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, 1998
---------------------------
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)
Issuer's telephone number, including area code (978) 922-2100
------------------
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, 1998. 1,558,474 shares
-------------------
Transitional small business disclosure format
Yes
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No X
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<PAGE>
BEVERLY NATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1.
Financial Statements (Unaudited)
Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 . . . . . . . . . . . 3-4
Consolidated Statements of Income for the Three Months and
Six Months Ended June 30, 1998 and 1997. . . . . . . . . . . 5-6
Consolidated Statements of Cash Flow for the
Six Months Ended June 30, 1998 and 1997. . . . . . . . . . . 7-8
Notes to Consolidated Financial Statements . . . . . . . . . 9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . 10
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 18
Item 2.
Changes in Securities and Use of Proceeds . . . . . . . . . 18
Item 3.
Defaults Upon Senior Securities . . . . . . . . . . . . . . 18
Item 4.
Submission of Matters to a Vote of Security Holders . . . . 18
Item 5.
Other Information. . . . . . . . . . . . . . . . . . . . . 18
Item 6.
Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 18
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31,
1998 1997
------------- -------------
ASSETS
Cash and due from banks $ 8,011,257 $ 9,587,570
Federal funds sold 21,900,000 9,100,000
Investments in available-for-sale securities 34,288,427 20,796,287
Investments in held-to-maturity securities 10,621,257 17,185,188
Federal Reserve Bank stock, at cost 97,500 97,500
Loans:
Commercial 23,172,368 23,184,382
Real estate - construction and land development 4,841,419 6,506,718
Real estate - residential 45,645,278 49,140,474
Real estate - commercial 43,940,745 44,241,896
Consumer 7,827,985 7,651,660
Municipal 2,927,747 1,750,000
Other 604,134 512,516
Allowance for possible loan losses (1,987,433) (2,163,349)
Deferred loan fees, net 0 19,848
------------- -------------
Net loans 126,972,243 130,844,145
Mortgages held for sale 1,833,545 376,533
Premises and equipment, net 4,737,293 4,819,606
Accrued interest receivable 1,292,683 1,162,497
Other assets 1,400,074 1,410,187
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Total assets $ 211,154,279 $ 195,379,513
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 36,519,592 $ 39,083,761
Interest bearing
Regular savings 40,125,276 39,187,382
NOW accounts 36,689,661 32,036,110
Money market accounts 22,386,818 15,813,378
Time deposits 55,379,314 50,170,379
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Total deposits 191,100,661 176,291,010
Notes payable 385,627 385,627
Employee Stock Ownership Plan loan 200,000 300,000
Other Liabilities 1,399,327 1,412,166
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Total liabilities 193,085,615 178,388,803
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<PAGE>
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;
5,000,000 shares authorized; issued 1,604,498
shares as of June 30, 1998 and 1,582,698 shares
as of December 31, 1997; Outstanding,
1,558,374 shares as of June 30, 1998 and
1,520,964 shares as of December 31,1997. 4,004,495 1,978,373
Paid-in Capital 2,437,172 4,319,092
Retained earnings 12,229,228 11,558,988
Treasury stock, at cost (46,124 shares as of
June 30, 1998 and 61,734 shares as of
December 31, 1997) (427,467) (572,093)
Net unrealized holding loss on available-for-
sale securities 25,236 6,350
Unearned compensation-
Employee Stock Ownership Plan (200,000) (300,000)
------------- -------------
Total stockholders' equity 18,068,664 16,990,710
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Total liabilities and stockholders' equity $ 211,154,279 $ 195,379,513
============= =============
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 June 30 Three Months Ended June 30,
---------- ---------- ---------- ----------
1998 1997 1998 1997
INTEREST INCOME:
Interest and fees on
loans $5,862,643 $5,472,211 $2,908,361 $2,762,599
Interest and dividends on
investment securities:
Taxable 1,189,047 1,231,257 615,018 620,227
Tax-exempt 10,886 7,433 5,122 4,234
Federal Funds Sold 447,687 204,259 280,801 114,015
Other interest 0 0 0 0
---------- ---------- ---------- ----------
Total interest and
dividend income 7,510,263 6,915,160 3,809,302 3,501,075
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on Deposits 2,723,474 2,417,753 1,428,431 1,229,630
Interest on Notes
payable 17,476 17,265 8,780 8,781
---------- ---------- --------- ----------
Total interest expense 2,740,950 2,435,018 1,437,211 1,238,411
---------- ---------- --------- ----------
Net interest and dividend
income 4,769,313 4,480,142 2,372,091 2,262,664
---------- ---------- ---------- ----------
Provision for loan losses 0 0 0 0
---------- ---------- ---------- ----------
Net interest and dividend
income after provision
for loan losses 4,769,313 4,480,142 2,372,091 2,262,664
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Income from fiduciary
activities 596,125 534,238 324,848 270,291
Service charges on
deposit accounts 198,240 218,000 104,902 110,544
Other deposit fees 113,279 105,708 56,131 55,362
Other income 180,503 175,190 88,813 108,396
Gain on sales of other
real estate owned, net 0 (8,275) 0 (8,275)
---------- ---------- --------- ----------
Total noninterest income 1,088,147 1,024,861 574,694 536,318
========== ========== ========= ==========
<PAGE>
NONINTEREST EXPENSE:
Salaries and employee
benefits 2,452,402 2,319,398 1,173,126 1,170,726
Occupancy expense 392,151 374,483 191,934 194,160
Equipment expense 221,746 213,783 112,446 112,654
Investment security
(gain)/loss, net 0 0 0 0
Data processing fees 119,623 132,276 61,883 71,221
F.D.I.C. insurance premium 10,580 9,931 10,580 5,328
Stationary and supplies 81,262 93,883 42,717 46,708
Other expense 946,257 811,288 504,330 389,309
---------- ---------- --------- ----------
Total noninterest expense 4,224,021 3,955,042 2,097,015 1,990,106
---------- ---------- ---------- ----------
Income before income taxes 1,633,439 1,549,961 849,771 808,876
Income taxes 648,319 649,400 334,219 337,500
---------- ---------- ---------- ----------
Net Income $ 985,120 $ 900,561 $ 515,551 $ 471,376
========== ========== ========== ==========
Earnings per share:
Weighted average shares
outstanding 1,639,597 1,508,834
========== ==========
Net income per share $ 0.60 $ 0.60
Dividends per share $ 0.18 $ 0.16
Special dividend per
share $ 0.03 $ 0.03
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
---------- ----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Interest received $ 7,235,721 $ 6,856,930
Service charges and other income 1,117,763 777,064
Interest paid (2,738,983) (2,416,807)
Cash paid to suppliers and employees (4,103,143) (3,925,167)
Income taxes paid (592,717) (646,960)
----------- -----------
Net cash provided by operating activities 918,641 645,060
Cash flows from investing activities:
Proceeds from maturities of investment
securities held-to-maturity 9,160,885 4,520,352
Proceeds from maturities of investment
securities available-for-sale 7,870,978 3,093,859
Purchases of investment securities held-to-
maturity (2,541,531) (1,984,063)
Purchases of investment securities available-
for-sale (21,332,183) (5,110,031)
Net (increase) decrease in loans 3,899,544 (7,521,121)
Proceeds from sale of mortgages (1,451,725) (186,576)
Proceeds from sale of other real estate owned 0 74,658
Capital expenditures (138,845) (765,808)
Recoveries of previously charged off loans 49,242 17,354
(Increase) decrease in other assets (6,259) (140,113)
Increase (decrease) in other liabilities 11,341 (5,263)
----------- ----------
Net cash provided by (used in) investing
activities (4,478,553) (8,006,752)
----------- -----------
Cash flows from financing activities:
Net decrease in demand deposits, NOW,
money market, and savings accounts 9,444,347 608,333
Net increase (decrease) in time deposits 5,365,304 1,240,232
Issued common stock 144,202 0
Issued treasury stock 144,626 1,800
Dividends paid (314,880) (241,402)
----------- -----------
Net cash provided by (used in) financing
activities 14,783,599 1,608,963
----------- -----------
Net decrease in cash and cash equivalents 11,223,687 (5,752,729)
Cash & cash equivalents beginning of year 18,687,570 25,363,278
----------- -----------
Cash & cash equivalents at June 30: $29,911,257 $19,610,549
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1998 and 1997
(Unaudited)
(Continued)
Reconciliation of net income to net cash provided by operating activities:
1997 1996
-------- --------
Net income $985,120 $900,561
Depreciation expense 221,158 213,320
Amortization expense of investment securities 3,745 15,820
Accretion income of investment securities (71,217) (20,475)
Change in prepaid interest 1,967 1,967
Provision for loan losses 0 0
Increase (decrease) in taxes payable 55,602 2,440
Increase in interest receivable (130,186) (247,796)
Increase (decrease) in interest payable 34,903 16,243
Increase (decrease) in accrued expenses (125,985) (175,447)
Net (gain) loss on sale of mortgages (5,287) (1,416)
Net (gain) loss on sale of other real estate owned 0 8,275
Change in deferred loan fees (76,884) (53,575)
Change in prepaid expenses 25,705 (14,857)
-------- --------
Total adjustments (66,479) (255,501)
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Net cash provided by operating activities $918,641 $645,060
======== ========
Non-cash investing activities:
Loans transferred to other real estate owned $ 0 $ 82,933
<PAGE>
BEVERLY NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1998
(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 31,1998.
2. EARNINGS PER SHARE
Earnings per share calculations are based on the weighted average number of
common shares outstanding during the period. The computation of basic and
diluted earnings per share have been adjusted retroactively for all periods
presented to reflect the 2 for 1 stock split on April 7, 1998.
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
- ------------
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 (CSRT).
Summary
- -------
The Corporation's net income for the six months ended June 30, 1998, was
$985,120 as compared to $900,561 for the time period ended June 30, 1997. This
represents an increase of $84,559 or 9.4%. However, earnings per share totaled
$.60 for each of the six month periods ended June 30, 1998, and 1997.
SIX MONTHS ENDED JUNE 30, 1998
AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net Interest Income
- -------------------
Net interest and dividend income for the six months ended June 30, 1998,
totaled $4,769,313 as compared to $4,480,142 for the same time period in 1997.
This is an increase of $289,171 or 6.5%. Total interest and dividend income
equaled $7,510,263 for the six months ended June 30, 1998 as compared to
$6,915,160 for the same time period in 1997, an increase of $595,103 or 8.6%.
Loan income for the six months ended June 30, 1998, totaled $5,862,643 as
compared to $5,472,211 for the same time period in 1997. This increase of
$390,432 or 7.1% reflects the continued increased loan production. Interest
and dividends on taxable investment securities for the six months ended
June 30, 1998 totaled $1,189,047 as compared to $1,231,257 for the same period
in 1997. This is a decrease of $42,210 or 3.4%. This decrease is due to a
reduction in reinvestment of taxable investment securities that had matured.
The interest earned from federal funds sold equaled $447,687 as of June 30,
1998 as compared to $204,259 for the same period in 1997 an increase $243,428
or 119.2%.
Deposit interest expense equaled $2,723,474 for the six months ended June 30,
1998, as compared to $2,417,753 for the same period in 1997. This increase of
$305,721 or 12.6% reflects the current strategy of managing the cost of funds
of the Bank. Average deposits have increased during 1998 in comparison to 1997.
Notes payable interest expense for the six months ended June 30, 1997 decreased
$211 in comparison to 1997 due to the reduction of rate on corporate
borrowings.
<PAGE>
Loan Loss Provision
- -------------------
No provisions to the allowance for loan losses were made during the six month
periods ended June 30, 1998 or 1997. At June 30, 1998, the Corporation's
allowance for possible loan losses was $1,987,433 representing 1.6% of gross
loans as compared to 1.6% of total loans at December 31, 1997. Factors that
enabled the Bank to have no provisions included management's evaluation of
economic conditions including a stable local economy and the low level of
non-performing loan balances.
The Corporation's non-accrual loans were $313,476 at June 30, 1998 as compared
to $341,366 at December 31, 1997.
The ratio of the allowance for loan losses to non-performing assets equaled
634.0% at June 30, 1998 as compared to 633.7% at December 31, 1997.
A total of $225,158 loans were charged off by the Corporation during the first
six months of 1998 as compared to $42,124 charged off during the corresponding
period in 1997. These charge-offs consisted primarily of loans to small
businesses and individuals. A total of $49,242 was recovered of previously
charged off notes by the Corporation during the six month period ended
June 30, 1998, as compared to $17,354 recovered of previously charged off notes
during the corresponding period in 1997.
<PAGE>
Noninterest Income
- ------------------
Noninterest income totaled $1,088,147 for the six months ended June 30, 1998 as
compared to $1,024,861 for six months ended June 30, 1997. This is an increase
of $63,286 or 6.2%. Income from fiduciary activities totaled $596,125 for the
six months ended June 30, 1997 as compared to $534,238 for six months ended
June 30, 1997 an increase of $61,887 or 11.6% due to the increased volume of
recurring trust services. Service charges on deposit accounts declined as
income totaled $198,240 for the six months ended June 30, 1998, as compared to
$218,000 for the same time period in 1997. A reduction in lockbox services
created the situation.
Other deposit fees increased $7,571 or 7.2% for the six months ended June 30,
1998 as compared to the same time period in 1997. Other income for the six
month period ended June 30, 1998 totaled $180,503 as compared to $175,190 on
June 30, 1997, an increase of $5,313 or 3.0%. The Bank sold $4,402,119 in
mortgages to the secondary market during the six months ended June 30, 1998 as
compared to $186,576 for the same time period in 1997.
Noninterest Expense
- -------------------
Noninterest expense totaled $4,224,020 for the six months ended June 30, 1998,
as compared to $3,955,042 for the same time period in 1997. This is an
increase of $268,978 or 6.8%. Salaries and benefits totaled $2,452,402 for the
six months ended June 30, 1998 and $2,319,398 for the same time period in 1997.
This increase of $133,004 or 5.7% can be attributed to increased staff in
commercial loans and retail services. Occupancy expense totaled $392,151 for
the six months ended June 30, 1998 as compared to $374,483 for the same period
in 1997. This $17,668 or 4.7% 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 $221,746 for the six months ending
June 30, 1998 as compared to $213,783 for the same period in 1997. Data
processing fees totaled $119,623 for the six months ended June 30, 1998 as
compared to $132,276 for the corresponding time period in 1997. The decrease
of $12,653 or 9.6%. Stationary and supplies totaled $81,262 at six months
ended June 30, 1998 as compared to $93,883 for the corresponding period in
1997. Other expense totaled $946,257 for the six months ended June 30, 1998
as compared to $811,288 for the corresponding time period in 1997. this is an
increase of $134,969 or 16.6%. Legal fees, consulting fees and fraud losses
helped create this increase.
Income Taxes
- ------------
The income tax provision for the six months ended June 30, 1998 totaled
$648,319 in comparison to an income tax provision of $649,400 for the same time
period in 1997. This decrease reflects a decrease of taxable income, due to
additional investment in tax exempt securities and loans.
<PAGE>
Net Income
- ----------
Net income amounted to $985,121 for the six months ended June 30, 1998 as
compared to net income of $900,561 for the same period in 1997, which is an
increase of $84,560 or 9.4%. The increase in net income for six months can be
attributed to: increased loan production; recurring trust income; and
management of the net interest margin.
THREE MONTHS ENDED JUNE 30, 1998
AS COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net Interest Income
- -------------------
Net interest and dividend income for the three months ended June 30, 1998,
totaled $2,372,091 as compared to $2,262,664 for the same time period in 1997.
This increase was $109,427 or 4.8%. Total interest and dividend income equaled
$3,809,302 for the three months ended June 30, 1998 as compared to $3,501,075
for the same time period in 1997, an increase of $308,227 or 8.8%. Loan
income for the three months ended June 30, 1998, totaled $2,908,361 as compared
to $2,762,599 for the same time period in 1997. This increase of $145,762 or
5.3% represents increased loan production. Interest and dividends on taxable
investment securities for the three months ended June 30, 1998 totaled
$615,018 as compared to $620,227 for the same period in 1997. This is a
decrease of $5,209 or 0.8%. This decrease can be attributed to lower average
balance of securities in 1998 in comparison to 1997. The interest earned from
federal funds sold increased $166,786 or 146.3% for the three months ended June
30, 1998 when compared to the same time period in 1997. This increase can be
attributed to an increase in the balances held in federal funds sold.
Deposit interest expense equaled $1,428,431 for the three months ended June 30,
1998, as compared to $1,229,630 for the same period in 1997. This increase of
$198,801 or 16.1% 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, 1998 and the
corresponding time period in 1997 were relatively the same.
Loan Loss Provision
- -------------------
No provisions to the allowance for possible loan losses were made during the
second calendar quarters of 1998 or 1997.
A total of $618 loans were charged off by the Corporation during the second
quarter of 1998 as compared to $2,847 charged off during the corresponding
period in 1997. These charge-offs consisted primarily of loans to small
businesses and individuals. A total of $947 was recovered of previously
charged off notes by the Corporation during the three month period ended
June 30, 1998, as compared to $11,763 recovered during the corresponding period
in 1997.
<PAGE>
Noninterest Income
- ------------------
Noninterest income totaled $574,694 for the three months ended June 30, 1998 as
compared to $536,318 for three months ended June 30, 1997. This is an increase
of $38,376 or 7.1%. Income from fiduciary activities totaled $324,848 for the
three months ended June 30, 1998 as compared to $270,291 for the three months
ended June 30, 1997. The increased valuation of the market and an increased
volume of recurring trust business created this situation. Service charges on
deposit accounts totaled $104,902 for the three months ended June 30, 1998, as
compared to $110,544 for the same time period in 1997. A reduction of locked
box services helped create this situation. Other deposit fees increased $769
or 1.4% for the three months ended June 30, 1998 as compared to the same time
period in 1997. Other income for the three month period ended June 30, 1998
totaled $88,813 as compared to $108,396 for the three month period ended June
30, 1997, a decrease of $19,583 or 18.1%. This increase is due to valuation of
the mortgage portfolio and credit card fee income.
Noninterest Expense
- -------------------
Noninterest expense totaled $2,097,015 for the three months ended June 30,
1998, as compared to $1,990,106 for the same time period in 1997. This
increase totaled $106,909 or 5.4%. Salaries and benefits totaled $1,173,126 for
the three months ended June 30, 1998 and $1,170,726 for the same time period in
1997. Occupancy expense totaled $191,934 for the three months ended June 30,
1998 as compared to $194,160 for the same period in 1997. This decrease is due
to start up costs incurred during the second quarter of 1997 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 $112,446 for the three months ended June 30, 1998 as compared to
$112,654 for the same period in 1997. 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 $61,883 for
the three months ended June 30, 1998 as compared to $71,221 for the
corresponding time in 1997. This decrease of $9,338 or 13.1%. Other expenses
totaled $514,909 at three months ended June 30, 1998 as compared to $394,637
for the same period in 1997. This reflects an increase in cost relating to
legal fees, consulting fees and fraud losses.
Income Taxes
- ------------
The income tax provision for the three months ended June 30, 1998 totaled
$334,219 in comparison to an income tax provision of $337,500 for the same time
period in 1997. This decrease reflects a decrease of taxable income, due to
additional investment in tax exempt securities and loans.
<PAGE>
Net Income
- ----------
Net income amounted to $515,551 for the three months ended June 30, 1998 as
compared to net income of $471,376 for the same period in 1997, which is an
increase of $44,175 or 9.4%. The increase in net income for the quarter can be
attributed to: increased loan production; recurring trust income; and
management of the net interest margin.
Capital Resources
- -----------------
As of June 30, 1998, the Corporation had total capital in the amount of
$18,068,664, as compared with $16,990,710 at December 31, 1997, which
represents an increase of $1,077,954 or 6.3%.
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, 1998,
the Bank's Tier 1 capital amounted to 7.69% 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, 1998, the Bank's ratio of
risk-based capital to risk weighted assets amounted to 13.76%, which satisfies
the applicable risk based capital requirements. As of December 31, 1997, the
Bank's Tier 1 capital amounted to 7.78% of total assets and risk based
capital amounted to 13.09% 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, 1998,
the Corporation's Tier 1 capital amounted to 8.80% 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, 1998, the
Corporation's ratio of risk-based capital to risk weighted assets amounted to
15.30%, which satisfies the applicable risk based capital requirements. As of
December 31, 1997, the Corporation's Tier 1 capital amounted to 8.68% of total
assets and risk based capital amounted to 14.39% of total risk based assets.
The capital ratios of the Corporation and the Bank exceed regulatory
requirements.
<PAGE>
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
$10,839,311 or 24.1% of the investment securities portfolio at June 30, 1998,
and $10,605,238 at December 31, 1997, representing 27.9% 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 7, 1998 By: /s/ Lawrence M. Smith
-----------------------
Lawrence M. Smith
President, Chief Executive Officer
Date: August 7, 1998 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, 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,011,257
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 21,900,000
<TRADING-ASSETS> 1,833,545
<INVESTMENTS-HELD-FOR-SALE> 34,288,427
<INVESTMENTS-CARRYING> 10,621,257
<INVESTMENTS-MARKET> 12,340,175
<LOANS> 128,959,676
<ALLOWANCE> 1,987,433
<TOTAL-ASSETS> 211,154,279
<DEPOSITS> 191,100,661
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,399,327
<LONG-TERM> 385,627
0
0
<COMMON> 4,004,495
<OTHER-SE> 14,064,169
<TOTAL-LIABILITIES-AND-EQUITY> 211,154,279
<INTEREST-LOAN> 5,862,643
<INTEREST-INVEST> 1,199,933
<INTEREST-OTHER> 447,687
<INTEREST-TOTAL> 7,510,263
<INTEREST-DEPOSIT> 2,723,474
<INTEREST-EXPENSE> 17,476
<INTEREST-INCOME-NET> 2,740,950
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,224,021
<INCOME-PRETAX> 1,633,439
<INCOME-PRE-EXTRAORDINARY> 1,633,439
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 985,120
<EPS-PRIMARY> .63
<EPS-DILUTED> .60
<YIELD-ACTUAL> 7.80
<LOANS-NON> 313,476
<LOANS-PAST> 44,883
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,163,349
<CHARGE-OFFS> 225,158
<RECOVERIES> 49,242
<ALLOWANCE-CLOSE> 1,987,433
<ALLOWANCE-DOMESTIC> 1,699,296
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 288,137
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