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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 endedJune 30, 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 August 1, 2003. 1,810,063 shares



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##### Table of Contents

BEVERLY NATIONAL CORPORATION



INDEX



|PART I.    FINANCIAL STATEMENTS                                                                         |  | PAGE
|------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                        | 
|Item 1.                                                                                                 |  |     
|                                                                                                        | 
|Condensed Financial Statements                                                                          |  |     
|                                                                                                        | 
|Consolidated Balance Sheets at June 30, 2003 (Unaudited) and December 31, 2002                          |  | 3   
|                                                                                                        | 
|Consolidated Statements of Income for the Six and Three Months Ended June 30, 2003 and 2002 (Unaudited) |  | 4   
|                                                                                                        | 
|Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (Unaudited)       |  | 5   
|                                                                                                        | 
|Notes to Consolidated Financial Statements (Unaudited)                                                  |  | 7   
|                                                                                                        | 
|Item 2.                                                                                                 |  |     
|                                                                                                        | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  | 9   
|                                                                                                        | 
|Item 3.                                                                                                 |  |     
|                                                                                                        | 
|Quantitative and Qualitative Disclosures About Market Risk                                              |  | 16  
|                                                                                                        | 
|Item 4.                                                                                                 |  |     
|                                                                                                        | 
|Controls and Procedures                                                                                 |  | 18  
|                                                                                                        | 
|PART II.    OTHER INFORMATION                                                                           |  |     
|                                                                                                        | 
|Item 1.                                                                                                 |  |     
|                                                                                                        | 
|Legal Proceedings                                                                                       |  | 19  
|                                                                                                        | 
|Item 2.                                                                                                 |  |     
|                                                                                                        | 
|Changes in Securities and Use of Proceeds                                                               |  | 19  
|                                                                                                        | 
|Item 3.                                                                                                 |  |     
|                                                                                                        | 
|Defaults Upon Senior Securities                                                                         |  | 19  
|                                                                                                        | 
|Item 4.                                                                                                 |  |     
|                                                                                                        | 
|Submission of Matters to a Vote of Security Holders                                                     |  | 19  
|                                                                                                        | 
|Item 5.                                                                                                 |  |     
|                                                                                                        | 
|Other Information                                                                                       |  | 20  
|                                                                                                        | 
|Item 6.                                                                                                 |  |     
|                                                                                                        | 
|Exhibits and Reports on Form 8-K                                                                        |  | 21  
|                                                                                                        | 
|Signatures                                                                                              |  | 22  



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BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                                |  | June 30, 2003 |             |   | December 31,2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | -
|                                                                                                                                                                                                                                                |  | (Unaudited)   |             |   |                  |  
|ASSETS                                                                                                                                                                                                                                          |  |               |             |   |                  |  
|Cash and due from banks                                                                                                                                                                                                                         |  | $             | 26,289,673  |   |                  | $
|Interest bearing demand deposits with other banks                                                                                                                                                                                               |  |               | 169,063     |   |                  |  
|Federal funds sold                                                                                                                                                                                                                              |  |               | 40,000,000  |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Cash and cash equivalents                                                                                                                                                                                                                       |  |               | 66,458,736  |   |                  |  
|                                                                                                                                                                                                                                                |  |              
|Investments in available-for-sale securities (at fair value)                                                                                                                                                                                    |  |               | 86,182,394  |   |                  |  
|Investments in held-to-maturity securities                                                                                                                                                                                                      |  |               | 1,349,249   |   |                  |  
|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 $2,203,061 and $2,012,578, respectively                                                                                                                                                          |  |               | 177,300,932 |   |                  |  
|Mortgages held for sale                                                                                                                                                                                                                         |  |               | 2,103,053   |   |                  |  
|Premises and equipment, net                                                                                                                                                                                                                     |  |               | 4,105,698   |   |                  |  
|Accrued interest receivable                                                                                                                                                                                                                     |  |               | 1,095,594   |   |                  |  
|Other assets                                                                                                                                                                                                                                    |  |               | 4,547,878   |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Total assets                                                                                                                                                                                                                                    |  | $             | 344,282,934 |   |                  | $
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|                                                                                                                                                                                                                                                |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                            |  |               |             |   |                  |  
|Deposits:                                                                                                                                                                                                                                       |  |               |             |   |                  |  
|Noninterest bearing                                                                                                                                                                                                                             |  | $             | 64,708,187  |   |                  | $
|Interest bearing                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Regular savings                                                                                                                                                                                                                                 |  |               | 65,837,342  |   |                  |  
|NOW accounts                                                                                                                                                                                                                                    |  |               | 80,485,065  |   |                  |  
|Money market accounts                                                                                                                                                                                                                           |  |               | 45,182,413  |   |                  |  
|Time deposits                                                                                                                                                                                                                                   |  |               | 58,868,094  |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Total deposits                                                                                                                                                                                                                                  |  |               | 315,081,101 |   |                  |  
|                                                                                                                                                                                                                                                |  |              
|Other liabilities                                                                                                                                                                                                                               |  |               | 3,109,497   |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Total liabilities                                                                                                                                                                                                                               |  |               | 318,190,598 |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|                                                                                                                                                                                                                                                |  |              
|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 1,929,043 as of June 30, 2003 and 1,905,321 as of
December 31, 2002; outstanding 1,809,563 shares as of June 30, 2003 and 1,785,841 shares as of December 31, 2002 |  |               | 4,822,607   |   |                  |  
|Paid-in Capital                                                                                                                                                                                                                                 |  |               | 6,071,349   |   |                  |  
|Retained earnings                                                                                                                                                                                                                               |  |               | 16,773,426  |   |                  |  
|Treasury stock, at cost (119,480 shares as of June 30, 2003 and December 31, 2002)                                                                                                                                                              |  |               | (1,618,112  | ) |                  |  
|Accumulated other comprehensive income                                                                                                                                                                                                          |  |               | 43,066      |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Total stockholders equity                                                                                                                                                                                                                      |  |               | 26,092,336  |   |                  |  
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  
|Total liabilities and stockholders equity                                                                                                                                                                                                      |  | $             | 344,282,934 |   |                  | $
|                                                                                                                                                                                                                                                |  |               |             |   |                  |  



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



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##### Table of Contents

BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                                                 |  | Six Months Ended |           | Three Months Ended
|---------------------------------------------------------------- |  | ---------------- | --------- | ------------------
|                                                                 |  | June 30,2003     |           | June 30,2002      
|INTEREST INCOME:                                                 |  |                  |           |                   
|Interest and fees on loans                                       |  | $                | 6,263,559 |                   
|Interest and dividends on investment securities:                 |  |                  |           |                   
|Taxable                                                          |  |                  | 1,246,552 |                   
|Tax-exempt                                                       |  |                  | 17,032    |                   
|Dividends on marketable equity securities                        |  |                  | 7,757     |                   
|Other interest                                                   |  |                  | 108,508   |                   
|                                                                 |  |                  |           |                   
|Total interest and dividend income                               |  |                  | 7,643,408 |                   
|                                                                 |  |                  |           |                   
|                                                                 |  |                  |           |                   
|INTEREST EXPENSE:                                                |  |                  |           |                   
|Interest on deposits                                             |  |                  | 1,555,970 |                   
|Interest on repurchase agreements                                |  |                  | 315       |                   
|                                                                 |  |                  |           |                   
|Total interest expense                                           |  |                  | 1,556,285 |                   
|                                                                 |  |                  |           |                   
|                                                                 |  |                  |           |                   
|Net interest and dividend income                                 |  |                  | 6,087,123 |                   
|                                                                 |  |                  |           |                   
|Provision for loan losses                                        |  |                  | 120,000   |                   
|                                                                 |  |                  |           |                   
|                                                                 |  |                  |           |                   
|Net interest and dividend income after provision for loan losses |  |                  | 5,967,123 |                   
|                                                                 |  |                  |           |                   
|                                                                 |  |                  |           |                   
|NON-INTEREST INCOME:                                             |  |                  |           |                   
|Income from fiduciary activities                                 |  |                  | 783,068   |                   
|Service charges on deposit accounts                              |  |                  | 326,158   |                   
|Other deposit fees                                               |  |                  | 198,745   |                   
|Mortgage servicing income                                        |  |                  | 37,678    |                   
|Gain on sale of securities                                       |  |                  | 220,603   |                   
|Other income                                                     |  |                  | 466,799   |                   
|                                                                 |  |                  |           |                   
|Total non-interest income                                        |  |                  | 2,033,051 |                   
|                                                                 |  |                  |           |                   
|                                                                 |  |                  |           |                   
|NON-INTEREST EXPENSE:                                            |  |                  |           |                   
|Salaries and employee benefits                                   |  |                  | 3,730,082 |                   
|Occupancy expense                                                |  |                  | 524,622   |                   
|Equipment expense                                                |  |                  | 292,269   |                   
|Contributions                                                    |  |                  | 61,510    |                   
|Data processing fees                                             |  |                  | 277,603   |                   
|Marketing and public relations                                   |  |                  | 178,475   |                   
|Stationery and supplies                                          |  |                  | 105,904   |                   
|Professional fees                                                |  |                  | 178,950   |                   
|Other expense                                                    |  |                  | 774,505   |                   
|                                                                 |  |                  |           |                   
|Total non-interest expense                                       |  |                  | 6,123,920 |                   
|                                                                 |  |                  |           |                   
|Income before income taxes                                       |  |                  | 1,876,254 |                   
|Income taxes                                                     |  |                  | 727,096   |                   
|                                                                 |  |                  |           |                   
|Net Income                                                       |  | $                | 1,149,158 |                   
|                                                                 |  |                  |           |                   
|Earnings per share:                                              |  |                  |           |                   
|                                                                 |  |                  |           |                   
|Weighted average shares outstanding                              |  |                  | 1,805,671 |                   
|                                                                 |  |                  |           |                   
|Weighted average diluted shares outstanding                      |  |                  | 1,895,210 |                   
|                                                                 |  |                  |           |                   
|Earnings per common share                                        |  | $                | 0.64      |                   
|Earnings per common share, assuming dilution                     |  | $                | 0.61      |                   
|Dividends per share                                              |  | $                | 0.40      |                   
|Special dividend per share                                       |  | $                |          |                   



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

Six Months Ended June 30, 2003 and 2002

(Unaudited)



|Reconciliation of net income to net cash provided by (used in) operating activities: |  |      |            |   |      |   |           |  
|------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                                                     |  | 2003 |            |   | 2002 |  
|Net income                                                                           |  | $    | 1,149,158  |   |      | $ | 954,872   |  
|                                                                                     |  |     
|(Increase) decrease in mortgages held for sale                                       |  |      | (1,053,984 | ) |      |   | 1,109,520 |  
|Benefit for mortgages held for sale                                                  |  |      | 0          |   |      |   | (17,514   | )
|Increase in mortgage servicing rights                                                |  |      | (3,670     | ) |      |   | (48,479   | )
|Depreciation expense                                                                 |  |      | 351,366    |   |      |   | 378,536   |  
|Gain on sale of securities                                                           |  |      | (220,603   | ) |      |   | (92,669   | )
|Provision for loan losses                                                            |  |      | 120,000    |   |      |   | 145,890   |  
|Decrease in interest receivable                                                      |  |      | 52,695     |   |      |   | 202,986   |  
|Decrease in interest payable                                                         |  |      | (20,779    | ) |      |   | (128,045  | )
|(Decrease) increase in accrued expenses                                              |  |      | (43,333    | ) |      |   | 159,361   |  
|Decrease (increase) in prepaid expenses                                              |  |      | 18,943     |   |      |   | (70,036   | )
|Decrease in other liabilities                                                        |  |      | (30,276    | ) |      |   | (36,123   | )
|(Increase) decrease in other assets                                                  |  |      | 275,573    |   |      |   | (139,253  | )
|(Increase) decrease in RABBI Trust trading securities                                |  |      | 17,673     |   |      |   | (3,807    | )
|Amortization expense of investment securities                                        |  |      | 291,796    |   |      |   | 67,227    |  
|Accretion income of investment securities                                            |  |      | (9,500     | ) |      |   | (75,016   | )
|Gain on sales of assets, net                                                         |  |      | 0          |   |      |   | (304      | )
|Change in deferred loan costs, net                                                   |  |      | 34,444     |   |      |   | 178,386   |  
|                                                                                     |  |      |            |   |      |   |           |  
|                                                                                     |  |     
|Total adjustments                                                                    |  |      | (219,655   | ) |      |   | 1,630,660 |  
|                                                                                     |  |      |            |   |      |   |           |  
|Net cash provided by operating activities                                            |  |      | 929,503    |   |      |   | 2,585,532 |  
|                                                                                     |  |      |            |   |      |   |           |  



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BEVERLY NATIONAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2003 and 2002

(Unaudited)

(Continued)



|                                                                      |  | 2003 |             |   | 2002 |  
|--------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Cash flows from investing activities:                                 |  |      |             |   |      |  
|Purchases of investment securities available-for-sale                 |  |      | (78,974,086 | ) |      |  
|Purchases of investment securities held-to-maturity                   |  |      | (408,548    | ) |      |  
|Proceeds from sales of investment securities available-for-sale       |  |      | 13,848,167  |   |      |  
|Proceeds from payments of investment securities available-for-sale    |  |      | 6,628,369   |   |      |  
|Proceeds from maturities of investment securities available-for-sale  |  |      | 27,000,000  |   |      |  
|Proceeds from maturities of investment securities held-to-maturity    |  |      | 105,000     |   |      |  
|Purchases of Federal Home Loan Bank stock                             |  |      | (297,100    | ) |      |  
|Loan originations and principal collections, net                      |  |      | 14,402,148  |   |      |  
|Recoveries of previously charged off loans                            |  |      | 110,197     |   |      |  
|Capital expenditures                                                  |  |      | (39,368     | ) |      |  
|Premiums paid on life insurance policies                              |  |      | (500,000    | ) |      |  
|Proceeds from sales of assets                                         |  |      | 0           |   |      |  
|                                                                      |  |      |             |   |      |  
|Net cash provided by (used in) investing activities                   |  |      | (18,125,221 | ) |      |  
|                                                                      |  |      |             |   |      |  
|Cash flows from financing activities:                                 |  |      |             |   |      |  
|Net increase in demand deposits, NOW, money market & savings accounts |  |      | 31,441,885  |   |      |  
|Net increase (decrease) in time deposits                              |  |      | 2,377,240   |   |      |  
|Proceeds from exercise of stock options                               |  |      | 176,768     |   |      |  
|Dividends paid                                                        |  |      | (723,104    | ) |      |  
|                                                                      |  |      |             |   |      |  
|Net cash provided by financing activities                             |  |      | 33,272,789  |   |      |  
|                                                                      |  |      |             |   |      |  
|Net change in cash and cash equivalents                               |  |      | 16,077,071  |   |      |  
|Cash & cash equivalents beginning of year                             |  |      | 50,381,665  |   |      |  
|                                                                      |  |      |             |   |      |  
|Cash & cash equivalents at June 30:                                   |  | $    | 66,458,736  |   |      | $
|                                                                      |  |      |             |   |      |  
|Supplemental disclosures:                                             |  |      |             |   |      |  
|Mortgages held for sale transferred to loans                          |  | $    | 573,431     |   |      | $
|Interest paid                                                         |  | $    | 1,577,064   |   |      | $
|Income taxes paid                                                     |  | $    | 341,224     |   |      | $



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



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##### Table of Contents

BEVERLY NATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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 June 30, 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 Six Months Ended June 30, |           | For the Three MonthsEnded June 30,
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | --------- | ----------------------------------
|                                                                                                                                            |  | 2003                              |           | 2002                              
|Net income, as reported                                                                                                                     |  | $                                 | 1,149,158 |                                   
|                                                                                                                                            |  |                                   |           |                                   
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                                   | 23,454    |                                   
|                                                                                                                                            |  |                                   |           |                                   
|Pro forma net income                                                                                                                        |  | $                                 | 1,125,704 |                                   
|                                                                                                                                            |  |                                   |           |                                   
|                                                                                                                                            |  |                                   |           |                                   
|Earnings per share:                                                                                                                         |  |                                   |           |                                   
|Basic  as reported                                                                                                                         |  | $                                 | .64       |                                   
|Basic  pro forma                                                                                                                           |  | $                                 | .62       |                                   
|Diluted  as reported                                                                                                                       |  | $                                 | .61       |                                   
|Diluted  pro forma                                                                                                                         |  | $                                 | .59       |                                   



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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 $174,684 and non-interest income increased $266,466 during the first six months of 2003, as compared with the
first six months of 2002. Non-interest expense decreased $285,925, for the corresponding period. As a result, the Corporations net income for the six months ended June 30, 2003, was $1,149,158, as compared to the Corporations net income
of $954,872 for the six month period ended June 30, 2002. This is an increase of $194,286 or 20.3%. Primary earnings per share totaled $.64 for the six months ended June 30, 2003, as compared to primary earnings per share of $.55 for the six months
ended June 30, 2002. On a fully diluted basis, earnings per share for the first six months of 2003 amounted to $.61 as compared with $.52 for the same period in 2002. The Corporation declared and paid dividends in January and April 2003 totaling
$.40 per share as compared with $.38 per share during the same period in 2002. A special dividend of $.05 per share was paid in June 2002.



During the first six months of 2003, the Corporations total assets increased $33,754,580 or 10.9% and amounted to $344,282,934 at June 30, 2003. The
change in assets was reflected in an increase in Federal Funds Sold of $7,000,000 or 21.2% and an increase of available-for-sale securities of $31,213,294 or 56.8%. The changes in the loan portfolio and mortgages held for sale for the six months
were as follows: net loans decreased $14,093,357 or 7.4% and mortgages held for sale increased $480,553 or 29.6%. However, there was loan growth in commercial loan and municipal lending. Approximately $10.9 million in residential mortgages were sold
in the secondary market during the first six months of 2003. Deposits increased $33,819,125 or 12.0% during the first six months of 2003. As a result, total deposits increased from $281,261,976 at December 31, 2002 to $315,081,101 at June 30, 2003.
Non-interest bearing deposits increased from $59,917,671 at December 31, 2002 to $64,708,187 at June 30, 2003.



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SIX MONTHS ENDED JUNE 30, 2003

AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2002



Net Interest and Dividend Income



Net interest and dividend income for the six months ended June 30, 2003 totaled $6,087,123 as compared to $6,261,807 for the same period in 2002, representing a decrease of $174,684 or 2.8%. Total interest and
dividend income equaled $7,643,408 for the six months ended June 30, 2003 as compared to $8,698,278 for the same time period in 2002, a decrease of $1,054,870 or 12.1%. Loan income for the six months ended June 30, 2003, totaled $6,263,559 as
compared to $6,812,288 for the same time period in 2002. This decrease of $548,729 or 8.1% reflects the re-pricing of the portfolio in a lower interest rate environment and sale of fixed rate residential mortgages. Interest and dividends on taxable
securities for the six months ended June 30, 2003 totaled $1,246,552 as compared to $1,758,199 for the same period in 2002. This is a decrease of $511,647 or 29.1% and is attributable to a lower interest rate environment. The interest and dividends
on tax-exempt securities increased $2,162 or 14.5% during the six months of 2003 as compared with the same period of 2002. The other interest earned including Federal Funds Sold, remained relatively level for the six months ended June 30, 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 $1,555,970 for the six months ended June 30, 2003, as compared to $2,436,471 for the same period in 2002. This decrease
of $880,501 or 36.1% 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 six months ended June 30, 2003 was $120,000 as compared to $145,890 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 $2,033,051 for the six months ended June 30,
2003 as compared to $1,766,585 for six months ended June 30, 2002. This is an increase of $266,466 or 15.1%. Income from fiduciary activities totaled $783,068 for the six months ended June 30, 2003 as compared to $841,487 for the six months ended
June 30, 2002. This decrease of $58,419 or 6.9% can be attributed to the lower market conditions and their effect on the trust portfolio. Service charges on deposit accounts totaled $326,158 for the six months ended June 30, 2003, as compared to
$241,226 for the same time period in 2002. This increase of $84,932 or 35.2% is due to increased service charges for traditional and electronic banking along with a higher number of accounts serviced. Other deposit fees increased $40,938 or 25.9%
for the six months ended June 30, 2003 as compared to the same time period in 2002. The mortgage servicing income decreased $46,666 for the six months ended June 30, 2003 as compared to June 30, 2002. Gain on sale of securities totaled $220,603 for
the six months ending June 30, 2003 as compared to gain on sale



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of securities of $92,669 for the corresponding period in 2002. Other income for the six-month period ended June 30, 2003
totaled $466,799 as compared to $349,052 for the six-month period ended June 30, 2002, an increase of $117,747 or 33.7%.



Non-interest Expense



Non-interest expense totaled $6,123,920 for the six months ended June 30, 2003, as compared to $6,409,845 for the same time period in 2002. This is a
decrease of $285,925 or 4.5%. This decrease is primarily attributed to stronger cost controls. Salaries and benefits totaled $3,730,082 for the six months ended June 30, 2003 and $3,822,033 for the same time period in 2002. This is a decrease of
$91,951 or 2.4% due to adjustments to fringe benefits. Occupancy expense totaled $524,622 for the six months ended June 30, 2003 as compared to $517,502 for the same period in 2002, which is an increase of $7,120 or 1.4%. This is due to higher rent
costs. The costs of equipment totaled $292,269 for the six months ended June 30, 2003 as compared to $326,245 for the same period in 2002. Decreased equipment depreciation and maintenance costs created this situation. Data processing fees totaled
$277,603 for the six months ended June 30, 2003 as compared to $307,689 for the corresponding time in 2002. This is a decrease of $30,086 or 9.8%, which is due to a renegotiated data processing contract. Professional fees decreased $88,876 or 33.2%
due to reduced legal fees and no recruiting expenses in 2003. Stationery and supplies increased $1,502 for the six months ended June 30, 2003 as compared to the same time period in 2002. Contributions increased $8,196 or 15.4% for the six months
ended June 30, 2003 as compared to the same time period in 2002. Marketing and public relations decreased $20,383 or 10.3% for the six months ended June 30, 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 $774,505 for the six months ended June 30, 2003 as compared to $811,976 for the same period in 2002. This reflects a decrease of $37,471 or 4.6%.



Income Taxes



The income tax provision for the six months ended June 30, 2003 totaled $727,096 in comparison to an income tax provision of $517,785 for the same time
period in 2002. This reflects an increase of taxable income.



Net Income



Net income amounted to $1,149,158 for the six months
ended June 30, 2003 as compared to net income of $954,872 for the same period in 2002, which is an increase of $194,286 or 20.3%. 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 six months of 2003 as compared to the corresponding period in 2002.



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THREE MONTHS ENDED JUNE 30, 2003

AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2002



Net Interest and Dividend Income



Net interest and dividend income for the three months ended June 30, 2003 totaled $3,041,078 as compared to $3,125,220 for the same period in 2002, representing a decrease of $84,142 or 2.7%. Total interest and
dividend income equaled $3,826,355 for the three months ended June 30, 2003 as compared to $4,279,534 for the same time period in 2002, representing a decrease of $453,179 or 10.6%. Loan income for the three months ended June 30, 2003, totaled
$3,091,689 as compared to $3,371,487 for the same time period in 2002. This decrease of $279,798 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 June 30, 2003 totaled $659,787 as compared to $825,927 for the same period in 2002. This is a decrease of $166,140 or 20.1% and is attributable to a lower interest rate environment. The interest and dividends on tax-exempt securities increased
$2,071 or 28.0% during the second quarter of 2003 as compared with the same quarter of 2002. The other interest earned including Federal Funds Sold decreased $11,006 or 15.2% for the three months ended June 30, 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 $784,962 for the three months ended June 30, 2003, as compared to $1,154,314 for the same period in 2002. This decrease of $369,352 or 32.0% 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 June 30, 2003 was $20,000 as compared to $79,890 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 $978,806 for the three months ended June 30, 2003 as compared to $919,812 for three months ended June 30, 2002. This is an
increase of $58,994 or 6.4%. Income from fiduciary activities totaled $420,622 for the three months ended June 30, 2003 as compared to $426,538 for the three months ended June 2002. This decrease of $5,916 or 1.4% can be attributed to the lower
market conditions and their effect on the trust portfolio. Service charges on deposit accounts totaled $168,027 for the three months ended June 30, 2003, as compared to $131,819 for the same time period in 2002. This increase of $36,208 or 27.5% is
due to increased service charges for traditional and electronic banking along with a higher number of accounts serviced. Other deposit fees increased $15,494 or 18.9% for the three months ended June 30, 2003 as compared to the same time period in
2002. The mortgage servicing income decreased $11,642 for the three months ended June 30, 2003 as compared to June 30, 2002. Gain on sale of securities



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totaled $49,957 for the three months ending June 30, 2003 as compared to gains on sale of securities of $92,669 for the
corresponding period in 2002. Other income for the three-month period ended June 30, 2003 totaled $225,017 as compared to $157,455 for the three-month period ended June 30, 2002, an increase of $67,562 or 42.9%. This positive variance is primarily
due to higher profits posted in 2003 on gain on sale of mortgages.



Non-interest Expense



Non-interest
expense totaled $3,102,959 for the three months ended June 30, 2003, as compared to $3,293,428 for the same time period in 2002. This is a decrease of $190,469 or 5.8%. This decrease is primarily attributed to new cost controls. Salaries and
benefits totaled $1,900,118 for the three months ended June 30, 2003 and $2,030,135 for the same time period in 2002. This decrease of $130,017 is due to adjustments to employee benefits. Occupancy expense totaled $248,842 for the three months ended
June 30, 2003 as compared to $220,104 for the same period in 2002, which is an increase of $28,738 or 13.1%. This is due to increased rent, real estate taxes and repair and maintenance costs. The costs of equipment totaled $145,274 for the three
months ended June 30, 2003 as compared to $161,283 for the same period in 2002. Decreased equipment depreciation and maintenance costs created this situation. Data processing fees totaled $144,613 for the three months ended June 30, 2003 as compared
to $156,387 for the corresponding time in 2002. This is a decrease of $11,774 or 7.5%, which is due to a renegotiated data processing contract. Professional fees decreased $54,120 or 34.5% due to lower legal expenses and no recruiting expenses in
2003. Stationery and supplies increased $10,426 for the three months ended June 30, 2003 as compared to the same time period in 2002. Contributions increased $5,945 or 23.7% for the three months ended June 30, 2003 as compared to the same time
period in 2002. Marketing and public relations decreased $1,278 or 1.3% for the three months ended June 30, 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 $374,795 for
the three months ended June 30, 2003 as compared to $397,175 for the same period in 2002. This reflects a decrease of $22,380 or 5.6%.



Income Taxes



The income tax provision for the three months ended June 30, 2003 totaled $351,550 in comparison to an income tax provision of $249,500 for the same time
period in 2002. This reflects an increase of taxable income.



Net Income



Net income amounted to $545,375 for the three months
ended June 30, 2003 as compared to net income of $422,214 for the same period in 2002, which is an increase of $123,161 or 29.2%. The earnings increase is primarily due to gains on mortgage sales, higher service charges on deposit accounts and cost
control on non-interest expense for the second 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 June 30, 2003, the allowance for loan losses totaled $2,203,061
representing 358.5% of non-performing loans. Non-performing loans totaled $614,407, which represented 0.34% of total loans and mortgages held for sale. At June 30, 2002, the allowance for loan losses amounted to $2,022,677, representing 257% of
non-performing loans. At June 30, 2002, non-performing loans totaled $786,757, which represented 0.41% of total loans and mortgages held for sale. A total of $39,714 of loans were charged off by the Bank during the first six months of 2003 as
compared to $350,216 charged off during the corresponding period in 2002. A total of $110,097 was recovered of previously charged-off loans during the first six months ended June 30, 2003 compared to $230,627 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
overall level of non-performing loans remains low. Accordingly, while the overall quality of the loan portfolio remains strong,



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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 grow its loan portfolio, ongoing periodic provisions to the allowance are likely to be necessary to maintain adequate coverage ratios.



Capital Resources



As of June 30, 2003, the Corporation had total capital in the amount of
$26,092,336 as compared with $25,433,145 at December 31, 2002, which represents an increase of $659,191 or 2.6%. 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 June 30,
2003, the Banks Tier 1 capital amounted to 6.84% of total assets. At June 30, 2003, the Banks ratio of risk-based capital to risk weighted assets amounted to 12.62%, 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 June 30,
2003, the Corporations Tier 1 capital amounted to 8.00% of total assets. At June 30, 2003, the Corporations ratio of risk-based capital to risk weighted assets amounted to 14.42%, 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 $6,037,605 at June 30, 2003 or 6.9% of the investment securities portfolio, and
$3,134,580 at December 31, 2002, representing 5.6% 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. The Corporations



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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 revenues and earnings for the Corporation and Bank.
| | --- |  | --------------------------------------------------------------------



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 June 30, 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 $1,284,221. 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 $1,211,859. On the other hand, if interest rates were to increase, net interest income would be expected to increase.



At June 30, 2003, it was estimated that the value of the net assets of the Corporation would increase by $4,389,429 if interest rates were to increase by
200 basis points and that the Corporations net interest income would decline by $116,210 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.



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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, 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-15(e). 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.



As of June 30, 2003, 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.



During the quarter ended June 30, 2003, there were 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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##### Table of Contents

PART IIOTHER INFORMATION



|        |  |                                                    
|------- |  | ---------------------------------------------------
|Item 1. |  | Legal Proceedings                                  
|        |  |                                                    
|Item 2. |  | Changes in Securities and Use of Proceeds          
|        |  |                                                    
|Item 3. |  | Defaults Upon Senior Securities                    
|        |  |                                                    
|Item 4. |  | Submission of Matters to a Vote of Security Holders



The Annual Meeting of
the Corporation was held on Tuesday, April 22, 2003. Stockholders voted to fix the number of directors at ten (10), on the election of directors and to ratify the appointment of independent auditors.



The results of the votes of stockholders regarding each proposal are set
forth below:



PROPOSAL 1

FIXING NUMBER OF DIRECTORS



The proposal to fix the number of directors, who shall constitute the full Board of Directors, at ten (10) was approved in that the proposal received the
affirmative vote of a majority of the shares voting.



The vote
for fixing the number of directors at ten (10) was as follows:



|                                       |  | FOR     |  | AGAINST |  | ABSTAIN
|-------------------------------------- |  | --------- |  | --------- |  | ---------
|Number of Votes:                       |  | 1,490,743 |  | 162,750   |  | 6,518    
|Percentage of Shares Voted:            |  | 89.8%     |  | 9.8%      |  |         
|Percentage of Shares Entitled to Vote: |  | 82.4%     |  | 9.0%      |  |         



PROPOSAL 2

ELECTION OF DIRECTORS



Each of the four nominees received in excess of a plurality of the votes cast at the meeting and were elected to serve a three-year term or until their
successors are elected and qualified.



The vote for electing
nominees as directors was as follows:



|                                       |  | For       |  | WithholdingAuthority*
|-------------------------------------- |  | --------- |  | ---------------------
|John N. Fisher                         |  |           |  |                      
|Number of Shares:                      |  | 1,653,913 |  |                     
|Percentage of Shares Voted:            |  | 99.6%     |  |                     
|Percentage of Shares Entitled to Vote: |  | 91.5%     |  |                     



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##### Table of Contents

|                                       |  | For       |  | WithholdingAuthority*
|-------------------------------------- |  | --------- |  | ---------------------
|Alice B. Griffin                       |  |           |  |                      
|Number of Shares:                      |  | 1,653,913 |  | 630                  
|Percentage of Shares Voted:            |  | 99.6%     |  |                     
|Percentage of Shares Entitled to Vote: |  | 91.4%     |  |                     
|                                       |  |          
|                                       |  | For       |  | WithholdingAuthority*
|Robert W. Luscinski                    |  |           |  |                      
|Number of Shares:                      |  | 1,648,663 |  | 5,250                
|Percentage of Shares Voted:            |  | 99.3%     |  | .3%                  
|Percentage of Shares Entitled to Vote: |  | 91.2%     |  | .3%                  
|                                       |  |          
|                                       |  | For       |  | WithholdingAuthority*
|James D. Wiltshire                     |  |           |  |                      
|Number of Shares:                      |  | 1,648,663 |  | 5,250                
|Percentage of Shares Voted:            |  | 99.3%     |  | .3%                  
|Percentage of Shares Entitled to Vote: |  | 91.2%     |  | .3%                  



Richard H. Booth, John
L. Good, III, and Clark R. Smith are currently serving terms on the Board of Directors which expire at the 2004 Annual Meeting of Shareholders. Neiland J. Douglas, Jr., Donat A. Fournier and Mark B. Glovsky are currently serving terms on the Board
of Directors which expire at the 2005 Annual Meeting of Shareholders.



*  Witholding Authority would include any Against or Abstain votes.



PROPOSAL 3

RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS



The appointment of
Shatswell, MacLeod & Company, P.C. as independent auditors for the Company for the year ending December 31,2003 was approved in that the votes for such appointment exceeded the votes against such appointment.



The vote to ratify the appointment of Shatswell, MacLeod & Company, P.C.
as independent auditors for the year ending December 31, 2003 was as follows:



|                                       |  | FOR     |  | AGAINST |  | ABSTAIN
|-------------------------------------- |  | --------- |  | --------- |  | ---------
|Number of Votes:                       |  | 1,648,272 |  | 0         |  | 11,739   
|Percentage of Shares Voted:            |  | 99.3%     |  | 0         |  |         
|Percentage of Shares Entitled to Vote: |  | 91.2%     |  | 0         |  |         



|        |  |                  
|------- |  | -----------------
|Item 5. |  | Other Information



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|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



| | a. |  | Exhibits
| | -- |  | --------



11.0    Computation of Per Share Earnings



31.1    Rule 13a-14(a)/15d-14(a) Certification



31.2    Rule 13a-14(a)/15d-14(a) Certification



32.1    Section 1350 Certifications



| | b. |  | Reports on Form 8-K:
| | -- |  | --------------------



The Corporation filed the following reports on Form 8-K during the quarter ended June 30, 2003:



1.    The Corporation filed a Form 8-K on
April 22, 2003 to report the events and results of the Corporations Annual Meeting of Shareholders that was held on April 22, 2003.



2.    The Corporation filed a Form 8-K on April 22, 2003 to report that the Corporation had issued a press release
related to its Annual Meeting, earnings 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: August 11, 2003 |  |  |  | By:                                      
|                      |  |  |  |                                          
|                      |  | 
|                      |  |  |  |                                          
|                      |  |  | 
|Date: August 11, 2003 |  |  |  | By:                                      
|                      |  |  |  |                                          



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