Danvers Bancorp, Inc. Reports Results for the Three Months Ended March 31, 2010

http://www.businesswire.com/news/home/20100422007030/en

DANVERS, Mass.--(Business Wire)--
Danvers Bancorp, Inc. (the "Company") (NASDAQ: DNBK), the holding company for
Danversbank, today reported net income of $4.3 million for the quarter ended
March 31, 2010 compared to net income of $1.4 million for the same quarter in
2009. The acquisition of Beverly National Corporation ("Beverly") and the
overall improvement of the Company`s net interest margin resulted in a
significant increase in net interest income and a lesser increase in
non-interest income. These increases were partially offset by higher provision
for loan losses, increased salaries and benefits expense, and other operating
expenses. Specifically, net interest income improved by $8.3 million or 66.5%,
between the comparable periods.

Compared to the quarter ended December 31, 2009, net income increased to $4.3
million, or 61.8%, from net income of $2.6 million. A moderate increase in net
interest income, a modest increase in non-interest income and a decline in the
provision for loan losses was partially offset by a tax provision in 2010 versus
a tax benefit in 2009.

2010 first quarter financial highlights include:

* 22% annualized growth in total deposits during the first quarter;
* Non-performing assets to total assets of 0.70% compared to 0.77% for Q4 `09
and 0.55% for Q1 `09;
* Net interest margin of 3.66% compared to 3.57% for Q4 `09 and 3.06% for Q1
`09;
* Net interest income increased 8.2% compared to Q4 `09 and 66.5% compared to Q1
`09; and
* Non-interest income increased 10.5% compared to Q4 `09 and 55.8% compared to
Q1 `09.

"Our margin improvement since the closing of our acquisition of Beverly National
Corporation in the fourth quarter of 2009 has exceeded our expectations. We will
seek to maintain this current level for the remainder of 2010 but do not expect
to see a continued widening as we have seen in recent quarters," noted Kevin T.
Bottomley, President and CEO.

Earnings per share basic and diluted for the first quarter of 2010 and 2009 were
$0.21 and $0.08, respectively. Earnings per share basic and diluted for the
quarter ended December 31, 2009 were $0.14.

Merger

On February 12, 2010, Beverly National Bank and all of its branches were legally
and operationally merged with and into Danversbank. On Tuesday February 16,
2010, the eight former Beverly National Bank branches reopened as Danversbank
branches.

Dividend Declared

The Board of Directors of the Company has declared a cash dividend on its common
stock of $.02 per share. The dividend will be paid on or after May 21, 2010 to
shareholders of record as of May 7, 2010.

2010 Earnings Summary

The Company`s net interest income increased $8.3 million, or 66.5%, during the
first quarter of 2010 compared to the same period in 2009. This is attributable
to the overall growth of the Company and in particular, the Company`s sizeable
loan growth and an increase in our net interest margin ("NIM"). Net loans
increased $508.0 million, or 44.8% between the periods, and the Company`s NIM
improved by 60 basis points from 3.06% for the first quarter of 2009 to 3.66%
for the first quarter of 2010. The improvement in our NIM is primarily the
result of a 94 basis point decline in funding costs between the comparable
periods.

The Company`s first quarter net interest income increased $1.6 million, or 8.2%,
compared to the fourth quarter of 2009 due to a 9 basis point increase in the
Company`s NIM, from 3.57% for the fourth quarter of 2009 to 3.66% for the first
quarter of 2010. While asset yields only declined 6 basis points, funding costs
declined 21 basis points. Net loans, investments and total assets declined
modestly between the comparable periods.

Non-interest income for the first quarter of 2010 totaled $2.7 million, an
increase of $953,000, or 55.8%, compared to the first quarter of 2009. The
improvement was primarily due to an increase of $393,000 in trust services fees,
$296,000 in additional deposit account service fees and $179,000 in the cash
surrender value of bank-owned life insurance. These increases were partially
offset by a $242,000 decline in gains on sales of loans.

Non-interest income for the first quarter of 2010 increased $252,000, or 10.5%,
compared to the fourth quarter of 2009. An increase of $129,000 in trust
services revenues was accompanied by modest increases in a number of other
non-interest income categories. While the Company`s general levels of
non-interest revenues have shown incremental improvement, developing additional
and meaningful sources of non-interest income remains a significant challenge.

Non-interest expense increased $5.7 million, or 48.5%, between the periods ended
March 31, 2010 and 2009, respectively, due primarily to increases in salaries
and employee benefits, occupancy and equipment expense as a result of the
additional personnel and branches related to the Beverly acquisition. Other
operating expense increased $1.4 million, or 90.2%, due primarily to the
amortization of the core deposit intangible related to the acquisition.

Non-interest expense increased slightly for the first quarter of 2010 compared
to the fourth quarter of 2009. The Company has experienced increases in salaries
and employee benefits and occupancy as a result of the acquisition and the
Company`s continued expansion of its branch footprint and general business
activities.

Since the fully taxable components of the Company`s revenues have increased as a
result of the acquisition, the Company booked a tax provision for the first
quarter of 2010 versus a tax benefit for the fourth quarter of 2009.

Balance Sheet Summary

Total assets decreased by $44.9 million, or 1.8%, during the quarter ended March
31, 2010. Net loans decreased by $8.5 million, or 0.5%, securities decreased by
$17.1 million, or 2.9% and cash declined $7.5 million, during the first quarter.
The strong growth of the balance sheet in 2008 and 2009 and in particular the
market transfer of large and well-diversified credit opportunities from some of
the larger institutions in the area to some of the community banking franchises
slowed substantially during the first quarter. At the same time, the Company
experienced moderate deposit growth during the period. Deposit balances
increased by $97.5 million, or 5.5%, for the period ended March 31, 2010. The
Company utilized these cash flows to fund some securities purchases and to
retire a significant portion of its overnight borrowing.

"We are confident that our loan portfolio, while flat during the first quarter,
will remain a source of growth in the future. A strong fourth quarter, and in
particular a very productive December, resulted in a smaller pipeline as we
transitioned into 2010. When you combine this with increased competition from
some of the larger banks in our market area, it put a damper on our organic
growth in the first quarter. We do not expect this trend to continue for the
remainder of the year," mentioned Bottomley.

All of the Company`s loan portfolio categories were relatively flat during the
quarter. The trend, as it has been for the better part of the past three years,
has been to systematically wind down the Company`s construction lending
activities in favor of C&I and selected permanent commercial real estate
opportunities.

The Company experienced a modest improvement in its asset quality metrics for
the quarter ended March 31, 2010. Total non-performing assets ("NPA`s")
decreased to $17.2 million at March 31, 2010 from $19.2 million at December 31,
2009. NPA`s, as a percentage of total assets, stand at 70 basis points at the
end of the quarter. This compares to non-performing asset metrics of 77 basis
points, 73 basis points and 79 basis points for the 2009 quarters ended December
31, September 30 and June 30, respectively. At March 31, 2010, total NPA`s were
composed of $9.9 million in loans considered impaired and on non-accrual, $6.0
million in troubled debt restructures ("TDR`s") and $1.3 million in other real
estate owned ("OREO"). At the present, the number of problem credits being
resolved are being offset by an equal number of new problem credits from quarter
to quarter. For the most part, these credits have emanated from the pre-merger
Danversbank loan portfolio. All of the credits classified as TDR`s were
performing in accordance with their modified terms and conditions at March 31,
2010 and the OREO balance consists of five properties with no particular
business segment or industry concentration represented.

"As we have noted in a number of our previous discussions, economic conditions
in Massachusetts remain challenging and we expect to be faced with continued
stresses in our loan portfolio in 2010," stated Bottomley.

Despite concerns over employment and some softening of the local economy, the
Company`s delinquency trends continue to be stable and favorable when compared
to many industry peers. The first quarter provision for loan losses was $1.2
million compared to $760,000 for the same period in 2009 and $1.8 million for
the fourth quarter of 2009. The commercial profile of the Company`s loan
portfolio and to a lesser extent the establishment of specific reserves were the
primary reasons for the increase. The allowance for loan losses increased
$810,000, or 5.5%, during the first quarter of 2010 and represented 0.93% of
loans at March 31, 2010. The recently completed merger with Beverly National
Bank and the attendant "purchase accounting" considerations are the reasons that
the reserve represents a lower percentage of gross loans than in previous
quarters. Net charge-offs for the quarter ended March 31, 2010 were $389,000. By
comparison, net charge-offs were $2.5 million for all of 2009. The allowance
represents 97.2% of non-performing loans at March 31, 2010 compared to 82.5% at
December 31, 2009.

Deposits increased by $97.5 million, or 5.5%, to $1.9 billion at March 31, 2010
compared to $1.8 billion at December 31, 2009. During the quarter, the Company
experienced increases in all deposit categories with the exception of demand
deposits. This growth is primarily attributable to the Company`s expanded retail
branch presence. The Company opened its Cambridge (third quarter) and Waltham
(fourth quarter) locations in 2009 and these branches have already attracted
$54.4 million in new deposit balances. Despite the low levels of short-term
interest rates, the Company has experienced considerable success at raising
"core" deposit balances.

The Company expects to continue with the expansion of its retail branch network
and plans to open a new branch in Needham during the third quarter of 2010 to go
along with the recent opening of a new Boston branch. In addition, the Company
has executed a lease and filed an application to open a branch in Lexington that
we hope to open prior to year-end.

"2009 marked the continued expansion of our retail franchise as evidenced by the
opening of branches in Cambridge and Waltham and the acquisition of Beverly
National Corporation which added eight branches to our network. We are pleased
to see a continuation of this expansion in 2010," mentioned Bottomley.

Short-term advances from the Federal Home Loan Bank of Boston ("FHLBB")
decreased by $128.0 million, or 37.8%, at March 31, 2010 compared to December
31, 2009. Management has replaced all of the Company`s short-term FHLBB
borrowing with the aforementioned deposit inflows and in the process has
lessened the Company`s reliance on any single short-term funding source. The
Company had approximately $210.4 million in various FHLBB term advances
outstanding and $39.7 million in short-term borrowings at March 31, 2010. The
Company`s short-term borrowings consist of $39.7 million in overnight customer
repurchase agreements ("REPO`s"). From a funding and liquidity perspective, the
Company has ready access to a number of very large, stable and well-diversified
short-term funding sources and these alternatives are available at highly
competitive rates given the current rate environment.

Company Profile

Danvers Bancorp, Inc., the holding company for Danversbank, is headquartered in
Danvers, Massachusetts. The Company has grown to $2.5 billion in assets through
acquisitions and internal growth, including de novo branching. We conduct
business from our main office located at One Conant Street, Danvers,
Massachusetts, and our 25 other branch offices located in Andover, Beverly,
Boston, Cambridge, Chelsea, Danvers, Hamilton, Malden, Manchester, Middleton,
Peabody, Reading, Revere, Salem, Saugus, Topsfield, Waltham, Wilmington and
Woburn, Massachusetts. Our business consists primarily of making loans to our
customers, including C&I loans, commercial real estate loans, owner-occupied
residential mortgages and consumer loans and investing in a variety of
investment securities. We fund these lending and investment activities with
deposits from our customers, funds generated from operations and selected
borrowings. We also provide wealth management and trust services, treasury
management, debit and credit card products and online banking services.
Additional information about the Company and its subsidiaries is available at
www.danversbank.com.

Forward Looking Statements

Certain statements herein constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on the beliefs and expectations of management, as well as
the assumptions made using information currently available to management. Since
these statements reflect the views of management concerning future events, these
statements involve risks, uncertainties and assumptions. As a result, actual
results may differ from those contemplated by these statements. Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts. They often include words like "believe," "expect,"
"anticipate," "estimate," and "intend" or future or conditional verbs such as
"will," "would," "should," "could," or "may." Certain factors that could cause
actual results to differ materially from expected results include changes in the
interest rate environment, changes in general economic conditions, legislative
and regulatory changes and the risk factors described in the Company`s December
31, 2009 Form 10-K, issued March 16, 2010, as updated by our Quarterly Reports
on Form 10-Q, that adversely affect the business in which Danvers Bancorp, Inc.
is engaged and changes in the securities market. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this release and the associated conference call. The Company
disclaims any intent or obligation to update any forward-looking statements,
whether in response to new information, future events or otherwise.

DANVERS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

March 31, December 31,
2010 2009
(In thousands)
ASSETS
Cash and cash equivalents $ 64,257 $ 71,757
Certificates of deposit - 10,679
Securities available for sale, at fair value 466,018 481,100
Securities held to maturity, at cost 108,879 110,932
Loans held for sale 215 1,948
Loans 1,659,677 1,666,164
Less allowance for loan losses (15,509 ) (14,699 )
Loans, net 1,644,168 1,651,465

Restricted stock, at cost 18,726 18,726
Premises and equipment, net 37,433 36,764
Bank-owned life insurance 33,216 32,900
Other real estate owned 1,271 1,427
Accrued interest receivable 9,442 9,998
Deferred tax asset, net 5,160 9,619
Goodwill and intangibles assets 34,539 35,094
Prepaid FDIC assessment 8,007 8,515
Other assets 23,497 18,825
$ 2,454,828 $ 2,499,749

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits $ 222,189 $ 224,776
Savings and NOW accounts 405,768 376,975
Money market accounts 667,640 621,683
Term certificates over $100,000 334,227 314,097
Other term certificates 233,539 228,272
Total deposits 1,863,363 1,765,803
Short-term borrowings 39,730 172,829
Long-term debt 210,436 218,475
Subordinated debt 29,965 29,965
Accrued expenses and other liabilities 21,120 27,011
Total liabilities 2,164,614 2,214,083
Stockholders' equity:
Preferred stock; $0.01 par value, 10,000,000 shares authorized;
none issued - -
Common stock; $0.01 par value, 60,000,000 shares authorized; 22,316,125 shares
issued 223 223
Additional paid-in capital 237,942 237,577
Retained earnings 75,704 71,864
Accumulated other comprehensive income 4,323 3,650
Unearned restricted shares - 545,558 and 639,807 shares at March 31, 2010 and
December 31, 2009, respectively (6,806 ) (6,793 )
Unearned compensation - ESOP; 1,266,818 and 1,284,660 shares at
March 31, 2010 and December 31, 2009, respectively (12,668 ) (12,846 )
Treasury stock, at cost; 644,218 and 610,593 shares at March 31, 2010 and
December 31, 2009, respectively (8,504 ) (8,009 )
Total stockholders' equity 290,214 285,666
$ 2,454,828 $ 2,499,749

DANVERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended
March 31,
2010 2009
(Dollars in thousands, except
per share amounts)
Interest and dividend income:
Interest and fees on loans $ 23,389 $ 15,707
Interest on debt securities:
Taxable 5,381 5,422
Non-taxable 242 203
Interest on cash equivalents and certificates of deposit 47 97
Total interest and dividend income 29,059 21,429

Interest expense:
Interest on deposits:
Savings and NOW accounts 1,053 548
Money market accounts 2,255 2,923
Term certificates 2,597 3,027
Interest on short-term borrowings 96 128
Interest on long-term debt and subordinated debt 2,277 2,322
Total interest expense 8,278 8,948
Net interest income 20,781 12,481
Provision for loan losses 1,200 760
Net interest income, after provision for loan losses 19,581 11,721

Non-interest income:
Service charges on deposits 1,084 788
Loan servicing fees 58 10
Net gain on sales of loans 99 341
Net gain on sales of securities 71 -
Increase in cash surrender value of bank-owned life insurance 316 137
Trust services 393 -
Other operating income 641 433
Total non-interest income 2,662 1,709

Non-interest expenses:
Salaries and employee benefits 9,856 6,973
Occupancy 2,089 1,504
Equipment 1,020 768
Outside services 546 243
Other real estate owned expense 186 96
Deposit insurance expense 582 436
Advertising expense 209 176
Other operating expense 2,998 1,576
Total non-interest expenses 17,486 11,772
Income before income taxes 4,757 1,658
Provision for income taxes 506 275
Net income $ 4,251 $ 1,383

Weighted-average shares outstanding:
Basic 20,423,418 16,376,388
Diluted 20,423,418 16,376,388

Earnings per share:
Basic $ 0.21 $ 0.08
Diluted $ 0.21 $ 0.08

DANVERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended
March 31, December 31,
2010 2009
(Dollars in thousands,
except per share amounts)
Interest and dividend income:
Interest and fees on loans $ 23,389 $ 21,650
Interest on debt securities:
Taxable 5,381 5,842
Non-taxable 242 248
Dividends on equity securities - 5
Interest on cash equivalents and certificates of deposit 47 114
Total interest and dividend income 29,059 27,859

Interest expense:
Interest on deposits:
Savings and NOW accounts 1,053 875
Money market accounts 2,255 2,479
Term certificates 2,597 2,822
Interest on short-term borrowings 96 103
Interest on long-term debt and subordinated debt 2,277 2,366
Total interest expense 8,278 8,645
Net interest income 20,781 19,214
Provision for loan losses 1,200 1,750
Net interest income, after provision for loan losses 19,581 17,464

Non-interest income:
Service charges on deposits 1,084 1,054
Loan servicing fees 58 60
Gain on sales of loans 99 54
Net gain on sales of securities 71 2
Increase in cash surrender value of bank-owned life insurance 316 331
Trust services 393 264
Other operating income 641 645
Total non-interest income 2,662 2,410

Non-interest expenses:
Salaries and employee benefits 9,856 8,683
Occupancy 2,089 1,706
Equipment 1,020 1,195
Outside services 546 929
Other real estate owned expense 186 393
Deposit insurance expense 582 692
Advertising expense 209 491
Other operating expense 2,998 3,391
Total non-interest expenses 17,486 17,480
Income before income taxes 4,757 2,394
Provision (benefit) for income taxes 506 (234 )
Net income $ 4,251 $ 2,628

Weighted-average shares outstanding:
Basic 20,423,418 18,488,838
Diluted 20,423,418 18,488,838

Earnings per share:
Basic $ 0.21 $ 0.14
Diluted $ 0.21 $ 0.14

DANVERS BANCORP, INC.
NET INTEREST INCOME ANALYSIS
(Unaudited)

Three Months Ended March 31,
2010 2009
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
(Dollars in thousands)
Interest-earning assets:
Interest-earning cash equivalents and
certificates of deposit $ 27,052 $ 47 0.69% $ 27,475 $ 97 1.41%
Debt securities: (2)
U.S. Government 15,493 6 0.15 1,538 11 2.86
Gov't-sponsored enterprises 218,927 1,943 3.55 198,460 2,439 4.92
Mortgage-backed 294,141 3,129 4.26 243,959 2,970 4.87
Municipal bonds 24,417 242 3.96 19,960 203 4.07
Other 10,310 303 11.76 250 2 3.20
Restricted stock 18,951 - - 14,626 - -
Real estate mortgages (3) 959,738 13,435 5.60 605,871 8,425 5.56
C&I loans (3) 567,021 8,215 5.80 436,752 6,225 5.70
IRBs (3) 124,625 1,468 4.71 74,833 890 4.76
Consumer loans (3) 11,345 271 9.55 8,641 167 7.73
Total interest-earning assets 2,272,020 29,059 5.12 1,632,365 21,429 5.25
Allowance for loan losses (15,083) (12,341)
Total earning assets less allowance
for loan losses 2,256,937 1,620,024
Non-interest-earning assets 206,360 100,126
Total assets $ 2,463,297 $ 1,720,150

Interest-bearing liabilities:
Deposits:
Savings and NOW accounts $ 396,621 1,053 1.06 $ 185,714 548 1.18
Money market accounts 653,047 2,255 1.38 466,267 2,923 2.51
Term certificates 558,538 2,597 1.86 379,904 3,027 3.19
Total deposits 1,608,206 5,905 1.47 1,031,885 6,498 2.52
Borrowed funds:
Short-term borrowings 86,494 96 0.44 128,388 128 0.40
Long-term debt 216,992 1,835 3.38 162,781 1,789 4.40
Subordinated debt 29,965 442 5.90 29,965 533 7.11
Total interest-bearing liabilities 1,941,657 8,278 1.71 1,353,019 8,948 2.65
Non-interest-bearing deposits 213,156 124,656
Other non-interest-bearing liabilities 20,612 13,572
Total non-interest-bearing liabilities 233,768 138,228
Total liabilities 2,175,425 1,491,247
Stockholders' equity 287,872 228,903
Total liabilities and stockholders' equity $ 2,463,297 $ 1,720,150

Net interest income $ 20,781 $ 12,481
Net interest rate spread (4) 3.41% 2.60%
Net interest-earning assets (5) $ 330,363 $ 279,346
Net interest margin (6) 3.66% 3.06%
Ratio of interest-earning assets to total interest-bearing liabilities 1.17 x 1.21 x

(1) Yields are annualized.
(2) Average balances are presented at average amortized cost.
(3) Average loans include non-accrual loans and are net of average deferred loan fees/costs.
(4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities for the periods indicated.
(5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6) Net interest margin represents net interest income divided by average total interest-earning assets.

DANVERS BANCORP, INC.
NET INTEREST INCOME ANALYSIS
(Unaudited)

Three Months Ended
March 31, 2010 December 31, 2009
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (1) Balance Paid Rate (1)
(Dollars in thousands)
Interest-earning assets:
Interest-earning cash equivalents and
certificates of deposit $ 27,052 $ 47 0.69% $ 64,866 $ 114 0.70%
Debt securities: (2)
U.S. Government 15,493 6 0.15 10,326 5 0.19
Gov't-sponsored enterprises 218,927 1,943 3.55 235,645 2,421 4.11
Mortgage-backed 294,141 3,129 4.26 284,050 3,104 4.37
Municipal bonds 24,417 242 3.96 24,223 248 4.10
Other 10,310 303 11.76 10,774 312 11.58
Restricted stock 18,951 - - 17,579 5 0.11
Real estate mortgages (3) 959,738 13,435 5.60 861,019 12,265 5.70
C&I loans (3) 567,021 8,215 5.80 510,371 7,760 6.08
IRBs (3) 124,625 1,468 4.71 121,196 1,453 4.80
Consumer loans (3) 11,345 271 9.55 10,267 172 6.70
Total interest-earning assets 2,272,020 29,059 5.12 2,150,316 27,859 5.18
Allowance for loan losses (15,083) (14,003)
Total earning assets less allowance
for loan losses 2,256,937 2,136,313
Non-interest-earning assets 206,360 132,633
Total assets $ 2,463,297 $ 2,268,946

Interest-bearing liabilities:
Deposits:
Savings and NOW accounts $ 396,621 1,053 1.06 $ 318,748 875 1.10
Money market accounts 653,047 2,255 1.38 623,484 2,479 1.59
Term certificates 558,538 2,597 1.86 510,741 2,822 2.21
Total deposits 1,608,206 5,905 1.47 1,452,973 6,176 1.70
Borrowed funds:
Short-term borrowings 86,494 96 0.44 121,451 103 0.34
Long-term debt 216,992 1,835 3.38 198,440 1,900 3.83
Subordinated debt 29,965 442 5.90 29,965 466 6.22
Total interest-bearing liabilities 1,941,657 8,278 1.71 1,802,829 8,645 1.92
Non-interest-bearing deposits 213,156 195,679
Other non-interest-bearing liabilities 20,612 22,986
Total non-interest-bearing liabilities 233,768 218,665
Total liabilities 2,175,425 2,021,494
Stockholders' equity 287,872 247,452
Total liabilities and stockholders' equity $ 2,463,297 $ 2,268,946

Net interest income $ 20,781 $ 19,214
Net interest rate spread (4) 3.41% 3.26%
Net interest-earning assets (5) $ 330,363 $ 347,487
Net interest margin (6) 3.66% 3.57%
Ratio of interest-earning assets to total interest-bearing liabilities 1.17 x 1.19 x

(1) Yields are annualized
(2) Average balances are presented at average amortized cost.
(3) Average loans include non-accrual loans and are net of average deferred loan fees/costs.
(4) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities for the periods indicated.
(5) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(6) Net interest margin represents net interest income divided by average total interest-earning assets.

DANVERS BANCORP, INC.
SELECTED FINANCIAL RATIOS AND OTHER DATA
(Unaudited)

At or For
At or For the the Three
Three Months Ended Months Ended
March 31, December 31,
2010 2009 2009

Performance Ratios:

Return on assets (ratio of income to average total assets) (1) 0.69% 0.32% 0.46%
Return on equity (ratio of income to average equity) (1) 5.91% 2.42% 4.25%
Net interest rate spread (1) (2) 3.41% 2.60% 3.26%
Net interest margin (1) (3) 3.66% 3.06% 3.57%
Efficiency ratio (4) 72.22% 82.79% 79.08%
Non-interest expenses to average total assets (1) 2.84% 2.74% 3.08%
Average interest-earning assets to interest-bearing liabilities 1.17x 1.21x 1.19x

Asset Quality Ratios:

Non-performing assets to total assets 0.70% 0.55% 0.77%
Non-performing loans to total loans 0.96% 0.73% 1.01%
Allowance for loan losses to non-performing loans 97.15% 149.54% 82.49%
Allowance for loan losses to total loans 0.93% 1.09% 0.88%

Capital Ratios:

Risk-based capital (to risk-weighted assets) 16.60% 21.31% 15.86%
Tier 1 risk-based capital (to risk-weighted assets) 15.72% 20.31% 15.05%
Tier 1 leverage capital (to average assets) 11.52% 14.76% 12.25%
Stockholders' equity to total assets 11.82% 13.28% 11.43%
Average stockholders' equity to average assets 11.69% 13.31% 10.91%

(1) Ratios are annualized.
(2) The net interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the periods indicated.
(3) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.
(4) The efficiency ratio represents non-interest expense for the period minus expenses related to the amortization of intangible assets divided by the sum of net interest income (before the loan loss provision) plus non-interest income.

Danvers Bancorp, Inc.
Kevin T. Bottomley, 978-739-0263
President and CEO
kevin.bottomley@danversbank.com
or
L. Mark Panella, 978-739-0217
Executive Vice President and CFO
mark.panella@danversbank.com

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