##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 2007
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-51194
 
 Benjamin Franklin Bancorp, Inc.
  Massachusetts
    
    04-3336598(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)58 Main Street, Franklin, MA
    
    02038(Address of Principal Executive Offices)
    
    (Zip Code)
 (508) 528-7000
 
   Large accelerated filer [     ]
    
    Accelerated filer [X ]
    
    Non-accelerated filer [     ]
    
 1




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##### 



PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance Sheets at September 30, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income for the three and nine months ended
September 30, 2007 and 2006
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the three and nine months ended
September 30, 2007 and 2006
    
    
    5Consolidated Statements of Cash Flows for the three and nine months ended
September 30, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1A
    
    Risk Factors
    
    
    30Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3.
    
    Defaults on Senior Securities
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30SIGNATURES
    
    
    33EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
 ( Dollars in thousands)
 September 30,

    
    December 31,2007
    
    2006(Unaudited)

    
    (Audited)ASSETSCash and due from banks
    
    $
    15,502
    
    
    $
    16,115Cash supplied to ATM customers
    
    
    43,523
    
    
    
    39,732Short-term investments
    
    
    11,534
    
    
    
    16,748Total cash and cash equivalents
    
    
    70,559
    
    
    
    72,595Securities available for sale, at fair value
    
    
    153,750
    
    
    
    126,982Securities held to maturity, at amortized cost
    
    
    -
    
    
    
    31Restricted equity securities, at cost
    
    
    11,399
    
    
    
    10,951Total securities
    
    
    165,149
    
    
    
    137,964LoansResidential real estate
    
    
    193,603
    
    
    
    212,910Commercial real estate
    
    
    163,929
    
    
    
    159,322Construction
    
    
    60,696
    
    
    
    68,877Commercial business
    
    
    138,811
    
    
    
    101,055Consumer
    
    
    40,850
    
    
    
    39,656Total loans, gross
    
    
    597,889
    
    
    
    581,820Allowance for loan losses
    
    
    (5,798
    )
    
    
    (5,781
    )Loans, net
    
    
    592,091
    
    
    
    576,039Trading assets
    
    
    15,138
    
    
    
    -Loans held for sale, net
    
    
    -
    
    
    
    63,730Premises and equipment, net
    
    
    5,571
    
    
    
    5,202Accrued interest receivable
    
    
    3,667
    
    
    
    3,480Bank-owned life insurance
    
    
    10,598
    
    
    
    10,298Goodwill
    
    
    33,763
    
    
    
    33,763Other intangible assets
    
    
    2,658
    
    
    
    3,069Other assets
    
    
    7,896
    
    
    
    7,538$
    907,090
    
    
    $
    913,678LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Regular savings accounts
    
    $
    79,524
    
    
    $
    81,569Money market accounts
    
    
    109,894
    
    
    
    93,988NOW accounts
    
    
    49,595
    
    
    
    28,606Demand deposit accounts
    
    
    117,404
    
    
    
    120,966Time deposit accounts
    
    
    271,338
    
    
    
    308,050Total deposits
    
    
    627,755
    
    
    
    633,179Short-term borrowings
    
    
    1,150
    
    
    
    10,000Long-term debt
    
    
    158,836
    
    
    
    148,969Deferred gain on sale of premises
    
    
    3,594
    
    
    
    3,783Other liabilities
    
    
    8,690
    
    
    
    8,342Total liabilities
    
    
    800,025
    
    
    
    804,273Common stock, no par value; 75,000,000 shares
authorized;
8,141,937 shares issued and 7,971,217 shares outstanding
at September 30, 2007; 8,468,137 shares issued and
8,249,802 shares outstanding at December 31, 2006
    
    
    -
    
    
    
    -Additional paid-in capital
    
    
    78,863
    
    
    
    82,909Retained earnings
    
    
    37,773
    
    
    
    36,634Unearned compensation
    
    
    (7,312
    )
    
    
    (7,938
    )Accumulated other comprehensive loss
    
    
    (2,259
    )
    
    
    (2,200
    )Total stockholders equity
    
    
    107,065
    
    
    
    109,405$
    907,090
    
    
    $
    913,678
  3




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands, except share and per share data)
 Three Months Ended

    
    Nine Months EndedSeptember 30,

    
    September 30,2007
    
    2006
    
    2007
    
    2006(Unaudited)

    
    (Unaudited)Interest and dividend income:Loans, including fees
    
    $
    9,856
    
    
    $
    9,620
    
    
    $
    29,273
    
    
    $
    27,698Debt securities
    
    
    1,904
    
    
    
    1,396
    
    
    
    5,543
    
    
    
    4,035Dividends
    
    
    180
    
    
    
    245
    
    
    
    512
    
    
    
    388Short-term investments
    
    
    141
    
    
    
    134
    
    
    
    644
    
    
    
    536Total interest and dividend income
    
    
    12,081
    
    
    
    11,395
    
    
    
    35,972
    
    
    
    32,657Interest expense:Interest on deposits
    
    
    4,367
    
    
    
    3,691
    
    
    
    12,832
    
    
    
    10,328Interest on borrowings
    
    
    1,948
    
    
    
    1,719
    
    
    
    5,496
    
    
    
    4,518Total interest expense
    
    
    6,315
    
    
    
    5,410
    
    
    
    18,328
    
    
    
    14,846Net interest income
    
    
    5,766
    
    
    
    5,985
    
    
    
    17,644
    
    
    
    17,811Provision for loan losses
    
    
    65
    
    
    
    200
    
    
    
    211
    
    
    
    327Net interest income, after provision for loan losses
    
    
    5,701
    
    
    
    5,785
    
    
    
    17,433
    
    
    
    17,484Other income:ATM servicing fees
    
    
    663
    
    
    
    867
    
    
    
    1,982
    
    
    
    2,245Deposit service fees
    
    
    385
    
    
    
    375
    
    
    
    1,093
    
    
    
    1,044Loan servicing fees
    
    
    297
    
    
    
    106
    
    
    
    770
    
    
    
    382Gain on sale of loans, net
    
    
    217
    
    
    
    110
    
    
    
    514
    
    
    
    249Gain on sale of securities
    
    
    -
    
    
    
    10
    
    
    
    -
    
    
    
    10Security impairment writedown
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (35
    )Gain on sale of bank-owned premises, net
    
    
    63
    
    
    
    -
    
    
    
    377
    
    
    
    -Gain on trading assets
    
    
    138
    
    
    
    -
    
    
    
    138
    
    
    
    -Gain on sale of CSSI customer list
    
    
    -
    
    
    
    -
    
    
    
    100
    
    
    
    -Income from bank-owned life insurance
    
    
    105
    
    
    
    99
    
    
    
    300
    
    
    
    250Miscellaneous
    
    
    211
    
    
    
    171
    
    
    
    571
    
    
    
    581Total other income
    
    
    2,079
    
    
    
    1,738
    
    
    
    5,845
    
    
    
    4,726Operating expenses:Salaries and employee benefits
    
    
    3,631
    
    
    
    3,063
    
    
    
    11,073
    
    
    
    8,509Occupancy and equipment
    
    
    844
    
    
    
    662
    
    
    
    2,587
    
    
    
    1,970Data processing
    
    
    601
    
    
    
    512
    
    
    
    1,803
    
    
    
    1,413Professional fees
    
    
    179
    
    
    
    232
    
    
    
    651
    
    
    
    965Marketing and advertising
    
    
    159
    
    
    
    214
    
    
    
    488
    
    
    
    525Amortization of intangible assets
    
    
    197
    
    
    
    254
    
    
    
    619
    
    
    
    832Other general and administrative
    
    
    631
    
    
    
    786
    
    
    
    2,498
    
    
    
    2,228Total operating expenses
    
    
    6,242
    
    
    
    5,723
    
    
    
    19,719
    
    
    
    16,442Income before income taxes
    
    
    1,538
    
    
    
    1,800
    
    
    
    3,559
    
    
    
    5,768Provision for income taxes
    
    
    467
    
    
    
    632
    
    
    
    1,067
    
    
    
    2,073Net income
    
    $
    1,071
    
    
    $
    1,168
    
    
    $
    2,492
    
    
    $
    3,695Weighted-average shares outstanding:Basic
    
    
    7,622,441
    
    
    
    7,931,455
    
    
    
    7,700,171
    
    
    
    7,996,242Diluted
    
    
    7,666,939
    
    
    
    7,937,021
    
    
    
    7,736,356
    
    
    
    7,998,098Earnings per share:Basic
    
    $
    0.14
    
    
    $
    0.15
    
    
    $
    0.32
    
    
    $
    0.46Diluted
    
    $
    0.14
    
    
    $
    0.15
    
    
    $
    0.32
    
    
    $
    0.46
  4




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Dollars
in thousands, except per share amounts)
 (Unaudited)
 AccumulatedAdditional

    
    
    
    
    
    
    
    
    
    Other

    
    TotalCommon Stock

    
    Paid-in

    
    Retained

    
    Unearned

    
    Comprehensive

    
    StockholdersShares

    
    Amount

    
    Capital

    
    Earnings

    
    Compensation

    
    Loss

    
    EquityBalance at December 31, 2005
    
    
    8,488,898
    
    
    $
    -
    
    
    $
    82,849
    
    
    $
    32,942
    
    
    $
    (5,353
    )
    
    $
    (2,326
    )
    
    $
    108,112Comprehensive income:Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,695
    
    
    
    -
    
    
    
    -
    
    
    
    3,695Net unrealized gain on securities available
for sale, net of reclassification adjustment
and tax effects
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    291
    
    
    
    291Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,986Dividends declared ($.09 per share)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (770
    )
    
    
    -
    
    
    
    -
    
    
    
    (770
    )Common stock repurchased
    
    
    (239,096
    )
    
    
    -
    
    
    
    (3,373
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (3,373
    )Issuance of common stock in connection
with Stock Incentive Plan
    
    
    -
    
    
    
    -
    
    
    
    3,046
    
    
    
    -
    
    
    
    (3,046
    )
    
    
    -
    
    
    
    -Restricted stock expense
    
    
    -
    
    
    
    -
    
    
    
    
    
    
    
    -
    
    
    
    111
    
    
    
    -
    
    
    
    111Stock option expense
    
    
    -
    
    
    
    -
    
    
    
    139
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    139Release of ESOP stock
    
    
    -
    
    
    
    -
    
    
    
    28
    
    
    
    -
    
    
    
    138
    
    
    
    -
    
    
    
    166Balance at September 30, 2006
    
    
    8,249,802
    
    
    $
    -
    
    
    $
    82,689
    
    
    $
    35,867
    
    
    $
    (8,150
    )
    
    $
    (2,035
    )
    
    $
    108,371Balance at December 31, 2006
    
    
    8,249,802
    
    
    $
    -
    
    
    $
    82,909
    
    
    $
    36,634
    
    
    $
    (7,938
    )
    
    $
    (2,200
    )
    
    $
    109,405Comprehensive income:Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,492
    
    
    
    -
    
    
    
    -
    
    
    
    2,492Net unrealized loss on securities available
for sale, net of reclassification adjustment
and tax effects
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (160
    )
    
    
    (160
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,332Common stock repurchased
    
    
    (326,200
    )
    
    
    -
    
    
    
    (4,628
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,628
    )Restricted stock expense
    
    
    47,615
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    487
    
    
    
    -
    
    
    
    487Stock option expense
    
    
    -
    
    
    
    -
    
    
    
    547
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    547Release of ESOP stock
    
    
    -
    
    
    
    -
    
    
    
    35
    
    
    
    -
    
    
    
    139
    
    
    
    -
    
    
    
    174FASB Statement No. 158 tax effect adjustment
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    101
    
    
    
    101Dividends declared ($.16 per share)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,353
    )
    
    
    -
    
    
    
    -
    
    
    
    (1,353
    )Balance at September 30, 2007
    
    
    7,971,217
    
    
    $
    -
    
    
    $
    78,863
    
    
    $
    37,773
    
    
    $
    (7,312
    )
    
    $
    (2,259
    )
    
    $
    107,065
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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 (Unaudited)
 Nine Months Ended September 30,2007
    
    2006Cash flows from operating activities:Net income
    
    $
    2,492
    
    
    $
    3,695Adjustments to reconcile net income to net cash
provided by operating activities:Accretion of securities, net
    
    
    (472
    )
    
    
    (582
    )Amortization (accretion) of loans, net
    
    
    91
    
    
    
    (50
    )Gain on sales of securities, net
    
    
    -
    
    
    
    (10
    )Gain on sale of bank-owned premises, net
    
    
    (377
    )
    
    
    -Provision for loan losses
    
    
    211
    
    
    
    327Accretion of deposits and borrowings, net
    
    
    (7
    )
    
    
    (30
    )Amortization of mortgage servicing rights
    
    
    225
    
    
    
    181Depreciation and amortization
    
    
    688
    
    
    
    752Amortization of intangible assets
    
    
    619
    
    
    
    832Stock-based compensation and ESOP expense
    
    
    1,208
    
    
    
    416Income from bank-owned life insurance
    
    
    (300
    )
    
    
    (250
    )Gain on trading assets
    
    
    (138
    )
    
    
    -Gains on sales of loans, net
    
    
    (514
    )
    
    
    (249
    )Loans originated for sale
    
    
    (41,305
    )
    
    
    (23,660
    )Proceeds from sales of loans
    
    
    41,818
    
    
    
    23,909Purchases of trading assets
    
    
    (15,000
    )
    
    
    -Increase in accrued interest receivable
    
    
    (187
    )
    
    
    (538
    )Security impairment writedown
    
    
    -
    
    
    
    35Other, net
    
    
    (22
    )
    
    
    293Net cash provided by operating activities
    
    
    (10,969
    )
    
    
    5,071Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    -
    
    
    
    10Maturities, calls, and principal repayments
    
    
    48,178
    
    
    
    53,123Purchases
    
    
    (74,580
    )
    
    
    (53,691
    )Principal repayments on
held-to-maturity securities
    
    
    4
    
    
    
    66Net change in restricted equity securities
    
    
    (448
    )
    
    
    (974
    )Purchases of mortgage loans
    
    
    -
    
    
    
    (16,118
    )Loan originations, net
    
    
    (15,516
    )
    
    
    (14,689
    )Proceeds from sales of loans held for sale
    
    
    62,122
    
    
    
    -Proceeds from sales of bank-owned premises
    
    
    821
    
    
    
    -Purchases of bank-owned life insurance
    
    
    -
    
    
    
    (2,500
    )Purchases of identifiable intangible assets
    
    
    (208
    )
    
    
    -Additions to premises and equipment
    
    
    (1,057
    )
    
    
    (1,306
    )Net cash provided by (used for) investing activities
    
    
    19,316
    
    
    
    (36,079
    )
   6




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
 (Dollars in thousands)
 (Unaudited)
 Nine Months Ended September 30,2007
    
    2006Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    (5,399
    )
    
    
    14,608Net proceeds from (repayments of) short-term borrowings
    
    
    (8,850
    )
    
    
    8,000Proceeds from long-term debt
    
    
    27,000
    
    
    
    52,000Repayments of long-term debt
    
    
    (17,151
    )
    
    
    (40,403
    )Common stock repurchased
    
    
    (4,628
    )
    
    
    (3,373
    )Dividends paid on common stock
    
    
    (1,353
    )
    
    
    (770
    )Net cash provided by (used for) financing activities
    
    
    (10,381
    )
    
    
    30,062Net change in cash and cash equivalents
    
    
    (2,036
    )
    
    
    (946
    )Cash and cash equivalents at beginning of period
    
    
    72,595
    
    
    
    65,750Cash and cash equivalents at end of period
    
    $
    70,559
    
    
    $
    64,804Supplemental cash flow information:Interest paid on deposits
    
    $
    12,977
    
    
    $
    10,390Interest paid on short-term borrowings
    
    
    222
    
    
    
    154Interest paid on long-term debt
    
    
    5,207
    
    
    
    4,291Income taxes paid
    
    
    970
    
    
    
    2,860Loans held for sale transferred to loans, net
    
    
    1,063
    
    
    
    -Loans held for sale transferred to other assets
    
    
    545
    
    
    
    -Loans transferred to other real estate owned
    
    
    225
    
    
    
    -Securities transferred from held-to-maturity to available for
sale
    
    
    26
    
    
    
    -
  7




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1.
    
    Basis of presentation and consolidationThe accompanying unaudited consolidated interim financial statements include the accounts of
Benjamin Franklin Bancorp, Inc. (the Company) and its wholly-owned subsidiary, Benjamin
Franklin Bank (the Bank). These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP) for
interim financial statements and the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation have been included.The Company operates as one reportable segment for financial reporting purposes. All
significant intercompany items are eliminated in consolidation. Certain amounts previously
reported have been reclassified to conform to the current years presentation.These consolidated interim financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the Companys Annual
Report on Form 10-K as of and for the year ended December 31, 2006.Recent Accounting PronouncementsIn September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This
Statement defines fair value, establishes a framework for measuring fair value in accordance
with generally accepted accounting principles, and expands disclosures about fair value
measurements. This Statement is effective for the Company on January 1, 2008 and is not
expected to have a material impact on the Companys consolidated financial statements.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities, to permit all entities to choose to elect to measure eligible
financial instruments at fair value. A business entity shall report unrealized gains and
losses on items for which the fair value option has been elected in earnings. Eligible items
include any recognized financial assets and liabilities with certain exceptions including
but not limited to, deposit liabilities, investments in subsidiaries, and certain deferred
compensation arrangements. The decision about whether to elect the fair value option is
generally applied on an instrument-by-instrument basis, is generally irrevocable, and is
applied only to an entire instrument and not to only specified risks, specific cash flows,
or portions of that instrument. This Statement is effective as of the beginning of each
reporting entitys first fiscal year that begins after November 15, 2007. Management is
currently analyzing the impact of making this election for any of the Companys eligible
financial assets or liabilities.In March 2006, the FASB issued Statement No. 156, Accounting for Servicing of Financial
Assets, which amends FASB Statement No. 140. This Statement requires that all separately
recognized servicing rights be initially measured at fair value, if practicable. For each
class of separately recognized servicing assets and liabilities, this Statement permits an
entity to choose either of the following subsequent measurement methods: (1) amortize
servicing assets or liabilities in proportion to and over the period of estimated net
servicing income or net servicing loss, or (2) report servicing assets or liabilities at
fair value at each reporting date and report changes in fair value in earnings in the period
in which the changes occur (the fair value method). This Statement also requires
additional disclosures for all separately recognized servicing rights. The Company adopted
SFAS No. 156 effective January 1, 2007. Adoption had no effect on the Companys financial
statements.
 8




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##### Table of Contents



In July 2006, the FASB issued Financial Accounting Standards Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an entitys financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement
of a tax position taken (or expected to be taken) in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting in interim
periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company has determined that the adoption of FIN 48 did not have a
material effect on the financial statements.2.
    
    CommitmentsOutstanding loan commitments totaled $119.2 million at September 30, 2007, compared to
$108.1 million as of December 31, 2006. Loan commitments consist of commitments to originate
new loans as well as the outstanding undrawn portions of lines of credit.3.
    
    Earnings per shareBasic earnings per share (EPS) is calculated by dividing net income available to common
stockholders by the weighted-average number of shares of common stock outstanding during the
period. Diluted EPS is computed in a manner similar to that of basic EPS except that the
weighted-average number of common shares outstanding is increased to include the number of
incremental common shares (computed using the treasury stock method) that would have been
outstanding if all potentially dilutive common stock equivalents (such as stock options and
unvested restricted stock) were issued during the period. For the three and nine month
periods ending September 30, 2007, potentially dilutive common stock equivalents totaled
44,498 and 36,185 shares, respectively, representing the effect of dilutive restricted
stock. For the three and nine month periods ending September 30, 2006, potentially dilutive
common stock equivalents totaled 5,566 and 1,856 shares, respectively. Unallocated common
shares held by the ESOP are shown as a reduction in stockholders equity and are not
included in the weighted-average number of common shares outstanding for either basic or
diluted earnings per share calculations.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Critical Accounting Policies
  9




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##### Table of Contents



Comparison of Financial Condition at September 30, 2007 and December 31, 2006
 Overview
   Investment Activities
   10




---



##### Table of Contents



September 30, 2007

    
    December 31, 2006Amortized

    
    Fair

    
    Amortized

    
    FairCost

    
    Value

    
    Cost

    
    Value(In thousands)Securities available for sale:Government-sponsored enterprise
obligations
    
    $
    90,132
    
    
    $
    90,316
    
    
    $
    97,723
    
    
    $
    97,502Municipal obligations
    
    
    1,706
    
    
    
    1,697
    
    
    
    1,707
    
    
    
    1,687Mortgage-backed securities
    
    
    64,169
    
    
    
    61,737
    
    
    
    29,677
    
    
    
    27,793Total available for sale securities
    
    $
    156,007
    
    
    $
    153,750
    
    
    $
    129,107
    
    
    $
    126,982Securities held to maturity:Mortgage-backed securities
    
    $
    -
    
    
    $
    -
    
    
    $
    31
    
    
    $
    31Restricted equity securities:Federal Home Loan Bank of Boston stock
    
    $
    8,918
    
    
    $
    8,918
    
    
    $
    8,470
    
    
    $
    8,470Access Capital Strategies
Community Investment Fund
    
    
    1,965
    
    
    
    1,965
    
    
    
    1,965
    
    
    
    1,965SBLI & DIF stock
    
    
    516
    
    
    
    516
    
    
    
    516
    
    
    
    516Total restricted equity securities
    
    $
    11,399
    
    
    $
    11,399
    
    
    $
    10,951
    
    
    $
    10,951
  Lending Activities
    11




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##### Table of Contents



September 30, 2007

    
    December 31, 2006Amount

    
    Percent

    
    Amount

    
    Percent(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    193,603
    
    
    
    32.4
    %
    
    $
    212,910
    
    
    
    36.6
    %Commercial
    
    
    163,929
    
    
    
    27.4
    %
    
    
    159,322
    
    
    
    27.4
    %Construction
    
    
    60,696
    
    
    
    10.2
    %
    
    
    68,877
    
    
    
    11.8
    %Home equity
    
    
    38,327
    
    
    
    6.4
    %
    
    
    36,546
    
    
    
    6.3
    %456,555
    
    
    
    76.4
    %
    
    
    477,655
    
    
    
    82.1
    %Other loans:Commercial business
    
    
    138,811
    
    
    
    23.2
    %
    
    
    101,055
    
    
    
    17.4
    %Consumer
    
    
    2,523
    
    
    
    0.4
    %
    
    
    3,110
    
    
    
    0.5
    %141,334
    
    
    
    23.6
    %
    
    
    104,165
    
    
    
    17.9
    %Total loans, gross
    
    
    597,889
    
    
    
    100.0
    %
    
    
    581,820
    
    
    
    100.0
    %Allowance for loan losses
    
    
    (5,798
    )
    
    
    
    
    
    
    (5,781
    )Total loans, net
    
    $
    592,091
    
    
    
    
    
    
    $
    576,039
 Non-performing Assets
  12




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##### Table of Contents



September 30, 2007

    
    December 31, 2006(Dollars in thousands)Non-accrual loans:Residential mortgage
    
    $
    814
    
    
    $
    230Commercial mortgage
    
    
    2,244
    
    
    
    1,257Construction
    
    
    -
    
    
    
    -Commercial business
    
    
    -
    
    
    
    -Consumer
    
    
    189
    
    
    
    61Total non-accrual loans
    
    $
    3,247
    
    
    $
    1,548Loans greater than 90 days delinquent
and still accruing:Residential mortgage
    
    $
    -
    
    
    $
    -Commercial mortgage
    
    
    -
    
    
    
    -Construction
    
    
    -
    
    
    
    -Commercial business
    
    
    -
    
    
    
    -Consumer
    
    
    -
    
    
    
    -Total loans 90 days and still accruing
    
    $
    -
    
    
    $
    -Total non-performing loans
    
    $
    3,247
    
    
    $
    1,548Other real estate owned
    
    $
    225
    
    
    $
    -Total non-performing assets
    
    $
    3,472
    
    
    $
    1,548Ratios:Non-performing loans to total loans (1)
    
    
    0.54
    %
    
    
    0.24
    %Non-performing assets to total assets
    
    
    0.38
    %
    
    
    0.17
    %
 (1)
    
    Including loans held for sale.  Allowance for Loan Losses
   13




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##### Table of Contents



14




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##### Table of Contents



Three Months Ended

    
    Nine Months EndedSeptember 30,

    
    September 30,2007
    
    2006
    
    2007
    
    2006(Dollars in thousands)Balance at beginning of period
    
    $
    5,887
    
    
    $
    5,797
    
    
    $
    5,781
    
    
    $
    5,670Charge-offs:Mortgage loans on real estate
    
    
    (143
    )
    
    
    -
    
    
    
    (143
    )
    
    
    -Other loans:Commercial business
    
    
    -
    
    
    
    (40
    )
    
    
    (7
    )
    
    
    (40
    )Consumer
    
    
    (24
    )
    
    
    (32
    )
    
    
    (85
    )
    
    
    (78
    )Total other loans
    
    
    (24
    )
    
    
    (72
    )
    
    
    (92
    )
    
    
    (118
    )Total charge-offs
    
    
    (167
    )
    
    
    (72
    )
    
    
    (235
    )
    
    
    (118
    )Recoveries:Mortgage loans on real estate
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Other loans:Commercial business
    
    
    6
    
    
    
    7
    
    
    
    10
    
    
    
    31Consumer
    
    
    7
    
    
    
    9
    
    
    
    31
    
    
    
    31Total other loans
    
    
    13
    
    
    
    16
    
    
    
    41
    
    
    
    62Total recoveries
    
    
    13
    
    
    
    16
    
    
    
    41
    
    
    
    62Net charge-offs
    
    
    (154
    )
    
    
    (56
    )
    
    
    (194
    )
    
    
    (56
    )Provision for loan losses
    
    
    65
    
    
    
    200
    
    
    
    211
    
    
    
    327Balance at end of period
    
    $
    5,798
    
    
    $
    5,941
    
    
    $
    5,798
    
    
    $
    5,941Ratios:Net charge-offs to average
loans outstanding (annualized)
    
    
    0.10
    %
    
    
    0.04
    %
    
    
    0.04
    %
    
    
    0.01
    %Allowance for loan losses to
non-performing loans at end of period
    
    
    178.57
    %
    
    
    314.84
    %
    
    
    178.57
    %
    
    
    314.84
    %Allowance for loan losses to
total loans at end of period
    
    
    0.97
    %
    
    
    0.93
    %
    
    
    0.97
    %
    
    
    0.93
    %
 Deposits
  15




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##### Table of Contents



September 30,

    
    % of

    
    December 31,

    
    % of2007
    
    Total
    
    2006
    
    Total(Dollars in thousands)Deposit type:Demand deposit accounts
    
    $
    117,404
    
    
    
    18.7
    %
    
    $
    120,966
    
    
    
    19.1
    %NOW accounts
    
    
    49,595
    
    
    
    7.9
    %
    
    
    28,606
    
    
    
    4.5
    %Regular savings accounts
    
    
    79,524
    
    
    
    12.7
    %
    
    
    81,569
    
    
    
    12.9
    %Money market accounts
    
    
    109,894
    
    
    
    17.5
    %
    
    
    93,988
    
    
    
    14.8
    %Total non-certificate accounts
    
    
    356,417
    
    
    
    56.8
    %
    
    
    325,129
    
    
    
    51.3
    %Term certificates less than $100,000
    
    
    162,729
    
    
    
    25.9
    %
    
    
    176,677
    
    
    
    27.9
    %Term certificates of $100,000 or more
    
    
    108,609
    
    
    
    17.3
    %
    
    
    131,373
    
    
    
    20.8
    %Total certificate accounts
    
    
    271,338
    
    
    
    43.2
    %
    
    
    308,050
    
    
    
    48.7
    %Total deposits
    
    $
    627,755
    
    
    
    100.0
    %
    
    $
    633,179
    
    
    
    100.0
    %
  Borrowed Funds
   Stockholders Equity
  16




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##### Table of Contents



Comparison of Operating Results for the Three and Nine Months Ended September 30, 2007 and 2006
   Analysis of Net Interest Income
   17




---



##### Table of Contents



Three Months Ended September 30,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)(Dollars in thousands)Interest-earning assets:Loans
    
    
    $599,107
    
    
    
    $9,856
    
    
    
    6.48
    %
    
    
    $633,064
    
    
    
    $9,620
    
    
    
    6.00
    %Securities
    
    
    165,391
    
    
    
    2,084
    
    
    
    5.04
    %
    
    
    136,104
    
    
    
    1,641
    
    
    
    4.10
    %Short-term investments
    
    
    17,089
    
    
    
    141
    
    
    
    3.24
    %
    
    
    10,562
    
    
    
    134
    
    
    
    4.96
    %Total interest-earning assets
    
    
    781,587
    
    
    
    12,081
    
    
    
    6.11
    %
    
    
    779,730
    
    
    
    11,395
    
    
    
    5.66
    %Non-interest-earning assets
    
    
    126,353
    
    
    
    
    
    
    
    
    
    
    
    113,101Total assets
    
    
    $907,940
    
    
    
    
    
    
    
    
    
    
    
    $892,831Interest-bearing liabilities:Savings accounts
    
    
    $80,416
    
    
    
    100
    
    
    
    0.50
    %
    
    
    $90,143
    
    
    
    113
    
    
    
    0.50
    %Money market accounts
    
    
    111,259
    
    
    
    798
    
    
    
    2.85
    %
    
    
    94,712
    
    
    
    502
    
    
    
    2.10
    %NOW accounts
    
    
    46,876
    
    
    
    314
    
    
    
    2.66
    %
    
    
    25,941
    
    
    
    9
    
    
    
    0.15
    %Certificates of deposit
    
    
    275,601
    
    
    
    3,155
    
    
    
    4.54
    %
    
    
    290,595
    
    
    
    3,067
    
    
    
    4.19
    %Total deposits
    
    
    514,152
    
    
    
    4,367
    
    
    
    3.37
    %
    
    
    501,391
    
    
    
    3,691
    
    
    
    2.92
    %Borrowings
    
    
    156,256
    
    
    
    1,948
    
    
    
    4.88
    %
    
    
    147,866
    
    
    
    1,719
    
    
    
    4.55
    %Total interest-bearing liabilities
    
    
    670,408
    
    
    
    6,315
    
    
    
    3.72
    %
    
    
    649,257
    
    
    
    5,410
    
    
    
    3.29
    %Non-interest bearing liabilities
    
    
    129,842
    
    
    
    
    
    
    
    
    
    
    
    134,481Total liabilities
    
    
    800,250
    
    
    
    
    
    
    
    
    
    
    
    783,738Equity
    
    
    107,690
    
    
    
    
    
    
    
    
    
    
    
    109,093Total liabilities and equity
    
    
    $907,940
    
    
    
    
    
    
    
    
    
    
    
    $892,831Net interest income
    
    
    
    
    
    
    $5,766
    
    
    
    
    
    
    
    
    
    
    
    $5,985Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.39
    %
    
    
    
    
    
    
    
    
    
    
    2.37
    %Net interest-earning assets (3)
    
    
    $111,179
    
    
    
    
    
    
    
    
    
    
    
    $130,473Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    2.93
    %
    
    
    
    
    
    
    
    
    
    
    3.05
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    116.58
    %
    
    
    
    
    
    
    
    
    
    
    120.10
    %
 
 (1)
    
    Yields and rates for the three months ended September 30, 2007 and 2006 are
annualized.(2)
    
    Net interest rate spread represents the difference between the weighted-average
yield on interest-earning assets and the
weighted-average cost of interest-bearing liabilities.(3)
    
    Net interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total
interest-earning assets. 18




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##### Table of Contents



Nine Months Ended September 30,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)(Dollars in thousands)Interest-earning assets:Loans
    
    
    $609,710
    
    
    
    $29,273
    
    
    
    6.36
    %
    
    
    $621,074
    
    
    
    $27,698
    
    
    
    5.91
    %Securities
    
    
    161,963
    
    
    
    6,055
    
    
    
    4.99
    %
    
    
    137,547
    
    
    
    4,423
    
    
    
    4.29
    %Short-term investments
    
    
    17,428
    
    
    
    644
    
    
    
    4.88
    %
    
    
    15,221
    
    
    
    536
    
    
    
    4.64
    %Total interest-earning assets
    
    
    789,101
    
    
    
    35,972
    
    
    
    6.04
    %
    
    
    773,842
    
    
    
    32,657
    
    
    
    5.60
    %Non-interest-earning assets
    
    
    114,858
    
    
    
    
    
    
    
    
    
    
    
    113,255Total assets
    
    
    $903,959
    
    
    
    
    
    
    
    
    
    
    
    $887,097Interest-bearing liabilities:Savings accounts
    
    
    $82,338
    
    
    
    306
    
    
    
    0.50
    %
    
    
    $93,835
    
    
    
    352
    
    
    
    0.50
    %Money market accounts
    
    
    106,243
    
    
    
    2,167
    
    
    
    2.73
    %
    
    
    103,106
    
    
    
    1,728
    
    
    
    2.24
    %NOW accounts
    
    
    37,935
    
    
    
    621
    
    
    
    2.19
    %
    
    
    27,111
    
    
    
    30
    
    
    
    0.15
    %Certificates of deposit
    
    
    285,655
    
    
    
    9,738
    
    
    
    4.56
    %
    
    
    281,552
    
    
    
    8,218
    
    
    
    3.90
    %Total deposits
    
    
    512,171
    
    
    
    12,832
    
    
    
    3.35
    %
    
    
    505,604
    
    
    
    10,328
    
    
    
    2.73
    %Borrowings
    
    
    151,535
    
    
    
    5,496
    
    
    
    4.78
    %
    
    
    136,892
    
    
    
    4,518
    
    
    
    4.35
    %Total interest-bearing liabilities
    
    
    663,706
    
    
    
    18,328
    
    
    
    3.68
    %
    
    
    642,496
    
    
    
    14,846
    
    
    
    3.08
    %Non-interest bearing liabilities
    
    
    131,359
    
    
    
    
    
    
    
    
    
    
    
    135,763Total liabilities
    
    
    795,065
    
    
    
    
    
    
    
    
    
    
    
    778,259Equity
    
    
    108,894
    
    
    
    
    
    
    
    
    
    
    
    108,838Total liabilities and equity
    
    
    $903,959
    
    
    
    
    
    
    
    
    
    
    
    $887,097Net interest income
    
    
    
    
    
    
    $17,644
    
    
    
    
    
    
    
    
    
    
    
    $17,811Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.36
    %
    
    
    
    
    
    
    
    
    
    
    2.52
    %Net interest-earning assets (3)
    
    
    $125,395
    
    
    
    
    
    
    
    
    
    
    
    $131,346Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    2.99
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.89
    %
    
    
    
    
    
    
    
    
    
    
    120.44
    %
 
 (1)
    
    Yields and rates for the nine months ended September 30, 2007 and 2006 are
annualized.(2)
    
    Net interest rate spread represents the difference between the weighted-average
yield on interest-earning assets and the
weighted-average cost of interest-bearing liabilities.(3)
    
    Net interest-earning assets represents total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total
interest-earning assets.  19




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Three Months Ended September 30,2007 vs. 2006Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    
    Rate
    
    
    (Decrease)(In thousands)Interest-earning assets:Loans
    
    $
    (533
    )
    
    $
    769
    
    
    $
    236Securities
    
    
    366
    
    
    
    77
    
    
    
    443Short-term investments
    
    
    64
    
    
    
    (57
    )
    
    
    7Total interest-earning assets
    
    
    (103
    )
    
    
    789
    
    
    
    686Interest-bearing liabilities:Savings accounts
    
    
    (11
    )
    
    
    (1
    )
    
    
    (12
    )Money market accounts
    
    
    98
    
    
    
    198
    
    
    
    296NOW accounts
    
    
    13
    
    
    
    291
    
    
    
    304Certificates of deposit
    
    
    (163
    )
    
    
    251
    
    
    
    88Total deposits
    
    
    (63
    )
    
    
    739
    
    
    
    676Borrowings
    
    
    101
    
    
    
    128
    
    
    
    229Total interest-bearing liabilities
    
    
    38
    
    
    
    867
    
    
    
    905Change in net interest income
    
    $
    (141
    )
    
    $
    (78
    )
    
    $
    (219
    )
 Nine Months Ended September 30,2007 vs. 2006Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    Rate

    
    (Decrease)(In thousands)Interest-earning assets:Loans
    
    $
    (514
    )
    
    $
    2,089
    
    
    $
    1,575Securities
    
    
    851
    
    
    
    781
    
    
    
    1,632Short-term investments
    
    
    81
    
    
    
    27
    
    
    
    108Total interest-earning assets
    
    
    418
    
    
    
    2,897
    
    
    
    3,315Interest-bearing liabilities:Savings accounts
    
    
    (43
    )
    
    
    (3
    )
    
    
    (46
    )Money market accounts
    
    
    54
    
    
    
    385
    
    
    
    439NOW accounts
    
    
    18
    
    
    
    573
    
    
    
    591Certificates of deposit
    
    
    121
    
    
    
    1,399
    
    
    
    1,520Total deposits
    
    
    150
    
    
    
    2,354
    
    
    
    2,504Borrowings
    
    
    508
    
    
    
    470
    
    
    
    978Total interest-bearing liabilities
    
    
    658
    
    
    
    2,824
    
    
    
    3,482Change in net interest income
    
    $
    (240
    )
    
    $
    73
    
    
    $
    (167
    )
 20




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21




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Provision for Loan Losses
   Non-interest Income
  22




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Non-interest Expense
    23




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Income Taxes
  Liquidity and Capital Resources
  24




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Contractual Obligations:
 September 30, 2007More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year
    
    
    through Three
    
    
    through Five
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years(In thousands)Federal Home Loan Bank advances(1)
    
    $
    150,986
    
    
    $
    34,150
    
    
    $
    87,986
    
    
    $
    21,000
    
    
    $
    7,850Subordinated debt (4)
    
    
    9,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    9,000Operating leases (2)
    
    
    14,643
    
    
    
    1,192
    
    
    
    2,372
    
    
    
    2,203
    
    
    
    8,876Other contractual obligations(3)
    
    
    6,507
    
    
    
    3,626
    
    
    
    2,881
    
    
    
    -
    
    
    
    -Total contractual obligations
    
    $
    181,136
    
    
    $
    38,968
    
    
    $
    93,239
    
    
    $
    23,203
    
    
    $
    25,726
 
 (1) Secured under a blanket security agreement on qualifying assets, principally 1-4
Family Residential mortgage loans.
An advance in the amount of $10.0 million maturing in June, 2010, will become immediately payable
if
3-month LIBOR rises above 6.0% (measured on a quarterly basis, beginning in June 2006).(2) Represents non-cancelable operating leases for branch offices.(3) Represents contracts for technology services and employment agreements.(4) The Company plans to prepay all of the subordinated debt in November 2007. 25




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##### Table of Contents



Loan Commitments
 September 30, 2007More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year
    
    
    through
    
    
    through
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Three Years
    
    
    Five Years
    
    
    Years(In thousands)Commitments to grant loans (1)
    
    $
    21,122
    
    
    $
    21,122
    
    
    $
    -
    
    
    $
    -
    
    
    $
    -Unused portion of commercial loan lines of credit
    
    
    24,993
    
    
    
    24,891
    
    
    
    102
    
    
    
    -
    
    
    
    -Unused portion of home equity lines of credit (2)
    
    
    40,691
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    40,691Unused portion of construction lines of credit (3)
    
    
    28,753
    
    
    
    17,134
    
    
    
    11,619
    
    
    
    -
    
    
    
    -Unused portion of personal lines of credit (4)
    
    
    2,432
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,432Commercial letter of credit
    
    
    1,213
    
    
    
    1,213
    
    
    
    -
    
    
    
    -
    
    
    
    -Total loan commitments
    
    $
    119,204
    
    
    $
    64,360
    
    
    $
    11,721
    
    
    $
    -
    
    
    $
    43,123
 
 
 (1)
    
    Commitments to grant loans are extended to customers for up to 180 days after
which they expire.(2)
    
    Unused portions of home equity lines of credit are available to the borrower for
up to 10 years.(3)
    
    Unused portions of construction lines of credit are available to the borrower
for up to 2 years for development loans and up to 1 year for other construction loans.(4)
    
    Unused portions of personal lines of credit are available to customers in good
standing indefinitely. 26




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Minimum Regulatory Capital Requirements:
  MinimumTo Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirements
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)September 30, 2007:Total capital to risk weighted
assets:Consolidated
    
    $
    87,504
    
    
    
    13.9
    %
    
    $
    50,442
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    69,481
    
    
    
    11.0
    
    
    
    50,604
    
    
    
    8.0
    
    
    $
    63,255
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:Consolidated
    
    
    81,706
    
    
    
    13.0
    
    
    
    25,221
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    63,683
    
    
    
    10.1
    
    
    
    25,302
    
    
    
    4.0
    
    
    
    37,953
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    81,706
    
    
    
    9.4
    
    
    
    36,318
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    63,683
    
    
    
    7.3
    
    
    
    36,360
    
    
    
    4.0
    
    
    
    45,450
    
    
    
    5.0December 31, 2006:Total capital to risk weighted
assets:Consolidated
    
    $
    89,256
    
    
    
    14.4
    %
    
    $
    49,473
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    66,632
    
    
    
    10.8
    
    
    
    49,408
    
    
    
    8.0
    
    
    $
    61,761
    
    
    
    10.0
    %Tier 1 capital to risk weighted
assets:Consolidated
    
    
    83,475
    
    
    
    13.5
    
    
    
    24,737
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    60,851
    
    
    
    9.9
    
    
    
    24,704
    
    
    
    4.0
    
    
    
    37,056
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    83,475
    
    
    
    9.6
    
    
    
    34,710
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    60,851
    
    
    
    7.0
    
    
    
    34,793
    
    
    
    4.0
    
    
    
    43,491
    
    
    
    5.0
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   27




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Percentage Change in EstimatedNet Interest Income over 12months200 basis point increase in rates
    
    (5.60)%100 basis point increase in rates
    
    (2.83)%Flat interest rates
    
    -100 basis point decrease in rates
    
    1.48 %200 basis point decrease in rates
    
    0.74 %
   
 Item 4. Controls and Procedures.
 (a) Evaluation of Disclosure Controls and Procedures.
  28




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Changes in Internal Controls Over Financial Reporting
 29




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 (a)
    
    Unregistered Sale of Equity Securities.Not applicable.(b)
    
    Use of Proceeds. Not applicable.(c)
    
    Repurchases of Our Equity Securities.On November 14, 2006, Benjamin Franklin
Bancorp announced that its Board of Directors had authorized a plan to repurchase up to
412,490 shares (approximately 5%) of the Companys outstanding common shares, at the
discretion of management through open market transactions or negotiated block
transactions. In the third quarter of 2007, the Company purchased 162,350 shares under
this plan, as follows:
 (a) Total
    
    
    
    
    
    
    
    
    (c) Total Number of
    
    
    
    (d) Maximum number (orNumber of
    
    
    
    (b) Average
    
    
    
    Shares Purchased as Part
    
    
    
    approximate dollar value) ofShares
    
    
    
    Price Paid per
    
    
    
    of Publicly Announced
    
    
    
    shares that may yet be purchasedPeriod
    
    
    Purchased
    
    
    
    Share
    
    
    
    Plans or Programs
    
    
    
    under the Plans or ProgramsJuly 1-31
    
    
    
    -
    
    
    
    
    -
    
    
    
    
    -
    
    
    
    
    248,640August 1-31
    
    
    
    127,600
    
    
    
    $
    13.30
    
    
    
    
    127,600
    
    
    
    
    121,040September 1-30
    
    
    
    34,750
    
    
    
    $
    13.87
    
    
    
    
    34,750
    
    
    
    
    86,290
  
 Item 3. Defaults on Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 30




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Exhibit No.
    
    Description
    
    Footnotes2.1
    
    Plan of Conversion of Benjamin Franklin Bancorp.
    
    32.2
    
    Agreement and Plan of Merger among Benjamin Franklin Bancorp, M.H.C., Benjamin Franklin Savings Bank and Chart Bank, a
Cooperative Bank, dated as of September 1, 2004.
    
    23.1
    
    Articles of Organization of Benjamin Franklin Bancorp, Inc.
    
    23.2
    
    Bylaws of Benjamin Franklin Bancorp, Inc.
    
    74.1
    
    Form of Common Stock Certificate of Benjamin Franklin Bancorp, Inc.
    
    510.1.1
    
    Form of Employment Agreement with Thomas R. Venables. *
    
    610.1.2
    
    Form of Employment Agreement with Claire S. Bean. *
    
    610.2
    
    Form of Change in Control Agreement with five other Executive Officers, providing one years severance to Karen Niro, Michael J.
Piemonte and Kathleen P. Sawyer, and two years severance to
Mariane E. Broadhurst and Rose M. Buckley. This form contains all
material information concerning the agreement and the only
differences are the name and contact information of the executive
officer who is party to the agreement and the number of years of
severance provided. *
    
    210.3
    
    Form of Benjamin Franklin Bank Benefit Restoration Plan. *
    
    210.4.1
    
    Amended and Restated Supplemental Executive Retirement Agreement between Benjamin Franklin Bank and Thomas R. Venables dated as of
March 22, 2006. *
    
    810.4.2
    
    Amended and Restated Supplemental Executive Retirement Agreement between Benjamin Franklin Bank and Claire S. Bean dated as of
March 22, 2006. *
    
    810.5
    
    Benjamin Franklin Bancorp Director Fee Continuation Plan. *
    
    410.6
    
    Benjamin Franklin Bancorp Employee Salary Continuation Plan. *
    
    210.7.1
    
    Payments and Waiver Agreement among Richard E. Bolton, Jr., Benjamin Franklin Bancorp, M.H.C., Benjamin Franklin Savings Bank
and Chart Bank, a Cooperative Bank, dated as of September 1, 2004.
*
    
    210.7.2
    
    Consulting and Noncompetition Agreement between Richard E. Bolton, Jr. and Benjamin Franklin Bancorp, M.H.C., dated as of September
1, 2004. *
    
    210.8
    
    Benjamin Franklin Bancorp, Inc. 2006 Stock Incentive Plan *
    
    910.8.1
    
    Form of Incentive Stock Option Agreement *
    
    1010.8.2
    
    Form of Non-Statutory Stock Option Agreement (Officer) *
    
    1010.8.3
    
    Form of Non-Statutory Stock Option Agreement (Director) *
    
    1010.8.4
    
    Form of Restricted Stock Agreement (Officer) *
    
    1010.8.5
    
    Form of Restricted Stock Agreement (Director) *
    
    1010.9
    
    Purchase and Sale Agreement dated December 19, 2006.
    
    1111
    
    See Note 3 to the Financial Statements for a discussion of earnings per share.
    
    -
 31




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##### Table of Contents



31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 earnings per share.
    
    131.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    132.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    132.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    1
 *
    
    Relates to compensation.
 1.
    
    Filed herewith.2.
    
    Incorporated by reference to the Registrants Registration Statement on
Form S-1, File No. 333-121154, filed on December 10, 2004.3.
    
    Incorporated by reference to Amendment No. 1 to the Registrants
Registration Statement on Form S-1, File No. 333-121154, filed on January 24, 2005.4.
    
    Incorporated by reference to the Registrants Registration Statement on
Form S-4, File No. 333-121608, filed on December 23, 2004.5.
    
    Incorporated by reference to the Registrants Registration Statement on
Form 8-A, File No. 000-51194, filed on March 9, 2005.6.
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K,
filed on March 29, 2005.7.
    
    Incorporated by reference to the Registrants Current Report on Form 8-K,
filed on March 3, 2006.8.
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K,
filed on March 28, 20069.
    
    Incorporated by reference to Appendix B to the Registrants Proxy
Statement for the 2006 Annual Meeting of Stockholders, filed on March
28, 2006.10.
    
    Incorporated by reference to the Registrants Quarterly Report on Form
10-Q/A, filed on August 18, 2006.11.
    
    Incorporated by reference to the Registrants Current Report on Form 8-K,
filed on December 26, 2006.
 32




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##### Table of Contents



SIGNATURES
  Benjamin Franklin Bancorp, Inc.Date: November 8, 2007
    
    
    
    
    
    By:
    
    /s/ Thomas R. VenablesThomas R. VenablesPresident and Chief Executive OfficerDate: November 8, 2007
    
    
    
    
    
    By:
    
    /s/ Claire S. BeanClaire S. BeanTreasurer and Chief Financial Officer
 33




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
 No.
    
    Item31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 34