U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 2000
-----------------------------
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 issuer as specified in its charter)
Massachusetts 04-2832201
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
240 Cabot Street Beverly,
Massachusetts 01915
------------------------------- ----------
(Address of principal executive (Zip Code)
offices)
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 _______
-------------
State the number of shares outstanding of each of the issuer's
classes of common equity, as of November 1, 2000. 1,632,774 shares
------------------
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 September 30, 2000 3-4
and December 31, 1999
Consolidated Statements of Income for the Nine 5-6
and Three Months Ended September 30, 2000 and
1999
Consolidated Statements of Cash Flows for the 7-9
Nine Months Ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of 9
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security 23
Holders
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December31,
2000 1999
ASSETS ------------ ------------
Cash and due from banks $ 14,150,629 $ 11,978,530
Federal funds sold 3,000,000 4,400,000
Investments in available-for-sale
securities 36,601,566 30,017,299
Investments in held-to-maturity
securities 18,130,400 17,078,037
Federal Home Loan Bank stock, at cost 636,200 636,200
Federal Reserve Bank Stock, at cost 97,500 97,500
Loans:
Commercial 28,544,837 25,018,277
Real estate-Construction and land
development 7,276,891 6,278,275
Real estate-residential 65,663,697 56,478,166
Real estate-commercial 49,601,486 48,546,154
Consumer 7,688,487 8,238,379
Municipal 6,148,926 3,476,578
Other 801,290 741,139
Allowance for possible loan losses (2,180,852) (2,132,386)
Deferred loan fees, net 275,882 208,996
------------ ------------
Net Loans 163,820,644 146,853,578
Mortgages held for sale 66,142 1,349,314
Premises and equipment, net 5,169,494 5,135,817
Accrued interest receivable 1,824,854 1,268,741
Other assets 2,889,285 2,622,638
------------ ------------
$246,386,714 $221,437,654
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 50,907,334 $ 44,806,770
Interest bearing
Regular savings 50,857,825 48,681,293
NOW accounts 40,083,283 36,109,984
Money market accounts 23,385,598 19,833,062
Time deposits 56,811,342 49,797,604
------------ ------------
Total deposits 222,045,382 199,228,713
Other liabilities 2,281,901 1,990,662
------------ ------------
Total liabilities 224,327,283 201,219,375
------------ ------------
<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; 2,500,000 shares authorized;
issued 1,674,898 shares as of
September 30, 2000 and 1,622,018
shares as of December 31, 1999;
outstanding 1,628,774 shares as of
September 30, 2000 and 1,575,894
shares as of December 31, 1999. 4,188,245 4,055,045
Paid in Capital 2,816,677 2,572,740
Retained earnings 15,607,373 14,349,652
Treasury Stock, at cost, 46,124
shares as of September 30, 2000 and
December 31, 1999. (427,467) (427,467)
Accumulated other comprehensive loss (125,397) (331,691)
------------ ------------
$246,386,714 $221,437,654
============ ============
The accompanying notes are an integral part of these consolidated financial
statments.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
INTEREST INCOME:
Interest and fees on loans $10,038,890 $ 8,946,223 $ 3,488,025 $ 3,127,794
Interest and dividends on
investment securities:
Taxable 2,291,151 2,083,599 818,966 724,081
Tax-exempt 34,187 24,524 18,540 7,386
Other interest 427,734 377,853 156,084 95,781
----------- ----------- ----------- -----------
Total interest and
dividend income 12,791,962 11,432,199 4,481,615 3,955,042
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 4,263,016 3,953,164 1,516,654 1,308,760
Interest on Federal Home
Loan Bank borrowings 2,699 0 0 0
Interest on notes payable 0 12,603 0 0
----------- ----------- ----------- -----------
Total interest expense 4,265,715 3,965,767 1,516,654 1,308,760
----------- ----------- ----------- -----------
Net interest and dividend
income 8,526,247 7,466,432 2,964,961 2,646,282
Provision for loan losses 0 0 0 0
----------- ----------- ----------- -----------
Net interest and dividend
income after provision for
loan losses 8,526,247 7,466,432 2,964,961 2,646,282
----------- ----------- ----------- -----------
NONINTEREST INCOME:
Income from fiduciary
activities 1,212,518 1,037,280 408,249 341,537
Service charges on deposit
accounts 298,130 285,543 105,104 98,035
Other deposit fees 170,293 159,423 58,699 55,442
Mortgage servicing income/
(loss) (16,969) 192,848 (1,788) (7,065)
Other income 363,594 307,645 125,055 99,341
----------- ----------- ----------- -----------
Total noninterest income 2,027,566 1,982,739 695,385 587,290
----------- ----------- ----------- -----------
<PAGE>
NONINTEREST EXPENSE:
Salaries and employee
benefits 4,052,715 3,908,250 1,230,471 1,320,329
Occupancy expense 779,643 641,643 271,910 211,752
Equipment expense 442,713 328,158 154,434 108,713
Data processing fees 329,441 285,444 139,567 95,903
Professional fees 163,587 247,679 47,495 74,492
Stationary and supplies 142,935 154,963 18,369 48,990
Postage expense 101,917 139,473 25,396 30,302
Other expense 1,319,838 1,104,062 447,276 353,457
----------- ----------- ----------- -----------
Total noninterest
expense 7,332,789 6,809,672 2,334,918 2,243,938
----------- ----------- ----------- -----------
Income before income
taxes 3,221,024 2,639,499 1,325,428 989,634
Income taxes 1,189,000 1,031,900 457,600 385,000
----------- ----------- ----------- -----------
Net income $ 2,032,024 $ 1,607,599 $ 867,828 $ 604,634
=========== =========== =========== ===========
Comprehensive income $ 2,238,318 $ 1,354,349 $ 1,100,535 $ 556,034
=========== =========== =========== ===========
Earnings per share:
Basic shares outstanding 1,610,683 1,556,817 1,629,057 1,559,221
=========== =========== =========== ===========
Diluted shares outstanding 1,735,148 1,731,381 1,744,129 1,723,948
=========== =========== =========== ===========
Net income per share-Basic $ 1.26 $ 1.03 $ 0.53 $ 0.39
Net income per share-Diluted $ 1.17 $ 0.93 $ 0.50 $ 0.35
Dividends per share $ 0.48 $ 0.42 $ 0.18 $ 0.15
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
------------ ------------
Cash flows from operating activities:
Interest received $ 12,123,178 $ 11,001,081
Service charges and other income 2,027,566 1,970,467
Interest paid (4,178,261) (4,036,880)
Cash paid to suppliers and employees (7,148,805) (6,519,304)
Income taxes paid (990,237) (1,018,029)
------------ ------------
Net cash provided by operating activities 1,833,441 1,397,335
------------ ------------
Cash flows from investing activities:
Proceeds from maturities of investment securities
held-to-maturity 110,000 4,154,000
Proceeds from maturities of investment securities
available-for-sale 1,577,884 11,722,046
Purchases of investment securities held-to-
maturity (1,161,351) (5,080,156)
Purchases of investment securities available-for-
sale (7,918,413) (12,256,787)
Net increase in loans (17,002,975) (10,794,190)
Proceeds from sale of mortgages 1,290,817 564,657
Capital expenditures (550,444) (494,199)
Recoveries of previously charged off loans 110,124 218,195
(Increase) in other assets (166,032) (662,058)
Increase (decrease) in other liabilites 229,545 (255,470)
------------ ------------
Net cash used in investing activities (23,480,845) (12,883,962)
------------ ------------
<PAGE>
Cash flows from financing activities:
Net increase in demand deposits, Now, money market
and savings accounts 15,622,601 5,474,304
Net increase (decrease) in time deposits 7,194,068 (5,684,380)
Proceeds from exercised stock options 377,137 34,754
Dividends paid (774,303) (657,460)
------------ ------------
Net cash provided by (used in) financing
activities 22,419,503 (832,782)
------------ ------------
Net increase (decrease) in cash and cash
equivalents 772,099 (12,319,409)
Cash and cash equivalents beginning of year 16,378,530 25,471,822
------------ ------------
Cash and cash equivalents at September 30: $ 17,150,629 $ 13,152,413
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF CASH FLOWS
Nine Months Ended September 30,2000 and 1999
(Unaudited)
(Continued)
Reconciliation of net income to net cash provided by operating activities:
2000 1999
------------ ------------
Net income $ 2,032,024 $ 1,607,599
------------ ------------
Depreciation expense 516,767 350,095
Amortization expense of investment securities 1,397 16,242
Accretion income of investment securities (39,853) (15,098)
Change in prepaid interest 0 (5,572)
Provision for loan losses 0 0
Increase in taxes payable 198,763 13,871
Increase in interest receivable (556,113) (415,131)
Increase (decrease) in interest payable 87,454 (65,541)
Increase (decrease) in accrued expenses (25,760) 14,084
Net (gain) on sale of mortgages (7,645) (12,272)
Change in deferred loan fees (74,215) (17,131)
Increase in prepaid expenses (299,378) (73,811)
------------ ------------
Total adjustments (198,583) (210,264)
------------ ------------
Net cash provided by operating activities $ 1,833,441 $ 1,397,335
============ ============
Non-cash investing activities:
Loans transferred from conforming mortgages $ 1,721,764 $ 0
<PAGE>
BEVERLY NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(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, 2000.
2. EARNINGS PER SHARE
Earnings per share calculations are based on the weighted-
average number of common shares outstanding during the period.
Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-
average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur
if the securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the
earnings of the entity. Diluted EPS is computed similarly
to fully diluted EPS pursuant to APB Opinion No. 15.
3. RECLASSIFICATION
Certain amounts for prior periods have been reclassified to
be consistent with the current statement presentation.
4. IMPACT OF NEW ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS no. 133 "Accounting for
Derivative Instruments and Hedging Activities". Statement
No. 133, as amended by SFAS 138, establishes accounting and
reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts
and for hedging activities. The Statement is effective for
all fiscal quarters of fiscal years beginning after June 15,
2000. In management's opinion, SFAS No. 133 does not have a
material effect on the corporation's consolidated financial
statements.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
Introduction
------------
The following discussion includes Beverly National Corporation
(the "Corporation") and its subsidiaries, Beverly National Bank
(the "Bank"), and Cabot Street Realty Trust (the "Realty Trust").
The Bank includes its wholly owned subsidiary, Beverly Community
Development Corporation.
Summary
-------
The Corporation's net income for the nine months ended September
30, 2000, was $2,032,024 as compared to $1,607,599 for the nine
month period ended September 30, 1999. This represents an
increase of $424,425 or 26.4%. Basic earnings per share totaled
$1.26 for the nine months ended September 30, 2000, as compared
to Basic earnings per share of $1.03 for the nine months ended
September 30, 1999. On a fully diluted basis, earnings per share
for the first nine months of 2000 amounted to $1.17 as compared
with $.93 for the same period in 1999. As a result of the
increase in earnings during the first nine months of 2000, the
Corporation declared and paid quarterly dividends of $.48 per
share as compared with $.42 per share during the same period in
1999.
During the first nine months of 2000, the Bank's total assets
grew by $24,949,060 or nearly 11.3% and amounted to $246,386,714
at September 30, 2000. Growth in assets was represented in
increases in the securities and the loan portfolios. Growth for
the nine months were as follows: available for sale securities
grew $6,584,267 or 21.9%, held to maturity securities grew
$1,052,363 or 6.2%, and Net loans grew $16,967,066 or 11.6%.
Deposits also grew by $22,816,669 or 11.5% during the first nine
months of 2000. As a result, total deposits increased from
$199,228,713 at December 31,1999 to $222,045,382 at September 30,
2000. Both interest bearing deposits and non-interest bearing
deposits grew. Non-interest bearing deposits grew from
$44,806,770 at December 31, 1999 to $50,907,334 at September 30,
2000.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000
AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999
Net Interest Income
-------------------
Net interest and dividend income for the nine months ended
September 30, 2000, totaled $8,526,247 as compared to $7,466,432
for the time period in 1999. This increase was $1,059,815 or
14.2%. Total interest and dividend income equaled $12,791,962
for the nine months ended September 30, 2000 as compared to
$11,432,199 for the same time period in 1999, an increase of
$1,359,763 or 11.9%. Loan income for the nine months ended
September 30, 2000 totaled $10,038,890 as compared to $8,946,223
for the same time period in 1999. This increase of $1,092,667 or
12.2% represents the increased level of loan production and a
higher rate environment. Interest and Dividends on Taxable
Securities for the nine months ended September 30, 2000 totaled
$2,291,151 as compared to $2,083,599 for the same period in 1999.
This increase of $207,552 or 10.0% is attributable to a higher
volume of investments and a higher rate environment. The
interest and dividends on tax exempt securities increased $9,663
or 39.4% for the first nine months of 2000 as compared with the
same period of 1999. The interest earned from Federal funds sold
increased $49,881 or 13.2% for the nine months ended September
30, 2000 when compared to the same time period in 1999. This is
primarily as a result of an increase in the volume of federal
funds sold and a higher interest rate environment.
<PAGE>
Deposit interest expense equaled $4,263,016 for the nine months
ended September 30, 2000, as compared to $3,953,164 for the same
period in 1999. This is an increase of $309,852 or 7.8%
reflecting higher cost of funds of the Bank due to the rate
environment and a higher level of deposits. The Bank generally
pays competitive rates for its deposit base in the local market.
Short-term borrowings interest expense equaled $2,699 for the
nine months ended September 30, 2000 as compared to none for the
same period in 1999. This expense reflects the cost of short-
term borrowings at the Federal Home Loan Bank of Boston. There
was no notes payable interest expense for the nine months ended
September 30, 2000 in comparison to $12,603 for the corresponding
time period in 1999. The reduction of such expense reflects the
write-off of loan fees relating to the pay-down of a bond in
March 1999.
Non-interest Income
-------------------
Non-interest income totaled $2,027,566 for the nine months ended
September 30, 2000 as compared to $1,982,739 for nine months
ended September 30, 1999. This is an increase of $44,827 or
2.3%. Income from fiduciary activities totaled $1,212,518 for
the nine months ended September 30, 2000 as compared to
$1,037,280 for the nine months ended September 30, 1999. This
$175,238 or 16.9% increase can be attributed to increased trust
business. Service charges on deposit accounts totaled $298,130
for the nine months ended September 30, 2000, as compared to
$285,543 for the same time period in 1999. Increased electronic
banking fees helped create this positive result.
<PAGE>
Other deposit fees increased $10,870 or 6.8% for the nine months
ended September 30, 2000 as compared to the same time period in
1999. Other income for the nine-month period ended September 30,
2000 totaled $363,594 as compared to $307,645 for the nine-month
period ended September 30, 1999, an increase of $55,949 or 18.2%.
This increase of income is the result of higher rents collected.
Mortgage servicing expense totaled $16,969 for the nine months
ended September 30, 2000 as compared to $192,848 posted as income
for the nine months ended September 30, 1999, when mortgage
servicing rights were established. The expense noted for the
first nine months in 2000 is the result of amortization expense
exceeding income relating to the establishment of new mortgage
servicing rights during the period.
Non-interest Expense
--------------------
Non-interest expense totaled $7,332,789 for the nine months ended
September 30, 2000, as compared to $6,809,672 for the same time
period in 1999. This increase totaled $523,117 or 7.7%. This
increase is attributed to additional personnel, the establishment
of the Manchester Branch and new product delivery systems.
Salaries and benefits totaled $4,052,715 for the nine months
ended September 30, 2000 and $3,908,250 for the same time period
in 1999. This $144,465 or 3.7% increase is primarily due to
increased staffing in lending and retail divisions. A reduction
of the pension expense accrual was booked during the third
quarter 2000 in the amount of $100,450 in comparison to an
expense of $52,234. Occupancy expense totaled $779,643 for the
nine months ended September 30, 2000 as compared to $641,643 for
the same period in 1999 which is an increase of $138,000 or
21.5%. This increase is due to the establishment of the
Manchester branch along with higher expenses of repairs and
maintenance of facilities. The costs of equipment totaled
$442,713 for the nine months ended September 30, 2000 as compared
to $328,158 for the same period in 1999. The Manchester Branch
and new data processing equipment created this increase. Data
processing fees totaled $329,441 for the nine months ended
September 30, 2000 as compared to $285,444 for the corresponding
time in 1999. Professional fees decreased $84,092 or 34.0% due
to lower legal and benefit consulting expenses. Other expenses
totaled $1,319,838 for the nine months ended September 30, 2000
as compared to $1,104,062 for the same period in 1999. This
reflects an increase of $215,776 or 19.5%, which can be
attributed to an expense increase in advertising, public
relations, communications and courier services.
<PAGE>
Income Taxes
------------
The income tax provision for the nine months ended September 30,
2000 totaled $1,189,000 in comparison to an income tax provision
of $1,031,900 for the same time period in 1999. This increase
reflects an increase in taxable income.
Net Income
----------
Net income amounted to $2,032,024 for the nine months ended
September 30, 2000 as compared to net income of $1,607,599 for
the same period in 1999, which is an increase of $424,425 or
26.4%. The earnings increase is due to a stronger net interest
margin and higher income from fiduciary activities and a
reduction of the pension accrual in 2000 as compared to 1999.
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2000
AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999
Net Interest Income
-------------------
Net interest and dividend income for the three months ended
September 30, 2000, totaled $2,964,961 as compared to $2,646,282
for the time period in 1999. This increase was $316,679 or
12.0%. Total interest and dividend income equaled $4,481,615 for
the three months ended September 30, 2000 as compared to
$3,955,042 for the same time period in 1999, an increase of
$526,573 or 13.3%. Loan income for the three months ended
September 30, 2000, totaled $3,488,025 as compared to $3,127,794
for the same time period in 1999. This increase of $360,231 or
11.5% represents the increased level of loan production and a
higher rate environment. Interest and Dividends on Taxable
Securities for the three months ended September 30, 2000 totaled
$818,966 as compared to $724,081 for the same period in 1999.
This increase of $94,885 or 13.1% is attributable to a higher
volume of investments and a higher rate environment. The
interest and dividends on tax exempt securities increased $11,154
or 151.0% during the third quarter of 2000 as compared with the
same quarter of 1999, due to higher volume. The interest earned
from Federal funds sold increased $60,303 or 63.0% for the three
months ended September 30, 2000 when compared to the same time
period in 1999.
Deposit interest expense equaled $1,516,654 for the three months
ended September 30, 2000,as compared to $1,308,760 for the same
period in 1999. This increase of $207,894 or 15.9% 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.
<PAGE>
Non-interest Income
-------------------
Non-interest income totaled $695,385 for the three months ended
September 30, 2000 as compared to $587,290 for three months ended
September 30, 1999. This is an increase of $108,095 or 18.4%.
Income from fiduciary activities totaled $408,249 for the three
months ended September 30, 2000 as compared to $341,537 for the
three months ended September 30, 1999. This $66,712 or 19.5%
increase can be attributed to increased trust business. Service
charges on deposit accounts totaled $105,104 for the three months
ended September 30, 2000, as compared to $98,035 for the same
time period in 1999. This increase is due to increased service
charges for electronic banking. Other deposit fees were stable
for the three months ended September 30, 2000 as compared to the
same time period in 1999. Other income for the three-month
period ended September 30, 2000 totaled $125,055 as compared to
$99,341 for the three-month period ended September 30, 1999, an
increase of $25,714 or 25.9%. This increase of income is the
result of higher rents collected. Mortgage servicing expense
totaled $1,722 for the three months ended September 30, 2000 as
compared to an expense of $7,065 for the three months ended
September 30, 1999, when mortgage servicing rights were
established. The expense is the result of amortization expense
exceeding income relating to the establishment of new mortgage
servicing rights during the period.
<PAGE>
Non-interest Expense
--------------------
Non-interest expense totaled $2,334,918 for the three months
ended September 30, 2000, as compared to $2,243,938 for the
same time period in 1999. This increase totaled $90,980 or 4.1%.
This increase is primarily attributed to additional personnel,
the establishment of the Manchester Branch and new delivery
systems. Salaries and benefits totaled $1,230,471 for the three
months ended September 30, 2000 and $1,320,329 for the same time
period in 1999. This $89,858 or 6.8% decrease is due to a
reduction of the pension expense accrual booked during the third
quarter 2000 in the amount of $100,450 in comparison to an
expense of $52,234 for the same period in 1999. Occupancy expense
totaled $271,910 for the three months ended September 30, 2000 as
compared to $211,752 for the same period in 1999 which is an
increase of $60,158 or 28.4%. This increase is due to the
establishment of a branch in Manchester along with higher
expenses of repairs and maintenance of facilities. The costs of
equipment totaled $154,434 for the three months ended September
30, 2000 as compared to $108,713 for the same period in 1999.
The Manchester Branch, ATM equipment and new data processing
equipment created this increase. Data processing fees totaled
$139,567 for the three months ended September 30, 2000 as
compared to $95,903 for the corresponding time in 1999. This
increase of $43,664 or 45.5% is due to additional data processing
products. Professional fees decreased $26,997 or 36.2% due to
lower legal and benefit consulting expenses. Other expenses
totaled $447,276 for the three months ended September 30, 2000 as
compared to $353,457 for the same period in 1999. This reflects
an increase of $93,819 or 26.5%, which can be attributed to an
expense increase in advertising, public relations, communications
and ATM courier services.
<PAGE>
Income Taxes
------------
The income tax provision for the three months ended September 30,
2000 totaled $457,600 in comparison to an income tax provision of
$385,000 for the same time period in 1999. This increase
reflects an increase of taxable income.
Net Income
----------
Net income amounted to $867,828 for the three months ended
September 30, 2000 as compared to net income of $604,634 for the
same period in 1999, which is an increase of $263,194 or 43.5%.
The earnings increase is due to a stronger net interest margin
and higher income from fiduciary activities in 2000 as compared
to 1999.
Allowance for Loan Losses
-------------------------
At September 30, 2000, the Corporation's allowance for loan
losses was $2,180,852 representing 1.3% of gross loans as
compared to $2,132,386 and a ratio of 1.4% of gross loans at
December 31, 1999. No provisions to the allowance for loan losses
were made during the first nine months of 2000 or 1999,
respectively.
The Corporation's non-accrual loans were $430,058 at September
30, 2000 as compared to $362,870 at December 31, 1999.
The ratio of non-performing assets to total loans and mortgages
held for sale was 0.26% for September 30, 2000 as compared to
0.24% as of December 31, 1999. This decrease can be attributed to
fewer loans that were temporarily overdue 90 days or more and a
lower non-accrual balance. The ratio of non-performing assets to
allowance for loan losses equaled 19.7% at September 30, 2000 as
compared to 17.0% at December 31, 1999.
A total of $61,658 loans were charged off by the Corporation
during the nine months ended September 30, 2000 as compared to
$9,325 charged off during the corresponding period in 1999.
These charged off loans consisted primarily of loans to small
businesses and individuals. A total of $110,124 was recovered
from previously charged off notes by the Corporation during the
nine months ended September 30, 2000, as compared to $218,914
recovered during the corresponding period in 1999.
<PAGE>
Capital Resources
-----------------
As of September 30, 2000, the Corporation had total capital in
the amount of $22,059,431 as compared with $20,218,279 at
December 31, 1999, which represents an increase of $1,841,152 or
9.1%.
The Bank is required to maintain a Tier 1 capital at a level
equal to or greater than 4.0% of the Bank's total assets. As of
September 30, 2000, the Bank's Tier 1 capital amounted to 7.80%
of total assets. At September 30, 2000, the Bank's ratio of risk-
based capital to risk weighted assets amounted to 13.61%, which
satisfies the applicable risk based capital requirements. As of
December 31, 1999, the Bank's Tier 1 capital amounted to 8.21% of
total assets and risk based capital amounted to 13.81% 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 Corporation's total
assets. As of September 30, 2000, the Corporation's Tier 1
capital amounted to 8.94% of total assets. At September 30,
2000, the Corporation's ratio of risk-based capital to risk
weighted assets amounted to 15.52%, which satisfies the
applicable risk based capital requirements.
The capital ratios of the Corporation and the Bank exceed all
regulatory requirements and both institutions are considered to
be "well capitalized" by their respective federal bank
supervisory agencies.
<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. The Corporation's interest rate sensitivity
management practices seek to provide consistency in the
maintenance of net interest margins and to foster the sustainable
growth of net interest income despite 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 $6,333,499 or 11.4% at
September 30, 2000 of the investment securities portfolio, and
$3,203,783 at December 31, 1999, representing 6.9% 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 goals and general
practices are to be substantially neutral with respect to
interest rate sensitivity and maintain a net cumulative gap at
one year of 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. The
Corporation's current practices are consistent with these
objectives.
<PAGE>
Forward Looking Statements
--------------------------
Certain statements contained in this report, including those
contained in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere, may be forward
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and are thus prospective. Such
forward looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ
materially from future results expressed or implied by such
statements. Such factors include, but are not limited to changes
in interest rates, regulation, competition and the local and
regional economy.
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security None
Holders
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports on Form 8-K
The Corporation did not file any Forms 8-K during the
quarter ended September 30, 2000.
<PAGE>
SIGNATURES
In accordance with 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: November 7, 2000 By: /s/ Lawrence M.Smith
----------------- ----------------------
Lawrence M. Smith
President, Chief Executive Officer
Date: November 7, 2000 By: /s/ Peter E. Simonsen
----------------- -----------------------
Peter E. Simonsen
Treasurer, Principal Financial Officer
