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  **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, 2004.** **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 FranklinBancorp, 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 executiveoffices)***SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THEACT:****None****SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THEACT:****Common Stock, no par value**      Indicate by check mark whether the registrant (1) has filedall reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has beensubject to such filing requirements for the past90 days.     Yes o          No þ.     Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.     þ     Indicate by check mark whether the registrant is an acceleratedfiler (as defined in Rule 12b-2 of theAct).     Yes o          No þ.     The registrant had not issued any shares of capital stock as ofJune 30, 2004, the last business day of theregistrant’s most recently completed second fiscal quarter.     As of March 25, 2005, we had no outstanding shares ofcommon stock.**DOCUMENTS INCORPORATED BY REFERENCE**     None.  

**TABLE OF CONTENTS**           **Page**     ** PART I**  2 ** Item 1.** ** Business**           General  2        Chart Bank Acquisition  2        The Mutual-to-Stock Conversion  3        Market Area and Competition  3        Lending Activities  4        Asset Quality  12        Investment Activities  18        Sources of Funds  20        Employees  23        Subsidiary Activities  23        The Benjamin Franklin Bank Charitable    Foundation  24        Regulation and Supervision  24        Risk Factors That May Affect Future    Results  32        Forward-Looking Statements  38 ** Item 2.** ** Properties**  39 ** Item 3.** ** Legal Proceedings**  40 ** Item 4.** ** Submission of Matters to a Vote of    Security Holders**  40 ** PART II**  40 ** Item 5.** ** Market for Registrant’s Common    Equity, Related Stockholder Matters and Issuer Purchases of    Equity Securities**  40 ** Item 6.** ** Selected Financial Data**  41 ** Item 7.** ** Management’s Discussion and    Analysis of Financial Condition and Results of Operations**  43 ** Item 7A.** ** Quantitative and Qualitative Disclosures    about Market Risk**  52 ** Item 8.** ** Financial Statements and Supplementary    Data**  57 ** Item 9.** ** Changes in and Disagreements With    Accountants on Accounting and Financial Disclosure**  57 ** Item 9A.** ** Controls and Procedures**  58 ** Item 9B.** ** Other Information**  58 ** PART III**  58 ** Item 10.** ** Directors and Executive Officers of the    Registrant**  58 ** Item 11.** ** Executive Compensation**  64 ** Item 12.** ** Security Ownership of Certain Beneficial    Owners and Management and Related Stockholder Matters**  71 ** Item 13.** ** Certain Relationships and Related    Transactions**  71 ** Item 14.** ** Principal Accountant Fees and    Services**  74 ** PART IV**  74 ** Item 15.** ** Exhibits and Financial Statement    Schedules**  74  EX-10.1.1 Form of Employment Agreement with Thomas R. Venables EX-10.1.2 Form of Employment Agreement with Claire S. Bean EX-23.1 Consent of Wolf & Company, P.C., independent registered public accounting firm EX-31.1 Section 302 Certification of CEO EX-31.2 Section 302 Certification of CFO EX-32.1 Section 906 Certification of CEO EX-32.2 Section 906 Certification of CFO
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**PART I****Item 1.*****Business*****General**     Benjamin Franklin Bancorp was organized in 1996 as a mutualholding company in connection with Benjamin Franklin Bank’sreorganization into the mutual holding company form oforganization. Benjamin Franklin Bancorp is registered with theFederal Reserve Board as a bank holding company under the BankHolding Company Act. Since the formation of Benjamin FranklinBancorp, it has owned 100% of Benjamin Franklin Bank’soutstanding capital stock and will continue to do so after thecompletion of the pending conversion from mutual to stock form,as described below. At December 31, 2004, Benjamin FranklinBancorp had total assets of $517.4 million and totaldeposits of $396.5 million.     Benjamin Franklin Bank is a full-service, community-orientedfinancial institution offering products and services toindividuals, families and businesses through six offices locatedin Norfolk and Worcester counties in Massachusetts. BenjaminFranklin Bank was originally organized as a Massachusettsstate-charted mutual savings bank in 1871. In 1996, it became aMassachusetts-chartered savings bank in stock form upon theformation of Benjamin Franklin Bancorp as its mutual holdingcompany.     Benjamin Franklin Bank’s business consists primarily ofmaking loans to its customers, including residential mortgages,commercial real estate loans, construction loans, commercialbusiness loans and consumer loans, and investing in a variety ofinvestment and mortgage-backed securities. Benjamin FranklinBank funds these lending and investment activities with depositsfrom the general public, funds generated from operations andselected borrowings.     Our principal website is www.benfranklinbank.com. We willmake our annual, quarterly and current reports, and amendmentsto those reports, available free of charge onwww.benfranklinbank.com, as soon as reasonablypracticable after we electronically file such material with, orfurnish it to, the Securities and Exchange Commission. Reportsof beneficial ownership of our common stock, and changes in thatownership, by directors and officers on Forms 3, 4 and 5will likewise be available free of charge on our website. Theinformation on our website is not incorporated by reference inthis annual report on Form 10-K or in any other report,schedule, notice or registration statement filed with orsubmitted to the SEC. The SEC maintains an Internet site thatcontains reports, proxy and information statements, and otherinformation regarding issuers that file electronically atwww.sec.gov. You may also read and copy the materials wefile with the SEC at the SEC’s Public Reference Room at450 Fifth Street, NW., Washington, DC 20549. You may obtaininformation on the operation of the Public Reference Room bycalling the SEC at 1-800-SEC-0330.**Chart Bank Acquisition**     On September 1, 2004, we entered into an agreement toacquire Chart Bank, which operates through two offices inWaltham and one office in Newton, Massachusetts. AtDecember 31, 2004, Chart Bank had total assets of$258.5 million and total deposits of $208.7 million.Pursuant to our merger agreement with Chart Bank, datedSeptember 1, 2004, Chart Bank will merge into and become apart of our subsidiary bank, Benjamin Franklin Bank, immediatelyfollowing completion of the mutual-to-stock conversion.     The acquisition will enable us to expand our branch network intoMiddlesex County, Massachusetts, where Chart Bank maintains twooffices in Waltham and one office in Newton. In addition toexpanding our geographic branching outreach, this acquisitionwill enable us to leverage our capital base and is expected toimprove operating efficiency through increased scale.     In our merger agreement with Chart Bank, we agreed that theChart Bank stockholders may elect to receive either $30.75 incash or 3.075 shares of our common stock for each share ofChart Bank stock held by them, with 45.0% of the aggregateconsideration to be paid in cash and 55.0% of the aggregateconsideration to be paid in common stock. The aggregateconsideration for the Chart Bank acquisition will be $21,477,250in cash and 2,503,050 shares of our common stock, assumingthat the 77,000 Chart Bank
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options outstanding as of March 25, 2005 are cashed out atthe closing rather than being exercised by optionees prior tothe closing. At December 31, 2004, 137,000 Chart Bankoptions were outstanding, 60,000 of which had been exercised asof March 25, 2005.**The Mutual-to-Stock Conversion**     To provide us with the capital and the form of considerationnecessary to acquire Chart Bank, we are in the process ofconverting from the mutual form (meaning no stockholders) to thestock form (100% owned by public stockholders if the conversionand related public offering are successful) and raisingadditional capital through such a stock offering. Other reasonsfor the conversion include: •     to support internal growth through lending in the communities we    serve;  •     to enhance existing products and services and support the    development of new products and services;  •     to facilitate growth through *de novo*branching;  •     to facilitate growth through branch and whole bank acquisitions    as opportunities arise; and  •     to improve our overall competitive position.     As a stock holding company, we will have greater flexibility instructuring further mergers and acquisitions, including the formof consideration that we can use to pay for an acquisition. Ourcurrent mutual holding company structure precludes us fromoffering shares of common stock as consideration in a merger oracquisition. Potential sellers often want stock for at leastpart of the purchase price, because the exchange of stockprovides the opportunity to enjoy future investment growth andto defer the recognition of capital gains. Our new stock holdingcompany structure will enable us to offer stock or cashconsideration, or a combination thereof and will, therefore,enhance our ability to compete with other bidders whenacquisition opportunities arise. Other than our agreement toacquire Chart Bank, we currently have no arrangements orunderstandings regarding any specific acquisition.**Market Area and Competition**     We offer a variety of financial products and services designedto meet the needs of the communities we serve. Our primarydeposit-gathering area is concentrated southwest of Boston inthe communities in which our six banking offices arelocated — specifically in the towns of Franklin,Foxboro, Bellingham, Milford, and Medfield — and incontiguous communities in Norfolk and Worcester Counties. Ourlending area is broader than our deposit-gathering area andincludes all of Massachusetts and northern Rhode Island,although most of our loans are made to customers located in ourprimary deposit-gathering market area.     We are headquartered in Franklin, Massachusetts, located41 miles southwest of Boston. Five of the six BenjaminFranklin Bank offices are located in Norfolk County, while oneoffice is located just across the county border in the town ofMilford, in Worcester County. The counties in which BenjaminFranklin Bank currently operates include a mixture of rural,suburban and urban markets. The economies of these areas werehistorically based on manufacturing, but similar to many areasof the country, have now evolved into more service-orientedeconomies with employment in most large economic sectorsincluding wholesale/retail trade, service, manufacturing,finance, real estate and government. A large portion of NorfolkCounty residents work in other nearby areas, including the Cityof Boston and the greater Boston area. There is also significantemployment located along the I-495 corridor, which runs directlythrough Benjamin Franklin Bank’s Norfolk County market area.     According to published statistics, Norfolk County’spopulation has grown by 0.3% since the year 2000 to a total of657,000 in 2004. Per capita income for the county has grown by4.0% since 2000 to $38,037, 27.5% higher than that ofMassachusetts and 57.9% higher than the U.S. as a whole.Median household income for Norfolk County was $72,764, 27.6%higher than for the state and 56.6% higher than the
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U.S. average. The unemployment rate for the county stood at4.5% as of August 2004, lower than the state average of 4.6% andthe U.S. average of 5.4%.     We face substantial competition in our efforts to originateloans and attract deposits and other fee-based business. We facedirect competition from a significant number of financialinstitutions, many with a state-wide, regional or nationalpresence. Many of these financial institutions are significantlylarger and have greater financial resources than BenjaminFranklin Bank.**Lending Activities**     *General.*Benjamin Franklin Bank’s gross loanportfolio aggregated $383.4 million at December 31,2004, representing 74.1% of total assets at that date. In itslending activities, Benjamin Franklin Bank originatesresidential real estate loans secured by one-to-four-familyresidences, commercial real estate loans, residential andcommercial construction loans, commercial loans, home equitylines-of-credit, fixed rate home equity loans, and otherpersonal consumer loans. While Benjamin Franklin Bank makesloans throughout Massachusetts and northern Rhode Island, mostof its lending activities are concentrated in its market area.Loans originated totaled $246.9 million in 2003 and$207.6 million in 2004. Residential mortgage loans sold inthe secondary market, on a servicing-retained basis, totaled$97.2 million and $31.3 million during those sameperiods.     Loans originated by Benjamin Franklin Bank are subject tofederal and state laws and regulations. Interest rates chargedby Benjamin Franklin Bank on its loans are influenced by thedemand for such loans, the amount and cost of funding availablefor lending purposes, current asset/liability managementobjectives and the interest rates offered by competitors.
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     The following table summarizes the composition of BenjaminFranklin Bank’s loan portfolio as of the dates indicated:                                             **At December 31,**     **2004** **2003** **2002** **2001** **2000**             **Amount** **Percent** **Amount** **Percent** **Amount** **Percent** **Amount** **Percent** **Amount** **Percent**                       **(Dollars in thousands)**    Mortgage loans on real estate:                                             Residential $241,090   62.56%  $172,123   59.22%  $165,007   62.58%  $172,959   66.99%  $206,918   72.69%      Commercial  85,911   22.29%   68,652   23.62%   51,357   19.48%   45,532   17.64%   44,456   15.62%      Construction  28,651   7.43%   23,936   8.23%   21,082   8.00%   19,106   7.40%   13,117   4.61%      Home equity  23,199   6.02%   18,171   6.25%   16,507   6.26%   11,161   4.32%   9,778   3.44%                                   378,851   98.30%   282,882   97.32%   253,953   96.32%   248,758   96.35%   274,269   96.36%                                    Other loans:                                             Commercial business  4,375   1.14%   5,559   1.92%   6,552   2.48%   5,512   2.14%   5,951   2.09%      Consumer and other  2,170   0.56%   2,219   0.76%   3,157   1.20%   3,899   1.51%   4,417   1.55%                                   6,545   1.70%   7,778   2.68%   9,709   3.68%   9,411   3.65%   10,368   3.64%                                  **Total loans**  385,396   100.00%   290,660   100.00%   263,662   100.00%   258,169   100.00%   284,637   100.00%                                **Other items:**                                            Deferred loan origination costs  1,149       725       583       574       663         Allowance for loan losses  (3,172)      (2,523)      (2,312)      (1,177)      (1,068)                                     **Total loans, net** $383,373      $288,862      $261,933      $257,566      $284,232                                    
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     *Residential Real Estate Loans.*Benjamin Franklin Bankoffers fixed-rate and adjustable-rate residential mortgage loanswith maturities of up to 30 years and maximum loan amountsgenerally of up to $1.5 million. As of December 31,2004, this portfolio totaled $241.1 million, or 62.6% ofthe total gross loan portfolio on that date, and had an averageyield of 4.61%. Of the residential mortgage loans outstanding onthat date, 61.3% were adjustable-rate loans with an averageyield of 4.19% and 38.7% were fixed-rate mortgage loans with anaverage yield of 5.28%. Residential mortgage loans originationstotaled $183.3 million and $116.9 million for 2003 and2004, respectively.     The decision to originate loans for portfolio or for sale in thesecondary market is made by the Bank’s Asset/ LiabilityManagement Committee, and is based on the organization’sinterest rate risk profile. Current practice is to sell almostall newly originated fixed-rate 15 and 30 year monthlypayment loans. At December 31, 2004, 15 and 30 yearfixed rate monthly payment loans held in portfolio totaled$10.0 million, or 4.1% of total residential real estatemortgage loans at that date. Benjamin Franklin Bank originatesmost such loans under forward sale commitments to Freddie Macand Fannie Mae. Benjamin Franklin Bank continues to serviceloans sold to Freddie Mac and Fannie Mae and earns a fee equalto 0.25% of the loan amounts outstanding for providing theseservices. The total of loans serviced for others as ofDecember 31, 2004 is $130.6 million.     Benjamin Franklin Bank also offers fixed-rate bi-weeklyresidential mortgage loans with maturities generally rangingbetween 10 and 30 years. Generally, Benjamin Franklinretains in its portfolio bi-weekly loans with terms of15 years or less and sells those with terms greater than15 years in the secondary market, with servicing rightsretained. As of December 31, 2004, bi-weekly residentialmortgage loans held in portfolio totaled $83.3 million, or34.6% of total residential mortgage loans on that date.     The adjustable-rate mortgage (ARM) loans offered byBenjamin Franklin Bank make up the largest portion of theresidential mortgage loans held in portfolio. AtDecember 31, 2004, ARM loans totaled $147.8 million or61.3% of total residential loans outstanding at that date. ARMsare offered for terms of up to 30 years with initialinterest rates that are fixed for 1, 3 or 5 years.After the initial fixed-rate period, the interest rates on theloans are reset based on the relevant U.S. Treasury CMT(Constant Maturity Treasury) Index plus add-on margins ofvarying amounts, for periods of 1, 3 or 5 years.Interest rate adjustments on such loans are typically limited tono more than 2.0% during any adjustment period and 6.0% over thelife of the loan. This feature of ARM loans that allows forperiodic adjustments in the interest rate charged helps toreduce Benjamin Franklin Bank’s exposure to changes ininterest rates. However, ARM loans may possess an element ofcredit risk not inherent in fixed-rate mortgage loans, in thatborrowers are potentially exposed to increases in debt servicerequirements over the life of the loan in the event marketinterest rates rise. Higher payments may increase the risk ofdefault, though this risk has not had a material adverse effecton Benjamin Franklin Bank to date.     In its residential mortgage loan originations, Benjamin FranklinBank lends up to a maximum loan-to-value ratio of 95.0% onmortgage loans secured by owner-occupied property, with thecondition that private mortgage insurance is required for loanswith a loan-to-value ratio in excess of 80.0%. Title insurance,hazard insurance and, if appropriate, flood insurance arerequired for all properties securing real estate loans made bythe Bank. A licensed appraiser appraises all properties securingresidential first mortgage loans.     In an effort to provide financing for low and moderate-incomefirst-time home buyers, Benjamin Franklin Bank originates andservices residential mortgage loans with private mortgageinsurance provided by the Mortgage Insurance Fund (MIF) ofthe Massachusetts Housing Finance Agency, or MassHousing. Theprogram provides mortgage payment protection as an enhancementto mortgage insurance coverage. This no-cost benefit, known as‘MI Plus’, provides up to six monthly principal andinterest payments in the event of a borrower’s job loss.     *Commercial Real Estate Loans.*Benjamin Franklin Bankoriginated $27.1 million and $26.2 million ofcommercial real estate loans in 2003 and 2004, respectively, andhad $85.9 million of commercial real estate loans, with anaverage yield of 5.69%, in its portfolio as of December 31,2004. We have placed increasing emphasis on commercial realestate lending over the past several years, and as a result such
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loans have grown from 15.6% of the total loan portfolio atDecember 31, 2000 to 22.3% as of December 31, 2004.Benjamin Franklin Bank intends to further grow this segment ofits loan portfolio, both in absolute terms and as a percentageof its total loan portfolio. Management of Benjamin FranklinBank believes that there exist additional profitable commercialreal estate lending opportunities in its market area and that ofChart Bank. Further, management believes that there exists anopportunity to leverage the considerable resources alreadyinvested by both institutions in commercial real estate lendingoperations to tap the potential of these markets.     Benjamin Franklin Bank generally originates commercial realestate loans for terms of up to 25 years, typically withinterest rates that adjust over periods of one to seven yearsbased on various rate indices. Commercial real estate loans aregenerally secured by multi-family income properties, smalloffice buildings, retail facilities, warehouses, industrialproperties and owner-occupied properties used for business.Generally, commercial real estate loans do not exceed 80.0% ofthe appraised value of the underlying collateral.     In its evaluation of a commercial real estate loan application,Benjamin Franklin Bank considers the net operating income of theborrower’s business, the borrower’s expertise, credithistory, and the profitability and value of the underlyingproperty. In addition, for loans secured by rental properties,Benjamin Franklin Bank will also consider the terms of theleases and the quality of the tenants. Benjamin Franklin Bankgenerally requires that the properties securing these loans havedebt service coverage ratios (the ratio of cash flow before debtservice to debt service) of at least 1.20x. Benjamin FranklinBank generally requires the borrowers seeking commercial realestate loans to personally guarantee those loans.     Commercial real estate loans generally have larger balances andinvolve a greater degree of risk than residential mortgageloans. Loan repayment is often dependent on the successfuloperation and management of the properties, as well as on thecollateral value of the commercial real estate securing theloan. Economic events and changes in government regulationscould have an adverse impact on the cash flows generated byproperties securing Benjamin Franklin Bank’s commercialreal estate loans and on the value of such properties. See“Risk Factors — Our Commercial Real Estate,Construction and Commercial Business Loans May Expose Us ToIncreased Credit Risks.”     *Construction Loans.*Benjamin Franklin Bank originatesland acquisition, development and construction loans to buildersand developers, as well as loans to individuals to finance theconstruction of residential dwellings for personal use. BenjaminFranklin Bank originated $16.2 million and$43.7 million in construction loans during 2003 and 2004,respectively, and as of December 31, 2004 had$28.7 million in construction loans in its portfolio,representing 7.4% of such portfolio, with an average yield of6.19%.     Acquisition loans help finance the purchase of land intended forfurther development, including single family houses andcondominiums, multi-family houses and commercial incomeproperty. In some cases, Benjamin Franklin Bank makes anacquisition loan before the borrower has received approval todevelop the land as planned. In general, the maximumloan-to-value ratio for a land acquisition loan is 75.0% of thelower of the cost or appraised value of the property. BenjaminFranklin Bank also makes development loans to builders in itsmarket area to finance improvements to real estate, consistingmostly of single-family subdivisions, typically to finance thecost of utilities, roads, waste treatment and other costs.Builders typically rely on the sale of single-family homes torepay development loans, although in some cases the improvedbuilding lots may be sold to another builder. The maximum amountloaned is generally limited to the cost of the improvements, notto exceed 80.0% of the appraised value, as completed. Advancesare made in accordance with a schedule reflecting the cost ofthe improvements.     Benjamin Franklin Bank also grants construction loans to areabuilders, often in conjunction with the development loans. Inthe case of residential subdivisions, these loans finance thecost of completing homes on the improved property. Advances onconstruction loans are made in accordance with a schedulereflecting the cost of construction. The maximum amount of theloan is generally limited to the lower of 80.0% of the appraisedvalue of the property, as completed, or the property’s costof construction. For construction loans on residential unitsbeing constructed without a pre-sale agreement, the loan amountis limited to 75.0% of the appraised value of the property, ascompleted. Repayment of construction loans on
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residential subdivisions is normally expected from the sale ofunits to individual purchasers. In the case of income-producingproperty, repayment is usually expected from permanent financingupon completion of construction. Benjamin Franklin Bank commitsto provide the permanent mortgage financing on most of itsconstruction loans on income-producing property.     For owner-occupied, one-to-four family properties, BenjaminFranklin Bank will lend up to 95.0% of the lesser of appraisedvalue upon completion of construction or the cost ofconstruction, provided that private mortgage insurance coverageis obtained for any loan with a loan-to-value or loan-to-cost inexcess of 80.0%.     Land acquisition, development and construction lending exposesBenjamin Franklin Bank to greater credit risk than residentialmortgage lending to owner occupants. The repayment of theseloans depends on the sale of the property to third parties orthe availability of permanent financing upon completion of allimprovements, and on the business and financial condition of theborrowers. In the event Benjamin Franklin Bank makes anacquisition loan on property that is not yet approved for theplanned development, there is the risk that approvals will notbe granted or will be delayed. Development and constructionloans also expose Benjamin Franklin Bank to the risk thatimprovements will not be completed on time in accordance withspecifications and projected costs. In addition, the ultimatesale or rental of the property may not occur as anticipated.These events, as well as economic events and changes ingovernment regulations could have an adverse impact on the valueof properties securing construction loans and on theborrowers’ ability to repay. See “RiskFactors — Our Commercial Real Estate, Construction andCommercial Business Loans May Expose Us To Increased CreditRisks.”     *Home Equity Lines-of-Credit and Loans.*Benjamin FranklinBank offers home equity lines-of-credit and home equity termloans. Benjamin Franklin Bank originated $17.1 million and$15.9 million of home equity lines-of-credit and loansduring 2003 and 2004, respectively, and at December 31,2004 had $23.2 million of home equity lines-of-credit andloans outstanding, representing 6.0% of the loan portfolio, withan average yield of 5.32% at that date.     Home equity lines-of-credit and loans are secured by secondmortgages on one-to-four family owner occupied properties, andare made in amounts such that the combined first and secondmortgage balances do not exceed 80.0% of the value of theproperty serving as collateral. The lines-of-credit areavailable to be drawn upon for 10 years, at the end ofwhich time they become term loans amortized over 10 years.Interest rates on home equity lines normally adjust based onBenjamin Franklin Bank’s prime rate of interest. Theundrawn portion of home equity lines-of-credit total$28.3 million at December 31, 2004.     *Commercial Business Loans.* Benjamin Franklin Bankoriginates secured and unsecured commercial business loans tobusiness customers in its market area for the purpose offinancing equipment purchases, working capital, expansion andother general business purposes. Benjamin Franklin Bankoriginated $1.6 million and $3.3 million in commercialbusiness loans during 2003 and 2004, respectively, and as ofDecember 31, 2004 had $4.4 million in commercialbusiness loans in its portfolio, representing 1.1% of suchportfolio, with an average yield of 6.98%. Benjamin FranklinBank intends to grow this segment of its lending business in thefuture.     Benjamin Franklin Bank’s commercial business loans aregenerally collateralized by equipment, accounts receivable andinventory, supported by personal guarantees. Benjamin FranklinBank offers both term and revolving commercial loans. The formerhave either fixed or adjustable-rates of interest and generallyfully amortize over a term of between three and seven years.Revolving loans are written for a one year term, renewableannually, with floating interest rates that are indexed toBenjamin Franklin Bank’s prime rate of interest.     When making commercial business loans, Benjamin Franklin Bankconsiders the financial statements of the borrower, theborrower’s payment history with respect to both corporateand personal debt, the debt service capabilities of theborrower, the projected cash flows of the business, theviability of the industry in which the borrower operates and thevalue of the collateral. Benjamin Franklin Bank’scommercial business loans are not concentrated in any oneindustry.
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     Commercial business loans generally bear higher interest ratesthan residential mortgage loans of like duration because theyinvolve a higher risk of default since their repayment isgenerally dependent on the successful operation of theborrower’s business and the sufficiency of collateral, ifany. Because commercial business loans often depend on thesuccessful operation or management of the business, repayment ofsuch loans may be affected by adverse changes in the economy.Further, collateral securing such loans may depreciate in valueover time, may be difficult to appraise and to liquidate, andmay fluctuate in value. See “Risk Factors — OurCommercial Real Estate, Construction and Commercial BusinessLoans May Expose Us To Increased Credit Risks.”     *Consumer and Other Loans.*Benjamin Franklin Bank offers avariety of consumer and other loans, including auto loans andloans secured by passbook savings or certificate accounts.Benjamin Franklin Bank originated $1.6 million and$1.7 million of consumer and other loans during 2003 and2004, respectively, and at December 31, 2004 had$2.2 million of consumer and other loans outstanding,representing 0.6% of the loan portfolio at that date, with anaverage yield of 7.12%.     *Loan Origination and Underwriting.*Loan originations comefrom a variety of sources. The primary source of originationsare our salaried and commissioned loan personnel, and to alesser extent, local mortgage brokers, advertising and referralsfrom customers. From time to time Benjamin Franklin Bankpurchases adjustable-rate residential mortgages from mortgagecorrespondents in the greater Boston area with whom the Bank hasestablished relationships. Benjamin Franklin Bank alsooccasionally purchases participation interests in commercialreal estate loans from banks located in the Boston area.Benjamin Franklin Bank underwrites such residential andcommercial purchased loans using its own underwriting criteria.     Benjamin Franklin Bank issues loan commitments to prospectiveborrowers conditioned on the occurrence of certain events.Commitments are made in writing on specified terms andconditions and are generally honored for up to 60 days fromapproval. At December 31, 2004, Benjamin Franklin Bank hadloan commitments and unadvanced loans and lines-of-credittotaling $70.6 million. For information about BenjaminFranklin Bank’s loan commitments outstanding as ofDecember 31, 2004, see Item 7A —“Quantitative and Qualitative Disclosures About MarketRisk — Liquidity Risk Management.”     Benjamin Franklin Bank charges origination fees, or points, andcollects fees to cover the costs of appraisals and creditreports on most residential mortgage loans originated. BenjaminFranklin Bank also collects late charges on real estate loans,and origination fees and prepayment penalties on commercialmortgage loans. For information regarding Benjamin FranklinBank’s recognition of loan fees and costs, please refer toNote 1 to the Consolidated Financial Statements of BenjaminFranklin Bancorp beginning on page F-7.
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     The following table sets forth certain information concerningBenjamin Franklin Bank’s portfolio loan originations,inclusive of loan purchases:                          **For the Years Ended December 31,**     **2004** **2003** **2002** **2001** **2000**             **(Dollars in thousands)**    Loans at beginning of year $290,660  $263,662  $258,169  $284,637  $269,817                     Originations:                         Mortgage loans on real estate:                          Residential  116,866   183,263   151,241   94,461   32,084       Commercial  26,167   27,105   23,383   9,371   6,929       Construction  43,661   16,176   22,524   32,301   27,975       Home equity  15,947   17,115   14,509   9,104   8,071                    202,642   243,659   211,657   145,237   75,059      Other loans:                          Commercial business  3,338   1,584   1,310   1,933   5,754       Consumer and other  1,659   1,625   1,953   3,502   3,131                    4,996   3,209   3,263   5,435   8,885                        Total loans originated  207,638   246,868   214,920   150,672   83,944     Purchases of mortgage loans  34,207   26,546   1,298   853   11,739                     Deduct:                        Principal loan repayments and prepayments  115,507   149,623   140,554   114,717   74,067      Loan sales  31,185   96,256   69,752   63,244   6,645      Charge-offs  17   537   419   32   151                        Total deductions  147,109   246,416   210,725   177,993   80,863                     Net increase (decrease) in loans  94,736   26,998   5,493   (26,468)  14,820                     Loans at end of year $385,396  $290,660  $263,662  $258,169  $284,637                      Residential mortgage loans are underwritten by the Bank’sstaff of residential loan underwriters. Conforming loans sold toFreddie Mac or Fannie Mae require the approval of the SeniorUnderwriter. Residential mortgage loans of less than $500,000 tobe held in portfolio require the approval of the SeniorResidential Loan Officer. Residential mortgage loans of $500,000or more but less than $1 million require the approval ofthe management Credit Committee. Residential mortgage loans$1 million or greater require the approval of the ExecutiveCommittee of the Board.     Commercial real estate and commercial business loans areunderwritten by commercial credit analysts. For commercial realestate loans, loan officers may approve loans up to $75,000,while loans up to $300,000 may be approved by the SeniorCommercial Loan Officer. Commercial real estate loans of up to$750,000 may be approved by the management Credit Committee. ForCommercial business loans, individual loan officer authority islimited to $65,000 ($25,000 for unsecured loans). The SeniorCommercial Loan Officer may approve commercial loans of up to$100,000 ($50,000 if unsecured), while the management CreditCommittee may approve loans of up to $200,000 ($50,000 ifunsecured). Loans over these limits require the approval of theExecutive Committee of the Board.     Consumer loans are underwritten by consumer loan underwriters.Loan officers and Branch Managers have approval authoritiesranging from $25,000 to $35,000 ($3,500 to $10,000 if unsecured)for these loans. The Senior Residential Loan Officer may approveconsumer loans of up to $100,000 ($25,000 if unsecured) whilethe management Credit Committee may approve loans of up to$300,000 ($25,000 if
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unsecured). All consumer loans in excess of these limits requirethe approval of the Executive Committee of the Board.     Pursuant to its loan policy, Benjamin Franklin Bank generallywill not make loans aggregating more than $5.0 million toone borrower (or related entity). Exceptions to this limitrequire the approval of the Executive Committee of the Boardprior to loan origination. As of December 31, 2004,Benjamin Franklin had one borrower relationship over the$5 million policy guideline, a relationship that aggregated$6.2 million in total. Benjamin Franklin Bank’sinternal lending limit is lower than the Massachusetts legallending limit, which is 20.0% of a bank’s surplus andcapital stock accounts, or $7.4 million for BenjaminFranklin Bank as of December 31, 2004.     Benjamin Franklin Bank has established a risk rating system forits commercial real estate, construction and commercial loans.This system evaluates a number of factors useful in indicatingthe risk of default and risk of loss associated with a loan.These ratings are performed by commercial credit analysts who donot have responsibility for loan originations. See“— Asset Quality — Classification ofAssets and Loan Review.”     *Loan Maturity.*The following table summarizes thescheduled repayments of Benjamin Franklin Bank’s loanportfolio at December 31, 2004. Demand loans, loans havingno stated repayment schedule, and overdraft loans are reportedas being due in one year or less:                            **Residential Mortgage** **Commercial Mortgage** **Construction**           **Weighted**   **Weighted**   **Weighted**    **Average**   **Average**   **Average**  **Amount** **Rate** **Amount** **Rate** **Amount** **Rate**               **(Dollars in thousands)**    Due less than one year $11,100   5.00%  $6,262   6.15%  $17,413   6.58%     Due after one year to five years  42,842   4.91%   20,167   5.82%   2,611   5.94%     Due after five years  187,148   4.52%   59,482   5.59%   8,627   5.47%                     **Total** $241,090   4.61%  $85,911   5.69%  $28,651   6.19%                                                  **Home Equity,**    **Commercial Business** **Consumer and Other** **Total**           **Weighted**   **Weighted**   **Weighted**    **Average**   **Average**   **Average**  **Amount** **Rate** **Amount** **Rate** **Amount** **Rate**               **(Dollars in thousands)**    Due less than one year $2,439   6.88%  $12,130   5.49%  $49,344   5.92%     Due after one year to five years  1,028   7.02%   1,514   6.41%   68,162   5.29%     Due after five years  908   7.19%   11,725   5.25%   267,890   4.83%                     **Total** $4,375   6.98%  $25,369   5.45%  $385,396   5.05%                         The following table sets forth, at December 31, 2004, thedollar amount of total loans, net of unadvanced funds on loans,contractually due after December 31, 2005 and whether suchloans have fixed interest rates or adjustable interest rates.                **Fixed** **Adjustable** **Total**         **(Dollars in thousands)**    Residential mortgage $85,336  $144,654  $229,990     Commercial mortgage  4,239   75,410   79,649     Construction  3,036   8,202   11,238     Commercial business  293   1,643   1,936     Home equity, consumer and other  2,829   10,410   13,239            **Total Loans** $95,733  $240,319  $336,052           
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**Asset Quality**     *General.*One of Benjamin Franklin Bank’s mostimportant operating objectives is to maintain a high level ofasset quality. Management uses a number of strategies infurtherance of this goal including maintaining sound creditstandards in loan originations, monitoring the loan portfoliothrough internal and third-party loan reviews, and employingactive collection and workout processes for delinquent orproblem loans.     *Delinquent Loans.*Management performs a monthly review ofall delinquent loans. The actions taken with respect todelinquencies vary depending upon the nature of the delinquentloans and the period of delinquency. Generally, the Bank’srequirement is that a delinquency notice be mailed no later thanthe 10th or 16th day, depending on loan type, after the paymentdue date. A late charge is normally assessed on loans where thescheduled payment remains unpaid after a 10 or 15 day graceperiod. After mailing delinquency notices Benjamin FranklinBank’s loan collection personnel call the borrower toascertain the reasons for delinquency and the prospects forrepayment. On loans secured by one-to-four family owner-occupiedproperty, Benjamin Franklin Bank initially attempts to work outa payment schedule with the borrower in order to avoidforeclosure. Any such loan restructurings must be approved bythe level of officer authority required for a new loan of thatamount. If these actions do not result in a satisfactoryresolution, Benjamin Franklin Bank refers the loan to legalcounsel and counsel initiates foreclosure proceedings. Forcommercial real estate, construction and commercial loans,collection procedures may vary depending on individualcircumstances.     The following table sets forth delinquencies in BenjaminFranklin Bank’s loan portfolio as of the dates indicated:                             **Loans Delinquent for**             **60-89 Days** **90 Days and Over** **Total**         **Number** **Amount** **Number** **Amount** **Number** **Amount**               **(Dollars in thousands)****At December 31, 2004**                             Residential mortgage  2  $163   —  $—   2  $163      Commercial mortgage  —   —   —   —   —   —      Construction  —   —   —   —   —   —      Commercial business  1   32   —   —   1   32      Home equity, consumer and other  2   1   4   3   6   4                      **Total**  5  $196   4  $3   9  $199                    **At December 31, 2003**                             Residential mortgage  5  $538   —  $—   5  $538      Commercial mortgage  —   —   —   —   —   —      Construction  —   —   —   —   —   —      Commercial business  1   160   —   —   1   160      Home equity, consumer and other  12   12   8   5   20   17                      **Total**  18  $710   8  $5   26  $715                    **At December 31, 2002**                             Residential mortgage  1  $41   —  $—   1  $41      Commercial mortgage  —   —   —   —   —   —      Construction  —   —   —   —   —   —      Commercial business  —   —   —   —   —   —      Home equity, consumer and other  3   13   1   2   4   15                      **Total**  4  $54   1  $2   5  $56                    
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     *Other Real Estate Owned.*Benjamin Franklin Bankclassifies property acquired through foreclosure or acceptanceof a deed in lieu of foreclosure as other real estate owned(“OREO”) in its financial statements. When property isplaced into OREO, it is recorded at the lower of the carryingvalue or the fair value less estimated costs to sell at the dateof foreclosure or acceptance of deed in lieu of foreclosure. Atthe time of transfer to OREO, any excess of carrying value overfair value is charged to the allowance for loan losses.Management inspects all OREO property periodically. Holdingcosts and declines in fair value result in charges to expenseafter the property is acquired. At December 31, 2004,Benjamin Franklin Bank had no property classified as OREO.     *Classification of Assets and Loan Review.*BenjaminFranklin Bank uses an internal rating system to monitor andevaluate the credit risk inherent in its loan portfolio. At thetime a loan is approved, all commercial real estate,construction and commercial business loans are assigned a riskrating based on all of the factors considered in originating theloan. The initial risk rating is recommended by the creditanalyst charged with underwriting the loan, and subsequentlyapproved by the relevant loan approval authority. Currentfinancial information is sought for all commercial real estate,construction and commercial borrowing relationships, and isevaluated on at least an annual basis to determine whether therisk rating classification is appropriate.     In Benjamin Franklin Bank’s loan rating system, there arethree classifications for problem assets: Substandard, Doubtfuland Loss. An asset is considered Substandard if it isinadequately protected by the current net worth and payingcapacity of the borrower or of the collateral pledged, if any.Substandard assets are characterized by the distinct possibilitythat Benjamin Franklin Bank will sustain some loss if thedeficiencies are not corrected. Doubtful assets have theweaknesses of Substandard assets with the additionalcharacteristic that the weaknesses make collection orliquidation in full questionable, on the basis of currentlyexisting facts, and there is a high possibility of loss. Assetsclassified Loss are considered uncollectible and of such littlevalue that continuance as an asset of Benjamin Franklin Bank isnot warranted. Assets that possess some weaknesses, but that donot expose Benjamin Franklin Bank to risk sufficient to warrantclassification in one of the aforementioned categories, aredesignated as Special Mention. If an asset or portion thereof isclassified as Loss, it is charged off in the quarter in which itis so classified. For assets designated as Special Mention,Substandard or Doubtful, Benjamin Franklin Bank establishesreserves in amounts management deems appropriate within theallowance for loan losses. This determination as to theclassification of assets and the amount of the loss allowancesestablished are subject to review by regulatory agencies, whichcan order the establishment of additional loss allowances. See“— Asset Quality — Allowance for LoanLosses” and “Management’s Discussion andAnalysis — Critical Accounting Policies —Allowance for Loan Losses.”     Benjamin Franklin Bank engages an independent third party toconduct a semi-annual review of its commercial real estate,construction and commercial loan portfolios. These loan reviews,which typically include a 70.0% penetration of the variouscommercial portfolios, provide a credit evaluation of individualloans to determine whether the risk ratings assigned areappropriate. In addition, independent loan reviews are performedon a quarterly basis for the residential mortgage portfolio,based on a sampling of newly originated loans during the period.Independent loan review findings are presented directly to theExecutive Committee of the Board of Directors.     At December 31, 2004, loans classified Substandard totaled$2.2 million, consisting of $1.9 million in commercialreal estate loans and $0.3 million in commercial loans.Special Mention loans totaled $2.3 million, consisting of$2.1 million in commercial real estate loans and$0.2 million in commercial loans. One commercial loan inthe amount of $7,287 was classified as Doubtful and no loanswere classified as Loss on December 31, 2004.
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     *Non-Performing Assets.*The table below sets forth theamounts and categories of our non-performing assets at the datesindicated. At each date presented, we had no troubled debtrestructurings (loans for which a portion of interest orprincipal has been forgiven and loans modified at interest ratesmaterially less than current market rates).                          **At December 31,**     **2004** **2003** **2002** **2001** **2000**             **(Dollars in thousands)****Non-accrual loans:**                         Residential mortgage $—  $—  $—  $—  $—      Commercial mortgage  —   —   —   —   —      Construction  —   —   —   —   —      Commercial business  334   458   —   157   —      Home equity, consumer and other  —   —   —   —   —                       Total non-accrual loans  334   458   —   157   —                 **Loans greater than 90 days delinquent and still    accruing:**                         Residential mortgage  —   —   —   —   177      Commercial mortgage  —   —   —   —   —      Construction  —   —   —   —   —      Commercial business  —   —   —   —   —      Home equity, consumer and other  3   5   2   —   —                       Total loans 90 days delinquent and still accruing  3   5   2   0   177                        Total non-performing loans  337   463   2   157   177                 **Total non-performing assets** $337  $463  $2  $157  $177                 **Ratios:**                         Non-performing loans to total loans  0.09%  0.16%  0.00%  0.06%  0.06%     Non-performing assets to total assets  0.07%  0.10%  0.00%  0.04%  0.04%     Loans are placed on non-accrual status either when reasonabledoubt exists as to the full timely collection of interest andprincipal, or when a loan becomes 90 days past due unlessan evaluation by the management Credit Committee clearlyindicates that the loan is well-secured and in the process ofcollection. Restructured loans represent performing loans forwhich concessions were granted due to a borrower’sfinancial condition. Such concessions may include reductions ofinterest rates to below-market terms and/or extension ofrepayment terms.     *Allowance for Loan Losses.*In originating loans, BenjaminFranklin Bank recognizes that losses will be experienced onloans and that the risk of loss will vary with many factors,including the type of loan being made, the creditworthiness ofthe borrower over the term of the loan, general economicconditions and, in the case of a secured loan, the quality ofthe security for the loan over the term of the loan. BenjaminFranklin Bank maintains an allowance for loan losses to absorblosses inherent in the loan portfolio, and as such, thisallowance represents management’s best estimate of theprobable known and inherent credit losses in the loan portfolioas of the date of the financial statements.     The allowance for loan losses is evaluated on a regular basis bymanagement and is based upon management’s periodic reviewof the collectibility of the loans in light of historicalexperience, portfolio volume and mix, geographic and largeborrower concentrations, estimated credit losses based oninternal and external portfolio reviews, adverse situations thatmay affect the borrower’s ability to repay, estimated valueof any underlying collateral and prevailing economic conditions.This evaluation is inherently
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subjective as it requires estimates that are susceptible tosignificant revision as more information becomes available.     The allowance consists of specific, general and unallocatedcomponents. The specific component relates to loans that areclassified as either doubtful, substandard or special mention.See “— Asset Quality — Classificationof Assets and Loan Review.” The general component coversnon-classified loans and is based on historical loss experienceadjusted for qualitative factors. An unallocated component ismaintained to cover uncertainties that could affectmanagement’s estimate of probable losses. The unallocatedcomponent of the allowance reflects the margin of imprecisioninherent in the underlying assumptions used in the methodologiesfor estimating specific and general losses in the portfolio.     A loan is considered impaired when, based on current informationand events, it is probable that Benjamin Franklin Bank will beunable to collect the scheduled payments of principal orinterest when due according to the contractual terms of the loanagreement. Factors considered by management in determiningimpairment include payment status, collateral value, and theprobability of collecting scheduled principal and interestpayments when due. Impairment is measured on a loan by loanbasis for commercial loans by either the present value ofexpected future cash flows discounted at the loan’seffective interest rate or the fair value of the collateral ifthe loan is collateral dependent. Large groups of smallerbalance homogeneous loans are collectively evaluated forimpairment. Accordingly, Benjamin Franklin Bank does notseparately identify individual consumer and residential loansfor impairment disclosures. At December 31, 2004, impairedloans totaled $334,000 and in the aggregate carried a valuationallowance of $210,000.     While Benjamin Franklin Bank believes that it has establishedadequate specific and general allowances for losses on loans,adjustments to the allowance may be necessary if futureconditions differ substantially from the information used inmaking the evaluations. In addition, as an integral part oftheir examination process, Benjamin Franklin Bank’sregulators periodically review the allowance for loan losses.These regulatory agencies may require the Bank to recognizeadditions to the allowance based on their judgments ofinformation available to them at the time of their examination,thereby negatively affecting Benjamin Franklin Bank’sfinancial condition and earnings.
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     The following table sets forth activity in Benjamin FranklinBank’s allowance for loan losses for the periods indicated:                         **At or For the Years Ended December 31,**     **2004** **2003** **2002** **2001** **2000**             **(Dollars in thousands)****Balance at beginning of year** $2,523  $2,312  $1,177  $1,068  $1,183                 **Charge-offs:**                        Mortgage loans on real estate (residential real estate,    commercial real estate, construction and home equity loans)  —   —   —   —   —                     Other loans:                         Commercial business  —   (43)  (389)  (10)  (138)     Consumer and other  (17)  (494)  (30)  (22)  (13)                      Total other loans  (17)  (537)  (419)  (32)  (151)                     Total charge-offs  (17)  (537)  (419)  (32)  (151)                **Recoveries:**                        Mortgage loans on real estate (residential real estate,    commercial real estate, construction and home equity loans)  —   —   —   20   20                     Other loans:                         Commercial business  35   100   132   55   9      Consumer and other  11   23   10   15   6                       Total other loans  46   123   142   70   15                      Total recoveries  46   123   142   90   35                     Net (charge-offs) recoveries  29   (414)  (277)  58   (116)    Provision for loan losses  620   625   1,412   51   1                 **Balance at end of year** $3,172  $2,523  $2,312  $1,177  $1,068                                      **Ratios:**                        Net (charge-offs) recoveries to average loans outstanding    (annualized)  0.01%  (0.15)%  (0.11)%  0.02%  (0.04)%    Allowance for loan losses to non-performing loans at end of year  941.25%  544.92%  115,600.00%  749.68%  603.39%    Allowance for loan losses to total loans at end of year  0.82%  0.87%  0.88%  0.46%  0.38%
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     The following tables set forth Benjamin Franklin Bank’spercent of allowance by loan category and the percent of theloans to total loans in each of the categories listed at thedates indicated. The allowance for loan losses allocated to eachcategory is not necessarily indicative of future losses in anyparticular category and does not restrict the use of theallowance to absorb losses in other categories:                                         **At December 31,**     **2004** **2003** **2002**           **Percent**   **Percent**   **Percent**    **of Loans**   **of Loans**   **of Loans**    **Loan** **in Each**   **Loan** **in Each**   **Loan** **in Each**  **Allowance** **Balances** **Category** **Allowance** **Balances** **Category** **Allowance** **Balances** **Category**  **for Loan** **by** **to Total** **for Loan** **by** **to Total** **for Loan** **by** **to Total**  **Losses** **Category** **Loans** **Losses** **Category** **Loans** **Losses** **Category** **Loans**                     **(Dollars in thousands)**    Mortgage loans on real estate:                                         Residential $612  $241,090   62.56%  $485  $172,123   59.22%  $552  $165,007   62.58%      Commercial  1,295   85,911   22.29%   1,136   68,652   23.62%   549   51,357   19.48%      Construction  505   28,651   7.43%   338   23,936   8.23%   422   21,082   8.00%      Home equity  193   23,199   6.02%   108   18,171   6.25%   82   16,507   6.26%                                2,605   378,851   98.30%   2,067   282,882   97.32%   1,605   253,953   96.32%                                 Other loans:                                         Commercial  325   4,375   1.14%   421   5,559   1.92%   181   6,552   2.48%      Consumer and other  27   2,170   0.56%   27   2,219   0.76%   276   3,157   1.20%      Unallocated  215   0   0.00%   8   0   0.00%   250   0   0.00%                                567   6,545   1.70%   456   7,778   2.68%   707   9,709   3.68%                               **Total** $3,172  $385,396   100.00%  $2,523  $290,660   100.00%  $2,312  $263,662   100.00%                                                          **At December 31,**     **2001** **2000**         **Percent**   **Percent**    **of Loans**   **of Loans**    **Loan** **in Each**   **Loan** **in Each**  **Allowance** **Balances** **Category** **Allowance** **Balances** **Category**  **for Loan** **by** **to Total** **for Loan** **by** **to Total**  **Losses** **Category** **Loans** **Losses** **Category** **Loans**               **(Dollars in thousands)**    Mortgage loans on real estate:                             Residential $433  $172,959   66.99%  $517  $206,918   72.69%      Commercial  236   45,532   17.64%   227   44,456   15.62%      Construction  143   19,106   7.40%   98   13,117   4.61%      Home equity  28   11,161   4.32%   25   9,778   3.44%                       840   248,758   96.35%   867   274,269   96.36%                        Other loans:                             Commercial  90   5,512   2.14%   94   5,951   2.09%      Consumer and other  30   3,899   1.51%   33   4,417   1.55%      Unallocated  217   0   0.00%   74   0   0.00%                       337   9,411   3.65%   201   10,368   3.64%                      **Total** $1,177  $258,169   100.00%  $1,068  $284,637   100.00%                    
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**Investment Activities**     *General.*Benjamin Franklin Bank’s investment policyis established by its Board of Directors. The Chief ExecutiveOfficer, Chief Financial Officer and Treasurer, as authorized bythe Board, implement this policy based on the establishedguidelines within the written policy. The primary objective ofthe investment portfolio is to achieve a competitive rate ofreturn without incurring undue interest rate and credit risk, tocomplement Benjamin Franklin Bank’s lending activities, toprovide and maintain liquidity, and to assist in managing theinterest rate sensitivity of its balance sheet. Individualinvestment decisions are made based on the safety of theinvestment, liquidity requirements, potential returns, cash flowtargets, and consistency with Benjamin Franklin Bank’sasset/liability management objectives.     SFAS No. 115 requires Benjamin Franklin Bank todesignate its securities as held to maturity, available for saleor trading, depending on Benjamin Franklin Bank’s intentwith regard to its investments at the time of purchase. AtDecember 31, 2004, $86.1 million or 92.3% of theportfolio was classified as available for sale, and$0.2 million or 0.2% of the portfolio was classified asheld to maturity. At December 31, 2004, the net unrealizedloss on securities classified as available for sale was$1.7 million. Benjamin Franklin Bank does not currentlymaintain a trading portfolio of securities.     *U.S. Government and Agency Obligations.* AtDecember 31, 2004, Benjamin Franklin Bank’sU.S. Government and Agency securities portfolio totaled$33.3 million, or 35.7% of the total portfolio on that date.     *Corporate Obligations.* At December 31, 2004,Benjamin Franklin Bank’s portfolio of corporate obligationstotaled $5.0 million, or 5.4% of the portfolio at thatdate. Benjamin Franklin Bank’s policy requires thatinvestments in corporate obligations be restricted only to thoseobligations that are readily marketable and rated ‘A’or better by a nationally recognized rating agency at the timeof purchase. At December 31, 2004, all investments incorporate obligations were rated ‘A’ or better.     *Mortgage-Backed Securities.* At December 31, 2004,Benjamin Franklin Bank’s portfolio of mortgage-backedsecurities totaled $48.0 million, or 51.4% of the portfolioon that date, and consisted of pass-through securities($3.7 million) and collateralized mortgage obligations($44.3 million) directly insured or guaranteed by FreddieMac, Fannie Mae or the Government National Mortgage Association(Ginnie Mae). In its purchase of collateralized mortgageobligations, Benjamin Franklin Bank has targeted instruments inthe three to five year weighted average life tranches, withexpected average life extensions up to a maximum of seven yearsin a rising rate environment. The objective of this strategy hasbeen to limit the potential interest rate risk due to extensionof this portfolio in a rising rate environment.     *Restricted Equity Securities.* At December 31, 2004,Benjamin Franklin Bank’s portfolio of restricted equitysecurities totaled $7.0 million or 7.5% of the portfolio atthat date. These securities consisted primarily of stock in theFederal Home Loan Bank of Boston ($4.5 million) whichmust be held as a condition of membership in the Federal HomeLoan Bank System and as a condition to Benjamin FranklinBank’s borrowing under the Federal Home Loan Bank ofBoston advance program. The remainder ($2.5 million)consisted of certain other equity investments in Savings BankLife Insurance, the Community Investment Fund and the DepositorsInsurance Fund.
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     The following table sets forth certain information regarding theamortized cost and market values of Benjamin FranklinBank’s investment securities at the dates indicated:                             **At December 31,**     **2004** **2003** **2002**         **Amortized Cost** **Fair Value** **Amortized Cost** **Fair Value** **Amortized Cost** **Fair Value**               **(Dollars in thousands)****Securities available for sale:**                             U.S. Government and agency obligations $33,607  $33,306  $30,272  $30,347  $67,513  $67,582      State agency and municipal obligations  —   —   —   —   570   570                       33,607   33,306   30,272   30,347   68,083   68,152      Corporate bonds and other obligations  5,056   5,014   —   —   3,536   3,716                       38,663   38,320   30,272   30,347   71,619   71,868     Mortgage-backed securities  49,246   47,750   74,502   72,299   26,376   26,446                          Total debt securities  87,909   86,070   104,774   102,646   97,995   98,314                        Marketable equity securities:                             Bank Investment Fund — Fund One  —   —   —   —   10,206   10,206                          Total securities available for sale $87,909  $86,070  $104,774  $102,646  $108,201  $108,520                    **Securities held to maturity:**                             Mortgage-backed securities $217  $221  $386  $398  $986  $1,023                    **Restricted equity securities:**                             Federal Home Loan Bank of Boston stock $4,459  $4,459  $3,707  $3,707  $3,707  $3,707      Access Capital Strategies Community Investment Fund  2,000   2,000   3,000   3,000   1,000   1,000      Savings Bank Life Insurance and Depositors Insurance Fund  516   516   515   515   515   515                          Total restricted equity securities $6,975  $6,975  $7,222  $7,222  $5,222  $5,222                    
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     The table below sets forth certain information regarding theamortized cost, weighted average yields and contractualmaturities of Benjamin Franklin Bank’s debt securitiesportfolio at December 31, 2004. In the case ofmortgage-backed securities, the table shows the securities bytheir contractual maturities, however there are scheduledprincipal payments for these securities and there will also beunscheduled prepayments prior to their contractual maturity:                               **More than One Year** **More than Five Years**  **One Year or Less** **through Five Years** **through Ten Years**           **Weighted**   **Weighted**   **Weighted**  **Amortized** **Average** **Amortized** **Average** **Amortized** **Average**  **Cost** **Yield** **Cost** **Yield** **Cost** **Yield**               **(Dollars in thousands)****Securities available for sale:**                             U.S. Government and agency securities $17,123   1.92% $16,484   2.32% $—   —      Corporate bonds and other obligations  2,503   2.36%  2,553   2.42%  —   —      Mortgage-backed securities  —   —   —   —   5,825   3.74%                         Total debt securities  19,626   1.97%  19,037   2.33%  5,825   3.74%                   **Securities held to maturity:**                             Mortgage-backed securities  —   —   174   6.05%  —   —                      **Total investment securities** $19,626   1.97% $19,211   2.37% $5,825   3.74%                                            **More than Ten Years** **Total Securities**         **Weighted**   **Weighted**  **Amortized** **Average** **Amortized** **Fair** **Average**  **Cost** **Yield** **Cost** **Value** **Yield**             **(Dollars in thousands)****Securities available for sale:**                         U.S. Government and agency securities $—   —  $33,607  $33,306   2.11%     Corporate bonds and other obligations  —   —   5,056   5,014   2.39%     Mortgage-backed securities  43,421   4.16%  49,246   47,750   4.11%                      Total debt securities  43,421   4.16%  87,909   86,070   3.25%                **Securities held to maturity:**                         Mortgage-backed securities  43   6.00%  217   221   6.04%                  **Total investment securities** $43,465   4.16% $88,126  $88,291   3.25%                **Sources of Funds**     *General.* Deposits are the primary source of BenjaminFranklin Bank’s funds for lending and other investmentpurposes. In addition to deposits, Benjamin Franklin Bankobtains funds from the amortization and prepayment of loans andmortgage-backed securities, the sale or maturity of investmentsecurities, advances from the Federal Home Loan Bank of Boston,and cash flows generated by operations.     *Deposits.* Consumer and commercial deposits are gatheredprimarily from Benjamin Franklin Bank’s primary market areathrough the offering of a broad selection of deposit productsincluding checking, regular savings, money market deposits andtime deposits, including certificate of deposit accounts andindividual retirement accounts. The FDIC insures deposits up tocertain limits (generally, $100,000 per depositor) and theDepositors Insurance Fund (DIF), which is neither a governmentagency nor backed by the full faith and credit of theCommonwealth of Massachusetts, fully insures amounts in excessof such limits.
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     The maturities of Benjamin Franklin Bank’s certificate ofdeposit accounts range from three months to five years. Inaddition, Benjamin Franklin Bank offers a variety of commercialbusiness products to small businesses operating within itsprimary market area. Currently, Benjamin Franklin Bank does notgenerally negotiate interest rates to attract jumbo certificatesof deposit, but accepts deposits of $100,000 or more fromcustomers within its market area based on posted rates. BenjaminFranklin Bank does not use brokers to obtain deposits.     Benjamin Franklin Bank relies primarily on competitive pricingof its deposit products, customer service and long-standingrelationships with customers to attract and retain deposits.Market interest rates, rates offered by financial servicecompetitors, the availability of other investment alternatives,and general economic conditions significantly affect BenjaminFranklin Bank’s ability to attract and retain deposits.     The following tables set forth certain information relative tothe composition of Benjamin Franklin Bank’s average depositaccounts and the weighted average interest rate on each categoryof deposits:                            **Years Ended December 31,**     **2004** **2003**         **Weighted**   **Weighted**  **Average**   **Average** **Average**   **Average**  **Balance** **Percent** **Rate** **Balance** **Percent** **Rate**               **(Dollars in thousands)****Deposit type:**                            Demand deposits $87,969   22.12%   0.00%  $57,253   14.81%   0.00%     NOW deposits  23,657   5.95%   0.15%   60,751   15.71%   0.15%     Money market deposits  53,246   13.39%   1.00%   48,256   12.48%   0.81%     Regular savings  98,753   24.83%   0.50%   93,501   24.18%   0.50%                         Total transaction accounts  263,625   66.29%   0.40%   259,761   67.18%   0.37%      Certificates of deposit  134,034   33.71%   2.47%   126,856   32.82%   2.79%                         Total deposits $397,659   100.00%   1.10%  $386,617   100.00%   1.16%                                    **Year Ended December 31, 2002**       **Weighted**  **Average**   **Average**  **Balance** **Percent** **Rate**         **(Dollars in thousands)****Deposit type:**                Demand deposits $36,870   10.04%   0.00%     NOW deposits  69,832   19.01%   0.31%     Money market deposits  45,648   12.43%   1.35%     Regular savings  83,878   22.83%   0.68%                Total transaction accounts  236,228   64.31%   0.59%      Certificates of deposit  131,073   35.69%   3.40%                Total deposits $367,301   100.00%   1.60%           
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     The following table sets forth the time deposits of BenjaminFranklin Bank classified by interest rate as of the datesindicated:                **At December 31,**     **2004** **2003** **2002**         **(Dollars in thousands)****Interest Rate**                 Less than 2% $36,983  $55,034  $39,945      2.00%-2.99%  75,524   37,753   38,374      3.00%-3.99%  12,241   7,776   9,808      4.00%-4.99%  10,332   13,960   17,353      5.00%-5.99%  1,406   4,034   12,641      6.00%-6.99%  735   5,226   6,832            **Total** $137,221  $123,783  $124,953                The following table sets forth the amount and maturities of timedeposits at December 31, 2004:                            **Year Ending December 31,** **After December 31,**       **2005** **2006** **2007** **2008** **2008** **Total**               **(Dollars in thousands)****Interest Rate**                             Less than 2% $36,843  $139  $—  $—  $—  $36,982      2.00%-2.99%  52,626   16,951   5,096   401   —   75,074      3.00%-3.99%  1,942   3,228   2,436   4,661   424   12,691      4.00%-4.99%  5,415   4,917   —   —   —   10,332      5.00%-5.99%  1,406   —   —   —   —   1,406      6.00%-6.99%  733   —   —   —   3   736                     **Total** $98,965  $25,235  $7,532  $5,062  $427  $137,221                         As of December 31, 2004, the aggregate amount ofoutstanding certificates of deposit in amounts greater than orequal to $100,000 was approximately $40.1 million. Thefollowing table sets forth the maturity of those certificates asof December 31, 2004:        **At December 31, 2004**     **(Dollars in thousands)**    Three months or less $15,285     Over three months through six months  6,867     Over six months through one year  8,251     Over one year to three years  7,755     Over three years  1,950      **Total** $40,107          *Borrowings.*Benjamin Franklin Bank utilizes advances fromthe Federal Home Loan Bank of Boston, primarily inconnection with the funding of growth in its assets. FederalHome Loan Bank of Boston advances are secured primarily bycertain of Benjamin Franklin Bank’s mortgage loans, certaininvestment securities and by Benjamin Franklin Bank’sholding of Federal Home Loan Bank of Boston stock. As ofDecember 31, 2004, Benjamin Franklin Bank had outstanding$76.3 million in Federal Home Loan Bank of Bostonadvances, and had the ability to borrow an additional$89.1 million based on available collateral.
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     The following table sets forth certain information concerningbalances and interest rates on Benjamin Franklin Bank’sFederal Home Loan Bank of Boston advances at the dates and forthe periods indicated:               **At or For the Years Ended**  **December 31,**     **2004** **2003** **2002**         **(Dollars in thousands)**    Balance at end of year $76,250  $36,000  $36,000     Average balance during year $51,497  $36,000  $36,000     Maximum outstanding at any month end $76,250  $36,000  $36,000     Weighted average interest rate at end of year  3.87%  4.47%  4.47%    Weighted average interest rate during year  3.95%  4.47%  4.47%     Of the $76.3 million in advances outstanding atDecember 31, 2004, $36.0 million, bearing aweighted-average interest rate of 4.47%, are callable by theFHLBB at its option and in its sole discretion. In the event theFHLBB calls these advances, the Bank will evaluate its liquidityand interest rate sensitivity position at that time anddetermine whether to replace the called advances with newborrowings.     In 2002, Benjamin Franklin Bancorp raised net proceeds of$8.7 million in a sale of $9.0 million of subordinateddebentures to Benjamin Franklin Capital Trust I (the“Trust”). The Trust funded the purchase byparticipating in a pooled offering of 9,000 capital securitiesrepresenting preferred ownership interests in the assets of theTrust with a liquidation value of $1,000 each. Interest payableon the subordinated debentures and cumulative dividends payablequarterly on the preferred securities is 6.94% for the firstfive years and thereafter will be at a rate equal to the threemonth LIBOR rate plus 3.45%. Benjamin Franklin Bancorp has theoption to defer interest payments on the subordinated debenturesfor up to five years and, accordingly, the Trust may deferdividend distributions for up to five years. The debentures andthe preferred securities mature in November 2032 unless BenjaminFranklin Bancorp elects and obtains regulatory approval toaccelerate the maturity to November 2007 or thereafter.**Employees**     As of December 31, 2004, Benjamin Franklin Bank had111 full-time and 22 part-time employees. Employeesare not represented by a collective bargaining unit and BenjaminFranklin Bank considers its relationship with its employees tobe good.**Subsidiary Activities**     Benjamin Franklin Bancorp conducts its principal businessactivities through its wholly-owned subsidiary, BenjaminFranklin Bank. Subsidiaries of Benjamin Franklin Bancorp andBenjamin Franklin Bank are as follows:     *Benjamin Franklin Bank Capital Trust I*, a DelawareTrust, is a wholly-owned subsidiary of Benjamin FranklinBancorp. In 2002, Benjamin Franklin Bancorp raised net proceedsof $8.7 million in a sale of $9.0 million in juniorsubordinated notes due 2032 to Benjamin Franklin CapitalTrust I (the “Trust”). The Trust funded thepurchase by participating in a pooled offering of 9,000 capitalsecurities representing preferred ownership interests in theassets of the Trust with a liquidation value of $1,000 each. Theinterest rate payable on the subordinated notes is 6.94% for thefirst five years and thereafter will be at a rate equal to thethree month LIBOR rate plus 3.45%.     *Benjamin Franklin Securities Corp*., a Massachusettscorporation, is a wholly-owned subsidiary of Benjamin FranklinBank. Benjamin Franklin Securities Corp. (“BFSC”)engages exclusively in buying, selling and holding investmentsecurities on its own behalf and not as a broker. The incomeearned on BFSC’s investment securities is subject to asignificantly lower rate of state tax than that assessed onincome earned on investment securities maintained at BenjaminFranklin Bank. At December 31, 2004, BFSC had total assetsof $64.1 million, consisting primarily of cash andinvestment securities.
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**The Benjamin Franklin Bank Charitable Foundation**     To further our commitment to our local community, we intend toestablish a charitable foundation, the Benjamin Franklin BankCharitable Foundation, as part of the conversion and to issueshares of common stock to it immediately following completion ofthe conversion. The charitable foundation will be incorporatedunder Massachusetts law as a non-stock, nonprofit corporation.Under its bylaws, the Benjamin Franklin Bank charitableFoundation’s Board of Directors will be comprised ofindividuals who are existing or former directors or officers ofBenjamin Franklin Bancorp or Benjamin Franklin Bank. Thefoundation’s place of business will be located at ouradministrative offices.     We intend to make an initial contribution to the foundation of anumber of shares of our authorized but unissued common stock inan amount up to 8.0% of the number of shares actually sold inthe offering, up to a maximum of 400,000 shares. Assumingthat we issue this maximum number, our contribution would havean initial market value of $4.0 million and we would recorda pre-tax expense of approximately $4.0 million during thequarter in which the conversion is completed. The charitablefoundation will be dedicated exclusively to supportingcharitable causes and community development activities in thecommunities we serve, including the communities in which theChart Bank offices are located. The issuance of these additionalshares of common stock to the charitable foundation will: •     dilute the voting interests of purchasers of shares of our    common stock in the offering;  •     result in an expense, and a reduction in earnings, of    $4.0 million, offset in part by a corresponding tax    benefit, during the quarter in which the contribution is    made, and  •     reduce our pro forma market value and, accordingly, the number    of shares that we otherwise would have offered for sale in the    stock offering.     See “Risk Factors — The Contribution of Shares tothe Charitable Foundation Will Dilute YourOwnership Interests and Adversely Affect Net Income in2005”.     As a private foundation under Section 501(c)(3) of theInternal Revenue Code, the Benjamin Franklin Bank CharitableFoundation will be required to distribute annually in grants ordonations a minimum of 5.0% of the average fair market value ofits net investment assets. Assuming that the fair market valueof the Benjamin Franklin Bank Charitable Foundation’s netinvestment assets is $4.0 million, the CharitableFoundation would make annual grants or donations of at least$200,000. This level of annual charitable giving compares to anaverage of $79,000 per year for the past three fiscalyears. As a community bank whose business depends to a largeextent upon our ties to and relationships with customers in ourlocal communities, we believe that this increased level ofcharitable giving is appropriate, especially given our largerasset size and larger geographic market following completion ofthe conversion and the Chart Bank merger.**Regulation and Supervision*****General***     Benjamin Franklin Bank is a Massachusetts-chartered stocksavings bank and a wholly owned subsidiary of Benjamin FranklinBancorp. Benjamin Franklin Bank’s deposits are insured upto applicable limits by the FDIC through the Bank Insurance Fundand by the DIF of the Deposit Insurance Fund of Massachusettsfor amounts in excess of the FDIC insurance limits. BenjaminFranklin Bank is subject to extensive regulation by theMassachusetts Division of Banks, as its chartering agency, andby the FDIC, as its deposit insurer. Benjamin Franklin Bank isrequired to file reports with, and is periodically examined by,the FDIC and the Massachusetts Division of Banks concerning itsactivities and financial condition and must obtain regulatoryapprovals prior to entering into certain transactions,including, but not limited to, mergers with or acquisitions ofother savings institutions. Benjamin Franklin Bank is a memberof the Federal Home Loan Bank and is subject to certainlimited regulation by the Federal Reserve Board.     Benjamin Franklin Bancorp, as a bank holding company, is subjectto regulation by the Federal Reserve Board and is required tofile reports with the Federal Reserve Board.
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***Massachusetts Bank Regulation***     *General.*As a Massachusetts-chartered savings bank,Benjamin Franklin Bank is subject to supervision, regulation andexamination by the Massachusetts Division of Banks and tovarious Massachusetts statutes and regulations which govern,among other things, investment powers, lending anddeposit-taking activities, borrowings, maintenance of surplusand reserve accounts, distribution of earnings and payment ofdividends. In addition, Benjamin Franklin Bank is subject toMassachusetts consumer protection and civil rights laws andregulations. The Massachusetts Commissioner of Banks’sapproval is required for a Massachusetts bank to establish orclose branches, merge with other banks, organize a holdingcompany, issue stock and undertake certain other activities.     In response to a Massachusetts law enacted in 1996, theMassachusetts Commissioner of Banks adopted rules that generallygive Massachusetts banks powers equivalent to those of nationalbanks. The Commissioner also has adopted procedures reducingregulatory burdens and expense and expediting branching bywell-capitalized and well-managed banks.     *Investment Activities.*In general,Massachusetts-chartered savings banks may invest in preferredand common stock of any corporation organized under the laws ofthe United States or any state provided such investments do notinvolve control of any corporation and do not, in the aggregate,exceed 4.0% of the bank’s deposits. Massachusetts-charteredsavings banks may in addition invest an amount equal to 1.0% oftheir deposits in stocks of Massachusetts corporations orcompanies with substantial employment in the commonwealth whichhave pledged to the Massachusetts Commissioner of Banks thatsuch monies will be used for further development within theCommonwealth. See also “— FederalRegulations — Investment Activities” for federalrestrictions on equity investments. At the present time,Benjamin Franklin Bank does not have authority to invest inequity securities.     *Lending Activities.*Massachusetts banking laws grantbanks broad lending authority. However, with certain limitedexceptions, total obligations of one borrower to a stock bankmay not exceed 20.0% of the total of the capital stock, surplusaccount and undivided profits (for banks with capital of atleast $500,000) and may not exceed 20.0% of the capital stock or10.0% of the total of the capital stock, surplus account andundivided profits, whichever is greater (for all other banks).     *Dividends.*A Massachusetts stock bank may declare fromnet profits cash dividends not more frequently than quarterlyand non-cash dividends at any time. No dividends may bedeclared, credited or paid if the bank’s capital stock isimpaired. The approval of the Massachusetts Commissioner ofBanks is required if the total of all dividends declared in anycalendar year exceeds the total of its net profits for that yearcombined with its retained net profits of the preceding twoyears. Net profits for this purpose means the remainder of allearnings from current operations plus actual recoveries on loansand investments and other assets after deducting from the totalthereof all current operating expenses, actual losses, accrueddividends on preferred stock, if any, and all federal and statetaxes.     *Regulatory Enforcement Authority.*Any Massachusetts bankthat does not operate in accordance with the regulations,policies and directives of the Massachusetts Commissioner ofBanks may be subject to sanctions for non-compliance, includingseizure of the property and business of the bank and suspensionor revocation of its charter. The Massachusetts Commissioner ofBanks may under certain circumstances suspend or remove officersor directors who have violated the law, conducted thebank’s business in a manner which is unsafe, unsound orcontrary to the depositors’ interests or been negligent inthe performance of their duties. In addition, upon finding thata bank has engaged in an unfair or deceptive act or practice,the Massachusetts Commissioner of Banks may issue an order tocease and desist and impose a fine on the bank concerned.Finally, Massachusetts consumer protection and civil rightsstatutes applicable to Benjamin Franklin Bank permit privateindividual and class action law suits and provide for therescission of consumer transactions, including loans, and therecovery of statutory and punitive damages and attorneys’fees in the case of certain violations or those statutes.     *Insurance Sales.*Massachusetts banks may engage ininsurance sales activities if the Massachusetts Commissioner ofBanks has approved its plan of operation for insuranceactivities and it obtains a license
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from the Massachusetts Division of Insurance. A bank may belicensed directly or indirectly through an affiliate or asubsidiary corporation established for this purpose.     *DIF.*All Massachusetts-chartered savings banks arerequired to be members of the Deposit Insurance Fund of theDepositors Insurance Fund of Massachusetts, a corporation thatinsures savings bank deposits in excess of federal depositinsurance coverage. The DIF is authorized to charge savingsbanks an annual assessment of up to 1/50th of 1.0% of a savingsbank’s deposit balances in excess of amounts insured by theFDIC.***Federal Regulations***     *Capital Requirements.*Under FDIC regulations, federallyinsured state-chartered banks that are not members of theFederal Reserve System (“state non-member banks”),such as Benjamin Franklin Bank, are required to comply withminimum leverage capital requirements. For an institutiondetermined by the FDIC to not be anticipating or experiencingsignificant growth and to be, in general, a strong bankingorganization rated composite 1 under the Uniform FinancialInstitutions Ranking System established by the Federal FinancialInstitutions Examination Council, the minimum capital leveragerequirement is a ratio of Tier 1 capital to total assets of3.0%. For all other institutions, the minimum leverage capitalratio is not less than 4.0%. Tier 1 capital is the sum ofcommon stockholders’ equity, non-cumulative perpetualpreferred stock (including any related surplus) and minorityinvestments in certain subsidiaries, less intangible assets(except for certain servicing rights and credit cardrelationships) and certain other specified items.     The FDIC regulations require state non-member banks to maintaincertain levels of regulatory capital in relation to regulatoryrisk-weighted assets. The ratio of regulatory capital toregulatory risk-weighted assets is referred to as a bank’s“risk-based capital ratio.” Risk-based capital ratiosare determined by allocating assets and specified off-balancesheet items (including recourse obligations, direct creditsubstitutes and residual interests) to four risk-weightedcategories ranging from 0.0% to 100.0%, with higher levels ofcapital being required for the categories perceived asrepresenting greater risk. For example, under the FDIC’srisk-weighting system, cash and securities backed by the fullfaith and credit of the U.S. government are given a 0.0%risk weight, loans secured by one- to four-family residentialproperties generally have a 50.0% risk weight, and commercialloans have a risk weighting of 100.0%.     State non-member banks must maintain a minimum ratio of totalcapital to risk-weighted assets of at least 8.0%, of which atleast one-half must be Tier 1 capital. Total capitalconsists of Tier 1 capital plus Tier 2 orsupplementary capital items, which include allowances for loanlosses in an amount of up to 1.25% of risk-weighted assets,cumulative preferred stock and certain other capitalinstruments, and a portion of the net unrealized gain on equitysecurities. The includable amount of Tier 2 capital cannotexceed the amount of the institution’s Tier 1 capital.Banks that engage in specified levels of trading activities aresubject to adjustments in their risk based capital calculationto ensure the maintenance of sufficient capital to supportmarket risk.     The Federal Deposit Insurance Corporation Improvement Act(FDICIA) required each federal banking agency to revise itsrisk-based capital standards for insured institutions to ensurethat those standards take adequate account of interest-raterisk, concentration of credit risk, and the risk ofnontraditional activities, as well as to reflect the actualperformance and expected risk of loss on multi-familyresidential loans. The FDIC, along with the other federalbanking agencies, has adopted a regulation providing that theagencies will take into account the exposure of a bank’scapital and economic value to changes in interest rate risk inassessing a bank’s capital adequacy. The FDIC also hasauthority to establish individual minimum capital requirementsin appropriate cases upon determination that aninstitution’s capital level is, or is likely to become,inadequate in light of the particular circumstances.     As a bank holding company, Benjamin Franklin Bancorp is subjectto capital adequacy guidelines for bank holding companiessimilar to those of the FDIC for state-chartered banks. On a proforma consolidated basis, after the offering, Benjamin FranklinBancorp’s pro forma stockholders’ equity will exceedthese requirements.
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     *Standards for Safety and Soundness.*As required bystatute, the federal banking agencies adopted final regulationsand Interagency Guidelines Establishing Standards for Safety andSoundness to implement safety and soundness standards. Theguidelines set forth the safety and soundness standards that thefederal banking agencies use to identify and address problems atinsured depository institutions before capital becomes impaired.The guidelines address internal controls and informationsystems, internal audit system, credit underwriting, loandocumentation, interest rate exposure, asset growth, assetquality, earnings and compensation, fees and benefits. Mostrecently, the agencies have established standards forsafeguarding customer information. If the appropriate federalbanking agency determines that an institution fails to meet anystandard prescribed by the guidelines, the agency may requirethe institution to submit to the agency an acceptable plan toachieve compliance with the standard.     *Investment Activities.*Since the enactment of FDICIA, allstate-chartered FDIC insured banks, including savings banks,have generally been limited in their investment activities toprincipal and equity investments of the type and in the amountauthorized for national banks, notwithstanding state law. FDICIAand the FDIC permit exceptions to these limitations. Forexample, state chartered banks may, with FDIC approval, continueto exercise state authority to invest in common or preferredstocks listed on a national securities exchange or the NasdaqNational Market and in the shares of an investment companyregistered under the Investment Company Act of 1940, as amended.The maximum permissible investment is 100.0% of Tier 1Capital, as specified by the FDIC’s regulations, or themaximum amount permitted by Massachusetts law, whichever is*less*. Such authority may be terminated upon theFDIC’s determination that such investments pose a safetyand soundness risk. Benjamin Franklin does not currently haveauthority to invest in equity securities. In addition, the FDICis authorized to permit state-chartered banks institutions toengage in state authorized activities or investments notpermissible for national banks (other than non-subsidiary equityinvestments) if they meet all applicable capital requirementsand it is determined that such activities or investments do notpose a significant risk to the Bank Insurance Fund. The FDIC hasadopted revisions to its regulations governing the proceduresfor institutions seeking approval to engage in such activitiesor investments. The Gramm-Leach-Bliley Act of 1999 specifiesthat a nonmember bank may control a subsidiary that engages inactivities as principal that would only be permitted for anational bank to conduct in a “financial subsidiary”if a bank meets specified conditions and deducts its investmentin the subsidiary for regulatory capital purposes.     *Interstate Banking and Branching.*The Riegle-NealInterstate Banking and Branching Efficiency Act of 1994, or theInterstate Banking Act, permits adequately capitalized bankholding companies to acquire banks in any state subject tospecified concentration limits and other conditions. TheInterstate Banking Act also authorizes the interstate merger ofbanks. In addition, among other things, the Interstate BankingAct permits banks to establish new branches on an interstatebasis provided that such action is specifically authorized bythe law of the host state.     *Prompt Corrective Regulatory Action.*Federal lawrequires, among other things, that federal bank regulatoryauthorities take “prompt corrective action” withrespect to banks that do not meet minimum capital requirements.For these purposes, the law establishes five capital categories:well capitalized, adequately capitalized, undercapitalized,significantly undercapitalized, and critically undercapitalized.     The FDIC has adopted regulations to implement the promptcorrective action legislation. An institution is deemed to be“well capitalized” if it has a total risk-basedcapital ratio of 10.0% or greater, a Tier 1 risk-basedcapital ratio of 6.0% or greater and a leverage ratio of 5.0% orgreater. An institution is “adequately capitalized” ifit has a total risk-based capital ratio of 8.0% or greater, aTier 1 risk-based capital ratio of 4.0% or greater, andgenerally a leverage ratio of 4.0% or greater. An institution is“undercapitalized” if it has a total risk-basedcapital ratio of less than 8.0%, a Tier 1 risk-basedcapital ratio of less than 4.0%, or generally a leverage ratioof less than 4.0%. An institution is deemed to be“significantly undercapitalized” if it has a totalrisk-based capital ratio of less than 6.0%, a Tier 1risk-based capital ratio of less than 3.0%, or a leverage ratioof less than 3.0%. An institution is considered to be“critically undercapitalized” if it has a ratio oftangible equity (as defined in the regulations) to total assetsthat is equal to or less than 2.0%. As of December 31,2004, Benjamin Franklin Bank was a “well capitalized”institution.
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     “Undercapitalized” banks must adhere to growth,capital distribution (including dividend) and other limitationsand are required to submit a capital restoration plan. Abank’s compliance with such a plan is required to beguaranteed by any company that controls the undercapitalizedinstitution in an amount equal to the lesser of 5.0% of theinstitution’s total assets when deemed undercapitalized orthe amount necessary to achieve the status of adequatelycapitalized. If an “undercapitalized” bank fails tosubmit an acceptable plan, it is treated as if it is“significantly undercapitalized.” “Significantlyundercapitalized” banks must comply with one or more of anumber of additional restrictions, including but not limited toan order by the FDIC to sell sufficient voting stock to becomeadequately capitalized, requirements to reduce total assets,cease receipt of deposits from correspondent banks or dismissdirectors or officers, and restrictions on interest rates paidon deposits, compensation of executive officers and capitaldistributions by the parent holding company. “Criticallyundercapitalized” institutions are subject to additionalmeasures including, subject to a narrow exception, theappointment of a receiver or conservator within 270 daysafter it obtains such status.     *Transactions with Affiliates.*Transactions between banksand their affiliates are governed by Sections 23A and 23Bof the Federal Reserve Act. An affiliate of a bank is anycompany or entity that controls, is controlled by or is undercommon control with the bank. In a holding company context, theparent bank holding company and any companies which arecontrolled by such parent holding company are affiliates of thebank. Generally, Sections 23A and 23B of the FederalReserve Act (i) limit the extent to which the bank or itssubsidiaries may engage in “covered transactions” withany one affiliate to an amount equal to 10.0% of suchinstitution’s capital stock and surplus, and contain anaggregate limit on all such transactions with all affiliates toan amount equal to 20.0% of such institution’s capitalstock and surplus and (ii) require that all suchtransactions be on terms substantially the same, or at least asfavorable, to the institution or subsidiary as those provided toa non-affiliate. The term “covered transaction”includes the making of loans, purchase of assets, issuance of aguarantee and other similar transactions. In addition, loans orother extensions of credit by the financial institution to theaffiliate are required to be collateralized in accordance withthe requirements set forth in Section 23A of the FederalReserve Act.     The Gramm-Leach-Bliley Act amended several provisions ofsection 23A and 23B of the Federal Reserve Act. Theamendments provide that so-called “financialsubsidiaries” of banks are treated as affiliates forpurposes of sections 23A and 23B of the Federal Reserve Act, butthe amendment provides that (i) the 10.0% capital limit ontransactions between the bank and such financial subsidiary asan affiliate is not applicable, and (ii) the investment bythe bank in the financial subsidiary does not include retainedearnings in the financial subsidiary. Certain anti-evasionprovisions have been included that relate to the relationshipbetween any financial subsidiary of a bank and sister companiesof the bank: (1) any purchase of, or investment in, thesecurities of a financial subsidiary by any affiliate of theparent bank is considered a purchase or investment by the bank;or (2) if the Federal Reserve Board determines that suchtreatment is necessary, any loan made by an affiliate of theparent bank to the financial subsidiary is to be considered aloan made by the parent bank.     Effective April 1, 2003, the Federal Reserve Board adoptedRegulation W that deals with the provisions ofSections 23A and 23B. The regulation unifies and updatesstaff interpretations issued over the years, incorporatesseveral new interpretations and provisions (such as to clarifywhen transactions with an unrelated third party will beattributed to an affiliate), and addresses new issues arising asa result of the expanded scope of non-banking activities engagedin by banks and bank holding companies in recent years andauthorized for financial holding companies under theGramm-Leach-Bliley Act.     In addition, Sections 22(h) and (g) of the FederalReserve Act place restrictions on loans to executive officers,directors and principal stockholders. Under Section 22(h)of the Federal Reserve Act, loans to a director, an executiveofficer and to a greater than 10.0% stockholder of a financialinstitution, and certain affiliated interests of these, may notexceed, together with all other outstanding loans to such personand affiliated interests, the financial institution’s loansto one borrower limit, generally equal to 15.0% of theinstitution’s unimpaired capital and surplus.Section 22(h) of the Federal Reserve Act also requires thatloans to directors, executive officers and principalstockholders be made on terms
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substantially the same as offered in comparable transactions toother persons and also requires prior board approval for certainloans. In addition, the aggregate amount of extensions of creditby a financial institution to insiders cannot exceed theinstitution’s unimpaired capital and surplus. Furthermore,Section 22(g) of the Federal Reserve Act places additionalrestrictions on loans to executive officers.     *Enforcement.*The FDIC has extensive enforcement authorityover insured savings state banks, including Benjamin FranklinBank. This enforcement authority includes, among other things,the ability to assess civil money penalties, issue cease anddesist orders and remove directors and officers. In general,these enforcement actions may be initiated in response toviolations of laws and regulations and unsafe or unsoundpractices. The FDIC has authority under Federal law to appoint aconservator or receiver for an insured bank under limitedcircumstances. The FDIC is required, with certain exceptions, toappoint a receiver or conservator for an insured statenon-member bank if that bank was “criticallyundercapitalized” on average during the calendar quarterbeginning 270 days after the date on which the institutionbecame “critically undercapitalized.” The FDIC mayalso appoint itself as conservator or receiver for an insuredstate non-member institution under specific circumstances on thebasis of the institution’s financial condition or upon theoccurrence of other events, including: (1) insolvency;(2) substantial dissipation of assets or earnings throughviolations of law or unsafe or unsound practices;(3) existence of an unsafe or unsound condition to transactbusiness; and (4) insufficient capital, or the incurring oflosses that will deplete substantially all of theinstitution’s capital with no reasonable prospect ofreplenishment without federal assistance.     *Insurance of Deposit Accounts.*The FDIC has adopted arisk-based insurance assessment system. The FDIC assigns aninstitution to one of three capital categories based on theinstitution’s financial condition consisting of(1) well capitalized, (2) adequately capitalized or(3) undercapitalized, and one of three supervisorysubcategories within each capital group. The supervisorysubgroup to which an institution is assigned is based on asupervisory evaluation provided to the FDIC by theinstitution’s primary federal regulator and informationwhich the FDIC determines to be relevant to theinstitution’s financial condition and the risk posed to thedeposit insurance funds. An institution’s assessment ratedepends on the capital category and supervisory category towhich it is assigned. Assessment rates for insurance funddeposits currently range from 0 basis points for thestrongest institution to 27 basis points for the weakest.Bank Insurance Fund members are also required to assist in therepayment of bonds issued by the Financing Corporation in thelate 1980’s to recapitalize the Federal Savings and LoanInsurance Corporation. For 2004 and 2003, Benjamin FranklinBank’s total FDIC assessment was $58,298 and $60,679,respectively. The FDIC is authorized to raise the assessmentrates. The FDIC has exercised this authority several times inthe past and may raise insurance premiums in the future. If suchaction is taken by the FDIC, it could have an adverse effect onthe earnings of Benjamin Franklin Bank.     The FDIC may terminate insurance of deposits if it finds thatthe institution is in an unsafe or unsound condition to continueoperations, has engaged in unsafe or unsound practices, or hasviolated any applicable law, regulation, rule, order orcondition imposed by the FDIC. The management of BenjaminFranklin Bank does not know of any practice, condition orviolation that might lead to termination of deposit insurance.***Federal Reserve System***     The Federal Reserve Board regulations require depositoryinstitutions to maintain non-interest-earning reserves againsttheir transaction accounts (primarily NOW and regular checkingaccounts). The Federal Reserve Board regulations generallyrequire that reserves be maintained against aggregatetransaction accounts as follows: for that portion of transactionaccounts aggregating $42.1 million or less (which may beadjusted by the Federal Reserve Board) the reserve requirementis 3.0%; and for amounts greater than $42.1 million, 10.0%(which may be adjusted by the Federal Reserve Board between 8.0%and 14.0%), against that portion of total transaction accountsin excess of $42.1 million. The first $6.0 million ofotherwise reservable balances (which may be adjusted by theFederal Reserve Board) are exempted from the reserverequirements. Benjamin Franklin Bank is in compliance with theserequirements.
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***Federal Home Loan Bank System***     Benjamin Franklin Bank is a member of the Federal HomeLoan Bank System, which consists of 12 regional FederalHome Loan Banks. The Federal Home Loan Bank provides acentral credit facility primarily for member institutions.Members of the Federal Home Loan Bank are required toacquire and hold shares of capital stock in the Federal HomeLoan Bank in an amount at least equal to 1.0% of theaggregate principal amount of its unpaid residential mortgageloans and similar obligations at the beginning of each year, or1/20of its advances (borrowings) from the Federal HomeLoan Bank, whichever is greater. Benjamin Franklin Bank wasin compliance with this requirement with an investment inFederal Home Loan Bank stock at December 31, 2004 of$4.5 million. At December 31, 2004, Benjamin FranklinBank had $76.3 million in Federal Home Loan Bankadvances.     The Federal Home Loan Banks are required to provide fundsfor certain purposes including the resolution of insolventthrifts in the late 1980s and to contributing funds foraffordable housing programs. These requirements could reduce theamount of dividends that the Federal Home Loan Banks pay totheir members and result in the Federal Home Loan Banksimposing a higher rate of interest on advances to their members.If dividends were reduced, or interest on future Federal HomeLoan Bank advances increased, a member bank affected bysuch reduction or increase would likely experience a reductionin its net interest income. Recent legislation has changed thestructure of the Federal Home Loan Banks’ fundingobligations for insolvent thrifts, revised the capital structureof the Federal Home Loan Banks and implemented entirelyvoluntary membership for Federal Home Loan Banks. For 2004and 2003, cash dividends from the Federal Home Loan Bank toBenjamin Franklin Bank amounted to approximately $110,090 and$112,997, respectively. There can be no assurance that suchdividends will continue in the future. Further, there can be noassurance that the impact of recent or future legislation on theFederal Home Loan Banks also will not cause a decrease inthe value of the Federal Home Loan Bank stock held byBenjamin Franklin Bank.***Holding Company Regulation***     *General.*As a bank holding company, Benjamin FranklinBancorp is subject to comprehensive regulation and regularexaminations by the Federal Reserve Board. The Federal ReserveBoard also has extensive enforcement authority over bank holdingcompanies, including, among other things, the ability to assesscivil money penalties, to issue cease and desist or removalorders and to require that a holding company divest subsidiaries(including its bank subsidiaries). In general, enforcementactions may be initiated for violations of law and regulationsand unsafe or unsound practices.     As a bank holding company, Benjamin Franklin Bancorp must obtainthe approval of the Federal Reserve Board before:(i) acquiring, directly or indirectly, ownership or controlof any voting shares of another bank or bank holding company if,after such acquisition, it would own or control more than 5.0%of such shares (unless it already owns or controls the majorityof such shares); (ii) acquiring all or substantially all ofthe assets of another bank or bank holding company; or(iii) merging or consolidating with another bank holdingcompany. In addition, Benjamin Franklin Bancorp must obtain theapproval of the Massachusetts Board of Bank Incorporation beforebecoming a “bank holding company” for Massachusettslaw purposes. Under Massachusetts law, a bank holding company isgenerally defined as a company that directly or indirectly owns,controls or holds with power to vote 25.0% of the votingstock of each of *two*or more banking institutions.     Under Federal Reserve Board policy, a bank holding company mustserve as a source of strength for its subsidiary bank. Underthis policy, the Federal Reserve Board may require, and hasrequired in the past, a holding company to contribute additionalcapital to an undercapitalized subsidiary bank.     The Banking Holding Company Act also prohibits a bank holdingcompany, with certain exceptions, from acquiring direct orindirect ownership or control of more than 5.0% of the votingshares of any company which is not a bank or bank holdingcompany, or from engaging directly or indirectly in activitiesother than those of banking, managing or controlling banks, orproviding services for its subsidiaries. The principalexceptions to these prohibitions involve certain non-bankactivities which, by statute or by
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Federal Reserve Board regulation or order, have been identifiedas activities closely related to the business of banking ormanaging or controlling banks. The list of activities permittedby the Federal Reserve Board includes, among other things:(i) operating a savings institution, mortgage company,finance company, credit card company or factoring company;(ii) performing certain data processing operations;(iii) providing certain investment and financial advice;(iv) underwriting and acting as an insurance agent forcertain types of credit-related insurance; (v) leasingproperty on a full-payout, non-operating basis;(vi) selling money orders, travelers’ checks andUnited States Savings Bonds; (vii) real estate and personalproperty appraising; (viii) providing tax planning andpreparation services; (ix) financing and investing incertain community development activities; and (x) subjectto certain limitations, providing securities brokerage servicesfor customers. Benjamin Franklin Bancorp has no present plans toengage in any of these activities.     *Dividends.*The Federal Reserve Board has issued a policystatement on the payment of cash dividends by bank holdingcompanies, which expresses the Federal Reserve Board’s viewthat a bank holding company should pay cash dividends only tothe extent that the holding company’s net income for thepast year is sufficient to cover both the cash dividends and arate of earnings retention that is consistent with the holdingcompany’s capital needs, asset quality and overallfinancial condition. The Federal Reserve Board also indicatedthat it would be inappropriate for a company experiencingserious financial problems to borrow funds to pay dividends.Furthermore, under the prompt corrective action regulationsadopted by the Federal Reserve Board, the Federal Reserve Boardmay prohibit a bank holding company from paying any dividends ifthe holding company’s bank subsidiary is classified as“undercapitalized.”     Bank holding companies are required to give the Federal ReserveBoard prior written notice of any purchase or redemption of itsoutstanding equity securities if the gross consideration for thepurchase or redemption, when combined with the net considerationpaid for all such purchases or redemptions during the preceding12 months, is equal to 10.0% or more of the consolidatednet worth of the bank holding company. The Federal Reserve Boardmay disapprove such a purchase or redemption if it determinesthat the proposal would constitute an unsafe or unsound practiceor would violate any law, regulation, Federal Reserve Boardorder or any condition imposed by, or written agreement with,the Federal Reserve Board. This notification requirement doesnot apply to any company that meets the well-capitalizedstandard for commercial banks, is “well managed”within the meaning of the Federal Reserve Board regulations andis not subject to any unresolved supervisory issues.     *Financial Modernization.*The Gramm-Leach-Bliley Actpermits greater affiliation among banks, securities firms,insurance companies, and other companies under a type offinancial services company known as a “financial holdingcompany.” A financial holding company essentially is a bankholding company with significantly expanded powers. Financialholding companies are authorized by statute to engage in anumber of financial activities previously impermissible for bankholding companies, including securities underwriting, dealingand market making; sponsoring mutual funds and investmentcompanies; insurance underwriting and agency; and merchantbanking activities. The act also permits the Federal ReserveBoard and the Treasury Department to authorize additionalactivities for financial holding companies if they are“financial in nature” or “incidental” tofinancial activities. A bank holding company may become afinancial holding company if each of its subsidiary banks iswell capitalized, well managed, and has at least a“satisfactory” Community Reinvestment Act rating. Afinancial holding company must provide notice to the FederalReserve Board within 30 days after commencing activitiespreviously determined by statute or by the Federal Reserve Boardand Department of the Treasury to be permissible. BenjaminFranklin Bancorp has not submitted notice to the Federal ReserveBoard of its intent to be deemed a financial holding company.However, it is not precluded from submitting a notice in thefuture should it wish to engage in activities only permitted tofinancial holding companies.***Miscellaneous Regulation***     *Community Reinvestment Act.*Under the CommunityReinvestment Act (CRA), as amended as implemented by FDICregulations, a bank has a continuing and affirmative obligation,consistent with its
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safe and sound operation, to help meet the credit needs of itsentire community, including low and moderate incomeneighborhoods. The CRA does not establish specific lendingrequirements or programs for financial institutions nor does itlimit an institution’s discretion to develop the types ofproducts and services that it believes are best suited to itsparticular community, consistent with the CRA. The CRA doesrequire the FDIC, in connection with its examination of a bank,to assess the institution’s record of meeting the creditneeds of its community and to take such record into account inits evaluation of certain applications by such institution,including applications to acquire branches and other financialinstitutions. The CRA requires the FDIC to provide a writtenevaluation of an institution’s CRA performance utilizing afour-tiered descriptive rating system. Benjamin FranklinBank’s latest FDIC CRA rating was “satisfactory.”     Massachusetts has its own statutory counterpart to the CRA whichis also applicable to Benjamin Franklin Bank and Chart Bank. TheMassachusetts version is generally similar to the CRA bututilizes a five-tiered descriptive rating system. Massachusettslaw requires the Massachusetts Commissioner of Banks toconsider, but not be limited to, a bank’s record ofperformance under Massachusetts law in considering anyapplication by the bank to establish a branch or otherdeposit-taking facility, to relocate an office or to merge orconsolidate with or acquire the assets and assume theliabilities of any other banking institution. Benjamin FranklinBank’s most recent rating under Massachusetts law was“high satisfactory.”     *Consumer Protection And Fair Lending Regulations.*Massachusetts savings banks are subject to a variety offederal and Massachusetts statutes and regulations that areintended to protect consumers and prohibit discrimination in thegranting of credit. These statutes and regulations provide for arange of sanctions for non-compliance with their terms,including imposition of administrative fines and remedialorders, and referral to the Attorney General for prosecution ofa civil action for actual and punitive damages and injunctiverelief. Certain of these statutes authorize private individualand class action lawsuits and the award of actual, statutory andpunitive damages and attorneys’ fees for certain types ofviolations.**Risk Factors That May Affect Future Results**     The following risk factors are relevant to our future resultsand financial success, and you should read them with care:***Our Financial Success Depends In Part On The Success    Of Our Acquisition of Chart Bank.***     Our future operating performance will depend, in part, on thesuccess of the merger with Chart Bank, which will be the largestmerger Benjamin Franklin Bancorp has consummated. The success ofthe merger will, in turn, depend on a number of factors,including our ability to: •     integrate into Benjamin Franklin Bank the operations and    branches of Chart Bank,  •     retain Chart Bank’s deposits and customers,  •     control future non-interest expenses in a manner that enables us    to improve our overall operating efficiencies,  •     retain and integrate key personnel of Chart Bank into our    operations, particularly those with specialized expertise in the    ATM management business operated by Chart Bank’s    subsidiary, Creative Strategic Solutions, Inc.     Integration of Chart Bank into Benjamin Franklin Bank followingthe merger will require the dedication of the time and resourcesof our management and may temporarily distract management’sattention from our day-to-day business. No assurance can begiven that we will successfully integrate Chart Bank’soperations into our own, or that we will achieve anticipatedbenefits of the merger or achieve earnings results in the futuresimilar to those we, or Chart Bank, have achieved in the past.Further, no assurance can be given that we will effectivelymanage any growth resulting from the merger.
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***Our Commercial Real Estate, Construction And Commercial    Business Loans May Expose Us To Increased Credit Risks, And This    Risk Will Increase If We Succeed In Increasing These Types Of    Loans.***     Residential real estate loans represent a smaller proportion ofour loan portfolio than the average for savings institutions inNew England. As of December 31, 2004, commercial realestate, construction and commercial business loans represented30.9% of our loan portfolio. This percentage would have been41.2% on a pro forma basis as of that date with the acquisitionof Chart Bank, and we intend to grow commercial real estate andcommercial business loans further as a proportion of ourportfolio over the next several years. Construction loans, whilethey are not likely to increase as a percentage of total loans,are expected to increase in absolute terms in line with theoverall growth in the bank’s loan portfolio. In general,construction loans, commercial real estate loans and commercialbusiness loans generate higher returns, but also pose greatercredit risks, than do owner-occupied residential mortgage loans.As our various commercial loan portfolios increase, thecorresponding risks and potential for losses from these loansmay also increase.     The repayment of construction and commercial real estate loansdepends on the business and financial condition of borrowersand, in the case of construction loans, on the economicviability of projects financed. A number of our borrowers havemore than one construction or commercial real estate loanoutstanding with us. Further, these loans are concentratedprimarily in Eastern Massachusetts. Economic events and changesin government regulations, which we and our borrowers cannotcontrol, could have an adverse impact on the cash flowsgenerated by properties securing our construction and commercialreal estate loans and on the values of the properties securingthose loans. Commercial properties tend to decline in value morerapidly than residential owner-occupied properties duringeconomic recessions. We held $114.6 million in constructionand commercial real estate loans in our loan portfolio as ofDecember 31, 2004 representing 29.7% of total loans on thatdate. On a pro forma basis on that date, assuming that themerger with Chart Bank had been completed, we would have had$222.8 million of these loans in our portfolio representing40.0% of total loans.     We make both secured and some short-term unsecured commercialbusiness loans, holding $4.4 million of these loans in ourloan portfolio as of December 31, 2004, representing 1.1%of total loans on that date. On a pro forma basis on that date,assuming that the merger with Chart Bank had been completed, wewould have had $9.4 million of commercial business loans inour portfolio, representing 1.7% of total loans. Repayment ofboth secured and unsecured commercial business loans dependssubstantially on borrowers’ underlying business, financialcondition and cash flows. Unsecured loans generally involve ahigher degree of risk of loss than do secured loans because,without collateral, repayment is wholly dependent upon thesuccess of the borrowers’ businesses. Secured commercialbusiness loans are generally collateralized by equipment,leases, inventory and accounts receivable. Compared to realestate, that type of collateral is more difficult to monitor,its value is harder to ascertain, it may depreciate more rapidlyand it may not be as readily saleable if repossessed.***Our Continuing Concentration Of Loans In Our Primary    Market Area May Increase Our Risk.***     Our success depends primarily on the general economic conditionsin the counties in which we conduct business, and in the Bostonmetropolitan area in general. Unlike larger banks that are moregeographically diversified, we provide banking and financialservices to customers primarily in Norfolk and WorcesterCounties, Massachusetts, southwest of Boston, and to lesserdegree in Middlesex and Suffolk Counties, which include the Cityof Boston and areas east of Boston. Following our proposedacquisition of Chart Bank, we will expand our presence inMiddlesex and Suffolk Counties. The local economic conditions inour market area have a significant impact on our loans, theability of the borrowers to repay these loans and the value ofthe collateral securing these loans. A significant decline ingeneral economic conditions caused by inflation, recession,unemployment or other factors beyond our control would affectthese local economic conditions and could adversely affect ourfinancial condition and results of operations. Additionally,because we have a significant amount of commercial real estateloans, decreases in tenant
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occupancy may also have a negative effect on the ability of manyof our borrowers to make timely repayments of their loans, whichwould have an adverse impact on our earnings.***Our Return On Equity May Initially Be Low Compared To    Other Financial Institutions. A Low Return Could Lower The    Trading Price Of Our Common Stock.***     Net income divided by average equity, known as “return onequity,” is a ratio many investors use to compare theperformance of a financial institution to its peers. Our returnon equity may be reduced due to the expenses we will incur inpursuing our growth strategies, the costs of being a publiccompany and added expenses associated with our employee stockownership plan and planned stock-based incentive plan. Theincrease in our core deposit intangible asset created by theChart Bank acquisition will also have a negative impact on ourreturn on equity, and if our periodic evaluation of the goodwillcreated by the Chart Bank acquisition results in a determinationof impairment, we would be required to reduce its carrying valuethrough a charge to earnings. Until we can increase our netinterest income and non-interest income, we expect our return onequity to be below the industry average for public thrifts,which may negatively affect the value of our common stock.***We May Have Difficulty Meeting Our Branch Expansion Goals,    And Our Branch Expansion Strategy May Not Be Accretive To    Earnings.***     Our growth plans include the opening of new branch offices incommunities located between the Benjamin Franklin Bank and ChartBank franchises as well as in other communities contiguous tothose currently served by Benjamin Franklin Bank. Our ability toestablish new branches will depend upon whether we can identifysuitable sites and negotiate acceptable lease or purchase andsale terms, and we may not be able to do so, or it may takelonger than we expect. Moreover, once we establish a new branch,numerous factors will contribute to its performance, such as asuitable location, qualified personnel and an effectivemarketing strategy. Additionally, it takes time for a new branchto gather significant loans and deposits to generate enoughincome to offset its expenses, some of which, like salaries andoccupancy expense, are relatively fixed costs. There can be noassurance that our branch expansion strategy will be accretiveto our earnings, or that it will be accretive to earnings withina reasonable period of time.***Strong Competition Within Our Market Area May Limit Our    Growth And Profitability.***     We face significant competition both in attracting deposits andin the origination of loans. Savings banks, credit unions,savings and loan associations and commercial banks operating inour primary market area have historically provided most of ourcompetition for deposits. In addition, and particularly in timesof high interest rates, we face additional and significantcompetition for funds from money-market mutual funds and issuersof corporate and government securities. Competition for theorigination of real estate and other loans comes from otherthrift institutions, commercial banks, insurance companies,finance companies, other institutional lenders and mortgagecompanies. Many of our competitors have substantially greaterfinancial and other resources than ours. Moreover, we may faceincreased competition in the origination of loans if competingthrift institutions convert to stock form, because suchconverting thrifts would likely seek to invest their new capitalinto loans. Finally, credit unions do not pay federal or stateincome taxes and are subject to fewer regulatory constraintsthan savings banks and as a result, they may enjoy a competitiveadvantage over us. This advantage places significant competitivepressure on the prices of our loans and deposits.***Our Ability to Grow May Be Limited if We Cannot Make    Acquisitions.***     In an effort to increase our loan and deposit growth, we willcontinue to seek to expand our banking franchise, includingthrough acquisitions of other financial institutions or branchesif opportunities arise. Our ability to grow through selectiveacquisitions of other financial institutions or branches willdepend on successfully identifying, acquiring and integratingthem. We compete with other financial institutions with respectto proposed acquisitions. We cannot assure you that we will beable to identify attractive acquisition candidates or makeacquisitions on favorable terms. In addition, we cannot assureyou that we
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can successfully integrate any acquired financial institutionsor branches into our banking organization in a timely orefficient manner, that we will be successful in retainingexisting customer relationships or that we can achieveanticipated operating efficiencies.***We Operate In A Highly Regulated Environment And May Be    Adversely Affected By Changes In Law And Regulations.***     We are subject to extensive regulation, supervision andexamination. See “Regulation and Supervision.” Anychange in the laws or regulations applicable to us, or inbanking regulators’ supervisory policies or examinationprocedures, whether by the Massachusetts Commissioner of Banks,the FDIC, the Federal Reserve Board, other state or federalregulators, the United States Congress or the Massachusettslegislature could have a material adverse effect on ourbusiness, financial condition, results of operations and cashflows.     We are subject to regulations promulgated by the MassachusettsDivision of Banks, as our chartering authority, and by the FDICas the insurer of our deposits up to certain limits. We alsobelong to the Federal Home Loan Bank System and, as amember of such system, we are subject to certain limitedregulations promulgated by the Federal Home Loan Bank ofBoston. In addition, the Federal Reserve Board regulates andoversees Benjamin Franklin Bancorp, as a Bank holding company.     This regulation and supervision limits the activities in whichwe may engage. The purpose of regulation and supervision isprimarily to protect our depositors and borrowers and, in thecase of FDIC regulation, the FDIC’s insurance fund.Regulatory authorities have extensive discretion in the exerciseof their supervisory and enforcement powers. They may, amongother things, impose restrictions on the operation of a bankinginstitution, the classification of assets by such institutionand such institution’s allowance for loan losses.Regulatory and law enforcement authorities also have widediscretion and extensive enforcement powers under variousconsumer protection and civil rights laws, including theTruth-in-Lending Act, the Equal Credit Opportunity Act, the FairHousing Act, the Real Estate Settlement Procedures Act andMassachusetts’s deceptive acts and practices law. Theselaws also permit private individual and class action law suitsand provide for the recovery of attorneys fees in certaininstances. No assurance can be given that the foregoingregulations and supervision will not change so as to affect usadversely.***Changes in Market Interest Rates Could Adversely Affect    Our Financial Condition and Results of Operations.***     Our profitability, like that of most financial institutions,depends to a large extent upon our net interest income, which isthe difference, or spread, between our gross interest income oninterest-earning assets, such as loans and securities, and ourinterest expense on interest-bearing liabilities, such asdeposits and borrowed funds. Accordingly, our results ofoperations and financial condition depend largely on movementsin market interest rates and our ability to manage ourinterest-rate-sensitive assets and liabilities in response tothese movements, including our adjustable-rate mortgage loans,which represent the largest portion of our residential loanportfolio. Changes in interest rates could have a materialadverse effect on our business, financial condition, results ofoperations and cash flows. Because, as a general matter, ourinterest-bearing liabilities re-price or mature more quicklythan our interest-earning assets, an increase in interest ratesgenerally would result in a decrease in our interest rate spreadand net interest income.     Changes in interest rates also affect the value of ourinterest-earning assets, including, in particular, the value ofour investment securities portfolio. Generally, the value ofinvestment securities fluctuates inversely with changes ininterest rates. At December 31, 2004, our securitiesportfolio totaled $93.3 million, including$86.1 million of securities available for sale. Unrealizedgains and losses on securities available for sale are reportedas a separate component of surplus, net of related taxes.Decreases in the fair value of securities available for saletherefore would have an adverse affect on our stockholders’equity. We are also subject to reinvestment risk relating tointerest rate movements. Decreases in interest
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rates can result in increased prepayments of loans andmortgage-related securities, as borrowers refinance to reducetheir borrowing costs. Under these circumstances, we are subjectto reinvestment risk to the extent that we are not able toreinvest funds from such prepayments at rates that arecomparable to the rates on the prepaid loans or securities. Onthe other hand, increases in interest rates on adjustable-ratemortgage loans result in larger mortgage payments due fromborrowers, which could potentially increase our level of loandelinquencies and defaults.***The Issuance of Additional Shares May Dilute the    Ownership Interest of Common Stockholders.***     The exact number of shares of common stock to be issued in theconversion will not be determined until we obtain an updatedappraisal immediately prior to the completion of the sale of thecommon stock. However, in general, the higher the number ofshares of common stock issued, the lower our pro forma netincome per share and pro forma stockholders’ equity pershare, and the higher the purchase price of a share of ourcommon stock as a percentage of pro forma stockholders’equity per share and as a multiple of net income per share. Dueto the intangibles (goodwill and core deposit value) createdfrom the acquisition of Chart Bank, our pro forma tangiblestockholders’ equity per share increases with a highernumber of common shares issued, and therefore the purchase priceof a share of our common stock as a percentage of pro formastockholders’ tangible equity per share decreases. Inaddition, the issuance of shares to stockholders of Chart Bankin connection with the merger will dilute the ownership interestof purchasers of shares of common stock in the conversion.***Relatively High Price to Pro Forma Tangible    Stockholders’ Equity May Negatively Affect After-Market    Stock Performance Compared with Other Recently Converted    Institutions.***     As a result of the relatively high purchase price of a share ofour common stock as a percentage of pro forma tangiblestockholders’ equity per share, the after-marketperformance of our common stock may be less favorable during theperiod immediately following the conversion than the priceperformance of common stock sold in recent mutual-to-stockconversions.     The purchase price of a share of our common stock as apercentage of pro forma tangible stockholders’ equity pershare exceeds by a significant amount the comparable ratios withrespect to common stock sold in standard mutual-to-stockconversions to date that do not also involve acquisitions ofother financial institutions. The ratio of purchase price to proforma tangible stockholders’ equity is also consistent withor in excess of the comparable ratios of the two recentconversions involving acquisitions of other financialinstitutions: NewAlliance Bancshares, Inc. and KNBT Bancorp,Inc. Although the common stock of those companies experiencedsignificant market appreciation immediately following theofferings, and both stocks continue to trade well above theinitial offering price, there can be no assurance that ourcommon stock will not trade below $10.00 per share, as hasbeen the case for some converted mutual institutions, includingsome institutions that have recently converted. The increase inany particular company’s stock price is subject to variousfactors, including the amount of proceeds a company raises, themarket in which it operates and the quality of management andmanagement’s ability to deploy the conversion proceeds. Inaddition, stock prices may be affected by general marketconditions, the interest rate environment, the market forfinancial institutions, merger or takeover transactions, thepresence of professional and other investors who purchase stockon speculation, as well as other unforeseeable events notnecessarily in the control of management. Finally, thosetransactions occurred primarily during a falling interest rateenvironment, during which time the market for financialinstitution stocks typically increases. If interest rates rise,our net interest income and the value of our assets could bereduced, which could negatively affect our stock price.***Our Stock-Based Benefit Plans Will Increase Our Costs,    Which Will Reduce Our Income.***     We have adopted an employee stock ownership plan, and we expectto adopt a stock-based incentive plan after the conversion,subject to stockholder approval. The allocation to employees ofshares under the employee stock ownership plan and the grantingof restricted stock awards and stock options under thestock-based incentive plan will increase our future compensationcosts, thereby reducing our earnings.
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***The Implementation of Stock-Based Benefit Plans Will    Dilute Your Ownership Interest.***     We expect to adopt a stock-based incentive plan following theconversion, subject to stockholder approval, and such plan coulddilute the voting rights of our stockholders. Federal and statebanking regulations allow our Board of Directors, and the Boardmay decide, to adopt one or more stock plans for the benefit ofour employees, officers and directors. This stock-basedincentive plan will be funded either through open marketpurchases, if permitted, or from the issuance of authorized butunissued shares of common stock of Benjamin Franklin Bancorp.While our intention is to fund this plan through open marketpurchases, stockholders will experience a reduction or dilutionin ownership interest of approximately 12.9% (approximately 9.1%dilution for stock options and approximately 3.8% dilution forrestricted stock awards) in the event newly issued shares areused to fund stock options and stock awards made under this plan.***The Contribution of Shares to the Charitable Foundation    Will Dilute Your Ownership Interests and Adversely Affect    Net Income in 2005.***     In connection with our conversion from mutual to stock form, wewill contribute to the Benjamin Franklin Bank CharitableFoundation 400,000 shares of our common stock, valued atthe $10 offering price. Persons purchasing shares in theoffering will have their ownership and voting interests inBenjamin Franklin Bancorp diluted by this contribution.     This contribution will have a material adverse effect on ourreported net income for the quarter and year in which thecontribution to the Benjamin Franklin Bank Charitable Foundationis made. Assuming that the contribution will be fullydeductible, the after-tax expense of the contribution willreduce net income that we report in our 2005 fiscal year byapproximately $2.6 million. If the contribution isdetermined to be less than fully deductible, then the after-taxexpense recorded in that quarter could be a maximum of$4.0 million.     We believe that our contribution to the Benjamin Franklin BankCharitable Foundation should be deductible for federal incometax purposes. However, we do not have any assurance that the IRSwill grant tax-exempt status to the Benjamin Franklin BankCharitable Foundation. If the contribution is not deductible, wewould not receive any tax benefit from the contribution. Inaddition, even if the contribution is tax deductible, we may nothave sufficient profits to be able to fully use the deductionover the six years allowed.***We Have Never Issued Stock and We Cannot Guarantee That An    Active Trading Market Will Develop.***     As a mutual institution, Benjamin Franklin Bancorp has neverissued capital stock and, consequently, there is currently noexisting market for our common stock. We have received approvalto have our common stock quoted on the Nasdaq National Marketunder the symbol “BFBC” subject to the completion ofthe conversion and compliance with initial listing conditions,including the presence of at least three market makers.     A public trading market having the desirable characteristics ofdepth, liquidity and orderliness depends upon the existence ofwilling buyers and sellers at any given time, the presence ofwhich is dependent upon the individual decisions of buyers andsellers over which neither we nor any market maker has control.Accordingly, there can be no assurance that an active and liquidtrading market for our common stock will develop or that, ifdeveloped, it will continue. The failure of an active and liquidtrading market to develop would likely have a material adverseeffect on the value of the our common stock. In addition, noassurance can be given that a purchaser in the conversion willbe able to resell our common stock at or above the purchaseprice of the shares, nor can any assurance be given that a ChartBank stockholder receiving shares in the merger will be able tosell those shares at or above the $10 price used in thecalculation of the exchange ratio for the merger.
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***Our Stock Value May Suffer From Anti-Takeover Provisions    That May Impede Potential Takeovers.***     Our governing statute, and our articles and by-laws, containprovisions (sometimes known as anti-takeover provisions) thatmay impede efforts to acquire us, or stock purchases infurtherance of an acquisition, even though acquisition effortsor stock purchases might otherwise have a favorable effect onthe price of our common stock. Those provisions will also makeit more difficult to remove our board and management. TheMassachusetts Business Corporation Law provides for staggereddirectors’ terms, limits the stockholders’ ability toremove directors and empowers only the directors to fill boardvacancies. Even if our board elects to opt out of thesestatutory provisions, our articles contain similar provisions.Our articles and by-laws also provide for, among other things,restrictions on the acquisition of more than 10.0% of ouroutstanding voting stock for a period of five years aftercompletion of the conversion, and approval of certain actions,including certain business combinations, by specifiedpercentages of our “disinterested Directors” (asdefined in the articles) or by specified percentages of theshares outstanding and entitled to vote. The articles alsoauthorize the Board of Directors to issue shares of preferredstock, the rights and preferences of which may be designated bythe Board, without the approval of our stockholders. Thearticles also establish supermajority voting requirements foramendments to the articles and by-laws, limit stockholders’ability to call special meetings of stockholders, and imposeadvance notice provisions on stockholders’ ability tonominate directors or to propose matters for consideration atstockholder meetings.     Our employee stock ownership plan, which expects to purchase anumber of shares equal to 8.0% of the shares issued in theoffering, contains provisions that permit participatingemployees to direct the voting of shares held in the employeestock ownership plan, and those provisions may haveanti-takeover effects.     The Benjamin Franklin Bank Charitable Foundation will be fundedwith 400,000 shares of our common stock, approximately 4.7%of the shares expected to be issued and outstanding after theconversion, including shares issued to the Chart Bankstockholders in the merger. The Benjamin Franklin BankCharitable Foundation’s Board of Directors will consist ofcurrent directors of Benjamin Franklin Bancorp.     Federal and state regulations and laws may also haveanti-takeover effects. The Change in Bank Control Act and theBank Holding Company Act, together with Federal Reserve Boardregulations under those acts, require that a person obtain theconsent of the Federal Reserve Board before attempting toacquire control of a bank holding company. In addition,Massachusetts laws place certain limitations on acquisitions ofthe stock of banking institutions and imposes restrictions onbusiness combination transactions between publicly heldMassachusetts corporations and stockholders owning 5% or more ofthe stock of those corporations.***Risks Related To Prior Auditors Of Benjamin Franklin    Bancorp***     Arthur Andersen LLP, which audited the financial statementsincluded in this prospectus of Benjamin Franklin Bancorp for theyear ended December 31, 2001, was convicted onJune 15, 2002 of federal obstruction of justice arisingfrom the government’s investigation of Enron Corp. As ithas ceased operations, Arthur Andersen LLP has not consented toinclude in this prospectus their report on the financialstatements of Benjamin Franklin Bancorp for the year endedDecember 31, 2001. Under Section 11 of the SecuritiesAct of 1933, investors may have no effective remedy againstArthur Andersen LLP in connection with a material misstatementor omission in the 2001 financial statements of BenjaminFranklin Bancorp included in this prospectus.
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**Forward-Looking Statements**     This Annual Report contains forward-looking statements, whichcan be identified by the use of such words as estimate, project,believe, intend, anticipate, plan, seek, expect and similarexpressions. These forward-looking statements include: •     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.     These forward-looking statements are subject to significantrisks, assumptions and uncertainties, including, among otherthings, the following important factors that could affect theactual outcome of future events: •     our ability to consummate the acquisition of Chart Bank;  •     our ability to integrate the Chart Bank merger successfully;  •     our ability to enter new markets successfully and take advantage    of growth opportunities;  •     significantly increased competition among depository and other    financial institutions;  •     inflation and changes in the interest rate environment 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; and  •     changes in our organization, compensation and benefit    plans; and  •     the risk factors described above.     Because of these and other uncertainties, our actual futureresults may be materially different from the results indicatedby these forward-looking statements. We discuss these and otheruncertainties in “Risk Factors.” We disclaim anyintent or obligation to update forward-looking statementswhether in response to new information, future events orotherwise.**Item 2.*****Properties***     Benjamin Franklin Bank conducts its business through its mainoffice located in Franklin, Massachusetts and five other officeslocated southeast of the Boston metropolitan area. All ofBenjamin Franklin Bank’s office facilities are owned by theBank. The following table sets forth information about ouroffices as of December 31, 2004:           **Year**  **Location** **Opened**     **Main Office:**     58 Main Street, Franklin, MA 02038  1935 **Branch Offices:**     231 East Central St., Franklin, MA 02038  1998       4 North Main St., Bellingham, MA 02019  1982       1 Mechanic St., Foxborough, MA 02035  1998       76 North Street, Medfield, MA 02052  1998       221 Main Street, Milford, MA 01757  1992 
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**Item 3.*****Legal Proceedings***     Benjamin Franklin Bancorp is not involved in any legalproceedings other than routine legal proceedings occurring inthe ordinary course of business. Management believes that thoseroutine legal proceedings involve, in the aggregate, amountsthat are immaterial to the financial condition and results ofoperations of Benjamin Franklin Bancorp.**Item 4.*****Submission of Matters to a Vote of Security Holders***     Not applicable.**PART II****Item 5.*****Market for Registrant’s Common Equity, Related    Stockholder Matters and Issuer Purchases of Equity    Securities***     (a)(1) **Market Information.**     We have not previously issued common stock, so there iscurrently no established market for the common stock. We havereceived approval to have our common stock quoted on the NasdaqNational Market under the symbol “BFBC” aftercompletion of the offering. Ryan Beck & Co., Inc. hasadvised us that it intends to make a market in the common stockfollowing the conversion, but is under no obligation to do so.We will encourage and assist additional market makers to make amarket in our common stock.     The development of an active trading market depends on theexistence of willing buyers and sellers, the presence of whichis not within our control, or the control of any market maker.The number of active buyers and sellers of the common stock atany particular time may be limited. Under such circumstances,our stockholders could have difficulty selling their shares onshort notice, and, therefore, should not view the common stockas a short-term investment. We cannot assure you that an activetrading market for the common stock will develop or that, if itdevelops, it will continue, nor can we assure you that you willbe able to sell shares of our common stock at any particularprice.     (a)(2) **Holders.**     There are currently no holders of our common stock, as notedabove.     (a)(3) **Dividends.**     Following completion of the conversion and related publicoffering, our Board of Directors will have the authority todeclare dividends on our common stock, subject to statutory andregulatory requirements. In the future, our Board intends toconsider a policy of paying cash or stock dividends on thecommon stock. However, no decision has been made with respect towhether or when the payment of dividends may occur. The paymentof dividends will depend upon a number of factors, includingcapital requirements, Benjamin Franklin Bancorp’s andBenjamin Franklin Bank’s financial condition and results ofoperations, tax considerations, statutory and regulatorylimitations and general economic conditions. No assurances canbe given that any dividends will be paid or that, if paid, willnot be reduced or eliminated in the future.     The only funds available for the payment of dividends on thecapital stock of Benjamin Franklin Bancorp will be cash and cashequivalents held by Benjamin Franklin Bancorp, dividends paid byBenjamin Franklin Bank to Benjamin Franklin Bancorp andborrowings. Benjamin Franklin Bank will be prohibited frompaying cash dividends to Benjamin Franklin Bancorp to the extentthat any such payment would reduce Benjamin Franklin Bank’scapital below required capital levels or would impair theliquidation account to be established for the benefit ofBenjamin Franklin Bank’s eligible account holders andsupplemental eligible account holders at the time of theconversion.     FDIC regulations limit Benjamin Franklin Bank’s ability topay dividends to Benjamin Franklin Bancorp under certaincircumstances. For example, Benjamin Franklin Bank could not paydividends if it
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was not in compliance with applicable regulatory capitalrequirements. In addition, Massachusetts law provides thatdividends may not be declared, credited or paid by BenjaminFranklin Bank so long as there is any impairment of capitalstock. No dividend may be declared on Benjamin FranklinBank’s common stock for any period other than for whichdividends are declared upon preferred stock, except asauthorized by the Massachusetts Commissioner of Banks. Theapproval of the Commissioner is also required for BenjaminFranklin Bank to declare a dividend, if the total of alldividends declared by it in any calendar year shall exceed thetotal of its net profits for that year combined with itsretained net profits of the preceding two years, less anyrequired transfer to surplus or a fund for the retirement of anypreferred stock. (a)(4)  **Securities Authorized for Issuance under Equity Compensation    Plans.**     Not applicable.     (b) Not applicable.     (c) Not applicable.**Item 6.*****Selected Financial Data***     The following tables contain certain information concerning theconsolidated financial position and results of operations ofBenjamin Franklin Bancorp at the dates and for the periodsindicated. This information should be read in conjunction withthe Consolidated Financial Statements of Benjamin FranklinBancorp, M.H.C. and Subsidiaries and notes thereto appearing inItem 8 of this Annual Report and Management’sDiscussion and Analysis appearing in Item 7 of this AnnualReport. The selected financial data and selected operating dataof Benjamin Franklin Bancorp as of December 31, 2004, 2003and 2002 and for the years then ended have been derived fromBenjamin Franklin Bancorp’s consolidated financialstatements which have been audited by Wolf &Company, P.C., the independent registered public accountingfirm.     The selected financial condition data and selected operatingdata of Benjamin Franklin Bancorp at or for the years endedDecember 31, 2001 and 2000 have been derived from BenjaminFranklin Bancorp’s consolidated financial statements thathave been audited by Arthur Andersen LLP. Because ArthurAndersen has ceased accounting and auditing operations, BenjaminFranklin Bancorp is unable to obtain written consent of ArthurAndersen to incorporate their report in this prospectus. BecauseArthur Andersen has not consented to incorporating their reportin this prospectus, investors will not be able to recoveragainst Arthur Andersen in connection with the use of theirreport. In addition, the ability of Arthur Andersen to satisfyany claims (including claims arising from its provision ofauditing and other services to Benjamin Franklin Bancorp) islimited as a result of the diminished amount of assets of ArthurAndersen that are now or may in the future be available tosatisfy claims.                       **At December 31,**     **2004** **2003** **2002** **2001** **2000**             **(Dollars in thousands)****Selected Financial Condition Data:**                        Total assets $517,393  $458,844  $452,230  $430,084  $443,092     Loans, net  383,373   288,862   261,933   257,566   284,232     Investment securities  93,262   110,254   114,728   86,136   112,884     Deposits  396,499   380,257   373,300   360,979   388,332     Short-term borrowings  4,250   —   —   —   19,400     Long-term debt(1)  81,000   45,000   45,000   36,000   6,000     Retained earnings  31,328   29,301   29,814   26,937   24,794  (1)     Long-term debt includes advances from the Federal Home    Loan Bank of Boston and subordinated debt. See    “Business — Sources of Funds —    Borrowings.”
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                       **For the Years Ended December 31,**     **2004** **2003** **2002** **2001** **2000**             **(Dollars in thousands)****Selected Operating Data:**                        Interest and dividend income $20,795  $19,532  $21,406  $26,441  $28,064     Interest expense  7,032   6,752   7,594   12,397   16,216                     Net interest income  13,763   12,780   13,812   14,044   11,848     Provision for loan losses  620   625   1,412   51   1                     Net interest income after provision for loan losses  13,143   12,155   12,400   13,993   11,847     Non-interest income  2,148   2,990   1,285   1,752   1,819     Gain (loss) on sales of securities, net  (24)  86   1,569   (2,529)  (6,784)    Non-interest expense  12,686   12,724   12,115   11,565   10,851                     Income (loss) before income tax expense  2,581   2,507   3,139   1,651   (3,969)    Income tax expense(1)  892   819   443   1,610   708                     Net income (loss) $1,689  $1,688  $2,696  $41  $(4,677)                 (1)     Refer to Item 7, “Management’s Discussion and    Analysis,” for discussion of changes in income tax expense    for the periods from 2002 forward. For the year ended    December 31, 2000, Benjamin Franklin recorded income tax    expense of $708,000 despite incurring a pre-tax loss. This is    because a valuation allowance was established for a deferred tax    asset associated with an impairment charge we recorded to    reflect unrealized net losses on equity securities. In 2001, the    effective tax rate was unusually high, at 97.5%, because the    valuation allowance was increased by $1.0 million due to    the fact that the capital losses on sales of securities realized    during the year were not deductible for tax purposes.                       **At or For the Years Ended December 31,**     **2004** **2003** **2002** **2001** **2000**           **Selected Financial Ratios and Other Data:**                    **Performance Ratios:**                        Return on assets (ratio of net income to average total assets)  0.34%  0.36%  0.61%  0.01%  (1.09)%    Return on equity (ratio of net income to average equity)  5.59%  5.65%  9.45%  0.16%  (16.32)%    Average interest rate spread(1)  2.63%  2.76%  3.32%  3.30%  2.87%    Net interest margin(2)  3.00%  2.98%  3.47%  3.51%  3.57%    Efficiency ratio(3)  79.09%  84.78%  75.69%  72.84%  78.07%    Non-interest expense to average total assets  2.58%  2.73%  2.76%  2.64%  2.53%    Average interest-earning assets to average interest bearing    liabilities  123.91%  114.38%  108.04%  106.92%  88.16%**Asset Quality Ratios:**                        Non-performing assets to total assets  0.07%  0.10%  0.00%  0.04%  0.04%    Non-performing loans to total loans  0.09%  0.16%  0.00%  0.06%  0.06%    Allowance for loan losses to non-performing loans  941.25%  544.92%  115,600.00%  749.68%  603.39%    Allowance for loan losses to total loans  0.82%  0.87%  0.88%  0.46%  0.38%
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                        **At or For the Years Ended December 31,**     **2004** **2003** **2002** **2001** **2000**           **Capital Ratios:**                        Equity to total assets at end of year  6.05%  6.39%  6.59%  6.26%  5.60%    Average equity to average assets  6.13%  6.42%  6.49%  5.82%  6.67%     Risk-based capital ratio (bank only) at end of year  12.26%  13.94%  13.54%  9.65%  7.69%**Other Data:**                        Number of full service offices  6   6   6   6   6  (1)     The average 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 year. (2)     The net interest margin represents net interest income as a    percent of average interest-earning assets for the year. (3)     The efficiency ratio represents non-interest expense for the    period minus expenses related to the amortization of intangible    assets divided by the sum of net interest income (before the    loan loss provision) plus non-interest income (excluding net    gains (losses) on sale of bank assets).**Item 7.*****Management’s Discussion and Analysis of Financial    Condition and Results of Operations***     This section is intended to help potential investors understandthe financial performance of Benjamin Franklin Bancorp andBenjamin Franklin Bank through a discussion of the factorsaffecting our financial condition at December 31, 2004,2003 and 2002 and our consolidated results of operations for theyears ended December 31, 2004, 2003 and 2002. This sectionshould be read in conjunction with the consolidated financialstatements and notes to the consolidated financial statementsthat appear in Item 8 of this Annual Report. In thissection, we sometimes refer to Benjamin Franklin Bank andBenjamin Franklin Bancorp together as “BenjaminFranklin” since the financial condition and results ofoperation of Benjamin Franklin Bancorp closely reflect thefinancial condition and results of operation of its soleoperating subsidiary, Benjamin Franklin Bank.**Overview**     *Income.* Benjamin Franklin Bancorp’s results ofoperations are dependent mainly on net interest income, which isthe difference between the income earned on its loan andinvestment portfolios and interest expense incurred on itsdeposits and borrowed funds. Results of operations are alsoaffected by fee income from banking and non-banking operations,provisions for loan losses, gains (losses) on sales of loans andsecurities available for sale, loan servicing income and othermiscellaneous income.     *Expenses.*Benjamin Franklin’s expenses consistprimarily of compensation and employee benefits, officeoccupancy, technology, marketing, general administrativeexpenses and income tax expense.     Results of operations are also significantly affected by generaleconomic and competitive conditions, particularly with respectto changes in interest rates, government policies and actions ofregulatory authorities. Future changes in applicable law,regulations or government policies may materially impactBenjamin Franklin’s financial condition and results ofoperations.**Critical Accounting Policies**     Critical accounting policies are those that involve significantjudgments and assessments by management, and which couldpotentially result in materially different results underdifferent assumptions and conditions. Benjamin Franklinconsiders the following to be critical accounting policies:     *Allowance for Loan Losses.* This accounting policy isconsidered critical due to the high degree of judgment involved,the subjectivity of the underlying assumptions used, and thepotential for changes in
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the economic environment that could result in material changesin the amount of the allowance for loan losses considerednecessary. The allowance is evaluated on a regular basis bymanagement and is based on a periodic review of thecollectibility of the loans in light of historical experience,the nature and size of the loan portfolio, adverse situationsthat may affect borrowers’ ability to repay, the estimatedvalue of any underlying collateral and prevailing economicconditions. For a full discussion of the allowance for loanlosses, please refer to “Business — AssetQuality” in Item 1.     *Income Taxes.*Benjamin Franklin uses the asset andliability method of accounting for income taxes. Under thismethod, deferred tax assets and liabilities are recognized forthe future tax consequences attributable to differences betweenthe financial statement carrying amounts of existing assets andliabilities and their respective tax bases. A valuationallowance related to deferred tax assets is established when, inmanagement’s judgment, it is more likely than not that allor a portion of such deferred tax assets will not be realized.Deferred tax assets applicable to capital loss carryforwardsthat expire in 2006 are recoverable only to the extent thatcapital gains can be realized during the carryforward period.Accordingly, given Benjamin Franklin’s limited opportunityto realize capital gains through the sale of capital assetswithin the required timeframe, management has provided avaluation allowance of $2.3 million against 100% of thedeferred tax assets related to capital loss carryforwards atDecember 31, 2004, 2003 and 2002. This valuation allowanceis assessed periodically for recoverability. The judgmentsapplied by management consider the likelihood that capital gainincome will be realized within the carryforward period in lightof Benjamin Franklin’s tax planning strategies and changesin market conditions.     *Intangible Assets.*Benjamin Franklin considers accountingfor goodwill to be critical because significant judgment isexercised in performing periodic valuations of this asset, whicharose through the acquisition of Foxboro National Bank. Goodwillis evaluated for potential impairment on an annual basis as ofeach December 31st, or more frequently if events orcircumstances indicate a potential for impairment. At the timeof acquisition, the operations of Foxboro National Bank werecombined with the operations of Benjamin Franklin based onsimilar economic characteristics. Accordingly, discretefinancial information is not separately maintained to evaluatethe operating results of the former Foxboro National Bank and,as a result, in performing a goodwill impairment evaluation,Benjamin Franklin measures the fair value of the entire company,rather than that of Foxboro separately. If impairment isdetected, the carrying value of goodwill is reduced through acharge to earnings. The evaluation of goodwill involvesestimations of discount rates and the timing of projected futurecash flows, which are subject to change with changes in economicconditions and other factors. Such changes in the assumptionsused to evaluate this intangible asset affect its value andcould have a material adverse impact on Benjamin Franklin’sresults of operations.     This discussion has highlighted those accounting policies thatmanagement considers to be critical, however all accountingpolicies are important, and therefore the reader is encouragedto review each of the policies included in Note 1 to theConsolidated Financial Statements to gain a better understandingof how Benjamin Franklin’s financial performance ismeasured and reported.**Analysis of Net Interest Income**     Net interest income represents the difference between income oninterest-earning assets and expense on interest-bearingliabilities. Net interest income also depends upon the relativeamounts of interest-earning assets and interest-bearingliabilities and the interest rates earned or paid on them.
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     The following tables set forth average balance sheets, averageyields and costs, and certain other information for the periodsindicated. All average balances are daily average balances.Non-accrual loans were included in the computation of averagebalances, but have been reflected in the table as loans carryinga zero yield. The yields set forth below include the effect ofdeferred fees, discounts and premiums that are amortized oraccreted to interest income or expense.                                         **Years Ended December 31,**     **2004** **2003** **2002**         **Average**   **Average**   **Average**    **Outstanding**   **Yield/** **Outstanding**   **Yield/** **Outstanding**   **Yield/**  **Balance** **Interest** **Rate** **Balance** **Interest** **Rate** **Balance** **Interest** **Rate**                     **(Dollars in thousands)****Interest-earning assets:**                                        Loans $338,198  $17,320   5.12%  $270,342  $15,530   5.74%  $249,260  $16,322   6.55%     Investment securities  107,122   3,336   3.11%   122,570   3,450   2.81%   89,295   4,166   4.67%     Interest-earning deposits  13,367   139   1.04%   35,293   552   1.56%   58,980   918   1.56%                                  Total interest-earning assets  458,687   20,795   4.53%   428,205   19,532   4.56%   397,535   21,406   5.38%     Non-interest-earning assets  33,838           37,495           41,978                                          Total assets $492,525          $465,700          $439,513                                     **Interest-bearing liabilities:**                                        Savings deposits $98,753   490   0.50%  $93,501   465   0.50%  $83,878   567   0.68%     Money market  53,246   535   1.00%   48,256   392   0.81%   45,648   617   1.35%     NOW accounts  23,657   36   0.15%   60,751   92   0.15%   69,832   221   0.32%     Certificates of deposits  134,034   3,305   2.47%   126,856   3,538   2.79%   131,073   4,451   3.40%                                  Total deposits  309,690   4,366   1.41%   329,364   4,487   1.36%   330,431   5,856   1.77%     Short-term borrowings  5,289   92   1.74%   —   —   0.00%   —   —   0.00%     Long-term debt  55,208   2,574   4.66%   45,001   2,265   5.03%   37,504   1,738   4.63%                                  Total interest-bearing liabilities  370,187   7,032   1.90%   374,365   6,752   1.80%   367,935   7,594   2.06%     Non-interest bearing liabilities  92,124           61,454           43,041                                          Total liabilities  462,311           435,819           410,976             Equity  30,214           29,881           28,537                                           Total liabilities and equity $492,525          $465,700          $439,513                                         Net interest income     $13,763          $12,780          $13,812                                     Net interest rate spread(3)          2.63%           2.76%           3.32%     Net interest-earning assets(1) $88,500          $53,840          $29,600                                         Net interest margin(2)          3.00%           2.98%           3.47%     Average interest-earning assets to interest-bearing liabilities          123.91%           114.38%           108.04%  (1)     Net interest-earning assets represents total interest-earning    assets less total interest-bearing liabilities. (2)     Net interest margin represents net interest income divided by    average total interest-earning assets. (3)     Net interest rate spread represents the difference between the    yield on average interest-earning assets and the cost of average    interest-bearing liabilities at December 31, 2004 and for    the years ended December 31, 2004, 2003 and 2002.
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     The following table presents the dollar amount of changes ininterest income and interest expense for the major categories ofBenjamin Franklin’s interest-earning assets andinterest-bearing liabilities. Information is provided for eachcategory of interest-earning assets and interest-bearingliabilities with respect to (i) changes attributable tochanges in volume (i.e., changes in average balances multipliedby the prior-period average rate) and (ii) changesattributable to rate (i.e., changes in average rate multipliedby prior-period average balances). For purposes of this table,changes attributable to both rate and volume, which cannot besegregated, have been allocated proportionately to the changedue to volume and the change due to rate.                            **Years Ended December 31,**     **2004 vs. 2003** **2003 vs. 2002**       **Increase (Decrease)**   **Increase (Decrease)**    **Due to** **Total** **Due to** **Total**    **Increase**   **Increase**  **Volume** **Rate** **(Decrease)** **Volume** **Rate** **(Decrease)**                   **(Dollars in thousands)**    **Interest-earning assets:**                             Loans $3,898  $(2,108) $1,790  $1,381  $(2,173) $(792)     Investment securities  (435)  321   (114)  1,552   (2,268)  (716)     Interest-earning deposits  (343)  (70)  (413)  (369)  3   (366)                       Total interest-earning assets  3,120   (1,857)  1,263   2,564   (4,438)  (1,874)                   **Interest-bearing liabilities:**                             Savings deposits  25   —   25   65   (166)  (101)     Money markets  40   103   143   35   (260)  (225)     NOW accounts  (56)  —   (56)  (29)  (102)  (131)     Certificates of deposits  200   (433)  (233)  (143)  (769)  (912)                       Total deposits  209   (330)  (121)  (72)  (1,297)  (1,369)     Short-term borrowings and long-term debt  514   (113)  401   347   180   527                        Total interest-bearing liabilities  723   (443)  280   275   (1,117)  (842)                       Change in net interest income $2,397  $(1,414) $983  $2,289  $(3,321) $(1,032)                   **Comparison of Financial Condition At December 31, 2004and December 31, 2003**     *Total Assets.*Total assets increased by$58.5 million, or 12.8%, from $458.8 million atDecember 31, 2003 to $517.4 million atDecember 31, 2004. This increase was largely the result ofan increase in the loan portfolio, offset by reductions in cash,short-term investments and investment securities.     *Cash and Short-term Investments.*Cash and correspondentbank balances decreased by $6.0 million to$8.7 million as of December 31, 2004 when compared toDecember 31, 2003. Over the same period, short-terminvestments, comprised of overnight fed funds sold and moneymarket funds, decreased $15.5 million to $5.5 millionat December 31, 2004. These reductions in short-termliquidity served primarily to fund increases in BenjaminFranklin Bank’s loan portfolio.     *Securities.*The investment portfolio totaled$93.3 million at December 31, 2004, a decrease of$17.0 million, or 15.4%, from $110.3 million atDecember 31, 2003. This reduction, caused by net pay-downsin mortgage-backed securities totaling $25.4 million,offset by increases in holdings of U.S. federal agencysecurities and corporate bonds totaling $3.7 million and$5.0 million, respectively, was used to fund growth inBenjamin Franklin Bank’s loan portfolio.     *Net Loans.*Net loans as of December 31, 2004 were$383.4 million, an increase of $94.5 million, or32.7%, over net loan balances of $288.9 million as ofDecember 31, 2003. Loan growth occurred in most productcategories, including residential mortgage loans($69.0 million), commercial real estate
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($17.3 million), construction ($4.7 million), andconsumer ($5.0 million), offset by a decline in commercialbusiness loans ($1.2 million). The significant growth inresidential mortgage loans can be attributed to the attractiverates offered on adjustable-rate mortgages and 15-year bi-weeklymortgage loans.     *Deposits.*Deposits increased by $16.2 million to$396.5 million at December 31, 2004, an increase of4.3% over balances of $380.3 million at December 31,2003. The largest increases came in certificates of deposit($13.9 million), money market accounts ($3.1 million)and demand accounts ($2.0 million), offset by a decline inchecking accounts ($2.2 million). The deposit increasesoverall were the result of Benjamin Franklin Bank’scontinued marketing and promotional efforts in its market area,including efforts to remain competitive in all of its depositproduct offerings.     *Borrowed Funds.*Funds borrowed from the Federal HomeLoan Bank of Boston increased by $40.3 million to$76.3 million at December 31, 2004, a 111.9% increaseover balances of $36.0 million as of December 31,2003. These additional funds were borrowed in order to fund thecontinued growth in the Bank’s loan portfolio during theyear ended December 31, 2004. The $9.0 million balancein subordinated debt remained unchanged from December 31,2003 to December 31, 2004.     *Retained Earnings.*Retained earnings increased by$2.0 million to $31.3 million at December 31,2004, an increase of 6.9% from a balance of $29.3 millionas of December 31, 2003. This change was the result of netincome for the year of $1.7 million and a decline of$365,000 in the net unrealized loss on marketable securities.**Comparison of Operating Results For The Year EndedDecember 31, 2004 and December 31, 2003**     *Net Income.*Net income for the year endedDecember 31, 2004 was $1,689,000, essentially unchangedwhen compared to net income of $1,688,000 for 2003. A $983,000increase in net interest income in 2004 was almost entirelyoffset by a decline in other income of $842,000 and a $110,000reduction in net gains incurred on sales of securities.     *Net Interest Income.*Benjamin Franklin Bancorp earned netinterest income of $13.8 million and $12.8 million inthe years ended December 31, 2004 and 2003, respectively.The increase between the two periods of $983,000 or 7.7%, is dueto a $30.5 million, or 7.1%, increase in averageinterest-earning assets, and to a lesser degree to a2 basis point, or 0.7%, increase in the net interestmargin. Within earnings assets, higher-yielding loans increasedon average by $67.9 million, while lower-yieldinginvestment securities and short-term investments declined by$37.4 million on average. Within Benjamin Franklin’sfunding liabilities, the mix shifted somewhat in favor ofnon-interest bearing accounts, which increased by$30.7 million on average. This shift was caused primarilyby a change made in Benjamin Franklin Bank’s primarychecking account product in September 2003, whereby the paymentof interest was eliminated.     *Interest Income.*Interest income rose $1.3 million,or 6.5%, to $20.8 million for the year endedDecember 31, 2004 from $19.5 million for the yearended December 31, 2003. The increase was caused primarilyby a $30.5 million increase in average interest-earningassets, which had the effect of increasing interest income by$3.2 million. Loans increased on average by$67.9 million, offset by decreases in the average balancesof investment securities ($15.4 million) and short-terminvestments ($21.9 million). Despite the fact that theaverage yield on loans declined from 5.74% for the year endedDecember 31, 2003 to 5.12% for the same period in 2004, theoverall yield on interest earning assets remained almostunchanged at 4.56% and 4.53% for 2003 and 2004, respectively,due to the change in the mix of interest earning assets.     *Interest Expense.*Interest expense for the year endedDecember 31, 2004 increased by $280,000, or 4.1%, to$7.0 million as compared to interest expense of$6.8 million for the year ended December 31, 2003. Theeffect of a 10 basis point, or 5.6%, increase in theaverage rates paid on interest-bearing liabilities was offset inpart by an increase in non-interest-bearing liabilities, whichgrew by an average of $30.7 million in the 2004. Theincrease in average non-interest-bearing liabilities wasprimarily due to a
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change made in Benjamin Franklin Bank’s primary checkingaccount product, which was converted to a non-interest bearingaccount in September 2003.     *Provision for Loan Losses.*Benjamin Franklin records aprovision for loan losses as a charge to its earnings whennecessary in order to maintain the allowance for loan losses ata level sufficient to absorb potential losses inherent in theloan portfolio. Refer to “Business — AssetQuality” for additional information about BenjaminFranklin’s methodology for establishing its allowance forloan losses. Benjamin Franklin recorded $620,000 and $625,000 inloan loss provisions during the years ended December 31,2004 and 2003, respectively. Provisions in both years werereflective of growth in the loan portfolio, and in the case ofthe 2003 period, the recording of net charge-offs of $414,000.In 2004, net recoveries of $29,000 were realized. AtDecember 31, 2004, the allowance for loan losses totaled$3.2 million, or 0.82% of the loan portfolio, compared to$2.5 million, or 0.87%, of total loans at December 31,2003.     *Non-interest Income.* Non-interest income for the yearended December 31, 2004 declined to $2.1 million, areduction of $952,000, or 31.0%, when compared to non-interestincome of $3.1 million during the year endedDecember 31, 2003. An $852,000 decline in gains on loansales, a $110,000 decrease in gains on sales of securities, an$82,000 reduction in loan servicing fees and a $46,000 reductionin deposit service fees were partially offset by an additional$111,000 in miscellaneous income and a $27,000 increase inincome earned on bank-owned life insurance. The decline in gainon loan sales was attributable to the rise in market interestrates in 2004, which in turn caused a decline in the originationof fixed rate residential mortgage loans that the Bank typicallysells at a small gain in the secondary market. Loan servicingfee income was also negatively affected by the reduction infixed rate loan originations sold with servicing rightsretained. The increase in miscellaneous income in the 2004period was primarily attributable to an increase in fees earnedon investment product sales, brought about by the addition of asecond sales representative in the fourth quarter of 2003.     *Non-interest Expense.*Non-interest expense wasessentially unchanged at $12.7 million for the years ended2004 and 2003. Reductions in occupancy and equipment costs, andprofessional fees were offset by an increase in salaries andemployee benefits.     Salaries and employee benefits expenses increased $820,000, or12.3%, to $7.5 million for the year ended December 31,2004. The increase was primarily due to normal merit increasesaveraging 4.5%, the addition of one senior officer position, andsignificantly lower deferral of loan origination costs due to alower volume of loan originations in 2004 when compared to 2003.Occupancy and equipment expenses declined $378,000, or 21.1%, to$1.4 million for the year ended December 31, 2004.Most of this reduction was attributable to a decline indepreciation expense associated with branch-related capitalexpenditures made five years earlier. Professional feesdecreased $611,000, or 62.0%, to $374,000 for the year endedDecember 31, 2004, due primarily to a decline in legalcosts and loan origination expenses.     *Income Taxes.*Income tax expense was $892,000 for theyear ended December 31, 2004, an increase of $73,000, or8.9%, compared to $819,000 for the year ended December 31,2003. The effective tax rates for the 2004 and 2003 yearswere 34.6% and 32.7%, respectively, and the increase was due toadditional income in Benjamin Franklin Bank which is taxed at ahigher rate for state tax purposes, and capital losses in 2004for which Benjamin Franklin Bank received no tax benefit.**Comparison of Financial Condition At December 31, 2003and December 31, 2002**     *Total Assets.*Total assets increased by$6.6 million, or 1.5%, from $452.2 million atDecember 31, 2002 to $458.8 million atDecember 31, 2003. This increase was largely the result ofan increase in the loan portfolio, offset by a reduction ininvestment securities.     *Cash and Short-term Investments.* While cash andcorrespondent bank balances remained essentially the same fromyear to year, short-term investments consisting of overnight fedfunds sold and money market funds declined by $16.9 millionto $21.0 million at December 31, 2003. This reductionin short-term liquidity served primarily to fund an increase inthe loan portfolio.
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     *Securities.*The investment portfolio aggregated$103.0 million at December 31, 2003, a decline of$6.5 million, or 5.9%, from $109.5 million atDecember 31, 2002. Within the securities portfolio,decreases in U.S. Treasury and Agency securities($37.2 million) and other bonds and obligations($14.5 million), offset by a $45.3 million increase inholdings of mortgage-backed securities, were used to fundincreases in the Bank’s loan portfolio. The change in thesecurities portfolio mix is due to the more favorable yieldsavailable on mortgage-backed securities of like duration.     *Net Loans.*Net loans as of December 31, 2003 were$288.9 million, an increase of $26.9 million, or10.3%, over net loan balances of $261.9 million as ofDecember 31, 2002. Most loan product categories increasedduring this period, including residential ($7.1 million),commercial real estate ($17.3 million), construction($2.9 million), and consumer ($0.7 million). In 2003,Benjamin Franklin had its highest level of new loan activity todate, with total originations of $246.9 million, theproduct of its ability to offer competitive, attractive interestrates resulting from a historically low interest rateenvironment. Of that amount, $96.3 million of fixed rateloan originations were sold in the secondary market, withservicing rights retained. The low interest rate environmentalso brought significant refinancing activity, which resulted intotal loan repayments and prepayments of $149.6 millionduring 2003.     *Deposits and Borrowed Funds.*Deposits increased slightly,by 1.9% or $7.0 million, to $380.2 million atDecember 31, 2003 from $373.3 million atDecember 31, 2002. A modest shift in the mix of depositsoccurred with increases in savings accounts ($8.6 million)and money market accounts ($5.9 million), offset by netreductions in demand deposits and NOW accounts($6.4 million) and certificates of deposit($1.2 million). Funds borrowed from the Federal HomeLoan Bank of Boston remained unchanged fromDecember 31, 2002 to December 31, 2003, at$36 million. The balance of subordinated debt also remainedunchanged year over year, at $9.0 million.     *Retained Earnings.*Retained earnings declined by$0.5 million to $29.3 million at December 31,2003, a decrease of 1.7% from a balance of $29.8 million asof December 31, 2002. This change was the result of netincome for the year of $1.7 million, offset by an increasein the net unrealized loss on marketable securities of$2.2 million.**Comparison of Operating Results For The Years EndedDecember 31, 2003 and December 31, 2002**     *Net Income.*Net income declined $1.0 million, or37.4%, to $1.7 million for the year ended December 31,2003 compared to $2.7 million for the year endedDecember 31, 2002. The decrease was primarily the result ofa reduction in net interest income, an increase in operatingexpenses, an increase in income taxes, offset in part by anincrease in other income and a reduction in the provision forloan losses.     *Net Interest Income.*The tables on pages 50 and 51set forth the components of Benjamin Franklin’s netinterest income, yields on interest earning assets and interestbearing liabilities, and the effect on net interest incomearising from changes in volume and rate.     Benjamin Franklin earned net interest income of$12.8 million and $13.8 million in the years endedDecember 31, 2003 and 2002, respectively. The declinebetween the two periods of $1.0 million, or 7.5%, wascaused by a 49 basis point, or 14.1%, reduction in the netinterest margin, which had the effect of reducing net interestincome by $3.3 million. This was offset in part by anincrease in the volume of interest-earning assets, which grew by$30.7 million, or 7.7%, in 2003 as compared to 2002, whichserved to increase net interest income by $2.3 million.     *Interest Income.*Interest income declined$1.9 million, or 8.8%, to $19.5 million for 2003 from$21.4 million for the prior year. The decrease was due tolower average yields on loans and investment securities, whichwas offset in part by higher average balances in both assetclasses. In 2003 as compared to 2002, the yield earned on loansdeclined by 81 basis points, or 12.4%, to 5.74%, a changethat reflected the drop in market interest rates generally in2003. Offsetting this to some degree was an increase in loansoutstanding, which grew by $21.1 million, or 8.5%.Consistent with the lower interest rate environment in 2003,yields on investments securities also dropped significantly whencompared to 2002, falling by
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186 basis points to 2.81% for the 2003 year. A$9.6 million net increase in the average balances ofinvestment securities and short-term investments in 2003partially offset the decline in yields.     *Interest Expense.*Interest expense declined $842,000, or11.1%, to $6.8 million for the year ended December 31,2003 from $7.6 million in the prior year. The primary causewas a reduction in the rates paid on interest-bearing depositaccounts, which declined by 41 basis points, or 23.2%, to1.36% for 2003 from 1.77% for 2002. The drop in deposit ratesreflected the lower interest rate environment generally in 2003as compared to 2002. The average balances of deposits andshort-term Federal Home Loan Bank of Boston borrowings werevirtually unchanged from year to year, while the average balanceof long-term debt including subordinated debt increased by$7.5 million to an average of $45.0 million for 2003from $37.5 million for 2002. The effect of the increase inthis item, which paid rates equivalent to 5.03% and 4.63% for2003 and 2002, respectively, was to increase interest expense by$527,000.     *Provision for Loan Losses.*Benjamin Franklin’sprovision for loan losses decreased by $787,000, or 55.7%, to$625,000 in 2003 from $1.4 million in 2002. Contributing tothe higher level of provision in 2002 was the creation of aspecific reserve in the amount of $250,000 for a non-performingloan with an outstanding balance of $462,000 atDecember 31, 2002. This loan was charged-off in itsentirety in 2003. Further, in 2002 management decided toincrease general reserve levels for the portfolio as a wholeafter a thorough reevaluation of the Bank’s methodology forestablishing the allowance for loan losses. This analysisconsidered economic conditions, peer comparisons andmanagement’s estimate of losses inherent in the portfolio,and resulted in increases in general reserves for commercialreal estate, commercial business and home equity loans. Alsoaffecting the provisions for 2003 and 2002 were net charge-offsaggregating $414,000 and $277,000, respectively. The allowancefor loan losses of $2.5 million at December 31, 2003represented 0.87% of total loans, essentially unchanged whencompared to 0.88% at December 31, 2002.     *Non-interest Income.*Total non-interest income was$3.1 million in 2003, an increase of $222,000, or 7.8% from$2.9 million for 2002. The increase was primarily theresult of a $904,000 rise in gains realized on sales of fixedrate residential mortgage loans sold in the secondary market andthe fact that a $741,000 loss realized on the curtailment of theBank’s pension plan was recognized in 2002, offset in partby a $1.5 million reduction in net gains realized on salesof investment securities. Also contributing to the changebetween years were a $189,000 decline in loan servicing fees andan increase of $180,000 in other income. The decrease in loanservicing fees was primarily the result of acceleratedamortization of mortgage servicing rights due to acceleratedprincipal payments caused by a reduction in market interestrates. The increase in other income was primarily caused by a$50,000 increase in fees earned on investment product sales dueto the addition of a second sales representative during 2003 anda $125,000 increase in income from $1.3 million of BOLIcontracts Benjamin Franklin purchased in the second half of 2003.     *Non-interest Expense.*Non-interest expense increased$609,000, or 5.0%, to $12.7 million in 2003 as compared to$12.1 million in 2002. The largest increases occurred insalaries and benefits and professional fees, offset partially bya reduction in other general and administrative expenses.Salaries and employee benefits expenses increased $518,000, or8.4%, to $6.7 million for the year ended December 31,2003. Normal merit increases averaging 4.8% accounted for overhalf of this difference, supplemented by increases in retirementcosts, medical insurance costs and an increase in the incentivebonus plan. Professional fees increased $262,000 or 36.2%, to$985,000 for 2003. This increase was caused primarily byincreases in legal fees and loan origination costs. Othergeneral and administrative expenses fell $223,000, or 10.8%, to$1.8 million for the year ended December 31, 2003.Contributing to this decline were reductions in fees paid toBoard members, the result of fewer meetings in 2003 than 2002,and a drop in supplies expense as the Bank negotiated morefavorable terms with its primary supplies vendor.     *Income Taxes.*Income tax expense was $819,000 for theyear ended December 31, 2003 an increase of $376,000, or84.9%, compared to $443,000 for the year ended December 31,2002. The effective tax rate was 32.7% in 2003 compared to 14.1%in 2002. The effective tax rate was unusually low in 2002 due toa
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$524,000 reduction in the deferred tax asset valuationallowance, a reduction made possible by the capital gain incomerealized on the sale of investment securities during the year.**Losses and Regulatory Action Arising from Equity Investmentsin 1999 and 2000**     Benjamin Franklin Bank entered into a Memorandum ofUnderstanding (MOU) in June 2001 in response to regulatoryconcerns over equity investments made by the Bank under priormanagement in 1999 and 2000. The MOU was lifted in October 2002.     In February 2001, the FDIC informed the Bank that both the sizeand concentration of its equity securities portfolio exceededregulatory limits. The FDIC found that the $36 millionequity securities portfolio at March 31, 2000 represented154.0% of the Bank’s Tier 1 capital, and thattechnology stocks comprised approximately 50.0% of the total.The FDIC ordered Benjamin Franklin Bank to immediately ceaseequity investment activities and to liquidate the remainingequity securities in its portfolio. In March 2001, BenjaminFranklin Bank sold a substantial portion of its equityportfolio, resulting in an aggregate loss of $15.2 million.On this basis, Benjamin Franklin Bancorp determined that another-than-temporary impairment existed with regard to certainequity securities in its portfolio as of December 31, 2000,and recorded an impairment charge of $11.4 million in theyear ended December 31, 2000. After giving effect to theimpairment charge and the net losses recognized upon theliquidation of the equity securities portfolio, partially offsetby net gains on sales of other investment securities, BenjaminFranklin Bancorp reported a net loss of $4.7 million forthe year ended December 31, 2000, and net income of only$41,000 for the year ended December 31, 2001.     In June 2001, the Board of Directors of Benjamin Franklin Bankentered into an MOU with the FDIC and the MassachusettsCommissioner of Banks. The significant provisions of the MOUrequired the Board to evaluate its management team using anindependent consultant, to prepare a management and staffingplan, and to retain qualified management consistent with suchplan. The MOU also prohibited the Bank from purchasing anyequity security without regulatory approval, called for a profitplan and revisions to the Bank’s liquidity and fundsmanagement policy, and required an increase in Tier 1capital to at least 7.0%.     In February 2002, the Bank’s former president retired, andthe Board hired Thomas R. Venables as President and CEO. InOctober 2002, the FDIC and the Commissioner lifted the MOU inrecognition of the substantial progress the Bank had made insatisfying its terms, and the Board of Directors adopted a BoardResolution addressing the matters remaining to be resolved. InJuly 2003, the Bank’s former Executive Vice President andTreasurer resigned. In August 2003, the FDIC and theCommissioner allowed the Board to rescind the Board Resolution,as all of the terms of the Resolution and the previous MOU hadbeen satisfied.**Off-Balance-Sheet Arrangements**     Benjamin Franklin Bancorp does not have any off-balance-sheetarrangements that have or are reasonably likely to have acurrent or future effect on its financial condition, revenues orexpenses, results of operations, liquidity, capital expendituresor capital resources that is material to investors.**Impact of Inflation and Changing Prices**     The financial statements, accompanying notes, and relatedfinancial data of Benjamin Franklin presented herein have beenprepared in accordance with generally accepted accountingprinciples, which require the measurement of financial positionand operating results in terms of historical dollar amountswithout considering the changes in the relative purchasing powerof money over time due to inflation. The impact of inflation isreflected in the increased cost of Benjamin Franklin operations.Most of Benjamin Franklin’s assets and liabilities aremonetary in nature, and therefore the impact of interest rateshas a greater impact on its performance than do the effects ofgeneral levels of inflation. Interest rates do not necessarilymove in the same direction or to the same extent as the pricesof goods and services.
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**Impact of Recent Accounting Standards**     In January 2003, the Financial Accounting Standards Board(FASB) issued Interpretation (FIN) No. 46,*“Consolidation of Variable Interest Entities.”*FIN 46 requires a variable interest entity to beconsolidated by a company if that company is subject to amajority of the risk of loss from the variable interestentity’s activities or is entitled to receive a majority ofthe entity’s residual returns, or both. FIN 46 alsorequires disclosures about variable interest entities that acompany is not required to consolidate, but in which it has asignificant variable interest. On December 17, 2003, theFASB revised FIN 46 and deferred the effective date ofFIN 46 to no later than the end of the first reportingperiod that ends after March 15, 2004. The adoption ofFIN 46 and Interpretation No. 46R did not have amaterial effect on Benjamin Franklin’s financial statements.     In March 2004, the SEC issued Staff Accounting Bulletin(SAB) No. 105, *“Application of AccountingPrinciples to Loan Commitments,”*which providesguidance regarding loan commitments that are accounted for asderivative instruments. In this SAB, the SEC determined that aninterest rate lock commitment should generally be valued at zeroat inception. The rate locks will continue to be adjusted forchanges in value resulting from changes in market interestrates. This SAB did not have any effect on Benjamin FranklinBancorp’s financial position or results of operations.     On December 16, 2004, the FASB issuedSFAS No. 123R, *“Share-Based Payment,”*which is an amendment of FASB Statement Nos. 123 and 95.SFAS No. 123R changes, among other things, the mannerin which share-based compensation, such as stock options, willbe accounted for by both public and non-public companies, andwill be effective as of the beginning of the first interim orannual reporting period that begins after June 15, 2005.For public companies, the cost of employee services received inexchange for equity instruments including options and restrictedstock awards generally will be measured at fair value at thegrant date. The grant date fair value will be estimated usingoption-pricing models adjusted for the unique characteristics ofthose options and instruments, unless observable market pricesfor the same or similar options are available. The cost will berecognized over the requisite service period, often the vestingperiod, and will be re-measured subsequently at each reportingdate through settlement date.     On September 30, 2004, the FASB issued FASB Staff Position(FSP) Emerging Issues Task Force (EITF) IssueNo. 03-1-1 delaying the effective date ofparagraphs 10-20 of EITF 03-1, *“The Meaning ofOther-Than-Temporary Impairment and Its Application to CertainInvestments,”*which provides guidance for determiningthe meaning of “other-than-temporarily impaired” andits application to certain debt and equity securities within thescope of SFAS No. 115, *“Accounting for CertainInvestments in Debt and Equity Securities,”*andinvestments accounted for under the cost method. The guidancerequires that investments which have declined in value due tocredit concerns or solely due to changes in interest rates mustbe recorded as other-than-temporarily impaired unless the Bankcan assert and demonstrate its intention to hold the securityfor a period of time sufficient to allow for a recovery of fairvalue up to or beyond the cost of the investment which mightmean maturity. The delay of the effective date of EITF 03-1will be superseded concurrent with the final issuance ofproposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-ais intended to provide implementation guidance with respect toall securities analyzed for impairment underparagraphs 10-20 of EITF 03-1. Management continues toclosely monitor and evaluate how the provisions ofEITF 03-1 and proposed FSP Issue 03-1-a will affectBenjamin Franklin Bancorp.**Item 7A.*****Quantitative and Qualitative Disclosures about Market    Risk***     Management and the Board of Benjamin Franklin recognize thattaking and managing risk is fundamental to the business ofbanking. Through the development, implementation and monitoringof its policies with respect to risk management, the Bankstrives to measure, evaluate and control the risks it faces. TheBoard and management understand that an effective riskmanagement system is critical to the safety and soundness of theBank. Chief among the risks faced by Benjamin Franklin arecredit risk, market risk including interest rate risk, liquidityrisk, operational (transaction) risk and compliance risk.
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     Within management, the responsibility for risk management restswith the Risk Management Committee, chaired by the Complianceand Risk Management Officer. Other members of the Committeeinclude the Chief Executive Officer, Chief Financial Officer,Treasurer, and the senior officers responsible for lending,retail banking and human resources. The Risk ManagementCommittee meets on a monthly basis to review the status of theCompany’s risk management efforts, including reviews ofinternal and external audit findings, loan review findings, andthe activities of the Asset/ Liability Committee with respect tomonitoring interest rate and liquidity risk. The Committeetracks any open items requiring corrective action with the goalof ensuring that each is addressed on a timely basis. TheCompliance and Risk Management Officer reports all findings ofthe Risk Management Committee directly to the Board’s Auditand Risk Management Committee.     *Management of Credit Risk.* Benjamin Franklin considerscredit risk to be the most significant risk it faces, in that ithas the greatest potential to affect the financial condition andoperating results of the Bank. Credit risk is managed through acombination of policies established by the Board, the monitoringof compliance with these policies, and the periodic evaluationof loans in the portfolio, including those with problemcharacteristics. In general, Benjamin Franklin’s policiesestablish maximums on the amount of credit that may be grantedto a single borrower (including affiliates), the aggregateamount of loans outstanding by type in relation to total assetsand capital, and loan concentrations. Collateral and debtservice coverage ratios, approval limits and other underwritingcriteria are also specified. Policies also exist with respect toperforming periodic credit reviews, the rating of loans, whenloans should be placed on non-performing status and factors thatshould be considered in establishing the Bank’s allowancefor loan losses. For additional information, refer to“Business — Lending Activities.”     *Management of Market Risk.* Market risk is the risk ofloss due to adverse changes in market prices and rates, andtypically encompasses exposures such as sensitivity to changesin market interest rates, foreign currency exchange rates, andcommodity prices. Benjamin Franklin has no exposure to foreigncurrency exchange or commodity price movements. Because netinterest income is Benjamin Franklin’s primary source ofrevenue, interest rate risk is a significant market risk towhich the Bank is exposed.     Interest rate risk is the exposure of Benjamin Franklin’snet interest income to adverse movements in interest rates. Netinterest income is affected by changes in interest rates as wellas by fluctuations in the level and duration of BenjaminFranklin’s assets and liabilities. Over and above theinfluence that interest rates have on net interest income,changes in rates may also affect the volume of lending activity,the ability of borrowers to repay variable rate loans, thevolume of loan prepayments and refinancings, the flow and mix ofdeposits, and the market value of the Bank’s assets andliabilities.     Exposure to interest rate risk is managed by Benjamin Franklinthrough periodic evaluations of the current interest rate riskinherent in its rate-sensitive assets and liabilities, coupledwith determinations of the level of risk considered appropriategiven the Bank’s capital and liquidity requirements,business strategy, and performance objectives. Through suchmanagement, Benjamin Franklin seeks to reduce the vulnerabilityof its net interest income to changes in interest rates.     Strategies used by Benjamin Franklin to reduce the potentialvolatility of its earnings include: •     Emphasizing the origination and retention of adjustable-rate    mortgage loans, variable rate commercial loans and variable rate    home equity lines-of-credit;  •     Investing in securities with relatively short maturities and/or    expected average lives;  •     Classifying nearly all of the investment portfolio as    “available for sale” in order to provide for    flexibility in liquidity management.     Benjamin Franklin’s Asset/ Liability Committee, comprisedof several members of senior and middle management, isresponsible for managing interest rate risk. On a quarterlybasis, the Committee reviews with the Board of Directors itsanalysis of the Bank’s exposure to interest rate risk, theeffect subsequent changes in interest rates could have on theBank’s future net interest income, its strategies and otheractivities, and the effect of those strategies on BenjaminFranklin’s operating results. The Committee is
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also actively involved in the Bank’s planning and budgetingprocess as well as in determining pricing strategies fordeposits and loans.     The Committee’s primary method for measuring and evaluatinginterest rate risk is income simulation analysis. This analysisconsiders the maturity and repricing characteristics of assetsand liabilities, as well as the relative sensitivities of thesebalance sheet components over a range of interest ratescenarios. Interest rate scenarios tested generally includeinstantaneous rate shocks, rate ramps over a one year period,and static (or flat) rates. The simulation analysis is used tomeasure the exposure of net interest income to changes ininterest rates over a specified time horizon, usually a two yearperiod.     The table below sets forth, as of December 31, 2004, theestimated changes in Benjamin Franklin’s net interestincome that would result from the designated instantaneouschanges in the U.S. Treasury yield curve. Computations ofprospective effects of hypothetical interest rate changes arebased on numerous assumptions including relative levels ofmarket interest rates, loan prepayments and deposit decay, andshould not be relied upon as indicative of actual results.       **Percentage Change in Estimated**  **Net Interest Income**  **Over 12 Months**       300 basis point increase in rates  (4.67)%    200 basis point increase in rates  (2.56)%    100 basis point increase in rates  .21%    Flat interest rates  —     100 basis point decrease in rates  (1.36)%     As indicated in the table above, the result of an immediate100 basis point increase in interest rates is estimated toincrease net interest income by .21% over a 12-month horizon,when compared to the flat rate scenario. For an immediate200 basis point parallel increase in the level of interestrates, net interest income is estimated to decline by 2.56% overa 12-month horizon, when compared against the flat ratescenario. Inherent in these estimates is the assumption thattransaction and savings account deposit rates would onlyincrease by 25 basis points and that money market depositaccount rates would only increase by 75 basis points foreach 100 basis point increase in market interest rates.These assumptions are based on the Bank’s past experiencewith the changes in rates paid on these non-maturity depositscoincident with changes in market interest rates.     The estimated change in net interest income from the flat ratescenario for a 100 basis point decline in the level ofinterest rates is a decrease of 1.36%, which assumes no decreasein interest-bearing checking rates, a 50 basis pointdecrease in savings rates and an average decrease in moneymarket rates of only 57 basis points. Effectively, in thedeclining interest rate scenario, Benjamin Franklin Bank doesnot reap the full potential benefit of lower rates because itscore deposit accounts are either already at their effectivefloors or reach those floors without giving full effect to therate decline.     There are inherent shortcomings in income simulation, given thenumber and variety of assumptions that must be made inperforming the analysis. The assumptions relied upon in makingthese calculations of interest rate sensitivity include thelevel of market interest rates, the shape of the yield curve,the degree to which certain assets and liabilities with similarmaturities or periods to repricing react to changes in marketinterest rates, the degree to which non-maturity deposits reactto changes in market rates, the expected prepayment rates onloans and mortgage-backed securities, the degree to which earlywithdrawals occur on certificates of deposit and the volume ofother deposit flows. As such, although the analysis shown aboveprovides an indication of Benjamin Franklin’s sensitivityto interest rate changes at a point in time, these estimates arenot intended to and do not provide a precise forecast of theeffect of changes in market interest rates on BenjaminFranklin’s net interest income and will differ from actualresults     In its management of interest rate risk, Benjamin Franklin alsorelies on the analysis of its interest rate “gap,”which is the measure of the mismatch between the amount ofBenjamin Franklin’s interest-earning assets andinterest-bearing liabilities that mature or reprice withinspecified timeframes. An asset-
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sensitive position (positive gap) exists when there are morerate-sensitive assets than rate-sensitive liabilities maturingor repricing within a particular time horizon, and generallysignifies a favorable effect on net interest income duringperiods of rising interest rates and a negative effect duringperiods of falling interest rates. Conversely, aliability-sensitive position (negative gap) would generallyindicate a negative effect on net interest income during periodsof rising rates and a positive effect during periods of fallingrates.     The table below shows Benjamin Franklin’s interestsensitivity gap position as of December 31, 2004,indicating the amount of interest-earning assets andinterest-bearing liabilities that are anticipated to mature orreprice in each of the future time periods shown. Generally,these assets and liabilities are shown in the table based on theearlier of the time remaining to repricing or contractualmaturity. However, residential mortgage loans andmortgage-backed securities have been presented in a manner thatalso incorporates the estimated effects of prepaymentassumptions. Interest-bearing checking, savings and money marketdeposit accounts are assumed to have annual rates of withdrawal(decay rates) of 12.7%, 46.1% and 47.7%, respectively.                                    **More than** **More than** **More than**        **More than** **Two Years** **Three Years** **Four Years**      **Up to** **One Year to** **to Three** **to Four** **to Five** **More than**    **One Year** **Two Years** **Years** **Years** **Years** **Five Years** **Total**                 **(Dollars in thousands)****Interest-earning assets:**                                Loans $162,414  $47,694  $63,598  $34,602  $39,176  $37,578  $385,062     Investment securities  28,115   22,136   9,899   5,421   3,083   26,447   95,101     Short-term investments  5,513   —   —   —   —   —   5,513                            Total interest-earning assets  196,042   69,830   73,497   40,023   42,259   64,025   485,676                       **Interest-bearing liabilities:**                                Savings deposits  44,133   23,788   12,822   6,911   3,725   4,496   95,875     Money market  25,361   13,264   6,937   3,628   1,897   2,080   53,167     NOW accounts  2,852   2,490   2,174   1,898   1,657   11,389   22,460     Certificates of deposits  99,682   24,968   7,532   4,612   427   —   137,221     Short-term borrowings  4,250   —   —   —   —   —   4,250     Long-term debt  —   7,000   32,000   6,000   6,000   30,000   81,000                            Total interest-bearing liabilities  176,278   71,510   61,464   23,049   13,706   47,966   393,973                           Interest rate sensitivity gap $19,764  $(1,680) $12,033  $16,974  $28,553  $16,059  $91,703                           Interest rate sensitivity gap as a % of total assets  3.82%  (0.32)%  2.32%  3.28%  5.51%  3.10%        Cumulative interest rate sensitivity gap $19,764  $18,084  $30,116  $47,091  $75,644  $91,703                               Cumulative interest rate sensitivity gap as a % of total assets  3.82%  3.49%  5.81%  9.09%  14.60%  17.71%         Certain factors may serve to limit the usefulness of themeasurement of the interest rate gap. For example, interestrates on certain assets and liabilities are discretionary andmay change in advance of, or
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may lag behind, changes in market rates. The gap analysis doesnot give effect to changes Benjamin Franklin may undertake tomitigate interest rate risk. Certain assets, such asadjustable-rate loans, have features that may restrict themagnitude of changes in interest rates both on a short-termbasis and over the life of the assets. Further, in the event ofchanges in interest rates, prepayment and early withdrawallevels would likely deviate significantly from those assumed inthe gap analysis. Lastly, should interest rates increase, theability of borrowers to service their debt may decrease.     *Liquidity Risk Management.*Liquidity risk, or the risk toearnings and capital arising from an organization’sinability to meet its obligations without incurring unacceptablelosses, is managed by Benjamin Franklin’s Treasurer, whomonitors on a daily basis the adequacy of BenjaminFranklin’s liquidity position. Oversight is provided by theAsset/ Liability Committee, which reviews BenjaminFranklin’s liquidity on a weekly basis, and by the Board ofDirectors, which reviews the adequacy of BenjaminFranklin’s liquidity resources on a monthly basis.     Benjamin Franklin’s primary sources of funds are fromdeposits, amortization of loans, loan prepayments and thematurity of loans, mortgage-backed securities and otherinvestments, and other funds provided by operations. Whilescheduled payments from amortization of loans andmortgage-backed securities and maturing loans and investmentsecurities are relatively predictable sources of funds, depositflows and loan prepayments can be greatly influenced by generalinterest rates, economic conditions and competition. BenjaminFranklin maintains excess funds in cash and short-terminterest-bearing assets that provide additional liquidity. AtDecember 31, 2004, cash and due from banks, short-terminvestments and debt securities maturing within one year totaled$33.8 million or 6.5% of total assets.     Benjamin Franklin also relies on outside borrowings from theFederal Home Loan Bank of Boston, as an additional fundingsource. In 2004, Benjamin Franklin has expanded its use ofFederal Home Loan Bank of Boston borrowings to fund growthin the loan portfolio and to assist in the management of itsinterest rate risk. Since December 31, 2003, BenjaminFranklin has increased Federal Home Loan Bank of Bostonborrowings by $40.3 million to a total of$76.3 million outstanding as of December 31, 2004. Onthat date, Benjamin Franklin had the ability to borrow anadditional $89.1 million from the Federal HomeLoan Bank of Boston.     Benjamin Franklin uses its liquidity to fund existing and futureloan commitments, to fund maturing certificates of deposit andborrowings, to fund other deposit withdrawals, to invest inother interest-earning assets and to meet operating expenses.Benjamin Franklin anticipates that it will continue to havesufficient funds and alternative funding sources to meet itscurrent commitments.     *Contractual Obligations.*The following tables presentinformation indicating various contractual obligations andcommitments of Benjamin Franklin as of the dates indicated andthe respective maturity dates:                       **December 31, 2004**       **More than** **More than**      **One Year** **Three**      **One** **through** **Years**      **Year or** **Three** **through** **Over Five**  **Total** **Less** **Years** **Five Years** **Years**             **(Dollars in thousands)**    Federal Home Loan Bank of Boston Advances(1) $76,250  $4,250  $30,000  $12,000  $30,000     Subordinated debt  9,000   —   —   —   9,000     Other(2)  4,458   1,191   2,277   990   —                     Total contractual obligations $89,708  $5,441  $32,277  $12,990  $39,000                  (1)     Secured under a blanket security agreement on qualifying assets,    principally 1-4 Family Residential mortgage loans. Advances    shown with a maturity of greater than three years may be called    by the Federal Home Loan Bank of Boston during the period    remaining to maturity. (2)     Represents contracts for technology services and employee    compensation.
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     *Loan Commitments.* The following tables presentcertain information about Benjamin Franklin Bank’s loancommitments outstanding as of the dates indicated:                        **December 31, 2004**       **More than** **More than**      **One Year** **Three Years**      **One Year** **through** **through** **Over**  **Total** **or Less** **Three Years** **Five Years** **Five Years**             **(Dollars in thousands)**    Commitments to grant loans(1) $15,470  $15,470  $—  $—  $—     Commercial loan lines-of-credit  4,391   4,391   —   —   —     Unused portion of home equity loans(2)  28,260   —   —   —   28,260     Unused portion of construction loans(3)  20,338   19,314   1,024   —   —     Unused portion of personal lines-of-credit(4)  2,130   —   —   —   2,130                      Total loan commitments $70,589  $39,175  $1,024  $—  $30,390                  *General:* Commitments to extend credit are agreements tolend to a customer as long as there is no violation of anycondition established in the contract and generally have fixedexpiration date or other termination clauses.(1)     Commitments for loans are extended to customers for up to    180 days after which they expire. (2)     Unused portions of home equity loans are available to the    borrower for up to 10 years. (3)     Unused portions of construction loans are available to the    borrower for up to two years for development loans and up to one    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.* Two additional risk areas thatreceive significant attention by management and the Board areoperational risk and compliance risk. Operational risk is therisk to earnings and capital arising from control deficiencies,problems with information systems, fraud, error or unforeseencatastrophes. Compliance risk is the risk arising fromviolations of, or nonconformance with, laws, rules, regulations,prescribed practices, internal policies and procedures orethical standards. Compliance risk can expose the Company tofines, civil money penalties, payment of damages and the voidingof contracts.     Benjamin Franklin addresses such risks through the establishmentof comprehensive policies and procedures with respect tointernal control, the management and operation of itsinformation and communication systems, disaster recovery, andcompliance with laws, regulations and banking “bestpractice”. Monitoring of the efficacy of such policies andprocedures is performed through a combination of BenjaminFranklin’s internal audit program, through periodicinternal and third-party compliance reviews, and through theongoing attention of its managers charged with supervisingcompliance and operational control. Oversight of theseactivities is provided by the Risk Management Committee and theAudit and Risk Management Committee of the Board.**Item 8.*****Financial Statements***     The Consolidated Financial Statements of Benjamin FranklinBancorp begin on page F-1 of this Annual Report.**Item 9.*****Changes in and Disagreements With Accountants on    Accounting and Financial Disclosure***     Not applicable.
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**Item 9A.*****Controls and Procedures***     (a) *Evaluation of Disclosure Controls andProcedures.* Our President and Chief Executive Officer, ourChief Financial Officer, and other members of our seniormanagement team have evaluated the effectiveness of ourdisclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)). Based on such evaluation,our President and Chief Executive Officer and Chief FinancialOfficer have concluded that our disclosure controls andprocedures, as of the end of the period covered by this report,were adequate and effective to provide reasonable assurance thatinformation required to be disclosed by the Benjamin FranklinBancorp, including our consolidated subsidiaries, in reportsthat we file or submit under the Exchange Act, is recorded,processed, summarized and reported, within the time periodsspecified in the Commission’s rules and forms.     The effectiveness of a system of disclosure controls andprocedures is subject to various inherent limitations, includingcost limitations, judgments used in decision making, assumptionsabout the likelihood of future events, the soundness of internalcontrols, and fraud. Due to such inherent limitations, there canbe no assurance that any system of disclosure controls andprocedures will be successful in preventing all errors or fraud,or in making all material information known in a timely mannerto the appropriate levels of management.     (b) *Changes in Internal Controls Over FinancialReporting.* There were no changes in our internal controlover financial reporting during the fourth quarter of fiscalyear 2004 that have materially affected, or that are reasonablylikely to materially affect, our internal controls overfinancial reporting.**Item 9B.*****Other Information***     Not applicable.**PART III****Item 10.*****Directors and Executive Officers of the Registrant*****Directors of Benjamin Franklin Bancorp**     The Board of Benjamin Franklin Bancorp (which is now known asthe Board of Trustees but will be renamed the Board of Directorsupon the completion of the conversion) currently consists of11 members, each of whom belongs to one of three classes.Directors serve three-year staggered terms so that onlyapproximately one-third of the Directors will be elected at eachannual meeting of stockholders. Upon the completion of the ChartBank acquisition, six directors from Chart Bank will join theBenjamin Franklin Bancorp Board of Directors, as describedbelow. These six directors will be classified evenly, to theextent practicable, into each of the three Board classes. Eachof the directors of Benjamin Franklin Bancorp also serves as adirector of Benjamin Franklin Bank. Following the completion ofthe Chart Bank acquisition, each of the six newly added Bancorpdirectors will also join the Board of Directors of BenjaminFranklin Bank.
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     The following table sets forth the current Directors’names, ages as of March 15, 2005, the years when they beganserving as Directors, and when their current term expires.       **Name(1)** **Age** **Date Elected(2)** **Term Expires**           Dr. Mary Ambler     72     1977     2008    William P. Bissonnette     59     1997     2006    William F. Brady, Jr., D.D.S.      72     1985     2007    John C. Fuller     72     1998     2007    Anne M. King     75     1997     2006    Richard D. Mann     69     1967     2007    John D. Murphy     75     1984     2006    Charles F. Oteri     59     1984     2008    Thomas R. Venables     49     2002     2008    Alfred H. Wahlers     71     1973     2007    Charles Yergatian     76     1980     2006 (1)     In addition to the Directors set forth in this table, six    members of Chart Bank’s board of directors will be    appointed to the Benjamin Franklin Bancorp Board of Directors    upon completion of the Chart Bank acquisition: Richard E.    Bolton, Jr., Paul E. Capasso, Jonathan A. Haynes, Daniel F.    O’Brien, Donald P. Quinn, and Neil E. Todreas. (2)     “Date Elected” indicates the date the Director first    joined the Board of Trustees or Board of Directors of Benjamin    Franklin Bancorp or Benjamin Franklin Bank.     The principal occupation and business experience for the lastfive years for each of Benjamin Franklin Bancorp’sDirectors is set forth below. All Directors have held theirpresent positions for five years unless otherwise stated.     *Dr. Mary Ambler*is a retired physician and aProfessor Emeritus of Brown University.     *William P. Bissonnette*is a partner in the firm ofLittle & Bissonnette, CPAs.     *William F. Brady, Jr., D.D.S.* is a retired dentist.     *John C. Fuller*is retired. He was formerly a VicePresident and member of the Board of Directors of the FoxboroCompany, a controls and instrumentation company located inFoxboro, Massachusetts.     *Anne M. King*, Clerk of Benjamin Franklin Bancorp andBenjamin Franklin Bank, is a retired journalist and currentlyworks part-time in public relations.     *Richard D. Mann*is an owner of Buckley & Mann,Inc., a textile manufacturer located in Norfolk, Massachusetts.He also serves as a member of the Board of Trustees ofClark-Cutler-McDermott Co. of Franklin, Massachusetts and ofDraper Knitting Co. of Canton, Massachusetts.     *John D. Murphy*is self-employed in the field of realestate.     *Charles F. Oteri*is the Chief Executive Officer andFuneral Director of Oteri Funeral Home in Franklin,Massachusetts.     *Thomas R. Venables*has served as President and ChiefExecutive Officer of Benjamin Franklin Bancorp and BenjaminFranklin Bank since 2002. Prior to 2002, Mr. Venablesco-founded Lighthouse Bank of Waltham, Massachusetts in 1999 andserved as its President and Chief Executive Officer. From 1998to 1999, Mr. Venables was employed as a consultant withMarsh and McLennan Capital, Inc. He was employed by Grove Bankof Newton, Massachusetts from 1974 until it was acquired byCitizens Bank in 1997, serving as its President and ChiefExecutive Officer for the last 11 years of his tenure.     *Alfred H. Wahlers* is the Chairman of the Board ofBenjamin Franklin Bancorp and Benjamin Franklin Bank.Mr. Wahlers is a retired insurance executive.
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     *Charles Yergatian*is a retired residential real estatedeveloper.     Upon completion of the Chart Bank acquisition, six directors ofChart Bank will be appointed as directors of Benjamin FranklinBancorp and Benjamin Franklin Bank. The principal occupation andbusiness experience for the last five years for each of theseChart Bank directors is set forth below. All of theseindividuals have held their present positions for five yearsunless otherwise stated.     *Richard E. Bolton, Jr.* has served as the Presidentand Chief Executive Officer of Chart Bank since 1995. He hasserved as President of Chart Bank’s subsidiary, CSSI, since1999. Mr. Bolton is 46 years old.     *Paul E. Capasso*is the President of Capasso RealtyCorporation located in Newton, Massachusetts, a real estateinvestment company specializing in apartment and office buildingownership. Mr. Capasso is 48 years old.     *Jonathan A. Haynes*is the President of Haynes Management,a real estate management firm located in Wellesley Hills,Massachusetts, and President of D.M. Bernardi, a generalcontracting firm located in Wellesley Hills, Massachusetts.Mr. Haynes is 49 years old.     *Daniel F. O’Brien*is a certified public accountantand owner and president of O’Brien, Riley and Ryan, a CPAfirm located in Boston. Mr. O’Brien is also themanager of State Street Wealthcare Advisors, LLC, a financialservices company and State Street Consulting, LLC, a computerservices consulting firm. Mr. O’Brien is also apracticing attorney. Mr. O’Brien is 49 years old.     *Donald P. Quinn*is an attorney in private practice inPlymouth, Massachusetts. He was formerly a partner concentratingin commercial business and real estate matters at GoodwinProcter LLP, a law firm located in Boston. Mr. Quinn is67 years old.     *Neil E. Todreas*is a professor of nuclear engineering anda professor of mechanical engineering at Massachusetts Instituteof Technology. He also provides consulting services through hiscompany, Energy Technology Associates, Inc. Mr. Todreas is70 years old.**Procedures for Shareholders to Nominate Directors**     Shareholders of record who wish to propose a candidate fornomination to the Board must comply with Section 3.3 andrelated sections of our by-laws, which sets forth proceduralrequirements for such nominations. To be timely, such a proposalmust be received by our corporate secretary at our principalexecutive offices at least 120 days and not more than150 days in advance of the anniversary date of our proxystatement for our prior year’s annual meeting. For ourfirst annual meeting following the conversion, notice must reachus not later than the close of business on the tenth calendarday after public disclosure of the date of that first annualmeeting. Section 3.3 specifies the type of informationabout the qualifications and background of the proposed nomineethat the shareholder must supply to us, including the consent ofthe proposed nominee to serve as a director if he or she iselected. The Governance Committee may reject any nomination by ashareholder that is not timely made or does not satisfy theinformation delivery requirements of the by-law. In general, wewill have no obligation to include in our proxy materialsinformation about a nominee proposed by a shareholder, unlessthe Governance Committee itself decides to propose that nomineeon behalf of Benjamin Franklin Bancorp.**Committees and Meetings of the Board**     Benjamin Franklin Bank’s Board meets on a monthly basis andmay hold additional special meetings. During 2004, the Boardheld 12 regular meetings, one of which was an annual meeting,and five special meetings.     The Board of Trustees of Benjamin Franklin Bancorp held fourregular meetings and eight special meetings during 2004. TheBenjamin Franklin Bancorp regular meetings are held immediatelybefore or after the Benjamin Franklin Bank Board meetingscheduled for that month. Following the conversion, the Board ofDirectors of Benjamin Franklin Bancorp is expected to meet on amonthly basis, or more often as may be necessary.
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     The Boards of Directors of Benjamin Franklin Bank and BenjaminFranklin Bancorp currently have three standing Board Committees.Those Board Committees are the Executive Committee, the Auditand Risk Management Committee and the Compensation Committee. Inaddition, in anticipation of the conversion, the Board ofBenjamin Franklin Bancorp will appoint a Governance Committee.Each of the Audit and Risk Management Committee, CompensationCommittee and Governance Committee will be comprised solely ofindependent directors within the meaning of the rulespromulgated under the Sarbanes-Oxley Act of 2002 and the Nasdaqlisting requirements. The Board of Directors may, by resolution,designate one or more additional committees.     The following committee descriptions set forth the currentmembers of each of Benjamin Franklin Bancorp’s existingBoard committee. However, immediately after completion of theChart Bank acquisition, each committee will be reconstituted tointegrate the six Chart Bank directors who will join the Boardsuch that, to the extent feasible, former Chart directors serveon each committee in the same proportions as they serve on theBoard of Directors. This committee reorganization is also likelyto result in certain changes in the committee assignments of thecurrent Benjamin Franklin Bancorp Board members.     The Executive Committee currently consists of Dr. WilliamBrady, Jr., William Bissonnette, Anne King, John Murphy,Thomas Venables, Alfred Wahlers, Charles Yergatian, withDr. Brady serving as Chair. The Executive Committee meetssemi-monthly to review ongoing activities and performance of theBank. The Committee approves loan originations that exceedcertain internal limitations, and reviews other loansoriginations, the monthly asset/liability report and monthlyfinancial reports. The Executive Committee met 25 times during2004.     The Audit and Risk Management Committee currently consists ofCharles Oteri, Dr. Mary Ambler, John Fuller and RichardMann, with Mr. Oteri serving as Chair. Each member of theAudit and Risk Management Committee is an independent directoras determined in accordance with the Sarbanes-Oxley Act of 2002and the Nasdaq listing requirements. At the present time, theBoard has determined that no Audit and Risk Management Committeemember is an “audit committee financial expert” underapplicable regulations and is currently considering whether ornot to add to the Board a director who would be an auditcommittee financial expert. However, the Board has alsoconcluded that each Committee member has sufficient knowledge infinancial and auditing matters to serve on the Committee. TheAudit and Risk Management Committee operates under a charter andoversees the independent auditor relationship, the internalaudit, risk management and compliance functions. The Committeemet five times during 2004.     The Compensation Committee currently consists of WilliamBissonnette, Richard Mann, John Murphy, Charles Oteri and AlfredWahlers, with Mr. Bissonnette serving as Chair. TheCompensation Committee oversees Director and executive officercompensation and certain employee benefit plans.     The Governance Committee is expected to consist of sixdirectors. The Governance Committee will be responsible forestablishing criteria for Directors, making recommendations forthe nomination of Directors, overseeing self-assessmentevaluations for the Board and its Committees and addressingother governance issues.
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**Executive Officers**     The names, ages as of March 15, 2005, and positions of eachof our executive officers, other than Thomas R. Venables, who isincluded in the description of directors above, are set forthbelow.     **Name(1)** **Age** **Position**         Claire S. Bean     52     Executive Vice President/Chief Financial Officer, Benjamin    Franklin Bank; Treasurer and Chief Financial Officer, Benjamin    Franklin Bancorp    Ronald E. Baron     48     Senior Vice President/Treasurer, Benjamin Franklin Bank    Mariane E. Broadhurst     48     Senior Vice President/Retail Banking, Benjamin Franklin Bank    Rose M. Buckley     37     Senior Vice President/Senior Commercial Lending Officer,    Benjamin Franklin Bank    Michael J. Piemonte     51     Senior Vice President/Risk Management and Compliance, Benjamin    Franklin Bank    Brian E. Ledwith     36     Vice President/Senior Retail Lending Officer, Benjamin Franklin    Bank    Kathleen P. Sawyer     47     Vice President/Human Resources, Benjamin Franklin Bank (1)     Upon completion of the Chart Bank merger, two officers of Chart    Bank, Alfred F. Odoardi and James Golden, are expected to become    our executive officers. Their biographies are included below.     *Claire S. Bean*has served as Executive Vice President/Chief Financial Officer of Benjamin Franklin Bank since July2004. Prior to her employment with Benjamin Franklin Bank,Ms. Bean served as Banking Advisor in the Capital MarketsGroup of FINCA International, Inc. and later as RegionalDirector of FINCA for Eastern Europe and NIS. From May 2002 toJune 2003, Ms. Bean served as Director of EconomicDevelopment in Kyrgyzstan for the Mercy Corps, and from June2003 to September 2003, she served as Manager ofMicro-enterprise and Economic Development for the sameorganization. In addition, from 1999 to 2001, Ms. Beanserved as Chief Operating Officer and Chief Financial Officer ofLighthouse Bank of Waltham, Massachusetts. From 1991 to 1997,Ms. Bean served as Executive Vice President/ Treasurer ofGrove Bank of Chestnut Hill, Massachusetts.     *Ronald E. Baron*has served as Senior Vice President/Treasurer of Benjamin Franklin Bank since April, 2003.Mr. Baron joined the Bank in June 1997 as Assistant VicePresident/ Controller. He was promoted to Vice President/Treasurer and Controller in January 2002 and to Senior VicePresident in April 2003. Prior to his employment at BenjaminFranklin Bank, Mr. Baron served as Vice President ofFinance at Educor, Inc. for three years and was a CreditSpecialist at Federal Deposit Insurance Corporation from 1991 to1994.     *Mariane E. Broadhurst*has served as Senior VicePresident/ Retail Banking of Benjamin Franklin Bank since April,2003. Ms. Broadhurst joined the Bank in August 1992 as aBranch Manager. She was promoted to Assistant Vice President/Branch Administrator in December 1997 and in April 2002 waspromoted to Vice President of Retail Banking. Prior to heremployment with Benjamin Franklin Bank, Ms. Broadhurst wasemployed as an Assistant Treasurer/ Branch Sales Manager ofHeritage Bank in Worcester, Massachusetts, beginning in 1988.     *Rose M. Buckley*has served as Senior Vice President/Senior Commercial Lending Officer of Benjamin Franklin Banksince April 2003. She joined the Bank in 1984 as a commercialloan officer. She was promoted to Assistant Vice President/Commercial Lending in April 1997 and to Vice President/Commercial Lending in April 1998.     *Michael J. Piemonte*has served as Senior Vice President/Risk Management and Compliance of Benjamin Franklin Bank sinceDecember 2003. He joined Benjamin Franklin Bank in March 1998 as
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Assistant Vice President/ Auditor/ Compliance and Loan ReviewOfficer in the Internal Audit Department. He became AssistantVice President/ Compliance Officer in the Compliance Departmentin July 2001 and became Vice President/ Risk Management andCompliance in December 2001.     *Brian E. Ledwith*has served as Vice President/ SeniorRetail Lending Officer of Benjamin Franklin Bank since September2004. He joined the Bank in February 2004 as Vice President/Commercial Lending. Prior to his employment with BenjaminFranklin Bank, Mr. Ledwith served as Vice President/ SeniorLoan Officer of Medway Cooperative Bank of Medway,Massachusetts. From 2000 to 2002, Mr. Ledwith served asVice President of the Commercial Lending Department of StrataBank in Franklin, Massachusetts. In addition, from 1998 to April2000, Mr. Ledwith served as Vice President of CommercialBanking of Rockland Trust in Brockton, Massachusetts.     *Kathleen P. Sawyer*has served as Vice President/ HumanResources of Benjamin Franklin Bank since April, 2003.Ms. Sawyer served as a Human Resources Officer of BenjaminFranklin Bank from 1996 to 2000, and as Assistant VicePresident/ Human Resources from 2000 to 2003.     Upon completion of the Chart Bank acquisition, the following twoofficers of Chart Bank are expected to become executive officersof Benjamin Franklin Bank.     *Alfred J. Odoardi* has served as Senior VicePresident — Commercial Lending and Senior Loan Officerof Chart Bank since August 1995. Upon completion of the ChartBank acquisition, Mr. Odoardi is expected to become SeniorVice President of Benjamin Franklin Bank and will be responsiblefor the commercial business loan department that BenjaminFranklin Bank intends to establish following the acquisition.Mr. Odoardi is 55 years old.     *James Golden*is Vice President of Chart Bank’s ATMcash management and settlement services subsidiary, CSSI, aposition he has held since October 2001. Previously, he servedas Chart Bank’s Vice President — Retail Banking,from October 2001 to October 2003, and as a branch manager fromAugust1997 to January 2000. Mr. Golden has also served ChartBank as its Compliance Officer since October 1997 and as itsSecurity Officer and CRA Officer since January 1998. Uponcompletion of the Chart Bank acquisition, Mr. Golden isexpected to become a Vice President of Benjamin Franklin Bankand will continue to be responsible for the CSSI ATM cashmanagement and settlement services business. Mr. Golden is41 years old.**Compensation Committee Interlocks and InsiderParticipation**     As noted above, the Board of Trustees of Benjamin FranklinBancorp established a Compensation Committee in connection withthe adoption of various compensation plans and agreements inanticipation of the conversion. The members of the CompensationCommittee are Messrs. Bissonnette, Mann, Murphy, Oteri andWahlers.     No person now serving as a member of the Compensation Committeeis a current or former officer or employee of Benjamin FranklinBancorp or Benjamin Franklin Bank or engaged in certaintransactions with Benjamin Franklin Bancorp or Benjamin FranklinBank that are required to be disclosed by SEC regulations.Additionally, there are no compensation committee“interlocks,” which generally means that no executiveofficer of Benjamin Franklin Bancorp or Benjamin Franklin Bankserved as a director or member of the compensation committee ofanother entity, one of whose executive officers serves as aDirector or member of the Compensation Committee.**Compliance with Section 16(a) of the Exchange Act**     Section 16(a) of the Securities Exchange Act of 1934, asamended, requires our officers, directors and persons whobeneficially own more than 10% of a registered class of ourcommon stock to file reports of ownership and changes inownership with the SEC. Section 16(a) was not applicable tous during the year ended December 31, 2004 because we hadnot registered under Section 12(g) of the SecuritiesExchange Act until March 9, 2005. Moreover, we have not yetissued any shares of capital stock.
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**Code of Ethics**     Our Board of Directors has adopted a code of ethics that appliesto all of our employees, officers and directors. The code coverscompliance with law; conflicts of interest; confidentiality andintegrity of bank and company records; fair and accuratedisclosure to the public; and procedures for compliance with thecode. If you would like a copy of our code of ethics, pleasecontact our main office at 508-528-7000 to request a copy, whichwe will provide to you without charge.**Item 11.*****Executive Compensation*****Executive Officer Compensation**     The following table sets forth certain information as to thetotal remuneration paid by Benjamin Franklin Bancorp andBenjamin Franklin Bank during the fiscal years endedDecember 31, 2004 and 2003 to the President and ChiefExecutive Officer of Benjamin Franklin Bancorp and BenjaminFranklin Bank and to the five most highly compensated executiveofficers of Benjamin Franklin Bancorp and Benjamin Franklin Bankother than the President and Chief Executive Officer who servedas executive officers during or at the end of 2004 and whoreceived total annual compensation in excess of $100,000. Eachof the individuals listed on the table below is referred to as a“named executive officer.”**Summary Compensation Table**                        **Annual Compensation**  **Name and Principal Position with**    **Benjamin Franklin Bancorp and**   **Other Annual** **All Other****Benjamin Franklin Bank** **Year** **Salary** **Bonus(1)** **Compensation(2)** **Compensation**               Thomas R. Venables  2004  $275,000  $50,000      $72,247(3)     President and Chief Executive  2003  $250,000  $50,000      $89,032      Officer of Benjamin Franklin Bancorp and Benjamin Franklin Bank                        Ronald E. Baron  2004  $100,000  $4,000      $6,285(4)     Senior Vice President and  2003  $95,000  $4,750      $2,777      Treasurer of Benjamin Franklin Bank and Treasurer of Benjamin    Franklin Bancorp                        Rose M. Buckley  2004  $96,300  $18,000      $5,778(4)     Senior Vice President and  2003  $90,000  $9,000      $7,200      Senior Commercial Lending Officer of Benjamin Franklin Bank                        Mariane E. Broadhurst  2004  $90,000  $12,600      $5,400(4)     Senior Vice President/ Retail  2003  $80,000  $7,200      $6,417      Banking of Benjamin Franklin Bank                        Patrick E. Niro(5)  2004  $247,118(6) $12,500      $96,586(7)    2003  $155,000  $12,425      $28,014     Stephen F. Banks(8)  2004  $139,300  $20,000      $48,370(9)    2003  $135,200  $20,000      $23,900  (1)     Represents bonuses earned in 2004 and 2003, but paid in 2005 and    2004 respectively. (2)     Perquisites and other personal benefits paid to each named    executive officer in each instance did not, in the aggregate,    equal or exceed the lesser of either $50,000 or 10% of the total    annual salary and bonus set forth in the columns entitled    “Salary” and “Bonus” for each officer and,    accordingly, are omitted from the table as permitted by the    rules of the SEC. (3)     Includes Benjamin Franklin Bank’s matching contribution of    $12,300 under its 401(k) plan and an accrual in connection with    Mr. Venables’s salary continuation agreement in the    amount of $59,947. (4)     Represents Benjamin Franklin Bank’s matching contributions    under its 401(k) plan.
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(5)     Mr. Niro served as Executive Vice President and Senior    Retail Lending Officer of Benjamin Franklin Bank and Vice    President of Benjamin Franklin Bancorp until his retirement on    September 17, 2004. (6)     In addition to salary in the amount of $121,634, includes    payments of $45,909 for consulting services during the period    September 17, 2004 through December 31, 2004 and a    severance payment of $79,575. (7)     Includes Benjamin Franklin Bank’s matching contribution of    $12,300 under its 401(k) plan and a lump sum payment of $84,286    under Mr. Niro’s salary continuation agreement. (8)     Mr. Banks served as Executive Vice President and Chief    Information Officer of Benjamin Franklin Bank and Vice President    of Benjamin Franklin Bancorp until his resignation effective    March 25, 2005. (9)     Includes Benjamin Franklin Bank’s matching contribution of    $9,558 under its 401(k) plan and an accrual in connection with    Mr. Banks’s supplemental executive retirement plan in    the amount of $38,812.**Compensation of Directors**     During 2004, members of the Benjamin Franklin Bank Board ofDirectors received an annual retainer of $4,000 for theirservice on the Board and $450 for each Board meeting that theyattended. The Chairman of the Board and the Clerk each receivedan additional $1,000 retainer for his or her service in thatcapacity. During 2004, members of the Executive Committee andthe Audit and Risk Management Committee received $450 and $600,respectively, for each committee meeting that they attended, butdid not receive a separate retainer, except that the Chairman ofeach committee and the Clerk of the Executive Committee receiveda $1,000 annual retainer.     Upon completion of the conversion, and in recognition ofBenjamin Franklin Bank’s increased size and change topublic company form, the Board and Committee fees will beadjusted as follows. The annual Board retainer will increase to$10,000 per year, and the per meeting fee for Board ofDirectors meetings will increase to $500 per meetingattended. The annual retainer for the Chairman of the Board andthe Clerk of Benjamin Franklin Bank will increase to$2,000 per year. The Executive Committee’s per meetingfee will also increase to $500, and the Executive CommitteeChairman’s annual retainer will increase to $2,000, but theExecutive Committee Clerk will no longer receive a retainer.Members of the Audit and Risk Management Committee, GovernanceCommittee and Compensation Committee will not receive permeeting fees, but will receive annual retainers of $8,000,$3,000 and $3,000, respectively. The Chair of each of thesethree committees will receive an additional annual retainer of$2,000.     Members of the Board who are employees of Benjamin Franklin Bankor Benjamin Franklin Bancorp do not receive these fees.Generally, Benjamin Franklin Bancorp’s Board of Directorsmeets immediately prior to or after a Benjamin Franklin BankBoard meeting. In such instances, directors do not receiveadditional fees for attendance at meetings of Benjamin FranklinBancorp’s Board. Otherwise, the directors of BenjaminFranklin Bancorp receive the same fees they receive forattendance at a Benjamin Franklin Bank Board meeting.**Employment and Change in Control Agreements**     *Employment Agreements.* In connection with the conversion,Benjamin Franklin Bancorp will enter into employment agreementswith its Chief Executive Officer, Mr. Venables, and itsExecutive Vice President, Ms. Bean. The agreements providefor an annual base salary, subject to increase (which increasedamount becomes a floor below which the officer’s basesalary may not fall during the term of the agreement), andcertain benefits. They also guarantee customary corporateindemnification and errors and omissions insurance coveragethroughout the employment term and for six years aftertermination. The current base salary of each ofMr. Venables and Ms. Bean is $315,000 and $200,000,respectively.     The initial term of each agreement is three years, with the termautomatically extended by one day for each day that the officeris employed by Benjamin Franklin Bancorp and Benjamin FranklinBank, although the automatic extensions may be discontinued atany time by Benjamin Franklin Bancorp,
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Benjamin Franklin Bank or the officer. For a one-year periodfollowing termination of the executive’s employment, theexecutive must adhere to a non-competition restriction andrefrain from soliciting employees or certain large commercialloan customers. Such provision is not operative after theoccurrence of a change in control of Benjamin Franklin Bancorp.     In the event the officer’s employment is terminated byBenjamin Franklin Bancorp or Benjamin Franklin Bank for otherthan “specially-defined cause” or by the officer for“good reason,” each as defined in the agreements, theofficer will be entitled to receive a lump sum severance benefitequal to three times the highest yearly compensation paid to theofficer in the three fiscal years preceding the termination,plus certain other benefits. These benefits include continuationof disability and medical benefits for three years followingtermination, an adjustment to the officer’s pension, andacceleration of all vesting of stock awards and options. If theexecutive’s employment is terminated following a change incontrol, the non-competition and nonsolicitation provisionsdescribed above would not apply.     Mr. Venables and Ms. Bean would also be entitled toreceive an additional tax indemnification payment if paymentsunder the employment agreements or any other payments triggeredliability under Section 280G of the Internal Revenue Codeas an excise tax constituting “excess parachutepayments.” Under applicable law, the excise tax istriggered by change in control-related payments that equal orexceed three times the executive’s average annualcompensation over the five calendar years preceding the changein control. The excise tax equals 20.0% of the amount of thepayment in excess of one times the executive’s averagecompensation over the preceding five calendar year period.     *Change in Control Agreements.* Benjamin Franklin Bancorpwill also enter into change in control agreements with six ofits senior officers in connection with the conversion. Thechange in control agreements provide for a lump sum severancepayment equal to approximately one times (in the case ofMr. Baron, Mr. Ledwith, Mr. Piemonte andMs. Sawyer) or two times (in the case ofMs. Broadhurst and Ms. Buckley) the officer’sbase salary plus the highest annual bonus paid during the threemost recent calendar years and certain other benefits upontermination of the officer’s employment under certaincircumstances.     Pursuant to the terms of the change in control agreements, theseseverance payments will be triggered if, within two years aftera “change in control,” as defined in the agreements,of Benjamin Franklin Bancorp or Benjamin Franklin Bank, theofficer’s employment is terminated for any reason otherthan death, deliberate dishonesty or gross misconduct of theofficer with respect to Benjamin Franklin Bancorp or any of itssubsidiaries, or conviction of the officer for the commission ofa felony. These payments will also be triggered if the officerterminates his or her employment following: (i) a reductionin the officer’s annual base salary; (ii) a relocationof the offices of Benjamin Franklin Bancorp or Benjamin FranklinBank at which the officer is principally employed by more than aspecified number of miles; (iii) a failure of BenjaminFranklin Bancorp or Benjamin Franklin Bank to pay any portion ofcompensation due to the officer within seven days of the datesuch compensation is due; (iv) a failure by BenjaminFranklin Bancorp or Benjamin Franklin Bank to continue theofficer’s participation in any material compensation,incentive bonus or benefit plan (or in a successor plan) or thefailure of a successor in interest to make available itsbenefits plans to the officer on a basis that is notsubstantially less favorable than the successor generallyaffords to its other employees holding similar positions; or(v) a failure of Benjamin Franklin Bancorp or BenjaminFranklin Bank to obtain a satisfactory agreement from anysuccessor to assume and agree to perform the officer’schange in control agreement.     In addition, if the officer’s employment is terminated forthe reasons described above, Benjamin Franklin Bancorp willcontinue to pay to the officer the disability and medicalbenefits existing as of and at the level in effect on the dateof termination, at no greater cost to the officer than theofficer is currently paying, for one year (in the case ofMr. Baron, Mr. Ledwith, Mr. Piemonte andMs. Sawyer) or two years (in the case ofMs. Broadhurst and Ms. Buckley). In the event paymentsand benefits under the change in control agreements, togetherwith other payments and benefits the officers may receive, wouldconstitute an excess parachute payment under Section 280Gof the Internal Revenue Code, such payments would be reduced toan amount necessary to avoid such payments constitutingparachute payments.
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**Benefit Plans**     *Employee Stock Ownership Plan.*In anticipation of theconversion, Benjamin Franklin Bank has established an employeestock ownership plan for its employees. Employees who have beencredited with at least 1,000 hours of service during aconsecutive 12-month period and who have attained age 21will be eligible to participate in Benjamin Franklin Bank’semployee stock ownership plan.     The employee stock ownership plan intends to purchase a numberof shares equal to 8.0% of the common stock issued in theoffering (including shares issued to the Benjamin Franklin BankCharitable Foundation). Benjamin Franklin Bank anticipates thatthe employee stock ownership plan will borrow from BenjaminFranklin Bancorp (or a subsidiary established for that purpose)to fund these purchases. The loan from Benjamin Franklin Bancorpto the employee stock ownership plan will be repaid principallyfrom Benjamin Franklin Bank’s contributions to the employeestock ownership plan over a period of 30 years and thecollateral for the loan will be the stock purchased by theemployee stock ownership plan. The interest rate for theemployee stock ownership plan loan from Benjamin FranklinBancorp will be fixed and is expected to be at Benjamin FranklinBank’s prime rate at the date the loan is entered into withthe employee stock ownership plan. Benjamin Franklin Bank andBenjamin Franklin Bancorp may, in any plan year, make additionaldiscretionary contributions for the benefit of plan participantsin cash, shares of common stock, or other property. The timing,amount and manner of future contributions to the employee stockownership plan will be affected by various factors, includingprevailing regulatory policies, the requirements of applicablelaws and regulations and market conditions.     Shares purchased by the Benjamin Franklin Bank employee stockownership plan will be held in a suspense account and releasedfor allocation to participants on a pro rata basis as debtservice payments are made. Shares released from the employeestock ownership plan will be allocated to each eligibleparticipant’s employee stock ownership plan account basedon the ratio of each such participant’s compensation, asdefined, to the total compensation of all eligible employeestock ownership plan participants. Forfeitures shall bereallocated among remaining participating employees.     Upon the completion of two years of service, the accountbalances of participants within the employee stock ownershipplan will become 20.0% vested. The vested percentage ofparticipants’ account balances will thereupon be increasedby an additional 20.0% for each additional year of service,until account balances reach 100.0% vesting upon the completionof six years of service. Credit is given for years of servicewith Benjamin Franklin Saving Bank or any of its affiliatesprior to the adoption of the employee stock benefit plan. In theevent of a “change in control,” as defined in theemployee stock ownership plan, however, participants will becomeimmediately fully vested in their account balances. Participantswill also become fully vested in their account balances upondeath, disability, retirement, termination of this plan, or thepermanent and complete discontinuance of contributions byBenjamin Franklin Bank and any of its affiliates to this plan.Benefits may be payable upon retirement or separation fromservice.     Benjamin Franklin Bank has appointed First BankersTrust Services, Inc., an independent corporate trustee, toserve as the trustee of the Benjamin Franklin Bank employeestock ownership plan. Under the terms of the Benjamin FranklinBank employee stock ownership plan, the trustee must generallyvote all allocated shares held in the employee stock ownershipplan in accordance with the instructions from the participatingemployees. Unallocated shares and allocated shares for which nowritten instructions have been received by the trustee regardingvoting will be voted by the trustee in a manner calculated tomost accurately reflect the instructions the trustee hasreceived from participants regarding allocated shares, and mustbe voted in a manner determined by the trustee to be solely inthe best interests of the participants and beneficiaries of theplan.     Generally accepted accounting principles require that any thirdparty borrowing by the Benjamin Franklin Bank employee stockownership plan be reflected as a liability on Benjamin FranklinBank’s balance sheet. If the employee stock ownership planborrows the necessary funds from Benjamin Franklin Bancorp, theloan will not be treated as a liability but instead will beexcluded from stockholders’ equity. If the employee stockownership plan purchases newly issued shares from BenjaminFranklin Bancorp, total stockholders’ equity would neitherincrease nor decrease, but per share stockholders’ equityand per
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share net earnings would decrease as the newly issued shares areallocated to the employee stock ownership plan participants.     Benjamin Franklin Bank’s employee stock ownership plan willbe subject to the requirements of the Employee Retirement IncomeSecurity Act of 1974, as amended, and the applicable regulationsof the Internal Revenue Service and the Department of Labor.     *401(k) Plan.* Benjamin Franklin Bank maintains theSBERA 401(k) Plan as adopted by Benjamin Franklin Bank, atax-qualified plan under Section 401(a) of the InternalRevenue Code with a cash or deferred arrangement underSection 401(k) of the Internal Revenue Code. In general,all salaried and hourly employees who are at least age 21become eligible to make salary reduction contributions in the401(k) plan and to receive matching contributions fromBenjamin Franklin Bank under the 401(k) plan on the firstday of the month following the completion of three months ofemployment with Benjamin Franklin Bank.     Under the 401(k) plan, participants may elect to haveBenjamin Franklin Bank contribute up to 75.0% of theircompensation to the 401(k) plan, subject to the dollarlimitations imposed by the Internal Revenue Code. BenjaminFranklin Bank currently makes matching contributions to the401(k) plan equal to 200.0% of the first 3.0% ofcompensation deferred by a participant. Compensation forpurposes of the 401(k) plan generally consists of totaltaxable income of a participant as reported on Form W-2with all pre-tax contributions added, but excluding compensationreceived from the Vacation Buy Back Program. The level ofmatching contributions under the 401(k) plan may changefrom time to time.     Currently, participants in the 401(k) plan may direct theinvestment of their accounts in several types of investmentfunds. In connection with the conversion, Benjamin Franklin Bankhas amended the 401(k) plan to permit participants in the401(k) plan to direct the investment of their accounts incommon stock of Benjamin Franklin Bancorp, which shares will beheld in a newly formed Employer Stock Fund. Investment in theEmployer Stock Fund will generally be limited to 20.0% of aparticipant’s 401(k) account, but a participant may waivethis limitation upon signing a certification that he or sheunderstands the risk of Benjamin Franklin Bancorp stockownership. Participants in the 401(k) plan will be given theopportunity to direct the 401(k) plan trustee to subscribe forshares of Benjamin Franklin Bancorp common stock in theconversion based on their individual subscription priorities,using the funds in the participants’ 401(k) plan accounts.     Participants are always 100.0% vested in their electivedeferrals and related earnings under the 401(k) plan. Inaddition, participants become fully vested in matchingcontributions and related earnings when such contributions aredeposited. Participants may receive distributions from the401(k) plan in the form of a single lump payment or installmentpayments.     *Benefit Restoration Plan.* In connection with theconversion, Benjamin Franklin Bank intends to establish theBenefit Restoration Plan, a non-tax-qualified plan that willprovide restorative payments to certain executives who areprevented from receiving earned benefits under Benjamin FranklinBank’s 401(k) plan or employee stock ownership plan becauseof limitations in the Internal Revenue Code applicable totax-qualified plans. The initial participants in the benefitrestoration plan will be Mr. Venables and Ms. Bean,with the Board of Directors of Benjamin Franklin Bankdesignating certain management personnel or highly compensatedemployees as additional participants in the benefit restorationplan from time to time. The Board of Directors of BenjaminFranklin Bank may also limit which benefits such additionalparticipants will receive under the benefit restoration plan.     Eligible participants will receive a restorative payment equalto the amount of additional benefits the participants wouldreceive under the 401(k) plan if there were no incomelimitations imposed by the Internal Revenue Code. Eligibleparticipants will also receive a restorative payment in lieu ofshares that cannot be allocated to participants under theemployee stock ownership plan due to the legal limitationsimposed on tax-qualified plans. In addition, eligibleparticipants who “retire” before the repayment in fullof the loan to the employee stock ownership plan will receiverestorative payments equal to the projected value of shares ofBenjamin Franklin Bancorp common stock that would have beenallocated to the
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executive over the remaining term of any loan, as if employmenthad continued through the full term of the loan, regardless oflimitations in the Internal Revenue Code. “Retirement”is defined in the benefit restoration plan as the first to occurof termination of employment at any time following satisfactionof the requirements for early or normal retirement under theemployee stock ownership plan (unless otherwise permitted by theBenjamin Franklin Bank Board of Directors), death while employedas a full-time employee, or the occurrence of a “change incontrol,” regardless of whether the participant continuesin the employ of the employer or any successor following thechange in control.     *Executive Salary Continuation Agreement and SupplementalExecutive Retirement Plan.* Mr. Venables is alsoentitled to retirement benefits pursuant to the terms of aSalary Continuation Agreement with Benjamin Franklin Bank andBenjamin Franklin Bancorp. This benefit arrangement is sometimesreferred to as a “SERP.”     Under the terms of his SERP, Mr. Venables is entitled to anannual retirement benefit at age 65, payable in monthlyinstallments for a period of 20 years, equal to 75.0% ofhis total compensation for the last full calendar year ofemployment, but reduced by his annual annuity retirement benefitfrom Benjamin Franklin Bank’s contributions to his 401(k)plan and his annual social security benefit. Mr. Venablesis entitled to a reduced benefit upon retirement prior toage 65 equal to the liability then accrued on BenjaminFranklin Bank’s books for the costs of benefits payablepursuant to his SERP. Based upon current compensation levels(adjusted for inflation at the rate of 5%) and assumingretirement at age 65, Mr. Venables would be entitledto an annual benefit of $443,832 under his SERP.     In connection with the conversion, Benjamin Franklin Bancorpintends to amend Mr. Venables’s SERP to include aprovision that any amounts payable under these agreements willbe reduced by amounts payable to each executive under theemployee stock ownership plan and the benefit restoration plan.Benjamin Franklin Bancorp also intends to amendMr. Venables’s SERP so that his annual retirementbenefit, payable under the SERP, will be reduced by one-half ofhis annual social security benefit, instead of the full amountof his annual social security benefit. In addition, BenjaminFranklin Bancorp intends to amend Mr. Venables’s SERPto comply with a new provision of the Internal Revenue Code,Section 409A, which is effective January 1, 2005, andapplies to deferred compensation arrangements. In order tocomply with Section 409A, the SERP will be amended toprovide that any payment upon termination of employment, otherthan in the case of death, shall not be made until at least6 months after such termination. Also, the SERP will beamended to remove the potential for Benjamin Franklin Bancorp orMr. Venables to exercise discretion with regard to thetiming or form of payment under the SERP. These amendments willnot be implemented until the Internal Revenue Service issuesfurther guidance regarding Section 409A, which is expectedto be issued in the first half of 2005. In addition, after theIRS issues that further guidance, Benjamin Franklin Bancorpintends to implement an additional salary continuation agreementto provide for supplemental retirement benefits to Ms. Bean.     *Employee Salary Continuation Plan.* Benjamin FranklinBancorp has established, effective upon completion of theconversion, an employee salary continuation plan, which willprovide eligible employees with severance pay benefits and otherbenefits in the event that their employment is terminated withina year after a change in control of Benjamin Franklin Bancorp orBenjamin Franklin Bank. Severance benefits will be equal to thegreater of (i) two weeks’ salary for each year orpartial year of service, up to a maximum of 52 weeks’salary, or (ii) the applicable “minimum benefit.”For Senior Vice Presidents or higher, the “minimumbenefit” is 52 weeks’ salary, for VicePresidents, it is 39 weeks’ salary, for Assistant VicePresidents, it is 26 weeks’ salary, for all otherexempt employees, it is 13 weeks’ salary, for allother full-time employees, it is 8 weeks’ salary, andfor all part-time employees, it is 6 weeks’ salary.Employees entitled to severance also receive continuedemployer-paid life and health insurance coverage for the greaterof (a) six months or (b) the number of weeks of salarycontinuation benefits to which the employee is entitled underthe plan, as well as professional outplacement and jobassistance services. These benefits are also available toemployees who resign because they have not been offered acomparable position following a change in control. A“comparable position” is defined as a position whichis offered to an employee where (a) there is no reductionin base salary or scheduled hours, and (b) the employee will
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be principally employed at a location not more than25 miles from the office where the employee is principallyemployed immediately prior to the change in control.     *Director Fee Continuation Plan.* Benjamin Franklin Bancorphas established, effective upon completion of the conversion, adirector fee continuation plan, which provides certain benefitsto all eligible non-employee members of the boards of directorsof Benjamin Franklin Bank and Benjamin Franklin Bancorp uponretirement. A director is eligible to receive these benefits(provided that the director was not terminated for cause) if thedirector has served as a director for three years or more withBenjamin Franklin Bank or Benjamin Franklin Bancorp. Servicewith a corporate predecessor, such as Chart Bank, is notincluded in determining whether this three-year servicerequirement has been met.     A director who has served on the board or as clerk for at least15 years (10 years for those who have attainedage 70) is entitled to receive an annual payment,commencing upon termination of service and payable for fiveyears, equal to the average total yearly fees for services as adirector paid by Benjamin Franklin Bancorp or Benjamin FranklinBank to the director for the three calendar years preceding theyear of the director’s retirement. Service with a corporatepredecessor, such as Chart Bank, is included in determining theamount of the normal retirement benefit. Eligible directors whoretire prior to attaining the full 15 (or 10) years ofservice are entitled to receive a reduced retirement benefit,based upon the director’s number of years of service,payable annually for five years following termination of service.     In the event of a “change in control,” as defined inthe directors fee continuation plan, if an eligibledirector’s service is terminated or if the director is notproposed for reelection within three years following the“change in control,” the director is entitled toreceive a full normal retirement benefit (as if he had served asa director for 15 years) as a lump sum upon termination ofservice. An eligible director who becomes disabled prior toage 70 is also entitled to receive the normal retirementbenefit, payable in equal installments over five years andcommencing upon termination of service. In addition, upon thedeath of an eligible director prior to termination of service,the director’s beneficiary is entitled to receive a normalretirement benefit, and upon the death of an eligible directorafter retirement, the director’s beneficiary is entitled toreceive the remainder of any benefit payments to which thedirector is entitled, with each such benefit payable annuallyand commencing upon the death of the director.     *Stock-Based Incentive Plan.* Following the conversion weintend to implement a stock-based incentive plan that willprovide for grants of stock options and restricted stock todirectors, officers and employees. The stock-based incentiveplan cannot be established sooner than six months after theoffering and, if implemented less than one year after theoffering, would require the approval of our stockholders bytwo-thirds of the outstanding shares of Benjamin FranklinBancorp common stock. If the stock-based incentive plan isimplemented more than one year after the offering, thestock-based incentive plan must be approved by a majority of theshares of Benjamin Franklin Bancorp present and voting. If suchplan is adopted less than one year after completion of theoffering, the number of options granted and restricted sharesawarded under the plan may not exceed 10.0% and 4.0%,respectively, of the total shares issued in the offering,including shares issued to the Benjamin Franklin Bank CharitableFoundation. However, these limitations would not apply if suchstock-based incentive plan is implemented one year or more afterthe completion of the offering. Finally, if adopted within oneyear, the stock-based incentive plan would be subject to suchother limitations as may be imposed by the MassachusettsCommissioner of Banks, including the following requirements: •     Non-employee directors in the aggregate may not receive more    than 30.0% of the options and restricted awards authorized under    the plan;  •     Any one non-employee director may not receive more than 5.0% of    the options and restricted awards authorized under the plan;  •     Any officer or employee may not receive more than 25.0% of the    options and restricted awards authorized under the plan;
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 •     The options and restricted awards may not vest more rapidly than    20.0% per year, beginning on the first anniversary of    stockholder approval of the plan; and  •     Accelerated vesting is not permitted except for death or    disability.     After the first anniversary of the conversion, we may amend theplan to change or remove these restrictions. If we adopt astock-based incentive plan within one year after the conversion,we expect to amend the plan later to remove these restrictionsand to provide for accelerated vesting in cases of retirementand change of control. We may obtain the shares needed for thisplan by issuing additional shares or through stock repurchases.     We have not decided whether we will implement this plan beforeor after the one-year anniversary of the conversion.**Interests of Chart Bank’s Directors and Officers in theAcquisition of Chart Bank**     Chart Bank’s directors and executive officers haveinterests in the merger that are different from, or are inaddition to, their interests as shareholders of Chart Bankgenerally. For more information about these benefits, seeItem 13 of this Annual Report, “Certain Relationshipsand Related Transactions — Interests of ChartBank’s Directors and Officers in the Acquisition of ChartBank,” which is incorporated herein by this reference.**Item 12.*****Security Ownership of Certain Beneficial Owners and    Management and Related Stockholder Matters***     Not applicable. We have not yet issued any shares of our capitalstock or options to acquire such shares.**Item 13.*****Certain Relationships and Related Transactions***     Federal law and regulations generally require that all loans orextensions of credit to directors and executive officers must bemade on substantially the same terms, including interest ratesand collateral, as those prevailing at the time for comparabletransactions with the general public and must not involve morethan the normal risk of repayment or present other unfavorablefeatures. However, regulations also permit directors andexecutive officers to receive the same terms through benefit orcompensation plans that are widely available to other employees,as long as the director or executive officer is not givenpreferential treatment compared to the other participatingemployees. Pursuant to such a program, loans have been extendedto directors and executive officers, which loans are onsubstantially the same terms as those prevailing at the time forcomparable transactions with the general public. These loans donot involve more than the normal risk of repayment or presentother unfavorable features.
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     The six directors of Chart Bank who will become directors ofBenjamin Franklin Bancorp are stockholders of Chart Bank, and insuch capacity they have a material interest in the mergeragreement between Benjamin Franklin Bancorp and Chart Bank. Thefollowing table summarizes the number of shares of BenjaminFranklin Bancorp common stock and amount of cash that each ofthese directors will receive in the merger in exchange for hisshares of Chart Bank common stock and Chart Bank options. Theinformation in the table is based on the number of shares ofChart Bank common stock in which a director has or shares adirect or indirect pecuniary interest as of December 6,2004, which in some cases is different from the number of sharesthat the director beneficially owns, and assumes that eachdirector exchanges 55% of his Chart Bank shares for sharesof Benjamin Franklin Bancorp common stock and 45% of his ChartBank shares for cash and that all Chart Bank options are cashedout at the closing rather than being exercised prior to theclosing.         **Director** **Shares** **Cash**         Richard E. Bolton, Jr.   14,375  $947,625     Paul E. Capasso  35,711   292,207     Jonathan A. Haynes(1)  115,287   943,296     Daniel F. O’Brien  17,250   141,150     Donald P. Quinn(2)  58,863   481,641     Neil E. Todreas  116,273   951,333  (1)     Includes 40,792 shares and $333,770 in which    Mr. Haynes’s children have a pecuniary interest. (2)     Includes 7,120 shares and $58,282 in which    Mr. Quinn’s spouse has a pecuniary interest, but with    respect to which Mr. Quinn disclaims beneficial ownership.**Interests of Chart Bank’s Directors and Officers in theAcquisition of Chart Bank**     Chart Bank’s directors and executive officers haveinterests in the merger that are different from, or are inaddition to, their interests as shareholders of Chart Bankgenerally. These include, among other things, severance paymentsand agreements with Richard E. Bolton, Sr., Richard E.Bolton, Jr., Alfred J. Odoardi, Dean Kenney, non-continuingdirectors and other executive officers of Chart Bank, consultingand non-competition agreements withMessrs. Bolton, Sr. and Bolton, Jr.,indemnification rights and insurance coverage and payment ofdirector fees to Chart Bank directors who will serve on theBenjamin Franklin Bancorp board.     *Severance Agreements and Payments.* In connection with theChart Bank merger agreement, we entered into payments and waiveragreements with Richard E. Bolton, Jr., the President andChief Executive Officer of Chart Bank, and Richard E.Bolton, Sr., the Chairman of the Board of Directors ofChart Bank and an executive officer of its wholly ownedsubsidiary, CSSI. The payments and waiver agreements provide forthe termination of Mr. Bolton, Jr.’s employmentagreement and Mr. Bolton, Sr.’s employment andconsulting agreement and all of Mr. Bolton, Jr.’sand Mr. Bolton, Sr.’s employment and directorrelationships with Chart Bank and its subsidiaries, effectiveupon the merger. Additionally, in exchange forMr. Bolton, Sr. and Mr. Bolton, Jr. agreeingto relinquish the right to receive certain payments in the eventof a change of control of Chart Bank under their existingagreements with Chart Bank, the payments and waiver agreementsprovide for Chart Bank to make termination payments of $486,000and $620,000 to Mr. Bolton, Sr. andMr. Bolton, Jr., respectively, immediately prior tothe effectiveness of the merger. However, in no event will theamounts under the payments and waiver agreements exceed theamount that may be paid without causing any portion of suchpayment to be deemed an “excess parachute payment”within the meaning of Section 280G of the Code.Mr. Bolton, Jr.’s payments and waiver agreementalso provides that he will be appointed as a director ofBenjamin Franklin Bancorp and Benjamin Franklin Bank as of theeffective time of the merger.     In addition, Chart Bank entered into a Special TerminationAgreement with Alfred J. Odoardi, Senior Vice President of ChartBank, as of August 20, 2004. Under the special terminationagreement,
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Mr. Odoardi is entitled to certain severance benefits inthe event that his employment with Chart Bank is terminatedafter a “change in control” for any reason other thandeath, disability, or “cause,” each as defined in theagreement, including continuation of his base salary and medicalbenefits for 18 months following termination and fullvesting of all unexercisable stock options held byMr. Odoardi on the date of termination. The value toMr. Odoardi of the severance pay and benefits continuationunder this agreement is $214,645, based on his current level ofhis base salary and medical benefits. Although the completion ofthe merger will constitute a change in control under the specialtermination agreement, it is not expected thatMr. Odoardi’s employment will terminate following themerger.     As part of the negotiation of the merger, we also agreed that ifDean Kenney, the Treasurer and Chief Financial Officer of ChartBank, is terminated within two years of the effective date ofthe merger, if his title or position is reduced or changedduring the first two years after the effective date, if his basesalary as of the effective date is reduced, or if his newdesignated place of employment is more than 30 driving milesfrom his principal place of residence, he will receive severancebenefits, including two years of his annual base salary andcontinuation of his medical and dental benefits for two yearsfollowing the date of termination. The value to Mr. Kenneyof the severance pay and benefits continuation under thisagreement is $245,194 based on his current level of his basesalary and medical benefits.     Chart Bank’s other officers whose employment is terminatedin connection with the merger, or who resign following themerger by reason of a reduction in pay or increase in commute ofgreater than 10 miles, will be entitled to receiveseverance benefits under Chart Bank’s employee severancebenefit program. Officers at the level of Vice President andabove are entitled to receive severance in an amount equal tofive times the officer’s weekly base pay multiplied by theofficers’ whole and partial years of service with ChartBank. Any employee who has completed five full years of serviceas of the date of the completion of the merger will be entitledto receive an additional lump-sum severance benefit equal to15.0% of the employee’s annual base salary.     Pursuant to the terms of the merger agreement, Chart Bank maymake severance payments in the aggregate amount of $120,000 tofour of the members of the Chart Bank Board of Directors whowill not become directors of Benjamin Franklin Bancorp orBenjamin Franklin Bank following the completion of the merger.     *Consulting and Non-Competition Agreements.* We have alsoentered in consulting and non-competition agreements withMessrs. Bolton, Sr. and Bolton, Jr. in connectionwith the merger. Under these agreements,Messrs. Bolton, Sr. and Bolton, Jr. have agreedto provide consulting services to us and have agreed tonon-competition obligations for a period of one year after theeffectiveness of the merger. We will payMessrs. Bolton, Sr. and Bolton, Jr. fees of$310,000 and $150,000, respectively, and will reimburse each ofthem for their travel or other expenses incurred in connectionwith the services provided under the consulting andnon-competition agreements.     *Indemnification and Insurance.* We have agreed that if themerger becomes effective, we will indemnify and hold harmlessChart Bank’s directors, officers and employees arising fromactions taken before the effectiveness of the merger, asprovided in Chart Bank’s articles of organization andbylaws. The merger agreement also provides for continueddirectors’ and officers’ liability insurance coveragefor Chart Bank’s directors and officers, with respect toacts and omissions in their capacities as officers and directorsof Chart Bank prior to the merger, for a period of six yearsfrom the effectiveness of the merger. That insurance may alsoprotect Benjamin Franklin Bancorp and Benjamin Franklin Bank inconnection with their obligations to indemnify those directorsand officers.     *Director Fees.* Six of Chart Bank’s directors willcontinue as directors of Benjamin Franklin Bancorp and BenjaminFranklin Bank following the merger. These directors will beentitled to receive payment of the directors fees and otherbenefits provided to directors of these entities, including,among other things, the annual $10,000 retainer, per meetingfees and annual retainers for committee members.
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**Item 14.*****Principal Accountant Fees and Services*****Public Accountants’ Fees**     The following is a summary of the fees for professional servicesrendered by Wolf & Company, P.C. for the fiscalyears ended December 31, 2004 and 2003:         **Fee Category** **2004 Fees** **2003 Fees**         Audit Fees(1) $75,000  $54,000     Audit-Related Fees(2)  2,500   2,200     Tax Fees(3)  14,600   14,000     All Other Fees(4)  159,000   28,000            Total Fees $251,100  $98,200         (1) *Audit Fees.* Audit fees were for professional services    rendered for the audit of our annual financial statements, the    review of quarterly financial statements and the preparation of    statutory and regulatory filings. (2) *Audit-Related Fees.* Audit-related fees were for    professional services rendered in connection with employee    benefit plan audits. (3) *Tax Fees.* Tax fees consist of fees billed for    professional services for tax compliance, tax planning and tax    advice. These services include assistance regarding federal,    state and international tax compliance and planning, tax audit    defense, and mergers and acquisitions. The Audit and Risk    Management Committee considered and determined that the    provision of non-audit services provided by Wolf &    Company, P.C., is compatible with maintaining that    firm’s independence. (4) *All Other Fees.* Other fees were for professional services    provided for information technology controls review and    assessment, and review of regulatory filings in connection with    our stock subscription offering and acquisition of Chart Bank.**Pre-Approval Policies And Procedures**     At present, our Audit and Risk Management Committee approveseach engagement for audit and non-audit services before weengage Wolf & Company, P.C., to provide thoseservices. Our Audit and Risk Management Committee has notestablished any pre-approval policies or procedures that wouldallow our management to engage Wolf &Company, P.C., to provide any specified services with onlyan obligation to notify the Audit and Risk Management Committeeof the engagement for those services. None of the servicesprovided by Wolf & Company, P.C. for fiscal 2004was obtained in reliance on the waiver of the pre-approvalrequirement afforded in SEC regulations.**PART IV****Item 15.*****Exhibits and Financial Statement Schedules***     **(a) Exhibits**       **Exhibit No.** **Description** **Footnotes**      2.1     Plan of Conversion of Benjamin Franklin Bancorp.     3 2.2     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.     2 3.1     Articles of Organization of Benjamin Franklin Bancorp, Inc.      2 3.2     Bylaws of Benjamin Franklin Bancorp, Inc.      2 4.1     Form of Common Stock Certificate of Benjamin Franklin Bancorp,    Inc.      5
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       **Exhibit No.** **Description** **Footnotes**      10.1.1     Form of Employment Agreement with Thomas R. Venables.*     1 10.1.2     Form of Employment Agreement with Claire S. Bean.*     1 10.2     Form of Change in Control Agreement with six other Executive    Officers, providing one year’s severance to Ronald S.    Baron, Brian E. Ledwith, Michael J. Piemonte, 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.*     2 10.3     Form of Benjamin Franklin Bank Benefit Restoration Plan.*     2 10.4.1     Benjamin Franklin Bank Salary Continuation Agreement with Thomas    R. Venables dated as of August 22, 2002.*     2 10.5     Benjamin Franklin Bancorp Director Fee Continuation Plan.*     4 10.6     Benjamin Franklin Bancorp Employee Salary Continuation Plan.*     2 10.7.1     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.*     2 10.7.2     Consulting and Noncompetition Agreement between Richard E.    Bolton, Jr. and Benjamin Franklin Bancorp, M.H.C., dated as    of September 1, 2004.*     2 21      Subsidiaries of Registrant.     3 23.1     Consent of Wolf & Company, P.C., independent    registered public accounting firm.     1 31.1     Certification of Chief Executive Officer pursuant to    Section 302 of the Sarbanes-Oxley Act of 2002.     1 31.2     Certification of Chief Financial Officer pursuant to    Section 302 of the Sarbanes-Oxley Act of 2002.     1 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.     1 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.     1 99.1     Consents of Richard E. Bolton, Jr., Paul E. Capasso,    Jonathan A. Haynes, Daniel F. O’Brien, Donald P. Quinn, and    Neil E. Todreas, to be identified as proposed directors.     2  *    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.     **(b) Financial Statement Schedules**     All schedules are omitted because they are not applicable or therequired information is shown in our financial statements andrelated notes.
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**SIGNATURES**     Pursuant to the requirements of Section 13 or 15(d) theSecurities Exchange Act of 1934, Benjamin Franklin Bancorp,M.H.C. has duly caused this Report to be signed on its behalf bythe undersigned, thereunto duly authorized. **Benjamin Franklin Bancorp, M.H.C.** By:     /s/ Thomas R. Venables       Thomas R. Venables *President and Chief Executive Officer*     Pursuant to the requirements of the Securities Exchange Act of1934, this Report has been signed by the following persons inthe indicated capacities as of March 29, 2005.     **Signature** **Title**        /s/ Thomas R. Venables