U. S. SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
Washington, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly period ended June 30, 1997
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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
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Beverly National Corporation
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(Name of small business issuer as specified in its charter)
Massachusetts 04-2832201
- -------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Cabot Street Beverly, Massachusetts 01915
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuers telephone number, including area code (508) 922-2100
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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
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of August 1, 1997. 754,482 shares
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Transitional small business disclosure format
Yes
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No X
-------
<PAGE>
BEVERLY NATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets at
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the Three Months and
Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flow for the
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings 15
Item 2.
Changes in Securities 15
Item 3.
Defaults Upon Senior Securities 15
Item 4.
Submission of Matters to a Vote of Security Holders 15
Item 5.
Other Information 15
Item 6.
Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31,
1997 1996
------------ ------------
ASSETS
Cash and due from banks $ 10,510,549 $ 11,263,278
Federal funds sold 9,100,000 14,100,000
Investments in available-for-sale securities 19,633,074 17,608,128
Investments in held-to-maturity securities 20,401,097 22,934,468
Federal Reserve Bank stock, at cost 97,500 97,500
Loans:
Commercial 20,347,263 16,946,508
Real estate - construction and
land development 6,500,531 5,847,491
Real estate - residential 40,951,397 40,019,022
Real estate - commercial 46,612,052 46,150,365
Consumer 8,498,467 6,538,122
Municipal 465,000 452,000
Other 593,210 583,066
Allowance for possible loan losses (2,172,924) (2,197,694)
Deferred loan fees, net (38,339) (85,990)
------------ ------------
Net loans 121,756,657 114,252,890
Mortgages held for sale 1,152,369 964,377
Premises and equipment, net 4,986,017 4,433,529
Accrued interest receivable 1,329,263 1,081,467
Other assets 1,405,020 1,281,374
------------ ------------
Total assets $190,371,546 $188,017,011
============ ============
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 34,987,345 $ 34,897,850
Interest bearing
Regular savings 36,948,868 35,647,330
NOW accounts 34,495,821 34,015,128
Money market accounts 17,485,596 18,748,989
Time deposits 48,669,163 47,428,931
------------ ------------
Total deposits 172,586,793 170,738,228
Notes payable 385,627 385,627
Employee Stock Ownership Plan loan 300,000 360,000
Other liabilities 1,228,568 1,390,595
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Total liabilities 174,500,988 172,874,450
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Stockholders' equity:
Preferred stock, $2.50 par value per share;
300,000 shares authorized; issued and
outstanding none
Common stock, $2.50 par value per share;
2,500,000 shares authorized; issued 791,349;
outstanding, 754,482 shares 1,978,373 1,978,373
Paid-in Capital 4,358,872 4,358,926
Retained earnings 10,546,060 9,886,901
Treasury stock, at cost (36,867 shares) (683,273) (685,127)
Net unrealized holding loss on
available-for-sale securities (29,474) (36,512)
Unearned compensation - Employee Stock
Ownership Plan (300,000) (360,000)
------------ ------------
Total stockholders' equity 15,870,558 15,142,561
------------ ------------
Total liabilities and stockholders' equity $190,371,546 $188,017,011
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
INTEREST INCOME:
Interest and fees on loans $5,472,211 $4,811,581 $2,762,599 $2,471,483
Interest and dividends on
investment securities:
Taxable 1,231,257 1,151,743 620,227 567,973
Tax-exempt 7,433 13,641 4,234 6,766
Federal Funds Sold 204,259 165,711 114,015 100,137
Other interest 0 98,727 0 98,727
---------- ---------- ---------- ----------
Total interest and
dividend income 6,915,160 6,241,403 3,501,075 3,245,086
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on Deposits 2,417,753 2,125,505 1,229,630 1,071,362
Interest on Notes payable 17,265 29,694 8,781 14,808
---------- ---------- ---------- ----------
Total interest expense 2,435,018 2,155,199 1,238,411 1,086,170
---------- ---------- ---------- ----------
Net interest and dividend
income 4,480,142 4,086,204 2,262,664 2,158,916
Provision for loan losses 0 0 0 0
---------- ---------- ---------- ----------
Net interest and dividend
income after provision
for loan losses 4,480,142 4,086,204 2,262,664 2,158,916
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Income from fiduciary
activities 534,238 431,521 270,291 232,457
Service charges on deposit
accounts 218,000 212,462 110,544 106,380
Other deposit fees 105,708 117,225 55,362 59,678
Other income 175,190 170,301 108,396 78,931
Gain on sales of other
real estate owned,net (8,275) 0 (8,275) 0
---------- --------- ---------- ----------
Total noninterest income 1,024,861 931,509 536,318 477,446
---------- --------- ---------- ----------
<PAGE>
NONINTEREST EXPENSE:
Salaries and employee
benefits 2,319,398 1,946,448 1,170,726 1,007,392
Occupancy expense 374,483 306,979 194,160 143,381
Equipment expense 213,783 207,700 112,654 103,673
Investment security
(gain)/ loss, net 0 0 0 0
Data processing fees 132,276 108,448 71,221 55,623
F.D.I.C. insurance premium 9,931 1,000 5,328 500
Stationary and supplies 93,883 72,345 46,708 36,584
Other expense 811,288 708,047 389,309 443,756
---------- ---------- ---------- ----------
Total noninterest expense 3,955,042 3,350,967 1,990,106 1,790,909
---------- ---------- ---------- ----------
Income before income taxes 1,549,961 1,666,746 808,876 845,453
Income taxes 649,400 698,500 337,500 353,000
---------- ---------- ---------- ----------
Net Income $ 900,561 $ 968,246 $ 471,376 $ 492,453
========== ========== ========== ==========
Earnings per share:
Weighted average shares
outstanding 754,417 753,994
========== ==========
Net income per share $ 1.19 $ 1.28
Dividends per share $ 0.34 $ 0.24
Special dividend per share $ 0.06 $ 0.12
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
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Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Interest received $6,609,134 $6,106,338
Service charges and other income 1,024,860 931,509
Interest paid (2,416,807) (2,155,076)
Cash paid to suppliers and employees (3,925,167) (3,232,960)
Income taxes paid (646,960) (635,858)
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Net cash provided by operating activities 645,060 1,013,953
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Cash flows from investing activities:
Proceeds from maturities of investment securities 4,520,352 3,053,391
Proceeds from maturities of investment securities 3,093,859 7,105,933
Purchases of investment securities held-to-
maturity (1,984,063) (3,961,183)
Purchases of investment securities available-for-
sale (5,110,031) (3,117,750)
Net increase in loans (7,961,853) (8,902,187)
Proceeds from sale of mortgages 254,156 0
Proceeds from sale of other real estate owned 74,658 0
Capital expenditures (765,808) (128,664)
Recoveries of previously charged off loans 17,354 606,334
(Increase) decrease in other assets (140,113) (10,248)
Increase (decrease) in other liabilities (5,263) (14,216)
----------- -----------
Net cash provided by (used in) investing
activities (8,006,752) (5,368,590)
----------- -----------
Cash flows from financing activities:
Net decrease in demand deposits, NOW,
money market & savings accounts 608,333 1,154,905
Net increase (decrease) in time deposits 1,240,232 1,284,106
Issued treasury stock 1,800 38,199
Dividends paid (241,402) (181,052)
----------- -----------
Net cash provided by (used in) financing
activities 1,608,963 2,296,158
----------- -----------
Net decrease in cash and cash equivalents (5,752,729) (2,058,479)
Cash & cash equivalents beginning of year 25,363,278 15,094,959
----------- -----------
Cash & cash equivalents at June 30: $19,610,549 $13,036,480
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended June 30, 1997 and 1996
(Unaudited)
(Continued)
Reconciliation of net income to net cash provided by operating activities:
1997 1996
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Net income $ 900,561 $ 968,246
--------- ---------
Depreciation expense 213,320 203,114
Amortization expense of investment securities 15,820 18,844
Accretion income of investment securities (20,475) (36,729)
Change in prepaid interest 1,967 1,967
Provision for loan losses 0 0
Increase (decrease) in taxes payable 2,440 62,642
Increase in interest receivable (247,796) (123,088)
Increase (decrease) in interest payable 16,243 (1,843)
Increase (decrease) in accrued expenses (175,447) (172,564)
Net (gain) loss on sale of mortgages (1,416) 0
Net (gain) loss on sale of other real estate owned 8,275 0
Change in deferred loan fees (53,575) 5,903
Change in prepaid expenses (14,857) 87,457
Change in unearned income 0 4
-------- ----------
Total adjustments (255,501) 45,707
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Net cash provided by operating activities $645,060 $1,013,953
======== ==========
Non-cash investing activities:
Loans transferred to other real estate owned $82,933 $0
Loans originated from the sales of other real estate $0 $0
<PAGE>
BEVERLY NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The interim consolidated financial statements contained herein are
unaudited but, in the opinion of management, include all adjustments
which are necessary, to make the financial statements not misleading. All
such adjustments are of a normal recurring nature. The results of
operations for any interim period are not necessarily indicative of
results that may be expected for the year ended December 31, 1997.
2. EARNINGS PER SHARE
Earnings per share calculations are based on the weighted average number
of common shares outstanding during the period.
3. LEVERAGED E.S.O.P.
The prepared financial statements include adjusting entries to properly
reflect the leveraged portion of the Employee Stock Ownership Plan.
4. RECLASSIFICATION
Certain amounts in the prior year have been reclassified to be consistent
with the current year's statement presentation.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
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The following discussion and related consolidated financial statements include
Beverly National Corporation (the "Corporation") and its subsidiaries, Beverly
National Bank (the "Bank"), and Cabot Street Realty Trust.
Summary
- -------
The Corporation's net income for the six months ended June 30, 1997, was
$900,561 as compared to $968,246 for the time period ended June 30, 1996. This
represents an decrease of $67,685 or 7.0%. Earnings per share totaled $1.19
for the six months ended June 30, 1997, as compared to earnings per share of
$1.28 for the six months ended June 30, 1996. The earnings per share reflect
both the improvement in core earnings and non-recurring income recorded in
1996.
SIX MONTHS ENDED JUNE 30, 1997
AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net Interest Income
- -------------------
Net interest and dividend income for the six months ended June 30, 1997,
totaled $4,480,142 as compared to $4,086,204 for the same time period in 1996.
This is an increase of $393,938 or 9.6%. Total interest and dividend income
equaled $6,915,160 for the six months ended June 30, 1997 as compared to
$6,241,403 for the same time period in 1996, an increase of $673,757 or 10.8%.
Loan income for the six months ended June 30, 1997, totaled $5,472,211 as
compared to $4,811,581 for the same time period in 1996. This increase of
$660,630 or 13.7% reflects the continued increased loan production and the
reduction of non-performing loans. Interest and Dividends on taxable Investment
Securities for the six months ended June 30, 1997 totaled $1,231,257 as
compared to $1,151,743 for the same period in 1996. This is a increase of
$79,514 or 6.9%. This increase is due to reinvestment of taxable investment
securities that had matured at higher rates. The interest earned from federal
funds sold increased $38,548 or 23.3% for the six months ended June 30, 1997
as compared to 1996.
Other interest was recorded in the amount of $98,727 for the six months ending
June 30, 1996 as compared to $-0- for the corresponding time period in 1997.
This interest was non-recurring and relative to a refund associated with
taxation of municipal amortization of investment premiums.
<PAGE>
Deposit interest expense equaled $2,417,753 for the six months ended June 30,
1997, as compared to $2,125,505 for the same period in 1996. This increase of
$292,248 or 13.8% reflects the current strategy of managing the cost of funds
of the Bank. Average deposit rates have increased slightly during 1997 in
comparison to 1996.
Notes payable interest expense for the six months ended June 30, 1997 decreased
$12,429 in comparison to 1996 due to the reduction of corporate borrowings.
Loan Loss Provision
- -------------------
There was no provision for the possible loan losses for the six months ended
June 30, 1997 and for the same period in 1996. At June 30, 1997, the
Corporation's allowance for possible loan losses was $2,172,924 representing
1.8% of gross loans at June 30, 1997 as compared to 1.9% of total loans at
December 31, 1996. The ratio of allowance for loan losses to non-performing
assets equaled 476.9% at June 30, 1996 as compared to 635.5% at December 31,
1996. Factors that enabled the Bank to have no provisions included
management's evaluation of improving economic conditions including a stable
local economy and the low level of non-performing loan balances.
The Corporation's non-accrual loans were $455,661 at June 30, 1997 as compared
to $345,755 at December 31, 1996. The continued low level of non-accrual loans
can be attributed to the additional resources devoted to addressing corrective
action of the loans that are in non-accrual status.
The ratio of non-performing assets to total loans and mortgages held for sale
was 0.37% for June 30, 1997 as compared to 0.29% as of December 31, 1996.
A total of $42,124 loans were charged off by the Corporation during the first
six months of 1997 as compared to $457,671 charged off during the corresponding
period in 1996. These charge-offs consisted primarily of loans to small
businesses and individuals. A total of $17,354 was recovered of previously
charged off notes by the Corporation during the six month period ended June
30, 1997, as compared to $606,334 recovered of previously charged off notes
during the corresponding period in 1996.
<PAGE>
Noninterest Income
- ------------------
Noninterest income totaled $1,024,861 for the six months ended June 30, 1997 as
compared to $931,509 for six months ended June 30, 1996. This is a increase of
$93,352 or 10.0%. Income from fiduciary activities totaled $534,238 for the
six months ended June 30, 1997 as compared to $431,521 for six months ended
June 30, 1996 an increase of $102,717 or 23.8% due to increased volume of
recurring trust services. Service charges on deposit accounts remained stable
as income totaled $218,000 for the six months ended June 30, 1997, as compared
to $212,462 for the same time period in 1996.
Other deposit fees decreased $11,517 or 9.8% for the six months ended June 30,
1997 as compared to the same time period in 1996. There were no net security
gains posted for the six month periods ended June 30, 1997 and June 30, 1996.
Other income for the six month period ended June 30, 1997 totaled $175,190 as
compared to $170,301 June 30, 1996, an increase of $4,889 or 2.9%. The Bank
sold $186,576 in mortgages to the secondary market during the six months ended
June 30, 1997 as compared to -0- for the same time period in 1996.
Noninterest Expense
- -------------------
Noninterest expense totaled $3,955,042 for the six months ended June 30, 1997,
as compared to $3,350,967 for the same time period in 1996. This is an
increase of $604,075 or 18.0%. Salaries and benefits totaled $2,319,398 for
the six months ended June 30, 1997 and $1,946,448 for the same time period in
1996. This increase of $372,950 or 19.2% can be attributed to increased staff
in commercial loans and retail services. Occupancy expense totaled $374,483
for the six months ended June 30, 1997 as compared to $306,979 for the same
period in 1996. This increase is due to increased rental expense and leasehold
improvements relating to the Cummings Center Branch, Beverly High School
Branch, Hamilton Wenham Regional High School Branch and two stand alone ATM
sites. The costs of equipment totaled $213,783 for the six months ending June
30, 1997 as compared to $207,700 for the same period in 1996. Data processing
fees totaled $132,276 for the six months ended June 30, 1997 as compared to
$108,448 for the corresponding time period in 1996. The increase of $23,828 or
22.0% is related to higher processing volumes, data processing upgrades, and
new products and services. The FDIC Insurance Premium totaled $9,931 for the
six months ended June 30, 1997 as compared to $1,000 for the corresponding
period in 1996. This is a increase of $8,931 of premium expense. This
increase is based on the Banks portion of the FICO assessment from FDIC.
Stationary and supplies totaled $93,883 at six months ended June 30, 1997 as
compared to $72,345 for the corresponding period in 1996. Legal and
miscellaneous expenses were reduced by $96,500 due to a recovery of
non-recurring trust expenses in the first six months of 1996.
Income Taxes
- ------------
The income tax provision for the six months ended June 30, 1997 totaled
$649,400 in comparison to an income tax provision of $698,500 for the same
time period in 1996. This decrease reflects the decrease in taxable income.
<PAGE>
Net Income
- ----------
Net income amounted to $900,561 for the six months ended June 30, 1997 as
compared to net income of $968,246 for the same period in 1996, which is a
decrease of $67,685 or 7.0%. The decrease in net income for six months can be
attributed to: increased loan production; collection of non-recurring interest
in 1996; recovery of non-recurring trust expenses in 1996; and costs associated
with the development of the Cummings Center Branch, two high school branches
and two stand alone ATM sites.
THREE MONTHS ENDED JUNE 30, 1997
AS COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Net Interest Income
- -------------------
Net interest and dividend income for the three months ended June 30, 1997,
totaled $2,262,664 as compared to $2,158,916 for the same time period in 1996.
This increase was $103,748 or 4.8%. Total interest and dividend income equaled
$3,501,075 for the three months ended June 30, 1997 as compared to $3,245,086
for the same time period in 1996, an increase of $255,989 or 7.9%. Loan income
for the three months ended June 30, 1997, totaled $2,762,599 as compared to
$2,471,483 for the same time period in 1996. This increase of $291,116 or
11.8% represents increased loan production and the reduction of non-performing
assets. Interest and Dividends on Taxable Investment Securities for the three
months ended June 30, 1997 totaled $620,227 as compared to $567,973 for the
same period in 1996. This is an increase of $52,254 or 9.2%. The interest
earned from federal funds sold increased $13,878 or 13.9% for the three months
ended June 30, 1997 when compared to the same time period in 1996. This
increase can be attributed to an increase in the balances held in Federal Funds
Sold of 20.0%.
Other interest was recorded in the amount of $98,727 for the three months
ending June 30, 1996 as compared to $-0- for the corresponding time in 1997.
This interest is non-recurring and relative to taxation of municipal
amortization of investment premiums.
Deposit interest expense equaled $1,229,630 for the three months ended June 30,
1997, as compared to $1,071,362 for the same period in 1996. This increase of
$158,268 or 14.8% reflects the current strategy of managing the cost of funds
of the Bank. The Bank generally pays competitive rates for its deposit base in
the local market.
Notes payable interest expense for the three months ended June 30, 1997
decreased $6,027 in comparison to the corresponding time period in 1996 due
to lower corporate borrowings.
<PAGE>
Loan Loss Provision
- -------------------
No provisions to the allowance for possible loan losses were made during the
second calendar quarters of 1997 or 1996. At June 30, 1997, the Corporation's
allowance for possible loan losses was $2,172,924 representing 1.8% of gross
loans as compared to the ratio of 1.9% of total loans at December 31, 1996.
The ratio of allowance for loan losses to non-performing assets equaled 476.9%
at June 30, 1997 as compared to 635.5% at December 31, 1996.
A total of $2,847 loans were charged off by the Corporation during the second
quarter of 1997 as compared to $423,452 charged off during the corresponding
period in 1996. These charge-offs consisted primarily of loans to small
businesses and individuals. A total of $11,763 was recovered of previously
charged off notes by the Corporation during the three month period ended June
30, 1997, as compared to $351,029 recovered during the corresponding period in
1996.
Noninterest Income
- ------------------
Noninterest income totaled $536,318 for the three months ended June 30, 1997 as
compared to $477,446 for three months ended June 30, 1996. This is an increase
of $58,872 or 12.3%. Income from fiduciary activities totaled $270,291 for the
three months ended June 30, 1997 as compared to $232,457 for the three months
ended June 30, 1996. The increased valuation of the market and an increased
volume of recurring Trust business created this situation. Service charges on
deposit accounts totaled $110,544 for the three months ended June 30, 1997, as
compared to $106,380 for the same time period in 1996. An increased deposit
volume helped create this situation. Other deposit fees decreased $4,316 or
7.2% for the three months ended June 30, 1997 as compared to the same time
period in 1996. There were no net security gains posted for the three month
periods ended June 30, 1997 and June 30, 1996. Other income for the three
month period ended June 30, 1996 totaled $108,396 as compared to $78,931 for
the three month period ended June 30, 1996, an increase of $29,465 or 37.3%.
This increase is due to valuation of the mortgage portfolio and credit card fee
income.
<PAGE>
Noninterest Expense
- -------------------
Noninterest expense totaled $1,990,106 for the three months ended June 30,
1997, as compared to $1,790,909 for the same time period in 1996. This
increase totaled $199,197 or 11.1%. Salaries and benefits totaled $1,170,726
for the three months ended June 30, 1997 and $1,007,392 for the same time
period in 1996. Occupancy expense totaled $194,160 for the three months ended
June 30, 1997 as compared to $143,381 for the same period in 1996. This
increase is due to increased rental expense and leasehold improvements relating
to the Cummings Center Branch, Beverly High School Branch, Hamilton Wenham
Regional High School Branch and two stand alone ATM sites. The costs of
equipment totaled $112,654 for the three months ended June 30, 1997 as compared
to $103,673 for the same period in 1996. The increased equipment expense can be
attributed to the purchase of additional equipment in connection with the
implementation of the above sites. Data processing fees totaled $46,708 for
the three months ended June 30, 1997 as compared to $55,623 for the
corresponding time in 1996. This increase of $15,598 or 28.0% is related to
higher volumes, data processing upgrades and new products and services. The
FDIC Insurance Premium was $5,328 for the three months ended June 30, 1997 as
compared to $500 for the corresponding period in 1996. This is an increase of
$4,828 of premium expense. This increase is based on the Banks portion of the
FICO assessment from FDIC. Other expenses totaled $389,309 at three months
ended June 30, 1997 as compared to $443,756 for the same period in 1996. This
reflects the decreases in repossession and collection costs.
Income Taxes
- ------------
The income tax provision for the three months ended June 30, 1997 totaled
$337,500 in comparison to an income tax provision of $353,000 for the same time
period in 1996. This decrease reflects a decrease of taxable income.
Net Income
- ----------
Net income amounted to $471,376 for the three months ended June 30, 1997 as
compared to net income of $492,453 for the same period in 1996, which is an
decrease of $21,077 or 4.3%. The decrease in net income for the quarter can be
attributed to increased occupancy expense and increased salary and benefits
costs.
<PAGE>
Capital Resources
- -----------------
As of June 30, 1997, the Corporation had total capital in the amount of
$15,870,558, as compared with $15,142,561 at December 31, 1996, which
represents an increase of $727,997 or 4.8%.
The Bank is required to maintain a Tier 1 capital at a level equal to or
greater than 4.0% of the Bank's adjusted total assets. As of June 30, 1997,
the Bank's Tier 1 capital amounted to 7.63% of total assets. In addition,
banks and holding companies must maintain minimum levels of risk-based capital
equal to risk weighted assets of 8.00%. At June 30, 1997, the Bank's ratio of
risk-based capital to risk weighted assets amounted to 12.76%, which satisfies
the applicable risk based capital requirements. As of December 31, 1996, the
Corporation's Tier 1 capital amounted to 7.34% of total assets and risk based
capital amounted to 11.38% of total risk based assets.
The Corporation is required to maintain a Tier 1 capital at a level equal to or
greater than 4.0% of the Bank's adjusted total assets. As of June 30, 1997,
the Corporation's Tier 1 capital amounted to 8.54% of total assets. In
addition, banks and holding companies must maintain minimum levels of risk-
based capital equal to risk weighted assets of 8.00%. At June 30, 1997, the
Corporation's ratio of risk-based capital to risk weighted assets amounted to
13.93%, which satisfies the applicable risk based capital requirements. As of
December 31, 1996, the Corporation's Tier 1 capital amounted to 8.26% of total
assets and risk based capital amounted to 12.58% of total risk based assets.
The capital ratios of the Corporation and the Bank exceed regulatory
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.
Certain marketable investment securities, particularly those of shorter
maturities, are the principal source of asset liquidity. The Corporation
maintains such securities in an available for sale account as a liquidity
resource. Securities maturing in one year or less amounted to approximately
$8,141,561 or 20.3% at June 30, 1997 of the investment securities portfolio,
and $7,534,983 at December 31, 1996, representing 18.6% 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 and general practice is to be interest rate sensitive
neutral, and maintain a net cumulative gap at one year or less than 10% of
Total Earning Assets, so that changes in interest rates should not dramatically
impact income as assets and liabilities mature and reprice concurrently.
<PAGE>
SIGNATURES
Pursuant to the requirements 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
(Registrant)
Date: August 12, 1997 By: /s/ Lawrence M. Smith
------------------------
Lawrence M. Smith
President, Chief Executive Officer
Date: August 12, 1997 By: /s/ Peter E. Simonsen
------------------------
Peter E. Simonsen
Treasurer, Principal Financial
Officer
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit Number
27. Financial Data Schedule
b. The Corporation did not file any reports on Form 8-K during
the quarter ended June 30, 1997.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,510,549
<INT-BEARING-DEPOSITS> 137,599,448
<FED-FUNDS-SOLD> 9,100,000
<TRADING-ASSETS> 1,152,369
<INVESTMENTS-HELD-FOR-SALE> 19,633,074
<INVESTMENTS-CARRYING> 20,401,097
<INVESTMENTS-MARKET> 20,069,216
<LOANS> 123,929,581
<ALLOWANCE> 2,172,924
<TOTAL-ASSETS> 190,371,546
<DEPOSITS> 172,586,793
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,228,568
<LONG-TERM> 385,627
0
0
<COMMON> 1,978,373
<OTHER-SE> 13,892,185
<TOTAL-LIABILITIES-AND-EQUITY> 190,371,546
<INTEREST-LOAN> 5,472,211
<INTEREST-INVEST> 1,238,690
<INTEREST-OTHER> 204,259
<INTEREST-TOTAL> 6,915,160
<INTEREST-DEPOSIT> 2,417,753
<INTEREST-EXPENSE> 17,265
<INTEREST-INCOME-NET> 2,435,018
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,955,042
<INCOME-PRETAX> 1,549,961
<INCOME-PRE-EXTRAORDINARY> 1,549,961
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 900,561
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 8.08
<LOANS-NON> 455,661
<LOANS-PAST> 0
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<ALLOWANCE-UNALLOCATED> 695,121
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