SOURCE: MASSBANK Corp.

January 22, 2008 09:00 ET

MASSBANK Corp. Announces 22.5% Increase in Fourth Quarter EPS and Declares Cash Dividend

READING, MA--(Marketwire - January 22, 2008) - MASSBANK Corp. (NASDAQ: MASB), the Holding Company for MASSBANK, today reported net income of $2,102,000 for the quarter ended December 31, 2007 compared to $1,731,000 for the quarter ended December 31, 2006, an increase of $371,000 or 21.4%. Diluted and basic earnings per share were $0.49 for the fourth quarter of 2007 compared to $0.40 for the same quarter of 2006, an increase of 22.5%.

For the year ended December 31, 2007, the Company reported net income of $7,731,000 compared to $7,027,000 for the year ended December 31, 2006, an increase of $704,000 or 10.0%. Diluted earnings per share for 2007 increased 10.6% to $1.78 from $1.61 for the prior year. Basic earnings per share for 2007 increased 11.1% to $1.80 from $1.62 per share for 2006.

The Company's return on average assets and return on average equity for the recent quarter showed marked improvement. Return on average assets and return on average equity for the fourth quarter 2007 were 1.05% and 7.87%, respectively, up from 0.83% and 6.52% for the comparable quarter of 2006. Book value per share also increased $0.93 or 3.8% reaching a new high of $25.69 per share at December 31, 2007, from $24.76 per share at December 31, 2006.

In commenting on the past year, Gerard H. Brandi, CEO of the Company, noted that, "These strong financial results in the face of a very challenging banking environment are a validation of MASSBANK's long-standing strategy of maintaining high levels of liquidity and capital. As we said in last year's Annual Report, our philosophy is to 'go against the tide when we feel the tide is going in the wrong direction.' We also stated then that while we would 'sacrifice a degree of growth when we feel that the cost of growth is too high,' we emphasized that we were not willing to 'sacrifice asset quality for a modest increase in yield.' By consistently adhering to these strategies, MASSBANK avoided virtually all of the current turmoil in the residential mortgage market and was one of the few banks to achieve significantly improved financial results in 2007. I am confident that our consistent business philosophies will position us for further solid results in the years to come."

Income Statement

The growth in net income during the recent quarter compared to the same quarter last year resulted primarily from an increase in non-interest income and a decrease in non-interest expense, partially offset by a decrease in net interest income.

Non-interest income for the three months ended December 31, 2007 was $1,517,000 compared to $736,000 for the same period in 2006, an increase of $781,000 or 106.1% over the three months ended December 31, 2006. The growth in non-interest income was mainly due to an increase in net securities gains of $889,000 resulting primarily from an increase in net gains on trading securities of $1,108,000. The strong performance of the Company's trading securities portfolio in the recent quarter reflects an increase in the fair value of the trading securities portfolio of $1,023,000 over the same quarter last year and an increase in gains on sales of trading securities of $85,000.

All other non-interest income in the recent quarter decreased $108,000 when compared to the same quarter last year. This was due essentially to the market value of the Company's deferred compensation plan assets having declined in the recent quarter compared to having appreciated in market value in the same quarter of 2006. This decease of $130,000 in deferred compensation plan income, however, is offset by a corresponding decrease in deferred compensation plan expense.

Non-interest expense was $2,841,000 for the three months ended December 31, 2007 compared to $3,053,000 for the same period in 2006, a decrease of $212,000 or 6.9%. The decreases were predominately in compensation related costs.

Salaries and employee benefits decreased $127,000 due principally to a reduction in the amount previously accrued for a profit sharing and incentive compensation bonus plan distribution to Company employees at year-end based on the Company's earnings performance, partially offset by the increased costs of employee benefits.

Deferred compensation plan expense decreased $131,000 in the recent quarter due principally to the decrease in market value of plan assets.

Net interest income for the three months ended December 31, 2007 decreased $410,000 to $4,569,000 from $4,979,000 for the same period in 2006. The decrease in net interest income results primarily from a decrease in both average earning assets and net interest margin. The Company's average earning assets for the fourth quarter of 2007 were $776.7 million compared to $833.8 million in the same quarter of 2006. The net interest margin for the recent quarter was 2.36% compared to 2.47% in the fourth quarter of 2006.

Balance Sheet

The Company's total assets decreased $41.7 million to $801.8 million at December 31, 2007, from $843.5 million at December 31, 2006. Deposits decreased $40.7 million year-over-year from $723.3 million at December 31, 2006 to $682.6 million at December 31, 2007. The decrease in deposits is due in part to continued intense competition for relatively expensive short term deposits. Because of its high liquidity position, the Company can tolerate outflows when the cost of retaining deposits cannot be justified by the availability of appropriately priced assets, as measured on a risk-adjusted basis. Stockholders' equity increased $2.1 million to $109.0 million at December 31, 2007, from $106.9 million at December 31, 2006.

The Company's non-accrual loans remain near historical lows totaling $199,000 at December 31, 2007, representing 0.10% of total loans. This compares to $137,000 representing 0.07% of total loans at December 31, 2006. Net charge-offs were $3,000 in 2007 compared to net recoveries of $6,000 in 2006.

At December 31, 2007, the Company's allowance for loan losses totaled $1.369 million representing 0.71% of total loans compared to $1.382 million representing 0.66% of total loans at December 31, 2006. In addition, the Company's allowance for loan losses on off-balance sheet credit exposures totaled $345,000 at December 31, 2007 and 2006. This is intended to protect the Company against possible losses on loan commitments made to customers that have not yet been drawn down.

MASSBANK Corp. is the holding company for MASSBANK, a Massachusetts chartered savings bank. The Bank operates fifteen banking offices in Reading, Chelmsford, Dracut, Everett, Lowell, Medford, Melrose, Stoneham, Tewksbury, Westford and Wilmington, providing a variety of deposit, lending and trust services.

ADDITIONAL INFORMATION

Dividend Declaration

MASSBANK Corp. today announced a quarterly cash dividend on its common stock of $0.29 per common share. This, the Company's eighty-sixth consecutive dividend, will be payable on February 15, 2008 to stockholders of record at the close of business on January 31, 2008.

Stock Repurchase Program

During the three months ended December 31, 2007, the Company continued the repurchase of its common stock by acquiring 33,500 shares. As of December 31, 2007, there were 117,017 shares available for repurchase in the current program.

Cautionary Statement

This press release may contain forward-looking information, including information concerning the Company's expectations of future business prospects. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results or performance to be materially different from the results and performance expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning the Company's belief, expectations or intentions concerning the Company's future performance, the financial outlook of the markets it serves and the performance and activities of its competitors. These statements reflect the Company's current views. They are based on numerous assumptions and are subject to numerous risks and uncertainties, including the strength of the local economy and the U.S. economy in general, unexpected fluctuations in market interest rates, unexpected fluctuations in the markets for equities, bonds, federal funds and other financial instruments, an increase in the level of non-performing assets, an increase in competitive pricing pressures within the Company's market, adverse legislative or regulatory developments, a significant decline in residential real estate values in the Company's market area, adverse impacts resulting from the continuing war on terrorism, an increase in employee-related costs, the impact of deflation or inflation, and other factors described in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2006.


                              MASSBANK CORP.
                           FINANCIAL HIGHLIGHTS
                    ($ in thousands except share data)

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
For the Period Ended
Total interest and dividend
 income                         $   9,734  $  10,085  $  39,782  $  39,939
Total interest expense              5,165      5,106     21,013     18,951
                                ---------  ---------  ---------  ---------
Net interest income                 4,569      4,979     18,769     20,988

Provision (credit) for loan
 losses                                --         (9)       (10)       123
                                ---------  ---------  ---------  ---------
Net interest income after
 provision (credit) for loan
 losses                             4,569      4,988     18,779     20,865
Gains on securities, net            1,148        259      4,381        797
Other non-interest income             369        477      1,517      1,408
Non-interest expense                2,841      3,053     12,792     12,360
Income tax expense                  1,143        940      4,154      3,683
                                ---------  ---------  ---------  ---------
Net income                      $   2,102  $   1,731  $   7,731  $   7,027

Weighted Average Common Shares
 Outstanding
Basic                           4,257,185  4,319,795  4,305,894  4,325,879
Diluted                         4,289,163  4,352,680  4,333,789  4,360,688

Per Common Share
Earnings:
  Basic                         $    0.49  $    0.40  $    1.80  $    1.62
  Diluted                            0.49       0.40       1.78       1.61
Cash dividends paid                  0.29       0.28       1.13       1.09
Book value (period end)                                   25.69      24.76

Ratios (1)
Return on average assets             1.05%      0.83%      0.95%      0.82%
Return on average equity             7.87       6.52       7.23       6.74
Net interest margin                  2.36       2.47       2.38       2.53
Total equity to assets (period
 end)                                                     13.59      12.67


                                                              At
                                                         December 31,
                                                        2007       2006
                                                      ---------  ---------
At Period End
Assets                                                $ 801,799  $ 843,522
Deposits                                                682,561    723,332
Total loans                                             191,567    208,927
Stockholders' equity                                  $ 108,961  $ 106,885
Common shares outstanding                             4,241,779  4,317,654

Asset Quality
Non-accrual loans                                     $     199  $     137
Real estate acquired through
 foreclosure                                                 --         --
                                                      ---------  ---------
Total non-performing assets                           $     199  $     137
Allowance for loan losses                             $   1,369  $   1,382

Percent of non-accrual loans to
 total loans                                               0.10%      0.07%

(1) Ratios are presented on an annualized basis with the exception of
    equity to assets.



                      MASSBANK CORP. AND SUBSIDIARIES
                        Consolidated Balance Sheets
                                (Unaudited)
                    ($ in thousands except share data)

                                                     At            At
                                                December 31,  December 31,
                                                    2007          2006
                                                ------------  ------------
Assets:
  Cash and due from banks                       $      6,126  $      8,650
  Short-term investments                             150,978       139,240
                                                ------------  ------------
     Total cash and cash equivalents                 157,104       147,890
  Term federal funds sold                             91,000        41,000
  Securities available for sale, at fair value
   (amortized cost of $127,205 in 2007 and
    $407,154 in 2006)                                128,710       402,629
  Securities held to maturity, at amortized
   cost (market value of $8,120 in 2007 and
   $5,276 in 2006)                                     8,098         5,396
  Trading securities, at fair value:                 206,566         1,931
  Loans:
     Mortgage loans                                  181,945       199,253
     Other loans                                       9,622         9,674
                                                ------------  ------------
        Total loans                                  191,567       208,927
  Allowance for loan losses                           (1,369)       (1,382)
                                                ------------  ------------
        Net loans                                    190,198       207,545
                                                ------------  ------------
  Premises and equipment                               8,163         7,085
  Real estate held for resale                            425           425
  Accrued interest and income receivable               4,061         5,083
  Goodwill                                             1,090         1,090
  Income tax receivable, net                               1            88
  Deferred income tax asset, net                         661         3,347
  Other assets                                         5,722        20,013
                                                ------------  ------------
        Total assets                            $    801,799  $    843,522
                                                ------------  ------------
Liabilities and Stockholders' Equity:
  Deposits:
    Demand and NOW                              $     71,687  $     78,860
    Savings                                          307,322       344,808
    Time certificates of deposit                     303,552       299,664
                                                ------------  ------------
        Total deposits                               682,561       723,332
  Escrow deposits of borrowers                           968         1,006
  Allowance for loan losses on off-balance
   sheet credit exposures                                345           345
  Other liabilities                                    8,964        11,954
                                                ------------  ------------
        Total liabilities                            692,838       736,637
                                                ------------  ------------
  Stockholders' equity:
     Preferred stock, par value $1.00 per share;
      2,000,000 shares authorized, none issued            --            --
     Common stock, par value $1.00 per share;
      10,000,000 shares authorized, 7,880,642
      and 7,850,317 shares issued, respectively        7,881         7,850
     Additional paid-in capital                       58,773        57,953
     Retained earnings                               107,674       107,055
                                                ------------  ------------
                                                     174,328       172,858
     Treasury stock at cost 3,638,863 and
      3,532,663 shares, respectively                 (66,597)      (62,902)
     Accumulated other comprehensive income (loss)     1,230        (3,071)
     Shares held in rabbi trust at cost, 20,194 and
      17,944 shares, respectively                       (503)         (426)
     Deferred compensation obligation                    503           426
                                                ------------  ------------
        Total stockholders' equity                   108,961       106,885
                                                ------------  ------------
        Total liabilities and stockholders'
         equity                                 $    801,799  $    843,522
                                                ------------  ------------



                      MASSBANK CORP. AND SUBSIDIARIES
                    Consolidated Statements of Income
                                (Unaudited)
                    ($ in thousands except share data)

                                                   Three Months Ended
                                                December 31, December 31,
                                                    2007         2006
                                                ------------ ------------
Interest and dividend income:
  Mortgage loans                                $      2,493 $      2,751
  Other loans                                            184          195
  Securities available for sale:
     Mortgage-backed securities                        1,620        1,824
     Other securities                                    110        3,037
  Mortgage-backed securities held to maturity            112           70
  Trading securities                                   2,401            1
  Federal funds sold                                   2,056        2,004
  Other investments                                      758          203
                                                ------------ ------------
     Total interest and dividend income                9,734       10,085
                                                ------------ ------------

Interest expense:
  Deposits                                             5,165        5,106
                                                ------------ ------------
     Total interest expense                            5,165        5,106
                                                ------------ ------------

  Net interest income                                  4,569        4,979
Provision (credit) for loan losses                        --           (9)
                                                ------------ ------------
  Net interest income after provision
   (credit) for loan losses                            4,569        4,988

                                                ------------ ------------

Non-interest income:
  Deposit account service fees                            80           85
  Gains on securities available for sale, net             88          307
  Gains on trading securities, net                     1,060          (48)
  Option fees                                            150          150
  Deferred compensation plan income (loss)               (60)          70
  Other                                                  199          172

                                                ------------ ------------
     Total non-interest income                         1,517          736

                                                ------------ ------------
Non-interest expense:
  Salaries and employee benefits                       1,667        1,794
  Deferred compensation plan expense                     (40)          91
  Occupancy and equipment                                541          474
  Data processing                                        152          166
  Professional services                                  141          139
  Advertising and marketing                               41           37
  Deposit insurance                                       26           30
  Other                                                  313          322

                                                ------------ ------------
     Total non-interest expense                        2,841        3,053

                                                ------------ ------------
  Income before income taxes                           3,245        2,671
Income tax expense                                     1,143          940

                                                ------------ ------------
  Net income                                    $      2,102 $      1,731

                                                ------------ ------------
Weighted average common shares outstanding:
  Basic                                            4,257,185    4,319,795
  Diluted                                          4,289,163    4,352,680
Earnings per share (in dollars):
  Basic                                         $       0.49 $       0.40
  Diluted                                               0.49         0.40



                      MASSBANK CORP. AND SUBSIDIARIES
                    Consolidated Statements of Income
                                (Unaudited)
                    ($ in thousands except share data)

                                                     Twelve Months Ended
                                                  December 31, December 31,
                                                      2007         2006
                                                  -----------  ------------
Interest and dividend income:
  Mortgage loans                                  $    10,313  $     11,305
  Other loans                                             768           765
  Securities available for sale:
     Mortgage-backed securities                         6,857         7,293
     Other securities                                     207        12,062
  Mortgage-backed securities held to maturity             353           299
  Trading securities                                   10,323           195
  Federal funds sold                                    8,494         7,731
  Other investments                                     2,467           289
                                                  -----------  ------------
     Total interest and dividend income                39,782        39,939
                                                  -----------  ------------

Interest expense:
  Deposits                                             21,009        18,951
  Borrowed funds                                            4            --
                                                  -----------  ------------
     Total interest expense                            21,013        18,951
                                                  -----------  ------------

  Net interest income                                  18,769        20,988
Provision (credit) for loan losses                        (10)          123
                                                  -----------  ------------
  Net interest income after provision
   (credit) for loan losses                            18,779        20,865

                                                  -----------  ------------
Non-interest income:
  Deposit account service fees                            325           343
  Gains on securities available for sale, net             272           736
  Gains on trading securities, net                      4,109            61
  Option fees                                             375           150
  Deferred compensation plan income                        58           178
  Other                                                   759           737

                                                  -----------  ------------
     Total non-interest income                          5,898         2,205

                                                  -----------  ------------
Non-interest expense:
  Salaries and employee benefits                        7,699         7,338
  Deferred compensation plan expense                      264           263
  Occupancy and equipment                               2,094         2,176
  Data processing                                         588           583
  Professional services                                   612           553
  Advertising and marketing                               166           139
  Deposit insurance                                       109           126
  Other                                                 1,260         1,182

                                                  -----------  ------------
     Total non-interest expense                        12,792        12,360

                                                  -----------  ------------
  Income before income taxes                           11,885        10,710
Income tax expense                                      4,154         3,683

                                                  -----------  ------------
  Net income                                      $     7,731  $      7,027

                                                  -----------  ------------
Weighted average common shares outstanding:
  Basic                                             4,305,894     4,325,879
  Diluted                                           4,333,789     4,360,688
Earnings per share (in dollars):
  Basic                                           $      1.80  $       1.62
  Diluted                                                1.78          1.61

Contact Information

  • For further information contact:
    Reginald E. Cormier
    Senior Vice President, Treasurer and CFO
    (781) 942-8192