##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 Annual
Report pursuant to sections 13 or 15(d)
of the Securities Exchange Act of 1934
  þ
    
    Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 for the
fiscal year ended DECEMBER 31, 2007or
 o
    
    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.
  Delaware
    
    04-2930382(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)123 Haven StreetReading, Massachusetts
    
    01867(Address of principal executive offices)
    
    (Zip Code)
   NONE
  COMMON STOCK, par value $1.00 per share
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### Table of Contents



DOCUMENTS INCORPORATED BY REFERENCE
  2




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##### 



MASSBANK Corp.
Form 10-K
For the Year Ended December 31, 2007
 TABLE OF CONTENTS
 PageDescription
    
    NumberPart 1Item 1
    
    Business
    
    
    5Supervision and Regulation
    
    
    22Executive Officers of the Registrant
    
    
    28Item 1A
    
    Risk Factors
    
    
    29Item 1B
    
    Unresolved Staff Comments
    
    
    33Item 2
    
    Properties
    
    
    34Item 3
    
    Legal Proceedings
    
    
    35Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    35Part IIItem 5
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    36Item 6
    
    Selected Financial Data
    
    
    37Item 7
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    37Item 7A
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 8
    
    Financial Statements and Supplementary Data
    
    
    37Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    37Item 9A
    
    Controls and Procedures
    
    
    38Item 9B
    
    Other Information
    
    
    38Part IIIItem 10
    
    Directors and Executive Officers and Corporate Governance
    
    
    39Item 11
    
    Executive Compensation
    
    
    40Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    40Item 13
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 14
    
    Principal Accountant Fees and Services
    
    
    40Part IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    41Signatures
    
    
    
    
    46Ex-13 2006 Annual Report to StockholdersEx-21 Subsidiaries of the RegistrantEx-23 Consent of Independent Registered Public Accounting FirmEx-31.1 Certification of CEOEx-31.2 Certification of CFOEx-32.1 Certification of CEOEx-32.2 Certification of CFO
  3




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##### Table of Contents



Forward-Looking Statement Disclosure
   Internet Access
 www.MASSBANK.com
 4




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##### Table of Contents



PART I
 
 Item 1. Business
 Business of MASSBANK Corp.
 General
      5




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##### Table of Contents



Pending Acquisition of the Company by Eastern Bank Corporation
     Competition
  Employees
  6




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##### Table of Contents



Dividends
  7




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##### Table of Contents



Business of MASSBANK
 General
     8




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##### Table of Contents



Market Area
    Lending Activities
  
 (In thousands) At December 31,
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Mortgage loans:Residential:Conventional
    
    $
    175,270
    
    
    $
    192,977
    
    
    $
    212,684
    
    
    $
    224,542
    
    
    $
    240,443FHA and VA
    
    
    5
    
    
    
    13
    
    
    
    27
    
    
    
    45
    
    
    
    84Commercial
    
    
    4,792
    
    
    
    4,443
    
    
    
    2,335
    
    
    
    1,623
    
    
    
    1,601Construction:Residential
    
    
    1,114
    
    
    
    1,217
    
    
    
    845
    
    
    
    84
    
    
    
    81Commercial
    
    
    708
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    Total mortgage loans
    
    
    181,889
    
    
    
    199,213
    
    
    
    215,891
    
    
    
    226,294
    
    
    
    242,209Premium on loans
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    5
    
    
    
    10Deferred mortgage loan
origination costs (fees)
    
    
    55
    
    
    
    38
    
    
    
    11
    
    
    
    (102
    )
    
    
    (333
    )Mortgage loans, net
    
    
    181,945
    
    
    
    199,253
    
    
    
    215,904
    
    
    
    226,197
    
    
    
    241,886Other loans:Consumer:Second mortgage loans
    
    
    1,231
    
    
    
    751
    
    
    
    34
    
    
    
    69
    
    
    
    111Installment
    
    
    287
    
    
    
    211
    
    
    
    211
    
    
    
    258
    
    
    
    304Guaranteed education
    
    
    427
    
    
    
    635
    
    
    
    1,094
    
    
    
    1,616
    
    
    
    2,333Other secured
    
    
    374
    
    
    
    408
    
    
    
    499
    
    
    
    504
    
    
    
    518Home equity lines of credit
    
    
    7,052
    
    
    
    7,460
    
    
    
    7,722
    
    
    
    7,284
    
    
    
    7,549Unsecured lines of credit
    
    
    125
    
    
    
    128
    
    
    
    148
    
    
    
    161
    
    
    
    166Total consumer loans
    
    
    9,496
    
    
    
    9,593
    
    
    
    9,708
    
    
    
    9,892
    
    
    
    10,981Commercial
    
    
    126
    
    
    
    81
    
    
    
    118
    
    
    
    109
    
    
    
    139Total other loans
    
    
    9,622
    
    
    
    9,674
    
    
    
    9,826
    
    
    
    10,001
    
    
    
    11,120Total loans
    
    
    191,567
    
    
    
    208,927
    
    
    
    225,730
    
    
    
    236,198
    
    
    
    253,006Allowance for loan losses
    
    
    (1,369
    )
    
    
    (1,382
    )
    
    
    (1,253
    )
    
    
    (1,307
    )
    
    
    (1,554
    )Net loans
    
    $
    190,198
    
    
    $
    207,545
    
    
    $
    224,477
    
    
    $
    234,891
    
    
    $
    251,452
 9




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##### Table of Contents



Maturity/Scheduled Payments (1)Within
    
    One to
    
    Five to
    
    After(In thousands)
    
    one year
    
    five years
    
    ten years
    
    ten years
    
    TotalMortgage loans:Residential
    
    $
    3,346
    
    
    $
    17,345
    
    
    $
    71,905
    
    
    $
    82,772
    
    
    $
    175,368Commercial & construction
    
    
    480
    
    
    
    5,147
    
    
    
    279
    
    
    
    671
    
    
    
    6,577Total mortgage loans
    
    
    3,826
    
    
    
    22,492
    
    
    
    72,184
    
    
    
    83,443
    
    
    
    181,945Other loans
    
    
    1,394
    
    
    
    4,141
    
    
    
    3,534
    
    
    
    553
    
    
    
    9,622Total loans
    
    $
    5,220
    
    
    $
    26,633
    
    
    $
    75,718
    
    
    $
    83,996
    
    
    $
    191,567
 (1)
    
    Loan amounts are accumulated as if the entire balance came due on the last
contractual payment date. Accordingly, the amounts do not reflect
proceeds from contractual loan amortization or anticipated prepayments.
  Total Due After One YearFixed
    
    Adjustable(In thousands)
    
    Rate
    
    Rate
    
    TotalMortgage loans:Residential
    
    $
    150,110
    
    
    $
    21,912
    
    
    $
    172,022Commercial & construction
    
    
    339
    
    
    
    5,758
    
    
    
    6,097Total mortgage loans
    
    
    150,449
    
    
    
    27,670
    
    
    
    178,119Other loans
    
    
    2,139
    
    
    
    6,089
    
    
    
    8,228Total loans
    
    $
    152,588
    
    
    $
    33,759
    
    
    $
    186,347
 Mortgage Lending
 10




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Mortgage Lending(continued)
       11




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##### Table of Contents



Mortgage Lending(continued)
    Other Loans
   Loan Approval
  12




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##### Table of Contents



Loan Delinquencies
 Real Estate Acquired through Foreclosure
  Non-Performing Assets
  (In thousands) At December 31,
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Nonaccrual loans:Mortgage loans:Residential
    
    $
    167
    
    
    $
    113
    
    
    $
    176
    
    
    $
    41
    
    
    $
    152Consumer
    
    
    32
    
    
    
    24
    
    
    
    81
    
    
    
    33
    
    
    
    78Total nonaccrual loans
    
    
    199
    
    
    
    137
    
    
    
    257
    
    
    
    74
    
    
    
    230Total non-performing assets
    
    $
    199
    
    
    $
    137
    
    
    $
    257
    
    
    $
    74
    
    
    $
    230Percent of non-performing loans to
total loans
    
    
    0.10
    %
    
    
    0.07
    %
    
    
    0.11
    %
    
    
    0.03
    %
    
    
    0.09
    %Percent of non-performing assets to
total assets
    
    
    0.02
    %
    
    
    0.02
    %
    
    
    0.03
    %
    
    
    0.01
    %
    
    
    0.02
    %
  (In thousands) Years Ended December 31,
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Interest income that would have been
recorded under original terms
    
    $
    14
    
    
    $
    8
    
    
    $
    16
    
    
    $
    4
    
    
    $
    17Interest income actually recorded
    
    
    3
    
    
    
    5
    
    
    
    9
    
    
    
    1
    
    
    
    20Reduction (increase) in interest income
    
    $
    11
    
    
    $
    3
    
    
    $
    7
    
    
    $
    3
    
    
    $
    (3
    )
 13




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Allowance for Loan Losses and Allowance for Loan Losses on Off-Balance Sheet Credit
Exposures
     (In thousands) Years ended December 31,
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Balance at beginning of year
    
    $
    1,382
    
    
    $
    1,253
    
    
    $
    1,307
    
    
    $
    1,554
    
    
    $
    2,271Provision (credit) for loan losses
    
    
    (10
    )
    
    
    123
    
    
    
    (53
    )
    
    
    (242
    )
    
    
    (502
    )Transfer to allowance for loan losses on
off-balance sheet credit exposures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )Charge-offs:Consumer loans
    
    
    (3
    )
    
    
    (4
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    (4
    )Commercial loans
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    Recoveries:Residential real estate
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Net recoveries (charge-offs)
    
    
    
    
    
    
    6
    
    
    
    (1
    )
    
    
    (5
    )
    
    
    11Balance at end of year
    
    $
    1,369
    
    
    $
    1,382
    
    
    $
    1,253
    
    
    $
    1,307
    
    
    $
    1,554Allowance for loan losses as a percent
of total loans outstanding at year-end
    
    
    0.71
    %
    
    
    0.66
    %
    
    
    0.56
    %
    
    
    0.55
    %
    
    
    0.61
    %Allowance for loan losses as a percent
of nonaccrual loans
    
    
    687.9
    %
    
    
    1008.8
    %
    
    
    487.5
    %
    
    
    1766.2
    %
    
    
    675.7
    %
 14




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Investment Activities
       15




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##### Table of Contents



Investment Activities(continued)
     16




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##### Table of Contents



Investment Portfolio
 (In thousands) At December 31,
    
    2007
    
    
    2006
    
    
    2005Short-term investments:Federal funds sold (overnight)
    
    $
    74,455
    
    
    $
    117,104
    
    
    $
    152,785Term federal funds sold
    
    
    7,000
    
    
    
    
    
    
    
    15,000Money market investment funds
    
    
    69,520
    
    
    
    22,133
    
    
    
    Interest-bearing bank money market accounts
    
    
    3
    
    
    
    3
    
    
    
    2Total short-term investments
    
    
    150,978
    
    
    
    139,240
    
    
    
    167,787Term federal funds sold
    
    
    91,000
    
    
    
    41,000
    
    
    
    Interest-bearing deposits in banks:Certificates of deposit
    
    
    
    
    
    
    
    
    
    
    898Total short-term investments, term
federal funds sold and interest-bearing
bank deposits
    
    $
    241,978
    
    
    $
    180,240
    
    
    $
    168,685Percent of total assets
    
    
    30.2
    %
    
    
    21.4
    %
    
    
    18.8
    %(In thousands) At December 31,
    
    
    2007
    
    
    
    2006
    
    
    
    2005Securities held to maturity: (a)Mortgage-backed securities
    
    $
    8,098
    
    
    $
    5,396
    
    
    $
    6,137Securities available for sale: (b)U.S. Treasury obligations
    
    
    
    
    
    
    21,709
    
    
    
    76,116U.S. Government agency obligations
    
    
    
    
    
    
    239,547
    
    
    
    234,537Equity securities
    
    
    4,180
    
    
    
    6,902
    
    
    
    6,962Mortgage-backed securities
    
    
    124,530
    
    
    
    134,471
    
    
    
    135,432Total securities available for sale
    
    
    128,710
    
    
    
    402,629
    
    
    
    453,047Trading securities: (b)U.S. Treasury obligations
    
    
    1,997
    
    
    
    
    
    
    
    7,896U.S. Government agency obligations
    
    
    201,172
    
    
    
    
    
    
    
    Equity securities
    
    
    3,393
    
    
    
    1,926
    
    
    
    1,382Investments in mutual funds
    
    
    4
    
    
    
    5
    
    
    
    4Total trading securities
    
    
    206,566
    
    
    
    1,931
    
    
    
    9,282Total securities
    
    $
    343,374
    
    
    $
    409,956
    
    
    $
    468,466Percent of total assets
    
    
    42.8
    %
    
    
    48.7
    %
    
    
    52.1
    %Total investments
    
    $
    585,352
    
    
    $
    590,196
    
    
    $
    637,151Total investments as a percent of total assets
    
    
    73.0
    %
    
    
    70.0
    %
    
    
    70.9
    %
 (a)
    
    At amortized cost.(b)
    
    At fair value.
 17




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##### Table of Contents



Debt Securities Held to Maturity and Available for Sale
 U.S.U. S.
    
    
    Government
    
    
    Mortgage-Treasury
    
    
    agency
    
    
    backed(Dollars in thousands)
    
    obligations
    
    
    obligations
    
    
    securities (1)
    
    
    TotalInvestment securities held to maturity:Maturing after 15 yearsAmount
    
    
    
    
    
    
    
    
    
    $
    8,098
    
    
    $
    8,098Yield
    
    
    
    
    
    
    
    
    
    
    5.53
    %
    
    
    5.53
    %Investment securities available for sale:Maturing within 1 yearAmount
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    156Yield
    
    
    
    
    
    
    
    
    
    
    6.06
    %
    
    
    6.06
    %Maturing after 1 but within 5 yearsAmount
    
    
    
    
    
    
    
    
    
    
    5,662
    
    
    
    5,662Yield
    
    
    
    
    
    
    
    
    
    
    6.61
    %
    
    
    6.61
    %Maturing after 5 but within 10 yearsAmount
    
    
    
    
    
    
    
    
    
    
    19,936
    
    
    
    19,936Yield
    
    
    
    
    
    
    
    
    
    
    5.70
    %
    
    
    5.70
    %Maturing after 10 but within 15 yearsAmount
    
    
    
    
    
    
    
    
    
    
    97,830
    
    
    
    97,830Yield
    
    
    
    
    
    
    
    
    
    
    5.18
    %
    
    
    5.18
    %Total debt securities available for saleAmount
    
    
    
    
    
    
    
    
    
    $
    123,584
    
    
    $
    123,584Yield
    
    
    
    
    
    
    
    
    
    
    5.33
    %
    
    
    5.33
    %
 (1)
    
    Mortgage-backed securities are shown based on contractual maturities.
Actual maturities will differ from contractual maturities due to
scheduled amortization and prepayments.
  18




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##### Table of Contents



Deposits and Other Sources of Funds
 General
 Deposits
  Borrowed Funds
 19




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##### Table of Contents



DEPOSITS
  (In thousands) at December 31,
    
    2007
    
    
    2006
    
    
    2005Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofAmount
    
    
    Deposits
    
    
    Amount
    
    
    Deposits
    
    
    Amount
    
    
    DepositsDemand and NOWNOW
    
    $
    47,600
    
    
    
    6.97
    %
    
    $
    51,856
    
    
    
    7.17
    %
    
    $
    54,924
    
    
    
    7.00
    %Demand accounts
(non interest-bearing)
    
    
    24,087
    
    
    
    3.53
    
    
    
    27,004
    
    
    
    3.73
    
    
    
    27,326
    
    
    
    3.48Total demand and NOW
    
    
    71,687
    
    
    
    10.50
    
    
    
    78,860
    
    
    
    10.90
    
    
    
    82,250
    
    
    
    10.48Savings:Regular savings and
special notice accounts
    
    
    298,409
    
    
    
    43.72
    
    
    
    335,142
    
    
    
    46.33
    
    
    
    430,771
    
    
    
    54.90Money market accounts
    
    
    8,913
    
    
    
    1.31
    
    
    
    9,666
    
    
    
    1.34
    
    
    
    10,770
    
    
    
    1.37Total savings
    
    
    307,322
    
    
    
    45.03
    
    
    
    344,808
    
    
    
    47.67
    
    
    
    441,541
    
    
    
    56.27Time certificates of deposit:Fixed rate certificates
    
    
    232,862
    
    
    
    34.11
    
    
    
    230,710
    
    
    
    31.90
    
    
    
    197,743
    
    
    
    25.20Variable rate certificates
    
    
    70,690
    
    
    
    10.36
    
    
    
    68,954
    
    
    
    9.53
    
    
    
    63,194
    
    
    
    8.05Total time certificates
of deposit
    
    
    303,552
    
    
    
    44.47
    
    
    
    299,664
    
    
    
    41.43
    
    
    
    260,937
    
    
    
    33.25Total deposits
    
    $
    682,561
    
    
    
    100.00
    %
    
    $
    723,332
    
    
    
    100.00
    %
    
    $
    784,728
    
    
    
    100.00
    %
  (In thousands) Years Ended December 31,
    
    2007
    
    
    2006
    
    
    2005Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNOW accounts
    
    $
    48,174
    
    
    
    0.53
    %
    
    $
    52,437
    
    
    
    0.43
    %
    
    $
    55,983
    
    
    
    0.33
    %Demand (non
interest-bearing)
accounts
    
    
    25,006
    
    
    
    
    
    
    
    26,997
    
    
    
    
    
    
    
    28,619
    
    
    
    Escrow deposits of borrowers
    
    
    737
    
    
    
    0.69
    
    
    
    754
    
    
    
    0.54
    
    
    
    724
    
    
    
    0.44Money market accounts
    
    
    9,236
    
    
    
    2.06
    
    
    
    10,426
    
    
    
    0.63
    
    
    
    11,728
    
    
    
    1.32Savings accounts
    
    
    313,896
    
    
    
    1.98
    
    
    
    378,834
    
    
    
    1.88
    
    
    
    488,044
    
    
    
    1.60Time certificates of deposit
    
    
    305,974
    
    
    
    4.69
    
    
    
    280,989
    
    
    
    4.16
    
    
    
    231,479
    
    
    
    3.03$
    703,023
    
    
    
    2.99
    %
    
    $
    750,437
    
    
    
    2.53
    %
    
    $
    816,577
    
    
    
    1.85
    %
 20




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##### Table of Contents



Investment Management and Trust Services
   Competition
    21




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary
   Regulation of the Company
   Control Acquisitions
 22




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary(continued)
  Bank Holding Company Dividends
 Regulation of the Bank
 Insurance of Accounts and FDIC Regulation
 23




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary(continued)
  Bank Holding Company Support of Subsidiary Banks
 Regulatory Capital Requirements
   24




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary(continued)
   Limitations on Bank Dividends
 Customer Information Security
 25




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary(continued)
  Privacy
 Bank Secrecy Act
 USA Patriot Act
 The Community Reinvestment Act
 26




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##### Table of Contents



Employees
  Subsidiaries
     27




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##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    OfficeGerard H. Brandi
    
    
    59
    
    
    Chairman of the Board of Directors, President and Chief Executive Officer of the Company and the BankReginald E. Cormier
    
    
    59
    
    
    Senior Vice President, Treasurer and Chief Financial Officer of the Company and the BankJames L. Milinazzo
    
    
    53
    
    
    Senior Vice President and Senior Lending Officer of the BankJoseph P. Orefice
    
    
    30
    
    
    Vice President of the BankThomas J. Queeney
    
    
    45
    
    
    Vice President and Senior Trust Officer of the BankWilliam F. Rivers
    
    
    52
    
    
    Vice President of the BankDonna H. West
    
    
    62
    
    
    Senior Vice President and Chief Operating Officer of the Bank and Assistant Secretary of the and Assistant Secretary of the Company
     28




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##### Table of Contents



Executive Officers of the Registrant(continued)
    
 Item 1A. Risk Factors
  Our business is concentrated in and dependent upon the continued economic growth and welfare
of our primary market areas.
  We face intense competition in all phases of our business from other banks and financial
institutions.
  29




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##### Table of Contents



We may face adverse conditions in the securities markets.
  Interest rates and other conditions impact our results of operations.
  We must effectively manage our credit risk.
  30




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##### Table of Contents



Our allowance for loan losses may prove to be insufficient to absorb potential losses in our
loan portfolio.
  Government regulation can result in limitations on our operations.
  Our employee benefit costs are increasing.
  Changes in accounting principles can have a significant impact on our operations.
  We may be facing increased costs when introducing new technology-based services.
  31




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##### Table of Contents



Due to the nature of our business, we may be subject to litigation from time to time.
  If our proposed Merger with Eastern Bank Corporation is not completed, our business and stock
price may be adversely affected.
  §
    
    Our stock price may fluctuate prior to completion of the Merger due to market
assessments regarding the expected timing of the Merger and risks relating to the
completion of the Merger, and if the Merger is not completed, our stock price may
decline significantly, since the current trading price reflects a market assumption
that the Merger will be completed;§
    
    We could lose important personnel as a result of the departure of employees who
decide to pursue other opportunities in light of the proposed Merger;§
    
    We have and will continue to incur significant expenses related to the Merger
prior to its closing, including fees paid to an investment bank for a fairness
opinion for the Merger, legal fees and accounting fees, which must be paid even if
the Merger is not completed;§
    
    Depending on the circumstances, we may be obligated to pay Eastern a termination
fee of $5.0 million or reimburse $1.0 million of Easterns out-of-pocket expenses
relating to the Merger Agreement; and§
    
    We may experience the additional impacts described in the risk factors below.
 INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED
TRANSACTION WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER.
 32




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##### Table of Contents



Our proposed Merger with Eastern may adversely affect our results of operations.
  If our proposed Merger with Eastern is not completed, we will have incurred substantial
expenses without realizing the expected benefits.
  
 Item 1B.
    
    Unresolved Staff Comments
  33




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##### Table of Contents



Item 2.
    
    Properties
   Owned
    
    Lease
    
    Renewalor
    
    Expiration
    
    OptionLocation
    
    
    
    Leased
    
    Date
    
    ThroughMAIN OFFICE:
    
    123 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    
    BRANCH OFFICES:
    
    291 Chelmsford Street, Chelmsford, MA
    
    Owned
    
    
    
    
    
    
    17 North Road, Chelmsford, MA
    
    Owned
    
    
    
    
    
    
    45 Broadway Road, Dracut, MA
    
    Leased
    
    
    2012
    
    
    
    2022738 Broadway, Everett, MA
    
    Owned
    
    
    
    
    
    
    50 Central Street, Lowell, MA
    
    Owned
    
    
    
    
    
    
    755 Lakeview Avenue, Lowell, MA
    
    Owned
    
    
    
    
    
    
    53 Locust Street, Medford, MA
    
    Leased
    
    
    2032
    
    
    
    2047476 Main Street, Melrose, MA
    
    Owned
    
    
    
    
    
    
    27 Melrose Street, Towers Plaza,
Melrose, MA
    
    Leased
    
    
    2014
    
    
    
    240 Main Street, Stoneham, MA
    
    Leased
    
    
    2009
    
    
    
    20141800 Main Street, Tewksbury, MA
    
    Owned
    
    
    
    
    
    
    203 Littleton Road, Westford, MA
    
    Owned
    
    
    
    
    
    
    370 Main Street, Wilmington, MA
    
    Owned
    
    
    
    
    
    
    219 Lowell Street, Luccis Plaza,
Wilmington, MA
    
    Leased
    
    
    2016
    
    
    
    OPERATIONS FACILITIES:
    
    159 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    
    169 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    
    11 North Road, Chelmsford, MA
    
    Owned
    
    
    
    
    
    
    
 34




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##### Table of Contents



Item 3.
    
    Legal Proceedings
  Seidman and Associates, L.L.C. v. MASSBANK Corp., et al.
    
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  35




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##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    Total Numberof Shares
    
    Maximum NumberPurchased as
    
    of Shares ThatPart of Publicly
    
    May Yet BeTotal Number
    
    Average Price
    
    Announced
    
    Purchased Underof Shares
    
    Paid Per
    
    Repurchase
    
    The RepurchasePeriod
    
    Purchased
    
    Share
    
    Program (1)
    
    Program10/01/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,51710/16/07
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    (1)150,51710/01/07-
10/31/07
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    150,51711/01/07-
11/30/07
    
    
    22,000
    
    
    $
    36.18
    
    
    
    22,000
    
    
    
    128,51712/01/07-
12/31/07
    
    
    11,500
    
    
    $
    36.13
    
    
    
    11,500
    
    
    
    117,017Total for quarter
    
    
    33,500
    
    
    
    
    
    
    
    33,500
 
 (1)
    
    On October 16, 2007 the Registrants Board of Directors extended for another year, the stock
repurchase program previously authorized. Additionally, the Board approved an increase of 100,000
in the number of shares of the Registrants common stock authorized for repurchase in the most
recent program which was previously authorized in January, 2004.  Total Numberof Shares
    
    Maximum NumberPurchased as

    of Shares ThatPart of Publicly
    
    May Yet BeTotal Number
    
    Average Price
    
    Announced
    
    Purchased Underof Shares
    
    Paid Per
    
    Repurchase
    
    The RepurchasePeriod
    
    Purchased
    
    Share
    
    Program
    
    Program10/01/07-
10/31/07
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    011/01/07-
11/30/07
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    012/01/07-
12/31/07
    
    
    750
    
    
    $
    36.15
    
    
    
    0
    
    
    
    0Total for quarter
    
    
    750
 36




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##### Table of Contents



Item 6.
    
    Selected Financial Data
   
 Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
  
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Independent Accountants on
Accounting and Financial Disclosure
  37




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##### Table of Contents



Item 9A.
    
    Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Item 9B.
    
    Other Information
  38




---



##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
 www.massbank.com
 Audit Committee.
 Audit Committee Financial Expert.
  §
    
    a new provision to Article I, Section 1 and Article II, Section 2 that addresses the
timing for stockholders to make director nominations or stockholder proposals when the
annual meeting of stockholders is held more than seven days after the anniversary of the
immediately preceding annual meeting of stockholders;§
    
    a new Section 2A to Article II, entitled Limitations on Eligibility to Serve as a
Director; and§
    
    a new Section 9 to Article V regarding the severability of the By-Laws.
 th th th
 39




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##### Table of Contents



Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
  
 Item 13.
    
    Certain Relationships and Related Transactions, and
Director Independence
   
 Item 14.
    
    Principal Accountant Fees and Services
  40




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules
  (a)1. Financial Statements
 Reference to 2007Annual Reportto Stockholders(Pages) *Reports of Independent Registered Public Accounting Firm
    
    
    29Consolidated Balance Sheets at December 31,
2007 and 2006
    
    
    30Consolidated Statements of Income for the three
years ended December 31, 2007
    
    
    31Consolidated Statements of Cash Flows for the three
years ended December 31, 2007
    
    
    32-33Consolidated Statements of Changes in Stockholders
Equity for the three years ended December 31,
2007
    
    
    34Notes to Consolidated Financial Statements
    
    
    35-61
 
 *
    
    Incorporated, by reference to pages 28 through 61 of the Registrants
2007 Annual Report to Stockholders attached to this filing as Exhibit 13. 2.
    
    Financial Statement Schedules
  3.
    
    Exhibits
 Exhibit No.
    
    Description of Exhibit2.1
    
    

Agreement and Plan of Merger, dated as of March 10, 2008, among Eastern Bank
Corporation, Eastern Bank, Minuteman Acquisition Corp., MASSBANK Corp. and MASSBANK 
incorporated by reference to Exhibit 4.1 to the
Registrants current report on Form 8-K
dated March 12, 2008.3.1
    
    

Restated
Certificate of Incorporation of the Registrant  incorporated by reference to
Exhibit 3.1 of the Registrants Form S-4 Registration Statement (Reg. No. 33-7916).3.2
    
    

By-Laws
of the Registrant  incorporated by reference to Exhibit 3 of the Registrants
Form 10-Q for the quarter ended September 30, 1991.3.3
    
    

Certificate of Amendment to the By-laws of MASSBANK Corp.  incorporated by reference
to the Exhibit 3.1 to the Registrants current report on Form 8-K dated October
17, 2007.
 41




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit3.4
    
    

Certificate of Amendment to the By-laws, as amended, of MASSBANK Corp.  incorporated
by reference to Exhibit 3.1 to the Registrants current report on Form 8-K dated
February 13, 2008.4.1
    
    

Shareholder Rights Agreement dated as of January 18, 2000, between the Company and The
First National Bank of Boston, as Rights Agent  incorporated herein by reference to
the Exhibit to the Companys Report on Form 8-K dated as of January 20, 2000. (SEC
file number 0-15137)4.2
    
    

Amendment to Shareholder Rights Agreement, dated as of March 10, 2008, by and between
MASSBANK Corp. and American Stock Transfer and Trust Company  incorporated by
reference to Exhibit 4.1 to the Registrants current report
on Form 8-K dated March 12,
2008.10.1
    
    

MASSBANK Corp. 1986 Stock Option Plan, as amended  incorporated by reference to
Exhibit 28.1 to the Registrants Form S-8 Registration
Statement (Reg. No. 33-11949).10.1.2
    
    

Amendment
to MASSBANK Corp. 1986 Stock Option Plan dated April 19, 1991  incorporated
by reference to Exhibit 10.1.2 to the Registrants annual report
on Form 10-K for the
year ended December 31, 1992.10.1.3
    
    

MASSBANK
Corp. 1994 Stock Incentive Plan  incorporated by reference to Exhibit 10.1
to the Registrants Form S-8 Registration Statement (Reg. No. 33-82110).10.1.4
    
    

Amendment
to MASSBANK Corp. 1994 Stock Incentive Plan dated April 21, 1998  incorporated by reference to Exhibit 10.1.4 to the Registrants annual report on
Form 10-K for the year ended December 31, 1997.10.1.5
    
    

MASSBANK Corp. 2004 Stock Option and Incentive Plan  incorporated by reference to
exhibit 10.1.5 to the Registrants Form S-8 Registration Statement (Ref.
No. 33-118028).10.1.6
    
    

Form of Incentive Stock Option Agreement under the MASSBANK Corp. 2004 Stock Option
and Incentive Plan  incorporated by reference to exhibit 10.1 to
the Registrants
report on Form 8-K dated January 14, 2005.10.1.7
    
    

Form of Non-Qualified Stock Option Agreement under the MASSBANK Corp. 2004 Stock
Option and Incentive Plan  incorporated by reference to exhibit 10.2 to
the Registrants report on Form 8-K dated January 14, 2005.10.1.8
    
    

Form of Incentive Stock Option Agreement under the MASSBANK Corp. 2004 Stock Option
and Incentive Plan  incorporated by reference to exhibit 10.1 to
the Registrants
report on Form 8-K dated January 13, 2006.
 42




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.1.9
    
    
    Form of Non-Qualified Stock Option Agreement for MASSBANK Corp. employees under the
MASSBANK Corp. 2004 Stock Option and Incentive Plan  incorporated by reference to
exhibit 10.2 to the Registrants report on Form 8-K dated January 13, 2006.10.1.10
    
    
    Form of Non-Qualified Stock Option Agreement for MASSBANK Corp. directors under the
MASSBANK Corp. 2004 Stock Option and Incentive Plan  incorporated by reference to
exhibit 10.3 to the Registrants report on Form 8-K dated January 13, 2006.10.2
    
    

MASSBANK
for Savings Employees Stock Ownership Plan and Trust Agreement  incorporated by reference to Exhibit 10.2 of the Registrants Form S-4
Registration Statement (Reg. No. 33-7916).10.2.1
    
    
    Amendments to the MASSBANK for Savings Employees Stock Ownership Plan and Trust
Agreement  incorporated by reference to Exhibit 10.2.1 to the Registrants
annual report on Form 10-K for the year ended December 31, 1993.10.2.2
    
    
    Amendments to the MASSBANK for Savings Employees Stock Ownership Plan and Trust
Agreement  incorporated by reference to Exhibit 10.2.2 to the Registrants
annual report on Form 10-K for the year ended December 31, 1997.10.2.3
    
    

Amended and Restated MASSBANK Employees Stock Ownership Plan and Trust Agreement
incorporated by reference to Exhibit 10.2.3 to the Registrants annual report on
Form 10K for the year ended December 31, 2003.10.3.16
    
    

Amended and Restated Employment Agreement with Gerard H. Brandi dated as of October
28, 2002  incorporated by reference to exhibit 10.3.16 to the Registrants
quarterly report on Form 10-Q for the period ended September 30, 2002.10.3.18
    
    

Amended and Restated Employment Agreement with Reginald E. Cormier dated as of October
28, 2002  incorporated by reference to exhibit 10.3.18 to the Registrants
quarterly report on Form 10-Q for the period ended September 30, 2002.10.3.20
    
    

Amended and Restated Employment Agreement with Donna H. West dated as of October 28,
2002  incorporated by reference to exhibit 10.3.20 to the Registrants
quarterly report on Form 10-Q for the period ended September 30, 2002.10.3.21
    
    

Form of Employment Agreement with Thomas J. Queeney dated as of October 28, 2002 
incorporated by reference to Exhibit 10.3.21 to the Registrants quarterly report
on Form 10-Q for the period ended September 30, 2002.10.3.22
    
    

Form of Employment Agreement with William F. Rivers dated as of March 23, 2005 
incorporated by reference to exhibit 10.3.22 to the Registrants report on Form
8-K dated March 24, 2005.
 43




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.3.23
    
    
    Form of Employment Agreement with James L. Milinazzo dated March 23, 2005 
incorporated by reference to exhibit 10.3.23 to the Registrants report on Form 8-K
dated March 24, 2005.10.3.24
    
    
    Form of Employment Agreement with Joseph P. Orefice dated March 10, 2006 
incorporated by reference to exhibit 10.3.24 to the Registrants report on Form 8-K
dated March 14, 2006.10.3.25
    
    

Amended and Restated Employment Agreement with James L. Milinazzo dated March 10, 2006
 incorporated by reference to exhibit 10.3.25 to the Registrants report on Form
8-K dated March 14, 2006.10.4
    
    

Form of Executive Supplemental Retirement Agreement, as amended, with Gerard H. Brandi
 incorporated by reference to Exhibit 10.4 of Registrants
annual report on Form 10-K
for the year ended December 31, 1986.10.4.1
    
    

Amendments to the Executive Supplemental Retirement Agreement with Gerard H. Brandi
are incorporated by reference to Exhibit 10.4.1 of the
Registrants annual report on
Form 10-K for the year ended December 31, 1996.10.5
    
    

Amended Deferred Compensation Plan for Directors of MASSBANK Corp. adopted March 8,
2000  incorporated by reference to Exhibit 10.5 of the
Registrants annual report on
Form 10-K for the year ended December 31, 2000. (SEC file number 0-15137)10.5.1
    
    

Amended and Restated Deferred Compensation Plan for Directors of MASSBANK Corp. (the
Company) and MASSBANK (the Bank) dated August 10, 2005  incorporated by reference
to exhibit 10.5.1 to the Registrants report on Form 8-K dated August 11, 2005.10.6
    
    

Deferred Compensation Program for Bank employees dated November 14, 1994 
incorporated by reference to Exhibit 10.6 of the Registrants annual report on Form
10-K for the year ended December 31, 2001. (SEC file number 0-15137)10.6.1
    
    

Amended and Restated Terms and Conditions of Deferred Compensation Program for
employees of MASSBANK (the Bank) dated August 10, 2005  incorporated by reference
to exhibit 10.6.1 to the Registrants report on Form 8-K dated August 11, 2005.11
    
    

The computation of per share earnings can be readily determined from the material
contained in the Annual Report on Form 10-K for the fiscal year
ended December 31,
2006.12
    
    

Statement re: Computation of Ratios  Not applicable as MASSBANK Corp. does not have
any debt securities registered under Section 12 of the
Securities Exchange Act of 1934.
 44




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit13
    
    

2006 Annual Report to Stockholders  except for those portions of the 2006 Annual
Report to Stockholders which are expressly incorporated by reference in this
report, such 2006 Annual Report to Stockholders is furnished for the information of the
SEC and is not to be deemed filed with the SEC.21
    
    
    Subsidiaries of the Registrant.23
    
    
    Consent of Independent Registered Public Accounting Firm Parent, McLaughlin & Nangle.31.1
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief
Executive Officer.31.2
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief
Financial Officer.32.1
    
    

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer.32.2
    
    

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer.(b
    )
    

Exhibits to this Form 10-K are attached or incorporated by reference as stated in the
Index to Exhibits.(c
    )
    
    Financial Statement Schedules  None.
 45




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##### Table of Contents



Signatures
 
 MASSBANK CORP.
 /s/ Gerard H. BrandiGerard H. BrandiChairman, President and Chief Executive Officer  /s/ Gerard H. Brandi
    
    Chairman, President,Gerard H. Brandi
    
    Chief Executive Officer and
Director
    
    March 14, 2008/s/ Reginald E. Cormier
    
    Senior Vice President, TreasurerReginald E. Cormier
    
    and Chief Financial Officer(Principal Financial and Accounting Officer)
    
    March 14, 2008/s/ Allan S. Bufferd
    
    Director
    
    March 14, 2008Allan S. Bufferd/s/ Kathleen M. Camilli
    
    Director
    
    March 14, 2008Kathleen M. CamilliDirectorStephen W. Carr/s/ Alexander S. Costello
    
    Director
    
    March 14, 2008Alexander S. Costello
 46




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##### Table of Contents



/s/ O. Bradley Latham
    
    Director
    
    March 14, 2008O. Bradley Latham/s/ Stephen E. Marshall
    
    Director
    
    March 14, 2008Stephen E. Marshall/s/ Paul J. McCarthy
    
    Director
    
    March 14, 2008Paul J. McCarthy/s/ Nalin M. Mistry
    
    Director
    
    March 14, 2008Nalin M. Mistry/s/ Nancy L. Pettinelli
    
    Director
    
    March 14, 2008Nancy L. Pettinelli/s/ William F. Rucci, Jr.
    
    Director
    
    March 14, 2008William F. Rucci, Jr.
 47