(FOLEY HOAG LOGO) FOLEY
HOAG LLP
ATTORNEYS AT LAW
Carol Hempfling Pratt
Boston Office
617-832-1148
January 24, 2005 cpratt@foleyhoag.com
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Mail Stop 04-08
Washington, D.C. 20549
Re: Benjamin Franklin Bancorp, Inc.
Form S-1, filed December 10, 2004
File No. 333-121154
Ladies and Gentlemen:
On behalf of Benjamin Franklin Bancorp, Inc., Franklin, Massachusetts (the
"Registrant"), following this letter is a electronic filing of Amendment No. 1
to the above-referenced Registration Statement on Form S-1 (the "Registration
Statement"). This filing is made pursuant to The Securities Act of 1933, as
amended (the "Act").
In addition, set forth below and attached hereto are the Registrant's
responses to the Staff's comments set forth in the letter of Mark Webb to the
Registrant dated January 7, 2005. As requested, the numbered responses are keyed
to the Staff's comments and appear below in bold faced type. Unless otherwise
indicated, defined terms in this letter have the same meanings as in the
applicable Registration Statement.
Additional courtesy packages, each including copies of this letter and
marked copies of Amendment No. 1 showing changes to the Registration Statement,
with exhibits thereto, are being delivered under separate cover to Mark Webb,
Barry McCarty, Donald Walker and Sharon Johnson for the convenience of the
Staff. The changes marked in the courtesy copies are number-keyed to the Staff's
comment letter. Page references in this letter refer to the printed (rather than
the EDGAR) version of Amendment No. 1 (the pagination is may be slightly
different because of the redlining).
We are making corresponding changes to the Registrant's Registration
Statement on Form S-4 filed December 23, 2004 (File No. 333-121608) and
Amendment No. 1 to Form S-4 will be filed as soon as practicable.
FHBOSTON/1154522.3
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Securities and Exchange Commission
January 24, 2005
Page 2
FORM S-1
GENERAL
1. PLEASE USE THE SAME SIZE TYPE THROUGHOUT THE DOCUMENT, I.E. NOT A SMALLER
TYPE FOR FOOTNOTES AND FINANCIAL INFORMATION.
In response to this comment and further clarification from the staff, the
Registration Statement has been modified so that all of the type in the
prospectus is in 10 point type or larger.
COVER PAGE
2. PLEASE CONFIRM THAT THE COVER PAGE WILL BE LIMITED TO ONE PAGE.
The Registrant confirms that the cover page to the Registration Statement
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.
This structure is solely for bank regulatory purposes. All the shares
issued to the Chart Bank stockholders will be sold under the Registration
Statement on Form S-4, and the shares issued to depositors and others in
the conversion will be sold under the Registration Statement on Form S-1.
However, banking regulations require that, in a mutual to stock
conversion, the converting institution must sell its stock at a total
price equal to the estimated pro forma market value of such stock based on
an independent valuation. In order to meet this banking law requirement,
the Registrant has asked the Massachusetts Commissioner of Banks for
approval to "count" some of the shares issued to the Chart Bank
stockholders under the Form S-4 as shares issued in the conversion, if
orders for the minimum reflected in the independent appraisal are not
received.
Benjamin Franklin Bancorp has no reason to believe that it will not
generate orders for the minimum number of shares through its subscription
offering and community offering. However, the Board of Directors
determined that it would be appropriate to build into the Plan of
Conversion the flexibility to "count" some of the shares issued to the
Chart Bank stockholders toward this minimum, in the event that market
conditions at the time of the offering result in fewer orders than
expected. The Board believes that utilizing this provision of its Plan of
Conversion may, under certain circumstances, be preferable to undergoing
the
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January 24, 2005
Page 3
expense of conducting a syndicated community offering, especially if only
a small number of shares remain to be issued to reach the minimum.
The Board believes that this provision of its Plan is appropriate in light
of the fact that persons entitled to purchase shares in the conversion
offering (depositors and others) would not be precluded from purchasing
shares. If this provision of the Plan of Conversion is utilized, all
persons with subscription rights--indeed, all persons who wish to purchase
shares in the direct community offering--will have had the opportunity to
purchase their full subscriptions. In addition, if this provision of the
Plan were utilized, the exchange of Chart Bank's shares for stock of
Benjamin Franklin Bancorp would basically be the same as a continuation of
the public offering, except that Chart Bank's securities would be taken as
consideration instead of cash.
This approach has been followed in at least two other conversions--the
conversion of Harris Financial, MHC of Harris, Pennsylvania (which changed
its name to Waypoint Financial Corp.) and simultaneous acquisition of York
Financial, Inc. in 2000, and the conversion of Provident Bancorp MHC and
simultaneous acquisition of E.N.B Holding Company, Inc., in 2003. In each
case, the Office of Thrift Supervision was the banking regulator involved
in the transaction and concluded that the provision was appropriate for
the reasons set forth in the preceding paragraph. This is the first
conversion to propose the use of such a provision under Massachusetts law.
At the request of the Massachusetts Commissioner of Banks, the prospectus
has been modified to indicate that the use of this provision will be
subject to regulatory approval.
4. PLEASE KNOCK DOWN THE ALL CAPITAL LETTER LEGENDS. RATHER THAN ALL CAPITAL
LETTERS, CONSIDER USING BOLD FACE TYPE AND/OR ITALICS.
The cover page to the prospectus has been modified in response to this
comment.
5. PLEASE SEPARATE THE FDIC LEGEND FROM THE FINAL LEGEND.
The cover page to the prospectus has been modified in response to this
comment.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 7.
Securities and Exchange Commission
January 24, 2005
Page 4
7. IN ADDITION, PLEASE ADD DISCLOSURE REGARDING THE VALUE OF THE FREE STOCK
($8-$14) CONSISTENT WITH RECENT THRIFT CONVERSIONS.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 9.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 14.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 16.
10. PLEASE DELETE THE PHRASE "TO THE EFFECT" FOUND IN THE THIRD LINE OF THIS
SECTION.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 16.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 26.
12. PLEASE CLARIFY BY ADDING THE PEER GROUP TRADING MULTIPLES, WHICH ARE
APPROXIMATELY 40% HIGHER THAN BEN FRANKLIN'S PRO FORMA TANGIBLE BOOK
MULTIPLE.
We believe that the peer group trading multiples, which are disclosed on
page 5 of Amendment No. 1, would not serve to clarify this risk factor.
The purpose of this risk factor is to compare pro forma pricing ratios of
recent conversions, and
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January 24, 2005
Page 5
to caution investors (who may assume that all conversion offerings have
similar pro forma pricing multiples) that the pro forma pricing ratios in
this offering are significantly higher than those of other mutual-to-stock
conversion offerings. The risk factor does not purport to compare the pro
forma pricing ratios of Benjamin Franklin Bancorp with the actual pricing
ratios of thrifts that are already publicly traded, and repeating such
information in this risk factor could cause confusion.
13. IN ADDITION, PLEASE ADVISE WHY THE BOOK VALUE MULTIPLE ISN'T INCLUDED TO
PROVIDE CONTEXT.
Because intangible assets are not included in regulatory capital and do
not provide earnings power in the form of interest-earning assets,
investors generally omit intangible assets when making investment
decisions. For this reason, the prospectus places greater emphasis on
measures of pro forma tangible stockholders' equity in assessing relative
value than on pro forma stockholders' equity.
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.
It is the Registrant's intention to fund the stock-based incentive plan
with open market purchases, so the original disclosure is accurate.
However, in the heading to this risk factor we have changed the word "may"
to "will" in recognition that the Registrant's current intention could
change over the life of the plan. See Amendment No. 1, page 26.
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.
In response to this comment and further clarification from the staff, the
Registration Statement has been modified to include a new column showing
the pro forma merger adjustments. See Amendment No. 1, page 35
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
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January 24, 2005
Page 6
CASH EQUIVALENTS RATHER THAN SECURITIES AVAILABLE FOR SALE AT FAIR VALUE.
PLEASE REVISE.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1 pages 40, 43, 46 and 49.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1 pages 41-59.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 74. Please note that Benjamin Franklin Bank does
not expect to modify its fundamental underwriting criteria, because
management believes that its existing credit evaluation criteria and
ongoing risk management systems will adequately protect the Bank.
Management believes that the underwriting criteria described in detail in
the "Business of Benjamin Franklin Bancorp"; the experience of the Bank's
lending staff, senior management and the Board in commercial lending; the
Bank's knowledge of the Benjamin Franklin and Chart Bank lending market
areas; the quality of the Bank's loan review procedures; and the Bank's
commitment to maintaining an adequate Allowance for Loan Losses will
enable the Bank to accomplish this potential growth in a prudent manner.
Management expects to remain alert to changes in the environment that
could change the risk profile of the Bank's commercial lending activities,
and will make adjustments to the Bank's underwriting criteria should
circumstances so warrant.
19. PROVIDE SIMILAR DISCLOSURE FOR CONSTRUCTION LOANS, HOME EQUITY,
COMMERCIAL BUSINESS, AS WELL AS CONSUMER LOANS.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, pages 73-76.
BENJAMIN FRANKLIN BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS- GENERAL
Securities and Exchange Commission
January 24, 2005
Page 7
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.
The requested information appears on page 109, in the two paragraphs
immediately following the table.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 96.
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.
Given the nature of Benjamin Franklin's investment portfolios, page F-10
has been revised to delete the categorization of other-than-temporary
impairment losses on securities as a material estimate that is susceptible
to significant change in the near term.
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 F14, 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.
Securities and Exchange Commission
January 24, 2005
Page 8
The Registration Statement has been modified in response to this
comment, including a description of how goodwill is evaluated for
impairment. See Amendment No. 1, page 96.
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.
The Consolidated Statements of Cash Flows on page F-7 have been revised to
reclassify the Bank's purchase of bank-owned life insurance ("BOLI") from
cash flows from operating activities to cash flows from investing
activities. With this reclassification, the variance in net cash provided
by operating activities in the 2004 and 2003 nine month periods is reduced
to 24.5%. Further, as the cash flow statement now more clearly shows, this
variance is caused primarily by changes in the other assets and
liabilities, and in particular by fluctuation in the Bank's official
checks liability account. In response to the request for additional
discussion of the Bank's financing activities and capital resources, the
Registration Statement has been revised. See Amendment No. 1, page 11.
EXECUTIVE COMPENSATION- PAGE 110
25. PLEASE INCLUDE THIS INFORMATION IN THE NEXT AMENDMENT.
The completed Executive Compensation table is included in Amendment No. 1
on page 122.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, starting on page 159.
Securities and Exchange Commission
January 24, 2005
Page 9
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 162 and page 189.
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).
A copy of the requested materials has been sent to the attention of Barry
McCarty on a confidential and supplemental basis.
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).
Ryan Beck did not provide the Registrant's Board with any documents in
connection with the Chart Bank merger agreement. A copy of the documents
provided by Ryan Beck to the Chart Bank Board has been sent to the
attention of Barry McCarty on a confidential and supplemental basis.
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).
In response to this comment and further clarification from the staff, the
following information has been sent to the attention of Barry McCarty on a
confidential and supplemental basis:
(a) 2004 Forecast and 2005 Budget information for Chart Bank and
Creative Strategic Solutions, Inc., provided by Chart Bank to
McConnell Budd & Romano.
(b) BFSB Financial Summary including 2005 projections provided by
Benjamin Franklin Bancorp M.H.C. to Ryan Beck:
Securities and Exchange Commission
January 24, 2005
Page 10
Management of Benjamin Franklin also had oral discussions with Ryan Beck
about its future plans and projections, and Ryan Beck's projections based
on those discussions are included in the materials submitted to the Board
of Directors of Chart Bank provided in response to comment 29.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 193.
CONSOLIDATED STATEMENTS OF CASH FLOWS - PAGE F-7
32. PLEASE REVISE TO SEPARATELY QUANTIFY PURCHASES OF MORTGAGE LOANS FROM LOAN
(ORIGINATION) PRINCIPAL PAYMENTS, NET. CLARIFY WHETHER THE AMOUNTS
PURCHASED REPRESENT PURCHASES OF LOANS OR PURCHASES OF LOAN
PARTICIPATIONS. REFER TO PARAGRAPH 21 OF SFAS 104.
The Consolidated Statements of Cash Flows on page F-7 have been revised to
separately present purchases of mortgage loans from loan (originations)
principal payments, net. The amounts purchased represent purchases of
loans and the Company did not pay any premiums on these loans. The Company
includes loan participations with loan (originations) principal payments,
net.
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.
The Consolidated Statements of Cash Flows on page F-7 have been revised to
provide a separate line in operating cash flows for gains/losses on sales
of loans.
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.
Benjamin Franklin Securities Corp. ("BFSC") does not meet the criteria
outlined in paragraph 10 of SFAS 131, because while BFSC earns revenues
and has discrete financial information available for it, its operating
results are not regularly reviewed by Benjamin Franklin Bancorp's chief
operating decision-maker. BFSC exists solely to buy, sell and hold
investment securities, and was
Securities and Exchange Commission
January 24, 2005
Page 11
formed for this purpose because income earned on investment securities
held by entities that are qualified as "securities corporations" under
Massachusetts law are subject to a significantly lower rate of state
income tax than that assessed on income earned on investment securities
maintained at Benjamin Franklin Bank.
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.
The Servicing Accounting Policy on page F-13 has been modified to
specifically identify the risk characteristics of the underlying financial
assets used to stratify servicing assets for purposes of measuring
impairment.
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.
The Derivative Financial Instruments Accounting Policy on page F-14 has
been expanded to include Benjamin Franklin Bancorp's policy for
commitments to sell mortgage loans under rate lock agreements with
borrowers. These are the only derivative instruments that the Benjamin
Franklin Bancorp uses.
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.
Page F-16 of Amendment No. 1 has been revised to disclose the amount of
income tax expense or benefit allocated to each component of other
comprehensive income, including reclassification adjustments.
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.
Securities and Exchange Commission
January 24, 2005
Page 12
The relevant line item on page F-22 has been modified. It should be noted
that all of the federal agency obligations are considered GSE direct
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.
Attached to this response is a list of the securities held in Benjamin
Franklin Bank's available-for-sale investment portfolio, together with an
explanation of how each security was evaluated against the criteria for
recording other-than-temporary loss.
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.
The quarterly valuation of the mortgage servicing rights ("MSR") asset is
determined by stratifying the servicing portfolio as of each quarter-end
date. The stratification of the servicing portfolio is based off of the
original maturity date of the mortgages, using a weighted average interest
rate and maturity date within each stratum. The servicing value or price
multiple for the various strata is obtained from national mortgage
industry sources such as "Mortgage Servicing News'" web site. The MSR
asset value is obtained by taking the price multiple times the servicing
rate of 25 basis points. This product is then multiplied by the unpaid
principal balance to arrive at a market value.
The Bank does not have a valuation allowance for mortgage servicing rights
at any of the reporting dates. Amortization of MSRs is based upon
individual loan-level activity versus estimates for the portfolio as a
whole. Loan-level amortization includes the monthly amortization of a
portion of the MSR balance for each "active" loan, as well as full
amortization of the MSR balance for any loan that prepays during the
month. Accordingly, it is less likely that a valuation allowance for MSRs
would be required as a result of falling interest rates since the
amortization method captures accelerated payments on a monthly basis.
NOTE 10 - LONG-TERM DEBT - PAGE F-27
Securities and Exchange Commission
January 24, 2005
Page 13
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.
Page F-28 of Amendment No. 1 has been revised to quantify the carrying
amount of assets qualified as collateral for FHLB advances.
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.
Page F-27 of Amendment No. 1 has been revised to disclose the
circumstances under which these advances could be called. The result of
calling the advances has been added on page [#] of Amendment No. 1.
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.
Page F-39 has been revised to disclose the carrying amount, the fair value
and the method and assumptions used to estimate the fair value of the
rate-lock agreements with individual borrowers and the investor loan sale
commitments.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1 pages 134, 137 and 138.
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.
Securities and Exchange Commission
January 24, 2005
Page 14
The Registration Statement has been modified in response to this
comment. See Amendment No. 1, pages 135, 137, 139 and 141.
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.
Chart Bank actually does not originate fixed-rate residential mortgages
for its own portfolio and then subsequently sell them; instead it has
arrangements whereby it originates fixed rate mortgage loans in the
capacity of a loan broker for other lenders. A loan originated under such
an arrangement is closed in the other lender's name, and Chart Bank
receives a loan brokerage fee for its brokerage services. The Registration
Statement has been clarified accordingly. See Amendment No. 1, page 133.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1, page 142.
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 PARTICIPATION.
REFER TO PARAGRAPH 21 OF SFAS 104.
The Consolidated Statements of Cash Flows on page G-6 have been revised to
separately disclose loans purchased and net loan (originations) principal
payments. The loan purchases are whole loans; not participations.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - COMPREHENSIVE INCOME/LOSS - PAGE
G-12
Securities and Exchange Commission
January 24, 2005
Page 15
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.
Page G-12 has been revised to disclose the amount of income tax expense or
benefit allocated to each component of other comprehensive income,
including reclassification adjustments.
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.
In the original filing, these amounts were included in loans on the
Consolidated Balance Sheet and were combined with their respective loan
categories in the loan footnote. The loan footnote on page G-17 has been
revised to separately disclose net loan origination costs and net loan
purchase premiums. In addition, the loan accounting policy disclosure in
Note 1 was revised to include Chart Bank's accounting policy for loan
purchase premiums.
51. PLEASE REVISE TO PROVIDE THE DISCLOSURES REQUIRED BY PARAGRAPH 17 (e) OF
SFAS 140 FOR YOUR MORTGAGE SERVICING RIGHTS, IF MATERIAL.
Mortgage servicing rights relate solely to commercial participation loans
serviced for others. The net servicing revenues attributable to such loans
over their estimated lives is immaterial.
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.
Note 11 on page G-25 has been revised to include the disclosures required
by paragraph 13 (c) of FIN 45 for Chart Bank's standby letters of credit.
The required disclosure for the related liability has not been included in
the disclosure as Chart Bank has not recorded a liability due to
immateriality.
GENERAL
53. PLEASE INCLUDE AN UPDATED CONSENT FROM YOUR INDEPENDENT AUDITORS IN THE
PRE-EFFECTIVE AMENDMENT.
Securities and Exchange Commission
January 24, 2005
Page 16
The updated auditors' consents are included as Exhibits 23.3 and 23.4 to
Amendment No. 1.
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.
The form of Legal Opinion filed as Exhibit 5 will be executed following
the meeting of the Registrant's corporators, scheduled for February 2, and
the executed copy will be filed in the next amendment. The Form of Tax
Opinion filed as Exhibit 8 has been executed and is filed as Exhibit 8 to
Amendment No. 1.
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.
RP Financial's appraisal and certain other Exhibits have been filed with
Amendment No. 1.
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.
The Form S-4 Registration Statement is being modified in response to this
comment and will be filed as soon as practicable.
PRIOR COMMENTS
57. PLEASE REVISE THE FORM S-4 CONSISTENT WITH THE FORM S-1 COMMENTS.
The Form S-4 Registration Statement is being modified as appropriate to
reflect the staff's comments on the Form S-1 Registration Statement, and
will be filed as soon as practicable.
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
Securities and Exchange Commission
January 24, 2005
Page 17
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."
The Form S-4 Registration Statement is being modified in response to this
comment and will be filed as soon as practicable.
59. TO THE EXTENT POSSIBLE, QUANTIFY THE INTERESTS OF CHART BANK'S EXECUTIVES
AND DIRECTORS IN THE MERGER.
The Form S-4 Registration Statement is being modified in response to this
comment and will be filed as soon as practicable.
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.
The information requested is being provided in response to comments 28, 29
and 30.
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.
The following chart shows the Chart Bank stockholders who executed voting
agreements, their stock ownership and their affiliation with Chart Bank,
representing 38.1% of the outstanding Chart Bank stock:
Richard E. Bolton Sr., individually
Chairman of Chart Bank; ................. 25,783
Richard E. Bolton Sr., Trustee
Bolton Family Trust...................... 25,592
Richard E. Bolton Jr.
President and CEO of Chart Bank.......... 4,500
Jonathan A. Haynes, individually
Director of Chart Bank................... 36,008
Jonathan A. Haynes, Trustee
Charter Voting Trust..................... 88,440
Arnold G. Haynes
Director, Chart Bank..................... 360,426
-------
TOTAL: 540,749
=======
Securities and Exchange Commission
January 24, 2005
Page 18
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.
All the remaining exhibits to the Form S-1 are being filed with Amendment
No. 1. The Registrant will notify the Staff when the exhibits that are not
yet finalized have been executed or finalized.
EXHIBIT 8.1
63. YOU CAN LIMIT RELIANCE ON YOUR OPINION WITH REGARD TO PURPOSE, BUT NOT
PERSON. PLEASE REVISE.
This Exhibit is being modified in response to this comment and will be
filed with Amendment No. 1 to the Form S-4 as soon as practicable.
* * * * *
Securities and Exchange Commission
January 24, 2005
Page 19
In addition to the changes made in response to the staff's comments noted
above, certain additional changes have also been made and are indicated in the
enclosed marked copies of Amendment No. 1.
If you have any questions or require any further information with respect
to Amendment No. 1 or any matters relating to this filing, please telephone the
undersigned at (617) 832-1000. If I am not available, Peter Coogan or Janene
Asgeirsson of this office should be in a position to assist you.
Thank you very much for your assistance.
Very truly yours,
/s/ Carol Hempfling Pratt
Carol Hempfling Pratt
CHP
Attachments
cc: Mark Webb
Barry McCarty
Donald Walker
Sharon Johnson
Thomas R. Venables
Claire S. Bean
Richard E. Bolton, Jr.
Robin P. Suskind
Marc P. Levy
William Pratt Mayer
Peter W. Coogan
IMPAIRMENT ASSESSMENT EXPLANATION CODE
A. For U.S. Government and Agency securities: As of September 30, 2004,
management has reviewed Benjamin Franklin Bancorp's financial prospects, its
likely growth targets and its existing sources of liquidity including its
borrowing capacity, and has determined that it has both the intent and the
ability to hold these securities until they mature. Because these are U.S.
Government guaranteed obligations, there is no concern that there will be a loss
of either principal or interest in the remaining period until maturity. As of
September 30, 2004, unrealized losses aggregated .53% of the amortized cost of
these securities.
B. For Corporate Bonds: As of September 30, 2004, management has reviewed
Benjamin Franklin Bancorp's financial prospects, its likely growth targets and
its existing sources of liquidity including its borrowing capacity, and has
determined that it has both the intent and the ability to hold these securities
until they mature. Because these corporate bonds are all "A" rated as of
September 30, 2004 and because the remaining time to maturity is relatively
short (less than 2 years), management considers it highly unlikely that there
would be any loss of either principal or interest in the time remaining until
maturity. As of September 30, 2004, unrealized losses aggregated .58% of the
amortized cost of these securities.
C. For Mortgage-backed Securities, consisting primarily of Collateralized
Mortgage Obligations ("CMOs"): Benjamin Franklin purchased its CMO portfolio,
with an original value of $99.4 million, in 2002 and 2003 as part of its
strategy to enhance earnings from its investment portfolio while providing
ongoing liquidity. That portfolio has since provided principal pay-downs in line
with management's expectations, aggregating $45.5 million, or 45.8% of the
original purchase amounts, over the past two years. Management, after reviewing
Benjamin Franklin's financial prospects, growth targets, and its existing
sources of liquidity including its borrowing capacity, has determined that it
has both the intent and ability to hold these remaining CMO and other MBS
investments until their final maturity. The unrealized losses, which aggregate
3.6% of amortized cost at September 30, 2004, will continue to exist as market
rates remain above the purchase yields of the individual securities. However,
these investments are supported by underlying residential mortgage loan
collateral as well as guarantees by the issuers of these investments--Freddie
Mac, Fannie Mae or Ginnie Mae. Thus, management considers that there is no risk
of loss of either principal or interest in the time remaining until final
maturity.
BENJAMIN FRANKLIN BANK AND BENJAMIN FRANKLIN SECURITIES CORP.
INVESTMENT SECURITIES SCHEDULE AS OF SEPTEMBER 30, 2004
MATURITY/ G/L AS IMPAIRMENT
SALE/ % OF ASSESSMENT
PURCHASE CALL UNREALIZED AMORTIZED EXPLANATION
DATE DATE CODE DESCRIPTION RATE AMORTIZED COST MARKET VALUE GAIN/(LOSS) COST CODE
---- --------- ---- ----------- ---- -------------- ------------ ----------- --------- -----------
8/27/92 9/1/22 AFS-MBS FHLMC POOL 350209 7.63% 134,546.01 126,274.43 (8,271.58) -6.15% C
10/14/92 10/1/22 AFS-MBS FHLMC POOL 60746 7.65% 20,717.70 11,211.45 (9,506.25) -45.88% C
1/25/93 1/1/23 AFS-MBS FHLMC #607746 4.70% 228,980.56 234,295.10 5,314.54 2.32%
1/25/93 1/1/23 AFS-MBS FHLMC #607703 4.75% 13,051.63 13,246.70 195.07 1.49%
4/22/93 5/1/23 AFS-MBS FHLMC POOL 408113 7.80% 42,512.49 36,004.72 (6,507.77) -15.31% C
6/1/93 12/1/14 AFS-MBS FNMA POOL # BL219863 8.00% 63,803.93 69,245.77 5,441.84 8.53%
6/30/93 10/1/15 AFS-MBS FNMA POOL BL219864 7.50% 43,057.76 45,982.67 2,924.91 6.79%
11/5/93 7/1/05 AFS-MBS FNMA B1246865(OURS) 7.50% 7,672.51 7,677.57 5.06 0.07%
11/18/93 7/1/15 AFS-MBS FNMA BL248540 (OURS) 7.25% 59,904.03 63,684.57 3,780.54 6.31%
12/1/93 11/1/05 AFS-MBS FNMA B12483541 6.50% 34,731.70 35,043.59 311.89 0.90%
6/22/94 3/1/24 AFS-MBS FHLMC CORP409664 4.38% 13,649.03 14,242.09 593.06 4.35%
2/22/96 10/20/25 AFS-MBS GNMA POOL 5.50% 24,699.23 24,899.78 200.55 0.81%
8/22/96 1/20/25 AFS-MBS GNMA II POOL # 8585 6.50% 113,651.63 113,195.28 (456.35) -0.40% C
8/22/96 7/20/25 AFS-MBS GNMA II POOL #8663 7.00% 58,392.15 57,984.32 (407.83) -0.70% C
9/24/96 11/20/25 AFS-MBS GNMA POOL G28747 6.50% 49,552.36 49,650.55 98.19 0.20%
11/21/96 10/20/24 AFS-MBS GNMA POOL #008518 6.50% 39,372.33 39,337.90 (34.43) -0.09% C
11/21/96 6/20/25 AFS-MBS GNMA POOL #8638 7.00% 66,226.83 65,421.95 (804.88) -1.22% C
12/12/97 5/20/27 AFS-MBS GNMA POOL #860982 6.00% 241,562.70 240,873.59 (689.11) -0.29% C
2/9/98 11/20/24 AFS-MBS FNMA POOL 100196 7.09% 508,092.08 495,095.81 (12,996.27) -2.56% C
1/11/01 6/1/15 AFS-MBS FNMA POOL 535639 6.50% 240,413.90 253,557.78 13,143.88 5.47%
1/21/01 4/1/13 AFS-MBS FNMA POOL E69768 6.50% 392,825.79 413,530.11 20,704.32 5.27%
2/20/02 4/1/17 AFS-MBS FNMA POOL 633281 6.00% 101,199.68 104,616.73 3,417.05 3.38%
8/18/03 8/1/18 AFS-MBS FNMA POOL 734959 4.00% 1,800,540.77 1,746,024.76 (54,516.01) -3.03% C
--------------------------------------------------------
TOTAL AFS-PASS-THRU 4,299,156.80 4,261,097.22 (38,059.58) -0.89%
1/30/03 1/15/18 AFS-MBS C FHLMC 2557 4.50% 678,707.84 654,193.52 (24,514.32) -3.61% C
2/7/03 12/15/12 AFS-MBS C FHLMC 2551 4.00% 746,118.33 740,873.34 (5,244.99) -0.70% C
2/28/03 12/15/21 AFS-MBS C FHLMC 2568 4.25% 1,543,335.06 1,532,581.51 (10,753.55) -0.70% C
2/28/03 12/15/12 AFS-MBS C FHLMC 2551 4.00% 744,271.50 740,873.34 (3,398.16) -0.46% C
3/28/03 2/15/17 AFS-MBS C FHLMC 2581 4.00% 1,070,529.94 1,057,028.05 (13,501.89) -1.26% C
3/28/03 8/15/32 AFS-MBS C FHLMC REMIC 2583 5.50% 55,180.12 53,821.31 (1,358.81) -2.46% C
3/28/03 12/15/13 AFS-MBS C FHLMC 2590 3.25% 596,361.49 594,727.54 (1,633.95) -0.27% C
3/28/03 12/15/16 AFS-MBS C FHLMC 2580 4.00% 1,039,976.15 1,021,038.59 (18,937.56) -1.82% C
3/28/03 12/15/13 AFS-MBS C FHLMC 2590 4.00% 1,229,288.63 1,212,405.59 (16,883.04) -1.37% C
4/30/03 5/25/18 AFS-MBS C FHLMC 2003-41 4.50% 939,854.33 900,387.47 (39,466.86) -4.20% C
4/30/03 12/15/13 AFS-MBS C FHLMC 2580 5.50% 1,390,585.03 1,359,222.45 (31,362.58) -2.26% C
4/30/03 12/15/13 AFS-MBS C FHLMC 2594 3.50% 1,375,191.09 1,359,044.57 (16,146.52) -1.17% C
4/30/03 5/25/33 AFS-MBS C FNMA 2003-42 4.00% 895,780.97 882,801.36 (12,979.61) -1.45% C
4/30/03 5/25/18 AFS-MBS C FNMA 2003-41 4.50% 939,854.33 900,387.47 (39,466.86) -4.20% C
4/30/03 5/25/18 AFS-MBS C FNMA 2003-38 4.50% 422,974.00 407,770.06 (15,203.94) -3.59% C
5/30/03 5/15/18 AFS-MBS C FHLMC 2617 4.50% 1,245,160.79 1,216,856.91 (28,303.88) -2.27% C
5/30/03 2/25/17 AFS-MBS C FNMA 2003-52 4.75% 347,427.89 337,833.42 (9,594.47) -2.76% C
5/30/03 2/25/17 AFS-MBS C FNMA 2003 4.75% 518,495.52 503,556.74 (14,938.78) -2.88% C
6/19/03 3/15/33 AFS-MBS C FHLMC REMIC 2590 4.50% 1,383,301.08 1,355,328.53 (27,972.55) -2.02% C
6/30/03 1/15/33 AFS-MBS C FHLMC 2627 5.00% 1,805,379.08 1,715,411.01 (89,968.07) -4.98% C
6/30/03 6/15/18 AFS-MBS C FHLMC 2628 4.00% 3,048,347.42 2,814,776.28 (233,571.14) -7.66% C
6/30/03 6/15/18 AFS-MBS C FHLMC 2628 4.00% 3,052,110.81 2,814,776.28 (237,334.53) -7.78% C
6/30/03 6/15/33 AFS-MBS C FHLMC 2628 4.00% 1,505,940.38 1,410,792.58 (95,147.80) -6.32% C
6/30/03 6/15/33 AFS-MBS C FHLMC 2628 4.00% 1,508,741.26 1,410,792.58 (97,948.68) -6.49% C
6/30/03 6/15/33 AFS-MBS C FHLMC 2628 4.00% 1,508,741.26 1,410,792.58 (97,948.68) -6.49% C
6/30/03 1/25/19 AFS-MBS C FNMA 2003-67 4.00% 3,575,369.41 3,383,547.84 (191,821.57) -5.37% C
7/30/03 8/25/23 AFS-MBS C FNMA REMIC 200375 3.50% 2,743,732.24 2,647,333.06 (96,399.18) -3.51% C
Page 2
BENJAMIN FRANKLIN BANK AND BENJAMIN FRANKLIN SECURITIES CORP.
INVESTMENT SECURITIES SCHEDULE AS OF SEPTEMBER 30, 2004
MATURITY/ G/L AS IMPAIRMENT
SALE/ % OF ASSESSMENT
PURCHASE CALL UNREALIZED AMORTIZED EXPLANATION
DATE DATE CODE DESCRIPTION RATE AMORTIZED COST MARKET VALUE GAIN/(LOSS) COST CODE
---- --------- ---- ----------- ---- -------------- ------------ ----------- --------- -----------
7/30/03 9/15/31 AFS-MBS C FHLMC 2645 3.50% 2,765,253.64 2,702,108.81 (63,144.83) -2.28% C
7/30/03 7/15/18 AFS-MBS C FHLMC 2640 4.50% 3,323,193.94 3,189,281.52 (133,912.42) -4.03% C
7/30/03 11/25/32 AFS-MBS C FNMA REMIC 200361 5.00% 3,650,003.39 3,556,836.26 (93,167.13) -2.55% C
7/30/03 7/15/18 AFS-MBS C FHLMC REMIC 2643 4.50% 2,218,469.22 2,102,105.76 (116,363.46) -5.25% C
7/30/03 8/25/18 AFS-MBS C FNMA REMIC 200374 4.50% 1,702,532.56 1,624,081.21 (78,451.35) -4.61% C
--------------------------------------------------------
TOTAL AFS-CMO - 53,869,365.50 51,874,464.76 (1,994,900.74) -3.70%
32
5/7/04 7/15/05 AFS-OTHER
BONDS CATERPILLAR FIN SERV 5.30% 512,291.68 509,343.00 (2,948.68) -0.58% B
5/7/04 1/15/06 AFS-OTHER
BONDS HOUSEHOLD FIN CORP 3.30% 1,011,602.59 998,280.00 (13,322.59) -1.32% B
5/7/04 3/15/06 AFS-OTHER
BONDS SALOMON SMITH BARNEY 5.88% 1,049,446.44 1,044,365.00 (5,081.44) -0.48% B
5/10/04 3/30/06 AFS-OTHER
BONDS BEAR STEARNS CO 3.00% 503,274.39 501,309.00 (1,965.39) -0.39% B
5/17/04 10/1/05 AFS-OTHER
BONDS NATIONAL RURAL UTILS 6.65% 1,042,159.88 1,037,228.00 (4,931.88) -0.47% B
5/17/04 8/24/05 AFS-OTHER
BONDS WELLS FARGO & CO 7.25% 470,054.33 468,109.35 (1,944.98) -0.41% B
6/17/04 8/15/05 AFS-OTHER
BONDS AMERICAN GENL FIN 2.05% 497,363.55 498,300.50 936.95 0.19%
--------------------------------------------------------
TOTAL AFS-OTHER BONDS 5,086,192.86 5,056,934.85 (29,258.01) -0.58%
2/15/02 2/15/05 AFS-US &
FED AGENCY US TREAS NOTE 7.50% 1,014,622.00 1,020,625.00 6,003.00 0.59%
4/7/03 4/29/05 AFS-US &
FED AGENCY FHLB 4.15 4.15% 2,028,301.38 2,022,500.00 (5,801.38) -0.29% A
5/29/03 5/15/05 AFS-US &
FED AGENCY FHLMC DISC 1.75% 2,005,212.86 1,994,376.00 (10,836.86) -0.54% A
7/17/03 8/15/05 AFS-US &
FED AGENCY FHLMC 1.5 1.50% 1,998,946.12 1,986,250.00 (12,696.12) -0.64% A
8/4/03 12/15/04 AFS-US &
FED AGENCY FHLB 3.875 3.88% 2,010,226.00 2,008,126.00 (2,100.00) -0.10% A
8/4/03 1/14/05 AFS-US &
FED AGENCY FHLB 4.125 4.13% 2,015,014.00 2,012,500.00 (2,514.00) -0.12% A
8/22/03 9/15/05 AFS-US &
FED AGENCY FNMA 1.875 1.88% 1,994,158.30 1,991,250.00 (2,908.30) -0.15% A
9/5/03 5/15/06 AFS-US &
FED AGENCY FHLB 2.25 2.25% 1,991,941.42 1,987,500.00 (4,441.42) -0.22% A
10/17/03 10/18/05 AFS-US &
FED AGENCY FHLMC 4.375 4.38% 2,049,143.46 2,040,936.00 (8,207.46) -0.40% A
11/3/03 11/15/05 AFS-US &
FED AGENCY FHLMC 2.125 2.13% 2,001,056.24 1,993,750.00 (7,306.24) -0.37% A
11/14/03 12/15/05 AFS-US &
FED AGENCY FEDERAL FARM CR 2.625 2.63% 2,009,783.58 2,003,126.00 (6,657.58) -0.33% A
2/9/04 2/2/07 AFS-US &
FED AGENCY FHLB 2.8% (CALL) 2.80% 2,000,000.00 1,990,626.00 (9,374.00) -0.47% A
2/9/04 2/9/07 AFS-US &
FED AGENCY FHLB 2.76% (CALL) 2.76% 2,000,000.00 1,988,750.00 (11,250.00) -0.56% A
3/10/04 12/19/08 AFS-US &
FED AGENCY FHLB (CALL) STEP 2.25% 2.25% 998,750.00 991,875.00 (6,875.00) -0.69% A
3/16/04 7/24/06 AFS-US &
FED AGENCY FHLB 1.82% (CALL) 1.82% 2,000,000.00 1,966,250.00 (33,750.00) -1.69% A
3/19/04 3/17/06 AFS-US &
FED AGENCY FED FARM CR 1.8 (CALL) 1.80% 1,500,000.00 1,482,187.50 (17,812.50) -1.19% A
4/5/04 9/29/06 AFS-US &
FED AGENCY FNMA 2.07% (CALL) 2.07% 1,995,228.00 1,971,250.00 (23,978.00) -1.20% A
4/15/04 4/13/06 AFS-US &
FED AGENCY FHLB 2% (CALL) 2.00% 2,000,000.00 1,981,250.00 (18,750.00) -0.94% A
5/10/04 2/13/06 AFS-US &
FED AGENCY FHLB 2% 2.00% 1,993,185.94 1,985,000.00 (8,185.94) -0.41% A
7/17/03 7/15/05 FHLMC 7% 7.00% 2,085,283.24 2,073,750.00 (11,533.24) -0.55% A
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TOTAL AFS-US & FED AGENCY 37,690,852.54 37,491,877.50 (198,975.04) -0.53% A
2/28/94 2/1/07 HTM-MBS FHLMC 030002 OURS 5.50% 111,590.73 112,783.64 1,192.91 1.07%
2/28/94 9/1/06 HTM-MBS FHLMC 030003 OURS 6.50% 109,684.80 112,025.47 2,340.67 2.13%
2/28/94 9/1/17 HTM-MBS FHLMC 020003 OURS 6.00% 44,834.78 46,165.93 1,331.15 2.97%
--------------------------------------------------------
TOTAL HELD TO MATURITY - MBS 266,110.31 270,975.04 4,864.73 1.83%
---------------------------------------------------------------
TOTALS 96,912,553.21 94,694,252.15 (2,218,301.06) -2.29%
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