SOURCE: MASSBANK Corp.

January 29, 2007 17:01 ET

MASSBANK Corp. Reports Fourth Quarter 2006 Earnings of $1.73 Million or $0.40 per Share and Declares Cash Dividend

READING, MA -- (MARKET WIRE) -- January 29, 2007 -- MASSBANK Corp. (NASDAQ: MASB), the Holding Company for MASSBANK, today reported net income of $1,731,000 or $0.40 in diluted earnings per share for the fourth quarter 2006, compared with net income of $1,888,000 or $0.43 in diluted earnings per share in the fourth quarter of 2005. Basic earnings per share in the recent quarter were $0.40 per share compared to $0.44 per share in the fourth quarter of the prior year.

For the year ended December 31, 2006, the Company reported net income of $7,027,000 or $1.61 in diluted earnings per share ($1.62 in basic earnings per share) compared to $7,323,000 or $1.66 in diluted earnings per share ($1.68 in basic earnings per share) for the year ended December 31, 2005.

Return on average assets for the fourth quarter of 2006 was 0.83% compared to 0.84% for the fourth quarter of 2005. For the year ended December 31, 2006 the Company's return on average assets improved to 0.82% from 0.79% for the prior year.

Net interest margin for the fourth quarter of 2006 was 2.47% compared to 2.53% for the fourth quarter of 2005. For the year ended December 31, 2006 the Company's net interest margin improved 13 basis points to 2.53% from 2.40% for the prior year.

Income Statement

Net interest income for the fourth quarter 2006 decreased by $514,000 or 9.4% as the bank continued to be challenged by the current inverted yield curve environment (an environment where short-term rates actually exceed long-term rates) and increased funding costs. This has resulted in a decrease of 6 basis points in net interest margin in the recent quarter compared to the fourth quarter of 2005. Average earning assets for the last quarter of 2006 declined to $808.7 million, from $873.4 million in the fourth quarter of the prior year due to a lower deposit base. This is due in part to intense competition for expensive short term deposits.

Non-interest income in the recent quarter increased by $193,000 or 35.5% compared to the same quarter of the prior year. This increase is primarily attributable to $150,000 in option fees the Company recorded in the final quarter of 2006. The Company has granted a local developer an option to purchase a parcel of land that the Company owns and is not being used for operations purposes. As consideration for this option, the developer will make quarterly option payments of $75,000 to the Company until the option is either exercised and the closing transaction for the purchase occurs or the option is allowed to lapse. The Closing is expected to take place in the third quarter of 2007. Option payments received are not applied towards the purchase price and are not refundable.

Non-interest expense decreased by $44,000 or 1.4% for the three months ended December 31, 2006, as compared to the same period in 2005 due primarily to reductions in salaries and employee benefits and occupancy and equipment expense.

Balance Sheet

The Company's total assets decreased $55.2 million to $843.5 million at December 31, 2006, from $898.7 million at December 31, 2005. Deposits decreased $61.4 million or 7.8% year-over-year from $784.7 million at December 31, 2005 to $723.3 million at December 31, 2006. Stockholders' equity increased $1.6 million or 1.5% to $106.9 million at December 31, 2006, from $105.3 million at year-end 2005. Book value per share increased $0.44 or 1.8% to $24.76 per share at December 31, 2006, from $24.32 per share at December 31, 2005.

The Company's non-accrual loans remain near historical lows totaling $137,000 at December 31, 2006, representing 0.07% of total loans. This compares to $257,000 representing 0.11% of total loans at December 31, 2005. At December 31, 2006, the Bank's allowance for loan losses totaled $1.382 million representing 0.66% of total loans compared to $1.253 million representing 0.56% of total loans at December 31, 2005. In addition, the Bank's allowance for loan losses on off-balance sheet credit exposures totaled $345,000 at December 31, 2006 compared to $517,000 a year earlier. This is intended to protect the Bank 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 $0.28 per share. This, the Company's eighty-second consecutive dividend, will be payable on February 16, 2007 to stockholders of record at the close of business on February 1, 2007.

Stock Repurchase Program

During the three months ended December 31, 2006, the Company continued the repurchase of its common stock by acquiring 7,000 shares in the open market. As of December 31, 2006, there were 123,217 shares available for repurchase in the current program.

Date Set for Annual Meeting

The Company also announced that the Annual Meeting of Stockholders will be held at the Sheraton Ferncroft Resort, 50 Ferncroft Road, Danvers, Massachusetts on Tuesday, April 17, 2007 at 10:00 a.m. Only stockholders of record at the close of business on February 26, 2007 are entitled to notice of and to vote at the Annual Meeting.

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, 2005.

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

                              Three Months Ended     Twelve Months Ended
                                 December 31,            December 31,
                               2006       2005         2006        2005
                             ---------  ---------  ------------  ---------
For the Period Ended
Total interest and dividend
 income                      $  10,085  $   9,621  $     39,939  $  36,801
Total interest expense           5,106      4,128        18,951     15,141
                             ---------  ---------  ------------  ---------
Net interest income              4,979      5,493        20,988     21,660
Provision (credit) for loan
 losses                             (9)        --           123        (53)
                             ---------  ---------  ------------  ---------
Net interest income after
 provision (credit) for loan
 losses                          4,988      5,493        20,865     21,713
Gains on securities, net           259        253           797        679
Other non-interest income          477        290         1,408      1,238
Non-interest expense             3,053      3,097        12,360     12,514
Income tax expense                 940      1,051         3,683      3,793
                             ---------  ---------  ------------  ---------
Net income                   $   1,731  $   1,888  $      7,027  $   7,323

Weighted Average Common
 Shares Outstanding
Basic                        4,319,795  4,331,984     4,325,879  4,365,932
Diluted                      4,352,680  4,371,312     4,360,688  4,422,529

Per Common Share
Earnings:
     Basic                   $    0.40  $    0.44  $       1.62  $    1.68
     Diluted                      0.40       0.43          1.61       1.66
Cash dividends paid               0.28       0.27          1.09       1.05
Book value (period end)                                   24.76      24.32

Ratios (1)
Return on average assets          0.83%      0.84%         0.82%      0.79%
Return on average equity          6.52       7.23          6.74       6.84
Net interest margin               2.47       2.53          2.53       2.40
Total equity to assets
 (period end)                                             12.67      11.71


                                                               At
                                                           December 31,
                                                        2006       2005
                                                   ------------  ---------
At Period End
Assets                                             $    843,522  $ 898,679
Deposits                                                723,332    784,728
Total loans                                             208,927    225,730
Stockholders' equity                               $    106,885  $ 105,264
Common shares outstanding                             4,317,654  4,328,517

Asset Quality
Non-accrual loans                                  $        137  $     257
Real estate acquired through
 foreclosure                                                 --         --
                                                   ------------  ---------
Total non-performing assets                        $        137  $     257
Allowance for loan losses                          $      1,382  $   1,253

Non-accrual loans to total
 loans                                                     0.07%      0.11%

(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,
                                                    2006          2005
                                               ------------- -------------
Assets:
   Cash and due from banks                     $       8,650 $       9,590
   Short-term investments                            139,240       167,787
                                               ------------- -------------
         Total cash and cash equivalents             147,890       177,377
                                               ------------- -------------
   Interest-bearing deposits in banks                     --           898
   Term federal funds sold                            41,000            --
   Securities available for sale, at market
    value (amortized cost of $407,604 in 2006
    and $458,297 in 2005)                            403,079       453,472
   Securities held to maturity, at amortized
    cost (market value of $5,276 in 2006 and
    $6,022 in 2005)                                    5,396         6,137
   Trading securities, at market value                 1,931         9,282
   Loans
      Mortgage loans                                 199,253       215,904
      Other loans                                      9,674         9,826
                                               ------------- -------------
         Total loans                                 208,927       225,730
   Allowance for loan losses                          (1,382)       (1,253)
                                               ------------- -------------
         Net loans                                   207,545       224,477
                                               ------------- -------------
   Premises and equipment                              7,085         6,525
   Real estate held for resale                           425            --
   Accrued interest and income receivable              5,083         3,898
   Goodwill                                            1,090         1,090
   Income tax receivable, net                             88            --
   Deferred income tax asset, net                      3,347         3,240
   Other assets                                       19,563        12,283
                                               ------------- -------------
         Total assets                          $     843,522 $     898,679
                                               ------------- -------------
Liabilities and Stockholders' Equity:
   Deposits:
      Demand and NOW                           $      78,860 $      82,250
      Savings                                        344,808       441,541
      Time certificates of deposit                   299,664       260,937
                                               ------------- -------------
         Total deposits                              723,332       784,728
   Escrow deposits of borrowers                        1,006         1,059
   Accrued income taxes, net                              --            35
   Allowance for loan losses on off-balance
    sheet credit exposures                               345           517
   Other liabilities                                  11,954         7,076
                                               ------------- -------------
         Total liabilities                           736,637       793,415
                                               ------------- -------------
   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, 7,850,317
       and 7,811,680 shares issued,
       respectively                                    7,850         7,812
      Additional paid-in capital                      57,953        57,067
      Retained earnings                              107,055       104,743
                                               ------------- -------------
                                                     172,858       169,622
      Treasury stock at cost 3,532,663 and
       3,483,163 shares, respectively                (62,902)      (61,281)
      Accumulated other comprehensive loss            (3,071)       (3,077)
      Shares held in rabbi trust at cost,
       17,944 and 15,644 shares, respectively           (426)         (351)
      Deferred compensation obligation                   426           351
                                               ------------- -------------
         Total stockholders' equity                  106,885       105,264
                                               ------------- -------------
         Total liabilities and stockholders'
          equity                               $     843,522 $     898,679
                                               ------------- -------------



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

                                                    Three Months Ended
                                                December 31,  December 31,
                                                    2006          2005
                                                ------------- -------------
Interest and dividend income:
   Mortgage loans                               $       2,751 $       2,963
   Other loans                                            195           174
   Securities available for sale:
      Mortgage-backed securities                        1,824         1,750
      Other securities                                  3,037         2,705
   Mortgage-backed securities held to maturity             70            75
   Trading securities                                       1           140
   Federal funds sold                                   2,004         1,806
   Other investments                                      203             8
                                                ------------- -------------
      Total interest and dividend income               10,085         9,621
                                                ------------- -------------

Interest expense:
   Deposits                                             5,106         4,128
                                                ------------- -------------
      Total interest expense                            5,106         4,128
                                                ------------- -------------

   Net interest income                                  4,979         5,493
Provision (credit) for loan losses                         (9)           --

                                                ------------- -------------
      Net interest income after provision
       (credit) for loan losses                         4,988         5,493

                                                ------------- -------------
Non-interest income:
   Deposit account service fees                            85            92
   Gains on securities available for sale, net            307           208
   Gains (losses) on trading securities, net              (48)           45
   Option fees                                            150            --
   Other                                                  242           198

                                                ------------- -------------
      Total non-interest income                           736           543

                                                ------------- -------------
Non-interest expense:
   Salaries and employee benefits                       1,885         1,938
   Occupancy and equipment                                474           563
   Data processing                                        166           136
   Professional services                                  139           105
   Advertising and marketing                               37            51
   Deposit insurance                                       30            35
   Other                                                  322           269

                                                ------------- -------------
      Total non-interest expense                        3,053         3,097

                                                ------------- -------------
   Income before income taxes                           2,671         2,939
Income tax expense                                        940         1,051

                                                ------------- -------------
   Net income                                   $       1,731 $       1,888

                                                ------------- -------------
Weighted average common shares outstanding:
   Basic                                            4,319,795     4,331,984
   Diluted                                          4,352,680     4,371,312
Earnings per share (in dollars):
   Basic                                        $        0.40 $        0.44
   Diluted                                               0.40          0.43



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

                                                   Twelve Months Ended
                                                 December 31, December 31,
                                                     2006         2005
                                                 ------------ ------------
Interest and dividend income:
     Mortgage loans                              $     11,305 $     12,111
     Other loans                                          765          681
     Securities available for sale:
        Mortgage-backed securities                      7,293        6,961
        Other securities                               12,062        9,863
     Mortgage-backed securities held to maturity          299          256
     Trading securities                                   195          760
     Federal funds sold                                 7,731        6,116
     Other investments                                    289           53
                                                 ------------ ------------
        Total interest and dividend income             39,939       36,801
                                                 ------------ ------------

Interest expense:
     Deposits                                          18,951       15,141
                                                 ------------ ------------
        Total interest expense                         18,951       15,141
                                                 ------------ ------------

     Net interest income                               20,988       21,660
Provision (credit) for loan losses                        123          (53)

                                                 ------------ ------------
     Net interest income after provision
      (credit) for loan losses                         20,865       21,713

                                                 ------------ ------------
Non-interest income:
     Deposit account service fees                         343          393
     Gains on securities available for sale, net          736          515
     Gains on trading securities, net                      61          164
     Option fees                                          150           --
     Other                                                915          845

                                                 ------------ ------------
        Total non-interest income                       2,205        1,917

                                                 ------------ ------------
Non-interest expense:
     Salaries and employee benefits                     7,601        7,635
     Occupancy and equipment                            2,176        2,212
     Data processing                                      583          540
     Professional services                                553          485
     Advertising and marketing                            139          155
     Deposit insurance                                    126          145
     Other                                              1,182        1,342

                                                 ------------ ------------
        Total non-interest expense                     12,360       12,514

                                                 ------------ ------------
     Income before income taxes                        10,710       11,116
Income tax expense                                      3,683        3,793

                                                 ------------ ------------
     Net income                                  $      7,027 $      7,323

                                                 ------------ ------------
Weighted average common shares outstanding:
     Basic                                          4,325,879    4,365,932
     Diluted                                        4,360,688    4,422,529
Earnings per share (in dollars):
     Basic                                       $       1.62 $       1.68
     Diluted                                             1.61         1.66

Contact Information

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