MASB Massbank Corp Read Mass (MM)

MASSBANK Corp. (NASDAQ - MASB), the Holding Company for MASSBANK, today reported net income of $1,755,000 or $0.40 in diluted earnings per share for the second quarter 2006, compared with net income of $1,857,000 or $0.42 in diluted earnings per share in the second quarter of 2005. Basic earnings per share in the recent quarter were $0.41 per share compared to $0.42 per share in the second quarter of last year. For the six months ended June 30, 2006, the Company reported net income of $3,565,000 or $0.82 in diluted earnings per share ($0.82 in basic earnings per share). This compares to $3,551,000 or $0.80 in diluted earnings per share ($0.81 in basic earnings per share) for the six months ended June 30, 2005. Income Statement Net interest income, the Company's core earnings, totaled $5,388,000 for the recent quarter, essentially unchanged from the same quarter in 2005. The net interest margin in the recent quarter improved 21 basis points to 2.57% from 2.36% in the second quarter of 2005. This is the seventh consecutive quarter that the Company has reported a year-over-year improvement in net interest margin. The current inverted yield curve environment (an environment where short-term rates actually exceed long-term rates) however, is making it increasingly difficult to improve the net interest margin. The Company's earnings in the second quarter 2006 were negatively impacted by the poor performance of the equity securities markets during last two months of the quarter. Securities gains in the recent quarter decreased $125,000 when compared to the second quarter of last year. Second quarter 2006 earnings results also reflect a decrease in other non-interest income of $75,000 and an increase in the bank's provision for loan losses of $50,000. These are offset by a decrease of $127,000 in the Company's non-interest expenses due in part to an increase of $54,000 in the credit provision for off-balance sheet credit exposures recorded in the recent quarter (reducing loan loss reserves against outstanding loan commitments) and cost containment measures implemented by the Company's management. Return on average assets and return on average equity for the second quarter 2006 were 0.81% and 6.81%, respectively, compared to 0.79% and 6.89%, respectively, for the second quarter of 2005. Balance Sheet The Company's total assets decreased $71.2 million to $861.9 million at June 30, 2006 from $933.1 million at June 30, 2005. Deposits decreased $65.4 million or 8.0% year-over-year from $817.2 million at June 30, 2005 to $751.8 million at June 30, 2006 due to increased competition for deposits. Stockholders' equity was $102.4 million at June 30, 2006, representing a book value of $23.72 per share. This compares to $108.4 million at June 30, 2005 representing a book value of $24.83 per share. The Bank's non-accrual loans are near historical lows totaling $102,000 at June 30, 2006 representing 0.05% of total loans. This compares to $343,000 representing 0.15% of total loans at June 30, 2005. At June 30, 2006, the Bank's allowance for loan losses totaled $1.297 million representing 0.60% of total loans compared to $1.253 million representing 0.54% of total loans at June 30, 2005. In addition, the Bank's allowance for loan losses on off-balance sheet credit exposures totaled $443,000 at June 30, 2006 compared to $585,000 a year earlier. This is intended to protect the bank against 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 $0.27 per share. This, the Company's eightieth consecutive dividend, will be payable on August 17, 2006 to stockholders of record at the close of business on August 2, 2006. Stock Repurchase Program During the three months ended June 30, 2006, the Company continued the repurchase of its common stock by acquiring 20,000 shares in the open market. As of June 30, 2006, there were 90,217 shares available for repurchase in the current program. 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. For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192. -0- *T MASSBANK CORP. FINANCIAL HIGHLIGHTS ($ in thousands except share date) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- For the Period Ended Total interest and dividend income $10,001 $9,069 $19,802 $17,834 Total interest expense 4,613 3,674 8,973 7,135 ------------------------------------------- Net interest income 5,388 5,395 10,829 10,699 Provision (credit) for loan losses 50 0 50 ( 53 ) ------------------------------------------- Net interest income after provision (credit) for loan losses 5,338 5,395 10,779 10,752 Gains on securities, net 119 244 370 188 Other non-interest income 266 341 613 594 Non-interest expense 3,045 3,172 6,339 6,203 Income tax expense 923 951 1,858 1,780 ------------------------------------------- Net income $1,755 $1,857 $3,565 $3,551 Weighted Average Common Shares Outstanding Basic 4,329,036 4,390,071 4,334,394 4,394,908 Diluted 4,364,341 4,452,405 4,370,604 4,462,343 Per Common Share Earnings: Basic $0.41 $0.42 $0.82 $0.81 Diluted 0.40 0.42 0.82 0.80 Cash dividends paid 0.27 0.26 0.54 0.52 Book value (period end) 23.72 24.83 Ratios (1) Return on average assets 0.81 % 0.79 % 0.81 % 0.75 % Return on average equity 6.81 6.89 6.86 6.55 Net interest margin 2.57 2.36 2.55 2.32 Total equity to assets (period end) 11.88 11.62 At June 30, 2006 2005 ---------- ---------- At Period End Assets $861,926 $933,064 Deposits 751,781 817,189 Total loans 216,745 229,930 Stockholders' equity $102,430 $108,441 Common shares outstanding 4,317,879 4,366,617 Asset Quality Non-accrual loans $102 $343 Real estate acquired through foreclosure -- -- --------------------- Total non-performing assets $102 $343 Allowance for loan losses $1,297 $1,253 Non-accrual loans to total loans 0.05% 0.15% (1) Ratios are presented on an annualized basis with the exception of equity to assets. MASSBANK CORP. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) ($ in thousands except share data) At At June 30, June 30, 2006 2005 ----------- ----------- Assets: Cash and due from banks $10,317 $9,377 Short-term investments 875 -- Interest-bearing deposits in banks 649 1,553 Federal funds sold 145,615 204,955 Debt securities available for sale, at market value: Mortgage-backed securities 135,102 130,847 Other securities 307,108 294,366 Equity securities available for sale, at market value 10,243 8,066 Mortgage-backed securities held to maturity, at amortized cost 5,659 4,595 Trading securities, at market value 6,670 30,785 Loans: Mortgage loans 207,412 220,087 Other loans 9,333 9,843 --------------------------------------------------------------------- Total loans 216,745 229,930 Allowance for loan losses ( 1,297 ) ( 1,253 ) --------------------------------------------------------------------- Net loans 215,448 228,677 Premises and equipment 7,309 6,266 Accrued interest receivable 3,972 3,520 Goodwill 1,090 1,090 Income tax receivable, net 143 342 Deferred income tax asset, net 5,413 1,465 Other assets 6,313 7,160 --------------------------------------------------------------------- Total assets $861,926 $933,064 --------------------------------------------------------------------- Liabilities and Stockholders' Equity Deposits: Demand and NOW $81,953 $85,798 Savings 391,571 497,391 Time certificates of deposit 278,257 234,000 --------------------------------------------------------------------- Total deposits 751,781 817,189 Escrow deposits of borrowers 931 901 Allowance for loan losses on off-balance sheet credit exposures 443 585 Other liabilities 6,341 5,948 --------------------------------------------------------------------- Total liabilities 759,496 824,623 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, 7,833,542 and 7,783,680 shares issued, respectively 7,834 7,784 Additional paid-in capital 57,516 56,440 Retained earnings 105,965 103,267 --------------------------------------------------------------------- 171,315 167,491 Treasury stock at cost 3,515,663 and 3,417,063 shares, respectively ( 62,346 ) ( 59,033 ) Accumulated other comprehensive loss: Net unrealized losses on securities available for sale, net of tax effect ( 6,539 ) ( 17 ) Shares held in rabbi trust at cost 16,744 and 14,744 shares, respectively ( 386 ) ( 321 ) Deferred compensation obligation 386 321 --------------------------------------------------------------------- Total stockholders' equity 102,430 108,441 --------------------------------------------------------------------- Total liabilities and stockholders' equity $861,926 $933,064 --------------------------------------------------------------------- MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) Three Months Ended June 30, June 30, 2006 2005 --------------- ---------- Interest and dividend income: Mortgage loans $2,865 $3,038 Other loans 190 164 Securities available for sale: Mortgage-backed securities 1,872 1,756 Other securities 3,035 2,393 Mortgage-backed securities held to maturity 77 60 Trading securities 74 185 Federal funds sold 1,882 1,458 Other investments 6 15 ---------------------------------------------------------------------- Total interest and dividend income 10,001 9,069 ---------------------------------------------------------------------- Interest expense: Deposits 4,613 3,674 ---------------------------------------------------------------------- Total interest expense 4,613 3,674 ---------------------------------------------------------------------- Net interest income 5,388 5,395 Provision (credit) for loan losses 50 -- ---------------------------------------------------------------------- Net interest income after provision (credit) for loan losses 5,338 5,395 ---------------------------------------------------------------------- Non-interest income: Deposit account service fees 84 101 Gains on securities available for sale, net 111 72 Gains on trading securities, net 8 172 Deferred compensation plan income (loss) ( 10 ) 22 Other 192 218 ---------------------------------------------------------------------- Total non-interest income 385 585 ---------------------------------------------------------------------- Non-interest expense: Salaries and employee benefits 1,868 1,924 Deferred compensation plan expense 11 50 Occupancy and equipment 610 529 Data processing 128 126 Professional services 133 135 Advertising and marketing 19 40 Deposit insurance 31 37 Other 245 331 ---------------------------------------------------------------------- Total non-interest expense 3,045 3,172 ---------------------------------------------------------------------- Income before income taxes 2,678 2,808 Income tax expense 923 951 ---------------------------------------------------------------------- Net income $1,755 $1,857 ---------------------------------------------------------------------- Weighted average common shares outstanding: Basic 4,329,036 4,390,071 Diluted 4,364,341 4,452,405 Earnings per share (in dollars): Basic $0.41 $0.42 Diluted 0.40 0.42 MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) Six Months Ended June 30, June 30, 2006 2005 ---------- ---------- Interest and dividend income: Mortgage loans $5,755 $6,150 Other loans 370 326 Securities available for sale: Mortgage-backed securities 3,670 3,474 Other securities 5,879 4,708 Mortgage-backed securities held to maturity 156 122 Trading securities 156 433 Federal funds sold 3,804 2,588 Other investments 12 33 ---------------------------------------------------------------------- Total interest and dividend income 19,802 17,834 ---------------------------------------------------------------------- Interest expense: Deposits 8,973 7,135 ---------------------------------------------------------------------- Total interest expense 8,973 7,135 ---------------------------------------------------------------------- Net interest income 10,829 10,699 Provision (credit) for loan losses 50 ( 53 ) ---------------------------------------------------------------------- Net interest income after provision (credit) for loan losses 10,779 10,752 ---------------------------------------------------------------------- Non-interest income: Deposit account service fees 173 201 Gains on securities available for sale, net 349 130 Gains on trading securities, net 21 58 Deferred compensation plan income 61 10 Other 379 383 ---------------------------------------------------------------------- Total non-interest income 983 782 ---------------------------------------------------------------------- Non-interest expense: Salaries and employee benefits 3,736 3,695 Deferred compensation plan expense 103 54 Occupancy and equipment 1,212 1,128 Data processing 271 267 Professional services 301 265 Advertising and marketing 56 60 Deposit insurance 65 75 Other 595 659 ---------------------------------------------------------------------- Total non-interest expense 6,339 6,203 ---------------------------------------------------------------------- Income before income taxes 5,423 5,331 Income tax expense 1,858 1,780 ---------------------------------------------------------------------- Net income $3,565 $3,551 ---------------------------------------------------------------------- Weighted average common shares outstanding: Basic 4,334,394 4,394,908 Diluted 4,370,604 4,462,343 Earnings per share (in dollars): Basic $0.82 $0.81 Diluted 0.82 0.80 *T