Exhibit 99.1
MASSBANK CORP. | October 19, 2005 | |
Reading, MA |
FOR IMMEDIATE RELEASE
MASSBANK CORP. REPORTS 7.5% INCREASE IN EARNINGS PER SHARE
FOR THE THIRD QUARTER 2005
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,884,000 or $0.43 in diluted earnings per share for the third quarter 2005, compared with net income of $1,811,000 or $0.40 in diluted earnings per share in the third quarter of 2004. Basic earnings per share in the recent quarter were $0.43 per share compared to $0.41 per share in the third quarter of last year. This is the Company’s second consecutive quarter of year-over-year earnings per share increases.
For the nine months ended September 30, 2005, the Company reported net income of $5,435,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share) compared to $5,494,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share) for the same period in 2004.
Income Statement
Net interest income, the Company’s core earnings, totaled $5,468,000 for the third quarter of 2005, up $257,000 or 4.9% from the same quarter in 2004. This is the fourth consecutive quarter that the Company has reported a year-over-year improvement in net interest income. The net interest margin in the recent quarter improved 24 basis points to 2.44% from 2.20% in the third quarter of 2004. This is an increase of 10.9% over the same quarter last year. The Company continues to benefit from rising 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 eight times since the end of September 2004, increasing the rate from 1.75% to 3.75%.
Return on average assets and return on average equity for the third quarter 2005 were 0.82% and 7.06%, respectively, up from 0.74% and 6.67% for the comparable quarter in 2004.
Balance Sheet
The Company’s total assets decreased $57.6 million to $920.4 million at September 30, 2005 from $978.0 million at September 30, 2004. Deposits decreased $50.5 million or 5.9% year-over-year from $853.0 million at September 30, 2004 to $802.6 million at September 30, 2005. Stockholders’ equity was $105.3 million at September 30, 2005, representing a book value of $24.38 per share. This compares to $110.6 million at September 30, 2004, representing a book value of $25.13 per share.
October 19, 2005
Page Two
The Company’s non-accrual loans remain low totaling $267,000 at September 30, 2005, representing 0.12% of total loans. This compares to $182,000 representing 0.08% of total loans at September 30, 2004. At September 30, 2005, the Bank’s allowance for loan losses totaled $1.253 million representing 0.54% of total loans compared to $1.363 million representing 0.57% of total loans at September 30, 2004. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $588,000 at September 30, 2005 compared to $616,000 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.
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 other 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, 2004.
For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.
October 19, 2005
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MASSBANK CORP.
FINANCIAL HIGHLIGHTS
($ in thousands except share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 9,346 | $ | 8,436 | $ | 27,180 | $ | 24,902 | ||||||||
Total interest expense | 3,878 | 3,225 | 11,013 | 9,425 | ||||||||||||
Net interest income | 5,468 | 5,211 | 16,167 | 15,477 | ||||||||||||
Provision (credit) for loan losses | — | (74 | ) | (53 | ) | (187 | ) | |||||||||
Net interest income after provision (credit) for loan losses | 5,468 | 5,285 | 16,220 | 15,664 | ||||||||||||
Gains on securities, net | 238 | 182 | 426 | 942 | ||||||||||||
Other non-interest income | 316 | 267 | 910 | 896 | ||||||||||||
Non-interest expense | 3,176 | 2,978 | 9,379 | 9,102 | ||||||||||||
Income tax expense | 962 | 945 | 2,742 | 2,906 | ||||||||||||
Net income | $ | 1,884 | $ | 1,811 | $ | 5,435 | $ | 5,494 | ||||||||
Weighted Average Common Shares Outstanding | ||||||||||||||||
Basic | 4,342,872 | 4,398,346 | 4,377,372 | 4,413,910 | ||||||||||||
Diluted | 4,397,998 | 4,482,585 | 4,440,659 | 4,509,796 | ||||||||||||
Per Common Share | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.43 | $ | 0.41 | $ | 1.24 | $ | 1.24 | ||||||||
Diluted | 0.43 | 0.40 | 1.22 | 1.22 | ||||||||||||
Cash dividends paid | 0.26 | 0.25 | 0.78 | 0.75 | ||||||||||||
Book value (period end) | 24.38 | 25.13 | ||||||||||||||
Ratios (1) | ||||||||||||||||
Return on average assets | 0.82 | % | 0.74 | % | 0.77 | % | 0.75 | % | ||||||||
Return on average equity | 7.06 | 6.67 | 6.72 | 6.66 | ||||||||||||
Net interest margin | 2.44 | 2.20 | 2.36 | 2.16 | ||||||||||||
Total equity to assets (period end) | 11.44 | 11.31 |
At September 30, | ||||||||
2005 | 2004 | |||||||
At Period End | ||||||||
Assets | $ | 920,429 | $ | 978,016 | ||||
Deposits | 802,597 | 853,049 | ||||||
Total loans | 231,073 | 237,621 | ||||||
Stockholders’ equity | $ | 105,340 | $ | 110,604 | ||||
Common shares outstanding | 4,321,367 | 4,401,050 | ||||||
Asset Quality | ||||||||
Non-accrual loans | $ | 267 | $ | 182 | ||||
Real estate acquired through foreclosure | — | — | ||||||
Total non-performing assets | $ | 267 | $ | 182 | ||||
Allowance for loan losses | $ | 1,253 | $ | 1,363 | ||||
Non-accrual loans to total loans | 0.12 | % | 0.08 | % |
(1) | Ratios are presented on an annualized basis with the exception of equity to assets. |
October 19, 2005
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MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At September 30, 2005 | At September 30, 2004 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 10,441 | $ | 9,842 | ||||
Interest-bearing deposits in banks | 1,115 | 4,633 | ||||||
Federal funds sold | 196,737 | 186,765 | ||||||
Short-term investments | — | 990 | ||||||
Debt securities available for sale: | ||||||||
Mortgage-backed securities | 128,262 | 120,403 | ||||||
Other securities | 294,284 | 323,088 | ||||||
Equity securities available for sale | 7,481 | 8,785 | ||||||
Mortgage-backed securities held-to-maturity | 4,577 | 4,894 | ||||||
Trading securities | 22,803 | 55,782 | ||||||
Loans: | ||||||||
Mortgage loans | 220,722 | 227,233 | ||||||
Other loans | 10,351 | 10,388 | ||||||
Total loans | 231,073 | 237,621 | ||||||
Allowance for loan losses | (1,253 | ) | (1,363 | ) | ||||
Net loans | 229,820 | 236,258 | ||||||
Premises and equipment | 6,182 | 6,596 | ||||||
Accrued interest receivable | 4,268 | 4,378 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Current income tax asset, net | 45 | 42 | ||||||
Deferred income tax asset, net | 2,762 | 376 | ||||||
Other assets | 10,562 | 14,094 | ||||||
Total assets | $ | 920,429 | $ | 978,016 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 87,810 | $ | 85,363 | ||||
Savings | 471,054 | 570,358 | ||||||
Time certificates of deposit | 243,733 | 197,328 | ||||||
Total deposits | 802,597 | 853,049 | ||||||
Escrow deposits of borrowers | 1,009 | 1,037 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 588 | 616 | ||||||
Other liabilities | 10,895 | 12,710 | ||||||
Total liabilities | 815,089 | 867,412 | ||||||
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, 7,793,930 and 7,724,930 shares issued, respectively | 7,794 | 7,725 | ||||||
Additional paid-in capital | 56,670 | 55,053 | ||||||
Retained earnings | 104,025 | 101,217 | ||||||
168,489 | 163,995 | |||||||
Treasury stock at cost 3,472,563 and 3,323,880 shares, respectively | (60,932 | ) | (55,650 | ) | ||||
Accumulated other comprehensive income (loss): | ||||||||
Net unrealized gains (losses) on securities available for sale, net of tax effect | (2,217 | ) | 2,259 | |||||
Shares held in rabbi trust at cost 15,144 and 25,304 shares, respectively | (335 | ) | (534 | ) | ||||
Deferred compensation obligation | 335 | 534 | ||||||
Total stockholders’ equity | 105,340 | 110,604 | ||||||
Total liabilities and stockholders’ equity | $ | 920,429 | $ | 978,016 | ||||
October 19, 2005
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Three Months Ended | |||||||
September 30, 2005 | September 30, 2004 | ||||||
Interest and dividend income: | |||||||
Mortgage loans | $ | 2,998 | $ | 3,342 | |||
Other loans | 181 | 167 | |||||
Securities available for sale: | |||||||
Mortgage-backed securities | 1,737 | 1,712 | |||||
Other securities | 2,450 | 2,199 | |||||
Mortgage-backed securities held-to-maturity | 59 | 63 | |||||
Trading securities | 187 | 301 | |||||
Federal funds sold | 1,722 | 615 | |||||
Other investments | 12 | 37 | |||||
Total interest and dividend income | 9,346 | 8,436 | |||||
Interest expense: | |||||||
Deposits | 3,878 | 3,225 | |||||
Total interest expense | 3,878 | 3,225 | |||||
Net interest income | 5,468 | 5,211 | |||||
Provision (credit) for loan losses | — | (74 | ) | ||||
Net interest income after provision (credit) for loan losses | 5,468 | 5,285 | |||||
Non-interest income: | |||||||
Deposit account service fees | 100 | 109 | |||||
Gains on securities available for sale, net | 177 | 113 | |||||
Gains on trading securities, net | 61 | 69 | |||||
Deferred compensation plan income (loss) | 49 | (10 | ) | ||||
Other | 167 | 168 | |||||
Total non-interest income | 554 | 449 | |||||
Non-interest expense: | |||||||
Salaries and employee benefits | 1,877 | 1,778 | |||||
Deferred compensation plan expense | 71 | 5 | |||||
Occupancy and equipment | 521 | 524 | |||||
Data processing | 137 | 131 | |||||
Professional services | 115 | 143 | |||||
Advertising and marketing | 44 | 31 | |||||
Deposit Insurance | 35 | 39 | |||||
Other | 376 | 327 | |||||
Total non-interest expense | 3,176 | 2,978 | |||||
Income before income taxes | 2,846 | 2,756 | |||||
Income tax expense | 962 | 945 | |||||
Net income | $ | 1,884 | $ | 1,811 | |||
Weighted average common shares outstanding: | |||||||
Basic | 4,342,872 | 4,398,346 | |||||
Diluted | 4,397,998 | 4,482,585 | |||||
Earnings per share (in dollars): | |||||||
Basic | $ | 0.43 | $ | 0.41 | |||
Diluted | 0.43 | 0.40 |
October 19, 2005
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
($ in thousands except share data)
Nine Months Ended | ||||||||
September 30, 2005 | September 30, 2004 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 9,148 | $ | 10,369 | ||||
Other loans | 507 | 502 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 5,211 | 4,689 | ||||||
Other securities | 7,158 | 6,587 | ||||||
Mortgage-backed securities held-to-maturity | 181 | 111 | ||||||
Trading securities | 620 | 895 | ||||||
Federal funds sold | 4,310 | 1,540 | ||||||
Other investments | 45 | 209 | ||||||
Total interest and dividend income | 27,180 | 24,902 | ||||||
Interest expense: | ||||||||
Deposits | 11,013 | 9,425 | ||||||
Total interest expense | 11,013 | 9,425 | ||||||
Net interest income | 16,167 | 15,477 | ||||||
Provision (credit) for loan losses | (53 | ) | (187 | ) | ||||
Net interest income after provision (credit) for loan losses | 16,220 | 15,664 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 301 | 342 | ||||||
Gains on securities available for sale, net 307 1,156 Gains (losses) on trading securities, net | 119 | (214 | ) | |||||
Deferred compensation plan income | 59 | 24 | ||||||
Other | 550 | 530 | ||||||
Total non-interest income | 1,336 | 1,838 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 5,572 | 5,443 | ||||||
Deferred compensation plan expense | 125 | 68 | ||||||
Occupancy and equipment | 1,649 | 1,644 | ||||||
Data processing | 404 | 391 | ||||||
Professional services | 380 | 383 | ||||||
Advertising and marketing | 104 | 79 | ||||||
Deposit Insurance | 110 | 122 | ||||||
Other | 1,035 | 972 | ||||||
Total non-interest expense | 9,379 | 9,102 | ||||||
Income before income taxes | 8,177 | 8,400 | ||||||
Income tax expense | 2,742 | 2,906 | ||||||
Net income | $ | 5,435 | $ | 5,494 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,377,372 | 4,413,910 | ||||||
Diluted | 4,440,659 | 4,509,796 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 1.24 | $ | 1.24 | ||||
Diluted | 1.22 | 1.22 |