Benjamin Franklin Bancorp Reports Results for Third Quarter of 2008; Declares Quarterly Dividend

Business Wire, Oct 23, 2008

FRANKLIN, Mass. -- 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.