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 $.17 per share (basic and diluted), for the quarter ended September 30, 2008. In the comparable 2007 quarter, the Company earned $1.1 million or $.14 per share (basic and diluted). For the nine months ended September 30, 2008, the Company reported net income of $3.5 million or $.48 per share (basic and diluted). For the comparable nine-month period in 2007, net income was $2.5 million, or $.32 and $.31 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 November 21, 2008 to stockholders of record as of November 7, 2008. Thomas R. Venables, President and CEO, noted: �In these very challenging times, our primary focus is on preserving our strong balance sheet and continuing to build core earnings. We have avoided any form of �sub-prime� lending and have constructed a high-quality, conservative investment securities portfolio. We have also emphasized the gathering of core deposits, another ingredient key to our long-term success. Our team has had tremendous results thus far, having grown non-certificate accounts by $52 million or nearly 15% year to date. While we cannot predict the ultimate depth or length of the current economic downturn, we believe that sticking to our community banking strategy will continue to serve us well, a strategy that emphasizes the safeguarding of asset quality and sensible growth.� Total assets increased by $77.5 million or 8.6% in the first nine months of 2008, driven primarily by growth in loans outstanding, which increased by $66.2 million or 10.8% during the period. Commercial business loans have grown by $19.5 million, or 12.2% year to date and commercial real estate credits have increased by $10.9 million or 6.4% in that period. Residential loans also increased by $41.3 million or 21.9% in the first nine months of 2008. Offsetting these increases was a reduction of $6.8 million (12.3%) in construction loans outstanding. However, while loan demand was generally strong in the first half of 2008, growth slowed in the third quarter, as loans increased by a more modest 1.2% on a linked-quarter basis. The Company�s core deposit accounts (savings, money market, demand and NOW accounts) have grown significantly year to date, increasing by a total of $51.6 million or 14.5% since year end 2007. Of that amount, $14.4 million (or 3.7%) occurred in the third quarter, driven by strong growth in money market and interest-bearing checking accounts. This growth is primarily attributable to the opening of two new branch locations in the past two years and to increases in commercial deposits in conjunction with growth in commercial business loans. The Company�s securities portfolio has increased by $26.0 million or 15.4% since year end 2007. The increase consists principally of purchases of government-sponsored enterprise (�GSE�) bonds and GSE-guaranteed mortgage-backed securities. All of the Company�s bond and mortgage-backed security portfolios are either issued or guaranteed by government-sponsored enterprises. Federal Home Loan Bank of Boston (�FHLBB�) borrowings increased by $31.8 million (19.3%) in the nine months ended September 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. The ratio of non-performing assets to total assets was 0.90% at September 30, 2008, compared to 0.38% at the end of the 2007 third quarter and 0.18% at year end 2007. The allowance for loan losses as a percent of loans was 1.01% at September 30, 2008, an increase from 0.94% at December 31, 2007. The provision for loan losses was $447,000 in the third quarter of 2008, compared to a $57,000 provision recorded in the comparable 2007 quarter. The Company�s loan loss provision in the third quarter of 2008 reflects an increase in general reserves provided for residential mortgage loans, the effect of loan growth during the quarter, and 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. Net interest income increased by $1.2 million or 20.1% in the third quarter of 2008 compared to the comparable 2007 period. This increase is due to an increase in average interest-earning assets of $98.7 million when comparing the two periods, augmented by a widening of the net interest margin (the �NIM�), which increased to 3.13% in the quarter from 2.93% one year earlier. The Company�s modest liability-sensitivity, which generally provides an earnings benefit when market interest rates decline, coupled with increases in higher-yielding commercial loans have both contributed to the increase in the net interest margin. Non-interest income decreased by $793,000, to $1.3 million in the 2008 third quarter from $2.1 million in the third quarter of 2007. The most significant reason for the decline is a $391,000 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 as of quarter-end had declined by 325 basis points since the second quarter of 2007. The 50 basis point decline in the prime rate in October of 2008 will have the effect of reducing ATM servicing fees further in the fourth quarter of 2008. Other noteworthy changes in non-interest income, comparing the third quarter of 2008 against 2007 were: a) an $82,000 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, b) a $199,000 decrease in loan fees due to declines in commercial loan prepayment penalties, and c) a $187,000 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 $249,000 or 4.0% in the third quarter of 2008, compared to the third quarter of 2007. The reduction in operating expenses contributed to an improvement in the Company�s efficiency ratio, to 71.3% from 77.2% in the third quarter of 2007. The largest contributor to the expense reduction was a $304,000 decrease in salaries and benefits, supplemented by smaller reductions in data processing and intangible asset amortization. Within salaries and benefits, most of the reduction was in benefits costs (specifically in employee retirement costs, medical benefits and stock incentive expenses). Offsetting these reductions was an increase in other general and administrative expense, which rose by 10.2% in the quarter, due primarily to an increase in FDIC deposit insurance expense. 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) � � � September 30, December 31, 2008 2007 ASSETS (Unaudited) (Audited) � Cash and due from banks $ 13,450 $ 12,226 Cash supplied to ATM customers 24,784 42,002 Short-term investments � 12,818 � � 10,363 � Total cash and cash equivalents 51,052 64,591 � Securities available for sale, at fair value 181,376 156,761 Restricted equity securities, at cost � 12,986 � � 11,591 � Total securities 194,362 168,352 � Loans Residential real estate 229,981 188,654 Commercial real estate 179,521 168,649 Construction 48,919 55,763 Commercial business 178,704 159,233 Consumer � 41,783 � � 40,436 � Total loans, gross 678,908 612,735 Allowance for loan losses � (6,853 ) � (5,789 ) Loans, net 672,055 606,946 � Premises and equipment, net 5,049 5,410 Accrued interest receivable 3,803 3,648 Bank-owned life insurance 11,016 10,700 Goodwill 33,763 33,763 Other intangible assets 2,057 2,474 Other assets � 7,580 � � 7,394 � � $ 980,737 � $ 903,278 � � LIABILITIES AND STOCKHOLDERS' EQUITY � Deposits: Regular savings accounts $ 81,338 $ 79,167 Money market accounts 141,566 110,544 NOW accounts 70,618 52,000 Demand deposit accounts 112,786 113,023 Time deposit accounts � 254,437 � � 262,634 � Total deposits 660,745 617,368 � Short-term borrowings 8,000 2,500 Long-term debt 189,109 162,784 Deferred gain on sale of premises 3,355 3,531 Other liabilities � 13,014 � � 9,651 � Total liabilities � 874,223 � � 795,834 � � � � � Common stock, no par value; 75,000,000 shares authorized; 7,842,015 shares issued and 7,710,632 shares outstanding at September 30, 2008; 8,030,415 shares issued and 7,856,172 shares outstanding at December 31, 2007 - - Additional paid-in capital 75,065 77,370 Retained earnings 40,256 38,515 Unearned compensation (6,515 ) (7,094 ) Accumulated other comprehensive loss � (2,292 ) � (1,347 ) Total stockholders' equity � 106,514 � � 107,444 � � $ 980,737 � $ 903,278 � BENJAMIN FRANKLIN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share and per share data) � � � � Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) � Interest and dividend income: Loans, including fees $ 10,299 $ 9,856 $ 30,152 $ 29,273 Debt securities 1,884 1,904 5,808 5,543 Dividends 121 180 405 512 Short-term investments � 59 � 141 � 397 � 644 Total interest and dividend income 12,363 12,081 36,762 35,972 � Interest expense: Interest on deposits 3,193 4,367 10,462 12,832 Interest on short-term borrowings 4 75 43 222 Interest on long-term debt � 2,241 � 1,873 � 6,531 � 5,274 Total interest expense � 5,438 � 6,315 � 17,036 � 18,328 Net interest income 6,925 5,766 19,726 17,644 � Provision for loan losses � 447 � 57 � 1,128 � 469 � Net interest income, after provision for loan losses � 6,478 � 5,709 � 18,598 � 17,175 � Other income: ATM servicing fees 272 663 937 1,982 Deposit servicing fees 467 385 1,305 1,093 Other loan-related fees 98 297 521 770 Gain on sale of loans, net 30 217 216 514 Gain on sale of bank-owned premises, net 63 63 189 377 Gain on trading assets - 138 - 138 Gain on sale of CSSI customer list - - 92 100 Income from bank-owned life insurance 101 105 295 300 Miscellaneous � 255 � 211 � 713 � 571 Total other income � 1,286 � 2,079 � 4,268 � 5,845 � Operating expenses: Salaries and employee benefits 3,327 3,631 9,963 11,073 Occupancy and equipment 871 844 2,657 2,587 Data processing 559 601 1,728 1,803 Professional fees 184 179 541 651 Marketing and advertising 205 159 386 488 Amortization of intangible assets 151 197 483 619 Other general and administrative � 704 � 639 � 1,933 � 2,240 Total operating expenses � 6,001 � 6,250 � 17,691 � 19,461 � Income before income taxes 1,763 1,538 5,175 3,559 � Provision for income taxes � 541 � 467 � 1,670 � 1,067 � Net income $ 1,222 $ 1,071 $ 3,505 $ 2,492 � Weighted-average shares outstanding: Basic 7,286,451 7,622,441 7,300,010 7,700,171 Diluted 7,355,906 7,666,939 7,369,376 7,736,356 � Earnings per share: Basic $ 0.17 $ 0.14 $ 0.48 $ 0.32 Diluted $ 0.17 $ 0.14 $ 0.48 $ 0.31 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 Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 (Unaudited) (Unaudited) Financial Highlights: Net interest income $ 6,925 $ 5,766 $ 19,726 $ 17,644 Net income $ 1,222 $ 1,071 $ 3,505 $ 2,492 Weighted average shares outstanding : Basic 7,286,451 7,622,441 7,300,010 7,700,171 Diluted 7,355,906 7,666,939 7,369,376 7,736,356 Earnings per share: Basic $ 0.17 $ 0.14 $ 0.48 $ 0.32 Diluted $ 0.17 $ 0.14 $ 0.48 $ 0.32 Stockholders' equity - end of period $ 106,514 $ 107,065 Book value per share - end of period $ 13.81 $ 13.43 Tangible book value per share - end of period $ 9.17 $ 8.86 � Ratios and Other Information: Return on average assets 0.50 % 0.47 % 0.49 % 0.37 % Return on average equity 4.56 % 3.95 % 4.37 % 3.06 % Net interest rate spread (1) 2.66 % 2.39 % 2.53 % 2.36 % Net interest margin (2) 3.13 % 2.93 % 3.06 % 2.99 % Efficiency ratio (3) 71.25 % 77.16 % 71.96 % 81.21 % Non-interest expense to average total assets 2.45 % 2.73 % 2.46 % 2.88 % Average interest-earning assets to average interest-bearing liabilities 118.48 % 116.58 % 118.78 % 118.89 % � At period end: Non-performing assets to total assets 0.90 % 0.38 % Non-performing loans to total loans 1.30 % 0.54 % Allowance for loan losses to total loans 1.01 % 0.94 % � Equity to total assets 10.86 % 11.80 % Tier 1 leverage capital ratio 7.76 % 9.38 % Total risk-based capital ratio 11.74 % 13.88 % � Number of full service offices 11 11 � (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 September 30, 2008 � 2007 Average � � Average � � Outstanding Outstanding Balance Interest Yield/Rate(1) Balance Interest Yield/Rate(1) � Interest-earning assets: Loans $674,239 $10,299 6.02% $599,107 $9,856 6.48% Securities 191,558 2,005 4.19% 165,391 2,084 5.04% Short-term investments 14,450 59 1.60% 17,089 141 3.24% Total interest-earning assets 880,247 12,363 5.55% 781,587 12,081 6.11% Non-interest-earning assets 95,533 126,353 Total assets $975,780 $907,940 � Interest-bearing liabilities: Savings accounts $82,404 83 0.40% $80,416 100 0.50% Money market accounts 139,461 618 1.76% 111,259 798 2.85% NOW accounts 64,292 287 1.78% 46,876 314 2.66% Certificates of deposit 261,632 2,205 3.35% 275,601 3,155 4.54% Total deposits 547,789 3,193 2.32% 514,152 4,367 3.37% Borrowings 195,149 2,245 4.50% 156,256 1,948 4.88% Total interest-bearing liabilities 742,938 5,438 2.89% 670,408 6,315 3.72% Non-interest bearing liabilities 126,323 129,842 Total liabilities 869,261 800,250 Equity 106,519 107,690 Total liabilities and equity $975,780 $907,940 � Net interest income $6,925 $5,766 Net interest rate spread (2) 2.66% 2.39% Net interest-earning assets (3) $137,309 $111,179 Net interest margin (4) 3.13% 2.93% � Average interest-earning assets to interest-bearing liabilities 118.48% 116.58% � (1) Yields and rates for the three months ended September 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) � Nine Months Ended September 30, 2008 � 2007 Average � � Average � � Outstanding Outstanding Balance Interest Yield/Rate(1) Balance Interest Yield/Rate(1) � Interest-earning assets: Loans $652,489 $30,152 6.10% $609,710 $29,273 6.36% Securities 185,335 6,213 4.47% 161,963 6,055 4.99% Short-term investments 23,470 397 2.22% 17,428 644 4.88% Total interest-earning assets 861,294 36,762 5.65% 789,101 35,972 6.04% Non-interest-earning assets 97,793 114,858 Total assets $959,087 $903,959 � Interest-bearing liabilities: Savings accounts $80,863 242 0.40% $82,338 306 0.50% Money market accounts 129,557 1,797 1.85% 106,243 2,167 2.73% NOW accounts 60,061 847 1.88% 37,935 621 2.19% Certificates of deposit 264,523 7,576 3.83% 285,655 9,738 4.56% Total deposits 535,004 10,462 2.61% 512,171 12,832 3.35% Borrowings 190,102 6,574 4.54% 151,535 5,496 4.78% Total interest-bearing liabilities 725,106 17,036 3.12% 663,706 18,328 3.68% Non-interest bearing liabilities 126,752 131,359 Total liabilities 851,858 795,065 Equity 107,229 108,894 Total liabilities and equity $959,087 $903,959 � Net interest income $19,726 $17,644 Net interest rate spread (2) 2.53% 2.36% Net interest-earning assets (3) $136,188 $125,395 Net interest margin (4) 3.06% 2.99% � Average interest-earning assets to interest-bearing liabilities 118.78% 118.89% � (1) Yields and rates for the nine months ended September 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. � September 30, � September 30, 2008 � 2007 2008 � 2007 � � Efficiency ratio based on GAAP numbers 73.09% 79.67% 73.73% 82.85% � Effect of amortization of intangible assets -1.84 -2.51 -2.02 -2.69 � Effect of net gain/(loss/write-down) on non-recurring sales of bank assets - � - 0.25 � 1.04 Efficiency ratio - Reported 71.25% � 77.16% 71.96% � 81.21%