Exhibit 99.1
MASSBANK Corp. | January 22, 2008 | |
Reading, MA |
FOR IMMEDIATE RELEASE
MASSBANK CORP. ANNOUNCES 22.5% INCREASE IN FOURTH QUARTER EPS
AND DECLARES CASH DIVIDEND
MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $2,102,000 for the quarter ended December 31, 2007 compared to $1,731,000 for the quarter ended December 31, 2006, an increase of $371,000 or 21.4%. Diluted and basic earnings per share were $0.49 for the fourth quarter of 2007 compared to $0.40 for the same quarter of 2006, an increase of 22.5%.
For the year ended December 31, 2007, the Company reported net income of $7,731,000 compared to $7,027,000 for the year ended December 31, 2006, an increase of $704,000 or 10.0%. Diluted earnings per share for 2007 increased 10.6% to $1.78 from $1.61 for the prior year. Basic earnings per share for 2007 increased 11.1% to $1.80 from $1.62 per share for 2006.
The Company’s return on average assets and return on average equity for the recent quarter showed marked improvement. Return on average assets and return on average equity for the fourth quarter 2007 were 1.05% and 7.87%, respectively, up from 0.83% and 6.52% for the comparable quarter of 2006. Book value per share also increased $0.93 or 3.8% reaching a new high of $25.69 per share at December 31, 2007, from $24.76 per share at December 31, 2006.
In commenting on the past year, Gerard H. Brandi, CEO of the Company, noted that, “These strong financial results in the face of a very challenging banking environment are a validation of MASSBANK’s long-standing strategy of maintaining high levels of liquidity and capital. As we said in last year’s Annual Report, our philosophy is to ‘go against the tide when we feel the tide is going in the wrong direction.’ We also stated then that while we would ‘sacrifice a degree of growth when we feel that the cost of growth is too high,’ we emphasized that we were not willing to ‘sacrifice asset quality for a modest increase in yield.’ By consistently adhering to these strategies, MASSBANK avoided virtually all of the current turmoil in the residential mortgage market and was one of the few banks to achieve significantly improved financial results in 2007. I am confident that our consistent business philosophies will position us for further solid results in the years to come.”
Income Statement
The growth in net income during the recent quarter compared to the same quarter last year resulted primarily from an increase in non-interest income and a decrease in non-interest expense, partially offset by a decrease in net interest income.
Non-interest income for the three months ended December 31, 2007 was $1,517,000 compared to $736,000 for the same period in 2006, an increase of $781,000 or 106.1% over the three months ended December 31, 2006. The growth in non-interest income was mainly due to an increase in net securities gains of $889,000 resulting primarily from an increase in net gains on trading securities of $1,108,000. The strong performance of the Company’s trading securities portfolio in the recent quarter reflects an increase in the fair value of the trading securities portfolio of $1,023,000 over the same quarter last year and an increase in gains on sales of trading securities of $85,000.
January 22, 2008
Page Two
All other non-interest income in the recent quarter decreased $108,000 when compared to the same quarter last year. This was due essentially to the market value of the Company’s deferred compensation plan assets having declined in the recent quarter compared to having appreciated in market value in the same quarter of 2006. This decrease of $130,000 in deferred compensation plan income, however, is offset by a corresponding decrease in deferred compensation plan expense.
Non-interest expense was $2,841,000 for the three months ended December 31, 2007 compared to $3,053,000 for the same period in 2006, a decrease of $212,000 or 6.9%. The decreases were predominately in compensation related costs.
Salaries and employee benefits decreased $127,000 due principally to a reduction in the amount previously accrued for a profit sharing and incentive compensation bonus plan distribution to Company employees at year-end based on the Company’s earnings performance, partially offset by the increased costs of employee benefits.
Deferred compensation plan expense decreased $131,000 in the recent quarter due principally to the decrease in market value of plan assets.
Net interest income for the three months ended December 31, 2007 decreased $410,000 to $4,569,000 from $4,979,000 for the same period in 2006. The decrease in net interest income results primarily from a decrease in both average earning assets and net interest margin. The Company’s average earning assets for the fourth quarter of 2007 were $776.7 million compared to $833.8 million in the same quarter of 2006. The net interest margin for the recent quarter was 2.36% compared to 2.47% in the fourth quarter of 2006.
Balance Sheet
The Company’s total assets decreased $41.7 million to $801.8 million at December 31, 2007, from $843.5 million at December 31, 2006. Deposits decreased $40.7 million year-over-year from $723.3 million at December 31, 2006 to $682.6 million at December 31, 2007. The decrease in deposits is due in part to continued intense competition for relatively expensive short term deposits. Because of its high liquidity position, the Company can tolerate outflows when the cost of retaining deposits cannot be justified by the availability of appropriately priced assets, as measured on a risk- adjusted basis. Stockholders’ equity increased $2.1 million to $109.0 million at December 31, 2007, from $106.9 million at December 31, 2006.
The Company’s non-accrual loans remain near historical lows totaling $199,000 at December 31, 2007, representing 0.10% of total loans. This compares to $137,000 representing 0.07% of total loans at December 31, 2006. Net charge-offs were $3,000 in 2007 compared to net recoveries of $6,000 in 2006.
At December 31, 2007, the Company’s allowance for loan losses totaled $1.369 million representing 0.71% of total loans compared to $1.382 million representing 0.66% of total loans at December 31, 2006. In addition, the Company’s allowance for loan losses on off-balance sheet credit exposures totaled $345,000 at December 31, 2007 and 2006. This is intended to protect the Company against possible 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.
January 22, 2008
Page Three
ADDITIONAL INFORMATION
Dividend Declaration
MASSBANK Corp. today announced a quarterly cash dividend on its common stock of $0.29 per common share. This, the Company’s eighty-sixth consecutive dividend, will be payable on February 15, 2008 to stockholders of record at the close of business on January 31, 2008.
Stock Repurchase Program
During the three months ended December 31, 2007, the Company continued the repurchase of its common stock by acquiring 33,500 shares. As of December 31, 2007, there were 117,017 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 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 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, 2006.
For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.
January 22, 2008
Page Four
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
($ in thousands except share data)
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 9,734 | $ | 10,085 | $ | 39,782 | $ | 39,939 | ||||||||
Total interest expense | 5,165 | 5,106 | 21,013 | 18,951 | ||||||||||||
Net interest income | 4,569 | 4,979 | 18,769 | 20,988 | ||||||||||||
Provision (credit) for loan losses | — | (9 | ) | (10 | ) | 123 | ||||||||||
Net interest income after provision (credit) for loan losses | 4,569 | 4,988 | 18,779 | 20,865 | ||||||||||||
Gains on securities, net | 1,148 | 259 | 4,381 | 797 | ||||||||||||
Other non-interest income | 369 | 477 | 1,517 | 1,408 | ||||||||||||
Non-interest expense | 2,841 | 3,053 | 12,792 | 12,360 | ||||||||||||
Income tax expense | 1,143 | 940 | 4,154 | 3,683 | ||||||||||||
Net income | $ | 2,102 | $ | 1,731 | $ | 7,731 | $ | 7,027 | ||||||||
Weighted Average Common Shares Outstanding | ||||||||||||||||
Basic | 4,257,185 | 4,319,795 | 4,305,894 | 4,325,879 | ||||||||||||
Diluted | 4,289,163 | 4,352,680 | 4,333,789 | 4,360,688 | ||||||||||||
Per Common Share | ||||||||||||||||
Earnings: | ||||||||||||||||
Basic | $ | 0.49 | $ | 0.40 | $ | 1.80 | $ | 1.62 | ||||||||
Diluted | 0.49 | 0.40 | 1.78 | 1.61 | ||||||||||||
Cash dividends paid | 0.29 | 0.28 | 1.13 | 1.09 | ||||||||||||
Book value (period end) | 25.69 | 24.76 | ||||||||||||||
Ratios (1) | ||||||||||||||||
Return on average assets | 1.05 | % | 0.83 | % | 0.95 | % | 0.82 | % | ||||||||
Return on average equity | 7.87 | 6.52 | 7.23 | 6.74 | ||||||||||||
Net interest margin | 2.36 | 2.47 | 2.38 | 2.53 | ||||||||||||
Total equity to assets (period end) | 13.59 | 12.67 | ||||||||||||||
At | ||||||||||||||||
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
At Period End | ||||||||||||||||
Assets | $ | 801,799 | $ | 843,522 | ||||||||||||
Deposits | 682,561 | 723,332 | ||||||||||||||
Total loans | 191,567 | 208,927 | ||||||||||||||
Stockholders' equity | $ | 108,961 | $ | 106,885 | ||||||||||||
Common shares outstanding | 4,241,779 | 4,317,654 | ||||||||||||||
Asset Quality | ||||||||||||||||
Non-accrual loans | $ | 199 | $ | 137 | ||||||||||||
Real estate acquired through foreclosure | — | — | ||||||||||||||
Total non-performing assets | $ | 199 | $ | 137 | ||||||||||||
Allowance for loan losses | $ | 1,369 | $ | 1,382 | ||||||||||||
Percent of non-accrual loans to total loans | 0.10 | % | 0.07 | % |
(1) | Ratios are presented on an annualized basis with the exception of equity to assets. |
January 22, 2008
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
At | At | |||||||
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 6,126 | $ | 8,650 | ||||
Short-term investments | 150,978 | 139,240 | ||||||
Total cash and cash equivalents | 157,104 | 147,890 | ||||||
Term federal funds sold | 91,000 | 41,000 | ||||||
Securities available for sale, at fair value (amortized cost of $127,205 in 2007 and $407,154 in 2006) | 128,710 | 402,629 | ||||||
Securities held to maturity, at amortized cost (market value of $8,120 in 2007 and $5,276 in 2006) | 8,098 | 5,396 | ||||||
Trading securities, at fair value: | 206,566 | 1,931 | ||||||
Loans: | ||||||||
Mortgage loans | 181,945 | 199,253 | ||||||
Other loans | 9,622 | 9,674 | ||||||
Total loans | 191,567 | 208,927 | ||||||
Allowance for loan losses | (1,369 | ) | (1,382 | ) | ||||
Net loans | 190,198 | 207,545 | ||||||
Premises and equipment | 8,163 | 7,085 | ||||||
Real estate held for resale | 425 | 425 | ||||||
Accrued interest and income receivable | 4,061 | 5,083 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 1 | 88 | ||||||
Deferred income tax asset, net | 661 | 3,347 | ||||||
Other assets | 5,722 | 20,013 | ||||||
Total assets | $ | 801,799 | $ | 843,522 | ||||
Liabilities and Stockholders' Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 71,687 | $ | 78,860 | ||||
Savings | 307,322 | 344,808 | ||||||
Time certificates of deposit | 303,552 | 299,664 | ||||||
Total deposits | 682,561 | 723,332 | ||||||
Escrow deposits of borrowers | 968 | 1,006 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 345 | 345 | ||||||
Other liabilities | 8,964 | 11,954 | ||||||
Total liabilities | 692,838 | 736,637 | ||||||
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, 7,880,642 and 7,850,317 shares issued, respectively | 7,881 | 7,850 | ||||||
Additional paid-in capital | 58,773 | 57,953 | ||||||
Retained earnings | 107,674 | 107,055 | ||||||
174,328 | 172,858 | |||||||
Treasury stock at cost 3,638,863 and 3,532,663 shares, respectively | (66,597 | ) | (62,902 | ) | ||||
Accumulated other comprehensive income (loss) | 1,230 | (3,071 | ) | |||||
Shares held in rabbi trust at cost, 20,194 and 17,944 shares, respectively | (503 | ) | (426 | ) | ||||
Deferred compensation obligation | 503 | 426 | ||||||
Total stockholders' equity | 108,961 | 106,885 | ||||||
Total liabilities and stockholders' equity | $ | 801,799 | $ | 843,522 | ||||
January 22, 2008
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Three Months Ended | ||||||||
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 2,493 | $ | 2,751 | ||||
Other loans | 184 | 195 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,620 | 1,824 | ||||||
Other securities | 110 | 3,037 | ||||||
Mortgage-backed securities held to maturity | 112 | 70 | ||||||
Trading securities | 2,401 | 1 | ||||||
Federal funds sold | 2,056 | 2,004 | ||||||
Other investments | 758 | 203 | ||||||
Total interest and dividend income | 9,734 | 10,085 | ||||||
Interest expense: | ||||||||
Deposits | 5,165 | 5,106 | ||||||
Total interest expense | 5,165 | 5,106 | ||||||
Net interest income | 4,569 | 4,979 | ||||||
Provision (credit) for loan losses | — | (9 | ) | |||||
Net interest income after provision (credit) for loan losses | 4,569 | 4,988 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 80 | 85 | ||||||
Gains on securities available for sale, net | 88 | 307 | ||||||
Gains on trading securities, net | 1,060 | (48 | ) | |||||
Option fees | 150 | 150 | ||||||
Deferred compensation plan income (loss) | (60 | ) | 70 | |||||
Other | 199 | 172 | ||||||
Total non-interest income | 1,517 | 736 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,667 | 1,794 | ||||||
Deferred compensation plan expense | (40 | ) | 91 | |||||
Occupancy and equipment | 541 | 474 | ||||||
Data processing | 152 | 166 | ||||||
Professional services | 141 | 139 | ||||||
Advertising and marketing | 41 | 37 | ||||||
Deposit insurance | 26 | 30 | ||||||
Other | 313 | 322 | ||||||
Total non-interest expense | 2,841 | 3,053 | ||||||
Income before income taxes | 3,245 | 2,671 | ||||||
Income tax expense | 1,143 | 940 | ||||||
Net income | $ | 2,102 | $ | 1,731 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 4,257,185 | 4,319,795 | ||||||
Diluted | 4,289,163 | 4,352,680 | ||||||
Earnings per share (in dollars): | ||||||||
Basic | $ | 0.49 | $ | 0.40 | ||||
Diluted | 0.49 | 0.40 |
January 22, 2008
Page Seven
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
Twelve Months Ended | |||||||
December 31, | December 31, | ||||||
2007 | 2006 | ||||||
Interest and dividend income: | |||||||
Mortgage loans | $ | 10,313 | $ | 11,305 | |||
Other loans | 768 | 765 | |||||
Securities available for sale: | |||||||
Mortgage-backed securities | 6,857 | 7,293 | |||||
Other securities | 207 | 12,062 | |||||
Mortgage-backed securities held to maturity | 353 | 299 | |||||
Trading securities | 10,323 | 195 | |||||
Federal funds sold | 8,494 | 7,731 | |||||
Other investments | 2,467 | 289 | |||||
Total interest and dividend income | 39,782 | 39,939 | |||||
Interest expense: | |||||||
Deposits | 21,009 | 18,951 | |||||
Borrowed funds | 4 | — | |||||
Total interest expense | 21,013 | 18,951 | |||||
Net interest income | 18,769 | 20,988 | |||||
Provision (credit) for loan losses | (10 | ) | 123 | ||||
Net interest income after provision (credit) for loan losses | 18,779 | 20,865 | |||||
Non-interest income: | |||||||
Deposit account service fees | 325 | 343 | |||||
Gains on securities available for sale, net | 272 | 736 | |||||
Gains on trading securities, net | 4,109 | 61 | |||||
Option fees | 375 | 150 | |||||
Deferred compensation plan income | 58 | 178 | |||||
Other | 759 | 737 | |||||
Total non-interest income | 5,898 | 2,205 | |||||
Non-interest expense: | |||||||
Salaries and employee benefits | 7,699 | 7,338 | |||||
Deferred compensation plan expense | 264 | 263 | |||||
Occupancy and equipment | 2,094 | 2,176 | |||||
Data processing | 588 | 583 | |||||
Professional services | 612 | 553 | |||||
Advertising and marketing | 166 | 139 | |||||
Deposit insurance | 109 | 126 | |||||
Other | 1,260 | 1,182 | |||||
Total non-interest expense | 12,792 | 12,360 | |||||
Income before income taxes | 11,885 | 10,710 | |||||
Income tax expense | 4,154 | 3,683 | |||||
Net income | $ | 7,731 | $ | 7,027 | |||
Weighted average common shares outstanding: | |||||||
Basic | 4,305,894 | 4,325,879 | |||||
Diluted | 4,333,789 | 4,360,688 | |||||
Earnings per share (in dollars): | |||||||
Basic | $ | 1.80 | $ | 1.62 | |||
Diluted | 1.78 | 1.61 |