January 7, 2005
Fax (508) 528-7000
Thomas R. Venables
President and Chief Executive Officer
Benjamin Frankin Bancorp
58 Main Street
Franklin, Massachusetts 02038-0309
RE: Benjamin Franklin Bancorp, Inc.
Form S-1 filed December 10, 2004
File No. 333-121154
Form S-4 filed December 23, 2004
File No. 333-121608
Dear Mr. Venables:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is to
assist
you in your compliance with the applicable disclosure requirements
and to enhance the overall disclosure in your filing. We look
forward to working with you in these respects. We welcome any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form S-1
General
1. Please use the same size type thoughout the document, i.e., not
a
smaller type for footnotes and financial information.
Cover Page
2. Please confirm that the cover page will be limited to one page.
3. Please provide us with your legal analysis supporting the
minimum
offering structure in your statement: "If we do not receive orders
for at least this minimum [4,250,000] number of shares, then we
may
apply up to 2,082,500 unsubscribed shares toward the merger
consideration to be paid to Chart Bank stockholders, but only in
order to issue sufficient shares to achieve this minimum number."
We
may have further comment based upon your response.
4. Please knock down the all capital letter legends. Rather than
all
capital letters, consider using bold face type and/or italics.
5. Please separate the FDIC legend from the final legend.
Summary
6. Please add a new subsection entitled "Benefits to Officers and
Directors in conjunction with the Conversion" directly following
the
After-Market Performance section beginning on page 6. We note the
Stock-Based Benefits disclosure beginning on page 12. Please
integrate this disclosure with the new subsection referenced in
the
first sentence.
7. In addition, please add disclosure regarding the value of the
free
stock ($8-$14) consistent with recent thrift conversions.
Charitable Foundation- page 10
8. Regarding the donation of 8% of the shares to a charity
controlled
by Ben Franklin, please clarify by comparing the estimated value
range of this charitable donation with recent charitable donations
by
Ben Franklin, and the dilution, on a per share basis, to
shareholders.
Tax Consequences of the Conversion- page 14
9. Please clarify to disclose counsel`s tax opinion regarding the
federal income tax consequences to depositors and others who
receive
subscription rights in the conversion.
10. Please delete the phrase "to the effect" found in the third
line
of this section.
Relatively High Pro Forma Pricing Multiples May Negatively Affect
After Market Stock Performance Compared with Other Recently
Converted
Institutions- page 24
11. Please advise regarding the comparable transactions; for
example,
NewAlliance is a recent conversion merger.
12. Please clarify by adding the peer group trading multiples,
which
are approximately 40% higher than Ben Franklin`s pro forma
tangible
book multiple.
13. In addition, please advise why the book value multiple isn`t
included to provide context.
The Implementation of Stock-Based Benefit Plans May Dilute Your
Ownership Interest- page 24
14. It appears that Stock-Based Benefit Plans will dilute
shareholder
ownership interest. Please revise accordingly.
Capitalization - page 32
15. Please revise to quantify the pro forma effects of the
acquisition of Chart Bank in a separate column. Also, revise to
present the pro forma effects of the acquisition to the right of
the
pro forma effects of the conversion, similar to the pro forma
financial statements on page 36.
Pro Forma Balance Sheets - page 36
16. It appears that pro forma conversion adjustments 3 and 11 on
the
consolidated statements of financial condition should be made to
cash
and cash equivalents rather than securities available for sale at
fair value. Please revise.
17. Please revise the footnotes here and on your pro forma
statements
of income to quantify the components and totals of pro forma
adjustments made. For example, use tables in the footnotes to
quantify and total the components of pro forma adjustments made to
cash and cash equivalents.
Commercial Real Estate Loans- page 64
18. Please add disclosure regarding the average yield for your
commercial real estate loan portfolio at the various periods you
mention. In addition, expand on why you intend on growing this
part
of your loan portfolio and any new underwriting criteria designed
to
limit risk.
19. Provide similar disclosure for construction loans, home
equity,
commercial business, as well as consumer loans.
Benjamin Franklin Bancorp:
Management`s Discussion and Analysis- General
20. Please revise to provide a discussion and analysis of your
expectations of changes in net interest income implied by the
income
simulation analysis shown on page 97, or tell us where this
information is provided.
Management`s Discussion and Analysis- Critical Accounting Policies
- -
page 85
21. Please expand your disclosure of the critical accounting
policy
for income taxes to discuss why this policy is considered
critical,
the judgments and uncertainties affecting the application of this
policy, and the likelihood that materially different amounts would
be
reported under different conditions or using different
assumptions.
Refer to Section V of SEC Financial Reporting Release 72.
22. On page F-10, you state that material estimates used in
determining other-than-temporary impairment losses on securities
are
particularly subject to change. Please revise to clarify why
those
estimates are not considered critical, or advise.
23. You state that goodwill is regularly evaluated for impairment,
which involves tracking and measuring the fair value of the
business
unit acquired. On page F-14, you state that you do not track the
separate value of Foxboro National Bank (to which all of your
goodwill relates).
* Tell us in detail how you followed the guidance in paragraph 30
of
SFAS 142 when you decided to measure the fair value of the entire
company when evaluating goodwill for impairment.
* Supplementally clarify how goodwill is evaluated for impairment
and
revise these disclosures for consistency.
* Revise to disclose how often goodwill is evaluated for
impairment.
Management`s Discussion and Analysis - Liquidity Risk Management -
page 99
24. We note that cash provided by operations decreased fifty
percent
from December 30, 2003 to September 30, 2004. We also note that
cash
provided by financing activities increased eight hundred percent
during the same period. Please revise to provide a significantly
enhanced discussion and analysis of your liquidity and capital
positions. Use the statement of cash flows in analyzing liquidity
and present a balanced discussion dealing with cash flows from
operating, investing and financing activities. Since there has
been
material variability in historical cash flows, discuss the
underlying
reasons for the changes, as well as their reasonably likely impact
on
future cash flows and cash management decisions. Also, discuss
prospective information regarding short and long term sources of
capital and the need for capital. Specifically, discuss how the
conversion, offering and acquisition of Chart Bank will affect
your
future liquidity and capital positions. Refer to Section IV of
SEC
Financial Reporting Release 72.
Executive Compensation- page 110
25. Please include this information in the next amendment.
Background and Reasons for the Acquisition- page 139
26. Please identify the outside consultants mentioned in the first
paragraph on page 140 as well as the services provided.
27. We note that Ryan Beck is representing both Chart Bank
(investment advisor/fairness opinion) and Benjamin Franklin
Bancorp
(sales agent conversion) in these transactions. Prominently
disclose
how this apparent conflict of interest was resolved by the board
of
directors of both Benjamin Franklin and Chart Bank consistent with
their fiduciary duties. Disclose the aggregate amount of
compensation expected to be paid by both companies to Ryan Beck.
In
addition, clarify whether it is expected that Ryan Beck will earn
addition compensation from Benjamin Franklin Bancorp by
participating
in their "intention to fund our stock-based incentive plan with
shares purchased on the open market***." Second full sentence,
page
13.
28. We note the references to McConnell Budd & Romano, financial
advisors, their financial analyses and fairness opinion.
Supplementally provide us with all documents prepared by the
financial advisor relating to the transaction which were made
available to the Board and its representatives (including
management
and counsel).
29. Similarly, provide us with all documents prepared by Ryan Beck
relating to the transaction which were made available to the Board
and its representatives (including management and counsel).
30. In addition, please provide all material nonpublic information
that was made available by either Chart Bank or Benjamin Franklin
to
the other side`s representatives (including management and
counsel).
Tax Aspects of the Conversion and the Chart Bank Acquisition- page
171
31. Please expand the disclosure to include all material federal
income tax consequences of the conversion. We note the word
"certain" modifying your federal income tax disclosure in the
first
sentence.
Consolidated Statements of Cash Flows - page F-7
32. Please revise to separately quantify purchases of mortgage
loans
from loan (originations) principal payments, net. Clarify whether
the amounts purchased represent purchases of loans or purchases of
loan participations. Refer to paragraph 21 of SFAS 104.
33. Please revise to provide a separate line item in operating
cash
flows for gains/losses on sales of loans. We note that the
proceeds
received from sales of loans are equal to the principal amount of
loans originated for sale. Refer to paragraph 28 of SFAS 95.
Summary of Significant Accounting Policies- Business and operating
segments - page F-9
34. Supplementally tell us how you considered paragraphs 10, 17
and
18 of SFAS 131 in your determination not to report segment
information for Benjamin Franklin Bank Securities Corp.
Summary of Significant Accounting Policies - Servicing -
page F-13
35. Please expand your policy to specifically identify the risk
characteristics of the underlying financial assets used to
stratify
servicing assets for purposes of measuring impairment. For
example,
you state that impairment is determined by stratifying rights
based
on interest rates and terms. Please revise your disclosure to
state
what these interest rates and terms are.
Summary of Significant Accounting Policies- Derivative Financial
Instruments - page F-14
36. Please expand your accounting policy for derivative financial
instruments to include your policy for commitments to sell
mortgage
loans under rate lock agreements with borrowers. Supplementally
clarify and revise to disclose whether these are the only
derivative
instruments you use. Refer to SAB 105.
Summary of Significant Accounting Policies- Comprehensive
Income/Loss
- - page F-15
37. Please revise to disclose the amount of income tax expense or
benefit allocated to each component of other comprehensive income,
including reclassification adjustments. Refer to paragraph 25 of
SFAS 130.
Note 4- Securities - page F-22
38. To the extent you have GSE direct obligations, please revise
to
disclose them separately from U.S. Government and federal agency
obligations.
39. Please provide a comprehensive analysis as of September 30,
2004
of the unrealized gains and losses in your available for sale
investment portfolio. Explain how each security with an unrealized
loss was evaluated against the criteria for recording other-than-
temporary loss in Staff Accounting Bulletin 59 and how you reached
the conclusion for each that no other-than-temporary loss should
be
recognized in the statement of income.
Note 6- Servicing - page F-25
40. Supplementally tell us how the fair values of your mortgage
servicing assets were determined for each period presented. We
would
expect the fair values to be lower than the carrying values in a
declining interest rate environment. Clarify whether you have a
valuation allowance for these assets and revise to provide the
disclosures required by paragraph 17e (4) of SFAS 140.
Note 10- Long-Term Debt - page F-27
41. Please revise to quantify the carrying amount of assets
pledged
as collateral for FHLB Advances. Refer to Rule 4-08 of Regulation
S-
X.
42. We note that portions of your FHLB advances are callable
during
2004. Please revise to disclose the circumstances under which
these
advances could be called and the results of calling. Refer to
paragraph 5 of FAS 78.
Note 16- Fair Value of Financial Instruments - page F-38
43. Please revise to disclose the carrying amount, the fair value,
and the methods and assumptions used to estimate the fair value of
commitments to sell mortgage loans under rate lock agreements with
borrowers. Refer to paragraph 10 of FAS 107.
Chart Bank:
Business of Chart Bank- General
44. Please revise to provide the disclosures required by Items I,
II,
and V of Guide 3 for each of the last three fiscal years and the
latest interim period. Provide the disclosures required by Items
III
and IV of Guide 3 for each of the last five fiscal years and the
latest interim period. Refer to General Instruction 3 of Industry
Guide 3.
45. In addition to the above, please revise to provide:
* The disclosures required by Item III (B) of Industry Guide 3.
* The disclosures required by Item IV (A) of Industry Guide 3.
* The disclosures required by Item V (D) of Industry Guide 3.
Business of Chart Bank - Lending Activities- page 120
46. You state that you typically sell fixed-rate residential
mortgage
loans originated; however, your table on page 121 does not
quantify
sales of these loans. Please revise your disclosures for
consistency. Also, revise your accounting policy for loans to
state
how these loans are accounted for. Specifically state whether or
not
you retain the right to service these loans. To the extent that
you
have sold loans during the periods presented, revise the notes to
the
financial statements to quantify the aggregate gains or losses on
these sales. Refer to paragraph .13 (d) of SOP 01-6.
47. Please revise to provide the allocation of the allowance for
loan
losses in conjunction with the percent of loans in each category
to
total loans. One reason for that presentation is so an investor
can
specifically and easily see the risk assessment within the
portfolio.
Refer to Item IV (B) of Industry Guide 3.
Consolidated Statements of Cash Flows - page G-6
48. Please revise to separately quantify purchases of mortgage
loans
from loan (originations) principal payments, net. Clarify whether
the amounts purchased represent purchases of loans or purchases of
loan participations. Refer to paragraph 21 of SFAS 104.
Summary of Significant Accounting Policies- Comprehensive
Income/Loss
- - page G-12
49. Please revise to disclose the amount of income tax expense or
benefit allocated to each component of other comprehensive income,
including reclassification adjustments. Refer to paragraph 25 of
SFAS 130.
Note 3 - Loans - page G-16
50. Please revise to separately quantify the unamortized balance
of
loan origination and other fees and costs and purchase premiums
and
discounts recognized under SFAS 91 in a separate line item on the
loans composition table. It is unclear whether these amounts have
been excluded from the loans balance on your consolidated balance
sheets based on the information disclosed. Refer to paragraph 21
of
SFAS 91.
51. Please revise to provide the disclosures required by paragraph
17
(e) of SFAS 140 for your mortgage servicing rights, if material.
Note 11- Commitments and Contingencies - page G-24
52. Please revise to provide the disclosures required by paragraph
13
(c) of FIN 45 for your standby letters of credit.
General
53. Please include an updated consent from your independent
auditors
in the pre-effective amendment.
Exhibits
54. We note certain exhibits are "Form Of" versions. E.g., Legal
Opinion and Tax Opinion. Please let us know when you file
executed
opinions and documents; we will review those documents.
55. In addition, we note that certain documents will be filed by
amendment. E.g., RP Financial`s appraisal. We may have further
comment once those documents are filed.
Form S-4
Cover Page
56. Please use bold face type to highlight the per share
consideration being offered, the nonbinding election situation,
and
the federal income tax consequences of receiving cash or stock.
Prior comments
57. Please revise the Form S-4 consistent with the Form S-1
comments.
Summary
58. Please revise the headings to be more descriptive. For
example,
but not limited to, rather than "What Chart Bank Stockholders Will
Receive in the Merger," what about "Chart Bank Shareholders will
receive either $30.75 cash per share or 3.075 shares of Benjamin
Franklin Bancorp common stock;" rather than "Material Federal
Income
Tax Consequences of the Merger," what about "Stockholders will be
Taxed on any Cash Received and Not Taxed on Stock Received in the
Merger;" rather than "Opinion of Chart Bank`s Financial Advisor"
what
about "Ryan Beck says the Merger is Fair to Chart Stockholders."
59. To the extent possible, quantify the interests of Chart Bank`s
Executives and Directors in the Merger.
Background of the Merger- page 59
60. Please provide all information requested in prior comments,
especially the Form S-1, "Background and Reasons for the
Acquisition-
page 139" comments above.
61. Please advise regarding the voting agreement, including the
Chart
stockholders who are signators, the amount of stock they control,
and
affiliations with officers and directors.
Exhibits
62. We note that certain exhibits have not been filed, executed,
or
finalized. Please let us know when those documents are filed,
executed, or finalized and we will review those documents.
Exhibit 8.1
63. You can limit reliance on your opinion with regard to purpose,
but not person. Please revise.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Sharon Johnson at (202) 942-2961 or Donald
Walker, Senior Assistant Chief Accountant at (202) 942-1799 if you
have questions regarding comments on the financial statements and
related matters. Please contact Barry McCarty at (202) 942-1779
or
me at (202) 942-1760 with any other questions.
Sincerely,
Mark Webb
Branch Chief
Office of Financial Institutions