Exhibit 99.1
MASSBANK CORP. | February 2, 2005 | |
Reading, MA |
FOR IMMEDIATE RELEASE
MASSBANK CORP. REPORTS INCREASE IN EARNINGS PER SHARE
FOR THE FOURTH QUARTER 2004
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,886,000 or $0.42 in diluted earnings per share for the fourth quarter 2004, compared with net income of $1,795,000 or $0.40 in diluted earnings per share in the fourth quarter of 2003. Basic earnings per share in the recent quarter were $0.43 per share compared to $0.41 per share in the fourth quarter of 2003. For the year ended December 31, 2004, the Company reported net income of $7,380,000 or $1.64 in diluted earnings per share ($1.67 in basic earnings per share). This compares to $7,863,000 or $1.73 in diluted earnings per share ($1.77 in basic earnings per share) for the year ended December 31, 2003.
The Company’s earnings per share have increased for the second consecutive quarter when compared to the previous quarter of 2004. Return on average assets and return on average equity for the fourth quarter 2004 were 0.78% and 6.86%, respectively, up from 0.71% and 6.57% for the comparable quarter of 2003.
Income Statement
Net interest income totaled $5,375,000 for the fourth quarter of 2004, up $168,000 from the same quarter in 2003. The net interest margin improved to 2.29% in the recent quarter, from 2.13% in the fourth quarter of 2003. The 16 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 target rate for Federal Funds by 25 basis points five times since the end of June 2004, increasing the rate from 1.00% to 2.25%. A further “measured rate” of increases is expected by most economists to continue in 2005. This will likely have a positive affect on the bank’s future net interest income and net interest margin.
The negative provisions for loan losses in the fourth quarter of 2004 and 2003 of $55,000 and $52,000, respectively, 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 fourth quarter of 2004 totaled $648,000, compared to $681,000 for the same period in 2003. The decrease of $33,000 is due primarily to lower securities gains in the recent quarter compared to the fourth quarter of 2003.
Non-interest expense in the fourth quarter of 2004 remained essentially unchanged from the same quarter of 2003.
February 2, 2005
Page Two
Balance Sheet
The Company’s total assets decreased $34.6 million to $976.2 million at December 31, 2004 from $1.011 billion at December 31, 2003. Deposits decreased $33.0 million or 3.7% year-over-year from $882.5 million at December 31, 2003 to $849.5 million at December 31, 2004. Stockholders’ equity was $110.0 million at December 31, 2004, representing a book value of $25.11 per share. This compares to $110.9 million at December 31, 2003 representing a book value of $25.17 per share.
The Company’s non-accrual loans remain low totaling $74,000 at December 31, 2004 representing 0.03% of total loans. This compares to $230,000 representing 0.09% of total loans at December 31, 2003. At December 31, 2004 the Bank’s allowance for loan losses totaled $1.307 million representing 0.55% of total loans compared to $1.554 million representing 0.61% of total loans at December 31, 2003. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $588,000 at December 31, 2004 compared to $626,000 a year earlier. This is intended to protect the bank against 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.
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.
February 2, 2005
Page Three
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
($ in thousands except share data)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 8,679 | $ | 8,690 | $ | 33,581 | $ | 38,137 | ||||||||
Total interest expense | 3,304 | 3,483 | 12,729 | 15,854 | ||||||||||||
Net interest income | 5,375 | 5,207 | 20,852 | 22,283 | ||||||||||||
Provision for loan losses | (55 | ) | (52 | ) | (242 | ) | (502 | ) | ||||||||
Gains on securities, net | 287 | 335 | 1,229 | 639 | ||||||||||||
Other non-interest income | 361 | 346 | 1,257 | 1,283 | ||||||||||||
Non-interest expense | 3,200 | 3,204 | 12,302 | 12,615 | ||||||||||||
Income tax expense | 992 | 941 | 3,898 | 4,229 | ||||||||||||
Net income | $ | 1,886 | $ | 1,795 | $ | 7,380 | $ | 7,863 | ||||||||
Weighted Average Common Shares Outstanding | ||||||||||||||||
Basic | 4,391,567 | 4,396,500 | 4,408,293 | 4,439,394 | ||||||||||||
Diluted | 4,476,938 | 4,522,500 | 4,501,537 | 4,544,594 | ||||||||||||
Per Common Share | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.43 | $ | 0.41 | $ | 1.67 | $ | 1.77 | ||||||||
Diluted | 0.42 | 0.40 | 1.64 | 1.73 | ||||||||||||
Cash dividends paid | 0.25 | 0.23 | 1.00 | 0.92 | ||||||||||||
Book value (period end) | 25.11 | 25.17 | ||||||||||||||
Ratios (1) | ||||||||||||||||
Return on average assets | 0.78 | % | 0.71 | % | 0.75 | % | 0.78 | % | ||||||||
Return on average equity | 6.86 | 6.57 | 6.71 | 7.08 | ||||||||||||
Net interest margin | 2.29 | 2.13 | 2.19 | 2.26 | ||||||||||||
Total equity to assets (period end) | 11.27 | 10.97 | ||||||||||||||
At December 31, | ||||||||||||||||
2004 | 2003 | |||||||||||||||
At Period End | ||||||||||||||||
Assets | $ | 976,168 | $ | 1,010,733 | ||||||||||||
Deposits | 849,465 | 882,508 | ||||||||||||||
Total loans | 236,198 | 253,006 | ||||||||||||||
Stockholders’ equity | $ | 110,015 | $ | 110,927 | ||||||||||||
Common shares outstanding | 4,381,727 | 4,407,453 | ||||||||||||||
Asset Quality | ||||||||||||||||
Non-accrual loans | $ | 74 | $ | 230 | ||||||||||||
Real estate acquired through foreclosure | — | — | ||||||||||||||
Total non-performing assets | $ | 74 | $ | 230 | ||||||||||||
Allowance for loan losses | $ | 1,307 | $ | 1,554 | ||||||||||||
Non-accrual loans to total loans | 0.03 | % | 0.09 | % | ||||||||||||
Allowance for loan losses as a% of non-accrual loans | 1766.2 | % | 675.7 | % |
(1) | Ratios are presented on an annualized basis with the exception of equity to assets. |
February 2, 2005
Page Four
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At December 31, 2004 | At December 31, 2003 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 9,829 | $ | 8,862 | ||||
Interest-bearing deposits in banks | 2,938 | 6,196 | ||||||
Federal funds sold | 193,728 | 190,684 | ||||||
Short-term investments | 302 | 23,337 | ||||||
Debt securities available for sale: | ||||||||
Mortgage-backed securities | 122,709 | 95,658 | ||||||
Other securities | 313,616 | 322,105 | ||||||
Equity securities available for sale | 7,428 | 11,466 | ||||||
Mortgage-backed securities held-to-maturity | 4,877 | — | ||||||
Trading securities | 59,013 | 72,633 | ||||||
Loans: | ||||||||
Mortgage loans | 226,197 | 241,886 | ||||||
Other loans | 10,001 | 11,120 | ||||||
Total loans | 236,198 | 253,006 | ||||||
Allowance for loan losses | (1,307 | ) | (1,554 | ) | ||||
Net loans | 234,891 | 251,452 | ||||||
Premises and equipment | 6,464 | 6,943 | ||||||
Accrued interest receivable | 3,416 | 3,854 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 164 | 325 | ||||||
Deferred income tax asset, net | 588 | — | ||||||
Other assets | 15,115 | 16,128 | ||||||
Total assets | $ | 976,168 | $ | 1,010,733 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 87,653 | $ | 85,056 | ||||
Savings | 561,313 | 607,831 | ||||||
Time certificates of deposit | 200,499 | 189,621 | ||||||
Total deposits | 849,465 | 882,508 | ||||||
Escrow deposits of borrowers | 1,074 | 1,139 | ||||||
Deferred income taxes | — | 783 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 588 | 626 | ||||||
Other liabilities | 15,026 | 14,750 | ||||||
Total liabilities | 866,153 | 899,806 | ||||||
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, 7,736,430 and 7,688,333 shares issued, respectively | 7,736 | 7,688 | ||||||
Additional paid-in capital | 55,313 | 54,417 | ||||||
Retained earnings | 102,003 | 99,038 | ||||||
165,052 | 161,143 | |||||||
Treasury stock at cost 3,354,703 and 3,280,880 shares, respectively | (56,794 | ) | (54,177 | ) | ||||
Accumulated other comprehensive income: | ||||||||
Net unrealized gains on securities available for sale, net of tax effect | 1,757 | 3,961 | ||||||
Shares held in rabbi trust at cost 25,804 and 25,200 shares, respectively | (553 | ) | (515 | ) | ||||
Deferred compensation obligation | 553 | 515 | ||||||
Total stockholders’ equity | 110,015 | 110,927 | ||||||
Total liabilities and stockholders’ equity | $ | 976,168 | $ | 1,010,733 | ||||
February 2, 2005
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Three Months Ended | ||||||||
December 31, 2004 | December 31, 2003 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 3,209 | $ | 3,740 | ||||
Other loans | 167 | 175 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,709 | 1,561 | ||||||
Other securities | 2,354 | 2,365 | ||||||
Mortgage-backed securities held-to-maturity | 62 | — | ||||||
Trading securities | 250 | 283 | ||||||
Federal funds sold | 898 | 465 | ||||||
Other investments | 30 | 101 | ||||||
Total interest and dividend income | 8,679 | 8,690 | ||||||
Interest expense: | ||||||||
Deposits | 3,304 | 3,483 | ||||||
Total interest expense | 3,304 | 3,483 | ||||||
Net interest income | 5,375 | 5,207 | ||||||
Provision for loan losses | (55 | ) | (52 | ) | ||||
Net interest income after provision for loan losses | 5,430 | 5,259 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 106 | 112 | ||||||
Gains on securities available for sale, net | 205 | 393 | ||||||
Gains (losses) on trading securities, net | 82 | (58 | ) | |||||
Other | 255 | 234 | ||||||
Total non-interest income | 648 | 681 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,917 | 1,965 | ||||||
Occupancy and equipment | 525 | 569 | ||||||
Data processing | 130 | 128 | ||||||
Professional services | 248 | 89 | ||||||
Advertising and marketing | 31 | 63 | ||||||
Deposit insurance | 38 | 42 | ||||||
Other | 311 | 348 | ||||||
Total non-interest expense | 3,200 | 3,204 | ||||||
Income before income taxes | 2,878 | 2,736 | ||||||
Income tax expense | 992 | 941 | ||||||
Net income | $ | 1,886 | $ | 1,795 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,391,567 | 4,396,500 | ||||||
Diluted | 4,476,938 | 4,522,500 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 0.43 | $ | 0.41 | ||||
Diluted | 0.42 | 0.40 |
February 2, 2005
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Twelve Months Ended | ||||||||
December 31, 2004 | December 31, 2003 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 13,578 | $ | 17,682 | ||||
Other loans | 669 | 834 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 6,398 | 8,250 | ||||||
Other securities | 8,941 | 7,557 | ||||||
Mortgage-backed securities held-to-maturity | 173 | — | ||||||
Trading securities | 1,145 | 1,113 | ||||||
Federal funds sold | 2,438 | 2,266 | ||||||
Other investments | 239 | 435 | ||||||
Total interest and dividend income | 33,581 | 38,137 | ||||||
Interest expense: | ||||||||
Deposits | 12,729 | 15,854 | ||||||
Total interest expense | 12,729 | 15,854 | ||||||
Net interest income | 20,852 | 22,283 | ||||||
Provision for loan losses | (242 | ) | (502 | ) | ||||
Net interest income after provision for loan losses | 21,094 | 22,785 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 448 | 494 | ||||||
Gains on securities available for sale, net | 1,361 | 558 | ||||||
Gains (losses) on trading securities, net | (132 | ) | 81 | |||||
Other | 809 | 789 | ||||||
Total non-interest income | 2,486 | 1,922 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 7,428 | 7,692 | ||||||
Occupancy and equipment | 2,169 | 2,248 | ||||||
Data processing | 521 | 528 | ||||||
Professional services | 631 | 394 | ||||||
Advertising and marketing | 110 | 154 | ||||||
Deposit insurance | 160 | 177 | ||||||
Other | 1,283 | 1,422 | ||||||
Total non-interest expense | 12,302 | 12,615 | ||||||
Income before income taxes | 11,278 | 12,092 | ||||||
Income tax expense | 3,898 | 4,229 | ||||||
Net income | $ | 7,380 | $ | 7,863 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,408,293 | 4,439,394 | ||||||
Diluted | 4,501,537 | 4,544,594 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 1.67 | $ | 1.77 | ||||
Diluted | 1.64 | 1.73 |