DNBK Danvers Bancorp, Inc. (MM)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

DANVERS BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)

(978) 777-2200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o     No  ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o     No  ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý     No  o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o     No  o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

         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):

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o     No  ý

         The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2010 was $275,104,186.

         Shares outstanding of the registrant's common stock, $0.01 par value, at February 28, 2011: 20,686,592

DOCUMENTS INCORPORATED BY REFERENCE

None.

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Forward-Looking Statements

        This report may contain statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements may be identified by the use of such words as "estimate," "project," "believe," "intend," "anticipate," "plan," "seek," "expect" and similar expressions. These forward-looking statements include, but are not limited to, the following:

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statements of our goals, intentions and expectations;



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statements regarding our business plans and prospects and 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.

        Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained or incorporated by reference in this document. Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 1A, "Risk Factors." Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. Our actual results could differ materially from those projected in the forward-looking statements as a result of the following factors:

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significantly increased competition among depository and other financial institutions;



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inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;



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general economic conditions, whether national or regional, and conditions in the real estate markets that could affect the demand for our loans and other products and ability of borrowers to repay loans, lead to further declines in credit quality and increased loan losses, and continue to negatively affect the value and salability of the real estate that is the collateral for many of our loans or that we own directly;



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changing business, banking, or regulatory conditions or policies, or new legislation affecting the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act"), that could lead to changes in the competitive balance among financial institutions, restrictions on bank activities, changes in costs (including deposit insurance premiums), increased regulatory scrutiny, declines in consumer confidence in depository institutions, or changes in the secondary market for bank loan and other products;



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the adequacy of loan loss reserves or deposit levels necessitating increased borrowing to fund loans and investments;



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our ability to enter new markets successfully and take advantage of growth opportunities;



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changes in consumer spending, borrowing and savings habits;



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changes in loan defaults and charge-off rates;



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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the Financial Accounting Standards Board ("FASB"); and



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changes in our organization, compensation and benefit plans.

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        This not an exhaustive list and as a result of variations in any of these factors actual results may differ materially from any forward-looking statements. Because of these and other uncertainties, among others, our actual future results may be materially different from the results indicated by any forward-looking statements. We discuss these and other uncertainties in "Risk Factors" beginning on page 40. Forward-looking statements speak only as of the date they are made. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

Item 1.    BUSINESS

Danvers Bancorp, Inc.

        Danvers Bancorp, Inc. (the "Company" or "Danvers") is a Delaware-chartered corporation and registered bank holding company under the Bank Holding Company Act of 1956, as amended. Danvers' principal activity is the ownership and management of its wholly-owned banking subsidiary, Danversbank, a Massachusetts-chartered stock savings bank. The executive offices of Danvers are located at One Conant Street, Danvers, Massachusetts 01923, and our main telephone number is (978) 777-2200.

        On October 30, 2009, the Company completed the acquisition of Beverly National Corporation ("Beverly") for a total purchase price of $62.1 million. Beverly stockholders received 1.66 shares of the Company's common stock in exchange for each common share of Beverly. Beverly, a Massachusetts-chartered corporation, was the holding company of Beverly National Bank, a federally-chartered bank, with one wholly-owned subsidiary, Beverly National Security Corporation. The Company merged Beverly National Bank with and into Danversbank after the close of business on February 12, 2010.

        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 Financial, Inc., a Delaware corporation ("People's United"). 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 common stock for the period ended January 19, 2011. The Merger Agreement provides that at the Effective Time (as defined in the Merger Agreement), 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. 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. Subject to the approval of the Company's common stockholders, regulatory approvals and other customary closing conditions, the parties anticipate completing the transaction late in the second quarter of 2011.

Danversbank

        Danversbank (the "Bank") is a Massachusetts-chartered stock savings bank headquartered in Danvers, Massachusetts. Originally founded in 1850 as a Massachusetts-chartered mutual savings bank. Danversbank conducts business from its main office located at One Conant Street, Danvers, Massachusetts, and its 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.

General

        The Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC"). The Bank is also insured by the Depositors Insurance Fund ("DIF"). The DIF is a private, industry-sponsored insurance company that insures all deposits over the FDIC's per-depositor limits of $250,000 for self-directed retirement accounts and $250,000 for all other deposit accounts in 64 Massachusetts-chartered savings banks. The standard maximum FDIC deposit insurance has been permanently increased from $100,000 to $250,000 per depositor in per insured bank by the Dodd-Frank Wall Street

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Reform and Consumer Protection Act. Danversbank is a member of the Federal Home Loan Bank of Boston ("FHLBB"), and is regulated by the FDIC and the Massachusetts Division of Banks.

        Danversbank's business consists primarily of making loans to its customers, including commercial and industrial ("C&I") loans, commercial real estate loans, owner-occupied residential mortgages and consumer loans, and investing in a variety of investment securities. Danversbank funds these lending and investment activities with deposits from the general public, funds generated from operations and selected borrowings. Danversbank also provides non-deposit investment products and services, cash management, debit and credit card products, trust services and online banking services. Danversbank has five subsidiaries: Conant Ventures, Inc., Conant Investment Corporation, Five Conant Street Investment Corporation, One Conant Capital LLC and Beverly National Security Corporation.

Market Area and Competition

        As of December 31, 2010, Danversbank was the seventh largest bank headquartered in the Commonwealth of Massachusetts and the largest banking franchise headquartered in Essex County. Our corporate headquarters is in Danvers, Massachusetts, located approximately 20 miles north of Boston. Over the past eleven years, Danversbank has expanded its footprint to include locations in Middlesex and Suffolk Counties. In September 2001, we acquired RFS Bancorp, Inc., the parent company of Revere Federal Savings Bank. In February 2007, BankMalden, a Massachusetts co-operative bank, merged into Danversbank. In October 2009, we acquired Beverly National Corporation, a Massachusetts-chartered corporation, the parent company of Beverly National Bank, and on February 12, 2010, Beverly's subsidiary bank was merged with and into Danversbank. The counties in which Danversbank currently operates include a mixture of rural, suburban and urban markets. The economies of these areas were historically based on manufacturing, but, similar to many areas of the country, the underpinnings of these economies are now more service oriented, with employment spread across many economic sectors including service, finance, health-care, technology, real estate and government.

        While our primary deposit-gathering area is concentrated in Essex and Middlesex Counties in Eastern Massachusetts, our lending area encompasses a somewhat broader market that includes portions of Suffolk County, southern New Hampshire and Rhode Island.

        The majority of our loans are made to customers located in our primary deposit-gathering markets. Our large C&I and commercial real estate lending programs comprise a substantial portion of our total loan portfolio. As of December 31, 2010, loans from these loan types totaled $1.3 billion, or 71.2%, of our total loan portfolio. In particular, C&I loans represent more than 48% of the portfolio.

        We face substantial competition in our efforts to originate loans and to attract deposits in our primary markets. Achieving meaningful growth is challenging given the number of competitors and the overall decline in the population of our primary market area. We face direct competition from not only locally based community banks but also a significant number of larger financial institutions that have a statewide, regional or national presence. Many of these financial institutions are significantly larger and have greater financial and technological resources than Danversbank. In our commercial real estate lending program, our major competitors also include life insurance companies and to a lesser extent pension funds. We compete with these institutions through competitive pricing coupled with superior service and complemented by very experienced lending teams—especially in the commercial real estate and C&I markets.

Business Strategy

        Our business objectives have focused on franchise growth and improved profitability while remaining a community-oriented financial institution that emphasizes personalized customer service. Over the past 11 years, we have expanded our branch network by establishing a number of de novo

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branches, acquiring 11 branch banking offices through our acquisition of Revere Federal Savings Bank, BankMalden and Beverly and opening a loan production office in Boston. We have also upgraded 3 branch offices by relocating to full-service facilities in more attractive locations. In addition, our total loan portfolio has grown significantly, both through organic growth and the addition of experienced lending officers. In addition to opening new branches, we have selectively pursued acquisitions of non-interest income producing businesses and lending groups that will further expand our loan portfolio or grow our banking franchise.

        Key elements of our business strategy have included:

        Continued Expansion of Our Branch Network.     We have expanded our retail banking franchise and generated additional deposits by increasing the number of full service branch offices. We currently maintain a main office and twenty-seven other branch locations, which offer extended hours of operation and increased customer convenience. Our branch network is complimented by a combination of 49 in-branch and free-standing ATMs.

        Expansion of Our C&I and Commercial Real Estate Loan Portfolio.     In recent years, we have substantially increased our originations of C&I loans and, on a selective basis, commercial real estate loans. We have accomplished this, in part, by hiring experienced senior C&I and commercial real estate lenders from other financial institutions operating in our market area in Eastern Massachusetts after their institutions were acquired by larger banks. In some instances, this has involved an individual lender and in other cases we executed lift-outs of commercial lending groups known to us. In September 2007, we broadened our C&I lending group by hiring two senior asset-based lenders.

        Expanding Our Sources of Non-interest Income.     We have increased non-interest income in recent periods by introducing additional fee-generating services, such as sales of non-deposit investment and insurance products.

        Increased Transaction Accounts.     We have developed various products designed to deepen our relationships with our customers, with the goal of ultimately becoming the customer's operating bank. Among local community banks, we are one of the earlier adopters of a deposit capture product, Snapdeposit ^SM , which enables our commercial checking customers to process deposits and checks electronically from their locations. In addition, we offer and promote retail checking services that offer an above-market rate of interest and are tied to a broad suite of required electronic banking services that include, among others, direct deposit, debit card usage and electronic statements. These services have attracted new transaction account balances. While we compete on the basis of rates for certain deposit accounts through the use of periodic market promotions, we have worked to reduce our reliance on certificates of deposit, which generally are more costly than transaction accounts and more susceptible to being moved to other institutions offering higher rates.

        Maintaining Asset Quality.     We continue to focus on maintaining a high level of asset quality, which we believe is a key component of long-term financial success. At December 31, 2010, our ratio of total non-performing assets to total assets was 0.52%. We intend to maintain asset quality primarily through the maintenance of prudent underwriting standards and a centralized credit approval process.

Lending Activities

        General.     Danversbank's gross loan portfolio totaled $1.8 billion at December 31, 2010, representing 62.5% of total assets at that date. In its lending activities, Danversbank originates C&I and asset based loans, commercial real estate loans, residential and commercial construction loans, residential real estate loans secured by owner-occupied one-to-four-family residences, home equity lines-of-credit, fixed rate home equity loans and other personal consumer loans. Total loans originated totaled $556.0 million in 2010 and $513.6 million in 2009.

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        Loans originated by Danversbank are subject to federal and state laws and regulations. Interest rates charged by Danversbank on its loans are influenced by the demand for such loans, the amount and cost of funding available for lending purposes, current asset/liability management objectives and the interest rates offered by competitors.

        The following table summarizes the composition of Danversbank's loan portfolio at the dates indicated:

        C&I Loans.     Danversbank originates secured and unsecured C&I loans to business customers in its market area for the purpose of financing equipment purchases, working capital, expansion and other general business purposes. At December 31, 2010, Danversbank had $866.4 million in C&I loans in its total portfolio, representing 48.5% of such portfolio. Danversbank originated $295.4 million and $197.6 million in C&I loans during the years ended December 31, 2010 and 2009, respectively. Danversbank intends to continue to grow this segment of its lending business as market conditions permit.

        Danversbank's C&I loans are generally collateralized by accounts receivable, inventory, equipment and other fixed assets and are usually supported by personal guarantees. Danversbank offers both term and revolving C&I loans. The term loans have either fixed or adjustable rates of interest and generally fully amortize over a term of between three and seven years. Revolving loans are generally written for a one- year term, renewable annually.

        When making C&I loans, Danversbank considers the financial statements of the borrower, the payment histories of the borrower and guarantor with respect to both corporate and personal debt, the projected cash flows of the business, the viability of the industry in which the borrower operates and the value of the collateral pledged to Danversbank. Danversbank's C&I loans are not concentrated in any single industry.

        The repayment of C&I loans is generally dependent on the successful operation of the borrower's business and the sufficiency of collateral, if any. Repayment of these loans, however, may be affected by adverse changes in the general economy. Further, collateral securing such loans may depreciate in value over time and may be difficult to appraise and to liquidate. Included in C&I loans are loans serviced for others in the amount of $37.5 million at December 31, 2010.

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        Commercial Real Estate Loans.     Danversbank originated $54.3 million and $87.5 million of commercial real estate loans during the years ended December 31, 2010 and 2009, respectively. We had $403.9 million of commercial real estate loans in our portfolio as of December 31, 2010. These loans comprise 22.6% of the total loan portfolio as of December 31, 2010. Danversbank intends to further increase this segment of its loan portfolio. Danversbank generally originates commercial real estate loans for terms of up to 25 years, typically with interest rates that adjust over periods of one to seven years based on various rate indices plus a margin. Commercial real estate loans are generally secured by non-owner-occupied multi-family income properties, office buildings, retail facilities, warehouses and industrial properties. Generally, commercial real estate loans do not exceed 75% of the appraised value of the underlying collateral at the time the loan is originated. Included in commercial real estate loans are loans serviced for others in the amount of $14.8 million at December 31, 2010.

        Danversbank monitors concentrations of commercial real estate loans by property type, location and borrower. For most of Danversbank's larger relationships, the extensions of credit are spread over multiple loans, varying property types and locations. In each instance, the relationships are with highly experienced real estate developers that have longstanding relationships or are well known to Danversbank.

        In its evaluation of a commercial real estate loan application, Danversbank considers the net operating income of the property used as collateral, the creditworthiness of the building's tenant(s), the terms of the respective leases, the borrower's expertise, credit history and the profitability and value of the underlying property. Danversbank generally requires that the properties securing these loans have debt service coverage ratios (the ratio of cash flow before debt service to debt service) of at least 1.20x. As a general practice, Danversbank requires the borrowers seeking commercial real estate loans to personally guarantee those loans.

        Commercial real estate loans generally have larger balances and involve a greater degree of risk than owner-occupied residential mortgage loans. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral value of the commercial real estate securing the loan. In addition, economic events could have an adverse impact on the cash flows generated by properties securing Danversbank's commercial real estate loans and on the value of such properties.

        Construction Loans.     Danversbank originates construction loans for one to four-family homes, residential condominiums, commercial, multi-family and other nonresidential purposes. Construction loans generally provide for the payment of interest only during the term of the loan, which is usually twelve to twenty-four months. One to four-family residential and residential condominium construction loans are made with a maximum loan-to-value ratio of 75%. Commercial, multi-family and other nonresidential construction loans are made with a maximum loan-to-value ratio of 75% of the upon-completion market value of the real estate and improvements. Danversbank originated $28.1 million and $28.2 million of construction loans during the years ended December 31, 2010 and 2009, respectively. We had $122.6 million of construction loans in our portfolio as of December 31, 2010. The construction loans are usually written with variable interest rates adjusted to each change in the index rate plus a margin. Danversbank began to reduce its exposure to construction lending through limited originations of construction loans starting in mid-2006 in response to a general downturn in the single-family residential and residential condominium markets, which is lengthening the amount of time required to sell the units that are built.

        As with our commercial real estate loan portfolio, we monitor concentrations of construction loans by property type, by location and relative to the amount of construction financing extended to any one borrower. In addition, management monitors the aggregate number of speculative units that Danversbank finances at any one time. There are also limits on the number of speculative units financed for any specific construction project. This limit is generally established at two units per

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project. However, exceptions to this policy are occasionally granted when the project involves a single building with multiple units. Danversbank's construction lending footprint encompasses an area similar to the franchise branch network, with the highest concentration located in Brookline, Massachusetts. Similar to the institution's commercial real estate portfolio, Danversbank has several large construction loan relationships with individual borrowers, but in each instance the relationship encompasses multiple loans, secured by varying types of properties in different locations. The borrowers involved are highly experienced real estate developers that have longstanding relationships with either a senior lending officer or Danversbank. At December 31, 2010, Danversbank's portfolio of construction loans was comprised of 38.6% residential condominiums, 15.0% single-family homes and subdivisions, 23.3% non-residential commercial real estate, 19.2% land loans, 1.6% apartment construction loans and 2.3% owner occupied residential construction loans. Based on our assessment that the inventory of residential condominiums listed for sale is continuing to decrease in our market area, we do not expect that the concentration of residential condominium construction loans will have a material impact on our revenues or net income.

        Construction loans generally involve a greater degree of risk than permanent commercial and residential loan financing. Loan repayment is dependent on the successful completion of the project at an as completed value commensurate with the market value of the real estate and improvements. In addition, economic events could have an adverse impact on our construction loan portfolio and on the value of such properties.

        Owner Occupied Residential Real Estate Loans.     Danversbank offers fixed-rate and adjustable-rate residential mortgage loans for owner-occupied residential real estate with maturities of up to 40 years and maximum loan amounts generally of up to $3.0 million. As of December 31, 2010, this portfolio totaled $305.2 million, or 17.1% of the total loan portfolio. Of the residential mortgage loans outstanding on that date, $163.3 million were adjustable-rate loans with an average yield of 4.78%, and $141.9 million were fixed-rate mortgage loans with an average yield of 5.02%. Residential mortgage loan originations totaled $165.9 million and $186.0 million for the years ended December 31, 2010 and 2009, respectively. Danversbank does not originate or purchase any sub-prime or alternative-A residential mortgage loans.

        The decision to originate loans for portfolio or for sale into the secondary market is made by Danversbank's Asset/Liability Management Committee, or ALCO, and is based on the borrower's interest rate risk profile. Residential mortgage loans sold into the secondary market totaled $44.9 million in 2010 and $66.2 million during 2009. Our current practice is to sell substantially all newly originated fixed-rate 20 and 30-year residential mortgage loans. These loans are underwritten in accordance with Freddie Mac and Fannie Mae standards and sold immediately after being originated by Danversbank. Newly originated, fixed-rate 10 and 15-year loans are typically held in portfolio. At December 31, 2010, fixed-rate residential mortgage loans held in the portfolio totaled $141.9 million, or 46.5% of total residential real estate mortgage loans. Danversbank services loans sold to Freddie Mac and Fannie Mae and earns a fee equal to 0.25% of the loan amounts outstanding for providing these services. The total of residential mortgage loans serviced for others as of December 31, 2010 was $129.5 million.

        The adjustable-rate mortgage, or ARM, loans offered by Danversbank make up the largest component of the residential mortgage loans held in portfolio. At December 31, 2010, ARM loans totaled $163.3 million or 53.5% of total residential loans outstanding at that date. ARM's are offered for terms of up to 40 years with initial interest rates that are fixed for 1, 3, 5, 7 or 10 years. After the initial fixed-rate period, the interest rates on the loans are reset based on the relevant U.S. Treasury Constant Maturity Treasury, or CMT, Index plus margins of varying percentages, for one-year periods. Interest rate adjustments on such loans typically range from 2.0% to 3.0% during any adjustment period, excluding the 7 and 10 year ARM's that can adjust up to 6% on the first adjustment period, and 5.0% to 6.0% over the life of the loan. Periodic adjustments in the interest rates charged on ARM

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Loans help to reduce our exposure to changes in interest rates. However, ARM loans generally possess an element of credit risk not inherent in fixed-rate mortgage loans, in that borrowers are potentially exposed to increases in debt service requirements over the life of the loan in the event market interest rates rise. The possibility of higher payments is taken into account during our underwriting process and many of our residential mortgage loans are made to existing Danversbank customers.

        For our residential mortgage loan originations held in portfolio, Danversbank lends up to a maximum loan-to-value ratio of 100% for first-time home buyers and generally up to 80% for other buyers on mortgage loans secured by owner-occupied property. Private mortgage insurance is generally required for loans with a loan-to-value ratio in excess of 80%. Title insurance, hazard insurance and, if appropriate, flood insurance are required for all properties securing real estate loans made by Danversbank. A licensed appraiser appraises all properties securing residential first mortgage purchase loans and all real estate transactions greater than $250,000.

        In an effort to provide financing for low and moderate-income first-time home buyers, Danversbank originates and services residential mortgage loans with private mortgage insurance provided by PMI and Genworth mortgage insurance companies as well as the Mortgage Insurance Fund, MIF, of the Massachusetts Housing Finance Agency. The program provides mortgage payment protection as an enhancement to mortgage insurance coverage. This no-cost benefit, known as MI Plus, provides up to six monthly principal and interest payments in the event that a borrower becomes unemployed.

        Home Equity Lines-of-Credit and Term Loans.     Danversbank offers home equity lines-of-credit and home equity term loans. Danversbank originated $11.3 million and $11.2 million of home equity lines-of-credit and term loans during the years ended December 31, 2010 and 2009, respectively. At December 31, 2010, the Company had $83.8 million of home equity lines-of-credit and loans outstanding. Danversbank does not originate or purchase any sub-prime home equity loans or lines. Home equity lines-of-credit and term loans are secured by first and second mortgages on one-to-four family owner occupied properties, and are made in amounts such that the combined first and second mortgage balances generally do not exceed 75% of the value of the property serving as collateral at time of origination. The lines-of-credit are available to be drawn upon for 10 years, at the end of which time they become term loans amortized over 10 years. Interest rates on home equity lines normally adjust based on the prime rate of interest as published by The Wall Street Journal . The undrawn portion of home equity lines-of-credit totaled $69.9 million at December 31, 2010.

        Consumer and Other Loans.     Danversbank offers a variety of consumer and other loans, including unsecured personal loans, automobile loans, loans secured by passbook savings or term certificate accounts, overdraft lines of credit, boat and recreational vehicle loans and loans to help finance the cost of education, including primary, secondary and graduate school. Danversbank originated $1.0 million and $3.1 million of consumer and other loans during the years ended December 31, 2010 and 2009, respectively. At December 31, 2010, we had $3.4 million of consumer and other loans outstanding.

        Loan Origination and Underwriting.     The primary source of originations is our loan personnel, and to a lesser extent, local mortgage brokers, advertising and referrals from customers. In a few instances, Danversbank has purchased participation interests in commercial real estate loans from banks located outside of Essex County. Danversbank underwrites such purchased loans using its own underwriting criteria. Danversbank issues loan commitments to prospective borrowers conditioned on the occurrence of certain events. Commitments are made in writing on specified terms and conditions and are generally honored for up to 60 days from approval. At December 31, 2010, Danversbank had loan commitments and unadvanced loans and lines-of-credit totaling $471.9 million. For information about loan commitments outstanding as of December 31, 2010, see "Quantitative and Qualitative Disclosures About Market Risk—Loan Commitments" on page 78. Danversbank charges origination fees, or points,

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and collects fees to cover the costs of appraisals and credit reports on most residential mortgage loans originated. Danversbank also collects late charges on real estate loans, and origination fees and prepayment penalties on commercial mortgage loans and some types of C&I loans. For information regarding Danversbank's recognition of loan fees and costs, please refer to Note 2 to the Consolidated Financial Statements beginning on page F-8.

        The following table sets forth certain information concerning Danversbank's portfolio loan activity, excluding loans originated for sale and sold:

        Residential mortgage loans are underwritten by Danversbank's staff of residential loan underwriters. Residential mortgage loans that are less than the Freddie Mac and Fannie Mae limit require the approval of a residential loan underwriter to be held in Danversbank's loan portfolio. Residential mortgage loans greater than $1.0 million require the approval of the Board of Investment of the Board of Directors of Danversbank.

        Commercial real estate and C&I loans are underwritten by commercial credit analysts. For commercial real estate loans, loan officers may approve loans up to their individual lending limits, which range from $100,000 to $2.0 million, while loans up to $3.0 million may be approved by the Senior Lending Officer and Danversbank's Chief Executive Officer. Danversbank's Senior Lending Officer may approve secured C&I loans of up to $3.0 million, while its Loan Committee may approve loans of up to $5.0 million. Loans over these limits require the approval of the Board of Investment of the Board of Directors of Danversbank.

        Consumer loans are underwritten by consumer loan underwriters who have approval authorities ranging from $1,000 to $10,000 for unsecured borrowings and up to $750,000 for secured borrowings. Several senior lenders have authority to approve unsecured consumer loans up to $500,000 and secured borrowing up to $2.0 million. Loans above these limits require the approval of the Board of Investment of the Board of Directors of Danversbank.

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        Pursuant to its loan policy, Danversbank generally does not make loans aggregating more than $30 million as of December 31, 2010, to one borrower or related entity. Danversbank's internal lending limit is lower than the Massachusetts legal lending limit, which is 20.0% of a bank's capital stock, retained earnings and undivided profits, or $47.2 million for Danversbank as of December 31, 2010.

        Danversbank has established a risk rating system for its commercial real estate, commercial construction and C&I loans. This system evaluates a number of factors useful in indicating the risk of default and risk of loss associated with a loan. Initial ratings are assigned by commercial credit analysts who do not have responsibility for loan originations. See "Business—Asset Quality—Classification of Assets and Loan Review" on page 14.

        Loan Maturity.     The following table summarizes the scheduled repayments based on the contractual maturity of Danversbank's loan portfolio at December 31, 2010. Demand loans, loans having no stated repayment schedule, and overdraft loans are reported as being due in one year or less.

        The following table sets forth the dollar amount of total loans, net of unadvanced funds on loans, contractually due after December 31, 2010 and whether such loans have fixed interest rates or adjustable interest rates.

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