SOURCE: MASSBANK Corp.

August 07, 2008 08:30 ET

MASSBANK Corp. Reports Second Quarter 2008 Earnings Results

READING, MA--(Marketwire - August 7, 2008) - MASSBANK Corp. (NASDAQ: MASB), the Holding Company for MASSBANK, today reported a net loss of $378,000 or $0.09 in basic and diluted earnings per share for the second quarter of 2008, compared with net income of $1,422,000 or $0.33 in basic and diluted earnings per share in the second quarter of 2007. For the first six months of 2008, the Company had a net loss of $197,000 or $0.05 in basic and diluted earnings per share as compared with net income of $3,503,000 or $0.81 in basic and $0.80 in diluted earnings per share for the first six months of 2007. The results for the second quarter of 2008 compared to the second quarter of 2007 were adversely affected by a decline of $1,584,000 in net interest income, an increase in securities losses of $578,000 and one-time merger expenses of $258,000 associated with the Company's merger with Eastern Bank. The decline in net interest income was principally due to changes in the Company's investment portfolio as the Company increased the liquidity of the portfolio as called for by the merger agreement with Eastern Bank. Consistent with the merger agreement, the percentage of the Company's total assets consisting of short-term investments and term Federal funds sold increased from 26.2% on June 30, 2007 to 47.0% on June 30, 2008.

Balance Sheet

The Company's total assets decreased $33.9 million to $783.0 million at June 30, 2008 from $816.9 million at June 30, 2007. Deposits decreased $31.2 million or 4.4% year-over-year from $704.6 million at June 30, 2007 to $673.4 million at June 30, 2008 due in part to increased competition for relatively expensive short-term deposits. Stockholders' equity was $105.2 million at June 30, 2008, representing a book value of $24.85 per share. This compares to $107.3 million at June 30, 2007 representing a book value of $24.83 per share.

The Company's non-accrual loans are near historical lows totaling $26,000 at June 30, 2008 representing 0.01% of total loans. This compares to $192,000 representing 0.10% of total loans at June 30, 2007. At June 30, 2008, the Bank's allowance for loan losses totaled $1.411 million representing 0.69% of total loans compared to $1.372 million representing 0.69% of total loans at June 30, 2007. In addition, the Bank's allowance for loan losses on off-balance sheet credit exposures totaled $302,000 at June 30, 2008 compared to $345,000 a year earlier. This is intended to protect the bank against 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

Stockholder approval of Merger

As previously announced, the Company's stockholders approved on July 15, 2008 the Company's merger with Eastern Bank Corporation. The merger remains subject to regulatory approvals. The merger is expected to close during the third quarter of 2008.

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 but not limited to the following: (1) changing economic conditions; (2) movements in interest rates; (3) the credit environment; (4) levels of activity in the capital markets, including the stock and bond market; (5) changes in the levels of non-performing assets; (6) changes in the competitive pricing pressures within the Company's market which may result in an increase in the Company's cost of funds, changes in loan originations, a change in deposits and assets; (7) adverse legislative and regulatory developments; (8) a significant decline in residential real estate values in the Company's market area; (9) adverse impacts resulting from the continuing war on terrorism; (10) a significant increase in employee benefit costs; (11) the impact of changes in accounting principles; (12) the impact of inflation or deflation; (13) the disruption to the Company's business as a result of the announcement and pending merger with Eastern Corporation, including the Company's ability to retain depositors and loan relationships and key personnel; and (14) the Company's success at managing the risks involved in the foregoing 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, 2007. In addition, the completion of the previously announced merger with Eastern Corporation is subject to numerous risks and uncertainties, including: (a) the risk the Company will be unable to satisfy all of the closing conditions set forth in the merger agreement; and (b) the possibility that the Company may not obtain the necessary state and federal regulatory approvals to consummate the merger or that an adverse regulatory condition will be imposed in connection with those approvals.

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



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


                              Three Months Ended        Six Months Ended
                                   June 30,                June 30,
                               2008        2007        2008        2007
                            ---------   ----------  ---------   ----------
For the Period Ended
Total interest and dividend
 income                     $   7,295   $   10,056  $  16,057   $   20,035
Total interest expense          4,115        5,292      8,862       10,480
                            ---------   ----------  ---------   ----------
Net interest income             3,180        4,764      7,195        9,555
Provision (credit) for loan
 losses                            15          (10)        43          (10)
                            ---------   ----------  ---------   ----------
Net interest income after
 provision (credit) for
 loan losses                    3,165        4,774      7,152        9,565
Gains (losses) on
 securities, net                 (584)          (6)        83        1,128
Other non-interest income         255          461        525          817
Non-interest expense            3,460        3,091      8,068        6,191
Income tax expense
 (benefit)                       (246)         716       (111)       1,816
                            ---------   ----------  ---------   ----------
Net income (loss)           $    (378)  $    1,422  $    (197)  $    3,503

Weighted Average Common
 Shares Outstanding
Basic                       4,233,079    4,331,823  4,237,508    4,333,696
Diluted                     4,270,506    4,356,972  4,271,290    4,359,200

Per Common Share
Earnings (loss):
  Basic                     $   (0.09)  $     0.33  $   (0.05)  $     0.81
  Diluted                       (0.09)        0.33      (0.05)        0.80
Cash dividends paid              0.29         0.28       0.58         0.56
Book value (period end)                                 24.85        24.83

Ratios (1)
Return on average assets        (0.19)%       0.69%     (0.05)%       0.85%
Return on average equity        (1.42)        5.28      (0.37)        6.53
Net interest margin              1.66         2.40       1.87         2.39
Total equity to assets
 (period end)                                           13.43        13.13


                                                             At
                                                          June 30,
                                                      2008        2007
                                                    ---------   ----------
At Period End
Assets                                              $ 783,031   $  816,948
Deposits                                              673,436      704,583
Total loans                                           203,679      198,458
Stockholders' equity                                $ 105,172   $  107,252
Common shares outstanding                           4,233,079    4,319,554

Asset Quality
Non-accrual loans                                   $      26   $      192
Real estate acquired
 through foreclosure                                       --           --
                                                    ---------   ----------
Total non-performing assets                         $      26   $      192
Allowance for loan losses                           $   1,411   $    1,372

Percent of non-accrual
 loans to total loans                                    0.01%        0.10%

(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
                                                    June 30,     June 30,
                                                      2008         2007
                                                  -----------  -----------
Assets:
   Cash and due from banks                        $     7,476  $     7,100
   Short-term investments                             318,183      174,006
                                                  -----------  -----------
           Total cash and cash equivalents            325,659      181,106
   Term federal funds sold                             50,000       40,000
   Securities available for sale, at fair value
    (amortized cost of $117,010 in 2008 and
     $138,029 in 2007)                                117,338      136,144
   Securities held to maturity, at amortized cost
    (market value of $7,193 in 2008 and
     $4,945 in 2007)                                    7,257        5,188
   Trading securities, at fair value:                  63,522      236,985
   Loans:
       Mortgage loans                                 194,722      188,558
       Other loans                                      8,957        9,900
                                                  -----------  -----------
           Total loans                                203,679      198,458
   Allowance for loan losses                           (1,411)      (1,372)
                                                  -----------  -----------
           Net loans                                  202,268      197,086
                                                  -----------  -----------
   Premises and equipment                               8,368        8,119
   Real estate held for resale                             --          425
   Accrued interest and income receivable               2,194        4,252
   Goodwill                                             1,090        1,090
   Income tax receivable, net                             223           19
   Deferred income tax asset, net                       1,191        3,349
   Other assets                                         3,921        3,185
                                                  -----------  -----------
           Total assets                           $   783,031  $   816,948
                                                  -----------  -----------
Liabilities and Stockholders' Equity:
   Deposits:
       Demand and NOW                             $    73,247  $    74,446
       Savings                                        312,694      323,168
       Time certificates of deposit                   287,495      306,969
                                                  -----------  -----------
           Total deposits                             673,436      704,583
   Escrow deposits of borrowers                           975          921
   Allowance for loan losses on off-balance sheet
    credit exposures                                      302          345
   Other liabilities                                    3,146        3,847
                                                  -----------  -----------
           Total liabilities                          677,859      709,696
                                                  -----------  -----------
   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, 7,900,942 and
        7,871,017 shares issued in 2008 and 2007,
        respectively                                    7,901        7,871
       Additional paid-in capital                      59,410       58,430
       Retained earnings                              105,016      105,893
                                                  -----------  -----------
                                                      172,327      172,194
       Treasury stock at cost 3,667,863 and
        3,551,463 shares in 2008 and 2007,
        respectively                                  (67,673)     (63,519)
       Accumulated other comprehensive income
        (loss)                                            518       (1,423)
       Shares held in rabbi trust at cost,
        20,194 and 18,944 shares in 2008
        and 2007, respectively                           (503)        (458)
       Deferred compensation obligation                   503          458
                                                  -----------  -----------
           Total stockholders' equity                 105,172      107,252
                                                  -----------  -----------
           Total liabilities and stockholders'
            equity                                $   783,031  $   816,948
                                                  -----------  -----------




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

                                                     Three Months Ended
                                                    June 30,     June 30,
                                                      2008         2007
                                                  -----------  -----------
Interest and dividend income:
  Mortgage loans                                  $     2,544  $     2,603
  Other loans                                             152          198
  Securities available for sale:
     Mortgage-backed securities                         1,544        1,729
     Other securities                                      30           32
  Mortgage-backed securities held to maturity             106           68
  Trading securities                                      856        2,639
  Federal funds sold                                    1,233        2,200
  Other investments                                       830          587
                                                  -----------  -----------
     Total interest and dividend income                 7,295       10,056
                                                  -----------  -----------

Interest expense:
  Deposits                                              4,115        5,292
                                                  -----------  -----------
     Total interest expense                             4,115        5,292
                                                  -----------  -----------

  Net interest income                                   3,180        4,764
Provision (credit) for loan losses                         15          (10)
                                                  -----------  -----------
  Net interest income after provision
   (credit) for loan losses                             3,165        4,774

                                                  -----------  -----------
Non-interest income:
  Deposit account service fees                             69           81
  Gains (losses) on securities available for
   sale, net                                              (18)         203
  Losses on trading securities, net                      (566)        (209)
  Option fees                                              --           75
  Deferred compensation plan income (loss)                (20)          84
  Other                                                   206          221

                                                  -----------  -----------
     Total non-interest income                           (329)         455

                                                  -----------  -----------
Non-interest expense:
  Salaries and employee benefits                        1,941        1,856
  Deferred compensation plan expense (income)              --          108
  Occupancy and equipment                                 520          494
  Data processing                                         129          141
  Professional services                                   243          113
  Merger related expense                                  258           --
  Advertising and marketing                                22           36
  Deposit insurance                                        34           28
  Other                                                   313          315

                                                  -----------  -----------
     Total non-interest expense                         3,460        3,091

                                                  -----------  -----------
  Income (loss) before income taxes                      (624)       2,138
Income tax expense (benefit)                             (246)         716

                                                  -----------  -----------
     Net income (loss)                            $      (378) $     1,422

                                                  -----------  -----------
Weighted average common shares outstanding:
  Basic                                             4,233,079    4,331,823
  Diluted                                           4,270,506    4,356,972
Earnings (loss) per share (in dollars):
  Basic                                           $     (0.09) $      0.33
  Diluted                                               (0.09)        0.33



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

                                                      Six Months Ended
                                                    June 30,     June 30,
                                                      2008         2007
                                                  -----------  -----------
Interest and dividend income:
  Mortgage loans                                  $     5,034  $     5,279
  Other loans                                             313          391
  Securities available for sale:
     Mortgage-backed securities                         3,133        3,535
     Other securities                                      57           63
  Mortgage-backed securities held to maturity             221          137
  Trading securities                                    2,521        5,276
  Federal funds sold                                    3,102        4,380
  Other investments                                     1,676          974
                                                  -----------  -----------
     Total interest and dividend income                16,057       20,035
                                                  -----------  -----------

Interest expense:
  Deposits                                              8,778       10,480
  Borrowed funds                                           84           --
                                                  -----------  -----------
     Total interest expense                             8,862       10,480
                                                  -----------  -----------

  Net interest income                                   7,195        9,555
Provision (credit) for loan losses                         43          (10)
                                                  -----------  -----------
  Net interest income after provision
   (credit) for loan losses                             7,152        9,565

                                                  -----------  -----------
Non-interest income:
  Deposit account service fees                            146          164
  Gains (losses) on securities available for
   sale, net                                              (63)         288
  Gains on trading securities, net                        146          840
  Option fees                                              75          150
  Deferred compensation plan income (loss)                (69)         109
  Other                                                   373          394

                                                  -----------  -----------
     Total non-interest income                            608        1,945

                                                  -----------  -----------
Non-interest expense:
  Salaries and employee benefits                        3,881        3,740
  Deferred compensation plan expense (income)             (21)         156
  Occupancy and equipment                               1,113        1,025
  Data processing                                         278          287
  Professional services                                   912          241
  Merger related expense                                1,161           --
  Advertising and marketing                                60           69
  Deposit insurance                                        60           56
  Other                                                   624          617

                                                  -----------  -----------
     Total non-interest expense                         8,068        6,191

                                                  -----------  -----------
  Income (loss) before income taxes                      (308)       5,319
Income tax expense (benefit)                             (111)       1,816

                                                  -----------  -----------
     Net income (loss)                            $      (197) $     3,503

                                                  -----------  -----------
Weighted average common shares outstanding:
  Basic                                             4,237,508    4,333,696
  Diluted                                           4,271,290    4,359,200
Earnings (loss) per share (in dollars):
  Basic                                           $     (0.05) $      0.81
  Diluted                                               (0.05)        0.80

Contact Information

  • Contact
    Reginald E. Cormier
    Senior Vice President, Treasurer and CFO
    (781) 942-8192