Ben Franklin Bank sells six branches for $9.8m
Will continue to issue dividends despite tough market
By MATTHEW L. BROWN
Higher-ups at Benjamin Franklin Bank say tough times have prompted them to sell off six branches and $63.7 million in mortgages all while issuing dividends to stockholders.
In late December, Benjamin Franklin Bancorp, holding company for Benjamin Franklin Bank, closed on the $9.8 million sale of six of its 10 bank branches, and immediately began leasing the branches, at $800,000 per year, from new owner Benlin Properties LLC.
The six branches are in Newton, Waltham, Bellingham, Milford, Franklin and Foxboro. The bank will use the $3.8 million it made on the branch sale to pay its 15-year lease with Benlin.
Benlin took out a mortgage from Franklin to buy the branches.
The branch sale allowed Franklin a one time opportunity to stoke its fourth quarter bottom line with $1.5 million in after tax income.
For the fourth quarter of 2006, Franklin reported net income of $1 million, which was down from net income of $1.3 million in the fourth quarter of 2005.
Franklin reports net operating income of $4.7 million for 2006, up from $431,000 in 2005, but a net interest margin of 2.8 percent, down from 3.1 percent in 2005.
Franklin reports a one-time fourth quarter 2006 after tax loss of $1.4 million after putting $63.7 million in adjustable rate mortgages up for sale. The bank expects to sell the mortgages during the first quarter of 2007.
In November, Franklin announced a 5 percent stock buy-back plan by which the company would repurchase up to 412,490 shares of its own common stock.
But according to analyst Laurie Hunsicker of Friedman, Billings, Ramsey Group, Franklin hasn’t actually bought back any of its common stock.
All the movement, which included the issuance of a quarterly cash dividend of $.04 per common share payable February 23, does not indicate trouble for the bank, Hunsicker says.
In fact, Franklin is better than most at managing its balance sheet during times of slim margins.
Alfred Wahlers, chair of the bank’s board of directors, says times are tough for all community banks.
"The margin between what we can sell money for and the interest rates, the margin is very, very narrow," Wahlers says. "It’s difficult to make a lot of money."
However, "I believe dividends will continue to be issued," says Wahlers.
Ben Franklin President Thomas Venables says the bank can’t afford to have its money invested in fixed assets that aren’t earning interest. The branch sale "frees up $8 or $9 million" that the bank can lend and earn interest on, Venables says.
Claire S. Bean, Franklin’s executive vice president and CFO, says, "we’ve had a policy of awarding dividends to shareholders since we went public" in April 2005.
She says the bank has been "fairly consistent" about awarding dividends since then.
"We’re trying the best we can to manage our balance sheet," Bean says, but shrinking margins have brought the company to the point of sloughing off "non-earning assets" like the bank branches.
According to Joseph Leonard, general council for the Massachusetts Division of Banks, the cry that times are tough for community banks is common.
"Those are statements that we hear," Leonard says.
However, the tough times may have as much to with a bank’s strategy as it does with rising interest rates and shrinking margins.
The division is currently considering a number of proposed bank mergers. "They need to be of a certain size to compete," Leonard said.
But along with proposals for mergers, the division is also considering proposals for new community banks in Springfield, Lawrence, Hyannis and Woburn.
"This has been an incredibly tough market," Hunsicker says, "and [Ben Franklin has] held the line on credit. They have not done crazy things on credit," a sure sign a bank is struggling. "They’re a solid franchise. They’re not out there doing sub-prime, or high-risk commercial loans. They’re secured by real estate and conservative underwriting."
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