SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______________to____________
Commission File Number 0-15137
MASSBANK Corp.
(Exact name of registrant as specified in its charter)
Delaware 04-2930382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
123 HAVEN STREET
Reading, Massachusetts 01867
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (781) 662-0100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's classes of common stock,
as of the latest practicable date is:
Class: Common stock $1.00 per share.
Outstanding at May 1, 2001: 3,131,343 shares.
MASSBANK CORP. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page
ITEM 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2001 (unaudited) and December 31, 2000 3
Consolidated Statements of Income (unaudited)
for the three months ended March 31, 2001 and 2000 4
Consolidated Statements of Changes in Stockholders' Equity
for the three months ended March 31, 2001 (unaudited)
and the year ended December 31, 2000 5 - 6
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 2001 and 2000 7 - 8
Condensed Notes to the Consolidated Financial Statements 9 - 10
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 27
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 27
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 28
ITEM 2. Changes in Securities 28
ITEM 3. Defaults Upon Senior Securities 28
ITEM 4. Submission of Matters to a Vote of Security Holders 28
ITEM 5. Other Information 28
ITEM 6. Exhibits and Reports on Form 8-K 28
Signature Page 29
2
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
March 31, December 31,
2001 2000
(unaudited)
Assets:
Cash and due from banks $ 10,355 $ 9,179
Short-term investments (Note 3) 176,087 112,842
- --------------------------------------------------------------------------------
Total cash and cash equivalents 186,442 122,021
Term federal funds sold 20,000 30,000
Interest-bearing deposits in banks 3,913 1,678
Securities held to maturity, at amortized cost
(market value of $230 in 2001 and 2000) 230 230
Securities available for sale, at market value (amortized
cost of $406,258 in 2001 and $432,567 in 2000) 418,501 442,552
Trading securities, at market value 6,972 19,794
Loans: (Note 4)
Mortgage loans 271,916 272,951
Other loans 36,333 37,196
Allowance for loan losses (2,607) (2,594)
- --------------------------------------------------------------------------------
Net loans 305,642 307,553
Premises and equipment 4,471 3,932
Accrued interest receivable 5,281 5,755
Goodwill 1,164 1,189
Current income tax asset, net -- 284
Other assets 3,849 3,714
- --------------------------------------------------------------------------------
Total assets $956,465 $938,702
Liabilities and Stockholders' Equity:
Deposits $837,249 $823,625
Escrow deposits of borrowers 1,409 1,387
Employee stock ownership plan liability 312 312
Current income taxes 1,161 --
Deferred income taxes 3,168 2,418
Other liabilities 2,647 2,717
- --------------------------------------------------------------------------------
Total liabilities 845,946 830,459
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, 7,457,232 and
7,447,982 shares issued, respectively 7,457 7,448
Additional paid-in capital 61,914 61,674
Retained earnings 94,925 93,165
- --------------------------------------------------------------------------------
164,296 162,287
Accumulated other comprehensive income: (Note 6)
Net unrealized gains on securities
available for sale, net of tax effect 7,422 5,972
Treasury stock at cost, 4,337,689 and
4,300,489 shares, respectively (Note 5) (60,887) (59,704)
Common stock acquired by ESOP (312) (312)
- --------------------------------------------------------------------------------
Total stockholders' equity 110,519 108,243
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $956,465 $938,702
See accompanying condensed notes to consolidated financial statements.
3
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
March 31,
(In thousands except share data) 2001 2000
- ------------------------------------------------------------------------------
Interest and dividend income:
Mortgage Loans $ 4,788 $ 5,010
Other loans 709 716
Securities available for sale:
Mortgage-backed securities 4,787 4,810
Other securities 1,836 2,405
Trading securities 113 41
Federal funds sold 2,369 1,500
Other investments 291 228
- ------------------------------------------------------------------------------
Total interest and dividend income 14,893 14,710
- ------------------------------------------------------------------------------
Interest expense:
Deposits 8,912 8,421
- ------------------------------------------------------------------------------
Total interest expense 8,912 8,421
- ------------------------------------------------------------------------------
Net interest income 5,981 6,289
Provision for loan losses 12 15
- ------------------------------------------------------------------------------
Net interest income after provision for loan losses 5,969 6,274
- ------------------------------------------------------------------------------
Non-interest income:
Deposit account service fees 161 174
Gains on securities, net 857 967
Other 153 171
- ------------------------------------------------------------------------------
Total non-interest income 1,171 1,312
- ------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 1,588 1,820
Occupancy and equipment 578 572
Data processing 129 128
Professional services 102 168
Advertising and marketing 42 55
Amortization of intangibles 82 82
Other 346 355
- ------------------------------------------------------------------------------
Total non-interest expense 2,867 3,180
- ------------------------------------------------------------------------------
Income before income taxes 4,273 4,406
Income tax expense 1,528 1,578
- ------------------------------------------------------------------------------
Net income $ 2,745 $ 2,828
- ------------------------------------------------------------------------------
Weighted average common shares outstanding:
Basic 3,132,567 3,263,124
Diluted 3,206,390 3,337,359
Earnings per share (in dollars):
Basic $ 0.88 $ 0.87
Diluted 0.86 0.85
See accompanying condensed notes to consolidated financial statements.
4
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 2001 (unaudited)
(In thousands except share data)
ACCUMULATED COMMON
ADDITIONAL OTHER STOCK
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE ACQUIRED
STOCK CAPITAL EARNINGS STOCK INCOME BY ESOP TOTAL
-------- ---------- -------- -------- ------------- -------- --------
Balance at December 31, 2000 $7,448 $61,674 $93,165 $(59,704) $ 5,972 $(312) $108,243
Net Income -- -- 2,745 -- -- -- 2,745
Other comprehensive income,
net of tax:
Unrealized gains on securities,
net of reclassification adjustment (Note 6) -- -- -- -- 1,450 -- 1,450
-----
Comprehensive income 4,195
Cash dividends declared and paid
($0.315 per share) -- -- (987) -- -- -- (987)
Tax benefit resulting from dividends
paid on unallocated shares held by the ESOP -- -- 2 -- -- -- 2
Amortization of ESOP shares
committed to be released -- 31 -- -- -- -- 31
Purchase of Company stock for
deferred compensation plan (Note 5) -- 16 -- (16) -- -- --
Purchase of treasury stock -- -- -- (1,167) -- -- (1,167)
Exercise of stock options
and related tax benefits 9 193 -- -- -- -- 202
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2001 $7,457 $61,914 $94,925 $(60,887) $ 7,422 $(312) $110,519
See accompanying condensed notes to consolidated financial statements.
5
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended December 31, 2000 (unaudited)
(In thousands except share data)
ACCUMULATED COMMON
ADDITIONAL OTHER STOCK
COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE ACQUIRED
STOCK CAPITAL EARNINGS STOCK INCOME BY ESOP TOTAL
-------- ---------- --------- ---------- ---------- --------- --------
Balance at December 31, 1999 $7,407 $60,591 $85,873 $(53,890) $ 1,966 $(468) $101,479
Net income -- -- 11,111 -- -- -- 11,111
Other comprehensive income, net of tax:
Unrealized gains on securities,
net of reclassification adjustment (Note 6) -- -- -- -- 4,006 -- 4,006
------
Comprehensive income 15,117
Cash dividends declared and paid
($1.185 per share) -- -- (3,829) -- -- -- (3,829)
Tax benefit resulting from dividends
paid on unallocated shares held by the ESOP -- -- 10 -- -- -- 10
Net decrease in liability to ESOP -- -- -- -- -- 156 156
Amortization of ESOP shares
committed to be released -- 93 -- -- -- -- 93
Purchase of treasury stock -- -- -- (5,448) -- -- (5,448)
Purchase of company stock for deferred
compensation plan (Note 5) -- 366 -- (366) -- -- --
Exercise of stock options
and related tax benefits 41 624 -- -- -- -- 665
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $7,448 $61,674 $93,165 $(59,704) $ 5,972 $(312) $108,243
See accompanying condensed notes to consolidated financial statements.
6
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 2,745 $ 2,828
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 206 233
Loan interest capitalized (12) (9)
Amortization of ESOP shares committed to be released 31 22
Decrease (increase) in accrued interest receivable 474 (38)
Decrease in other liabilities (70) (307)
Increase in current income taxes 1,445 1,428
Accretion of discounts on securities, net of amortization
of premiums (198) (194)
Net trading securities activity 13,490 5,111
Gains on securities available for sale, net (773) (749)
Gains on trading securities, net (84) (218)
Decrease in deferred mortgage loan
origination fees, net of amortization (55) (32)
Deferred income tax benefit (58) (12)
(Increase) decrease in other assets (214) 98
Provision for loan losses 12 15
Gains on sales of real estate acquired through foreclosure -- (8)
Gains on sales of premises and equipment (4) --
Increase in escrow deposits of borrowers 22 75
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,957 8,243
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of term federal funds (10,000) --
Proceeds from maturities of term federal funds 20,000 --
Net (increase) decrease in interest bearing bank deposits (2,235) 551
Proceeds from sales of investment securities available for sale 7,877 11,662
Proceeds from maturities of investment securities
available for sale 21,000 15,000
Purchases of investment securities
available for sale (4,453) (24,173)
Purchases of mortgage-backed securities (10,046) (3,904)
Principal repayments of mortgage-backed securities 12,396 11,148
Principal repayments of securities available for sale 1 1
Loans originated (12,578) (7,038)
Loan principal payments received 14,531 10,281
Purchases of premises & equipment (650) (58)
Proceeds from sales of premises and equipment 4 --
Proceeds from sales of real estate acquired through foreclosure -- 70
- ------------------------------------------------------------------------------------------
Net cash provided by investing activities 35,847 13,540
- ------------------------------------------------------------------------------------------
7
MASSBANK CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
Three Months Ended
March 31,
2001 2000
---- ----
(In thousands)
Cash flows from financing activities:
Net increase in deposits 13,567 2,489
Payments to acquire treasury stock (1,183) (1,703)
Purchase of Company stock for deferred compensation plan 16 112
Issuance of common stock under stock option plan 173 10
Tax benefit resulting from stock options exercised 29 --
Cash dividends paid on common stock (987) (934)
Tax benefit resulting from dividends paid on
unallocated shares held by the ESOP 2 3
- ------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 11,617 (23)
- ------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 64,421 21,760
Cash and cash equivalents at beginning of period 122,021 121,404
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $186,442 $143,164
- ------------------------------------------------------------------------------------------
Supplemental cash flow disclosures:
Cash transactions:
Cash paid during the period for interest $ 8,933 $ 8,455
Cash paid during the period for taxes, net of refunds 110 160
Purchases of securities executed but not settled at
beginning of period which settled during the period 60 117
Sales of securities executed but not settled at
beginning of period which settled during the period 573 202
Non-cash transactions:
SFAS 115:
Increase (decrease) in accumulated other comprehensive income 1,450 (2,677)
Increase (decrease) in deferred tax liabilities 808 (1,780)
Purchases of securities executed but not settled at end of period 273 797
Sales of securities executed but not settled at end of period 707 747
- ------------------------------------------------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
8
MASSBANK CORP.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial condition and results of operations of MASSBANK Corp. (the
"Company") essentially reflect the operations of its subsidiary, MASSBANK (the
"Bank"). All significant intercompany balances and transactions have been
eliminated in consolidation.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, and in the opinion of management,
include all adjustments of a normal recurring nature necessary for the fair
presentation of the financial condition of the Company as of March 31, 2001 and
December 31, 2000, and its operating results for the three months ended March
31, 2001 and 2000. The results of operations for any interim period are not
necessarily indicative of the results to be expected for the entire year.
The information in this report should be read in conjunction with the
financial statements and related notes included in the Annual Report on Form
10-K for the year ended December 31, 2000.
(2) Cash and Cash Equivalents:
For purposes of reporting cash flows, cash and cash equivalents consist of
cash and due from banks, and short-term investments with original maturities of
less than 90 days.
(3) Short-Term Investments
Short-term investments consist of the following:
- --------------------------------------------------------------------------------
At At
(In thousands) March 31, 2001 December 31, 2000
- --------------------------------------------------------------------------------
Federal funds sold (overnight) $151,711 $112,711
Money market funds 24,376 131
- --------------------------------------------------------------------------------
Total short-term investments $176,087 $112,842
- --------------------------------------------------------------------------------
The investments above are stated at cost which approximates market value and
have original maturities of less than 90 days.
(4) Commitments
At March 31, 2001, the Company had outstanding commitments to originate
mortgage loans and to advance funds for construction loans amounting to
$5,970,000 and commitments under existing home equity lines of credit and other
loans of approximately $32,061,000 which are not reflected on the consolidated
balance sheet. In addition, as of March 31, 2001, the Company had a performance
standby letter of credit conveyed to others in the amount of $312,000 which is
also not reflected on the consolidated balance sheet.
(5) Directors Deferred Compensation Plan
In 1988, the Company established a deferred compensation plan for its
directors. The plan allows the Company's directors to defer receipt of all or a
portion of their compensation until the earlier of: (1) their attaining the age
of 72, or (2) their termination as a director of the Company. In 2000, the plan
was amended to allow the directors compensation to be invested in Company stock
held in an irrevocable trust. At March 31, 2001 the trust held 13,700 shares of
MASSBANK Corp. stock that the Company has classified as treasury stock. The
treasury shares are considered outstanding in the computation of earnings per
share and book value per share.
9
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(6) Comprehensive Income
Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources." It includes all changes in equity during a period
except those resulting from investments by and distributions to shareholders.
The term "comprehensive income" describes the total of all components of
comprehensive income including net income.
The Company's other comprehensive income and related tax effect for the
three months ended March 31, 2001 and the year ended December 31, 2000 is as
follows:
For the Three Months Ended
March 31, 2001
- ------------------------------------------------------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
(In thousands) Amount or Benefit Amount
------ ---------- ------
Unrealized gains on securities:
Unrealized holding gains arising
during period $3,030 $ (1,130) $ 1,900
Less: reclassification adjustment for
gains realized in net income 773 (323) 450
------ -------- ------
Net unrealized gains 2,257 (807) 1,450
------ -------- ------
Other comprehensive income $2,257 $ (807) $ 1,450
------ -------- ------
For the Year Ended
December 31, 2000
- ------------------------------------------------------------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
(In thousands) Amount or Benefit Amount
------ ---------- ------
Unrealized gains on securities:
Unrealized holding gains arising
during period $ 9,377 $ (3,613) $ 5,764
Less: reclassification adjustment for
gains realized in net income 3,049 (1,291) 1,758
------ -------- ------
Net unrealized gains 6,328 (2,322) 4,006
------ -------- ------
Other comprehensive income $ 6,328 $ (2,322) $ 4,006
------ -------- ------
10
MASSBANK CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 2001
Cautionary Statement.
Certain statements contained in this report or incorporated herein by
reference are "forward-looking statements." We may also make forward-looking
statements in other written documents we file with the Securities and Exchange
Commission, in our annual reports to stockholders, in press releases and other
written materials, and in oral statements made by our officers, directors or
employees. You can identify forward-looking statements by the use of the words
"believe," "expect," "anticipate," "intend," "estimate," "assume" and other
similar expressions which predict or indicate future events and trends and which
do not relate to historical matters. You should not rely on forward-looking
statements, because they involve known and unknown risks, uncertainties and
other factors, some of which are beyond the control of the Company. These risks,
uncertainties and other factors may cause the actual results, performance or
achievements of the Company to be materially different from the anticipated
future results, performance or achievements expressed or implied by the forward-
looking statements.
Some of the factors that might cause these differences include the
following: fluctuations in interest rates, price volatility in the stock and
bond markets, inflation, government regulations and economic conditions and
competition in the geographic and business areas in which the Company conducts
its operations; and increases in loan defaults. You should carefully review all
of these factors, and you should be aware that there may be other factors that
could cause these differences. These forward-looking statements were based on
information, plans and estimates at the date of this report, and we do not
promise to update any forward-looking statements to reflect changes in
underlying assumptions or factors, new information, future events or other
changes.
Results of Operations for the three months ended March 31, 2001
GENERAL
For the quarter ended March 31, 2001, MASSBANK Corp. reported net income of
$2,745,000, or $0.86 in diluted earnings per share compared to net income of
$2,828,000 or $0.85 in diluted earnings per share earned in the first quarter of
2000. Basic earnings per share in the recent quarter increased to $0.88 from
$0.87 per share in the first quarter of the prior year.
The Company's net income in the first quarter 2001 compared to the same
quarter of 2000 reflects a reduction in non-interest expense of $313,000 and a
decrease in the provision for loan losses of $3,000. These improvements were
offset by decreases in net interest income and non-interest income of $308,000
and $141,000, respectively. In addition, the Company's favorable earnings per
share performance in the recent quarter was positively affected by the reduced
number of average common shares outstanding as a result of the Company's
purchase of 170,800 shares of its common stock in the last twelve months,
pursuant to its stock repurchase program.
11
AVERAGE BALANCE SHEETS
Three Months Ended
March 31,
2001 2000
---- ----
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate Balance Expense Rate
(4) (4) (4) (4)
- ------------------------------------------------------------------------------------------
Assets:
Earning assets:
Federal funds sold $168,030 $ 2,369 5.72% $105,390 $ 1,500 5.72%
Short-term investments (2) 21,474 288 5.44 16,262 226 5.56
Investment securities 135,728 1,863 5.49 177,022 2,439 5.51
Mortgage-backed securities 284,627 4,787 6.73 276,576 4,810 6.96
Trading securities 7,480 113 6.19 3,279 41 5.04
Mortgage loans (1) 271,595 4,788 7.05 286,909 5,010 6.98
Other loans (1) 36,762 709 7.78 36,658 716 7.79
- -------------------------------------------------- ----------------
Total earning assets 925,696 $14,917 6.45% 902,096 $14,742 6.53%
Allowance for loan losses (2,601) (2,559)
- ------------------------------------------------------------------------------------------
Total earning assets
less allowance for
loan losses 923,095 899,537
Other assets 19,711 20,572
- ------------------------------------------------------------------------------------------
Total assets $942,806 $920,109
- ------------------------------------------------------------------------------------------
12
AVERAGE BALANCE SHEETS - (continued)
Three Months Ended
March 31,
2001 2000
---- ----
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate Balance Expense Rate
(4) (4) (4) (4)
- ------------------------------------------------------------------------------------------
Liabilities:
Deposits:
Demand and NOW $ 78,325 $ 119 0.62% $ 73,050 $ 118 0.65%
Savings 338,036 2,842 3.41 350,417 2,977 3.42
Time certificates of deposit 409,947 5,951 5.89 394,011 5,326 5.44
- -------------------------------------------------- ----------------
Total deposits 826,308 8,912 4.37 817,478 8,421 4.14
Other liabilities 6,262 3,302
- ------------------------------------------------------------------------------------------
Total liabilities 832,570 820,780
Stockholders' equity 110,236 99,329
- ------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $942,806 $920,109
- ------------------------------------------------------------------------------------------
Net interest income
(tax-equivalent basis) 6,005 6,321
Less adjustment of tax-exempt
interest income 24 32
- ------------------------------------------------------------------------------------------
Net interest income $ 5,981 $ 6,289
- ------------------------------------------------------------------------------------------
Interest rate spread 2.08% 2.39%
- ------------------------------------------------------------------------------------------
Net interest margin (3) 2.60% 2.80%
- ------------------------------------------------------------------------------------------
(1) Loans on non-accrual status are included in the average balance.
(2) Short-term investments consist of interest-bearing deposits in banks and
investments in money market funds.
(3) Net interest income (tax equivalent basis) before provision for loan
losses divided by average interest-earning assets.
(4) Includes average net unrealized gains or losses on securities available for
sale.
13
Net Interest Income
Net interest income totaled $5,981,000 in the first quarter of 2001, a
decrease of $308,000 from the same quarter a year ago. This decrease was
principally attributable to a decline in net interest margin, partially offset
by the positive effect of average earning asset growth. The Company's net
interest margin for the three months ended March 31, 2001 was 2.60%, a decline
from 2.80% reported in the first quarter of 2000. The Company's average earning
assets increased $23.6 million to $925.7 million in the recent quarter, from
$902.1 million in the same quarter last year.
Interest and Dividend Income
Interest and dividend income on a fully taxable equivalent basis for the
three months ended March 31, 2001, increased to $14,917,000 from $14,742,000 for
the three months ended March 31, 2000. The increase in interest and dividend
income resulted from an increase in average earning assets, as noted above,
partially offset by a decrease in yield on the Company's average earning assets.
As reflected in the table on page 12 of this report, the yield on the Company's
average earning assets in the first quarter of 2001 was 6.45%, down from 6.53%
in the same quarter of 2000.
Interest Expense
Total interest expense for the three months ended March 31, 2001 increased
$491,000 or 5.8% to $8,912,000 from $8,421,000 for the three months ended March
31, 2000. This increase is due to increases in the Company's average cost of
funds and average deposits. The Company's average cost of funds for the recent
quarter was 4.37%, up from 4.14% for the comparable quarter in 2000. The
Company's average deposits, as shown in the table on page 13, increased $8.8
million to $826.3 million in the first quarter of 2001, from $817.5 million in
the first quarter of 2000.
Provision for Loan Losses
The provision for loan losses represents a charge against current earnings
and an addition to the allowance for loan losses. The provision for loan losses
in the first quarter of 2001 was $12,000 compared to $15,000 in the first
quarter of last year. In determining the amount to provide for loan losses, the
key factor is the adequacy of the allowance for loan losses. Management uses a
methodology to systematically measure the amount of estimated loan loss exposure
inherent in the portfolio for purposes of establishing a sufficient allowance
for loan losses. The methodology includes three elements: an analysis of
individual loans deemed to be impaired in accordance with the terms of SFAS 114,
general loss allocations for various loan types based on loss experience factors
and an unallocated allowance which is maintained based on management's
assessment of many factors including the risk characteristics of the portfolio,
concentrations of credit, current and anticipated economic conditions that may
effect the borrower's ability to pay, and trends in loan delinquencies and
charge-offs. At March 31, 2001, the allowance for loan losses was $2,607,000
representing $614.9% of nonaccrual loans. The Bank's nonaccrual loans totaled
$424,000 at March 31, 2001 down from $738,000 a year earlier. The Bank had net
recoveries of loans previously charged-off of $1,000 in the recent quarter
compared to net charge-offs of $1,000 in the same quarter last year. Management
believes that the allowance for loan losses as of March 31, 2001 is adequate to
cover the risks inherent in the loan portfolio under current conditions.
14
Non-Interest Income
Non-interest income consists of deposit account service fees, net gains on
securities and other non-interest income.
Non-interest income decreased by $141,000 to $1,171,000 for the recent
quarter, from $1,312,000 for the comparable quarter of the prior year. This
decrease is due essentially to lower net securities gains in the first quarter
of 2001.
Net gains on securities totaled $857,000 in the first quarter of this year
compared to $967,000 in the first quarter of last year. Realized gains on the
sale of equity securities and debt securities totaled $800,000 and $63,000,
respectively, for the three months ended March 31, 2001. The Bank also recorded
a mark-to-market loss of $6,000 on its trading account during this same period.
The Bank's deposit account service fees and other non-interest income
totaled $161,000 and $153,000, respectively, in the first quarter of 2001
compared to $174,000 and $171,000, respectively, in the first quarter of 2000.
Non-Interest Expense
Non-interest expense decreased $313,000 or 9.8% to $2,867,000 in the first
quarter of 2001 from $3,180,000 in the first quarter or 2000. The decrease in
non-interest expense is primarily due to decreases in salaries and employee
benefits and professional service expenses.
Salaries and employee benefits, the largest component of non-interest
expense decreased $232,000 or 12.7% to $1,588,000 in the recent quarter, from
$1,820,000 in the comparable quarter of 2000. This reduction is due principally
to a decrease in salaries and lower expenses associated with various employee
benefits, including profit sharing and incentive compensation bonus payments.
The Bank continues to operate effectively with fewer people than in the prior
year resulting in a reduction in personnel-related expenses.
Professional service expenses decreased $66,000 or 39.3% to $102,000 in the
first quarter of 2001 from $168,000 in the first quarter of last year. The
decrease is due primarily to a reduction in legal fees.
All other non-interest expenses combined, consisting of occupancy and
equipment, data processing, advertising and marketing, amortization of
intangibles and other expenses, decreased $15,000 to $1,177,000 for the three
months ended March 31, 2001 from $1,192,000 for the three months ended March 31,
2000.
15
Income Tax Expense
The Company, the Bank and its subsidiaries file a consolidated federal
income tax return. The Parent Company is subject to a State of Delaware
Franchise Tax and a State of Massachusetts Bank Excise Tax and the Bank's
subsidiaries are subject to a State of Massachusetts Corporate Excise Tax.
The Company recorded income tax expense of $1,528,000 in the first quarter
of 2001, a decrease of $50,000 when compared to the same quarter last year. The
decrease in income tax expense is due primarily to a decrease in income before
income taxes. The Company's income before income taxes was $4,273,000 in the
recent quarter compared to $4,406,000 for the same quarter a year ago. The
effective income tax rate for the three months ended March 31, 2001 and 2000 was
35.8%.
16
Financial Condition
The Company's total assets increased $17.8 million to $956.5 million as of
March 31, 2001, as a result of an increase in total investments of $18.6 million
partially offset by a decrease in the Bank's loan portfolio, net of allowance
for loan losses, of $1.9 million. Other assets reflect an increase of $1.1
million as of March 31, 2001 from year-end 2000.
The Company's total investments consisting of investment securities and
other short-term investments, including term federal funds sold and interest-
bearing bank deposits increased $18.6 million from $607.1 million at December
31, 2000 to $625.7 million at March 31, 2001. The increase is attributable to an
increase in short-term investments and interest-bearing bank deposits of $63.3
million and $2.2 million, respectively. These were partially offset by decreases
in the Bank's term federal funds sold, trading securities, and securities
available for sale portfolio of $10.0 million, $12.8 million and $24.1 million,
respectively.
During the first quarter of 2001 the interest rate curve was either flat or
inverted. As a result of long-term rates being either the same as or lower than
short-term rates during this period, the Company's investments continued to
shift toward short-term investments, ending the quarter with an increase in
short-term investments compared to year-end 2000.
The increase in the Company's total investments was also positively
affected by an increase in the market value of its securities available for sale
portfolio. The net unrealized gains on the Company's securities available for
sale portfolio increased $2.2 million to $12.2 million at March 31, 2001 from
$10.0 million at December 31, 2000. The increase in market value of the
securities portfolio is directly related to the upward movement in bond prices.
The loan portfolio at March 31, 2001, net of allowance for loan losses,
amounted to $305.6 million compared to $307.5 million at December 31, 2000, a
decrease of $1.9 million or less than 1%. The decrease resulted from a decrease
in fixed rate residential mortgage loans of $1.0 million and a decrease in
consumer loans of $0.9 million. The decline in mortgage interest rates in the
recent quarter has sparked the demand for mortgage refinancings. As a result,
total loan originations for the recent quarter increased by $5.6 million to
$12.6 million from $7.0 million in the first three months of last year.
Loan originations in the recent quarter, however, were not sufficient to
offset the level of principal amortization and prepayments in the portfolio
resulting in a modest decrease of $1.9 million in the loan portfolio noted
above.
Total deposits were $837.2 million at March 31, 2001 reflecting an increase
of $13.6 million or 1.7% from $823.6 million at year-end 2000.
Total stockholders' equity increased $2.3 million to $110.5 million at
March 31, 2001, representing a book value of $35.27 per share, from $108.2
million representing a book value of $34.25 per share at December 31, 2000.
Contributing to the increase in total stockholders' equity was the Company's net
income of $2.7 million in the recent quarter, an increase in net unrealized
gains, net of tax, on the Company's securities available for sale of $1.5
million and the issuance of common stock under the Company's stock option plan.
These were partially offset by the payment of $1.0 million in dividends to
stockholders and the cost of shares of treasury stock purchased during the first
quarter 2001 in the amount of $1.2 million. The Company's book value per share
was also positively affected by the Company's purchase of 37,200 shares of its
common stock, at less than current book value, during the recent quarter
pursuant to its stock repurchase program.
17
Investments
As previously noted, total investments consisting of investment securities,
short-term investments, term federal funds sold, and interest-bearing bank
deposits equaled $625.7 million at March 31, 2001, up $18.6 million from $607.1
million at year-end 2000. These investments are principally in federal funds
sold, short-term U.S. Treasury and government agency obligations and government
agency fifteen year mortgage-backed securities. The Bank also maintains an
equity securities portfolio, valued at $19.8 million as of March 31, 2001, that
has yielded substantial realized and unrealized gains. Nearly all of the Bank's
investment securities are classified as available for sale or trading
securities. Management evaluates its investment alternatives in order to
properly manage the mix of assets on its balance sheet. Investment securities
available for sale and trading securities provide liquidity, facilitate interest
rate sensitivity management and enhance the Bank's ability to respond to
customers' needs should loan demand increase and/or deposits decline.
The Bank continues to maintain a large proportion of its securities
portfolio in government agency mortgage-backed securities. These represent an
attractive investment with minimal credit risk, no servicing responsibilities,
and no delinquencies. The Bank's investment in mortgage-backed securities
totaled $288.4 million at March 31, 2001 versus $287.2 million at year-end 2000.
The Bank also maintains a portfolio of trading securities which consisted
of the following as of the dates shown:
March 31, December 31,
(In thousands) 2001 2000
------------- -------------
U.S. Treasury obligations $ 6,970 $19,791
Investments in mutual funds 2 3
------- -------
Total $ 6,972 $19,794
18
FINANCIAL CONDITION
INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities at
March 31, 2001 with gross unrealized gains and losses, follows:
- ------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands) At March 31, 2001 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------
Securities held to maturity:
Other bonds and obligations $ 230 $ -- $ -- $ 230
- ------------------------------------------------------------------------------------------
Total securities held to maturity $ 230 $ -- $ -- $ 230
- ------------------------------------------------------------------------------------------
Securities available for sale:
Debt securities:
U.S. Treasury obligations $108,712 $ 1,470 $ -- $110,182
U.S. Government agency obligations 146 -- (2) 144
- ------------------------------------------------------------------------------------------
Total 108,858 1,470 (2) 110,326
- ------------------------------------------------------------------------------------------
Mortgage-backed securities:
Government National Mortgage
Association 29,198 1,025 -- 30,223
Federal Home Loan Mortgage
Corporation 247,814 6,068 -- 253,882
Federal National Mortgage
Association 1,950 39 (1) 1,988
Collateralized mortgage
obligations 2,258 23 (2) 2,279
- ------------------------------------------------------------------------------------------
Total mortgage-backed securities 281,220 7,155 (3) 288,372
- ------------------------------------------------------------------------------------------
Total debt securities 390,078 8,625 (5) 398,698
- ------------------------------------------------------------------------------------------
Equity securities 16,180 6,429 (2,806) 19,803
- ------------------------------------------------------------------------------------------
Total securities available for sale 406,258 $ 15,054 $ (2,811) $418,501
- ------------------------------------------------------------------------------------------
Net unrealized gains on securities
available for sale 12,243
- ------------------------------------------------------------------------------------------
Total securities available
for sale, net 418,501
- ------------------------------------------------------------------------------------------
Total investment securities, net $418,731
- ------------------------------------------------------------------------------------------
Trading securities $ 6,970 $ 6,972
- ------------------------------------------------------------------------------------------
19
FINANCIAL CONDITION
INVESTMENT SECURITIES (continued)
The amortized cost and estimated market value of investment securities at
December 31, 2000 with gross unrealized gains and losses, follows:
- ------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands) At December 31, 2000 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------
Securities held to maturity:
Other bonds and obligations $ 230 $ -- $ -- $ 230
- ------------------------------------------------------------------------------------------
Total securities held to maturity $ 230 $ -- $ -- $ 230
- ------------------------------------------------------------------------------------------
Securities available for sale:
Debt securities:
U.S. Treasury obligations $125,630 $ 827 $ (1) $126,456
U.S. Government agency obligations 9,147 -- (14) 9,133
- ------------------------------------------------------------------------------------------
Total 134,777 827 (15) 135,589
- ------------------------------------------------------------------------------------------
Mortgage-backed securities:
Government National Mortgage
Association 30,847 543 (3) 31,387
Federal Home Loan Mortgage
Corporation 247,925 3,322 (125) 251,122
Federal National Mortgage
Association 2,230 43 (9) 2,264
Collateralized mortgage
obligations 2,465 12 (37) 2,440
- ------------------------------------------------------------------------------------------
Total mortgage-backed securities 283,467 3,920 (174) 287,213
- ------------------------------------------------------------------------------------------
Total debt securities 418,244 4,747 (189) 422,802
- ------------------------------------------------------------------------------------------
Equity securities 14,323 7,132 (1,705) 19,750
- ------------------------------------------------------------------------------------------
Total securities available for sale 432,567 $ 11,879 $ (1,894) $442,552
- ------------------------------------------------------------------------------------------
Net unrealized gains on securities
available for sale 9,985
- ------------------------------------------------------------------------------------------
Total securities available
for sale, net 442,552
- ------------------------------------------------------------------------------------------
Total investment securities, net $442,782
- ------------------------------------------------------------------------------------------
Trading securities $ 19,786 $ 19,794
- ------------------------------------------------------------------------------------------
20
Investments (continued)
The amortized cost and estimated market value of debt securities held to
maturity and debt securities available for sale by contractual maturity at March
31, 2001 and December 31, 2000 are as follows:
March 31, 2001
--------------------------------------------
Available for Sale Held to Maturity
Amortized Market Amortized Market
Maturing: Cost Value Cost Value
(In thousands)
Within 1 year $ 77,918 $ 78,462 $ 230 $ 230
After 1 year but within 5 years 30,794 31,720 -- --
After 15 years 146 144 -- --
-------- -------- ------- -------
108,858 110,326 230 230
Mortgage-backed securities 281,220 288,372 -- --
-------- -------- ------- -------
$390,078 $398,698 $ 230 $ 230
December 31, 2000
--------------------------------------------
Available for Sale Held to Maturity
Amortized Market Amortized Market
Maturing: Cost Value Cost Value
(In thousands)
Within 1 year $ 90,841 $ 91,025 $ -- $ --
After 1 year but within 5 years 43,789 44,420 230 230
After 15 years 147 144 -- --
-------- -------- ------- -------
134,777 135,589 230 230
Mortgage-backed securities 283,467 287,213 -- --
-------- -------- ------- -------
$418,244 $422,802 $ 230 $ 230
21
LOANS
The composition of the Bank's loan portfolio is summarized as follows:
- ---------------------------------------------------------------------------------------
At At
(In thousands) March 31, 2001 December 31, 2000
- ---------------------------------------------------------------------------------------
Mortgage loans:
Residential $269,556 $270,330
Commercial 2,923 3,117
Construction 574 683
- ---------------------------------------------------------------------------------------
273,053 274,130
Add: Premium on loans 91 105
Less: Deferred mortgage loan origination fees (1,228) (1,284)
- ---------------------------------------------------------------------------------------
Total mortgage loans 271,916 272,951
Other loans:
Consumer:
Installment 1,741 1,829
Guaranteed education 6,063 6,266
Other secured 1,196 1,169
Home equity lines of credit 12,065 12,624
Unsecured 205 224
- ---------------------------------------------------------------------------------------
Total consumer loans 21,270 22,112
Commercial 15,063 15,084
- ---------------------------------------------------------------------------------------
Total other loans 36,333 37,196
- ---------------------------------------------------------------------------------------
Total loans $308,249 $310,147
- ---------------------------------------------------------------------------------------
The Bank's loan portfolio decreased $1.9 million during the first three
months of 2001, from $310.1 million at December 31, 2000 to $308.2 million at
March 31, 2001. Mortgage loans decreased $1.0 million and consumer loans
decreased $0.9 million.
Loan originations increased by $5.6 million to $12.6 million in the first
three months of 2001 compared to $7.0 million in the first three months of last
year.
22
NON-PERFORMING ASSETS
The following table shows the composition of the Bank's non-performing
assets at March 31, 2001 and 2000, and December 31, 2000:
At At At
March 31, December 31, March 31,
(In thousands) 2001 2000 2000
- ------------------------------------------------------------------------------------
Non-Performing Assets:
Non-accrual loans $ 424 $ 565 $ 738
Real estate acquired through foreclosure -- -- --
- ------------------------------------------------------------------------------------
Total non-performing assets $ 424 $ 565 $ 738
- ------------------------------------------------------------------------------------
Allowance for loan losses $ 2,607 $ 2,594 $ 2,569
Allowance as a percent of
non-accrual loans 614.9% 459.1% 348.1%
Allowance as a percent of
non-performing assets 614.9% 459.1% 348.1%
Non-accrual loans as a percent
of total loans 0.14% 0.18% 0.23%
Non-performing assets as a percent
of total assets 0.04% 0.06% 0.08%
- ------------------------------------------------------------------------------------
The Bank generally does not accrue interest on loans which are 90 days or
more past due. It is the Bank's policy to place such loans on non-accrual status
and to reverse from income all interest previously accrued but not collected and
to discontinue all amortization of deferred loan fees.
Non-performing assets decreased from December 31, 2000 to March 31, 2001 as
noted in the table above. The principal balance of non-accrual loans was down to
$424,000, or approximately 0.14% of total loans at March 31, 2001.
The Bank did not have any impaired loans as of March 31, 2001.
23
ALLOWANCE FOR LOAN LOSSES
An analysis of the activity in the allowance for loan losses is as follows:
Three Months Ended
March 31,
2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Balance at beginning of period $ 2,594 $ 2,555
Provision for loan losses 12 15
Recoveries of loans previously charged-off 1 1
Less: Charge-offs -- (2)
- --------------------------------------------------------------------------------
Balance at end of period $ 2,607 $ 2,569
- --------------------------------------------------------------------------------
The Company maintains an allowance for probable losses that are inherent in
the Company's loan portfolio. The allowance for loan losses is increased by
provisions charged to operations based on the estimated loan loss exposure
inherent in the portfolio. Management uses a methodology to systematically
measure the amount of estimated loan loss exposure inherent in the portfolio for
purposes of establishing a sufficient allowance for loan losses. The methodology
includes three elements: an analysis of individual loans deemed to be impaired
in accordance with the terms of SFAS 114, general loss allocations for various
loan types based on loss experience factors and an unallocated allowance which
is maintained based on management's assessment of many factors including the
risk characteristics of the portfolio, concentrations of credit, current and
anticipated economic conditions that may effect the borrower's ability to pay,
and trends in loan delinquencies and charge-offs. Realized losses, net of
recoveries, are charged directly to the allowance. While management uses the
information available in establishing the allowance for loan losses, future
adjustments to the allowance may be necessary if economic conditions differ from
the assumptions used in making the evaluation. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on judgments different from those of
management.
At March 31, 2001 the balance of the allowance for loan losses was
$2,607,000 representing 614.9% of non-accrual loans. Management believes that
the allowance for loan losses is adequate to cover the risks inherent in the
portfolio under current conditions.
24
DEPOSITS
Deposit accounts of all types have traditionally been the primary source of
funds for the Bank's lending and investment activities. The Bank's deposit flows
are influenced by prevailing interest rates, competition and other market
conditions. The Bank's management attempts to manage its deposits through
selective pricing and marketing.
The Bank's total deposits increased by $13.6 million to $837.2 million at
March 31, 2001 from $823.6 million at December 31, 2000.
The composition of the Bank's total deposits as of the dates shown are
summarized as follows:
March 31, December 31,
2001 2000
- ------------------------------------------------------------------------------
(In thousands)
Demand and NOW $ 82,547 $ 79,952
Savings and money market accounts 343,878 334,948
Time certificates of deposit 411,023 408,981
Deposit acquisition premium,
net of amortization (199) (256)
- ------------------------------------------------------------------------------
Total deposits $837,249 $823,625
- ------------------------------------------------------------------------------
Recent Accounting Developments
"Accounting for Derivative Instruments and Hedging Activities"
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities."
These Statements establish comprehensive accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. They require that an entity recognize all derivatives as either
assets or liabilities in its balance sheet and measure those instruments at fair
market value. Under these Statements, an entity that elects to apply hedge
accounting is required to establish at the inception of the hedge the method it
will use for assessing the effectiveness of the hedging derivative and the
measurement approach for determining the ineffective aspect of the hedge. The
Company adopted these Statements on January 1, 2001. The adoption of these
Statements did not have a material effect on the Company's consolidated
financial statements.
25
Liquidity and Capital Resources
The Bank must maintain a sufficient amount of cash and assets which can
readily be converted into cash in order to meet cash outflows from normal
depositor requirements and loan demands. The Bank's primary sources of funds are
deposits, loan amortization and prepayments, sales or maturities of investment
securities and income on earning assets. In addition to loan payments and
maturing investment securities, which are relatively predictable sources of
funds, the Bank maintains a high percentage of its assets invested in overnight
federal funds sold, which can be immediately converted into cash and United
States Treasury and Government agency securities, which can be sold or pledged
to raise funds. At March 31, 2001 the Bank had $151.7 million or 15.9% of total
assets and $117.3 million or 12.3% of total assets invested, respectively, in
overnight federal funds sold and United States obligations.
The Bank is a Federal Deposit Insurance Corporation ("FDIC") insured
institution subject to the FDIC regulatory capital requirements. The FDIC
regulations require all FDIC insured institutions to maintain minimum levels of
Tier 1 capital. Highly rated banks (i.e., those with a composite rating of 1
under the CAMELS rating system) are required to maintain a minimum leverage
ratio of Tier 1 capital to total assets of at least 3.00%. An additional 100 to
200 basis points are required for all but these most highly rated institutions.
The Bank is also required to maintain a minimum level of risk-based capital.
Under the risk-based capital standards, FDIC insured institutions must maintain
a Tier 1 capital to risk-weighted assets ratio of 4.00% and are generally
expected to meet a minimum total qualifying capital to risk-weighted assets
ratio of 8.00%. The risk-based capital guidelines take into consideration risk
factors, as defined by the regulators, associated with various categories of
assets, both on and off the balance sheet. Under the guidelines, capital
strength is measured in two tiers which are used in conjunction with risk
adjusted assets to determine the risk-based capital ratios. Tier II components
include supplemental capital components such as qualifying allowance for loan
losses and qualifying subordinated debt and up to 45 percent of the pre-tax net
unrealized holding gains on certain available for sale equity securities. Tier I
capital plus the Tier II capital components are referred to as total qualifying
capital.
The capital ratios of the Bank and the Company currently exceed the minimum
regulatory requirements. At March 31, 2001, the Bank had a leverage Tier I
capital to total assets ratio of 10.68%, a Tier I capital to risk- weighted
assets ratio of 31.22% and a total capital to risk-weighted assets ratio of
32.53%. The Company, on a consolidated basis, had ratios of leverage Tier I
capital to total assets of 10.77%, Tier I capital to risk-weighted assets of
31.47% and total capital to risk-weighted assets of 32.78% at March 31, 2001.
26
Impact Of Inflation And Changing Prices
MASSBANK Corp.'s financial statements presented herein have been prepared
in accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of money
over time, due to the fact that substantially all of the assets and liabilities
of a financial institution are monetary in nature. As a result, interest rates
have a more significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and
services.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity and Liquidity
See discussion and analysis of interest rate sensitivity and liquidity
provided in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2000. There have been no material changes in reported market risks
faced by the Corporation since the filing of the Corporation's 2000 Annual
Report on Form 10-K.
27
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, MASSBANK Corp. and/or the Bank are involved as a
plaintiff or defendant in various legal actions incident to their
business. As of March 31, 2001, none of these actions individually or
in the aggregate is believed by management to be material to the
financial condition of MASSBANK Corp. or the Bank.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
1. Exhibit No. 11.1: Statement regarding computation of per
share earnings.
b. Reports on Form 8-K
None.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASSBANK Corp. & Subsidiaries
-----------------------------
(Registrant)
Date: May 9, 2001 /s/ Gerard H. Brandi
---------------------------
(Signature)
Gerard H. Brandi
President and CEO
Date: May 9, 2001 /s/ Reginald E. Cormier
---------------------------
(Signature)
Reginald E. Cormier
Sr. V.P., Treasurer and CFO
29