CAROL HEMPFLING PRATT
BOSTON OFFICE
617-832-1148
January 31, 2005 CPRATT@FOLEYHOAG.COM
BY EDGAR
Securities and Exchange Commission
Division of Corporation Finance
450 5th Street, N.W.
Washington, D.C. 20549
Re: Benjamin Franklin Bancorp, Inc.
Amendment No. 1 to Registration Statement on
Form S-4 filed December 23, 2004
File No. 333-121608
Ladies and Gentlemen:
On behalf of Benjamin Franklin Bancorp, Inc., Franklin, Massachusetts (the
"Registrant"), following this letter is a direct transmission (modem) filing of
Amendment No. 1 to Registration Statement on Form S-4 (the "Registration
Statement"). This filing is made pursuant to The Securities Act of 1933, as
amended.
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).
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.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 2
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.
Not applicable to S-4.
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.
Not applicable to S-4.
4. PLEASE KNOCK DOWN THE ALL CAPITAL LETTER LEGENDS. RATHER THAN ALL CAPITAL
LETTERS, CONSIDER USING BOLD FACE TYPE AND/OR ITALICS.
Not applicable to S-4.
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, beginning on page 11.
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 13.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 3
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.
Not applicable to S-4.
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.
Not applicable to S-4.
10. PLEASE DELETE THE PHRASE "TO THE EFFECT" FOUND IN THE THIRD LINE OF THIS
SECTION.
Not applicable to S-4.
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 [#].
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 9 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 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.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 4
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 32.
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.
The Registration Statement has been modified in response to this comment.
See Amendment No. 1 pages 37, 40, 43 and 46.
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 5
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 38-56.
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 145. 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 145-147.
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.
The requested information appears on page 180, in the two paragraphs
immediately following the table.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 6
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 167.
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.
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 167.
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 7
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 182.
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 193.
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.
Not applicable to S-4.
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 8
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 72 and page 219.
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:
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 9
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.
Not applicable to S-4.
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 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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 10
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.
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.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 11
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.
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, was submitted in connection with the
registrant's Amendment No. 1 to Registration Statement on Form S-1.
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
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.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 12
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 163 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 115, 118 and 120.
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.
The Registration Statement has been modified in response to this
comment. See Amendment No. 1, pages 116, 118, 119, 120 and 122.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 13
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 114.
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 123.
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
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.
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 14
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.
The updated auditors' consents are included as Exhibits 23.3 and 23.4 to
Amendment No. 1.
EXHIBITS
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 15
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 were filed with
Amendment No. 1 to the Registration Statement on Form S-1 and are
incorporated by reference to Amendment No. 1 to the Registration Statement
on Form S-4. Certain additional exhibits are also being filed with
Amendment No. 1 to the Registration Statement on Form S-4.
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 cover page to the prospectus has been modified in response to this
comment.
PRIOR COMMENTS
57. PLEASE REVISE THE FORM S-4 CONSISTENT WITH THE FORM S-1 COMMENTS.
Amendment No. 1 to the Registration Statement on Form S-4, incorporating
the Form S-1 comments, is being filed with this letter.
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 16
CHART BANK'S FINANCIAL ADVISOR" WHAT ABOUT "RYAN BECK SAYS THE MERGER IS
FAIR TO CHART STOCKHOLDERS."
The Form S-4 Registration Statement has been modified in response to this
comment. See Amendment No. 1, pages 2 - 6.
59. TO THE EXTENT POSSIBLE, QUANTIFY THE INTERESTS OF CHART BANK'S EXECUTIVES
AND DIRECTORS IN THE MERGER.
The Form S-4 Registration Statement has been modified in response to this
comment. See Amendment No. 1, page 4.
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 was provided in connection with Amendment No. 1
to the Form S-1.
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
Division of Corporation Finance
January 31, 2005
Page 17
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-4 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 has been modified in response to this comment.
* * * * *
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 18
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
Securities and Exchange Commission
Division of Corporation Finance
January 31, 2005
Page 19
bcc: Daniel Adams
Thomas J. Vocatura
Denise Toomey
Dean Kenney