UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number 000-51194

Benjamin Franklin Bancorp, Inc.

(Exact name of Registrant as specified in its Charter)

P.O. Box 309

58 Main Street

Franklin, Massachusetts 02038-0309

(508) 528-7000

(Address and telephone number of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, no par value

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes o          No þ.

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ.

      The registrant had not issued any shares of capital stock as of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter.

      As of March 25, 2005, we had no outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

      None.

TABLE OF CONTENTS

PART I

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% of Benjamin Franklin Bank’s outstanding capital stock and will continue to do so after the completion of the pending conversion from mutual to stock form, as described below. At December 31, 2004, Benjamin Franklin Bancorp had total assets of $517.4 million and total deposits of $396.5 million.

      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. 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.

      Our principal website is www.benfranklinbank.com. We will make our annual, quarterly and current reports, and amendments to those reports, available free of charge on www.benfranklinbank.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Reports of beneficial ownership of our common stock, and changes in that ownership, by directors and officers on Forms 3, 4 and 5 will likewise be available free of charge on our website. The information on our website is not incorporated by reference in this annual report on Form 10-K or in any other report, schedule, notice or registration statement filed with or submitted to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically at www.sec.gov. You may also read and copy the materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Chart Bank Acquisition

      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 December 31, 2004, Chart Bank had total assets of $258.5 million and total deposits of $208.7 million. 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 mutual-to-stock 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 expected to improve operating efficiency through increased scale.

      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 $21,477,250 in cash and 2,503,050 shares of our common stock, assuming that the 77,000 Chart Bank

options outstanding as of March 25, 2005 are cashed out at the closing rather than being exercised by optionees prior to the closing. At December 31, 2004, 137,000 Chart Bank options were outstanding, 60,000 of which had been exercised as of March 25, 2005.

The Mutual-to-Stock Conversion

      To provide us with the capital and the form of consideration necessary to acquire Chart Bank, we are in the process of converting from the mutual form (meaning no stockholders) to the stock form (100% owned by public stockholders if the conversion and related public offering are successful) and raising additional capital through such a stock offering. Other reasons for the conversion include:

      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.

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.

      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 $383.4 million at December 31, 2004, representing 74.1% 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 $207.6 million in 2004. Residential mortgage loans sold in the secondary market, on a servicing-retained basis, totaled $97.2 million and $31.3 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:

      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 December 31, 2004, this portfolio totaled $241.1 million, or 62.6% of the total gross loan portfolio on that date, and had an average yield of 4.61%. Of the residential mortgage loans outstanding on that date, 61.3% were adjustable-rate loans with an average yield of 4.19% and 38.7% were fixed-rate mortgage loans with an average yield of 5.28%. Residential mortgage loans originations totaled $183.3 million and $116.9 million for 2003 and 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 December 31, 2004, 15 and 30 year fixed rate monthly payment loans held in portfolio totaled $10.0 million, or 4.1% of total residential real estate mortgage loans at that date. Benjamin Franklin Bank originates most such loans under forward sale 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 December 31, 2004 is $130.6 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 December 31, 2004, bi-weekly residential mortgage loans held in portfolio totaled $83.3 million, or 34.6% 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 December 31, 2004, ARM loans totaled $147.8 million or 61.3% 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 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 $26.2 million of commercial real estate loans in 2003 and 2004, respectively, and had $85.9 million of commercial real estate loans, with an average yield of 5.69%, in its portfolio as of December 31, 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 15.6% of the total loan portfolio at December 31, 2000 to 22.3% as of December 31, 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.”

      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 $43.7 million in construction loans during 2003 and 2004, respectively, and as of December 31, 2004 had $28.7 million in construction loans in its portfolio, representing 7.4% of such portfolio, with an average yield of 6.19%.

      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 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.”

      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 $15.9 million of home equity lines-of-credit and loans during 2003 and 2004, respectively, and at December 31, 2004 had $23.2 million of home equity lines-of-credit and loans outstanding, representing 6.0% of the loan portfolio, with an average yield of 5.32% 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 $28.3 million at December 31, 2004.

      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 $3.3 million in commercial business loans during 2003 and 2004, respectively, and as of December 31, 2004 had $4.4 million in commercial business loans in its portfolio, representing 1.1% of such portfolio, with an average yield of 6.98%. 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.”

      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 $1.7 million of consumer and other loans during 2003 and 2004, respectively, and at December 31, 2004 had $2.2 million of consumer and other loans outstanding, representing 0.6% of the loan portfolio at that date, with an average yield of 7.12%.

      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 December 31, 2004, Benjamin Franklin Bank had loan commitments and unadvanced loans and lines-of-credit totaling $70.6 million. For information about Benjamin Franklin Bank’s loan commitments outstanding as of December 31, 2004, see Item 7A — “Quantitative and Qualitative Disclosures About Market Risk — Liquidity Risk Management.”

      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 F-7.

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

      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.

      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. As of December 31, 2004, Benjamin Franklin had one borrower relationship over the $5 million policy guideline, a relationship that aggregated $6.2 million in total. 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 $7.4 million for Benjamin Franklin Bank as of December 31, 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.”

      Loan Maturity. The following table summarizes the scheduled repayments of Benjamin Franklin Bank’s loan portfolio at December 31, 2004. Demand loans, loans having no stated repayment schedule, and overdraft loans are reported as being due in one year or less:

      The following table sets forth, at December 31, 2004, the dollar amount of total loans, net of unadvanced funds on loans, contractually due after December 31, 2005 and whether such loans have fixed interest rates or adjustable interest rates.

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.

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

      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 December 31, 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.

      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” and “Management’s Discussion and Analysis — Critical Accounting Policies — Allowance for Loan Losses.”

      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 December 31, 2004, loans classified Substandard totaled $2.2 million, consisting of $1.9 million in commercial real estate loans and $0.3 million in commercial loans. Special Mention loans totaled $2.3 million, consisting of $2.1 million in commercial real estate loans and $0.2 million in commercial loans. One commercial loan in the amount of $7,287 was classified as Doubtful and no loans were classified as Loss on December 31, 2004.

      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).

      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.

      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.” 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 December 31, 2004, impaired loans totaled $334,000 and in the aggregate carried a valuation allowance of $210,000.

      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.

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

      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:

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 December 31, 2004, $86.1 million or 92.3% of the portfolio was classified as available for sale, and $0.2 million or 0.2% of the portfolio was classified as held to maturity. At December 31, 2004, the net unrealized loss on securities classified as available for sale was $1.7 million. Benjamin Franklin Bank does not currently maintain a trading portfolio of securities.

      U.S. Government and Agency Obligations. At December 31, 2004, Benjamin Franklin Bank’s U.S. Government and Agency securities portfolio totaled $33.3 million, or 35.7% of the total portfolio on that date.

      Corporate Obligations. At December 31, 2004, Benjamin Franklin Bank’s portfolio of corporate obligations totaled $5.0 million, or 5.4% 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 December 31, 2004, all investments in corporate obligations were rated ‘A’ or better.

      Mortgage-Backed Securities. At December 31, 2004, Benjamin Franklin Bank’s portfolio of mortgage-backed securities totaled $48.0 million, or 51.4% of the portfolio on that date, and consisted of pass-through securities ($3.7 million) and collateralized mortgage obligations ($44.3 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 December 31, 2004, Benjamin Franklin Bank’s portfolio of restricted equity securities totaled $7.0 million or 7.5% of the portfolio at that date. These securities consisted primarily of stock in the Federal Home Loan Bank of Boston ($4.5 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.

      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: