##### 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, 2005 or
 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: 000-15137
 MASSBANK Corp.
  Delaware
    
    04-2930382(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
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
 Form 10-K o
  o þ o
 o þ




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##### Table of Contents



DOCUMENTS
INCORPORATED BY REFERENCE
 Form 10-K.
  2




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##### 



MASSBANK Corp.
Form 10-K
For the Year Ended December 31, 2005
  
 TABLE OF CONTENTS
 PageDescription
    
    NumberPart 1Item 1 Business
    
    
    5Supervision and Regulation
    
    
    21Executive Officers of the Registrant
    
    
    27Item 1A Risk Factors
    
    
    28Item 1B Unresolved Staff Comments
    
    
    31Item 2 Properties
    
    
    31Item 3 Legal Proceedings
    
    
    31Item 4 Submission of Matters to a Vote of Security Holders
    
    
    31Part IIItem 5 Market for Registrants Common Stock, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    32Item 6 Selected Financial Data
    
    
    33Item 7 Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    33Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 8 Financial Statements and Supplementary Data
    
    
    33Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    34Item 9A Controls and Procedures
    
    
    34Item 9B Other Information
    
    
    34Part IIIItem 10 Directors and Executive Officers of the Registrant
    
    
    34Item 11 Executive Compensation
    
    
    34Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    35Item 13 Certain Relationships and Related Transactions
    
    
    35Item 14 Principal Accountant Fees and Services
    
    
    35Part IVItem 15 Exhibits and Financial Statement Schedules
    
    
    35Signatures
    
    
    39EX-13 Portions of the 2005 Annual Report to ShareholdersEX-21 Subsidiaries of the RegistrantEX-23 Consent of Parent, McLaughlin & NangleEX-31.1 Section 302 Certification CEOEX-31.2 Section 302 Certification CFOEX-32.1 Section 906 Certification CEOEX-32.2 Section 906 Certification 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
     Competition
  5




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Employees
  Dividends
  6




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Business of MASSBANK
 General
     7




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##### Table of Contents



Market Area
    Lending Activities
   (In thousands) At December 31,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Mortgage loans:Residential:Conventional
    
    $
    212,684
    
    
    $
    224,542
    
    
    $
    240,443
    
    
    $
    300,528
    
    
    $
    293,764FHA and VA
    
    
    27
    
    
    
    45
    
    
    
    84
    
    
    
    133
    
    
    
    259Commercial
    
    
    2,335
    
    
    
    1,623
    
    
    
    1,601
    
    
    
    2,348
    
    
    
    2,641Construction
    
    
    845
    
    
    
    84
    
    
    
    81
    
    
    
    654
    
    
    
    993Total mortgage loans
    
    
    215,891
    
    
    
    226,294
    
    
    
    242,209
    
    
    
    303,663
    
    
    
    297,657Premium on loans
    
    
    2
    
    
    
    5
    
    
    
    10
    
    
    
    20
    
    
    
    51Deferred mortgage loan origination costs (fees)
    
    
    11
    
    
    
    (102
    )
    
    
    (333
    )
    
    
    (895
    )
    
    
    (1,239
    )Mortgage loans, net
    
    
    215,904
    
    
    
    226,197
    
    
    
    241,886
    
    
    
    302,788
    
    
    
    296,469Other loans:Consumer:Installment
    
    
    245
    
    
    
    327
    
    
    
    415
    
    
    
    798
    
    
    
    1,178Guaranteed education
    
    
    1,094
    
    
    
    1,616
    
    
    
    2,333
    
    
    
    3,293
    
    
    
    4,937Other secured
    
    
    499
    
    
    
    504
    
    
    
    518
    
    
    
    515
    
    
    
    873Home equity lines of credit
    
    
    7,722
    
    
    
    7,284
    
    
    
    7,549
    
    
    
    11,102
    
    
    
    12,271Unsecured lines of credit
    
    
    148
    
    
    
    161
    
    
    
    166
    
    
    
    187
    
    
    
    201Total consumer loans
    
    
    9,708
    
    
    
    9,892
    
    
    
    10,981
    
    
    
    15,895
    
    
    
    19,460Commercial
    
    
    118
    
    
    
    109
    
    
    
    139
    
    
    
    116
    
    
    
    15,088Total other loans
    
    
    9,826
    
    
    
    10,001
    
    
    
    11,120
    
    
    
    16,011
    
    
    
    34,548Total loans
    
    
    225,730
    
    
    
    236,198
    
    
    
    253,006
    
    
    
    318,799
    
    
    
    331,017Allowance for loan losses (1)
    
    
    (1,253
    )
    
    
    (1,307
    )
    
    
    (1,554
    )
    
    
    (2,271
    )
    
    
    (2,494
    )Net loans
    
    $
    224,477
    
    
    $
    234,891
    
    
    $
    251,452
    
    
    $
    316,528
    
    
    $
    328,523
 (1)
    
    The allowance for loan losses for 2002 and 2001 has been restated to reflect the
reclassification of the allowance for loan losses on off-balance sheet credit
exposures (shown separately on the balance sheet) and to facilitate comparison
with the current fiscal year.
 8




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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
    
    $
    1,052
    
    
    $
    8,769
    
    
    $
    62,818
    
    
    
    $140,273
    
    
    
    $212,912Commercial & construction
    
    
    569
    
    
    
    62
    
    
    
    705
    
    
    
    1,656
    
    
    
    2,992Total mortgage loans
    
    
    1,621
    
    
    
    8,831
    
    
    
    63,523
    
    
    
    141,929
    
    
    
    215,904Other loans
    
    
    1,051
    
    
    
    3,695
    
    
    
    4,768
    
    
    
    312
    
    
    
    9,826Total loans
    
    $
    2,672
    
    
    $
    12,526
    
    
    $
    68,291
    
    
    
    $142,241
    
    
    
    $225,730
 (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
    
    $
    188,765
    
    
    $
    23,095
    
    
    $
    211,860Commercial & construction
    
    
    316
    
    
    
    2,107
    
    
    
    2,423Total mortgage loans
    
    
    189,081
    
    
    
    25,201
    
    
    
    214,283Other loans
    
    
    1,234
    
    
    
    7,541
    
    
    
    8,775Total loans
    
    $
    190,315
    
    
    $
    32,743
    
    
    $
    223,058
 Mortgage
Lending
 9




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Mortgage Lending(continued)
       10




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##### Table of Contents



Mortgage Lending(continued)
    Other Loans
   Loan Approval
  Loan Delinquencies
 11




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##### Table of Contents



Real Estate Acquired through Foreclosure
  Non-Performing Assets
  (In thousands) At December 31,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Nonaccrual loans:Mortgage loans:Residential:Conventional
    
    $
    176
    
    
    $
    41
    
    
    $
    152
    
    
    $
    269
    
    
    $
    477FHA and VA
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    4Consumer
    
    
    81
    
    
    
    33
    
    
    
    78
    
    
    
    149
    
    
    
    163Total nonaccrual loans
    
    
    257
    
    
    
    74
    
    
    
    230
    
    
    
    420
    
    
    
    644Total non-performing assets
    
    $
    257
    
    
    $
    74
    
    
    $
    230
    
    
    $
    420
    
    
    $
    644Percent of non-performing loans to
total loans
    
    
    0.11
    %
    
    
    0.03
    %
    
    
    0.09
    %
    
    
    0.13
    %
    
    
    0.19
    %Percent of non-performing assets to
total assets
    
    
    0.03
    %
    
    
    0.01
    %
    
    
    0.02
    %
    
    
    0.04
    %
    
    
    0.07
    %
  (In thousands) Years Ended December 31,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Interest income that would have been
recorded under original terms
    
    $
    16
    
    
    $
    4
    
    
    $
    17
    
    
    $
    31
    
    
    $
    60Interest income actually recorded
    
    
    9
    
    
    
    1
    
    
    
    20
    
    
    
    27
    
    
    
    37Reduction (increase) in interest income
    
    $
    7
    
    
    $
    3
    
    
    $
    (3
    )
    
    $
    4
    
    
    $
    23
 12




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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,
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Balance at beginning of year
    
    $
    1,307
    
    
    $
    1,554
    
    
    $
    2,271
    
    
    $
    2,494
    
    
    $
    2,594Provision (credit) for loan losses
    
    
    (53
    )
    
    
    (242
    )
    
    
    (502
    )
    
    
    
    
    
    
    40Transfer to allowance for loan losses on
off-balance sheet credit exposures
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    (235
    )
    
    
    (149
    )Charge-offs: Consumer loans
    
    
    (1
    )
    
    
    (5
    )
    
    
    (4
    )
    
    
    (4
    )
    
    
    (22
    )Recoveries:Residential real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    25Commercial real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Consumer loans
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    10
    
    
    
    1Net recoveries (charge-offs)
    
    
    (1
    )
    
    
    (5
    )
    
    
    11
    
    
    
    12
    
    
    
    9Balance at end of year
    
    $
    1,253
    
    
    $
    1,307
    
    
    $
    1,554
    
    
    $
    2,271
    
    
    $
    2,494Allowance for loan losses as a percent
of total loans outstanding at year-end
    
    
    0.56
    %
    
    
    0.55
    %
    
    
    0.61
    %
    
    
    0.83
    %
    
    
    0.80
    %Allowance for loan losses as a percent
of nonaccrual loans
    
    
    487.5
    %
    
    
    1766.2
    %
    
    
    675.7
    %
    
    
    632.1
    %
    
    
    10.4
    %
 13




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Investment Activities
       14




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##### Table of Contents



Investment Activities(continued)
     15




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##### Table of Contents



Investment Portfolio
 (In thousands) At December 31,
    
    2005
    
    
    2004
    
    
    2003Federal funds sold:Overnight federal funds
    
    $
    152,785
    
    
    $
    193,728
    
    
    $
    145,684Term federal funds
    
    
    15,000
    
    
    
    
    
    
    
    45,000Total federal funds sold
    
    
    167,785
    
    
    
    193,728
    
    
    
    190,684Money market investment funds
    
    
    
    
    
    
    302
    
    
    
    23,337Interest-bearing deposits in banks:Money market accounts
    
    
    2
    
    
    
    220
    
    
    
    511Certificates of deposit
    
    
    898
    
    
    
    2,718
    
    
    
    5,685Total short-term investments and
interest-bearing bank deposits
    
    $
    168,685
    
    
    $
    196,968
    
    
    $
    220,217Percent of total assets
    
    
    18.8
    %
    
    
    20.2
    %
    
    
    21.8
    %
 (In thousands) At December 31,
    
    2005
    
    
    2004
    
    
    2003Securities held to maturity: (a)Mortgage-backed securities
    
    $
    6,137
    
    
    $
    4,877
    
    
    
    Securities available for sale: (b)(c)U.S. Treasury obligations
    
    
    76,116
    
    
    
    125,097
    
    
    $
    123,642U.S. Government agency obligations
    
    
    234,537
    
    
    
    188,519
    
    
    
    198,463Equity securities
    
    
    7,387
    
    
    
    7,428
    
    
    
    11,466Mortgage-backed securities
    
    
    135,432
    
    
    
    122,709
    
    
    
    95,658Total securities available for sale
    
    
    453,472
    
    
    
    443,753
    
    
    
    429,229Trading securities: (b)U.S. Treasury obligations
    
    
    7,896
    
    
    
    57,878
    
    
    
    72,408Equity securities
    
    
    1,382
    
    
    
    1,131
    
    
    
    222Investments in mutual funds
    
    
    4
    
    
    
    4
    
    
    
    3Total trading securities
    
    
    9,282
    
    
    
    59,013
    
    
    
    72,633Total securities
    
    $
    468,891
    
    
    $
    507,643
    
    
    $
    501,862Percent of total assets
    
    
    52.2
    %
    
    
    52.0
    %
    
    
    49.7
    %Total investments
    
    $
    637,576
    
    
    $
    704,611
    
    
    $
    722,079Total investments as a percent of total assets
    
    
    70.9
    %
    
    
    72.2
    %
    
    
    71.4
    %
 (a)
    
    At amortized cost.(b)
    
    At market value.(c)
    
    The market value of callable agency securities included in securities available
for sale at December 31, 2005, 2004 and 2003, totaled $189.3 million, $158.8
million and $192.4 million, respectively.
 16




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##### Table of Contents



Debt Securities Available for Sale
 U.S.U. S.
    
    Government
    
    Mortgage-Treasury
    
    agency
    
    backed(Dollars in thousands)
    
    obligations
    
    obligations (2)
    
    securities (1)
    
    TotalMaturing within 1 yearAmount
    
    $
    50,950
    
    
    $
    45,999
    
    
    $
    19
    
    
    $
    96,968Yield
    
    
    3.21
    %
    
    
    2.48
    %
    
    
    7.80
    %
    
    
    2.86
    %Maturing after 1
but within 5 yearsAmount
    
    
    26,101
    
    
    
    171,992
    
    
    
    7,238
    
    
    
    205,331Yield
    
    
    3.14
    %
    
    
    3.77
    %
    
    
    6.49
    %
    
    
    3.78
    %Maturing after 5
but within 10 yearsAmount
    
    
    
    
    
    
    19,996
    
    
    
    22,333
    
    
    
    42,329Yield
    
    
    
    
    
    
    4.82
    %
    
    
    6.39
    %
    
    
    5.65
    %Maturing after 10
but within 15 yearsAmount
    
    
    
    
    
    
    1,037
    
    
    
    105,779
    
    
    
    106,816Yield
    
    
    
    
    
    
    5.76
    %
    
    
    5.06
    %
    
    
    5.06
    %Maturing after 15 yearsAmount
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    65Yield
    
    
    
    
    
    
    
    
    
    
    6.50
    %
    
    
    6.50
    %TotalAmount
    
    $
    77,051
    
    
    $
    239,024
    
    
    $
    135,434
    
    
    $
    451,509Yield
    
    
    3.19
    %
    
    
    3.62
    %
    
    
    5.36
    %
    
    
    4.06
    %
 (1)
    
    Mortgage-backed securities are shown based on contractual maturities.
Actual maturities will differ from contractual maturities due to scheduled
amortization and prepayments.(2)
    
    The amortized cost of callable securities included in securities available for sale
totaled $193.0 million as of December 31, 2005.
  17




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##### Table of Contents



Deposits and Other Sources of Funds
 General
 Deposits
  Borrowed Funds
 18




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##### Table of Contents



DEPOSITS
  (In thousands) at December 31,
    
    2005
    
    
    2004
    
    
    2003Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    ofAmount
    
    
    Deposits
    
    
    Amount
    
    
    Deposits
    
    
    Amount
    
    
    DepositsDemand and NOWNOW
    
    $
    54,924
    
    
    
    7.00
    %
    
    $
    58,991
    
    
    
    6.95
    %
    
    $
    56,108
    
    
    
    6.36
    %Demand accounts
(non interest-bearing)
    
    
    27,326
    
    
    
    3.48
    
    
    
    28,662
    
    
    
    3.37
    
    
    
    28,948
    
    
    
    3.28Total demand and NOW
    
    
    82,250
    
    
    
    10.48
    
    
    
    87,653
    
    
    
    10.32
    
    
    
    85,056
    
    
    
    9.64Savings:Regular savings and
special notice accounts
    
    
    430,771
    
    
    
    54.90
    
    
    
    549,657
    
    
    
    64.71
    
    
    
    595,575
    
    
    
    67.49Money market accounts
    
    
    10,770
    
    
    
    1.37
    
    
    
    11,656
    
    
    
    1.37
    
    
    
    12,256
    
    
    
    1.39Total savings
    
    
    441,541
    
    
    
    56.27
    
    
    
    561,313
    
    
    
    66.08
    
    
    
    607,831
    
    
    
    68.88Time certificates of deposit:Fixed rate certificates
    
    
    197,743
    
    
    
    25.20
    
    
    
    145,249
    
    
    
    17.10
    
    
    
    129,210
    
    
    
    14.64Variable rate certificates
    
    
    63,194
    
    
    
    8.05
    
    
    
    55,250
    
    
    
    6.50
    
    
    
    60,411
    
    
    
    6.84Total time certificates
of deposit
    
    
    260,937
    
    
    
    33.25
    
    
    
    200,499
    
    
    
    23.60
    
    
    
    189,621
    
    
    
    21.48
    %Total deposits
    
    $
    784,728
    
    
    
    100.00
    %
    
    $
    849,465
    
    
    
    100.00
    %
    
    $
    882,508
    
    
    
    100.00
    %
  (In thousands) Years Ended December 31,
    
    2005
    
    
    2004
    
    
    2003Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    Average
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNOW accounts
    
    $
    55,983
    
    
    
    0.33
    %
    
    $
    56,273
    
    
    
    0.30
    %
    
    $
    55,150
    
    
    
    0.45
    %Demand (non interest-bearing)
accounts
    
    
    28,619
    
    
    
    
    
    
    
    28,020
    
    
    
    
    
    
    
    27,483
    
    
    
    Escrow deposits of borrowers
    
    
    724
    
    
    
    0.44
    
    
    
    773
    
    
    
    0.27
    
    
    
    950
    
    
    
    0.16Money market accounts
    
    
    11,728
    
    
    
    1.32
    
    
    
    11,727
    
    
    
    0.53
    
    
    
    13,466
    
    
    
    0.63Savings accounts
    
    
    488,044
    
    
    
    1.60
    
    
    
    573,512
    
    
    
    1.48
    
    
    
    581,998
    
    
    
    1.88Time certificates of deposit
    
    
    231,479
    
    
    
    3.03
    
    
    
    192,386
    
    
    
    2.08
    
    
    
    213,282
    
    
    
    2.15$
    816,577
    
    
    
    1.85
    %
    
    $
    862,691
    
    
    
    1.48
    %
    
    $
    892,329
    
    
    
    1.78
    %
 19




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##### Table of Contents



Investment Management and Trust Services
   Competition
    20




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary
   Regulation of the Company
   Control Acquisitions
 21




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiarycontinued)
  Bank Holding Company Dividends
 Regulation of the Bank
 Insurance of Accounts and FDIC Regulation
  22




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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
    23




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary
   Limitations on Bank Dividends
 Customer Information Security
 24




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##### Table of Contents



Supervision and Regulation of the Company and its Subsidiary(continued)
 Privacy
 USA Patriot Act
 The Community Reinvestment Act
 25




---



##### Table of Contents



Employees
  Subsidiaries
     26




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##### Table of Contents



Executive Officers of the Registrant
  Name
    
    
    Age
    
    
    OfficeGerard H. Brandi
    
    
    57
    
    
    Chairman of the Board of Directors,
President and Chief Executive Officer of the
   Company and the BankReginald E. Cormier
    
    
    57
    
    
    Senior Vice President, Treasurer
and Chief Financial Officer of the Company and the BankJames L. Milinazzo
    
    
    51
    
    
    Senior Vice President and Senior Lending Officer of the BankJoseph P. Orefice
    
    
    28
    
    
    Vice President of the BankThomas J. Queeney
    
    
    43
    
    
    Vice President and Senior Trust Officer of the BankWilliam F. Rivers
    
    
    50
    
    
    Vice President of the BankDonna H. West
    
    
    60
    
    
    Senior Vice President of the Bank and Assistant Secretary of the Company
     27




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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.
  28




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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.
  Our allowance for loan losses may prove to be insufficient to absorb potential losses in our
loan portfolio.
  29




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##### Table of Contents



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.
  Due to the nature of our business, we may be subject to litigation from time to time.
  30




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##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   Owned
    
    Lease
    
    Renewalor
    
    Expiration
    
    OptionLocation
    
    
    
    Leased
    
    Date
    
    ThroughMAIN OFFICE:
    
    123 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    BRANCH
    
    291 Chelmsford Street, Chelmsford, MA
    
    Owned
    
    
    
    
    
    OFFICES:
    
    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
    
    
    
    
    
    4110 Mystic Valley Pkwy, Medford, MA
    
    Leased
    
    
    2006
    
    
    476 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
    
    
    2006
    
    
    OPERATIONSFACILITIES:
    
    159 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    169 Haven Street, Reading, MA
    
    Owned
    
    
    
    
    
    11 North Road, Chelmsford, MA
    
    Owned
    
    
    
    
    
    
 
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  31




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##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Stock and Related Stockholder
Matters
    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)
    
    
    Program01/01/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,17701/18/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    (1)126,17701/01/05-
03/31/05
    
    11,060
    
    
    
    $
    37.17
    
    
    
    11,060
    
    
    
    115,11704/01/05-
06/30/05
    
    44,800
    
    
    
    $
    35.78
    
    
    
    44,800
    
    
    
    70,31707/01/05-
09/30/05
    
    62,000
    
    
    
    $
    34.25
    
    
    
    62,000
    
    
    
    8,31710/18/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,000
    (2)133,31710/01/05-
10/31/05
    
    0
    
    
    
    $
    0.00
    
    
    
    0
    
    
    
    133,31711/01/05-
11/30/05
    
    0
    
    
    
    $
    0.00
    
    
    
    0
    
    
    
    133,31712/01/05-
12/31/05
    
    10,600
    
    
    
    $
    33.00
    
    
    
    10,600
    
    
    
    122,717128,460
   
    
    
    $
    34.93
    
    
    
    128,460
   32




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##### Table of Contents



Item 5
  Total Numberof Shares
    
    
    Maximum NumberPurchased as
    
    
    of Shares ThatPart of Publicly
    
    
    May Yet BeTotal Number
    
    
    
    
    
    Announced
    
    
    Purchased Underof Shares
    
    
    Average Price
    
    
    Repurchase
    
    
    The RepurchasePeriod
    
    Purchased
    
    
    Paid Per Share
    
    
    Program (1)
    
    
    Program01/01/05-
03/31/05
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    004/01/05-
06/30/05
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    007/01/05-
09/30/05
    
    
    400
    
    
    $
    34.29
    
    
    
    0
    
    
    
    010/01/05-
10/31/05
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    011/01/05-
11/30/05
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    
    012/01/05-
12/31/05
    
    
    500
    
    
    $
    32.20
    
    
    
    0
    
    
    
    0900
    
    
    $
    33.13
 
 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
  33




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##### Table of Contents



Item 9. Changes in and Disagreements with Independent Accountants on
Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  34




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
   Reference to 2005Annual Reportto Stockholders(Pages)*Reports of Independent Registered Public Accounting Firm
    
    
    30Consolidated Balance Sheets at December 31,
2005 and 2004
    
    
    32Consolidated Statements of Income for the three
years ended December 31, 2005
    
    
    33Consolidated Statements of Cash Flows for the three
years ended December 31, 2005
    
    
    34-35Consolidated Statements of Changes in Stockholders
Equity for the three years ended December 31,
2005
    
    
    36Notes to Consolidated Financial Statements
    
    
    37-60
 
 *
   35




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit3.1
    
    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, 1991.4.1
    
    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, 2000.10.1
    
    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, 2005.10.2
    
    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).
 36




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.2.1
    
    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, 2005.10.3.23
    
    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, 2005.10.4
    
    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.
 37




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.5
    
    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, 2000.10.5.1
    
    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, 2001.10.6.1
    
    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, 2005.12
    
    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 1934.13
    
    2005 Annual Report to Stockholders  except for those
portions of the 2005 Annual Report to Stockholders which
are expressly incorporated by reference in this report,
such 2005 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.
 38




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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

Gerard H. Brandi
    
    Chairman, President, Chief
Executive Officer and Director
    
    March 13, 2006/s/Reginald E. Cormier

Reginald E. Cormier
    
    Senior Vice President, Treasurer
and Chief Financial Officer (Principal Financial and Accounting Officer)
    
    March 13, 2006/s/Mathias B. Bedell

Mathias B. Bedell
    
    Director
    
    March 13, 2006/s/Allan S. Bufferd

Allan S. Bufferd
    
    Director
    
    March 13, 2006/s/Kathleen M. Camilli

Kathleen M. Camilli
    
    Director
    
    March 13, 2006/s/Alexander S. Costello

Alexander S. Costello
    
    Director
    
    March 13, 2006
 39




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##### Table of Contents



/s/O. Bradley Latham

O. Bradley Latham
    
    Director
    
    March 13, 2006/s/Stephen E. Marshall

Stephen E. Marshall
    
    Director
    
    March 13, 2006/s/Nancy L. Pettinelli

Nancy L. Pettinelli
    
    Director
    
    March 13, 2006/s/William F. Rucci, Jr.

William F. Rucci, Jr.
    
    Director
    
    March 13, 2006/s/Donald B. Stackhouse

Donald B. Stackhouse
    
    Director
    
    March 13, 2006
 40