Beverly National 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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 September 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number 33-22224-B

Beverly National Corporation

(Name of 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

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 a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large Accelerated Filer  ¨    Accelerated Filer  ¨    Non-Accelerated Filer  x

Indicate by check mark whether the registrant is a shell company (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 November 9, 2007: 2,633,565.

BEVERLY NATIONAL CORPORATION

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2007 (Unaudited) and December 31, 2006	3
Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (Unaudited)	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.
Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.
Controls and Procedures	18
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings	19
Item 1A.
Risk Factors	19
Item 2.
Unregistered Sales of Equity 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	19
Item 6.
Exhibits	19
Signatures	20

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BEVERLY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

	September 30, 2007			December 31, 2006
	(unaudited)
ASSETS
Cash and due from banks	$	8,044		$	12,954
Interest-bearing demand deposits with other banks		146			1,010
Federal funds sold		5,119			11,604
Cash and cash equivalents		13,309			25,568
Investments in available-for-sale securities (at fair value)		115,734			116,181
Federal Home Loan Bank stock, at cost		3,452			3,503
Federal Reserve Bank stock, at cost		553			188
Loans, net of the allowance for loan losses of $3,554 and $3,044, respectively		317,374			302,667
Premises and equipment		7,444			6,285
Accrued interest receivable		1,969			1,840
Other assets		11,183			10,912
Total assets	$	471,018		$	467,144
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	73,024		$	75,751
Interest-bearing		285,270			277,107
Total deposits		358,294			352,858
Federal Home Loan Bank advances		50,852			47,000
Securities sold under agreements to repurchase		10,941			16,372
Other liabilities		4,647			4,736
Total liabilities		424,734			420,966
Stockholders’ equity:
Preferred stock, $1.00 par value per share; 300,000 shares authorized; issued and outstanding none		—			—
Common stock, $2.50 par value per share; 5,000,000 shares authorized; issued 2,889,925 shares as of September 30, 2007 and 2,837,240 shares as of December 31, 2006; outstanding, 2,702,665 shares as of September 30, 2007 and 2,726,835 shares as of December 31, 2006		7,225			7,093
Paid-in capital		22,320			21,772
Retained earnings		20,647			19,694
Treasury stock, at cost (178,255 shares as of September 30, 2007 and 110,405 shares as of December 31, 2006)		(2,902	)		(1,495	)
Unearned shares, Restricted Stock Plan (9,005 shares as of September 30, 2007)		(23	)		—
Accumulated other comprehensive loss		(983	)		(886	)
Total stockholders’ equity		46,284			46,178
Total liabilities and stockholders’ equity	$	471,018		$	467,144
Book value per share	$	17.13		$	16.93

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

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BEVERLY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
Interest and dividend income:
Interest and fees on loans	$	5,271	$	4,882	$	15,440	$	13,900
Interest on debt securities:
Taxable		1,160		1,149		3,426		3,175
Tax-exempt		120		23		339		72
Dividends on marketable equity securities		162		61		477		185
Other interest		131		32		349		46
Total interest and dividend income		6,844		6,147		20,031		17,378
Interest expense:
Interest on deposits		2,119		1,570		5,796		4,122
Interest on other borrowed funds		783		694		2,329		1,889
Total interest expense		2,902		2,264		8,125		6,011
Net interest and dividend income		3,942		3,883		11,906		11,367
Provision for loan losses		75		150		325		440
Net interest and dividend income after provision for loan losses		3,867		3,733		11,581		10,927
Noninterest income:
Income from fiduciary activities		486		424		1,427		1,344
Fees from sale of non-deposit products		60		45		190		168
Service charges on deposit accounts		157		137		452		416
Other deposit fees		198		216		700		521
Gain on sales of loans, net		—		—		6		—
Income on cash surrender value of life insurance		54		58		165		162
Other income		304		176		759		598
Total noninterest income		1,259		1,056		3,699		3,209
Noninterest expense:
Salaries and employee benefits		2,185		2,160		6,460		6,526
Director fees		68		65		233		232
Occupancy expense		389		329		1,164		1,001
Equipment expense		216		203		638		598
Data processing fees		290		208		854		602
Marketing and public relations		102		137		344		332
Professional fees		186		208		752		492
Other expense		412		380		1,249		1,133
Total noninterest expense		3,848		3,690		11,694		10,916
Income before income taxes		1,278		1,099		3,586		3,220
Income taxes		357		339		976		1,003
Net income	$	921	$	760	$	2,610	$	2,217
Comprehensive income	$	1,760	$	1,177	$	2,513	$	2,391
Earnings per share:
Weighted average shares outstanding		2,748,336		2,558,642		2,755,340		2,116,626
Weighted average diluted shares outstanding		2,764,357		2,592,186		2,770,712		2,154,128
Earnings per common share	$	0.34	$	0.30	$	0.95	$	1.05
Earnings per common share, assuming dilution	$	0.33	$	0.29	$	0.94	$	1.03
Dividends per share	$	0.20	$	0.20	$	0.60	$	0.60

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

4

BEVERLY NATIONAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Nine Months Ended
	September 30, 2007			September 30, 2006
Cash flows from operating activities:
Net income	$	2,610		$	2,217
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		554			495
Increase in interest payable		439			243
Provision for loan losses		325			440
Decrease in RABBI Trust trading securities		70			69
Amortization of securities, net		32			192
Decrease in mortgage servicing rights		27			30
Change in deferred loan costs, net		13			(29	)
Stock-based compensation		12			12
(Increase) decrease in taxes receivable		(33	)		20
Increase in prepaid expenses		(43	)		(17	)
Decrease in other liabilities		(43	)		(191	)
Increase in other assets		(99	)		(4	)
Increase in interest receivable		(129	)		(450	)
Increase in cash surrender value of life insurance		(165	)		(162	)
Decrease in accrued expenses		(485	)		(211	)
Net cash provided by operating activities		3,085			2,654
Cash flows from investing activities:
Proceeds from maturities of available-for-sale securities		11,157			7,641
Proceeds from sales of available-for-sale securities		3,091			—
Recoveries of loans previously charged off		188			6
Sale (purchase) of Federal Home Loan Bank stock		51			(844	)
Proceeds from maturities of held-to-maturity securities		—			3,645
Purchase of Federal Reserve Bank stock		(365	)		—
Capital expenditures		(1,713	)		(1,303	)
Purchases of available-for-sale securities		(13,958	)		(11,821	)
Loan originations and principal collections, net		(15,233	)		(33,327	)
Net cash used in investing activities		(16,782	)		(36,003	)
Cash flows from financing activities:
Net increase in time deposits		13,362			11,890
Net increase in Federal Home Loan Bank advances		3,852			19,840
Proceeds from exercise of stock options		645			518
Proceeds from stock offering (total proceeds of $16,812, less offering costs of $ 450)		—			16,362
Purchase of treasury stock		(1,407	)		—
Dividends paid		(1,657	)		(1,299	)
(Decrease) increase in securities sold under agreements to repurchase		(5,431	)		1,892
Net decrease in demand deposits, NOW, money market and savings accounts		(7,926	)		(19,756	)
Net cash provided by financing activities		1,438			29,447
Net decrease in cash and cash equivalents		(12,259	)		(3,902	)
Cash and cash equivalents at beginning of period		25,568			13,440
Cash and cash equivalents at end of period	$	13,309		$	9,538
Supplemental disclosures:
Interest paid	$	7,686		$	5,768
Income taxes paid		1,009			983

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

5

BEVERLY NATIONAL CORPORATION AND SUBSIDIARY

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 that 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, 2007.

The year-end condensed consolidated 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 (“EPS”) 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

In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155, “Accounting for Certain Hybrid Instruments” (SFAS 155), which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with SFAS 133. The statement also subjects beneficial interests issued by securitization vehicles to the requirements of SFAS No. 133. The statement was effective as of January 1, 2007. The adoption of SFAS 155 is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets- an amendment of FASB Statement No. 140” (SFAS 156). SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in specific situations. Additionally, the servicing asset or servicing liability shall be initially measured at fair value; however, an entity may elect the “amortization method” or “fair value method” for subsequent balance sheet reporting periods. SFAS 156 is effective as of an entity’s first fiscal year beginning after September 15, 2006. Early adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year. The Company does not expect the adoption of this statement to have a material impact on its financial condition, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (GAAP) and enhances disclosures about fair value measurements. SFAS 157 retains the exchange price notion and clarifies that the exchange price is the price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. SFAS 157 is effective for the Company’s consolidated financial statements for the year beginning on January 1, 2008, with earlier adoption permitted. The Company does not expect the adoption of this statement to have a material impact on its financial condition, results of operations or cash flows.

6

In September 2006, the FASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and other Postretirement Plans – an amendment of FASB Statements No 87, 88, 106 and 132(R)” (SFAS 158). SFAS 158 requires 1) the recognition of an asset or liability for the over-funded or under-funded status of a defined benefit plan, 2) the recognition of actuarial gains and losses and prior service costs and credits in other comprehensive income, 3) measurement of plan assets and benefit obligations as of the employer’s balance sheet date, rather than at interim measurement dates as currently allowed, and 4) disclosure of additional information concerning actuarial gains and losses and prior service costs and credits recognized in other comprehensive income. This statement is effective for financial statements with fiscal years ending after December 15, 2006. The adoption of this statement did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In September 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on lssue No. 06-4 “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” (EITF Issue 06-4). EITF 06-4 requires companies with an endorsement split-dollar life insurance arrangement to recognize a liability for future postretirement benefits. The effective date is for fiscal years beginning after December 15,2007, with earlier application permitted. Companies should recognize the effects of applying this issue through either (a) a change in accounting principle through a cumulative effect adjustment to retained earnings or (b) a change in accounting principle through retrospective application to all periods. The Company is currently evaluating and has not yet determined the impact the new EITF is expected to have on its financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement No. 115” (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective at the beginning of the Company’s fiscal year beginning January 1, 2008, and early application may be elected in certain circumstances. The Company is currently evaluating and has not yet determined the impact the new standard is expected to have on its financial position, results of operations or cash flows.

5. STOCK BASED COMPENSATION

The Company maintains six stock-based employee compensation plans. Effective January 1, 2006, the Company adopted SFAS 123R. For the nine months ended September 30, 2007, stock-based employee compensation costs recorded as expenses amounted to $43,000, compared to $25,000 for the same period last year. The 2007 figure includes compensation costs of $31,000 for grants made to employees pursuant to the Company’s Restricted Stock Plan, from which the Board of Directors approved the initial grant of 9,140 shares, at costs of $21.85 per share, during the second quarter of 2007. Prior to January 1, 2006, the Company accounted for the plans under the recognition and measurement principles of APB Opinion No. 25. No stock-based employee compensation cost had been recognized during periods prior to January 1, 2006 for the Company’s fixed stock option plans.

7

6. PENSION BENEFITS

The following summarizes the net periodic cost for the three and nine months ended September 30:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
	(in thousands)						(in thousands)
Service cost	$	—		$	—		$	—		$	—
Interest cost on benefit obligation		123			118			369			355
Expected return on plan assets		(161	)		(150	)		(484	)		(451	)
Amortization of prior service cost		—			—			—			—
Net periodic benefit cost	$	(38	)	$	(32	)	$	(115	)	$	(96	)

Effective January 1, 2006, the pension plan was suspended so that employees no longer earn additional defined benefits for future service.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Introduction

The following discussion includes Beverly National Corporation (“Company”) and its subsidiary, Beverly National Bank (“Bank”) and the Bank’s wholly owned subsidiary, Beverly National Security Corporation (“BNSC”). BNSC was established to buy, sell and hold securities for the Bank’s investment portfolios. A former subsidiary of the Bank, Hannah Insurance Agency (“Hannah”), which was established to sell annuities, life and long-term disability insurance, was dissolved during the first quarter of 2006.

Critical Accounting Estimates

In preparing the Company’s financial statements, management selects and applies numerous accounting policies. In applying these policies, management must make estimates and assumptions. The accounting policy that is most susceptible to critical estimates and assumptions is the allowance for loan losses. The determination of an appropriate provision is based on a determination of the probable amount of credit losses in the loan portfolio. Many factors influence the amount of potential charge-offs of loans deemed to be uncollectible. These factors include the specific characteristics of the loan portfolio and general economic conditions nationally and locally. While management carefully considers these factors in determining the amount of the allowance for loan losses, future adjustments may be necessary due to changed conditions, which could have an adverse impact on reported earnings in the future. See “Provisions and Allowance for Loan Losses.”

Summary

Total assets as of September 30, 2007 increased $3.9 million, or 0.8%, compared to December 31, 2006. Loans, net of the allowance for loan losses, increased $14.7 million, or 4.9%, while cash and cash equivalents declined $12.3 million, or 48.0% since December 31, 2006. The Bank has strategically slowed its asset growth rate to evaluate current market conditions and determine the asset allocation that would be most advantageous. The loan portfolio has expanded, however, through utilization of available funding and the reallocation of existing resources. The strategic focus remains the prudent growth of the loan portfolio, and funding that growth through an expanded deposit base, or other less expensive funding alternatives. Deposits increased $5.4 million, or 1.5%, repurchase agreements decreased $5.4 million, or 33.2%, and Federal Home Loan Bank advances increased $3.9 million, or 8.2%. This growth in deposits reflects the June, 2007 opening of the Bank’s newest branch in Salem and the introduction of an enhanced line of deposit products. Management’s focus continues to be on maintaining the appropriate strategic direction and allocating resources to the areas that provide the most beneficial returns consistent with the Bank’s commitment to the maintenance of asset quality.

8

Investment Portfolio

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The following table presents the amortized cost of securities and their approximate fair values as of September 30, 2007 (unaudited) and December 31, 2006:

	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Available-for-sale securities:
September 30, 2007:
Debt securities issued by U.S. government corporations and agencies	$	16,939	$	56	$	18	$	16,977
Debt securities issued by states of the United States or political subdivisions of the states		12,326		9		336		11,999
Trust preferred securities		9,367		—		156		9,211
Marketable equity securities		1,643		3		15		1,631
Mortgage-backed securities		76,418		83		984		75,517
Debt securities issued by foreign governments		400		—		1		399
	$	117,093	$	151	$	1,510	$	115,734
December 31, 2006:
Debt securities issued by U.S. government corporations and agencies	$	13,000	$	14	$	71	$	12,943
Debt securities issued by states of the United States or political subdivisions of the states		9,730		2		75		9,657
Corporate debt securities		1,451		—		—		1,451
Trust preferred securities		9,529		—		49		9,480
Marketable equity securities		4,692		4		13		4,683
Mortgage-backed securities		78,613		118		1,159		77,572
Debt securities issued by foreign governments		400		—		5		395
	$	117,415	$	138	$	1,372	$	116,181

Loan Portfolio

The following table summarizes the distribution of the Bank’s loan portfolio as of September 30, 2007 and December 31, 2006:

	September 30, 2007			% of Total		December 31, 2006			% of Total
	(in thousands)					(in thousands)
	(unaudited)
Commercial, financial and agricultural	$	37,582		11.84	%	$	48,201		15.93	%
Real estate—construction and land development		18,265		5.76	%		20,890		6.90	%
Real estate—residential		119,549		37.67	%		106,930		35.33	%
Real estate—commercial		127,853		40.29	%		112,237		37.08	%
Consumer		2,681		0.84	%		3,102		1.03	%
Other		14,324		4.51	%		13,664		4.51	%
		320,254		100.91	%		305,024		100.78	%
Allowance for loan losses		(3,554	)	-1.12	%		(3,044	)	-1.01	%
Deferred loan costs, net		674		0.21	%		687		0.23	%
Net Loans	$	317,374		100.00	%	$	302,667		100.00	%

9

Deposits

The following table summarizes deposits as of September 30, 2007 and December 31, 2006:

	September 30, 2007		% of Total		December 31, 2006		% of Total
	(in thousands)				(in thousands)
	(unaudited)
Demand Deposits	$	73,024	20.38	%	$	75,751	21.47	%
NOW Accounts		58,774	16.40	%		71,805	20.35	%
Money Market Accounts		85,600	23.89	%		76,427	21.66	%
Savings Deposits		47,465	13.25	%		48,805	13.83	%
Time Deposits		93,431	26.08	%		80,070	22.69	%
Total	$	358,294	100.00	%	$	352,858	100.00	%

Comparison of operating results for the three months ended September 30, 2007 and 2006

The Company reported net income for the quarter of $921,000, or basic earnings per share of $0.34 and fully diluted earnings of $0.33 per share, compared to net income of $760,000, or basic earnings per share of $0.30 and fully diluted earnings of $0.29 per share for the same quarter last year. These results represent an increase in net income of $161,000, or 21.2%, and a 12.8% and 13.6% increase in basic and fully diluted earnings per share, respectively.

Total interest and dividend income, when compared to the same period last year, increased by $697,000, or 11.3%. This was the result of increases in interest and fees on loans, which increased by $389,000, or 8.0%, and interest and dividends on investments, which increased $308,000, or 24.4%. The current interest rate environment has led to the increase in the Company’s yield on loans. The restructuring of the investment portfolio in December 2006, as well as the reinvestment of cash flows from the portfolio at current market rates, has led to the increase in the Company’s yield on investments.

Total interest expense increased by $638,000, or 28.2%, compared to the same calendar quarter last year. The increase was primarily comprised of a $549,000, or 35.0%, increase in deposit interest expense, which was due to an increase in the amount of deposits and in the average interest rate paid on deposits, fueled by the current competitive rate environment.

The above changes in interest income and expense resulted in an increase in net interest and dividend income after provision for loan losses of $134,000, or 3.6%, from the comparable quarter last year.

The Company’s net interest margin decreased by approximately ten basis points, from 3.76% to 3.66%, from the comparable quarter last year.

10

The following table summarizes the components and activity with respect to the Company’s net interest and dividend income and interest rate spread and margin for the periods presented:

	For the Three Months Ended September 30, 2007							For the Three Months Ended September 30, 2006
	Average Balance		Interest Inc/Exp			Yield/ Rate		Average Balance		Interest Inc/Exp			Yield/ Rate
	(in thousands)		(in thousands)					(in thousands)		(in thousands)
	(unaudited)		(unaudited)					(unaudited)		(unaudited)
Assets
Federal funds sold and interest-bearing deposits	$	4,510	$	53		4.67	%	$	1,151	$	16		5.52	%
Investments		119,788		1,582	*	5.24	%		115,238		1,261	*	4.34	%
Loans		319,014		5,358	**	6.66	%		300,465		4,940	**	6.52	%
Total interest-earning assets	$	443,312		6,993		6.26	%	$	416,854		6,217		5.92	%
Liabilities
Savings deposits	$	48,670		107		0.87	%	$	54,808		76		0.55	%
NOW accounts		57,545		120		0.83	%		58,241		60		0.41	%
Money market accounts		88,980		823		3.67	%		82,227		692		3.34	%
Time deposits		89,030		1,069		4.76	%		73,698		742		3.99	%
FHLB advances		58,523		719		4.88	%		44,098		593		5.34	%
Repurchase agreements		7,201		64		3.54	%		11,993		101		3.34	%
Total interest-bearing liabilities		349,949		2,902		3.29	%		325,065		2,264		2.76	%
Non-interest-bearing deposits		74,164		—					71,074		—
Total deposits	$	424,113		2,902		2.71	%	$	396,139		2,264		2.27	%
Net interest income			$	4,091						$	3,953
Net interest spread						3.55	%						3.65	%
Net interest margin						3.66	%						3.76	%
Tax Equivalent Income Adjustment:
State and Muncipal Investment Income			$	62	*					$	12	*
Industrial Revenue Bond Income				87	**						58	**
Total Tax Equivalent Income Adjustment			$	149						$	70

* Amount included in investment income.

** Amount included in loan income.

Total noninterest income for the quarter was $1.3 million, an increase of $203,000, or 19.2%, from the same quarter last year. Increases in income from fiduciary activities, as well as in other income, accounted for much of this increase.

Total noninterest expense increased by $158,000, or 4.3%, when compared to the same quarter last year. While the Company realized a decrease in a few categories, such as professional fees and marketing and public relations expenses, most categories experienced a slight increase. This is an anticipated, inherent result in the strategy of growing the Bank. Occupancy and equipment expense increased due to lease payments and depreciation of improvements for the recently upgraded North Beverly location and the opening of the new Salem branch during the second quarter of 2007. Data processing fees increased due to improvements made to the Bank’s Internet banking system, a newly upgraded website and the outsourcing of the items processing operation. The Internet banking improvements included enhancing the overall system’s functionality, as well as the addition of several products and services now available to Internet banking customers. Other expenses also increased due to additional audit and compliance costs.

11

The following table sets forth the various components of noninterest income and noninterest expense for the quarters ended September 30, 2007 and 2006 and the dollar amount and percentage change between the periods:

	September 30,				Increase (Decrease)
	2007		2006		$			%
	(Dollars in thousands)
	(unaudited)
Noninterest income:
Income from fiduciary activities	$	486	$	424	$	62		14.62	%
Fees from sale of non-deposit products		60		45		15		33.33	%
Service charges on deposit accounts		157		137		20		14.60	%
Other deposit fees		198		216		(18	)	-8.33	%
Income on cash surrender value of life insurance		54		58		(4	)	-6.90	%
Other income		304		176		128		72.73	%
Total noninterest income	$	1,259	$	1,056	$	203		19.22	%
Noninterest expense:
Salaries and employee benefits	$	2,185	$	2,160	$	25		1.16	%
Director fees		68		65		3		4.62	%
Occupancy expense		389		329		60		18.24	%
Equipment expense		216		203		13		6.40	%
Data processing fees		290		208		82		39.42	%
Marketing and public relations		102		137		(35	)	-25.55	%
Professional fees		186		208		(22	)	-10.58	%
Other expense		412		380		32		8.42	%
Total noninterest expense	$	3,848	$	3,690	$	158		4.28	%

The income tax provision for the quarter increased by $18,000, or 5.3%, compared to the same period last year, due to the increase in net income. The 2.9% decrease in the effective tax rate, from 30.8% to 27.9%, is the result of the restructuring of the Company’s investment portfolio in December 2006, which included the Bank increasing its level of tax exempt investment securities, and a significant increase in tax-exempt loans realized during the past year.

Comparison of operating results for the nine months ended September 30, 2007 and 2006

Net income for the nine months ended September 30, 2007 of $2.6 million, or basic earnings per share of $0.95 and fully diluted earnings of $0.94 per share, increased $393,000, or 17.7%, compared to net income of $2.2 million, or basic earnings per share of $1.05 and fully diluted earnings of $1.03 per share, for the same period last year. The decrease in both basic and diluted earnings per share is due to the issuance of 805,000 shares of common stock resulting from the Company’s secondary stock offering in July 2006.

Total interest and dividend income, when compared to the same period last year, increased by $2.7 million, or 15.3%. This was the result of increases in interest and fees on loans, which increased by $1.5 million, or 11.1%, and interest and dividends on investments, which increased $1.1 million, or 32.0%. As stated with the quarterly operating results, the current interest rate environment, an increase in net loans and restructuring of the investment portfolio in December 2006 contributed to the increase in interest and dividend income.

Total interest expense increased by $2.1 million, or 35.2%, compared to the same period last year. The increase was partially comprised of a $1.7 million, or 40.6%, increase in deposit interest expense, which was caused by an increase in the amount of deposits and in the average interest rate paid on deposits, fueled by the current competitive rate environment. The increase in total interest expense was also attributed to interest on other borrowed funds, comprised of advances from the Federal Home Loan Bank and securities sold under agreements to repurchase. Interest paid on these borrowings increased $440,000, or 23.3%, from the same period last year. The increase in the amount of borrowings by the Bank to fund loan portfolio growth is the cause for the increase in interest paid on borrowed funds.

The above changes in interest income and expense resulted in an increase in net interest and dividend income after provision for loan losses of $654,000, or 6.0%, from the comparable period last year.

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The Company’s net interest margin decreased by approximately five basis points, from 3.83% to 3.78%, from the comparable period last year.

The following table summarizes the components and activity with respect to the Company’s net interest and dividend income and interest rate spread and margin for the periods presented:

	For the Nine Months Ended September 30, 2007							For the Nine Months Ended September 30, 2006
	Average Balance		Interest Inc/Exp			Yield/ Rate		Average Balance		Interest Inc/Exp			Yield/ Rate
	(in thousands)		(in thousands)					(in thousands)		(in thousands)
	(unaudited)		(unaudited)					(unaudited)		(unaudited)
Assets
Federal funds sold and interest-bearing deposits	$	2,836	$	102		4.82	%	$	627	$	23		4.90	%
Investments		119,635		4,663	*	5.21	%		114,097		3,492	*	4.09	%
Loans		314,402		15,701	**	6.68	%		288,976		14,075	**	6.51	%
Total interest-earning assets	$	436,873		20,466		6.26	%	$	403,700		17,590		5.83	%
Liabilities
Savings deposits	$	48,323		266		0.74	%	$	58,003		237		0.55	%
NOW accounts		58,784		347		0.79	%		58,018		131		0.30	%
Money market accounts		86,102		2,334		3.62	%		81,064		1,873		3.09	%
Time deposits		82,122		2,849		4.64	%		69,677		1,881		3.61	%
FHLB advances		56,873		2,107		4.95	%		43,302		1,627		5.02	%
Repurchase agreements		8,253		222		3.59	%		10,745		262		3.26	%
Total interest-bearing liabilities		340,457		8,125		3.19	%		320,809		6,011		2.51	%
Non-interest-bearing deposits		73,451		—					71,961		—
Total deposits	$	413,908		8,125		2.62	%	$	392,770		6,011		2.05	%
Net interest income			$	12,341						$	11,579
Net interest spread						3.64	%						3.78	%
Net interest margin						3.78	%						3.83	%
Tax Equivalent Income Adjustment:
State and Muncipal Investment Income			$	174	*					$	37	*
Industrial Revenue Bond Income				261	**						175	**
Total Tax Equivalent Income Adjustment			$	435						$	212

* Amount included in investment income.

** Amount included in loan income.

Total noninterest income for the nine months ended September 30, 2007 was $3.7 million, an increase of $490,000, or 15.3%, from the same period last year. Increases in other deposit fees accounted for much of this increase, and were due to implementations made as a result of the corporate-wide efficiency review occurring in 2006.

Total noninterest expense increased by $778,000, or 7.1%, when compared to the same period last year. Several categories contributed to this increase, including occupancy and equipment expense, data processing fees and professional fees. The increase in occupancy and equipment expense, data processing fees and other expenses is consistent with that stated with the results for the quarter. Professional fees increased as a result of the one-time costs associated with the implementation of a number of initiatives identified in the recently completed efficiency study and new product development. This review also resulted in increased non-interest income and a reduction in salaries and benefits expense.

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The following table sets forth the various components of noninterest income and noninterest expense for the nine months ended September 30, 2007 and 2006 and the dollar amount and percentage change between the periods:

	September 30,				Increase (Decrease)
	2007		2006		$			%
	(Dollars in thousands)
	(unaudited)
Noninterest income:
Income from fiduciary activities	$	1,427	$	1,344	$	83		6.18	%
Fees from sale of non-deposit products		190		168		22		13.10	%
Service charges on deposit accounts		452		416		36		8.65	%
Other deposit fees		700		521		179		34.36	%
Gain on sales of loans, net		6		—		6		—
Income on cash surrender value of life insurance		165		162		3		1.85	%
Other income		759		598		161		26.92	%
Total noninterest income	$	3,699	$	3,209	$	490		15.27	%
Noninterest expense:
Salaries and employee benefits	$	6,460	$	6,526	$	(66	)	-1.01	%
Director fees		233		232		1		0.43	%
Occupancy expense		1,164		1,001		163		16.28	%
Equipment expense		638		598		40		6.69	%
Data processing fees		854		602		252		41.86	%
Marketing and public relations		344		332		12		3.61	%
Professional fees		752		492		260		52.85	%
Other expense		1,249		1,133		116		10.24	%
Total noninterest expense	$	11,694	$	10,916	$	778		7.13	%

The income tax provision for the nine months ended September 30, 2007 decreased by $27,000, or 2.7%, compared to the same period last year, despite the increase in income. The 3.9% decrease in the effective tax rate, from 31.1% to 27.2%, is the result of the restructuring of the Company’s investment portfolio in December 2006 and an increase in tax-exempt income realized during the past year.

Provisions and Allowance for Loan Losses

Credit risk is inherent in the business of extending loans. The Bank maintains an allowance for loan losses through charges to earnings. A provision of $75,000 was made to the allowance for loan losses during the three months ended September 30, 2007, compared to $150,000 for the same period last year. The provision for the nine months ended September 30, 2007 was $325,000, compared to $440,000 for the same period last year. Despite reduced provisions in 2007, the allowance for loan losses was 1.11% and 1.00% of total loans at September 30, 2007 and December 31, 2006, respectively.

The Bank formally determines the adequacy of the allowance for loan losses on a quarterly basis. This determination is based on an 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 SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.” 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.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of

14

the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of loans consisting of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, as a general rule, the Company does not separately identify individual consumer and residential loans for impairment disclosures. The loss factors applied as a general allowance are determined by a periodic analysis of the allowance for loan losses. This analysis considers historical loan losses and delinquency figures and 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.

Changes in the allowance for loan losses were as follows for the nine months ended September 30, 2007 and 2006:

	2007			2006
	(in thousands)
	(unaudited)
Balance as of January 1st	$	3,044		$	2,514
Loans charged off		(5	)		(9	)
Provision for loan losses		325			440
Recoveries of loans previously charged off		188			6
Reclass to reserve for unfunded commitments		2			(40	)
Balance as of September 30th	$	3,554		$	2,911

The allowance for loan losses represented 13,669.2% and 17,123.5% of non-performing loans, which totaled $26,000 and $17,000, at September 30, 2007 and 2006, respectively. Non-performing loans represented less than 0.01% of total loans and mortgages held-for-sale at September 30, 2007 and 2006.

Management maintains the adequacy of the allowance through monthly provisions. The amount of the provision is based on changes in economic and real estate market conditions, 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, management will continue to monitor economic conditions and the performance of the portfolio in order to maintain an adequate allowance for loan losses.

Capital Resources

As of September 30, 2007, the Company had total capital of $46.3 million, an increase of $106,000, or 0.2%, from total capital as of December 31, 2006. The net change in the Bank’s capital reflects current year income, reduced by dividends declared, the purchase of treasury stock, the increase in the net unrealized loss on securities available-for-sale, the vesting of stock awards and the exercise of stock options.

The Company’s policy has been to pay dividends out of funds in excess of the needs of the business. The Company declared and paid cash dividends to shareholders on a quarterly basis at a rate of $0.20 per share in each of the final two quarters of 2006 and the first three quarters of 2007. The Company expects to continue paying dividends of $0.20 per quarter.

Generally, banks are required to maintain Tier 1 capital at a level equal to or greater than 4.0% of their average total assets. As of September 30, 2007, the Bank’s Tier 1 capital amounted to 9.14% of average total assets. At September 30, 2007, the Bank’s ratio of risk-based capital to risk-weighted assets amounted to 13.94%, which satisfies the applicable risk-based capital requirements. As of December 31, 2006, the Bank’s Tier 1 capital amounted to 9.37% of average assets and risk-based capital amounted to 13.47% of total risk-based assets.

Generally, bank holding companies are also required to maintain Tier 1 capital at a level equal to or greater than 4.0% of their average total assets. As of September 30, 2007, the Company’s Tier 1 capital amounted to 10.13% of average total assets. At September 30, 2007, the Company’s ratio of risk-based capital to risk weighted assets amounted to 15.42%, which satisfies the applicable risk-based capital requirements. As of December 31, 2006, the Company’s Tier 1 capital amounted to 10.81% of average assets and risk-based capital amounted to 15.35% of total risk-based assets.

15

To provide for its future capital needs, the Company took the steps necessary to increase the authorized and issued number of its shares of common stock. On July 19, 2006, the Company completed the sale of 805,000 shares of its common stock, including 105,000 shares of common stock sold pursuant to the exercise of the underwriter’s over-allotment option, at an offering price of $22.00 per share in a public offering underwritten by Sandler O’Neill & Partners, L.P. Of the $16.4 million in net proceeds from the offering, the Company contributed $12 million in additional capital to the Bank to assist in funding its growth and expansion plans. The financial statements and results of operations contained in this report reflect the results of such offering, which was completed in the third calendar quarter of 2006.

The capital ratios of the Company and the Bank exceed all regulatory requirements, and each entity is considered “well capitalized” by their federal 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. Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates.

Certain marketable investment securities, particularly those of shorter maturities, are the principal source of asset liquidity. The Company maintains such securities in an available-for-sale account as a liquidity resource. Securities maturing in one year or less amounted to $8.1 million at September 30, 2007; additionally, a minimum amount of contractual payments in the amount of $14.9 million for the mortgage-backed securities portfolio is due within one year at September 30, 2007. Assets such as federal funds sold, mortgages held for sale, pre-payments and payoffs on mortgage-backed securities, as well as maturing loans, are also sources of liquidity. The Company’s objectives 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 Company’s current practices are consistent with these objectives.

Off Balance Sheet Arrangements

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. In the opinion of Management, these off-balance sheet arrangements are not likely to have a material effect on the Company’s financial condition, results of operations, or liquidity. As of September 30, 2007, total off-balance sheet financial commitments, which include unadvanced funds on loans, commitments to fund loans and letters of credit, amounted to approximately $63.2 million.

Forward-Looking Statements

This Form 10-Q and future filings made by the Company with the Securities and Exchange Commission, as well as other filings, reports and press releases made or issued by the Company and the Bank, and oral statements made by executive officers of the Company 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 Company and the Bank do business; and

(b) expectations for increased revenues and earnings for the Company 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 Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Act of 1995.

The Company 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 Company’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;

16

(b) changes in the legislative and regulatory environment that negatively impact the Company 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 Company’s filings with the Securities and Exchange Commission.

Such developments could have an adverse impact on the Company’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 and liabilities 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 Company’s primary source of revenue, interest rate risk is the most significant non-credit related market risk to which the Company is exposed. Net interest income is affected by changes in interest rates as well as fluctuations in the level and duration of the Company’s assets and liabilities.

The Company’s net interest margin for the nine months ended September 30, 2007 was 3.78%, in comparison to the 3.83% net interest margin for the nine months ended September 30, 2006. Interest rate risk is the exposure of net interest income to 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 Company’s Asset/Liability Management Committee is comprised of the President and Chief Executive Officer of the Company; the Executive Vice President and Chief Financial Officer; the Executive Vice President and Senior Loan Officer; the Executive Vice President of Retail Banking; the Senior Vice President, Secretary, Chief Operations Officer and Cashier; the Senior Vice President and Chief Risk Officer; and various lending, retail and finance officers. The Committee 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. The Committee meets bi-weekly and develops new products, sets the rates paid on deposits, approves loan pricing and reviews investment transactions. This Asset/Liability Management Committee reports to the Board of Directors’ Asset/Liability Committee, which is comprised of several Directors and the President and Chief Executive Officer.

The Company is subject to interest rate risk in the event that rates either increase or decrease. The two primary measurements of exposure to changes in interest rates, which the Bank manages and monitors closely, are net interest income simulation, using various interest rate scenarios, or rate shocks, and the impact on the economic value of equity, given those same interest rate scenarios.

The Bank works with an independent third party consultant to calculate and review these various measurements.

In the event that interest rates increase or decrease, the economic value of equity (EVE) changes due to its inherent correlation to changes in the market value of the Company’s assets and liabilities. The Company is considered “liability sensitive” if changes in the interest rate would cause the assets of the Company to extend out, and as a result, liabilities would re-price faster than assets. Conversely, the Company is considered “asset sensitive” if interest rate changes cause liabilities to extend out, thus making assets re-price faster than liabilities.

As of September 30, 2007, the capital ratio of the Company on an EVE basis, at current rate levels, is 13.49%. Based on the most recent analysis it is estimated that an increase in interest rates over the next year of 200 basis points (for example, an increase in the prime rate from 7.50% to 9.50%) would result in an EVE capital ratio of 12.41%. Alternatively, if interest rates were to decrease over the next year by 200 basis points, the EVE capital ratio is estimated to be 12.63%. These changes are within the risk tolerance levels established by the Company policies.

As part of its risk management practices the Company runs net interest income simulations to determine the impact on net interest income given an increase or decrease in interest rates as these changes would have an impact on future levels of net interest income. These simulations require that estimates and assumptions be made with respect to deposit pricing; including potential changes in non-maturity core deposits, and reinvestment of cash flows from the loan and investment portfolios given changes in rates both up and down.

17

The following table summarizes the net interest income simulation as of September 30, 2007 and December 31, 2006:

	September 30, 2007							December 31, 2006
	Projected net interest income		Change from year 1 base case					Projected net interest income		Change from year 1 base case
	(Dollars in thousands)
Year 1 projections:
Down 200BP	$	16,642	$	58		0.35	%	$	16,815	$	(52	)	-0.31	%
Base		16,584		—		—			16,867		—		—
Up 200BP		15,794		(790	)	-4.76	%		16,411		(456	)	-2.70	%
Year 2 projections:
Down 200BP	$	16,725	$	141		0.85	%	$	16,624	$	(243	)	-1.44	%
Base		17,276		692		4.17	%		17,438		571		3.39	%
Up 200BP		15,744		(840	)	-5.07	%		16,737		(130	)	-0.77	%

ITEM 4. CONTROLS AND PROCEDURES.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’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 Company’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.

Based on their evaluation, as of September 30, 2007, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

In the quarter ended September 30, 2007, there have been no significant changes in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were taken.

18

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	Not applicable
Item 1A.	Risk Factors	Not applicable
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

The table below presents information pursuant to Item 703 of Regulation S-K regarding the repurchase of the Company’s common stock by the Company in the three-month period ended September 30, 2007.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2007 – July 31, 2007	—	$	—	—	138,487
August 1, 2007 – August 31, 2007	57,850		20.63	57,850	80,637
September 1, 2007 – September 30, 2007	10,000		21.30	67,850	70,637
Total	67,850	$	20.73

(1) On July 25, 2007, the Company announced that the Board of Directors approved a stock repurchase program to acquire within twelve months from July 25, 2007 up to an aggregate of 138,487 shares of the Company’s outstanding shares through privately negotitated transactions and/or market purchases at appropriate prices, subject to price and market conditions.

Item 3.	Defaults Upon Senior Securities.	Not applicable
Item 4.	Submission of Matters to a Vote of Security Holders.	Not applicable
Item 5.	Other Information.	Not applicable
Item 6.	Exhibits.

11	Computation of Per Share Earnings
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certifications

19

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BEVERLY NATIONAL CORPORATION
	(Registrant)
Date: November 9, 2007	By:	/s/ Donat A. Fournier
		Donat A. Fournier
		President and Chief Executive Officer
Date: November 9, 2007	By:	/s/ Michael O. Gilles
		Michael O. Gilles
		Executive Vice President and Chief Financial Officer

20