MASB Massbank Corp Read Mass (MM)

MASSBANK Corp. (NASDAQ � MASB), the Holding Company for MASSBANK, today reported net income of $1,731,000 or $0.40 in basic and diluted earnings per share for the third quarter 2006, compared with net income of $1,884,000 or $0.43 in basic and diluted earnings per share in the same quarter of 2005. For the nine months ended September 30, 2006 the Company reported net income of $5,296,000 or $1.21 in diluted earnings per share ($1.22 in basic earnings per share). This compares to $5,435,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share) for the nine months ended September 30, 2005. Income Statement The Company�s net income in the third quarter of 2006, compared to the same quarter of 2005, was negatively impacted by a decrease in net interest income. This resulted from a decrease in average earning assets due to a lower deposit base, partially offset by an improvement in net interest margin. Net interest income for the recent quarter decreased by $288,000 or 5.3% 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). The market for deposits has become more competitive as financial institutions have been aggressive in pricing their deposit products to retain deposits. MASSBANK has chosen not to match these competitors� rates in order to protect its net interest margin. The Company�s net interest margin in the recent quarter improved 9 basis points to 2.53% from 2.44% in the third quarter of 2005. This is the eighth consecutive quarter that the Company has reported a year-over-year improvement in net interest margin. Average earning assets for the recent quarter declined $75.4 million to $822.2 million, from $897.6 million in the third quarter of last year. Average total deposits were $741.0 million for the third quarter 2006 compared to $809.6 million for the same quarter of 2005. The provision for loan losses was $82,000 for the recent quarter compared to no provision in the same quarter last year. This, however, is offset by a credit of $107,000 to the bank�s provision for off-balance sheet credit exposures, which is included in non-interest expense. As loan commitments made to customers are drawn down, loss reserves against such commitments are reduced and loss reserves against outstanding loans are generally increased. The Company�s earnings in the third quarter 2006 also reflect a decrease in non-interest income of $107,000 due primarily to lower securities gains compared to the same quarter last year. Non-interest expenses in the recent quarter decreased $247,000 or 7.8% to $2,929,000 from $3,176,000 in the same quarter last year. This is due to 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 bank�s management. Return on average assets and return on average equity for the third quarter 2006 were 0.82% and 6.72%, respectively, compared to 0.82% and 7.06%, respectively, for the third quarter of 2005. Balance Sheet The Company�s total assets decreased $74.5 million to $845.9 million at September 30, 2006 from $920.4 million at September 30, 2005. Deposits decreased $73.2 million or 9.1% year-over-year from $802.6 million at September 30, 2005 to $729.4 million at September 30, 2006. Stockholders� equity increased to $105.9 million at September 30, 2006, from $105.3 million at September 30, 2005. This represents a book value per share of $24.55 at September 30, 2006, up $0.17 from $24.38 per share at September 30, 2005. The Company�s non-accrual loans are at historical lows totaling only $5,000 at September 30, 2006 compared to $267,000 at September 30, 2005. At September 30, 2006, the Bank�s allowance for loan losses totaled $1.395 million representing 0.65% of total loans compared to $1.253 million representing 0.54% of total loans at September 30, 2005. In addition, the Bank�s allowance for loan losses on off-balance sheet credit exposures totaled $336,000 at September 30, 2006 compared to $588,000 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 The Company�s Board of Directors has recently announced an increase in the Company�s quarterly cash dividend to stockholders, from $0.27 to $0.28 per common share. The increase will raise the annualized dividend from $1.08 to $1.12 per share. This, the Company�s eighty-first consecutive dividend, will be payable on November 16, 2006 to stockholders of record at the close of business on November 1, 2006. New Stock Repurchase Program The Company also recently announced that its Board of Directors has extended for another year, the stock repurchase program that it authorized in October of last year. Additionally, the Board approved an increase of 50,000 in the number of shares of the Company�s common stock authorized for repurchase in the current program, bringing the total shares available for repurchase to 130,217 during the next twelve months. 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. MASSBANK CORP. FINANCIAL HIGHLIGHTS ($ in thousands except share date) � Three Months Ended Nine Months Ended September 30, September 30, 2006� 2005� 2006� 2005� For the Period Ended Total interest and dividend income $10,052� $9,346� $29,854� $27,180� Total interest expense 4,872� � 3,878� � 13,845� � 11,013� Net interest income 5,180� 5,468� 16,009� 16,167� Provision (credit) for loan losses 82� � 0� � 132� � ( 53� ) Net interest income after provision (credit) for loan losses 5,098� 5,468� 15,877� 16,220� Gains on securities, net 168� 238� 538� 426� Other non-interest income 279� 316� 892� 910� Non-interest expense 2,929� 3,176� 9,268� 9,379� Income tax expense 885� � 962� � 2,743� � 2,742� Net income $ 1,731� $1,884� $ 5,296� $ 5,435� � Weighted Average Common Shares Outstanding Basic 4,315,211� 4,342,872� 4,327,930� 4,337,372� Diluted 4,349,187� 4,397,998� 4,363,386� 4,440,659� � Per Common Share Earnings: Basic $ 0.40� $ 0.43� $ 1.22� $ 1.24� Diluted 0.40� 0.43� 1.21� 1.22� Cash dividends paid 0.27� 0.26� 0.81� 0.78� Book value (period end) 24.55� 24.38� � Ratios (1) Return on average assets 0.82� % 0.82� % 0.81� % 0.77� % Return on average equity 6.72� 7.06� 6.81� 6.72� Net interest margin 2.53� 2.44� 2.54� 2.36� Total equity to assets (period end) 12.52� 11.44� � � At September 30, 2006� 2005� At Period End Assets $845,927� $920,429� Deposits 729,411� 802,597� Total loans 213,876� 231,073� Stockholders' equity $105,902� $105,340� Common shares outstanding 4,314,504� 4,321,367� � Asset Quality Non-accrual loans $ 5� $ 267� Real estate acquired through foreclosure --� � --� Total non-performing assets $ 5� $ 267� Allowance for loan losses $ 1,395� $ 1,253� � Non-accrual loans to total loans 0.00% 0.12% � (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 September 30, September 30, 2006� 2005� Assets: Cash and due from banks $ 8,489� $ 10,441� Short-term investments 8,674� --� Interest-bearing deposits in banks 3� 1,115� Federal funds sold 145,177� 196,737� Debt securities available for sale, at market value: Mortgage-backed securities 130,731� 128,262� Other securities 289,027� 294,284� Equity securities available for sale, at market value 9,255� 7,481� Mortgage-backed securities held to maturity, at amortized cost 5,416� 4,577� Trading securities, at market value 369� 22,803� Loans: Mortgage loans 204,036� 220,722� Other loans 9,840� � � 10,351� Total loans 213,876� 231,073� Allowance for loan losses ( 1,395� ) � ( 1,253� ) Net loans 212,481� 229,820� Premises and equipment 7,476� 6,182� Accrued interest receivable 5,573� 4,268� Goodwill 1,090� 1,090� Income tax receivable, net 246� 45� Deferred income tax asset, net 3,587� 2,762� Other assets 18,333� � � 10,562� Total assets $845,927� � � $920,429� � Liabilities and Stockholders' Equity Deposits: Demand and NOW $ 77,577� $ 87,810� Savings 363,610� 471,054� Time certificates of deposit 288,224� � � 243,733� Total deposits 729,411� 802,597� Escrow deposits of borrowers 992� 1,009� Allowance for loan losses on off-balance sheet credit exposures 336� 588� Other liabilities 9,286� � � 10,895� Total liabilities 740,025� 815,089� 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, 7,840,167 and 7,793,930 shares issued, respectively � 7,840� 7,794� Additional paid-in capital 57,695� 56,670� Retained earnings 106,532� � � 104,025� 172,067� 168,489� Treasury stock at cost 3,525,663 and 3,472,563 shares, respectively ( 62,672� ) ( 60,932� ) Accumulated other comprehensive loss: Net unrealized losses on securities available for sale, net of tax effect ( 3,493� ) ( 2,217� ) Shares held in rabbi trust at cost 16,744 and 15,144 shares ,respectively ( 386� ) ( 335� ) Deferred compensation obligation 386� � � 335� Total stockholders' equity 105,902� � � 105,340� Total liabilities and stockholders' equity $845,927� � � $920,429� MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) � Three Months Ended September 30, September 30, 2006� 2005� Interest and dividend income: Mortgage loans $ 2,799� $ 2,998� Other loans 200� 181� Securities available for sale: Mortgage-backed securities 1,799� 1,737� Other securities 3,146� 2,450� Mortgage-backed securities held to maturity 73� 59� Trading securities 38� 187� Federal funds sold 1,923� 1,722� Other investments 74� � � 12� Total interest and dividend income 10,052� � � 9,346� � Interest expense: Deposits 4,872� � � 3,878� Total interest expense 4,872� � � 3,878� � Net interest income 5,180� 5,468� Provision (credit) for loan losses 82� --� � � � � � Net interest income after provision (credit) for loan losses 5,098� 5,468� � � � � � Non-interest income: Deposit account service fees 84� 100� Gains on securities available for sale, net 80� 177� Gains on trading securities, net 88� 61� Deferred compensation plan income 48� 49� Other 147� 167� � � � � � Total non-interest income 447� 554� � � � � � Non-interest expense: Salaries and employee benefits 1,808� 1,877� Deferred compensation plan expense 69� 71� Occupancy and equipment 490� 521� Data processing 146� 137� Professional services 113� 115� Advertising and marketing 46� 44� Deposit insurance 31� 35� Other 226� 376� � � � � � Total non-interest expense 2,929� 3,176� � � � � � Income before income taxes 2,616� 2,846� Income tax expense 885� 962� � � � � � Net income $ 1,731� $ 1,884� � � � � � Weighted average common shares outstanding: Basic 4,315,211� 4,342,872� Diluted 4,349,187� 4,397,998� Earnings per share (in dollars): Basic $0.40� $0.43� Diluted 0.40� 0.43� MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) � Nine Months Ended September 30, September 30, 2006� 2005� Interest and dividend income: Mortgage loans $ 8,554� $ 9,148� Other loans 570� 507� Securities available for sale: Mortgage-backed securities 5,469� 5,211� Other securities 9,025� 7,158� Mortgage-backed securities held to maturity 229� 181� Trading securities 194� 620� Federal funds sold 5,727� 4,310� Other investments 86� � � 45� � Total interest and dividend income 29,854� � � 27,180� � � Interest expense: Deposits 13,845� � � 11,013� � Total interest expense 13,845� � � 11,013� � � Net interest income 16,009� 16,167� Provision (credit) for loan losses 132� ( 53� ) � � � � � � Net interest income after provision (credit) for loan losses 15,877� 16,220� � � � � � � Non-interest income: Deposit account service fees 258� 301� Gains on securities available for sale, net 429� 307� Gains on trading securities, net 109� 119� Deferred compensation plan income 109� 59� Other 525� 550� � � � � � � Total non-interest income 1,430� 1,336� � � � � � � Non-interest expense: Salaries and employee benefits 5,544� 5,572� Deferred compensation plan expense 172� 125� Occupancy and equipment 1,702� 1,649� Data processing 417� 404� Professional services 414� 380� Advertising and marketing 102� 104� Deposit insurance 96� 110� Other 821� 1,035� � � � � � � Total non-interest expense 9,268� 9,379� � � � � � � Income before income taxes 8,039� 8,177� Income tax expense 2,743� 2,742� � � � � � � Net income $ 5,296� $ 5,435� � � � � � � Weighted average common shares outstanding: Basic 4,327,930� 4,337,372� Diluted 4,363,386� 4,440,659� Earnings per share (in dollars): Basic $1.22� $1.24� Diluted 1.21� 1.22� MASSBANK Corp. (NASDAQ - MASB), the Holding Company for MASSBANK, today reported net income of $1,731,000 or $0.40 in basic and diluted earnings per share for the third quarter 2006, compared with net income of $1,884,000 or $0.43 in basic and diluted earnings per share in the same quarter of 2005. For the nine months ended September 30, 2006 the Company reported net income of $5,296,000 or $1.21 in diluted earnings per share ($1.22 in basic earnings per share). This compares to $5,435,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share) for the nine months ended September 30, 2005. Income Statement The Company's net income in the third quarter of 2006, compared to the same quarter of 2005, was negatively impacted by a decrease in net interest income. This resulted from a decrease in average earning assets due to a lower deposit base, partially offset by an improvement in net interest margin. Net interest income for the recent quarter decreased by $288,000 or 5.3% 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). The market for deposits has become more competitive as financial institutions have been aggressive in pricing their deposit products to retain deposits. MASSBANK has chosen not to match these competitors' rates in order to protect its net interest margin. The Company's net interest margin in the recent quarter improved 9 basis points to 2.53% from 2.44% in the third quarter of 2005. This is the eighth consecutive quarter that the Company has reported a year-over-year improvement in net interest margin. Average earning assets for the recent quarter declined $75.4 million to $822.2 million, from $897.6 million in the third quarter of last year. Average total deposits were $741.0 million for the third quarter 2006 compared to $809.6 million for the same quarter of 2005. The provision for loan losses was $82,000 for the recent quarter compared to no provision in the same quarter last year. This, however, is offset by a credit of $107,000 to the bank's provision for off-balance sheet credit exposures, which is included in non-interest expense. As loan commitments made to customers are drawn down, loss reserves against such commitments are reduced and loss reserves against outstanding loans are generally increased. The Company's earnings in the third quarter 2006 also reflect a decrease in non-interest income of $107,000 due primarily to lower securities gains compared to the same quarter last year. Non-interest expenses in the recent quarter decreased $247,000 or 7.8% to $2,929,000 from $3,176,000 in the same quarter last year. This is due to 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 bank's management. Return on average assets and return on average equity for the third quarter 2006 were 0.82% and 6.72%, respectively, compared to 0.82% and 7.06%, respectively, for the third quarter of 2005. Balance Sheet The Company's total assets decreased $74.5 million to $845.9 million at September 30, 2006 from $920.4 million at September 30, 2005. Deposits decreased $73.2 million or 9.1% year-over-year from $802.6 million at September 30, 2005 to $729.4 million at September 30, 2006. Stockholders' equity increased to $105.9 million at September 30, 2006, from $105.3 million at September 30, 2005. This represents a book value per share of $24.55 at September 30, 2006, up $0.17 from $24.38 per share at September 30, 2005. The Company's non-accrual loans are at historical lows totaling only $5,000 at September 30, 2006 compared to $267,000 at September 30, 2005. At September 30, 2006, the Bank's allowance for loan losses totaled $1.395 million representing 0.65% of total loans compared to $1.253 million representing 0.54% of total loans at September 30, 2005. In addition, the Bank's allowance for loan losses on off-balance sheet credit exposures totaled $336,000 at September 30, 2006 compared to $588,000 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 The Company's Board of Directors has recently announced an increase in the Company's quarterly cash dividend to stockholders, from $0.27 to $0.28 per common share. The increase will raise the annualized dividend from $1.08 to $1.12 per share. This, the Company's eighty-first consecutive dividend, will be payable on November 16, 2006 to stockholders of record at the close of business on November 1, 2006. New Stock Repurchase Program The Company also recently announced that its Board of Directors has extended for another year, the stock repurchase program that it authorized in October of last year. Additionally, the Board approved an increase of 50,000 in the number of shares of the Company's common stock authorized for repurchase in the current program, bringing the total shares available for repurchase to 130,217 during the next twelve months. 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 Nine Months Ended September 30, September 30, 2006 2005 2006 2005 ---------- ---------- ---------- ---------- For the Period Ended Total interest and dividend income $10,052 $9,346 $29,854 $27,180 Total interest expense 4,872 3,878 13,845 11,013 ------------------------------------------- Net interest income 5,180 5,468 16,009 16,167 Provision (credit) for loan losses 82 0 132 ( 53 ) ------------------------------------------- Net interest income after provision (credit) for loan losses 5,098 5,468 15,877 16,220 Gains on securities, net 168 238 538 426 Other non-interest income 279 316 892 910 Non-interest expense 2,929 3,176 9,268 9,379 Income tax expense 885 962 2,743 2,742 ------------------------------------------- Net income $1,731 $1,884 $5,296 $5,435 Weighted Average Common Shares Outstanding Basic 4,315,211 4,342,872 4,327,930 4,337,372 Diluted 4,349,187 4,397,998 4,363,386 4,440,659 Per Common Share Earnings: Basic $0.40 $0.43 $1.22 $1.24 Diluted 0.40 0.43 1.21 1.22 Cash dividends paid 0.27 0.26 0.81 0.78 Book value (period end) 24.55 24.38 Ratios (1) Return on average assets 0.82 % 0.82 % 0.81 % 0.77 % Return on average equity 6.72 7.06 6.81 6.72 Net interest margin 2.53 2.44 2.54 2.36 Total equity to assets (period end) 12.52 11.44 At September 30, 2006 2005 ---------- ---------- At Period End Assets $845,927 $920,429 Deposits 729,411 802,597 Total loans 213,876 231,073 Stockholders' equity $105,902 $105,340 Common shares outstanding 4,314,504 4,321,367 Asset Quality Non-accrual loans $5 $267 Real estate acquired through foreclosure -- -- --------------------- Total non-performing assets $5 $267 Allowance for loan losses $1,395 $1,253 Non-accrual loans to total loans 0.00% 0.12% (1) Ratios are presented on an annualized basis with the exception of equity to assets. *T -0- *T MASSBANK CORP. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) ($ in thousands except share data) At At September 30, September 30, 2006 2005 ------------ ------------ Assets: Cash and due from banks $8,489 $10,441 Short-term investments 8,674 -- Interest-bearing deposits in banks 3 1,115 Federal funds sold 145,177 196,737 Debt securities available for sale, at market value: Mortgage-backed securities 130,731 128,262 Other securities 289,027 294,284 Equity securities available for sale, at market value 9,255 7,481 Mortgage-backed securities held to maturity, at amortized cost 5,416 4,577 Trading securities, at market value 369 22,803 Loans: Mortgage loans 204,036 220,722 Other loans 9,840 10,351 --------------------------------------------------------------------- Total loans 213,876 231,073 Allowance for loan losses ( 1,395 ) ( 1,253 ) --------------------------------------------------------------------- Net loans 212,481 229,820 Premises and equipment 7,476 6,182 Accrued interest receivable 5,573 4,268 Goodwill 1,090 1,090 Income tax receivable, net 246 45 Deferred income tax asset, net 3,587 2,762 Other assets 18,333 10,562 --------------------------------------------------------------------- Total assets $845,927 $920,429 --------------------------------------------------------------------- Liabilities and Stockholders' Equity Deposits: Demand and NOW $77,577 $87,810 Savings 363,610 471,054 Time certificates of deposit 288,224 243,733 --------------------------------------------------------------------- Total deposits 729,411 802,597 Escrow deposits of borrowers 992 1,009 Allowance for loan losses on off-balance sheet credit exposures 336 588 Other liabilities 9,286 10,895 --------------------------------------------------------------------- Total liabilities 740,025 815,089 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, 7,840,167 and 7,793,930 shares issued, respectively 7,840 7,794 Additional paid-in capital 57,695 56,670 Retained earnings 106,532 104,025 --------------------------------------------------------------------- 172,067 168,489 Treasury stock at cost 3,525,663 and 3,472,563 shares, respectively ( 62,672 ) ( 60,932 ) Accumulated other comprehensive loss: Net unrealized losses on securities available for sale, net of tax effect ( 3,493 ) ( 2,217 ) Shares held in rabbi trust at cost 16,744 and 15,144 shares ,respectively ( 386 ) ( 335 ) Deferred compensation obligation 386 335 --------------------------------------------------------------------- Total stockholders' equity 105,902 105,340 --------------------------------------------------------------------- Total liabilities and stockholders' equity $845,927 $920,429 --------------------------------------------------------------------- *T -0- *T MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) Three Months Ended September 30, September 30, 2006 2005 ------------- ------------- Interest and dividend income: Mortgage loans $2,799 $2,998 Other loans 200 181 Securities available for sale: Mortgage-backed securities 1,799 1,737 Other securities 3,146 2,450 Mortgage-backed securities held to maturity 73 59 Trading securities 38 187 Federal funds sold 1,923 1,722 Other investments 74 12 ---------------------------------------------------------------------- Total interest and dividend income 10,052 9,346 ---------------------------------------------------------------------- Interest expense: Deposits 4,872 3,878 ---------------------------------------------------------------------- Total interest expense 4,872 3,878 ---------------------------------------------------------------------- Net interest income 5,180 5,468 Provision (credit) for loan losses 82 -- ---------------------------------------------------------------------- Net interest income after provision (credit) for loan losses 5,098 5,468 ---------------------------------------------------------------------- Non-interest income: Deposit account service fees 84 100 Gains on securities available for sale, net 80 177 Gains on trading securities, net 88 61 Deferred compensation plan income 48 49 Other 147 167 ---------------------------------------------------------------------- Total non-interest income 447 554 ---------------------------------------------------------------------- Non-interest expense: Salaries and employee benefits 1,808 1,877 Deferred compensation plan expense 69 71 Occupancy and equipment 490 521 Data processing 146 137 Professional services 113 115 Advertising and marketing 46 44 Deposit insurance 31 35 Other 226 376 ---------------------------------------------------------------------- Total non-interest expense 2,929 3,176 ---------------------------------------------------------------------- Income before income taxes 2,616 2,846 Income tax expense 885 962 ---------------------------------------------------------------------- Net income $1,731 $1,884 ---------------------------------------------------------------------- Weighted average common shares outstanding: Basic 4,315,211 4,342,872 Diluted 4,349,187 4,397,998 Earnings per share (in dollars): Basic $0.40 $0.43 Diluted 0.40 0.43 *T -0- *T MASSBANK CORP. AND SUBSIDIARIES Consolidated Statements of Income ($ in thousands except share data) Nine Months Ended September 30, September 30, 2006 2005 ------------- ------------- Interest and dividend income: Mortgage loans $8,554 $9,148 Other loans 570 507 Securities available for sale: Mortgage-backed securities 5,469 5,211 Other securities 9,025 7,158 Mortgage-backed securities held to maturity 229 181 Trading securities 194 620 Federal funds sold 5,727 4,310 Other investments 86 45 ---------------------------------------------------------------------- Total interest and dividend income 29,854 27,180 ---------------------------------------------------------------------- Interest expense: Deposits 13,845 11,013 ---------------------------------------------------------------------- Total interest expense 13,845 11,013 ---------------------------------------------------------------------- Net interest income 16,009 16,167 Provision (credit) for loan losses 132 ( 53 ) ---------------------------------------------------------------------- Net interest income after provision (credit) for loan losses 15,877 16,220 ---------------------------------------------------------------------- Non-interest income: Deposit account service fees 258 301 Gains on securities available for sale, net 429 307 Gains on trading securities, net 109 119 Deferred compensation plan income 109 59 Other 525 550 ---------------------------------------------------------------------- Total non-interest income 1,430 1,336 ---------------------------------------------------------------------- Non-interest expense: Salaries and employee benefits 5,544 5,572 Deferred compensation plan expense 172 125 Occupancy and equipment 1,702 1,649 Data processing 417 404 Professional services 414 380 Advertising and marketing 102 104 Deposit insurance 96 110 Other 821 1,035 ---------------------------------------------------------------------- Total non-interest expense 9,268 9,379 ---------------------------------------------------------------------- Income before income taxes 8,039 8,177 Income tax expense 2,743 2,742 ---------------------------------------------------------------------- Net income $5,296 $5,435 ---------------------------------------------------------------------- Weighted average common shares outstanding: Basic 4,327,930 4,337,372 Diluted 4,363,386 4,440,659 Earnings per share (in dollars): Basic $1.22 $1.24 Diluted 1.21 1.22 *T