an amendment to clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar agreement. In addition, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure in accordance with local requirements of the applicable jurisdiction. ASU 2014-04 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. An entity can elect to adopt the amendments using either a modified retrospective method or a prospective transition method. Early adoption is permitted. The adoption of ASU 2014-04 is expected to have no impact on the Company’s financial condition or results of operations. |
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In January 2014, the FASB issued ASU No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects”, which permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional method, the investment should be accounted for as an equity method investment or a cost method investment. The decision to apply the proportional amortization method of accounting is an accounting policy decision that should be applied consistently to all qualifying affordable housing project investments rather than a decision to be applied to individual investments. This amendment should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. ASU 2014-01 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. The adoption of ASU 2014-01 is expected to have no impact on the Company’s financial condition or results of operations. |
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In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” to improve the transparency of reporting these reclassifications. ASU No. 2013-02 does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements. ASU No. 2013-02 requires an entity to disaggregate the total change of each component of other comprehensive income (e.g., unrealized gains or losses on available-for-sale investment securities) and separately present reclassification adjustments and current period other comprehensive income. The provisions of ASU No. 2013-02 also requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., unrealized gains or losses on available-for-sale investment securities) and the income statement line item affected by the reclassification (e.g., realized gains (losses) on sales of investment securities). If a component is not required to be reclassified to net income in its entirety (e.g., amortization of defined benefit plan items), entities would instead cross reference to the related note to the financial statements for additional information (e.g., pension footnote). ASU No. 2013-02 is effective for interim and annual reporting periods beginning after December 15, 2012. The Company’s adoption of ASU No. 2013-02 had no impact on the Company’s financial condition or results of operations. |
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In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” (“ASU No. 2013-01”). ASU No. 2013-01 clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities,” and that ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the ASC or subject to a master netting arrangement or similar agreement. ASU 2013-01 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The Company’s adoption of ASU 2013-01 had no effect on the Company’s consolidated statement of condition or results of operations. |