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 $.16 per share (basic and diluted), for the quarter ended June 30, 2008. In the comparable 2007 quarter, the Company earned $829,000 or $.11 per share (basic and diluted). For the six months ended June 30, 2008, the Company reported net income of $2.3 million, or $.31 per share (basic and diluted). For the comparable six-month period in 2007, net income was $1.4 million, or $.19 and $.18 per share (basic and diluted, respectively). The Company also today announced that its Board of Directors declared a quarterly cash dividend of $.08 per common share, payable on August 22, 2008 to stockholders of record as of August 8, 2008. Thomas R. Venables, President and CEO, noted: �In the face of an economic slowdown, continued market uncertainty, and volatility in market interest rates, Benjamin Franklin has maintained a strong balance sheet and increased quarterly EPS (year over year) by 45%. In this environment, we are pleased to have produced loan growth of nearly 10% year-to-date, significantly increased core deposits, and maintained non-performing assets at less than 1% of total assets. Sensible growth and preservation of asset quality remain our primary focus in these challenging times.� Total assets increased by $63.8 million or 7.1% in the first six months of 2008, driven primarily by growth in loans outstanding, which increased by $57.2 million or 9.4% during the period. Commercial business loans have grown by $20.7 million, or 13.0% year to date and commercial real estate credits have increased by $6.5 million or 3.8% in that period. Residential loans also increased by $36.0 million or 19.1% in the first half of 2008. Offsetting these increases was a reduction of $5.5 million (9.8%) in construction loans outstanding. While loan demand has been generally strong in the first half of 2008, this trend may not be sustainable for the remainder of the year, given current economic conditions, and in particular continued pressure on both pricing and the volume of transactions within the residential real estate market. The Company�s core deposit accounts (savings, money market, demand and NOW accounts) have also grown significantly year to date, increasing by a total of $37.2 million or 10.5% since year end 2007. These results are primarily attributable to the opening of two new branch locations in the past two years and increases in commercial deposits in conjunction with growth in commercial business loans. Federal Home Loan Bank of Boston (�FHLBB�) borrowings increased by $27.1 million (16.4%) in the six months ended June 30, 2008. These additional borrowed funds (which were principally a blend of two to seven year FHLBB term advances) were used primarily to fund the growth in fixed rate residential mortgage loans during the period. During the second quarter of 2008, the Company repurchased 4,400 shares of its common stock at an average price of $13.55 per share. These repurchases bring the total repurchased under the Company�s second repurchase plan to 219,400 shares (out of a total of 394,200 permitted under the plan, which was authorized by the Company�s Board of Directors on November 29, 2007). The ratio of non-performing assets to total assets was 0.89% at June 30, 2008, compared to 0.40% at the end of the 2007 second quarter and 0.18% at year end 2007. The allowance for loan losses as a percent of loans was 0.96% at June 30, 2008, an increase from 0.94% at December 31, 2007. The increase in non-performing assets is primarily the result of weakness exhibited in one $6.4 million commercial real estate loan relationship, for which the primary source of repayment has ceased due to the loss of a tenant. Based on a review of all relevant factors, including the collateral securing this credit, no specific reserve has been allocated for this loan relationship as of June 30, 2008. The provision for loan losses was $368,000 in the second quarter of 2008, compared to a $230,000 provision recorded in the comparable 2007 quarter. The Company�s loan loss provision in the second quarter of 2008 reflects both the growth in loans during the quarter as well as specific reserves provided for several non-performing residential and commercial business loans. The Bank has not originated and does not own any sub-prime residential mortgage loans. The Bank�s portfolio of residential mortgage-backed securities is also not collateralized by any sub-prime loans. Net interest income increased by $444,000 or 7.3% in the second quarter of 2008 compared to the comparable 2007 period. This increase is due to an increase in average interest-earning assets of $83.8 million when comparing the two periods, offset by a narrowing of the net interest margin (the �NIM�), which declined to 3.00% in the quarter from 3.08% one year earlier. As market interest rates have declined in the past nine months, the Company was�able to offset much of the corresponding reduction in asset yields with decreases in its deposit costs. However, growth in higher-costing FHLB debt,�planned reductions in capital pursuant to repurchased common shares, and a small decline in other non-interest bearing liabilities served to reduce the margin by eight basis points, year-over-year. Non-interest income decreased by $289,000, to $1.5 million in the 2008 second quarter from $1.8 million in the second quarter of 2007. The most significant reason for the decline is a $301,000 decrease in ATM servicing fees, caused by both a reduction in the average cash outstanding under the program and contractual reductions in the yield earned on those balances. The yield on ATM cash balances is tied to the prime rate, which has declined by 325 basis points since the second quarter of 2007. Other noteworthy changes in non-interest income, comparing the second quarter of 2008 against 2007 were: a) a $106,000 increase in deposit account service fees, caused primarily by an increase in fees earned for cash management services provided to business customers and in overdraft fees, and b) a $111,000 decrease in gains earned on sales of residential mortgage loans, the result of the Bank�s decision in late 2007 to hold most new residential loan production in portfolio. The Company�s operating expenses decreased by $515,000 or 8.0% in the second quarter of 2008, compared to the second quarter of 2007. The reduction in operating expenses contributed to a marked improvement in the Company�s efficiency ratio, to 72.6% from 80.3% in the second quarter of 2007. The largest contributor to this $515,000 decline was a $424,000 decrease in salaries and benefits, supplemented by smaller reductions in data processing, professional fees and marketing expenses. These year-over-year savings are due primarily to cost containment measures instituted by the Company in the second half of 2007. Within salaries and benefits, most of the reduction was in benefits costs (specifically in employee retirement costs, medical benefits and stock incentive expenses). Other general and administrative expenses increased by $127,000 year-over-year, reflecting an increase in the reserve for losses on unfunded loan commitments, offset in part by decreases in expenses associated with the Bank�s ATM cash management program. 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, 2008 2007 ASSETS (Unaudited) (Audited) � Cash and due from banks $ 12,235 $ 12,226 Cash supplied to ATM customers 25,970 42,002 Short-term investments � 9,474 � � 10,363 � Total cash and cash equivalents 47,679 64,591 � Securities available for sale, at fair value 178,920 156,761 Restricted equity securities, at cost � 12,908 � � 11,591 � Total securities 191,828 168,352 � Loans Residential real estate 224,665 188,654 Commercial real estate 175,135 168,649 Construction 50,307 55,763 Commercial business 179,982 159,233 Consumer � 40,453 � � 40,436 � Total loans, gross 670,542 612,735 Allowance for loan losses � (6,431 ) � (5,789 ) Loans, net 664,111 606,946 � Premises and equipment, net 5,156 5,410 Accrued interest receivable 3,641 3,648 Bank-owned life insurance 10,903 10,700 Goodwill 33,763 33,763 Other intangible assets 2,209 2,474 Other assets � 7,739 � � 7,394 � � $ 967,029 � $ 903,278 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Deposits: Regular savings accounts $ 82,219 $ 79,167 Money market accounts 126,119 110,544 NOW accounts 65,415 52,000 Demand deposit accounts 118,182 113,023 Time deposit accounts � 262,980 � � 262,634 � Total deposits 654,915 617,368 � Short-term borrowings 1,200 2,500 Long-term debt 191,169 162,784 Deferred gain on sale of premises 3,405 3,531 Other liabilities � 10,276 � � 9,651 � Total liabilities � 860,965 � � 795,834 � � Common stock, no par value; 75,000,000 shares authorized; 7,840,415 shares issued and 7,666,172 shares outstanding at June 30, 2008; 8,030,415 shares issued and 7,856,172 shares outstanding at December 31, 2007 - - Additional paid-in capital 74,985 77,370 Retained earnings 39,663 38,515 Unearned compensation (6,699 ) (7,094 ) Accumulated other comprehensive loss � (1,885 ) � (1,347 ) Total stockholders' equity � 106,064 � � 107,444 � � $ 967,029 � $ 903,278 � 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, 2008 2007 2008 2007 (Unaudited) (Unaudited) � Interest and dividend income: Loans, including fees $ 9,962 $ 9,712 � $ 19,853 $ 19,418 Debt securities 1,917 1,953 � 3,924 3,639 Dividends 124 165 � 284 331 Short-term investments � 96 � 222 � � 338 � 503 Total interest and dividend income 12,099 12,052 � 24,399 23,891 � Interest expense: Interest on deposits 3,410 4,308 7,269 8,464 Interest on short-term borrowings 10 18 39 147 Interest on long-term debt � 2,183 � 1,674 � 4,289 � 3,402 Total interest expense � 5,603 � 6,000 � � 11,597 � 12,013 Net interest income 6,496 6,052 � 12,802 11,878 � Provision for loan losses � 368 � 230 � 682 � 412 � Net interest income, after provision for loan losses � 6,128 � 5,822 � 12,120 � 11,466 � Other income: ATM servicing fees 321 622 664 1,319 Deposit servicing fees 475 369 838 709 Other loan-related fees 170 141 423 472 Gain on sale of loans, net 82 193 186 296 Gain on sale of bank-owned premises, net 63 63 126 313 Gain on sale of CSSI customer list 92 100 92 100 Income from bank-owned life insurance 94 99 195 195 Miscellaneous � 207 � 206 � 458 � 361 Total other income � 1,504 � 1,793 � 2,982 � 3,765 � Operating expenses: Salaries and employee benefits 3,405 3,829 6,636 7,442 Occupancy and equipment 842 836 1,786 1,744 Data processing 569 598 1,169 1,202 Professional fees 182 235 357 472 Marketing and advertising 103 201 181 329 Amortization of intangible assets 161 205 332 422 Other general and administrative � 648 � 521 � 1,229 � 1,601 Total operating expenses � 5,910 � 6,425 � 11,690 � 13,212 � Income before income taxes 1,722 1,190 3,412 2,019 � Provision for income taxes � 551 � 361 � 1,129 � 599 Net income $ 1,171 $ 829 $ 2,283 $ 1,420 � Weighted-average shares outstanding: Basic 7,271,431 7,663,634 7,306,789 7,739,036 Diluted 7,352,265 7,699,363 7,381,938 7,768,666 � Earnings per share: Basic $ 0.16 $ 0.11 $ 0.31 $ 0.19 Diluted $ 0.16 $ 0.11 $ 0.31 $ 0.18 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, 2008 2007 2008 2007 (Unaudited) (Unaudited) Financial Highlights: Net interest income $ 6,496 $ 6,052 $ 12,802 $ 11,878 Net income $ 1,171 $ 829 $ 2,283 $ 1,420 Weighted average shares outstanding : Basic 7,271,431 7,663,634 7,306,789 7,739,036 Diluted 7,352,265 7,699,363 7,381,938 7,768,666 Earnings per share: Basic $ 0.16 $ 0.11 $ 0.31 $ 0.19 Diluted $ 0.16 $ 0.11 $ 0.31 $ 0.18 Stockholders' equity - end of period $ 106,064 $ 107,368 Book value per share - end of period $ 13.84 $ 13.28 Tangible book value per share - end of period $ 9.14 $ 8.75 � Ratios and Other Information: Return on average assets 0.49 % 0.37 % 0.48 % 0.32 % Return on average equity 4.38 % 3.05 % 4.27 % 2.61 % Net interest rate spread (1) 2.47 % 2.43 % 2.46 % 2.36 % Net interest margin (2) 3.00 % 3.08 % 3.02 % 3.02 % Efficiency ratio (3) 72.59 % 80.31 % 72.33 % 83.28 % Non-interest expense to average total assets 2.46 % 2.87 % 2.47 % 2.95 % Average interest-earning assets to average interest-bearing liabilities 119.08 % 120.19 % 118.94 % 120.08 % � At period end: Non-performing assets to total assets 0.89 % 0.40 % Non-performing loans to total loans 1.29 % 0.60 % Allowance for loan losses to total loans 0.96 % 0.95 % � Equity to total assets 10.97 % 11.98 % Tier 1 leverage capital ratio 7.73 % 9.63 % Total risk-based capital ratio 11.67 % 14.07 % � 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 non-recurring 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, 2008 � 2007 Average � � Average � � Outstanding Outstanding Balance Interest Yield/ Rate(1) Balance Interest Yield/ Rate(1) � Interest-earning assets: Loans $ 659,601 $ 9,962 6.00 % $ 604,459 $ 9,712 6.38 % Securities 188,621 2,041 4.33 % 169,543 2,118 5.00 % Short-term investments � 22,504 � 96 1.69 % � 12,891 � 222 6.81 % Total interest-earning assets 870,726 � 12,099 5.53 % 786,893 � 12,052 6.09 % Non-interest-earning assets � 96,330 � 109,495 Total assets $ 967,056 $ 896,388 � Interest-bearing liabilities: Savings accounts $ 81,338 81 0.40 % $ 83,086 103 0.50 % Money market accounts 132,152 557 1.70 % 108,825 748 2.76 % NOW accounts 60,599 265 1.76 % 38,269 217 2.27 % Certificates of deposit � 265,260 � 2,507 3.80 % � 284,314 � 3,240 4.57 % Total deposits 539,349 3,410 2.54 % 514,494 4,308 3.36 % Borrowings � 191,849 � 2,193 4.52 % � 140,225 � 1,692 4.77 % Total interest-bearing liabilities 731,198 � 5,603 3.06 % 654,719 � 6,000 3.66 % Non-interest bearing liabilities � 128,334 � 132,490 Total liabilities 859,532 787,209 Equity � 107,524 � 109,179 Total liabilities and equity $ 967,056 $ 896,388 � Net interest income $ 6,496 $ 6,052 Net interest rate spread (2) 2.47 % 2.43 % Net interest-earning assets (3) $ 139,528 $ 132,174 Net interest margin (4) 3.00 % 3.08 % Average interest-earning assets to interest-bearing liabilities 119.08 % 120.19 % � (1) Yields and rates for the three months ended June 30, 2008 and 2007 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, 2008 2007 Average � Average Outstanding Outstanding Balance Interest Yield/ Rate(1) Balance Interest Yield/ Rate(1) � Interest-earning assets: Loans $ 641,495 $ 19,853 6.15 % $ 615,099 $ 19,418 6.30 % Securities 182,189 4,208 4.62 % 160,220 3,970 4.96 % Short-term investments � 28,030 � 338 2.39 % � 17,600 � 503 5.69 % Total interest-earning assets 851,714 24,399 5.70 % 792,919 23,891 6.01 % Non-interest-earning assets � 98,935 � 109,016 Total assets $ 950,649 $ 901,935 � Interest-bearing liabilities: Savings accounts $ 80,084 159 0.40 % $ 83,315 205 0.50 % Money market accounts 124,550 1,178 1.90 % 103,693 1,368 2.66 % NOW accounts 57,922 560 1.94 % 33,390 307 1.86 % Certificates of deposit � 265,985 � 5,372 4.06 % � 290,765 � 6,585 4.57 % Total deposits 528,541 7,269 2.77 % 511,163 8,465 3.34 % Borrowings � 187,551 � 4,328 4.56 % � 149,136 � 3,548 4.73 % Total interest-bearing liabilities 716,092 11,597 3.24 % 660,299 12,013 3.65 % Non-interest bearing liabilities � 126,969 � 132,130 Total liabilities 843,061 792,429 Equity � 107,588 � 109,506 Total liabilities and equity $ 950,649 $ 901,935 � Net interest income $ 12,802 $ 11,878 Net interest rate spread (2) 2.46 % 2.36 % Net interest-earning assets (3) $ 135,622 $ 132,620 Net interest margin (4) 3.02 % 3.02 % Average interest-earning assets to interest-bearing liabilities 118.94 % 120.08 % � (1) Yields and rates for the six months ended June 30, 2008 and 2007 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. June 30, � June 30, 2008 � 2007 2008 � 2007 � � Efficiency ratio based on GAAP numbers 73.88 % 81.90 % 74.06 % 84.46 % � Effect of amortization of intangible assets -2.03 -2.65 -2.11 -2.75 � Effect of net gain/(loss/write-down) on non-recurring sales of bank assets 0.75 � � 1.06 � 0.38 � � 1.57 � Efficiency ratio - Reported 72.59 % � 80.31 % 72.33 % � 83.28 %