Exhibit 99.1
MASSBANK CORP. Reading, MA | October 23, 2003 |
FOR IMMEDIATE RELEASE
MASSBANK CORP. REPORTS INCREASE IN EARNINGS PER SHARE
FOR THE THIRD QUARTER 2003
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $2,137,000 or $0.48 in diluted earnings per share for the third quarter 2003, compared with net income of $2,210,000 or $0.46 in diluted earnings per share in the third quarter of 2002. Basic earnings per share in the recent quarter were $0.49 per share compared to $0.47 per share in the third quarter of last year. This represents an increase of $0.04 in both basic and diluted earnings per share over the second quarter of this year. For the nine months ended September 30, 2003, the Company reported net income of $6,068,000 or $1.33 in diluted earnings per share ($1.36 in basic earnings per share). This compares to $7,562,000 or $1.56 in diluted earnings per share ($1.61 in basic earnings per share) for the nine months ended September 30, 2002.
The Company’s favorable earnings per share (“EPS”) performance in the recent quarter was positively affected by the reduced number of average common shares outstanding as a result of the Company’s repurchase of 377,251 shares of its common stock in the last twelve months pursuant to its stock repurchase program.
The Company’s net income in the third quarter 2003 compared to the same quarter of 2002 includes a negative provision for loan losses of $450,000 due to a decline in the loan portfolio and an improvement in loan quality. The loan portfolio totaled $260.7 million at September 30, 2003 reflecting a decrease of $66.9 million or 20.4% from $327.6 million at September 30, 2002.
Additionally, earnings results reflect a decrease in net interest income of $522,000 due to a decline in net interest margin resulting largely from prepayments of mortgage loans and mortgage-backed securities and lower interest rates compared to the same quarter last year. Third quarter 2003 earnings results also reflect an increase in non-interest expense of $203,000. However, this is essentially offset by an increase in non-interest income of $146,000 and a decrease in income tax expense of $56,000 due to lower income before taxes and a decline in the Company’s effective income tax rate.
The Company’s total assets increased $10.9 million or 1.1% to $1.015 billion at September 30, 2003 from $1.004 billion at September 30, 2002. Deposits increased $19.5 million or 2.2% year-over-year reaching $899.0 million as of September 30, 2003. Stockholders’ equity was $110.3 million at September 30, 2003, representing a book value of $25.16 per share. This compares to $117.7 million at September 30, 2002 representing a book value of $25.18 per share.
October 23, 2003
Page Two
The Company’s non-accrual loans remain low totaling $234,000 at September 30, 2003 representing 0.09% of total loans. This compares to $327,000 representing 0.10% of total loans at September 30, 2002. At September 30, 2003 MASSBANK’s allowance for loan losses totaled $1.605 million representing 686% of non-accrual loans compared to $2.261 million representing 691% of non-accrual loans at September 30, 2002. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $610,000 at September 30, 2003 compared to $380,000 a year earlier. This is an increase of $230,000 in reserves for outstanding loan commitments from a year earlier. The allowance for loan losses reported at September 30, 2002 has been reclassified to adjust for the allowance for loan losses on off-balance sheet credit exposures (shown separately) to conform to the 2003 presentation.
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 $0.23 per share. This, the Company’s sixty-ninth consecutive dividend, will be payable on November 20, 2003 to stockholders of record at the close of business on November 5, 2003.
Cautionary Statement
This press release may contain forward-looking information, including information concerning the Company’s expectations of future business prospects. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to be materially different from the results and performance expressed or implied by the forward-looking statements. Forward looking statements include, but are not limited to, statements concerning the Company’s future performance, the financial outlook of the markets it serves and the performance and activities of its competitors. These statements reflect the Company’s current views. They are based on numerous assumptions and are subject to numerous risks and uncertainties, including unexpected fluctuations in market interest rates, unexpected fluctuations in the markets for equities, bonds, federal funds and other financial instruments, an increase in the level of non-performing assets, an increase in competitive pricing pressures within the Company’s market, adverse legislative or regulatory developments, adverse impacts resulting from the continuing war on terrorism, the impact of inflation, and other factors described in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2002.
For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.
October 23, 2003
Page Three
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
(Unaudited)
($ in thousands except share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 9,226 | $ | 11,728 | $ | 29,447 | $ | 35,718 | ||||||||
Total interest expense | 3,622 | 5,602 | 12,371 | 17,639 | ||||||||||||
Net interest income | 5,604 | 6,126 | 17,076 | 18,079 | ||||||||||||
Provision for loan losses | (450 | ) | — | (450 | ) | — | ||||||||||
Gains (losses) on securities, net | 72 | (50 | ) | 304 | 1,801 | |||||||||||
Other non-interest income | 271 | 247 | 937 | 888 | ||||||||||||
Non-interest expense | 3,133 | 2,930 | 9,411 | 8,952 | ||||||||||||
Income tax expense | 1,127 | 1,183 | 3,288 | 4,254 | ||||||||||||
Net income | $ | 2,137 | $ | 2,210 | $ | 6,068 | $ | 7,562 | ||||||||
Weighted Average Common Shares Outstanding (1) | ||||||||||||||||
Basic | 4,378,050 | 4,669,659 | 4,453,849 | 4,709,018 | ||||||||||||
Diluted | 4,490,325 | 4,795,193 | 4,452,039 | 4,838,536 | ||||||||||||
Per Common Share (1) | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.49 | $ | 0.47 | $ | 1.36 | $ | 1.61 | ||||||||
Diluted | 0.48 | 0.46 | 1.33 | 1.56 | ||||||||||||
Cash dividends paid | 0.23 | 0.22 | 0.69 | 0.66 | ||||||||||||
Book value (period end) | 25.16 | 25.18 | ||||||||||||||
Ratios (2) | ||||||||||||||||
Return on average assets | 0.85 | % | 0.89 | % | 0.80 | % | 1.02 | % | ||||||||
Return on average equity | 7.93 | 7.53 | 7.24 | 8.64 | ||||||||||||
Interest rate spread | 2.15 | 2.26 | 2.13 | 2.20 | ||||||||||||
Net interest margin | 2.28 | 2.51 | 2.31 | 2.50 | ||||||||||||
Total equity to assets (period end) | 10.87 | 11.72 | ||||||||||||||
At September 30, | ||||||||||||||||
2003 | 2002 | |||||||||||||||
At Period End | ||||||||||||||||
Assets | $ | 1,015,125 | $ | 1,004,200 | ||||||||||||
Deposits | 898,982 | 879,516 | ||||||||||||||
Total loans | 260,684 | 327,588 | ||||||||||||||
Total stockholders’ equity | $ | 110,297 | $ | 117,669 | ||||||||||||
Common shares outstanding | 4,384,900 | 4,673,700 | ||||||||||||||
Asset Quality | ||||||||||||||||
Non-accrual loans | $ | 234 | $ | 327 | ||||||||||||
Real estate acquired through foreclosure | — | — | ||||||||||||||
Total non-performing assets | $ | 234 | $ | 327 | ||||||||||||
Allowance for loan losses (3) | $ | 1,605 | $ | 2,261 | ||||||||||||
Non-accrual loans to total loans | 0.09 | % | 0.10 | % | ||||||||||||
Allowance for loan losses as a % of non-accrual loans | 685.9 | % | 691.4 | % |
(1) | Current and prior year share data reflects the three-for-two stock split of April 19, 2002. |
(2) | Ratios are presented on an annualized basis with the exception of equity to assets. |
(3) | Amount reported for prior year has been reclassified to adjust for allowance for loan losses on off-balance sheet credit exposures to conform to the 2003 presentation. |
October 23, 2003
Page Four
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At September 30, 2003 | At September 30, 2002 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 9,267 | $ | 10,116 | ||||
Interest-bearing deposits in banks | 6,156 | 4,102 | ||||||
Federal funds sold | 195,437 | 200,265 | ||||||
Short-term investments | 23,278 | 24,983 | ||||||
Debt securities available for sale | 429,737 | 382,143 | ||||||
Equity securities available for sale | 11,301 | 13,297 | ||||||
Trading securities | 62,950 | 27,390 | ||||||
Loans: | ||||||||
Mortgage loans | 248,915 | 309,559 | ||||||
Other loans | 11,769 | 18,029 | ||||||
Total loans | 260,684 | 327,588 | ||||||
Allowance for loan losses | (1,605 | ) | (2,261 | ) | ||||
Net loans | 259,079 | 325,327 | ||||||
Premises and equipment | 7,100 | 6,767 | ||||||
Accrued interest receivable | 4,240 | 4,198 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 84 | 203 | ||||||
Other assets | 5,406 | 4,319 | ||||||
Total assets | $ | 1,015,125 | $ | 1,004,200 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 84,244 | $ | 82,512 | ||||
Savings | 614,928 | 515,535 | ||||||
Time certificates of deposit | 199,810 | 281,469 | ||||||
Total deposits | 898,982 | 879,516 | ||||||
Escrow deposits of borrowers | 1,204 | 1,400 | ||||||
Employee stock ownership plan liability | 0 | 156 | ||||||
Deferred income taxes | 1,218 | 2,445 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 610 | 380 | ||||||
Other liabilities | 2,814 | 2,634 | ||||||
Total liabilities | 904,828 | 886,531 | ||||||
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, 7,665,780 and 7,577,329 shares issued, respectively | 7,666 | 7,577 | ||||||
Additional paid-in capital | 53,869 | 52,260 | ||||||
Retained earnings | 98,254 | 94,014 | ||||||
159,789 | 153,851 | |||||||
Treasury stock at cost 3,280,880 and 2,903,629 shares, respectively | (54,176 | ) | (43,196 | ) | ||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains on securities available for sale, net of tax effect | 4,684 | 7,170 | ||||||
Shares held in rabbi trust at cost 25,200 and 23,400 shares, respectively | (515 | ) | (458 | ) | ||||
Deferred compensation obligation | 515 | 458 | ||||||
Common stock acquired by ESOP | 0 | (156 | ) | |||||
Total stockholders’ equity | 110,297 | 117,669 | ||||||
Total liabilities and stockholders’ equity | $ | 1,015,125 | $ | 1,004,200 | ||||
October 23, 2003
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Three Months Ended | ||||||||
September 30, 2003 | September 30, 2002 | |||||||
Interest and dividend income: | ||||||||
Mortgage Loans | $ | 4,343 | $ | 5,166 | ||||
Other loans | 199 | 297 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,783 | 3,625 | ||||||
Other securities | 2,050 | 1,511 | ||||||
Trading securities | 261 | 158 | ||||||
Federal funds sold | 491 | 822 | ||||||
Other investments | 99 | 149 | ||||||
Total interest and dividend income | 9,226 | 11,728 | ||||||
Interest expense: | ||||||||
Deposits | 3,622 | 5,602 | ||||||
Total interest expense | 3,622 | 5,602 | ||||||
Net interest income | 5,604 | 6,126 | ||||||
Provision for loan losses | (450 | ) | — | |||||
Net interest income after provision for loan losses | 6,054 | 6,126 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 112 | 140 | ||||||
Gains (losses) on securities available for sale, net | 206 | (80 | ) | |||||
Gains (losses) on trading securities, net | (134 | ) | 30 | |||||
Other | 159 | 107 | ||||||
Total non-interest income | 343 | 197 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,916 | 1,734 | ||||||
Occupancy and equipment | 570 | 497 | ||||||
Data processing | 126 | 134 | ||||||
Professional services | 86 | 128 | ||||||
Advertising and marketing | 21 | 53 | ||||||
Deposit insurance | 45 | 45 | ||||||
Other | 369 | 339 | ||||||
Total non-interest expense | 3,133 | 2,930 | ||||||
Income before income taxes | 3,264 | 3,393 | ||||||
Income tax expense | 1,127 | 1,183 | ||||||
Net income | $ | 2,137 | $ | 2,210 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,378,050 | 4,669,659 | ||||||
Diluted | 4,490,325 | 4,795,193 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 0.49 | $ | 0.47 | ||||
Diluted | 0.48 | 0.46 |
October 23, 2003
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Nine Months Ended | |||||||
September 30, 2003 | September 30, 2002 | ||||||
Interest and dividend income: | |||||||
Mortgage Loans | $ | 13,942 | $ | 15,570 | |||
Other loans | 659 | 1,085 | |||||
Securities available for sale: | |||||||
Mortgage-backed securities | 6,689 | 11,670 | |||||
Other securities | 5,192 | 4,104 | |||||
Trading securities | 830 | 481 | |||||
Federal funds sold | 1,801 | 2,271 | |||||
Other investments | 334 | 537 | |||||
Total interest and dividend income | 29,447 | 35,718 | |||||
Interest expense: | |||||||
Deposits | 12,371 | 17,639 | |||||
Total interest expense | 12,371 | 17,639 | |||||
Net interest income | 17,076 | 18,079 | |||||
Provision for loan losses | (450 | ) | — | ||||
Net interest income after provision for loan losses | 17,526 | 18,079 | |||||
Non-interest income: | |||||||
Deposit account service fees | 382 | 427 | |||||
Gains on securities available for sale, net | 165 | 1,669 | |||||
Gains on trading securities, net | 139 | 132 | |||||
Other | 555 | 461 | |||||
Total non-interest income | 1,241 | 2,689 | |||||
Non-interest expense: | |||||||
Salaries and employee benefits | 5,727 | 5,360 | |||||
Occupancy and equipment | 1,679 | 1,491 | |||||
Data processing | 400 | 394 | |||||
Professional services | 305 | 424 | |||||
Advertising and marketing | 91 | 129 | |||||
Deposit insurance | 135 | 137 | |||||
Other | 1,074 | 1,017 | |||||
Total non-interest expense | 9,411 | 8,952 | |||||
Income before income taxes | 9,356 | 11,816 | |||||
Income tax expense | 3,288 | 4,254 | |||||
Net income | $ | 6,068 | $ | 7,562 | |||
Weighted average common shares outstanding: | |||||||
Basic | 4,453,849 | 4,709,018 | |||||
Diluted | 4,552,039 | 4,838,536 | |||||
Earnings per share (in dollars): | |||||||
Basic | $ | 1.36 | $ | 1.61 | |||
Diluted | 1.33 | 1.56 |