Benjamin Franklin Bancorp Reports Results for Fourth Quarter of 2006; Declares Quarterly Dividend.

FRANKLIN, Mass. -- Benjamin Franklin Bancorp, Inc.(the "Company" or "Benjamin Franklin") (Nasdaq: BFBC), the bank holding company for Benjamin Franklin Bank (the "Bank"), today reported net income of $1.0 million, or $.13 per share (basic and diluted), for the quarter ended December 31, 2006. In the comparable 2005 quarter, the Company earned $1.3 million or $.16 per share (basic and diluted). Fourth quarter 2006 results included two non-recurring items:

1. After-tax income of $1.5 million, or $.19 per share, recorded in conjunction with the sale and leaseback of six of the Bank's branch locations. The positive effect of this transaction on fourth quarter 2006 earnings is primarily due to the capital gain generated by the transaction, which allowed the Bank to use a capital loss carryover, the tax benefit of which was previously unrecorded. The total purchase price of the six branches was $9.8 million. The gain recognized on the sale ($3.8 million) will be deferred and recognized ratably over the initial lease term of 15 years. Details are as follows:

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2. After-tax loss of $1.4 million, or $.18 per share, incurred upon the designation of $63.7 million of adjustable-rate mortgage loans as "held for sale" at December 31, 2006. These loans, which bear below-market interest rates, will be sold in the first quarter of 2007. Proceeds realized will be reinvested in securities and in future loan growth. Details are as follows:

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For the year ended December 31, 2006, the Company reported earnings of $4.7 million or $.60 per share (basic and diluted). In 2005, the Company earned $431,000, results that were adversely affected by two non-recurring charges aggregating $3.7 million after-tax.

The Company also today announced that its Board of Directors declared a quarterly cash dividend of $.04 per common share. This dividend will be payable on February 23, 2007 to stockholders of record as of February 9, 2007.

Thomas R. Venables, President and CEO, noted: "Margin pressure has continued to be a challenge, resulting from the significant inversion of the yield curve in the second half of 2006. We are optimistic that our growth plans, focused on commercial loans and core deposits, will work over time to offset the effects of an unfavorable interest rate environment. The restructuring of the balance sheet, once our loan sale is completed in the first quarter of 2007, will also assist in this effort."

In 2006, the Company's balance sheet increased by $46.6 million, or 5.4%, to $913.7 million. Asset growth was focused primarily in total loans (including loans held for sale), which increased by $34.7 million or 5.7% during the year. This growth was funded by increases in deposit balances totaling $21.5 million or 3.5%, and in borrowed funds, which increased by $18.6 million or 13.3% during 2006.

Deposit growth was centered in time deposit accounts, which increased by $45.2 million or 17.2% during 2006, offset by decreases in transaction and savings accounts, which declined in the aggregate by $23.7 million or 6.8% during the year. Short-term market interest rates increased by approximately 100 basis points during 2006, and this increase intensified a shift in demand toward higher-yielding certificate accounts and away from lower-rate savings and transaction accounts.

The increase in loans during 2006 was largely the result of growth in the Bank's commercial and construction loan portfolios, which increased in total by $40.6 million or 14.1% during the year. This growth was spread across each of the Bank's commercial portfolios, as commercial real estate loans increased by $22.4 million or 10.7%, commercial business loans increased by $9.7 million or 50.7% and construction loans increased by $8.5 million or 14.0%. Consumer loans also increased during the year, rising by $4.8 million or 13.9%, due to growth in the Company's portfolio of home equity loans and lines of credit. Within the Bank's residential mortgage loan portfolio, loans totaling $63.7 million were designated as held for sale at December 31, 2006, reflecting the Bank's intention to sell these loans in the first quarter of 2007.

Non-performing assets as a percentage of total assets stood at 0.17% at December 31, 2006. The Bank reduced its allowance for loan losses by $141,000 in the fourth quarter of 2006, due primarily to the elimination of the allowance for losses for loans transferred to held for sale at year end 2006. The allowance for loan losses as a percent of loans was 0.99% as of December 31, 2006, compared to 0.93% at year end 2005.

The Company's net interest margin ("NIM") was 2.80% for the three months ended December 31, 2006, a decrease of 37 basis points compared to the fourth quarter of 2005. The reduction in the NIM compared to the year earlier period is due to increases in funding costs, which have outpaced increases in yields earned on loans and securities. Overall, rates paid on interest-bearing deposits have increased by 106 basis points compared to the fourth quarter of 2005, as customers have preferred short-term time deposits over lower-rate savings and transaction accounts. The intense competitive pressure for certificate accounts in the Bank's market area has continued unabated for much of the last half of 2006, and management does not anticipate that it will lessen in the near term.

Fourth quarter results benefited from an increase in non-interest income which, excluding one-time losses of $2.9 million, rose by $218,000 or 15.2% on a normalized basis when measured against the comparable 2005 period. For a reconciliation, see the table at the end of this release. This growth is primarily attributable to increases in gross revenue generated by ATM servicing activities, and to an increase in income earned on bank-owned life insurance.

The Company's operating expenses increased by $579,000 or 10.9% in the fourth quarter of 2006 compared to the fourth quarter of 2005. $374,000 of the increase between periods is attributable to the expense associated with stock options and restricted stock, incurred for the first time in the third quarter of 2006. In 2007, total expense for these awards will amount to $1.3 million, a figure that reflects the Company's recognition of stock compensation expense using an accelerated method allowed by SFAS No. 123R.

The Company's growth plans call for establishing new branch locations in Massachusetts. A new office was opened in Wellesley in August of 2006. A new branch location in Watertown is expected to open early in the second quarter of 2007, while a third new location is also likely in the first half of 2007. These new branch openings will adversely affect the Company's profits in the year 2007.

Certain statements herein constitute "forward-looking statements" and actual results may differ from those contemplated by these statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the businesses in which Benjamin Franklin Bancorp is engaged and changes in the securities market. The Company disclaims any intent or obligation to update any forward-looking statements, whether in response to new information, future events or otherwise.

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Reconciliation of Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company's management uses these non-GAAP measures in its analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude significant gains or losses that are expected to be non-recurring and to exclude the effects of amortization of intangible assets (in the case of the efficiency ratio). Because these items and their impact on the Company's performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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