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 $1.2 million, or $.15 per share (basic and diluted), for the quarter ended December 31, 2007. In the comparable 2006 quarter, the Company earned $1.0 million or $.13 per share (basic and diluted). For the year ended December 31, 2007, the Company earned $3.6 million, or $.47 per diluted share ($.48 per basic share) compared to $4.7 million, or $.60 per share (basic and diluted) for the 2006 year. 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 February 21, 2008 to stockholders of record as of February 7, 2008. Thomas R. Venables, President and CEO, noted: �In 2007 we made steady progress toward our goal of growing our core businesses. Our earnings reflect this progress, increasing in each of the second, third and fourth quarters of 2007, driven by strong growth in commercial loans and core deposits. Our industry will undoubtedly face some degree of challenge should a significant economic slowdown materialize in 2008, but we believe we are well-positioned as we enter the new year, with a strong balance sheet that exhibits excellent asset quality.� The Company�s commercial loan growth in 2007 amounted to $54.4 million, an increase of 16.5% compared to year end 2006. This growth was focused in commercial business loans (up $58.2 million or 57.6%) and commercial real estate loans (up $9.3 million or 5.9%). Offsetting this, in part, is a decline in the Bank�s construction loan portfolio, which has decreased by $13.1 million or 19.0% since December 31, 2006. In mid-2006 the Company made a decision to reduce its construction loan exposure, by considering fewer transactions and tightening underwriting standards. Residential mortgage loans outstanding (excluding loans held for sale) decreased by $24.3 million or 11.4% during 2007, as most new residential loan originations were sold in the secondary market. More recently, spreads have widened for residential fixed and adjustable loans, and as a result the Company currently intends to hold much of its production in portfolio. This is expected to increase net interest income over time, but will have the more immediate effect of reducing gains realized on loans sold. The Bank�s focus on attracting and retaining core deposit accounts has produced favorable results in 2007. As of December 31, 2007, core accounts (savings, money market, demand and NOW accounts) increased in the aggregate by $29.6 million, or 9.1%, compared to year end 2006, fueled by two new branch locations in the past 18 months, increased sales resources and new product offerings. Core deposit growth was offset by a $45.4 million, or 14.7%, decrease in time deposits during the year, as the Bank cut back its premium-rate promotional certificate offerings. The Company�s borrowed funds increased by $6.3 million, or 4.0%, to a total of $165.3 million at December 31, 2007, compared to December 31, 2006. This increase is net of the repayment of $9.0 million in subordinated debt (trust preferred securities) on November 15, 2007. During the fourth quarter of 2007, the Company repurchased 115,690 shares of its common stock at an average price of $14.20 per share. On October 29, 2007 the Company completed repurchases under its November, 2006 repurchase plan, repurchasing a total of 412,490 shares in 2007 at an average price of $14.28. On November 29, 2007 the Company�s Board authorized a second repurchase plan, permitting the repurchase of up to a maximum of 394,200 shares. To date, 101,200 shares have been repurchased under the second plan, at an average price of $13.23. The ratio of non-performing assets to total assets at December 31, 2007 was 0.18%, compared to 0.38% at the prior quarter-end and 0.17% at year end 2006. The allowance for loan losses as a percent of loans was .94% at December 31, 2007, compared to .92% at December 31, 2006. Despite declines in sales activity and sales prices within the Bank�s market area for single family homes in 2007, we have not seen signs that this softening in the real estate markets is affecting the Bank�s residential loan portfolio. Loan portfolio delinquency has declined to 0.71% of total loans at December 31, 2007 from 1.78% at year end 2006. The Bank has not originated and does not own any sub-prime residential mortgage loans. The Bank�s portfolio of mortgage-backed securities was originated by government-sponsored enterprises, such as Fannie Mae, and is not collateralized by any sub-prime loans. Net interest income increased by $455,000 or 8.2% in the fourth quarter of 2007 compared to the comparable 2006 period. This increase is due primarily to the widening of the Bank�s net interest margin (�NIM�), which increased to 3.04% in the 2007 fourth quarter from 2.80% in the fourth quarter of 2006. A 32 bp increase in yield on the Bank�s loan portfolio is responsible for much of the NIM increase, as loan assets were shifted from lower-yielding residential mortgage loans to commercial loans. While loan and securities yields have increased over the past year, the cost of interest-bearing liabilities has remained relatively stable (increasing by 3 bp comparing the fourth quarter of 2007 to that of 2006). The Bank�s cost of deposits has benefitted from the increase in core deposit accounts and the reduction in high-cost time deposits. The Bank�s cost of borrowing has benefitted from the repayment of high-cost subordinated debt. The Bank�s ATM cash asset ($42.0 million at December 31, 2007) continues to affect the Bank�s NIM, since income associated with those cash balances are recorded in fee income instead of interest income. Had income (and corresponding average balances) earned on that asset been included in the Company�s NIM calculation in the fourth quarter of 2007 and 2006, the NIM would have been 3.16% and 3.03%, respectively. Non-interest income increased by $3.2 million, to $2.0 million in the 2007 fourth quarter from a loss of $1.2 million in the fourth quarter of 2006, a quarter that included two non-recurring losses totaling $2.9 million. Excluding those one-time items (related to a residential loan portfolio restructuring and branch sale/leaseback), non-interest income increased by $311,000 or 18.8%. The increase was principally due to increased residential mortgage loan sale gains (excluding the one-time loan restructuring), loan fee income, a gain on trading assets, and the second installment on the sale of the CSSI customer list, which occurred in May 2007. The Company�s operating expenses increased by $287,000 or 4.8% in the fourth quarter of 2007, compared to the fourth quarter of 2006. The largest contributor to this change is a $441,000 increase in salaries and benefits, due primarily to increases in commercial and retail business development staff, the costs of staffing the new Watertown branch location, and increases in retirement costs and health benefits. Occupancy costs increased by $208,000, due primarily to the onset of rental expense in the sale/leaseback transaction and the new branch location. Offsetting these increases, in part, were savings realized in professional fees ($117,000), marketing costs ($131,000), and other general and administrative costs ($140,000), and a decrease in intangible asset amortization ($49,000). 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) � � � December 31, December 31, � 2007 � � 2006 � ASSETS (Unaudited) (Audited) � Cash and due from banks $ 12,226 $ 16,115 Cash supplied to ATM customers 42,002 39,732 Short-term investments � 10,363 � � 16,748 � Total cash and cash equivalents 64,591 72,595 � Securities available for sale, at fair value 156,761 126,982 Securities held to maturity, at amortized cost - 31 Restricted equity securities, at cost � 11,591 � � 10,951 � Total securities 168,352 137,964 � Loans Residential real estate 188,654 212,910 Commercial real estate 168,649 159,322 Construction 55,763 68,877 Commercial business 159,233 101,055 Consumer � 40,436 � � 39,656 � Total loans, gross 612,735 581,820 Allowance for loan losses � (5,789 ) � (5,337 ) Loans, net 606,946 576,483 � Loans held for sale, net - 63,730 Premises and equipment, net 5,410 5,202 Accrued interest receivable 3,648 3,480 Bank-owned life insurance 10,700 10,298 Goodwill 33,763 33,763 Other intangible assets 2,474 3,069 Other assets � 7,394 � � 7,538 � � $ 903,278 � $ 914,122 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Deposits: Regular savings accounts $ 79,167 $ 81,569 Money market accounts 110,544 93,988 NOW accounts 52,000 28,606 Demand deposit accounts 113,023 120,966 Time deposit accounts � 262,634 � � 308,050 � Total deposits 617,368 633,179 � Short-term borrowings 2,500 10,000 Long-term debt 162,784 148,969 Deferred gain on sale of premises 3,531 3,783 Other liabilities � 9,651 � � 8,786 � Total liabilities � 795,834 � � 804,717 � Common stock, no par value; 75,000,000 shares authorized; 8,045,747 shares issued and 7,857,827 shares outstanding at December 31, 2007; 8,468,137 shares issued and 8,249,802 shares outstanding at December 31, 2006 � � � Additional paid-in capital 77,608 82,909 Retained earnings 38,515 36,634 Unearned compensation (7,332 ) (7,938 ) Accumulated other comprehensive loss � (1,347 ) � (2,200 ) Total stockholders' equity � 107,444 � � 109,405 � � $ 903,278 � $ 914,122 � BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share and per share data) � � � � � Three Months Ended Twelve Months Ended December 31, December 31, � 2007 � 2006 � � 2007 � 2006 � (Unaudited) (Unaudited) (Audited) � Interest and dividend income: Loans, including fees $ 9,909 $ 9,978 � $ 39,182 $ 37,676 Debt securities 1,889 1,339 � 7,432 5,374 Dividends 196 163 � 707 551 Short-term investments � 207 � 122 � � � 852 � 658 � Total interest and dividend income 12,201 11,602 � 48,173 44,259 � Interest expense: Interest on deposits 4,153 4,218 16,985 14,547 Interest on borrowings � 2,007 � 1,798 � � 7,503 � 6,316 � Total interest expense � 6,160 � 6,016 � � � 24,488 � 20,863 � Net interest income 6,041 5,586 � 23,685 23,396 � Provision (credit) for loan losses � 165 � (169 ) � 634 � 201 � � Net interest income, after provision for loan losses � 5,876 � 5,755 � � 23,051 � 23,195 � � Other income: ATM servicing fees 552 813 2,534 3,059 Deposit service fees 394 383 1,487 1,428 Other loan-related fees 165 105 935 487 Gain(loss) on sale of loans, net 166 (2,278 ) 680 (2,030 ) Gain on sale of securities 38 - 38 10 Security impairment writedown - - - (35 ) Gain (loss) on sale of bank-owned premises, net 73 (495 ) 450 (495 ) Gain on trading assets 126 - 264 - Gain on sale of CSSI customer list 103 - 203 - Income from bank-owned life insurance 102 98 402 347 Miscellaneous � 246 � 172 � � 817 � 753 � Total other income (loss) � 1,965 � (1,202 ) � 7,810 � 3,524 � � Operating expenses: Salaries and employee benefits 3,614 3,173 14,687 11,682 Occupancy and equipment 869 661 3,456 2,631 Data processing 607 532 2,411 1,945 Professional fees 208 325 859 1,289 Marketing and advertising 123 254 611 778 Amortization of intangible assets 183 232 803 1,064 Other general and administrative � 622 � 762 � � 2,860 � 2,948 � Total operating expenses � 6,226 � 5,939 � � 25,687 � 22,337 � � Income (loss) before income taxes 1,615 (1,386 ) 5,174 4,382 � Provision (benefit) for income taxes � 465 � (2,430 ) � 1,532 � (358 ) � Net income $ 1,150 $ 1,044 � $ 3,642 $ 4,740 � � � Weighted-average shares outstanding: Basic 7,477,366 7,807,439 7,644,470 7,949,042 Diluted 7,534,520 7,820,633 7,686,543 7,953,739 � Earnings per share: Basic $ 0.15 $ 0.13 $ 0.48 $ 0.60 Diluted $ 0.15 $ 0.13 $ 0.47 $ 0.60 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 Twelve Months Ended December 31, Ended December 31, � 2007 � � 2006 � � 2007 � � 2006 � (Unaudited) (Unaudited) Financial Highlights: Net interest income $ 6,041 $ 5,586 $ 23,685 $ 23,396 Net income $ 1,150 $ 1,044 $ 3,642 $ 4,740 Weighted average shares outstanding: Basic 7,462,479 7,807,439 7,640,748 7,949,042 Diluted 7,519,633 7,820,663 7,682,821 7,953,739 Earnings per share: Basic $ 0.15 $ 0.13 $ 0.48 $ 0.60 Diluted $ 0.15 $ 0.13 $ 0.47 $ 0.60 Shareholders' equity - end of period $ 107,444 $ 109,405 Book value per share - end of period $ 13.67 $ 13.26 Tangible book value per share - end of period $ 9.06 $ 8.80 � Ratios and Other Information: Return on average assets 0.50 % 0.46 % 0.40 % 0.53 % Return on average equity 4.26 % 3.80 % 3.36 % 4.35 % Net interest rate spread (1) 2.51 % 2.14 % 2.40 % 2.45 % Net interest margin (2) 3.04 % 2.80 % 3.00 % 3.01 % Efficiency ratio (3) 76.94 % 79.74 % 80.13 % 72.19 % Non-interest expense to average total assets 2.72 % 2.60 % 2.84 % 2.50 % Average interest-earning assets to average interest-bearing liabilities 116.71 % 118.95 % 118.34 % 120.06 % � At period end: Non-performing assets to total assets 0.18 % 0.17 % Non-performing loans to total loans 0.26 % 0.27 % Allowance for loan losses to total loans 0.94 % 0.92 % � Equity to total assets 11.89 % 11.97 % Tier 1 leverage capital ratio 8.29 % 9.62 % Total risk-based capital ratio 12.26 % 14.43 % � Number of full service offices 11 10 � (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 December 31, � 2007 � � 2006 Average � � Average � � Outstanding Outstanding � Balance Interest Yield/Rate(1) Balance Interest Yield/Rate(1) � Interest-earning assets: Loans $ 606,145 $ 9,909 6.44 % $ 643,454 $ 9,978 6.12 % Securities 163,495 2,085 5.10 % 138,413 1,502 3.87 % Short-term investments � 19,147 � 207 4.23 % � 10,005 � 122 4.76 % Total interest-earning assets 788,787 12,201 6.11 % 791,872 11,602 5.71 % Non-interest-earning assets � 119,896 � 112,715 Total assets $ 908,683 $ 904,587 � Interest-bearing liabilities: Savings accounts $ 79,769 91 0.45 % $ 83,384 104 0.50 % Money market accounts 117,669 750 2.53 % 93,725 571 2.42 % NOW accounts 48,536 301 2.46 % 27,284 45 0.65 % Certificates of deposit � 267,736 � 3,011 4.46 % � 310,976 � 3,498 4.46 % Total deposits 513,710 4,153 3.21 % 515,369 4,218 3.25 % Borrowings � 162,132 � 2,007 4.84 % � 150,339 � 1,798 4.68 % Total interest-bearing liabilities 675,842 6,160 3.60 % 665,708 6,016 3.57 % Non-interest bearing liabilities � 125,766 � 129,846 Total liabilities 801,608 795,554 Equity � 107,075 � 109,033 Total liabilities and equity $ 908,683 $ 904,587 � Net interest income $ 6,041 $ 5,586 Net interest rate spread (2) 2.51 % 2.14 % Net interest-earning assets (3) $ 112,945 $ 126,164 Net interest margin (4) 3.04 % 2.80 % Average interest-earning assets to interest-bearing liabilities 116.71 % 118.95 % � (1) Yields and rates for the three months ended December 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. BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY ANALYSIS OF NET INTEREST INCOME (Dollars in thousands) (Unaudited) � Twelve Months Ended December 31, � 2007 � � 2006 Average � � Average � � Outstanding Outstanding � Balance Interest Yield/Rate Balance Interest Yield/Rate � Interest-earning assets: Loans $ 608,811 $ 39,182 6.38 % $ 626,715 $ 37,676 5.97 % Securities 162,349 8,139 5.01 % 137,765 5,925 4.30 % Short-term investments � 17,861 � 852 4.70 % � 13,906 � 658 4.66 % Total interest-earning assets 789,021 48,173 6.06 % 778,386 44,259 5.65 % Non-interest-earning assets � 116,246 � 113,930 Total assets $ 905,267 $ 892,316 � Interest-bearing liabilities: Savings accounts $ 81,691 397 0.49 % $ 91,201 456 0.50 % Money market accounts 109,123 2,917 2.67 % 100,741 2,299 2.28 % NOW accounts 40,607 922 2.27 % 27,155 75 0.27 % Certificates of deposit � 281,138 � 12,749 4.53 % � 288,969 � 11,717 4.05 % Total deposits 512,559 16,985 3.31 % 508,066 14,547 2.86 % Borrowings � 154,206 � 7,503 4.80 % � 140,281 � 6,316 4.44 % Total interest-bearing liabilities 666,765 24,488 3.66 % 648,347 20,863 3.20 % Non-interest bearing liabilities � 130,067 � 135,082 Total liabilities 796,832 783,429 Equity � 108,435 � 108,887 Total liabilities and equity $ 905,267 $ 892,316 � Net interest income $ 23,685 $ 23,396 Net interest rate spread (1) 2.40 % 2.45 % Net interest-earning assets (2) $ 122,256 $ 130,039 Net interest margin (3) 3.00 % 3.01 % Average interest-earning assets to interest-bearing liabilities 118.34 % 120.06 % � (1) 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. � (2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. � (3) 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 December 31, Year ended December 31, 2007 � 2006 � 2007 � 2006 � Efficiency ratio based on GAAP numbers 77.77 % 135.47 % 81.56 % 82.98 % Effect of amortization of intangible assets (2.33 ) (3.24 ) (2.59 ) (3.61 ) Effect of net gain/(loss/write-down) on non-recurring sales of bank assets 1.50 � (52.49 ) 1.16 � (7.18 ) Efficiency ratio - Reported 76.94 % 79.74 % 80.13 % 72.19 %