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  **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 THESECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2008****OR**   o **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934****Commission file number 000-51194** **Benjamin Franklin Bancorp, Inc.**(Exact Name of Registrant as Specified in its Charter)   **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)Registrant’s telephone number, including area code: **(617) 528-7000**      Indicate by check mark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes þ      No o     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company.See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filero               Accelerated filerþ                        Non-accelerated filero                        Smaller reporting companyo                                      (Do not check if a smaller reporting company)Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes o      No þ     Shares outstanding of the registrant’s common stock (no par value) at May 8, 2008: 7,666,172  
 

 
               **Page** **PART I – FINANCIAL INFORMATION**                  Item 1. Financial Statements  3              Consolidated Balance Sheets at March 31, 2008 and December 31, 2007  3              Consolidated Statements of Income for the three months endedMarch 31, 2008 and 2007  4              Consolidated Statements of Changes in Stockholders’ Equity for the three months endedMarch 31, 2008 and 2007  5              Consolidated Statements of Cash Flows for the three months endedMarch 31, 2008 and 2007  6              Notes to Condensed Consolidated Financial Statements  8               Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  10               Item 3. Quantitative and Qualitative Disclosures about Market Risk  24               Item 4. Controls and Procedures  25          **PART II – OTHER INFORMATION**                  Item 1. Legal Proceedings  26               Item 1A Risk Factors  26               Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  26               Item 3. Defaults on Senior Securities  26               Item 4. Submission of Matters to a Vote of Security Holders  26               Item 5. Other Information  26               Item 6. Exhibits  26          **SIGNATURES**  29  EX-10.1.1 FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH THOMAS R. VENABLES EX-10.1.2 FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT WITH CLAIRE S. BEAN EX-10.2 FORM OF CHANGE IN CONTROL EX-10.4.1 AMENDED RETIREMENT AGREEMENT BETWEEN BENJAMIN FRANKLIN BANK AND THOMAS R. VENABLES EX-10.4.2 AMENDED RETIREMENT AGREEMENT BETWEEN BENJAMIN FRANKLIN BANK AND CLAIRE BEAN EX-31.1 SECTION 302 CERTIFICATION OF THE CEO EX-31.2 SECTION 302 CERTIFICATION OF CFO EX-32.1 SECTION 906 CERTIFICATION OF CEO EX-32.2 SECTION 906 CERTIFICATION OF THE CFO
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     **PART I. FINANCIAL INFORMATION****Item 1. Financial Statements****BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY****CONSOLIDATED BALANCE SHEETS****(Dollars in thousands)**           March 31,  December 31,   2008  2007   (Unaudited)  (Audited) **ASSETS**        Cash and due from banks $11,428  $12,226 Cash supplied to ATM customers  29,285   42,002 Short-term investments  29,875   10,363        Total cash and cash equivalents  70,588   64,591 Securities available for sale, at fair value  172,882   156,761 Restricted equity securities, at cost  12,908   11,591        Total securities  185,790   168,352          Loans        Residential real estate  210,309   188,654 Commercial real estate  168,774   168,649 Construction  50,525   55,763 Commercial business  177,143   159,233 Consumer  39,107   40,436        Total loans, gross  645,858   612,735 Allowance for loan losses  (6,090)  (5,789)       Loans, net  639,768   606,946 Premises and equipment, net  5,289   5,410 Accrued interest receivable  3,599   3,648 Bank-owned life insurance  10,801   10,700 Goodwill  33,763   33,763 Other intangible assets  2,304   2,474 Other assets  6,703   7,394          $958,605  $903,278                 **LIABILITIES AND STOCKHOLDERS’ EQUITY**        Deposits:        Regular savings accounts $80,630  $79,167 Money market accounts  118,303   110,544 NOW accounts  62,076   52,000 Demand deposit accounts  114,770   113,023 Time deposit accounts  267,727   262,634        Total deposits  643,506   617,368          Short-term borrowings  2,500   2,500 Long-term debt  192,230   162,784 Deferred gain on sale of premises  3,468   3,531 Other liabilities  9,902   9,651        Total liabilities  851,606   795,834                 Common stock, no par value; 75,000,000 sharesauthorized;7,844,815 shares issued and 7,670,572 sharesoutstandingat March 31, 2008; 8,030,415 shares issued and7,856,172 shares outstanding at December 31, 2007  —   — Additional paid-in capital  74,918   77,370 Retained earnings  39,120   38,515 Unearned compensation  (6,911)  (7,094)Accumulated other comprehensive loss  (128)  (1,347)       Total stockholders’ equity  106,999   107,444          $958,605  $903,278        See accompanying notes to condensed consolidated financial statements
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**BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY****CONSOLIDATED STATEMENTS OF INCOME****(Dollars in thousands, except per share data)**           Three Months Ended   March 31,   2008  2007   (Unaudited) Interest and dividend income:        Loans, including fees $9,891  $9,706 Debt securities  2,006   1,686 Dividends  160   166 Short-term investments  242   281        Total interest and dividend income  12,299   11,839          Interest expense:        Interest on deposits  3,858   4,156 Interest on short-term borrowings  29   129 Interest on long-term debt  2,106   1,728        Total interest expense  5,993   6,013        Net interest income  6,306   5,826 Provision for loan losses  314   183        Net interest income, after provision for loanlosses  5,992   5,643                 Other income:        ATM servicing fees  343   697 Deposit servicing fees  363   340 Other loan-related fees  253   331 Gain on sale of loans, net  104   103 Gain on sale of bank-owned premises, net  63   250 Income from bank-owned life insurance  101   97 Miscellaneous  251   154        Total other income  1,478   1,972                 Operating expenses:        Salaries and employee benefits  3,231   3,613 Occupancy and equipment  944   908 Data processing  601   604 Professional fees  175   237 Marketing and advertising  77   128 Amortization of intangible assets  170   217 Other general and administrative  582   1,079        Total operating expenses  5,780   6,786        Income before income taxes  1,690   829 Provision for income taxes  578   238        Net income $1,112  $591                 Weighted-average shares outstanding:        Basic  7,342,147   7,814,438 Diluted  7,393,717   7,837,969          Earnings per share:        Basic $0.15  $0.08 Diluted $0.15  $0.07 See accompanying notes to condensed consolidated financial statements
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**BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY****CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY****(Dollars in thousands)****(Unaudited)**                                                   Accumulated              Additional          Other  Total   Common Stock  Paid-in  Retained  Unearned  Comprehensive  Stockholders’   Shares  Amount  Capital  Earnings  Compensation  Loss  Equity Balance at December 31, 2006  8,249,802  $—  $82,909  $36,634  $(7,938) $(2,200) $109,405 Comprehensive income:                            Net income  —   —   —   591   —   —   591 Net unrealized loss on securities availableforsale, net of reclassification adjustmentand tax effects  —   —   —   —   —   (362)  (362)Total comprehensive income                          229                                                          Common stock repurchased  (50,000)  —   (747)  —   —   —   (747)Restricted stock expense  —   —   —   —   164   —   164 Stock option expense  —   —   205   —   —   —   205 Release of ESOP stock  —   —   15   —   46   —   61 Dividends declared ($.04 per share)  —   —   —   (336)  —   —   (336)                                                   Balance at March 31, 2007  8,199,802  $—  $82,382  $36,889  $(7,728) $(2,562) $108,981                                                    Balance at December 31, 2007  7,856,172  $—  $77,370  $38,515  $(7,094) $(1,347) $107,444                              Comprehensive income:                            Net income  —   —   —   1,112   —   —   1,112 Net unrealized gain on securities availableforsale, net of tax effects  —   —   —   —   —   1,219   1,219 Total comprehensive income                          2,331                                                          Common stock repurchased  (185,600)  —   (2,548)  —   —   —   (2,548)Restricted stock expense  —   —   —   —   137   —   137 Stock option expense  —   —   88   —   —   —   88 Release of ESOP stock  —   —   8   —   46   —   54 Dividends declared ($.06 per share)  —   —   —   (507)  —   —   (507)                                                   Balance at March 31, 2008  7,670,572  $—  $74,918  $39,120  $(6,911) $(128) $106,999                       See accompanying notes to condensed consolidated financial statements
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     **BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY****CONSOLIDATED STATEMENTS OF CASH FLOWS****(Dollars in thousands)****(Unaudited)**           Three Months Ended March 31,   2008  2007 Cash flows from operating activities:        Net income $1,112  $591 Adjustments to reconcile net income to net cashprovided by (used for) operating activities:        Accretion of securities, net  (82)  (181)Amortization of loans, net  60   19 Amortization of deferred gain on sale of premises  (63)  (63)Gain on sale of premises, net  —   (187)Provision for loan losses  314   183 Accretion of deposits and borrowing discounts, net  —   (3)Amortization of mortgage servicing rights  80   62 Depreciation expense  212   237 Amortization of intangible assets  170   217 Stock-based compensation and ESOP  279   430 Income from bank-owned life insurance  (101)  (97)Gain on sale of loans, net  (104)  (103)Loans originated for sale  (1,111)  (9,886)Proceeds from sales of loans  1,215   9,989 Decrease (increase) in accrued interest receivable  49   (288)Other, net  805   (2,126)       Net cash provided by (used for) operating activities  2,835   (1,206)                Cash flows from investing activities:        Activity in available-for-sale securities:        Maturities, calls, and principal repayments  31,493   15,208 Purchases  (46,256)  (48,287)Net change in restricted equity securities  (1,317)  (233)Loan originations, net  (33,196)  (15,225)Proceeds from sales of loans held for sale  —   62,122 Proceeds from sales of premises and equipment  —   821 Additions to premises and equipment  (91)  (150)       Net cash provided by (used for) investing activities  (49,367)  14,256        (Continued)See accompanying notes to condensed consolidated financial statements
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**BENJAMIN FRANKLIN BANCORP,INC. AND SUBSIDIARY****CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)****(Dollars in thousands)****(Unaudited)**           Three Months Ended March 31,   2008  2007 Cash flows from financing activities:        Net increase (decrease) in deposits  26,144   (1,523)Net change in short-term borrowings  —   (9,400)Proceeds from long-term debt  29,500   — Repayment of long-term debt  (60)  (10,041)Common stock repurchased  (2,548)  (747)Dividends paid on common stock  (507)  (336)       Net cash provided by (used for) financing activities  52,529   (22,047)                Net change in cash and cash equivalents  5,997   (8,997)Cash and cash equivalents at beginning of period  64,591   72,595                 Cash and cash equivalents at end of period $70,588  $63,598                 Supplemental cash flow information:        Interest paid on deposits $3,849  $4,260 Interest paid on borrowings  2,032   1,879 Income taxes paid  395   965 Loans held for sale transferred to loans, net  —   1,063 Loans held for sale transferred to other assets  —   545 See accompanying notes to condensed consolidated financial statements
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**BENJAMIN FRANKLIN BANCORP, INC AND SUBSIDIARY****NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS****(Unaudited)** ***1.*** ***Basis of presentation and consolidation***    The accompanying unaudited consolidated interim financial statements include the accounts ofBenjamin Franklin Bancorp, Inc. (the “Company’’) and its wholly-owned subsidiary, BenjaminFranklin Bank (the “Bank’’). These financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of America (“GAAP”) forinterim financial statements and the instructions for Form 10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by GAAPfor complete financial statements. In the opinion of management, all adjustments (consistingof only normal recurring adjustments) necessary for a fair presentation have been included.    The Company operates as one reportable segment for financial reporting purposes. Allsignificant intercompany items are eliminated in consolidation. Certain amounts previouslyreported have been reclassified to conform to the current year’s presentation.    These consolidated interim financial statements should be read in conjunction with theaudited consolidated financial statements and notes thereto included in the Company’s AnnualReport on Form 10-K as of and for the year ended December 31, 2007.  *** ****** ******Recent Accounting Pronouncements***    In December 2007, the FASB issued Statement No. 141 (revised), “Business Combinations.” ThisStatement replaces FASB Statement No. 141, and applies to all business entities, includingmutual entities that previously used the pooling-of-interests method of accounting forcertain business combinations. Under Statement No. 141 (revised) an acquirer is required torecognize at fair value the assets acquired, liabilities assumed, and any non-controllinginterest in the acquiree at the acquisition date. This replaces the cost allocation processunder Statement No. 141, which resulted in the non-recognition of some assets andliabilities at the acquisition date and in measuring some assets and liabilities at amountsother than their fair values at the acquisition date. This Statement requires thatacquisition costs and expected restructuring costs be recognized separately from theacquisition, and that the acquirer in a business combination achieved in stages recognizethe identifiable assets and liabilities, as well as the non-controlling interest in theacquiree, at the full amounts of their fair values. This Statement also requires an acquirerto recognize assets acquired and liabilities assumed arising from contractual contingenciesas of the acquisition date, while Statement 141 allowed for the deferred recognition ofpre-acquisition contingencies until certain recognition criteria were met, and an acquireris only required to recognize assets or liabilities arising from all other contingencies ifit is more likely than not that they meet the definition of an asset or a liability. Underthis Statement, an acquirer is required to recognize contingent consideration at theacquisition date, whereas contingent consideration obligations usually were not recognizedat the acquisition date under Statement 141. Further, this Statement eliminates the conceptof negative goodwill and requires gain recognition in instances in which the totalacquisition-date fair value of the identifiable net assets acquired exceeds the fair valueof the consideration transferred plus any non-controlling interest in the acquiree. ThisStatement makes significant amendments to other Statements and other authoritative guidance,and applies prospectively to business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008. An entity may not apply it before that date.    In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests inConsolidated Financial Statements, an amendment of ARB No. 51.” This Statement establishesaccounting and
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   reporting standards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiaryis an ownership interest in the consolidated entity that should be reported as equity in theconsolidated financial statements. This Statement is effective for fiscal years beginning onor after December 15, 2008.  ***2.*** ***Commitments***    Outstanding loan commitments totaled $137.8 million at March 31, 2008, compared to $116.4million as of December 31, 2007. Loan commitments consist of commitments to originate newloans as well as the outstanding undrawn portions of lines of credit.  ***3.*** ***Earnings per share***    Basic earnings per share (“EPS”) excludes dilution and is calculated by dividing net incomeavailable tocommon stockholders by the weighted-average number of shares of common stock outstandingduring theperiod. Diluted EPS is computed in a manner similar to that of basic EPS except that theweighted-average number of common shares outstanding is increased to include the number ofincremental common shares (computed using the treasury stock method) that would have beenoutstanding if all potentially dilutive common stock equivalents (such as stock options andunvested restricted stock) were issued during the period. For the quarters ended March 31,2008 and 2007, potentially dilutive common stock equivalents totaled 51,570 shares and23,531 shares, respectively, representing the effect of dilutive restricted stock.Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equityand are not included in the weighted-average number of common shares outstanding for eitherbasic or diluted earnings per share calculations.  ***4.*** ***Fair Values of Assets and Liabilities***    Effective January 1, 2008, the Company adopted Statement of Financial Accounting StandardsNo. 157 (“SFAS 157”), “Fair Value Measurements”, which provides a framework for measuringfair value under generally accepted accounting principles.    The Company also adopted SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities, including an amendment of FASB Statement No. 115.” SFAS 159 allowsan entity the irrevocable option to elect fair value for the initial and subsequentmeasurement for certain financial assets and liabilities on a contract-by-contract basis.The Company did not elect fair value treatment for any financial assets or liabilities uponadoption.    In accordance with SFAS 157, the Company groups its financial assets and financialliabilities measured at fair value in three levels, based on the markets in which the assetsand liabilities are traded and the reliability of the assumptions used to determine fairvalue.    Level 1 – Quoted prices in active markets for identical assets or liabilities.    Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similarassets or liabilities; quoted prices in markets that are not active; or other inputs thatare observable or can be corroborated by observable market data for substantially the fullterm of the assets or liabilities.    Level 3 — Unobservable inputs that are supported by little or no market activity and thatare significant to the fair value of the assets or liabilities. Level 3 assets andliabilities include financial instruments whose value is determined using pricing models,discounted cash flow methodologies, or similar techniques, as well as instruments for whichthe determination of fair value requires significant management judgment or estimation.
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   Assets measured at fair value on a recurring basis are summarized below. There are noliabilities measured at fair value on a recurring basis at March 31, 2008:                   March 31, 2008               Assets at   Level 1  Level 2  Level 3  Fair Value   (Dollars in thousands) Assets                Securities available for sale $—  $172,882  $—  $172,882     Total assets $—  $172,882  $—  $172,882          Securities classified as available for sale are reported at fair value utilizing Level 2inputs. For these securities, the Company obtains fair value measurements from anindependent pricing service that subscribes to multiple third-party pricing vendors. Thepricing service conducts a series of quality assurance activities on a monthly basis toselect the most appropriate pricing vendor for each sector of the bond market. The fairvalue measurements consider observable market data that may include, among other data,benchmark yields and spread relationships, cash flows, collateral attributes, marketconsensus prepayment speeds, and credit risk information as well as terms and conditionsrelevant to the individual bond (such as issuer, coupon, maturity and credit rating).    Also, the Company may be required, from time to time, to measure certain other financialassets on a nonrecurring basis in accordance with GAAP. These adjustments to fair valueusually result from application of lower-of-cost-or-market accounting or write-downs ofindividual assets. The following table summarizes the fair value hierarchy used todetermine each adjustment and the carrying value of the related individual assets as ofMarch 31, 2008.                               Quarter ended   March 31, 2008  March 31, 2008               Total   Level 1  Level 2  Level 3  Gains/(Losses)   (Dollars in thousands) Assets                Impaired loans $—  $—  $1,134  $(64)    Total assets $—  $—  $1,134  $(64)        The amount of impaired loans represents the carrying value and related write-downs of impaired loansfor which adjustments are based on the appraised value of thecollateral. Appraised values are typically based on a blend of (a) an income approach using unobservable cashflows to measure fair value, and (b) a market approach using observable market comparables. Theseappraised values may be discounted based on management’s historical knowledge, expertise or changesin market conditions from the time of valuation. For these reasons, impaired loans are categorizedas Level 3 assets.**Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations**The following analysis discusses the changes in financial position and results of operations of theCompany, and should be read in conjunction with the Company’s unaudited consolidated interimfinancial statements and the notes thereto, appearing in Part I, Item 1 of this document.**Forward-Looking Statements**
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Certain statements herein constitute “forward-looking statements” and actual results may differfrom those contemplated by these statements. Forward-looking statements can be identified by thefact that they do not relate strictly to historical or current facts. They often include words like“believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as“will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results todiffer materially from expected results include changes in the interest rate environment, changesin general economic conditions, legislative and regulatory changes that adversely affect thebusinesses in which the Company is engaged and changes in the securities market.**Critical Accounting Policies**Critical accounting policies are those that involve significant judgments and assessments bymanagement, and which could potentially result in materially different results under differentassumptions and conditions. As discussed in the Company’s 2007 Annual Report on Form 10-K, theCompany considers its critical accounting policies to be those associated with the allowance forloan losses, the valuation of goodwill and other intangible assets and the valuation of deferredtax assets. The Company’s critical accounting policies have not changed since December 31, 2007.**Comparison of Financial Condition at March 31, 2008 and December 31, 2007****Overview**Total assets increased by $55.3 million, or 6.1%, to $958.6 million at March 31, 2008 from $903.3million at December 31, 2007. The increase in assets was primarily attributable to increases in netloans (up $32.8 million or 5.4%), securities (up $17.4 million or 10.4%) and cash/cash equivalents(up $6.0 million or 9.3%, in total). Funding these increases were growth in deposits, whichincreased by $26.1 million or 4.2%, and in borrowed funds, which increased by $29.4 million or17.8%.**Investment Activities**Cash and cash equivalent balances increased by $6.0 million to $70.6 million at March 31, 2008,compared to $64.6 million at December 31, 2007. That increase was principally due to a $19.5million increase in short-term investments, offset by a reduction of $12.7 million in cash suppliedto ATMs owned by ATM customers. The decline in ATM cash was due to seasonal fluctuations as well asto the loss of one customer on February 1, 2008.At March 31, 2008, the Company’s securities portfolio amounted to $185.8 million, or 19.4% of totalassets. When compared to year-end 2007, securities increased by $17.4 million, or 10.4%, by March31, 2008. The increase consisted almost entirely of increases in government-sponsored enterpriseinsured mortgage-backed securities. The following table sets forth certain information regardingthe amortized cost and fair values of the Company’s securities at the dates indicated:
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                   **March 31,**  **December 31,**   **2008**  **2007**   **Amortized**  **Fair**  **Amortized**  **Fair**   **Cost**  **Value**  **Cost**  **Value**   **(Dollars in thousands)** **Securities available for sale:**                Government-sponsoredenterprise obligations $83,215  $83,917  $85,972  $86,178 Municipal obligations  1,205   1,208   1,206   1,202                 84,420   85,125   87,178   87,380 Mortgage-backed securities  88,443   87,757   70,839   69,381                               Total debt securities  172,863   172,882   158,017   156,761                               Total available for sale securities $172,863  $172,882  $158,017  $156,761                               **Restricted equity securities:**                Federal Home Loan Bank of Boston stock $10,427  $10,427  $9,110  $9,110 Access Capital StrategiesCommunity Investment Fund  1,965   1,965   1,965   1,965 SBLI & DIF stock  516   516   516   516                               Total restricted equity securities $12,908  $12,908  $11,591  $11,591              **Lending Activities**The Company’s net loan portfolio aggregated $639.8 million on March 31, 2008, or 66.7% of totalassets on that date. As of December 31, 2007, the net loan portfolio totaled $606.9 million, or67.2% of total assets. The main components of the growth of $32.8 million in the quarter were a$21.7 million (11.5%) increase in residential mortgage loans and a $17.9 million (11.2 %) increasein commercial business loans. Offsetting these increases was a reduction of $5.2 million (9.4%) inconstruction loans outstanding. The growth in residential loans reflects the Company’s decision inlate 2007 to retain most new residential originations (fixed-rate and adjustable-rate) inportfolio, due to the recent widening of market spreads available on most residential mortgageproducts. Previously, for much of 2006 and 2007, the Company had sold most fixed-rate residentialloan production in the secondary market. While demand for commercial business loans remained strongin the first quarter of 2008, management considers it likely that demand will lessen in futurequarters as a result of the economic downturn currently occurring in New England and nationally.The following table sets forth the composition of the loan portfolio at the dates indicated:
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                   **March 31, 2008**  **December 31, 2007**   **Amount**  **Percent**  **Amount**  **Percent**   (Dollars in thousands) Mortgage loans on real estate:                Residential $209,598   32.51% $187,991   30.73%Commercial  168,603   26.14%  168,463   27.54%Construction  50,525   7.83%  55,763   9.11%Home equity  36,685   5.69%  37,768   6.17%                 465,411   72.17%  449,985   73.55%                              Other loans:                Commercial  177,143   27.46%  159,233   26.03%Consumer  2,331   0.36%  2,592   0.42%                179,474   27.83%  161,825   26.45%                              Total loans  644,885   100.00%  611,810   100.00%                                Other items:                Net deferred loan costs  973       925     Allowance for loan losses  (6,090)      (5,789)                   Total loans, net $639,768      $606,946                    **Non-performing Assets**The table below sets forth the amounts and categories of the Company’s non-performing assets at thedates indicated. At each date presented, the Company had no troubled debt restructurings (loans forwhich a portion of interest or principal has been forgiven and loans modified at interest ratesmaterially less than current market rates):
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           **March 31, 2008**  **December 31, 2007**   **(Dollars in thousands)** **Non-accrual loans:**        Residential mortgage $1,038  $712 Commercial mortgage  583   658 Construction  —   — Commercial  —   — Consumer and other  327   228        **Total non-accrual loans** $1,948  $1,598                 **Loans greater than 90 days delinquentand still accruing:** $—  $—          $—  $—                 **Total non-performing loans and assets** $1,948  $1,598                 **Ratios:**        Non-performing loans to total loans  0.30%  0.26%Non-performing assets to total assets  0.20%  0.18%The level of non-performing loans increased modestly, by $350,000, when compared to year-end 2007.The Bank’s “watch loans” (loans rated special mention or substandard) increased by $7.4 millionduring the quarter. This increase is the result of weakness exhibited in one $7.5 millioncommercial real estate loan relationship, for which the primary source of repayment has recentlyceased due to the loss of a tenant. Based on a review of all relevant factors, including thecollateral securing this loan, no specific reserve has been allocated for this loan. As of April30, 2008, this loan is 49 days past due and has been placed on non-accrual status.**Allowance for Loan Losses**In originating loans, the Company recognizes that losses will be experienced on loans and that therisk of loss will vary with many factors, including the type of loan being made, thecreditworthiness of the borrower over the term of the loan, general economic conditions and, in thecase of a secured loan, the quality of the security for the loan over the term of the loan. TheCompany maintains an allowance for loan losses to absorb losses inherent in the loan portfolio, andas such, this allowance represents management’s best estimate of the probable known and inherentcredit losses in the loan portfolio as of the date of the financial statements.The allowance for loan losses is evaluated on a regular basis by management and is based uponmanagement’s periodic review of the collectibility of the loans in light of historical experience,portfolio volume and mix, geographic and large borrower concentrations, estimated credit lossesbased on internal and external portfolio reviews, adverse situations that may affect the borrower’sability to repay, estimated value of any underlying collateral and prevailing economic conditions.This evaluation is inherently subjective, as it requires estimates that are susceptible tosignificant revision as more information becomes available.
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The allowance consists of specific, general and unallocated components. The specific componentrelates to loans that are impaired. The general component covers non-impaired loans and is basedon historical loss experience adjusted for qualitative factors. Qualitative factors consideredinclude general business and economic conditions, the level of real estate values in our marketarea, the tenure and experience of the Company’s lending staff, the seasoning of the loanportfolio, and delinquency trends in the loan portfolio. An unallocated component is maintained tocover uncertainties that could affect management’s estimate of probable losses. The unallocatedcomponent of the allowance reflects the margin of imprecision inherent in the underlyingassumptions used in the methodologies for estimating specific and general losses in the portfolio.The following tables set forth Benjamin Franklin Bank’s percent of allowance by loan category andthe percent of the loans to total loans in each of the categories listed at the dates indicated.The allowance for loan losses allocated to each category is not necessarily indicative of futurelosses in any particular category and does not restrict the use of the allowance to absorb lossesin other categories:                           **At March 31,**  **At December 31,**   **2008**  **2007**           **Percent**          **Percent**           **of Loans**          **of Loans**       **Loan**  **in Each**      **Loan**  **in Each**   **Allowance**  **Balances**  **Category**  **Allowance**  **Balances**  **Category**   **for Loan**  **by**  **to Total**  **for Loan**  **by**  **to Total**   **Losses**  **Category**  **Loans**  **Losses**  **Category**  **Loans**   **(Dollars in thousands)** Mortgage loans on real estate:                        Residential $580  $209,598   32.50% $499  $187,991   30.73%Commercial  2,015   168,603   26.14%  1,959   168,463   27.54%Construction  805   50,525   7.83%  850   55,763   9.11%Home equity  138   36,685   5.69%  142   37,768   6.17%                      3,538   465,411   72.17%  3,450   449,985   73.55%                   Other loans:                        Commercial  2,101   177,143   27.47%  1,874   159,233   26.03%Consumer  66   2,331   0.36%  80   2,592   0.42%Unallocated (1)  385   0   0.00%  385   0   0.00%                      2,552   179,474   27.83%  2,339   161,825   26.45%                   **Total** $6,090  $644,885   100.00% $5,789  $611,810   100.00%                    (1) The unallocated portion of the allowance for loan losses is intended to capture the exposure, if any, that mayexist as a result of a number of qualitative factors that are difficult to quantify with precision.The Massachusetts economy has shown signs of a slow-down in recent months, and in particular,evidence of declines in residential real estate values. Values in the towns where the Bank’soffices are located have declined on average by nine percent since the market price peak in 2005(The Warren Group). Management monitors these trends closely, as well as many portfoliocharacteristics, including the level of delinquencies, charge-offs, and other measures of riskwithin the loan portfolio. In particular, portfolio delinquency (percentage of loans greater than30 days past due) stood at 0.91% at March 31, 2008, compared to an average of 1.07% for 2007.Net charge-offs in the first quarter of 2008 were $13,000, compared to $22,000 in the comparable 2007quarter and $182,000 in total for 2007. In the first quarter of 2008, this analysis did not result in anysignificant change in the general and unallocated components of the allowance, other than thatproduced by changes in the balances outstanding.A loan is considered impaired when, based on current information and events, it is probable thatthe Company will be unable to collect the scheduled payments of principal or interest when dueaccording to the contractual terms of the loan agreement. Factors considered by management indetermining impairment include payment status, collateral value, and the probability of collectingscheduled principal and interest payments when due. Impairment is measured on a loan-by-loan basisfor commercial loans by either the present value of expected future cash flows discounted at theloan’s effective interest rate or the fair value of the collateral if the loan is collateraldependent. Large groups of smaller balance homogeneous loans are collectively evaluated forimpairment. Accordingly, the Company does not separately identify individual consumer andresidential loans for impairment disclosures. At March 31, 2008 and December 31, 2007, theCompany’s impaired loans totaled $1.1 million and $880,000 respectively. The specific valuationallowances carried within the allowance for loan losses for impaired loans at March 31, 2008 andDecember 31, 2007 were $64,000 and 37,000, respectively.While the Company believes that it has established adequate specific and general allowances forlosses on loans, adjustments to the allowance may be necessary if future conditions differsubstantially from the information used in making the evaluations. In addition, as an integralpart of their examination process, the Company’s regulators periodically review the allowance forloan losses.The following table sets forth activity in the Company’s allowance for loan losses for the periodsindicated:
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           **Three Months Ended**   **March 31,**   **2008**  **2007**   **(Dollars in thousands)** **Balance at beginning of period** $5,789  $5,337          **Charge-offs:**        Residential mortgage loans  —   — Commercial loans  —   (5)Consumer loans  (37)  (32)       Total charge-offs  (37)  (37)                **Recoveries:**        Commercial loans  12   2 Consumer loans  12   13        Total recoveries  24   15                 Net charge-offs  (13)  (22)         Provision for loan losses  314   183                 **Balance at end of period** $6,090  $5,498                 **Ratios:**        Net (charge-offs)/recoveries to average loansoutstanding  0.00%  0.00%Allowance for loan losses tonon-performing loans at end of period  312.63%  188.48%Allowance for loan losses tototal loans at end of period  0.94%  0.92%**Deposits**The following table sets forth the Company’s deposit accounts for the periods indicated:
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                   **March 31,**  **% of**  **December 31,**  **% of**   **2008**  **Total**  **2007**  **Total**   (Dollars in thousands) **Deposit type:**                Demand deposits $114,770   17.9% $113,023   18.3%NOW accounts  62,076   9.6%  52,000   8.4%Regular and other savings  80,630   12.5%  79,167   12.8%Money market deposits  118,303   18.4%  110,544   17.9%             Total non-certificate accounts  375,779   58.4%  354,734   57.5%                              Term certificates less than $100,000  160,611   25.0%  159,272   25.8%Term certificates of $100,000or more  107,116   16.6%  103,362   16.8%             Total certificate accounts  267,727   41.6%  262,634   42.6%                              Total deposits $643,506   100.0% $617,368   100.0%             The Company continued to make progress in growing its core deposit accounts (savings, money market,demand and NOW accounts), which increased by $21.0 million or 5.9% in the first quarter of 2008.Certificate accounts also increased, by $5.1 million, bringing total deposit growth in the quarterto $26.1 million, representing a 4.2% increase over deposit balances at year end 2007. Theseresults are primarily attributable to the opening of two new branch locations in the past 18 monthsand increases in commercial deposits in conjunction with growth in commercial loans.**Borrowed Funds**The Company’s borrowed funds increased by $29.4 million, or 17.8%, to a total of $194.7 million atMarch 31, 2008, compared to December 31, 2007. These additional borrowed funds (which wereprimarily a blend of 2 to 7 year Federal Home Loan Bank of Boston term advances) were usedprincipally to fund the growth in fixed rate residential mortgage loans during the quarter.**Stockholder’s Equity**Total stockholders’ equity was $107.0 million as of March 31, 2008, a decrease of $445,000 whencompared to the balance at December 31, 2007. The decrease was primarily attributable to therepurchase of 185,600 shares ($2.5 million) and dividends paid ($507,000), offset in part by a $1.2million increase in the fair value of securities available for sale (net of tax), earnings of $1.1million and stock-based compensation and ESOP expense ($279,000).**Comparison of Operating Results for the Three Months Ended March 31, 2008 and 2007**The Company earned net income of $1.1 million for the quarter ended March 31, 2008, an increase of$521,000 as compared to net income of $591,000 earned in the first quarter of 2007. The earningsincrease largely reflected significantly lower operating expenses and higher net interest income,partially offset by an increase in the provision for loan losses and a reduction in other income.
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**Analysis of Net Interest Income**Net interest income represents the difference between income on interest-earning assets and expenseon interest-bearing liabilities. Net interest income also depends upon the relative amounts ofinterest-earning assets and interest-bearing liabilities and the interest rates earned or paid onthem.The following tables set forth average balance sheets, average yields and costs, and certain otherinformation for the periods indicated. Most average balances are daily average balances.Non-accrual loans were included in the computation of average balances, but have been reflected inthe table as loans carrying a zero yield. The yields set forth below include the effect ofdeferred fees, discounts and premiums that are amortized or accreted to interest income or expense:                           **Three Months Ended March 31,**   **2008**  **2007**   **Average**          **Average**         **Outstanding**          **Outstanding**         **Balance**  **Interest**  **Yield/Rate**(1)  **Balance**  **Interest**  **Yield/Rate**(1)   (Dollars in thousands) **Interest-earning assets:**                        Loans $623,388  $9,891   6.30% $625,857  $9,706   6.21%Securities  175,757   2,166   4.93%  150,793   1,852   4.92%Short-term investments  33,556   242   2.85%  22,361   281   5.03%                   Total interest-earning assets  832,701   12,299   5.87%  799,011   11,839   5.93%                       Non-interest-earning assets  101,541           108,532                                Total assets $934,242          $907,543                                                         **Interest-bearing liabilities:**                        Savings accounts $78,829   78   0.40% $83,546   102   0.50%Money market accounts  116,948   621   2.14%  98,504   620   2.55%NOW accounts  55,245   294   2.14%  28,458   90   1.28%Certificates of deposit  266,709   2,865   4.32%  297,288   3,344   4.56%                   Total deposits  517,731   3,858   3.00%  507,796   4,156   3.32%Borrowings  183,253   2,135   4.61%  158,145   1,857   4.70%                   Total interest-bearing liabilities  700,984   5,993   3.42%  665,941   6,013   3.65%                       Non-interest bearing liabilities  125,607           131,766                                Total liabilities  826,591           797,707         Equity  107,651           109,836                                Total liabilities and equity $934,242          $907,543                                                         Net interest income     $6,306          $5,826                            Net interest rate spread (2)          2.46%          2.28%Net interest-earning assets (3) $131,717          $133,070                                Net interest margin (4)          3.04%          2.96%Average interest-earning assets tointerest-bearing liabilities          118.79%          119.98% (1) Yields and rates for the three months ended March 31, 2008 and 2007 areannualized. (2) Net interest rate spread represents the difference between the weighted-averageyield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. (3) Net interest-earning assets represents total interest-earning assets less totalinterest-bearing liabilities. (4) Net interest margin represents net interest income divided by average totalinterest-earning assets.
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The following table presents the dollar amount of changes in interest income and interest expensefor the major categories of the Company’s interest-earning assets and interest-bearing liabilities.Information is provided for each category of interest-earning assets and interest-bearingliabilities with respect to (i) changes attributable to changes in volume (i.e., changes in averagebalances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e.,changes in average rate multiplied by prior-period average balances). For purposes of this table,changes attributable to both rate and volume, which cannot be segregated, have been allocatedproportionately to the change due to volume and the change due to rate.               **Three Months Ended March 31,**   **2008 vs. 2007**   **Increase (Decrease)**      **Due to**  **Total**   ** **      **Increase**   **Volume**  **Rate**  **(Decrease)**   (In thousands) Interest-earning assets:            Loans $(38) $223  $185 Securities  308   6   314 Short-term investments  108   (147)  (39)          Total interest-earning assets  378   82   460                        Interest-bearing liabilities:            Savings accounts  (6)  (18)  (24)Money market accounts  106   (105)  1 NOW accounts  118   86   204 Certificates of deposit  (333)  (146)  (479)          Total deposits  (115)  (183)  (298)             Borrowings  293   (15)  278           Total interest-bearing liabilities  178   (198)  (20)          Change in net interest income $200  $280  $480           Net interest income for the quarter ended March 31, 2008 was $6.3 million, an increase of $480,000or 8.2% as compared to net interest income of $5.8 million for the three months ended March 31,2007. The increase was primarily the result of an eight basis point increase in the net interestmargin coupled with a $33.7 million increase in average interest-earning assets between the twoquarters.The Company’s net interest margin was 3.04% for the three months ended March 31, 2008, the same aswas achieved in the fourth quarter of 2007 and eight basis points higher than the 2.96% marginachieved in the year-earlier period. In the first quarter of 2007, the net interest margin wasstill suffering the negative effect of an inverted yield curve. In the past 4-5 months, the yieldcurve has once again become positively sloped, a situation that generally benefits the Company’snet interest margin.Interest income for the quarter ended March 31, 2008 was $12.3 million, an increase of $460,000 or3.9% compared to $11.8 million earned in the quarter ended March 31, 2007. This increase resultedfrom the $33.7 million increase in average interest-earning assets between the two periods, offsetin part by the effect of a 6 basis point decrease in the yield earned on average interest-earningassets. The largest increase in average interest-
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earning assets between the two periods was in securities, at $25.0 million, which in turncontributed $314,000 of the increase in interest income between the two periods. The averagebalance of loans outstanding declined slightly, by $2.5 million, largely a result of the sale of$62.1 million of residential loans in the first quarter of 2007. However, total loan incomeincreased period over period as a result of a nine basis point increase in the yield on loans,despite significant reductions in market interest rates over the past six months. This is dueprincipally to an increase in the proportion of commercial loans in the Company’s loan portfolio,which rose to 61.4% of total loans in the first quarter of 2008 compared to 58.4 % in the firstquarter of 2007. The average balance of short-term investments increased by $11.2 million duringthe quarter, while the yield on short-term investments decreased by 218 basis points, due to thesharp decline in short-term market interest rates in late 2007 and the first quarter of 2008.Interest expense for the quarter ended March 31, 2008 was $6.0 million, essentially unchanged whencompared to interest expense for the first quarter of 2007. Effectively, the negative effect of a$35.0 million increase in average interest-bearing liabilities was offset entirely by a 23 basispoint decline in the rate paid on those liabilities. Within the interest-bearing deposit portfolio,the average balances of ‘core’ accounts (money market, checking and savings accounts) increased onaverage by $40.5 million, while certificate balances decreased on average by $30.6 million whencomparing the two quarters. This favorable change in deposit mix coupled with the decline inshort-term market interest rates helped to reduce the weighted average rate on interest-bearingdeposits by 32 basis points from quarter to quarter. Borrowed funds increased on average by $25.1million from the first quarter of 2007 to 2008. These borrowings have been particularly useful inproviding funding of similar duration to that of newly originated or acquired fixed-rateresidential mortgage loans and mortgage-backed securities.**Provision for Loan Losses**The loan loss provision for the first quarter of 2008 was $314,000, compared to $183,000 providedin the comparable quarter in 2007. Provisions in both quarters were primarily reflective of growthand change in mix in the loan portfolio. The provision in the first quarter of 2008 largelyreflects year-to-date growth of $17.9 million in the commercial business loan portfolio, and to alesser degree, growth of $21.7 million in residential loans during the quarter. The Companyreserves a higher proportion for losses on commercial loans than it does for residential mortgageloans.At March 31, 2008, the allowance for loan losses totaled $6.1 million, or .94% of the loanportfolio, as compared to $5.8 million, or .92% of total loans, at March 31, 2007. The increase inthe allowance for loan losses as a percentage of the loan portfolio as of March 31, 2008 comparedto a year earlier was primarily due to an increase in the proportion of commercial loans in theportfolio.**Non-interest Income**Non-interest income decreased by $494,000 to $1.5 million in the 2008 first quarter from $2.0million in the first quarter of 2007. The most significant reason for the decline is a $354,000decrease in ATM servicing fees, caused primarily by a reduction in the yield earned on thesebalances. The yield on ATM cash balances is tied to the prime rate, which has declined by 300 bpssince the first quarter of 2007. Further, when the ATM customer list was sold in the second quarterof 2007, the Bank agreed to continue to provide cash to former ATM customers, but at a rate lowerthan previously earned since operational responsibility was transferred to the purchaser. Alsocontributing to the change between quarters was a non-recurring $187,000 gain recorded in the firstquarter of 2007 on the sale of bank-owned land.Less significant changes between the first quarters of 2008 and 2007 included a $78,000 decrease inother loan-related fees, due to lower loan prepayment penalty income ($150,000 was collected in thefirst quarter of 2008 compared to $235,000 in the comparable 2007 quarter). The Company alsobenefited from a $97,000 increase in miscellaneous income between the two quarters, consistingprimarily of increases in cash management service fees, debit card income and an increase in incomeearned on the sale of non-deposit investment products.
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**Non-interest Expense**The Company’s operating expenses decreased by $1.0 million or 14.8% in the first quarter of 2008,compared to the first quarter of 2007. The largest contributors to this decline were a $382,000decrease in salaries and benefits and a $497,000 decrease in other general and administrativeexpenses. Both reductions, as well as smaller decreases in professional fees and marketing, weredue primarily to cost containment measures instituted in late 2007 and early 2008.Within salaries and benefits, most of the $382,000 reduction in expense was in benefits costs.Stock incentive plan expense decreased by $143,000, due to the fact that the Company has beenrecognizing stock option expense using an accelerated method, which has resulted in higher expensesin the earlier portion of the multi-year vesting periods. Employee retirement costs and medicalbenefits declined by a total of $124,000, as the Company cut back its percentage participation inmedical and 401(k) plan costs, effective January 1, 2008. Within the other general andadministrative expense category, the sale of the Company’s ATM customer list in May of 2007contributed approximately $248,000 of the quarter over quarter savings, since post-sale, theCompany is no longer responsible for the operational aspects of providing ATM cash. Most of theremaining reduction in other general and administrative expense is the result of a non-recurringcharge in the amount of $176,000, representing the write-off of costs, previously capitalized uponthe issuance of subordinated debt, incurred in the first quarter of 2007. The decrease inoperating expenses in the first quarter of 2008 resulted in an improvement in the Company’sefficiency ratio, to 72.1% from 86.3% in the first quarter of 2007.**Income Taxes**The income tax provision of $578,000 recorded for the three months ended March 31, 2008 resulted inan effective tax rate of 34.2%. In the first quarter of 2007, income tax expense of $238,000equated to an effective tax rate of 28.7%. The lower effective tax rate in the 2007 periodreflects favorable income tax treatment on the gain on sale of bank-owned land.**Liquidity and Capital Resources**The Company’s primary sources of funds are from deposits, borrowings, amortization of loans, loanprepayments and the maturity of loans, mortgage-backed securities and other investments, and otherfunds provided by operations. While scheduled payments from amortization of loans andmortgage-backed securities and maturing loans and investment securities are relatively predictablesources of funds, deposit flows and loan and mortgage-backed security prepayments can be greatlyinfluenced by general interest rates, economic conditions and competition. The Company maintainsexcess funds in cash and short-term interest-bearing assets that provide additional liquidity. AtMarch 31, 2008, cash and due from banks, short-term investments and debt securities maturing withinone year totaled $98.8 million (excluding cash supplied to ATM customers) or 10.3% of total assets.The Company borrows from the Federal Home Loan Bank of Boston as an additional funding source. Asof March 31, 2008, the Company had the ability to borrow an additional $83.7 million from theFederal Home Loan Bank of Boston.The Company uses its liquidity to fund existing and future loan commitments, to fund maturingcertificates of deposit and borrowings, to fund other deposit withdrawals, to invest in otherinterest-earning assets and to meet operating expenses. The Company anticipates that it willcontinue to have sufficient funds and alternative funding sources to meet its current commitments.
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The following tables present information indicating various contractual obligations and commitmentsof the Company as of the dates indicated and the respective maturity dates:***Contractual Obligations:***                       **March 31, 2008**           **More than**  **More than**              **One Year**  **Three Years**          **One Year**  **through Three**  **through Five**  **Over Five**   **Total**  **or Less**  **Years**  **Years**  **Years**   **(Dollars in thousands)** Federal Home Loan Bank advances(1)  $194,730  $30,500  $121,200  $29,500  $13,530 Operating leases (2)  14,040   1,187   2,349   2,186   8,318 Non-qualified pension (3)  11,695   2,614   2,009   1,865   5,207 Other contractual obligations(4)  8,892   2,856   4,834   1,202   —                 Total contractual obligations $229,357  $37,157  $130,392  $34,753  $27,055                  (1) Secured under a blanket security agreement on qualifying assets, principally 1-4family residential mortgage loans. One advance in the amount of $10 million maturing in June, 2010will become immediately payable if 3-month LIBOR rises above 6.0% (measured on a quarterly basis). (2) Represents non-cancelable operating leases for branch offices. (3) Pension obligations include expected payments under the Company’s Director FeeContinuation Plan and expected contributions to the Company’s supplemental executive retirementplans. (4) Represents contracts for technology services and employment agreements.***Loan Commitments:***                       **March 31, 2008**           **More than**  **More than**              **One Year**  **Three Years**          **One Year**  **through Three**  **through Five**  **Over Five**   **Total**  **or Less**  **Years**  **Years**  **Years**   **(Dollars in thousands)** Commitments to grant loans at attorney (1) $22,245  $22,245  $—  $—  $— Unused portion of commercial loan lines of credit  40,017   31,794   8,223   —   — Unused portion of home equity lines of credit (2)  44,406   —   —   —   44,406 Unused portion of construction loans (3)  27,412   21,671   5,741   —   — Unused portion of personal lines of credit (4)  2,492   —   —   —   2,492 Commercial letters of credit  1,213   1,213   —   —   —                                      Total loan commitments $137,785  $76,923  $13,964  $—  $46,898                  General: Commitments to extend credit are agreements to lend to a customer as long as there is noviolation of any conditionestablished in the contract, and generally have fixed expiration dates or other terminationclauses. (1) Commitments for loans are extended to customers for up to 180 days after whichthey expire. (2) Unused portions of home equity lines of credit are available to the borrower forup to 10 years. (3) Unused portions of construction loans are available to the borrower for up to 2years for development loans and up to 1 year for other construction loans. (4) Unused portion of checking overdraft lines of credit are available to customersin “good standing” indefinitely.
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***Minimum Regulatory Capital Requirements:***As of March 31, 2008, the most recent notification from the Federal Deposit Insurance Corporationcategorized the Bank as well capitalized under the regulatory framework for prompt correctiveaction. To be categorized as well capitalized, the Bank must maintain minimum total risk-based,Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are noconditions or events since the notification that management believes have changed the Bank’scategory. Prompt corrective action provisions are not applicable to bank holding companies. TheCompany’s and the Bank’s actual capital amounts and ratios as of March 31, 2008 and December 31,2007 are also presented in this table:                                           Minimum                  To Be Well          Minimum Capitalized Under          Capital Prompt Corrective  Actual Requirements Action Provisions  Amount Ratio Amount Ratio Amount Ratio  (Dollars in thousands)**March 31, 2008:**                                                 Total capital to risk weightedassets:                        Consolidated $77,320   11.6% $53,121   8.0%  N/A   N/A Bank  69,724   10.5   53,273   8.0  $66,591   10.0%                         Tier 1 capital to risk weightedassets:                        Consolidated  71,061   10.7   26,561   4.0   N/A   N/A Bank  63,465   9.5   26,636   4.0   39,955   6.0                          Tier 1 capital to average assets:                        Consolidated  71,061   7.9   35,927   4.0   N/A   N/A Bank  63,465   7.1   35,961   4.0   44,952   5.0                          **December 31, 2007:**                                                 Total capital to risk weightedassets:                        Consolidated $78,526   12.3% $50,982   8.0%  N/A   N/A Bank  71,154   11.2   50,944   8.0  $63,680   10.0%                         Tier 1 capital to risk weightedassets:                        Consolidated  72,554   11.4   25,491   4.0   N/A   N/A Bank  65,182   10.2   25,472   4.0   38,208   6.0                          Tier 1 capital to average assets:                        Consolidated  72,554   8.3   34,898   4.0   N/A   N/A Bank  65,182   7.5   35,006   4.0   43,757   5.0 
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**Item 3. Quantitative and Qualitative Disclosures about Market Risk**.The Company’s Asset/Liability Committee’s primary method for measuring and evaluating interest raterisk is income simulation analysis. This analysis considers the maturity and repricingcharacteristics of assets and liabilities, as well as the relative sensitivities of these balancesheet components over a range of interest rate scenarios. Interest rate scenarios tested generallyinclude instantaneous rate shocks compared against static (or flat) rates. The simulation analysisis used to measure the exposure of net interest income to changes in interest rates over aspecified time horizon, usually a two-year period.The following table sets forth, as of March 31, 2008, the estimated changes in net interest incomeover the next twelve months comparing an unchanged rate scenario to projected results using variousparallel shifts in market interest rates. These computations of prospective effects ofhypothetical interest rate changes are based on numerous assumptions and should not be relied uponas being indicative of actual future results.       **Percentage Change in Estimated**  **Net Interest Income over 12**  **months**200 basis point increase in rates  (4.28)%100 basis point increase in rates  (1.99)%Flat interest rates  — 100 basis point decrease in rates  (.73)%200 basis point decrease in rates  (4.09)%The Company’s income simulation analysis contains important assumptions regarding the ratesensitivity of interest-bearing core deposit accounts. For example, the Company assumes that rateson certain money market accounts would change by 37 basis points for each 100 basis point change inmarket interest rates. These scenarios also assume no change in regular savings and regular NOWaccount interest rates. Interest rates for certain premium-rate NOW and money market savingsaccounts are expected to vary to the full extent of any increase or decrease in market interestrates. In addition, deposits are assumed to have certain minimum rate floors below which rateswill not fall. These assumptions are based on the Bank’s past experience with the changes in ratespaid on these non-maturity deposits coincident with changes in market interest rates. There can beno assurance that the core deposit pricing assumptions used in the simulation analysis willactually occur.As indicated in the table above, the result of an immediate 100 basis point parallel increase ininterest rates is estimated to decrease net interest income by 1.99% over a 12-month horizon, whencompared to the unchanged rate scenario. For an immediate 200 basis point parallel increase in thelevel of interest rates, net interest income is estimated to decrease by 4.28% over a 12-monthhorizon, when compared against the unchanged rate scenario. The exposure of net interest income torising rates as compared to an unchanged rate scenario results from the difference betweenanticipated increases in asset yields and somewhat more rapid increases in funding costs. TheCompany assumes that certain premium-rate NOW and money market deposit products, that demonstratedstrong growth in 2007 and 2008 and comprise a larger proportion of interest-bearing deposits, bearfull sensitivity to increases in market rates for simulation purposes.The estimated change in net interest income over a 12-month horizon from the unchanged ratescenario for a 100 basis point parallel decline in the level of interest rates is a decrease of .73%. For an immediate 200 basis point parallel decrease in the level of interest rates, netinterest income is estimated to decrease by 4.09% over a 12-month horizon, when compared againstthe unchanged rate scenario. Often in the past, interest rate decreases have resulted in a modeledfavorable change in net interest income over a 12-month time horizon, because the Company’s fundingcosts tend to reprice more rapidly than do the yields on its earning assets. However, in today’sinterest rate environment, one in which short-term market interest rates have declined sharply overthe past six months, earning asset yields are projected to decline further than rates paid onfunding liabilities when
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shocked downward by 100 bps and 200 bps as compared to the flat interest rate scenario. In bothdownward shock scenarios, rate floors on most core deposit accounts would come into effect forsimulation purposes. In addition, asset yields may decline more than funding costs as cash flowfrom prepayments of mortgage-related products, and redemption of callable securities, wouldincrease significantly as market rates fall, exposing the Company to higher re-investment risk.There are inherent shortcomings in income simulation, given the number and variety of assumptionsthat must be made in performing the analysis. The assumptions relied upon in making thesecalculations of interest rate sensitivity include the level of market interest rates, the shape ofthe yield curve, the degree to which certain assets and liabilities with similar maturities orperiods to repricing react to changes in market interest rates, the degree to which non-maturitydeposits react to changes in market rates, the expected prepayment rates on loans andmortgage-backed securities, the degree to which early withdrawals occur on certificates of depositand the volume of other deposit flows. As such, although the analysis shown above provides anindication of the Company’s sensitivity to interest rate changes at a point in time, theseestimates are not intended to and do not provide a precise forecast of the effect of changes inmarket interest rates on the Company’s net interest income and will differ from actual results.**Item 4. Controls and Procedures.***(a) Evaluation of Disclosure Controls and Procedures.*The Company’s President and Chief ExecutiveOfficer, its Chief Financial Officer, and other members of its senior management team haveevaluated the effectiveness of the Company’s disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)). Based on such evaluation, the President and ChiefExecutive Officer and Chief Financial Officer have concluded that the Company’s disclosure controlsand procedures, as of the end of the period covered by this report, were adequate and effective toprovide reasonable assurance that information required to be disclosed by the Benjamin FranklinBancorp, including its consolidated subsidiaries, in reports that are filed or submitted under theExchange Act, is recorded, processed, summarized and reported, within the time periods specified inthe Commission’s rules and forms.The effectiveness of a system of disclosure controls and procedures is subject to various inherentlimitations, including cost limitations, judgments used in decision making, assumptions about thelikelihood of future events, the soundness of our systems, the possibility of human error, and therisk of fraud. Moreover, projections of any evaluation of effectiveness to future periods aresubject to the risk that controls may become inadequate because of changes in conditions and therisk that the degree of compliance with policies or procedures may deteriorate over time. Due tosuch inherent limitations, there can be no assurance that any system of disclosure controls andprocedures will be successful in preventing all errors or fraud, or in making all materialinformation known in a timely manner to the appropriate levels of management.(b) *Changes in Internal Controls Over Financial Reporting*. There were no changes in our internalcontrol over financial reporting during the quarter ended March 31, 2008 that have materiallyaffected, or that are reasonably likely to materially affect, our internal controls over financialreporting.
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**PART II. OTHER INFORMATION****Item 1. Legal Proceedings.**Benjamin Franklin Bancorp is not involved in any legal proceedings other than routine legalproceedings occurring the ordinary course of business. Management believes that thoseroutine legal proceedings involve, in the aggregate, amounts that are immaterial to thefinancial condition and results of operations of Benjamin Franklin Bancorp.**Item 1A. Risk Factors That May Affect Future Results**Risk factors that may affect future results were discussed in the Company’s 2007 AnnualReport on Form 10-K. The Company’s analysis of its risk factors has not changed sinceDecember 31, 2007.**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 29, 2007, the Company’sBoard of Directors authorized a repurchase plan, permitting the repurchase of up to amaximum of 394,200 shares. As of April 30, 2008, total repurchases under the plan were219,400 at an average price of $13.62 per share. In the first quarter of 2008, theCompany purchased 185,600 shares, as follows:                                   (d) Maximum number (or    (a) Total     (c) Total Number of approximate dollar value) of    Number of (b) Average Shares Purchased as Part shares that may yet be    Shares Price Paid per of Publicly Announced purchased Period  Purchased Share Plans or Programs under the Plans or Programs January 1-31   78,400  $13.36   78,400   286,400  February 1-29   53,600  $13.97   53,600   232,800  March 1-31   53,600  $14.02   53,600   179,200                     Total   185,600  $13.73   185,600                        **Item 3. Defaults on Senior Securities.**Not applicable.**Item 4. Submission of Matters to a Vote of Security Holders.**Not applicable.**Item 5. Other Information.**Not applicable**Item 6. Exhibits.**The following exhibits, required by Item 601 of Regulation S-K, are filed as part of thisQuarterly Report on Form 10-Q. Exhibit numbers, where applicable, in the left columncorrespond to those of Item 601 of Regulation S-K.
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       Exhibit No. Description Footnotes2.1 Plan of Conversion of Benjamin Franklin Bancorp.  3        2.2 Agreement and Plan of Merger among Benjamin Franklin Bancorp,M.H.C., Benjamin Franklin Savings Bank and Chart Bank, aCooperative Bank, dated as of September 1, 2004.  2        3.1 Articles of Organization of Benjamin Franklin Bancorp, Inc.  2        3.2 Bylaws of Benjamin Franklin Bancorp, Inc.  6        4.1 Form of Common Stock Certificate of Benjamin Franklin Bancorp, Inc.  5        10.1.1 Form of Amended and Restated Employment Agreement with Thomas R.Venables. *  1        10.1.2 Form of Amended and Restated Employment Agreement with Claire S.Bean. *  1        10.2 Form of Amended and Restated Change in Control Agreement withthree Executive Officers and two other officers, providing oneyear’s severance to Michael J. Piemonte and two other officers,and two years’ severance to Mariane E. Broadhurst and Rose M.Buckley. The only differences among the several agreements arethe name and contact information of the officer who is party tothe agreement and the number of years of severance provided. *  1        10.3 Form of Benjamin Franklin Bank Benefit Restoration Plan. *  2        10.4.1 Amended and Restated Supplemental Executive Retirement Agreementbetween Benjamin Franklin Bank and Thomas R. Venables dated as ofMarch 26, 2008. *  1        10.4.2 Amended and Restated Supplemental Executive Retirement Agreementbetween Benjamin Franklin Bank and Claire S. Bean dated as ofMarch 26, 2008. *  1        10.5 Benjamin Franklin Bancorp Director Fee Continuation Plan. *  4        10.6 Benjamin Franklin Bancorp Employee Salary Continuation Plan. *  2        10.7.1 Payments and Waiver Agreement among Richard E. Bolton, Jr.,Benjamin Franklin Bancorp, M.H.C., Benjamin Franklin Savings Bankand Chart Bank, a Cooperative Bank, dated as of September 1, 2004.*  2        10.7.2 Consulting and Noncompetition Agreement between Richard E. Bolton,Jr. and Benjamin Franklin Bancorp, M.H.C., dated as of September1, 2004. *  2        10.8 Benjamin Franklin Bancorp, Inc. 2006 Stock Incentive Plan *  8        10.8.1 Form of Incentive Stock Option Agreement *  9        10.8.2 Form of Non-Statutory Stock Option Agreement (Officer) *  9        10.8.3 Form of Non-Statutory Stock Option Agreement (Director) *  9        10.8.4 Form of Restricted Stock Agreement (Officer) *  9        10.8.5 Form of Restricted Stock Agreement (Director) *  9        10.9 Purchase and Sale Agreement dated December 19, 2006.  10        11 See Note 3 to the Condensed Consolidated Financial Statements fora discussion of earnings per share. —       21 Subsidiaries of Registrant  7        31.1 Certification of Chief Executive Officer pursuant to Section 302of the Sarbanes-Oxley Act of 2002.  1 
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       Exhibit No. Description Footnotes31.2 Certification of Chief Financial Officer pursuant to Section 302of the Sarbanes-Oxley Act of 2002.  1        32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.  1        32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.  1  * Relates to compensation. 1. Filed herewith. 2. Incorporated by reference to the Registrant’s Registration Statement onForm S-1, File No. 333-121154, filed on December 10, 2004. 3. Incorporated by reference to Amendment No. 1 to the Registrant’sRegistration Statement on Form S-1, File No. 333-121154, filed on January 24, 2005. 4. Incorporated by reference to the Registrant’s Registration Statement onForm S-4, File No. 333-121608, filed on December 23, 2004. 5. Incorporated by reference to the Registrant’s Registration Statement onForm 8-A, File No. 000-51194, filed on March 9, 2005. 6. Incorporated by reference to the Registrant’s Current Report on Form 8-K,filed on March 3, 2006. 7. Incorporated by reference to the Registrant’s Annual Report on Form 10-K,filed on March 28, 2006 8. Incorporated by reference to Appendix B to the Registrant’s ProxyStatement for the 2006 Annual Meeting of Stockholders, filed on March28, 2006. 9. Incorporated by reference to the Registrant’s Quarterly Report on Form10-Q/A, filed on August 18, 2006. 10. Incorporated by reference to the Registrant’s Current Report on Form 8-K,filed on December 26, 2006.
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**SIGNATURES**     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto duly authorized.      **Benjamin Franklin Bancorp, Inc.**