Exhibit 99.1
MASSBANK CORP. | January 22, 2004 |
Reading, MA
FOR IMMEDIATE RELEASE
MASSBANK CORP. ANNOUNCES FOURTH QUARTER EARNINGS,
INCREASE IN DIVIDENDS AND
NEW STOCK REPURCHASE PROGRAM
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,795,000 or $0.40 in diluted earnings per share for the fourth quarter 2003, compared with net income of $2,252,000 or $0.47 in diluted earnings per share in the fourth quarter of 2002. Basic earnings per share in the recent quarter were $0.41 per share compared to $0.48 per share in the fourth quarter of 2002. For the year ended December 31, 2003, the Company reported net income of $7,863,000 or $1.73 in diluted earnings per share ($1.77 in basic earnings per share). This compares to $9,814,000 or $2.04 in diluted earnings per share ($2.09 in basic earnings per share) for the year ended December 31, 2002.
The Company’s net income in the fourth quarter 2003 compared to the same quarter of 2002 was negatively impacted by a decrease in net interest income due to significant loan payoffs, prepayments on mortgage-backed securities and historically low short-term market interest rates. Net interest income in the recent quarter decreased $1,116,000 from $6,323,000 in the fourth quarter of 2002 to $5,207,000 in the fourth quarter of 2003. The loan portfolio totaled $253.0 million at December 31, 2003 reflecting a decrease of $65.8 million or 20.6% from $318.8 million at December 31, 2002. The mortgage-backed securities portfolio totaled $95.7 million at year-end 2003, a decrease of $93.4 million or 49.4% from $189.1 million at year-end 2002.
The Company’s net income in the fourth quarter of 2003 compared to the same quarter of 2002 includes a negative provision for loan losses of $52,000 due to a decline in the loan portfolio and an improvement in loan quality. This brings the negative provision for loan losses for 2003 to $502,000.
The Company’s 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 278,751 shares of its common stock in the last twelve months pursuant to its stock repurchase program.
Additionally, fourth quarter 2003 earnings results reflect an increase in non-interest income of $447,000 due primarily to an increase in securities gains of $418,000 compared to the same quarter of 2002. This is partially offset by an increase in non-interest expense of $119,000. The Company’s income tax expense decreased $279,000 in the recent quarter due to lower income before taxes and a decline in the Company’s effective income tax rate.
The Company’s total assets increased $0.9 million to $1.010 billion at December 31, 2003 from $1.009 billion at December 31, 2002. Deposits decreased $1.9 million or 0.2% year-over-year from $883.9 million at December 31, 2002 to $882.0 million at December 31, 2003. Stockholders’ equity was $110.9 million at December 31, 2003, representing a book value of $25.17 per share. This compares to $117.3 million at year-end 2002 representing a book value of $25.45 per share.
January 22, 2004
Page Two
The Company’s non-accrual loans remain low totaling $230,000 at December 31, 2003 representing 0.09% of total loans. This compares to $420,000 representing 0.13% of total loans at December 31, 2002. At December 31, 2003 MASSBANK’s allowance for loan losses totaled $1.554 million representing 676% of non-accrual loans compared to $2.271 million representing 541% of non-accrual loans at December 31, 2002. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $626,000 at December 31, 2003 compared to $384,000 a year earlier. The allowance for loan losses reported at December 31, 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.
DIVIDEND INCREASE
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK announced today that its Board of Directors has authorized an increase in the Company’s quarterly cash dividend to stockholders, from $0.23 to $0.25 per common share. This, the Company’s seventieth consecutive dividend, will be payable on February 18, 2004 to stockholders of record at the close of business on February 2, 2004.
NEW STOCK REPURCHASE PROGRAM
The Company also announced today that its Board of Directors has approved a further repurchase program authorizing the Company to repurchase up to 100,000 shares of its common stock in the open market or in private transactions over the next twelve months.
ADDITIONAL INFORMATION
Date Set for Annual Meeting
The Company also announced that the Annual Meeting of Stockholders had been set for Tuesday, April 20, 2004 at 10:00 A.M. at the Sheraton Ferncroft Resort, 50 Ferncroft Road, Danvers, Massachusetts. The record date for the Annual Meeting is March 1, 2004.
January 22, 2004
Page Three
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.
January 22, 2004
Page Four
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
(Unaudited)
($ in thousands except share data)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 8,690 | $ | 11,385 | $ | 38,137 | $ | 47,103 | ||||||||
Total interest expense | 3,483 | 5,062 | 15,854 | 22,701 | ||||||||||||
Net interest income | 5,207 | 6,323 | 22,283 | 24,402 | ||||||||||||
Provision for loan losses | (52 | ) | — | (502 | ) | — | ||||||||||
Gains (losses) on securities, net | 335 | (83 | ) | 639 | 1,718 | |||||||||||
Other non-interest income | 346 | 317 | 1,283 | 1,205 | ||||||||||||
Non-interest expense | 3,204 | 3,085 | 12,615 | 12,037 | ||||||||||||
Income tax expense | 941 | 1,220 | 4,229 | 5,474 | ||||||||||||
Net income | $ | 1,795 | $ | 2,252 | $ | 7,863 | $ | 9,814 | ||||||||
Weighted Average Common Shares Outstanding (1) | ||||||||||||||||
Basic | 4,396,500 | 4,664,612 | 4,439,394 | 4,697,826 | ||||||||||||
Diluted | 4,522,500 | 4,774,919 | 4,544,594 | 4,822,501 | ||||||||||||
Per Common Share (1) | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.41 | $ | 0.48 | $ | 1.77 | $ | 2.09 | ||||||||
Diluted | 0.40 | 0.47 | 1.73 | 2.04 | ||||||||||||
Cash dividends paid | 0.23 | 0.22 | 0.92 | 0.88 | ||||||||||||
Book value (period end) | 25.17 | 25.45 | ||||||||||||||
Ratios (2) | ||||||||||||||||
Return on average assets | 0.71 | % | 0.90 | % | 0.78 | % | 0.99 | % | ||||||||
Return on average equity | 6.57 | 7.63 | 7.08 | 8.39 | ||||||||||||
Interest rate spread | 1.99 | 2.35 | 2.09 | 2.24 | ||||||||||||
Net interest margin | 2.13 | 2.57 | 2.26 | 2.52 | ||||||||||||
Total equity to assets (period end) | 10.98 | 11.62 | ||||||||||||||
At December 31, | ||||||||||||||||
At Period End | 2003 | 2002 | ||||||||||||||
Assets | $ | 1,010,249 | $ | 1,009,367 | ||||||||||||
Deposits | 882,024 | 883,928 | ||||||||||||||
Total loans | 253,006 | 318,799 | ||||||||||||||
Total stockholders’ equity | $ | 110,927 | $ | 117,285 | ||||||||||||
Common shares outstanding | 4,407,453 | 4,608,066 | ||||||||||||||
Asset Quality | ||||||||||||||||
Non-accrual loans | $ | 230 | $ | 420 | ||||||||||||
Real estate acquired through foreclosure | — | — | ||||||||||||||
Total non-performing assets | $ | 230 | $ | 420 | ||||||||||||
Allowance for loan losses (3) | $ | 1,554 | $ | 2,271 | ||||||||||||
Non-accrual loans to total loans | 0.09 | % | 0.13 | % | ||||||||||||
Allowance for loan losses as a % of non-accrual loans | 675.7 | % | 540.7 | % |
(1) | All share information presented has been adjusted to reflect the 3-for-2 stock split of the Company’s common stock effective April 19, 2002. |
(2) | Ratios are presented on an annualized basis with the exception of equity to assets. |
(3) | Amount reported for 2002 has been reclassified to adjust for allowance for loan losses on off-balance sheet credit exposures (shown separately) to conform to the 2003 presentation. |
January 22, 2004
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At December 31, | At December 31, | |||||||
2003 | 2002 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 8,378 | $ | 8,356 | ||||
Interest-bearing deposits in banks | 6,196 | 4,941 | ||||||
Federal funds sold | 190,684 | 221,586 | ||||||
Short-term investments | 23,337 | 27,077 | ||||||
Debt securities available for sale: | ||||||||
Mortgage-backed securities | 95,658 | 189,105 | ||||||
Other securities | 322,105 | 177,084 | ||||||
Equity securities available for sale | 11,466 | 13,833 | ||||||
Trading securities | 72,633 | 36,249 | ||||||
Loans: | ||||||||
Mortgage loans | 241,886 | 302,788 | ||||||
Other loans | 11,120 | 16,011 | ||||||
Total loans | 253,006 | 318,799 | ||||||
Allowance for loan losses | (1,554 | ) | (2,271 | ) | ||||
Net loans | 251,452 | 316,528 | ||||||
Premises and equipment | 6,943 | 6,795 | ||||||
Accrued interest receivable | 3,854 | 3,926 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 325 | 199 | ||||||
Other assets | 16,128 | 2,598 | ||||||
Total assets | $ | 1,010,249 | $ | 1,009,367 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 84,572 | $ | 85,327 | ||||
Savings | 607,831 | 548,947 | ||||||
Time certificates of deposit | 189,621 | 249,654 | ||||||
Total deposits | 882,024 | 883,928 | ||||||
Escrow deposits of borrowers | 1,139 | 1,387 | ||||||
Deferred income taxes | 783 | 2,671 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 626 | 384 | ||||||
Other liabilities | 14,750 | 3,712 | ||||||
Total liabilities | 899,322 | 892,082 | ||||||
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, 7,688,333 and 7,610,195 shares issued, respectively | 7,688 | 7,610 | ||||||
Additional paid-in capital | 54,417 | 52,820 | ||||||
Retained earnings | 99,038 | 95,243 | ||||||
161,143 | 155,673 | |||||||
Treasury stock at cost 3,280,880 and 3,002,129 shares, respectively | (54,177 | ) | (46,080 | ) | ||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains on securities available for sale, net of tax effect | 3,961 | 7,692 | ||||||
Shares held in rabbi trust at cost 25,200 and 23,400 shares, respectively | (515 | ) | (477 | ) | ||||
Deferred compensation obligation | 515 | 477 | ||||||
Total stockholders’ equity | 110,927 | 117,285 | ||||||
Total liabilities and stockholders’ equity | $ | 1,010,249 | $ | 1,009,367 | ||||
January 22, 2004
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Three Months Ended | ||||||||
December 31, | December 31, | |||||||
2003 | 2002 | |||||||
Interest and dividend income: | ||||||||
Mortgage Loans | $ | 3,740 | $ | 5,249 | ||||
Other loans | 175 | 277 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,561 | 3,193 | ||||||
Other securities | 2,365 | 1,625 | ||||||
Trading securities | 283 | 204 | ||||||
Federal funds sold | 465 | 703 | ||||||
Other investments | 101 | 134 | ||||||
Total interest and dividend income | 8,690 | 11,385 | ||||||
Interest expense: | ||||||||
Deposits | 3,483 | 5,062 | ||||||
Total interest expense | 3,483 | 5,062 | ||||||
Net interest income | 5,207 | 6,323 | ||||||
Provision for loan losses | (52 | ) | — | |||||
Net interest income after provision for loan losses | 5,259 | 6,323 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 112 | 140 | ||||||
Gains (losses) on securities available for sale, net | 393 | (103 | ) | |||||
Gains (losses) on trading securities, net | (58 | ) | 20 | |||||
Other | 234 | 177 | ||||||
Total non-interest income | 681 | 234 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,965 | 1,938 | ||||||
Occupancy and equipment | 569 | 507 | ||||||
Data processing | 128 | 134 | ||||||
Professional services | 89 | 102 | ||||||
Advertising and marketing | 63 | 39 | ||||||
Deposit insurance | 42 | 45 | ||||||
Other | 348 | 320 | ||||||
Total non-interest expense | 3,204 | 3,085 | ||||||
Income before income taxes | 2,736 | 3,472 | ||||||
Income tax expense | 941 | 1,220 | ||||||
Net income | $ | 1,795 | $ | 2,252 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,396,500 | 4,664,612 | ||||||
Diluted | 4,522,500 | 4,774,919 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 0.41 | $ | 0.48 | ||||
Diluted | 0.40 | 0.47 |
January 22, 2004
Page Seven
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Twelve Months Ended | |||||||
December 31, | December 31, | ||||||
2003 | 2002 | ||||||
Interest and dividend income: | |||||||
Mortgage Loans | $ | 17,682 | $ | 20,819 | |||
Other loans | 834 | 1,362 | |||||
Securities available for sale: | |||||||
Mortgage-backed securities | 8,250 | 14,863 | |||||
Other securities | 7,557 | 5,729 | |||||
Trading securities | 1,113 | 685 | |||||
Federal funds sold | 2,266 | 2,974 | |||||
Other investments | 435 | 671 | |||||
Total interest and dividend income | 38,137 | 47,103 | |||||
Interest expense: | |||||||
Deposits | 15,854 | 22,701 | |||||
Total interest expense | 15,854 | 22,701 | |||||
Net interest income | 22,283 | 24,402 | |||||
Provision for loan losses | (502 | ) | — | ||||
Net interest income after provision for loan losses | 22,785 | 24,402 | |||||
Non-interest income: | |||||||
Deposit account service fees | 494 | 567 | |||||
Gains on securities available for sale, net | 558 | 1,566 | |||||
Gains on trading securities, net | 81 | 152 | |||||
Other | 789 | 638 | |||||
Total non-interest income | 1,922 | 2,923 | |||||
Non-interest expense: | |||||||
Salaries and employee benefits | 7,692 | 7,298 | |||||
Occupancy and equipment | 2,248 | 1,998 | |||||
Data processing | 528 | 528 | |||||
Professional services | 394 | 526 | |||||
Advertising and marketing | 154 | 168 | |||||
Deposit insurance | 177 | 182 | |||||
Other | 1,422 | 1,337 | |||||
Total non-interest expense | 12,615 | 12,037 | |||||
Income before income taxes | 12,092 | 15,288 | |||||
Income tax expense | 4,229 | 5,474 | |||||
Net income | $ | 7,863 | $ | 9,814 | |||
Weighted average common shares outstanding: | |||||||
Basic | 4,439,394 | 4,697,826 | |||||
Diluted | 4,544,594 | 4,822,501 | |||||
Earnings per share (in dollars): | |||||||
Basic | $ | 1.77 | $ | 2.09 | |||
Diluted | 1.73 | 2.04 |