Exhibit 99.1
| MASSBANK Corp. | August 7, 2008 | |
| Reading, MA |
FOR IMMEDIATE RELEASE
MASSBANK Corp. Reports Second Quarter 2008 Earnings Results
READING, MA—(Marketwire)—August 7, 2008 — MASSBANK Corp. (Nasdaq:MASB), the Holding Company for MASSBANK, today reported a net loss of $378,000 or $0.09 in basic and diluted earnings per share for the second quarter of 2008, compared with net income of $1,422,000 or $0.33 in basic and diluted earnings per share in the second quarter of 2007. For the first six months of 2008, the Company had a net loss of $197,000 or $0.05 in basic and diluted earnings per share as compared with net income of $3,503,000 or $0.81 in basic and $0.80 in diluted earnings per share for the first six months of 2007. The results for the second quarter of 2008 compared to the second quarter of 2007 were adversely affected by a decline of $1,584,000 in net interest income, an increase in securities losses of $578,000 and one-time merger expenses of $258,000 associated with the Company’s merger with Eastern Bank. The decline in net interest income was principally due to changes in the Company’s investment portfolio as the Company increased the liquidity of the portfolio as called for by the merger agreement with Eastern Bank. Consistent with the merger agreement, the percentage of the Company’s total assets consisting of short-term investments and term Federal funds sold increased from 26.2% on June 30, 2007 to 47.0% on June 30, 2008.
Balance Sheet
The Company’s total assets decreased $33.9 million to $783.0 million at June 30, 2008 from $816.9 million at June 30, 2007. Deposits decreased $31.2 million or 4.4% year-over-year from $704.6 million at June 30, 2007 to $673.4 million at June 30, 2008 due in part to increased competition for relatively expensive short-term deposits. Stockholders’ equity was $105.2 million at June 30, 2008, representing a book value of $24.85 per share. This compares to $107.3 million at June 30, 2007 representing a book value of $24.83 per share.
The Company’s non-accrual loans are near historical lows totaling $26,000 at June 30, 2008 representing 0.01% of total loans. This compares to $192,000 representing 0.10% of total loans at June 30, 2007. At June 30, 2008, the Bank’s allowance for loan losses totaled $1.411 million representing 0.69% of total loans compared to $1.372 million representing 0.69% of total loans at June 30, 2007. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $302,000 at June 30, 2008 compared to $345,000 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.
ADDITIONAL INFORMATION
Stockholder approval of Merger
As previously announced, the Company’s stockholders approved on July 15, 2008 the Company’s merger with Eastern Bank Corporation. The merger remains subject to regulatory approvals. The merger is expected to close during the third quarter of 2008.
August 7, 2008
Page Two
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 but not limited to the following: (1) changing economic conditions; (2) movements in interest rates; (3) the credit environment; (4) levels of activity in the capital markets, including the stock and bond market; (5) changes in the levels of non-performing assets; (6) changes in the competitive pricing pressures within the Company’s market which may result in an increase in the Company’s cost of funds, changes in loan originations, a change in deposits and assets; (7) adverse legislative and regulatory developments; (8) a significant decline in residential real estate values in the Company’s market area; (9) adverse impacts resulting from the continuing war on terrorism; (10) a significant increase in employee benefit costs; (11) the impact of changes in accounting principles; (12) the impact of inflation or deflation; (13) the disruption to the Company’s business as a result of the announcement and pending merger with Eastern Corporation, including the Company’s ability to retain depositors and loan relationships and key personnel; and (14) the Company’s success at managing the risks involved in the foregoing 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, 2007. In addition, the completion of the previously announced merger with Eastern Corporation is subject to numerous risks and uncertainties, including: (a) the risk the Company will be unable to satisfy all of the closing conditions set forth in the merger agreement; and (b) the possibility that the Company may not obtain the necessary state and federal regulatory approvals to consummate the merger or that an adverse regulatory condition will be imposed in connection with those approvals.
For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.
August 7, 2008
Page Three
MASSBANK CORP.
FINANCIAL HIGHLIGHTS
($ in thousands except share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
For the Period Ended | ||||||||||||||||
Total interest and dividend income | $ | 7,295 | $ | 10,056 | $ | 16,057 | $ | 20,035 | ||||||||
Total interest expense | 4,115 | 5,292 | 8,862 | 10,480 | ||||||||||||
Net interest income | 3,180 | 4,764 | 7,195 | 9,555 | ||||||||||||
Provision (credit) for loan losses | 15 | (10 | ) | 43 | (10 | ) | ||||||||||
Net interest income after provision (credit) for loan losses | 3,165 | 4,774 | 7,152 | 9,565 | ||||||||||||
Gains (losses) on securities, net | (584 | ) | (6 | ) | 83 | 1,128 | ||||||||||
Other non-interest income | 255 | 461 | 525 | 817 | ||||||||||||
Non-interest expense | 3,460 | 3,091 | 8,068 | 6,191 | ||||||||||||
Income tax expense (benefit) | (246 | ) | 716 | (111 | ) | 1,816 | ||||||||||
Net income (loss) | $ | (378 | ) | $ | 1,422 | $ | (197 | ) | $ | 3,503 | ||||||
Weighted Average Common Shares Outstanding | ||||||||||||||||
Basic | 4,233,079 | 4,331,823 | 4,237,508 | 4,333,696 | ||||||||||||
Diluted | 4,270,506 | 4,356,972 | 4,271,290 | 4,359,200 | ||||||||||||
Per Common Share | ||||||||||||||||
Earnings (loss): | ||||||||||||||||
Basic | $ | (0.09 | ) | $ | 0.33 | $ | (0.05 | ) | $ | 0.81 | ||||||
Diluted | (0.09 | ) | 0.33 | (0.05 | ) | 0.80 | ||||||||||
Cash dividends paid | 0.29 | 0.28 | 0.58 | 0.56 | ||||||||||||
Book value (period end) | 24.85 | 24.83 | ||||||||||||||
Ratios(1) | ||||||||||||||||
Return on average assets | (0.19 | )% | 0.69 | % | (0.05 | )% | 0.85 | % | ||||||||
Return on average equity | (1.42 | ) | 5.28 | (0.37 | ) | 6.53 | ||||||||||
Net interest margin | 1.66 | 2.40 | 1.87 | 2.39 | ||||||||||||
Total equity to assets (period end) | 13.43 | 13.13 | ||||||||||||||
| At June 30, | ||||||||
| 2008 | 2007 | |||||||
At Period End | ||||||||
Assets | $ | 783,031 | $ | 816,948 | ||||
Deposits | 673,436 | 704,583 | ||||||
Total loans | 203,679 | 198,458 | ||||||
Stockholders’ equity | $ | 105,172 | $ | 107,252 | ||||
Common shares outstanding | 4,233,079 | 4,319,554 | ||||||
Asset Quality | ||||||||
Non-accrual loans | $ | 26 | $ | 192 | ||||
Real estate acquired through foreclosure | — | — | ||||||
Total non-performing assets | $ | 26 | $ | 192 | ||||
Allowance for loan losses | $ | 1,411 | $ | 1,372 | ||||
Percent of non-accrual loans to total loans | 0.01 | % | 0.10 | % | ||||
| (1) | Ratios are presented on an annualized basis with the exception of equity to assets. |
August 7, 2008
Page Four
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in thousands except share data)
| At June 30, 2008 | At June 30, 2007 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 7,476 | $ | 7,100 | ||||
Short-term investments | 318,183 | 174,006 | ||||||
Total cash and cash equivalents | 325,659 | 181,106 | ||||||
Term federal funds sold | 50,000 | 40,000 | ||||||
Securities available for sale, at fair value (amortized cost of $117,010 in 2008 and $138,029 in 2007) | 117,338 | 136,144 | ||||||
Securities held to maturity, at amortized cost (market value of $7,193 in 2008 and $4,945 in 2007) | 7,257 | 5,188 | ||||||
Trading securities, at fair value: | 63,522 | 236,985 | ||||||
Loans: | ||||||||
Mortgage loans | 194,722 | 188,558 | ||||||
Other loans | 8,957 | 9,900 | ||||||
Total loans | 203,679 | 198,458 | ||||||
Allowance for loan losses | (1,411 | ) | (1,372 | ) | ||||
Net loans | 202,268 | 197,086 | ||||||
Premises and equipment | 8,368 | 8,119 | ||||||
Real estate held for resale | — | 425 | ||||||
Accrued interest and income receivable | 2,194 | 4,252 | ||||||
Goodwill | 1,090 | 1,090 | ||||||
Income tax receivable, net | 223 | 19 | ||||||
Deferred income tax asset, net | 1,191 | 3,349 | ||||||
Other assets | 3,921 | 3,185 | ||||||
Total assets | $ | 783,031 | $ | 816,948 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Deposits: | ||||||||
Demand and NOW | $ | 73,247 | $ | 74,446 | ||||
Savings | 312,694 | 323,168 | ||||||
Time certificates of deposit | 287,495 | 306,969 | ||||||
Total deposits | 673,436 | 704,583 | ||||||
Escrow deposits of borrowers | 975 | 921 | ||||||
Allowance for loan losses on off-balance sheet credit exposures | 302 | 345 | ||||||
Other liabilities | 3,146 | 3,847 | ||||||
Total liabilities | 677,859 | 709,696 | ||||||
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, 7,900,942 and 7,871,017 shares issued in 2008 and 2007, respectively | 7,901 | 7,871 | ||||||
Additional paid-in capital | 59,410 | 58,430 | ||||||
Retained earnings | 105,016 | 105,893 | ||||||
| 172,327 | 172,194 | |||||||
Treasury stock at cost 3,667,863 and 3,551,463 shares in 2008 and 2007, respectively | (67,673 | ) | (63,519 | ) | ||||
Accumulated other comprehensive income (loss) | 518 | (1,423 | ) | |||||
Shares held in rabbi trust at cost, 20,194 and 18,944 shares in 2008 and 2007, respectively | (503 | ) | (458 | ) | ||||
Deferred compensation obligation | 503 | 458 | ||||||
Total stockholders’ equity | 105,172 | 107,252 | ||||||
Total liabilities and stockholders’ equity | $ | 783,031 | $ | 816,948 | ||||
August 7, 2008
Page Five
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
| Three Months Ended | ||||||||
| June 30, 2008 | June 30, 2007 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 2,544 | $ | 2,603 | ||||
Other loans | 152 | 198 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 1,544 | 1,729 | ||||||
Other securities | 30 | 32 | ||||||
Mortgage-backed securities held to maturity | 106 | 68 | ||||||
Trading securities | 856 | 2,639 | ||||||
Federal funds sold | 1,233 | 2,200 | ||||||
Other investments | 830 | 587 | ||||||
Total interest and dividend income | 7,295 | 10,056 | ||||||
Interest expense: | ||||||||
Deposits | 4,115 | 5,292 | ||||||
Total interest expense | 4,115 | 5,292 | ||||||
Net interest income | 3,180 | 4,764 | ||||||
Provision (credit) for loan losses | 15 | (10 | ) | |||||
Net interest income after provision (credit) for loan losses | 3,165 | 4,774 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 69 | 81 | ||||||
Gains (losses) on securities available for sale, net | (18 | ) | 203 | |||||
Losses on trading securities, net | (566 | ) | (209 | ) | ||||
Option fees | — | 75 | ||||||
Deferred compensation plan income (loss) | (20 | ) | 84 | |||||
Other | 206 | 221 | ||||||
Total non-interest income | (329 | ) | 455 | |||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 1,941 | 1,856 | ||||||
Deferred compensation plan expense (income) | — | 108 | ||||||
Occupancy and equipment | 520 | 494 | ||||||
Data processing | 129 | 141 | ||||||
Professional services | 243 | 113 | ||||||
Merger related expense | 258 | — | ||||||
Advertising and marketing | 22 | 36 | ||||||
Deposit insurance | 34 | 28 | ||||||
Other | 313 | 315 | ||||||
Total non-interest expense | 3,460 | 3,091 | ||||||
Income (loss) before income taxes | (624 | ) | 2,138 | |||||
Income tax expense (benefit) | (246 | ) | 716 | |||||
Net income (loss) | $ | (378 | ) | $ | 1,422 | |||
Weighted average common shares outstanding: | ||||||||
Basic | 4,233,079 | 4,331,823 | ||||||
Diluted | 4,270,506 | 4,356,972 | ||||||
Earnings (loss) per share (in dollars): | ||||||||
Basic | $ | (0.09 | ) | $ | 0.33 | |||
Diluted | (0.09 | ) | 0.33 | |||||
August 7, 2008
Page Six
MASSBANK CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
($ in thousands except share data)
| Six Months Ended | ||||||||
| June 30, 2008 | June 30, 2007 | |||||||
Interest and dividend income: | ||||||||
Mortgage loans | $ | 5,034 | $ | 5,279 | ||||
Other loans | 313 | 391 | ||||||
Securities available for sale: | ||||||||
Mortgage-backed securities | 3,133 | 3,535 | ||||||
Other securities | 57 | 63 | ||||||
Mortgage-backed securities held to maturity | 221 | 137 | ||||||
Trading securities | 2,521 | 5,276 | ||||||
Federal funds sold | 3,102 | 4,380 | ||||||
Other investments | 1,676 | 974 | ||||||
Total interest and dividend income | 16,057 | 20,035 | ||||||
Interest expense: | ||||||||
Deposits | 8,778 | 10,480 | ||||||
Borrowed funds | 84 | — | ||||||
Total interest expense | 8,862 | 10,480 | ||||||
Net interest income | 7,195 | 9,555 | ||||||
Provision (credit) for loan losses | 43 | (10 | ) | |||||
Net interest income after provision (credit) for loan losses | 7,152 | 9,565 | ||||||
Non-interest income: | ||||||||
Deposit account service fees | 146 | 164 | ||||||
Gains (losses) on securities available for sale, net | (63 | ) | 288 | |||||
Gains on trading securities, net | 146 | 840 | ||||||
Option fees | 75 | 150 | ||||||
Deferred compensation plan income (loss) | (69 | ) | 109 | |||||
Other | 373 | 394 | ||||||
Total non-interest income | 608 | 1,945 | ||||||
Non-interest expense: | ||||||||
Salaries and employee benefits | 3,881 | 3,740 | ||||||
Deferred compensation plan expense (income) | (21 | ) | 156 | |||||
Occupancy and equipment | 1,113 | 1,025 | ||||||
Data processing | 278 | 287 | ||||||
Professional services | 912 | 241 | ||||||
Merger related expense | 1,161 | — | ||||||
Advertising and marketing | 60 | 69 | ||||||
Deposit insurance | 60 | 56 | ||||||
Other | 624 | 617 | ||||||
Total non-interest expense | 8,068 | 6,191 | ||||||
Income (loss) before income taxes | (308 | ) | 5,319 | |||||
Income tax expense (benefit) | (111 | ) | 1,816 | |||||
Net income (loss) | $ | (197 | ) | $ | 3,503 | |||
Weighted average common shares outstanding: | ||||||||
Basic | 4,237,508 | 4,333,696 | ||||||
Diluted | 4,271,290 | 4,359,200 | ||||||
Earnings (loss) per share (in dollars): | ||||||||
Basic | $ | (0.05 | ) | $ | 0.81 | |||
Diluted | (0.05 | ) | 0.80 | |||||
