Danvers Bancorp, Inc. (the “Company”) (NASDAQ: DNBK), the holding company for Danversbank, today reported net income of $3.2 million for the quarter ended March 31, 2011, compared to $4.3 million for the same quarter in 2010. Increases in net interest income and non-interest income were offset by $2.3 million in expenses related to the proposed merger with People’s United Financial, Inc. (“Peoples United”) during the 2011 quarter. Also contributing to the offset in income were increased salaries and benefits expense, occupancy, other operating expenses and the provision for income taxes. Net interest income for the quarter ended March 31, 2011 improved by $2.3 million, or 10.9%, when compared to the same period in 2010.

Compared to the quarter ended December 31, 2010, net income decreased by $1.7 million, or 34.1%. Increases in net interest income and a decline in provision for loan losses and income tax expense were offset by the aforementioned merger expenses and increased salaries and benefits expense, occupancy and other operating expenses.

Proposed Merger

On January 20, 2011, the Company announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) with People’s United, a Delaware corporation. Pursuant to the Merger Agreement, People’s United will acquire the Company in a 55% stock and 45% cash merger transaction valued at approximately $493 million, based on the 10-day average closing price of People’s United’s common stock for the period ended January 19, 2011.

The Merger Agreement provides that the Company will be merged with and into People’s United (the “Merger”), with People’s United continuing as the surviving corporation. Simultaneously with the effective time of the Merger, the Company’s subsidiary bank, Danversbank, will be merged with and into People’s United subsidiary bank, People’s United Bank, with People’s United Bank continuing as the surviving entity. The Company anticipates that the Merger will close in the second quarter of 2011, subject to approval by bank regulatory authorities and by the stockholders of the Company. People’s United’s shareholder approval is not required for the Merger.

Under the terms and conditions of the Merger Agreement, the Company’s stockholders have the right to elect to receive (i) $23.00 in cash or (ii) 1.624 shares of People’s United common stock for each share of Company common stock, subject to customary pro ration provisions, whereby 55% of Company shares are exchanged for stock and 45% for cash.

“I’m confident that this transaction will benefit Danvers Bancorp shareholders, customers and employees,” said Kevin T. Bottomley, Chairman, President and Chief Executive Officer of Danvers Bancorp. “People’s United brings substantial resources for increased lending, additional products and services and opportunities for professional development for our employees. When coupled with our highly experienced lending staff and extensive eastern Massachusetts branch network, the combined organization will be well positioned to compete.”

Selected 2011 first quarter and annual financial highlights include:
  • Non-performing assets to total assets of 0.55% compared to 0.70% for Q1 ‘10 and 0.52% for Q4 ‘10;
  • Net interest margin of 3.43% compared to 3.66% for Q1 ‘10 and 3.53% for Q4 ‘10;
  • Net interest income increased 10.9% compared to Q1 ‘10 and 1.7% compared to Q4 ‘10;
  • Non-interest income increased 24.8% compared to Q1 ‘10 and decreased 13.4% compared to Q4 ‘10;
  • 1% annualized loan growth in 2011; and
  • 5% annualized deposit growth in 2011.

Earnings per share basic and diluted for the first quarter of 2011 and 2010 were $0.16 and $0.21, respectively. Earnings per share basic and diluted for the quarter ended December 31, 2010 was $0.25.

Dividend Declared

The Board of Directors of the Company has declared a cash dividend on its common stock of $0.04 per share. The dividend will be paid on or after May 13, 2011 to shareholders of record as of April 29, 2011.

2011 Earnings Summary

The Company’s net interest income increased $2.3 million, or 10.9%, during the first quarter of 2011 compared to the same period in 2010. This increase is attributable to the overall growth of the Company and, in particular, the growth of the loan portfolio. The Company’s net interest margin (“NIM”) decreased by 23 basis points from 3.66% for the quarter ended March 31, 2010 to 3.43% for the quarter ended March 31, 2011. The decline was due primarily to a 48 basis point decline in the yield on earning assets between the comparable periods.

The Company’s first quarter 2011 net interest income increased slightly by $395,000, or 1.7%, compared to the fourth quarter of 2010. Higher volume of interest earning assets early in the quarter slightly offset a decline in the NIM. We experienced a 22 basis point decrease in the yield on earning assets, while the cost of interest-bearing liabilities declined by 16 basis points. As a result, the Company’s NIM decreased from 3.53% to 3.43% between the periods.

“Deposit funding is still reasonably abundant at the moment and these balances can be acquired at a reasonable cost. The competition for new loan originations remains extremely challenging and it continues to pressure our loan pricing and net interest margin as a result,” mentioned Mr. Bottomley.

Non-interest income for the first quarter of 2011 totaled $3.3 million, an increase of $661,000, or 24.8%, compared to the first quarter of 2010. The improvement was primarily due to an increase of $231,000 in net gain on sales of loans, $229,000 in net gain on sales of securities and a $279,000 increase in the other operating income that was primarily related to an increase in debit card fee income.

Non-interest income for the first quarter of 2011 decreased $514,000, or 13.4%, compared to the fourth quarter of 2010. The difference relates to gains on limited partnership investments that the Company recognized during the fourth quarter of 2010. 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 $3.8 million, or 21.7%, between the quarters ended March 31, 2011 and 2010, respectively, due primarily to $2.3 million in merger related expenses and secondarily to increases in salaries and employee benefits and occupancy expense as a result of the additional personnel and branches related to the overall expansion of the Company’s branch network.

Non-interest expense increased by $3.1 million, or 16.8%, for the first quarter of 2011 compared to the fourth quarter of 2010. This increase was primarily due to $2.3 million in merger related expenses.

Since the fully taxable components of the Company’s revenues have increased as a result of the Beverly acquisition and organic growth of the franchise, the Company’s 2011 effective tax rate has increased when compared to the same period in 2010. As of March 31, 2011, the Company’s effective tax rate was 17.6%.

Balance Sheet Summary

Total assets decreased by $78.9 million, or 2.8%, for the quarter ended March 31, 2011. Net loans (including loans held for sale) increased $4.8 million, or 0.3%, securities, in aggregate, decreased by $86.7 million, or 9.9%, and cash and cash equivalents remained flat for the quarter. On the liability side, deposit balances increased by $25.2 million, or 1.2%, for the quarter ended March 31, 2011. For ALCO purposes, management chose to sell some long-term fixed-rate residential mortgage loans during the quarter. The bulk of the sales activity was included in one package of loans totaling $25.9 million. In addition, the combination of sales, calls, maturities and scheduled cash flow resulted in a sizeable decline in the Company’s securities portfolio. These declines were only partially offset by increases in commercial and industrial (“C&I”) and permanent commercial real estate loan balances during the period.

The Company experienced a slight decline in its asset quality metrics for the quarter ended March 31, 2011. Non-performing assets (“NPAs”) totaled $15.1 million at March 31, 2011 compared to $14.8 million at December 31, 2010. NPAs were $19.2 million at March 31, 2010. NPAs as a percentage of total assets increased to 55 basis points at the end of the current quarter. This compares to NPA metrics of 52 basis points and 70 basis points for the quarters ended December 31, 2010 and March 31, 2010, respectively. At March 31, 2011, total NPAs consisted of $12.7 million in loans considered impaired and on non-accrual, $880,000 in performing troubled debt restructures and $1.5 million in other real estate owned (“OREO”). As has been the case in the most recent quarters, the number of problem credits being resolved has been largely offset by an equal number of new problem credits. At March 31, 2011, the OREO balance consists of four separate properties.

Notwithstanding the current economic and employment conditions, the Company’s asset quality metrics and delinquency trends continue to be stable and favorable when compared to many industry peers. The first quarter provision for loan losses for both 2011 and 2010 was $1.2 million. The provision was $1.75 million for the fourth quarter of 2010. The allowance for loan losses increased $1.0 million, or 5.8%, for the quarter and represents 1.06% of total loans at March 31, 2011. Net charge-offs for the quarter ended March 31, 2011 were $170,000. By comparison, net charge-offs were $390,000 for the comparable period in 2010. The allowance represents 139.0% of non-performing loans at March 31, 2011 compared to 97.2% at March 31, 2010.

Deposits increased by $25.2 million, or 1.2%, during the first quarter of 2011. During the quarter, the Company experienced increases in demand, savings and NOW and money market account deposit categories. This growth is attributable to the Company’s expanded retail branch presence and online banking initiatives. The Company opened its first Boston retail location in the first quarter of 2010 and its Needham location in the third quarter of 2010. The previously announced Lexington branch is tentatively scheduled to open during the second quarter of 2011. Despite the low levels of short-term interest rates, the Company has experienced success in raising core deposit balances.

Short-term Federal Home Loan Bank (“FHLB”) advances, repurchase agreements and Federal Reserve Board short-term advances declined by $70.0 million, or 41.7%, $11.9 million, or 26.2% and $1.0 million, respectively, at March 31, 2011 compared to December 31, 2010. Management has selectively replaced some short- and long-term borrowing with the aforementioned deposit inflows and in the process has lessened the Company’s reliance on any single funding source. The Company had approximately $187.9 million in various FHLB term advances outstanding and an additional $131.4 million in short-term borrowings at March 31, 2011. The Company’s short-term borrowings consist of short-term FHLB advances and overnight customer repurchase agreements. From a funding and liquidity perspective, the Company has ready access to a number of large, stable and well-diversified short-term funding sources and these alternatives are available at competitive rates given the current rate environment. On February 8, 2011, in order to take advantage of the current interest rate environment, the Company exercised the call provision on its Danvers Capital Trust II subordinated debt issuance in the amount of $10,392,000. The transaction consisted of principal and interest of $10,310,000 and $82,000, respectively.

Company Profile

Danvers Bancorp, Inc., the holding company for Danversbank, is headquartered in Danvers, Massachusetts. The Company has grown to $2.8 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 27 other branch offices located in Andover, Beverly, Boston, Cambridge, Chelsea, Danvers, Hamilton, Malden, Manchester, Middleton, Needham, 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, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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,” “project,” “seek,” “plan” 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, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the risk factors described in the Company’s December 31, 2010 Annual Report on Form 10-K, filed March 15, 2011, 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,
2011 2010
(In thousands)

ASSETS
Cash and cash equivalents $ 30,292 $ 30,282
Securities available for sale, at fair value 641,332 723,610
Securities held to maturity, at cost 148,267 152,731
Loans held for sale 192 2,881
Loans 1,791,291 1,782,741
Less allowance for loan losses   (18,930 )   (17,900 )
Loans, net   1,772,361     1,764,841  
 
Restricted stock, at cost 18,172 18,172
Premises and equipment, net 41,198 39,793
Bank-owned life insurance 34,533 34,250
Other real estate owned 1,506 832
Accrued interest receivable 10,453 9,845
Deferred tax asset, net 16,977 15,675
Goodwill and intangible assets 32,616 33,119
Prepaid FDIC assessment 5,539 6,215
Other assets   20,987     21,099  
$ 2,774,425   $ 2,853,345  
 

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand deposits $ 258,426 $ 246,973
Savings and NOW accounts 455,084 449,036
Money market accounts 860,203 837,647
Term certificates over $100,000 336,895 344,165
Other term certificates   214,629     222,205  
Total deposits   2,125,237     2,100,026  
Short-term borrowings 131,440 214,330
Long-term debt 187,946 196,778
Subordinated debt 19,655 29,965
Accrued expenses and other liabilities   24,032     26,972  
Total liabilities   2,488,310     2,568,071  
 
Commitments and contingencies
 
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 239,665 239,163
Retained earnings 90,489 88,067
Accumulated other comprehensive loss (3,975 ) (2,102 )

Unearned restricted shares - 398,861 and 530,558 shares at March 31, 2011 and December 31, 2010, respectively
(4,902 ) (5,331 )

Unearned compensation - ESOP; 1,195,447 and 1,213,290 shares at March 31, 2011 and December 31, 2010, respectively
(11,954 ) (12,133 )

Treasury stock, at cost; 1,629,533 and 1,592,382 shares at March 31, 2011 and December 31, 2010, respectively
  (23,431 )   (22,613 )
Total stockholders' equity   286,115     285,274  
$ 2,774,425   $ 2,853,345  

DANVERS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended
March 31,
2011   2010
(Dollars in thousands, except
Interest and dividend income: per share amounts)
Interest and fees on loans $ 24,161 $ 23,389
Interest on debt securities:
Taxable 6,357 5,381
Non-taxable 580 242
Dividends on equity securities 14 -
Interest on cash equivalents and certificates of deposit   3     47  
Total interest and dividend income   31,115     29,059  
 
Interest expense:
Interest on deposits:
Savings and NOW accounts 1,235 1,053
Money market accounts 2,105 2,255
Term certificates 2,476 2,597
Interest on short-term borrowings 171 96
Interest on long-term debt and subordinated debt   2,084     2,277  
Total interest expense   8,071     8,278  
Net interest income 23,044 20,781
Provision for loan losses   1,200     1,200  
Net interest income, after provision for loan losses   21,844     19,581  
 
Non-interest income:
Service charges on deposits 1,113 1,084
Loan servicing fees 119 58
Net gain on sales of loans 330 99
Net gain on sales of securities 300 71
Loss on limited partnerships, net (180 ) (34 )
Increase in cash surrender value of bank-owned life insurance 283 316
Trust services 404 393
Other operating income   954     675  
Total non-interest income   3,323     2,662  
 
Non-interest expenses:
Salaries and employee benefits 10,459 9,856
Occupancy 2,531 2,089
Equipment 1,022 1,020
Outside services 819 546
Other real estate owned expense 108 186
Deposit insurance expense 729 582
Advertising expense 138 209
Merger expense 2,288 -
Other operating expense   3,188     2,998  
Total non-interest expenses   21,282     17,486  
Income before income taxes 3,885 4,757
Provision for income taxes   684     506  
Net income $ 3,201   $ 4,251  
 
Weighted-average shares outstanding:
Basic 19,495,533 20,423,418
Diluted 19,843,457 20,423,418
 
Earnings per share:
Basic $ 0.16 $ 0.21
Diluted $ 0.16 $ 0.21

DANVERS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended
March 31,   December 31,
2011 2010
(Dollars in thousands,
except per share amounts)
Interest and dividend income:
Interest and fees on loans $ 24,161 $ 25,162
Interest on debt securities:
Taxable 6,357 5,500
Non-taxable 580 498
Dividends on equity securities 14 -
Interest on cash equivalents and certificates of deposit   3     20
Total interest and dividend income   31,115     31,180
 
Interest expense:
Interest on deposits:
Savings and NOW accounts 1,235 1,268
Money market accounts 2,105 2,433
Term certificates 2,476 2,510
Interest on short-term borrowings 171 64
Interest on long-term debt and subordinated debt   2,084     2,256
Total interest expense   8,071     8,531
Net interest income 23,044 22,649
Provision for loan losses   1,200     1,750
Net interest income, after provision for loan losses   21,844     20,899
 
Non-interest income:
Service charges on deposits 1,113 1,136
Loan servicing fees 119 35
Net gain on sales of loans 330 220
Net gain on sales of securities, net of impairment write-down 300 -
Gain (loss) on limited partnerships, net (180 ) 717
Increase in cash surrender value of bank-owned life insurance 283 346
Trust services 404 373
Other operating income   954     1,010
Total non-interest income   3,323     3,837
 
Non-interest expenses:
Salaries and employee benefits 10,459 10,020
Occupancy 2,531 2,073
Equipment 1,022 1,071
Outside services 819 575
Other real estate owned expense 108 176
Deposit insurance expense 729 706
Advertising expense 138 416
Merger expense 2,288 -
Other operating expense   3,188     3,183
Total non-interest expenses   21,282     18,220
Income before income taxes 3,885 6,516
Provision for income taxes   684     1,661
Net income $ 3,201   $ 4,855
 
Weighted-average shares outstanding:
Basic 19,495,533 19,612,520
Diluted 19,843,457 19,767,484
 
Earnings per share:
Basic $ 0.16 $ 0.25
Diluted $ 0.16 $ 0.25

DANVERS BANCORP, INC.
NET INTEREST INCOME ANALYSIS
(Unaudited)
   
Three Months Ended March 31,
2011     2010  
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
$ 7,055 $ 3 0.17 % $ 27,052 $ 47 0.69 %
Debt securities: (2)
U.S. Government - - - 15,493 6 0.15
Gov't-sponsored enterprises 480,766 3,506 2.92 218,927 1,943 3.55
Mortgage-backed 321,165 2,848 3.55 294,141 3,129 4.26
Municipal bonds 53,593 580 4.33 24,417 242 3.96
Other 1,062 3 1.13 10,310 303 11.76
Restricted stock 18,172 14 0.31 18,951 - -
Real estate mortgages (3) 918,151 12,548 5.47 967,439 13,650 5.64
C&I loans (3) 693,367 9,556 5.51 567,021 8,215 5.80
IRBs (3) 188,201 2,022 4.30 124,625 1,468 4.71
Consumer loans (3)   3,105     35 4.51   3,644     56 6.15
Total interest-earning assets 2,684,637   31,115 4.64 2,272,020   29,059 5.12
Allowance for loan losses   (18,258 )   (15,083 )
Total earning assets less allowance for loan losses
2,666,379 2,256,937
Non-interest-earning assets   183,187     206,360  
Total assets $ 2,849,566   $ 2,463,297  
 
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts $ 454,208 1,235 1.09 $ 396,621 1,053 1.06
Money market accounts 842,058 2,105 1.00 653,047 2,255 1.38
Term certificates   561,103     2,476 1.77   558,538     2,597 1.86
Total deposits 1,857,369 5,816 1.25 1,608,206 5,905 1.47
Borrowed funds:
Short-term borrowings 213,672 171 0.32 86,494 96 0.44
Long-term debt 193,914 1,654 3.41 216,992 1,835 3.38
Subordinated debt   24,008     430 7.16   29,965     442 5.90
Total interest-bearing liabilities 2,288,963   8,071 1.41 1,941,657   8,278 1.71
Non-interest-bearing deposits 252,534 213,156
Other non-interest-bearing liabilities   21,992     20,612  
Total non-interest-bearing liabilities   274,526     233,768  
Total liabilities 2,563,489 2,175,425
Stockholders' equity   286,077     287,872  
Total liabilities and stockholders' equity $ 2,849,566   $ 2,463,297  
 
Net interest income $ 23,044 $ 20,781
Net interest rate spread (4) 3.23 % 3.41 %
Net interest-earning assets (5) $ 395,674   $ 330,363  
Net interest margin (6) 3.43 % 3.66 %
Ratio of interest-earning assets to total interest-bearing liabilities
  1.17   x   1.17   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.
(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, 2011   December 31, 2010
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
$ 7,055 $ 3 0.17 % $ 40,567 $ 20 0.20 %
Debt securities: (2)
Gov't-sponsored enterprises 480,766 3,506 2.92 375,638 2,869 3.06
Mortgage-backed 321,165 2,848 3.55 298,353 2,629 3.52
Municipal bonds 53,593 580 4.33 47,130 498 4.23
Other 1,062 3 1.13 1,062 2 0.75
Restricted stock 18,172 14 0.31 18,172 - -
Real estate mortgages (3) 918,151 12,548 5.47 913,745 12,828 5.62
C&I loans (3) 693,367 9,556 5.51 696,436 10,426 5.99
IRBs (3) 188,201 2,022 4.30 169,379 1,867 4.41
Consumer loans (3)   3,105     35 4.51   3,305     41 4.96
Total interest-earning assets 2,684,637   31,115 4.64 2,563,787   31,180 4.86
Allowance for loan losses   (18,258 )   (16,845 )
Total earning assets less allowance for loan losses
2,666,379 2,546,942
Non-interest-earning assets   183,187     193,772  
Total assets $ 2,849,566   $ 2,740,714  
 
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts $ 454,208 1,235 1.09 $ 450,830 1,268 1.13
Money market accounts 842,058 2,105 1.00 850,142 2,433 1.14
Term certificates   561,103     2,476 1.77   557,471     2,510 1.80
Total deposits 1,857,369 5,816 1.25 1,858,443 6,211 1.34
Borrowed funds:
Short-term borrowings 213,672 171 0.32 74,564 64 0.34
Long-term debt 193,914 1,654 3.41 204,103 1,789 3.51
Subordinated debt   24,008     430 7.16   30,073     467 6.21
Total interest-bearing liabilities 2,288,963   8,071 1.41 2,167,183   8,531 1.57
Non-interest-bearing deposits 252,534 260,241
Other non-interest-bearing liabilities   21,992     22,781  
Total non-interest-bearing liabilities   274,526     283,022  
Total liabilities 2,563,489 2,450,205
Stockholders' equity   286,077     290,509  
Total liabilities and stockholders' equity $ 2,849,566   $ 2,740,714  
 
Net interest income $ 23,044 $ 22,649
Net interest rate spread (4) 3.23 % 3.29 %
Net interest-earning assets (5) $ 395,674   $ 396,604  
Net interest margin (6) 3.43 % 3.53 %
Ratio of interest-earning assets to total interest-bearing liabilities
  1.17   x   1.18   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.
(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)
     
At or For
At or For the the Three
Three Months Ended Months Ended
March 31, December 31,
2011 2010 2010
 
Performance Ratios:
 
Return on assets (ratio of income to average total assets) (1) 0.45 % 0.69 % 0.71 %
Return on equity (ratio of income to average equity) (1) 4.48 % 5.91 % 6.68 %
Net interest rate spread (1) (2) 3.23 % 3.41 % 3.29 %
Net interest margin (1) (3) 3.43 % 3.66 % 3.53 %
Efficiency ratio (4) 78.81 % 72.22 % 66.83 %
Non-interest expenses to average total assets (1) 2.99 % 2.84 % 2.66 %
Average interest-earning assets to interest-bearing liabilities

1.17

x

1.17

x

1.18

x
 
Asset Quality Ratios:
 
Non-performing assets to total assets 0.55 % 0.70 % 0.52 %
Non-performing loans to total loans 0.76 % 0.96 % 0.78 %
Allowance for loan losses to non-performing loans 138.97 % 97.15 % 128.51 %
Allowance for loan losses to total loans 1.06 % 0.93 % 1.00 %
 
Capital Ratios:
 
Risk-based capital (to risk-weighted assets) 15.05 % 16.60 % 15.36 %
Tier 1 risk-based capital (to risk-weighted assets) 14.09 % 15.72 % 14.45 %
Tier 1 leverage capital (to average assets) 9.80 % 11.52 % 10.44 %
Stockholders' equity to total assets 10.31 % 11.82 % 10.00 %
Average stockholders' equity to average assets 10.04 % 11.69 % 10.60 %
 
(1) Ratios are annualized.
(2) The net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(3) The net interest margin represents net interest income divided by average total interest-earning assets.
(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.

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