##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2008.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from _________ to _________.
 Commission File Number 000-51194
 Benjamin Franklin Bancorp, Inc.
 Exact name of Registrant as specified in its Charter
 Massachusetts
    
    04-3336598(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 P.O. Box 309
58 Main Street
Franklin, Massachusetts 02038-0309
(508) 528-7000  Address and telephone number of principal executive offices
 securities registered pursuant to section of the act
 Title of Each Class
    
    Name of Each Exchange on which RegisteredCommon Stock, no par value
    
    NASDAQ Global Select Market
 securities registered pursuant to section of the act
 
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
Accelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART I.
    
    
    
    
    2Item 1.
    
    Business
    
    
    2General
    
    
    2Market Area and Competition
    
    
    3Lending Activities
    
    
    4Asset Quality
    
    
    14Investment Activities
    
    
    21Sources of Funds
    
    
    25Employees
    
    
    28Subsidiary Activities
    
    
    28Regulation and Supervision
    
    
    29Forward-Looking Statements
    
    
    39Item 1A.
    
    Risk Factors
    
    
    40Item 1B.
    
    Unresolved Staff Comments
    
    
    45Item 2.
    
    Properties
    
    
    46Item 3.
    
    Legal Proceedings
    
    
    47Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    47PART II.
    
    
    
    
    48Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    48Item 6.
    
    Selected Financial Data
    
    
    51Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    52Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    71Item 8.
    
    Financial Statements and Supplementary Data
    
    
    77Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    77Item 9A.
    
    Controls and Procedures
    
    
    77Item 9B.
    
    Other Information
    
    
    80PART III.
    
    
    
    
    81Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    81Item 11.
    
    Executive Compensation
    
    
    81Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    81Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    81Item 14.
    
    Principal Accounting Fees and Services
    
    
    81PART IV
    
    
    
    
    82Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    82Ex-23.1 Consent of Wolf & Company, P.C., independent registered public accounting firmEx-31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley act of 2002Ex-31.2 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley act of 2002Ex-32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Ex-32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




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PART I
 
 Item 1. Business
   
     www.benfranklinbank.com www.benfranklinbank.com
 2




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www.sec.gov
 
 Market Area and Competition
   Per Capita
    
    Median Household
    
    UnemploymentIncome (1)
    
    Income (2)
    
    Rate (3)Norfolk County
    
    $
    58,357
    
    
    $
    78,976
    
    
    
    5.5
    %Middlesex County
    
    
    55,555
    
    
    
    74,558
    
    
    
    5.2
    %Worcester County
    
    
    38,748
    
    
    
    61,791
    
    
    
    7.0
    %Massachusetts
    
    
    46,299
    
    
    
    62,383
    
    
    
    6.9
    %United States
    
    
    36,714
    
    
    
    50,740
    
    
    
    7.2
    %
 
 (1)
    
    Bureau of Economic Analysis, as of April 2008.(2)
    
    USDA Economic Research Service, 2007.(3)
    
    Mass. Department of Labor and Workforce Development, December
2008. 3




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1 2 3 4 5 6 7
  
 Lending Activities
 General .
  
 1
    
    University of Massachusetts Report, December 2008.2
    
    University of Massachusetts Report, December 2008.3
    
    Federal Reserve Bank of Boston (FRBB), Economic
Activity Index, December 2007 to December 2008 comparison.4
    
    University of Massachusetts Report, December 2008.5
    
    New England Economic Partnership (NEEP), November
2008.6
    
    NEEP.7
    
    Massachusetts Association of Realtors. 4




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At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    240,260
    
    
    
    34.54
    %
    
    $
    187,991
    
    
    
    30.73
    %
    
    $
    275,861
    (1)
    
    
    42.79
    %
    
    $
    286,204
    
    
    
    46.95
    %
    
    $
    241,090
    
    
    
    62.56
    %Commercial
    
    
    183,608
    
    
    
    26.39
    %
    
    
    168,463
    
    
    
    27.54
    %
    
    
    159,188
    
    
    
    24.70
    %
    
    
    159,504
    
    
    
    26.17
    %
    
    
    65,176
    
    
    
    16.91
    %Construction
    
    
    47,485
    
    
    
    6.83
    %
    
    
    55,763
    
    
    
    9.11
    %
    
    
    68,877
    
    
    
    10.68
    %
    
    
    60,399
    
    
    
    9.91
    %
    
    
    28,651
    
    
    
    7.43
    %Home equity
    
    
    41,649
    
    
    
    5.99
    %
    
    
    37,768
    
    
    
    6.17
    %
    
    
    36,546
    
    
    
    5.67
    %
    
    
    32,419
    
    
    
    5.32
    %
    
    
    23,199
    
    
    
    6.02
    %513,002
    
    
    
    73.75
    %
    
    
    449,985
    
    
    
    73.55
    %
    
    
    540,472
    
    
    
    83.84
    %
    
    
    538,526
    
    
    
    88.35
    %
    
    
    358,116
    
    
    
    92.92
    %Other loans:Commercial
    
    
    180,274
    
    
    
    25.91
    %
    
    
    159,233
    
    
    
    26.03
    %
    
    
    101,055
    
    
    
    15.68
    %
    
    
    68,667
    
    
    
    11.26
    %
    
    
    25,110
    
    
    
    6.52
    %Consumer
    
    
    2,351
    
    
    
    0.34
    %
    
    
    2,592
    
    
    
    0.42
    %
    
    
    3,110
    
    
    
    0.48
    %
    
    
    2,395
    
    
    
    0.39
    %
    
    
    2,170
    
    
    
    0.56
    %182,625
    
    
    
    26.25
    %
    
    
    161,825
    
    
    
    26.45
    %
    
    
    104,165
    
    
    
    16.16
    %
    
    
    71,062
    
    
    
    11.65
    %
    
    
    27,280
    
    
    
    7.08
    %Total loans
    
    
    695,627
    
    
    
    100.00
    %
    
    
    611,810
    
    
    
    100.00
    %
    
    
    644,637
    
    
    
    100.00
    %
    
    
    609,588
    
    
    
    100.00
    %
    
    
    385,396
    
    
    
    100.00
    %Other items:Net deferred loan origination costs
    
    
    1,131
    
    
    
    
    
    
    
    925
    
    
    
    
    
    
    
    913
    
    
    
    
    
    
    
    1,214
    
    
    
    
    
    
    
    1,149Allowance for loan losses
    
    
    (7,929
    )
    
    
    
    
    
    
    (5,789
    )
    
    
    
    
    
    
    (5,337
    )
    
    
    
    
    
    
    (5,212
    )
    
    
    
    
    
    
    (2,874
    )Total loans, net
    
    $
    688,829
    
    
    
    
    
    
    $
    606,946
    
    
    
    
    
    
    $
    640,213
    
    
    
    
    
    
    $
    605,590
    
    
    
    
    
    
    $
    383,671
 
 (1)
    
    Includes $63.7 million of
loans held for sale 5




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Commercial Real Estate Loans .
     Construction Loans .
  6




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Commercial Business Loans.
  7




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Residential Real Estate Loans .
   8




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9




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Home Equity Lines-of-Credit and Loans.
  Consumer and Other Loans .
 Loan Origination and Underwriting .
   10




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For the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in thousands)Loans, including loans held for sale,
at beginning of year
    
    $
    611,810
    
    
    $
    644,637
    
    
    $
    609,588
    
    
    $
    385,396
    
    
    $
    290,660Originations:Mortgage loans on real estate:Residential
    
    
    101,162
    
    
    
    75,378
    
    
    
    52,965
    
    
    
    61,132
    
    
    
    116,866Commercial
    
    
    52,844
    
    
    
    51,307
    
    
    
    45,994
    
    
    
    67,701
    
    
    
    23,230Construction
    
    
    15,957
    
    
    
    50,407
    
    
    
    46,361
    
    
    
    49,376
    
    
    
    43,661Home equity
    
    
    20,197
    
    
    
    18,474
    
    
    
    17,221
    
    
    
    17,990
    
    
    
    15,947190,160
    
    
    
    195,566
    
    
    
    162,541
    
    
    
    196,199
    
    
    
    199,704Other loans:Commercial
    
    
    47,487
    
    
    
    71,903
    
    
    
    41,962
    
    
    
    25,740
    
    
    
    6,276Consumer
    
    
    1,561
    
    
    
    1,708
    
    
    
    3,186
    
    
    
    1,993
    
    
    
    1,65949,048
    
    
    
    73,611
    
    
    
    45,148
    
    
    
    27,733
    
    
    
    7,935Total loans originated
    
    
    239,208
    
    
    
    269,176
    
    
    
    207,690
    
    
    
    223,932
    
    
    
    207,639Loans acquired through acquisition of Chart Bank
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185,847
    
    
    
    Purchases of mortgage loans
    
    
    
    
    
    
    
    
    
    
    16,118
    
    
    
    
    
    
    
    34,207Deduct:Principal loan repayments and
prepayments
    
    
    152,465
    
    
    
    185,540
    
    
    
    153,041
    
    
    
    162,348
    
    
    
    115,908Loan sales
    
    
    2,363
    
    
    
    116,200
    
    
    
    33,205
    
    
    
    23,160
    
    
    
    31,185Charge-offs
    
    
    563
    
    
    
    263
    
    
    
    152
    
    
    
    79
    
    
    
    17Writedown on transfer of loans to held for sale
    
    
    
    
    
    
    
    
    
    
    2,361
    
    
    
    
    
    
    
    Total deductions
    
    
    155,391
    
    
    
    302,003
    
    
    
    188,759
    
    
    
    185,587
    
    
    
    147,110Net increase (decrease) in loans
    
    
    83,817
    
    
    
    (32,827
    )
    
    
    35,049
    
    
    
    224,192
    
    
    
    94,736Loans, including loans held for sale, at end of year
    
    $
    695,627
    
    
    $
    611,810
    
    
    $
    644,637
    
    
    $
    609,588
    
    
    $
    385,396
   11




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12




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Loan Maturity .
 Residential Mortgage
    
    
    Commercial Mortgage
    
    
    ConstructionWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in thousands)Due less than one year
    
    $
    11,670
    
    
    
    5.29
    %
    
    $
    17,480
    
    
    
    5.97
    %
    
    $
    32,502
    
    
    
    5.99
    %Due after one year to
five years
    
    
    40,713
    
    
    
    5.31
    %
    
    
    28,950
    
    
    
    6.72
    %
    
    
    1,650
    
    
    
    6.88
    %Due after five years
    
    
    187,877
    
    
    
    5.61
    %
    
    
    137,178
    
    
    
    6.62
    %
    
    
    13,333
    
    
    
    6.34
    %Total
    
    $
    240,260
    
    
    
    5.54
    %
    
    $
    183,608
    
    
    
    6.57
    %
    
    $
    47,485
    
    
    
    6.12
    %
 Commercial
    
    
    Consumer
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in thousands)Due less than one year
    
    $
    32,910
    
    
    
    5.07
    %
    
    $
    7,563
    
    
    
    4.65
    %
    
    $
    102,125
    
    
    
    5.51
    %Due after one year to
five years
    
    
    35,650
    
    
    
    6.83
    %
    
    
    5,864
    
    
    
    5.92
    %
    
    
    112,827
    
    
    
    6.21
    %Due after five years
    
    
    111,714
    
    
    
    6.87
    %
    
    
    30,573
    
    
    
    3.62
    %
    
    
    480,675
    
    
    
    6.08
    %Total
    
    $
    180,274
    
    
    
    6.53
    %
    
    $
    44,000
    
    
    
    4.10
    %
    
    $
    695,627
    
    
    
    6.02
    %
  Fixed
    
    
    Adjustable
    
    
    Total(Dollars in thousands)Residential mortgage
    
    $
    133,854
    
    
    $
    94,736
    
    
    $
    228,590Commercial mortgage
    
    
    26,968
    
    
    
    139,160
    
    
    
    166,128Construction
    
    
    6,748
    
    
    
    8,235
    
    
    
    14,983Commercial
    
    
    33,929
    
    
    
    113,435
    
    
    
    147,364Home equity,
consumer and other
    
    
    11,298
    
    
    
    25,139
    
    
    
    36,437Total Loans
    
    $
    212,797
    
    
    $
    380,705
    
    
    $
    593,502
 13




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Asset Quality
 General .
 Delinquent Loans . th th
 14




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Loans Delinquent For60-89 Days
    
    
    90 Days and Over
    
    
    TotalNumber
    
    
    Amount
    
    
    Number
    
    
    Amount
    
    
    Number
    
    
    Amount(Dollars in thousands)At December 31, 2008Residential mortgage
    
    
    2
    
    
    $
    176
    
    
    
    5
    
    
    $
    1,201
    
    
    
    7
    
    
    $
    1,377Commercial mortgage
    
    
    2
    
    
    
    1,340
    
    
    
    3
    
    
    
    6,517
    
    
    
    5
    
    
    
    7,857Construction
    
    
    1
    
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    247Commercial
    
    
    1
    
    
    
    25
    
    
    
    4
    
    
    
    934
    
    
    
    5
    
    
    
    959Consumer
    
    
    5
    
    
    
    86
    
    
    
    1
    
    
    
    47
    
    
    
    6
    
    
    
    133Total
    
    
    11
    
    
    $
    1,874
    
    
    
    13
    
    
    $
    8,699
    
    
    
    24
    
    
    $
    10,573At December 31, 2007Residential mortgage
    
    
    4
    
    
    $
    627
    
    
    
    2
    
    
    $
    376
    
    
    
    6
    
    
    $
    1,003Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    658
    
    
    
    2
    
    
    
    658Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    7
    
    
    
    110
    
    
    
    2
    
    
    
    55
    
    
    
    9
    
    
    
    165Total
    
    
    11
    
    
    $
    737
    
    
    
    6
    
    
    $
    1,089
    
    
    
    17
    
    
    $
    1,826At December 31, 2006Residential mortgage
    
    
    3
    
    
    $
    272
    
    
    
    1
    
    
    $
    230
    
    
    
    4
    
    
    $
    502Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1,256
    
    
    
    2
    
    
    
    1,256Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    1
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    437Consumer
    
    
    11
    
    
    
    112
    
    
    
    1
    
    
    
    25
    
    
    
    12
    
    
    
    137Total
    
    
    15
    
    
    $
    821
    
    
    
    4
    
    
    $
    1,511
    
    
    
    19
    
    
    $
    2,332
  Other Real Estate Owned .
 15




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Classification of Assets and Loan Review .
    16




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Non-Performing Assets .
 At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in thousands)Non-accrual loans:Residential mortgage
    
    $
    1,495
    
    
    $
    712
    
    
    $
    230
    
    
    $
    184
    
    
    $
    Commercial mortgage
    
    
    6,517
    
    
    
    658
    
    
    
    1,257
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    934
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    334Consumer and other
    
    
    80
    
    
    
    228
    
    
    
    61
    
    
    
    25
    
    
    
    Total non-accrual loans
    
    $
    9,026
    
    
    $
    1,598
    
    
    $
    1,548
    
    
    $
    465
    
    
    $
    334Loans greater than 90 days delinquent
and still accruing:Residential mortgage
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3Total loans 90 days and still
accruing
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2
    
    
    $
    3Total non-performing loans and assets
    
    $
    9,026
    
    
    $
    1,598
    
    
    $
    1,548
    
    
    $
    467
    
    
    $
    337Total restructured loans
    
    $
    1,180
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Ratios:Non-performing loans to total loans
and loans
held for sale
    
    
    1.30
    %
    
    
    0.26
    %
    
    
    0.24
    %
    
    
    0.08
    %
    
    
    0.09
    %Non-performing assets to total assets
    
    
    0.90
    %
    
    
    0.18
    %
    
    
    0.17
    %
    
    
    0.05
    %
    
    
    0.07
    %
    17




---



##### Table of Contents



Allowance for Loan Losses .
   18




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006Percent
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    
    
    
    
    Percentof Loans
    
    
    
    
    
    
    
    
    
    
    of Loans
    
    
    
    
    
    
    
    
    
    
    of LoansLoan
    
    
    in Each
    
    
    
    
    
    
    Loan
    
    
    in Each
    
    
    
    
    
    
    Loan
    
    
    in EachAllowance
    
    
    Balances
    
    
    Category
    
    
    Allowance
    
    
    Balances
    
    
    Category
    
    
    Allowance
    
    
    Balances
    
    
    Categoryfor Loan
    
    
    by
    
    
    to Total
    
    
    for Loan
    
    
    by
    
    
    to Total
    
    
    for Loan
    
    
    by
    
    
    to TotalLosses
    
    
    Category
    
    
    Loans
    
    
    Losses
    
    
    Category
    
    
    Loans
    
    
    Losses
    
    
    Category
    
    
    Loans(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    966
    
    
    $
    240,260
    
    
    
    34.54
    %
    
    $
    499
    
    
    $
    187,991
    
    
    
    30.73
    %
    
    $
    533
    
    
    $
    212,131
    
    
    
    36.52
    %Commercial
    
    
    3,183
    
    
    
    183,608
    
    
    
    26.39
    %
    
    
    1,959
    
    
    
    168,463
    
    
    
    27.54
    %
    
    
    1,864
    
    
    
    159,188
    
    
    
    27.40
    %Construction
    
    
    851
    
    
    
    47,485
    
    
    
    6.83
    %
    
    
    850
    
    
    
    55,763
    
    
    
    9.11
    %
    
    
    1,083
    
    
    
    68,877
    
    
    
    11.86
    %Home equity
    
    
    156
    
    
    
    41,649
    
    
    
    5.99
    %
    
    
    142
    
    
    
    37,768
    
    
    
    6.17
    %
    
    
    137
    
    
    
    36,546
    
    
    
    6.29
    %5,156
    
    
    
    513,002
    
    
    
    73.75
    %
    
    
    3,450
    
    
    
    449,985
    
    
    
    73.55
    %
    
    
    3,617
    
    
    
    476,742
    
    
    
    82.07
    %Other loans:Commercial
    
    
    2,405
    
    
    
    180,274
    
    
    
    25.91
    %
    
    
    1,874
    
    
    
    159,233
    
    
    
    26.03
    %
    
    
    1,319
    
    
    
    101,055
    
    
    
    17.39
    %Consumer
    
    
    68
    
    
    
    2,351
    
    
    
    0.34
    %
    
    
    80
    
    
    
    2,592
    
    
    
    0.42
    %
    
    
    76
    
    
    
    3,110
    
    
    
    0.54
    %Unallocated (1)
    
    
    300
    
    
    
    0
    
    
    
    0.00
    %
    
    
    385
    
    
    
    0
    
    
    
    0.00
    %
    
    
    325
    
    
    
    0
    
    
    
    0.00
    %2,773
    
    
    
    182,625
    
    
    
    26.25
    %
    
    
    2,339
    
    
    
    161,825
    
    
    
    26.45
    %
    
    
    1,720
    
    
    
    104,165
    
    
    
    17.93
    %Total
    
    $
    7,929
    
    
    $
    695,627
    
    
    
    100.00
    %
    
    $
    5,789
    
    
    $
    611,810
    
    
    
    100.00
    %
    
    $
    5,337
    
    
    $
    580,907
    
    
    
    100.00
    %
 At December 31,2005
    
    
    2004Percent
    
    
    
    
    
    
    
    
    
    
    Percentof Loans
    
    
    
    
    
    
    
    
    
    
    of LoansLoan
    
    
    in Each
    
    
    
    
    
    
    Loan
    
    
    in EachAllowance
    
    
    Balances
    
    
    Category
    
    
    Allowance
    
    
    Balances
    
    
    Categoryfor Loan
    
    
    by
    
    
    to Total
    
    
    for Loan
    
    
    by
    
    
    to TotalLosses
    
    
    Category
    
    
    Loans
    
    
    Losses
    
    
    Category
    
    
    Loans(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    721
    
    
    $
    286,204
    
    
    
    46.95
    %
    
    $
    612
    
    
    $
    241,090
    
    
    
    62.56
    %Commercial
    
    
    2,004
    
    
    
    159,504
    
    
    
    26.17
    %
    
    
    1,067
    
    
    
    65,176
    
    
    
    16.91
    %Construction
    
    
    840
    
    
    
    60,399
    
    
    
    9.91
    %
    
    
    340
    
    
    
    28,651
    
    
    
    7.43
    %Home equity
    
    
    122
    
    
    
    32,419
    
    
    
    5.32
    %
    
    
    87
    
    
    
    23,199
    
    
    
    6.02
    %3,687
    
    
    
    538,526
    
    
    
    88.35
    %
    
    
    2,106
    
    
    
    358,116
    
    
    
    92.92
    %Other loans:Commercial
    
    
    1,172
    
    
    
    68,667
    
    
    
    11.26
    %
    
    
    532
    
    
    
    25,110
    
    
    
    6.52
    %Consumer
    
    
    44
    
    
    
    2,395
    
    
    
    0.39
    %
    
    
    22
    
    
    
    2,170
    
    
    
    0.56
    %Unallocated (1)
    
    
    308
    
    
    
    0
    
    
    
    0.00
    %
    
    
    214
    
    
    
    0
    
    
    
    0.00
    %1,524
    
    
    
    71,062
    
    
    
    11.65
    %
    
    
    768
    
    
    
    27,280
    
    
    
    7.08
    %Total
    
    $
    5,211
    
    
    $
    609,588
    
    
    
    100.00
    %
    
    $
    2,874
    
    
    $
    385,396
    
    
    
    100.00
    %
 
 (1)
    
    The unallocated portion of the allowance for loan losses is intended to capture the exposure, if any, that may
exist as a result of a number of qualitative factors that are difficult to quantify with precision. 
 19




---



##### Table of Contents




    
    Loan delinquency: At December 31, 2008, portfolio delinquency (percentage of total loans
greater than 30 days past due) stood at 2.16%, compared to 0.71% at December 31, 2007.
Average delinquency for 2008 was 1.56% versus 1.07% for 2007. The main contributor to both
of these increases was the delinquency of one $6.4 million commercial relationship,
discussed earlier in Non-performing Assets.
    
    Level of charge-offs: Net charge-offs were nominal in both 2008 and 2007. In 2008, net
charge-offs aggregated $158,000, down from $182,000 for 2007. These levels of net
charge-offs represented a negligible 0.02% and 0.03% of average loans outstanding for 2008
and 2007, respectively.
    
    Real estate collateral values: Management monitors loan-to-value ratios for its
residential mortgage loan portfolio, as well as for its construction portfolio, which is a
mix of commercial and residential construction credits. At December 31, 2008, the weighted
average loan-to-value ratio of the Banks construction loan portfolio was approximately
67%, and the weighted average loan-to value ratio of the Banks residential mortgage loan
portfolio was approximately 55%. Loan-to-value ratios are computed using the appraised
value of collateral on the date of loan origination.
    
    Underwriting criteria:The Bank has not originated and does not hold any sub-prime
mortgages in its loan portfolio.
    20




---



##### Table of Contents



At or For the Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in thousands)Balance at beginning of year
    
    $
    5,789
    
    
    $
    5,337
    
    
    $
    5,211
    
    
    $
    2,874
    
    
    $
    2,395Allowance added from acquisition
of Chart Bank
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,812
    
    
    
    Charge-offs:Residential mortgage loans
    
    
    (37
    )
    
    
    (143
    )
    
    
    
    
    
    
    
    
    
    
    Commercial loans
    
    
    (396
    )
    
    
    (11
    )
    
    
    (40
    )
    
    
    (68
    )
    
    
    Consumer loans
    
    
    (130
    )
    
    
    (109
    )
    
    
    (112
    )
    
    
    (11
    )
    
    
    (17
    )Total charge-offs
    
    
    (563
    )
    
    
    (263
    )
    
    
    (152
    )
    
    
    (79
    )
    
    
    (17
    )Recoveries:Commercial loans
    
    
    374
    
    
    
    45
    
    
    
    37
    
    
    
    71
    
    
    
    35Consumer loans
    
    
    31
    
    
    
    36
    
    
    
    40
    
    
    
    8
    
    
    
    11Total recoveries
    
    
    405
    
    
    
    81
    
    
    
    77
    
    
    
    79
    
    
    
    46Net (charge-offs) / recoveries
    
    
    (158
    )
    
    
    (182
    )
    
    
    (75
    )
    
    
    
    
    
    
    29Provision for loan losses
    
    
    2,298
    
    
    
    634
    
    
    
    201
    
    
    
    525
    
    
    
    450Balance at end of year
    
    $
    7,929
    
    
    $
    5,789
    
    
    $
    5,337
    
    
    $
    5,211
    
    
    $
    2,874Ratios:Net (charge-offs)/recoveries to
average loans
outstanding (1)
    
    
    (0.02
    )%
    
    
    (0.03
    )%
    
    
    (0.01
    )%
    
    
    0.00
    %
    
    
    0.01
    %Allowance for loan losses to
non-performing loans at end of year
    
    
    87.85
    %
    
    
    362.27
    %
    
    
    344.77
    %
    
    
    1115.85
    %
    
    
    852.82
    %Allowance for loan losses to
total loans at end of year
    
    
    1.14
    %
    
    
    0.94
    %
    
    
    0.92
    %
    
    
    0.85
    %
    
    
    0.74
    %
 
 (1)
    
    Average loans
includes loans held for sale. 
 Investment Activities
 General .
 21




---



##### Table of Contents



Government-sponsored Enterprise Obligations.
  Mortgage-Backed Securities .
  22




---



##### Table of Contents



Marketable Equity Securities.
 Restricted Equity Securities.
  23




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)Securities available for sale:Government-sponsored
enterprise obligations
    
    $
    94,798
    
    
    $
    96,030
    
    
    $
    85,972
    
    
    $
    86,178
    
    
    $
    97,723
    
    
    $
    97,502Municipal obligations
    
    
    
    
    
    
    
    
    
    
    1,206
    
    
    
    1,202
    
    
    
    1,707
    
    
    
    1,68794,798
    
    
    
    96,030
    
    
    
    87,178
    
    
    
    87,380
    
    
    
    99,430
    
    
    
    99,189Mortgage-backed securities
    
    
    89,218
    
    
    
    90,016
    
    
    
    70,839
    
    
    
    69,381
    
    
    
    29,677
    
    
    
    27,793Total debt securities
    
    
    184,016
    
    
    
    186,046
    
    
    
    158,017
    
    
    
    156,761
    
    
    
    129,107
    
    
    
    126,982Access Capital Strategies
Community Investment Fund (1)
    
    
    1,965
    
    
    
    1,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available for sale securities
    
    $
    185,981
    
    
    $
    187,956
    
    
    $
    158,017
    
    
    $
    156,761
    
    
    $
    129,107
    
    
    $
    126,982Securities held to maturity:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    31
    
    
    $
    31Restricted equity securities:Federal Home Loan Bank of Boston stock
    
    $
    11,179
    
    
    $
    11,179
    
    
    $
    9,110
    
    
    $
    9,110
    
    
    $
    8,470
    
    
    $
    8,470Access Capital Strategies
Community Investment Fund (1)
    
    
    
    
    
    
    
    
    
    
    1,965
    
    
    
    1,965
    
    
    
    1,965
    
    
    
    1,965SBLI & DIF stock
    
    
    516
    
    
    
    516
    
    
    
    516
    
    
    
    516
    
    
    
    516
    
    
    
    516Total restricted equity securities
    
    $
    11,695
    
    
    $
    11,695
    
    
    $
    11,591
    
    
    $
    11,591
    
    
    $
    10,951
    
    
    $
    10,951
 
 (1)
    
    Reclassified as available for sale at December 31, 2008 24




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##### Table of Contents



More than One Year
    
    
    More than Five YearsOne Year or Less
    
    
    through Five Years
    
    
    through Ten YearsWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield(Dollars in thousands)Securities available for sale:Government-sponsored
enterprise obligations
    
    $
    63,108
    
    
    
    2.77
    %
    
    $
    31,690
    
    
    
    3.46
    %
    
    $
    
    
    
    
    0.00
    %Mortgage-backed securities
    
    
    
    
    
    
    0.00
    %
    
    
    1,158
    
    
    
    2.61
    %
    
    
    15,389
    
    
    
    4.16
    %Total debt securities
    
    $
    63,108
    
    
    
    2.77
    %
    
    $
    32,848
    
    
    
    3.43
    %
    
    $
    15,389
    
    
    
    4.16
    %
 More than Ten Years
    
    
    Total SecuritiesWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAmortized
    
    
    Average
    
    
    Amortized
    
    
    Fair
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in thousands)Securities available for sale:Government-sponsored
enterprise obligations
    
    $
    
    
    
    
    0.00
    %
    
    $
    94,798
    
    
    $
    96,030
    
    
    
    3.00
    %Mortgage-backed securities
    
    
    72,671
    
    
    
    4.67
    %
    
    
    89,218
    
    
    
    90,016
    
    
    
    4.56
    %Total debt securities
    
    $
    72,671
    
    
    
    4.67
    %
    
    $
    184,016
    
    
    $
    186,046
    
    
    
    3.75
    %
 
 Sources of Funds
 General .
 Deposits.
 25




---



##### Table of Contents



Years Ended December 31,2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(Dollars in thousands)Deposit type:Demand deposits
    
    $
    114,032
    
    
    
    17.44
    %
    
    
    0.00
    %
    
    $
    117,938
    
    
    
    18.70
    %
    
    
    0.00
    %NOW deposits
    
    
    62,651
    
    
    
    9.59
    %
    
    
    1.80
    %
    
    
    40,607
    
    
    
    6.44
    %
    
    
    2.27
    %Money market deposits
    
    
    135,511
    
    
    
    20.73
    %
    
    
    1.79
    %
    
    
    109,123
    
    
    
    17.31
    %
    
    
    2.67
    %Regular and other savings
    
    
    80,849
    
    
    
    12.37
    %
    
    
    0.40
    %
    
    
    81,691
    
    
    
    12.96
    %
    
    
    0.49
    %Total transaction and savings accounts
    
    
    393,043
    
    
    
    60.13
    %
    
    
    0.99
    %
    
    
    349,359
    
    
    
    55.41
    %
    
    
    1.21
    %Certificates of deposit
    
    
    260,589
    
    
    
    39.87
    %
    
    
    3.65
    %
    
    
    281,138
    
    
    
    44.59
    %
    
    
    4.53
    %Total deposits
    
    $
    653,632
    
    
    
    100.00
    %
    
    
    2.05
    %
    
    $
    630,497
    
    
    
    100.00
    %
    
    
    2.69
    %
 Year Ended December 31, 2006WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate(Dollars in thousands)Deposit type:Demand deposits
    
    $
    126,894
    
    
    
    19.98
    %
    
    
    0.00
    %NOW deposits
    
    
    27,155
    
    
    
    4.28
    %
    
    
    0.27
    %Money market deposits
    
    
    100,741
    
    
    
    15.87
    %
    
    
    2.28
    %Regular and other savings
    
    
    91,201
    
    
    
    14.36
    %
    
    
    0.50
    %Total transaction and savings accounts
    
    
    345,991
    
    
    
    54.49
    %
    
    
    0.82
    %Certificates of deposit
    
    
    288,969
    
    
    
    45.51
    %
    
    
    4.05
    %Total deposits
    
    $
    634,960
    
    
    
    100.00
    %
    
    
    2.29
    %
 26




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Interest RateLess than 2%
    
    $
    9,441
    
    
    $
    7
    
    
    $
    2.00%-2.99%
    
    
    127,675
    
    
    
    100
    
    
    
    3,7483.00%-3.99%
    
    
    66,000
    
    
    
    33,143
    
    
    
    53,4354.00%-4.99%
    
    
    27,470
    
    
    
    185,734
    
    
    
    121,2305.00%-5.99%
    
    
    12,928
    
    
    
    43,650
    
    
    
    129,637Total
    
    $
    243,514
    
    
    $
    262,634
    
    
    $
    308,050
  Year Ending December 31,2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Total(Dollars in thousands)Interest RateLess than 2%
    
    $
    9,183
    
    
    $
    258
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    9,4412.00%-2.99%
    
    
    121,766
    
    
    
    5,372
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    127,6753.00%-3.99%
    
    
    49,611
    
    
    
    10,512
    
    
    
    1,303
    
    
    
    3,313
    
    
    
    1,261
    
    
    
    66,0004.00%-4.99%
    
    
    18,560
    
    
    
    3,519
    
    
    
    2,164
    
    
    
    1,709
    
    
    
    1,518
    
    
    
    27,4705.00%-5.99%
    
    
    7,296
    
    
    
    1,091
    
    
    
    599
    
    
    
    3,942
    
    
    
    
    
    
    
    12,928Total
    
    $
    206,416
    
    
    $
    20,752
    
    
    $
    4,603
    
    
    $
    8,964
    
    
    $
    2,779
    
    
    $
    243,514
  At December 31, 2008(Dollars in thousands)Three months or less
    
    $
    33,523Over three months through six months
    
    
    27,766Over six months through one year
    
    
    17,784Over one year to three years
    
    
    7,557Over three years
    
    
    4,714$
    91,344
 27




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##### Table of Contents



Borrowings .
   At or For the Years Ended December 31,2008
    
    2007
    
    2006(Dollars in thousands)Balance at end of year
    
    $
    223,546
    
    
    $
    165,284
    
    
    $
    149,969Average balance during year
    
    
    192,712
    
    
    
    146,409
    
    
    
    130,908Maximum outstanding at any month end
    
    
    223,546
    
    
    
    165,284
    
    
    
    150,963Weighted average interest rate at end of year
    
    
    3.86
    %
    
    
    4.74
    %
    
    
    4.54
    %Weighted average interest rate during year
    
    
    4.55
    %
    
    
    4.73
    %
    
    
    4.32
    %
  
 Employees
  
 Subsidiary Activities
  Benjamin Franklin Bank Capital Trust I
 Benjamin Franklin Securities Corp. (BFSC) and Benjamin Franklin Securities Corp. II
(BFSCII)
 28




---



##### Table of Contents



Creative Strategic Solutions, Inc. (CSSI),
 
 Regulation and Supervision
 General.
   Massachusetts Bank Regulation.
 General
  Activities and Investments
 29




---



##### Table of Contents



Lending Activities
 Dividends
 Regulatory Enforcement Authority
 Insurance Sales
 DIF
 Federal Regulations.
 Capital Requirements
 30




---



##### Table of Contents



Standards for Safety and Soundness
 31




---



##### Table of Contents



Investment Activities
 Interstate Banking and Branching
 Prompt Corrective Regulatory Action
   32




---



##### Table of Contents



Transactions with Affiliates
    33




---



##### Table of Contents



Enforcement
 Insurance of Deposit Accounts
     34




---



##### Table of Contents



Federal Reserve System.
  Federal Home Loan Bank System.
   35




---



##### Table of Contents



Holding Company Regulation.
 General
    Dividends
 36




---



##### Table of Contents



Financial Modernization
 Miscellaneous Regulation.
 Community Reinvestment Act
  37




---



##### Table of Contents



Consumer Protection And Fair Lending Regulations
 Sarbanes-Oxley Act of 2002.
  Emergency Economic Stabilization Act of 2008.
  American Recovery and Reinvestment Act of 2009.
 38




---



##### Table of Contents



Forward-Looking Statements
  
    
    statements of our goals, intentions and expectations;
    
    statements regarding our business plans and prospects and growth and operating
strategies;
    
    statements regarding the asset quality of our loan and investment portfolios; and
    
    estimates of our risks and future costs and benefits.
  
    
    our ability to enter new markets successfully and take advantage of growth
opportunities;
    
    significantly increased competition among depository and other financial institutions;
    
    inflation, changes in the interest rate environment (including changes in the shape of
the yield curve) that reduce our margins or reduce the fair value of financial instruments;
    
    general economic conditions, either nationally or in our market areas, that are worse
than expected;
    
    adverse changes in the securities markets;
    
    legislative or regulatory changes that adversely affect our business;
    
    changes in consumer spending, borrowing and savings habits;
    
    changes in accounting policies and practices, as may be adopted by the bank regulatory
agencies, the Financial Accounting Standards Board and the Public Company Accounting
Oversight Board;
    
    changes in our organization, compensation and benefit plans; and
    
    the risk factors described below.
  39




---



##### Table of Contents



Item 1.A. Risk Factors
 Risks Related to the Merger
 Benjamin Franklins shareholders will receive a fixed ratio of 0.59 shares of Independent
common stock for each share of Benjamin Franklin common stock regardless of any changes in the
market value of Benjamin Franklin common stock or Independent common stock before the completion of
the merger.
  Benjamin Franklin will be subject to business uncertainties and contractual restrictions while
the merger is pending.
  The merger agreement prohibits Benjamin Franklin from pursuing alternatives to the merger following shareholder approval.
  40




---



##### Table of Contents



Regulatory approvals may not be received, may take longer than expected or impose conditions
that are not presently anticipated.
   If the merger is not consummated by April 30, 2009, either Independent or Benjamin Franklin
may choose not to proceed with the merger.
  Risks Related to Our Business
  Difficult market conditions have adversely affected the industry in which the Company
operates.
  41




---



##### Table of Contents




    
    The Company expects to face increased regulation of its industry. Compliance
with such regulation may increase its costs and limit its ability to pursue
business opportunities.
    
    Market developments may cause increases in loan delinquencies and default rates,
which could unfavorably affect the Companys loan charge-offs and provision for
loan losses.
    
    The Companys ability to borrow from other financial institutions or to access
the debt or equity capital markets on favorable terms, or at all, could be
adversely affected by further disruptions in the capital markets or other events.
    
    Competition in the industry could intensify as a result of the increasing
consolidation of financial services companies in connection with current market
conditions.
    
    FDIC insurance premiums paid by the Company are scheduled to increase
significantly in 2009, and may increase even further because market developments
have significantly depleted the insurance fund of the FDIC and reduced the ratio of
their reserves to insured deposits.
 There can be no assurance that recent action by governmental agencies and regulators, as well
as recently enacted legislation authorizing the U.S. government to invest in, and purchase large
amounts of illiquid assets from, financial institutions will help stabilize the U.S. financial
system.
  Changes in interest rates could adversely impact our financial condition and results of
operations.
   42




---



##### Table of Contents



The determination of our allowance for loan losses is highly subjective and could materially affect our results of operations or financial position.
  A significant amount of our loans are concentrated in Massachusetts, and the adverse
conditions in this area could negatively impact our operations.
  Our Commercial Real Estate, Construction And Commercial Business Loans May Expose Us To
Increased Credit Risks, And This Risk Will Increase As We Increase Our Investment In These Types Of
Loans.
  43




---



##### Table of Contents



Strong Competition Within Our Market Area May Limit Our Growth And Profitability.
  44




---



##### Table of Contents



We Operate In A Highly Regulated Environment And May Be Adversely Affected By Changes In Law
And Regulations.
    Impairment of goodwill and/or intangible assets could require charges to earnings, which could result in a negative effect on our results of operations.
  Deterioration in the Federal Home Loan Bank of Bostons (FHLBB) capital might restrict the
FHLBBs ability to meet the funding needs of its members, cause the suspension of its dividend to
continue and cause its stock to be determined to be impaired.
   
 Item 1.B. Unresolved Staff Comments
  45




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##### Table of Contents



Item 2. Properties
  Year Opened/
    
    Owned or
    
    Expiration of
    
    RenewalAcquired
    
    Leased
    
    Lease
    
    OptionsMain Office:58 Main Street 
Franklin, MA 02038
    
    
    1935
    
    
    Owned
    
    
    
    Branch Offices:231 East Central Street 
Franklin, MA 02038
    
    
    1998
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms4 North Main Street 
Bellingham, MA 02019
    
    
    1982
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms1 Mechanic Street 
Foxborough, MA 02035
    
    
    1998
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms76 North Street 
Medfield, MA 02052
    
    
    1998
    
    
    Owned
    
    
    
    221 Main Street 
Milford, MA 01757
    
    
    1992
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms40 Austin Street 
Newton, MA 02460
    
    
    2005
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms1290 Main Street 
Waltham, MA 02451
    
    
    2005
    
    
    Leased
    
    December 2021
    
    Three 5-year
renewal terms75 Moody Street 
Waltham, MA 02453
    
    
    2005
    
    
    Leased
    
    March 2018
    
    Three 10-year
renewal terms330B Washington Street 
Wellesley, MA 02481
    
    
    2006
    
    
    Leased
    
    December 2010
    
    Two 5-year
renewal terms430 Main Street 
Watertown, MA 02472
    
    
    2006
    
    
    Leased
    
    June 2016
    
    Two 5-year
renewal terms
 46




---



##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  47




---



##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information.
  Dividends DeclaredHigh
    
    Low
    
    Per Share2007First Quarter
    
    $
    16.94
    
    
    $
    14.19
    
    
    $
    0.04Second Quarter
    
    
    15.68
    
    
    
    13.50
    
    
    
    0.06Third Quarter
    
    
    14.34
    
    
    
    12.01
    
    
    
    0.06Fourth Quarter
    
    
    14.98
    
    
    
    11.50
    
    
    
    0.062008First Quarter
    
    $
    14.62
    
    
    $
    12.77
    
    
    $
    0.06Second Quarter
    
    
    14.59
    
    
    
    12.50
    
    
    
    0.08Third Quarter
    
    
    12.92
    
    
    
    11.15
    
    
    
    0.08Fourth Quarter
    
    
    15.65
    
    
    
    9.49
    
    
    
    0.08
 Holders.
  Dividends.
   48




---



##### Table of Contents



Securities Authorized for Issuance under Equity Compensation Plans.
  CNumber of SecuritiesA
    
    
    
    
    
    
    Remaining Available forNumber of Securities to
    
    
    B
    
    
    Future Issuance Underto be Issued Upon
    
    
    Weighted-Average
    
    
    Equity CompensationExercises of Outstanding
    
    
    Exercise Price of
    
    
    Plans (Excluding SecuritiesPlan Category
    
    Options (a)
    
    
    Outstanding Options (b)
    
    
    Reflected in Column A)Equity compensation plans
approved by security
shareholders:Stock options
    
    
    535,571
    
    
    $
    13.63
    
    
    
    62,170Restricted stock
    
    
    
    
    
    
    
    
    
    
    14,993Equity compensation plans
not approved by security
shareholders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    535,571
    
    
    $
    13.63
    
    
    
    77,163
 49




---



##### Table of Contents



Performance Graph.
  
 Period EndingIndex
    
    04/05/05
    
    06/30/05
    
    12/31/05
    
    12/31/06
    
    12/31/07
    
    12/31/08Benjamin Franklin Bancorp
    
    
    100.00
    
    
    
    114.31
    
    
    
    140.46
    
    
    
    164.23
    
    
    
    134.34
    
    
    
    156.21Russell 2000
    
    
    100.00
    
    
    
    104.41
    
    
    
    110.55
    
    
    
    130.85
    
    
    
    128.80
    
    
    
    85.28SNL New England Bank
    
    
    100.00
    
    
    
    103.21
    
    
    
    111.99
    
    
    
    132.18
    
    
    
    154.72
    
    
    
    78.26SNL New England Thrift
    
    
    100.00
    
    
    
    107.58
    
    
    
    109.80
    
    
    
    143.09
    
    
    
    118.57
    
    
    
    124.78
 Use of Proceeds
 Repurchases of Equity Securities
  50




---



##### Table of Contents



Item 6. Selected Financial Data
  At December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(Dollars in thousands)Selected Financial Condition Data:Total assets
    
    $
    997,740
    
    
    $
    903,278
    
    
    $
    914,122
    
    
    $
    867,515
    
    
    $
    517,691Loans, net (1)
    
    
    688,829
    
    
    
    606,946
    
    
    
    640,213
    
    
    
    605,590
    
    
    
    383,671Securities (2)
    
    
    199,651
    
    
    
    168,352
    
    
    
    137,964
    
    
    
    132,500
    
    
    
    93,262Deposits
    
    
    652,928
    
    
    
    617,368
    
    
    
    633,179
    
    
    
    611,673
    
    
    
    396,499Short-term borrowings
    
    
    34,500
    
    
    
    2,500
    
    
    
    10,000
    
    
    
    
    
    
    
    4,250Long-term debt
    
    
    189,046
    
    
    
    162,784
    
    
    
    148,969
    
    
    
    140,339
    
    
    
    81,000Stockholders equity
    
    
    109,795
    
    
    
    107,444
    
    
    
    109,405
    
    
    
    108,112
    
    
    
    31,328
 
 (1)
    
    Includes loans held for sale of $63.7 million at
December 31, 2006.(2)
    
    Includes restricted equity securities. For the Years Ended December 31,2008
    
    
    2007
    
    
    2006(3)
    
    
    2005(1)(2)
    
    
    2004(Dollars in thousands, except per share data)Selected Operating Data:Interest and dividend income
    
    $
    49,147
    
    
    $
    48,173
    
    
    $
    44,259
    
    
    $
    35,135
    
    
    $
    20,795Interest expense
    
    
    22,174
    
    
    
    24,488
    
    
    
    20,863
    
    
    
    13,117
    
    
    
    7,032Net interest income
    
    
    26,973
    
    
    
    23,685
    
    
    
    23,396
    
    
    
    22,018
    
    
    
    13,763Provision for loan losses
    
    
    2,298
    
    
    
    634
    
    
    
    201
    
    
    
    525
    
    
    
    451Net interest income after provision for loan losses
    
    
    24,675
    
    
    
    23,051
    
    
    
    23,195
    
    
    
    21,493
    
    
    
    13,312Non-interest income
    
    
    5,671
    
    
    
    7,772
    
    
    
    3,549
    
    
    
    3,487
    
    
    
    2,148Gain (loss) on sale/write-down of securities, net
    
    
    
    
    
    
    38
    
    
    
    (25
    )
    
    
    
    
    
    
    (24
    )Non-interest expense
    
    
    24,708
    
    
    
    25,687
    
    
    
    22,337
    
    
    
    23,437
    
    
    
    12,855Income before income taxes
    
    
    5,638
    
    
    
    5,174
    
    
    
    4,382
    
    
    
    1,543
    
    
    
    2,581Income tax provision (benefit)
    
    
    1,969
    
    
    
    1,532
    
    
    
    (358
    )
    
    
    1,112
    
    
    
    892Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740
    
    
    $
    431
    
    
    $
    1,689Dividends paid per common share
    
    $
    0.30
    
    
    $
    0.22
    
    
    $
    0.13
    
    
    $
    0.06
    
    
    
    n/aDividend payout ratio
    
    
    60.00
    %
    
    
    46.81
    %
    
    
    21.67
    %
    
    
    n/a
    
    
    
    n/aEarnings per share (basic)
    
    $
    0.50
    
    
    $
    0.48
    
    
    $
    0.60
    
    
    
    n/a
    
    
    
    n/aEarnings per share (diluted)
    
    $
    0.50
    
    
    $
    0.47
    
    
    $
    0.60
    
    
    
    n/a
    
    
    
    n/a
 
 (1)
    
    Operating results for 2005 reflect the acquisition of Chart Bank, the conversion from mutual to stock
form, and the $4.0 million pre-tax contribution to the Benjamin Franklin Bank Charitable Foundation,
all occurring on April 4, 2005.(2)
    
    The Companys mutual-to-stock conversion was completed on April 4, 2005. Because shares were not
issued and outstanding for the entire period, earnings per share have not been reported for the year
ended
December 31, 2005. Earnings per share (both basic and diluted) were $.16 in each of the third and fourth
quarters of 2005. Cash dividends paid per share were $.03 in each of the third and fourth quarters of
2005.(3)
    
    Operating results for 2006 reflect the effect of the sale and leaseback of six of the Banks branch
locations
as well as a loss incurred upon the designation of $63.7 million of loans as held for sale at December 31, 2006.(*)(*)
    
    For further information see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations. 51




---



##### Table of Contents



At or For the Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Selected Financial Ratios and Other Data:Performance Ratios:Return on average assets (ratio of net income to average total assets)
    
    
    0.38
    %
    
    
    0.40
    %
    
    
    0.53
    %
    
    
    0.06
    %
    
    
    0.34
    %Return on average equity (ratio of net income to average equity)
    
    
    3.41
    %
    
    
    3.36
    %
    
    
    4.35
    %
    
    
    0.49
    %
    
    
    5.59
    %Net interest rate spread (1)
    
    
    2.59
    %
    
    
    2.40
    %
    
    
    2.45
    %
    
    
    2.79
    %
    
    
    2.63
    %Net interest margin (2)
    
    
    3.10
    %
    
    
    3.00
    %
    
    
    3.01
    %
    
    
    3.21
    %
    
    
    3.00
    %Efficiency ratio (3)
    
    
    73.95
    %
    
    
    80.13
    %
    
    
    71.38
    %
    
    
    68.00
    %
    
    
    79.66
    %Non-interest expense to average total assets
    
    
    2.56
    %
    
    
    2.84
    %
    
    
    2.50
    %
    
    
    3.01
    %
    
    
    2.61
    %Average interest-earning assets to average interest-
bearing liabilities
    
    
    118.75
    %
    
    
    118.34
    %
    
    
    120.06
    %
    
    
    121.90
    %
    
    
    123.91
    %Asset Quality Ratios:Non-performing assets to total assets
    
    
    0.90
    %
    
    
    0.18
    %
    
    
    0.17
    %
    
    
    0.05
    %
    
    
    0.07
    %Non-performing loans to total loans and loans
held for sale
    
    
    1.30
    %
    
    
    0.26
    %
    
    
    0.24
    %
    
    
    0.08
    %
    
    
    0.09
    %Allowance for loan losses to non-performing loans
    
    
    87.85
    %
    
    
    362.27
    %
    
    
    344.77
    %
    
    
    1115.85
    %
    
    
    852.82
    %Allowance for loan losses to total loans
    
    
    1.14
    %
    
    
    0.94
    %
    
    
    0.92
    %
    
    
    0.85
    %
    
    
    0.74
    %Capital Ratios:Equity to total assets at end of year
    
    
    11.00
    %
    
    
    11.89
    %
    
    
    11.97
    %
    
    
    12.46
    %
    
    
    6.05
    %Average equity to average assets
    
    
    11.12
    %
    
    
    11.98
    %
    
    
    12.20
    %
    
    
    11.36
    %
    
    
    6.13
    %Risk-based capital ratio at end of year
    
    
    11.72
    %
    
    
    12.32
    %
    
    
    14.43
    %
    
    
    15.30
    %
    
    
    12.48
    %Other Data:Number of full service offices
    
    
    11
    
    
    
    11
    
    
    
    10
    
    
    
    9
    
    
    
    6
 
 (1)
    
    The net interest rate spread represents the difference between the weighted-average yield on
interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.(2)
    
    The net interest margin represents net interest income as a percent of average interest-earning
assets for the period.(3)
    
    The efficiency ratio represents non-interest expense minus expenses related to the amortization
of intangible assets, and (in 2005) to the contribution to the Benjamin Franklin Bank Charitable Foundation,
divided by the sum of net interest income (before the loan loss provision) plus non-interest income
(excluding nonrecurring net gains (losses) on sale of bank assets). 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  52




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##### Table of Contents



Overview
 Financial Condition.
      Operating Results.
  53




---



##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses
 Income Taxes .
 54




---



##### Table of Contents



Intangible Assets . st
  Analysis of Net Interest Income
  55




---



##### Table of Contents



Years Ended December 31,2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    Outstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(Dollars in thousands)Interest-earning assets:Loans (4)
    
    $
    662,079
    
    
    $
    40,575
    
    
    
    6.06
    %
    
    $
    608,811
    
    
    $
    39,182
    
    
    
    6.38
    %
    
    $
    626,715
    
    
    $
    37,676
    
    
    
    5.97
    %Securities
    
    
    187,532
    
    
    
    8,154
    
    
    
    4.34
    %
    
    
    162,349
    
    
    
    8,139
    
    
    
    5.01
    %
    
    
    137,765
    
    
    
    5,925
    
    
    
    4.30
    %Short-term investments
    
    
    20,033
    
    
    
    418
    
    
    
    2.05
    %
    
    
    17,861
    
    
    
    852
    
    
    
    4.70
    %
    
    
    13,906
    
    
    
    658
    
    
    
    4.66
    %Total interest-earning assets
    
    
    869,644
    
    
    
    49,147
    
    
    
    5.60
    %
    
    
    789,021
    
    
    
    48,173
    
    
    
    6.06
    %
    
    
    778,386
    
    
    
    44,259
    
    
    
    5.65
    %Non-interest-earning assets
    
    
    96,652
    
    
    
    
    
    
    
    
    
    
    
    116,246
    
    
    
    
    
    
    
    
    
    
    
    113,930Total assets
    
    $
    966,296
    
    
    
    
    
    
    
    
    
    
    $
    905,267
    
    
    
    
    
    
    
    
    
    
    $
    892,316Interest-bearing liabilities:Savings accounts
    
    $
    80,849
    
    
    
    323
    
    
    
    0.40
    %
    
    $
    81,691
    
    
    
    397
    
    
    
    0.49
    %
    
    $
    91,201
    
    
    
    456
    
    
    
    0.50
    %Money market accounts
    
    
    135,511
    
    
    
    2,426
    
    
    
    1.79
    %
    
    
    109,123
    
    
    
    2,917
    
    
    
    2.67
    %
    
    
    100,741
    
    
    
    2,299
    
    
    
    2.28
    %NOW accounts
    
    
    62,651
    
    
    
    1,129
    
    
    
    1.80
    %
    
    
    40,607
    
    
    
    922
    
    
    
    2.27
    %
    
    
    27,155
    
    
    
    75
    
    
    
    0.27
    %Certificates of deposit
    
    
    260,589
    
    
    
    9,523
    
    
    
    3.65
    %
    
    
    281,138
    
    
    
    12,749
    
    
    
    4.53
    %
    
    
    288,969
    
    
    
    11,717
    
    
    
    4.05
    %Total deposits
    
    
    539,600
    
    
    
    13,401
    
    
    
    2.48
    %
    
    
    512,559
    
    
    
    16,985
    
    
    
    3.31
    %
    
    
    508,066
    
    
    
    14,547
    
    
    
    2.86
    %Borrowings
    
    
    192,711
    
    
    
    8,773
    
    
    
    4.48
    %
    
    
    154,206
    
    
    
    7,503
    
    
    
    4.80
    %
    
    
    140,281
    
    
    
    6,316
    
    
    
    4.44
    %Total interest-bearing liabilities
    
    
    732,311
    
    
    
    22,174
    
    
    
    3.01
    %
    
    
    666,765
    
    
    
    24,488
    
    
    
    3.66
    %
    
    
    648,347
    
    
    
    20,863
    
    
    
    3.20
    %Non-interest bearing liabilities
    
    
    126,525
    
    
    
    
    
    
    
    
    
    
    
    130,067
    
    
    
    
    
    
    
    
    
    
    
    135,082Total liabilities
    
    
    858,836
    
    
    
    
    
    
    
    
    
    
    
    796,832
    
    
    
    
    
    
    
    
    
    
    
    783,429Equity
    
    
    107,460
    
    
    
    
    
    
    
    
    
    
    
    108,435
    
    
    
    
    
    
    
    
    
    
    
    108,887Total liabilities and equity
    
    $
    966,296
    
    
    
    
    
    
    
    
    
    
    $
    905,267
    
    
    
    
    
    
    
    
    
    
    $
    892,316Net interest income
    
    
    
    
    
    $
    26,973
    
    
    
    
    
    
    
    
    
    
    $
    23,685
    
    
    
    
    
    
    
    
    
    
    $
    23,396Net interest rate spread (1)
    
    
    
    
    
    
    
    
    
    
    2.59
    %
    
    
    
    
    
    
    
    
    
    
    2.40
    %
    
    
    
    
    
    
    
    
    
    
    2.45
    %Net interest-earning assets (2)
    
    $
    137,333
    
    
    
    
    
    
    
    
    
    
    $
    122,256
    
    
    
    
    
    
    
    
    
    
    $
    130,039Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    3.10
    %
    
    
    
    
    
    
    
    
    
    
    3.00
    %
    
    
    
    
    
    
    
    
    
    
    3.01
    %Average of interest-earning
assets to interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.75
    %
    
    
    
    
    
    
    
    
    
    
    118.34
    %
    
    
    
    
    
    
    
    
    
    
    120.06
    %
 
 (1)
    
    Net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost
of interest-bearing liabilities.(2)
    
    Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.(3)
    
    Net interest margin represents net interest income divided by average total interest-earning assets.(4)
    
    Loans include loans held for sale. 56




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Years Ended December 31,
    
    
    Years Ended December 31,2008 vs. 2007
    
    
    2007 vs. 2006Increase (Decrease)
    
    
    Total
    
    
    Increase (Decrease)
    
    
    TotalDue to
    
    
    Increase
    
    
    Due to
    
    
    IncreaseVolume
    
    
    Rate
    
    
    (Decrease)
    
    
    Volume
    
    
    Rate
    
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    3,322
    
    
    
    ($1,929
    )
    
    $
    1,393
    
    
    
    ($1,098
    )
    
    $
    2,604
    
    
    $
    1,506Securities
    
    
    1,172
    
    
    
    (1,157
    )
    
    
    15
    
    
    
    1,148
    
    
    
    1,066
    
    
    
    2,214Short-term investments
    
    
    93
    
    
    
    (527
    )
    
    
    (434
    )
    
    
    189
    
    
    
    5
    
    
    
    194Total interest-earning assets
    
    
    4,587
    
    
    
    (3,613
    )
    
    
    974
    
    
    
    239
    
    
    
    3,675
    
    
    
    3,914Interest-bearing liabilities:Savings accounts
    
    
    (4
    )
    
    
    (70
    )
    
    
    (74
    )
    
    
    (46
    )
    
    
    (13
    )
    
    
    (59
    )Money market accounts
    
    
    607
    
    
    
    (1,098
    )
    
    
    (491
    )
    
    
    202
    
    
    
    416
    
    
    
    618NOW accounts
    
    
    426
    
    
    
    (219
    )
    
    
    207
    
    
    
    54
    
    
    
    793
    
    
    
    847Certificates of deposit
    
    
    (882
    )
    
    
    (2,344
    )
    
    
    (3,226
    )
    
    
    (325
    )
    
    
    1,357
    
    
    
    1,032Total deposits
    
    
    147
    
    
    
    (3,731
    )
    
    
    (3,584
    )
    
    
    (115
    )
    
    
    2,553
    
    
    
    2,438Borrowings
    
    
    1,778
    
    
    
    (508
    )
    
    
    1,270
    
    
    
    655
    
    
    
    532
    
    
    
    1,187Total interest-bearing
liabilities
    
    
    1,925
    
    
    
    (4,239
    )
    
    
    (2,314
    )
    
    
    540
    
    
    
    3,085
    
    
    
    3,625Change in net interest income
    
    $
    2,662
    
    
    $
    626
    
    
    $
    3,288
    
    
    
    ($301
    )
    
    $
    590
    
    
    $
    289
 57




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Comparison of Financial Condition At December 31, 2008 and December 31, 2007
 Total Assets .
 Cash and Short-term Investments .
  Securities.
 Net Loans.
  58




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Deposits .
  59




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Borrowed Funds .
 Stockholders Equity
 Comparison of Operating Results For The Year Ended December 31, 2008 and December 31, 2007
 Net Income.
 60




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Net Interest Income .
   Interest Income .
 61




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Interest Expense .
   62




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Provision for Loan Losses .
  Non-interest Income.
   63




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Non-interest Expense .
   Income Taxes.
  Comparison of Operating Results For The Year Ended December 31, 2007 and December 31, 2006
 Net Income.
 Net Interest Income .
 64




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Interest Income .
   Interest Expense .
 65




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Provision for Loan Losses .
  Non-interest Income
 66




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##### Table of Contents



2007
    
    
    2006
    
    
    Change(In thousands)Reported non-interest income
    
    $
    7,810
    
    
    $
    3,524
    
    
    $
    4,286Less:
    
    
    
    
    
    
    
    
    
    
    Write-down of loans transferred
to held for sale
    
    
    
    
    
    
    (2,361
    )
    
    
    2,361Gain/(loss) on sale of premises
    
    
    198
    
    
    
    (503
    )
    
    
    701Gain on sale of CSSI customer list
    
    
    203
    
    
    
    
    
    
    
    203Normalized non-interest income
    
    $
    7,409
    
    
    $
    6,388
    
    
    $
    1,021
     67




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Non-interest Expense .
    68




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Income Taxes.
  Off-Balance-Sheet Arrangements
  Impact of Inflation and Changing Prices
  69




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Impact of Recent Accounting Standards
      70




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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   Management of Credit Risk.
 Management of Market Risk.
 71




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72




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Percentage Change in EstimatedNet Interest Income over 12 months300 basis point increase in rates
    
    
    (6.55
    )%200 basis point increase in rates
    
    
    (0.94
    )%100 basis point increase in rates
    
    
    1.41
    %Flat interest rates
    
    
    
    73




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Management of Liquidity Risk.
     74




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Contractual Obligations:
 At December 31, 2008More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year
    
    
    through Three
    
    
    through Five
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years(Dollars in thousands)Federal Home Loan Bank advances(1)
    
    $
    223,546
    
    
    $
    77,500
    
    
    $
    108,700
    
    
    $
    21,500
    
    
    $
    15,846Operating leases (2)
    
    
    13,249
    
    
    
    1,218
    
    
    
    2,334
    
    
    
    2,204
    
    
    
    7,493Non-qualified pension (3)
    
    
    10,827
    
    
    
    2,905
    
    
    
    2,040
    
    
    
    1,518
    
    
    
    4,364Other contractual obligations(4)
    
    
    8,813
    
    
    
    3,300
    
    
    
    5,141
    
    
    
    372
    
    
    
    Total contractual obligations
    
    $
    256,435
    
    
    $
    84,923
    
    
    $
    118,215
    
    
    $
    25,594
    
    
    $
    27,703
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally 1-4
family residential mortgage loans. An advance in the amount of $10 million maturing in June, 2010
will become immediately payable if 3-month LIBOR rises above 6.0% (measured on a quarterly basis).(2)
    
    Represents non-cancelable operating leases for branch offices.(3)
    
    Pension obligations include expected payments under the Companys Director Fee
Continuation Plan and expected contributions to the Companys supplemental executive retirement
plans.(4)
    
    Represents contracts for technology services and employment agreements. 75




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Loan Commitments:
 At December 31, 2008More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year
    
    
    through Three
    
    
    through Five
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years(Dollars in thousands)Commitments to grant loans (1)
    
    $
    6,707
    
    
    $
    6,707
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused portion of commercial loan lines of credit
    
    
    35,841
    
    
    
    30,241
    
    
    
    5,600
    
    
    
    
    
    
    
    Unused portion of home equity lines of credit (2)
    
    
    45,777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,777Unused portion of construction loans (3)
    
    
    13,924
    
    
    
    13,868
    
    
    
    56
    
    
    
    
    
    
    
    Unused portion of personal lines of credit (4)
    
    
    2,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,444Commercial letters of credit
    
    
    783
    
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    Total loan commitments
    
    $
    105,476
    
    
    $
    51,599
    
    
    $
    5,656
    
    
    $
    
    
    
    $
    48,221
 
 General: Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract, and generally have fixed expiration dates
or other termination clauses.(1)
    
    Commitments for loans are extended to customers for up to 180 days after which
they expire.(2)
    
    Unused portion of home equity lines of credit are available to the borrower for
up to 10 years.(3)
    
    Unused portion of construction loans are available to the borrower for up to 2
years for development loans and up to 1 year for other construction loans.(4)
    
    Unused portion of checking overdraft lines of credit are available to customers
in good standing indefinitely. Management of Other Risks
  76




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Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Controls Over Financial Reporting.
  Managements Report on Internal Control Over Financial Reporting.
  Internal
Control  Integrated Framework
  77




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Important Considerations
  78




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##### Table of Contents



Report of Independent Registered Public Accounting Firm on Internal Control over Financial
Reporting
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
   
 79




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##### Table of Contents



Item 9B. Other Information
  80




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PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13 Certain Relationships and Related Transactions, and Director Independence
  
 Item 14 Principal Accountant Fees and Services
  81




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
 (a) Exhibits
 Exhibit No.
    
    Description
    
    Footnotes2.1
    
    Plan of Conversion of Benjamin Franklin Bancorp.
    
    
    32.2
    
    Agreement and Plan of Merger among Benjamin Franklin Bancorp, M.H.C.,
Benjamin Franklin Savings Bank and Chart Bank, a Cooperative Bank, dated as
of September 1, 2004.
    
    
    22.3
    
    Second Amended and Restated Plan of Merger among Independent Bank Corp.,
Independent Acquisition Subsidiary, Inc., Rockland Trust Company, Benjamin
Franklin Bancorp, Inc. and Benjamin Franklin Bank dated as of January 12,
2009.
    
    
    133.1
    
    Articles of Organization of Benjamin Franklin Bancorp, Inc.
    
    
    23.2
    
    Bylaws of Benjamin Franklin Bancorp, Inc.
    
    
    74.1
    
    Form of Common Stock Certificate of Benjamin Franklin Bancorp, Inc.
    
    
    510.1.1
    
    Form of Employment Agreement with Thomas R. Venables. *
    
    
    610.1.2
    
    Form of Employment Agreement with Claire S. Bean. *
    
    
    610.2
    
    Form of Change in Control Agreement with five other Executive Officers,
providing one years severance to Karen Niro, Michael J. Piemonte and
Kathleen P. Sawyer, and two years severance to Mariane E. Broadhurst and
Rose M. Buckley. This form contains all material information concerning the
agreement and the only differences are the name and contact information of
the executive officer who is party to the agreement and the number of years
of severance provided. *
    
    
    210.3
    
    Form of Benjamin Franklin Bank Benefit Restoration Plan. *
    
    
    210.4.1
    
    Amended and Restated Supplemental Executive Retirement Agreement between
Benjamin Franklin Bank and Thomas R. Venables dated as of March 22, 2006. *
    
    
    810.4.2
    
    Amended and Restated Supplemental Executive Retirement Agreement between
Benjamin Franklin Bank and Claire S. Bean dated as of March 22, 2006. *
    
    
    810.5
    
    Benjamin Franklin Bancorp Director Fee Continuation Plan. *
    
    
    410.6
    
    Benjamin Franklin Bancorp Employee Salary Continuation Plan. *
    
    
    210.7.1
    
    Payments and Waiver Agreement among Richard E. Bolton, Jr., Benjamin Franklin
Bancorp, M.H.C., Benjamin Franklin Savings Bank and Chart Bank, a Cooperative
Bank, dated as of September 1, 2004. *
    
    
    210.7.2
    
    Consulting and Noncompetition Agreement between Richard E. Bolton, Jr. and
Benjamin Franklin Bancorp, M.H.C., dated as of September 1, 2004. *
    
    
    210.8
    
    Benjamin Franklin Bancorp, Inc. 2006 Stock Incentive Plan *
    
    
    910.8.1
    
    Form of Incentive Stock Option Agreement *
    
    
    1010.8.2
    
    Form of Non-Statutory Stock Option Agreement (Officer) *
    
    
    10
 82




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##### Table of Contents



Exhibit No.
    
    Description
    
    Footnotes10.8.3
    
    Form of Non-Statutory Stock Option Agreement (Director) *
    
    
    1010.8.4
    
    Form of Restricted Stock Agreement (Officer) *
    
    
    1010.8.5
    
    Form of Restricted Stock Agreement (Director) *
    
    
    1010.9
    
    Purchase and Sale Agreement dated December 19, 2006.
    
    
    1111
    
    See Note 3 to the Financial Statements for a discussion of earnings per share.
    
    21
    
    Subsidiaries of Registrant
    
    
    823.1
    
    Consent of Wolf & Company, P.C.,
independent registered public accounting firm.
    
    
    131.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    
    131.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    
    132.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    
    132.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    
    1
 
 *
    
    Relates to compensation. 1.
    
    Filed herewith.2.
    
    Incorporated by reference to the Registrants Registration Statement on
Form S-1, File No. 333-121154, filed on December 10, 2004.3.
    
    Incorporated by reference to Amendment No. 1 to the Registrants
Registration Statement on Form S-1, File No. 333-121154, filed on January 24, 2005.4.
    
    Incorporated by reference to the Registrants Registration Statement on
Form S-4, File No. 333-121608, filed on December 23, 2004.5.
    
    Incorporated by reference to the Registrants Registration Statement on
Form 8-A, File No. 000-51194, filed on March 9, 2005.6.
    
    Incorporated by reference to the Registrants Annual Report on Form
10-K, filed on March 29, 2005.7.
    
    Incorporated by reference to the Registrants Current Report on Form
8-K, filed on March 3, 2006.8.
    
    Incorporated by reference to the Registrants Annual Report on Form
10-K, filed on March 28, 2006.9.
    
    Incorporated by reference to Appendix B to the Registrants Proxy
Statement for the 2006 Annual Meeting of Stockholders, filed on March
28, 2006.10.
    
    Incorporated by reference to the Registrants Quarterly Report on Form
10-Q/A, filed on August 18, 2006.11.
    
    Incorporated by reference to the Registrants Current Report on Form
8-K, filed on December 26, 2006.12.
    
    Incorporated by reference to the Registrants Quarterly Report on Form
10-Q, filed on May 8, 2008.13.
    
    Incorporated by reference to the Registrants Proxy Statement for the
Special Meeting of Stockholders, filed on January 16, 2009.
 (b) Financial Statement Schedules
  83




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SIGNATURES
  Benjamin Franklin Bancorp, Inc.Date:  March 13, 2009
    By:
    /s/ Thomas R. VenablesThomas R. VenablesPresident and Chief Executive Officer  Signature
    
    Title/s/ Thomas R. Venables

Thomas R. Venables
    
    President and Chief Executive Officer, Director
(Principal Executive Officer)/s/ Claire S. Bean

Claire S. Bean
    
    Treasurer and Chief Financial Officer(Principal Financial and Accounting Officer)/s/ Mary Ambler

Mary Ambler
    
    Director/s/ William P. Bissonnette

William P. Bissonnette
    
    Director/s/ William F. Brady, Jr.

William F. Brady, Jr.
    
    Director/s/ Paul E. Capasso

Paul E. Capasso
    
    Director/s/
Jonathan A. Haynes

Jonathan A. Haynes
    
    Director
 84




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##### Table of Contents



Signature
    
    Title/s/ Anne M. King

Anne M. King
    
    Director/s/ Daniel F. OBrien

Daniel F. OBrien
    
    Director/s/ Charles F. Oteri

Charles F. Oteri
    
    Director/s/ Donald P. Quinn

Donald P. Quinn
    
    Director/s/ Neil E. Todreas

Neil E. Todreas
    
    Director/s/ Alfred H. Wahlers

Alfred H. Wahlers
    
    Director/s/ Charles Yergatian

Charles Yergatian
    
    Director
 85




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##### Table of Contents



Benjamin Franklin Bancorp, Inc.
 
 ExhibitNumber
    
    Description23.1
    
    Consent of Wolf & Company, P.C., independent registered public accounting firm.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 86




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BENJAMIN FRANKLIN BANCORP, INC.
YEARS ENDED DECEMBER 31, 2008, 2007 and 2006
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets
    
    F-2Consolidated Statements of Income
    
    F-3Consolidated Statements of Changes in Stockholders Equity
    
    F-4Consolidated Statements of Cash Flows
    
    F-5-6Notes to Consolidated Financial Statements
    
    F-7-51




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control -
Integrated Framework
  
 F-1




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007(Dollars in thousands)ASSETSCash and due from banks
    
    $
    9,289
    
    
    $
    12,226Cash supplied to ATM customers
    
    
    28,092
    
    
    
    42,002Short-term investments
    
    
    8,246
    
    
    
    10,363Total cash and cash equivalents
    
    
    45,627
    
    
    
    64,591Securities available for sale, at fair value
    
    
    187,956
    
    
    
    156,761Restricted equity securities, at cost
    
    
    11,695
    
    
    
    11,591Loans, net of allowance for loan losses of $7,929
in 2008 and $5,789 in 2007
    
    
    688,829
    
    
    
    606,946Premises and equipment, net
    
    
    4,979
    
    
    
    5,410Accrued interest receivable
    
    
    3,667
    
    
    
    3,648Bank-owned life insurance
    
    
    11,110
    
    
    
    10,700Goodwill
    
    
    33,763
    
    
    
    33,763Other intangible assets
    
    
    1,914
    
    
    
    2,474Other assets
    
    
    8,200
    
    
    
    7,394$
    997,740
    
    
    $
    903,278LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    109,743
    
    
    $
    113,023Interest-bearing
    
    
    543,185
    
    
    
    504,345Total deposits
    
    
    652,928
    
    
    
    617,368Short-term borrowings
    
    
    34,500
    
    
    
    2,500Long-term debt
    
    
    189,046
    
    
    
    162,784Deferred gain on sale of premises
    
    
    3,279
    
    
    
    3,531Other liabilities
    
    
    8,192
    
    
    
    9,651Total liabilities
    
    
    887,945
    
    
    
    795,834Commitments and contingencies (Notes 6 and 12)Stockholders equity:Common stock, no par value, 75,000,000 shares
authorized: 7,842,015 shares issued and 7,713,788 shares
outstanding
at December 31, 2008; 8,030,415 shares issued and 7,856,172
shares outstanding at December 31, 2007
    
    
    
    
    
    
    Additional paid-in capital
    
    
    75,140
    
    
    
    77,370Retained earnings
    
    
    39,923
    
    
    
    38,515Unearned compensation
    
    
    (6,303
    )
    
    
    (7,094
    )Accumulated other comprehensive income (loss)
    
    
    1,035
    
    
    
    (1,347
    )Total stockholders equity
    
    
    109,795
    
    
    
    107,444$
    997,740
    
    
    $
    903,278
  F-2




---



##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF INCOME
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands, except per share amounts)Interest and dividend income:Loans, including fees
    
    $
    40,575
    
    
    $
    39,182
    
    
    $
    37,676Debt securities
    
    
    7,651
    
    
    
    7,432
    
    
    
    5,374Dividends
    
    
    503
    
    
    
    707
    
    
    
    551Short-term investments
    
    
    418
    
    
    
    852
    
    
    
    658Total interest and dividend income
    
    
    49,147
    
    
    
    48,173
    
    
    
    44,259Interest expense:Deposits
    
    
    13,401
    
    
    
    16,985
    
    
    
    14,547Short-term borrowings
    
    
    64
    
    
    
    272
    
    
    
    320Long-term debt
    
    
    8,709
    
    
    
    7,231
    
    
    
    5,996Total interest expense
    
    
    22,174
    
    
    
    24,488
    
    
    
    20,863Net interest income
    
    
    26,973
    
    
    
    23,685
    
    
    
    23,396Provision for loan losses
    
    
    2,298
    
    
    
    634
    
    
    
    201Net interest income, after provision for loan losses
    
    
    24,675
    
    
    
    23,051
    
    
    
    23,195Other income (charges):ATM servicing fees
    
    
    1,144
    
    
    
    2,534
    
    
    
    3,059Deposit servicing fees
    
    
    1,769
    
    
    
    1,487
    
    
    
    1,428Other loan-related fees
    
    
    782
    
    
    
    935
    
    
    
    487Gain (loss) on loans sold and held for sale, net
    
    
    265
    
    
    
    680
    
    
    
    (2,030
    )Gain (loss) on sale/write-down of securities, net
    
    
    
    
    
    
    38
    
    
    
    (25
    )Gain (loss) on sale/write-down of premises, net
    
    
    252
    
    
    
    450
    
    
    
    (495
    )Gain on trading assets
    
    
    
    
    
    
    264
    
    
    
    Gain on sale of CSSI customer list
    
    
    92
    
    
    
    203
    
    
    
    Income from bank-owned life insurance
    
    
    410
    
    
    
    402
    
    
    
    347Miscellaneous
    
    
    957
    
    
    
    817
    
    
    
    753Total other income
    
    
    5,671
    
    
    
    7,810
    
    
    
    3,524Operating expenses:Salaries and employee benefits
    
    
    13,477
    
    
    
    14,687
    
    
    
    11,682Occupancy and equipment
    
    
    3,507
    
    
    
    3,456
    
    
    
    2,631Data processing
    
    
    2,299
    
    
    
    2,411
    
    
    
    1,945Professional fees
    
    
    1,126
    
    
    
    859
    
    
    
    1,289Marketing and advertising
    
    
    555
    
    
    
    611
    
    
    
    778Amortization of intangible assets
    
    
    627
    
    
    
    803
    
    
    
    1,064Other general and administrative
    
    
    3,117
    
    
    
    2,860
    
    
    
    2,948Total operating expenses
    
    
    24,708
    
    
    
    25,687
    
    
    
    22,337Income before income taxes
    
    
    5,638
    
    
    
    5,174
    
    
    
    4,382Provision (benefit) for income taxes
    
    
    1,969
    
    
    
    1,532
    
    
    
    (358
    )Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740Weighted-average shares outstanding:Basic
    
    
    7,300,611
    
    
    
    7,644,470
    
    
    
    7,949,042Diluted
    
    
    7,383,386
    
    
    
    7,686,543
    
    
    
    7,953,739Earnings per share:Basic
    
    $
    0.50
    
    
    $
    0.48
    
    
    $
    0.60Diluted
    
    $
    0.50
    
    
    $
    0.47
    
    
    $
    0.60
  F-3




---



##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Years Ended December 31, 2008, 2007 and 2006
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Unearned
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Income (Loss)
    
    
    Equity(Dollars in thousands, except per share amounts)Balance at December 31, 2005
    
    
    8,488,898
    
    
    $
    
    
    
    $
    82,849
    
    
    $
    32,942
    
    
    $
    (5,353
    )
    
    $
    (2,326
    )
    
    $
    108,112Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,740
    
    
    
    
    
    
    
    
    
    
    
    4,740Net unrealized gain on securities available for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    424Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,164Common stock repurchased
    
    
    (239,096
    )
    
    
    
    
    
    
    (3,373
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,373
    )Issuance of common stock in connection
with stock incentive plan (218,335 shares)
    
    
    
    
    
    
    
    
    
    
    3,046
    
    
    
    
    
    
    
    (3,046
    )
    
    
    
    
    
    
    Share-based compensation  restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    277Share-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347Common stock held by ESOP committed
to be released (15,940 shares)
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    224Dividends declared ($.13 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,048
    )
    
    
    
    
    
    
    
    
    
    
    (1,048
    )Adjustment to initially apply FASB Statement
No. 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (298
    )
    
    
    (298
    )Balance at December 31, 2006
    
    
    8,249,802
    
    
    
    
    
    
    
    82,909
    
    
    
    36,634
    
    
    
    (7,938
    )
    
    
    (2,200
    )
    
    
    109,405Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,642
    
    
    
    
    
    
    
    
    
    
    
    3,642Net unrealized gain on securities available for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    752
    
    
    
    752FASB Statement No. 158 tax effect adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    101Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,495Common stock repurchased
    
    
    (441,890
    )
    
    
    
    
    
    
    (6,271
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,271
    )Issuance of common stock in connection
with stock incentive plan (18,034 shares)
    
    
    
    
    
    
    
    
    
    
    225
    
    
    
    
    
    
    
    (225
    )
    
    
    
    
    
    
    Share-based compensation  restricted stock
    
    
    48,260
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    
    
    
    
    690Forfeiture of restricted stock
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    Share-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    657
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657Common stock held by ESOP committed
to be released (15,940 shares)
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    229Dividends declared ($.22 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,761
    )
    
    
    
    
    
    
    
    
    
    
    (1,761
    )Balance at December 31, 2007
    
    
    7,856,172
    
    
    
    
    
    
    
    77,370
    
    
    
    38,515
    
    
    
    (7,094
    )
    
    
    (1,347
    )
    
    
    107,444Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,669
    
    
    
    
    
    
    
    
    
    
    
    3,669Net unrealized gain on securities available for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,382
    
    
    
    2,382Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,051Common stock repurchased
    
    
    (190,000
    )
    
    
    
    
    
    
    (2,608
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,608
    )Issuance of common stock in connection
with stock incentive plan (2,000 shares)
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    Share-based compensation  restricted stock
    
    
    47,616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    627
    
    
    
    
    
    
    
    627Forfeiture of restricted stock
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    Share-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    337Common stock held by ESOP committed
to be released (15,940 shares)
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    205Dividends declared ($.30 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,261
    )
    
    
    
    
    
    
    
    
    
    
    (2,261
    )Balance at December 31, 2008
    
    
    7,713,788
    
    
    $
    
    
    
    $
    75,140
    
    
    $
    39,923
    
    
    $
    (6,303
    )
    
    $
    1,035
    
    
    $
    109,795
  F-4




---



##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Cash flows from operating activities:Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740Adjustments to reconcile net income to net cash
provided by operating activities:Amortization (accretion) of securities, net
    
    
    493
    
    
    
    (579
    )
    
    
    (760
    )Amortization (accretion) of loans, net
    
    
    301
    
    
    
    124
    
    
    
    (37
    )(Gain) loss on sale/write-down of securities, net
    
    
    
    
    
    
    (38
    )
    
    
    25(Gain) loss on sale/write-down of premises, net
    
    
    
    
    
    
    (198
    )
    
    
    499Amortization of deferred gain on sale of premises
    
    
    (252
    )
    
    
    (252
    )
    
    
    (4
    )Provision for loan losses
    
    
    2,298
    
    
    
    634
    
    
    
    201Accretion of deposit and borrowing discounts, net
    
    
    (18
    )
    
    
    (6
    )
    
    
    (35
    )Depreciation and amortization expense
    
    
    789
    
    
    
    913
    
    
    
    1,019Amortization of intangible assets
    
    
    627
    
    
    
    803
    
    
    
    1,064Share-based compensation expense
    
    
    964
    
    
    
    1,347
    
    
    
    624Amortization of ESOP expense
    
    
    205
    
    
    
    229
    
    
    
    224Deferred income tax provision (benefit)
    
    
    (1,212
    )
    
    
    264
    
    
    
    (4,231
    )Income from bank-owned life insurance
    
    
    (410
    )
    
    
    (402
    )
    
    
    (347
    )Gains on trading assets
    
    
    
    
    
    
    (264
    )
    
    
    Purchases of trading assets
    
    
    
    
    
    
    (15,000
    )
    
    
    Proceeds from sales of trading assets
    
    
    
    
    
    
    15,264
    
    
    
    Gain (loss) on loans sold and held for sale, net
    
    
    (265
    )
    
    
    (680
    )
    
    
    2,030Loans originated for sale
    
    
    (2,363
    )
    
    
    (54,078
    )
    
    
    (33,205
    )Proceeds from sales of loans
    
    
    2,628
    
    
    
    54,758
    
    
    
    33,536Increase in accrued interest receivable
    
    
    (19
    )
    
    
    (168
    )
    
    
    (435
    )Other, net
    
    
    (1,902
    )
    
    
    640
    
    
    
    1,866Net cash provided by operating activities
    
    
    5,533
    
    
    
    6,953
    
    
    
    6,774Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    
    
    
    
    6,967
    
    
    
    10Maturities, calls, and principal repayments
    
    
    98,694
    
    
    
    67,606
    
    
    
    65,970Purchases
    
    
    (125,186
    )
    
    
    (102,840
    )
    
    
    (69,350
    )Maturities of and principal repayments on
held-to-maturity securities
    
    
    
    
    
    
    5
    
    
    
    78Net change in restricted equity securities
    
    
    (2,069
    )
    
    
    (640
    )
    
    
    (974
    )Purchases of mortgage loans
    
    
    
    
    
    
    
    
    
    
    (16,118
    )Loan originations, net
    
    
    (84,482
    )
    
    
    (30,383
    )
    
    
    (21,029
    )Purchases of bank-owned life insurance
    
    
    
    
    
    
    
    
    
    
    (2,500
    )Proceeds from sales of loans held for sale
    
    
    
    
    
    
    62,122
    
    
    
    Proceeds from sales of premises and equipment
    
    
    
    
    
    
    1,078
    
    
    
    9,743Purchases of identifiable intangible assets
    
    
    (67
    )
    
    
    (208
    )
    
    
    Additions to premises and equipment
    
    
    (358
    )
    
    
    (1,142
    )
    
    
    (1,509
    )Net cash (used for) provided by investing
activities
    
    
    (113,468
    )
    
    
    2,565
    
    
    
    (35,679
    )
   F-5




---



##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
 Years Ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    35,584
    
    
    
    (15,780
    )
    
    
    21,574Net change in short-term borrowings
    
    
    32,000
    
    
    
    (7,500
    )
    
    
    10,000Proceeds from long-term debt
    
    
    53,500
    
    
    
    46,000
    
    
    
    56,000Repayment of long-term debt
    
    
    (27,244
    )
    
    
    (32,210
    )
    
    
    (47,403
    )Common stock repurchased
    
    
    (2,608
    )
    
    
    (6,271
    )
    
    
    (3,373
    )Dividends paid on common stock
    
    
    (2,261
    )
    
    
    (1,761
    )
    
    
    (1,048
    )Net cash provided by (used for) financing activities
    
    
    88,971
    
    
    
    (17,522
    )
    
    
    35,750Net change in cash and cash equivalents
    
    
    (18,964
    )
    
    
    (8,004
    )
    
    
    6,845Cash and cash equivalents at beginning of year
    
    
    64,591
    
    
    
    72,595
    
    
    
    65,750Cash and cash equivalents at end of year
    
    $
    45,627
    
    
    $
    64,591
    
    
    $
    72,595Supplemental cash flow information:Interest paid on deposits
    
    $
    13,459
    
    
    $
    17,147
    
    
    $
    14,450Interest paid on borrowings
    
    
    8,688
    
    
    
    7,441
    
    
    
    6,186Income taxes paid
    
    
    3,136
    
    
    
    1,282
    
    
    
    3,595Loans reclassified as held for sale
    
    
    
    
    
    
    
    
    
    
    66,091Loans held for sale transferred to loans, net
    
    
    
    
    
    
    1,063
    
    
    
    Loans held for sale transferred to other assets
    
    
    
    
    
    
    545
    
    
    
    Deferred gain recorded on sale of premises and equipment
    
    
    
    
    
    
    
    
    
    
    3,787Loans transferred to other assets
    
    
    
    
    
    
    225
    
    
    
    Securities transferred from held-to-maturity to available-for-sale
    
    
    
    
    
    
    26
    
    
    
    
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Years Ended December 31, 2008, 2007 and 2006
 (Dollars in Thousands, Except per Share Amounts)
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentation and consolidationThe consolidated financial statements include the accounts of Benjamin Franklin Bancorp, Inc.
(the Company) and its wholly-owned subsidiary, Benjamin Franklin Bank (the Bank). The
Bank has three subsidiaries, Benjamin Franklin Securities Corp. and Benjamin Franklin
Securities Corp. II, formed for the purpose of buying, holding, and selling securities, and
Creative Strategic Solutions, Inc. (CSSI), which supplied cash to automatic teller machines
owned by Independent Service Organizations (ISOs) and related cash management services to a
nationwide customer base of ISOs. At December 31, 2008 and 2007, CSSI is inactive. All
significant intercompany balances and transactions have been eliminated in consolidation.Merger agreementOn February 11, 2009, the shareholders of the Company voted to approve the definitive Merger
Agreement by which the Company will be acquired by Independent Bank Corp. (Independent),
parent company of Rockland Trust Company, in an all-stock transaction. At the effective date
of the merger, each share of the Companys common stock outstanding will be converted into
0.59 shares of Independents common stock. The transaction is expected to close in the
second quarter of 2009, and constitutes a change of control in relation to certain of the
Companys employee benefit plans (See Note 15). Execution of the merger is subject to
receipt of all required regulatory approvals of the merger.Business and operating segmentsThe Company provides a variety of financial services to individuals and small businesses
through its offices in Norfolk, Middlesex and Worcester counties in Massachusetts. Its
primary deposit products are checking, savings and term certificate accounts, and its primary
lending products are residential and commercial mortgage loans. The Company also provides
non-deposit investment products to customers.Management evaluates the Companys performance and allocates resources based on a single
segment concept. Accordingly, there are no separately identified operating segments for
which discrete financial information is available. The Company does not derive revenues
from, or have assets located in, foreign countries, nor does it derive revenues from any
single customer that represents 10% or more of the Companys total revenues.
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Use of estimatesIn preparing consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of the date of
the consolidated balance sheet and reported amounts of revenues and expenses during the
reporting period. Actual results could differ 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, the valuation of goodwill and other
intangible assets and the valuation of deferred tax assets.ReclassificationsCertain amounts in the 2007 and 2006 consolidated financial statements have been reclassified
to conform to the 2008 presentation.Significant group concentrations of credit riskMost of the Companys activities are with customers located within New England. Notes 3 and
4 discuss the types of securities that the Company invests in. Note 5 discusses the types of
lending that the Company engages in. The Company does not have any significant
concentrations to any one industry or customer.Cash and cash equivalentsCash and cash equivalents include cash and balances due from banks, repurchase agreements and
money market accounts, all of which mature within ninety days.Trading activitiesThe Company has engaged in trading activities for its own account. Securities that are held
principally for resale in the near term are recorded in the trading assets account at fair
value with changes in fair value recorded in earnings. Interest and dividends are included
in net interest income.SecuritiesDebt securities that management has the positive intent and ability to hold to maturity are
classified as held to maturity and recorded at amortized cost. Securities not classified
as held to maturity, including equity securities with readily determinable fair values, are
classified as available for sale and recorded at fair value, with unrealized gains and
losses excluded from earnings and reported in other comprehensive income (loss).
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Securities (concluded)Purchase premiums and discounts are recognized into interest income using the interest method
over the contractual terms of the securities. Declines in the fair value of held-to-maturity
and available-for-sale securities below their cost that are deemed to be other-than-temporary
are reflected in earnings as realized losses. In estimating other-than-temporary impairment
losses, management considers (1) the length of time and the extent to which the fair value
has been less than cost, (2) the financial condition of the issuer, and (3) the intent and
ability of the Company to retain its investment in the issuer for a period of time sufficient
to allow for any anticipated recovery in fair value. Gains and losses on the sale of
securities are recorded on the trade date and determined using the specific identification
method.Restricted equity securities consist primarily of Federal Home Loan Bank stock. Based on
redemption provisions of the FHLB, the stock has no quoted market value and is carried at
cost. The Company reviews for impairment based on the ultimate recoverability of the cost
basis in the FHLB stock. As of December 31, 2008, no impairment has been recognized.LoansThe Company grants mortgage, commercial and consumer loans to customers. A substantial
portion of the loan portfolio is represented by mortgage loans in the communities in which
the Banks branches are located. The ability of the Banks debtors to honor their contracts
is dependent upon the local real estate market and general economic conditions in this area.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. Certain
direct loan origination costs, net of origination fees are deferred and recognized as an
adjustment of the related loan yield using the interest method.The accrual of interest on mortgage and commercial loans is discontinued at the time the loan
is 90 days past due unless the credit is well-secured and in process of collection. Past due
status is based on contractual terms of the loan. In all cases, loans are placed on
non-accrual or charged-off at an earlier date if collection of principal or interest is
considered doubtful.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Loans (concluded)All interest accrued but not collected for loans that are placed on non-accrual or charged
off is reversed against interest income. The interest on these loans is accounted for on the
cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all principal and interest amounts contractually due are
brought current and future payments are reasonably assured.Allowance for loan lossesThe allowance for loan losses is established as losses are estimated to have occurred through
a provision for loan losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.The allowance for loan losses is evaluated on a regular basis by management and is based upon
managements periodic review of the collectibility of the loans in light of historical
experience, the nature and volume of the loan portfolio, adverse situations that may affect
the borrowers ability to repay, estimated value of any underlying collateral and prevailing
economic conditions. This evaluation is inherently subjective as it requires estimates that
are susceptible to significant revision as more information becomes available.The allowance consists of specific, general and unallocated components. The specific
component relates to loans that are classified as impaired. Impairment is measured on a loan
by loan basis for commercial loans by either the present value of expected future cash flows
discounted at the loans effective interest rate, or the fair value of the collateral if the
loan is collateral dependent. The general component covers non-impaired loans and is based
on historical loss experience adjusted for qualitative factors. An unallocated component is
maintained 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 specific and general
losses in the portfolio.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.
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Allowance for loan losses (concluded)Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.
Accordingly, the Company does not separately identify individual consumer loans for
impairment disclosures.Premises and equipmentLand is carried at cost. Buildings and improvements and equipment are carried at cost, less
accumulated depreciation and amortization computed on the straight-line method over the
estimated useful lives of the assets or the expected terms of the leases, if shorter.
Expected terms include lease option periods to the extent that the exercise of the options is
reasonably assured.Bank-owned life insuranceBank-owned life insurance policies are reflected on the consolidated balance sheet at cash
surrender value. Changes in cash surrender value are reflected in other income on the
consolidated statement of income.Transfers of financial assetsTransfers of financial assets 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 through an agreement to repurchase them before their maturity.Goodwill and other intangible assetsThe assets (including identifiable intangible assets) and liabilities acquired in a business
combination are recorded at fair value at the date of acquisition. Goodwill is recognized
for the excess of the acquisition cost over the fair values of the net assets acquired.
Identifiable intangible assets are subsequently amortized on a straight-line or accelerated
basis, over their estimated lives. Management assesses the recoverability of intangible
assets subject to amortization whenever events or changes in circumstances indicate that
their carrying value may not be recoverable. If the carrying amount exceeds the fair value,
an impairment charge is recorded to income. Goodwill is not amortized and is reviewed on an
annual basis for impairment. In evaluating goodwill, management does not monitor the
separate fair value of the acquired entities, but instead measures the fair value of the
entire Company, as a single reporting unit. At December 31, 2008 and 2007, management
concluded that no intangible assets were impaired.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Derivative financial instrumentsDerivative Loan CommitmentsDerivative financial instruments are recognized as assets and liabilities on the consolidated
balance sheet and measured at fair value.Mortgage loan commitments are referred to as derivative loan commitments if the loan that
will result from exercise of the commitment will be held for sale upon funding. Loan
commitments that are derivatives are recognized at fair value on the consolidated balance
sheet in other assets and other liabilities with changes in their fair values recorded in
other income, if material.The Company records a zero value for the loan commitment at inception (at the time the
commitment is issued to a borrower (the time of rate lock)) and does not recognize the
value of the expected normal servicing rights until the underlying loan is sold. Subsequent
to inception, changes in the fair value of the loan commitment are recognized based on
changes in the fair value of the underlying mortgage loan due to interest rate changes,
changes in the probability the derivative loan commitment will be exercised, and the passage
of time. In estimating fair value, the Company assigns a probability to a loan commitment
based on an expectation that it will be exercised and the loan will be funded.Forward Loan Sale CommitmentsTo protect against the price risk inherent in derivative loan commitments, the Company
utilizes both mandatory delivery and best efforts forward loan sale commitments to
mitigate the risk of potential decreases in the values of loans that would result from the
exercise of the derivative loan commitments. Mandatory delivery contracts are accounted for
as derivative instruments. Generally, the Companys best efforts contracts meet the
definition of derivative instruments when the loans to the underlying borrowers close, and
are accounted for as derivative instruments at that time. Accordingly, forward loan sale
commitments are recognized at fair value on the consolidated balance sheet in other assets
and other liabilities with changes in their fair values recorded in other income, if
material.The Company estimates the fair value of its forward loan sales commitments using a
methodology similar to that used for derivative loan commitments.
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Retirement planThe Company accounts for directors post-retirement pension plan benefits on the net periodic
pension cost method for financial reporting purposes. This method recognizes the
compensation cost of an employees pension benefit over the directors approximate service
period.Effective December 31, 2006, the Company adopted Financial Accounting Standards Board
(FASB) Statement No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (SFAS 158), which requires employers to (a) recognize in its
statement of financial position the funded status of a benefit plan, (b) measure a plans
assets and its obligations that determine its funded status as of the employers
fiscal year, (c) recognize, through other comprehensive income, net of tax, changes in the
funded status of the benefit plan that are not recognized as net periodic benefit cost, and
(d) disclose additional information about certain effects on net periodic benefit cost for
the next fiscal year that relate to the delayed recognition of certain benefit cost elements.
The adoption of the Statement resulted in a $298 decrease to other liabilities and
accumulated other comprehensive income.Share-based compensation plansThe Company measures and recognizes compensation cost relating to share-based payment
transactions based on the grant-date fair value of the equity instruments issued. Share
based compensation is recognized over the period the employee is required to provide services
for the award. The Company uses the Black-Scholes option-pricing model to determine the fair
value of stock options granted.Employee Stock Ownership PlanCompensation expense for the Employee Stock Ownership Plan (ESOP) is recorded at an amount
equal to the shares allocated by the ESOP multiplied by the average fair market value of the
 shares during the period. The Company recognizes compensation expense ratably over the year
based upon the Companys estimate of the number of shares expected to be allocated by the
ESOP. Unearned compensation applicable to the ESOP is reflected as a reduction of
stockholders equity in the consolidated balance sheet. The difference between the average
fair market value and the cost of the shares allocated by the ESOP is recorded as an
adjustment to additional paid-in capital.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Income taxesDeferred tax assets and liabilities are reflected at currently enacted income tax rates
applicable to the period in which the deferred tax assets or liabilities are expected to be
realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted accordingly through the provision for income taxes. The Banks base
amount of its federal income tax reserve for loan losses is a permanent difference for which
there is no recognition of a deferred tax liability. However, the loan loss allowance
maintained for financial reporting purposes is a temporary difference with allowable
recognition of a related deferred tax asset, if deemed realizable.A valuation allowance related to deferred tax assets is established when, in the judgment of
management, it is more likely than not that all or a portion of such deferred tax assets will
not be realized. (See Note 11.)Advertising costsAdvertising costs are expensed as incurred.Comprehensive income/lossAccounting principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Although certain changes in assets and liabilities are reported
as a separate component of the stockholders equity section of the consolidated balance
sheet, such items, along with net income, are components of comprehensive income/loss. The
components of other comprehensive income and related tax effects are as follows:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Unrealized holding gains on securities
available for sale
    
    $
    3,231
    
    
    $
    907
    
    
    $
    438Reclassification adjustment for (gains) losses
and impairment recognized in income
    
    
    
    
    
    
    (38
    )
    
    
    253,231
    
    
    
    869
    
    
    
    463Tax effect
    
    
    (849
    )
    
    
    (117
    )
    
    
    (39
    )Net-of-tax amount
    
    
    2,382
    
    
    
    752
    
    
    
    424FASB Statement No. 158 tax effect adjustment
    
    
    
    
    
    
    101
    
    
    
    $
    2,382
    
    
    $
    853
    
    
    $
    424
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Comprehensive income/loss (concluded)The components of accumulated other comprehensive income (loss), included in stockholders
equity, are as follows:
 December 31,2008
    
    
    2007Net unrealized gain (loss) on securities
available for sale
    
    $
    1,975
    
    
    $
    (1,256
    )Tax effect
    
    
    (743
    )
    
    
    106Net-of-tax amount
    
    
    1,232
    
    
    
    (1,150
    )Unrecognized net actuarial gain pertaining
to defined benefit plan
    
    
    346
    
    
    
    346Unrecognized prior service cost pertaining
to defined benefit plan
    
    
    (644
    )
    
    
    (644
    )(298
    )
    
    
    (298
    )Tax effect of initially applying SFAS No. 158
    
    
    101
    
    
    
    101Net-of-tax amount
    
    
    (197
    )
    
    
    (197
    )$
    1,035
    
    
    $
    (1,347
    )
 Earnings per shareBasic earnings per share (EPS) excludes dilution and is calculated by dividing net income
available to common stockholders by the weighted-average number of shares of common stock
outstanding during the period. Diluted EPS is computed in a manner similar to that of basic
EPS except that the weighted-average number of common shares outstanding is increased to
include the number of incremental common shares (computed using the treasury stock method)
that would have been outstanding if all potentially dilutive common stock equivalents (such
as stock options and unvested restricted stock) were issued during the period. Unallocated
common shares held by the ESOP are shown as a reduction in stockholders equity and are not
included in the weighted-average number of common shares outstanding for either basic or
diluted earnings per share calculations.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Earnings per share (concluded)Earnings per common share have been computed based on the following:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740Average number of common shares outstanding
    
    
    7,300,611
    
    
    
    7,644,470
    
    
    
    7,949,042Effect of dilutive unvested restricted stock
    
    
    82,775
    
    
    
    42,073
    
    
    
    4,697Average number of common shares outstanding used
to calculate diluted earnings per common share
    
    
    7,383,386
    
    
    
    7,686,543
    
    
    
    7,953,739
 Stock options and restricted stock that would have an anti-dilutive effect on diluted
earnings per share are excluded from the calculation. For the years ended December 31, 2008
and 2007, there was no anti-dilutive restricted stock and 535,571 and 541,766 options,
respectively, were excluded from the earnings per share calculation because their effect
would have been anti-dilutive. There was no anti-dilutive restricted stock or options for
the year ended December 31, 2006.Recent accounting pronouncementsIn September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This
Statement defines fair value, establishes a framework for measuring fair value in accordance
with generally accepted accounting principles, and expands disclosures about fair value
measurements. The definition of fair value retains the exchange price notion in earlier
definitions of fair value. This Statement clarifies that the exchange price is the price in
an orderly transaction between market participants to sell the asset or transfer the
liability in the market in which the reporting entity would transact for the asset or
liability, that is, the principal or most advantageous market for the asset or liability.
Emphasis is placed on fair value being a market-based measurement, not an entity-specific
measurement, and therefore a fair value measurement should be determined based on the
assumptions that market participants would use in pricing the asset or liability. As a basis
for considering these market participant assumptions, a fair value hierarchy has been
established to distinguish between (1) market participant assumptions developed based on
market data obtained from sources independent of the reporting entity (observable inputs) and
(2) the reporting entitys own assumptions about market participant assumptions developed
based on the best information available in the circumstances (unobservable
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent accounting pronouncements (continued)inputs). In February 2008, the FASB issued a Staff Position which delays the effective date
of Statement No. 157 for non-financial assets and non-financial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a recurring
basis, to fiscal years beginning after November 15, 2008. The Company adopted this
statement, except for items covered by the Staff Position, as of January 1, 2008 and the
adoption did not have a material impact on the consolidated financial statements. See Note
18.In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active (FSP 157-3). FSP
157-3 clarifies the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a financial asset
when the market for that financial asset is not active. FSP 157-3 was effective immediately
upon issuance, and includes prior periods for which financial statements have not been
issued. FSP 157-3 did not have an impact on the consolidated financial statements.In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115. This
Statement permits entities to choose to measure many financial instruments and certain other
items at fair value. The fair value option may generally be applied instrument by instrument
and is irrevocable. This Statement was adopted by the Company on January 1, 2008 and the
Company did not elect fair value treatment for any financial assets or liabilities upon
adoption.In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations
(Statement No. 141(R)). Statement No. 141(R) establishes principles and requirements for
how the acquirer in a business combination recognizes and measures identifiable assets
acquired, liabilities assumed, and noncontrolling interests in the acquiree. Statement No.
141(R) further addresses how goodwill acquired or a gain from a bargain purchase is to be
recognized and measured and determines what disclosures are needed to enable users of the
financial statements to evaluate the effects of the business combination. Statement No.
141(R) is effective prospectively for business combinations for which the acquisition date is
on or after December 15, 2008.
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
 Recent accounting pronouncements (concluded)In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. This Statement establishes
accounting and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. This Statement is effective for fiscal years
beginning on or after December 15, 2008, and is not expected to have a material impact on the
consolidated financial statements.In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133. This Statement changes the
disclosure requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are accounted for under
SFAS 133 and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows.
This Statement is effective for fiscal years and interim periods beginning after November 15,
2008 and is not expected to have a material impact on the consolidated financial statements
of the Company.2.
    
    RESTRICTIONS ON CASH AND DUE FROM BANKSThe Bank is required to maintain daily average balances on hand or with the Federal Reserve
Bank. At both December 31, 2008 and 2007, these reserve balances amounted to $200.3.
    
    SHORT-TERM INVESTMENTSShort-term investments consist of the following:
 December 31,2008
    
    
    2007Federal funds sold
    
    $
    2,265
    
    
    $
    2,370Repurchase agreements
    
    
    359
    
    
    
    3,029Money market accounts
    
    
    5,622
    
    
    
    4,964$
    8,246
    
    
    $
    10,363
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 4.
    
    SECURITIES AVAILABLE FOR SALEThe amortized cost and fair value of securities available for sale, with gross unrealized
gains and losses, follows:
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2008:Debt securities:Government-sponsored
enterprise obligations
    
    $
    94,798
    
    
    $
    1,245
    
    
    $
    (13
    )
    
    $
    96,030Mortgage-backed securities
    
    
    89,218
    
    
    
    1,442
    
    
    
    (644
    )
    
    
    90,016Total debt securities
    
    
    184,016
    
    
    
    2,687
    
    
    
    (657
    )
    
    
    186,046Mutual fund
    
    
    1,965
    
    
    
    
    
    
    
    (55
    )
    
    
    1,910$
    185,981
    
    
    $
    2,687
    
    
    $
    (712
    )
    
    $
    187,956December 31, 2007:Government-sponsored
enterprise obligations
    
    $
    85,972
    
    
    $
    240
    
    
    $
    (34
    )
    
    $
    86,178Municipal obligations
    
    
    1,206
    
    
    
    
    
    
    
    (4
    )
    
    
    1,202Mortgage-backed securities
    
    
    70,839
    
    
    
    373
    
    
    
    (1,831
    )
    
    
    69,381$
    158,017
    
    
    $
    613
    
    
    $
    (1,869
    )
    
    $
    156,761
 All of the Companys mortgage-backed securities are issued by government-sponsored
enterprises or federal agencies.The amortized cost and estimated fair value of debt securities, excluding mortgage-backed
securities, by contractual maturity at December 31, 2008 is as follows. Expected maturities
will differ from contractual maturities on certain securities because of call or prepayment
provisions.
 Amortized
    
    
    FairCost
    
    
    ValueWithin 1 year
    
    $
    63,108
    
    
    $
    63,652After 1 year through 5 years
    
    
    31,690
    
    
    
    32,378$
    94,798
    
    
    $
    96,030
 F-19




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SECURITIES AVAILABLE FOR SALE (concluded)
 There were no sales of securities during the year ended December 31, 2008. Proceeds from the
sale of securities available for sale during the years ended December 31, 2007 and 2006
amounted to $6,967 and $0, respectively. Gross gains of $38 were realized during the year
ended December 31, 2007. In addition, the Company recorded a $35 impairment loss during the
year ended December 31, 2006.Information pertaining to securities with gross unrealized losses at December 31, 2008 and
2007, aggregated by investment category and length of time that individual securities have
been in a continuous loss position, follows:
 Less Than TwelveMonths
    
    
    Over Twelve MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    ValueDecember 31, 2008:Debt securities:Government-sponsored
enterprise obligations
    
    $
    13
    
    
    $
    6,151
    
    
    $
    
    
    
    $
    Mortgage-backed securities
    
    
    5
    
    
    
    191
    
    
    
    639
    
    
    
    23,171Total debt securities
    
    
    18
    
    
    
    6,342
    
    
    
    639
    
    
    
    23,171Mutual fund
    
    
    55
    
    
    
    1,910
    
    
    
    
    
    
    
    Total temporarily
impaired
securities
    
    $
    73
    
    
    $
    8,252
    
    
    $
    639
    
    
    $
    23,171December 31, 2007:Government-sponsored
enterprise obligations
    
    $
    26
    
    
    $
    12,920
    
    
    $
    8
    
    
    $
    3,983Municipal obligations
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1,202Mortgage-backed securities
    
    
    4
    
    
    
    2,317
    
    
    
    1,827
    
    
    
    24,968Total temporarily
impaired securities
    
    $
    30
    
    
    $
    15,237
    
    
    $
    1,839
    
    
    $
    30,153
 At December 31, 2008, thirty-one debt securities and one mutual fund have unrealized losses
with aggregate depreciation of 2% from the Companys amortized cost basis. Because the
decline in market value is primarily attributable to changes in interest rates and not to
credit quality, and because the Company has the ability and intent to hold these investments
until a recovery of fair value, which may be maturity, the Company does not consider these
investments to be other-than-temporarily impaired at December 31, 2008.
 F-20




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 5.
    
    LOANSA summary of the balances of loans follows:
 December 31,2008
    
    
    2007Mortgage loans on real estate:Residential
    
    $
    240,260
    
    
    $
    187,991Commercial
    
    
    183,608
    
    
    
    168,463Construction
    
    
    47,485
    
    
    
    55,763Home equity
    
    
    41,649
    
    
    
    37,768513,002
    
    
    
    449,985Other loans:Commercial
    
    
    180,274
    
    
    
    159,233Consumer
    
    
    2,351
    
    
    
    2,592182,625
    
    
    
    161,825Total loans
    
    
    695,627
    
    
    
    611,810Allowance for loan losses
    
    
    (7,929
    )
    
    
    (5,789
    )Net deferred loan costs
    
    
    1,131
    
    
    
    925Loans, net
    
    $
    688,829
    
    
    $
    606,946
 An analysis of the allowance for loan losses follows:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    5,789
    
    
    $
    5,337
    
    
    $
    5,211Provision for loan losses
    
    
    2,298
    
    
    
    634
    
    
    
    201Recoveries
    
    
    405
    
    
    
    81
    
    
    
    77Charge-offs
    
    
    (563
    )
    
    
    (263
    )
    
    
    (152
    )Balance at end of year
    
    $
    7,929
    
    
    $
    5,789
    
    
    $
    5,337
 F-21




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 LOANS (concluded)The following is a summary of impaired and non-accrual loans:
 December 31,2008
    
    
    2007Impaired loans without a valuation allowance
    
    $
    2,552
    
    
    $
    Impaired loans with a valuation allowance
    
    
    7,741
    
    
    
    880Total impaired loans
    
    $
    10,293
    
    
    $
    880Valuation allowances related to impaired loans
    
    $
    1,453
    
    
    $
    37Non-accrual loans
    
    $
    9,026
    
    
    $
    1,598Loans greater than 90 days past due
and still accruing
    
    $
    
    
    
    $
    
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Average recorded investment in
impaired loans
    
    $
    8,021
    
    
    $
    439
    
    
    $
    38Interest income recognized on a cash
basis on impaired loans
    
    $
    42
    
    
    $
    9
    
    
    $
    
 No additional funds are committed to be advanced in connection with impaired loans.At December 31, 2008 and 2007, loans with principal balances of $9,980 and $8,582,
respectively, were pledged to the Federal Reserve Bank of Boston as part of the
Borrower-in-Custody advance program for which there are no outstanding advances as of
December 31, 2008 and 2007.
 F-22




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 6.
    
    PREMISES AND EQUIPMENTA summary of the cost and accumulated depreciation and amortization of premises and equipment
follows:
 December 31,
    
    
   Estimated2008
    
    
    2007
    
    
    Useful LivesLand
    
    $
    1,415
    
    
    $
    1,415
    
    

    N/ABuildings and improvements
    
    
    5,195
    
    
    
    5,043
    
    
    5 - 40 yearsEquipment
    
    
    7,533
    
    
    
    7,327
    
    
    3 - 10 years14,143
    
    
    
    13,785Less accumulated depreciation
and amortization
    
    
    (9,164
    )
    
    
    (8,375
    )$
    4,979
    
    
    $
    5,410
 Depreciation and amortization expense for the years ended December 31, 2008, 2007 and 2006,
amounted to $789, $913 and $1,019, respectively.The Company leases nine of its branch offices, including two offices leased from entities
owned and managed by a Director of the Company (see Note 17). Pursuant to the terms of
noncancelable lease agreements in effect at December 31, 2008, pertaining to banking
premises, future minimum rent commitments (excluding option periods) under the operating
leases are as follows:
 Years EndingDecember 31,
    
    Amount2009
    
    $
    1,2182010
    
    
    1,2182011
    
    
    1,1162012
    
    
    1,1042013
    
    
    1,100Thereafter
    
    
    7,493$
    13,249
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 PREMISES AND EQUIPMENT (concluded)On December 27, 2006, the Bank entered into an agreement to sell and simultaneously lease
back six of its branch properties. The aggregate purchase price was $9,728, which resulted
in a gain of $3,787 on five of the branch properties, and a loss of $503 on the remaining
property. The gain of $3,787 was deferred and is being recognized in income ratably over the
15-year initial fixed term of the lease. The loss of $503 was recognized immediately in the
2006 operating results. The aggregate initial rent for the six properties is $800 per annum,
which is subject to increase based on increases in CPI, capped at a maximum of 3% per annum.
The Bank has three 5-year renewal options, at market, at the conclusion of the 15-year
initial lease term.Other leases contain options to extend for periods of five to ten years at then-market rents.
Total rent expense for the years ended December 31, 2008, 2007 and 2006 amounted to $1,265,
$1,184 and $305, respectively.
 7.
    
    GOODWILL AND OTHER INTANGIBLE ASSETSThe goodwill recognized in the 2005 acquisition of Chart Bank and the 1998 acquisition of
Foxboro National Bank amounted to $29,515 and $4,248, respectively.The Company recorded an identifiable intangible asset for core deposits in connection with
its 2005 acquisition of Chart Bank and its 2007 acquisition of a customer list in a strategic
alliance with an investment services firm, for which an additional $67 was paid in 2008. The
resulting core deposit and customer list intangible assets are being amortized over periods
of 15 years on the double declining balance method and 5 years on the straight-line basis,
respectively. The net book value of this asset at December 31, 2008 and 2007 is as follows:
 December 31,2008
    
    
    2007Customer-based intangible assets
    
    $
    7,031
    
    
    $
    6,964Accumulated amortization
    
    
    (5,117
    )
    
    
    (4,490
    )$
    1,914
    
    
    $
    2,474
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 GOODWILL AND OTHER INTANGIBLE ASSETS (concluded)Amortization expense on other intangible assets, was $627, $803 and $1,064 for the years
ended December 31, 2008, 2007 and 2006, respectively. Expected future amortization expense
as of December 31, 2008 is as follows:
 Year EndingDecember 31,
    
    Amount2009
    
    $
    4822010
    
    
    3682011
    
    
    2882012
    
    
    2012013
    
    
    135Thereafter
    
    
    440$
    1,914
 8.
    
    DEPOSITSA summary of deposit balances, by type, is as follows:
 December 31,2008
    
    
    2007Demand deposits
    
    $
    109,743
    
    
    $
    113,023NOW
    
    
    73,029
    
    
    
    52,000Regular and other savings
    
    
    80,691
    
    
    
    79,167Money market deposits
    
    
    145,951
    
    
    
    110,544Total non-certificate accounts
    
    
    409,414
    
    
    
    354,734Term certificates less than $100
    
    
    152,170
    
    
    
    159,272Term certificates of $100 or more
    
    
    91,344
    
    
    
    103,362Total certificate accounts
    
    
    243,514
    
    
    
    262,634Total deposits
    
    $
    652,928
    
    
    $
    617,368
 F-25




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 DEPOSITS (concluded)At December 31, 2008, the scheduled maturities of term certificate accounts are as follows:
 2009
    
    $
    206,4162010
    
    
    20,7522011
    
    
    4,6032012
    
    
    8,9642013
    
    
    2,779$
    243,514
 9.
    
    SHORT-TERM BORROWINGSAt December 31, 2008 and 2007, short-term borrowings consisted of Federal Home Loan Bank
(FHLB) advances in the amount of $34,500 and $2,500, respectively, with a weighted average
rate of 0.31% and 4.58%, respectively. The Bank also has an available line of credit with the
FHLB at an interest rate that adjusts daily. At December 31, 2008 and 2007, borrowings
available under the line were limited to $500, none of which was outstanding. The advances
are secured as described in Note 10.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 10.
    
    LONG-TERM DEBTAt December 31, 2008 and 2007, long-term debt consists of the following fixed-rate FHLB
advances:
 December 31, 2008
    
    
    December 31, 2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageMaturity Date
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate2008
    
    $
    
    
    
    
    
    %
    
    $
    26,994
    
    
    
    4.09
    %2009
    
    
    43,000
    
    
    
    5.08
    
    
    
    43,000
    
    
    
    5.082010(1)
    
    
    72,600
    
    
    
    4.35
    
    
    
    64,000
    
    
    
    4.532011(2)
    
    
    36,100
    
    
    
    4.35
    
    
    
    15,000
    
    
    
    5.632012
    
    
    6,000
    
    
    
    3.99
    
    
    
    3,000
    
    
    
    4.262013
    
    
    15,500
    
    
    
    3.89
    
    
    
    
    
    
    
    2014
    
    
    3,000
    
    
    
    4.58
    
    
    
    3,000
    
    
    
    4.582015
    
    
    5,300
    
    
    
    4.11
    
    
    
    
    
    
    
    2027(3)
    
    
    7,546
    
    
    
    5.31
    
    
    
    7,790
    
    
    
    5.31$
    189,046
    
    
    
    4.50
    %
    
    $
    162,784
    
    
    
    4.74
    %
 
 (1)
    
    Includes a $10,000 advance that is callable by the FHLB in 2009.(2)
    
    Includes a $5,000 advance that is callable by the FHLB in 2009.(3)
    
    Includes one amortizing advance requiring monthly principal and interest payments of $55. Short-term and long-term borrowings from the FHLB are secured by a blanket lien on qualified
collateral, defined principally as 75% of the carrying value of first mortgage loans on
one-to-four family owner-occupied residential property and 90% to 97% of the fair value of
government-sponsored enterprise obligations and mortgage-backed securities. The Company has
also pledged certain commercial real estate and home equity loans with principal balances of
$90,393 at December 31, 2008. At December 31, 2008 and 2007, the carrying amount of assets
qualifying as collateral for FHLB advances amounted to $391,011 and $351,074, respectively.
 F-27




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 11.
    
    INCOME TAXESAllocation of the federal and state income taxes between current and deferred portions is as
follows:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Current tax provision:Federal
    
    $
    2,631
    
    
    $
    1,178
    
    
    $
    2,711State
    
    
    550
    
    
    
    90
    
    
    
    1,1623,181
    
    
    
    1,268
    
    
    
    3,873Deferred tax benefit:Federal
    
    
    (740
    )
    
    
    405
    
    
    
    (976
    )State
    
    
    (220
    )
    
    
    191
    
    
    
    (1,117
    )(960
    )
    
    
    596
    
    
    
    (2,093
    )Change in valuation reserve
    
    
    (252
    )
    
    
    (332
    )
    
    
    (2,138
    )(1,212
    )
    
    
    264
    
    
    
    (4,231
    )Total tax provision (benefit)
    
    $
    1,969
    
    
    $
    1,532
    
    
    $
    (358
    )
 The reasons for the differences between the statutory federal income tax rate and the
effective tax rates are summarized as follows:
 Years Ended December 31,2008
    
    2007
    
    2006Statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Increase (decrease) resulting from:State taxes, net of federal tax
    
    
    3.9
    
    
    
    3.6
    
    
    
    0.7Change in valuation reserve
    
    
    (4.5
    )
    
    
    (6.4
    )
    
    
    (40.2
    )Non-deductible merger costs
    
    
    3.0
    
    
    
    
    
    
    
    Officers life insurance
    
    
    (2.4
    )
    
    
    (2.5
    )
    
    
    (2.6
    )Other, net
    
    
    0.9
    
    
    
    0.9
    
    
    
    (0.1
    )Effective tax rates
    
    
    34.9
    %
    
    
    29.6
    %
    
    
    (8.2
    )%
 F-28




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 INCOME TAXES (continued)The components of the net deferred tax asset included in other assets are as follows:
 December 31,2008
    
    
    2007Deferred tax liabilities:Federal
    
    $
    (1,732
    )
    
    $
    (1,425
    )State
    
    
    (368
    )
    
    
    (478
    )(2,100
    )
    
    
    (1,903
    )Deferred tax assets:Federal
    
    
    5,749
    
    
    
    5,477State
    
    
    1,510
    
    
    
    1,4747,259
    
    
    
    6,951Valuation reserve
    
    
    
    
    
    
    (252
    )7,259
    
    
    
    6,699Net deferred tax asset
    
    $
    5,159
    
    
    $
    4,796
 The tax effect of each item that gives rise to deferred taxes are as follows:
 December 31,2008
    
    
    2007Allowance for loan losses
    
    $
    3,250
    
    
    $
    2,362Employee benefit plans
    
    
    2,021
    
    
    
    1,656Net unrealized (gain) loss on securities available
for sale
    
    
    (743
    )
    
    
    106Depreciation
    
    
    (73
    )
    
    
    (155
    )Net deferred loan costs
    
    
    (452
    )
    
    
    (379
    )Mortgage servicing rights
    
    
    (137
    )
    
    
    (242
    )Capital loss carryforward
    
    
    
    
    
    
    252Deferred gain on sale of premises
    
    
    1,310
    
    
    
    1,445Charitable contribution carryover
    
    
    560
    
    
    
    848Purchase accounting adjustments
    
    
    (753
    )
    
    
    (989
    )Other, net
    
    
    176
    
    
    
    1445,159
    
    
    
    5,048Valuation reserve
    
    
    
    
    
    
    (252
    )Deferred tax asset
    
    $
    5,159
    
    
    $
    4,796
 F-29




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 INCOME TAXES (concluded)At December 31, 2008, the Company has a $1,647 charitable contribution carryforward, which
will expire in 2010 if not fully utilized.The change in the valuation reserve for the year ended December 31, 2008 is due to the
utilization of the $740 capital loss carryover as of December 31, 2007. The change in the
valuation reserve for the year ended December 31, 2007 was due to the $708 increase in the
capital loss carryover, and the sale of land which had been previously written down by
$1,400. The change in the valuation reserve for the year ended December 31, 2006 is due to
the utilization of $5,182 of a capital loss carryover and the expiration of $1,139 of a
capital loss carryover.The federal income tax reserve for loan losses at the Companys base year amounted to $3,055.
If any portion of the reserve is used for purposes other than to absorb loan losses,
approximately 150% of the amount actually used (limited to the amount of the reserve) would
be subject to taxation in the year in which used. As the Bank intends to use the reserve
only to absorb loan losses, a deferred tax liability of $1,220 has not been provided.
 12.
    
    OTHER COMMITMENTS AND CONTINGENCIESIn the normal course of business, there are outstanding commitments which are not reflected
in the accompanying consolidated financial statements.
 Loan commitmentsThe Bank is a party to financial instruments with off-balance-sheet risk in the normal course
of business to meet the financing needs of its customers. These financial instruments
include commitments to extend credit and advance funds on outstanding lines-of-credit. Such
commitments involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets.The Banks exposure to credit loss is represented by the contractual amount of the
commitments. The Bank uses the same credit policies in making commitments as it does for
on-balance-sheet instruments.
 F-30




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 OTHER COMMITMENTS AND CONTINGENCIES (continued)
 Loan commitments (concluded)At December 31, 2008 and 2007, the following financial instruments were outstanding whose
contract amounts represent credit risk:
 December 31,2008
    
    2007Commitments to grant loans
    
    $
    6,707
    
    
    $
    15,097Unadvanced funds on construction loans
    
    
    13,924
    
    
    
    25,126Unadvanced funds on home equity lines-of-credit
    
    
    45,777
    
    
    
    42,691Unadvanced funds on commercial lines-of-credit
    
    
    35,841
    
    
    
    29,909Unadvanced funds on personal lines-of-credit
    
    
    2,444
    
    
    
    2,413Commercial letters of credit
    
    
    783
    
    
    
    1,213
 Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. The
commitments for lines-of-credit may expire without being drawn upon, therefore, the total
commitment amounts do not necessarily represent future cash requirements. The Bank evaluates
each customers credit worthiness on a case-by-case basis. Funds disbursed under commitments
to grant loans and extend advances for construction loans and home equity lines-of-credit are
primarily secured by real estate, and commercial lines-of-credit are generally secured by
business assets. Personal lines-of-credit are unsecured.Commercial letters-of-credit are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Those letters-of-credit are primarily issued to
support public and private borrowing arrangements. Essentially all letters of credit issued
have expiration dates within one year. The credit risk involved in issuing letters-of-credit
is essentially the same as that involved in extending loan facilities to customers. The Bank
generally holds collateral supporting those commitments.
 Derivative financial instrumentsLoan commitments pertaining to loans that the Bank is originating for sale are, by
definition, derivative financial instruments. The Bank enters into investor loan sale
commitments to mitigate the interest rate risk inherent in fixed-rate loan commitments.
These sale commitments also meet the characteristics of a derivative financial instrument.
These transactions involve both credit and market risk.
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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 OTHER COMMITMENTS AND CONTINGENCIES (concluded)Derivative financial instruments (concluded)Loan commitments with individual borrowers require the Bank to originate a loan upon
completion of various underwriting requirements, and may lock an interest rate at the time of
commitment. In turn, the Bank generally enters into investor loan sale commitments which
represent agreements to sell these loans to investors at a predetermined price. If the
individual loan is not available for sale (i.e. the loan does not close), the Bank may fill
the commitment with a similar loan, or pay a fee to terminate the contract. At December 31,
2008 and 2007, the Bank had $10,914 and $807, respectively, in commitments to grant mortgage
loans originated for sale under rate lock agreements with borrowers. At December 31, 2008
and 2007, the Bank had $10,914 and $807, respectively, in outstanding investor loan sale
commitments. The fair value of these derivative financial instruments is zero at the date of
commitment and subsequent changes are not material.Other contingenciesVarious legal claims also arise from time to time in the normal course of business which, in
the opinion of management, will have no material effect on the Companys consolidated
financial statements.
 13.
    
    STOCKHOLDERS EQUITYMinimum regulatory capital requirementsThe Company and the Bank are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Companys and the Banks consolidated
financial statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific capital guidelines that
involve quantitative measures of its assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The capital amounts and classification
are also subject to qualitative judgments by the regulators about components, risk weightings
and other factors. Bank holding companies are not covered by the prompt corrective action
provisions of the capital guidelines.Quantitative measures established by regulation to ensure capital adequacy require the
Company and the Bank to maintain minimum amounts and ratios (set forth in the following
table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined) and of
Tier 1 capital to average assets (as defined). Management believes, as of December 31, 2008
and 2007, that the Company and the Bank meet all capital adequacy requirements to which they
are subject.
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 STOCKHOLDERS EQUITY (continued)Minimum regulatory capital requirements (continued)As of December 31, 2008, the most recent notification from the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the
following table. There are no conditions or events since the notification that management
believes have changed the Banks category. The Companys and the Banks actual capital
amounts and ratios as of December 31, 2008 and 2007 are also presented in the table.
 MinimumTo Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirements
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioDecember 31, 2008:Total capital to risk weighted assets:Consolidated
    
    $
    81,098
    
    
    
    11.7
    %
    
    $
    55,372
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    72,719
    
    
    
    10.5
    
    
    
    55,378
    
    
    
    8.0
    
    
    $
    69,222
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:Consolidated
    
    
    73,028
    
    
    
    10.6
    
    
    
    27,686
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    64,649
    
    
    
    9.3
    
    
    
    27,689
    
    
    
    4.0
    
    
    
    41,533
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    73,028
    
    
    
    7.7
    
    
    
    38,142
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    64,649
    
    
    
    6.8
    
    
    
    38,144
    
    
    
    4.0
    
    
    
    47,679
    
    
    
    5.0December 31, 2007:Total capital to risk weighted assets:Consolidated
    
    $
    78,526
    
    
    
    12.3
    %
    
    $
    50,982
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    71,154
    
    
    
    11.2
    
    
    
    50,944
    
    
    
    8.0
    
    
    $
    63,680
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:Consolidated
    
    
    72,554
    
    
    
    11.4
    
    
    
    25,491
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    65,182
    
    
    
    10.2
    
    
    
    25,472
    
    
    
    4.0
    
    
    
    38,208
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    72,554
    
    
    
    8.3
    
    
    
    34,898
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    65,182
    
    
    
    7.5
    
    
    
    35,006
    
    
    
    4.0
    
    
    
    43,757
    
    
    
    5.0
 F-33




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 STOCKHOLDERS EQUITY (continued)Minimum regulatory capital requirements (concluded)A reconciliation of the Companys and Banks stockholders equity to regulatory capital
follows:
 December 31, 2008
    
    
    December 31, 2007Consolidated
    
    
    Bank
    
    
    Consolidated
    
    
    BankTotal stockholders equity per
financial statements
    
    $
    109,795
    
    
    $
    101,416
    
    
    $
    107,444
    
    
    $
    100,072Adjustments for Tier 1 capital:Goodwill
    
    
    (33,763
    )
    
    
    (33,763
    )
    
    
    (33,763
    )
    
    
    (33,763
    )Intangible assets
    
    
    (1,914
    )
    
    
    (1,914
    )
    
    
    (2,474
    )
    
    
    (2,474
    )Net unrealized loss (gain) on securities
available for sale, net of tax
    
    
    (1,232
    )
    
    
    (1,232
    )
    
    
    1,150
    
    
    
    1,150Net unrealized loss on mutual fund
    
    
    (55
    )
    
    
    (55
    )
    
    
    
    
    
    
    Unrecognized gains and prior service cost
pertaining to defined benefit plan, net of tax
    
    
    197
    
    
    
    197
    
    
    
    197
    
    
    
    197Total Tier 1 capital
    
    
    73,028
    
    
    
    64,649
    
    
    
    72,554
    
    
    
    65,182Adjustments for total capital:Allowance for loan losses
    
    
    7,929
    
    
    
    7,929
    
    
    
    5,789
    
    
    
    5,789Allowance for unfunded lending
commitments
    
    
    141
    
    
    
    141
    
    
    
    183
    
    
    
    183Total capital per regulatory reporting
    
    $
    81,098
    
    
    $
    72,719
    
    
    $
    78,526
    
    
    $
    71,154
 Common stock repurchasesIn 2008, the Company repurchased 190,000 shares of its common stock at a total cost of $2,608
or $13.72 per share on average. These shares were repurchased under a plan authorized by the
Board of Directors on November 29, 2007. 394,200 shares were authorized for repurchase under
the November 29, 2007 plan, 29,400 of which were repurchased during 2007, leaving 174,800
available for repurchase as of December 31, 2008.
 F-34




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 STOCKHOLDERS EQUITY (concluded)Liquidation accountAt the time of the conversion from mutual to stock form in 2005 (the Conversion), the
Company established a liquidation account in the amount of $31,327 which was equal to the net
worth of the Company as of the date of the latest consolidated balance sheet appearing in the
final prospectus distributed in connection with the Conversion. The liquidation account is
maintained for the benefit of eligible account holders and supplemental eligible account
holders who maintain their deposit accounts at the Bank after the Conversion. The
liquidation account will be reduced annually to the extent that such account holders have
reduced their qualifying deposits as of each anniversary date. Subsequent increases will not
restore an account holders interest in the liquidation account. In the event of a complete
liquidation, each eligible account holder will be entitled to receive balances for accounts
then held.
 14.
    
    RESTRICTIONS ON DIVIDENDS, LOANS AND ADVANCESFederal and state banking regulations place certain restrictions on dividends paid and loans
or advances made by the Bank to the Company. While Federal regulations limit the amount of
dividends that may be paid at any date to the retained earnings of the Bank, for State
regulatory purposes, the approval of the Massachusetts Commissioner of Banks is required if
the total of all dividends declared in any calendar year exceeds the total of the Banks net
profits for that year combined with its retained net profits of the preceding two years.
Loans or advances are limited to 10 percent of the Banks capital stock and surplus on a
secured basis.At December 31, 2008, the Banks total retained earnings available for the payment of
dividends was $41,105. Accordingly, $60,311 of the Companys equity in the net assets of the
Bank was restricted at December 31, 2008. At December 31, 2008, any dividend paid by the
Bank in excess of $6,427 requires the approval of the Massachusetts Commissioner of Banks.
Funds available for loans or advances by the Bank to the Company amounted to $10,142.The Company may not declare or pay dividends on, and may not repurchase, any of its shares of
common stock if the effect thereof would cause stockholders equity to be reduced below
applicable regulatory capital maintenance requirements or if such declaration, payment or
repurchase would otherwise violate regulatory requirements or impair the liquidation account
established for the benefit of the Banks eligible account holders and supplemental account
holders at the time of the Conversion.
 F-35




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 15.
    
    EMPLOYEE BENEFIT PLANS401(k)planThe Bank adopted a 401(k) savings plan, which provides for voluntary contributions by
participating employees up to seventy-five percent of their compensation, subject to certain
limitations. Prior to January 1, 2008, the Bank matched two hundred percent of an employees
contribution to the 401(k) plan subject to a maximum of 6% of the employees compensation.
Effective January 1, 2008, the Bank, at its discretion, matches an employees contribution up
to a maximum of 4% of the employees compensation. Total expense under the 401(k) plan for
the years ended December 31, 2008, 2007 and 2006, amounted to $323, $507 and $462,
respectively.Supplemental retirement plansThe Bank has adopted a Supplemental Executive Retirement Plan, which provides for certain of
the Banks executives to receive monthly benefits upon retirement, subject to certain
limitations as set forth in the Plan and a Benefit Restoration Plan which provides for
restorative payments equal to (1) the amount of additional benefits the participants would
receive under the 401(k) plan if there were no income limitations imposed by the Internal
Revenue Service and (2) projected allocation under the ESOP plan as if the participant had
continued through the full vesting term of the plan upon retirement. Vesting under the
Supplemental Executive Retirement Plan will fully accelerate upon the officers death,
disability, termination without cause, resignation for good reason or change in control (as
defined). The present value of these future benefits is accrued over the executives
required service periods, and the expense for the years ended December 31, 2008, 2007 and
2006 amounted to $599, $758 and $443, respectively.
 F-36




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 EMPLOYEE BENEFIT PLANS (continued)Director fee continuation planEffective April 4, 2005, the Company established an unfunded director fee continuation plan
which provides certain benefits to all eligible non-employee members of the boards of
directors of the Company and Bank upon retirement. Information pertaining to the activity in
the plan follows:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    918
    
    
    $
    801
    
    
    $
    788Service cost
    
    
    26
    
    
    
    44
    
    
    
    65Interest cost
    
    
    50
    
    
    
    45
    
    
    
    45Change in discount rate
    
    
    
    
    
    
    
    
    
    
    (9
    )Actuarial gain (loss)
    
    
    30
    
    
    
    64
    
    
    
    (88
    )Benefits paid
    
    
    (36
    )
    
    
    (36
    )
    
    
    Benefit obligation at end of year
    
    
    988
    
    
    
    918
    
    
    
    801Fair value of plan assets at end of year
    
    
    
    
    
    
    
    
    
    
    Funded status and accrued pension cost
    
    $
    988
    
    
    $
    918
    
    
    $
    801Accumulated benefit obligation at end of year
    
    $
    (859
    )
    
    $
    (826
    )
    
    $
    (718
    )
 The assumptions used to determine the benefit obligation are as follows:
 December 31,2008
    
    2007Discount rate
    
    
    5.50
    %
    
    
    6.00
    %Rate of fee increase
    
    
    2.00
    
    
    
    2.00
 F-37




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 EMPLOYEE BENEFIT PLANS (continued)Director fee continuation plan (concluded)The components of net periodic pension cost are as follows:
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Service cost
    
    $
    26
    
    
    $
    44
    
    
    $
    65Interest cost
    
    
    50
    
    
    
    45
    
    
    
    45Amortization of prior service cost
    
    
    103
    
    
    
    103
    
    
    
    103Recognized net actuarial gain
    
    
    (28
    )
    
    
    (27
    )
    
    
    (14
    )$
    151
    
    
    $
    165
    
    
    $
    199
 The following amounts, included in accumulated other comprehensive income at December 31,
2008, are expected to be recognized as components of net periodic pension cost for the year
ending December 31, 2009:
 Actuarial gain
    
    $
    (2
    )Prior service costs
    
    $
    103
 The assumptions used to determine net periodic pension cost are as follows:
 Years Ended December 31,2008
    
    2007
    
    2006Discount rate
    
    
    5.50
    %
    
    
    6.00
    %
    
    
    5.75
    %Annual salary increase
    
    
    2.00
    
    
    
    2.00
    
    
    
    2.00
 Estimated future benefit payments, which reflect expected future service, as appropriate, are
as follows:
 Year EndingDecember 31,
    
    Amount2009
    
    $
    742010
    
    
    1282011
    
    
    1882012
    
    
    1572013
    
    
    120Years 2014-2018
    
    
    419
 F-38




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 EMPLOYEE BENEFIT PLANS (continued)Executive employment and change in control agreementsThe Bank has entered into Executive Employment Agreements with the President and the Chief
Financial Officer for an initial term of three years. These agreements provide for, among
other things, an annual base salary, severance and full acceleration of vesting under
outstanding restricted stock awards and options upon termination of employment, which
includes termination as a result of change in control. The agreements also provide for
indemnification for any impact from excise taxes due under Section 280G of the Internal
Revenue Code. However, such employment may be terminated for cause, as defined, without
incurring any continuing obligation. These agreements also provide for automatic extensions
such that, at any point in time, the then-remaining term of employment shall be three years.The Company has also entered into Change in Control Agreements with five of its senior
officers, which provide for a lump sum severance payment equal to either one or two times the
officers annual compensation, as defined, and certain other benefits upon termination of the
officers employment under certain circumstances within two years after a change in control,
including full acceleration of vesting under outstanding restricted stock and option plans.
Further, the Company established at the time of conversion an employee salary continuation
plan that will provide eligible employees with certain severance benefits in the event their
employment is terminated within one year following a change in control.Employee Stock Ownership PlanAs part of the Conversion, the Bank established an Employee Stock Ownership Plan (ESOP) for
the benefit of its eligible employees. The Company provided a loan to the Benjamin Franklin
Bank Employee Stock Ownership Trust of $5,538, which was used to purchase 478,194 shares of
the Companys outstanding stock. The loan bears interest equal to 5.75% and provides for
annual payments of interest and principal over the 30-year term of the loan.
 F-39




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 EMPLOYEE BENEFIT PLANS (concluded)
 Employee Stock Ownership Plan (concluded)
  Years EndingDecember 31,
    
    Amount2009
    
    $
    882010
    
    
    942011
    
    
    992012
    
    
    1042013
    
    
    111Thereafter
    
    
    4,594$
    5,090
   December 31,2008
    
    2007Allocated
    
    
    45,131
    
    
    
    30,989Committed to be allocated
    
    
    15,940
    
    
    
    15,940Unallocated
    
    
    414,434
    
    
    
    430,374475,505
    
    
    
    477,303
   F-40




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 16.
    
    SHARE-BASED COMPENSATION PLANS
  Restricted stock awards
  WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueRestricted stock at beginning of year
    
    
    174,243
    
    
    $
    13.82Granted
    
    
    2,000
    
    
    
    13.01Vested
    
    
    (47,616
    )
    
    
    13.78Forfeited
    
    
    (400
    )
    
    
    13.95Restricted stock at end of year
    
    
    128,227
    
    
    $
    13.82
  F-41




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SHARE-BASED COMPENSATION PLANS (continued)
 Stock options
   2008
    
    2007
    
    2006Fair value
    
    $
    2.26
    
    
    $
    2.26
    
    
    $
    3.86Risk-free interest rate
    
    
    3.41
    %
    
    
    3.41
    %
    
    
    4.49
    %Expected dividend yield
    
    
    1.90
    %
    
    
    1.90
    %
    
    
    0.85
    %Expected volatility
    
    
    18.71
    %
    
    
    18.71
    %
    
    
    14.66
    %Expected term
    
    5 years
    
    5 years
    
    7 years
  F-42




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 SHARE-BASED COMPENSATION PLANS (concluded)
 Stock options (concluded)
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (In Years)
    
    
    ValueOutstanding at beginning
of year
    
    
    541,766
    
    
    $
    13.64Granted
    
    
    6,000
    
    
    
    13.01Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (12,195
    )
    
    
    13.63Expired
    
    
    
    
    
    
    Outstanding at end of year
    
    
    535,571
    
    
    $
    13.63
    
    
    
    4.9
    
    
    $
    692Exercisable at end of year
    
    
    206,875
    
    
    $
    13.77
    
    
    
    4.8
    
    
    $
    239
 Stock options and restricted stock awards
  2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    TotalStock options
    
    $
    246
    
    
    $
    153
    
    
    $
    85
    
    
    $
    52
    
    
    $
    1
    
    
    $
    537Restricted stock
    
    
    607
    
    
    
    523
    
    
    
    326
    
    
    
    45
    
    
    
    2
    
    
    
    1,503$
    853
    
    
    $
    676
    
    
    $
    411
    
    
    $
    97
    
    
    $
    3
    
    
    $
    2,040
 F-43




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 17.
    
    RELATED PARTY TRANSACTIONS
  Years Ended December 31,2008
    
    
    2007Beginning balance
    
    $
    3,683
    
    
    $
    3,136Originations
    
    
    373
    
    
    
    837Payments and change in status
    
    
    (2,004
    )
    
    
    (290
    )Ending balance
    
    $
    2,052
    
    
    $
    3,683
  18.
    
    FAIR VALUE OF ASSETS AND LIABILITIES
 Determination of fair value
  F-44




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 FAIR VALUE OF ASSETS AND LIABILITIES (continued)
 Fair value hierarchy
      Cash and cash equivalents
 Securities
  F-45




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 FAIR VALUE OF ASSETS AND LIABILITIES (continued)
 Loans
 Deposits .
 Short-term borrowings and long-term debt
 Accrued interest
 Off-balance-sheet instruments
 Assets measured at fair value on a recurring basis
  TotalLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair ValueSecurities available for sale
    
    $
    
    
    
    $
    187,956
    
    
    $
    
    
    
    $
    187,956
 F-46




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 FAIR VALUE OF ASSETS AND LIABILITIES (continued)
 Assets measured at fair value on a non-recurring basis
  Year EndedDecember 31, 2008
    
    
    December 31, 2008Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total LossesImpaired loans
    
    $
    
    
    
    $
    
    
    
    $
    6,288
    (A)
    
    $
    1,453
  
 (A)
    
    Represents impaired loans totaling $7,741, net of specific valuation reserves for
those loans totaling $1,453. F-47




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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 FAIR VALUE OF ASSETS AND LIABILITIES (concluded)
 Summary of Fair Values of Financial Instruments
  December 31,2008
    
    2007Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    45,627
    
    
    $
    45,627
    
    
    $
    64,591
    
    
    $
    64,591Securities available for sale
    
    
    187,956
    
    
    
    187,956
    
    
    
    156,761
    
    
    
    156,761Restricted equity securities
    
    
    11,695
    
    
    
    11,695
    
    
    
    11,591
    
    
    
    11,591Loans
    
    
    688,829
    
    
    
    706,151
    
    
    
    606,946
    
    
    
    606,915Accrued interest receivable
    
    
    3,667
    
    
    
    3,667
    
    
    
    3,648
    
    
    
    3,648Financial liabilities:Deposits
    
    
    652,928
    
    
    
    655,469
    
    
    
    617,368
    
    
    
    618,583Short-term borrowings
    
    
    34,500
    
    
    
    34,498
    
    
    
    2,500
    
    
    
    2,510Long-term debt
    
    
    189,046
    
    
    
    195,623
    
    
    
    162,784
    
    
    
    163,702Accrued interest payable
    
    
    766
    
    
    
    766
    
    
    
    721
    
    
    
    721
 F-48




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 19.
    
    CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
  December 31,BALANCE SHEETS
    
    2008
    
    
    2007AssetsCash due from Benjamin Franklin Bank
    
    $
    2,309
    
    
    $
    1,882Investment in common stock of Benjamin Franklin Bank
    
    
    101,416
    
    
    
    100,072Loan to Benjamin Franklin Bank ESOP
    
    
    5,090
    
    
    
    5,173Other assets
    
    
    1,046
    
    
    
    650Total assets
    
    $
    109,861
    
    
    $
    107,777Liabilities and Stockholders EquityTotal liabilities
    
    $
    66
    
    
    $
    333Stockholders equity
    
    
    109,795
    
    
    
    107,444Total liabilities and stockholders equity
    
    $
    109,861
    
    
    $
    107,777
 Years Ended December 31,STATEMENTS OF INCOME
    
    2008
    
    
    2007
    
    
    2006Income:Dividends from Benjamin Franklin Bank
    
    $
    4,227
    
    
    $
    633
    
    
    $
    633Interest on investments
    
    
    341
    
    
    
    615
    
    
    
    692Total income
    
    
    4,568
    
    
    
    1,248
    
    
    
    1,325Other operating expenses
    
    
    
    
    
    
    768
    
    
    
    642Income before income taxes and equity in
undistributed
net income of Benjamin Franklin Bank
    
    
    4,568
    
    
    
    480
    
    
    
    683Applicable income tax provision (benefit)
    
    
    139
    
    
    
    (52
    )
    
    
    204,429
    
    
    
    532
    
    
    
    663Equity in undistributed net income (loss) of
Benjamin
Franklin Bank
    
    
    (760
    )
    
    
    3,110
    
    
    
    4,077Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740
 F-49




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in Thousands, Except per Share Amounts)
 CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (concluded)
 Years Ended December 31,STATEMENTS OF CASH FLOWS
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    3,669
    
    
    $
    3,642
    
    
    $
    4,740Adjustments to reconcile net income to net
cash provided by operating activities:Equity in undistributed net income (loss) of
Benjamin Franklin Bank
    
    
    760
    
    
    
    (3,110
    )
    
    
    (4,077
    )Decrease (increase) in other assets
    
    
    (396
    )
    
    
    257
    
    
    
    2,233Increase (decrease) in other liabilities
    
    
    (267
    )
    
    
    231
    
    
    
    69Other, net
    
    
    795
    
    
    
    1,248
    
    
    
    517Net cash provided by operating activities
    
    
    4,561
    
    
    
    2,268
    
    
    
    3,482Cash flows from investing activities:Redemption of money market account
    
    
    652
    
    
    
    
    
    
    
    Repayment of ESOP loan
    
    
    83
    
    
    
    79
    
    
    
    74Net cash provided by investing activities
    
    
    735
    
    
    
    79
    
    
    
    74Cash flows from financing activities:Common stock repurchased
    
    
    (2,608
    )
    
    
    (6,271
    )
    
    
    (3,373
    )Repayment of subordinated debt
    
    
    
    
    
    
    (9,000
    )
    
    
    Dividends paid on common stock
    
    
    (2,261
    )
    
    
    (1,761
    )
    
    
    (1,048
    )Net cash used by financing activities
    
    
    (4,869
    )
    
    
    (17,032
    )
    
    
    (4,421
    )Net change in cash and cash equivalents
    
    
    427
    
    
    
    (14,685
    )
    
    
    (865
    )Cash and cash equivalents at beginning of year
    
    
    1,882
    
    
    
    16,567
    
    
    
    17,432Cash and cash equivalents at end of year
    
    $
    2,309
    
    
    $
    1,882
    
    
    $
    16,567
 F-50




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
 (Dollars in Thousands, Except per Share Amounts)
 NOTE 20  QUARTERLY DATA (UNAUDITED)
 Years Ended December 31,2008
    
    
    2007Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterInterest and dividend income
    
    $
    12,385
    
    
    $
    12,363
    
    
    $
    12,100
    
    
    $
    12,299
    
    
    $
    12,201
    
    
    $
    12,081
    
    
    $
    12,052
    
    
    $
    11,839Interest expense
    
    
    5,138
    
    
    
    5,439
    
    
    
    5,604
    
    
    
    5,993
    
    
    
    6,160
    
    
    
    6,315
    
    
    
    6,000
    
    
    
    6,013Net interest income
    
    
    7,247
    
    
    
    6,924
    
    
    
    6,496
    
    
    
    6,306
    
    
    
    6,041
    
    
    
    5,766
    
    
    
    6,052
    
    
    
    5,826Provision for loan losses (1)
    
    
    1,169
    
    
    
    447
    
    
    
    368
    
    
    
    314
    
    
    
    165
    
    
    
    57
    
    
    
    229
    
    
    
    183Net interest income, after provision
for loan losses
    
    
    6,078
    
    
    
    6,477
    
    
    
    6,128
    
    
    
    5,992
    
    
    
    5,876
    
    
    
    5,709
    
    
    
    5,823
    
    
    
    5,643Non-interest income
    
    
    1,402
    
    
    
    1,286
    
    
    
    1,504
    
    
    
    1,479
    
    
    
    1,965
    
    
    
    2,079
    
    
    
    1,794
    
    
    
    1,972Non-interest expenses (2)
    
    
    7,017
    
    
    
    6,001
    
    
    
    5,910
    
    
    
    5,780
    
    
    
    6,226
    
    
    
    6,250
    
    
    
    6,425
    
    
    
    6,786Income before income taxes
    
    
    463
    
    
    
    1,762
    
    
    
    1,722
    
    
    
    1,691
    
    
    
    1,615
    
    
    
    1,538
    
    
    
    1,192
    
    
    
    829Provision for income taxes
    
    
    299
    
    
    
    541
    
    
    
    551
    
    
    
    578
    
    
    
    465
    
    
    
    467
    
    
    
    362
    
    
    
    238Net income
    
    $
    164
    
    
    $
    1,221
    
    
    $
    1,171
    
    
    $
    1,113
    
    
    $
    1,150
    
    
    $
    1,071
    
    
    $
    830
    
    
    $
    591Earnings per common share:Basic
    
    $
    0.02
    
    
    $
    0.17
    
    
    $
    0.16
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.11
    
    
    $
    0.08Diluted
    
    $
    0.02
    
    
    $
    0.17
    
    
    $
    0.16
    
    
    $
    0.15
    
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.11
    
    
    $
    0.07
 
 (1)
    
    Increase in the fourth quarter of 2008 is primarily due to the $726 increase in the valuation allowance allocated to one non-performing commercial
loan relationship.(2)
    
    Increase in the fourth quarter of 2008 is primarily due to expenses associated with pending merger (See Note 1). F-51