FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Annual Report
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, l995
-------------------
OR
( ) 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 33-22224-B
--------------
Beverly National Corporation
--------------------------------------
(Name of small business in its charter)
A Massachusetts Corporation 04-2832201
- ---------------------------- ------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Cabot Street Beverly, Massachusetts 0l9l5
- ---------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code (508) 922-2l00
---------------
Securities registered pursuant to Section l2 (b) of the Act:
Title of each class Name of each exchange on which registered
None
- -------------------- -----------------------------------------
Securities registered pursuant to l2(g) of the Act:
None
- ------------------- ----------------------------------------
(Title of class)
Check whether the issuer (l) filed all reports required to be
filed by Section l3 or l5 (d) of the Securities Exchange Act
during the past l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.[ ].
State issuer's revenues for its most recent fiscal year. $13,595,986
-----------
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days. (See
definition of affiliate in Rule 12b-2 of the Exchange Act). $13,520,892
-----------
Note: If determining whether a person is an affiliate will
involve an unreasonable effort and expense, the issuer may
calculate the aggregate market value of the common equity held
by non-affiliates on the basis of reasonable assumptions, if the
assumptions are stated. State the number of shares outstanding
of each of the issuer's classes of common equity, as of the
latest practicable date. 754,382
---------
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
PART l
ITEM l. BUSINESS
Beverly National Corporation, a Massachusetts corporation
("Corporation or Holding Company"), is a registered bank holding
company under the Bank Holding Company Act of l956, as amended.
The Holding Company has one banking subsidiary, Beverly National
Bank (Bank), and also owns l00% of two Massachusetts Business
Trusts; 86 Bay Road Realty Trust, and Cabot Street Realty Trust. The
principal executive office of the Corporation is located at
240 Cabot Street, Beverly, Massachusetts 0l9l5, and telephone
number is (508) 922-2100. The Holding Company owns all
outstanding shares of the bank and both Realty Trusts.
The Bank is engaged in substantially all of the business
operations customarily conducted by an independent commercial
bank in Massachusetts. Banking services offered include
acceptance of checking, savings and time deposits and the making
of commercial, real estate, installment and other loans. The
bank also offers a full range of trust services, official
checks, traveler's checks, safe deposit boxes, automatic teller
machines and customary banking services to its customers.
The business of the bank is not significantly effected by
seasonal factors.
In the last five years the Bank derived its operating income
from the following sources:
% of Operating Income
-------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Interest and fees on loans 63% 58% 60% 62% 63%
Interest and dividends on
Securities and Fed. Funds
Sold and Certificate of Deposit 23 28 26 25 26
Charges, fees and other
sources 14 14 14 13 11
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
<PAGE>
Competition
- ------------
In Massachusetts generally, and in the Bank's primary service
area, there is heavy competition in the commercial banking
industry. In addition to commercial banks, the Bank competes
with other financial institutions such as savings banks, savings
and loan associations and credit unions, in obtaining lendable
funds and in making loans. In the Bank's primary service area
there are four national banks, two Massachusetts trust
companies, seven savings banks, two co-operative banks and one
finance company. Included among those financial institutions
are regional banks such as Bank of Boston, BayBank and Fleet
Bank Massachusetts.
Regulation of the Corporation
- ------------------------------
The Corporation is a registered bank holding company under the
Bank Holding Company Act of l956, as amended. It is subject to
the supervision and examination of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and files
with the Federal Reserve Board the reports as required under the
Bank Holding Company Act.
The Bank Holding Company Act requires prior approval by the
Federal Reserve Board of the acquisition by the Corporation of
substantially all the assets or more than five percent of the
voting stock of any bank. The Bank Holding Company Act also
allows the Federal Reserve Board to determine (by order or by
regulation) what activities are so closely related to banking as
to be a proper incident of banking, and thus, whether the
Corporation can engage in such activities. The Bank Holding
Company Act prohibits the Corporation and the Bank from engaging
in certain tie-in arrangements in connection with any extension
of credit, sale of property or furnishing of services.
Recently adopted Federal legislation will soon permit adequately
capitalized bank holding companies to venture across state lines
to offer banking services through bank subsidiaries to a wider
geographic market. In light of this change in the law, it will
be possible for large super-regional organizations to enter many
new markets including the market served by the Bank. It is not
possible to assess what impact these changes in the regulatory
scheme will have on the Corporation or the Bank.
The Corporation is subject to examination by the Board of
Governors of the Federal Reserve System. The Federal Reserve
Act also imposes certain restrictions on loans by the Bank to
the Corporation and certain other activities, on investments, in
their stock or securities, and on the taking by the Bank of such
stock or securities as collateral security for loans to any
borrower. In addition, the Corporation is subject to examination.
Under the Bank Holding Company Act of l956, as amended, no
corporation may become a bank holding company as defined
therein, without prior approval of the Board of Governors of the
Federal Reserve System. The Corporation received the approval
<PAGE>
of the Board of Governors to become a bank holding company on
May 29, l984. The Corporation will also have to secure prior
approval of the Board of Governors of the Federal Reserve System
if it wishes to acquire voting shares of any other bank, if
after such acquisition it would own or control more than 5% of
the voting shares of such bank. The Corporation is also limited
under the Bank Holding Company Act of l956, as amended, as to
the types of business in which it may engage.
The Corporation, as a bank holding company, is subject to the
Massachusetts Bank Holding Company laws.
The regulations of the Federal Reserve System, promulgated
pursuant to Bank Holding Company Act require bank holding
companies to provide the Federal Reserve Board with written
notice before purchasing or redeeming equity securities if the
gross consideration for the purchase or redemption, when
aggregated with the net consideration paid by the Company for
all such purchases or redemptions during the preceding twelve
months, is equal to 10% or more of the company's consolidated
net worth. For purposes of Regulation Y, "net consideration" is
the gross consideration paid by the company for all of its
equity securities purchased or redeemed during the period, minus
the gross consideration received for all of its equity securities
sold during the period other than as part of a new issue.
Regulation of the Bank
- -----------------------
The Bank is subject to regulation by the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System and
the Federal Deposit Insurance Corporation. The business of the
Bank is subject in certain areas to state laws applicable to banks.
Employees
- ----------
The Corporation and the Bank employ 95 officers and employees.
<PAGE>
Distribution of Assets, Liabilities and Stockholder's Equity:
- -------------------------------------------------------------
Interest Rates and Interest Differential
- ----------------------------------------
The following tables present the condensed average balance
sheets and the components of net interest differential for the
two years ended December 31, l995 and l994. The total dollar
amount of interest income from earning assets and the resultant
yields are calculated on a tax equivalent basis.
1995
------------------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
------------------------------------------
ASSETS
Federal funds sold $ 5,439,178 $ 317,032 5.83%
Investment securities(1) 41,431,251 2,238,402 5.40%
Securities available
for sale 10,392,725 590,956 5.69%
Loans, net of unearned
income (1,2,3) 93,226,841 8,504,806 9.12%
----------- ---------- -----
Total earning assets 150,489,995 11,651,196 7.74%
----------- ---------- -----
Other non interest-
earning assets 13,719,694
-----------
Total average assets $164,209,689
============
LIABILITIES
Savings deposits $ 36,070,516 $ 1,112,693 3.08%
NOW accounts 29,631,193 407,670 1.38%
Money market accounts 21,560,428 714,734 3.32%
Time deposits $100,000
and over 3,287,467 178,170 5.42%
Other time deposits 29,491,197 1,644,838 5.58%
Short-term borrowing 15,068 923 6.13%
Notes payable 1,033,544 96,134 9.30%
------------ ---------- -----
Total interest-
bearing liabilities 121,089,413 4,155,162 3.43%
------------ ---------- -----
Non interest-bearing
deposits 28,985,310
Other non interest-
bearing liabilities 1,162,614
Stockholders' equity 12,972,352
------------
Total average liabilities
and stockholders' equity $164,209,689
============
Net interest income $ 7,496,034
===========
Net yield on interest earning assets 4.98%
=====
<PAGE>
(1) Interest income and yield are stated on a fully tax-equivalent
basis. The total amount of adjustment is $14,537. A federal
tax rate of 34% was used in performing this calculation.
(2) Includes loan fees of $151,962.
(3) Includes non-accruing loan balances and interest received on
non-accruing loans.
Distribution of Assets, Liabilities and Stockholders' Equity:
- -------------------------------------------------------------
Interest Rates and Interest Differential(Continued)
- ---------------------------------------
1994
------------------------------------------
Average Interest Yield/
Balance Inc./Exp. Rate
ASSETS ------------------------------------------
Certificate of deposit $ 50,479 $ 1,046 2.07%
Federal funds sold 4,686,027 187,627 4.00%
Investment securities(l) 54,576,935 2,816,814 5.16%
Securities available for
sale 10,902,398 533,606 4.89%
Loans, net of unearned
income (2,3) 82,154,476 7,448,112 9.07%
------------ ---------- -----
Total earning assets 152,370,315 10,987,205 7.21%
------------ ---------- -----
Other non interest-
earning assets 15,057,192
------------
Total average assets $167,427,507
============
LIABILITIES
Savings deposits $ 42,910,260 $ 1,095,967 2.55%
NOW accounts 32,315,056 518,790 1.61%
Money market accounts 23,144,944 495,312 2.14%
Time deposits $100,000
and over 2,675,366 105,778 3.95%
Other time deposits 26,432,794 1,078,720 4.08%
Short-term borrowings 665,753 59,293 8.91%
Notes payable 567,990 65,455 11.52%
------------ ---------- ------
Total interest-bearing
liabilities 128,712,163 3,419,315 2.66%
------------ ---------- ------
Non interest-bearing
deposits 25,517,439
Other non interest-
bearing liabilities 919,664
Stockholders' equity 12,278,241
------------
Total average liabilities
and stockholders' equity $167,427,507
============
Net interest income $ 7,567,890
===========
Net yield on interest earning assets 4.97%
======
<PAGE>
(1) Interest income and yield are stated on a fully tax-equivalent
basis. The total amount of adjustment is $16,961. A federal
tax rate of 34% was used in performing this calculation.
(2) Includes loan fees of $220,342.
(3) Includes non-accruing loan balances and interest received
on non-accruing loans.
Distribution of Assets, Liabilities and Stockholders' Equity:
- -------------------------------------------------------------
Interest Rates and Interest Differential (Continued)
- ----------------------------------------
The following table shows, for the periods indicated, the dollar
amount of changes in interest income and interest expense
resulting from changes in volume and interest rates.
1995 as compared to l994
--------------------------------------
Due to a change in:
Volume(1) Rate(1) Total
--------------------------------------
Interest income from:
Certificate of deposit $ (1,046) $ 0 $ (1,046)
Federal funds sold 33,642 95,763 129,405
Investment securities (704,366) 125,954 (578,412)
Securities available for sale 87,219 (29,869) 57,350
Loans, net of unearned interest 1,052,790 3,904 1,056,694
----------- ---------- ----------
Total $ 468,239 $ 195,752 $ 663,991
----------- ---------- ----------
Interest expense on:
Savings deposits $(190,161) $ 206,887 $ 16,726
NOW accounts (40,852) (70,268) (111,120)
Money market accounts (36,084) 255,506 219,422
Time deposits $100,000 and over 27,560 44,832 72,392
Other time 135,518 430,600 566,118
Short term borrowings (44,246) (14,124) (58,370)
Notes payable 45,258 (14,579) 30,679
----------- ---------- ---------
Total (103,007) 838,854 735,847
----------- ---------- ---------
Net interest income $ 571,246 $(643,102) $(71,856)
----------- ---------- ---------
<PAGE>
1994 as compared to l993
-----------------------------------
Due to a change in:
Volume(1) Rate(1) Total
-----------------------------------
Interest income from:
Certificate of deposit $ 1,046 $ 0 $ 1,046
Federal funds sold 106 48,293 48,399
Investment securities 206,779 (235,736) (28,957)
Securities available
for sale 533,606 0 533,606
Securities held for sale (516,093) 0 (516,093)
Loans, net of unearned
interest (419,661) 1,654 (418,007)
----------- ----------- ----------
Total $ (194,217) $ (185,789) $(380,006)
----------- ----------- ----------
Interest expense on:
Savings deposits $ (9,951) $(200,561) $ (210,512)
NOW accounts 63,921 (141,007) (77,086)
Money market deposits (108,546) (90,400) (198,946)
Time deposits $100,000 and over (16,868) (10,547) (27,415)
Other time (19,725) (84,980) (104,705)
Short-term borrowings 59,293 0 59,293
Notes payable (4,113) 29,432 25,319
----------- ---------- -----------
Total (35,989) (498,063) (534,052)
----------- ---------- -----------
Net interest income $ (158,228) $ 312,274 $ 154,046
----------- ---------- -----------
(1) The change in interest attributed to both rate and volume
has been allocated to the changes in the rate and the volume on
a pro rated basis.
<PAGE>
Investment Portfolio
- --------------------
The following table indicates the book value of the
Corporation's consolidated investment portfolio at December 31,
l995 and 1994:
Amortized
1995 Cost Basis 1994 Book Value
--------------- ---------------
Investments Held to Maturity:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $32,402,473 $46,374,054
Investments Held to Maturity:
Obligations of states and
political subdivisions 481,245 957,970
Investments Held to Maturity:
Other debt securities 300,000 300,000
----------- -----------
$33,183,718 $47,632,024
=========== ===========
Federal Reserve Bank Stock 97,500 97,500
=========== ===========
Investments Available for sale $11,153,903 $11,512,047
=========== ===========
As of January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for certain
Investments in Debt and Equity Securities". The adoption of
FAS No. 115 had the following effect on the consolidated
financial statements for the year ended December 31, 1994:
Addition to stockholder's equity:
Net unrealized holding gain on
available-for-sale securities....... $57,161
Less tax effect...................... 24,166
-------
$32,995
=======
<PAGE>
The following table shows the maturities, amortized cost basis
and weighted average yields of the Corporation's consolidated
investment in held to maturity and available for sale securities
at December 31, l995. The yields on state and municipal
securities are presented on a tax equivalent basis. A federal
tax rate of 34% was used in performing this calculation.*
(In thousands)
After one After five
Within but within but within After
one year five years ten years ten years
Maturing: Amount Yield Amount Yield Amount Yield Amount Yield
- --------- -------------- -------------- -------------- --------------
U.S. Govt.
& Agency
obligations $16,591 5.18% $27,094 5.58%
State and
Political
subdivisions 253 7.74% 228 6.20% 100 5.13%
Other
securities 300 8.10%
------- ----- ------- ----- ---- ----- ---- -----
$16,844 5.21% $27,322 5.59% $300 8.10% $100 5.13%
------- ----- ------- ----- ---- ----- ---- -----
* Federal Reserve Stock not included.
Non-Accrual, Past Due and Restructured Loans
- ---------------------------------------------
It is the policy of the Bank to discontinue the accrual of
interest on loans when, in management's judgment, the
collection of the full amount of interest is considered
doubtful. This will generally occur once a loan has become 90
days past due, unless the loan is well secured and in the
process of collection. Restructured loans generally may have a
reduced interest rate, an extension of loan maturity, future
benefits for current concessions and a partial forgiveness of
principal or interest. The following table sets forth
information on non-accrual, past due and restructured loans as
of December 31, for each of the years indicated:
(In thousands) 1995 1994
---- ----
Loans, non-accrual $2,374 $1,812
Loans past due 90 days or
more and still accruing 737 0
------ ------
Total $3,111 $1,812
------ ------
<PAGE>
The amount of interest income recorded during 1995 and 1994 on
non-accrual loans and restructured loans outstanding at December
31, 1995 and 1994 amounted to $16,593 and $60,716, respectively.
Had these loans performed in accordance with their original
terms, the amount recorded would have been $190,312 in 1995 and
$195,598 in 1994.
As of December 31, 1995, there were no loans which are not now
included above but where known information about possible credit
problems of borrowers caused management to have serious doubts
as to the ability of such borrowers to comply with the present
loan repayment terms.
There are no industry concentrations in the Bank's Loan
Portfolio, as the customers are broad-based in the Bank's market area.
Loan Portfolio
- --------------
The following table summarizes the distribution of the Bank's
loan portfolio and mortgages held for sale as of December 31 the
years indicated:
(In thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Commercial, financial
& agricultural $16,486 $16,323 $16,689 $21,154 $22,695
Real estate-
construction and land
development 4,649 3,807 1,622 960 222
Real estate-residential 34,217 26,037 27,345 26,580 30,618
Real estate-commercial 42,588 35,702 32,591 29,002 21,466
Consumer 5,594 6,481 7,028 10,228 12,498
Municipal tax-exempt
obligations 465 146 0 0 0
Loans to depository
institutions 0 0 0 0 0
Other 787 176 166 241 610
------- ------ ------ ------ ------
104,786 88,672 85,441 88,165 88,109
Allowance for possible
loan losses (2,073) (2,075) (2,764) (2,555) (1,270)
Deferred loan fees net (97) (40) (13) (62) 5
Unearned income 0 (1) (8) (50) (159)
-------- ------- ------- ------- -------
Net loans $102,616 $86,556 $82,656 $85,498 $86,685
======== ======= ======= ======= =======
<PAGE>
Loan maturities for commercial, financial and agricultural at
December 31, l995 were as follows: $8,027,409 due in one year
or less; $7,178,825 due after one year through five years;
$1,279,298 due after five years. Of the Bank's commercial,
financial and agricultural loans due after one year, $12,475,179
have floating or adjustable rates and $4,010,353 have fixed rates.
Loan maturities for real estate construction and land
development at December 31, 1995 were as follows: $1,856,431
due in one year or less, $1,690,000 due after one year through
five years and $1,102,387 due after five years.
Summary of Loan Loss Experience
- -------------------------------
The following table summarizes historical data with respect to
loans outstanding, loan losses and recoveries, and the allowance
for possible loan losses at December 31 for each of the years indicated:
(In Thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Average loans outstanding,
net of unearned income $93,227 $82,154 $84,721 $91,435 $83,093
======= ======= ======= ======= =======
Allowance for possible loan losses
- ----------------------------------
Balance at beginning
of period 2,075 2,764 2,555 1,270 775
------- ------- ------- ------- ------
Charge-offs:
Real Estate-Construction 0 0 0 0 0
Real Estate-Residential 0 (64) 0 (205) (154)
Real Estate-Commercial (28) (322) (5) (403) 0
Commercial, Financial
& Agric. (20) (741) (591) (356) (197)
Consumer (30) (22) (35) (89) (220)
Municipal Tax Exempt Loans 0 0 0 0 0
Loans to Depository Inst. 0 0 0 0 0
Other Loans 0 0 0 0 0
Recoveries:
Real Estate-Construction 0 0 0 0 0
Real Estate-Residential 50 0 0 4 0
Real Estate-Commercial 10 0 6 0 0
Commercial, Financial
& Agric. 10 234 156 26 7
Consumer 6 11 28 28 24
Municipal Tax Exempt Loans 0 0 0 0 0
Loans to Depository Inst. 0 0 0 0 0
Other loans 0 0 0 0 0
Net charge-offs (2) (904) (441) (995) (540)
------- ------- ------- ------- -------
Provision for loan losses 0 215 650 2,280 1,035
------- ------- ------- ------- -------
Balance at period end $2,073 $2,075 $2,764 $2,555 $1,270
======= ======= ======= ======= =======
Ratio of net charge-offs
to average loans 0.00% 1.10% .52% 1.09% 0.65%
------- ------- ------- ------ ------
<PAGE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES:
- -----------------------------------
An allowance is available for losses which may be incurred in
the future on loans in the current portfolio. The allowance is
increased by provisions charged to current operations and is
decreased by loan losses, net of recoveries. The provision for
loan losses is based on management's evaluation of current and
anticipated economic conditions, changes in the character and
size of the loan portfolio, and other indicators. The balance
in the allowance for possible loan losses is considered adequate
by management to absorb any reasonably foreseeable loan losses.
The following table reflects the allocation of the allowance for
possible loan losses and the percentage of loans in each
category to total outstanding loans as of December 31 for each
of the years indicated:
1995 1994
-------------------- ---------------------
Percent of Percent of
loans in loans in
category to category to
Amount total loans Amount total loans
------ ----------- ------ -----------
Commercial
Financial &
Agricultural $ 649,208 15.7% $1,150,001 18.3%
Real Estate-
Construction 72,056 4.4% 13,324 4.3%
Real Estate-
Residential 102,302 32.7% 93,445 29.4%
Real Estate-
Commercial 698,032 40.6% 769,254 40.3%
Consumer 19,937 5.4% 47,104 7.3%
Municipal Tax
Exempt Loans 0 .4% 0 .2%
Other 0 .8% 0 .2%
Unallocated 530,988 0% 2,188 0%
---------- ------ ---------- ------
Total $2,072,523 100.0% $2,075,316 100.0%
========== ====== ========== ======
<PAGE>
Deposits
- --------
The following table shows the average deposits and average
interest rate paid for the last two years:
1995 1994
-------------------- ------------------
Average Average Average Average
Balance Rate Balance Rate
------- ------- ------- -------
Demand Deposits $28,985,310 0.00% $25,517,439 0.00%
NOW Accounts 29,631,193 1.38% 32,315,056 1.61%
Money Market
Accounts 21,560,428 3.32% 23,144,944 2.14%
Savings Deposits 36,070,516 3.08% 42,910,260 2.55%
Time Deposits
$100,000 and over 3,287,467 5.42% 2,675,366 3.95%
Other Time
Deposits 29,491,197 5.58% 26,432,794 4.08%
------------ ----- ------------ -----
Total $149,026,111 2.72% $152,995,859 2.15%
============ ===== ============ =====
As of December 31, 1995, the Bank had certificates of deposit
in amounts of $100,000 and over aggregating $3,716,289. These
certificates of deposit mature as follows:
Maturity Amount
--------- -------
3 months or less $1,028,963
Over 3 months through 6 months 872,436
Over 6 months through 12 months 992,157
Over 12 months 822,733
----------
Total $3,716,289
==========
<PAGE>
Return on Equity and Assets
- ----------------------------
The following table summarizes various financial ratios of the
Corporation for each of the last two years:
Year ended December 31,
------------------------
1995 1994
---- ----
Return on average total
assets (net income divided
by average total assets) .87% .65%
Return on average
stockholders' equity
net income divided by
average stockholders' equity) 11.04% 8.93%
Dividend payout ratio
(total declared dividends
divided by net income) 29.43% 26.74%
Equity to assets
(average stockholders' equity
as a percentage of average
total assets) 7.90% 7.33%
Short-term Borrowings
- ---------------------
The Bank engages in certain borrowing agreements throughout the
year. These are in the ordinary course of the Bank's business
and are composed of three types. Federal funds purchased
represent daily transactions which the Bank uses to manage its
funds and liquidity position to comply with regulatory
requirements. Interest rates fluctuate daily reflecting
existing market conditions. Another borrowing consists of the
interest bearing portion of the treasury tax and loan account
due to the Federal Reserve Bank. Other borrowings consisted of
a term loan from Warren Five Cents Savings Bank to Beverly
National Corporation. There were no short-term borrowings
during 1993. The following table summarizes such short-term
borrowings at December 31 for each of the years indicated:
Maximum Weighted
amount average
out- Average interest
Balance, standing amount rate
end of at any out- during
Year Ended period month-end standing period
- ---------- ------ --------- -------- ------
1995 -0- -0- $ 15,068 6.13%
1994 -0- $1,250,000 $665,753 8.91%
1993 -0- -0- -0- -0-
<PAGE>
ITEM 2. PROPERTIES
The Bank's main office (15,000 square feet) at 240 Cabot
Street, Beverly, Massachusetts is owned by the Bank. The
Bank completed renovations in 1988 which has enhanced the
Bank's ability to effectively serve its customer base.
The Bank's Operation Center (12,000 square feet) is located at
246 Cabot Street, immediately adjacent to the Bank's main
office, and is owned by Cabot Street Realty Trust. The
Operations Center provides a loan center and an on-site item
processing facility for the Bank. It is encumbered by a
mortgage securing an industrial revenue bond with an outstanding
balance as of December 31, 1995 of $385,627.
The Bank's South Hamilton office, built in 1991 (2,388
square feet)at 25 Railroad Avenue, South Hamilton, Massachusetts
is owned by the Corporation. The office is part of a four-unit
condominium. The three other units have been sold to third
parties.
The Bank's Topsfield office (2,109 square feet) at 15 Main
Street, Topsfield, Massachusetts is leased by the Bank from a
third party with a term that expires February 2000 and a current
annual rent of $39,280.
The Bank's North Beverly Plaza office (5,127 square feet) at 63
Dodge Street, Beverly, Massachusetts is leased by the Bank from
a third party with a term that expires October 1996 and a
current annual rent of $33,936.
The Bank has one stand-alone, automatic teller machine which is
located at Beverly Hospital, Herrick Street, Beverly, Massachusetts.
In Management's opinion, all properties occupied by the Bank are
in good condition, and are adequate at present and for the
foreseeable future for the purposes for which they are being
used and are properly insured.
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings other than
ordinary routine litigation incidental to normal business to
which the Corporation or the Bank is a party or to which any of
their properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the quarter ended December 31, 1995.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the
Corporation's common stock which is not actively traded and is
not listed on any public exchange or the National Association of
Securities Dealer's Automatic Quotation System ("NASDAQ").
Shares are traded on a sporadic workout basis between individuals.
The following table sets forth, to the best knowledge of
Management the representative prices, for each quarterly period
during the last two years. These prices are based on private transactions
that management is aware of and transactions brokered through Advest.
1995* 1994*
----- -----
Quarter ended March 31, $15.00 $11.67
Quarter ended June 30, 17.00 13.67
Quarter ended Sept. 30, 17.50 19.50
Quarter ended Dec. 31, 18.50 19.50
*The price of the stock has been adjusted to reflect the 3 for 1
stock split effective August 15, 1994.
Capital
- -------
The Beverly National Corporation Employee Stock Ownership Plan
(ESOP) established a $400,000 line with Andover Bank for the
purpose of purchasing Beverly National Corporation Stock. As of
December 31, 1995 the ESOP purchased $374,354 of Beverly
National Corporation stock.
On June 29, 1994, the Corporation, the Retirement Plan for
Employees of The Beverly National Bank and other investors
purchased an aggregate of 38,313 shares of common stock owned by
Warren Five Cents Savings Bank 144,939 shares at a purchase
price of approximately $19.33 per share, (after adjusting to
reflect the three for one stock split).
The Corporation purchased 64,650 shares at $19.33 per share for
a total purchase price of $1,249,900. The Pension Plan
purchased 15,000 shares at $19.33 per share for a total purchase
price of $290,000. Other investors purchased 35,289 shares at
$19.33 per share for a total purchase price of $682,254.
The Corporation purchased 64,650 shares at $19.33 which was
financed by a loan from Warren Five Cents Savings Bank with a
maturity date of June 29, 1995. The Corporation made a Rights
Offering to current shareholders and others on September 26,
1994. The proceeds of this offering totaled $582,755. The
proceeds along with internal funds and long term debt of
$550,000 from First and Ocean National Bank paid off the loan at
Warren Five Cents Savings Bank (see Notes Payable).
<PAGE>
The Corporation has a $300,000 loan which it expects to repay
over the next three years. This loan was reduced to $300,000
during the fourth quarter and modified to reduce the term of the
loan (see Note 8). The repayment of the loan is funded through cash flow
from the non-bank subsidiaries and dividends from the Bank.
For restrictions on the ability of the Bank to pay dividends to
the Corporation (see Note 16).
The number of record holders of the Corporation's common stock
was 408 as of March 1, 1996. The Corporation declared quarterly
cash dividends and one special dividend on its outstanding common
stock, which amounted to an aggredgate of $.44 quarterly dividend,
$.12 special dividends per share during 1995 and $.39 per share
during 1994, adjusted to reflect the 3 for 1 stock split
effective August 15, 1994.
ITEM 6.
Management's Discussions and Analysis 1995 as Compared to 1994
- ---------------------------------------------------------------
The total assets of the Corporation as of December 31, 1995
amounted to $169,120,694 as compared to $163,218,196 in 1994.
This increase amounted to $5,902,498 or 3.6%.
The economy of the Corporation's market area is considered stable.
Regulatory Matters
- ------------------
In January 1995, following an examination of the Bank and based
upon the Bank's improved condition and compliance, the Office of
the Comptroller of the Currency ("OCC") terminated the
Memorandum of Understanding which the Bank had entered into with
the OCC in December 1992.
Investment Portfolio
- --------------------
As of January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for certain
Investments in Debt and Equity Securities." This resulted in
new classifications of investment securities, Investments Held
to Maturity, and Investments Available for Sale. The securities
reported in available for sale are carried at fair value on the
balance sheet. Unrealized holding gains and losses are not
included in earnings, but are reported as a net amount (less
expected tax) in a separate component of capital until realized.
The securities reported in Securities Held to Maturity are
carried at amortized cost.
<PAGE>
Investments in Held to Maturity
- -------------------------------
The investments in held to maturity totaled $33,183,718 at
December 31, 1995 as compared to $47,632,024 at December 31,
1994. This is a decrease of $14,448,306 or 30.3%. U.S.
Treasury and U.S. Agency obligations totaled $32,402,473 at
December 31, 1995 as compared to $46,374,054 at December 31,
1994 a decrease of $13,971,581 or 30.1%. The decrease in U.S.
Treasury and Agency securities funded loan growth. The majority
of investment purchases were made in the 24 to 60-month maturity
range. State and municipal obligations held to maturity totaled
$481,245 at December 31, 1995 as compared to $957,970 at
December 31, 1994. This decrease totaled $476,725 or 49.8%.
The decrease in the state and municipal portfolio is attributed
to maturing issues. Management continues the investment focus on
short to medium term U.S. Treasury notes and Government agencies.
It is management's intent to hold those securities designated as
held-to-maturity in the Investment Securities Portfolio until maturity.
The strategic maturity spread of the portfolio includes consideration
for foreseeable events and liquidity conditions.
Securities Available for Sale
- -----------------------------
The balance of Investments in Available-for-Sale totaled
$11,053,903 as of December 31, 1995 as compared to the balance
of Securities Held for Sale which totaled $11,512,047 as of
December 31, 1994. These investments are comprised of short to
medium term U.S. Treasury and U.S. Government Agency Securities.
These securities may be used to meet the liquidity needs of the
Bank or Corporation.
Federal Funds Sold
- ------------------
These short-term Liquidity Loans to other commercial banks
totaled $5,800,000 at December 31, 1995 in comparison to $0 at
December 31, 1994. The Bank's liquidity position is adequate
to cover the increased loan demand or reduction of deposits.
Loans
- -----
Net Loans as of December 31, 1995 totaled $102,491,814 as
compared to December 31, 1994 of $86,378,312. This increase was
$16,113,502 or 18.7%.
Commercial Loans totaled $16,485,532 at December 31, 1995 as
compared to $16,322,592 at December 31, 1994. This is an
increase of $162,940 or 1.0%. This is attributed to increased
competition for the small business credit needs. The growth in
the Bank's loan portfolio has been primarily in the Real Estate
<PAGE>
Based Portfolio. Real estate construction loans totaled
$4,648,818 at December 31, 1995 as compared to $3,806,610 at
December 31, 1994. This is an increase of $842,208 or 22.1%,
which can be attributed to both increased commercial and
residential real estate construction activity. Real estate
residential loans totaled $34,092,682 at December 31, 1995 as
compared to $25,858,917 at December 31, 1994. This is an
increase of $8,233,765 or 31.8%. Real estate commercial loans
totaled $42,587,993 at December 31, 1995 as compared to
$35,702,101 at December 31, 1994, representing an increase of
$6,885,892 or 19.3%. Consumer loans totaled $5,593,914 at
December 31, 1995 as compared to $6,481,293 at December 31, 1994.
This is a decrease of $887,379 or 13.7%. This decrease is
attributable to higher underwriting standards that were established
and lower demand for retail loans.
There are no industry concentrations in the Bank's loan
portfolio, as the customers are broad based in the Bank's market
area. The corporation is however exposed to geographic
concentrations as the majority of the Bank's loan portfolio is
compiled of loans collateralized by real estate located in the
Commonwealth of Massachusetts.
Premises and Equipment
- ----------------------
Premises and equipment decreased $22,669 or .5% from $4,399,704 at December
31, 1994 to $4,377,035 December 31, 1995. This decrease can be attributed
to depreciation of $394,450 which exceeded purchases of furniture
equipment, consisting primarily of personal computers and communication
lines, purchased for the Banks' technology upgrade and depreciation.
Deposits
- --------
Deposits totaled $153,498,225 at December 31, 1995 as compared
to $148,860,743 for the same period in 1994. The increase of
$4,637,482 or 3.1% increase can be attributed to deposit
products being priced to maintain a lower cost of funds and hold
market shares. Demand deposits totaled $34,500,825 at December
31, 1995 as compared to $29,012,533 at December 31, 1994. This is an
increase of $5,488,292 or 18.9%. This can be attributed to
continued strong commercial deposits. The core deposit mix
changed with decreases in the balance of money market accounts,
NOW accounts and savings were greater than the growth of time
deposits.
<PAGE>
Notes Payable
- -------------
Notes Payable totaled $685,627 at December 31, 1995 as
compared to $1,035,627 at December 31, 1994, a decrease which
reflects the $385,627 balance outstanding industrial revenue bond issued
for Cabot Street Realty Trust and a loan from First and Ocean
National Bank in the amount of $300,000 interest only for the
first year, at a rate of one half over prime rate. The
principal balance of the loan was reduced to $300,000 in the
fourth quarter and the term of the loan was changed to be
amortized in three years (see Note 8). The Corporation expects cash flow
from Cabot Street Realty Trust and dividends from the Bank to
fund the repayment of the loan.
Other Liabilities
- -----------------
Other Liabilities increased $375,726 or 53.9% from $696,010 at December 31,
1994 to $1,071,736 at December 31, 1995. The higher interest rate
environment has increased interest payable which has increased accruals
for interest payable.
Capital
- -------
On June 29, 1994, the Corporation, the Retirement Plan for
Employees of The Beverly National Bank and other investors
purchased an aggregate of 38,313 shares of common stock owned by
Warren Five Cents Savings Bank (114,939 shares at a purchase
price of approximately $19.33 per share, after adjusting to
reflect the three for one stock split). The Corporation purchased
64,650 shares at $19.33 per share for a total purchase price of $1,249,900.
The Pension Plan purchased 15,000 shares at $19.33 per share for a total
purchase price of $290,000 and other investors purchased 35,289 shares at
$19.33 per share for a total purchase price of $682,254.
The Corporation purchased 64,650 shares at $19.33 which was
financed by a loan from Warren Five Cents Savings Bank with a
maturity date of June 29, 1995. The Corporation made a Rights
Offering to current shareholders and others on September 26,
1994. The proceeds of this offering totaled $582,755. The
proceeds along with internal funds and long term debt of
$550,000 from First and Ocean National Bank paid off the loan at
Warren Five Cents Savings Bank (see Notes Payable).
Consolidated Statement of Income
- --------------------------------
Net interest and dividend income totaled $7,481,497 for the year
ended December 31, 1995 as compared to $7,550,929 for the year
ended December 31, 1994. This decrease was $69,432 or .9%.
The interest income and interest expense described below created
this occurrence.
<PAGE>
Loan Income
- -----------
Interest and fee's on loans totaled $8,504,806 for the year
ended December 31, 1995 as compared to $7,447,170 for 1994.
This is an increase of $1,057,636 or 14.2%. The loan portfolio
changed in composition during the year. Unsecured consumer
loans continued to decline. However there was a significant increase
in residential and commercial real estate loans in 1995. The growth
of residential mortgages can be primarily attributed to the growth of
variable rate mortgage loans. The growth of loan income can be based on the
increased real estate production along with a reduction of
non-accrual loans throughout the year.
Investment Securities Income
- ----------------------------
Taxable investment securities income for 1995 totaled $2,772,065
as compared $3,287,288 in 1994. This is a decrease of $515,223
or 15.7%. The average balance of taxable investments of U.S.
Treasury notes and Government agencies decreased in 1995.
Other Interest Income
- ---------------------
Other interest income increased $128,360 or 68.0% from $188,672 during
1994 to $317,032 during 1995. The increase is attributed to higher
volumes of federal funds sold and the short-term interest rate environment.
Interest Expense
- ----------------
Interest expense on deposits totaled $4,058,105 for the year
ended December 31, 1995 as compared to $3,294,567 for the year
ended December 31, 1994. The increase between 1995 and 1994 was
$763,538 or 23.2%. The increase in the interest rate
environment during the year created this situation. The interest
expense for short-term borrowings totaled $923 for the 12 months
ending December 31, 1995. This expense reflects federal funds
purchased for liquidity needs. Interest on Notes Payable totaled
$96,134 for the year ended December 31, 1995 as compared to $65,455
for the year ended December 31, 1994, an increase of $30,679 or 46.8%.
This situation was created by higher interest rates and a higher
average balance outstanding in 1994 for borrowings of Cabot Street
Realty Trust and the parent company.
Loan Loss Provision
- --------------------
There were no provisions to the allowance for possible loan losses
("ALLL") during 1995 as compared to $215,000 during 1994. No
provisions were warranted because of improved collateral values and
improved quality throughout most of the loan portfolio. At December
31, 1995, the Corporation's allowance for possible loan losses
<PAGE>
was $2,072,523 representing 2.0% of gross loans at December 31,
1995 as compared to $2,075,316, representing a ratio of 2.4% of
total loans at December 31, 1994. The decrease in this ratio
reflects the growth in the loan portfolio during 1995. However,
such growth was primarily in well collateralized loans, which do
not warrant substantial allocations within ALLL.
Additional factors warranting the reduced provision during 1995,
included management's evaluation of economic conditions including
a stabilization and improvement of the local economy. Despite
these positive factors, the Corporation's non-accrual loans
increased to $2,374,226 at December 31, 1995 as compared to
$1,811,688 at December 31, 1994. Similarly, accruing loans past
due 90 days or more and still accruing increased from -0- to
$736,754 at December 31, 1995. As a result, combined non-accrual
loans and past due loans 90 days or more increased to $3,110,980 at
December 31, 1995 as compared to $1,811,688 at December 31, 1994.
However, two loans totaling $2,213,833 or 71.2% at December 31, 1995
were primarily responsible for these increases. Each of these loans
are adequately collateralized and supported by appropriate specific
allocations in the ALLL.
The ratio of non-performing assets to total loans, mortgages
held for sale and OREO was 2.97% for December 31, 1995 as
compared to 2.32% as of December 31, 1994. This increase of
non-accrual loans is $562,538. The ratio of allowance for loan
losses to non-performing assets equaled 66.6% at December 31,
1995 as compared to 100.1% at December 31, 1994.
A total of $78,497 loans were charged off by the Corporation
during 1995 as compared to $1,148,425 charged off during the
corresponding period in 1994. These charge-offs consisted
primarily of loans to small businesses.
Non-Interest Income
- -------------------
Non-interest income increased $207,990 or 11.9% from $1,751,337 in 1994
to $1,959,327 in 1995. This was mainly attributable to income from
fiduciary accounts increased in 1995 in the amount of $129,742 or 16.5%.
Net gains on sales of OREO of $58,155 posted in 1995 as compared to net
gains on sales of OREO of $1,642 in 1994 also helped create an increased
non-interest income. In addition, the corporation generated service charges
remained stable with a slight reduction of $2,339 and other income for 1995
increased $29,325 or 10.0% over 1994.
<PAGE>
Other Expense
- -------------
The total non-interest expense decreased $188,880 or 2.7% from $7,170,732
in 1994 to $6,981,852 in 1995. Salaries and benefits expense decreased
$28,859, because of a reductions in personnel. The full-time equivalent
number of employees dropped by 14 of 15.7% over the past two years.
Occupancy expense increased $33,474 or 5.8%. This is attributed to
write offs of wiring expense related to the corporation's prior computer
system and general upkeep of premises. Equipment costs totaled $374,483
for the 12 months ending December 31, 1995 as compared to $340,298 for the
same period in 1994. This increase of $34,185 or 10.0% can be attributed
to upgrades of computer equipment to support the technology upgrades of both
the Bank and Trust Department operating systems. The FDIC premium decreased
$187,148. The variance of lower other expenses in the amount of $112,193
can be attributed to advertising, seminars, OCC fees, insurance and ATM
processing fees.
Income Taxes
- ------------
Income tax expense totaled $1,026,700 for the year ended December
31, 1995 as compared to $819,963 in 1994. This increase
reflects the increase of taxable income.
Change In Accounting Method for Income Taxes
- --------------------------------------------
There were no changes in accounting method for income taxes in
1995 and 1994. Effective January 1, 1993, the Corporation
adopted SFAS No. 109 "Accounting for Income Taxes". The
adoption of this method resulted in the recognition of an
additional deferred income tax asset of $96,270 which has been
reported in 1993 income as the cumulative effect of an
accounting change.
Net Income
- ----------
Net income was $1,432,272 for 1995 as compared to $1,096,571 for
1994, which is an increase of $335,701 or 30.6%.
Capital Resources
- -----------------
As of December 31, 1995, the Corporation had total capital in
the amount of $13,470,752 as compared with $12,500,816 at
December 31, 1994, which represents an increase of $969,936 or
7.8% (see capital Note 16). The capital ratios of the
Corporation and the Bank exceed applicable regulatory requirements.
<PAGE>
Banks are generally required to maintain a Tier 1 capital at a
level equal to or greater than 4.0% to their adjusted total
assets. As of December 31, 1995, the Bank's Tier 1 capital
amounted to 7.12% of total assets (see Capital Note 16). Banks
and holding companies must maintain minimum levels of risk-based
capital equal to risk weighted assets of 8.00%. At December 31,
1994, the Bank's ratio of risk based capital to risk weighted
assets amounted to 11.24% for Tier 1 and 12.59% for total
capital, which satisfies the applicable risk based capital requirements.
Liquidity
- ---------
The primary function of asset/liability management is to assure
adequate liquidity and maintain an appropriate balance between
interest-sensitive earning assets and interest-bearing
liabilities. Liquidity management involves the ability to meet
the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their
credit needs. Interest rate sensitivity management seeks to
avoid fluctuating net interest margins and to enhance consistent
growth of net interest income through periods of changing
interest rates.
Marketable investment securities, particularly those of shorter
maturities, are the principal source of asset liquidity. The
Corporation maintains a securities available-for-sale account as
a liquidity resource. Securities maturing in one year or less
amounted to approximately $16,843,430 or 37.9% at December 31,
1995 of the investment securities portfolio, and $17,365,246 at
December 31, 1994, representing 29.3% of the investment
securities portfolio. Assets such as federal funds sold,
mortgages held for sale, as well as maturing loans are also
sources of liquidity.
The Corporation's goal is to be interest rate sensitive neutral,
and maintain a net cumulative gap at one year of less than 10%
of Total Earning Assets. The Corporation believes that it is
successfully managing its interest rate risk. Listed below is a
gap analysis by repricing date or maturity.
<PAGE>
Gap Analysis
- ------------
(In Thousands) 0-31 1-3 3-6 6-12 1-5 Over 5
Days Months Months Months Years Years
---- ------ ------ ------ ----- ------
ASSETS
Investments $ 7,464 $ 3,027 $ 3,997 $10,686 $ 7,710 $398
Investments-
Available for Sale 3,121 1,000 0 2,014 5,019 0
Fed Funds Sold 5,800 0 0 0 0 0
Total Loans 14,599 3,095 3,742 10,243 37,253 35,731
Mortgages Held
for Sale 124 0 0 0 0 0
Total Earning ------- ------ ----- ------ ------ ------
Assets 31,108 7,122 7,739 22,943 49,982 36,129
------- ------ ------ ------ ------ ------
LIABILITIES
- -----------
Non-interest
bearing Deposits 0 0 0 0 0 34,501
Savings 0 0 22,985 0 11,316 0
NOW Accounts 0 0 10,004 0 20,312 0
Money Market
Accounts 19,271 0 0 0 0 0
Time Deposits
$100,000 and over 621 408 872 992 823 0
Other time deposits 3,345 5,040 5,697 7,885 9,419 8
------ ----- ------ ----- ------ ------
Total Deposits 23,237 5,448 39,558 8,877 41,870 34,509
Borrowings 0 0 0 300 386 0
Total Deposits & ------ ----- ------ ----- ------ ------
Borrowing 23,237 5,448 39,558 9,177 42,256 34,509
------ ----- ------ ----- ------ ------
Net Asset
(Liability) Gap 7,871 1,674 (31,819) 13,766 7,726 1,620
Cumulative Gap $ 7,871 $ 9,545 $(22,274) $(8,508) $ (782) 838
% Cumulative Gap 5.08% 6.16% (14.37%) (5.49%) (.50%) .54%
The assumptions used to develop this analysis include the following:
- Investments were accumulated by maturity or call dates.
- Loans were accumulated by earliest repricing date or maturity.
- Deposits or borrowings were accumulated by earliest repricing
date or maturity.
<PAGE>
Historically, the overall liquidity of the Corporation has been
enhanced by a high-level of core deposits. Maintaining an
ability to acquire time deposits, money market certificates, and
money market fund accounts are a key to assuring liquidity. This
involves maintenance of an appropriate maturity distribution of
purchased funds as well as diversification of sources through
various money markets. Management believes that the liquidity
of the Bank is sufficient to meet future needs. In addition,
the Bank is subject to Regulation D of the Federal Reserve Board
which requires depository institutions to maintain reserve
balances on deposit with the Federal Reserve Bank based on
certain average depositor balances. The Bank is in compliance
with such requirement.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statement Schedules
---------------------------------------------------
The following consolidated financial statement schedules for the
year ended December 31, 1995 are hereby incorporated by reference.
Description Page Reference
----------- --------------
Consolidated Balance Sheets at
December 31, 1995 and 1994 FS2
Consolidated Statements of Income for
the years ended December 31, 1995,
1994 and 1993 FS3 - FS4
Consolidated Statements of Changes in
Stockholders' Equity for the years
ended December 31, 1995, 1994 and 1993 FS5
Consolidated Statements of Cash Flow for
the years ended December 31, 1995, 1994 and 1993 FS6 - FS7
Notes to Consolidated Financial Statements
for the years ended 1995, 1994 and 1993 including: FS8 - FS29
Parent Company only Balance Sheets at
December 31, 1995 and 1994 FS30
Parent Company only Statements of Income for
the years ended December 31, 1995, 1994 and 1993 FS31
Parent Company only Statements of Changes in
Stockholders' Equity for the years
ended December 31, 1995, 1994 and 1993 FS33
Parent Company only Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993 FS32 - FS33
<PAGE>
The Board of Directors and Stockholders Beverly National
Corporation Beverly, Massachusetts
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of
Beverly National Corporation and Subsidiaries as of December 31,
1995 and 1994 and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Beverly National Corporation
and Subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of their operations and their cash flows
for each of the years in the three-year period ended December
31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 12 to the consolidated financial
statements, the Corporation adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pension," effective for the
year ended December 31, 1993.
As discussed in Notes 2 and 9 to the consolidated financial
statements, the Corporation adopted the provisions of the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes,"
effective January 1, 1993.
As discussed in Note 2 to the consolidated financial statements,
the Bank adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" as of January 1, 1994.
SHATSWELL, MacLEOD & COMPANY, P.C. West Peabody, Massachusetts
January 11, 1996
FS1
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
Cash and due from banks $ 9,294,959 $10,031,837
Federal funds sold 5,800,000
Investments in available-for-sale
securities (at fair value)(Note 3) 11,153,903 11,512,047
Investments in held-to-maturity
securities (fair values of $33,232,340
as of December 31, 1995 and $45,885,636
as of December 31, 1994) (Note 3) 33,183,718 47,632,024
Federal Reserve Bankstock, at cost 97,500 97,500
Loans, net of the allowance for possible
loan losses of $2,072,523 and
$2,075,316, respectively (Note 4) 102,491,814 86,378,312
Mortgages held for sale 123,663 177,819
Premises and equipment (Note 5) 4,377,035 4,399,704
Other real estate 232,000
Accrued interest receivable 1,204,582 1,387,996
Other assets 1,393,520 1,368,957
------------ ------------
$169,120,694 $163,218,196
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6) $153,498,225 $148,860,743
Notes payable (Note 8) 685,627 1,035,627
Employee Stock Ownership Plan
loans (Note 11) 394,354 125,000
Other liabilities 1,071,736 696,010
------------ ------------
Total liabilities 155,649,942 150,717,380
------------ ------------
Commitments and contingent liabilities (Notes 13 and 14)
Stockholders' equity:
Preferred stock, $2.50 par value per share; 300,000
shares authorized; issued and outstanding none
Common stock, par value $2.50 per share; authorized
2,500,000 shares in 1995 and 1,000,000 shares in 1994;
issued 791,349 shares as of December 31, 1995 and
791,349 shares as of December 31, 1994; outstanding,
751,172 shares as of December 31, 1995 and
754,172 shares as of December 31, 1994 1,978,373 1,978,373
Paid-in capital 4,380,219 4,380,219
Retained earnings 8,304,831 7,294,056
Treasury stock, at cost (40,177 shares
as of December 31, 1995 and 37,177
shares as of December 31, 1994) (744,619) (695,119)
Unearned Compensation - Employee Stock
Ownership Plan (Note 11) (394,354) (125,000)
Net unrealized holding loss on available-
for-sale securities(Notes 2 and 3) (53,698) (331,713)
------------ ------------
Total stockholders' equity 13,470,752 12,500,816
------------ ------------
$169,120,694 $163,218,196
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
FS2
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Interest and dividend income:
Interest and fees on loans $ 8,504,806 $ 7,447,170 $ 7,866,119
Interest and dividends on
investment securities:
Taxable 2,772,065 3,287,288 3,276,411
Tax-exempt 42,756 47,114 63,771
Other interest 317,032 188,672 139,228
----------- ----------- -----------
Total interest and dividend income 11,636,659 10,970,244 11,345,529
----------- ----------- -----------
Interest expense:
Interest on deposits (Note 6) 4,058,105 3,294,567 3,913,231
Interest on short-term borrowings
(Note 7) 923 59,293
Interest on notes payable (Note 8) 96,134 65,455 40,136
----------- ----------- -----------
Total interest expense 4,155,162 3,419,315 3,953,367
----------- ----------- -----------
Net interest and dividend income 7,481,497 7,550,929 7,392,162
Provision for loan losses (Note 4) 215,000 650,000
----------- ----------- -----------
Net interest and dividend income
after provision for loan losses 7,481,497 7,335,929 6,742,162
----------- ----------- -----------
Other income:
Income from fiduciary activities 918,471 788,729 779,689
Service charges on deposit accounts 416,149 418,488 399,372
Other deposit fees 242,489 247,740 222,442
Gain on sales of other real estate
owned, net 58,155 1,642 19,733
Other income 324,063 294,738 441,137
----------- ----------- -----------
Total other income 1,959,327 1,751,337 1,862,373
----------- ----------- -----------
Other expense:
Salaries and employee benefits
(Notes 11 and 12) 4,004,874 4,033,733 3,866,178
Occupancy expense 606,840 573,366 613,568
Equipment expense 374,483 340,298 325,990
Data processing fees 320,409 263,916 250,782
Investment securities losses, net 6,811 2,648
F.D.I.C. insurance premium 194,495 381,643 359,727
Stationary and supplies 141,943 130,938 142,739
Other expense 1,331,997 1,444,190 1,366,040
----------- ----------- -----------
Total other expense 6,981,852 7,170,732 6,925,024
----------- ----------- -----------
FS3
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993 (continued)
1995 1994 1993
Income before income taxes and
cumulative effect of change in
accounting principle 2,458,972 1,916,534 1,679,511
Income taxes (Note 9) 1,026,700 819,963 675,200
------------ ------------ -----------
Income before cumulative effect of
change in accounting principle 1,432,272 1,096,571 1,004,311
Cumulative effect of change in
method of accounting for income
taxes (Note 2) 96,270
------------ ------------ ------------
Net income $ 1,432,272 $ 1,096,571 $ 1,100,581
============ ============ ============
Earnings per share (Note 18):
Primary shares outstanding 757,884 738,584 784,422
============ ============ ============
Income before cumulative effect
of change in accounting
principle $ 1.89 $ 1.48 $ 1.28
Cumulative effect of change in
method of accounting for
income taxes (Note 2) .12
------------ ------------ ------------
Net income per share $ 1.89 $ 1.48 $ 1.40
============ ============ ============
Fully diluted shares outstanding 767,762 762,663 784,422
============ ============ ============
Income before cumulative effect
of change in accounting
principle $ 1.87 $ 1.44 $ 1.28
Cumulative effect of change in
method of accounting for
income taxes (Note 2) .12
------------ ------------ ------------
Net income per share $ 1.87 $ 1.44 $ 1.40
============ ============ ============
Earnings per share for 1993 have been reduced to reflect the
effect of the 1994 stock split.
The accompanying notes are an integral part of these
consolidated financial statements.
FS4
<PAGE>
<TABLE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Net Unrealized
Holding Gain
Unearned (Loss) On
Common Paid-in Retained Treasury Compensation Available-For-
Stock Capital Earnings Stock ESOP Sale Securities Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 659,458 $5,759,415 $5,693,424 $(88,155) $(160,000) $ $11,864,142
Net income 1,100,581 1,100,581
Unearned compensation payment 40,000 40,000
Dividends declared ($.39
per share) (Note 18) (303,310) (303,310)
---------- ---------- ---------- ----------- ---------- ------------ ------------
Balance, December 31, 1993 659,458 5,759,415 6,490,695 (88,155) (120,000) 12,701,413
Net income 1,096,571 1,096,571
Unearned compensation payment 60,000 60,000
Unearned compensation increase (65,000) (65,000)
Dividends declared ($.39
per share) (Note 18) (293,210) (293,210)
Purchase of treasury stock (1,250,000) (1,250,000)
Stock split (3 for 1)
(Note 18) 1,318,915 (1,318,915)
Sale of treasury stock (60,281) 643,036 582,755
Net unrealized holding gain
on adoption of SFAS No. 115
as of January 1, 1994
(Notes 2 and 3) 32,995 32,995
Net change in unrealized
holding gain on available-
for-sale securities (364,708) (364,708)
---------- ----------- --------- ----------- --------- ----------- -----------
Balance, December 31, 1994 1,978,373 4,380,219 7,294,056 (695,119) (125,000) (331,713) 12,500,816
Net income 1,432,272 1,432,272
Unearned compensation payment 40,000 40,000
Unearned compensation increase (309,354) (309,354)
Dividends declared ($.56
per share) (Note 18) (421,497) (421,497)
Purchase of treasury stock (49,500) (49,500)
Net change in unrealized
holding loss on available-
for-sale securities 278,015 278,015
---------- ---------- ---------- ---------- ---------- ----------- -----------
Balance, December 31, 1995 $1,978,373 $4,380,219 $8,304,831 $(744,619) $(394,354) $ (53,698) $13,470,752
========== ========== ========== ========== ========== =========== ===========
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
FS5
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating activities:
Net income $1,432,272 $1,096,571 $1,100,581
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Net decrease in mortgages
held-for-sale 3,776 576,290 1,448,266
Net decrease in securities
held-for-sale 932,344
Gain on sales of other real estate
owned, net (58,155) (1,642) (19,733)
Write downs of other real estate
owned 17,808 42,000
Write down of fixed assets 7,404 74,500 44,575
Change in prepaid interest 3,933 3,933 3,933
Depreciation and amortization 394,450 382,813 386,026
Provision for loan losses 215,000 650,000
Deferred tax expense (benefit) (35,081) 292,372 (105,138)
Increase (decrease) in taxes payable 149,637 (360,472) 245,003
Cumulative effect of change in
method of accounting for
income taxes (96,270)
Decrease in interest receivable 183,414 159,141 11,082
Increase (decrease) in interest
payable 126,244 (9,150) (52,311)
Increase in accrued expenses 135,417 69,054 227,521
Increase in prepaid expenses (208,453) (78,038) (51,413)
Amortization (accretion) of
investment securities, net (104,077) 248,697 460,417
(Gain) loss on sales of assets, net (400) 6,621
Investment securities losses, net 6,811 2,648
Change in deferred loan costs 56,853 27,017 (49,184)
Change in unearned income (245) (7,545) (42,010)
----------- ----------- -----------
Net cash provided by operating
activities 2,111,608 2,697,810 5,135,689
----------- ----------- -----------
Cash flows from investing activities:
Purchases of available-for-sale
securities (5,283,781) (4,121,719)
Proceeds from sales of available
-for-sale securities 5,204,906 175,000
Proceeds from maturities of
available-for-sale securities 1,000,000 2,000,000
Purchases of held-to-maturity
securities (8,009,063) (17,863,887)
Proceeds from maturities of
held-to-maturity securities 22,368,720 24,319,375
Proceeds from maturities of
investment securities 12,555,000
FS6
<PAGE>
Proceeds from sales of
investment securities 190,725
Purchases of investment securities (22,770,547)
Proceeds from sales of other real
estate owned 329,157 89,100 256,733
Net (increase) decrease in loans (16,252,244) (4,785,009) 5,583,763
Capital expenditures (379,225) (76,306) (240,573)
Recoveries of previously charged
-off loans 75,704 244,212 189,734
Increase in other liabilities 24,466 3,638 4,802
(Increase) decrease in federal
funds sold (5,800,000) 1,900,000 3,500,000
Increase in other assets (34,192) (86,229) (39,695)
Proceeds from sales of fixed assets 440 189,328
----------- ----------- ----------
Net cash provided by (used in)
investing activities (6,755,112) 1,987,503 (770,058)
----------- ----------- ----------
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993 (continued)
1995 1994 1993
Cash flows from financing activities:
Proceeds from sales of treasury stock 582,755
Purchases of treasury stock (49,500) (1,250,000)
Net increase (decrease) in demand
deposits, NOW, money market and
savings accounts (2,811,633) 287,770 (1,716,157)
Net increase (decrease) in time
deposits 7,449,115 (2,020,920) (3,215,013)
Repayment of notes payable (450,000) (100,000) (100,000)
Proceeds from notes payable 100,000 550,000
Dividends paid (331,356) (293,210) (303,310)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 3,906,626 (2,243,605) (5,334,480)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (736,878) 2,441,708 (968,849)
Cash and cash equivalents at
beginning of year 10,031,837 7,590,129 8,558,978
------------ ----------- -----------
Cash and cash equivalents at
end of year $ 9,294,959 $10,031,837 $ 7,590,129
============ ============ ============
Supplemental disclosures:
Loans transferred to other real
estate owned $616,810 $417,000 $621,708
Loans originated for sales of
other real estate owned $560,000 $554,400 $227,000
Investment securities transferred
to securities held for sale $3,009,259
Mortgages held-for-sale transferred
to loans $50,380 $2,842,732 $330,192
Available-for-sale securities
transferred to held-to-maturity
securities $1,998,275
Held-to-maturity securities
transferred to available-for-sale $100,000
Interest paid $4,028,918 $3,428,465 $4,005,678
Income taxes paid $912,144 $888,063 $535,335
The accompanying notes are an integral part of these
consolidated financial statements.
FS7
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
NOTE 1 - NATURE OF OPERATIONS Beverly National Corporation
(Corporation) is a state chartered corporation that was
organized in 1984 to become the holding company of Beverly
National Bank (Bank). The Corporation's primary activity is to
act as the holding company for the Bank. The Bank is a
federally chartered bank, which was incorporated in 1802 and is
headquartered in Beverly, Massachusetts. The Bank operates its
business from four banking offices located in Massachusetts.
The Bank is engaged principally in the business of attracting
deposits from the general public and investing those deposits in
residential and real estate loans, and in consumer and small
business loans.
NOTE 2 - ACCOUNTING POLICIES The accounting and reporting
policies of the Corporation and its subsidiaries conform to
generally accepted accounting principles and predominant
practices within the banking industry. The consolidated
financial statements of the Corporation were prepared using the
accrual basis of accounting with the exception of fiduciary
activities and certain minor sources of income which are
reflected on a cash basis. The results of these activities do
not differ materially from those which would result using the
accrual method. The significant accounting policies of the
Corporation and its subsidiaries are summarized below to assist
the reader in better understanding the financial statements and
other data contained herein.
PERVASIVENESS OF ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from the estimates.
BASIS OF PRESENTATION: The consolidated financial statements
include the accounts of the Corporation and its wholly-owned
subsidiaries, the Bank, Cabot Street Realty Trust and 86 Bay
Road Realty Trust. All significant intercompany accounts and
transactions have been eliminated in the consolidation.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, cash items and
due from banks.
FS8
<PAGE>
INVESTMENT SECURITIES, IN GENERAL: Investments in debt
securities are adjusted for amortization of premiums and
accretion of discounts computed on the straight-line method
which has substantially the same effect as using the interest
method. Gains or losses on sales of investment securities are
computed on a specific identification basis.
INVESTMENT SECURITIES, AFTER THE ADOPTION OF SFAS NO. 115: As
of January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115). The
Statement establishes standards of financial accounting and
reporting for investments in equity securities that have readily
determinable fair values and all investments in debt securities.
SFAS No. 115 requires that the Corporation classify debt and
equity securities into one of three categories:
held-to-maturity, available-for-sale, or trading. This security
classification may be modified after acquisition only under
certain specified conditions. In general, securities may be
classified as held-to-maturity only if the Corporation has the
positive intent and ability to hold them to maturity. Trading
securities are defined as those bought and held principally for
the purpose of selling them in the near term. All other
securities must be classified as available-for-sale.
-- Held-to-maturity securities are measured at amortized cost in
the balance sheet. Unrealized holding gains and losses are not
included in earnings or in a separate component of capital.
They are disclosed in the notes to the financial statements.
-- Available-for-sale securities are carried at fair value on
the balance sheet. Unrealized holding gains and losses are not
included in earnings, but are reported as a net amount (less
expected tax) in a separate component of capital until realized.
-- Trading securities are carried at fair value on the balance
sheet. Unrealized holding gains and losses for trading
securities are included in earnings. As the Corporation had no
trading securities as of January 1, 1994, there was no impact
to the Corporation's earnings upon the adoption of the statement.
INVESTMENT SECURITIES, PRIOR TO THE ADOPTION OF SFAS NO. 115:
Investments in debt securities are those securities which the
Corporation has the ability to hold to maturity and the intent
to hold on a long-term basis or until maturity. Investments in
debt securities to be held for indefinite periods of time,
including securities that management intends to use as part of
its asset/liability strategy, or that may be sold in response to
changes in interest rates, changes in prepayment risk, the need
to increase regulatory capital or other similar factors, are
classified as held for sale and are carried at the lower of cost
or market value.
FS9
<PAGE>
LOANS: Loans, as reported, have been reduced by amounts due to
borrowers on unadvanced loans, net deferred loan fees and the
allowance for possible loan losses.
Interest on loans is generally recognized on a simple interest
basis. Interest on loans is not generally accrued when loans
become 90 days or more overdue.
Loan origination and commitment fees and certain direct
origination costs are deferred, and the net amount amortized as
an adjustment of the related loan's yield. The Corporation is
generally amortizing these amounts over the contractual life of
the related loans.
Loans receivable that management has the intent and ability to
hold for the foreseeable future or until maturity or payoff are
reported at their outstanding principal balances reduced by any
charge-offs or specified valuation accounts and net of any
deferred fees or costs on originated loans, or unamortized
premiums or discounts on purchased loans. Cash receipts of
interest income on impaired loans is credited to principal to
the extent necessary to eliminate doubt as to the collectibility
of the net carrying amount of the loan. Some or all of the cash
receipts of interest income on impaired loans is recognized as
nterest income if the remaining net carrying amount of the loan
is deemed to be fully collectible. When recognition of interest
income on an impaired loan on a cash basis is appropriate, the
amount of income that is recognized is limited to that which
would have been accrued on the net carrying amount of the loan
at the contractual interest rate. Any cash interest payments
received in excess of the limit and not applied to reduce the
net carrying amount of the loan are recorded as recoveries of
charge-offs until the charge-offs are fully recovered.
ALLOWANCE FOR POSSIBLE LOAN LOSSES: An allowance is available
for losses which may be incurred in the future on loans in the
current portfolio. The allowance is increased by provisions
charged to current operations and is decreased by loan losses,
net of recoveries. The provision for loan losses is based on
management's evaluation of current and anticipated economic
conditions, changes in the character and size of the loan
portfolio, and other indicators. The balance in the allowance
for possible loan losses is considered adequate by management to
absorb any reasonably foreseeable loan losses.
As of January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan," as amended by SFAS No. 118.
According to SFAS No. 114, a loan is impaired when, based on
current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The Statement requires
that impaired loans be measured on a loan by loan basis by
either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's
observable market price, or the fair value of the collateral if
the loan is collateral dependent.
FS10
<PAGE>
The Statement is applicable to all loans, except large groups of
smaller balance homogeneous loans that are collectively
evaluated for impairment, loans that are measured at fair value
or at the lower of cost or fair value, leases, and convertible
or nonconvertible debentures and bonds and other debt securities.
The financial statement impact of adopting the provisions of
this Statement was not material.
PREMISES AND EQUIPMENT: Premises and equipment are stated at
cost, less accumulated depreciation and amortization. Cost and
related allowances for depreciation and amortization of premises
and equipment retired or otherwise disposed of are removed from
the respective accounts with any gain or loss included in income
or expense. Depreciation and amortization are calculated
principally on the straight-line method over the estimated
useful lives of the assets.
MORTGAGES: Mortgages held-for-sale in the secondary market are
carried at the lower of cost or estimated fair value in the
aggregate. Fair value is estimated based on outstanding
investor commitments or, in the absence of such commitments,
based on current investor yield requirements. Net unrealized
losses are provided for in a valuation allowance by charges to
operations.
Interest income on loans held-for-sale is accrued currently and
classified as interest on loans.
OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES: Other
real estate owned includes properties acquired through
foreclosure and properties classified as in-substance
foreclosures in accordance with Financial Accounting Standards
Board Statement No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring." These properties are carried at
the lower of cost or fair value less estimated costs to sell.
Any write down from cost to fair value required at the time of
foreclosure or classification as in-substance foreclosure is
charged to the allowance for possible loan losses. Expenses
incurred in connection with maintaining these assets, subsequent
write downs and gains or losses recognized upon sale are
included in other expense.
Beginning in 1995, in accordance with Statement of Financial
Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan," the Corporation classifies loans as
in-substance repossessed or foreclosed if the Corporation
receives physical possession of the debtor's assets regardless
of whether formal foreclosure proceedings take place.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," requires that the Corporation disclose
estimated fair values for its financial instruments. Fair value
methods and assumptions used by the Corporation in estimating
its fair value disclosures are as follows:
FS11
<PAGE>
Cash and cash equivalents: The carrying amounts reported in the
balance sheet for cash and federal funds sold approximate those
assets' fair values.
Securities: Fair values for securities are based on quoted
market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments.
Loans receivable: For variable-rate loans that reprice
frequently and with no significant change in credit risk, fair
values are based on carrying values. The fair values for other
loans are estimated by discounting the future cash flows, using
interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. The carrying
amount of accrued interest approximates its fair value.
Deposit liabilities: The fair values disclosed for demand
deposits, regular savings, NOW accounts, and money market
accounts are equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for
certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Off-balance sheet instruments: The fair value of commitments to
originate loans is estimated using the fees currently charged to
enter similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments and the
unadvanced portion of loans, fair value also considers the
difference between current levels of interest rates and the
committed rates. The fair value of letters of credit is based
on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the
obligation with the counterparties at the reporting date.
INCOME TAXES: Effective January 1, 1993, the Corporation
recognizes income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are
established for the temporary differences between the accounting
basis and the tax basis of the Corporation's assets and
liabilities at enacted tax rates expected to be in effect when
the amounts related to such temporary differences are realized
or settled. The adoption of this method as of January 1, 1993
resulted in the recognition of an additional deferred income tax
asset of $96,270 which has been reported in 1993 income as the
cumulative effect of an accounting change.
Prior to January 1, 1993, the Corporation recognized income
taxes under the deferred method. Under this method, annual
income tax expense was matched with pretax accounting income by
providing deferred taxes at current tax rates for timing
differences between income reported for accounting purposes and
that reported for tax purposes.
FS12
<PAGE>
NOTE 3 - INVESTMENTS IN SECURITIES
Investments in available-for-sale securities are carried at fair
value on the balance sheet and are summarized as follows as of
December 31, 1995:
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
Debt securities issued by the
U.S. Treasury and other U.S.
government corporations
and agencies $11,070,812 $41,617 $58,526 $11,053,903
Debt securities issued by
states of the United States
and political subdivisions
of the states 100,000 100,000
----------- ------- ------- -----------
$11,170,812 $41,617 $58,526 $11,153,903
=========== ======= ======= ===========
Information about the contractual maturities of investments in
debt securities classified as available-for-sale is summarized
as follows as of December 31, 1995:
Amortized
Cost Fair
Basis Value
Due within one year $ 2,073,295 $ 2,086,140
Due after one year through five years 8,997,517 8,967,763
Due after ten years 100,000 100,000
----------- -----------
$11,170,812 $11,153,903
=========== ===========
During 1995, proceeds from sales of available-for-sale securities
amounted to $5,204,904. Gross realized gains and gross realized
losses on those sales amounted to $5,358 and $8,927, respectively.
In 1995, the Corporation transferred at fair value a municipal
debt security classified as held-to-maturity to a security
classified as available-for-sale. There was no unrealized
holding gain or loss at the date of transfer. The transfer was
a result of a reassessment of the appropriateness of the
classification of all securities held as of December 31, 1995.
In accordance with a special report of the Financial Accounting
Standards Board regarding SFAS No. 115 this transfer will not
call into question the intent of the Corporation to hold other
debt securities to maturity in the future.
FS13
<PAGE>
Investments in available-for sale securities are carried at fair value
on the balance sheet and are summarized as follows
as of December 31, 1994: Gross
Amortized Unrealized
Cost Holding Fair
Basis Losses Value
Debt securities issued by the
U.S. Treasury and other U.S.
government corporations
and agencies $11,982,140 $470,093 $11,512,047
=========== ======== ===========
During 1994, proceeds from sales of available-for-sale
securities amounted to $175,000. There were no gross realized
gains or gross realized losses on those sales.
The adoption of SFAS No. 115 as of January 1, 1994 had the
following effect on the consolidated financial statements for
the year ended December 31, 1994:
Addition to stockholders' equity:
Net unrealized holding gain on available-for-sale securities $57,161
Less tax effect 24,166
-------
Net effect $32,995
=======
In 1994, subsequent to the adoption of SFAS No. 115 as of
January 1, 1994, certain available-for-sale securities were
transferred at fair value from the category available-for-sale
to the category held-to-maturity. The net unrealized holding
losses on such securities are $104,565 and that amount less the
tax effect of $44,206 is included in the separate component of
stockholders' equity as of December 31, 1994.
Investments in held-to-maturity securities are carried at
amortized cost on the balance sheet and are summarized as
follows as of December 31, 1995:
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
Debt securities issued by the
U.S. Treasury and other U.S.
government corporations
and agencies $32,402,473 $ 95,704 $93,340 $32,404,837
Debt securities issued by
states of the United States
and political subdivisions
of the states 481,245 5,749 486,994
Debt securities issued by
foreign governments 300,000 40,509 340,509
----------- -------- ------- -----------
$33,183,718 $141,962 $93,340 $33,232,340
=========== ======== ======= ===========
FS14
<PAGE>
Information about the contractual maturities of investments in
debt securities classified as held-to-maturity is summarized as
follows as of December 31, 1995:
Amortized
Cost Fair
Basis Value
Due within one year $14,757,290 $14,725,916
Due after one year through five years 18,126,428 18,165,915
Due after five years through ten years 300,000 340,509
----------- -----------
$33,183,718 $33,232,340
=========== ===========
Investments in held-to-maturity securities are carried at
amortized cost on the balance sheet and are summarized as
follows as of December 31, 1994:
Gross Gross
Amortized Unrealized Unrealized
Cost Holding Holding Fair
Basis Gains Losses Value
Debt securities issued by the
U.S. Treasury and other U.S.
government corporations
and agencies $46,374,054 $ 7,365 $1,766,073 $44,615,346
Debt securities issued by
states of the United States
and political subdivisions
of the states 957,970 16,223 974,193
Debt securities issued by
foreign governments 300,000 3,903 296,097
----------- ------- ---------- -----------
$47,632,024 $23,588 $1,769,976 $45,885,636
=========== ======= ========== ===========
Proceeds from sales of investments in debt securities during 1993 were
$190,725. There were no realized gains or losses from those sales.
There were no sales or realized gains or losses recorded on
securities held-for-sale during 1993.
There were no securities of issuers whose aggregate carrying amount
exceeded 10% of stockholders' equity as of December 31, 1995.
A total par value of $16,100,000 and $13,600,000 was pledged to
secure treasury tax and loan, trust funds and public funds on
deposit at December 31, 1995 and 1994, respectively.
FS15
<PAGE>
NOTE 4 - LOANS
Loans consisted of the following as of December 31:
1995 1994
Commercial, financial and agricultural $16,485,532 $16,322,592
Real estate - construction and land
development 4,648,818 3,806,610
Real estate - residential 34,092,682 25,858,917
Real estate - commercial 42,587,993 35,702,101
Consumer 5,593,914 6,481,293
Other 1,252,342 322,447
------------ -----------
104,661,281 88,493,960
Allowance for possible loan losses (2,072,523) (2,075,316)
Deferred loan fees, net (96,940) (40,087)
Unearned income (4) (245)
------------ -----------
Net loans $102,491,814 $86,378,312
============ ===========
Information with respect to nonaccrual and past due loans is as
follows as of December 31:
1995 1994
Nonaccrual loans $2,374,226 $1,811,688
Accruing loans past due 90 days or more 736,754
---------- ----------
$3,110,980 $1,811,688
========== ==========
There were no accruing loans past due 90 days or more as of December 31, 1994.
The amount of interest income recorded during 1995, 1994 and
1993 on nonaccrual loans outstanding as of December 31, 1995,
1994 and 1993 amounted to $16,593, $60,716 and $53,807,
respectively. Had the nonaccrual loans performed under their
original terms, the amount recorded would have been $190,312,
$195,598 and $511,074 in 1995, 1994 and 1993, respectively.
Certain directors and executive officers of the Corporation and
companies in which they have significant ownership interest were
customers of the Corporation during 1995. Total loans to such
persons and their companies amounted to $583,036 as of December
31, 1995 and $467,919 as of December 31, 1994. During 1995
principal payments and advances totaled $40,883 and $156,000,
respectively.
FS16
<PAGE>
Changes in the allowance for possible loan losses were as
follows for the years ended December 31:
1995 1994 1993
Balance at beginning of period $2,075,316 $2,764,529 $2,555,204
Loans charged off (78,497) (1,148,425) (630,409)
Provision for loan losses 215,000 650,000
Recoveries of loans previously charged off 75,704 244,212 189,734
---------- ---------- ---------
Balance at end of period $2,072,523 $2,075,316 $2,764,529
========== ========== ==========
Information about loans that meet the definition of an impaired
loan in Statement of Financial Accounting Standards No. 114 is
as follows as of December 31, 1995:
Recorded Related
Investment Allowance
In Impaired For Credit
Loans Losses
Loans for which there is a related
allowance for credit losses $1,945,167 $400,000
Loans for which there is no related
allowance for credit loss 24,819
---------- --------
Totals $1,969,986 $400,000
========== ========
Average recorded investment in impaired
loans during the year ended
December 31, 1995 $1,118,454
==========
Related amount of interest income
recognized during the time,in
the year ended December 31, 1995,
that the loans were impaired $ 20,539
==========
Total recognized $ 20,539
==========
Amount recognized using a cash-basis
method of accounting $ 0
==========
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
1995 1994
Land $ 421,077 $ 421,077
Buildings 4,403,652 4,449,724
Furniture and equipment 1,622,289 1,472,905
Leasehold improvements 507,258 617,089
---------- ----------
6,954,276 6,960,795
Accumulated depreciation and amortization (2,577,241) (2,561,091)
---------- ----------
$4,377,035 $4,399,704
========== ==========
FS17
<PAGE>
Depreciation and amortization expense amounted to $394,450, $382,813 and
$386,026 for the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 6 - DEPOSITS
The carrying amounts of deposits consisted of the following as of December 31:
1995 1994
Demand $ 34,500,825 $ 29,012,533
Regular savings 34,300,913 40,929,159
NOW accounts 30,316,353 30,548,473
Money market accounts 19,271,207 20,710,766
Time deposits 35,108,927 27,659,812
------------ ------------
$153,498,225 $148,860,743
============ ============
As of December 31, 1995 and 1994 the amounts of time deposits of
$100,000 and over were $3,716,289 and $2,475,216, respectively.
Interest on deposits classified by type is as follows for the
years ended December 31:
1995 1994 1993
Regular savings $1,112,693 $1,095,967 $1,306,479
NOW accounts 497,670 518,790 595,876
Money market accounts 714,734 495,312 694,258
Time deposits 1,733,008 1,184,498 1,316,618
---------- ---------- ----------
$4,058,105 $3,294,567 $3,913,231
========== ========== ==========
NOTE 7 - SHORT-TERM BORROWINGS
The Bank engages in certain borrowing agreements throughout the
year. These are ordinary consequences of bank business and are
composed of two types. Federal funds purchased represent daily
transactions which the Bank uses to manage its funds and liquity
position to comply with regulatory requirements. Interest rates
fluctuate daily reflecting existing market conditions. Other
borrowings consisted of a term loan from Warren Five Cents
Savings Bank to Beverly National Corporation which was paid off
in 1994. There were no short-term borrowings during 1993.
FS18
<PAGE>
Information relating to average borrowings, interest paid and
average rates paid is as follows for the years ended December 31:
1995 1994
Average borrowings:
Federal funds purchased $15,068 $ 35,616
Other borrowings 630,137
------- --------
$15,068 $665,753
======= ========
Interest paid:
Federal funds purchased $ 923 $ 2,106
Other borrowings 57,187
------- --------
$ 923 $ 59,293
======= ========
Average borrowing rates:
Federal funds purchased 6.13% 5.91%
Other borrowings 9.08%
Weighted average 6.13% 8.91%
There were no short-term borrowings
outstanding at any month end during 1995.
Maximum amount outstanding at
any month's end during 1994:
Other borrowings $1,250,000
The average borrowing rate was arrived at by dividing the actual
interest expense related to the borrowing by the average daily
balance of the outstanding borrowings.
NOTE 8 - NOTES PAYABLE
Notes payable consisted of the following as of December 31:
1995 1994
Term loan, maturing on January 1, 1999.
Interest payable at the First & Ocean
National Bank's base rate $300,000 $ 550,000
Industrial Revenue Bond, due in equal
annual payments until June 30,1995
and a balloon payment due June 30, 2000.
Interest payable at94.11% of the Bank
of Boston prime rate 385,627 485,627
-------- ----------
$685,627 $1,035,627
======== ==========
The term loan was issued to Beverly National Corporation on
December 29, 1994. The loan was granted by First & Ocean
National Bank. The balance as of December 31, 1995 is due and
payable in three consecutive annual installments of principal,
each in the amount of $100,000, beginning January 1, 1997 and
continuing on the same day of each of the next two succeeding years.
FS19
<PAGE>
The Industrial Revenue Bond was issued to Cabot Street Realty
Trust on August 1, 1985 in order to purchase property and
finance renovations. The Bond was issued by the Bank of Boston
and was reduced by annual payments of $100,000. Annual payments
continued until June 30, 1995. The Corporation will continue to
pay interest quarterly on the outstanding principal balance until
June 30, 2000 when the remaining $385,627 in principal will be due.
Interest expense on notes payable for the years ended December 31, 1995,
1994 and 1993 totaled $96,134, $65,455, and $40,136, respectively.
NOTE 9 - INCOME TAXES
As discussed in Note 2, effective January 1, 1993, the
Corporation adopted Statement of Financial Accounting Standard
No. 109, "Accounting for Income Taxes."
The components of the income tax expense are as follows for the
years ended December 31:
1995 1994 1993
Current:
Federal $ 731,021 $328,931 $527,218
State 330,760 198,660 253,120
---------- -------- --------
1,061,781 527,591 780,338
---------- -------- --------
Deferred:
Federal (14,160) 214,032 (84,628)
State (20,921) 78,340 (20,510)
---------- -------- --------
(35,081) 292,372 (105,138)
---------- -------- --------
Total income tax expense $1,026,700 $819,963 $675,200
========== ======== ========
The following reconciles the income tax provision from the
statutory rate to the amount reported in the consolidated
statements of income for the years ended December 31:
% of % of % of
1995 Income 1994 Income 1993 Income
Federal income tax at
statutory rate $ 836,050 34.0% $651,622 34.0% $571,034 34.0%
Increase (decrease)
in tax resulting from:
Tax-exempt income (18,717) (.8) (17,299) (.9) (22,013) (1.3)
Dividends paid to ESOP (8,100) (.3) (3,135) (.1) (3,109) (.2)
Alternative minimum tax (27,900) (1.6)
Unallowable expenses 8,511 .3 5,955 .3 3,738 .2
State tax, net of federal
tax benefit 208,956 8.5 182,820 9.5 153,450 9.1
---------- ---- -------- ---- -------- ----
$1,026,700 41.7% $819,963 42.8% $675,200 40.2%
========== ==== ======== ==== ======== ====
FS20
<PAGE>
The major components of deferred income tax benefits attributable
to income are as follows for the years ended December 31:
1995 1994 1993
Accrued interest on nonperforming loans $(40,635) $ 4,932 $ (9,311)
Provision for loan losses 24,242 323,831 (88,495)
Accelerated depreciation 2,139 (4,363) 18,605
Deferred loan fees and costs (26,881) (7,118) 18,088
Pension expense 10,074 (14,871) 22,670
Alternative minimum tax credit deferred (27,900)
Other temporary differences 15,471 (4,368) 1,868
Valuation of real estate 15,183 (15,183)
Post retirement benefits (19,491) (20,854) (25,480)
--------- --------- ----------
$(35,081) $292,372 $(105,138)
========= ========= ==========
The Corporation had gross deferred tax assets and gross deferred
tax liabilities as follows as of December 31:
1995 1994
Deferred tax assets:
Allowance for loan losses $607,419 $631,661
Loan origination fees and cost, net 44,004 17,123
Accrued retirement benefits 65,825 46,334
Accrued interest on nonperforming loans 69,026 28,391
Net unrealized holding loss on available
-for-sale securities 39,206 242,945
-------- --------
Gross deferred tax asset 825,480 966,454
-------- --------
Deferred tax liabilities:
Accelerated depreciation 228,977 226,838
Prepaid pension expense 35,971 25,897
Other adjustments 24,061 8,590
-------- --------
Gross deferred tax liability 289,009 261,325
-------- --------
Net deferred tax asset $536,471 $705,129
======== ========
Deferred tax assets as of December 31, 1995 and 1994 have not
been reduced by a valuation allowance because management
believes that it is more likely than not that the full amount of
deferred tax assets will be realized.
As of December 31, 1995, the Corporation had no operating loss
and tax credit carryovers for tax purposes.
FS21
<PAGE>
NOTE 10 - INCENTIVE STOCK OPTION PLAN
The Incentive Stock Option Plan allows the Board of Directors to
issue stock options to key employees that it may determine to be
capable of making substantial contributions to the management or
development of the Corporation or its subsidiaries. Under the
plan, options are granted at fair market value. There are
56,100 options available under this plan.
The Corporation has a non-qualified Directors Stock Option Plan
to provide incentives to present and future directors of Beverly
National Corporation, in order that they may provide exceptional
services to the Corporation and its subsidiaries and to offer
inducements to such individuals to accept and continue service
on its or their boards of directors. Under this plan, stock
options are granted at no less than 85% of fair market value.
There are 108,000 options available under this plan.
Stock options are as follows for the years ended December 31:
1995 1994
Outstanding at end of year 164,100 164,100
Exercisable at end of year 60,577 56,172
No options were exercised during 1995 or 1994.
Options outstanding as of December 31, 1995 were exercisable at $11.90
for the Director's Plan and $14.00 for the Key Employee Plan.
NOTE 11 - EMPLOYEE BENEFITS OTHER THAN POSTRETIREMENT, MEDICAL
AND LIFE INSURANCE BENEFITS
The Bank has a defined benefit pension plan covering
substantially all of its full time employees who meet certain
eligibility requirements. The benefits paid are based on 2 1/2%
of the final average salary for each of the first 20 years of
service plus an additional 1% for each of the next 10 years of
service less 1 2/3% of the member's social security benefit for
each year of service (maximum 30 years), up to a maximum of 60%
of the final average salary less 50% of the member's social
security benefit.
FS21
<PAGE>
The following table sets forth the funded status of the plan and
amounts recognized in the Corporation's balance sheet as of
December 31:
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested
benefits of $2,885,273 and $2,375,200, respectively) $ 2,954,229 $ 2,437,343
=========== ===========
Projected benefit obligation for services rendered
to date $(4,065,579) $(3,233,630)
Plan assets at fair value, primarily invested
in U.S. Treasury Notes, common stocks and bonds 3,687,435 2,997,820
----------- -----------
Plan assets less than projected benefit obligation (378,144) (235,810)
Prior service cost not yet recognized in net
periodic pension cost (29,594) (30,701)
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions 696,048 572,605
Unrecognized net obligation at January 1, 1987,
being amortized over 16.631 years (202,551) (229,097)
----------- -----------
Prepaid pension cost included in the balance sheet $ 85,759 $ 76,997
=========== ===========
Net periodic pension cost included the following components for
the years ended December 31:
1995 1994 1993
Service cost-benefits earned during the period $162,172 $168,491 $137,460
Interest cost on projected benefit obligation 251,055 235,878 229,636
Expected return on plan assets (686,633) (3,101) (166,640)
Net amortization and deferral 410,887 (281,847) (111,993)
-------- -------- --------
Net periodic pension cost $137,481 $119,421 $ 88,463
======== ======== ========
The weighted-average discount rate and rate of increase in
future compensation levels used in determining the actuarial
present value of the projected benefit obligation were 7.0% and
5.0% for 1995 and 8.0% and 5.0% for 1994, 7.0% and 5.0% for 1993,
respectively. The expected long-term rate of return on assets was 9.0%.
In addition to the defined benefit pension plan, the Corporation also
offers a number of benefit programs to its key officers and employees.
The Corporation has a defined contribution profit sharing plan.
Contributions by the Corporation were $13,447 in 1995, $65,000
in 1994 and $10,000 in 1993.
FS22
<PAGE>
The Corporation contributed $70,171 and $68,753 to a 401K plan
in 1995 and 1994, respectively.
The Corporation established an Employee Stock Ownership Plan
(ESOP) effective January 1, 1988. This plan is offered to
employees who have attained age 21 and who have been employed by
the Corporation for at least one year full time and have
completed a minimum of 1,000 hours of employment. The plan
entitles Corporation employees to common stock or cash upon
retirement, disability, death or separation from service from
the Corporation based on a vesting schedule. Benefits become
25% vested after two years of vesting service and increase to
100% vested after five years of vesting service.
The Corporation makes annual contributions to the ESOP in
amounts determined by the board of directors, subject to a
limitation based on earnings and capital of the Corporation.
Such contributions are first made to permit required payments of
amounts due under acquisition loans. Dividends received by the
ESOP on shares of the Corporation owned by the ESOP are used to
repay acquisition loans or are credited to the accounts of
allocated shares. The ESOP borrows money to purchase shares of
the Corporation. The shares are pledged as collateral for its
debt. As the debt is repaid, shares are released from
collateral and allocated to active employees, based on the
proportion of debt service paid in the year. The debt of the
ESOP is recorded as debt and the shares pledged as collateral
are reported as unearned ESOP shares in the statement of
financial position. ESOP compensation expense was $90,000 for
1995 and $68,853 for 1994. The ESOP shares were as follows as
of December 31:
1995 1994
Allocated shares 22,595 17,082
Shares released for allocation 815 3,322
Unreleased shares 24,832 6,612
-------- --------
Total ESOP shares 48,242 27,016
======== ========
Estimated fair value of unreleased
shares as of December 31, $459,392 $109,598
======== ========
Any shares of the Corporation purchased by the ESOP after
December 31, 1992 are subject to the accounting specified by the
American Institute of CPAs Statement of Position 93-6. The only
such shares were 3,378 shares purchased on October 31, 1994. As
of December 31, 1994 none of these shares had been released from
collateral. As they are released, the Corporation will report
compensation expense equal to the current market price of the
shares and the shares will become outstanding for
earnings-per-share computations. Also, as the shares are
released, the related dividends will be recorded as a reduction
of retained earnings, and dividends on the unallocated shares
will be recorded as a reduction of debt and accrued interest.
FS23
<PAGE>
Loans payable by the ESOP, with repayment guaranteed by the
Corporation, consist of the following as of December 31, 1995:
1988 loan payable March 10, 1996 at 80% of the base
rate of the First National Bank of Boston $ 20,000
1995 loan payable March 31, 2005 at Wall Street Journal
prime rate 374,354
--------
$394,354
========
The Severance Compensation Plan was adopted for employees, in
the event of a Hostile Takeover, who have completed at least two
years of continuous service with the Corporation. A participant
in this plan is entitled to payments ranging from a lump sum
payment equal to the employee's annual compensation during the
preceding twelve months to a lump sum payment equal to
two-and-one-half times such annual compensation if the employee
is terminated for any reason set forth in the plan within two
years after the takeover.
NOTE 12 - POSTRETIREMENT BENEFITS OTHER THAN PENSION
The Corporation provides postretirement medical and life
insurance benefits for retired employees. During 1993 the
Corporation adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pension." The Corporation
elected to spread the cumulative effect of the change in
accounting for postretirement benefits of $859,500 which
represents the accumulated postretirement benefit obligation
(APBO) existing as of January 1, 1993. The APBO will be spread
on a straight-line basis over a twenty year period. The
Corporation continues to fund medical and life insurance benefit
costs on a pay-as-you-go basis.
Summary information on the Corporation's plan is as follows as of December 31:
1995 1994
Financial status of plan:
APBO:
Retirees $554,893 $520,632
Fully eligible active employees 162,955 240,297
Other active employees 39,123 34,636
-------- --------
756,971 795,565
Unrecognized transition obligation (730,800) (773,700)
Unrecognized net gain 107,082 86,136
-------- --------
Accrued postretirement benefit cost
included in other liabilities on
the balance sheet $133,253 $108,001
======== ========
FS24
<PAGE>
The components of net periodic postretirement benefit cost are
as follows for the years ended December 31:
1995 1994 1993
Service Cost (benefits attributed to employee
services during the year) $ 2,340 $ 2,400 $ 7,100
Interest cost (on the APBO) 54,071 58,500 58,400
Amortization cost (of APBO over 20 years) 42,900 42,900 42,900
Amortization of net gain (8,612)
------- -------- --------
Net periodic postretirement benefit cost $90,699 $103,800 $108,400
======= ======== ========
The discount rate used in determining the APBO as of December
31, 1995 and 1994 was 7.0% and 8.0%, respectively. Estimated
pay increases were 5.0%. The assumed healthcare cost trend rate
used in measuring the APBO was 10% for 1995 and 1994, declining
and freezing at 7% by 1997. If the healthcare cost trend rate
assumptions were increased by 1%, the APBO, as of December 31,
1995 and 1994 would increase by approximately $15,624 and
$20,500, respectively. The effect of this change on the sum of
the service cost and interest cost components of the net
periodic postretirement benefit cost for 1995 and 1994 would be
increases of approximately $1,044 and $1,665, respectively. The
pay-as-you-go expenditures for postretirement benefits were
$65,447 for 1995, $54,471 for 1994 and $49,728 for 1993.
Changes in the accrued postretirement benefit cost were as
follows for the years ended December 31:
1995 1994
Accrued postretirement benefit at beginning of period $108,001 $ 58,672
Plus postretirement benefit expense 90,699 103,800
Less postretirement benefit cash expenditures (65,447) (54,471)
-------- --------
Accrued postretirement benefit cost at end of period $133,253 $108,001
======== ========
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is obligated under various lease agreements
covering branch offices and equipment. These agreements are
considered to be operating leases. The terms expire between
1996 and 2000. Options to renew for additional terms are
included under the branch office lease agreements. The Bank has
exercised its option to extend its lease for the North Beverly
branch until the year 2001 but at the present time do not know
what the rental will be. The total minimum rental due in future
periods under these existing agreements is as follows as of
December 31, 1995:
1996 $ 67,560
1997 39,280
1998 39,280
1999 39,280
2000 6,547
--------
Total minimum lease payments $191,947
========
FS25
<PAGE>
Certain leases contain provisions for escalation of minimum lease
payments contingent upon increases in real estate taxes and
percentage increases in the consumer price index. The total rental
expense amounted to $83,497 for 1995, $78,908 for 1994 and $79,197 for 1993.
NOTE 14 - FINANCIAL INSTRUMENTS
The Corporation is party to financial instruments with
off-balance sheet risk in the normal course of business to meet
the financing needs of its customers. These financial
instruments include commitments to originate loans, standby
letters of credit and unadvanced funds on loans. The
instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheets. The
contract amounts of those instruments reflect the extent of
involvement the Corporation has in particular classes of
financial instruments.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for loan commitments and standby letters of credit is
represented by the contractual amounts of those instruments.
The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for
on-balance sheet instruments.
Commitments to originate loans are agreements to lend to a
customer provided there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The
Corporation evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Corporation upon extension of credit, is
based on management's credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued by
the Corporation to guarantee the performance by a customer to a
third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending
loan facilities to customers. Of the total standby letters of
credit outstanding as of December 31, 1995, $64,500 are secured
by deposit accounts held by the Bank.
FS26
<PAGE>
The estimated fair values of the Corporation's financial
instruments, all of which are held or issued for purposes other
than trading, and are as follows as of December 31:
1995 1994
-------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
Financial assets:
Cash and due from banks $ 9,294,959 $ 9,294,959 $ 10,031,837 $ 10,031,837
Federal funds sold 5,800,000 5,800,000
Available-for-sale
securities 11,153,903 11,153,903 11,512,047 11,512,047
Held-to-maturity
securities 33,183,718 33,232,340 47,632,024 45,885,636
Federal Reserve Bank stock 97,500 97,500 97,500 97,500
Loans 102,491,814 103,113,242 86,378,312 85,527,000
Accrued interest
receivable 1,204,582 1,204,582 1,387,996 1,387,996
Financial liabilities:
Deposits 153,498,225 153,657,661 148,860,743 148,521,931
Notes payable 685,627 685,627 1,035,627 1,035,627
Employee Stock Ownership
Plan loans 394,354 394,354 125,000 125,000
The carrying amounts of financial instruments shown in the above table are
included in the consolidated balance sheet under the indicated captions.
Off-balance-sheet liabilities: 1995 1994
Notional Notional
Amount Amount
Commitments to originate loans $ 4,001,000 $ 1,298,000
Standby letters of credit 1,397,646 1,534,841
Unadvanced portions of loans:
Consumer 776,218 343,585
Home equity 3,025,195 1,108,477
Commercial lines of credit 11,175,779 10,129,375
Commercial construction 484,486
Residential construction 777,363
There is no material difference between the notional amount and
the estimated fair value of loan commitments and unadvanced
portions of loans. The fair value of letters of credit
approximates the notional value.
The Company has no derivative financial instruments subject to
the provisions of SFAS No. 119 "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments."
FS27
<PAGE>
NOTE 15 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Bank's business activity is with customers located
within the state. There are no concentrations of credit to
borrowers that have similar economic characteristics. The
majority of the Bank's loan portfolio is comprised of loans
collateralized by real estate located in the state of
Massachusetts.
NOTE 16 - REGULATORY MATTERS
The Bank, as a National Bank is subject to the dividend
restrictions set forth by the Comptroller of the Currency.
Under such restrictions, the Bank may not, without the prior
approval of the Comptroller of the Currency, declare dividends
in excess of the sum of the current year's earnings (as defined)
plus the retained earnings (as defined) from the prior two years.
As of December 31, 1995 the Bank could declare dividends up to
$2,473,162, without the approval of the Comptroller of the Currency.
Bank regulators have established Risk Based and Leverage Capital
requirements that establish the minimum level of capital. Under
the requirements a minimum level of capital will vary among
banks based on safety and soundness of operations. As of
December 31, 1995 the minimum regulatory capital level for Risk
Based Capital was 4% for Tier 1 capital, 8% for total capital
and Leverage Capital was 4%. As of December 31, 1995 the actual
Risk Based Capital of Beverly National Bank was 11.24% for Tier
1 and 12.59% for total capital and the Leverage Capital was 7.12%.
NOTE 17 - RECLASSIFICATION
Certain amounts in the prior years has been reclassified to be
consistent with the current year's statement presentation.
NOTE 18 - STOCK SPLIT AND EARNINGS AND DIVIDENDS PER SHARE
On August 15, 1994 the Corporation issued 527,566 shares of its
common stock to effect a three for one stock split, including
47,718 shares which were added to treasury stock. In 1994,
prior to the stock split, the Corporaton purchased 21,550 shares
of treasury stock. In 1994, subsequent to the stock split, the
Corporation sold 34,400 shares of treasury stock.
Earnings per share for 1993 has been reduced to reflect the
effect of the 1994 stock split as follows:
For both primary and fully diluted shares outstanding
Net income before the cumulative effect of a change
in accounting principle $2.56
Cumulative effect of the change in accounting principle .25
-----
Net income per share $2.81
=====
FS28
<PAGE>
Dividends per share have been restated to reflect the stock split.
In the earnings-per-share computations, the average number of
shares outstanding does not include 15,722 shares for 1995 and
6,591 shares for 1994 which was the average number of shares not
committed to be released under the Bank's ESOP plan for those years.
NOTE 19 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following financial statements presented are for the Beverly
National Corporation (Parent Company Only) and should be read in
conjunction with the consolidated financial statements.
FS29
<PAGE>
BEVERLY NATIONAL CORPORATION (Parent Company Only)
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
Cash $ 104,753 $ 16,989
Investment in Beverly National Bank 11,789,546 10,723,747
Investment in Cabot Street Realty Trust 604,617 640,093
Investment in 86 Bay Road Realty Trust 92,622 90,775
Investment securities 4,000 10,000
Loans 35,000 35,000
Premises and equipment 574,269 591,197
Accounts receivable from subsidiaries 1,029,000 1,038,000
Interest receivable 3,745 17,353
Other assets 1,441
Prepaid and deferred taxes 34,648 119,300
----------- -----------
$14,273,641 $13,282,454
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to Cabot Street Realty Trust $ $ 45,631
Due to 86 Bay Road Realty Trust 41,255
Notes payable 300,000 550,000
Employee Stock Ownership Plan loans 394,354 125,000
Accrued audit expense 13,700 12,850
Other liabilities 94,835 6,902
---------- -----------
Total liabilities 802,889 781,638
---------- -----------
Stockholders' equity:
Preferred stock, $2.50 par value per share;
300,000 shares authorized; issued and
outstanding none
Common stock, par value $2.50 per share;
authorized 2,500,000 shares in 1995 and
1,000,000 shares in 1994; issued 791,349
shares as of December 31, 1995 and 791,349
shares as of December 31, 1994; outstanding,
751,172 shares as of December 31, 1995 and
754,172 shares as of December 31, 1994 1,978,373 1,978,373
Paid-in capital 4,380,219 4,380,219
Retained earnings 8,304,831 7,294,056
Treasury stock, at cost (40,177 shares as
of December 31, 1995 and 37,177 shares
as of December 31, 1994) (744,619) (695,119)
Unearned Compensation - Employee Stock
Ownership Plan (394,354) (125,000)
Net unrealized holding loss on available
-for-sale securities (53,698) (331,713)
----------- -----------
Total stockholders' equity 13,470,752 12,500,816
----------- -----------
$14,273,641 $13,282,454
=========== ===========
FS30
<PAGE>
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Interest and dividend income:
Interest on taxable investment securities $ 6,146 $ 2,278 $ 3,258
Interest on loans and receivables from
subsidiaries 75,188 109,231 104,631
Dividends from Beverly National Bank 721,496 443,210 303,310
---------- ---------- ---------
Total interest and dividend income 802,830 554,719 411,199
---------- ---------- ---------
Other income:
Rental income 36,000 36,000 36,000
Other income 395 1,057 78
---------- ---------- ---------
Total other income 36,395 37,057 36,078
---------- ---------- ---------
Expenses:
Occupancy expense 16,927 18,840 21,862
Equipment expense 1,906
Interest on short-term borrowings 57,188
Interest on notes payable 59,532 25,390
Other expense 116,343 131,914 79,238
---------- ---------- ---------
Total expenses 194,708 233,332 101,100
---------- ---------- ---------
Income before income taxes, equity in
undistributed net income(loss) of
subsidiaries and cumulative effect of
change in accounting principle 644,517 358,444 346,177
Income taxes (benefit) (33,600) (30,965) 17,500
---------- ---------- --------
Income before equity in undistributed
net income (loss) of subsidiaries and
cumulative effect of change in accounting
principle 678,117 389,409 328,677
---------- ---------- ---------
Equity in undistributed net income (loss)
of subsidiaries:
Beverly National Bank 787,784 823,897 861,481
Cabot Street Realty Trust (35,476) (66,045) (49,889)
86 Bay Road Realty Trust 1,847 (50,690) (28,862)
---------- ---------- ---------
Total equity in undistributed net
income (loss) of subsidiaries 754,155 707,162 782,730
---------- ---------- ---------
Income before cumulative effect of change
in accounting principle 1,432,272 1,096,571 1,111,407
Cumulative effect of change in method of
accounting for income taxes (Note 2) (10,826)
---------- ---------- ----------
Net income $1,432,272 $1,096,571 $1,100,581
========== ========== ==========
FS31
<PAGE>
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating activities:
Net income $1,432,272 $1,096,571 $1,100,581
Adjustments to reconcile net income
to net cash provided by
operating activities:
Loss on sale of fixed asset 6,621
Undistributed net income of
subsidiaries (754,155) (707,162) (782,730)
Increase in accrued expenses 850 1,210 3,440
Depreciation expense 16,928 16,927 16,928
Cumulative effect of change in
method of accounting for
income taxes 10,826
Increase (decrease) in taxes payable 82,696 (122,078) (20,577)
(Increase) decrease in interest
receivable 13,608 (8,510) 17,863
Increase (decrease) in interest
payable (252) 390
Transfer of fixed assets from
86 Bay Road Realty Trust to
Beverly National Corporation (195,309)
Amortization (accretion), net of
investment securities 5 (5)
-------- -------- --------
Net cash provided by operating activities 791,947 88,665 346,326
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (640)
Proceeds from sales of fixed assets 189,328
Purchases of available-for-sale
securities (230,000) (185,000)
Proceeds from sales of available
-for-sale securities 236,000 175,000
Proceeds from maturities of
investment securities 20,000
Proceeds from sales of investment
securities 190,725
Purchases of investment securities (160,000)
Increase in investment in
subsidiaries (550,000) (150,000)
Decrease in due from subsidiaries 9,000 621,700 96,505
Increase (decrease) in due to
subsidiaries (86,886) 86,887 (42,131)
Increse in other assets (1,441)
--------- --------- ---------
Net cash provided by (used in)
investing activities (73,327) 337,275 (44,901)
--------- --------- ---------
FS32
<PAGE>
Cash flows from financing activities:
Repayment of notes patable (350,000)
Proceeds from notes payable 100,000 550,000
Proceeds from sales of treasury stock 582,755
Purchases of treasury stock (49,500) (1,250,000)
Dividends paid (331,356) (293,210) (303,310)
--------- ---------- ---------
Net cash used in financing activities (630,856) (410,455) (303,310)
--------- --------- ---------
BEVERLY NATIONAL CORPORATION (Parent Company Only)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Net increase (decrease) in cash and
cash equivalents 87,764 15,485 (1,885)
Cash and cash equivalents
at beginning of year 16,989 1,504 3,389
--------- --------- --------
Cash and cash equivalents at
end of year $ 104,753 $ 16,989 $ 1,504
========= ========= ========
Supplemental disclosure:
Income taxes paid (received) $(116,296) $ 91,113 $38,077
The Parent Only Statements of Changes in Stockholders' Equity
are identical to the Consolidated Statements of Changes in
Stockholders' Equity for the years ended December 31, 1995, 1994
and 1993, and therefore are not reprinted here.
FS33
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
PART III
--------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth each of the Directors and
Executive Officers of the Corporation and of the Bank. Except
as follows, all Directors and Executive Officers of the
Corporation have served as such since 1990. Mr. Sullivan,
has been a Director since 1991. Mrs. Griffin has been a
Director since 1992. Mr. Booth and Mr. Wiltshire, have been
Directors since 1993. Mr. Clark R. Smith has been a Director
since 1994. Mr. Glovsky has been a Director since 1996.
Each Executive Officer holds office until the first Directors'
meeting following the annual meeting of stockholders and thereafter
until his or her successor is elected and qualified. Each
Director of the Corporation is also a Director of the Bank.
Expiration Business
Date for Experience
Term of During Past
Name Age Position Office Five Years
- ---- --- -------- ------ ----------
Richard H. Booth 61 Director 1998 Retired Stockbroker
Neiland J. Douglas,Jr. 60 Director 1999 President, Morgan
and Douglas (Real
Estate Services)
John N. Fisher 55 Director 1997 President, Fisher &
George Electrical
Co., Inc.
Mark B. Glovsky 48 Director 1999 Attorney, Partner,
Glovsky & Glovsky
Attorneys at Law
John L. Good, III 51 Director 1998 Vice President,
Community Relations
& Development,
Beverly Hospital
<PAGE>
Alice B. Griffin 58 Director 1997 President,
Griffin Pension
Services, Inc.
Julia L. Robichau 58 Vice Pres. Vice Pres. of
& Clerk of Corporation:
Corporation; Vice President,
Vice President, & Chief Operations
Chief Operations Officer &
Officer & Cashier of Bank
Cashier of Bank
<PAGE>
Peter E. Simonsen 45 Treasurer of Treasurer of
Corporation; Corporation;
Vice President Vice President
and Chief and Chief
Financial Financial
Officer of Bank Officer of Bank
Clark R. Smith 57 Director 1998 Attorney
Lawrence M. Smith 54 President & 1999 President,
Chief Beverly
Executive National
Officer of Corporation and
Corporation Beverly
and Bank, National Bank
Director
Barry A. Sullivan 36 Director 1997 Certified Public
Accountant,
Sullivan and Drooks
James D. Wiltshire 64 Director 1998 President, Grimes
Wiltshire, Inc.
DBA TruForm
Industries, Inc.
No Director holds a directorship in any corporation (other than
Beverly National Corporation) with a class of securities
registered pursuant to Section 12, of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d), of
such Act or any Corporation registered as an investment company
under the Investment Company Act of 1940.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table provides certain information regarding the
compensation paid to Executive Officers for services rendered in
capacities to the Corporation and the Bank during the fiscal
year ended December 31, 1995, 1994, and 1993, respectively. No
other Executive Officer of the Corporation or the Bank received
cash compensation in excess of $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
<CAPTION>
___________________________________
| Long Term Compensation |
-------------------------------------|---------------------------------|
Annual Compensation | Awards Payouts |
| |
| |
|Restricted |
Name and Other Annual |Stock Options/ | All
Principal Compensation |Award(s) SARs LTIP | Other
Position Year Salary($) Bonus($) ($)(1)<F1> | ($) (#) Payouts($)| Compensation(2)($)<F2>
- ------------------------------------------------------------|---------------------------------|-------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| |
Lawrence M. Smith 1995 $166,075 $23,400 $5,563 | 24,000 | $54,105
President of the 1994 $160,075 $15,696 $3,763 | 24,000 | $52,464(3)<F3>
Corporation and 1993 $152,950 $ 0 $2,559 | 24,000 | $22,295
President, Chief | |
Executive Officer | |
of the Bank | |
| |
James E. Rich 1995 $ 90,475 $10,100 $116 | 6,000 | $14,291
Vice President 1994 $ 87,775 $ 7,425 $116 | 6,000 | $ 9,659
and Senior Trust 1993 $ 84,375 $ 0 $109 | 6,000 | $ 9,659
Officer of the Bank | |
<FN>
<F1>
(1) Included in other annual compensation is an automobile
allowance and Excess Group Life Insurance.
<F2>
(2) Included in all other compensation is profit sharing, ESOP,
life insurance for Lawrence M. Smith and James E. Rich and key
man insurance $4,045 for Lawrence M. Smith.
<F3>
(3) Information concerning allocations under the Corporation's
Employee Stock Ownership Plan is unavailable, at date of filing.
</FN>
</TABLE>
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
- ----------------------------------------------------------------
Option/SAR Values
- -----------------
The table below sets forth information regarding stock options
that were exercised, if any, during the last fiscal year, and
unexercised stock options held by the President of the
Corporation and the President and Chief Executive Officer of the Bank:
Value of
Number of Unexercised
Unexercised In-the-Money(1)
Options/SARs Options/SARs
Value At FY-/End(#) At FY-/End($)
Shares Acquired Realized Exercisable(E)/ Exercisable (E)/
Name on Exercise(#) ($) Unexercisable(U) Unexercisable(U)
- ------------------------------------------------------------------------------
Lawrence M. Smith -0- -0- 24,000(E) -0-
President of the -0-(U)
Corporation;
President and
Chief Executive Officer
of the Bank
James E. Rich -0- -0- 4,005(E) -0-
Vice President 1,995(U)
and Senior Trust
Officer of the Bank
(1) As of December 31, 1995, the market value of the common
stock was approximately $18.50 per share. Because the exercise
prices for the options granted are $11.70 and $14.00, which amounts
were greater than $11.67 per share at December 31, 1995, none of the
options were "In the Money". Options are "In the Money" if the fair
market value of the underlying securities exceeds the exercise or base
price of the option. The above shares were adjusted to reflect
the 3 for 1 stock split effective August 15, 1994.
<PAGE>
Option/SAR Grants in Last Fiscal Year
- -------------------------------------
With the exception of the individuals set forth in the table
below, no other executive officer of the Corporation was granted
options to purchase shares of common stock. All shares
purchased upon the exercise of any option must be paid in full
at the time of the purchase.
<TABLE>
Individual Grants
-----------------
<CAPTION>
Percent of
Total
Number of Options/SARs Fair
Securities Granted to Exercise Market
Underlying Employees of Base Value on
Option/SARs in Fiscal Price date of Date of Date of Expiration
Name Granted (#) Year(1)<FN1> ($/Sh) Grant Grant Exercise Date
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence M. Smith 12,000 20.5% $11.90 $11.67 7/20/93 NA 7/20/2003
President of the 12,000 20.5% $14.00 $11.67 7/20/93 NA 7/20/2003
Corporation;
President and Chief
Executive Officer
of the Bank
James E. Rich 6,000 10.3% $14.00 $11.67 7/20/93 NA 7/20/2003
Vice President
and Senior Trust
Officer of the Bank
All other Executive
Officers 15,000 25.6% $14.00 $11.67 7/20/93 NA 7/20/2003
<FN>
<F1>
(1) Does not include options granted to non-employee
directors, pursuant to the non-qualified Directors Stock Option
Plan, which options are discussed in Item 11, supra. The above
shares were adjusted to reflect the 3 for 1 stock split
effective August 15, 1994.
</FN>
</TABLE>
<PAGE>
Directors
- ----------
The Corporation pays no cash compensation to its Directors for
their services as a Director. As a Director of the Bank,
Directors are paid an annual fee of $3,600.00. In addition, for each
semi-monthly meeting attended, a Director receives $150.00. Any
Director serving on a sub-committee is compensated at the rate
of $100.00 per hour.
Employment and Severance Agreements
- -----------------------------------
The Corporation has entered into an Employment Agreement and
Severance Agreement with Lawrence M. Smith. The Employment
Agreement provided Mr. Smith with a minimum compensation until
May 31, 1991. At that time the contract was extended to
continue through May 29, 1996; provided, however, that
commencing on May 31, 1996 the term of the Employment Agreement
shall automatically be extended for one additional year unless,
not later than November 30, 1995, either party notifies the
other by written notice of its intent not to extend. Also this
agreement provides that during the Employment Agreement and for
one year afterward, Mr. Smith cannot compete with the
Corporation and its subsidiaries within their market area. The
Severance Agreement allows that in the event of a change in
control of the Corporation, if Mr. Smith's employment is
terminated other than for cause as defined in the agreement,
disability or retirement within three years after the change in
control, then he shall be entitled to a lump sum payment from
the Corporation approximately equal to three times his average
annual compensation for the previous five years.
The Corporation adopted, in 1987, a Plan for Severance
Compensation After Hostile Takeover ("Severance Compensation)
which provides for certain payments to be made in the
event that employees participating in such Plan are terminated
following a "hostile change in control" of the Corporation as
defined in such Plan. Any employee (other than Mr. Smith) may
participate in the Severance Compensation Plan as soon as he has
completed two years of continuous service with the Corporation
or a subsidiary. A participant is entitled to payments under
the Severance Compensation Plan in the event that, within two
years after a hostile change in control, his employment is
terminated for any reason specified in the Plan. Such reasons
include, among others, change in the employee's duties or
compensation, or termination of the employee other than for
"just cause" as defined in the Severance Compensation Plan.
The amount of the payment under the Severance Compensation Plan
is determined by the length of the participant's service, and
ranges generally from a lump sum payment equal to the employee's
annual compensation during the preceding twelve months to a lump
sum payment equal to two-and-one-half times such annual compensation.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and related notes set forth information
regarding stock owned by each of the Directors of the
Corporation and Bank and by all officers and Directors of the
Corporation and Bank as a group at March 15, 1996. The
percentage is based upon 754,382 shares of common stock outstanding.
Number of Shares Percent of
Beneficially Outstanding
Name of Owner Owned (1)(2) Shares
------------ ----------------- -----------
Richard H. Booth 2,000 (3,4) .26%
Neiland J. Douglas, Jr. 5,156 (3,5) .68%
John N. Fisher 4,615 (3,6) .61%
Mark B. Glovsky 250 .03%
John L. Good, III 3,626 (3) .48%
Alice B. Griffin 2,287 (3) .30%
Clark R. Smith 2,993 .40%
Lawrence M. Smith 27,828 (3,7) 3.58%
Barry A. Sullivan 1,722 (8) .23%
James D. Wiltshire 1,600 .21%
All Directors and officers
as a group (23 persons) 56,467 (9) 9.94%
(1) Based upon information provided to the Corporation by the
indicated persons. The number of shares which each individual
has the option to purchase has been added to the number of
shares actually outstanding for the purpose of calculating the
percentage of such person's ownership.
(2) Under regulations of the Securities and Exchange Commission,
a person is treated as the beneficial owner of a security if
the person, directly or indirectly (through contract,
arrangement, understanding, relationship or otherwise) has or
shares (a) voting power, including the power to vote or to
direct the voting, of such security, or (b) investment power
with respect to such security, including the power to dispose or
direct the disposition of such security. A person is also
deemed to have beneficial ownership of any security that such
person has the right to acquire within 60 days. Unless indicated
in another footnote to this tabulation, a person has sole voting
and investment power with respect to the shares set forth
opposite his or her name. The table does not reflect the 15,000
shares held in the Beverly National Bank Retirement Plan or the
2,300 shares held in the Beverly National Bank Profit Sharing
<PAGE>
Plan, or the 49,652 shares held by the Corporation's Employee
Stock Ownership Plan, as to which Mssrs. Smith, Good and Douglas
serve as trustees.
(3) Includes a stock option to purchase shares which were
exercisable as of March 15, 1996, or within 60 days thereafter,
as listed: Richard H. Booth, 900, Neiland J. Douglas, Jr.,
3,060, John N. Fisher, 1,050, John L. Good, III, 3,060, Alice B.
Griffin, 1,050, Lawrence M. Smith, 24,000, Barry A. Sullivan,
1,050, James D. Wiltshire, 900, Officers (as a group), 21,397.
(4) Includes 65 shares owned jointly with Mr. Booth's spouse.
(5) Includes 59 shares owned by Mr. Douglas' spouse.
(6) Includes 1,519 shares owned jointly by Mr. Fisher and
Mr. Fisher's spouse.
(7) Includes 2,335 shares owned jointly by Mr. Smith and Mr.
Smith's spouse; and 1,115 shares owned by Mr. Smith's
spouse; stock options to purchase 24,000 shares.
(8) Includes 150 shares owned by Mr. Sullivan's spouse.
(9) Includes stock options owned by all Directors and Officers
as a group to purchase 56,467 shares which were exercisable,
as of March 15, 1996 or 60 days thereafter.
The following table and related notes set forth certain
information as of March 15, 1996 with respect to all persons
known to the Corporation to be the beneficial owner of more than
5% of the Corporation's outstanding Common Stock:
Number of Shares
Directly and Percentage of
Name and Address Beneficially Outstanding
of Owner Owned Shares
----------------- --------------- -------------
Beverly National Bank 75,434 (1) 10.00%
Trust Department
240 Cabot Street
Beverly, MA 01915
Harold C. Booth 60,891 (2) 8.07%
P.O. Box 729
Center Harbor, NH 03226
Beverly National Corporation 49,652 6.58%
Employee Stock Ownership Plan
Nathalie D. Rothblatt 38,562 5.11%
11 Sunnycrest Avenue
Beverly, MA 01915
- ---------------------
<PAGE>
(1) These shares include shares held as Trustee and under agency
agreements. As Trustee, the Bank has sole investment and voting
power over 28,883 shares, and shared investment and voting power
over 46,551 shares.
(2) Includes 14,673 shares owned by Mr. Booth's spouse.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation, through its wholly-owned subsidiary, the Bank,
has had, currently has, and expects to continue to have in the
future, banking (including loans and extensions of credit)
transactions in the ordinary course of its business with its
Directors, Executive Officers, members of their family, and
their associates. Such banking transactions have been and are
on substantially the same terms, including interest rates,
collateral and repayment conditions, as those prevailing at the
same time for comparable transactions with others and did not
involve more than the normal risk of collectability or present
other unfavorable features.
As of December 31, 1995, the Bank had outstanding $583,036 in
loans to Directors, Executive Officers, members of their family
and their associates, which represents 4.33% of capital.
Federal banking laws and regulations limit the aggregate amount
of indebtness which banks may extend to bank insiders.
Pursuant to such laws, the Bank may extend credit to Executive Officers,
Directors, Principal Shareholders or any related interest of
such persons, if the extension of credit to such person is in
the amount that, when aggregated with the amount of all
outstanding extensions of credit to such individuals, does not
exceed the Bank's unimpaired capital and unimpaired surplus.
As of December 31, 1995, the aggregate amount of extensions of
credit to insiders was well below this limit.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BEVERLY NATIONAL CORPORATION
Date: 3/26/96 By: Lawrence M. Smith
---------- -------------------
President & CEO and
Director, Principal
Executive Officer
Date: 3/26/96 By: Peter E. Simonsen
---------- ------------------
Treasurer, Principal
Financial &
Accounting Officer
_________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Date Name and Capacity
3/26/96 /s/ Lawrence M. Smith
------- -------------------
Lawrence M. Smith,
President & CEO &
Director, Principal
Executive Officer
3/26/96 /s/ Richard H. Booth
------- ------------------
Richard H. Booth - Director
3/26/96 /s/ Neiland J. Douglas,Jr.
------- -----------------------
Neiland J.Douglas,Jr. - Director
3/26/96 /s/ John N. Fisher
------- ----------------------
John N. Fisher - Director
3/26/96 /s/ Mark B. Glovsky
------- ---------------------
Mark B. Glovsky - Director
3/26/96 /s/ John L. Good, III
------- ---------------------
John L. Good, III - Director
<PAGE>
3/26/96 /s/ Alice B. Griffin
------- ---------------------
Alice B. Griffin - Director
3/26/96 /s/ Clark R. Smith
------- ----------------------
Clark R. Smith - Director
3/26/96 /s/ Barry A. Sullivan
------- -----------------------
Barry A. Sullivan - Director
3/26/96 /s/ James D. Wiltshire
------- ------------------------
James D. Wiltshire - Director
<PAGE>
SUPPLEMENTAL INFORMATION
------------------------
Copies of the Notice of Annual Meeting of shareholders, Proxy Statement
and Proxy for Annual Meeting of Shareholders for the Registrant's 1996
Annual Meeting of Shareholders, which was held on March 26, 1996,
are furnished herein. Such material is not deemed to be filed with
Commission or otherwise subject to the liabilities of Section 18
of the Securities Exchange Act, unless specifically incorporated
by reference in their reports.
<PAGE>
ITEM 13. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3. EXIBITS
-------
(b) The Company did not file a Form 8-K during the
quarter ended December 31, 1995.
EXHIBIT INDEX
3.1 Articles of Organization of Company, as Amended ............***
3.2 By-Laws of Company, as Amended ............................**
10.1 Indenture dated as of January 21, 1976 between Benjamin
Brown and Virgil C. Brink, Trustee of Y & M Trust, and
Beverly National Bank ......................................*
10.2 Incentive Stock Option Plan for Key Employees ..............*
10.3 Directors' Plan ............................................*
10.4 Employment Agreement dated May 31, 1991 between Beverly
National Corporation and Lawrence M. Smith .................**
10.5 Severance Agreement dated July 8, 1987 between Beverly
National Corporation and Lawrence M. Smith .................*
10.7 Beverly National Corporation Plan for Severance
Compensation After Hostile Takeover ........................*
20. 1996 Proxy Statement .......................................Page 77
21. Subsidiaries of the Corporation ............................Page 91
23. Consent of Shatswell, MacLeod and Co. ......................Page 92
* Incorporated herein by reference to the identically
numbered exhibits filed as part of Company's Registration
Statement on Form S-18 (file No. 33-22224-B filed with
the Commision on July 9, 1988).
** Incorporated herein by reference to the identically
numbered exhibits to the Annual Report 10-KSB for
December 31, 1993.
*** Incorporated herein by reference to the identically
numbered exhibits to the Annual Report 10-KSB for
December 31, 1994.
BEVERLY NATIONAL CORPORATION
NOTICE OF
1996 ANNUAL MEETING OF SHAREHOLDERS
MARCH 26, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of
Shareholders of Beverly National Corporation ("Corporation") will
be held at the main office of the Corporation at 240 Cabot
Street, Beverly, Massachusetts, on March 26, 1996 at 3 o'clock
P.M., for the purpose of considering and voting upon the
following matters:
(1) Fixing of the number of directors who shall constitute
the full Board of Directors at ten.
(2) Election as directors of the individuals listed as
nominees in the Proxy Statement accompanying this notice
of meeting, who, together with the directors whose terms
of office do not expire at this meeting, will constitute
the full Board of Directors.
(3) Approving the Beverly National Corporation 1996
Incentive Stock Option Plan for Key Employees.
(4) Such other matters as may properly be brought before the
meeting and any adjournment thereof.
The record date and hour for determining shareholders
entitled to notice of, and to vote at, the meeting, has been
fixed at 5 o'clock P.M., February 20, 1996.
By Order of the Board of Directors,
February 23, 1996 Julia L. Robichau, Clerk
PLEASE SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED FOR THAT PURPOSE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND THE MEETING.
6527O
<PAGE>
BEVERLY NATIONAL CORPORATION
PROXY STATEMENT
1996 ANNUAL MEETING OF SHAREHOLDERS
MARCH 26, 1996
The following information is furnished in connection with
the solicitation of proxies by the management of Beverly National
Corporation ("Corporation"), whose principal executive office is
located at 240 Cabot Street, Beverly, Massachusetts (Telephone:
(508) 922-2100) for use at the 1996 Annual Meeting of
Shareholders of the Corporation to be held on March 26, 1996.
As of February 20, 1996, 754,382 shares of common stock,
$2.50 par value ("Common Stock"), of the Corporation were
outstanding and entitled to be voted.
The record date and hour for determining shareholders
entitled to vote has been fixed at 5 o'clock P.M., February 20,
1996. Only shareholders of record at such time will be entitled
to notice of, and to vote at, the meeting. Shareholders are
urged to sign the enclosed form of proxy solicited on behalf of
the management of the Corporation and return it at once in the
envelope enclosed for that purpose. Proxies will be voted in
accordance with the shareholder's directions. If no directions
are given, proxies will be voted to fix the number of directors
at ten, to elect the nominees listed below, and to approve the
Beverly National Corporation 1996 Incentive Stock Option Plan for
Key Employees (the "Plan"), a copy of which is attached hereto as
Exhibit A. The proxy does not affect the right to vote in person
at the meeting and may be revoked prior to its exercise.
The affirmative vote of the holders of a majority of the
Common Stock of the Corporation present or represented and voting
at the meeting is required to fix the number of directors at ten.
The affirmative vote of a plurality of the votes cast by
shareholders is required to elect directors. The affirmative vote
of the holders of a majority of the Common Stock of the
Corporation present or represented and voting at the meeting is
required to approve the Plan.
The 1995 Annual Report of the Corporation containing
financial statements for 1995 is being mailed to the shareholders
with the mailing of this Notice and Proxy Statement.
The cost of the solicitation of proxies is being paid by the
Corporation. The Proxy Statement will be mailed to shareholders
of the Corporation on or about February 23, 1996.
<PAGE>
-2-
DETERMINATION OF NUMBER OF DIRECTORS
AND ELECTION OF DIRECTORS
The persons named as proxies intend to vote to fix the
number of directors for the ensuing year at ten and vote for the
election of the individuals named below as nominees for election
as director, to hold office until the 1999 annual meeting. If
any nominee should not be available for election at the time of
the meeting, the persons named as proxies may vote for another
person in their discretion or may vote to fix the number of
directors at less than ten. The management does not anticipate
that any nominee will be unavailable.
The By-Laws of the Corporation provide in substance that the
Board of Directors shall be divided into three classes as nearly
equal in number as possible, and that the term of office of one
class shall expire and a successor class be elected at each
annual meeting of the shareholders.
The present number of directors is ten. It is proposed by
the Board, that at the meeting, the number of directors who shall
constitute the full Board of Directors until the next annual
meeting be fixed at ten and that the nominees listed below be
elected to serve until 1999.
Opposite the name of the nominees for election at this
meeting and each director continuing in office in the following
tables are shown: (1) the number of shares of stock of the
Corporation owned beneficially by the individual, including
exercisable stock options; (2) the date on which the individual's
term of office as director began; (3) the term of office for
which the individual will serve; and (4) the individual's current
principal occupation or employment.
Nominees For Election at This Meeting
-------------------------------------
On Board of
Shares of Directors
Stock Owned of the
Beneficially Corporation
as of or Its Term
February 20, Predecessor of Principal
Name 1996 (1)(2) Since Office Occupation
- --------------- ----------- -------- ------- --------------------
Neiland J. Douglas, 5,156 1977 1999 President, Morgan and
Jr. Douglas (Planning and
Research)
Mark B. Glovsky, Esq. 250 1996 1999 Attorney, Partner in
the Law Firm of Glovsky
& Glovsky
Lawrence M. Smith 27,828 1981 1999 President, Beverly
National Corporation
and Beverly National
Bank
<PAGE>
-3-
Directors Continuing in Office
------------------------------
On Board of
Shares of Directors
Stock Owned of the
Beneficially Corporation
as of or Its Term
February 20, Predecessor of Principal
Name 1996 (1)(2) Since Office Occupation
- ------------- ----------- --------- ------ ----------
Richard H. Booth 2,000 1993 1998 Stockbroker - Retired
John N. Fisher 4,615 1989 1997 President, Fisher & George
Electrical Co., Inc.
John L. Good, III 3,626 1987 1998 Vice President of
Community Relations &
Development - Beverly
Hospital
Alice B. Griffin 2,287 1992 1997 President, Griffin Pension
Services, Inc.
Clark R. Smith 2,993 1994 1998 Attorney
Barry A. Sullivan 1,722 1991 1997 Partner, Sullivan & Drooks,
Certified Public
Accountants
James D. Wiltshire 1,600 1993 1998 President - Grimes -
Wiltshire d/b/a/
TruForm Industries,
Inc.
NOTE
----
(1) Beneficial ownership of stock for the purpose of this
statement includes securities owned by the spouse and minor
children and any relative with the same address. Certain
directors may disclaim beneficial ownership of certain of
the shares listed beside their names.
(2) Includes stock options to purchase shares which were
exercisable as of February 20, 1996 or within 60 days
thereafter, as listed: Richard H. Booth, 900; Neiland J.
Douglas, Jr., 3,060; John N. Fisher, 1,050; John L. Good,
III, 3,060; Alice B. Griffin, 1,050; Lawrence M. Smith,
24,000; Barry A. Sullivan, 1,050; and James D. Wiltshire,
900.
<PAGE>
-4-
APPROVAL OF 1996 INCENTIVE STOCK OPTION
PLAN FOR KEY EMPLOYEES
---------------------------------------
The Board of Directors of the Corporation has unanimously
adopted the Plan and recommended its approval by the
shareholders. The Plan is intended to replace the 1987 Incentive
Stock Option Plan, which expires in 1997. The purpose of the
Plan is to provide an incentive to certain employees of the
Corporation and subsidiaries at least 50% owned by the
Corporation, including The Beverly National Bank
("Subsidiaries"), to perform exceptional services and to devote
their full abilities and industry to improve the operations of
the Corporation and its Subsidiaries and to offer inducement to
such employees to accept and continue employment with the
Corporation and its Subsidiaries. The Plan is designed to reward
such key employees on a long-term basis by granting them options
to purchase shares of the Corporation's common stock. The
maximum number of shares of the Corporation which may be issued
under the Plan is 35,900 shares, subject to adjustments in the
event of stock splits, stock dividend or reclassification,
recapitalization or other possible future changes.
The following is a summary of the other principal features
of the Plan. This summary is qualified in its entirety by the
complete text of the Plan as set forth in Exhibit A of this Proxy
Statement.
Administration. The Plan will be administered by the Board
of Directors. Only one director is eligible for awards under the
Plan.
Participants. Participants will be selected from key
employees of the Corporation and its Subsidiaries who the Board
may determine to be capable of making substantial contributions
to the management or development of the Corporation or its
Subsidiaries.
Grant of Options. Stock options awarded under the Plan are
intended to qualify for treatment as incentive stock options
under the Internal Revenue Code of 1986. The Board of Directors
will determine the option price, term, manner and effective date
of the exercise of each option granted except that the option
price of incentive stock options may not be less than the fair
market value of the common stock of the Corporation on the date
of the grant, and no option may have a term greater than 10
years. Each option will be exercisable in such installment or
installments as may be determined by the Board of Directors at
the time of the grant. The right to
<PAGE>
-5-
purchase shares will be cumulative so that when the right to
purchase shares has accrued such shares or any part thereof may
be purchased at any time thereafter until the expiration or
termination of the option. An option may be exercised by the
payment in full of the option price for the shares to be
purchased. If an option expires or terminates for any reason
without having been exercised, the shares represented by the
option will again be available for grant under the Plan. The
fair market value, at the date of grant, of options exercisable
for the first time in any year may not, when aggregated with the
value of all other incentive stock options issued by the
Corporation or any affiliate that are likewise exercisable for
the first time in such year, exceed $100,000.
Termination of Employment. Each option granted will be
exercisable only if the employee remains in the employ of the
Corporation or any Subsidiary from the date of grant of his
option until a date not more than 3 months prior to exercise. In
general, if an optionee's employment with the Corporation
terminates by reason of death or permanent and total disability,
the optionee, or his legal representative, may exercise
outstanding options within twelve months from the date of such
termination of employment. If an optionee's employment
terminates for any other reason, including retirement, the
optionee may exercise outstanding options within three months
from the date of such termination. In no event may an optionee
exercise an option at a date later than the expiration date of
such option.
Amendment or Termination. The Plan will terminate on the
earliest of February 6, 2006 or such other date as the Board of
Directors may determine. The Board of Directors may at any time
modify, amend or terminate the Plan, except that approval of the
holders of at least a majority of the stock of the Corporation is
required in certain circumstances described in Section 8.2 of the
Plan.
Federal Tax Aspects. The following is a brief description
of the principal Federal income tax consideration of incentive
stock options under present law:
Optionees do not realize income at the time of grant or
exercise of an incentive stock option. Recognition of such
income is ordinarily postponed until the optionee disposes of the
shares of common stock. The tax consequences to the optionee
upon disposition of such shares is dependent upon the option
price, the sale price and the holding period. The difference
between the exercise price of stock purchased on exercise of an
option and the fair market value of the
<PAGE>
-6-
Corporation's stock is an item of tax preference for purposes of
the applicability, if any, of the alternative minimum tax for the
year in which the option is exercised.
The Corporation is entitled to a deduction for Federal
income tax purposes only to the extent that ordinary income is
realized by the optionee as a result of a disposition prior to
termination of any requisite holding period required to qualify
the option for incentive stock option treatment.
The affirmative vote of the holders of a majority of the
shares of common stock of the Corporation present or represented
and voting at the meeting is required for approval of the Plan.
The Board of Directors recommends a vote FOR adoption of the
Plan, and unless otherwise directed, proxies will be voted in
favor of such adoption.
OTHER MATTERS
The management knows of no business which will be presented
for consideration at the meeting other than that set forth in
this Proxy Statement. However, if any such business comes before
the meeting, the persons named as proxies will vote thereon
according to their best judgment.
By order of the Board of Directors
----------------------------------
Lawrence M. Smith
President
Beverly, Massachusetts
February 23, 1996
0963D
<PAGE>
BEVERLY NATIONAL CORPORATION
l996 Incentive Stock Option Plan for Key Employees
l. Purpose.
l.l The purpose of the Beverly National Corporation
l996 Incentive Stock Option Plan for Key Employees (hereinafter
referred to as the "Plan") is to provide incentives to present
and future employees of Beverly National Corporation, a
Massachusetts corporation (this "Corporation"), and any of its
present and future subsidiaries at least fifty percent (50%)
owned by this Corporation ("Subsidiaries") (such employees being
hereinafter referred to as "Employees" and each of them
individually as an "Employee") in order that they may provide
exceptional services to this Corporation and its Subsidiaries,
and to offer inducements to Employees to accept and continue
employment with this Corporation and its Subsidiaries by offering
Employees options to purchase shares of this Corporation's common
stock which may qualify for treatment as incentive stock options
under the Internal Revenue Code of 1986, as amended (the "Code")
upon the approval of the Plan by the shareholders of this
Corporation and upon the satisfaction by such Employees of the
requirements for such qualification. This Plan is an "incentive
stock option plan" described in Section 422 of the Code.
2. Administration of Plan.
2.l The Plan shall be administered by the Board of
Directors of this Corporation (the "Board of Directors") which
shall: (l) determine which Employees shall be granted options to
purchase shares of this Corporation's Common Stock ($2.50 par
value) ("Stock") pursuant to the Plan (which options shall
hereinafter be referred to as "Options," or in the singular as an
"Option"); (2) determine the time or times when Options shall be
granted and the number of shares of Stock to be subject to each
Option; (3) determine the option price at which the shares of
Stock subject to each Option may be purchased pursuant to the
Plan and the forms of the instruments evidencing any Options
granted under the Plan or any other instrument to be used in
connection with the Plan; (4) adopt, amend and rescind, in its
discretion, rules and regulations for the administration of the
Plan; (5) interpret the Plan and decide all questions and settle
all controversies and disputes which may arise in connection with
the Plan, which decisions and interpretations shall be binding
upon all persons; and (6) exercise such other powers as may be
necessary or desirable to implement the provisions of this Plan.
<PAGE>
2.2 Members of the Board of Directors who are Employees
shall be eligible to receive Options pursuant to the
Plan. The grant of an Option to an Employee who is also a
director of this Corporation shall not be affected or invalidated
by reason of the fact that such director voted to approve the
grant of such Option.
2.3 No member of the Board of Directors shall be liable
for any action taken or determination made in good faith and in a
manner reasonably believed to be in the best interests of this
Corporation with respect to the Plan or any Option granted
pursuant thereto. The Board of Directors may indemnify any
person against expenses reasonably incurred or the amount of any
damages, fine, or settlement assessed against or agreed to by
such person, in connection with any action, suit or proceeding in
which such person may be involved in connection with any Option
or this Plan to the same extent that the Board of Directors may
indemnify such person under the By-laws of this Corporation.
3. Authority to Grant Options.
3.l Subject to the terms and conditions of this Plan,
the Board of Directors may from time to time grant to such
Employees as it may determine to be capable of making substantial
contributions to the management or development of this
Corporation and its Subsidiaries Options, upon such terms
and conditions as it may deem appropriate, subject to applicable
provisions of this Plan.
3.2 The Board of Directors may authorize the grant of
Options to Employees by action taken with or without a meeting.
The effective date of the grant of an Option pursuant hereto
shall be the date specified by the Board of Directors in the
Stock Option Agreement, as hereinafter defined.
3.3 The number of shares of Stock subject to an Option
shall in each case be determined by the Board of Directors,
subject to the applicable provisions of this Plan. More than one
Option may be granted to the same Employee.
3.4 Nothing contained in this Plan or in any resolution
adopted by the Board of Directors or the shareholders of this
Corporation shall constitute the grant of an Option hereunder,
and no Employee shall be entitled to the grant of an Option
unless action granting an Option to such Employee shall have been
taken by the Board of Directors and unless the recipient of an
Option shall have executed an agreement in form and substance
satisfactory to the Board of Directors containing terms,
restrictions and conditions imposed upon the exercise of the
Option and the transfer of any Stock pursuant thereto ("Stock
Option Agreement").
<PAGE>
3.5 Any purported disposition of shares of Stock
acquired pursuant to an Option which shall be in contravention of
the terms, restrictions and conditions contained in the Stock
Option Agreement executed in connection with such Option shall be
ineffective, and such disposition shall not be registered upon
the stock transfer books of this Corporation.
3.6 The aggregate fair market value of Stock with
respect to which Options issued hereunder are exercisable for the
first time during any calendar year, when aggregated with the
fair market value of stock subject to other incentive stock
options then outstanding under all plans of this Corporation and
its parent and subsidiary corporations and exercisable for the
first time during such calendar year, shall not exceed $l00,000
or such other amount as shall be permitted for options intended
to qualify for incentive stock option treatment. For purposes of
this section the fair market value of Stock subject to Options
shall be determined at the time the Options are issued.
4. Stock Subject to the Plan.
4.l Stock to be issued upon the exercise of an Option
shall be made available, in the discretion of the Board of
Directors, from authorized but unissued shares of Stock or from
shares of Stock held in the treasury of this Corporation, however
acquired.
4.2 The aggregate number of shares of Stock for which
Options may be granted under the Plan shall be 35,900. If an
Option shall expire, terminate, or be cancelled or surrendered in
whole or in part prior to the exercise thereof, the number of
shares of Stock subject to the unexercised portion of such Option
shall be subject to other Options granted theretofore or
thereafter pursuant to the Plan.
4.3 Appropriate adjustments in the number of shares of
Stock subject to Options previously issued hereunder and in the
number of shares of Stock for which Options have not yet been
granted under this Plan shall be made by the Board of Directors
if at any time after the effective date of this Plan this
Corporation shall increase or decrease the number of outstanding
shares of Stock, whether by stock split, combination, stock
dividend or reclassification, or merger, consolidation,
recapitalization, or reorganization.
4.4 No provision of this Plan, nor any Option granted
pursuant hereto or Stock Option Agreement entered into in
connection therewith shall confer upon any Employee or any
other person any preemptive right to acquire any stock of this
Corporation.
<PAGE>
5. Eligibility.
5.l The Board of Directors may grant Options pursuant
hereto to such Employees as it may designate from time to time
pursuant to Section 3.l hereof regardless of whether such
Employees are also officers or directors of this Corporation.
5.2 No officer or director of this Corporation shall be
eligible to receive any Option pursuant to this Plan unless such
officer or director is also an Employee.
5.3 No Employee may exercise any part of an Option
unless he or she has been continuously employed by this
Corporation from the date the Option was granted until no more
than three (3) months prior to the time of such exercise,
provided, that in the case of a deceased employee or an employee
whose employment terminates for reason of permanent and total
disability, no Option may be exercised unless the optionee was
continuously employed by this Corporation from the date the
Option was granted until no more than l2 months prior to the time
of such exercise.
5.4 If an Employee or former Employee eligible to
exercise an Option granted pursuant to this Plan dies prior to
such exercise, such Option may be exercised to the extent
permitted herein by his estate or a person who acquires the right
to exercise such Option by bequest or inheritance.
5.5 No Option granted pursuant to this Plan may be
transferred by the holder thereof other than by will or the laws
of descent and distribution of the state in which such holder is
domiciled at the time of his death.
6. Terms of Options.
6.l The price at which shares of Stock may be purchased
pursuant to an Option shall be the fair market value of the Stock
on the date of the grant of such Option (as determined pursuant
to Section 3.2 hereof), provided, that in the case of Options
granted to an Employee who at the date of the grant of such
Option owns l0% or more of the combined voting stock of the
Corporation (a "l0% Employee"), such price shall be equal to ll0%
of the fair market value of the Stock on the date of the grant of
such Option. For purposes of determining the percentage of stock
of the Corporation owned by an Employee, attribution rules made
applicable by the Code and related regulations shall apply.
The fair market value of any Stock shall be determined by the
Board of Directors in good faith.
<PAGE>
6.2 Each Option granted under this Plan shall expire,
and may not be exercised to any extent, upon the earliest to
occur of the following:
(a) Each Option shall expire ten years after the date
of grant of such Option (as determined pursuant to Section 3.2
hereof), or on such date prior thereto as may be fixed by the
Board of Directors, provided, however, that each Option granted
to a l0% Employee shall expire five years after the date of grant
of such Option, or such date prior thereto as may be fixed by the
Board of Directors.
(b) Each Option shall expire not later than three
months after termination of the optionee's employment with this
Corporation or any of its Subsidiaries (with or without cause,
voluntary or involuntary) for reasons other than death or total
and permanent disability, during which three-month period the
Option may be exercised only to the extent that it was
exercisable upon termination. If the optionee's employment with
this Corporation or any of its Subsidiaries terminates for
reasons of death or total and permanent disability, then the
Option shall expire l2 months after such termination of
employment, and during that 12-month period the Option may be
exercised only to the extent it was exercisable upon termination.
If an optionee whose employment terminates for reasons other than
death or disability dies during the three-month period described
above, such optionee's Options shall expire one year from the
date of termination of employment, during which time they may be
exercised to the extent exercisable on the date of termination.
7. Exercise of Options.
7.l Each Option granted hereunder shall be exercisable
in such installment or installments as may be determined by the
Board of Directors at the time of the grant. The right to
purchase shares shall be cumulative so that when the right to
purchase any shares has accrued such shares or any part thereof
may be purchased at any time thereafter until the expiration or
termination of the Option.
7.2 A person entitled to exercise an Option may,
subject to the terms and conditions of the Stock Option Agreement
executed in connection therewith, exercise such Option from time
to time by delivery to this Corporation at its principal office
of written notice of his or her intention to exercise such
Option setting forth the number of shares with respect to which
the Option is to be exercised and accompanied by
(l) payment in full of the purchase price of the shares to be
purchased, (2) payment in full of all local, state or federal
taxes due on account of the exercise of such Option, and (3) such
other documents and materials as may be required by this
Corporation under the terms of this Plan, the Stock Option
Agreement, or otherwise. As promptly as practicable thereafter,
this Corporation shall deliver to the purchaser certificates for
the number of shares purchased.
<PAGE>
7.3 The date of actual receipt by this Corporation of
notice of intention to exercise an Option shall be deemed the
date of exercise of the Option with respect to the shares then
purchased. Delivery of shares purchased shall be deemed
effective when a stock transfer agent shall have deposited
certificates therefor with the United States mail for delivery to
the purchaser at the address specified in the notice of exercise
provided to this Corporation.
7.4 During the life of a holder of an Option issued
pursuant to this Plan, such Option may be exercised only by the
holder.
7.5 No person, estate or other entity shall have any of
the rights of a shareholder of this Corporation with respect to
shares subject to an Option until a certificate or certificates
for such shares shall have been delivered by this Corporation to
such person or entity. Upon delivery of such a certificate to
the purchaser thereof for the number of shares of Stock
purchased, the owner thereof shall have all the rights of a
shareholder of such shares of Stock, including the right to vote
the same and receive dividends thereon, subject, however, to the
terms, conditions and restrictions contained in this Plan and in
the Stock Option Agreement executed in connection with the Option
exercised with respect to such shares.
8. Miscellaneous.
8.l The grant of an Option to an Employee pursuant
hereto shall not confer upon such Employee a right to continued
employment, nor shall it limit the right of this Corporation or
any Subsidiary to terminate the employment of any such Employee.
8.2 The Board of Directors may modify, amend or
terminate this Plan or any provision thereof at any time and from
time to time, provided however, that no amendment to this
Plan shall be made which shall: (l) increase the total number of
shares of Stock for which Options under this Plan may be issued,
except as provided in Section 4.3 hereof, (2) increase the total
number of shares of Stock which may be acquired by an Employee
pursuant to Options issued under this Plan except as provided in
Section 4.3 hereof, (3) extend the maximum period during which
any Option may be exercised as set forth in Section 6.2 hereof,
(4) change the class of employees entitled to receive awards, (5)
reduce the purchase price of Stock subject to any Option, or (6)
extend the termination date of this Plan, without in each case
the prior approval of the holders of at least a majority of the
Stock of this Corporation of all classes voting together. No
amendment to this Plan shall alter or impair any Option
previously granted pursuant hereto without the consent of the
holder thereof.
<PAGE>
8.3 The effective date of this Plan shall be April 1,
1996. No Option may be granted pursuant hereto subsequent to the
date which is ten years after the date on which the Plan shall be
adopted by the Board of Directors.
8.4 This Plan, and all rights and obligations
hereunder, including matters of construction, validity and
performance, shall be governed by the laws of the Commonwealth of
Massachusetts.
8.5 Notice to this Corporation pursuant to Sections 7.2
or 8.5 hereof or for any other purpose may be given by delivery
in hand or first class mail, postage prepaid, and addressed as
follows:
Beverly National Corporation
240 Cabot Street
Beverly, Massachusetts 01915
Notice to an Employee to whom an Option shall be granted
hereunder may be given by delivery in hand or first class mail,
postage prepaid, to the address listed by such Employee in the
Stock Option Agreement executed by such Employee.
5854E
EXHIBIT 21
21. Subsidiaries of the Corporation at December 31, 1995:
Incorporate in Percent Owned
Subsidiary the State of by the Corporation
- ---------- -------------- ------------------
Beverly National Bank Massachusetts 100%
86 Bay Road Realty Trust Massachusetts 100%
Cabot Street Realty Trust Massachusetts 100%
EXHIBIT 23
24. Consent of Shatswell, MacLeod and Co.
SHATSWELL, MaclEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
83 PINE STREET
WEST PEABODY, MASSACHUSETTS 01960-3635
(508)535-0206
We consent to the incorporation by reference in this Annual Report
on Form 10-KSB of Beverly National Corporation of our report dated
January 11, 1996.
SHATSWELL, MacLEOD & COMPANY, P.C.
March 26, 1996
<TABLE> <S> <C>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 9,294,959
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<FED-FUNDS-SOLD> 5,800,000
<TRADING-ASSETS> 123,663
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<INVESTMENTS-CARRYING> 33,183,718
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<LOANS> 104,564,337
<ALLOWANCE> 2,072,523
<TOTAL-ASSETS> 169,120,694
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<SHORT-TERM> 0
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0
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</TABLE>
