SOURCE: MASSBANK Corp.

May 01, 2008 16:12 ET

MASSBANK Corp. Reports First Quarter 2008 Earnings Results

READING, MA--(Marketwire - May 1, 2008) - MASSBANK Corp. (NASDAQ: MASB), the Holding Company for MASSBANK, today reported net income of $181,000 or $0.04 in basic and diluted earnings per share for the first quarter of 2008, compared with net income of $2,081,000 or $0.48 in basic and diluted earnings per share in the first quarter of 2007. The results in the first quarter of 2008 were adversely affected by the incurrence in the quarter of $1,392,000 of expenses relating to a proxy contest instituted by a dissident stockholder, litigation initiated by that dissident stockholder, the Company's merger with Eastern Corporation announced on March 10, 2008 and litigation challenging that merger. Excluding these expenses, the Company's net income would have been $1,100,000 or $0.26 per share in the first quarter of 2008.

The Company's earnings performance for the recent quarter was also adversely impacted by a decrease in net interest income and non-interest income compared to the same quarter last year.

Net interest income, the Company's core earnings, for the three months ended March 31, 2008 decreased $776,000 or 16.2% to $4,015,000 from $4,791,000 for the same quarter last year. The decrease in net interest income results primarily from a decrease in average earning assets and net interest margin. The Company's average earning assets for the first quarter of 2008 were $778.2 million compared to $803.4 million in the same quarter of 2007. The net interest margin for the recent quarter was 2.07% compared to 2.39% in the first quarter of 2007.

Non-interest income for the recent quarter decreased $553,000 to $937,000 from $1,490,000 for the same quarter of last year due essentially to a decrease in securities gains. Gains on securities available for sale and trading declined $467,000 to $667,000 in the first quarter of 2008 from $1,134,000 in the first quarter of 2007.

Balance Sheet

The Company's total assets decreased $28.0 million to $800.1 million at March 31, 2008 from $828.1 at March 31, 2007. Deposits decreased $32.3 million or 4.5% year-over-year from $714.3 million at March 31, 2007 to $682.0 million at March 31, 2008 due in part to increased competition for relatively expensive short term deposits. Stockholders' equity was $108.1 million at March 31, 2008, representing a book value of $25.53 per share. This compares to $108.6 million at March 31, 2007 representing a book value of $25.04 per share.

The Company's non-accrual loans are near historical lows totaling $46,000 at March 31, 2008 representing 0.02% of total loans. This compares to $148,000 representing 0.07% of total loans at March 31, 2007. At March 31, 2008, the Bank's allowance for loan losses totaled $1.397 million representing 0.73% of total loans compared to $1.382 million representing 0.68% of total loans at March 31, 2007. In addition, the Bank's allowance for loan losses on off-balance sheet credit exposures totaled $317,000 at March 31, 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

Dividend Declaration

MASSBANK Corp. today announced a quarterly cash dividend on its common stock of $0.29 per share. This, the Company's eighty-seventh consecutive dividend, will be payable on May 19, 2008 to stockholders of record at the close of business on May 2, 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;
(b)     the possibility that the Company's stockholders will not approve
        the merger agreement;
(c)     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;
(d)     the outcome of any legal proceeding that has been
        or may be instituted against us, Eastern or others relating to the
        merger agreement, including the terms of any settlement of such
        legal proceedings that may be subject to court approval.

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
                                                          March 31,
                                                       2008        2007
                                                    ----------  ----------
For the Period Ended
Total interest and dividend income                  $    8,762  $    9,979
Total interest expense                                   4,747       5,188
                                                    ----------  ----------
Net interest income                                      4,015       4,791
Provision (credit) for loan losses                          28          --
                                                    ----------  ----------
Net interest income after provision (credit) for
 loan losses                                             3,987       4,791
Gains on securities, net                                   667       1,134
Other non-interest income                                  270         356
Non-interest expense                                     4,608       3,100
Income tax expense                                         135       1,100
                                                    ----------  ----------
Net income                                          $      181  $    2,081

Weighted Average Common Shares Outstanding
Basic                                                4,241,937   4,335,589
Diluted                                              4,272,073   4,361,453

Per Common Share
Earnings:
     Basic                                          $     0.04  $     0.48
     Diluted                                              0.04        0.48
Cash dividends paid                                       0.29        0.28
Book value (period end)                                  25.53       25.04

Ratios (1)
Return on average assets                                  0.09%       1.01%
Return on average equity                                  0.67        7.79
Net interest margin                                       2.07        2.39
Total equity to assets (period end)                      13.51       13.12


                                                             At
                                                           March 31,
                                                       2008        2007
                                                    ----------  ----------
At Period End
Assets                                              $  800,076  $  828,181
Deposits                                               682,048     714,298
Total loans                                            191,810     203,370
Stockholders' equity                                $  108,054  $  108,626
Common shares outstanding                            4,233,079   4,338,154

Asset Quality
Non-accrual loans                                   $       46  $      148
Real estate acquired through foreclosure                    --          --
                                                    ----------  ----------
Total non-performing assets                         $       46  $      148
Allowance for loan losses                           $    1,397  $    1,382

Percent of non-accrual loans to total loans               0.02%       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
                                                      March 31,  March 31,
                                                        2008       2007
                                                     ----------  ---------
Assets:
     Cash and due from banks                          $   5,495  $   7,464
     Short-term investments                             222,850    163,698
                                                      ---------  ---------
             Total cash and cash equivalents            228,345    171,162
     Term federal funds sold                            110,000     50,000
     Trading securities, at fair value                  114,232    240,042
     Securities available for sale, at fair value
      (amortized cost of $125,021 in 2008 and
      $140,743 in 2007)                                 127,463    139,965
     Securities held to maturity, at amortized cost
       (market value of $7,650 in 2008 and $5,101
        in 2007)                                          7,537      5,208
     Loans:
          Mortgage loans                                182,532    193,661
          Other loans                                     9,278      9,709
                                                      ---------  ---------
             Total loans                                191,810    203,370
     Allowance for loan losses                           (1,397)    (1,382)
                                                      ---------  ---------
             Net loans                                  190,413    201,988
                                                      ---------  ---------
     Real estate held for resale                            425        425
     Accrued interest and income receivable               3,408      4,726
     Income tax receivable, net                             266         --
     Deferred income tax asset, net                          46      2,620
     Premises and equipment                               8,063      7,238
     Goodwill                                             1,090      1,090
     Other assets                                         8,788      3,717
                                                      ---------  ---------
             Total assets                             $ 800,076  $ 828,181
                                                      ---------  ---------
Liabilities and Stockholders' Equity:
     Deposits:
          Demand and NOW                              $  76,025  $  75,967
          Savings                                       302,096    333,266
          Time certificates of deposit                  303,927    305,065
                                                      ---------  ---------
             Total deposits                             682,048    714,298
     Escrow deposits of borrowers                           990        993
     Accrued income taxes, net                               --        419
     Allowance for loan losses on off-balance sheet
      credit exposures                                      317        345
     Other liabilities                                    8,667      3,500
                                                      ---------  ---------
             Total liabilities                          692,022    719,555
                                                      ---------  ---------
     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 7,870,817 shares issued,
           respectively                                   7,901      7,871
          Additional paid-in capital                     59,379     58,401
          Retained earnings                             106,622    105,686
                                                      ---------  ---------
                                                        173,902    171,958
          Treasury stock at cost 3,667,863 and
           3,532,663 shares, respectively               (67,673)   (62,902)
          Accumulated other comprehensive income
           (loss)                                         1,825       (430)
          Shares held in rabbi trust at cost, 20,194
           and 17,944 shares, respectively                 (503)      (426)
          Deferred compensation obligation                  503        426
                                                      ---------  ---------
             Total stockholders' equity                 108,054    108,626
                                                      ---------  ---------
             Total liabilities and stockholders'
              equity                                  $ 800,076  $ 828,181
                                                      ---------  ---------



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

                                                      Three Months Ended
                                                    March 31,    March 31,
                                                       2008        2007
                                                    ----------  -----------
Interest and dividend income:
     Mortgage loans                                 $    2,490  $     2,676
     Other loans                                           161          193
     Securities available for sale:
        Mortgage-backed securities                       1,589        1,806
        Other securities                                    27           31
     Mortgage-backed securities held to maturity           115           69
     Trading securities                                  1,665        2,637
     Federal funds sold                                  1,869        2,180
     Other investments                                     846          387
                                                    ----------  -----------
        Total interest and dividend income               8,762        9,979
                                                    ----------  -----------

Interest expense:
     Deposits                                            4,663        5,188
     Borrowed funds                                         84           --
                                                    ----------  -----------
        Total interest expense                           4,747        5,188
                                                    ----------  -----------

     Net interest income                                 4,015        4,791
Provision (credit) for loan losses                          28           --
                                                    ----------  -----------
     Net interest income after provision
      (credit) for loan losses                           3,987        4,791

                                                    ----------  -----------
Non-interest income:
     Deposit account service fees                           77           83
     Gains (losses) on securities available for
      sale, net                                            (45)          85
     Gains on trading securities, net                      712        1,049
     Option fees                                            75           75
     Deferred compensation plan income (loss)              (49)          25
     Other                                                 167          173

                                                    ----------  -----------
        Total non-interest income                          937        1,490

                                                    ----------  -----------
Non-interest expense:
     Salaries and employee benefits                      1,940        1,884
     Deferred compensation plan expense                    (21)          48
     Occupancy and equipment                               593          531
     Data processing                                       149          146
     Professional services                                 669          128
     Merger related expense                                903           --
     Advertising and marketing                              38           33
     Deposit insurance                                      26           28
     Other                                                 311          302

                                                    ----------  -----------
        Total non-interest expense                       4,608        3,100

                                                    ----------  -----------
     Income before income taxes                            316        3,181
Income tax expense                                         135        1,100

                                                    ----------  -----------
     Net income                                     $      181  $     2,081

                                                    ----------  -----------
Weighted average common shares outstanding:
     Basic                                           4,241,937    4,335,589
     Diluted                                         4,272,073    4,361,453
Earnings per share (in dollars):
     Basic                                          $     0.04  $      0.48
     Diluted                                              0.04         0.48

Contact Information

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