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 $829,000, or $.11 per share (basic and diluted), for the quarter ended June 30, 2007. In the comparable 2006 quarter, the Company earned $1.3 million or $.16 per share (basic and diluted). For the six months ended June 30, 2007, the Company earned $1.4 million, or $.18 per share (basic and diluted) compared to $2.5 million, or $.32 per share (basic and diluted) in the comparable 2006 period. The Company also today announced that its Board of Directors declared a quarterly cash dividend of $.06 per common share. This dividend will be payable on August 24, 2007 to stockholders of record as of August 10, 2007. Thomas R. Venables, President and CEO, noted: �Over the past year we�ve put in place a number of strategies to promote profitable growth and to address the highly unfavorable interest rate environment. We are encouraged by improvement in our net interest margin over the past six months, a direct result of our continued focus on our commercial business lines and on core deposit growth.� The Bank has continued to generate strong growth in commercial loans, which have increased by $32.8 million or 10.0% since December 31, 2006. Growth was achieved in both commercial real estate and commercial business loans, which increased by 12.0% and 19.7%, respectively, during this period. Construction lending declined slightly, by 1.1%. Residential mortgage loans outstanding (excluding loans held for sale) decreased by $12.2 million or 5.8% during the first six months of 2007. Most new residential loan originations are fixed rate loans, which the Company sells in the secondary market. Core deposit accounts also experienced strong growth during the first six months of 2007, increasing by $36.6 million or 11.3%. 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. Total deposit growth was offset by a $34.9 million decrease in time deposits during the period, as the Bank cut back its premium-rate promotional certificate offerings. Non-performing assets as a percentage of total assets stood at .40% at June 30, 2007. The provision for loan losses in the second quarter of 2007 was a credit of $24,000, due to a change made in the Company�s method of calculating reserves for loan commitments and the undrawn portions of lines of credit. The Company re-analyzed the risk characteristics of these various �unfunded� exposures, and determined that it would be appropriate to reduce reserves by $260,000 for this category. Without that adjustment, the provision for the second quarter of 2007 would have been $236,000. The allowance for loan losses as a percent of loans was .98% at June 30, 2007, compared to .99% at December 31, 2006. The Company�s quarterly net interest margin (�NIM�) of 3.08% was little changed from the NIM of 3.06% for the second quarter of 2006. However, second quarter 2007 NIM improved from the 2.96% produced in the first quarter of 2007 and the 2.80% earned in the fourth quarter of 2006. The rebound in the Company�s NIM is primarily the result of steps taken in late 2006/early 2007, including the sale of low-rate residential mortgages and the six-branch sale/leaseback transaction. Reductions in higher-cost certificate accounts and FHLBB borrowings, increases in core deposit funding and increases in higher-yielding commercial loans also contributed to the widening of the NIM. The Company�s operating expenses increased by $1.3 million or 24.0% in the second quarter of 2007, compared to the second quarter of 2006. The major components of this increase are: 1. An increase of $1.1 million in salaries and benefits. Forty-four percent 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. Further, the Company reduced its staff by 8% in June (half of which was reductions related to its ATM cash management unit � see below), and recorded $148,000 in severance costs related to staff reductions. The remainder of the increase is due primarily to increases in commercial and retail business development staff, including two new branch locations. 2. An increase of $194,000 in occupancy costs, due primarily to the sale/leaseback transaction and two new branch locations. Expenses associated with new branch openings and other business development initiatives will continue to adversely affect the Company�s profits in 2007, since many of these require more than one year to achieve breakeven. As noted in the Company�s last quarterly report on Form 10-Q, on May 1, 2007 the Bank and its subsidiary, Creative Strategic Solutions, Inc. (�CSSI�), entered into an agreement to sell certain of CSSI�s assets (principally its customer list and rights and obligations under its customer contracts) to another bank with an ATM servicing division. As part of this transaction, the Bank retained the right to continue to supply ATM cash to its former customers, for a minimum of 30 months. The Company will continue to earn fees for providing cash to former CSSI customers, but those fees will be lower, since the Company will no longer be providing full administrative and operational service for these customers. As of May 1, 2007, the rate on cash provided declined to 6.76% from 8.30%, the approximate rate earned in the 6 months prior to the sale. Operating expenses associated with providing cash to ATM owners remained at normalized levels through late June, 2007, as CSSI continued to provide administrative services to these customers during a transitional period, but will decline significantly beginning in the third quarter of 2007. 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) � June 30, December 31, � 2007 � � 2006 � ASSETS (Unaudited) (Audited) � Cash and due from banks $ 14,484 $ 16,115 Cash supplied to ATM customers 46,630 39,732 Short-term investments � 10,461 � � 16,748 � Total cash and cash equivalents 71,575 72,595 � Securities available for sale, at fair value 152,033 126,982 Securities held to maturity, at amortized cost 27 31 Restricted equity securities, at cost � 11,184 � � 10,951 � Total securities 163,244 137,964 � Loans Residential real estate 199,923 212,131 Commercial real estate 259,225 231,372 Construction 68,090 68,877 Commercial business 34,566 28,871 Consumer 40,114 39,656 Net deferred loan costs � 897 � � 913 � Total loans, gross 602,815 581,820 Allowance for loan losses � (5,887 ) � (5,781 ) Loans, net 596,928 576,039 � Loans held for sale, net - 63,730 Premises and equipment, net 5,429 5,202 Accrued interest receivable 3,499 3,480 Bank-owned life insurance 10,493 10,298 Goodwill 33,763 33,763 Other intangible assets 2,827 3,069 Other assets � 8,442 � � 7,538 � � $ 896,200 � $ 913,678 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Deposits: Regular savings accounts $ 82,353 $ 81,569 Money market accounts 108,484 93,988 NOW accounts 48,794 28,606 Demand deposit accounts 122,102 120,966 Time deposit accounts � 273,154 � � 308,050 � Total deposits 634,887 633,179 � Short-term borrowings 3,000 10,000 Long-term debt 138,884 148,969 Deferred gain on sale of premises 3,657 3,783 Other liabilities � 8,404 � � 8,342 � Total liabilities � 788,832 � � 804,273 � � Common stock, no par value; 75,000,000 shares authorized; 8,304,287 shares issued and 8,085,952 shares outstanding at June 30, 2007; 8,468,137 shares issued and 8,249,802 shares outstanding at December 31, 2006 � � - - Additional paid-in capital 80,900 82,909 Retained earnings 37,210 36,634 Unearned compensation (7,516 ) (7,938 ) Accumulated other comprehensive loss � (3,226 ) � (2,200 ) Total stockholders' equity � 107,368 � � 109,405 � � $ 896,200 � $ 913,678 � BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share and per share data) � Three Months Ended Six Months Ended June 30, June 30, � 2007 � � 2006 � � 2007 � 2006 � (Unaudited) (Unaudited) � Interest and dividend income: Loans, including fees $ 9,712 $ 9,236 � $ 19,418 $ 18,078 Debt securities 1,953 1,377 � 3,639 2,639 Dividends 165 23 � 331 143 Short-term investments � 222 � � 186 � � � 503 � 402 � Total interest and dividend income 12,052 10,822 � 23,891 21,262 � Interest expense: Interest on deposits 4,308 3,535 8,464 6,637 Interest on borrowings � 1,692 � � 1,373 � � 3,549 � 2,799 � Total interest expense � 6,000 � � 4,908 � � � 12,013 � 9,436 � Net interest income 6,052 5,914 � 11,878 11,826 � Provision (credit) for loan losses � (24 ) � 122 � � 146 � 128 � � Net interest income, after provision for loan losses � 6,076 � � 5,792 � � 11,732 � 11,698 � � Other income: ATM servicing fees 622 752 1,319 1,377 Deposit service fees 369 341 709 670 Loan servicing fees 141 155 472 277 Gain on sale of loans, net 193 73 296 138 Security impairment writedown - (35 ) - (35 ) Gain on sale of bank-owned premises, net 63 - 313 - Gain on sale of CSSI customer list 100 - 100 - Income from bank-owned life insurance 99 85 196 150 Miscellaneous � 206 � � 206 � � 360 � 410 � Total other income � 1,793 � � 1,577 � � 3,765 � 2,987 � � Operating expenses: Salaries and employee benefits 3,829 2,725 7,442 5,446 Occupancy and equipment 836 642 1,744 1,308 Data processing 598 452 1,202 900 Professional fees 235 355 472 733 Marketing and advertising 201 148 329 310 Amortization of intangible assets 205 277 422 578 Other general and administrative � 775 � � 786 � � 1,867 � 1,441 � Total operating expenses � 6,679 � � 5,385 � � 13,478 � 10,716 � � Income before income taxes 1,190 1,984 2,019 3,969 � Provision for income taxes � 361 � � 724 � � 599 � 1,441 � � Net income $ 829 � $ 1,260 � $ 1,420 $ 2,528 � � � Weighted-average shares outstanding: Basic 7,663,634 8,030,629 7,739,036 8,028,636 Diluted 7,699,363 8,030,629 7,768,666 8,028,636 � Earnings per share: Basic $ 0.11 $ 0.16 $ 0.18 $ 0.32 Diluted $ 0.11 $ 0.16 $ 0.18 $ 0.32 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 At or For the Six Months Ended June 30, Ended June 30, � 2007 � � 2006 � � 2007 � � 2006 � (Unaudited) (Unaudited) Financial Highlights: Net interest income $ 6,052 $ 5,914 $ 11,878 $ 11,826 Net income $ 829 $ 1,260 $ 1,420 $ 2,528 Weighted average shares outstanding: Basic 7,663,634 8,030,629 7,739,036 8,028,636 Diluted 7,699,363 8,030,629 7,768,666 8,028,636 Earnings per share: Basic $ 0.11 $ 0.16 $ 0.18 $ 0.32 Diluted $ 0.11 $ 0.16 $ 0.18 $ 0.32 Shareholders' equity - end of period $ 107,368 $ 109,265 Book value per share - end of period $ 13.28 $ 13.24 Tangible book value per share - end of period $ 8.75 $ 8.96 � Ratios and Other Information: Return on average assets 0.37 % 0.57 % 0.32 % 0.58 % Return on average equity 3.05 % 4.64 % 2.61 % 4.69 % Net interest rate spread (1) 2.43 % 2.49 % 2.36 % 2.54 % Net interest margin (2) 3.08 % 3.06 % 3.02 % 3.10 % Efficiency ratio (3) 83.59 % 67.88 % 85.02 % 68.29 % Non-interest expense to average total assets 2.99 % 2.43 % 3.01 % 2.44 % Average interest-earning assets to average interest-bearing liabilities 120.19 % 120.66 % 120.08 % 120.44 % � At period end: Non-performing assets to total assets 0.40 % 0.01 % Non-performing loans to total loans 0.60 % 0.02 % Allowance for loan losses to total loans 0.98 % 0.92 % � Equity to total assets 11.98 % 12.18 % Tier 1 leverage capital ratio 9.63 % 9.89 % Total risk-based capital ratio 14.07 % 15.05 % � 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 nonrecurring 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 June 30, 2007 2006 Average Out- standing Balance Average Out- standing Balance � � Interest Yield/ Rate(1) Interest Yield/ Rate(1) � Interest-earning assets: Loans $604,459 $9,712 6.38% $620,986 $9,236 5.91% Securities 169,543 2,118 5.00% 139,739 1,400 3.94% Short-term investments 12,891 222 6.81% 15,504 186 4.75% Total interest-earning assets 786,893 12,052 6.09% 776,229 10,822 5.54% Non-interest-earning assets 109,495 113,054 Total assets $896,388 $889,283 � Interest-bearing liabilities: Savings accounts $83,086 103 0.50% $94,810 121 0.51% Money market accounts 108,825 748 2.76% 116,061 716 2.47% NOW accounts 38,269 217 2.27% 28,250 10 0.15% Certificates of deposit 284,314 3,240 4.57% 277,996 2,688 3.88% Total deposits 514,494 4,308 3.36% 517,117 3,535 2.74% Borrowings 140,225 1,692 4.77% 126,214 1,373 4.30% Total interest-bearing liabilities 654,719 6,000 3.66% 643,331 4,908 3.05% Non-interest bearing liabilities 132,490 136,999 Total liabilities 787,209 780,330 Equity 109,179 108,953 Total liabilities and equity $896,388 $889,283 � Net interest income $6,052 $5,914 Net interest rate spread (2) 2.43% 2.49% Net interest-earning assets (3) $132,174 $132,898 Net interest margin (4) 3.08% 3.06% Average interest-earning assets to interest-bearing liabilities 120.19% 120.66% � (1) Yields and rates for the three months ended June 30, 2007 and 2006 are annualized. (2) Net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. � (3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by average total interest-earning assets. BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY ANALYSIS OF NET INTEREST INCOME (Dollars in thousands) (Unaudited) Six Months Ended June 30, 2007 2006 Average Out- standing Balance Average Out- standing Balance � � Interest Yield/ Rate(1) Interest Yield/ Rate(1) � Interest-earning assets: Loans $615,099 $19,418 6.30% $613,788 $18,078 5.88% Securities 160,220 3,970 4.96% 138,280 2,782 4.03% Short-term investments 17,600 503 5.69% 17,589 402 4.55% Total interest-earning assets 792,919 23,891 6.01% 769,657 21,262 5.51% Non-interest-earning assets 109,016 114,487 Total assets $901,935 $884,144 � Interest-bearing liabilities: Savings deposits $83,315 205 0.50% $95,712 239 0.50% Money market accounts 103,693 1,368 2.66% 107,372 1,226 2.30% NOW accounts 33,390 307 1.86% 27,706 20 0.15% Certificates of deposit 290,765 6,585 4.57% 276,957 5,152 3.75% Total deposits 511,163 8,465 3.34% 507,747 6,637 2.64% Borrowings 149,136 3,548 4.73% 131,314 2,799 4.24% Total interest-bearing liabilities 660,299 12,013 3.65% 639,061 9,436 2.97% Non-interest bearing liabilities 132,130 136,372 Total liabilities 792,429 775,433 Equity 109,506 108,711 Total liabilities and equity $901,935 $884,144 � Net interest income $11,878 $11,826 Net interest rate spread (2) 2.36% 2.54% Net interest-earning assets (3) $132,620 $130,596 Net interest margin (4) 3.02% 3.10% Average interest-earning assets to interest-bearing liabilities 120.08% 120.44% � (1) Yields and rates for the six months ended June 30, 2007 and 2006 are annualized. (2) Net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities. � (3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. (4) Net interest margin represents net interest income divided by average total interest-earning assets. 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 June 30, Six months ended June 30, 2007 � 2006 � 2007 � 2006 � Efficiency ratio based on GAAP numbers 85.14 % 71.89 % 86.16 % 72.35 % Effect of amortization of intangible assets (2.65 ) (3.68 ) (2.75 ) (3.89 ) Effect of net gain/(loss/write-down) on non-recurring sales of bank assets 1.10 � (0.33 ) 1.61 � (0.17 ) Efficiency ratio - Reported 83.59 % 67.88 % 85.02 % 68.29 %