BFBC Benjamin Franklin Bancorp (MM)

Benjamin Franklin Bancorp, Inc. (the "Company" or "Benjamin Franklin") (Nasdaq: BFBC), the bank holding company for Benjamin Franklin Bank (the �Bank�), today reported net income of $591,000, or $.08 per share (basic and diluted), for the quarter ended March 31, 2007. In the comparable 2006 quarter, the Company earned $1.3 million or $.16 per share (basic and diluted). First quarter 2007 results included three non-recurring items: 1) Costs previously capitalized upon the issuance of $9.0 million in subordinated debt amounting to $176,000 were expensed in connection with the Company�s assessment that it is probable that the debt will be prepaid in November, 2007 (the earliest date upon which the debt may be repaid); 2) The Company is evaluating a number of strategic options with respect to Creative Strategic Solutions, Inc., its ATM cash management business. $125,000 was provided for costs (employee severance and one-time operational expenses) anticipated upon the sale or other disposition of this business; and 3) A gain of $187,000 was realized upon the sale of bank-owned land. The net effect of these three non-recurring items was to reduce quarterly earnings per share by $.01 (basic and diluted). The Company also today announced that its Board of Directors declared a quarterly cash dividend of $.06 per common share, which represents an increase of 50% over the amount paid in the most recent quarter. This dividend will be payable on May 23, 2007 to stockholders of record as of May 9, 2007. Thomas R. Venables, President and CEO, noted: �Business development resources put in place over the past nine months are beginning to bear fruit, particularly in the generation of core deposit accounts. We expect those results to improve further in coming quarters as we gain even more momentum. The inverted yield curve continues as a source of frustration, but we are encouraged by the response of our net interest margin to the steps taken to restructure our balance sheet late last year.� The Bank�s commercial lending efforts continued to produce meaningful results during the first quarter, as total commercial loans increased by $19.7 million or 6.0% compared to December 31, 2006. Growth was particularly strong in commercial business loans, which increased by 12.7% and in commercial real estate loans, which grew by 7.5% during the quarter. Construction loans outstanding fell by 2.0% compared to December 31, 2006. Within the residential portfolio, $63.7 million of adjustable-rate mortgage loans designated as held for sale at December 31, 2006 were sold in February of 2007. Core deposit accounts also experienced strong growth during the quarter, increasing by $17.7 million or 5.5%. This growth was primarily the result of increased commercial cash management offerings and associated sales efforts, as well as to the introduction of new retail deposit products. A $19.3 million decrease in time deposits during the quarter occurred as the Bank cut back its premium-rate promotional certificate offerings. Borrowed funds also declined during the quarter, by $19.4 million, paid down using liquidity generated from sales of residential mortgage loans. Over and above providing funding for commercial loan growth and retirement of borrowings, a portion of the residential mortgage loan sale proceeds was reinvested in securities (principally in mortgage-backed securities), which increased by $33.1 million during the quarter. Non-performing assets as a percentage of total assets stood at 0.29% at March 31, 2007. As a result of commercial loan growth, the provision for loan losses was $170,000 for the current quarter, an increase of $164,000 over the comparable 2006 quarter. The allowance for loan losses as a percent of loans remained unchanged, at .99%, when compared to December 31, 2006. The Company�s quarterly net interest margin (�NIM�) of 2.96%, while lower than the 3.14% earned in the first quarter of 2006, rebounded from the 2.80% earned in the fourth quarter of 2006. Steps taken in late 2006/early 2007 to help counter the effect of the inverted yield curve, including the sale of low-rate residential mortgages and the six-branch sale/leaseback transaction, caused part of this improvement. Reductions in higher-cost certificate accounts and FHLBB borrowings, and increases in higher-yielding commercial loans also contributed to the widening of the NIM. The Company�s operating expenses increased by $1.5 million or 27.5% in the first quarter of 2007, compared to the first quarter of 2006. The major components of this increase are: 1. An increase of $892,000 in salaries and benefits. Nearly half of this increase is due to the cost of stock incentive and retirement plans. Stock incentive awards were made for the first time in July, 2006, and an accelerated method is being used to recognize a significant portion of this expense. The remainder of the increase is due primarily to increases in commercial and retail business development staff, as well as to staffing for new branch locations. 2. Increases of $242,000 in occupancy costs, due primarily to the sale/leaseback transaction ($200,000 of the increase). 3. Non-recurring expenses totaling $301,000, as described earlier. Expenses associated with new branch openings and other business development initiatives will adversely affect the Company�s profits in 2007, since many such initiatives require more than one year to achieve breakeven. Certain statements herein constitute �forward-looking statements� and actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact 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 to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the businesses in which Benjamin Franklin Bancorp is engaged and changes in the securities market. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events or otherwise. BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS � (Dollars in thousands) � � � March 31, December 31, 2007� 2006� ASSETS (Unaudited) (Audited) � Cash and due from banks $ 20,383� $ 16,115� Cash supplied to ATM customers 33,783� 39,732� Short-term investments 9,432� 16,748� Total cash and cash equivalents 63,598� 72,595� � Securities available for sale, at fair value 159,880� 126,982� Securities held to maturity, at amortized cost 29� 31� Restricted equity securities, at cost 11,184� 10,951� Total securities 171,093� 137,964� � Loans Residential real estate 209,436� 212,131� Commercial real estate 248,768� 231,372� Construction 67,498� 68,877� Commercial business 32,551� 28,871� Consumer 38,909� 39,656� Net deferred loan costs 905� 913� Total loans, gross 598,067� 581,820� Allowance for loan losses (5,929) (5,781) Loans, net 592,138� 576,039� � Loans held for sale, net -� 63,730� Premises and equipment, net 5,115� 5,202� Accrued interest receivable 3,768� 3,480� Bank-owned life insurance 10,395� 10,298� Goodwill 33,763� 33,763� Identifiable intangible asset 2,852� 3,069� Other assets 8,442� 7,538� � $ 891,164� $ 913,678� � LIABILITIES AND STOCKHOLDERS' EQUITY � Deposits: Regular savings accounts $ 83,816� $ 81,569� Money market accounts 103,369� 93,988� NOW accounts 36,613� 28,606� Demand deposit accounts 119,072� 120,966� Time deposit accounts 288,777� 308,050� Total deposits 631,647� 633,179� � Short-term borrowings 600� 10,000� Long-term debt 138,934� 148,969� Deferred gain on sale of premises 3,720� 3,783� Other liabilities 7,282� 8,342� Total liabilities 782,183� 804,273� � Common stock, no par value; 75,000,000 shares authorized; 8,418,137 shares issued and 8,199,802 shares outstanding at March 31, 2007; 8,468,137 shares issued and � � 8,249,802 shares outstanding at December 31, 2006 -� -� Additional paid-in capital 82,382� 82,909� Retained earnings 36,889� 36,634� Unearned compensation (7,728) (7,938) Accumulated other comprehensive loss (2,562) (2,200) Total stockholders' equity 108,981� 109,405� � $ 891,164� $ 913,678� BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share and per share data) � � Three Months Ended March 31, 2007� 2006� (Unaudited) � Interest and dividend income: Loans, including fees $ 9,706� $ 8,842� Debt securities 1,686� 1,262� Dividends 166� 120� Short-term investments 281� 216� Total interest and dividend income 11,839� 10,440� � Interest expense: Interest on deposits 4,156� 3,102� Interest on borrowings 1,857� 1,426� Total interest expense 6,013� 4,528� Net interest income 5,826� 5,912� � Provision for loan losses 170� 6� � Net interest income, after provision for loan losses 5,656� 5,906� � Other income: ATM servicing fees 697� 625� Deposit service fees 340� 329� Loan servicing fees 331� 122� Gain on sale of loans, net 103� 65� Gain on sale of bank-owned premises, net 250� -� Income from bank-owned life insurance 97� 65� Miscellaneous 154� 204� Total other income 1,972� 1,410� � Operating expenses: Salaries and employee benefits 3,613� 2,721� Occupancy and equipment 908� 666� Data processing 604� 448� Professional fees 237� 378� Marketing and advertising 128� 162� Amortization of core deposit intangible 217� 301� Other general and administrative 1,092� 655� Total operating expenses 6,799� 5,331� � Income before income taxes 829� 1,985� � Provision for income taxes 238� 717� � Net income $ 591� $ 1,268� � � Weighted-average shares outstanding: Basic 7,814,438� 8,026,644� Diluted 7,837,969� 8,026,644� � Earnings per share: Basic $ 0.08� $ 0.16� Diluted $ 0.08� $ 0.16� BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS AND OTHER DATA (Dollars in thousands, except share and per share data) � At or For the Three Months Ended March 31, 2007� 2006� (Unaudited) Financial Highlights: Net interest income $ 5,826� $ 5,912� Net income $ 591� $ 1,268� Weighted average shares outstanding : Basic 7,814,438� 8,026,644� Diluted 7,837,969� 8,026,644� Earnings per share: Basic $ 0.08� $ 0.16� Diluted $ 0.08� $ 0.16� Stockholders' equity - end of period $ 108,981� $ 108,759� Book value per share - end of period $ 13.99� $ 13.54� Tangible book value per share - end of period $ 9.29� $ 8.86� � Ratios and Other Information: Return on average assets 0.26% 0.58% Return on average equity 2.18% 4.74% Net interest rate spread (1) 2.28% 2.68% Net interest margin (2) 2.96% 3.14% Efficiency ratio (3) 88.41% 69.31% Non-interest expense to average total assets 3.04% 2.46% Average interest-earning assets to average interest-bearing liabilities 119.98% 119.23% � At period end: Non-performing assets to total assets 0.29% 0.04% Non-performing loans to total loans 0.43% 0.05% Allowance for loan losses to total loans 0.99% 0.91% � Equity to total assets 12.23% 12.14% Tier 1 leverage capital ratio 9.60% 9.85% Total risk-based capital ratio 14.72% 15.19% � Number of full service offices 10� 9� � (1) The 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 for the period. (2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period. (3) The efficiency ratio represents non-interest expense minus expenses related to the amortization of intangible assets divided by the sum of net interest income (before the loan loss provision) plus non-interest income (excluding net gains (losses) on sale of bank assets). BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY ANALYSIS OF NET INTEREST INCOME (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2007� 2006� Average Average Outstanding Outstanding � Balance Interest Yield/Rate(1) Balance Interest Yield/Rate(1) � Interest-earning assets: Loans $625,857� $9,706� 6.21% $606,510� $8,842� 5.91% Securities 150,793� 1,852� 4.92% 136,805� 1,382� 4.10% Short-term investments 22,361� 281� 5.03% 19,697� 216� 4.45% Total interest-earning assets 799,011� 11,839� 5.93% 763,012� 10,440� 5.55% Non-interest-earning assets 108,532� 115,936� Total assets $907,543� $878,948� � Interest-bearing liabilities: Savings deposits $83,546� 102� 0.50% $96,624� 118� 0.50% Money market accounts 98,504� 620� 2.55% 98,587� 510� 2.10% NOW accounts 28,458� 90� 1.28% 27,155� 10� 0.15% Certificates of deposit 297,288� 3,344� 4.56% 275,787� 2,464� 3.62% Total deposits 507,796� 4,156� 3.32% 498,153� 3,102� 2.53% Borrowings 158,145� 1,857� 4.70% 141,797� 1,426� 4.08% Total interest-bearing liabilities 665,941� 6,013� 3.65% 639,950� 4,528� 2.87% Non-interest bearing liabilities 131,766� 130,530� Total liabilities 797,707� 770,480� Equity 109,836� 108,468� Total liabilities and equity $907,543� $878,948� � Net interest income $5,826� $5,912� Net interest rate spread (2) 2.28% 2.68% Net interest-earning assets (3) $133,070� $123,062� Net interest margin (4) 2.96% 3.14% Average interest-earning assets to interest-bearing liabilities 119.98% 119.23% � (1) Yields and rates for the three months ended March 31, 2007 and 2006 are annualized. (2) Net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. (3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by average total interest-earning assets. Reconciliation of Non-GAAP Financial Measures This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (�GAAP�). The Company�s management uses these non-GAAP measures in its analysis of the Company�s performance. These measures typically adjust GAAP performance measures to exclude significant gains or losses that are expected to be non-recurring and to exclude the effects of amortization of intangible assets (in the case of the efficiency ratio). Because these items and their impact on the Company�s performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Company�s core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Three months ended March 31, 2007� 2006� Efficiency ratio based on GAAP numbers 87.19 % 72.81 % Effect of amortization of intangible assets (2.91) (4.15) Effect of net gain on sale of bank assets 4.13� 0.65� Efficiency ratio - reported 88.41 % 69.31 %