-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VQL4O6NQaKtYfRmcW+oU1GdYqY/5vHB+n9POZXIzXMYLFet+CoZ8H4B+nDlfqfhu PqT8Vlc7EYYM/a0ssvj0+g== 0000950135-05-000262.txt : 20080320 0000950135-05-000262.hdr.sgml : 20080320 20050124154221 ACCESSION NUMBER: 0000950135-05-000262 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20050124 DATE AS OF CHANGE: 20050211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Benjamin Franklin Bancorp, M.H.C. CENTRAL INDEX KEY: 0001302176 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 043336598 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-121154 FILM NUMBER: 05544384 BUSINESS ADDRESS: STREET 1: 58 MAIN STREET STREET 2: P.O. BOX 309 CITY: FRANKLIN STATE: MA ZIP: 02038 BUSINESS PHONE: (508) 528-7000 MAIL ADDRESS: STREET 1: 58 MAIN STREET STREET 2: P.O. BOX 309 CITY: FRANKLIN STATE: MA ZIP: 02038 FORMER COMPANY: FORMER CONFORMED NAME: Benjamin Franklin Bancorp, M.H.C. DATE OF NAME CHANGE: 20040901 S-1/A 1 b52576a1sv1za.htm BENJAMIN FRANKLIN BANCORP, INC. Benjamin Franklin Bancorp, Inc. Form S-1/A
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As filed with the Securities and Exchange Commission on January 24, 2005

Registration No. 333- 121154

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PRE-EFFECTIVE

AMENDMENT NO. 1
to
FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Benjamin Franklin Bancorp, Inc.

(Exact name of registrant as specified in its charter)
         
Massachusetts   6712   04-3336598
(State or other jurisdiction   (Primary Standard Industrial   (I.R.S. Employer
of incorporation or organization)   Classification Code Number)   Identification Number)

58 Main Street
Franklin, Massachusetts 02038-0309
(508) 528-7000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Thomas R. Venables
President and Chief Executive Officer
Benjamin Franklin Bancorp
58 Main Street
Franklin, Massachusetts 02038-0309
(508) 528-7000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
     
Peter W. Coogan, Esq.   Eric Luse, Esq.
Carol Hempfling Pratt, Esq.   Marc P. Levy, Esq.
Foley Hoag LLP   Luse Gorman Pomerenk & Schick P.C.
155 Seaport Boulevard   5335 Wisconsin Ave. N.W.
Boston, Massachusetts 02210   Washington, D.C. 20015
Telephone: (617) 832-1000   Telephone: (202) 274-2000
Telecopy: (617) 832-7000   Telecopy: (202) 362-2902

     Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

     The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

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PROSPECTUS

[LOGO OF BENJAMIN FRANKLIN BANCORP, INC.

(Holding Company for Benjamin Franklin Bank)
Up to 6,612,500 Shares of Common Stock

     Benjamin Franklin Bancorp, Inc., Franklin, Massachusetts, is offering shares of its common stock in connection with its conversion from its current form as a Massachusetts-chartered mutual holding company, known as Benjamin Franklin Bancorp, M.H.C., to a Massachusetts-chartered business corporation and stock holding company. Benjamin Franklin Bancorp now owns all of the common stock of Benjamin Franklin Bank and will continue to do so after the conversion. Currently, there are no outstanding shares of Benjamin Franklin Bancorp common stock. We have applied to have the common stock of Benjamin Franklin Bancorp quoted on the Nasdaq National Market under the symbol “BFBC.”

     At the same time as the conversion, Benjamin Franklin Bancorp will acquire Chart Bank of Waltham, Massachusetts, using $22,492,000 of the net proceeds of the offering, together with 2,401,575 newly issued shares of our common stock, assuming that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing.

     We are offering up to 5,750,000 shares of common stock for sale on a best efforts basis. We may sell up to 6,612,500 shares of common stock because of demand for the shares positive changes in market conditions or regulatory considerations, without resoliciting subscribers. In addition, we will donate to a charitable foundation to be established by Benjamin Franklin Bank 8.0% of the number of shares we actually sell in the offering, up to a maximum of 400,000 shares. We must issue a minimum of 4,250,000 shares in the offering. If we do not receive orders for at least this minimum number of shares, then we may, subject to regulatory 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. The contribution of the common stock to the Benjamin Franklin Bank Charitable Foundation will not be considered in determining whether the minimum number of shares of common stock, 4,250,000, has been sold in order to complete the offering.

     The minimum order size is 25 shares. The offering is expected to expire at 10:00 a.m., Massachusetts time, [date], 2005. We may extend this expiration date without notice to you until [date], 2005, unless the Massachusetts Commissioner of Banks approves a later date, which may not be beyond [date], 2005. Once submitted, orders are irrevocable unless the offering is terminated or is extended beyond [date], 2005 or the number of shares of common stock to be sold is increased to more than 6,612,500 shares or decreased to less than 4,250,000 shares. In any of these cases, subscribers will have the right to modify or rescind their purchase orders. Funds received during the offering will be held in a segregated account at Benjamin Franklin Bank and will earn interest at our passbook savings rate.

     Ryan Beck & Co., Inc. will assist us in selling our shares of common stock on a best efforts basis. As Ryan Beck & Co., Inc. is not underwriting the offering, it is not required to purchase any shares of the common stock that are being offered for sale. The purchase price is $10 per share. Purchasers will not pay a commission to purchase shares of common stock in the offering.

Offering Summary
Price: $10 per share

                         
    Minimum     Maximum     Adjusted Maximum  
Number of Shares
     4,250,000       5,750,000       6,612,500  
Gross Offering Proceeds
   $ 42,500,000     $ 57,500,000     $ 66,125,000  
Estimated Offering Expenses (1)
     1,553,850       1,691,370       1,770,720  
Estimated Net Proceeds
   $ 40,946,150     $ 55,808,630     $ 64,354,280  
Estimated Net Proceeds/Share
   $ 9.63     $ 9.71     $ 9.73  

(1)   Includes fees payable to Ryan Beck & Co. as marketing agent for the offering. See “Pro Forma Data” beginning on page [#] and “Plan of Distribution and Marketing Arrangements” beginning on page [#].

This investment involves a degree of risk, including the possible loss of principal.
Please read “Risk Factors” beginning on page [#].

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

None of the Securities and Exchange Commission, the Massachusetts Commissioner of Banks nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

For assistance, contact the Stock Information Center at (800) 290-0793.

Ryan Beck & Co.
The date of this prospectus is [date], 2005

 

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(BENJAMIN FRANKLIN BANK LOGO (UPON THE CLOSING OF THE CONVERSION AND THE ACQUISITION, CHART BANKS BRANCHES WILL BECOME BRANCHES OF BENJAMIN FRANKLIN BANK))

 

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Financial Statements
        
    F-1  
    G-1  
 Ex-1.2 Form of Agency Agreement
 Ex-2.1 Plan of Conversion
 Ex-4.1 Form of Common Stock Certificate
 Ex-8.1 Tax Opinion of Foley Hoag LLP
 Ex-21 Subsidiaries
 EX-23.3 Consent of Wolf & Company, P.C. with respect to Benjamin Franklin Bancorp
 EX-23.4 Consent of Wolf & Company, P.C. with respect to Chart Bank
 Ex-99.2 Appraisal Report of RP Financial, LC.
 Ex-99.4 Marketing Materials
 Ex-99.5 Order and Acknowledgment Form
 Ex-99.7 Prospectus Supplement for particiants in the 401(k) Plan

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SUMMARY

     The following summary explains the significant aspects of the conversion and the offering. It may not contain all the information that is important to you. For additional information, you should read this entire document carefully, including the consolidated financial statements and the notes to the consolidated financial statements of Benjamin Franklin Bancorp and Chart Bank.

The Companies

     Benjamin Franklin Bancorp. Benjamin Franklin Bancorp, M.H.C. is the Massachusetts-chartered mutual holding company of Benjamin Franklin Bank, a Massachusetts-chartered savings bank. Upon the conversion, Benjamin Franklin Bancorp, M.H.C. will exchange its mutual holding company charter for the charter of a Massachusetts business corporation and will change its name to Benjamin Franklin Bancorp, Inc. Benjamin Franklin Bancorp’s principal activity is, and after the conversion will continue to be, the ownership of 100.0% of the outstanding capital stock of Benjamin Franklin Bank.

     Our executive offices are located at 58 Main Street, Franklin, Massachusetts 02038-0309. Our telephone number at this address is (508) 528-7000.

     Benjamin Franklin Bank. Benjamin Franklin Bank is a full-service, community-oriented financial institution offering products and services to individuals, families and businesses through six offices located in Norfolk and Worcester Counties in Massachusetts, and specifically in the towns of Franklin, Foxboro, Bellingham, Milford, and Medfield. Benjamin Franklin Bank was originally organized as a Massachusetts state-chartered mutual savings bank in 1871, and reorganized into the mutual holding company structure and became the wholly-owned subsidiary of Benjamin Franklin Bancorp in 1996. At September 30, 2004, Benjamin Franklin Bank had total assets of $517.1 million and total deposits of $402.0. million. Pursuant to our merger agreement with Chart Bank, Chart Bank will merge into and become a part of Benjamin Franklin Bank immediately following the completion of the conversion.

     Benjamin Franklin Bank’s business consists primarily of making loans to its customers, including residential mortgages, commercial real estate loans, construction loans, commercial business loans and consumer loans, and investing in a variety of investment and mortgage-backed securities. Benjamin Franklin Bank funds these lending and investment activities with deposits from the general public, funds generated from operations and selected borrowings.

     Chart Bank. Chart Bank, A Cooperative Bank, is a Massachusetts cooperative bank that was formed in 1985. Chart Bank primarily conducts its business from two banking offices in Waltham, Massachusetts and one banking office in Newton, Massachusetts. Chart Bank is engaged principally in the business of investing in various types of residential and commercial mortgages, consumer and commercial loans, and investment securities, funded primarily with deposits from the general public and Federal Home Loan Bank of Boston borrowings. Chart Bank offers a wide variety of deposit and loan products and services to individual and commercial customers. Additionally, Chart Bank, through its subsidiary, Creative Strategic Solutions, Inc., or CSSI, supplies cash to automatic teller machines, or ATMs, owned by independent service organizations and provides related cash management services to a nationwide customer base.

Our Business Strategy

     Since its inception, Benjamin Franklin Bank has maintained a community-focused orientation, through attention to superior levels of customer service coupled with a diverse product menu designed to meet the needs of individuals and businesses located in its market area. As a result of the conversion and

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simultaneous acquisition of Chart Bank, Benjamin Franklin Bank will be a larger, more geographically diverse and well-capitalized institution, with a management team and structure geared toward implementing operating strategies that build on these strengths and draw on the best of the business strategies currently being used at Benjamin Franklin Bank and Chart Bank. Important elements of the business strategy that we will be pursuing going forward can be summarized as follows:

  1.   Increase Loan Assets And Change Loan Mix. In addition to concentrating on increasing the loan portfolio generally, we expect to continue our focus in particular on increasing originations of commercial real estate and commercial business loans, with a goal of increasing these types of loans as a proportion of our loan portfolio from the September 30, 2004 level of 22.3% of total loans. Our acquisition of Chart Bank is an important step in the direction of achieving this goal; at September 30, 2004 on a pro forma basis including Chart Bank’s loan portfolio, commercial real estate and commercial business loans would have represented 33.9% of total loans. We also expect to hire additional lending personnel, and intend to establish a commercial lending department, headed by Chart Bank’s senior commercial lender, that will focus specifically on the origination of commercial business loans and related commercial deposit opportunities.
 
  2.   Maintain Asset Quality. We will continue to focus on managing credit risk to maintain our favorable asset quality. While focusing on expanding our lending activities, and our commercial lending activities in particular, we will continue to emphasize what we believe are prudent underwriting standards, as well as diligent monitoring and collection efforts and maintaining adequate loan loss reserves.
 
  3.   Geographic Expansion. We intend to continue the geographic expansion of our franchise represented by the Chart Bank acquisition. We intend to open new branch offices, to the extent our financial resources permit, in communities located between the Benjamin Franklin Bank and Chart Bank franchises as well as in other communities contiguous to those currently served by Benjamin Franklin Bank. While the precise number of new branches and related timing has not yet been determined, we consider it likely that we will establish at least one new branch in each of the years 2005 through 2007. We will also remain open to the possibility of further expansion through whole-bank and branch acquisitions, as opportunities arise.
 
  4.   Increase Deposit Market Share in the Markets We Serve. Retail deposits are our primary source of funds for our lending and investing activities. By offering a variety of deposit products and superior customer service, we will seek to retain and expand existing customer relationships as well as to attract new deposit customers. Personalized service and flexibility with regard to customer needs will continue to be augmented with a variety of delivery channels to maximize customer convenience. These include extended branch hours, ATMs, Internet banking, automated bill payment and telephone banking. Through our continued focus on these deposit-gathering efforts in existing branch locations, coupled with our plans for geographic expansion, we expect to increase the overall level of deposits and our market share in the markets we serve.
 
  5.   Increase Non-interest Income. Traditionally, Benjamin Franklin Bank’s profits have relied heavily on the net interest income derived from its lending and investing activities. Over the past several years, management has initiated activities to decrease that reliance on net interest income, by offering fee-based products such as investment advisory services and insurance. Going forward, Benjamin Franklin Bank will continue to pursue initiatives to increase non-interest income, including the potential expansion of the activities of Chart Bank’s subsidiary, CSSI, which supplies cash to automatic teller machines, or ATMs, owned by independent service organizations and provides related cash management services to a nationwide customer base.
 

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  6.   Improve Operating Efficiency And Cost Control. While our operating efficiency has improved over the past two years, with the ratio of non-interest expense to average total assets declining from 2.76% in 2002 to 2.73% in 2003, we believe there is potential for further improvement. We recognize that our growth strategies and our public company status will require greater investments in personnel, marketing, premises and equipment, and these investments will have a negative impact on our expense ratios over the short term. However, we will continue our efforts to monitor and control costs throughout the organization, and over the long term, as our assets grow, we expect our ratio of non-interest expense to total average assets to decline. The increased scale that will result from the acquisition of Chart Bank is one important factor in achieving this goal.

Reasons for the Conversion

     The primary reasons for converting from the mutual form (meaning no stockholders) to the stock form (100% owned by public stockholders) and raising additional capital through the stock offering are:

  •   to provide us with the capital and the form of consideration necessary to acquire Chart Bank, as discussed below;
 
  •   to support internal growth through lending in the communities we serve;
 
  •   to enhance existing products and services and support the development of new products and services;
 
  •   to facilitate growth through de novo branching;
 
  •   to facilitate growth through branch and whole bank acquisitions as opportunities arise; and
 
  •   to improve our overall competitive position.

     As a stock holding company, we will have greater flexibility in structuring further mergers and acquisitions, including the form of consideration that we can use to pay for an acquisition. Our current mutual holding company structure precludes us from offering shares of common stock as consideration in a merger or acquisition. Potential sellers often want stock for at least part of the purchase price, because the exchange of stock provides the opportunity to enjoy future investment growth and to defer the recognition of capital gains. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination thereof and will, therefore, enhance our ability to compete with other bidders when acquisition opportunities arise. Other than our agreement to acquire Chart Bank, we currently have no arrangements or understandings regarding any specific acquisition.

Chart Bank Acquisition

     We decided to undertake the conversion in connection with our decision to acquire Chart Bank, a Massachusetts-chartered cooperative bank in stock form with $256.3 million in assets and $216.0 million in deposits as of September 30, 2004. Pursuant to our merger agreement with Chart Bank, dated September 1, 2004, Chart Bank will merge into and become a part of our subsidiary bank, Benjamin Franklin Bank, immediately following completion of the conversion.

     The acquisition will enable us to expand our branch network into Middlesex County, Massachusetts, where Chart Bank maintains two offices in Waltham and one office in Newton. In addition to expanding our geographic branching outreach, this acquisition will enable us to leverage our capital base and is

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expected to improve operating efficiency through increased scale. Our pro forma assets and deposits, after giving effect to the acquisition and the stock offering, assuming 6,612,500 shares are sold in the offering, would have been $836.7 million and $616.2 million, respectively, at September 30, 2004. See “Pro Forma Data” on page [#].

     In our merger agreement with Chart Bank, we agreed that the Chart Bank stockholders may elect to receive either $30.75 in cash or 3.075 shares of our common stock for each share of Chart Bank stock held by them, with 45.0% of the aggregate consideration to be paid in cash and 55.0% of the aggregate consideration to be paid in common stock. The aggregate consideration for the Chart Bank acquisition will be $22,492,000 in cash and 2,401,575 shares of our common stock, assuming that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing.

     By subscribing for or purchasing shares of Benjamin Franklin Bancorp common stock in the offering, subscribers and other purchasers will be approving and consenting to the completion of the Chart Bank acquisition. If, for any reason, the Chart Bank acquisition cannot be completed, our Board will consider whether to proceed with the conversion. If we were to decide to proceed with the conversion without Chart Bank, we would resolicit subscribers, send them a modified prospectus and provide them with an opportunity to increase, decrease or rescind their orders. If for any reason the conversion cannot be completed, we will not proceed with the Chart Bank acquisition.

Terms of The Conversion and Offering

     We are offering between 4,250,000 and 5,750,000 shares of common stock of Benjamin Franklin Bancorp for sale to the public at an offering price of $10 per share. The subscription offering is made to Benjamin Franklin Bank’s eligible depositors, our tax qualified employee benefit plans and our officers, directors and employees. Shares not sold to these persons may be made available to the public in a direct community offering, and shares not purchased in the subscription offering or the direct community offering may be offered for sale through a syndicated community offering. The maximum number of shares that we sell in the offering may increase by up to 15.0%, to 6,612,500 shares, as a result of demand for the shares in the offering, positive changes in financial markets in general and with respect to financial institution stocks in particular or regulatory considerations. Unless the number of shares of common stock to be offered is increased to more than 6,612,500 or decreased to less than 4,250,000, or the offering is extended beyond [date], 2005, subscribers will not have the opportunity to modify or rescind their stock orders. In addition, we will contribute shares of our authorized but unissued common stock to the Benjamin Franklin Bank Charitable Foundation, a new charitable foundation to be established by Benjamin Franklin Bank, in an amount up to 8.0% of the number of shares we actually sell in the offering, up to a maximum of 400,000 shares, which is 8.0% of the number of shares that would be issued at the 5,000,000 share midpoint of the offering range.

     If we do not receive orders for at least 4,250,000 shares of common stock, the minimum of the offering range, then, subject to regulatory approval 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 the minimum of the offering range. This limitation was established to ensure that the Chart Bank stockholders’ ownership interest in Benjamin Franklin Bancorp will not exceed 49.0%. Applying unsubscribed shares toward the merger will not increase or reduce the number of shares issued to Chart Bank stockholders in the merger, but will reduce the total number of shares outstanding after the conversion and merger and will therefore increase the percentage of our outstanding stock owned by former Chart Bank stockholders.

     All investors will pay the same $10 purchase price per share. Investors will not be charged a commission to purchase shares of common stock. Ryan Beck & Co., Inc., our marketing agent in the

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offering, will use its best efforts to assist us in selling shares of our common stock. Ryan Beck & Co., Inc. is not obligated to purchase any shares of common stock in the offering.

How We Determined The Offering Range And The $10 Per Share Stock Price

     The amount of common stock we are offering in the conversion is based on an independent appraisal of the estimated market value of Benjamin Franklin Bancorp, assuming the offering, the funding of the Benjamin Franklin Bank Charitable Foundation and the acquisition of Chart Bank are completed. RP Financial, LC., our independent appraiser, has estimated that, as of November 26, 2004, this market value ranged from $69.9 million to $85.5 million, with a midpoint of $78.0 million. Based on this valuation and the $10 per share price, the number of shares of common stock being offered for sale by Benjamin Franklin Bancorp will range from 4,250,000 shares to 5,750,000 shares. In addition, we will contribute shares of our authorized but unissued common stock to the Benjamin Franklin Bank Charitable Foundation in an amount up to 8.0% of the number of shares we actually sell in the offering, up to a maximum of 400,000 shares, which maximum is 8.0% of the number of shares that would be issued at the 5,000,000 share midpoint of the offering range. The contribution of shares of our common stock to the Benjamin Franklin Bank Charitable Foundation will have the effect of reducing our pro forma valuation. See “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation” on page [#]. We will issue an additional 2,401,575 shares of common stock to the Chart Bank stockholders as consideration for the Chart Bank merger. These shares are in addition to the shares issued in the offering, unless we elect and receive regulatory approval to apply up to 2,082,500 unsubscribed shares toward the merger consideration in order to issue sufficient shares to achieve the minimum of the offering range. The $10 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

     The appraisal is based in part on Benjamin Franklin Bancorp’s financial condition and results of operations, the effect of the additional capital raised by the sale of shares of common stock in the offering, the acquisition of Chart Bank and an analysis of a peer group of 10 publicly traded thrift holding companies that RP Financial, LC. considered comparable to Benjamin Franklin Bancorp.

     The following table presents a summary of selected pricing ratios for the peer group companies and the pricing ratios for Benjamin Franklin Bancorp. The estimated appraised value and the resulting premium/discount took into consideration the potential financial impact of the conversion, the contribution to the Benjamin Franklin Bank Charitable Foundation, adoption of stock based benefit plans consistent with industry practice, and the proposed acquisition of Chart Bank. The ratios for Benjamin Franklin Bancorp reflect the new accounting rule that will require us to expense the cost of stock options that we expect to grant under the stock-based incentive plan; the peer group ratios do not reflect such an expense because the new rule has not yet gone into effect.

                         
                    Price as a % of  
    Price as a     Price as a % of     Pro Forma  
    Multiple of Pro     Pro Forma     Tangible  
    Forma Earnings     Stockholders’     Stockholders’  
    Per Share     Equity Per Share     Equity Per Share  
Benjamin Franklin Bancorp
                        
(pro forma data as of September 30, 2004):
                        
Maximum
     41.67x       83.40 %     129.70 %
Minimum
     34.09x       78.31 %     132.63 %
Valuation of Peer Group Companies as of November 26, 2004
                        
Averages
     19.04x       166.24 %     178.05 %
Medians
     20.34x       159.61 %     169.23 %

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     The independent appraisal does not indicate market value. Investors should not assume or expect that the valuation of Benjamin Franklin Bancorp as indicated above means that the common stock will trade at or above the $10 purchase price after the conversion.

     The independent appraisal will be updated prior to the completion of the conversion. Any changes to the appraisal would be subject to regulatory approval. The estimated pro forma market value of Benjamin Franklin Bancorp common stock to be sold in the conversion may be increased over the maximum level of $57.5 million by up to 15.0%, to up to $66.1 million, without notification to those who subscribed for shares in the offering. If this occurs, the maximum number of shares to be sold will correspondingly increase. See “Pro Forma Data” on page [#]. In the event that the updated appraisal results in an increase in the maximum valuation range to more than $66.1 million, or a decrease in the minimum valuation range below $42.5 million, the offering would not be completed without a resolicitation of subscribers. See “Pro Forma Data” on page [#], and “The Conversion And The Offering—Stock Pricing and Number of Shares to be Issued” on page [#].

After-Market Performance Information Provided by Independent Appraiser

     The following information was provided to our Board of Trustees by RP Financial, LC. as part of the appraisal. The table presents information for all standard mutual-to-stock conversion transactions completed between January 1, 2003 and November 26, 2004. The information shows the average and median after-market performance of the trading price of the common stock at certain points after the completion of the stock conversion. Based on the independent valuation, Benjamin Franklin Bancorp has initial pro forma price-to-tangible stockholders’ equity ratios as of September 30, 2004 of 132.63%, 131.41%, 129.70%, and 128.21% at the minimum, midpoint, maximum, and maximum as adjusted of the valuation range, respectively. During the period, the average closing price to tangible stockholders’ equity ratios in the conversions are lower than the range of pro forma price to book ratios for Benjamin Franklin Bancorp and, with the exception of NewAlliance Bancshares, Inc. of Connecticut, which also involved the acquisition of other financial institutions, there were no other mutual-to-stock conversions with pro forma price-to-tangible stockholders’ equity ratios exceeding 100.0%. Thus, the pro forma price-to-tangible stockholders’ equity ratios for Benjamin Franklin Bancorp exceed by a significant amount essentially all of the comparable pro forma pricing ratios for standard mutual-to-stock conversions completed during the January 1, 2003 to November 26, 2004 period that did not also involve acquisitions of other financial institutions. The high pro forma price-to-tangible stockholders’ equity ratios for Benjamin Franklin may have a negative effect on any potential price appreciation of our stock. The information shown in the following table was not included in the appraisal report.

Mutual-to-Stock Conversion Offerings with Completed Closing Dates
between January 1, 2003 and November 26, 2004

                                         
    Appreciation From Initial Trading Date  
                                    Through  
    Conversion                             November  
Transaction   Date     1 day     1 week     1 month     26, 2004  
Third Century Bancorp, Inc. — IN
     06/30/04       13.2 %     10.5 %     12.5 %     30.0 %
SE Financial Corp. — PA
     05/06/04       (0.5 %)     (1.5 %)     (6.0 %)     11.0 %
NewAlliance Bancshares, Inc. — CT
     04/02/04       51.7 %     45.3 %     36.5 %     47.8 %
KNBT Bancorp, Inc. — PA
     11/03/03       68.8 %     67.5 %     70.5 %     71.1 %
Rainier Pacific Fin Group — WA
     10/21/03       69.9 %     66.0 %     61.9 %     78.9 %
Community First Bancorp, Inc. — KY
     06/27/03       20.0 %     20.0 %     20.5 %     40.0 %
Rantoul First Bank, s.b. — IL
     04/02/03       15.1 %     20.0 %     23.5 %     60.0 %
Provident Fin. Services, Inc. — NJ
     01/16/03       55.0 %     56.5 %     51.5 %     93.5 %
CCSB Financial Corp. — MO
     01/09/03       20.0 %     23.1 %     25.0 %     50.0 %
 
             34.8 %     34.2 %     32.9 %     53.6 %

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     RP Financial, LC. advised the Board that the appraisal was prepared in conformance with the regulatory appraisal methodology. That methodology requires a valuation based on an analysis of the trading prices of comparable public companies whose stocks have traded for at least one year prior to the valuation date. RP Financial, LC. also advised the Board that the aftermarket trading experience of recent transactions was considered in the appraisal as a general indicator of current market conditions, but was not relied upon as a primary valuation methodology.

     The table above is not intended to be indicative of how our stock may perform. Stock appreciation is affected by many factors, including, but not limited to, the factors set forth below. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the “Risk Factors” generally, beginning on page [#].

     Data represented in the table were calculated using a small sample. The data, therefore, may not be meaningful for investors. For example, in the period between January 1, 2003 and November 26, 2004, only one transaction had closed where the initial pro forma price-to-tangible stockholders’ equity ratio was 100.0% or greater. While stock prices of converting institutions have, on average, increased for the transactions presented, there can be no assurance that our stock price will not trade below $10 per share, as has been the case for some converted mutual institutions. In addition, the conversion transactions from which the data are derived occurred primarily during a falling interest rate environment, during which time the market for financial institution stocks typically increases. If interest rates rise, our net interest income and the value of our assets could be reduced, which could negatively affect our stock price. The increase in any particular company’s stock price is subject to various factors, including the amount of proceeds a company raises and the quality of management and management’s ability to deploy proceeds (such as through investments, the acquisition of other financial institutions or other businesses, the payment of dividends and common stock repurchases). In addition, stock prices may be affected by general market conditions, the interest rate environment, the market for financial institutions, merger or takeover transactions, the presence of professional and other investors who purchase stock on speculation, as well as other unforeseeable events not necessarily in the control of management.

     Our Board of carefully reviewed the information provided to it by RP Financial, LC. through the appraisal process, but did not make any determination regarding whether prior standard mutual-to-stock conversions have been undervalued on a price to tangible stockholders’ equity basis, nor did the Board draw any conclusions regarding how the historical data reflected above may affect Benjamin Franklin Bancorp’s appraisal. Instead, the Board engaged RP Financial, LC. to help it understand the regulatory process as it applies to the appraisal and to advise the Board as to how much capital Benjamin Franklin Bancorp would be required to raise under the regulatory appraisal guidelines.

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

     In order to align the interests of our employees, officers and directors more closely to our shareholders’ interests, we intend to establish certain benefit plans some of which use our common stock as compensation. Accordingly, we are adopting new benefit plans for our officers and employees at no cost to them. We have established an employee stock ownership plan that will award shares of our common stock to eligible employees primarily based on their compensation. At the completion of the conversion, we will make, or contribute funds to a subsidiary to enable it to make, a loan to the employee stock ownership plan to enable it to purchase shares of our common stock in the offering or in the open market following completion of the offering. It is expected that our employee stock ownership plan will purchase 8.0% of the shares issued in the offering, including shares issued to the Benjamin Franklin Bank

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Charitable Foundation. If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to the total of 8.0% of shares of common stock issued in the offering. This plan is a tax-qualified retirement plan for the benefit of all our employees. Assuming the employee stock ownership plan purchases 492,000 shares in the offering (the number of shares it would purchase at the maximum of the offering range), we will recognize additional compensation expense of $4.9 million over a 30-year period, assuming the shares of common stock have a fair market value of $10 per share for the full 30-year period. If, in the future, the shares of common stock have a fair market value greater or less than $10 per share, the compensation expense will increase or decrease accordingly.

     In addition to the employee stock ownership plan, following the conversion we intend to implement a stock-based incentive plan that will provide for grants of stock options and restricted stock to directors, officers and employees. The stock-based incentive plan cannot be established sooner than six months after the offering and, if implemented less than one year after the offering, would require the approval of our stockholders by two-thirds of the outstanding shares of Benjamin Franklin Bancorp common stock. If the stock-based incentive plan is implemented more than one year after the offering, the stock-based incentive plan must be approved by a majority of the shares of Benjamin Franklin Bancorp present and voting. If such plan is adopted less than one year after completion of the offering, the number of options granted and restricted shares awarded under the plan may not exceed 10.0% and 4.0%, respectively, of the total shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. However, these limitations would not apply if such stock-based incentive plan is implemented one year or more after the completion of the offering. Finally, if adopted within one year, the stock-based incentive plan would be subject to such other limitations as may be imposed by the Massachusetts Commissioner of Banks, including certain vesting requirements.

     The employee stock ownership plan and restricted stock grants under the stock-based incentive plan will increase our future compensation costs, thereby reducing our earnings. In addition, the Financial Accounting Standards Board, or FASB, recently issued a statement requiring companies to expense the cost of stock options granted to officers, directors and employees, effective for reports filed with the Securities and Exchange Commission after June 15, 2005. As a result, we will expense the cost of stock options granted under the stock-based incentive plan, and this will further increase our compensation costs and reduce our earnings. Additionally, while our intention is to fund our stock-based incentive plan with shares purchased on the open market, stockholders will experience a dilution in their ownership interest if newly issued shares of common stock are used to fund stock options and stock awards. See “Risk Factors—Our Stock Benefit Plans Will Increase Our Costs, Which Will Reduce Our Income” and “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Benefit Plans” on page [#].

     The following table summarizes the stock benefits that our officers, directors and employees may receive following the reorganization and offering, at the maximum of the offering range and assuming that we initially implement a stock-based incentive plan granting options to purchase 10.0% of the shares issued in the offering and issued to the Benjamin Franklin Bank Charitable Foundation and awarding shares of restricted stock equal to 4.0% of the shares issued in the offering and issued to the Charitable Foundation (the maximum permissible amount of grants and awards if such plan is adopted less than one year from the date of completion of the offering). The table also shows the dilution to stockholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees.

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    Aggregate Number of Shares to be                        
    Granted or Purchased                     Value of Grants (3)  
                            Dilution              
                    As a     Resulting if              
    At the     At the     Percentage     We Issue     At the     At the  
    Minimum     Maximum     of Common     New Shares     Minimum     Maximum  
    of the     of the     Stock to be     for Stock     of the     of the  
    Offering     Offering     Issued in the     Benefit     Offering     Offering  
    Range     Range     Offering(1)     Plans (2)     Range     Range  
    (Dollars in thousands)  
Employee stock ownership plan
     367,200       492,000       8.0 %     5.4 %   $ 3,672     $ 4,920  
Stock options under stock-based incentive plan
     459,000       615,000       10.0       6.7 %     1,767       2,368  
Restricted stock awards under stock-based incentive plan
     183,600       246,000       4.0       2.8 %     1,836       2,460  
 
                                    
Total
     1,009,800       1,353,000       22.0 %     13.7 %   $ 7,275     $ 9,748  
 
                                    

(1)   Includes shares issued to the Benjamin Franklin Bank Charitable Foundation, but does not include shares issued to Chart Bank stockholders as merger consideration (other than the up to 2,082,500 unsubscribed shares that may, subject to regulatory approval, be applied toward the merger consideration to be paid to Chart Bank stockholders in order to issue sufficient shares to achieve the minimum of the offering range).
 
(2)   Calculated at the maximum of the offering range.
 
(3)   The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10 per share. The fair value of stock options has been estimated at $3.85 per option using the Black-Scholes option pricing model with the following assumptions; a grant-date share price and option exercise price of $10.00; dividend yield of zero; expected option life of 10 years; risk free interest rate of 4.27%; and a volatility rate of 14.89% based on the SNL Index of publicly traded thrift institutions.

     The value of the shares to be granted as restricted stock awards under the stock-based incentive plan will be based on the price of Benjamin Franklin Bancorp’s common stock at the time those shares are purchased on the open market or issued, which, subject to stockholder approval, cannot be implemented until at least six months after the offering. The following table presents the total value of all shares we expect to be available for award as restricted stock under the stock-based incentive plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $14.00 per share.

                                         
            Value of Shares To Be Available for Award as Restricted Stock  
                        280,500 Shares  
            183,600 Shares     216,000 Shares     246,000 Shares     Awarded at  
            Awarded at     Awarded at     Awarded at     Maximum, as  
            Minimum of     Midpoint of     Maximum of     adjusted, of  
    Share Price     Offering Range     Offering Range     Offering Range     Offering Range  
            (Dollars in thousands)  
 
   $ 8.00     $ 1,469     $ 1,728     $ 1,968     $ 2,244  
 
     10.00       1,836       2,160       2,460       2,805  
 
     12.00       2,203       2,592       2,952       3,366  
 
     14.00       2,570       3,024       3,444       3,927  

     The grant-date fair value of the options granted under the stock-based incentive plan will be based in part on the price of Benjamin Franklin Bancorp’s common stock at the time the options are granted, which, subject to stockholder approval, cannot be implemented until at least six months after the offering. The value will also depend on the various assumptions utilized in estimating the value using the Black-Scholes option pricing model. The following table presents the total estimated value of the options we

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expect to be available for grant under the stock-based incentive plan, assuming the market price and exercise price for the stock options are equal and the range of market prices for the shares are $8.00 per share to $14.00 per share.

                                                 
                    Estimated Value of Options To Be Available For Grant        
                                            701,250  
                    459,000     540,000     615,000     Options at  
            Grant-Date     Options at     Options at     Options at     Maximum of  
    Market/Exercise Price     Fair Value     Minimum of     Midpoint of     Maximum of     Range, as  
    Per Share     per Option     Range     Range     Range     Adjusted  
                    (Dollars in thousands, except per share and per option data)  
 
   $ 8.00     $ 3.08     $ 1,414     $ 1,663     $ 1,894     $ 2,160  
 
     10.00       3.85       1,767       2,079       2,368       2,700  
 
     12.00       4,62       2,121       2,495       2,841       3,240  
 
     14.00       5.39       2,474       2,911       3,315       3,780  

     We also plan to enter into employment and change of control agreements with certain of our executive officers in connection with the conversion, which would provide for severance benefits in the event of a change in control of Benjamin Franklin Bancorp. This includes our President and Chief Executive Officer, who has an existing employment agreement that will be amended in connection with the conversion. We also intend to enter into a benefit restoration plan, which would provide certain restorative payments to our President and Chief Executive Officer and our Chief Financial Officer, who are prevented from receiving earned benefits under the employee stock ownership plan and 401(k) plan by statutory limitations, and would provide to these officers, upon retirement or termination of employment following a change in control, additional restorative payments equal to the projected value of shares of Benjamin Franklin Bancorp common stock that would have been allocated to the executive under the employee stock ownership plan over the remaining term of any loan, as if employment had continued through the full term of the loan. We also have adopted a director fee continuation plan in connection with the conversion, which provides a retirement benefit for directors in the nature of the continuation of director fees for a period of five years following retirement, subject to certain vesting requirements. See “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Employment and Change in Control Agreements” and “—Benefit Plans”, on page [#].

Who May Order Shares Of Common Stock In The Offering

     Under the terms of our plan of conversion, we are offering the shares of common stock of Benjamin Franklin Bancorp in a “subscription offering,” in the following descending order of priority:

  (1)   First, to depositors with accounts at Benjamin Franklin Bank with aggregate balances of at least $50.00 on May 31, 2003;
 
  (2)   Second, to depositors (other than Benjamin Franklin Bank officers, directors, trustees, corporators and their associates) with accounts at Benjamin Franklin Bank with aggregate balances of at least $50.00 on December 31, 2004;
 
  (3)   Third, to Benjamin Franklin Bancorp’s and Benjamin Franklin Bank’s tax qualified employee plans, including our employee stock ownership plan; and
 
  (4)   Fourth, to Benjamin Franklin Bancorp’s and Benjamin Franklin Bank’s officers, directors, trustees and employees who do not have a higher priority right.

     Any remaining shares may be offered for sale in a “direct community offering” that can begin concurrently with, during or immediately following the subscription offering. Orders received in the direct community offering will be subordinate to subscription offering orders. Shares will be allocated in the community offering, to the extent available, first to natural persons who live in the communities served and to be served by Benjamin Franklin Bank upon completion of the conversion and the Chart Bank merger, then to the general public. The communities served and to be served by Benjamin Franklin Bank upon completion of the conversion and the Chart Bank merger consist of the following Massachusetts cities and towns: Attleboro, Ashland, Bellingham, Belmont, Blackstone, Brookline,

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     Dover, Franklin, Foxboro, Holliston, Hopedale, Hopkinton, Lexington, Lincoln, Mansfield, Medfield, Medway, Mendon, Milford, Millis, Millville, Needham, Newton, Norfolk, North Attleboro, Northbridge, Norton, Plainville, Sharon, Sherborn, Upton, Uxbridge, Walpole, Waltham, Watertown, Wellesley, Weston and Wrentham. Shares of common stock not purchased in the subscription offering or the direct community offering may be offered for sale through a “syndicated community offering” managed by Ryan Beck. We have the right to accept or reject, in our sole discretion, orders we receive in the direct community offering and syndicated community offering.

     If we do not receive orders for at least 4,250,000 shares of common stock (the minimum of the offering range) in the subscription and direct community offerings, then instead of proceeding with a syndicated community offering we may, subject to regulatory approval, choose to 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 the minimum of the offering range. We may also do this after holding a syndicated community offering if sufficient shares to achieve the minimum of the offering range are not ordered in the subscription, direct community and syndicated community offerings.

     If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated pursuant to our plan of conversion. A detailed description of share allocation procedures can be found in the section entitled “The Conversion And The Offering.”

How You May Purchase Shares Of Common Stock

     In the subscription offering and the community offering you may pay for your shares only by:

  (1)   personal check, bank check or money order made payable directly to Benjamin Franklin Bancorp, Inc. (do not endorse third-party checks); or
 
  (2)   authorizing us to withdraw money from your Benjamin Franklin Bank deposit account(s) without check writing privileges.

     If you wish to use your Benjamin Franklin Bank individual retirement account to pay for your shares, please be aware that you must first transfer your funds to a self-directed retirement account with a trustee other than Benjamin Franklin Bank. The transfer of such funds to a new trustee takes time, so please contact the Stock Information Center promptly for further information. Also, Benjamin Franklin Bank is not permitted to lend funds (including funds drawn on a Benjamin Franklin Bank line of credit or overdraft checking) to anyone for the purpose of purchasing shares of common stock in the offering.

     You can subscribe for shares of common stock in the offering by delivering to Benjamin Franklin Bancorp a signed and completed original stock order form, together with full payment or authorization to withdraw from one or more of your Benjamin Franklin Bank deposit accounts without checkwriting privileges, provided we receive the stock order form before 10:00 a.m. Massachusetts time on [date] 2005 (regardless of when the reply envelope is postmarked). Checks and money orders will be immediately deposited by us into a Benjamin Franklin Bank segregated savings account or, at our discretion, another insured depository institution. We will pay interest at Benjamin Franklin Bank’s passbook savings rate, currently 0.50% per annum, from the date those funds are received until completion or termination of the offering. Withdrawals from certificates of deposit at Benjamin Franklin Bank for the purpose of purchasing common stock in the offering may be made without incurring an early withdrawal penalty. All funds authorized for withdrawal from deposit accounts with Benjamin Franklin Bank must be available within the deposit accounts at the time the stock order form is received. However, funds will not be withdrawn from the accounts until the offering is completed and will continue to earn interest at the applicable contractual deposit account rate until the completion of the offering. A hold will be placed on

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the amount of funds designated on your stock order form. Those funds will be unavailable to you for check writing or other purposes during the offering. After we receive an order, the order cannot be revoked or changed. Payment may not be made by wire transfer or any other electronic transfer of funds. In addition, we are not required to accept copies or facsimiles of order forms.

     For a further discussion regarding the stock ordering procedures, see “The Conversion and the Offering—Procedure for Purchasing Shares” on page [#].

Limits On How Much Common Stock You May Purchase

     The minimum number of shares of common stock that may be purchased is 25.

     No person, or persons exercising subscription rights through a single qualifying deposit account held jointly, may purchase more than 15,000 shares of common stock ($150,000) in the offering. If any of the following persons purchase stock, their purchases, when combined with your purchases, cannot exceed 25,000 shares ($250,000) in all categories of the offering, combined:

  •   Your spouse, or any relative of you or your spouse, who either shares your home or is a director, trustee or officer of Benjamin Franklin Bancorp or Benjamin Franklin Bank;
 
  •   Companies or other entities in which you are a director, officer or partner, or have a 10.0% beneficial ownership interest;
 
  •   Trusts or other estates in which you have a substantial beneficial interest or as to which you serve as a trustee or in another fiduciary capacity; or
 
  •   Other persons who may be acting together with you as associates or persons acting in concert.

     Persons exercising subscription rights through qualifying deposit accounts registered to the same address will be subject to this overall purchase limitation.

     Subject to regulatory approval, we may increase or decrease the purchase limitations at any time. For additional information on purchase limitations, including the detailed definitions of “associates” and “acting in concert,” see “The Conversion And The Offering—Limitations On Common Stock Purchases” on page [#]. We have the right to determine, in our sole discretion, whether prospective purchasers are associates or acting in concert. Our tax-qualified employee benefit plans, including our employee stock ownership plan, are authorized to purchase up to 10.0% of the shares issued in the offering (including shares issued to the Benjamin Franklin Bank Charitable Foundation) without regard to these purchase limitations.

Deadline For Orders Of Common Stock

     If you wish to purchase shares, a properly completed original stock order form, together with full payment for the shares of common stock, must be received by us (not postmarked) no later than 10:00 a.m., Massachusetts time, on [date], 2005. You may submit your order form in one of three ways: by mail using the return envelope provided, by overnight courier to the address indicated on the order form or by taking the stock order form and payment to our Stock Information Center located at our headquarters, 58 Main Street, Franklin, Massachusetts. Stock order forms may not be hand-delivered to branches of Benjamin Franklin Bank. Once submitted, your order is irrevocable unless the offering is terminated or extended beyond [date], 2005.

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You May Not Sell Or Transfer Your Subscription Rights

     If you order stock in the subscription offering, you will be required on the stock order form to state that you are purchasing the stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe sells or gives away their subscription rights. We will not accept your order if we have reason to believe that you sold or transferred your subscription rights. In addition, you may not add the names of others for joint stock registration unless you share the same subscription offering eligibility priority.

     The stock order form requires that you list all deposit accounts in which the subscriber had an interest, giving all names on each account and the account number at the applicable eligibility date, May 31, 2003 or December 31, 2004. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation.

How We Intend To Use The Proceeds From The Offering

     We estimate net proceeds from the offering will be between $40.9 million and $55.8 million, or $64.4 million if the offering range is increased by 15.0%. We intend to use the net proceeds for the cash merger consideration portion of the acquisition of Chart Bank, approximately $21,469,000 assuming that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing and netting out the tax benefit of such option cash out. We also intend to use the net proceeds for a loan to the employee stock ownership plan to fund its purchase of shares of common stock, between $3.7 million and $4.9 million, or $5.6 million if the offering is increased by 15.0%. Of the net proceeds remaining, we intend to retain at the parent-company level between $10.9 million and $20.8 million of the net proceeds, or $26.6 million if the offering range is increased by 15.0%, and to invest in Benjamin Franklin Bank approximately $4.9 million to $8.6 million of the net proceeds, or $10.7 million if the offering range is increased by 15.0%. Benjamin Franklin Bancorp may use the funds to pay cash dividends, repurchase shares of common stock and for general corporate purposes. Funds invested in Benjamin Franklin Bank will be used to support increased lending and new products and services. We may also use the net proceeds for future business expansion by establishing new branches or by acquiring branches or other whole banks. Initially, a substantial portion of the net proceeds could be used to pay down certain Federal Home Loan Bank of Boston borrowings, as well as invested in short-term investments, investment-grade debt obligations and mortgage-backed securities.

Our Issuance Of Shares Of Common Stock To The Benjamin Franklin Bank Charitable Foundation

     To further our commitment to our local community, we intend to establish a charitable foundation as part of the conversion and issue shares of common stock to it immediately following completion of the conversion. We intend to make an initial contribution to the foundation of a number of shares of our authorized but unissued common stock in an amount up to 8.0% of the number of shares actually sold in the offering, up to a maximum of 400,000 shares. Assuming that we issue this maximum number, our contribution would have an initial market value of $4.0 million and we would record a pre-tax expense of approximately $4.0 million during the quarter in which the conversion is completed. The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities. The issuance of these additional shares of common stock to the charitable foundation will:

  •   dilute the voting interests of purchasers of shares of our common stock in the offering by up to 7.4% and 6.5% at the minimum and maximum, respectively, of the offering range;

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  •   result in an expense, and a reduction in earnings, of $4.0 million, offset in part by a corresponding tax benefit, during the quarter in which the contribution is made, and
 
  •   reduce our pro forma market value and, accordingly, the number of shares that we otherwise would have offered for sale in the stock offering.

     See “Risk Factors—The Contribution of Shares to the Charitable Foundation Will Dilute Your Ownership Interests and Adversely Affect Net Income in 2005” on page [#], “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation” on page [#] and “The Benjamin Franklin Bank Charitable Foundation” on page [#].

     As a private foundation under Section 501(c)(3) of the Internal Revenue Code, the Benjamin Franklin Bank Charitable Foundation will be required to distribute annually in grants or donations a minimum of 5.0% of the average fair market value of its net investment assets. Assuming that the fair market value of the Charitable Foundation’s net investment assets is $4,000,000, the Charitable Foundation would make annual grants or donations of at least $200,000. This level of annual charitable giving compares to an average of $79,000 per year for the past three fiscal years. As a community bank whose business depends to a large extent upon our ties to and relationships with customers in our local communities, we believe that this increased level of charitable giving is appropriate, especially given our larger asset size and larger geographic market following completion of the conversion and the Chart Bank merger.

Delivery Of Stock Certificates

     Certificates representing shares of common stock sold in the offering will be mailed to the certificate registration address noted on the order form, as soon as practicable following completion of the offering and receipt of all necessary regulatory approvals. It is possible that, until certificates for the common stock are available and delivered to purchasers, purchasers might not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading.

Expiration of the Offering

     The subscription offering will expire at 10:00 a.m., Massachusetts time, on [date], 2005, unless extended by Benjamin Franklin Bancorp with the approval of the Massachusetts Commissioner of Banks and the Federal Reserve Board, if required. The direct community and syndicated community offerings, if conducted, must be completed by [date], 2005 unless extended, with regulatory approval, if necessary. If the subscription offering and/or direct community and syndicated community offerings extend beyond [date], 2005, we will be required to resolicit subscribers before proceeding with the offering. In no event may we extend the offering beyond October 28, 2006.

Steps We May Take If We Do Not Receive Orders For The Minimum Number Of Shares

     If we do not receive orders for at least 4,250,000 shares of common stock in the subscription offering, we may take several steps in order to issue the minimum number of shares of common stock in the offering range. Specifically, we may:

  (i)   make shares available to the public in a direct community offering,
 
  (ii)   offer shares for sale through a syndicated community offering;

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  (iii)   apply up to 2,082,500 unsubscribed shares toward the stock portion of the merger consideration to be delivered to stockholders of Chart Bank, subject to regulatory approval;
 
  (iv)   increase the purchase and ownership limitations;
 
  (v)   seek regulatory approval to extend the offering beyond the [date], 2005 expiration date, provided that any such extension will require us to resolicit subscriptions received in the offering; and
 
  (vi)   terminate the offering, returning the subscription funds with interest and canceling deposit account withdrawal authorizations.

Purchases By Officers And Directors

     Our directors and executive officers will pay the same $10 per share purchase price paid by all other persons who purchase shares of common stock in the offering. We expect our directors and executive officers, together with their associates, to subscribe for 196,750 shares of common stock in the offering. Following the conversion and the issuance of additional shares to the Benjamin Franklin Bank Charitable Foundation and to the Chart Bank stockholders in the acquisition, these shares will represent 2.5% of our total outstanding shares of common stock at the midpoint of the offering range. In addition, the Chart Bank directors who will become Benjamin Franklin Bancorp directors are expected to beneficially own 825,128 shares of common stock, or 10.6% of our total outstanding shares of common stock at the midpoint of the offering range, based on these directors’ current beneficial ownership of Chart Bank common stock and assuming that such directors exchange 55.0% of their Chart Bank shares for shares of Benjamin Franklin Bancorp common stock and that all Chart Bank options held by these directors are cashed out at the closing rather than being exercised prior to the closing.

Market For Common Stock

     Currently, there are no outstanding shares of Benjamin Franklin Bancorp common stock. We have applied to have the common stock of Benjamin Franklin Bancorp quoted on the Nasdaq National Market following the conversion, under the symbol “BFBC.” See “Market For The Common Stock” on page [#].

Our Dividend Policy

     Upon completion of the conversion, our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. While our Board of Directors intends to consider a policy of paying cash dividends, payment of dividends will depend upon a number of factors, including our future operating results and financial condition, ongoing capital requirements, regulatory limitations, tax considerations and general economic conditions. As a result, we cannot assure you that Benjamin Franklin Bancorp will pay dividends, or if paid, the amounts of such dividends, or whether such dividends will continue to be paid in the future. See “Our Policy Regarding Dividends” on page [#].

Tax Consequences of the Conversion

     Based on certain factual representations and assumptions, which we believe are consistent with the facts that will exist at the effective time of the conversion, our legal counsel Foley Hoag LLP, has delivered to us its legal opinion that the conversion will constitute or be part of a tax-free “reorganization” for federal income tax purposes. As such, neither Benjamin Franklin

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Bank nor Benjamin Franklin Bancorp will recognize gain or loss as a result of the conversion and eligible account holders and supplemental eligible account holders will not recognize gain or loss upon their receipt of nontransferable subscription rights to purchase shares of Benjamin Franklin Bancorp common stock. The opinion of our legal counsel, however, is not binding on the Internal Revenue Service. See “The Conversion And The Offering—Tax Aspects Of The Conversion And The Chart Bank Acquisition” on page [#].

Conditions to Completion of the Conversion

     We cannot complete our conversion and related offering unless:

  •   We issue at least the minimum number of shares of common stock offered;
 
  •   We receive the approval of the Massachusetts Commissioner of Banks and the Federal Reserve Board;
 
  •   We complete the conversion by [date].

     In addition, we intend to complete the conversion together with the completion of the Chart Bank acquisition. If, for any reason, the Chart Bank acquisition cannot be completed, our Board would consider whether to proceed with the conversion. If we were to decide to proceed with the conversion without Chart Bank, we would resolicit subscribers, providing them with a modified prospectus and provide them with an opportunity to increase, decrease or rescind their orders. If for any reason the conversion cannot be completed, we will not proceed with the Chart Bank acquisition.

How You Can Obtain Additional Information – Stock Information Center

     The employees of Benjamin Franklin Bank’s branch offices may not, by law, assist with investment related questions about the offering. If you have any questions regarding the stock offering, you may call our Stock Information Center, toll free, at (800) 290-0793, Monday through Friday between 9:30 a.m. and 4:00 p.m., Massachusetts time. You may also visit our Stock Information Center, which is located at our headquarters, 58 Main Street, Franklin, Massachusetts. The Stock Information Center will be closed on weekends and bank holidays. Our branches will not have offering materials and cannot accept completed order forms.

     To ensure that each person receives a prospectus at least 48 hours before the offering deadline, we may not mail prospectuses any later than five days prior to such date or hand-deliver prospectuses later than two days prior to that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus.

     We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at 10:00 a.m., Massachusetts time, on [date], 2005, whether or not we have been able to locate each person entitled to subscription rights.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF
BENJAMIN FRANKLIN BANCORP

     The following tables contain certain information concerning the financial position and results of operations of Benjamin Franklin Bancorp at the dates and for the periods indicated. This information should be read in conjunction with the Consolidated Financial Statements of Benjamin Franklin Bancorp, M.H.C. and Subsidiaries and notes thereto commencing on page [#] of this prospectus and the Management’s Discussion and Analysis of Benjamin Franklin Bancorp commencing on page [#] of this prospectus. The selected financial data and selected operating data of Benjamin Franklin Bancorp as of December 31, 2003 and 2002 and for the years then ended have been derived from Benjamin Franklin Bancorp’s consolidated financial statements which have been audited by Wolf & Company, P.C., independent accountants. See “Experts” on page [#]. The data presented at and for the nine months ended September 30, 2004 and 2003 were derived from unaudited consolidated financial statements and reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to present fairly the results for such interim periods. Interim results at and for the nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.

     The selected financial condition data and selected operating data of Benjamin Franklin Bancorp at or for the years ended December 31, 2001, 2000 and 1999 have been derived from Benjamin Franklin Bancorp’s consolidated financial statements that have been audited by Arthur Andersen LLP. Because Arthur Andersen has ceased accounting and auditing operations, Benjamin Franklin Bancorp is unable to obtain written consent of Arthur Andersen to incorporate their report in this prospectus. Because Arthur Andersen has not consented to incorporating their report in this prospectus, investors will not be able to recover against Arthur Andersen in connection with the use of their report. In addition, the ability of Arthur Andersen to satisfy any claims (including claims arising from its provision of auditing and other services to Benjamin Franklin Bancorp) is limited as a result of the diminished amount of assets of Arthur Andersen that are now or may in the future be available to satisfy claims. See “Risk Factors—Risks Related to Prior Auditors of Benjamin Franklin Bancorp” on page [#].

                                                 
    At        
    September 30,     At December 31,  
    2004     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Selected Financial Condition Data:
                                                
Total assets
   $ 517,931     $ 458,844     $ 452,230     $ 430,084     $ 443,092     $ 429,635  
Loans, net
     375,516       288,862       261,933       257,566       284,232       269,125  
Investment securities
     101,551       110,254       114,728       86,136       112,884       113,315  
Deposits
     399,562       380,257       373,300       360,979       388,332       324,050  
Short-term borrowings
     29,000       0       0       0       19,400       48,280  
Long-term debt (1)
     55,000       45,000       45,000       36,000       6,000       21,000  
Retained earnings
     30,586       29,301       29,814       26,937       24,794       28,652  

(1)   Long-term debt includes advances from the Federal Home Loan Bank of Boston and subordinated debt. See “Business of Benjamin Franklin Bancorp—Sources of Funds—Borrowings” on page [#].

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    For the        
    Nine Months Ended        
    September 30,     For The Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Selected Operating Data:
                                                        
 
                                                        
Interest and dividend income
   $ 15,223     $ 14,529     $ 19,532     $ 21,406     $ 26,441     $ 28,064     $ 24,730  
Interest expense
     5,024       5,134       6,752       7,594       12,397       16,216       12,533  
 
                                          
Net interest income
     10,199       9,395       12,780       13,812       14,044       11,848       12,197  
Provision for loan losses (1)
     470       300       625       1,412       51       1       70  
 
                                          
Net interest income after provision for loan losses
     9,729       9,095       12,155       12,400       13,993       11,847       12,127  
Non-interest income
     1,658       2,450       2,990       1,285       1,752       1,819       1,510  
Gain (loss) on sales of securities, net
     8       113       86       1,569       (2,529 )     (6,784 )     1,402  
Non-interest expense
     9,457       9,626       12,724       12,115       11,565       10,851       10,280  
 
                                          
Income (loss) before income tax expense
     1,938       2,032       2,507       3,139       1,651       (3,969 )     4,759  
Income tax expense (2)
     626       651       819       443       1,610       708       1,858  
 
                                          
Net income (loss)
   $ 1,312     $ 1,381     $ 1,688     $ 2,696     $ 41       ($4,677 )   $ 2,901  
 
                                          

(1)   Refer to “Management’s Discussion and Analysis of Benjamin Franklin Bancorp,” beginning on page [#] for discussion of changes in the provision for loan losses for the periods from 2001 forward. For the year ended December 31, 2000, the provision declined to $1,000 from $70,000 recorded for the 1999 period, due primarily to the fact that impaired loans dropped to $308,000 at December 31, 2000 from $1.3 million at December 31, 1999.
 
(2)   Refer to “Management’s Discussion and Analysis of Benjamin Franklin Bancorp,” beginning on page [#] for discussion of changes in income tax expense for the periods from 2001 forward. For the year ended December 31, 2000, Benjamin Franklin recorded income tax expense of $708,000 despite incurring a pre-tax loss. This is because a valuation allowance was established for a deferred tax asset associated with an impairment charge we recorded to reflect unrealized net losses on equity securities.

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    At or For the        
    Nine Months        
    Ended        
    September 30,     At or For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
Selected Financial Ratios and Other Data:
                                                        
 
                                                        
Performance Ratios:
                                                        
Return on assets (ratio of net income to average total assets) (1)
     0.36 %     0.40 %     0.36 %     0.61 %     0.01 %     (1.09 %)     0.76 %
Return on equity (ratio of net income to average equity) (1)
     5.85 %     6.13 %     5.65 %     9.45 %     0.16 %     (16.32 %)     10.23 %
Average interest rate spread (1) (2)
     2.67 %     2.76 %     2.76 %     3.32 %     3.29 %     2.87 %     3.47 %
Net interest margin (1)(3)
     3.03 %     2.93 %     2.98 %     3.47 %     3.51 %     3.57 %     4.30 %
Efficiency ratio (4)
     79.31 %     87.13 %     84.78 %     75.69 %     72.84 %     78.07 %     73.53 %
 
                                                        
Non-interest expense to average total assets (1)
     2.61 %     2.76 %     2.73 %     2.76 %     2.64 %     2.53 %     2.70 %
 
                                                        
Average interest-earning assets to average interest bearing liabilities
     124.43 %     110.89 %     114.38 %     108.04 %     106.92 %     88.16 %     86.56 %
 
                                                        
Asset Quality Ratios:
                                                        
Non-performing assets to total assets
     0.08 %     0.14 %     0.10 %     0.00 %     0.04 %     0.04 %     0.04 %
 
                                                        
Non-performing loans to total loans
     0.11 %     0.24 %     0.16 %     0.00 %     0.06 %     0.06 %     0.07 %
Allowance for loan losses to non-performing loans
     714.93 %     394.35 %     544.92 %     115,600.00 %     749.68 %     603.39 %     657.22 %
Allowance for loan losses to total loans
     0.80 %     0.95 %     0.87 %     0.88 %     0.46 %     0.38 %     0.44 %
 
                                                        
Capital Ratios:
                                                        
Equity to total assets at end of period
     5.91 %     6.22 %     6.39 %     6.59 %     6.26 %     5.60 %     6.67 %
Average equity to average assets
     6.19 %     6.47 %     6.42 %     6.49 %     5.82 %     6.67 %     7.45 %
Risk-based capital ratio (bank only) at end of period
     13.05 %     14.01 %     13.94 %     13.54 %     9.65 %     7.69 %     10.08 %
 
                                                        
Other Data:
                                                        
Number of full service offices
     6       6       6       6       6       6       6  

(1)   Ratios for the nine months ended September 30, 2004 and 2003 are annualized.
 
(2)   The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the period.
 
(3)   The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
 
(4)   The efficiency ratio represents non-interest expense for the period minus expenses related to the amortization of intangible assets divided by the sum of net interest income (before the loan loss provision) plus non-interest income (excluding net gains (losses) on sale of bank assets and the pension plan curtailment loss).

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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF CHART BANK

     The following tables contain certain information concerning the financial position and results of operations of Chart Bank at the dates and for the periods indicated. This information should be read in conjunction with the Consolidated Financial Statements of Chart Bank, A Cooperative Bank and Subsidiaries and notes thereto commencing on page [#] of this prospectus and the Management’s Discussion and Analysis of Chart Bank commencing on page [#] of this prospectus. The selected financial data and selected operating data of Chart Bank as of December 31, 2003, 2002, 2001, 2000 and 1999, and for the years then ended have been derived from Chart Bank’s consolidated financial statements which have been audited by Wolf & Company, P.C., independent accountants. See “Experts” on page [#]. The data presented at and for the nine months ended September 30, 2004 and 2003 were derived from unaudited consolidated financial statements and reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to present fairly the results for such interim periods. Interim results at and for the nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year December 31, 2004.

                                                 
    At        
    September     At December 31,  
    30, 2004     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Selected Financial Condition Data:
                                                
 
                                                
Total assets
   $ 256,261     $ 209,854     $ 202,932     $ 181,645     $ 168,702     $ 142,823  
Loans, net
     175,572       139,890       122,965       126,088       121,237       107,237  
Investment securities
     35,495       29,369       29,532       21,585       19,589       15,853  
Deposits
     215,972       175,801       170,279       145,549       152,749       129,436  
Borrowings
     22,000       15,930       14,986       19,731       1,923       3,449  
Stockholders’ equity.
     17,546       17,399       16,061       14,980       13,384       9,362  
                                                         
    For the Nine Months        
    Ended        
    September 30,     For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Selected Operating Data:
                                                        
 
                                                        
Interest and dividend income
   $ 8,006     $ 7,621     $ 10,091     $ 11,033     $ 11,718     $ 11,023     $ 8,838  
Interest expense
     2,732       2,648       3,452       4,466       5,870       6,061       4,595  
 
                                          
Net interest income
     5,274       4,973       6,639       6,567       5,848       4,962       4,243  
Provision for loan losses
     90       90       120       120       120       131       180  
 
                                          
Net interest income after provision for loan losses
     5,184       4,883       6,519       6,447       5,728       4,831       4,063  
Non-interest income
     1,916       2,048       2,665       3,270       3,544       1,529       1,033  
Non-interest expense
     5,636       4,806       6,406       7,190       7,004       5,954       4,914  
 
                                          
Income before income tax provision (benefit)
     1,464       2,125       2,778       2,527       2,268       406       182  
Income tax provision (benefit)
     680       823       1,076       958       850       (141 )     48  
 
                                          
Net income
   $ 784     $ 1,302     $ 1,702     $ 1,569     $ 1,418     $ 547     $ 134  
 
                                          

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    At or For the        
    Nine Months        
    Ended        
    September 30,     At or For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
Selected Financial Ratios and Other Data:
                                                        
 
                                                        
Performance Ratios:
                                                        
Return on assets (ratio of net income to average total assets) (1)
     0.44 %     0.86 %     0.83 %     0.81 %     0.80 %     0.35 %     0.11 %
Return on equity (ratio of net income to average equity) (1)
     5.95 %     10.61 %     10.28 %     10.31 %     10.37 %     4.43 %     1.48 %
Average interest rate spread (1) (2)
     3.40 %     3.87 %     3.83 %     3.88 %     3.39 %     2.99 %     3.21 %
Net interest margin (1)(3)
     3.52 %     4.00 %     3.96 %     4.06 %     3.81 %     3.56 %     3.75 %
Efficiency ratio (4)
     79.29 %     70.06 %     70.09 %     82.75 %     92.34 %     94.70 %     98.60 %
Non-interest expense to average total assets (1)
     3.19 %     3.16 %     3.13 %     3.72 %     .5 %     3. %     4. %
Average interest-earning assets to average interest-bearing liabilities
     106.87 %     105.65 %     106.08 %     106.90 %     110.92 %     97.15 %     99.86 %
 
                                                        
Asset Quality Ratios:
                                                        
Non-performing assets to total assets
     0.06 %     0.01 %     0.10 %     0.01 %     0.13 %     0.00 %     0.25 %
Non-performing loans to total loans
     0.08 %     0.02 %     0.15 %     0.02 %     0.18 %     0.00 %     0.32 %
Allowance for loan losses to total loans
     0.99 %     1.22 %     1.17 %     1.23 %     1.09 %     1.07 %     1.02 %
 
                                                        
Capital Ratios:
                                                        
Equity to total assets at end of period
     6.85 %     8.31 %     8.29 %     7.91 %     8.25 %     7.93 %     6.55 %
Average equity to average assets
     7.47 %     8.08 %     8.10 %     7.87 %     7.71 %     7.92 %     7.46 %
Tier 1 risk-based capital ratio at end of period
     10.90 %     11.30 %     11.30 %     10.80 %     10.60 %     11.80 %     9.80 %
 
                                                        
Other Data:
                                                        
Number of full service offices
     3       3       3       3       4       4       4  

(1)   Ratios for the nine months ended September 30, 2004 and 2003 are annualized.
 
(2)   The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the period.
 
(3)   The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
 
(4)   The efficiency ratio represents non-interest expense for the period divided by the sum of net interest income (before the loan loss provision) plus non-interest income (excluding net gains (losses) on sales of bank assets and deposits and loan fees).

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RISK FACTORS

     Please consider the following risk factors, in addition to those you may find elsewhere in this Prospectus, when deciding whether to purchase our common stock in the conversion.

Our Financial Success Depends In Part On The Success Of Our Acquisition of Chart Bank.

     Our future operating performance will depend, in part, on the success of the merger with Chart Bank, which will be the largest merger Benjamin Franklin Bancorp has consummated. The success of the merger will, in turn, depend on a number of factors, including our ability to:

  •   integrate into Benjamin Franklin Bank the operations and branches of Chart Bank,
 
  •   retain Chart Bank’s deposits and customers,
 
  •   control future non-interest expenses in a manner that enables us to improve our overall operating efficiencies,
 
  •   retain and integrate key personnel of Chart Bank into our operations, particularly those with specialized expertise in the CSSI ATM management business.

     Integration of Chart Bank into Benjamin Franklin Bank following the merger will require the dedication of the time and resources of our management and may temporarily distract management’s attention from our day-to-day business. No assurance can be given that we will successfully integrate Chart Bank’s operations into our own, or that we will achieve anticipated benefits of the merger or achieve earnings results in the future similar to those we, or Chart Bank, have achieved in the past. Further, no assurance can be given that we will effectively manage any growth resulting from the merger.

Our Commercial Real Estate, Construction And Commercial Business Loans May Expose Us To Increased Credit Risks, And This Risk Will Increase If We Succeed In Increasing These Types Of Loans.

     Residential real estate loans represent a smaller proportion of our loan portfolio than the average for savings institutions in New England. As of September 30, 2004, commercial real estate, construction and commercial business loans represented 28.9% of our loan portfolio. This percentage would have been 39.9% on a pro forma basis as of that date with the acquisition of Chart Bank, and we intend to grow commercial real estate and commercial business loans further as a proportion of our portfolio over the next several years. Construction loans, while they are not likely to increase as a percentage of total loans, are expected to increase in absolute terms in line with the overall growth in the bank’s loan portfolio. In general, construction loans, commercial real estate loans and commercial business loans generate higher returns, but also pose greater credit risks, than do owner-occupied residential mortgage loans. As our various commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

     The repayment of construction and commercial real estate loans depends on the business and financial condition of borrowers and, in the case of construction loans, on the economic viability of projects financed. A number of our borrowers have more than one construction or commercial real estate loan outstanding with us. Further, these loans are concentrated primarily in Eastern Massachusetts. Economic events and changes in government regulations, which we and our borrowers cannot control, could have an adverse impact on the cash flows generated by properties securing our construction and commercial real estate loans and on the values of the properties securing those loans. Commercial properties tend to decline in value more rapidly than residential owner-occupied properties during economic recessions. We held $104.3 million in construction and commercial real estate loans in our

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loan portfolio as of September 30, 2004 representing 27.6% of total loans on that date. On a pro forma basis on that date, assuming that the merger with Chart Bank had been completed, we would have had $212.2 million of these loans in our portfolio representing 38.3% of total loans.

     We make both secured and some short-term unsecured commercial business loans, holding $5.0 million of these loans in our loan portfolio as of September 30, 2004, representing 1.3% of total loans on that date. On a pro forma basis on that date, assuming that the merger with Chart Bank had been completed, we would have had $9.1 million of commercial business loans in our portfolio, representing 1.6% of total loans. Repayment of both secured and unsecured commercial business loans depends substantially on borrowers’ underlying business, financial condition and cash flows. Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Secured commercial business loans are generally collateralized by equipment, leases, inventory and accounts receivable. Compared to real estate, that type of collateral is more difficult to monitor, its value is harder to ascertain, it may depreciate more rapidly and it may not be as readily saleable if repossessed.

Our Continuing Concentration Of Loans In Our Primary Market Area May Increase Our Risk.

     Our success depends primarily on the general economic conditions in the counties in which we conduct business, and in the Boston metropolitan area in general. Unlike larger banks that are more geographically diversified, we provide banking and financial services to customers primarily in Norfolk and Worcester Counties, Massachusetts, southwest of Boston, and to lesser degree in Middlesex and Suffolk Counties, which include the City of Boston and areas east of Boston. Following our proposed acquisition of Chart Bank, we will expand our presence in Middlesex and Suffolk Counties. The local economic conditions in our market area have a significant impact on our loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control would affect these local economic conditions and could adversely affect our financial condition and results of operations. Additionally, because we have a significant amount of commercial real estate loans, decreases in tenant occupancy may also have a negative effect on the ability of many of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings.

Our Return On Equity May Initially Be Low Compared To Other Financial Institutions. A Low Return Could Lower The Trading Price Of Our Common Stock.

     Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Our return on equity may be reduced due to the expenses we will incur in pursuing our growth strategies, the costs of being a public company and added expenses associated with our employee stock ownership plan and planned stock-based incentive plan. The increase in our core deposit intangible asset created by the Chart Bank acquisition will also have a negative impact on our return on equity, and if our periodic evaluation of the goodwill created by the Chart Bank acquisition results in a determination of impairment, we would be required to reduce its carrying value through a charge to earnings. Until we can increase our net interest income and non-interest income, we expect our return on equity to be below the industry average for public thrifts, which may negatively affect the value of our common stock. At the midpoint of the offering range, pro forma return on equity is estimated to be 2.43% compared to our comparable peer group return on equity of 9.38%.

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We May Have Difficulty Meeting Our Branch Expansion Goals, And Our Branch Expansion Strategy May Not Be Accretive To Earnings.

     Our growth plans include the opening of new branch offices in communities located between the Benjamin Franklin Bank and Chart Bank franchises as well as in other communities contiguous to those currently served by Benjamin Franklin Bank. Our ability to establish new branches will depend upon whether we can identify suitable sites and negotiate acceptable lease or purchase and sale terms, and we may not be able to do so, or it may take longer than we expect. Moreover, once we establish a new branch, numerous factors will contribute to its performance, such as a suitable location, qualified personnel and an effective marketing strategy. Additionally, it takes time for a new branch to gather significant loans and deposits to generate enough income to offset its expenses, some of which, like salaries and occupancy expense, are relatively fixed costs. There can be no assurance that our branch expansion strategy will be accretive to our earnings, or that it will be accretive to earnings within a reasonable period of time.

Strong Competition Within Our Market Area May Limit Our Growth And Profitability.

     We face significant competition both in attracting deposits and in the origination of loans. See “Business of Benjamin Franklin Bancorp— Market Area and Competition” on page [#]. Savings banks, credit unions, savings and loan associations and commercial banks operating in our primary market area have historically provided most of our competition for deposits. In addition, and particularly in times of high interest rates, we face additional and significant competition for funds from money-market mutual funds and issuers of corporate and government securities. Competition for the origination of real estate and other loans comes from other thrift institutions, commercial banks, insurance companies, finance companies, other institutional lenders and mortgage companies. Many of our competitors have substantially greater financial and other resources than ours. Moreover, we may face increased competition in the origination of loans if competing thrift institutions convert to stock form, because such converting thrifts would likely seek to invest their new capital into loans. Finally, credit unions do not pay federal or state income taxes and are subject to fewer regulatory constraints than savings banks and as a result, they may enjoy a competitive advantage over us. This advantage places significant competitive pressure on the prices of our loans and deposits.

Our Ability to Grow May Be Limited if We Cannot Make Acquisitions.

     In an effort to increase our loan and deposit growth, we will continue to seek to expand our banking franchise, including through acquisitions of other financial institutions or branches if opportunities arise. Our ability to grow through selective acquisitions of other financial institutions or branches will depend on successfully identifying, acquiring and integrating them. We compete with other financial institutions with respect to proposed acquisitions. We cannot assure you that we will be able to identify attractive acquisition candidates or make acquisitions on favorable terms. In addition, we cannot assure you that we can successfully integrate any acquired financial institutions or branches into our banking organization in a timely or efficient manner, that we will be successful in retaining existing customer relationships or that we can achieve anticipated operating efficiencies.

We Operate In A Highly Regulated Environment And May Be Adversely Affected By Changes In Law And Regulations.

     We are subject to extensive regulation, supervision and examination. See “Regulation and Supervision” on page [#]. Any change in the laws or regulations applicable to us, or in banking regulators’ supervisory policies or examination procedures, whether by the Massachusetts Commissioner of Banks, the FDIC, the Federal Reserve Board, other state or federal regulators, the United States Congress or the Massachusetts legislature could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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     We are subject to regulations promulgated by the Massachusetts Division of Banks, as our chartering authority, and by the FDIC as the insurer of our deposits up to certain limits. We also belong to the Federal Home Loan Bank System and, as a member of such system, we are subject to certain limited regulations promulgated by the Federal Home Loan Bank of Boston. In addition, the Federal Reserve Board regulates and oversees Benjamin Franklin Bancorp, as a Bank holding company.

     This regulation and supervision limits the activities in which we may engage. The purpose of regulation and supervision is primarily to protect our depositors and borrowers and, in the case of FDIC regulation, the FDIC’s insurance fund. Regulatory authorities have extensive discretion in the exercise of their supervisory and enforcement powers. They may, among other things, impose restrictions on the operation of a banking institution, the classification of assets by such institution and such institution’s allowance for loan losses. Regulatory and law enforcement authorities also have wide discretion and extensive enforcement powers under various consumer protection and civil rights laws, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act and Massachusetts’s deceptive acts and practices law. These laws also permit private individual and class action law suits and provide for the recovery of attorneys fees in certain instances. No assurance can be given that the foregoing regulations and supervision will not change so as to affect us adversely.

Changes in Market Interest Rates Could Adversely Affect Our Financial Condition and Results of Operations.

     Our profitability, like that of most financial institutions, depends to a large extent upon our net interest income, which is the difference, or spread, between our gross interest income on interest-earning assets, such as loans and securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowed funds. Accordingly, our results of operations and financial condition depend largely on movements in market interest rates and our ability to manage our interest-rate-sensitive assets and liabilities in response to these movements, including our adjustable-rate mortgage loans, which represent the largest portion of our residential loan portfolio. Changes in interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows. Because, as a general matter, our interest-bearing liabilities re-price or mature more quickly than our interest-earning assets, an increase in interest rates generally would result in a decrease in our interest rate spread and net interest income. See “Management’s Discussion and Analysis of Benjamin Franklin Bancorp—Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure About Risk Management” on page [#].

     Changes in interest rates also affect the value of our interest-earning assets, including, in particular, the value of our investment securities portfolio. Generally, the value of investment securities fluctuates inversely with changes in interest rates. At September 30, 2004, our securities portfolio totaled $101.6 million, including $94.4 million of securities available for sale. Unrealized gains and losses on securities available for sale are reported as a separate component of surplus, net of related taxes. Decreases in the fair value of securities available for sale therefore would have an adverse affect on our stockholders’ equity. See “Business of Benjamin Franklin Bancorp—Investment Activities” on page [#].

     We are also subject to reinvestment risk relating to interest rate movements. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are not able to reinvest funds from such prepayments at rates that are comparable to the rates on the prepaid loans or securities. On the other hand, increases in interest rates on adjustable-rate mortgage loans result in larger mortgage payments due from borrowers, which could potentially increase our level of loan delinquencies and defaults.

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The Issuance of Additional Shares May Dilute Your Ownership Interest.

     The exact number of shares of common stock to be issued in the conversion will not be determined until RP Financial, LC. updates its appraisal immediately prior to the completion of the sale of the common stock. However, in general, the higher the number of shares of common stock issued, the lower our pro forma net income per share and pro forma stockholders’ equity per share, and the higher the purchase price of a share of our common stock as a percentage of pro forma stockholders’ equity per share and as a multiple of net income per share. Due to the intangibles (goodwill and core deposit value) created from the acquisition of Chart Bank, our pro forma tangible stockholders’ equity per share increases with a higher number of common shares issued, and therefore the purchase price of a share of our common stock as a percentage of pro forma stockholders’ tangible equity per share decreases. See “Pro Forma Data—Pro Forma Unaudited Financial Statements Giving Effect to Conversion and Acquisition” on page [#]. In addition, the issuance of shares to stockholders of Chart Bank in connection with the merger will dilute the ownership interest of purchasers of shares of common stock in the conversion.

Relatively High Pro Forma Pricing Multiples May Negatively Affect After-Market Stock Performance Compared with Other Recently Converted Institutions.

     The purchase price of a share of our common stock as a percentage of pro forma tangible stockholders’ equity per share of the shares of common stock sold in the conversion ranges from 132.63% at the minimum of the estimated offering range to 128.21% at the maximum, as adjusted, of the estimated offering range, taking into consideration the shares to be issued to the Chart Bank stockholders in the merger. The ratio of that purchase price to pro forma tangible stockholders’ equity exceeds by a significant amount the price to pro forma tangible stockholders’ equity of common stock sold in all standard mutual-to-stock conversions to date that do not also involve acquisitions of other financial institutions. The ratio of purchase price to pro forma tangible stockholders’ equity is also comparable to or in excess of the comparable ratios of the two recent conversions involving acquisitions of other financial institutions: New Alliance Bancshares, Inc. converted with a pro forma price to tangible stockholders’ equity ratio of 127.0%; and KNBT Bancorp, Inc. converted with a pro forma price to tangible stockholders’ equity ratio of 90.3%. Prospective investors should be aware that, as a result of the relatively high ratio of the price to pro forma tangible stockholders’ equity, the after-market performance of our common stock may be less favorable during the period immediately following the conversion than the price performance of common stock sold in recent mutual-to-stock conversions.

The Implementation of Stock-Based Benefit Plans Will Dilute Your Ownership Interest.

     We expect to adopt a stock-based incentive plan following the conversion, subject to stockholder approval, and such plan could dilute the voting rights of our stockholders. Federal and state banking regulations allow our Board of Directors, and the Board may decide, to adopt one or more stock plans for the benefit of our employees, officers and directors. See “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Benefit Plans—Stock-Based Incentive Plan” on page [#]. This stock-based incentive plan will be funded either through open market purchases, if permitted, or from the issuance of authorized but unissued shares of common stock of Benjamin Franklin Bancorp. While our intention is to fund this plan through open market purchases, stockholders will experience a reduction or dilution in ownership interest of approximately 12.9% (approximately 9.1% dilution for stock options and approximately 3.8% dilution for restricted stock awards) in the event newly issued shares are used to fund stock options and stock awards made under this plan.

The Contribution of Shares to the Charitable Foundation Will Dilute Your Ownership Interests and Adversely Affect Net Income in 2005.

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     We will make a contribution to the Benjamin Franklin Bank Charitable Foundation of 8.0% of the shares actually sold in the offering, up to a maximum of 400,000 shares of common stock, valued at the $10 offering price. Persons purchasing shares in the offering will have their ownership and voting interests in Benjamin Franklin Bancorp diluted by up to 7.4% and 6.5% at the minimum and maximum, respectively, of the offering range.

     This contribution will have a material adverse effect on our reported net income for the quarter and year in which the contribution to the Benjamin Franklin Bank Charitable Foundation is made. Assuming that the contribution will be fully deductible, the after-tax expense of the contribution will reduce net income that we report in our 2005 fiscal year by approximately $2.6 million, assuming the foundation is funded with 400,000 shares. If the contribution is determined to be less than fully deductible, then the after-tax expense recorded in that quarter could be a maximum of $4.0 million.

     We believe that our contribution to the Benjamin Franklin Bank Charitable Foundation should be deductible for federal income tax purposes. However, we do not have any assurance that the IRS will grant tax-exempt status to the Benjamin Franklin Bank Charitable Foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution. In addition, even if the contribution is tax deductible, we may not have sufficient profits to be able to fully use the deduction over the six years allowed. For additional discussion, see “The Benjamin Franklin Bank Charitable Foundation” on page [#].

There May Be Delays in Completion of the Offering and the Chart Bank Acquisition, and Stock Orders are Irrevocable.

     We will hold funds submitted to purchase shares of common stock in connection with the offering until we complete or terminate the offering, and we may not complete or terminate the offering for an extended period of time. The offering may be delayed one or more times because its completion will be subject to various conditions, including the receipt of regulatory approvals of both the conversion and the Chart Bank merger. If, for any reason, the Chart Bank acquisition cannot be completed, our Board will consider whether to proceed with the conversion. If we were to decide to proceed with the conversion without Chart Bank, we would resolicit subscribers, providing them with a modified prospectus and an opportunity to increase, decrease or rescind their orders. However, unless we resolicit subscribers or terminate the conversion, orders to purchase shares of common stock made in connection with the offering will be irrevocable. No assurance can be given that we will complete or terminate the offering on or before any particular date. However, if the offering is not completed by [date], 2005, the offering will be terminated and all subscribers will have applicable subscription funds returned promptly with interest (or have applicable withdrawal authorizations canceled).

We Have Never Issued Stock and We Cannot Guarantee That An Active Trading Market Will Develop.

     As a mutual institution, Benjamin Franklin Bancorp has never issued capital stock and, consequently, there is currently no existing market for our common stock. We have received conditional approval to have the our common stock quoted on the Nasdaq National Market under the symbol “BFBC” subject to the completion of the conversion and compliance with initial listing conditions, including the presence of at least three market makers.

     A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, the presence of which is dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. Accordingly, there can be no assurance that an active and liquid trading market for our common stock will develop or that, if developed, it will continue. The failure of an active and liquid trading market to develop would likely have a material adverse effect on the value of the our common

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stock. In addition, no assurance can be given that a purchaser in the conversion will be able to resell our common stock at or above the purchase price of the shares, nor can any assurance be given that a Chart Bank stockholder receiving shares in the merger will be able to sell those shares at or above the $10 price used in the calculation of the exchange ratio for the merger. See “Market for The Common Stock” on page [#].

Our Stock Value May Suffer From Anti-Takeover Provisions That May Impede Potential Takeovers.

     Our governing statute, and our articles and by-laws, contain provisions (sometimes known as “anti-takeover” provisions) that may impede efforts to acquire us, or stock purchases in furtherance of an acquisition, even though acquisition efforts or stock purchases might otherwise have a favorable effect on the price of our common stock. Those provisions will also make it more difficult to remove our board and management. The Massachusetts Business Corporation Law provides for staggered directors’ terms, limits the stockholders’ ability to remove directors and empowers only the directors to fill board vacancies. Even if our board elects to opt out of these statutory provisions, our articles contain similar provisions. Our articles and by-laws also provide for, among other things, restrictions on the acquisition of more than 10.0% of our outstanding voting stock for a period of five years after completion of the conversion, and approval of certain actions, including certain business combinations, by specified percentages of our “disinterested Directors” (as defined in the articles) or by specified percentages of the shares outstanding and entitled to vote. The articles also authorize the Board of Directors to issue shares of preferred stock, the rights and preferences of which may be designated by the Board, without the approval of our stockholders. The articles also establish supermajority voting requirements for amendments to the articles and by-laws, limit stockholders’ ability to call special meetings of stockholders, and impose advance notice provisions on stockholders’ ability to nominate directors or to propose matters for consideration at stockholder meetings.

     Our employee stock ownership plan, which expects to purchase 8.0% of the shares issued in the offering, contains provisions that permit participating employees to direct the voting of shares held in the employee stock ownership plan, and those provisions may have anti-takeover effects.

     The Benjamin Franklin Bank Charitable Foundation will be funded with up to 400,000 shares of our common stock, approximately 5.1% of the shares issued and outstanding after the conversion (at the midpoint of the valuation range), including shares issued to the Chart Bank stockholders in the merger. The Benjamin Franklin Bank Charitable Foundation’s Board of Directors will consist of current directors of Benjamin Franklin Bancorp.

     Federal and state regulations and laws may also have anti-takeover effects. The Change in Bank Control Act and the Bank Holding Company Act, together with Federal Reserve Board regulations under those acts, require that a person obtain the consent of the Federal Reserve Board before attempting to acquire control of a bank holding company. In addition, Massachusetts laws place certain limitations on acquisitions of the stock of banking institutions and imposes restrictions on business combination transactions between publicly held Massachusetts corporations and stockholders owning 5% or more of the stock of those corporations.

     For more information about the anti-takeover effects of our articles and by-laws, the employee stock ownership plan and certain federal and state regulations and laws, see “Restrictions on Acquisition of Benjamin Franklin Bancorp and Benjamin Franklin Bank” on page [#].

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Risks Related To Prior Auditors Of Benjamin Franklin Bancorp

     Arthur Andersen LLP, which audited the financial statements included in this prospectus of Benjamin Franklin Bancorp for the year ended December 31, 2001, was convicted on June 15, 2002 of federal obstruction of justice arising from the government’s investigation of Enron Corp. As it has ceased operations, Arthur Andersen LLP has not consented to include in this prospectus their report on the financial statements of Benjamin Franklin Bancorp for the year ended December 31, 2001. Under Section 11 of the Securities Act of 1933, investors may have no effective remedy against Arthur Andersen LLP in connection with a material misstatement or omission in the 2001 financial statements of Benjamin Franklin Bancorp included in this prospectus.

FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements, which can be identified by the use of such words as estimate, project, believe, intend, anticipate, plan, seek, expect and similar expressions. These forward-looking statements include:

  •   statements of our goals, intentions and expectations;
 
  •   statements regarding our business plans and prospects and growth and operating strategies;
 
  •   statements regarding the asset quality of our loan and investment portfolios; and
 
  •   estimates of our risks and future costs and benefits.

     These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:

  •   our ability to consummate the acquisition of Chart Bank;
 
  •   our ability to integrate the Chart Bank merger successfully;
 
  •   our ability to enter new markets successfully and take advantage of growth opportunities;
 
  •   significantly increased competition among depository and other financial institutions;
 
  •   inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;
 
  •   general economic conditions, either nationally or in our market areas, that are worse than expected;
 
  •   adverse changes in the securities markets;
 
  •   legislative or regulatory changes that adversely affect our business;
 
  •   changes in consumer spending, borrowing and savings habits;
 
  •   changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board and the Public Company Accounting Oversight Board; and

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  •   changes in our organization, compensation and benefit plans; and
 
  •   the risk factors described above.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. We discuss these and other uncertainties in “Risk Factors” beginning on page [#] . We disclaim any intent or obligation to update forward-looking statements whether in response to new information, future events or otherwise.

HOW WE INTEND TO USE THE NET PROCEEDS FROM THE OFFERING

     The amount of net proceeds will depend on the total number of shares of common stock sold in the offering, which in turn will depend on RP Financial, LC.’s appraisal as well as regulatory and market considerations, and the expenses incurred in connection with the offering. Although we will not be able to determine the actual net proceeds from the sale of the common stock until we complete the offering, we estimate the net proceeds will be between $40.9 million and $55.8 million, or $64.4 million if the offering is increased by 15.0%.

     The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering is used to sell shares not purchased in the subscription offering and community offering. The net proceeds will also vary if the number of shares to be sold in the offering is adjusted to reflect a change in the estimated pro forma market value of Benjamin Franklin Bancorp or if our employee stock ownership plan purchases shares in the open market at an average cost that is higher or lower than the $10 per share offering price. Payments for shares made through withdrawals from existing deposit accounts at Benjamin Franklin Bank will not result in the receipt of new funds for investment but will result in a reduction of Benjamin Franklin Bank’s deposits.

     We are undertaking the conversion and offering at this time primarily in order to provide the consideration for the acquisition of Chart Bank. For further information, see “The Acquisition of Chart Bank” on page [#].

     The table below indicates the net proceeds to us based on the number of shares sold in the offering.

                                 
                            Adjusted  
    Minimum     Midpoint     Maximum     Maximum  
            (Dollars in thousands)          
Gross proceeds
   $ 42,500     $ 50,000     $ 57,500     $ 66,125  
Less offering expenses
     (1,554 )     (1,622 )     (1,691 )     (1,771 )
 
                      
Net offering proceeds
     40,946       48,378       55,809       64,354  
Less:
                                
Cash for acquisition of Chart Bank (1)
     (21,469 )     (21,469 )     (21,469 )     (21,469 )
Employee stock ownership plan loan
     (3,672 )     (4,320 )     (4,920 )     (5,610 )
 
                      
Cash/excess
     15,805       22,589       29,420       37,275  
 
                      
Distribution of cash/excess:
  
To Benjamin Franklin Bank
     4,869       6,727       8,585       10,721  
Retained by Benjamin Franklin Bancorp.
     10,936       15,862       20,835       26,554  

(1)   Equals cash portion of acquisition price of $19,649,250 plus cost of cashing out all outstanding options of $2,842,750, net of tax benefit of option cash-out of $1,023,390. Does not include $6,613,000 of other miscellaneous cash costs of the Chart Bank acquisition, consisting primarily of personnel contract payouts, contract termination fees, deal advisor fees and prepayment penalty on Federal Home Loan Bank of Boston

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    advance repayments. Assumes that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing.

     The cash retained by Benjamin Franklin Bancorp, after paying the cash acquisition costs of the Chart Bank merger, lending funds to the employee stock ownership plan and contributing a portion to Benjamin Franklin Bank as shown above, would be used for general operating purposes. No specific uses are contemplated at this time. The additional funds available could be used as follows:

  •   To pay cash dividends to stockholders;
 
  •   To repurchase shares of our common stock;
 
  •   To invest in securities;
 
  •   To finance the acquisition of other financial institutions or branches although, except for the proposed acquisition of Chart Bank, we do not currently have any agreements or understandings regarding any specific acquisition transaction; and
 
  •   for other general corporate purposes, including investment of additional funds in Benjamin Franklin Bank.

     Initially, a substantial portion of the remaining net proceeds will be invested in short-term investments, investment grade debt obligations and mortgage-backed securities.

     Massachusetts regulations restrict our ability to repurchase shares of our common stock for a three-year period following the conversion. See “Restrictions on Acquisition of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Statutory and Regulatory Restrictions—Massachusetts Banking Law” on page [#].

     Benjamin Franklin Bank could use funds from the offering provided to it by Benjamin Franklin Bancorp as follows:

  •   to pay down Federal Home Loan Bank of Boston borrowings, including a prepayment penalty of approximately $2.0 million;
 
  •   to fund new loans, including single-family mortgage loans, multi-family residential and commercial mortgage loans, commercial business loans, construction loans and consumer loans;
 
  •   to expand its retail banking franchise by establishing new branches;
 
  •   to enhance existing products and services and to support new products and services;
 
  •   to invest in securities; and
 
  •   for other general corporate purposes.

OUR POLICY REGARDING DIVIDENDS

     Following completion of the offering, our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. In the future, our Board intends to consider a policy of paying cash or stock dividends on the common stock. However, no

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decision has been made with respect to whether or when the payment of dividends may occur. The payment of dividends will depend upon a number of factors, including capital requirements, Benjamin Franklin Bancorp’s and Benjamin Franklin Bank’s financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future.

     The only funds available for the payment of dividends on the capital stock of Benjamin Franklin Bancorp will be cash and cash equivalents held by Benjamin Franklin Bancorp, dividends paid by Benjamin Franklin Bank to Benjamin Franklin Bancorp and borrowings. Benjamin Franklin Bank will be prohibited from paying cash dividends to Benjamin Franklin Bancorp to the extent that any such payment would reduce Benjamin Franklin Bank’s capital below required capital levels or would impair the liquidation account to be established for the benefit of Benjamin Franklin Bank’s eligible account holders and supplemental eligible account holders at the time of the conversion. See “The Conversion and The Offering—Effects of the Conversion—Liquidation Rights” on page [#].

     FDIC regulations limit Benjamin Franklin Bank’s ability to pay dividends to Benjamin Franklin Bancorp under certain circumstances. For example, Benjamin Franklin Bank could not pay dividends if it was not in compliance with applicable regulatory capital requirements. In addition, Massachusetts law provides that dividends may not be declared, credited or paid by Benjamin Franklin Bank so long as there is any impairment of capital stock. No dividend may be declared on Benjamin Franklin Bank’s common stock for any period other than for which dividends are declared upon preferred stock, except as authorized by the Massachusetts Commissioner of Banks. The approval of the Commissioner is also required for Benjamin Franklin Bank to declare a dividend, if the total of all dividends declared by it in any calendar year shall exceed the total of its net profits for that year combined with its retained net profits of the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.

     If Benjamin Franklin Bancorp issues preferred stock, the holders of the preferred stock may have dividend preferences over the holders of common stock.

MARKET FOR THE COMMON STOCK

     We have not previously issued common stock, so there is currently no established market for the common stock. We have applied to have our common stock quoted on the Nasdaq National Market under the symbol “BFBC” after completion of the offering. Ryan Beck & Co., Inc. has advised us that it intends to make a market in the common stock following the conversion, but is under no obligation to do so. We will encourage and assist additional market makers to make a market in our common stock.

     The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or the control of any market maker. The number of active buyers and sellers of the common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares on short notice, and, therefore, you should not view the common stock as a short-term investment. We cannot assure you that an active trading market for the common stock will develop or that, if it develops, it will continue, nor can we assure you that if you purchase shares you will be able to sell them at or above $10 per share.

     We also cannot assure that a Chart Bank stockholder receiving Benjamin Franklin Bancorp shares in the Chart Bank acquisition will be able to sell those shares at or above $10 per share. See “Risk Factors—We Have Never Issued Stock And We Cannot Guarantee That An Active Market Will Develop” on page [#] and “The Acquisition of Chart Bank” on page [#].

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REGULATORY CAPITAL COMPLIANCE

     At September 30, 2004, Benjamin Franklin Bancorp and Benjamin Franklin Bank independently exceeded all their regulatory capital requirements. The following table sets forth the historical regulatory capital of Benjamin Franklin Bancorp and Benjamin Franklin Bank and the approximate pro forma regulatory capital of Benjamin Franklin Bancorp and Benjamin Franklin Bank after giving effect to the conversion and the Chart Bank acquisition, based on the assumptions set forth in the table on page [#] as to net offering proceeds and the cash cost of the Chart Bank acquisition and the employee stock ownership plan loan. The pro forma risk-based capital amounts assume the investment of the net proceeds in assets which have a risk-weight of 20.0% under applicable regulations as if such net proceeds had been received and so applied at September 30, 2004. The Federal Reserve Board has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis) substantially similar to the FDIC’s capital requirements for Benjamin Franklin Bank. On a pro forma basis after completion of the conversion and the acquisition, Benjamin Franklin Bancorp’s and Benjamin Franklin Bank’s pro forma regulatory capital will exceed these requirements. See “Regulation and Supervision—Federal Regulation—Capital Requirements” on page [#].

                                                                                 
                    Pro Forma at September 30, 2004 based on (1)  
    Benjamin Franklin     4,250,000 Shares     5,000,000 Shares     5,750,000 Shares     6,612,500 Shares  
    Historical at     Sold @ $10 Per     Sold @ $10 Per     Sold @ $10 Per     Sold @ $10 Per  
    September 30, 2004     Share (2)     Share     Share     Share  
            Percent             Percent             Percent             Percent             Percent  
            of             of             of             of             of  
            Assets             Assets             Assets             Assets             Assets  
    Amount     (3)     Amount     (3)     Amount     (3)     Amount     (3)     Amount     (3)  
                                    (Dollars in thousands)                                  
Benjamin Franklin Bancorp:
                                                                                
Total capital shown on financial statements
   $ 30,586       5.91 %   $ 89,296       10.94 %   $ 95,972       11.67 %   $ 02,503       12.36 %   $ 10,013       13.15 %
 
                                                            
Tier 1 leverage capital
     37,281       7.42 %     63,758       8.27 %     70,434       9.06 %     76,965       9.82 %     84,475       10.67 %
Tier 1 leverage requirement
     20,093       4.00 %     30,832       4.00 %     31,099       4.00 %     31,361       4.00 %     31,661       4.00 %
 
                                                            
Excess capital
   $ 17,188       3.42 %   $ 32,926       4.27 %   $ 39,335       5.06 %   $ 45,604       5.82 %   $ 52,814       6.67 %
 
                                                            
Tier 1 risk-based capital
     37,281       11.71 %     63,758       13.25 %     70,434       14.59 %     76,965       15.90 %     84,475       17.40 %
Tier 1 risk-based requirement(2)
     12,738       4.00 %     19,254       4.00 %     19,307       4.00 %     19,359       4.00 %     19,419       4.00 %
 
                                                            
Excess capital
   $ 24,543       7.71 %   $ 44,504       9.25 %   $ 51,127       10.59 %   $ 57,606       11.90 %   $ 65,056       13.40 %
 
                                                            
Total risk-based capital
     40,298       12.65 %     68,528       14.24 %     75,204       15.58 %     81,735       16.89 %     89,245       18.38 %
Total risk-based requirement
     25,476       8.00 %     38,507       8.00 %     38,614       8.00 %     38,718       8.00 %     38,839       8.00 %
 
                                                            
Excess capital
   $ 14,822       4.65 %   $ 30,021       6.24 %   $ 36,590       7.58 %   $ 43,017       8.89 %   $ 50,406       10.38 %
 
                                                            

Footnotes on following page

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                    Pro Forma at September 30, 2004 based on (1)
      Benjamin Franklin     4,250,000 Shares     5,000,000 Shares     5,750,000 Shares     6,612,500 Shares  
      Historical at     Sold @ $10 Per     Sold @ $10 Per     Sold @ $10 Per     Sold @ $10 Per  
      September 30, 2004   Share (2)     Share     Share     Share  
            Percent             Percent             Percent             Percent             Percent  
            of             of             of             of             of  
            Assets             Assets             Assets             Assets             Assets  
      Amount     (3)     Amount     (3)     Amount     (3)     Amount     (3)     Amount     (3)  
    (Dollars in thousands)
Benjamin Franklin Bank:
Total capital shown on financial statements
   $ 38,785       7.50 %   $ 83,498       10.37 %   $ 84,708       10.49 %   $ 85,965       10.63 %   $ 87,412       10.78 %
 
                                                            
Tier 1 leverage capital
     36,481       7.27 %     48,960       6.44 %     50,170       6.58 %     51,427       6.73 %     52,874       6.90 %
Tier 1 leverage requirement
     20,059       4.00 %     30,407       4.00 %     30,481       4.00 %     30,555       4.00 %     30,641       4.00 %
 
                                                            
Excess capital
   $ 16,422       3.27 %   $ 18,553       2.44 %   $ 19,689       2.58 %   $ 20,872       2.73 %   $ 22,233       2.90 %
 
                                                            
Tier 1 risk-based capital
     36,481       11.50 %     48,960       10.22 %     50,170       10.47 %     51,427       10.72 %     52,874       11.01 %
Tier 1 risk-based requirement(2)
     12,685       4.00 %     19,158       4.00 %     19,173       4.00 %     19,188       4.00 %     19,205       4.00 %
 
                                                            
Excess capital
   $ 23,796       7.50 %   $ 29,802       6.22 %   $ 30,997       6.47 %   $ 32,239       6.72 %   $ 33,669       7.01 %
 
                                                            
Total risk-based capital
     39,498       12.45 %     53,730       11.22 %     54,940       11.46 %     56,197       11.72 %     57,644       12.01 %
Total risk-based requirement
     25,371       8.00 %     37,317       8.00 %     38,347       8.00 %     38,376       8.00 %     38,411       8.00 %
 
                                                            
Excess capital
   $ 14,127       4.45 %   $ 15,413       3.22 %   $ 16,593       3.46 %   $ 17,821       3.72 %   $ 19,233       4.01 %
 
                                                            

(1)   Pro forma capital compliance figures shown for Benjamin Franklin Bancorp and Benjamin Franklin Bank.
 
(2)   If Benjamin Franklin Bancorp receives orders for fewer than 4,250,000 shares, Benjamin Franklin Bancorp may, subject to regulatory approval, 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. If the full 2,082,500 shares are applied in this manner, then Benjamin Franklin Bancorp would contribute to Benjamin Franklin Bank 90% (rather than 25%, as otherwise planned) of the cash proceeds of the offering remaining after providing for offering expenses, the cash consideration in the acquisition and the loan to the employee stock ownership plan, and the resulting pro forma regulatory capital ratios for Benjamin Franklin Bancorp and Benjamin Franklin Bank as of September 30, 2004 would be as follows:
                                 
    Benjamin Franklin     Benjamin Franklin  
    Bancorp     Bank  
(Dollars in thousands)   Capital     Ratio     Capital     Ratio  
Total capital per financial statements
   $ 68,679       8.63 %   $ 75,541       9.47 %
Tier 1 leverage capital
     43,141       5.75 %     41,003       5.45 %
Tier 1 risk-based capital
     43,141       9.04 %     41,003       8.59 %
Total risk-based capital
     47,911       10.04 %     45,773       9.59 %

(3)   Adjusted total or adjusted risk-weighted assets, as appropriate. Pro forma adjusted risk-weighted assets assume that funds infused into Benjamin Franklin Bank are held in assets that carry a risk-weighting of 20.0%.

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CAPITALIZATION

     The following table presents the historical capitalization of Benjamin Franklin Bancorp and Chart Bank at September 30, 2004, and the approximate pro forma consolidated capitalization of Benjamin Franklin Bancorp after giving effect to the conversion and the Chart Bank acquisition.

                                                                 
                            Benjamin Franklin Bancorp
                            Pro Forma based upon a sale at $10 per share
                            Benjamin                                
                            Franklin                                
                            Bancorp                             Maximum  
                            Pro Forma     Minimum     Midpoint     Maximum     as adjusted  
    Benjamin             Pro Forma     Consolidated     4,250,000     5,000,000     5,750,000     6,612,500  
    Franklin     Chart     Merger     Pre-     Price of     Price of     Price of     Price of  
    Bancorp     Bank     Adjust-     Conversion     $10 per     $10 per     $10 per     $10 per  
    Historical     Historical     ments (1)     (2)     share     share     share     share (3)  
    (Dollars in thousands)  
Deposits (4)
   $ 399,562     $ 215,972     $ 703     $ 616,237     $ 616,237     $ 616,237     $ 616,237     $ 616,237  
Borrowings(5)
    75,000       22,000       (29 )     96,971       96,971       96,971       96,971       96,971  
Subordinated Debt
     9,000       —       —       9,000       9,000       9,000       9,000       9,000  
 
                                                
Total deposits and
                                             8       8          
borrowed funds
   $ 483,562     $ 237,972     $ 674     $ 722,208     $ 722,208     $ 722,208     $ 722,208     $ 722,208  
 
                                                
Stockholders’ equity:
                                                                
Common Stock, no par value, 75 million shares authorized; shares to be issued as reflected
   $ —     $ 1,420     $ (1,420 )   $ —     $ —     $ —     $ —     $ —  
Additional paid-in capital
     —       11,575       12,441       24,016       68,362       76,394       83,825       92,370  
Retained earnings (6)
     32,620       4,524       (6,492 )     30,652       30,652       30,652       30,652       30,652  
Less expense of contribution to foundation (7)
     —       —       —       —       (3,400 )     (4,000 )     (4,000 )     (4,000 )
Plus: tax benefit of contribution to foundation (8)
     —       —       —       —       1,224       1,440       1,440       1,440  
Accumulated other comprehensive income (loss)
    (2,034 )     27       (27 )     (2,034 )     (2,034 )     (2,034 )     (2,034 )     (2,034 )
Less: common stock acquired by ESOP (9)
     —       —       —       —       (3,672 )     (4,320 )     (4,920 )     (5,610 )
Less: common stock acquired for restricted stock awards (10)
     —       —       —       —       (1,836 )     (2,160 )     (2,460 )     (2,805 )
 
                                                
Total stockholders’ equity
   $ 30,586     $ 17,546     $ 4,502     $ 52,634     $ 89,296     $ 95,972     $ 102,503     $ 110,013  
 
                                                

(1)   Reflects the pro forma impact of the acquisition of Chart Bank, including entries to reflect the application of purchase accounting and the payment of cash and stock merger consideration equal to $30.75 per share of Chart Bank common stock.
 
(2)   Reflects the pro forma impact of the acquisition of Chart Bank, with the stock portion of the purchase price paid in newly issued shares of Benjamin Franklin Bancorp at a price of $10 per share and the purchase accounting mark-to-market adjustments required to adjust the deposits and borrowings of Chart Bank to market values. Additional paid-in capital reflects the issuance of 2,401,575 shares of common stock in the acquisition of Chart Bank. See footnote 11 to the pro forma balance sheets on pages [#]-[#] for the assumptions as to cash consideration and expenses in the acquisition.
 
(3)   As adjusted to give effect to an increase in the number of shares which could occur due to an increase in the offering range up to approximately 15.0% to reflect changes in market and financial conditions before the conversion is completed.
 
(4)   Does not reflect withdrawals from deposit accounts for the purchase of common stock in the conversion. Such withdrawals would reduce pro forma deposits by the amount of such withdrawals.
 
(5)   Pro forma borrowings reflect the employee stock ownership plan loan funded internally and eliminated in consolidation, but do not reflect the possible repayment of certain Federal Home Loan Bank of Boston borrowings after completion of the conversion.

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(6)   The retained earnings of Benjamin Franklin Bancorp will be substantially restricted after the conversion. See “The Conversion and the Offering—Certain Effects of the Conversion—Liquidation Rights” on page [#] and “Regulation and Supervision” on page [#].
 
(7)   Represents the pre-tax expense of the contribution of common stock to the Benjamin Franklin Bank Charitable Foundation.
 
(8)   Represents the tax benefit of the contribution of common stock in the Benjamin Franklin Bank Charitable Foundation based on an estimated tax rate of 36.0%.
 
(9)   Assumes that 8.0% of the common stock issued in the offering including shares contributed to the Benjamin Franklin Bank Charitable Foundation (but excluding shares to be issued to Chart Bank stockholders), will be acquired by the employee stock ownership plan. The common stock acquired by the employee stock ownership plan is reflected as a reduction in stockholders’ equity.
 
(10)   Gives effect to the restricted stock awards under the stock-based incentive plan that Benjamin Franklin Bancorp expects to adopt after the conversion and Chart Bank acquisition and present to stockholders for approval at a meeting of stockholders to be held at least six months after conversion and the acquisition are completed. No shares will be purchased in the conversion for restricted stock awards under the stock-based incentive plan, and no shares can be purchased for such purpose until stockholder approval has been obtained. If the stock-based incentive plan is approved by the Benjamin Franklin Bancorp stockholders, Benjamin Franklin Bancorp intends to purchase, for award as restricted stock under the plan, an amount of common stock equal to 4.0% of the shares of common stock sold in the offering including shares contributed to the Benjamin Franklin Bank Charitable Foundation, but excluding shares to be issued to Chart Bank stockholders. The table assumes that stockholder approval has been obtained and that such shares are purchased in the open market at $10 per share. The common stock so acquired is reflected as a reduction of stockholders’ equity. If the shares are purchased at prices higher or lower than the initial price of $10 per share, such purchases would have a greater or lesser impact, respectively, on stockholders’ equity. If the restricted stock awards under the stock-based incentive plan are made by issuing authorized but unissued shares, such issuance would dilute the voting interests of existing stockholders by approximately 2.7% if 5,000,000 shares were sold in the conversion. See “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Benefit Plans—Stock-Based Incentive Plan” on page [#].

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PRO FORMA DATA

Pro Forma Unaudited Financial Statements Giving Effect to Conversion and Acquisition

     The following Pro Forma Unaudited Consolidated Balance Sheets at September 30, 2004 and December 31, 2003, and the Pro Forma Unaudited Consolidated Statements of Income for the nine months ended September 30, 2004 and the year ended December 31, 2003 give effect to the proposed conversion and the Chart Bank acquisition based on the assumptions set forth below. The pro forma unaudited financial statements are based on the unaudited consolidated financial statements of Benjamin Franklin Bancorp and Chart Bank as of and for the nine months ended September 30, 2004 and the audited consolidated financial statements of Benjamin Franklin Bancorp and Chart Bank as of and for the year ended December 31, 2003. The pro forma unaudited financial statements give effect to the conversion and the acquisition using purchase accounting as required by accounting principles generally accepted in the United States.

     Chart Bank stockholders will receive in the acquisition either $30.75 in cash or 3.075 shares of Benjamin Franklin Bancorp common stock for each share of Chart Bank stock held by them, with 45.0% of the aggregate consideration to be paid in cash and 55.0% of the aggregate consideration to be paid in common stock. The purchase price for purposes of the pro forma presentation for Chart Bank was calculated as follows:

         
    As of September 30, 2004  
      (Dollars in thousands)
Net assets acquired
   $ 17,546  
Fair value adjustments:
        
Estimated non-tax deductible merger costs remaining at September 30, 2004
     (983 )
Estimated tax deductible capitalized merger expenses
     (3,091 )
Loans(1)
     299  
Deposits(1)
     (703 )
Borrowings(1)
     29  
Fixed assets(2)
     427  
Core deposit intangible asset(3)
     3,799  
Tax impact of purchase accounting adjustments
     (274 )
Goodwill
     28,435  
 
      
Purchase price (net of tax effect of cashing out Chart Bank options)
     45,484  
Tax effect of cashing out Chart Bank options
     1,023  
 
      
Purchase price
   $ 46,508  
 
      

     
 
(1)   Loans, CDs and borrowing adjustments reflect the market value adjustment assigned to each class of these items. Market value adjustments are calculated using portfolio balances, portfolio rates and market rates as of September 30, 2004. Each adjustment was determined using present value analysis, discounting the difference between market rates of interest and portfolio rates of interest to present value over the contractual or estimated lives of the respective assets and liabilities. Cash flows were discounted at the estimated risk-adjusted market rate. Fair value adjustments are amortized using the interest method over the contractual or estimated lives of the respective assets and liabilities.
 
(2)   Fixed asset adjustments based on estimated current market values of acquired fixed assets. Fixed asset adjustments are amortized as depreciation expense over the estimated remaining lives of the fixed assets.
 
(3)   Core deposit intangibles reflect the present value benefit to Benjamin Franklin Bancorp of utilizing the acquired core deposits as a funding source relative to wholesale funding costs based on the rates of Federal Home Loan Bank advances. The core deposit intangible is calculated using deposit balances and interest rates as of September 30, 2004. Costs of the acquired core deposits include

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    interest costs, plus estimated operating expenses, less estimated non-interest income to be derived from the core deposits. Acquired core deposits are projected to decay based on assumptions promulgated by the Office of Thrift Supervision. The yield benefit for each period is discounted to present value using a weighted average cost of capital. The core deposit intangibles are amortized over the estimated lives of the core deposits using the double declining balance accelerated amortization schedule.

     The pro forma adjustments in the tables assume the sale of 4,250,000 shares and 6,612,500 shares, respectively, in the offering at a price of $10 per share, which is the minimum and maximum, as adjusted, of the offering range, respectively. In addition, the pro forma adjustments in the tables assume the issuance of 2,401,575 shares to Chart Bank stockholders in the acquisition, and the contribution of 340,000 and 400,000 shares, respectively, of Benjamin Franklin Bancorp common stock to the Benjamin Franklin Bank Charitable Foundation. The number of shares issued to Chart Bank stockholders may vary if Chart Bank options are exercised prior to closing. The net proceeds are based upon the following assumptions:

  •   Benjamin Franklin Bancorp will sell all shares of common stock offered in the conversion in the subscription offering;
 
  •   Benjamin Franklin Bancorp’s employee stock ownership plan will purchase 8.0% of the shares of common stock issued in the offering, including shares contributed to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp;
 
  •   Benjamin Franklin Bancorp will make a contribution to the Benjamin Franklin Bank Charitable Foundation amounting to 340,000 and 400,000 shares, respectively, at the minimum and maximum, as adjusted, of its common stock with an assumed value of $10 per share;
 
  •   Fixed expenses of the offering, other than the fees to be paid to Ryan Beck, are estimated to be $1.1 million; and
 
  •   Ryan Beck will receive reimbursement of legal fees and other expenses in the amount of $100,000, in addition to fees equal to 1.0% of the aggregate purchase price of the shares of stock sold in the offering, excluding any shares purchased by any employee benefit plans, purchased by any of Benjamin Franklin Bancorp’s directors, officers or employees or members of their immediate families, issued to the Benjamin Franklin Bank Charitable Foundation or issued to the Chart Bank stockholders in the acquisition.

     The expenses of the conversion and the acquisition may vary from those estimated, and the fees paid to Ryan Beck will vary from the amounts estimated if the amount of shares of Benjamin Franklin Bancorp common stock sold varies from the amounts assumed above or if a syndicated community offering becomes necessary. Additionally, certain one-time charges to operating results are expected to occur following the conversion and the acquisition, which expenses are currently estimated to be approximately $3.1 million, pre-tax. These items, net of income tax effects, are shown as a reduction in stockholders’ equity in the balance sheets but are not shown as a reduction in net income for the periods shown in the income statements.

     Pro forma net income has been calculated for the nine months ended September 30, 2004 and for the year ended December 31, 2003 for Benjamin Franklin Bancorp and Chart Bank as if the shares of Benjamin Franklin Bancorp common stock to be issued in the offering had been sold and the shares issued to Chart Bank stockholders happened as of the beginning of the first period presented. Pro forma net income has also been calculated assuming the acquisition of Chart Bank had happened as of the

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beginning of each period. Pro forma merger adjustments to net income include entries to reflect the estimated difference between contractual yields and costs on financial assets and liabilities and comparable market yields and costs and the amortization of identifiable intangible assets created in the acquisition. Excluded from the calculation of pro forma net income are any adjustments to reflect the estimated interest income to be earned on the net proceeds of the offering, the estimated interest income to be foregone on the cash required to fund the acquisition of Chart Bank and related expenses, and other estimated expense reductions from consolidating the operations of Chart Bank with those of Benjamin Franklin Bancorp. Such entries will be recorded as incurred, are non-recurring, and are thus not reflected in the calculations of pro forma income.

     The pro forma unaudited consolidated statements of financial condition assume the conversion and the acquisition were consummated as of September 30, 2004 and as of the year ended December 31, 2003, respectively. The pro forma unaudited consolidated balance sheets reflect the estimated impact of the offering on Benjamin Franklin Bancorp and the estimated merger adjustments to reflect the acquisition of Chart Bank. Estimated merger adjustments reflect the application of the purchase method of accounting, including adjustments to reflect the difference between historical carrying values and estimated market values for financial assets and liabilities and fixed assets and the creation of intangible assets. The pro forma stockholders’ equity represents the combined book value of Benjamin Franklin Bancorp and Chart Bank, as adjusted for the offering and the acquisition, computed in accordance with generally accepted accounting principles used in the United States. This amount is not intended to represent fair market value nor does it represent amounts, if any, that would be available for distribution to stockholders in the event of liquidation.

     The pro forma unaudited financial statements are provided for informational purposes only. The pro forma financial information presented is not necessarily indicative of the market value of Benjamin Franklin Bancorp or the actual results that would have been achieved had the conversion and the acquisition been consummated on September 30, 2004 or December 31, 2003 or at the beginning of the periods presented, and is not indicative of future results. The pro forma unaudited financial statements should be read in conjunction with the consolidated financial statements and the notes thereto of Benjamin Franklin Bancorp and Chart Bank contained elsewhere in this prospectus.

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     September 30, 2004 Pro Forma Balance Sheet—Minimum of Offering Range. The following table presents pro forma balance sheet information at September 30, 2004 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 4,250,000 shares at the minimum of the offering range.

                                                 
    Benjamin             Benjamin             Pro Forma        
    Franklin     Pro Forma     Franklin             Merger        
    Bancorp     Conversion     Bancorp as     Chart Bank     Adjustments     Pro Forma  
    Historical     Adjustments (1)     Converted     Historical     (2)     Consolidated  
    (Dollars in thousands)  
Assets
                                                
Cash and cash equivalents
   $ 15,126     $ 35,438 (3)   $ 50,564     $ 38,773     $ (28,082) (11)   $ 61,255  
Securities available for sale, at fair value
     94,423       —       94,423       3,669       —       98,092  
Securities held to maturity, at amortized cost
     266       —       266       31,826       —       32,092  
Loans, net
     375,516       —       375,516       175,572       299 (12)     551,387  
Restricted equity securities, at cost
     6,862       —       6,862       1,662       —       8,524  
Premises and equipment, net
     11,280       —       11,280       2,171       427 (13)     13,878  
Goodwill
     4,248       —       4,248       —       28,435 (14)     32,683  
Core deposit intangible
     91       —       91       —       3,799 (15)     3,890  
Other amortizing intangible assets
     720       —       720       —       —       720  
Other assets
     9,399       1,224 (4)     10,623       2,588       298 (16)     13,509  
 
                                    
Total assets
   $ 517,931     $ 36,662     $ 554,593     $ 256,261     $ 5,176     $ 816,030  
 
                                    
Liabilities
                                                
Deposits
   $ 399,562     $ —     $ 399,562     $ 215,972     $ 703 (17)   $ 616,237  
FHLB advances and other borrowings
     75,000       — (5)     75,000       22,000       (29) (18)     96,971  
Other liabilities
     3,783       —       3,783       743       —       4,526  
Subordinated debt
     9,000       —       9,000       —       —       9,000  
 
                                    
Total liabilities
     487,345       —       487,345       238,715       674       726,734  
 
                                    
Stockholder’s equity
                                                
Common Stock
     —       — (6)     —       1,420       (1,420) (19)     —  
Additional paid-in capital
     —       44,346 (7)     44,346       11,575       12,441 (20)     68,362  
Retained earnings
     32,620       (2,176) (8)     30,444       4,524       (6,492) (21)     28,476  
Employee stock ownership plan shares
     —       (3,672) (9)     (3,672 )     —       —       (3,672 )
Restricted shares under stock-based incentive plan
     —       (1,836) (10)     (1,836 )     —       —       (1,836 )
Accumulated other compre-hensive (loss) income.
     (2,034 )     —       (2,034 )     27       (27) (22)     (2,034 )
 
                                    
 
                                                
Total stockholders’ equity
     30,586       36,662       67,248       17,546       4,502       89,296  
 
                                    
Total liabilities and stockholders’ equity
   $ 517,931     $ 36,662     $ 554,593     $ 256,261     $ 5,176     $ 816,030  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $42.5 million, the minimum of the offering range, offering expenses of $1.6 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $3.4 million of common stock, and establishment of an employee stock ownership plan and a stock-based incentive plan that will acquire 8.0% and 4.0%, respectively, of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. It is assumed that Benjamin Franklin Bancorp will purchase, for grant as restricted stock under the stock-based incentive plan, shares in the open market after receiving stockholder approval to adopt the plan. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. The reduction in retained earnings reflects the one-time expense of funding the Benjamin Franklin Bank Charitable Foundation net of a deferred tax asset.

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(2)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.

(3)   Calculate as follows:
         
    (Dollars in thousands)  
Gross conversion proceeds
   $ 42,500  
Offering expenses
     (1,554 )
ESOP adjustment
     (3,672 )
Stock-based incentive plan (restricted stock grants) adjustment
     (1,836 )
 
      
Pro forma cash adjustment
   $ 35,438  
 
      

(4)   Deferred tax asset resulting from funding the Benjamin Franklin Bank Charitable Foundation based on marginal tax rate of 36.0%.

(5)   The employee stock ownership plan loan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp, thus no borrowing liability will be recorded on the consolidated balance sheet of Benjamin Franklin Bancorp.

(6) No par value common stock.

(7) Calculate as follows:
         
    (Dollars in thousands)  
Net proceeds of offering
   $ 40,946  
Common stock issued to Foundation
     3,400  
 
      
Pro forma adjustment
   $ 44,346  
 
      

(8)   After-tax impact to retained earnings from the $3.4 million expense for funding the Benjamin Franklin Bank Charitable Foundation based on a marginal tax rate of 36.0%.

(9)   Contra-equity account established to reflect the unallocated shares in the employee stock ownership plan, anticipated to purchase 8.0% of the shares issued in the offering (including shares contributed to the Benjamin Franklin Bank Charitable Foundation).

(10)   Contra-equity account established to reflect the unvested shares of restricted stock under the stock-based incentive plan equal to 4.0% of offering plus foundation shares.

(11)   Includes the cash portion of the merger consideration paid to Chart Bank, non-tax deductible transaction costs remaining to be paid at September 30, 2004, tax deductible one time acquisition costs, and one time expenses that will be incurred by Benjamin Franklin Bancorp to consolidate Chart Bank, net of cash received from return of the Chart Bank Cooperative Central Bank deposit.

         
    (Dollars in thousands)  
Cash portion of merger consideration
   $ 21,469  
Non-tax deductible transaction expenses
     983  
Tax deductible transaction expenses
     3,091  
One time expenses incurred to consolidate Chart Bank
     3,075  
Return of Chart Bank Cooperative Central Bank Deposit
     (536 )
 
      
Total cash adjustment
   $ 28,082  
 
      

(12)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for loans acquired in the acquisition. Yield adjustments were calculated using present value analysis as follows: (a) the acquired loan portfolio was segregated into pools of similar loans; (b) cash flow projections were prepared for each loan pool based interest rates, balances, remaining terms to maturity, and estimated prepayment speeds for each pool; (c) cash flows were discounted to present value using risk adjusted discount rates for comparable loans; and (d) the resulting difference between the present value of future cash flows for each pool and the corresponding principal balance was the yield adjustment. Yield adjustments on acquired loans are amortized into interest income using the interest method over the estimated lives of the acquired loans, which range between 0.5 years and 8.3 years, depending upon the type of loan (average is 4.2 years).

(13)   Reflects the difference between market values and net book values of fixed assets acquired in the acquisition.

(14)   Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as follows:
         
    (Dollars in thousands, except per share data)  
Purchase price per share
   $ 30.75  
Number of shares acquired
     1,420,000  
Number of options acquired
     137,000  
Average exercise price of options
   $ 10.00  
Cost of purchasing shares
   $ 43,665  
Cost of purchasing options
     2,843  
Tax effect of purchasing options
     (1,024 )
 
      

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    (Dollars in thousands, except per share data)  
Purchase price (net of tax effect of purchasing options)
     45,484  
Less: acquired stockholders’ equity
     (17,546 )
Plus: estimated non-tax deductible transaction costs
     983  
Plus: taxable purchase accounting adjustments Estimated tax deductible expenses (pretax)
     3,091  
Yield adjustment for acquired CDs
     703  
Yield adjustment for acquired borrowings
     (29 )
Yield adjustment for acquired loans
     (299 )
Core deposit intangible
     (3,799 )
Market value adjustment for fixed assets
     (427 )
Tax effect at 36.0% marginal tax rate
     274  
 
      
Goodwill
   $ 28,435  
 
      

(15)   Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Chart Bank deposit base, calculated as the present value benefit of funding operations with the acquired deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense on an accelerated basis using the double declining balance method over 8.3 years.

(16)   Calculate as follows:

         
    (Dollars in thousands)  
Deferred tax entry for taxable transaction costs (footnote 14)
   $ (274 )
Deferred tax entry for one time merger charges (footnote 21)
     1,108  
Repayment of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Pro forma adjustment
   $ 298  
 
      

(17)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for time deposits acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balances for time deposits and the present value of projected cash flows related to the time deposits discounted using current market rates. Current market rates were based on average rates paid by institutions competing in the regional market area based on rate surveys on or around September 30, 2004. The yield adjustment for time deposits will be accreted into income using the interest method over the lives of the acquired time deposits based on their monthly maturities (5 years).

(18)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for borrowings acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balance for borrowings and the present value of projected cash flows related to the borrowings discounted using current market rates. Current market rates were based on rates offered by the Federal Home Loan Bank of Boston as of September 30, 2004. The yield adjustment for borrowings will be amortized into expense using the interest method over the lives of the acquired borrowings based on their monthly maturities (4 years).

(19)   Eliminate Chart Bank common stock par value. Newly issued shares of Benjamin Franklin Bancorp have no par value.

(20)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank paid-in capital
   $ (11,575 )
Common stock (par value) issued in acquisition
     24,016  
 
      
Adjustment to paid-in capital
   $ 12,441  
 
      

(21)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank retained earnings
   $ (4,524 )
One-time merger charges incurred:
        
Restructure FHLB advances and conversion of accounts
     (3,075 )
Tax effect at marginal rate of 36.0%
     1,107  
 
      
Adjustment to retained earnings
   $ (6,492 )
 
      

(22)   Calculate to eliminate the capital account entries of Chart Bank pursuant to purchase accounting.

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     September 30, 2004 Pro Forma Balance Sheet—Maximum, as Adjusted, of Offering Range. The following table presents pro forma balance sheet information at September 30, 2004 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 6,612,500 shares at the maximum, as adjusted, of the offering range.

                                                 
    Benjamin             Benjamin                    
    Franklin     Pro Forma     Franklin                    
    Bancorp     Conversion     Bancorp as     Chart Bank     Pro Forma Merger     Pro Forma  
    Historical     Adjustments (1)     Converted     Historical     Adjustments (2)     Consolidated  
                    (Dollars in thousands)                  
Assets
                                                
Cash and cash equivalents
   $ 15,126     $ 55,939 (3)   $ 71,065     $ 38,773     $ (28,082 )(11)   $ 81,756  
Securities available for sale, at fair value
     94,423       —       94,423       3,669       —       98,092  
Securities held to maturity, at amortized cost
     266       —       266       31,826       —       32,092  
Loans, net
     375,516       —       375,516       175,572       299 (12)     551,387  
Restricted equity securities, at cost
     6,862       —       6,862       1,662       —       8,524  
Premises and equipment, net
     11,280       —       11,280       2,171       427 (13)     13,878  
Goodwill
     4,248       —       4,248       —       28,435 (14)     32,683  
Core deposit intangible
     91       —       91       —       3,799 (15)     3,890  
Other amortizing intangible assets
     720       —       720       —       —       720  
Other assets
     9,399       1,440 (4)     10,839       2,588       298 (16)     13,725  
 
                                    
Total assets
   $ 517,931     $ 57,379     $ 575,310     $ 256,261     $ 5,176     $ 836,747  
 
                                    
Liabilities
                                                
Deposits
   $ 399,562     $ —     $ 399,562     $ 215,972     $ 703 (17)   $ 616,237  
FHLB advances and other borrowings
     75,000       — (5)     75,000       22,000       (29) (18)     96,971  
Other liabilities
     3,783       —       3,783       743       —       4,526  
Subordinated debt
     9,000       —       9,000       —       —       9,000  
 
                                    
Total liabilities
     487,345       —       487,345       238,715       674       726,734  
 
                                    
Stockholder’s equity
                                                
Common Stock
     —       — (6)             1,420       (1,420) (19)     —  
Additional paid-in capital
     —       68,354 (7)     68,354       11,575       12,441 (20)     92,370  
Retained earnings
     32,620       (2,560) (8)     30,060       4,524       (6,492) (21)     28,092  
Employee stock ownership plan shares
     —       (5,610) (9)     (5,610 )     —       —       (5,610 )
Restricted shares under stock-based incentive plan
     —       (2,805) (10)     (2,805 )     —       —       (2,805 )
Accumulated other comprehensive (loss) income
     (2,034 )     —       (2,034 )     27       (27) (22)     (2,034 )
 
                                    
 
                                                
Total stockholders’ equity
     30,586       57,379       87,965       17,546       4,502       110,013  
 
                                    
Total liabilities and stockholders’ equity
   $ 517,931     $ 57,379     $ 575,310     $ 256,261     $ 5,176     $ 836,747  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $66.1 million, the maximum, as adjusted, offering expenses of $1.8 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $4.0 million of common stock, and establishment of an employee stock ownership plan and the stock-based incentive plan that will acquire 8.0% and 4.0%, respectively, of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. It is assumed that Benjamin Franklin Bancorp will purchase, for grant as restricted stock under the stock-based incentive plan, shares in the open market after receiving stockholder approval to adopt the plan. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. The reduction in retained earnings reflects the one-time expense of funding the Benjamin Franklin Bank Charitable Foundation net of a deferred tax asset.

(2)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.

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(3)   Calculate as follows:

         
    (Dollars in thousands)  
Gross conversion proceeds
   $ 66,125  
Offering expenses
     (1,771 )
ESOP adjustment
     (5,610 )
Stock-based incentive plan (restricted stock grants) adjustment
     (2,805 )
 
      
Pro forma cash adjustment
   $ 55,939  
 
      

(4)   Deferred tax asset resulting from funding the Benjamin Franklin Bank Charitable Foundation based on marginal tax rate of 36.0%.

(5)   The employee stock ownership plan loan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp, thus no borrowing liability will be recorded on the consolidated balance sheet of Benjamin Franklin Bancorp.

(6) No par value common stock.

(7) Calculate as follows:

         
    (Dollars in thousands)  
Net proceeds of offering
   $ 64,354  
Common stock issued to Foundation
     4,000  
 
      
Pro forma adjustment
   $ 68,354  
 
      

(8)   After-tax impact to retained earnings from the $4.0 million expense for funding the Benjamin Franklin Bank Charitable Foundation based on a marginal tax rate of 36.0%.

(9)   Contra-equity account established to reflect the unallocated shares in the employee stock ownership plan, anticipated to purchase 8.0% of the shares issued in the offering (including shares contributed to the Benjamin Franklin Bank Charitable Foundation).

(10)   Contra-equity account established to reflect the unvested shares of restricted stock under the stock-based incentive plan equal to 4.0% of offering plus foundation shares.

(11)   Includes the cash portion of the merger consideration paid to Chart Bank, non-tax deductible transaction costs remaining to be paid at September 30, 2004, tax deductible one time acquisition costs, and one time expenses that will be incurred by Benjamin Franklin Bancorp to consolidate Chart Bank, net of cash received from return of the Chart Bank Cooperative Central Bank deposit.
         
    (Dollars in thousands)  
Cash portion of merger consideration
   $ 21,469  
Non-tax deductible transaction expenses
     983  
Tax deductible transaction expenses
     3,091  
One time expenses incurred to consolidate Chart Bank
     3,075  
Return of Chart Bank Cooperative Central Bank Deposit
     (536 )
 
      
Total cash adjustment
   $ 28,082  
 
      

(12)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for loans acquired in the acquisition. Yield adjustments were calculated using present value analysis as follows: (a) the acquired loan portfolio was segregated into pools of similar loans; (b) cash flow projections were prepared for each loan pool based interest rates, balances, remaining terms to maturity, and estimated prepayment speeds for each pool; (c) cash flows were discounted to present value using risk adjusted discount rates for comparable loans; and (d) the resulting difference between the present value of future cash flows for each pool and the corresponding principal balance was the yield adjustment. Yield adjustments on acquired loans are amortized into interest income using the interest method over the estimated lives of the acquired loans, which range between 0.5 years and 8.3 years, depending upon the type of loan (average is 4.2 years).

(13)   Reflects the difference between market values and net book values of fixed assets acquired in the acquisition.

(14)   Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:

         
    (Dollars in thousands, except per share data)  
Purchase price per share
   $ 30.75  
Number of shares acquired
     1,420,000  
Number of options acquired
     137,000  
Average exercise price of options
   $ 10.00  
Cost of purchasing shares
   $ 43,665  
Cost of purchasing options
     2,843  
Tax effect of purchasing options
     (1,024 )
 
      
Purchase price (net of tax effect of purchasing options)
     45,484  
Less: acquired stockholders’ equity
     (17,546 )

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    (Dollars in thousands, except per share data)  
Plus: estimated non-tax deductible transaction costs
     983  
Plus: taxable purchase accounting adjustments
 
Estimated tax deductible expenses (pretax)
     3,091  
Yield adjustment for acquired CDs
     703  
Yield adjustment for acquired borrowings
     (29 )
Yield adjustment for acquired loans
     (299 )
Core deposit intangible
     (3,799 )
Market value adjustment for fixed assets
     (427 )
Tax effect at 36.0% marginal tax rate
     274  
 
      
Goodwill
   $ 28,435  
 
      

(15)   Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Chart Bank deposit base, calculated as the present value benefit of funding operations with the acquired deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense on an accelerated basis using the double declining balance method over 8.3 years.
 
(16)   Calculate as follows:

         
    (Dollars in thousands)  
Deferred tax entry for taxable transaction costs (footnote 14)
   $ (274 )
Deferred tax entry for one time merger charges (footnote 21)
     1,108  
Repayment of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Pro forma adjustment
   $ 298  
 
      

(17)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for time deposits acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balances for time deposits and the present value of projected cash flows related to the time deposits discounted using current market rates. Current market rates were based on average rates paid by institutions competing in the regional market area based on rate surveys on or around September 30, 2004. The yield adjustment for time deposits will be accreted into income using the interest method over the lives of the acquired time deposits based on their monthly maturities (5 years).

(18)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for borrowings acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balance for borrowings and the present value of projected cash flows related to the borrowings discounted using current market rates. Current market rates were based on rates offered by the Federal Home Loan Bank of Boston as of September 30, 2004. The yield adjustment for borrowings will be amortized into expense using the interest method over the lives of the acquired borrowings based on their monthly maturities (4 years).

(19)   Eliminate Chart Bank common stock par value. Newly issued shares of Benjamin Franklin Bancorp have no par value.
 
(20)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank paid-in capital
   $ (11,575 )
Common stock (par value) issued in acquisition
     24,016  
 
      
Adjustment to paid-in capital
   $ 12,441  
 
      

(21)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank retained earnings
   $ (4,524 )
One-time merger charges incurred:
        
Restructure FHLB advances and conversion of accounts
     (3,075 )
Tax effect at marginal rate of 36.0%
     1,107  
 
      
Adjustment to retained earnings
   $ (6,492 )
 
      

(22)   Calculate to eliminate the capital account entries of Chart Bank pursuant to purchase accounting.

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     December 31, 2003 Pro Forma Balance Sheet—Minimum of Offering Range. The following table presents pro forma balance sheet information at December 31, 2003 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 4,250,000 shares at the minimum of the offering range.

                                                                 
    Benjamin     Pro Forma     Benjamin                    
    Franklin     Conversion     Franklin     Chart     Pro Forma        
    Bancorp     Adjustments     Bancorp as     Bank     Merger     Pro Forma  
    Historical     (1)     Converted     Historical     Adjustments (2)     Consolidated  
    (Dollars in thousands)  
Assets
                                                                
Cash and cash equivalents.
   $ 35,485     $ 35,438       (3 )   $ 70,923     $ 34,874     $ (28,082 )     (11 )   $ 77,715  
Securities available for sale, at fair value
     102,646       —               102,646       5,404       —               108,050  
Securities held to maturity, at amortized cost
     386       —               386       23,965       —               24,351  
Loans, net
     288,862       —               288,862       139,890       299       (12 )     429,051  
Restricted equity securities, at cost
     7,222       —               7,222       1,060       —               8,282  
Premises and equipment, net
     11,199       —               11,199       2,400       427       (13 )     14,026  
Goodwill
     4,248       —               4,248       —       28,582       (14 )     32,830  
Core deposit intangible
     226       —               226       —       3,799       (15 )     4,025  
Other amortizing intangible assets
     862       —               862       —       —               862  
Other assets
     7,708       1,224       (4 )     8,932       2,261       298       (16 )     11,491  
 
                                                    
Total assets
   $ 458,844     $ 36,662             $ 495,506     $ 209,854     $ 5,323             $ 710,683  
 
                                                    
Liabilities
                                                                
Deposits
   $ 380,257     $ —             $ 380,257     $ 175,801     $ 703       (17 )   $ 556,761  
FHLB advances and other borrowings
     36,000       —       (5 )     36,000       15,930       (29 )     (18 )     51,901  
Other liabilities
     4,286       —               4,286       724       —               5,010  
Subordinated debt
     9,000       —               9,000     $ —       —               9,000  
 
                                                    
Total liabilities
     429,543       —               429,543       192,455       674               622,672  
 
                                                    
Stockholder’s equity
                                                                
Common Stock
     —       —       (6 )     —       1,420       (1,420 )     (19 )     —  
Additional paid-in capital
     —       44,346       (7 )     44,346       11,575       12,441       (20 )     68,362  
Retained earnings
     31,308       (2,176 )     (8 )     29,132       4,337       (6,305 )     (21 )     27,164  
Employee stock ownership plan shares
     —       (3,672 )     (9 )     (3,672 )     —       —               (3,672 )
Restricted shares under stock-based incentive plan
     —       (1,836 )     (10 )     (1,836 )     —       —               (1,836 )
Accumulated other comprehensive (loss) income
     (2,007 )     —               (2,007 )     67       (67 )     (22 )     (2,007 )
 
                                                    
Total stockholders’ equity
     29,301       36,662               65,963       17,399       4,649               88,011  
 
                                                    
Total liabilities and stockholders’ equity
   $ 458,844     $ 36,662             $ 495,506     $ 209,854     $ 5,323             $ 710,683  
 
                                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $42.5 million, the minimum of the offering range, offering expenses of $1.6 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $3.4 million of common stock, and establishment of an employee stock ownership plan and the stock-based incentive plan that will acquire 8.0% and 4.0%, respectively, of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. It is assumed that Benjamin Franklin Bancorp will purchase, for grant as restricted stock under the stock-based incentive plan, shares in the open market after receiving stockholder approval to adopt the plan. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. The reduction in retained earnings reflects the one-time expense of funding the Benjamin Franklin Bank Charitable Foundation net of a deferred tax asset.
 
(2)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.

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(3)   Calculate as follows:

         
    (Dollars in thousands)  
Gross conversion proceeds
   $ 42,500  
Offering expenses
     (1,554 )
ESOP adjustment
     (3,672 )
Stock-based incentive plan (restricted stock grants) adjustment
     (1,836 )
 
      
Pro forma cash adjustment
   $ 35,438  
 
      

(4)   Deferred tax asset resulting from funding the Benjamin Franklin Bank Charitable Foundation based on marginal tax rate of 36.0%.
 
(5)   The employee stock ownership plan loan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp, thus no borrowing liability will be recorded on the consolidated balance sheet of Benjamin Franklin Bancorp.
 
(6)   No par value common stock.
 
(7)   Calculate as follows:

         
    (Dollars in thousands)  
Net proceeds of offering
   $ 40,946  
Common stock issued to Foundation
     3,400  
 
      
Pro forma adjustment
   $ 44,346  
 
      

(8)   After-tax impact to retained earnings from the $3.4 million expense for funding the Benjamin Franklin Bank Charitable Foundation based on a marginal tax rate of 36.0%.
 
(9)   Contra-equity account established to reflect the unallocated shares in the employee stock ownership plan, anticipated to purchase 8.0% of the shares issued in the offering (including shares contributed to the Benjamin Franklin Bank Charitable Foundation).
 
(10)   Contra-equity account established to reflect the unvested shares of restricted stock under the stock-based incentive plan equal to 4.0% of offering plus foundation shares.
 
(11)   Includes the cash portion of the merger consideration paid to Chart Bank, non-tax deductible transaction costs remaining to be paid at September 30, 2004, tax deductible one time acquisition costs, and one time expenses that will be incurred by Benjamin Franklin Bancorp to consolidate Chart Bank, net of cash received from return of the Chart Bank Cooperative Central Bank deposit.

         
    (Dollars in thousands)  
Cash portion of merger consideration
   $ 21,469  
Non-tax deductible transaction expenses
     983  
Tax deductible transaction expenses
     3,091  
One time expenses incurred to consolidate Chart Bank
     3,075  
Return of Chart Bank Cooperative Central Bank Deposit
     (536 )
 
      
Total cash adjustment
   $ 28,082  
 
      

(12)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for loans acquired in the acquisition. Yield adjustments were calculated using present value analysis as follows: (a) the acquired loan portfolio was segregated into pools of similar loans; (b) cash flow projections were prepared for each loan pool based interest rates, balances, remaining terms to maturity, and estimated prepayment speeds for each pool; (c) cash flows were discounted to present value using risk adjusted discount rates for comparable loans; and (d) the resulting difference between the present value of future cash flows for each pool and the corresponding principal balance was the yield adjustment. Yield adjustments on acquired loans are amortized into interest income using the interest method over the estimated lives of the acquired loans, which range between 0.5 years and 8.3 years, depending upon the type of loan (average is 4.2 years).

(13)   Reflects the difference between market values and net book values of fixed assets acquired in the acquisition.

(14)   Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:

         
    (Dollars in thousands,  
    except per share data)  
Purchase price per share
   $ 30.75  
Number of shares acquired
     1,420,000  
Number of options acquired
     137,000  
Average exercise price of options
   $ 10.00  
 
        
Cost of purchasing shares
   $ 43,665  
Cost of purchasing options
     2,843  
Tax effect of purchasing options
     (1,024 )
 
      
Purchase price (net of tax effect of purchasing options)
     45,484  

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    (Dollars in thousands,  
    except per share data)  
Less: acquired stockholders’ equity
     (17,399 )
Plus: estimated non-tax deductible transaction costs
     983  
Plus: taxable purchase accounting adjustments
        
Estimated tax deductible transaction expenses (pre-tax)
     3,091  
Yield adjustment for acquired CDs
     703  
Yield adjustment for acquired borrowings
     (29 )
Yield adjustment for acquired loans
     (299 )
Core deposit intangible
     (3,799 )
Market value adjustment for fixed assets
     (427 )
Tax effect at 36.0% marginal tax rate
     274  
 
      
Goodwill
   $ 28,582  
 
      

(15)   Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Chart Bank deposit base, calculated as the present value benefit of funding operations with the acquired deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense on an accelerated basis using the double declining balance method over 8.3 years.

(16)   Calculate as follows:
         
    (Dollars in thousands)  
Deferred tax entry for taxable transaction costs (footnote 14)
   $ (274 )
Deferred tax entry for one time merger charges (footnote 21)
     1,108  
Repayment of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Pro forma adjustment
   $ 298  
 
      

(17)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for time deposits acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balances for time deposits and the present value of projected cash flows related to the time deposits discounted using current market rates. Current market rates were based on average rates paid by institutions competing in the regional market area based on rate surveys on or around September 30, 2004. The yield adjustment for time deposits will be accreted into income using the interest method over the lives of the acquired time deposits based on their monthly maturities (5 years).

(18)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for borrowings acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balance for borrowings and the present value of projected cash flows related to the borrowings discounted using current market rates. Current market rates were based on rates offered by the Federal Home Loan Bank of Boston as of September 30, 2004. The yield adjustment for borrowings will be amortized into expense using the interest method over the lives of the acquired borrowings based on their monthly maturities (4 years).

(19)   Eliminate Chart Bank common stock par value. Newly issued shares of Benjamin Franklin Bancorp have no par value.

(20)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank paid-in capital
   $ (11,575 )
Common stock (par value) issued in acquisition
     24,016  
 
      
Adjustment to paid-in capital
   $ 12,441  
 
      

(21)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank retained earnings
   $ (4,337 )
One-time merger charges incurred:
        
Restructure FHLB advances and conversion of accounts
     (3,075 )
Tax effect at marginal rate of 36.0%
     1,107  
 
      
Adjustment to retained earnings
   $ (6,305 )
 
      

(22)   Calculate to eliminate the capital account entries of Chart Bank pursuant to purchase accounting.

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     December 31, 2003 Pro Forma Balance Sheet—Maximum, as Adjusted, of Offering Range. The following table presents pro forma balance sheet information at December 31, 2003 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 6,612,500 shares at the maximum, as adjusted, of the offering range.

                                                                 
    Benjamin                     Benjamin                    
    Franklin     Pro Forma     Franklin     Chart     Pro Forma        
    Bancorp     Conversion     Bancorp as     Bank     Merger     Pro Forma  
    Historical     Adjustments (1)     Converted     Historical     Adjustments (2)     Consolidated  
    (Dollars in thousands)  
Assets
                                                                
Cash and cash equivalents
   $ 35,485     $ 55,939       (3 )   $ 91,424     $ 34,874     $ (28,082 )     (11 )   $ 98,216  
Securities available for sale, at fair value
     102,646       —               102,646       5,404       —               108,050  
Securities held to maturity, at amortized cost
     386       —               386       23,965       —               24,351  
Loans, net
     288,862       —               288,862       139,890       299       (12 )     429,051  
Restricted equity securities, at cost
     7,222       —               7,222       1,060       —               8,282  
Premises and equipment, net
     11,199       —               11,199       2,400       427       (13 )     14,026  
Goodwill
     4,248       —               4,248       —       28,582       (14 )     32,830  
Core deposit intangible
     226       —               226       —       3,799       (15 )     4,025  
Other amortizing intangible assets
     862       —               862       —       —               862  
Other assets
     7,708       1,440       (4 )     9,148       2,261       298       (16 )     11,707  
 
                                                    
Total assets
   $ 458,844     $ 57,379             $ 516,223     $ 209,854     $ 5,323             $ 731,400  
 
                                                    
Liabilities
                                                                
Deposits
   $ 380,257     $ —             $ 380,257     $ 175,801     $ 703       (17 )   $ 556,761  
FHLB advances and other borrowings
     36,000       —       (5 )     36,000       15,930       (29 )     (18 )     51,901  
Other liabilities
     4,286       —               4,286       724       —               5,010  
Subordinated debt
     9,000       —               9,000       —       —               9,000  
 
                                                    
Total liabilities
     429,543       —               429,543       192,455       674               622,672  
 
                                                    
Stockholder’s equity
                                                                
Common Stock
     —       —       (6 )     —       1,420       (1,420 )     (19 )     —  
Additional paid-in capital
     —       68,354       (7 )     68,354       11,575       12,441       (20 )     92,370  
Retained earnings
     31,308       (2,560 )     (8 )     28,748       4,337       (6,305 )     (21 )     26,780  
Employee stock ownership plan shares
     —       (5,610 )     (9 )     (5,610 )     —       —               (5,610 )
Restricted shares under stock-based incentive plan
     —       (2,805 )     (10 )     (2,805 )     —       —               (2,805 )
Accumulated other comprehensive (loss) income
     (2,007 )     —               (2,007 )     67       (67 )     (22 )     (2,007 )
 
                                                    
Total stockholders’ equity
     29,301       57,379               86,680       17,399       4,649               108,728  
 
                                                    
Total liabilities and stockholders’ equity
   $ 458,844     $ 57,379             $ 516,223     $ 209,854     $ 5,323             $ 731,400  
 
                                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $66.1 million, the maximum, as adjusted, offering expenses of $1.8 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $4.0 million of common stock, and establishment of an employee stock ownership plan and the stock-based incentive plan that will acquire 8.0% and 4.0%, respectively, of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. It is assumed that Benjamin Franklin Bancorp will purchase, for grant as restricted stock under the stock-based incentive plan, shares in the open market after receiving stockholder approval to adopt the plan. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. The reduction in retained earnings reflects the one-time expense of funding the Benjamin Franklin Bank Charitable Foundation net of a deferred tax asset.
 
(2)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.

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(3)   Calculate as follows:

         
    (Dollars in thousands)  
Gross conversion proceeds
   $ 66,125  
Offering expenses
     (1,771 )
ESOP adjustment
     (5,610 )
Stock-based incentive plan (restricted stock grants) adjustment
     (2,805 )
 
      
Pro forma cash adjustment
   $ 55,939  
 
      

(4)   Deferred tax asset resulting from the expense of funding the Benjamin Franklin Bank Charitable Foundation based on marginal tax rate of 36.0%.

(5)   The employee stock ownership plan loan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp, thus no borrowing liability will be recorded on the consolidated balance sheet of Benjamin Franklin Bancorp.

(6)   No par value common stock.

(7)   Calculate as follows:

         
    (Dollars in thousands)  
Net proceeds of offering
   $ 64,354  
Common stock issued to Foundation
     4,000  
 
      
Pro forma adjustment
   $ 68,354  
 
      

(8)   After-tax impact to retained earnings from the $4.0 million expense for funding the Benjamin Franklin Bank Charitable Foundation based on a marginal tax rate of 36.0%.

(9)   Contra-equity account established to reflect the unallocated shares in the employee stock ownership plan, anticipated to purchase 8.0% of the shares issued in the offering (including shares contributed to the Benjamin Franklin Bank Charitable Foundation).

(10)   Contra-equity account established to reflect the unvested shares of restricted stock under the stock-based incentive plan equal to 4.0% of offering plus foundation shares.

(11)   Includes the cash portion of the merger consideration paid to Chart Bank, non-tax deductible transaction costs remaining to be paid at September 30, 2004, tax deductible one time acquisition costs, and one time expenses that will be incurred by Benjamin Franklin Bancorp to consolidate Chart Bank, net of cash received from return of the Chart Bank Cooperative Central Bank deposit.

         
    (Dollars in thousands)  
Cash portion of merger consideration
   $ 21,469  
Non-tax deductible transaction expenses
     983  
Tax deductible transaction expenses
     3,091  
One time expenses incurred to consolidate Chart Bank
     3,075  
Return of Chart Bank Cooperative Central Bank Deposit
     (536 )
 
      
Total cash adjustment
   $ 28,082  
 
      

(12)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for loans acquired in the acquisition. Yield adjustments were calculated using present value analysis as follows: (a) the acquired loan portfolio was segregated into pools of similar loans; (b) cash flow projections were prepared for each loan pool based interest rates, balances, remaining terms to maturity, and estimated prepayment speeds for each pool; (c) cash flows were discounted to present value using risk adjusted discount rates for comparable loans; and (d) the resulting difference between the present value of future cash flows for each pool and the corresponding principal balance was the yield adjustment. Yield adjustments on acquired loans are amortized into interest income using the interest method over the estimated lives of the acquired loans, which range between 0.5 years and 8.3 years, depending upon the type of loan (average is 4.2 years).

(13)   Reflects the difference between market values and net book values of fixed assets acquired in the acquisition.

(14)   Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:

         
    (Dollars in thousands,  
    except per share data)  
Purchase price per share
   $ 30.75  
Number of shares acquired
     1,420,000  
Number of options acquired
     137,000  
Average exercise price of options
   $ 10.00  
Cost of purchasing shares
   $ 43,665  
Cost of purchasing options
     2,843  
Tax effect of purchasing options
     (1,024 )
 
      
Purchase price (net of tax effect of purchasing options)
     45,484  
Less: acquired stockholders’ equity
     (17,399 )

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    (Dollars in thousands,  
    except per share data)  
Plus: estimated non-tax deductible transaction costs
     983  
Plus: taxable purchase accounting adjustments
 
Estimated tax deductible transaction expenses (pre-tax)
     3,091  
Yield adjustment for acquired CDs
     703  
Yield adjustment for acquired borrowings
     (29 )
Yield adjustment for acquired loans
     (299 )
Core deposit intangible
     (3,799 )
Market value adjustment for fixed assets
     (427 )
Tax effect at 36.0% marginal tax rate
     274  
 
      
Goodwill
   $ 28,582  
 
      

(15)   Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Chart Bank deposit base, calculated as the present value benefit of funding operations with the acquired deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense on an accelerated basis using the double declining balance method over 8.3 years.

(16)   Calculate as follows:

         
    (Dollars in thousands)  
Deferred tax entry for taxable transaction costs (footnote 14)
   $ (274 )
Deferred tax entry for one time merger charges (footnote 21)
     1,108  
Repayment of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Pro forma adjustment
   $ 298  
 
      

(17)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for time deposits acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balances for time deposits and the present value of projected cash flows related to the time deposits discounted using current market rates. Current market rates were based on average rates paid by institutions competing in the regional market area based on rate surveys on or around September 30, 2004. The yield adjustment for time deposits will be accreted into income using the interest method over the lives of the acquired time deposits based on their monthly maturities (5 years).

(18)   Yield adjustment to reflect the difference between portfolio yields and market rates as of September 30, 2004 for borrowings acquired in the acquisition. Yield adjustment is calculated as the difference between the current portfolio balance for borrowings and the present value of projected cash flows related to the borrowings discounted using current market rates. Current market rates were based on rates offered by the Federal Home Loan Bank of Boston as of September 30, 2004. The yield adjustment for borrowings will be amortized into expense using the interest method over the lives of the acquired borrowings based on their monthly maturities (4 years).

(19)   Eliminate Chart Bank common stock par value. Newly issued shares of Benjamin Franklin Bancorp have no par value.

(20)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank paid-in capital
   $ (11,575 )
Common stock (paid-in capital) issued in acquisition
     24,016  
 
      
Adjustment to paid-in capital
   $ 12,441  
 
      

(21)   Calculate as follows:

         
    (Dollars in thousands)  
Eliminate existing Chart Bank retained earnings
   $ (4,337 )
One-time merger charges incurred:
        
Restructure FHLB advances and conversion of accounts
     (3,075 )
Tax effect at marginal rate of 36.0%
     1,107  
Adjustment to retained earnings
   $ (6,305 )
 
      

(22)   Calculate to eliminate the capital account entries of Chart Bank pursuant to purchase accounting.

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     September 30, 2004 Pro Forma Income Statement—Minimum of Offering Range. The following table presents pro forma income statement information for the nine months ended September 30, 2004 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 4,250,000 shares at the minimum of the offering range.

                                                 
    Benjamin     Pro Forma     Benjamin Franklin             Pro Forma        
    Franklin Bancorp     Conversion     Bancorp as     Chart Bank     Merger     Pro Forma  
    Historical     Adjustments (1)     Converted     Historical (3)     Adjustments (4)     Consolidated  
    (Dollars in thousands)  
Interest income
   $ 15,223     $ —     $ 15,223     $ 8,006     $ (158 )(5)   $ 23,071  
Interest expense
     (5,024 )     —       (5,024 )     (2,732 )     517 (6)     (7,239 )
 
                                    
Net interest income before provision for loan losses
     10,199       —       10,199       5,274       359       15,832  
Provision for loan losses
     (470 )     —       (470 )     (90 )     —       (560 )
 
                                    
Net interest income after provision for loan losses
     9,729       —       9,729       5,184       359       15,272  
Non-interest income
     1,666       —       1,666       1,916       —       3,582  
Non-interest expense
     (9,457 )     (92 )(2)     (9,549 )     (5,636 )     (696 )(7)     (15,881 )
 
                                    
Income before provision for income taxes
     1,938       (92 )     1,846       1,464       (337 )     2,973  
Provision for income taxes
     (626 )     33       (593 )     (680 )     121 (8)     (1,152 )
 
                                    
Net income
   $ 1,312     $ (59 )   $ 1,253     $ 784     $ (216 )   $ 1,821  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $42.5 million, the minimum of the offering range, offering expenses of $1.6 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $3.4 million of common stock, and establishment of an employee stock ownership plan that will acquire 8.0% of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. The loan taken down by the employee stock ownership plan will be amortized over 30 years on a straight line basis. The employee stock ownership plan expense shown reflects the estimated amortization expense on a pretax basis for the period shown. Benjamin Franklin Bancorp also intends to adopt a stock-based incentive plan that will award shares of restricted stock in the amount 4.0% of the number of shares issued in the offering plus the shares issued to the Benjamin Franklin Bank Charitable Foundation. The shares to be granted by the stock-based incentive plan as restricted stock are assumed to be purchased in the open market after receiving stockholder approval. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. Also under the stock-based incentive plan, Benjamin Franklin Bancorp intends to grant options to purchase 10.0% of the number of shares issued in the offering plus shares issued to the Benjamin Franklin Bank Charitable Foundation. The exercise price of the options is assumed to be $10 per share and the grant-date price of the shares is also assumed to be $10 per share. Adjustments to record estimated stock-based incentive plan expenses, including expenses of the restricted stock awards and option grants, and interest income to be earned on net proceeds of the offering, will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $35.4 million from the offering are invested at an average pretax yield of 2.16% for the nine months ended September 30, 2004 would be approximately $0.6 million pretax. The yield utilized approximates the yield on a one year U.S. Treasury security as of September 30, 2004. The estimated restricted stock expense for the stock-based incentive plan assuming gross proceeds of $42.5 million is $0.3 million pretax for the nine months ended September 30, 2004. The employee stock ownership plan loan is amortized over 30 years on a straight-line basis. Employee stock ownership plan shares are assumed to be released at $10 per share. The estimated stock option expense for the stock-based incentive plan assuming gross proceeds of $42.5 million is $0.3 million pretax for the nine months ended September 30, 2004. Restricted shares under the stock-based incentive plan are assumed to vest over 5 years on a straight-line basis. The fair value of the stock options are expensed over 5 years on a straight-line basis, and only 15.0% of the stock option expense is tax deductible. Taxes are calculated on an assumed marginal rate of 36.0%. No expenses are included for the shares issued to the Benjamin Franklin Bank Charitable Foundation or other merger-related charges, all of which are one time expenses.
 
(2)   Employee stock ownership plan loan is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for Benjamin Franklin Bancorp Employee stock ownership plan expense thus reflects only the amortization of principal for the period shown below:

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    (Dollars in thousands)  
Employee stock ownership plan loan
   $ 3,672  
Divided by amortization period in years
     ÷ 30  
 
      
Annual expense
   $ 122  
Nine months expense
   $ 92  
 
      

(3)   Chart Bank operating results for the nine months ended September 30, 2004 include $382,000 of merger-related expenses.
 
(4)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.
 
(5)   Adjustment to interest income is the amortization of the loan premium on the Chart Bank loans resulting from purchase accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration paid to stockholders of Chart Bank and the expense of the acquisition will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the Pro forma income statements. The estimated reduction in interest income assuming total funding requirements of $28.1 million for the acquisition and related expenses, assuming such cash costs were funded with investments yielding 2.16% for the nine months ended September 30, 2004, would be approximately $0.5 million. The yield approximates the yield on the one year U.S. Treasury security on September 30, 2004.
 
(6)   Adjustment to interest expense is calculated as follows:

         
    (Dollars in thousands)  
Accretion of deposit premium from purchase accounting
   $ 533  
Amortization of borrowings discount from purchase accounting
     (16 )
 
      
Adjustment to interest income
   $ 517  
 
      

(7)   Adjustment to non-interest expense is calculated as follows:

         
Amortization of new core deposit intangible
   $ (684 )
Depreciation adjustment for market value of fixed assets
     (12 )
 
      
Adjustment to non-interest expense
   $ (696 )
 
      

(8)   Marginal tax rate of 36.0%.

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     September 30, 2004 Pro Forma Income Statement—Maximum, as Adjusted, of Offering Range. The following table presents pro forma income statement information for the nine months ended September 30, 2004 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 6,612,500 shares at the maximum, as adjusted, of the offering range.

                                                 
            Pro Forma     Benjamin Franklin             Pro Forma        
    Benjamin     Conversion     Bancorp as     Chart Bank     Merger     Pro Forma  
    Franklin Historical     Adjustments (1)     Converted     Historical(3)     Adjustments (4)     Consolidated  
    (Dollars in thousands)  
Interest income
   $ 15,223     $ —     $ 15,223     $ 8,006     $ (158 )(5)   $ 23,071  
Interest expense
     (5,024 )     —       (5,024 )     (2,732 )     517 (6)     (7,239 )
 
                                    
Net interest income before provision for loan losses
     10,199       —       10,199       5,274       359       15,832  
Provision for loan losses
     (470 )     —       (470 )     (90 )     —       (560 )
 
                                    
Net interest income after provision for loan losses
     9,729       —       9,729       5,184       359       15,272  
Non-interest income
     1,666       —       1,666       1,916       —       3,582  
Non-interest expense
     (9,457 )     (141 )(2)     (9,598 )     (5,636 )     (696 )(7)     (15,930 )
 
                                    
Income before provision for income taxes
     1,938       (141 )     1,797       1,464       (337 )     2,924  
Provision for income taxes
     (626 )     51       (575 )     (680 )     121 (8)     (1,134 )
 
                                    
Net income
   $ 1,312     $ (90 )   $ 1,222     $ 784     $ (216 )   $ 1,790  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $66.1 million, the maximum, as adjusted, of the offering range, offering expenses of $1.8 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $4.0 million of common stock, and establishment of an employee stock ownership plan that will acquire 8.0% of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. The loan taken down by the employee stock ownership plan will be amortized over 30 years on a straight line basis. The employee stock ownership plan expense shown reflects the estimated amortization expense on a pretax basis for the period shown. Benjamin Franklin Bancorp also intends to adopt an stock-based incentive plan that will award shares of restricted stock in the amount of 4.0% of the number of shares issued in the offering plus the shares issued to the Benjamin Franklin Bank Charitable Foundation. The shares to be granted by the stock-based incentive plan as restricted stock are assumed to be purchased in the open market after receiving stockholder approval. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. Also under the stock-based benefit plan, Benjamin Franklin Bancorp intends to grant options to purchase 10.0% of the number of shares issued in the offering plus shares issued to the Benjamin Franklin Bank Charitable Foundation. The exercise price of the options is assumed to be $10 per share and the grant-date price of the shares is also assumed to be $10 per share. Adjustments to record estimated stock-based incentive plan expenses, including expenses of the restricted stock awards and option grants, and interest income to be earned on net proceeds of the offering, will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $55.9 million from the offering are invested at an average pretax yield of 2.16% for the nine months ended September 30, 2004 would be approximately $0.9 million pretax. The yield utilized approximates the yield on a one year U.S. Treasury security as of September 30, 2004. The estimated restricted stock expense for the stock-based incentive plan assuming gross proceeds of $66.1 million is $0.4 million pretax for the nine months ended September 30, 2004. The estimated stock option expense for the stock-based incentive plan assuming gross proceeds of $66.1 million is $0.4 million pretax for the nine months ended September 30, 2004. The employee stock ownership plan loan is amortized over 30 years on a straight-line basis. Employee stock ownership plan shares are assumed to be released at $10 per share. Restricted shares under the stock-based incentive plan are assumed to vest over 5 years on a straight-line basis. The fair value of the stock options are expensed over 5 years on a straight-line basis, and only 15.0% of the stock option expense is tax deductible. Taxes are calculated on an assumed marginal rate of 36.0%. No expenses are included for the shares issued to the Benjamin Franklin Bank Charitable Foundation or other merger-related charges, all of which are one time expenses.

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(2)   Employee stock ownership plan loan is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for Benjamin Franklin Bancorp Employee stock ownership plan expense thus reflects only the amortization of principal for the period shown below:
         
    (Dollars in thousands)  
Employee stock ownership plan loan
   $ 5,610  
Divided by amortization period in years
     ÷ 30  
 
      
Annual expense
   $ 187  
Nine months expense
   $ 141  
 
      

(3)   Chart Bank operating results for the nine months ended September 30, 2004 include $382,000 of merger-related expenses.
 
(4)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.
 
(5)   Adjustment to interest income is the amortization of the loan premium on the Chart Bank loans resulting from purchase accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration paid to stockholders of Chart Bank and the expense of the acquisition will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the Pro forma income statements. The estimated reduction in interest income assuming total funding requirements of $28.1 million for the acquisition and related expenses, assuming such cash costs were funded with investments yielding 2.16% for the nine months ended September 30, 2004, would be approximately $0.5 million. The yield approximates the yield on the one year U.S. Treasury security on September 30, 2004.
 
(6)   Adjustment to interest expense is calculated as follows:

         
    (Dollars in Thousands)  
Accretion of deposit premium from purchase accounting
   $ 533  
Amortization of borrowings discount from purchase accounting
     (16 )
 
      
Adjustment to interest expense
   $ 517  
 
      

(7)   Adjustment to non-interest expense is calculated as follows:

         
Amortization of new core deposit intangible
   $ (684 )
Depreciation adjustment for market value of fixed assets
     (12 )
 
      
Adjustment to non-interest expense
   $ (696 )
 
      

(8)   Marginal tax rate of 36.0%.

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     December 31, 2003 Pro Forma Income Statement—Minimum of Offering Range. The following table presents pro forma income statement information for the year ended December 31, 2003 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 4,250,000 shares at the minimum of the offering range.

                                                 
    Benjamin     Pro Forma     Benjamin Franklin             Pro Forma        
    Franklin Bancorp     Conversion     Bancorp as     Chart Bank     Merger     Pro Forma  
    Historical     Adjustments (1)     Converted     Historical     Adjustments (3)     Consolidated  
    (Dollars in thousands)  
Interest income
   $ 19,532     $ —     $ 19,532     $ 10,091     $ (187 )(4)   $ 29,436  
Interest expense
     (6,752 )     —       (6,752 )     (3,452 )     588 (5)     (9,616 )
 
                                    
Net interest income before provision for loan losses
     12,780       —       12,780       6,639       401       19,820  
Provision for loan losses
     (625 )     —       (625 )     (120 )     —       (745 )
 
                                    
Net interest income after provision for loan losses
     12,155       —       12,155       6,519       401       19,075  
Non-interest income
     3,076       —       3,076       2,665       —       5,741  
Non-interest expense
     (12,724 )     (122 )(2)     (12,846 )     (6,406 )     (928 )(6)     (20,180 )
 
                                    
Income before provision for income taxes
     2,507       (122 )     2,385       2,778       (527 )     4,636  
Provision for income taxes
     (819 )     44       (775 )     (1,076 )     190 (7)     (1,661 )
 
                                    
Net income
   $ 1,688     $ (78 )   $ 1,610     $ 1,702     $ (337 )   $ 2,975  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $42.5 million, the minimum of the offering range, offering expenses of $1.6 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $3.4 million of common stock, and establishment of an employee stock ownership plan that will acquire 8.0% of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. The loan taken down by the employee stock ownership plan will be amortized over 30 years on a straight line basis. The employee stock ownership plan expense shown reflects the estimated amortization expense on a pretax basis for the period shown. Benjamin Franklin Bancorp also intends to adopt an stock-based incentive plan that will award shares of restricted stock in the amount of 4.0% of the number of shares issued in the offering plus the shares issued to the Benjamin Franklin Bank Charitable Foundation. The shares to be granted by the stock-based incentive plan as restricted stock are assumed to be purchased in the open market after receiving stockholder approval. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. Also under the stock-based benefit plan, Benjamin Franklin Bancorp intends to grant options to purchase 10.0% of the number of shares issued in the offering plus shares issued to the Benjamin Franklin Bank Charitable Foundation. The exercise price of the options is assumed to be $10 per share and the grant-date price of the shares is also assumed to be $10 per share. Adjustments to record estimated stock-based incentive plan expenses, including expenses of the restricted stock awards and option grants, and interest income to be earned on net proceeds of the offering, will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $35.4 million from the offering are invested at an average pretax yield of 1.26% for the year ended December 31, 2003 would be approximately $0.5 million pretax. The yield utilized approximates the yield on a one year U.S. Treasury security as of September 30, 2004. The estimated restricted expense for the stock-based incentive plan assuming gross proceeds of $42.5 million is $0.4 million pretax for the year ended December 31, 2003. The estimated stock option expense for the stock-based incentive plan assuming gross proceeds of $42.5 million is $0.3 million pretax for the nine months ended September 30, 2004. The employee stock ownership plan loan is amortized over 30 years on a straight-line basis. Employee stock ownership plan shares are assumed to be released at $10 per share. Restricted shares under the stock-based incentive plan are assumed to vest over 5 years on a straight-line basis. The fair value of the stock options are expensed over 5 years on a straight-line basis, and only 15.0% of the stock option expense is tax deductible. Taxes are calculated on an assumed marginal rate of 36.0%. No expenses are included for the shares issued to the Benjamin Franklin Bank Charitable Foundation or other merger-related charges, all of which are one time expenses.

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(2)   Employee stock ownership plan loan is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for Benjamin Franklin Bancorp Employee stock ownership plan expense thus reflects only the amortization of principal for the period shown below:
         
    (Dollars in thousands)  
Employee stock ownership plan loan
   $ 3,672  
Divided by amortization period in years
     ÷30  
 
      
Annual expense
   $ 122  
Nine months expense
   $ 92  
 
      

(3)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.
 
(4)   Adjustment to interest income is the amortization of the loan premium on the Chart Bank loans resulting from purchase accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration paid to stockholders of Chart Bank and the expense of the acquisition will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the Pro forma income statements. The estimated reduction in interest income assuming total funding requirements of $28.1 million for the acquisition and related expenses, assuming such cash costs were funded with investments yielding 1.26% for year ended December 31, 2003, would be approximately $0.4 million. The yield approximates the yield on the one year U.S. Treasury security on December 31, 2003.
 
(5)   Adjustment to interest expense is calculated as follows:

         
    (Dollars in thousands)  
Accretion of deposit premium from purchase accounting
   $ 606  
Amortization of borrowings discount from purchase accounting
     (18 )
 
      
Adjustment to interest income
   $ 588  
 
      

(6)   Adjustment to non-interest expense is calculated as follows:

         
Amortization of new core deposit intangible
   $ (912 )
Depreciation adjustment for market value of fixed assets
     (16 )
 
      
Adjustment to non-interest expense
   $ (928 )
 
      

(7)   Marginal tax rate of 36.0%.

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     December 31, 2003 Pro Forma Income Statement—Maximum, as Adjusted, of Offering Range. The following table presents pro forma income statement information for the year ended December 31, 2003 for Benjamin Franklin Bancorp and Chart Bank assuming the sale of 6,612,500 shares at the maximum, as adjusted, of the offering range.

                                                 
    Benjamin     Pro Forma     Benjamin             Pro Forma        
    Franklin     Conversion     Franklin             Merger        
    Bancorp     Adjustments     Bancorp as     Chart Bank     Adjustments     Pro Forma  
    Historical     (1)     Converted     Historical     (3)     Consolidated  
    (Dollars in thousands)  
Interest income
   $ 19,532     $ —     $ 19,532     $ 10,091     $ (187 )(4)   $ 29,436  
Interest expense
     (6,752 )     —       (6,752 )     (3,452 )     588 (5)     (9,616 )
 
                                    
Net interest income before provision for loan losses
     12,780       —       12,780       6,639       401       19,820  
Provision for loan losses
     (625 )     —       (625 )     (120 )     —       (745 )
 
                                    
Net interest income after provision for loan losses
     12,155       —       12,155       6,519       401       19,075  
Non-interest income
     3,076       —       3,076       2,665       —       5,741  
Non-interest expense
     (12,724 )     (187 )(2)     (12,911 )     (6,406 )     (928 )(6)     (20,245 )
 
                                    
Income before provision for income taxes
     2,507       (187 )     2,320       2,778       (527 )     4,571  
Provision for income taxes
     (819 )     67       (752 )     (1,076 )     190 (7)     (1,638 )
 
                                    
Net income
   $ 1,688     $ (120 )   $ 1,568     $ 1,702     $ (337 )   $ 2,933  
 
                                    

(1)   Shows the effect of the mutual-to-stock conversion of Benjamin Franklin Bancorp, assuming gross proceeds of $66.1 million, the maximum, as adjusted, of the offering range, offering expenses of $1.8 million, a contribution to the Benjamin Franklin Bank Charitable Foundation of $4.0 million of common stock, and establishment of an employee stock ownership plan that will acquire 8.0% of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to purchase its shares in the offering and in open market purchases. The loan taken down by the employee stock ownership plan will be amortized over 30 years on a straight line basis. The employee stock ownership plan expense shown reflects the estimated amortization expense on a pretax basis for the period shown. Benjamin Franklin Bancorp also intends to adopt an stock-based incentive plan that will award shares of restricted stock in the amount of 4.0% of the number of shares issued in the offering plus the shares issued to the Benjamin Franklin Bank Charitable Foundation. The shares to be granted by the stock-based incentive plan as restricted stock are assumed to be purchased in the open market after receiving stockholder approval. Open market purchases by the employee stock ownership plan and for the stock-based incentive plan are assumed at $10 per share. Also under the stock-based benefit plan, Benjamin Franklin Bancorp intends to grant options to purchase 10.0% of the number of shares issued in the offering plus shares issued to the Benjamin Franklin Bank Charitable Foundation. The exercise price of the options is assumed to be $10 per share and the grant-date price of the shares is also assumed to be $10 per share. Adjustments to record estimated stock-based incentive plan expenses, including expenses of the restricted stock awards and option grants, and interest income to be earned on net proceeds of the offering, will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $55.9 million from the offering are invested at an average pretax yield of 1.26% for the year ended December 31, 2003 would be approximately $0.7 million pretax. The yield utilized approximates the yield on a one year U.S. Treasury security as of September 30, 2004. The estimated restricted stock expense for the stock-based incentive plan assuming gross proceeds of $66.1 million is $0.6 million pretax for the year ended December 31, 2003. The estimated stock option expense for the stock-based incentive plan assuming gross proceeds of $66.1 million is $0.4 million pretax for the nine months ended September 30, 2004. The employee stock ownership plan loan is amortized over 30 years on a straight-line basis. Employee stock ownership plan shares are assumed to be released at $10 per share. Restricted shares under the stock-based incentive plan are assumed to vest over 5 years on a straight-line basis. The fair value of the stock options are expensed over 5 years on a straight-line basis, and only 15.0% of the stock option expense is tax deductible.. Taxes are calculated on an assumed marginal rate of 36.0%. No expenses are included for the shares issued to the Benjamin Franklin Bank Charitable Foundation or other merger-related charges, all of which are one time expenses.

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(2)   Employee stock ownership plan loan is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for Benjamin Franklin Bancorp Employee stock ownership plan expense thus reflects only the amortization of principal for the period shown below:

         
    (Dollars in thousands)  
Employee stock ownership plan loan
   $ 5,610  
Divided by amortization period in years
     ÷30  
 
      
Annual expense
   $ 187  
Nine months expense
   $ 141  
 
      

(3)   Reflects the purchase accounting and acquisition adjustments related to the acquisition of Chart Bank for a price of $30.75 per share in cash and newly issued common stock.
 
(4)   Adjustment to interest income is the amortization of the loan premium on the Chart Bank loans resulting from purchase accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration paid to stockholders of Chart Bank and the expense of the acquisition will be recorded as incurred. Since these estimates are non-recurring, they are not reflected in the Pro forma income statements. The estimated reduction in interest income assuming total funding requirements of $28.1 million for the acquisition and related expenses, assuming such cash costs were funded with investments yielding 1.26% for year ended December 31, 2003, would be approximately $0.4 million. The yield approximates the yield on the one year U.S. Treasury security on December 31, 2003.
 
(5)   Adjustment to interest expense is calculated as follows:

         
    (Dollars in thousands)  
Accretion of deposit premium from purchase accounting
   $ 606  
Amortization of borrowings discount from purchase accounting
     (18 )
 
      
Adjustment to interest income
   $ 588  
 
      

(6)   Adjustment to non-interest expense is calculated as follows:

         
Amortization of new core deposit intangible
   $ (912 )
Depreciation adjustment for market value of fixed assets
     (16 )
 
      
Adjustment to non-interest expense
   $ (928 )
 
      

(7)   Marginal tax rate of 36.0%.

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Pro Forma Conversion Data

     The actual net proceeds from the sale of Benjamin Franklin Bancorp common stock in the offering cannot be determined until the conversion is completed. However, the net proceeds in the offering are currently estimated to be between $40.9 million and $55.8 million, or up to $64.4 million at the maximum, as adjusted, in the event the offering range is increased by approximately 15.0%, based upon the following assumptions:

  •   Benjamin Franklin Bancorp will sell all shares of common stock in the subscription offering;
 
  •   Benjamin Franklin Bancorp’s employee stock ownership plan will purchase 8.0% of the shares of common stock issued in the offering, including shares contributed to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp;
 
  •   Benjamin Franklin Bancorp will acquire, through open market purchases, 4.0% of the shares of common stock issued in the offering, including shares contributed to the Benjamin Franklin Bank Charitable Foundation, for purposes of granting restricted stock awards under the stock-based incentive plan;
 
  •   Benjamin Franklin Bancorp will make a contribution to the Benjamin Franklin Bank Charitable Foundation amounting to 340,000 shares of its common stock at the minimum of the offering range and 400,000 shares of its common stock at the midpoint, maximum and maximum as adjusted of the offering range, with an assumed value of $10 per share;
 
  •   Expenses of the offering, other than the fees to be paid to Ryan Beck are estimated to be $1.1 million;
 
  •   Ryan Beck will receive reimbursement of legal fees and other expenses in the amount of $100,000, in addition to fees equal to 1.0% of the aggregate purchase price of the shares of stock sold in the offering, excluding any shares purchased by any employee benefit plans, by any of Benjamin Franklin Bancorp’s directors, officers or employees or members of their immediate families, issued to the Benjamin Franklin Bank Charitable Foundation or issued to the Chart Bank Stockholders in the acquisition;
 
  •   2,401,575 shares will be issued to Chart Bank’s stockholders in the acquisition; and
 
  •   The cash required to fund the acquisition of Chart Bank was $28.1 million as of December 31, 2003 and September 30, 2004.

     Benjamin Franklin Bancorp has prepared the following tables, which set forth Benjamin Franklin Bancorp’s historical consolidated net income and stockholders’ equity in combination with Chart Bank prior to the conversion, and Benjamin Franklin Bancorp’s pro forma consolidated net income and stockholders’ equity following the conversion and acquisition of Chart Bank. In preparing these tables and in calculating pro forma data, the following assumptions have been made:

  •   Pro forma earnings have been calculated assuming the stock had been sold at the beginning of the period and the net proceeds, if any, had been invested at an average yield of 2.16% and 1.26% for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively, which approximates the yield on a one-year U.S. Treasury bill adjusted to a constant maturity (CMT) on September 30, 2004 and December 31, 2003, respectively;

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  •   The pro forma after-tax yield on the net proceeds from the offering is assumed to be 1.38% and 0.81% for the nine months ended September 30, 2004 and the year ended December 31, 2003, respectively, based on a marginal tax rate of 36.00%;
 
  •   No withdrawals were made from Benjamin Franklin Bancorp’s deposit accounts for the purchase of shares in the offering;
 
  •   Benjamin Franklin Bancorp will grant options under the stock-based incentive plan to acquire common stock equal to 10.0% of the shares of common stock issued in the offering, including shares contributed to Benjamin Franklin Bank Charitable Foundation, and the estimated fair value of such options, estimated using an application of the Black-Scholes option pricing model, is recognized as expense over the vesting term of the options;
 
  •   Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the indicated number of shares of stock issued in the conversion, issued to Chart Bank stockholders and issued to the Benjamin Franklin Bank Charitable Foundation, as adjusted in the pro forma net income per share to give effect to the purchase of shares by the employee stock ownership plan;
 
  •   Pro forma stockholders’ equity amounts have been calculated as if Benjamin Franklin Bancorp common stock had been sold in the offering on September 30, 2004 and December 31, 2003, respectively, and, accordingly, no effect has been given to the assumed earnings effect of the transactions; and
 
  •   Pro forma tangible stockholders’ equity amounts have been calculated by subtracting the estimated balances of intangible assets from pro forma stockholders’ equity; intangible assets include assets such as core deposit intangibles and goodwill.

     The following pro forma information may not be representative of the financial effects of the conversion at the date on which the conversion and the acquisition actually occur and should not be taken as indicative of future results of operations.

     Pro forma stockholders’ equity represents the difference between the stated amount of Benjamin Franklin Bancorp assets and liabilities computed in accordance with generally accepted accounting principles used in the United States. Stockholders’ equity does not give effect to intangible assets in the event of a liquidation. The pro forma stockholders’ equity is not intended to represent the fair market value of the common stock and may be different than amounts that would be available for distribution to stockholders in the event of liquidation.

     Stockholders’ equity gives no effect to the liquidation account to be established for the benefit of eligible account holders and supplemental eligible account holders. See “The Conversion And The Offering—Effects Of The Conversion—Liquidation Rights ” on page [#].

     The tables on the following pages present historical data of Benjamin Franklin Bancorp and Chart Bank (as defined in the footnotes to the table), and Benjamin Franklin Bancorp’s pro forma data at or for the dates and periods indicated based on the assumptions set forth above and in the tables and should not be used as a basis for projection of the market value of the common stock following the conversion and the acquisition.

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    At or for the nine months ended September 30, 2004  
                            Maximum  
    Minimum of     Midpoint of     Maximum of     As Adjusted  
    Offering     Offering     Offering     of Offering  
    Range     Range     Range     Range  
    4,250,000     5,000,000     5,750,000     6,612,500  
    Shares at     shares     shares     shares  
    $10 per share     at $10 per     at $10 per     at $10 per  
    (1)     share     share     share (2)  
    (Dollars in thousands, except per share data)  
Gross proceeds
   $ 42,500     $ 50,000     $ 57,500     $ 66,125  
Plus: shares issued to the foundation (3)
     3,400       4,000       4,000       4,000  
Plus: shares issued to Chart Bank (4)
     24,016       24,016       24,016       24,016  
 
                        
Pro Forma Market Capitalization
   $ 69,916     $ 78,016     $ 85,516     $ 94,141  
 
                                
Gross proceeds
   $ 42,500     $ 50,000     $ 57,500     $ 66,125  
Less: conversion expenses
     (1,554 )     (1,622 )     (1,691 )     (1,771 )
 
                        
Estimated net proceeds
     40,946       48,378       55,809       64,354  
Less: common stock acquired by ESOP (5)
     (3,672 )     (4,320 )     (4,920 )     (5,610 )
Less: common stock acquired for restricted stock awards (6)
     (1,836 )     (2,160 )     (2,460 )     (2,805 )
 
                        
Estimated net proceeds as adjusted
     35,438       41,898       48,429       55,939  
 
                                
Estimated acquisition cash costs (7)
   $ (28,082 )   $ (28,082 )   $ (28,082 )   $ (28,082 )
 
                                
For the nine months ended September 30, 2004
                                
Consolidated net income
 
Historical consolidated net income(8)
   $ 1,881     $ 1,881     $ 1,881     $ 1,881  
Pro forma income on net proceeds
     367       434       502       580  
Pro forma acquisition adjustment (7)
     (291 )     (291 )     (291 )     (291 )
Pro forma ESOP adjustment (5)
     (59 )     (69 )     (79 )     (90 )
Pro forma restricted stock adjustment (6)
     (176 )     (207 )     (236 )     (269 )
Pro forma stock option adjustment (9)
     (251 )     (295 )     (336 )     (383 )
 
                        
Pro forma net income
   $ 1,471     $ 1,453     $ 1,441     $ 1,428  
 
                        
 
                                
Per share net income (reflects SOP93-6)
 
Historical consolidated net income
   $ 0.28     $ 0.26     $ 0.24     $ 0.21  
Pro forma income on net proceeds
     0.06       0.06       0.06       0.06  
Pro forma acquisition adjustment (7)
     (0.04 )     (0.04 )     (0.04 )     (0.03 )
Pro forma ESOP adjustment (5)
     (0.01 )     (0.01 )     (0.01 )     (0.01 )
Pro forma restricted stock adjustment (6)
     (0.03 )     (0.03 )     (0.03 )     (0.03 )
Pro forma stock option adjustment (9)
     (0.04 )     (0.04 )     (0.04 )     (0.04 )
 
                        
Pro forma net income per share
   $ 0.22     $ 0.20     $ 0.18     $ 0.16  
 
                        
 
                                
Shares used for calculating pro forma earnings per share
     6,633,555       7,380,375       8,071,875       8,867,100  
 
                                
Stock price as a multiple of pro forma earnings per share (6)(9)
     34.09x       37.50x       41.67x       46.88x  
 
                                
At September 30, 2004
                                
Stockholders’ equity:
                                
Historical consolidated stockholders’ equity (10)
   $ 52,634     $ 52,634     $ 52,634     $ 52,634  
Estimated net proceeds
     40,946       48,378       55,809       64,354  
Plus: tax benefit of shares issued to foundation (3)
     1,224       1,440       1,440       1,440  
Plus: shares issued to foundation (3)
     3,400       4,000       4,000       4,000  
Less: shares issued to foundation (3)
     (3,400 )     (4,000 )     (4,000 )     (4,000 )
Less: common stock acquired by ESOP (5)
     (3,672 )     (4,320 )     (4,920 )     (5,610 )
Less: common stock acquired for restricted stock awards (6)
     (1,836 )     (2,160 )     (2,460 )     (2,805 )
 
                        
Pro forma stockholders’ equity
     89,296       95,972       102,503       110,013  
Intangible assets (11)
     (36,573 )     (36,573 )     (36,573 )     (36,573 )
 
                        
Pro forma tangible stockholders equity
   $ 52,723     $ 59,399     $ 65,930     $ 73,440  
 
                        

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    At or for the nine months ended September 30, 2004  
                            Maximum,  
            Midpoint of             As Adjusted,  
    Minimum of     Offering     Maximum of     of Offering  
    Offering     Range     Offering     Range  
    Range     5,000,000     Range     6,612,500  
    4,250,000 Shares     Shares     5,750,000 Shares     Shares  
    at $10 per     at $10 per     at $10 per     at $10 per  
    share (1)     share     share     share (2)  
At September 30, 2004
                                
Stockholders’ equity per share
 
Historical
   $ 7.52     $ 6.75     $ 6.16     $ 5.59  
Estimated net proceeds
     5.86       6.20       6.53       6.84  
Plus: tax benefit of shares issued to foundation (3)
     0.18       0.18       0.17       0.15  
Plus: shares issued to foundation (3)
     0.49       0.51       0.47       0.42  
Less: shares issued to foundation (3)
     (0.49 )     (0.51 )     (0.47 )     (0.42 )
Less: common stock acquired by ESOP (5)
     (0.53 )     (0.55 )     (0.58 )     (0.60 )
Less: common stock acquired for restricted stock awards (6)
     (0.26 )     (0.28 )     (0.29 )     (0.30 )
 
                        
Pro forma stockholders’ equity per share
     12.77       12.30       11.99       11.68  
Intangible assets (11)
     (5.23 )     (4.69 )     (4.28 )     (3.88 )
 
                        
Pro forma tangible stockholders’ equity per share
   $ 7.54     $ 7.61     $ 7.71     $ 7.80  
 
                        
Shares used for pro forma stockholders equity per share
     6,991,575       7,801,575       8,551,575       9,414,075  
Stock price as a percentage of equity per share (6)
     78.31 %     81.30 %     83.40 %     85.62 %
Stock price as a percentage of tangible equity per share (6)(9)(11)
     132.63 %     131.41 %     129.70 %     128.21 %

(1)   Bancorp receives orders for fewer than 4,250,000 shares, Benjamin Franklin Bancorp may, subject to regulatory approval, 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. If the full 2,082,500 shares are applied in this manner, then, as of September 30, 2004, Benjamin Franklin Bancorp’s pro forma earnings per share would be $0.33, pro forma stockholders’ equity per share would be $13.99, pro forma tangible stockholders’ equity per share would be $6.54, stock price as a multiple of annualized pro forma earnings per share would be 22.73 times, stock price as a percentage of equity per share would be 71.48% and stock price as a percentage of tangible equity per share would be 152.91%.

(2)   As adjusted to give effect to an increase in the number of shares which could occur due to an increase in the estimated offering range of up to 15.0% as a result of regulatory considerations, demand for the shares, or changes in market or general financial and economic conditions following the commencement of the offering.

(3)   Benjamin Franklin Bancorp will make a contribution to the Benjamin Franklin Bank Charitable Foundation amounting to the lesser of 8.0% of the shares actually sold in the offering and 400,000 shares of its common stock. The pro forma net income does not take into account the non-recurring expense that will be recognized as a result of the establishment of the Foundation. Benjamin Franklin Bancorp expects to recognize a tax benefit of and an after tax expense related to the contribution to the Benjamin Franklin Bank Charitable Foundation.

(4)   Assumes 2,401,575 shares of Benjamin Franklin Bancorp common stock will be issued to Chart Bank stockholders in the acquisition.

(5)   It is assumed that the employee stock ownership plan will purchase up to 8.0% of the shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp. Benjamin Franklin Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the principal and the interest requirement of the debt. Benjamin Franklin Bank’s total annual payments on the employee stock ownership plan debt is based upon 30 equal installments of principal and interest. The pro forma adjustments assume the employee stock ownership plan shares are allocated in equal installments based on the number of loan repayment installments assumed to be paid by Benjamin Franklin Bank, the fair value of the common stock remains at the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 36.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders equity. No reinvestment rate is assumed on the proceeds contributed to the fund the employee stock ownership plan. The pro forma net income further assumes (i) that 9,180, 10,800, 12,300 and 14,025 shares were committed to be released during the period at the minimum, midpoint, maximum and the adjusted maximum of the offering range,

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    respectively, and (ii) only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of net income per share calculations.
 
(6)   If the stock-based incentive plan is approved by Benjamin Franklin Bancorp's stockholders, Benjamin Franklin Bancorp may purchase an aggregate number of shares of common stock equal to 4.0% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion, although such plan, including the amount awarded under such plan, may remain subject to supervisory restrictions), to be awarded as restricted stock to officers and directors under the stock-based incentive plan. Stockholder approval of the stock-based incentive plan and purchases of stock for grant under the plan may not occur earlier than six months after the completion of the conversion. The shares may be issued directly by Benjamin Franklin Bancorp or acquired through open market purchases. The funds to be used purchase the shares to be awarded by the stock-based incentive plan will be provided by Benjamin Franklin Bancorp. The table assumes that (i) the shares to be awarded under the stock-based incentive plan are acquired through open market purchases at $10 per share, (ii) 15.0% of the amount contributed to the stock-based incentive plan is amortized as an expense during the year ended December 31, 2003 and (iii) the stock-based incentive plan expense reflects an effective combined federal and state tax rate of 36.0%. Assuming stockholder approval of the stock-based incentive plan and that shares of common stock (equal to 4.0% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 2.7%.

(7)   Represents the cash portion of the purchase price of Chart Bank, transaction expenses related to the Chart Bank acquisition and cash merger expenses of Benjamin Franklin Bancorp as follows:

         
    (Dollars in thousands)  
Acquisition of Chart Bank (net of tax-effect of option cash-out)
   $ 21,469  
Transaction expenditures
     983  
Merger expenses
     3,091  
One time operating expenses
     3,075  
Less: Recovery of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Total acquisition cash costs
   $ 28,082  
 
      

    The pro forma acquisition adjustments to net income reflects the after-tax amount of interest income foregone as a result of the payment of acquisition cash costs out of the gross proceeds of the offering for the nine months ended September 30, 2004, assuming an interest rate of 2.16% and a marginal tax rate of 36.0%.
(8)   Historical net income includes the historical net income of Benjamin Franklin Bancorp and Chart Bank, and the impact of the recurring purchase accounting adjustments.

(9)   Gives effect to the options we expect to grant under the stock-based incentive plan, which is expected to be adopted by Benjamin Franklin Bancorp following the offering and presented for approval not earlier than six months after the completion of the conversion. We have assumed that options will be granted to acquire 10.0% of the shares sold in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. In calculating the pro forma effect of the stock options, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $3.85 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight line basis over a five year vesting period of the option, and that 15.0% of the amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 36.0%. Under the above assumptions, the granting of options under the stock-based incentive plan will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based incentive plan are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of up to 6.7% on the ownership interest of persons who purchase common stock in the offering.

(10)   Historical stockholders’ equity includes the historical equity of Benjamin Franklin Bancorp and the impact of the Chart Bank acquisition.

(11)   Equity is adjusted to exclude $36.6 million of goodwill and other intangibles on a pro forma basis reflecting the acquisition as of September 30, 2004.

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    At or for the year ended December 31, 2003  
                            Maximum,  
            Midpoint of             As Adjusted,  
    Minimum of     Offering     Maximum of     of Offering  
    Offering     Range     Offering     Range  
    Range     5,000,000     Range     6,612,500  
    4,250,000 Shares     Shares     5,750,000 Shares     Shares  
    at $10 per     at $10 per     at $10 per     at $10 per  
    share (1)     share     share     share (2)  
    (Dollars in thousands, except per share data)  
Gross proceeds
   $ 42,500     $ 50,000     $ 57,500     $ 66,125  
Plus: shares issued to the foundation (3)
     3,400       4,000       4,000       4,000  
Plus: shares issued to Chart Bank (4)
     24,016       24,016       24,016       24,016  
 
                        
Pro Forma Market Capitalization
   $ 69,916     $ 78,016     $ 85,516     $ 94,141  
Gross proceeds
   $ 42,500     $ 50,000     $ 57,500     $ 66,125  
Less: conversion expenses
     (1,554 )     (1,622 )     (1,691 )     (1,771 )
 
                        
Estimated net proceeds
     40,946       48,378       55,809       64,354  
Less: common stock acquired by ESOP (5)
     (3,672 )     (4,320 )     (4,920 )     (5,610 )
Less: common stock acquired for restricted stock awards (6)
     (1,836 )     (2,160 )     (2,460 )     (2,805 )
 
                        
Estimated net proceeds
     35,438       41,898       48,429       55,939  
Estimated acquisition cash costs (7)
   $ (28,082 )   $ (28,082 )   $ (28,082 )   $ (28,082 )
For the 12 Months ended December 31, 2003
                                
Consolidated net income
                                
Historical consolidated net income (8)
   $ 3,053     $ 3,053     $ 3,053     $ 3,053  
Pro forma income on net proceeds
     286       338       391       451  
Pro forma acquisition adjustment (7)
     (226 )     (226 )     (226 )     (226 )
Pro forma ESOP adjustment (5)
     (78 )     (92 )     (105 )     (120 )
Pro forma restricted stock adjustment (6)
     (235 )     (276 )     (315 )     (359 )
Pro forma stock option adjustment (9)
     (334 )     (393 )     (448 )     (511 )
 
                        
Pro forma net income
   $ 2,466     $ 2,404     $ 2,350     $ 2,288  
 
                        
Per share net income (reflects SOP93-6)
 
Historical
   $ 0.46     $ 0.41     $ 0.38     $ 0.35  
Pro forma income on net proceeds
     0.04       0.05       0.05       0.05  
Pro forma acquisition adjustment (7)
     (0.03 )     (0.03 )     (0.03 )     (0.03 )
Pro forma ESOP adjustment (5)
     (0.01 )     (0.01 )     (0.01 )     (0.01 )
Pro forma restricted stock adjustment (6)
     (0.04 )     (0.04 )     (0.04 )     (0.04 )
Pro forma stock option adjustment (9)
     (0.05 )     (0.05 )     (0.06 )     (0.06 )
 
                        
Pro forma net income per share
   $ 0.37     $ 0.33     $ 0.29     $ 0.26  
 
                        
Shares used for calculating pro forma earnings per share
     6,636,615       7,383,975       8,075,975       8,871,775  
Stock price as a multiple of pro forma earnings per share (6)(9)
     27.03x       30.30x       34.48x       38.46x  
At December 31, 2003
                                
Stockholders’ equity:
                                
Historical consolidated stockholders’ equity (10)
   $ 51,349     $ 51,349     $ 51,349     $ 51,349  
Estimated net proceeds
     40,946       48,378       55,809       64,354  
Plus: tax benefit of shares issued to foundation (3)
     1,224       1,440       1,440       1,440  
Plus: shares issued to foundation (3)
     3,400       4,000       4,000       4,000  
Less: shares issued to foundation (3)
     (3,400 )     (4,000 )     (4,000 )     (4,000 )
Less: common stock acquired by ESOP (5)
     (3,672 )     (4,320 )     (4,920 )     (5,610 )
Less: common stock acquired for restricted stock awards (6)
     (1,836 )     (2,160 )     (2,460 )     (2,805 )
 
                        
Pro forma stockholders’ equity
     88,011       94,687       101,218       108,728  
Intangible assets (11)
     (36,855 )     (36,855 )     (36,855 )     (36,855 )
 
                        
Pro forma tangible stockholders equity
   $ 51,156     $ 57,832     $ 64,363     $ 71,873  
 
                        

Footnotes on following page

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    At or for the year ended December 31, 2003  
                            Maximum,  
            Midpoint of             As Adjusted,  
    Minimum of     Offering     Maximum of     of Offering  
    Offering     Range     Offering     Range  
    Range     5,000,000     Range     6,612,500  
    4,250,000 Shares     Shares     5,750,000 Shares     Shares  
    at $10 per     at $10 per     at $10 per     at $10 per  
    share (1)     share     share     share (2)  
    (Dollars in thousands, except per share data)  
At December 31, 2003
                                
Stockholders’ equity per share
 
Historical
   $ 7.34     $ 6.58     $ 6.00     $ 5.45  
Estimated net proceeds
     5.86       6.20       6.54       6.85  
Plus: tax benefit of shares issued to foundation (3)
     0.18       0.18       0.17       0.15  
Plus: shares issued to foundation (3)
     0.49       0.51       0.47       0.42  
Less: shares issued to foundation (3)
     (0.49 )     (0.51 )     (0.47 )     (0.42 )
Less: common stock acquired by ESOP (5)
     (0.53 )     (0.55 )     (0.58 )     (0.60 )
Less: common stock acquired for restricted stock awards (6)
     (0.26 )     (0.28 )     (0.29 )     (0.30 )
 
                        
Pro forma stockholders’ equity per share
     12.59       12.13       11.84       11.55  
Intangible assets (11)
     (5.27 )     (4.72 )     (4.31 )     (3.92 )
 
                        
Pro forma tangible stockholders’ equity per share
   $ 7.32     $ 7.41     $ 7.53     $ 7.63  
 
                        
Shares used for pro forma stockholders equity per share
     6,991,575       7,801,575       8,551,575       9,414,075  
Stock price as a percentage of equity per share (6)
     79.43 %     82.44 %     84.46 %     86.58 %
Stock price as a percentage of tangible equity per share (6)(9)(11)
     136.61 %     134.95 %     132.80 %     131.06 %

(1)   If Benjamin Franklin Bancorp receives orders for fewer than 4,250,000 shares, Benjamin Franklin Bancorp may, subject to regulatory approval, 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. If the full 2,082,500 shares are applied in this manner, then, as of December 31, 2003, Benjamin Franklin Bancorp’s pro forma earnings per share would be $0.58, pro forma stockholders’ equity per share would be $13.73, pro forma tangible stockholders’ equity per share would be $6.22, stock price as a multiple of annualized pro forma earnings per share would be 17.24 times, stock price as a percentage of equity per share would be 72.83% and stock price as a percentage of tangible equity per share would be 160.77%.

(2)   As adjusted to give effect to an increase in the number of shares which could occur due to an increase in the estimated offering range of up to 15.0% as a result of regulatory considerations, demand for the shares, or changes in market or general financial and economic conditions following the commencement of the offering.

(3)   Benjamin Franklin Bancorp will make a contribution to the Benjamin Franklin Bank Charitable Foundation amounting to the lesser of 8.0% of the shares actually sold in the offering and 400,000 shares of its common stock. The pro forma net income does not take into account the non-recurring expense that will be recognized as a result of the establishment of the Foundation. Benjamin Franklin Bancorp expects to recognize a tax benefit of and an after tax expense related to the contribution to the Benjamin Franklin Bank Charitable Foundation.

(4)   Assumes 2,401,575 shares of Benjamin Franklin Bancorp common stock will be issued to Chart Bank stockholders in the acquisition.

(5)   It is assumed that the employee stock ownership plan will purchase up to 8.0% of the shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. The employee stock ownership plan is assumed to be funded internally with a loan from Benjamin Franklin Bancorp. Benjamin Franklin Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the principal and the interest requirement of the debt. Benjamin Franklin Bank’s total annual payments on the employee stock ownership plan debt is based upon 30 equal installments of principal and interest. The pro forma adjustments assume the employee stock ownership plan shares are allocated in equal installments based on the number of loan repayment installments assumed to be paid by Benjamin Franklin Bank, the fair value of the common stock remains at the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 36.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders equity. No reinvestment rate is assumed on the proceeds contributed to the fund the employee stock ownership plan. The pro forma net income further assumes (i) that 12,240, 14,400, 16,400 and 18,700 shares were committed to be released during the period at the minimum, midpoint, maximum and the adjusted maximum of the

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    offering range, respectively, and (ii) only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of net income per share calculations.
 
(6)   If the stock-base incentive plan is approved by Benjamin Franklin Bancorp’s stockholders, Benjamin Franklin Bancorp may purchase an aggregate number of shares of common stock equal to 4.0% of the shares to be sold in the offering (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion, although such plan, including the amount awarded under such plan, may remain subject to supervisory restrictions), to be awarded as restricted stock to officers and directors under the stock-based incentive plan. Stockholder approval of the stock-based incentive plan and purchases of stock for grant under the plan may not occur earlier than six months after the completion of the conversion. The shares may be issued directly by Benjamin Franklin Bancorp or acquired through open market purchases. The funds to be used purchase the shares to be awarded by the stock-based incentive plan will be provided by Benjamin Franklin Bancorp. The table assumes that (i) the shares to be awarded under the stock-based incentive plan are acquired through open market purchases at $10 per share, (ii) 15.0% of the amount contributed to the stock-based incentive plan is amortized as an expense during the year ended December 31, 2003 and (iii) the stock-based incentive plan expense reflects an effective combined federal and state tax rate of 36.0%. Assuming stockholder approval of the stock-based incentive plan and that shares of common stock (equal to 4.0% of the shares sold in the offering) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 2.7%.
 
(7)   Represents the cash portion of the purchase price of Chart Bank, transaction expenses related to the Chart Bank acquisition and cash merger expenses of Benjamin Franklin Bancorp as follows:

         
    (Dollars in thousands)  
Acquisition of Chart Bank (net of tax-effect of option cash-out)
   $ 21,469  
Transaction expenditures
     983  
Merger expenses
     3,091  
One time operating expenses
     3,075  
Less: Recovery of Chart Bank Cooperative Central Bank deposit
     (536 )
 
      
Total acquisition cash costs
   $ 28,082  
 
      

    The pro forma acquisition adjustment to net income reflects the after-tax amount of interest income foregone as a result of the payment of acquisition cash costs out of the gross proceeds of the offering of the nine months ended September 30, 2004, assuming an interest rate of 2.16% and a marginal tax rate of 36.0%.
 
(8)   Historical net income includes the historical net income of Benjamin Franklin Bancorp and Chart Bank, and the impact of the recurring purchase accounting adjustments.
 
(9)   Gives effect to the options we expect to grant under the stock-based incentive plan, which is expected to be adopted by Benjamin Franklin Bancorp following the offering and presented for approval not earlier than six months after the completion of the conversion. We have assumed that options will be granted to acquire 10.0% of the shares sold in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. In calculating the pro forma effect of the stock options, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $3.85 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight line basis over a five year vesting period of the option, and that 15.0% of the amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 36.0%. Under the above assumptions, the granting of options under the stock-based incentive plan will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise options under the stock-based incentive plan are obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of up to 6.7% on the ownership interest of persons who purchase common stock in the offering.
 
(10)   Historical stockholders’ equity includes the historical equity of Benjamin Franklin Bancorp and the impact of the Chart Bank acquisition.
 
(11)   Equity is adjusted to exclude $36.9 million of goodwill and other intangibles on a pro forma basis reflecting the acquisition as of December 31, 2003.

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COMPARISON OF INDEPENDENT VALUATION AND PRO FORMA FINANCIAL INFORMATION
WITH AND WITHOUT THE BENJAMIN FRANKLIN BANK CHARITABLE FOUNDATION

     As set forth in the following table, if Benjamin Franklin Bancorp was not making a contribution to the Benjamin Franklin Bank Charitable Foundation as part of the conversion, RP Financial, LC. estimates that the pro forma valuation of Benjamin Franklin Bancorp would be greater, which would increase the amount of common stock offered for sale in the offering. Without the foundation, the amount of common stock offered for sale in the offering at the midpoint of the offering range would be approximately $6.0 million greater. If the Benjamin Franklin Bank Charitable Foundation were not established, there is no assurance that the appraisal prepared at the time of conversion would conclude that the pro forma market value of Benjamin Franklin Bancorp would be the same as the estimate set forth in the table below.

     The information presented in the following table is for comparative purposes only. It assumes that the conversion, the contribution to the Benjamin Franklin Bank Charitable Foundation and the Chart Bank acquisition were completed at September 30, 2004. It shows gross proceeds of $42.5 million, $50.0 million $57.5 million and $66.1 million, respectively, at the minimum, midpoint, maximum and maximum, as adjusted, of the offering range, and the establishment of an employee stock ownership plan that would acquire 8.0% of the number of shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. It reflects the establishment of a stock-based incentive plan that would grant restricted stock awards and options to acquire shares of stock in an amount equal to 4.0% and 10.0%, respectively, of the shares issued in the offering including the shares issued to the Benjamin Franklin Bank Charitable Foundation. It assumes that the employee stock ownership plan will purchase shares in the offering and open market and that Benjamin Franklin Bancorp will purchase, for award as restricted stock under the stock-based incentive plan, shares in the open market within one year of the conversion. Open market purchases are assumed at $10 per share. It also assumes that options are granted with a $10.00 exercise price and that the grant-date price of the stock is $10.00 per share. For comparative purposes, the table also shows the effects of the conversion, assuming no contribution to the foundation and gross proceeds of $47.6 million, $56.0 million, $64.4 million and $74.1 million, respectively, at the minimum, midpoint, maximum and maximum, as adjusted, of the offering range.

                                                                 
                                                    At the Maximum,  
    At the Minimum     At the Midpoint     At the Maximum     as adjusted,  
    4,250,000 Shares     5,000,000 Shares     5,750,000 Shares     6,612,500 Shares  
    With     Without     With     Without     With     Without     With     Without  
    Foundation     Foundation     Foundation     Foundation     Foundation     Foundation     Foundation     Foundation  
                    (Dollars in thousands, except per share amounts)                  
Estimated offering amount (1)
   $ 42,500     $ 47,600     $ 50,000     $ 56,000     $ 57,500     $ 64,400     $ 66,125     $ 74,060  
Pro forma market capitalization (2)
     69,916       71,616       78,016       80,016       85,516       88,416       94,141       98,076  
Pro forma total assets (3)
     816,030       819,653       822,706       826,967       829,237       834,282       836,747       842,694  
Pro forma total liabilities (4)
     726,734       726,734       726,734       726,734       726,734       726,734       726,734       726,734  
Pro forma stockholders’ equity
     89,296       92,919       95,972       100,233       102,503       107,548       110,013       115,960  
Pro forma net income (5)
     1,471       1,504       1,453       1,491       1,441       1,478       1,428       1,463  
Pro forma stockholders’ equity per share
     12.77       12.97       12.30       12.53       11.99       12.16       11.68       11.82  
Pro forma tangible stockholders’ equity per share
     7.54       7.86       7.61       7.96       7.71       8.02       7.80       8.09  
Pro forma net income per share(5)
   $ 0.22     $ 0.22     $ 0.20     $ 0.20     $ 0.18     $ 0.18     $ 0.16     $ 0.16  

Footnotes on following page

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                                                    At the Maximum,  
    At the Minimum     At the Midpoint     At the Maximum     as adjusted,  
    4,250,000 Shares     5,000,000 Shares     5,750,000 Shares     6,612,500 Shares  
    With     Without     With     Without     With     Without     With     Without  
    Foundation     Foundation     Foundation     Foundation     Foundation     Foundation     Foundation     Foundation  
                    (Dollars in thousands, except per share amounts)                  
Pro forma pricing ratios
                                                                
Offering price as a percent of pro forma stockholders’ equity per share
     78.31 %     77.10 %     81.30 %     79.81 %     83.40 %     82.24 %     85.62 %     84.60 %
Offering price as a percent of pro forma tangible stockholders’ equity per share
     132.63 %     127.23 %     131.41 %     125.63 %     129.70 %     124.69 %     128.21 %     123.61 %
Offering price as a multiple of pro forma net income per share (6)
     34.09       34.09       37.50       37.50       41.67       41.67       46.88       46.88  
Offering price to assets
     8.57 %     8.74 %     9.48 %     9.68 %     10.31 %     10.60 %     11.25 %     11.64 %
Pro Forma Financial Ratios
                                                                
Return on assets (7)
     0.24 %     0.24 %     0.24 %     0.24 %     0.23 %     0.24 %     0.23 %     0.23 %
Return on stockholders’ equity (8)
     2.20 %     2.16 %     2.02 %     1.98 %     1.87 %     1.83 %     1.73 %     1.68 %
Stockholders’ equity to assets
     10.94 %     11.34 %     11.67 %     12.12 %     12.36 %     12.89 %     13.15 %     13.76 %
Tangible stockholders’ equity to assets
     6.76 %     7.20 %     7.56 %     8.05 %     8.32 %     8.90 %     9.18 %     9.85 %

(1)   Gross proceeds of the offering, based on the midpoint of the preliminary pro forma valuation prepared by RP Financial, LC. as of November 26, 2004.
 
(2)   Gross proceeds of the offering, plus shares issued to the Benjamin Franklin Bank Charitable Foundation and shares issued to Chart Bank stockholders in the acquisition.
 
(3)   Pro forma total assets are equal to Benjamin Franklin Bancorp’s total assets at September 30, 2004, plus estimated net proceeds and the tax benefit created by the shares issued to the Benjamin Franklin Bank Charitable Foundation plus the assets of Chart Bank, as adjusted to reflect acquisition and purchase accounting adjustments.
 
(4)   Pro forma total liabilities are equal to Benjamin Franklin Bancorp’s total liabilities at September 30, 2004, plus the liabilities assumed through the acquisition of Chart Bank as adjusted to reflect acquisition and purchase accounting adjustments.
 
(5)   Pro forma earnings per share for the nine months ended September 30, 2004. If the contribution to the Benjamin Franklin Bank Charitable Foundation had been expensed during the nine months ended September 30, 2004, Benjamin Franklin Bancorp would have incurred a net loss.
 
(6)   Offering price of $10 per share divided by annualized pro forma net income per share.
 
(7)   If the contribution to the Benjamin Franklin Bank Charitable Foundation had been expensed during the nine months ended September 30, 2004, annualized pro forma return on assets would have been (0.12%), (0.18%), (0.18%), and (0.18%) at the minimum, midpoint, maximum, and maximum, as adjusted, respectively.
 
(8)   If the contribution to the Benjamin Franklin Bank Charitable Foundation had been expensed during the nine months ended September 30, 2004, annualized pro forma return on equity would have been (1.05%), (1.54%), (1.46%) and (1.37%), at the minimum, midpoint, maximum, and maximum, as adjusted, respectively.

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BUSINESS OF BENJAMIN FRANKLIN BANCORP

General

     Benjamin Franklin Bancorp was organized in 1996 as a mutual holding company in connection with Benjamin Franklin Bank’s reorganization into the mutual holding company form of organization. Benjamin Franklin Bancorp is registered with the Federal Reserve Board as a bank holding company under the Bank Holding Company Act. Since the formation of Benjamin Franklin Bancorp, it has owned 100.0% of Benjamin Franklin Bank’s outstanding capital stock and will continue to do so after the completion of the conversion. At September 30, 2004, Benjamin Franklin Bancorp had total assets of $517.9 million and total deposits of $399.6 million.

     Benjamin Franklin Bank is a full-service, community-oriented financial institution offering products and services to individuals, families and businesses through 6 offices located in Norfolk and Worcester counties in Massachusetts. Benjamin Franklin Bank was originally organized as a Massachusetts state-charted mutual savings bank in 1871. In 1996, it became a Massachusetts-chartered savings bank in stock form upon the formation of Benjamin Franklin Bancorp as its mutual holding company.

     Benjamin Franklin Bank’s business consists primarily of making loans to its customers, including residential mortgages, commercial real estate loans, construction loans, commercial business loans and consumer loans, and investing in a variety of investment and mortgage-backed securities. Benjamin Franklin Bank funds these lending and investment activities with deposits from the general public, funds generated from operations and selected borrowings.

     On September 1, 2004, we entered into an agreement to acquire Chart Bank, which operates through two offices in Waltham and one office in Newton, Massachusetts. At September 30, 2004, Chart Bank had total assets of $256.3 million and total deposits of $216.0 million. This acquisition will expand Benjamin Franklin Bank’s geographic branching outreach, leverage its capital base and is expected to improve operating efficiency through increased scale.

Market Area and Competition

     We offer a variety of financial products and services designed to meet the needs of the communities we serve. Our primary deposit-gathering area is concentrated southwest of Boston in the communities in which our six banking offices are located—specifically in the towns of Franklin, Foxboro, Bellingham, Milford, and Medfield—and in contiguous communities in Norfolk and Worcester Counties. Our lending area is broader than our deposit-gathering area and includes all of Massachusetts and northern Rhode Island, although most of our loans are made to customers located in our primary deposit-gathering market area.

     We are headquartered in Franklin, Massachusetts, located 41 miles southwest of Boston. Five of the six Benjamin Franklin Bank offices are located in Norfolk County, while one office is located just across the county border in the town of Milford, in Worcester County. The counties in which Benjamin Franklin Bank currently operates include a mixture of rural, suburban and urban markets. The economies of these areas were historically based on manufacturing, but similar to many areas of the country, have now evolved into more service-oriented economies with employment in most large economic sectors including wholesale/retail trade, service, manufacturing, finance, real estate and government. A large portion of Norfolk County residents work in other nearby areas, including the City of Boston and the greater Boston area. There is also significant employment located along the I-495 corridor, which runs directly through Benjamin Franklin Bank’s Norfolk County market area.

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     According to published statistics, Norfolk County’s population has grown by 0.3% since the year 2000 to a total of 657,000 in 2004. Per capita income for the county has grown by 4.0% since 2000 to $38,037, 27.5% higher than that of Massachusetts and 57.9% higher than the U.S. as a whole. Median household income for Norfolk County was $72,764, 27.6% higher than for the state and 56.6% higher than the U.S. average. The unemployment rate for the county stood at 4.5% as of August 2004, lower than the state average of 4.6% and the U.S. average of 5.4%.

     We face substantial competition in our efforts to originate loans and attract deposits and other fee-based business. We face direct competition from a significant number of financial institutions, many with a state-wide, regional or national presence. Many of these financial institutions are significantly larger and have greater financial resources than Benjamin Franklin Bank.

Lending Activities

     General. Benjamin Franklin Bank’s gross loan portfolio aggregated $377.3 million at September 30, 2004, representing 72.9% of total assets at that date. In its lending activities, Benjamin Franklin Bank originates residential real estate loans secured by one-to-four-family residences, commercial real estate loans, residential and commercial construction loans, commercial loans, home equity lines-of-credit, fixed rate home equity loans, and other personal consumer loans. While Benjamin Franklin Bank makes loans throughout Massachusetts and northern Rhode Island, most of its lending activities are concentrated in its market area. Loans originated totaled $246.9 million in 2003 and $162.6 million in the first nine months of 2004. Residential mortgage loans sold in the secondary market, on a servicing-retained basis, totaled $96.3 million and $28.6 million during those same periods.

     Loans originated by Benjamin Franklin Bank are subject to federal and state laws and regulations. Interest rates charged by Benjamin Franklin Bank on its loans are influenced by the demand for such loans, the amount and cost of funding available for lending purposes, current asset/liability management objectives and the interest rates offered by competitors.

     The following table summarizes the composition of Benjamin Franklin Bank’s loan portfolio as of the dates indicated:

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                    At December 31,  
    At September 30,                                
    2004     2003     2002     2001     2000     1999  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
  (Dollars in thousands)
Mortgage loans on real estate:
                                                                                                
Residential
   $ 244,363       64.76 %   $ 172,123       59.22 %   $ 165,007       62.58 %   $ 172,959       66.99 %   $ 206,918       72.69 %   $ 190,027       70.43 %
Commercial
     79,173       20.98 %     68,652       23.62 %     51,357       19.48 %     45,532       17.64 %     44,456       15.62 %     43,734       16.21 %
Construction
     25,079       6.64 %     23,936       8.23 %     21,082       8.00 %     19,106       7.40 %     13,117       4.61 %     19,429       7.20 %
Home equity
     21,883       5.80 %     18,171       6.25 %     16,507       6.26 %     11,161       4.32 %     9,778       3.44 %     8,167       3.03 %
 
                                                                        
 
     370,498       98.18 %     282,882       97.32 %     253,953       96.32 %     248,758       96.35 %     274,269       96.36 %     261,357       96.87 %
 
                                                                        
Other loans:
                                                                                                
Commercial business
     4,972       1.32 %     5,559       1.92 %     6,552       2.48 %     5,512       2.14 %     5,951       2.09 %     4.649       1.72 %
Consumer and other
     1,879       0.50 %     2,219       0.76 %     3,157       1.20 %     3,899       1.51 %     4,417       1.55 %     3,811       1.41 %
 
                                                                        
 
     6,851       1.82 %     7,778       2.68 %     9,709       3.68 %     9,411       3.65 %     10,368       3.64 %     8,460       3.13 %
 
                                                                        
Total loans
     377,349       100.00 %     290,660       100.00 %     263,662       100.00 %     258,169       100.00 %     284,637       100.00 %     269,817       100.00 %
 
                                                                        
Other items:
                                                                                                
Deferred loan origination costs
     1,184               725               583               574               663               491          
Allowance for loan losses
     (3,017 )             (2,523 )             (2,312 )             (1,177 )             (1,068 )             (1,183 )        
 
                                                                                    
Total loans, net
   $ 375,516             $ 288,862             $ 261,933             $ 257,566             $ 284,232             $ 269,125          
 
                                                                                    

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     Residential Real Estate Loans. Benjamin Franklin Bank offers, fixed-rate and adjustable-rate residential mortgage loans with maturities of up to 30 years and maximum loan amounts generally of up to $1.5 million. As of September 30, 2004, this portfolio totaled $244.4 million, or 64.8% of the total gross loan portfolio on that date, and had an average yield of 4.82%. Of the residential mortgage loans outstanding on that date, 59.9% were adjustable-rate loans with an average yield of 4.2% and 40.1% were fixed-rate mortgage loans with an average yield of 5.3%. Residential mortgage loans originations totaled $183.3 million and $103.1 million for 2003 and the first nine months of 2004, respectively.

     The decision to originate loans for portfolio or for sale in the secondary market is made by the Bank’s Asset/Liability Management Committee, and is based on the organization’s interest rate risk profile. Current practice is to sell almost all newly originated fixed-rate 15 and 30 year monthly payment loans. At September 30, 2004, 15 and 30 year fixed rate monthly payment loans held in portfolio totaled $9.4 million, or 3.8% of total residential real estate mortgage loans at that date. Benjamin Franklin Bank originates most such loans under forward rate commitments to Freddie Mac and Fannie Mae. Benjamin Franklin Bank continues to service loans sold to Freddie Mac and Fannie Mae and earns a fee equal to 0.25% of the loan amounts outstanding for providing these services. The total of loans serviced for others as of September 30, 2004 is $133.2 million.

     Benjamin Franklin Bank also offers fixed-rate bi-weekly residential mortgage loans with maturities generally ranging between 10 and 30 years. Generally, Benjamin Franklin retains in its portfolio bi-weekly loans with terms of 15 years or less and sells those with terms greater than 15 years in the secondary market, with servicing rights retained. As of September 30, 2004, bi-weekly residential mortgage loans held in portfolio totaled $88.6 million, or 36.3 % of total residential mortgage loans on that date.

     The adjustable-rate mortgage (ARM) loans offered by Benjamin Franklin Bank make up the largest portion of the residential mortgage loans held in portfolio. At September 30, 2004, ARM loans totaled $146.4 million or 59.9% of total residential loans outstanding at that date. ARMs are offered for terms of up to 30 years with initial interest rates that are fixed for 1, 3 or 5 years. After the initial fixed-rate period, the interest rates on the loans are reset based on the relevant U.S. Treasury CMT (Constant Maturity Treasury) Index plus add-on margins of varying amounts, for periods of 1, 3 or 5 years. Interest rate adjustments on such loans are typically limited to no more than 2.0% during any adjustment period and 6.0% over the life of the loan. This feature of ARM loans that allows for periodic adjustments in the interest rate charged helps to reduce Benjamin Franklin Bank’s exposure to changes in interest rates. However, ARM loans may possess an element of credit risk not inherent in fixed-rate mortgage loans, in that borrowers are potentially exposed to increases in debt service requirements over the life of the loan in the event market interest rates rise. Higher payments may increase the risk of default, though this risk has not had a material adverse effect on Benjamin Franklin Bank to date.

     In its residential mortgage loan originations, Benjamin Franklin Bank lends up to a maximum loan-to-value ratio of 95.0% on mortgage loans secured by owner-occupied property, with the condition that private mortgage insurance is required for loans with a loan-to-value ratio in excess of 80.0%. Title insurance, hazard insurance and, if appropriate, flood insurance are required for all properties securing real estate loans made by the Bank. A licensed appraiser appraises all properties securing residential first mortgage loans.

     In an effort to provide financing for low and moderate-income first-time home buyers, Benjamin Franklin Bank originates and services residential mortgage loans with private mortgage insurance provided by the Mortgage Insurance Fund (MIF) of the Massachusetts Housing Finance Agency, or MassHousing. The program provides mortgage payment protection as an enhancement to mortgage

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insurance coverage. This no-cost benefit, known as ‘MI Plus’, provides up to six monthly principal and interest payments in the event of a borrower’s job loss.

     Commercial Real Estate Loans. Benjamin Franklin Bank originated $27.1 million and $17.7 million of commercial real estate loans in 2003 and the first nine months of 2004, respectively, and had $79.2 million of commercial real estate loans, with an average yield of 5.82%, in its portfolio as of September 30, 2004. We have placed increasing emphasis on commercial real estate lending over the past several years, and as a result such loans have grown from 16.2% of the total loan portfolio at December 31, 1999 to 21.0% as of September 30, 2004. Benjamin Franklin Bank intends to further grow this segment of its loan portfolio, both in absolute terms and as a percentage of its total loan portfolio. Management of Benjamin Franklin Bank believes that there exist additional profitable commercial real estate lending opportunities in its market area and that of Chart Bank. Further, management believes that there exists an opportunity to leverage the considerable resources already invested by both institutions in commercial real estate lending operations to tap the potential of these markets.

     Benjamin Franklin Bank generally originates commercial real estate loans for terms of up to 25 years, typically with interest rates that adjust over periods of one to seven years based on various rate indices. Commercial real estate loans are generally secured by multi-family income properties, small office buildings, retail facilities, warehouses, industrial properties and owner-occupied properties used for business. Generally, commercial real estate loans do not exceed 80.0% of the appraised value of the underlying collateral.

     In its evaluation of a commercial real estate loan application, Benjamin Franklin Bank considers the net operating income of the borrower’s business, the borrower’s expertise, credit history, and the profitability and value of the underlying property. In addition, for loans secured by rental properties, Benjamin Franklin Bank will also consider the terms of the leases and the quality of the tenants. Benjamin Franklin Bank generally requires that the properties securing these loans have debt service coverage ratios (the ratio of cash flow before debt service to debt service) of at least 1.20x. Benjamin Franklin Bank generally requires the borrowers seeking commercial real estate loans to personally guarantee those loans.

     Commercial real estate loans generally have larger balances and involve a greater degree of risk than residential mortgage loans. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral value of the commercial real estate securing the loan. Economic events and changes in government regulations could have an adverse impact on the cash flows generated by properties securing Benjamin Franklin Bank’s commercial real estate loans and on the value of such properties. See “Risk Factors—Our Commercial Real Estate, Construction and Commercial Business Loans May Expose Us To Increased Credit Risks” on page [#].

     Construction Loans. Benjamin Franklin Bank originates land acquisition, development and construction loans to builders and developers, as well as loans to individuals to finance the construction of residential dwellings for personal use. Benjamin Franklin Bank originated $16.2 million and $25.6 million in construction loans during 2003 and during the first nine months of 2004, respectively, and as of September 30, 2004 had $25.1 million in construction loans in its portfolio, representing 6.6% of such portfolio, with an average yield of 6.11%.

     Acquisition loans help finance the purchase of land intended for further development, including single family houses and condominiums, multi-family houses and commercial income property. In some cases, Benjamin Franklin Bank makes an acquisition loan before the borrower has received approval to develop the land as planned. In general, the maximum loan-to-value ratio for a land acquisition loan is 75.0% of the lower of the cost or appraised value of the property. Benjamin Franklin Bank also makes

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development loans to builders in its market area to finance improvements to real estate, consisting mostly of single-family subdivisions, typically to finance the cost of utilities, roads, waste treatment and other costs. Builders typically rely on the sale of single-family homes to repay development loans, although in some cases the improved building lots may be sold to another builder. The maximum amount loaned is generally limited to the cost of the improvements, not to exceed 80.0% of the appraised value, as completed. Advances are made in accordance with a schedule reflecting the cost of the improvements.

     Benjamin Franklin Bank also grants construction loans to area builders, often in conjunction with the development loans. In the case of residential subdivisions, these loans finance the cost of completing homes on the improved property. Advances on construction loans are made in accordance with a schedule reflecting the cost of construction. The maximum amount of the loan is generally limited to the lower of 80.0% of the appraised value of the property, as completed, or the property’s cost of construction. For construction loans on residential units being constructed without a pre-sale agreement, the loan amount is limited to 75.0% of the appraised value of the property, as completed. Repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. Benjamin Franklin Bank commits to provide the permanent mortgage financing on most of its construction loans on income-producing property.

     For owner-occupied, one-to-four family properties, Benjamin Franklin Bank will lend up to 95.0% of the lesser of appraised value upon completion of construction or the cost of construction, provided that private mortgage insurance coverage is obtained for any loan with a loan-to-value or loan-to-cost in excess of 80.0%.

     Land acquisition, development and construction lending exposes Benjamin Franklin Bank to greater credit risk than residential mortgage lending to owner occupants. The repayment of these loans depends on the sale of the property to third parties or the availability of permanent financing upon completion of all improvements, and on the business and financial condition of the borrowers. In the event Benjamin Franklin Bank makes an acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. Development and construction loans also expose Benjamin Franklin Bank to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. These events, as well as economic events and changes in government regulations could have an adverse impact on the value of properties securing construction loans and on the borrowers’ ability to repay. See “Risk Factors—Our Commercial Real Estate, Construction and Commercial Business Loans May Expose Us To Increased Credit Risks” on page [#].

     Home Equity Lines-of-Credit and Loans. Benjamin Franklin Bank offers home equity lines-of-credit and home equity term loans. Benjamin Franklin Bank originated $17.1 million and $13.4 million of home equity lines-of-credit and loans during 2003 and during the first nine months of 2004, respectively, and at September 30, 2004 had $21.9 million of home equity lines-of-credit and loans outstanding , representing 5.8% of the loan portfolio, with an average yield of 4.66% at that date.

     Home equity lines-of-credit and loans are secured by second mortgages on one-to-four family owner occupied properties, and are made in amounts such that the combined first and second mortgage balances do not exceed 80.0% of the value of the property serving as collateral. The lines-of-credit are available to be drawn upon for 10 years, at the end of which time they become term loans amortized over 10 years. Interest rates on home equity lines normally adjust based on Benjamin Franklin Bank’s prime rate of interest. The undrawn portion of home equity lines-of-credit total $28.8 million at September 30, 2004.

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     Commercial Business Loans. Benjamin Franklin Bank originates secured and unsecured commercial business loans to business customers in its market area for the purpose of financing equipment purchases, working capital, expansion and other general business purposes. Benjamin Franklin Bank originated $1.6 million and $1.7 million in commercial business loans during 2003 and during the first nine months of 2004, respectively, and as of September 30, 2004 had $5.0 million in commercial business loans in its portfolio, representing 1.3% of such portfolio, with an average yield of 7.04%. Benjamin Franklin Bank intends to grow this segment of its lending business in the future.

     Benjamin Franklin Bank’s commercial business loans are generally collateralized by equipment, accounts receivable and inventory, supported by personal guarantees. Benjamin Franklin Bank offers both term and revolving commercial loans. The former have either fixed or adjustable-rates of interest and generally fully amortize over a term of between three and seven years. Revolving loans are written for a one year term, renewable annually, with floating interest rates that are indexed to Benjamin Franklin Bank’s prime rate of interest.

     When making commercial business loans, Benjamin Franklin Bank considers the financial statements of the borrower, the borrower’s payment history with respect to both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in which the borrower operates and the value of the collateral. Benjamin Franklin Bank’s commercial business loans are not concentrated in any one industry.

     Commercial business loans generally bear higher interest rates than residential mortgage loans of like duration because they involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business and the sufficiency of collateral, if any. Because commercial business loans often depend on the successful operation or management of the business, repayment of such loans may be affected by adverse changes in the economy. Further, collateral securing such loans may depreciate in value over time, may be difficult to appraise and to liquidate, and may fluctuate in value. See “Risk Factors—Our Commercial Real Estate, Construction and Commercial Business Loans May Expose Us To Increased Credit Risks” on page [#].

     Consumer and Other Loans. Benjamin Franklin Bank offers a variety of consumer and other loans, including auto loans and loans secured by passbook savings or certificate accounts. Benjamin Franklin Bank originated $1.6 million and $1.1 million of consumer and other loans during 2003 and during the first nine months of 2004, respectively, and at September 30, 2004 had $1.9 million of consumer and other loans outstanding , representing 0.5% of the loan portfolio at that date, with an average yield of 7.14%.

     Loan Origination and Underwriting. Loan originations come from a variety of sources. The primary source of originations are our salaried and commissioned loan personnel, and to a lesser extent, local mortgage brokers, advertising and referrals from customers. From time to time Benjamin Franklin Bank purchases adjustable-rate residential mortgages from mortgage correspondents in the greater Boston area with whom the Bank has established relationships. Benjamin Franklin Bank also occasionally purchases participation interests in commercial real estate loans from banks located in the Boston area. Benjamin Franklin Bank underwrites such residential and commercial purchased loans using its own underwriting criteria.

     Benjamin Franklin Bank issues loan commitments to prospective borrowers conditioned on the occurrence of certain events. Commitments are made in writing on specified terms and conditions and are generally honored for up to 60 days from approval. At September 30, 2004, Benjamin Franklin Bank had loan commitments and unadvanced loans and lines-of-credit totaling $53.0 million. For information about Benjamin Franklin Bank’s loan commitments outstanding as of September 30, 2004, see

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“Management’s Discussion and Analysis of Benjamin Franklin Bancorp—Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure About Risk Management—Liquidity Risk Management” on page [#].

     Benjamin Franklin Bank charges origination fees, or points, and collects fees to cover the costs of appraisals and credit reports on most residential mortgage loans originated. Benjamin Franklin Bank also collects late charges on real estate loans, and origination fees and prepayment penalties on commercial mortgage loans. For information regarding Benjamin Franklin Bank’s recognition of loan fees and costs, please refer to Note 1 to the Consolidated Financial Statements of Benjamin Franklin Bancorp beginning on page [#].

     The following table sets forth certain information concerning Benjamin Franklin Bank’s portfolio loan originations, inclusive of loan purchases:

                                                         
    For the Nine Months        
    Ended September 30,     For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)
Loans at beginning of period
   $ 290,660     $ 263,662     $ 263,662     $ 258,169     $ 284,637     $ 269,817     $ 244,584  
 
                                          
Originations:
                                                        
Mortgage loans on real estate:
                                                        
Residential
     103,120       172,210       183,263       151,241       94,461       32,084       67,027  
Commercial
     17,659       18,280       27,105       23,383       9,371       6,929       5,759  
Construction
     25,612       11,152       16,176       22,524       32,301       27,975       39,585  
Home equity
     13,350       13,584       17,115       14,509       9,104       8,071       6,794  
 
                                          
 
     159,741       215,226       243,659       211,657       145,237       75,059       119,165  
Other loans:
                                                        
Commercial business
     1,724       570       1,584       1,310       1,933       5,754       2,604  
Consumer and other
     1,126       1,281       1,625       1,953       3,502       3,131       4,073  
 
                                          
 
     2,850       1,851       3,209       3,263       5,435       8,885       6,677  
 
                                          
Total loans originated
     162,591       217,077       246,868       214,920       150,672       83,944       125,842  
Purchases of mortgage loans
     34,207       26,332       26,546       1,298       853       11,739       0  
 
                                          
Deduct:
                                                        
Principal loan repayments and prepayments
     81,534       132,286       149,623       140,554       114,717       74,067       87,570  
Loan sales
     28,566       92,606       96,256       69,752       63,244       6,645       12,678  
Charge-offs
     9       63       537       419       32       151       361  
 
                                          
Total deductions
     110,109       224,955       246,416       210,725       177,993       80,863       100,609  
 
                                          
Net increase/(decrease) in loans
     86,689       18,454       26,998       5,493       (26,468 )     14,820       25,233  
 
                                          
Loans at end of period
   $ 377,349     $ 282,116     $ 290,660     $ 263,662     $ 258,169     $ 284,637     $ 269,817  
 
                                          

     Residential mortgage loans are underwritten by the Bank’s staff of residential loan underwriters. Conforming loans sold to Freddie Mac or Fannie Mae require the approval of the Senior Underwriter. Residential mortgage loans of less than $500,000 to be held in portfolio require the approval of the Senior Residential Loan Officer. Residential mortgage loans of $500,000 or more but less than $1 million require the approval of the management Credit Committee. Residential mortgage loans $1 million or greater require the approval of the Executive Committee of the Board.

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     Commercial real estate and commercial business loans are underwritten by commercial credit analysts. For commercial real estate loans, loan officers may approve loans up to $75,000, while loans up to $300,000 may be approved by the Senior Commercial Loan Officer. Commercial real estate loans of up to $750,000 may be approved by the management Credit Committee. For Commercial business loans, individual loan officer authority is limited to $65,000 ($25,000 for unsecured loans). The Senior Commercial Loan Officer may approve commercial loans of up to $100,000 ($50,000 if unsecured), while the management Credit Committee may approve loans of up to $200,000 ($50,000 if unsecured). Loans over these limits require the approval of the Executive Committee of the Board.

     Consumer loans are underwritten by consumer loan underwriters. Loan officers and Branch Managers have approval authorities ranging from $25,000 to $35,000 ($3,500 to $10,000 if unsecured) for these loans. The Senior Residential Loan Officer may approve consumer loans of up to $100,000 ($25,000 if unsecured) while the management Credit Committee may approve loans of up to $300,000 ($25,000 if unsecured). All consumer loans in excess of these limits require the approval of the Executive Committee of the Board.

     Pursuant to its loan policy, Benjamin Franklin Bank generally will not make loans aggregating more than $5.0 million to one borrower (or related entity). Exceptions to this limit require the approval of the Executive Committee of the Board prior to loan origination. Benjamin Franklin Bank’s internal lending limit is lower than the Massachusetts legal lending limit, which is 20.0% of a bank’s surplus and capital stock accounts, or $7.3 million for Benjamin Franklin Bank as of September 30, 2004.

     Benjamin Franklin Bank has established a risk rating system for its commercial real estate, construction and commercial loans. This system evaluates a number of factors useful in indicating the risk of default and risk of loss associated with a loan. These ratings are performed by commercial credit analysts who do not have responsibility for loan originations. See “—Asset Quality—Classification of Assets and Loan Review” on page [#].

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     Loan Maturity. The following table summarizes the scheduled repayments of Benjamin Franklin Bank’s loan portfolio at September 30, 2004. Demand loans, loans having no stated repayment schedule, and overdraft loans are reported as being due in one year or less:

                                                 
    Residential Mortgage     Commercial Mortgage     Construction  
            Weighted             Weighted             Weighted  
            Average             Average             Average  
    Amount     Rate     Amount     Rate     Amount     Rate  
                    (Dollars in thousands)                  
Due less than one year
   $ 12,242       5.07 %   $ 5,242       6.05 %   $ 15,027       6.51 %
Due after one year to five years
     42,217       4.99 %     17,429       5.84 %     1,510       5.58 %
Due after five years
     189,904       4.77 %     56,502       5.79 %     8,542       5.50 %
 
                                    
Total
   $ 244,363       4.82 %   $ 79,173       5.82 %   $ 25,079       6.11 %
 
                                    
                                                 
                    Home Equity,        
                    Consumer        
    Commercial Business     and Other     Total  
            Weighted             Weighted             Weighted  
            Average             Average             Average  
    Amount     Rate     Amount     Rate     Amount     Rate  
                    (Dollars in thousands)                  
Due less than one year
   $ 2,202       6.80 %   $ 12,215       4.86 %   $ 46,928       5.67 %
Due after one year to five years
     1,696       7.38 %     1,250       6.63 %     64,102       5.33 %
Due after five years
     1,074       6.98 %     10,297       4.63 %     266,319       5.01 %
 
                                    
Total
   $ 4,972       7.04 %   $ 23,762       4.85 %   $ 377,349       5.15 %
 
                                    

     The following table sets forth, at September 30, 2004, the dollar amount of total loans, net of unadvanced funds on loans, contractually due after September 30, 200 5 and whether such loans have fixed interest rates or adjustable interest rates.

                         
    Fixed     Adjustable     Total  
    (Dollars in thousands)  
Residential mortgage
   $ 97,940     $ 146,423     $ 244,363  
Commercial mortgage
     24,601       54,572       79,173  
Construction
     20,669       4,410       25,079  
Commercial business
     2,494       2,478       4,972  
Home equity, consumer and other
     3,878       19,884       23,762  
 
                  
Total Loans
   $ 149,582     $ 227,767     $ 377,349  
 
                  

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Asset Quality

     General. One of Benjamin Franklin Bank’s most important operating objectives is to maintain a high level of asset quality. Management uses a number of strategies in furtherance of this goal including maintaining sound credit standards in loan originations, monitoring the loan portfolio through internal and third-party loan reviews, and employing active collection and workout processes for delinquent or problem loans.

     Delinquent Loans. Management performs a monthly review of all delinquent loans. The actions taken with respect to delinquencies vary depending upon the nature of the delinquent loans and the period of delinquency. Generally, the Bank’s requirement is that a delinquency notice be mailed no later than the 10th or 16th day, depending on loan type, after the payment due date. A late charge is normally assessed on loans where the scheduled payment remains unpaid after a 10 or 15 day grace period. After mailing delinquency notices Benjamin Franklin Bank’s loan collection personnel call the borrower to ascertain the reasons for delinquency and the prospects for repayment. On loans secured by one-to-four family owner-occupied property, Benjamin Franklin Bank initially attempts to work out a payment schedule with the borrower in order to avoid foreclosure. Any such loan restructurings must be approved by the level of officer authority required for a new loan of that amount. If these actions do not result in a satisfactory resolution, Benjamin Franklin Bank refers the loan to legal counsel and counsel initiates foreclosure proceedings. For commercial real estate, construction and commercial loans, collection procedures may vary depending on individual circumstances.

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     The following table sets forth delinquencies in Benjamin Franklin Bank’s loan portfolio as of the dates indicated:

                                                 
    Loans Delinquent For        
    60-89 Days     90 Days and Over     Total  
    Number     Amount     Number     Amount     Number     Amount  
    (Dollars in thousands)
At September 30, 2004
                                                
Residential mortgage
     —     $ —       1     $ 64       1     $ 64  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial business
     1       10       —       —       1       10  
Home equity, consumer and other
     15       11       5       1       20       12  
 
                                    
Total
     16     $ 21       6     $ 65       22     $ 86  
 
                                    
At December 31, 2003
                                                
Residential mortgage
     5     $ 538       —     $ —       5     $ 538  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial business
     1       160       —       —       1       160  
Home equity, consumer and other
     12       12       8       5       20       17  
 
                                    
Total
     18     $ 710       8     $ 5       26     $ 715  
 
                                    
At December 31, 2002
                                                
Residential mortgage
     1     $ 41       —     $ —       1     $ 41  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial business
     —       —       —       —       —       —  
Home equity, consumer and other
     3       13       1       2       4       15  
 
                                    
Total
     4     $ 54       1     $ 2       5     $ 56  
 
                                    

     Other Real Estate Owned. Benjamin Franklin Bank classifies property acquired through foreclosure or acceptance of a deed in lieu of foreclosure as other real estate owned (“OREO”) in its financial statements. When property is placed into OREO, it is recorded at the lower of the carrying value or the fair value less estimated costs to sell at the date of foreclosure or acceptance of deed in lieu of foreclosure. At the time of transfer to OREO, any excess of carrying value over fair value is charged to the allowance for loan losses. Management inspects all OREO property periodically. Holding costs and declines in fair value result in charges to expense after the property is acquired. At September 30, 2004, Benjamin Franklin Bank had no property classified as OREO.

     Classification of Assets and Loan Review. Benjamin Franklin Bank uses an internal rating system to monitor and evaluate the credit risk inherent in its loan portfolio. At the time a loan is approved, all commercial real estate, construction and commercial business loans are assigned a risk rating based on all of the factors considered in originating the loan. The initial risk rating is recommended by the credit analyst charged with underwriting the loan, and subsequently approved by the relevant loan approval authority. Current financial information is sought for all commercial real estate, construction and commercial borrowing relationships, and is evaluated on at least an annual basis to determine whether the risk rating classification is appropriate.

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     In Benjamin Franklin Bank’s loan rating system, there are three classifications for problem assets: Substandard, Doubtful and Loss. An asset is considered Substandard if it is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard assets are characterized by the distinct possibility that Benjamin Franklin Bank will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of Substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable, on the basis of currently existing facts, and there is a high possibility of loss. Assets classified Loss are considered uncollectible and of such little value that continuance as an asset of Benjamin Franklin Bank is not warranted. Assets that possess some weaknesses, but that do not expose Benjamin Franklin Bank to risk sufficient to warrant classification in one of the aforementioned categories, are designated as Special Mention. If an asset or portion thereof is classified as Loss, it is charged off in the quarter in which it is so classified. For assets designated as Special Mention, Substandard or Doubtful, Benjamin Franklin Bank establishes reserves in amounts management deems appropriate within the allowance for loan losses. This determination as to the classification of assets and the amount of the loss allowances established are subject to review by regulatory agencies, which can order the establishment of additional loss allowances. See “—Asset Quality—Allowance for Loan Losses” on page [#] and “Management’s Discussion and Analysis of Benjamin Franklin Bancorp—Critical Accounting Policies—Allowance for Loan Losses” on page [#].

     Benjamin Franklin Bank engages an independent third party to conduct a semi-annual review of its commercial real estate, construction and commercial loan portfolios. These loan reviews, which typically include a 70.0% penetration of the various commercial portfolios, provide a credit evaluation of individual loans to determine whether the risk ratings assigned are appropriate. In addition, independent loan reviews are performed on a quarterly basis for the residential mortgage portfolio, based on a sampling of newly originated loans during the period. Independent loan review findings are presented directly to the Executive Committee of the Board of Directors.

     At September 30, 2004, loans classified Substandard totaled $3.2 million, consisting of $2.4 million in commercial real estate loans and $0.8 million in commercial loans. Special Mention loans totaled $2.1 million, consisting of $2.0 million in commercial real estate loans and $0.1 million in commercial loans. One commercial loan in the amount of $10,000 was classified as Doubtful and no loans were classified as Loss on September 30, 2004.

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     Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At each date presented, we had no troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).

                                                 
    At        
    September     At December 31,  
    30, 2004     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Non-accrual loans:
                                                
Residential mortgage
   $ —     $ —     $ —     $ —     $ —     $ —  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial business
     357       458       —       157       —       —  
Home equity, consumer and other
     —       —       —       —       —       —  
 
                                    
Total non-accrual loans
     357       458       —       157       —       —  
 
                                    
 
                                                
Loans greater than 90 days delinquent and still accruing:
                                                
Residential mortgage
     64       —       —       —       177       180  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial business
     —       —       —       —       —       —  
Home equity, consumer and other
     1       5       2       —       —       —  
 
                                    
Total loans 90 days delinquent and still accruing
     65       5       2       0       177       180  
 
                                    
Total non-performing loans
     422       463       2       157       177       180  
 
                                    
 
                                                
Total non-performing assets
   $ 422     $ 463     $ 2     $ 157     $ 177     $ 180  
 
                                    
 
                                                
Ratios:
                                                
Non-performing loans to total loans
     0.11 %     0.16 %     0.00 %     0.06 %     0.06 %     0.07 %
Non-performing assets to total assets
     0.08 %     0.10 %     0.00 %     0.04 %     0.04 %     0.04 %

     Loans are placed on non-accrual status either when reasonable doubt exists as to the full timely collection of interest and principal, or when a loan becomes 90 days past due unless an evaluation by the management Credit Committee clearly indicates that the loan is well-secured and in the process of collection.. Restructured loans represent performing loans for which concessions were granted due to a borrower’s financial condition. Such concessions may include reductions of interest rates to below-market terms and/or extension of repayment terms.

     Allowance for Loan Losses. In originating loans, Benjamin Franklin Bank recognizes that losses will be experienced on loans and that the risk of loss will vary with many factors, including the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan over the term of the loan. Benjamin Franklin Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio, and as such, this allowance represents management’s best estimate of the probable known and inherent credit losses in the loan portfolio as of the date of the financial statements.

     The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, portfolio volume and mix, geographic and large borrower concentrations, estimated credit losses based on internal and external portfolio reviews, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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     The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. See “—Asset Quality—Classification of Assets and Loan Review” on page [#]. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows or collateral value or observable market price of the impaired loan is lower than the carrying value of the loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

     A loan is considered impaired when, based on current information and events, it is probable that Benjamin Franklin Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, Benjamin Franklin Bank does not separately identify individual consumer and residential loans for impairment disclosures. At September 30, 2004, impaired loans totaled $357,000 and none of those loans carried a valuation allowance.

     While Benjamin Franklin Bank believes that it has established adequate specific and general allowances for losses on loans, adjustments to the allowance may be necessary if future conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, Benjamin Franklin Bank’s regulators periodically review the allowance for loan losses. These regulatory agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of their examination, thereby negatively affecting Benjamin Franklin Bank’s financial condition and earnings.

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     The following table sets forth activity in Benjamin Franklin Bank’s allowance for loan losses for the periods indicated:

                                                         
    At or for the        
    Nine Months Ended        
    September 30,     At or For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Balance at beginning of period
   $ 2,523     $ 2,312     $ 2,312     $ 1,177     $ 1,068     $ 1,183     $ 1,418  
 
                                          
 
                                                        
Charge-offs:
                                                        
Mortgage loans on real estate:
     -$       —       —       —       —       —       —  
 
                                          
Other loans:
                                                        
Commercial business
     —       (43 )     (43 )     (389 )     (10 )     (138 )     (325 )
Consumer and other
     (9 )     (20 )     (494 )     (30 )     (22 )     (13 )     (36 )
 
                                          
Total other loans
     (9 )     (63 )     (537 )     (419 )     (32 )     (151 )     (361 )
 
                                          
Total charge-offs
     (9 )     (63 )     (537 )     (419 )     (32 )     (151 )     (361 )
 
                                          
 
                                                        
Recoveries:
                                                        
Mortgage loans on real estate
     —       —       —       —       20       20       —  
 
                                          
Other loans:
                                                        
Commercial business
     23       94       100       132       55       9       48  
Consumer and other
     10       7       23       10       15       6       8  
 
                                          
Total other loans
     33       101       123       142       70       15       56  
 
                                          
Total recoveries
     33       101       123       142       90       35       56  
 
                                          
 
                                                        
Net (charge-offs) recoveries
     24       38       (414 )     (277 )     58       (116 )     (305 )
Provision for loan losses
     470       300       625       1,412       51       1       70  
 
                                          
 
                                                        
Balance at end of period
   $ 3,017     $ 2,650     $ 2,523     $ 2,312     $ 1,177     $ 1,068     $ 1,183  
 
                                          
 
                                                        
Ratios:
                                                        
Net (charge-offs) recoveries to average loans outstanding (annualized)
     0.01 %     0.01 %     (0.15 %)     (0.11 %)     0.02 %     (0.04 %)     (0.12 %)
Allowance for loan losses to non-performing loans at end of period
     714.93 %     394.35 %     544.92 %     115,600.00 %     749.68 %     603.39 %     657.22 %
Allowance for loan losses to total loans at end of period
     0.80 %     0.95 %     0.87 %     0.88 %     0.46 %     0.38 %     0.44 %

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     The following tables set forth Benjamin Franklin Bank’s percent of allowance by loan category and the percent of the loans to total loans in each of the categories listed at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories:

                                                                         
                            At December 31,  
    At September 30, 2004     2003     2002  
                    Percent                     Percent                     Percent  
                    of Loans                     of Loans                     of Loans  
            Loan     in Each             Loan     in Each             Loan     in Each  
    Allowance     Balances     Category     Allowance     Balances     Category     Allowance     Balances     Category  
    for Loan     by     to Total     for Loan     by     to Total     for Loan     by     to Total  
    Losses     Category     Loans     Losses     Category     Loans     Losses     Category     Loans  
    (Dollars in thousands)  
Mortgage loans on real estate:
                                                                        
Residential
   $ 615     $ 244,363       64.76 %   $ 485     $ 172,123       59.22 %   $ 552     $ 165,007       62.58 %
Commercial
     1,279       79,173       20.98 %     1,136       68,652       23.62 %     549       51,357       19.48 %
Construction
     358       25,079       6.64 %     338       23,936       8.23 %     422       21,082       8.00 %
Home equity
     127       21,883       5.80 %     108       18,171       6.25 %     82       16,507       6.26 %
 
                                                      
 
     2,379       370,498       98.18 %     2,067       282,882       97.32 %     1,605       253,953       96.32 %
 
                                                      
Other loans:
                                                                        
Commercial
     400       4,972       1.32 %     421       5,559       1.92 %     181       6,552       2.48 %
Consumer and other
     24       1,879       0.50 %     27       2,219       0.76 %     276       3,157       1.20 %
Unallocated
     214       0       0.00 %     8       0       0.00 %     250       0       0.00 %
 
                                                      
 
     638       6,851       1.82 %     456       7,778       2.68 %     707       9,709       3.68 %
 
                                                      
Total
   $ 3,017     $ 377,349       100.00 %   $ 2,523     $ 290,660       100.00 %   $ 2,312     $ 263,662       100.00 %
 
                                                      
                                                                         
    At December 31,  
    2001     2000     1999  
                    Percent                     Percent                     Percent  
                    of Loans                     of Loans                     of Loans  
            Loan     in Each             Loan     in Each             Loan     in Each  
    Allowance     Balances     Category     Allowance     Balances     Category     Allowance     Balances     Category  
    for Loan     by     to Total     for Loan     by     to Total     for Loan     by     to Total  
    Losses     Category     Loans     Losses     Category     Loans     Losses     Category     Loans  
    (Dollars in thousands)  
Mortgage loans on real estate:
                                                                        
Residential
   $ 433     $ 172,959       66.99 %   $ 517     $ 206,918       72.69 %   $ 508     $ 190,027       70.43 %
Commercial
     236       45,532       17.64 %     227       44,456       15.62 %     250       43,734       16.21 %
Construction
     143       19,106       7.40 %     98       13,117       4.61 %     194       19,429       7.20 %
Home equity
     28       11,161       4.32 %     25       9,778       3.44 %     28       8,167       3.03 %
 
                                                      
 
     840       248,758       96.35 %     867       274,269       96.36 %     980       261,357       96.87 %
 
                                                      
Other loans:
                                                                        
Commercial
     90       5,512       2.14 %     94       5,951       2.09 %     91       4,649       1.72 %
Consumer and other
     30       3,899       1.51 %     33       4,417       1.55 %     19       3,811       1.41 %
Unallocated
     217       0       0.00 %     74       0       0.00 %     93       0       0.00 %
 
                                                      
 
     337       9,411       3.65 %     201       10,368       3.64 %     203       8,460       3.13 %
 
                                                      
Total
   $ 1,177     $ 258,169       100.00 %   $ 1,068     $ 284,637       100.00 %   $ 1,183     $ 269,817       100.00 %
 
                                                      

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Investment Activities

     General. Benjamin Franklin Bank’s investment policy is established by its Board of Directors. The Chief Executive Officer, Chief Financial Officer and Treasurer, as authorized by the Board, implement this policy based on the established guidelines within the written policy. The primary objective of the investment portfolio is to achieve a competitive rate of return without incurring undue interest rate and credit risk, to complement Benjamin Franklin Bank’s lending activities, to provide and maintain liquidity, and to assist in managing the interest rate sensitivity of its balance sheet. Individual investment decisions are made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with Benjamin Franklin Bank’s asset/liability management objectives.

     SFAS NO. 115 requires Benjamin Franklin Bank to designate its securities as held to maturity, available for sale or trading, depending on Benjamin Franklin Bank’s intent with regard to its investments at the time of purchase. At September 30, 2004, $94.4 million or 92.9% of the portfolio was classified as available for sale, and $0.3 million or 0.3% of the portfolio was classified as held to maturity. At September 30, 2004, the net unrealized loss on securities classified as available for sale was $2.2 million. Benjamin Franklin Bank does not currently maintain a trading portfolio of securities.

     U.S. Government and Agency Obligations. At September 30, 2004, Benjamin Franklin Bank’s U.S. Government and Agency securities portfolio, totaled $37.5 million or 36.9% of the total portfolio on that date.

     Corporate Obligations. At September 30, 2004, Benjamin Franklin Bank’s portfolio of corporate obligations totaled $5.1 million, or 5.0% of the portfolio at that date. Benjamin Franklin Bank’s policy requires that investments in corporate obligations be restricted only to those obligations that are readily marketable and rated ‘A’ or better by a nationally recognized rating agency at the time of purchase. At September 30, 2004, all investments in corporate obligations were rated ‘A’ or better.

     Mortgage-Backed Securities. At September 30, 2004, Benjamin Franklin Bank’s portfolio of mortgage-backed securities totaled $52.1 million, or 51.3% of the portfolio on that date, and consisted of pass-through securities ($4.5 million) and collateralized mortgage obligations ($47.6 million) directly insured or guaranteed by Freddie Mac, Fannie Mae or the Government National Mortgage Association (Ginnie Mae). In its purchase of collateralized mortgage obligations, Benjamin Franklin Bank has targeted instruments in the three to five year weighted average life tranches, with expected average life extensions up to a maximum of seven years in a rising rate environment. The objective of this strategy has been to limit the potential interest rate risk due to extension of this portfolio in a rising rate environment.

     Restricted Equity Securities. At September 30, 2004, Benjamin Franklin Bank’s portfolio of restricted equity securities totaled $6.9 million or 6.8% of the portfolio at that date. These securities consisted primarily of stock in the Federal Home Loan Bank of Boston ($4.3 million) which must be held as a condition of membership in the Federal Home Loan Bank System and as a condition to Benjamin Franklin Bank’s borrowing under the Federal Home Loan Bank of Boston advance program. The remainder ($2.5 million) consisted of certain other equity investments in Savings Bank Life Insurance, the Community Investment Fund and the Depositors Insurance Fund of Massachusetts.

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     The following table sets forth certain information regarding the amortized cost and market values of Benjamin Franklin Bank’s investment securities at the dates indicated:

                                                                 
                    At December 31,  
    At September 30,                    
    2004     2003     2002     2001  
    Amortized     Fair     Amortized     Fair     Amortized     Fair     Amortized     Fair  
    Cost     Value     Cost     Value     Cost     Value     Cost     Value  
    (Dollars in thousands)  
Securities available for sale:
                                                                
U.S. Government and agency obligations
   $ 37,691     $ 37,492     $ 30,272     $ 30,347     $ 67,513     $ 67,582     $ 38,506     $ 39,113  
State agency and municipal obligations
     0       0       0       0       570       570       1,942       1,915  
 
                                                
 
     37,691       37,492       30,272       30,347       68,083       68,152       40,488       41,028  
Corporate bonds and other obligations
     5,086       5,057       0       0       3,536       3,716       23,091       23,214  
 
                                                
 
     42,777       42,549       30,272     $ 30,347       71,619       71,868       63,539       64,242  
Mortgage-backed securities
     53,869       51,874       74,502       72,299       26,376       26,446       13,432       13,536  
 
                                                
Total debt securities
     96,646       94,423       104,774       102,646       97,995       98,314       76,971       77,778  
 
                                                
Marketable equity securities:
                                                                
Bank Investment Fund—Fund One
     0       0       0       0       10,206       10,206       0       0  
 
                                                
Total securities available for sale
   $ 96,646     $ 94,423     $ 104,774     $ 102,646     $ 108,201     $ 108,520     $ 76,971     $ 77,778  
 
                                                
 
                                                                
Securities held to maturity:
                                                                
Mortgage-backed securities
   $ 266     $ 271     $ 386     $ 398     $ 986     $ 1,023     $ 2,749     $ 2,774  
 
                                                
 
                                                                
Restricted equity securities:
                                                                
Federal Home Loan Bank of Boston stock
   $ 4,347     $ 4,347     $ 3,707     $ 3,707     $ 3,707     $ 3,707     $ 3,707     $ 3,707  
Access Capital Strategies Community Investment Fund.
     2,000       2,000       3,000       3,000       1,000       1,000       1,000       1,000  
Savings Bank Life Insurance and Depositors Insurance Fund stock
     515       515       515       515       515       515       902       902  
 
                                                
Total restricted equity securities
   $ 6,862     $ 6,862     $ 7,222     $ 7,222     $ 5,222     $ 5,222     $ 5,609     $ 5,609  
 
                                                

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     The table below sets forth certain information regarding the amortized cost, weighted average yields and contractual maturities of Benjamin Franklin Bank’s debt securities portfolio at September 30, 2004. In the case of mortgage-backed securities, the table shows the securities by their contractual maturities, however there are scheduled principal payments for these securities and there will also be unscheduled prepayments prior to their contractual maturity:

                                                 
                    More than One Year     More than Five Years  
    One Year or Less     through Five Years     through Ten Years  
            Weighted             Weighted             Weighted  
    Amortized     Average     Amortized     Average     Amortized     Average  
    Cost     Yield     Cost     Yield     Cost     Yield  
                    (Dollars in thousands)                  
Securities available for sale:
                                                
U.S. Government and agency securities
   $ 15,152       1.71 %   $ 22,539       2.26 %   $ 0       —  
Corporate bonds and other obligations
     1,480       2.35 %     3,606       2.41 %     0       —  
Mortgage-backed securities:
     7       7.50 %     35       6.50 %     6,475       3.74 %
 
                                          
Total debt securities
     16,639       1.77 %     26,180       2.29 %     6,475       3.74 %
 
                                          
 
                                                
Securities held to maturity:
                                                
Mortgage-backed securities
     0       —       221       6.00 %     0       —  
 
                                          
 
                                                
Total investment securities
   $ 16,639       1.77 %   $ 26,401       2.32 %   $ 6,475       3.74 %
 
                                          
                                         
    More than Ten Years     Total Securities  
            Weighted                     Weighted  
    Amortized     Average     Amortized     Fair     Average  
    Cost     Yield     Cost     Value     Yield  
            (Dollars in thousands)          
Securities available for sale:
                                        
U.S. Government and agency securities
   $ 0       —     $ 37,691     $ 37,492       2.04 %
Corporate bonds and other obligations
     0       —       5,086       5,057       2.39 %
Mortgage-backed securities:
     47,352       4.20 %     53,869       51,874       4.15 %
 
                                  
Total debt securities
     47,352       4.20 %     96,646       94,423       3.23 %
 
                                  
 
                                        
Securities held to maturity:
                                        
Mortgage-backed securities
     45       6.00 %     266       271       6.00 %
 
                                  
 
                                        
Total investment securities
   $ 47,397       4.21 %   $ 96,912     $ 94,694       3.24 %
 
                                  

Sources of Funds

     General. Deposits are the primary source of Benjamin Franklin Bank’s funds for lending and other investment purposes. In addition to deposits, Benjamin Franklin Bank obtains funds from the amortization and prepayment of loans and mortgage-backed securities, the sale or maturity of investment securities, advances from the Federal Home Loan Bank of Boston, and cash flows generated by operations.

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     Deposits. Consumer and commercial deposits are gathered primarily from Benjamin Franklin Bank’s primary market area through the offering of a broad selection of deposit products including checking, regular savings, money market deposits and time deposits, including certificate of deposit accounts and individual retirement accounts. The FDIC insures deposits up to certain limits (generally, $100,000 per depositor) and the DIF fully insures amounts in excess of such limits.

     The maturities of Benjamin Franklin Bank’s certificate of deposit accounts range from three months to four years. In addition, Benjamin Franklin Bank offers a variety of commercial business products to small businesses operating within its primary market area. Currently, Benjamin Franklin Bank does not generally negotiate interest rates to attract jumbo certificates of deposit, but accepts deposits of $100,000 or more from customers within its market area based on posted rates. Benjamin Franklin Bank does not use brokers to obtain deposits.

     Benjamin Franklin Bank relies primarily on competitive pricing of its deposit products, customer service and long-standing relationships with customers to attract and retain deposits. Market interest rates, rates offered by financial service competitors, the availability of other investment alternatives, and general economic conditions significantly affect Benjamin Franklin Bank’s ability to attract and retain deposits.

     The following tables set forth certain information relative to the composition of Benjamin Franklin Bank’s deposit accounts and the weighted average interest rate on each category of deposits:

                                                 
    At September 30, 2004     At December 31, 2003  
                    Weighted                     Weighted  
                    Average                     Average  
    Balance     Percent     Rate     Balance     Percent     Rate  
                    (Dollars in thousands)                  
Deposit type:
                                                
Demand deposits
   $ 86,605       21.68 %     0.00 %   $ 85,681       22.53 %     0.00 %
NOW deposits
     25,179       6.30 %     0.14 %     24,581       6.47 %     0.15 %
Money market deposits
     54,390       13.61 %     1.14 %     50,094       13.17 %     0.83 %
Regular savings
     99,799       24.98 %     0.50 %     96,118       25.28 %     0.50 %
 
                                        
Total transaction accounts
     265,973       66.57 %     0.43 %     256,474       67.45 %     0.36 %
 
                                                
Certificates of deposit
     133,589       33.43 %     2.35 %     123,783       32.55 %     2.55 %
 
                                        
 
                                                
Total deposits
   $ 399,562       100.00 %     1.07 %   $ 380,257       100.00 %     1.08 %
 
                                        

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    At December 31,  
    2002     2001  
                    Weighted                     Weighted  
                    Average                     Average  
    Balance     Percent     Rate     Balance     Percent     Rate  
                    (Dollars in thousands)                  
Deposit type:
                                                
Demand deposits
   $ 36,730       9.84 %     0.00 %   $ 36,744       10.18 %     0.00 %
NOW deposits
     79,904       21.41 %     0.14 %     68,429       18.96 %     0.36 %
Money market deposits
     44,177       11.83 %     0.87 %     37,876       10.49 %     1.60 %
Regular savings
     87,536       23.45 %     0.50 %     77,323       21.42 %     0.75 %
 
                                        
Total transaction accounts
     248,347       66.53 %     0.38 %     220,372       61.05 %     0.65 %
 
                                                
Certificates of deposit
     124,953       33.47 %     3.09 %     140,607       38.95 %     3.99 %
 
                                        
 
                                                
Total deposits
   $ 373,300       100.00 %     1.28 %   $ 360,979       100.00 %     1.95 %
 
                                        

     The following table sets forth the time deposits of Benjamin Franklin Bank classified by interest rate as of the dates indicated:

                                 
    At September 30,     At December 31,  
    2004     2003     2002     2001  
            (Dollars in thousands)          
Interest Rate
                                
Less than 2%
   $ 50,247     $ 55,034     $ 39,945     $ 387  
2.00%-2.99%
     60,282       37,753       38,374       46,442  
3.00%-3.99%
     8,713       7,776       9,808       29,213  
4.00%-4.99%
     10,967       13,960       17,353       28,278  
5.00%-5.99%
     1,443       4,034       12,641       36,287  
6.00%-6.99%
     1,937       5,226       6,832       —  
 
                        
 
                                
Total
   $ 133,589     $ 123,783     $ 124,953     $ 140,607  
 
                        

     The following table sets forth the amount and maturities of time deposits at September 30, 2004:

                                                 
                                    After        
    Year ending September 30,     September 30,        
    2005     2006     2007     2008     2008     Total  
                    (Dollars in thousands)                  
Interest Rate
                                                
Less than 2%
   $ 49,579     $ 668     $ —     $ —     $ —     $ 50,247  
2.00%-2.99%
     36,486       17,780       4,850       1,166       —       60,282  
3.00%-3.99%
     1,640       1,770       1,837       3,466       —       8,713  
4.00%-4.99%
     4,028       6,911       —       28       —       10,967  
5.00%-5.99%
     1,443       —       —       —       —       1,443  
6.00%-6.99%
     1,921       —       —       16       —       1,937  
 
                                    
 
                                                
Total
   $ 95,097     $ 27,129     $ 6,687     $ 4,676     $ —     $ 133,589  
 
                                    

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     As of September 30, 2004, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $38.7 million. The following table sets forth the maturity of those certificates as of September 30, 2004:

         
    At  
    September  
    30. 2004  
    (Dollars in  
    thousands)  
Three months or less
   $ 8,859  
Over three months through six months
     14,949  
Over six months through one year
     5,049  
Over one year to three years
     7,982  
Over three years
     1,858  
 
      
Total
   $ 38,697  
 
      

     Borrowings. Benjamin Franklin Bank utilizes advances from the Federal Home Loan Bank of Boston, primarily in connection with the funding of growth in its assets. Federal Home Loan Bank of Boston advances are secured primarily by certain of Benjamin Franklin Bank’s mortgage loans, certain investment securities and by Benjamin Franklin Bank’s holding of Federal Home Loan Bank of Boston stock. As of September 30, 2004, Benjamin Franklin Bank had outstanding $75.0 million in Federal Home Loan Bank of Boston advances, and had the ability to borrow up to a total of $154.6 million based on available collateral.

     The following table sets forth certain information concerning balances and interest rates on Benjamin Franklin Bank’s Federal Home Loan Bank of Boston advances at the dates and for the periods indicated:

                                         
    At or For the        
    Nine Months Ended        
    September 30,     At or For the Years Ended December 31,  
    2004     2003     2003     2002     2001  
            (Dollars in thousands)          
Balance at end of period
   $ 75,000     $ 36,000     $ 36,000     $ 36,000     $ 36,000  
Average balance during period
   $ 44,421     $ 36,000     $ 36,000     $ 36,000     $ 35,242  
Maximum outstanding at any month end
   $ 75,000     $ 36,000     $ 36,000     $ 36,000     $ 36,150  
Weighted average interest rate at end of period
     3.21 %     4.47 %     4.47 %     4.47 %     4.47 %
Weighted average interest rate during period
     3.99 %     4.47 %     4.47 %     4.47 %     4.67 %

     Of the $75.0 million in advances outstanding at September 30, 2004, $36.0 million, bearing a weighted-average interest rate of 4.47%, are callable by the FHLBB at its option and in its sole discretion. In the event the FHLBB calls these advances, the Bank will evaluate its liquidity and interest rate sensitivity position at that time and determine whether to replace the called advances with new borrowings.

     In 2002, Benjamin Franklin Bancorp raised net proceeds of $8.7 million in a sale of $9.0 million of subordinated debentures to Benjamin Franklin Capital Trust I (the “Trust”). The Trust funded the purchase by participating in a pooled offering of 9,000 capital securities representing preferred ownership interests in the assets of the Trust with a liquidation value of $1,000 each. Interest payable on the

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subordinated debentures and cumulative dividends payable quarterly on the preferred securities is 6.94% for the first five years and thereafter will be at a rate equal to the three month LIBOR rate plus 3.45%. Benjamin Franklin Bancorp has the option to defer interest payments on the subordinated debentures for up to five years and, accordingly, the Trust may defer dividend distributions for up to five years. The debentures and the preferred securities mature in November 2032 unless Benjamin Franklin Bancorp elects and obtains regulatory approval to accelerate the maturity to November 2007 or thereafter.

Properties

     Benjamin Franklin Bank conducts its business through its main office located in Franklin, Massachusetts and five other offices located southeast of the Boston metropolitan area. All of Benjamin Franklin Bank’s office facilities are owned by the Bank. The following table sets forth information about our offices as of September 30, 2004:

             
    Location   Year Opened
Main Office:
  58 Main Street, Franklin, MA 02038     1935  
 
            
Branch Offices:
  231 East Central St., Franklin, MA 02038     1998  
  4 North Main St., Bellingham, MA 02019     1982  
  1 Mechanic St., Foxborough, MA 02035     1998  
  76 North Street, Medfield, MA 02052     1998  
  221 Main Street, Milford, MA 01757     1992  

Subsidiary Activities

     Benjamin Franklin Bancorp conducts its principal business activities through its wholly-owned subsidiary, Benjamin Franklin Bank. Subsidiaries of Benjamin Franklin Bancorp and Benjamin Franklin Bank are as follows:

     Benjamin Franklin Bank Capital Trust I, a Delaware Trust, is a wholly-owned subsidiary of Benjamin Franklin Bancorp. In 2002, Benjamin Franklin Bancorp raised net proceeds of $8.7 million in a sale of $9.0 million in junior subordinated notes due 2032 to Benjamin Franklin Capital Trust I (the “Trust”). The Trust funded the purchase by participating in a pooled offering of 9,000 capital securities representing preferred ownership interests in the assets of the Trust with a liquidation value of $1,000 each. The interest rate payable on the subordinated notes is 6.94% for the first five years and thereafter will be at a rate equal to the three month LIBOR rate plus 3.45%.

     Benjamin Franklin Securities Corp., a Massachusetts corporation, is a wholly-owned subsidiary of Benjamin Franklin Bank. Benjamin Franklin Securities Corp. (“BFSC”) engages exclusively in buying, selling and holding investment securities on its own behalf and not as a broker. The income earned on BFSC’s investment securities is subject to a significantly lower rate of state tax than that assessed on income earned on investment securities maintained at Benjamin Franklin Bank. At September 30, 2004, BFSC had total assets of $73.7 million, consisting primarily of cash and investment securities.

Legal Proceedings

     Benjamin Franklin Bank is not involved in any legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Management believes that those routine legal proceedings involve, in the aggregate, amounts that are immaterial to the financial condition and results of operations of Benjamin Franklin Bank.

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Employees

     As of September 30, 2004, Benjamin Franklin Bank had 110 full-time and 21 part-time employees. Employees are not represented by a collective bargaining unit and Benjamin Franklin Bank considers its relationship with its employees to be good.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF BENJAMIN FRANKLIN BANCORP

     This section is intended to help potential investors understand the financial performance of Benjamin Franklin Bancorp and Benjamin Franklin Bank through a discussion of the factors affecting our financial condition at September 30, 2004, December 31, 2003 and December 31, 2002 and our consolidated results of operations for the nine months ended September 30, 2004 and 2003 and for the years ended December 31, 2003, 2002 and 2001. This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in this prospectus. The financial condition and results of operations reported at September 30, 2004 and for the nine-month period ending September 30, 2004 are not necessarily indicative of the financial condition and results of operations that will result for the fiscal year ended December 31, 2004. In this section, we sometimes refer to Benjamin Franklin Bank and Benjamin Franklin Bancorp together as “Benjamin Franklin” since the financial condition and results of operation of Benjamin Franklin Bancorp closely reflect the financial condition and results of operation of its sole operating subsidiary, Benjamin Franklin Bank.

     Following the completion of the conversion, we anticipate that our non-interest expense will increase as a result of the increased costs associated with managing a public company, increased compensation expenses associated with the purchases of shares of common stock by our employee stock ownership plan, the costs of funding the Benjamin Franklin Bank Charitable Foundation and the adoption of a stock-based incentive plan, if approved by Benjamin Franklin Bancorp’s stockholders.

     Assuming that the adjusted maximum number of shares is sold in the offering (6,612,500 shares) and 400,000 shares are issued to the Benjamin Franklin Bank Charitable Foundation:

  i.   the contribution to the Benjamin Franklin Bank Charitable Foundation will be approximately $4,000,000 million, all of which will be expensed in the quarter during which the conversion is completed;
 
  ii.   the employee stock ownership plan will acquire 561,000 shares of common stock with a $5.6 million loan that is expected to be repaid over 30 years, resulting in an annual compensation expense (pre-tax) of approximately $187,000 (assuming that the common stock maintains a value of $10 per share);
 
  iii.   the stock-based incentive plan would award a number of shares of restricted stock equal to 4.0% of the shares sold in the offering (including shares issued to the Benjamin Franklin Bank Charitable Foundation), or 280,500 shares to eligible participants, which would be expensed as the awards vest. Assuming that all shares of restricted stock under the stock-based incentive plan are awarded at a price of $10 per share, and that the awards vest over a five year period, the corresponding annual expense (pre-tax) associated with shares awarded under the stock-based incentive plan would be approximately $561,000.
 
  iv.   the stock-based incentive plan would grant options to acquire common stock equal to 10% of the shares issued in the offering (including shares issued to the Benjamin Franklin Bank Charitable Foundation), or 701,250 options, to eligible participants, which would be expensed as the awards vest. Using the Black-Scholes option pricing model, assuming that all option grants are made at a grant-date share price and option exercise price of $10 and that options vest over a 5 year period, the corresponding annual expense (pre-tax) associated with options granted under the stock-based incentive plan would be approximately $540,000.

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     The actual expense that will be recorded for the employee stock ownership plan will be determined by the market value of the shares of common stock as they are released to employees over the term of the loan, and whether the loan is repaid faster than its contractual term. Accordingly, increases in the stock price above $10 per share will increase the total employee stock ownership plan expense, and any accelerated repayment of the loan will increase the annual employee stock ownership plan expense. Further, the actual expense of the restricted stock awards granted under the stock-based incentive plan will be determined by the fair market value of the stock on the grant date, which might be greater than $10 per share. The actual expense of the options granted will be determined by the results of the Black-Scholes option pricing model for the actual period under measurement. The assumptions and factors considered in this pricing model will include the grant-date share price and option exercise price, the dividend yield, if any, the expected option life, the option vesting period, the risk-free interest rate, and the volatility rate for the stock, all of which may differ from the information used herein to estimate the effect of stock option grants on future earnings.

Overview

     Income. Benjamin Franklin Bancorp’s results of operations are dependent mainly on net interest income, which is the difference between the income earned on its loan and investment portfolios and interest expense incurred on its deposits and borrowed funds. Results of operations are also affected by fee income from banking and non-banking operations, provisions for loan losses, gains (losses) on sales of loans and securities available for sale, loan servicing income and other miscellaneous income.

     Expenses. Benjamin Franklin’s expenses consist primarily of compensation and employee benefits, office occupancy, technology, marketing, general administrative expenses and income tax expense.

     Results of operations are also significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact Benjamin Franklin’s financial condition and results of operations. See “Risk Factors” beginning on page [#].

Critical Accounting Policies

     Critical accounting policies are those that involve significant judgments and assessments by management, and which could potentially result in materially different results under different assumptions and conditions. Benjamin Franklin considers the following to be critical accounting policies:

     Allowance for Loan Losses. This accounting policy is considered critical due to the high degree of judgment involved, the subjectivity of the underlying assumptions used, and the potential for changes in the economic environment that could result in material changes in the amount of the allowance for loan losses considered necessary. The allowance is evaluated on a regular basis by management and is based on a periodic review of the collectibility of the loans in light of historical experience, the nature and size of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, the estimated value of any underlying collateral and prevailing economic conditions. For a full discussion of the allowance for loan losses, please refer to “Business of Benjamin Franklin Bancorp—Asset Quality” on page [#].

     Income Taxes. Benjamin Franklin uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance related to deferred tax assets is established when, in management’s judgment, it is more likely than not that all or a portion of such deferred tax

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assets will not be realized. Deferred tax assets applicable to capital loss carryforwards that expire in 2006 are recoverable only to the extent that capital gains can be realized during the carryforward period. Accordingly, given Benjamin Franklin’s limited opportunity to realize capital gains through the sale of capital assets within the required timeframe, management has provided a valuation allowance of $2.3 million against 100% of the deferred tax assets related to capital loss carryforwards at September 30, 2004 and December 31, 2003 and 2002. This valuation allowance is assessed periodically for recoverability. The judgments applied by management consider the likelihood that capital gain income will be realized within the carryforward period in light of Benjamin Franklin’s tax planning strategies and changes in market conditions.

     Intangible Assets. Benjamin Franklin considers accounting for goodwill to be critical because significant judgment is exercised in performing periodic valuations of this asset, which arose through the acquisition of Foxboro National Bank. Goodwill is evaluated for potential impairment on an annual basis as of each December 31st , or more frequently if events or circumstances indicate a potential for impairment. At the time of acquisition, the operations of Foxboro National Bank were combined with the operations of Benjamin Franklin based on similar economic characteristics. Accordingly, discrete financial information is not separately maintained to evaluate the operating results of the former Foxboro National Bank and, as a result, in performing a goodwill impairment evaluation, Benjamin Franklin measures the fair value of the entire company, rather than that of Foxboro separately. If impairment is detected, the carrying value of goodwill is reduced through a charge to earnings. The evaluation of goodwill involves estimations of discount rates and the timing of projected future cash flows, which are subject to change with changes in economic conditions and other factors. Such changes in the assumptions used to evaluate this intangible asset affect its value and could have a material adverse impact on Benjamin Franklin’s results of operations.

     This discussion has highlighted those accounting policies that management considers to be critical, however all accounting policies are important, and therefore the reader is encouraged to review each of the policies included in Note 1 to the consolidated financial statements to gain a better understanding of how Benjamin Franklin’s financial performance is measured and reported.

Analysis of Net Interest Income

     Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income also depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

     The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

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                    Nine Months Ended September 30,  
    At September 30, 2004     2004     2003  
            Weighted                                            
            Average     Average                     Average                
            Yield/     Outstanding             Yield/     Outstanding             Yield/  
    Balance     Rate     Balance     Interest     Rate(1)     Balance     Interest     Rate(1)  
    (Dollars in thousands)  
Interest-earning assets:
                                                                
Loans
   $ 375,516       5.00 %   $ 324,944     $ 12,567       5.17 %   $ 265,369     $ 11,601       5.84 %
Investment securities
     101,551       3.77 %     109,898       2,549       3.10 %     121,402       2,413       2.66 %
Interest-earning deposits
     6,831       1.71 %     15,382       107       0.93 %     41,565       515       1.66 %
 
                                                      
Total interest-earning assets
     483,898       4.70 %     450,224       15,223       4.52 %     428,336       14,529       4.54 %
Non-interest-earning assets
     34,033               33,760                       37,560                  
 
                                                          
Total assets
   $ 517,931             $ 483,984                     $ 465,896                  
 
                                                          
 
                                                                
Interest-bearing liabilities:
                                                                
Savings deposits
   $ 99,799       0.50 %   $ 99,172       368       0.50 %   $ 92,652       345       0.50 %
Money market
     54,391       1.14 %     51,779       332       0.86 %     47,836       290       0.81 %
NOW accounts
     25,179       0.14 %     23,955       27       0.15 %     73,403       82       0.15 %
Certificates of deposits
     133,589       2.35 %     133,492       2,494       2.50 %     127,370       2,722       2.86 %
 
                                                      
Total deposits
     312,958       1.37 %     308,398       3,221       1.40 %     341,261       3,439       1.35 %
Short term borrowings
     29,000       1.68 %     6,195       56       1.21 %     —       —       0.00 %
Long-term debt
     55,000       4.72 %     47,226       1,747       4.94 %     45,000       1,695       5.03 %
 
                                                      
Total interest-bearing liabilities
     396,958       1.86 %     361,819       5,024       1.85 %     386,261       5,134       1.78 %
Non-interest bearing liabilities
     90,387               92,207                       49,501                  
 
                                                          
Total liabilities
     487,345               454,026                       435,762                  
Equity
     30,586               29,958                       30,134                  
 
                                                          
Total liabilities and equity
   $ 517,931             $ 483,984                     $ 465,896                  
 
                                                          
 
                                                                
Net interest income
                           $ 10,199                     $ 9,395          
 
                                                            
Net interest rate spread (2)(5)
             2.84 %                     2.67 %                     2.76 %
Net interest-earning assets (3)
   $ 86,940             $ 88,405                     $ 42,075                  
 
                                                            
Net interest margin (4)
             N/A                       3.03 %                     2.93 %
Average interest-earning assets to
                                                                
interest-bearing liabilities
                                     124.43 %                     110.89 %

Footnotes on following page

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    Years Ended December 31,  
    2003     2002     2001  
    Average                     Average                     Average                
    Outstanding             Yield/     Outstanding             Yield/     Outstanding             Yield/  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
    (Dollar in thousands)  
Interest-earning assets:
                                                                        
Loans
   $ 270,342     $ 15,530       5.74 %   $ 249,260     $ 16,322       6.55 %   $ 274,088     $ 20,355       7.43 %
Investment securities
     122,570       3,450       2.81 %     89,295       4,166       4.67 %     73,069       4,267       5.84 %
Interest-earning deposits
     35,293       552       1.56 %     58,980       918       1.56 %     53,084       1,819       3.43 %
 
                                                            
Total interest-earning assets
     428,205       19,532       4.56 %     397,535       21,406       5.38 %     400,241       26,441       6.61 %
Non-interest-earning assets
     37,495                       41,978                       37,154                  
 
                                                                  
Total assets
   $ 465,700                     $ 439,513                     $ 437,395                  
 
                                                                  
 
                                                                        
Interest-bearing liabilities:
                                                                        
Savings deposits
   $ 93,501       465       0.50 %   $ 83,878       567       0.68 %   $ 71,651       921       1.29 %
Money market
     48,256       392       0.81 %     45,648       617       1.35 %     37,919       849       2.24 %
NOW accounts
     60,751       92       0.15 %     69,832       221       0.32 %     61,957       360       0.58 %
Certificates of deposits
     126,856       3,538       2.79 %     131,073       4,451       3.40 %     167,566       8,622       5.15 %
 
                                                            
Total deposits
     329,364       4,487       1.36 %     330,431       5,856       1.77 %     339,093       10,752       3.17 %
Short-term borrowings
     0       0       0.00 %     0       0       0.00 %     0       0       0.00 %
Long-term debt
     45,001       2,265       5.03 %     37,504       1,738       4.63 %     35,242       1,645       4.67 %
 
                                                            
Total interest-bearing liabilities
     374,365       6,752       1.80 %     367,935       7,594       2.06 %     374,335       12,397       3.31 %
Non-interest bearing liabilities
     61,454                       43,041                       37,612                  
 
                                                                  
Total liabilities
     435,819                       410,976                       411,947                  
Equity
     29,881                       28,537                       25,448                  
 
                                                                  
Total liabilities and equity
   $ 465,700                     $ 439,513                     $ 437,395                  
 
                                                                  
 
                                                                        
Net interest income
           $ 12,780                     $ 13,812                     $ 14,044          
 
                                                                  
Net interest rate spread (5)
                     2.76 %                     3.32 %                     3.30 %
Net interest-earning assets (3)
   $ 53,840                     $ 29,600                     $ 25,906                  
 
                                                                  
Net interest margin (4)
                     2.98 %                     3.47 %                     3.51 %
Average interest-earning assets to interest-bearing liabilities
                     114.38 %                     108.04 %                     106.92 %
     
 
    
(1)
  Yields and rates for the nine months ended September 30, 2004 and 2003 are annualized.
 
    
(2)
  Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities at September 30, 2004.
 
    
(3)
  Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
 
    
(4)
  Net interest margin represents net interest income divided by average total interest-earning assets.
 
    
(5)
  Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities for the nine months ended September 30, 2004 and 2003 and the years ended December 31, 2003, 2002 and 2001.

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     The following table presents the dollar amount of changes in interest income and interest expense for the major categories of Benjamin Franklin’s interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

                                                                         
    Nine Months Ended              
    September 30,     Years Ended December 31,     Years Ended December 31,  
    2004 vs. 2003     2003 vs. 2002     2002 vs. 2001  
                            Increase                    
    Increase     Total     (Decrease)     Total     Increase     Total  
    (Decrease) Due to     Increase     Due to     Increase     (Decrease) Due to     Increase  
    Volume     Rate     (Decrease)     Volume     Rate     (Decrease)     Volume     Rate     (Decrease)  
                                    (Dollars in thousands)                          
Interest-earning assets:
                                                                        
Loans
   $ 2,604     $ (1,637 )   $ 967     $ 1,381     $ (2,173 )   $ (792 )   $ (1,844 )   $ (2,189 )   $ (4,033 )
Investment securities
     (229 )     364       135       1,552       (2,268 )     (716 )     948       (1,049 )     (101 )
Interest-earning deposits
     (324 )     (84 )     (408 )     (369 )     3       (366 )     202       (1,102 )     (900 )
 
                                                      
Total interest-earning assets
     2,051       (1,357 )     694       2,564       (4,438 )     (1,874 )     (694 )     (4,340 )     (5,034 )
 
                                                      
Interest-bearing liabilities:
                                                                        
Savings deposits
     24       —       24       65       (166 )     (101 )     157       (511 )     (354 )
Money market
     24       19       43       35       (260 )     (225 )     173       (406 )     (233 )
NOW accounts
     (55 )     —       (55 )     (29 )     (102 )     (131 )     46       (182 )     (136 )
Certificates of deposits
     131       (361 )     (230 )     (143 )     (769 )     (912 )     (1,878 )     (2,294 )     (4,172 )
 
                                                      
Total deposits
     124       (342 )     (218 )     (72 )     (1,297 )     (1,369 )     (1,502 )     (3,393 )     (4,895 )
Short-term borrowings and long-term debt
     84       24       108       347       180       527       106       (13 )     93  
 
                                                      
Total interest-bearing liabilities
     208       (318 )     (110 )     275       (1,117 )     (842 )     (1,396 )     (3,406 )     (4,802 )
 
                                                      
Change in net interest income
   $ 1,843     $ (1,039 )   $ 804     $ 2,289     $ (3,321 )   $ (1,032 )   $ 702     $ (934 )   $ (232 )
 
                                                      

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Comparison of Financial Condition At September 30, 2004 and December 31, 2003

     Total Assets. Total assets increased by $59.1 million, or 12.9%, from $458.8 million at December 31, 2003 to $517.9 million at September 30, 2004. This increase was largely the result of an increase in the loan portfolio, offset by reductions in cash and short-term investments.

     Cash and Short-term Investments. Cash and correspondent bank balances decreased by $6.2 million to $8.3 million as of September 30, 2004 when compared to December 31, 2003. Over the same 9-month period, short-term investments, comprised of overnight fed funds sold and money market funds, decreased $14.1 million to $6.8 million at September 30, 2004. These reductions in short-term liquidity served primarily to fund increases in the Bank’s loan portfolio.

     Securities. The investment portfolio aggregated $94.7 million at September 30, 2004, a decrease of $8.3 million, or 8.1%, from $103.0 million at December 31, 2003. This reduction, caused by net paydowns in mortgage-backed securities totaling $20.5 million offset by increases in holdings of U.S. Agency securities and corporate bonds totaling $7.1 million and $5.1 million, respectively, was used to fund growth in the Bank’s loan portfolio.

     Net Loans. Net loans as of September 30, 2004 were $375.5 million, an increase of $86.7 million, or 30.0%, over net loan balances of $288.9 million as of December 31, 2003. Loan growth occurred in most product categories, including residential mortgage loans ($72.2 million), commercial real estate ($10.5 million), construction ($1.1 million), and consumer ($3.4 million). The significant growth in residential mortgage loans can be attributed to the attractive rates offered on adjustable-rate mortgages and 15-year bi-weekly mortgage loans.

     Deposits. Deposits increased by $19.3 million to $399.6 million at September 20, 2004, an increase of 5.1% over balances of $380.3 million at December 31, 2003. The largest increases came in certificates of deposit ($9.8 million), money market accounts ($4.3 million) and savings accounts ($3.7 million). The deposit increases overall were the result Ben Franklin’s continued marketing and promotional efforts in its market area, including efforts to remain competitive in all of its deposit product offerings.

     Borrowed Funds. Funds borrowed from the Federal Home Loan Bank of Boston increased by $39.0 million to $75.0 million at September 30, 2004, a 108.3% increase over balances of $36.0 million as of December 31, 2003. These additional funds were borrowed in order to fund the continued growth in the Bank’s loan portfolio during the nine months ended September 30, 2004. The $9.0 million balance in subordinated debt remained unchanged from December 31, 2003 to September 30, 2004.

     Retained Earnings. Retained earnings increased by $1.3 million to $30.6 million at September 30, 2004, an increase of 4.4% from a balance of $29.3 million as of December 31, 2003. This change was the result of net income for the first nine months of $1,312,000, offset by a small increase ($27,000) in the net unrealized loss on marketable securities.

Comparison of Operating Results For The Nine Months Ended September 30, 2004 and September 30, 2003

     Net Income. Net income for the nine months ended September 30, 2004 was $1,312,000, a decrease from net income of $1,381,000 for the first nine months of 2003. An $897,000 decline in other income and a $170,000 increase in the provision for loan losses were almost entirely offset by an increase in net interest income of $804,000 and a $169,000 reduction in operating expenses.

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     Net Interest Income. The tables on pages [#] and [#] set forth the components of Benjamin Franklin’s net interest income, yields on interest earning assets and interest bearing liabilities, and the effect on net interest income arising from changes in volume and rate.

     Benjamin Franklin earned net interest income of $10.2 million and $9.4 million in the first nine months of 2004 and 2003, respectively. The increase between the two periods of $804,000, or 8.6%, is due to a 10 basis point, or 3.4%, increase in the net interest margin coupled with a $21.9 million, or 5.1%, increase in average interest-earning assets. Though average yields and rates declined generally from the nine months ended September 30, 2003 to the same period in 2004, the 10 basis point increase in the net interest margin from 2003 to 2004 was achieved primarily through a change in mix in both earning assets and in funding liabilities. Within earnings assets, higher-yielding loans increased by $59.6 million between periods, while lower-yielding investment securities and short-term investments declined by $37.7 million on average. Within Benjamin Franklin’s funding liabilities, the mix shifted somewhat in favor of non-interest bearing accounts, which increased by $42.7 million on average. This shift was caused by a change made in the Bank’s primary checking account product in September 2003, whereby the payment of interest was eliminated.

     Interest Income. Interest income rose $694,000, or 4.8%, to $15.2 million for the nine months ended September 30, 2004 from $14.5 million for the nine months ended September 30, 2003. The increase was caused primarily by a $21.9 million increase in interest-earning assets, which had the effect of increasing interest income by $2.0 million. Loans increased on average by $59.6 million between the two periods, offset by decreases in the average balances of investment securities ($11.5 million) and short-term investments ($26.2 million). Despite the fact that the average yield on loans declined from 5.84% for the nine months ended September 30, 2003 to 5.17% for the same period in 2004, the overall yield on interest earning assets remained almost unchanged at 4.54% and 4.52% for the 2003 and 2004 periods, respectively, due to the change in the mix of interest earning assets.

     Interest Expense. Interest expense for the nine months ended September 30, 2004 declined (by $110,000 or 2.1%) to $5.0 million as compared to interest expense of $5.1 million for the nine months ended September 30, 2003. The effect of an increase in non-interest-bearing liabilities, which grew by an average of $42.7 million in the 2004 period, was offset partially by a 7 basis point, or 3.9%, increase in the average rates paid on interest-bearing liabilities. The increase in non-interest-bearing liabilities was due to a change made in the Bank’s primary checking account product, whereby the payment of interest was eliminated.

     Provision for Loan Losses. Benjamin Franklin records a provision for loan losses as a charge to its earnings when necessary in order to maintain the allowance for loan losses at a level sufficient to absorb potential losses inherent in the loan portfolio. Refer to “Business of Benjamin Franklin Bancorp—Asset Quality” on page [#] for additional information about Benjamin Franklin’s methodology for establishing its allowance for loan losses. Benjamin Franklin recorded $470,000 and $300,000 in loan loss provisions during the nine months ended September 30, 2004 and 2003, respectively. Provisions in both years were reflective of growth in the loan portfolio and the realization of net recoveries of $24,000 and $38,000 in the nine months ended September 30, 2004 and 2003, respectively. At September 30, 2004, the allowance for loan losses totaled $3.0 million, or 0.80% of the loan portfolio, compared to $2.7 million, or 0.95%, of total loans at September 30, 2003.

     Non-interest Income. Non-interest income for the nine month period ended September 30, 2004 declined to $1.7 million, a reduction of $0.9 million, or 35.0%, when compared to non-interest income of $2.6 million earned during the nine month period ended September 30, 2003. An $845,000 decline in gains on loan sales, a $122,000 reduction in loan servicing fees and a $105,000 decrease in gains on sales of securities were partially offset by a $52,000 increase in deposit service fees and an additional $123,000

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in miscellaneous income. The largest area of decline, on loan sales, was attributable to the rise in market interest rates in 2004, which in turn caused a decline in the origination of fixed rate residential mortgage loans that the Bank typically sells at a small gain in the secondary market. Loan servicing fee income was also negatively affected by the reduction in fixed rate loan originations sold with servicing rights retained. The increase in miscellaneous income in the 2004 period was primarily attributable to an increase in fees earned on investment product sales, brought about by the addition of a second sales representative in the fourth quarter of 2003.

     Non-interest Expense. Non-interest expense declined, by $169,000 or 1.8%, to $9.5 million for the nine months ended September 30, 2004, compared to $9.6 million for the nine months ended September 30, 2003. Reductions in occupancy and equipment costs, and professional fees were offset in part by an increase in salaries and employee benefits.

     Salaries and employee benefits expenses increased $673,000, or 13.4%, to $5.7 million for the nine months ended September 30, 2004. The increase was primarily due to normal merit increases averaging 4.5%, the addition of one senior officer position, and significantly lower deferral of loan origination costs due to a lower volume of loan originations in the 2004 period when compared to 2003. Occupancy and equipment expenses declined $285,000, or 21.6%, to $1.0 million for the nine months ended September 30, 2004. Most of this reduction was attributable to a decline in depreciation expense associated with branch-related capital expenditures made five years earlier. Professional fees decreased $629,000, or 76.6%, to $192,000 for the nine months ended September 30, 2004, due primarily to a decline in legal costs and loan origination expenses.

     Income Taxes. Income tax expense was $626,000 for the nine months ended September 30, 2004, a decrease of $25,000, or 3.8%, compared to $651,000 for the nine months ended September 30, 2003. The effective tax rate remained essentially unchanged between years, at 32.3% and 32.0% in 2004 and 2003, respectively.

Comparison of Financial Condition At December 31, 2003 and December 31, 2002

     Total Assets. Total assets increased by $6.6 million, or 1.5%, from $452.2 million at December 31, 2002 to $458.8 million at December 31, 2003. This increase was largely the result of an increase in the loan portfolio, offset by a reduction in investment securities.

     Cash and Short-term Investments. While cash and correspondent bank balances remained essentially the same from year to year, short-term investments consisting of overnight fed funds sold and money market funds declined by $16.9 million to $21.0 million at September 30, 2003. This reduction in short-term liquidity served primarily to fund an increase in the loan portfolio.

     Securities. The investment portfolio aggregated $103.0 million at December 31, 2003, a decline of $6.5 million, or 5.9%, from $109.5 million at December 31, 2002. Within the securities portfolio, decreases in U.S. Treasury and Agency securities ($37.2 million) and other bonds and obligations ($14.5 million), offset by a $45.3 million increase in holdings of mortgage-backed securities, were used to fund increases in the Bank’s loan portfolio. The change in the securities portfolio mix is due to the more favorable yields available on mortgage-backed securities of like duration.

     Net Loans. Net loans as of December 31, 2003 were $288.9 million, an increase of $26.9 million, or 10.3%, over net loan balances of $261.9 million as of December 31, 2002. Most loan product categories increased during this period, including residential ($7.1 million), commercial real estate ($17.3 million), construction ($2.9 million), and consumer ($0.7 million). In 2003, Benjamin Franklin had its highest level of new loan activity to date, with total originations of $246.9 million, the product of its ability to offer

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competitive, attractive interest rates resulting from a historically low interest rate environment. Of that amount, $96.3 million of fixed rate loan originations were sold in the secondary market, with servicing rights retained. The low interest rate environment also brought significant refinancing activity, which resulted in total loan repayments and prepayments of $149.6 million during 2003.

     Deposits and Borrowed Funds. Deposits increased slightly, by 1.9% or $7.0 million, to $380.2 million at December 31, 2003 from $373.3 million at December 31, 2002. A modest shift in the mix of deposits occurred with increases in savings accounts ($8.6 million) and money market accounts ($5.9 million), offset by net reductions in demand deposits and NOW accounts ($6.4 million) and certificates of deposit ($1.2 million). Funds borrowed from the Federal Home Loan Bank of Boston remained unchanged from December 31, 2002 to December 31, 2003, at $36 million. The balance of subordinated debt also remained unchanged year over year, at $9.0 million.

     Retained Earnings. Retained earnings declined by $0.5 million to $29.3 million at December 31, 2003, a decrease of 1.7% from a balance of $29.8 million as of December 31, 2002. This change was the result of net income for the year of $1.7 million, offset by an increase in the net unrealized loss on marketable securities of $2.2 million.

Comparison of Operating Results For The Years Ended December 31, 2003 and December 31, 2002

     Net Income. Net income declined $1.0 million, or 37.4%, to $1.7 million for the year ended December 31, 2003 compared to $2.7 million for the year ended December 31, 2002. The decrease was primarily the result of a reduction in net interest income, an increase in operating expenses, an increase in income taxes, offset in part by an increase in other income and a reduction in the provision for loan losses.

     Net Interest Income. The tables on pages [#] and [#] set forth the components of Benjamin Franklin’s net interest income, yields on interest earning assets and interest bearing liabilities, and the effect on net interest income arising from changes in volume and rate.

     Benjamin Franklin earned net interest income of $12.8 million and $13.8 million in the years ended December 31, 2003 and 2002, respectively. The decline between the two periods of $1.0 million, or 7.5%, was caused by a 49 basis point, or 14.1%, reduction in the net interest margin, which had the effect of reducing net interest income by $3.3 million. This was offset in part by an increase in the volume of interest-earning assets, which grew by $30.7 million, or 7.7%, in 2003 as compared to 2002, which served to increase net interest income by $2.3 million.

     Interest Income. Interest income declined $1.9 million, or 8.8%, to $19.5 million for 2003 from $21.4 million for the prior year. The decrease was due to lower average yields on loans and investment securities, which was offset in part by higher average balances in both asset classes. In 2003 as compared to 2002, the yield earned on loans declined by 81 basis points, or 12.4%, to 5.74%, a change that reflected the drop in market interest rates generally in 2003. Offsetting this to some degree was an increase in loans outstanding, which grew by $21.1 million, or 8.5%. Consistent with the lower interest rate environment in 2003, yields on investments securities also dropped significantly when compared to 2002, falling by 186 basis points to 2.81% for the 2003 year. A $9.6 million net increase in the average balances of investment securities and short-term investments in 2003 partially offset the decline in yields.

     Interest Expense. Interest expense declined $842,000, or 11.1%, to $6.8 million for the year ended December 31, 2003 from $7.6 million in the prior year. The primary cause was a reduction in the rates paid on interest-bearing deposit accounts, which declined by 41 basis points, or 23.2%, to 1.36% for 2003 from 1.77% for 2002. The drop in deposit rates reflected the lower interest rate environment generally in

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2003 as compared to 2002. The average balances of deposits and short-term Federal Home Loan Bank of Boston borrowings were virtually unchanged from year to year, while the average balance of long-term debt including subordinated debt increased by $7.5 million to an average of $45.0 million for 2003 from $37.5 million for 2002. The effect of the increase in this item, which paid rates equivalent to 5.03% and 4.63% for 2003 and 2002, respectively, was to increase interest expense by $527,000.

     Provision for Loan Losses. Benjamin Franklin’s provision for loan losses decreased by $787,000, or 55.7%, to $625,000 in 2003 from $1.4 million in 2002. Contributing to the higher level of provision in 2002 was the creation of a specific reserve in the amount of $250,000 for a non-performing loan with an outstanding balance of $462,000 at December 31, 2002. This loan was charged-off it its entirety in 2003. Further, in 2002 management decided to increase general reserve levels for the portfolio as a whole after a thorough reevaluation of the Bank’s methodology for establishing the allowance for loan losses. This analysis considered economic conditions, peer comparisons and management’s estimate of losses inherent in the portfolio, and resulted in increases in general reserves for commercial real estate, commercial business and home equity loans. Also affecting the provisions for 2003 and 2002 were net charge-offs aggregating $414,000 and $277,000, respectively. The allowance for loan losses of $2.5 million at December 31, 2003 represented 0.87% of total loans, essentially unchanged when compared to 0.88% at December 31, 2002.

     Non-interest Income. Total non-interest income was $3.1 million in 2003, an increase of $222,000, or 7.8% from $2.9 million for 2002. The increase was primarily the result of a $904,000 rise in gains realized on sales of fixed rate residential mortgage loans sold in the secondary market and the fact that a $741,000 loss realized on the curtailment of the Bank’s pension plan was recognized in 2002, offset in part by a $1.5 million reduction in net gains realized on sales of investment securities. Also contributing to the change between years were a $189,000 decline in loan servicing fees and an increase of $180,000 in other income. The decrease in loan servicing fees was primarily the result of accelerated amortization of mortgage servicing rights due to accelerated principal payments caused by a reduction in market interest rates. The increase in other income was primarily caused by a $50,000 increase in fees earned on investment product sales due to the addition of a second sales representative during 2003 and a $125,000 increase in income from $1.3 million of BOLI contracts Benjamin Franklin purchased in the second half of 2003.

     Non-interest Expense. Non-interest expense increased $609,000, or 5.0%, to $12.7 million in 2003 as compared to $12.1 million in 2002. The largest increases occurred in salaries and benefits and professional fees, offset partially by a reduction in other general and administrative expenses. Salaries and employee benefits expenses increased $518,000, or 8.4%, to $6.7 million for the year ended December 31, 2003. Normal merit increases averaging 4.8% accounted for over half of this difference, supplemented by increases in retirement costs, medical insurance costs and an increase in the incentive bonus plan. Professional fees increased $262,000 or 36.2%, to $985,000 for 2003. This increase was caused primarily by increases in legal fees and loan origination costs. Other general and administrative expenses fell $223,000, or 10.8%, to $1.8 million for the year ended December 31, 2003. Contributing to this decline were reductions in fees paid to Board members, the result of fewer meetings in 2003 than 2002, and a drop in supplies expense as the Bank negotiated more favorable terms with its primary supplies vendor.

     Income Taxes. Income tax expense was $819,000 for the year ended December 31, 2003 an increase of $376,000, or 84.9%, compared to $443,000 for the year ended December 31, 2002. The effective tax rate was 32.7% in 2003 compared to 14.1% in 2002. The effective tax rate was unusually low in 2002 due to a $524,000 reduction in the deferred tax asset valuation allowance, a reduction made possible by the capital gain income realized on the sale of investment securities during the year.

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Comparison of Operating Results For The Years Ended December 31, 2002 and December 31, 2001

     Net Income. Net income rose to $2.7 million in 2002 from $41,000 in 2001. The primary reasons for the increase in income were a $4.1 million net change between years in the gain/loss realized on sale of securities and a significant reduction in the effective tax rate in 2002 when compared to 2001.

     Net Interest Income. The tables on pages [#] and [#] set forth the components of Benjamin Franklin’s net interest income, yields on interest earning assets and interest bearing liabilities, and the effect on net interest income arising from changes in volume and rate.

     Benjamin Franklin earned net interest income of $13.8 million and $14.0 million in the years ended December 31, 2002 and 2001, respectively. The decline between the two periods of $232,000, or 1.7%, resulted from a 4 basis point, or 1.1%, reduction in the net interest margin, and a $2.7 million, or 0.7%, drop in interest-earning assets.

     Interest Income. Interest income fell by $5.0 million, or 19.0%, to $21.4 million for 2002 from $26.4 million for the prior year. The decline was caused primarily by 1.23% reduction in the yield on interest-earning assets, which averaged 5.38% for 2002 as compared to 6.61% for 2001. All interest-earning asset categories experienced declines in yield between the two years, with loans declining 88 basis points to 6.55%, investment securities declining 117 basis points to 4.67% and short-term investments declining by 187 basis points to 1.56%. All yield declines were consistent with an interest rate environment that was lower generally in 2002 than in 2001. Though earning asset average balances declined by only $2.7 million in the aggregate, average loans outstanding fell by $24.8 million to an average of $249.3 million from $274.1 million in 2001, as a consequence of heavy refinancing activity in late 2001 and 2002. The Company’s liquidity position increased as a result, with increases in average balances of investment securities and short-term investments aggregating $16.2 million and $5.9 million, respectively. The net effect of these changes in earning asset volumes was to reduce interest income by $694,000 year over year. The $4.3 million remaining reduction in interest income from 2001 to 2002 was the result of the decline in earning-asset yields.

     Interest Expense. Interest expense declined $4.8 million, or 38.7%, to $7.6 million for the year ended December 31, 2002 from $12.4 million in the prior year. A 125 basis point, or 37.8%, decline in the average rate paid on interest-bearing liabilities, from 3.31% in 2001 to 2.06% in 2002 was responsible for $3.4 million of the reduction in interest expense. The remaining decline of $1.4 million was caused by a shift in the mix of deposits as well as by an overall reduction in deposit balances of $8.7 million or 2.6%. In response to the low interest rate environment existing in 2002, customers shifted funds out of term certificates into money market, savings and transaction accounts. The average volume of certificates of deposit declined by $36.5 million, or 21.8%, to an average of $131.1 million outstanding in 2002 from $167.6 million in 2001. Average balances of savings, money market and interest-bearing checking increased in the aggregate by $27.8 million from 2001 to 2002.

     Provision for Loan Losses. Benjamin Franklin’s provision for loan losses increased to $1.4 million for 2002 from $51,000 in 2001. The higher level of provision in 2002 was attributable in part to the creation of a specific reserve in the amount of $250,000 for a $462,000 non-performing loan classified “doubtful” and to a decision by management to increase general reserve levels for the portfolio as a whole. This decision was based on a review of economic conditions, peer comparisons and management’s estimate of losses inherent in the portfolio. As a result of this analysis, general reserves for commercial real estate, commercial construction, commercial business and home equity loans were increased significantly, by 100.0% to 167.0% of previous levels. For further discussion of the Benjamin Franklin’s current methodology, please refer to “Business of Benjamin Franklin Bancorp—Asset Quality” on page [#]. The provision in 2002 also included an amount sufficient to replenish the allowance for the effect of net charge-offs aggregating $277,000. In 2001, net recoveries of $58,000 were reflected in determining

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the provision for the year. The allowance for loan losses of $2.3 million at December 31, 2002 represented 0.88% of total loans, as compared to 0.46% at December 31, 2001.

     Non-interest Income. Total non-interest income was $2.9 million in 2002 as compared to net other charges aggregating $777,000 for the 2001 year. The swing between years was caused primarily by a $4.1 million change in gains/losses on sales of securities. In 2001, the Bank realized a net loss on securities sales of $2.5 million, while in 2002, net gains of $1.6 million were recorded. Offsetting this somewhat in 2002 was a $741,000 loss incurred on the curtailment of the Bank’s pension plan. Loan servicing fees also increased significantly in 2002, to $525,000 from $86,000 in 2001 as a result of an increase in fixed rate residential loans serviced.

     Non-interest Expense. Non-interest expense increased $550,000, or 4.8%, to $12.1 million in 2002 as compared to $11.6 million in 2001. Most of this increase occurred in salaries and benefits, which increased $529,000, or 9.4%, to $6.2 million for the year ended December 31, 2002. This increase was due to normal merit increases averaging 4.3% and costs associated with transitioning to a new CEO during 2002.

     Income Taxes. Income tax expense was $443,000 for the year ended December 31, 2002, a reduction of $1,167,000, or 72.5%, when compared to $1.6 million for the year ended December 31, 2001. The effective tax rate fell to 14.1% in 2002 as compared to 97.5% in 2001. The effective tax rate was unusually low in 2002 and unusually high in 2001 due to changes in the Bank’s deferred tax asset valuation allowance. In 2002, the valuation allowance was reduced by $524,000, a reduction allowed for by the capital gain income realized on the sale of investment securities during the year. In 2001, the valuation allowance increased by $1.0 million due to the fact that the capital losses on sales of securities realized during the year were not deductible for tax purposes.

Losses and Regulatory Action Arising from Equity Investments in 1999 and 2000

     Benjamin Franklin Bank entered into a Memorandum of Understanding (MOU) in June 2001 in response to regulatory concerns over equity investments made by the Bank under prior management in 1999 and 2000. The MOU was lifted in October 2002.

     In February 2001, the FDIC informed the Bank that both the size and concentration of its equity securities portfolio exceeded regulatory limits. The FDIC found that the $36 million equity securities portfolio at March 31, 2000 represented 154.0% of the Bank’s Tier 1 capital, and that technology stocks comprised approximately 50.0% of the total. The FDIC ordered Benjamin Franklin Bank to immediately cease equity investment activities and to liquidate the remaining equity securities in its portfolio. In March 2001, Benjamin Franklin Bank sold a substantial portion of its equity portfolio, resulting in an aggregate loss of $15.2 million. On this basis, Benjamin Franklin Bancorp determined that an other-than-temporary impairment existed with regard to certain equity securities in its portfolio as of December 31, 2000, and recorded an impairment charge of $11.4 million in the year ended December 31, 2000. After giving effect to the impairment charge and the net losses recognized upon the liquidation of the equity securities portfolio, partially offset by net gains on sales of other investment securities, Benjamin Franklin Bancorp reported a net loss of $4.7 million for the year ended December 31, 2000, and net income of only $41,000 for the year ended December 31, 2001.

     In June 2001, the Board of Directors of Benjamin Franklin Bank entered into an MOU with the FDIC and the Massachusetts Commissioner of Banks. The significant provisions of the MOU required the Board to evaluate its management team using an independent consultant, to prepare a management and staffing plan, and to retain qualified management consistent with such plan. The MOU also prohibited the Bank from purchasing any equity security without regulatory approval, called for a profit

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plan and revisions to the Bank’s liquidity and funds management policy, and required an increase in Tier 1 capital to at least 7.0%.

     In February 2002, the Bank’s former president retired, and the Board hired Thomas R. Venables as President and CEO. In October 2002, the FDIC and the Commissioner lifted the MOU in recognition of the substantial progress the Bank had made in satisfying its terms, and the Board of Directors adopted a Board Resolution addressing the matters remaining to be resolved. In July 2003, the Bank’s former Executive Vice President and Treasurer resigned. In August 2003, the FDIC and the Commissioner allowed the Board to rescind the Board Resolution, as all of the terms of the Resolution and the previous MOU had been satisfied.

Quantitative And Qualitative Disclosures About Risk Management

     Management and the Board of Benjamin Franklin recognize that taking and managing risk is fundamental to the business of banking. Through the development, implementation and monitoring of its policies with respect to risk management, the Bank strives to measure, evaluate and control the risks it faces. The Board and management understand that an effective risk management system is critical to the safety and soundness of the Bank. Chief among the risks faced by Benjamin Franklin are credit risk, market risk including interest rate risk, liquidity risk, operational (transaction) risk and compliance risk.

     Within management, the responsibility for risk management rests with the Risk Management Committee, chaired by the Compliance and Risk Management Officer. Other members of the Committee include the Chief Executive Officer, Chief Financial Officer, Treasurer, Chief Information Officer, and the senior officers responsible for lending, retail banking and human resources. The Risk Management Committee meets on a monthly basis to review the status of the Company’s risk management efforts, including reviews of internal and external audit findings, loan review findings, and the activities of the Asset/Liability Committee with respect to monitoring interest rate and liquidity risk. The Committee tracks any open items requiring corrective action with the goal of ensuring that each is addressed on a timely basis. The Compliance and Risk Management Officer reports all findings of the Risk Management Committee directly to the Board’s Audit and Risk Management Committee.

     Management of Credit Risk. Benjamin Franklin considers credit risk to be the most significant risk it faces, in that it has the greatest potential to affect the financial condition and operating results of the Bank. Credit risk is managed through a combination of policies established by the Board, the monitoring of compliance with these policies, and the periodic evaluation of loans in the portfolio, including those with problem characteristics. In general, Benjamin Franklin’s policies establish maximums on the amount of credit that may be granted to a single borrower (including affiliates), the aggregate amount of loans outstanding by type in relation to total assets and capital, and loan concentrations. Collateral and debt service coverage ratios, approval limits and other underwriting criteria are also specified. Policies also exist with respect to performing periodic credit reviews, the rating of loans, when loans should be placed on non-performing status and factors that should be considered in establishing the Bank’s allowance for loan losses. For additional information, refer to “Business of Benjamin Franklin Bancorp – Lending Activities,” on page [#].

     Management of Market Risk. Market risk is the risk of loss due to adverse changes in market prices and rates, and typically encompasses exposures such as sensitivity to changes in market interest rates, foreign currency exchange rates, and commodity prices. Benjamin Franklin has no exposure to foreign currency exchange or commodity price movements. Because net interest income is Benjamin Franklin’s primary source of revenue, interest rate risk is a significant market risk to which the Bank is exposed.

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     Interest rate risk is the exposure of Benjamin Franklin’s net interest income to adverse movements in interest rates. Net interest income is affected by changes in interest rates as well as by fluctuations in the level and duration of Benjamin Franklin’s assets and liabilities. Over and above the influence that interest rates have on net interest income, changes in rates may also affect the volume of lending activity, the ability of borrowers to repay variable rate loans, the volume of loan prepayments and refinancings, the flow and mix of deposits, and the market value of the Bank’s assets and liabilities.

     Exposure to interest rate risk is managed by Benjamin Franklin through periodic evaluations of the current interest rate risk inherent in its rate-sensitive assets and liabilities, coupled with determinations of the level of risk considered appropriate given the Bank’s capital and liquidity requirements, business strategy, and performance objectives. Through such management, Benjamin Franklin seeks to reduce the vulnerability of its net interest income to changes in interest rates.

     Strategies used by Benjamin Franklin to reduce the potential volatility of its earnings include:

  •   Emphasizing the origination and retention of adjustable-rate mortgage loans, variable rate commercial loans and variable rate home equity lines-of-credit;

  •   Investing in securities with relatively short maturities and/or expected average lives;

  •   Classifying nearly all of the investment portfolio as “available for sale” in order to provide for flexibility in liquidity management.

     Benjamin Franklin’s Asset/Liability Committee, comprised of several members of senior and middle management, is responsible for managing interest rate risk. On a quarterly basis, the Committee reviews with the Board of Directors its analysis of the Bank’s exposure to interest rate risk, the effect subsequent changes in interest rates could have on the Bank’s future net interest income, its strategies and other activities, and the effect of those strategies on Benjamin Franklin’s operating results. The Committee is also actively involved in the Bank’s planning and budgeting process as well as in determining pricing strategies for deposits and loans.

     The Committee’s primary method for measuring and evaluating interest rate risk is income simulation analysis. This analysis considers the maturity and repricing characteristics of assets and liabilities, as well as the relative sensitivities of these balance sheet components over a range of interest rate scenarios. Interest rate scenarios tested generally include instantaneous rate shocks, rate ramps over a one year period, and static (or flat) rates. The simulation analysis is used to measure the exposure of net interest income to changes in interest rates over a specified time horizon, usually a two year period.

     The table below sets forth, as of September 30, 2004, the estimated changes in Benjamin Franklin’s net interest income that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

         
    Percentage Change in Estimated
    Net Interest Income over 12 months
300 basis point increase in rates
     (6.85 %)
200 basis point increase in rates
     (4.21 %)
100 basis point increase in rates
     (1.86 %)
Flat interest rates
     —  
100 basis point decrease in rates
     (2.47 %)

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     As indicated in the table above, the result of an immediate 100 basis point increase in interest rates is estimated to decrease net interest income by 1.86% over a 12-month horizon, when compared to the flat rate scenario. For an immediate 200 basis point parallel increase in the level of interest rates, net interest income is estimated to decline by 4.21% over a 12-month horizon, when compared against the flat rate scenario. Inherent in these estimates is the assumption that transaction and savings account deposit rates would only increase by 25 basis points and that money market deposit account rates would only increase by 75 basis points for each 100 basis point increase in market interest rates. These assumptions are based on the Bank’s past experience with the changes in rates paid on these non-maturity deposits coincident with changes in market interest rates.

     The estimated change in net interest income from the flat rate scenario for a 100 basis point decline in the level of interest rates is a decrease of 2.47%, which assumes no decrease in savings and interest-bearing checking rates, and an average decrease in money market rates of only 58 basis points. Effectively, in the declining interest rate scenario, Benjamin Franklin Bank does not reap the full potential benefit of lower rates because its core deposit accounts are either already at their effective floors or reach those floors without giving full effect to the rate decline. This simulation also incorporates the assumption that $29 million of short-term FHLBB borrowings at September 30, 2004 are replaced with longer-term borrowings with maturities ranging from 2 years to 2.75 years in mid-October, 2004. This lengthening of the average maturity of the Company’s borrowings in mid-October, 2004 had the effect of decreasing the liability-sensitivity of the balance sheet. This decreased liability sensitivity, coupled with the fact that the Company’s core deposit accounts reach their effective floors in the simulation analysis without giving full effect to the 100 basis point decline in rates, causes the estimated decline in net interest income of 2.47% when compared to the flat interest rate scenario.

     There are inherent shortcomings in income simulation, given the number and variety of assumptions that must be made in performing the analysis. The assumptions relied upon in making these calculations of interest rate sensitivity include the level of market interest rates, the shape of the yield curve, the degree to which certain assets and liabilities with similar maturities or periods to repricing react to changes in market interest rates, the degree to which non-maturity deposits react to changes in market rates, the expected prepayment rates on loans and mortgage-backed securities, the degree to which early withdrawals occur on certificates of deposit and the volume of other deposit flows. As such, although the analysis shown above provides an indication of Benjamin Franklin’s sensitivity to interest rate changes at a point in time, these estimates are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on Benjamin Franklin’s net interest income and will differ from actual results.

     In its management of interest rate risk, Benjamin Franklin also relies on the analysis of its interest rate “gap,” which is the measure of the mismatch between the amount of Benjamin Franklin’s interest-earning assets and interest-bearing liabilities that mature or reprice within specified timeframes. An asset-sensitive position (positive gap) exists when there are more rate-sensitive assets than rate-sensitive liabilities maturing or repricing within a particular time horizon, and generally signifies a favorable effect on net interest income during periods of rising interest rates and a negative effect during periods of falling interest rates. Conversely, a liability-sensitive position (negative gap) would generally indicate a negative effect on net interest income during periods of rising rates and a positive effect during periods of falling rates.

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     The table below shows Benjamin Franklin’s interest sensitivity gap position as of September 30, 2004, indicating the amount of interest-earning assets and interest-bearing liabilities that are anticipated to mature or reprice in each of the future time periods shown. Generally, these assets and liabilities are shown in the table based on the earlier of the time remaining to repricing or contractual maturity. However, residential mortgage loans and mortgage-backed securities have been presented in a manner that also incorporates the estimated effects of prepayment assumptions. Interest-bearing checking, savings and money market deposit accounts are assumed to have annual rates of withdrawal (decay rates) of 12.7%, 46.1% and 47.7%, respectively.

                                                         
                    More than     More than     More than              
            More than     two years     three years     four years              
    Up to     one year to     to three     to four     to five     More than        
    one year     two years     years     years     years     five years     Total  
                    (Dollars in thousands)                          
Interest-earning assets:
                                                        
Loans
   $ 124,891     $ 61,882     $ 73,424     $ 31,222     $ 41,131     $ 44,442     $ 376,992  
Investment securities
     26,729       30,643       10,752       4,978       4,396       26,276       103,774  
Short-term investments
     6,831       —       —       —       —       —       6,831  
 
                                          
Total interest-earning assets
     158,451       92,525       84,176       36,200       45,527       70,718       487,597  
 
                                          
Interest-bearing liabilities:
                                                        
Savings deposits
     46,007       24,798       13,366       7,205       3,883       4,540       99,799  
Money market
     25,944       13,569       7,096       3,712       1,941       2,128       54,390  
NOW accounts
     3,198       2,792       2,437       2,128       1,857       12,767       25,179  
Certificates of deposits
     95,097       27,129       6,687       4,660       16       —       133,589  
Short-term borrowings
     29,000       —       —       —       —       —       29,000  
Long-term debt
     —       —       10,000       —       6,000       39,000       55,000  
 
                                          
Total interest-bearing liabilities
     199,246       68,288       39,586       17,705       13,697       58,435       396,957  
 
                                          
Interest rate sensitivity gap
   $ (40,795 )   $ 24,237     $ 44,590     $ 18,495     $ 31,830     $ 12,283     $ 90,640  
 
                                          
Interest rate sensitivity gap as a % of total assets
     (7.88 %)     4.68 %     8.61 %     3.57 %     6.15 %     2.37 %        
Cumulative interest rate sensitivity gap
     (40,795 )     (16,558 )     28,032       46,527       78,357       90,640          
 
                                            
Cumulative interest rate sensitivity gap as a % of total assets
     (7.88 %)     (3.20 %)     5.41 %     8.98 %     15.13 %     17.50 %        

     Certain factors may serve to limit the usefulness of the measurement of the interest rate gap. For example, interest rates on certain assets and liabilities are discretionary and may change in advance of, or may lag behind, changes in market rates. The gap analysis does not give effect to changes Benjamin Franklin may undertake to mitigate interest rate risk. For example, in mid-October 2004, $29 million of short-term borrowings were replaced with longer-term borrowings with maturities ranging from 2 years to 2.75 years. Had the analysis at September 30, 2004 given effect to this change, Benjamin Franklin’s interest rate sensitivity gap within one year would have been 2.27% of total assets instead of 7.88%. Certain assets, such as adjustable-rate loans, have features that may restrict the magnitude of changes in interest rates both on a short-term basis and over the life of the assets. Further, in the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in the gap analysis. Lastly, should interest rates increase, the ability of borrowers to service their debt may decrease.

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     Liquidity Risk Management. Liquidity risk, or the risk to earnings and capital arising from an organization’s inability to meet its obligations without incurring unacceptable losses, is managed by Benjamin Franklin’s Treasurer, who monitors on a daily basis the adequacy of Benjamin Franklin’s liquidity position. Oversight is provided by the Asset/Liability Committee, which reviews Benjamin Franklin’s liquidity on a weekly basis, and by the Board of Directors, which reviews the adequacy of Benjamin Franklin’s liquidity resources on a monthly basis.

     Benjamin Franklin’s primary sources of funds are from deposits, amortization of loans, loan prepayments and the maturity of loans, mortgage-backed securities and other investments, and other funds provided by operations. While scheduled payments from amortization of loans and mortgage-backed securities and maturing loans and investment securities are relatively predictable sources of funds, deposit flows and loan prepayments can be greatly influenced by general interest rates, economic conditions and competition. Benjamin Franklin maintains excess funds in cash and short-term interest-bearing assets that provide additional liquidity. At September 30, 2004, cash and due from banks, short-term investments and debt securities maturing within one year totaled $31.8 million or 6.1% of total assets.

     Benjamin Franklin also relies on outside borrowings from the Federal Home Loan Bank of Boston, as an additional funding source. In the first nine months of 2004, Benjamin Franklin has expanded its use of Federal Home Loan Bank of Boston borrowings to fund growth in the loan portfolio and to assist in the management of its interest rate risk. Since December 31, 2003, Benjamin Franklin has increased Federal Home Loan Bank of Boston borrowings by $39 million to a total of $75 million outstanding as of September 30, 2004. On that date, Benjamin Franklin had the ability to borrow an additional $79.1 million from the Federal Home Loan Bank of Boston.

     Benjamin Franklin uses its liquidity to fund existing and future loan commitments, to fund maturing certificates of deposit and borrowings, to fund other deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. Benjamin Franklin anticipates that it will continue to have sufficient funds and alternative funding sources to meet its current commitments.

     With the recent growth in Benjamin Franklin’s balance sheet, some of our cash flow characteristics and patterns have changed. Refer to the Consolidated Statements of Cash Flows on pages F-7 and F-8 of this prospectus. Specifically, in the nine months ended September 30, 2004, cash provided by financing activities increased by $40.8 million, or 232.2%, to $58.3 million from $17.5 million in the nine months ended September 30, 2003. This increase, consisting primarily of additional borrowings from the FHLBB, occurred in order to fund growth in the bank’s assets, as seen by a $43.0 million increase in cash used by investing activities, and in particular to fund an increase residential mortgage loans outstanding.

     Upon the consummation of the stock conversion and merger with Chart Bank, we expect to have liquidity in excess of 20% of total assets. Tangible capital as a percentage of total assets is expected to range between 6.76% at the minimum of the offering range and 9.18% at the maximum, as adjusted. See “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation” on page [#]. As noted in “Summary—Our Business Strategy” on page [#], we intend to grow our loan assets further after the stock conversion and merger with Chart Bank. The cash flow required to fund those potential increases in loans will likely be provided primarily by increases in deposits, as we implement our strategy to expand our franchise geographically and to increase our deposit market share in the areas served by Benjamin Franklin and Chart Bank at present. To the extent that cash flow provided by our deposit-gathering efforts does not completely fund increases in assets, we will likely borrow funds from the FHLBB to provide the necessary cash flow. The capital necessary to support future growth in assets is anticipated to be provided by our capital resources in hand following the conversion and merger, augmented over time by increases from net income, net of dividends paid, if any.

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     Contractual Obligations. The following tables present information indicating various contractual obligations and commitments of Benjamin Franklin as of the dates indicated and the respective maturity dates:

                                         
    September 30, 2004  
                    More than     More than        
                    One Year     Three        
            One     through     Years     Over  
            Year or     Three     Through     Five  
    Total     Less     Years     Five Years     Years  
            (Dollars in thousands)          
Federal Home Loan Bank of Boston Advances (1)
   $ 75,000     $ 29,000     $ 10,000     $ 6,000     $ 30,000  
Subordinated debt
     9,000       —       —       —       9,000  
Other (2)
     4,557       1,153       2,216       1,188       —  
 
                              
Total contractual obligations
   $ 88,557     $ 30,153     $ 12,216     $ 7,188     $ 39,000  
 
                              

(1)   Secured under a blanket security agreement on qualifying assets, principally 1-4 Family Residential mortgage loans. Advances shown with a maturity of greater than three years may be called by the Federal Home Loan Bank of Boston during the period remaining to maturity.
 
(2)   Represents contracts for technology services and employee compensation.

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    December 31, 2003  
                    More than     More than        
                    One Year     Three        
            One     through     Years     Over  
            Year or     Three     Through     Five  
    Total     Less     Years     Five Years     Years  
    (Dollars in thousands)  
Federal Home Loan Bank of Boston Advances (1)
   $ 36,000     $ —     $ —     $ —     $ 36,000  
Subordinated debt
     9,000       —       —       —       9,000  
Other (2)
     5,161       1,136       2,229       1,599       196  
 
                              
Total contractual obligations
   $ 50,161     $ 1,136     $ 2,229     $ 1,599     $ 45,196  
 
                              

(1)   Secured under a blanket security agreement on qualifying assets, principally 1-4 Family Residential mortgage loans. These advances may be called by the Federal Home Loan Bank of Boston during the period remaining to maturity.
 
(2)   Represents contracts for technology services and employee compensation.

     Loan Commitments. The following tables present certain information about Benjamin Franklin Bank’s loan commitments outstanding as of the dates indicated:

                                         
    September 30, 2004  
                    More than     More than        
                    One Year     Three        
            One     through     Years     Over  
            Year or     Three     through     Five  
    Total     Less     Years     Five Years     Years  
    (Dollars in thousands)  
Commitments to grant loans (1)
   $ 7,055     $ 7,055     $ —     $ —     $ —  
Commercial loan lines-of-credit
     3,412       3,412       —       —       —  
Unused portion of home equity loans (2)
     28,839       —       —       —       28,839  
Unused portion of construction loans (3)
     11,483       10,083       1,400       —       —  
Unused portion of personal lines-of-credit(4)
     2,158       —       —       —       2,158  
 
                              
Total loan commitments
   $ 52,947     $ 20,550     $ 1,400     $ —     $ 30,997  
 
                              
                                         
    December 31, 2003  
                    More than     More than        
                    One Year     Three        
            One     through     Years     Over  
            Year or     Three     through     Five  
    Total     Less     Years     Five Years     Years  
    (Dollars in thousands)  
Commitments to grant loans(1)
   $ 11,567     $ 11,567     $ —     $ —     $ —  
Commitments to purchase real estate loans
     2,953       2,953       —       —       —  
Commercial loan lines-of-credit
     3,717       3,717       —       —       —  
Unused portion of home equity loans (2)
     24,812       0       —       —       24,812  
Unused portion of construction loans (3)
     10,264       8,065       2,199       —       —  
Unused portion of personal lines-of-credit(4)
     2,200       0       —       —       2,200  
 
                              
Total loan commitments
   $ 55,513     $ 26,302     $ 2,199     $ —     $ 27,012  
 
                              

General: Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and generally have fixed expiration date or other termination clauses.

Footnotes on following page

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(1)   Commitments for loans are extended to customers for up to 180 days after which they expire.
 
(2)   Unused portions of home equity loans are available to the borrower for up to 10 years.
 
(3)   Unused portions of construction loans are available to the borrower for up to two years for development loans and up to one year for other construction loans.
 
(4)   Unused portion of checking overdraft lines-of-credit are available to customers in “good standing” indefinitely.

     Management of Other Risks. Two additional risk areas that receive significant attention by management and the Board are operational risk and compliance risk. Operational risk is the risk to earnings and capital arising from control deficiencies, problems with information systems, fraud, error or unforeseen catastrophes. Compliance risk is the risk arising from violations of, or nonconformance with, laws, rules, regulations, prescribed practices, internal policies and procedures or ethical standards. Compliance risk can expose the Company to fines, civil money penalties, payment of damages and the voiding of contracts.

     Benjamin Franklin addresses such risks through the establishment of comprehensive policies and procedures with respect to internal control, the management and operation of its information and communication systems, disaster recovery, and compliance with laws, regulations and banking ‘best practice’. Monitoring of the efficacy of such policies and procedures is performed through a combination of Benjamin Franklin’s internal audit program, through periodic internal and third-party compliance reviews, and through the ongoing attention of its managers charged with supervising compliance and operational control. Oversight of these activities is provided by the Risk Management Committee and the Audit and Risk Management Committee of the Board.

Off-Balance-Sheet Arrangements

     Benjamin Franklin Bancorp does not have any off-balance-sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Impact of Inflation and Changing Prices

     The financial statements, accompanying notes, and related financial data of Benjamin Franklin presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollar amounts without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of Benjamin Franklin operations. Most of Benjamin Franklin’s assets and liabilities are monetary in nature, and therefore the impact of interest rates has a greater impact on its performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Impact of Recent Accounting Standards

     In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” (FIN 46) requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns, or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. On December 17, 2003, the FASB revised FIN 46 and deferred the effective date of FIN 46 to no later than the end of the first reporting period that ends after March 15, 2004. The adoption of FIN 46 and Interpretation No. 46R did not have a material effect on Benjamin Franklin’s financial statements.

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     In April 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133, Accounting for Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133. This Statement was effective for contracts and hedging relationships entered into or modified after June 30,2003. This Statement did not affect Benjamin Franklin’s consolidated financial statements.

     In March 2004, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 105, “Application of Accounting Principles to Loan Commitments,” which provides guidance regarding loan commitments that are accounted for as derivative instruments. In this SAB, the Securities and Exchange Commission determined that an interest rate lock commitment should generally be valued at zero at inception. The rate locks will continue to be adjusted for changes in value resulting from changes in market interest rates. This SAB did not have any effect on Benjamin Franklin Bancorp’s financial position or results of operations.

     On December 16, 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which is an amendment of FASB Statement Nos. 123 and 95. SFAS No. 123R changes, among other things, the manner in which share-based compensation, such as stock options, will be accounted for by both public and non-public companies, and will be effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. For public companies, the cost of employee services received in exchange for equity instruments including options and restricted stock awards generally will be measured at fair value at the grant date. The grant date fair value will be estimated using option-pricing models adjusted for the unique characteristics of those options and instruments, unless observable market prices for the same or similar options are available. The cost will be recognized over the requisite service period, often the vesting period, and will be re-measured subsequently at each reporting date through settlement date. The changes in accounting will replace existing requirements under SFAS No. 123, “Accounting for Stock-Based Compensation,” and will eliminate the ability to account for share-based compensation transactions using APB Opinion No. 25, “Accounting for Stock Issued to Employees,” which does not require companies to expense options if the exercise price is equal to the trading price at the date of grant. The accounting for similar transactions involving parties other than employees or the accounting for employee stock ownership plans that are subject to American Institute of Certified Public Accountants (“AICPA”) Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans,” would remain unchanged.

     On September 30, 2004, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” which provides guidance for determining the meaning of “other-than-temporarily impaired” and its application to certain debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and investments accounted for under the cost method. The guidance requires that investments which have declined in value due to credit concerns or solely due to changes in interest rates must be recorded as other-than-temporarily impaired unless the Bank can assert and demonstrate its intention to hold the security for a period of time sufficient to allow for a recovery of fair value up to or beyond the cost of the investment which might mean maturity. The delay of the effective date of EITF 03-1 will be superseded concurrent with the final issuance of proposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect Benjamin Franklin Bancorp.

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MANAGEMENT OF BENJAMIN FRANKLIN BANCORP
AND BENJAMIN FRANKLIN BANK

Directors of Benjamin Franklin Bancorp

     The Board of Benjamin Franklin Bancorp (which is now known as the Board of Trustees but will be renamed the Board of Directors upon the completion of the conversion) currently consists of 11 members, each of whom belongs to one of three classes. Directors serve three-year staggered terms so that only approximately one-third of the Directors will be elected at each annual meeting of stockholders. Upon the completion of the Chart Bank acquisition, six directors from Chart Bank will join the Benjamin Franklin Bancorp Board of Directors: Richard E. Bolton Jr., the President and Chief Executive Officer of Chart Bank, Paul E. Capasso, Jonathan A. Haynes, Daniel F. O’Brien, Donald P. Quinn, and Neil E. Todreas. Such former directors of Chart Bank will be classified evenly, to the extent practicable, into each of the three Board classes. Each of the directors of Benjamin Franklin Bancorp also serves as a director of Benjamin Franklin Bank, and following the completion of the Chart Bank acquisition each of the designated Chart Bank directors named above will also join the Board of Directors of Benjamin Franklin Bank. The following table sets forth the current Directors’ names, ages as of November 15, 2004, the years when they began serving as Directors, and when their current term expires.

                         
            Date      
Name (1)   Age   Elected (2)   Term Expires
Dr. Mary Ambler
     72       1977       2008  
William P. Bissonnette
     58       1997       2006  
William F. Brady, Jr., D.D.S.
     72       1985       2007  
John C. Fuller
     72       1998       2007  
Anne M. King
     75       1997       2006  
Richard D. Mann
     69       1967       2007  
John D. Murphy
     74       1984       2006  
Charles F. Oteri
     59       1984       2008  
Thomas R. Venables
     49       2002       2008  
Alfred H. Wahlers
     71       1973       2007  
Charles Yergatian
     76       1980       2006  

(1)   In addition to the Directors set forth in this table, six members of Chart Bank’s board of directors will be appointed to the Benjamin Franklin Bancorp Board of Directors upon completion of the Chart Bank acquisition: Richard E. Bolton, Jr., Paul E. Capasso, Jonathan A. Haynes, Daniel F. O’Brien, Donald P. Quinn, and Neil E. Todreas.
 
(2)   “Date Elected” indicates the date the Director first joined the Board of Trustees or Board of Directors of Benjamin Franklin Bancorp or Benjamin Franklin Bank.

     The principal occupation and business experience for the last five years for each of Benjamin Franklin Bancorp’s Directors is set forth below. All Directors have held their present positions for five years unless otherwise stated.

     Dr. Mary Ambler is a retired physician and a Professor Emeritus of Brown University.

     William P. Bissonnette is a partner in the firm of Little & Bissonnette, CPAs.

     William F. Brady, Jr., D.D.S. is a retired dentist.

     John C. Fuller is retired. He was formerly a Vice President and member of the Board of Directors of the Foxboro Company, a controls and instrumentation company located in Foxboro, Massachusetts.

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     Anne M. King, Clerk of Benjamin Franklin Bancorp and Benjamin Franklin Bank, is a retired journalist and currently works part-time in public relations.

     Richard D. Mann is an owner of Buckley & Mann, Inc., a textile manufacturer located in Norfolk, Massachusetts. He also serves as a member of the Board of Trustees of Clark-Cutler-McDermott Co. of Franklin, Massachusetts and of Draper Knitting Co. of Canton, Massachusetts.

     John D. Murphy is self-employed in the field of real estate.

     Charles F. Oteri is the Chief Executive Officer and Funeral Director of Oteri Funeral Home in Franklin, Massachusetts.

     Thomas R. Venables has served as President and Chief Executive Officer of Benjamin Franklin Bancorp and Benjamin Franklin Bank since 2002. Prior to 2002, Mr. Venables co-founded Lighthouse Bank of Waltham, Massachusetts in 1999 and served as its President and Chief Executive Officer. From 1998 to 1999, Mr. Venables was employed as a consultant with Marsh and McLennan Capital, Inc. He was employed by Grove Bank of Newton, Massachusetts from 1974 until it was acquired by Citizens Bank in 1997, serving as its President and Chief Executive Officer for the last 11 years of his tenure.

     Alfred H. Wahlers, is the Chairman of the Board of Benjamin Franklin Bancorp and Benjamin Franklin Bank. Mr. Wahlers is a retired insurance executive.

     Charles Yergatian is a retired residential real estate developer.

     Upon completion of the Chart Bank acquisition, six directors of Chart Bank will be appointed as directors of Benjamin Franklin Bancorp and Benjamin Franklin Bank. The principal occupation and business experience for the last five years for each of these Chart Bank directors is set forth below. All of these individuals have held their present positions for five years unless otherwise stated.

     Richard E. Bolton, Jr. has served as the President and Chief Executive Officer of Chart Bank since 1995. He has served as President of Chart Bank’s subsidiary, CSSI, since 1999. Mr. Bolton is 45 years old.

     Paul E. Capasso is the President of Capasso Realty Corporation located in Newton, Massachusetts, a real estate investment company specializing in apartment and office building ownership. Mr. Capasso is 48 years old.

     Jonathan A. Haynes is the President of Haynes Management, a real estate management firm located in Wellesley Hills, Massachusetts, and President of D.M. Bernardi, a general contracting firm located in Wellesley Hills, Massachusetts. Mr. Haynes is 48 years old.

     Daniel F. O’Brien is a certified public accountant and owner and president of O’Brien, Riley and Ryan, a CPA firm located in Boston. Mr. O’Brien is also the manager of State Street Wealthcare Advisors, LLC, a financial services company and State Street Consulting, LLC, a computer services consulting firm. Mr. O’Brien is also a practicing attorney. Mr. O’Brien is 49 years old.

     Donald P. Quinn is an attorney in private practice in Plymouth, Massachusetts. He was formerly a partner concentrating in commercial business and real estate matters at Goodwin Procter LLP , a law firm located in Boston. Mr. Quinn is 66 years old.

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     Neil E. Todreas is a professor of nuclear engineering and a professor of mechanical engineering at Massachusetts Institute of Technology. He also provides consulting services through his company, Energy Technology Associates, Inc. Mr. Todreas is 69 years old.

Meetings of the Board of Directors and Committees

     Benjamin Franklin Bank’s Board of Directors meets on a monthly basis and may hold additional special meetings. During 2004, the Board held twelve regular meetings, one of which was an annual meeting, and five special meetings.

     The Board of Trustees of Benjamin Franklin Bancorp held four regular meetings and eight special meetings during 2004. The Benjamin Franklin Bancorp regular meetings are held immediately before or after the Benjamin Franklin Bank Board meeting scheduled for that month. Following the conversion, the Board of Directors of Benjamin Franklin Bancorp is expected to meet on a monthly basis, or more often as may be necessary.

     The Boards of Directors of Benjamin Franklin Bank and Benjamin Franklin Bancorp currently have three standing Board Committees. Those Board Committees are the Executive Committee, the Audit and Risk Management Committee and the Compensation Committee. In addition, in anticipation of the conversion, the Board of Benjamin Franklin Bancorp will appoint a Governance Committee. Each of the Audit and Risk Management Committee, Compensation Committee and Governance Committee will be comprised solely of independent directors within the meaning of the rules promulgated under the Sarbanes-Oxley Act of 2002 and the Nasdaq listing requirements. The Board of Directors may, by resolution, designate one or more additional committees.

     The following committee descriptions set forth the current members of each of Benjamin Franklin Bancorp’s existing Board committee. However, immediately after completion of the Chart Bank acquisition, each committee will be reconstituted to integrate the six Chart Bank directors who will join the Board such that, to the extent feasible, former Chart directors serve on each committee in the same proportions as they serve on the Board of Directors. This committee reorganization is also likely to result in certain changes in the committee assignments of the current Benjamin Franklin Bancorp Board members.

     The Executive Committee currently consists of Dr. William Brady, Jr., William Bissonnette, Anne King, John Murphy, Thomas Venables, Alfred Wahlers, Charles Yergatian, with Dr. Brady serving as Chair. The Executive Committee meets semi-monthly to review ongoing activities and performance of the Bank. The Committee approves loan originations that exceed certain internal limitations, and reviews other loans originations, the monthly asset/liability report and monthly financial reports. The Executive Committee met twenty-five times during 2004.

     The Audit and Risk Management Committee currently consists of Charles Oteri, Dr. Mary Ambler, John Fuller, Richard Mann, with Mr. Oteri serving as Chair. Each member of the Audit and Risk Management Committee is an independent director as determined in accordance with the Sarbanes-Oxley Act of 2002 and the Nasdaq listing requirements. The Audit and Risk Management Committee, which operates under a charter, oversees the independent auditor relationship, the internal audit, risk management and compliance functions. The Audit and Risk Management Committee met five times during 2004.

     The Compensation Committee currently consists of William Bissonnette, Richard Mann, John Murphy, Charles Oteri and Alfred Wahlers, with Mr. Bissonnette serving as Chair. The Compensation Committee oversees Director and executive officer compensation and certain employee benefit plans.

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     The Governance Committee is expected to consist of six directors. The Governance Committee will be responsible for establishing criteria for Directors, making recommendations for the nomination of Directors, overseeing self-assessment evaluations for the Board and its Committees and addressing other governance issues.

Compensation of Directors

     During 2004, members of the Benjamin Franklin Bank Board of Directors received an annual retainer of $4,000 for their service on the Board and $450 for each Board meeting that they attended. The Chairman of the Board and the Clerk each received an additional $1,000 retainer for his or her service in that capacity. During 2004, members of the Executive Committee and the Audit and Risk Management Committee received $450 and $600, respectively, for each committee meeting that they attended, but did not receive a separate retainer, except that the Chairman of each committee and the Clerk of the Executive Committee received a $1,000 annual retainer.

     Upon completion of the conversion, and in recognition of Benjamin Franklin Bank’s increased size and change to public company form, the Board and Committee fees will be adjusted as follows. The annual Board retainer will increase to $10,000 per year, and the per meeting fee for Board of Directors meetings will increase to $500 per meeting attended. The annual retainer for the Chairman of the Board and the Clerk of Benjamin Franklin Bank will increase to $2,000 per year. The Executive Committee’s per meeting fee will also increase to $500, and the Executive Committee Chairman’s annual retainer will increase to $2,000, but the Executive Committee Clerk will no longer receive a retainer. Members of the Audit and Risk Management Committee, Governance Committee and Compensation Committee will not receive per meeting fees, but will receive annual retainers of $8,000, $3,000 and $3,000, respectively. The Chair of each of these three committees will receive an additional annual retainer of $2,000.

     Members of the Board who are employees of Benjamin Franklin Bank or Benjamin Franklin Bancorp do not receive these fees. Generally, Benjamin Franklin Bancorp’s Board of Directors meets immediately prior to or after a Benjamin Franklin Bank Board meeting. In such instances, directors do not receive additional fees for attendance at meetings of Benjamin Franklin Bancorp’s Board. Otherwise, the directors of Benjamin Franklin Bancorp receive the same fees they receive for attendance at a Benjamin Franklin Bank Board meeting.

Executive Officers

     The names, ages as of November 15, 2004, and positions of each of our executive officers, other than Thomas R. Venables, who is included in the description of directors above, are set forth below.

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Name (1)   Age   Position
Claire S. Bean
    52     Executive Vice President/Chief Financial Officer, Benjamin Franklin Bank; Treasurer and Chief Financial Officer, Benjamin Franklin Bancorp
Stephen F. Banks
    52     Executive Vice President/Chief Information Officer, Benjamin Franklin Bank; Vice President, Benjamin Franklin Bancorp
Ronald E. Baron
    48     Senior Vice President/Treasurer, Benjamin Franklin Bank
Mariane E. Broadhurst
    47     Senior Vice President/Retail Banking, Benjamin Franklin Bank
Rose M. Buckley
    37     Senior Vice President/Senior Commercial Lending Officer, Benjamin
Franklin Bank
Michael J. Piemonte
    50     Senior Vice President/Risk Management and Compliance, Benjamin Franklin Bank
Brian E. Ledwith
    36     Vice President/Senior Retail Lending Officer, Benjamin Franklin Bank
Kathleen P. Sawyer
    47     Vice President/Human Resources, Benjamin Franklin Bank

(1)   Upon completion of the Chart Bank merger, two officers of Chart Bank, Alfred F. Odoardi and James Golden, are expected to become our executive officers. Their biographies are included below.

     Claire S. Bean has served as Executive Vice President/Chief Financial Officer of Benjamin Franklin Bank since July, 2004. Prior to her employment with Benjamin Franklin Bank, Ms. Bean served as Banking Advisor in the Capital Markets Group of FINCA International, Inc. and later as Regional Director of FINCA for Eastern Europe and NIS. From May 2002 to June 2003, Ms. Bean served as Director of Economic Development in Kyrgyzstan for the Mercy Corps, and from June 2003 to September 2003, she served as Manager of Micro-enterprise and Economic Development for the same organization. In addition, from 1999 to 2001, Ms. Bean served as Chief Operating Officer and Chief Financial Officer of Lighthouse Bank of Waltham, Massachusetts. From 1991 to 1997, Ms. Bean served as Executive Vice President/Treasurer of Grove Bank of Chestnut Hill, Massachusetts.

     Stephen F. Banks has served as Executive Vice President/Chief Information Officer of Benjamin Franklin Bank since January 2001. Mr. Banks joined the Bank in 1996 as Assistant Vice President/ Operations and was promoted to Senior Vice President of Systems/Operations in 1998. Prior to his employment at Benjamin Franklin Bank, Mr. Banks served as a data center manager at Bankline New England from 1995 to 1996 and as Vice President/Senior Operations Officer of Quincy Savings Bank from 1987 to 1995.

     Ronald E. Baron has served as Senior Vice President/Treasurer of Benjamin Franklin Bank since April, 2003. Mr. Baron joined the Bank in June 1997 as Assistant Vice President/Controller. He was promoted to Vice President/Treasurer and Controller in January 2002 and to Senior Vice President in April 2003. Prior to his employment at Benjamin Franklin Bank, Mr. Baron served as Vice President of Finance at Educor, Inc. for three years and was a Credit Specialist at Federal Deposit Insurance Corporation from 1991 to 1994.

     Mariane E. Broadhurst has served as Senior Vice President/Retail Banking of Benjamin Franklin Bank since April, 2003. Ms. Broadhurst joined the Bank in August 1992 as a Branch Manager. She was promoted to Assistant Vice President/Branch Administrator in December 1997 and in April 2002 was promoted to Vice President of Retail Banking. Prior to her employment with Benjamin Franklin Bank, Ms. Broadhurst was employed as an Assistant Treasurer/Branch Sales Manager of Heritage Bank in Worcester, Massachusetts, beginning in 1988.

     Rose M. Buckley has served as Senior Vice President/Senior Commercial Lending Officer of Benjamin Franklin Bank since April 2003. She joined the Bank in 1984 as a commercial loan officer.

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She was promoted to Assistant Vice President/Commercial Lending in April 1997 and to Vice President/Commercial Lending in April 1998.

     Michael J. Piemonte has served as Senior Vice President/Risk Management and Compliance of Benjamin Franklin Bank since December, 2003. He joined Benjamin Franklin Bank in March, 1998 as Assistant Vice President/Auditor/Compliance and Loan Review Officer in the Internal Audit Department. He became Assistant Vice President/Compliance Officer in the Compliance Department in July 2001 and became Vice President/Risk Management and Compliance in December 2001.

     Brian E. Ledwith has served as Vice President/Senior Retail Lending Officer of Benjamin Franklin Bank since September, 2004. He joined the Bank in February, 2004 as Vice President/Commercial Lending. Prior to his employment with Benjamin Franklin Bank, Mr. Ledwith served as Vice President/Senior Loan Officer of Medway Cooperative Bank of Medway, Massachusetts. From 2000 to 2002, Mr. Ledwith served as Vice President of Commercial Lending Department of Strata Bank in Franklin, Massachusetts. In addition, from 1998 to April 2000, Mr. Ledwith served as Vice President of Commercial Banking of Rockland Trust in Brockton, Massachusetts.

     Kathleen P. Sawyer has served as Vice President/Human Resources of Benjamin Franklin Bank since April, 2003. Ms. Sawyer served as a Human Resources Officer of Benjamin Franklin Bank from 1996 to 2000, and as Assistant Vice President/Human Resources from 2000 to 2003.

     Upon completion of the Chart Bank acquisition, the following two officers of Chart Bank are expected to become executive officers of Benjamin Franklin Bank.

     Alfred J. Odoardi, has served as Senior Vice President — Commercial Lending and Senior Loan Officer of Chart Bank since August 1995. Upon completion of the Chart Bank acquisition, Mr. Odoardi is expected to become Senior Vice President of Benjamin Franklin Bank and will be responsible for the commercial business loan department that Benjamin Franklin Bank intends to establish following the acquisition. Mr. Odoardi is 55 years old.

     James Golden is Vice President of Chart Bank’s ATM cash management and settlement services subsidiary, CSSI, a position he has held since October 2001. Previously, he served as Chart Bank’s Vice President — Retail Banking, from October 2001 to October 2003, and as a branch manager from August 1997 to January 2000. Mr. Golden has also served Chart Bank as its Compliance Officer since October 1997 and as its Security Officer and CRA Officer since January 1998. Upon completion of the Chart Bank acquisition, Mr. Golden is expected to become a Vice President of Benjamin Franklin Bank and will continue to be responsible for the CSSI ATM cash management and settlement services business. Mr. Golden is 41 years old.

Indemnification and Limitation of Liability

     The By-Laws of Benjamin Franklin Bancorp provide that each director of Benjamin Franklin Bancorp and each officer appointed or elected by the Board of Directors of Benjamin Franklin Bancorp who is serving in the level of vice president or above shall be indemnified by Benjamin Franklin Bancorp to the maximum extent permitted by law against all expenses and other liabilities incurred by such person in connection with any threatened, pending or completed proceeding in which he or she is involved as a result of (i) his or her serving or having served as a director of Benjamin Franklin Bancorp, (ii) his or her serving or having served as an officer of Benjamin Franklin Bancorp, or (iii) while he or she is or was serving as a director or officer of Benjamin Franklin Bancorp, his or her serving or having served in any capacity with respect to any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise at the request or direction of Benjamin Franklin Bancorp. The Board of Directors may, in

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its discretion, indemnify officers serving below the level of vice president and employees of Benjamin Franklin Bancorp. The articles of organization of Benjamin Franklin Bancorp provide that, to the maximum extent permitted by the Massachusetts Business Corporation Act, no director shall be personally liable to Benjamin Franklin Bancorp or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability.

Executive Officer Compensation

     The following table sets forth certain information as to the total remuneration paid by Benjamin Franklin Bancorp and Benjamin Franklin Bank during the fiscal year ended December 31, 2004 to the President and Chief Executive Officer of Benjamin Franklin Bancorp and Benjamin Franklin Bank and to the five most highly compensated executive officers of Benjamin Franklin Bancorp and Benjamin Franklin Bank other than the President and Chief Executive Officer who served as executive officers during or at the end of 2004 and who received total annual compensation in excess of $100,000. Each of the individuals listed on the table below is referred to as a “named executive officer.”

Summary Compensation Table

                                         
Name and Principal Position with   Annual Compensation        
Benjamin Franklin Bancorp and                           Other Annual     All Other  
Benjamin Franklin Bank   Year   Salary     Bonus (1)     Compensation (2)     Compensation  
Thomas R. Venables, President and Chief Executive Officer of Benjamin Franklin Bancorp and Benjamin Franklin Bank
     2004     $ 275,000     $ 50,000             $ 72,247 (3)
Stephen F. Banks, Executive Vice President and Chief Information Officer of Benjamin Franklin Bank
     2004     $ 139,300     $ 20,000             $ 48,370 (4)
Ronald E. Baron, Senior Vice President and Treasurer of Benjamin Franklin Bank and Treasurer of Benjamin Franklin Bancorp
     2004     $ 100,000     $ 4,000             $ 6,285 (5)
Rose M. Buckley, Senior Vice President and Senior Commercial Lending Officer of Benjamin Franklin Bank
     2004     $ 96,300     $ 18,000             $ 5,778 (5)
Mariane E. Broadhurst, Senior Vice President/Retail Banking of Benjamin Franklin Bank
     2004     $ 90,000     $ 12,600             $ 5,400 (5)
Patrick E. Niro (6)
     2004     $ 247,118 (7)   $ 12,500             $ 96,586 (8)

(1)   Represents bonuses earned in 2004, but paid in 2005.
 
(2)   Perquisites and other personal benefits paid to each named executive officer in each instance did not, in the aggregate, equal or exceed the lesser of either $50,000 or 10% of the total annual salary and bonus set forth in the columns entitled “Salary” and “Bonus” for each officer and, accordingly, are omitted from the table as permitted by the rules of the Securities and Exchange Commission.
 
(3)   Includes Benjamin Franklin Bank’s matching contribution of $12,300 under its 401(k) plan and an accrual in connection with Mr. Venables’s salary continuation agreement in the amount of $59,947.
 
(4)   Includes Benjamin Franklin Bank’s matching contribution of $9,558 under its 401(k) plan and an accrual in connection with Mr. Banks’s supplemental executive retirement plan in the amount of $38,812.
 
(5)   Represents Benjamin Franklin Bank’s matching contributions under its 401(k) plan.

Footnotes continued on following page

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(6)   Mr. Niro served as Executive Vice President and Senior Retail Lending Officer of Benjamin Franklin Bank and Vice President of Benjamin Franklin Bancorp until his retirement on September 17, 2004.
 
(7)   In addition to salary in the amount of $139,300, includes payments of $45,909 for consulting services during the period September 17, 2004 through December 31, 2004 and a severance payment of $79,575.
 
(8)   Includes Benjamin Franklin Bank’s matching contribution of $12,300 under its 401(k) plan and a lump sum payment of $84,286 under Mr. Niro’s salary continuation agreement.

Employment and Change in Control Agreements

     Employment Agreements. In connection with the conversion, Benjamin Franklin Bancorp will enter into employment agreements with its Chief Executive Officer, Mr. Venables, and its two Executive Vice Presidents, Ms. Bean and Mr. Banks. The agreements provide for an annual base salary, subject to increase (which increased amount becomes a floor below which the officer’s base salary may not fall during the term of the agreement), and certain benefits. They also guarantee customary corporate indemnification and errors and omissions insurance coverage throughout the employment term and for six years after termination. The current base salary of each of Mr. Venables, Ms. Bean and Mr. Banks is $315,000, $200,000, and $150,000, respectively.

     The initial term of each agreement is three years, with the term automatically extended by one day for each day that the officer is employed by Benjamin Franklin Bancorp and Benjamin Franklin Bank, although the automatic extensions may be discontinued at any time by Benjamin Franklin Bancorp, Benjamin Franklin Bank or the officer. For a one-year period following termination of the executive’s employment, the executive must adhere to a non-competition restriction and refrain from soliciting employees or certain large commercial loan customers. Such provision is not operative after the occurrence of a change in control of Benjamin Franklin Bancorp.

     In the event the officer’s employment is terminated by Benjamin Franklin Bancorp or Benjamin Franklin Bank for other than “specially-defined cause” or by the officer for “good reason,” each as defined in the agreements, the officer will be entitled to receive a lump sum severance benefit equal to three times the highest yearly compensation paid to the officer in the three fiscal years preceding the termination, plus certain other benefits. These benefits include continuation of disability and medical benefits for three years following termination, an adjustment to the officer’s pension, and acceleration of all vesting of stock awards and options. If the executive’s employment is terminated following a change in control, the non-competition and nonsolicitation provisions described above would not apply.

     Mr. Venables and Ms. Bean would also be entitled to receive an additional tax indemnification payment if payments under the employment agreements or any other payments triggered liability under Section 280G of the Internal Revenue Code as an excise tax constituting “excess parachute payments.” Under applicable law, the excise tax is triggered by change in control-related payments that equal or exceed three times the executive’s average annual compensation over the five calendar years preceding the change in control. The excise tax equals 20.0% of the amount of the payment in excess of one times the executive’s average compensation over the preceding five calendar year period. In the event payments and benefits under Mr. Banks’s employment agreement, together with other payments and benefits he may receive, would constitute an excess parachute payment under Section 280G of the Internal Revenue Code, such payments would be reduced to an amount necessary to avoid such payments constituting parachute payments.

     Change in Control Agreements. Benjamin Franklin Bancorp will also enter into change in control agreements with six of its senior officers in connection with the conversion. The change in control agreements provide for a lump sum severance payment equal to approximately one times (in the case of Mr. Baron, Mr. Ledwith, Mr. Piemonte and Ms. Sawyer) or two times (in the case of Ms. Broadhurst and

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Ms. Buckley) the officer’s base salary plus the highest annual bonus paid during the three most recent calendar years and certain other benefits upon termination of the officer’s employment under certain circumstances.

     Pursuant to the terms of the change in control agreements, these severance payments will be triggered if, within two years after a “change in control,” as defined in the agreements, of Benjamin Franklin Bancorp or Benjamin Franklin Bank, the officer’s employment is terminated for any reason other than death, deliberate dishonesty or gross misconduct of the officer with respect to Benjamin Franklin Bancorp or any of its subsidiaries, or conviction of the officer for the commission of a felony. These payments will also be triggered if the officer terminates his or her employment following: (i) a reduction in the officer’s annual base salary; (ii) a relocation of the offices of Benjamin Franklin Bancorp or Benjamin Franklin Bank at which the officer is principally employed by more than a specified number of miles; (iii) a failure of Benjamin Franklin Bancorp or Benjamin Franklin Bank to pay any portion of compensation due to the officer within seven days of the date such compensation is due; (iv) a failure by Benjamin Franklin Bancorp or Benjamin Franklin Bank to continue the officer’s participation in any material compensation, incentive bonus or benefit plan (or in a successor plan) or the failure of a successor in interest to make available its benefits plans to the officer on a basis that is not substantially less favorable than the successor generally affords to its other employees holding similar positions; or (v) a failure of Benjamin Franklin Bancorp or Benjamin Franklin Bank to obtain a satisfactory agreement from any successor to assume and agree to perform the officer’s change in control agreement.

     In addition, if the officer’s employment is terminated for the reasons described above, Benjamin Franklin Bancorp will continue to pay to the officer the disability and medical benefits existing as of and at the level in effect on the date of termination, at no greater cost to the officer than the officer is currently paying, for one year (in the case of Mr. Baron, Mr. Ledwith, Mr. Piemonte and Ms. Sawyer) or two years (in the case of Ms. Broadhurst and Ms. Buckley). In the event payments and benefits under the change in control agreements, together with other payments and benefits the officers may receive, would constitute an excess parachute payment under Section 280G of the Internal Revenue Code, such payments would be reduced to an amount necessary to avoid such payments constituting parachute payments.

Benefit Plans

     Employee Stock Ownership Plan. In anticipation of the conversion, Benjamin Franklin Bank has established an employee stock ownership plan for its employees. Employees who have been credited with at least 1,000 hours of service during a consecutive twelve-month period and who have attained age 21 will be eligible to participate in Benjamin Franklin Bank’s employee stock ownership plan.

     As part of the conversion, the employee stock ownership plan intends to purchase 8.0% of the common stock issued in the offering (including shares issued to the Benjamin Franklin Bank Charitable Foundation). Benjamin Franklin Bank anticipates that the employee stock ownership plan will borrow from Benjamin Franklin Bancorp (or a subsidiary established for that purpose) to fund these purchases. The loan from Benjamin Franklin Bancorp to the employee stock ownership plan will be repaid principally from Benjamin Franklin Bank’s contributions to the employee stock ownership plan over a period of 30 years and the collateral for the loan will be the stock purchased by the employee stock ownership plan. The interest rate for the employee stock ownership plan loan from Benjamin Franklin Bancorp will be fixed and is expected to be at Benjamin Franklin Bank’s prime rate at the date the loan is entered into with the employee stock ownership plan. Benjamin Franklin Bank and Benjamin Franklin Bancorp may, in any plan year, make additional discretionary contributions for the benefit of plan participants in cash, shares of common stock, or other property. The timing, amount and manner of future contributions to the employee stock ownership plan will be affected by various factors, including prevailing regulatory policies, the requirements of applicable laws and regulations and market conditions.

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     Shares purchased by the Benjamin Franklin Bank employee stock ownership plan will be held in a suspense account and released for allocation to participants on a pro rata basis as debt service payments are made. Shares released from the employee stock ownership plan will be allocated to each eligible participant’s employee stock ownership plan account based on the ratio of each such participant’s compensation, as defined, to the total compensation of all eligible employee stock ownership plan participants. Forfeitures shall be reallocated among remaining participating employees.

     Upon the completion of two years of service, the account balances of participants within the employee stock ownership plan will become 20.0% vested. The vested percentage of participants’ account balances will thereupon be increased by an additional 20.0% for each additional year of service, until account balances reach 100.0% vesting upon the completion of six years of service. Credit is given for years of service with Benjamin Franklin Saving Bank or any of its affiliates prior to the adoption of the employee stock benefit plan. In the event of a “change in control,” as defined in the employee stock ownership plan, however, participants will become immediately fully vested in their account balances. Participants will also become fully vested in their account balances upon death, disability, retirement, termination of this plan, or the permanent and complete discontinuance of contributions by Benjamin Franklin Bank and any of its affiliates to this plan. Benefits may be payable upon retirement or separation from service.

     It is currently expected that an independent corporate trustee will be appointed by Benjamin Franklin Bank to serve as the trustee of the Benjamin Franklin Bank employee stock ownership plan. Under the terms of the Benjamin Franklin Bank employee stock ownership plan, the trustee must generally vote all allocated shares held in the employee stock ownership plan in accordance with the instructions from the participating employees. Unallocated shares and allocated shares for which no written instructions have been received by the trustee regarding voting will be voted by the trustee in a manner calculated to most accurately reflect the instructions the trustee has received from participants regarding allocated shares, and must be voted in a manner determined by the trustee to be solely in the best interests of the participants and beneficiaries of the plan.

     Generally accepted accounting principles require that any third party borrowing by the Benjamin Franklin Bank employee stock ownership plan be reflected as a liability on Benjamin Franklin Bank’s balance sheet. If the employee stock ownership plan borrows the necessary funds from Benjamin Franklin Bancorp, the loan will not be treated as a liability but instead will be excluded from stockholders’ equity. If the employee stock ownership plan purchases newly issued shares from Benjamin Franklin Bancorp, total stockholders’ equity would neither increase nor decrease, but per share stockholders’ equity and per share net earnings would decrease as the newly issued shares are allocated to the employee stock ownership plan participants.

     Benjamin Franklin Bank’s employee stock ownership plan will be subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended, and the applicable regulations of the Internal Revenue Service and the Department of Labor.

     401(k) Plan. Benjamin Franklin Bank maintains the SBERA 401(k) Plan as adopted by Benjamin Franklin Bank, a tax-qualified plan under Section 401(a) of the Internal Revenue Code with a cash or deferred arrangement under Section 401(k) of the Internal Revenue Code. In general, all salaried and hourly employees who are at least age 21 become eligible to make salary reduction contributions in the 401(k) plan and to receive matching contributions from Benjamin Franklin Bank under the 401(k) plan on the first day of the month following the completion of three months of employment with Benjamin Franklin Bank.

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     Under the 401(k) plan, participants may elect to have Benjamin Franklin Bank contribute up to 75.0% of their compensation to the 401(k) plan, subject to the dollar limitations imposed by the Internal Revenue Code. Benjamin Franklin Bank currently makes matching contributions to the 401(k) plan equal to 200.0% of the first 3.0% of compensation deferred by a participant. Compensation for purposes of the 401(k) plan generally consists of total taxable income of a participant as reported on Form W-2 with all pre-tax contributions added, but excluding compensation received from the Vacation Buy Back Program. The level of matching contributions under the 401(k) plan may change from time to time.

     Currently, participants in the 401(k) plan may direct the investment of their accounts in several types of investment funds. In connection with the conversion, Benjamin Franklin Bank has amended the 401(k) plan to permit participants in the 401(k) plan to direct the investment of their accounts in common stock of Benjamin Franklin Bancorp, which shares will be held in a newly formed Employer Stock Fund. Investment in the Employer Stock Fund will generally be limited to 20.0% of a participant’s 401(k) account, but a participant may waive this limitation upon signing a certification that he or she understands the risk of Benjamin Franklin Bancorp stock ownership. Participants in the 401(k) plan will be given the opportunity to direct the 401(k) plan trustee to subscribe for shares of Benjamin Franklin Bancorp common stock in the conversion based on their individual subscription priorities, using the funds in the participants’ 401(k) plan accounts. See “The Conversion and the Offering—Subscription Offering and Subscription Rights” on page [#].

     Participants are always 100.0% vested in their elective deferrals and related earnings under the 401(k) plan. In addition, participants become fully vested in matching contributions and related earnings when such contributions are deposited. Participants may receive distributions from the 401(k) plan in the form of a single lump payment or installment payments.

     Benefit Restoration Plan. In connection with the conversion, Benjamin Franklin Bank intends to establish the Benefit Restoration Plan, a non-tax-qualified plan that will provide restorative payments to certain executives who are prevented from receiving earned benefits under Benjamin Franklin Bank’s 401(k) plan or employee stock ownership plan because of limitations in the Internal Revenue Code applicable to tax-qualified plans. The initial participants in the benefit restoration plan will be Mr. Venables and Ms. Bean, with the Board of Directors of Benjamin Franklin Bank designating certain management personnel or highly compensated employees as additional participants in the benefit restoration plan from time to time. The Board of Directors of Benjamin Franklin Bank may also limit which benefits such additional participants will receive under the benefit restoration plan.

     Eligible participants will receive a restorative payment equal to the amount of additional benefits the participants would receive under the 401(k) plan if there were no income limitations imposed by the Internal Revenue Code. Eligible participants will also receive a restorative payment in lieu of shares that cannot be allocated to participants under the employee stock ownership plan due to the legal limitations imposed on tax-qualified plans. In addition, eligible participants who “retire” before the repayment in full of the loan to the employee stock ownership plan will receive restorative payments equal to the projected value of shares of Benjamin Franklin Bancorp common stock that would have been allocated to the executive over the remaining term of any loan, as if employment had continued through the full term of the loan, regardless of limitations in the Internal Revenue Code. “Retirement” is defined in the benefit restoration plan as the first to occur of termination of employment at any time following satisfaction of the requirements for early or normal retirement under the employee stock ownership plan (unless otherwise permitted by the Benjamin Franklin Bank Board of Directors), death while employed as a full-time employee, or the occurrence of a “change in control,” regardless of whether the participant continues in the employ of the employer or any successor following the change in control.

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     Executive Salary Continuation Agreement and Supplemental Executive Retirement Plan. Each of Mr. Venables and Mr. Banks is also entitled to retirement benefits pursuant to the terms of a Salary Continuation Agreement with Benjamin Franklin Bank and Benjamin Franklin Bancorp (in the case of Mr. Venables) or a Supplemental Executive Retirement Plan with Benjamin Franklin Bank (in the case of Mr. Banks). These benefit arrangements are sometimes referred to as “SERPs.”

     Under the terms of his SERP, Mr. Venables is entitled to an annual retirement benefit at age 65, payable in monthly installments for a period of 20 years, equal to 75.0% of his total compensation for the last full calendar year of employment, but reduced by his annual annuity retirement benefit from Benjamin Franklin Bank’s contributions to his 401(k) plan and his annual social security benefit. Under the terms of his SERP, Mr. Banks is entitled to an annual retirement benefit at age 65, payable in monthly installments for a period of 15 years, equal to 65.0% of the average of his annual compensation during the 36 consecutive calendar months during his last ten years of employment by Benjamin Franklin Bank in which such compensation was the highest, but reduced by the annual amount of benefits payable to him arising from Benjamin Franklin Bank’s contributions to his 401(k) plan, the annual amount of benefits payable to him from any other non-qualified supplemental retirement plan of Benjamin Franklin Bank, the annual amount of benefits payable to him from any qualified defined benefit pension plan of Benjamin Franklin Bank, and one-half of his annual social security benefit. Each of Mr. Venables and Mr. Banks is entitled to a reduced benefit upon retirement prior to age 65 equal to the liability then accrued on Benjamin Franklin Bank’s books for the costs of benefits payable pursuant to the executive’s SERP. Based upon current compensation levels (adjusted for inflation at the rate of 5%) and assuming retirement at age 65, Mr. Venables would be entitled to an annual benefit of $443,832 under his SERP and Mr. Banks would be entitled to an annual benefit of $125,415 under his SERP.

     In connection with the conversion, Benjamin Franklin Bancorp intends to amend Mr. Venables’s and Mr. Banks’s SERPs to include a provision that any amounts payable under these agreements will be reduced by amounts payable to each executive under the employee stock ownership plan and, in the case of Mr. Venables, the benefit restoration plan. Benjamin Franklin Bancorp also intends to amend Mr. Venables’s SERP so that his annual retirement benefit, payable under the SERP, will be reduced by one-half of his annual social security benefit, instead of the full amount of his annual social security benefit. In addition, Benjamin Franklin Bancorp intends to amend Mr. Venables’s and Mr. Bank’s SERPs to comply with a new provision of the Internal Revenue Code, Section 409A, which is effective January 1, 2005, and applies to deferred compensation arrangements. In order to comply with Section 409A, both SERPs will be amended to provide that any payment upon termination of employment, other than in the case of death, shall not be made until at least 6 months after such termination. Also, both SERPs will be amended to remove the potential for Benjamin Franklin Bancorp or Mr. Venables or Mr. Banks to exercise discretion with regard to the timing or form of payment under the SERP. These amendments will not be implemented until the Internal Revenue Service issues further guidance regarding Section 409A, which is expected to be issued in the first half of 2005. In addition, after the IRS issues that further guidance, Benjamin Franklin Bancorp intends to implement an additional salary continuation agreement to provide for supplemental retirement benefits to Ms. Bean, upon terms similar to those of Mr. Banks’s agreement.

     Employee Salary Continuation Plan. Benjamin Franklin Bancorp has established, effective upon completion of the conversion, an employee salary continuation plan, which will provide eligible employees with severance pay benefits and other benefits in the event that their employment is terminated within a year after a change in control of Benjamin Franklin Bancorp or Benjamin Franklin Bank. Severance benefits will be equal to the greater of (i) two weeks’ salary for each year or partial year of service, up to a maximum of 52 weeks’ salary, or (ii) the applicable “minimum benefit.” For Senior Vice Presidents or higher, the “minimum benefit” is 52 weeks’ salary, for Vice Presidents, it is 39 weeks’ salary, for Assistant Vice Presidents, it is 26 weeks’ salary, for all other exempt employees, it is 13

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weeks’ salary, for all other full-time employees, it is 8 weeks’ salary, and for all part-time employees, it is 6 weeks’ salary. Employees entitled to severance also receive continued employer-paid life and health insurance coverage for the greater of (a) six months or (b) the number of weeks of salary continuation benefits to which the employee is entitled under the plan, as well as professional outplacement and job assistance services. These benefits are also available to employees who resign because they have not been offered a comparable position following a change in control. A “comparable position” is defined as a position which is offered to an employee where (a) there is no reduction in base salary or scheduled hours, and (b) the employee will be principally employed at a location not more than 25 miles from the office where the employee is principally employed immediately prior to the change in control.

     Director Fee Continuation Plan. Benjamin Franklin Bancorp has established, effective upon completion of the conversion, a director fee continuation plan, which provides certain benefits to all eligible non-employee members of the boards of directors of Benjamin Franklin Bank and Benjamin Franklin Bancorp upon retirement. A director is eligible to receive these benefits (provided that the director was not terminated for cause) if the director has served as a director for three years or more with Benjamin Franklin Bank or Benjamin Franklin Bancorp. Service with a corporate predecessor, such as Chart Bank, is not included in determining whether this three-year service requirement has been met.

     A director who has served on the board or as clerk for at least 15 years (10 years for those who have attained age 70) is entitled to receive an annual payment, commencing upon termination of service and payable for five years, equal to the average total yearly fees for services as a director paid by Benjamin Franklin Bancorp or Benjamin Franklin Bank to the director for the three calendar years preceding the year of the director’s retirement. Service with a corporate predecessor, such as Chart Bank, is included in determining the amount of the normal retirement benefit. Eligible directors who retire prior to attaining the full 15 (or 10) years of service are entitled to receive a reduced retirement benefit, based upon the director’s number of years of service, payable annually for five years following termination of service.

     In the event of a “change in control,” as defined in the directors fee continuation plan, if an eligible director’s service is terminated or if the director is not proposed for reelection within three years following the “change in control,” the director is entitled to receive a full normal retirement benefit (as if he had served as a director for 15 years) as a lump sum upon termination of service. An eligible director who becomes disabled prior to age 70 is also entitled to receive the normal retirement benefit, payable in equal installments over five years and commencing upon termination of service. In addition, upon the death of an eligible director prior to termination of service, the director’s beneficiary is entitled to receive a normal retirement benefit, and upon the death of an eligible director after retirement, the director’s beneficiary is entitled to receive the remainder of any benefit payments to which the director is entitled, with each such benefit payable annually and commencing upon the death of the director.

     Stock-Based Incentive Plan. Following the conversion we intend to implement a stock-based incentive plan that will provide for grants of stock options and restricted stock to directors, officers and employees. The stock-based incentive plan cannot be established sooner than six months after the offering and, if implemented less than one year after the offering, would require the approval of our stockholders by two-thirds of the outstanding shares of Benjamin Franklin Bancorp common stock. If the stock-based incentive plan is implemented more than one year after the offering, the stock-based incentive plan must be approved by a majority of the shares of Benjamin Franklin Bancorp present and voting. If such plan is adopted less than one year after completion of the offering, the number of options granted and restricted shares awarded under the plan may not exceed 10.0% and 4.0%, respectively, of the total shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. However, these limitations would not apply if such stock-based incentive plan is implemented one year or more after the completion of the offering. Finally, if adopted within one year,

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the stock-based incentive plan would be subject to such other limitations as may be imposed by the Massachusetts Commissioner of Banks, including the following requirements:

  •   Non-employee directors in the aggregate may not receive more than 30.0% of the options and restricted awards authorized under the plan;
 
  •   Any one non-employee director may not receive more than 5.0% of the options and restricted awards authorized under the plan;
 
  •   Any officer or employee may not receive more than 25.0% of the options and restricted awards authorized under the plan;
 
  •   The options and restricted awards may not vest more rapidly than 20.0% per year, beginning on the first anniversary of stockholder approval of the plan; and
 
  •   Accelerated vesting is not permitted except for death or disability.

     After the first anniversary of the conversion, we may amend the plan to change or remove these restrictions. If we adopt a stock-based incentive plan within one year after the conversion, we expect to amend the plan later to remove these restrictions and to provide for accelerated vesting in cases of retirement and change of control. We may obtain the shares needed for this plan by issuing additional shares or through stock repurchases.

     We have not decided whether we will implement this plan before or after the one-year anniversary of the conversion.

Transactions with Directors and Executive Officers

     Federal law and regulation generally require that all loans or extensions of credit to directors and executive officers must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with the general public and must not involve more than the normal risk of repayment or present other unfavorable features. However, regulations also permit directors and executive officers to receive the same terms through benefit or compensation plans that are widely available to other employees, as long as the director or executive officer is not given preferential treatment compared to the other participating employees. Pursuant to such a program, loans have been extended to directors and executive officers, which loans are on substantially the same terms as those prevailing at the time for comparable transactions with the general public. These loans do not involve more than the normal risk of repayment or present other unfavorable features.

     The six directors of Chart Bank who will become directors of Benjamin Franklin Bancorp are stockholders of Chart Bank, and in such capacity they have a material interest in the merger agreement between Benjamin Franklin Bancorp and Chart Bank. The following table summarizes the number of shares of Benjamin Franklin Bancorp common stock and amount of cash that each of these directors will receive in the merger in exchange for his shares of Chart Bank common stock and Chart Bank options. The information in the table is based on the number of shares of Chart Bank common stock in which a director has or shares a direct or indirect pecuniary interest as of December 6, 2004, which in some cases is different from the number of shares that the director beneficially owns, and assumes that each director exchanges 55% of his Chart Bank shares for shares of Benjamin Franklin Bancorp common stock and 45% of his Chart Bank shares for cash and that all Chart Bank options are cashed out at the closing rather than being exercised prior to the closing.

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Director   Shares   Cash
Richard E. Bolton, Jr.
     14,375     $ 947,625  
Paul E. Capasso
     35,711       292,207  
Jonathan A. Haynes (1)
     115,287       943,296  
Daniel F. O’Brien
     17,250       141,150  
Donald P. Quinn (2)
     58,863       481,641  
Neil E. Todreas
     116,273       951,333  

(1)   Includes 40,792 shares and $333,770 in which Mr. Haynes’s children have a pecuniary interest.
 
(2)   Includes 7,120 shares and $ 58,282 in which Mr. Quinn’s spouse has a pecuniary interest, but with respect to which Mr. Quinn disclaims beneficial ownership.

     See “The Acquisition of Chart Bank—Interests of Chart Bank’s Directors and Officers in the Merger” for a description of the payments and waiver agreement and consulting and non-competition agreement we have entered into with Richard E. Bolton Jr. and the severance agreement between Alfred Odoardi and Chart Bank. Mr. Odoardi is expected to become an executive officer of Benjamin Franklin Bank after completion of the Chart Bank acquisition.

Compensation Committee Interlocks and Insider Participation

     The Board of Trustees of Benjamin Franklin Bancorp established a Compensation Committee in connection with the adoption of various compensation plans and agreements in anticipation of the conversion. The members of the Compensation Committee are William Bissonnette, Richard Mann, John Murphy, Charles Oteri and Alfred Wahlers.

     No person now serving as a member of the Compensation Committee is a current or former officer or employee of Benjamin Franklin Bancorp or Benjamin Franklin Bank or engaged in certain transactions with Benjamin Franklin Bancorp or Benjamin Franklin Bank that are required to be disclosed by SEC regulations. Additionally, there are no compensation committee “interlocks,” which generally means that no executive officer of Benjamin Franklin Bancorp or Benjamin Franklin Bank served as a director or member of the compensation committee of another entity, one of whose executive officers serves as a Director or member of the Compensation Committee.

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PURCHASES BY BENJAMIN FRANKLIN BANCORP MANAGEMENT IN THE OFFERING

     The following table sets forth information regarding intended common stock purchases by each of our directors and executive officers and their associates, and by all directors and executive officers as a group, assuming the availability of shares. In the event the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. This table excludes shares to be purchased by the employee stock ownership plan. The table also shows the shares to be issued in the Chart Bank acquisition to the directors and officers of Chart Bank who will become our directors and officers after completion of the acquisition, assuming that 55% of the shares of Chart Bank common stock beneficially owned by these persons are exchanged for shares of Benjamin Franklin Bancorp common stock and that all Chart Bank options are cashed out at the closing rather than being exercised prior to the closing.

                                         
    Proposed Purchases in             Total Common Stock
    the Offering     Shares to be     to be Held
    Number of     Aggregate     Issued in the     Number of     % of Total
    Shares     Price     Acquisition     Shares     Outstanding (1)
Current Benjamin Franklin Bancorp Directors
                                        
Dr. Mary Ambler
     20,000     $ 200,000       0       20,000       0.26 %
William P. Bissonnette
     10,000       100,000       0       10,000       0.13 %
William F. Brady, Jr., D.D.S
     15,000       150,000       0       15,000       0.19 %
John C. Fuller
     10,000       100,000       0       10,000       0.13 %
Anne M. King
     5,000       50,000       0       5,000       0.06 %
Richard D. Mann
     20,000       200,000       0       20,000       0.26 %
John D. Murphy
     15,000       150,000       0       15,000       0.19 %
Charles F. Oteri
     5,000       50,000       0       5,000       0.06 %
Thomas R. Venables
     25,000       250,000       0       25,000       0.32 %
Alfred H. Wahlers
     5,000       50,000       0       5,000       0.06 %
Charles Yergatian
     15,000       150,000       0       15,000       0.19 %
Chart Bank Directors who will become Benjamin Franklin Bancorp Directors
                                        
Richard E. Bolton, Jr.
     0       0       14,375 (2)     14,375 (2)     0.18 %
Paul E. Capasso
     0       0       35,711 (3)     35,711 (3)     0.46 %
Jonathan A. Haynes
     0       0       210,472 (4)     210,472 (4)     2.70 %
Daniel F. O’Brien
     0       0       17,250       17,250       0.22 %
Donald P. Quinn
     0       0       431,047 (5)     431,047 (5)     5.53 %
Neil E. Todreas
     0       0       116,273       116,273       1.49 %
Current Executive Officers of Benjamin Franklin Bancorp who are not Directors
                                        
Claire S. Bean
     25,000     $ 250,000       0       25,000       0.32 %
Stephen F. Banks
     6,500       65,000       0       6,500       0.08 %
Rose M. Buckley
     5,000       50,000       0       5,000       0.06 %
Mariane E. Broadhurst
     10,000       100,000       0       10,000       0.13 %
Ronald E. Baron
     250       2,500       0       250       *  
Michael J. Piemonte
     1,000       10,000       0       1,000       0.01 %
Kathleen P. Sawyer
     2,500       25,000       0       2,500       0.03 %
Brian E. Ledwith
     1,500       15,000       0       1,500       0.02 %
Chart Officers who will become Benjamin Franklin Bancorp Executive Officers
                                        
Alfred F. Odoardi
     0       0       0       0       0  
James Golden
     0       0       0       0       0  
 
All Directors and Executive Officers as a Group
                             1,021,878       13.10 %

*   Less than 0.01%

(Footnotes on following page)

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(1)   Based on an assumed 7,801,575 shares outstanding, including 5,000,000 shares issued in the offering at the midpoint of the offering range, 400,000 shares issued to the Benjamin Franklin Bank Charitable Foundation and 2,401,575 shares issued to the Chart Bank stockholders in the acquisition.
 
(2)   Includes 6,765 shares of common stock held by a voting trust of which Richard E. Bolton, Sr. is the sole trustee and with respect to which Mr. Bolton, Jr. has sole investment power.
 
(3)   Includes 14,943 shares of common stock held by a voting trust of which Donato D. Capasso is the sole trustee and with respect to which Mr. P. Capasso has sole investment power.
 
(4)   Includes 149,574 shares of common stock held by The Charter Voting Trust – 1996, of which Mr. Haynes is the sole trustee and with respect to which Mr. Haynes has sole voting power. Mr. Haynes may also be deemed to have sole investment power with respect to 54,389 of the 149,574 shares of common stock held by The Charter Voting Trust – 1996, including 40,792 shares beneficially owned by Mr. Haynes’s children.
 
(5)   Includes (a) 47,557 shares of common stock held in an IRA account of Mr. Quinn and (b) 383,490 shares of common stock held by Village Voting Trust - 1995, of which Mr. Quinn is the sole trustee and with respect to which Mr. Quinn has sole voting power. Mr. Quinn may also be deemed to have sole investment power with respect to 12,151 of the 383,490 shares of common stock held by Village Voting Trust – 1995, including 6,698 shares beneficially owned by Mr. Quinn’s spouse and 1,690 shares beneficially owned by a limited partnership of which Mr. Quinn is the sole general partner.

BUSINESS OF CHART BANK

General

     Chart Bank, A Cooperative Bank, is a Massachusetts cooperative bank that was formed in 1985. Chart Bank primarily conducts its business from two banking offices in Waltham, Massachusetts and one banking office in Newton, Massachusetts. Chart Bank is engaged principally in the business of investing in various types of residential and commercial mortgages, consumer and commercial loans, and investment securities, funded primarily with deposits from the general public and loan proceeds from the Federal Home Loan Bank of Boston. Chart Bank offers a wide variety of deposit and loan products and services to individual and commercial customers. Additionally, Chart Bank, through its subsidiary, Creative Strategic Solutions, Inc., or CSSI, manages cash for owners of automatic teller machines, or ATMs, and provides related cash management services to a nationwide customer base.

     As a Massachusetts cooperative bank, Chart Bank is regulated by the Massachusetts Division of Banks, the FDIC and the Cooperative Central Bank. Chart Bank’s deposits are insured by the FDIC up to FDIC limits (generally $100,000 per depositor) and by the Share Insurance Fund of the Cooperative Central Bank for the portion of deposits in excess of that insured by the FDIC. Chart Bank is also a member of the Federal Home Loan Bank System.

     Chart Bank’s main office is located at 75 Moody Street, Waltham, Massachusetts 02453. Its telephone number is 781-398-2700.

Market Area

     Chart Bank’s primary market area is centered in Waltham, Massachusetts, where its main office is located, and Newton, Massachusetts, both approximately 10 miles west of Boston, and includes other cities and towns of Middlesex County, Massachusetts. The majority of Chart Bank’s customers reside in or maintain their principal offices in Middlesex County, Massachusetts. Middlesex County, and Waltham and Newton in particular, have a relatively diversified employment base, with employment spread among most economic sectors. Education-related employment is particularly significant in this area. Other dominant sectors include services, manufacturing and wholesale/retail trade.

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     According to published statistics, Middlesex County’s population has grown by 0.1% since the year 2000 to a total of 1,470,000 in 2004. Per capita income for the county has grown by 3.8% since 2000 to $36,220, which is 21.4% higher than that of Massachusetts and 50.3% higher than the United States as a whole. Median household income for Middlesex County was $69,234 in 2004, which is 21.4% higher than that of Massachusetts and 49.0% higher than the U.S. average. The unemployment rate for Middlesex County stood at 4.4% as of August 2004, lower than the average for Massachusetts of 4.6% and the U.S. average of 5.4%.

     Chart Bank faces significant competition from savings, cooperative and commercial banks, as well as from a variety of non-bank financial institutions. Many of these competitors are larger and have a state-wide, regional or national presence, and have greater financial resources than Chart Bank.

Lending Activities

     Chart Bank’s principal business is lending, and loans represent a large portion of Chart Bank’s assets. Chart Bank’s lending activity has focused on the origination of commercial loans secured by liens on real estate and first mortgage loans for the purchase, refinance or construction of residential properties in Chart Bank’s market area. Currently, Chart Bank maintains the commercial loans it originates in its loan portfolio, although, in some instances, other financial institutions may also participate in these loans. Chart Bank typically retains the adjustable-rate residential mortgages that it originates in its portfolio. Chart Bank typically does not originate fixed-rate residential mortgages for its portfolio; however, it does act as broker for other lenders in originating these mortgages and receives loan brokerage fees for its services as loan broker. Loans secured by mortgages on a borrower’s principal residence are generally viewed as the least vulnerable to major economic changes and at the same time provide an attractive source of interest income.

     Chart Bank’s loan portfolio consists of many types of loans, including residential mortgage loans, including home equity lines-of-credit, monthly installment loans for consumers, as well as commercial loans that include lines-of-credit, short-term loans, Small Business Administration loans and real estate loans for business customers. The following table summarizes the composition of Chart Bank’s loan portfolio as of the dates indicated:

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                    December 31,  
    September 30, 2004     2003     2002  
    Amount     Percent     Amount     Percent     Amount     Percent  
    (Dollars in thousands)  
Real estate mortgage loans:
                                                
Residential (1)(2)
   $ 64,953       36.63 %   $ 37,666       26.61 %   $ 33,719       27.09 %
Commercial (2)
     99,682       56.21 %     91,788       64.85 %     83,619       67.16 %
Construction
     8,225       4.64 %     6,498       4.59 %     3,327       2.67 %
 
                                    
 
     172,860       97.48 %     135,952       96.05 %     120,665       96.92 %
 
                                    
Commercial loans:
                                                
Secured
     4,029       2.27 %     3,913       2.76 %     3,182       2.56 %
Unsecured
     95       0.06 %     512       0.36 %     255       0.20 %
 
                                    
 
     4,124       2.33 %     4,425       3.12 %     3,437       2.76 %
 
                                    
Consumer loans:
                                                
Consumer share secured
     132       0.07 %     741       0.53 %     61       0.05 %
Other consumer
     209       0.12 %     429       0.30 %     338       0.27 %
 
                                    
 
     341       0.19 %     1,170       0.83 %     399       0.32 %
 
                                    
Total loans
     177,325       100.00 %     141,547       100.00 %     124,501       100.00 %
 
                                          
Allowance for loan losses
     (1,753 )             (1,657 )             (1,536 )        
 
                                          
 
Loans, net
   $ 175,572             $ 139,890             $ 122,965          
 
                                          
                                                 
    December 31,  
    2001     2000     1999  
    Amount     Percent     Amount     Percent     Amount     Percent  
    (Dollars in thousands)  
Real estate mortgage loans:
                                                
Residential (1)(2)
   $ 41,118       32.25 %   $ 44,765       36.53 %   $ 39,531       36.49 %
Commercial (2)
     76,406       59.94 %     68,995       56.30 %     60,490       55.83 %
Construction
     3,936       3.09 %     2,535       2.07 %     2,794       2.58 %
 
                                    
 
     121,460       95.28 %     116,295       94.90 %     102,815       94.90 %
 
                                    
Commercial loans:
                                                
Secured
     5,470       4.29 %     5,587       4.56 %     4,377       4.04 %
Unsecured
     65       0.05 %     57       0.04 %     534       0.49 %
 
                                    
 
     5,535       4.34 %     5,644       4.60 %     4,911       4.53 %
 
                                    
Consumer loans:
                                                
Consumer share secured
     76       0.06 %     267       0.22 %     335       0.31 %
Other consumer
     404       0.32 %     342       0.28 %     277       0.26 %
 
                                    
 
     480       0.38 %     609       0.50 %     612       0.57 %
 
                                    
Total loans
     127,475       100.00 %     122,548       100.00 %     108,338       100.00 %
 
                                          
Allowance for loan losses
     (1,387 )             (1,311 )             (1,101 )        
 
                                          
Loans, net
   $ 126,088             $ 121,237             $ 107,237          
 
                                          

(1)   Includes home equity lines-of-credit.
 
(2)   Includes net deferred loan costs and purchase premiums.

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     Loan Maturity. The following table summarizes the scheduled repayments of Chart Bank’s loan portfolio at September 30, 2004. Demand loans, loans having no stated repayment schedule, and overdraft loans are reported as being due in one year or less:

                                                 
    Residential Mortgage     Commercial Mortgage     Construction  
            Weighted             Weighted             Weighted  
            Average             Average             Average  
    Amount     Rate     Amount     Rate     Amount     Rate  
    (Dollars in thousands)  
Due less than one year
   $ 16,197       5.07 %   $ 27,410       6.38 %   $ 8,225       6.70 %
Due after one year to five years
     44,340       5.41 %     66,980       6.54 %     —       —  
Due after five years
     4,416       5.00 %     5,292       6.25 %     —       —  
 
                                          
Total
   $ 64,953       5.30 %   $ 99,682       6.48 %   $ 8,225       6.70 %
 
                                          
                                                 
    Commercial Loans     Consumer Loans     Total  
            Weighted             Weighted             Weighted  
            Average             Average             Average  
    Amount     Rate     Amount     Rate     Amount     Rate  
    (Dollars in thousands)  
Due less than one year
   $ 4,124       6.39 %   $ 279       9.59 %   $ 56,235       6.07 %
Due after one year to five years
     —       —       62       8.87 %     111,382       6.09 %
Due after five years
     —       —       —       —       9,708       5.68 %
 
                                          
Total
   $ 4,124       6.39 %   $ 341       9.46 %   $ 177,325       6.06 %
 
                                          

     The following table sets forth, at September 30, 2004, the dollar amount of total loans, net of unadvanced funds on loans, contractually due after September 30, 2005 and whether such loans have fixed interest rates or adjustable interest rates.

                         
    Fixed     Adjustable     Total  
    (Dollars in thousands)  
Residential mortgage
   $ 8,015     $ 40,741     $ 48,756  
Commercial mortgage
     19,597       52,675       72,272  
Consumer loans
     62       —       62  
 
                  
Total Loans
   $ 27,674     $ 93,416     $ 121,090  
 
                  

     Loan Originations, Purchases and Sales. The following table sets certain information concerning Chart Bank’s loan activity during the periods indicated:

                                                         
    For the        
    Nine Months Ended        
    September 30,     For the Years Ended December 31,
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Loans at beginning of period
   $ 141,547     $ 124,501     $ 124,501     $ 127,475     $ 122,548     $ 108,338     $ 84,628  
 
                                          
Originations:
                                                        
Residential mortgage
     18,222       12,711       16,318       6,628       10,658       10,446       15,279  
Commercial mortgage
     20,294       16,501       26,260       28,738       18,815       19,889       23,965  

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    For the        
    Nine Months Ended        
    September 30,     For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Construction
     10,566       6,325       9,161       6,968       2,515       4,882       5,010  
Commercial
     1,799       2,556       3,770       801       2,315       2,053       4,006  
Consumer and other
     967       2,653       2,687       4,041       2,262       822       2,642  
 
                                          
Total loans originated
     51,848       40,746       58,196       47,176       36,565       38,092       50,902  
Purchases of mortgage loans
     14,002       —       —       —       —       —       —  
 
                                          
Total additions
     65,850       40,746       58,196       47,176       36,565       38,092       50,902  
 
                                          
Deduct:
                                                        
Principal loan repayments and prepayments
     30,078       32,415       41,151       50,179       31,594       24,051       27,293  
 
                                                      
Charge-offs (recoveries), net.
     (6 )     (1 )     (1 )     (29 )     44       (79 )     (101 )
 
                                          
Total deductions
     30,072       32,414       41,150       50,150       31,638       23,972       27,192  
 
                                          
 
                                                      
Net increase (decrease) in loans.
     35,778       8,332       17,046       (2,974 )     4,927       14,120       23,710  
 
                                          
 
                                                      
Loans at end of period
   $ 177,325     $ 132,833     $ 141,547     $ 124,501     $ 127,475     $ 122,548     $ 108,338  
 
                                          

Investment Activities

     Chart Bank’s investment portfolio is an important component of its balance sheet, and interest and dividends represent an important source of its earnings. Chart Bank’s investment policy is designed to complement its lending activities, provide an alternative source of income through interest, dividends and capital gains, diversify Chart Bank’s assets and improve liquidity while minimizing Chart Bank’s tax liability. Investment decisions are made in accordance with Chart Bank’s investment policy and are based upon the quality of a particular investment, its inherent risks, the composition of the balance sheet, market expectations, Chart Bank’s liquidity and income needs and how the investment fits within Chart Bank’s interest rate risk strategy. Chart Bank’s investment portfolio is comprised of obligations of various federal agencies, and corporate equity securities. At September 30, 2004, Chart Bank’s investment portfolio totaled $35.5 million, which represents approximately 13.9% of total assets.

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     The following table presents the amortized cost, gross unrealized gains and losses and fair value of Chart Bank’s securities at the dates indicated. At December 31, 2003, 2002 and 2001, all securities consisted of federal agency obligations.

                                 
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair  
    Cost     Gain     Losses     Value  
            (Dollars in thousands)          
September 30, 2004
                                
Securities available for sale:
                                
Federal agency obligations
   $ 2,009     $ 26     $ —     $ 2,035  
Marketable equity securities
     1,614       59       (39 )     1,634  
 
                        
 
                                
Total securities available for sale
   $ 3,623     $ 85     $ (39 )   $ 3,669  
 
                        
Securities held to maturity:
                                
Federal agency obligations
   $ 31,826     $ 66     $ (150 )   $ 31,742  
 
                        
 
                                
December 31, 2003
                                
Securities available for sale
   $ 5,292     $ 112     $ —     $ 5,404  
 
                        
Securities held to maturity
   $ 23,965     $ 113     $ (118 )   $ 23,960  
 
                        
 
                                
December 31, 2002
                                
Securities available for sale
   $ 16,142     $ 364     $ —     $ 16,506  
 
                        
Securities held to maturity
   $ 13,026     $ 146     $ —     $ 13,172  
 
                        
 
                                
December 31, 2001
                                
Securities available for sale
   $ 21,000     $ 587     $ (2 )   $ 21,585  
 
                        
Securities held to maturity
   $ —     $ —     $ —     $ —  
 
                        

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     The table below sets forth certain information regarding the amortized cost, weighted average yields and contractual maturities of Chart Bank’s debt securities portfolio at September 30, 2004:

                                                         
                    Over One Year        
    One Year or Less     through Five Years     Total  
            Weighted             Weighted                     Weighted  
    Amortized     Average     Amortized     Average     Amortized     Fair     Average  
    Cost     Yield     Cost     Yield     Cost     Value     Yield  
    (Dollars in thousands)  
Securities available for sale:
                                                        
Federal agency obligations
   $ 1,500       4.37 %   $ 509       4.41 %   $ 2,009     $ 2,035       4.38 %
Securities held to maturity:
                                                        
Federal agency obligations
     —       —       31,826       2.65 %     31,826       31,742       2.65 %
 
                                                
Total debt securities
   $ 1,500       4.37 %   $ 32,335       2.68 %   $ 33,835     $ 33,777       2.76 %
 
                                                

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     Deposit Activities and Other Sources of Funds

     Deposits are the major external source of funds for Chart Bank’s lending and investment activities. Chart Bank offers a wide variety of deposit accounts with a range of interest rates and terms, including, among others, interest bearing checking, non-interest bearing checking, regular savings, money market savings, NOW accounts and certificates of deposit. Chart Bank also generates funds internally from loan principal repayments and prepayments and maturing investment securities. In addition, Chart Bank is a member of the Federal Home Loan Bank of Boston which permits Chart Bank to borrow from the Federal Home Loan Bank of Boston to fund asset growth when other sources of funds are unavailable. At September 30, 2004, Chart Bank had total deposits of $216.0 million and the ability to borrow a total of $37.2 million from the Federal Home Loan Bank of Boston, in addition to the outstanding borrowings from the Federal Home Loan Bank of Boston of $22.0 million.

     The following tables set forth certain information relative to the composition of Chart Bank’s deposit accounts and the weighted average interest rate on each category of deposits:

                                                 
    At September 30, 2004     At December 31, 2003  
                    Weighted                     Weighted  
                    Average                     Average  
    Balance     Percent     Rate     Balance     Percent     Rate  
    (Dollars in thousands)  
Demand deposits
   $ 33,205       15.38 %     —     $ 30,458       17.32 %     —  
NOW deposits
     11,266       5.22 %     0.29 %     9,601       5.46 %     0.32 %
Money market deposits
     64,383       29.81 %     1.62 %     50,977       29.00 %     1.56 %
Other savings accounts
     14,630       6.77 %     0.77 %     21,479       12.22 %     0.84 %
 
                                    
Total non-certificate accounts
     123,484       57.18 %     0.96 %     112,515       64.00 %     0.89 %
 
                                    
 
Term certificates less than $100,000
     48,762       22.58 %     2.58 %     32,013       18.21 %     2.44 %
Term certificates of $100,000 or more
     43,726       20.24 %     2.69 %     31,273       17.79 %     2.60 %
 
                                    
Total certificates of deposit
     92,488       42.82 %     2.63 %     63,286       36.00 %     2.52 %
 
 
                                    
Total deposits
   $ 215,972       100.00 %     1.68 %   $ 175,801       100.00 %     1.48 %
 
                                    
                                                 
    At December 31,  
    2002     2001  
                    Weighted                     Weighted  
                    Average                     Average  
    Balance     Percent     Rate     Balance     Percent     Rate  
    (Dollars in thousands)  
Demand deposits
   $ 27,701       16.27 %     —     $ 25,183       17.30 %     —  
NOW deposits
     9,384       5.51 %     0.42 %     9,137       6.28 %     0.87 %
Money market deposits
     49,848       29.27 %     1.90 %     31,527       21.66 %     2.57 %
Other savings accounts
     18,988       11.15 %     1.24 %     15,859       10.90 %     1.90 %
 
                                    
Total non-certificate accounts
     105,921       62.20 %     1.15 %     81,706       56.14 %     1.46 %
 
                                    
 
Term certificates less than $100,000
     38,094       22.37 %     3.49 %     37,110       25.49 %     4.34 %
Term certificates of $100,000 or more
     26,264       15.43 %     3.45 %     26,733       18.37 %     4.60 %
 
                                    
Total certificates of deposit
     64,358       37.80 %     3.47 %     63,843       43.86 %     4.45 %
 
                                    
 
Total deposits
   $ 170,279       100.00 %     2.03 %   $ 145,549       100.00 %     2.77 %
 
                                    

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     As of September 30, 2004, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $43.7 million. The following table sets forth the maturity of those certificates as of September 30, 2004:

         
    At  
    September 30.  
    2004  
    (Dollars in  
    thousands)  
Three months or less
   $ 6,365  
Over three months through six months
     2,323  
Over six months through one year
     24,204  
Over one year to three years
     8,901  
Over three years
     1,933  
 
      
Total
   $ 43,726  
 
      

Cash Management Business - CSSI Subsidiary

     Chart Bank’s subsidiary, Creative Strategic Solutions, Inc. or CSSI, manages cash for owners of ATMs and provides related cash management services to a nationwide customer base. CSSI’s primary business is supplying cash funds to ATMs owned by independent service organizations, who are its customers, and processing the transactions effected at those ATMs. Currently, CSSI manages over 1700 ATMs for numerous independent service organizations in the United States. CSSI typically receives fees based on the amount of cash in the ATMs and in transit, tied to a floating index rate such as the Prime Rate. Chart Bank considers this business as an important part of its asset liability management program, and as of September 30, 2004 was using $31.2 million, or approximately 12.2% of its total assets, in this business. The cash used in this business remains an asset of Chart Bank. CSSI employs independent, bonded transit companies to transport the cash, and also insures the cash in ATMs against theft or loss through common insurance carriers.

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Non-Performing Assets

     The table below sets forth the amounts and categories of Chart Bank’s non-performing assets at the dates indicated. At each date presented, Chart Bank had no troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).

                                                 
    At        
    September     At December 31,  
    30, 2004     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Non-accrual loans:
                                                
Residential mortgage
   $ 119     $ 120     $ —     $ —     $ —     $ —  
Commercial mortgage
     —       —       —       —       —       —  
Construction
     —       —       —       —       —       —  
Commercial
     —       —       —       —       —       —  
Consumer and other
     —       —       —       —       —       —  
 
                                    
Total non-accrual loans
   $ 119     $ 120     $ —     $ —     $ —     $ —  
 
                                    
 
                                                
Loans greater than 90 days delinquent and still accruing:
                                                
Residential mortgage
   $ —     $ —     $ —     $ —     $ —     $ —  
Commercial mortgage
     —       68       —       —       —       351  
Construction
     —       —       —       —       —       —  
Commercial
     25       25       25       230       —       —  
Consumer and other
     —       —       —       —       —       —  
 
                                    
Total loans greater than 90 days delinquent and still accruing
   $ 25     $ 93     $ 25     $ 230     $ —     $ 351  
 
                                    
 
Total non-performing loans
   $ 144     $ 213     $ 25     $ 230     $ —     $ 351  
 
                                    
 
Total real estate owned
   $ —     $ —     $ —     $ —     $ —     $ —  
 
                                    
 
Total non-performing assets
   $ 144     $ 213     $ 25     $ 230     $ —     $ 351  
 
                                    
 
                                                
Ratios:
                                                
Non-performing loans to total loans
     0.08 %     0.15 %     0.02 %     0.18 %     — %     0.32 %
Non-performing assets to total assets
     0.06 %     0.10 %     0.01 %     0.13 %     — %     0.25 %

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     The following table sets forth activity in Chart Bank’s allowance for loan losses for the periods indicated:

                                                         
    At or for the        
    Nine Months Ended        
    September 30,     At or For the Years Ended December 31,  
    2004     2003     2003     2002     2001     2000     1999  
    (Dollars in thousands)  
Balance at beginning of period
   $ 1,657     $ 1,536     $ 1,536     $ 1,387     $ 1,311     $ 1,101     $ 820  
 
                                                        
Charge-offs:
                                                        
Real estate mortgage loans:
                                                        
Residential
     —       —       —       —       —       —       —  
Commercial
     —       —       —       —       47       —       —  
 
                                          
 
     —       —       —       —       47       —       —  
Commercial loans
     —       —       —       25       —       —       —  
Consumer loans
     6       5       5       6       7       5       14  
 
                                          
Total charge-offs
     6       5       5       31       54       5       14  
 
                                          
 
                                                        
Recoveries:
                                                        
Real estate mortgage loans
                                                        
Residential
     —       4       4       1       1       21       100  
Commercial
     —       —       —       45       5       62       12  
 
                                          
 
     —       4       4       46       6       83       112  
Commercial loans
     11       —       —       14       —       —       —  
Consumer loans
     1       2       2       —       4       1       3  
 
                                          
Total recoveries
     12       6       6       60       10       84       115  
 
                                          
 
                                                        
Net (charge-offs) recoveries
     6       1       1       29       (44 )     79       101  
Provision for loan losses
     90       90       120       120       120       131       180  
 
                                          
 
                                                        
Balance at end of period
   $ 1,753     $ 1,627     $ 1,657     $ 1,536     $ 1,387     $ 1,311     $ 1,101  
 
                                          
 
                                                        
Ratios:
                                                        
Net (charge-offs) recoveries to average loans outstanding (annualized)
     0.00 %     0.00 %     0.00 %     0.02 %     (0.04 %)     0.07 %     0.11 %
Allowance for loan losses to non-performing loans at end of period
     1,217.36 %     1,122.07 %     777.93 %     6,144.00 %     603.04 %     0.00 %     313.68 %
Allowance for loan losses to total loans at end of period
     0.99 %     1.22 %     1.17 %     1.23 %     1.09 %     1.07 %     1.02 %

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     The following tables set forth Chart Bank’s percent of allowance by loan category and the percent of the loans to total loans in each of the categories listed at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories:

                                                                         
                            At December 31,  
    At September 30, 2004     2003     2002  
                    Percent                     Percent                     Percent  
                    of Loans                     of Loans                     of Loans  
            Loan     in Each             Loan     in Each             Loan     in Each  
    Allowance     Balances     Category     Allowance     Balances     Category     Allowance     Balances     Category  
    for Loan     by     to Total     for Loan     by     to Total     for Loan     by     to Total  
    Losses     Category     Loans     Losses     Category     Loans     Losses     Category     Loans  
    (Dollars in thousands)  
Real estate mortgage loans :
                                                                        
Residential
   $ 197     $ 64,953       36.63 %   $ 123     $ 37,666       26.61 %   $ 108     $ 33,719       27.09 %
Commercial
     1,114       99,682       56.21 %     1,083       91,788       64.85 %     941       83,619       67.16 %
Construction
     237       8,225       4.64 %     179       6,498       4.59 %     102       3,327       2.67 %
 
                                                      
 
     1,548       172,860       97.48 %     1,385       135,952       96.05 %     1,151       120,665       96.92 %
Commercial loans
     95       4,124       2.33 %     85       4,425       3.12 %     58       3,437       2.76 %
Consumer loans
     6       341       0.19 %     7       1,170       0.83 %     8       399       0.32 %
Unallocated
    104       —       —       180       —       —       319       —       —  
 
                                                      
Total
   $ 1,753     $ 177,325       100.00 %   $ 1,657     $ 141,547       100.00 %   $ 1,536     $ 124,501       100.00 %
 
                                                      
                                                                         
    At December 31,  
    2001     2000     1999  
                    Percent                     Percent                     Percent  
                    of Loans                     of Loans                     of Loans  
            Loan     in Each             Loan     in Each             Loan     in Each  
    Allowance     Balances     Category     Allowance     Balances     Category     Allowance     Balances     Category  
    for Loan     by     to Total     for Loan     by     to Total     for Loan     by     to Total  
    Losses     Category     Loans     Losses     Category     Loans     Losses     Category     Loans  
    (Dollars in thousands)  
Real estate mortgage loans :
                                                                        
Residential
   $ 119     $ 41,118       32.25 %   $ 124     $ 44,765       36.53 %   $ 115     $ 39,531       36.49 %
Commercial
     906       76,406       59.94 %     887       68,995       56.30 %     803       60,490       55.83 %
Construction
     108       3,936       3.09 %     86       2,535       2.07 %     84       2,794       2.58 %
 
                                                      
 
     1,133       121,460       95.28 %     1,097       116,295       94.90 %     1,002       102,815       94.90 %
Commercial loans
     63       5,535       4.34 %     101       5,644       4.60 %     90       4,911       4.53 %
Consumer loans
     10       480       0.38 %     9       609       0.50 %     9       612       0.57 %
Unallocated
    181       —       —       104       —       —       —       —       —  
 
                                                      
Total
   $ 1,387     $ 127,475       100.00 %   $ 1,311     $ 122,548       100.00 %   $ 1,101     $ 108,338       100.00 %
 
                                                      

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Employees

     Chart Bank’s workforce at September 30, 2004 was 48 employees, of whom 44 were full-time and 4 were part-time.

Properties

     Chart Bank currently conducts its business through its main office located in Waltham, Massachusetts and two other full-service banking offices. In addition, Chart Bank operates eight off-site ATMs.

                     
    Location   Leased or Owned   Year Opened   Expiration of Lease
Main Office:
  75 Moody Street, Waltham,
Massachusetts 02453 		  Leased     1996     March 2008
Branch Offices:
  1290 Main Street, Waltham,
Massachusetts 02451 		  Owned     1996     N/A
  40 Austin Street, Newton,
Massachusetts 02460 		  Owned     1998     N/A
Administrative
Office:
  295 Weston Street
Waltham, Massachusetts 02453 		  Leased     1999     April 2005

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF CHART BANK

     The following discussion should be read in conjunction with “Selected Consolidated Financial Information of Chart Bank” and the Consolidated Financial Statements of Chart Bank, A Cooperative Bank and Subsidiaries and related Notes appearing elsewhere in this prospectus.

Forward-Looking Statements

     This management’s discussion and analysis of Chart Bank’s financial condition and results of operations contains forward-looking statements that are based on assumptions and describe future plans, strategies and expectations of Chart Bank, including those with respect to its pending acquisition by Benjamin Franklin Bank. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Chart Bank’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of Chart Bank include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in Chart Bank’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Subject to applicable laws and regulations, Chart Bank does not undertake—and specifically disclaims any obligation—to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

General

     Chart Bank’s results of operations depend primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. Chart Bank also generates noninterest income primarily from fees charged on customers’ accounts and income generated through Chart Bank’s subsidiary, CSSI. CSSI provides cash to ATMs owned by independent service organizations nationwide. Fees are collected from the independent service organizations for managing the ATMs and for the use of the cash in the machines. Chart Bank’s noninterest expenses primarily consist of employee compensation and benefits, occupancy, advertising and other operating expenses. Chart Bank’s results of operations are affected by general economic and competitive conditions, notably changes in market interest rates, government policies and regulations. Chart Bank exceeded all of its regulatory capital requirements at December 31, 2003 and at September 30, 2004.

Critical Accounting Policies

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods.

     Note 1 of the Notes to Chart Bank’s consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of Chart Bank’s consolidated financial statements. The following is a brief discussion of the critical accounting policy used by Chart Bank in preparation of its financial statements.

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     Allowance For Loan Losses. The most significant estimate made by Chart Bank in the preparation of its financial statements relates to determining the allowance for loan losses. The actual amount of loan losses could differ significantly from this estimate. Senior management has discussed the development and selection of this accounting estimate, the assumptions on which this estimate is based, and the related disclosures with the audit committee of Chart Bank’s Board of Directors.

     Chart Bank devotes significant attention to maintaining high loan quality through its underwriting standards, active servicing of loans and aggressive management of nonperforming assets. The allowance for loan losses is maintained at a level estimated by management to provide adequately for probable loan losses inherent in the loan portfolio. Probable loan losses are estimated based on a monthly review of the loan portfolio, loss experience, specific problem loans, economic conditions and other pertinent factors. In assessing risks inherent in the portfolio, management considers the risk of loss on non-performing and classified loans including an analysis of collateral in each situation. Chart Bank’s methodology for assessing the appropriateness of the allowance for loan losses includes several key elements. Problem loans are identified and analyzed individually to detect specific losses including an analysis of estimated cash flows for impaired loans. The loan portfolio is also segmented into pools of loans that are similar in type and risk characteristics (i.e., commercial, consumer and mortgage loans). Loss factors based on Chart Bank’s historical charge offs are applied using Chart Bank’s historical experience and may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. Additionally, the portfolio is segmented into pools based on internal risk ratings with estimated loss factors applied to each rating category. Other factors considered in determining probable loan losses are any changes in concentrations in the portfolio, trends in loan growth, the relationship and trends in recent years of recoveries as a percentage of prior charge offs and peer bank’s loss experience. Although management believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary, and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while Chart Bank believes it has established its existing allowance for loan losses consistent with accounting principles generally accepted in the United States of America, there can be no assurance that regulators, in reviewing Chart Bank’s loan portfolio, will not request Chart Bank to increase its allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Material increases in the allowance for loan losses will adversely affect Chart Bank’s financial condition and results of operations.

Changes in Chart Bank’s Financial Condition and Results of Operations

     The following analysis discusses changes in the financial condition and results of operations for the nine months ended September 30, 2004 and 2003, and for the years ended December 31, 2003 and 2002, and should be read in conjunction with Chart Bank’s consolidated financial statements and the notes thereto, appearing elsewhere herein.

Comparison of Chart Bank’s Financial Condition at September 30, 2004 and December 31, 2003

     General. Chart Bank’s total assets increased $46.4 million, or 22.1%, to $256.3 million at September 30, 2004 as compared to $209.9 million at December 31, 2003. The increase in assets was mainly attributable to a $35.7 million increase in net loans, a $6.1 million increase in securities and a $3.9 million increase in cash and cash equivalents. The growth in assets was primarily funded by an increase in deposit account balances of $40.2 million and advances from the Federal Home Loan Bank of Boston of $6.1 million.

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     Net Loans. Net loans increased $35.7 million, or 25.5%, from $139.9 million at December 31, 2003 to $175.6 million at September 30, 2004, primarily as a result of increased residential mortgage loans, commercial mortgage loans and construction loans. Residential mortgage loans increased $27.3 million, or 72.4%, from $37.7 million at December 31, 2003 to $65.0 million at September 30, 2004 mainly due to additional residential mortgage loan originations primarily resulting from refinancing activity in a low interest rate environment and the purchase of $14.0 million of residential mortgage loans from another institution. Commercial mortgage loans increased $7.9 million, or 8.6%, from $91.8 million at December 31, 2003, to $99.7 million at September 30, 2004, primarily due to additional commercial mortgage originations. Construction loans increased $1.7 million, or 26.6%, from $6.5 million at December 31, 2003 to $8.2 million at September 30, 2004, primarily due to additional construction loan originations.

     Securities. Available for sale securities decreased $1.7 million, or 32.1%, from a fair value of $5.4 million at December 31, 2003 to a fair value of $3.7 million at September 30, 2004. Held to maturity securities increased $7.9 million from an amortized cost of $24.0 million at December 31, 2003 to $31.8 million at September 30, 2004. The decrease in available for sale securities and the increase in held to maturity securities primarily resulted from the reinvestment of proceeds from maturities, calls and sales of available for sale securities in held to maturity securities and an additional net increase of $6.2 million of federal agency securities, which were classified as held to maturity securities.

     Cash and Cash Equivalents. Cash and cash equivalents increased $3.9 million, or 11.2%, from $34.9 million at December 31, 2003 to $38.8 million at September 30, 2004, primarily as a result of a $4.2 million, or 15.5%, increase in the cash deployed in ATMs by CSSI from $27.0 million at December 31, 2003 to $31.2 million at September 30, 2004 and a $1.0 million increase in short-term investments, partially offset by a $1.3 million decrease in cash and due from banks primarily resulting from fluctuations in the ordinary course of business.

     Deposits and Borrowed Funds. Deposits totaled $216.0 million at September 30, 2004, an increase of $40.2 million, or 22.9%, compared to $175.8 million at December 31, 2003. Certificates of deposit increased $29.2 million, or 46.1%, from $63.3 million at December 31, 2003 to $92.5 million at September 30, 2004. Savings and money market accounts increased $6.6 million, or 9.0%, from $72.5 million at December 31, 2003 to $79.0 million at September 30, 2004. NOW and demand deposit accounts increased $4.4 million, or 11.0%, from $40.0 million at December 31, 2003 to $44.5 million at September 30, 2004. Borrowed funds from the Federal Home Loan Bank of Boston increased $6.1 million, or 38.1%, from $15.9 million to $22.0 million at September 30, 2004.

     Non-performing Assets, Delinquencies and Allowance for Loan Losses. Non-performing assets, all of which consisted of loans, totaled $144,000 at September 30, 2004, compared to $213,000 at December 31, 2003, a decrease of $69,000.

     On a monthly basis, management informs the Board of Directors of the amount of loans delinquent for more than 30 days, all loans in foreclosure and all foreclosed and repossessed property that Chart Bank owns. Chart Bank ceases accruing interest on mortgage loans when principal or interest payments are delinquent 90 days or more unless management determines that the loan principal and interest is fully secured and in the process of collection. Once the accrual of interest on a loan is discontinued, all interest previously accrued is reversed against current period interest income.

     The allowance for loan losses was $1.8 million at September 30, 2004, an increase of $96,000 from the $1.7 million recorded at December 31, 2003. The allowance for loan losses as a percentage of gross loans was 0.99% at September 30, 2004 as compared to 1.17% at December 31, 2003. The allowance for loan losses as a percentage of non-performing loans was 1,217% at September 30, 2004 as compared to 778% at December 31, 2003.

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     The allowance for loan losses consists of a formula allowance for various loan portfolio classifications and an amount for loans identified as impaired, if necessary. The allowance is an estimate, and ultimate losses may vary from current estimates. See “—Critical Accounting Policies—Allowance for Loan Losses” on page [#] for a discussion of the factors considered in making this estimate and the risks associated and the risks associated with using those factors. Changes in the estimate are recorded in the results of operations in the period in which they become known, along with provisions for estimated losses incurred during that period.

     A portion of the allowance for loan losses is not allocated to any specific segment of the loan portfolio. This unallocated reserve is maintained for two primary reasons: there exists an inherent subjectivity and imprecision to the analytical processes employed, and the prevailing business environment, as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. Moreover, management has identified certain risk factors, which could impact the degree of loss sustained within the portfolio. These include: market risk factors, such as the effects of economic variability on the entire portfolio, and unique portfolio risk factors that are inherent characteristics of Chart Bank’s loan portfolio. Market risk factors may consist of changes to general economic and business conditions that may impact Chart Bank’s loan portfolio customer base in terms of ability to repay and that may result in changes in value of underlying collateral. Unique portfolio risk factors may include industry or geographic concentrations, or trends that may exacerbate losses resulting from economic events which Chart Bank may not be able to fully diversify out of its portfolio.

     Due to the inherent imprecise nature of the loan loss estimation process and ever changing conditions, these risk attributes may not be adequately captured in data related to the formula-based loan loss components used to determine allocations in Chart Bank’s analysis of the adequacy of the allowance for loan losses. Management, therefore, has established and maintains an unallocated allowance for loan losses. The amount of the unallocated allowance was $ 104 ,000 at September 30, 2004 as compared to $ 180 ,000 at December 31, 2003.

     Stockholders’ Equity. Total stockholders’ equity increased $147,000, or 0.8%, to $17.5 million at September 30, 2004 compared to $17.4 million at December 31, 2003. The increase is due primarily to net income of $784,000 for the nine months ended September 30, 2004, partially offset by $597,000 in dividends paid to stockholders during the period ended September 30, 2004 and a reduction in accumulated other comprehensive income. The decrease in accumulated other comprehensive income was due to a reduction in the unrealized gain on securities available for sale, net of taxes of $40,000. The decline in the unrealized gain was due to the realization of $53,000, or $32,000 net of taxes, of security gains during the nine months ended September 30, 2004 and a higher interest rate environment reducing the fair value of Chart Bank’s fixed income portfolio.

Comparison of Chart Bank’s Operating Results for the Nine Months Ended September 30, 2004 and 2003

     Net Income. Net income for the nine months ended September 30, 2004 was $784,000 compared to $1.3 million for the nine months ended September 30, 2003. The decrease of $518,000 was mainly the result of an increase in noninterest expense of $830,000, primarily resulting from merger-related expenses and increases in salaries and employee benefits, partially offset by a $301,000 increase in net interest income.

     Net Interest Income. Net interest income increased $301,000, or 6.1%, to $5.3 million for the first nine months of 2004 compared to $5.0 million for the first nine months of 2003. The increase was primarily due to higher average loans and a lower cost of funds, partially offset by lower asset yields.

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     Interest Income. Total interest and dividend income increased $385,000, or 5.1%, to $8.0 million for the first nine months of 2004 from $7.6 million for the first nine months of 2003. Interest income on loans increased $478,000, or 7.1%, to $7.2 million for the nine months ended September 30, 2004 compared to $6.7 million for the nine months ended September 30, 2003. The increase was due a $27.3 million increase in the average balance of net loans outstanding partially offset by an 81 basis point decrease in the average yield on loans. The increase in loan volume and the decrease in yield were mainly due to a lower interest rate environment, additional originations primarily resulting from prepayments and refinancing activity in a low interest rate environment and the purchase of $14.0 million of residential mortgage loans from another institution during the first nine months of 2004 compared to the first nine months of 2003. Interest and dividend income from investment securities, short-term investments and other investments decreased $93,000, or 10.6%, to $781,000 for the nine months ended September 30, 2004, compared to $874,000 for the nine months ended September 30, 2003. The decrease in income was due to a 74 basis point decrease in the average yield on these investments partially offset by a $6.4 million increase in the average balance of these investments outstanding. The lower yields on these investments resulted from a lower interest rate environment during the first nine months of 2004 compared to the first nine months of 2003.

     Interest Expense. Interest expense increased $84,000, or 3.2%, to $2.7 million for the nine months ended September 30, 2004 compared to $2.6 million for the nine months ended September 30, 2003. The increase was primarily due to an increase in interest-bearing liabilities of $29.7 million, or 18.9%, to $186.8 million for the nine months ended September 30, 2004 from $157.1 million for the nine months ended September 30, 2003 partially offset by a decrease in the average cost of funds for interest-bearing liabilities of 30 basis points. The average cost of interest-bearing liabilities for the first nine months of 2004 was 1.95% as compared to 2.25% for the first nine months of 2003. The decrease in the average cost of interest-bearing liabilities was primarily due to a lower interest rate environment. The higher average balance of interest-bearing liabilities for the first nine months of 2004 primarily resulted from a $12.9 million increase in the average balance of certificates of deposit, a $8.7 million increase in the average balances in money market/NOW accounts and a $10.9 million increase in the average balance of Federal Home Loan Bank of Boston advances, partially offset by a $2.7 million decrease in savings deposits.

     Provision for Loan Losses. The provision for loan losses was $90,000 for the nine months ended September 30, 2004 and $90,000 for the nine months ended September 30, 2003.

     Noninterest Income. Noninterest income was $1.9 million for the nine months ended September 30, 2004 as compared to $2.0 million for the nine months ended September 30, 2003, a decrease of $132,000, or 6.4%. The decrease in noninterest income was due to a decrease in loan brokerage fees of $126,000 as more loans originated by Chart Bank were for its own portfolio, a decrease in customer service fees of $89,000 due to a reduction in service fees on deposit accounts that was instituted in the fourth quarter of 2003, partially offset by increases in revenues from net gain on sales and redemptions of securities of $47,000, ATM service contract fees of $24,000 and miscellaneous income of $12,000.

     Noninterest Expense. Noninterest expense increased $830,000, or 17.3%, from $4.8 million for the nine months ended September 30, 2003 to $5.6 million for the nine months ended September 30, 2004. The increase in noninterest expense from the prior year period was primarily due to merger-related expenses of $382,000 and increases in expense relating to salaries and employee benefits of $345,000, data processing of $90,000 due to added volume and new services offered, advertising and marketing expenses of $81,000 and legal fees of $38,000, partially offset by decreases in telephone costs of $34,000, exam and audit related costs of $9,000, stationary and supplies costs of $25,000, and occupancy and equipment expenses of $31,000 as certain assets became fully depreciated.

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     Provision for Income Taxes. The provision for income taxes decreased $143,000 from $823,000 for the first nine months of 2003 to $680,000 for the nine months ended September 30, 2004. The effective tax rate for the nine months ended September 30, 2004 increased to 46.4% from 38.7% in the prior year period, primarily due to merger-related expenses that are not deductible for tax purposes.

Comparison of Chart Bank’s Financial Condition at December 31, 2003 and 2002

     General. Chart Bank’s total assets increased $6.9 million, or 3.3%, to $209.9 million at December 31, 2003 as compared to $203.0 million at December 31, 2002. The increase was primarily due to a $16.9 million increase in net loans, partially offset by a $9.9 million decrease in cash and cash equivalents. The growth in assets was primarily funded by an increase in deposits of $5.5 million and advances from the Federal Home Loan Bank of Boston of $944,000.

     Net Loans. Net loans increased $16.9 million, or 13.8%, from $123.0 million at December 31, 2002 to $139.9 million at December 31, 2003, primarily as a result of increased commercial mortgage loans, residential mortgage loans and construction loans. Commercial mortgage loans increased $8.2 million, or 9.8%, from $83.6 million at December 31, 2002 to $91.8 million at December 31, 2003, primarily as a result of additional originations of commercial mortgage loans. Residential mortgage loans increased $3.9 million, or 11.7%, from $33.7 million at December 31, 2002 to $37.7 million at December 31, 2003, primarily as a result of additional originations of residential mortgage loans. Construction loans increased $3.2 million, or 95.3%, from $3.3 million at December 31, 2002 to $6.5 million at December 31, 2003, primarily as a result of additional originations of construction loans.

     Securities. Available for sale securities decreased by $11.1 million, or 67.3%, from a fair value of $16.5 million at December 31, 2002 to a fair value of $5.4 million at December 31, 2003. Held to maturity securities increased $10.9 million, or 84.0%, from an amortized cost of $13.0 million at December 31, 2002 to $24.0 million at December 31, 2003. The decrease in available for sale securities and the increase in held to maturity securities primarily resulted from the reinvestment of proceeds from maturities, calls and sales of available for sale securities and held to maturity securities in held to maturity securities.

     Cash and Cash Equivalents. Cash and cash equivalents decreased $9.9 million, or 22.1%, from $44.8 million at December 31, 2002 to $34.9 million at December 31, 2003, primarily as a result of a $9.1 million decrease in short-term investments and a $781,000 decrease in cash and due from banks primarily resulting from fluctuations in the ordinary course of business. The decrease in cash and cash equivalents was mainly due to the deployment of cash and cash equivalents in loans. Cash deployed in ATMs by CSSI increased from $26.7 million at December 31, 2002 to $27.0 million at December 31, 2004.

     Deposits and Borrowed Funds. Deposits totaled $175.8 million at December 31, 2003, an increase of $5.5 million, or 3.1%, compared to $170.3 million at December 31, 2002. The deposit growth reflects an increase in nonmaturity deposits partially offset by a decrease in certificates of deposit. Nonmaturity deposits (savings, money market, NOW and demand deposit accounts) increased $6.6 million, while certificates of deposit decreased $1.1 million. Chart Bank shifted its marketing focus during 2003 to obtain nonmaturity deposit accounts to take advantage of their lower cost of funds when compared to certificates of deposit. Advances from the Federal Home Loan Bank of Boston increased $944,000, or 5.9%, to $15.9 million at December 31, 2003 from $15.0 million at December 31, 2002. These funds were primarily used to fund loan growth.

     Non-Performing Assets, Delinquencies and Allowance for Loan Losses. Non-performing assets, all of which consisted of loans, totaled $213,000 at December 31, 2003, compared to $25,000 at December 31, 2002, representing an increase of $188,000. The increase in non-performing assets was an

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increase in non-performing residential mortgage loans of $120,000 and an increase in non-performing commercial mortgage loans of $68,000.

     The allowance for loan losses was $1.7 million at December 31, 2003, an increase of $121,000 from the $1.5 million recorded at December 31, 2002. The allowance for loan losses as a percentage of gross loans was 1.17% at December 31, 2003 as compared to 1.23% at December 31, 2002. The allowance for loan losses as a percentage of non-performing loans was 778% at December 31, 2003 as compared to 6,144% at December 31, 2002. The amount of the unallocated allowance, which is not allocated to any specific segment of the loan portfolio, was $180,000 December 31, 2003 as compared to $319,000 at December 31, 2002. The allowance is an estimate, and ultimate losses may vary from current estimates. See “—Critical Accounting Policies—Allowance for Loan Losses” on page [#] for a discussion of the factors considered in making this estimate and the risks associated and the risks associated with using those factors.

     Stockholders’ Equity. Total stockholders’ equity increased $1.3 million, or 8.3%, to $17.4 million at December 31, 2003, compared to $16.1 million at December 31, 2002. The increase was primarily due to net income of $1.7 million during the year ended December 31, 2003, partially offset by dividends paid to stockholders during 2003 of $213,000 and the reduction of accumulated other comprehensive income of $151,000. The decrease in accumulated other comprehensive income was due to a reduction in the unrealized gain on securities available for sale, net of taxes of $151,000. The decline in the unrealized gains was primarily due to a higher interest rate environment reducing the fair value of Chart Bank’s fixed income portfolio.

Comparison of Chart Bank’s Operating Results for the Years Ended December 31, 2003 and 2002

     Net Income. Net income for the year ended December 31, 2003 was $1.7 million compared to net income of $1.6 million for the prior year. The increase of $133,000 was mainly the result of a decrease in noninterest expense of $784,000, partially offset by a decrease in noninterest income of $605,000, both of which primarily related to the partial discontinuation of the residential loan brokerage program.

     Net Interest Income. Net interest income remained consistent at $6.6 million for 2003 from 2002. Net interest income increased as a result of higher interest income from an increase in the level of average interest earning assets, but was offset by lower yields and higher interest expense resulting from an increase in the level of average interest bearing liabilities.

     Interest Income. Total interest and dividend income decreased $942,000, or 8.5%, to $10.1 million for 2003 from $11.0 million for 2002. Interest income on loans decreased $602,000, or 6.3%, to $9.0 million in 2003 from $9.6 million in 2002. The decrease was due to a 70 basis point decrease in the average yield on loans, partially offset by a $4.2 million increase in the average balance of net loans outstanding. The decrease in yield and increase in loan volume was due to a lower interest rate environment and higher prepayments and refinancing of residential and commercial mortgage loans in 2003 compared to 2002. Interest and dividend income from investment securities, short-term investments and other investments decreased $340,000, or 23.3%, to $1.1 million in 2003 from $1.5 million in 2002. The decrease was due to a 114 basis point decrease in the average yield on these investments, partially offset by a $2.1 million increase in the average balance of these investments outstanding. The lower yields on these investments resulted from a lower interest rate environment in 2003 compared to 2002.

     Interest Expense. Interest expense decreased $1.0 million, or 22.7%, to $3.5 million for 2003 from $4.5 million for 2002. The decrease was primarily due to a decrease in the average cost of funds for interest-bearing liabilities of 77 basis points, partially offset by an increase in the average balance of interest-bearing liabilities of $7.0 million, or 4.6%, to $158.2 million in 2003 from $151.2 million in

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2002. The average cost of interest-bearing liabilities for 2003 was 2.18% as compared to 2.95% for 2002. The decrease in the average interest-bearing liabilities was primarily due to a lower interest rate environment. The higher average balance of interest-bearing liabilities in 2003 primarily resulted from an $8.1 million increase in the average balances in money market/NOW accounts and a $2.4 million increase in savings deposits, partially offset by a $3.4 million decrease in the average balance of Federal Home Loan Bank of Boston advances.

     Provision for Loan Losses. The provision for loan losses was $120,000 for 2003 and 2002.

     Noninterest Income. Noninterest income decreased $605,000, or 18.5%, to $2.7 million for 2003 as compared to $3.3 million for 2002. The decrease in noninterest income was due to the decrease in loan brokerage fees of $589,000 due to the partial discontinuation of the residential loan brokerage program due to lack profitability, gain on the sale of the Hyannis banking office of $316,000 in 2002, which did not recur in 2003, the decrease in gains from sales and redemptions of securities of $79,000, partially offset by increases in revenues from ATM service contracts of $318,000 and customer service fees of $102,000 and $41,000 in miscellaneous income due to a legal settlement.

     Noninterest Expense. Noninterest expense decreased $784,000, or 10.9%, to $6.4 million for 2003 from $7.2 million for 2002. The decrease in noninterest expense for 2003 was primarily due to decreases in expenses relating to salaries and employee benefits of $432,000 due to the partial discontinuation of the residential loan brokerage program, and reductions in advertising and marketing of $129,000, data processing of $85,000, professional services of $46,000 and other general and administrative of $91,000.

     Provision for Income Taxes. The provision for income taxes increased $118,000, or 12.3%, to $1.1 million for 2003 from $958,000 in for 2002. The effective tax rates were 38.7% for 2003 and 37.9% for 2002.

     Average Balances, Interest And Average Yields/Cost. The following table presents certain information for the periods indicated regarding average balances of assets and liabilities, as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented.

     Average balances were derived from average daily balances. The yields and rates include fees which are considered adjustments to yields.

     The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

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                    Nine Months Ended September 30,
    At September 30, 2004     2004     2003
            Weighted                                              
            Average     Average                     Average              
    Outstanding     Yield/     Outstanding             Yield/Rate     Outstanding             Yield/Rate  
    Balance     Rate     Balance     Interest     (1)     Balance     Interest     (1)  
    (Dollars in thousands)  
Interest-earning assets:
                                                                
Loans, net
   $ 175,572       6.07 %   $ 156,122     $ 7,225       6.17 %   $ 128,862     $ 6,747       6.98 %
Investment securities
     40,658       2.65       43,467       781       2.40       37,107       874       3.14  
 
                                                      
Total interest-earning assets
     216,230       5.43       199,589       8,006       5.35       165,969       7,621       6.12  
 
                                                            
Non-interest-earning assets
     40,031               35,860                       36,640                  
 
                                                          
Total assets
   $ 256,261             $ 235,449                     $ 202,609                  
 
                                                          
Interest-bearing liabilities:
                                                                
Savings deposits
   $ 14,630       0.77     $ 17,521       105       0.80     $ 20,215       148       0.98  
Money market/NOW accounts
     75,649       1.42       68,349       722       1.41       59,694       618       1.38  
Certificates of deposit
     92,488       2.63       77,982       1,504       2.57       65,128       1,566       3.21  
 
                                                      
Total deposits
     182,767       1.98       163,852       2,331       1.90       145,037       2,332       2.14  
FHLB advances
     22,000       2.52       22,913       401       2.33       12,051       316       3.50  
 
                                                      
Total interest-bearing liabilities
     204,767       2.04       186,765       2,732       1.95       157,088       2,648       2.25  
 
                                                            
Non-interest-bearing liabilities
     33,948               31,106                       29,153                  
 
                                                          
Total liabilities
     238,715               217,871                       186,241                  
Stockholders’ equity
     17,546               17,578                       16,368                  
 
                                                          
Total liabilities and stockholders’ equity
   $ 256,261             $ 235,449                     $ 202,609                  
 
                                                          
Net interest income
                           $ 5,274                     $ 4,973          
 
                                                            
Net interest rate spread (2)(5)
             3.39 %                     3.40 %                     3.87 %
Net interest-earning assets (3)
   $ 11,463             $ 12,824                     $ 8,881                  
 
                                                          
Net interest margin (4)
                                     3.52 %                     4.00 %
Average interest-earning assets to interest-bearing liabilities
                                     106.87 %                     105.65 %

(footnotes on following page)

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    Years Ended December 31,
    2003     2002     2001
    Average                     Average                     Average              
    Outstanding             Yield/     Outstanding             Yield/     Outstanding             Yield/  
    Balance     Interest     Rate     Balance     Interest     Rate     Balance     Interest     Rate  
    (Dollars in thousands)  
Interest-earning assets:
                                                                        
Loans
   $ 130,425     $ 8,971       6.88 %   $ 126,264     $ 9,573       7.58 %   $ 126,178     $ 10,168       8.06 %
Investment securities
     37,416       1,120       2.99 %     35,365       1,460       4.13 %     27,149       1,550       5.71 %
 
                                                            
Total interest-earning assets
     167,841       10,091       6.01 %     161,629       11,033       6.83 %     153,327       11,718       7.64 %
 
                                                                  
Non-interest-earning assets
     36,517                       31,792                       24,007                  
 
                                                                    
Total assets
   $ 204,358                     $ 193,421                     $ 177,334                  
 
                                                                  
Interest-bearing liabilities:
                                                                        
Savings deposits
   $ 20,643       194       0.94 %   $ 18,244       310       1.70 %   $ 16,770       394       2.35 %
Money market/NOW accounts
     60,408       828       1.37 %     52,280       1,079       2.06 %     44,486       1,311       2.95 %
Certificates of deposit
     64,672       1,992       3.08 %     64,734       2,520       3.89 %     74,593       4,063       5.45 %
 
                                                            
Total deposits
     145,723       3,014       2.07 %     135,258       3,909       2.89 %     135,849       5,768       4.25 %
FHLB advances
     12,491       438       3.51 %     15,932       557       3.50 %     2,378       102       4.29 %
 
                                                            
Total interest-bearing liabilities
     158,214       3,452       2.18 %     151,190       4,466       2.95 %     138,227       5,870       4.25 %
 
                                                                  
Non-interest-bearing liabilities
     29,592                       27,013                       25,432                  
 
                                                                  
Total liabilities
     187,806                       178,203                       163,659                  
Stockholders’ equity
     16,552                       15,218                       13,675                  
 
                                                                  
Total liabilities and stockholders’ equity
   $ 204,358                     $ 193,421                     $ 177,334                  
 
                                                                  
Net interest income
           $ 6,639                     $ 6,567                     $ 5,848          
 
                                                                  
Net interest rate spread (5)
                     3.83 %                     3.88 %                     3.39 %
Net interest-earning assets (3)
   $ 9,627                     $ 10,439                     $ 15,100                  
 
                                                                  
Net interest margin (4)
                     3.96 %                     4.06 %                     3.81 %
Average of interest-earning assets to interest-bearing liabilities
                     106.08 %                     106.90 %                     110.92 %

(1)   Yields and rates for the nine months ended September 30, 2004 and 2003 are annualized.
 
(2)   Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities at September 30, 2004.
 
(3)   Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
 
(4)   Net interest margin represents net interest income divided by average total interest-earning assets.
 
(5)   Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities for the nine months ended September 30, 2004 and 2003 and the years ended December 31, 2003, 2002 and 2001.

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     The following table presents the dollar amount of changes in interest income and interest expense for the major categories of Chart Bank’s interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

                                                                         
    Nine Months Ended              
    September 30,     Years Ended December 31,     Years Ended December 31,  
    2004 vs. 2003     2003 vs. 2002     2002 vs. 2001  
    Increase     Total     Increase     Total     Increase     Total  
    (Decrease) Due to     Increase     (Decrease) Due to     Increase     (Decrease) Due to     Increase  
    Volume     Rate     (Decrease)     Volume     Rate     (Decrease)     Volume     Rate     (Decrease)  
    (Dollars in thousands)                          
Interest-earning assets:
                                                                        
Loans
   $ 1,320     $ (842 )   $ 478     $ 308     $ (910 )   $ (602 )   $ 7     $ (602 )   $ (595 )
Investment securities
     135       (228 )     (93 )     80       (420 )     (340 )     401       (491 )     (90 )
 
                                                      
Total interest-earning assets
     1,455       (1,070 )     385       388       (1,330 )     (942 )     408       (1,093 )     (685 )
 
                                                      
Interest-bearing liabilities:
                                                                        
Savings deposits
     (18 )     (25 )     (43 )     48       (164 )     (116 )     39       (123 )     (84 )
Money market/NOW accounts
     91       13       104       216       (467 )     (251 )     327       (559 )     (232 )
Certificates of deposits
     278       (340 )     (62 )     (2 )     (526 )     (528 )     (669 )     (874 )     (1,543 )
 
                                                      
Total deposits
     351       (352 )     (1 )     262       (1,157 )     (895 )     (303 )     (1,556 )     (1,859 )
FHLB advances
     216       (131 )     85       (121 )     2       (119 )     477       (22 )     455  
 
                                                      
Total interest-bearing liabilities
     567       (483 )     84       141       (1,155 )     (1,014 )     174       (1,578 )     (1,404 )
 
                                                      
Change in net interest income
   $ 888     $ (587 )   $ 301     $ 247     $ (175 )   $ 72     $ 234     $ 485     $ 719  
 
                                                      

Liquidity and Capital Resources

     Liquidity is the ability to meet current and future financial obligations of a short-term nature. Chart Bank further defines liquidity as the ability to respond to the needs of depositors and borrowers as well as maintaining the flexibility to take advantage of investment opportunities. Primary sources of funds consist of deposit inflows, loan repayments, maturities, pay downs, and sales of mortgage obligations and investments and advances from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

     Chart Bank’s primary investing activities are: (1) originating and purchasing commercial mortgage loans, residential mortgage loans, construction loans, commercial business loans and consumer loans (2) investing in federal agency obligations and corporate equity securities and (3) funding cash in ATMs for Chart Bank’s subsidiary CSSI. These activities are funded primarily by principal and interest payments on loans, deposit growth, Federal Home Loan Bank of Boston advances and maturities of securities.

     During the nine months ended September 30, 2004, Chart Bank’s loan originations and purchases, net of repayments, totaled $35. 8 million, including the purchase of $14.0 million in residential mortgage loans from another institution. For the nine months ended September 30, 2004, Chart Bank purchased federal agency obligations and corporate equity securities totaling $15.7 million and had proceeds from

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maturities and sales of securities of $9.5 million. Chart Bank experienced a net increase in total deposits of $40.2 million for the nine months ended September 30, 2004. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by Chart Bank and its local competitors and other factors. Net Federal Home Loan Bank of Boston advances for the nine months ended September 30, 2004 were $6.1 million.

     During the years ended December 31, 2003 and 2002, Chart Bank’s loan originations, net of repayments totaled $17.0 million and a decline of $3.0 million, respectively. For the years ended December 31, 2003 and 2002, Chart Bank purchased federal agency obligations totaling $23.1 million and $24.6 million, respectively, and had proceeds from maturities, calls and sales of securities of $22.9 million and $16.5 million, respectively. Chart Bank experienced a net increase in total deposits of $5.5 million and $24.7 million for the years ended December 31, 2003 and 2002, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by Chart Bank and its local competitors and other factors. Net Federal Home Loan Bank of Boston advances for the years ended December 31, 2003 and 2002 were $944,000 and a reduction of $4.7 million, respectively

     Chart Bank closely monitors its liquidity position on a daily basis. If Chart Bank should require funds beyond its ability to generate them internally, additional sources of funds are available through Federal Home Loan Bank of Boston advances and through a borrowing agreement with the Federal Reserve Bank of Boston at an interest rate that adjusts daily.

     Outstanding commitments for all loans and unadvanced construction loans and lines-of-credit totaled $31.7 million and $27.6 million at September 30, 2004 and December 31, 2003, respectively. Management of Chart Bank anticipates that it will have sufficient funds available to meet its current loan commitments. Certificates of deposit that are scheduled to mature in one year or less from September 30, 2004 totaled $17.4 million and from December 31, 2003 totaled $20.6 million. Chart Bank relies primarily on competitive rates, customer service, and long-standing relationships with customers to retain deposits. Occasionally, Chart Bank will also offer special competitive promotions to its customers to increase retention and promote deposit growth. Based upon Chart Bank’s historical experience with deposit retention, management believes that a significant portion of its deposits will remain with Chart Bank.

     Chart Bank must satisfy various regulatory capital requirements administered by the federal banking agencies including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories.

     At September 30, 2004, Chart Bank exceeded all of its regulatory capital requirements with a leverage capital level of $17.5 million, or 6.8% of average assets, which is above the required level of $10.4 million, or 4.0%, and total risk-based capital of $19.4 million, or 12.0% of risk weighted assets, which is above the required level of $12.9 million, or 8.0%. Chart Bank is considered “well capitalized” under regulatory guidelines.

     At December 31, 2003, Chart Bank exceeded all of its regulatory capital requirements with a leverage capital level of $17.3 million, or 8.4% of average quarterly assets, which was above the required level of $8.3 million, or 4.0%, and total risk-based capital of $19.0 million, or 12.4% of risk weighted assets, which is above the required level of $12.3 million, or 8.0%. At December 31, 2003, Chart Bank was considered “well capitalized” under regulatory guidelines.

     The following table summarizes our principal contractual obligations as of September 30, 2004 and the effects such obligations are expected to have on our liquidity and cash flows in future periods.

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    Payments Due by Period  
    Total     Less than 1 Year     1-3 Years     3-5 Years     More than 5 Years  
    (in thousands)  
Contractual Obligations:
                                        
FHLBB borrowings
   $ 22,000     $ 17,000     $ 2,000     $ 3,000     $ —  
Operating lease obligations
     571       227       275       69       —  
Data processing contracts
     1,250       480       770       —       —  
 
                              
Total
   $ 23,821     $ 17,707     $ 3,045     $ 3,069     $ —  
 
                              

Off Balance Sheet Information

     Chart Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments included commitments to extend credit of approximately $31.7 million, $27.6 million and $14.6 million as of September 30, 2004, December 31, 2003 and 2002, respectively, and standby letters of credit of approximately $618,000, $542,000 and $232,000 as of September 30, 2004, December 31, 2003 and 2002, respectively. Management of Chart Bank anticipates that it will have sufficient funds available to meet its current loan commitments.

     These consolidated financial instruments involve, to varying degrees, elements of credit and interest rate risk. Chart Bank’s exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. Chart Bank uses the same credit policies in making commitments as it does for existing loans. Management believes that Chart Bank controls the credit risk of these financial instruments through credit approvals, lending limits, monitoring procedures and the receipt of collateral when deemed necessary.

     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Chart Bank’s management evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Chart Bank, upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include income producing commercial properties, accounts receivable, inventory and property, plant and equipment.

     Standby letters of credit are conditional commitments issued by Chart Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in existing loan facilities to customers. Chart Bank holds real estate and marketable securities as collateral supporting those commitments for which collateral is deemed necessary.

Impact of Inflation and Changing Prices

     The consolidated financial statements of Chart Bank and related data presented in this document have been prepared in conformity with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of the assets and liabilities of Chart Bank are monetary in nature. As a result, interest rates have a more significant impact on Chart Bank’s

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performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as inflation.

Impact of New Accounting Standards

     On December 16 , 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” which is an amendment of SFAS Nos. 123 and 95 . SFAS 123R changes , among other things, the manner in which share-based compensation, such as stock options, will be accounted for by both public and non-public companies. SFAS 123R allows nonpublic entities, such as Chart Bank, to elect to measure compensation cost of awards of equity share options and similar instruments at intrinsic value through the date of settlement and therefore, is not expected to have a material impact on Chart Bank’s consolidated financial statements.

     On September 30, 2004, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which provides guidance for determining the meaning of “other-than-temporarily impaired” and its application to certain debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and investments accounted for under the cost method. The guidance requires that investments which have declined in value due to credit concerns or solely due to changes in interest rates must be recorded as other-than-temporarily impaired unless the Bank can assert and demonstrate its intention to hold the security for a period of time sufficient to allow for a recovery of fair value up to or beyond the cost of the investment which might mean maturity. The delay of the effective date of EITF 03-1 will be superceded concurrent with the final issuance of proposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect Chart Bank.

Quantitative and Qualitative Disclosures About Market Risk

     Chart Bank’s most significant form of market risk is interest rate risk. The principal objectives of Chart Bank’s interest rate risk management are to evaluate the interest rate risk inherent in certain balance sheet accounts, determine the level of risk appropriate given its business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with its established policies. Chart Bank has an Asset/Liability Committee, responsible for reviewing its asset/liability policies and interest rate risk position, which meets quarterly and reports trends and interest rate risk position to the Finance Committee of the Board of Directors and the Board of Directors quarterly. The extent of the movement of interest rates is an uncertainty that could have a negative impact on the earnings of Chart Bank. Chart Bank manages interest rate risk by:

  (1)   Maintaining a high quality securities portfolio that provides adequate liquidity and flexibility to take advantage of opportunities that may arise from fluctuations in market interest rates, the overall maturity and duration of which is monitored in relation to the repricing of its loan portfolio;
 
  (2)   Promoting lower cost liability accounts such as demand deposits savings and money market deposits; and
 
  (3)   Using advances from the Federal Home Loan Bank of Boston to better structure maturities of its interest rate sensitive liabilities.

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     Chart Bank’s investment policy authorizes it to be a party to financial instruments with off-balance sheet risk in the normal course of business to reduce its exposure to fluctuations in interest rates. All counter-parties must be pre-approved by Chart Bank’s Executive Committee and reported to its Finance Committee.

Quantitative Aspects Of Market Risk

     Chart Bank analyzes its interest rate sensitivity position to manage the risk associated with interest rate movements through the use of balance sheet simulation and gap analyses. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

     Chart Bank’s goal is to manage asset and liability positions so as to moderate the effects of interest rate fluctuations on net interest income. Balance sheet simulations are completed quarterly and presented to the Board of Directors. The simulations provide an estimate of the impact of changes in interest rates on net interest income under a range of assumptions. The numerous assumptions used in the simulation process are what Chart Bank’s management believes to be the most appropriate assumptions about customer and competitor behavior in the specified interest rate scenario and are reviewed by its Asset/Liability Committee on a quarterly basis. In performing the simulations, Chart Bank assumes that there is no overall growth, decline or change in the mix of its interest-bearing assets and liabilities during the period measured. Simulation analysis may have certain limitations caused by market conditions varying from those assumed in a model. Actual results can often differ due to the effects of prepayments and refinancings of loans and investments, as well as the repricing or runoff of deposits, which may be different from that which has been assumed. Changes to these assumptions can significantly affect the results of the balance sheet simulation.

     Chart Bank’s current limits on interest-rate risk specify that if interest rates were to ramp up a total of 100, 200 or 300 basis points or down a total of 100 basis points over a twelve month period beginning October 1, 2004 as a result of equal monthly increases or decreases, estimated net interest income for the two-year period beginning October 1, 2004 should not increase or decrease by greater than 5% per year. The results of these simulations are shown below:

                 
    Calculated increase  
    (decrease) in projected net  
    interest income for the year  
    ending September 30,  
    2005     2006  
Changes in interest rates:
                
+300 bps
     1.15 %     3.91 %
+200 bps
     1.24       3.58  
+100 bps
     0.62       1.65  
-100 bps
     -1.00       -3.65  
Policy Limit
     +/-5.00 %     +/-5.00 %

     As noted above, one of the tools used to measure rate sensitivity is the funds gap. The funds gap is defined as the amount by which a bank’s rate sensitive assets exceed its rate sensitive liabilities. A positive gap exists when rate sensitive assets exceed rate sensitive liabilities. This indicates that a greater volume of assets than liabilities will reprice during a given period. This mismatch will improve earnings in a rising rate environment and inhibit earnings when rates decline. Conversely, when rate sensitive liabilities exceed rate sensitive assets, the gap is referred to as negative and indicates that a greater volume of liabilities than assets will reprice during the period. In this case, a rising rate environment will inhibit earnings and declining rates will improve earnings. Notwithstanding this general description of the effect on income of the gap position, it may not be an accurate predictor of changes in net interest income.

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     The following table shows the amounts of interest-earning assets and interest-bearing liabilities at September 30, 2004 that reprice during the periods indicated:

                                         
    Repricing or Maturity Date  
    One Day     Over Six     Over One              
    to Six     Months to     Year to     Over Five        
    Months     One Year     Five Years     Years     Total  
                    (Dollars in thousands)          
Interest earning assets:
                                        
Loans(1)
   $ 43,844     $ 15,519     $ 107,300     $ 10,217     $ 176,880  
Investment securities
     10,815       3,204       26,619       20       40,658  
 
                              
Total interest-earning assets
     54,659       18,723       133,919       10,237       217,538  
 
                              
Interest bearing liabilities:
                                        
Deposits – non-certificates(2)
     63,757       —       —       26,522       90,279  
– certificates
     20,506       49,395       22,587       —       92,488  
Borrowings
     13,000       4,000       5,000       —       22,000  
 
                              
Total interest-bearing liabilities
     97,263       53,395       27,587       26,522       204,767  
 
                              
Net interest rate sensitivity gap
   $ (42,604 )   $ (34,672 )   $ 106,332     $ (16,285 )   $ 12,771  
 
                              
Cumulative interest rate sensitivity gap
   $ (42,604 )   $ (77,276 )   $ 29,056     $ 12,771          
 
                                

(1)   Excludes the allowance for loan losses and net deferred loan costs.
 
(2)   Regular savings and NOW accounts have been included in the over five year timeframe; money market accounts have primarily been included in the one day to six months category.

THE ACQUISITION OF CHART BANK

     We decided to undertake the conversion in connection with our decision to enter into an Agreement and Plan of Merger with Chart Bank dated September 1, 2004. Based on September 30, 2004 unaudited financials for Benjamin Franklin Bancorp and Chart Bank at the minimum of the valuation range, the combined entity would have on a pro forma basis total assets of $815.9 million, total deposits of $6l6.2 million, and net loans of $551.4 million. For pro forma income statements and balance sheets, see “Pro Forma Data” on page [#]. For historical financial information about Chart Bank, see “Selected Consolidated Financial Information of Chart Bank” on page [#] and the Consolidated Financial Statements of Chart Bank, A Cooperative Bank and Subsidiaries on page [#].

Background and Reasons for the Acquisition.

     We believe that the acquisition of Chart Bank furthers our expansion strategy, including geographic market area, customer base and asset size, while maintaining our loan portfolio quality and relatively low cost of funds. Although it is a cooperative bank, Chart Bank has a significant amount of commercial loans, which furthers our goal of increasing such loans. We believe that our current product offerings and corporate culture will blend well with that of Chart Bank, which will facilitate the integration of the two companies after the acquisition.

     Over the past few years, our Board has come to the conclusion that we need to grow Benjamin Franklin Bank in order to have the scale to effectively compete with the larger institutions in our market and to continue to be a meaningful provider of financial services to our communities. In a series of special meetings to consider various growth strategies, the Board invited outside speakers from time to time to

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help educate the Board about the strategic alternatives available to Benjamin Franklin Bancorp, including a representative of Ryan Beck & Co., Inc. and a representative of BNK Advisory Group. At the time the Ryan Beck representative made a presentation to the Board, neither Benjamin Franklin Bank nor Chart Bank had engaged Ryan Beck to provide it with any investment banking services. In the course of these meetings, the alternatives considered by the Board included the possible merger with another mutual institution, but such transactions are difficult to initiate. The Board recognizes that our ability to grow by internal expansion has been hampered somewhat by our capital level; as a mutual institution, our primary means of increasing our capital is through retaining our earnings, and earnings take time to generate. The Board determined that it was willing to consider a mutual to stock conversion or minority stock issuance if necessary to facilitate an expansion opportunity.

     In May, 2004, Chart Bank engaged Ryan Beck & Co., Inc. to assist the Chart Bank board in considering strategic alternatives for Chart Bank. In that capacity, a representative of Ryan Beck contacted Thomas R. Venables, our President and Chief Executive Officer, and asked him if Benjamin Franklin Bancorp would be interested in exploring a strategic transaction with Chart Bank. Mr. Venables met with Richard E. Bolton, Jr., Chart Bank’s President and Chief Executive Officer, and the parties signed a confidentiality agreement pursuant to which Chart Bank provided Mr. Venables with preliminary information regarding Chart Bank to enable him to assess whether Benjamin Franklin Bancorp would be interested in pursuing a transaction with Chart Bank.

     Mr. Venables met with the Benjamin Franklin Bancorp Board on July 8, 2004, and discussed the possible transaction with Chart Bank, including the necessity to undergo a full conversion to a public company in order to effect the transaction. After a lengthy discussion, the Board authorized Mr. Venables to move to the next stage of the process. On July 13, the Board held another special meeting at which the Board authorized the engagement of McConnell Budd & Romano, investment advisors, and Foley Hoag LLP, legal counsel, to assist in formulating a proposal to acquire Chart Bank and in negotiating the terms of a possible transaction. Representatives of both McConnell Budd & Romano and Foley Hoag LLP were present at that meeting and engaged in a detailed discussion of the process that a transaction with Chart Bank would follow.

     Over the next three weeks, Mr. Venables and his team of advisors worked to formulate a financial proposal for the possible acquisition of Chart Bank. During this period, Mr. Venables also hired as Chief Financial Officer Claire Bean, who had worked with him as chief financial officer at two prior banks. On July 28, 2004, the Benjamin Franklin Bancorp Board met again with representatives of McConnell Budd & Romano and Foley Hoag, as well as with senior management of Benjamin Franklin Bank. After a thorough discussion of the financial analysis presented by McConnell Budd representatives, and a discussion of various strategic alternatives available to the institution, the Board authorized management and representatives of McConnell Budd to submit to Chart Bank a non-binding expression of interest in pursuing a transaction and to conduct price negotiations in a range of $30.50 to $31.50, with 55.0% of the consideration to be paid in stock and 45.0% of the consideration to be paid in cash. The transaction would be conditioned on Benjamin Franklin Bancorp’s conversion to stock form.

     Subsequent to the July 28, 2004 Board meeting, management of Benjamin Franklin Bancorp, with the assistance of its legal and financial advisors, engaged in discussions with Chart Bank, and the parties proceeded to draft a letter of intent to form the basis of negotiations of a definitive merger agreement. After several days of negotiations, Benjamin Franklin Bancorp and Chart Bank agreed to some, but not all, of the material terms of a transaction, including a price of $30.75 per share, and executed a non-binding letter of intent on August 11, 2004. Pursuant to the letter of intent, the parties agreed to work together diligently towards execution of a definitive agreement.

     After the parties executed the letter of intent, legal counsel for Benjamin Franklin Bancorp prepared and circulated a draft merger agreement and the parties began negotiations concerning the terms of the

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merger agreement. Drafts of consulting agreements and payments and waiver agreements with Richard E. Bolton, Sr. and Richard E. Bolton, Jr. and a draft voting agreement to be executed by certain stockholders of Chart Bank, also were prepared and circulated for discussion. On August 21, 2004, representatives of Benjamin Franklin Bancorp and Chart Bank conducted more specific financial, business, regulatory and legal due diligence at an off-site location. During the period between August 21 and August 30, 2004, the parties discussed and negotiated various issues, including without limitation, the representations and warranties to be made by Chart Bank, the treatment of Chart Bank’s employees in the transaction, the conduct of the respective parties’ businesses between signing and closing of the transaction, the parties’ respective conditions to closing, the rights of the parties to abandon the transaction, the voting agreements to be entered into by certain stockholders of Chart Bank pursuant to which such stockholders would agree to vote their shares of Chart Bank stock in favor of the transaction, and the consulting and payments and waiver agreements for Mr. Bolton, Sr. and Mr. Bolton, Jr.

     On August 25, 2004, the Board of Trustees of Benjamin Franklin Bancorp met to discuss the status of the merger negotiations and to hear presentations by senior management about their due diligence review of Chart Bank. On August 30, 2004, the Board met again to consider the terms of the merger agreement, the potential advantages and risks associated with the merger and the conversion and an update of the financial analyses of McConnell Budd & Romano. Following a discussion by the Benjamin Franklin Bancorp Board, McConnell Budd & Romano delivered an oral opinion concerning the fairness, from a financial point of view, of the proposed consideration to be paid to Chart Bank’s stockholders as set forth in the merger agreement, [which opinion was later confirmed in writing]. Following discussion, by the unanimous vote of all of the directors, the Benjamin Franklin Bancorp Board approved and adopted the merger agreement, authorized management to enter into the merger agreement and directed management and legal counsel to move promptly toward preparation of a plan of conversion and other documents related to the conversion. Chart Bank and Benjamin Franklin Bancorp executed the merger agreement and related agreements on September 1, 2004 and the transaction was publicly announced later that same day.

     The acquisition will immediately expand our geographic market toward the more densely populated suburbs closer to Boston and will result in a larger branch network for the benefit of the customers of the combined institution. The market served by Chart Bank is a logical geographic extension of our current market area, and is an area in which our Chief Executive Officer and our Chief Financial Officer have significant banking experience. We currently operate in communities southwest of the city of Boston, and the merger with Chart Bank will extend our market area northeast toward Boston. Over the next several years, we intend to open new banking offices in select towns located between the two market areas, which will further enhance the accessibility and convenience of the organization for our combined customer base.

     Our Board believes that the combination with Chart Bank will enhance the competitive position of the combined entity and will enable the resulting institution to compete more effectively than would the individual institutions alone. We currently compete with a variety of financial institutions, including many that have competitive advantages due to greater financial resources, larger loan limits, larger branch networks and a broader offering of financial services. The combination with Chart Bank will result in a larger company with a larger branch network and greater financial resources that can be utilized to enhance the services we offer. Among the factors considered by our Board were the following:

  •   The ability of Benjamin Franklin Bank to establish its physical presence in Middlesex County, which is a contiguous market that offers the opportunity for us to reach new customers and expand our franchise;
 
  •   The beneficial impact of the conversion and the Chart Bank acquisition on the depositors, employees, customers and communities served by the two institutions. The conversion and

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      acquisition results in a larger, well-capitalized company that will have greater resources and more locations to serve its depositors, customers and communities. The creation of the charitable foundation will provide additional benefits to the community. As a larger company, we will be better able provide career development opportunities for our employees.
 
  •   The difficulty and expense of expanding our presence through de novo branching in contrast to the efficacy of expanding through acquisition;
 
  •   Information concerning the pro forma financial condition, results of operations, capital levels, asset quality and prospects of the combined institutions which provided a basis for our board to understand and ultimately approve of the transaction;
 
  •   The ability to substantially increase our commercial business and commercial real estate loans, which represent key components of our lending activities;
 
  •   The general structure of the transaction and the compatibility of the respective managements and business philosophies that are thought to have beneficial implications with respect to the integration of the companies;
 
  •   The ability of the combined enterprise to compete more effectively as described above; and
 
  •   General industry and economic conditions that were viewed as favorable with respect to our plans for expansion through acquisition.

     As a result of the acquisition, six members of Chart Bank’s Board of Directors (including Richard E. Bolton Jr., Chart Bank’s Chief Executive Officer) will serve on both the Benjamin Franklin Bancorp and the Benjamin Franklin Bank Boards of Directors.

     We anticipate that when the acquisition is completed, a majority of the employees of Chart Bank will become employees of Benjamin Franklin Bank. Former employees of Chart Bank will be entitled to benefits afforded to our existing employees generally. We will be working to identify operational efficiencies that may be obtained through the consolidation of the entities in the acquisition. It is anticipated that some management and support positions will be eliminated following the acquisition. We have no continuing obligation under the terms of the merger to retain any specific employees of Chart Bank as our employees.

     On October 13, 2004, after the merger agreement had been approved by our Board and Chart Bank’s board, signed by the parties and publicly announced, we retained Ryan Beck to act as our marketing agent for the conversion stock offering. Prior to our retention of Ryan Beck, both our Board and Chart Bank’s board considered, with the advice of counsel, the potential conflicts of interest that might arise if Ryan Beck were to serve as both financial advisor to Chart Bank for the period following execution of the merger agreement and at the same time marketing agent for us in connection with the offering. Our Board determined that it would be in the best interests of Benjamin Franklin Bancorp to engage Ryan Beck as our marketing agent in connection with the offering in view of Ryan Beck’s knowledge of the banking markets in which we conduct our business and Ryan Beck’s experience in serving as a conversion offering selling agent in connection with transactions of this type. Our Board also considered Ryan Beck’s knowledge of and familiarity with the businesses of Benjamin Franklin Bancorp and Chart Bank, as well as Ryan Beck’s reputation in the financial services industry generally.

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     In considering Ryan Beck’s potential conflict of interest, our Board noted that Benjamin Franklin Bancorp, Chart Bank and Ryan Beck shared a common interest in the successful completion of the conversion offering. Our Board addressed a potential future conflict of interest by conditioning its engagement of Ryan Beck on Ryan Beck’s and Chart Bank’s agreement that Ryan Beck would not provide financial advisory services to Chart Bank in connection with, or opine on the financial merits of, any potential competing merger or acquisition offer that might be received by Chart Bank subsequent to the announcement of the merger with Benjamin Franklin Bancorp.

     The Chart Bank board determined that Ryan Beck’s service as marketing agent in connection with the offering would be in the best interests of the shareholders of Chart Bank for substantially the same reasons noted above. Although the Chart Bank board recognized that there might be an inconvenience associated with having to retain a new, independent financial advisor if Chart Bank were to receive a competing offer, the Chart Bank board concluded that the benefits of having Ryan Beck serve as marketing agent in connection with the offering, which would further both our interests and Chart Bank’s interests in ensuring that the offering and merger are successfully completed, were substantially greater than the burden of this potential inconvenience.

     With regard to Ryan Beck’s services in connection with the merger, Chart Bank will pay an advisory fee equal to 1.00% of the final aggregate transaction value, 80% of which is contingent upon the consummation of the merger. Based upon the aggregate value of the merger consideration on September 1, 2004, the date of announcement of the merger, Ryan Beck’s total fee would be approximately $465,000 of which $93,000 was paid shortly after signing the merger agreement. In addition, Chart Bank has agreed to reimburse Ryan Beck for its reasonable out-of-pocket expenses, including the fees and disbursements of Ryan Beck’s legal counsel, which will not exceed $5,000 without Chart Bank’s prior consent. Chart Bank has also agreed to indemnify Ryan Beck and related persons against certain liabilities, including liabilities under federal securities law, incurred in connection with its services.

     See “Plan of Distribution and Marketing Arrangements” beginning on page [#] for a description of the fees we will pay to Ryan Beck for its services as marketing agent in the conversion.

The Chart Bank Merger Agreement

     The following is a brief summary of the significant provisions of the merger agreement between Benjamin Franklin Bancorp and Chart Bank dated as of September 1, 2004. The merger agreement is filed as an exhibit to the registration statement of which this prospectus is a part and is incorporated by reference herein. The merger agreement contains the complete terms of that agreement and this summary is qualified in its entirety by reference to that agreement.

     General; Exchange Ratio. Our merger agreement with Chart Bank provides that Chart Bank will merge into Benjamin Franklin Bank immediately after completion of the conversion of Benjamin Franklin Bancorp into stock form. At the effective time of the merger, each outstanding share of Chart Bank common stock will be converted into the right to receive either $30.75 in cash or 3.075 shares of Benjamin Franklin Bancorp common stock, plus cash in lieu of any fractional share, subject to election and allocation procedures. Each Chart Bank option outstanding at the effective time of the merger will be terminated in exchange for a cash payment equal to $30.75, minus the exercise price applicable to the option, multiplied by the number of Chart Bank shares subject to the option. Chart Bank is a closely-held cooperative bank, so its shares are not publicly traded.

     Chart Bank stockholders will be given the opportunity to elect to receive all cash, all stock or a combination of cash and stock. The election and allocation procedures set forth in the merger agreement will ensure that 55.0% of the shares of Chart Bank common stock will be converted into the right to receive shares of Benjamin Franklin Bancorp common stock and 45.0% of the shares of Chart Bank

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common stock will be converted into the right to receive shares of Benjamin Franklin Bancorp common stock and 45.0% of the shares of Chart Bank common stock will be converted into the right to receive cash. Thus, Chart Bank stockholders may not receive exactly the form of consideration that they elect. Instead, they may receive a pro rata amount of cash and Benjamin Franklin Bancorp common stock even if they elect all cash or all stock.

     As of November 30, 2004, there were 1,420,000 shares of Chart Bank common stock and options to purchase 137,000 shares of Chart Bank common stock outstanding. The aggregate consideration for the Chart Bank acquisition will be $22,492,000 in cash and 2,401,575 newly issued shares of Benjamin Franklin Bancorp common stock, assuming that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing.

     Conditions to the Merger. The merger agreement provides that completion of the acquisition is subject to the satisfaction or waiver of specified conditions by Benjamin Franklin Bancorp and Chart Bank. The respective obligations of each party under the merger agreement are subject to the fulfillment or waiver of the following conditions at or prior to the completion of the merger:

  •   approval of the merger agreement by the stockholders of Chart Bank.
 
  •   approval of the merger agreement and the conversion by our corporators.
 
  •   receipt of all regulatory approvals required to consummate the conversion and the merger, which approvals do not contain any conditions, restrictions or requirements which our Board reasonably determines in good faith would, individually or in the aggregate, materially reduce the benefits of the conversion and the merger to such a degree that we would not have entered into the merger agreement if the conditions, restrictions or requirements had been known, and expiration of all applicable waiting periods.
 
  •   absence of any law, judgment, decree, injunction or other order of any governmental authority prohibiting consummation of the conversion or the merger.
 
  •   effectiveness under the Securities Act of 1933 of the registration statements registering the shares of our common stock to be issued in the conversion and the merger and absence of a stop order suspending the effectiveness or proceedings for that purpose initiated by the SEC and not withdrawn.
 
  •   authorization for listing on the Nasdaq National Market of the shares of our common stock to be issued in the merger and the conversion, subject to official notice of issuance.
 
  •   completion of the conversion, resulting in net proceeds sufficient to enable Benjamin Franklin Bank to remain well-capitalized under applicable federal banking law and otherwise to meet regulatory capital requirements after giving effect to the merger.
 
  •   receipt by both parties of an opinion dated as of the effective date of the merger that the merger will constitute a tax-free reorganization described in section 368(a) of the Internal Revenue Code.
 
  •   receipt by Benjamin Franklin Bancorp of an opinion dated as of the effective date that the conversion will constitute a tax-free reorganization described in section 368(a) of the Internal Revenue Code.
 
  •   the accuracy of the representations and warranties of the other party in all material respects as of September 1, 2004 and as of the closing date (except to the extent that a representation or warranty speaks as of an earlier date), except that any inaccuracies in a party’s representations and warranties shall not prevent that party’s satisfaction of this condition unless the cumulative effect of all inaccuracies, taken together, would be reasonably likely to be material and adverse to the financial condition, results of operation or business of that party, or would materially impair the ability of that party to perform its obligations or would

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  •   otherwise materially impede the completion of the conversion or the merger, such change or effect being referred to as a “material adverse effect”.
 
  •   performance by the other party in all material respects of all obligations required to be performed by it under the merger agreement.
 
  •   no change that individually or in the aggregate has a material adverse effect on the other party, excluding the impact of any (1) changes in banking and similar laws or interpretations of these laws by governmental authorities, (2) changes in generally accepted accounting principles or regulatory accounting requirements, (3) changes in economic conditions affecting financial institutions generally, including changes in general levels of interest rates, (4) direct effects of complying with the merger agreement and (5) the effects of any action or omission otherwise contemplated by the merger agreement or any related document..

     In addition, Benjamin Franklin Bancorp’s obligation to consummate the merger is subject to the fulfillment of each of the following conditions:

  •   shares of Chart Bank common stock as to which Chart Bank stockholders have exercised dissenters’ rights shall represent less than 10.0% or more of the outstanding shares of Chart Bank common stock.
 
  •   each of Richard E. Bolton, Jr., the President and Chief Executive Officer of Chart Bank, and Richard E. Bolton, Sr., the Chairman of the Board of Directors of Chart Bank shall have entered into, and performed in all material respects, a payments and waiver agreement which, among other things, terminates the officer’s existing employment arrangements with Chart Bank upon the effectiveness of the merger in consideration of specified termination payments.
 
  •   all consents of third parties, other than of regulatory authorities, necessary to permit lawful completion of the merger have been obtained, except if the failure to obtain such consents would not individually or in the aggregate have a material adverse effect on Benjamin Franklin Bancorp after giving effect to the conversion and the merger, and none of the consents shall contain any term or condition which would, individually or in the aggregate, have a material adverse effect on Chart Bank or Benjamin Franklin Bancorp.
 
  •   Chart Bank shall have not taken any action or made any payment that would result in a parachute payment under section 280G, or in a payment that would be nondeductible under Section 162(m), of the Internal Revenue Code.

     Conduct of Business Prior to the Merger. Each of Chart Bank and Benjamin Franklin Bancorp has each agreed that between the date of the merger agreement and the completion of the merger it will conduct its business in the ordinary course of business. In addition, Chart Bank has agreed that it will

  •   continue to operate in the same geographic markets serving the same market segments.
 
  •   maintain its current loan, deposit, banking products and service programs on substantially the same terms and conditions.
 
  •   use commercially-reasonable efforts to preserve its business organization, keep available the present services of its officers, employees and directors and preserve current relationships and goodwill with customers, suppliers and others.

     Each of Chart Bank and Benjamin Franklin Bancorp has agreed that, except as otherwise expressly contemplated or permitted by the merger agreement or consented to in writing by the other, it will not do any of the following:

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  •   take any action that would materially adversely affect or delay its ability to obtain any necessary approvals of any governmental authority for the transactions contemplated by the merger agreement or perform its covenants and agreements under the merger agreement or any related document.
 
  •   acquire the assets, business, deposits or properties of any other entity, including through merger or consolidation, , other than in the ordinary course of business or, in the case of Benjamin Franklin Bancorp, as would not be expected to prevent, impede or materially delay the completion of the transactions contemplated by the merger agreement and related documents.
 
  •   change its accounting principles, practices or methods.
 
  •   take any action that would prevent the merger (or conversion, for Benjamin Franklin Bancorp) from qualifying as a tax-free reorganization.
 
  •   take any action that is intended or is reasonably likely to result in: any of its representations or warranties in the merger agreement being or becoming untrue in any material respect at any time at or prior to the effectiveness of the merger; any of the conditions to the merger not being satisfied; or a material violation of any provision of the merger agreement or related documents.

     In addition, Chart Bank has agreed that, except as otherwise expressly contemplated or permitted by the merger agreement or consented to in writing by Benjamin Franklin Bancorp, it will not do any of the following:

  •   issue, sell or otherwise permit to become outstanding any additional shares of stock, other than upon exercise of existing stock options.
 
  •   grant stock options.
 
  •   declare or pay any dividends or other distributions on its capital stock except for a regular quarterly cash dividend not in excess of $0.16 per share or, if declared after April 1, 2005, $0.18 per share.
 
  •   enter into, amend or terminate any material contracts.
 
  •   adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock.
 
  •   hire any new employees, except to fill vacancies for positions with a base salary, including bonus, not in excess of stated limits.
 
  •   enter into new or amend existing benefit plans, including stock option, deferred compensation, pension, retirement and bonus plans, or accelerate the vesting or exercisability of any benefits or awards under these plans, except for the acceleration of vesting of existing stock options.
 
  •   sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties, or cancel or release any indebtedness or claims held by any person, except in the ordinary course of business.
 
  •   enter into new or amend existing employment, consulting, severance or similar agreements with directors, officers and employees or increase compensation or any employee benefit, including bonuses, beyond stated limits.
 
  •   foreclose upon or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property, or foreclose if the environmental

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      assessment indicates the presence of material amounts of hazardous substances on that property.
 
  •   make any investments in any other company, except as otherwise permitted in connection with its investment securities portfolio.
 
  •   make capital expenditures beyond stated limits and only in the ordinary course of business.
 
  •   amend its charter or by-laws.
 
  •   settle any lawsuits or similar proceedings for an amount in excess of stated limits or resulting in the imposition of any material restriction on its business.
 
  •   enter into any derivatives contract, except in the ordinary course of business.
 
  •   make any commercial, commercial real estate or industrial loan other than in the ordinary course of business and consistent with existing lending policies and practices.
 
  •   restructure or materially change its investment securities portfolio, other than in the ordinary course of business.
 
  •   make equity investments in real estate, other than in foreclosed properties, settlements in lieu of foreclosure or troubled loan or debt restructurings in the ordinary course of business.
 
  •   change in any material respect its loan or investment policies and procedures.
 
  •   enter into, renew, amend or terminate any agreement with respect to office space, operations space or branch space except in the ordinary course of business, or enter into, renew, amend or terminate any such agreement exceeding stated dollar and term limits, whether or not in the ordinary course of business.
 
  •   materially breach any material contract or license or any agreement with a governmental authority.
 
  •   make an “excess parachute payment” within the meaning of 280G of the Internal Revenue Code or a payment that would be nondeductible under Section 162(m) of the Internal Revenue Code.
 
  •   become responsible for the obligations of any other entity or incur any indebtedness for borrowed money, with certain exceptions.
 
  •   renew, amend or permit to expire, lapse or terminate any of its material insurance policies, with certain exceptions.

     No Solicitation of Third Party Proposals to Acquire Chart Bank. Chart Bank has also agreed, subject to certain exceptions relating to the fiduciary duties of the Chart Bank board of directors, that neither it nor its officers, directors, employees, agents or representatives will, directly or indirectly:

  •   initiate, solicit, encourage or otherwise facilitate any inquiries regarding, or the making of any proposal to engage in, a change in control transaction with respect to Chart Bank; or
 
  •   engage in any negotiations concerning, or provide any confidential information or data to or have any discussions with any person or entity relating to, a proposal to engage in a change in control transaction with respect to Chart Bank; or
 
  •   enter into any agreement, arrangement or understanding with respect to a change in control transaction with respect to Chart Bank, or requiring it (or conditioned upon requiring it) to abandon, terminate or fail to consummate the merger with Benjamin Franklin Bank or any other transactions contemplated by the merger agreement.

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     A “change in control transaction” is a merger or similar transaction involving Chart Bank, the disposition of 25.0% or more of the consolidated assets of Chart Bank or the issuance, sale or other disposition of securities representing 19.9% or more of the voting power of Chart Bank or any subsidiary.

     Chart Bank has agreed that it will notify Benjamin Franklin Bancorp immediately if any inquiries, proposals or offers are received by, any such information is requested from, or any discussions or negotiations are sought to be initiated or continued with, any of its officers, directors or employees relating to a proposal to engage in a change in control transaction. Chart Bank has agreed that it will promptly advise Benjamin Franklin Bancorp following receipt of any such proposal and the substance of the proposal, and will keep Benjamin Franklin Bancorp apprised of any related developments, discussions and negotiations of any such proposal on a current basis.

     Employee Matters. The merger agreement contains certain agreements of the parties with respect to various employee matters, which are briefly described below.

     As soon as administratively practicable after the effective time of the merger, Benjamin Franklin Bancorp will take all reasonable action so that employees of Chart Bank and its subsidiaries will:

  •   receive employee benefits which are no less favorable than those generally afforded to other employees of Benjamin Franklin Bancorp and its subsidiaries holding similar positions; and
 
  •   be entitled to participate in the Benjamin Franklin Bancorp employee benefit plans of general applicability to the same extent as similarly-situated employees of Benjamin Franklin Bancorp and its subsidiaries.

     For purposes of determining eligibility to participate in, the vesting of benefits and for all other purposes (but not for determining the amount of benefits or determining accrual of benefits) under the Benjamin Franklin Bancorp employee benefit plans, Benjamin Franklin Bancorp will recognize years of service with Chart Bank and its subsidiaries to the same extent as such service was credited for such purpose by Benjamin Franklin Bancorp.

     If employees of Chart Bank or any of its subsidiaries become eligible to participate in a medical, dental or health plan of Benjamin Franklin Bancorp, Benjamin Franklin Bancorp will cause each such plan to:

  •   waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans of Benjamin Franklin Bancorp;
 
  •   waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to such employee on or after the effective time of the merger to the extent such employee had satisfied any similar limitation or requirement under an analogous plan prior to the effective time of the merger; and
 
  •   provide full credit under such plans for any deductibles, co-payments and out-of-pocket expenses incurred by the employees and their beneficiaries during the portion of the calendar year prior to such participation.

     Employees of Chart Bank or its subsidiaries (other than employees who are a party to an employment agreement, a severance agreement or a special termination agreement) whose employment is involuntarily terminated other than for cause within two years after the effective time of the merger will be entitled to receive severance payments in accordance with Chart Bank’s merger severance benefit program.

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     Other Covenants. In the merger agreement, each of Benjamin Franklin Bancorp and Chart Bank agreed to use its reasonable best efforts, in good faith, to take all actions necessary, proper, desirable or advisable to enable the conversion and the merger to be completed, and to:

  •   cooperate in preparing applications for approval of regulatory authorities and securities filings;
 
  •   provide ongoing access to information about itself to the other party, subject to confidentiality requirements;
 
  •   consult with the other party before issuing a press release relating to the merger or conversion, and, except as required by law, rule or regulation, not issue such a release without the other party’s consent, which shall not be unreasonably withheld;
 
  •   notify the other party of facts, events and circumstances that would have been required to have been disclosed if known as of the date of the merger agreement;
 
  •   provide current financial statements and internal control reports to the other party;
 
  •   notify the other of material changes in its business, or the institution or threat of material litigation;
 
  •   consult with each other on the introduction of new products and services not currently offered by Chart; or
 
  •   make changes or elections with respect to tax matters or accounting methods

     Benjamin Franklin Bancorp agreed to take certain additional actions, including:

  •   making all regulatory and securities filings necessary for the completion of the conversion and the merger by specified dates;
 
  •   convening a special meeting of its corporators to vote on the conversion and the merger, and recommending that the corporators approve the conversion and the merger;
 
  •   listing its common stock on the Nasdaq National Market;
 
  •   taking steps required to cause the acquisition of its stock under the merger agreement to be exempt from Rule 16b-3 under the Securities Exchange Act of 1934.

     Chart Bank agreed to take certain additional actions, including:

  •   convening a special meeting of its stockholders to vote on the merger, and recommending that the stockholders approve the merger, except as otherwise required in order for its directors to comply with their fiduciary duties under applicable law;
 
  •   cause its affiliates to deliver to Benjamin Franklin Bancorp an affiliate agreement to comply with the requirements of Rule 145 under the Securities Act of 1933 in connection with the sale or transfer of Benjamin Franklin Bancorp common stock received by them in the merger;
 
  •   manage its assets and liabilities in accordance with its asset and liability management policy in effect on the date of the merger agreement, and consult on investment programs to be administered by Chart Bank.
 
  •   consistent with generally accepted accounting principles, the rules and regulations of the Securities and Exchange Commission and applicable banking laws and regulations, modify or change its loan, other real estate owned, accrual, reserve, tax, litigation and real estate

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      valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of Benjamin Franklin Bancorp.

     Representations and Warranties. The merger agreement contains representations and warranties by Benjamin Franklin Bancorp and Chart Bank regarding various legal, regulatory, financial and business matters including, but not limited to, the following:

  •   organization, standing and authority
 
  •   capital structure;
 
  •   subsidiaries;
 
  •   corporate power and authority;
 
  •   regulatory approvals, reports and other matters;
 
  •   absence of violation of organizational documents and terms of agreements;
 
  •   financial statements;
 
  •   absence of undisclosed liabilities;
 
  •   material contracts;
 
  •   tax matters;
 
  •   loan portfolio and allowance for loan losses;
 
  •   capitalization;
 
  •   absence of material adverse change;
 
  •   environmental matters;
 
  •   legal proceedings;
 
  •   employee benefit plans;
 
  •   properties;
 
  •   investment securities;
 
  •   transactions with affiliates;
 
  •   labor matters;
 
  •   compliance with the Community Reinvestment Act, Bank Secrecy Act and privacy of customer information requirements contained in any federal and state privacy laws and regulations;
 
  •   compliance with laws;
 
  •   use of brokers;
 
  •   risk management instruments;
 
  •   bank owned life insurance;
 
  •   intellectual property;
 
  •   fiduciary accounts;
 
  •   books and records;

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  •   insurance;
 
  •   credit card accounts; and
 
  •   merchant credit card processing services.

     The merger agreement also contains additional representations and warranties by Chart Bank relating to:

  •   required vote for the merger and absence of anti-takeover provisions applicable to the merger;
 
  •   material interests of certain persons; and
 
  •   receipt of a fairness opinion.

     Except as otherwise provided in the merger agreement, these representations and warranties do not survive after the effective time of the merger.

     Termination and Termination Fees. The merger agreement may be terminated at any time prior to the effective time as follows:

  •   by mutual consent of Benjamin Franklin Bancorp and Chart Bank.
 
  •   by either party if the merger shall not have occurred on or before July 15, 2005 or a later date agreed to in writing by the parties, unless the failure of the merger to occur by that date results from the knowing action or inaction of the party seeking to terminate or, in the case of a termination by Chart Bank, its stockholders’ actions in violation of their obligations under the merger agreement or related voting agreements.
 
  •   by either party if the approval of any governmental authority required for completion of the merger shall have been denied by final nonappealable action or an application for approval shall have been permanently withdrawn at the request of a governmental authority.
 
  •   by either party if Benjamin Franklin Bancorp’s board of trustees or corporators shall have not approved the conversion, the approval of any governmental authority required for completion of the conversion shall have been denied by final nonappealable action or an application for approval shall have been permanently withdrawn at the request of a governmental authority or a court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling prohibiting the conversion, which order, decree or ruling shall have become final and nonappealable.
 
  •   by either party in the event of a material breach by the other party of any representation or warranty contained in the merger agreement which breach would constitute, if occurring or continuing on the closing date, the failure of the conditions to completion of the merger relating to the accuracy of the representations and warranties and which cannot be or has not been cured within 30 days after the giving of written notice to the breaching party of the breach.
 
  •   by either party in the event of a material breach by the other party of any of the covenants or agreements contained in the merger agreement, which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party of the breach.
 
  •   by either party if the Chart Bank stockholders do not approve the merger, provided that Chart Bank may not terminate if it has materially breached its covenants relating to the stockholders meeting.
 
  •   by either party if the corporators of Benjamin Franklin Bancorp do not approve the merger and the conversion , provided that Benjamin Franklin Bancorp may not terminate if it has

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      materially breached its covenants relating to the corporators meeting and obtaining all necessary regulatory approvals for the conversion and the merger.
 
  •   by Benjamin Franklin Bancorp if, prior to the Chart Bank stockholders meeting at which the merger is considered:

  •   Chart Bank materially breaches its covenant regarding third party proposals to acquire Chart Bank, or
 
  •   the Chart Bank board fails to recommend to its stockholders that they approve the merger, withdraws such recommendation or modifies or changes such recommendation in a manner adverse in any respect to the interests of Benjamin Franklin Bancorp or
 
  •   Chart Bank materially breaches its obligations to call, give notice of, convene and hold the Chart Bank stockholders meeting.

  •   by Benjamin Franklin Bancorp if a tender offer is commenced, other than by Benjamin Franklin Bancorp, and the Chart Bank board recommends that its stockholders tender their shares in the tender offer or otherwise fails to recommend that its stockholders reject the tender offer.

     If the merger agreement is terminated as a result of a breach of a representation, warranty, covenant or other agreement that is caused by the gross negligence or willful or intentional breach of a party to the merger agreement, the breaching party is liable to the non-breaching party for all out-of-pocket costs and expenses, including reasonable fees and expenses of lawyers, accountants and investment bankers, incurred by the non-breaching party in connection with the merger agreement, up to a maximum of $500,000.

     In addition, Benjamin Franklin Bancorp would be liable to Chart Bank for Chart Bank’s out-of-pocket costs and expenses, up to a maximum of $500,000:

  •   if the merger agreement is terminated because the conversion was not approved by the trustees or corporators of Benjamin Franklin Bancorp or by the regulatory authorities or because the conversion was prohibited by a court or other governmental authority (except under circumstances in which a breach of a representation, warranty or covenant by Chart Bank materially adversely affected Benjamin Franklin Bancorp’s ability to obtain the necessary approvals), or
 
  •   if Benjamin Franklin Bancorp has not completed the conversion by July 15, 2005, except that such expense payment would not apply in circumstances where Benjamin Franklin Bancorp is obligated to pay the termination fee described in the next paragraph, and Benjamin Franklin Bancorp would not be obligated to make such a payment if a breach of a representation, warranty or covenant by Chart Bank has materially adversely affected Benjamin Franklin Bancorp’s ability to complete the conversion in a timely manner.

     The merger agreement provides that Benjamin Franklin Bancorp must pay Chart Bank a termination fee of $2.3 million if:

  •   Benjamin Franklin Bancorp has failed to consummate the conversion by July 15, 2005 as a result of a material failure to perform or comply with any of its covenants or agreements in the merger agreement, or
 
  •   Chart Bank has terminated the merger agreement because Benjamin Franklin Bancorp has intentionally or willfully breached any of its representations or warranties in the merger agreement or intentionally and willfully failed to perform or comply with any of its covenants

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  or agreements in the merger agreement, in each case to such an extent as to permit Chart Bank to terminate the merger agreement.

     The merger agreement provides that Chart Bank must pay Benjamin Franklin Bancorp a termination fee of $2.3 million if a payment event has occurred before the special payment termination date.

     A “payment event” means any of the following events:

  •   without Benjamin Franklin Bancorp’s prior written consent, Chart Bank or the stockholders of Chart Bank have entered into an agreement to effect or have consummated a change in control transaction with a third party.
 
  •   Benjamin Franklin Bancorp has terminated the merger agreement because

  •   Chart Bank has materially breached its covenant regarding third party proposals to acquire Chart Bank, or
 
  •   the Chart Bank board has failed to recommend to its stockholders that they approve the merger, has withdrawn such recommendation or has modified or changed such recommendation in a manner adverse in any respect to the interests of Benjamin Franklin Bancorp or
 
  •   Chart Bank has materially breached its obligations to call, give notice of, convene and hold the Chart Bank stockholders meeting;
 
  •   or the Chart Bank board has recommended that the stockholders of Chart Bank tender their shares to a third party in a tender offer.

  •   Benjamin Franklin Bancorp has terminated the merger agreement because Chart Bank has intentionally or willfully breached any of its representations or warranties in the merger agreement or intentionally and willfully failed to perform or comply with any of its covenants or agreements in the merger agreement, in each case to such an extent as to permit Benjamin Franklin Bancorp to terminate the merger agreement.

     The “special payment termination date” is the earliest to occur of

  •   the effectiveness of the merger.
 
  •   the date that is 12 months after termination of the merger agreement following the occurrence of a time extension event.
 
  •   the date on which the merger agreement is terminated in accordance with its terms, but only if the termination takes place prior to the occurrence of a payment event or a time extension event.

     A “time extension event” is any of the following events:

  •   a third party has commenced a tender offer for the Chart Bank common stock.
 
  •   a third party (or a group) has acquired beneficial ownership of or has the contractual right to acquire beneficial ownership of 15.0% or more of the then outstanding shares of Chart Bank common stock.
 
  •   following a third party proposal for a change in control transaction with respect to Chart Bank, the holders of Chart Bank common stock fail to approve the merger agreement at the Chart Bank stockholder meeting.
 
  •   following a third party proposal for a change in control transaction with respect to Chart Bank, the Chart Bank stockholders meeting to approve the merger is not held in violation of

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      Chart Bank’s obligations, Chart Bank’s board has withdrawn or modified in a manner adverse to Benjamin Franklin Bancorp the recommendation of Chart Bank’s board with respect to the merger with Benjamin Franklin Bank, or Chart Bank has willfully or intentionally breached any representation, warranty, covenant or obligation in the merger agreement and such breach would entitle Benjamin Franklin Bancorp to terminate the merger agreement.

     Amendment and Waiver. Prior to the effectiveness of the merger, any provision of the merger agreement may be waived by the party benefited by the provision or amended or modified by an agreement in writing among the parties to the merger agreement, except that after the Chart Bank stockholders meeting no amendment may be made that changes in kind or reduces in amount the merger consideration without the further approval of Chart Bank’s stockholders.

     Voting Agreements; Release Agreements. Directors of Chart Bank beneficially owning 39.1% of Chart Bank’s outstanding common stock as of the record date for the stockholders meeting at which the approval of the merger agreement is to be considered have entered into voting agreements with Benjamin Franklin Bancorp pursuant to which each such director has agreed that at any meeting of the stockholders of Chart Bank, or in connection with any written consent of the stockholders of Chart Bank, the director shall cause all of the shares of Chart Bank common stock that he beneficially owns to be counted as present for purposes of calculating a quorum and vote those shares:

  •   in favor of adoption and approval of the merger agreement and the transactions contemplated thereby;
 
  •   against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Chart Bank contained in the merger agreement or of the director contained in the voting agreement; and
 
  •   against any third party proposal to acquire Chart Bank or agreement or transaction that is intended, or could reasonably be expected, to materially impede, interfere with, delay, postpone, discourage or materially and adversely affect completion of the merger or any of the transactions contemplated by the merger agreement.

     The voting agreements also provide that the director executing the agreement will not, directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, assignment or other disposition of, any of the shares or option or right to obtain shares of Chart Bank common stock owned by him or her, except as may be permitted under the terms of the voting agreement. The voting agreements will remain in effect until the earlier of the special payment termination date of the mutual written agreement of the parties.

     In addition, each Chart Bank director has entered into a release agreement pursuant to which the director has agreed to release Chart Bank and Benjamin Franklin Bancorp from certain claims such director may have in his capacity as a stockholder of Chart Bank.

Interests of Chart Bank’s Directors and Officers in the Merger

     Chart Bank’s directors and executive officers have interests in the merger that are different from, or are in addition to, their interests as shareholders of Chart Bank generally. These include, among other things, severance payments and agreement with Richard E. Bolton, Sr., Richard E. Bolton, Jr., Alfred J. Odoardi, Dean Kenney, non-continuing directors and other executive officers of Chart Bank, consulting and non-competition agreements with Messrs. Bolton, Sr. and Bolton, Jr., indemnification rights and insurance coverage and payment of director fees to Chart Bank directors who will serve on the Benjamin Franklin Bancorp board.

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     Severance Agreements and Payments. In connection with the Chart Bank merger agreement, we entered into payments and waiver agreements with Richard E. Bolton, Jr., the President and Chief Executive Officer of Chart Bank, and Richard E. Bolton, Sr., the Chairman of the Board of Directors of Chart Bank and an executive officer of its wholly owned subsidiary, CSSI. The payments and waiver agreements provide for the termination of Mr. Bolton, Jr.’s employment agreement and Mr. Bolton, Sr.’s employment and consulting agreement and all of Mr. Bolton, Jr.’s and Mr. Bolton, Sr.’s employment and director relationships with Chart Bank and its subsidiaries, effective upon the merger. Additionally, in exchange for Mr. Bolton, Sr. and Mr. Bolton, Jr. agreeing to relinquish the right to receive certain payments in the event of a change of control of Chart Bank under their existing agreements with Chart Bank, the payments and waiver agreements provide for Chart Bank to make termination payments of $486,000 and $620,000 to Mr. Bolton, Sr. and Mr. Bolton, Jr., respectively, immediately prior to the effectiveness of the merger. However, in no event will the amounts under the payments and waiver agreements exceed the amount that may be paid without causing any portion of such payment to be deemed an “excess parachute payment” within the meaning of Section 280G of the Code. Mr. Bolton, Jr.’s payments and waiver agreement also provides that he will be appointed as a director of Benjamin Franklin Bancorp and Benjamin Franklin Bank as of the effective time of the merger.

     In addition, Chart Bank entered into a Special Termination Agreement with Alfred J. Odoardi, Senior Vice President of Chart Bank, as of August 20, 2004. Under the special termination agreement, Mr. Odoardi is entitled to certain severance benefits in the event that his employment with Chart Bank is terminated after a “change in control” for any reason other than death, disability, or “cause,” each as defined in the agreement, including continuation of his base salary and medical benefits for 18 months following termination and full vesting of all unexercisable stock options held by Mr. Odoardi on the date of termination. The value to Mr. Odoardi of the severance pay and benefits continuation under this agreement is $214,645, based on his current level of his base salary and medical benefits. Although the completion of the merger will constitute a change in control under the special termination agreement, it is not expected that Mr. Odoardi’s employment will terminate following the merger.

     As part of the negotiation of the merger, we also agreed that if Dean Kenney, the Treasurer and Chief Financial Officer of Chart Bank, is terminated within two years of the effective date of the merger, if his title or position is reduced or changed during the first two years after the effective date, if his base salary as of the effective date is reduced, or if his new designated place of employment is more than 30 driving miles from his principal place of residence, he will receive severance benefits, including two years of his annual base salary and continuation of his medical and dental benefits for two years following the date of termination. The value to Mr. Kenney of the severance pay and benefits continuation under this agreement is $245,194 based on his current level of his base salary and medical benefits.

     Chart Bank’s other officers whose employment is terminated in connection with the merger, or who resign following the merger by reason of a reduction in pay or increase in commute of greater than 10 miles, will be entitled to receive severance benefits under Chart Bank’s employee severance benefit program. Officers at the level of Vice President and above are entitled to receive severance in an amount equal to five times the officer’s weekly base pay multiplied by the officers’ whole and partial years of service with Chart Bank. Any employee who has completed five full years of service as of the date of the completion of the merger will be entitled to receive an additional lump-sum severance benefit equal to 15.0% of the employee’s annual base salary.

     Pursuant to the terms of the merger agreement, Chart Bank may make severance payments in the aggregate amount of $120,000 to the three members of the Chart Bank Board of Directors who will not become directors of Benjamin Franklin Bancorp or Benjamin Franklin Bank following the completion of the merger.

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     Consulting and Non-Competition Agreements. We have also entered in consulting and non-competition agreements with Messrs. Bolton, Sr. and Bolton, Jr. in connection with the merger. Under these agreements, Messrs. Bolton, Sr. and Bolton, Jr. have agreed to provide consulting services to us and have agreed to non-competition obligations for a period of one year after the effectiveness of the merger. We will pay Messrs. Bolton, Sr. and Bolton, Jr. fees of $310,000 and $150,000, respectively, and will reimburse each of them for their travel or other expenses incurred in connection with the services provided under the consulting and non-competition agreements.

     Indemnification and Insurance. We have agreed that if the merger becomes effective, we will indemnify and hold harmless Chart Bank’s directors, officers and employees arising from actions taken before the effectiveness of the merger, as provided in Chart Bank’s articles of organization and bylaws. The merger agreement also provides for continued directors’ and officers’ liability insurance coverage for Chart Bank’s directors and officers, with respect to acts and omissions in their capacities as officers and directors of Chart Bank prior to the merger, for a period of six years from the effectiveness of the merger. That insurance may also protect Benjamin Franklin Bancorp and Benjamin Franklin Bank in connection with their obligations to indemnify those directors and officers.

     Director Fees. Six of Chart Bank’s directors will continue as directors of Benjamin Franklin Bancorp and Benjamin Franklin Bank following the merger. These directors will be entitled to receive payment of the directors fees and other benefits provided to directors of these entities, including, among other things, the annual $10,000 retainer, per meeting fees and annual retainers for committee members.

THE CONVERSION AND THE OFFERING

General

     Our Board of Trustees adopted the plan of conversion on October 28, 2004. Pursuant to the plan, Benjamin Franklin Bancorp will convert from a Massachusetts-chartered bank holding company in mutual form to a Massachusetts-chartered bank holding company in stock form, and will drop “M.H.C.” and add “Inc.” to its name. Benjamin Franklin Bank is now and will continue to be the wholly-owned subsidiary of Benjamin Franklin Bancorp. As part of the conversion, Benjamin Franklin Bancorp is offering between 4,250,000 and 5,750,000 shares of common stock to the public, which offering may be increased to 6,612,500, and is forming a new charitable foundation, to which additional shares of Benjamin Franklin Bancorp common stock will be contributed.

     We intend to use the net proceeds for the cash merger consideration portion of the acquisition of Chart Bank, approximately $22,492,000 assuming that the Chart Bank options are cashed out at the closing rather than being exercised by optionees prior to the closing; and for the loan to the employee stock ownership plan to fund its purchase of shares of common stock, between $3.7 million and $4.9 million, or $5.6 million if the offering is increased by 15.0%. Of the net proceeds remaining, we intend to retain at the parent-company level between $10.9 million and $20.8 million of the net proceeds, or $26.6 million if the offering range is increased by 15.0%, and to invest in Benjamin Franklin Bank approximately $4.9 million to $8.6 million of the net proceeds, or $10.7 million if the offering range is increased by 15.0%. The conversion will be consummated only upon the issuance of at least the minimum number of shares of our common stock offered pursuant to the plan of conversion^. The minimum may, subject to regulatory approval, include up to 2,082,500 shares of the common stock of Benjamin Franklin Bancorp that will be issued in connection with the acquisition of Chart Bank.

     The plan of conversion provides that we will offer shares of common stock for sale in the subscription offering to eligible account holders, supplemental eligible account holders, our tax-qualified employee benefit plans (specifically our employee stock ownership plan) and to officers, directors and employees of Benjamin Franklin Bank who are not eligible or supplemental eligible account holders.

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     Subject to the purchase priority rights of these holders of subscription rights, we may also offer the common stock for sale in a direct community offering to members of the general public, with a preference given to natural persons residing in the following Massachusetts cities and towns: Attleboro, Ashland, Bellingham, Belmont, Blackstone, Brookline, Dover, Franklin, Foxboro, Holliston, Hopedale, Hopkinton, Lexington, Lincoln, Mansfield, Medfield, Medway, Mendon, Milford, Millis, Millville, Needham, Newton, Norfolk, North Attleboro, Northbridge, Norton, Plainville, Sharon, Sherborn, Upton, Uxbridge, Walpole, Waltham, Watertown, Wellesley, Weston and Wrentham. The direct community offering may begin at the same time as, during or after the subscription offering.

     We may sell any shares of Benjamin Franklin Bancorp common stock that are not sold in the subscription offering or the direct community offering to the general public in a syndicated community offering. In addition, if we do not receive aggregate subscriptions in the subscription and direct community offerings totaling 4,250,000 shares (the minimum of the offering range), we may, subject to regulatory approval, choose to apply up to 2,082,500 unsubscribed shares toward the merger consideration to be paid to the Chart Bank stockholders in the Chart Bank merger. Such shares will “count” in determining whether we have issued the minimum number of shares required to be issued in the conversion, but will not increase the total number of shares to be issued to the Chart Bank stockholders.

     We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the direct community offering or the syndicated community offering. The community offerings must be completed within 45 days after the completion of the subscription offering unless otherwise extended by the Massachusetts Commissioner of Banks. See “ — Direct Community Offering” on page [#] and “ — Syndicated Community Offering” on page [#].

     We determined the number of shares of common stock to be offered in the offering based upon an independent valuation appraisal of the estimated pro forma market value of the Benjamin Franklin Bancorp common stock, which takes into account the sale of shares in the offering, the contribution of shares to the Benjamin Franklin Bank Charitable Foundation and the anticipated Chart Bank acquisition. All shares of common stock to be sold in the offering will be sold at $10 per share. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See “ — Stock Pricing and Number of Shares to be Issued” on page [#] for more information as to the determination of the estimated pro forma market value of the common stock.

Reasons For The Conversion

     The primary reasons for the conversion and related stock offering are:

  •   to provide us with the capital and the form of consideration (stock) necessary to acquire Chart Bank;
 
  •   to facilitate growth through other acquisitions and de novo branching opportunities;
 
  •   to increase our capital base so as to support internal growth through lending in communities we serve;
 
  •   to enhance existing products and services and support the development of new products and services; and
 
  •   to improve our overall competitive position.

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     As a stock holding company, we will have greater flexibility in structuring further mergers and acquisitions, including the form of consideration that we can use to pay for an acquisition. Our current mutual holding company structure limits our ability to offer shares of common stock as consideration for a merger or acquisition since a mutual holding company is required to own a majority of the outstanding shares of common stock of its subsidiary bank. Potential sellers often want stock for at least part of the purchase price. Our stock holding company structure will enable us to offer stock or cash consideration, or a combination thereof, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. Except for the agreement to acquire Chart Bank, we do not have any agreement or understanding as to any specific acquisition.

Effects Of The Conversion

     General. Each depositor in a mutual savings bank has both a deposit account in the institution and a pro rata interest in the equity of the institution based upon the balance in the depositor’s account. This interest may only be realized in the event of a liquidation of the savings institution. However, this ownership interest is tied to the depositor’s account and has no tangible market value separate from such deposit account. Any depositor who opens a deposit account obtains a pro rata ownership interest in the equity of the institution without any additional payment beyond the amount of the deposit. A depositor who reduces or closes such depositor’s account receives the balance in the account but receives nothing for such depositor’s ownership interest in the equity of the institution, which is lost to the extent that the balance in the account is reduced. Consequently, depositors of a mutual savings bank have no way to realize the value of their ownership interest, except in the unlikely event that the mutual savings bank is liquidated. In such event, the depositors of record at that time would share pro rata in any residual surplus and reserves after other claims, including claims of depositors to the amounts of their deposits, are paid.

     When a mutual savings bank converts to stock form, permanent non-withdrawable capital stock is created to represent the ownership of the institution’s equity and the former pro rata interest of depositors is thereafter represented exclusively by their liquidation rights as described below. Capital stock is separate and apart from deposit accounts and cannot be and is not insured by the FDIC or any other governmental agency. Certificates are issued to evidence ownership of the capital stock sold in connection with the conversion. The stock certificates are transferable, and, therefore, the stock may be sold or traded with no effect on any deposit account the seller or trader may hold in the institution.

     Continuity. While the conversion is pending, our normal business of accepting deposits and making loans will continue without interruption. Benjamin Franklin Bank will continue to be subject to regulation by the Massachusetts Commissioner of Banks and the FDIC. After the conversion, we will continue to provide existing services to depositors, borrowers and other customers under Benjamin Franklin Bank’s current policies by its present management and staff, as supplemented by Chart Bank personnel.

     The directors and officers of Benjamin Franklin Bank at the time of the conversion will continue to serve as directors and officers of Benjamin Franklin Bank after the conversion, and the trustees and officers of Benjamin Franklin Bancorp at the time of the conversion will continue to serve as directors and officers of Benjamin Franklin Bancorp after the conversion. In each case, upon completion of the Chart Bank merger, six directors of Chart Bank will become directors of both Benjamin Franklin Bank and Benjamin Franklin Bancorp. See “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank — Directors of Benjamin Franklin Bancorp” on page [#].

     Effect on Deposit Accounts. The conversion will have no effect on Benjamin Franklin Bank’s deposit accounts, except to the extent that funds in the account are withdrawn to purchase conversion shares and except with respect to liquidation rights. Subject to certain limitations, each such account will be insured by the FDIC to the same extent as before the conversion, and each such account will continue

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to be insured in full for amounts in excess of FDIC limits by the excess insurer of savings bank deposits, the DIF. Depositors will continue to hold their existing certificates, passbooks and other evidences of their accounts.

     Effect on Loans. No loan outstanding from Benjamin Franklin Bank will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as they were contractually fixed prior to the conversion.

     Tax Effects. Benjamin Franklin Bancorp has received a favorable opinion regarding the federal income tax consequences of the conversion to the effect that the conversion will not result in any adverse federal or state tax consequences to eligible account holders. See “ — Tax Aspects Of The Conversion And The Chart Bank Acquisition” on page [#].

     Liquidation Rights. The plan of conversion provides for us to establish and maintain a liquidation account for the benefit of eligible account holders and supplemental eligible account holders, in an amount equal to the net worth of Benjamin Franklin Bancorp as set forth in the most recent consolidated statement of financial condition contained in this prospectus. In the unlikely event of a complete liquidation of Benjamin Franklin Bancorp, and only in such event, each eligible account holder and supplemental eligible account holder who continues to maintain such account holder’s deposit account at Benjamin Franklin Bank following the conversion would be entitled to a distribution from the liquidation account prior to any payment to the holders of Benjamin Franklin Bancorp’s capital stock (but following all liquidation payments to creditors, including depositors).

     Each eligible account holder and supplemental eligible account holder would initially have a pro rata interest in the total liquidation account based on the proportion that the aggregate balance of such person’s qualifying deposit accounts on May 31, 2003 (the eligibility record date) and December 31, 2004 (the supplemental eligibility record date), as applicable, bears to the aggregate balance of all qualifying deposit accounts of all eligible account holders and supplemental eligible account holders on such dates. For this purpose, qualifying deposit accounts include all savings, time, demand, interest bearing demand, money market and passbook savings accounts maintained at Benjamin Franklin Bank (excluding any escrow accounts). The liquidation account will be an off-balance sheet memorandum account that will not be reflected in the published financial statements of Benjamin Franklin Bank or Benjamin Franklin Bancorp.

     If, however, on the last day of any fiscal year of Benjamin Franklin Bancorp commencing after the completion of the conversion, the amount in any deposit account is less than either the amount in such deposit account on May 31, 2003 (with respect to an eligible account holder) or on December 31, 2004 (with respect to a supplemental eligible account holder), or the amount in such deposit account on any previous fiscal year closing date, then the interest in the liquidation account relating to such deposit account would be reduced in an amount proportional to the reduction in such deposit balance, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account.

     Neither Benjamin Franklin Bank nor Benjamin Franklin Bancorp will be required to set aside funds for the purpose of establishing the liquidation account, and the creation and maintenance of the liquidation account will not operate to restrict the use or application of any of the net worth accounts of Benjamin Franklin Bank or Benjamin Franklin Bancorp, except that neither Benjamin Franklin Bank nor Benjamin Franklin Bancorp, as the case may be, shall declare or pay a cash dividend on, or repurchase any of, its capital stock if the effect of such a transaction would be to cause its net worth to be reduced below the amount required for the liquidation account.

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     Any payments to eligible account holders or supplemental eligible account holders pursuant to liquidation rights would be separate and apart from the payment to them of any insured deposit accounts. Any assets remaining after the above liquidation rights of eligible account holders and supplemental eligible account holders are satisfied would be distributed to the stockholders of Benjamin Franklin Bancorp.

     We have no plans to liquidate.

Approvals Required

     Our Board of Trustees [and corporators (including a majority of our “independent” corporators)] have approved our plan of conversion and the establishment and funding of the Benjamin Franklin Bank Charitable Foundation. The Massachusetts Commissioner of Banks [and the Federal Reserve Board] have also conditionally approved the plan of conversion; such approvals, however, do not constitute a recommendation or endorsement of the plan of conversion by the Massachusetts Commissioner of Banks or the Federal Reserve Board. The Massachusetts Commissioner of Banks must issue a further approval (based on the final updated appraisal) before we can consummate the conversion and issue shares of common stock.

     Our Board of Trustees also has approved the merger agreement for the acquisition of Chart Bank. The merger agreement also has been approved by the Board of Directors of Chart Bank, but has not yet been approved by the stockholders of Chart Bank.

     The merger must be also be approved by the Massachusetts Commissioner of Banks and the Federal Deposit Insurance Corporation. Benjamin Franklin has filed applications for approval of the merger with the Commissioner and the FDIC. In addition, the Massachusetts Board of Bank Incorporation has advised Benjamin Franklin Bancorp that Board of Bank Incorporation approval of the merger is required as well. Accordingly, Benjamin Franklin Bancorp has filed an application with the Board of Bank Incorporation, although it does not believe that it is or would become at any point in connection with the merger a bank holding company under Massachusetts law or that the approval of the Board of Bank Incorporation is legally required.

The Stock Offering

     We are offering between 4,250,000 and 5,750,000 shares of common stock (subject to adjustment to up to 6,612,500) pursuant to this prospectus and the plan of conversion.

     The shares of common stock are being offered for sale at a purchase price of $10 per share in the subscription offering pursuant to subscription rights in the following order of priority to:

  •   eligible account holders: each holder of deposit accounts with aggregate balances of $50.00 or more on May 31, 2003;
 
  •   supplemental eligible account holders: each holder of deposit accounts (other than Benjamin Franklin Bank officers, directors, trustees, corporators and their associates) with aggregate balances of $50.00 or more on December 31, 2004;
 
  •   our tax qualified employee plans, specifically our employee stock ownership plan; and
 
  •   officers, directors, and employees of Benjamin Franklin Bank who do not have a higher priority right.

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Subject to the prior rights of holders of subscription rights, remaining shares of common stock may be offered in the direct community offering at $10 per share to certain members of the general public, with a preference first given to natural persons residing in the following Massachusetts cities and towns: Attleboro, Ashland, Bellingham, Belmont, Blackstone, Brookline, Dover, Franklin, Foxboro, Holliston, Hopedale, Hopkinton, Lexington, Lincoln, Mansfield, Medfield, Medway, Mendon, Milford, Millis, Millville, Needham, Newton, Norfolk, North Attleboro, Northbridge, Norton, Plainville, Sharon, Sherborn, Upton, Uxbridge, Walpole, Waltham, Watertown, Wellesley, Weston and Wrentham. The direct community offering may begin at the same time as the subscription offering, or after the subscription offering begins. We also may offer shares of common stock not purchased in the subscription offering or the direct community offering through a syndicated community offering. If we do not receive orders for at least 4,250,000 shares of common stock (the minimum of the offering range), then we may, subject to regulatory approval, apply up to 2,082,500 unsubscribed shares toward the merger consideration to be paid to Chart Bank stockholders, but only in order to complete the offering and conversion at the minimum of the offering range. Applying unsubscribed shares to the merger will not affect the number of shares issued to Chart Bank stockholders in the merger, but will reduce the total number of shares outstanding after the conversion and merger and will therefore increase the percentage of the combined company owned by former Chart Bank stockholders.

     We have the right to reject any order submitted in the offering by a person we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent, the terms and conditions of the plan of conversion.

Stock Pricing And Number Of Shares To Be Issued

     The plan of conversion and regulations require that the aggregate purchase price of the common stock issued in the offering must be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. Benjamin Franklin Bancorp has retained RP Financial, LC. to make this valuation. For its services in preparing the initial valuation, RP Financial, LC. will receive a fee of $75,000. This amount does not include a fee of $15,000 to be paid to RP Financial, LC. for assistance in the preparation of a business plan. We have agreed to indemnify RP Financial, LC. and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as appraiser, except where RP Financial, LC.’s liability results from its bad faith, willful misconduct or gross negligence.

     The independent valuation states that as of November 26, 2004, the estimated pro forma market value of the shares to be outstanding immediately following the conversion (including the shares to be issued to the Chart Bank stockholders in the acquisition and shares to be issued to the Benjamin Franklin Bank Charitable Foundation), was $69,915,750 at the minimum of the valuation range and $85,515,750 at the maximum of the valuation range, with a midpoint value of $78,015,750. Based on the $10 per share offering price determined by the Board of Trustees of Benjamin Franklin Bancorp, this valuation range equates to total shares outstanding of 6,991,575 at the minimum, 8,551,575 at the maximum and 7,801,575 at the midpoint of the valuation range. Based on this valuation range, the estimated pro forma market value of the shares to be sold in the offering (not including shares issued to the Chart Bank stockholders in the acquisition or the shares issued to the Benjamin Franklin Bank Charitable Foundation) is as follows: $42,500,000 at the minimum and $57,500,000 at the maximum, with a midpoint of $50,000,000. Based on the $10 per share offering price determined by the Board of Trustees, the minimum of the offering range is 4,250,000 shares, the midpoint of the offering range is 5,000,000 shares and the maximum of the offering range is 5,750,000 shares. In addition, we are contributing to the Benjamin Franklin Bank Charitable Foundation a number of shares of our authorized but unissued common stock in an amount up to 8.0% of the number of shares actually sold in the offering, up to a maximum of 400,000 shares. The contribution of the common stock to the Benjamin Franklin Bank

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Charitable Foundation will not be considered in determining whether the minimum number of shares of common stock (4,250,000) has been issued in order to complete the offering.

     The Board of Trustees of Benjamin Franklin Bancorp reviewed the independent valuation and, in particular, considered the following:

  •   Our financial condition and results of operations;
 
  •   Comparison of our financial performance ratios to those of other financial institutions of similar size; and
 
  •   Stock market conditions generally and in particular for financial institutions.

     All of these factors are set forth in the independent valuation. The Board of Trustees also reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent valuation and the Board believes that such assumptions were reasonable. The offering range may be amended with the approval of the bank regulators, if required, as a result of subsequent developments in our financial condition or market conditions generally. In the event the independent valuation is updated to amend the pro forma market value of the Benjamin Franklin Bancorp common stock to less than $42.5 million or more than $66.1 million, the appraisal will be filed with the Securities and Exchange Commission by post-effective amendment.

     The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing our common stock. RP Financial, LC. did not independently verify the financial statements and other information that Benjamin Franklin Bancorp provided to them, nor did RP Financial, LC. independently value the assets or liabilities of Benjamin Franklin Bancorp. The independent valuation considers Benjamin Franklin Bancorp as a going concern and should not be considered as an indication of the liquidation value of Benjamin Franklin Bancorp. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10 price.

     Following commencement of the subscription offering, the maximum of the valuation range may be increased by up to 15.0% to up to $66.1 million, which will result in a corresponding increase of up to 15.0% in the maximum of the offering range to up to 6,612,500 shares, to reflect changes in the market and financial conditions, demand for the shares or regulatory considerations, without resoliciting subscribers. We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The subscription price of $10 per share will remain fixed.

     If the update to the independent valuation prior to the completion of the conversion results in an increase in the maximum of the offering range to more than $66.1 million and a corresponding increase in the offering size to more than 6,612,500 shares, or a decrease in the minimum of the offering range to less than $42.5 million and a corresponding decrease in the offering size to fewer than 4,250,000 shares, then, after consulting with the bank regulators, we may terminate the plan of conversion and cancel deposit account withdrawal authorizations and return by check all funds received promptly with interest at Benjamin Franklin Bank’s applicable passbook savings rate. Alternatively, we may hold a new offering with a new offering range, extend the offering period and commence a resolicitation of subscribers or take other actions as permitted by the bank regulators in order to complete the conversion and the offering. In the event that a resolicitation is commenced, all subscribers will have the right to increase, decrease or rescind their subscriptions. Unless we receive an affirmative response from an investor within a reasonable designated period of time, we will return all funds received promptly to the investor as

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described above. Any resolicitation would not exceed 45 days unless further extended with the approval of the bank regulators.

     An increase in the number of shares to be issued in the offering would decrease both a subscriber’s ownership interest and Benjamin Franklin Bancorp’s pro forma earnings and stockholders’ equity on a per share basis while increasing pro forma earnings and stockholders’ equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber’s ownership interest and Benjamin Franklin Bancorp’s pro forma earnings and stockholders’ equity on a per share basis, while decreasing pro forma earnings and stockholders’ equity on an aggregate basis. For a presentation of the effects of these changes, see “Pro Forma Data” on page [#].

     Copies of the appraisal report of RP Financial, LC. are available for inspection at the main office of Benjamin Franklin Bank and as specified under “Additional Information” on page [#].

Subscription Offering And Subscription Rights

     In accordance with the plan of conversion, rights to subscribe for shares of common stock in the subscription offering have been granted in the following descending order of priority. The filling of all subscriptions that we receive will depend on the availability of common stock after satisfaction of all subscriptions of all persons having prior rights in the subscription offering and to the maximum, minimum and overall purchase limitations set forth in the plan of conversion and as described below under “Limitations on Common Stock Purchases” on page [#].

     Priority 1: Eligible Account Holders. Each eligible account holder will receive, as first priority and without payment, nontransferable rights to subscribe for common stock in an amount of up to $150,000. See “ — Limitations on Common Stock Purchases” on page [#].

     If there are not sufficient shares available to satisfy all subscriptions by eligible account holders, shares first will be allocated so as to permit each subscribing eligible account holder to purchase a number of shares sufficient to make such eligible account holder’s total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares will be allocated among the remaining eligible account holders whose subscriptions remain unfilled in the proportion that the amount of their respective qualifying deposit bears to the total amount of qualifying deposits of all eligible account holders whose subscriptions remain unfilled. However, no fractional shares shall be issued.

     To ensure proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest on the eligibility record date of May 31, 2003. Failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. The subscription rights of eligible account holders who are also directors, trustees, corporators or officers of Benjamin Franklin Bank or Benjamin Franklin Bancorp, and the associates of such persons, will be subordinated to the subscription rights of other eligible account holders to the extent attributable to increased deposits in the one year period preceding May 31, 2003. “Associates” is defined below under “Limitations on Common Stock Purchases” on page [#].

     Priority 2: Supplemental Eligible Account Holders. To the extent that there are shares remaining after satisfaction of the subscriptions by eligible account holders, each supplemental eligible account holder will receive, as a second priority and without payment, non-transferable rights to subscribe for common stock in an amount of up to $150,000. See “ — Limitations on Common Stock Purchases” on page [#].

     If there are not sufficient shares available to satisfy all subscriptions by supplemental eligible account holders, shares first will be allocated so as to permit each subscribing supplemental eligible

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account holder to purchase a number of shares sufficient to make such supplemental eligible account holder’s total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares will be allocated among the remaining supplemental eligible account holders whose subscriptions remain unfilled in the proportion that the amount of their respective qualifying deposit bears to the total amount of qualifying deposits of all supplemental eligible account holders whose subscriptions remain unfilled. However, no fractional shares shall be issued.

     To ensure proper allocation of stock, each supplemental eligible account holder must list on his or her stock order form all deposit accounts in which he or she had an ownership interest on the supplemental eligibility record date of December 31, 2004. Failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed.

     Priority 3: The Tax-Qualified Employee Benefit Plans. On a third priority basis, our tax-qualified employee benefit plans will receive, as a third priority and without payment therefor, non-transferable subscription rights to purchase up to 10.0% of the common stock to be issued in the offering. As a tax-qualified employee benefit plan, our employee stock ownership plan expects to purchase 8.0% of the shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation. Subscriptions by the employee stock ownership plan will not be aggregated with shares of common stock purchased directly by or which are otherwise attributable to any other participants in the subscription and community offerings, including subscriptions of any of Benjamin Franklin Bank’s directors, officers or employees. In the event that the total number of shares offered is increased to more than 5,750,000 shares, the tax qualified plans will have a first priority right to purchase any such shares up to an aggregate of 10.0% of the shares issued in the offering and issued to the Benjamin Franklin Bank Charitable Foundation. Unsubscribed shares applied toward the merger consideration payable to Chart Bank stockholders in order achieve the minimum of the offering range are considered “issued in the offering” for purposes of calculating the subscription rights of the tax qualified plans. We reserve the right to purchase shares of common stock in the open market following the offering in order to fund the employee stock ownership plan, rather than subscribing for shares in the subscription offering.

     Priority 4: Employees, Officers, Directors and Trustees of Benjamin Franklin Bank or Benjamin Franklin Bancorp. On a fourth priority basis, each employee, officer, director and trustee of Benjamin Franklin Bank or Benjamin Franklin Bancorp at the time of the offering who is not eligible in the preceding priority categories shall receive non-transferable subscription rights to subscribe for common stock in an amount up to $150,000. See “ — Limitations on Common Stock Purchases” on page [#]. In the event that persons in this category subscribe for more shares of stock than are available for purchase by them, shares will be allocated among such subscribing persons on an equitable basis, such as by giving weight to the period of service, compensation and position of the individual subscriber.

Direct Community Offering

     To the extent that shares remain available for purchase after satisfaction of all subscriptions of the eligible account holders, supplemental eligible account holders, Benjamin Franklin Bank’s tax qualified employee benefit plans, officers, directors trustees and employees of Benjamin Franklin Bank, we may, at our discretion, offer shares pursuant to the plan of conversion to members of the general public in a direct community offering. In the direct community offering, preference will be given to natural persons residing in the following Massachusetts cities and towns: Attleboro, Ashland, Bellingham, Belmont, Blackstone, Brookline, Dover, Franklin, Foxboro, Holliston, Hopedale, Hopkinton, Lexington, Lincoln, Mansfield, Medfield, Medway, Mendon, Milford, Millis, Millville, Needham, Newton, Norfolk, North Attleboro, Northbridge, Norton, Plainville, Sharon, Sherborn, Upton, Uxbridge, Walpole, Waltham, Watertown, Wellesley, Weston and Wrentham.

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     The term “residing” means any person who occupies a dwelling within the indicated counties, has an intent to remain for a period of time and manifests the genuineness of that intent by establishing an ongoing physical presence together with an indication that such presence is something other than merely transitory in nature. We may utilize depositor or loan records or such other evidence provided to us to make a determination as to whether a person is a resident. In all cases, the determination of resident status will be made by us in our sole discretion.

     Stock sold in the direct community offering will be offered and sold in a manner to achieve a wide distribution of the stock. No person may purchase more than $150,000 of common stock in the direct community offering. Orders accepted will each be filled to a maximum percentage to be determined by us and not to exceed the purchase limitations in the plan. Thereafter remaining shares will be allocated on an equal number of shares per order basis until all orders have been filled. Allocation of shares if an oversubscription occurs in this category of the offering will give preference to natural persons residing in the counties listed above, so that each such Person may receive 100 shares, and thereafter, on an equal number of shares basis until all available shares have been allocated.

     The direct community offering, if any, may commence concurrently with or subsequent to the commencement of the subscription offering and shall terminate no later than 45 days after the expiration of the subscription offering unless extended by Benjamin Franklin Bancorp, with the approval of the Massachusetts Commissioner of Banks and the Federal Reserve Board, if necessary. We may terminate the direct community offering or the syndicated community offering at any time after we have received orders for at least the minimum number of shares available for purchase in the offering.

Syndicated Community Offering

     If feasible, our Board may decide to offer for sale shares of common stock not subscribed for or purchased in the subscription and direct community offerings to the general public by a selling group of broker-dealers in a syndicated community offering, subject to such terms, conditions and procedures as we may determine, in a manner that will achieve the widest distribution of the common stock. However, we retain the right to accept or reject in whole or in part any orders in the syndicated community offering. In the syndicated community offering, any person may purchase up to $150,000 of common stock, subject to the overall maximum purchase limitation. See “ — Limitations on Common Stock Purchases” on page [#]. Any syndicated offering will likely begin as soon as possible after the expiration of the subscription and direct community offerings.

     The syndicated community offering will be conducted in accordance with certain SEC rules applicable to best efforts offerings. Generally under those rules, Ryan Beck, a broker-dealer, will deposit funds it receives prior to the closing date from interested investors into a separate non-interest bearing bank account. If and when all the conditions for the closing are met, funds for common stock sold by Ryan Beck in the syndicated community offering will be promptly delivered to us. If the offering closes, but some or all of an interested investor’s funds are not accepted by us, those funds will be returned to the interested investor promptly after the closing, without interest. If the offering does not close, funds in the account will be promptly returned, without interest, to the potential investor. Normal customer ticketing will be used. In the syndicated community offering, stock order forms will not be used.

     If for any reason we cannot effect a syndicated community offering of shares remaining unsold after the subscription offering and direct community offering, and we have not received orders for at least 4,250,000 shares of common stock (the minimum of the offering range), then we may, subject to regulatory approval, apply up to 2,082,500 unsubscribed shares toward the merger consideration to be paid to Chart Bank stockholders, but only in order to complete the offering and conversion at the minimum of the offering range. This limitation was established to ensure that the Chart Bank stockholders’ ownership interest in Benjamin Franklin Bancorp will not exceed 49.0%. Alternatively, we

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will try to make other arrangements for the sale of remaining shares, if possible. The bank regulators must approve any such arrangements.

Expiration Date of the Offering.

     The subscription offering will expire at 10:00 a.m., Massachusetts time, on [date], 2005, unless we extend this period with the approval of the Massachusetts Commissioner of Banks and, if necessary, the Federal Reserve Board. Subscription rights will expire then, whether or not each eligible depositor can be located. We may decide to extend the expiration date of the subscription offering for any reason, whether or not subscriptions have been received for shares at the minimum, midpoint or maximum of the offering range. Subscription rights which have not been exercised prior to the expiration date, as extended, will become void.

     We will not execute orders until at least the minimum number of shares in the offering range has been issued. This minimum issuance may include shares allocated to Chart Bank stockholders as merger consideration. If at least 4,250,000 shares have not been issued within 45 days after the expiration of the subscription offering and the Massachusetts Commissioner of Banks and the Federal Reserve Board, if necessary, have not consented to an extension, all funds delivered to us to purchase shares of common stock in the offering will be returned promptly to the subscribers with interest at Benjamin Franklin Bank’s passbook savings rate and all deposit account withdrawal authorizations will be canceled. If an extension beyond the 45-day period following the subscription offering expiration date is granted by the Massachusetts Commissioner of Banks and the Federal Reserve Board, if necessary, we will notify subscribers of the extension of time and of the rights of subscribers to increase, decrease or cancel their subscriptions during that time. Unless we receive an affirmative response from an investor within a reasonable designated period of time, we will return all funds received promptly to the investor as described above. Extensions may not go beyond October 28, 2006, which is two years after the approval of the plan of conversion by the Board of Trustees.

Limitations On Common Stock Purchases

     The plan of conversion includes the following limitations on the number of shares of common stock that may be purchased during the conversion:

  (1)   No person, or persons exercising subscription rights through a single qualifying deposit account, may purchase fewer than 25 shares of common stock;
 
  (2)   Our tax qualified employee benefit plans are entitled to purchase up to 10.0% of the shares issued in the offering and issued to the Benjamin Franklin Bank Charitable Foundation. As a tax qualified employee benefit plan, our employee stock ownership plan intends to purchase 8.0% of the shares issued in the offering, including             shares issued to the Benjamin Franklin Bank Charitable Foundation.
 
  (3)   Except for our employee stock ownership plan, no person may subscribe for more than $150,000 of common stock in the offering. In the subscription offering, no persons exercising subscription rights through a single qualifying deposit account held jointly may purchase more than this amount.
 
  (4)   Except for the employee stock ownership plan, no person, together with associates or persons acting in concert with such person (please see definitions of “associate” or “acting in concert” below), may purchase more than $250,000 of common stock in all categories of the offering combined.

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  (5)   The aggregate number of shares of common stock that may be purchased in all categories of the offering by officers, directors, trustees and corporators of Benjamin Franklin Bancorp and Benjamin Franklin Bank and their associates may not exceed 30.0% of the total shares issued in the offering.

     Depending upon market or financial conditions, our Board of Trustees may increase or decrease the individual and overall maximum purchase limitations, provided that the purchase limitations may not be increased to a percentage that is more than 5.0% of the common stock offered for sale and may not be decreased to a percentage that is less than one-tenth of a percent (0.10%) of the common stock offered for sale in the conversion. Such an increase or decrease would require the approval of the bank regulators but would not require further approval of Benjamin Franklin Bancorp’s corporators unless the bank regulators so require. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and some other large subscribers may be, given the opportunity to increase their subscriptions up to the then applicable limit. The effect of this type of resolicitation will be an increase in the number of shares owned by subscribers who choose to increase their subscriptions.

     In the event of an increase in the offering range of up to 15.0% of the total number of shares of common stock offered in the offering, shares will be allocated in the following order of priority in accordance with the plan of conversion:

  (1)   to fill the employee benefit plans’ subscription for up to 10.0% of the total number of shares of common stock issued in the offering and issued to the Benjamin Franklin Bank Charitable Foundation;
 
  (2)   in the event that there is an oversubscription at the eligible account holder or supplemental eligible account holder levels, to fill unfulfilled subscriptions of these subscribers according to their respective priorities; and
 
  (3)   to fill unfulfilled subscriptions in the community offering, with preference given first to natural persons residing in the Massachusetts cities and towns listed above under “—Direct Community Offering” on page [#], and then to other members of the general public.

     The term “associate” of a person means:

  (1)   any corporation or organization of which the person is an officer, partner or 10.0% stockholder (other than Benjamin Franklin Bancorp, Benjamin Franklin Bank or a majority-owned subsidiary of either of them);
 
  (2)   any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity;
 
  (3)   any relative or spouse of the person, or any relative of the spouse, who either has the same home as the person or who is a director or trustee or officer of Benjamin Franklin Bancorp or Benjamin Franklin Bank, and
 
  (4)   any person “acting in concert” with any of the persons or entities specified in clauses 1-3 above.

The term “acting in concert” means

  (1)   knowing participation in a joint activity or conscious parallel action towards a common goal, whether or not pursuant to an express agreement; or

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  (2)   persons seeking to combine or pool their voting or other interests (such as subscription rights) in the securities of an issuer for a common purpose, pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

     We have the sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.” Persons living at the same address, and persons exercising subscription rights through qualifying deposits registered at the same address, whether or not related, will be deemed to be acting in concert unless we determine otherwise. Trustees and directors of Benjamin Franklin Bancorp and Benjamin Franklin Bank are not treated as acting in concert solely as a result of their board membership.

Other Restrictions

     Notwithstanding any other provision of the plan of conversion, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state “blue sky” registrations, or would violate regulations or policies of the National Association of Securities Dealers, Inc., particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. We will make reasonable efforts to comply with the securities laws of all states in the United States in which depositors entitled to subscribe for shares reside. However, no shares are expected to be offered or sold under the plan of conversion to any person who resides in a foreign country, or in a state of the United States in which fewer than 100 persons otherwise eligible to subscribe for shares under the plan of conversion reside and where Benjamin Franklin Bancorp, Benjamin Franklin Bank or their employees would be required to register, under the securities laws of the state, as a broker, dealer, or agent. No payments will be made in lieu of the granting of subscription rights to any person.

Certain Restrictions On Purchase Or Transfer Of Our Shares After Conversion

     Shares of common stock purchased in the offering by the directors, trustees, officers and corporators of Benjamin Franklin Bancorp and Benjamin Franklin Bank generally may not be sold for a period of one year following the closing of the conversion, except in the event of the death or substantial disability, as determined by the Massachusetts Commissioner of Banks, of such person, or upon the written approval of the Commissioner^. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or record ownership of the shares other than as provided above is not to be recognized or effected. Any shares of common stock issued at a later date as a stock dividend, stock split, or otherwise, with respect to the restricted stock will be similarly restricted.

     The directors and officers of Benjamin Franklin Bancorp and Benjamin Franklin Bank and their associates may not purchase Benjamin Franklin Bancorp common stock for three years after the conversion is completed without the Massachusetts Commissioner of Banks’s approval except through a broker or dealer registered with the Securities and Exchange Commission. This restriction does not apply to negotiated transactions involving more than 1.0% of Benjamin Franklin Bancorp’s outstanding common stock or to stock purchases under a stock-based incentive plan. The directors and officers also will be restricted by the insider trading rules and other applicable requirements of the federal securities laws.

     Under NASD guidelines, members of the NASD and their associates are subject to certain restrictions on transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of these securities.

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Plan Of Distribution And Marketing Arrangements

     Offering materials have been initially distributed through mailings to those eligible to subscribe in the subscription offering. To assist in the marketing of our common stock, we have retained Ryan Beck & Co., Inc., which is a broker/dealer registered with the National Association of Securities Dealers, Inc. Ryan Beck & Co., Inc. will assist us in the offering by:

  (1)   Acting as our financial advisor for the conversion, providing administrative services and managing the Stock Information Center;
 
  (2)   Targeting our sales efforts, including assisting in the preparation of marketing materials; and
 
  (3)   Soliciting orders for common stock.

     For these services, Ryan Beck & Co., Inc. will receive a marketing fee equal to 1.0% of the dollar amount of common stock sold in the subscription and direct community offerings. No fee will be payable to Ryan Beck & Co., Inc. with respect to shares purchased by officers, directors and employees or their immediate families, the Benjamin Franklin Bank Charitable Foundation, any common stock purchased by our tax-qualified and non-qualified employee benefit plans, or any shares issued to the Chart Bank stockholders as merger consideration. In the event that Ryan Beck & Co., Inc. sells common stock through a group of broker-dealers in a syndicated community offering, it will be paid a fee equal to 1.0% of the dollar amount of total shares sold in the syndicated community offering, which fee along with the fee payable to selected dealers (which may include Ryan Beck & Co., Inc. for the shares it sells) shall not exceed 6.0% in the aggregate. Ryan Beck & Co., Inc. will also be reimbursed for its allocable expenses in an amount not to exceed $25,000 and for its legal fees in an amount not to exceed $75,000.

     We will indemnify Ryan Beck & Co., Inc. against liabilities and expenses, including legal fees, incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering materials for the common stock, including liabilities under the Securities Act of 1933.

     If we seek Ryan Beck’s assistance in purchasing shares of our common stock on the open market to fund our stock-based incentive plan, Ryan Beck would earn a brokerage commission on those purchases. The amount of such commission would depend on the market price of our stock at the time any such purchases were made, the number of shares purchased through Ryan Beck brokers and the per share brokerage commission, which would be a negotiated amount. We do not have any agreement or arrangement with Ryan Beck to purchase any shares through Ryan Beck’s brokers.

     Some of our Directors and executive officers may participate in the solicitation of offers to purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with the solicitation. Other regular, full-time employees of Benjamin Franklin Bank may assist in the offering, but only in ministerial capacities, and may provide clerical work in effecting a sales transaction. No offers or sales may be made by tellers or at the teller counters. All sales activity will be conducted in a segregated or separately identifiable area of our executive offices apart from they area accessible to the general public. Investment-related questions of prospective purchasers will be directed to executive officers or registered representatives of Ryan Beck & Co., Inc. Our other employees have been instructed not to solicit offers to purchase shares of common stock or provide advice regarding the purchase of common stock. We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, and sales of common stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors, trustees and employees to participate in the sale of common stock. None of our officers, directors, trustees or employees will be compensated in connection with their participation in the offering.

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Timing and Procedure For Purchasing Shares

     Expiration Date. The offering is expected to expire at 10:00 a.m., Massachusetts time, on [date], 2005, unless extended by Benjamin Franklin Bancorp with the approval of the Massachusetts Commissioner of Banks and the Federal Reserve Board, if required. If the offering is extended beyond [date], 2005, we will be required to resolicit subscribers before proceeding. In no event may we extend the offering beyond October 28, 2006.

     Prospectus Delivery. To ensure that each purchaser receives a prospectus at least 48 hours before the expiration date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, no prospectus will be mailed any later than five days prior to this date or hand delivered any later than two days prior to this date. Execution of an order form will confirm receipt of delivery in accordance with Rule 15c2-8. Order forms will be distributed only if preceded or accompanied by a prospectus. Subscription funds will be maintained in a segregated account at Benjamin Franklin Bank.

     Termination of Offering; Rejection of Orders. We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal holds and promptly return all funds submitted, plus interest at Benjamin Franklin Bank’s applicable passbook savings rate from the date of receipt.

     We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion.

     Use of Order Forms. In order to purchase shares of common stock in the subscription offering and direct community offering, you must complete an order form and remit payment. Incomplete order forms or order forms that are not signed are not required to be accepted. We will not be required to accept orders submitted on photocopied or facsimiled stock order forms. All order forms must be received prior to 10:00 a.m. Massachusetts time on [date], 2005. We are not required to accept order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate withdrawal instructions. We are not required to notify subscribers of incomplete or improperly executed order forms, and we have the right to waive or permit the correction of incomplete or improperly executed order forms. We do not represent, however, that we will do so and we have no affirmative duty to notify any prospective subscriber of any such defects. You may submit your order form and payment in one of three ways: by mail using the return envelope provided, by overnight delivery to the indicated address noted on the back of the order form or by hand delivery to the Stock Information Center located at 58 Main Street, Franklin, Massachusetts. Order forms may not be delivered to Benjamin Franklin Bank branch offices. Once tendered, an order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject any order form received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering. If you are ordering shares, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final.

     By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account that is federally insured or otherwise guaranteed by Benjamin Franklin Bank or the Federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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     Payment for Shares. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares may be made by:

  •   Personal check, bank check or money order made payable directly to Benjamin Franklin Bancorp, Inc. (do not endorse third-party checks); or
 
  •   Authorization of withdrawal from the types of Benjamin Franklin Bank deposit accounts designated on the stock order form.

     Appropriate means for designating withdrawals from deposit accounts at Benjamin Franklin Bank are provided on the order form. The funds designated must be available in the account(s) at the time the order form is received. A hold will be placed on these funds, making them otherwise unavailable to the depositor. Please do not designate withdrawal from accounts with check-writing privileges. Provide a check, instead, because we do not intend to place holds on these type of accounts. If you request that we do so, we reserve the right to interpret that as your authorization to immediately withdraw the funds as if you had remitted a check in the amount. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the conversion is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be cancelled at the time the conversion is completed without penalty and, thereafter, the remaining balance will earn interest at Benjamin Franklin Bank’s applicable passbook savings rate. In the case of payments made by check or money order, these funds must be available in the account(s) and will be immediately cashed and placed in a segregated account at Benjamin Franklin Bank and interest will be paid at Benjamin Franklin Bank’s applicable passbook savings rate, calculated from the date payment is received until the conversion is completed or terminated. Third party checks and Benjamin Franklin Bank line of credit checks may not be remitted as payment for your order, nor will wire transfers be accepted as payment. Once we receive your executed order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by [date], 2005 or the offering range is revised, in which events purchasers will be given the opportunity to increase, decrease or rescind their orders for a specified period of time.

     Using IRA Funds. Owners of self-directed IRAs may use the assets of such IRAs to purchase shares of common stock in the subscription and community offerings, provided that such IRAs are not maintained at Benjamin Franklin Bank. Persons who wish to use assets in IRAs maintained at Benjamin Franklin Bank may not authorize direct withdrawal from these accounts. They must have their IRA accounts transferred to an unaffiliated institution or broker to purchase shares of common stock in the subscription and community offerings. Assistance on how to transfer IRAs maintained at Benjamin Franklin Bank can be obtained from the Stock Information Center. If you are interested in using funds in a Benjamin Franklin Bank IRA or any other IRA to purchase common stock, contact the Stock Information Center as soon as possible, preferably at least two weeks prior to the end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institution where such funds are currently held. We cannot guarantee that you will be able to use such funds.

     Our employee stock ownership plan will not be required to pay for shares purchased in the offering until completion of the offering, provided there is a loan commitment from an unrelated financial institution or Benjamin Franklin Bancorp to lend to the employee stock ownership plan the necessary amount to fund the purchase.

     Regulations prohibit Benjamin Franklin Bank from lending funds or extending credit to any persons to purchase shares of common stock in the offering.

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     Delivery of Stock Certificates. Certificates representing shares of common stock issued in the offering and Benjamin Franklin Bank checks representing any applicable refund and/or interest on subscriptions made by personal check, money order or bank check will be mailed to the persons entitled thereto at the certificate registration address noted on the order form, as soon as practicable following completion of the offering and receipt of all necessary regulatory approvals. Any certificates returned as undeliverable will be held by the transfer agent until claimed by persons legally entitled thereto or otherwise disposed of in accordance with applicable law. Until certificates for the common stock are available and delivered to purchasers, purchasers may not be able to sell the shares of common stock which they ordered, even though the common stock will have begun trading.

Restrictions On Transfer Of Subscription Rights And Shares

     Applicable regulations and the plan of conversion prohibit any person with subscription rights, including the eligible account holders, supplemental eligible account holders, and officers, directors and employees of Benjamin Franklin Bancorp and Benjamin Franklin Bank, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. When registering your stock purchase on the order form, you should not add the name(s) of persons who have no subscription rights or who qualify only in a lower purchase priority than you do. Doing so may jeopardize your subscription rights. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering.

     We will pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

     Persons affiliated with us, including our trustees, directors and executive officers, received subscription rights based only on their deposits with Benjamin Franklin Bank as account holders. While this aspect of the offering makes it difficult, if not impossible, for insiders to purchase stock for the explicit purpose of meeting the minimum of the offering, any purchases made by persons affiliated with us for the explicit purpose of meeting the minimum of the offering must be made for investment purposes only, and not with a view towards redistribution.

Purchasers’ Consent to the Merger

     By subscribing for or purchasing shares of Benjamin Franklin Bancorp common stock in the offering, subscribers and other purchasers will be approving and consenting to the completion of the Chart Bank merger, which is expected to occur immediately following completion of the conversion. The Order Form, which each subscriber in the subscription offering and any direct community offering will be required to sign, contains an acknowledgment of such approval and consent.

Stock Information Center

     If you have any questions regarding the stock offering, you may call our Stock Information Center, toll free, at (800) 290-0793, Monday through Friday between 9:30 a.m. and 4:00 p.m., Massachusetts time. You may also visit our Stock Information Center, which is located at our headquarters, 58 Main Street, Franklin, Massachusetts. The Stock Information Center will be closed on weekends and bank holidays. Our branches will not have offering materials and cannot accept completed order forms.

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Tax Aspects Of The Conversion And The Chart Bank Acquisition

     The Conversion. Based in part upon representations of Benjamin Franklin Bank and Benjamin Franklin Bancorp, Foley Hoag LLPhas rendered its opinion regarding the material federal income tax consequences of the conversion. Foley Hoag LLP has opined that the conversion will constitute or be part of a reorganization described in Code section 368(a). As such

  (1)   neither Benjamin Franklin Bank nor Benjamin Franklin Bancorp will recognize gain or loss as a result of the conversion; and
 
  (2)   eligible account holders and supplemental eligible account holders will not recognize gain or loss upon their receipt of nontransferable subscription rights to purchase shares of Benjamin Franklin Bancorp, provided the amount to be paid for such shares is equal to fair market value of such shares.

     The Chart Bank Merger. In connection with the registration of the shares to be issued to the stockholders of Chart Bank in the Chart Bank Merger, Foley Hoag LLP, has rendered an opinion to the effect that the Chart Bank Merger will constitute or be part of a reorganization described in Section 368(a) of the Internal Revenue Code. Such opinion is based upon facts existing at the effective time of the Chart Bank Merger, and in rendering such opinion Foley Hoag LLP required and relied upon factual representations and assumptions provided by Benjamin Franklin Bancorp and Chart Bank.

     As a result of the treatment of the Chart Bank Merger as a reorganization described in Section 368(a) of the Internal Revenue Code, for federal income tax purposes none of Benjamin Franklin Bancorp, Benjamin Franklin Bank, or the shareholders of Benjamin Franklin Bancorp, will recognize any taxable gain or loss as a result of the merger.

     The foregoing opinions are also based on the Internal Revenue Code, existing and proposed Treasury Regulations and judicial and administrative determinations, as each is in effect as of the date of this registration statement. All of the foregoing are subject to change at any time, possibly with retroactive effect, and all are subject to differing interpretation. No advance ruling has been sought or obtained from the Internal Revenue Service regarding the United States federal income tax consequences of the conversion or the merger. The opinions are not binding on the Internal Revenue Service or a court. As a result, we cannot assure you that the tax consequences or such opinions will not be challenged by the Internal Revenue Service or sustained by a court if so challenged.

Accounting Treatment Of The Conversion And The Chart Bank Merger

     As a result of purchase accounting treatment, the assets and liabilities of Chart Bank will be adjusted for purposes of generally accepted accounting principles to reflect their market value to Benjamin Franklin Bancorp with any excess purchase price becoming goodwill. See “Pro Forma Data” on page [#].

THE BENJAMIN FRANKLIN BANK CHARITABLE FOUNDATION

     General.

     In furtherance of our commitment to the communities we serve, we intend to establish a new charitable foundation, the Benjamin Franklin Bank Charitable Foundation, in connection with the conversion. The plan of conversion provides that the Foundation will be established as a non-stock corporation and will be funded with an initial contribution of a number of shares of our authorized but unissued common stock in an amount up to 8.0% of the number of shares actually sold in the offering, up to a maximum of 400,000 shares. The contribution of common stock to the Benjamin Franklin Bank

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Charitable Foundation will be dilutive to the interests of stockholders and will have an adverse impact on the reported earnings of Benjamin Franklin Bancorp in 2005, the year in which the foundation is established. The contribution of the common stock to the Benjamin Franklin Bank Charitable Foundation will not be included in determining whether the minimum number of shares of common stock (4,250,000) has been sold in order to complete the offering.

Purpose of the Benjamin Franklin Bank Charitable Foundation

     The purpose of the Benjamin Franklin Bank Charitable Foundation is to provide funding to support charitable causes and community development activities in the communities we serve, including the communities in which the Chart Bank offices are located. The Benjamin Franklin Bank Charitable Foundation will be dedicated completely to community activities and the promotion of charitable causes, and may be able to support such activities in manners that are not presently available to us. We believe that the Benjamin Franklin Bank Charitable Foundation will enable us to assist the communities within our market area in areas beyond community development and lending and will enhance our current activities under the Community Reinvestment Act.

     We further believe that the funding of the Benjamin Franklin Bank Charitable Foundation with shares of Benjamin Franklin Bancorp common stock will allow our community to share in the potential growth and success of Benjamin Franklin Bank long after the conversion. The Benjamin Franklin Bank Charitable Foundation will accomplish that goal by providing for continued ties between it and Benjamin Franklin Bank, thereby forming a partnership within the communities in which Benjamin Franklin Bank operates and surrounding marketing areas.

Structure Of The Charitable Foundation

     The Benjamin Franklin Bank Charitable Foundation will be incorporated under Massachusetts law as a non-stock, nonprofit corporation. Under its Bylaws, the Benjamin Franklin Bank Charitable Foundation’s Board of Directors will be comprised of individuals that are existing or former directors or officers of Benjamin Franklin Bancorp or Benjamin Franklin Bank. The Articles of Organization of the Benjamin Franklin Bank Charitable Foundation will provide that the corporation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of the Internal Revenue Code. The Benjamin Franklin Bank Charitable Foundation’s articles of organization will further provide that no part of the net earnings of the charitable foundation will inure to the benefit of, or be distributable to, its directors, officers or members.

     The board of directors of the Benjamin Franklin Bank Charitable Foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, directors of the Benjamin Franklin Bank Charitable Foundation will at all times be bound by their fiduciary duty to advance the charitable foundation’s charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the charitable foundation is established. The directors of the Benjamin Franklin Bank Charitable Foundation also will be responsible for directing the activities of the charitable foundation, including the management and voting of the shares of common stock of Benjamin Franklin Bancorp held by the charitable foundation. However, as required by regulatory authorities, all shares of common stock held by the Benjamin

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Franklin Bank Charitable Foundation must be voted in the same ratio as all other shares of the common stock on all proposals considered by stockholders of Benjamin Franklin Bancorp.

     The Benjamin Franklin Bank Charitable Foundation’s place of business will be located at our administrative offices. The board of directors of the Benjamin Franklin Bank Charitable Foundation will appoint such officers and employees as may be necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and regulations governing transactions between Benjamin Franklin Bank and the foundation.

     The Benjamin Franklin Bank Charitable Foundation will receive working capital from:

  (1)   any dividends that may be paid on Benjamin Franklin Bancorp’s shares of common stock in the future;
 
  (2)   within the limits of applicable federal and state laws, loans collateralized by the shares of common stock; or
 
  (3)   the proceeds of the sale of any of the shares of common stock in the open market from time to time.

     As a private foundation under Section 501(c)(3) of the Internal Revenue Code, the Benjamin Franklin Bank Charitable Foundation will be required to distribute annually in grants or donations a minimum of 5.0% of the average fair market value of its net investment assets. Legislation has been introduced that, if enacted, could have the impact of increasing the charitable foundation’s required annual distribution in grants or donations. One of the conditions imposed on the gift of common stock is that the amount of common stock that may be sold by the Benjamin Franklin Bank Charitable Foundation in any one year shall not exceed 5.0% of the average market value of the assets held by the Benjamin Franklin Bank Charitable Foundation, except where the board of directors of the charitable foundation determines that the failure to sell an amount of common stock greater than such amount would result in a long-term reduction of the value of its assets and/or would otherwise jeopardize its capacity to carry out its charitable purposes.

Tax Considerations

     Our tax counsel, Foley Hoag LLP, has advised us that an organization created for the above purposes should qualify as a private foundation that is exempt from federal income tax because it is described in Section 501(c)(3) of the Internal Revenue Code. Foley Hoag LLP has not, however, rendered any advice on whether the Foundation’s ability to qualify as tax exempt will be affected by the regulatory requirement that all shares of common stock of Benjamin Franklin Bancorp held by the Foundation must be voted in the same ratio as all other outstanding shares of common stock of Benjamin Franklin Bancorp. The Foundation will submit a timely request to the Internal Revenue Service to be recognized as an exempt organization. As long as the Benjamin Franklin Bank Charitable Foundation files its application for tax-exempt status within 15 months from the date of its organization, and the Internal Revenue Service approves the application, the effective date of the Benjamin Franklin Bank Charitable Foundation’s tax exemption will be the date of its organization.

     Benjamin Franklin Bank is authorized by federal law to make charitable contributions. We believe that the conversion presents a unique opportunity to establish and fund a charitable foundation given the substantial amount of additional capital being raised. In making such a determination, we considered the dilutive impact to our stockholders of the contribution of shares of common stock to the Benjamin Franklin Bank Charitable Foundation. We believe that the contribution to the Benjamin Franklin Bank Charitable Foundation in excess of the 10.0% annual limitation on charitable deductions described below

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is justified given Benjamin Franklin Bank’s capital position and its earnings, the substantial additional capital being raised in the conversion and the potential benefits of the Benjamin Franklin Bank Charitable Foundation to our community. See “Capitalization” on page [#], “Regulatory Capital Compliance” on page [#], and “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation” on page [#]. The amount of the contribution will not adversely affect our financial condition. We therefore believe that the amount of the charitable contribution is reasonable given our pro forma capital position, and it does not raise safety and soundness concerns.

     We have received an opinion from our tax counsel that, subject to the limitations described below, our contribution of shares of our stock to the Benjamin Franklin Bank Charitable Foundation will be deductible for federal income tax purposes in an amount equal to the fair market value of the shares at the time of the contribution. Foley Hoag LLP based its opinion, in part, on factual representations provided by us, as well as on certain assumptions, including an assumption that the Benjamin Franklin Bank Charitable Foundation will qualify as a tax exempt organization described in Code section 501(c)(3). In any one year we are limited in the amount we may deduct for our charitable contributions. In particular, in any one year we may deduct as charitable contributions an aggregate amount equal to no more than 10.0% of our annual taxable income for such year. We may, however, carry forward for up to five years the value of our charitable contributions for the year that exceed 10.0% of our annual taxable income, and can deduct such excess to the extent permitted in such succeeding years. We estimate that substantially all of the value of the contribution of the shares to the Foundation should be deductible over this six-year period. However, we may not have sufficient earnings to be able to use the deduction in full. We do not expect to make any further contributions to the Foundation within the first five years following the initial contribution, unless such contributions would be deductible under the Internal Revenue Code. Any such decision would be based on an assessment of, among other factors, our financial condition at that time, the interests of our stockholders and depositors, and the financial condition and operations of the Foundation.

     Although we have received an opinion from our tax counsel that we will be entitled to a deduction for a charitable contribution to the Benjamin Franklin Bank Charitable Foundation if it is tax exempt, there can be no assurances that the Internal Revenue Service will recognize the Benjamin Franklin Bank Charitable Foundation as a tax exempt organization, nor can there be assurance that the charitable deduction will be permitted. If the Benjamin Franklin Bank Charitable Foundation does not receive recognition as a tax exempt organization or if the charitable deduction is disallowed, our contribution to the Benjamin Franklin Bank Charitable Foundation might have to be expensed for financial accounting purposes without tax benefit, resulting in a reduction in earnings for financial accounting purposes in the year in which the Internal Revenue Service makes such a determination.

     As a tax exempt organization that is classified as a private foundation, the Benjamin Franklin Bank Charitable Foundation’s income generally will be exempt from federal and state income taxation. Nevertheless, the Benjamin Franklin Bank Charitable Foundation’s investment income, such as interest, dividends and capital gains, will generally be subject to federal income taxation at a rate of 2.0% . After the Foundation’s first year, the rate of this tax on the Foundation’s net investment income could be reduced to 1.0% if certain distribution requirements are met. The Foundation will be required to file an annual return with the Internal Revenue Service within four and one-half months after the close of its fiscal year, and to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundation’s managers and a concise statement of the purpose of each grant.

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Regulatory Requirements Imposed On The Charitable Foundation

     Establishment of the Benjamin Franklin Bank Charitable Foundation is expected to be subject to the following conditions to be agreed to by the Benjamin Franklin Bank Charitable Foundation as a condition to receiving the Massachusetts Commissioner of Banks’s approval to the conversion:

  •   the foundation be dedicated to charitable purposes within certain specified communities, including the communities in which Benjamin Franklin Bank and Chart Bank currently maintain banking offices and certain contiguous communities;
 
  •   the foundation must vote its shares in the same ratio as all other holders of shares;
 
  •   the Massachusetts Division of Banks can examine the foundation;
 
  •   the foundation must comply with all supervisory directives or regulatory bulletins imposed by the Massachusetts Division of Banks;
 
  •   the foundation will operate according to written policies adopted by its board of directors, including a business plan and a conflict of interest policy;
 
  •   the foundation will provide annual reports to the Massachusetts Division of Banks describing the grants made and the grant recipients; and
 
  •   the foundation will not engage in self-dealing and shall comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code.

     The Benjamin Franklin Bank Charitable Foundation will also need to comply with the requirement that the establishment and funding of the Benjamin Franklin Bank Charitable Foundation be approved by: (1) a majority vote of Benjamin Franklin Bancorp’s corporators present and voting at a special meeting called for such purpose; and (2) the majority vote of all “independent” corporators (who shall not constitute less than sixty percent (60%) of all corporators eligible to vote) present and voting at a special meeting called for such purpose.

     Finally, the Federal Reserve Board required that Benjamin Franklin Bancorp make the following commitments in connection with the Benjamin Franklin Bank Charitable Foundation:

  •   The Foundation will be considered an affiliate of Benjamin Franklin Bank for purposes of sections 23A and 23B of the Federal Reserve Act.
 
  •   Benjamin Franklin Bancorp will notify the Federal Reserve Board should its direct or indirect ownership in a company, when aggregated with the ownership position of Foundation, exceed 5% of the outstanding shares of any class of voting securities of the company.
 
  •   At its organizational meeting, the Benjamin Franklin Bank Foundation will adopt a resolution requiring prior approval of the Federal Reserve Board for acquisitions of Benjamin Franklin Bancorp stock. The resolution will contain an exception for transactions affecting one or more classes of Benjamin Franklin Bancorp shareholders generally (e.g., stock splits and stock dividends), and also provide that any gifts of Benjamin Franklin Bancorp stock will be promptly sold.

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foundation may, however, materially increase the pro forma market value of Benjamin Franklin Bancorp. See “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation” on page [#].

FEDERAL AND STATE TAXATION OF

BENJAMIN FRANKLIN BANCORP AND BENJAMIN FRANKLIN BANK

Federal Taxation

     General. Benjamin Franklin Bancorp and Benjamin Franklin Bank will be subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. Benjamin Franklin Bancorp’s federal income tax returns are not currently under audit and have not been audited during the past five years. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Benjamin Franklin Bancorp.

     Bad Debt Reserves. Benjamin Franklin Bank is permitted to establish a reserve for bad debts and to make annual additions to the reserve. These additions can, within specified formula limits, be deducted in connection with the calculation of Benjamin Franklin Bank’s taxable income. Pursuant to the Small Business Protection Act of 1996, savings institutions were required to recapture (over a six year period) of the excess of tax bad debt reserves accumulated after December 31, 1987.

     Taxable Distributions and Recapture. Prior to the Small Business Protection Act of 1996, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income should Benjamin Franklin Bank fail to meet certain thrift asset and definitional tests. New federal legislation eliminated these thrift related recapture rules. However, under current law, pre-1988 reserves remain subject to recapture should Benjamin Franklin Bank make certain non-dividend distributions, pay dividends in excess of earnings and profits or cease to maintain a bank charter. At September 30, 2004, Benjamin Franklin Bank’s total federal pre-1988 reserve was $3.1 million. This reserve reflects the cumulative effects of federal tax deductions by Benjamin Franklin Bank for which no federal income tax provision has been made.

     Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax (AMT) at a rate of 20.0% on a base of regular taxable income plus certain tax preferences, (the alternative minimum taxable income or AMTI). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90.0% of AMTI. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Benjamin Franklin Bank has not been subject to the alternative minimum tax and has no such amounts available as credits for carryover.

     Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At September 30, 2004, Benjamin Franklin Bank had no net operating loss carryforwards for federal income tax purposes.

     Capital Loss Carryovers. A financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. At September 30, 2004, Benjamin Franklin Bank had $6.7 million in capital loss carryforwards for federal income tax purposes which expire on December 31, 2006.

     Corporate Dividends-Received Deduction. Benjamin Franklin Bancorp may exclude from its income 100.0% of dividends received from Benjamin Franklin Bank since they are both members of the same affiliated group of corporations.

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State Taxation

     For Massachusetts income tax purposes, a consolidated return cannot be filed. Instead, each entity files separate annual income tax returns. Benjamin Franklin Bancorp’s state tax returns, as well as those of its subsidiaries, are not currently under audit and have not been audited during the past five years.

     In 1995, legislation was enacted to reduce the Massachusetts bank excise (income) tax rate and to allow Massachusetts-based financial institutions to apportion income earned in other states. Further, this legislation expanded the applicability of the tax to non-bank entities and out-of-state financial institutions. The Massachusetts excise tax rate for savings banks is currently 10.5% of federal taxable income, adjusted for certain items. Taxable income includes gross income as defined under the Internal Revenue Code, plus interest from bonds, notes and evidences of indebtedness of any state, including Massachusetts, less deductions, but not the credits, allowable under the provisions of the Internal Revenue Code, except for those deductions relating to dividends received and income or franchise taxes imposed by a state or political subdivision. Carryforwards and carrybacks of net operating losses are not allowed.

     A financial institution or business corporation is generally entitled to special tax treatment as a “security corporation” under Massachusetts law provided that: (a) its activities are limited to buying, selling, dealing in or holding securities on its own behalf and not as a broker; and (b) it has applied for, and received, classification as a “security corporation” by the Commissioner of the Massachusetts Department of Revenue. A security corporation that is also a bank holding company under the Code must pay a tax equal to 0.33% of its gross income. A security corporation that is not a bank holding company under the Code must pay a tax equal to 1.32% of its gross income. Benjamin Franklin Bancorp is considering whether to seek to qualify as a security corporation. To do so, it would need to (a) apply for, and receive, security corporation classification by the Massachusetts Department of Revenue; and (b) not conduct any activities deemed impermissible under the governing statutes and the various regulations, directives, letter rulings and administrative pronouncements issued by the Massachusetts Department of Revenue. If it decides to seek such qualification, it would establish a subsidiary for the purpose of making the loan to the employee stock ownership plan, since making such a loan directly could disqualify it from classification as a security corporation.

REGULATION AND SUPERVISION

General

     Benjamin Franklin Bank is a Massachusetts-chartered stock savings bank and a wholly owned subsidiary of Benjamin Franklin Bancorp. Benjamin Franklin Bank’s deposits are insured up to applicable limits by the FDIC through the Bank Insurance Fund and by the Depositors Insurance Fund of the Deposit Insurance Fund of Massachusetts for amounts in excess of the FDIC insurance limits. Benjamin Franklin Bank is subject to extensive regulation by the Massachusetts Division of Banks, as its chartering agency, and by the FDIC, as its deposit insurer. Benjamin Franklin Bank is required to file reports with, and is periodically examined by, the FDIC and the Massachusetts Division of Banks concerning its activities and financial condition and must obtain regulatory approvals prior to entering into certain transactions, including, but not limited to, mergers with or acquisitions of other savings institutions. Benjamin Franklin Bank is a member of the Federal Home Loan Bank and is subject to certain limited regulation by the Federal Reserve Board.

     Benjamin Franklin Bancorp, as a bank holding company, is subject to regulation by the Federal Reserve Board and is required to file reports with the Federal Reserve Board.

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Massachusetts Bank Regulation

     General. As a Massachusetts-chartered savings bank, Benjamin Franklin Bank is subject to supervision, regulation and examination by the Massachusetts Division of Banks and to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends. In addition, Benjamin Franklin Bank is subject to Massachusetts consumer protection and civil rights laws and regulations. The Massachusetts Commissioner of Banks’s approval is required for a Massachusetts bank to establish or close branches, merge with other banks, organize a holding company, issue stock and undertake certain other activities.

     In response to a Massachusetts law enacted in 1996, the Massachusetts Commissioner of Banks adopted rules that generally give Massachusetts banks powers equivalent to those of national banks. The Commissioner also has adopted procedures reducing regulatory burdens and expense and expediting branching by well-capitalized and well-managed banks.

     Investment Activities. In general, Massachusetts-chartered savings banks may invest in preferred and common stock of any corporation organized under the laws of the United States or any state provided such investments do not involve control of any corporation and do not, in the aggregate, exceed 4.0% of the bank’s deposits. Massachusetts-chartered savings banks may in addition invest an amount equal to 1.0% of their deposits in stocks of Massachusetts corporations or companies with substantial employment in the commonwealth which have pledged to the Massachusetts Commissioner of Banks that such monies will be used for further development within the Commonwealth. See also “—Federal Regulation—Investment Activities” on page [#] for federal restrictions on equity investments. At the present time, Benjamin Franklin Bank does not have authority to invest in equity securities.

     Lending Activities. Massachusetts banking laws grant banks broad lending authority. However, with certain limited exceptions, total obligations of one borrower to a stock bank may not exceed 20.0% of the total of the capital stock, surplus account and undivided profits (for banks with capital of at least $500,000) and may not exceed 20.0% of the capital stock or 10.0% of the total of the capital stock, surplus account and undivided profits, whichever is greater (for all other banks).

     Dividends. A Massachusetts stock bank may declare from net profits cash dividends not more frequently than quarterly and non-cash dividends at any time. No dividends may be declared, credited or paid if the bank’s capital stock is impaired. The approval of the Massachusetts Commissioner of Banks is required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained net profits of the preceding two years. Net profits for this purpose means the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal and state taxes.

     Regulatory Enforcement Authority. Any Massachusetts bank that does not operate in accordance with the regulations, policies and directives of the Massachusetts Commissioner of Banks may be subject to sanctions for non-compliance, including seizure of the property and business of the bank and suspension or revocation of its charter. The Massachusetts Commissioner of Banks may under certain circumstances suspend or remove officers or directors who have violated the law, conducted the bank’s business in a manner which is unsafe, unsound or contrary to the depositors’ interests or been negligent in the performance of their duties. In addition, upon finding that a bank has engaged in an unfair or deceptive act or practice, the Massachusetts Commissioner of Banks may issue an order to cease and desist and impose a fine on the bank concerned. Finally, Massachusetts consumer protection and civil rights statutes applicable to Benjamin Franklin Bank permit private individual and class action law suits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damages and attorneys’ fees in the case of certain violations or those statutes.

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     Insurance Sales. Massachusetts banks may engage in insurance sales activities if the Massachusetts Commissioner of Banks has approved its plan of operation for insurance activities and it obtains a license from the Massachusetts Division of Insurance. A bank may be licensed directly or indirectly through an affiliate or a subsidiary corporation established for this purpose.

     DIF. All Massachusetts-chartered savings banks are required to be members of the Deposit Insurance Fund of the Depositors Insurance Fund of Massachusetts, a corporation that insures savings bank deposits in excess of federal deposit insurance coverage. The DIF is authorized to charge savings banks an annual assessment of up to 1/50th of 1.0% of a savings bank’s deposit balances in excess of amounts insured by the FDIC.

Federal Regulations

     Capital Requirements. Under FDIC regulations, federally insured state-chartered banks that are not members of the Federal Reserve System (“state non-member banks”), such as Benjamin Franklin Bank and Chart Bank, are required to comply with minimum leverage capital requirements. For an institution determined by the FDIC to not be anticipating or experiencing significant growth and to be, in general, a strong banking organization rated composite 1 under the Uniform Financial Institutions Ranking System established by the Federal Financial Institutions Examination Council, the minimum capital leverage requirement is a ratio of Tier 1 capital to total assets of 3.0%. For all other institutions, the minimum leverage capital ratio is not less than 4.0%. Tier 1 capital is the sum of common stockholders’ equity, noncumulative perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less intangible assets (except for certain servicing rights and credit card relationships) and certain other specified items.

     The FDIC regulations require state non-member banks to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of regulatory capital to regulatory risk-weighted assets is referred to as a bank’s “risk-based capital ratio.” Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items (including recourse obligations, direct credit substitutes and residual interests) to four risk-weighted categories ranging from 0.0% to 100.0%, with higher levels of capital being required for the categories perceived as representing greater risk. For example, under the FDIC’s risk-weighting system, cash and securities backed by the full faith and credit of the U.S. government are given a 0.0% risk weight, loans secured by one- to four-family residential properties generally have a 50.0% risk weight, and commercial loans have a risk weighting of 100.0%.

     State non-member banks must maintain a minimum ratio of total capital to risk-weighted assets of at least 8.0%, of which at least one-half must be Tier 1 capital. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock and certain other capital instruments, and a portion of the net unrealized gain on equity securities. The includable amount of Tier 2 capital cannot exceed the amount of the institution’s Tier 1 capital. Banks that engage in specified levels of trading activities are subject to adjustments in their risk based capital calculation to ensure the maintenance of sufficient capital to support market risk.

     The Federal Deposit Insurance Corporation Improvement Act (the “FDICIA”) required each federal banking agency to revise its risk-based capital standards for insured institutions to ensure that those standards take adequate account of interest-rate risk, concentration of credit risk, and the risk of nontraditional activities, as well as to reflect the actual performance and expected risk of loss on multi- family residential loans. The FDIC, along with the other federal banking agencies, has adopted a regulation providing that the agencies will take into account the exposure of a bank’s capital and economic value to changes in interest rate risk in assessing a bank’s capital adequacy. The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination

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that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances.

     As a bank holding company, Benjamin Franklin Bancorp is subject to capital adequacy guidelines for bank holding companies similar to those of the FDIC for state-chartered banks. On a pro forma consolidated basis, after the offering, Benjamin Franklin Bancorp’s pro forma stockholders’ equity will exceed these requirements.

     Standards for Safety and Soundness. As required by statute, the federal banking agencies adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness to implement safety and soundness standards. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit system, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. Most recently, the agencies have established standards for safeguarding customer information. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

     Investment Activities. Since the enactment of FDICIA, all state-chartered FDIC insured banks, including savings banks, have generally been limited in their investment activities to principal and equity investments of the type and in the amount authorized for national banks, notwithstanding state law. FDICIA and the FDIC permit exceptions to these limitations. For example, state chartered banks may, with FDIC approval, continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange or the Nasdaq National Market and in the shares of an investment company registered under the Investment Company Act of 1940, as amended. The maximum permissible investment is 100.0% of Tier 1 Capital, as specified by the FDIC’s regulations, or the maximum amount permitted by Massachusetts law, whichever is less. Chart Bank received grandfathered authority from the FDIC to invest in listed stock and/or registered shares. Benjamin Franklin does not currently have authority to invest in equity securities. Such grandfathered authority may be terminated upon the FDIC’s determination that such investments pose a safety and soundness risk. In addition, the FDIC is authorized to permit such institutions to engage in state authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if they meet all applicable capital requirements and it is determined that such activities or investments do not pose a significant risk to the Bank Insurance Fund. The FDIC has adopted revisions to its regulations governing the procedures for institutions seeking approval to engage in such activities or investments. The Gramm-Leach-Bliley Act of 1999 specifies that a nonmember bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a “financial subsidiary” if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes.

     Interstate Banking and Branching. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, or the Interstate Banking Act, permits adequately capitalized bank holding companies to acquire banks in any state subject to specified concentration limits and other conditions. The Interstate Banking Act also authorizes the interstate merger of banks. In addition, among other things, the Interstate Banking Act permits banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state.

     Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized

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     The FDIC has adopted regulations to implement the prompt corrective action legislation. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater and a leverage ratio of 5.0% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, and generally a leverage ratio of 4.0% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or generally a leverage ratio of less than 4.0%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0%, or a leverage ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. As of September 30, 2004, Benjamin Franklin Bank and Chart Bank were “well capitalized” institutions.

     “Undercapitalized” banks must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. A bank’s compliance with such a plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

     Transactions with Affiliates. Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. In a holding company context, the parent bank holding company and any companies which are controlled by such parent holding company are affiliates of the bank. Generally, Sections 23A and 23B of the Federal Reserve Act (i) limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of such institution’s capital stock and surplus, and contain an aggregate limit on all such transactions with all affiliates to an amount equal to 20.0% of such institution’s capital stock and surplus and (ii) require that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and other similar transactions. In addition, loans or other extensions of credit by the financial institution to the affiliate are required to be collateralized in accordance with the requirements set forth in Section 23A of the Federal Reserve Act.

     The Gramm-Leach-Bliley Act amended several provisions of section 23A and 23B of the Federal Reserve Act. The amendments provide that so-called “financial subsidiaries” of banks are treated as affiliates for purposes of sections 23A and 23B of the Federal Reserve Act, but the amendment provides that (i) the 10.0% capital limit on transactions between the bank and such financial subsidiary as an affiliate is not applicable, and (ii) the investment by the bank in the financial subsidiary does not include retained earnings in the financial subsidiary. Certain anti-evasion provisions have been included that relate to the relationship between any financial subsidiary of a bank and sister companies of the bank: (1) any purchase of, or investment in, the securities of a financial subsidiary by any affiliate of the parent bank is considered a purchase or investment by the bank; or (2) if the Federal Reserve Board determines

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that such treatment is necessary, any loan made by an affiliate of the parent bank to the financial subsidiary is to be considered a loan made by the parent bank.

     Effective April 1, 2003, the Federal Reserve Board adopted Regulation W that deals with the provisions of Sections 23A and 23B. The regulation unifies and updates staff interpretations issued over the years, incorporates several new interpretations and provisions (such as to clarify when transactions with an unrelated third party will be attributed to an affiliate), and addresses new issues arising as a result of the expanded scope of nonbanking activities engaged in by banks and bank holding companies in recent years and authorized for financial holding companies under the Gramm-Leach-Bliley Act.

     In addition, Sections 22(h) and (g) of the Federal Reserve Act place restrictions on loans to executive officers, directors and principal stockholders. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% stockholder of a financial institution, and certain affiliated interests of these, may not exceed, together with all other outstanding loans to such person and affiliated interests, the financial institution’s loans to one borrower limit, generally equal to 15.0% of the institution’s unimpaired capital and surplus. Section 22(h) of the Federal Reserve Act also requires that loans to directors, executive officers and principal stockholders be made on terms substantially the same as offered in comparable transactions to other persons and also requires prior board approval for certain loans. In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus. Furthermore, Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers.

     Enforcement. The FDIC has extensive enforcement authority over insured savings state banks, including Benjamin Franklin Bank and Chart Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices. The FDIC has authority under Federal law to appoint a conservator or receiver for an insured bank under limited circumstances. The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an insured state non-member bank if that bank was “critically undercapitalized” on average during the calendar quarter beginning 270 days after the date on which the institution became “critically undercapitalized.” The FDIC may also appoint itself as conservator or receiver for an insured state non-member institution under specific circumstances on the basis of the institution’s financial condition or upon the occurrence of other events, including: (1) insolvency; (2) substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) existence of an unsafe or unsound condition to transact business; and (4) insufficient capital, or the incurring of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment without federal assistance.

     Insurance of Deposit Accounts. The FDIC has adopted a risk-based insurance assessment system. The FDIC assigns an institution to one of three capital categories based on the institution’s financial condition consisting of (1) well capitalized, (2) adequately capitalized or (3) undercapitalized, and one of three supervisory subcategories within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation provided to the FDIC by the institution’s primary federal regulator and information which the FDIC determines to be relevant to the institution’s financial condition and the risk posed to the deposit insurance funds. An institution’s assessment rate depends on the capital category and supervisory category to which it is assigned. Assessment rates for insurance fund deposits currently range from 0 basis points for the strongest institution to 27 basis points for the weakest. Bank Insurance Fund members are also required to assist in the repayment of bonds issued by the Financing Corporation in the late 1980’s to recapitalize the Federal Savings and Loan Insurance Corporation. For the nine months ended September 30, 2004 and 2003, the total FDIC assessment was $45,958 and $45,157, respectively, for Benjamin Franklin Bank, and $19,445 and $18,540, respectively for Chart Bank. The FDIC is authorized to raise the assessment rates. The FDIC has

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exercised this authority several times in the past and may raise insurance premiums in the future. If such action is taken by the FDIC, it could have an adverse effect on the earnings of Benjamin Franklin Bank.

     The FDIC may terminate insurance of deposits if it finds that the institution is in an unsafe or unsound condition to continue operations, has engaged in unsafe or unsound practices, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The managements of Benjamin Franklin Bank and Chart Bank do not know of any practice, condition or violation that might lead to termination of deposit insurance.

Federal Reserve System

     The Federal Reserve Board regulations require depository institutions to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve Board regulations generally require that reserves be maintained against aggregate transaction accounts as follows: for that portion of transaction accounts aggregating $42.1 million or less (which may be adjusted by the Federal Reserve Board) the reserve requirement is 3.0%; and for amounts greater than $42.1 million, 10.0% (which may be adjusted by the Federal Reserve Board between 8.0% and 14.0%), against that portion of total transaction accounts in excess of $42.1 million. The first $6.0 million of otherwise reservable balances (which may be adjusted by the Federal Reserve Board) are exempted from the reserve requirements. Benjamin Franklin Bank and Chart Bank are in compliance with these requirements.

Federal Home Loan Bank System

     Benjamin Franklin Bank and Chart Bank are members of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions. Members of the Federal Home Loan Bank are required to acquire and hold shares of capital stock in the Federal Home Loan Bank in an amount at least equal to 1.0% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of its advances (borrowings) from the Federal Home Loan Bank, whichever is greater. Benjamin Franklin Bank was in compliance with this requirement with an investment in Federal Home Loan Bank stock at September 30, 2004 of $4.3 million. At September 30, 2004, Benjamin Franklin Bank had $75.0 million in Federal Home Loan Bank advances. Chart Bank was in compliance with this requirement with such an investment at September 30, 2004 of $1.7 million. At September 30, 2004, Chart Bank had $22.0 million in Federal Home Loan Bank advances.

     The Federal Home Loan Banks are required to provide funds for certain purposes including the resolution of insolvent thrifts in the late 1980s and to contributing funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. If dividends were reduced, or interest on future Federal Home Loan Bank advances increased, a member bank affected by such reduction or increase would likely experience a reduction in its net interest income. Recent legislation has changed the structure of the Federal Home Loan Banks’ funding obligations for insolvent thrifts, revised the capital structure of the Federal Home Loan Banks and implemented entirely voluntary membership for Federal Home Loan Banks. For the nine months ended September 30, 2004 and 2003, cash dividends from the Federal Home Loan Bank to Benjamin Franklin Bank amounted to approximately $87,000 and $72,000, respectively, and to Chart Bank, approximately $22,917 and $24,149. There can be no assurance that such dividends will continue in the future. Further, there can be no assurance that the impact of recent or future legislation on the Federal Home Loan Banks also will not cause a decrease in the value of the Federal Home Loan Bank stock held by Benjamin Franklin Bank and Chart Bank.

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Holding Company Regulation

     General. As a bank holding company, Benjamin Franklin Bancorp is subject to comprehensive regulation and regular examinations by the Federal Reserve Board. The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

     As a bank holding company, Benjamin Franklin Bancorp must obtain the approval of the Federal Reserve Board before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5.0% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or (iii) merging or consolidating with another bank holding company. In addition, Benjamin Franklin Bancorp must obtain the approval of the Massachusetts Board of Bank Incorporation before becoming a “bank holding company” for Massachusetts law purposes. Under Massachusetts law, a bank holding company is generally defined as a company that directly or indirectly owns, controls or holds with power to vote 25.0% of the voting stock of each of two or more banking institutions.

     Under Federal Reserve Board policy, a bank holding company must serve as a source of strength for its subsidiary bank. Under this policy, the Federal Reserve Board may require, and has required in the past, a holding company to contribute additional capital to an undercapitalized subsidiary bank.

     The Banking Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5.0% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by Federal Reserve Board regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks. The list of activities permitted by the Federal Reserve Board includes, among other things: (i) operating a savings institution, mortgage company, finance company, credit card company or factoring company; (ii) performing certain data processing operations; (iii) providing certain investment and financial advice; (iv) underwriting and acting as an insurance agent for certain types of credit-related insurance; (v) leasing property on a full-payout, non-operating basis; (vi) selling money orders, travelers’ checks and United States Savings Bonds; (vii) real estate and personal property appraising; (viii) providing tax planning and preparation services; (ix) financing and investing in certain community development activities; and (x) subject to certain limitations, providing securities brokerage services for customers. Benjamin Franklin Bancorp has no present plans to engage in any of these activities.

     Dividends. The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Board’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve Board also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve Board, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” See “Regulatory Capital Compliance” on page [#].

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     Bank holding companies are required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10.0% or more of the consolidated net worth of the bank holding company. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve Board order or any condition imposed by, or written agreement with, the Federal Reserve Board. This notification requirement does not apply to any company that meets the well-capitalized standard for commercial banks, is “well managed” within the meaning of the Federal Reserve Board regulations and is not subject to any unresolved supervisory issues.

     Financial Modernization. The Gramm-Leach-Bliley Act permits greater affiliation among banks, securities firms, insurance companies, and other companies under a type of financial services company known as a “financial holding company.” A financial holding company essentially is a bank holding company with significantly expanded powers. Financial holding companies are authorized by statute to engage in a number of financial activities previously impermissible for bank holding companies, including securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; and merchant banking activities. The act also permits the Federal Reserve Board and the Treasury Department to authorize additional activities for financial holding companies if they are “financial in nature” or “incidental” to financial activities. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized, well managed, and has at least a “satisfactory” Community Reinvestment Act rating. A financial holding company must provide notice to the Federal Reserve Board within 30 days after commencing activities previously determined by statute or by the Federal Reserve Board and Department of the Treasury to be permissible. Benjamin Franklin Bancorp has not submitted notice to the Federal Reserve Board of its intent to be deemed a financial holding company. However, it is not precluded from submitting a notice in the future should it wish to engage in activities only permitted to financial holding companies.

Miscellaneous Regulation

     Community Reinvestment Act. Under the Community Reinvestment Act (CRA), as amended as implemented by FDIC regulations, a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA does require the FDIC, in connection with its examination of a bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions. The CRA requires the FDIC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. Benjamin Franklin Bank’s latest FDIC CRA rating was “satisfactory.” Chart Bank’s most recent CRA rating was “satisfactory.”

     Massachusetts has its own statutory counterpart to the CRA which is also applicable to Benjamin Franklin Bank and Chart Bank. The Massachusetts version is generally similar to the CRA but utilizes a five-tiered descriptive rating system. Massachusetts law requires the Massachusetts Commissioner of Banks to consider, but not be limited to, a bank’s record of performance under Massachusetts law in considering any application by the bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution. Benjamin Franklin Bank’s most recent rating under Massachusetts law was “high satisfactory” and Chart Bank’s was “satisfactory.”

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     Consumer Protection And Fair Lending Regulations. Massachusetts savings banks are subject to a variety of federal and Massachusetts statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit. These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief. Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations.

DESCRIPTION OF CAPITAL STOCK OF BENJAMIN FRANKLIN BANCORP

General

     Upon completion of the conversion, Benjamin Franklin Bancorp will be authorized to issue up to 75 million shares of common stock. As of the date of this Prospectus, none of these shares has been issued. Benjamin Franklin Bancorp currently expects to issue between 4,250,000 and 5,750,000 shares of common stock in the conversion, with an adjusted maximum of 6,612,500 shares, and 2,401,575 shares of common stock in the merger (based on 1,420,000 outstanding shares of Chart Bank common stock, which is exclusive of options to purchase 137,000 shares of Chart Bank common stock outstanding as of Sept. 30, 2004).

Benjamin Franklin Bancorp Common Stock

     General. Each issued and outstanding share of Benjamin Franklin Bancorp common stock will have the same rights as, and will be identical in all respects with, each other share of common stock. Upon payment of the purchase price for the conversion shares in accordance with the plan of conversion, and upon issuance of the exchange shares in accordance with the provisions of the merger agreement, all such shares will be duly authorized, fully paid, validly issued and non-assessable.

     Voting Rights. Each holder of Benjamin Franklin Bancorp common stock will be entitled to one vote for each share of common stock held. Holders of common stock will not have cumulative voting rights in connection with the election of directors.

     Dividends. Holders of Benjamin Franklin Bancorp common stock will be entitled to receive and share equally in such dividends as the board of directors of Benjamin Franklin Bancorp may declare out of funds legally available for such payments. If Benjamin Franklin Bancorp issues preferred stock, holders of such stock may have a priority over holders of common stock with respect to the payment of dividends. See “ — Preferred Stock” on page [#]. State and federal laws and regulations place limitations on the payment of dividends. See “Our Policy Regarding Dividends” on page [#].

     Liquidation or Dissolution. In the event of a liquidation or dissolution of Benjamin Franklin Bancorp, holders of Benjamin Franklin Bancorp common stock will be entitled to receive, after payment or provision for payment of all debts and liabilities of Benjamin Franklin Bancorp (including all deposits in Benjamin Franklin Bank and accrued interest thereon) and after distribution of the liquidation account established upon the completion of the conversion for the benefit of eligible account holders and supplemental eligible account holders who continue their deposit accounts at Benjamin Franklin Bank, all assets of Benjamin Franklin Bancorp available for distribution. If Benjamin Franklin Bancorp issues preferred stock, holders of such stock may have a senior interest over holders of common stock in such a distribution.

     No Preemptive or Redemption Rights. Holders of Benjamin Franklin Bancorp common stock will not have preemptive rights with respect to any shares of the capital stock of Benjamin Franklin

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Bancorp that may be issued. Shares of Benjamin Franklin Bancorp common stock will not be subject to call for redemption.

Preferred Stock

     Benjamin Franklin Bancorp’s board of directors may, without stockholder approval but subject to certain regulatory approvals, reclassify any unissued shares of common stock into one or more series of preferred stock and designate and issue one or more series of preferred stock, establish the number of shares in each such series, fix and state the voting powers, designations, preferences and the relative or special rights or privileges of the shares of any series so established and the qualifications thereon without further vote or action by the stockholders.

     Any issuance of preferred stock could have an adverse effect on the voting and other rights of holders of common stock. Each series of preferred stock issued after the conversion may rank senior to shares of common stock with respect to dividend rights and liquidation preferences, may have full, limited or no voting rights and may be convertible into shares of common stock.

RESTRICTIONS ON ACQUISITION OF BENJAMIN FRANKLIN BANCORP
AND BENJAMIN FRANKLIN BANK

General

     Benjamin Franklin Bancorp’s articles of organization and by-laws, which will become effective upon completion of the conversion, contain certain provisions relating to corporate governance and rights of stockholders that might discourage future takeover attempts by impeding efforts to acquire Benjamin Franklin Bancorp or stock purchases in furtherance of such an acquisition. Such provisions will also make it more difficult to remove the board and Benjamin Franklin Bancorp’s management. Certain state and federal laws and Benjamin Franklin Bank’s employee stock ownership plan could have a similar effect.

     Although the board of directors of Benjamin Franklin Bank and the board of trustees of Benjamin Franklin Bancorp are not aware of any effort that might be made to obtain control of Benjamin Franklin Bancorp following the conversion, the boards believe, as discussed below, that it is appropriate to include certain provisions in the articles of organization and by-laws to protect the interests of Benjamin Franklin Bancorp and its stockholders from takeovers that the board might conclude are not in the best interest of Benjamin Franklin Bank, Benjamin Franklin Bancorp or Benjamin Franklin Bancorp’s stockholders.

     These provisions will also increase protections available to Benjamin Franklin Bancorp against transactions that, although not resulting in an acquisition of a majority of Benjamin Franklin Bancorp’s capital stock, nevertheless may harm Benjamin Franklin Bancorp and its stockholders by disrupting Benjamin Franklin Bank’s operations and management and by causing Benjamin Franklin Bancorp to incur substantial expenses.

     The following is a general summary of the material provisions of Benjamin Franklin Bancorp’s articles and by-laws and of certain provisions of the employee stock ownership plan and certain laws that may have an “anti-takeover” effect. The descriptions are necessarily general and, with respect to provisions contained in the articles and by-laws, reference should be made to the document in question, each of which is part of Benjamin Franklin Bancorp’s application to the Massachusetts Commissioner of Banks and Registration Statement on Form S-1 filed with the SEC. See “Additional Information” on page [#].

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Certain Provisions of Benjamin Franklin Bancorp’s Articles and By-Laws and the Massachusetts Business Corporation Law

     Directors. The articles of organization and by-laws of Benjamin Franklin Bancorp contain certain provisions that may make it difficult to change majority control of Benjamin Franklin Bancorp’s board of directors. The Massachusetts Business Corporation Act also contains provisions similar to certain of the provisions of the articles, as described below.

     Benjamin Franklin Bancorp’s articles, as well as Section 8.06(b) of the Massachusetts Business Corporation Act, require that Benjamin Franklin Bancorp have three classes of directors elected for three-year staggered terms, so that ordinarily no more than approximately one-third of Benjamin Franklin Bancorp’s directors will stand for election in any one year. Thus, it would take two annual elections to replace a majority of Benjamin Franklin Bancorp’s board. The stockholders do not have cumulative voting rights in the election of directors.

     Benjamin Franklin Bancorp’s articles, as well as Section 8.06(e) of the Massachusetts Business Corporation Act, also provide that any vacancy occurring in the board of directors, including vacancies resulting from an increase in the number of directors, may be filled only by a vote of a majority of the directors (even if such directors do not constitute a quorum). The articles further provide that if, at the time a board vacancy occurs, there is an interested stockholder, the vacancy may be filled only by vote of a majority of the independent directors then in office. Since Section 8.06(e) does not include a similar provision requiring the vote of the independent directors if there is an interested stockholder, this provision of the articles will not be effective unless the board of directors or the shareholders by a two-thirds vote elect to opt out of Section 8.06(b) of the Massachusetts Business Corporation Act. In addition, the by-laws impose certain advance notice and informational requirements on the nomination by stockholders of candidates for election to the board of directors. See “—Certain Provisions of Benjamin Franklin Bancorp’s Articles and By-laws—Stockholder Proposals and Director Nominations” on page [#].

     Finally, Benjamin Franklin Bancorp’s articles, as well as Section 8.06(d) of the Massachusetts Business Corporation Act, provide that directors may be removed only for cause and only by the shareholders. The articles require a two-thirds vote of the shareholders to remove a director, while Section 8.06(d) requires only a majority vote of the shareholders. The majority vote provision contained in Section 8.06(d) will govern (rather than the two-thirds vote provision contained in the articles) unless the board of directors or the shareholders by a two-thirds vote elect to opt out of Section 8.06(b) of the Massachusetts Business Corporation Act.

     The board of directors has not elected to opt out of 8.06(b) of the Massachusetts Business Corporation Act, but it could choose to do so at any time.

     Definitions of “independent director” and “interested stockholder” appear in the last subsection of “—Certain Provisions of Benjamin Franklin Bancorp’s Articles and By-laws” on page [#].

     Meetings of Stockholders. The articles and by-laws provide that a special meeting of stockholders may be called at any time by the president, a majority of the directors then in office (unless at the time there is an interested shareholder, in which case such call by the board of directors shall also require the affirmative vote of a majority of the independent directors then in office), or by the secretary upon the written request of one or more stockholders who hold at least 80% in interest of the capital stock entitled to vote at such meeting. Only those matters set forth in the call of the special meeting may be considered or acted upon at such meeting, unless otherwise provided by law. With respect to annual meetings of stockholders, the by-laws impose certain advance notice and informational requirements for any business that a stockholder may wish to propose for consideration at such a meeting. See “—Certain Provisions of Benjamin Franklin Bancorp’s Articles and By-laws—Stockholder Proposals and Director

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Nominations” on page [#]. The by-laws provide that any action by the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to such action in writing.

     Authorized Stock. The articles authorize the board of directors to issue any of the 75 million shares of Benjamin Franklin Bancorp common stock not issued in the conversion and the merger that are authorized but unissued. The board of directors may, without stockholder approval but subject to certain regulatory approvals, reclassify any unissued shares of common stock into one or more series of preferred stock and designate and issue one or more series of preferred stock, establish the number of shares in each such series, fix and state the voting powers, designations, preferences and the relative or special rights or privileges of the shares of any series so established and the qualifications thereon without further vote or action by the stockholders. In the event of a proposed merger, tender offer or other attempt to gain control of Benjamin Franklin Bancorp that the board of directors does not approve, it might be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that might impede the completion of such a transaction. Benjamin Franklin Bancorp has no present plans or understandings for the issuance of any shares of preferred stock.

     Vote Required to Approve Business Combinations Involving Interested Stockholders. The articles contain a so-called “fair price” provision pursuant to which certain mergers, acquisitions, stock issuances, dispositions of assets, liquidations or recapitalizations (these transactions are referred to as “business combinations”) involving an interested stockholder and Benjamin Franklin Bancorp or any subsidiary would require stockholder approval by the affirmative vote of holders of at least 75.0% of the outstanding shares of Benjamin Franklin Bancorp entitled to vote in elections of directors. The 75.0% vote is not required if the business combination is approved by two-thirds of the independent directors then in office or if certain procedures and price requirements are met. An affirmative vote of the holders of at least 75.0% of the outstanding voting stock is required to amend or repeal, or adopt any provisions inconsistent with, the fair price provision.

     Vote Required for Certain Transactions. The articles further provide that, unless a higher percentage vote is required by law or the fair price provision of the articles, any

  •   sale, lease or exchange of all or substantially all of Benjamin Franklin Bancorp’s property or assets, including goodwill, or
 
  •   the merger, share exchange or consolidation of Benjamin Franklin Bancorp with or into any other entity

must be approved by an affirmative vote of at least two-thirds of the total votes that may be cast by Benjamin Franklin Bancorp’s stockholders on such a transaction. However, only a majority vote of Benjamin Franklin Bancorp’s stockholders is necessary if the transaction has been recommended to the stockholders for approval by two-thirds of the directors then in office (unless there is an interested stockholder, in which case the recommendation to stockholders must also be approved by the vote of a majority of the independent directors then in office).

     Restrictions on Acquisitions of Securities. The articles provide that, for a period of five years following the date of completion of Benjamin Franklin Bancorp’s conversion from mutual to stock form, no person may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10.0% of the issued and outstanding voting stock of Benjamin Franklin Bancorp. Shares acquired in excess of this limitation will not be entitled to vote or to take other stockholder action or to be counted in determining the total number of outstanding shares for purposes of any matter involving stockholder action, and such shares may be required to be sold through an independent trustee. The foregoing provision of the articles does not apply to:

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  •   Benjamin Franklin Bancorp or any subsidiary or any pension, profit-sharing, stock bonus or other compensation plan maintained by Benjamin Franklin Bancorp or by a member of a controlled group of corporations or trades or businesses of which Benjamin Franklin Bancorp is a member for the benefit of the employees of Benjamin Franklin Bancorp or any subsidiary, or any trust or custodial arrangement established in connection with any such plan;
 
  •   any offer or acquisition of shares of voting stock that has been approved in advance by an affirmative vote of not less than two-thirds (2/3) of the directors then in office (plus an affirmative vote of two-thirds (2/3) of the independent directors then in office if there is an interested stockholder at the time of the offer or acquisition);
 
  •   any offer with a view toward public resale made exclusively to Benjamin Franklin Bancorp by underwriters or a selling group acting on its behalf; or
 
  •   a corporate reorganization without a change in the respective beneficial ownership interests of Benjamin Franklin Bancorp’s stockholders other than pursuant to the exercise of any dissenters’ appraisal rights.

     Provisions for Amendment of Articles and By-laws. The articles provide that, in general, amendment of the articles and the by-laws requires the vote of 75.0% of the votes eligible to be cast by Benjamin Franklin Bancorp’s stockholders or, if two-thirds of the independent directors vote to recommend that the stockholders approve such amendment, the vote of a majority of the votes eligible to be cast by Benjamin Franklin Bancorp’s stockholders . In addition, any provision of the articles that requires a greater than majority vote of stockholders can only be amended by such greater vote. In addition, the directors may amend the by-laws without stockholder approval by a majority vote (plus an affirmative vote of two-thirds of the independent directors if there is an interested stockholder).

     Stockholder Proposals and Director Nominations. Stockholders may submit proposals for inclusion on the agenda of an annual meeting of stockholders, and may submit nominations for election to the board of directors at an annual meeting, only by delivering a notice thereof to the secretary of Benjamin Franklin Bancorp at least 120 days but not more than 150 days in advance of the first anniversary of the date of the proxy statement for the previous year’s annual meeting (for the first annual meeting following the conversion, the deadline is ten days after the day on which notice of the date of the scheduled annual meeting is publicly disclosed).

     The stockholder notice must:

  •   state the stockholder’s name, the name of other stockholders who support the proposal or nominee and the class and number of shares owned by them,
 
  •   in the case of a proposal, describe the matter proposed and the reason for considering it at the annual meeting and must set forth any financial interest that the proposing stockholder has in the proposal, and
 
  •   in the case of a nomination, the name, age, business address and residence address, principal occupation or employment of the nominee, the class and number of shares owned by the nominee, and any other information relating to the nominee that is required under the securities laws to be disclosed in solicitations of proxies with respect to nominees for election as directors, including, but not limited to, the written consent of the nominee to serve as a director if elected.

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     The board of directors may reject a stockholder’s proposal or nomination if the stockholder does not fully and timely comply with the foregoing notice requirement.

     Purpose and Takeover Defensive Effects of Articles and By-Laws. The boards of Benjamin Franklin Bancorp and Benjamin Franklin Bank believe that the provisions described above are prudent and will reduce Benjamin Franklin Bancorp’s vulnerability to takeover attempts and to certain other transactions that have not been negotiated with and approved by Benjamin Franklin Bancorp’s board of directors. These provisions will also assist Benjamin Franklin Bancorp and Benjamin Franklin Bank in the orderly deployment of the offering proceeds into productive assets during the initial period after the offering. The boards believe these provisions are in the best interests of Benjamin Franklin Bank, Benjamin Franklin Bancorp and its stockholders. Attempts to acquire control of financial institutions and their holding companies have become increasingly common. Takeover attempts that have not been negotiated with and approved by boards of directors present to stockholders the risk of a takeover on terms that may be less favorable than might otherwise be available. A transaction that is negotiated and approved by the board of directors of Benjamin Franklin Bancorp, on the other hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value for Benjamin Franklin Bancorp and its stockholders, with due consideration given to matters such as the management and business of the acquiring corporation and maximum strategic development of Benjamin Franklin Bancorp’s assets.

     An unsolicited takeover proposal can seriously disrupt the business and management of a corporation and cause it great expense. Although a tender offer or other takeover attempt may be made at a price substantially above then-current market prices, such offers are sometimes made for less than all of the outstanding shares of a target company. As a result, stockholders may be presented with the alternative of partially liquidating their investment at a time that may be disadvantageous or retaining their investment in an enterprise that is under different management and the objectives of which may not be similar to those of the remaining stockholders.

     Potential Anti-Takeover Effects. Despite the belief of Benjamin Franklin Bank and Benjamin Franklin Bancorp as to the benefits to stockholders of the provisions described above, these provisions will have the effect of discouraging any takeover attempt that would not be approved either by regulatory policy or by Benjamin Franklin Bancorp’s board of directors but pursuant to which stockholders may receive a substantial premium for their shares over then-current market prices. As a result, stockholders who might desire to participate in such a transaction may not have any opportunity to do so. Such provisions will also make it more difficult to remove the board and Benjamin Franklin Bancorp’s management. The Boards of Benjamin Franklin Bank and Benjamin Franklin Bancorp, however, have concluded that the potential benefits outweigh the possible disadvantages.

     Definition of “Interested Stockholder” and “Independent Director.” An “interested stockholder” is any person (other than Benjamin Franklin Bancorp, any direct or indirect subsidiary of Benjamin Franklin Bancorp or any employee stock ownership plan formed by Benjamin Franklin Bancorp) who or which:

  •   is the beneficial owner, directly or indirectly, of 10.0% or more of the voting power of the outstanding voting stock of Benjamin Franklin Bancorp;
 
  •   is an “affiliate” of Benjamin Franklin Bancorp and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10.0% or more of the voting power of the then outstanding voting stock of Benjamin Franklin Bancorp; or

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  •   is an assignee of or has otherwise succeeded to any shares of voting stock of Benjamin Franklin Bancorp that were at any time within the two-year period immediately prior to the date in question beneficially owned by any interested stockholder, if such assignment or succession has occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933 and was not approved by two-thirds (2/3) of the independent directors.

An “independent director” is defined in Benjamin Franklin Bancorp’s articles of organization as any director of Benjamin Franklin Bancorp at any time when there is no interested stockholder and, when there is an interested stockholder, any director who

  •   is not, and was not at any time during the two-year period immediately prior to the date in question, an affiliate or associate of an interested stockholder, and

  •   is not an employee of Benjamin Franklin Bancorp or any of its affiliates.

Employee Stock Ownership Plan

     The Benjamin Franklin Bank employee stock ownership plan, which expects to purchase 8.0% of the shares issued in the offering, including shares issued to the Benjamin Franklin Bank Charitable Foundation, contains certain provisions permitting participating employees to direct the voting of shares held in the plan. Such provisions may be considered to have anti-takeover effects. See “Management of Benjamin Franklin Bancorp and Benjamin Franklin Bank—Benefit Plans—Employee Stock Ownership Plan” on page[#].

Statutory and Regulatory Restrictions

     Federal Change in Bank Control Act. Federal law provides that no person, acting directly or indirectly or through or in concert with one or more other persons, may acquire control of a bank holding company unless the Federal Reserve Board has been given 60 days prior written notice. For this purpose, the term “control” means the acquisition of the ownership, control or holding of the power to vote 25.0% or more of any class of a bank holding company’s voting stock, and the term “person” includes an individual, corporation, partnership, and various other entities. In addition, a person is presumed to acquire control if the person acquires the ownership, control or holding of the power to vote of 10.0% or more of any class of the holding company’s voting stock if

  •   the bank holding company’s shares are registered pursuant to Section 12 of the Exchange Act, or

  •   no other person will own, control or hold the power to vote a greater percentage of that class of voting securities.

Accordingly, the prior approval of the Federal Reserve Board would be required before any person could acquire 10.0% or more of the common stock of Benjamin Franklin Bancorp.

     The Federal Reserve Board may prohibit an acquisition of control if:

  •   it would result in a monopoly or substantially lessen competition;

  •   the financial condition of the acquiring person might jeopardize the financial stability of the institution; or

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  •   the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or of the public to permit the acquisition of control by such person.

     Federal Bank Holding Company Act. Federal law provides that no company may acquire control of a bank directly or indirectly without the prior approval of the Federal Reserve Board. Any company that acquires control of a bank becomes a “bank holding company” subject to registration, examination and regulation by the Federal Reserve Board. Pursuant to federal regulations, the term “company” is defined to include banks, corporations, partnerships, associations, and certain trusts and other entities, and “control” of a bank is deemed to exist if a company has voting control, directly or indirectly of at least 25.0% of any class of a bank’s voting stock, and may be found to exist if a company controls in any manner the election of a majority of the directors of the bank or has the power to exercise a controlling influence over the management or policies of the bank. In addition, a bank holding company must obtain Federal Reserve Board approval prior to acquiring voting control of more than 5.0% of any class of voting stock of a bank or another bank holding company.

     An acquisition of control of a bank that requires the prior approval of the Federal Reserve Board under the Bank Holding Company Act is not subject to the notice requirements of the Change in Bank Control Act. Accordingly, the prior approval of the Federal Reserve Board under the Bank Holding Company Act would be required

  •   before any bank holding company could acquire 5.0% or more of the common stock of Benjamin Franklin Bancorp and

  •   before any other company could acquire 25.0% or more of the common stock of Benjamin Franklin Bancorp.

     Restrictions applicable to the operations of bank holding companies may also deter companies from seeking to obtain control of Benjamin Franklin Bancorp. See “Regulation and Supervision” on page [#].

     Massachusetts Banking Law. Massachusetts banking law also prohibits any “company,” defined to include banking institutions as well as corporations, from directly or indirectly controlling the voting power of 25.0% or more of the voting stock of two or more banking institutions without the prior approval of the Massachusetts Board of Bank Incorporation. Additionally, an out-of-state company that already directly or indirectly controls voting power of 25.0% or more of the voting stock of two or more banking institutions may not also acquire direct or indirect ownership or control of more than 5.0% of the voting stock of a Massachusetts banking institution without the prior approval of the Board of Bank Incorporation. Finally, for a period of three years following completion of a conversion to stock form, no person may directly or indirectly offer to acquire or acquire beneficial ownership of more than 10.0% of any class of equity security of a converting mutual holding company without prior written approval of the Massachusetts Commissioner of Banks.

     Massachusetts Anti-Takeover Laws. The Massachusetts General Laws contain two anti-takeover statutes that are applicable to certain public corporations in Massachusetts—Chapter 110F, the “business combinations” law and Chapter 110D, the “control share acquisition” law. Chapter 110F of the Massachusetts General Laws generally prohibits a publicly held Massachusetts corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction which results in the stockholder becoming an interested stockholder, unless:

  •   the corporation’s board of directors approves the business combination or transaction which results in the stockholder becoming an interested stockholder prior to such event; or

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  •   the interested stockholder owns at least 90% of the corporation’s outstanding voting stock upon completion of the transaction that resulted in its becoming an interested stockholder, excluding shares held by directors who are also officers of the corporation and by certain employee stock plans, or

  •   the business combination is approved by both the corporation’s board of directors and the holders of two-thirds of the corporation’s outstanding voting stock at a meeting of stockholders, excluding shares held by the interested stockholder.

     The Massachusetts General Laws defines the term “business combination” to include a merger, a stock or asset sale, and certain other transactions resulting in a financial benefit to the interested stockholder. An “interested stockholder” is generally a person who, together with affiliates and associates, owns, or within the prior three years, owned, 5% or more of a corporation’s voting stock.

     Benjamin Franklin Bancorp’s articles contain a provision opting out of the applicability of Chapter 110D, in light of the provisions contained in Benjamin Franklin Bancorp’s articles that provide similar anti-takeover protections.

TRANSFER AGENT AND REGISTRAR FOR
BENJAMIN FRANKLIN BANCORP COMMON STOCK

     American Stock Transfer & Trust Company will act as the transfer agent and registrar for issued and outstanding shares of Benjamin Franklin Bancorp common stock.

LEGAL OPINIONS

     Foley Hoag LLP, Boston, Massachusetts, will give its opinions on behalf of Benjamin Franklin Bancorp concerning the legality of the shares issued in the offering and concerning certain tax matters. Foley Hoag LLP has consented to the references herein to its opinions. Certain legal matters will be passed upon for Ryan Beck & Co., Inc. by Luse Gorman Pomerenk & Schick, P.C. of Washington, D.C.

EXPERTS

     The consolidated financial statements of Benjamin Franklin Bancorp as of December 31, 2003 and 2002 and for the years then ended included in this prospectus have been so included in reliance on the report of Wolf & Company, P.C., independent accountants, given on the authority of said firm as experts in auditing and accounting.

     The consolidated financial statements of Chart Bank as of December 31, 2003 and 2002 and for the years then ended included in this prospectus have been so included in reliance on the report of Wolf & Company, P.C., independent accountants, given on the authority of said firm as experts in auditing and accounting.

     Arthur Andersen LLP, which audited the financial statements of Benjamin Franklin Bancorp for the year ended December 31, 2001 in this prospectus, was convicted on June 15, 2002 of federal obstruction of justice charges arising from the government’s investigation of Enron Corp. At the time of Arthur Andersen LLP’s conviction, it ceased accounting and auditing operations, and the Board of Trustees of Benjamin Franklin Bancorp declined to retain Arthur Andersen LLP to provide further services. At that time, there were no disagreements on the part of Arthur Andersen LLP with Benjamin Franklin Bancorp, and the reports of Arthur Andersen LLP concerning the above financial statements of Benjamin Franklin Bancorp contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. Because Arthur Andersen LLP has ceased accounting

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and auditing operations in 2002, Benjamin Franklin Bancorp has not obtained, as contemplated by the Securities and Exchange Commission’s regulations, a letter from Arthur Andersen LLP confirming the above statements.

     Arthur Andersen LLP has not consented to the incorporation of their report on the financial statements of Benjamin Franklin Bancorp for the year ended December 31, 2001 in this prospectus, and we have dispensed with the requirement to file their consent in reliance upon Rule 437a of the Securities Act of 1933. Because Arthur Andersen LLP has not consented to the incorporation by reference of their reports in this prospectus, you will not be able to recover against Arthur Andersen LLP under Section 11 of the Securities Act of 1933 for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen LLP or any omissions to state a material fact required to be stated therein. See “Risk Factors—Risks Related To Prior Auditor Of Benjamin Franklin Bancorp” on page [#].

     RP Financial, LC. has consented to the publication in this prospectus of the summary of its report to Benjamin Franklin Bancorp setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and the offering.

ADDITIONAL INFORMATION

     We have filed a registration statement with the SEC under the Securities Act of 1933 with respect to the common stock offered through this prospectus. As permitted by the rules and regulations of the SEC, this prospectus does not contain all the information set forth in the registration statement. You may examine this information without charge at the public reference facilities of the SEC located at 450 Fifth Street, NW, Washington, D.C. 20549. You may obtain copies of the material from the SEC at prescribed rates. The registration statement also is available through the SEC’s world wide web site on the internet at http://www.sec.gov.

     This document contains a description of the material features of certain contracts and other documents filed as exhibits to the registration statement. The statements as to the contents of such exhibits are of necessity brief descriptions and are not necessarily complete. Each such statement is qualified by reference to the contract or document.

     Benjamin Franklin Bancorp has filed an application for conversion with the Massachusetts Commissioner of Banks and has also requested the Federal Reserve Board’s approval of the conversion. This prospectus omits some information contained in those applications. The Massachusetts conversion application may be examined at the Massachusetts Division of Banks, One South Station, Boston, Massachusetts 02110 and the public portion of the materials filed with the Federal Reserve Board may be examined at the offices of the Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, Massachusetts 02106.

     In connection with the offering, we will register the common stock with the Securities and Exchange Commission under Section 12(g) of the Exchange Act. Upon this registration, Benjamin Franklin Bancorp will become subject to the Securities and Exchange Commission’s proxy solicitation rules and periodic reporting requirements.

     You may obtain a copy of the plan of conversion as well as the Articles of Organization and bylaws of Benjamin Franklin Bancorp without charge from us by contacting Claire S. Bean at Benjamin Franklin Bank, 58 Main Street, Franklin, Massachusetts, 02038. Copies of the appraisal report of RP Financial, LC. and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at the main office of Benjamin Franklin Bank by contacting Claire S. Bean as indicated above.

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STOCK INFORMATION CENTER

     If you have any questions regarding the offering or the conversion, please call our Stock Information Center, toll free, at (800) 290-0793.

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BENJAMIN FRANKLIN BANCORP, M.H.C.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

         
    Page
Report of Independent Registered Public Accounting Firm
     F-2  
Report of Independent Public Accountants
     F-3  
Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003 and 2002
     F-4  
Consolidated Statements of Income for the Nine Months Ended September 30, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001
     F-5  
Consolidated Statements of Changes in Retained Earnings for the Nine Months Ended September 30, 2004 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001
     F-6  
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003, 2002 and 2001
     F-7  
Notes to Consolidated Financial Statements
     F-9  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee
Benjamin Franklin Bancorp, M.H.C.
Franklin, Massachusetts

We have audited the accompanying consolidated balance sheets of Benjamin Franklin Bancorp, M.H.C. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in retained earnings and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of Benjamin Franklin Bancorp, M.H.C. and subsidiaries for the year ended December 31, 2001 (before they were restated for the matter discussed in Note 1 to the consolidated financial statements) were audited by other auditors who have ceased operations and whose report, dated April 12, 2002, and included herein, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2003 and 2002 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Benjamin Franklin Bancorp, M.H.C. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

WOLF & COMPANY, P.C.

Boston, Massachusetts
February 27, 2004, except for Note 17 as to which
     the date is October 28, 2004

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Report of Independent Public Accountants

To the Audit Committee of
Benjamin Franklin Bancorp, M.H.C. and subsidiaries

We have audited the accompanying consolidated balance sheets of Benjamin Franklin Bancorp, M.H.C. and subsidiaries (the Company) as of December 31, 2001 and 2000 and the related consolidated statements of operations, changes in surplus and comprehensive income (loss) and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the consolidated financial position of the Company as of December 31, 2001 and 2000 and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
April 1, 2002

This Report of Independent Public Accountants is a copy of a previously issued Arthur Andersen LLP (Andersen) report and has not been reissued by Andersen in connection with this filing on Form S-1. The inclusion of this previously issued Andersen report is made pursuant to Section 2.02(e) of regulation S-X. Note that this previously issued Andersen report includes references to the year ended December 31, 2000 which is not required to be presented in the accompanying consolidated financial statements as of and for the years ended December 31, 2003.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
ASSETS
                        
Cash and due from banks
   $ 8,295     $ 14,512     $ 14,162  
Short-term investments
     6,831       20,973       37,874  
 
    
 		      
 		      
 		  
Total cash and cash equivalents
     15,126       35,485       52,036  
 
    
 		      
 		      
 		  
Securities available for sale, at fair value
     94,423       102,646       108,520  
Securities held to maturity, at amortized cost
     266       386       986  
Restricted equity securities, at cost
     6,862       7,222       5,222  
Loans
     378,533       291,385       264,245  
Allowance for loan losses
     (3,017 )     (2,523 )     (2,312 )
 
    
 		      
 		      
 		  
Loans, net
     375,516       288,862       261,933  
Premises and equipment, net
     11,280       11,199       11,847  
Accrued interest receivable
     1,495       1,388       1,299  
Goodwill
     4,248       4,248       4,248  
Bank-owned life insurance
     5,619       4,074       2,593  
Other assets
     3,096       3,334       3,546  
 
    
 		      
 		      
 		  
 
   $ 517,931     $ 458,844     $ 452,230  
 
    
 		      
 		      
 		  
LIABILITIES AND RETAINED EARNINGS
                        
Deposits
   $ 399,562     $ 380,257     $ 373,300  
Short-term borrowings
     29,000       —       —  
Long-term debt
     55,000       45,000       45,000  
Other liabilities
     3,783       4,286       4,116  
 
    
 		      
 		      
 		  
Total liabilities
     487,345       429,543       422,416  
 
    
 		      
 		      
 		  
Commitments and contingencies (Note 12)
                        
Retained earnings
     32,620       31,308       29,620  
Accumulated other comprehensive (loss) income
     (2,034 )     (2,007 )     194  
 
    
 		      
 		      
 		  
Total retained earnings
     30,586       29,301       29,814  
 
    
 		      
 		      
 		  
 
   $ 517,931     $ 458,844     $ 452,230  
 
    
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Interest and dividend income:
                                        
Loans, including fees
   $ 12,567     $ 11,601     $ 15,530     $ 16,322     $ 20,355  
Debt securities:
                                        
Taxable
     2,379       2,233       3,186       3,903       3,774  
Tax-exempt
     —       14       14       35       128  
Dividends
     170       166       250       228       365  
Short-term investments
     107       515       552       918       1,819  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest and dividend income
     15,223       14,529       19,532       21,406       26,441  
 
    
 		      
 		      
 		      
 		      
 		  
Interest expense:
                                        
Interest on deposits
     3,221       3,439       4,487       5,856       10,752  
Interest on short-term borrowings
     56       —       —       —       —  
Interest on long-term debt
     1,747       1,695       2,265       1,738       1,645  
 
    
 		      
 		      
 		      
 		      
 		  
Total interest expense
     5,024       5,134       6,752       7,594       12,397  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income
     10,199       9,395       12,780       13,812       14,044  
Provision for loan losses
     470       300       625       1,412       51  
 
    
 		      
 		      
 		      
 		      
 		  
Net interest income, after provision for loan losses
     9,729       9,095       12,155       12,400       13,993  
 
    
 		      
 		      
 		      
 		      
 		  
Other income (charges):
                                        
Deposit service fees
     684       632       928       859       856  
Loan servicing fees
     187       309       336       525       86  
Gain on sale of loans, net
     106       951       975       71       167  
Gain (loss) on sales of securities, net
     8       113       86       1,569       (2,529 )
Income from bank-owned life insurance
     145       129       181       59       —  
Pension plan curtailment loss
     —       —       —       (741 )     —  
Miscellaneous
     536       429       570       512       643  
 
    
 		      
 		      
 		      
 		      
 		  
Total other income (charges)
     1,666       2,563       3,076       2,854       (777 )
 
    
 		      
 		      
 		      
 		      
 		  
Operating expenses:
                                        
Salaries and employee benefits
     5,679       5,006       6,668       6,150       5,621  
Occupancy and equipment
     1,035       1,320       1,788       1,814       1,922  
Data processing
     1,047       1,115       1,446       1,368       1,225  
Professional fees
     192       821       985       723       651  
Other general and administrative
     1,504       1,364       1,837       2,060       2,146  
 
    
 		      
 		      
 		      
 		      
 		  
Total operating expenses
     9,457       9,626       12,724       12,115       11,565  
 
    
 		      
 		      
 		      
 		      
 		  
Income before income taxes
     1,938       2,032       2,507       3,139       1,651  
Provision for income taxes
     626       651       819       443       1,610  
 
    
 		      
 		      
 		      
 		      
 		  
Net income
   $ 1,312     $ 1,381     $ 1,688     $ 2,696     $ 41  
 
    
 		      
 		      
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS

Nine Months Ended September 30, 2004 (Unaudited) and the
Years Ended December 31, 2003, 2002 and 2001

(Dollars in Thousands)

                         
            Accumulated    
            Other   Total
    Retained   Comprehensive   Retained
    Earnings
   Income (Loss)
   Earnings
Balance at December 31, 2000, as restated (See Note 1)
   $ 26,883     $ (1,589 )   $ 25,294  
 
                    
 		  
Comprehensive income:
                        
Net income
     41       —       41  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects
     —       2,102       2,102  
 
    
 		      
 		      
 		  
Total comprehensive income
                     2,143  
 
                    
 		  
Balance at December 31, 2001
     26,924       513       27,437  
 
                    
 		  
Comprehensive income:
                        
Net income
     2,696       —       2,696  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects
     —       (319 )     (319 )
 
    
 		      
 		      
 		  
Total comprehensive income
                     2,377  
 
                    
 		  
Balance at December 31, 2002
     29,620       194       29,814  
 
                    
 		  
Comprehensive loss:
                        
Net income
     1,688       —       1,688  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects
     —       (2,201 )     (2,201 )
 
    
 		      
 		      
 		  
Total comprehensive loss
                     (513 )
 
                    
 		  
Balance at December 31, 2003
     31,308       (2,007 )     29,301  
 
                    
 		  
Comprehensive income:
                        
Net income (unaudited)
     1,312       —       1,312  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects (unaudited)
     —       (27 )     (27 )
 
    
 		      
 		      
 		  
Total comprehensive income (unaudited)
                     1,285  
 
                    
 		  
Balance at September 30, 2004 (unaudited)
   $ 32,620     $ (2,034 )   $ 30,586  
 
    
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Cash flows from operating activities:
                                        
Net income
   $ 1,312     $ 1,381     $ 1,688     $ 2,696     $ 41  
Adjustments to reconcile net income to net cash provided by operating activities:
                                        
Net amortization of securities
     703       554       833       316       104  
Amortization of deferred loan costs, net
     214       363       407       582       551  
Loss (gain) on sales of securities, net
     (8 )     (113 )     (86 )     (1,569 )     2,529  
Provision for loan losses
     470       300       625       1,412       51  
Amortization of mortgage servicing rights
     423       732       892       535       358  
Income from bank-owned life insurance
     (145 )     (129 )     (181 )     (59 )     —  
Depreciation expense
     509       688       872       1,008       688  
Deferred income tax (benefit) provision
     48       (259 )     (169 )     (1,005 )     1,981  
Gain on sale of loans, net
     (106 )     (951 )     (975 )     (71 )     (167 )
Loans originated for sale
     (28,566 )     (92,606 )     (96,256 )     (69,752 )     (63,411 )
Proceeds from sales of loans
     28,672       93,557       97,231       69,823       63,578  
Changes in assets and liabilities:
                                        
Accrued interest receivable
     (107 )     (241 )     (89 )     919       536  
Other assets
     (185 )     (1,385 )     (511 )     2,294       (450 )
Other liabilities
     (483 )     1,753       416       (1,547 )     (1,964 )
 
    
 		      
 		      
 		      
 		      
 		  
Net cash provided by operating activities
     2,751       3,644       4,697       5,582       4,425  
 
    
 		      
 		      
 		      
 		      
 		  
Cash flows from investing activities:
                                        
Activity in available-for-sale securities:
                                        
Sales
     2,015       17,123       30,886       110,420       64,995  
Maturities, calls, and principal repayments
     35,829       202,015       211,994       62,883       4,028  
Purchases
     (30,411 )     (236,088 )     (240,200 )     (202,921 )     (41,579 )
Activity in held-to-maturity securities:
                                        
Maturities and principal repayments
     120       373       600       1,763       969  
Purchases
     —       —       —       —       (1,000 )
Net change in restricted equity securities
     360       (2,000 )     (2,000 )     —       —  
Loan purchases of mortgage loans
     (34,207 )     (26,332 )     (26,546 )     (1,298 )     (853 )  
Loan (originations) principal payments, net
     (53,131 )     7,189       (1,415 )     (4,727 )     27,466  
Purchase of bank-owned life insurance
     (1,400 )     (500 )     (1,300 )     (2,534 )     —    
Additions to premises and equipment
     (590 )     (178 )     (224 )     (501 )     (477 )
 
    
 		      
 		      
 		      
 		      
 		  
Net cash (used) provided by investing activities
     (81,415 )     (38,398 )     (28,205 )     (36,915 )     53,549  
 
    
 		      
 		      
 		      
 		      
 		  

(continued)

     See accompanying notes to consolidated financial statements.

F-7

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)

(Dollars in Thousands)

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Cash flows from financing activities:
                                        
Net increase (decrease) in deposits
     19,305       17,549       6,957       12,178       (27,353 )
Proceeds from short-term borrowings
     29,000       —       —       —       —  
Net proceeds from long-term debt
     10,000       —       —       9,000       10,600  
 
    
 		      
 		      
 		      
 		      
 		  
Net cash provided (used) by financing activities
     58,305       17,549       6,957       21,178       (16,753 )
 
    
 		      
 		      
 		      
 		      
 		  
Net change in cash and cash equivalents
     (20,359 )     (17,205 )     (16,551 )     (10,155 )     41,221  
Cash and cash equivalents at beginning of year
     35,485       52,036       52,036       62,191       20,970  
 
    
 		      
 		      
 		      
 		      
 		  
Cash and cash equivalents at end of year
   $ 15,126     $ 34,831     $ 35,485     $ 52,036     $ 62,191  
 
    
 		      
 		      
 		      
 		      
 		  
Supplemental cash flow information:
                                        
Interest paid on deposits
   $ 3,222     $ 3,444     $ 4,492     $ 5,871     $ 11,014  
Interest paid on short-term borrowings
     39       —       —       —       —  
Interest paid on long-term debt
     1,726       1,723       2,280       1,632       1,645  
Income taxes paid (refunded)
     640       940       942       (356 )     1,363  

See accompanying notes to consolidated financial statements.

F-8

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2004 and 2003 (Unaudited) and Years Ended
December 31, 2003, 2002 and 2001

(Dollars in Thousands)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    Basis of presentation and consolidation
 
    The consolidated financial statements include the accounts of Benjamin Franklin Bancorp, M.H.C. (the “Company”) and its wholly-owned subsidiary, Benjamin Franklin Bank (the “Bank”). The Company’s wholly-owned subsidiary, Benjamin Franklin Capital Trust, was included in the Company’s consolidated financial statements for December 31, 2003 and 2002 and recorded on the equity method effective January 1, 2004 (See Note 1 - Recent Accounting Pronouncements). The Bank has one subsidiary, Benjamin Franklin Securities Corp., formed for the purpose of buying, holding, and selling securities. All significant intercompany balances and transactions have been eliminated in consolidation.
 
    The financial information included herein as of September 30, 2004 and for the interim periods ended September 30, 2004 and 2003 is unaudited; however, in the opinion of management the information reflects all adjustments (consisting solely of normal recurring adjustments) that are necessary for a fair presentation. The results shown for nine months ended September 30, 2004 and 2003 are not necessary indicative of the results to be obtained for a full year.
 
    Business and operating segments
 
    The Company provides a variety of financial services to individuals and small businesses through its six offices in Norfolk and Worcester counties. Its primary deposit products are checking, savings and term certificate accounts, and its primary lending products are residential and commercial mortgage loans. The Bank also provides non-deposit investment products to customers.
 
    Management evaluates the Company’s performance and allocates resources based on a single segment concept. Accordingly, there are no separately identified operating segments for which discrete financial information is available. The Company does not derive revenues from, or have assets located in, foreign countries, nor does it derive revenues from any single customer that represents 10% or more of the Company’s total revenues.

F-9

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Use of estimates
 
    In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of deferred tax assets.
 
    Reclassifications
 
    Certain amounts in the 2002 and 2001 consolidated financial statements have been reclassified to conform to the 2003 presentation.
 
    Prior period adjustment
 
    As a result of an overstatement of deferred tax liabilities in connection with temporary income tax differences, identified during 2002, a prior period adjustment was made to retained earnings as of December 31, 2000, as follows:

         
    Retained
    Earnings
Balance, as previously reported
   $ 26,383  
Effect of prior period adjustment on opening balance
     500  
 
    
 		  
Balance, as restated
   $ 26,883  
 
    
 		  

    Cash and cash equivalents
 
    Cash and cash equivalents include cash and balances due from banks and short-term investments, all of which mature within ninety days.

F-10

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Securities
 
    Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income/loss.
 
    Purchase premiums and discounts are recognized into interest income using the interest method over the contractual terms of the securities. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific identification method.
 
    Restricted equity securities, which consist of Federal Home Loan Bank stock and stock in a community investment fund, are carried at cost.
 
    Loans
 
    The Bank grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans in Franklin, Massachusetts and surrounding communities. The ability of the Bank’s debtors to honor their contracts is dependent upon the local real estate market and general economic conditions in this area.
 
    Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.
 
    The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

F-11

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Loans (concluded)
 
    All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
 
    Allowance for loan losses
 
    The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
 
    The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
 
    The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows or collateral value or observable market price of the impaired loan is lower than the carrying value of the loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
 
    A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent.

F-12

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Allowance for loan losses (concluded)
 
    Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer and residential loans for impairment disclosures.
 
    Servicing
 
    Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. For sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage servicing contracts. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets, and are adjusted for prepayments. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by the original term of maturity ranging from 10 to 30 years and using a weighted average interest rate and maturity date with each strata. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.
 
    Premises and equipment
 
    Land is carried at cost. Buildings and improvements and equipment are carried at cost, less accumulated depreciation computed on the straight-line method over the estimated useful lives of the assets.
 
    Transfers of financial assets
 
    Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

F-13

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Goodwill
 
    Prior to January 1, 2002, goodwill, arising from the acquisition of Foxboro National Bank, was being amortized on a straight-line basis over 15 years. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” and goodwill, which amounted to $4,248 at September 30, 2004 (unaudited), December 31, 2003 and 2002, is no longer amortized, but is evaluated for impairment. In evaluating the goodwill, the Company does not track the separate fair value of Foxboro National Bank, but instead measures the fair value of the entire Company. If the Company determines that goodwill is impaired, the carrying value of goodwill would be reduced through a charge to earnings.
 
    If goodwill amortization of $385 had not been recorded for the year ending December 31, 2001, net income as reported for 2001 would have increased by $375.
 
    Derivative financial instruments
 
    The derivative financial instruments currently used by the Company are rate-lock commitments and forward investor loan sale commitments.
 
    Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with related fees received from potential borrowers, are recorded at fair value in derivative assets and liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans, if material. The Company manages the interest rate risk on rate-lock commitments by simultaneously entering into forward loan sale contracts, whereby the Company obtains the right to deliver residential loans to investors in the future at a specified yield. Such contracts are accounted for as derivatives and, along with related fees paid to investors, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans, if material.
 
    Fair value is assumed to be zero on the date the derivative financial instruments are entered into. To date, any subsequent changes in fair value have been immaterial and, therefore, not recorded in the financial statements.
 
    Retirement plan
 
    The Company accounted for pension plan benefits on the net periodic pension cost method for financial reporting purposes. This method recognized the compensation cost of an employee’s pension benefit over the employee’s approximate service period. The aggregate cost method was utilized for funding purposes. The Bank elected to curtail the pension plan effective December 31, 2000 (See Note 14).
 
    Income taxes
 
    Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted accordingly through the provision for income taxes. The Bank’s base amount of its federal income tax reserve for loan losses is a permanent difference for which there is no recognition of a deferred tax liability. However, the loan loss allowance maintained for financial reporting purposes is a temporary difference with allowable recognition of a related deferred tax asset, if deemed realizable.

F-14

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Income taxes (concluded)
 
    A valuation allowance related to deferred tax assets is established when, in the judgement of management, it is more likely than not, that all or a portion of such deferred tax assets will be realized. (See Note 11)
 
    Advertising costs
 
    Advertising costs are expensed as incurred.
 
    Comprehensive income/loss
 
    Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the retained earnings section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income/loss. The components of other comprehensive income/loss and related tax effects are as follows:

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Change in unrealized holding gains (losses) on securities available for sale
   $ (87 )   $ (1,896 )   $ (2,361 )   $ 1,081     $ (133 )
Tax effect
     62       79       237       (374 )     16  
 
    
 		      
 		      
 		      
 		      
 		  
Net-of-tax amount
     (25 )     (1,817 )     (2,124 )     707       (117 )
 
    
 		      
 		      
 		      
 		      
 		  
Reclassification adjustment for gains realized in income
     (8 )     (113 )     (86 )     (1,569 )     2,529  
 
    
 		      
 		      
 		      
 		      
 		  
Tax effect
     6       5       9       543       (310 )
 
    
 		      
 		      
 		      
 		      
 		  
Net-of-tax amount
     (2 )     (108 )     (77 )     (1,026 )     2,219  
 
    
 		      
 		      
 		      
 		      
 		  
Total change
   $ (27 )   $ (1,925 )   $ (2,201 )   $ (319 )   $ 2,102  
 
    
 		      
 		      
 		      
 		      
 		  

F-15

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Recent accounting pronouncements
 
    In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This Statement is effective for contracts entered into or modified after June 30, 2003, except in certain circumstances, and for hedging relationships designated after June 30, 2003. This Statement did not have a material effect on the Company’s consolidated financial statements.
 
    In December 2003, the FASB issued a revision to Interpretation No. 46, “Consolidation of Variable Interest Entities,” (“FIN 46”) which establishes guidance for determining when an entity should consolidate another entity that meets the definition of a variable interest entity. FIN 46 requires a variable interest entity to be consolidated by a company if that company will absorb a majority of the expected losses, will receive a majority of the expected residual returns, or both. FASB deferred the effective date of FIN 46 to no later than the end of the first reporting period that ends after March 15, 2004. The Company adopted FIN 46 as of January 1, 2004 which resulted in the Company no longer consolidating its wholly-owned subsidiary, Benjamin Franklin Capital Trust, and recording it on the equity method. The Interpretation and the revision had no material effect on the Company’s consolidated financial statements.
 
    In March 2004, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 105, Application of Accounting Principles to Loan Commitments, which provides guidance regarding loan commitments that are accounted for as derivative instruments. In this SAB, the SEC determined that an interest rate lock commitment should generally be valued at zero at inception. The rate locks will continue to be adjusted for changes in value resulting from changes in market interest rates. This SAB did not have any effect on the Company’s financial position or results of operations.

F-16

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Recent accounting pronouncements (continued)
 
    On December 16, 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which is an Amendment of FASB Statement Nos. 123 and 95 SFAS No. 123R changes, among other things, the manner in which share-based compensation, such as stock options, will be accounted for by both public and non-public companies, and will be effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. For public companies, the cost of employee services received in exchange for equity instruments including options and restricted stock awards generally will be measured at fair value at the grant date. The grant date fair value will be estimated using option-pricing models adjusted for the unique characteristics of those options and instruments, unless observable market prices for the same or similar options are available. The cost will be recognized over the requisite service period, often the vesting period, and will be remeasured subsequently at each reporting date through settlement date.
 
    The changes in accounting will replace existing requirements under SFAS No. 123, “Accounting for Stock-Based Compensation,” and will eliminate the ability to account for share-based compensation transactions using APB Opinion No. 25, “Accounting for Stock Issued to Employees,” which does not require companies to expense options if the exercise price is equal to the trading price at the date of grant. The accounting for similar transactions involving parties other than employees or the accounting for employee stock ownership plans that are subject to American Institute of Certified Public Accountants (“AICPA”) Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans,” would remain unchanged.

F-17

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
 
    Recent accounting pronouncements (concluded)
 
    On September 30, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which provides guidance for determining the meaning of “other-than-temporarily impaired” and its application to certain debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and investments accounted for under the cost method. The guidance requires that investments which have declined in value due to credit concerns or solely due to changes in interest rates must be recorded as other-than-temporarily impaired unless the Company can assert and demonstrate its intention to hold the security for a period of time sufficient to allow for a recovery of fair value up to or beyond the cost of the investment which might mean maturity. The delay of the effective date of EITF 03-1 will be superceded concurrent with the final issuance of proposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect the Company.
 
2.   RESTRICTIONS ON CASH AND DUE FROM BANKS
 
    The Bank is required to maintain average balances on hand or with the Federal Reserve Bank. At September 30, 2004 (unaudited), December 31, 2003 and 2002, these reserve balances amounted to $973, $6,760 and $4,703, respectively.

F-18

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

3.   SHORT-TERM INVESTMENTS
 
    Short-term investments consist of the following:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Federal funds
   $ 6,215     $ 16,031     $ 14,039  
Bank Investment Liquidity Fund
     577       4,937       23,825  
Money market account
     39       5       10  
 
    
 		      
 		      
 		  
 
   $ 6,831     $ 20,973     $ 37,874  
 
    
 		      
 		      
 		  

4.   SECURITIES
 
    The amortized cost and fair value of securities with gross unrealized gains and losses follows:

                                 
            Gross   Gross    
    Amortized   Unrealized   Unrealized   Fair
    Cost
   Gains
   Losses
   Value
            (Unaudited)        
September 30, 2004:
                                
Securities available for sale:
                                
U.S. Government and federal agency obligations
   $ 37,691     $ 6     $ (205 )   $ 37,492  
Mortgage-backed securities
     53,869       56       (2,051 )     51,874  
Other bonds and obligations
     5,086       1       (30 )     5,057  
 
    
 		      
 		      
 		      
 		  
 
   $ 96,646     $ 63     $ (2,286 )   $ 94,423  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity:
                                
Mortgage-backed securities
   $ 266     $ 5     $ —     $ 271  
 
    
 		      
 		      
 		      
 		  

F-19

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SECURITIES (continued)

                                 
            Gross   Gross    
    Amortized   Unrealized   Unrealized   Fair
    Cost
   Gains
   Losses
   Value
December 31, 2003:
                                
Securities available for sale:
                                
U.S. Government and federal agency obligations
   $ 30,272     $ 91     $ (16 )   $ 30,347  
Mortgage-backed securities
     74,502       118       (2,321 )     72,299  
 
    
 		      
 		      
 		      
 		  
 
   $ 104,774     $ 209     $ (2,337 )   $ 102,646  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity:
                                
Mortgage-backed securities
   $ 386     $ 12     $ —     $ 398  
 
    
 		      
 		      
 		      
 		  
December 31, 2002:
                                
Securities available for sale:
                                
U.S. Government and federal agency obligations
   $ 67,513     $ 72     $ (3 )   $ 67,582  
State and municipal bonds
     570       —       —       570  
Mortgage-backed securities
     26,376       160       (90 )     26,446  
Other bonds and obligations
     3,536       180       —       3,716  
 
    
 		      
 		      
 		      
 		  
Total debt securities
     97,995       412       (93 )     98,314  
Bank Investment Fund
     10,206       —       —       10,206  
 
    
 		      
 		      
 		      
 		  
 
   $ 108,201     $ 412     $ (93 )   $ 108,520  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity:
                                
Mortgage-backed securities
   $ 986     $ 37     $ —     $ 1,023  
 
    
 		      
 		      
 		      
 		  

F-20

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SECURITIES (continued)
 
    The amortized cost and estimated fair value of debt securities, excluding mortgage-backed securities, by contractual maturity at September 30, 2004 (unaudited) and December 31, 2003 is as follows. Expected maturities will differ from contractual maturities on certain securities because of call or prepayment provisions.

                                 
    September 30, 2004
   December 31, 2003
    Amortized   Fair   Amortized   Fair
    Cost
   Value
   Cost
   Value
    (Unaudited)                
Within 1 year
   $ 16,632     $ 16,584     $ 6,134     $ 6,140  
After 1 year through 5 years
     26,145       25,965       23,418       23,482  
After 10 years
     —       —       720       725  
 
    
 		      
 		      
 		      
 		  
 
   $ 42,777     $ 42,549     $ 30,272     $ 30,347  
 
    
 		      
 		      
 		      
 		  

    Proceeds from the sale of securities available for sale for the nine months ended September 30, 2004 and 2003 (unaudited) amounted to $2,015 and $17,123, respectively. Gross gains of $9 and $150, and gross losses of $1 and $37, were realized during the nine months ended September 30, 2004 and 2003 (unaudited), respectively.
 
    Proceeds from the sale of securities available for sale during the years ended December 31, 2003, 2002 and 2001 amounted to $30,886, $110,420 and $64,995, respectively. Gross realized gains of $189, $1,823 and $1,344, and gross losses of $103, $254 and $3,873, were realized during the years ended December 31, 2003, 2002 and 2001, respectively.

F-21

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SECURITIES (concluded)
 
    Information pertaining to securities with gross unrealized losses at September 30, 2004 (unaudited) and December 31, 2003, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

                                 
    Less Than Twelve Months
   Over Twelve Months
    Gross           Gross    
    Unrealized   Fair   Unrealized   Fair
    Losses
   Value
   Losses
   Value
    (Unaudited)
September 30, 2004:
                                
Federal agency obligations
   $ 170     $ 30,417     $ 35     $ 6,054  
Other bonds and obligations
     30       4,559       —       —  
Mortgage-backed securities
     19       3,268       2,032       47,277  
 
    
 		      
 		      
 		      
 		  
Total temporarily impaired securities
   $ 219     $ 38,244     $ 2,067     $ 53,331  
 
    
 		      
 		      
 		      
 		  
                                 
    Less Than Twelve Months
   Over Twelve Months
    Gross           Gross    
    Unrealized   Fair   Unrealized   Fair
    Losses
   Value
   Losses
   Value
December 31, 2003:
                                
Federal agency obligations
   $ 16     $ 6,379     $ —     $ —  
Mortgage-backed securities
     2,295       63,998       26       867  
 
    
 		      
 		      
 		      
 		  
Total temporarily impaired securities
   $ 2,311     $ 70,377     $ 26     $ 867  
 
    
 		      
 		      
 		      
 		  

    At September 30, 2004 (unaudited) and December 31, 2003, the Company’s mortgage-backed securities have unrealized losses with an aggregate depreciation of 3.6% and 3.1%, respectively, from the amortized cost basis. Significant portions of these investments are in collateralized mortgage obligations, commonly referred to as CMOs. The unrealized losses will continue to exist as market interest rates rise above the purchase yield of the individual securities. Management’s intent is to hold these securities until maturity, as a core element of the total investment portfolio. The current CMO securities are all early-tranche investments thereby providing significant cash flows early in the life of the security. The issuers of the investments are the Federal Home Loan Mortgage Corporation (“FHLMC”) and the Federal National Mortgage Corporation (“FNMA”). The residential mortgage collateral, backing these investments and the guarantees of the federal agency issuers do not indicate that these declines are other than temporary.

F-22

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

5.   LOANS
 
    A summary of the balances of loans follows:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Mortgage loans on real estate:
                        
Residential
   $ 244,363     $ 172,123     $ 165,007  
Commercial
     79,173       68,652       51,357  
Construction
     25,079       23,936       21,082  
Home equity
     21,883       18,171       16,507  
 
    
 		      
 		      
 		  
 
     370,498       282,882       253,953  
 
    
 		      
 		      
 		  
Other loans:
                        
Commercial
     4,972       5,559       6,552  
Consumer
     980       1,309       2,313  
Passbook and stock-secured
     899       910       844  
 
    
 		      
 		      
 		  
 
     6,851       7,778       9,709  
 
    
 		      
 		      
 		  
Total loans
     377,349       290,660       263,662  
Allowance for loan losses
     (3,017 )     (2,523 )     (2,312 )
Net deferred loan costs
     1,184       725       583  
 
    
 		      
 		      
 		  
Loans, net
   $ 375,516     $ 288,862     $ 261,933  
 
    
 		      
 		      
 		  

    An analysis of the allowance for loan losses follows:

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Balance at beginning of year
   $ 2,523     $ 2,312     $ 2,312     $ 1,177     $ 1,068  
Provision for loan losses
     470       300       625       1,412       51  
Recoveries
     33       101       123       142       90  
Charge-offs
     (9 )     (63 )     (537 )     (419 )     (32 )
 
    
 		      
 		      
 		      
 		      
 		  
Balance at end of year
   $ 3,017     $ 2,650     $ 2,523     $ 2,312     $ 1,177  
 
    
 		      
 		      
 		      
 		      
 		  

F-23

Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    LOANS (concluded)
 
    The following is a summary of the impaired and non-accrual loans:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Total impaired loans with no valuation allowance
   $ 357     $ 458     $ 462  
 
    
 		      
 		      
 		  
Non-accrual loans
   $ 357     $ 458     $ —  
 
    
 		      
 		      
 		  
Loans greater than 90 days delinquent and still accruing
   $ 65     $ 5     $ 2  
 
    
 		      
 		      
 		  

     No additional funds are committed to be advanced in connection with impaired loans.

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Average recorded investment in impaired loans
   $ 429     $ 565     $ 594     $ 568     $ 354  
 
    
 		      
 		      
 		      
 		      
 		  
Interest income recognized on a cash basis on impaired loans
   $ 22     $ 25     $ 60     $ 30     $ 33  
 
    
 		      
 		      
 		      
 		      
 		  

    At September 30, 2004 (unaudited), December 31, 2003 and 2002, loans with a principal balance of $17,794, $23,590 and $22,915, respectively, were pledged to the Federal Reserve Bank of Boston as part of the Borrower-in-Custody advance program for which there are no outstanding advances as of September 30, 2004 (unaudited), December 31, 2003 and 2002.
 
6.   SERVICING
 
    Loans serviced for others by the Bank amounted to $133,210, $131,845 and $127,316 at September 30, 2004 (unaudited), December 31, 2003 and 2002, respectively. All loans sold and serviced for others were sold without recourse provisions.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SERVICING (concluded)
 
    Mortgage servicing rights included in other assets at September 30, 2004 (unaudited), December 31, 2003 and 2002 were $721, $862 and $889, respectively. The fair value of mortgage servicing rights was $1,021, $1,008 and $984 at September 30, 2004 (unaudited), December 31, 2003 and 2002, respectively. Information applicable to mortgage servicing rights is as follows:

                                         
    Nine Months    
    Ended   Years Ended
    September 30,
   December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Mortgage servicing rights capitalized
   $ 282     $ 780     $ 865     $ 721     $ 721  
 
    
 		      
 		      
 		      
 		      
 		  
Mortgage servicing rights amortized
   $ 423     $ 732     $ 892     $ 535     $ 358  
 
    
 		      
 		      
 		      
 		      
 		  

7.   PREMISES AND EQUIPMENT
 
    A summary of the cost and accumulated depreciation of premises and equipment follows:

                                 
    September 30,   December 31,
   Estimated
    2004
   2003
   2002
   Useful Lives
    (Unaudited)                        
Premises:
                                
Land
   $ 4,357     $ 4,357     $ 4,357          
Buildings and improvements
     10,505       10,458       10,389     5 - 39 years
Equipment
     4,657       4,114       3,959     2 - 10 years
 
    
 		      
 		      
 		          
 
     19,519       18,929       18,705          
Less accumulated depreciation
     (8,239 )     (7,730 )     (6,858 )        
 
    
 		      
 		      
 		          
 
   $ 11,280     $ 11,199     $ 11,847          
 
    
 		      
 		      
 		          

    Depreciation expense for the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003, 2002 and 2001 amounted to $509, $673, $872, $1,008 and $688, respectively.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

8.   DEPOSITS
 
    A summary of deposit balances, by type, is as follows:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Demand deposits
   $ 86,605     $ 85,681     $ 36,730  
NOW
     25,179       24,581       79,904  
Regular and other savings
     99,799       96,118       87,536  
Money market deposits
     54,390       50,094       44,177  
 
    
 		      
 		      
 		  
Total non-certificate accounts
     265,973       256,474       248,347  
 
    
 		      
 		      
 		  
Term certificates less than $100,000
     94,892       93,643       96,734  
Term certificates of $100,000 or more
     38,697       30,140       28,219  
 
    
 		      
 		      
 		  
Total certificate accounts
     133,589       123,783       124,953  
 
    
 		      
 		      
 		  
Total deposits
   $ 399,562     $ 380,257     $ 373,300  
 
    
 		      
 		      
 		  

    A summary of term certificate accounts by maturity is as follows:

                                                 
    September 30, 2004
   December 31, 2003
   December 31, 2002
            Weighted           Weighted           Weighted
            Average           Average           Average
    Amount
   Rate
   Amount
   Rate
   Amount
   Rate
    (Unaudited)                                
Within 1 year
   $ 93,965       1.63 %   $ 89,585       2.25 %   $ 80,873       2.59 %
Over 1 year to 3 years
     34,618       2.91       28,633       3.47       35,462       3.99  
Over 3 years to 5 years
     5,006       3.13       5,565       2.75       8,618       3.87  
 
    
 		              
 		              
 		          
 
   $ 133,589       2.02 %   $ 123,783       2.55 %   $ 124,953       3.07 %
 
    
 		              
 		              
 		          

9.   SHORT-TERM BORROWINGS
 
    Short-term borrowings consist of Federal Home Loan Bank (“FHLB”) advances maturing within one year at a weighted average rate of 1.68% at September 30, 2004 (unaudited). The advances are secured by a blanket lien on qualified collateral as described in Note 10.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

10.   LONG-TERM DEBT
 
    Long-term debt consists of the following:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
FHLB advances
   $ 46,000     $ 36,000     $ 36,000  
Subordinated debt
     9,000       9,000       9,000  
 
    
 		      
 		      
 		  
 
   $ 55,000     $ 45,000     $ 45,000  
 
    
 		      
 		      
 		  

FHLB Advances

     Additional information pertaining to FHLB advances at September 30, 2004 (unaudited) and December 31, 2003 and 2002 are as follows:

                                 
    September 30, 2004
   December 31, 2003 and 2002
            Weighted           Weighted
            Average           Average
Maturity Date
   Amount
   Rate
   Amount
   Rate
    (Unaudited)                
2007
   $ 10,000       3.12 %   $ —       — %
2009*
     6,000       4.91       6,000       4.91  
2011*
     30,000       4.38       30,000       4.38  
 
    
 		              
 		          
 
   $ 46,000       4.18 %   $ 36,000       4.47 %
 
    
 		              
 		          

*   All advances are callable during the remaining period until maturity by the FHLB at its option and in its sole discretion.

    The Bank also has an available line of credit with the FHLB at an interest rate that adjusts daily. At September 30, 2004 (unaudited), December 31, 2003 and 2002, borrowings under the line were limited to $500, none of which was outstanding.
 
    Borrowings under the line are limited to 2% of the Bank’s total assets. All borrowings from the Federal Home Loan Bank are secured by a blanket lien on qualified collateral, defined principally as 75% of the carrying value of first mortgage loans on owner-occupied residential property and 90% of the market value of U.S. Government and federal agency securities. At September 30, 2004 (unaudited), December 31, 2003 and 2002 the carrying amount of assets qualifying as collateral for FHLB advances amounted to $223,956, $167,559 and $162,519, respectively.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    LONG-TERM DEBT (concluded)
 
    Subordinated Debt
 
    During the fourth quarter of 2002, the Company raised net proceeds of $8.7 million in a sale of $9.0 million of subordinated debentures to Benjamin Franklin Capital Trust I (the “Trust”), a wholly-owned subsidiary of the Company. The Trust funded the purchase by participating in a pooled offering of 9,000 capital securities representing preferred ownership interests in the assets of the Trust with a liquidation value of $1,000 each. Using interest payments made by the Company on the debentures, the Trust will pay quarterly dividends to preferred security holders. The percentage rate of interest payable on the subordinated debentures and the cumulative dividends payable quarterly on the preferred securities is 6.94% for the first five years and thereafter will be at a rate equal to the three month Libor rate plus 3.45%. The Company has the option to defer interest payments on the subordinated debentures for up to five years and, accordingly, the Trust may defer dividend distributions for up to five years. The debentures and the preferred securities mature in November 2032 unless the Company elects and obtains regulatory approval to accelerate the maturity date to November 2007 or thereafter.
 
    The outstanding preferred securities are classified as subordinated debt and may be included in regulatory Tier 1 capital (See Note 13), subject to a limitation that such amounts not exceed 25% of Tier 1 capital. At September 30, 2004 (unaudited), December 31, 2003 and 2002, subordinated debt aggregating $9,000, $8,945 and $8,321, respectively, is included in Tier 1 capital. Deferred debt financing costs are included in other assets and are amortized over the life of the debentures.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

11. INCOME TAXES

     Allocation of the federal and state income taxes between current and deferred portions is as follows:

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Current tax provision (benefit):
                                        
Federal
   $ 473     $ 752     $ 863     $ 1,304     $ (546 )
State
     105       158       125       144       175  
 
    
 		      
 		      
 		      
 		      
 		  
 
     578       910       988       1,448       (371 )
 
    
 		      
 		      
 		      
 		      
 		  
Deferred tax provision (benefit):
                                        
Federal
     27       (140 )     (73 )     (221 )     977  
State
     16       (67 )     (44 )     (260 )     (17 )
 
    
 		      
 		      
 		      
 		      
 		  
 
     43       (207 )     (117 )     (481 )     960  
Change in valuation reserve
     5       (52 )     (52 )     (524 )     1,021  
 
    
 		      
 		      
 		      
 		      
 		  
 
     48       (259 )     (169 )     (1,005 )     1,981  
 
    
 		      
 		      
 		      
 		      
 		  
Total tax provision
   $ 626     $ 651     $ 819     $ 443     $ 1,610  
 
    
 		      
 		      
 		      
 		      
 		  

    The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

                                         
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
   2001
    (Unaudited)                        
Statutory rate
     34.0 %     34.0 %     34.0 %     34.0 %     34.0 %
Increase (decrease) resulting from:
                                        
State taxes, net of federal tax
     4.1       3.0       2.1       (2.4 )     6.3  
Change in valuation reserve
     —       (2.5 )     (2.1 )     (16.7 )     61.9  
Officers’ life insurance
     (1.8 )     (2.1 )     (3.4 )     (0.5 )     —  
Change in estimate
     (4.0 )     —       —       —       —  
Other, net
     —       (0.3 )     2.1       (0.3 )     (4.7 )
 
    
 		      
 		      
 		      
 		      
 		  
Effective tax rates
     32.3 %     32.1 %     32.7 %     14.1 %     97.5 %
 
    
 		      
 		      
 		      
 		      
 		  

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Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    INCOME TAXES (continued)
 
    The components of the net deferred tax liability, included in other liabilities, are as follows:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Deferred tax liability:
                        
Federal
   $ 1,223     $ 1,153     $ 1,345  
State
     399       370       399  
 
    
 		      
 		      
 		  
 
     1,622       1,523       1,744  
 
    
 		      
 		      
 		  
Deferred tax asset:
                        
Federal
     (3,438 )     (3,339 )     (3,250 )
State
     (397 )     (372 )     (319 )
 
    
 		      
 		      
 		  
 
     (3,835 )     (3,711 )     (3,569 )
Valuation reserve
     2,278       2,273       2,325  
 
    
 		      
 		      
 		  
 
     (1,557 )     (1,438 )     (1,244 )
 
    
 		      
 		      
 		  
Net deferred tax liability
   $ 65     $ 85     $ 500  
 
    
 		      
 		      
 		  

    The tax effects of each type of income and expense item that give rise to deferred taxes are as follows:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Allowance for loan losses
   $ (1,150 )   $ (959 )   $ (852 )
Employee benefit plans
     (84 )     (151 )     (139 )
Net unrealized gain/loss on securities available for sale
     (189 )     (121 )     125  
Depreciation and amortization
     615       604       573  
Net deferred loan costs
     484       297       239  
Mortgage servicing rights
     295       353       364  
Capital loss carryforward
     (2,278 )     (2,273 )     (2,325 )
Other, net
     94       62       190  
 
    
 		      
 		      
 		  
 
     (2,213 )     (2,188 )     (1,825 )
Valuation reserve
     2,278       2,273       2,325  
 
    
 		      
 		      
 		  
 
   $ 65     $ 85     $ 500  
 
    
 		      
 		      
 		  

    At September 30, 2004 (unaudited) and December 31, 2003, the Company has a capital loss carryover of $6,701 and $6,684, respectively, available to offset future capital gains which expires in 2006. The change in the valuation reserve for the nine months ended September 30, 2004 (unaudited) and the year ended December 31, 2003 is due to the change in the capital loss carryforward.

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Table of Contents

BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    INCOME TAXES (concluded)
 
    The federal income tax reserve for loan losses at the Bank’s base year amounted to $3,055. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used (limited to the amount of the reserve) would be subject to taxation in the year in which used. As the Bank intends to use the reserve only to absorb loan losses, a deferred tax liability of $1,253 has not been provided.
 
12.   COMMITMENTS AND CONTINGENCIES
 
    In the normal course of business, there are outstanding commitments which are not reflected in the accompanying consolidated financial statements.
 
    Loan commitments
 
    The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and advance funds on outstanding lines-of-credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
 
    The Bank’s exposure to credit loss is represented by the contractual amount of the commitments. The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
 
    At September 30, 2004 (unaudited), December 31, 2003 and 2002, the following financial instruments were outstanding whose contract amounts represent credit risk:

                         
    September 30,
   December 31,
    2004
   2003
   2002
    (Unaudited)                
Commitments to grant loans
   $ 7,055     $ 11,567     $ 16,123  
Commitments to purchase loans
     —       2,953       540  
Unadvanced funds on construction loans
     11,483       10,264       9,722  
Unadvanced funds on home equity lines-of-credit
     28,839       24,812       19,250  
Unadvanced funds on commercial lines-of-credit
     3,412       3,717       4,412  
Unadvanced funds on personal lines-of-credit
     2,158       2,200       2,443  

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    COMMITMENTS AND CONTINGENCIES (concluded)
 
    Loan commitments (concluded)
 
    Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines-of-credit may expire without being drawn upon, therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. Funds disbursed under commitments to grant loans and home equity lines-of-credit are primarily secured by real estate, and commercial lines-of-credit are generally secured by business assets. Personal lines-of-credit are unsecured.
 
    Other commitments
 
    As of September 30, 2004 (unaudited) and December 31, 2003, the Bank had entered into two purchase and sale agreements to sell two parcels of land, one located in Medway, Massachusetts for $450 and the other located in Wrentham, Massachusetts for $400.
 
    Derivative financial instruments
 
    The Bank uses rate-lock agreements with individual borrowers and investor loan sale commitments for mortgage banking activities. These transactions involve both credit and market risk.
 
    From time to time, the Bank enters into rate lock agreements with individual borrowers which require the Bank to originate a loan at a specific interest rate upon completion of various underwriting requirements. In addition, the Bank generally enters into investor loan sale commitments which represent agreements to sell these loans to investors at a predetermined price. If the individual loan is not available for sale (i.e. the loan does not close), the Bank may fill the commitment with a similar loan, or pay a fee to terminate the contract.
 
    At September 30, 2004 (unaudited), December 31, 2003 and 2002, the Bank had $557, $715 and $14,748, respectively, in loan commitments to sell mortgage loans under rate lock agreements with borrowers. At September 30, 2004 (unaudited), December 31, 2003 and 2002, the Bank had $557, $715 and $14,748, respectively, in outstanding investor loan sale commitments. The gain or loss related to these derivative financial instruments is not material.
 
    Other contingencies
 
    Various legal claims also arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

F-32

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

13.   MINIMUM REGULATORY CAPITAL REQUIREMENTS
 
    The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Mutual holding companies are not covered by the prompt corrective action provisions of the capital guidelines.
 
    Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1 capital to average assets (as defined). Management believes, as of September 30, 2004 (unaudited), December 31, 2003 and 2002, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

F-33

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

MINIMUM REGULATORY CAPITAL REQUIREMENTS (continued)

    As of December 31, 2003, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed the Bank’s category. The Company’s and the Bank’s actual capital amounts and ratios as of September 30, 2004 (unaudited), December 31, 2003 and 2002 are also presented in the table.

                                                 
                                    Minimum
                                    To Be Well
                    Minimum   Capitalized Under
                    Capital   Prompt Corrective
    Actual
   Requirements
   Action Provisions
    Amount
   Ratio
   Amount
   Ratio
   Amount
   Ratio
September 30, 2004 (Unaudited):
                                                
Total capital to risk weighted assets:
                                                
Consolidated
   $ 40,298       12.7 %   $ 25,476       8.0 %     N/A       N/A  
Bank
     39,498       12.5       25,371       8.0     $ 31,714       10.0 %
Tier 1 capital to risk weighted assets:
                                                
Consolidated
     37,281       11.7       12,738       4.0       N/A       N/A  
Bank
     36,481       11.5       12,685       4.0       19,028       6.0  
Tier 1 capital to average assets:
                                                
Consolidated
     37,281       7.4       20,093       4.0       N/A       N/A  
Bank
     36,481       7.3       20,059       4.0       25,074       5.0  
December 31, 2003:
                                                
Total capital to risk weighted assets:
                                                
Consolidated
   $ 38,357       14.2 %   $ 21,647       8.0 %     N/A       N/A  
Bank
     37,717       13.9       21,647       8.0     $ 27,058       10.0 %
Tier 1 capital to risk weighted assets:
                                                
Consolidated
     35,779       13.2       10,823       4.0       N/A       N/A  
Bank
     35,194       13.0       10,823       4.0       16,235       6.0  
Tier 1 capital to average assets:
                                                
Consolidated
     35,779       7.8       18,461       4.0       N/A       N/A  
Bank
     35,194       7.6       18,416       4.0       23,020       5.0  

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

MINIMUM REGULATORY CAPITAL REQUIREMENTS (concluded)

                                                 
                                    Minimum
                                    To Be Well
                    Minimum   Capitalized Under
                    Capital   Prompt Corrective
    Actual
   Requirements
   Action Provisions
    Amount
   Ratio
   Amount
   Ratio
   Amount
   Ratio
December 31, 2002:
                                                
Total capital to risk weighted assets:
                                                
Consolidated
   $ 36,276       13.8 %   $ 20,988       8.0 %     N/A       N/A  
Bank
     35,527       13.5       20,988       8.0     $ 26,235       10.0 %
Tier 1 capital to risk weighted assets:
                                                
Consolidated
     33,285       12.7       10,494       4.0       N/A       N/A  
Bank
     33,215       12.7       10,494       4.0       15,741       6.0  
Tier 1 capital to average assets:
                                                
Consolidated
     33,285       7.4       17,942       4.0       N/A       N/A  
Bank
     33,215       7.4       17,933       4.0       22,416       5.0  

14.   EMPLOYEE BENEFIT PLANS
 
    Pension plan

The Bank had provided pension benefits for eligible employees electing participation through the Savings Bank’s Employee Retirement Association’s (SBERA) Pension Plan (the “Plan”). Effective December 31, 2000, the Bank elected to curtail the pension plan subject to the Bank’s capital to assets ratio exceeding 7%. As the Bank exceeded the required capital ratio during the year ended December 31, 2002, a curtailment loss of $741 was recognized. Effective August 14, 2003, assets of the Plan were fully settled and allocated to the participants.

     401(k) plan

The Bank adopted a 401(k) savings plan, which provides for voluntary contributions by participating employees up to seventy-five percent of their compensation, subject to certain limitations. Under the terms of the plan, the Bank at its discretion will match two hundred percent of an employee’s contribution to the 401(k) plan subject to a maximum of 6% of the employee’s compensation. Total expense under the 401(k) plan for the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003, 2002 and 2001, amounted to $279, $321, $437, $413 and $418, respectively.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    EMPLOYEE BENEFIT PLANS (concluded)
 
    Supplemental executive plan
 
    The Bank has adopted a Supplemental Executive Retirement Plan, which provides for certain of the Bank’s executives to receive monthly benefits upon retirement, subject to certain limitations as set forth in the Plan. The present value of these future benefits is accrued over the executives’ terms of employment, and the expense for the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003, 2002 and 2001 amounted to $78, $71, $101, $70 and $60, respectively.
 
    Executive employment agreement
 
    The Bank has entered into an Executive Employment Agreement with the President which expires on December 31, 2006 and provides for, among other things, an annual base salary and severance upon termination of employment. However, such employment may be terminated for cause, as defined, without incurring any continuing obligation. The agreement also provides for automatic extensions for one year on the anniversary date of the agreement.
 
15.   LOANS TO RELATED PARTIES
 
    In the ordinary course of business, the Bank grants loans to its officers and directors and their affiliates as follows:

                         
    Nine Months Ended   Years Ended December 31,
    September 30,        
    2004
   2003
   2002
    (Unaudited)                
Beginning balance
   $ 2,563     $ 2,759     $ 2,477  
Originations
     369       1,216       1,338  
Payments and change in status
     (504 )     (1,412 )     (1,056 )
 
    
 		      
 		      
 		  
Ending balance
   $ 2,428     $ 2,563     $ 2,759  
 
    
 		      
 		      
 		  

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

16.   FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Statement of Financial Accounting Standards No. SFAS 107, Disclosures about Fair Value of Financial Instruments, excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
 
    The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

    Cash and cash equivalents: The carrying amounts of these instruments approximate fair values.
 
    Securities: Fair values for securities, excluding restricted equity securities, are based on quoted market prices. The carrying value of restricted equity securities approximates fair value based on the redemption provisions of the issuers.
 
    Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for residential mortgage loans and certain consumer loans are generally based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for commercial real estate and investment property mortgage loans, commercial and industrial loans and certain consumer loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for non-performing loans are estimated using the lower of underlying collateral values or cost.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

    Deposits: The fair values disclosed for non-certificate accounts are, by definition, equal to the amount payable on demand at the reporting date which is the carrying amount. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
 
    Short-term borrowings: The carrying amounts of short-term borrowings approximate fair value.
 
    Long-term debt: Fair values of long-term debt are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.
 
    Accrued interest: The carrying amount of accrued interest approximates fair value.
 
    Derivative financial instruments: Fair values of derivative financial instruments are based on the present value of the difference between the committed interest rate and the current interest rate for similar agreements, taking into account the remaining terms of the agreements.
 
    Off-balance-sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these instruments is not material.
 
    The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:

                                                 
    September 30,   December 31,
    2004
   2003
   2002
    Carrying   Fair   Carrying   Fair   Carrying   Fair
    Amount
   Value
   Amount
   Value
   Amount
   Value
    (Unaudited)                                
Financial assets:
                                                
Cash and cash equivalents
   $ 15,126     $ 15,126     $ 35,485     $ 35,485     $ 52,036     $ 52,036  
Securities available for sale
     94,423       94,423       102,646       102,646       108,520       108,520  
Securities held to maturity
     266       271       386       398       986       1,023  
Restricted equity securities
     6,862       6,862       7,222       7,222       5,222       5,222  
Loans, net
     375,516       374,133       288,862       288,535       261,933       279,443  
Accrued interest receivable
     1,495       1,495       1,388       1,388       1,299       1,299  
Financial liabilities:
                                                
Deposits
     399,562       399,816       380,257       381,479       373,300       374,518  
Short-term borrowings
     29,000       29,000       —       —       —       —  
Long-term debt
     55,000       58,036       45,000       46,461       45,000       47,852  
Accrued interest payable
     263       263       225       225       254       254  
On-balance sheet derivative financial instruments:
                                                
Rate-lock agreements-(liability) asset
     —       2       —       4       —       (87 )
Investor loan sale commitments-asset (liability)
     —       (2 )     —       (4 )     —       87  

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

17.   SUBSEQUENT EVENTS
 
    Stock Conversion
 
    On October 28, 2004, the Board of Trustees of the Company adopted a Plan of Conversion (the “Plan”) whereby the Company will convert to a Massachusetts-chartered stock corporation known as Benjamin Franklin Bancorp, Inc. (the “Stock Holding Company”) and offer Stock Holding Company stock on a priority basis to qualifying depositors, tax-qualified employee plans, and employees, officers, directors and trustees of the Bank and the Company, with any remaining shares to be offered to the public in a direct community offering and possibly in a syndicated community offering (the “Conversion”).
 
    As part of the Conversion, the Company will establish a liquidation account in an amount equal to the net worth of the Company as of the date of the latest consolidated balance sheet appearing in the final prospectus distributed in connection with the Conversion. The liquidation account will be maintained for the benefit of eligible account holders and supplemental eligible account holders who maintain their accounts at the Company after the Conversion. The liquidation account will be reduced annually to the extent that such account holders have reduced their qualifying deposits as of each anniversary date. Subsequent increases will not restore an account holder’s interest in the liquidation account. In the event of a complete liquidation, each eligible account holder will be entitled to receive balances for accounts then held.
 
    Subsequent to the Conversion, the Company may not declare or pay dividends on, and may not repurchase, any of its shares of common stock if the effect thereof would cause stockholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration, payment or repurchase would otherwise violate regulatory requirements.
 
    Conversion costs will be deferred and reduce the proceeds from the shares sold in the Conversion. If the Conversion is not completed, all costs will be expensed. As of September 30, 2004, no Conversion costs have been incurred.
 
    As part of the Conversion, the Bank intends to enter into employment agreements or change of control agreements with certain executive officers, which in the case of the President would replace his existing employment agreement. In addition, as part of the Conversion, the Bank intends to implement an employee stock ownership plan and other benefit and salary continuation plans for directors, officers and employees.

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BENJAMIN FRANKLIN BANCORP, M.H.C. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

(Dollars in Thousands)

    SUBSEQUENT EVENTS (concluded)
 
    Charitable Foundation
 
    As part of the Conversion, the Company intends to form a charitable foundation (the “Foundation”) by donating to the Foundation a number of shares of its authorized but unissued common stock in an amount up to 8% of the lesser of (i) the number of shares actually sold in the Conversion or (ii) the number of shares that would have been sold at the midpoint of the estimated valuation range of the Conversion.
 
    Merger Agreement
 
    On September 1, 2004, the Company and the Bank signed an Agreement and Plan of Merger with Chart Bank, A Cooperative Bank (“Chart”), a Massachusetts-chartered stock bank located in Waltham, Massachusetts, whereby Chart, subject to the Company’s Conversion, will be acquired by the Company and merged into the Bank.
 
    Upon completion of the Company’s Conversion, each share of Chart’s common stock issued and outstanding immediately prior to the merger shall be converted into, and shall be cancelled in exchange for, the right to receive 3.075 shares of the Company’s common stock or a cash amount equal to $30.75 per share of Chart’s common stock. The per share stock consideration assumes a $10 per share price for the Company’s common stock to be sold in the Conversion. In addition, each option to purchase Chart’s stock outstanding at the effective date of the merger, whether or not vested, shall be terminated and each grantee thereof shall be entitled to receive an amount of cash equal to the excess of the $30.75 per share cash consideration over the option exercise price.
 
    The merger is subject to regulatory approval and satisfaction of certain closing conditions.
 
    The Conversion and merger of Chart are expected to close on the same day and at substantially the same time, however, the Conversion is not conditioned upon the merger of Chart.

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CHART BANK, A COOPERATIVE BANK

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

         
    Page
Independent Auditors’ Report
     G-2  
Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003 and 2002
     G-3  
Consolidated Statements of Income for the Nine Months Ended September 30, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003 and 2002
     G-4  
Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003 and 2002
     G-5  
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (unaudited) and for the Years Ended December 31, 2003 and 2002
     G-6  
Notes to Consolidated Financial Statements
     G-8  

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Table of Contents

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of
Chart Bank, A Cooperative Bank
Waltham, Massachusetts

We have audited the accompanying consolidated balance sheets of Chart Bank, A Cooperative Bank and subsidiaries, as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chart Bank, A Cooperative Bank and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

WOLF & COMPANY, P.C.

Boston, Massachusetts
February 20, 2004, except for Note 13 as to which
     the date is September 1, 2004

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
ASSETS
Cash and due from banks
   $ 35,808     $ 32,882     $ 33,663  
Short-term investments
     2,965       1,992       11,090  
 
    
 		      
 		      
 		  
Total cash and cash equivalents
     38,773       34,874       44,753  
 
    
 		      
 		      
 		  
Securities available for sale, at fair value
     3,669       5,404       16,506  
Securities held to maturity, at amortized cost
     31,826       23,965       13,026  
Loans
     177,325       141,547       124,501  
Allowance for loan losses
     (1,753 )     (1,657 )     (1,536 )
 
    
 		      
 		      
 		  
Loans, net
     175,572       139,890       122,965  
 
    
 		      
 		      
 		  
Banking premises and equipment, net
     2,171       2,400       2,594  
Federal Home Loan Bank stock, at cost
     1,662       1,060       1,060  
Co-operative Central Bank deposit
     536       536       536  
Accrued interest receivable
     966       816       779  
Deferred income taxes
     348       352       257  
Other assets
     738       557       456  
 
    
 		      
 		      
 		  
 
   $ 256,261     $ 209,854     $ 202,932  
 
    
 		      
 		      
 		  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
   $ 215,972     $ 175,801     $ 170,279  
Federal Home Loan Bank advances:
                        
Short-term
     11,000       5,202       4,000  
Long-term
     11,000       10,728       10,986  
Mortgagors’ escrow accounts
     417       307       280  
Other liabilities
     326       417       1,326  
 
    
 		      
 		      
 		  
Total liabilities
     238,715       192,455       186,871  
 
    
 		      
 		      
 		  
Commitments and contingencies (Note 11)
                       
Stockholders’ equity:
                        
Preferred stock; $1 par value, 3,000,000 shares authorized; none issued
     —       —       —  
Common stock - - Series B; $1 par value; 3,000,000 shares authorized; none issued
     —       —       —  
Common stock - - Series A; $1 par value; 3,000,000 shares authorized; 1,420,000 shares issued and outstanding
     1,420       1,420       1,420  
Additional paid-in capital
     11,575       11,575       11,575  
Retained earnings
     4,524       4,337       2,848  
Accumulated other comprehensive income
     27       67       218  
 
    
 		      
 		      
 		  
Total stockholders’ equity
     17,546       17,399       16,061  
 
    
 		      
 		      
 		  
 
   $ 256,261     $ 209,854     $ 202,932  
 
    
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands)

                                 
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
    (Unaudited)                
Interest and dividend income:
                                
Interest and fees on loans
   $ 7,225     $ 6,747     $ 8,971     $ 9,573  
Interest and dividends on securities:
                                
Taxable interest on securities
     667       775       990       1,218  
Dividends on securities
     57       24       31       39  
Other interest income
     57       75       99       203  
 
    
 		      
 		      
 		      
 		  
Total interest and dividend income
     8,006       7,621       10,091       11,033  
 
    
 		      
 		      
 		      
 		  
Interest expense:
                                
Interest on deposits
     2,331       2,332       3,014       3,909  
Interest on borrowed funds:
                                
Short-term
     178       126       148       153  
Long-term
     223       190       290       404  
 
    
 		      
 		      
 		      
 		  
Total interest expense
     2,732       2,648       3,452       4,466  
 
    
 		      
 		      
 		      
 		  
Net interest income
     5,274       4,973       6,639       6,567  
Provision for loan losses
     90       90       120       120  
 
    
 		      
 		      
 		      
 		  
Net interest income, after provision for loan losses
     5,184       4,883       6,519       6,447  
 
    
 		      
 		      
 		      
 		  
Other income:
                                
ATM service contract fees
     1,368       1,344       1,755       1,437  
Customer service fees
     446       535       713       611  
Loan brokerage fees
     29       155       158       747  
Gain on sale of banking premises
     —       —       —       316  
Net gain on sales and redemptions of securities
     53       6       6       85  
Miscellaneous income
     20       8       33       74  
 
    
 		      
 		      
 		      
 		  
Total other income
     1,916       2,048       2,665       3,270  
 
    
 		      
 		      
 		      
 		  
Operating expenses:
                                
Salaries and employee benefits
     2,775       2,430       3,279       3,711  
Occupancy and equipment
     927       958       1,260       1,261  
Professional services
     293       240       343       389  
Advertising and marketing
     268       187       242       371  
Data processing
     423       333       433       518  
Merger expenses
     382       —       —       —  
Other general and administrative
     568       658       849       940  
 
    
 		      
 		      
 		      
 		  
Total operating expenses
     5,636       4,806       6,406       7,190  
 
    
 		      
 		      
 		      
 		  
Income before income taxes
     1,464       2,125       2,778       2,527  
Income tax provision
     680       823       1,076       958  
 
    
 		      
 		      
 		      
 		  
Net income
   $ 784     $ 1,302     $ 1,702     $ 1,569  
 
    
 		      
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2004 (Unaudited) and
Years Ended December 31, 2003 and 2002

(Dollars in Thousands)

                                                 
                                    Accumulated    
    Common Stock
   Additional           Other   Total
      Paid-in   Retained   Comprehensive   Stockholders’
    Shares
   Amount
   Capital
   Earnings
   Income
   Equity
Balance at December 31, 2001
     1,420     $ 1,420     $ 11,575     $ 1,634     $ 351     $ 14,980  
 
                                            
 		  
Comprehensive income:
                                                
Net income
     —       —       —       1,569       —       1,569  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects
     —       —       —       —       (133 )     (133 )
 
                                            
 		  
Total comprehensive income
                                             1,436  
 
                                            
 		  
Cash dividends declared ($.25 per share)
     —       —       —       (355 )     —       (355 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balance at December 31, 2002
     1,420       1,420       11,575       2,848       218       16,061  
 
                                            
 		  
Comprehensive income:
                                                
Net income
     —       —       —       1,702       —       1,702  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects
     —       —       —       —       (151 )     (151 )
 
                                            
 		  
Total comprehensive income
                                             1,551  
 
                                            
 		  
Cash dividends declared ($.15 per share)
     —       —       —       (213 )     —       (213 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balance at December 31, 2003
     1,420       1,420       11,575       4,337       67       17,399  
 
                                            
 		  
Comprehensive income:
                                                
Net income (unaudited)
     —       —       —       784       —       784  
Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects (unaudited)
     —       —       —       —       (40 )     (40 )
 
                                            
 		  
Total comprehensive income (unaudited)
                                             744  
 
                                            
 		  
Cash dividends declared ($.42 per share) (unaudited)
     —       —       —       (597 )     —       (597 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balance at September 30, 2004 (unaudited)
     1,420     $ 1,420     $ 11,575     $ 4,524     $ 27     $ 17,546  
 
    
 		      
 		      
 		      
 		      
 		      
 		  

See accompanying notes to consolidated financial statements.

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

                                 
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
    (Unaudited)                
Cash flows from operating activities:
                                
Net income
   $ 784     $ 1,302     $ 1,702     $ 1,569  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Provision for loan losses
     90       90       120       120  
Gain on sale of banking premises
     —       —       —       (316 )
Net gain on sales and redemptions of securities
     (53 )     (6 )     (6 )     (85 )
Depreciation and amortization
     307       320       429       434  
Deferred tax provision (benefit)
     30       5       6       (49 )
Net (increase) decrease in accrued interest receivable
     (150 )     (14 )     (37 )     71  
Other, net
     (243 )     (928 )     (961 )     533  
 
    
 		      
 		      
 		      
 		  
Net cash provided by operating activities
     765       769       1,253       2,277  
 
    
 		      
 		      
 		      
 		  
Cash flows from investing activities:
                                
Activity in securities available for sale:
                                
Maturities and redemptions
     3,158       10,331       10,831       11,901  
Sales
     900       —       —       2,567  
Purchases
     (2,346 )     —       —       (9,550 )
Activity in securities held to maturity:
                                
Maturities and redemptions
     5,482       10,614       12,114       1,999  
Purchases
     (13,362 )     (19,081 )     (23,077 )     (15,031 )
Net loan (originations) principal payments
     (21,770 )     (8,404 )     (17,045 )     3,003  
Purchase of loans
     (14,002 )     —       —       —  
Purchase of banking premises and equipment
     (78 )     (197 )     (235 )     (405 )
Proceeds from the sale of banking premises
     —       —       —       475  
Purchase of Federal Home Loan Bank stock
     (602 )     —       —       (73 )
 
    
 		      
 		      
 		      
 		  
Net cash used by investing activities
     (42,620 )     (6,737 )     (17,412 )     (5,114 )
 
    
 		      
 		      
 		      
 		  

(continued)

See accompanying notes to consolidated financial statements.

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)

(Dollars in Thousands)

                                 
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
    (Unaudited)                
Cash flows from financing activities:
                                
Net increase in deposits
     40,171       1,948       5,522       24,730  
Activity in Federal Home Loan Bank advances:
                                
Net increase (decrease) in advances with maturities within three months
     (5,202 )     (4,000 )     1,202       (1,004 )
Proceeds from issuance of advances with maturities greater than three months
     15,000       3,000       3,000       7,500  
Repayments of advances with maturities greater than three months
     (3,728 )     (192 )     (3,258 )     (11,241 )
Net change in mortgagors’ escrow accounts
     110       49       27       (79 )
Cash dividends paid on common stock
     (597 )     (213 )     (213 )     (355 )
 
    
 		      
 		      
 		      
 		  
Net cash provided by financing activities
     45,754       592       6,280       19,551  
 
    
 		      
 		      
 		      
 		  
Net change in cash and cash equivalents
     3,899       (5,376 )     (9,879 )     16,714  
Cash and cash equivalents at beginning of period
     34,874       44,753       44,753       28,039  
 
    
 		      
 		      
 		      
 		  
Cash and cash equivalents at end of period
   $ 38,773     $ 39,377     $ 34,874     $ 44,753  
 
    
 		      
 		      
 		      
 		  
Supplemental cash flow information:
                                
Interest paid on deposits
   $ 2,326     $ 2,336     $ 3,015     $ 3,878  
Interest paid on borrowed funds
     394       315       439       564  
Net income tax payments
     654       862       1,139       1,281  

See accompanying notes to consolidated financial statements.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2004 and 2003 (Unaudited) and
Years Ended December 31, 2003 and 2002

(Dollars in Thousands)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    Basis of presentation and consolidation
 
    The consolidated financial statements include the accounts of Chart Bank, A Cooperative Bank (the “Bank”) and its wholly-owned subsidiaries, Creative Strategic Solutions, Inc. (“CSSI”), which provides electronic commerce, electronic funds transfer, automated teller machine services and related consulting services, and Weston Street Securities Corporation, which buys, sells and holds securities. All significant intercompany balances and transactions have been eliminated in consolidation.
 
    Unaudited interim financial statements
 
    The consolidated financial statements and related notes as of September 30, 2004 and for the nine months ended September 30, 2004 and 2003 are unaudited. All adjustments, consisting of only normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the financial information, have been made.
 
    Business
 
    The Bank is a full service community bank that provides financial services, through its three offices in Waltham and Newton, including a complete line of personal and consumer accounts as well as an extensive line of commercial loan services to accounts in eastern Massachusetts. In addition, the Bank, through its subsidiary CSSI, provides electronic commerce, electronic funds transfer, automated teller machine services and related consulting services to the financial services industry, while offering services and specific products to third parties throughout the United States.
 
    Use of estimates
 
    In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Reclassifications
 
    Certain amounts in the 2002 consolidated financial statements have been reclassified to conform to the 2003 presentation.
 
    Cash and cash equivalents
 
    Cash equivalents include amounts due from banks and short-term investments, which consist of federal funds sold and investment in the Bank Investment Liquidity Fund. The Bank is required to maintain average balances on hand or with the Federal Reserve Bank. At September 30, 2004 (unaudited), December 31, 2003 and 2002, the required reserve balance amounted to $2,172, $1,160 and $1,080, respectively.
 
    Securities
 
    Securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. All other securities are classified as available for sale and recorded at fair value, with unrealized gains and losses excluded from income and reported in other comprehensive income/loss.
 
    Discounts and premiums are recognized in income over the term of the securities, by the interest method. Gains and losses on disposition of securities are computed by the specific identification method.
 
    Loans
 
    The Bank grants mortgage and consumer loans to customers and a substantial portion of the loan portfolio is represented by mortgage loans in the Waltham and Newton areas. The ability of the Bank’s debtors to honor their contracts is dependent upon the real estate and economic sectors.
 
    Loans are reported at their outstanding principal balances, adjusted for charge-offs, the allowance for loan losses, deferred loan origination fees or costs and loan purchase premiums.
 
    Interest is not accrued on loans, including impaired loans, ninety days or more past due, unless the loan is well-secured and in process of collection. Past due status is based on contractual terms of the loan. Interest income previously accrued on such loans is reversed against current period income. In addition, interest collected is applied to principal when management is uncertain as to the collectibility of the principal balance. Net deferred loan costs/fees and purchase premiums are amortized over the life of the related loan on the interest method.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Loans (concluded)
 
    Loans are considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan by loan basis by the fair value of the collateral.
 
    Allowance for loan losses
 
    The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to operations. Loan losses, including loan losses on impaired loans, are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
 
    The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of known and inherent risks in the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
 
    The allowance consists of allocated, general and unallocated components. The allocated component relates to loans that are classified as either substandard or loss. For such loans that are also classified as impaired, an allowance is established when the collateral value of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating losses in the portfolio.
 
    Banking premises and equipment
 
    Land is carried at cost. Building, leasehold improvements and equipment are stated at cost, less accumulated depreciation and amortization, computed principally on the straight-line method over the estimated useful lives of the assets or the anticipated term of the lease, if shorter.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
    Income taxes
 
    Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted accordingly through the provision for income taxes. The Bank’s base amount of its federal income tax reserve for loan losses is a permanent difference for which there is no recognition of a deferred tax liability. However, the loan loss allowance maintained for financial reporting purposes is a temporary difference with allowable recognition of a related deferred tax asset, if it is deemed realizable.
 
    Transfers of financial assets
 
    Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
 
    Advertising and marketing costs
 
    Advertising and marketing costs are expensed as incurred.
 
    Stock compensation plan
 
    In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” the Bank has elected to measure compensation cost for its stock option plan using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Bank’s stock option plan have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The pro forma impact of accounting for stock options granted in accordance with SFAS No. 123 was not material.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    Comprehensive income
 
    Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on securities available for sale, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income. The components of other comprehensive income/loss and related tax effects are as follows:

                         
    Before-Tax     Tax     Net-of-Tax  
    Amount     Effects     Amount  
Nine months ended September 30, 2004 (unaudited)
                        
Unrealized holding losses on securities available for sale
   $ (13 )   $ 5     $ (8 )
Reclassification adjustment for gains realized in income
     (53 )     21       (32 )
 
                  
Other comprehensive loss
   $ (66 )   $ 26     $ (40 )
 
                  
Nine months ended September 30, 2003 (unaudited)
                        
Unrealized holding losses on securities available for sale
   $ (201 )   $ 81     $ (120 )
Reclassification adjustment for gains realized in income
     (6 )     2       (4 )
 
                  
Other comprehensive loss
   $ (207 )   $ 83     $ (124 )
 
                  
 
                        
Year ended December 31, 2003
                        
Unrealized holding losses on securities available for sale
   $ (246 )   $ 99     $ (147 )
Reclassification adjustment for gains realized in income
     (6 )     2       (4 )
 
                  
Other comprehensive loss
   $ (252 )   $ 101     $ (151 )
 
                  
 
                        
Year ended December 31, 2002
                        
Unrealized holding losses on securities available for sale
   $ (136 )   $ 54     $ (82 )
Reclassification adjustment for gains realized in income
     (85 )     34       (51 )
 
                  
Other comprehensive loss
   $ (221 )   $ 88     $ (133 )
 
                  

    Recent accounting pronouncements
 
    On June 30, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment,” which is an Amendment of SFAS Nos. 123 and 95. SFAS No. 123R changes, among other things, the manner in which share-based compensation, such as stock options, will be accounted for by both public and non-public companies. SFAS No. 123R allows nonpublic entities, such as the Bank, to elect to measure compensation cost of awards of equity share options and similar instruments at intrinsic value through the date of settlement and therefore, is not expected to have a material impact on the Bank’s consolidated financial statements.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

    Recent accounting pronouncements (concluded)
 
    On September 30, 2004, the FASB issued FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which provides guidance for determining the meaning of “other-than-temporarily impaired” and its application to certain debt and equity securities within the scope of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and investments accounted for under the cost method. The guidance requires that investments which have declined in value due to credit concerns or solely due to changes in interest rates must be recorded as other-than-temporarily impaired unless the Bank can assert and demonstrate its intention to hold the security for a period of time sufficient to allow for a recovery of fair value up to or beyond the cost of the investment which might mean maturity. The delay of the effective date of EITF 03-1 will be superceded concurrent with the final issuance of proposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect the Bank.
 
2.   SECURITIES
 
    The amortized cost, gross unrealized gains and losses and fair value of securities follows. At December 31, 2003 and 2002, all securities consisted of federal agency obligations.

                                 
            Gross   Gross    
    Amortized   Unrealized   Unrealized   Fair
    Cost
   Gains
   Losses
   Value
September 30, 2004 (unaudited)
                                
Securities available for sale:
                                
Federal agency obligations
   $ 2,009     $ 26     $ —     $ 2,035  
Marketable equity securities
     1,614       59       (39 )     1,634  
 
    
 		      
 		      
 		      
 		  
Total securities available for sale
   $ 3,623     $ 85     $ (39 )   $ 3,669  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity:
                                
Federal agency obligations
   $ 31,826     $ 66     $ (150 )   $ 31,742  
 
    
 		      
 		      
 		      
 		  

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SECURITIES (continued)

                                 
            Gross   Gross    
    Amortized   Unrealized   Unrealized   Fair
    Cost
   Gains
   Losses
   Value
December 31, 2003
                                
Securities available for sale
   $ 5,292     $ 112     $ —     $ 5,404  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity
   $ 23,965     $ 113     $ (118 )   $ 23,960  
 
    
 		      
 		      
 		      
 		  
December 31, 2002
                                
Securities available for sale
   $ 16,142     $ 364     $ —     $ 16,506  
 
    
 		      
 		      
 		      
 		  
Securities held to maturity
   $ 13,026     $ 146     $ —     $ 13,172  
 
    
 		      
 		      
 		      
 		  

    The carrying value and estimated fair value of debt securities by contractual maturity at September 30, 2004 (unaudited) and December 31, 2003, follows. Expected maturities may differ from contractual maturities because the issuer may have the right to call or prepay obligations with or without call or prepayment penalties.

                                 
    Available for Sale
   Held to Maturity
    Amortized   Fair   Amortized   Fair
    Cost
   Value
   Cost
   Value
September 30, 2004 (unaudited)
                                
Within 1 year
   $ 1,500     $ 1,514     $ —     $ —  
Over 1 year to 2 years
     509       521       17,019       16,967  
Over 2 years to 5 years
     —       —       14,807       14,775  
 
    
 		      
 		      
 		      
 		  
 
   $ 2,009     $ 2,035     $ 31,826     $ 31,742  
 
    
 		      
 		      
 		      
 		  
December 31, 2003
                                
Within 1 year
   $ 3,777     $ 3,826     $ —     $ —  
Over 1 year to 2 years
     1,515       1,578       3,002       3,051  
Over 2 years to 5 years
     —       —       20,963       20,909  
 
    
 		      
 		      
 		      
 		  
 
   $ 5,292     $ 5,404     $ 23,965     $ 23,960  
 
    
 		      
 		      
 		      
 		  

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SECURITIES (concluded)
 
    Proceeds from the sales of securities for the nine months ended September 30, 2004 (unaudited) amounted to $900, which realized gross gains of $54 and gross losses of $4. There were no sales of securities in 2003. Proceeds from sales of securities available for sale for the year ended December 31, 2002 amounted to $2,567, which realized gross gains of $68 and no losses.
 
    At September 30, 2004 (unaudited), December 31, 2003 and 2002, securities with a fair value of $6,559, $5,775 and $4,867, respectively, were pledged to secure municipal deposits, the Bank’s treasury, tax and loan account and funds advanced under the Federal Reserve borrowing agreement. (See Note 6.)
 
    At September 30, 2004 (unaudited), five marketable equity securities with a fair value of $173 had unrealized losses of $39 or 5% of cost. These unrealized losses have existed for less than twelve months and relate principally to the financial services industry. No credit issues have been identified that cause management to believe the declines are other-than-temporary.
 
    At September 30, 2004 (unaudited), eleven securities held to maturity with a fair value of $10,941 had unrealized losses of $110 or 1% of amortized cost in a continuous loss position for over twelve months. At September 30, 2003 (unaudited), twelve securities held to maturity with a fair value of $7,056 had unrealized losses of $40 or 1% of amortized cost in a continuous loss position for less than twelve months. The declines in value are due principally to the effect that rising interest rates have on the value of the securities. The securities are issued by government agencies, therefore impairment is not deemed to be other-than-temporary.
 
    At December 31, 2003, eleven securities held to maturity with a fair value of $11,950 had unrealized losses of $118, or 1% of amortized cost. All of these securities had been in a continuous loss position for less than twelve months. The decline in value is due principally to the effect that rising interest rates have on the value of the securities. The securities are issued by government agencies, therefore impairment is not deemed to be other-than-temporary.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

3.   LOANS
 
    The composition of the balance of loans follows:

                         
            December 31,
    September 30,        
    2004
   2003
   2002
    (Unaudited)                
Real estate mortgage loans:
                        
Residential
   $ 57,696     $ 31,113     $ 29,015  
Home equity lines-of-credit
     6,881       6,462       4,640  
Commercial
     99,614       91,774       83,652  
Construction loans
     8,225       6,498       3,327  
 
    
 		      
 		      
 		  
 
     172,416       135,847       120,634  
 
    
 		      
 		      
 		  
Commercial loans:
                        
Secured
     4,029       3,913       3,182  
Unsecured
     95       512       255  
 
    
 		      
 		      
 		  
 
     4,124       4,425       3,437  
 
    
 		      
 		      
 		  
Consumer loans:
                        
Consumer share secured
     132       741       61  
Other consumer
     209       429       338  
 
    
 		      
 		      
 		  
 
     341       1,170       399  
 
    
 		      
 		      
 		  
Total loans
     176,881       141,442       124,470  
 
Allowance for loan losses
     (1,753 )     (1,657 )     (1,536 )
Net deferred loan origination costs
     200       105       31  
Net loan purchase premiums
    244       —       —  
 
    
 		      
 		      
 		  
Loans, net
   $ 175,572     $ 139,890     $ 122,965  
 
    
 		      
 		      
 		  

    An analysis of the allowance for loan losses follows:

                                 
    Nine Months Ended   Years Ended
    September 30,
   December 31,
    2004
   2003
   2003
   2002
    (Unaudited)                
Balance at beginning of period
   $ 1,657     $ 1,536     $ 1,536     $ 1,387  
Provision for loan losses
     90       90       120       120  
Recoveries
     12       6       6       60  
Charge-offs
     (6 )     (5 )     (5 )     (31 )
 
    
 		      
 		      
 		      
 		  
Balance at end of period
   $ 1,753     $ 1,627     $ 1,657     $ 1,536  
 
    
 		      
 		      
 		      
 		  

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    LOANS (concluded)
 
    At September 30, 2004 (unaudited), impaired and non-accrual loans amounted to $119. For the nine months ended September 30, 2004 and 2003 (unaudited), the average balance of impaired loans was $89 and $10, respectively, and $10 and $0, respectively, in interest income was recognized on impaired loans on the cash basis during the period they were impaired.
 
    At December 31, 2003, impaired and non-accrual loans amounted to $120. For the year ended December 31, 2003, the average balance of impaired loans was $40 and $1 in interest income was recognized on impaired loans on the cash basis during the period they were impaired. There were no non-accrual or impaired loans at or for the year ended December 31, 2002.
 
    At September 30, 2004 (unaudited) and December 31, 2003 and 2002, accruing loans past due greater than ninety days amounted to $25, 93 and $25, respectively.
 
    Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $10,475, $10,553 and $10,945 at September 30, 2004 (unaudited), December 31, 2003 and 2002, respectively. Loans sold did not contain recourse provisions.
 
4.   BANKING PREMISES AND EQUIPMENT
 
    A summary of the cost and accumulated depreciation and amortization of banking premises and equipment follows:

                                 
            December 31,
    
    September 30,                   Estimated
    2004
   2003
   2002
   Useful Lives
    (Unaudited)                        
Banking premises:
                                
Land
   $ 380     $ 380     $ 380          
Building and improvements
     1,181       1,181       1,181     10-35 years
Leasehold improvements
     671       665       653     10 years
Furniture, fixtures and equipment
     2,862       2,790       2,578     3-10 years
 
    
 		      
 		      
 		          
 
     5,094       5,016       4,792          
Less accumulated depreciation and amortization
     (2,923 )     (2,616 )     (2,198 )        
 
    
 		      
 		      
 		          
 
   $ 2,171     $ 2,400     $ 2,594          
 
    
 		      
 		      
 		          

    Depreciation and amortization expense for the nine months ended September 30, 2004 and 2003 (unaudited) and the years ended December 31, 2003 and 2002 amounted to $307, $320, $429 and $434, respectively.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

5.   DEPOSITS
 
    A summary of deposit balances by type follows:

                         
            December 31,
    September 30,        
    2004
   2003
   2002
    (Unaudited)                
Demand deposits
   $ 33,205     $ 30,458     $ 27,701  
NOW accounts
     11,266       9,601       9,384  
Money market deposits
     64,383       50,977       49,848  
Other savings accounts
     14,630       21,479       18,988  
 
    
 		      
 		      
 		  
Total non-certificate accounts
     123,484       112,515       105,921  
 
    
 		      
 		      
 		  
Term certificates less than $100
     48,762       32,013       38,094  
Term certificates of $100 or more
     43,726       31,273       26,264  
 
    
 		      
 		      
 		  
Total certificate accounts
     92,488       63,286       64,358  
 
    
 		      
 		      
 		  
 
   $ 215,972     $ 175,801     $ 170,279  
 
    
 		      
 		      
 		  

    A summary of term certificates by maturity at follows:

                                                 
    September 30,   December 31,
    2004
   2003
   2002
            Weighted           Weighted           Weighted
            Average           Average           Average
    Amount
   Rate
   Amount
   Rate
   Amount
   Rate
    (Unaudited)                                
Within 1 year
   $ 17,359       1.99 %   $ 20,600       1.71 %   $ 23,020       2.36 %
Over 1 year to 3 years
     70,041       2.72       39,684       2.89       39,859       4.05  
Over 3 years to 5 years
     5,088       3.59       3,002       3.38       1,479       5.48  
 
    
 		              
 		              
 		          
 
   $ 92,488       2.64 %   $ 63,286       2.53 %   $ 64,358       3.48 %
 
    
 		              
 		              
 		          

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

6.   BORROWED FUNDS
 
    Borrowed funds consist of advances from the Federal Home Loan Bank of Boston (“FHLB”). Short-term advances mature within one year and have a weighted average interest rate of 2.20%, 1.24% and 1.56% at September 30, 2004 (unaudited), December 31, 2003 and 2002, respectively. Long-term advances are as follows:

                                                 
    September 30,   December 31,
    2004
   2003
   2002
            Weighted           Weighted           Weighted
            Average           Average           Average
    Amount
   Rate
   Amount
   Rate
   Amount
   Rate
    (Unaudited)                                
Fixed-rate advances maturing:
                                                
2003
   $ —       — %   $ —       — %   $ 5,000       3.25 %
2004
     2,000       4.25       5,500       3.91       5,500       3.91  
2005
     4,000       1.44       —       —       —       —  
2006
     2,000       2.82       2,000       2.82       —       —  
2008
     3,000       3.79       3,000       3.79       —       —  
Amortizing advance, due September 30, 2004, requiring monthly principal and interest of $23,500
     —       —       228       6.38       486       6.38  
 
    
 		              
 		              
 		          
 
   $ 11,000       2.84 %   $ 10,728       3.73 %   $ 10,986       3.72 %
 
    
 		              
 		              
 		          

    At September 30, 2004 (unaudited), December 31, 2003 and 2002, the Bank’s unadvanced Ideal Way line of credit available from the FHLB amounted to $2,389, $187 and $2,389, respectively, at an interest rate that adjusts daily. All FHLB borrowings are secured primarily by a blanket lien on the Bank’s unencumbered residential real estate loan portfolio and at September 30, 2004 (unaudited), December 31, 2003 and 2002, $45,148, $27,793 and $11,265, respectively, in commercial real estate loans in accordance with the FHLB’s products policy.
 
    The Bank also maintains a borrowing agreement with the Federal Reserve Bank of Boston at an interest rate that adjusts daily. Advances are limited to the amount of collateral pledged. At September 30, 2004 (unaudited), December 31, 2003 and 2002, certain federal agency obligations are pledged as collateral under this agreement and no advances are outstanding.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

7.   INCOME TAXES
 
    The allocation of income taxes between current and deferred portions is as follows:

                                 
    Nine Months Ended    
    September 30,
   Years Ended December 31,
    2004
   2003
   2003
   2002
    (Unaudited)
Current tax provision:
                                
Federal
   $ 533     $ 621     $ 872     $ 845  
State
     117       197       198       162  
 
    
 		      
 		      
 		      
 		  
 
     650       818       1,070       1,007  
 
    
 		      
 		      
 		      
 		  
Deferred tax provision (benefit):
                                
Federal
     22       4       5       (37 )
State
     8       1       1       (12 )
 
    
 		      
 		      
 		      
 		  
 
     30       5       6       (49 )
 
    
 		      
 		      
 		      
 		  
 
   $ 680     $ 823     $ 1,076     $ 958  
 
    
 		      
 		      
 		      
 		  

    For the nine months ended September 30, 2004 and 2003 (unaudited), and years ended December 31, 2003 and 2002, the reason for the difference between the statutory federal income tax rate of 34% and the effective rates of 46.4%, 38.7%, 38.7% and 37.9%, respectively, is state taxes, net of federal tax benefit and, for the nine months ended September 30, 2004 (unaudited), a 6.6% increase in the effective tax rate due to non-tax deductible merger expenses.
 
    The components of the net deferred tax asset are as follows:

                         
            December 31,
    September 30,            
    2004
   2003
 2002
    (Unaudited)                
Deferred tax asset:
                        
Federal
   $ 534     $ 504     $ 467  
State
     184       174       161  
 
    
 		      
 		      
 		  
 
     718       678       628  
 
    
 		      
 		      
 		  
Deferred tax liability:
                        
Federal
     (277 )     (247 )     (289 )
State
     (93 )     (79 )     (82 )
 
    
 		      
 		      
 		  
 
     (370 )     (326 )     (371 )
 
    
 		      
 		      
 		  
Net deferred tax asset
   $ 348     $ 352     $ 257  
 
    
 		      
 		      
 		  

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    INCOME TAXES (concluded)
 
    The tax effects of each type of income and expense item that gives rise to deferred taxes are as follows:

                         
            December 31,
    September 30,        
    2004
   2003
   2002
    (Unaudited)                
Cash basis of accounting
   $ (4 )   $ (3 )   $ (4 )
Net unrealized gain on securities available for sale
     (19 )     (45 )     (146 )
Depreciation and amortization
     (62 )     (32 )     (9 )
Deferred income
     (78 )     (43 )     (13 )
Allowance for loan losses
     511       474       430  
Other
     —       1       (1 )
 
    
 		      
 		      
 		  
Net deferred tax asset
   $ 348     $ 352     $ 257  
 
    
 		      
 		      
 		  

    A summary of the change in the net deferred tax asset is as follows:

                                 
    Nine Months Ended   Years Ended
    September 30,
   December 31,
    2004
   2003
   2003
   2002
    (Unaudited)                
Balance at beginning of period
   $ 352     $ 257     $ 257     $ 120  
Deferred tax (provision) benefit
     (30 )     (5 )     (6 )     49  
Change in deferred tax effect of net unrealized gain/loss on securities available for sale
     26       83       101       88  
 
    
 		      
 		      
 		      
 		  
Balance at end of period
   $ 348     $ 335     $ 352     $ 257  
 
    
 		      
 		      
 		      
 		  

    There was no valuation reserve required during the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003 and 2002.

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Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

8.   EMPLOYEE BENEFIT PLAN
 
    The Bank has a 401(k) Plan whereby each employee reaching the age of 21 and having completed six months of service automatically becomes a participant in the Plan. Employees may contribute up to 15% of their compensation subject to certain limits based on federal tax laws. The Bank may make discretionary matching contributions each Plan year proportionate to the employee’s contribution up to 4% of the employee’s compensation. The Bank’s contributions vest 20% per year of service and are fully vested after five years. For the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003 and 2002, expense attributable to the Plan amounted to $61, $58, $78 and $90, respectively.
 
9.   MINIMUM REGULATORY CAPITAL REQUIREMENTS
 
    The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
 
    Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 2004 (unaudited), December 31, 2003 and 2002, that the Bank met all capital adequacy requirements to which it is subject.

G-22

Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    MINIMUM REGULATORY CAPITAL REQUIREMENTS (concluded)
 
    As of September 30, 2004 (unaudited) and December 31, 2003, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed the Bank’s category. The Bank’s actual capital amounts and ratios as of September 30, 2004 (unaudited), December 31, 2003 and 2002 are also presented in the table.

                                                 
                                    Minimum
                                    To Be Well
                    Minimum   Capitalized Under
                    Capital   Prompt Corrective
    Actual
   Requirements
   Action Provisions
    Amount
   Ratio
   Amount
   Ratio
   Amount
   Ratio
September 30, 2004 (unaudited)
                                                
Total capital
(to risk weighted assets)
   $ 19,281       12.0 %   $ 12,904       8.0 %   $ 16,130       10.0 %
Tier 1 capital
(to risk weighted assets)
     17,519       10.9       6,452       4.0       9,678       6.0  
Tier 1 capital
(to average assets)
     17,519       6.8       10,377       4.0       12,971       5.0  
December 31, 2003
                                                
Total capital
(to risk weighted assets)
   $ 18,989       12.4 %   $ 12,274       8.0 %   $ 15,343       10.0 %
Tier 1 capital
(to risk weighted assets)
     17,332       11.3       6,137       4.0       9,206       6.0  
Tier 1 capital
(to average assets)
     17,332       8.4       8,279       4.0       10,349       5.0  
December 31, 2002
                                                
Total capital
(to risk weighted assets)
   $ 17,379       11.9 %   $ 11,737       8.0 %   $ 14,672       10.0 %
Tier 1 capital
(to risk weighted assets)
     15,843       10.8       5,869       4.0       8,803       6.0  
Tier 1 capital
(to average assets)
     15,843       7.9       8,007       4.0       10,009       5.0  

G-23

Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

10.   STOCK OPTION PLAN
 
    During 1996 and amended in 2000, the Bank adopted a stock option plan for the benefit of employees of the Bank covering 142,000 shares of common stock, all of which were granted by the end of 2000. At September 30, 2004 (unaudited), December 31, 2003, 2002 and 2001, there were 137,000 options outstanding. The exercise period for all options is ten years and the exercise price is $10 per share, adjusted for stock splits and dividends in stock. The options vest over periods up to five years from the date of grant. At September 30, 2004 (unaudited), December 31, 2003 and 2002, 126,200, 120,200 and 106,800 options, respectively, were exercisable. At September 30, 2004 (unaudited) and December 31, 2003, the weighted average remaining contractual life of outstanding options was 3.8 and 4.6 years, respectively.
 
11.   COMMITMENTS AND CONTINGENCIES
 
    General
 
    In the ordinary course of business, various legal claims arise from time to time and, in the opinion of management, these claims will have no material effect on the Bank’s consolidated financial statements.
 
    Employment and consulting agreements
 
    The Bank has entered into an employment and consulting agreement with the former Chief Executive Officer of the Bank and an employment agreement with the current Chief Executive Officer for periods of not less than three years. The agreements generally provide for a specified minimum annual salary, which may be increased at the discretion of the Bank’s Board of Directors, and continuation of benefits currently received. The agreements provide for certain lump sum severance payments within a one-year period following a “change in control,” as defined in the agreements. (See Note 13.)
 
    Loan commitments
 
    The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and advance funds on home equity and commercial lines-of-credit and construction loans and standby letters-of-credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss is represented by the contractual amount or unpaid principal balance of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

G-24

Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    COMMITMENTS AND CONTINGENCIES (continued)
 
    Loan commitments (concluded)
 
    The contract amount of financial instruments which represent credit risk are as follows:

                         
    September 30,   December 31,
    2004
   2003
   2002
    (Unaudited)                
Commitments to grant loans
   $ 8,623     $ 12,176     $ 1,134  
Unadvanced funds on home equity lines-of-credit
     6,637       4,988       4,637  
Unadvanced funds on commercial lines-of-credit
     11,803       7,714       6,428  
Unadvanced funds on construction loans
     4,601       2,749       2,411  
Standby letters-of-credit
     618       542       232  

    Commitments to grant loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for home equity and commercial lines-of-credit may expire without being drawn upon, therefore, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s credit worthiness on a case-by-case basis and these financial instruments are generally collateralized by real estate or other assets.
 
    Standby letters-of-credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters-of-credit are primarily issued to support public and private borrowing arrangements. Essentially all letters-of-credit issued have expiration dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending loan facilities to customers. The Bank collateralizes those commitments for which collateral is deemed necessary.
 
    Lease commitments
 
    Pursuant to the terms of lease agreements in effect at the dates noted, pertaining to banking premises, future minimum rent commitments are as follows:

                 
Year Ending   September 30,   December 31,
December 31,
  2004
   2003
    (Unaudited)        
2004
   $ 75     $ 319  
2005
     150       233  
2006
     138       138  
2007
     138       138  
2008
     34       34  
 
    
 		      
 		  
 
   $ 535     $ 862  
 
    
 		      
 		  

G-25

Table of Contents

CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    COMMITMENTS AND CONTINGENCIES (concluded)
 
    Lease commitments (concluded)
 
    In addition to the minimum rental payments, the leases contain renewal options for up to forty years. The cost of such options is not included above. Rent expense for the nine months ended September 30, 2004 (unaudited) and 2003 and years ended December 31, 2003 and 2002 amounted to $240, $240, $320 and $323, respectively.
 
    The Bank leases an office from a director of the Bank. At September 30, 2004 (unaudited) and December 31, 2003, future minimum rent commitments, included in the table above, total $481 and $584, respectively, through 2008. The lease contains renewal options for four additional ten year periods. Rent expense under this lease for the nine months ended September 30, 2004 and 2003 (unaudited) and years ended December 31, 2003 and 2002 amounted to $103, $103, $139 and $139, respectively.
 
12.   FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Bank’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Bank.
 
    The following methods and assumptions were used by the Bank in estimating fair value disclosures for financial instruments:

    Cash and cash equivalents: The carrying amounts of cash, due from banks and short-term investments approximate fair values.
 
    Securities: Fair values are based on quoted market prices.
 
    FHLB stock: The carrying value of FHLB stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank of Boston.

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

    Loans: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms, adjusted for credit risk.
 
    Accrued interest: The carrying amounts of accrued interest approximate fair values.
 
    Deposits: The fair values for non-certificate accounts are, by definition, equal to the amount payable on demand at the reporting date which is the carrying amount. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.
 
    FHLB advances: The fair value of FHLB advances is estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rates for similar types of borrowing arrangements.
 
    Off-balance-sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The estimated fair values of off-balance-sheet instruments are immaterial.

    The estimated fair values, and related carrying amounts, of the Bank’s financial instruments are as follows:

                                                 
    September 30,   December 31,
    2004
   2003
   2002
    Carrying   Fair   Carrying   Fair   Carrying   Fair
    Amount
   Value
   Amount
   Value
   Amount
   Value
    (Unaudited)                                
Financial assets:
                                                
Cash and cash equivalents
   $ 38,773     $ 38,773     $ 34,874     $ 34,874     $ 44,753     $ 44,753  
Securities available for sale
     3,669       3,669       5,404       5,404       16,506       16,506  
Securities held to maturity
     31,826       31,742       23,965       23,960       13,026       13,172  
FHLB stock
     1,662       1,662       1,060       1,060       1,060       1,060  
Loans, net
     175,572       175,749       139,890       144,079       122,965       130,729  
Accrued interest receivable
     966       966       816       816       779       779  
Financial liabilities:
                                                
Deposits
     215,972       215,717       175,801       176,409       170,279       171,045  
FHLB advances
     22,000       21,938       15,930       15,941       14,986       15,162  

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

13.   MERGER AGREEMENT
 
    On September 1, 2004, the Bank signed an Agreement and Plan of Merger with Benjamin Franklin Bancorp, MHC (Benjamin Franklin Bancorp), a Massachusetts-chartered mutual holding company, and Benjamin Franklin Savings Bank (Benjamin Franklin Bank), a Massachusetts-chartered savings bank and wholly-owned subsidiary of Benjamin Franklin Bancorp. Benjamin Franklin Bancorp and Benjamin Franklin Bank are located in Franklin, Massachusetts. Benjamin Franklin Bancorp will convert from mutual to stock form pursuant to a plan of conversion. The Bank will merge with Benjamin Franklin Bank, with Benjamin Franklin Bank as the surviving bank.
 
    Each share of the Bank’s common stock issued and outstanding immediately prior to the merger shall be converted into, and shall be cancelled in exchange for, the right to receive 3.075 shares of Benjamin Franklin Bancorp common stock or a cash amount equal to $30.75 per share of the Bank’s common stock. The per share stock consideration assumes a $10 per share price for Benjamin Franklin Bancorp’s common stock to be sold in the mutual-to-stock conversion.
 
    In addition, each option to purchase Chart Bank stock outstanding at the effective date of the merger, whether or not vested, shall be terminated and each grantee thereof shall be entitled to receive an amount of cash equal to the excess of the $30.75 per share cash consideration over the option exercise price.
 
    The Bank’s employment agreements with the former and current Chief Executive Officer will terminate upon completion of the merger.
 
    The merger is subject to regulatory approval and satisfaction of certain closing conditions.
 
    Merger expenses incurred through September 30, 2004 (unaudited) amounted to $382.
 
14.   SEGMENT REPORTING
 
    The Bank has two reportable segments, its traditional banking business and the operations of CSSI (see Note 1).

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

    SEGMENT REPORTING (continued)
 
    Information about reportable segments, and reconciliation of such information to the consolidated financial statements at or for the periods ended follows:

                                 
                    Intersegment   Consolidated
    Bank
   CSSI
   Elimination
   Totals
September 30, 2004 (unaudited)
                                
Net interest income (loss)
   $ 5,274     $ (351 )   $ 351     $ 5,274  
Other revenue - external customers
     548       1,368       —       1,916  
Depreciation and amortization
     307       —       —       307  
Provision for loan losses
     90       —       —       90  
Income tax provision
     422       258       —       680  
Profit (loss)
     412       372       —       784  
Assets
     261,334       38,835       (43,908 )     256,261  
Expenditures for additions to premises and equipment
     78       —       —       78  
September 30, 2003 (unaudited)
                                
Net interest income
   $ 4,973     $ (334 )   $ 334     $ 4,973  
Other revenue - external customers
     704       1,344       —       2,048  
Depreciation and amortization
     320       —       —       320  
Provision for loan losses
     90       —       —       90  
Income tax provision
     551       272       —       823  
Profit (loss)
     911       391       —       1,302  
Assets
     207,569       31,313       (35,178 )     203,704  
Expenditures for additions to premises and equipment
     197       —       —       197  
December 31, 2003
                                
Net interest income
   $ 6,639     $ (433 )   $ 433     $ 6,639  
Other revenue - external customers
     910       1,755       —       2,665  
Depreciation and amortization
     429       —       —       429  
Provision for loan losses
     120       —       —       120  
Income tax provision
     718       358       —       1,076  
Profit (loss)
     1,187       515       —       1,702  
Assets
     214,124       33,112       (37,382 )     209,854  
Expenditures for additions to premises and equipment
     235       —       —       235  
December 31, 2002
                                
Net interest income
   $ 6,567     $ (515 )   $ 515     $ 6,567  
Other revenue - external customers
     1,833       1,437       —       3,270  
Depreciation and amortization
     434       —       —       434  
Provision for loan losses
     120       —       —       120  
Income tax provision
     778       180       —       958  
Profit (loss)
     1,310       259       —       1,569  
Assets
     206,117       30,770       (33,955 )     202,932  
Expenditures for additions to premises and equipment
     405       —       —       405  

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CHART BANK, A COOPERATIVE BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

(Dollars in Thousands)

    SEGMENT REPORTING (concluded)
 
    The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Bank evaluates performance based on net income.
 
    The Bank’s reportable segments are strategic business units that offer different products and services. They are managed separately because each segment appeals to different markets and, accordingly, requires different technology and marketing strategies.
 
    The Bank derives a majority of its revenues from interest income and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segments and make decisions about resources to be allocated to the segment. Therefore, the segments are reported using net interest income. Other revenue represents noninterest income.
 
    The Bank does not have operating segments other than those reported and does not have a single external customer from which it derives 10 percent or more of its revenues and operates in one geographical area.

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You should rely only on information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.

Up to 6,612,500

Shares of
Common Stock

BENJAMIN FRANKLIN BANCORP, INC.

(Holding Company for Benjamin Franklin Bank)

_________________________________

PROSPECTUS
_________________________________

Ryan Beck & Co., Inc.

[_____________], 2005

Until the later of [_____] 2005 or 25 days after commencement of the syndicated community offering, if any, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

Table of Contents

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

         
* Legal fees and expenses
   $ 675,000  
* Printing, postage and mailing
     75,000  
* Appraisal and business plan fees and expenses
     95,000  
* Accounting fees and expenses
     75,000  
* Conversion agent and data processing fees
     45,000  
** Marketing agent fees and expenses
     465,000  
* Filing fees (Massachusetts Commissioner of Banks, Massachusetts Secretary of State, NASD, Nasdaq and * SEC)
     196,000  
* Other
     100,000  
 
      
* Total
   $ 1,726,000  
 
      

*   Estimated
 
**   Benjamin Franklin Bancorp has retained Ryan Beck & Co., Inc. to assist in the sale of common stock on a best efforts basis in the offering. Fees are estimated at the midpoint of the offering range

Item 14. Indemnification of Directors and Officers.

     Sections 8.50-8.59 of the Massachusetts Business Corporation Act authorize a Massachusetts corporation to indemnify its present and former directors and officers under certain conditions. Article 7 of our by-laws provides that we shall indemnify each person who serves or has served as a director or officer at the level of Vice President or above to the fullest extent permitted by applicable law, against expenses (including attorney’s fees), judgments, fines, ERISA excise taxes, penalties, and amounts reasonably paid in settlement incurred in connection with any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative, arbitrative or investigative (without regard to whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity for or on behalf of Benjamin Franklin Bancorp while serving as a director or officer) or any claim, issue or matter therein, which proceeding such director or officer is, or is threatened to be made, a party to or participant in by reason of the fact that he or she is or was one of our directors or officers or was serving at our request as a director, officer, trustee, or in a similar capacity with another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The rights of indemnification continue as to a director or officer after he or she has ceased to be a director or officer and shall inure to the benefit of his or her heirs, estate, executors, administrators and personal representatives. No amendment, termination or repeal of the provisions of Article 7 of our by-laws or of the relevant provisions of the Massachusetts Business Corporation Act shall affect or deprive a director or officer of the benefit of those by-laws or applicable law with respect to any proceeding arising out of or relating to any actions, transactions or facts occurring prior to such amendment, termination or repeal.

     Section 2.02 of the Massachusetts Business Corporation Act authorizes a Massachusetts corporation to adopt a charter provision eliminating or limiting the personal liability of directors to the corporation for monetary damages for breach of fiduciary duty as directors, provided that the provision may not eliminate or limit the liability of directors for:

  •   any breach of the director’s duty of loyalty to the corporation or its stockholders;

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  •   any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
  •   any improper distributions to stockholders under Section 6.40 of the Massachusetts Business Corporation Act; or
 
  •   any transaction from which the director derived an improper personal benefit.

     Section 6.5.4 of Benjamin Franklin Bancorp’s articles of organization provides that, to the maximum extent permitted by the Massachusetts Business Corporation Act, none of our directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability. No amendment to or repeal of the provisions of Section 6.5.4 shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any act or failure to act of such director occurring prior to such amendment or repeal. If the Massachusetts Business Corporation Act is subsequently amended to further eliminate or limit the personal liability of directors or to authorize corporate action to further eliminate or limit such liability, then the liability of the directors will be eliminated or limited to the fullest extent permitted by the Massachusetts Business Corporation Act as so amended. A principal effect of Section 6.5.4 is to limit or eliminate the potential liability of our directors for monetary damages arising from breaches of their duty of care, unless the breach involves one of the four exceptions described above.

     Section 8.57 of the Massachusetts Business Corporation Act also authorizes a Massachusetts corporation to obtain insurance on behalf of its directors and officers against liability incurred by them in those capacities. We have procured a directors’ and officers’ liability and company reimbursement liability insurance policy that insures (a) our directors and officers against losses, above a deductible amount, arising from specified types of claims made against them by reason of enumerated acts done or attempted by our directors or officers and (b) us against losses, above a deductible amount, arising from any of the specified types of claims, but only if we are required or permitted to indemnify our directors or officers for those losses under statutory or common law or under provisions of our articles of organization or by-laws.

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16. Exhibits and Financial Schedules.

     (a) Exhibits

     
Exhibit No.   Description
1.1
  Engagement Letter between Benjamin Franklin Bancorp and Ryan Beck & Co. *
 
    
1.2
  Form of Agency Agreement between Benjamin Franklin Bancorp and Ryan Beck & Co.
 
    
2.1
  Plan of Conversion of Benjamin Franklin Bancorp.
 
    
2.2
  Agreement and Plan of Merger among Benjamin Franklin Bancorp, M.H.C., Benjamin Franklin Savings Bank and Chart Bank, a Cooperative Bank, dated as of September 1, 2004.*
 
    
3.1
  Articles of Organization of Benjamin Franklin Bancorp, Inc. *
 
    
3.2
  Bylaws of Benjamin Franklin Bancorp, Inc. *
 
    
4.1
  Form of Common Stock Certificate of Benjamin Franklin Bancorp, Inc.

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Table of Contents

     
Exhibit No.   Description
5.1
  Form of Opinion of Foley Hoag LLP regarding legality of securities being registered. *
 
    
8.1
  Tax Opinion of Foley Hoag LLP .
 
    
10.1.1
  Form of Employment Agreement with Thomas R. Venables.*
 
    
10.1.2
  Form of Employment Agreement with Claire S. Bean.*
 
    
10.1.3
  Form of Employment Agreement with Stephen F. Banks.*
 
    
10.2
  Form of Change in Control Agreement with six other Executive Officers.*
 
    
10.3
  Form of Benjamin Franklin Bank Benefit Restoration Plan.*
 
    
10.4.1
  Benjamin Franklin Bank Salary Continuation Agreement with Thomas R. Venables dated as of August 22, 2002.*
 
    
10.4.2
  Benjamin Franklin Bank Supplemental Executive Retirement Plan with Stephen F. Banks dated as of January 1, 2000.*
 
    
10.5
  Benjamin Franklin Bancorp Director Fee Continuation Plan. **
 
    
10.6
  Benjamin Franklin Bancorp Employee Salary Continuation Plan.*
 
    
10.7.1
  Payments and Waiver Agreement among Richard E. Bolton, Jr., Benjamin Franklin Bancorp, M.H.C., Benjamin Franklin Savings Bank and Chart Bank, a Cooperative Bank, dated as of September 1, 2004.*
 
    
10.7.2
  Consulting and Noncompetition Agreement between Richard E. Bolton, Jr. and Benjamin Franklin Bancorp, M.H.C., dated as of September 1, 2004.*
 
    
10.8
  Special Termination Agreement between Alfred F. Odoardi and Chart Bank dated as of August 20, 2004. *
 
    
21
  Subsidiaries of Registrant
 
    
23.1
  Consent of Foley Hoag LLP (contained in Opinion included as Exhibit 5)
 
    
23.2
  Consent of Foley Hoag LLP (contained in Opinion included as Exhibit 8.1)
 
    
23.3
  Consent of Wolf & Company, P.C. with respect to Benjamin Franklin Bancorp
 
    
23.4
  Consent of Wolf & Company, P.C. with respect to Chart Bank
 
    
23.5
  Consent of RP Financial, LC. *
 
    
24
  Power of Attorney *
 
    
99.1
  Appraisal Agreement between Benjamin Franklin Bancorp and RP Financial, LC. *
 
    
99.2
  Appraisal Report of RP Financial, LC. ***
 
    
99.3
  Business Plan Agreement between Benjamin Franklin Bancorp and RP Financial, LC. *
 
    
99.4
  Marketing Materials
 
    
99.5
  Order and Acknowledgment Form
 
    
99.7
  Prospectus Supplement for participants in the Benjamin Franklin Bank 401(k)
 
    
99.8
  Consents of Richard E. Bolton, Jr., Paul E. Capasso, Jonathan A. Haynes, Daniel F. O’Brien, Donald P. Quinn, and Neil E. Todreas, to be identified as proposed directors *

*   Previously filed
 
**   Incorporated by reference to the Registrant’s Registration Statement on Form S-4 filed on December 23, 2004
 
***   Excludes certain tabular and statistical information falling within the hardship exemption granted pursuant to Rule 202 of Regulation S-T.

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     (b) Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in our financial statements and related notes.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission that indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against those liabilities (other than our payment of expenses incurred or paid by one of our directors, officers or controlling persons of the registrant in the successful defense of any action, suit or proceeding) is asserted by our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether that indemnification by us is against public policy as expressed in the Securities Act and we will be governed by the final adjudication of such issue.

     We hereby undertake:

(1) To file, during any period in which it offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20.0% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Benjamin Franklin Bancorp, M.H.C. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Franklin, Commonwealth of Massachusetts, as of January 24, 2005.

         
  Benjamin Franklin Bancorp, M.H.C.
 		  
  By:        /s/ Thomas R. Venables    
    Thomas R. Venables   
    President and Chief Executive Officer   
 

POWER OF ATTORNEY

In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the in the indicated capacities as of January 24, 2005.

     
Signature   Title
 
/s/ Thomas R. Venables
  President and Chief Executive Officer, Director
Thomas R. Venables
  (Principal Executive Officer)
 
    
/s/ Claire S. Bean
  Treasurer and Chief Financial Officer
Claire S. Bean
  (Principal Financial and Accounting Officer)
 
    
*
Mary Ambler
  Director
 
    
*
William P. Bissonnette
  Director
 
    
*
William F. Brady, Jr.
  Director
 
    

John C. Fuller
  Director
 
    
*
Anne M. King
  Director
 
    
*
Richard D. Mann
  Director

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Signature   Title
 
John D. Murphy
  Director
 
    
*
Charles F. Oteri
  Director
 
    
*
Alfred H. Wahlers
  Director
 
    
*
Charles Yergatian
  Director
       
* By:
       /s/ Thomas R. Venables
Thomas R. Venables, Attorney-in-fact		  

II-6

EX-1.2 2 b52576a1exv1w2.txt EX-1.2 FORM OF AGENCY AGREEMENT EXHIBIT 1.2 __________ Shares (subject to increase up to _________ shares in the event of an oversubscription) BENJAMIN FRANKLIN BANCORP, INC. (a Massachusetts corporation) Common Stock (no par value) AGENCY AGREEMENT ___________, 2005 RYAN BECK & CO. 18 Columbia Turnpike Florham Park, New Jersey 07932 Ladies and Gentlemen: Benjamin Franklin Bancorp, M.H.C. (the "MHC"), a Massachusetts mutual holding company which intends to convert into a Massachusetts business corporation known as Benjamin Franklin Bancorp, Inc., a Massachusetts business corporation (the "Company"), and Benjamin Franklin Bank, a Massachusetts chartered savings bank (the "Bank"), hereby confirm their agreement with Ryan Beck & Co. ("Ryan Beck" or the "Agent") with respect to the offer and sale by the Company of ___________ shares (subject to increase up to _____________ shares in the event of an oversubscription) of the Company's Common Stock, no par value per share (the "Common Stock"). The shares of Common Stock to be sold by the Company are hereinafter called the "Securities." In addition, as described herein, the Company expects to contribute up to 400,000 shares of Common Stock to the Benjamin Franklin Bank Charitable Foundation (the "Foundation"), such shares hereinafter being referred to as the "Foundation Shares." The Securities are being offered for sale and the Foundation Shares are being contributed in accordance with the plan of conversion (the "Plan") adopted by the Board of Trustees of the MHC on October 28, 2004, as amended on ________, 2005, pursuant to which the MHC intends to convert from a Massachusetts chartered mutual holding company to a Massachusetts chartered business corporation and stock holding company. Pursuant to the Plan, the Company is offering to certain of the Bank's depositors, the Bank's Tax-Qualified Employee Plan, and each of the Company's and the Bank's directors, trustees, officers and employees who does not have a higher priority, the right to subscribe for the Securities in a subscription offering (the "Subscription Offering"). To the extent Securities are not subscribed for in the Subscription Offering, such Securities may be offered to certain members of the general public, with preference given to certain natural persons residing in the Massachusetts counties of Norfolk, Middlesex and Worcester, in a direct community offering (the "Community Offering" and together with the Subscription Offering, as each may be extended or reopened from time to time, the "Subscription and Community Offering") to be commenced concurrently with, during or promptly after the Subscription Offering. It is currently anticipated by the Bank, the MHC and the Company that any Securities not subscribed for in the Subscription and Community Offering will be offered, subject to Section 2 hereof, in a syndicated community offering (the "Syndicated Community Offering"). The Subscription and Community Offering and the Syndicated Community Offering are hereinafter referred to collectively as the "Offerings," and the conversion of the MHC from mutual to stock form and the Offerings are hereinafter referred to collectively as the "Conversion." The Securities may be offered to the general public in a public offering (the "Public Offering") in lieu of or subsequent to the Syndicated Community Offering. If there is a Public Offering, the Public Offering will be governed by a separate definitive purchase agreement as described in Section 2 hereof. It is acknowledged that the number of Securities to be sold in the Conversion may be increased or decreased as described in the Prospectus (as hereinafter defined). If the number of Securities is increased or decreased in accordance with the Plan, the term "Securities" shall mean such greater or lesser number, where applicable. Simultaneous with the consummation of the Conversion and the Offerings, the Company will acquire Chart Bank, A Cooperative Bank, a Massachusetts chartered stock co-operative bank ("Chart Bank") pursuant to the terms of an Agreement and Plan of Merger dated as of September 1, 2004 (the "Chart Bank Merger Agreement"). Chart Bank will merge with and into the Bank pursuant to the Chart Bank Merger Agreement (the "Chart Bank Merger"). The Chart Bank Merger will be accomplished in accordance with the laws of the Commonwealth of Massachusetts and the United States and applicable regulations of the Commonwealth of Massachusetts, the Federal Deposit Insurance Corporation [and the Board of Governors of the Federal Reserve System] (such laws and the regulations collectively, the "Chart Bank Merger Regulations"). Ryan Beck is serving as financial advisor to Chart Bank in connection with the Chart Bank Merger and has disclosed the engagement to the Company, the MHC and the Bank. Pursuant to the terms of the Chart Bank Merger Agreement, upon consummation of the Chart Bank Merger, each outstanding share of common stock, par value one dollar ($1.00) per share, of Chart Bank ("Chart Bank Common Stock"), will convert into the right to receive the Chart Bank Merger consideration of $30.75 per share of the Chart Bank Common Stock in the form of cash or 3.075 shares of common stock of the Company, subject to proration and allocation proceeds contained in the Chart Bank Merger Agreement. Each holder of an outstanding option to purchase the Chart Bank Common Stock will receive the difference between the applicable exercise price of the option and the $30.75 Chart Bank Merger consideration in the form of cash. The Chart Bank Merger is expected to close simultaneously with consummation of the Conversion. If the Conversion is not completed by July 15, 2005, the Bank may be required to pay a $2.3 million cash payment to Chart Bank. The Company has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-1 (No. 333--121154), including a related prospectus, for the registration of the Securities and the Foundation Shares under the Securities Act of 1933, as amended (the "Securities Act"), has filed such amendments thereto, if any, and such amended prospectuses as may have been required to the date hereof by the SEC in order to declare such registration statement effective, and will file such additional amendments thereto and such amended prospectuses and prospectus supplements as may hereafter be required. Such registration statement (as amended to date, if applicable, and as from time to time amended or supplemented hereafter) and the prospectuses constituting a part thereof (including in each case all documents incorporated or deemed to be incorporated by reference therein and the information, if any, deemed to be a part thereof pursuant to the rules and regulations of the SEC under the Securities Act, as from time to time amended or supplemented pursuant to the Securities Act or otherwise (the "Securities Act Regulations")), are hereinafter referred to as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus shall be used by the Company in connection with the Subscription and Community Offering or the Syndicated Community Offering which differs from the Prospectus on file at the SEC at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) of the Securities Act Regulations), the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Agent for such use. 2 The Company has also filed with the SEC a registration statement on Form S-4 (File No. 333-121608) (the "S-4 Registration Statement") containing a proxy statement to be used to solicit proxies of the Chart Bank stockholders with respect to the approval of the Chart Bank Merger. The Company has filed such amendments to the S-4 Registration Statement and such amended prospectus, on file with the SEC at the time the S-4 Registration Statement becomes effective is hereinafter called the "S-4 Prospectus," except that if the S-4 Prospectus filed by the Company pursuant to Rule 424(b) of the rules and regulations of the SEC under the 1933 Act Regulations differs from the prospectus on file at the time the Registration Statement becomes effective, the term "S-4 Prospectus" shall refer to the prospectus filed pursuant to Rule 424(b) from and after the time such prospectus is filed with or mailed to the SEC for filing. Concurrently with the execution of this Agreement, the Company is delivering to the Agent copies of the Prospectus to be used in the Subscription and Community Offering. The Prospectus contains information with respect to the Company, the MHC, the Bank and the Common Stock. SECTION 1. REPRESENTATIONS AND WARRANTIES. (a) The Company, the MHC and the Bank jointly and severally represent and warrant to the Agent as of the date hereof as follows: (i) The Registration Statement has been declared effective by the SEC, no stop order has been issued with respect thereto and no proceedings therefore have been initiated or, to the knowledge of the Company, the MHC and the Bank, threatened by the SEC. At the time the Registration Statement became effective and at the Closing Time referred to in Section 2 hereof, the Registration Statement complied and will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations. The Prospectus, at the date hereof does not, and at the Closing Time referred to in Section 2 hereof will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information with respect to the Agent furnished to the Company in writing by the Agent expressly for use in the Registration Statement or Prospectus (the "Agent Information," which the Company, the MHC and the Bank acknowledge appears only in the second paragraph of the section captioned "The Conversion and The Offering--Plan of Distribution and Marketing Arrangements" of the Prospectus and "The Acquisition of the Chart Bank and the Merger Agreement--Opinion of Financial Advisor" in the S-4 Registration Statement). (ii) The Company and the MHC have filed with the Board of Governors of the Federal Reserve System (the "FRB") the MHC's application for approval of its conversion to a Massachusetts chartered stock holding company of the Bank (the "Holding Company Application") on Form FR Y-3 promulgated under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and the regulations promulgated thereunder. The Company has received written notice from the FRB of its approval of the acquisition of the Bank, such approval remains in full force and effect and no order has been issued by the FRB suspending or revoking such approval and no proceedings therefor have been initiated or, to the knowledge of the Company, the MHC or the Bank, threatened by the FRB. At the date of such approval and at the Closing Time referred to in Section 2, the Holding Company Application complied and will comply in all material respects with the applicable provisions of the BHCA and the regulations promulgated thereunder. 3 (iii) Pursuant to Chapter 167H, Section 9 of Massachusetts General Laws and the regulations promulgated thereunder governing the conversion of Massachusetts chartered mutual holding companies to Massachusetts chartered stock holding companies and 209 CMR Part [33.__] et seq. (collectively, the "Offering Regulations"), the MHC has filed an application for conversion with the Massachusetts Commissioner of Banks (the "Commissioner"), including copies of the MHC's Information Statement for Special Meeting of its Corporators, dated _______, 2005, relating to the Conversion (the "Corporator Statement") and the Prospectus (such application, as amended to date, if applicable, and as from time to time amended or supplemented hereafter, is hereinafter referred to as the "Massachusetts Application"). The Commissioner has, by order dated ____________, 2005, approved the Massachusetts Application, such approval remains in full force and effect and no order has been issued by the Commissioner suspending or revoking such approval and no proceedings therefor have been initiated or, to the knowledge of the Company, the MHC or the Bank, threatened by the Commissioner. At the date of such approval by the Commissioner and at the Closing Time referred to in Section 2, the Massachusetts Application complied and will comply in all material respects with the applicable provisions of the Conversion Regulations. (iv) At the time of their use, the Prospectus will comply in all material respects with the applicable provisions of the Conversion Regulations and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company, the MHC and the Bank have filed the Prospectus and sales literature with the Commissioner and the FRB. The Prospectus and all supplemental sales literature, as of the date the Registration Statement became effective and at the Closing Time referred to in Section 2, complied and will comply in all material respects with the applicable requirements of the Conversion Regulations and, at or prior to the time of their first use, will have received all required authorizations of the Commissioner and the FRB for use in final form. (v) None of the SEC, the Commissioner, the FRB or any Blue Sky authority has, by order or otherwise, prevented or suspended the use of the Corporator Statement, Prospectus or any supplemental sales literature authorized by the Company, the MHC or the Bank for use in connection with the Offerings, and no action by or before any such governmental entity to prevent or suspend the use of the Corporator Statement, Prospectus or any supplemental sales literature is, to the best knowledge of the Company, the MHC and the Bank, pending or threatened. (vi) At the Closing Time referred to in Section 2, (i) the Company, the MHC and the Bank will have completed the conditions precedent to the Conversion and the Offerings and the establishment of the Foundation in accordance with the Plan, the Conversion Regulations and all other applicable laws, regulations, decisions and orders, including all material terms, conditions, requirements and provisions precedent to the Conversion imposed upon the Company, the MHC or the Bank by the FRB, the Commissioner or any other regulatory authority or Blue Sky authority, other than those which the regulatory authority permits to be completed after the Conversion; (ii) the Conversion and the Offerings and the establishment of the Foundation will have been effected in the manner described in the Prospectus and in accordance with the Plan, the Conversion Regulations and all other applicable material laws, regulations, decisions and orders, including in compliance with all terms, conditions, requirements and provisions precedent to the Conversion and Offering imposed upon the Company, the MHC and the Bank by the FRB, the Commissioner or any other regulatory or Blue Sky authority or any other regulatory authority; and (iii) the Company, the MHC and the Bank will have completed the conditions precedent to 4 the Chart Bank Merger in accordance with the Chart Bank Merger Agreement, and all applicable laws, regulations, decisions and orders, including all material terms, conditions, requirements and provisions precedent to the Chart Bank Merger imposed upon the parties thereto by any regulatory authority, other than those which the regulatory authority permits to be completed after the effective time of the Chart Bank Merger ("Chart Bank Effective Time"). (vii) RP Financial, LC. ("RP Financial"), which prepared the valuation of the Company as part of the Conversion, has advised the Company, the MHC and the Bank in writing that it satisfies all requirements for an appraiser set forth in the Conversion Regulations and any interpretations or guidelines issued by the Commissioner with respect thereto. (viii) Wolf & Company, P.C., the firm which certified the consolidated financial statements and supporting schedules of the MHC included in the Registration Statement, have advised the Company, the MHC and the Bank in writing that they are independent public accountants within the meaning of the Code of Ethics of the American Institute of Certified Public Accountants (the "AICPA"), and such accountants are, with respect to the Company, the MHC, the Bank and each of the Subsidiaries (as hereinafter defined), independent certified public accountants as required by the Securities Act and the Securities Act Regulations and such accountants are not in violation of the auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). Wolf & Company, P.C., the firm which certified the consolidated financial statements and supporting schedules of Chart Bank included in the Registration Statement, have advised the Company, the MHC and the Bank in writing that they are independent public accountants within the meaning of the Code of Ethics of the AICPA, and such accountants are, with respect to Chart Bank, independent certified public accountants as required by the Securities Act and the Securities Act Regulations and such accountants are not in violation of the auditor independence requirements of the Sarbanes-Oxley Act. (ix) The only direct and indirect subsidiaries of the Company, the MHC or the Bank (other than the Bank) are Benjamin Franklin Bank Capital Trust I and Benjamin Franklin Securities Corp. (collectively, the "Subsidiaries" and, individually, each a "Subsidiary"). Except for the Subsidiaries, the Company, the MHC or the Bank do not, directly or indirectly, control any other corporation, limited liability company, partnership, joint venture, association, trust or other business organization. Upon completion of the Conversion, the only direct subsidiary of the Company will be the Bank. (x) The consolidated financial statements and the related schedules and notes thereto included in the Registration Statement and the Prospectus present fairly the financial condition, results of operations, changes in retained earnings, equity and cash flows of each of (i) the Company, the MHC, the Bank and the Subsidiaries, and (ii) to the Company's knowledge, Chart Bank and its subsidiaries at the dates indicated and the results of operations, retained earnings, equity and cash flows for the periods specified, and comply as to form in all material respects with the applicable accounting requirements of the Securities Act Regulations and the Conversion Regulations; except as otherwise stated in the Registration Statement, said financial statements have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis; and the supporting schedules and tables included in the Registration Statement present fairly the information required to be stated therein. The other financial, statistical and pro forma information and related notes included in the Prospectus present fairly the information shown therein on a basis consistent with the audited and unaudited financial statements included in the Prospectus, and as to the pro forma adjustments, the adjustments made therein have been consistently applied on the basis described therein. 5 (xi) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries, whether or not arising in the ordinary course of business, (B) except for transactions specifically referred to or contemplated in the Prospectus, there have been no transactions entered into by the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries, other than those in the ordinary course of business consistent with past practice, which are material with respect to the Company, the MHC, the Bank and the Subsidiaries, considered as one enterprise, and (C) the capitalization, liabilities, assets, properties and business of the Company, the MHC, Bank and Chart Bank conform in all material respects to the descriptions contained in the Prospectus and none of the Company, the MHC, the Bank or Chart Bank has any material liabilities of any kind, contingent or otherwise, except as disclosed in the Registration Statement or the Prospectus. (xii) The MHC has been duly incorporated and is validly existing as a mutual holding company under the laws of the Commonwealth of Massachusetts, with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement; and the MHC is duly qualified as a foreign corporation to transact business in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business. Upon completion of the Conversion, the Company will be duly incorporated and validly existing as a corporation under the laws of the Commonwealth of Massachusetts, with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement; and the Company will be duly qualified as a foreign corporation to transact business in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business. (xiii) Upon completion of the Conversion and the contribution of the Foundation Shares and the issuance of shares of Common Stock to Chart Bank stockholders as merger consideration, all as described in the Prospectus, the authorized, issued and outstanding capital stock of the Company will be in the range as set forth in the Prospectus under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectus); no shares of Common Stock or other capital stock of the Company have been or will be issued and outstanding prior to the Closing Time referred to in Section 2; at the time of Conversion, the Securities will have been duly authorized for issuance and, when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan and stated on the cover page of the Prospectus, will be duly and validly issued and fully paid and nonassessable; the terms and provisions of the Common Stock and the capital stock of the Company conform to all statements relating thereto contained in the Prospectus; the certificates representing the shares of Common Stock conform to the requirements of applicable law and regulations; and the issuance of the Securities and the Foundation Shares is not subject to preemptive or other similar rights. (xiv) The Bank is a Massachusetts chartered savings bank in stock form and Chart Bank is a Massachusetts-chartered cooperative bank in stock form, in all instances with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; the Company, the MHC, the Bank, Chart Bank and their respective subsidiaries each has obtained all licenses, permits and other governmental authorizations currently required for the conduct of their respective businesses or required for the conduct of their respective businesses as contemplated by the Holding Company Application and 6 the Massachusetts Application, except where the failure to obtain such licenses, permits or other governmental authorizations would not have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries; all such licenses, permits and other governmental authorizations are in full force and effect and the Company, the MHC, the Bank, Chart Bank and their respective subsidiaries are in all material respects in compliance therewith; none of the Company, the MHC, the Bank, Chart Bank nor any of their respective subsidiaries has received notice of any proceeding or action relating to the revocation or modification of any such license, permit or other governmental authorization which, singly or in the aggregate, is the subject of an unfavorable decision, ruling or finding, might have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries; and each of the Bank and Chart Bank is validly existing and in good standing under the laws of the Commonwealth of Massachusetts and is qualified as a foreign corporation in any jurisdiction in which the failure to so qualify would have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries, considered as one enterprise. (xv) The deposit accounts of each of the Bank and Chart Bank are insured by the FDIC up to the applicable limits. Upon consummation of the Conversion, the liquidation account for the benefit of eligible accountholders of the Bank will be duly established in accordance with the Plan and the requirements of the Conversion Regulations. (xvi) Upon consummation of the Conversion, the authorized capital stock of the Bank will be 2,000,000 shares of common stock, par value $1.00 per share ("Bank Common Stock") and 500,000 shares of preferred stock, par value $1.00 per share ("Bank Preferred Stock"), and the issued and outstanding capital stock of the Bank will be 500,000 shares of Bank Common Stock and no shares of Bank Preferred Stock, and one share of Bank Common Stock and no shares of Bank Preferred Stock have been or will be issued prior to the Closing Time referred to in Section 2; and as of the Closing Time referred to in Section 2, all of the issued and outstanding capital stock of the Bank will be duly authorized, validly issued and fully paid and nonassessable and have been issued in compliance with all federal and state securities laws. The shares of Bank Common Stock issued and to be issued to the Company have been and will have been duly authorized for issuance and are, or, when issued and delivered by the Bank, will be, duly and validly issued and fully paid and nonassessable, and all such Bank Common Stock is and will be owned beneficially and of record by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance or legal or equitable claim; and the certificates representing the shares of the Bank Common Stock will conform with the requirements of applicable laws and regulations; the issuance of the Bank Common Stock is not subject to preemptive or similar rights; and there are no other warrants, options or rights of any kind to acquire additional shares of Bank Common Stock or any shares of Bank Preferred Stock. (xvii) The Foundation has been duly authorized and incorporated and is validly existing as a non-stock corporation in good standing under the laws of the Commonwealth of Massachusetts with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus; the Foundation will not be a bank holding company within the meaning of 12 C.F.R. Section 225.2(c) as a result of the issuance of shares of Common Stock to it in accordance with the terms of the Plan and in the amounts as described in the Prospectus; no approvals are required to establish the Foundation and to contribute the shares of Common Stock thereto as described in the Prospectus other than those imposed by the Commissioner; except as specifically disclosed in the Prospectus and the Corporator Statement, there are no agreements and/or understandings, written or oral, between the Company and/or the 7 Bank and the Foundation with respect to the control, directly or indirectly, over the voting and the acquisition or disposition of the Foundation Shares; at the time of the Conversion, the Foundation Shares will have been duly authorized for issuance and, when issued and contributed by the Company pursuant to the Plan, will be duly and validly issued and fully paid and nonassessable; and the issuance of the Foundation Shares is not subject to preemptive or similar rights. The issuance of the Foundation Shares to the Foundation pursuant to the Plan has been registered pursuant to the Registration Statement. (xviii) Each subsidiary of the Bank and Chart Bank has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and Prospectus, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries considered as one enterprise; the activities of each subsidiary of the Bank and Chart Bank are permitted to subsidiaries of a Massachusetts chartered savings bank by the rules, regulations, resolutions and practices of the Commissioner; all of the issued and outstanding capital stock of each such subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Bank or Chart Bank, as appropriate, directly, free and clear of any security interest, mortgage, pledge, lien, encumbrance or legal or equitable claim; and there are no warrants, options or rights of any kind to acquire shares of capital stock of any subsidiary of the Bank and Chart Bank. (xix) The Company, the MHC, and the Bank each has taken all corporate actions necessary for them to execute, deliver and perform this Agreement, and this Agreement and the Chart Bank Merger Agreement, as applicable, have been duly executed and delivered by, and are the valid and binding agreements of, the Company, the MHC, the Bank and Chart Bank, enforceable in accordance with their respective terms. (xx) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus and prior to the Closing Time, except as otherwise may be indicated or contemplated therein, none of the Company, the MHC, the Bank and Chart Bank or any subsidiary thereof will have (A) issued any securities or incurred any liability or obligation, direct or contingent, or borrowed money, except borrowings in the ordinary course of business consistent with past practice from the same or similar sources and in similar amounts as indicated in the Prospectus, or (B) entered into any transaction or series of transactions which are material in light of the business of the Company, the MHC, the Bank and the Subsidiaries. (xxi) No approval of any regulatory or supervisory or other public authority is required in connection with the execution and delivery of this Agreement, the issuance of the Securities and the Foundation Shares or the Chart Bank Merger that has not been obtained and a copy of which has been delivered to the Agent, except as may be required under the "blue sky" or state securities laws of various jurisdictions. (xxii) None of the Company, the MHC, the Bank, Chart Bank nor any of their respective subsidiaries is in violation of their respective certificate of incorporation, organization certificate, articles of incorporation or charter, as the case may be, or bylaws or other written corporate governance requirements or guidelines, including board committee charters; and none of the Company, the MHC, the Bank, Chart Bank nor any of their respective subsidiaries is in 8 default (nor has any event occurred which, with notice or lapse of time or both, would constitute a default) in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries is subject, except for such defaults that would not, individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, The MHC, the Bank, Chart Bank and their respective subsidiaries; and there are no contracts or documents of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries which are required to be filed as exhibits to the Registration Statement, the Massachusetts Application or the Holding Company Application which have not been so filed. (xxiii) The consummation of the Conversion, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, the MHC and the Bank and do not and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries is subject, except for such defaults that would not, individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries; nor will such action result in any violation of the provisions of the certificate of incorporation, organization certificate, articles of incorporation or charter or bylaws of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries, or any applicable law, administrative regulation or administrative or court decree. (xxiv) No labor dispute with the employees of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries exists or, to the knowledge of the Company, the MHC, or the Bank is imminent or threatened; and the Company, the MHC, and the Bank are not aware of any existing or threatened labor disturbance by the employees of any of its principal suppliers or contractors which might be expected to result in any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries considered as one enterprise. (xxv) Each of the Company, the MHC, the Bank, Chart Bank and their respective subsidiaries have good and marketable title to all properties and assets for which ownership is material to the business of the Company, the MHC, the Bank or the Subsidiaries and to those properties and assets described in the Prospectus as owned by them, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Prospectus or are not material in relation to the business of the Company, the MHC, the Bank and the Subsidiaries; and all of the leases and subleases material to the business of the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries under which the Company, the MHC, the Bank, Chart Bank, or their respective subsidiaries hold properties, including those described in the Prospectus, are valid and binding agreements thereon, as applicable, in full force and effect, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforceability of the rights of creditors generally and judicial limitations on the right 9 of specific performance and except as the enforceability of indemnification and contribution provisions may be limited by applicable securities laws. (xxvi) None of the Company, the MHC, the Bank, Chart Bank nor their respective subsidiaries are in violation of any directive from the SEC, the FRB, the Commissioner or any other governmental authority to make any material change in the method of conducting their respective businesses; the Bank and Chart Bank and their respective Subsidiaries have conducted and are conducting their business so as to comply in all material respects with all applicable statutes, regulations and administrative and court decrees (including, without limitation, all regulations, decisions, directives and orders of the SEC, FRB and the Commissioner). Except as set forth in the Prospectus, none of the Company, the MHC, the Bank, Chart Bank nor any of their respective subsidiaries is subject or is party to, or has received any notice or advice that any of them may become subject or party to, any investigation with respect to any cease-and-desist order, agreement, consent agreement, memorandum of understanding or other regulatory enforcement action, proceeding or order with or by, or is a party to any commitment letter or similar undertaking to, or is subject to any directive by, or has been a recipient of any supervisory letter from, or has adopted any board resolutions at the request of, any Regulatory Agency (as defined below) that currently restricts in any material respect the conduct of their business or that in any material manner relates to their capital adequacy, their credit policies, their management or their business (each, a "Regulatory Agreement"), nor has the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries been advised by any Regulatory Agency that it is considering issuing or requesting any such Regulatory Agreement; and there is no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries which, in the reasonable judgment of the Company, the MHC or the Bank, is expected to result in a Material Adverse Effect. As used herein, the term "Regulatory Agency" means any federal or state agency charged with the supervision or regulation of depositary institutions or holding companies of depositary institutions, or engaged in the insurance of depositary institution deposits, or any court, administrative agency or commission or other governmental agency, authority or instrumentality having supervisory or regulatory authority with respect to the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries. (xxvii) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, the MHC or the Bank, threatened, against or affecting the Company, the MHC, the Bank, Chart Bank or any of their respective subsidiaries which is required to be disclosed in the Registration Statement (other than as disclosed therein), or which might result in any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries, or which might materially and adversely affect the properties or assets thereof or which might materially and adversely affect the consummation of the Conversion, Chart Bank or the Chart Bank Merger or the performance of this Agreement; all pending legal or governmental proceedings to which the Company, the MHC, the Bank, Chart Bank or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, are considered in the aggregate not material; and there are no contracts or documents of the Company, the MHC or any of the Subsidiaries which are required to be filed as exhibits to the Registration Statement, the Massachusetts Application or the Holding Company Application which have not been so filed. 10 (xxviii) The Company, the MHC and the Bank have obtained opinions of its outside legal and tax counsel, Foley Hoag LLP, respectively, with respect to the legality of the Securities and the Foundation Shares to be issued and the federal income tax consequences of the Conversion, copies of which are filed as exhibits to the Registration Statement; all material aspects of the aforesaid opinions are accurately summarized in the Prospectus; the facts and representations upon which such opinions are based are truthful, accurate and complete in all material respects; and neither the Bank (including the Subsidiaries) nor the Company has taken or will take any action inconsistent therewith. (xxix) The Company is not and, upon completion of the Conversion and the Offerings and sale of the Common Stock and the application of the net proceeds therefrom, will not be, required to be registered under the Investment Company Act of 1940, as amended. (xxx) All of the loans represented as assets on the most recent consolidated financial statements or in selected consolidated financial and other data of the Bank, the MHC and Chart Bank included in the Prospectus meet or are exempt from all requirements of federal, state or local law pertaining to lending, including without limitation truth in lending (including the requirements of Regulations Z and 12 C.F.R. Part 226), real estate settlement procedures, consumer credit protection, equal credit opportunity and all disclosure laws applicable to such loans, except for violations which, if asserted, would not result in a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries considered as one enterprise. (xxxi) To the knowledge of the Company, the MHC and the Bank, with the exception of the intended loan to the Bank's ESOP by the Company to enable the ESOP to purchase shares of Common Stock in an amount of up to 8.0% of the Common Stock issued in the Conversion, including shares contributed to the Foundation, none of the Company, the MHC, the Bank or employees of the Bank has made any payment of funds of the Company, the MHC or the Bank as a loan for the purchase of the Common Stock or made any other payment of funds prohibited by law, and no funds have been set aside to be used for any payment prohibited by law. (xxxii) To the knowledge of the Company, there are no affiliations or associations (as such terms are defined by the National Association of Securities Dealers, Inc. ("NASD")) between any member of the NASD and any of the Company's officers or directors except as previously disclosed to the Agent. (xxxiii) Each of the Company, the MHC, the Bank, Chart Bank and each of their respective subsidiaries carries, or is covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties as is customary for companies engaged in similar industries. (xxxiv) Each of the Company, the MHC, the Bank, Chart Bank and each of their respective subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management's general or specific authorizations; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (c) access to assets is permitted only in accordance with management's general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 11 (xxxv) Each of the Company, the MHC, the Bank, Chart Bank and each of their respective subsidiaries is in compliance in all material respects with the applicable financial record keeping and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970, as amended, and the rules and regulations thereunder. (xxxvi) The Company, the MHC and the Bank have not relied on Agent or its counsel for any legal, tax or accounting advice in connection with the Conversion. (xxxvii) The records of eligible account holders, supplemental eligible account holders and other depositors are accurate and complete in all material respects. (xxxiii) Each of the Company, the MHC, the Bank, Chart Bank and each of their respective subsidiaries is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company, the MHC, the Bank or any Subsidiary, respectively, would have any liability; each of the Company, the MHC, the Bank and each Subsidiary has not incurred and does not expect to incur liability under (1) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company, the MHC, the Bank and any Subsidiary would have any liability that is intended to be qualified under Section 401 (a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (xxxix) None of the Company, the MHC, the Bank, Chart Bank nor their respective subsidiaries nor any properties owned or operated thereby is in violation of or liable under any Environmental Law (as defined below), except for such violations or liabilities that, individually or in the aggregate, would not have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank and the Subsidiaries considered as one enterprise. There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation, notices, demand letters or requests for information from any environmental agency) instituted or pending, or to the knowledge of the Company, the MHC or the Bank threatened, relating to the liability of any property owned or operated by the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries, under any Environmental Law. For purposes of this subsection, the term "Environmental Law" means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component. (xl) Each of the Company, the MHC, the Bank, Chart Bank and their respective subsidiaries has filed all federal income and state and local income and franchise tax returns required to be filed and has made timely payments of all taxes shown as due and payable in respect of such returns, and no deficiency has been asserted with respect thereto by any taxing 12 authority. The Company, the MHC and the Bank have no knowledge of any tax deficiency which has been asserted or could be asserted against the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries. (xli) The Company has received approval, subject to regulatory approval to consummate the Offerings and issuance, to have the Securities and the Foundation Shares listed on the Nasdaq Stock Market effective as of the Closing Time referred to in Section 2 hereof. (xlii) The Company has filed a registration statement for the Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such registration statement was declared effective concurrent with the effectiveness of the Registration Statement. (xliii) The Bank and Chart Bank have established compliance programs to ensure compliance with the requirements of the USA Patriot Act and all applicable regulations promulgated thereunder. Neither the Bank nor Chart Bank is in violation of the USA Patriot Act or any applicable regulations promulgated thereunder, and there is no charge, investigation, action, suit or proceeding before any court, regulatory authority or governmental agency or body pending or, to the best knowledge of the Company, the MHC and the Bank, threatened regarding the Bank's or Chart Bank's compliance with the USA Patriot Act or any regulations promulgated thereunder. (xliv) The Company and Chart Bank are in compliance with the applicable provisions of the Sarbanes-Oxley Act and will comply with those provisions of the Sarbanes-Oxley Act that will become effective in the future upon their effectiveness. (b) Any certificate signed by any officer of the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries and delivered to either of the Agent or counsel for the Agent shall be deemed a representation and warranty by the Company, the MHC, the Bank and Chart Bank to the Agent and, for purposes of the opinion to be delivered to the Agent pursuant to Section 5(b)(2) hereof, to the counsel for the Agent as to the matters covered thereby. SECTION 2. APPOINTMENT OF RYAN BECK; SALE AND DELIVERY OF THE SECURITIES; CLOSING. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby appoints Ryan Beck as its agent to consult with and advise the Company, and to assist the Company with the solicitation of subscriptions and purchase orders for Securities in connection with the Company's sale of Common Stock in the Subscription and Community Offerings and the Syndicated Community Offering. On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, Ryan Beck accepts such appointment and agrees to use its best efforts to assist the Company with the solicitation of subscriptions and purchase orders for Securities in accordance with this Agreement; provided, however, that the Agent shall not be obligated to take any action which is inconsistent with any applicable laws, regulations, decisions or orders. The services to be rendered by Ryan Beck pursuant to this appointment include the following: (i) consulting as to the securities marketing implications of any aspect of the Plan or related corporate documents; (ii) reviewing with the Board of Directors the financial and securities marketing implications of the independent appraiser's appraisal of the Common Stock; (iii) reviewing all offering documents, including the Prospectus, stock order forms and related offering materials (it being understood that preparation and filing of such documents is the sole responsibility of the Company, the MHC and the Bank and their counsel); (iv) assisting in the design and implementation of a marketing 13 strategy for the Offerings; (v) assisting the Company, the MHC and the Bank in obtaining all requisite regulatory approvals; (vi) assisting Bank management in preparing for meetings with potential investors and broker-dealers; and (vii) providing such other general advice and assistance as may be requested to promote the successful completion of the Offerings. The appointment of the Agent hereunder shall terminate one year from the date of the engagement, unless terminated earlier by the Company or the Agent upon receipt of written notice to that effect. If any of the Securities remain available after the expiration of both the Subscription and Community Offerings, at the request of the Company, the MHC and the Bank and subject to the continued accuracy of the representations and warranties of the Company, the MHC and the Bank set forth herein and compliance with the covenants and conditions set forth herein, Ryan Beck will seek to form a syndicate of registered brokers or dealers ("Selected Dealers") to assist in the solicitation of purchase orders of such Securities on a best efforts basis, subject to the terms and conditions set forth in a selected dealer's agreement (the "Selected Dealer's Agreement"), substantially in the form set forth in Exhibit A to this Agreement. Ryan Beck will endeavor to limit the aggregate fees to be paid by the Company, the MHC and the Bank under any such Selected Dealer's Agreement to an amount competitive with gross underwriting discounts charged at such time for underwritings of comparable amounts of stock sold at a comparable price per share in a similar market environment; provided, however, that the aggregate fees payable to Ryan Beck and Selected Dealers shall not exceed 6.0% of the aggregate purchase price of the Securities sold by such Selected Dealers. Ryan Beck will endeavor to distribute the Securities among the Selected Dealers in a fashion which best meets the distribution objective of the Company and the requirements of the Plan, which may result in limiting the allocation of stock to certain Selected Dealers. It is understood that in no event shall Ryan Beck be obligated to act as a Selected Dealer or to take or purchase any Securities. If any of the Securities remain available after the expiration of the Subscription and Community Offering and the Syndicated Community Offering, the Company agrees to offer Ryan Beck the first right to act as lead managing underwriter for the Public Offering. The terms of the Public Offering will be set forth in a separate definitive purchase agreement in a form satisfactory to Ryan Beck and containing customary representations, warranties, conditions, agreements and indemnities, which purchase agreement, when executed, will supersede and replace this Agreement with respect to Securities sold thereunder (the "Purchase Agreement"). This Agreement is not intended to constitute, and should not be construed as, an agreement or commitment between the Company, the MHC, the Bank and Ryan Beck relating to the firm commitment underwriting of any securities, and Ryan Beck may, in its sole judgment and discretion, determine at any time not to proceed with the proposed firm commitment underwriting. Such proposed underwriting will be subject, among other things, to: (i) satisfactory completion by Ryan Beck of such due diligence investigation or inquiries as it may deem appropriate, (ii) approval of the proposed underwriting by Ryan Beck's commitment committee or such other authorization as may be required by its internal procedures, (iii) market conditions, which, in the sole judgment of Ryan Beck, shall be satisfactory, and (iv) the execution and delivery of a definitive Purchase Agreement. In the event the Company is unable to sell at least the total minimum of the Securities, as set forth on the cover page of the Prospectus, within the period herein provided, this Agreement shall terminate and the Company shall refund to any persons who have subscribed for any of the Securities the full amount which it may have received from them, together with interest as provided in the Prospectus, and no party to this Agreement shall have any obligation to the others hereunder, except for the obligations of the Company, the MHC and the Bank as set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing the funds received from subscriptions for Securities or other offers to purchase Securities in special interest-bearing 14 accounts with the Bank until all Securities are sold and paid for were made prior to the commencement of the Subscription Offering, with provision for refund to the purchasers as set forth above, or for delivery to the Company if all Securities are sold. If at least the total minimum of Securities, as set forth on the cover page of the Prospectus, are sold, the Company agrees to issue or have issued the Securities sold and to release for delivery certificates for such Securities at the Closing Time against payment therefor by release of funds from the special interest-bearing accounts referred to above. The closing shall be held at the Boston, Massachusetts offices of Foley Hoag LLP, at 10:00 a.m., local time, or at such other place and time as shall be agreed upon by the parties hereto, on a business day to be agreed upon by the parties hereto. The Company shall notify the Agent by telephone, confirmed in writing, when funds shall have been received for all the Securities. Certificates for Securities shall be delivered directly to the purchasers thereof in accordance with their directions. Notwithstanding the foregoing, certificates for Securities purchased through Selected Dealers shall be made available to the Agent for inspection at least 48 hours prior to the Closing Time at such office as the Agent shall designate. The hour and date upon which the Company shall release for delivery all of the Securities, in accordance with the terms hereof, is herein called the "Closing Time." The Company will pay any stock issue and transfer taxes which may be payable with respect to the sale of the Securities. In addition to reimbursement of the expenses specified in Section 4 hereof, the Agent will receive the following compensation for its services hereunder: (a) One percent (1.0%) of the aggregate price (the "Purchase Price") of the Securities sold in the Subscription and Community Offering, excluding in each case shares purchased by (i) any qualified or non-qualified employee benefit plans of the Company, (ii) by any charitable foundation established by the Bank in connection with the Conversion, (iii) any director or employee of the Company, the MHC or the Bank or members of their immediate families (which term shall mean parents, grandparents, spouse, siblings, children and grandchildren), and (iv) any shares issued to Chart Bank stockholders as merger consideration; and (b) with respect to any Securities sold by an NASD member firm (including Ryan Beck) under the Selected Dealer's Agreement in the Syndicated Community Offering, (i) the compensation payable to Selected Dealers under any Selected Dealer's Agreement, (ii) any sponsoring dealer's fees; and (iii) a management fee to Ryan Beck of one percent (1.0%). The 1.0% management fee payable to Ryan Beck in connection with the Syndicated Community Offering, along with the fees payable by the Company directly to Selected Dealers, shall not exceed an aggregate of six percent (6.0%) of the Purchase Price of the Securities sold by Ryan Beck and other NASD member firms under such Selected Dealer's Agreement. If this Agreement is terminated by the Agent in accordance with the provisions of Section 9(a) hereof or the Conversion is terminated by the Company, no fee shall be payable by the Company to Ryan Beck; provided, however, that the Company shall reimburse the Agent for all of its reasonable out-of-pocket expenses (inclusive of fees and disbursements of counsel) incurred prior to termination up to a maximum of $25,000 for expenses and $75,000 for legal counsel, with no expenses over $2000 without prior approval by the Company. In addition, the Company shall be obligated to pay the fees and expenses as contemplated by the provisions of Section 4 hereof in the event of any such termination. All fees payable to the Agent hereunder shall be payable in immediately available funds at the Closing Time, or upon termination of this Agreement, as the case may be. 15 SECTION 3. COVENANTS OF THE COMPANY. The Company, the MHC and the Bank covenant with the Agent as follows: (a) The Company, the MHC and the Bank will prepare and file such amendments or supplements to the Registration Statement, the Prospectus, the Massachusetts Application, the Holding Company Application as may hereafter be required by the Securities Act Regulations or the Conversion Regulations or as may hereafter be requested by the Agent. Following completion of the Subscription and Community Offering, in the event of a Syndicated Community Offering, the Company, the MHC and the Bank will (i) promptly prepare and file with the SEC a post-effective amendment to the Registration Statement relating to the results of the Subscription and Community Offering, any additional information with respect to the proposed plan of distribution and any revised pricing information or (ii) if no such post-effective amendment is required, will file with, or mail for filing to, the SEC a prospectus or prospectus supplement containing information relating to the results of the Subscription and Community Offering and pricing information pursuant to Rule 424 of the Securities Act Regulations, in either case in a form acceptable to the Agent. The Company, the MHC and the Bank will notify the Agent immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment of the Registration Statement or the filing of any supplement to the Prospectus and the filing of any amendment to the Massachusetts Application, (ii) of the receipt of any comments from the Commissioner, the FRB or the SEC with respect to the transactions contemplated by this Agreement, the Plan or the Chart Bank Merger, (iii) of any request by the Commissioner, the FRB or the SEC for any amendment to the Registration Statement, the Massachusetts Application or the Holding Company Application or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commissioner or the FRB of any order suspending the Offerings, the use of the Prospectus or the Chart Bank Merger or the initiation of any proceedings for that purpose, (v) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, and (vi) of the receipt of any notice with respect to the suspension of any qualification of the Securities for offering or sale in any jurisdiction. The Company, the MHC and the Bank will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) The Company, the MHC and the Bank will give the Agent notice of its intention to file or prepare any amendment to the Holding Company Application, the Massachusetts Application or the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use in connection with the Syndicated Community Offering of the Securities which differs from the prospectus on file at the SEC at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the Securities Act Regulations), will furnish the Agent with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which the Agent or counsel for the Agent may object. (c) The Company, the MHC and the Bank will deliver to the Agent as many signed copies and as many conformed copies of the Massachusetts Application and the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) as the Agent may reasonably request, and from time to time such number of copies of the Prospectus as the Agent may reasonably request. (d) During the period when the Prospectus is required to be delivered, the Company, the MHC and the Bank will comply, at their own expense, with all requirements imposed upon them by the Commissioner and the FRB by the applicable Conversion Regulations, as from time to time in force, and 16 by the Nasdaq Stock Market, the Securities Act, the Securities Act Regulations, the Exchange Act, and the rules and regulations of the SEC promulgated thereunder, including, without limitation, Regulation M under the Exchange Act, so far as necessary to permit the continuance of sales or dealing in shares of Common Stock during such period in accordance with the provisions hereof and the Prospectus. (e) If any event or circumstance shall occur as a result of which it is necessary, in the opinion of counsel for the Agent, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Company, the MHC and the Bank will forthwith amend or supplement the Prospectus (in form and substance satisfactory to counsel for the Agent) so that, as so amended or supplemented, the Prospectus will not include an untrue statement of a material factor omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, and the Company, the MHC and the Bank will furnish to the Agent a reasonable number of copies of such amendment or supplement. For the purpose of this subsection, the Company, the MHC and the Bank will each furnish such information with respect to itself as the Agent may from time to time reasonably request. (f) The Company, the MHC and the Bank will take all necessary action, in cooperation with the Agent, to qualify the Securities for offering and sale under the applicable securities laws of such states of the United States and other jurisdictions as the Conversion Regulations may require and as the Agent and the Company have agreed; provided, however, that the Company, the MHC and the Bank shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. In each jurisdiction in which the Securities have been so qualified, the Company, the MHC and the Bank will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement. (g) The Company authorizes Ryan Beck and any Selected Dealers to act as agent of the Company in distributing the Prospectus to persons entitled to receive subscription rights and other persons to be offered Securities having record addresses in the states or jurisdictions set forth in a survey of the securities or "blue sky" laws of the various jurisdictions in which the Offerings will be made (the "Blue Sky Survey"). (h) The Company will make generally available to its security holders as soon as practicable, but not later than 60 days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 of the Securities Act Regulations) covering a twelve month period beginning not later than the first day of the Company's fiscal quarter next following the "effective date" (as defined in said Rule 158) of the Registration Statement. (i) During the period ending on the third anniversary of the expiration of the fiscal year during which the closing of the transactions contemplated hereby occurs, the Company will furnish to its stockholders as soon as practicable after the end of each such fiscal year an annual report (including consolidated statements of financial condition and consolidated statements of income, stockholders' equity and cash flows, certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company, the MHC, the Bank and the Subsidiaries for such quarter in reasonable detail. In addition, such annual report and quarterly consolidated summary financial information shall be made public through the issuance of appropriate press releases at the same time or prior to the time of the furnishing thereof to stockholders of the Company. 17 (j) During the period ending on the third anniversary of the expiration of the fiscal year during which the closing of the transactions contemplated hereby occurs, the Company will furnish to the Agent (i) as soon as publicly available, a copy of each report or other document of the Company furnished generally to stockholders of the Company or furnished to or filed with the SEC under the Exchange Act or any national securities exchange or system on which any class of securities of the Company is listed, and (ii) from time to time, such other information concerning the Company as the Agent may reasonably request. (k) The Company, the MHC and the Bank will conduct the Conversion, including the formation and operation of the Foundation, in all material respects in accordance with the Plan, the Conversion Regulations and all other applicable regulations, decisions and orders, including all applicable terms, requirements and conditions precedent to the Conversion imposed upon the Company, the MHC or the Bank by the Commissioner or the FRB. (l) The Company, the MHC and the Bank will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under "How We Intend to Use the Net Proceeds from the Offering." (m) The Company will report the use of proceeds from the Offerings on its first periodic report filed with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act and on any subsequent periodic reports as may be required pursuant to Rule 463 of the Securities Act Regulations. (n) The Company will maintain the effectiveness of the Exchange Act Registration Statement for not less than three years and will comply in all material respects with its filing obligations under the Exchange Act. The Company will use its best efforts to effect and maintain the listing of the Common Stock on the Nasdaq Stock Market and, once listed on the Nasdaq Stock Market, the Company will comply with all applicable corporate governance standards required by the Nasdaq Stock Market. (o) The Company, the MHC and the Bank will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with the NASD's "Interpretation Relating to Free-Riding and Withholding." (p) Other than in connection with the Chart Bank Merger or any employee benefit plan or arrangement described in the Prospectus, the Company will not, without the prior written consent of the Agent, sell or issue, contract to sell or otherwise dispose of, any shares of Common Stock other than the Securities and the Foundation Shares for a period of 180 days following the Closing Time. (q) During the period beginning on the date hereof and ending on the later of the third anniversary of the Closing Time or the date on which the Agent receives full payment in satisfaction of any claim for indemnification or contribution to which it may be entitled pursuant to Sections 6 or 7, respectively, none of the Company, the MHC or the Bank shall, without the prior written consent of the Agent, take or permit to be taken any action that could result in the Bank Common Stock becoming subject to any security interest, mortgage, pledge, lien or encumbrance; provided, however, that this covenant shall be null and void if the FRB, by regulation, policy statement or interpretative release, or by written order or written advice addressed to the Bank or the Agent specifically addressing the provisions of Section 6(a) hereof, permits indemnification of the Agent by the Bank as contemplated by such provisions. (r) The Company, the MHC and the Bank will comply with the conditions imposed by or agreed to with the FRB in connection with its approval of the Holding Company Application in connection with their approval or non-objection of, or non-objection to, the Conversion, including those 18 conditions relating to the establishment and the operation of the Foundation; the Company, the MHC and the Bank shall use their best efforts to ensure that the Foundation submits within the time frames required by applicable law a request to the Internal Revenue Service to be recognized as a tax-exempt organization under Section 501(c)(3) of the Code; the Company, the MHC and the Bank will take no action which will result in the possible loss of the Foundation's tax exempt status; and none of the Company, the MHC or the Bank will contribute any additional assets to the Foundation until such time that such additional contributions will be deductible for federal and state income tax purposes. (s) The Company shall not deliver the Securities until the Company, the MHC and the Bank have satisfied each condition set forth in Section 5 hereof, unless such condition is waived in writing by the Agent. (t) The Company, the MHC or the Bank will furnish to Ryan Beck as early as practicable prior to the Closing Time, but no later than two (2) full business days prior thereto, a copy of the latest available audited consolidated financial statements of the Company, the MHC and the Bank and the Subsidiaries which have been read by Wolf & Company, P.C., as stated in their letters to be furnished pursuant to subsections (e) and (f) of Section 5 hereof. (u) The Company will promptly register as a bank holding company under the BHCA, as required. (v) Each of the Company, the MHC and the Bank will conduct its business in compliance in all material respects with all applicable federal and state laws, rules, regulations, decisions, directives and orders, including all decisions, directives and orders of the SEC, the Nasdaq Stock Market, the Commissioner and the FRB. (w) The Bank will not amend the Plan in any manner that would affect the sale of the Securities or the terms of this Agreement. (x) The Company, the MHC and the Bank will not, prior to the Closing Time, incur any liability or obligation, direct or contingent, or enter into any material transaction, other than in the ordinary course of business consistent with past practice, except as contemplated by the Prospectus. (y) The Company, the MHC and the Bank will use all reasonable efforts to comply with, or cause to be complied with, the conditions precedent to the several obligations of the Agent specified in Section 5 hereof. (z) The Company, the MHC and the Bank will provide the Agent with any information necessary to carry out the allocation of the Securities in the event of an oversubscription, and such information will be accurate and reliable in all material respects. (aa) The Company, the MHC and the Bank will notify the Agent when funds have been received for the minimum number of Securities set forth in the Prospectus. (bb) Prior to the Closing Time, the Company, the MHC and the Bank shall have received each approval required to consummate the Chart Bank Merger, and all applicable waiting periods shall have expired. SECTION 4. PAYMENT OF EXPENSES. The Company, the MHC and the Bank jointly and severally agree to pay all expenses incident to the performance of their obligations under this Agreement, including but not limited to (i) the cost of obtaining all securities and bank regulatory approvals relating 19 to the Conversion, the Offerings, and the Chart Bank Merger, (ii) the preparation, printing and filing of the Registration Statement, the Massachusetts Application and the Holding Company Application each as originally filed and of each amendment thereto, (iii) the preparation, issuance and delivery of the certificates for the Securities to the purchasers in the Offerings, (iv) the fees and disbursements of the Company's, the MHC's and the Bank's counsel, accountants, appraiser and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(g) hereof, including filing fees and the fees and disbursements of the Agent's counsel in connection therewith and in connection with the preparation of the Blue Sky Survey, (vi) the printing and delivery to the Agent (in such quantities as the Agent shall reasonably request) of copies of the Registration Statement as originally filed and of each amendment thereto and the printing and delivery of the Prospectus and any amendments or supplements thereto to the purchasers in the Offerings and the Agent (in such quantities as the Agent shall reasonably request), (vii) the printing and delivery to the Agent of copies of a Blue Sky Survey, and (viii) the fees and expenses incurred in connection with the listing of the Securities on the Nasdaq Stock Market. In the event the Agent incurs any such fees and expenses on behalf of the Company, the Bank or the MHC, the Bank will reimburse the Agent for such fees and expenses whether or not the Conversion is consummated; provided, however, that the Agent shall not incur any substantial expenses on behalf of the Company, the MHC or the Bank pursuant to this Section without the prior approval of the Bank. The Company, the MHC and the Bank jointly and severally agree to pay certain expenses incident to the performance of the Agent's obligations under this Agreement, regardless of whether the Conversion is consummated, including (i) the filing fees paid or incurred by the Agent in connection with all filings with the NASD, and (ii) all reasonable out of pocket expenses (including legal fees and expenses) incurred by the Agent relating to the filings with the NASD. All fees and expenses to which the Agent is entitled to reimbursement under this paragraph of this Section 4 shall be due and payable upon receipt by the Company, the MHC or the Bank of a written accounting therefor setting forth in reasonable detail the expenses incurred by the Agent. SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS. The Company, the MHC, the Bank and the Agent agree that the issuance and the sale of Securities and all obligations of the Agent hereunder are subject to the accuracy of the representations and warranties of the Company, the MHC and the Bank herein contained as of the date hereof and the Closing Time, to the accuracy of the statements of officers and directors of the Company, the MHC and the Bank made pursuant to the provisions hereof, to the performance by the Company, the MHC and the Bank of their obligations hereunder, and to the following further conditions: (a) No stop order suspending the effectiveness of the Registration Statement shall have been issued under the Securities Act or proceedings therefor initiated or threatened by the SEC, no order suspending the Offerings or authorization for final use of the Prospectus shall have been issued or proceedings therefor initiated or threatened by the Commissioner, the FRB or any state securities or Blue Sky authority, and no order suspending the sale of the Securities in any jurisdiction shall have been issued. (b) At the Closing Time, the Agent shall have received: (1) The favorable opinion, dated as of the Closing Time, of Foley Hoag LLP, counsel for the Company, the MHC and the Bank, in form and substance satisfactory to counsel for the Agent as to matters set forth in Exhibit B hereto. (2) The favorable opinion, dated as of Closing Time, of Luse Gorman Pomerenk & Schick, counsel for the Agent, with respect to the matters set forth on Exhibit C hereto. 20 (3) In giving their opinions required by subsections (b)(1) and (b)(2), respectively, of this Section, Foley Hoag LLP and Luse Gorman Pomerenk & Schick shall each additionally state that nothing has come to their attention that would lead them to believe that the Registration Statement (except for financial statements and schedules and other financial or statistical data included therein, as to which counsel need make no statement), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (except for financial statements and schedules and other financial or statistical data included therein, as to which counsel need make no statement), at the time the Registration Statement became effective or at Closing Time, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In giving their opinions, Foley Hoag LLP and Luse Gorman Pomerenk & Schick may rely as to matters of fact on certificates of officers and directors of the Company, the MHC and the Bank and certificates of public officials, and Luse Gorman Pomerenk & Schick may also rely on the opinion of Foley Hoag LLP. (c) At the Closing Time referred to in Section 2, the Company, the MHC and the Bank shall have completed in all material respects the conditions precedent to the Conversion in accordance with the Plan, the applicable Conversion Regulations and all other applicable laws, regulations, decisions and orders, including all terms, conditions, requirements and provisions precedent to the Conversion imposed upon the Company, the MHC or the Bank by the FRB or the Commissioner, or any other regulatory authority, other than those which the FRB or the Commissioner permit to be completed after the Conversion. (d) At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries, whether or not arising in the ordinary course of business consistent with past practice, and the Agent shall have received a certificate of the Chief Executive Officer and President of the Company, the MHC and of the Bank and the Chief Financial Officer of the Company, the MHC and of the Bank, dated as of Closing Time, to the effect that (i) there has been no such material adverse change; (ii) there shall have been no material transaction entered into by the Company, the MHC, the Bank, Chart Bank or their respective subsidiaries from the latest date as of which the financial condition of the Company, the MHC or the Bank is set forth in the Registration Statement and the Prospectus other than transactions referred to or contemplated therein and transactions in the ordinary course of business consistent with past practice, (iii) none of the Company, the MHC or the Bank shall have received from the FRB or the Commissioner any direction (oral or written) to make any material change in the method of conducting its business with which it has not complied (which direction, if any, shall have been disclosed to the Agent) or which materially and adversely would affect the business affairs, financial condition, results of operations or prospects of the Company, the MHC, the Bank or the Subsidiaries, (iv) the representations and warranties in Section 2 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (v) the Company, the MHC and the Bank have complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Time, (vi) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the SEC and (vii) no order suspending the Offerings or the authorization for final use of the Prospectus has been issued and no proceedings for that purpose have been initiated or threatened by the Commissioner and no person has sought to obtain regulatory or judicial review of the action of the Commissioner in approving the Plan in accordance with the Conversion 21 Regulations nor has any person sought to obtain regulatory or judicial review of the action of the FRB in approving the Holding Company Application. (e) At the Closing Time, the Agent shall have received a certificate of the Chief Executive Officer and President of the Company, the MHC and the Bank and the Chief Financial Officer of the Company, the MHC and the Bank, dated as of Closing Time, to the effect that (i) they have reviewed the contents of the Registration Statement and the Prospectus; (ii) based on each of their knowledge, the Registration Statement and the Prospectus do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which such statements were made, not misleading; (iii) based on each of their knowledge, the financial statements and other financial information included in the Registration Statement and the Prospectus fairly present the financial condition and results of operations of the Company, the MHC, the Bank, Chart Bank and their respective subsidiaries as of and for the dates and periods covered by the Registration Statement and the Prospectus; (iv) they are responsible for establishing and maintaining internal controls; (v) they have designed such internal controls to ensure that material information relating to the Company, the MHC, the Bank and the Subsidiaries is made known to them; (vi) they have evaluated the effectiveness of their internal controls; and (vii) they have disclosed to Wolf & Company, P.C. and the audit committee (A) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's, the MHC and the Bank's ability to record, process, summarize, and report financial data, and have identified for the Company's, the MHC's and the Bank's auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's, the MHC's and the Bank's internal controls. (f) (1) At the time of the execution of this Agreement, the Agent shall have received from Wolf & Company, P.C. a letter dated such date, in form and substance satisfactory to the Agent, to the effect that (i) they are independent public accountants with respect to the Company, the MHC, the Bank and the Subsidiaries within the meaning of the Code of Ethics of the AICPA, the Securities Act and the Securities Act Regulations and the Conversion Regulations and they are not in violation of the auditor independence requirements of the Sarbanes-Oxley Act; (ii) it is their opinion that the consolidated financial statements and supporting schedules included in the Registration Statement and covered by their opinions therein comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Securities Act Regulations; (iii) based upon limited procedures as agreed upon by the Agent and Wolf & Company, P.C. set forth in detail in such letter, nothing has come to their attention which causes them to believe that (A) the unaudited financial statements and supporting schedules of the Company, the MHC and the Bank and the Subsidiaries included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act, the Securities Act Regulations and the Conversion Regulations or are not presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus, (B) the unaudited amounts of net interest income and net income set forth under "Selected Consolidated Financial Information of Benjamin Franklin Bancorp" in the Registration Statement and the Prospectus do not agree with the amounts set forth in unaudited consolidated financial statements as of and for the dates and periods presented under such captions or such amounts were not determined on a basis substantially consistent with that used in determining the corresponding amounts in the audited financial statements included in the Registration Statement, (C) at a specified date not more than five days prior to the date of this Agreement, there has been any increase in the consolidated long term or short term debt of the Company, the MHC and the Bank and the Subsidiaries or any decrease in consolidated total assets, the allowance for loan losses, total deposits or net worth of the Company, the MHC and the Bank and the Subsidiaries, in each case as compared with the amounts shown in the September 30, 2004 balance sheet included in the Registration Statement or, (D) during the period from September 30, 2004 to a specified 22 date not more than five days prior to the date of this Agreement, there were any decreases, as compared with the corresponding period in the preceding year, in total interest income, net interest income, net interest income after provision for loan losses, income before income tax expense or net income of the Company, the MHC and the Bank and the Subsidiaries, except in all instances for increases or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur; and (iv) in addition to the examination referred to in their opinions and the limited procedures referred to in clause (iii) above, they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included in the Registration Statement and the Prospectus and which are specified by the Agent, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Company, the MHC, the Bank and the Subsidiaries identified in such letter. (2) At the time of the execution of this Agreement, the Agent shall have received from Wolf & Company, P.C. a letter dated such date, in form and substance satisfactory to the Agent, to the effect that (i) they are independent public accountants with respect to Chart Bank and its subsidiaries within the meaning of the Code of Ethics of the AICPA, the Securities Act and the Securities Act Regulations and the Conversion Regulations and they are not in violation of the auditor independence requirements of the Sarbanes-Oxley Act; (ii) it is their opinion that the consolidated financial statements and supporting schedules included in the Registration Statement and covered by their opinions therein comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Securities Act Regulations; (iii) based upon limited procedures as agreed upon by the Agent and Wolf & Company, P.C. set forth in detail in such letter, nothing has come to their attention which causes them to believe that (A) the unaudited financial statements and supporting schedules of Chart Bank and its subsidiaries included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act, the Securities Act Regulations and the Conversion Regulations or are not presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus, (B) the unaudited amounts of net interest income and net income set forth under "Selected Consolidated Financial Information of Chart Bank" in the Registration Statement and the Prospectus do not agree with the amounts set forth in unaudited consolidated financial statements as of and for the dates and periods presented under such captions or such amounts were not determined on a basis substantially consistent with that used in determining the corresponding amounts in the audited financial statements included in the Registration Statement, (C) at a specified date not more than five days prior to the date of this Agreement, there has been any increase in the consolidated long term or short term debt of Char Bank and its subsidiaries or any decrease in consolidated total assets, the allowance for loan losses, total deposits or net worth of Chart Bank and its subsidiaries, in each case as compared with the amounts shown in the September 30, 2004 balance sheet included in the Registration Statement or, (D) during the period from September 30, 2004 to a specified date not more than five days prior to the date of this Agreement, there were any decreases, as compared with the corresponding period in the preceding year, in total interest income, net interest income, net interest income after provision for loan losses, income before income tax expense or net income of the Bank and the Subsidiaries, except in all instances for increases or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur; and (iv) in addition to the examination referred to in their opinions and the limited procedures referred to in clause (iii) above, they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included in the Registration Statement and the Prospectus and which are specified by the Agent, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of Chart Bank and its subsidiaries identified in such letter. 23 (g) At Closing Time, the Agent shall have received a letter from Wolf & Company, P.C., dated as of Closing Time, to the effect that it reaffirms the statements made in the letter furnished pursuant to subsection (f) of this Section, except that the specified date referred to shall be a date not more than five days prior to Closing Time. (h) At Closing Time, the Securities shall have been approved for listing on the Nasdaq Stock Market upon notice of issuance. (i) At Closing Time, the Agent shall have received a letter from RP Financial, dated as of the Closing Time, confirming its appraisal. (j) At Closing Time, counsel for the Agent shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities and the Foundation Shares as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities and the Foundation Shares as herein contemplated shall be satisfactory in form and substance to the Agent and counsel for the Agent. (k) At any time prior to Closing Time, (1) there shall not have occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effect of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities, and (ii) trading generally on the American Stock Exchange, the New York Stock Exchange or the Nasdaq Stock Market shall not have been suspended, and minimum or maximum prices for trading shall not have been fixed, or maximum ranges for prices for securities have been required, by any of said exchanges or by order of the SEC or any other governmental authority, and a banking moratorium shall not have been declared by either Federal or New York authorities. SECTION 6. INDEMNIFICATION. (a) The Company, the MHC and the Bank, jointly and severally, agree to indemnify and hold harmless the Agent, each person, if any, who controls the Agent, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and its respective partners, directors, officers, employees and agents as follows: (i) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, related to or arising out of the Conversion (including the establishment of the Foundation and the contribution of the Foundation Shares thereto by the Company) or any action taken by the Agent where acting as agent of the Company, the MHC or the Bank or otherwise as described in Section 2 hereof; (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, based upon or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Corporator Statement or Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a 24 material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (iii) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever described in clauses (i) or (ii) above, if such settlement is effected with the written consent of the Company, the MHC or the Bank, which consent shall not be unreasonably withheld; and (iv) from and against any and all expense whatsoever, as incurred (including, subject to Section 6(c) hereof, the fees and disbursements of counsel chosen by the Agent), reasonably incurred in investigating, preparing for or defending against any litigation, or any investigation, proceeding or inquiry by any governmental agency or body, commenced or threatened, or any claim pending or threatened whatsoever described in clauses (i) or (ii) above, to the extent that any such expense is not paid under (i), (ii) or (iii) above; provided, however, that the indemnification provided for in this paragraph (a) shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading which was made in reliance upon and in conformity with the Agent Information. (b) The Agent agrees to indemnify and hold harmless the Company, the MHC, the Bank, their directors, their trustees, each of their officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, of a material fact made in the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Agent Information. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement unless the failure to so notify materially prejudices the indemnifying party's defense of the action. An indemnifying party may participate at its own expense in the defense of any such action. In addition, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and reasonably acceptable to the indemnified parties that are defendants in such action, unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them that are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action, proceeding or claim, other than reasonable costs of investigation. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to no more than one local counsel in each separate jurisdiction in which any action or proceeding is commenced) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or 25 circumstances. No indemnifying party shall be liable for any settlement of any action, proceeding or suit effected without its prior written consent. (d) The Company, the MHC and the Bank also agree that the Agent shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to the Bank, the MHC, the Company, its security holders or the Bank's, the MHC's or the Company's creditors relating to or arising out of the engagement of the Agent pursuant to, or the performance by the Agent of the services contemplated by, this Agreement. (e) In addition to, and without limiting, the provisions of Section (6)(a)(iv) hereof, in the event that the Agent, any person, if any, who controls the Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Actor any of its partners, directors, officers, employees or agents is requested or required to appear as a witness or otherwise gives testimony in any action, proceeding, investigation or inquiry brought by or on behalf of or against the Company, the MHC, the Bank, the Agent or any of its respective affiliates or any participant in the transactions contemplated hereby in which the Agent or such person or agent is not named as a defendant, the Company, the MHC and the Bank jointly and severally agree to reimburse the Agent or such other persons for all reasonable and necessary out-of-pocket expenses incurred by it or them in connection with preparing or appearing as a witness or otherwise giving testimony and to compensate the Agent in an amount to be mutually agreed upon. SECTION 7. CONTRIBUTION. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 6 hereof is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company, the MHC, the Bank and the Agent shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company, the MHC or the Bank and the Agent, as incurred, in such proportions (i) that the Agent is responsible for that portion represented by the percentage that the maximum aggregate marketing fees appearing on the cover page of the Prospectus bears to the maximum aggregate gross proceeds appearing thereon and the Company, the MHC and the Bank are jointly and severally responsible for the balance or (ii) if, but only if, the allocation provided for in clause (i) is for any reason held unenforceable, in such proportion as is appropriate to reflect not only the relative benefits to the Company, the MHC and the Bank on the one hand and the Agent on the other, as reflected in clause (i), but also the relative fault of the Company, the MHC and the Bank on the one hand and the Agent on the other, as well as any other relevant equitable considerations; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls the Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Agent, and each director of the Company, the MHC or the Bank, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company, the MHC or the Bank within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company, the MHC and the Bank. Notwithstanding anything to the contrary set forth herein, to the extent permitted by applicable law, in no event shall the Agent be required to contribute an aggregate amount in excess of the aggregate marketing fees to which the Agent is entitled and actually paid pursuant to this Agreement. SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company, the MHC or the Bank submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of 26 the Agent or any controlling person, or by or on behalf of the Company, the MHC and the Bank, and shall survive delivery of the Securities. SECTION 9. TERMINATION OF AGREEMENT. (a) The Agent may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Registration Statement, any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the MHC or the Bank, or the Company, the MHC, the Bank and the Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effect of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities, or (iii) if trading generally on the Nasdaq Stock Market, the American Stock Exchange or the Nasdaq Stock Market has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by any of said exchanges or by order of the SEC or any other governmental authority, or if a banking moratorium has been declared by either Federal or New York authorities, (iv) if any condition specified in Section 5 shall not have been fulfilled when and as required to be fulfilled; (v) if there shall have been such material adverse change in the condition or prospects of the Company, the MHC or the Bank or the prospective market for the Company's securities as in the Agent's good faith opinion would make it inadvisable to proceed with the offering, sale or delivery of the Securities; (vi) if, in the Agent's good faith opinion, the aggregate value for the Securities established by RP Financial is not reasonable or equitable under then prevailing market conditions; or (vii) if the Conversion is not consummated on or prior to [____________]. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Sections 2 and 4 hereof relating to the reimbursement of expenses and except that the provisions of Sections 6 and 7 hereof shall survive any termination of this Agreement. SECTION 10. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Agent shall be directed to the Agent at 18 Columbia Turnpike, Florham Park, New Jersey 07932, attention of Chief Executive Officer, facsimile number (973) 549-4034; notices to the Company, the MHC and the Bank shall be directed to either of them at 58 Main Street, Franklin, Massachusetts 02038, attention: Chief Executive Officer. SECTION 11. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Agent, the Company, the MHC and the Bank and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Agent, the Company, the MHC and the Bank and their respective successors and the controlling persons and partners, and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Agent, the Company, the MHC and the Bank and their respective successors, and said controlling persons and partners and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. 27 SECTION 12. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made, except for the engagement letter dated October 13, 2004, by and between the Agent and the MHC and the Bank, relating to the Agent's providing conversion agent services to the Company, the MHC and the Bank in connection with the Conversion. No waiver, amendment or other modification of this Agreement shall be effective unless in writing and signed by the parties hereto. SECTION 13. GOVERNING LAW AND TIME. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed in said state without regard to the conflicts of laws provisions thereof. Unless otherwise noted, specified times of day refer to Eastern time. SECTION 14. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. SECTION 15. HEADINGS. Sections headings are not to be considered part of this Agreement, are for convenience and reference only, and are not to be deemed to be full or accurate descriptions of the contents of any paragraph or subparagraph. 28 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Agent, the Company, the MHC and the Bank in accordance with its terms. Very truly yours, BENJAMIN FRANKLIN BANCORP,INC. By: ____________________________ Name: Title: BENJAMIN FRANKLIN BANCORP,M.H.C. By: ____________________________ Name: Title: BENJAMIN FRANKLIN BANK By: ____________________________ Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: RYAN BECK & CO. By: _________________________________ Name: Title: 29 EX-2.1 3 b52576a1exv2w1.txt EX-2.1 PLAN OF CONVERSION EXHIBIT 2.1 - -------------------------------------------------------------------------------- BENJAMIN FRANKLIN BANCORP, M.H.C. PLAN OF CONVERSION ADOPTED BY THE BOARD OF TRUSTEES ON OCTOBER 28, 2004 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE 1. INTRODUCTION - BUSINESS PURPOSE........................................................................1 ARTICLE 2. DEFINITIONS............................................................................................3 2.1. ACTING IN CONCERT.........................................................................................3 2.2. AFFILIATE.................................................................................................3 2.3. APPLICATION...............................................................................................3 2.4. ASSOCIATE.................................................................................................3 2.5. BANK......................................................................................................4 2.6. BHCA......................................................................................................4 2.7. COMMISSIONER..............................................................................................4 2.8. COMMUNITY OFFERING........................................................................................4 2.9. CONVERSION................................................................................................4 2.10. CORPORATOR...............................................................................................4 2.11. DEPOSIT ACCOUNT..........................................................................................4 2.12. DIRECT COMMUNITY OFFERING................................................................................4 2.13. DIVISION.................................................................................................4 2.14. ELIGIBLE ACCOUNT HOLDER..................................................................................5 2.15. ELIGIBILITY RECORD DATE..................................................................................5 2.16. EMPLOYEE.................................................................................................5 2.17. EMPLOYEE PLAN............................................................................................5 2.18. ESOP.....................................................................................................5 2.19. ESTIMATED VALUATION RANGE................................................................................5 2.20. EXCHANGE ACT.............................................................................................5 2.21. FDIC.....................................................................................................5 2.22. FRB......................................................................................................5 2.23. FRB APPLICATION..........................................................................................5 2.24. FOUNDATION...............................................................................................5 2.25. GROUP MAXIMUM PURCHASE LIMIT.............................................................................5 2.26. HOLDING COMPANY COMMON STOCK.............................................................................5 2.27. HOLDING COMPANY CONVERSION STOCK.........................................................................5 2.28. INDEPENDENT APPRAISER....................................................................................5 2.29. INDEPENDENT CORPORATOR...................................................................................5 2.30. INDEPENDENT VALUATION....................................................................................6 2.31. INDIVIDUAL MAXIMUM PURCHASE LIMIT........................................................................6 2.32. INFORMATION STATEMENT....................................................................................6 2.33. LIQUIDATION ACCOUNT......................................................................................6 2.34. LOCAL COMMUNITY..........................................................................................6 2.35. MARKETING AGENT..........................................................................................6 2.36. MARKET MAKER.............................................................................................6 2.37. MERGER SHARES............................................................................................6 2.38. MHC......................................................................................................6 2.39. NON-TAX-QUALIFIED EMPLOYEE BENEFIT PLAN..................................................................6 2.40. OFFERING.................................................................................................6
-i- 2.41. OFFICER..................................................................................................6 2.42. PERSON...................................................................................................6 2.43. PLAN.....................................................................................................7 2.44. QUALIFYING DEPOSIT.......................................................................................7 2.45. RANGE MAXIMUM............................................................................................7 2.46. RANGE MINIMUM............................................................................................7 2.47. REGULATIONS..............................................................................................7 2.48. SEC......................................................................................................7 2.49. SPECIAL MEETING..........................................................................................7 2.50. STOCK HOLDING COMPANY....................................................................................7 2.51. SUBSCRIPTION OFFERING....................................................................................7 2.52. SUBSCRIPTION PRICE.......................................................................................7 2.53. SUBSIDIARY...............................................................................................7 2.54. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER.....................................................................7 2.55. SUPPLEMENTAL ELIGIBILITY RECORD DATE.....................................................................7 2.56. SYNDICATED COMMUNITY OFFERING............................................................................8 2.57. TAX-QUALIFIED EMPLOYEE PLAN..............................................................................8 ARTICLE 3. GENERAL PROCEDURE FOR CONVERSION.......................................................................8 3.1. PRECONDITIONS TO CONVERSION...............................................................................8 3.2. SUBMISSION OF PLAN TO COMMISSIONER AND FRB................................................................8 3.3. SPECIAL MEETING OF CORPORATORS TO APPROVE THE PLAN........................................................8 3.4. STOCK HOLDING COMPANY CHARTER AND BYLAWS..................................................................9 3.5. BANK CHARTER AND BYLAWS...................................................................................9 3.6. OFFER AND SALE OF HOLDING COMPANY CONVERSION STOCK........................................................9 3.7. CONVERSION OF MHC TO STOCK HOLDING COMPANY................................................................9 ARTICLE 4. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION....................................................10 4.1. ESTABLISHMENT OF THE FOUNDATION..........................................................................10 4.2. PURPOSES OF THE FOUNDATION; CHARITABLE CONTRIBUTIONS.....................................................10 4.3. BOARD OF DIRECTORS OF THE FOUNDATION.....................................................................10 ARTICLE 5. SHARES TO BE OFFERED..................................................................................11 5.1. HOLDING COMPANY COMMON STOCK.............................................................................11 5.2. INDEPENDENT VALUATION, PURCHASE PRICE AND NUMBER OF SHARES...............................................11 ARTICLE 6. SUBSCRIPTION RIGHTS AND ORDERS FOR COMMON STOCK.......................................................12 6.1. DISTRIBUTION OF PROSPECTUS...............................................................................12 6.2. ORDER FORMS..............................................................................................13 6.3. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT..........................................14 6.4. PAYMENT FOR STOCK........................................................................................14 ARTICLE 7. STOCK PURCHASE PRIORITIES.............................................................................15 7.1. PRIORITIES FOR OFFERING..................................................................................15 7.2. CERTAIN DETERMINATIONS...................................................................................15 7.3. MINIMUM PURCHASE; NO FRACTIONAL SHARES...................................................................15 7.4. OVERVIEW OF PRIORITIES...................................................................................15 7.5. PRIORITIES FOR SUBSCRIPTION OFFERING.....................................................................16
-ii- 7.6. PRIORITIES FOR DIRECT COMMUNITY OFFERING.................................................................17 7.7. PRIORITIES FOR SYNDICATED COMMUNITY OFFERING.............................................................19 ARTICLE 8. ADDITIONAL LIMITATIONS ON PURCHASES...................................................................19 8.1. GENERAL..................................................................................................19 8.2. INDIVIDUAL MAXIMUM PURCHASE LIMIT........................................................................19 8.3. GROUP ACTING IN CONCERT..................................................................................20 8.4. PURCHASES BY OFFICERS, DIRECTORS, TRUSTEES AND CORPORATORS...............................................20 8.5. SPECIAL RULE FOR TAX-QUALIFIED EMPLOYEE PLANS............................................................20 8.6. INCREASE IN THE TOTAL NUMBER OF SHARES OFFERED...........................................................20 8.7. ILLEGAL PURCHASES........................................................................................21 8.8. REJECTION OF ORDERS......................................................................................21 8.9. SUBSCRIBERS IN NON-QUALIFIED STATES OR IN FOREIGN COUNTRIES..............................................21 8.10. NO OFFER TO TRANSFER SHARES.............................................................................21 8.11. CONFIRMATION BY PURCHASERS..............................................................................21 ARTICLE 9. POST OFFERING MATTERS.................................................................................22 9.1. STOCK PURCHASES AFTER THE CONVERSION.....................................................................22 9.2. RESALES OF STOCK BY MANAGEMENT PERSONS...................................................................22 9.3. STOCK CERTIFICATES.......................................................................................22 9.4. RESTRICTION ON FINANCING STOCK PURCHASES.................................................................22 9.5. STOCK BENEFIT PLANS......................................................................................22 9.6. MARKET FOR HOLDING COMPANY COMMON STOCK..................................................................23 9.7. LIQUIDATION ACCOUNT......................................................................................23 9.8. PAYMENT OF DIVIDENDS.....................................................................................25 9.9. REPURCHASE OF STOCK......................................................................................25 9.10. CONVERSION EXPENSES.....................................................................................25 9.11. PUBLIC INSPECTION OF CONVERSION APPLICATION.............................................................25 9.12. ENFORCEMENT OF TERMS AND CONDITIONS.....................................................................25 9.13. VOTING RIGHTS IN CONVERTED BANK.........................................................................26 ARTICLE 10. MISCELLANEOUS........................................................................................26 10.1. INTERPRETATION OF PLAN..................................................................................26 10.2. AMENDMENT OR TERMINATION OF THE PLAN....................................................................26
Exhibit 3.4 -- Proposed Charter and Bylaws of the Stock Holding Company Exhibit 3.5 -- Proposed Amended and Restated Charter and Bylaws of the Bank Exhibit 3.7 -- Initial Members of the Board of Directors of the Stock Holding Company -iii- BENJAMIN FRANKLIN BANCORP, M.H.C. PLAN OF CONVERSION ARTICLE 1. INTRODUCTION - BUSINESS PURPOSE The Board of Trustees of Benjamin Franklin Bancorp, M.H.C., a Massachusetts-chartered mutual holding company (the "MHC"), has determined that it is in the best interests of the MHC, of Benjamin Franklin Savings Bank,1 a Massachusetts-chartered stock savings bank and wholly owned subsidiary of the MHC (the "BANK"), of the depositors and customers of the Bank, and of the communities served by the Bank and the MHC for the MHC to convert from a mutual institution to a stock-form institution (the "CONVERSION"). Capitalized terms used but not defined in this Article 1 shall have the meaning set forth in Article 2 hereof. In order to carry out the Conversion, the Board of Trustees of the MHC has adopted this Plan of Conversion (the "PLAN") to be carried out under the laws of The Commonwealth of Massachusetts and the regulations of the Massachusetts Division of Banks, and other applicable laws and regulations. Pursuant to the Plan, the MHC will convert to a Massachusetts-chartered stock form corporation known as Benjamin Franklin Bancorp, Inc. (the "STOCK HOLDING COMPANY") and offer Holding Company Conversion Stock in the Conversion on a priority basis to qualifying depositors, any Tax-Qualified Employee Plan, and Employees, Officers, directors and trustees of the Bank and the MHC, with any remaining shares to be offered to the public in a Direct Community Offering and possibly in a Syndicated Community Offering. One of the primary purposes of the Conversion is to enable the MHC to acquire Chart Bank, a Massachusetts-chartered stock co-operative bank ("CHART BANK"). Pursuant to an Agreement and Plan of Merger dated September 1, 2004 ("AFFILIATION AGREEMENT") by and among the MHC, the Bank and Chart, each issued and outstanding share of Chart common stock will be exchanged for either cash or shares of Holding Company Common Stock, and Chart Bank will be merged with the Bank (the "CHART ACQUISITION") at a closing to take place immediately after the consummation of the Conversion. The Conversion will generate capital to pay the cash portion of the consideration to be paid to the holders of Chart Bank common stock, and will make it possible for the Stock Holding Company to issue shares of Holding Company Common Stock as the stock portion of the consideration to be paid to holders of Chart common stock. The combination of the Conversion and the Chart Acquisition is intended to enable the Bank to compete and expand more effectively in the financial services marketplace. The Conversion is intended to provide an additional source of capital not now available to the MHC or the Bank. Under the Plan, the Stock Holding Company will issue capital stock to depositors and other members of the public, and intends to use a portion of the capital raised through such issuance to pay the cash portion of the consideration to be paid in the Chart Acquisition. The - ---------- 1 Following the adoption of the Plan of Conversion by the Board of Trustees, the Bank changed its name from "Benjamin Franklin Savings Bank"to "Benjamin Franklin Bank." Stock Holding Company will use the remaining capital raised, directly or after investing such capital into the Bank, to further the expansion of the activities of the Stock Holding Company and the Bank. In addition, after the Conversion, the Stock Holding Company would have the ability to issue additional shares of Holding Company Common Stock to raise additional capital or in connection with additional mergers or acquisitions, although no additional capital issuance and no merger or acquisition (other than the Chart Acquisition) are planned or contemplated at the present time. In addition, stock ownership by Officers and other Employees of the Stock Holding Company and the Bank has proven to be an effective performance incentive and as a means of attracting and retaining qualified personnel. Finally, the Board of Directors, Board of Trustees and senior management also believe that the Conversion will be beneficial to the population within the primary market area. The Conversion will provide local customers and other residents with an opportunity to become equity owners of the Bank, and thereby participate in the possible stock price appreciation and cash dividends, which is consistent with the objective of being a locally-owned financial institution servicing local financial needs. The Board and management believe that, through expanded local stock ownership, current customers and non-customers who purchase Holding Company Conversion Stock will seek to enhance the financial success of the Bank through consolidation of their banking business and increased referrals to the Bank. The Conversion and the Chart Acquisition are expected to close on the same date and at substantially the same time. The Conversion, however, is not conditioned upon the consummation of Chart Acquisition. In furtherance of the MHC's commitment to its community, the MHC intends to form a charitable foundation (the "Foundation") as part of the Conversion. The Foundation is intended to complement the Bank's community reinvestment activities in a manner that will allow the Bank's local communities to share in the growth and profitability of the Stock Holding Company and the Bank over the long term. Consistent with the Bank's goal, the Stock Holding Company intends, immediately following the Conversion, to donate to the Foundation a number of shares of its authorized but unissued Common Stock in an amount up to 8.0% of the lesser of (i) the number of shares actually sold in the Conversion or (ii) the number of shares that would have been sold at the midpoint of the Estimated Valuation Range. The Chart Acquisition is subject to the approval of various regulatory agencies, and must also be approved by the affirmative vote of at least (i) two-thirds of the MHC's Corporators present and eligible to vote at the meeting called for approval of such Acquisition and (ii) the holders of two thirds of issued and outstanding capital stock of Chart. In addition, individuals purchasing Holding Company Conversion Stock will, by executing their order to purchase such Holding Company Conversion Stock, consent to and approve of the Chart Acquisition. The Plan is subject to the approval of various regulatory agencies, and must also be approved by the affirmative vote of a majority of the total votes of the MHC's Corporators and a majority of the MHC's Independent Corporators (who shall constitute not less than 60% of all of the MHC's Corporators) at an annual meeting or a special meeting called for such purpose. By approving the Plan, the Corporators will also be approving the charter and bylaws of each of the Stock Holding Company and the Bank and all other steps necessary or incidental to the Conversion. -2- The Bank became a stock-form subsidiary of the MHC when Benjamin Franklin Savings Bank reorganized into mutual holding company form in 1995. Accordingly, the Conversion will not affect the corporate existence of the Bank. Although the Plan does provide that certain amendments will be made to the Bank's corporate charter and bylaws, the Bank's business and operations will not be affected or interrupted by the Conversion, and the Bank will continue as the same legal entity after the Conversion. The deposit accounts and loan accounts of the Bank's customers will not be affected by the Conversion. Upon Conversion, each deposit account holder of the Bank will continue to hold exactly the same deposit account as the holder held immediately before the Conversion. All deposit accounts in the Bank following the Conversion will continue to be insured up to the legal maximum by the Federal Deposit Insurance Corporation and the Deposit Insurance Fund of the Depositors Insurance Fund in the same manner as such deposit accounts were insured immediately before the Conversion. There will be no change in the Bank's loans. The Conversion will not result in any reduction of the Bank's reserves or net worth. ARTICLE 2. DEFINITIONS As used in the Plan, the terms set forth below have the following meanings: 2.1. ACTING IN CONCERT. The term "ACTING IN CONCERT" means (a) knowing participation in a joint activity or conscious parallel action towards a common goal, whether or not pursuant to an express agreement; or (b) Persons seeking to combine or pool their voting or other interests (such as subscription rights) in the securities of an issuer for a common purpose, pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. When Persons act together for such purpose, their group is deemed to have acquired their stock. The determination of whether a group is Acting in Concert shall be made solely by the Board of Trustees of the MHC or Officers delegated by such Board and may be based on any evidence upon which the Board or such delegatee chooses to rely, including, without limitation, joint account relationships or the fact that such Persons have filed joint Schedules 13D with the SEC with respect to other companies. Persons living at the same address, whether or not related, will be deemed to be Acting in Concert unless otherwise determined by the Board or such delegatee. Trustees of the MHC and directors of the Stock Holding Company and the Bank shall not be deemed to be Acting in Concert solely as a result of their membership on any such board or boards. 2.2. AFFILIATE. An "AFFILIATE" of, or a Person "AFFILIATED" with, a specified Person, is a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. 2.3. APPLICATION. The application, including a copy of the Plan, submitted by the MHC to the Commissioner for approval of the Conversion. 2.4. ASSOCIATE. The term "ASSOCIATE," when used to indicate a relationship with any Person, means: (i) any corporation or organization (other than the Bank, the Stock Holding Company, the MHC or a majority-owned subsidiary of any thereof) of which such Person is a director, Officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of -3- any class of equity securities; (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of such Person or any relative of such spouse, who has the same home as such Person or who is a director or trustee or officer of the MHC or the Bank; and (iv) any Person Acting in Concert with any of the Persons or entities specified in clauses (i) through (iii) above; provided, however, that any Tax-Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be an Associate of any director, trustee or Officer of the MHC, the Stock Holding Company or the Bank, to the extent provided in the Plan. When used to refer to a Person other than an Officer or director of the Bank, the MHC or the Stock Holding Company, the MHC in its sole discretion may determine the Persons that are Associates of other Persons. Trustees of the MHC and directors of the Stock Holding Company and the Bank shall not be deemed to be Associates solely as a result of their membership on such Board. 2.5. BANK. Benjamin Franklin Savings Bank, which will change its name to Benjamin Franklin Bank in connection with the Conversion. 2.6. BHCA. The Bank Holding Company Act of 1956, as amended. 2.7. COMMISSIONER. The Commissioner of Banks of The Commonwealth of Massachusetts. 2.8. COMMUNITY OFFERING. A Direct Community Offering and/or a Syndicated Community Offering. 2.9. CONVERSION. (1) The conversion of the MHC into the Stock Holding Company by amendment of the MHC's charter and bylaws to authorize the issuance of capital stock or by such other means as the Commissioner and the FRB shall approve under the Regulations, (2) the offering of Holding Company Conversion Stock in a Subscription Offering and, to the extent shares remain available, in a Direct Community Offering and possibly in a Syndicated Community Offering; (3) the issuance of the Holding Company Conversion Stock, (4) the amendment of the Bank's charter and bylaws as contemplated in the Plan; and (5) the consummation of the related transactions provided for in the Plan. 2.10. CORPORATOR. A member of the MHC's Board of Corporators. 2.11. DEPOSIT ACCOUNT. Any withdrawable deposit account offered by the Bank, including, without limitation, savings accounts, NOW account deposits, certificates of deposit, demand deposits, Keogh Plan, SEPs and IRA accounts for which the Bank acts as custodian or trustee, and such other types of deposit accounts as may then have been authorized by Massachusetts or federal law and regulations, but not including repurchase agreements, savings bank life insurance policies or certain escrow accounts. 2.12. DIRECT COMMUNITY OFFERING. The offering for sale directly by the Stock Holding Company of Holding Company Conversion Stock (i) to the Local Community, as provided in Section 7.6 of the Plan, with preference given to natural persons residing in the Local Community, and then (ii) to the public at large. The Direct Community Offering may be conducted simultaneously with the Subscription Offering. 2.13. DIVISION. The Division of Banks of The Commonwealth of Massachusetts. -4- 2.14. ELIGIBLE ACCOUNT HOLDER. Any Person holding a Qualifying Deposit on the Eligibility Record Date. 2.15. ELIGIBILITY RECORD DATE. May 31, 2003, the date for determining who qualifies as an Eligible Account Holder. 2.16. EMPLOYEE. The term "EMPLOYEE" does not include a trustee, director or Officer. 2.17. EMPLOYEE PLAN. Any Tax-Qualified Employee Plan or Non-Tax-Qualified Employee Benefit Plan. 2.18. ESOP. The employee stock ownership plan to be established by the Bank. 2.19. ESTIMATED VALUATION RANGE. The dollar range of the proposed Offering, as determined by the Independent Appraiser before the Offering and as it may be amended from time to time thereafter. The Estimated Valuation Range may vary within 15% above or 15% below the midpoint of such range, with a possible adjustment by up to 15% above the Range Maximum. 2.20. EXCHANGE ACT. The Securities Exchange Act of 1934, as amended. 2.21. FDIC. The Federal Deposit Insurance Corporation. 2.22. FRB. The Board of Governors of the Federal Reserve System. 2.23. FRB APPLICATION. The application submitted by the MHC to the FRB seeking the FRB's prior approval of the MHC's conversion from mutual to stock form. 2.24. FOUNDATION. A charitable foundation established and funded by the Stock Holding Company immediately following the Conversion as contemplated by Article 4 hereof. The Foundation will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. 2.25. GROUP MAXIMUM PURCHASE LIMIT. The limitation on the purchase of shares of Holding Company Conversion Stock established by Section 8.3, as such limit may be increased pursuant to said Section 8.3. 2.26. HOLDING COMPANY COMMON STOCK. The common stock authorized to be issued from time to time by the Stock Holding Company. 2.27. HOLDING COMPANY CONVERSION STOCK. The Holding Company Common Stock to be issued by the Stock Holding Company in the Conversion, including the Merger Shares, if any, issued as described in Section 7.6.4. 2.28. INDEPENDENT APPRAISER. The appraiser retained by the MHC to prepare an appraisal of the pro forma market value of the Holding Company Conversion Stock. 2.29. INDEPENDENT CORPORATOR. A Corporator who is not an Employee, Officer, or trustee of the MHC or an Employee, Officer, director, or "significant borrower" of the Bank as determined by the Commissioner. -5- 2.30. INDEPENDENT VALUATION. The estimated pro forma market value of the Holding Company Conversion Stock as determined by the Independent Appraiser. 2.31. INDIVIDUAL MAXIMUM PURCHASE LIMIT. The limitation on the purchase of shares of Holding Company Conversion Stock established by Section 8.2, as such limit may be increased pursuant to said Section 8.2. 2.32. INFORMATION STATEMENT. The information statement required to be sent to the Corporators in connection with the Special Meeting. 2.33. LIQUIDATION ACCOUNT. The liquidation account established pursuant to Section 9.7 of the Plan. 2.34. LOCAL COMMUNITY. The following Massachusetts cities and towns: Attleboro, Ashland, Bellingham, Belmont, Blackstone, Brookline, Dover, Franklin, Foxboro, Holliston, Hopedale, Hopkinton, Lexington, Lincoln, Mansfield, Medfield, Medway, Mendon, Milford, Millis, Millville, Needham, Newton, Norfolk, North Attleboro, Northbridge, Norton, Plainville, Sharon, Sherborn, Upton, Uxbridge, Walpole, Waltham, Watertown, Wellesley, Weston and Wrentham. 2.35. MARKETING AGENT. The broker-dealer responsible for organizing and managing the Conversion and sale of the Holding Company Conversion Stock. 2.36. MARKET MAKER. A dealer (i.e., any Person who engages directly or indirectly as agent, broker, or principal in the business of offering, buying, selling or otherwise dealing or trading in securities issued by another Person) who, with respect to a particular security, (i) regularly publishes bona fide competitive bid and offer quotations on request, and (ii) is ready, willing and able to effect transactions in reasonable quantities at the dealer's quoted prices with other brokers or dealers. 2.37. MERGER SHARES. Shares of Holding Company Common Stock issued to stockholders of Chart Bank in consideration of the Chart Acquisition, whether pursuant to Section 7.6.4 or otherwise. 2.38. MHC. Benjamin Franklin Bancorp, M.H.C., the Massachusetts-chartered holding company for the Bank as it exists in mutual form prior to the Conversion. 2.39. NON-TAX-QUALIFIED EMPLOYEE BENEFIT PLAN. Any defined benefit plan or defined contribution plan which is not qualified under Section 401 of the Internal Revenue Code. 2.40. OFFERING. The Subscription Offering, the Direct Community Offering and the Syndicated Community Offering. 2.41. OFFICER. The Chairman of the Board, the President, any officer of the level of vice president or above, the Clerk and the Treasurer of the Bank, the MHC or the Stock Holding Company, as the case may be. 2.42. PERSON. An individual, corporation, partnership, association, joint-stock company, -6- trust (including Individual Retirement Accounts, SEPs and Keogh Accounts), unincorporated organization, government entity or political subdivision thereof or any other entity. 2.43. PLAN. This Plan of Conversion. 2.44. QUALIFYING DEPOSIT. The aggregate balances of all Deposit Accounts of an Eligible Account Holder as of the close of business on the Eligibility Record Date or of a Supplemental Eligible Account Holder as of the close of business on the Supplemental Eligibility Record Date, as the case may be, provided that such aggregate balance is not less than $50. 2.45. RANGE MAXIMUM. The valuation which is 15% above the midpoint of the Estimated Valuation Range, as defined in Section 2.19. 2.46. RANGE MINIMUM. The valuation which is 15% below the midpoint of the Estimated Valuation Range, as defined in Section 2.19. 2.47. REGULATIONS. The regulations of the Division regarding mutual to stock conversions mutual holding companies and the applicable regulations of the Office of Thrift Supervision (as administered by the FRB), to the extent that such Office of Thrift Supervision regulations do not conflict with the regulations of the Division. 2.48. SEC. The Securities and Exchange Commission. 2.49. SPECIAL MEETING. The Special Meeting of Corporators called for the purpose of voting on the Plan and the Chart Acquisition. 2.50. STOCK HOLDING COMPANY. The stock-form holding company that (x) will result from the conversion of the MHC as provided in the Plan, (y) issue Holding Company Conversion Stock in the Conversion, and (z) continue to own 100% of the common stock of the Bank. The Stock Holding Company will be a Massachusetts-chartered corporation known as Benjamin Franklin Bancorp, Inc. 2.51. SUBSCRIPTION OFFERING. The offering of Holding Company Conversion Stock for subscription by Persons holding subscription rights pursuant to the Plan. 2.52. SUBSCRIPTION PRICE. The price per share, determined as provided in Section 5.2 of the Plan, at which the Holding Company Conversion Stock will be sold in the Offering. 2.53. SUBSIDIARY. A company that is controlled by another company, either directly or indirectly through one or more subsidiaries. 2.54. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER. Any Person (other than Officers, Directors, Trustees, or Corporators of the MHC and the Bank and their Associates) holding a Qualifying Deposit on the Supplemental Eligibility Record Date. 2.55. SUPPLEMENTAL ELIGIBILITY RECORD DATE. The supplemental record date for determining who qualifies as a Supplemental Eligible Account Holder. The Supplemental Eligibility Record Date shall be the last day of the calendar quarter preceding the Commissioner's approval of the Application. -7- 2.56. SYNDICATED COMMUNITY OFFERING. At the discretion of the MHC, the offering of Holding Company Conversion Stock following or contemporaneously with the Direct Community Offering through a syndicate of broker-dealers. 2.57. TAX-QUALIFIED EMPLOYEE PLAN. Any defined benefit plan or defined contribution plan (including the ESOP, any stock bonus plan, profit-sharing plan, 401(k) plan or other plan) of the Bank, the Stock Holding Company, the MHC or any of their Affiliates, which, with its related trusts, meets the requirements to be qualified under Section 401 of the Internal Revenue Code. ARTICLE 3. GENERAL PROCEDURE FOR CONVERSION 3.1. PRECONDITIONS TO CONVERSION. The Conversion is expressly conditioned upon prior occurrence of the following: 3.1.1 Approval of the Plan by the affirmative vote of a majority of the Corporators at a regular or special meeting of such Corporators (and, if required by regulatory authorities, by the affirmative vote of a majority of Independent Corporators (who shall constitute not less than 60% of all Corporators)). 3.1.2 Approval by the Commissioner of the Application, including the Plan and the Charter and Bylaws of the Stock Holding Company and of the Bank. 3.1.3 Approval by the FRB of the FRB Application. 3.2. SUBMISSION OF PLAN TO COMMISSIONER AND FRB. Upon approval by at least two-thirds of all Trustees of the MHC, the Plan will be submitted to the Commissioner as part of the Application, and to the FRB as part of the FRB Application, together with a copy of the proposed Information Statement and all other material required by the Regulations, for approval by the Commissioner and the FRB. The MHC must also receive either a private letter ruling from the Internal Revenue Service or an opinion of its counsel as to the federal income tax consequences of the Conversion, substantially to the effect that the Conversion will not result in any adverse federal income tax consequence to the MHC, the Bank, the Stock Holding Company, Eligible Account Holders or Supplemental Eligible Account Holders. Upon a determination by the Commissioner that the Application is complete, the MHC will publish and post public announcements and notices of the Application as required by the Commissioner and the Regulations. 3.3. SPECIAL MEETING OF CORPORATORS TO APPROVE THE PLAN. Following approval of the Plan by the Commissioner, the Special Meeting shall be scheduled in accordance with the MHC's Bylaws, and the Plan (as revised in response to comments received from the Commissioner and the FRB), proposed revisions and amendments to the charters and bylaws of the Bank and the Stock Holding Company, and any information required pursuant to the Regulations, will be submitted to the Corporators for their consideration and approval at the Special Meeting. The MHC will mail to each Corporator a copy of the Information Statement not less than seven (7) days before the Special Meeting. Following approval of the Plan by the Corporators, the MHC intends to take such steps as may be appropriate pursuant to applicable -8- laws and regulations to convert the MHC to a Massachusetts-chartered stock form holding company. 3.4. STOCK HOLDING COMPANY CHARTER AND BYLAWS. Copies of the proposed Charter and Bylaws of the Stock Holding Company are attached hereto as Exhibit 3.4, and are made a part of the Plan. By their approval of the Plan, the Corporators shall have approved and adopted the Charter and Bylaws of the Stock Holding Company. 3.5. BANK CHARTER AND BYLAWS. Copies of the proposed amended and restated Charter and Bylaws of the Bank are attached hereto as Exhibit 3.5, and are made a part of the Plan. By their approval of the Plan, the Trustees, as the governing body of the sole stockholder of the Bank, have approved and adopted the amended and restated Charter and Bylaws of the Bank. 3.6. OFFER AND SALE OF HOLDING COMPANY CONVERSION STOCK. 3.6.1 If the Corporators approve the Plan, and upon receipt of all required regulatory approvals, the Holding Company Conversion Stock will be offered for sale in a Subscription Offering simultaneously to Eligible Account Holders, Supplemental Eligible Account Holders, any Tax-Qualified Employee Plan, and directors, trustees, Officers and Employees in the manner set forth in Article 7 hereof. The Subscription Offering period will run for no less than twenty (20) but no more than forty-five (45) days from the date of distribution of the Subscription Offering materials, unless extended by the MHC with the approval of the Commissioner and the FRB, if required. If feasible, any Holding Company Conversion Stock remaining will then be sold to the general public through a Direct Community Offering as provided in Article 7 hereof, which may be held either subsequent to or concurrently with the Subscription Offering. 3.6.2 If feasible, any shares of Holding Company Conversion Stock remaining unsold after completion of the Subscription Offering and a Direct Community Offering may, in the sole discretion of the MHC, either be applied toward the Merger Shares as described in Section 7.6.4 or sold in a Syndicated Community Offering (which may commence following or contemporaneously with the Direct Community Offering). If for any reason a Syndicated Community Offering cannot be effected, the MHC will either apply such unsubscribed Holding Company Conversion Stock toward the Merger Shares as described in Section 7.6.4 or use its best efforts to obtain other purchasers, or both, in order to meet the Range Minimum, subject to the approval of the Commissioner and the FRB, if required. The sale of all shares of Holding Company Conversion Stock to be sold pursuant to this Plan must be completed within forty-five (45) days after termination of the Subscription Offering, subject to the extension of such forty-five (45) day period by the MHC with the approval of the Commissioner and the FRB, if required. The MHC may seek one or more extensions of such forty-five (45) day period if necessary to complete the sale of all shares of Holding Company Conversion Stock. If all available shares of Holding Company Conversion Stock are sold in the Subscription Offering and any Direct Community Offering, there will be no Syndicated Community Offering and the Conversion will be consummated upon completion of the Subscription Offering or the Direct Community Offering, as the case may be. 3.7. CONVERSION OF MHC TO STOCK HOLDING COMPANY. Upon the consummation of the -9- Conversion the MHC will be converted into the Stock Holding Company. The Stock Holding Company will be chartered as a Massachusetts corporation and will be authorized to exercise any and all powers, rights and privileges, and will be subject to all limitations applicable to bank holding companies under applicable laws and regulations. The initial members of the Board of Directors of the Stock Holding Company will be those Persons whose names are set forth on Exhibit 3.7 to the Plan, each to hold office until the Annual Meeting (or Special Meeting in lieu thereof) in the year set forth opposite their respective names on such Exhibit 3.7, and until their successors are elected and have been qualified, and otherwise in accordance with the Charter and By-Laws of the Stock Holding Company. The Officers of the MHC immediately prior to the Conversion shall be the initial Officers of the Stock Holding Company, in each case to serve at the pleasure of the Board of Directors of the Stock Holding Company. The Stock Holding Company, as successor in interest to the MHC, will continue to own 100% of the common stock of the Bank. The Stock Holding Company expects to contribute to the Bank as additional capital at least half of the net proceeds remaining after the payment of expenses of the Conversion; provided that the capital contributed to the Bank will include the amount of Conversion proceeds applied toward the cash portion of the purchase price in the Chart Acquisition. ARTICLE 4. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION. 4.1. ESTABLISHMENT OF THE FOUNDATION. As part of the Conversion, the Stock Holding Company intends to establish the Foundation which will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code and to donate to the Foundation a number of shares of its authorized but unissued Common Stock in an amount up to 8.0% of the lesser of (i) the number of shares actually sold in the Conversion or (ii) the number of shares that would have been sold at the midpoint of the Estimated Valuation Range. 4.2. PURPOSES OF THE FOUNDATION; CHARITABLE CONTRIBUTIONS. The Foundation is being formed in connection with the Conversion in order to complement the Bank's existing community reinvestment activities and to share with the Bank's community a part of the Bank's financial success as a locally headquartered, community minded, financial services institution. The funding of the Foundation with Holding Company Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Stock Holding Company and the Bank over the long term. The Foundation will be dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within the Bank's community of not less than five percent (5.0%) of the average fair value of Foundation assets each year, less certain expenses. In order to serve the purposes for which it was formed and maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a portion of the Holding Company Common Stock contributed to it by the Holding Company. 4.3. BOARD OF DIRECTORS OF THE FOUNDATION. The board of directors of the Foundation will consist of a majority of individuals who are directors of the Bank. The board of directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation. -10- ARTICLE 5. SHARES TO BE OFFERED 5.1. HOLDING COMPANY COMMON STOCK. The Holding Company Common Stock shall be fully paid and nonassessable. The total number of shares of Holding Company Common Stock authorized under the Stock Holding Company's Charter will exceed the number of shares of Holding Company Conversion Stock to be issued to the Stock Holding Company stockholders in the Conversion and shares of Holding Company Common Stock to be issued to holders of Chart common stock in the Acquisition. HOLDING COMPANY COMMON STOCK WILL NOT BE COVERED BY DEPOSIT INSURANCE. 5.2. INDEPENDENT VALUATION, PURCHASE PRICE AND NUMBER OF SHARES. 5.2.1 INDEPENDENT VALUATION. An Independent Appraiser shall be employed by the MHC to provide it with an Independent Valuation as required by the Regulations, which value shall be included in the prospectus (as described in Section 6.1 of this Plan) filed with the Commissioner and the SEC. The Trustees of the MHC shall thoroughly review and analyze the methodology and fairness of the Independent Valuation. The Independent Valuation will be made by a written report to the MHC, contain the factors upon which the Independent Valuation was made and conform to procedures adopted by the Commissioner and the FRB. The Independent Valuation provided by the Independent Appraiser to the MHC before the commencement of the Subscription Offering will contain an Estimated Valuation Range of aggregate prices for the Holding Company Conversion Stock, which range shall reflect the anticipated pro forma market value of the Holding Company Conversion Stock. Such Estimated Valuation Range will establish a midpoint and will vary within 15% above (the "RANGE MAXIMUM") to 15% below (the "RANGE MINIMUM") such midpoint. The Independent Appraiser shall also present to the MHC at the close of the Subscription Offering a valuation of the pro forma market value of the Holding Company Conversion Stock. 5.2.2 SUBSCRIPTION PRICE. All shares sold in the Conversion will be sold at a uniform price per share (the "SUBSCRIPTION PRICE"), which is expected to be determined before the commencement of the Offering. If there is a Syndicated Community Offering, the price per share at which the Holding Company Conversion Stock is sold in such Syndicated Community Offering shall be equal to the per share purchase price of the shares sold in the Subscription Offering and the Direct Community Offering. The aggregate purchase price for all shares of Holding Company Conversion Stock will be equal to the estimated consolidated pro forma market value of the Holding Company Conversion Stock, as determined for such purpose by the Independent Appraiser. 5.2.3 NUMBER OF SHARES. The total number of shares (and a range thereof) of Holding Company Conversion Stock to be issued and offered for sale will be determined by the MHC immediately before the commencement of the Subscription Offering based on the Independent Valuation, the Estimated Valuation Range and the Subscription Price. The Independent Valuation, and such number of shares, shall be subject to adjustment thereafter if necessitated by market or financial conditions, with the approval of the Commissioner and the FRB, if necessary. In particular, the total number of shares may be increased by up to 15% above the Range Maximum if the Independent Valuation is increased subsequent to the -11- commencement of the Subscription Offering to reflect changes in market and financial conditions and the resulting aggregate purchase price is not more than 15% above the Range Maximum. 5.2.4 INCREASE OR DECREASE IN NUMBER OF SHARES. The number of shares of Holding Company Conversion Stock may be increased or decreased by the MHC, subject to the following provisions. In the event that the aggregate purchase price of the number of shares of Holding Company Conversion Stock ordered is below the minimum of the Estimated Valuation Range, or materially above the Range Maximum, resolicitation of purchasers may be required, provided, however, that a resolicitation will not be required (i) if the number of shares increases by up to 15% above the Range Maximum, or (ii) if the Range Minimum is achieved by applying Holding Company Conversion Stock toward the Merger Shares as described in Section 7.6.4. Any such resolicitation shall be effected in such manner and within such time as the MHC shall establish, with the approval of the Commissioner and the FRB, if required. 5.2.5 CONFIRMATION OF VALUATION. Notwithstanding the foregoing, no sale of Holding Company Conversion Stock may be consummated unless, before such consummation, the Independent Appraiser confirms to the MHC and to the Commissioner and the FRB that, to the best knowledge of the Independent Appraiser, nothing of a material nature has occurred which, taking into account all relevant factors, would cause the Independent Appraiser to conclude that the aggregate value of all shares of Holding Company Conversion Stock ordered, at the Subscription Price, is incompatible with its estimate of the aggregate consolidated pro forma market value of the Holding Company Conversion Stock. An increase in the aggregate value of the Holding Company Conversion Stock by up to 15% above the Range Maximum would not be deemed to be material. If such confirmation is not received, the MHC may cancel the Conversion, resolicit and extend the Conversion and establish a new Subscription Price and/or Estimated Valuation Range, or hold a new Conversion or take such other action as the Commissioner and the FRB may permit. The estimated pro forma market value of the Holding Company Conversion Stock shall be determined for such purpose by an Independent Appraiser on the basis of such appropriate factors as are not inconsistent with the Regulations and will be confirmed upon completion of the Conversion. In any case, the total number of shares of Holding Company Conversion Stock to be issued and sold will be determined by the MHC as follows: (a) the estimated aggregate pro forma market value of the Holding Company Conversion Stock, immediately after Conversion as determined by the Independent Appraiser, expressed in terms of a specific aggregate dollar amount rather than as a range, shall be divided by (b) the Subscription Price. ARTICLE 6. SUBSCRIPTION RIGHTS AND ORDERS FOR COMMON STOCK 6.1. DISTRIBUTION OF PROSPECTUS. The Conversion shall be conducted in compliance with the Regulations and applicable SEC regulations. As soon as practicable after the prospectus prepared by the MHC has been declared effective by the Commissioner and the SEC, copies of the prospectus and order forms will be distributed to all Eligible Account Holders, Supplemental Eligible Account Holders, any Tax-Qualified Employee Plan and Employees, Officers, directors and trustees at their last known addresses appearing on the records of the Bank for the purpose of subscribing for shares of Holding Company Conversion Stock in the Subscription Offering and will be made available (if and when a Community Offering is held) for use by those Persons -12- entitled to purchase in the Community Offering. Instead of distributing the prospectus and order forms, the MHC may distribute a notice of availability of the prospectus and the order form, together with a request card and a postage-prepaid return envelope for use in requesting such prospectus and order form. If the latter method is employed by the MHC, such notices shall be mailed to those eligible to subscribe in the Subscription Offering not less than thirty (30) calendar days before the expiration of the Subscription Offering. 6.2. ORDER FORMS. Each order form will be preceded or accompanied by the prospectus describing the Stock Holding Company, the Bank, the Chart Acquisition, the Holding Company Conversion Stock and the Subscription and Community Offerings. Each order form will contain, among other things, the following: 6.2.1 A specified date by which all order forms must be received by the MHC, which date shall be not less than 20 nor more than 45 days following the date on which the order forms are mailed by the MHC, and which date will constitute the expiration of the Subscription Offering, unless extended; 6.2.2 The Subscription Price per share for shares of Holding Company Conversion Stock to be sold in the Offering; 6.2.3 A description of the minimum and maximum number of shares of Holding Company Conversion Stock that may be subscribed for pursuant to the exercise of subscription rights or otherwise purchased in the Offering; 6.2.4 Instructions as to how the recipient of the order form is to indicate thereon the number of shares of Holding Company Conversion Stock for which such Person elects to subscribe and the available alternative methods of payment therefor; 6.2.5 An acknowledgment that the recipient of the order form has received a copy of the prospectus before execution of the order form; 6.2.6 A statement indicating the consequences of failing to properly complete and return the order form, including a statement to the effect that all subscription rights are nontransferable, will be void at the end of the Subscription Offering, and can only be exercised by delivering to the MHC within the Subscription Offering period such properly completed and executed order form, together with a check or money order in the full amount of the purchase price as specified in the order form for the shares of Holding Company Conversion Stock for which the recipient elects to subscribe in the Subscription Offering (or by authorizing on the order form that the Bank withdraw said amount from the Deposit Account at the Bank maintained by such Person, but only if the MHC elects to permit such withdrawals from the type of such Deposit Account); 6.2.7 A statement to the effect that the executed order form, once received by the MHC, may not be modified or amended by the subscriber without the consent of the MHC; and 6.2.8 An acknowledgment by the Person submitting the order form that such Person understands and agrees that by submitting such order form such Person is approving the Chart Acquisition and is voting by written consent (pursuant to M.G.L. ch. 156D, Section 7.04) all -13- Holding Company Conversion Stock to be purchased by such Person in favor of the Chart Acquisition. Notwithstanding the above, the MHC reserves the right in its sole discretion to accept or reject orders received on photocopied or faxed order forms. 6.3. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT. In the event order forms (a) are not delivered for any reason or are returned undelivered to the MHC by the United States Postal Service, (b) are not received back by the MHC or are received by the MHC after the expiration date specified thereon, (c) are defectively filled out or executed, (d) are not accompanied by the full required payment for the shares of Holding Company Conversion Stock subscribed for (including cases in which Deposit Accounts from which withdrawals are authorized are insufficient to cover the amount of the required payment), or (e) are not mailed pursuant to a "NO MAIL" order placed in effect by the account holder, the subscription rights of the Person to whom such rights have been granted will lapse as though such Person failed to return the contemplated order form within the time period specified thereon; provided, however, that the MHC may, but will not be required to, waive any immaterial irregularity on any order form or require the submission of corrected order forms or the remittance of full payment for subscribed shares by such date as the MHC may specify, and all interpretations by the MHC of terms and conditions of this Plan and of the order forms will be final. 6.4. PAYMENT FOR STOCK. 6.4.1 All payments for Holding Company Conversion Stock subscribed for or ordered in the Conversion must be delivered in full to the MHC, together with a properly completed and executed order form, except in the case of the Syndicated Community Offering, on or before the expiration date specified on the order form, unless such date is extended by the MHC; provided, however, that if any Employee Plan subscribes for shares during the Subscription Offering, such plan will not be required to pay for the shares at the time it subscribes but rather may pay for such shares of Holding Company Conversion Stock subscribed for by such plan at the Subscription Price upon consummation of the Conversion, provided, however, that, in the case of the ESOP there is in force from the time of its subscription until the consummation of the Conversion, a loan commitment to lend to the ESOP, at such time, the aggregated Subscription Price of the shares for which it subscribed. The Stock Holding Company or the Bank may make scheduled discretionary contributions to an Employee Plan provided such contributions from the Bank, if any, do not cause the Bank to fail to meet its regulatory capital requirement. Payment for Holding Company Conversion Stock may also be made by a participant in an Employee Plan (including the Bank's 401(k) plan) causing funds held for such participant's benefit by an Employee Plan to be paid over for such purchase to the extent that such plan allows participants or any related trust established for the benefit of such participants to direct that some or all of their individual accounts or sub-accounts be invested in Holding Company Conversion Stock. 6.4.2 Payment for Holding Company Conversion Stock shall be made either by check, bank draft or money order, or if a purchaser has a Deposit Account in the Bank (and if the MHC has elected to permit such withdrawals from the type of Deposit Account maintained by such Person), such purchaser may pay for the shares subscribed for by authorizing the Bank to -14- make a withdrawal from the purchaser's Deposit Account at the Bank in an amount equal to the aggregate purchase price of such shares. No wire transfers will be accepted. Any authorized withdrawal, whether from a savings, passbook or certificate account, shall be without penalty as to premature withdrawal. If the authorized withdrawal is from a certificate account, and the remaining balance does not meet the applicable minimum balance requirements, the certificate shall be canceled at the time of withdrawal, without penalty, and the remaining balance will earn interest at the passbook rate. Funds for which a withdrawal is authorized will remain in the purchaser's Deposit Account but may not be used by the purchaser pending consummation of the Conversion or expiration of the 45-day period (or such longer period as may be approved by the Commissioner) following termination of the Subscription Offering, whichever occurs first. After consummation of the Conversion, the withdrawal will be given effect only to the extent necessary to satisfy the subscription (to the extent it can be filled) at the Subscription Price. Interest submitted will continue to be earned on any amounts authorized for withdrawal until such withdrawal is given effect. Interest on checks and money orders will be paid by the Bank at the Bank's passbook rate. Such interest will be paid from the date payment is received by the Bank until consummation or termination of the Conversion. If for any reason the Conversion is not consummated, all payments made by subscribers in the Conversion will be refunded to them with interest. In case of amounts authorized for withdrawal from Deposit Accounts, refunds will be made by canceling the authorization for withdrawal. ARTICLE 7. STOCK PURCHASE PRIORITIES 7.1. PRIORITIES FOR OFFERING. All purchase priorities established by this Article 7 shall be subject to the purchase limitations set forth in, and shall be subject to adjustment as provided in, Article 8 of this Plan. In addition to the priorities set forth in this Article 7, the MHC may establish other priorities for the purchase of Holding Company Conversion Stock, subject to the approval of the Commissioner and the FRB. The priorities for the purchase of shares in the Conversion are set forth in the following Sections. 7.2. CERTAIN DETERMINATIONS. All interpretations or determinations of whether prospective purchasers are "RESIDENTS," "ASSOCIATES," or "ACTING IN CONCERT", and any other interpretations of any and all other provisions of the Plan shall be made by and at the sole discretion of the MHC, and may be based on whatever evidence the MHC may choose to use in making any such determination. 7.3. MINIMUM PURCHASE; NO FRACTIONAL SHARES. The minimum purchase by any Person shall be 25 shares (to the extent that shares of Holding Company Conversion Stock are available for purchase), provided, however, that the aggregate purchase price for any minimum share purchase shall not exceed $500. No fractional shares will be allocated or issued. 7.4. OVERVIEW OF PRIORITIES. In descending order of priority, the opportunity to purchase Holding Company Conversion Stock shall be given in the Subscription Offering to: (1) Eligible Account Holders; (2) Supplemental Eligible Account Holders; (3) any Tax-Qualified Employee Plan; and (4) Employees, Officers, directors and trustees of the MHC and the Bank. Any shares of Holding Company Conversion Stock that are not subscribed for in the Subscription Offering at the discretion of the MHC may be offered for sale in a Direct Community Offering and/or a -15- Syndicated Community Offering on terms and conditions and procedures satisfactory to the MHC. 7.5. PRIORITIES FOR SUBSCRIPTION OFFERING. 7.5.1 FIRST PRIORITY: ELIGIBLE ACCOUNT HOLDERS. Upon approval of the Plan by the Corporators and the receipt of permission from the Commissioner and the FRB to offer the Holding Company Conversion Stock for sale, each Eligible Account Holder shall receive, without payment therefor, nontransferable subscription rights on a first priority basis to subscribe for a number of shares of Holding Company Conversion Stock equal to the greatest of (x) a number determined by dividing the Individual Maximum Purchase Limit (as such term is defined in Section 8.2) by the per share Subscription Price, (y) one-tenth of one percent (.10%) of the shares offered in the Conversion, or (z) 15 times the product (rounded down to the nearest whole number) obtained by multiplying (1) the total number of shares of Holding Company Conversion Stock to be issued in the Conversion by (2) a fraction, of which the numerator is the Qualifying Deposit of the Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders. If there are insufficient shares available to satisfy all subscriptions of Eligible Account Holders, shares will be allocated to Eligible Account Holders so as to permit each such subscribing Eligible Account Holder to purchase a number of shares of Holding Company Conversion Stock sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares of Holding Company Conversion Stock will be allocated pro rata to remaining subscribing Eligible Account Holders whose subscriptions remain unfilled in the same proportion that each such subscriber's Qualifying Deposit bears to the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. Subscription rights to purchase Holding Company Conversion Stock received by corporators, Trustees, Officers, and directors of the MHC and the Bank (and their Associates) based on their increased deposits in the Bank in the one year preceding the Eligibility Record Date shall be subordinated to the subscription rights of other Eligible Account Holders. To ensure proper allocation of stock, each Eligible Account Holder must list on his or her subscription order form all Deposit Accounts in which he had an ownership interest as of the Eligibility Record Date. 7.5.2 SECOND PRIORITY: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent there are shares remaining after satisfaction of subscriptions by Eligible Account Holders, each Supplemental Eligible Account Holder shall receive non-transferable subscription rights to subscribe for a number of shares of Holding Company Conversion Stock equal to the greatest of (x) a number determined by dividing the Individual Maximum Purchase Limit by the per share Subscription Price, (y) one-tenth of one percent (.10%) of the shares offered in the Conversion, or (z) 15 times the product (rounded down to the nearest whole number) obtained by multiplying (1) the total number of shares of Holding Company Conversion Stock to be issued in the Conversion by (2) a fraction, of which the numerator is the Qualifying Deposit of the Supplemental Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders. In the event Supplemental Eligible Account Holders subscribe for a number of shares of Holding Company Conversion Stock which, when added to the shares subscribed for by Eligible Account Holders, exceed available shares, the available shares of Holding Company Conversion Stock will be allocated among subscribing Supplemental Eligible Account Holders so as to permit each subscribing -16- Supplemental Eligible Account Holder to purchase a number of shares of Holding Company Conversion Stock sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares subscribed for. Thereafter, unallocated shares will be allocated to each subscribing Supplemental Eligible Account Holder whose subscription remains unfilled in the same proportion that such subscriber's Qualifying Deposit on the Supplemental Eligibility Record Date bears to the total amount of Qualifying Deposits of all subscribing Supplemental Eligible Account Holders whose subscriptions remain unfilled. 7.5.3 THIRD PRIORITY: TAX-QUALIFIED EMPLOYEE PLAN. To the extent there are shares remaining after satisfaction of subscriptions by Eligible Account Holders and Supplemental Eligible Account Holders, the Tax-Qualified Employee Plan shall be given the opportunity to purchase in the aggregate up to 10% of the Holding Company Conversion Stock issued in the Conversion. In the event that the total number of shares of Holding Company Conversion Stock offered in the Conversion is increased to an amount greater than the Range Maximum, the Tax-Qualified Employee Plan shall have a priority right to purchase any such shares exceeding the Range Maximum (up to the aggregate of 10% of Holding Company Conversion Stock to be issued in the Conversion). If any Tax-Qualified Employee Plan chooses not to fill its order in the Offering, then the Tax-Qualified Employee Plan may purchase shares in the open market following consummation of the Conversion. 7.5.4 FOURTH PRIORITY: EMPLOYEES, OFFICERS, DIRECTORS AND TRUSTEES. To the extent there are shares remaining after satisfaction of subscriptions by Eligible Account Holders, Supplemental Eligible Account Holders, and any Tax-Qualified Employee Plan, each Employee, Officer, director and trustee of the MHC or the Bank who is not an Eligible Account Holder or a Supplemental Eligible Account Holder shall receive non-transferable subscription rights to subscribe for shares of Holding Company Conversion Stock offered in the Conversion in an amount equal to the Individual Maximum Purchase Limit; provided, however, that the aggregate number of shares of Holding Company Conversion Stock that may be purchased by Employees, Officers, directors and trustees in the Conversion shall be limited to 30% of the total number of shares of Holding Company Conversion Stock issued in the Conversion (including shares purchased by Employees, Officers, directors and trustees under this Section 7.5.4 and under the preceding priority categories, but not including shares purchased by the ESOP). In the event that Employees, Officers, directors, and trustees subscribe under this Section 7.5.4 for more shares of Holding Company Conversion Stock than are available for purchase by them, the shares of Holding Company Conversion Stock available for purchase will be allocated by the MHC among such subscribing Persons on an equitable basis, such as by giving weight to the period of service, compensation and position of the individual subscriber. 7.6. PRIORITIES FOR DIRECT COMMUNITY OFFERING. 7.6.1 Any shares of Holding Company Conversion Stock not subscribed for in the Subscription Offering may be offered for sale in a Direct Community Offering. This will involve an offering of all unsubscribed shares of Holding Company Conversion Stock directly to the general public. The Direct Community Offering, if any, shall be for a period of not more than 45 days unless extended by the MHC, and shall commence concurrently with, during or promptly after the Subscription Offering. The MHC may use an investment banking firm or firms on a best efforts basis to sell the unsubscribed shares in the Subscription and Direct Community Offering. The MHC may pay a commission or other fee to such investment banking -17- firm or firms as to the shares sold by such firm or firms in the Subscription and Direct Community Offering and may also reimburse such firm or firms for expenses incurred in connection with the sale. The Holding Company Conversion Stock will be offered and sold in the Direct Community Offering, in accordance with the Regulations, so as to achieve the widest distribution of the Holding Company Conversion Stock. In making the Direct Community Offering, the Bank will give preference to natural persons residing in the Local Community. Orders accepted in the Direct Community Offering shall be filled up to a maximum not to exceed the Individual Maximum Purchase Limit. No Person may subscribe for or purchase more than the Individual Maximum Purchase Limit of Holding Company Conversion Stock in the Direct Community Offering. The MHC, in its sole discretion, may reject subscriptions, in whole or in part, received from any Person under this Section 7.6. 7.6.2 In the event of an oversubscription for shares in the Direct Community Offering, available shares will be allocated (to the extent shares remain available) first to cover orders of natural Persons residing in the Local Community, so that each such Person may receive 100 shares, and thereafter, on a pro rata basis to such Persons based on the amount of their respective subscriptions or on such other reasonable basis as may be determined by the MHC. If oversubscription does not occur among natural Persons residing in the Local Community, the allocation process to cover orders of other Person subscribing for shares in the Direct Community Offering shall be as described above for natural Persons. 7.6.3 The terms "RESIDENCE," "RESIDE," or "RESIDING" as used herein with respect to any Person shall mean any Person who occupies a dwelling within the Local Community, has an intent to remain with the Local Community for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the Local Community together with an indication that such presence within the Local Community is not merely transitory in nature. To the extent the Person is a corporation or other business entity, the principal place of business or headquarters must be in the Local Community. The Bank may use deposit or loan records or such other evidence provided to it to determine whether a Person is a resident. In all cases, however, such a determination shall be in the sole discretion of the MHC. 7.6.4 If: (i) aggregate subscriptions totaling at least the minimum of the Estimated Valuation Range (the "RANGE MINIMUM") are not received in the Subscription Offering and Direct Community Offering, and the MHC, in its sole discretion, determines that a Syndicated Community Offering is not in the best interests of the MHC; or (ii) aggregate subscriptions and orders totaling at least the Range Minimum are not received in the Subscription Offering, Direct Community Offering and the Syndicated Community Offering; then, subject to regulatory approval, the MHC may, in its sole discretion, apply unsubscribed/unordered Holding Company Conversion Stock toward the stock consideration to be issued to Chart stockholders in exchange for their shares of Chart Bank, or in any other manner that facilitates the completion of the Chart Acquisition, provided that the total Merger Shares, including Merger Shares issued pursuant to this Section 7.6.4, represent no more than -18- 49% of the outstanding Holding Company Common Stock immediately after the closing of the Conversion and Chart Acquisition. Holding Company Conversion Stock may only be issued as Merger Shares in order to achieve the Range Minimum. 7.7. PRIORITIES FOR SYNDICATED COMMUNITY OFFERING. 7.7.1 Any shares of Holding Company Conversion Stock not sold in the Subscription Offering or in the Direct Community Offering, if any, may be offered for sale to the general public by a selling group of broker-dealers in a Syndicated Community Offering, subject to terms, conditions and procedures as may be determined by the MHC in a manner that is intended to achieve the widest distribution of the Holding Company Conversion Stock subject to the rights of the MHC to accept or reject in whole or in part all orders in the Syndicated Community Offering. No Person may purchase in the Syndicated Community Offering more than the Individual Maximum Purchase Limit of Holding Company Conversion Stock. It is expected that the Syndicated Community Offering will commence as soon as practicable after termination of the Direct Community Offering, if any. The Syndicated Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended as provided herein. The commission in the Syndicated Community Offering shall be determined by a marketing agreement between the MHC and the Marketing Agent. Such agreement shall be filed with the FRB, the Division and the SEC. 7.7.2 If for any reason a Syndicated Community Offering of unsubscribed shares of Holding Company Conversion Stock cannot be effected or is not deemed to be advisable, and any shares remain unsold after the Subscription Offering and the Community Offering, if any, the MHC may seek to make other arrangements for the sale of the remaining shares in order to meet the Range Minimum, including an underwritten public offering. Such other arrangements will be subject to the approval of the Commissioner and the FRB and to compliance with applicable state and federal securities laws. ARTICLE 8. ADDITIONAL LIMITATIONS ON PURCHASES 8.1. GENERAL. Purchases of Holding Company Conversion Stock in the Conversion will be subject to the purchase limitations set forth in this Article 8. 8.2. INDIVIDUAL MAXIMUM PURCHASE LIMIT. This Section 8.2 sets forth the "INDIVIDUAL MAXIMUM PURCHASE LIMIT." No Person (or Persons exercising subscription rights through a single qualifying deposit account held jointly) may purchase in the Offering (including the Subscription Offering, the Direct Community Offering and the Syndicated Community Offering) more than $150,000 of Holding Company Conversion Stock, except that: (i) the MHC may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, (x) increase such Individual Maximum Purchase Limit to up to 5% of the number of shares of Holding Company Conversion Stock offered in the Conversion or (y) decrease such Individual Maximum Purchase Limit to no less than one-tenth of one percent (.10%) of the number of shares of Holding Company Conversion Stock offered in the Conversion; and (ii) Tax-Qualified Employee Plan may purchase up to 10% of the shares issued in the Conversion. If the MHC increases the Individual Maximum Purchase Limit (as permitted by this -19- Section 8.2), subscribers in the Subscription Offering who ordered the previously-effective maximum amount will be, and certain other large subscribers in the sole discretion of the MHC may be, given the opportunity to increase their subscriptions up to the then applicable limit. Requests to purchase additional shares of Holding Company Conversion Stock under this provision will be determined by the MHC, in its sole discretion. 8.3. GROUP ACTING IN CONCERT. This Section 8.3 sets forth the "GROUP MAXIMUM PURCHASE LIMIT." No Person and his or her Associates or group of Persons Acting in Concert, may purchase in the Offering (including the Subscription Offering, the Direct Community Offering and the Syndicated Community Offering) more than $250,000 of Holding Company Conversion Stock, except that: (i) the MHC may, in its sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, (x) increase such Group Maximum Purchase Limit to up to 5% of the number of shares of Holding Company Conversion Stock offered in the Conversion or (y) decrease such Group Maximum Purchase Limit to no less than one-tenth of one percent (.10%) of the number of shares of Holding Company Conversion Stock offered in the Conversion; and (ii) the Tax-Qualified Employee Plan may purchase up to 10% of the shares issued in the Conversion. Notwithstanding the foregoing, in the event that the MHC increases the Individual Maximum Purchase Limit (as permitted by Section 8.2) to a number that is in excess of the Group Maximum Purchase Limit established by this Section 8.3, the Group Maximum Purchase Limit shall automatically be increased so as to be equal to the Individual Maximum Purchase Limit, as adjusted. 8.4. PURCHASES BY OFFICERS, DIRECTORS, TRUSTEES AND CORPORATORS. The aggregate number of shares of Holding Company Conversion Stock to be purchased in the Offering by Officers, Directors, Trustees and Corporators of the MHC and the Bank (and their Associates) shall not exceed 30% of the total number of shares of Holding Company Conversion Stock issued in the Conversion. 8.5. SPECIAL RULE FOR TAX-QUALIFIED EMPLOYEE PLAN. Shares of Holding Company Conversion Stock purchased by any individual participant ("PLAN PARTICIPANT") in a Tax-Qualified Employee Plan using funds therein pursuant to the exercise of subscription rights granted to such Participant in his individual capacity as an Eligible Account Holder or Supplemental Eligible Account Holder shall not be deemed to be purchases by a Tax-Qualified Employee Plan for purposes of calculating the maximum amount of Holding Company Conversion Stock that Tax-Qualified Employee Plans may purchase pursuant to this Plan, if the individual Plan Participant controls or directs the investment authority with respect to such account or subaccount. 8.6. INCREASE IN THE TOTAL NUMBER OF SHARES OFFERED. In the event that (i) the total number of shares of Holding Company Conversion Stock offered in the Conversion is increased to an amount greater than the Range Maximum, and (ii) there shall be additional shares of Holding Company Conversion Stock available after any Tax-Qualified Employee Plan shall have exercised its priority right (established pursuant to Section 7.5.3) to purchase shares exceeding the Range Maximum, any additional shares not purchased by a Tax-Qualified Employee Plan will be issued to fill unfulfilled subscriptions of other subscribers according to their respective priorities set forth in the Plan. -20- 8.7. ILLEGAL PURCHASES. Notwithstanding any other provision of the Plan, no Person shall be entitled to purchase any Holding Company Conversion Stock to the extent such purchase would be illegal under any federal law or state law or regulation or would violate regulations or policies of the National Association of Securities Dealers, Inc., particularly those regarding free riding and withholding. The MHC and/or its agents may ask for an acceptable legal opinion from any purchaser as to the legality of such purchase and may refuse to honor any purchase order if such opinion is not timely furnished. 8.8. REJECTION OF ORDERS. The MHC has the right in its sole discretion to reject any order submitted by a Person whose representations the MHC believes to be false or who it otherwise believes, either alone or Acting in Concert with others, is violating, circumventing, or intends to violate, evade or circumvent the terms and conditions of the Plan. 8.9. SUBSCRIBERS IN NON-QUALIFIED STATES OR IN FOREIGN COUNTRIES. The MHC, in its sole discretion, may make reasonable efforts to comply with the securities laws of any state in the United States in which its depositors reside, and will only offer and sell the Holding Company Conversion Stock in states in which the offers and sales comply with such states' securities laws. However, no Person will be offered or allowed to purchase any Holding Company Conversion Stock under the Plan if he or she resides in a foreign country or in a state of the United States with respect to which any of the following apply: (i) a small number of Persons otherwise eligible to purchase shares under the Plan reside in such state or foreign county; (ii) the offer or sale of shares of Holding Company Conversion Stock to such Persons would require the Stock Holding Company or its Employees to register, under the securities laws of such state or foreign country, as a broker or dealer or to register or otherwise qualify its securities for sale in such state or foreign country; or (iii) such registration or qualification would be impracticable for reasons of cost or otherwise. 8.10. NO OFFER TO TRANSFER SHARES. Before the consummation of the Conversion, no Person shall offer to transfer, or enter into any agreement or understanding to transfer the legal or beneficial ownership of any subscription rights or shares of Holding Company Conversion Stock, except pursuant to the Plan. The following shall not constitute impermissible transfers under this Plan. Any Person having subscription rights in his individual capacity as an Eligible Account Holder or Supplemental Eligible Account Holder may exercise such subscription rights by causing a tax-qualified plan to make such purchase using funds allocated to such Person in such tax-qualified plan if such individual plan participant controls or directs the investment authority with respect to such account or subaccount. A tax-qualified plan that maintains an Eligible Deposit Account in the Bank as trustee for or for the benefit of a Person who controls or directs the investment authority with respect to such account or subaccount ("BENEFICIARY") may, in exercising its subscription rights, direct that the Holding Company Conversion Stock be issued in the name of such individual Beneficiary in his individual capacity. 8.11. CONFIRMATION BY PURCHASERS. Each Person ordering Holding Company Conversion Stock in the Conversion will be deemed to confirm that such purchase does not conflict with the purchase limitations in the Plan. All questions concerning whether any Persons are Associates or a Group Acting in Concert or whether any purchase conflicts with the purchase limitations in the Plan or otherwise violates any provision of the Plan shall be determined by the MHC in its sole discretion. Such determination shall be conclusive, final and binding on all -21- Persons and the MHC may take any remedial action, including without limitation rejecting the purchase or referring the matter to the Commissioner for action, as in its sole discretion the MHC may deem appropriate. ARTICLE 9. POST OFFERING MATTERS 9.1. STOCK PURCHASES AFTER THE CONVERSION. For a period of three years after the proposed Conversion, no Officer or director of the Stock Holding Company or the Bank, or his or her Associates, may purchase, without the prior written approval of the Commissioner, any Holding Company Common Stock except from a broker-dealer registered with the SEC, provided that the foregoing shall not apply to (x) negotiated transactions involving more than 1% of the outstanding Holding Company Common Stock, or (y) purchases of stock made by and held by or otherwise made pursuant to any Tax-Qualified Employee Plan or Non-Tax-Qualified Employee Benefit Plan of the Bank or the Stock Holding Company even if such stock is attributable to Officers, directors or their Associates. 9.2. RESALES OF STOCK BY MANAGEMENT PERSONS. Holding Company Conversion Stock purchased in the Conversion by Officers, directors, trustees and Corporators of the Bank, the Stock Holding Company and the MHC may not be resold for a period of at least one year following the date of purchase, except in the case of death or substantial disability, as determined by the Commissioner, of such person, or upon the written approval of the Commissioner. 9.3. STOCK CERTIFICATES. Each stock certificate shall bear a legend giving appropriate notice of the restrictions set forth in Section 9.2. Appropriate instructions shall be issued to the Stock Holding Company's transfer agent with respect to applicable restrictions on transfers of such stock. Any shares of stock issued as a stock dividend, stock split or otherwise with respect to such restricted stock, shall be subject to the same restrictions as apply to the restricted stock. 9.4. RESTRICTION ON FINANCING STOCK PURCHASES. The Stock Holding Company will not offer or sell any of the Holding Company Common Stock proposed to be issued to any Person whose purchase would be financed by funds loaned, directly or indirectly, to the Person by the Stock Holding Company, Bank or any of their Affiliates. 9.5. STOCK BENEFIT PLANS. The Board of Directors of the Bank and/or the Stock Holding Company are permitted under the Regulations, and may decide, to adopt one or more stock benefit plans for the benefit of the Employees, Officers and directors of the Bank and Stock Holding Company, including an ESOP, an Employer Stock Fund option in the 401(k) plan, stock award plans and stock option plans, which will be authorized to purchase Holding Company Common Stock and grant options for Holding Company Common Stock. However, only Tax-Qualified Employee Plan will be permitted to purchase Holding Company Conversion Stock in the Conversion subject to the purchase priorities set forth in the Plan. Pursuant to the Regulations, the Stock Holding Company may authorize the ESOP and any other Tax-Qualified Employee Plan to purchase in the aggregate up to 10% of the Holding Company Conversion Stock to be issued. The Bank or the Stock Holding Company may make scheduled discretionary contributions to one or more Tax-Qualified Employee Plans to purchase Holding Company Common Stock or to purchase issued and outstanding shares of Holding Company Common Stock or authorized but unissued shares of Holding Company Common Stock subsequent to the -22- completion of the Conversion, provided, however, that such contributions do not cause the Bank to fail to meet any of its regulatory capital requirements. The Plan specifically authorizes the grant and issuance by the Stock Holding Company of (i) awards of Holding Company Common Stock after the Conversion pursuant to one or more stock recognition and award plans (the "RECOGNITION PLANS") in an amount equal to up to 4% of the number of shares of Holding Company Conversion Stock issued in the Conversion, (ii) options to purchase a number of shares of Holding Company Common Stock in an amount equal to up to 10% of the number of shares of Holding Company Conversion Stock issued in the Conversion, and shares of Holding Company Common Stock issuable upon exercise of such options, and (iii) Holding Company Common Stock to one or more Tax Qualified Employee Plans, including the ESOP, at the closing of the Conversion or at any time thereafter, in an amount equal to up to 10% of the number of shares of Holding Company Conversion Stock issued in the Conversion. Shares awarded to the Tax Qualified Employee Plans or pursuant to the Recognition Plans, and shares issued upon exercise of options may be authorized but unissued shares of the Stock Holding Company's Holding Company Common Stock, or shares of Holding Company Common Stock purchased by the Stock Holding Company or such plans in the open market. No Recognition Plans or stock option plans have yet been adopted by the Board of the Holding Company, and no such plans will be submitted for the approval of the Stock Holding Company's stockholders at a meeting held earlier than six months after completion of the Conversion. 9.6. MARKET FOR HOLDING COMPANY COMMON STOCK. If at the close of the Conversion the Stock Holding Company has more than 300 shareholders of any class of stock, the Stock Holding Company shall use its best efforts to: 9.6.1 Encourage and assist a Market Maker to establish and maintain a market for that class of stock; and 9.6.2 List that class of stock on a national or regional securities exchange, or on the Nasdaq system. 9.6.3 Register the Holding Company Common Stock with the SEC pursuant to the Exchange Act, and undertake not to deregister such Holding Company Common Stock for a period of three years thereafter. 9.7. LIQUIDATION ACCOUNT. 9.7.1 The MHC shall, at the time of the Conversion, establish a Liquidation Account in an amount equal to the net worth of the MHC as set forth in the latest consolidated statement of financial condition contained in the final Prospectus distributed in connection with the Conversion. The function of the Liquidation Account is to establish a priority on liquidation and, except as otherwise provided in this Section 9.7, the existence of the Liquidation Account shall not operate to restrict the use or application of any of the net worth accounts of the Stock Holding Company. The Liquidation Account will be maintained by the MHC for the benefit of the Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain Deposit Accounts with the Bank following the Conversion. Each Eligible Account Holder and Supplemental Eligible Account Holder shall, with respect to each Deposit Account, hold a related inchoate interest in a portion of the Liquidation Account balance, in relation to -23- each Deposit Account balance at the Eligibility Record Date or Supplemental Eligibility Record Date, as the case may be, or to such balance as it may be subsequently reduced, as hereinafter provided. The initial Liquidation Account balance shall not be increased, and shall be subject to downward adjustment to the extent of any downward adjustment of any subaccount balance of any Eligible Account Holder or Supplemental Eligible Account Holder in accordance with 209 CMR 33.05(12). 9.7.2 In the unlikely event of a complete liquidation of the Stock Holding Company (and only in such event), following all liquidation payments to creditors (including those to depositors to the extent of their Deposit Accounts) each Eligible Account Holder and Supplemental Eligible Account Holder shall be entitled to receive a liquidating distribution from the Liquidation Account, in the amount of the then-adjusted subaccount balances for his or her deposit accounts then held, before any liquidating distribution may be made to any holders of the Stock Holding Company's capital stock. No merger, consolidation, reorganization, or purchase of bulk assets with assumption of deposit accounts and other liabilities, or similar transactions with an FDIC-insured institution, in which the Stock Holding Company is not the surviving institution, shall be deemed to be a complete liquidation for this purpose. In such transactions, the Liquidation Account shall be assumed by the surviving institution. 9.7.3 The initial subaccount balance for a Deposit Account held by an Eligible Account Holder and/or Supplemental Eligible Account Holder shall be determined by multiplying the opening balance in the Liquidation Account by a fraction, the numerator of which is the amount of such Eligible Account Holder's or Supplemental Eligible Account Holder's Qualifying Deposit and the denominator of which is the total amount of all Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible Account Holders in the Bank. For Deposit Accounts in existence on both dates, separate subaccounts shall be determined on the basis of the Qualifying Deposits in such Deposit Accounts on such record dates. Such initial subaccount balance shall not be increased by additional Deposits, but shall be subject to downward adjustment as described below. 9.7.4 If, at the close of business on the last day of any period for which the Stock Holding Company has prepared audited financial statements subsequent to the effective date of the Conversion, the deposit balance in the Deposit Account of an Eligible Account Holder or Supplemental Eligible Account Holder is less than the lesser of: (i) the balance in the Deposit Account at the close of business on the last day of any period for which the Stock Holding Company has prepared audited financial statements subsequent to the Eligibility Record Date or Supplemental Eligibility Record Date, or (ii) the amount in such Deposit Account as of the Eligibility Record Date or Supplemental Eligibility Record Date, then the subaccount balance for such Deposit Account shall be adjusted by reducing such subaccount balance in an amount proportionate to the reduction in the balance of such Deposit Account. In the event of such downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any subsequent increase in the deposit balance of the related Deposit Account. If any such Deposit Account is closed, the related subaccount shall be reduced to zero. For purposes of this Section 9.7, a time account shall be deemed to be closed upon its maturity date regardless of any renewal thereof. A distribution of each subaccount balance may be made only in the event of a complete liquidation of the Stock Holding Company subsequent to the Conversion and only out of funds available for such purpose after payment of all creditors. -24- 9.7.5 The Stock Holding Company shall not be required to set aside funds for the purpose of establishing the Liquidation Account, and the creation and maintenance of the Liquidation Account shall not operate to restrict the use or application of any of the net worth accounts of the Stock Holding Company, except that the Stock Holding Company shall not declare or pay a cash dividend on, or repurchase any of, its capital stock if the effect thereof would cause its net worth to be reduced below the amount required for the Liquidation Account. 9.8. PAYMENT OF DIVIDENDS. The Stock Holding Company may not declare or pay a cash dividend on the Holding Company Common Stock if the effect thereof would cause its regulatory capital to be reduced below the amount required to maintain the Liquidation Account and under FDIC rules and regulations. Otherwise, the Stock Holding Company may declare dividends in accordance with applicable laws and regulations. 9.9. REPURCHASE OF STOCK. The Stock Holding Company has no present intention of repurchasing any of the Holding Company Common Stock. However, based upon facts and circumstances following the Conversion and subject to applicable regulatory and accounting requirements, the Board of Directors of the Stock Holding Company may determine to repurchase stock in the future. Such facts and circumstances may include but not be limited to: (i) market and economic factors such as the price at which the Holding Company Common Stock is trading in the market, the volume of trading, the attractiveness of other investment alternatives in terms of the rate of return and risk involved in the investment, the ability to increase the book value and/or earnings per share of the remaining outstanding shares, and the opportunity to improve the Stock Holding Company's return on equity; (ii) the avoidance of dilution to stockholders by not having to issue additional shares to cover the exercise of stock options or the purchase of shares by the ESOP in the event the ESOP is unable to acquire shares in the Subscription Offering, or to fund the any stock plans adopted after the consummation of the Conversion; and (iii) any other circumstances in which repurchases would be in the best interests of the Stock Holding Company and its shareholders. 9.10. CONVERSION EXPENSES. The Regulations require that the expenses of the Conversion must be reasonable. The MHC will use its best efforts to assure that the expenses incurred by the MHC in effecting the Conversion will be reasonable. 9.11. PUBLIC INSPECTION OF CONVERSION APPLICATION. The MHC will maintain a copy of the Application in the main banking office of the Bank and such copy will be available for public inspection. 9.12. ENFORCEMENT OF TERMS AND CONDITIONS. The MHC shall have the right to take all such action as it, in its sole discretion, may deem necessary, appropriate or advisable in order to monitor and enforce the terms, conditions, limitations and restrictions contained in the Plan and the terms, conditions and representations contained in the Order Forms, including, but not limited to, the right to require any subscriber or purchaser to provide evidence, in a form satisfactory to the MHC, of such Person's eligibility to subscribe for or purchase shares of the Holding Company Conversion Stock under the terms of the Plan and the absolute right (subject only to any necessary regulatory approvals or concurrence) to reject, limit or revoke acceptance of any subscription or order and to delay, terminate or refuse to consummate any sale of Holding Company Conversion Stock that it believes might violate, or is designed to, or is any part of a -25- plan to, evade or circumvent such terms, conditions, limitations, restrictions and representations. Any such action shall be final, conclusive and binding on all Persons, and the MHC, the Bank and their Board of Trustees, Board of Directors, Officers, Employees and agents shall be free from any liability to any Person on account of any such action. 9.13. VOTING RIGHTS IN CONVERTED BANK. Following the Conversion, the holders of the capital stock of the Stock Holding Company shall have exclusive voting rights in the Stock Holding Company. ARTICLE 10. MISCELLANEOUS 10.1. INTERPRETATION OF PLAN. All interpretations of the Plan and application of its provisions to particular circumstances by the MHC shall be final, subject to the authority of the Commissioner. When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to the Plan unless otherwise indicated. The recitals hereto constitute an integral part of the Plan. References to Sections include subsections, which are part of the related Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5" would also refer to material contained in the subsection described as "Section 5.5.1"). The table of contents and headings contained in the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. Whenever the words "include", "includes" or "including" are used in the Plan, they shall be deemed to be followed by the words "without limitation". 10.2. AMENDMENT OR TERMINATION OF THE PLAN. If deemed necessary or desirable, the terms of the Plan may be substantively amended by a majority vote of the members of the Board of Trustees as a result of comments from regulatory authorities at any time prior to approval of the Plan by the Commissioner and at any time thereafter with the concurrence of the Commissioner. If amendments to the Plan are made after the Special Meeting, no further approval of the Corporators will be necessary unless otherwise required by the Commissioner. The Plan may be terminated by the Board of Trustees in its sole discretion, by reason of the termination of the Acquisition Agreement or otherwise, at any time prior to the Special Meeting and at any time thereafter with the concurrence of the Commissioner. The Plan will terminate if the sale of all shares of Holding Company Conversion Stock is not completed within twenty four months from the date of approval of the Plan by the Board of Trustees. 10.3. AUTHORITY OF THE COMMISSIONER TO APPROVE OTHER PROVISIONS. The Commissioner may approve such other equitable provisions as may be necessary to avert imminent injury to the MHC and Benjamin Franklin Bank. Dated: -26- EXHIBIT 3.4 PROPOSED CHARTER AND BYLAWS OF THE STOCK HOLDING COMPANY -27- EXHIBIT 3.5 PROPOSED AMENDED AND RESTATED CHARTER AND BYLAWS OF THE BANK -28- EXHIBIT 3.7 INITIAL MEMBERS OF THE BOARD OF DIRECTORS OF THE STOCK HOLDING COMPANY
NAME TERM EXPIRES - ---- ------------ Dr. Mary Ambler 2008 Mr. William P. Bissonnette 2006 Dr. William F. Brady 2007 Mr. John C. Fuller 2007 Ms. Anne M. King 2006 Mr. Richard D. Mann 2007 Mr. John D. Murphy 2006 Mr. Charles F. Oteri 2008 Mr. Thomas R. Venables 2008 Mr. Alfred H. Wahlers 2007 Mr. Charles Yergatian 2006
-29- EX-4.1 4 b52576a1exv4w1.txt EX-4.1 FORM OF COMMON STOCK CERTIFICATE Exhibit 4.1 [SPECIMEN OF STOCK CERTIFICATE] [FRONT SIDE OF CERTIFICATE] BENJAMIN FRANKLIN BANCORP, INC. INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS [NUMBER] [SHARES] BFBC *XX* * XX * COMMON STOCK SEE REVERSE FOR CERTAIN RESTRICTIONS NO PAR VALUE AND DEFINITIONS AND FOR CERTAIN PREFERENCES WHICH MAY EXIST WITH RESPECT TO THE COMMON STOCK ________________________________________________________________________________ This Certifies that SPECIMEN CUSIP 082073 10 7 is the owner of NO _ _ _ _ _ _ __ ________________________________________________________________________________ FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE PER SHARE, OF BENJAMIN FRANKLIN BANCORP, INC. Transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed or assigned. This Certificate and the shares of common stock represented hereby are issued and shall be held subject to the laws of The Commonwealth of Massachusetts and to the Articles of Organization and By-Laws of the Corporation, as in effect and as amended from time to time hereafter. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. IN WITNESS WHEREOF, the Corporation has caused its facsimile corporate seal and facsimile signatures of its duly authorized officers to be hereunto affixed. BENJAMIN FRANKLIN BANCORP, INC. /s/________________________________ SEAL /s/________________________________ TREASURER PRESIDENT COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY (New York, NY) TRANSFER AGENT AND REGISTRAR BY____________________________ AUTHORIZED SIGNATURE [BACK SIDE OF CERTIFICATE] The shares represented by this Certificate are issued subject to all the provisions of the Articles of Organization and By-Laws of the Corporation, as in effect and as amended from time to time, to all of which the holder by acceptance hereof assents. The Corporation will furnish to any shareholder, upon written request and without charge, a copy of the Articles of Organization and By-Laws of the Corporation. Such request may be made to the Clerk of the Corporation. Under the Articles of Organization, the Board of Directors may, without stockholder approval but subject to certain regulatory approvals, reclassify any unissued shares of common stock into one or more series of preferred stock and designate and issue one or more series of preferred stock, establish the number of shares in each such series, fix and state the voting powers, designations, preferences and the relative or special rights or privileges of the shares of any series so established and the qualifications thereon without further vote or action by the stockholders. A statement of the preferences, powers, qualifications and rights of the series and classes of preferred stock will be furnished to the holder of this Certificate upon written request and without charge. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT-- Custodian ...(Cust) (Minor) under Uniform Gifts to Minors Act (State) TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list. For value received, __________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ________________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ________________________________________________________________ shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated: _________________________ NOTICE: __________________________________________________ THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATIONS OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: __________________________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17AD-15. NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration or enlargement, or any change whatsoever. EX-8.1 5 b52576a1exv8w1.txt EX-8.1 TAX OPINION OF FOLEY HOAG LLP EXHIBIT 8.1 Tax Opinion of Foley Hoag LLP January 19, 2005 Benjamin Franklin Bancorp, M.H.C. 58 Main Street P.O. Box 309 Franklin, Massachusetts 02038-0927 Re: U.S. Federal Income Taxation of Conversion Ladies and Gentlemen: We have acted as counsel to Benjamin Franklin Bancorp, M.H.C. ("MHC"), a Massachusetts mutual holding company, in connection with the proposed conversion (the "Conversion") of MHC, a Massachusetts chartered mutual holding company, from mutual to stock form of ownership, in accordance with The Benjamin Franklin Bancorp M.H.C. Plan of Conversion adopted by MHC's Board of Trustees on October 28, 2004 (the "Plan"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. We have examined the law and such papers, including the Plan, as deemed necessary to render these opinions. As to questions of fact material to our opinions we have relied upon representations set forth in the Plan (including the Exhibits), and such other documents pertaining to the transactions contemplated by the Plan as we have deemed appropriate and necessary. As to questions of fact material to our opinions, we have relied upon representations of MHC contained in a letter of even date addressed to us and attached to this letter (the "Letter of Representation"), without undertaking to verify the same by independent investigation. In our examination we have assumed that (i) the transactions contemplated by the Plan will be consummated in accordance with the terms of the Plan; (ii) each entity that is a party to any of the documents (the "Documents") described in the preceding paragraphs has been duly organized under the laws of its state or country of organization, is validly existing and in good standing under such laws, and is duly qualified and in good standing in each jurisdiction in which it is required to be qualified to engage in the transactions contemplated by the Documents; (iii) each such entity has full power, authority, capacity and legal right to enter into and perform the terms of the Documents and the transactions contemplated thereby; (iv) the copies or originals of the Documents furnished to us are authentic (if originals) or accurate (if copies), those that are contracts or instruments are enforceable and effective in accordance with their terms against all parties thereto, and all signatures are genuine; (v) any representations made in the Documents are, and will continue to be, true and complete, and no default exists under any of the Documents; (vi) the business and affairs of each of the entities that is a party to any of the Documents will be conducted in accordance with the Documents and all relevant laws; (vii) no actions will be taken, no change in any of the Documents will occur, and no other events will occur, after the date hereof, that would have the effect of altering the facts, Documents or Benjamin Franklin Bancorp, M.H.C. January 19, 2005 assumptions upon which this opinion is based; and (viii) the business reasons for the Conversion will constitute a valid business purpose, within the meaning of Treasury Regulation section 1.368-1(b) and (c). The opinions rendered herein are based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Department proposed, temporary and final regulations, judicial decisions, and rulings and administrative interpretations of the Internal Revenue Service (the "IRS"), as each of the foregoing exists on the date hereof. The opinion rendered below is not binding on the IRS or any court of law, and no assurance can be given that legislative or administrative action or judicial decisions that differ from the opinion rendered below will not be forthcoming. Any such differences could be retroactive to transactions or business operations prior to such action or decisions. We express no opinion as to the federal income tax consequences of the Conversion other than those described below, if any, as to any tax consequences under the laws of any jurisdiction other than the United States, or as to the effect of the Conversion on prior transactions, or as to any matter not specifically addressed below. Based on the foregoing, we are of opinion, as of the date hereof and under existing law, that the Conversion will constitute or be part of a reorganization within the meaning of section 368(a) of the Code. We undertake no responsibility to update or supplement our opinion. We are furnishing this letter to you in support of the information set forth under the heading "Tax Aspects of the Conversion and the Chart Bank Acquisition" in the Registration Statement. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to our firm under such heading in the Registration Statement. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. This letter is not to be used, circulated, quoted, or otherwise referred to for any other purpose, and may not be relied upon by any person or entity other than you, without our prior written consent. For purposes only of compliance with Treasury Regulation Section 1.6011-4T(b)(3)(i), we hereby agree that you (and each of your employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Conversion and all materials of any kind, including this opinion letter any other tax analyses, that we have provided to you relating to such tax treatment and tax structure; provided, however, that any such information relating to the tax treatment or tax structure must be kept confidential to the extent necessary to comply with applicable securities laws. Very truly yours, Foley Hoag llp By: /s/ Richard Schaul-Yoder ________________________ A Partner - 2 - EX-21 6 b52576a1exv21.txt EX-21 SUBSIDIARIES . . . Exhibit 21 Subsidiaries of Benjamin Franklin Bancorp The following are the subsidiaries of Benjamin Franklin Bancorp:
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION - --------------------------------------- ----------------------------- Benjamin Franklin Bank Massachusetts Benjamin Franklin Bank Capital Trust I Delaware
The following is a wholly-owned subsidiary of Benjamin Franklin Bank:
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION - --------------------------------------- ----------------------------- Benjamin Franklin Securities Corp. Massachusetts
EX-23.3 7 b52576a1exv23w3.txt EX-23.3 CONSENT OF WOLF & COMPANY, P.C. WITH RESPECT TO BENJAMIN FRANKLIN BANCORP EXHIBIT 23.3 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT We consent to the use in Pre-Effective Amendment No. 1 of this Registration Statement on Form S-1 of our report dated February 27, 2004, except for Note 17 as to which the date is October 28, 2004, with respect to the consolidated financial statements of Benjamin Franklin Bancorp, Inc. as of and for the years ended December 31, 2003 and 2002, appearing in the Registration Statement, and to the references to us under the headings "Selected Consolidated Financial Information of Benjamin Franklin Bancorp" and "Experts" in such Registration Statement. /s/ WOLF & COMPANY, P.C. Boston, Massachusetts January 21, 2005 EX-23.4 8 b52576a1exv23w4.txt EX-23.4 CONSENT OF WOLF & COMPANY, P.C. WITH RESPECT TO CHART BANK EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the use in Pre-Effective Amendment No. 1 of this Registration Statement on Form S-1, relating to an offering of common stock of Benjamin Franklin Bancorp, Inc., of our report dated February 20, 2004, except for Note 13 as to which the date is September 1, 2004, relating to the consolidated financial statements of Chart Bank, A Cooperative Bank as of and for the years ended December 31, 2003 and 2002, appearing in the Registration Statement, and to the references to us under the headings "Selected Consolidated Financial Information of Chart Bank" and "Experts" in such Registration Statement. /s/ WOLF & COMPANY, P.C. Boston, Massachusetts January 21, 2005 EX-99.2 9 b52576a1exv99w2.txt EX-99.2 APPRAISAL REPORT OF RP FINANCIAL, LC. EXHIBIT 99.2 CONVERSION APPRAISAL REPORT BENJAMIN FRANKLIN BANCORP, INC. PROPOSED HOLDING COMPANY FOR BENJAMIN FRANKLIN BANK FRANKLIN, MASSACHUSETTS DATED AS OF: NOVEMBER 26, 2004 PREPARED BY: RP FINANCIAL, LC. 1700 NORTH MOORE STREET SUITE 2210 ARLINGTON, VIRGINIA 22209 November 26, 2004 Board of Trustees Benjamin Franklin Bancorp, M.H.C. Benjamin Franklin Savings Bank 58 Main Street Franklin, Massachusetts 02038-0309 Members of the Board of Directors: At your request, we have completed and hereby provide an independent appraisal ("Appraisal") of the estimated pro forma market value of the common stock which is to be issued in connection with the mutual-to-stock conversion transaction described below. This Appraisal is furnished pursuant to the requirements of 563b.7 and has been prepared in accordance with the "Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization" of the Office of Thrift Supervision ("OTS") and applicable interpretations thereof. Such Valuation Guidelines are relied upon by the Federal Deposit Insurance Corporation ("FDIC") and the Massachusetts Division of Banks in the absence of separate written valuation guidelines. Plan of Conversion On October 28, 2004, the Board of Trustees adopted a Plan of Conversion (the "Plan"). Pursuant to the Plan, Benjamin Franklin Bancorp, M.H.C. (the "MHC"), will convert from a Massachusetts-chartered bank holding company in mutual form to a Massachusetts-chartered bank holding company in stock form, and will drop "M.H.C." and add "Inc." to its name. Benjamin Franklin Savings Bank ("Benjamin Franklin" or the "Bank") is now and will continue to be the wholly-owned subsidiary of Benjamin Franklin Bancorp, Inc. (the "Company"). The Company will offer and sell the shares of common stock to be sold in the conversion. It is intended that all of the common stock of the Bank following the conversion will be held by the Company. Pursuant to the Plan, the Company will offer the public shares of common stock in a subscription offering to Eligible Account Holders, Supplemental Eligible Account Holders, Tax-Qualified Employee Benefit Plans, and Employees, Offices, Directors and Trustees of the Bank or the Company. Upon completion of the subscription offering, any shares of common stock not subscribed for in the subscription offering will be offered in a direct community offering. The Plan also provides for the establishment of the Benjamin Franklin Bank Charitable Foundation (the "Foundation") as part of the conversion, which will be funded with a contribution of Company common stock. The contribution to be made to the Foundation will be equal to 8% of RP Financial, LC. Board of Trustees November 26, 2004 Page 2 the number of shares actually sold in the offering, up to a maximum of 400,000 shares, or $4,000,000. The net conversion proceeds retained by the Company will be loaned to the ESOP to fund the ESOP's stock purchases in the offering. A portion of the remaining net proceeds will be used to fund the acquisition of Chart Bank ("Chart Bank"). September 1, 2004, the Bank entered into an agreement to acquire Chart Bank, headquartered in Waltham, Massachusetts. Chart Bank will merge with and into the Bank, and Chart Bank will cease to exist as a separate entity. Each share of Chart Bank common stock and each option to purchase Chart Bank common stock, will become exchangeable for, at the election of the holder, convert into the right to receive $30.75 in cash or 3.075 shares of Company common stock, based on the $10.00 conversion offering price per share, with 45% of the aggregate consideration to be paid in cash and 55% of the aggregate consideration to be paid in common stock. It is expected that the aggregate purchase price paid for Chart Bank will be approximately $21.5 million in cash and 2,401,575 shares of Company common stock. RP Financial, LC. RP Financial, LC. ("RP Financial") is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. We believe that, except for the fee we will receive for our Appraisal and assisting the Bank and the Company in the preparation of the post-conversion business plan and pro forma financial tables for purposes of the prospectus and regulatory applications, we are independent of the Bank, the Company, Chart Bank, and the other parties engaged by the Bank or the Company to assist in the stock conversion process. Valuation Methodology In preparing our appraisal, we have reviewed the Bank's and the Company's regulatory applications, including the prospectus as filed with the FDIC, the Massachusetts Division of Banks and the Securities and Exchange Commission. We have conducted a financial analysis of the Bank that has included a review of its audited financial information for the fiscal years ended 1999 through 2003 and as of or for the nine months ended September 30, 2004, a review of various unaudited information and internal financial reports through September 30, 2004, and due diligence related discussions with the Bank's management; Wolf & Company, PC, the Bank's independent auditor; Foley Hoag LLP, the Bank's counsel in connection with the Plan and merger agreements, and Ryan Beck & Co., Inc., the Bank's financial and marketing advisor in connection with the Company's stock offering and acquisition of Chart Bank. Additionally, we have conducted an analysis of Chart Bank, including a review of financial documents and discussions with Chart Bank's management. All conclusions set forth in the appraisal were reached independently from such discussions. In addition, where appropriate, we have RP Financial, LC. Board of Directors November 26, 2004 Page 3 considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information. We have investigated the competitive environment within which the Bank operates and have assessed the Bank's relative strengths and weaknesses. We have kept abreast of the changing regulatory and legislative environment for financial institutions and analyzed the potential impact on the Bank and the industry as a whole. We have analyzed the potential effects of the stock conversion and the Chart Bank acquisition on the Bank's operating characteristics and financial performance as they relate to the pro forma market value. We have reviewed the overall conditions in the Bank's and Chart Bank's primary market areas as set forth in demographic, economic and competitive information prepared by SNL Financial and other third party private and governmental sources. We have compared the Bank's financial performance and condition, incorporating the Chart Bank acquisition, with selected publicly-traded thrifts with similar characteristics as the Bank, as well as all publicly-traded thrifts. We have reviewed the current conditions in the securities markets in general and in the market for thrift stocks in particular, including the market for existing thrift issues and the market for initial public offerings by thrifts. Our Appraisal is based on the Bank's representation that the information contained in the regulatory applications and additional information furnished to us by the Bank and Chart Bank and their respective independent auditors, legal counsel and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by the Bank or Chart Bank, or their respective independent auditors, legal counsel and other authorized agents nor did we independently value the assets or liabilities of the Bank or Chart Bank. Our valuation was also predicated on the Bank completing the acquisition of Chart Bank in a manner consistent with the merger agreement. The valuation considers the Bank only as a going concern and should not be considered as an indication of the Bank's liquidation value. Our appraised value is predicated on a continuation of the current operating environment for the Bank and Chart Bank and for all savings institutions. Changes in the local, state and national economy, the legislative and regulatory environment for financial institutions, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the Bank's value alone. It is our understanding that the Company intends to remain an independent institution and there are no current plans for selling control of the Company as a converted institution. To the extent that such factors can be foreseen, they have been factored into our analysis. The estimated pro forma market value is defined as the price at which the Company's common stock, immediately upon completion of the conversion offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. RP Financial, LC. Board of Trustees November 26, 2004 Page 4 Valuation Conclusion It is our opinion that, as of November 26, 2004, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, including the shares issued to Chart Bank shareholders and shares issued to the Foundation, was $78,015,750 at the midpoint, equal to 7,801,575 shares at an issue price of $10.00 per share. Based on regulatory conversion guidelines requiring a range applied to the offering shares, the valuation includes a minimum aggregate market value of $69,915,750 and a maximum aggregate market value of $85,515,750. Based on the $10.00 per share offering price, this valuation range equates to total shares outstanding of 6,991,575 at the minimum and 8,551,575 at the maximum. In the event the appraised value is subject to an increase, up to 9,414,075 shares may be issued at an issue price of $10.00 per share, for an aggregate market value of $94,140,750, without requiring a resolicitation. Based on the midpoint pro forma market value of $78,015,750, the midpoint of the offering range is $50,000,000. The 15% range required by the conversion regulations results in a range as follows: $42,500,000 at the minimum, $50,000,000 at the midpoint, $57,500,000 at the maximum and $66,125,000 at the top of the super maximum. Based on a $10.00 per share offering price, the number of offering shares is as follows: 4,250,000 at the minimum, 5,000,000 at the midpoint, 5,750,000 at the maximum and 6,612,500 at the top of the super maximum. Limiting Factors and Considerations Our valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the conversion will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. RP Financial's valuation was determined based on the financial condition and operations of the Bank and Chart Bank as of September 30, 2004, the date of the financial data included in the regulatory applications and the prospectus and the pro forma acquisition adjustments as described in the Company's prospectus. RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its client institutions. RP Financial, LC. Board of Directors November 26, 2004 Page 5 This valuation will be updated as provided for in the conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the Bank's and Chart Bank's financial performance and condition, management policies, and current conditions in the equity markets for thrift shares. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the legislative and regulatory environment for financial institutions, the stock market and the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in the update at the date of the release of the update. Respectfully submitted, RP FINANCIAL, LC. William E. Pommerening Chief Executive Officer and Managing Director James J. Oren Senior Vice President RP Financial, LC. TABLE OF CONTENTS BENJAMIN FRANKLIN BANK Franklin, Massachusetts
PAGE DESCRIPTION NUMBER - ----------- ------ CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS Introduction 1.1 Plan of Conversion 1.1 Acquisition of Chart Bank 1.2 Chart Bank 1.2 Strategic Overview 1.3 Reasons for the Acquisition 1.5 Reasons for Conversion and Use of Proceeds 1.6 Balance Sheet Trends 1.7 Chart Bank Balance Sheet Trends 1.12 Pro Forma Balance Sheet Impact of the Acquisition 1.13 Income and Expense Trends 1.14 Chart Bank Income and Expense Trends 1.18 Pro Forma Earnings Impact of the Acquisition 1.18 Interest Rate Risk Management 1.19 Lending Activities and Strategy 1.20 Asset Quality 1.24 Funding Composition and Strategy 1.25 Subsidiaries 1.27 Legal Proceedings 1.28 CHAPTER TWO MARKET AREA Introduction 2.1 National Economic Factors 2.1 Economic and Interest Rate Environment 2.2 Regional Economy 2.3 Market Area Demographics 2.6 Deposit Trends 2.8 Competition 2.10
RP Financial, LC. TABLE OF CONTENTS BENJAMIN FRANKLIN BANK Franklin, Massachusetts (continued)
PAGE DESCRIPTION NUMBER - ----------- ------ CHAPTER THREE PEER GROUP ANALYSIS Peer Group Selection 3.1 Financial Condition 3.4 Income and Expense Components 3.8 Loan Composition 3.12 Credit Rate Risk 3.14 Interest Rate Risk 3.14 Summary 3.17 CHAPTER FOUR VALUATION ANALYSIS Introduction 4.1 Appraisal Guidelines 4.1 RP Financial Approach to the Valuation 4.1 Valuation Analysis 4.2 1. Financial Condition 4.3 2. Profitability, Growth and Viability of Earnings 4.4 3. Asset Growth 4.6 4. Primary Market Area 4.7 5. Dividends 4.8 6. Liquidity of the Shares 4.9 7. Marketing of the Issue 4.10 A. The Public Market 4.10 B. The New Issue Market 4.14 C. The Acquisition Market 4.16 8. Management 4.17 9. Effect of Government Regulation and Regulatory Reform 4.17 Summary of Adjustments 4.17 Valuation Approaches 4.18 1. Price-to-Earnings ("P/E") 4.19 2. Price-to-Book ("P/B") 4.22 3. Price-to-Assets ("P/A") 4.22 Comparison to Recent Conversions 4.22 Valuation Conclusion 4.23
RP Financial, LC. LIST OF TABLES BENJAMIN FRANKLIN BANK Franklin, Massachusetts
TABLE NUMBER DESCRIPTION PAGE - ------ ----------- ---- 1.1 Historical Balance Sheets 1.8 1.2 Historical Income Statements 1.15 2.1 Primary Market Area Employment Sectors 2.5 2.2 Unemployment Data 2.6 2.3 Demographic Data 2.7 2.4 Deposit Summary 2.9 2.5 Market Area Counties Deposit Competitors 2.11 3.1 Peer Group of Publicly-Traded Thrifts 3.3 3.2 Balance Sheet Composition and Growth Rates 3.5 3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.9 3.4 Loan Portfolio Composition and Related Information 3.13 3.5 Credit Risk Measures and Related Information 3.15 3.6 Interest Rate Risk Measures and Net Interest Income Volatility 3.16 4.1 Market Area Unemployment Rates 4.8 4.2 Pricing Characteristics and After-Market Trends Recent Conversions Completed (Last Three Months) 4.15 4.3 Valuation Adjustments 4.18 4.4 Estimated Core Earnings 4.20 4.5 Public Market Pricing 4.23
RP Financial, LC. Page 1.1 I. OVERVIEW AND FINANCIAL ANALYSIS Introduction The Bank, organized in 1871, is a Massachusetts-chartered stock savings bank headquartered in Franklin, Massachusetts. The Bank was reorganized into the mutual holding company structure and become the wholly-owned subsidiary of the Company in 1996. The Bank serves southeastern Massachusetts through 6 branch offices located in the counties of Norfolk and Worcester (see Exhibit I-1 for a map of the Bank's office locations. The Bank's primary regulator is the Massachusetts Division of Banks. The Bank is a member of the Federal Home Loan Bank ("FHLB") system and its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation ("FDIC"), while deposits in excess of FDIC limits are covered in full by the Deposit Insurance Fund of Massachusetts. As of September 30, 2004, the Company had $517.9 million in assets, $399.6 million in deposits and total equity of $30.6 million, equal to 5.9% of total assets. The Company's audited financial statements are included by reference as Exhibit I-2. Plan of Conversion On October 28, 2004, the Board of Trustees adopted a Plan of Conversion (the "Plan"). Pursuant to the Plan, the MHC will convert from a Massachusetts-chartered bank holding company in mutual form to a Massachusetts-chartered bank holding company in stock form, and will drop "M.H.C." and add "Inc." to its name. The Bank is now and will continue to be the wholly-owned subsidiary of the Company. The Company will offer and sell the shares of common stock to be sold in the conversion. It is intended that all of the common stock of the Bank following the conversion will be held by the Company. Pursuant to the Plan, the Company will offer the public shares of common stock in a subscription offering to Eligible Account Holders, Supplemental Eligible Account Holders, Tax-Qualified Employee Benefit Plans, and Employees, Officers, Directors and Trustees of the Bank or the Company. Upon completion of the subscription offering, any shares of common stock not subscribed for in the subscription offering will be offered in a direct community offering. The Plan also provides for the establishment of the Foundation as part of the conversion, which will RP Financial, LC. Page 1.2 be funded with a contribution of Company common stock. The contribution to be made to the Foundation will be equal to 8% of the number of shares actually sold in the offering, up to a maximum of 400,000 shares, or $4,000,000. The net conversion proceeds retained by the Company will be loaned to the ESOP to fund the ESOP's stock purchases in the offering. A portion of the net proceeds will be used to fund the acquisition of Chart Bank. Acquisition of Chart Bank September 1, 2004, the Bank entered into an agreement to acquire Chart Bank, headquartered in Waltham, Massachusetts. Chart Bank will merge with and into the Bank, and Chart Bank will cease to exist as a separate entity. Each share of Chart Bank common stock and each option to purchase Chart Bank common stock, will become exchangeable for, at the election of the holder, convert into the right to receive $30.75 in cash or 3.075 shares of Company common stock, based on the $10.00 conversion offering price per share, with 45% of the aggregate consideration to be paid in cash and 55% of the aggregate consideration to be paid in common stock. It is expected that the aggregate purchase price paid for Chart Bank will be approximately $21.5 million in cash and 2,401,575 shares of Company common stock, issued at $10.00 per share. Based on Chart Bank's balance sheet at September 30, 2004 and estimated purchase accounting adjustments, total intangible assets resulting from the acquisition have been estimated to equal $32.2 million. Chart Bank Chart Bank was founded in 1985 and is currently regulated by the Massachusetts Division of Banks and the FDIC. Headquartered in Waltham, Massachusetts, Middlesex County, Chart Bank's primary deposit and lending areas are concentrated in the communities surrounding its 3 banking offices located in Waltham and Newton, both of which are located in the western suburbs of Boston. Chart Bank is engaged primarily in the business of investing in various types of residential and commercial mortgages, consumer and commercial loans, and investment securities, funded primarily with retail deposits from the general public. Chart Bank offers a wide variety of deposit and loan products and services to individual and commercial customers. Additionally, Chart Bank, through its subsidiary, Creative Strategic Solutions, Inc. ("CSSI"), RP Financial, LC. Page 1.3 manages cash for owners of automatic teller machines, or ATMs, and provides related cash management services to a nationwide customer base. On the asset side of the balance sheet, Chart Bank's loan portfolio consists primarily of commercial and residential mortgage loans. Areas of lending diversification include construction/land loans, and to a lesser extent, commercial business loans and consumer loans. Investments held by Chart Bank consist primarily of U.S. Government sponsored agency securities and marketable equity securities. Retail deposits serve as the principal funding source for Chart Bank, which is supplemented with borrowings that consist primarily of FHLB advances. Strategic Overview Based in Franklin, Massachusetts, the Bank serves southeastern Massachusetts through six branch offices. The Bank is a community-oriented financial institution, which emphasizes the offering of traditional financial services to individuals and businesses within the markets served by the Bank's branch offices and nearby surrounding markets. The Bank offers a comprehensive range of personal and business banking products, services and expertise through the retail branch offices, 6 ATM-equipped branch locations, 24-hour phone access, an online banking package and a network of in-branch and field-based loan officers and other banking services professionals. Through the acquisition of Chart Bank, the Bank will expand its market presence into the western suburbs of the Boston metropolitan area that will provide opportunities to develop full service banking relationships with current customers of Chart Bank as well as develop new banking relationships through offering a more comprehensive range of products and services with the highest level of personal service. The Bank's market niche is to serve as a community-oriented financial institution that meets the financial services needs of residents and businesses in the markets served by the combined branch networks of the Bank and Chart Bank and nearby surrounding markets. Providing a tradition of quality customer service that serves as the foundation of forming lasting relationships with the Bank's customers is critical to how the Bank conducts business. The focus on the customer covers all sides of the customer experience: service, products and convenience. The Bank seeks to provide an exceptional level of customer service that will serve as the foundation to building long-term, brand-loyal customer relationships and create powerful and RP Financial, LC. Page 1.4 positive "word-of-mouth" marketing in the Bank's communities. The Bank is focused on strengthening and expanding customer relationships to generate additional internal growth from the community bank franchise that will result from the acquisition of Chart Bank. Historically, Benjamin Franklin's operating strategy has been fairly reflective of a traditional thrift operating strategy, in which 1-4 family residential mortgage loans have been the primary type of loan origination and assets have been primarily funded with retail deposits. In recent years, the Bank was also involved in certain investments in equities, including common stocks, which resulted in losses. Following a change in focus and a change in senior management in 2002, the Bank has followed a strategy of increasing activity in the areas of residential lending (including sales of fixed rate loans in the secondary market), and building the balance of commercial real estate loans held in portfolio. Pursuant to the Bank's business plan, Benjamin Franklin will continue to emphasize 1-4 family lending, but will also pursue greater diversification into commercial real estate and commercial business lending, with a goal of increasing these types of loans as a percent of the loan portfolio. The Bank's historical lending emphasis on originating relatively low risk 1-4 family permanent mortgage loans, quality underwriting, maintenance of sound credit standards for new loan originations and relatively favorable economic and real estate market conditions have facilitated maintenance of low delinquency ratios in recent years. Implementation of a more diversified lending strategy will be pursued to enhance the yield and interest rate sensitivity of the loan portfolio. The Bank has sought to limit the credit risk exposure associated with diversification into higher risk types of loans, through emphasizing origination of such loans in local and stable markets, and establishing lending relationships with favorable credit histories. The Bank also seeks to limit credit risk exposure on commercial business loans through emphasizing origination of smaller balance fully collateralized loans. Benjamin Franklin's earnings base is largely dependent upon net interest income and operating expense levels, as income derived through non-interest sources is a modest contributor to the Bank's earnings. As part of the Chart Bank acquisition, the Bank will realize an increase in the level of non-interest income due to the operations of Chart Bank's ATM cash management subsidiary. Operating expenses have trended upwards in recent years, due to general inflationary costs of doing business, and the Bank's post-conversion and acquisition growth strategy RP Financial, LC. Page 1.5 represents a key focus in order to improve operating efficiencies and reduce the overall future expense ratios. Reasons for the Acquisition The acquisition of Chart Bank will be beneficial to the Bank's operations in a number of ways. Most notably, the acquisition will provide expansion of market area and strengthen the Bank's competitive position, providing Benjamin Franklin a deposit presence in the Boston area. The acquisition moves Benjamin Franklin into the western section of the Boston metropolitan area. Benjamin Franklin will maintain a market share of 2.31% in Norfolk County and 0.47% Worcester County, and will add Chart Bank's deposits in Middlesex County, equal to a 0.56% market share. Other reasons for the merger are set forth below. - The expanded branch network will enhance customer convenience, thereby increasing opportunities for growth at all of the Bank's branches. - The combined entity will offer a broader base of customer services than currently offered by each of the institutions independently, which will facilitate cross-selling of additional products and services to a larger customer base. - Certain operating synergies and cost reductions, net of certain consolidation costs, are anticipated as a result of the merger, including: -- Reduction in personnel expenses through consolidation of certain back office and management positions; -- Reduction of certain professional services, such as legal, audit and tax and consulting; -- Spreading securities and shareholder reporting expenses over a larger base; and, -- Certain cross-selling opportunities - The larger asset size, capital base and market capitalization that will result from the acquisition will better position the Company to pursue other strategic acquisitions. It is anticipated that the senior management of Benjamin Franklin will continue in their current roles following the acquisition. There will be some consolidation of Chart Bank's senior management positions and administrative staffs following the acquisition. RP Financial, LC. Page 1.6 Thomas R. Venables, current President and Chief Executive Officer of Benjamin Franklin, will continue to serve in that capacity following the acquisition. Six directors from Chart Bank's Board of Directors will join the Board of Directors of Benjamin Franklin that will result in a 17-member Board of Directors for the Company and Benjamin Franklin. Reasons for Conversion and Use of Proceeds The Board and senior management believe that the Bank's planned conversion from mutual form to full stock form is well-founded on several sound business and competitive reasons. Increasing market share and competitive position is a significant part of the Company's growth strategy. The Company's growth strategy going forward will include a combination of internal growth and external growth, including the acquisition of Chart Bank and the intended opening of de novo branch offices. The conversion proceeds will be utilized as the primary source of funds for purposes of funding the cash portion of the acquisition of Chart Bank. Notably, the merger will significantly enhance the Bank's competitive position, as the combined banking institutions will form a financial institution with approximately $800 million in assets and nine branch offices. Following the conversion, opportunities to grow through other acquisitions will continue to be evaluated. The stock offering will provide local customers and other residents with an opportunity to become equity owners of the Company, and thereby participate in possible stock price appreciation and cash dividends, which is consistent with the objective of being a locally-owned financial institution servicing local financial needs. The shares issued to the Chart Bank shareholders should also facilitate local ownership of the Company's stock. The Board and management believe that through local stock ownership, current customers and non-customers who own the Company's stock will seek to enhance the financial success of the Bank through consolidation of their banking business and increased referrals to the Bank. A key component of the Bank's business plan is to complete a conversion offering. The conversion will support growth of market share and competitive position, most notably through the acquisition of Chart Bank. The conversion proceeds will be utilized as the primary source of funds for purposes of funding the cash portion of the acquisition of Chart Bank. Additionally, the conversion and increased capital resources that will result from the sale and issuance of RP Financial, LC. Page 1.7 common stock will support: (1) expansion of lending and deposit gathering activities with broader distribution outlets throughout Massachusetts; (2) investment in the Bank's operational infrastructure; and (3) expansion and diversification of operations through acquisitions of other financial institutions or fund de novo branching activities. The projected use of proceeds is highlighted below. - The Company. The Company will retain up to 75% of the net conversion proceeds after expenses and funding the cash portion of the Chart Bank acquisition, or approximately $21 million. From this amount will be deducted the necessary amount to fund the ESOP loan. The remaining proceeds will be used to fund the cash portion of the acquisition of Chart Bank. It is expected that the aggregate purchase price of the Chart Bank transaction will approximate $45.5 million. Over time, Company funds may be utilized for various corporate purposes, including the possible payment of regular and/or special cash dividends, acquisitions, infusing additional equity into the Bank and/or repurchases of common stock. - The Bank. It has been assumed that 75% of the net proceeds will be retained by the Company and 25% of the net proceeds will be infused into the Bank. Under the terms of the acquisition agreement, Chart Bank will be merged into Benjamin Franklin. Balance Sheet Trends Table 1.1 shows the Bank's historical balance sheet data from December 31, 1999 through September 30, 2004, and the Bank's consolidated pro forma balance sheet at September 30, 2004, giving effect to the acquisition of Chart Bank before incorporating the capital to be raised in the stock offering. The following paragraphs describe the historical balance sheet trends for the Bank on a pre-acquisition basis. The pro forma balance sheet impact of the acquisition of Chart Bank will be discussed at the end of this section. From December 31, 1999 through September 30, 2004, the Bank's assets increased at an annualized rate of 4.0%. General trends in the Bank's interest-earning asset composition reflect that following a relatively stable period from fiscal 1999 to fiscal 2002 in terms of loans receivable, the loans receivable balance has trended higher as a percent of assets since December 31, 2002. The increase in the loans receivable ratio has been funded in part from declines in the balances of cash and equivalents and investment securities. Loan growth has been achieved by an expansion of the 1-4 family loan portfolio, reflecting additional lending efforts by in-house RP Financial, LC. Page 1.8 Table 1.1 Benjamin Frankling Bancorp, M.H.C. Historical Balance Sheets (Amount and Percent of Assets)
At Fiscal Year End December 31, ------------------------------------------------------------------------------------ 1999 2000 2001 2002 2003 --------------- --------------- --------------- --------------- --------------- Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- ($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%) Total Amount of: Assets $429,635 100.0% $443,092 100.0% $430,084 100.0% $452,230 100.0% $458,844 100.0% Cash and cash equivalents 19,372 4.5% 20,970 4.7% 62,191 14.5% 52,036 11.5% 35,485 7.7% Investment securities 113,315 26.4% 112,884 25.5% 85,234 19.8% 109,506 24.2% 103,032 22.5% Loans, net 269,125 62.6% 284,232 64.1% 257,566 59.9% 261,933 57.9% 288,862 63.0% Intangible assets 5,969 1.4% 5,403 1.2% 4,837 1.1% 4,716 1.0% 4,474 1.0% Deposits 324,050 75.4% 388,332 87.6% 360,979 83.9% 373,300 82.5% 380,257 82.9% Borrowings 69,280 16.1% 25,400 5.7% 36,000 8.4% 45,000 10.0% 45,000 9.8% Total equity 28,652 6.7% 24,794 5.6% 27,437 6.4% 29,814 6.6% 29,301 6.4% Tangible equity 22,683 5.3% 19,391 4.4% 22,600 5.3% 25,098 5.5% 24,827 5.4% Full Service Offices 6 6 6 6 6 Annual Pro Forma Combined Growth At 09/30/2004 Rate 09/30/2004 (2) --------------- ---- ------------------ Amount Pct Pct Amount Pct -------- ----- ---- --------- ------- ($000) (%) (%) ($000) (%) Total Amount of: Assets $517,931 100.0% 4.0% $779,368 100.0% Cash and cash equivalents 15,126 2.9% -5.1% 53,899 6.9% Investment securities 94,678 18.3% -3.7% 102,102 13.1% Loans, net 375,516 72.5% 7.3% 551,387 70.7% Intangible assets 4,339 0.8% -6.5% 36,573 4.7% Deposits 399,562 77.1% 4.5% 616,237 79.1% Borrowings 84,000 16.2% 4.1% 105,971 13.6% Total equity 30,586 5.9% 1.4% 52,634 6.8% Tangible equity 26,247 5.1% ---- 16,061 2.1% Full Service Offices 6 9
- ---------------------------- (1) Ratios are as a percent of ending assets. (2) Includes impact of purchase accounting adjustments for the acquisition of Chart Bank. Does not reflect impact of conversion offering. Sources: Benjamin Franklin Bancorp's prospectus and RP Financial calculations. RP Financial, LC. Page 1.9 personnel, along with increased purchases of loans from outside sources, factors which more than offset the impact of accelerated repayments of 1-4 family loans caused by borrowers refinancing into lower rate loans and the Bank's general philosophy of selling originations of 1-4 family loans that have 30-year fixed rate terms. Similar to the increase in the 1-4 family loan portfolio, other loan types, including commercial real estate, construction and home equity loans have all increased in balance since December 31, 2001. Overall, loans receivable increased from 59.9% of assets at year fiscal year end 2001 to 72.5% of assets at September 30, 2004, while cash, cash equivalents and investment securities decreased from 34.3% of assets at fiscal year end 2001 to 21.2% of assets at September 30, 2004. Asset growth has been funded with additional deposits and borrowings. A summary of Benjamin Franklin's key operating ratios for the past five and three-quarters years is presented in Exhibit I-3. Trends in the Bank's loan portfolio composition reflect the impact of the recent emphasis on commercial real estate lending, the recent sales of loans into the secondary market for interest rate risk purposes, and the current business plan of a pursuing a more diversified lending strategy. Over the past five and three-quarters years, the concentration of 1-4 family permanent mortgage loans comprising total loans declined from 70.4% at fiscal year end 1999 to 59.2% at December 31, 2003, and then increased to 65.8% at September 30, 2004. Comparatively, over the same time period, commercial real estate and multi-family loans increased from 16.2% to 21.0% of total loans. Construction and land development loans have become a smaller part of the Bank's total loan portfolio composition, declining from 7.2% to 6.7% of total loans. Commercial business loans decreased from 1.7% to 1.3% of total loans and consumer loans decreased from 1.4% to 0.5% of total loans. Home equity loans have increased from 3.0% to 5.8% of total loans. The intent of the Bank's investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting Benjamin Franklin's overall credit and interest rate risk objectives. Over the past five and three-quarter years, the Bank's level of cash, cash equivalents and investment securities ranged from a high of 35.7% of assets at fiscal year end 2002 to a low of 21.2% of assets at September 30, 2004. Benjamin Franklin purchases mortgage-backed securities and collateralized mortgage obligations ("MBS/CMOs") in the secondary market, with the portfolio consisting substantially RP Financial, LC. Page 1.10 of securities guaranteed or insured by a federal agency. Mortgage-backed securities and CMOs are generally purchased as a means to deploy excess liquidity at more favorable yields than other investment alternatives that are consistent with Benjamin Franklin's investment philosophy. As of September 30, 2004, the portfolio consisted substantially of MBS/CMOs with three-to-five year weighted average life tranches, with expected average life extensions of up to seven years in a rising rate environment. The Bank's portfolio of mortgage-backed securities and CMOs totaled $52.1 million at September 30, 2004, with essentially all of such securities classified as available for sale. As of September 30, 2004, the net unrealized gain on the held-to-maturity portfolio of mortgage-backed securities and CMOs equaled $5,000. In addition to the portfolio of MBS/CMOs, investment securities held by the Bank consist of U.S. Government agency securities ($36.5 million), U.S. Treasury securities ($1.0 million), corporate obligations ($5.1 million), federal funds sold ($6.2 million), FHLB stock ($4.3 million) and mutual funds and other equity securities ($2.6 million). To facilitate management of interest rate risk, most of the investment portfolio matures or reprices within five years and, with the exception of a small amount of mortgage-backed securities, the entire portfolio is maintained as available for sale. The Bank also maintained cash and cash equivalents of $8.3 million as of September 30, 2004. As of September 30, 2004, the Bank maintained total cash and investments, including MBS/CMOs, of $115.5 million, equaling 22.3% of total assets. No material changes are planned for the Bank's investment strategy over the near term future, and the Bank's interest-earning asset composition will remain relatively stable in terms of the concentration of loans and investments held on the balance sheet. Exhibit I-4 provides historical detail of the Bank's investment portfolio. Benjamin Franklin also maintained an investment in bank-owned life insurance ("BOLI") policies, which cover the lives of some of the Bank's employees and directors. The Bank is the owner and beneficiary of the policies. The purpose of the BOLI investments is to provide funding for employee benefit plans. The life insurance policies earn tax-exempt income through cash value accumulation and death proceeds. As of September 30, 2004, the cash surrender value of Benjamin Franklin's BOLI equaled $7.1 million. Over the past five and three-quarter fiscal years, Benjamin Franklin's funding needs have been substantially met through retail deposits, internal cash flows, borrowings and retained RP Financial, LC. Page 1.11 earnings. From fiscal year end 1999 through September 30, 2004, the Bank's deposits increased at an annual rate of 4.5%. Deposits have increased each year since fiscal 2001, and the ratio of deposits funding assets increased from 75.4% at fiscal year end 1999 to 77.1% at September 30, 2004, as borrowings and capital funded a smaller portion of the Bank's asset growth. In recent years, deposit growth has been realized through growth of transaction and savings accounts, while the balance of CDs has declined. Accordingly, the Bank's deposit composition has exhibited a shift towards a higher concentration of transaction and savings accounts. Money market accounts and demand deposits have represented the most significant growth area in transaction and savings accounts. Growth of the money market account has been facilitated by the Bank's promotion of a money market account products. The low interest rate environment is also believed to have contributed to the increase in money market deposits, as the general decline in CD rates has increased depositor preference to hold funds in liquid transaction accounts. As of September 30, 2004, transaction and savings accounts equaled 66.6% of total deposits and CDs equaled 33.4% of total deposits. Borrowings serve as an alternative funding source for the Bank to support management of funding costs and interest rate risk. Borrowings as a percent of assets ranged from a low of 5.7% at fiscal year end 2000 to a high of 16.2% at September 30, 2004. The Bank held borrowings of $84.0 million at September 30, 2004, which consisted of $75.0 million of FHLB advances and $9.0 million of trust preferred securities. FHLB advances held by the Bank consist both of short-term notes and longer term fixed rate notes with remaining terms of up to 7 years. The Bank's capital increased at a 1.4% annual rate over the past four and three-quarter years, which was realized through the retention of earnings. Asset growth outpaced the Bank's capital growth rate, as Benjamin Franklin's equity-to-assets ratio decreased from 6.7% at fiscal year end 1999 to 5.9% at September 30, 2004. The Company's tangible capital was somewhat lower, equal to 5.1% of assets at September 30, 2004. The intangible assets on the Bank's books, equal to $4.3 million as of September 30, 2004, resulted from a prior acquisition of a commercial bank. The Bank and Company maintained capital surpluses relative to all of its regulatory capital requirements at September 30, 2004. RP Financial, LC. Page 1.12 Chart Bank Balance Sheet Trends From December 31, 2002 through September 30, 2004, Chart Bank's assets increased at an annual rate of 14.3%. Essentially all of the asset growth has been channeled into loan growth, as the total balance of cash, cash equivalents and investment securities maintained by Chart Bank has remained relatively stable. Growth has been primarily funded by deposits and, to a lesser extent, increased utilization of borrowings and capital growth. Chart Bank's deposits increased at a 14.6% annual rate over the past one and three-quarters years. Loans constitute the largest component of Chart Bank's interest-earning asset composition, and loans have increased at a faster rate than investments over the past one and one-half years. Loans receivable increased from 60.6% of assets at year end 2002 to 68.5% of assets at September 30, 2004, while cash, cash equivalents and investments decreased from 37.4% of assets at year end 2002 to 29.8% of assets at September 30, 2004. Chart Bank's loan portfolio is concentrated in 1-4 family permanent mortgage loans (32.8% of total loans), with commercial real estate/multi-family loans (56.2% of total loans) and construction loans (4.6% of total loans) constituting the primary areas of lending diversification. Lending diversification by Chart Bank also includes home equity lines of credit (3.9%), commercial business loans (2.3% of total loans) and consumer loans (0.2% of total loans). In recent periods, Chart Bank has not invested available funds into mortgage-backed securities or CMOs, and reported no such investments as of September 30, 2004. Investments held in Chart Bank's investment portfolio at September 30, 2004 consisted of U.S. Government and agency securities ($33.8 million), investments in mutual funds and other marketable equity securities ($1.6 million) and FHLB stock ($1.6 million). Chart Bank maintains $31.8 million of the U.S. Government and agency securities as held-to-maturity, and the remaining investments as available for sale. As of September 30, 2004, Chart Bank maintained total cash and investments of $76.5 million, equaling 29.8% of assets. Overall, Chart Bank's investment portfolio is composed of securities that are consistent with the Bank's investment strategy, with the exception of the marketable equity securities. Upon completion of the acquisition, the balance of Chart Bank's investment portfolio will be incorporated into the Bank's investment portfolio, with the exception of the marketable equity securities, which are expected to be sold. RP Financial, LC. Page 1.13 Deposits serve as the primary funding source for Chart Bank's assets, with borrowings remaining a more moderate source over the past one and three-quarter years. The ratio of deposits-to-assets increased from 83.9% at year end 2002 to 84.3% at September 30, 2004. Comparatively, borrowings-to-assets increased from 7.4% at year end 2002 to 8.6% at September 30, 2004. Recent trends in Chart Bank's deposit composition reflect a shift towards a higher concentration of CDs. As of September 30, 2004, CDs equaled 42.8% of total deposits and transaction and savings accounts equaled 57.2% of total deposits. Chart Bank maintains a similar borrowing structure as the Bank, as borrowings consisted of $11.0 million of short-term FHLB advances and $11.0 million of longer term FHLB advances at September 30, 2004. Chart Bank's equity increased at a 5.6% annual rate over the past one and three-quarters years, with essentially all of the increase due to additions to retained earnings. Capital growth has been partially offset by dividend payments. Chart Bank's equity-to-assets ratio equaled 6.9%t at September 30, 2004, versus a comparable ratio of 7.9% at year end 2002. Pro Forma Balance Sheet Impact of the Acquisition The pro forma balance sheet impact of the acquisition is shown in Table 1.1 as of September 30, 2004. On the asset side of the balance sheet, the acquisition will serve to decrease the concentration of loans and decrease the concentration of cash and investments that comprise interest-earning assets. Approximately $21.5 million of cash will be utilized to fund the cash portion of the acquisition of Chart Bank. Loans decreased from 72.5% of assets to 70.7% of assets on a pro forma combined basis, while cash and investments (including FHLB stock) decreased from 21.2% of assets to 20.0% of assets on a pro forma combined basis. Overall, the level of interest-earning assets declined from 93.7% of assets to 90.7% of assets on a pro forma combined basis, as the result of the goodwill and intangibles created by the acquisition. The Bank maintained a nominal balance of goodwill and intangibles at September 30, 2004, while on a pro forma combined basis goodwill and intangibles equaled 4.7% of assets. On the liability side, the level of deposits and borrowings funding assets will increase and decrease, respectively, on a pro forma combined basis. Deposits increased from 77.1% of assets to 79.1% of assets on a pro forma combined basis, while borrowings decreased from 16.2% of assets to 13.6% of assets on a pro forma combined basis. Before factoring in the impact of the net conversion proceeds, RP Financial, LC. Page 1.14 the Company's equity-to-asset ratio increases from 5.9% at September 30, 2004 to 6.8% on a pro forma combined basis. Before factoring in the impact of the net conversion proceeds, tangible equity declines from 5.1% to 2.1% on a pro forma combined basis. Income and Expense Trends Table 1.2 shows the Bank's historical income statements from the fiscal year ended December 31, 1999 through the twelve months ended September 30, 2004, as well as the Bank's pro forma income statement for the twelve months ended September 30, 2004 giving effect to the acquisition of Chart Bank. The following paragraphs describe the historical income statements of Benjamin Franklin on a pre-acquisition basis. The pro forma income statement impact of the acquisition is discussed at the end of this section. Earnings for the Company over the past five and three-quarter years ranged from a loss of 1.07% of average assets for the year ended December 31, 2000 to a high of 0.68% of average assets in fiscal year 2002. Net interest income and operating expenses represent the primary components of Benjamin Franklin's core earnings. Non-interest operating income also contributes to the Bank's core earnings and has been source of earnings growth. Loan loss provisions have been a moderate factor in the Bank's earnings in recent years, reflecting Benjamin Franklin's emphasis on relatively low risk lending and overall favorable credit quality of the loan portfolio. Non-operating sources of income or expense have consisted of gains or losses on the sale of investment securities, gains on sale of loans and a loss on the termination of a pension plan. The Bank's net interest income to average assets ratio has been affected by the profile of the earning asset base and the capital ratio. Over the past five and three-quarter years, the Bank's net interest income to average assets ratio ranged from a low of 2.72% during the twelve months ended December 31, 2000 to a high of 3.22% during fiscal year 2001. The downward trend reflected in the Bank's net interest margin since fiscal 2001 has been the result of a more significant reduction in yield earned on interest-earning assets relative to the decline in funding costs. Most notably, the loss of yield income resulting from accelerated repayments of 1-4 family loans and mortgage-related securities has not been offset by a comparable reduction in funding costs. Overall, the Bank's interest rate spread declined from 3.29% in fiscal 2001 to RP Financial, LC Page 1.15 Table 1.2 Benjamin Franklin Bancorp, MHC Historical Income Statements (Amount and Percent of Average Assets)(1)
For the Fiscal Year Ended December 31, -------------------------------------------------------------- 1999 2000 2001 2002 -------------- -------------- -------------- -------------- Amount Pct Amount Pct Amount Pct Amount Pct ------- ----- ------- ----- ------- ----- ------- ----- ($000) (%) ($000) (%) ($000) (%) ($000) (%) Interest Income $24,988 5.82% $28,064 6.43% $26,441 6.06% $21,406 4.85% Interest Expense (12,533) -2.92% (16,216) -3.72% (12,397) -2.84% (7,594) -1.72% ------- ----- ------- ------ ------- ----- ------- ----- Net Interest Income $12,455 2.90% $11,848 2.72% $14,044 3.22% $13,812 3.13% Provision for Loan Losses (70) -0.02% (1) 0.00% (51) -0.01% (1,412) -0.32% ------- ----- ------- ----- ------- ----- ------- ----- Net Interest Income after Provisions $12,385 2.88% $11,847 2.71% $13,993 3.21% $12,400 2.81% Other Income 1,289 0.30% 1,819 0.42% 1,585 0.36% 1,955 0.44% Goodwill/Intangible amortization (670) -0.16% (566) -0.13% (566) -0.13% (121) -0.03% Operating Expense (9,610) -2.24% (10,285) -2.36% (10,999) -2.52% (11,994) -2.72% ------- ----- ------- ----- ------- ----- ------- ----- Net Operating Income $ 3,394 0.79% $ 2,815 0.65% $ 4,013 0.92% $ 2,240 0.51% Non-Operating Income Net gain(loss) on sale of loans ($37) -0.01% $0 0.00% $ 167 0.04% $ 71 0.02% Net gain(loss) on sale of securities 1,402 0.33% (6,784) -1.55% (2,529) -0.58% 1569 0.36% Pension Plan curtailment loss 0 0.00% 0 0.00% 0 0.00% (741) -0.17% Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00% 0 0.00% ------- ----- ------- ----- ------- ----- ------- ----- Net Non-Operating Income 1,365 0.32% (6,784) -1.55% (2,362) -0.54% 899 0.20% Net Income Before Tax $ 4,759 1.11% ($3,969) -0.91% $ 1,651 0.38% $ 3,139 0.71% Income Taxes (1,858) -0.43% (708) -0.16% (1,610) -0.37% (443) -0.10% ------- ----- ------- ----- ------- ----- ------- ----- Net Income (Loss) $ 2,901 0.68% ($4,677) -1.07% $ 41 0.01% $ 2,696 0.61% Adjusted Earnings Net Income Before Ext. Items $ 2,901 0.68% ($4,677) -1.07% $ 41 0.01% $ 2,696 0.61% Addback: Non-Operating Losses 37 0.01% 6,784 1.55% 2,529 0.58% 741 0.17% Deduct: Non-Operating Gains (1,402) -0.33% 0 0.00% (167) -0.04% (1,640) -0.37% Tax effect (2) 491 0.11% (2,442) -0.56% (850) -0.19% 324 0.07% ------- ----- ------- ----- ------- ----- ---- ---- Adjusted Net Income $ 2,027 0.47% ($ 335) -0.08% $ 1,553 0.36% $ 2,121 0.48% Pro Forma Combined For the Twelve Months For the Twelve Months 2003 Ended 09/30/04 Ended 09/30/04(3) -------------- --------------------- --------------------- Amount Pct Amount Pct Amount Pct ------- ------ ------- ----- ---------- -------- ($000) (%) ($000) (%) ($000) (%) Interest Income $19,532 4.29% $20,226 4.14% $ 29,907 3.99% Interest Expense (6,752) -1.48% (6,642) -1.36% (9,590) -1.28% ------- ----- ------- ----- --------- ----- Net Interest Income $12,780 2.81% $13,584 2.78% $ 20,317 2.71% Provision for Loan Losses (625) -0.14% (795) -0.16% (915) -0.12% ------- ----- ------- ----- --------- ----- Net Interest Income after Provisions $12,155 2.67% $12,789 2.62% $ 19,402 2.59% Other Income 2,015 0.44% 2,068 0.42% 4,548 0.61% Goodwill/Intangible amortization (242) -0.05% (181) -0.04% (181) -0.02% Operating Expense (12,482) -2.74% (12,374) -2.53% (20,156) -2.69% ------- ----- ------- ----- --------- ----- Net Operating Income $ 1,446 0.32% $ 2,302 0.47% $ 3,613 0.48% Non-Operating Income Net gain(loss) on sale of loans $ 975 0.21% $ 130 0.03% $ 130 0.02% Net gain(loss) on sale of securities 86 0.02% (19) 0.00% $ 34 0.00% Pension Plan curtailment loss 0 0.00% 0 0.00% 0 0.00% Other non-operating income(loss) 0 0.00% 0 0.00% (382) -0.05% ------- ----- ------- ----- --------- ----- Net Non-Operating Income 1,061 0.23% 111 0.02% (218) -0.03% Net Income Before Tax $ 2,507 0.55% $ 2,413 0.49% $ 3,395 0.45% Income Taxes (819) -0.18% (794) -0.16% (1,341) -0.18% ------- ----- ------- ----- --------- ----- Net Income (Loss) $ 1,688 0.37% $ 1,619 0.33% $ 2,054 0.27% Adjusted Earnings Net Income Before Ext. Items $ 1,688 0.37% $ 1,619 0.33% $ 2,054 0.27% Addback: Non-Operating Losses 0 0.00% 19 0.00% 382 0.05% Deduct: Non-Operating Gains (1,061) -0.23% (130) -0.03% (164) -0.02% Tax effect (2) 382 0.08% 40 0.01% (77) -0.01% ------- ---- ------- ---- --------- ----- Adjusted Net Income $ 1,009 0.22% $ 1,548 0.32% $ 2,195 0.29%
- ---------------------------- (1) Ratios are as a percent of average assets. (2) Assumes tax rate of 36.0%. (3) Reflects pro forma impact of the Chart Bank acquistion. The impact of the net conversion proceeds has not been reflected. Sources: Benjamin Franklin Bancorp's prospectus and RP Financial calculations. RP Financial, LC. Page 1.16 2.76% as of September 30, 2004. The more significant decline in yield reflects the implementation of the Bank's interest rate risk management strategies to hedge against rising interest rates. These strategies include selling originations of 30-year fixed rate loans and utilizing longer-term fixed rate FHLB advances to fund asset growth. Additionally, the Bank's ability to realize further reductions in core deposit costs is limited, since current rates paid on those accounts have already been reduced to near bottom levels. The Bank's historical net interest rate spreads and yields and costs are set forth in Exhibits I-3 and I-5. Non-interest operating income has been a moderate source of earnings growth for the Bank, but has remained fairly stable relative to average assets. Over the past five and three-quarter years, non-interest operating income ranged from a low of 0.30% of average assets during fiscal year 1999 to a high of 0.44% during the fiscal year ended 2003. For the twelve months ended September 30, 2004, non-interest operating income equaled 0.42% of average assets. Service charges on deposits and loan servicing fees constitute the primary components of the Bank's non-interest operating income. It is the Bank's expectation that growth of non-interest operating income will be enhanced by the acquisition, as it will provide the Bank the opportunity to cross-sell a broader base of services to the current customers and potential customers of Chart Bank. In addition, Chart Bank operated an ATM cash management subsidiary which will provide noticeable levels of additional non-interest income to the Bank. Operating expenses represent the other major component of the Bank's earnings, ranging from a low of 2.24% of average assets during fiscal 1999 to a high of 2.74% of average assets during fiscal 2003. For the twelve months ended September 30, 2004, operating expenses equaled 2.53% of average assets. The general upward trend reflected in the Bank's operating expense ratio has been in part attributable to an increase investment in personnel compensation and benefits, along with certain other marketing and promotional expenses. Upward pressure will be placed on the Bank's operating expense ratio following the stock offering and acquisition of Chart Bank, due to expenses associated with operating as a publicly-traded company, including expenses related to the stock benefit plans, as well the expense that will result from the amortization of the intangibles created by the acquisition. The Bank also will incur certain non-recurring merger expenses during the first year following the completion of the acquisition, which have been estimated to equal $3.1 million on a pre-tax basis. The Bank is also expected to RP Financial, LC. Page 1.17 realize certain cost savings from the acquisition, as the result of consolidation of certain back office and management positions. Overall, the general trends in the Bank's net interest margin and operating expense ratio since fiscal 1999 reflect a decline in core earnings, as indicated by a decline in the expense coverage ratio (net interest income divided by operating expenses). Benjamin Franklin's expense coverage ratio equaled 1.29 times during fiscal 1999, versus a comparable ratio of 1.10 times during the twelve months ended September 30, 2004. Similarly, Benjamin Franklin's efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of net interest income and non-interest operating income) of 79.1% for the twelve months ended September 30, 2004 was less favorable than the 70.0% efficiency ratio maintained during fiscal 1999. A lower net interest margin and a higher operating expense ratio both contributed to the decline experienced in the Bank's core earnings. Over the past five and three-quarter years, credit quality related losses have not been a material factor in the Bank's earnings, reflecting Benjamin Franklin's maintenance of generally favorable credit quality measures and a healthy local real estate market. Since fiscal 2002, the Bank has established a noticeable level of loss provisions, primarily to build the level of reserves as a percent of loans receivable, and to a lesser extent, to offset loan chargeoffs. As of September 30, 2004, the Bank maintained valuation allowances of $3.017 million, equal to 0.80% of net loans receivable and 745.1% of non-performing loans. Exhibit I-6 sets forth the Bank's loan loss allowance activity during the past five and three-quarters years. Gains and losses derived from the sale of loans and securities have had a varied impact on the Bank's earnings over the past five and three-quarters fiscal years, ranging from a net loss equal to 1.55% of average assets during fiscal 2000 to a net gain equal to 0.32% of average assets during fiscal 1999. For the twelve months ended September 30, 2004, the Bank recorded net gains of $111,000, or 0.02% of average assets. The income statement for fiscal years 1999 through 2002 were impacted by gains or losses on the sale of certain securities, primarily common stocks, including technology company common stocks. This represents a prior investment strategy that was terminated in fiscal 2002. The gains on sale of loans represent the more recent strategy of selling long-term fixed rate residential loans into the secondary market, RP Financial, LC. Page 1.18 and the future level of these gains are subject to market conditions. During fiscal 2002, the Bank recorded a loss due to the termination of a pension plan. Benjamin Franklin's effective tax rate equaled 32.9% for the twelve months ended September 30, 2004, which was comparable to the Bank's effective tax rate for recent prior fiscal years. As set forth in the prospectus, the Bank's marginal effective tax approximates 36%. Chart Bank Income and Expense Trends Chart Bank reported positive earnings over the past five and three-quarters years, ranging from a low of $134,000 during 1999 to a high of $1.7 million during fiscal 2003. For the twelve months ended September 30, 2004, Chart Bank recorded net income of $1.4 million, or approximately 0.5% of average assets. Net interest income and operating expenses also represent the major components of Chart Bank's core earnings, which is supplemented by non-interest operating income derived primarily from service charges and fees, and income from a subsidiary operation that provides cash management for ATMs on a nationwide basis. Growth of net interest income has been supported by Chart Bank's general philosophy of retaining all loan originations for investment, which has sustained loan growth and limited the degree of interest rate spread compression experienced from refinancing of the existing portfolio. Income generated from the ATM cash management subsidiary has accounted for most of increase in non-interest income. Loan loss provisions established by Chart Bank during the twelve months ended September 30, 2004 approximated 0.05% of average assets, which is consistent with the level of loss provisions established in recent prior years. With the exception of 2002, the Bank's earnings have not been noticeably affected by non-operating gains or losses. For the nine months ended September 30, 2004, Chart Bank maintained expense coverage and efficiency ratios of 0.94 times and 79.0%, respectively. Pro Forma Earnings Impact of the Acquisition The pro forma income statement impact of the acquisition is shown in Table 1.2 for the twelve month period ended September 30, 2004. The pro forma earnings reflect the yield adjustments for interest rate sensitive assets and liabilities, based on mark-to-market valuation adjustments on Chart Bank's September 30, 2004 balance sheet. Non-interest expenses were RP Financial, LC. Page 1.19 adjusted to account for the amortization of intangibles. The adjustment for amortization of intangibles equaled $0.912 million in the first year following the acquisition. On a pro forma basis, before factoring in the reinvestment of conversion proceeds, Benjamin Franklin's core earnings declined from 0.32% of average assets to 0.29% of average assets. In addition to the amortization of the intangibles, the reduction in core earnings was attributable to a lower net interest margin (declining from 2.78% of average assets to 2.71% of average assets) and higher operating expense ratio (increasing from 2.53% of average assets to 2.69% of average assets). Partially offsetting the decline in pro forma core earnings were a lower provision for loan loss ratio (declining from 0.16% of average assets to 0.12% of average assets) and a higher ratio of non-interest operating income (increasing from 0.42% of average assets to 0.61% of average assets). The pro forma earnings do not reflect any potential cost savings that may be realized, as such estimates are considered to be speculative and therefore are not disclosed in the pro forma financial statements set forth in the prospectus. Interest Rate Risk Management The Bank pursues a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate sensitive assets and liabilities. As of September 30, 2004, an analysis of the Bank's interest rate risk as measured by the repricing mismatch between interest rate sensitive assets and interest rate sensitive liabilities indicated that the Bank maintained a cumulative one-year gap-to-assets ratio of negative 7.88% (see Exhibit I-7). As of September 30, 2004, the estimated change in the Bank's net interest margin equaled negative 4.21% under a 200 basis point instantaneous and sustained rise in interest rates and negative 2.47% under a 100 basis point instantaneous and sustained decline in interest rates. The Bank manages interest rate risk from the asset side of the balance sheet through emphasizing investment in short- and intermediate-term securities, selling originations of long term 1-4 family fixed rate loans to the secondary market, and emphasizing the origination of adjustable rate and short-term fixed rate loans for investment. As of September 30, 2004, of the total loans due after September 30, 2004, ARM loans comprised 60.7% of those loans (see Exhibit I-8). The Bank's entire investment portfolio, except for a minimal balance of MBS RP Financial, LC. Page 1.20 ($266,000), is classified as available-for-sale and, thereby, facilitates the ability to sell investments for purposes of interest rate risk management. On the liability side of the balance sheet, management of interest rate risk has been pursued through utilizing fixed rate FHLB advances with terms of more than one year and emphasizing growth of lower cost and less interest rate sensitive transaction and savings accounts. The majority of the Bank's deposits are maintained in transaction and savings accounts and those deposit types have sustained the Bank's deposit growth in recent years. Management of interest rate risk by Chart Bank is conducted in a similar manner as Benjamin Franklin, with the exception of Chart Bank's philosophy of retaining originations of longer term 1-4 family fixed rate loans for investment. Chart Bank also has built a portfolio shorter term or adjustable commercial real estate loans. Lending Activities and Strategy Benjamin Franklin offers a full range of mortgage loan products through its retail and commercial banking activities. Benjamin Franklin's lending activities have traditionally emphasized 1-4 family permanent mortgage loans and 1-4 family permanent mortgage loans continue to comprise the largest concentration of the loan portfolio. Beyond 1-4 family loans, lending diversification by the Bank has emphasized commercial real estate (including multi-family loans), and construction/development loans. Benjamin Franklin has not pursued commercial business or consumer lending to a great extent. Going forward, the Bank's lending strategy is to continue to pursue growth of the loan portfolio through emphasizing origination of commercial loans and 1-4 family permanent mortgage loans, with the goal of increasing the proportion of commercial real estate and multi-family loans held in the loan portfolio Exhibit I-9 provides historical detail of the Bank's loan portfolio composition over the past five and three-quarters fiscal years and Exhibit I-10 provides the contractual maturity of the Bank's loan portfolio by loan type as of September 30, 2004. Chart Bank's loan portfolio is also concentrated in 1-4 family permanent mortgage loans, with commercial real estate loans constituting the primary area of lending diversification. Similar to the Bank, Chart Bank also has not emphasized commercial business or consumer loans. Exhibit I-9A provide historical detail of Chart Bank's loan portfolio composition for the ` RP Financial, LC. Page 1.21 past two and three-quarters years. Following the acquisition of Chart Bank, the loan programs offered by Benjamin Franklin will be implemented by the merged entity. Benjamin Franklin offers both fixed rate and adjustable 1-4 family mortgage loans. Fixed rate loans offered by the Bank have terms ranging from 9 to 30 years. In the current interest rate environment, the Bank generally sells longer term fixed rate loan originations with servicing retained by the Bank. Notwithstanding the high demand for fixed rate loans in the low interest rate environment that has prevailed in recent years, the Bank has effectively marketed originations of adjustable rate loans and such loans account for the majority of the Bank's 1-4 family loan portfolio. Benjamin Franklin offers ARM loans that have initial repricing periods of one, three or five years. ARM loans are indexed to the constant maturity U.S. treasury index of a similar term. After the initial repricing period, ARM loans convert to a one- three- or five-year ARM loan for the balance of the mortgage term. Interest rate adjustments on such loans are typically limited to no more than 2% during any adjustment period and 6% over the life of the loan. Benjamin Franklin lends up to a maximum loan-to-value ratio of 95% on owner-occupied property, with private mortgage insurance required for loans with a loan-to-value ratio in excess of 80%. The substantial portion of the Bank's 1-4 family permanent mortgage loans are underwritten to secondary market standards specified by Fannie Mae and Freddie Mac. As of September 30, 2004, the Bank's 1-4 family permanent mortgage loan portfolio equaled $244.4 million or 65.8% of total loans outstanding. Chart Bank has also emphasized the origination of fixed rate 1-4 family loans in the prevailing interest rate environment and has retained all loans for investment. As of September 30, 2004, Chart Bank's 1-4 family permanent mortgage loan portfolio equaled $58.1 million or 33.1% of its total loans. Construction/land development loans originated by the Bank consist primarily of loans to finance the construction of residential developmental properties along with a lower level of originations for construction of commercial properties. Construction and land lending has also been a significant area of lending diversification for Chart Bank. As of September 30, 2004, Benjamin Franklin's and Chart Bank's outstanding balances of construction and land development loans totaled $33.3 million. Land loans are offered as adjustable rate loans with one-year adjustment periods and 25 year amortization periods. Land development loans RP Financial, LC. Page 1.22 complement the Bank's residential construction lending activities, as such loans are primarily extended to finance lots that will be used for residential development. Land development loans generally require a loan-to-value ("LTV") ratio of 75% or less and are offered as variable rate loans with a maximum term of 25 years. To a lesser extent, the Bank provides construction financing for commercial real estate up to a maximum LTV ratio of 80%. Commercial real estate construction/land loans are generally originated as construction/permanent loans and are subject to the same underwriting criteria as required for permanent mortgage loans, as well as submission of completed plans, specifications and cost estimates related to the proposed construction. These items are used as an additional basis to determine the appraised value of the subject property. The balance of the mortgage loan portfolio consists of commercial real estate and multi-family loans, which are generally collateralized by properties in the Bank's normal lending territory. This type of lending is structured based on the credit rating of the borrower and the specific loan characteristics. Credit ratings include "2", "3" and "3A" credits. For each credit rating, the loan characteristics also are determined by the loan term, which can range from one to seven years. Within each credit rating and loan term, the rates are based on the corresponding FHLB advances rate of a similar maturity plus a margin ranging from 1.75% to 2.00%. Loans with terms in excess of one year have floor rates, which currently range from 5.00% to 6.75%. Loan amortization periods are generally up to 20 years, and loan to-value ratios for commercial real estate loans generally do not exceed 80%. Benjamin Franklin also generally requires that the properties securing these loans have debt service coverage ratios of at least 1.20 times, and the Bank also generally obtains personal guarantees on these loans from the borrower. The Bank also offers fixed rate commercial real estate mortgage loans, with the rates increasing by a set amount over the first 10 years of the loan. Properties securing the commercial real estate and multi-family loan portfolio consist primarily of office buildings, retail properties, mix-use properties and apartment buildings. Chart Bank also originates commercial real estate and multi-family loans under comparable terms as extended by the Bank and both institutions respective portfolios are largely secured by local properties. Growth of commercial real estate lending is currently an area of lending emphasis for the Bank and will continue to be emphasized over the course of this Plan. RP Financial, LC. Page 1.23 Growth will be supported by the Bank's expanded market presence provided by the acquisition. As of September 30, 2004, Benjamin Franklin's and Chart Bank's outstanding balances of commercial real estate and multi-family loans totaled $178.9 million or 32.3% of total loans outstanding. Diversification into consumer lending is not an area of emphasis for either Benjamin Franklin or Chart Bank. Home equity loans and lines of credit represent the largest component of the Bank's and Chart Bank's consumer lending activities. Fixed rate home equity loans are offered for terms of up to fifteen years, and are made with loan-to-value ratios of up to 90% with private mortgage insurance, or 80% without private mortgage insurance. Home equity lines of credit are tied to the prime rate and are offered for terms of up to ten years before repayment of principal is required with a maximum balance of $300,000. Home equity loans require a LTV ratio of 80% or less (unless insured) of the combined balance of the home equity loan or line of credit and the first lien. The balance of the Bank's consumer loan portfolio consists primarily of installment loans. Home equity loans and lines of credit represent the primary source of consumer loans for Chart Bank as well. As of September 30, 2004, Benjamin Franklin's and Chart Bank's consumer loan portfolios totaled $31.0 million or 5.6% of total loans outstanding, with home equity loans and lines of credit comprising $28.8 million of the total balance of consumer loans. The Bank offers commercial business loans and lines of credit to small and medium sized companies in its market area. Commercial business loans offered by the Bank consist of floating rate loans indexed to the prime rate with one year adjustment periods, as well as fixed rate loans for typically up to seven years. The commercial business loan portfolio consists primarily of secured loans for purposes of financing equipment acquisition, expansion, working capital and other general business purposes, and the portfolio also includes a minor amount of unsecured loans. When making such loans, Benjamin Franklin considers the value of the collateral, the financial statements of the borrower and debt service capabilities, among other factors. Commercial business lending is expected to be a growth area for the Bank. Chart Bank engages in similar types of commercial business lending as the Bank. As of September 30, 2004, Benjamin Franklin's and Chart Bank's outstanding balances of commercial business loans totaled $9.1 million or 1.6% of total loans outstanding. RP Financial, LC. Page 1.24 Exhibit I-11 provides a summary of the Bank's lending activities over the past five and three-quarters fiscal years, inclusive of loan purchases. The Bank's lending volume has increased significantly since fiscal 2000, which was primarily attributable to increased originations of 1-4 family permanent mortgage loans and, to a lesser extent, higher originations of commercial real estate loans. Total loan originations increased from $83.9 million in fiscal 2000 to $192.4 million for the twelve months ended September 30, 2004. During the past two and three-quarters fiscal years, residential loans originated accounted for 70.1% of total loans originated. Commercial real estate loans represented the second highest source of originations and accounted for 10.9% of total loans originated over the past two and three-quarters fiscal years. Notwithstanding the increase experienced in the Bank's loan volume, loan portfolio growth has been slowed by accelerated repayments that has resulted from borrowers refinancing into lower rate loans and the sale of fixed rate 1-4 family mortgage loans to the secondary market. During fiscal 2003, in an effort to build the loan portfolio, the Bank began active purchases of residential mortgage loans from loan brokers in the Boston metropolitan area, and such purchases totaled $34.4 million for the twelve months ended September 30, 2004. The amount of loans purchased totaled 11.8% of loan originations over that time period. Loans sold increased from $6.6 million in fiscal 2000 to $96.3 million in fiscal 2003 and decreased to $32.2 million for the twelve months ended September 30, 2004, reflecting the slowdown in loan originations. Loan principal repayments increased from $74.1 million in fiscal 2000 to $149.6 million in fiscal 2003 and $98.9 million for the twelve months ended September 30, 2004. Asset Quality The Bank's maintenance of adequate lending policies and the historical 1-4 family lending emphasis has supported the maintenance of favorable credit quality measures during the past five and three-quarters years. Over the past five and three-quarters fiscal years, Benjamin Franklin's balance of non-performing assets ranged from a high of 0.10% of assets at fiscal year end 2003 to a low of 0.00% of assets at fiscal year end 2002. As of September 30, 2004, the Bank's non-performing assets-to-assets ratio equaled 0.08%. As shown in Exhibit I-12, the Bank's balance of non-performing assets at September 30, 2004 consisted of $357,000 of non-accruing loans and $65,000 of loans greater than 90 days delinquent and still accruing. Loans RP Financial, LC. Page 1.25 secured by commercial business assets accounted for all of the non-accruing loan balance at September 30, 2004. To track the adequacy of valuation allowances, Benjamin Franklin has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. The Bank determines its allowance and provisions for loan losses based upon a detailed evaluation of the loan portfolio segregated into various pools of outstanding loans. Loss factors are determined using the Bank's historical loss experience, industry data and peer comparisons. Some loans have been identified individually and assigned specific reserve amounts. In addition, the Bank's regulators periodically review the allowance for loan losses, and the regulatory agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of their examination, thereby negatively affecting the Bank's financial condition and earnings. As a result of the Bank's loan portfolio evaluations, and increase in the balances of non-residential real estate secured loans, the Bank has increased the total balance of allowances for loan and lease losses in recent years. As of September 30, 2004, the Bank's allowance for loan losses equaled $3.017 million, which equaled 745.1% of non-performing loans and 0.80% of net loans receivable. In general, Chart Bank has maintained a relatively low non-performing assets ratio over the past five and three-quarters years. Net charge-offs recorded by Chart Bank have also been relatively limited over the past two and three-quarters years. As of September 30, 2004, Chart Bank's balance of non-performing assets totaled $144,000 or 0.06% of assets, most of which was secured by residential property. Chart Bank maintained valuation allowances of $1.753 million at September 30, 2004, equal to 0.99% of net loans receivable and 1,437.7% of non-performing assets. Funding Composition and Strategy Deposits have consistently served as the Bank's primary source of funds and at September 30, 2004 deposits accounted for 82.6% of Benjamin Franklin's interest-bearing funding composition. Exhibit I-13 provides historical detail of the Bank's deposit composition for the past five and three-quarters years. Lower cost savings and demand accounts comprise the largest component of the Bank's transaction account deposit composition and have increased as RP Financial, LC. Page 1.26 percent of total deposits since December 31, 2001. Savings and demand accounts increased from 36.8% of deposits for the fiscal year ended 2001 to 46.7% of deposits as of September 30, 2004. The low interest rate environment is believed to have contributed to the increase in demand and savings accounts maintained by the Bank, as the general decline in CD rates has increased depositor preference to hold funds in liquid transaction accounts. The Bank has experienced relatively stable levels of NOW and money market accounts, which has been facilitated by the Bank's promotion of money market account products and commercial account relationships. Money market accounts and NOW accounts totaled $79.6 million or 19.9% of deposits at September 30, 2004, versus $87.6 million, or 19.6% as of December 31, 2001. CDs comprise the balance of the Bank's deposit composition, with the current CD composition reflecting a higher concentration of short-term CDs (maturities of one year or less). As of September 30, 2004, CDs totaled $133.6 million, of which 71.2% were scheduled to mature in one year or less. CDs comprised 33.4% of deposits as of September 30, 2004. As of September 30, 2004, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $38.7 million or 29.0% of total CDs. Benjamin Franklin does not maintain any brokered CDs. Borrowings serve as an alternative funding source for the Bank to support management of funding costs and interest rate risk. As of September 30, 2003, the Bank held $75.0 million of borrowings, which consisted of $29.0 million of short term FHLB advances maturing within one year from September 30, 2004, and $46.0 million of long term FHLB advances with maturities ranging from 2007 through 2011. Of the longer term FHLB advances, $36.0 million contained call features. In addition, the Company held $9.0 million of trust preferred securities through a subsidiary, Benjamin Franklin Capital Trust I, as described below. Exhibit I-14 provides detail of the Bank's use of FHLB advances over the past three and one-quarters fiscal years. Exhibit I-13A sets forth Chart Bank's deposit composition for the past two years and as of September 30, 2004. As of September 30, 2004, deposits held by Chart Bank totaled $216.0 million and accounted for 90.8% of Chart Bank's interest-bearing funding composition. As of September 30, 2004, CDs represented the largest portion of Chart Bank's deposit base, totaling $92.5 million, or 42.8% of total deposits. As of the same date, jumbo CDs held by Chart Bank totaled $43.7 million or 47.3% of total CDs. Chart Bank does not hold any brokered deposits. Money market deposit accounts represent the second largest component of Chart Bank's RP Financial, LC. Page 1.27 deposits, equaling $64.4 million, or 29.8% of total deposits at September 30, 2004. Demand, savings and NOW accounts comprise the remainder of the core deposit base. Borrowings held by Chart Bank are comparable to the types of borrowings utilized by the Bank, consisting of $22.0 million of FHLB advances, with terms ranging from six months to five years. A total of $11.0 million of borrowings were classified as short term borrowings with terms of less than one year. Long term advances had maturities of the ranging from December 2004 to August 2008 and a weighted average rate of 2.84%. The trust preferred debt consists of one $9.0 million issue with a fixed interest rate of 6.94% and a maturity date in 2032. Subsidiaries The Bank maintains one subsidiary, as described below. Benjamin Franklin Securities Corp. was incorporated for the purpose of buying, selling and holding investment securities, in order to qualify for favorable state income tax treatment. As of September 30, 2004, this subsidiary held approximately $73.7 million of assets, consisting primarily of cash and investment securities. The operations of Chart Bank's investment subsidiary, Weston Street Securities Corporation will be consolidated into this subsidiary upon completion of the acquisition. Chart Bank maintains two subsidiaries, as follows: Creative Strategic Solutions, Inc. was organized to provide electronic commerce, electronic funds transfer, automated teller machine services and related consulting services. At September 30, 2004. this subsidiary held approximately $38.8 million in assets, consisting primarily of cash. Future plans for the operation of this subsidiary include maintaining the operational structure and attempting to expand its level of business activity in order to generate additional non-interest income. Weston Street Securities Corporation was incorporated for the purpose of buying, selling and holding investment securities, in order to qualify for favorable state income treatment. As of September 30, 2004, this subsidiary held approximately $33 million of securities. This subsidiary will be consolidated into the Bank's investment subsidiary following completion of the acquisition. RP Financial, LC. Page 1.28 The Company also owns one statutory business trust, Benjamin Franklin Capital Trust I, which was established in December 2002 for the purpose of issuing a total of $9.0 million of trust preferred securities. The trust preferred debt consists of 9,000 issues with a liquidation value of $1,000 each. These issues carry a fixed interest rate of 6.94% for the first five years of operations, and adjust to the three month LIBOR plus 3.45% thereafter, with a maturity date of November 2032. Early redemption at Bancorp's option may occur after November 2007, or in the event of certain regulatory or tax changes. The trust will be a subsidiary of the Company following the acquisition. Legal Proceedings The Bank and Chart Bank are involved in routine legal proceedings occurring in the ordinary course of business which, in the aggregate, are believed by their respective managements to be immaterial to the financial conditions of Benjamin Franklin and Chart Bank. RP Financial, LC. Page 2.1 II. MARKET AREA Introduction Benjamin Franklin serves southeastern Massachusetts through six branch offices located in the counties of Norfolk and Worcester. With the acquisition of Chart Bank, the Bank's branch presence will expand into eastern-central Massachusetts through the addition of three branches located in the cities of Waltham and Newtonville, Middlesex County. A listing of the Bank's and Chart Bank's office locations is presented in Exhibit II-1. The primary market area includes a mixture of rural, suburban and urban markets, with the Franklin and Waltham markets constituting the largest population centers of the markets that will be served by the combined entity. The economy in the primary market area is fairly diversified, with services, wholesale/retail trade, manufacturing, finance, insurance and real estate ("FIRE"), and state and local government constituting the basis of the regional economy that will be served by the Bank. The Bank's competitive environment includes a large number of thrifts, commercial banks, credit unions and other financial services companies, some of which have a regional or national presence. Future business and growth opportunities will be partially influenced by economic and demographic characteristics of the markets served by the Bank, particularly the future growth and stability of the regional economy, demographic growth trends, and the nature and intensity of the competitive environment for financial institutions. These factors outlined herein have been examined in relation to the relative impact on value. National Economic Factors The business potential of a financial institution is partially dependent on the future operating environment and growth opportunities for the banking industry and the economy as a whole. The major stock exchange indices increased during calendar year 2003 and through mid-2004, due to the completion of major military action in Iraq, a somewhat improved overall economic performance by the nation's economy, a continued expectation that interest rates will remain at current historical low levels in the foreseen future, low inflation rates and more RP Financial, LC. Page 2.2 positive recent corporate earnings reports. However, during April and May 2004, increasing signs of a strongly growing economy led to fears of inflation, higher interest rates and a potential slowdown of the national economy, which resulted in a moderate pullback in the stock market during mid-2004. The price of oil reached all time highs approaching $50 per barrel, which also led to fears of adverse economic impacts. The size of the projected federal budget deficit in the future has also led to a level of uncertainty about future economic performance. The economy showed signs of slowing at the end of the second quarter of 2004, as higher energy prices reduced consumer spending. Retail sales, industrial production and housing starts all fell in June. The index of leading indicators fell in June for the first time in over a year and second quarter GDP declined to a 3.0% annual growth rate. Surging oil prices continued to hamper the U.S. economy during July, as employers added just 32,000 jobs in July. Despite modest job growth, the July unemployment rate dropped to 5.5%. Employment data showed a strengthening jobs market for August, as the 5.4% unemployment rate reported for August was its lowest level since October 2001. Comparatively, other economic data for August generally showed the pace of economic activity continued to decelerate, which included a decline in retail sales and the third straight monthly drop in the index of leading indicators. In September and October 2004, the stock markets reacted to continued unrest in Iraq, the level of oil prices, and the uncertainty surrounding the presidential election. The national unemployment rate has remained relatively low in comparison to recent historical levels, and was 5.4% as of September 2004, representing a decline from 6.5% one year earlier. As an indication of the changes in the nation's stock markets over the last 12 months, as of November 26, 2004, the Dow Jones Industrial Average closed at 10522.23, an increase of 0.7% from December 31, 2003, while the NASDAQ Composite Index stood at 2102.0, an increase of 7.2% over the same time period. The Standard & Poors 500 Index totaled 1182.7 as of November 26, 2004, an increase of 6.4% from December 31, 2003. Economic and Interest Rate Environment The future success of Benjamin Franklin's operations is partially dependent upon various national and local economic trends. Trends in the national economy improved during calendar year 2003 and in the first three quarters of 2004. Inflation remains relatively low compared to RP Financial, LC. Page 2.3 historical levels, increasing at an annual rate of 4.1% for the first six months of 2004. The economic slowdown of 2000 to 2002, the results of the reaction to the September 11 attacks, and other actions by the federal government has eliminated the previous Federal budget surplus and caused a record budget deficit for fiscal 2004. The economic slowdown has also caused a noticeable increase in unemployment, which increased from several decades lows of below 5.0% in 2000 to 6.0% in late 2003. As of September 2004, the unemployment rate had declined to 5.4%, although a large number of potential workers had stopped seeking employment and thus were not counted among the unemployed. The economy has showed signs of recovery, termed a "jobless recovery", although certain sectors of the economy remain stagnant. The GDP increased by 3.3% in the second quarter of 2004 and a revised 4.5% in the first quarter of 2004, indicating a somewhat stable growth rate to the economy in the short term. After remaining at historical lows over the past couple of years, interest rates have increased in recent months, following the perception of a strongly growing economy, and statements by the Federal Reserve that it would likely raise key interest rates in the near future. The Federal Reserve raised the key interest rates by 0.25% at each of the June, July, September and November meetings of the Fed, in recognition of the current stronger economy. The Federal Reserve had kept key market interest rates at historical lows not seen since the 1950s, having lowered the key interest rates (federal funds and the discount rate) over a dozen times since January 1, 2001. As of the latest Fed rate increase, effective September 2004, the Fed Funds rate was 2.00%, down from 6.50% at the beginning of 2001, while the Discount Rate stood at 1.75%, down from 6.00% at January 1, 2001. The financial markets had previously "priced in" the expectation of rising interest rates, as the treasury yield curve had risen in the past 3 months. As of November 26, 2004, one- and ten-year U.S. government bonds were yielding 2.65% and 4.24%, respectively, compared to 1.29% and 4.25%, respectively, as of one year ago. Historical trends for interest rates are presented in Exhibit II-2. Regional Economy The Bank's market area following completion of the acquisition will consist of Norfolk County and the area surrounding the Chart Bank office locations, particularly the cities of Waltham and Newtonville. Five of the six Benjamin Franklin offices are located in Norfolk RP Financial, LC. Page 2.4 County, while one office is located just across the county border in the town of Milford, Worcester County. The Chart Bank offices are located within Middlesex County, a county that covers a large, highly populated area to the west and northwest of Boston. For this reason, the Chart Bank market area, particularly for deposits, will be defined as cities of Waltham and Newtonville. The Norfolk County area was historically based on manufacturing, but similar to many areas of the country, has been transferred into a more services oriented economy in the last couple of decades with employment in most large economic sectors. However, manufacturing maintains a material presence in the area. Two of the largest employers include Waters Corp. and EMC Corp. A large portion of Norfolk County residents work in other nearby areas, including the city of Boston and the Route 128 area, and thus to an extent Norfolk County serves as a bedroom community. There also is significant employment located along the I-495 corridor, which runs directly through the Bank's Norfolk County market area. The Middlesex County, or more specifically Waltham area also represents a relatively diversified employment base, with employment spread between most economic sectors. Education-related employment is also significant in this area. As shown in Table 2.1 below, the State of Massachusetts and Norfolk and Middlesex Counties all reported the largest proportion of employment in services, wholesale/retail trade, and finance, insurance and real estate, indicative of a relatively diversified employment base. Middlesex County reported a higher level of manufacturing employment, while the state of Massachusetts reported a higher level of government employment. Overall, however, with the exception of the government employment, the employment base of the Bank's market area was quite similar to the statewide averages. Construction employment was similar in the market area counties also. The presence of a higher level of manufacturing employment generally is an unfavorable characteristic, as the manufacturing sector of the economy has been declining for a number of decades. See Exhibit II-3 for additional data and details. RP Financial, LC. Page 2.5 Table 2.1 Primary Market Area Employment Sectors (Percent of Labor Force)
Employ. Sectors Massachusetts Norfolk Cty. Middlesex Cty. - --------------------------- ------------- ------------ -------------- Services 45.7% 46.0% 53.1% Wholesale/Ret. Trade 13.7 16.3 13.6 Finance, Ins., Real Estate 11.8 13.0 6.7 Government 11.1 8.0 8.5 Manufacturing 8.8 7.4 10.2 Construction 5.4 6.4 5.4 Transportation/Public Util. 2.8 2.6 2.2 Agriculture 0.3 0.1 0.2 Other 0.4 0.2 0.3 ----- ----- ----- 100.0% 100.0% 100.0%
Source: REIS DataSource. Comparative unemployment rates for the primary market area counties, as well as for the U.S. and Massachusetts, are shown in Table 2.2. Current unemployment rates for all of the primary market area counties and cities as well as for Massachusetts were lower than the comparable U.S. unemployment rate. Unemployment was lowest in Franklin City, Middlesex County and Waltham City, with all areas maintaining unemployment rates that were below the Massachusetts unemployment rate of 4.6% as of August 2004. The comparatively lower unemployment rates indicated for the state and local areas are indicative of the overall strength of the economy. Similar to the U.S., the August 2004 unemployment rates for all of the primary market areas were lower than a year ago. RP Financial, LC. Page 2.6 Table 2.2 Unemployment Data
Region August 2003 August 2004 - ---------------- ----------- ----------- United States 6.0% 5.4% Massachusetts 5.8 4.6 Norfolk County 5.0 4.5 Franklin City 4.9 4.3 Middlesex County 5.2 4.4 Waltham City 5.1 4.4
Source: U.S. Bureau of Labor Statistics. Market Area Demographics Demographic and economic growth trends, measured by changes in population, number of households, age distribution and median household income, provide key insight into the health of the Bank's market area (see Table 2.3, with additional data shown in Exhibit II-4). Norfolk and Middlesex Counties are two heavily populated counties that will be served by the combined entity's branch network. Since 2000, population growth in the primary market area has been moderate in comparison to national averages, but in-line with statewide changes in population. The city of Waltham recorded a population decline between 2000 and 2004, and is expected to continue recording declines through 2009, while the city of Franklin recorded a moderate level of population increase. These population trends represent a moderately positive trend for Bank as the market area has certain areas of strong growth and certain areas of weaker growth. The overall population base provides a source of business for financial institutions, although the Bank operates in a mixed rural and suburban area with small cities functioning as population centers. As shown in Table 2.3, the number and growth of households performed somewhat better over the same time period, although this reflects a national trend towards a lower average household size and an increase in the number of households overall. In addition, the population and household growth trends described above are forecasted to remain relatively constant over the next five years, indicating that the Bank's business prospects are expected to remain stable in the foreseeable future. Table 2.3 Benjamin Franklin Savings Bank Summary Demographic/Economic Information
Year Growth Growth -------------------------------------------- Rate Rate 2000 2004 2009 2000-04 2004-2009 ------------ ---------- ---------- ------- --------- (%) (%) POPULATION(000) United States 281,422 292,937 307,116 1.0% 0.9% Massachusetts 6,349 6,447 6,545 0.4% 0.3% Norfolk County 650 657 663 0.3% 0.2% Franklin City 30 30 30 0.4% 0.3% Middlesex County 1,465 1,470 1,469 0.1% 0.0% Waltham City 59 59 58 -0.3% -0.3% HOUSEHOLDS(000) United States 105,480 109,949 115,474 1.0% 1.0% Massachusetts 2,444 2,495 2,551 0.5% 0.4% Norfolk County 249 253 258 0.4% 0.4% Franklin City 10 10 10 0.3% 0.2% Middlesex County 561 566 570 0.2% 0.1% Waltham City 23 23 23 0.1% 0.1% MEDIAN HOUSEHOLD INCOME($) United States $ 42,729 $ 46,475 $ 51,597 2.1% 2.1% Massachusetts 50,707 57,033 64,912 3.0% 2.6% Norfolk County 64,398 72,764 84,920 3.1% 3.1% Franklin City 71,236 84,193 101,678 4.3% 3.8% Middlesex County 61,698 69,234 79,910 2.9% 2.9% Waltham City 55,534 59,695 66,213 1.8% 2.1% PER CAPITA INCOME($) United States $ 21,587 $ 24,092 $ 27,309 2.8% 2.5% Massachusetts 25,952 29,837 34,701 3.5% 3.1% Norfolk County 32,484 38,037 44,783 4.0% 3.3% Franklin City 27,849 34,034 41,982 5.1% 4.3% Middlesex County 31,199 36,220 42,404 3.8% 3.2% Waltham City 26,364 29,853 34,180 3.2% 2.7%
2002 AGE DISTRIBUTION(%) 0-14 Yrs. 15-34 Yrs. 35-54 Yrs. 55+ Yrs. - ------------------------ -------- ---------- ---------- -------- United States 21.0% 28.0% 29.0% 22.0% Massachusetts 19.0% 27.0% 31.0% 23.0% Norfolk County 19.0% 24.0% 32.0% 26.0% Franklin City 25.0% 23.0% 35.0% 16.0% Middlesex County 18.0% 27.0% 32.0% 23.0% Waltham City 13.0% 36.0% 28.0% 23.0%
Less Than $25,000 to 2002 HH INCOME DIST.(%) $25,000 50,000 $50,000+ - ----------------------- --------- ---------- -------- United States 26.0% 28.0% 46.0% Massachusetts 22.0% 22.0% 55.0% Norfolk County 15.0% 18.0% 66.0% Franklin City 12.0% 15.0% 74.0% Middlesex County 17.0% 19.0% 64.0% Waltham City 19.0% 23.0% 58.0%
Source: ERSI. RP Financial, LC. Page 2.8 Income levels, in terms of median household income and per capita income, varied within a fairly broad range between the market area counties and cities examined, with all four areas posting income measures that exceeded the comparable state and U.S. measures. Waltham City reported the lowest levels of income of all market areas examined. However, reflecting the relative affluence of the State of Massachusetts overall, all four of the counties maintained strong income measures. The city of Franklin, where the largest portion of the Bank's deposits are currently maintained, had income measures that were the highest of all areas, along with the highest growth in median household and per capita income. Similar to Massachusetts, growth in household income is projected to slow throughout the primary market area over the next five years, with Franklin City and Norfolk County projected to experience the strongest growth in household income through 2009. Household income distribution measures reflect that the primary market area is represented by all income levels, with Franklin City and Norfolk County maintaining the highest percentage of households with incomes of more than $50,000. Age distribution measures for the primary market area counties were fairly consistent with the Massachusetts measures, with the exception of Franklin City, which reported a relatively younger average age. In summary, the demographic characteristics of the primary market area are considered to be relatively conducive for facilitating loan and deposit growth. It is expected that growth will be achieved through building on the Bank's expansion into new markets through offering comprehensive financial services and providing superior customer service. Additionally, growth may also be realized through additional acquisitions of financial institutions or other providers of financial services, although beyond the acquisition of Chart Bank there are currently no acquisitions under consideration. Deposit Trends The Bank's and Chart Bank's retail deposit bases are closely tied to the market areas where the respective branches are currently maintained. Table 2.4 displays deposit market trends from June 30, 2000 through June 30, 2004 for the primary market area counties as well as for Massachusetts. The data indicates that deposits increased in the counties served by the combined branch networks of Benjamin Franklin and Chart Bank. All three market area Table 2.4 Benjamin Franklin Savings Bank Deposit Summary
As of June 30, ----------------------------------------------------------------------------------- 2000 2004 ----------------------------------------- --------------------------------------- Deposit Market # of Market # of Growth Rate Deposits Share Branches Deposits Share Branches 2000-2003 ------------ ------ -------- -------- ------ -------- ----------- (Dollars in Thousands) (%) State of Massachusetts $133,949,000 100.0% 1,972 $172,722,000 100.0% 2,115 8.8% Commercial Banks 85,554,000 63.9% 951 108,180,000 62.6% 1,008 8.1% Savings Institutions 48,395,000 36.1% 1,021 64,542,000 37.4% 1,107 10.1% Norfolk County $ 11,332,000 100.0% 211 $ 15,869,000 100.0% 231 11.9% Commercial Banks 5,179,000 45.7% 81 7,634,000 48.1% 92 13.8% Savings Institutions 6,153,000 54.3% 130 8,235,000 51.9% 139 10.2% Benjamin Franklin SB 342,008 3.0% 5 366,176 2.3% 5 2.3% Middlesex County $ 25,577,000 225.7% 454 $ 35,720,000 100.0% 478 11.8% Commercial Banks 12,160,000 107.3% 220 18,907,000 52.9% 237 15.9% Savings Institutions 13,417,000 118.4% 234 16,813,000 47.1% 241 7.8% Chart Bank 107,939 0.4% 3 200,356 0.6% 3 22.9% Worcester County $ 7,200,000 63.5% 196 $ 9,919,000 100.0% 226 11.3% Commercial Banks 4,183,000 36.9% 107 4,490,000 45.3% 93 2.4% Savings Institutions 3,017,000 26.6% 89 5,429,000 54.7% 133 21.6% Benjamin Franklin SB 40,906 0.6% 1 46,539 0.5% 1 4.4%
Source: FDIC RP Financial, LC. Page 2.10 counties (including Worcester County, in which one of the Bank's branches is located), posted deposit growth rates that exceeded the Massachusetts annualized deposit growth rate of 8.8%. Similar to Massachusetts, savings institutions maintained a larger market share of deposits than commercial banks in all of the primary market area counties, except for Middlesex County. Benjamin Franklin's deposit holdings are substantially concentrated in Norfolk County, with a balance of $366 million (89% of all deposits), and a deposit market share of 2.3% at June 30, 2004. During the four year period covered in Table 2.4, the Bank realized a decline in deposit market share in both Norfolk County and Worcester County. Chart Bank's holdings of deposits in Middlesex County, totaling $200 million, represented a 0.6% market share of thrift and bank deposits at June 30, 2004. Chart Bank's three branch offices are relatively small in relation to the 478 financial institution branches in that county. It is anticipated that no branches will be closed following the acquisition. Overall, future deposit growth should be enhanced through the Bank's expanded geographic presence in the state and through the introduction of a broader array of financial services that are currently offered through the Bank's branches. Competition The Bank faces notable competition in both deposit gathering and lending activities, including direct competition with several financial institutions that primarily have a local or regional presence. Securities firms and mutual funds also represent major sources of competition in raising deposits. In many cases, these competitors are also seeking to provide some or all of the community-oriented services as Benjamin Franklin. With regard to lending competition, the Bank encounters the most significant competition from the same institutions providing deposit services. In addition, the Bank competes with mortgage companies, independent mortgage brokers, and credit unions in originating mortgage loans. Table 2.5 lists the Bank's largest competitors in each of the primary market area counties that will be served following the acquisition of Chart Bank. The Bank's and Chart Bank's deposit market share are also provided in Table 2.5. RP Financial, LC. Page 2.11 Table 2.5 Benjamin Franklin Bank Market Area Counties Deposit Competitors Location Name - --------------------- ------------------------------- Norfolk County, MA Fleet National Bank (22.2%) Citizens Bank of MA (20.8%) Sovereign Bank (5.1%) Dedham Inst. For Savings (4.8%) Benjamin Franklin SB (2.3%) Middlesex County, MA Fleet National Bank (22.1%) Citizens Bank of MA (19.8%) Middlesex Savings Bank (6.6%) Sovereign Bank (6.4%) Chart Bank (0.6%) Sources: FDIC. In the face of this competition, it has been necessary for the Bank to establish a strategy in order to continue to expand and operate as a viable competitor. As a strong multi-market community banking franchise, the Bank's strategy will be to place an emphasis on positioning Benjamin Franklin as a community-oriented financial institution that provides superior customer service with local decision making that meets the retail, commercial banking and asset management needs of its customer base. This strategy is designed to identify a niche in the Bank's market where it can compete against other much larger institutions. In this regard, the Bank continually seeks to create and maintain an image of professionalism and integrity, and to keep customers and potential customers informed of the Bank's services. RP Financial, LC. Page 3.1 III. PEER GROUP ANALYSIS This chapter presents an analysis of Benjamin Franklin's operations versus a group of comparable companies (the "Peer Group") selected from the universe of all publicly-traded savings institutions. The primary basis of the pro forma market valuation of Benjamin Franklin is provided by these public companies. Factors affecting the Bank's pro forma market value such as financial condition, credit risk, interest rate risk, and recent operating results can be readily assessed in relation to the Peer Group. Current market pricing of the Peer Group, subject to appropriate adjustments to account for differences between Benjamin Franklin and the Peer Group, will then be used as a basis for the valuation of the Company's to-be-issued common stock. Our comparative analysis of Benjamin Franklin and the Peer Group took into consideration the pro forma impact of the acquisition of Chart Bank. Such data was derived from the prospectus and RP Financial calculations. Peer Group Selection The Peer Group selection process is governed by the general parameters set forth in the regulatory valuation guidelines. Accordingly, the Peer Group is comprised of only those publicly-traded savings institutions whose common stock is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed, since their stock trading activity is regularly reported and generally more frequent than non-publicly traded and closely-held institutions. Non-listed institutions are inappropriate since the trading activity for thinly-traded or closely-held stocks is typically highly irregular in terms of frequency and price and thus may not be a reliable indicator of market value. We have also excluded from the Peer Group those companies under acquisition or subject to rumored acquisition, mutual holding companies and recent conversions, since their pricing ratios are subject to unusual distortion and/or have limited trading history. A recent listing of the universe of all publicly-traded savings institutions is included as Exhibit III-1. Ideally, the Peer Group, which must have at least 10 members to comply with the regulatory valuation guidelines, should be comprised of locally or regionally-based institutions with comparable resources, strategies and financial characteristics. There are approximately 185 publicly-traded institutions nationally and, thus, it is typically the case that the Peer Group will RP Financial, LC. Page 3.2 be comprised of institutions with relatively comparable characteristics. To the extent that differences exist between the converting institution and the Peer Group, valuation adjustments will be applied to account for the differences. Since Benjamin Franklin will be a fully-converted public company upon completion of the offering, we considered only fully-converted public companies to be viable candidates for inclusion in the Peer Group. From the universe of publicly-traded thrifts, we selected ten institutions with characteristics similar to those of Benjamin Franklin. In the selection process, we applied two "screens" to the universe of all public companies: - Screen #1. Massachusetts savings institutions. Eleven companies met the criteria for Screen #1 and eight were included in the Peer Group. Two companies that are under acquisition, Mystic Financial, Inc. and BostonFed Bancorp, Inc., were excluded from consideration, while Westfield Financial, Inc. was excluded due to its mutual holding company form of organization. Exhibit III-2 provides financial and public market pricing characteristics of all publicly-traded thrifts based in Massachusetts. - Screen #2. Other New England institutions with assets between $500 million and $1 billion. Three companies met the criteria for Screen #2 and two were included in the Peer Group. SI Financial Group of CT was excluded due to its mutual holding company form of organization. Exhibit III-3 provides financial and public market pricing characteristics of these additional publicly-traded thrifts based in New England. Table 3.1 shows the general characteristics of each of the ten Peer Group companies and Exhibit III-4 provides summary demographic and deposit market share data for the primary market areas served by each of the Peer Group companies. While there are expectedly some differences between the Peer Group companies and Benjamin Franklin, we believe that the Peer Group companies, on average, provide a good basis for valuation subject to valuation adjustments. The following sections present a comparison of Benjamin Franklin's financial condition, income and expense trends, loan composition, interest rate risk and credit risk versus the Peer Group as of the most recent publicly available date. RP Financial, LC. Page 3.3 RP Financial, LC. Page 3.4 In aggregate, the Peer Group companies maintain a higher level of capital than the industry average (11.67% of assets versus 10.80% for all public companies), generate slightly higher earnings as a percent of average assets (0.92% ROAA versus 0.79% for all public companies), and generate a slightly higher return on equity (9.38% ROE versus 8.38% for all public companies). Overall, the Peer Group's average P/B ratio approximated the average P/B ratio for all publicly-traded thrifts, while the Peer Group's average P/E multiple was higher than the average P/E multiple for all publicly-traded thrifts.
ALL PUBLICLY-TRADED PEER GROUP --------------- ---------- Financial Characteristics (Averages) Assets ($Mil) $ 2,524 $ 792 Market capitalization ($Mil) 396 189 Equity/assets (%) 10.80% 11.67% Return on average assets (%) 0.79% 0.92% Return on average equity (%) 8.38% 9.38% Pricing Ratios (Averages)(1) Price/earnings (x) 18.47x 18.09x Price/book (%) 164.76% 166.24% Price/assets (%) 17.74% 19.09%
(1) Based on market prices as of November 26, 2004. Ideally, the Peer Group companies would be comparable to Benjamin Franklin in terms of all of the selection criteria, but the universe of publicly-traded thrifts does not provide for an appropriate number of such companies. However, in general, the companies selected for the Peer Group were fairly comparable to Benjamin Franklin, as will be highlighted in the following comparative analysis. The financial data presented for Benjamin Franklin includes the estimated pro forma impact of the acquisition of Chart Bank. The conclusions drawn from the comparative analysis are then factored into the valuation analysis discussed in the final chapter. Financial Condition Table 3.2 shows comparative balance sheet measures for Benjamin Franklin and the Peer Group. Benjamin Franklin's and the Peer Group's ratios reflect balances as September 30, 2004, RP Financial, LC. Page 3.5 RP Financial, LC. Page 3.6 unless otherwise indicated for the Peer Group companies. The Bank's ratios have been adjusted to reflect the pro forma impact of the Chart Bank acquisition, before factoring in the proceeds to be realized from the public stock offering. Benjamin Franklin's net worth base of 6.8% was below the Peer Group's net worth ratio of 11.7%. In addition, as the result of the significant goodwill and intangibles created by the acquisition, equal to 4.7% of assets, the Bank's tangible net worth ratio of 2.1% was well below the Peer Group's tangible net worth ratio of 11.2%. Goodwill and intangibles had a far less significant impact on the Peer Group's balance sheet, equaling 0.5% of assets. The Bank's pro forma capital position (consolidated with the holding company) will increase with the addition of the stock proceeds to a level that will be continue to be somewhat below the Peer Group's tangible capital ratio. Both the Bank's and the Peer Group's capital ratios reflected surpluses over the regulatory capital requirements. The regulatory capital ratios indicated for Benjamin Franklin are on a stand alone-basis. The interest-earning asset compositions for the Bank and the Peer Group were somewhat similar, with loans constituting the largest component of their respective interest-earning assets. However, Benjamin Franklin's loans-to-assets ratio of 70.8% was above the comparable Peer Group ratio of 60.4%. Comparatively, the Bank's cash and investments-to-assets ratio of 20.0% was lower than the comparable Peer Group ratio of 36.4%. Overall, Benjamin Franklin's interest-earning assets amounted to 90.8% of assets, which was notably less than the Peer Group's ratio of 96.8%. The Bank's lower ratio was attributable to the significantly larger impact that goodwill and intangibles had on its balance sheet, as indicated by goodwill-to-assets ratios of 4.7% for the Bank and 0.5% for the Peer Group. Benjamin Franklin' funding liabilities reflected a funding strategy that relied more on deposits than that of the Peer Group. The Bank's deposits equaled 79.1% of assets, which was above the Peer Group average of 66.6%. Comparatively, borrowings were utilized to a greater degree by the Peer Group, as indicated by borrowings-to-assets ratios of 20.3% and 12.4% for the Peer Group and the Bank, respectively. Total interest-bearing liabilities maintained by the Bank and the Peer Group, as a percent of assets, equaled 92.7% and 87.4%, respectively. A key measure of balance sheet strength for a thrift institution is its IEA/IBL ratio. Presently, the Peer Group's IEA/IBL ratio is stronger than the Bank's ratio, based on respective RP Financial, LC. Page 3.7 ratios of 110.8% and 98.0%. The additional capital realized from stock proceeds should serve to provide Benjamin Franklin with an IEA/IBL ratio that is more comparable to the Peer Group's ratio, as the increase in capital realized from the stock proceeds will lessen the proportion of interest-bearing liabilities funding assets and on the asset size the proceeds will be primarily deployed into interest-earning investments and loans. At the same time, the Bank's significantly higher level of goodwill and intangibles will continue to result in a lower interest-earning assets-to-assets ratio than maintained by the Peer Group. The growth rate section of Table 3.2 shows annual growth rates for key balance sheet items. Benjamin Franklin's growth rates were based on annualized growth for the nine months ended September 30, 2004, while the Peer Group's growth rates were based on annual growth for the 12 months ended September 30, 2004, or the most recent period available. The Bank's growth rates reflect Benjamin Franklin's growth and the growth resulting from the purchase accounting acquisition of Chart Bank. As the result of the acquisition, Benjamin Franklin's annualized asset growth rate (103%) was significantly higher than the comparable growth rate posted by the Peer Group. The Peer Group's asset growth was realized primarily through growth in cash and investments, which was supplemented with a lower rate of growth for loans. The increase in loans provided by the acquisition will serve to more than double the size of the Bank's current loan portfolio, (annualized growth of 136%), while the Bank's growth rate for cash and investments was significantly less (due to the use of cash for a portion of the Chart Bank acquisition. Acquisition-related growth also provided for higher deposit, borrowing and net worth growth rates for Benjamin Franklin. The Bank's 90.4% deposit growth rate was realized substantially through acquisition-related growth, as the Bank posted only modest deposit growth during the nine month period. The Bank's borrowings growth was due to increases in borrowings by the Bank in the most recent nine month period, while a smaller balance of borrowings will be obtained through the acquisition. Asset growth for the Peer Group was funded through a combination of deposits and borrowings, which reflected growth rates of 5.5% and 33.0%, respectively. The Peer Group's positive capital growth rate reflects the impact of dividend payments and stock repurchases substantially offsetting earnings for the period. Comparatively, the Bank's significantly higher capital growth rate reflects the retention of all RP Financial, LC. Page 3.8 earnings for the period, as well as the issuance of stock in the acquisition of Chart Bank. However, the Bank's tangible net worth declined significantly, as the result of the goodwill and intangibles that will be created by the acquisition. Following the conversion, the Bank's capital growth rate may also be depressed by possible dividend payments and stock repurchases. Income and Expense Components Table 3.3 displays comparable statements of operations for the Bank and the Peer Group , based on earnings for the twelve months ended September 30, 2004, or the most recent twelve month period available. The Bank's earnings have been adjusted to reflect the pro forma impact of the Chart Bank acquisition, including purchase accounting adjustments. For the period shown in Table 3.3, Benjamin Franklin and the Peer Group reported net income to average assets ratios of 0.27% and 0.92%, respectively. The Peer Group's higher return was realized through lower operating expenses, lower loss provisions and higher net interest income, which was somewhat offset by the Bank's higher non-interest operating income. The Bank's lower net interest income was the result of a lower interest income ratio, which was partially offset by the Bank's lower interest expense ratio. The Peer Group's higher interest income ratio was realized through maintaining a higher level of interest-earning assets as a percent of total assets, as the Bank and the Peer Group maintained comparable interest-earning asset yields. In addition, the Bank's post-acquisition level of interest income is lower due to the lost interest income from the cash used to fund a portion of the Chart Bank acquisition, along with the impact of purchase accounting adjustments such as the amortization of a premium on loans. Similarly, the Bank's lower interest expense ratio was the result of the projected amortization of a purchase accounting adjustment in the form of amortization of a deposit premium, which reduces interest expense. The Bank and the Peer Group maintained comparable ratios of funding costs, in costs of interest bearing liabilities, and at the same time the Bank maintains a higher level of interest-bearing liabilities as a percent of assets. Overall, Benjamin Franklin and the Peer Group reported net interest income to average assets ratios of 2.71% and 3.04%, respectively. RP Financial, LC. Page 3.9 RP Financial, LC. Page 3.10 In another key area of core earnings strength, the Bank maintained a higher level of operating expenses than the Peer Group. Benjamin Franklin's operating expense to average assets ratio equaled 2.69% for the twelve month period, versus a comparable ratio of 2.17% for the Peer Group. Additional operating expense was included in the form of the year 1 amortization expense of the core deposit value established as part of the Chart Bank acquisition. This item added an estimated 11 basis points the Bank's post-acquisition expense base. The Bank reported a minimal level of intangibles expense, 0.03% of average assets, versus one basis point for the Peer Group. In addition, the Bank's operation of the ATM cash management subsidiary, which generated a higher level of non-interest operating income than earned by the Peer Group, also was considered to be a factor that contributed to the Bank's higher operating expense ratio. Before factoring in any staffing reductions that may result following the acquisition, the Bank combined with Chart Bank maintained a higher number of employees relative to its asset size than the Peer Group. Assets per full time equivalent employee equaled $4.7 million for the Bank, versus a comparable measure of $5.7 million for the Peer Group. When viewed together, net interest income and operating expenses provide considerable insight into a thrift's earnings strength, since those sources of income and expenses are typically the most prominent components of earnings and are generally more predictable than losses and gains realized from the sale of assets or other non-recurring activities. In this regard, as measured by their expense coverage ratios (net interest income divided by operating expenses), the Bank's earnings were not as strong as the Peer Group's. Expense coverage ratios posted by Benjamin Franklin and the Peer Group equaled 1.00x and 1.39x, respectively. An expense coverage ratio of greater than 1.0x indicates that an institution is able to sustain pre-tax profitability without having to rely on non-interest sources of income. Sources of non-interest operating income were a larger contributor to the Bank's earnings, with such income amounting to 0.61% and 0.46% of Benjamin Franklin's and the Peer Group's average assets, respectively. As noted above, the Bank's higher level of non-interest operating income is supported by diversification of operations into areas that generate fee income and service charges, in particular the ATM cash management subsidiary operations of Chart Bank. There are no purchase accounting adjustments that impact the level of post-acquisition non-interest income. The Bank's higher level of non-interest income is also supported by a funding RP Financial, LC Page 3.11 composition that consists of a comparatively higher level of deposits than maintained by the Peer Group, which generate non-interest income through service charges and cross-selling of other fee-based products and services. Taking non-interest operating income into account in comparing the Bank's and the Peer Group's core earnings, Benjamin Franklin' efficiency ratio of 81.6% was less favorable than the Peer Group's efficiency ratio of 62.3%. Loan loss provisions had a more significant impact on the Bank's earnings, amounting to 0.12% and 0.03% of the Bank's and the Peer Group's average assets, respectively. The higher level of loss provisions established by the Bank was consistent with the Bank's higher loans-to-assets ratio (see Table 3.2). Overall, the level of loan loss provisions established by the Bank and the Peer Group were reflective of low credit risk operating strategies, which, in turn, supported the maintenance of generally favorable credit quality measures by the Bank and the Peer Group. Net gains or losses did not impact either the Bank's or the Peer Group's income statement to any material degree, equaling a net loss of 0.03% and 0.00% of average assets for the Bank and the Peer Group, respectively. Typically, gains and losses generated from the sale of assets are viewed as earnings with a relatively high degree of volatility and, thus, are substantially discounted in the evaluation of an institution's core earnings. In the case of Benjamin Franklin, the gains were in part derived through selling fixed rate loans into the secondary market, which is considered to be an ongoing activity for the Bank during low interest rate environment periods such that prevailed in 2002 and the first two quarters of 2003. Other gains were recorded in the form of gains on the sale of investment securities. The Bank also reported a loss of $382,000, or 0.02% of average assets, from the expensing of merger-related costs during the most recent twelve month period. Likewise, the gains recorded by the Peer Group primarily consisted of gains derived from the sale of fixed rate loans into the secondary market, which is also considered an ongoing activity for the majority of the Peer Group companies. Accordingly, such gains warrant some consideration as a core earnings factor for the Bank and the Peer Group, but are still viewed as a more volatile source of income than income generated through the net interest margin and non-interest operating income. RP Financial, LC. Page 3.12 Taxes had a slightly larger impact on the Bank's earnings, as Benjamin Franklin and the Peer Group posted effective tax rates of 40.0% and 34.7%, respectively. Loan Composition Table 3.4 presents data related to the Bank's and the Peer Group's loan portfolio compositions, as well as data pertaining to investments in mortgage-backed securities, loans serviced for others and risk-weighted assets. Benjamin Franklin's ratios include the pro forma impact of the Chart Bank acquisition. The information presented for the Bank and the Peer Group reflect data as of September 30, 2004, unless otherwise indicated for the Peer Group companies. In comparison to the Peer Group, the Bank's loan portfolio composition reflected a comparable concentration in the aggregate of 1-4 family residential mortgage loans and mortgage-backed securities (49.2% of assets versus 44.8% for the Peer Group). The Peer Group maintained a higher concentration of MBS, which was more than offset by the Bank's higher concentration of 1-4 family residential loans. Loans serviced for others represented a more significant off-balance sheet item for the Bank, both in terms of balance of loans serviced ($133.2 million versus $52.2 million for the Peer Group) and as a percent of assets (17.1% versus 6.5% for the Peer Group). The Peer Group's larger portfolio of loans serviced for others portfolio also translated into a higher ratio of servicing intangibles, as servicing assets equaled 0.09% and 0.05% of the Peer Group's and the Bank's assets, respectively. Diversification into higher risk types of lending was fairly comparable for the Bank and the Peer Group. Commercial real estate loans represented the most significant area of loan portfolio diversification for the Bank and the Peer Group, with such loans equaling 23.0% and 19.4% of the Bank's and the Peer Group's assets, respectively. Construction/land (4.3% of assets) constituted the other major area of lending diversification for the Bank. The balance of the Peer Group's loan portfolio composition was dividend fairly evenly between commercial business loans (3.4% of assets), construction and land loans (2.9% of assets) and consumer loans (2.8% of assets). Commercial business and consumer loans constituted relatively minor areas of lending diversification for the Bank, with such loans equaling 1.2% and 0.3% of assets, respectively. Benjamin Franklin and the Peer Group maintained comparable risk weighted RP Financial, LC. Page 3.13 RP Financial, LC. Page 3.14 assets-to-assets ratios of 61.9% and 59.0%, respectively, both of which were in line with the average ratio of 60.3% for all publicly-traded thrifts. Credit Risk Overall, both the Bank's and the Peer Group's credit quality measures were considered to be representative of limited credit risk exposure. Benjamin Franklin's ratios include the pro forma impact of the Chart Bank acquisition. As shown in Table 3.5, Benjamin Franklin's ratio of non-performing assets and accruing loans that are more than 90 days past due as a percent of assets was less than the comparable Peer Group ratio (0.07% versus 0.09% for the Peer Group). Likewise, Benjamin Franklin's non-performing loans-to-loans ratio, which does not include accruing loans that are more than 90 days past due, was lower than the Peer Group's ratio (0.09% versus 0.11% for the Peer Group). Loss reserve ratios were also stronger for the Bank, as the Bank maintained a higher level of loss reserves as a percent of non-performing loans (900.2% versus 619.0% for the Peer Group). Alternatively, the Peer Group maintained a slightly higher level of reserves as a percent of loans (1.06% versus 0.87% for the Bank). Net loan charge-offs were a higher factor for the Bank, as net loan charge-offs posted by the Bank and the Peer Group equaled 0.08% and 0.03% of their respective loan balances. Interest Rate Risk Table 3.6 reflects various key ratios highlighting the relative interest rate risk exposure of the Bank versus the Peer Group companies. The Bank's ratios for "Balance Sheet Measures" reflect the pro forma impact of the Chart Bank acquisition. The "Quarterly Change In Net Interest Income" figures reflect Benjamin Franklin's, due to the absence of data for the merged entity. Additionally, the historical fluctuations in Chart Bank's net interest margins is considered to be less meaningful for purposes of analyzing interest rate risk of the combined entity, since Chart Bank's interest rate sensitive assets and liabilities will be marked-to-market based on prevailing interest rates at the time the acquisition becomes effective. RP Financial, LC. Page 3.15 RP Financial, LC. Page 3.16 RP Financial, LC. Page 3.17 In terms of balance sheet composition, Benjamin Franklin's interest rate risk characteristics were considered to be less favorable than the Peer Group's. Most notably, Benjamin Franklin's lower tangible capital position and lower IEA/IBL ratio indicate a greater dependence on the yield-cost spread to sustain the net interest margin. Likewise, the Peer Group's lower level of non-interest earning assets represented a positive consideration in terms of capacity to generate interest income. On a pro forma basis, the infusion of stock proceeds should serve to narrow the gap between the Bank's and the Peer Group's ratios, although the Bank will continue to maintain a significantly higher ratio for non-interest earning assets due to the goodwill and intangibles that will result from the acquisition. To analyze interest rate risk associated with the net interest margin, we reviewed quarterly changes in net interest income as a percent of average assets for Benjamin Franklin and the Peer Group. In general, the more significant fluctuations in the Bank's ratios implied there was a slightly greater degree of interest rate risk associated with its net interest income compared to the Peer Group's. Summary Based on the above analysis, RP Financial concluded that the Peer Group forms a reasonable basis for determining the pro forma market value of Benjamin Franklin. Such general characteristics as asset size, capital position, interest-earning asset composition, funding composition, core earnings measures, loan composition, credit quality and exposure to interest rate risk all tend to support the reasonability of the Peer Group from a financial standpoint. Those areas where differences exist will be addressed in the form of valuation adjustments to the extent necessary. RP Financial, LC. Page 4.1 IV. VALUATION ANALYSIS Introduction This chapter presents the valuation analysis and methodology, prepared pursuant to the regulatory valuation guidelines, and valuation adjustments and assumptions used to determine the estimated pro forma market value of the common stock to be issued in conjunction with the Bank's conversion transaction. Appraisal Guidelines The OTS written appraisal guidelines, which have been adopted in practice by the FDIC and the Massachusetts Division of Banks, specify the market value methodology for estimating the pro forma market value of an institution pursuant to a mutual-to-stock conversion. Pursuant to this methodology: (1) a peer group of comparable publicly-traded institutions is selected; (2) a financial and operational comparison of the subject company to the peer group is conducted to discern key differences; and (3) a valuation analysis in which the pro forma market value of the subject company is determined based on the market pricing of the peer group as of the date of valuation, incorporating valuation adjustments for key differences. In addition, the pricing characteristics of recent conversions, both at conversion and in the aftermarket, must be considered. RP Financial Approach to the Valuation The valuation analysis herein complies with such regulatory approval guidelines. Accordingly, the valuation incorporates a detailed analysis based on the Peer Group, discussed in Chapter III, which constitutes "fundamental analysis" techniques. Additionally, the valuation incorporates a "technical analysis" of recently completed stock conversions, including closing pricing and aftermarket trading of such offerings. It should be noted that these valuation analyses cannot possibly fully account for all the market forces which impact trading activity and pricing characteristics of a particular stock on a given day. RP Financial, LC. Page 4.2 The pro forma market value determined herein is a preliminary value for the Bank's to-be-issued stock. Throughout the conversion process, RP Financial will: (1) review changes in Benjamin Franklin's and Chart Bank's operations and financial conditions; (2) monitor Benjamin Franklin's and Chart Bank's operations and financial conditions relative to the Peer Group to identify any fundamental changes; (3) monitor the external factors affecting value including, but not limited to, local and national economic conditions, interest rates, and the stock market environment, including the market for thrift stocks; and (4) monitor pending conversion offerings (including those in the offering phase), both regionally and nationally. If material changes should occur during the conversion process, RP Financial will evaluate if updated valuation reports should be prepared reflecting such changes and their related impact on value, if any. RP Financial will also prepare a final valuation update at the closing of the offering to determine if the prepared valuation analysis and resulting range of value continues to be appropriate. The appraised value determined herein is based on the current market and operating environment for the Bank and for all thrifts. Subsequent changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or major world events), which may occur from time to time (often with great unpredictability) may materially impact the market value of all thrift stocks, including Benjamin Franklin's value, or Benjamin Franklin's value alone. To the extent a change in factors impacting the Bank's value can be reasonably anticipated and/or quantified, RP Financial has incorporated the estimated impact into the analysis. Valuation Analysis A fundamental analysis discussing similarities and differences relative to the Peer Group was presented in Chapter III. The following sections summarize the key differences between the Bank and the Peer Group, incorporating the Chart Bank acquisition, and how those differences affect the pro forma valuation. Emphasis is placed on the specific strengths and weaknesses of the Bank relative to the Peer Group in such key areas as financial condition, profitability, growth and viability of earnings, asset growth, primary market area, dividends, liquidity of the shares, marketing of the issue, management, and the effect of government regulations and/or regulatory RP Financial, LC. Page 4.3 reform. We have also considered the market for thrift stocks, in particular new issues, to assess the impact on value of Benjamin Franklin coming to market at this time. 1. Financial Condition The financial condition of an institution is an important determinant in pro forma market value, because investors typically look to such factors as liquidity, capital, asset composition and quality, and funding sources in assessing investment attractiveness. The similarities and differences in the Bank's and the Peer Group's financial strength are noted as follows: - Overall A/L Composition. Loans and investments funded by retail deposits were the primary components of the Bank's and Peer Group's balance sheets. The Bank's interest-earning asset composition exhibited a higher loans-to-assets ratio, and a higher similar degree of diversification into higher risk and higher yielding types of loans. Overall, the Bank and the Peer Group exhibited comparable risk weighted assets-to-assets ratios. Benjamin Franklin's funding composition reflected a higher level of deposits and a lower level of borrowings than the comparable Peer Group ratios. Overall, as a percent of assets, the Bank maintained a lower level of interest-earning assets and a higher level of interest-bearing liabilities relative to the Peer Group's measures, which resulted in a higher IEA/IBL ratio for the Peer Group. The infusion of stock proceeds should serve to increase the Bank's IEA/IBL ratio to a ratio that is more comparable to the Peer Group's ratio, although the Bank will continue to maintain a higher level of non-interest earning assets compared to the Peer Group. The Bank's higher level of non-interest earning assets is largely due the significant amount of goodwill and intangibles that will result from the acquisitions. Accordingly, for valuation purposes, RP Financial concluded that a no adjustment was warranted for the Bank's overall asset/liability composition. - Credit Quality. The Bank maintained lower ratios of non-performing assets-to-assets and non-performing loans-to-loans. Reserve coverage ratios were also stronger for the Bank as a percent of non-performing loans, and as a percent of NPAs. Net loan charge-offs were more significant for the Bank, while the Bank's and the Peer Group's risk weighted assets-to-assets ratios were comparable. Overall, in comparison to the Peer Group, the Bank's measures imply a lower degree of credit exposure and, thus, RP Financial concluded that a slight upward adjustment was warranted for the Bank's credit quality. - Balance Sheet Liquidity. The Bank operated with a somewhat lower level of cash and investment securities relative to the Peer Group (20.0% of assets versus 36.4% for the Peer Group). The Bank's cash and investments ratio reflects the reduction in cash and investments to fund a portion of the Chart Bank acquisition, RP Financial, LC. Page 4.4 but does not reflect the impact of the stock offering. Accordingly, after taking into account the pro forma impact of the stock offering, the Bank's cash and investments ratio is expected to be exceed the current ratio as proceeds raised in the offering will offset the funding of the Chart Bank acquisition. Benjamin Franklin's future borrowing capacity was considered to be greater than the Peer Group's, in light of the higher level of borrowings currently maintained by the Peer Group. However, both the Bank and the Peer Group were considered to have ample borrowing capacities. Overall, balance sheet liquidity was considered to be more similar for the Bank and the Peer Group and, thus, RP Financial concluded that a no adjustment was warranted for this factor. - Funding Liabilities. Retail deposits served as the primary interest-bearing source of funds for the Bank and the Peer Group, with the Bank's funding composition reflecting a higher concentration of deposits and lower utilization of borrowings in comparison to the Peer Group's measures. The Bank's overall funding composition provided for a similar cost of funds and contributed to the higher level of revenues generated from non-interest income sources. In total, the Bank maintained a higher ratio of interest-bearing liabilities as the Peer Group. Following the stock offering, the infusion of stock proceeds can be expected to support an increase in the Bank's capital ratio and a resulting decline in the level of interest-bearing liabilities maintained as a percent of assets. Overall, RP Financial concluded that a slight upward adjustment was warranted for Benjamin Franklin's funding composition. - Capital. The Bank maintains a lower pre-conversion capital ratio than the Peer Group on a reported basis, while on a tangible capital basis the Bank's pre-conversion capital ratio is significantly lower than the Peer Group's ratio. After factoring in stock proceeds, the Bank's tangible capital position is expected to be only somewhat lower than the Peer Group's tangible capital ratio. Accordingly, RP Financial concluded that no adjustment was warranted for the Bank's pro forma capital position. Overall, the upward adjustments applied for the Bank's credit quality and funding liabilities resulted in a slight upward adjustment for the Bank's financial condition. 2. Profitability, Growth and Viability of Earnings Earnings are a key factor in determining pro forma market value, as the level and risk characteristics of an institution's earnings stream and the prospects and ability to generate future earnings heavily influence the multiple the investment community will pay for earnings. The major factors considered in the valuation are described below. RP Financial, LC. Page 4.5 - Reported Earnings. The Bank reported lower earnings on a ROAA basis (0.29% of average assets versus 0.92% for the Peer Group). A lower level of operating expenses, lower loss provisions and a higher net interest income level supported the Peer Group's higher return. A higher level of non-interest operating income represented an earnings advantage for the Bank. Reinvestment of stock proceeds into interest-earning assets will serve to increase the Bank's earnings on an ROAA basis. At the same time, the Bank will incur certain one-time expenses related to the acquisitions and the expense of amortizing the stock benefit plans. Overall, after factoring the pro forma impact of the conversion and the acquisitions, Benjamin Franklin's reported earnings warranted a slight downward adjustment for valuation purposes. - Core Earnings. Both the Bank's and the Peer Group's earnings were derived largely from recurring sources, including net interest income, operating expenses, and non-interest operating income. In these measures, the Bank operated with a lower level of net interest income, a higher level of non-interest operating income and a higher operating expense ratio. The Bank's higher level of net interest income and higher level of operating expenses translated into a lower expense coverage ratio (1.00x versus 1.39x for the Peer Group), and an unfavorable efficiency ratio of 81.6% compared to the Peer Group's efficiency ratio of 62.3%. Effective tax rates were similar for both. Overall, these measures, as well as the expected earnings benefits the Bank should realize from the redeployment of stock proceeds into interest-earning assets, indicate that the Bank will continue to report less favorable earnings than the Peer Group, and thus a slight downward adjustment was warranted for the Bank's core earnings. - Interest Rate Risk. Quarterly changes in the Bank's and the Peer Group's net interest income to average assets ratios indicated that a slightly higher degree of volatility was associated with the Bank's net interest margins. Other measures of interest rate risk, such as capital ratios, IEA/IBL ratios, and the level of non-interest earning assets-to-total assets were more favorable for the Peer Group, thereby indicating a lower dependence on the yield-cost spread to sustain net interest income. On a pro forma basis, the Bank's capital position and IEA/IBL ratio will be enhanced by the infusion of stock proceeds and should narrow the current advantages reflected in the Peer Group's ratios. However, as the result of the Bank's significantly higher level of non-interest earnings assets, the Bank will need to maintain a higher yield-cost spread to sustain a comparable level of net interest income as the Peer Group. Overall, RP Financial concluded that the interest rate risk associated with the Bank's earnings was greater than the Peer Group's earnings interest rate risk exposure and a slight downward valuation adjustment was necessary for this factor. - Credit Risk. Loan loss provisions were a larger factor in the Bank's earnings (0.12% of average assets versus 0.03% for the Peer Group). Other factors, such as the Bank's slightly lower ratios of non-performing assets and non-performing loans and stronger reserve coverage ratios also implied a lower degree of credit RP Financial, LC. Page 4.6 risk exposure was associated with the Bank's earnings. Overall, RP Financial concluded that a slight upward valuation adjustment was warranted for the Bank's earnings credit risk exposure. - Earnings Growth Potential. Several factors were considered in assessing earnings growth potential. First, earnings growth facilitated by acquisition related growth was considered to be more favorable for the Bank pursuant to the increase in earnings that will be provided by the acquisition of Chart Bank. Second, following the infusion of stock proceeds, the Bank's earnings growth potential with respect to leverage capacity will be less favorable to the Peer Group's. Lastly, the Bank's more diversified operations into areas that generate non-interest operating income provides greater earnings growth potential and sustainability of earnings during periods when net interest margins come under pressure as the result of higher interest rates. On balance, the Bank's earnings growth potential appears to be similar to the Peer Group's, and, thus, we concluded that no adjustment was warranted for this factor. - Return on Equity. The Bank's pro forma return on equity will be below the comparable averages for the Peer Group and the industry, which will primarily be attributable to Benjamin Franklin's lower level of pro forma earnings on a reported basis. In view of the lower capital growth rate that will be imposed by Benjamin Franklin's lower ROE, we concluded that a moderate downward adjustment was warranted for the Bank's pro forma ROE. Overall, due to the Bank's less favorable reported and core earnings levels, along with lower expected ROE, RP Financial concluded that a slight downward valuation adjustment was warranted for the Bank's profitability, growth and viability of earnings. 3. Asset Growth As the result of the Chart Bank acquisition, Benjamin Franklin's asset growth was significantly stronger than the Peer Group's. Without the acquisition, the Bank's annualized growth rate of 17.5% for the nine month period ended September 30, 2004 also exceeded the Peer Group's annual growth rate. On a pro forma basis, the Bank's tangible equity-to-assets ratio will be lower than to the Peer Group's ratio, indicating less comparable leverage capacity as maintained by the Peer Group. The expansion of market area and customer base will provide growth opportunities for the Bank, particularly given the greater diversity of products and services that will be offered to the current customers of the acquired institution. On balance, we believe a slight upward adjustment was warranted for this factor. RP Financial, LC. Page 4.7 4. Primary Market Area The general condition of an institution's market area has an impact on value, as future success is in part dependent upon opportunities for profitable activities in the local market served. The market area served by the Bank following the acquisition will include a mixture of rural, suburban, and urban markets, with the Bank's market area covering a part of the southeastern Massachusetts region, which includes a number of small and medium sized towns and cities. The acquisition will expand the Bank's market area into Middlesex County, from the primary market area county of Norfolk. The Chart Bank market area includes the more urban areas to the west of the city of Boston. The primary market areas of the Peer Group companies has experienced population and household growth since 2000, with the strongest growth occurring in Plymouth County, to the east of the Bank's market area. The primary market area has a fairly diversified economy, which has experienced a slowdown in conjunction with the national economic downturn. Competition faced by the Bank for deposits and loans is significant, which includes other locally based banks and savings institutions, as well as regional and super regional banks. Overall, the markets served by the Peer Group companies were viewed as having demographic growth characteristics that were relatively comparable to the Bank's primary market area (eight of the Peer Group companies operate in Massachusetts). The primary market areas served by the Peer Group companies contain on average a similar population level and experienced a higher population growth rate compared to the Bank's primary market area, with this trend expected to continue over the next five years. The Bank, combined with Chart Bank will maintain a somewhat smaller deposit market share as the Peer Group companies on average, indicating a potential advantage for the Bank in terms of the degree of competition faced for deposits and competitive position within the market area and the ability to increase the market share. Comparative per capita income data indicate that the Peer Group companies generally operate in markets that are less affluence as the market served by the Bank, with the Bank's market area per capita income higher than the statewide average and the Peer Group's markets reflecting per capita income measures that in line with the respective statewide average. Summary demographic and deposit market share data for the Bank and the Peer Group RP Financial, LC. Page 4.8 companies is provided in Exhibit III-4. As shown in Table 4.1, September 2004 unemployment rates for the markets served by the Peer Group companies generally were comparable to the unemployment rates reflected for Bank's primary market area. On balance, we concluded that no valuation adjustment was appropriate for the Bank's market area. Table 4.1 Market Area Unemployment Rates Benjamin Franklin and the Peer Group Companies (1)
Sept. 2004 County Unemployment ---------- ------------ Benjamin Franklin SB of MA Norfolk 3.9% The Peer Group Average 4.1% Brookline Bancorp, Inc. of MA Norfolk 3.9% Berkshire Hills Bancorp, Inc. of MA Berkshire 3.8 MassBank Corp. of Reading, MA Middlesex 3.8 Woronoco Bancorp, Inc. of MA Hampden 5.6 Newmil Bancorp, Inc. of CT Litchfield 3.8 NH Thrift Bancshares, Inc. of NH Sullivan 1.9 Hingham Inst. For Savings of MA Plymouth 4.8 Central Bancorp, Inc. of MA Middlesex 3.8 LSB Corp. of North Andover, MA Essex 5.7 Mayflower Co-op Bank of MA Plymouth 4.8
(1) Unemployment rates are not seasonally adjusted. Source: U.S. Bureau of Labor Statistics. 5. Dividends At this time the Bank has not established a dividend policy. Future declarations of dividends by the Board of Directors will depend upon a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, stock market characteristics and general economic conditions. All ten of the Peer Group companies pay regular cash dividends, with implied dividend yields ranging from 1.33% to 3.13%. The average dividend yield on the stocks of the Peer RP Financial, LC. Page 4.9 Group institutions was 2.22% as of November 26, 2004, representing an average payout ratio of 41.1% of core earnings. As of November 26, 2004, approximately 91% of all publicly-traded thrifts had adopted cash dividend policies (see Exhibit IV-1) exhibiting an average yield of 2.26% and an average payout ratio of 36.4% of core earnings. The dividend paying thrifts generally maintain higher than average profitability ratios, facilitating their ability to pay cash dividends. While the Bank has not established a definitive dividend policy prior to converting, the Bank will have the capacity to pay a dividend comparable to the Peer Group's average dividend yield based on pro forma earnings and capitalization, although the Bank's pro forma tangible capital ratio will be less favorable than the Peer Group. On balance, we concluded that no adjustment was warranted for purposes of the Bank's dividend policy. 6. Liquidity of the Shares The Peer Group is by definition composed of companies that are traded in the public markets. Eight of the Peer Group companies trade on the NASDAQ system and two trade on the AMEX exchange. Typically, the number of shares outstanding and market capitalization provides an indication of how much liquidity there will be in a particular stock. The market capitalization of the Peer Group companies ranged from $36.1 million to $940.0 million as of November 26, 2004, with average and median market values of $188.6 million and $105.9 million, respectively. The shares issued and outstanding to the public shareholders of the Peer Group members ranged from 1.6 million to 58.8 million, with average and median shares outstanding of 8.9 million and 4.0 million, respectively. The Bank's pro forma market value will be somewhat smaller than the median of the Peer Group companies, while the number of shares at the proposed midpoint value will exceed all except one of the Peer Group companies. It is anticipated that the Bank's stock will be quoted on the NASDAQ National Market System. Overall, we anticipate that the Bank's stock will have a comparable trading market as the Peer Group companies on average and, therefore, concluded no adjustment was necessary for this factor. RP Financial, LC. Page 4.10 7. Marketing of the Issue We believe that three separate markets exist for thrift stocks, including those coming to market such as Benjamin Franklin: (1) the after-market for public companies, in which trading activity is regular and investment decisions are made based upon financial condition, earnings, capital, ROE, dividends and future prospects; (2) the new issue market in which converting thrifts are evaluated on the basis of the same factors but on a pro forma basis without the benefit of prior operations as a publicly-held company and stock trading history; and (3) the thrift acquisition market for thrift franchises in Massachusetts. All of these markets were considered in the valuation of the Bank's to-be-issued stock. A. The Public Market The value of publicly-traded thrift stocks is easily measurable, and is tracked by most investment houses and related organizations. Exhibit IV-1 provides pricing and financial data on all publicly-traded thrifts. In general, thrift stock values react to market stimuli such as interest rates, inflation, perceived industry health, projected rates of economic growth, regulatory issues and stock market conditions. Exhibit IV-2 displays historical stock market trends for various indices and includes historical stock price index values for thrifts and commercial banks. Exhibit IV-3 displays historical stock price indices for thrifts only. In terms of assessing general stock market conditions, the performance of the overall stock market has been mixed over the past year. In late-November and early-December 2003, positive economic news such as improved third quarter corporate profits and a strong start to the Christmas shopping season provided a boost to stocks. Stocks continued to move higher at the close of 2003, as key sectors of the economy continued to show signs of strengthening. Year end momentum in the stock market was sustained at the beginning of 2004, reflecting generally favorable fourth quarter earnings and an increase in consumer confidence. Profit taking and slower than expected GDP growth in the fourth quarter of 2003 caused stocks to falter in late-January. However, aided by January employment data that showed jobs were added and a decline in the national unemployment rate to 5.6%, the broader stock market moved higher during the first half of February. Stocks generally declined during the balance of February and during the first half of March, reflecting valuation concerns following a year of strong gains and RP Financial, LC. Page 4.11 weaker than expected job growth during February. Concerns about terrorism and higher oil prices caused stocks to tumble in late-March, before rebounding at the close of the first quarter on more attractive fundamentals and optimism about first quarter earnings. Stocks moved higher in early April 2004, as investors reacted favorably to a strong employment report for March. For the balance of April trading in the broader market produced uneven results, as generally favorable first quarter earnings and strong economic data weighed against the growing threat of inflation and higher interest rates. The DJIA closed below 10000 for the first time in 2004 in the second week of May, as strong job growth during April raised expectations of a rate increase by the Federal Reserve. The downward trend in stocks prevailed through most of May, on concerns about higher oil prices, violence in the Middle East and higher interest rates. Stocks rebounded in late-May, primarily on the basis of higher corporate earnings and lower oil prices. Strong employment data for May combined with lower oil prices and favorable inflation data provided for a positive trend in the broader market through mid-June. Stocks traded in a narrow range through the end of the second quarter, as investors awaited the outcome of the Federal Reserve meeting at the end of June. Rising oil prices and profit warnings from some technology companies caused major stock indices to fall at the start of the third quarter of 2004. Stocks continued to trend lower through most of July, as a slow down in the economic expansion raised concerns about future earnings growth. Strong consumer confidence numbers for July reversed the downward in stocks during the last week of July, with the DJIA closing up for the week for the first time since mid-June. The recovery in the stock market was short-lived, as record high oil prices, weak retail sales for July and weaker than expected job growth for July pulled stocks lower in early-August. A positive economic outlook by the Federal Reserve and bargain hunting supported gains in the stock market during mid-August, as the DJIA moved back above the 10000 barrier. The Dow Jones Industrial Average ("DJIA") hit a six week high in late-August, which was supported by a drop in oil prices. After the DJIA closed at a two month high in early-September on hopes for favorable employment numbers for August, the broader stock market traded in a narrow range through mid-September. Concerns that rising oil prices would hurt the economy and reduce corporate earnings pressured stocks lower in late-September. RP Financial, LC. Page 4.12 Stocks rallied at the start of the fourth quarter, largely on the basis of a rebound in technology stocks due to an upbeat outlook for third quarter earnings. Higher oil prices and allegations of improprieties in the insurance industry pressured the DJIA to its lowest level of the year in late-October. Lower oil prices reversed the downward trend in stock at the close of October. The election outcome and a strong jobs report for October extended the stock market rally into mid-November, as the DJIA hit a five month high. Positive expectations to the opening of the holiday retail shopping season also provide upward momentum to the stock markets in general. As an indication of the general trends in the nation's stock markets over the past year, as of November 26, 2004, the DJIA closed at 10522.23, an increase of 7.6% from one year ago and an increase of 0.7% year-to-date. As of November 26, 2004 the NASDAQ closed at 2,102.0, an increase of 7.2% from one year ago and an increase of 4.9% year-to-date. The Standard & Poors 500 Index closed at 1182.7 on November 26, 2004, an increase of 11.8% from a year ago and an increase of 6.4% year-to-date. The market for thrift stocks has been mixed as well during the past twelve months, but, in general, thrift issues have paralleled trends in the broader market. After following the broader stock market lower as the close of the third quarter approached, thrift issues posted solid gains at the beginning of the fourth quarter. In late-November and early-December 2003, thrift stocks followed the broader market higher and then stabilized at the close of the fourth quarter. After trading in a narrow range at the beginning of 2004, thrift issues trended higher in late-January and the first half of February. The positive trend was supported by further consolidation in the thrift sector, including GreenPoint Financial's agreement to sell to North Fork Bancorp, as well as generally favorable fourth quarter earnings. Indications that interest rates would continue to remain low provided further support to thrift prices. Thrift stocks followed the broader market lower in mid-February, before recovering in late-February following a dip in long term Treasury yields. Thrift issues generally experienced some selling pressure during the first half of March, reflecting profit taking and weakness in the broader stock market. Higher interest rates and weakness in the broader market pressured thrift issues lower in late-March, which was followed by an upward move in thrift prices at the close of the first quarter. RP Financial, LC. Page 4.13 Thrifts stocks generally traded lower at the start of the second quarter of 2004, as a strong employment report for March pushed interest rates higher. Higher interest rates and inflation worries pressured interest rate sensitive issues lower through most of April, with the sell-off sharpening in early-May following another strong employment report for April. Thrift stocks recovered modestly in mid-May as the yield on 10-year Treasury note declined slightly. Acquisition speculation involving the sale of Washington Mutual lifted the thrift sector in late-May. Thrift stocks generally retreated during the first half of June, as the yield on the 10-year Treasury note moved to a two-year high on inflation concerns. Following the sharp sell-off, thrift stocks rebounded as a moderate increase in core consumer prices during may and comments by the Federal Reserve Chairman that inflation does not seem likely to be a serious problem eased fears of a sharp rise in inflation. Acquisition activity helped to boost thrift stocks in late-June, but the upward trend was abruptly reversed at the end of June as a significant decline in Washington Mutual's 2004 earnings guidance pulled the broader thrift sector lower. Thrift stocks responded favorably to the 25 basis point rate increase implemented by the Federal Reserve at the close of the 2004 second quarter, as the Federal Reserve indicated that it would continue to raise the federal funds rate 25 basis points at a time. June employment data which showed weaker than expected job growth also provided support to thrift stocks in early-July. For most of July there was little movement in thrift stocks, as second quarter earnings were generally in line with expectations. A rally in the broader market in late-July provided a boost to thrift stocks as well. Thrift issues traded down with the rest of the market in early-August, although losses in the thrift sector were mild compared to the sell-off experienced in the boarder market as weaker than expected job growth for July pushed interest rates lower. Improved inflation data, lower interest rates and a rally in the broader stock market combined to push the thrift sector higher in mid-August. Thrift stocks sustained a positive trend in late-August, which was fueled by lower interest rates and strength in the broader stock market. The upward trend in thrift prices continued through mid-September, as September employment data matched expectations and inflation remained low. Thrift stocks edged lower at the close of the third quarter, which was largely attributable to weakness in the broader stock market. Thrift issues also rebounded in conjunction with the broader stock market rally at the start of the fourth quarter. After trading in a narrow range into mid-October, thrift stocks RP Financial, LC. Page 4.14 moved lower on some disappointing third quarter earnings and lower guidance on future earnings due to margin compression resulting from a flatter yield curve. The rally in the boarder stock market and the Federal Reserve's indication that inflation risks were well contained fueled gains in the thrift sector during the first half of November. On November 26, 2004, the SNL Index for all publicly-traded thrifts closed at 1,568.8, an increase of 3.0% from one year ago and an increase of 5.8% year-to-date. B. The New Issue Market In addition to thrift stock market conditions in general, the new issue market for converting thrifts is also an important consideration in determining the Company's pro forma market value. The new issue market is separate and distinct from the market for seasoned thrift issues in that the pricing ratios for converting issues are computed on a pro forma basis, specifically: (1) the numerator and denominator are both impacted by the conversion offering amount, unlike existing stock issues in which price change affects only the numerator; and (2) the pro forma pricing ratio incorporates assumptions regarding source and use of proceeds, effective tax rates, stock plan purchases, etc. which impact pro forma financials, whereas pricing for existing issues are based on reported financials. The distinction between pricing of converting and existing issues is perhaps no clearer than in the case of the price/book ("P/B") ratio in that the P/B ratio of a converting thrift will typically result in a discount to tangible book value whereas in the current market for existing thrifts the P/B ratio often reflects a premium to book value. Therefore, it is appropriate to also consider the market for new issues, both at the time of the conversion and in the aftermarket. Thrift offerings completed in 2004 have generally been well received, with most offerings being oversubscribed and trading higher in initial trading activity. As shown in Table 4.2, one second-step conversion and four mutual holding company offerings were completed during the past three months. The second-step conversion offering is considered to be more relevant in the valuation analysis. In general, second-step conversions tend to be priced (and trade in the aftermarket) at a higher P/B ratio than standard conversions. We believe investors take into consideration the generally more leveraged pro forma balance sheets of second-step companies, their track records as public companies prior to conversion, and their generally RP Financial, LC. Page 4.15 RP Financial, LC. Page 4.16 higher pro forma ROE measures relative to standard conversions in pricing their common stocks. Roebling Financial's second-step offering was closed at the top of the super range and its stock price declined 0.5% after one week of trading as a fully-converted company. Roebling Financial's pro forma price/tangible book ratio at closing equaled 112.3% and pro forma core price/earnings ratio at closing equaled 32.6 times. There are no current pricing multiples for fully-converted companies that trade on NASDAQ or an Exchange, as Roebling Financial's stock is traded on the OTC Bulletin Board. C. The Acquisition Market Also considered in the valuation was the potential impact on Benjamin Franklin's stock price of recently completed and pending acquisitions of other savings institutions operating in Massachusetts. As shown in Exhibit IV-4, there were ten Massachusetts thrift acquisitions announced from the beginning of 2003 through year-to-date 2004, of which two are pending acquisitions of Massachusetts savings institutions. The recent acquisition activity involving Massachusetts savings institutions may imply a certain degree of acquisition speculation for the Company's stock. To the extent that acquisition speculation may impact the Company's offering, we have largely taken this into account in selecting companies for the Peer Group which operate in markets that have experienced a comparable level of acquisition activity as the Company's market and, thus, are subject to the same type of acquisition speculation that may influence Benjamin Franklin's stock. However, since converting thrifts are subject to a three-year regulatory moratorium from being acquired, acquisition speculation in Benjamin Franklin's stock would tend to be less compared to the stocks of the Peer Group companies. * * * * * * * * * * * In determining our valuation adjustment for marketing of the issue, we considered trends in both the overall thrift market, the new issue market including the new issue market for conversion shares, and the acquisition market for Massachusetts thrift stocks. Taking these factors and trends into account, RP Financial concluded that a slight upward adjustment was appropriate in the valuation analysis for purposes of marketing of the issue. RP Financial, LC. Page 4.17 8. Management Benjamin Franklin's management team appears to have experience and expertise in all of the key areas of the Bank's operations. The directors and staff that will be added through the acquisition of Chart Bank will serve to strengthen personnel depth and expertise. Six members of Chart Bank's Board of Directors will be added to the Bank's and Company's Board of Directors to form a new 17-member Board of Directors. The Bank's current executive management will serve as executive management for the merged entity. Exhibit IV-5 provides summary resumes of Benjamin Franklin's Board of Directors and senior management. The financial characteristics of the Bank and Chart Bank suggest that both institutions have been effectively managed and there appears to be a well-defined organizational structure for the merged entity. Similarly, the returns, capital positions, and other operating measures of the Peer Group companies are indicative of well-managed financial institutions, which have Boards and management teams that have been effective in implementing competitive operating strategies. Therefore, on balance, we concluded no valuation adjustment relative to the Peer Group was appropriate for this factor. 9. Effect of Government Regulation and Regulatory Reform In summary, as a fully-converted FDIC regulated institution, Benjamin Franklin will operate in substantially the same regulatory environment as the Peer Group members -- all of whom are adequately capitalized institutions and are operating with no apparent restrictions. Exhibit IV-6 reflects the Bank's pro forma regulatory capital ratios. On balance, no adjustment has been applied for the effect of government regulation and regulatory reform. Summary of Adjustments Overall, based on the factors discussed above, we concluded that the Bank's pro forma market value should reflect the following valuation adjustments relative to the Peer Group: RP Financial, LC. Page 4.18 Table 4.3 Valuation Adjustments Benjamin Franklin and the Peer Group Companies (1)
Key Valuation Parameters: Valuation Adjustment - ------------------------- -------------------- Financial Condition Slight Upward Profitability, Growth and Viability of Earnings Slight Downward Asset Growth Slight Upward Primary Market Area No Adjustment Dividends No Adjustment Liquidity of the Shares No Adjustment Marketing of the Issue Slight Upward Management No Adjustment Effect of Government Regulations and Regulatory Reform No Adjustment
Valuation Approaches In applying the accepted valuation methodology promulgated by the OTS and adopted by the FDIC and the Massachusetts Division of Banks, i.e., the pro forma market value approach, we considered the three key pricing ratios in valuing Benjamin Franklin's to-be-issued stock -- price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches -- all performed on a pro forma basis including the effects of the stock proceeds and the acquisition of Chart Bank. In computing the pro forma impact of the conversion and the related pricing ratios, we have incorporated the valuation parameters disclosed in Benjamin Franklin's prospectus for offering expenses, reinvestment rate, effective tax rate, Foundation shares, purchase accounting adjustments for the acquisition of Chart Bank, and stock benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). RP Financial's valuation placed an emphasis on the following: - P/E Approach. The P/E approach is generally the best indicator of long-term value for a stock. Given the similarities between the Bank's and the Peer Group's operating strategies, earnings composition and overall financial condition, the P/E approach was carefully considered in this valuation. At the same time, since reported earnings for both the Bank and the Peer Group included certain non-recurring items, we also made adjustments to earnings to arrive at core earnings estimates for the Bank and the Peer Group and resulting price/core earnings ratios. RP Financial, LC. Page 4.19 - P/B Approach. P/B ratios have generally served as a useful benchmark in the valuation of thrift stocks, particularly in the context of a public offering, as the earnings approach involves assumptions regarding the use of proceeds. RP Financial considered the P/B approach to be a valuable indicator of pro forma value taking into account the pricing ratios under the P/E and P/A approaches. We have also modified the P/B approach to exclude the impact of intangible assets (i.e., price/tangible book value or "P/TB"), in that the investment community frequently makes this adjustment in its evaluation of this pricing approach. - P/A Approach. P/A ratios are generally a less reliable indicator of market value, as investors typically assign less weight to assets and attribute greater weight to book value and earnings - we have also given less weight to the assets approach. Furthermore, this approach as set forth in the regulatory valuation guidelines does not take into account the amount of stock purchases funded by deposit withdrawals, thus understating the pro forma P/A ratio. At the same time, the P/A ratio is an indicator of franchise value, and, in the case of highly capitalized institutions, high P/A ratios may limit the investment community's willingness to pay market multiples for earnings or book value when ROE is expected to be low. The Bank will adopt Statement of Position ("SOP") 93-6, which will cause earnings per share computations to be based on shares issued and outstanding excluding unreleased ESOP shares. For purposes of preparing the pro forma pricing analyses, we have reflected all shares issued in the offering, including all ESOP shares, to capture the full dilutive impact, particularly since the ESOP shares are economically dilutive, receive dividends and can be voted. However, we did consider the impact of the adoption of SOP 93-6 in the valuation. Based on the application of the three valuation approaches, taking into consideration the valuation adjustments discussed above, RP Financial concluded that, as of November 26, 2004, the pro forma market value of the Bank's conversion stock, including the stock to-be-issued for the acquisition of Chart Bank and the shares to-be-issued to the Foundation was $78,015,750 at the midpoint, equal to 7,801,575 shares at $10.00 per share. Excluding the shares issued to the Chart Bank shareholders as a portion of the merger consideration, and the shares issued to the Foundation, the size of the offering at the midpoint value is equal to $50,000,000. 1. Price-to-Earnings ("P/E"). The application of the P/E valuation method requires calculating the Bank's pro forma market value by applying a valuation P/E multiple to the pro RP Financial, LC. Page 4.20 forma earnings base. In applying this technique, we considered both reported earnings and a recurring earnings base, that is, earnings adjusted to exclude any one-time non-operating items, plus the estimated after-tax earnings benefit of the reinvestment of the net proceeds. The Bank's reported earnings, including the estimated pro forma earnings impact of the acquisition of Chart Bank, equaled $2.054 million for the twelve months ended September 30, 2004. In deriving Benjamin Franklin's estimated core earnings for purposes of the valuation, the adjustments made to reported earnings were to eliminate net gains on the sale of investment securities ($34,000), eliminate net gains on the sale of loans ($130,000) and eliminate the writeoff of merger expenses ($382,000). As shown below, on a tax-effected basis, assuming an effective marginal tax rate of 36%, the Bank's estimated core earnings were determined to equal $2.195 million for the twelve months ended September 30, 2004. (Note: see Exhibit IV-9 for the adjustments applied to the Peer Group's earnings in the calculation of core earnings). Table 4.4 Estimated Core Earnings
Amount(1) --------- ($000) Net income $ 2,054 Less: Net gains on sale of securities (34) Less: Net gains on sale of loans (130) Add back: Writeoff of merger expenses 382 Less: Tax impact (77) -------- Core earnings estimate $ 2,195
(1) Adjustments were tax affected at 36%. Based on the Bank's reported and estimated core earnings, and incorporating the impact of the pro forma assumptions discussed previously, the Bank's pro forma reported and core average P/E multiples at the $78.0 million midpoint value equaled 34.45 times and 32.43 times, respectively, which provided for premiums of 90.4% and 70.3% relative to the Peer Group's average reported and core earnings multiples of 18.09 times and 19.04 times, respectively (see Table 4.5). RP Financial, LC. Page 4.21 RP Financial, LC. Page 4.22 2. Price-to-Book ("P/B"). The application of the P/B valuation method requires calculating the Bank's pro forma market value by applying a valuation P/B ratio, derived from the Peer Group's P/B ratio, to the Bank's pro forma book value taking into account the estimated pro forma impact of the Chart Bank acquisition. In applying the P/B approach, we considered both reported book value and tangible book value. Goodwill and intangibles created by the acquisition of Chart Bank have been estimated to equal $32.2 million. Based on the $78.0 million midpoint valuation, Benjamin Franklin's pro forma P/B and P/TB ratios equaled 81.29% and 131.34%, respectively. In comparison to the average P/B and P/TB ratios for the Peer Group of 166.24% and 178.05%, the Bank's ratios reflected discounts of 51.1% and 26.2%, respectively. RP Financial considered the discounts under the P/B approach to be reasonable in light of the valuation adjustments referenced earlier, the nature of the calculation of the pro forma P/B ratio which mathematically results in a discount ratio to book value, the Bank's comparatively lower pro forma return on equity and the resulting pricing ratios under the earnings approach. 3. Price-to-Assets ("P/A"). The P/A valuation methodology determines market value by applying a valuation P/A ratio to the Bank's pro forma asset base taking into account the estimated pro forma impact of the Chart Bank acquisition and conservatively assuming no deposit withdrawals are made to fund stock purchases. In all likelihood there will be deposit withdrawals, which results in understating the pro forma P/A ratio computed herein. At the midpoint of the valuation range, Benjamin Franklin's value equaled 9.48% of pro forma assets. Comparatively, the Peer Group companies exhibited an average P/A ratio of 19.09%, which implies a discount of 50.3% has been applied to the Bank's pro forma P/A ratio. Comparison to Recent Conversions As indicated at the beginning of this chapter, RP Financial's analysis of recent conversion offering pricing characteristics at closing and in the aftermarket has been limited to a "technical" analysis and, thus, the pricing characteristics of recent conversion offerings can not be a primary RP Financial, LC. Page 4.23 determinate of value. Particular focus was placed on the P/TB approach in this analysis, since the P/E multiples do not reflect the actual impact of reinvestment and the source of the stock proceeds (i.e., external funds vs. deposit withdrawals). The one second-step conversion completed during the past three month closed at a price/tangible book ratio of 112.3% (see Table 4.2). The price of the second-step conversion declined by 0.5% during the first week of trading. In comparison, the Bank's P/TB ratio at the appraised midpoint value reflects a premium of 17.0% relative to the closing P/TB ratio of the recent second-step conversion The meaningfulness of this comparative technical analysis is also considered to be somewhat diminished by the different characteristics of a second-step conversion offering compared to a full conversion offering. Valuation Conclusion Based on the foregoing, it is our opinion that, as of November 26, 2004, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, including the shares to be issued in connection with the acquisition of Chart Bank's common stock and the shares to be issued to the Foundation was $78,015,750 at the midpoint. Pursuant to conversion guidelines, the regulatory range applied to the offering shares provides for a minimum aggregate value of $69,915,750 and a maximum aggregate value of $85,515,750. Based on the $10.00 per share offering price, this valuation range equates to total shares outstanding of 6,991,575 at the minimum and 8,551,575 at the maximum. In the event the appraised value is subject to an increase, up to 9,414,075 shares may be issued at an issue price of $10.00 per share, for an aggregate market value of $94,140,750, without requiring a resolicitation. Based on the midpoint pro forma market value of $78,015,750, the midpoint of the offering range is $50,000,000. Based on this midpoint of the offering range, the offering range is as follows: $42,500,000 at the minimum, $50,000,000 at the midpoint, $57,500,000 at the maximum and $66,125,000 at the top of the super maximum. Based on a $10.00 per share offering price, the number of offering shares is as follows: 4,250,000 at the minimum, 5,000,000 at the midpoint, 5,750,000 at the maximum and 6,612,500 at the top of the super maximum. The RP Financial, LC. Page 4.24 comparative pro forma valuation calculations relative to the Peer Group are shown in Table 4.5 and are detailed in Exhibits IV-7 and IV-8. RP Financial, LC. LIST OF EXHIBITS
Exhibit Number Description - ------ --------------------------------------------------------- I-1 Map of Office Locations I-2 Audited Financial Statements I-3 Key Operating Ratios I-4 Investment Portfolio Composition I-5 Yields and Costs I-6 Loan Loss Allowance Activity I-7 Gap Table I-8 Fixed Rate and Adjustable Rate Loans I-9 Loan Portfolio Composition I-9A Chart Bank Loan Portfolio Composition I-10 Contractual Maturity By Loan Type I-11 Loan Originations, Purchases and Sales I-12 Non-Performing Assets I-13 Deposit Composition I-13A Chart Bank Deposit Composition I-14 Borrowing Activity II-1 Description of Office Facilities II-2 Historical Interest Rates II-3 Economic Data in the Primary Market Area II-4 Demographic Data in the Primary Market Area
RP Financial, LC. LIST OF EXHIBITS(continued) III-1 General Characteristics of Publicly-Traded Institutions III-2 Public Market Pricing of Connecticut Savings Institutions III-3 Public Market Pricing of New England Savings Institutions III-4 Peer Group Market Area Comparative Analysis IV-1 Stock Prices: As of November 26, 2004 IV-2 Historical Stock Price Indices IV-3 Historical Thrift Stock Indices IV-4 Market Area Acquisition Activity IV-5 Director and Senior Management Summary Resumes IV-6 Pro Forma Regulatory Capital Ratios IV-7 Pro Forma Analysis Sheet IV-8 Pro Forma Effect of Conversion Proceeds IV-9 Peer Group Core Earnings Analysis V-1 Firm Qualifications Statement
EXHIBITS EXHIBIT I-1 Benjamin Franklin Bank and Chart Bank Map of Office Locations IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT I-1, BENJAMIN FRANKLIN BANK AND CHART BANK MAP OF OFFICE LOCATIONS, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT I-2 Benjamin Franklin Bank and Chart Bank Audited Financial Statements [Incorporated by Reference] EXHIBIT I-3 Benjamin Franklin Bank Key Operating Ratios
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, AT OR FOR THE YEARS ENDED DECEMBER 31, ---------------- ------------------------------------------------- 2004 2003 2003 2002 2001 2000 1999 ------- ------- ------- ------------ ------- -------- ------- SELECTED FINANCIAL RATIOS AND OTHER DATA: PERFORMANCE RATIOS: Return on assets (ratio of net income to average total assets) (1) ..................................... 0.36% 0.40% 0.36% 0.61% 0.01% (1.09%) 0.76% Return on equity (ratio of net income to average equity) (1) ........................................... 5.85% 6.13% 5.65% 9.45% 0.16% (16.32%) 10.23% Average interest rate spread (1) (2) ..................... 2.67% 2.76% 2.76% 3.32% 3.29% 2.87% 3.47% Net interest margin (1)(3) ............................... 3.03% 2.93% 2.98% 3.47% 3.51% 3.57% 4.30% Efficiency ratio (4) ..................................... 79.31% 87.13% 84.78% 75.69% 72.84% 78.07% 73.53% Non-interest expense to average total assets (1) ......... 2.61% 2.76% 2.73% 2.76% 2.64% 2.53% 2.70% Average interest-earning assets to average interest bearing liabilities ................................... 124.43% 110.89% 114.38% 108.04% 106.92% 88.16% 86.56% ASSET QUALITY RATIOS: Non-performing assets to total assets .................... 0.08% 0.14% 0.10% 0.00% 0.04% 0.04% 0.04% Non-performing loans to total loans ...................... 0.11% 0.24% 0.16% 0.00% 0.06% 0.06% 0.07% Allowance for loan losses to non-performing loans ........ 714.93% 394.35% 544.92% 115,600.00% 749.68% 603.39% 657.22% Allowance for loan losses to total loans ................. 0.80% 0.95% 0.87% 0.88% 0.46% 0.38% 0.44% CAPITAL RATIOS: Equity to total assets at end of period .................. 5.91% 6.22% 6.39% 6.59% 6.26% 5.60% 6.67% Average equity to average assets ......................... 6.19% 6.47% 6.42% 6.49% 5.82% 6.67% 7.45% Risk-based capital ratio (bank only) at end of period..... 13.05% 14.01% 13.94% 13.54% 9.65% 7.69% 10.08% OTHER DATA: Number of full service offices ........................... 6 6 6 6 6 6 6
- ---------- (1) Ratios for the nine months ended September 30, 2004 and 2003 are annualized. (2) The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the period. (3) The net interest margin represents net interest income as a percent of average interest-earning assets for the period. (4) The efficiency ratio represents non-interest expense for the period minus expenses related to the amortization of intangible assets divided by the sum of net interest income (before the loan loss provision) plus non-interest income (excluding net gains (losses) on sale of bank assets and the pension plan curtailment loss). Source: Benjamin Franklin's prospectus. EXHIBIT I-4 Benjamin Franklin Bank Investment Portfolio Composition
AT DECEMBER 31, ------------------------------------------------------------ AT SEPTEMBER 30, 2004 2003 2002 2001 --------------------- ------------------- ------------------- ------------------ AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR COST VALUE COST VALUE COST VALUE COST VALUE --------- ------- --------- -------- --------- -------- --------- ------- (DOLLARS IN THOUSANDS) SECURITIES AVAILABLE FOR SALE: U.S. Government and agency obligations ........................ $ 37,691 $37,492 $ 30,272 $ 30,347 $ 67,513 $ 67,582 $ 38,506 $39,113 State agency and municipal obligations ........................ 0 0 0 0 570 570 1,942 1,915 --------- ------- --------- -------- --------- -------- --------- ------- 37,691 37,492 30,272 30,347 68,083 68,152 40,488 41,028 Corporate bonds and other obligations ............................. 5,086 5,057 0 0 3,536 3,716 23,091 23,214 --------- ------- --------- -------- --------- -------- --------- ------- 42,777 42,549 30,272 $ 30,347 71,619 71,868 63,539 64,242 Mortgage-backed securities ........... 53,869 51,874 74,502 72,299 26,376 26,446 13,432 13,536 --------- ------- --------- -------- --------- -------- --------- ------- Total debt securities .............. 96,646 94,423 104,774 102,646 97,995 98,314 76,971 77,778 --------- ------- --------- -------- --------- -------- --------- ------- Marketable equity securities: Bank Investment Fund -- Fund One ..... 0 0 0 0 10,206 10,206 0 0 --------- ------- --------- -------- --------- -------- --------- ------- Total securities available for sale ...................... $ 96,646 $94,423 $ 104,774 $102,646 $ 108,201 $108,520 $ 76,971 $77,778 ========= ======= ========= ======== ========= ======== ========= ======= SECURITIES HELD TO MATURITY: Mortgage-backed securities ......... $ 266 $ 271 $ 386 $ 398 $ 986 $ 1,023 $ 2,749 $ 2,774 ========= ======= ========= ======== ========= ======== ========= ======= RESTRICTED EQUITY SECURITIES: Federal Home Loan Bank of Boston stock ................................... $ 4,347 $ 4,347 $ 3,707 $ 3,707 $ 3,707 $ 3,707 $ 3,707 $ 3,707 Access Capital Strategies Community Investment Fund ......... 2,000 2,000 3,000 3,000 1,000 1,000 1,000 1,000 Savings Bank Life Insurance and Depositors Insurance Fund stock.... 515 515 515 515 515 515 902 902 --------- ------- --------- -------- --------- -------- --------- ------- Total restricted equity securities .............................. $ 6,862 $ 6,862 $ 7,222 $ 7,222 $ 5,222 $ 5,222 $ 5,609 $ 5,609 ========= ======= ========= ======== ========= ======== ========= =======
Source: Benjamin Franklin's prospectus. EXHIBIT I-5 Benjamin Franklin Bank Yields and Costs
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------------------------------- AT SEPTEMBER 30, 2004 2004 2003 --------------------- ------------------------------ ------------------------------ WEIGHTED AVERAGE AVERAGE AVERAGE YIELD/ OUTSTANDING YIELD/ OUTSTANDING YIELD/ BALANCE RATE BALANCE INTEREST RATE(1) BALANCE INTEREST RATE(1) -------- -------- ----------- -------- ------- ---------- -------- ------- (DOLLARS IN THOUSANDS) INTEREST-EARNING ASSETS: Loans............................ $375,516 5.00% $ 324,944 $ 12,567 5.17% $ 265,369 $ 11,601 5.84% Investment securities............ 101,551 3.77% 109,898 2,549 3.10% 121,402 2,413 2.66% Interest-earning deposits........ 6,831 1.71% 15,382 107 0.93% 41,565 515 1.66% -------- --------- -------- --------- -------- Total interest-earning assets.... 483,898 4.70% 450,224 15,223 4.52% 428,336 14,529 4.54% Non-interest-earning assets...... 34,033 33,760 37,560 -------- --------- --------- Total assets................... $517,931 $ 483,984 $ 465,896 ======== ========= ========= INTEREST-BEARING LIABILITIES: Savings deposits................. $99,799 0.50% $99,172 368 0.50% $92,652 345 0.50% Money market..................... 54,391 1.14% 51,779 332 0.86% 47,836 290 0.81% NOW accounts..................... 25,179 0.14% 23,955 27 0.15% 73,403 82 0.15% Certificates of deposits......... 133,589 2.35% 133,492 2,494 2.50% 127,370 2,723 2.86% -------- --------- -------- --------- -------- Total deposits................. 312,958 1.37% 308,398 3,221 1.40% 341,261 3,440 1.35% Short term borrowings............ 29,000 1.68% 6,195 56 1.21% - - 0.00% Long-term debt................... 55,000 4.72% 47,226 1,747 4.94% 45,000 1,694 5.03% -------- --------- -------- --------- -------- Total interest-bearing liabilities.................. 396,958 1.86% 361,819 5,024 1.85% 386,261 5,134 1.78% Non-interest bearing liabilities. 90,387 92,207 49,501 -------- --------- --------- Total liabilities.............. 487,345 454,026 435,762 Equity........................... 30,586 29,958 30,134 -------- --------- --------- Total liabilities and equity... $517,931 $ 483,984 $ 465,896 ======== ========= ========= Net interest income.............. $ 10,199 $ 9,395 ======== ======== Net interest rate spread (2)(5).. 2.84% 2.67% 2.76% Net interest-earning assets (3).. $86,940 $ 88,405 $ 42,075 ========= ========= Net interest margin (4).......... N/A 3.03% 2.93% Average interest-earning assets to interest-bearing liabilities 124.43% 110.89%
EXHIBIT I-5 (continued) Benjamin Franklin Bank Yields and Costs
YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------------------------- 2003 2002 2001 ----------------------------- ----------------------------- ----------------------------- AVERAGE AVERAGE AVERAGE OUTSTANDING YIELD/ OUTSTANDING YIELD/ OUTSTANDING YIELD/ BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE ----------- -------- ------ ----------- -------- ------ ----------- -------- ------ (DOLLAR IN THOUSANDS) INTEREST-EARNING ASSETS: Loans........................... $270,342 $ 15,530 5.74% $249,260 $ 16,322 6.55% $274,088 $ 20,355 7.43% Investment securities........... 122,570 3,450 2.81% 89,295 4,166 4.67% 73,069 4,267 5.84% Interest-earning deposits....... 35,293 552 1.56% 58,980 918 1.56% 53,084 1,819 3.43% -------- -------- -------- -------- -------- -------- Total interest-earning assets...................... 428,205 19,532 4.56% 397,535 21,406 5.38% 400,241 26,441 6.61% Non-interest-earning assets..... 37,495 41,978 37,154 -------- -------- -------- Total assets.................. $465,700 $439,513 $437,395 ======== ======== ======== INTEREST-BEARING LIABILITIES:... Savings deposits................ $ 93,501 465 0.50% $ 83,878 567 0.68% $ 71,651 921 1.29% Money market.................... 48,256 392 0.81% 45,648 617 1.35% 37,919 849 2.24% NOW accounts.................... 60,751 92 0.15% 69,832 221 0.32% 61,957 360 0.58% Certificates of deposits........ 126,856 3,538 2.79% 131,073 4,451 3.40% 167,566 8,622 5.15% -------- -------- -------- -------- -------- -------- Total deposits................ 329,364 4,487 1.36% 330,431 5,856 1.77% 339,093 10,752 3.17% Short-term borrowings........... 0 0 0.00% 0 0 0.00% 0 0 0.00% Long-term debt.................. 45,001 2,265 5.03% 37,504 1,738 4.63% 35,242 1,645 4.67% -------- -------- -------- -------- -------- -------- Total interest-bearing liabilities..................... 374,365 6,752 1.80% 367,935 7,594 2.06% 374,335 12,397 3.31% Non-interest bearing liabilities..................... 61,454 43,041 37,612 -------- -------- -------- Total liabilities............. 435,819 410,976 411,947 Equity.......................... 29,881 28,537 25,448 -------- -------- -------- Total liabilities and equity...................... $465,700 $439,513 $437,395 ======== ======== ======== Net interest income............. $ 12,780 $ 13,812 $ 14,044 ======== ======== ======== Net interest rate spread (5)............................. 2.76% 3.32% 3.30% Net interest-earning assets (3)...................... $ 53,840 $ 29,600 $ 25,906 ======== ======== ======== Net interest margin (4)......... 2.98% 3.47% 3.51% Average interest-earning assets to interest-bearing liabilities................... 114.38% 108.04% 106.92%
Source: Benjamin Franklin's prospectus. EXHIBIT I-6 Benjamin Franklin Bank Loan Loss Allowance Activity
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, AT OR FOR THE YEARS ENDED DECEMBER 31, -------------------- ----------------------------------------------------------- 2004 2003 2003 2002 2001 2000 1999 ------- ------- ------- ----------- ------- ------- ------- (DOLLARS IN THOUSANDS) BALANCE AT BEGINNING OF PERIOD ............ $ 2,523 $ 2,312 $ 2,312 $ 1,177 $ 1,068 $ 1,183 $ 1,418 ------- ------- ------- ----------- ------- ------- ------- CHARGE-OFFS: Mortgage loans on real estate: ............ - - - - - - - ------- ------- ------- ----------- ------- ------- ------- Other loans: Commercial business ................... - (43) (43) (389) (10) (138) (325) Consumer and other .................... (9) (20) (494) (30) (22) (13) (36) ------- ------- ------- ----------- ------- ------- ------- Total other loans ............. (9) (63) (537) (419) (32) (151) (361) ------- ------- ------- ----------- ------- ------- ------- Total charge-offs ....................... (9) (63) (537) (419) (32) (151) (361) ------- ------- ------- ----------- ------- ------- ------- RECOVERIES: Mortgage loans on real estate ............. - - - - 20 20 - ------- ------- ------- ----------- ------- ------- ------- Other loans: Commercial business ................... 23 94 100 132 55 9 48 Consumer and other .................... 10 7 23 10 15 6 8 ------- ------- ------- ----------- ------- ------- ------- Total other loans ............. 33 101 123 142 70 15 56 ------- ------- ------- ----------- ------- ------- ------- Total recoveries ...................... 33 101 123 142 90 35 56 ------- ------- ------- ----------- ------- ------- ------- Net (charge-offs) recoveries .............. 24 38 (414) (277) 58 (116) (305) Provision for loan losses ................. 470 300 625 1,412 51 1 70 ------- ------- ------- ----------- ------- ------- ------- BALANCE AT END OF PERIOD .................. $ 3,017 $ 2,650 $ 2,523 $ 2,312 $ 1,177 $ 1,068 $ 1,183 ======= ======= ======= =========== ======= ======= ======= RATIOS: Net (charge-offs) recoveries to average loans outstanding (annualized) ........ 0.01% 0.01% (0.15%) (0.11%) 0.02% (0.04%) (0.12%) Allowance for loan losses to non-performing loans at end of period ................ 714.93% 394.35% 544.92% 115,600.00% 749.68% 603.39% 657.22% Allowance for loan losses to total loans at end of period ......................... 0.80% 0.95% 0.87% 0.88% 0.46% 0.38% 0.44%
Source: Benjamin Franklin's prospectus. EXHIBIT I-7 Benjamin Franklin Bank Gap Table
MORE THAN MORE THAN MORE THAN MORE THAN UP TO ONE YEAR TO TWO YEARS TO THREE YEARS FOUR YEARS TO MORE THAN ONE YEAR TWO YEARS THREE YEARS TO FOUR YEARS FIVE YEARS FIVE YEARS TOTAL ----------- ----------- ------------ ------------- ------------- ---------- --------- (DOLLARS IN THOUSANDS) INTEREST-EARNING ASSETS: Loans....................................... $ 124,891 $ 61,882 $ 73,424 $ 31,222 $ 41,131 $ 42,576 $ 375,126 Investment securities....................... 26,729 30,643 10,752 4,978 4,396 25,750 103,248 Short-term investments...................... 6,831 6,831 --------- -------- -------- -------- -------- -------- --------- Total interest-earning assets............. 158,451 92,525 84,176 36,200 45,527 68,326 485,205 --------- -------- -------- -------- -------- -------- --------- INTEREST-BEARING LIABILITIES: Savings deposits............................ 46,007 24,798 13,366 7,204 3,883 4,540 99,799 Money market................................ 25,944 13,569 7,096 3,711 1,941 2,128 54,390 NOW accounts................................ 3,198 2,792 2,437 2,128 1,857 12,768 25,179 Certificates of deposits.................... 95,097 27,129 6,687 4,660 16 133,589 Short-term borrowings....................... 3,000 3,000 Long-term debt.............................. 29,000 - 10,000 - 6,000 39,000 84,000 --------- -------- -------- -------- -------- -------- --------- Total interest-bearing liabilities........ 202,246 68,287 39,587 17,703 13,698 58,436 396,957 --------- -------- -------- -------- -------- -------- --------- Interest rate sensitivity gap............... (43,795) 24,238 44,589 18,497 31,829 9,890 88,248 ========= ======== ======== ======== ======== ======== ========= Interest rate sensitivity gap as a % of total assets..................... (8.46%) 4.68% 8.61% 3.57% 6.15% 1.91% Cumulative interest rate sensitivity gap.... (43,795) (19,557) 25,032 43,529 75,358 85,248 ========= ======== ======== ======== ======== ======== Cumulative interest rate sensitivity gap as a % of total assets................. (8.46%) (3.78%) 4.83% 8.40% 14.55% 16.46%
Source: Benjamin Franklin's prospectus. EXHIBIT I-8 Benjamin Franklin Bank Fixed Rate and Adjustable Rate Loans
FIXED ADJUSTABLE TOTAL -------- ---------- -------- (DOLLARS IN THOUSANDS) Residential mortgage .......... $ 97,940 $146,423 $244,363 Commercial mortgage ........... 24,601 54,572 79,173 Construction .................. 20,669 4,410 25,079 Commercial business ........... 2,494 2,478 4,972 Home equity, consumer and other 3,878 19,884 23,762 -------- -------- -------- TOTAL LOANS ............. $149,582 $227,767 $377,349 ======== ======== ========
Source: Benjamin Franklin's prospectus. EXHIBIT I-9 Benjamin Franklin Bank Loan Portfolio Composition
AT DECEMBER 31, -------------------------------------- AT SEPTEMBER 30, 2004 2003 2002 --------------------- ------------------ ------------------ AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT --------- ------- --------- ------- --------- ------- (DOLLARS IN THOUSANDS) Mortgage loans on real estate: Residential ................ $ 244,363 64.76% $ 172,123 59.22% $ 165,007 62.58% Commercial ................. 79,173 20.98% 68,652 23.62% 51,357 19.48% Construction ............... 25,079 6.64% 23,936 8.23% 21,082 8.00% Home equity ................ 21,883 5.80% 18,171 6.25% 16,507 6.26% --------- ------ --------- ------ --------- ------ 370,498 98.18% 282,882 97.32% 253,953 96.32% --------- ------ --------- ------ --------- ------ Other loans: Commercial business ........ 4,972 1.32% 5,559 1.92% 6,552 2.48% Consumer and other ......... 1,879 0.50% 2,219 0.76% 3,157 1.20% --------- ------ --------- ------ --------- ------ 6,851 1.82% 7,778 2.68% 9,709 3.68% --------- ------ --------- ------ --------- ------ TOTAL LOANS ............ 377,349 100.00% 290,660 100.00% 263,662 100.00% ====== ====== ====== OTHER ITEMS: Deferred loan origination costs ...................... 1,184 725 583 Allowance for loan losses .... (3,017) (2,523) (2,312) --------- --------- --------- TOTAL LOANS, NET ....... $ 375,516 $ 288,862 $ 261,933 ========= ========= ========= AT DECEMBER 31, --------------------------------------------------------- 2001 2000 1999 ----------------- ------------------ ------------------ AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT -------- ------- --------- ------- --------- ------- (DOLLARS IN THOUSANDS) Mortgage loans on real estate: Residential ................ $172,959 66.99% $ 206,918 72.69% $ 190,027 70.43% Commercial ................. 45,532 17.64% 44,456 15.62% 43,734 16.21% Construction ............... 19,106 7.40% 13,117 4.61% 19,429 7.20% Home equity ................ 11,161 4.32% 9,778 3.44% 8,167 3.03% -------- ----- --------- ----- --------- ----- 248,758 96.35% 274,269 96.36% 261,357 96.87% -------- ----- --------- ----- --------- ----- Other loans: Commercial business ........ 5,512 2.14% 5,951 2.09% 4.649 1.72% Consumer and other ......... 3,899 1.51% 4,417 1.55% 3,811 1.41% -------- ----- --------- ----- --------- ----- 9,411 3.65% 10,368 3.64% 8,460 3.13% -------- ----- --------- ----- --------- ----- TOTAL LOANS ............ 258,169 100.00% 284,637 100.00% 269,817 100.00% ====== ====== ====== OTHER ITEMS: Deferred loan origination costs ...................... 574 663 491 Allowance for loan losses .... (1,177) (1,068) (1,183) -------- --------- --------- TOTAL LOANS, NET ....... $257,566 $ 284,232 $ 269,125 ======== ========= =========
Source: Benjamin Franklin's prospectus. EXHIBIT I-9A Benjamin Franklin Bank Loan Portfolio Composition
DECEMBER 31, ------------------------------------------- SEPTEMBER 30, 2004 2003 2002 ---------------------- -------------------- ------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) Real estate mortgage loans: Residential............................ $ 64,953 36.63% $ 37,666 26.61% $ 33,719 27.09% Commercial............................. 99,682 56.21% 91,788 64.85% 83,619 67.16% Construction........................... 8,225 4.64% 6,498 4.59% 3,327 2.67% --------- ------ --------- ------ -------- ------ 172,860 97.48% 135,952 96.05% 120,665 96.92% --------- ------ --------- ------ -------- ------ Commercial loans: Secured................................ 4,029 2.27% 3,913 2.76% 3,182 2.56% Unsecured.............................. 95 0.06% 512 0.36% 255 0.20% --------- ------ --------- ------ -------- ------ 4,124 2.33% 4,425 3.12% 3,437 2.76% --------- ------ --------- ------ -------- ------ Consumer loans: Consumer share secured................. 132 0.07% 741 0.53% 61 0.05% Other consumer......................... 209 0.12% 429 0.30% 338 0.27% --------- ------ --------- ------ -------- ------ 341 0.19% 1,170 0.83% 399 0.32% --------- ------ --------- ------ -------- ------ Total loans................... 177,325 100.00% 141,547 100.00% 124,501 100.00% ====== ====== ====== Allowance for loan losses.................. (1,753) (1,657) (1,536) --------- --------- -------- Loans, net.................... $ 175,572 $ 139,890 $122,965 ========= ========= ========
- ------------------ Source: Benjamin Franklin's prospectus. EXHIBIT I-10 Benjamin Franklin Bank Contractual Maturity By Loan Type
RESIDENTIAL MORTGAGE COMMERCIAL MORTGAGE CONSTRUCTION -------------------- ------------------- ------------------ WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE AMOUNT RATE ------ ---- ------ ---- ------ ---- (DOLLARS IN THOUSANDS) Due less than one year ............ $ 12,242 5.07% $ 5,242 6.05% $15,027 6.51% Due after one year to five years... 42,217 4.99% 17,429 5.84% 1,510 5.58% Due after five years............... 189,904 4.77% 56,502 5.79% 8,542 5.50% -------- ------- ------- TOTAL.................. $244,363 4.82% $79,173 5.82% $25,079 6.11% ======== ======= =======
HOME EQUITY, COMMERCIAL BUSINESS CONSUMER AND OTHER TOTAL ------------------- --------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AMOUNT RATE AMOUNT RATE AMOUNT RATE ------ ---- ------ ---- ------ ---- (DOLLARS IN THOUSANDS) Due less than one year ............ $2,202 6.80% $12,215 4.86% $ 46,928 5.67% Due after one year to five years... 1,696 7.38% 1,250 6.63% 64,102 5.33% Due after five years............... 1,074 6.98% 10,297 4.63% 266,319 5.01% ------ ------- -------- TOTAL.................. $4,972 7.04% $23,762 4.85% $377,349 5.15% ====== ======= ========
Source: Benjamin Franklin's prospectus. EXHIBIT I-11 Benjamin Franklin Bank Loan Originations, Purchases and Sales
FOR THE NINE MONTHS ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31, -------------------- -------------------------------------------------------- 2004 2003 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Loans at beginning of period....... $290,660 $263,662 $263,662 $258,169 $ 284,637 $269,817 $244,584 -------- -------- -------- -------- --------- -------- -------- Originations: Mortgage loans on real estate: Residential.................... 103,120 172,210 183,263 151,241 94,461 32,084 67,027 Commercial..................... 17,659 18,280 27,105 23,383 9,371 6,929 5,759 Construction................... 25,612 11,152 16,176 22,524 32,301 27,975 39,585 Home equity.................... 13,350 13,584 17,115 14,509 9,104 8,071 6,794 -------- -------- -------- -------- --------- -------- -------- 159,741 215,226 243,659 211,657 145,237 75,059 119,165 Other loans: Commercial business............ 1,724 570 1,584 1,310 1,933 5,754 2,604 Consumer and other............. 1,126 1,281 1,625 1,953 3,502 3,131 4,073 -------- -------- -------- -------- --------- -------- -------- 2,850 1,851 3,209 3,263 5,435 8,885 6,677 -------- -------- -------- -------- --------- -------- -------- Total loans originated..... 162,591 217,077 246,868 214,920 150,672 83,944 125,842 Purchases of mortgage loans........ 34,207 26,332 26,546 1,298 853 11,739 0 -------- -------- -------- -------- --------- -------- -------- Deduct: Principal loan repayments and prepayments..................... 81,534 132,286 149,623 140,554 114,717 74,067 87,570 Loan sales....................... 28,566 92,606 96,256 69,752 63,244 6,645 12,678 Charge-offs...................... 9 63 537 419 32 151 361 Transfers to OREO................ 0 0 0 0 0 0 0 -------- -------- -------- -------- --------- -------- -------- Total deductions............. 110,109 224,955 246,416 210,725 177,993 80,863 100,609 -------- -------- -------- -------- --------- -------- -------- Net increase/(decrease) in loans............................. 86,689 18,454 26,998 5,493 (26,468) 14,820 25,233 -------- -------- -------- -------- --------- -------- -------- Loans at end of period............. $377,349 $282,116 $290,660 $263,662 $ 258,169 $284,637 $269,817 ======== ======== ======== ======== ========= ======== ========
Source: Benjamin Franklin's prospectus. EXHIBIT I-12 Benjamin Franklin Bank Non-Performing Assets
AT SEPTEMBER AT DECEMBER 31, --------- ----------------------------------------------- 30, 2004 2003 2002 2001 2000 1999 -------- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) NON-ACCRUAL LOANS: Residential mortgage....................................... $ - $ - $ - $ - $ - $ - Commercial mortgage........................................ - - - - - - Construction............................................... - - - - - - Commercial business........................................ 357 458 - 157 - - Home equity, consumer and other............................ - - - - - - ------ ------ ------ ------ ------ ------ TOTAL NON-ACCRUAL LOANS.................................. 357 458 - 157 - - ------ ------ ------ ------ ------ ------ LOANS GREATER THAN 90 DAYS DELINQUENT AND STILL ACCRUING: Residential mortgage....................................... 64 - - - 177 180 Commercial mortgage........................................ - - - - - - Construction............................................... - - - - - - Commercial business........................................ - - - - - - Home equity, consumer and other............................ 1 5 2 - - - ------ ------ ------ ------ ------ ------ TOTAL LOANS 90 DAYS DELINQUENT AND STILL ACCRUING........ 65 5 2 0 177 180 ------ ------ ------ ------ ------ ------ TOTAL NON-PERFORMING LOANS............................... 422 463 2 157 177 180 ------ ------ ------ ------ ------ ------ TOTAL NON-PERFORMING ASSETS.................................. $ 422 $ 463 $ 2 $ 157 $ 177 $ 180 ====== ====== ====== ====== ====== ====== RATIOS: Non-performing loans to total loans........................ 0.11% 0.16% 0.00% 0.06% 0.06% 0.07% Non-performing assets to total assets...................... 0.08% 0.10% 0.00% 0.04% 0.04% 0.04%
Source: Benjamin Franklin's prospectus. EXHIBIT I-13 Benjamin Franklin Bank Deposit Composition
AT SEPTEMBER 30, 2004 AT DECEMBER 31, 2003 ----------------------------------- --------------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE BALANCE PERCENT RATE BALANCE PERCENT RATE ------- ------- -------- ------- ------- -------- (DOLLARS IN THOUSANDS) DEPOSIT TYPE: Demand deposits..................... $ 86,605 21.68% 0.00% $ 85,681 22.53% 0.00% NOW deposits........................ 25,179 6.30% 0.14% 24,581 6.47% 0.15% Money market deposits............... 54,390 13.61% 1.14% 50,094 13.17% 0.83% Regular savings..................... 99,799 24.98% 0.50% 96,118 25.28% 0.50% -------- ------ -------- ------ Total transaction accounts........ 265,973 66.57% 0.43% 256,474 67.45% 0.36% Certificates of deposit........... 133,589 33.43% 2.35% 123,783 32.55% 2.55% -------- ------ -------- ------ Total deposits.................... $399,562 100.00% 1.07% $380,257 100.00% 1.08% ======== ====== ======== ======
AT DECEMBER 31, ---------------------------------------------------------------------------- 2002 2001 ------------------------------------ --------------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE BALANCE PERCENT RATE BALANCE PERCENT RATE ------- ------- -------- ------- ------- -------- (DOLLARS IN THOUSANDS) DEPOSIT TYPE: Demand deposits................. $ 36,730 9.84% 0.00% $ 36,744 10.18% 0.00% NOW deposits.................... 79,904 21.41% 0.14% 68,429 18.96% 0.36% Money market deposits........... 44,177 11.83% 0.87% 37,876 10.49% 1.60% Regular savings................. 87,536 23.45% 0.50% 77,323 21.42% 0.75% -------- ------ -------- ------ Total transaction accounts.... 248,347 66.53% 0.38% 220,372 61.05% 0.65% Certificates of deposit....... 124,953 33.47% 3.09% 140,607 38.95% 3.99% -------- ------ -------- ------ Total deposits................ $373,300 100.00% 1.28% $360,979 100.00% 1.95% ======== ====== ======== ======
Source: Benjamin Franklin's prospectus. EXHIBIT I-13A Benjamin Franklin Bank Deposit Composition
AT DECEMBER 31, -------------------------------------------- AT SEPTEMBER 30, 2004 2003 2002 --------------------- ------------------- ------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) Demand deposits......................... $ 33,205 15.38% $ 30,458 17.32% $ 27,701 16.27% NOW accounts............................ 11,266 5.22% 9,601 5.46% 9,384 5.51% Money market deposits................... 64,383 29.81% 50,977 29.00% 49,848 29.27% Other savings accounts.................. 14,630 6.77% 21,479 12.22% 18,988 11.15% -------- ------ -------- ------ -------- ------ Total non-certificate accounts.......... 123,484 57.18% 112,515 64.00% 105,921 62.20% -------- ------ -------- ------ -------- ------ Term certificates less than $100,000.... 48,762 22.58% 32,013 18.21% 38,094 22.37% Term certificates of $100,000 or more... 43,726 20.24% 31,273 17.79% 26,264 15.43% -------- ------ -------- ------ -------- ------ Total certificate accounts.............. 92,488 42.82% 63,286 36.00% 64,358 37.80% -------- ------ -------- ------ -------- ------ Total deposits.......................... $215,972 100.00% $175,801 100.00% $170,279 100.00% ======== ====== ======== ====== ======== ======
Source: Benjamin Franklin's prospectus. EXHIBIT I-14 Benjamin Franklin Bank Borrowing Activity
AT OR FOR THE NINE MONTHS ENDED AT OR FOR THE YEARS ENDED SEPTEMBER 30, DECEMBER 31, ------------------ ---------------------------- 2004 2003 2003 2002 2001 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) FEDERAL HOME LOAN BANK OF BOSTON ADVANCES Balance at end of period................ $75,000 $36,000 $36,000 $36,000 $36,000 Average balance during period........... $44,421 $36,000 $36,000 $36,000 $35,242 Maximum outstanding at any month end.... $75,000 $36,000 $36,000 $36,000 $36,150 Weighted average interest rate at end of period.................................. 3.21% 4.47% 4.47% 4.47% 4.47% Weighted average interest rate during period.................................. 3.99% 4.47% 4.47% 4.47% 4.67%
Source: Benjamin Franklin's prospectus. EXHIBIT II-1 Description of Office Facilities MAIN OFFICE: 58 Main Street, Franklin, MA 02038 1935 BRANCH OFFICES: 231 East Central St., Franklin, MA 02038 1998 4 North Main St., Bellingham, MA 02019 1982 1 Mechanic St., Foxborough, MA 02035 1998 76 North Street, Medfield, MA 02052 1998 221 Main Street, Milford, MA 01757 1992
LOCATION LEASED OR OWNED YEAR OPENED EXPIRATION OF LEASE ---------------------------- --------------- ----------- ------------------- MAIN OFFICE: 75 Moody Street, Waltham, Massachusetts 02453 Leased 1996 March 2008 BRANCH OFFICES: 1290 Main Street, Waltham, Massachusetts 02451 Owned 1996 N/A 40 Austin Street, Newton, Massachusetts 02460 Owned 1998 N/A ADMINISTRATIVE 295 Weston Street OFFICE: Waltham, Massachusetts 02453 Leased 1999 April 2005
Source: Benjamin Franklin's prospectus. Exhibit II-2 Historical Interest Rates(1)
Prime 90 Day One Year 10 Year Year/Qtr. Ended Rate T-Bill T-Bill T-Bond - --------------- ---- ------ ------ ------ 1995: Quarter 1 9.00% 5.88% 6.49% 7.20% Quarter 2 9.00% 5.60% 5.65% 6.21% Quarter 3 8.75% 5.40% 5.65% 6.17% Quarter 4 8.50% 5.10% 5.18% 5.58% 1996: Quarter 1 8.25% 5.13% 5.41% 6.34% Quarter 2 8.25% 5.18% 5.70% 6.73% Quarter 3 8.25% 5.14% 5.71% 6.72% Quarter 4 8.25% 5.21% 5.51% 6.43% 1997: Quarter 1 8.50% 5.35% 6.02% 6.92% Quarter 2 8.50% 5.25% 5.67% 6.51% Quarter 3 8.50% 5.06% 5.47% 6.12% Quarter 4 8.50% 5.36% 5.51% 5.75% 1998: Quarter 1 8.50% 5.16% 5.41% 5.67% Quarter 2 8.50% 5.10% 5.38% 5.44% Quarter 3 8.25% 4.37% 4.41% 4.44% Quarter 4 7.75% 4.48% 4.53% 4.65% 1999: Quarter 1 7.75% 4.49% 4.72% 5.25% Quarter 2 7.75% 4.78% 5.07% 5.81% Quarter 3 8.25% 4.88% 5.22% 5.90% Quarter 4 8.50% 5.33% 5.98% 6.45% 2000: Quarter 1 9.00% 5.88% 6.28% 6.03% Quarter 2 9.50% 5.88% 6.08% 6.03% Quarter 3 9.50% 6.23% 6.07% 5.80% Quarter 4 9.50% 5.89% 5.32% 5.12% 2001: Quarter 1 8.00% 4.30% 4.09% 4.93% Quarter 2 6.75% 3.65% 3.72% 5.42% Quarter 3 6.00% 2.40% 2.49% 4.60% Quarter 4 4.75% 1.74% 2.17% 5.07% 2002: Quarter 1 4.75% 1.79% 2.70% 5.42% Quarter 2 4.75% 1.70% 2.06% 4.86% Quarter 3 4.75% 1.57% 1.53% 3.63% Quarter 4 4.25% 1.22% 1.32% 3.83% 2003: Quarter 1 4.25% 1.14% 1.19% 3.83% Quarter 2 4.00% 0.90% 1.09% 3.54% Quarter 3 4.00% 0.95% 1.15% 3.96% Quarter 4 4.00% 0.95% 1.26% 4.27% 2004: Quarter 1 4.00% 0.95% 1.20% 3.86% Quarter 2 4.00% 1.33% 2.09% 4.62% Quarter 3 4.75% 1.70% 2.16% 4.12% As of Nov. 26, 2004 5.00% 2.18% 2.65% 4.24%
(1) End of period data. Sources: Federal Reserve. EXHIBIT II-3 Economic Trends in the Primary Market Area IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT II-3, ECONOMIC TRENDS IN THE PRIMARY MARKET AREA, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT II-4 Demographic Trends in the Primary Market Area IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT II-4, DEMOGRAPHIC TRENDS IN THE PRIMARY MARKET AREA, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT III-1 Characteristics of Publicly-Traded Thrifts November 27, 2004(1) IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT III-1, CHARACTERISTICS OF PUBLICLY-TRADED THRIFTS NOVEMBER 27, 2004(1), IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT III-2 Market Pricing Comparatives Prices as of November 26, 2004 IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT III-2, MARKET PRICING COMPARATIVES PRICES AS OF NOVEMBER 26, 2004, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT III-3 Market Pricing Comparatives Prices as of November 26, 2004 IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT III-3, MARKET PRICING COMPARATIVES PRICES AS OF NOVEMBER 26, 2004, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. Exhibit III-4 Peer Group Market Area Comparative Analysis
Per Capita Income Population Proj. ------------------------- Deposit ------------ Pop. 2000-2004 2004-2009 % State Market Institution County 2000 2004 2009 % Change % Change Amount Average Share(1) ----------- ------ ----- ----- ---- --------- --------- ------ ------- -------- (000) (000) Brookline Bancorp, Inc. of MA Norfolk 650 657 663 1.1% 0.9% $38,037 127.5% 3.9% Berkshire Hills Bancorp, Inc. of MA Berkshire 135 132 128 -2.3% -3.2% 24,305 81.5% 32.8% MassBank Corp. of Reading, MA Middlesex 1,465 1,470 1,469 0.3% 0.0% 36,220 121.4% 2.4% Woronoco Bancorp, Inc. of MA Hampden 456 460 463 0.8% 0.6% 21,661 72.6% 6.5% Newmil Bancorp, Inc. of CT Litchfield 182 190 199 4.2% 5.0% 30,821 97.2% 7.7% NH Thrift Bancshares, Inc. of NH Sullivan 40 42 43 3.0% 3.4% 24,193 88.5% 27.6% Hingham Inst. For Savings of MA Plymouth 473 492 515 4.1% 4.6% 28,492 95.5% 3.9% Central Bancorp of Somerville, MA Middlesex 1,465 1,470 1,469 0.3% 0.0% 36,220 121.4% 0.9% LSB Corp. of North Andover, MA Essex 723 739 757 2.2% 2.3% 30,342 101.7% 2.1% Mayflower Co-op. Bank of MA Plymouth 473 492 515 4.1% 4.6% 28,492 95.5% 2.8% AVERAGES: 606 614 622 1.8% 1.8% 29,878 100.3% 9.0% MEDIANS: 473 492 515 1.6% 1.6% 29,417 96.3% 3.9% BENJAMIN FRANKLIN SB NORFOLK 650 657 663 1.1% 0.9% $38,037 127.5% 2.3%
(1) Total institution deposits in headquarters county as percent of total county deposits. Sources: SNL Financial, LC. and the FDIC. EXHIBIT IV-1A Weekly Thrift Market Line - Part One Prices as of November 26, 2004 IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT IV-1A, WEEKLY THRIFT MARKET LINE - PART ONE PRICES AS OF NOVEMBER 26, 2004, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT IV-1B Weekly Thrift Market Line - Part Two Prices as of November 26, 2004 IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT IV-1B, WEEKLY THRIFT MARKET LINE - PART TWO PRICES AS OF NOVEMBER 26, 2004, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. Exhibit IV-2 Historical Stock Price Indices(1)
SNL SNL NASDAQ Thrift Bank Year/Qtr. Ended DJIA S&P 500 Composite Index Index --------------- ---- ------- --------- ----- ----- 1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1 Quarter 2 4556.1 544.8 933.5 313.5 171.7 Quarter 3 4789.1 584.4 1,043.5 362.3 195.3 Quarter 4 5117.1 615.9 1,052.1 376.5 207.6 1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1 Quarter 2 5654.6 670.6 1,185.0 387.2 224.7 Quarter 3 5882.2 687.3 1,226.9 429.3 249.2 Quarter 4 6442.5 737.0 1,280.7 483.6 280.1 1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5 Quarter 2 7672.8 885.1 1,442.1 624.5 333.3 Quarter 3 7945.3 947.3 1,685.7 737.5 381.7 Quarter 4 7908.3 970.4 1,570.4 814.1 414.9 1998: Quarter 1 8799.8 1101.8 1,835.7 869.3 456.1 Quarter 2 8952.0 1133.8 1,894.7 833.5 457.7 Quarter 3 7842.6 1017.0 1,693.8 651.3 363.5 Quarter 4 9181.4 1229.2 2,192.7 705.9 439.6 1999: Quarter 1 9786.2 1286.4 2,461.4 707.6 448.4 Quarter 2 10970.8 1372.7 2,686.1 695.6 479.3 Quarter 3 10337.0 1282.7 2,746.2 609.1 409.9 Quarter 4 11497.1 1469.3 4,069.3 562.4 416.7 2000: Quarter 1 10921.9 1498.6 4,572.8 545.6 421.2 Quarter 2 10447.9 1454.6 3,966.1 567.8 387.4 Quarter 3 10650.9 1436.5 3,672.8 718.3 464.6 Quarter 4 10786.9 1320.3 2,470.5 874.3 479.4 2001: Quarter 1 9878.8 1160.3 1,840.3 885.2 459.2 Quarter 2 10502.4 1224.4 2,160.5 964.5 493.7 Quarter 3 8847.6 1040.9 1,498.8 953.9 436.6 Quarter 4 10021.5 1148.1 1,950.4 918.2 473.7 2002: Quarter 1 10403.9 1147.4 1,845.4 1006.7 498.3 Quarter 2 9243.3 989.8 1,463.2 1121.4 468.9 Quarter 3 7591.9 815.3 1,172.1 984.3 396.8 Quarter 4 8341.6 879.8 1,335.5 1073.2 419.1 2003: Quarter 1 7992.1 848.2 1,341.2 1096.2 401.0 Quarter 2 8985.4 974.5 1,622.8 1266.6 476.1 Quarter 3 9275.1 996.0 1,786.9 1330.9 490.9 Quarter 4 10453.9 1112.0 2,003.4 1482.3 548.6 2004: Quarter 1 10357.7 1126.2 1,994.2 1585.3 562.2 Quarter 2 10435.5 1140.8 2,047.8 1437.8 546.6 Quarter 3 10080.3 1114.6 1,896.8 1495.1 556.0 As of Nov. 26, 2004 10522.2 1182.7 2,102.0 1568.8 581.5
(1) End of period data. Sources: SNL Securities and Wall Street Journal. EXHIBIT IV-3 Historical Thrift Stock Indices IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT IV-3, HISTORICAL THRIFT STOCK INDICES, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT IV-4 MASSACHUSETTS THRIFT ACQUISITIONS 2003-PRESENT
TARGET FINANCIALS AT ANNOUNCEMENT ----------------------------------------- TOTAL NPAS/ RSRVS/ ANNOUNCE COMPLETE ASSETS E/A ROAA ROAE ASSETS NPLS DATE DATE BUYER SHORT NAME TARGET NAME ($000) (%) (%) (%) (%) (%) ---- ---- ---------------- ----------- ------ --- --- --- --- --- 07/07/2004 PENDING BROOKLINE BANCORP INC. MA MYSTIC FINANCIAL, INC. MA 428,417 6.47 0.39 6.35 0.50 131.20 06/21/2004 PENDING BANKNORTH GROUP INC. ME BOSTONFED BANCORP, INC. MA 1,667,866 5.73 0.19 3.30 NA NA 01/26/2004 07/23/2004 SOVEREIGN BANCORP INC. PA SEACOAST FINANCIAL SERVICES CORPORATION MA 4,476,594 8.55 0.65 7.65 0.38 258.10 01/08/2004 07/16/2004 INDEPENDENT BANK CORP. MA FALMOUTH BANCORP, INC. MA 166,118 10.68 0.37 3.48 0.00 NM 11/25/2003 04/30/2004 BANKNORTH GROUP INC. ME FOXBOROUGH SAVINGS BANK MA 231,074 13.02 1.59 12.46 0.00 NA 10/20/2003 04/29/2004 SEACOAST FINANCIAL SERVICES MA ABINGTON BANCORP, INC. MA 950,600 6.15 0.40 6.53 0.26 170.56 10/06/2003 05/14/2004 WEBSTER FINANCIAL CORP. CT FIRSTFED AMERICA BANCORP, INC. MA 2,680,526 7.44 1.00 12.82 0.08 NM 06/13/2003 02/06/2004 SOVEREIGN BANCORP INC. PA FIRST ESSEX BANCORP, INC. MA 1,755,214 8.23 1.14 13.65 0.29 455.24 04/17/2003 07/31/2003 ROYAL BANK OF SCOTLAND GROUP PORT FINANCIAL CORP. MA 1,469,265 8.24 1.03 11.91 0.02 NM 02/10/2003 09/22/2003 AUBURNDALE CO-OPERATIVE BANK MA NEWTON SOUTH CO-OPERATIVE BANK MA 118,756 16.52 1.91 11.92 0.00 NA ------- ----- ---- ----- ---- -- AVERAGE: 1,394,443 9.10 0.87 9.01 0.17 253.78 MEDIAN: 1,209,933 8.24 0.83 9.78 0.08 455.24 DEAL TERMS AND PRICING AT ANNOUNCEMENT ----------------------------------------------- DEAL VALUE/ PREM/ ANNOUNCE COMPLETE VALUE SHARE P/B P/TB P/E P/A CDEPS DATE DATE BUYER SHORT NAME TARGET NAME ($M) ($) (%) (%) (X) (%) (%) ---- ---- ---------------- ----------- ---- --- --- --- --- --- --- 07/07/2004 PENDING BROOKLINE BANCORP INC. MA MYSTIC FINANCIAL, INC. MA 66.8 39.354 207.56 207.56 37.48 15.60 13.61 06/21/2004 PENDING BANKNORTH GROUP INC. ME BOSTONFED BANCORP, INC. MA 194.5 40.555 192.02 233.88 33.24 11.66 13.62 01/26/2004 07/23/2004 SOVEREIGN BANCORP INC. PA SEACOAST FINANCIAL SERVICES CORPORATION MA 1,099.8 35.327 218.07 396.04 33.02 20.54 NA 01/08/2004 07/16/2004 INDEPENDENT BANK CORP. MA FALMOUTH BANCORP, INC. MA 36.9 37.560 193.31 193.31 58.69 22.23 14.48 11/25/2003 04/30/2004 BANKNORTH GROUP INC. ME FOXBOROUGH SAVINGS BANK MA 90.6 100.000 301.03 301.03 22.41 39.20 35.05 10/20/2003 04/29/2004 SEACOAST FINANCIAL SERVICES MA ABINGTON BANCORP, INC. MA 137.4 34.000 220.92 266.88 26.98 14.79 14.95 10/06/2003 05/14/2004 WEBSTER FINANCIAL CORP. CT FIRSTFED AMERICA BANCORP, INC. MA 456.5 24.500 207.63 282.91 16.67 17.33 33.84 06/13/2003 02/06/2004 SOVEREIGN BANCORP INC. PA FIRST ESSEX BANCORP, INC.MA 402.6 48.014 256.35 285.97 18.54 22.93 23.20 04/17/2003 07/31/2003 ROYAL BANK OF SCOTLAND GROUP PORT FINANCIAL CORP. MA 308.4 54.000 224.63 224.63 19.85 20.99 17.69 02/10/2003 09/22/2003 AUBURNDALE CO-OPERATIVE BANK MA NEWTON SOUTH CO-OPERATIVE BANK MA NA NA NA NA NA NA NA -- -- -- -- -- -- -- AVERAGE: 224.61 265.80 29.65 20.59 20.81 MEDIAN: 218.07 266.88 26.98 20.54 16.32
SOURCE: SNL FINANCIAL, LC. EXHIBIT IV-5 Benjamin Franklin Bank Director Summary Resumes DR. MARY AMBLER is a retired physician and a Professor Emeritus of Brown University. WILLIAM P. BISSONNETTE is a partner in the firm of Little & Bissonnette, CPAs. WILLIAM F. BRADY, JR., D.D.S. is a retired dentist. JOHN C. FULLER is retired. He was formerly a Vice President and member of the Board of Directors of the Foxboro Company, a controls and instrumentation company located in Foxboro, Massachusetts. ANNE M. KING, Clerk of Benjamin Franklin Bancorp and Benjamin Franklin Bank, is a retired journalist and currently works part-time in public relations. RICHARD D. MANN is an owner of Buckley & Mann, Inc., a textile manufacturer located in Norfolk, Massachusetts. He also serves as a member of the Board of Trustees of Clark-Cutler-McDermott Co. of Franklin, Massachusetts and of Draper Knitting Co. of Canton, Massachusetts. JOHN D. MURPHY is self-employed in the field of real estate. CHARLES F. OTERI is the Chief Executive Officer and Funeral Director of Oteri Funeral Home in Franklin, Massachusetts. THOMAS R. VENABLES has served as President and Chief Executive Officer of Benjamin Franklin Bancorp and Benjamin Franklin Bank since 2002. Prior to 2002, Mr. Venables co-founded Lighthouse Bank of Waltham, Massachusetts in 1999 and served as its President and Chief Executive Officer. From 1998 to 1999, Mr. Venables was employed as a consultant with Marsh and McLennan Capital, Inc. He was employed by Grove Bank of Newton, Massachusetts from 1974 until it was acquired by Citizens Bank in 1997, serving as its President and Chief Executive Officer for the last 11 years of his tenure. ALFRED H. WAHLERS, is the Chairman of the Board of Benjamin Franklin Bancorp and Benjamin Franklin Bank. Mr. Wahlers is a retired insurance executive. CHARLES YERGATIAN is a retired residential real estate developer. EXHIBIT IV-5 Benjamin Franklin Bank Director Summary Resumes (cont.) Upon completion of the Chart Bank acquisition, six directors of Chart Bank will be appointed as directors of Benjamin Franklin Bancorp and Benjamin Franklin Bank. The principal occupation and business experience for the last five years for each of these Chart Bank directors is set forth below. All of these individuals have held their present positions for five years unless otherwise stated. RICHARD E. BOLTON, JR. has served as the President and Chief Executive Officer of Chart Bank since 1995. He has served as President of Chart Bank's subsidiary, CSSI, since 1999. Mr. Bolton is 45 years old. PAUL E. CAPASSO is the President of Capasso Realty Corporation located in Newton, Massachusetts, a real estate investment company specializing in apartment and office building ownership. Mr. Capasso is 48 years old. JONATHAN A. HAYNES is the President of Haynes Management, a real estate management firm located in Wellesley Hills, Massachusetts, and President of D.M. Bernardi, a general contracting firm located in Wellesley Hills, Massachusetts. Mr. Haynes is 48 years old. DANIEL F. O'BRIEN is a certified public accountant and owner and president of O'Brien, Riley and Ryan, a CPA firm located in Boston. Mr. O'Brien is also the manager of State Street Wealthcare Advisors, LLC, a financial services company and State Street Consulting, LLC, a computer services consulting firm. Mr. O'Brien is also a practicing attorney. Mr. O'Brien is 49 years old. DONALD P. QUINN is an attorney in private practice in Plymouth, Massachusetts. He was formerly a partner concentrating in commercial business and real estate matters at Goodwin Procter LLP, a law firm located in Boston. Mr. Quinn is 66 years old. NEIL E. TODREAS is a professor of nuclear engineering and a professor of mechanical engineering at Massachusetts Institute of Technology. He also provides consulting services through his company, Energy Technology Associates, Inc. Mr. Todreas is 69 years old. EXHIBIT IV-6 Benjamin Franklin Bank Pro Forma Regulatory Capital Ratios
PRO FORMA AT SEPTEMBER 30, 2004 BASED ON (1) BENJAMIN FRANKLIN -------------------------------------------------- HISTORICAL AT 4,250,000 SHARES SOLD 5,000,000 SHARES SOLD SEPTEMBER 30, 2004 @ $10 PER SHARE (2) @ $10 PER SHARE ----------------------- ----------------------- ----------------------- PERCENT PERCENT PERCENT OF OF OF AMOUNT ASSETS (3) AMOUNT ASSETS (3) AMOUNT ASSETS (3) ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BENJAMIN FRANKLIN BANCORP: TOTAL CAPITAL SHOWN ON FINANCIAL STATEMENTS ...... $ 30,586 5.91% $ 89,296 10.94% $ 95,972 11.67% ========== ======= ========== ======= ========== ======= Tier 1 leverage capital .......................... 37,281 7.42% 63,878 8.29% 70,554 9.07% Tier 1 leverage requirement ...................... 20,093 4.00% 30,832 4.00% 31,099 4.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 17,188 3.42% $ 33,046 4.29% $ 39,454 5.07% ========== ======= ========== ======= ========== ======= Tier 1 risk-based capital ........................ 37,281 11.71% 63,878 13.68% 70,554 15.07% Tier 1 risk-based requirement(2) ................. 12,738 4.00% 18,676 4.00% 18,730 4.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 24,543 7.71% $ 45,201 9.68% $ 51,824 11.07% ========== ======= ========== ======= ========== ======= Total risk-based capital ......................... 40,298 12.65% 68,648 14.70% 75,324 16.09% Total risk-based requirement ..................... 25,476 8.00% 37,353 8.00% 37,460 8.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 14,822 4.65% $ 31,295 6.70% $ 37,864 8.09% ========== ======= ========== ======= ========== ======= BENJAMIN FRANKLIN BANK: TOTAL CAPITAL SHOWN ON FINANCIAL STATEMENTS ...... $ 38,785 7.50% $ 83,498 10.37% $ 84,708 10.49% ========== ======= ========== ======= ========== ======= Tier 1 leverage capital .......................... 36,481 7.27% 49,080 6.46% 50,290 6.60% Tier 1 leverage requirement ...................... 20,059 4.00% 30,407 4.00% 30,481 4.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 16,422 3.27% $ 18,673 2.46% $ 19,809 2.60% ========== ======= ========== ======= ========== ======= Tier 1 risk-based capital ........................ 36,481 11.50% 49,080 10.57% 50,290 10.82% Tier 1 risk-based requirement(2) ................. 12,685 4.00% 18,581 4.00% 18,596 4.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 23,796 7.50% $ 30,498 6.57% $ 31,694 6.82% ========== ======= ========== ======= ========== ======= Total risk-based capital ......................... 39,498 12.45% 53,850 11.59% 55,060 11.84% Total risk-based requirement .................... 25,371 8.00% 37,163 8.00% 37,192 8.00% ---------- ------- ---------- ------- ---------- ------- Excess capital ................................... $ 14,127 4.45% $ 16,687 3.59% $ 17,867 3.84% ========== ======= ========== ======= ========== ======= PRO FORMA AT SEPTEMBER 30, 2004 BASED ON (1) -------------------------------------------------- 5,750,000 SHARES SOLD 6,612,500 SHARES SOLD @ $10 PER SHARE @ $10 PER SHARE ----------------------- ----------------------- PERCENT PERCENT OF OF AMOUNT ASSETS (3) AMOUNT ASSETS (3) ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BENJAMIN FRANKLIN BANCORP: TOTAL CAPITAL SHOWN ON FINANCIAL STATEMENTS ...... $ 102,503 12.36% $ 110,013 13.15% ========== ======= ========== ======= Tier 1 leverage capital .......................... 77,085 9.83% 84,595 10.69% Tier 1 leverage requirement ...................... 31,361 4.00% 31,661 4.00% ---------- ------- ---------- ------- Excess capital ................................... $ 45,724 5.83% $ 52,934 6.69% ========== ======= ========== ======= Tier 1 risk-based capital ........................ 77,085 16.42% 84,595 17.96% Tier 1 risk-based requirement(2) ................. 18,782 4.00% 18,842 4.00% ---------- ------- ---------- ------- Excess capital ................................... $ 58,303 12.42% $ 65,753 13.96% ========== ======= ========== ======= Total risk-based capital ......................... 81,855 17.43% 89,365 18.97% Total risk-based requirement ..................... 37,564 8.00% 37,684 8.00% ---------- ------- ---------- ------- Excess capital ................................... $ 44,291 9.43% $ 51,681 10.97% ========== ======= ========== ======= BENJAMIN FRANKLIN BANK: TOTAL CAPITAL SHOWN ON FINANCIAL STATEMENTS ...... $ 85,965 10.63% $ 87,412 10.78% ========== ======= ========== ======= Tier 1 leverage capital .......................... 51,547 6.75% 52,994 6.92% Tier 1 leverage requirement ...................... 30,555 4.00% 30,641 4.00% ---------- ------- ---------- ------- Excess capital ................................... $ 20,992 2.75% $ 22,353 2.92% ========== ======= ========== ======= Tier 1 risk-based capital ........................ 51,547 11.08% 52,994 11.38% Tier 1 risk-based requirement(2) ................. 18,611 4.00% 18,628 4.00% ---------- ------- ---------- ------- Excess capital ................................... $ 32,936 7.08% $ 34,366 7.38% ========== ======= ========== ======= Total risk-based capital ......................... 56,317 12.10% 57,764 12.40% Total risk-based requirement .................... 37,222 8.00% 37,256 8.00% ---------- ------- ---------- ------- Excess capital ................................... $ 19,095 4.10% $ 20,507 4.40% ========== ======= ========== =======
- ------------------ (1) Pro forma capital compliance figures shown for Benjamin Franklin Bancorp and Benjamin Franklin Bank. (2) If Benjamin Franklin Bancorp receives orders for fewer than 4,250,000 shares, Benjamin Franklin Bancorp 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. If the full 2,082,500 shares are applied in this manner, then Benjamin Franklin Bancorp would contribute to Benjamin Franklin Bank 90% (rather than 25%, as otherwise planned) of the cash proceeds of the offering remaining after providing for offering expenses, the cash consideration in the acquisition and the loan to the employee stock ownership plan, and the resulting pro forma regulatory capital ratios for Benjamin Franklin Bancorp and Benjamin Franklin Bank as of September 30, 2004 would be as follows:
BENJAMIN FRANKLIN BANCORP BENJAMIN FRANKLIN BANK ------------------------- ---------------------- (DOLLARS IN THOUSANDS) CAPITAL RATIO CAPITAL RATIO - -------------------------------------------------- --------- --------- --------- ---------- Total capital per financial statements ........... $ 68,672 8.63% $ 75,534 9.47% Tier 1 leverage capital .......................... 43,254 5.77% 41,116 5.47% Tier 1 risk-based capital ........................ 43,254 9.35% 41,116 8.88% Total risk-based capital ......................... 48,024 10.38% 45,886 9.91%
(3) Adjusted total or adjusted risk-weighted assets, as appropriate. Pro forma adjusted risk-weighted assets assume that funds infused into Benjamin Franklin Bank are held in assets that carry a risk-weighting of 20.0%. Source: Benjamin Franklin's Prospectus EXHIBIT IV-7 PRO FORMA ANALYSIS SHEET Benjamin Franklin Bancorp, Inc. Prices as of November 26, 2004
Massachusetts All Publicly Traded Peer Group Companies Companies --------------- --------------- ------------------- Price Multiple Symbol Subject (1) Mean Median Mean Median Mean Median - ------------------------------------------------------------------------------------------------------------ Price-earnings ratio = P/E 34.45 18.09x 19.34x 19.44x 19.46x 18.47x 17.47x Price-core earnings ratio = P/Core 32.43 19.04x 20.23x 20.50x 21.46x 19.81x 18.28x Price-book ratio = P/B 81.29% 166.24% 159.61% 162.34% 159.51% 164.76% 180.03% Price-tangible book ratio = P/TB 131.34% 178.05% 169.23% 165.26% 162.89% 155.47% 170.41% Price-assets ratio = P/A 9.48% 19.09% 16.47% 20.49% 16.47% 17.74% 15.22%
Valuation Parameters Pre-Conversion Earnings (Y) $ 2,054,000 (2) ESOP Stock Purchases (E) 5.54% (5) Pre-Conversion Book Value (B) $ 52,634,000 (2) Cost of ESOP Borrowings (S) 0.00% (5) Pre-Conv. Tang. Book Val. (B) $ 16,061,000 (2) ESOP Amortization (T) 30.00 years Pre-Conversion Assets (A) $779,368,000 (2) MRP Amount (M) 2.77% (6) Reinvestment Rate (R) 1.38%(3) MRP Vesting (N) 5.00 years Est. Conversion Expenses (X) 2.08%(4) Shares Issued to Chart Bank 2,401,575 Tax rate (TAX) 36.00% Percent of Total Shares (AP) 30.78% (7) Foundation (F) 5.13% (8) Tax Benefit (Z) $ 1,440,000 Percentage Sold (PCT) 100.00%
Calculation of Pro Forma Value After Conversion 1. V= P/E * Y V= $ 78,015,750 --------------------------------------------------------------------- 1 - P/E * PCT * ( (1 - X - E - M - F - AP) * R - (1-TAX)* ( E/T + M/N)) 2. V= P/B * ( B + Z ) V= $ 78,015,750 ---------------------------------------- 1 - P/B * PCT * (1 - X - E - M - F - AP) 3. V= P/A * ( A + Z ) V= $ 78,015,750 ---------------------------------------- 1 - P/A * PCT * (1 - X - E - M - F - AP)
Price Gross Shares Shares Total Total Share Sold Per Offering Issued To Issued To Shares Market Conclusion to Public Share Proceeds Foundation Chart Bank Issued Value - ---------------------------------------------------------------------------------------------------------------------- Supermaximum 6,612,500 10.00 $66,125,001 400,000 2,401,575 9,414,075 $94,140,750 Maximum 5,750,000 10.00 $57,500,000 400,000 2,401,575 8,551,575 $85,515,750 Midpoint 5,000,000 10.00 $50,000,000 400,000 2,401,575 7,801,575 $78,015,750 Minimum 4,250,000 10.00 $42,500,000 340,000 2,401,575 6,991,575 $69,915,750
- ---------------- (1) Pricing ratios shown reflect the midpoint value. (2) Reflects impact of purchase accounting adjustments and merger costs for the acquisition of Chart Bank (3) Net return reflects a reinvestment rate of 2.16% and a tax rate of 34.0%. (4) Offering expenses are $1.6 million as a percent of the $78.0 million total market value of the company at the midpoint of the valuation. (5) ESOP is 8.0% of the gross offering plus foundation, equal to $4.3 million at the midpoint. Shown as a percent of the $78.0 million total market value of the at the midpoint of the valuation. ESOP is funded internally by the company, thus no interest cost is recorded. (6) MRP is 4.0% of the gross offering plus foundation, equal to $2.2 million at the midpoint. Shown as a percent of the $78.0 million total market value at the midpoint. (7) Percent is 2,401,575 shares issued to Chart Bank as a percent of the 7,801,575 shares outstanding on a pro forma basis at the midpoint. (8) Foundation is 8.0% of gross offering, to a maximum of 400,000 shares. Percent is 400,000 shares issued to the Foundation at the midpoint as a percent of the 7,801,575 shares outstanding on a pro forma basis at the midpoint. Exhibit IV-8 PRO FORMA EFFECT OF CONVERSION PROCEEDS Benjamin Franklin Bancorp, Inc. At the Minimum of the Offering Range
1. Offering Proceeds $ 42,500,000 Less: Estimated Offering Expenses 1,553,850 ------------ Net Conversion Proceeds $ 40,946,150 2. Estimated Additional Income from Conversion Proceeds Net Conversion Proceeds $ 40,946,150 Less: Non-recurring merger expenses 0 Less: Non-Cash Stock Purchases (1) 5,508,000 ------------ Net Proceeds Reinvested $ 35,438,150 Estimated net incremental rate of return 1.38% ------------ Earnings Increase $ 489,897 Less: Estimated cost of ESOP borrowings (2) 0 Less: Amortization of ESOP borrowings (3) 78,336 Less: Recognition Plan Vesting (4) 235,008 ------------ Net Earnings Increase $ 176,553
Net Before Earnings After Conversion Increase Conversion ------------ --------------- ------------ 3. Pro Forma Earnings 12 Months ended September 30, 2004 (reported) $ 2,054,000 $ 176,553 $ 2,230,553 12 Months ended September 30, 2004 (core) $ 2,195,000 $ 176,553 $ 2,371,553
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ------------ ------------ --------------- ------------ 4. Pro Forma Net Worth September 30, 2004 $ 52,634,000 $ 35,438,150 $ 1,224,000 $ 89,296,150 September 30, 2004 (Tangible) $ 16,061,000 $ 35,438,150 $ 1,224,000 $ 52,723,150
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ------------ ------------ --------------- ------------ 5. Pro Forma Assets September 30, 2004 $779,368,000 $ 35,438,150 $ 1,224,000 $816,030,150
(1) Includes ESOP and MRP stock purchases equal to 8.0% and 4.0% of the offering and foundation. (2) ESOP stock purchases are internally financed by a loan from the holding company. (3) It has been assumed that ESOP borrowings are amortized over 30 years and the amortization expense is tax-effected at a 36.0% rate. (4) MRP is amortized over 5 years, and the amortization expense is tax effected at 36.0%. (5) Reflects tax benefit of the contribution to the Foundation. Exhibit IV-8 (continued) PRO FORMA EFFECT OF CONVERSION PROCEEDS Benjamin Franklin Bancorp, Inc. At the Midpoint of the Offering Range 1. Offering Proceeds $ 50,000,000 Less: Estimated Offering Expenses 1,622,370 ------------ Net Conversion Proceeds $ 48,377,630 2. Estimated Additional Income from Conversion Proceeds Net Conversion Proceeds $ 48,377,630 Less: Non-recurring merger expenses 0 Less: Non-Cash Stock Purchases (1) 6,480,000 ------------ Net Proceeds Reinvested $ 41,897,630 Estimated net incremental rate of return 1.38% ------------ Earnings Increase $ 579,193 Less: Estimated cost of ESOP borrowings (2) 0 Less: Amortization of ESOP borrowings (3) 92,160 Less: Recognition Plan Vesting (4) 276,480 ------------ Net Earnings Increase $ 210,553
Net Before Earnings After Conversion Increase Conversion ---------- -------- ---------- 3. Pro Forma Earnings 12 Months ended September 30, 2004 (reported) $ 2,054,000 $210,553 $ 2,264,553 12 Months ended September 30, 2004 (core) $ 2,195,000 $210,553 $ 2,405,553
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ---------- -------- --------------- ---------- 4. Pro Forma Net Worth September 30, 2004 $ 52,634,000 $41,897,630 $ 1,440,000 $ 95,971,630 September 30, 2004 (Tangible) $ 16,061,000 $41,897,630 $ 1,440,000 $ 59,398,630
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ---------- -------- --------------- ---------- 5. Pro Forma Assets September 30, 2004 $779,368,000 $41,897,630 $ 1,440,000 $822,705,630
(1) Includes ESOP and MRP stock purchases equal to 8.0% and 4.0% of the offering and foundation. (2) ESOP stock purchases are internally financed by a loan from the holding company. (3) It has been assumed that ESOP borrowings are amortized over 30 years and the amortization expense is tax-effected at a 36.0% rate. (4) MRP is amortized over 5 years, and the amortization expense is tax effected at 36.0%. (5) Reflects tax benefit of the contribution to the Foundation. Exhibit IV-8 (continued) PRO FORMA EFFECT OF CONVERSION PROCEEDS Benjamin Franklin Bancorp, Inc. At the Maximum of the Offering Range 1. Offering Proceeds $ 57,500,000 Less: Estimated Offering Expenses 1,691,370 ------------ Net Conversion Proceeds $ 55,808,630 2. Estimated Additional Income from Conversion Proceeds Net Conversion Proceeds $ 55,808,630 Less: Non-recurring merger expenses 0 Less: Non-Cash Stock Purchases (1) 7,380,000 ------------ Net Proceeds Reinvested $ 48,428,630 Estimated net incremental rate of return 1.38% ------------ Earnings Increase $ 669,477 Less: Estimated cost of ESOP borrowings (2) 0 Less: Amortization of ESOP borrowings (3) 104,960 Less: Recognition Plan Vesting (4) 314,880 ------------ Net Earnings Increase $ 249,637
Net Before Earnings After Conversion Increase Conversion ---------- -------- ---------- 3. Pro Forma Earnings 12 Months ended September 30, 2004 (reported) $2,054,000 $ 249,637 $ 2,303,637 12 Months ended September 30, 2004 (core) $2,195,000 $ 249,637 $ 2,444,637
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ------------ -------- --------------- ---------- 4. Pro Forma Net Worth September 30, 2004 $ 52,634,000 $48,428,630 $1,440,000 $102,502,630 September 30, 2004 (Tangible) $ 16,061,000 $48,428,630 $1,440,000 $ 65,929,630
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ---------- -------- --------------- ---------- 5. Pro Forma Assets September 30, 2004 $779,368,000 $48,428,630 $1,440,000 $829,236,630
(1) Includes ESOP and MRP stock purchases equal to 8.0% and 4.0% of the offering and foundation. (2) ESOP stock purchases are internally financed by a loan from the holding company. (3) It has been assumed that ESOP borrowings are amortized over 30 years and the amortization expense is tax-effected at a 36.0% rate. (4) MRP is amortized over 5 years, and the amortization expense is tax effected at 36.0%. (5) Reflects tax benefit of the contribution to the Foundation. Exhibit IV-8 (continued) PRO FORMA EFFECT OF CONVERSION PROCEEDS Benjamin Franklin Bancorp, Inc. At the Maximum, as Adjusted, of the Offering Range 1. Offering Proceeds $ 66,125,001 Less: Estimated Offering Expenses $ 1,770,720 ------------ Net Conversion Proceeds $ 64,354,281 2. Estimated Additional Income from Conversion Proceeds Net Conversion Proceeds $ 64,354,281 Less: Non-recurring merger expenses 0 Less: Non-Cash Stock Purchases (1) 8,415,000 ------------ Net Proceeds Reinvested $ 55,939,281 Estimated net incremental rate of return 1.38% ------------ Earnings Increase $ 773,305 Less: Estimated cost of ESOP borrowings (2) 0 Less: Amortization of ESOP borrowings (3) 119,680 Less: Recognition Plan Vesting (4) 359,040 ------------ Net Earnings Increase $ 294,585
Net Before Earnings After Conversion Increase Conversion ---------- -------- ---------- 3. Pro Forma Earnings 12 Months ended September 30, 2004 (reported) $ 2,054,000 $ 294,585 $ 2,348,585 12 Months ended September 30, 2004 (core) $ 2,195,000 $ 294,585 $ 2,489,585
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ---------- -------- --------------- ---------- 4. Pro Forma Net Worth September 30, 2004 $ 52,634,000 $55,939,281 $1,440,000 $110,013,281 September 30, 2004 (Tangible) $ 16,061,000 $55,939,281 $1,440,000 $ 73,440,281
Before Net Cash Tax Benefit (5) After Conversion Proceeds Of Contribution Conversion ---------- -------- --------------- ---------- 5. Pro Forma Assets September 30, 2004 $779,368,000 $55,939,281 $1,440,000 $836,747,281
(1) Includes ESOP and MRP stock purchases equal to 8.0% and 4.0% of the offering and foundation. (2) ESOP stock purchases are internally financed by a loan from the holding company. (3) It has been assumed that ESOP borrowings are amortized over 30 years and the amortization expense is tax-effected at a 36.0% rate. (4) MRP is amortized over 5 years, and the amortization expense is tax effected at 36.0%. (5) Reflects tax benefit of the contribution to the Foundation. EXHIBIT IV-9 Peer Group Core Earnings Analysis IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT IV-9, PEER GROUP CORE EARNINGS ANALYSIS, IS BEING FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION. EXHIBIT V-1 RP Financial, LC. Firm Qualifications Statement FIRM QUALIFICATION STATEMENT RP Financial provides financial and management consulting and valuation services to the financial services industry nationwide, particularly federally-insured financial institutions. RP Financial establishes long-term client relationships through its wide array of services, emphasis on quality and timeliness, hands-on involvement by our principals and senior consulting staff, and careful structuring of strategic plans and transactions. RP Financial's staff draws from backgrounds in consulting, regulatory agencies and investment banking, thereby providing our clients with considerable resources. STRATEGIC AND CAPITAL PLANNING RP Financial's strategic and capital planning services are designed to provide effective workable plans with quantifiable results. RP Financial analyzes strategic options to enhance shareholder value or other established objectives. Our planning services involve conducting situation analyses; establishing mission statements, strategic goals and objectives; and identifying strategies for enhancement of franchise value, capital management and planning, earnings improvement and operational issues. Strategy development typically includes the following areas: capital formation and management, asset/liability targets, profitability, return on equity and market value of stock. Our proprietary financial simulation model provides the basis for evaluating the financial impact of alternative strategies and assessing the feasibility/compatibility of such strategies with regulations and/or other guidelines. MERGER AND ACQUISITION SERVICES RP Financial's merger and acquisition (M&A) services include targeting candidates and potential acquirors, assessing acquisition merit, conducting detailed due diligence, negotiating and structuring transactions, preparing merger business plans and financial simulations, rendering fairness opinions and assisting in implementing post-acquisition strategies. Through our financial simulations, comprehensive in-house data bases, valuation expertise and regulatory knowledge, RP Financial's M&A consulting focuses on structuring transactions to enhance shareholder returns. VALUATION SERVICES RP Financial's extensive valuation practice includes valuations for a variety of purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs, subsidiary companies, mark-to-market transactions, loan and servicing portfolios, non-traded securities, core deposits, FAS 107 (fair market value disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our principals and staff are highly experienced in performing valuation appraisals which conform with regulatory guidelines and appraisal industry standards. RP Financial is the nation's leading valuation firm for mutual-to-stock conversions of thrift institutions. OTHER CONSULTING SERVICES AND DATA BASES RP Financial offers a variety of other services including branching strategies, feasibility studies and special research studies, which are complemented by our quantitative and computer skills. RP Financial's consulting services are aided by its in-house data base resources for commercial banks and savings institutions and proprietary valuation and financial simulation models. RP Financial's Key Personnel Gregory E. Dunn, Senior Vice President James P. Hennessey, Senior Vice President James J. Oren, Senior Vice President William E. Pommerening, Managing Director Ronald S. Riggins, Managing Director EX-99.4 10 b52576a1exv99w4.txt EX-99.4 MARKETING MATERIALS Exhibit 99.4 (BENJAMIN FRANKLIN BANCORP LOGO) Dear Valued Customer: As you may be aware, Benjamin Franklin Bank has some exciting plans underway. I am pleased to invite you to invest in the initial public offering of stock of Benjamin Franklin Bancorp, Inc., the Bank's parent company. The stock offering is being conducted in connection with the conversion of our organization from the mutual holding company structure without stockholders, to a stockholder-owned corporate structure. A key reason for the conversion and related stock offering is to facilitate our intended acquisition of Chart Bank, headquartered in Waltham, Massachusetts. The acquisition of Chart Bank will be paid for in cash and shares of our common stock. Also, in connection with the conversion, we will establish a non-profit charitable foundation to be funded with shares of our common stock. In its initial public offering, Benjamin Franklin Bancorp, Inc. is offering for sale between 4,250,000 and 6,612,500 shares of its common stock. All shares will be sold at a price of $10.00 per share, and no commission will be charged to purchasers. Upon the completion of the conversion and stock offering, Benjamin Franklin Bancorp, Inc. will be 100% owned by stockholders, including the charitable foundation. Before being offered for sale to the general public, the shares of common stock are being offered for sale to eligible Benjamin Franklin Bank past and current depositors, employees, and trustees. AS AN ELIGIBLE DEPOSITOR OF THE BANK ON EITHER MAY 30, 2003 OR DECEMBER 31, 2004, OR A CURRENT TRUSTEE OR EMPLOYEE, YOU HAVE THE NON-TRANSFERABLE RIGHT, BUT NO OBLIGATION, TO BUY SHARES OF BENJAMIN FRANKLIN BANCORP, INC. STOCK IN THE OFFERING. Before making an investment decision, carefully review the information in the enclosed Prospectus, including the section entitled "Risk Factors". If you are interested in purchasing shares, complete the enclosed Stock Order Form and return it, with full payment, in the enclosed Order Reply Envelope. STOCK ORDER FORMS MUST BE RECEIVED BY US (NOT POSTMARKED) PRIOR TO 10:00 A.M., MASSACHUSETTS TIME, ON , 2005. Payment may be in the form of check, money order or authorization to withdraw funds (without any early withdrawal penalty) from your Benjamin Franklin Bank deposit account(s), excluding checking and NOW accounts. If you wish to purchase stock through an IRA, please call the Stock Information Center promptly, because IRA-related procedures require additional processing time. Please note: - Our business focus will not change. The conversion is an internal corporate restructuring meant to give us added flexibility to achieve business goals. - There will be no change to account numbers, interest rates or other terms of deposit and loan accounts at Benjamin Franklin Bank as a result of the conversion, and deposits will continue to be insured by the Federal Deposit Insurance Corporation, up to the maximum legal limits, and by the Depositors Insurance Fund. - Our management and staff will continue to serve customers in our offices, and we look forward to welcoming the customers, stockholders and offices of Chart Bank. - After the offering concludes, the common stock is expected to trade on the Nasdaq National Market, under the symbol "BFBC". For detailed information regarding our organization and stock offering, you may refer to the enclosed Prospectus or call our Stock Information Center at the [toll free] number shown below. I am pleased to offer you this opportunity to share in our future as a stockholder of Benjamin Franklin Bancorp, Inc. Sincerely, /s/ Thomas R. Venables Thomas R. Venables President and Chief Executive Officer THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SHARES OF COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS. THE SHARES OF COMMON STOCK ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. - -------------------------------------------------------------------------------- QUESTIONS? CALL OUR STOCK INFORMATION CENTER TOLL FREE AT (800) 290-0793, FROM 9:30 A.M. TO 4:00 P.M., MASSACHUSETTS TIME, MONDAY THROUGH FRIDAY VC (BENJAMIN FRANKLIN BANCORP LOGO) Dear Friend: I am pleased to inform you of an investment opportunity. Benjamin Franklin Bancorp, Inc., the parent company of Benjamin Franklin Bank, is offering shares of its common stock for sale. The stock offering is being conducted in connection with the conversion of our organization from the mutual holding company structure without stockholders, to a stockholder-owned corporate structure. A key reason for the conversion and related stock offering is to facilitate our intended acquisition of Chart Bank, headquartered in Waltham, Massachusetts. The acquisition price will be paid for in cash and shares of our common stock. Upon the completion of the conversion and stock offering, Benjamin Franklin Bancorp, Inc. will be 100% owned by stockholders, including a non-profit charitable foundation that we are forming in connection with the conversion. The price per share of common stock is $10.00 per share. There will be no sales commission charged to purchasers. Before making an investment decision, carefully review the information in the enclosed Prospectus, including the section entitled "Risk Factors". If you are interested in purchasing shares, complete the enclosed Stock Order Form and return it, with full payment, in the enclosed Order Reply Envelope. STOCK ORDER FORMS MUST BE RECEIVED BY US (NOT POSTMARKED) PRIOR TO 10:00 A.M., MASSACHUSETTS TIME, ON , 2005. If you wish to purchase stock with funds you have in an IRA, please call the Stock Information Center promptly because IRA-related procedures require additional processing time. After the offering concludes, the common stock is expected to trade on the Nasdaq National Market, under the symbol "BFBC". Sincerely, - -s- Thomas R. Venables Thomas R. Venables President and Chief Executive Officer THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SHARES OF COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS. THE SHARES OF COMMON STOCK ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. - -------------------------------------------------------------------------------- QUESTIONS? CALL OUR STOCK INFORMATION CENTER TOLL FREE AT (800) 290-0793, FROM 9:30 A.M. TO 4:00 P.M., MASSACHUSETTS TIME, MONDAY THROUGH FRIDAY F (BENJAMIN FRANKLIN BANCORP LOGO) Dear Sir/Madam: At the request of Benjamin Franklin Bancorp, Inc., we are enclosing materials regarding the offering of Benjamin Franklin Bancorp common stock. We have included a Prospectus describing the stock offering. Ryan Beck & Co., Inc. has been retained by Benjamin Franklin Bancorp as selling agent in connection with the stock offering. Sincerely, (RYAN BECK & CO. LOGO) THIS LETTER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SHARES OF COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS. THE SHARES OF COMMON STOCK ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. B (BENJAMIN FRANKLIN BANCORP LOGO) Dear Stockholder: I would like to thank you for participating in our stock offering. A total of shares were purchased by investors at a price of $10.00 per share. Your stock certificate is enclosed. Please review the certificate to make sure the registration name and address are correct. If you find an error or have questions about your certificate, please contact our transfer agent: AMERICAN STOCK TRANSFER AND TRUST COMPANY BY MAIL: [MAILING ADDRESS] OR BY PHONE: [PHONE NUMBER] OR ELECTRONICALLY: [EMAIL ADDRESS] If the enclosed stock certificate must be forwarded for reissue, it is recommended that it be sent to our transfer agent by registered mail. If you change your address, please notify our transfer agent immediately, so that you will continue to receive stockholder communications. If you paid for your shares of common stock by check or money order, you have received, or soon will receive, a check representing interest earned on your funds. Interest payments were calculated at Benjamin Franklin Bank's passbook savings rate ( % per annum) from the date your funds were received until , 2005. If you paid for your shares by authorizing a withdrawal from a Benjamin Franklin Bank deposit account, that withdrawal has been made. Interest was earned at your account's contractual rate and was credited to your account through the date of withdrawal, , 2005. Benjamin Franklin Bancorp, Inc. common stock trades on the Nasdaq National Market, under the trading symbol "BFBC". I welcome you as a fellow stockholder of Benjamin Franklin Bancorp, Inc. Sincerely, /s/ Thomas R. Venables Thomas R. Venables President and Chief Executive Officer SH EX-99.5 11 b52576a1exv99w5.txt EX-99.5 ORDER AND ACKNOWLEDGMENT FORM . . . Exhibit 99.5 [BENJAMIN FRANKLIN BANCORP LOGO] SINCE 1871 [BENJAMIN FRANKLIN BANCORP LOGO] FOR INTERNAL USE ONLY SINCE 1871 REC'D #___ BATCH #______ ORDER #_____ CATEGORY#______ ------------------------------------------------------ Stock Information Center O_________________________ C__________________________ 58 Main Street, Franklin, MA 02038 ------------------------------------------------------ ORDER DEADLINE & DELIVERY: Stock Order Forms, QUESTIONS? properly completed and with full payment, must be received (not postmarked) by 10:00 a.m., Call us toll free at (800) 290-0793 Massachusetts Time, on _____ ___, 2005. Stock Order 9:30 a.m. to 4:00 p.m., Forms can be delivered by using the enclosed order Monday through Friday reply envelope, or by hand or overnight delivery to the Stock Information Center. You may NOT deliver this form to Benjamin Franklin Bank branch offices. Please read important instructions on the reverse side as you complete this form. Faxes or copies of this form are not required to be accepted. Each Stock Order Form will generate one stock certificate (subject to stock allocation provisions described in the Prospectus).
PLEASE COMPLETE ALL APPLICABLE SHADED AREAS (1) NUMBER OF SHARES PRICE PER SHARE (2) TOTAL PAYMENT DUE (25 SHARE MINIMUM) X $10.00 = $ .00 - -------------------- --------------------- (3) METHOD OF PAYMENT -- CHECK OR MONEY ORDER Enclosed is a check or money order made $ .00 payable to BENJAMIN FRANKLIN BANCORP, INC., --------------------- in the amount of: No cash or wire transfers will be accepted. Checks will be cashed upon receipt. Benjamin Franklin Bank line of credit checks may not be remitted as payment with this form. (4) METHOD OF PAYMENT -- WITHDRAWAL The undersigned authorizes withdrawal from the Benjamin Franklin Bank deposit account(s) listed below. There will be no early withdrawal penalty applicable for funds authorized on this form. Funds designated for withdrawal must be in the account(s) listed at the time this stock order form is received. BENJAMIN FRANKLIN BANK REGULAR CHECKING, MONEY MARKET CHECKING, NOW ACCOUNTS AND IRA ACCOUNTS MAY NOT BE LISTED FOR DIRECT WITHDRAWAL BELOW. For Internal Use Only Account Number(s) Withdrawal Amount(s) - -------------------------------------------------------------------------- $ .00 - -------------------------------------------------------------------------- $ .00 - -------------------------------------------------------------------------- $ .00 - -------------------------------------------------------------------------- Total Withdrawal Amount $ .00 -------------------
(5) PURCHASER INFORMATION Check the one box that applies, as of the earliest date, to the purchaser(s) listed in Section 7 below. a. [ ] Purchaser(s) listed below had a minimum of $50 on deposit at Benjamin Franklin Bank on May 31, 2003. b. [ ] Box (a) above does not apply, however the purchaser(s) listed below had a minimum of $50 on deposit at Benjamin Franklin Bank on December 31, 2004. c. [ ] Purchaser(s) listed below are Benjamin Franklin Bank's officers, directors, trustees or employees who do not have a higher priority. d. [ ] None of the above apply but the purchaser(s) listed below resides in the communities described in the Prospectus, p. ______. e. [ ] None of the above apply to the purchaser(s) listed below. This order is placed in a Community Offering. - -------------------------------------------------------------------------------- If you checked boxes (a) or (b), please provide the following information as of the eligibility date under which purchaser(s) listed in Section 7 below qualify in the subscription offering:
Deposit Account Title (Names on Accounts) Account Number(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Please attach a separate page if additional space is required. Not listing all eligible deposit accounts, or providing incorrect or incomplete information, could result in the loss of all or part of any share allocation. (6) MANAGEMENT, EMPLOYEES, CORPORATORS (a) MANAGEMENT AND EMPLOYEES (Check the box, if applicable) [ ] Check if you are a Benjamin Franklin Bank director, officer or employee or a member of their immediate family as defined on the reverse side of this form. (b) CORPORATORS (Check the box, if applicable) [ ] Check here if you are a Benjamin Franklin corporator of an associate of a corporator. (7) STOCK REGISTRATION Please PRINT clearly and provide all information requested. Read reverse side of this form carefully for important registration information. Use full first and last name(s), not initials. If purchasing in the Subscription Offering (i.e., you checked box (a), (b) or (c) in Section 5 of this form), you may not add the names of persons/entities who qualify in a lower purchase priority than yours. - ------------------------------------------- ----------------------------------- First Name, Middle Initial, Last Name Social Security No./Tax ID No. (to be used for reporting purposes) - ------------------------------------------- ----------------------------------- First Name, Middle Initial, Last Name Social Security No./Tax ID No. - ------------------------------------------- ----------------------------------- Street Daytime Phone Number - --------------------- ---------- ------- ----------------------------------- City State Zip Evening Phone Number (8) FORM OF STOCK OWNERSHIP [ ] Individual [ ] Joint [ ] Tenants in Common [ ] Uniform Transfer to Minors Act [ ] Corporation [ ] Partnership [ ] Other_____________________________________ FOR SELF-DIRECTED IRAs ONLY (see order form instructions on reverse side) [ ] IRA SSN of Beneficial Owner: - - ------ -------- -------- (9) ACKNOWLEDGMENT AND SIGNATURE Please read the following acknowledgment carefully. I agree that after receipt by Benjamin Franklin Bancorp, this Stock Order Form may not be modified or withdrawn without Benjamin Franklin Bancorp's consent, and that if withdrawal from a deposit account has been authorized above, the amount will not otherwise be available for withdrawal. Under penalty of perjury, I certify that (1) the Social Security or Tax ID information and all other information provided hereon are true, correct and complete, (2) I AM PURCHASING SOLELY FOR MY OWN ACCOUNT, AND THERE IS NO AGREEMENT OR UNDERSTANDING REGARDING THE SALE OR TRANSFER OF THE SHARES, OR MY RIGHT TO SUBSCRIBE FOR SHARES and (3) I am not subject to backup withholding tax. [Cross out (3) if you have been notified by the IRS that you are subject to backup withholding.] I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK ARE NOT A DEPOSIT OR ACCOUNT AND ARE NOT FEDERALLY INSURED, AND ARE NOT GUARANTEED BY BENJAMIN FRANKLIN BANCORP OR BY THE FEDERAL GOVERNMENT. I further certify that, before purchasing the common stock of Benjamin Franklin Bancorp, I received the Prospectus dated ____ __, ____. The Prospectus that I received contains disclosure concerning the nature of the common stock being offered and describes the risks involved in the investment, beginning on page ___, in the section entitled "Risk Factors". By subscribing for or purchasing shares of Benjamin Franklin Bancorp I hereby approve and consent to the consummation of the Chart Bank merger, as described in the enclosed Prospectus. SUBSCRIPTION RIGHTS PERTAIN TO THOSE ELIGIBLE TO SUBSCRIBE IN THE SUBSCRIPTION OFFERING. FEDERAL AND STATE REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING, OR ENTERING INTO AN AGREEMENT, DIRECTLY OR INDIRECTLY, TO TRANSFER THE LEGAL OR BENEFICIAL OWNERSHIP OF SUBSCRIPTION RIGHTS OR THE UNDERLYING SECURITIES TO THE ACCOUNT OF ANOTHER. BENJAMIN FRANKLIN BANCORP WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT IT BECOMES AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS, AND WILL NOT HONOR ORDERS KNOWN TO INVOLVE SUCH TRANSFER. --------------------------------------- ORDER NOT VALID UNLESS SIGNED ONE SIGNATURE REQUIRED, UNLESS SECTION (4) OF THIS FORM INCLUDES ACCOUNTS REQUIRING MORE THAN ONE SIGNATURE TO AUTHORIZE WITHDRAWAL IF SIGNING AS A CUSTODIAN, CORPORATE OFFICER, ETC. PLEASE INCLUDE YOUR FULL TITLE. - --------------------------------------- --------------------------------------- Signature (title, if applicable) (Date) Signature (title, if applicable) (Date) QUESTIONS? See the reverse side of this form, or call our Stock Information Center toll free at (800) 290-0793, Monday through Friday from 9:30 a.m. to 4:00 p.m., Massachusetts time. BENJAMIN FRANKLIN BANCORP, INC. STOCK ORDER FORM INSTRUCTIONS SECTIONS (1) AND (2)-- NUMBER OF SHARES AND TOTAL PAYMENT DUE. Fill in the number of shares that you wish to subscribe for and the Total Payment Due. Calculate the Total Payment Due by multiplying the number of shares by the $10.00 price per share. The minimum purchase is 25 shares. In the Subscription Offering and in the Community Offering, the maximum purchase is 15,000 shares ($150,000). The maximum limit applies to any individual/individuals exercising subscription rights through a single qualifying deposit account held jointly. Further, no person, either alone or together with associates of or persons acting in concert with such person, may purchase in the aggregate more than 25,000 shares ($250,000) of common stock, in all categories of the stock offering combined. Please see the prospectus section entitled "The Conversion and the Offering -- Limitations on Common Stock Purchases" for more specific information. By signing this form, you are certifying that your order does not conflict with these purchase limitations. SECTION (3) -- PAYMENT BY CHECK OR MONEY ORDER. Payment may be made by check, bank check or money order payable directly to Benjamin Franklin Bancorp, Inc. These will be cashed upon receipt. Indicate the amount remitted. Interest will be paid at our regular passbook savings rate until the offering is completed. You may not remit a Benjamin Franklin Bank line of credit check or a third party check that is endorsed and made payable to Benjamin Franklin Bancorp, Inc. Wire transfers will not be accepted. SECTION (4) -- PAYMENT BY ACCOUNT WITHDRAWAL. Payment may be made by authorizing withdrawal from Benjamin Franklin Bank deposit accounts. Indicate the Benjamin Franklin Bank account number(s) and the amount(s) you want withdrawn. Funds designated for withdrawal must be available within the account(s) at the time this stock order form is received. Funds will not be withdrawn prior to completion of the offering period, but upon receipt of your order, a hold will be placed on the dollar amount(s) designated on this form, making the amount(s) unavailable to you. You will continue to earn interest within the account(s) at the contractual rate. Note that you may not designate Benjamin Franklin Bank regular checking, money market checking, NOW accounts and IRA accounts for direct withdrawal on this form. For IRA guidance, please contact the Stock Information Center -- preferably at least two weeks before the ___________, 2005 offering deadline. SECTION (5) -- PURCHASER INFORMATION. Please check the one box that applies to the purchaser(s) listed in Section 7 of this form. Purchase priorities are based on eligibility dates. If you checked box (a) or (b), list all deposit account numbers that the purchaser(s) may have had ownership in as of the applicable eligibility date. Include all forms of account ownership (individual, joint, IRA, etc.) If purchasing shares for a minor, list only the minor's eligible accounts. If purchasing shares for a corporation or partnership, list only those entities' eligible accounts. Attach a separate page, if necessary. FAILURE TO COMPLETE THIS SECTION, OR PROVIDING INCORRECT OR INCOMPLETE INFORMATION, COULD RESULT IN A LOSS OF PART OR ALL OF YOUR SHARE ALLOCATION IN THE EVENT OF AN OVERSUBSCRIPTION. Boxes (a), (b) and (c) apply to orders placed in the SUBSCRIPTION OFFERING. Box (c) applies to officers, directors, trustees and employees of Benjamin Franklin Bank who do not qualify in categories (a) or (b). Boxes (d) and (e) apply to a COMMUNITY OFFERING, if held. Orders placed in the Subscription Offering will take preference over orders placed in a Community Offering. See "The Conversion and the Stock Offering" section of the Prospectus for further details about the Subscription Offering and Community Offering, and the method for allocating shares in the event of an oversubscription. SECTION (6) -- MANAGEMENT, EMPLOYEES AND CORPORATORS. Check the box(es), if applicable. Immediate family includes spouse, parents, siblings and children who live in the same house as the director, officer or employee. The term "associate" is defined on p.___ of the Prospectus. SECTION (7) -- STOCK REGISTRATION. Clearly PRINT the name(s) in which you want the shares registered and the mailing address for all correspondence related to this order, including a stock certificate. Each Stock Order Form will generate one stock certificate, subject to the stock allocation provisions described in the Prospectus. IMPORTANT: If you checked boxes (a), (b) or (c) in Section 5 of this form, you may not add the names of persons/entities who qualify in a lower purchase priority than yours. A Social Security or Tax ID Number must be provided. The first number listed will be identified with the stock certificate for tax reporting purposes. Listing at least one phone number is important, in the event we need to contact you about this form. NOTE FOR NASD MEMBERS: If you are a member of the NASD ("National Association of Securities Dealers"), or a person affiliated or associated with an NASD member, you may have additional reporting requirements. Please report this subscription in writing to the applicable NASD member within one day of payment thereof. SECTION (8) -- FORM OF STOCK OWNERSHIP. For reasons of clarity and standardization, the stock transfer industry has developed uniform stockholder registrations for issuance of stock certificates. Beneficiaries may not be named on stock registration. If you have any questions on wills, estates, beneficiaries, etc., please consult your legal advisor. When registering stock, do not use two initials -- use full first name, middle initial, and last name. Omit words that do not affect ownership such as "Dr.", "Mrs.", etc. Check the one box that applies. Buying Stock Individually -- Used when shares are registered in the name of only one owner. To qualify in the Subscription Offering, the purchaser named in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on either May 31, 2003, or December 31, 2004. Buying Stock Jointly: Joint Tenants -- Joint Tenancy (with Right of Survivorship) may be specified to identify two or more owners where ownership is intended to pass automatically to the surviving tenant(s). All owners must agree to the transfer or sale of shares. To qualify in the Subscription Offering, all purchasers named in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on the same eligibility date (either May 31, 2003 or December 31, 2004.) Tenants in Common -- May be specified to identify two or more owners where, upon the death of one co-tenant, ownership of the stock will be held by the surviving co-tenant(s) and by the heirs of the deceased co-tenant. All owners must agree to the transfer or sale of shares. To qualify in the Subscription Offering, all purchasers named in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on the same eligibility date (either May 31, 2003, or December 31, 2004.) Buying Stock for a Minor -- Shares may be held in the name of a custodian for a minor under the Uniform Transfer to Minors Act. To qualify in the Subscription Offering, the minor (not the custodian) named in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on either May 31, 2003 or December 31, 2004. The standard abbreviation for Custodian is CUST, while the Uniform Transfer to Minors Act is UTMA, followed by the state abbreviations. For example, stock held by John Smith as custodian for Susan Smith under the Massachusetts Uniform Transfer to Minors Act, should be registered as John Smith, CUST Susan Smith UTMAMA (list only the minor's social security number). Buying Stock for a Corporation/Partnership -- On the first name line, indicate the name of the corporation or partnership and indicate that entity's Tax ID Number for reporting purposes. To qualify in the Subscription Offering, the corporation or partnership listed in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on either May 31, 2003 or December 31, 2004. Buying Stock in a Trust/Fiduciary Capacity -- Indicate the name of the fiduciary and the capacity under which they are acting (for example, "Executor"), or the name of the trust, the trustees, and the date of the trust. Indicate the Tax ID Number to be used for reporting purposes. To qualify in the Subscription Offering, the entity listed in Section 7 of this form must have had an eligible account at Benjamin Franklin Bank on either May 31, 2003 or December 31, 2004. Buying Stock in a Self-Directed IRA [for broker use only] -- Registration should reflect the custodian or trustee firm's registration requirements. For example, on the first name line indicate the name of the brokerage firm, followed by CUST or TRUSTEE. On the second name line, indicate the name of the beneficial owner (for example, "FBO JOHN SMITH IRA"). You can indicate an account number or other identifying information, and the firm's address and department to which all correspondence should be mailed, including a stock certificate. Indicate the Tax ID Number under which the firm's IRAs are reported. SECTION (9) -- ACKNOWLEDGMENT AND SIGNATURE. Sign and date this form where indicated. Before you sign, please carefully review the information you provided and read the acknowledgment. Only one signature is required, unless any account listed in Section 4 of this form requires more than one signature to authorize a withdrawal. Deliver your completed Stock Order Form, with full payment (or withdrawal authorization), so that it is received (not postmarked) at the Stock Information Center by 10:00 a.m. Massachusetts Time, on ________,____ 2005. Please review the Prospectus carefully before making an investment decision. We are not required to accept Stock Order Forms that are found to be deficient or incorrect, or that do not include proper payment and required signatures. A POSTAGE-PAID REPLY ENVELOPE IS INCLUDED. IF SENDING VIA OVERNIGHT DELIVERY, OR FOR HAND-DELIVERY: Benjamin Franklin Bank, Attn: Stock Information Center, 58 Main Street, Franklin, MA 02038 QUESTIONS? Call our Stock Information Center toll free at (800) 290-0793, Monday through Friday from 9:30 a.m. to 4:00 p.m., Massachusetts Time. EX-99.7 12 b52576a1exv99w7.txt EX-99.7 PROSPECTUS SUPPLEMENT FOR PARTICIANTS IN THE 401(K) PLAN EXHIBIT 99.7 PROSPECTUS SUPPLEMENT INTERESTS IN BENJAMIN FRANKLIN BANK 401(K) PLAN AND OFFERING OF UP TO [________] SHARES OF BENJAMIN FRANKLIN BANCORP, INC. COMMON STOCK (NO PAR VALUE) -------------------- This prospectus supplement relates to the offer and sale to participants in the Benjamin Franklin Bank 401(k) Plan of participation interests and shares of common stock of Benjamin Franklin Bancorp the holding company of Benjamin Franklin Bank. The Board of Trustees of Benjamin Franklin Bancorp has adopted a plan to convert Benjamin Franklin Bancorp from its current form as a Massachusetts-chartered mutual holding company, known as Benjamin Franklin Bancorp, M.H.C., to a Massachusetts-chartered business corporation and stock holding company. As part of the conversion, Benjamin Franklin Bancorp will simultaneously offer shares of its common stock to the public under certain purchase priorities in the plan of conversion. At the same time as the conversion, Benjamin Franklin Bancorp will acquire Chart Bank of Waltham, Massachusetts. In connection with the offering of Benjamin Franklin Bancorp common stock, Benjamin Franklin Bank 401(k) Plan participants will be permitted to direct the trustee of the 401(k) Plan to use their current account balances to subscribe for and purchase shares of Benjamin Franklin Bancorp common stock through the Employer Stock Fund. Based upon the value of the 401(k) Plan assets at [DATE], the trustee of the 401(k) Plan could purchase up to [________] shares of Benjamin Franklin Bancorp common stock assuming a purchase price of $10 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the trustee of the 401(k) Plan to invest all or a portion of their 401(k) Plan accounts in Benjamin Franklin Bancorp common stock. The prospectus dated [DATE], 2005, of Benjamin Franklin Bancorp, which we have provided to you with this prospectus supplement, includes detailed information regarding the conversion, the Chart Bank acquisition, the common stock and the financial condition, results of operations and business of Benjamin Franklin Bancorp and Benjamin Franklin Bank. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference. Please refer to "Risk Factors" beginning on page __ of the prospectus. THE SECURITIES OFFERED IN THIS SUPPLEMENT ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. NONE OF THE SECURITIES AND EXCHANGE COMMISSION, THE MASSACHUSETTS COMMISSIONER OF BANKS NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED OF THESE THE INTERESTS IN THE PLAN OR THE i OFFERING OF THE COMMON STOCK OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This prospectus supplement may be used only in connection with offers and sales by Benjamin Franklin Bancorp of interests or shares of common stock pursuant to the 401(k) Plan. No one may use this prospectus supplement to reoffer or resell interests or shares of common stock acquired through the 401(k) Plan. You should rely only on the information contained in this prospectus supplement and the attached prospectus. Benjamin Franklin Bancorp, Inc. and the Plan have not authorized anyone to provide you with information that is different. This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock shall under any circumstances imply that there has been no change in the affairs of Benjamin Franklin Bancorp, Inc. or any of its subsidiaries or the Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement. The date of this Prospectus Supplement is [DATE], 2005. ii TABLE OF CONTENTS
Page THE OFFERING.................................................................................1 Securities Offered...................................................................1 Election to Purchase the Common Stock in the Conversion..............................1 Value of Participation Interests.....................................................1 Method of Directing Transfer.........................................................2 Time for Directing Transfer..........................................................2 Irrevocability of Transfer Direction.................................................2 Direction to Purchase the Common Stock After the Conversion..........................2 Common Stock in the Conversion will be Purchased at $10 Per Share....................2 Nature of a Participant's Interest in the Employer Stock Fund........................3 Voting and Tender Rights of the Common Stock.........................................4 DESCRIPTION OF THE PLAN......................................................................5 Introduction.........................................................................5 Eligibility and Participation........................................................5 Contributions Under the Plan.........................................................5 Limitations on Contributions.........................................................6 Investment of Contributions..........................................................7 Benefits Under the Plan..............................................................9 Withdrawals and Distributions From the 401(k) Plan...................................9 Administration of the Plan..........................................................10 Reports to Plan Participants........................................................10 Plan Administrator..................................................................10 Amendment and Termination...........................................................10 Merger, Consolidation or Transfer...................................................11 Federal Income Tax Consequences.....................................................11 ERISA and Other Qualification.......................................................12 Restrictions on Resale..............................................................12 SEC Reporting and Short-Swing Profit Liability......................................12 LEGAL OPINION...............................................................................13
iii THE OFFERING SECURITIES OFFERED The securities offered in connection with this prospectus supplement are participation interests in the 401(k) Plan. At [DATE], there were sufficient funds in the Plan to purchase up to approximately [____] shares of Benjamin Franklin Bancorp, Inc. common stock in the offering. Benjamin Franklin Bancorp, the holding company for Benjamin Franklin Bank, is the issuer of the common stock. Only employees of Benjamin Franklin Bank may participate in the 401(k) Plan. The interests offered under this prospectus supplement are conditioned on the consummation of the conversion. Your investment in the Employer Stock Fund in connection with the conversion is subject to priorities set forth in the plan of conversion of Benjamin Franklin Bancorp. This prospectus supplement contains information regarding the 401(k) Plan. The attached prospectus contains information regarding the conversion, acquisition and the financial condition, results of operations and business of Benjamin Franklin Bancorp, Benjamin Franklin Bank and Chart Bank. The address of the principal executive offices of Benjamin Franklin Bancorp and Benjamin Franklin Bank is 58 Main Street, Franklin, Massachusetts 02038-0309. Their telephone number is (508) 528-7000. ELECTION TO PURCHASE THE COMMON STOCK IN THE CONVERSION In connection with the conversion, Benjamin Franklin Bank has amended the 401(k) Plan to permit you to direct the trustee to transfer all or part of the funds which represent your beneficial interest in the assets of the 401(k) Plan to the Employer Stock Fund. The trustee of the 401(k) Plan will subscribe for common stock offered for sale in connection with the conversion in accordance with each participant's direction. In the event the conversion offering is oversubscribed and some or all of your funds cannot be used to purchase common stock in the conversion offering, the trustee will reallocate the amount not invested in common stock on a proportionate basis to the other investment options you have selected. All plan participants are eligible to direct a transfer of funds to the Employer Stock Fund. However, such directions are subject to the purchase priorities in the plan of conversion of Benjamin Franklin Bancorp. Participants who are depositors with accounts at Benjamin Franklin Bank with aggregate balances of at least $50.00 on May 31, 2003 have first priority, and participants who are depositors (other than Benjamin Franklin Bank officers, directors, trustees, corporators and their associates) with accounts at Benjamin Franklin Bank with aggregate balances of at least $50.00 on [DATE] have second priority. No 401(k) Plan participant may direct the trustee to transfer in excess of 20% of the funds which represent such participant's beneficial interest in the assets of the 401(k) Plan to the Employer Stock Fund unless such participant has waived this limitation and signed a certificate that he or she understands the risk of Benjamin Franklin Bancorp stock ownership. VALUE OF PLAN ASSETS As of [DATE], the market value of the assets of the 401(k) Plan totaled $__________. The value of plan assets represents the past contributions to the 401(k) Plan by or on behalf of the participants of the 401(k) Plan, plus or minus earnings or losses on the contributions, less previous withdrawals. METHOD OF DIRECTING TRANSFER If you want to use your 401(k) Plan funds to purchase common stock in the Benjamin Franklin Bancorp offering, you must make a transfer of funds into the Employer Stock Fund from the other 1 investment funds in which your funds are invested. You must do this by completing the attached form and submitting it to Kathy Sawyer. The trustee will submit an order form on your behalf to purchase the maximum number of shares in the offering that can be purchased with the funds you transferred to the Employer Stock Fund. If you do not wish to make such an election at this time, you do not need to take any action. TIME FOR DIRECTING TRANSFER The deadline for submitting a direction to transfer amounts to the Employer Stock Fund in connection with the conversion is ten (10) days prior to [DATE], 2005, the Expiration Date of the offering. You should return the Contribution and Investment Form attached to this prospectus supplement to the Kathy Sawyer by [TIME], Massachusetts time, on [DATE], 2005. IRREVOCABILITY OF TRANSFER DIRECTION You may not revoke your direction transfer amounts credited to your account in the Plan to the Employer Stock Fund for the purchase of stock in the offering. Pending completion of the initial public offering, the funds you transfer to the Employer Stock Fund will be held in an interest-bearing account at Benjamin Franklin Bank on the same terms as other subscribers in the initial public offering, as described in the attached prospectus. DIRECTION TO PURCHASE THE COMMON STOCK AFTER THE CONVERSION After the conversion, you may direct the trustee of the 401(k) Plan to transfer a certain percentage (in multiples of not less than 1%) of the net value of your interests in the trust fund to the Employer Stock Fund or to the other investment funds available under the 401(k) Plan. Alternatively, you may direct the trustee of the 401(k) Plan to transfer a certain percentage of your interest in the Employer Stock Fund to the trust fund and invested in accordance with the terms of the 401(k) Plan. You may direct the trustee to invest future contributions made to the 401(k) Plan on your behalf in the Employer Stock Fund or any of the other funds available under the 401(k) Plan. Following your initial election, you may change the allocation of your interest in the Employer Stock Fund on the first day of the beginning of the next payroll period by submitting an appropriate form to the plan administrator. You may obtain a form from the Kathy Sawyer. Special restrictions may apply to transfers directed by those participants who are officers, directors and principal shareholders of Benjamin Franklin Bank who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934. COMMON STOCK IN THE CONVERSION WILL BE PURCHASED AT $10 PER SHARE The trustee will use the funds transferred to the Employer Stock Fund to purchase shares of common stock in the conversion. The trustee will pay the same price for shares of common stock as all other persons who purchase shares of the common stock in the conversion. Post-conversion purchases of common stock in the Employer Stock Fund will be made at prevailing market prices. These prices may be higher or lower than the conversion price of $10 per share of common stock. NATURE OF A PARTICIPANT'S INTEREST IN THE EMPLOYER STOCK FUND With the other investment funds in the 401(k) Plan, the funds purchase their underlying investment every pay period. Each investment fund's unit value is updated every day based on the total value of its underlying investments and the number of units held in the fund. Distributions, withdrawals, loans and investment transfers occur without having to wait until the end of the calendar quarter. Loan 2 and transfer requests are made through the Voice Response System ("VRS"). However, the Employer Stock Fund differs from the other investment options in the 401(k) Plan in the following ways: - Any of your elective deferrals that you direct into the Employer Stock Fund are invested in the fund every pay period (as your deferrals are withheld from each paycheck). However, your money is invested in a money market fund and earns interest until the end of the calendar quarter, at which time the cash is used to buy Benjamin Franklin Bancorp common stock. - The Employer Stock Fund's unit values are determined only at the end of a calendar quarter, based on the market value of all Benjamin Franklin Bancorp common stock the fund holds. The units you hold do not represent an equivalent number of Benjamin Franklin Bancorp common stock, but instead reflect your portion of the fund's holdings. - The value of your investment in the Employer Stock Fund that you can obtain from the VRS will be its value based on the Employer Stock Fund unit value at the close of the prior calendar quarter plus your deferrals, which are being held in money market fund until the end of the calendar quarter. - If you invest in the Employer Stock Fund, all distributions and investment transfers you make involving that fund are done only at the end of the applicable calendar quarter using the appropriate administrative form, which must reach Kathy Sawyer at least two weeks before the end of the calendar quarter. Transfers into or out of the Employer Stock Fund cannot be initiated in the VRS. - Withdrawals can only be drawn from your Employer Stock Fund at the end of a calendar quarter, unlike the other funds, which can be drawn against on any day. Therefore, withdrawals will be drawn first from the other funds, not your interest in the Employer Stock Fund. Only if there is not enough money in your other funds to meet your withdrawal amount will the remainder be drawn from your interest in the Employer Stock Fund at the end of the calendar quarter. In that event, the entire amount of your withdrawal will not be made until after the end of the calendar quarter. - When you request from the VRS the amount available for loan, the amount will not include your interest in the Employer Stock Fund. If you wish to borrow from your interest in the Employer Stock Fund, you must first transfer an amount out of the Employer Stock Fund, equal to twice the amount you wish to borrow, into one of the other investment funds. Then you can follow the usual procedures to request a loan from that investment fund. VOTING AND TENDER RIGHTS OF THE COMMON STOCK The plan administrator generally will exercise voting rights attributable to all of the common stock held by the Employer Stock Fund. However, in the event that a significant corporate transaction is proposed to the shareholders of Benjamin Franklin Bancorp, such as a tender offer, the trustees of the 401(k) Plan may pass-through to you the voting or tender rights of shares in the Employer Stock Fund that represent your interest in the fund. The number of shares of the common stock held in the Employer Stock Fund that the trustee votes in the affirmative and negative on each matter shall be proportionate to the number of voting instruction rights exercised by participants in the affirmative and negative, respectively. For matters not involving a tender offer, the plan administrator will direct the vote of allocated shares and participants will not have an opportunity to direct the voting of shares. 3 DESCRIPTION OF THE PLAN INTRODUCTION Effective May 1, 1993, Benjamin Franklin Bank adopted the Benjamin Franklin Bank 401(k) Plan in the SBERA Common and Collective Trust. The 401(k) plan was amended and restated, effective January 1, 2004, and was subsequently amended on October 89, 2004 to permit 401(k) Plan participants to direct the trustee to transfer all or a part of the funds which represent such participant's beneficial interest in the assets of the 401(k) Plan to the Employer Stock Fund. Benjamin Franklin Bank intends for the 401(k) Plan to comply, in form and in operation, with all applicable provisions of the Internal Revenue Code and the Employee Retirement Income Security Act, most commonly referred to as "ERISA." Benjamin Franklin Bank may amend the 401(k) Plan from time to time in the future to ensure continued compliance with these laws. Benjamin Franklin Bank may also amend the 401(k) Plan from time to time in the future to add, modify, or eliminate certain features of the plan, as it sees fit. As a plan subject to ERISA, federal law provides you with various rights and protections as a plan participant. Although the 401(k) Plan is subject to many of the provisions of ERISA, your benefits under the 401(k) Plan are not guaranteed by the Pension Benefit Guaranty Corporation. Applicable federal tax law requires the 401(k) Plan to impose substantial restrictions on your right to withdraw amounts held under the 401(k) Plan prior to your termination of employment with Benjamin Franklin Bank. Federal law may also impose an excise tax on withdrawals made from the 401(k) Plan prior to your attainment of age 59 1/2, subject to certain exceptions. Reference to Full Text of Plan. The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. Benjamin Franklin Bank qualifies these summaries in their entirety by the full text of the 401(k) Plan. You may obtain copies of the 401(k) Plan document by sending a request to: Plan Administrator, Thomas Forese, Jr., Savings Banks Employees Retirement Association, 69 Cummings Park, Woburn, Massachusetts 01801. You should carefully read the full text of the 401(k) Plan document to understand your rights and obligations under the 401(k) Plan. ELIGIBILITY AND PARTICIPATION Any employee of Benjamin Franklin Bank may participate in the 401(k) Plan as of the first day of the month coinciding with or next following completion of three months of service and attainment of age twenty-one. For purposes of the 401(k) Plan, you do not have to complete a designated number of hours of service within the three-month period. As of [DATE], approximately ______ out of _____ then eligible employees had elected to participate in the 401(k) Plan. CONTRIBUTIONS UNDER THE PLAN 401(k) Plan Participant Contributions. The 401(k) Plan permits each participant to make pre-tax salary deferrals to the 401(k) Plan in amounts ranging from 1% to 75% of compensation, subject to annual dollar limits imposed by law. Participants in the 401(k) Plan may modify the amount contributed to the 401(k) Plan, effective on the first day of the beginning of the next payroll period, by submitting an appropriate form to the plan administrator. 4 Benjamin Franklin Bank Contributions. Pursuant to the 401(k) Plan, Benjamin Franklin Bank makes matching contributions equal to 200% of each participant's deferred compensation for the 401(k) Plan each year, up to a maximum of 3% of such participant's compensation. Amounts deferred in excess of 3% of a participant's compensation are not subject to matching contributions. LIMITATIONS ON CONTRIBUTIONS Limitation on Employee Salary Deferral. Although the 401(k) Plan permits you to defer up to 75% of your compensation, by law, your total pre-tax deferrals under the 401(k) Plan, together with similar plans, may not exceed $14,000 for 2005. The IRS will periodically increase this annual limitation. Contributions in excess of this limitation ("excess deferrals") will be included in an affected participant's gross income for federal income tax purposes in the year they are made. In addition, any such excess deferral will again be subject to federal income tax when distributed by the 401(k) Plan to the participant, unless the excess deferral (together with any income allocable thereto) is distributed to the participant not later than the first April 15th following the close of the taxable year in which the excess deferral is made. Any income on the excess deferral that is distributed not later than such date shall be treated, for federal income tax purposes, as earned and received by the participant in the taxable year in which the distribution is made. Limitations on Annual Additions and Benefits. Under the requirements of the Internal Revenue Code, the 401(k) Plan provides that the total amount of contributions and forfeitures (annual additions) allocated to participants under the 401(k) Plan and other defined contribution plans during any plan year may not exceed $42,000 for 2005. Limitation on Plan Contributions for Highly Compensated Employees. Special provisions of the Code limit the amount of salary deferrals and matching contributions that may be made to the 401(k) Plan in any year on behalf of highly compensated employees in relation to the amount of deferrals and matching contributions made by or on behalf of all other employees eligible to participate in the 401(k) Plan. If these limitations are exceeded, the level of deferrals by highly compensated employees must be adjusted. In general, a Highly Compensated Employee includes any employee who (1) was a five percent owner of the employer at any time during the year or preceding year; or (2) had compensation for the preceding year in excess of $90,000 and, if the employer so elects, was in the top 20% of employees by compensation for the year. The dollar amounts in the foregoing sentence are for 2005. Such amounts may be adjusted annually to reflect increases in the cost of living. In order to prevent the disqualification of the 401(k) Plan, any amount contributed by Highly Compensated Employees that exceed the average deferral limitation in any plan year ("excess contributions"), together with any income allocable thereto, must be distributed to such Highly Compensated Employees before the close of the following plan year. Benjamin Franklin Bank will be subject to a 10% excise tax on any excess contributions unless such excess contributions, together with any income allocable thereto, either are recharacterized or are distributed before the close of the first 2 1/2 months following the plan year to which such excess contributions relate. Top-Heavy Plan Requirements. If for any plan year the 401(k) Plan is a Top-Heavy Plan (as defined below), Benjamin Franklin Bank may be required to make certain minimum contributions to the 401(k) Plan on behalf of non-key employees (as defined below). In general, the 401(k) Plan will be regarded as a "Top-Heavy Plan" for any plan year if, as of the last day of the preceding plan year, the aggregate balance of the accounts of participants who are Key 5 Employees (as defined below) exceeds 60% of the aggregate balance of the accounts of all participants. Key Employees generally include any employee who, at any time during the plan year or any of the four preceding plan years, is (1) an officer of Benjamin Franklin Bank having annual compensation in excess of $135,000 who is in an administrative or policy-making capacity, (2) a more than 5% direct or indirect owner of Benjamin Franklin Bank, (or a family member of a more than 5% owner) or (3) a 1% or more direct or indirect owner of Benjamin Franklin Bank having annual compensation in excess of $150,000. The dollar amounts in the foregoing sentence are for 2005. INVESTMENT OF CONTRIBUTIONS All amounts credited to participants' accounts under the 401(k) Plan are held in trust. A trustee designated by Benjamin Franklin Bank administers the trust. Immediately prior to [INSERT DATE OF PROSPECTUS HERE], the 401(k) Plan offered the following investment choices: Money Market Account. Provides income consistent with preservation of principal. SBERA's Investment Policy Statement requires the Money Market Account to be invested exclusively in U. S. Treasury or other obligations guaranteed by the U. S. Government or its agencies. All securities in this account must have a maturity of six (6) months or less. Bond Account. Aims to match the performance of the Lehman Brothers Aggregate Bond Index, the most widely recognized benchmark for U. S. debt. The Index measures the performance of the total universe of U. S. government and other investment-grade fixed income debt, such as corporate and international dollar-denominated bonds, mortgage-backed and asset-backed securities. Equity Account. Seeks long-term growth of capital and income by investing in common stocks of domestic and foreign companies. The account is managed by seven investment advisors, each with a different investment mandate. Large Cap Value Account. The Large Cap Value Account investment philosophy combines detailed fundamental research, bottom-up stock selection, portfolio construction, and disciplined management of portfolio volatility to achieve strong risk-adjusted returns over full market cycles. Mid-Large Cap Value Account. The investment objective of the Mid-Large Cap Value Account is to seek a superior total return with only a moderate degree of risk. The account seeks to achieve its investment objective by investing primarily in U. S. dollar-denominated equity securities of companies with market capitalizations of at least $2 Billion. The account seeks to achieve a total return greater than the S & P 500 over a full market cycle and indices comprised of value-oriented stocks over shorter periods. Index 500 Account. Aims to duplicate the investment results of the Standard and Poor's 500 Index by holding all 500 stocks in relatively the same proportions as does the S & P 500 Index. This is often referred to as "complete replication". International Equity Account. The objective is to obtain long-term capital growth through a diversified portfolio of marketable equity securities of foreign companies. The performance objective is to out-perform the EAFE Index over a market cycle. Small Cap Value Account. A domestic common stock portfolio comprised of value-oriented stocks whose sector weights are relatively similar to those of the Russell 200 Index. 6 Small Cap Growth Account. Investment objective is capital appreciation through investment in the common stock of high-quality emerging companies with superior earnings, growth expectations and attractive stock market valuations. LifePath Accounts. The LifePath series are designed to be complete investment solutions for individuals. Each LifePath strategy is a broadly diversified portfolio, designed for both a particular risk tolerance and when the money will be needed. The LifePath series include LifePath 2040, 2030, 2020, 2010 and LifePath Retirement. The number, as in LifePath 2020, represents the approximate year when you plan to start withdrawing your money. As time goes by, the investment managers gradually adjust the portfolio's mix to compensate for the level of risk that is appropriate for the number of years before account drawdown. LifePath Retirement is for those already in retirement and withdrawing funds. Large Cap Growth Account. INTECH strategies attempt to provide consistent upside potential combined with downside protection. They believe that they can add value using natural stock price volatility through a mathematically based risk controlled process. INTECH's mathematical investment strategies have produced excess returns net of fees since the inception date. In connection with the conversion, the 401(k) Plan now provides the Employer Stock Fund as an additional choice to these investment alternatives. The Employer Stock Fund will invest primarily in the common stock of Benjamin Franklin Bancorp. Participants in the 401(k) Plan may direct the trustee to invest all or a portion of their 401(k) Plan account balance in the Employer Stock Fund. On the first day of the beginning of the next payroll period you may elect (in increments of 1%), to have both past and future contributions and additions to your accounts invested in the Employer Stock Fund. Your election becomes effective as of the [LAST DAY] of the payroll period for which you make the election, provided you file the appropriate forms with the plan administrator. No 401(k) Plan participant may direct the trustee to transfer in excess of 20% of the funds which represent such participant's beneficial interest in the assets of the 401(k) Plan to the Employer Stock Fund unless such participant has waived this limitation and signed a certificate that he or she understands the risk of Benjamin Franklin Bancorp stock ownership. A. PREVIOUS FUNDS. Prior to the conversion and implementation of the Employer Stock Fund, contributions under the 401(k) Plan were invested in the funds specified below. The annual percentage return on these funds for the prior three years was:
2002 2003 2004 ---- ---- ---- Money Market Account % % % Bond Account Equity Account Large Cap Value Account Mid-Large Cap Value Account Index 500 Account International Equity Account Small Cap Value Account Small Cap Growth Account Employer Stock Account LifePath Accounts Large Cap Growth Account
7 B. EMPLOYER STOCK FUND. The Employer Stock Fund will consist of investments primarily in the common stock of Benjamin Franklin Bancorp made on and after the effective date of the conversion. After the conversion, the trustee of the 401(k) Plan will, to the extent practicable, use all amounts held by it in the Employer Stock Fund, including cash dividends paid on the common stock held in the fund, to purchase shares of common stock of Benjamin Franklin Bancorp. Benjamin Franklin Bank expects that the trustee will make all purchases of common stock at prevailing market prices. As of the date of this prospectus supplement, none of the shares of common stock have been issued or are outstanding and there is no established market for the common stock of Benjamin Franklin Bancorp. Accordingly, there is no record of the historical performance of the Employer Stock Fund. Performance of the Employer Stock Fund depends on a number of factors, including the financial condition and profitability of Benjamin Franklin Bancorp and Benjamin Franklin Bank and market conditions for the common stock generally. Investments in the Employer Stock Fund may involve certain special risks in investments in the common stock of Benjamin Franklin Bancorp. For a discussion of these risk factors, see "Risk Factors" in the prospectus. No 401(k) Plan participant may direct the trustee to transfer in excess of 20% of the funds which represent such participant's beneficial interest in the assets of the 401(k) Plan to the Employer Stock Fund unless such participant has waived this limitation and signed a certificate that he or she understands the risk of Benjamin Franklin Bancorp stock ownership. BENEFITS UNDER THE PLAN Vesting. At all times, you have a fully vested, nonforfeitable interest in your accounts under the 401(k) Plan. WITHDRAWALS AND DISTRIBUTIONS FROM THE 401(K) PLAN Withdrawals Prior to Termination of Employment. You may receive in-service distributions from the 401(k) Plan under limited circumstances in the form of hardship distributions and loans. You can apply for a loan from the 401(k) Plan by submitting a loan application to the plan administrator. Subject to nondiscriminatory approval by Benjamin Franklin Bank, you may also be eligible for hardship withdrawals. In order to qualify for a hardship withdrawal, you must have an immediate and substantial need to meet certain expenses and have no other reasonably available resources to meet the financial need. If you qualify for a hardship distribution, the trustee will make the distribution pro rata from the investment funds in which you have invested your account balances. Hardship withdrawals may not be paid back to the 401(k) Plan. Distribution Upon Retirement or Disability. Participants shall receive benefits as soon as administratively feasible following the close of a valuation period during which the distribution is requested. Distributions are payable to participants in lump sum unless you submit a form requesting installment payments to the plan administrator. Distribution Upon Death. If you die prior to your benefits being paid from the 401(k) Plan, your benefits will be paid to your surviving spouse or beneficiary under one or more of the forms available under the 401(k) Plan. 8 Distribution Upon Termination for Any Other Reason. If you terminate employment for any reason other than retirement, disability or death, the trustee will make your distribution on your normal retirement date, unless you request otherwise. Nonalienation of Benefits. Except with respect to federal income tax withholding and as provided with respect to a qualified domestic relations order, benefits payable under the 401(k) Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to benefits payable under the 401(k) Plan shall be void. However, there is an exception for a Qualified Domestic Relations Order (QDRO) or if you are a plan fiduciary and you are found guilty of a violation of the law involving the assets of the 401(k) Plan. ADMINISTRATION OF THE PLAN Trustees. Benjamin Franklin Bank has designated Thomas Forese, Jr., Savings Bank Employees Retirement Association as trustee of the Employer Stock Fund. The trustee with respect to the 401(k) Plan is the named fiduciary of the 401(k) Plan for purposes of ERISA. The trustee receives, holds and invests the contributions to the 401(k) Plan in trust and distributes them to participants and beneficiaries in accordance with the terms of the 401(k) Plan and the directions of the plan administrator. The trustee is responsible for investment of the assets of the trust. REPORTS TO PLAN PARTICIPANTS The plan administrator will furnish you a statement [AT LEAST QUARTERLY] showing (i) the balance in your account as of the end of that period, (ii) the amount of contributions allocated to your account for that period, and (iii) the adjustments to your account to reflect earnings or losses (if any). PLAN ADMINISTRATOR Currently, the plan administrator of the 401(k) Plan is Thomas Forese, Jr., SBERA, 69 Cummings Park, Woburn, Massachusetts 01801, (781) 938-6559. The plan administrator is responsible for the administration of the 401(k) Plan, interpretation of the provisions of the 401(k) Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the plan, maintenance of plan records, books of account and all other data necessary for the proper administration of the plan, and preparation and filing of all returns and reports relating to the plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under ERISA. AMENDMENT AND TERMINATION Benjamin Franklin Bank intends to continue the 401(k) Plan indefinitely. Nevertheless, Benjamin Franklin Bank may terminate the 401(k) Plan in whole or in part at any time. If Benjamin Franklin Bank terminates the 401(k) Plan in whole or in part, then regardless of other provisions in the 401(k) Plan, all participants affected by such termination shall become fully vested in their accounts. Benjamin Franklin Bank reserves the right to make, from time to time, any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Benjamin Franklin Bank may amend the plan as it determines necessary or desirable, with or without retroactive effect, to comply with ERISA or the Internal Revenue Code. 9 MERGER, CONSOLIDATION OR TRANSFER In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the trust assets to another plan, the 401(k) Plan requires that you would (if either the 401(k) Plan or the other plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer (if the 401(k) Plan had then terminated). FEDERAL INCOME TAX CONSEQUENCES The following is only a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. You are urged to consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan. As a "qualified retirement plan," the Internal Revenue Code affords the 401(k) Plan special tax treatment, including: (1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the plan each year; (2) participants pay no current income tax on amounts contributed by the employer on their behalf; and (3) earnings of the plan are tax-deferred thereby permitting the tax- deferred accumulation of income and gains on investments. Benjamin Franklin Bank will administer the 401(k) Plan to comply in operation with the requirements of the Internal Revenue Code as of the applicable effective date of any change in the law. If Benjamin Franklin Bank receives an adverse determination letter regarding its tax-exempt status from the Internal Revenue Service, all participants would generally recognize income equal to their vested interest in the 401(k) Plan, the participants would not be permitted to transfer amounts distributed from the 401(k) Plan to an Individual Retirement Account or to another qualified retirement plan, and Benjamin Franklin Bank may be denied certain deductions taken with respect to the 401(k) Plan. Lump Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump sum distribution if it is made within one taxable year, on account of the participant's death, disability or separation from service, or after the participant attains age 59 1/2; and consists of the balance to the credit of the participant under this plan and all other profit sharing plans, if any, maintained by Benjamin Franklin Bank. The portion of any lump sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump sum distribution less the amount of after-tax contributions, if any, you have made to this plan and any other profit sharing plans maintained by Benjamin Franklin Bank which is included in the distribution. Distributions. Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account generally in accordance with the terms of the other plan or account. 10 We have provided you with a brief description of the material federal income tax aspects of the 401(k) Plan which are of general application under the Code. It is not intended to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the 401(k) Plan. Accordingly, you are urged to consult a tax advisor concerning the federal, state and local tax consequences of participating in and receiving distributions from the 401(k) Plan. ERISA AND OTHER QUALIFICATION As noted above, the 401(k) Plan is subject to certain provisions of ERISA and is intended to be a qualified retirement plan under the Internal Revenue Code. RESTRICTIONS ON RESALE Any person receiving a distribution of shares of common stock under the 401(k) Plan who is an "affiliate" of Benjamin Franklin Bancorp under Rules 144 and 405 under the Securities Act of 1933, as amended (the "Securities Act") (e.g., directors, officers and substantial shareholders of Benjamin Franklin Bancorp) may reoffer or resell such shares only pursuant to a registration statement filed under the Securities Act assuming the availability of a registration statement, pursuant to Rule 144 or some other exemption of the registration requirements of the Securities Act. Any person who may be an "affiliate" of Benjamin Franklin Bancorp may wish to consult with counsel before transferring any common stock they own. In addition, participants are advised to consult with counsel as to the applicability of Section 16 of the 1934 Act which may restrict the sale of common stock acquired under the 401(k) Plan, or other sales of common stock. Persons who are not deemed to be "affiliates" of Benjamin Franklin Bancorp at the time of resale will be free to resell any shares of common stock distributed to them under the 401(k) Plan, either publicly or privately, without regard to the registration and prospectus delivery requirements of the Securities Act or compliance with the restrictions and conditions contained in the exemptive rules under federal law. An "affiliate" of Benjamin Franklin Bancorp is someone who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control, with Benjamin Franklin Bancorp. Normally, a director, principal officer or major shareholder of a corporation may be deemed to be an "affiliate" of that corporation. A person who may be deemed an "affiliate" of Benjamin Franklin Bancorp at the time of a proposed resale will be permitted to make public resales of the common stock only pursuant to a "reoffer" prospectus or in accordance with the restrictions and conditions contained in Rule 144 under the Securities Act or some other exemption from registration, and will not be permitted to use this prospectus in connection with any such resale. In general, the amount of the common stock which any such affiliate may publicly resell pursuant to Rule 144 in any three-month period may not exceed the greater of one percent of the common stock then outstanding or the average weekly trading volume reported on the National Association of Securities Dealers Automated Quotation System during the four calendar weeks prior to the sale. Such sales may be made only in "broker transactions" or through transactions with "market makers" without solicitation and only at a time when Benjamin Franklin Bancorp is current in filing the reports required of it under the 1934 Act. SEC REPORTING AND SHORT-SWING PROFIT LIABILITY Section 16 of the 1934 Act imposes reporting and liability requirements on officers, directors and persons beneficially owning more than ten percent of public companies such as Benjamin Franklin Bancorp. Section 16(a) of the 1934 Act requires the filing of reports of beneficial ownership. Within ten days of becoming a person subject to the reporting requirements of Section 16(a), a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Certain changes in beneficial ownership, such as purchases, sales, gifts and participation in savings and retirement plans 11 must be reported periodically, either on a Form 4 by the end of the second busines day after the day on which the change occurred, or annually on a Form 5 within 45 days after the close of Benjamin Franklin Bankcorp's fiscal year. Participation in the Employer Stock Fund of the 401(k) Plan by officers, directors and persons beneficially owning more than ten percent of common stock of Benjamin Franklin Bancorp must be reported to the SEC annually on a Form 5 by such individuals. In addition to the reporting requirements described above, Section 16(b) of the 1934 Act provides for the recovery by Benjamin Franklin Bancorp of profits realized by any officer, director or any person beneficially owning more than ten percent of the common stock ("Section 16(b) Persons") resulting from the purchase and sale or sale and purchase of the common stock within any six-month period. The SEC has adopted rules that exempt many transactions involving the 401(k) Plan from the "short-swing" profit recovery provisions of Section 16(b). The exemptions generally involve restrictions upon the timing of elections to buy or sell employer securities for the accounts of Section 16(b) persons. Except for distributions of the common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, Section 16(b) persons may, under limited circumstances involving the purchase of common stock within six months of the distribution, be required to hold shares of the common stock distributed from the 401(k) Plan for six months following such distribution. LEGAL OPINION The validity of the issuance of the common stock will be passed upon by Foley Hoag LLP, Boston, Massachusetts. 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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 SEAPORT WORLD TRADE CENTER WEST / 155 SEAPORT BLVD. / BOSTON, MA 02210-2600 / TEL: 617.832.1000 / FAX: 617.832.7000 FOLEY HOAG LLP BOSTON WASHINGTON, DC WWW.FOLEYHOAG.COM 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 Securities and Exchange Commission 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 Securities and Exchange Commission 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 Securities and Exchange Commission 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 -------------------------------------------------------- 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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