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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | -------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



| |  | For the Quarterly period ended March 31, 2003
| |  | ---------------------------------------------



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

(Name of registrant as specified in its charter)



|Massachusetts                                                  |  | 04-2832201                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|240 Cabot Street Beverly, Massachusetts  |  | 01915     
|---------------------------------------- |  | ----------
|(Address of principal executive offices) |  | (Zip Code)



Registrants telephone number, including area code (978) 922-2100



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Indicate by check mark whether registrant (l) has filed all
reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during the preceding 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 ̈



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



Indicate the
number of shares outstanding of each of the issuers classes of common stock, as of May 1, 2003. 1,808,360 shares



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##### Table of Contents

BEVERLY NATIONAL CORPORATION



INDEX



|                                                                        
|------------------------------------------------------------------------
|                                                                        
|                                                                        
|PART I.                                                                 
|                                                                        
|Item 1.                                                                 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Item 2.                                                                 
|                                                                        
|Item 3.                                                                 
|                                                                        
|Item 4.                                                                 
|                                                                        
|PART II.                                                                
|                                                                        
|Item 1.                                                                 
|                                                                        
|Item 2.                                                                 
|                                                                        
|Item 3.                                                                 
|                                                                        
|Item 4.                                                                 
|                                                                        
|Item 5.                                                                 
|                                                                        
|Item 6.                                                                 
|                                                                        
|Signatures                                                              
|                                                                        
|Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



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BEVERLY
NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                  |  | March 31, 2003 |             |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|                                                                                                                                                                                                                                                  |  | (Unaudited)    |             |   |                   |  
|ASSETS                                                                                                                                                                                                                                            |  |                |             |   |                   |  
|Cash and due from banks                                                                                                                                                                                                                           |  | $              | 18,885,588  |   |                   | $
|Interest bearing demand deposits with other banks                                                                                                                                                                                                 |  |                | 162,712     |   |                   |  
|Federal funds sold                                                                                                                                                                                                                                |  |                | 18,500,000  |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                         |  |                | 37,548,300  |   |                   |  
|Investments in available-for-sale securities (at fair value)                                                                                                                                                                                      |  |                | 73,469,815  |   |                   |  
|Investments in held-to-maturity securities                                                                                                                                                                                                        |  |                | 1,454,666   |   |                   |  
|Federal Reserve Bank stock, at cost                                                                                                                                                                                                               |  |                | 97,500      |   |                   |  
|Federal Home Loan Bank stock, at cost                                                                                                                                                                                                             |  |                | 1,041,900   |   |                   |  
|Loans, net of the allowance for loan losses of $2,072,908 and $2,012,578,
respectively                                                                                                                                                            |  |                | 185,871,371 |   |                   |  
|Mortgages held for sale                                                                                                                                                                                                                           |  |                | 1,804,886   |   |                   |  
|Premises and equipment, net                                                                                                                                                                                                                       |  |                | 4,250,211   |   |                   |  
|Accrued interest receivable                                                                                                                                                                                                                       |  |                | 1,239,418   |   |                   |  
|Other assets                                                                                                                                                                                                                                      |  |                | 4,012,858   |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total assets                                                                                                                                                                                                                                      |  | $              | 310,790,925 |   |                   | $
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS
EQUITY                                                                                                                                                                                                              |  |                |             |   |                   |  
|Deposits:                                                                                                                                                                                                                                         |  |                |             |   |                   |  
|Noninterest bearing                                                                                                                                                                                                                               |  | $              | 59,089,801  |   |                   |  
|Interest bearing                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Regular savings                                                                                                                                                                                                                                   |  |                | 66,506,405  |   |                   |  
|NOW accounts                                                                                                                                                                                                                                      |  |                | 61,666,142  |   |                   |  
|Money market accounts                                                                                                                                                                                                                             |  |                | 37,623,666  |   |                   |  
|Time deposits                                                                                                                                                                                                                                     |  |                | 56,809,913  |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total deposits                                                                                                                                                                                                                                    |  |                | 281,695,927 |   |                   |  
|Other liabilities                                                                                                                                                                                                                                 |  |                | 3,092,695   |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total liabilities                                                                                                                                                                                                                                 |  |                | 284,788,622 |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|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 1,927,840
as of March 31, 2003 and 1,905,321 as of December 31, 2002; outstanding 1,808,360 shares as of March 31, 2003 and 1,785,841 shares as of December 31, 2002 |  |                | 4,819,600   |   |                   |  
|Paid-in Capital                                                                                                                                                                                                                                   |  |                | 6,058,375   |   |                   |  
|Retained earnings                                                                                                                                                                                                                                 |  |                | 16,589,723  |   |                   |  
|Treasury stock, at cost (119,480 shares as of March 31, 2003 and December 31,
2002)                                                                                                                                                               |  |                | (1,618,112  | ) |                   |  
|Accumulated other comprehensive income                                                                                                                                                                                                            |  |                | 152,717     |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total stockholders equity                                                                                                                                                                                                                        |  |                | 26,002,303  |   |                   |  
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  
|Total liabilities and stockholders equity                                                                                                                                                                                                        |  | $              | 310,790,925 |   |                   | $
|                                                                                                                                                                                                                                                  |  |                |             |   |                   |  



The
accompanying notes are an integral part of these condensed consolidated financial statements.



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BEVERLY
NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



|                                                                 |  | Three Months Ended |          
|---------------------------------------------------------------- |  | ------------------ | ---------
|                                                                 |  | March 31, 2003     |          
|                                                                 |  | (Unaudited)        |          
|INTEREST INCOME:                                                 |  |                    |          
|Interest and fees on loans                                       |  | $                  | 3,171,870
|Interest and dividends on investment securities:                 |  |                    |          
|Taxable                                                          |  |                    | 586,765  
|Tax-exempt                                                       |  |                    | 7,564    
|Dividends on marketable equity securities                        |  |                    | 3,963    
|Other interest                                                   |  |                    | 46,891   
|                                                                 |  |                    |          
|Total interest and dividend income                               |  |                    | 3,817,053
|                                                                 |  |                    |          
|INTEREST EXPENSE:                                                |  |                    |          
|Interest on deposits                                             |  |                    | 771,008  
|                                                                 |  |                    |          
|Total interest expense                                           |  |                    | 771,008  
|                                                                 |  |                    |          
|Net interest and dividend income                                 |  |                    | 3,046,045
|Provision for loan losses                                        |  |                    | 100,000  
|                                                                 |  |                    |          
|Net interest and dividend income after provision for loan losses |  |                    | 2,946,045
|                                                                 |  |                    |          
|NON-INTEREST INCOME:                                             |  |                    |          
|Income from fiduciary activities                                 |  |                    | 362,446  
|Service charges on deposit accounts                              |  |                    | 158,131  
|Other deposit fees                                               |  |                    | 101,069  
|Mortgage servicing income                                        |  |                    | 3,629    
|Gain on sale of securities                                       |  |                    | 170,646  
|Other income                                                     |  |                    | 258,324  
|                                                                 |  |                    |          
|Total non-interest income                                        |  |                    | 1,054,245
|                                                                 |  |                    |          
|NON-INTEREST EXPENSE:                                            |  |                    |          
|Salaries and employee benefits                                   |  |                    | 1,829,964
|Occupancy expense                                                |  |                    | 275,780  
|Equipment expense                                                |  |                    | 146,995  
|Contributions                                                    |  |                    | 30,525   
|Data processing fees                                             |  |                    | 132,990  
|Marketing and public relations                                   |  |                    | 80,972   
|Stationery and supplies                                          |  |                    | 47,691   
|Professional fees                                                |  |                    | 76,334   
|Other expense                                                    |  |                    | 399,710  
|                                                                 |  |                    |          
|Total non-interest expense                                       |  |                    | 3,020,961
|                                                                 |  |                    |          
|Income before income taxes                                       |  |                    | 979,329  
|Income taxes                                                     |  |                    | 375,546  
|                                                                 |  |                    |          
|Net Income                                                       |  | $                  | 603,783  
|                                                                 |  |                    |          
|Earnings per share:                                              |  |                    |          
|Weighted average shares outstanding                              |  |                    | 1,802,618
|                                                                 |  |                    |          
|Weighted average diluted shares outstanding                      |  |                    | 1,891,433
|                                                                 |  |                    |          
|Earnings per common share                                        |  | $                  | 0.33     
|Earnings per common share, assuming dilution                     |  | $                  | 0.32     
|Dividends per share                                              |  | $                  | 0.20     



|(1) |  | Restated 2002 for 5% stock dividend in 2002
|--- |  | -------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.



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BEVERLY
NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2003 and 2002

(Unaudited)



Reconciliation of net income to net cash provided by (used in) operating activities:



|                                                    |  | 2003 |          |   | 2002 |  
|--------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Net income                                          |  | $    | 603,783  |   |      | $
|Increase in mortgages held for sale                 |  |      | (433,852 | ) |      |  
|Benefit for mortgages held for sale                 |  |      | 0        |   |      |  
|(Increase) decrease in mortgage servicing rights    |  |      | (3,629   | ) |      |  
|Depreciation expense                                |  |      | 176,828  |   |      |  
|Gain on sale of securities                          |  |      | (170,646 | ) |      |  
|Provision for loan losses                           |  |      | 100,000  |   |      |  
|Increase in interest receivable                     |  |      | (91,129  | ) |      |  
|Decrease in interest payable                        |  |      | (3,433   | ) |      |  
|(Decrease) increase in accrued expenses             |  |      | (71,043  | ) |      |  
|Increase in prepaid expenses                        |  |      | (43,846  | ) |      |  
|Decrease in other liabilities                       |  |      | (36,714  | ) |      |  
|(Increase) decrease in other assets                 |  |      | 279,234  |   |      |  
|Decrease in RABBI Trust trading securities          |  |      | 35,801   |   |      |  
|Amortization expense of investment securities       |  |      | 126,750  |   |      |  
|Accretion income of investment securities           |  |      | (1,027   | ) |      |  
|Gain on sales of assets,net                         |  |      | 0        |   |      |  
|Change in deferred loan costs,net                   |  |      | 24,680   |   |      |  
|                                                    |  |      |          |   |      |  
|Total adjustments                                   |  |      | (112,026 | ) |      |  
|                                                    |  |      |          |   |      |  
|Net cash provided by (used in) operating activities |  |      | 491,757  |   |      |  
|                                                    |  |      |          |   |      |  



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BEVERLY
NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2003 and 2002

(Unaudited)

(Continued)



|                                                                                 |  | 2003 |             |   | 2002 |  
|-------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Cash flows from investing activities:                                            |  |      |             |   |      |  
|Purchases of investment securities available-for-sale                            |  |      | (36,982,162 | ) |      |  
|Purchases of investment securities held-to-maturity                              |  |      | (408,548    | ) |      |  
|Proceeds from sales of investment securities available-for-sale                  |  |      | 7,167,070   |   |      |  
|Proceeds from payments of investment securities available-for-sale               |  |      | 1,321,950   |   |      |  
|Proceeds from maturities of investment securities available-for-sale             |  |      | 10,000,000  |   |      |  
|Purchases of Federal Home Loan Bank stock                                        |  |      | (297,100    | ) |      |  
|Net (increase) decrease in loans                                                 |  |      | 5,649,660   |   |      |  
|Recoveries of previously charged off loans                                       |  |      | 44          |   |      |  
|Capital expenditures                                                             |  |      | (9,343      | ) |      |  
|Proceeds from sales of assets                                                    |  |      | 0           |   |      |  
|                                                                                 |  |      |             |   |      |  
|Net cash provided by (used in) investing activities                              |  |      | (13,558,429 | ) |      |  
|                                                                                 |  |      |             |   |      |  
|Cash flows from financing activities:                                            |  |      |             |   |      |  
|Net increase (decrease) in demand deposits, NOW, money market & savings
accounts |  |      | 114,892     |   |      |  
|Net increase (decrease) in time deposits                                         |  |      | 319,059     |   |      |  
|Proceeds from exercise of stock options                                          |  |      | 160,788     |   |      |  
|Dividends paid                                                                   |  |      | (361,432    | ) |      |  
|                                                                                 |  |      |             |   |      |  
|Net cash provided by (used in) financing activities                              |  |      | 233,307     |   |      |  
|                                                                                 |  |      |             |   |      |  
|Net change in cash and cash equivalents                                          |  |      | (12,833,365 | ) |      |  
|Cash & cash equivalents beginning of year                                        |  |      | 50,381,665  |   |      |  
|                                                                                 |  |      |             |   |      |  
|Cash & cash equivalents at March 31:                                             |  | $    | 37,548,300  |   |      | $
|                                                                                 |  |      |             |   |      |  
|Supplemental disclosures:                                                        |  |      |             |   |      |  
|Mortgages held for sale transferred to loans                                     |  | $    | 251,466     |   |      | $
|Interest paid                                                                    |  | $    | 774,441     |   |      | $
|Income taxes paid                                                                |  | $    | 69,124      |   |      | $



The
accompanying notes are an integral part of these condensed consolidated financial statements.



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BEVERLY
NATIONAL CORPORATION



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



FOR THE THREE MONTHS ENDED MARCH 31, 2003



(Unaudited)



|1. |  | BASIS OF PRESENTATION
|-- |  | ---------------------



The interim condensed 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, 2003.



The
year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.



|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.



|3. |  | RECLASSIFICATION
|-- |  | ----------------



Certain amounts for prior periods have been reclassified to be consistent with the current statement presentation.



|4. |  | IMPACT OF NEW ACCOUNTING STANDARDS
|-- |  | ----------------------------------



Statement of Financial Accounting Standards No. 141 improves the consistency of the accounting and reporting for business combinations by
requiring that all business combinations be accounted for under a single methodthe purchase method. Use of the pooling-of-interests method is no longer permitted. Statement No. 141 requires that the purchase method be used for business
combinations initiated after June 30, 2001. There was no impact on the consolidated financial statements upon adoption of this Statement.



Statement of Financial Accounting Standards No. 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for
impairment. The amortization of goodwill ceases upon adoption of the Statement, which for most companies, was January 1, 2002. There was no impact on the consolidated financial statements upon adoption of this Statement.



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In August
2001, the FASB issued SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supercedes
SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, but retains the basic recognition and measurement model for assets held for use and held for sale. The provisions of SFAS No.
144 were required to be adopted starting with fiscal years beginning after December 15, 2001. This Statement did not have a material impact on the Corporations consolidated financial statements.



In June 2002, the FASB issued SFAS No. 146 Accounting
for Costs Associated with Exit or Disposal Activities. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred.
SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. This Statement did not have any material impact on the Corporations consolidated financial statements.



|5. |  | STOCK DIVIDEND
|-- |  | --------------



In May 2002, the Corporation declared a stock dividend of 5%. Earnings per share data and other per share data for prior dates and periods
have been restated to reflect the stock dividend.



|6. |  | STOCK BASED COMPENSATION
|-- |  | ------------------------



At March 31, 2003, the Corporation has three stock-based employee compensation plans. The Corporation accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, no compensation cost has been recognized for its fixed stock option plans. The following
table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.



|                                                                                                                                            |  | For the Three Months Ended March 31,
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|                                                                                                                                            |  | 2003                                
|Net income, as reported                                                                                                                     |  | $                                   
|Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of related tax effects |  |                                     
|                                                                                                                                            |  |                                     
|Pro forma net income                                                                                                                        |  | $                                   
|                                                                                                                                            |  |                                     
|Earnings per share:                                                                                                                         |  |                                     
|Basic  as reported                                                                                                                         |  | $                                   
|Basic  pro forma                                                                                                                           |  | $                                   
|Diluted  as reported                                                                                                                       |  | $                                   
|Diluted  pro forma                                                                                                                         |  | $                                   



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PART I 
FINANCIAL INFORMATION



|Item 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



Introduction



The following discussion includes Beverly National Corporation (Corporation) and its subsidiaries, Beverly National Bank (Bank),
Cabot Street Realty Trust (CSRT) and the Banks wholly owned subsidiaries, Beverly Community Development Corporation (CDC) and Hannah Insurance Agency, Inc. (Hannah). The purpose of Hannah is to market life
insurance, annuities, and long term care insurance products. The purpose of the CDC is to promote lending in Beverlys low and moderate-income census tracks.



Summary



Net interest and dividend income decreased $109,737 and non-interest income increased $226,667 during the first quarter of
2003, as compared with the first quarter of 2002. Non-interest expense decreased $95,456, for the corresponding period. As a result, the Corporations net income for the three months ended March 31, 2003, was $603,783, as compared to the
Corporations net income of $532,658 for the three month period ended March 31, 2002. This is an increase of $71,125 or 13.4%. Primary earnings per share totaled $.33 for the three months ended March 31, 2003, as compared to primary earnings
per share of $.31 for the three months ended March 31, 2002. On a fully diluted basis, earnings per share for the first three months of 2003 amounted to $.32 as compared with $.29 for the same period in 2002. The Corporation declared and paid a
quarterly dividend in January 2003 totaling $.20 per share as compared with $.19 per share during the same period in 2002.



During the first three months of 2003, the Corporations total assets increased $262,571 or .1% and amounted to $310,790,925 at March 31, 2003. The
change in assets was reflected in decreases in Federal Funds Sold of $14,500,000 or 43.9% and an increase of available-for-sale securities of $18,500,715 or 33.7%. The loan portfolio and mortgages held for sale changes for the three months were as
follows: net loans decreased $5,522,918 or 2.9% and mortgages held for sale increased $182,386 or 11.2%. However, there was loan growth in commercial loan and municipal lending. Approximately $5.1 million in residential mortgages were sold in the
secondary market during the first three months of 2003. Deposits increased $433,951 or 0.2% during the first three months of 2003. As a result, total deposits increased from $281,261,976 at December 31, 2002 to $281,695,927 at March 31, 2003.
Non-interest bearing deposits declined from $59,917,671 at December 31, 2002 to $59,089,801 at March 31, 2003.



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##### Table of Contents



THREE MONTHS
ENDED MARCH 31, 2003

AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2002



Net Interest and Dividend Income



Net interest and dividend income for the three months ended
March 31, 2003 totaled $3,046,045 as compared to $3,155,782 for the same period in 2002, representing a decrease of $109,737 or 3.5%. Total interest and dividend income equaled $3,817,053 for the three months ended March 31, 2003 as compared to
$4,437,939 for the same time period in 2002, a decrease of $620,886 or 14.0%. Loan income for the three months ended March 31, 2003, totaled $3,171,870 as compared to $3,459,996 for the same time period in 2002. This decrease of $288,126 or 8.3%
reflects the re-pricing of the portfolio in a lower interest rate environment. Interest and dividends on taxable securities for the three months ended March 31, 2003 totaled $586,765 as compared to $932,272 for the same period in 2002. This is a
decrease of $345,507 or 37.1% and is attributable to a lower interest rate environment. The interest and dividends on tax-exempt securities increased $91 or 1.2% during the first quarter of 2003 as compared with the same quarter of 2002. The other
interest earned including Federal Funds Sold increased $10,000 or 27.1% for the three months ended March 31, 2003 when compared to the same time period in 2002 due to higher balances invested in a lower interest rate environment.



Deposit interest expense equaled $771,008 for the three months ended March 31,
2003, as compared to $1,282,157 for the same period in 2002. This decrease of $511,149 or 39.9% reflects the current strategy of managing the cost of funds of the Bank, in a lower rate environment. The Bank generally pays competitive rates for its
deposit base in the local market.



Provision for Loan Losses



Credit risk is
inherent in the business of extending loans. The Bank maintains an allowance or reserve for credit losses through charges to earnings. The loan loss provision for the three months ended March 31, 2003 was $100,000 as compared to $66,000 for the same
period in 2002. Managements assessment of the potential for continued weakness in the economy and the potential erosion of collateral values were the primary factors which warranted the provision despite the current sound quality of the
Banks portfolio. (See Allowance for Loan Losses).



Non-interest Income



Non-interest income totaled $1,054,245 for the three months ended March 31, 2003 as compared to $827,578 for three months ended March 31, 2002. This is an increase of $226,667 or 27.4%. Income from fiduciary activities totaled
$362,446 for the three months ended March 31, 2003 as compared to $414,949 for the three months ended March 31, 2002. This decrease of $52,503 or 12.7% can be attributed to the lower market conditions and their effect on the trust portfolio. Service
charges on deposit accounts totaled $158,131 for the three months ended March 31, 2003, as compared to $109,407 for the same time period in 2002.



10



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##### Table of Contents

This increase of $48,724 or 44.5% is due to increased service charges for traditional and electronic
banking along with a higher number of accounts serviced. Other deposit fees increased $25,444 or 33.6% for the three months ended March 31, 2003 as compared to the same time period in 2002. The mortgage servicing income decreased $32,371 for the
three months ended March 31, 2003 as compared to March 31, 2002. Gain on sale of securities totaled $170,646 for the three months ending March 31, 2003 as compared to no gains for the corresponding period in 2002. Other income for the three-month
period ended March 31, 2003 totaled $258,324 as compared to $191,597 for the three-month period ended March 31, 2002, an increase of $66,727 or 34.8%.



Non-interest Expense



Non-interest expense totaled $3,020,961 for the three months ended March 31, 2003, as compared to $3,116,417 for the same time period in 2002. This is a
decrease of $95,456 or 3.1%. This decrease is primarily attributed to new cost controls. Salaries and benefits totaled $1,829,964 for the three months ended March 31, 2003 and $1,791,898 for the same time period in 2002. This $38,066 or 2.1%
increase is due to additional personnel in commercial lending and cash management along with higher costs for the pension plan. Occupancy expense totaled $275,780 for the three months ended March 31, 2003 as compared to $297,398 for the same period
in 2002, which is a decrease of $21,618 or 7.3%. This is due to lower repair and maintenance costs. The costs of equipment totaled $146,995 for the three months ended March 31, 2003 as compared to $164,962 for the same period in 2002. Decreased
equipment and maintenance costs created this situation. Data processing fees totaled $132,990 for the three months ended March 31, 2003 as compared to $151,302 for the corresponding time in 2002. This is a decrease of $18,312 or 12.1%, which is due
to a renegotiated data processing contract. Professional fees decreased $34,756 or 31.3% due to lower consulting, legal and benefit consulting expenses. Stationery and supplies decreased $8,924 for the three months ended March 31, 2003 as compared
to the same time period in 2002. Contributions increased $2,251 or 8.0% for the three months ended March 31, 2003 as compared to the same time period in 2002. Marketing and public relations decreased $19,105 or 19.1% for the three months ended March
31, 2003 as compared to the same time period in 2002. This is due to additional non-recurring 2002 expenses related to the 200thanniversary celebration of the Corporations main subsidiary Beverly National Bank. Other expenses totaled $399,710 for the three months ended March 31, 2003 as compared to $414,801 for the same period in 2002. This reflects a
decrease of $15,091 or 3.6%.



Income Taxes



The income tax provision
for the three months ended March 31, 2003 totaled $375,546 in comparison to an income tax provision of $268,285 for the same time period in 2002. This reflects an increase of taxable income.



Net Income



Net income amounted to $603,783 for the three months ended March 31, 2003 as
compared to net income of $532,658 for the same period in 2002, which is an increase of $71,125 or 13.4%. The earnings increase is primarily due to gains on asset sales, higher service charges on deposit accounts and cost control on non-interest
expense for the first quarter 2003 as compared to the corresponding period in 2002.



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Allowance for Loan Losses



The Bank
formally determines the adequacy of the allowance for loan losses on a quarterly basis. This determination is based on assessment of credit quality or risk rating of loans. Loans are initially risk rated when originated and are reviewed
periodically. If there is deterioration in the credit, the risk rating is adjusted accordingly.



The allowance also includes a component resulting from the application of the measurement criteria of Statements of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a
Loan (SFAS114). Impaired loans receive individual evaluation of the allowance necessary on a quarterly basis. Impaired loans are defined in the Banks Loan Policy as those instances in which it is probable that the Bank will not be
able to collect all principal and interest due according to the terms of the note.



Commercial loans and residential mortgages are considered to be impaired under any one of the following circumstances: Non-accrual status; Loans over 90 days delinquent; Troubled debt restructures consummated after December
31, 1994; or Loans classified as doubtful, meaning that they have weaknesses which make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.



The individual allowance for each impaired loan is based upon an
assessment of the present value of expected future cash flows discounted at the loans effective interest rate or the fair value of the collateral if the loan is collateral dependent.



The loss factor applied as a general allowance is determined by a periodic analysis of the Allowance for Loan Losses. This
analysis considers historical loan losses and delinquency figures. It also looks at delinquency trends.



Concentrations of credit and local economic factors are also evaluated on a periodic basis. Historical average net losses by loan type are examined and any identified trends are assessed. The
Banks loan mix over that same period of time is also analyzed. A loan loss allocation is made for each type of loan and multiplied by the loan mix percentage for each loan type to produce a weighted average factor.



At March 31, 2003, the allowance for loan losses totaled $2,072,908
representing 222.4% of non-performing loans. Non-performing loans totaled $932,052, which represented 0.50% of total loans and mortgages held for sale. At March 31, 2002, the allowance for loan losses amounted to $2,012,578, representing 349.9% of
non-performing loans. At March 31, 2002, non-performing loans totaled $575,229, which represented 0.30% of total loans and mortgages held for sale. A total of $39,714 of loans were charged off by the Bank during the first three months of 2003 as
compared to $7,773 charged off during the corresponding period in 2002. A total of $44 was recovered of previously charged-off loans during the first three months ended March 31, 2003 compared to $1,000 recovered during the corresponding period of
2002. Management believes that the allowance for loan losses is adequate. However, while management estimates loan losses using the best available information, no assurances can be given that future additions to the allowance will not be necessary
based on changes in economic and real estate market conditions, further information obtained regarding problem loans, identification of additional problem loans and other factors, both within and outside of managements control. The $356,823
increase in non-performing loans at March 31, 2003, as compared with March 31, 2002, is not believed by management to be indicative of any material change in the credit quality



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of the loan portfolio. The overall level of non-performing loans remains low. Accordingly, while the overall quality of the loan portfolio
remains strong, management will continue to monitor economic conditions and the performance of the portfolio in order to maintain an adequate allowance for loan losses. Additionally, with expectations of the Bank to continue to grow its loan
portfolio, ongoing periodic provisions to the allowance are likely to be necessary to maintain adequate coverage ratios.



Capital Resources



As of March 31, 2003, the Corporation had total capital in the amount of $26,002,303 as compared with $25,433,145 at December 31, 2002, which represents
an increase of $569,158 or 2.2%. Generally, banks are required to maintain Tier 1 capital at a level equal to or greater than 4.0% of their total assets. As of March 31, 2003, the Banks Tier 1 capital amounted to 7.19% of total assets. At
March 31, 2003, the Banks ratio of risk-based capital to risk weighted assets amounted to 12.63%, which satisfies the applicable risk based capital requirements. As of December 31, 2002, the Banks Tier 1 capital amounted to 6.78% of
total assets and risk-based capital amounted to 12.10% of total risk based assets.



Generally, bank holding companies are required to maintain Tier 1 capital at a level equal to or greater than 4.0% of their total assets. As of March 31, 2003, the Corporations Tier 1 capital amounted to 8.40% of total
assets. At March 31, 2003, the Corporations ratio of risk-based capital to risk weighted assets amounted to 14.47%, which satisfies the applicable risk based capital requirements. As of December 31, 2002, the Corporations Tier 1 capital
amounted to 7.87% of total assets and risk-based capital amounted to 13.79% of total risk based assets.



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.



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 $4,408,673 at March 31, 2003 or 5.8% of the investment securities portfolio, and $3,134,580 at December 31, 2002,
representing 5.7% of the investment securities portfolio. Assets such as federal funds sold, mortgages held for sale, payments of mortgage-backed securities, 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 15% of total earning assets. Changes in interest rates should not



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dramatically impact income as assets and liabilities mature and reprice concurrently. The Corporations current practices are consistent
with these objectives.



Forward Looking Statements



This Form
10-Q and future filings made by the Corporation with the Securities and Exchange Commission, as well as other filings, reports and press releases made or issued by the Corporation and the Bank, and oral statements made by executive officers of the
Corporation and the Bank, may include forward-looking statements relating to such matters as:



| | (a) |  | assumptions concerning future economic and business conditions and their effect on the economy in general and on the markets in which the Corporation and the Bank do
business, and
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) |  | expectations for increased revenues and earnings for the Corporation and Bank through growth resulting from acquisitions, attraction of new deposit and loan
customers and the introduction of new products and services.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Such forward-looking statements are based on assumptions rather than historical or current facts and, therefore, are inherently uncertain and subject to risk. For those statements, the Corporation claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities Litigation Act of 1995.



The Corporation notes that a variety of factors could cause the actual results or experience to differ materially from the anticipated results or other expectations described or implied by such
forward-looking statements. The risks and uncertainties that may affect the operation, performance, development and results of the Corporations and Banks business include the following:



|(a) |  | the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Bank operates;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | changes in the legislative and regulatory environment that negatively impact the Corporation and Bank through increased operating expenses;
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | increased competition from other financial and non-financial institutions;
|--- |  | --------------------------------------------------------------------------

|(d) |  | the impact of technological advances; and
|--- |  | -----------------------------------------

|(e) |  | other risks detailed from time to time in the Corporations filings with the Securities and Exchange Commission.
|--- |  | ----------------------------------------------------------------------------------------------------------------



Such developments could have an adverse impact on the Corporations and
the Banks financial position and results of operation.



ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market risk is the risk of loss from adverse changes in market prices. In particular, the market price of interest-earning assets may be affected by changes in interest rates. Since net interest income (the difference or
spread between the interest earned on loans and investments and the interest paid on deposits and borrowings) is the Corporations primary source of revenue, interest rate risk is the most significant non-credit related market risk to which the
Corporation is exposed. Net interest income is affected by changes in interest rates as well as fluctuations in the level and duration of the Corporations assets and liabilities.



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Interest rate risk is the
exposure of net interest income to adverse movements in interest rates. In addition to directly impacting net interest income, changes in interest rates can also affect the amount of new loan originations, the ability of borrowers to repay variable
rate loans, the volume of loan prepayments and re-financings, the carrying value of investment securities classified as available for sale and the flow and mix of deposits.



The Corporations Asset/Liability Management Committee, comprised of the President of the Corporation, the Chief
Financial Officer, the Senior Lending Officer, and marketing, retail and finance officers, is responsible for managing interest rate risk in accordance with policies approved by the Board of Directors regarding acceptable levels of interest rate
risk, liquidity, and capital. This committee meets weekly and sets the rates paid on deposits, approves loan pricing and reviews investment transactions. This Asset/Liability Management Committee reports to the Risk Management Committee, which is
comprised of several Directors, the President and Chief Executive Officer, the Senior Vice President and Chief Financial Officer, and the Senior Vice President and Senior Lender.



The Corporation is subject to interest rate risk in the event that rates either increase or decrease. In the event that
interest rates increase, the value of net assets (the liquidation value of stockholders equity) would increase because the Corporation is asset sensitive, the assets will re-price faster than liabilities. At March 31, 2003, it is estimated
that an increase in interest rates of 200 basis points (for example, an increase in the prime rate from 4.25% to 6.25%) would increase the value of net assets by $3,129,186. If interest rates were to decrease, the value of net assets would also
increase.



Although the value of net assets is subject to risk if
interest rates rise (but not if rates fall) the opposite is true of the Corporations earnings. If interest rates were to increase, net interest income would increase because the Corporation has more interest-earning assets which would re-price
than it has interest-bearing liabilities which would re-price. As a result, net interest income is instead subject to the risk of a decline in rates. Not only are there fewer interest-bearing liabilities to re-price, but many of these liabilities
could not re-price much lower because the rates paid on them are already low. Accordingly, if interest rates were to decrease by 200 basis points (for example, a decrease in the prime rate from 4.25% to 2.25%) it is estimated that net interest
income would decrease by $1,277,606. On the other hand, if interest rates were to increase, net interest income would increase.



At March 31, 2003, it was estimated that the value of the net assets of the Corporation would increase by $3,129,186 if interest rates were to increase by
200 basis points and that the Corporations net interest income would decline by $1,277,606 if interest rates were to decline by 200 basis points. The year-to-year change in these estimates is a result of a lengthening of the duration of the
net assets of the Corporation.



ITEM 4.
CONTROLS AND PROCEDURES



The Corporation
maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Corporations Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms, and that such information is accumulated and communicated to the Corporations management,



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including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure
based closely on the definition of disclosure controls and procedures in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



Within 90 days prior to the date of this report, the Corporation
carried out an evaluation, under the supervision and with the participation of the Corporations management, including the Corporations Chief Executive Officer and the Corporations Chief Financial Officer, of the effectiveness of
the design and operation of the Corporations disclosure controls and procedures. Based on the foregoing, the Corporations Chief Executive Officer and Chief Financial Officer concluded that the Corporations disclosure controls and
procedures were effective.



There have been no significant
changes in the Corporations internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Corporation completed its evaluation. Therefore, no corrective actions were taken.



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PART II 
Other Information



|       
|-------
|Item 1.
|       
|Item 2.
|       
|Item 3.
|       
|Item 4.
|       
|Item 5.
|       
|Item 6.



a. Exhibits



11.0

Computation of Per Share Earnings99.1

Certificate of Chief Executive Officer pursuant to section 906 of Sarbanes-Oxley Act
of 200299.2

Certificate of Chief Financial Officer pursuant to section 906 of Sarbanes-Oxley Act
of 2002




b. Reports on Form 8-K:



On
January 16, 2003, pursuant to Item 5, the Corporation filed a Form 8-K announcing earnings for the year and quarter ended December 31, 2002 and issued a press release related to earnings and dividend payment.



On April 22, 2003, pursuant to Item 5, the Corporation filed
a Form 8-K announcing earnings for the quarter ended March 31, 2003 and issued a press release related to earnings and dividend payment.



On April 22, 2003, pursuant to Item 5, the Corporation filed a Form 8-K relating to the 2003 annual meeting with results of vote and
issued a press release related to earnings for the quarter ended March 31, 2003 and dividend payment.



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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: May 9, 2003 |  |  |  | By:                                      
|                  |  |  |  |                                          



|                 
|-----------------
|Date: May 9, 2003
|                 



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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002



I, Donat A. Fournier, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Beverly National Corporation;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



5. The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):



a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



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6. The registrants other
certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



Date: May 9, 2003



|   
|---
|By:
|   



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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002



I, Peter E. Simonsen, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Beverly National Corporation;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



5. The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):



a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



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6. The registrants other
certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



Date: May 9, 2003



|   
|---
|By:
|   



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