SOURCE: MASSBANK Corp.

October 23, 2007 16:08 ET

MASSBANK Corp. Announces 22.8% Increase in Third Quarter Earnings, Increase in Dividends and New Stock Repurchase Program

READING, MA--(Marketwire - October 23, 2007) - MASSBANK Corp. (NASDAQ: MASB), the Holding Company for MASSBANK, today reported net income of $2,126,000 for the quarter ended September 30, 2007 compared to $1,731,000 for the quarter ended September 30, 2006, an increase of $395,000 or 22.8%. Diluted and basic earnings per share were $0.49 for the third quarter of 2007 compared to $0.40 for the same period in 2006, an increase of 22.5%.

For the nine months ended September 30, 2007, the Company reported net income of $5,629,000 compared to $5,296,000 for the same period in 2006, an increase of $333,000 or 6.3%. Diluted earnings per share for the first nine months of 2007 increased 6.6% to $1.29 from $1.21 for the same period last year. Basic earnings per share for the nine months ended September 30, 2007 were $1.30 compared to $1.22 for the same period in 2006.

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 provision for loan losses, partially offset by a decrease in net interest income and an increase in non-interest expense.

Non-interest income for the three months ended September 30, 2007 was $2,436,000 compared to $447,000 for the same period in 2006, an increase of $1,989,000 or 445.0% over the same period last year. The growth in non-interest income was mainly due to an increase in net securities gains of $1,937,000 resulting primarily from net gains on trading securities. 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 $2,036,000 over the same quarter last year. In addition, all other non-interest income in the recent quarter increased $52,000 over the same period last year.

There was no loan loss provision recorded by the Company in the third quarter of 2007 compared with a provision of $82,000 in the prior year. The reduced provision reflects a decrease in the size of the loan portfolio and a relatively low level of loan delinquencies and charge-offs. The Company's non-accrual loans remain near historical lows totaling $206,000 at September 30, 2007, representing 0.11% of total loans. This compares to $5,000 representing 0.002% of total loans at September 30, 2006. Net charge-offs were $2,000 in the first nine months of 2007 compared to net recoveries of $10,000 during the first nine months of 2006.

Net interest income for the three months ended September 30, 2007 was $4,645,000 compared to $5,180,000 for the same period in 2006. The decrease in net interest income was due in part to a flat yield curve, increased funding costs due to intense competition for short-term deposits and a decrease in the Company's average earning assets. Average earning assets for the third quarter of 2007 declined to $786.1 million, from $822.2 million in the third quarter of the prior year due to a decrease in deposits. Deposits declined due in part to management's decision to seek to protect the Company's net interest margin.

Non-interest expense was $3,760,000 for the three months ended September 30, 2007 compared to $2,929,000 for the same period in 2006, an increase of $831,000 or 28.4%. The increases were predominately in compensation related costs, professional services and other expenses.

Salaries and employee benefits increased $484,000 due principally to an accrual of $390,000 for a profit sharing and incentive compensation bonus plan distribution to Company employees at year-end based on the Company's earnings performance, the increased costs of employee benefits and an increase in stock-based compensation costs.

Deferred compensation plan expense increased $79,000 in the recent quarter due principally to a higher expense provision for the Company's executive supplemental retirement plan.

Professional services expense increased $117,000 due to higher legal fees incurred related to various shareholder and other business matters.

Other expenses increased $104,000 for the three months ended June 30, 2007 compared to the same period in 2006. The increase was due primarily to a benefit of $107,000 recorded in the third quarter of 2006 resulting from a decrease in the Bank's allowance for loan losses on off-balance sheet credit exposures.

Balance Sheet

The Company's total assets decreased $28.9 million to $817.0 million at September 30, 2007, from $845.9 million at September 30, 2006. Deposits decreased $36.0 million year-over-year from $729.4 million at September 30, 2006 to $693.4 million at September 30, 2007. Stockholders' equity increased $1.5 million to $107.4 million at September 30, 2007, from $105.9 million at September 30, 2006. Book value per share increased $0.63 to $25.18 per share at September 30, 2007, from $24.55 per share at September 30, 2006.

At September 30, 2007, the Company's allowance for loan losses totaled $1.370 million representing 0.71% of total loans compared to $1.395 million representing 0.65% of total loans at September 30, 2006. In addition, the Company's allowance for loan losses on off-balance sheet credit exposures totaled $345,000 at September 30, 2007 compared to $336,000 a year earlier. 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 Increase

MASSBANK Corp. today announced an increase in its quarterly cash dividend to stockholders, from $0.28 to $0.29 per common share. The increase will raise the annualized dividend from $1.12 to $1.16 per share. This, the Company's eighty-fifth consecutive dividend, will be payable on November 15, 2007 to stockholders of record at the close of business on October 31, 2007.

New Stock Repurchase Program

The Company also announced today that its Board of Directors has extended for another year, the stock repurchase program which it authorized in October of last year. Additionally, the Board approved an increase of 100,000 in the number of shares of the Company's common stock authorized for repurchase in the current program, bringing the total shares available for repurchase to 150,517 during the next twelve months.

During the three months ended September 30, 2007, the Company continued the repurchase of its common stock by acquiring 53,900 shares in the open market.

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 date)

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
For the Period Ended
Total interest and dividend
 income                         $  10,013  $  10,052  $  30,048  $  29,854
Total interest expense              5,368      4,872     15,848     13,845
                                ---------  ---------  ---------  ---------
Net interest income                 4,645      5,180     14,200     16,009
Provision (credit) for loan
 losses                                --         82        (10)       132
                                ---------  ---------  ---------  ---------
Net interest income after
 provision (credit) for loan
 losses                             4,645      5,098     14,210     15,877
Gains on securities, net            2,105        168      3,233        538
Other non-interest income             331        279      1,148        892
Non-interest expense                3,760      2,929      9,951      9,268
Income tax expense                  1,195        885      3,011      2,743
                                ---------  ---------  ---------  ---------
Net income                      $   2,126  $   1,731  $   5,629  $   5,296

Weighted Average Common Shares
 Outstanding
Basic                           4,299,907  4,315,211  4,322,309  4,327,930
Diluted                         4,328,422  4,349,187  4,348,828  4,363,386

Per Common Share
Earnings:
  Basic                         $    0.49  $    0.40  $    1.30  $    1.22
  Diluted                            0.49       0.40       1.29       1.21
Cash dividends paid                  0.28       0.27       0.84       0.81
Book value (period end)                                   25.18      24.55

Ratios (1)
Return on average assets             1.05%      0.82%      0.92%      0.81%
Return on average equity             8.00       6.72       7.02       6.81
Net interest margin                  2.37       2.53       2.39       2.54
Total equity to assets (period
 end)                                                     13.15      12.52


                                                               At
                                                          September 30,
                                                         2007      2006
                                                      ---------  ---------
At Period End
Assets                                                $ 817,047  $ 845,927
Deposits                                                693,362    729,411
Total loans                                             193,412    213,876
Stockholders' equity                                  $ 107,423  $ 105,902
Common shares outstanding                             4,266,654  4,314,504

Asset Quality
Non-accrual loans                                     $     206  $       5
Real estate acquired through
 foreclosure                                                 --         --
                                                      ---------  ---------
Total non-performing assets                           $     206  $       5
Allowance for loan losses                             $   1,370  $   1,395

Percent of non-accrual loans to
 total loans                                               0.11%     0.002%


(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
                                              September 30,  September 30,
                                                  2007           2006
                                              -------------  -------------
Assets:
  Cash and due from banks                     $       6,882  $       8,489
  Short-term investments                            162,452        138,854
                                              -------------  -------------
        Total cash and cash
         equivalents                                169,334        147,343
  Term federal funds sold                            63,000         15,000
  Securities available for sale, at fair
   value (amortized cost of $130,019 in 2007
   and $434,564 in 2006)                            129,863        429,013
  Securities held to maturity, at amortized
   cost (market value of $8,004 in 2007 and
   $5,277 in 2006)                                    8,127          5,416
  Trading securities, at fair value:
     Debt securities                                231,160             --
     Equity securities and mutual funds               2,817            369
  Loans:
     Mortgage loans                                 183,841        204,036
     Other loans                                      9,571          9,840
                                              -------------  -------------
        Total loans                                 193,412        213,876
  Allowance for loan losses                          (1,370)        (1,395)
                                              -------------  -------------
        Net loans                                   192,042        212,481
                                              -------------  -------------
  Premises and equipment                              8,176          7,051
  Real estate held for resale                           425            425
  Accrued interest and income receivable              5,322          5,573
  Goodwill                                            1,090          1,090
  Income tax receivable, net                            380            246
  Deferred income tax asset, net                      1,968          3,587
  Other assets                                        3,343         18,333
                                              -------------  -------------
        Total assets                          $     817,047  $     845,927
                                              -------------  -------------
Liabilities and Stockholders' Equity:
  Deposits:
     Demand and NOW                           $      72,606  $      77,577
     Savings                                        311,725        363,610
     Time certificates of deposit                   309,031        288,224
                                              -------------  -------------
        Total deposits                              693,362        729,411
  Escrow deposits of borrowers                          963            992
  Borrowed funds                                     10,000             --
  Allowance for loan losses on off-balance
   sheet credit exposures                               345            336
  Other liabilities                                   4,954          9,286
                                              -------------  -------------
        Total liabilities                           709,624        740,025
                                              -------------  -------------
  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,
      7,872,017 and 7,840,167 shares issued
      in 2007 and 2006, respectively                  7,872          7,840
     Additional paid-in capital                      58,482         57,695
     Retained earnings                              106,810        106,532
                                              -------------  -------------
                                                    173,164        172,067
     Treasury stock at cost 3,605,363 and
      3,525,663 shares in 2007 and 2006,
      respectively                                  (65,385)       (62,672)
     Accumulated other comprehensive loss              (356)        (3,493)
      Shares held in rabbi trust at cost,
       19,444 and 16,744 shares in 2007 and
       2006, respectively                              (475)          (386)
     Deferred compensation obligation                   475            386
                                              -------------  -------------
        Total stockholders' equity                  107,423        105,902
                                              -------------  -------------
        Total liabilities and
         stockholders' equity                 $     817,047  $     845,927
                                              -------------  -------------


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

                                                       Three Months Ended
                                                      September  September
                                                         30,        30,
                                                        2007       2006
                                                      ---------  ----------
Interest and dividend income:
  Mortgage loans                                      $   2,541  $    2,799
  Other loans                                               193         200
  Securities available for sale:
     Mortgage-backed securities                           1,702       1,799
     Other securities                                        34       3,146
  Mortgage-backed securities held to maturity               104          73
  Trading securities                                      2,646          38
  Federal funds sold                                      2,058       1,923
  Other investments                                         735          74
                                                      ---------  ----------
     Total interest and dividend income                  10,013      10,052
                                                      ---------  ----------

Interest expense:
  Deposits                                                5,364       4,872
  Borrowed funds                                              4          --
                                                      ---------  ----------
     Total interest expense                               5,368       4,872
                                                      ---------  ----------

  Net interest income                                     4,645       5,180
Provision (credit) for loan losses                           --          82
                                                      ---------  ----------
  Net interest income after provision
   (credit) for loan losses                               4,645       5,098

                                                      ---------  ----------
Non-interest income:
  Deposit account service fees                               81          84
  Gains (losses) on securities available for sale,
   net                                                     (104)         80
  Gains on trading securities, net                        2,209          88
  Option fees                                                75          --
  Deferred compensation plan income (loss)                    9          48
  Other                                                     166         147

                                                      ---------  ----------
     Total non-interest income                            2,436         447

                                                      ---------  ----------
Non-interest expense:
  Salaries and employee benefits                          2,292       1,808
  Deferred compensation plan expense                        148          69
  Occupancy and equipment                                   528         490
  Data processing                                           149         146
  Professional services                                     230         113
  Advertising and marketing                                  56          46
  Deposit insurance                                          27          31
  Other                                                     330         226

                                                      ---------  ----------
     Total non-interest expense                           3,760       2,929

                                                      ---------  ----------
  Income before income taxes                              3,321       2,616
Income tax expense                                        1,195         885

                                                      ---------  ----------
     Net income                                       $   2,126  $    1,731

                                                      ---------  ----------
Weighted average common shares outstanding:
  Basic                                               4,299,907   4,315,211
  Diluted                                             4,328,422   4,349,187
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)

                                                    Nine Months Ended
                                               September 30,  September 30,
                                                    2007          2006
                                                ------------  -------------
Interest and dividend income:
  Mortgage loans                                $      7,820  $       8,554
  Other loans                                            585            570
  Securities available for sale:
     Mortgage-backed securities                        5,236          5,469
     Other securities                                     97          9,025
  Mortgage-backed securities held to maturity            240            229
  Trading securities                                   7,922            194
  Federal funds sold                                   6,438          5,727
  Other investments                                    1,710             86
                                                ------------  -------------
     Total interest and dividend income               30,048         29,854
                                                ------------  -------------

Interest expense:
  Deposits                                            15,844         13,845
  Borrowed funds                                           4             --
                                                ------------  -------------
     Total interest expense                           15,848         13,845
                                                ------------  -------------

  Net interest income                                 14,200         16,009
Provision (credit) for loan losses                       (10)           132
                                                ------------  -------------
  Net interest income after provision
   (credit) for loan losses                           14,210         15,877

                                                ------------  -------------
Non-interest income:
  Deposit account service fees                           245            258
  Gains on securities available for sale, net            184            429
  Gains on trading securities, net                     3,049            109
  Option fees                                            225             --
  Deferred compensation plan income                      118            109
  Other                                                  560            525

                                                ------------  -------------
     Total non-interest income                         4,381          1,430

                                                ------------  -------------
Non-interest expense:
  Salaries and employee benefits                       6,032          5,544
  Deferred compensation plan expense                     304            172
  Occupancy and equipment                              1,553          1,702
  Data processing                                        436            417
  Professional services                                  472            414
  Advertising and marketing                              125            102
  Deposit insurance                                       82             96
  Other                                                  947            821

                                                ------------  -------------
     Total non-interest expense                        9,951          9,268

                                                ------------  -------------
  Income before income taxes                           8,640          8,039
Income tax expense                                     3,011          2,743

                                                ------------  -------------
      Net income                                $      5,629  $       5,296

                                                ------------  -------------
Weighted average common shares outstanding:
  Basic                                            4,322,309      4,327,930
  Diluted                                          4,348,828      4,363,386
Earnings per share (in dollars):
  Basic                                         $       1.30  $        1.22
  Diluted                                               1.29           1.21


Contact Information

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