##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTER ENDED JUNE 30, 2007
 OR
 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 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)58 Main Street, Franklin, MA
(Address of Principal Executive Offices)
    
    02038
(Zip Code)
 (508) 528-7000
 
 þ o
  o þ o
 o þ
    1




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##### Table of Contents



PagePART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets at June 30, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Income for the three and six months ended
June 30, 2007 and 2006
    
    
    4Consolidated Statements of Changes in Stockholders Equity for the three and six months ended
June 30, 2007 and 2006
    
    
    5Consolidated Statements of Cash Flows for the three and six months ended
June 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
    
    
    29Item 1A Risk Factors That May Affect Future Results
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults on Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30SIGNATURES
    
    
    32Ex-31.1 Certification of CEOEx-31.2 Certification of CFOEx-32.1 Certification of CEOEX-32.2 Certification of CFO
 2




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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)
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)
    
    
    (Audited)ASSETSCash and due from banks
    
    $
    14,484
    
    
    $
    16,115Cash supplied to ATM customers
    
    
    46,630
    
    
    
    39,732Short-term investments
    
    
    10,461
    
    
    
    16,748Total cash and cash equivalents
    
    
    71,575
    
    
    
    72,595Securities available for sale, at fair value
    
    
    152,033
    
    
    
    126,982Securities held to maturity, at amortized cost
    
    
    27
    
    
    
    31Restricted equity securities, at cost
    
    
    11,184
    
    
    
    10,951Total securities
    
    
    163,244
    
    
    
    137,964LoansResidential real estate
    
    
    199,923
    
    
    
    212,131Commercial real estate
    
    
    259,225
    
    
    
    231,372Construction
    
    
    68,090
    
    
    
    68,877Commercial business
    
    
    34,566
    
    
    
    28,871Consumer
    
    
    40,114
    
    
    
    39,656Net deferred loan costs
    
    
    897
    
    
    
    913Total loans, gross
    
    
    602,815
    
    
    
    581,820Allowance for loan losses
    
    
    (5,887
    )
    
    
    (5,781
    )Loans, net
    
    
    596,928
    
    
    
    576,039Loans held for sale, net
    
    
    
    
    
    
    63,730Premises and equipment, net
    
    
    5,429
    
    
    
    5,202Accrued interest receivable
    
    
    3,499
    
    
    
    3,480Bank-owned life insurance
    
    
    10,493
    
    
    
    10,298Goodwill
    
    
    33,763
    
    
    
    33,763Other intangible assets
    
    
    2,827
    
    
    
    3,069Other assets
    
    
    8,442
    
    
    
    7,538$
    896,200
    
    
    $
    913,678LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Regular savings accounts
    
    $
    82,353
    
    
    $
    81,569Money market accounts
    
    
    108,484
    
    
    
    93,988NOW accounts
    
    
    48,794
    
    
    
    28,606Demand deposit accounts
    
    
    122,102
    
    
    
    120,966Time deposit accounts
    
    
    273,154
    
    
    
    308,050Total deposits
    
    
    634,887
    
    
    
    633,179Short-term borrowings
    
    
    3,000
    
    
    
    10,000Long-term debt
    
    
    138,884
    
    
    
    148,969Deferred gain on sale of premises
    
    
    3,657
    
    
    
    3,783Other liabilities
    
    
    8,404
    
    
    
    8,342Total liabilities
    
    
    788,832
    
    
    
    804,273Common stock, no par value; 75,000,000 shares
authorized;
8,304,287 shares issued and 8,085,952 shares
outstanding
at June 30, 2007; 8,468,137 shares issued and
8,249,802 shares outstanding at December 31, 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    80,900
    
    
    
    82,909Retained earnings
    
    
    37,210
    
    
    
    36,634Unearned compensation
    
    
    (7,516
    )
    
    
    (7,938
    )Accumulated other comprehensive loss
    
    
    (3,226
    )
    
    
    (2,200
    )Total stockholders equity
    
    
    107,368
    
    
    
    109,405$
    896,200
    
    
    $
    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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)Interest and dividend income:Loans, including fees
    
    $
    9,712
    
    
    $
    9,236
    
    
    $
    19,418
    
    
    $
    18,078Debt securities
    
    
    1,953
    
    
    
    1,377
    
    
    
    3,639
    
    
    
    2,639Dividends
    
    
    165
    
    
    
    23
    
    
    
    331
    
    
    
    143Short-term investments
    
    
    222
    
    
    
    186
    
    
    
    503
    
    
    
    402Total interest and dividend income
    
    
    12,052
    
    
    
    10,822
    
    
    
    23,891
    
    
    
    21,262Interest expense:Interest on deposits
    
    
    4,308
    
    
    
    3,535
    
    
    
    8,464
    
    
    
    6,637Interest on borrowings
    
    
    1,692
    
    
    
    1,373
    
    
    
    3,549
    
    
    
    2,799Total interest expense
    
    
    6,000
    
    
    
    4,908
    
    
    
    12,013
    
    
    
    9,436Net interest income
    
    
    6,052
    
    
    
    5,914
    
    
    
    11,878
    
    
    
    11,826Provision (credit) for loan losses
    
    
    (24
    )
    
    
    122
    
    
    
    146
    
    
    
    128Net interest income, after provision for loan
losses
    
    
    6,076
    
    
    
    5,792
    
    
    
    11,732
    
    
    
    11,698Other income:ATM servicing fees
    
    
    622
    
    
    
    752
    
    
    
    1,319
    
    
    
    1,377Deposit service fees
    
    
    369
    
    
    
    341
    
    
    
    709
    
    
    
    670Loan servicing fees
    
    
    141
    
    
    
    155
    
    
    
    472
    
    
    
    277Gain on sale of loans, net
    
    
    193
    
    
    
    73
    
    
    
    296
    
    
    
    138Security impairment writedown
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    (35
    )Gain on sale of bank-owned premises, net
    
    
    63
    
    
    
    
    
    
    
    313
    
    
    
    Gain on sale of CSSI customer list
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    Income from bank-owned life insurance
    
    
    99
    
    
    
    85
    
    
    
    195
    
    
    
    150Miscellaneous
    
    
    206
    
    
    
    206
    
    
    
    361
    
    
    
    410Total other income
    
    
    1,793
    
    
    
    1,577
    
    
    
    3,765
    
    
    
    2,987Operating expenses:Salaries and employee benefits
    
    
    3,829
    
    
    
    2,725
    
    
    
    7,442
    
    
    
    5,446Occupancy and equipment
    
    
    836
    
    
    
    642
    
    
    
    1,744
    
    
    
    1,308Data processing
    
    
    598
    
    
    
    452
    
    
    
    1,202
    
    
    
    900Professional fees
    
    
    235
    
    
    
    355
    
    
    
    472
    
    
    
    733Marketing and advertising
    
    
    201
    
    
    
    148
    
    
    
    329
    
    
    
    310Amortization of intangible assets
    
    
    205
    
    
    
    277
    
    
    
    422
    
    
    
    578Other general and administrative
    
    
    775
    
    
    
    786
    
    
    
    1,867
    
    
    
    1,441Total operating expenses
    
    
    6,679
    
    
    
    5,385
    
    
    
    13,478
    
    
    
    10,716Income before income taxes
    
    
    1,190
    
    
    
    1,984
    
    
    
    2,019
    
    
    
    3,969Provision for income taxes
    
    
    361
    
    
    
    724
    
    
    
    599
    
    
    
    1,441Net income
    
    $
    829
    
    
    $
    1,260
    
    
    $
    1,420
    
    
    $
    2,528Weighted-average shares outstanding:Basic
    
    
    7,663,634
    
    
    
    8,030,629
    
    
    
    7,739,036
    
    
    
    8,028,636Diluted
    
    
    7,699,363
    
    
    
    8,030,629
    
    
    
    7,768,666
    
    
    
    8,028,636Earnings per share:Basic
    
    $
    0.11
    
    
    $
    0.16
    
    
    $
    0.18
    
    
    $
    0.32Diluted
    
    $
    0.11
    
    
    $
    0.16
    
    
    $
    0.18
    
    
    $
    0.32
  4




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BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Dollars in thousands, except 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,528
    
    
    
    
    
    
    
    
    
    
    
    2,528Net unrealized loss on securities available
for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (976
    )
    
    
    (976
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,552Release of ESOP stock
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    109Dividends declared ($.06 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508
    )
    
    
    
    
    
    
    
    
    
    
    (508
    )Balance at June 30, 2006
    
    
    8,488,898
    
    
    $
    
    
    
    $
    82,866
    
    
    $
    34,962
    
    
    $
    (5,261
    )
    
    $
    (3,302
    )
    
    $
    109,265Balance at December 31, 2006
    
    
    8,249,802
    
    
    $
    
    
    
    $
    82,909
    
    
    $
    36,634
    
    
    $
    (7,938
    )
    
    $
    (2,200
    )
    
    $
    109,405Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,420
    
    
    
    
    
    
    
    
    
    
    
    1,420Net unrealized loss on securities available
for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,127
    )
    
    
    (1,127
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    293Common stock repurchased
    
    
    (163,850
    )
    
    
    
    
    
    
    (2,449
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,449
    )Restricted stock expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    330
    
    
    
    
    
    
    
    330Stock option expense
    
    
    
    
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413Release of ESOP stock
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    119FASB Statement No. 158 tax effect adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    101Dividends declared ($.10 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (844
    )
    
    
    
    
    
    
    
    
    
    
    (844
    )Balance at June 30, 2007
    
    
    8,085,952
    
    
    $
    
    
    
    $
    80,900
    
    
    $
    37,210
    
    
    $
    (7,516
    )
    
    $
    (3,226
    )
    
    $
    107,368
  5




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 (Unaudited)
 Six Months Ended June 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    1,420
    
    
    $
    2,528Adjustments to reconcile net income to net cash
provided by operating activities:Accretion of securities, net
    
    
    (341
    )
    
    
    (398
    )Amortization (accretion) of loans, net
    
    
    64
    
    
    
    (45
    )Gain on sale of bank-owned premises, net
    
    
    (313
    )
    
    
    Provision for loan losses
    
    
    146
    
    
    
    128Accretion of deposits and borrowings, net
    
    
    (6
    )
    
    
    (26
    )Amortization of mortgage servicing rights
    
    
    152
    
    
    
    124Depreciation and amortization
    
    
    465
    
    
    
    499Amortization of intangible assets
    
    
    422
    
    
    
    578Stock-based compensation and ESOP expense
    
    
    862
    
    
    
    109Income from bank-owned life insurance
    
    
    (195
    )
    
    
    (150
    )Gains on sales of loans, net
    
    
    (296
    )
    
    
    (138
    )Loans originated for sale
    
    
    (26,560
    )
    
    
    (12,849
    )Proceeds from sales of loans
    
    
    26,856
    
    
    
    12,987Increase in accrued interest receivable
    
    
    (19
    )
    
    
    (132
    )Security impairment writedown
    
    
    
    
    
    
    35Other, net
    
    
    (697
    )
    
    
    977Net cash provided by operating activities
    
    
    1,960
    
    
    
    4,227Cash flows from investing activities:Activity in available-for-sale securities:Maturities, calls, and principal repayments
    
    
    30,220
    
    
    
    41,780Purchases
    
    
    (56,342
    )
    
    
    (44,403
    )Principal repayments on held-to-maturity securities
    
    
    4
    
    
    
    49Net change in restricted equity securities
    
    
    (233
    )
    
    
    (503
    )Purchases of mortgage loans
    
    
    
    
    
    
    (16,118
    )Loan originations, net
    
    
    (20,036
    )
    
    
    (2,791
    )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
    
    
    (180
    )
    
    
    Additions to premises and equipment
    
    
    (692
    )
    
    
    (479
    )Net cash provided by (used for) investing activities
    
    
    15,684
    
    
    
    (24,965
    )
   6




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BENJAMIN FRANKLIN BANCORP,INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
 (Dollars in thousands)
 (Unaudited)
 Six Months Ended June 30,2007
    
    
    2006Cash flows from financing activities:Net increase in deposits
    
    
    1,726
    
    
    
    17,869Net proceeds from (repayments of) short-term borrowings
    
    
    (7,000
    )
    
    
    15,000Proceed from long-term debt
    
    
    10,000
    
    
    
    Repayments of long-term debt
    
    
    (20,097
    )
    
    
    (5,403
    )Common stock repurchased
    
    
    (2,449
    )
    
    
    Dividends paid on common stock
    
    
    (844
    )
    
    
    (508
    )Net cash provided by (used for) financing activities
    
    
    (18,664
    )
    
    
    26,958Net change in cash and cash equivalents
    
    
    (1,020
    )
    
    
    6,220Cash and cash equivalents at beginning of period
    
    
    72,595
    
    
    
    65,750Cash and cash equivalents at end of period
    
    $
    71,575
    
    
    $
    71,970Supplemental cash flow information:Interest paid on deposits
    
    $
    8,591
    
    
    $
    6,676Interest paid on short-term borrowings
    
    
    147
    
    
    
    39Interest paid on long-term debt
    
    
    3,429
    
    
    
    2,773Income taxes paid
    
    
    989
    
    
    
    1,920Loans held for sale transferred to loans, net
    
    
    1,063
    
    
    
    Loans held for sale transferred to other assets
    
    
    545
    
    
    
    
  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.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.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
 8




---



##### Table of Contents



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 derecognition, 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 $114.4 million at June 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.The Bank has received approval from the Massachusetts Commissioner of Banks and the FDIC to
open a new branch in Watertown, Massachusetts. It is anticipated that this branch will
become operational in August of 2007. The annual direct costs of operating this branch are
estimated at $700,000, including annual lease payments for the new branch facility of
approximately $127,000 per annum for the initial ten-year term of the lease.3.
    
    Earnings per shareBasic earnings per share (EPS) excludes dilution and is calculated by dividing net income
available to
common stockholders by the weighted-average number of shares of common stock outstanding
during the
period. Diluted EPS is computed in a manner similar to that of basic EPS except that the
weighted-average number of common shares outstanding is increased to include the number of
incremental common shares (computed using the treasury stock method) that would have been
outstanding if all potentially dilutive common stock equivalents (such as stock options and
unvested restricted stock) were issued during the period. For the three and six month
periods ending June 30, 2007, potentially dilutive common stock equivalents totaled 35,729
and 29,630 shares, respectively, representing the effect of dilutive restricted stock. There
were no potentially dilutive common stock equivalents outstanding during the comparable
periods in 2006. 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
  9




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Critical Accounting Policies
  Comparison of Financial Condition at June 30, 2007 and December 31, 2006
 Overview
   Investment Activities
   10




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##### Table of Contents



June 30, 2007
    
    
    December 31, 2006Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In thousands)Securities available for sale:Government-sponsored enterprise
obligations
    
    $
    92,171
    
    
    $
    91,985
    
    
    $
    97,723
    
    
    $
    97,502Municipal obligations
    
    
    1,707
    
    
    
    1,692
    
    
    
    1,707
    
    
    
    1,687Mortgage-backed securities
    
    
    61,691
    
    
    
    58,356
    
    
    
    29,677
    
    
    
    27,793Total securities available for sale
    
    $
    155,569
    
    
    $
    152,033
    
    
    $
    129,107
    
    
    $
    126,982Securities held to maturity:Mortgage-backed securities
    
    $
    27
    
    
    $
    27
    
    
    $
    31
    
    
    $
    31Restricted equity securities:Federal Home Loan Bank of Boston stock
    
    $
    8,703
    
    
    $
    8,703
    
    
    $
    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
    
    $
    11,184
    
    
    $
    11,184
    
    
    $
    10,951
    
    
    $
    10,951
 Lending Activities
  11




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##### Table of Contents



June 30, 2007
    
    
    December 31, 2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    199,923
    
    
    
    33.2
    %
    
    $
    212,131
    
    
    
    36.5
    %Commercial
    
    
    259,225
    
    
    
    43.1
    %
    
    
    231,372
    
    
    
    39.8
    %Construction
    
    
    68,090
    
    
    
    11.3
    %
    
    
    68,877
    
    
    
    11.9
    %Home equity
    
    
    37,584
    
    
    
    6.2
    %
    
    
    36,546
    
    
    
    6.3
    %564,822
    
    
    
    93.8
    %
    
    
    548,926
    
    
    
    94.5
    %Other loans:Commercial business
    
    
    34,566
    
    
    
    5.8
    %
    
    
    28,871
    
    
    
    5.0
    %Consumer
    
    
    2,530
    
    
    
    0.4
    %
    
    
    3,110
    
    
    
    0.5
    %37,096
    
    
    
    6.2
    %
    
    
    31,981
    
    
    
    5.5
    %Total loans, gross
    
    
    601,918
    
    
    
    100.0
    %
    
    
    580,907
    
    
    
    100.0
    %Other items:Net deferred loan costs
    
    
    897
    
    
    
    
    
    
    
    913Allowance for loan losses
    
    
    (5,887
    )
    
    
    
    
    
    
    (5,781
    )Total loans, net
    
    $
    596,928
    
    
    
    
    
    
    $
    576,039
 Non-performing Assets
  12




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##### Table of Contents



June 30, 2007
    
    
    December 31, 2006(Dollars in thousands)Non-accrual loans:Residential mortgage
    
    $
    1,189
    
    
    $
    230Commercial mortgage
    
    
    2,247
    
    
    
    1,257Construction
    
    
    
    
    
    
    Commercial business
    
    
    
    
    
    
    Consumer
    
    
    161
    
    
    
    61Total non-accrual loans
    
    $
    3,597
    (2)
        
    $
    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 assets
    
    $
    3,597
    
    
    $
    1,548Ratios:Non-performing loans to total loans (1)
    
    
    0.60
    %
    
    
    0.24
    %Non-performing assets to total assets
    
    
    0.40
    %
    
    
    0.17
    %
 
 (1)
    
    Total loans include loans held for sale.(2)
    
    The increase in non-accrual loans at June 30, 2007 compared to year end 2006 is due primarily to the
addition of two commercial loans totalling $1.0 million, which management believes are well-secured,
and to the addition of several residential mortgage loans totalling approximately $960,000. Residential
mortgage loans on non-accrual are also generally well-secured, with the exception of two loans that carry
$186,000 in specific reserves within the allowance for loan losses. Allowance for Loan Losses
   13




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14




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands)Balance at beginning of period
    
    $
    5,929
    
    
    $
    5,666
    
    
    $
    5,781
    
    
    $
    5,670Charge-offs:Mortgage loans on real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Commercial business
    
    
    (2
    )
    
    
    
    
    
    
    (7
    )
    
    
    Consumer
    
    
    (29
    )
    
    
    (17
    )
    
    
    (61
    )
    
    
    (46
    )Total other loans
    
    
    (31
    )
    
    
    (17
    )
    
    
    (68
    )
    
    
    (46
    )Total charge-offs
    
    
    (31
    )
    
    
    (17
    )
    
    
    (68
    )
    
    
    (46
    )Recoveries:Mortgage loans on real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Commercial business
    
    
    2
    
    
    
    16
    
    
    
    4
    
    
    
    24Consumer
    
    
    11
    
    
    
    10
    
    
    
    24
    
    
    
    21Total other loans
    
    
    13
    
    
    
    26
    
    
    
    28
    
    
    
    45Total recoveries
    
    
    13
    
    
    
    26
    
    
    
    28
    
    
    
    45Net (charge-offs) recoveries
    
    
    (18
    )
    
    
    9
    
    
    
    (40
    )
    
    
    (1
    )Provision (credit) for loan losses
    
    
    (24
    )
    
    
    122
    
    
    
    146
    
    
    
    128Balance at end of period
    
    $
    5,887
    
    
    $
    5,797
    
    
    $
    5,887
    
    
    $
    5,797Ratios:Net (charge-offs) recoveries to average
loans outstanding (annualized)
    
    
    -0.01
    %
    
    
    0.01
    %
    
    
    -0.01
    %
    
    
    0.00
    %Allowance for loan losses to
non-performing loans at end of period
    
    
    163.66
    %
    
    
    4354.94
    %
    
    
    163.66
    %
    
    
    4354.94
    %Allowance for loan losses to
total loans at end of period
    
    
    0.98
    %
    
    
    0.92
    %
    
    
    0.98
    %
    
    
    0.92
    %
 Deposits
  15




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##### Table of Contents



June 30,
    
    
    % of
    
    
    December 31,
    
    
    % of2007
    
    
    Total
    
    
    2006
    
    
    Total(Dollars in thousands)Deposit type:Demand deposit accounts
    
    $
    122,102
    
    
    
    19.2
    %
    
    $
    120,966
    
    
    
    19.1
    %NOW accounts
    
    
    48,794
    
    
    
    7.7
    %
    
    
    28,606
    
    
    
    4.5
    %Regular savings accounts
    
    
    82,353
    
    
    
    13.0
    %
    
    
    81,569
    
    
    
    12.9
    %Money market accounts
    
    
    108,484
    
    
    
    17.1
    %
    
    
    93,988
    
    
    
    14.8
    %Total non-certificate accounts
    
    
    361,733
    
    
    
    57.0
    %
    
    
    325,129
    
    
    
    51.3
    %Term certificates less than $100,000
    
    
    162,801
    
    
    
    25.6
    %
    
    
    176,677
    
    
    
    27.9
    %Term certificates of $100,000 or more
    
    
    110,353
    
    
    
    17.4
    %
    
    
    131,373
    
    
    
    20.8
    %Total certificate accounts
    
    
    273,154
    
    
    
    43.0
    %
    
    
    308,050
    
    
    
    48.7
    %Total deposits
    
    $
    634,887
    
    
    
    100.0
    %
    
    $
    633,179
    
    
    
    100.0
    %
  Borrowed Funds
  Stockholders Equity
  Comparison of Operating Results for the Three and Six Months Ended June 30, 2007 and 2006
   16




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##### Table of Contents



Analysis of Net Interest Income
   Three Months Ended June 30,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    604,459
    
    
    $
    9,712
    
    
    
    6.38
    %
    
    $
    620,986
    
    
    $
    9,236
    
    
    
    5.91
    %Securities
    
    
    169,543
    
    
    
    2,118
    
    
    
    5.00
    %
    
    
    139,739
    
    
    
    1,400
    
    
    
    3.94
    %Short-term investments
    
    
    12,891
    
    
    
    222
    
    
    
    6.81
    %
    
    
    15,504
    
    
    
    186
    
    
    
    4.75
    %Total interest-earning assets
    
    
    786,893
    
    
    
    12,052
    
    
    
    6.09
    %
    
    
    776,229
    
    
    
    10,822
    
    
    
    5.54
    %Non-interest-earning assets
    
    
    109,495
    
    
    
    
    
    
    
    
    
    
    
    113,054Total assets
    
    $
    896,388
    
    
    
    
    
    
    
    
    
    
    $
    889,283Interest-bearing liabilities:Savings accounts
    
    $
    83,086
    
    
    
    103
    
    
    
    0.50
    %
    
    $
    94,810
    
    
    
    121
    
    
    
    0.51
    %Money market accounts
    
    
    108,825
    
    
    
    748
    
    
    
    2.76
    %
    
    
    116,061
    
    
    
    716
    
    
    
    2.47
    %NOW accounts
    
    
    38,269
    
    
    
    217
    
    
    
    2.27
    %
    
    
    28,250
    
    
    
    10
    
    
    
    0.15
    %Certificates of deposit
    
    
    284,314
    
    
    
    3,240
    
    
    
    4.57
    %
    
    
    277,996
    
    
    
    2,688
    
    
    
    3.88
    %Total deposits
    
    
    514,494
    
    
    
    4,308
    
    
    
    3.36
    %
    
    
    517,117
    
    
    
    3,535
    
    
    
    2.74
    %Borrowings
    
    
    140,225
    
    
    
    1,692
    
    
    
    4.77
    %
    
    
    126,214
    
    
    
    1,373
    
    
    
    4.30
    %Total interest-bearing liabilities
    
    
    654,719
    
    
    
    6,000
    
    
    
    3.66
    %
    
    
    643,331
    
    
    
    4,908
    
    
    
    3.05
    %Non-interest bearing liabilities
    
    
    132,490
    
    
    
    
    
    
    
    
    
    
    
    136,999Total liabilities
    
    
    787,209
    
    
    
    
    
    
    
    
    
    
    
    780,330Equity
    
    
    109,179
    
    
    
    
    
    
    
    
    
    
    
    108,953Total liabilities and equity
    
    $
    896,388
    
    
    
    
    
    
    
    
    
    
    $
    889,283Net interest income
    
    
    
    
    
    $
    6,052
    
    
    
    
    
    
    
    
    
    
    $
    5,914Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.43
    %
    
    
    
    
    
    
    
    
    
    
    2.49
    %Net interest-earning assets (3)
    
    $
    132,174
    
    
    
    
    
    
    
    
    
    
    $
    132,898Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.08
    %
    
    
    
    
    
    
    
    
    
    
    3.06
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.19
    %
    
    
    
    
    
    
    
    
    
    
    120.66
    %
 
 (1)
    
    Yields and rates for the three months ended June 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. 17




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##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    615,099
    
    
    $
    19,418
    
    
    
    6.30
    %
    
    $
    613,788
    
    
    $
    18,078
    
    
    
    5.88
    %Securities
    
    
    160,220
    
    
    
    3,970
    
    
    
    4.96
    %
    
    
    138,280
    
    
    
    2,782
    
    
    
    4.03
    %Short-term investments
    
    
    17,600
    
    
    
    503
    
    
    
    5.69
    %
    
    
    17,589
    
    
    
    402
    
    
    
    4.55
    %Total interest-earning assets
    
    
    792,919
    
    
    
    23,891
    
    
    
    6.01
    %
    
    
    769,657
    
    
    
    21,262
    
    
    
    5.51
    %Non-interest-earning assets
    
    
    109,016
    
    
    
    
    
    
    
    
    
    
    
    114,487Total assets
    
    $
    901,935
    
    
    
    
    
    
    
    
    
    
    $
    884,144Interest-bearing liabilities:Savings deposits
    
    $
    83,315
    
    
    
    205
    
    
    
    0.50
    %
    
    $
    95,712
    
    
    
    239
    
    
    
    0.50
    %Money market accounts
    
    
    103,693
    
    
    
    1,368
    
    
    
    2.66
    %
    
    
    107,372
    
    
    
    1,226
    
    
    
    2.30
    %NOW accounts
    
    
    33,390
    
    
    
    307
    
    
    
    1.86
    %
    
    
    27,706
    
    
    
    20
    
    
    
    0.15
    %Certificates of deposit
    
    
    290,765
    
    
    
    6,585
    
    
    
    4.57
    %
    
    
    276,957
    
    
    
    5,152
    
    
    
    3.75
    %Total deposits
    
    
    511,163
    
    
    
    8,465
    
    
    
    3.34
    %
    
    
    507,747
    
    
    
    6,637
    
    
    
    2.64
    %Borrowings
    
    
    149,136
    
    
    
    3,548
    
    
    
    4.73
    %
    
    
    131,314
    
    
    
    2,799
    
    
    
    4.24
    %Total interest-bearing liabilities
    
    
    660,299
    
    
    
    12,013
    
    
    
    3.65
    %
    
    
    639,061
    
    
    
    9,436
    
    
    
    2.97
    %Non-interest bearing liabilities
    
    
    132,130
    
    
    
    
    
    
    
    
    
    
    
    136,372Total liabilities
    
    
    792,429
    
    
    
    
    
    
    
    
    
    
    
    775,433Equity
    
    
    109,506
    
    
    
    
    
    
    
    
    
    
    
    108,711Total liabilities and equity
    
    $
    901,935
    
    
    
    
    
    
    
    
    
    
    $
    884,144Net interest income
    
    
    
    
    
    $
    11,878
    
    
    
    
    
    
    
    
    
    
    $
    11,826Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.36
    %
    
    
    
    
    
    
    
    
    
    
    2.54
    %Net interest-earning assets (3)
    
    $
    132,620
    
    
    
    
    
    
    
    
    
    
    $
    130,596Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.02
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    120.08
    %
    
    
    
    
    
    
    
    
    
    
    120.44
    %
 
 (1)
    
    Yields and rates for the six months ended June 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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19




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##### Table of Contents



Three Months Ended June 30,2007 vs. 2006Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    
    Rate
    
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    (251
    )
    
    $
    727
    
    
    $
    476Securities
    
    
    333
    
    
    
    385
    
    
    
    718Short-term investments
    
    
    (35
    )
    
    
    71
    
    
    
    36Total interest-earning assets
    
    
    47
    
    
    
    1,183
    
    
    
    1,230Interest-bearing liabilities:Savings accounts
    
    
    (15
    )
    
    
    (3
    )
    
    
    (18
    )Money market accounts
    
    
    (46
    )
    
    
    78
    
    
    
    32NOW accounts
    
    
    5
    
    
    
    202
    
    
    
    207Certificates of deposit
    
    
    62
    
    
    
    490
    
    
    
    552Total deposits
    
    
    6
    
    
    
    767
    
    
    
    773Borrowings
    
    
    161
    
    
    
    158
    
    
    
    319Total interest-bearing liabilities
    
    
    167
    
    
    
    925
    
    
    
    1,092Change in net interest income
    
    $
    (120
    )
    
    $
    258
    
    
    $
    138
 Six Months Ended June 30,2007 vs. 2006Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    
    Rate
    
    
    (Decrease)(Dollars in thousands)Interest-earning assets:Loans
    
    $
    39
    
    
    $
    1,301
    
    
    $
    1,340Securities
    
    
    483
    
    
    
    705
    
    
    
    1,188Short-term investments
    
    
    
    
    
    
    101
    
    
    
    101Total interest-earning assets
    
    
    522
    
    
    
    2,107
    
    
    
    2,629Interest-bearing liabilities:Savings accounts
    
    
    (31
    )
    
    
    (3
    )
    
    
    (34
    )Money market accounts
    
    
    (43
    )
    
    
    185
    
    
    
    142NOW accounts
    
    
    5
    
    
    
    282
    
    
    
    287Certificates of deposit
    
    
    267
    
    
    
    1,166
    
    
    
    1,433Total deposits
    
    
    198
    
    
    
    1,630
    
    
    
    1,828Borrowings
    
    
    404
    
    
    
    345
    
    
    
    749Total interest-bearing liabilities
    
    
    602
    
    
    
    1,975
    
    
    
    2,577Change in net interest income
    
    $
    (80
    )
    
    $
    132
    
    
    $
    52
 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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##### Table of Contents



Contractual Obligations:
 June 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)
    
    $
    132,884
    
    
    $
    32,000
    
    
    $
    60,000
    
    
    $
    33,000
    
    
    $
    7,884Subordinated debt
    
    
    9,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000Operating leases (2)
    
    
    13,212
    
    
    
    1,155
    
    
    
    2,056
    
    
    
    1,904
    
    
    
    8,097Other contractual obligations(3)
    
    
    7,155
    
    
    
    3,635
    
    
    
    3,520
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    162,251
    
    
    $
    36,790
    
    
    $
    65,576
    
    
    $
    34,904
    
    
    $
    24,981
 
 (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. Loan Commitments
 June 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)
    
    $
    20,259
    
    
    $
    20,259
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused portion of commercial loan lines of credit
    
    
    25,307
    
    
    
    24,431
    
    
    
    876
    
    
    
    
    
    
    
    Unused portion of home equity lines of credit (2)
    
    
    41,897
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,897Unused portion of construction lines of credit (3)
    
    
    23,065
    
    
    
    20,192
    
    
    
    2,829
    
    
    
    
    
    
    
    44Unused portion of personal lines of credit (4)
    
    
    2,423
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,423Commercial letter of credit
    
    
    1,413
    
    
    
    1,413
    
    
    
    
    
    
    
    
    
    
    
    Total loan commitments
    
    $
    114,364
    
    
    $
    66,295
    
    
    $
    3,705
    
    
    $
    
    
    
    $
    44,364
  
 (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. 25




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##### Table of Contents



Minimum Regulatory Capital Requirements:
  MinimumTo Be WellMinimum
    
    Capitalized UnderCapital
    
    Prompt CorrectiveActual
    
    Requirements
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)June 30, 2007:Total capital to risk weighted assets:Consolidated
    
    $
    88,695
    
    
    
    14.1
    %
    
    $
    50,435
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    68,426
    
    
    
    10.9
    
    
    
    50,450
    
    
    
    8.0
    
    
    $
    63,063
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:Consolidated
    
    
    82,808
    
    
    
    13.1
    
    
    
    25,217
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    62,539
    
    
    
    9.9
    
    
    
    25,225
    
    
    
    4.0
    
    
    
    37,838
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    82,808
    
    
    
    9.6
    
    
    
    35,856
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    62,539
    
    
    
    7.3
    
    
    
    35,875
    
    
    
    4.0
    
    
    
    44,844
    
    
    
    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
 26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   Percentage Change in EstimatedNet Interest Income over 12months200 basis point increase in rates
    
    
    (7.92
    )%100 basis point increase in rates
    
    
    (4.16
    )%Flat interest rates
    
    
    100 basis point decrease in rates
    
    
    3.29
    %200 basis point decrease in rates
    
    
    4.58
    %
   27




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##### Table of Contents



Item 4. Controls and Procedures.
 (a) Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Controls Over Financial Reporting
 28




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##### Table of Contents



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 second quarter of 2007, the Company purchased
113,850 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 ProgramsApril 1-30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362,490May 1-31
    
    
    57,850
    
    
    $
    14.71
    
    
    
    57,850
    
    
    
    304,640June 1-30
    
    
    56,000
    
    
    $
    15.20
    
    
    
    56,000
    
    
    
    248,640
 
 Item 3. Defaults on Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  Name
    
    For
    
    WithheldWilliam F. Brady, Jr. D.D.S.
    
    
    6,625,311
    
    
    
    74,479Donald P. Quinn
    
    
    6,653,226
    
    
    
    46,564Thomas R. Venables
    
    
    6,629,932
    
    
    
    69,858Alfred H. Wahlers
    
    
    6,629,502
    
    
    
    70,288
  29




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##### Table of Contents



Ratification of Wolf & Co.For
    
    6,665,013Against
    
    3,286Abstentions
    
    28,341Broker Non-Votes
    
    0
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
  Exhibit No.
    
    Description
    
    Footnotes2.1
    
    Plan of Conversion of Benjamin Franklin Bancorp.
    
    
    32.2
    
    Agreement and Plan of Merger among Benjamin Franklin Bancorp,
M.H.C., Benjamin Franklin Savings Bank and Chart Bank, a
Cooperative Bank, dated as of September 1, 2004.
    
    
    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.
*
    
    
    2
 30




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##### Table of Contents



Exhibit No.
    
    Description
    
    Footnotes10.7.2
    
    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.
    
    31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
    
    
    131.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
    
    
    132.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    
    132.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    
    1
 
 *
    
    Relates to compensation. 1.
    
    Filed herewith.2.
    
    Incorporated by reference to the Registrants Registration Statement
on Form S-1, File No. 333-121154, filed on December 10, 2004.3.
    
    Incorporated by reference to Amendment No. 1 to the Registrants
Registration Statement on Form S-1, File No. 333-121154, filed on January 24,
2005.4.
    
    Incorporated by reference to the Registrants Registration Statement
on Form S-4, File No. 333-121608, filed on December 23, 2004.5.
    
    Incorporated by reference to the Registrants Registration Statement
on Form 8-A, File No. 000-51194, filed on March 9, 2005.6.
    
    Incorporated by reference to the Registrants Annual Report on Form
10-K, filed on March 29, 2005.7.
    
    Incorporated by reference to the Registrants Current Report on Form
8-K, filed on March 3, 2006.8.
    
    Incorporated by reference to the Registrants Annual Report on Form
10-K, filed on March 28, 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.
 31




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##### Table of Contents



SIGNATURES
  Benjamin Franklin Bancorp, Inc.Date:  August 8, 2007
    By:
    /s/ Thomas R. VenablesThomas R. VenablesPresident and Chief Executive Officer Date:  August 8, 2007
    By:
    /s/ Claire S. BeanClaire S. BeanTreasurer and Chief Financial Officer 32




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    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.
 33