Exhibit 99.1
MASSBANK CORP. | October 28, 2004 | |
Reading, MA |
FOR IMMEDIATE RELEASE
MASSBANK CORP. REPORTS THIRD QUARTER 2004 EARNINGS OF
$1.8 MILLION OR $0.40 PER SHARE
AND DECLARES CASH DIVIDEND
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,811,000 or $0.40 in diluted earnings per share for the third quarter 2004, compared with net income of $2,137,000 or $0.48 in diluted earnings per share in the third quarter of 2003. Basic earnings per share in the recent quarter were $0.41 per share compared to $0.49 per share in the third quarter of last year. For the nine months ended September 30, 2004, the Company reported net income of $5,494,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share). This compares to $6,068,000 or $1.33 in diluted earnings per share ($1.36 in basic earnings per share) for the nine months ended September 30, 2003.
Income Statement
Net interest income totaled $5,211,000 for the third quarter of 2004, up $186,000 from the second quarter 2004 but representing a decrease of $393,000 from the same period in 2003. The net interest margin for the recent quarter was 2.20%, compared to 2.10% in the second quarter of 2004. The 10 basis point improvement is primarily the result of a rise in short-term interest rates. The Federal Reserve Bank Board’s Federal Open Market Committee (FOMC) has raised the Federal Funds rate by 25 basis points three times since its June 29-30, 2004 meeting, increasing the rate from 1.00% to 1.75%. A further “measured rate” of increases is expected by most economists to continue into 2005. This will likely have a positive affect on the bank’s future net interest income and net interest margin.
The third quarter of 2004 negative loan loss provision was $74,000, which was $376,000 less than the prior year’s third quarter negative provision of $450,000. The negative provisions are due to reductions in the size of the bank’s loan portfolio and a low level of problem loans.
Non-interest income for the third quarter of 2004 totaled $449,000, compared to $343,000 for the same period in 2003. The increase of $106,000 is due primarily to securities gains of $182,000 in the recent quarter versus $72,000 in the third quarter of 2003.
Non-interest expense in the third quarter totaled $2,978,000, compared to $3,133,000 reported for the same quarter of 2003. The decrease is mainly attributable to a decrease in salaries and employee benefits due to a reduction in the number of bank employees.
Balance Sheet
The Company’s total assets decreased $37.1 million to $978.0 million at September 30, 2004 from $1.015 billion at September 30, 2003. Deposits decreased $45.9 million or 5.1% year-over-year from $899.0 million at September 30, 2003 to $853.0 million at September 30, 2004. Stockholders’ equity was $110.6 million at September 30, 2004, representing a book value of $25.13 per share. This compares to $110.3 million at September 30, 2003 representing a book value of $25.15 per share.
October 28, 2004
Page Two
Credit Quality/Balance Sheet
The Company’s non-accrual loans remain low totaling $182,000 at September 30, 2004 representing 0.08% of total loans. This compares to $234,000 representing 0.09% of total loans at September 30, 2003. At September 30, 2004 the Bank’s allowance for loan losses totaled $1.363 million representing 749% of non-accrual loans compared to $1.605 million representing 686% of non-accrual loans at September 30, 2003. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $616,000 at September 30, 2004 compared to $610,000 a year earlier. This is intended to protect the bank against loan commitments made to customers that have not yet been drawn down.
General Information
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 $0.25 per share. This, the Company’s seventy-third consecutive dividend, will be payable on November 18, 2004 to stockholders of record at the close of business on November 3, 2004.
Stock Repurchase Program
The Company did not repurchase any of its common stock in the third quarter of 2004. As of September 30, 2004 there were 57,000 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 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, 2003.
For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.
October 28, 2004
Page Three
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
($ in thousands except share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 8,436 | $ | 9,226 | $ | 24,902 | $ | 29,447 | ||||||||
Total interest expense | 3,225 | 3,622 | 9,425 | 12,371 | ||||||||||||
Net interest income | 5,211 | 5,604 | 15,477 | 17,076 | ||||||||||||
Provision for loan losses | (74 | ) | (450 | ) | (187 | ) | (450 | ) | ||||||||
Gains on securities, net | 182 | 72 | 942 | 304 | ||||||||||||
Other non-interest income | 267 | 271 | 896 | 937 | ||||||||||||
Non-interest expense | 2,978 | 3,133 | 9,102 | 9,411 | ||||||||||||
Income tax expense | 945 | 1,127 | 2,906 | 3,288 | ||||||||||||
Net income | $ | 1,811 | $ | 2,137 | $ | 5,494 | $ | 6,068 | ||||||||
Weighted Average Common Shares Outstanding | ||||||||||||||||
Basic | 4,398,346 | 4,378,050 | 4,413,910 | 4,453,849 | ||||||||||||
Diluted | 4,482,585 | 4,490,325 | 4,509,796 | 4,552,039 | ||||||||||||
Per Common Share | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.41 | $ | 0.49 | $ | 1.24 | $ | 1.36 | ||||||||
Diluted | 0.40 | 0.48 | 1.22 | 1.33 | ||||||||||||
Cash dividends paid | 0.25 | 0.23 | 0.75 | 0.69 | ||||||||||||
Book value (period end) | 25.13 | 25.15 | ||||||||||||||
Ratios (1) | ||||||||||||||||
Return on average assets | 0.74 | % | 0.85 | % | 0.75 | % | 0.80 | % | ||||||||
Return on average equity | 6.67 | 7.93 | 6.66 | 7.24 | ||||||||||||
Interest rate spread | 2.06 | 2.15 | 2.02 | 2.13 | ||||||||||||
Net interest margin | 2.20 | 2.28 | 2.16 | 2.31 | ||||||||||||
Total equity to assets (period end) | 11.31 | 10.87 |
At September 30, | ||||||
2004 | 2003 | |||||
At Period End | ||||||
Assets | $ | 978,016 | $ | 1,015,125 | ||
Deposits | 853,049 | 898,982 | ||||
Loans | 237,621 | 260,684 | ||||
Stockholders’ equity | $ | 110,604 | $ | 110,297 | ||
Common shares outstanding | 4,401,050 | 4,384,900 |
At Sept. 30, 2004 | At Dec. 31, 2003 | At Sept. 30, 2003 | ||||||||||
Asset Quality | ||||||||||||
Non-accrual loans | $ | 182 | $ | 230 | $ | 234 | ||||||
Real estate acquired through foreclosure | — | — | — | |||||||||
Total non-performing assets | $ | 182 | $ | 230 | $ | 234 | ||||||
Allowance for loan losses | $ | 1,363 | $ | 1,554 | $ | 1,605 | ||||||
Non-accrual loans to total loans | 0.08 | % | 0.09 | % | 0.09 | % | ||||||
Allowance for loan losses as a % of non-accrual loans | 748.9 | % | 675.7 | % | 685.9 | % |
(1) | Ratios are presented on an annualized basis with the exception of equity to assets. |
October 28, 2004
Page Four
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At September 30, 2004 | At September 30, 2003 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 9,842 | $ | 9,267 | ||||
Interest-bearing deposits in banks | 4,633 | 6,156 | ||||||
Federal funds sold | 186,765 | 195,437 | ||||||
Short-term investments | 990 | 23,278 | ||||||
Debt securities available for sale: | ||||||||
Mortgage-backed securities | 120,403 | 110,050 | ||||||
Other securities | 323,088 | 319,687 | ||||||
Equity securities available for sale | 8,785 | 11,301 | ||||||
Mortgage-backed securities held-to-maturity | 4,894 | — | ||||||
Trading securities | 55,782 | 62,950 | ||||||
Loans: | ||||||||
Mortgage loans | 227,233 | 248,915 | ||||||
Other loans | 10,388 | 11,769 | ||||||
Total loans | 237,621 | 260,684 | ||||||
Allowance for loan losses | (1,363 | ) | (1,605 | ) | ||||
Net loans | 236,258 | 259,079 | ||||||
Premises and equipment | 6,596 | 7,100 | ||||||
Accrued interest receivable | 4,378 | 4,240 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 42 | 84 | ||||||
Deferred income tax asset, net | 376 | — | ||||||
Other assets | 14,094 | 5,406 | ||||||
Total assets | $ | 978,016 | $ | 1,015,125 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 85,363 | $ | 84,244 | ||||
Savings | 570,358 | 614,928 | ||||||
Time certificates of deposit | 197,328 | 199,810 | ||||||
Total deposits | 853,049 | 898,982 | ||||||
Escrow deposits of borrowers | 1,037 | 1,204 | ||||||
Deferred income taxes | — | 1,218 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 616 | 610 | ||||||
Other liabilities | 12,710 | 2,814 | ||||||
Total liabilities | 867,412 | 904,828 | ||||||
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, 7,724,930 and 7,665,780 shares issued, respectively | 7,725 | 7,666 | ||||||
Additional paid-in capital | 55,053 | 53,869 | ||||||
Retained earnings | 101,217 | 98,254 | ||||||
163,995 | 159,789 | |||||||
Treasury stock at cost 3,323,880 and 3,280,880 shares, respectively | (55,650 | ) | (54,176 | ) | ||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains on securities available for sale, net of tax effect | 2,259 | 4,684 | ||||||
Shares held in rabbi trust at cost 25,304 and 25,200 shares, respectively | (534 | ) | (515 | ) | ||||
Deferred compensation obligation | 534 | 515 | ||||||
Total stockholders’ equity | 110,604 | 110,297 | ||||||
Total liabilities and stockholders’ equity | $ | 978,016 | $ | 1,015,125 | ||||
October 28, 2004
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Three Months Ended | ||||||||
September 30, 2004 | September 30, 2003 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 3,342 | $ | 4,343 | ||||
Other loans | 167 | 199 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,712 | 1,783 | ||||||
Other securities | 2,199 | 2,050 | ||||||
Mortgage-backed securities held-to-maturity | 63 | — | ||||||
Trading securities | 301 | 261 | ||||||
Federal funds sold | 615 | 491 | ||||||
Other investments | 37 | 99 | ||||||
Total interest and dividend income | 8,436 | 9,226 | ||||||
Interest expense: | ||||||||
Deposits | 3,225 | 3,622 | ||||||
Total interest expense | 3,225 | 3,622 | ||||||
Net interest income | 5,211 | 5,604 | ||||||
Provision for loan losses | (74 | ) | (450 | ) | ||||
Net interest income after provision for loan losses | 5,285 | 6,054 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 109 | 112 | ||||||
Gains on securities available for sale, net | 113 | 206 | ||||||
Gains (losses) on trading securities, net | 69 | (134 | ) | |||||
Other | 158 | 159 | ||||||
Total non-interest income | 449 | 343 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,783 | 1,916 | ||||||
Occupancy and equipment | 524 | 570 | ||||||
Data processing | 131 | 126 | ||||||
Professional services | 143 | 86 | ||||||
Advertising and marketing | 31 | 21 | ||||||
Deposit insurance | 39 | 45 | ||||||
Other | 327 | 369 | ||||||
Total non-interest expense | 2,978 | 3,133 | ||||||
Income before income taxes | 2,756 | 3,264 | ||||||
Income tax expense | 945 | 1,127 | ||||||
Net income | $ | 1,811 | $ | 2,137 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,398,346 | 4,378,050 | ||||||
Diluted | 4,482,585 | 4,490,325 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 0.41 | $ | 0.49 | ||||
Diluted | 0.40 | 0.48 |
October 28, 2004
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Nine Months Ended | ||||||||
September 30, 2004 | September 30, 2003 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 10,369 | $ | 13,942 | ||||
Other loans | 502 | 659 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 4,689 | 6,689 | ||||||
Other securities | 6,587 | 5,192 | ||||||
Mortgage-backed securities held-to-maturity | 111 | — | ||||||
Trading securities | 895 | 830 | ||||||
Federal funds sold | 1,540 | 1,801 | ||||||
Other investments | 209 | 334 | ||||||
Total interest and dividend income | 24,902 | 29,447 | ||||||
Interest expense: | ||||||||
Deposits | 9,425 | 12,371 | ||||||
Total interest expense | 9,425 | 12,371 | ||||||
Net interest income | 15,477 | 17,076 | ||||||
Provision for loan losses | (187 | ) | (450 | ) | ||||
Net interest income after provision for loan losses | 15,664 | 17,526 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 342 | 382 | ||||||
Gains on securities available for sale, net | 1,156 | 165 | ||||||
Gains (losses) on trading securities, net | (214 | ) | 139 | |||||
Other | 554 | 555 | ||||||
Total non-interest income | 1,838 | 1,241 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 5,511 | 5,727 | ||||||
Occupancy and equipment | 1,644 | 1,679 | ||||||
Data processing | 391 | 400 | ||||||
Professional services | 383 | 305 | ||||||
Advertising and marketing | 79 | 91 | ||||||
Deposit insurance | 122 | 135 | ||||||
Other | 972 | 1,074 | ||||||
Total non-interest expense | 9,102 | 9,411 | ||||||
Income before income taxes | 8,400 | 9,356 | ||||||
Income tax expense | 2,906 | 3,288 | ||||||
Net income | $ | 5,494 | $ | 6,068 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,413,910 | 4,453,849 | ||||||
Diluted | 4,509,796 | 4,552,039 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 1.24 | $ | 1.36 | ||||
Diluted | 1.22 | 1.33 |