Exhibit 99.1

MASSBANK CORP.	October 20, 2006
Reading, MA

FOR IMMEDIATE RELEASE

MASSBANK CORP. REPORTS THIRD QUARTER 2006 EARNINGS

OF $1.73 MILLION OR $0.40 PER SHARE

MASSBANK Corp. (NASDAQ – MASB), the Holding Company for MASSBANK, today reported net income of $1,731,000 or $0.40 in basic and diluted earnings per share for the third quarter 2006, compared with net income of $1,884,000 or $0.43 in basic and diluted earnings per share in the same quarter of 2005. For the nine months ended September 30, 2006 the Company reported net income of $5,296,000 or $1.21 in diluted earnings per share ($1.22 in basic earnings per share). This compares to $5,435,000 or $1.22 in diluted earnings per share ($1.24 in basic earnings per share) for the nine months ended September 30, 2005.

Income Statement

The Company’s net income in the third quarter of 2006, compared to the same quarter of 2005, was negatively impacted by a decrease in net interest income. This resulted from a decrease in average earning assets due to a lower deposit base, partially offset by an improvement in net interest margin.

Net interest income for the recent quarter decreased by $288,000 or 5.3% as the bank continued to be challenged by the current inverted yield curve environment (an environment where short-term rates actually exceed long-term rates). The market for deposits has become more competitive as financial institutions have been aggressive in pricing their deposit products to retain deposits. MASSBANK has chosen not to match these competitors’ rates in order to protect its net interest margin. The Company’s net interest margin in the recent quarter improved 9 basis points to 2.53% from 2.44% in the third quarter of 2005. This is the eighth consecutive quarter that the Company has reported a year-over-year improvement in net interest margin. Average earning assets for the recent quarter declined $75.4 million to $822.2 million, from $897.6 million in the third quarter of last year. Average total deposits were $741.0 million for the third quarter 2006 compared to $809.6 million for the same quarter of 2005.

The provision for loan losses was $82,000 for the recent quarter compared to no provision in the same quarter last year. This, however, is offset by a credit of $107,000 to the bank’s provision for off-balance sheet credit exposures, which is included in non-interest expense. As loan commitments made to customers are drawn down, loss reserves against such commitments are reduced and loss reserves against outstanding loans are generally increased.

The Company’s earnings in the third quarter 2006 also reflect a decrease in non-interest income of $107,000 due primarily to lower securities gains compared to the same quarter last year.

Non-interest expenses in the recent quarter decreased $247,000 or 7.8% to $2,929,000 from $3,176,000 in the same quarter last year. This is due to 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 bank’s management.

October 20, 2006

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Return on average assets and return on average equity for the third quarter 2006 were 0.82% and 6.72%, respectively, compared to 0.82% and 7.06%, respectively, for the third quarter of 2005.

Balance Sheet

The Company’s total assets decreased $74.5 million to $845.9 million at September 30, 2006 from $920.4 million at September 30, 2005. Deposits decreased $73.2 million or 9.1% year-over-year from $802.6 million at September 30, 2005 to $729.4 million at September 30, 2006. Stockholders’ equity increased to $105.9 million at September 30, 2006, from $105.3 million at September 30, 2005. This represents a book value per share of $24.55 at September 30, 2006, up $0.17 from $24.38 per share at September 30, 2005.

The Company’s non-accrual loans are at historical lows totaling only $5,000 at September 30, 2006 compared to $267,000 at September 30, 2005. At September 30, 2006, the Bank’s allowance for loan losses totaled $1.395 million representing 0.65% of total loans compared to $1.253 million representing 0.54% of total loans at September 30, 2005. In addition, the Bank’s allowance for loan losses on off-balance sheet credit exposures totaled $336,000 at September 30, 2006 compared to $588,000 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

The Company’s Board of Directors has recently announced an increase in the Company’s quarterly cash dividend to stockholders, from $0.27 to $0.28 per common share. The increase will raise the annualized dividend from $1.08 to $1.12 per share. This, the Company’s eighty-first consecutive dividend, will be payable on November 16, 2006 to stockholders of record at the close of business on November 1, 2006.

New Stock Repurchase Program

The Company also recently announced that its Board of Directors has extended for another year, the stock repurchase program that it authorized in October of last year. Additionally, the Board approved an increase of 50,000 in the number of shares of the Company’s common stock authorized for repurchase in the current program, bringing the total shares available for repurchase to 130,217 during the next twelve months.

October 20, 2006

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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.

October 20, 2006

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MASSBANK CORP.

FINANCIAL HIGHLIGHTS

($ in thousands except share date)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
For the Period Ended
Total interest and dividend income	$	10,052		$	9,346		$	29,854		$	27,180
Total interest expense		4,872			3,878			13,845			11,013
Net interest income		5,180			5,468			16,009			16,167
Provision (credit) for loan losses		82			0			132			(53	)
Net interest income after provision (credit) for loan losses		5,098			5,468			15,877			16,220
Gains on securities, net		168			238			538			426
Other non-interest income		279			316			892			910
Non-interest expense		2,929			3,176			9,268			9,379
Income tax expense		885			962			2,743			2,742
Net income	$	1,731		$	1,884		$	5,296		$	5,435
Weighted Average Common Shares Outstanding
Basic		4,315,211			4,342,872			4,327,930			4,377,372
Diluted		4,349,187			4,397,998			4,363,386			4,440,659
Per Common Share
Earnings:
Basic	$	0.40		$	0.43		$	1.22		$	1.24
Diluted		0.40			0.43			1.21			1.22
Cash dividends paid		0.27			0.26			0.81			0.78
Book value (period end)								24.55			24.38
Ratios (1)
Return on average assets		0.82	%		0.82	%		0.81	%		0.77	%
Return on average equity		6.72			7.06			6.81			6.72
Net interest margin		2.53			2.44			2.54			2.36
Total equity to assets (period end)								12.52			11.44
							At September 30,
							2006			2005
At Period End
Assets							$	845,927		$	920,429
Deposits								729,411			802,597
Total loans								213,876			231,073
Stockholders’ equity							$	105,902		$	105,340
Common shares outstanding								4,314,504			4,321,367
Asset Quality
Non-accrual loans							$	5		$	267
Real estate acquired through foreclosure								—			—
Total non-performing assets							$	5		$	267
Allowance for loan losses							$	1,395		$	1,253
Non-accrual loans to total loans								0.00	%		0.12	%

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

October 20, 2006

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

($ in thousands except share data)

	At September 30, 2006			At September 30, 2005
Assets:
Cash and due from banks	$	8,489		$	10,441
Short-term investments		8,674			—
Interest-bearing deposits in banks		3			1,115
Federal funds sold		145,177			196,737
Debt securities available for sale, at market value:
Mortgage-backed securities		130,731			128,262
Other securities		289,027			294,284
Equity securities available for sale, at market value		9,255			7,481
Mortgage-backed securities held to maturity, at amortized cost		5,416			4,577
Trading securities, at market value		369			22,803
Loans:
Mortgage loans		204,036			220,722
Other loans		9,840			10,351
Total loans		213,876			231,073
Allowance for loan losses		(1,395	)		(1,253	)
Net loans		212,481			229,820
Premises and equipment		7,476			6,182
Accrued interest receivable		5,573			4,268
Goodwill		1,090			1,090
Income tax receivable, net		246			45
Deferred income tax asset, net		3,587			2,762
Other assets		18,333			10,562
Total assets	$	845,927		$	920,429
Liabilities and Stockholders’ Equity
Deposits:
Demand and NOW	$	77,577		$	87,810
Savings		363,610			471,054
Time certificates of deposit		288,224			243,733
Total deposits		729,411			802,597
Escrow deposits of borrowers		992			1,009
Allowance for loan losses on off-balance sheet credit exposures		336			588
Other liabilities		9,286			10,895
Total liabilities		740,025			815,089
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, 7,840,167 and 7,793,930 shares issued, respectively		7,840			7,794
Additional paid-in capital		57,695			56,670
Retained earnings		106,532			104,025
		172,067			168,489
Treasury stock at cost 3,525,663 and 3,472,563 shares, respectively		(62,672	)		(60,932	)
Accumulated other comprehensive loss:
Net unrealized losses on securities available for sale, net of tax effect		(3,493	)		(2,217	)
Shares held in rabbi trust at cost 16,744 and 15,144 shares ,respectively		(386	)		(335	)
Deferred compensation obligation		386			335
Total stockholders’ equity		105,902			105,340
Total liabilities and stockholders’ equity	$	845,927		$	920,429

October 20, 2006

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Three Months Ended
	September 30, 2006		September 30, 2005
Interest and dividend income:
Mortgage loans	$	2,799	$	2,998
Other loans		200		181
Securities available for sale:
Mortgage-backed securities		1,799		1,737
Other securities		3,146		2,450
Mortgage-backed securities held to maturity		73		59
Trading securities		38		187
Federal funds sold		1,923		1,722
Other investments		74		12
Total interest and dividend income		10,052		9,346
Interest expense:
Deposits		4,872		3,878
Total interest expense		4,872		3,878
Net interest income		5,180		5,468
Provision (credit) for loan losses		82		—
Net interest income after provision (credit) for loan losses		5,098		5,468
Non-interest income:
Deposit account service fees		84		100
Gains on securities available for sale, net		80		177
Gains on trading securities, net		88		61
Deferred compensation plan income		48		49
Other		147		167
Total non-interest income		447		554
Non-interest expense:
Salaries and employee benefits		1,808		1,877
Deferred compensation plan expense		69		71
Occupancy and equipment		490		521
Data processing		146		137
Professional services		113		115
Advertising and marketing		46		44
Deposit insurance		31		35
Other		226		376
Total non-interest expense		2,929		3,176
Income before income taxes		2,616		2,846
Income tax expense		885		962
Net income	$	1,731	$	1,884
Weighted average common shares outstanding:
Basic		4,315,211		4,342,872
Diluted		4,349,187		4,397,998
Earnings per share (in dollars):
Basic	$	0.40	$	0.43
Diluted		0.40		0.43

October 20, 2006

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MASSBANK CORP. AND SUBSIDIARIES

Consolidated Statements of Income

($ in thousands except share data)

	Nine Months Ended
	September 30, 2006		September 30, 2005
Interest and dividend income:
Mortgage loans	$	8,554	$	9,148
Other loans		570		507
Securities available for sale:
Mortgage-backed securities		5,469		5,211
Other securities		9,025		7,158
Mortgage-backed securities held to maturity		229		181
Trading securities		194		620
Federal funds sold		5,727		4,310
Other investments		86		45
Total interest and dividend income		29,854		27,180
Interest expense:
Deposits		13,845		11,013
Total interest expense		13,845		11,013
Net interest income		16,009		16,167
Provision (credit) for loan losses		132		(53	)
Net interest income after provision (credit) for loan losses		15,877		16,220
Non-interest income:
Deposit account service fees		258		301
Gains on securities available for sale, net		429		307
Gains on trading securities, net		109		119
Deferred compensation plan income		109		59
Other		525		550
Total non-interest income		1,430		1,336
Non-interest expense:
Salaries and employee benefits		5,544		5,572
Deferred compensation plan expense		172		125
Occupancy and equipment		1,702		1,649
Data processing		417		404
Professional services		414		380
Advertising and marketing		102		104
Deposit insurance		96		110
Other		821		1,035
Total non-interest expense		9,268		9,379
Income before income taxes		8,039		8,177
Income tax expense		2,743		2,742
Net income	$	5,296	$	5,435
Weighted average common shares outstanding:
Basic		4,327,930		4,377,372
Diluted		4,363,386		4,440,659
Earnings per share (in dollars):
Basic	$	1.22	$	1.24
Diluted		1.21		1.22