Exhibit 99.1

MASSBANK CORP.	July 21, 2006
Reading, MA

FOR IMMEDIATE RELEASE

MASSBANK CORP. REPORTS SECOND QUARTER 2006 EARNINGS

OF $1.8 MILLION OR $0.40 PER SHARE

MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,755,000 or $0.40 in diluted earnings per share for the second quarter 2006, compared with net income of $1,857,000 or $0.42 in diluted earnings per share in the second quarter of 2005. Basic earnings per share in the recent quarter were $0.41 per share compared to $0.42 per share in the second quarter of last year. For the six months ended June 30, 2006, the Company reported net income of $3,565,000 or $0.82 in diluted earnings per share ($0.82 in basic earnings per share). This compares to $3,551,000 or $0.80 in diluted earnings per share ($0.81 in basic earnings per share) for the six months ended June 30, 2005.

Income Statement

Net interest income, the Company’s core earnings, totaled $5,388,000 for the recent quarter, essentially unchanged from the same quarter in 2005. The net interest margin in the recent quarter improved 21 basis points to 2.57% from 2.36% in the second quarter of 2005. This is the seventh consecutive quarter that the Company has reported a year-over-year improvement in net interest margin. The current inverted yield curve environment (an environment where short-term rates actually exceed long-term rates) however, is making it increasingly difficult to improve the net interest margin.

The Company’s earnings in the second quarter 2006 were negatively impacted by the poor performance of the equity securities markets during last two months of the quarter. Securities gains in the recent quarter decreased $125,000 when compared to the second quarter of last year. Second quarter 2006 earnings results also reflect a decrease in other non-interest income of $75,000 and an increase in the bank’s provision for loan losses of $50,000. These are offset by a decrease of $127,000 in the Company’s non-interest expenses due in part to an increase of $54,000 in the credit provision for off-balance sheet credit exposures recorded in the recent quarter (reducing loan loss reserves against outstanding loan commitments) and cost containment measures implemented by the Company’s management.

Return on average assets and return on average equity for the second quarter 2006 were 0.81% and 6.81%, respectively, compared to 0.79% and 6.89%, respectively, for the second quarter of 2005.

Balance Sheet

The Company’s total assets decreased $71.2 million to $861.9 million at June 30, 2006 from $933.1 million at June 30, 2005. Deposits decreased $65.4 million or 8.0% year-over-year from $817.2 million at June 30, 2005 to $751.8 million at June 30, 2006 due to increased competition for deposits. Stockholders’ equity was $102.4 million at June 30, 2006, representing a book value of $23.72 per share. This compares to $108.4 million at June 30, 2005 representing a book value of $24.83 per share.

July 21, 2006

Page Two

The Bank’s non-accrual loans are near historical lows totaling $102,000 at June 30, 2006 representing 0.05% of total loans. This compares to $343,000 representing 0.15% of total loans at June 30, 2005. At June 30, 2006, the Bank’s allowance for loan losses totaled $1.297 million representing 0.60% of total loans compared to $1.253 million representing 0.54% of total loans at June 30, 2005. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $443,000 at June 30, 2006 compared to $585,000 a year earlier. This is intended to protect the bank against losses on 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 $0.27 per share. This, the Company’s eightieth consecutive dividend, will be payable on August 17, 2006 to stockholders of record at the close of business on August 2, 2006.

Stock Repurchase Program

During the three months ended June 30, 2006, the Company continued the repurchase of its common stock by acquiring 20,000 shares in the open market. As of June 30, 2006, there were 90,217 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 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, 2005.

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

July 21, 2006

Page Three

MASSBANK CORP.

FINANCIAL HIGHLIGHTS

($ in thousands except share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
For the Period Ended
Total interest and dividend income	$	10,001		$	9,069		$	19,802		$	17,834
Total interest expense		4,613			3,674			8,973			7,135
Net interest income		5,388			5,395			10,829			10,699
Provision (credit) for loan losses		50			0			50			(53	)
Net interest income after provision (credit) for loan losses		5,338			5,395			10,779			10,752
Gains on securities, net		119			244			370			188
Other non-interest income		266			341			613			594
Non-interest expense		3,045			3,172			6,339			6,203
Income tax expense		923			951			1,858			1,780
Net income	$	1,755		$	1,857		$	3,565		$	3,551
Weighted Average Common Shares Outstanding
Basic		4,329,036			4,390,071			4,334,394			4,394,908
Diluted		4,364,341			4,452,405			4,370,604			4,462,343
Per Common Share
Earnings:
Basic	$	0.41		$	0.42		$	0.82		$	0.81
Diluted		0.40			0.42			0.82			0.80
Cash dividends paid		0.27			0.26			0.54			0.52
Book value (period end)								23.72			24.83
Ratios (1)
Return on average assets		0.81	%		0.79	%		0.81	%		0.75	%
Return on average equity		6.81			6.89			6.86			6.55
Net interest margin		2.57			2.36			2.55			2.32
Total equity to assets (period end)								11.88			11.62

	At June 30,
	2006			2005
At Period End
Assets	$	861,926		$	933,064
Deposits		751,781			817,189
Total loans		216,745			229,930
Stockholders’ equity	$	102,430		$	108,441
Common shares outstanding		4,317,879			4,366,617
Asset Quality
Non-accrual loans	$	102		$	343
Real estate acquired through foreclosure		—			—
Total non-performing assets	$	102		$	343
Allowance for loan losses	$	1,297		$	1,253
Non-accrual loans to total loans		0.05	%		0.15	%

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

July 21, 2006

Page Four

MASSBANK CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

($ in thousands except share data)

	At June 30, 2006			At June 30, 2005
Assets:
Cash and due from banks	$	10,317		$	9,377
Short-term investments		875			—
Interest-bearing deposits in banks		649			1,553
Federal funds sold		145,615			204,955
Debt securities available for sale, at market value:
Mortgage-backed securities		135,102			130,847
Other securities		307,108			294,366
Equity securities available for sale, at market value		10,243			8,066
Mortgage-backed securities held to maturity, at amortized cost		5,659			4,595
Trading securities, at market value		6,670			30,785
Loans:
Mortgage loans		207,412			220,087
Other loans		9,333			9,843
Total loans		216,745			229,930
Allowance for loan losses		(1,297	)		(1,253	)
Net loans		215,448			228,677
Premises and equipment		7,309			6,266
Accrued interest receivable		3,972			3,520
Goodwill		1,090			1,090
Income tax receivable, net		143			342
Deferred income tax asset, net		5,413			1,465
Other assets		6,313			7,160
Total assets	$	861,926		$	933,064
Liabilities and Stockholders’ Equity
Deposits:
Demand and NOW	$	81,953		$	85,798
Savings		391,571			497,391
Time certificates of deposit		278,257			234,000
Total deposits		751,781			817,189
Escrow deposits of borrowers		931			901
Allowance for loan losses on off-balance sheet credit exposures		443			585
Other liabilities		6,341			5,948
Total liabilities		759,496			824,623
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, 7,833,542 and 7,783,680 shares issued, respectively		7,834			7,784
Additional paid-in capital		57,516			56,440
Retained earnings		105,965			103,267
		171,315			167,491
Treasury stock at cost 3,515,663 and 3,417,063 shares, respectively		(62,346	)		(59,033	)
Accumulated other comprehensive loss:
Net unrealized losses on securities available for sale, net of tax effect		(6,539	)		(17	)
Shares held in rabbi trust at cost 16,744 and 14,744 shares, respectively		(386	)		(321	)
Deferred compensation obligation		386			321
Total stockholders’ equity		102,430			108,441
Total liabilities and stockholders’ equity	$	861,926		$	933,064

July 21, 2006

Page Five

MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Three Months Ended
	June 30, 2006			June 30, 2005
Interest and dividend income:
Mortgage loans	$	2,865		$	3,038
Other loans		190			164
Securities available for sale:
Mortgage-backed securities		1,872			1,756
Other securities		3,035			2,393
Mortgage-backed securities held to maturity		77			60
Trading securities		74			185
Federal funds sold		1,882			1,458
Other investments		6			15
Total interest and dividend income		10,001			9,069
Interest expense:
Deposits		4,613			3,674
Total interest expense		4,613			3,674
Net interest income		5,388			5,395
Provision (credit) for loan losses		50			—
Net interest income after provision (credit) for loan losses		5,338			5,395
Non-interest income:
Deposit account service fees		84			101
Gains on securities available for sale, net		111			72
Gains on trading securities, net		8			172
Deferred compensation plan income (loss)		(10	)		22
Other		192			218
Total non-interest income		385			585
Non-interest expense:
Salaries and employee benefits		1,868			1,924
Deferred compensation plan expense		11			50
Occupancy and equipment		610			529
Data processing		128			126
Professional services		133			135
Advertising and marketing		19			40
Deposit insurance		31			37
Other		245			331
Total non-interest expense		3,045			3,172
Income before income taxes		2,678			2,808
Income tax expense		923			951
Net income	$	1,755		$	1,857
Weighted average common shares outstanding:
Basic		4,329,036			4,390,071
Diluted		4,364,341			4,452,405
Earnings per share (in dollars):
Basic	$	0.41		$	0.42
Diluted		0.40			0.42

July 21, 2006

Page Six

MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Six Months Ended
	June 30, 2006		June 30, 2005
Interest and dividend income:
Mortgage loans	$	5,755	$	6,150
Other loans		370		326
Securities available for sale:
Mortgage-backed securities		3,670		3,474
Other securities		5,879		4,708
Mortgage-backed securities held to maturity		156		122
Trading securities		156		433
Federal funds sold		3,804		2,588
Other investments		12		33
Total interest and dividend income		19,802		17,834
Interest expense:
Deposits		8,973		7,135
Total interest expense		8,973		7,135
Net interest income		10,829		10,699
Provision (credit) for loan losses		50		(53	)
Net interest income after provision (credit) for loan losses		10,779		10,752
Non-interest income:
Deposit account service fees		173		201
Gains on securities available for sale, net		349		130
Gains on trading securities, net		21		58
Deferred compensation plan income		61		10
Other		379		383
Total non-interest income		983		782
Non-interest expense:
Salaries and employee benefits		3,736		3,695
Deferred compensation plan expense		103		54
Occupancy and equipment		1,212		1,128
Data processing		271		267
Professional services		301		265
Advertising and marketing		56		60
Deposit insurance		65		75
Other		595		659
Total non-interest expense		6,339		6,203
Income before income taxes		5,423		5,331
Income tax expense		1,858		1,780
Net income	$	3,565	$	3,551
Weighted average common shares outstanding:
Basic		4,334,394		4,394,908
Diluted		4,370,604		4,462,343
Earnings per share (in dollars):
Basic	$	0.82	$	0.81
Diluted		0.82		0.80