Exhibit: 99.1

MASSBANK CORP.	July 21, 2005
Reading, MA

FOR IMMEDIATE RELEASE

MASSBANK CORP. REPORTS 7.7% INCREASE IN EARNINGS PER SHARE

FOR THE SECOND QUARTER 2005

MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,857,000 or $0.42 in basic and diluted earnings per share for the second quarter 2005, compared with net income of $1,734,000 or $0.39 in basic and diluted earnings per share in the second quarter of 2004. This represents an increase of 7.7% over the earnings per share results of the prior year. For the six months ended June 30, 2005, the Company reported net income of $3,551,000 or $0.80 in diluted earnings per share ($0.81 in basic earnings per share) compared to $3,683,000 or $0.81 in diluted earnings per share ($0.83 in basic earnings per share) for the six months ended June 30, 2004.

Income Statement

Net interest income, the Company’s core earnings, totaled $5,395,000 for the second quarter of 2005, up $370,000 or 7.4% from the same quarter in 2004. This is the third consecutive quarter that the Company has reported a year-over-year improvement in net interest income. The net interest margin in the recent quarter improved 26 basis points to 2.36% from 2.10% in the second quarter of 2004. This is an increase of 12.4% over the same quarter last year. The Company continues to benefit from rising short-term interest rates. The Federal Reserve Bank Board’s Federal Open Market Committee (FOMC) has raised the target rate for Federal Funds by 25 basis points nine times since the end of June 2004, increasing the rate from 1.00% to 3.25%.

Balance Sheet

The Company’s total assets decreased $47.4 million to $933.1 million at June 30, 2005 from $980.5 at June 30, 2004. Deposits decreased $43.0 million or 5.0% year-over-year from $860.2 million at June 30, 2004 to $817.2 million at June 30, 2005. Stockholders’ equity was $108.4 million at June 30, 2005, representing a book value of $24.83 per share. This compares to $107.7 million at June 30, 2004, representing a book value of $24.51 per share.

July 21, 2005

Page Two

The Company’s non-accrual loans remain low totaling $343,000 at June 30, 2005, representing 0.15% of total loans. This compares to $398,000 representing 0.16% of total loans at June 30, 2004. At June 30, 2005, the Bank’s allowance for loan losses totaled $1.253 million representing 0.54% of total loans compared to $1.439 million representing 0.59% of total loans at June 30, 2004. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $585,000 at June 30, 2005 compared to $616,000 a year earlier. This is intended to protect the bank against loan commitments made to customers that have not yet been drawn down.

MASSBANK Corp. is the holding company for MASSBANK, a Massachusetts chartered savings bank. The Bank operates fifteen banking offices in Reading, Chelmsford, Dracut, Everett, Lowell, Medford, Melrose, Stoneham, Tewksbury, Westford and Wilmington, providing a variety of deposit, lending and trust services.

ADDITIONAL INFORMATION

Dividend Declaration

MASSBANK Corp. today announced a quarterly cash dividend on its common stock of $0.26 per share. This, the Company’s seventy-sixth consecutive dividend, will be payable on August 18, 2005 to stockholders of record at the close of business on August 3, 2005.

Stock Repurchase Program

During the three months ended June 30, 2005, the Company continued the repurchase of its common stock by acquiring 51,300 shares. As of June 30, 2005, there were 63,817 shares available for repurchase in the current program.

Cautionary Statement

This press release may contain forward-looking information, including information concerning the Company’s expectations of future business prospects. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to be materially different from the results and performance expressed or implied by the forward-looking statements. Forward looking statements include, but are not limited to, statements concerning the Company’s belief, expectations or intentions concerning the Company’s future performance, the financial outlook of the markets it serves and the performance and activities of its competitors. These statements reflect the Company’s current views. They are based on numerous assumptions and are subject to numerous risks and uncertainties, including the strength of the local economy and the U.S. economy in general, unexpected fluctuations in market interest rates, unexpected fluctuations in the markets for equities, bonds, federal funds and other financial instruments, an increase in the level of non-performing assets, an increase in competitive pricing pressures within the Company’s market, adverse legislative or regulatory developments, a significant decline in residential real estate values in the Company’s market area, adverse impacts resulting from the continuing war on terrorism, an increase in other employee-related costs, the impact of deflation or inflation, and other factors described in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2004.

For further information contact Reginald E. Cormier, Senior Vice President, Treasurer and CFO at (781) 942-8192.

July 21, 2005

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MASSBANK CORP.

FINANCIAL HIGHLIGHTS

($ in thousands except share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
For the Period Ended
Total interest and dividend income	$	9,069		$	8,121		$	17,834		$	16,466
Total interest expense		3,674			3,096			7,135			6,200
Net interest income		5,395			5,025			10,699			10,266
Provision (credit) for loan losses		—			(51	)		(53	)		(113	)
Net interest income after provision (credit) for loan losses		5,395			5,076			10,752			10,379
Gains on securities, net		244			186			188			760
Other non-interest income		341			342			594			629
Non-interest expense		3,172			2,964			6,203			6,124
Income tax expense		951			906			1,780			1,961
Net income	$	1,857		$	1,734		$	3,551		$	3,683
Weighted Average Common Shares Outstanding
Basic		4,390,071			4,416,159			4,394,908			4,421,777
Diluted		4,452,405			4,501,866			4,462,343			4,523,552
Per Common Share
Earnings:
Basic	$	0.42		$	0.39		$	0.81		$	0.83
Diluted		0.42			0.39			0.80			0.81
Cash dividends paid		0.26			0.25			0.52			0.50
Book value (period end)								24.83			24.51
Ratios (1)
Return on average assets		0.79	%		0.70	%		0.75	%		0.75	%
Return on average equity		6.89			6.33			6.55			6.65
Net interest margin		2.36			2.10			2.32			2.14
Total equity to assets (period end)								11.62			10.98
							At June 30,
							2005			2004
At Period End
Assets							$	933,064		$	980,450
Deposits								817,189			860,233
Total loans								229,930			244,722
Stockholders’ equity							$	108,441		$	107,669
Common shares outstanding								4,366,617			4,393,425
Asset Quality
Non-accrual loans							$	343		$	398
Real estate acquired through foreclosure								—			—
Total non-performing assets							$	343		$	398
Allowance for loan losses							$	1,253		$	1,439
Non-accrual loans to total loans								0.15	%		0.16	%

(1) Ratios are presented on an annualized basis with the exception of equity to assets.

July 21, 2005

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

($ in thousands except share data)

	At June 30, 2005			At June 30, 2004
Assets:
Cash and due from banks	$	9,377		$	7,374
Interest-bearing deposits in banks		1,553			6,507
Federal funds sold		204,955			148,546
Short-term investments		—			987
Debt securities available for sale:
Mortgage-backed securities		130,847			119,996
Other securities		294,366			336,114
Equity securities available for sale		8,066			8,644
Mortgage-backed securities held-to-maturity		4,595			4,911
Trading securities		30,785			78,209
Loans:
Mortgage loans		220,087			234,132
Other loans		9,843			10,590
Total loans		229,930			244,722
Allowance for loan losses		(1,253	)		(1,439	)
Net loans		228,677			243,283
Premises and equipment		6,266			6,667
Accrued interest receivable		3,520			3,724
Goodwill		1,090			1,090
Current income tax asset, net		342			160
Deferred income tax asset, net		1,465			1,750
Other assets		7,160			12,488
Total assets	$	933,064		$	980,450
Liabilities and Stockholders’ Equity:
Deposits:
Demand and NOW	$	85,798		$	83,504
Savings		497,391			586,314
Time certificates of deposit		234,000			190,415
Total deposits		817,189			860,233
Escrow deposits of borrowers		901			949
Allowance for loan losses on off-balance sheet credit exposures		585			616
Other liabilities		5,948			10,983
Total liabilities		824,623			872,781
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, 7,783,680 and 7,717,305 shares issued, respectively		7,784			7,717
Additional paid-in capital		56,440			54,946
Retained earnings		103,267			100,506
		167,491			163,169
Treasury stock at cost 3,417,063 and 3,323,880 shares, respectively		(59,033	)		(55,650	)
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on securities available for sale, net of tax effect		(17	)		150
Shares held in rabbi trust at cost 14,744 and 26,600 shares, respectively		(321	)		(567	)
Deferred compensation obligation		321			567
Total stockholders’ equity		108,441			107,669
Total liabilities and stockholders’ equity	$	933,064		$	980,450

July 21, 2005

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Three Months Ended
	June 30, 2005		June 30, 2004
Interest and dividend income:
Mortgage loans	$	3,038	$	3,445
Other loans		164		166
Securities available for sale:
Mortgage-backed securities		1,756		1,492
Other securities		2,393		2,127
Mortgage-backed securities held-to-maturity		60		48
Trading securities		185		309
Federal funds sold		1,458		439
Other investments		15		95
Total interest and dividend income		9,069		8,121
Interest expense:
Deposits		3,674		3,096
Total interest expense		3,674		3,096
Net interest income		5,395		5,025
Provision (credit) for loan losses		—		(51	)
Net interest income after provision (credit) for loan losses		5,395		5,076
Non-interest income:
Deposit account service fees		101		112
Gains on securities available for sale, net		72		679
Gains (losses) on trading securities, net		172		(493	)
Other		240		230
Total non-interest income		585		528
Non-interest expense:
Salaries and employee benefits		1,974		1,831
Occupancy and equipment		529		522
Data processing		126		123
Professional services		135		103
Advertising and marketing		40		31
Deposit Insurance		37		42
Other		331		312
Total non-interest expense		3,172		2,964
Income before income taxes		2,808		2,640
Income tax expense		951		906
Net income	$	1,857	$	1,734
Weighted average common shares outstanding:
Basic		4,390,071		4,416,159
Diluted		4,452,405		4,501,866
Earnings per share (in dollars):
Basic	$	0.42	$	0.39
Diluted		0.42		0.39

July 21, 2005

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Six Months Ended
	June 30, 2005			June 30, 2004
Interest and dividend income:
Mortgage loans	$	6,150		$	7,027
Other loans		326			335
Securities available for sale:
Mortgage-backed securities		3,474			2,977
Other securities		4,708			4,388
Mortgage-backed securities held-to-maturity		122			48
Trading securities		433			594
Federal funds sold		2,588			925
Other investments		33			172
Total interest and dividend income		17,834			16,466
Interest expense:
Deposits		7,135			6,200
Total interest expense		7,135			6,200
Net interest income		10,699			10,266
Provision (credit) for loan losses		(53	)		(113	)
Net interest income after provision (credit) for loan losses		10,752			10,379
Non-interest income:
Deposit account service fees		201			233
Gains (losses) on trading securities, net		58			(283	)
Gains on securities available for sale, net		130			1,043
Other		393			396
Total non-interest income		782			1,389
Non-interest expense:
Salaries and employee benefits		3,749			3,728
Occupancy and equipment		1,128			1,120
Data processing		267			260
Professional services		265			240
Advertising and marketing		60			48
Deposit Insurance		75			83
Other		659			645
Total non-interest expense		6,203			6,124
Income before income taxes		5,331			5,644
Income tax expense		1,780			1,961
Net income	$	3,551		$	3,683
Weighted average common shares outstanding:
Basic		4,394,908			4,421,777
Diluted		4,462,343			4,523,552
Earnings per share (in dollars):
Basic	$	0.81		$	0.83
Diluted		0.80			0.81