Beverly National Corporation Announces Increase in Net Income for the Quarter

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Beverly National Corporation and Beverly National Bank, the oldest community bank in the United States, announce quarterly earnings.

Beverly National Corporation (AMEX “BNV”) (the “Company”) and its subsidiary, Beverly National Bank (“Bank”), the oldest community bank in the United States, have increased net income this quarter. Don Fournier, President and Chief Executive Officer of the Company, recently announced the Company’s earnings for the quarter and nine months ended September 30, 2007.

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 13.6% increase in fully diluted earnings per share. The Company also reported 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, 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. These results represent an increase in net income of $393,000, or 17.7%. The decrease in the Company’s basic and fully diluted earnings per share for the nine months ended September 30, 2007, compared to the same period last year, is due to the Company’s secondary stock issuance in July 2006 and the resulting increase in the number of shares outstanding.

Net interest income after the provision for loan losses increased $134,000, or 3.6%, and $654,000, or 6.0%, for the three and nine months ended September 30, 2007, respectively, from the same periods last year. These increases were primarily the net result of an increase in interest-earning assets and the restructuring of the investment portfolio in December 2006, despite an increase in the average cost of interest-bearing liabilities. Non-interest income increased $203,000, or 19.2%, and $490,000, or 15.3%, for the three and nine months ended September 30, 2007, respectively, from the same periods last year. The improvements for the nine months ended September 30, 2007 are primarily the result of increases in other deposit fees and other income, which is comprised of recovered interest from a previously charged-off loan. Non-interest expenses increased $158,000, or 4.3%, and $778,000, or 7.1%, for the three and nine months ended September 30, 2007, respectively, from the same periods last year. Occupancy and equipment expense contributed to this increase, as the Bank incurred increases in lease payments and depreciation of improvements for the recently upgraded North Beverly location and the opening of the new Salem community bank 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, the outsourcing of the items processing operation and the costs associated with enhancing and expanding the Bank’s existing retail and commercial deposit product lines. Professional and other fees increased for the nine months ended September 30, 2007 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. Other expenses were up due to additional audit and compliance costs.

The Company was also able to reduce its effective tax rate to 27.9% and 27.2% for the three and nine months ended September 30, 2007, respectively, from 30.8% and 31.1% for the same periods last year. This reduction was a result of the aforementioned restructuring of the investment portfolio, which included the Bank increasing its level of tax-exempt investment securities. The Bank has also realized an increase from last year in its portfolio of tax-exempt loans, aiding the overall reduction of the Bank’s effective tax rate.

President Fournier stated, “We are very pleased with our reported results, which continue to show strong performance improvement in a very difficult and challenging operating environment. The increase in net income over last year is very encouraging, as the efforts we have placed on emphasizing business development and operating efficiencies are beginning to flow through to the bottom line. The recent interest rate reduction by the Federal Reserve should provide us with a more stable rate environment with respect to the pricing of our core transaction accounts and maturing certificates of deposits. ”

Total assets as of September 30, 2007 were $471.0 million, compared to $467.1 million at December 31, 2006, an increase of $3.9 million, or 0.8%. 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%, during the period. 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%.

President Fournier stated, “We have slowed down the asset growth rate compared to recent quarters while we evaluate current market conditions and determine the asset allocation that would be most advantageous for the Company at this time. We continue to expand the loan portfolio through utilization of available funding and the reallocation of existing resources. The growth in the deposit base reflects the opening of our newest branch in Salem and the rollout of our enhanced deposit products. The strategic focus remains the growth of the loan portfolio, and funding that growth through an expanded deposit base, or other alternatives, with the lowest feasible cost available to the Bank. Our focus continues to be on maintaining the appropriate strategic direction during these challenging and uncertain economic times, and we will continue to allocate our resources to the areas that provide the most beneficial returns consistent with our commitment to the maintenance of asset quality. The emphasis on augmenting earnings through non-interest income related activities as well as a continued emphasis on maintaining operating expenses and improved efficiencies is also a major part of our strategic direction.”

Beverly National Bank, a subsidiary of Beverly National Corporation, is headquartered in Beverly, MA, and operates full-service branch offices in Downtown Beverly, Cummings Center – Beverly, North Beverly, Danvers, Hamilton, Manchester-by-the-Sea, Salem and Topsfield. The Bank offers a full array of consumer products and services including full electronic banking, financial planning, trust and investment services and business specialties. Incorporated in 1802, Beverly National Bank is the oldest community bank in the United States. The Bank’s deposits are insured by the FDIC in accordance with the Federal Deposit Insurance Act.

Contact:
Michael O. Gilles
978-720-1226
http://www.beverlynational.com

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