MASSBANK Corp. Reports Second Quarter 2008 Earnings Results

SOURCE:

MASSBANK Corp.

2008-08-07 07:30:00

READING, MA–(EMWNews – 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
Reginald E. Cormier
Senior Vice President, Treasurer and CFO
(781) 942-8192

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