As filed with the Securities and Exchange Commission on July 15, 2014

Registration No. 333-196509

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1 TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Beverly Financial, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Massachusetts

6036

To be applied for

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

254 Cabot Street

P.O. Box 498

Beverly, Massachusetts 01915

(978) 922-0857

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Michael R. Wheeler

President and Chief Executive Officer

254 Cabot Street

P.O. Box 498

Beverly, Massachusetts 01915

(978) 922-0857

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Richard A. Schaberg

Gregory F. Parisi

Hogan Lovells US LLP

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5600

Samantha M. Kirby

Goodwin Procter LLP

Exchange Place

Boston, Massachusetts 02109

(617) 570-1000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Prospectus

LOGO

Beverly Financial, Inc.

(Proposed Holding Company for Beverly Bank)

Up to 4,255,000 Shares of Common Stock

(Subject to increase to 4,893,250 Shares of Common Stock)

Beverly Financial, Inc., a Massachusetts corporation, is offering shares of common stock for sale in connection with the conversion of Beverly Financial, MHC from the mutual to the stock form of organization. All shares of common stock are being offered for sale at a price of $10.00 per share. We expect that our common stock will be listed on The NASDAQ Capital Market under the symbol “BEVB” upon completion of this offering. There is currently no public market for the shares of our common stock. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

We are offering up to 4,255,000 shares of common stock for sale on a best efforts basis. We must sell a minimum of 3,145,000 shares in order to complete the offering. Purchasers will not pay a commission to purchase shares of common stock in the offering. We may sell up to 4,893,250 shares of common stock because of demand for the shares or changes in market conditions without resoliciting subscribers.

We are offering the shares of common stock in a subscription offering to eligible depositors of Beverly Bank. Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a direct community offering. To the extent any shares offered for sale are not purchased in the subscription offering or direct community offering, they may be sold in a syndicated community offering to be managed by Sandler O’Neill + Partners, L.P. With respect to the subscription offering, the direct community offering and the syndicated community offering, Sandler O’Neill + Partners, L.P. will use its best efforts to assist Beverly Financial, Inc. in its selling efforts, but is not required to purchase any shares of common stock that are being offered for sale in such offerings. Sandler O’Neill + Partners, L.P. has advised us that it intends to make a market in the common stock, but is under no obligation to do so.

In addition to the shares that we will sell in the offering, we intend to establish a charitable foundation in connection with the conversion and contribute to it 110,000 shares of our common stock and $250,000 in cash.

The minimum number of shares of common stock you may purchase is 25 shares, or $250. The maximum number of shares of common stock that an individual may purchase in all categories of the offering is 30,000 shares, or $300,000, and the maximum number of shares of common stock that an individual, together with any associate or group of persons acting in concert, may purchase in all categories of the offering is 50,000 shares, or $500,000.

Stock orders must be received by us before p.m., Eastern time, on [Expiration Date]. Orders received after p.m., Eastern time, on [Expiration Date] will be rejected unless we extend this expiration date. We may extend this expiration date without notice to you until [Extension Date], or such later date as the Federal Reserve Board may approve, to the extent such approval is required, which may not be beyond [2 Year Extension Date], 2016. Once submitted, orders are irrevocable. However, if the offering is extended beyond [Extension Date], or the number of shares of common stock to be sold is increased to more than 4,893,250 shares or decreased to fewer than 3,145,000 shares, we will resolicit subscribers, giving them an opportunity to change or cancel their orders. Funds received during the offering will be held in a segregated account at Beverly Bank, and will earn interest at 0.10% per annum, which is our current statement savings rate.

We expect that our directors and executive officers, together with their associates, will subscribe for approximately 265,000 shares, which is 7.0% of the shares that would be sold in the offering at the midpoint of the offering range and contributed to our charitable foundation.

This investment involves a degree of risk, including the possible loss of your investment.

Please read “Risk Factors” beginning on page 11.

OFFERING SUMMARY

Price: $10.00 per Share


	Minimum		Midpoint		Maximum		Adjusted Maximum
Number of shares		3,145,000		3,700,000		4,255,000		4,893,250
Gross offering proceeds	$	31,450,000	$	37,000,000	$	42,550,000	$	48,932,500
Estimated offering expenses (excluding marketing agent fees)	$	1,177,201	$	1,177,201	$	1,177,201	$	1,177,201
Estimated selling agent fees⁽¹⁾	$	361,960	$	413,020	$	464,080	$	522,799
Estimated net proceeds	$	29,910,839	$	35,409,779	$	40,908,719	$	47,232,500
Estimated net proceeds per share	$	9.51	$	9.57	$	9.61	$	9.65

⁽¹⁾

Marketing agent commissions shown assume that all shares are sold in the subscription and direct community offerings. The amounts shown include (i) a fee payable by us to Sandler O’Neill + Partners, L.P. in connection with the subscription and direct community offerings equal to 1.0% of the aggregate purchase price of shares sold in the subscription and direct community offerings (excluding shares purchased by officers, directors, employees and our employee stock ownership plan or shares contributed to the foundation, for which no fees would be paid) and (ii) other expenses of the offering payable to Sandler O’Neill + Partners, L.P. equal to $100,000. If all shares of common stock are sold in the syndicated community offering, excluding shares purchased by officers, directors, employees and our employee stock ownership plan or shares contributed to the foundation, for which no selling agent commissions would be paid, the maximum selling agent commissions and expenses would be $1.6 million at the minimum, $1.8 million at the midpoint, $2.1 million at the maximum and $2.4 million at the adjusted maximum and the estimated net proceeds per share would be $9.13 at the minimum, $9.19 at the midpoint, $9.23 at the maximum and $9.26 at the adjusted maximum. See the section of this prospectus entitled “The Conversion and Offering—Marketing Arrangements” for a discussion of fees to be paid to Sandler O’Neill + Partners, L.P. and other FINRA member firms in the event that all shares are sold in a syndicated community offering.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Share Insurance Fund, or any other government agency.

Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

For assistance, please call our Conversion Center at .

SANDLER O’NEILL + PARTNERS, L.P.

The date of this prospectus is , 2014.

LOGO

TABLE OF CONTENTS


	Page
Summary		1
Risk Factors		11
Special Note Regarding Forward-Looking Statements and Industry Data		22
Selected Consolidated Financial and Other Data		24
Use of Proceeds		26
Dividend Policy		28
Market for Common Stock		29
Historical and Pro Forma Regulatory Capital Compliance		30
Capitalization		31
Pro Forma Data		33
Comparison of Valuation and Pro Forma Information With and Without our Charitable Foundation		38
Business		39
Management’s Discussion and Analysis of Financial Condition and Results of Operations		49
Supervision and Regulation		73
Management		85
Executive and Director Compensation		91
Transactions with Related Persons		98
Subscriptions by Directors and Executive Officers		99
The Conversion and Offering		100
Material U.S. Income Tax Consequences		115
Our Charitable Foundation		118
Restrictions on Acquisition of Beverly Financial		121
Description of Capital Stock		124
Legal and Tax Matters		126
Experts		126
Where You Can Find Additional Information		126
Index to Consolidated Financial Statements of Beverly Financial, MHC and Subsidiary		F-1

Summary

The following summary explains the significant aspects of the mutual-to-stock conversion of Beverly Financial, MHC and the related offering of Beverly Financial, Inc. common stock. It may not contain all of the information that is important to you. For additional information before making an investment decision, you should read this entire document carefully, including the financial statements and the notes to the financial statements, and the section of this prospectus entitled “Risk Factors.”

The Companies

Beverly Financial, Inc. This offering is made by Beverly Financial, Inc., or Beverly Financial, a Massachusetts-chartered corporation, which will be the stock holding company of Beverly Bank, or the Bank, upon completion of the conversion. Beverly Financial has no assets and has not engaged in any business to date. Following the conversion, Beverly Financial will own all of the outstanding shares of common stock of the Bank. Upon completion of the conversion, Beverly Financial will register as a bank holding company and will be subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System, or the Federal Reserve Board.

Beverly Financial, MHC. Beverly Financial, MHC is a Massachusetts-chartered mutual holding company formed in 2003 in connection with the Bank’s reorganization. Beverly Financial, MHC owns 100% of the outstanding capital stock of the Bank. Beverly Financial, MHC has no shareholders, and is governed by its board of corporators and its board of trustees. In connection with the conversion, Beverly Financial, MHC will merge with and into Beverly Financial with Beverly Financial being the surviving entity.

Beverly Bank. Founded in 1888, the Bank is a Massachusetts stock cooperative bank headquartered in Beverly, Massachusetts. The Bank changed its name from Beverly Cooperative Bank in March 2014. The Bank operates as a community-oriented financial institution offering traditional financial services to consumers and businesses in our primary market area.

Our executive and administrative offices are located at 254 Cabot Street, Beverly, Massachusetts 01915, the telephone number at this address is (978) 922-0857, and our website address is www.beverlybank.com. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this prospectus. You should not rely on any such information in making your decision to invest in our common stock.

Our Business

We conduct our operations from our main office in Beverly, Massachusetts, and our three full-service banking offices located in Beverly and Salem, Massachusetts. Our primary lending market includes the communities of Beverly, Danvers, Hamilton, Manchester, Peabody, Salem and Wenham, Massachusetts, which are located within Essex County. We attract deposits from the general public and use those funds to originate primarily commercial real estate loans and residential mortgage loans and, to a lesser extent, construction loans, commercial business loans, home equity lines of credit and other consumer loans. We conduct our lending and deposit activities primarily with individuals and small businesses in our primary market area.

We also invest in securities, which consist primarily of U.S. government agency obligations and U.S. government agency mortgage-backed securities and to a lesser extent, state and municipal securities and U.S. government agency collateralized mortgage obligations. We offer a variety of deposit accounts, including checking accounts, NOW accounts, savings accounts, money market accounts and certificate of deposit accounts.

Since December 31, 2009, our total assets have grown from $304.5 million to $327.0 million at March 31, 2014, our loan portfolio has increased from $249.1 million to $275.4 million at March 31, 2014, our total deposits have grown from $218.6 million to $283.6 million at March 31, 2014, and our retained earnings have increased from $15.0 million to $21.8 million at March 31, 2014. Our growth during this period was funded primarily through deposit growth and retained earnings. The deposit growth allowed for a significant reduction in borrowed funds. As of March 31, 2014, we were considered “well-capitalized” for regulatory purposes.

Our Business Strategy

As emphasized by our branding statement “Your Community Bank,” we are committed to meeting the financial needs of consumers and small businesses in the communities in which we operate, and we are dedicated to providing exceptional personal service to our customers. We emphasize personalized banking, competitive pricing strategies and the advantage of local decision-making in our banking business. Our operating strategy is to:

•

continue to emphasize our commercial real estate, construction and commercial business lending;

•

fund growth by increasing our deposit market area and expanding our banking franchise as opportunities arise through de novo branching and/or branch acquisitions;

•

maintain one- to four-family residential mortgage lending in our market area;

•

continue our conservative underwriting practices while maintaining a high quality loan portfolio; and

•

emphasize lower cost core deposits to maintain low funding costs, and increase our commercial business depository relationships in our market area.

These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and offering, subject to changes necessitated by future market conditions, regulatory restrictions and other factors. See “Business—Business Strategy” for a further discussion of our business strategy.

The Conversion and Offering

Description of the Conversion

The conversion transaction that we are undertaking involves a change from our mutual form to a stock form that will result in all of the Bank’s capital stock being owned by Beverly Financial. Voting rights in Beverly Financial will belong to its shareholders, including our employee stock ownership plan and our charitable foundation. We are conducting the conversion under the terms of our plan of conversion.

The following diagram depicts our corporate structure after the conversion and offering:

LOGO

For further information about the conversion, see the section of this prospectus entitled “The Conversion and Offering.”

Reasons for the Conversion and Offering

Our primary reason for the conversion and offering is to obtain capital to implement our business strategy and fund continued growth. In addition, the conversion and offering will allow us, subject to market conditions and other factors, to access the capital markets in the future. The conversion and offering will also provide an additional source of capital to allow us, if and when authorized by our board of directors to pay dividends to shareholders and to repurchase shares of common stock.

For further information about our reasons for the conversion and offering, see the section of this prospectus entitled “The Conversion and Offering—Reasons for the Conversion and Offering.”

Terms of the Conversion and Offering

We are offering between 3,145,000 and 4,255,000 shares of common stock to eligible depositors of the Bank, to our employee benefit plans and, to the extent shares remain available, to the general public. The number of shares of common stock to be sold may be increased to up to 4,893,250 as a result of demand for the shares or changes in the market for financial institution stocks. Unless the number of shares of common stock to be offered is increased to more than 4,893,250 or decreased to less than 3,145,000, or the offering is extended beyond [Extension Date], subscribers will not have the opportunity to change or cancel their stock orders.

The purchase price of each share of common stock to be sold in the offering (other than shares we are contributing to our charitable foundation) is $10.00. Investors will not be charged a commission to purchase shares of common stock in the offering.

Persons Who May Order Shares of Common Stock in the Offering

We are offering the shares of common stock in a subscription offering in the following descending order of priority:

•

depositors of the Bank with aggregate account balances of at least $50 as of the close of business on December 31, 2012;

•

depositors of the Bank with aggregate account balances of at least $50 as of the close of business on December 31, 2013;

•

the Bank’s tax-qualified employee benefit plans, including the employee stock ownership plan we are establishing in connection with the conversion, which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 8% of the shares of common stock sold in the offering and contributed to our charitable foundation; and

•

employees, officers, directors, trustees and corporators of Beverly Financial, MHC or the Bank who do not have a higher priority right.

Shares not sold in the subscription offering may be offered to the general public in a direct community offering, or the community offering. Natural persons who are residents of the cities and towns of Beverly, Danvers, Hamilton, Manchester, Peabody, Salem and Wenham, Massachusetts, will be given a preference to purchase shares in any community offering. We may, in our sole discretion, reject orders received in the community offering either in whole or in part. If your order is rejected in part, you cannot cancel the remainder of your order.

Shares not sold in the subscription or community offerings may be sold in a syndicated community offering, or the syndicated offering, to be managed by Sandler O’Neill + Partners, L.P., or Sandler O’Neill. Such syndicated offering will only occur after the completion of the subscription and community offerings.

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. A detailed description of the subscription offering, the community offering and the syndicated offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion and Offering.”

How We Determined the Offering Range

The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of Beverly Financial assuming the conversion and offering are completed. RP Financial, LC., or RP Financial, our independent appraiser, has estimated that, as of May 9, 2014, this market value (including the shares to be contributed to our charitable foundation) ranged from $32.6 million to $43.7 million, with a midpoint of $38.1 million, subject to increase up to $50.0 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 3,145,000 shares to 4,255,000 shares, subject to increase to 4,893,250 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

RP Financial also considered that we intend to contribute an amount equal to $1,350,000 to a charitable foundation that we are establishing, with such contribution to consist of 110,000 shares of our common stock and $250,000 in cash. The intended contribution of cash and shares of common stock to our charitable foundation has the effect of reducing our estimated pro forma valuation. See the section of this prospectus entitled “Comparison of Valuation and Pro Forma Information With and Without our Charitable Foundation.”

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see the section of this prospectus entitled “The Conversion and Offering—Determination of Share Price and Offering Range.”

Possible Change in the Offering Range

RP Financial will update its appraisal before we complete the offering. If, as a result of demand for the shares, or changes in market conditions, RP Financial determines that our pro forma market value has increased, we may sell up to 4,893,250 shares in the offering without further notice to you. If our pro forma market value at that time is either below $32.6 million or above $50.0 million, then, after consulting with the Federal Reserve Board and the Massachusetts Commissioner of Banks, we may:

•

terminate the offering and promptly return all funds;

•

set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their purchase orders for shares of Beverly Financial’s common stock; or

•

take such other actions as may be permitted, to the extent such permission is required, by the Federal Reserve Board, the Massachusetts Commissioner of Banks and the Securities and Exchange Commission, or SEC.

Conditions to Completion of the Conversion and Offering

We cannot complete the conversion and offering unless:

•

the plan of conversion is approved by two-thirds of the shareholders of Beverly Financial, MHC;

•

the plan of conversion is approved by two-thirds of the corporators of Beverly Financial, MHC;

•

we have received orders to purchase at least the minimum number of shares of common stock offered; and

•

we receive all required final approvals of the Federal Reserve Board and the Massachusetts Commissioner of Banks.

Issuance of Cash and Shares of Our Common Stock to our Charitable Foundation

To further our commitment to our local community, we intend to establish a charitable foundation as part of the conversion. Assuming we receive approval from our corporators, we will make a contribution to our charitable foundation in an amount equal to $1,350,000, with such contribution to consist of 110,000 shares of our common stock and $250,000 in cash.

Our charitable foundation will be dedicated to supporting charitable causes and community development activities in the communities in which we operate. Our charitable foundation will be required to distribute annually in grants or donations a minimum of 5% of the average fair market value of its net investment assets, and is expected to make contributions totaling approximately $67,500 in its first full year of operation.

Issuing shares of common stock and contributing cash to our charitable foundation will:

•

dilute the voting interests of purchasers of shares of our common stock in the offering; and

•

result in an after-tax expense of approximately $810,000 during the quarter in which the offering is completed.

The establishment and funding of our charitable foundation has been approved by the board of trustees of Beverly Financial, MHC and is subject to approval by the corporators of Beverly Financial, MHC. If the corporators do not approve the funding of our charitable foundation with shares of our common stock and cash, we may, in our discretion, complete the conversion and offering without the inclusion of our charitable foundation and without resoliciting subscribers. We may also determine, in our discretion, not to complete the conversion and offering if the corporators do not approve our charitable foundation.

The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the formation and funding of our charitable foundation. For a further discussion of the financial impact of our charitable foundation, including its effect on those who purchase shares in the offering, see the section of this prospectus entitled “Risk Factors—Risks Related to the Contribution to our Charitable Foundation.”

Deadline for Ordering Stock in the Subscription and Community Offerings

The subscription offering will end at p.m., Eastern time, on [Expiration Date]. We expect that the community offering, if held, will terminate at the same time. We are not required to accept order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate withdrawal instructions. A postmark prior to [Expiration Date], 2014 will not entitle you to purchase shares of common stock unless we receive the envelope by [Expiration Date], 2014. You may submit your order form and payment by overnight delivery to the indicated address on the order form, by bringing your order form to our Conversion Center or by mail using the return envelope provided. Due to recent reductions in U.S. Postal Service 1^st Class Mail delivery standards, we encourage subscribers to consider in-person or overnight delivery to enhance the likelihood that your order is received before the deadline.

We may extend the subscription and community offerings without notice to you until [Extension Date], or longer if the Federal Reserve Board and Massachusetts Commissioner of Banks approve a later date. If we extend the offering beyond [Extension Date], all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will return your funds promptly with interest at our passbook savings rate or cancel your deposit account withdrawal authorization.

Purchase Limitations

Our plan of conversion establishes limitations on the purchase of stock in the offering. These limitations include the following:

•

the minimum purchase is 25 shares, or $250 of common stock;

•

no individual (or individuals on a single deposit account) may purchase more than 30,000 shares, or $300,000 of common stock, in all categories of the offering combined; and

•

no individual, together with any associates, and no group of persons acting in concert, may purchase more than 50,000 shares, or $500,000 of common stock, in all categories of the offering combined.

Subject to the approval of the Federal Reserve Board and Massachusetts Commissioner of Banks, we may increase or decrease the purchase limitations at any time. Our employee stock ownership plan may purchase up to 8% of the shares sold in the offering and contributed to our charitable foundation without regard to these purchase limitations.

Please see the section of this prospectus entitled “The Conversion and Offering—Limitations on Common Stock Purchases.” See the detailed descriptions of “acting in concert” and “associate” in the section of this prospectus entitled “The Conversion and Offering—Limitations on Common Stock Purchases.”

How to Purchase Common Stock

In order to purchase shares of common stock in the subscription and community offerings, you must submit a completed order form, together with full payment or authorization to withdraw funds from one or more of your deposit accounts held at the Bank. We are not required to accept incomplete order forms, unsigned order forms, or orders submitted on photocopied

or facsimiled order forms. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares may be made by:

(1)

personal check, bank check or money order, payable to Beverly Financial, Inc.; or

(2)

authorization of withdrawal from the Bank deposit accounts designated on the order form.

Regulations prohibit the Bank from knowingly lending funds or extending credit to any persons to purchase shares of common stock in the offering. You may not use cash, wires or a check drawn on a Bank line of credit, and we will not accept third-party checks (a check written by someone other than you) payable to you and endorsed over to Beverly Financial, Inc. If you request that we place a hold on your checking account for the subscription amount, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account. Once we receive your executed order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time. You may not authorize direct withdrawal from a Bank retirement account. See “—Using Retirement Account Funds to Purchase Shares of Common Stock” below.

Please see the section of this prospectus entitled “The Conversion and Offering—Procedure for Purchasing Shares” for a complete description of how to purchase shares in the offering.

Using Retirement Account Funds to Purchase Shares of Common Stock

You may be able to subscribe for shares of common stock using funds in your individual retirement account, or IRA. If you wish to use funds that are currently in your IRA or other retirement account held at the Bank, the funds you wish to use for the purchase of common stock will have to be transferred to a brokerage account with a broker who is willing and able to facilitate your purchase in the offering. It may take several weeks to transfer the funds in your IRA to an independent trustee, so please allow yourself sufficient time to take this action. Depositors interested in using funds in an individual retirement account or any other retirement account to purchase shares of common stock should contact our Conversion Center as soon as possible, preferably at least two weeks prior to the end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

Please see the section of this prospectus entitled “The Conversion and Offering—Procedure for Purchasing Shares in the Subscription and Community Offerings—Payment for Shares” and “—Using Retirement Account Funds” for a complete description of how to use IRA funds to purchase shares in the offering.

How We Intend to Use the Proceeds From the Offering

Assuming we sell 4,893,250 shares of common stock in the offering (the adjusted maximum of the offering range) and we have net proceeds of $47.2 million, we intend to distribute the net proceeds as follows:

•

$23.6 million, or 50.0% of the net proceeds, will be invested in the Bank;

•

$4.0 million, or 8.5% of the net proceeds, will be loaned to our employee stock ownership plan to fund its purchase of our shares of common stock;

•

$250,000, or 0.5% of the net proceeds, will be contributed our charitable foundation; and

•

$19.4 million, or 41.0% of the net proceeds, will be retained by Beverly Financial.

Beverly Financial may use the funds that it retains to pay cash dividends, to repurchase shares of common stock and for other general corporate purposes, including additional investments in the Bank, subject to regulatory approval as applicable. The Bank may use the funds invested in it to support future business expansion, including the establishment or acquisition of new loan production offices or branches, or the acquisition of other financial institutions or other financial services companies, although no such transactions are contemplated at this time. Initially, a substantial portion of the net proceeds will be invested in short-term investments and other securities consistent with our investment policy.

Please see the section of this prospectus entitled “Use of Proceeds” for more information on the proposed use of the proceeds from the offering, including a table showing the distribution of net proceeds at different points in the offering range.

You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights.

Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 3,145,000 shares of common stock (not counting shares to be contributed to our charitable foundation), we may take additional steps to attempt to sell the minimum number of shares of common stock in the offering range. Specifically, we may:

•

increase the purchase limitations; and/or

•

seek the approval, to the extent required, of the Federal Reserve Board and the Massachusetts Commissioner of Banking, to extend the offering beyond [Extension Date], 2014, so long as we resolicit subscriptions that we have previously received in the offering.

If we extend the offering beyond [Extension Date], 2014, we will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. If a subscriber does not respond, we will cancel his or her stock order and return his or her subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of corporators of Beverly Financial, MHC that is being called to vote upon the plan of conversion and to approve the establishment and funding of our charitable foundation and at any time after corporator approval, with the approval, to the extent such approval is required, of the Federal Reserve Board or the Massachusetts Commissioner of Banks.

We must sell a minimum of 3,145,000 shares to complete the offering. If we terminate the offering because we fail to sell the minimum number of shares (not counting shares that we will contribute to our charitable foundation) or for any other reason, we will promptly return your funds with interest at our statement savings rate, currently 0.10% per annum, and we will cancel deposit account withdrawal authorizations.

Purchases by Directors and Executive Officers

We expect our directors and executive officers, together with their associates, to subscribe for 265,000 shares of common stock in the offering, or 7.0% of the shares to be sold in the offering at the midpoint of the offering range and contributed to our charitable foundation. Our directors and executive officers will pay the same $10.00 per share price for the common stock as all other subscribers in the offering. Purchases of the common stock by our directors and executive officers are for investment purposes for these individuals and not with a view towards resale, and pursuant to applicable conversion regulations, our directors and executive officers generally will not be permitted to sell any shares of the common stock that they purchase in the offering for a period of at least one year from the closing of the conversion and offering. See the section of this prospectus entitled “Subscriptions by Directors and Executive Officers.”

Benefits to Management and Potential Dilution to Shareholders Following the Conversion

Employee Stock Ownership Plan. We have adopted an employee stock ownership plan that will purchase 8% of the shares sold in the offering and contributed to our charitable foundation. The employee stock ownership plan’s purchase will be funded by a 30-year loan from Beverly Financial. As the loan is repaid and shares are released from collateral, the plan will allocate shares to the accounts of participating employees. Participants will receive allocations based on their individual compensation as a percentage of total plan compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. We will incur additional compensation expense as a result of this plan. See the section of this prospectus entitled “Pro Forma Data” for an illustration of the effects of this plan.

Future Stock-Based Benefit Plan. We currently intend to implement a stock-based benefit plan more than one year after completion of the conversion and, in any event, no earlier than six months after completion of the conversion. We currently expect the plan to encompass a maximum of 14% of the shares of common stock sold in the offering. If we implement the plan within one year after the conversion, the plan must be approved by a majority of the total votes eligible to be cast by our shareholders. If we implement the plan more than one year after the conversion, it must be approved by a majority of the total votes cast by our shareholders. If adopted within one year following the completion of the conversion, the stock-based benefit plan will reserve a number of shares of common stock equal to not more than 4% of the shares sold in the offering and contributed to our charitable foundation for restricted stock awards to key employees and directors, at no cost to the recipients, and will also reserve a number of stock options equal to not more than 10% of the shares of common stock sold in the offering and contributed to our charitable foundation for key employees and directors. If the stock-based benefit plan is adopted after one year from the date of the completion of the conversion, the 4% and 10% limitations described above will no longer apply, and we may adopt a stock-based benefit plan encompassing more than 14% of the shares of common stock that were sold in the offering though that is not our current intention. However, if Beverly Financial adopts the stock-based benefit plan within three years of the completion of the offering, the plan may be subject to other applicable regulatory requirements. We have not yet determined when we will present these plans for shareholder approval and we have not yet determined the number of shares that would be reserved for issuance under this plan, but do not currently expect such number to exceed 14% of the shares of common stock sold in the offering. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan.

Potential Dilution and Increased Compensation Costs. Although our intention is to implement a stock-based plan more than one year after the conversion, we currently anticipate that we would continue to follow the applicable regulations that limit the number of shares that we reserve to not more than (i) 4% of the shares issued in the conversion (including shares contributed to our charitable foundation) for restricted stock awards to key employees and directors and (ii) 10% of the shares of common stock issued in the conversion (including shares contributed to our charitable foundation) for key employees and directors as if we adopted such plan within one year following the completion of the conversion and offering. Accordingly, the following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that will be available under our employee stock ownership plan and one or more stock-based benefit plans if such plans are adopted within one year following the completion of the conversion and offering. The table shows the dilution to shareholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees. A portion of the stock award and stock option grants shown in the table below may be made to non-management employees.


	Number of Shares to be Granted or Purchased⁽¹⁾							Dilution Resulting From Issuance of Shares for Stock Benefit Plans			Value of Grants⁽²⁾
	Number of Shares to be Granted or Purchased⁽¹⁾										Value of Grants⁽²⁾
	At Minimum of Offering Range		At Adjusted Maximum of Offering Range		As a Percentage of Common Stock to be Issued⁽²⁾						At Minimum Offering Range		At Adjusted Maximum Offering Range
											*(Dollars in thousands)*
Employee stock ownership plan		260,400		400,260		8.00	%		—	%	$	2,604	$	4,003
Stock awards		130,200		200,130		4.00			3.85	%		1,302		2,001
Stock options		325,500		500,325		10.00			9.09	%		1,094		1,681

Total		716,100		1,100,715		22.00	%		12.28	%	$	5,000	$	7,685

(1)	For plans adopted within 12 months of the completion of the conversion, applicable regulations permit stock awards to encompass up to 4.0% and the employee stock ownership plan and stock awards to encompass in the aggregate up to

12.0% of the shares issued, provided the Bank has tangible capital of 10.0% or more following the conversion.

(2)	The stock-based benefit plans may award a greater number of options and shares, respectively, if the plans are adopted more than 12 months after the completion of the conversion.

(3)

The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $3.36 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0.00%; an expected option life of 10 years; a risk-free interest rate of 2.73%; and a volatility rate of 17.71% based on an index of publicly traded thrift institutions. The actual expense of stock options granted under a stock-based benefit plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted which may or may not be the Black-Scholes model.

The actual value of restricted stock awards will be determined based on their fair value (the closing market price of shares of common stock of Beverly Financial) as of the date grants are made. The following table presents the total value of all shares to be available for awards of restricted stock under the stock-based benefit plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $14.00 per share at the time of the grant.


Share Price ($)	130,200 Shares Awarded at Minimum of Offering Range ($)		152,400 Shares Awarded at Midpoint of Offering Range ($)		174,600 Shares Awarded at Maximum of Offering Range ($)		200,130 Shares Awarded at Maximum of Offering Range, As Adjusted ($)
8.00		1,041,600		1,219,200		1,396,800		1,601,040
10.00		1,302,000		1,524,000		1,746,000		2,001,300
12.00		1,562,400		1,828,800		2,095,200		2,401,560
14.00		1,822,800		2,133,600		2,444,400		2,801,820

The grant-date fair value of the stock options granted under the stock-based benefit plans will be based, in part, on the closing price of shares of common stock of Beverly Financial on the date the options are granted. The fair value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted. The following table presents the total estimated value of the stock options to be available for grant under the stock-based benefit plans, assuming the range of market prices for the shares are $8.00 per share to $14.00 per share at the time of the grant.


Exercise Price ($)	Grant-Date Fair Value Per Option ($)		325,500 Options at Minimum of Range ($)		381,000 Options at Midpoint of Range ($)		436,500 Options at Maximum of Range ($)		500,325 Options at Maximum of Range, As Adjusted ($)
8.00		2.69		875,595		1,024,890		1,174,185		1,345,874
10.00		3.36		1,093,680		1,280,160		1,466,640		1,681,092
12.00		4.03		1,311,765		1,535,430		1,759,095		2,016,310
14.00		4.70		1,529,850		1,790,700		2,051,550		2,351,528

Market for Common Stock

We have applied for approval to list our common stock on The NASDAQ Capital Market under the symbol “BEVB.” Sandler O’Neill has advised us that it intends to become a market maker in the common stock, but it is under no obligation to do so.

Our Policy Regarding Dividends

Our board of directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. We do not currently have any plan to declare or to pay dividends in the near future. In determining whether to pay a cash dividend in the future and the amount of any cash dividend, the board of directors is expected to take into account a number of factors, including regulatory capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of shareholders, tax considerations, statutory and regulatory limitations and general economic conditions. See the section of this prospectus entitled “Dividend Policy” for additional information regarding our dividend policy. In addition, beginning in 2016, the Bank’s ability to pay dividends will be limited if the Bank does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to shareholders. See the section of this prospectus entitled “Supervision and Regulation—Federal Banking Regulation—New Capital Rule.”

Material Income Tax Consequences

The conversion qualifies as a tax-free reorganization. See the section of this prospectus entitled “Material U.S. Income Tax Consequences” for a complete discussion of the income tax consequences of the transaction.

Emerging Growth Company Status

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified relief from reporting requirements and other burdens that are applicable to other public companies. These provisions include:

•

a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis;

•

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

•

an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

•

reduced disclosure about the company’s executive compensation arrangements; and

•

exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or shareholder approval of any golden parachute arrangements.

We may remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

In addition, pursuant to the JOBS Act, we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Delivery of Prospectus

To ensure that each person in the subscription and community offerings receives a prospectus at least 48 hours before the offering deadline, we may not mail prospectuses any later than five days before such date or hand-deliver prospectuses later than two days before that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or order form by means other than U.S. mail.

We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at p.m., Eastern time, on [Expiration Date] whether or not we have been able to locate each person entitled to subscription rights.

Conversion Center

Our branch office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, please call our Conversion Center at to speak to a representative of Sandler O’Neill. Representatives are available by telephone Monday through Friday from 10:00 a.m. to 4:00 p.m., Eastern time, except for bank holidays.

Risk Factors

Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. We cannot assure you that any of the events discussed below will not occur. These events could have a material and adverse impact on our business, results of operations, financial condition and cash flows. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business

Our commercial real estate, multi-family, commercial business and construction loans generally carry greater credit risk than loans secured by owner occupied one- to four-family real estate, and these risks will increase if we succeed in our plan to increase these types of loans.

At March 31, 2014, $171.8 million, or 62.36%, of our loan portfolio consisted of commercial real estate, multi-family, commercial business and construction loans. Given their larger balances and the complexity of the underlying collateral, commercial real estate, multi-family, commercial business and construction loans generally expose a lender to greater credit risk than loans secured by owner occupied one- to four-family real estate. Also, many of our borrowers have more than one of these types of loans outstanding. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential real estate loan. These loans also have greater credit risk than residential real estate for the following reasons:

•

commercial real estate and multi-family loans—repayment is generally dependent on income being generated in amounts sufficient to cover operating expenses and debt service;

•

commercial business loans—repayment is generally dependent upon the successful operation of the borrower’s business; and

•

construction loans—repayment is dependent upon completion, the ability of the owner to make payments during the construction process, and the subsequent ability of the owner to either sell the completed project or obtain permanent financing on the completed project.

If loans that are collateralized by real estate or other business assets become troubled and the value of the collateral has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for loan losses which would in turn adversely affect our operating results and financial condition.

Our business may be adversely affected by credit risk associated with residential property.

At March 31, 2014, one- to four-family residential loans comprised $91.3 million, or 33.16% of our total loan portfolio, and home equity loans and lines of credit comprised $11.8 million, or 4.27% of our total loan portfolio. One- to four-family residential mortgage lending, whether owner occupied or non-owner occupied, is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. The decline in residential real estate values as a result of the downturn in our local housing market has reduced the value of the real estate collateral securing these types of loans. Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

Residential loans with combined higher loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale proceeds. Further, a significant amount of our home equity loans and lines of credit consist of second mortgage loans. For those home equity loans and lines of credit secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property. For these reasons, we may experience higher rates of delinquencies, default and losses on our home equity loans.

We may not be able to successfully implement our strategic plan.

Our growth is essential to our future profitability, and we expect to incur expenses related to the implementation of our growth plan, including hiring initiatives and the development and marketing of new products and services. In addition, the conversion will have a short-term adverse impact on our operating results, due to additional costs related to becoming a public company, increased compensation expenses associated with our employee stock ownership plan and the possible implementation of one or more stock-based benefit plans after the completion of the conversion. We may not be able to successfully implement our strategic plan, and therefore may not continue to operate at a profit or increase profitability in the timeframe that we expect or at all.

The successful implementation of our strategic plan will require, among other things, that we increase our market share by attracting new customers that currently bank at other financial institutions in our market area or adjacent markets. In addition, our ability to successfully grow will depend on several factors, including continued favorable market conditions, the competitive responses from other financial institutions in our market area, and our ability to maintain high asset quality as we increase our commercial real estate, multi-family, commercial business and construction loans. While we believe we have the management resources and internal systems in place to successfully manage our future growth, growth opportunities may not be available and we may not be successful in implementing our business strategy. Further, it will take time to implement our business strategy, especially for our lenders to originate enough loans and for our branches to attract enough favorably priced deposits to generate the revenue needed to offset the associated expenses. Our strategic plan, even if successfully implemented, may not ultimately produce positive results.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings and capital could decrease.

At March 31, 2014, our allowance for loan losses totaled $3.6 million, which represented 1.29% of total loans. We make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate other factors including, among other things, current economic conditions. If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, which could materially decrease our net income.

In addition, our regulators, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to increase the allowance for loan losses by recognizing additional provisions for loan losses charged to income, or to charge off loans, which, net of any recoveries, would decrease the allowance for loan losses. Any such additional provisions for loan losses or charge-offs could have a material adverse effect on our financial condition and results of operations.

Changes in interest rates may hurt our profits and asset value.

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. Changes in the general level of interest rates can affect our net interest income by affecting the difference between the weighted-average yield earned on our interest-earning assets and the weighted-average rate paid on our interest-bearing liabilities, or interest rate spread, and the average life of our interest-earning assets and interest-bearing liabilities. Interest rates are highly sensitive to many factors, including government monetary policies, domestic and international economic and political conditions and other factors beyond our control.

While we pursue an asset/liability strategy designed to mitigate our risk from changes in interest rates, changes in interest rates may still have a material adverse effect on our financial condition and results of operations. Changes in the level of interest rates also may negatively affect our ability to originate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings. For further discussion of how changes in interest rates could impact us, see the section of this prospectus entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Risk Management—Interest Rate Risk Management.”

Strong competition within our market area could hurt our profits and slow growth.

We face intense competition in making loans and attracting deposits. Price competition for loans and deposits sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits and may

reduce our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. If we are not able to effectively compete in our market area, our profitability may be negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets. For more information about our market area and the competition we face, see the section of this prospectus entitled “Business—Market Area” and “—Competition.”

The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the local economy.

While there is not a single employer or industry in our market area on which a significant number of our customers are dependent, a substantial portion of our loan portfolio is composed of loans secured by property located in the greater Boston metropolitan area. This makes us vulnerable to a downturn in the local economy and real estate markets. Adverse conditions in the local economy such as unemployment, recession, a catastrophic event or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income. Decreases in local real estate values caused by economic conditions or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. For more information about our market area, see the section of this prospectus entitled “Business—Market Area” and “—Competition.”

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and nearby Boston. As a community bank, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or by events beyond our control, our business and operating results may be adversely affected.

Financial reform legislation will result in new laws and regulations that are expected to increase our costs of operations.

We are subject to extensive regulation, supervision and examination by the Massachusetts Commissioner of Banks, the Federal Reserve Board and the Federal Deposit Insurance Corporation, or the FDIC. Such regulators govern the activities in which we may engage, primarily for the protection of depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a financial institution, the classification of assets by a financial institution, and the adequacy of a financial institution’s allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on us and our operations. See the section of this prospectus entitled “Supervision and Regulation” for a discussion of the regulations to which we are subject.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, among other things, has changed and will continue to change the bank regulatory framework. The legislation will also result in new regulations affecting the lending, funding, trading and investment activities of banks and bank holding companies. An independent Consumer Financial Protection Bureau, or CFPB, has assumed the consumer protection responsibilities of the various federal banking agencies and has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as the Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. Banks and savings institutions with $10.0 billion or less in assets will continue to be examined by their applicable bank regulators. The new legislation also gives state attorneys general the ability to enforce applicable federal consumer protection laws. The Dodd-Frank Act also requires the federal banking agencies to promulgate rules requiring mortgage lenders to retain a portion of the credit risk related to securitized loans. Bank regulatory agencies also have been responding

aggressively to concerns and adverse trends identified in examinations. These measures are likely to increase our costs of doing business and increase our costs related to regulatory compliance, and may have a significant adverse effect on our lending activities, financial performance and operating flexibility.

We will become subject to more stringent capital requirements, which may adversely impact our return on equity or constrain us from paying dividends or repurchasing shares.

In July 2013, the federal banking agencies approved a new rule that will substantially amend the regulatory risk-based capital rules applicable to Beverly Financial and the Bank. The final rule implements the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.

The final rule includes new minimum risk-based capital and leverage ratios, which will be effective for us on January 1, 2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. The Bank intends to exercise its one-time option to opt-out of the requirement under the final rule to include certain “available-for-sale” securities holdings for purposes of calculating its regulatory capital requirements. The final rule also establishes a “capital conservation buffer” of 2.5%, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. A banking organization will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions. The application of more stringent capital requirements could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements.

Increased FDIC or Co-Operative Central Bank insurance assessments could significantly increase our expenses.

The Dodd-Frank Act eliminated the maximum Deposit Insurance Fund ratio of 1.5% of estimated deposits, and the FDIC has established a long-term ratio of 2.0%. The FDIC has the authority to increase assessments in order to maintain the Deposit Insurance Fund ratio at particular levels. In addition, if our regulators issue downgraded ratings of the Bank in connection with their examinations, the FDIC could impose significant additional fees and assessments on us. All Massachusetts-chartered co-operative banks are required to be members of the Co-Operative Central Bank, which maintains the Share Insurance Fund that insures co-operative bank deposits in excess of federal deposit insurance coverage. The Co-Operative Central Bank is authorized to charge co-operative banks an annual assessment fee on deposit balances in excess of amounts insured by the FDIC. Increases in assessments by either the FDIC or the Co-Operative Central Bank could significantly increase our expenses.

Income from secondary mortgage market operations is volatile, and we may incur losses with respect to our secondary mortgage market operations that could negatively affect our earnings.

We generally sell in the secondary market longer term, conforming fixed-rate residential mortgage loans that we originate, earning noninterest income in the form of gains on sale. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand. Although we originate, and intend to continue originating, loans on a “best efforts” basis, and we sell, and intend to continue selling, most loans in the secondary market with limited or no recourse, we are required, and will continue to be required, to give customary representations and warranties to the buyers relating to compliance with applicable law. If we breach those representations and warranties, the buyers will be able to require us to repurchase the loans and we may incur a loss on the repurchase that could negatively affect our earnings.

Changes in the valuation of our securities could adversely affect us.

Most of the securities in our portfolio are classified as available-for-sale. Accordingly, a decline in the fair value of our securities could cause a material decline in our reported equity and/or net income. At least quarterly, and more frequently

when warranted by economic or market conditions, management evaluates all securities classified as available-for-sale with a decline in fair value below the amortized cost of the investment to determine whether or not the impairment is deemed to be other-than-temporary, or OTTI. Marketable equity securities are evaluated for OTTI based on the severity and duration of the impairment and, if deemed to be other than temporary, the declines in fair value are reflected in earnings as realized losses. For impaired debt securities that are intended to be sold, or more likely than not will be required to be sold, the full amount of market decline is recognized as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized through earnings. Non-credit related OTTI for such debt securities is recognized in other comprehensive income, net of applicable taxes. A decline in the market value of our securities portfolio could adversely affect our earnings.

We depend on our management team to implement our business strategy and we could be harmed by the loss of their services.

We are dependent upon the services of the members of our senior management team who direct our strategy and operations. We have benefited from the extensive banking knowledge and experience of our senior management team, with our top three executives having a combined 87 years of financial institution experience. Members of our senior management team, or commercial lending specialists, who possess expertise in our markets and key business relationships, could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by our regulators to maintain adequate levels of capital to support our operations. We believe the net proceeds of the offering will be sufficient to permit the Bank to maintain regulatory capital compliance for the foreseeable future. Nonetheless, we may at some point need to raise additional capital to support continued growth.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. Accordingly, we may not be able to raise additional capital if needed on terms that are acceptable to us, or at all. If we cannot raise additional capital when needed, our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by the Massachusetts Commissioner of Banks or the Federal Reserve Board, we may be subject to adverse regulatory action. See the section of this prospectus entitled “Supervision and Regulation.”

We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.

We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations. However, some legal and regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance. For example, we are subject to regulations issued by the Office of Foreign Assets Control, or OFAC, that prohibit financial institutions from participating in the transfer of property belonging to the governments of certain foreign countries and designated nationals of those countries. OFAC may impose penalties for inadvertent or unintentional violations even if reasonable processes are in place to prevent the violations. There may be other negative consequences resulting from a finding of noncompliance, including restrictions on certain activities. Such a finding may also damage our reputation as described above and could restrict the ability of institutional investment managers to invest in our securities.

Systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, data processing system failures and errors, inadequate or failed internal processes, customer or employee fraud and catastrophic failures resulting from terrorist acts or natural disasters. We depend upon data processing, software, communication, and information exchange on a variety of computing platforms and networks and over the Internet, and we rely on the services of a variety of vendors to meet our data processing and communication needs. Despite instituted safeguards, we cannot be certain that all of our systems are entirely

free from vulnerability to attack or other technological difficulties or failures. Information security risks have increased significantly due to the use of online, telephone and mobile banking channels by clients and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our technologies, systems, networks and our clients’ devices have been subject to, and are likely to continue to be the target of, cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, the theft of client assets through fraudulent transactions or disruption of our or our clients’ or other third parties’ business operations. If information security is breached or other technology difficulties or failures occur, information may be lost or misappropriated, services and operations may be interrupted and we could be exposed to claims from customers. While we maintain a system of internal controls and procedures, any of these results could have a material adverse effect on our business, financial condition, results of operations or liquidity.

We rely on other companies to provide key components of our business infrastructure.

Third-party vendors provide key components of our business infrastructure such as internet connections, network access and core application processing. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively. Replacing these third party vendors could also entail significant delay and expense.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

We will need to implement additional financial and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements.

As a result of the completion of the offering, we will become a public reporting company. We expect that the obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a stand-alone public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the SEC. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our core operations.

If our risk management framework does not effectively identify or mitigate our risks, we could suffer losses.

Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established processes and procedures intended to identify, measure, monitor and report the types of risk to which we are subject,

including credit risk, operations risk, compliance risk, reputation risk, strategic risk, market risk and liquidity risk. We seek to monitor and control our risk exposure through a framework of policies, procedures and reporting requirements. Management of our risks in some cases depends upon the use of analytical and/or forecasting models. If the models used to mitigate these risks are inadequate, we may incur losses. In addition, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

Risks Related to This Offering

The future price of the shares of common stock may be less than the purchase price in the offering.

If you purchase shares of common stock in the offering, you may not be able to sell them later at or above the purchase price in the offering. The purchase price in the offering is based upon an independent third-party appraisal of the pro forma market value of the Bank, pursuant to banking regulations, and subject to review and approval by the Massachusetts Commissioner of Banks and the Federal Reserve Board. The appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of our common stock. Our aggregate pro forma market value as reflected in the final independent appraisal may exceed the market price of our shares of common stock after the completion of the offering, which may result in our stock trading below the initial offering price of $10.00 per share.

After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions and the outlook for the financial services industry in general. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded.

The capital we raise in the offering will reduce our return on equity. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. For the three months ended March 31, 2014, we had a return on average equity of 6.84%, compared to an average return on equity of 4.39% based on trailing 12-month earnings for all publicly traded, full converted savings institutions as of March 31, 2014, or the most recent date for which information is available. Following the offering, we expect our consolidated equity to increase from $21.8 million at March 31, 2014 to between $48.1 million at the minimum of the offering range and $63.3 million at the adjusted maximum of the offering range. Based upon our earnings for the three months ended March 31, 2014, and these pro forma equity levels, our projected annualized return on equity would be 2.80% and 2.03% at the minimum and adjusted maximum of the offering range, respectively. We expect our return on equity to remain relatively low until we are able to leverage the additional capital we receive from the offering. Although we anticipate increasing net interest income using proceeds of the offering, our return on equity will be reduced by the capital raised in the offering, higher expenses from the costs of being a public company, and added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt. Until we can increase our net interest income and noninterest income, our return on equity may reduce the value of our shares of common stock. See the section of this prospectus entitled “Pro Forma Data” for an illustration of the financial impact of the offering.

We have broad discretion in allocating the net proceeds of the offering. Our failure to effectively utilize such net proceeds may have an adverse effect on our financial performance and the value of our common stock.

We intend to (i) invest a portion of the proceeds in the Bank, (ii) fund a loan to the employee stock ownership plan to purchase shares of common stock in the offering and (iii) contribute cash and shares of common stock to our charitable foundation. We intend to invest between $15.0 million and $20.5 million of the net proceeds of the offering (or $23.6 million at the adjusted maximum of the offering range) in the Bank. We may use the net proceeds we retain to pay dividends, repurchase shares of common stock, or for other general corporate purposes, including additional investments in the Bank, subject to regulatory approval as applicable. The Bank may use the net proceeds it receives to fund new loans, enhance existing products and services, invest in short-term investments, expand its banking franchise by opening de novo branches or loan production offices or acquiring new branches or by acquiring other financial institutions or other financial services companies, or for other general corporate purposes. However, with the exception of the loan to the employee stock ownership plan and contributions to our charitable foundation, we have not allocated specific amounts of the net proceeds for

any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and the timing of such applications. Also, certain of these uses, such as opening new branches or acquiring other financial institutions, paying dividends and repurchasing common stock, may require the approval of the Massachusetts Commissioner of Banks or the Federal Reserve Board. We have not established a timetable for investing the net proceeds, and, accordingly, we may not invest the net proceeds at the time that is most beneficial to Beverly Financial, the Bank or the shareholders. For additional information see the section of this prospectus entitled “Use of Proceeds.”

There may be a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be listed on The NASDAQ Capital Market under the symbol “BEVB,” subject to completion of the offering and compliance with certain quantitative listing requirements, such as the number and market value of our outstanding shares of common stock, and qualitative listing requirements relating to our corporate governance. Sandler O’Neill has advised us that it intends to make a market in our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less the shares held by our employee stock ownership plan and our directors and executive officers, is likely to be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. If you purchase shares of common stock, you may not be able to sell them at or above $10.00 per share. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

Our stock-based benefit plans will increase our costs, which will reduce our income.

We anticipate that our employee stock ownership plan will purchase 8% of the total shares of common stock sold in the offering and contributed to our charitable foundation, with funds borrowed from Beverly Financial. We will record annual employee stock ownership plan expense in an amount equal to the fair value of shares of common stock committed to be released to employees. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.

We also intend to adopt a stock-based benefit plan after the offering, which will allow us to award participants restricted shares of our common stock (at no cost to them) and/or options to purchase shares of our common stock. Although we currently intend to adopt the stock-based benefit plan more than one year following the offering, if we adopt within 12 months after the completion of the offering, the number of shares of restricted stock or options to purchase shares of our common stock reserved for issuance under any initial stock-based benefit plan may not exceed 4% and 10%, including shares issued to our charitable foundation, respectively, of our total outstanding shares. If adopted more than one year following the offering, we may reserve for issuance shares of restricted stock and options to purchase shares of our common stock in excess of these amounts. The estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis is $3.36 per option granted. Assuming this value is amortized over a five-year vesting period, the corresponding annual pre-tax expense associated with the options would be $336,000 at the adjusted maximum of the offering range. In addition, assuming that all shares of restricted stock are awarded at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual pre-tax expense associated with restricted stock awarded under the stock-based benefit plan would be $400,000 at the adjusted maximum of the offering range. However, if we grant shares of common stock or options to purchase shares of our common stock in excess of these amounts, such grants would increase our costs further.

The shares of restricted stock granted under the stock-based benefit plan will be expensed by us over their vesting period at the fair market value of the shares on the date they are awarded. If the shares of restricted stock to be granted under the plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by Beverly Financial) and cost the same as the purchase price in the offering, the reduction to shareholders’ equity due to the plan would be between $1.3 million at the minimum of the offering range and $2.0 million at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares under the plan,

and the price of such shares exceeds the offering price of $10.00 per share, the reduction to shareholders’ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to shareholders’ equity would be less than the range described above.

The implementation of stock-based benefit plans may dilute your ownership interest.

More than one year following the offering, we intend to adopt, and request shareholder approval of, one or more stock-based benefit plans, which will allow us to award participants restricted shares of our common stock (at no cost to them) and/or options to purchase shares of our common stock. If these stock-based benefit plans are funded from the issuance of authorized but unissued shares of common stock, shareholders would experience a reduction in ownership interest totaling 12.28% based on the adjusted maximum of the offering range.

We have entered into an employment agreement and change of control agreements with certain of our officers and intend to implement a severance pay plan for employees not covered by such arrangements which may increase our compensation costs upon the occurrence of certain events or increase the cost of acquiring us.

We have entered into an employment agreement with our chief executive officer and change of control agreements with our chief financial officer and our senior vice president, residential and consumer lending. These agreements will be assumed by Beverly Financial upon completion of the conversion. In the event of termination of employment other than for cause, or in the event of certain types of termination following a change of control, as set forth in the employment agreement and change of control agreements, the agreements will provide for cash severance benefits that would cost us up to $1.4 million in the aggregate based on information as of March 31, 2014. We also intend to implement a severance pay plan in connection with the conversion for those eligible employees not covered by an employment or change of control agreement. For additional information see the section of this prospectus entitled “Executive and Director Compensation—Employment and Change in Control Agreements and Severance Arrangements.”

A significant percentage of our common stock will be held by our directors, executive officers and employee benefit plans.

We expect that our directors and executive officers, together with their associates, will subscribe for 265,000 shares in the offering. In addition, we intend to establish an employee stock ownership plan that will purchase an amount of shares equal to 8% of the common stock sold in the offering. As a result, upon consummation of the offering and the issuance of shares to our charitable foundation, a total of up to 525,400 shares, or 16.1% of our outstanding shares, and 665,260 shares, or 13.3%, of our outstanding shares will be held by our directors and executive officers and our employee stock ownership plan at the minimum and maximum of the offering range, respectively. Additional shares will be held by management following the implementation of an equity incentive plan, which we intend to implement more than 12 months following the completion of the offering. The articles of organization and bylaws of Beverly Financial contain supermajority voting provisions that require that the holders of at least two-thirds of Beverly Financial’s outstanding shares of voting stock approve certain actions including, but not limited to, the amendment of Beverly Financial’s articles of organization and bylaws. For more information on the restrictions included in the articles of organization and bylaws of Beverly Financial see the section of this prospectus entitled “Restrictions on the Acquisition of Beverly Financial.”

Our articles of organization and bylaws and certain regulations may prevent or make more difficult to pursue certain transactions, including a sale or merger of Beverly Financial.

Provisions of our articles of organization and bylaws, state corporate law and federal and state banking regulations may make it more difficult for companies or persons to acquire control of Beverly Financial. Consequently, our shareholders may not have the opportunity to participate in such a transaction and the trading price of our common stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers.

Provisions of our articles of organization and bylaws and state corporate law that may make it more difficult and expensive to pursue a takeover attempt that the board of directors opposes include:

•

supermajority voting requirements for certain business combinations and changes to some provisions of the articles of organization and bylaws;

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a limitation on the right to vote shares;

•

the election of directors to staggered terms of three years;

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the removal of directors only for cause;

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the absence of cumulative voting by shareholders in the election of directors;

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provisions restricting the calling of special meetings of shareholders; and

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provisions regarding the timing and content of shareholder proposals and nominations.

In addition, Massachusetts banking regulations prohibit, for three years following the completion of a mutual-to-stock conversion, the offer to acquire or the acquisition of more than 10% of any class of equity security of a converted institution without the prior approval of the Massachusetts Commissioner of Banks. Additional state corporate law and federal banking regulations place limitations on the acquisition of certain percentages of our common stock and impose restrictions on these significant shareholders.

For further information, see the section of this prospectus entitled “Restrictions on the Acquisition of Beverly Financial.”

We are an “emerging growth company,” as defined in the JOBS Act, and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.

For so long as we remain an “emerging growth company,” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not “emerging growth companies” including:

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the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

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the “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our chief executive officer;

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the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act and instead provide a reduced level of disclosure concerning executive compensation; and

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any rules that the Public Company Accounting Oversight Board may adopt requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.

We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) the first fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenues are $1 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.

We have elected to delay the adoption of new and revised accounting pronouncements, which means that our financial statements may not be comparable to those of other public companies.

As an “emerging growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Risks Related to the Contribution to our Charitable Foundation

The contribution to our charitable foundation will dilute your ownership interest and adversely affect net income in the year we complete the offering.

We intend to establish and fund a charitable foundation in connection with the conversion and offering. We intend to contribute a total of $1,350,000 to a charitable foundation that we are establishing, with such contribution to consist of 110,000 shares of our common stock and $250,000 in cash. The amount of our contribution will not be dependent upon the amount of the net proceeds raised in the offering. The contribution will have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to our charitable foundation. The after-tax expense of the contribution will reduce net income in the year in which we complete the offering by approximately $810,000. Persons purchasing shares in the offering will have their ownership and voting interests in Beverly Financial diluted by 2.89% due to the issuance of shares of common stock to our charitable foundation.

Our contribution to our charitable foundation may not be tax deductible, which could decrease our profits.

We believe that the contribution to our charitable foundation will be deductible for federal income tax purposes. However, the Internal Revenue Service may disagree with our determination and not grant tax-exempt status to our charitable foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution. It is expected that the value of the contribution of cash and shares will be $1,350,000, which would result in after-tax expense of approximately $810,000. In the event that the Internal Revenue Service does not grant tax-exempt status to our charitable foundation or the contribution to our charitable foundation is otherwise not tax deductible, we would recognize as after-tax expense the full value of the entire contribution.

In addition, even if the contribution is tax deductible, we may not have sufficient profits to be able to use the deduction fully. Pursuant to the Internal Revenue Code of 1986, as amended, or the Code, an entity is permitted to deduct charitable contributions up to 10% of its taxable income prior to the charitable contribution deduction in any one year. Any contribution in excess of the 10% limit may be deducted for federal and state income tax purposes over each of the five years following the year in which the charitable contribution is made. Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period. Our pre-tax income over this period may not be sufficient to fully use this deduction. With certain exceptions, Massachusetts tax law follows the federal income tax laws and taxable income is recomputed using state taxable income on a combined reporting basis.

Special Note Regarding Forward-Looking Statements and Industry Data

Some of the statements made under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus constitute forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “intend,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

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statements of our goals, intentions and expectations;

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statements regarding our business plans, prospects, growth and operating strategies;

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statements regarding the asset quality of our loan and investment portfolios; and

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estimates of our risks and future costs and benefits.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

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adverse changes to economic conditions in our market area;

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adverse changes in the financial industry, securities, credit and national and local real estate markets (including real estate values);

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significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

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credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

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competition among depository and other financial institutions;

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our success in implementing our business strategy, particularly increasing our commercial real estate, multi-family, non-owner occupied residential and construction lending;

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our success in introducing new financial products;

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our ability to attract and maintain deposits;

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our ability to continue to improve our asset quality even as we increase our non-residential and non-owner occupied residential lending;

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changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

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fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

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changes in consumer spending, borrowing and saving habits;

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declines in the yield on our assets resulting from the current low interest rate environment;

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risks related to a high concentration of loans secured by real estate located in our market area;

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the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

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changes in the level of government support of housing finance;

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our ability to enter new markets successfully and capitalize on growth opportunities;

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changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements (particularly the new capital regulations), regulatory fees and compliance costs and the resources we have available to address such changes;

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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, or FASB, the SEC and the Public Company Accounting Oversight Board;

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changes in our organization, compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;

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loan delinquencies and changes in the underlying cash flows of our borrowers;

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our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;

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the failure or security breaches of computer systems on which we depend;

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the ability of key third-party service providers to perform their obligations to us;

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changes in the financial condition or future prospects of issuers of securities that we own; and

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other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the section of this prospectus entitled “Risk Factors” and elsewhere in this prospectus. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, after the date of this prospectus, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

This prospectus also contains estimates, projections and other information concerning our industry, the market and our business. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. We obtained the industry, market and competitive position data in this prospectus from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties.

Selected Consolidated Financial and Other Data

The summary financial information presented below is derived in part from our consolidated financial statements. The following is only a summary and you should read it in conjunction with the consolidated financial statements and notes beginning on page F-1. The information at December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at December 31, 2011, 2010 and 2009 and for the years ended December 31, 2010 and 2009 is derived in part from our audited consolidated financial statements that do not appear in this prospectus. The information at March 31, 2014 and 2013 and for the three months then ended that appear elsewhere in this prospectus was not audited, but in the opinion of management, reflects all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results of operations that may be expected for the entire year.


	At March 31, 2014		At December 31,
(In thousands)	At March 31, 2014		2013		2012		2011		2010		2009
Financial Condition Data:
Total assets	$	327,015	$	323,989	$	308,281	$	297,937	$	300,423	$	304,513
Cash and cash equivalents		14,992		13,414		26,994		28,302		31,809		20,859
Investment securities⁽¹⁾		21,543		22,625		29,605		29,383		23,658		21,471
Loans receivable, net⁽²⁾		271,923		269,048		231,612		222,280		228,760		246,180
Deposits		283,628		275,390		259,564		245,017		244,751		218,630
FHLB advances		12,035		10,036		15,539		21,542		24,544		54,047
Repurchase agreements		—		6,437		2,646		2,037		3,618		4,970
Junior subordinated debentures		7,686		9,186		9,186		9,186		9,186		9,186
Total equity⁽³⁾		21,813		21,414		20,197		18,386		16,597		15,084


	For the Three Months Ended March 31,				For the Year Ended December 31,
(In thousands)	2014		2013		2013		2012		2011		2010		2009
Operating Data:
Interest and dividend income	$	3,153	$	3,022	$	12,378	$	12,558	$	13,263	$	14,268	$	14,933
Interest expense		542		611		2,369		2,852		3,599		4,657		6,572

Net interest and dividend income		2,611		2,411		10,009		9,706		9,664		9,611		8,361
Provision for loan losses		60		121		241		221		303		606		636

Net interest and dividend income after provision for loan losses		2,551		2,290		9,768		9,485		9,361		9,005		7,725
Noninterest income		302		573		1,580		2,120		1,456		1,300		1,105
Noninterest expense		2,246		2,251		9,103		8,671		8,031		7,871		7,230

Income before income taxes		607		612		2,245		2,934		2,786		2,434		1,600
Income tax expense		236		238		867		1,136		1,085		945		638

Net income	$	371	$	374	$	1,378	$	1,798	$	1,701	$	1,489	$	962

(1)	Investment securities include securities available-for-sale and Federal Home Loan Bank of Boston, or FHLB, stock.

(2)	Excludes loans held-for-sale.

(3)	Includes retained earnings and accumulated other comprehensive income/loss.


	At or For the Three Months Ended March 31,						At or For the Year Ended December 31,
	2014⁽¹⁾			2013⁽¹⁾			2013			2012			2011			2010			2009
Performance Ratios:
Return on average assets		0.47	%		0.51	%		0.44	%		0.61	%		0.57	%		0.50	%		0.32	%
Return on average equity		6.84	%		7.34	%		6.51	%		9.20	%		9.56	%		9.21	%		6.42	%
Interest rate spread⁽²⁾		3.24	%		3.24	%		3.16	%		3.22	%		3.24	%		3.28	%		2.71	%
Net interest margin⁽³⁾		3.43	%		3.46	%		3.36	%		3.44	%		3.45	%		3.49	%		2.99	%
Efficiency ratio⁽⁵⁾		77.10	%		75.44	%		78.55	%		73.32	%		72.22	%		72.14	%		76.38	%
Average interest-earning assets to average interest-bearing liabilities		125.85	%		123.90	%		125.39	%		122.60	%		116.72	%		112.54	%		111.95	%
Average equity to average assets		6.82	%		6.95	%		6.78	%		6.60	%		6.00	%		5.48	%		5.04	%

Capital Ratios (Bank only):
Total capital to risk-weighted assets		13.08	%		15.91	%		14.50	%		15.77	%		15.49	%		14.26	%		13.05	%
Tier 1 capital to risk-weighted assets		11.20	%		13.11	%		11.90	%		12.96	%		12.60	%		11.42	%		10.27	%
Tier 1 capital to average assets		8.22	%		8.57	%		8.25	%		8.32	%		7.79	%		7.24	%		6.81	%

Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans⁽⁴⁾		1.29	%		1.46	%		1.28	%		1.42	%		1.40	%		1.33	%		1.17	%
Allowance for loan losses as a percentage of non-performing loans		2,339.47	%		293.98	%		714.96	%		242.82	%		131.29	%		83.86	%		129.82	%
Net charge-offs to average outstanding loans during the period		—	%		—	%		0.04	%		0.01	%		0.10	%		0.18	%		0.06	%
Nonperforming loans as a percentage of total loans⁽⁴⁾		0.06	%		0.50	%		0.18	%		0.59	%		1.06	%		1.58	%		0.90	%
Nonperforming assets as a percentage of total assets		0.13	%		0.39	%		0.23	%		0.45	%		0.85	%		1.22	%		0.73	%

Other Data:
Number of offices		4			4			4			4			4			4			4

(1)	Ratios for the three months ended March 31, 2014 and 2013 have been annualized, where appropriate.

(2)	Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3)	Represents net interest income as a percent of average interest-earning assets.

(4)	Loans are presented before the allowance but include deferred costs/fees. Loans held-for-sale are excluded.

(5)	Represents noninterest expense divided by the sum of net interest income and noninterest income.

Use of Proceeds

The following table shows how we intend to use the net proceeds of the offering. The actual net proceeds will depend on the number of shares of common stock sold in the offering and the expenses incurred in connection with the offering. See the section of this prospectus entitled “Pro Forma Data” for the assumptions used to arrive at these amounts.


	Based Upon the Sale at $10.00 Per Share of
	Minimum of Offering Range (3,145,000 Shares)					Midpoint of Offering Range (3,700,000 Shares)					Maximum of Offering Range (4,255,000 Shares)					Adjusted Maximum of Offering Range (4,893,250 Shares)⁽¹⁾
	Amount		Percent of Net Proceeds			Amount		Percent of Net Proceeds			Amount		Percent of Net Proceeds			Amount		Percent of Net Proceeds
	(Dollars in thousands)
Offering proceeds	$	31,450				$	37,000				$	42,550				$	48,933
Less offering expenses		1,539					1,590					1,641					1,700

Net offering proceeds	$	29,911		100.0	%	$	35,410		100.0	%	$	40,909		100.0	%	$	47,233		100.0	%

Use of net proceeds:
To the Bank	$	14,955		50.0	%	$	17,705		50.0	%	$	20,454		50.0	%	$	23,616		50.0	%
To fund loan to employee stock ownership plan		2,604		8.7			3,048		8.6			3,492		8.5			4,003		8.5
Contributed to charitable foundation		250		0.8			250		0.7			250		0.6			250		0.5

Retained by Beverly Financial	$	12,102		40.5		$	14,407		40.7		$	16,713		40.9		$	19,364		41.0

(1)	As adjusted to give effect to an increase in the number of shares that could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

Payments for shares made through withdrawals from deposit accounts at the Bank will reduce deposits and will not result in the receipt of new funds for investment. The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated offering were used to sell shares of common stock not purchased in the subscription and community offerings.

•

to pay cash dividends to shareholders, subject to regulatory approval;

•

to repurchase shares of our common stock, subject to regulatory approval; and

•

for other general corporate purposes, including additional investments in the Bank.

With the exception of the funding of the loan to the employee stock ownership plan and the contribution to our charitable foundation, we have not quantified our plans for use of the retained net proceeds for each of the foregoing purposes. Initially, we intend to invest a substantial portion of the net proceeds in short-term investments, investment-grade debt obligations and mortgage-backed securities.

Under currently applicable regulations, we may not repurchase shares of our common stock during the first year following the conversion, except to fund equity benefit plans other than stock options or except when extraordinary circumstances exist and with prior regulatory approval.

The Bank will receive a capital contribution equal to 50% of the net proceeds of the offering, which it may use as follows:

•

to support commercial real estate, multi-family, commercial business, one- to four-family residential and construction lending;

•

to invest in technological advances to enhance customer service and products offered by the Bank;

•

to invest in short-term investments and other securities consistent with the Bank’s investment policy;

•

to expand its banking franchise by establishing or acquiring new loan production offices or branches, or by acquiring other financial institutions or other financial services companies, although no such transactions are contemplated at this time; and

•

for other general corporate purposes.

The Bank has not quantified its plans for use of the offering proceeds for any of the foregoing purposes. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, our relative position in the financial services industry, the attractiveness of opportunities to expand our operations through establishing or acquiring new branches, our ability to receive regulatory approval for any such expansion activities, and overall market conditions.

Dividend Policy

Following completion of the offering, our board of directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. Specifically, the Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances, such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate of earnings retention is inconsistent with the its capital needs and overall financial condition. We do not currently have any plan to declare or to pay dividends in the near future. In determining whether to pay a cash dividend in the future and the amount of any cash dividend, the board of directors is expected to take into account a number of factors, including regulatory capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of shareholders, tax considerations, statutory and regulatory limitations and general economic conditions.

Dividends we can declare and pay will depend, in part, upon receipt of dividends from the Bank, because initially we will have no source of income other than dividends from the Bank, earnings from the investment of proceeds from the sale of shares of common stock, and interest payments received in connection with the loan to the employee stock ownership plan (which we expect will be funded through a subsidiary formed solely for the purpose of making the loan to the employee stock ownership plan). Massachusetts banking law and FDIC regulations impose significant limitations on “capital distributions” by depository institutions. See the section of this prospectus entitled “Regulation and Supervision—Massachusetts Banking Laws and Supervision—Dividends” and “Regulation and Supervision—Federal Regulations—Prompt Corrective Action Regulations.” In addition, beginning in 2016, the Bank’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to shareholders. See the section of this prospectus entitled “Supervision and Regulation—Federal Banking Regulation—New Capital Rule.” No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Massachusetts Commissioner of Banks, may be paid in addition to, or in lieu of, regular cash dividends.

Any payment of dividends by the Bank to us that would be deemed to be drawn out of the Bank’s bad debt reserves would require a payment of taxes at the then-current tax rate by the Bank on the amount of earnings deemed to be removed from the reserves for such distribution. The Bank does not intend to make any distribution to us that would create such a federal tax liability.

Market for Common Stock

We have not previously issued common stock and there is currently no established market for our common stock. We have applied for approval to list our common stock for trading on The NASDAQ Capital Market under the symbol “BEVB” upon completion of the offering. In order to list our common stock on The NASDAQ Capital Market, we are required to have at least three broker-dealers who will make a market in our common stock. Sandler O’Neill has advised us that it intends to make a market in our common stock following the conversion and offering, but it is under no obligation to do so. Sandler O’Neill also may assist us, if needed, in obtaining other market makers after the offering. We cannot assure you that other market makers will be obtained or that an active and liquid trading market for the common stock will develop or, if developed, will be maintained.

The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share. Purchasers of common stock in the offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the offering and may have an adverse impact on the price at which the common stock can be sold.

Historical and Pro Forma Regulatory Capital Compliance

At March 31, 2014, the Bank exceeded all of the applicable regulatory capital requirements. The table below sets forth the historical equity capital and regulatory capital of the Bank at March 31, 2014, and the pro forma regulatory capital of the Bank, after giving effect to the sale of shares of common stock at a $10.00 per share purchase price. The items captioned “Requirement” reflect amounts necessary to be considered “well-capitalized” under applicable federal regulations. The table assumes the receipt by the Bank of 50% of the net offering proceeds. See the section of this prospectus entitled “Use the Proceeds.”


	Historical at March 31, 2014					Pro Forma at March 31, 2014 Based Upon the Sale in the Offering of
	Historical at March 31, 2014					3,145,000 Shares (Minimum of Offering Range)						3,700,000 Shares (Midpoint of Offering Range)						4,255,000 Shares (Maximum of Offering Range)						4,893,250 Shares (Adjusted Maximum of Offering Range)⁽¹⁾
	Amount		Percent of Assets⁽²⁾			Amount			Percent of Assets⁽²⁾			Amount			Percent of Assets⁽²⁾			Amount			Percent of Assets⁽²⁾			Amount			Percent of Assets⁽²⁾
	(Dollars in thousands)
Equity	$	26,841		8.22	%	$	37,890			11.10	%	$	39,974			11.61	%	$	42,057			12.12	%	$	44,453			12.70	%

Tier 1 leverage capital⁽³⁾	$	26,748		8.22	%	$	37,797			11.11	%	$	39,881			11.63	%	$	41,964			12.14	%	$	44,360			12.71	%
Requirement⁽⁴⁾		16,264		5.00			17,011			5.00			17,149			5.00			17,286			5.00			17,444			5.00

Excess	$	10,484		3.22	%	$	20,786			6.11	%	$	22,732			6.63	%	$	24,678			7.14	%	$	26,916			7.71	%

Tier 1 risk-based capital	$	26,748		11.20	%	$	37,797			15.34	%	$	39,881			16.10	%	$	41,964			16.85	%	$	44,360			17.70	%
Requirement⁽⁴⁾		14,331		6.00			14,780			6.00			14,862			6.00			14,945			6.00			15,040			6.00

Excess	$	12,417		5.20	%	$	23,017			9.34	%	$	25,019			10.10	%	$	27,019			10.85	%	$	29,320			11.70	%

Total risk-based capital⁽³⁾	$	31,241		13.08	%	$	42,290			17.17	%	$	44,374			17.91	%	$	46,457			18.65	%	$	48,853			19.49	%
Requirement⁽⁴⁾		23,885		10.00			24,633			10.00			24,771			10.00			24,908			10.00			25,066			10.00

Excess	$	7,356		3.08	%	$	17,657			7.17	%	$	19,603			7.91	%	$	21,549			8.65	%	$	23,787			9.49	%


Reconciliation:
Net proceeds invested in the Bank						$	14,955					$	17,705					$	20,454					$	23,616
Less: Common stock acquired by employee stock ownership plan							(2,604	)					(3,048	)					(3,492	)					(4,003	)
Less: Common stock acquired by stock-based incentive plan							(1,302	)					(1,524	)					(1,746	)					(2,001	)

Pro forma increase in Tier 1 and total risk-based capital						$	11,049					$	13,133					$	15,216					$	17,612

(1)	As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)	Leverage capital ratios are shown as a percentage of total adjusted assets. Risk-based capital ratios are shown as a percentage of risk-weighted assets.

(3)	Pro forma amounts and percentages assume net proceeds contributed to the Bank are invested in assets that carry a 50% risk weighting.

(4)	Reflects regulatory requirements to be considered “well-capitalized.”

Capitalization

The following table presents the historical consolidated capitalization of Beverly Financial, MHC at March 31, 2014 and the pro forma consolidated capitalization of Beverly Financial, after giving effect to the conversion and offering, based upon the assumptions set forth in the section of this prospectus entitled “Pro Forma Data.”


(Dollars in thousands)	Historical at March 31, 2014			Beverly Financial, Inc. Pro Forma Based Upon the Sale in the Offering at $10.00 per Share of
(Dollars in thousands)	Historical at March 31, 2014			3,145,000 Shares (Minimum of Offering Range)			3,700,000 Shares (Midpoint of Offering Range)			4,255,000 Shares (Maximum of Offering Range)			4,893,250 Shares (Adjusted Maximum of Offering Range)⁽¹⁾
Deposits	$	283,628		$	283,628		$	283,628		$	283,628		$	283,628
FHLB advances		12,035			12,035			12,035			12,035			12,035
Junior subordinated debentures		7,686			7,686			7,686			7,686			7,686

Total deposits, FHLB advances and junior subordinated debentures	$	303,349		$	303,349		$	303,349		$	303,349		$	303,349

Shareholders’ equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued or outstanding	$	—		$	—		$	—		$	—		$	—
Common stock, $0.01 par value, 10,000,000 shares authorized; assuming shares outstanding as shown⁽²⁾		—			33			38			44			50
Additional paid-in capital⁽³⁾		—			30,978			36,472			41,965			48,283
Retained earnings⁽⁴⁾		21,760			21,760			21,760			21,760			21,760
Tax benefit of contribution to charitable foundation		—			540			540			540			540
Accumulated other comprehensive income		53			53			53			53			53
Common stock to be acquired by employee stock ownership plan⁽⁵⁾		—			(2,604	)		(3,048	)		(3,492	)		(4,003	)
Common stock to be acquired by stock-based benefit plans⁽⁶⁾		—			(1,302	)		(1,524	)		(1,746	)		(2,001	)
Expense of contribution to charitable foundation		—			(1,350	)		(1,350	)		(1,350	)		(1,350	)

Total shareholders’ equity	$	21,813		$	48,108		$	52,941		$	57,774		$	63,332

Total shareholders’ equity as a percentage of total assets⁽⁷⁾		6.67	%		13.62	%		14.78	%		15.92	%		17.18	%
Tangible equity as a percentage of total assets⁽⁷⁾		6.67	%		13.62	%		14.78	%		15.92	%		17.18	%

(1)	As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for shares or changes in market conditions following the commencement of the subscription and community offerings.

(2)

No effect has been given to the issuance of additional shares of Beverly Financial common stock pursuant to one or more stock-based benefit plans. If these plans are implemented within 12 months following the completion of the offering, an amount up to 10% and 4% of the shares of Beverly Financial common stock sold in the offering and contributed to our charitable foundation will be reserved for issuance upon the exercise of stock options and for issuance as restricted stock awards, respectively. See the section of this prospectus entitled “Executive and Director Compensation.”

(3)	The sum of the par value of the total shares outstanding and additional paid-in capital equals the net offering proceeds at the offering price of $10.00 per share.

(4)	The retained earnings of the Bank will be substantially restricted after the conversion. See the sections of this prospectus entitled “Dividend Policy,” “The Conversion and Offering—Liquidation Rights” and “Supervision and Regulation.”

(5)

Assumes that 8% of the shares sold in the offering and contributed to our charitable foundation will be purchased by the employee stock ownership plan with a loan from Beverly Financial. The loan will be repaid principally from the Bank’s contributions to the employee stock ownership plan. Since Beverly Financial will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no asset or liability will be reflected on Beverly Financial’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total shareholders’ equity.

(6)

Assumes a number of shares of common stock equal to 4% of the shares of common stock to be issued in the offering and contributed to our charitable foundation will be purchased for grant by one or more stock-based benefit plans in open market purchases. The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As Beverly Financial accrues compensation expense to reflect the vesting of shares pursuant to the stock-based benefit plans, the credit to equity will be offset by a charge to noninterest expense. Implementation of the stock-based benefit plans will require shareholder approval. Any funds to be used by the stock-based benefit plans to conduct open market purchases will be provided by Beverly Financial.

(7)	Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.

Pro Forma Data

The following tables summarize historical data of Beverly Financial, MHC and pro forma data of Beverly Financial at and for the three months ended March 31, 2014 and at and for the year ended December 31, 2013. The information provided illustrates our pro forma net income and shareholders’ equity based on the sale of common stock at the minimum, midpoint, maximum and 15% above the maximum of the offering range. The actual net proceeds from the sale of the common stock cannot be determined until the offering is completed and may vary from our estimates. Net proceeds indicated in the following tables are based upon the following assumptions:

•

all shares of common stock will be sold in the subscription and community offerings;

•

our employee stock ownership plan will purchase 8% of the shares of common stock sold in the offering and contributed to our charitable foundation with a loan from Beverly Financial. The loan will be repaid in substantially equal payments of principal and interest over a period of 30 years;

•

Sandler O’Neill will receive a fee equal to 1.0% of the dollar amount of the shares of common stock sold in the subscription and community offerings. Shares purchased by our stock-based benefit plans or by our officers, directors and employees, and their immediate families and shares contributed to our charitable foundation will not be included in calculating the shares of common stock sold for this purpose; and

•

expenses of the offering, other than fees to be paid to Sandler O’Neill, will be approximately $1.2 million.

We calculated pro forma consolidated net income for the three months ended March 31, 2014, and the year ended December 31, 2013, as if the estimated net proceeds had been invested at an assumed interest rate of 1.73% (1.04% on an after-tax basis) and 1.75% (1.05% on an after-tax basis), respectively. These rates represent the five-year United States Treasury Note rates at March 31, 2014 and December 31, 2013, respectively, which, in light of current market interests rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earnings assets and the weighted average rate paid on our deposits.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and shareholders’ equity by the indicated number of shares of common stock. We adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the shares of common stock were outstanding at the beginning of each period, but we did not adjust per share historical or pro forma shareholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of stock-based benefit plans. Subject to the receipt of shareholder approval, we have assumed that the stock-based benefit plans will acquire for restricted stock awards a number of shares of common stock equal to 4% of our outstanding shares of common stock at the same price for which they were sold in the offering. We assume that shares of common stock are granted under the plans in awards that vest over a five-year period.

We have also assumed that the stock-based benefit plans will grant options to acquire shares of common stock equal to 10% of our outstanding shares of common stock. In preparing the tables below, we assumed that shareholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of 10 years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $3.36 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 17.71% for the shares of common stock, a dividend yield of 0.0%, an expected option life of 10 years and a risk-free interest rate of 2.73%.

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of our total outstanding shares if the stock-based benefit plans are adopted more than one year following the offering. In addition, we may grant options and award shares that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the offering.

As discussed under the section of this prospectus entitled “Use of Proceeds,” we intend to contribute 50% of the net proceeds to the Bank, to fund a loan to the employee stock ownership plan with a portion of the net proceeds and to contribute a portion of the net proceeds to our charitable foundation. We intend to retain the rest of the proceeds for future use.

The pro forma table does not give effect to:

•

withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the offering;

•

our results of operations after the offering; or

•

changes in the market price of the shares of common stock after the offering.

The following pro forma information may not represent the financial effects of the offering at the date on which the offering actually occurs and you should not use the table to indicate future results of operations. Pro forma shareholders’ equity represents the difference between the stated amount of our assets and liabilities, computed in accordance with generally accepted accounting principles. We did not increase or decrease shareholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma shareholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to shareholders if we liquidated. Pro forma shareholders’ equity does not give effect to the impact of intangible assets, the liquidation account we will establish in the conversion or tax bad debt reserves in the unlikely event we are liquidated.


	At or For the Three Months Ended March 31, 2014 Based Upon the Sale at $10.00 Per Share of
	3,145,000 Shares (Minimum of Offering Range)			3,700,000 Shares (Midpoint of Offering Range)			4,255,000 Shares (Maximum of Offering Range)			4,893,250 Shares (Adjusted Maximum Offering of Range)⁽¹⁾
	(Dollars in thousands, except per share amounts)
Gross proceeds of offering	$	31,450		$	37,000		$	42,550		$	48,933
Plus: Market value of shares issued to charitable foundation		1,100			1,100			1,100			1,100

Pro forma market capitalization	$	32,550		$	38,100		$	43,650		$	50,033

Gross proceeds of offering	$	31,450		$	37,000		$	42,550		$	48,933
Less: Expenses		1,539			1,590			1,641			1,700

Estimated net proceeds		29,911			35,410			40,909			47,233
Less: Common stock purchased by employee stock ownership plan⁽²⁾		(2,604	)		(3,048	)		(3,492	)		(4,003	)
Less: Cash contribution to charitable foundation		(250	)		(250	)		(250	)		(250	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾		(1,302	)		(1,524	)		(1,746	)		(2,001	)

Estimated net cash proceeds as adjusted	$	25,755		$	30,588		$	35,421		$	40,979

Net income:
Historical	$	371		$	371		$	371		$	371
Pro forma income on net proceeds		67			79			92			106
Pro forma employee stock ownership plan adjustment⁽²⁾		(13	)		(15	)		(17	)		(20	)
Pro forma stock award adjustment⁽³⁾		(39	)		(46	)		(52	)		(60	)
Pro forma stock option adjustment⁽⁴⁾		(49	)		(58	)		(66	)		(76	)

Pro forma net income	$	337		$	331		$	328		$	321

Per share net income:
Historical	$	0.12		$	0.10		$	0.09		$	0.08
Pro forma income on net proceeds		0.02			0.02			0.02			0.02
Pro forma employee stock ownership plan adjustment⁽²⁾		—			—			—			—
Pro forma stock award adjustment⁽³⁾		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Pro forma stock option adjustment⁽⁴⁾		(0.02	)		(0.02	)		(0.02	)		(0.02	)

Pro forma net income per share⁽⁵⁾	$	0.11		$	0.09		$	0.08		$	0.07

Offering price as a multiple of pro forma net earnings per share		22.73x			27.78x			31.25x			35.71x
Number of shares outstanding for pro forma net Income per share calculations⁽⁵⁾		2,996,770			3,507,740			4,018,710			4,606,326
Shareholders’ equity:
Historical	$	21,813		$	21,813		$	21,813		$	21,813
Estimated net proceeds		29,911			35,410			40,909			47,233
Plus: Market value of shares issued to charitable foundation		1,100			1,100			1,100			1,100
Plus: Tax benefit of contribution to charitable foundation		540			540			540			540
Less: Common stock acquired by employee stock ownership plan⁽²⁾		(2,604	)		(3,048	)		(3,492	)		(4,003	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾⁽⁴⁾		(1,302	)		(1,524	)		(1,746	)		(2,001	)
Less: Expense of contribution to charitable foundation⁽⁶⁾		(1,350	)		(1,350	)		(1,350	)		(1,350	)

Pro forma shareholders’ equity	$	48,108		$	52,941		$	57,774		$	63,332

Shareholders’ equity per share:
Historical	$	6.70		$	5.73		$	5.00		$	4.36
Estimated net proceeds		9.19			9.29			9.37			9.44
Plus: Market value of shares issued to charitable foundation		0.34			0.29			0.25			0.22
Plus: Tax benefit of contribution to charitable foundation		0.16			0.14			0.12			0.11
Less: Common stock acquired by employee stock ownership plan⁽²⁾		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾⁽⁴⁾		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Less: Expense of contribution to charitable foundation		(0.41	)		(0.35	)		(0.31	)		(0.27	)

Pro forma shareholders’ equity per share⁽⁷⁾	$	14.78		$	13.90		$	13.23		$	12.66

Offering price as percentage of pro forma shareholders’ equity per share		67.66	%		71.94	%		75.59	%		78.99	%
Number of shares outstanding for pro forma book value per share calculations		3,255,000			3,810,000			4,365,000			5,003,250


	At or For the Year Ended December 31, 2013 Based Upon the Sale at $10.00 Per Share of
	3,145,000 Shares (Minimum of Offering Range)			3,700,000 Shares (Midpoint of Offering Range)			4,255,000 Shares (Maximum of Offering Range)			4,893,250 Shares (Adjusted Maximum of Offering Range)⁽¹⁾
	(Dollars in thousands, except per share amounts)
Gross proceeds of offering	$	31,450		$	37,000		$	42,550		$	48,933
Plus: Market value of shares issued to charitable foundation		1,100			1,100			1,100			1,100

Pro forma market capitalization	$	32,550		$	38,100		$	43,650		$	50,033

Gross proceeds of offering	$	31,450		$	37,000		$	42,550		$	48,933
Less: Expenses		1,539			1,590			1,641			1,700

Estimated net proceeds		29,911			35,410			40,909			47,233
Less: Common stock purchased by employee stock ownership plan⁽²⁾		(2,604	)		(3,048	)		(3,492	)		(4,003	)
Less: Cash contribution to charitable foundation		(250	)		(250	)		(250	)		(250	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾		(1,302	)		(1,524	)		(1,746	)		(2,001	)

Estimated net cash proceeds as adjusted	$	25,755		$	30,588		$	35,421		$	40,979

Net income:
Historical	$	1,378		$	1,378		$	1,378		$	1,378
Pro forma income on net proceeds		270			321			372			430
Pro forma employee stock ownership plan adjustment⁽²⁾		(52	)		(61	)		(70	)		(80	)
Pro forma stock award adjustment⁽³⁾		(156	)		(183	)		(210	)		(240	)
Pro forma stock option adjustment⁽⁴⁾		(197	)		(230	)		(264	)		(303	)

Pro forma net income	$	1,243		$	1,225		$	1,206		$	1,185

Per share net income:
Historical	$	0.46		$	0.40		$	0.35		$	0.31
Pro forma income on net proceeds		0.09			0.09			0.09			0.09
Pro forma employee stock ownership plan adjustment⁽²⁾		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Pro forma stock award adjustment⁽³⁾		(0.05	)		(0.05	)		(0.05	)		(0.05	)
Pro forma stock option adjustment⁽⁴⁾		(0.07	)		(0.07	)		(0.07	)		(0.07	)

Pro forma net income per share⁽⁵⁾	$	0.41		$	0.35		$	0.30		$	0.26

Offering price as a multiple of pro forma net earnings per share		24.39x			28.57x			33.33x			38.46x
Number of shares outstanding for pro forma net income per share calculations⁽⁵⁾		3,003,280			3,515,360			4,027,440			4,616,332
Shareholders’ equity:
Historical	$	21,414		$	21,414		$	21,414		$	21,414
Estimated net proceeds		29,911			35,410			40,909			47,233
Plus: Market value of shares issued to charitable foundation		1,100			1,100			1,100			1,100
Plus: Tax benefit of contribution to charitable foundation		540			540			540			540
Less: Common stock acquired by employee stock ownership plan⁽²⁾		(2,604	)		(3,048	)		(3,492	)		(4,003	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾⁽⁴⁾		(1,302	)		(1,524	)		(1,746	)		(2,001	)
Less: Expense of contribution to charitable foundation⁽⁶⁾		(1,350	)		(1,350	)		(1,350	)		(1,350	)

Pro forma shareholders’ equity	$	47,709		$	52,542		$	57,375		$	62,933

Shareholders’ equity per share:
Historical	$	6.58		$	5.62		$	4.91		$	4.28
Estimated net proceeds		9.19			9.29			9.37			9.44
Plus: Market value of shares issued to charitable foundation		0.34			0.29			0.25			0.22
Plus: Tax benefit of contribution to charitable foundation		0.16			0.14			0.12			0.11
Less: Common stock acquired by employee stock ownership plan⁽²⁾		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans⁽³⁾⁽⁴⁾		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Less: Expense of contribution to charitable foundation		(0.41	)		(0.35	)		(0.31	)		(0.27	)

Pro forma shareholders’ equity per share⁽⁷⁾	$	14.66		$	13.79		$	13.14		$	12.58

Offering price as percentage of pro forma shareholders’ equity per share		68.21	%		72.52	%		76.10	%		79.49	%
Number of shares outstanding for pro forma book value per share calculations		3,255,000			3,810,000			4,365,000			5,003,250

(1)	As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)

Assumes that 8% of shares of common stock sold in the offering and contributed to our charitable foundation will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Beverly Financial at a fixed-rate per annum equal to the Prime Rate on the closing of the offering. The Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. The Bank’s total annual payments on the employee stock ownership plan debt are based upon 30 equal annual installments of principal and interest. Accounting Standard Codification, or ASC, 718-40-30 requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the

employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by the Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 40.0%. The unallocated employee stock ownership plan shares are reflected as a reduction of shareholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 2,170, 2,540, 2,910 and 3,336 shares were committed to be released during the three months ended March 31, 2014, and that 8,680, 10,160, 11,640 and 13,342 shares were committed to be released during the year ended December 31, 2013, at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. In accordance with ASC 718-40-30, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations.

(3)

If approved by Beverly Financial’s shareholders, one or more stock-based benefit plans may issue an aggregate number of shares of common stock equal to 4% of the shares to be sold in the offering and contributed to our charitable foundation (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion) for award as restricted stock to our officers, employees and directors. Shareholder approval of the stock-based benefit plans, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Beverly Financial or through open market purchases. The funds to be used by the stock-based benefit plans to purchase the shares will be provided by Beverly Financial. The table assumes that (i) the stock-based benefit plans acquire the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the stock-based benefit plans is amortized as an expense during the fiscal year and (iii) the stock-based benefit plans expense reflects an effective combined federal and state tax rate of 40.0%. Assuming shareholder approval of the stock-based benefit plans and that shares of common stock equal to 4% of the shares sold in the offering and contributed to our charitable foundation are awarded through the use of authorized but unissued shares of common stock, shareholders would have their ownership and voting interests diluted by approximately 3.85%.

(4)

If approved by Beverly Financial’s shareholders, one or more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be sold in the offering and contributed to our charitable foundation (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Shareholder approval of the stock-based benefit plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock options to be granted under stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $3.36 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. The actual expense of the stock options to be granted under the stock-based benefit plans will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based benefit plans is obtained from the issuance of authorized but unissued shares, our net income per share and shareholders’ equity per share would decrease. Assuming shareholder approval of the stock-based benefit plans and that shares of common stock used to fund stock options equal to 10% of the shares sold in the offering and contributed to our charitable foundation are awarded through the use of authorized but unissued shares of common stock, shareholders would have their ownership and voting interests diluted by approximately 9.09%.

(5)

Income per share computations are determined by taking the number of shares assumed to be sold in the offering and, in accordance with applicable accounting standards for employee stock ownership plans, subtracting the employee stock ownership plan shares that have not been committed for release during the period. See note 2 above.

(6)

Does not give effect to the nonrecurring expense that is expected to be recognized as a result of the contribution of cash and shares of common stock to our charitable foundation. Assuming the contribution to the foundation was expensed, the estimated before tax expense, estimated after-tax expense and pro forma tax benefit associated with the contribution to the foundation, and the pro forma net income (loss) and pro forma net income (loss) per share are set forth in the table below. The pro forma data assume that we will realize 100.0% of the income tax benefit as a result of the contribution to the foundation based on a 40.0% income tax rate. The realization of the tax benefit is limited annually to 10.0% of our annual taxable income. However, for federal and state tax purposes, we can carry forward any unused portion of the deduction for five years following the year in which the contribution is made.


(in thousands, except per share data)	Minimum of Offering Range			Midpoint of Offering Range			Maximum of Offering Range			Maximum, as adjusted, of Offering Range
For the three months ended March 31, 2014:
Before tax expense of contribution	$	1,350		$	1,350		$	1,350		$	1,350
Estimated after tax expense of contribution		810			810			810			810
Pro forma net loss		(473	)		(479	)		(482	)		(490	)
Pro forma net loss per share		(0.16	)		(0.14	)		(0.12	)		(0.11	)
Pro forma tax benefit		540			540			540			540

For the year ended December 31, 2013:
Before tax expense of contribution	$	1,350		$	1,350		$	1,350		$	1,350
Estimated after tax expense of contribution		810			810			810			810
Pro forma net income		433			415			396			375
Pro forma net income per share		0.14			0.12			0.10			0.08
Pro forma tax benefit		540			540			540			540

(7)

The retained earnings of the Bank will be substantially restricted after the conversion. See the sections of this prospectus entitled “Dividend Policy,” “The Conversion and Offering—Liquidation Rights” and “Supervision and Regulation.” The number of shares used to calculate pro forma shareholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

Comparison of Valuation and Pro Forma Information With and Without our Charitable Foundation

As reflected in the table below, if our charitable foundation is not established and funded as part of the offering, RP Financial estimates that our pro forma valuation would be greater and, as a result, a greater number of shares of common stock would be sold in the offering. At the minimum, midpoint, maximum and adjusted maximum of the valuation range, our pro forma valuation is $32.6 million, $38.1 million, $43.7 million and $50.0 million, respectively, with our charitable foundation, as compared to $33.6 million, $39.5 million, $45.4 million and $52.2 million, respectively, without our charitable foundation. There is no assurance that in the event our charitable foundation were not formed, the appraisal prepared at that time would conclude that our pro forma market value would be the same as that estimated in the table below. Any appraisal prepared at that time would be based on the facts and circumstances existing at that time, including, among other things, market and economic conditions.

For comparative purposes only, set forth below are certain pricing ratios and financial data and ratios at and for the three months ended March 31, 2014 at the minimum, midpoint, maximum and adjusted maximum of the offering range, assuming the offering was completed at the beginning of the year, with and without our charitable foundation.


	Minimum of Offering Range						Midpoint of Offering Range						Maximum of Offering Range						Adjusted Maximum of Offering Range
	With Foundation			Without Foundation			With Foundation			Without Foundation			With Foundation			Without Foundation			With Foundation			Without Foundation
	(Dollars in thousands, except per share amounts)
Estimated offering amount	$	31,450		$	33,575		$	37,000		$	39,500		$	42,550		$	45,425		$	48,933		$	52,239
Estimated full value		32,550			33,575			38,100			39,500			43,650			45,425			50,033			52,239
Total assets		353,310			355,001			358,143			360,161			362,976			365,320			368,534			371,254
Total liabilities		305,202			305,202			305,202			305,202			305,202			305,202			305,202			305,202
Pro forma shareholders’ equity		48,108			49,799			52,941			54,959			57,774			60,118			63,332			66,052
Pro forma net income		337			340			331			334			328			328			321			322
Pro forma shareholders’ equity per share		14.78			14.83			13.90			13.91			13.23			13.22			12.66			12.64
Pro forma net income per share		0.11			0.11			0.09			0.09			0.08			0.08			0.07			0.07
Pro forma pricing ratios:
Offering price as a percentage of pro forma shareholders’ equity per share		67.66	%		67.43	%		71.94	%		71.89	%		75.53	%		75.64	%		78.99	%		79.11	%
Offering price to pro forma net income per share		22.73x			22.73x			27.78x			27.78x			31.25x			31.25x			35.71x			35.71x
Pro forma financial ratios:
Return on assets (annualized)		0.38	%		0.38	%		0.37	%		0.37	%		0.36	%		0.36	%		0.35	%		0.35	%
Return on equity (annualized)		2.80			2.73			2.50			2.43			2.27			2.18			2.03			1.95
Equity to assets		13.62			14.03			14.78			15.26			15.92			16.46			17.18			17.79
Total shares issued		3,255,000			3,357,500			3,810,000			3,950,000			4,365,000			4,542,500			5,003,250			5,223,875

Business

General

Beverly Financial will become the stock holding company of the Bank upon completion of the conversion. Following completion of the conversion, Beverly Financial’s business activities will be the ownership of the outstanding capital stock of the Bank and management of the investment of offering proceeds retained from the conversion. Initially, Beverly Financial will not own or lease any property, but instead use the premises, equipment and other property of the Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement that Beverly Financial and the Bank will enter into upon completion of the conversion. In addition, Beverly Financial and the Bank will also enter into a tax allocation agreement upon completion of the conversion as a result of their status as members of an affiliated group under the Code. In the future, Beverly Financial may acquire other financial institutions or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.

Market Area

Our primary lending market includes the communities of Beverly, Danvers, Hamilton, Manchester, Peabody, Salem and Wenham, Massachusetts, which are located within Essex County. Due to its proximity to Boston, our primary market area benefits from the presence of numerous institutions of higher learning, medical care and research centers and the corporate headquarters of several investment and financial services companies. The greater Boston metropolitan area also has many life science and high technology companies employing personnel with specialized skills. These factors affect the demand for residential homes, residential construction, office buildings, shopping centers, and other commercial properties in our market area. Communities within our market area include many older residential commuter towns, which function partially as business and service centers.

While our primary lending market area was not affected by the recent recessionary conditions as much as the United States generally, our primary lending market area did experience increased unemployment levels and a softening of the local real estate market, including reductions in local property values. Since officially emerging from the U.S. recession in 2010, our primary lending market area has seen an increase in local property values; however, they have not yet fully returned to their pre-recession levels.

The estimated population of Essex County in 2013 was approximately 755,000, an increase of approximately 1.7% from 2010. The February 2014 unemployment rate for Essex County was 7.0% as compared to the Massachusetts unemployment rate of 6.5% and the U.S. unemployment rate of 6.7%. The 2013 estimated average household income for Essex County was $89,077 compared to the 2013 average household income for Massachusetts and the United States of $87,849 and $69,637, respectively. The 2013 estimated median household income for Essex County was $63,716 compared to 2013 median household income for Massachusetts and the United States of $63,748 and $49,297, respectively.

Although our current operations are not focused in Boston, we are affected by economic conditions in Boston because our loan portfolio includes a number of loans that are secured by real estate or that have borrowers located in Boston. In addition, a number of our customers who reside in our market area are employed in Boston, the operations of our commercial and industrial loan customers depend in part on sales of products and services to individuals or other businesses located in Boston, and a number of our non-owner occupied residential and multi-family loan customers have properties in Boston as well as in our market area. We intend to expand our lending operations, particularly commercial real estate, multi-family, non-owner occupied residential and construction lending, in Boston, so we will continue to be affected by economic conditions in Boston.

Competition

We face significant competition for deposits and loans. Our most direct competition for deposits has historically come from the banking institutions operating in our primary market area and from other financial service companies such as securities brokerage firms, credit unions and insurance companies. We also face competition for investors’ funds from money market funds and mutual funds. At June 30, 2013, which is the most recent date for which data is available from the FDIC, we held 1.5% of the deposits in Essex County, which was the 15^th largest market share out of 36 financial institutions

with offices in Essex County. Many of the banks owned by large national and regional holding companies and other community-based banks that operate in our primary market area are larger than we are and, therefore, may have greater resources or offer a broader range of products and services.

Our competition for loans comes from financial institutions, including credit unions, in our primary market area and from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from nondepository financial service companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies.

We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the internet, and made it possible for nondepository institutions to offer products and services that traditionally have been provided by banks. Competition for deposits and the origination of loans could limit our growth in the future.

Business Strategy

We have been operating continuously in and around Beverly, Massachusetts, since 1888. As emphasized by our branding statement “Your Community Bank,” we are committed to meeting the financial needs of consumers and small businesses in the communities in which we operate, and we are dedicated to providing exceptional personal service to our customers. We emphasize personalized banking, competitive pricing strategies and the advantage of local decision-making in our banking business. Following the conversion, we intend to continue to:

•

build long term, mutually beneficial relationships with our communities, customers and employees;

•

provide superior customer service and continue to investigate and offer innovative lending and deposit products designed to meet the needs of the small businesses and individuals in the communities we serve; and

•

continue to make charitable contributions to, and support, the communities in which we do business.

Additionally, we believe that the establishment and funding of our charitable foundation will further promote our relationships and exposure in our local community.

The key elements of our operating strategy are summarized below:

Continue to emphasize our commercial real estate, multi-family, construction and commercial business lending. We have worked to increase our commercial relationships by diversifying our loan portfolio beyond residential mortgage loans. Since December 31, 2009, our commercial real estate, multi-family, construction and commercial business loan portfolio has increased $47.0 million, or 37.68%, and at March 31, 2014 these loans comprised 62.36% of our total loan portfolio. We will also continue to pursue growth in business lending and deposit products and services through the addition of lending teams operating in our current market areas and adjacent markets, and we may establish loan production offices located in other communities in eastern Massachusetts.

Increase our deposit market area and expand our banking franchise as opportunities arise through de novo branching and/or branch acquisitions. Since our foundation, the Bank has primarily served the town of Beverly, Massachusetts, and the immediate surrounding communities. Despite considerable competition from larger financial institutions with greater resources than the Bank, we have increased our market presence in recent years. Our deposits have increased $65.0 million, or 29.7%, from $218.6 million at December 31, 2009 to $283.6 million at March 31, 2014. We believe our planned implementation of new service delivery channels and technological enhancements, such as mobile deposit capabilities and the ability to open new accounts online, will assist us in increasing our deposits within our market area and the surrounding communities. We also believe there are branch expansion opportunities within our market area and in the adjacent markets. We intend to evaluate branch expansion opportunities, including through establishing de novo branches and/or branch acquisitions, as they arise. However, we currently have no understandings or agreements with respect to establishing a new branch or acquiring a branch.

Maintain one- to four-family residential mortgage lending in our market area. Residential mortgage lending has historically comprised a significant portion of our operations. We recognize that one- to four-family residential mortgage lending is essential to maintaining customer relations and our status as an independent community-oriented institution, and

also creates invaluable ties to the customers that we serve. Including loans we originated and then sold, during the three months ended March 31, 2014 and the years ended December 31, 2013 and 2012, we originated $7.8 million, $44.8 million and $49.7 million of one- to four-family residential mortgage loans, respectively. After the offering, we will continue to maintain our one- to four-family residential mortgage lending capabilities and geographic coverage through the addition of lenders or lending teams that operate in our market area and adjacent markets.

Continue our conservative underwriting practices while maintaining a high quality loan portfolio. We believe that maintaining strong asset quality while undertaking the other elements of our business strategy is a key to long-term financial success. Nonperforming loans declined from a recent period-end peak of $3.7 million at December 31, 2010 to $152,000 at March 31, 2014. Aggregate net charge-offs for the period from January 1, 2010 through March 31, 2014 were $778,000. At March 31, 2014, nonperforming loans were 0.06% of the total loan portfolio. Although we intend to increase our commercial real estate, construction and commercial business lending, we intend to continue to emphasize conservative loan underwriting and credit administration standards.

Emphasize lower cost core deposits to maintain low funding costs and increase our commercial business depository relationships. We seek to increase net interest income by controlling costs of funding. Over the past several years, we have sought to reduce our dependence on traditional higher cost certificates of deposit in favor of stable lower cost demand deposits. We have utilized additional sales efforts, product offerings, technology and a focus on customer service in working toward this goal. In addition, we intend to seek to obtain demand deposits associated with our growing commercial banking relationships. Our core deposits, which we define as deposits other than certificates of deposit, comprised 75.1% of our total deposits at March 31, 2014, as compared to 52.7% at December 31, 2009.

Lending Activities

Commercial Real Estate and Multi-Family Loans. At March 31, 2014, commercial real estate loans were $97.1 million, or 35.24% of total loans, and multi-family loans were $38.0 million, or 13.78% of total loans.

We originate fixed- and adjustable-rate commercial real estate and multi-family loans for terms up to 30 years. Excluding loans maturing in one year or less, the commercial real estate and multi-family loan portfolios consisted of $12.9 million and $7.6 million, respectively, of fixed-rate loans and $70.8 million and $27.8 million, respectively, of adjustable rate loans at March 31, 2014. Interest rates and payments on our adjustable-rate loans adjust every three, five or seven years and generally are adjusted to a rate equal to a specified percentage above the corresponding FHLB Classic Advance borrowing rate. Most of our adjustable-rate commercial real estate and multi-family loans adjust every five years and amortize over a 25 year term. Loan amounts do not exceed 80% of the property’s appraised value at the time the loan is originated.

We currently focus our commercial real estate and multi-family origination efforts on small- and mid-size owner occupants and investors in our market area seeking loans between $2.0 million and $3.0 million. Our commercial real estate and multi-family loans are generally secured by properties used for business purposes such as office buildings, warehouses, retail facilities and apartment buildings. In addition to originating these loans, we also participate in commercial real estate loans with other financial institutions located primarily in Massachusetts.

At March 31, 2014, the average loan balance of our outstanding commercial real estate and multi-family loans was $369,000, and our four largest loans ranged from $2.8 million to $3.5 million. These loans were performing in accordance with their original terms at March 31, 2014.

Residential Mortgage Loans. We also offer mortgage loans to enable borrowers to purchase homes or refinance loans on existing homes, most of which serve as the primary residence of the owner. At March 31, 2014, residential mortgage loans were $91.3 million, or 33.16% of total loans, and, excluding loans maturing in one year or less, consisted of $58.6 million and $32.3 million of fixed-rate and adjustable rate loans, respectively. Non-owner occupied residential loans were $12.8 million, or 4.65% of total loans.

We offer fixed-rate and adjustable-rate residential mortgage loans with terms up to 30 years. Generally, our fixed-rate loans conform to Fannie Mae and Freddie Mac underwriting guidelines and are originated with the intention to sell. Our adjustable-rate mortgage loans generally adjust annually or every three years after an initial fixed period that ranges from three to seven years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a specified percentage above the three year U.S. Treasury index. Depending on the loan type, the maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate caps range from 5% to 6% over the initial interest rate of the loan.

Borrower demand for adjustable-rate compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

While residential mortgage loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans. Additionally, our current practice is generally to (1) sell to the secondary market newly originated 15-year or longer term conforming fixed-rate residential mortgage loans, and (2) hold in our portfolio nonconforming loans, shorter-term fixed-rate loans and adjustable-rate loans. Generally, conforming fixed-rate loans are sold to third parties with servicing either retained or released. Our portfolio lending generally consists of conforming and non-conforming adjustable-rate loans for owner-occupied and investor properties with loan-to-value ratios of up to 80%. We generally do not originate “interest only” mortgage loans on one- to four-family residential properties nor do we offer loans that provide for negative amortization of principal such as “option ARM” loans where the borrower can pay less than the interest owed on their loan. Additionally, we do not offer “subprime” loans (loans that are made with low down payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies or borrowers with questionable repayment capacity) or “Alt-A” loans (loans to borrowers having less than full documentation).

We will make loans with loan-to-value ratios up to 90% (95% for first time home buyers only); however, we generally require private mortgage insurance for residential loans secured by a first mortgage with a loan-to-value ratio over 80%. We generally require all properties securing mortgage loans to be appraised by a licensed real estate appraiser. We generally require title insurance on all first mortgage loans. Exceptions to these lending policies are based on an evaluation of credit risk related to the borrower and the size of the loan. Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

In an effort to provide financing for first-time buyers, we offer adjustable- and fixed-rate loans to qualified individuals and originate the loans using modified underwriting guidelines, reduced interest rates and loan conditions and reduced closing costs.

Commercial Business Loans. We make commercial business loans primarily in our market area to a variety of professionals, sole proprietorships and small businesses. At March 31, 2014, commercial business loans were $21.4 million, or 7.77% of total loans. Commercial lending products include term and time loans and revolving lines of credit. Commercial business loans and lines of credit are made with either variable or fixed rates of interest. Variable rates are based on the prime rate as published in The Wall Street Journal, plus a margin. Fixed-rate business loans are generally indexed to a corresponding FHLB rate, plus a margin. Commercial business loans typically have shorter maturity terms and higher interest spreads than real estate loans, but generally involve more credit risk because of the type and nature of the collateral. We are focusing our efforts on small- to medium-sized, privately held companies with local or regional businesses that operate in our market area. In addition, commercial business loans are generally made only to existing customers having a business or individual deposit account and new borrowers are expected to establish appropriate deposit relationships with us if not already a depositor.

When making commercial loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities of the borrower, the projected cash flows of the business and the value of the

collateral, primarily accounts receivable, inventory and equipment. Generally, loans are supported by personal guarantees. Depending on the collateral used to secure the loans, commercial business loans are generally made in amounts of up to 80% of the value of the collateral securing the loan.

At March 31, 2014, our largest commercial business loan was a $1.7 million loan and our largest commercial line of credit was $2.0 million, of which $1.3 million was outstanding at March 31, 2014. These loans are secured by all business assets of the respective borrowers and were performing according to their original terms at March 31, 2014. No other commercial business loan or commercial line of credit exceeded $790,000 at March 31, 2014.

Construction Loans. At March 31, 2014, construction loans were $15.3 million, or 5.57% of total loans. We primarily originate construction loans to contractors and builders, and to a lesser extent individuals, to finance the construction of residential dwellings. We also make construction loans for commercial development projects, including small industrial buildings and retail and office buildings. Our construction loans generally are fixed-rate, interest-only loans that provide for the payment of interest only during the construction phase, which is usually 12 months. At the end of the construction phase, the loan may be paid in full or converted to a permanent mortgage loan. Construction loans generally can be made with a maximum loan to value ratio of 80% of the appraised market value estimated upon completion of the project. Before making a commitment to fund a construction loan, we generally require an appraisal of the property by an independent licensed appraiser. Our construction loans do not provide for interest payments to be funded by interest reserves.

Our loan policy dictates a minimum equity contribution by the borrower of 20% and an end loan-to-value ratio not greater than 80%. All borrowers are underwritten and evaluated for creditworthiness based on past experience, debt service ability, net worth analysis including available liquidity, and other credit factors. We generally require personal guarantees on all construction loans. Advances are only made following an inspection of the property confirming completion of the required progress on the project and an update to the title completed by a bank approved attorney.

Most of our loans for the construction of residential properties are for residences being built that have not been sold prior to commencement of construction (speculative loans). At March 31, 2014, our construction loan portfolio consisted of $6.4 million in loans that were secured by residential real estate speculative loan projects, $2.1 million in loans that were secured by owner-occupied residential real estate, and $6.8 million in loans that were secured by commercial real estate speculative loan projects.

At March 31, 2014, our largest outstanding construction loan relationship was for a single-family subdivision aggregating $3.1 million. This project is secured by a first mortgage on homes built. This relationship was performing according to its original repayment terms at March 31, 2014.

Home Equity Loans and Lines of Credit. We offer home equity lines of credit, which are secured by owner-occupied residences. At March 31, 2014, home equity lines of credit were $11.8 million, or 4.27% of total loans. Home equity lines of credit have adjustable rates of interest with 10-year draws amortized over 10 years that are indexed to the London Interbank Offered Rate (LIBOR) and generally are subject to an interest rate floor. Our home equity lines of credit generally have a monthly variable interest rate. We offer home equity lines of credit with cumulative loan-to-value ratios generally up to 80%, when taking into account both the balance of the home equity loans and first mortgage loan. We typically do not hold a first mortgage position on the homes that secure home equity lines of credit.

The procedures for underwriting home equity lines of credit include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral to the proposed loan amount. The procedures for underwriting residential mortgage loans apply equally to home equity loans.

Other Consumer Loans. We occasionally make automobile loans, loans secured by passbook or certificate accounts and overdraft loans. At March 31, 2014, other consumer loans were $567,000, or 0.21% of total loans.

The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

Loan Underwriting Risks.

Commercial Real Estate Loans. Loans secured by commercial real estate, including multi-family real estate, generally have larger balances and involve a greater degree of risk than residential mortgage loans. Of primary concern in commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, where applicable, to provide annual financial statements on commercial real estate loans. In reaching a decision on whether to make a commercial real estate loan, we consider the net operating income of the property, the borrower’s expertise, credit history, profitability and the value of the underlying property. We require an environmental survey for commercial real estate loans.

Commercial Business Loans. Commercial loans also involve a greater degree of risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Construction Loans. Construction financing is considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a project having a value which is insufficient to assure full repayment. As a result of the foregoing, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest. If we are forced to foreclose on a project before or at completion due to a default, we may not be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Residential Loans. Due to historically low interest rate levels, borrowers generally have preferred fixed-rate loans in recent years. While we anticipate that our adjustable-rate loans will better offset the adverse effects on our net interest income of an increase in interest rates as compared to fixed-rate mortgages, the increased mortgage payments required of adjustable-rate loans in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

Consumer Loans. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Loan Originations, Purchases and Sales. Loan originations come from a number of sources. The primary source of loan originations are our in-house loan originators, and to a lesser extent, local mortgage brokers, advertising and referrals from customers. We occasionally purchase commercial real estate loans or participation interests in commercial real estate loans.

Additionally, our current practice is generally (1) to sell to the secondary market newly originated 15-year or longer term conforming fixed-rate residential mortgage loans and (2) to hold in our portfolio nonconforming loans, shorter-term fixed-rate loans and adjustable-rate residential mortgage loans. Our decision to sell loans is based on prevailing market

interest rate conditions and interest rate risk management. Loans are sold to third parties with servicing either retained or released. In addition, we sell participation interests in commercial real estate loans to local financial institutions, primarily the portion of loans that exceed our borrowing limits or are in an amount that is considered prudent to manage our credit risk.

For the three months ended March 31, 2014 and year ended December 31, 2013, we originated $20.6 million and $120.1 million of loans. During the same periods, we sold $1.9 million and $19.5 million of loans, all of which were residential mortgage loans.

Loan Participations. We look to form relationships with other financial institutions and mitigate risk of our lending activities by participating either as the lead bank or as a participant in various loan transactions. We independently underwrite each loan using underwriting practices that generally do not differ from loans that we originate.

At March 31, 2014, the outstanding balances of loan participations purchased totaled $13.2 million and loan participations sold totaled $14.8 million.

Loan Approval Procedures and Authority. Our lending activities follow written, nondiscriminatory underwriting standards and loan origination procedures established by our board of directors and management. Our board of directors has granted loan approval authority to certain executive officers. Loans in excess of any officer’s individual authority and up to the “in-house limit” established by the board of directors and loans containing any exceptions to our loan policies must be approved by the security committee, which is comprised of our president and chief executive officer and three independent members of our board of directors. Loans in excess of the “in-house limit” must be approved by the board of directors. The security committee of the board of directors reviews all residential loan requests greater than $800,000, commercial loan requests greater than $600,000, and commercial real estate loan requests greater than $800,000. All mortgage and commercial real estate loans to any single borrower that exceed $1.5 million and commercial loans that exceed $1.0 million must be approved by the board of directors. The president and senior loan officer are authorized to grant lending authority to officers and other employees in individual amounts up to $100,000. Delegation of such authority is made after due consideration of the individual’s lending experience, past performance and his/her area of responsibility.

Loans-to-One Borrower Limit. The maximum amount that the Bank may lend to one borrower and the borrower’s related entities is generally limited, by statute, to 20% of the Bank’s capital, which is defined under Massachusetts law as the sum of the Bank’s capital stock, surplus account and undivided profits. At March 31, 2014, our regulatory limit on loans-to-one borrower was $5.4 million. At that date, our largest lending relationship totaled $4.3 million and was secured by commercial real estate and multi-family properties. This loan was performing in accordance with its original repayment terms at March 31, 2014. Upon completion of this offering, our regulatory limit on loans-to-one borrower will increase to $7.6 million at the minimum, $8.0 million at the midpoint, $8.4 million at the maximum and $8.9 million at the adjusted maximum. Following the completion of this offering, our board of directors will determine and set our internal limit on loans-to-one borrower.

Loan Commitments. We issue commitments for fixed- and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after 60 days.

Investment Activities

General. The goals of our investment policy are to provide and maintain liquidity to meet deposit withdrawal and loan funding needs, to help mitigate interest rate and market risk, to diversify our assets, and to generate a reasonable rate of return on funds within the context of our interest rate and credit risk objectives. Our board of directors is responsible for adopting our investment policy. The investment policy is reviewed annually by the board of directors and our security committee. Authority to make investments under the approved investment policy guidelines is delegated to our president and chief executive officer and our chief financial officer. All investment transactions are reviewed at the next regularly scheduled meeting of the board of directors. We classify the majority of our securities as available-for-sale.

We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the FHLB, certificates of deposit of federally insured institutions, investment grade corporate bonds and investment grade marketable equity securities. We also are required to maintain an investment in FHLB stock. While we have the authority under applicable law to invest in derivative securities, we had no investments in derivative securities at March 31, 2014.

U.S. Government and Agency Obligations. At March 31, 2014, we had U.S. government and agency securities totaling $2.4 million, which constituted 11.3% of our securities portfolio. While these securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent we deem appropriate, for liquidity purposes, as collateral for borrowings and for prepayment protection.

Mortgage-Backed Securities. At March 31, 2014, we had mortgage-backed securities totaling $16.2 million, which constituted 75.1% of our securities portfolio. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors, net of certain costs, including servicing and guarantee fees. Mortgage-backed securities typically are collateralized by pools of one- to four-family or multi-family mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as the Bank. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. All of our mortgage-backed securities are either backed by Ginnie Mae, a U.S. government agency, or government-sponsored enterprises, such as Fannie Mae and Freddie Mac.

Residential mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, residential mortgage-backed securities may be used to collateralize our borrowings. Investments in residential mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

FHLB Stock. We held common stock of the FHLB in connection with our borrowing activities totaling $2.9 million at March 31, 2014. The FHLB common stock is carried at cost and classified as restricted equity securities. We may be required to purchase additional FHLB stock if we increase borrowings in the future.

Other Securities. At March 31, 2014, we had $568,000 invested in the Co-operative Central Bank reserve fund but did not have any mutual funds, corporate bonds, preferred stock, or equities. These securities generally provide higher yields than other securities in our portfolio and in some cases more liquid than our other investments, so we may maintain these investments to provide liquidity and to generate returns in our portfolio.

Bank-Owned Life Insurance. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. At March 31, 2014, our balance in bank-owned life insurance totaled $4.2 million and was issued by three insurance companies.

Sources of Funds

General. Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

Deposit Accounts. Deposits are attracted from within our market area by sales efforts of our commercial loan and retail officers, advertising and through our website. We offer a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), savings accounts and certificates of deposit. From time to time we have utilized brokered deposits as part of our funding sources to fund loan growth. At March 31, 2014, we had $10.0 million of brokered deposits, which represents 3.51% of total deposits at March 31, 2014. Brokered deposits are a more volatile source of funding than core deposits and do not increase our deposit franchise. In a rising rate environment, we may be unwilling or unable to pay a competitive rate. To the extent that such deposits do not remain with us, they may need to be replaced with borrowings, which could increase our cost of funds and negatively impact our interest rate spread, financial condition and results of operation.

Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity needs, profitability to us, and customer preferences and concerns. We generally

review our deposit mix and pricing on a weekly basis. Our deposit pricing strategy has generally been to offer competitive rates and to offer periodically special rates in order to attract deposits of a specific type or term.

Business Banking and Cash Management Services. We also offer a variety of deposit accounts designed for businesses operating in our market area. Our business banking deposit products include a commercial checking account and checking accounts specifically designed for small businesses. We also offer remote deposit capture products for business customers to meet their online banking needs. Additionally, we offer sweep accounts and money market accounts for businesses. We are seeking to increase our commercial deposits through the offering of these types of cash management products.

Borrowings. We may utilize advances from the FHLB to supplement our supply of investable funds. The FHLB functions as a central reserve bank providing credit for its member financial institutions. As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our whole first mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness. At March 31, 2014 and December 31, 2013, we had $12.0 million and $10.0 million in outstanding advances from the FHLB, respectively. At March 31, 2014 and December 31, 2013, based on available collateral and our ownership of FHLB stock, and based upon our internal policy, we had access to additional FHLB advances of up to $49.7 million and $50.0 million, respectively. We had no overnight advances with FHLB on this date. All of our borrowings from the FHLB are secured by a blanket lien on residential real estate.

The Co-operative Central Bank borrowings for liquidity purposes are available to all cooperative member banks. Loan advances will generally be made on an unsecured basis provided that the aggregate loan balance is less than 5% of total deposits of the member bank; the member bank’s primary capital ratio is in excess of 5%; the member bank meets the required CAMELS rating; and the quarterly and year-to-date net income before extraordinary items is positive. At March 31, 2014, we had $5.0 million of borrowing capacity with the Co-operative Central Bank, none of which was outstanding.

Securities sold under agreements to repurchase are customer deposits that are invested overnight in mortgage-related securities. The customers, predominantly commercial customers, set a predetermined balance and deposits in excess of that amount are transferred into the repurchase account from each customer’s checking account. The next banking day, the funds are recredited to their individual checking account along with interest earned at market rates. These types of accounts are often referred to as sweep accounts.

Junior Subordinated Debentures. On December 17, 2003, Beverly Cooperative Statutory Trust I, or Trust I, issued $3.0 million of capital securities and purchased $3.1 million of variable rate junior subordinated deferrable interest debentures from Beverly Financial, MHC, which mature on December 17, 2033. On October 19, 2007, Beverly Cooperative Statutory Trust II, or Trust II, issued $3.0 million of capital securities and purchased $3.1 million of variable rate junior subordinated deferrable interest debentures from Beverly Financial, MHC, which mature on December 15, 2037. The proceeds of these capital securities, which have been contributed to the Bank, are included in the Bank’s capital ratio calculations and treated as Tier 1 capital.

In December 2008, the Bank borrowed $3.0 million from another bank in the form of a subordinated note. As of March 31, 2014, the outstanding balance of the subordinated note was $1.5 million. The subordinated note qualifies as Tier 2 capital for regulatory purposes.

For additional information pertaining to our junior subordinated debentures, see the section of this prospectus entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Comparison of Financial Condition at March 31, 2014 and December 31, 2013 and 2012—Junior Subordinated Debentures.”

Properties

The following table sets forth information with respect to our banking offices, including the expiration date of leases with respect to leased facilities.


Office Name and Address	Leased or Owned	Year Acquired or Leased	Month of Lease Expiration
254 Cabot Street Beverly, Massachusetts 01915	Owned	1955	—

63 Dodge Street Beverly, Massachusetts 01915	Lease	August 1996	February 2016

48 Enon Street Beverly, Massachusetts 01915	Lease	February 1995	January 2016

73 Lafayette Street Salem, Massachusetts 01970	Owned – Building Lease – Right of Way	January 2003	December 2032

Personnel

As of July 15, 2014, we had 49 full-time and 27 part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

Subsidiaries

Beverly Financial currently has no subsidiaries. Upon completion of the conversion, the Bank will become the wholly-owned subsidiary of Beverly Financial.

In addition to owning 100% of the Bank, Beverly Financial, MHC has two other wholly owned subsidiaries, Beverly Cooperative Statutory Trust I and Beverly Cooperative Statutory Trust II. The trusts were formed in 2003 and 2007, respectively, for the purpose of issuing trust preferred securities.

The Bank has three wholly owned subsidiaries, Beverly Security Corporation, 254 Cabot Street Corporation and Essex County Properties, LLC. Beverly Security Corporation, a Massachusetts-chartered corporation, was formed for the primary purpose of holding qualified securities. 254 Cabot Street Corporation, a Massachusetts-chartered corporation, was formed to hold property and equipment of the Bank. Essex County Properties, LLC, a Massachusetts-chartered limited liability company, was formed for the primary purpose of holding real property acquired as security for debts previously contracted by the Bank.

Legal Proceedings

We are not currently a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section is intended to help potential investors understand the financial performance of Beverly Financial, MHC and its subsidiaries through a discussion of the factors affecting our financial condition at March 31, 2014, December 31, 2013 and December 31, 2012, and our results of operations for the three months ended March 31, 2014 and 2013 and for the years ended December 31, 2013 and 2012. This section should be read in conjunction with the consolidated financial statements and notes thereto that appear elsewhere in this prospectus.

Overview

Our fundamental business strategy is to be a “well-capitalized,” full service community bank that provides high quality customer service and competitively priced products and services to individuals and businesses in the communities we serve.

Our results of operations depend primarily on net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on interest-bearing liabilities. Our interest-earning assets consist primarily of commercial real estate loans, residential mortgage loans, multi-family loans, commercial business loans, home equity loans and lines of credit, construction loans, consumer loans, mortgage-backed securities and investment securities. Interest-bearing liabilities consist primarily of deposit accounts, borrowings from the FHLB and junior subordinated debt.

Since December 31, 2009, our total assets have grown from $304.5 million to $327.0 million at March 31, 2014, and our total deposits have grown from $218.6 million to $283.6 million at March 31, 2014. Our growth during this period was funded primarily through deposit growth and retained earnings. The deposit growth allowed for a significant reduction in borrowed funds. As of March 31, 2014, we were considered “well-capitalized” for regulatory purposes.

Critical Accounting Policies

Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Our significant accounting policies are discussed in detail in Note 2 to our Consolidated Financial Statements included elsewhere in this prospectus.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: the likelihood of default; the loss exposure at default; the amount and timing of future cash flows on impaired loans; the value of collateral; and the determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the Massachusetts Commissioner of Banks, as an integral part of their examination process, periodically review our allowance for loan losses and may require us to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See notes 2 and 4 of the notes to consolidated financial statements included in this prospectus.

Deferred Tax Assets. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. Management reviews deferred tax assets on a quarterly basis to identify any uncertainties pertaining to realization of such assets. In determining whether a valuation allowance is required against deferred tax assets, management assesses historical and forecasted operating results, including a review of eligible carryforward periods, tax planning opportunities and other relevant considerations. We believe the accounting estimate related to the valuation allowance is a critical estimate because the underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change in the valuation allowance. Should actual factors and conditions differ materially from those used by management, the actual realization of net deferred tax assets could differ materially from the amounts recorded in the financial statements. If we were not able to realize all or part of our deferred tax assets in the future, an adjustment to the related valuation allowance would be charged to income tax expense in the period such determination was made and could have a negative impact on earnings. In addition, if actual factors and conditions differ materially from those used by management, we could incur penalties and interest imposed by taxing authorities.

Comparison of Financial Condition at March 31, 2014 and December 31, 2013 and 2012

Total Assets. Total assets increased $3.0 million, or 0.93%, from $324.0 million at December 31, 2013 to $327.0 million at March 31, 2014. Total assets increased primarily due to an increase in total net loans and an increase in cash and cash equivalents of $2.9 million and $1.6 million, respectively, partially offset by a decrease in investment securities of $1.1 million.

Total assets increased $15.7 million, or 5.09%, from $308.3 million at December 31, 2012 to $324.0 million at December 31, 2013, primarily due to an increase in total net loans of $37.4 million, partially offset by a decrease in cash and cash equivalents of $13.6 million and a decrease in investment securities of $7.0 million.

Net Loans. Total net loans increased by $2.9 million, or 1.08%, from $269.0 million at December 31, 2013 to $271.9 million at March 31, 2014. The increase in loans was due primarily to an increase of $3.5 million, or 3.75%, in commercial real estate loans and an increase of $2.1 million, or 5.84%, in multi-family real estate loans, partially offset by a decrease of $3.9 million, or 20.14%, in construction loans. The increase in loans reflects our continued focus on generating commercial real estate and multi-family loans, which was partially offset by pay downs and payoffs of loans.

Total net loans increased by $37.4 million, or 16.15%, from $231.6 million at December 31, 2012 to $269.0 million at December 31, 2013. The increase in loans was due primarily to an increase of $17.9 million, or 23.71%, in commercial real estate loans, an increase of $7.2 million, or 25.22%, in multi-family real estate loans, and an increase of $5.4 million, or 38.77%, in construction loans. These increases reflect our continued emphasis on originating these types of loans and increased loan demand. One- to four-family residential loans also increased $5.0 million, or 5.88%, and home equity loans and lines of credit increased $1.6 million, or 16.49%.

The following tables set forth the composition of our loan portfolio at the dates indicated:


	At March 31,						At December 31,
	2014						2013						2012
(Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Real estate loans:
One- to four-family residential	$	91,345			33.16	%	$	90,841			33.34	%	$	85,795			36.51	%
Commercial		97,057			35.24			93,549			34.33			75,619			32.18
Multi-family		37,959			13.78			35,865			13.16			28,641			12.19
Home equity loans and lines of credit		11,773			4.27			11,485			4.21			9,859			4.20
Construction		15,338			5.57			19,207			7.05			13,841			5.89
Commercial business loans		21,404			7.77			21,053			7.73			20,629			8.78
Consumer loans		567			0.21			500			0.18			592			0.25

		275,443			100.00	%		272,500			100.00	%		234,976			100.00	%

Deferred loan origination costs (fees), net		36						37						(18	)
Allowance for loan losses		(3,556	)					(3,489	)					(3,346	)

Loans, net	$	271,923					$	269,048					$	231,612


	At December 31,
	2011						2010						2009
(Dollars in thousands)	Amount			Percent			Amount			Percent			Amount			Percent
Real estate loans:
One- to four-family residential	$	83,244			36.92	%	$	96,480			41.61	%	$	113,104			45.40	%
Commercial		77,708			34.47			77,697			33.51			74,949			30.09
Multi-family		27,482			12.19			21,212			9.15			20,508			8.23
Home equity loans and lines of credit		9,449			4.19			10,223			4.41			10,426			4.19
Construction		10,940			4.85			10,533			4.54			10,040			4.03
Commercial business loans		15,922			7.06			15,026			6.48			19,251			7.73
Consumer loans		722			0.32			691			0.30			830			0.33

		225,467			100.00	%		231,862			100.00	%		249,108			100.00	%

Deferred loan origination fees, net		(39	)					(27	)					(24	)
Allowance for loan losses		(3,148	)					(3,075	)					(2,904	)

Loans, net	$	222,280					$	228,760					$	246,180

The following table sets forth our loan originations (net of sales of residential one- to four-family mortgage loans), purchases and principal repayment activities during the periods indicated.


	Three Months Ended March 31,						Years Ended December 31,
(In thousands)	2014			2013			2013			2012			2011
Total loans at beginning of period	$	272,500		$	234,976		$	234,976		$	225,466		$	231,862

Loan originations:
Real estate loans:
One- to four-family residential		5,865			7,987			25,257			20,902			9,286
Commercial		3,858			5,326			25,930			8,952			12,155
Multi-family		3,500			2,656			16,728			6,400			9,619
Home equity loans and lines of credit		1,889			1,746			5,072			3,020			1,480
Construction		2,964			594			16,362			11,400			6,311

Total real estate		18,076			18,309			89,349			50,674			38,851
Commercial business loans		530			4,137			10,930			11,597			8,043
Consumer loans		126			47			307			143			257

Total loans originations		18,732			22,493			100,586			62,414			47,151

Loan purchases:
Real estate loans:
One- to four-family residential		—			—			—			—			—
Commercial		—			—			6,654			—			1,200
Multi-family		—			—			—			1,476			—
Home equity loans and lines of credit		—			—			—			—			—
Construction		—			—			250			—			—

Total real estate		—			—			6,904			1,476			1,200
Commercial business loans		—			—			—			—			—
Consumer loans		—			—			—			—			—

Total loan purchases		—			—			6,904			1,476			1,200

Other:
Principal repayments, net		(13,192	)		(16,508	)		(58,504	)		(45,994	)		(47,675	)
Unadvanced funds on originations		(2,597	)		(3,169	)		(10,915	)		(8,220	)		(5,705	)
Transfer to other real estate owned		—			—			(547	)		(166	)		(1,367	)

Total other		(15,789	)		(19,677	)		(69,966	)		(54,380	)		(54,747	)
Net loan activity		2,943			2,816			37,524			9,510			(6,396	)

Total loans at end of period	$	275,443		$	237,792		$	272,500		$	234,976		$	225,466

The Bank originates residential one- to four-family real estate loans for sale as well as for its own portfolio. During the three months ended March 31, 2014 and 2013 and for the years ended December 31, 2013, 2012 and 2011, the Bank sold $1.9 million, $9.3 million, $19.5 million, $28.8 million and $14.5 million of residential one- to four-family real estate loans, respectively.

Loan Maturity. The following tables set forth certain information at March 31, 2014 and December 31, 2013 regarding scheduled contractual maturities during the periods indicated. The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. The amounts shown below exclude net deferred loan fees.


	March 31, 2014
(In thousands)	One- to Four- Family Residential Real Estate		Commercial Real Estate		Multi- Family Real Estate		Home Equity Loans and Lines of Credit		Construction		Commercial Business		Consumer		Total Loans
Amounts due in:
One year or less	$	470	$	13,365	$	2,601	$	113	$	7,714	$	1,628	$	305	$	26,196
More than one to two years		43		8,725		3,843		14		742		1,466		16		14,849
More than two to three years		199		11,702		6,936		13		499		1,475		74		20,898
More than three to five years		1,250		39,824		10,994		186		2,704		3,849		172		58,979
More than five to ten years		13,851		18,536		11,028		5,343		742		6,049		—		55,549
More than ten to 15 years		15,748		4,905		752		648		1,112		548		—		23,713
More than 15 years		59,784		—		1,805		5,456		1,825		6,389		—		75,259

Total	$	91,345	$	97,057	$	37,959	$	11,773	$	15,338	$	21,404	$	567	$	275,443


	December 31, 2013
(In thousands)	One- to Four- Family Residential Real Estate		Commercial Real Estate		Multi- Family Real Estate		Home Equity Loans and Lines of Credit		Construction		Commercial Business		Consumer		Total Loans
Amounts due in:
One year or less	$	566	$	14,647	$	2,302	$	—	$	9,164	$	1,692	$	214	$	28,585
More than one to two years		137		8,651		4,205		117		1,203		1,141		25		15,479
More than two to three years		227		11,595		6,978		27		776		1,499		76		21,178
More than three to five years		1,078		39,421		11,951		161		3,974		3,817		185		60,587
More than five to ten years		14,394		15,192		8,135		5,411		752		6,333		—		50,217
More than ten to 15 years		15,752		4,043		762		1,222		1,986		557		—		24,322
More than 15 years		58,687		—		1,532		4,547		1,352		6,014		—		72,132

Total	$	90,841	$	93,549	$	35,865	$	11,485	$	19,207	$	21,053	$	500	$	272,500

Fixed vs. Adjustable Rate Loans. The following table sets forth the dollar amount of all scheduled maturities of loans at March 31, 2014 that are due after March 31, 2015 and have either fixed interest rates or adjustable interest rates. The amounts shown below exclude net deferred loan fees.


(In thousands)	Fixed Rates		Adjustable Rates		Total
Real estate loans:
One- to four-family residential	$	58,558	$	32,317	$	90,875
Commercial		12,928		70,764		83,692
Multi-family		7,557		27,801		35,358
Home equity loans and lines of credit		—		11,660		11,660
Construction		2,201		5,423		7,624
Commercial business loans		9,578		10,198		19,776
Consumer loans		262		—		262

Total	$	91,084	$	158,163	$	249,247

The following table sets forth the dollar amount of all scheduled maturities of loans at December 31, 2013 that are due after December 31, 2014 and have either fixed interest rates or adjustable interest rates. The amounts shown below exclude net deferred loan fees.


(In thousands)	Fixed Rates		Adjustable Rates		Total
Real estate loans:
One- to four-family residential	$	59,416	$	30,859	$	90,275
Commercial		11,747		67,155		78,902
Multi-family		3,634		29,929		33,563
Home equity loans and lines of credit		—		11,485		11,485
Construction		2,118		7,925		10,043
Commercial business loans		9,631		9,730		19,361
Consumer loans		286		—		286

Total	$	86,832	$	157,083	$	243,915

Securities. Our securities portfolio is predominately composed of investment grade mortgage-backed securities and securities issued by U.S. government-sponsored corporations. We classify the majority of our securities as available-for-sale. We do not engage in securities trading or derivatives activities in carrying out our investment strategies.

Securities, in the aggregate, decreased by $1.1 million, or 4.78%, to $21.5 million at March 31, 2014. The decrease in the portfolio was primarily due to normal pay downs or maturities and calls during the three months ended March 31, 2014. Securities, in the aggregate, decreased by $7.0 million, or 23.58%, to $22.6 million at December 31, 2013, from $29.6 million at December 31, 2012. The decrease in the portfolio was primarily due to normal pay downs or maturities and the sale of FHLB stock during the year ended December 31, 2013.

The following table sets forth the amortized cost and fair values of our securities portfolio at the dates indicated.


	At March 31,				At December 31,
	2014				2013				2012				2011
	Amortized		Fair		Amortized		Fair		Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value		Cost		Value		Cost		Value
Securities available-for-sale:
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies	$	2,451	$	2,444	$	2,455	$	2,440	$	9,441	$	9,497	$	12,018	$	12,139
Issued by foreign governments		25		25		25		25		25		25		25		25
Mortgage-backed securities		16,084		16,180		17,206		17,266		16,601		16,852		13,185		13,292
Marketable equity securities		—		—		—		—		—		—		33		39
Preferred stock		—		—		—		—		—		—		309		365

Total securities available-for-sale		18,560		18,649		19,686		19,731		26,067		26,374		25,570		25,860


FHLB stock		2,894		2,894		2,894		2,894		3,231		3,231		3,523		3,523

Total securities	$	21,454	$	21,543	$	22,580	$	22,625	$	29,298	$	29,605	$	29,093	$	29,383

At March 31, 2014, we had no investments in a single company or entity (other than the U.S. government or an agency of the U.S. government), including both debt and equity securities, that had an aggregate book value in excess of 10% of our equity.

The following table sets forth the stated maturities and weighted average yields of investment securities at March 31, 2014. As of March 31, 2014, we do not have any tax-exempt or municipal securities. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below.


	One Year or Less					More than One Year to Five Years					More than Five Years to Ten Years					More than Ten Years					Total
(Dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield
Securities available-for-sale:
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies	$	—		—	%	$	1,494		0.97	%	$	957		2.18	%	$	—		—	%	$	2,451		1.45	%
Issued by foreign governments		—		—			25		1.14			—		—			—		—			25		1.14
Mortgage-backed securities		—		—			—		—			7,163		2.30			8,921		1.82			16,084		2.03

Total securities available-for-sale	$	—		—	%	$	1,519		0.97	%	$	8,120		2.29	%	$	8,921		1.82	%	$	18,560		1.95	%

Deposits. Our primary sources of funds are retail deposit accounts held primarily by individuals and businesses within our market area. Deposits increased $8.2 million, or 2.98%, to $283.6 million at March 31, 2014. Deposits increased $15.8 million, or 6.09%, to $275.4 million at December 31, 2013 from $259.6 million at December 31, 2012. At March 31, 2014 and December 31, 2013, our core deposits, which are deposits other than certificates of deposit and brokered deposits, were $212.9 million and $209.2 million, respectively, representing 75.06% and 75.96%, respectively, of total deposits. This level of core deposits shows continued shifting out of certificates of deposit by customers to more liquid deposit accounts due to low interest rates.

The following table sets forth the average balances and weighted average rates of our deposit products at the dates indicated.


	For the Three Months Ended March 31,								For the Year Ended December 31,
	2014								2013
(Dollars in thousands)	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
Deposit type:
Noninterest-bearing demand	$	53,795		19.52	%		—	%	$	52,171		20.04	%		—	%
Money market		98,488		35.74			0.61			84,689		32.53			0.63
Savings		43,079		15.63			0.11			42,278		16.24			0.13
NOW accounts		12,091		4.39			0.17			12,247		4.70			0.17
Certificates of deposit		68,109		24.72			1.05			68,955		26.49			1.11

Total	$	275,562		100.00	%		0.63	%	$	260,340		100.00	%		0.66	%


	For the Years Ended December 31,
	2012								2011
(Dollars in thousands)	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
Deposit type:
Noninterest-bearing demand	$	45,075		18.44	%		—	%	$	37,510		15.48	%		—	%
Money market		70,442		28.81			0.71			66,840		27.60			1.05
Savings		37,806		15.46			0.26			33,420		13.79			0.29
NOW accounts		11,987		4.90			0.22			10,012		4.13			0.13
Certificates of deposit		79,197		32.39			1.31			94,487		39.00			1.61

Total	$	244,507		100.00	%		0.83	%	$	242,269		100.00	%		1.14	%

The following table sets forth our certificates of deposit classified by interest rate as of the dates indicated.


	At March 31,		At December 31,
(Dollars in thousands)	2014		2013		2012		2011
0.00% - 1.00%	$	44,970	$	44,122	$	43,242	$	24,668
1.01 - 2.00%		18,042		17,173		22,386		45,828
2.01 - 3.00%		7,721		4,776		9,396		12,551
3.01 - 4.00%		—		125		135		1,148
4.01 - 5.00%		—		—		—		259
5.01 - 6.00%		—		—		—		—
6.01 - 7.00%		—		—		—		—
7.01 - 8.00%		—		—		—		—
8.01 - 9.00%		—		—		—		2

Total	$	70,733	$	66,196	$	75,159	$	84,456

The following table sets forth the amount and maturities of our certificates of deposit by interest rate at March 31, 2014.


	Amount Due										Total		% of Total Certificate Accounts
	Less than One Year		More than One Year to Two Years		More Than Two Years to Three Years		More Than Three Years to Four Years		More than Four Years
(Dollars in thousands)	Less than One Year		More than One Year to Two Years		More Than Two Years to Three Years		More Than Three Years to Four Years		More than Four Years
0.00 - 100%	$	30,190	$	8,352	$	6,428	$	—	$	—	$	44,970		63.58	%
1.01 - 2.00%		7,227		5,201		1,887		2,417		1,310		18,042		25.51	%
2.01 - 3.00%		2,665		1,211		256		—		3,589		7,721		10.91	%

Total	$	40,082	$	14,764	$	8,571	$	2,417	$	4,899	$	70,733		100.00	%

As of March 31, 2014, the aggregate amount of our certificates of deposit in amounts greater than or equal to $100,000 was approximately $26.3 million. The following table sets forth the maturity of these certificates as of March 31, 2014.


(In thousands) Maturity Period	Amount
Three months or less	$	4,219
Over three through six months		3,467
Over six through twelve months		6,515
Over twelve months		12,110

Total	$	26,311

Borrowings. We may obtain advances from the FHLB upon the security of certain of our mortgage loans and investment securities. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms of repricing than our deposits, they

can change our interest rate risk profile. At March 31, 2014 and December 31, 2013, we had $12.0 million and $10.0 million in outstanding advances from the FHLB, respectively. At March 31, 2014 and December 31, 2013, based on available collateral and our ownership of FHLB stock, and based upon our internal policy, we had access to additional FHLB advances of up to $49.7 million and $50.0 million, respectively. We had no overnight advances with FHLB on this date.

We also borrow funds under repurchase agreements with certain customers. These agreements are recorded as financing transactions as we maintain effective control over the transferred or pledged securities. The dollar amount of the securities underlying the agreements continues to be carried in our securities portfolio while the obligations to repurchase the securities are reported as liabilities. The securities underlying the agreements are delivered to the party with whom each transaction is executed. Those parties agree to resell to us the identical securities we delivered to them at the maturity or call period of the agreement.

The following table sets forth information concerning balances and interest rates on our borrowings at the dates and for the periods indicated.


	At or For the Three Months Ended March 31,						At or For the Year Ended December 31,
(Dollars in thousands)	2014			2013			2013			2012			2011
FHLB Advances:
Balance outstanding at end of period	$	12,035		$	15,538		$	10,036		$	15,539		$	21,542
Average amount outstanding during the period	$	12,245		$	15,538		$	13,570		$	19,163		$	22,653
Maximum outstanding at any month end	$	14,000		$	15,500		$	15,500		$	21,500		$	24,500
Weighted average interest rate during the period		3.84	%		4.52	%		4.38	%		4.29	%		3.95	%
Weighted average interest rate at end of period		3.92	%		4.45	%		4.30	%		4.45	%		3.87	%

Repurchase Agreements:
Balance outstanding at end of period	$	—		$	4,564		$	6,437		$	2,646		$	2,037
Average amount outstanding during the period	$	2,176		$	5,536		$	6,500		$	2,036		$	3,220
Maximum outstanding at any month end	$	3,051		$	5,853		$	8,987		$	3,893		$	4,431
Weighted average interest rate during the period		0.93	%		1.03	%		1.02	%		0.98	%		0.99	%
Weighted average interest rate at end of period		—	%		1.00	%		1.00	%		1.00	%		1.00	%

Junior Subordinated Debentures. In December 2003, Trust I issued $3.0 million of capital securities, adjustable every three months at LIBOR plus 2.85%, to investors. Trust I purchased $3.1 million of variable rate junior subordinated deferrable interest debentures from Beverly Financial, MHC, which mature on December 17, 2033. On October 19, 2007, Trust II issued $3.0 million of capital securities, adjustable every three months at LIBOR plus 2.85%. Trust II purchased $3.1 million of variable rate junior subordinated deferrable interest debentures from Beverly Financial, MHC, which mature on December 15, 2037. The debentures are the sole asset of Trusts I and II. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The interest rate at March 31, 2014 was 3.08%. Beverly Financial, MHC makes interest payments and other payments under the subordinated debentures to Trusts I and II. Beverly Financial, MHC’s obligations under the subordinated debentures are unsecured and rank junior to all of its other borrowings, except borrowings that by their terms rank equal or junior to the subordinated debentures. Beverly Financial, MHC guarantees the payments by Trusts I and II of the amounts that are required to be paid on the capital securities, to the extent that Trusts I and II have funds available for such payments. The proceeds of these capital securities, which have been contributed to the Bank, are included in the Bank’s capital ratio calculations and treated as Tier I capital. In accordance with the Financial Accounting Standards Board Accounting Standards Codification 810, Consolidations, Trusts I and II are not included in our consolidated financial statements.

In December 2008, the Bank borrowed $3.0 million from another bank in the form of a subordinated note. The subordinated note is subordinate and junior in right of payment to the Bank’s obligations to its depositors, and its other obligations to its general and secured creditors, except such other creditors holding obligations of the Bank ranking on a parity with or junior to this subordinated note. The subordinated note carries an interest rate of LIBOR, as determined by the servicing agent on the LIBOR determination date for such interest payment period, plus 4.25%. Interest is paid quarterly with principal due on the maturity date of March 15, 2019. The Bank paid down principal of $1.5 million at the time of the quarterly interest payment in March 2014. As of March 31, 2014, the outstanding balance of the subordinated note was $1.5 million. The interest rate at March 31, 2014 was 4.48%. The subordinated note qualifies as Tier 2 capital for regulatory purposes.

The following table sets forth information concerning balances and interest rates on our junior subordinated debt at the date and for the periods indicated.


	At or For the Three Months Ended March 31,						At or For the Year Ended December 31,
(Dollars in thousands)	2014			2013			2013			2012			2011
Balance outstanding at end of period	$	7,686		$	9,186		$	9,186		$	9,186		$	9,186
Average amount outstanding during the period	$	8,936		$	9,186		$	9,186		$	9,186		$	9,186
Maximum outstanding at any month end	$	9,186		$	9,186		$	9,186		$	9,186		$	9,186
Weighted average interest rate during the period		3.59	%		3.66	%		3.64	%		3.82	%		3.67	%
Weighted average interest rate at end of period		3.35	%		3.59	%		3.66	%		3.62	%		3.86	%

Comparison of Operating Results for the Three Months Ended March 31, 2014 and 2013

Net Income. Net income was $371,000 for the three months ended March 31, 2014 compared to $374,000 for the three months ended March 31, 2013.

Interest and Dividend Income. Total interest and dividend income increased $131,000, or 4.33%, to $3.2 million for the three months ended March 31, 2014 compared to the same period in 2013. The increase in interest income was the primarily the result of a $154,000 increase in interest and fees on loans mitigated by a $25,000 decrease in interest on debt securities. The average balance of loans during the three months ended March 31, 2014 increased $38.5 million, or 16.31%, to $274.6 million from $236.1 million for the three months ended March 31, 2013, while the average yield on loans decreased by 47 basis points to 4.52% for the three months ended March 31, 2014 from 4.99% for the three months ended March 31, 2013. The decline in yield reflects the competitive rate environment and the general level of interest rates. The average balance of investment securities decreased $6.5 million, or 22.34%, to $22.6 million for the three months ended March 31, 2014 from $29.1 million for the three months ended March 31, 2013, and the yield on investment securities (on a tax-equivalent basis) increased by 12 basis points to 1.60% for the three months ended March 31, 2014 from 1.48% for the three months ended March 31, 2013.

Interest Expense. Total interest expense decreased $69,000, or 11.29%, to $542,000 for the three months ended March 31, 2014 from $611,000 for the three months ended March 31, 2013. Interest expense on interest-bearing deposit accounts for the three months ended March 31, 2014 and 2013 remained relatively flat at $342,000.

Interest expense on FHLB advances decreased $57,000, or 32.95%, to $116,000 for the three months ended March 31, 2014 from $173,000 for the three months ended March 31, 2013. The average balance of FHLB advances decreased by $3.3 million, or 21.29%, to $12.2 million for the three months ended March 31, 2014 from $15.5 million for the three months ended March 31, 2013. The cost decreased 68 basis points to 3.84% for the three months ended March 31, 2014 from 4.52% for the three months ended March 31, 2013.

Net Interest and Dividend Income. Net interest and dividend income increased $200,000, or 8.30%, to $2.6 million for the three months ended March 31, 2014 from $2.4 million for the three months ended March 31, 2013. The increase resulted primarily from a $131,000 increase in interest income and a $69,000 decrease in interest expense. Our average interest-earning assets increased to $308.5 million for the three months ended March 31, 2014 from $282.9 million for the three months ended March 31, 2013, and our net interest rate spread remained flat at 3.24% for the three months ended March 31, 2014 and 2013. Our net interest margin decreased slightly to 3.43% for the three months ended March 31, 2014 from 3.46% for the three months ended March 31, 2013. The stability in our interest rate spread and net interest margin reflected the increase in loan origination and the management of the repricing of our interest-bearing liabilities. In addition, we benefited from the repricing of long-term certificates of deposit at maturity in the ordinary course as well as an increase in average balances of $6.3 million in noninterest-bearing deposits.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we recorded a provision for loan losses of $60,000 for the three months ended March 31, 2014, compared to a provision of $121,000 for the three months ended March 31, 2013. The allowance for loan losses was $3.6 million, or 1.29% of total loans at March 31, 2014, compared to $3.5 million, or 1.46% of total loans at March 31, 2013. Total nonperforming loans were $152,000 at March 31, 2014 compared to $1.2 million at March 31, 2013. Total special mention loans were $4.8 million at March 31, 2014 compared to $3.9 million at March 31, 2013. The allowance for loan losses

reflects the estimate we believe to be appropriate to cover incurred probable losses inherent in the loan portfolio at March 31, 2014 and 2013.

Noninterest Income. Noninterest income decreased $271,000, or 47.29%, to $302,000 during the three months ended March 31, 2014 from $573,000 for the three months ended March 31, 2013. The decrease is primarily attributed to the gain on the sale of loans decreasing $301,000 to $45,000 for the three months ended March 31, 2014 as compared to $346,000 for the three months ended March 31, 2013 due to lower volume of sales in the secondary market at slightly lower margins. Other income increased by $26,000 primarily due to ATM and interchange income and loan servicing fees.

Noninterest Expense. Noninterest expense decreased $5,000 to $2.2 million for the three months ended March 31, 2014 from $2.3 million for the three months ended March 31, 2013. The decrease primarily reflected lower salaries and employee benefits expense of $54,000, and slight decreases in equipment expenses, professional fees and the FDIC assessment mitigated by an increase of $39,000 in other expenses, an increase of $12,000 in occupancy expenses and an increase of $11,000 in ATM processing fees.

Income Taxes. Income tax expense for the three months ended March 31, 2014 decreased slightly to $236,000 from $238,000 for the three months ended March 31, 2013, primarily due to decreased income before income taxes. The effective tax rate as a percent of pre-tax income was 38.9% for the three months ended March 31, 2014 and 2013.

Comparison of Operating Results for the Years Ended December 31, 2013 and 2012

Net Income. Net income was $1.4 million for the year ended December 31, 2013 compared to $1.8 million for the year ended December 31, 2012, a decrease of $420,000, or 23.36%. The decrease was primarily due to a decrease of $540,000 in noninterest income and an increase of $432,000 in noninterest expenses mitigated by an increase of $303,000 in net interest and dividend income.

Interest and Dividend Income. Total interest and dividend income decreased $180,000, or 1.43%, to $12.4 million for the year ended December 31, 2013 compared to the same period in 2012. The decrease in interest income was primarily the result of a $105,000 decrease in interest and fees on loans and a $58,000 decrease in interest on debt securities, and a $17,000 decrease in dividends paid on marketable equity securities and other interest. The average balance of loans during the year ended December 31, 2013 increased $24.0 million, or 10.45%, to $253.6 million from $229.6 million for the year ended December 31, 2013, while the average yield on loans decreased by 54 basis points to 4.71% for the year ended December 31, 2013 from 5.25% for the year ended December 31, 2012. The decrease in yield reflected the lower market rates for originated loans in 2013. The average balance of investment securities decreased $2.5 million, or 8.62%, to $26.5 million for the year ended December 31, 2013 from $29.0 million for the year ended December 31, 2012, and the yield on investment securities decreased by 10 basis points to 1.45% for the year ended December 31, 2013 from 1.55% for the year ended December 31, 2012.

Interest Expense. Total interest expense decreased $483,000, or 16.94%, to $2.4 million for the year ended December 31, 2013 from $2.9 million for the year ended December 31, 2012. Interest expense on interest-bearing deposit accounts decreased $285,000 to $1.4 million for the year ended December 31, 2013 from $1.7 million for the year ended December 31, 2012. The decrease was primarily due to the impact of maturing certificates of deposit renewing at lower rates, a shift in deposit mix toward core deposits and deposit rate reductions in core deposits.

Interest expense on FHLB advances decreased $227,000, or 27.61%, to $595,000 for the year ended December 31, 2013 from $822,000 for the year ended December 31, 2012. The average balance of FHLB advances decreased by $5.6 million, or 29.17%, to $13.6 million for the year ended December 31, 2013 from $19.2 million for the year ended December 31, 2012. The cost increased 9 basis points to 4.38% for the year ended December 31, 2013 from 4.29% for the year ended December 31, 2012.

Net Interest and Dividend Income. Net interest and dividend income increased $303,000, or 3.12%, to $10.0 million for the year ended December 31, 2013 from $9.7 million for the year ended December 31, 2012. The increase resulted primarily from a $483,000 decrease in interest expense. Our average interest-earning assets increased to $297.7 million for the year ended December 31, 2013 from $281.7 million for the year ended December 31, 2012, and our net interest rate spread decreased 6 basis points to 3.16% for the year ended December 31, 2013 from 3.22% at December 31, 2012. Our net interest margin decreased 8 basis points to 3.36% for the year ended December 31, 2013 from 3.44% for the year ended December 31, 2012.

The decline in our interest rate spread and net interest margin reflects yields of interest-earning assets declining more quickly than yields of interest-bearing liabilities in this low rate environment. Increased loan origination mitigated this impact. In addition, we benefited from the repricing of long-term certificates of deposit at maturity in the ordinary course as well as an increase of $7.1 million in noninterest-bearing deposits.

Provision for Loan Losses. Based on our analysis of the factors described in “Critical Accounting Policies—Allowance for Loan Losses,” we recorded a provision for loan losses of $241,000 for the year ended December 31, 2013, compared to a provision of $221,000 for the year ended December 31, 2012. The allowance for loan losses was $3.5 million, or 1.28% of total loans at December 31, 2013, compared to $3.3 million, or 1.42% of total loans at December 31, 2012. Total nonperforming loans were $488,000 at December 31, 2013 compared to $1.4 million at December 31, 2012. Total special mention loans remained relatively stable at $4.5 million at December 31, 2013 and 2012. The allowance for loan losses reflects the estimate we believe to be appropriate to cover incurred probable losses inherent in the loan portfolio at December 31, 2013 and 2012.

Noninterest Income. Noninterest income decreased $540,000, or 25.47%, to $1.6 million during the year ended December 31, 2013 from $2.1 million for the year ended December 31, 2012. The decrease is primarily attributed to a $218,000 decrease in the gain on the sale of loans to $637,000 for the year ended December 31, 2013 as compared to $855,000 for the year ended December 31, 2012 due to lower volume of sales in the secondary market. Other income decreased by $292,000 as a result of a one-time payment from a third party vendor in 2012.

Noninterest Expense. Noninterest expense increased $432,000, or 4.98%, to $9.1 million for the year ended December 31, 2013 from $8.7 million for the year ended December 31, 2012. The increase primarily reflected increases in salaries and employee benefits expense of $404,000 as a result of a charge of $424,000 to fully vest all units of the Bank’s Performance Unit Plan in anticipation of the plan being terminated and an increase of $143,000 in other expenses, which consisted primarily of increased marketing and loan-related expenses. These increases are mitigated by decreases of $111,000 in data processing expenses.

Income Taxes. Income tax expense for the year ended December 31, 2013 decreased $269,000 to $867,000 from $1.1 million for the year ended December 31, 2013, primarily due to decreased income before income taxes. The effective tax rate as a percent of pre-tax income was 38.6% and 38.7% for the year ended December 31, 2013 and 2012, respectively.

Analysis of Net Interest Income

Net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities.

Average Balances and Yields. The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made during the periods presented as we had no tax-exempt securities during those periods. All average balances are daily average balances. Non-accrual loans were included in the computation of average

balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.


	For the Three Months Ended March 31,
	2014							2013
(Dollars in thousands)	Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate
Interest-earning assets:
Loans⁽¹⁾	$	274,608	$	3,058		4.52	%	$	236,054	$	2,904		4.99	%
Investment securities⁽²⁾		22,554		89		1.60	%		29,094		106		1.48	%
Interest-earning deposits		11,335		6		0.21	%		17,703		12		0.27	%

Total interest-earning assets		308,497		3,153		4.14	%		282,851		3,022		4.33	%

Noninterest-earning assets		14,098							14,664

Total assets	$	322,595						$	297,515

Interest-bearing liabilities:
Savings accounts	$	43,079		12		0.11	%	$	40,929		17		0.17	%
NOW accounts		12,091		5		0.17	%		11,494		5		0.18	%
Money market accounts		98,488		148		0.61	%		74,428		116		0.63	%
Certificates of deposit		68,109		177		1.05	%		71,187		203		1.16	%

Total interest-bearing deposits		221,767		342		0.63	%		198,038		341		0.70	%
FHLB advances		12,245		116		3.84	%		15,538		173		4.52	%
Repurchase agreements		2,176		5		0.93	%		5,536		14		1.03	%
Junior subordinated debt		8,936		79		3.59	%		9,186		83		3.66	%

Total interest-bearing liabilities		245,124		542		0.90	%		228,298		611		1.09	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits		53,795							47,495
Other noninterest-bearing liabilities		1,681							1,051

Total liabilities		300,600							276,844
Total equity		21,995							20,671

Total liabilities and equity	$	322,595						$	297,515

Net interest income			$	2,611						$	2,411

Interest rate spread⁽³⁾						3.24	%						3.24	%
Net interest-earning assets⁽⁴⁾	$	63,373						$	54,553

Net interest margin⁽⁵⁾						3.43	%						3.46	%
Ratio of interest-earning assets to interest-bearing liabilities		125.85x							123.90x


	For the Year Ended December 31,
	2013							2012							2011
(Dollars in thousands)	Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Outstanding Balance		Interest Earned/ Paid		Average Yield/ Rate
Interest-earning assets:
Loans⁽¹⁾	$	253,580	$	11,950		4.71	%	$	229,586	$	12,055		5.25	%	$	226,721	$	12,654		5.58	%
Investment securities⁽²⁾		26,488		384		1.45	%		28,963		449		1.55	%		27,339		557		2.04	%
Interest-earning deposits		17,639		44		0.25	%		23,197		54		0.23	%		25,861		52		0.20	%

Total interest-earning assets		297,707		12,378		4.16	%		281,746		12,558		4.46	%		279,921		13,263		4.74	%

Noninterest-earning assets		14,214							14,448							16,701

Total assets	$	311,921						$	296,194						$	296,622

Interest-bearing liabilities:
Savings accounts	$	42,278		57		0.13	%	$	37,806		99		0.26	%	$	33,420		96		0.29	%
NOW accounts		12,247		21		0.17	%		11,987		26		0.22	%		10,012		13		0.13	%
Money market accounts		84,689		534		0.63	%		70,442		499		0.71	%		66,840		703		1.05	%
Certificates of deposit		68,955		762		1.11	%		79,197		1,035		1.31	%		94,487		1,523		1.61	%

Total interest-bearing deposits		208,169		1,374		0.66	%		199,432		1,659		0.83	%		204,759		2,335		1.14	%
FHLB advances		13,570		595		4.38	%		19,163		822		4.29	%		22,653		895		3.95	%
Repurchase agreements		6,500		66		1.02	%		2,036		20		0.98	%		3,220		32		0.99	%
Junior subordinated debt		9,186		334		3.64	%		9,186		351		3.82	%		9,186		337		3.67	%

Total interest-bearing liabilities		237,425		2,369		1.00	%		229,817		2,852		1.24	%		239,818		3,599		1.50	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits		52,171							45,075							37,510
Other noninterest-bearing liabilities		1,173							1,762							1,504

Total liabilities		290,769							276,654							278,832
Total equity		21,152							19,540							17,790

Total liabilities and equity	$	311,921						$	296,194						$	296,622

Net interest income			$	10,009						$	9,706						$	9,664

Interest rate spread⁽³⁾						3.16	%						3.22	%						3.24	%
Net interest-earning assets⁽⁴⁾	$	60,282						$	51,929						$	40,103

Net interest margin⁽⁵⁾						3.36	%						3.44	%						3.45	%
Ratio of interest-earning assets to interest-bearing liabilities		125.39x							122.60x							116.72x

(1)	Includes nonaccruing loan balances and interest received on such loans.

(2)	Includes securities available-for-sale, FHLB stock and investment in Co-operative Central Reserve Fund.

(3)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(5)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by

prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Three Months Ended March 31, 2014 v. 2013									Year Ended December 31, 2013 v. 2012									Year Ended December 31, 2012 v. 2011
	Increase (Decrease) Due to Changes in						Total Increase (Decrease)			Increase (Decrease) Due to Changes in						Total Increase (Decrease)			Increase (Decrease) Due to Changes in						Total Increase (Decrease)
(In thousands)	Volume			Rate			Total Increase (Decrease)			Volume			Rate			Total Increase (Decrease)			Volume			Rate			Total Increase (Decrease)

Interest-earning assets:
Loans	$	367		$	(213	)	$	154		$	1,195		$	(1,300	)	$	(105	)	$	162		$	(761	)	$	(599	)
Investment securities		(27	)		10			(17	)		(37	)		(28	)		(65	)		36			(144	)		(108	)
Interest-earning deposits		(4	)		(2	)		(6	)		(14	)		4			(10	)		(4	)		6			2

Total interest-earning assets		336			(205	)		131			1,144			(1,324	)		(180	)		194			(899	)		(705	)


Interest-bearing liabilities:
Savings accounts		1			(6	)		(5	)		11			(53	)		(42	)		9			(6	)		3
NOW accounts		—			—			—			1			(6	)		(5	)		3			10			13
Money market accounts		36			(4	)		32			94			(59	)		35			40			(244	)		(204	)
Certificates of deposit		(9	)		(17	)		(26	)		(124	)		(149	)		(273	)		(225	)		(263	)		(488	)

Total interest-bearing deposits		28			(27	)		1			(18	)		(267	)		(285	)		(173	)		(503	)		(676	)
FHLB advances		(33	)		(24	)		(57	)		(245	)		18			(227	)		(165	)		92			(73	)
Repurchase agreements		(8	)		(1	)		(9	)		45			1			46			(12	)		—			(12	)
Junior subordinated debt		(2	)		(2	)		(4	)		—			(17	)		(17	)		—			14			14

Total interest-bearing liabilities		(15	)		(54	)		(69	)		(218	)		(265	)		(483	)		(350	)		(397	)		(747	)

Change in net interest income	$	351		$	(151	)	$	200		$	1,362		$	(1,059	)	$	303		$	544		$	(502	)	$	42

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk, market risk and liquidity risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or security when it is due. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are recorded at fair value. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers when due. Other risks that we face are operational risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.

Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. This strategy also emphasizes conservative loan-to-value ratios and guarantees of construction and commercial real estate loans by parties with substantial net worth. In addition, during each calendar year, we engage an outside loan review firm to perform a thorough review of our loan portfolio. This review involves analyzing all large borrowing relationships, delinquency trends and loan collateral valuation in order to identify impaired loans.

When a borrower fails to make a required loan payment, management takes a number of steps to have the borrower cure the delinquency and restore the loan to current status. Management makes initial contact with the borrower when the loan becomes 15 days past due. If payment is not then received by the 30^th day of delinquency, additional letters and phone calls generally are made, and a plan of collection is pursued for each individual loan. A particular plan of collection may lead to foreclosure, the timing of which depends on the prospects for the borrower bringing the loan current, the financial strength and commitment of any guarantors, the type and value of the collateral securing the loan and other factors. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. We may consider loan workout arrangements with certain borrowers under

certain circumstances, as well as the sale of the nonperforming loans. Management informs the board of directors on a monthly basis of the amount of loans delinquent more than 30 days.

Our collection procedure for commercial loans includes sending periodic late notices to a borrower once a loan is past due. We attempt to make direct contact with the borrower once a loan becomes 15 days past due. If collection activity is unsuccessful after 60 days, we may refer the matter to our legal counsel for further collection efforts and we may charge-off the loan. All loans delinquent 15 days and over are reported monthly at the board of directors meeting.

Nonperforming Assets. We consider foreclosed assets, loans that are maintained on a nonaccrual basis and loans that are past 90 days or more and still accruing to be nonperforming assets. Loans are generally placed on nonaccrual status when they are classified as impaired or when they become 90 days or more past due. Loans are classified as impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. At the time a loan is placed on nonaccrual status, the accrual of interest ceases and interest income previously accrued on such loans is reversed against current period interest income. Payments received on a nonaccrual loan are first applied to the outstanding principal balance when collectibility of principal is in doubt.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until it is sold. When property is acquired it is recorded at the lower of its cost or fair market value at the date of foreclosure. Any holding costs and declines in fair value after acquisition of the property result in charges against income.

Troubled debt restructurings occur when we grant borrowers concessions that we would not otherwise grant but for economic or legal reasons pertaining to the borrower’s financial difficulties. We may modify the terms of loans to lower interest rates (which may be at below market rates) or to provide for temporary interest-only terms, or to forgive or defer the payment of interest. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and that is in our best interests. We generally do not forgive principal on loans. Once the borrower has demonstrated sustained performance with the modified terms, the loan may be upgraded from its classified and/or nonperforming status. Any loan categorized as troubled debt restructurings will continue to retain that designation through the life of the loan.

The following table provides information with respect to our nonperforming assets, including troubled debt restructurings, at the dates indicated. We did not have any accruing loans past due 90 days or more at the dates presented.


	At March 31,						At December 31,
(Dollars in thousands)	2014			2013			2013			2012			2011			2010			2009
Nonaccrual loans:
Real estate loans:
One- to four-family residential	$	—		$	293		$	488		$	293		$	451		$	899		$	401
Commercial		—			452			—			611			1,582			2,703			1,656
Multi-family		—			—			—			—			—			—			—
Home equity loans and lines of credit		149			149			—			188			74			19			19
Construction		—			286			—			286			286			—			—
Commercial business loans		3			—			—			—			4			46			161
Consumer loans		—			—			—			—			—			—			—

Total nonaccrual loans		152			1,180			488			1,378			2,397			3,667			2,237

Other real estate owned:
One- to four-family residential		264			—			264			—			132			—			—

Total other real estate owned		264			—			264			—			132			—			—

Other nonperforming assets		—			—			—			—			—			—			—

Total nonperforming assets		416			1,180			752			1,378			2,529			3,667			2,237

Performing troubled debt restructurings		519			—			23			—			—			588			—

Total nonperforming assets and performing troubled debt restructurings	$	935		$	1,180		$	775		$	1,378		$	2,529		$	4,255		$	2,237

Total nonperforming loans to total loans⁽¹⁾		0.06	%		0.50	%		0.18	%		0.59	%		1.06	%		1.58	%		0.90	%
Total nonperforming assets and performing troubled debt restructurings to total assets		0.29	%		0.39	%		0.24	%		0.45	%		0.85	%		1.42	%		0.73	%

(1)	Loans are presented before allowance for loan losses, but include deferred loan origination costs (fees), net.

Interest income that would have been recorded for the three months ended March 31, 2014 and the year ended December 31, 2013, had nonaccruing loans been current according to their original terms amounted to $2,000 and $10,000, respectively. Income related to nonaccrual loans included in interest income for the three months ended March 31, 2014, and the year ended December 31, 2013, amounted to $0 and $0, respectively.

Total nonperforming loans decreased from December 31, 2013 to March 31, 2014, primarily due to the loans brought current by customers. Total nonperforming loans decreased from December 31, 2012 to December 31, 2013, primarily due to collection practices, loan payoffs and foreclosures into other real estate owned.

Classified Assets. Federal regulations require us to review and classify assets on a regular basis. In addition, the FDIC and the Massachusetts Commissioner of Banks have the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. When management classifies an asset as substandard or doubtful, a specific allowance for loan losses may be established. If management classifies an asset as loss, an amount equal to 100% of the portion of the asset classified loss is charged to the allowance for loan losses. The regulations also provide for a “special mention” category, described as assets that do not currently expose us to a sufficient degree of risk to warrant classification, but do possess credit deficiencies or potential weaknesses deserving our close attention. We utilize a seven grade internal loan rating system for commercial real estate, construction and commercial loans. See note 4 to the consolidated financial statements.

The following table shows the aggregate amounts of our regulatory classified assets at the dates indicated.


	At March 31,		At December 31,
(In thousands)	2014		2013		2012		2011
Classified assets:
Substandard	$	—	$	—	$	1,633	$	1,586
Doubtful		—		—		—		—
Loss		—		—		—		—

Total classified assets	$	—	$	—	$	1,633	$	1,586

Special mention	$	4,758	$	4,506	$	4,467	$	2,408

None of the special mention assets at March 31, 2014 and December 31, 2013 were on nonaccrual.

Other than as disclosed in the above tables, there are no other loans where management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

Delinquencies. The following table provides information about delinquencies in our loan portfolio at the dates indicated.


	At March 31,						At December 31,
	2014						2013
(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
Real estate loans:
One- to four-family residential	$	2,989	$	—	$	—	$	2,359	$	443	$	488
Commercial		277		—		—		—		—		—
Multi-family		—		—		—		—		—		—
Home equity loans and lines of credit		—		—		149		149		—		—
Construction		—		—		—		—		—		—
Commercial business loans		13		4		—		7		5		—
Consumer loans		—		—		—		—		1		—

Total	$	3,279	$	4	$	149	$	2,515	$	449	$	488


	At December 31,
	2012						2011
(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
Real estate loans:
One- to four-family residential	$	1,422	$	133	$	160	$	271	$	—	$	158
Commercial		—		—		611		—		159		170
Multi-family		—		—		—		—		—		—
Home equity loans and lines of credit		43		—		188		—		34		40
Construction		—		—		286		—		286		—
Commercial business loans		—		—		—		—		—		—
Consumer loans		4		—		—		1		—		—

Total	$	1,469	$	133	$	1,245	$	272	$	479	$	368

Beverly Financial, Inc. S-1/A