##### 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
SEPTEMBER 30, 2005
 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)58 Main Street, Franklin, MA
    
    02038(Address of Principal Executive Offices)
    
    (Zip Code)
 (617) 528-7000
 
 þ o
 o þ
 o þ




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PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial StatementsConsolidated Balance Sheets at September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the three and nine months ended  September 30, 2005 and 2004
    
    
    4Consolidated
Statements of Changes in Stockholders Equity for the nine months ended September 30, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    32PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults on Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    33Item 6.
    
    Exhibits
    
    
    33SIGNATURES
    
    
    36Ex-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
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 September 30,
    
    
    December 31,2005
    
    
    2004(In thousands)ASSETSCash and due from banks
    
    $
    20,641
    
    
    $
    8,691Cash supplied by CSSI to ATM customers
    
    
    27,508
    
    
    
    Short-term investments
    
    
    13,546
    
    
    
    5,513Total cash and cash equivalents
    
    
    61,695
    
    
    
    14,204Securities available for sale, at fair value
    
    
    117,105
    
    
    
    86,070Securities held to maturity, at amortized cost
    
    
    133
    
    
    
    217Restricted equity securities, at cost
    
    
    10,015
    
    
    
    6,975Total securities
    
    
    127,253
    
    
    
    93,262Loans:Residential real estate mortgage
    
    
    290,195
    
    
    
    241,090Commercial real estate mortgage
    
    
    215,776
    
    
    
    85,911Construction mortgage
    
    
    47,297
    
    
    
    28,651Commercial business
    
    
    18,931
    
    
    
    4,375Consumer
    
    
    35,226
    
    
    
    25,370Net deferred loan costs
    
    
    1,292
    
    
    
    1,148Total loans
    
    
    608,717
    
    
    
    386,545Allowance for loan losses
    
    
    (5,631
    )
    
    
    (3,172
    )Loans, net
    
    
    603,086
    
    
    
    383,373Premises and equipment, net
    
    
    9,217
    
    
    
    11,147Accrued interest receivable
    
    
    2,988
    
    
    
    1,490Goodwill
    
    
    33,762
    
    
    
    4,248Core deposit intangible
    
    
    4,489
    
    
    
    Bank-owned life insurance
    
    
    7,386
    
    
    
    7,182Other assets
    
    
    6,299
    
    
    
    2,487$
    856,175
    
    
    $
    517,393LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Regular savings accounts
    
    $
    103,455
    
    
    $
    95,875Money market accounts
    
    
    99,243
    
    
    
    53,167Now accounts
    
    
    29,508
    
    
    
    22,460Demand deposit accounts
    
    
    127,425
    
    
    
    87,776Time deposit accounts
    
    
    244,855
    
    
    
    137,221Total deposits
    
    
    604,486
    
    
    
    396,499Short-term borrowings
    
    
    
    
    
    
    4,250Long-term debt
    
    
    137,926
    
    
    
    81,000Other liabilities
    
    
    6,031
    
    
    
    4,316Total liabilities
    
    
    748,443
    
    
    
    486,065Common stock, no par value; authorized 75,000,000 shares;
issued 8,488,898 shares at September 30, 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    82,845
    
    
    
    Unallocated
common shares held by ESOP; 422,073 shares at September 30, 2005
    
    
    (4,797
    )
    
    
    Retained earnings
    
    
    31,860
    
    
    
    32,997Accumulated other comprehensive loss
    
    
    (2,176
    )
    
    
    (1,669
    )Total stockholders equity
    
    
    107,732
    
    
    
    31,328$
    856,175
    
    
    $
    517,393
  3




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(In thousands)
    
    
    (In thousands)Interest and dividend income:Loans, including fees
    
    $
    8,716
    
    
    $
    4,578
    
    
    $
    21,656
    
    
    $
    12,567Debt securities
    
    
    1,103
    
    
    
    744
    
    
    
    2,657
    
    
    
    2,374Equity securities
    
    
    110
    
    
    
    76
    
    
    
    271
    
    
    
    175Short-term investments
    
    
    100
    
    
    
    21
    
    
    
    344
    
    
    
    107Total interest and dividend income
    
    
    10,029
    
    
    
    5,419
    
    
    
    24,928
    
    
    
    15,223Interest expense:Interest on deposits
    
    
    2,375
    
    
    
    1,085
    
    
    
    5,798
    
    
    
    3,221Interest on short-term borrowings
    
    
    33
    
    
    
    
    
    
    
    55
    
    
    
    Interest on long-term debt
    
    
    1,301
    
    
    
    672
    
    
    
    3,068
    
    
    
    1,804Total interest expense
    
    
    3,709
    
    
    
    1,757
    
    
    
    8,921
    
    
    
    5,025Net interest income
    
    
    6,320
    
    
    
    3,662
    
    
    
    16,007
    
    
    
    10,198Provision for loan losses
    
    
    152
    
    
    
    150
    
    
    
    648
    
    
    
    470Net interest income, after provision for loan losses
    
    
    6,168
    
    
    
    3,512
    
    
    
    15,359
    
    
    
    9,728Other income (charges):Deposit service fees
    
    
    356
    
    
    
    198
    
    
    
    857
    
    
    
    682Loan servicing fees
    
    
    126
    
    
    
    11
    
    
    
    331
    
    
    
    188CSSI ATM servicing fees
    
    
    493
    
    
    
    
    
    
    
    1,002
    
    
    
    Gain on sale of loans, net
    
    
    52
    
    
    
    8
    
    
    
    72
    
    
    
    106Gain on sales of securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Loss on sale/write-down of bank-owned
land, net
    
    
    
    
    
    
    
    
    
    
    (1,020
    )
    
    
    Income from bank-owned life insurance
    
    
    83
    
    
    
    48
    
    
    
    204
    
    
    
    145Miscellaneous
    
    
    204
    
    
    
    179
    
    
    
    605
    
    
    
    538Total other income
    
    
    1,314
    
    
    
    444
    
    
    
    2,051
    
    
    
    1,667Operating expenses:Salaries and employee benefits
    
    
    2,529
    
    
    
    1,962
    
    
    
    7,010
    
    
    
    5,679Occupancy and equipment
    
    
    654
    
    
    
    289
    
    
    
    1,753
    
    
    
    1,035Data processing
    
    
    468
    
    
    
    345
    
    
    
    1,339
    
    
    
    1,047Professional fees
    
    
    257
    
    
    
    74
    
    
    
    624
    
    
    
    191Contribution to Benjamin Franklin Bank
Charitable Foundation
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    Amortization of core deposit intanglible
    
    
    445
    
    
    
    45
    
    
    
    1,044
    
    
    
    136Other general and administrative
    
    
    986
    
    
    
    430
    
    
    
    2,174
    
    
    
    1,369Total operating expenses
    
    
    5,339
    
    
    
    3,145
    
    
    
    17,944
    
    
    
    9,457Income (loss) before income taxes
    
    
    2,143
    
    
    
    811
    
    
    
    (534
    )
    
    
    1,938Provision for income taxes
    
    
    814
    
    
    
    277
    
    
    
    348
    
    
    
    626Net income (loss)
    
    $
    1,329
    
    
    $
    534
    
    
    $
    (882
    )
    
    $
    1,312Earnings per shareBasic
    
    $
    0.16
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aDiluted
    
    $
    0.16
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aWeighted-average shares outstanding:Basic
    
    
    8,148,113
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aDiluted
    
    
    8,148,113
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
  4




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BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
 (Unaudited)
  Unallocated
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Common
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Stock Held
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    by ESOP
    
    
    Earnings
    
    
    Loss
    
    
    EquityBalance at December 31, 2003
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    31,308
    
    
    $
    (2,007
    )
    
    $
    29,301Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,312
    
    
    
    
    
    
    
    1,312Net unrealized loss on securities available for
sale, net of reclassification adjustment
and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (27
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,285Balance at September 30, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    32,620
    
    
    $
    (2,034
    )
    
    $
    30,586Balance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    32,997
    
    
    $
    (1,669
    )
    
    $
    31,328Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (882
    )
    
    
    
    
    
    
    (882
    )Net unrealized gain on securities available for
sale, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (507
    )
    
    
    (507
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,389
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (255
    )
    
    
    
    
    
    
    (255
    )Issuance of common stock for initial
public offering, net of expenses of
$2.1 million
    
    
    5,577,419
    
    
    
    
    
    
    
    53,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,721Issuance of common stock to Benjamin
Frankin Bank Charitable Foundation
    
    
    400,000
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Issuance of common stock for acquisition
of Chart Bank, A Cooperative Bank
    
    
    2,511,479
    
    
    
    
    
    
    
    25,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,115Stock purchased for ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,911
    )
    
    
    
    
    
    
    
    
    
    
    (4,911
    )Release of ESOP stock
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    123Balance at September 30, 2005
    
    
    8,488,898
    
    
    $
    
    
    
    $
    82,845
    
    
    $
    (4,797
    )
    
    $
    31,860
    
    
    $
    (2,176
    )
    
    $
    107,732
  5




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months Ended September 30,2005
    
    
    2004(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (882
    )
    
    $
    1,312Adjustments to reconcile net income to net cash
provided by (used for) operating activities:Amortization of securities, net
    
    
    99
    
    
    
    703Amortization (accretion) of loans, net
    
    
    (88
    )
    
    
    214Loss (gain) on sales of securities, net
    
    
    
    
    
    
    (8
    )Provision for loan losses
    
    
    648
    
    
    
    470Accretion of certificates of deposit and borrowings
    
    
    (249
    )
    
    
    Amortization of mortgage servicing rights
    
    
    214
    
    
    
    423Depreciation expense
    
    
    709
    
    
    
    509Amortization of core deposit intangible
    
    
    1,044
    
    
    
    136Amortization of unearned compensation
    
    
    123
    
    
    
    Deferred income tax (benefit) provision
    
    
    (1,760
    )
    
    
    48Income from bank-owned life insurance
    
    
    (204
    )
    
    
    (145
    )Gains on sales of loans, net
    
    
    (72
    )
    
    
    (106
    )Loans originated for sale
    
    
    (11,203
    )
    
    
    (28,566
    )Proceeds from sales of loans
    
    
    11,275
    
    
    
    28,672Increase in accrued interest receivable
    
    
    (1,498
    )
    
    
    (107
    )Gain on sale of bank-owned land
    
    
    (380
    )
    
    
    Writedown of bank-owned land
    
    
    1,400
    
    
    
    Charitable Foundation Contribution
    
    
    4,000
    
    
    
    Other, net
    
    
    1,980
    
    
    
    (804
    )Net cash provided by operating activities
    
    
    5,156
    
    
    
    2,751Cash flows from investing activities:Activity in available-for-sale securities:Sales
    
    
    
    
    
    
    2,015Maturities, calls, and principal repayments
    
    
    34,127
    
    
    
    35,829Purchases
    
    
    (33,495
    )
    
    
    (30,411
    )Principal repayments on held-to-maturity securities
    
    
    84
    
    
    
    120Net change in restricted equity securities
    
    
    798
    
    
    
    360Purchases of mortgage loans
    
    
    
    
    
    
    (34,207
    )Loan originations, net
    
    
    (36,237
    )
    
    
    (53,131
    )Proceeds from sales of bank-owned land
    
    
    868
    
    
    
    Additions to premises and equipment
    
    
    (343
    )
    
    
    (590
    )Purchases of
bank-owned life insurance
    
    
    
    
    
    
    (1,400
    )Net cash purchased in acquisition of Chart Bank
    
    
    9,879
    
    
    
    Net cash used for investing activities
    
    
    (24,319
    )
    
    
    (81,415
    )
  6




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (Concluded)
 (Unaudited)
 Nine Months Ended September 30,2005
    
    
    2004(In thousands)Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    (9,406
    )
    
    
    19,305Net proceeds (repayments) from short-term borrowings
    
    
    (24,750
    )
    
    
    29,000Net proceeds from long-term debt
    
    
    52,000
    
    
    
    10,000Net proceeds from common stock offering
    
    
    53,721
    
    
    
    Acquisition of Common Stock by ESOP
    
    
    (4,911
    )
    
    
    Net cash provided by financing activities
    
    
    66,654
    
    
    
    58,305Net change in cash and cash equivalents
    
    
    47,491
    
    
    
    (20,359
    )Cash and cash equivalents at beginning of the period
    
    
    14,204
    
    
    
    35,485Cash and cash equivalents at end of the period
    
    $
    61,695
    
    
    $
    15,126Supplemental cash flow information:Interest paid on deposits
    
    $
    5,794
    
    
    $
    3,222Interest paid on short-term borrowings
    
    
    55
    
    
    
    39Interest paid on long-term debt
    
    
    2,873
    
    
    
    1,726Income taxes paid (refunded)
    
    
    665
    
    
    
    640Assets
acquired and liabilities assumed were as follows:Fair value
of noncash assets acquired
    
    $
    259,008Fair value
of liabilities assumed
    
    
    243,772Fair value
of common stock issued
    
    
    25,115
  7




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##### Table of Contents



BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARIES
 
 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 and subsidiaries (the Company) including its main
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, 2004.Stock Conversion and Merger
The Company completed its mutual-to-stock conversion and related stock offering with the
issuance of 5,977,419 shares (including 400,000 shares contributed to the Benjamin Franklin
Bank Charitable Foundation) on April 4, 2005. An additional 2,511,479 shares were issued in
connection with the acquisition of Chart Bank, which was consummated immediately following
the stock conversion. The cash portion of the consideration paid to Chart Bank shareholders
totaled $21,534,960. The Companys stock began trading on April 5, 2005, on the Nasdaq
National Market, under the symbol BFBC.In connection with the stock conversion, the Company established the Benjamin Franklin Bank
Charitable Foundation (the Foundation), funded with a contribution of 400,000 shares of
newly-issued Benjamin Franklin common stock. This contribution resulted in the recognition
of expense in the second quarter of 2005 equal to the $10 offering
price for each of the shares contributed, net of tax benefits. The effect of this transaction on the Companys
results for the second quarter was $2.6 million ($4.0 million expense, net of $1.4 million
in tax benefits). The Foundation provides funding to support charitable causes and community
development activities in the communities served by the Company.The acquisition of Chart Bank was accounted for using the purchase method of accounting in
accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations. The allocation of purchase price is as follows:
 8




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##### Table of Contents



Chart Bank
    
    
    Purchase
    
    
    Final Allocation ofBalance at
    
    
    Accounting
    
    
    PurchaseApril 4, 2005
    
    
    Adjustments
    
    
    Price(In thousands)Assets:Cash and cash equivalents
    
    $
    35,643
    
    
    $
    (4,229
    )
    
    $
    31,414Securities
    
    
    36,743
    
    
    
    (607
    )
    
    
    36,136Loans, less allowance for loan losses
    
    
    185,022
    
    
    
    (987
    )
    
    
    184,035Premises and equipment
    
    
    2,054
    
    
    
    569
    
    
    
    2,623Goodwill
    
    
    
    
    
    
    29,515
    
    
    
    29,515Core deposit intangible
    
    
    
    
    
    
    5,488
    
    
    
    5,488Other assets
    
    
    1,211
    
    
    
    
    
    
    
    1,211260,673
    
    
    
    29,749
    
    
    
    290,422Liabilities:Deposits
    
    
    216,903
    
    
    
    473
    
    
    
    217,376Borrowed funds
    
    
    25,500
    
    
    
    (101
    )
    
    
    25,399Other liabilities
    
    
    725
    
    
    
    272
    
    
    
    997243,128
    
    
    
    644
    
    
    
    243,772Net assets acquired
    
    
    
    
    
    
    
    
    
    $
    46,650
 The goodwill created in the acquisition of Chart Bank, in the amount of $29.5 million,
is not tax deductible. In accordance with SFS No. 142, Goodwill and Other Intangibles,
goodwill will not be amortized, but will be subject to periodic testing for impairment. Any
impairment detected in the future as a result of such testing would result in a charge to
earnings. Certain other purchase accounting adjustments are being amortized/accreted into
income over the estimated lives of those adjustments. The following table summarizes the
Companys current estimates for the future amortization or accretion of the most significant
of the purchase accounting adjustments:
 Estimated Accretion/(Amortization)Actual-Quarter
    
    Three MonthsEnded
    
    Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    Year Ended
    
    AfterSeptember 30,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,
    
    December 31,2005
    
    2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2009(In thousands)Core deposit intangible
    
    $
    (445
    )
    
    $
    (356
    )
    
    $
    (1,064
    )
    
    $
    (779
    )
    
    $
    (574
    )
    
    $
    (408
    )
    
    $
    (1,308
    )Loan discount
    
    
    144
    
    
    
    126
    
    
    
    337
    
    
    
    154
    
    
    
    53
    
    
    
    21
    
    
    
    16Investments discount
    
    
    93
    
    
    
    98
    
    
    
    252
    
    
    
    62
    
    
    
    8
    
    
    
    
    
    
    
    Time deposit premium
    
    
    131
    
    
    
    67
    
    
    
    66
    
    
    
    31
    
    
    
    20
    
    
    
    13Borrowed funds discount
    
    
    (11
    )
    
    
    (10
    )
    
    
    (33
    )
    
    
    (20
    )
    
    
    (11
    )
 The forecasted accretion and amortization of the fair market value adjustments for loans,
investments, time deposits and borrowed funds approximates the level yield method and may
vary in the future if actual prepayments or other dispositions differ from current
estimates. The core deposit intangible is
 9




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##### Table of Contents



being amortized on an accelerated basis over its
estimated life of 15 years. The core deposit intangible will be tested periodically for
impairment which, if detected, would result in a charge to earnings.The results of Chart Bank are included in the results of the Company subsequent to April 3,
2005. The unaudited condensed pro forma consolidated statements of operations for the nine
months ended September 30, 2005 and 2004 assume that Chart Bank had been acquired as of
January 1, 2005 and 2004. The pro forma information is theoretical in nature and is not
necessarily indicative of future consolidated results of operations of the Company or the
consolidated results of operations that would have resulted had the Company acquired the
stock of Chart Bank during the periods presented:
 For the Nine Months Ended Sept 30,2005
    
    
    2004(In thousands except share and per share amounts)Interest and dividend income
    
    $
    28,346
    
    
    $
    24,079Interest expense
    
    
    9,923
    
    
    
    7,454Net interest income
    
    
    18,423
    
    
    
    16,625Provision for loan losses
    
    
    678
    
    
    
    560Non-interest income
    
    
    2,776
    
    
    
    3,570Non-interest expense
    
    
    21,232
    
    
    
    16,592Income (loss) before income taxes
    
    
    (711
    )
    
    
    3,043Income tax provision
    
    
    556
    
    
    
    1,177Net income (loss)
    
    $
    (1,267
    )
    
    $
    1,866Earnings (loss) per share  diluted
    
    $
    (0.16
    )
    
    $
    0.23Weighted average shares outstanding  diluted
    
    
    8,124,296
    
    
    
    8,124,296
 The pro forma results of operations for the nine months ended September 30, 2005 include a
net $1.0 million loss on sale/write-down of bank-owned land and a $4.0 million expense item
for the contribution of 400,000 shares of Benjamin Franklin Bancorp common stock to the
Foundation. Tax benefits have been reflected for the $4.0 million Foundation contribution,
but no tax benefit has been recognized for the $1.0 loss on sale/write-down of bank owned
land. These results also include $709,000 of non-tax deductible merger-related expenses recorded by Chart Bank during the period from January 1,
2005 to April 4, 2005.
 Recent Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, which changes,
among other things, the manner in which share-based compensation, such as stock options,
will be accounted for by both public and non-public companies. SFAS No. 123R will be
effective beginning with the first interim or annual reporting period of the Companys first
fiscal year that begins after June 15, 2005, which would be January 1, 2006 for the Company.
For public companies, the cost of employee services
 10




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##### Table of Contents



received in exchange for equity
instruments including options and restricted stock awards generally will be measured at fair
value at the grant date. The grant date fair value will be estimated using option-pricing
models adjusted for the unique characteristics of those options and instruments, unless
observable market prices for the same or similar options are available. The cost will be
recognized over the requisite service period, often the vesting period, and will be
re-measured subsequently at each reporting date through settlement date. On March 29, 2005,
the SEC staff issued Staff Accounting Bulletin No. 107 (SAB 107). SAB 107 expresses the
views of the SEC staff regarding SFAS No. 123R and certain rules and regulations and
provides the SECs view regarding the valuation of share-based payment arrangements for
public companies.The provisions of SFAS No. 123R and SAB 107 do not have an impact on the Companys results
of operations at this time. However, as disclosed in the prospectus used in the Companys
stock offering related to the mutual-to-stock conversion and in the
Companys Annual Report on Form 10-K for the year ended
December 31, 2004, the Company expects to adopt a
stock-based incentive plan in 2006, subject to shareholder approval. The granting of
restricted stock awards and stock options under the stock-based incentive plan will increase
the Companys compensation costs in the periods in which such awards and options vest.In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS
154). This Statement replaces Accounting Principles Board Opinion No. 20 (APB 20),
Accounting Changes and Statement of Financial Accounting Standard No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes the requirements for the
accounting for and reporting of a change in accounting principle. In accordance with the
prior guidance of APB 20, most voluntary changes in an accounting principle required
recognizing the cumulative effect of a change in accounting principle in net income in the
period of change. SFAS 154 requires retrospective application to prior periods financial
statements for the direct effects of a change in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of
the change. Indirect effects of a change in accounting principle should be recognized in the
period of accounting change. SFAS 154 carries forward the guidance of APB 20 relating to the
reporting for correction of an error in previously issued financial statements, change in
accounting estimate and the justification requirement for a change in accounting principle
on the basis of preferability. Provisions of this statement are effective for accounting
changes made in the fiscal years beginning after December 15, 2005. At this time, the
Company is uncertain how the application of SFAS 154 will impact prior period financial
statements for the implementation of future accounting pronouncements.2.
    
    CommitmentsOutstanding loan commitments totaled $122.3 million at September 30, 2005, compared to $70.6
million as of December 31, 2004. Loan commitments consist of commitments to originate new
loans as well as the outstanding undrawn portions of lines of credit.The Bank recently received approval from the Massachusetts Commissioner of Banks to open a
new branch in Wellesley Hills, Massachusetts. It is anticipated that this branch will become
operational in the second quarter of 2006. The annual direct costs of operating this branch
are estimated at $610,000.3.
    
    Earnings per shareBasic earnings per share excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average common shares outstanding during the period.
Diluted earnings per share takes into account the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted into common
stock. Earnings per share were not meaningful for the nine months ended September 30, 2005
and for the 2004 periods presented, because the Company did not complete its public offering
until April 4, 2005.
 11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  Critical Accounting Policies
  Comparison of Financial Condition at September 30, 2005 and December 31, 2004
 Overview
  Investment Activities
  12




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At September 30, 2005
    
    
    At December 31, 2004Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In thousands)Securities available for sale:U.S. Government and agency
obligations
    
    $
    76,162
    
    
    $
    75,649
    
    
    $
    33,607
    
    
    $
    33,306Corporate bonds and other obligations
    
    
    4,523
    
    
    
    4,502
    
    
    
    5,056
    
    
    
    5,014Municipal bonds
    
    
    1,708
    
    
    
    1,702
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    37,097
    
    
    
    35,252
    
    
    
    49,246
    
    
    
    47,750Total available for sale securities
    
    $
    119,490
    
    
    $
    117,105
    
    
    $
    87,909
    
    
    $
    86,070Securities held to maturity:Mortgage-backed securities
    
    $
    133
    
    
    $
    133
    
    
    $
    217
    
    
    $
    221Restricted equity securities:Federal Home Loan Bank of Boston stock
    
    $
    7,497
    
    
    $
    7,497
    
    
    $
    4,459
    
    
    $
    4,459Access Capital StrategiesCommunity Investment Fund
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000SBLI & DIF stock
    
    
    518
    
    
    
    518
    
    
    
    516
    
    
    
    516Total equity securities
    
    $
    10,015
    
    
    $
    10,015
    
    
    $
    6,975
    
    
    $
    6,975
  Lending Activities
  13




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##### Table of Contents



At September 30, 2005
    
    
    At December 31, 2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Mortgage loans on real estate:Residential
    
    $
    290,195
    
    
    
    47.77
    %
    
    $
    241,090
    
    
    
    62.56
    %Commercial
    
    
    215,776
    
    
    
    35.52
    %
    
    
    85,911
    
    
    
    22.29
    %Construction
    
    
    47,297
    
    
    
    7.79
    %
    
    
    28,651
    
    
    
    7.43
    %Home equity
    
    
    32,915
    
    
    
    5.42
    %
    
    
    23,200
    
    
    
    6.02
    %586,183
    
    
    
    96.50
    %
    
    
    378,852
    
    
    
    98.30
    %Other loans:Commercial
    
    
    18,931
    
    
    
    3.12
    %
    
    
    4,375
    
    
    
    1.14
    %Consumer
    
    
    2,311
    
    
    
    0.38
    %
    
    
    2,170
    
    
    
    0.56
    %21,242
    
    
    
    3.50
    %
    
    
    6,545
    
    
    
    1.70
    %Total loans
    
    
    607,425
    
    
    
    100.00
    %
    
    
    385,397
    
    
    
    100.00
    %Deferred loan origination costs
    
    
    1,292
    
    
    
    
    
    
    
    1,148Allowance for loan losses
    
    
    (5,631
    )
    
    
    
    
    
    
    (3,172
    )Total loans, net
    
    $
    603,086
    
    
    
    
    
    
    $
    383,373
   Non-performing Assets
  14




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##### Table of Contents



At September 30, 2005
    
    
    At December 31, 2004(In thousands)Non-accrual loans:Residential mortgage
    
    $
    184
    
    
    $
    Commercial mortgage
    
    
    8
    
    
    
    Construction
    
    
    
    
    
    
    Commercial
    
    
    274
    
    
    
    334Consumer and other
    
    
    
    
    
    
    Total non-performing loans
    
    
    466
    
    
    
    334Loans greater than 90 days delinquent
and still accruing:Residential mortgage
    
    
    
    
    
    
    Commercial mortgage
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    Consumer and other
    
    
    
    
    
    
    3Total loans 90 days and still accruing
    
    
    
    
    
    
    3Total non-performing assets
    
    $
    466
    
    
    $
    337Ratios:Non-performing loans to total loans
    
    
    0.08
    %
    
    
    0.09
    %Non-performing assets to total assets
    
    
    0.05
    %
    
    
    0.07
    %
 Allowance for Loan Losses
    15




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16




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##### Table of Contents



At or For the
    
    
    At or For theThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(In thousands)
    
    
    (In thousands)Balance at beginning of period
    
    $
    5,531
    
    
    $
    2,861
    
    
    $
    3,172
    
    
    $
    2,523Allowance added from acquisition
of Chart Bank
    
    
    
    
    
    
    
    
    
    
    1,812
    
    
    
    Charge-offs:Mortgage loans on real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Commercial
    
    
    (57
    )
    
    
    
    
    
    
    (68
    )
    
    
    Consumer
    
    
    (5
    )
    
    
    (5
    )
    
    
    (8
    )
    
    
    (9
    )(62
    )
    
    
    (5
    )
    
    
    (76
    )
    
    
    (9
    )Total charge-offs
    
    
    (62
    )
    
    
    (5
    )
    
    
    (76
    )
    
    
    (9
    )Recoveries:Mortgage loans on real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other loans:Commercial
    
    
    8
    
    
    
    7
    
    
    
    68
    
    
    
    28Consumer
    
    
    2
    
    
    
    4
    
    
    
    7
    
    
    
    1110
    
    
    
    10
    
    
    
    75
    
    
    
    39Total recoveries
    
    
    10
    
    
    
    10
    
    
    
    75
    
    
    
    39Net (charge-offs) recoveries
    
    
    (52
    )
    
    
    5
    
    
    
    (1
    )
    
    
    30Provision for loan losses
    
    
    152
    
    
    
    150
    
    
    
    648
    
    
    
    470Balance at end of period
    
    $
    5,631
    
    
    $
    3,017
    
    
    $
    5,631
    
    
    $
    3,023Ratios:Net (charge-offs) recoveries to average
loans outstanding (annualized)
    
    
    (0.03
    %)
    
    
    0.01
    %
    
    
    0.00
    %
    
    
    0.01
    %Allowance for loan losses to
non-performing loans at end of period
    
    
    1208.37
    %
    
    
    845.01
    %
    
    
    1208.37
    %
    
    
    846.85
    %Allowance for loan losses to
total loans at end of period
    
    
    0.93
    %
    
    
    0.80
    %
    
    
    0.93
    %
    
    
    0.81
    %
 Deposits
  17




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##### Table of Contents



September 30,
    
    
    % of
    
    
    December 31,
    
    
    % of2005
    
    
    Total
    
    
    2004
    
    
    Total(In thousands)
    
    
    
    
    
    
    (In thousands)Deposit type:Demand deposit accounts
    
    $
    127,425
    
    
    
    21.08
    %
    
    $
    87,776
    
    
    
    22.14
    %NOW accounts
    
    
    29,508
    
    
    
    4.88
    
    
    
    22,460
    
    
    
    5.66Regular savings accounts
    
    
    103,455
    
    
    
    17.11
    
    
    
    95,875
    
    
    
    24.18Money market accounts
    
    
    99,243
    
    
    
    16.42
    
    
    
    53,167
    
    
    
    13.41Total non-certificate accounts
    
    
    359,631
    
    
    
    59.49
    
    
    
    259,278
    
    
    
    65.39Term certificates less than $100,000
    
    
    149,504
    
    
    
    24.74
    
    
    
    97,114
    
    
    
    24.49Term certificates of $100,000 or more
    
    
    95,351
    
    
    
    15.77
    
    
    
    40,107
    
    
    
    10.12Total certificate accounts
    
    
    244,855
    
    
    
    40.51
    
    
    
    137,221
    
    
    
    34.61Total deposits
    
    $
    604,486
    
    
    
    100.00
    %
    
    $
    396,499
    
    
    
    100.00
    %
   Borrowed Funds
  Stockholders Equity
  18




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##### Table of Contents



Comparison of Operating Results for the Three Months and Nine Months Ended September 30, 2005 and
2004
  Analysis of Net Interest Income
   19




---



##### Table of Contents



Three Months Ended September 30,2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)Interest-earning assets:Loans
    
    $
    607,136
    
    
    $
    8,716
    
    
    
    5.70
    %
    
    $
    365,231
    
    
    $
    4,578
    
    
    
    4.99
    %Securities
    
    
    128,734
    
    
    
    1,213
    
    
    
    3.74
    %
    
    
    103,982
    
    
    
    820
    
    
    
    3.14
    %Short-term investments
    
    
    15,139
    
    
    
    100
    
    
    
    2.62
    %
    
    
    7,185
    
    
    
    21
    
    
    
    1.16
    %Total interest-earning assets
    
    
    751,009
    
    
    
    10,029
    
    
    
    5.30
    %
    
    
    476,398
    
    
    
    5,419
    
    
    
    4.53
    %Non-interest-earning assets
    
    
    111,195
    
    
    
    
    
    
    
    
    
    
    
    30,449Total assets
    
    $
    862,204
    
    
    
    
    
    
    
    
    
    
    $
    506,847Interest-bearing liabilities:Savings deposits
    
    $
    106,123
    
    
    
    133
    
    
    
    0.50
    %
    
    $
    100,300
    
    
    
    125
    
    
    
    0.50
    %Money market
    
    
    106,015
    
    
    
    432
    
    
    
    1.62
    %
    
    
    52,500
    
    
    
    124
    
    
    
    0.94
    %NOW accounts
    
    
    36,438
    
    
    
    12
    
    
    
    0.13
    %
    
    
    23,736
    
    
    
    9
    
    
    
    0.15
    %Certificates of deposits
    
    
    247,960
    
    
    
    1,798
    
    
    
    2.88
    %
    
    
    135,643
    
    
    
    827
    
    
    
    2.43
    %Total deposits
    
    
    496,536
    
    
    
    2,375
    
    
    
    1.90
    %
    
    
    312,179
    
    
    
    1,085
    
    
    
    1.38
    %Borrowings
    
    
    121,854
    
    
    
    1,334
    
    
    
    4.34
    %
    
    
    69,427
    
    
    
    672
    
    
    
    3.85
    %Total interest-bearing liabilities
    
    
    618,390
    
    
    
    3,709
    
    
    
    2.38
    %
    
    
    381,606
    
    
    
    1,757
    
    
    
    1.83
    %Non-interest bearing liabilities
    
    
    134,899
    
    
    
    
    
    
    
    
    
    
    
    95,111Total liabilities
    
    
    753,289
    
    
    
    
    
    
    
    
    
    
    
    476,717Equity
    
    
    108,915
    
    
    
    
    
    
    
    
    
    
    
    30,130Total liabilities and equity
    
    $
    862,204
    
    
    
    
    
    
    
    
    
    
    $
    506,847Net interest income
    
    
    
    
    
    $
    6,320
    
    
    
    
    
    
    
    
    
    
    $
    3,662Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.92
    %
    
    
    
    
    
    
    
    
    
    
    2.70
    %Net interest-earning assets (3)
    
    $
    132,619
    
    
    
    
    
    
    
    
    
    
    $
    94,792Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.34
    %
    
    
    
    
    
    
    
    
    
    
    3.06
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    121.45
    %
    
    
    
    
    
    
    
    
    
    
    124.84
    %
 
 (1)
    
    Yields and rates for the three months ended September 30, 2005 and 2004 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 as a percent of average interest-earning assets. 20




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##### Table of Contents



Nine Months Ended September 30,2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    AverageOutstanding
    
    
    
    
    
    
    
    
    
    
    OutstandingBalance
    
    
    Interest
    
    
    Yield/Rate(1)
    
    
    Balance
    
    
    Interest
    
    
    Yield/Rate(1)Interest-earning assets:Loans
    
    $
    528,411
    
    
    $
    21,656
    
    
    
    5.48
    %
    
    $
    327,700
    
    
    $
    12,567
    
    
    
    5.12
    %Securities
    
    
    116,350
    
    
    
    2,928
    
    
    
    3.37
    %
    
    
    109,897
    
    
    
    2,549
    
    
    
    3.10
    %Short-term investments
    
    
    19,230
    
    
    
    344
    
    
    
    2.39
    %
    
    
    15,382
    
    
    
    107
    
    
    
    0.93
    %Total interest-earning assets
    
    
    663,991
    
    
    
    24,928
    
    
    
    5.02
    %
    
    
    452,979
    
    
    
    15,223
    
    
    
    4.49
    %Non-interest-earning assets
    
    
    84,433
    
    
    
    
    
    
    
    
    
    
    
    31,055Total assets
    
    $
    748,424
    
    
    
    
    
    
    
    
    
    
    $
    484,034Interest-bearing liabilities:Savings deposits
    
    $
    103,492
    
    
    
    391
    
    
    
    0.50
    %
    
    $
    99,172
    
    
    
    369
    
    
    
    0.50
    %Money market
    
    
    93,744
    
    
    
    1,099
    
    
    
    1.57
    %
    
    
    51,779
    
    
    
    331
    
    
    
    0.85
    %NOW accounts
    
    
    31,584
    
    
    
    52
    
    
    
    0.22
    %
    
    
    23,955
    
    
    
    27
    
    
    
    0.15
    %Certificates of deposits
    
    
    211,602
    
    
    
    4,256
    
    
    
    2.69
    %
    
    
    133,492
    
    
    
    2,494
    
    
    
    2.50
    %Total deposits
    
    
    440,422
    
    
    
    5,798
    
    
    
    1.76
    %
    
    
    308,398
    
    
    
    3,221
    
    
    
    1.40
    %Borrowings
    
    
    100,931
    
    
    
    3,123
    
    
    
    4.14
    %
    
    
    53,421
    
    
    
    1,804
    
    
    
    4.51
    %Total interest-bearing liabilities
    
    
    541,353
    
    
    
    8,921
    
    
    
    2.20
    %
    
    
    361,819
    
    
    
    5,025
    
    
    
    1.86
    %Non-interest bearing liabilities
    
    
    125,076
    
    
    
    
    
    
    
    
    
    
    
    92,257Total liabilities
    
    
    666,429
    
    
    
    
    
    
    
    
    
    
    
    454,076Equity
    
    
    81,995
    
    
    
    
    
    
    
    
    
    
    
    29,958Total liabilities and equity
    
    $
    748,424
    
    
    
    
    
    
    
    
    
    
    $
    484,034Net interest income
    
    
    
    
    
    $
    16,007
    
    
    
    
    
    
    
    
    
    
    $
    10,198Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.82
    %
    
    
    
    
    
    
    
    
    
    
    2.63
    %Net interest-earning assets (3)
    
    $
    122,638
    
    
    
    
    
    
    
    
    
    
    $
    91,160Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.22
    %
    
    
    
    
    
    
    
    
    
    
    3.01
    %Average interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    122.65
    %
    
    
    
    
    
    
    
    
    
    
    125.20
    %
 
 (1)
    
    Yields and rates for the nine months ended September 30, 2005 and 2004 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 as a percent of average interest-earning assets. 21




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22




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Three Months Ended September 30,2005 vs. 2004Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    
    Rate
    
    
    (Decrease)(In thousands)Interest-earning assets:Loans
    
    $
    3,393
    
    
    $
    745
    
    
    $
    4,138Securities
    
    
    216
    
    
    
    177
    
    
    
    393Short-term investments
    
    
    37
    
    
    
    42
    
    
    
    79Total interest-earning assets
    
    
    3,646
    
    
    
    964
    
    
    
    4,610Interest-bearing liabilities:Savings deposits
    
    
    7
    
    
    
    1
    
    
    
    8Money market
    
    
    180
    
    
    
    128
    
    
    
    308NOW accounts
    
    
    4
    
    
    
    (1
    )
    
    
    3Certificates of deposits
    
    
    789
    
    
    
    182
    
    
    
    971Total deposits
    
    
    980
    
    
    
    310
    
    
    
    1,290Borrowings
    
    
    564
    
    
    
    98
    
    
    
    662Total interest-bearing liabilities
    
    
    1,544
    
    
    
    408
    
    
    
    1,952Change in net interest income
    
    $
    2,102
    
    
    $
    556
    
    
    $
    2,658
 Nine Months Ended September 30,2005 vs. 2004Increase (Decrease)Due to
    
    
    TotalIncreaseVolume
    
    
    Rate
    
    
    (Decrease)(In thousands)Interest-earning assets:Loans
    
    $
    8,172
    
    
    $
    917
    
    
    $
    9,089Securities
    
    
    155
    
    
    
    224
    
    
    
    379Short-term investments
    
    
    33
    
    
    
    204
    
    
    
    237Total interest-earning assets
    
    
    8,360
    
    
    
    1,345
    
    
    
    9,705Interest-bearing liabilities:Savings deposits
    
    
    16
    
    
    
    6
    
    
    
    22Money market
    
    
    379
    
    
    
    389
    
    
    
    768NOW accounts
    
    
    10
    
    
    
    15
    
    
    
    25Certificates of deposits
    
    
    1,558
    
    
    
    204
    
    
    
    1,762Total deposits
    
    
    1,963
    
    
    
    614
    
    
    
    2,577Borrowings
    
    
    1,482
    
    
    
    (163
    )
    
    
    1,319Total interest-bearing liabilities
    
    
    3,445
    
    
    
    451
    
    
    
    3,896Change in net interest income
    
    $
    4,915
    
    
    $
    894
    
    
    $
    5,809
 23




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24




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Provision for Loan Losses
  Non-interest Income
    25




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For the ThreeMonths EndedSeptember 30, 2005(In thousands)Income:Fees earned on ATM servicing contracts
    
    $
    493Expenses:Interest expense
    
    
    281Personnel costs
    
    
    78Occupancy and equipment
    
    
    9Total expenses
    
    
    368Pre-tax contribution margin
    
    $
    125
  Non-interest Expense
   26




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Income Taxes
  Liquidity and Capital Resources
     27




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Contractual Obligations:
 At September 30, 2005More 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)
    
    $
    128,926
    
    
    $
    1,969
    
    
    $
    56,957
    
    
    $
    40,000
    
    
    $
    30,000Subordinated Debt
    
    
    9,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000Other (2)
    
    
    5,671
    
    
    
    1,732
    
    
    
    3,363
    
    
    
    576
    
    
    
    Total Contractual Obligations
    
    $
    143,597
    
    
    $
    3,701
    
    
    $
    60,320
    
    
    $
    40,576
    
    
    $
    39,000
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally 1-4 Family
Residential mortgage loans. Advances totalling $36 million shown with maturities of greater than three years may be called by the
FHLB during the period remaining to maturity. These advances bear rates ranging from 3.99% to 4.91%, with a weighted
average rate of 4.47%. Based on the current and predicted level of market interest rates, management considers it
likely that these advances will be called by the FHLBB in the next 12 months. One knock-out advance in the amount of
$10 million maturing in June, 2010 will become immediately payable if 3-month LIBOR rises above 6.0%
(measured on a quarterly basis, beginning in June 2006).(2)
    
    Represents contracts for technology services and employee compensation. Loan Commitments
 At September 30, 2005More than
    
    
    More thanOne Year
    
    
    Three YearsOne Year
    
    
    through Three
    
    
    through five
    
    
    Over FiveTotal
    
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years(In thousands)Commitments to grant loans (1)
    
    $
    37,507
    
    
    $
    37,507
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial loan lines of credit
    
    
    18,230
    
    
    
    18,230
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity loans (3)
    
    
    38,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,790Unused portion of construction loans (4)
    
    
    25,288
    
    
    
    18,632
    
    
    
    6,656
    
    
    
    
    
    
    
    Unused portion of personal lines of credit (2)
    
    
    2,460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,460Total Loan Commitments
    
    $
    122,275
    
    
    $
    74,369
    
    
    $
    6,656
    
    
    $
    
    
    
    $
    41,250
  
 (1)
    
    Commitments for loans are typically extended to customers for up to 180 days, after which they expire.(2)
    
    Unused portions of checking overdraft lines of credit are available to customers in good standing
indefinitely.(3)
    
    Unused portions of home equity loans are available to the borrower for up to 10 years.(4)
    
    Unused portions of construction loans are available to the borrower for up to 2 years for development
loans and up to 1 year for other construction loans. 28




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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, 2005:Total capital to risk weighted assets:Consolidated
    
    $
    86,287
    
    
    
    15.5
    %
    
    $
    44,600
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    60,435
    
    
    
    10.9
    
    
    
    44,494
    
    
    
    8.0
    
    
    $
    55,617
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:Consolidated
    
    
    80,656
    
    
    
    14.5
    
    
    
    22,300
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    54,804
    
    
    
    9.9
    
    
    
    22,247
    
    
    
    4.0
    
    
    
    33,370
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    80,656
    
    
    
    9.8
    
    
    
    32,958
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    54,804
    
    
    
    6.7
    
    
    
    32,883
    
    
    
    4.0
    
    
    
    41,103
    
    
    
    5.0December 31, 2004:Total capital to risk weighted assets:Consolidated
    
    $
    40,875
    
    
    
    12.5
    %
    
    $
    26,200
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    40,022
    
    
    
    12.3
    
    
    
    26,125
    
    
    
    8.0
    
    
    $
    32,656
    
    
    
    10.0
    %Tier 1 capital to risk weighted assets:Consolidated
    
    
    37,703
    
    
    
    11.5
    
    
    
    13,100
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,850
    
    
    
    11.3
    
    
    
    13,062
    
    
    
    4.0
    
    
    
    19,594
    
    
    
    6.0Tier 1 capital to average assets:Consolidated
    
    
    37,703
    
    
    
    7.3
    
    
    
    20,545
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,850
    
    
    
    7.2
    
    
    
    20,513
    
    
    
    4.0
    
    
    
    25,641
    
    
    
    5.0
 29




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
   Percentage Change in EstimatedNet Interest Income over 12months200 basis point increase in rates
    
    1.04%100 basis point increase in rates
    
    .62%Flat interest rates
    
    100 basis point decrease in rates
    
    (2.50)%
    30




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Up to
    
    
    More than
    
    
    More than
    
    
    More than
    
    
    More than
    
    
    More thanone
    
    
    one year to
    
    
    two years to
    
    
    three years to
    
    
    four years to
    
    
    fiveyear
    
    
    two years
    
    
    three years
    
    
    four years
    
    
    five years
    
    
    years
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans (1)
    
    $
    243,867
    
    
    $
    107,930
    
    
    $
    89,224
    
    
    $
    81,758
    
    
    $
    37,875
    
    
    $
    46,304
    
    
    $
    606,958Securities (2)
    
    
    47,922
    
    
    
    37,677
    
    
    
    10,049
    
    
    
    5,846
    
    
    
    2,068
    
    
    
    26,076
    
    
    
    129,638Short-term investments
    
    
    13,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,546Total interest-earning assets
    
    
    305,335
    
    
    
    145,607
    
    
    
    99,273
    
    
    
    87,604
    
    
    
    39,943
    
    
    
    72,380
    
    
    
    750,142Interest-bearing liabilities:Savings deposits
    
    
    39,623
    
    
    
    24,448
    
    
    
    15,084
    
    
    
    9,307
    
    
    
    5,742
    
    
    
    9,251
    
    
    
    103,455Money market
    
    
    59,050
    
    
    
    23,915
    
    
    
    9,686
    
    
    
    3,923
    
    
    
    1,589
    
    
    
    1,081
    
    
    
    99,243NOW accounts
    
    
    2,715
    
    
    
    2,465
    
    
    
    2,238
    
    
    
    2,032
    
    
    
    1,845
    
    
    
    18,212
    
    
    
    29,508Certificates of deposits
    
    
    171,877
    
    
    
    56,444
    
    
    
    10,350
    
    
    
    4,258
    
    
    
    1,926
    
    
    
    
    
    
    
    244,855Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    38,000
    
    
    
    24,000
    
    
    
    33,000
    
    
    
    
    
    
    
    33,926
    
    
    
    9,000
    
    
    
    137,926Total interest-bearing liabilities
    
    $
    311,265
    
    
    $
    131,272
    
    
    $
    70,358
    
    
    $
    19,520
    
    
    $
    45,028
    
    
    $
    37,545
    
    
    $
    614,987Interest rate sensitivity gap
    
    
    (5,930
    )
    
    
    14,335
    
    
    
    28,915
    
    
    
    68,084
    
    
    
    (5,085
    )
    
    
    34,835
    
    
    
    135,155Interest rate sensitivity gap as a %
of total assets
    
    
    -0.69
    %
    
    
    1.67
    %
    
    
    3.38
    %
    
    
    7.95
    %
    
    
    -0.59
    %
    
    
    4.07
    %Cum. interest rate sensitivity gap
    
    
    (5,930
    )
    
    
    8,406
    
    
    
    37,321
    
    
    
    105,405
    
    
    
    100,320
    
    
    
    135,155Cum. interest rate sensitivity gap
as a % of total assets
    
    
    -0.69
    %
    
    
    0.98
    %
    
    
    4.36
    %
    
    
    12.31
    %
    
    
    11.72
    %
    
    
    15.79
    %
 
 (1)
    
    Excludes the allowance for loan losses, deferred fees and costs, and non-performing loans.(2)
    
    Securities are shown at amortized cost.  31




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##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
  Changes in Internal Controls Over Financial Reporting.
 32




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 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. The Use of Proceeds from the Companys stock
offering, which closed on April 4, 2005, was reported in the Companys Quarterly Report
on Form 10-Q for the Quarter ended March 31, 2005.(c)
    
    Repurchases of Our Equity Securities.The Companys employee stock ownership
plan, an affiliated purchaser, purchased the following shares of the Companys common
stock during the quarter:
 (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 (1)
    
    under the Plans or Programs (1)July 1-31
    
    
    0
    
    
    
    
    
    
    
    0
    
    
    178,194August 1-31
    
    
    77,500
    
    $
    14.15
    
    
    77,500
    
    
    100,694September 1-30
    
    
    55,200
    
    $
    13.96
    
    
    55,200
    
    
    45,494
 
 (1)
    
    In a press release issued on March 31, 2005 and in a Current Report on Form
8-K filed on April 1, 2005, the Company announced that its employee stock ownership
plan (the ESOP) intended to purchase in the public offering after market up to
478,194 shares of the Companys common stock, or 8% of the shares sold in the offering
and issued to the Benjamin Franklin Bank Charitable Foundation. In the second quarter
of 2005, the ESOP purchased 300,000 shares, resulting in a total of 432,700 shares
purchased through September 30, 2005. There is no expiration date for these planned
purchases. These purchases have been and will continue to be effected by the
independent corporate trustee of the Companys ESOP. 
 Item 3. Defaults on Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
  Exhibit No.
    
    Description
    
    Footnotes2.1
    
    Plan of Conversion of Benjamin Franklin Bancorp.
    
    
    3
 33




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##### Table of Contents



Exhibit No.
    
    Description
    
    Footnotes2.2
    
    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.
    
    
    24.1
    
    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 Brian E. Ledwith,
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
    
    Benjamin Franklin Bank Salary Continuation Agreement with Thomas
R. Venables dated as of August 22, 2002. *
    
    
    210.5
    
    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. *
    
    
    211
    
    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.
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##### Table of Contents



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 Forma 10-K,
filed on March 29, 2005.
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##### Table of Contents



SIGNATURES
  Benjamin Franklin Bancorp, Inc.Date: November 14, 2005
    
    
    
    By:
    
    /s/ Thomas R. VenablesThomas R. VenablesPresident and Chief Executive OfficerDate: November 14, 2005
    
    
    
    By:
    
    /s/ Claire S. BeanClaire S. BeanTreasurer and Chief Financial Officer
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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.
 37