SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ________________ to _____________
Commission File Number: 0-16667
DNB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2222567
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 Brandywine Avenue - Downingtown, PA 19335
(Address of principal executive offices and Zip Code)
(610) 269-1040
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock ($1.00 Par Value) 1,451,961
(Class) (Shares Outstanding as of
November 14, 1998)
---------------------------------------------------------------------------
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1998 and December 31, 1997 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997 4
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1998 and 1997 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998 and 1997 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and December 31, 1997 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. CHANGE IN SECURITIES 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 19
SECURITY HOLDERS
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 20
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
September 30, December 31,
1998 1997
------------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks .......................................................... $ 10,657,334 $7,503,007
Federal funds sold ............................................................... 15,206,000 15,889,000
Investment securities available for sale, at market value ........................ 29,359,228 13,888,462
Investment securities (market value $52,405,729
in 1998 and $49,863,493 in 1997) .............................................. 51,875,429 49,694,161
Loans, net of unearned income .................................................... 143,012,690 129,954,114
Allowance for loan losses ........................................................ (5,170,215) (5,280,958)
----------- -----------
Net loans......................................................................... 137,842,475 124,673,156
----------- -----------
Office property and equipment, net ............................................... 3,867,847 3,644,581
Accrued interest receivable ...................................................... 1,483,736 1,584,213
Other real estate owned .......................................................... 196,015 231,187
Deferred income taxes ............................................................ 973,829 977,981
Other assets...................................................................... 1,615,932 1,365,317
----------- -----------
Total assets ..................................................................... $ 253,077,825 $ 219,451,065
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Non-interest-bearing deposits .................................................... $ 27,628,572 $27,149,502
Interest-bearing deposits:
NOW accounts .................................................................. 33,416,564 33,386,755
Money market .................................................................. 25,259,905 19,289,128
Savings ....................................................................... 27,182,460 27,714,419
Time .......................................................................... 101,171,251 91,697,168
----------- -----------
Total deposits ................................................................... 214,658,752 199,236,972
----------- -----------
FHLB advances .................................................................... 16,000,000 --
Accrued interest payable ......................................................... 902,012 830,533
Other liabilities ................................................................ 1,531,698 1,027,997
----------- -----------
Total liabilities ................................................................ 233,092,462 201,095,502
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $10.00 par value;
1,000,000 shares authorized; none issued ...................................... -- --
Common stock, $1.00 par value;
10,000,000 shares authorized; 1,451,961 and
1,451,661 issued and outstanding, respectively ................................ 1,451,961 1,451,661
Surplus .......................................................................... 14,882,576 14,607,109
Retained earnings ................................................................ 3,625,017 2,276,556
Accumulated other comprehensive income ........................................... 25,809 20,237
----------- -----------
Total stockholders' equity ....................................................... 19,985,363 18,355,563
----------- -----------
Total liabilities and stockholders' equity ....................................... $ 253,077,825 $ 219,451,065
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended September 30
-------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans .......................... $3,030,646 $2,938,947
Interest on taxable investment securities ........... 1,254,214 1,001,859
Interest on Federal funds sold ...................... 308,908 207,059
--------- ---------
Total interest income ............................... 4,593,768 4,147,865
--------- ---------
INTEREST EXPENSE:
Interest on time deposits ........................... 1,370,160 1,259,100
Interest on NOW, money market and savings ........... 679,073 514,355
Interest on repurchase agreements ................... -- 7,067
Interest on FHLB advances ........................... 145,453 17,150
--------- ---------
Total interest expense .............................. 2,194,686 1,797,672
--------- ---------
Net interest income ................................. 2,399,082 2,350,193
Provision for loan losses ........................... -- --
--------- ---------
Net interest income after provision for loan losses . 2,399,082 2,350,193
--------- ---------
NON-INTEREST INCOME:
Service charges ..................................... 167,738 118,236
Trust income ........................................ 72,841 84,924
Other ............................................... 178,491 172,929
--------- ---------
Total non-interest income ........................... 419,070 376,089
--------- ---------
NON-INTEREST EXPENSE:
Salaries and employee benefits ...................... 986,163 984,264
Furniture and equipment ............................. 179,876 172,620
Occupancy ........................................... 111,231 122,086
Advertising and marketing ........................... 52,203 45,097
Professional and consulting ......................... 50,808 190,590
Printing and supplies ............................... 30,736 40,880
Other ............................................... 275,359 270,943
--------- ---------
Total non-interest expense .......................... 1,686,376 1,826,480
--------- ---------
Income before income taxes .......................... 1,131,776 899,802
Income tax expense .................................. 384,000 218,000
--------- ---------
NET INCOME .......................................... $ 747,776 $ 681,802
========= =========
EARNINGS PER SHARE:
Basic ............................................... $ 0.52 $ 0.47
Diluted ............................................. 0.50 0.46
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic ............................................... 1,451,961 1,451,661
Diluted ............................................. 1,503,949 1,484,526
CASH DIVIDENDS PER SHARE ............................ $ 0.12 $ 0.12
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended September 30
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans ................................................................... $ 8,853,388 $ 8,588,471
Interest on taxable investment securities .................................................... 3,478,832 3,280,876
Interest on Federal funds sold ............................................................... 735,784 296,183
---------- ----------
Total interest income ........................................................................ 13,068,004 12,165,530
---------- ----------
INTEREST EXPENSE:
Interest on time deposits .................................................................... 3,889,038 3,412,834
Interest on NOW, money market and savings .................................................... 1,852,571 1,511,053
Interest on repurchase agreements ............................................................ 673 107,582
Interest on FHLB advances .................................................................... 247,946 88,947
Interest on Federal funds purchased .......................................................... -- 5,364
---------- ----------
Total interest expense ....................................................................... 5,990,228 5,125,780
---------- ----------
Net interest income .......................................................................... 7,077,776 7,039,750
Provision for loan losses .................................................................... -- --
---------- ----------
Net interest income after provision for loan losses .......................................... 7,077,776 7,039,750
---------- ----------
NON-INTEREST INCOME:
Service charges .............................................................................. 469,348 320,391
Trust income ................................................................................. 306,402 257,244
Other ........................................................................................ 378,130 323,246
---------- ----------
Total non-interest income .................................................................... 1,153,880 900,881
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits ............................................................... 3,043,850 2,938,762
Furniture and equipment ...................................................................... 488,302 509,391
Occupancy .................................................................................... 323,577 352,148
Advertising and marketing .................................................................... 172,991 158,066
Professional and consulting .................................................................. 185,122 328,694
Printing and supplies ........................................................................ 124,222 135,518
Other ........................................................................................ 830,643 827,419
---------- ----------
Total non-interest expense ................................................................... 5,168,707 5,249,998
---------- ----------
Income before income taxes ................................................................... 3,062,949 2,690,633
Income tax expense ........................................................................... 919,000 646,000
---------- ----------
NET INCOME ................................................................................... $ 2,143,949 $ 2,044,633
========== ==========
COMMON SHARE DATA:
Basic ........................................................................................ $ 1.48 $ 1.41
Diluted ...................................................................................... 1.43 1.39
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic ........................................................................................ 1,451,866 1,451,661
Diluted ...................................................................................... 1,502,285 1,475,137
CASH DIVIDENDS PER SHARE ..................................................................... $ 0.36 $ 0.32
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................................. $ 2,143,949 $ 2,044,633
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ............................................................... 582,364 293,761
Gain on sale of investments ................................................................. (4,682) --
Gain on sale of OREO ........................................................................ (152,754) (107,748)
Decrease (increase) in accrued interest receivable .......................................... 100,477 (36,741)
Increase in other assets .................................................................... (250,615) (287,510)
Increase in accrued interest payable ........................................................ 71,479 228,799
Decrease in current taxes payables .......................................................... (66,000) (29,000)
Increase (decrease) in other liabilities .................................................... 569,701 (99,493)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................................... 2,993,919 2,006,701
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities & paydowns of AFS securities ....................................... 6,247,625 10,466,192
Proceeds from maturities & paydowns of HTM securities ....................................... 31,452,996 16,715,894
Purchase of AFS securities .................................................................. (23,901,043) (2,250,688)
Purchase of HTM securities .................................................................. (33,722,793) (18,351,691)
Proceeds from sale of AFS securities ........................................................ 1,996,371 --
Net increase in loans ....................................................................... (13,373,707) (10,499,053)
Proceeds from sale of OREO .................................................................. 392,314 977,748
Purchase of office property and equipment ................................................... (516,414) (49,056)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES ....................................................... (31,424,651) (2,990,654)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits .................................................................... 15,421,780 15,954,146
Decrease in repurchase agreements ........................................................... -- (11,225,273)
Increase in FHLB advances ................................................................... 16,000,000 --
Proceeds from exercise of stock options ..................................................... 2,949 --
Dividends paid .............................................................................. (522,670) (442,510)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................................... 30,902,059 4,286,363
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ..................................................... 2,471,327 3,302,410
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................................ 23,392,007 11,469,470
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................................. $ 25,863,334 $ 14,771,880
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .................................................................................... $ 5,918,749 $ 4,896,981
Taxes ....................................................................................... 985,000 650,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION:
Transfer of loans to OREO ................................................................... $ 240,404 $ 90,687
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of DNB
Financial Corporation (referred to herein as the "Corporation" or "DNB") and its
subsidiary, Downingtown National Bank (the "Bank"), have been prepared in
accordance with the instructions for Form 10-Q and therefore do not include
certain information or footnotes necessary for the presentation of financial
condition, statement of operations and statement of cash flows required by
generally accepted accounting principles. However, in the opinion of management,
the consolidated financial statements reflect all adjustments (which consist of
normal recurring adjustments) necessary for a fair presentation of the results
for the unaudited periods. Prior period amounts not affecting net income are
reclassified when necessary to conform with current year classifications. The
results of operations for the nine months ended September 30, 1998 are not
necessarily indicative of the results which may be expected for the entire year.
The consolidated financial statements should be read in conjunction with the
Annual Report and report on Form 10-K for the year ended December 31, 1997.
NOTE 2: EARNINGS PER SHARE (EPS)
Basic earnings per share is computed based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the potential dilution that could occur from the conversion of common
stock equivalents and is computed using the treasury stock method. Earnings per
share, dividends per share and weighted average shares outstanding have been
adjusted to reflect the effects of the 5% stock dividend paid in December 1997
and the September 1997 two-for-one stock split, effected in the form of a 100%
stock dividend. Net income and weighted average number of shares outstanding for
basic and diluted EPS for the three and nine months ended September 30, 1998 and
1997 are reconciled as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1998 September 30, 1997
--------------------------- ----------------------------
Income Shares Amount Income Shares Amount
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to common stockholders $747,776 1,451,961 $0.52 $681,802 1,451,661 $0.47
Effect of dilutive common stock
equivalents-stock options - 51,988 0.02 - 32,865 0.01
-------- --------- ---- ------- --------- ----
Diluted EPS $747,776 1,503,949 $0.50 $681,802 1,484,526 $0.46
======== ========= ==== ======== ========= ====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1998 September 30, 1997
------------------------------ -----------------------------
Income Shares Amount Income Shares Amount
---------- --------- ------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income available to common stockholders $2,143,949 1,451,866 $1.48 $2,044,633 1,451,661 $1.41
Effect of dilutive common stock
equivalents-stock options - 50,419 0.05 - 23,476 0.02
---------- --------- ---- ---------- --------- ----
Diluted EPS $2,143,949 1,502,285 $1.43 $2,044,633 1,475,137 $1.39
========== ========= ==== ========== ========= ====
</TABLE>
7
<PAGE>
NOTE 3: COMPREHENSIVE INCOME
On January 1, 1998, DNB adopted SFAS 130, Reporting Comprehensive Income.
This statement establishes standards for reporting comprehensive income, which
includes all changes in stockholders' equity during the period, except those
resulting from investments by owners and distributions to owners. DNB's
comprehensive income for the three months ended September 30, 1998 and 1997 was
$756,892 and $669,686, respectively and consisted of net income and the change
in unrealized gains (losses) on investment securities available for sale.
Comprehensive income for the nine months ended September 30, 1998 and 1997 was
$2,149,521 and $2,094,561, respectively.
NOTE 4: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information ("SFAS No. 131"). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997, but need not be applied to interim financial
statements in the initial year of application. The impact, if any, of this
statement on DNB, would be to require additional disclosures in DNB's financial
statements.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits ("SFAS No. 132"). This
statement amends the disclosure requirements of Statements No. 87, Employers'
Accounting for Pensions ("Statement No. 87"), No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pensions Plans and for
Termination Benefits ("Statement No. 88"), and No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions ("Statement No. 106"). SFAS No.
132 is applicable to all entities. This statement standardizes the disclosure
requirements of Statements No. 87 and No. 106 to the extent practicable and
recommends a parallel format for presenting information about pensions and other
postretirement benefits. SFAS No. 132 only addresses disclosure and does not
change any of the measurement or recognition provisions provided for in
Statements No. 87, No. 88, or No. 106. The statement is effective for fiscal
years beginning after December 15, 1997. Restatement of comparative period
disclosures is required unless the information is not readily available, in
which case the notes to the financial statements should include all available
information and a description of the information not available. The impact, if
any, of this statement on DNB would be to require additional disclosures in
DNB's financial statements.
8
<PAGE>
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). This statement standardizes
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and those used for hedging activities,
by requiring that an entity recognize those items as assets or liabilities in
the statement of financial position and measure them at fair value. SFAS No. 133
categorizes derivatives used for hedging purposes as either fair value hedges,
cash flow hedges, foreign currency fair value hedges, foreign currency cash flow
hedges, or hedges of net investments in foreign operations. SFAS No. 133
generally provides for matching of gain or loss recognition on the hedging
instrument with the recognition of the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk, so long as the
hedge is effective. The statement eliminates the accounting provisions outlined
in SFAS No. 52, "Foreign Currency Translation" related to forward contracts, as
accounting for all foreign currency derivatives will be governed under SFAS 133.
Prospective application of SFAS No. 133 is required for all fiscal years
beginning after June 15, 1999, however earlier application is permitted. DNB has
not yet determined the impact, if any, of this statement on its balance sheet
upon adoption.
NOTE 5: COMMON STOCK
In May 1998, the Corporation's amended Articles of Incorporation were filed
with the State. The amendment to Article 5 was approved by the Board of
Directors and ratified by the shareholders at the Annual Meeting held in April
1998. The amendment (a) increased the number of authorized shares of the
Corporation's Common Stock from 5,000,000 to 10,000,000 shares and (b) changed
the par value of the Common Stock from $10.00 to $1.00. The Common Stock and
Surplus accounts have been adjusted for this change by decreasing Common Stock
and increasing Surplus by $13,067,649. All prior periods presented have been
restated.
9
<PAGE>
DNB FINANCIAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
DNB's total assets were $253.1 million at September 30, 1998 compared to
$219.5 million at December 31, 1997. Total loans were $143.0 million, up $13
million or 10% from $130.0 million at December 31, 1997. The increase was
primarily in the real estate loan portfolio which increased $9.1 million or 14%.
Investment securities (AFS and HTM) increased $17.7 million or 28% to $81.2
million at September 30, 1998. Federal funds sold were $15.2 million at
September 30, 1998, down $0.7 million from December. The overall increase in
assets was funded by growth in both deposits and borrowings.
Deposits and other borrowings at September 30, 1998 totaled $230.7 million,
compared to $199.2 million at December 31, 1997. Time deposits increased $9.5
million and money market accounts increased $5.9 million, due largely to
seasonal deposits. In addition, other borrowings increased $16.0 million as a
result of FHLB advances.
At September 30, 1998, stockholders' equity was $20.0 million or $13.77 per
share, compared to $18.4 million or $12.64 per share at December 31, 1997. The
increase in stockholders' equity was the result of net income of $2.1 million
for the nine months ended September 30, 1998, offset by dividends paid of
approximately $523,000 or $.36 per share.
RESULTS OF OPERATIONS
NET INTEREST INCOME
DNB's earnings performance is primarily dependent upon its level of net
interest income, which is the excess of interest revenue over interest expense.
Interest revenue includes interest earned on loans (net of interest reversals on
non-performing loans), investments and Federal funds sold and interest-earning
cash, as well as loan fees and dividend income. Interest expense includes
interest cost for deposits, repurchase agreements, Federal funds purchased, FHLB
advances and other borrowings.
Net interest income increased $49,000 or 2% to $2.4 million for the three
month period and $38,000 or 1% to $7.1 million for the nine month period ended
September 30, 1998. As shown in the following tables, the increase in net
interest income for the three and nine month periods ended September 30, 1998
was attributable to the positive effects of volume changes which were
significantly offset by the negative effects of rate changes. The positive
impact from volume changes during the three and nine month periods was
attributable to significant increases in interest-earning assets, which
increased $37 million and $25 million on average, respectively, compared to
increases in interest-bearing liabilities which grew $31 million and $20
million, respectively. The negative impact from changes in rates for both
periods was primarily attributable to loans and investments rolling over at
lower yields, reflecting the lower interest rate environment.
10
<PAGE>
The following tables sets forth, among other things, the extent to which
changes in interest rates and changes in the average balances of
interest-earning assets and interest-bearing liabilities have affected interest
income and expense during the three and nine months ended September 30, 1998 and
1997. For each category of interest-earning assets and interest-bearing
liabilities, information is provided with respect to changes attributable to (i)
changes in rate (change in rate multiplied by old volume) and (ii) changes in
volume (change in volume multiplied by old rate). The net change attributable to
the combined impact of rate and volume has been allocated proportionately to the
change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
Compared to 1997
-------------------------------------
Increase (Decrease) Due to
-------------------------------------
<S> <C> <C> <C>
(Dollars in Thousands) Rate Volume Total
------- -------- -------
INTEREST-EARNING ASSETS:
Loans ............................................................................................. $(109) $ 201 $ 92
Investments/interest bearing deposits ............................................................. (58) 310 252
Federal funds sold ................................................................................ (9) 111 102
----- ---- ----
Total ........................................................................................ (176) 622 446
----- ---- ----
INTEREST-BEARING LIABILITIES:
Savings deposits .................................................................................. 58 106 164
Time deposits ..................................................................................... 14 97 111
FHLB advances ..................................................................................... (2) 131 129
Repurchase agreements ............................................................................. (4) (3) (7)
----- ---- ----
Total ........................................................................................ (66) 331 397
----- ---- ----
NET INTEREST INCOME/INTEREST RATE SPREAD .......................................................... $(242) $ 291 $ 49
===== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
Compared to 1997
-------------------------------------
Increase (Decrease) Due to
-------------------------------------
<S> <C> <C> <C>
(Dollars in Thousands) Rate Volume Total
------ ------ -----
Interest-earning assets:
Loans ............................................................................................. $ (272) $ 536 $ 264
Investments/interest bearing deposits ............................................................. (98) 296 198
Federal funds sold ................................................................................ (6) 446 440
----- ----- ----
Total ........................................................................................ (376) 1,278 902
----- ----- ----
Interest-bearing liabilities:
Savings deposits .................................................................................. 150 193 343
Time deposits ..................................................................................... 72 404 476
FHLB advances ..................................................................................... (9) 168 159
Federal funds purchased ........................................................................... (3) (3) (6)
Repurchase agreements ............................................................................. (55) (53) (108)
----- ----- ----
Total ........................................................................................ 155 709 864
----- ----- ----
Net interest income/interest rate spread .......................................................... $ (531) $ 569 $ 38
===== ===== ====
</TABLE>
11
<PAGE>
PROVISION FOR LOAN LOSSES
To provide for potential losses inherent in the loan portfolio, DNB
maintains an allowance for loan losses. In establishing its allowance for loan
losses, management considers the size and risk exposure of each segment of the
loan portfolio, past loss experience, delinquency rates, collateral values, the
potential for losses in future periods, and other relevant factors. In assessing
this risk, management also considers external factors which affect the
portfolio, such as economic and delinquency trends, as well as internal factors
such as underwriting standards, management expertise and concentrations of
credit. In addition, the risk uncertainty contained in the unreviewed portion of
the portfolio has also been considered. Management believes that it makes an
informed judgment based upon available information.
To maintain an adequate allowance, management charges the provision for
loan losses against income. There were no provisions made during the three and
nine months ended September 30, 1998. Effective workout strategies, sales of
OREO properties and other reductions in non-performing assets have temporarily
eliminated the need to make additional provisions.
The following table summarizes the changes in the allowance for loan losses
for the periods indicated. Real estate includes both residential and commercial
real estate.
<TABLE>
<CAPTION>
9 Months Year 9 Months
Ended Ended Ended
9/30/98 12/31/97 9/30/97
------- -------- -------
<S> <C> <C> <C>
(Dollars in Thousands)
Beginning balance .......... $ 5,281 $ 5,112 $ 5,112
Provisions ................. -- -- --
Loans charged off:
Real estate ......... (59) -- --
Commercial .......... (218) (32) (32)
Consumer ............ (9) (16) (11)
----- ----- -----
Total charged off (286) (48) (43)
----- ----- -----
Recoveries:
Real estate ......... 139 1 1
Commercial .......... 27 167 116
Consumer ............ 9 49 42
----- ----- -----
Total recoveries 175 217 159
----- ----- -----
Net (charge-offs) recoveries (111) 169 116
----- ----- -----
Ending balance ............. $ 5,170 $ 5,281 $ 5,228
===== ===== =====
</TABLE>
NON-INTEREST INCOME
Total non-interest income includes service charges on deposit products,
fees received by DNB's Investment Services and Trust Division, and other less
significant sources of income such as fees for safe deposit box rentals, issuing
travelers' checks and money orders, check cashing and similar activities.
12
<PAGE>
For the three and nine month periods ended September 30, 1998, non-interest
income was $419,000 and $1.2 million, respectively, compared to $419,000 and
$901,000 for the same periods in 1997. Service charges increased $50,000 and
$149,000, to $168,000 and $469,000 for the three and nine month periods ended
September 30, 1998. The increase in service charge income came largely from NSF
fees and ATM charges.
Trust income decreased $12,000 to $73,000 for the three month period ended
September 30, 1998. Trust income increased $49,000 to $306,000 for the nine
month period ended September 30, 1998. The increase was due to an overall
increase in estate settlements.
Other non-interest income increased $55,000 to $378,000 for the nine month
period ended September 30, 1998. The increase in other income reflected the
gains recognized on the sales of OREO properties.
NON-INTEREST EXPENSE
Non-interest expense includes salaries & employee benefits, furniture &
equipment, occupancy, professional & consulting fees as well as printing &
supplies, insurance, advertising and other less significant expense items.
Non-interest expenses decreased $140,000 to $1.7 million for the three
month period ended September 30, 1998. The decrease during the period resulted
primarily from lower levels of occupancy, professional & consulting, printing &
supplies expense, partially offset by increases in furniture & equipment and
advertising & marketing.
Non-interest expenses decreased $81,000 to $5.2 million for the nine month
period ended September 30, 1998. The decreases during the period resulted
primarily from lower levels of furniture & equipment, occupancy, printing &
supplies and professional & consulting expenses partially offset by increases in
salaries & employee benefits, advertising & marketing and "other expenses".
Salaries & employee benefits increased $106,000 or 4% to $3.0 million for
the nine months ended September 30, 1998, compared to $2.9 million for the same
period in 1997. The increase in this category was caused by normal salary merit
increases and increases in other benefit/incentive plans offered by DNB.
Furniture & equipment expense increased approximately $7,000 or 4% to
$180,000 and $21,000 or 4% to $488,000 for the three and nine months ended
September 30, 1998, respectively. The increase for the three month period
related to recent purchases of equipment intended to upgrade DNB's back-office
processing. The decrease for the three month period was due to lower levels of
depreciation and maintenance.
Occupancy expense decreased approximately $11,000 or 9% to $111,000 and
$29,000 or 8% to $324,000 for the three and nine months ended September 30,
1998, respectively. This compares to $122,000 and $352,000 for the same periods
in 1997. The decreases in this category reflect the higher costs incurred in
1997 for repairs and maintenance of our community offices.
13
<PAGE>
Advertising & marketing increased $7,000 or 16% to $52,000 and $15,000 or
9% to $173,000 for the three and nine months ended September 30, 1998,
respectively. This compares to $45,000 and $158,000 for the same periods in
1997. The modest increase for both periods is due largely to the creation and
implementation of DNB's new logo, as well as increased advertising relating to
employee recruitment.
Professional & consulting fees decreased $140,000 or 73% to $51,000 and
$144,000 or 44% to $185,000 for the three and nine months ended September 30,
1998. This compares to $191,000 and $329,000 for the same periods in 1997. DNB
incurred significant expenses in the third quarter of 1997 relative to a project
undertaken with an outside consultant to identify and implement improved
operating procedures.
Printing & supplies decreased $10,000 or 25% to $31,000 and $11,000 or 8%
to $124,000 for the three and nine months ended September 30, 1998. This
compares to $41,000 and $136,000 for the same periods in 1997. The decrease was
due largely to timing differences in purchasing stationery, supplies and other
items.
Other expenses include such items as PA shares tax, insurance, ATM charges,
OREO expense, satisfaction fees, appraisal fees, telephone & fax, and other
miscellaneous expenses. Other expenses increased modestly for the three and nine
month periods to $275,000 and $831,000 from $271,000 and $827,000, respectively.
INCOME TAXES
Income tax expense was $384,000 and $919,000 for the three and nine months
ended September 30, 1998 and $218,000 and $646,000 for the three and nine months
ended September 30, 1997. The increased effective tax rate resulted largely from
a decrease in tax-exempt income, as well as a reduction in deferred tax
benefits.
ASSET QUALITY
Non-performing assets are comprised of nonaccrual loans, loans delinquent
over ninety days and still accruing, troubled debt restructurings ("TDRs") and
Other Real Estate Owned ("OREO"). Nonaccrual loans are loans for which the
accrual of interest ceases when the collection of principal or interest payments
is determined to be doubtful by management. It is the policy of DNB to
discontinue the accrual of interest when principal or interest payments are
delinquent 90 days or more (unless the loan principal and interest are
determined by management to be fully secured and in the process of collection),
or earlier, if considered prudent. Interest received on such loans is applied to
the principal balance, or may in some instances, be recognized as income on a
cash basis.
OREO consists of real estate acquired by foreclosure or deed in lieu of
foreclosure. OREO is carried at the lower of cost or estimated fair value, less
estimated disposition costs.
Any significant change in the level of nonperforming assets is dependent to
a large extent on the economic climate within DNB's markets and to the efforts
of management to reduce the level of such assets.
14
<PAGE>
The following table sets forth those assets that are: (i) on nonaccrual
status, (ii) contractually delinquent by 90 days or more and still and (iii)
other real estate owned as a result of foreclosure or voluntary transfer to DNB.
<TABLE>
<CAPTION>
Sept. 30 Dec. 31 Sept. 30
(Dollars in Thousands) 1998 1997 1997
<S> <C> <C> <C>
Nonaccrual Loans:
Residential mortgage ................ $ 381 $ 676 $ 686
Commercial mortgage ................. 1,069 1,301 1,338
Commercial .......................... 797 821 914
Consumer ............................ 87 107 127
----- ----- -----
Total nonaccrual loans ................... 2,334 2,905 3,065
----- ----- -----
Loans 90 days past due and still accruing:
Residential mortgage ................ 128 -- --
Commercial mortgage ................. 518 -- --
Commercial .......................... 14 -- --
Consumer ............................ 51 70 57
----- ----- -----
Total non-performing loans ............... 3,045 2,975 3,122
Other real estate owned .................. 196 231 231
----- ----- -----
Total non-performing assets .............. $3,241 $3,206 $3,353
===== ===== =====
</TABLE>
The following table sets forth the DNB's asset quality and allowance
coverage ratios at the dates indicated:
<TABLE>
<CAPTION>
Sept. 30 Dec. 31 Sept. 30
1998 1997 1997
-------- ------- --------
<S> <C> <C> <C>
Non-performing Loans/Total Loans .............. 2.1% 2.3% 2.4%
Non-performing Assets/Total Loans and OREO .... 2.3 2.5 2.5
Allowance for Loan Losses/Total Loans ......... 3.6 4.1 4.0
Allowance for Loan Losses/Total Loans and OREO 3.6 4.0 3.9
Allowance for Loan Losses/Non-performing Assets 159.5 164.7 155.9
Allowance for Loan Losses/Non-performing Loans 169.8 177.5 167.5
</TABLE>
If interest income had been recorded on nonaccrual loans, interest would
have increased as shown in the following table:
<TABLE>
<CAPTION>
9 Months Year 9 Months
Ended Ended Ended
(Dollars in thousands) 9/30/98 12/31/97 9/30/97
<S> <C> <C> <C>
Interest income which would have been recorded
under original terms .................. $ 142 $ 243 $ 193
Interest income recorded during the period ... (69) (71) (47)
--- --- ---
Net impact on interest income ................ $ 73 $ 172 $ 146
=== === ===
</TABLE>
15
<PAGE>
As of September 30, 1998, DNB had impaired loans with a total recorded
investment of $1.6 million and an average recorded investment for the nine month
period ended September 30, 1998 of $1.6 million. As of September 30, 1998, there
was no related allowance for credit losses necessary for these impaired loans.
Total cash collected on impaired loans was credited to the outstanding principal
balance in the amount of $130,000 during the nine months ended September 30,
1998 and no interest income was recorded on such loans during the period.
As of December 31, 1997, DNB had impaired loans with a total recorded
investment of $1.8 million and an average recorded investment for the year ended
December 31, 1997 of $1.6 million. As of December 31, 1997, there was no related
allowance for credit losses necessary for these impaired loans. Total cash
collected on impaired loans was credited to the outstanding principal balance in
the amount of $51,000 during the nine months ended September 30, 1997 and no
interest income was recorded on such loans during the period.
LIQUIDITY AND CAPITAL RESOURCES
For a financial institution, liquidity is a measure of the ability to fund
customers' needs for loans and deposit withdrawals. Management regularly
evaluates economic conditions in order to maintain a strong liquidity position.
One of the most significant factors considered by management when evaluating
liquidity requirements is the stability of DNB's core deposit base. In addition
to cash, DNB maintains a portfolio of short term investments to meet its
liquidity requirements. DNB has historically relied on cash flow from operations
and other financing activities. Liquidity is provided by investing activities,
including the repayment and maturing of loans and investment securities.
At September 30, 1998 DNB has $6.0 million in commitments to fund
commercial real estate, construction and land development. In addition, DNB had
commitments to fund $1.9 million in home equity lines of credit and $12.5
million in other unused commitments. Management anticipates the majority of
these commitments will be funded by means of normal cash flows. In addition,
$27.5 million of time deposits at DNB are scheduled to mature during the three
months ending December 31, 1998. Management believes that the majority of such
deposits will be reinvested with DNB and that certificates that are not renewed
will be funded by maturing loans and investments.
Stockholders' equity increased to $20.0 million at September 30, 1998 as a
result of the $2,144,000 profit reported for the nine months then ended and
after dividends paid totaling approximately $523,000 year-to-date. The Bank's
common equity position at September 30, 1998 exceeds the 1998 regulatory
required minimums. The following table summarizes data and ratios pertaining to
the Bank's capital structure. To Be Well Capitalized Under For Capital Prompt
Corrective Actual Adequacy Purposes Action Provisions
<TABLE>
<CAPTION>
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1998:
Total risk-based capital $22,137 12.93% $13,698 8.00% $17,123 10.00%
Tier 1 capital .......... 19,959 11.66 6,849 4.00 10,274 6.00
Tier 1 (leverage) capital 19,959 8.04 9,936 4.00 12,420 5.00
</TABLE>
16
<PAGE>
In addition, the Federal Reserve Bank (the "FRB") leverage ratio rules
require bank holding companies to maintain a minimum level of "primary capital"
to total assets of 5.5% and a minimum level of "total capital" to total assets
of 6%. For this purpose, (i) "primary capital" includes, among other items,
common stock, contingency and other capital reserves, and the allowance for loan
losses, (ii) "total capital" includes, among other things, certain subordinated
debt, and "total assets" is increased by the allowance for loan losses. DNB's
primary capital ratio and its total capital ratio are both 9.7%, well in excess
of FRB requirements.
INTEREST RATE SENSITIVITY ANALYSIS
To measure interest rate risk, DNB utilizes the gap ratio, which is defined
as the difference between the dollar volume of interest-earning assets and
interest-bearing liabilities maturing or repricing within a specified period of
time as a percentage of total assets. DNB's one year gap ratio at September 30,
1998 was -2.3%, which reflects very little change from -2.1% at December 31,
1997. Qualitative and quantitative disclosures regarding market risk are
contained in the Form 10-K for the period ended December 31, 1997.
In addition to utilizing the gap ratio for interest rate risk management,
the ALCO committee utilizes simulation analysis whereby the model estimates the
variance in net interest income with a change in interest rates of plus or minus
300 basis points over a twelve month period. Given recent simulations, net
interest income would be within policy guidelines regardless of the direction of
market rates.
REGULATORY MATTERS
Dividends - Dividends payable to the Corporation by the Bank are subject to
certain regulatory limitations. Under normal circumstances, the payment of
dividends in any year without regulatory permission is limited to the net
profits (as defined for regulatory purposes) for that year plus the retained net
profits for the preceding two calendar years.
Year 2000 Readiness Disclosure - As part of the awareness phase of Year
2000 compliance, DNB has defined Year 2000 compliance as the point at which each
organizational function, system, application, file, program and database will
correctly process, provide and/or receive date data within and between the 20th
and 21st centuries. During this phase, DNB developed a comprehensive approach to
solving Year 2000 issues beginning with the establishment of the Technology
Steering Committee. As part of the assessment phase, the Committee has conducted
an in-depth review of its systems to identify and assess the risks posed by the
Year 2000. The committee has worked with the Bank's primary software and
hardware vendors to prepare the computer operating environment. The committee
has identified and prioritized its information technology (IT) and non-IT
systems, and has established time frames for renovation, validation and
implementation of all Year 2000 compliant systems. During the renovation and
validation phase DNB has contacted and worked with customers in their
preparation for Year 2000 and has completed a due diligence analysis of
significant borrowers. Testing has been substantially completed for all mission
critical systems. DNB is currently in the implementation phase of Year 2000
compliance. This phase requires testing of all bank interfaces and connections
with other systems. In addition, DNB plans to provide training and support for
users and staff and finalize all contingency plans and procedures.
17
<PAGE>
While DNB has not completed its contingency plan, it has identified its
"worst case" scenario to be that some third party systems may not prove to be
Year 2000 compliant or may not meet the deadline set for compliance (or fail
testing). In such a case, DNB's current plans call for use of backup or
alternative systems as designated by our disaster recovery plan. Whether a
temporary backup or a permanent substitution might be appropriate will be
evaluated in the event that a system change is necessary
DNB, while not completely Year 2000 compliant, is working diligently to
achieve this goal. Year 2000 issues could result in a material financial risk to
a company such as DNB if the company and third party vendors upon which it
relies were unable to address this issue in a timely manner. However, management
currently expects DNB and its third party vendors to be Year 2000 compliant in
all material respects before December 31, 1999. The Year 2000 statements
contained herein, and in other securities filings of DNB, may not be relied upon
as representations or warranties for any purpose other than disclosure for
federal securities law compliance purposes.
Management currently estimates that the costs of Year 2000 compliance will
be approximately $60,000 during the two years ended December 31, 1999, of which
approximately $30,000 has been expended through September 30, 1998. To date,
management has succeeded in implementing its Year 2000 effort with existing
staff and internal resources, and has not been obligated to expend significant
funds in the process. It is anticipated that this will be possible for the
balance of the Year 2000 project, except that in 1999 management plans to
upgrade all personal computers that are not Year 2000 compliant. As a
consequence, management anticipates that the Year 2000 costs will be funded from
operating cash flows.
Forward-Looking Statements - Certain statements in this Form 10-Q,
including any which are not statements of historical fact, may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Without limiting the foregoing, the
words "expect", "anticipate", "plan", "believe", "see", "estimate", "predict",
"internal" and similar words are intended to identify expressions that may be
forward-looking statements. Forward-looking statements involve certain risks and
uncertainties, and actual results may differ materially from those contemplated
by such statements. For example, actual results may be adversely affected by the
following possibilities: (1) competitive pressure among depository institutions
may increase; (2) changes in interest rates may reduce banking interest margins;
(3) general economic conditions an real estate values may be less favorable than
contemplated; (4) adverse legislation or regulatory requirements may be adopted;
(5) the impact of the Year 2000 issue may be more significant than currently
anticipated; (6) unexpected contingencies relating to Year 2000 compliance; and
(7) other unexpected contingencies may arise. Many of these factors are beyond
DNB's ability to control or predict. Readers of this Form 10-Q are accordingly
cautioned not to place undue reliance on forward-looking statements. DNB
disclaims any intent or obligation to update publicly any of the forward-looking
statements herein, whether in response to new information, future events or
otherwise.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Shareholders of the Company are entitled to submit proposals on matters
appropriate for shareholder action consistent with regulations of the Securities
and Exchange Commission ("SEC") and the Company's bylaws. Should a shareholder
wish to have a proposal considered for inclusion in the proxy statement for the
Company's 1999 annual meeting, under Rule 14a-8 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), such proposal must be received by the
Company on or beofre November 24, 1998.
In connection with the Company's 1999 annual meeting and pursuant to
recently amended Rule 14a-4 under the Exchange Act, if the shareholder's notice
is not received by the Company on or before February 4, 1999, the Company
(through management proxy holders) may exercise discretionary voting authority
when the proposal is raised at the annual meeting without any reference to the
matter in the proxy statement.
The above summary, which sets forth only the procedures by which business
may be properly brought before and voted upon at the Company's annual meeting,
is qualified in its entirety by reference to the Company's bylaws.
All shareholder proposals and notices should be directed to the Company's
Secretary at 4 Brandywine Avenue, Downingtown, PA 19335.
ITEM 6.
(a) EXHIBITS:
Not Applicable
(b) REPORTS ON FORM 8-K
Not Applicable
19
<PAGE>
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DNB FINANCIAL CORPORATION
(Registrant)
DATE: November 14, 1998 /S/ Henry F. Thorne
Henry F. Thorne
President and Chief Executive Officer
DATE: November 14, 1998 /S/ Bruce E. Moroney
Bruce E. Moroney
Chief Financial Officer
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000713671
<NAME> DNB FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 10,657,334
<INT-BEARING-DEPOSITS> 5,521,312
<FED-FUNDS-SOLD> 15,206,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,359,228
<INVESTMENTS-CARRYING> 51,875,429
<INVESTMENTS-MARKET> 52,405,729
<LOANS> 143,012,690
<ALLOWANCE> 5,170,215
<TOTAL-ASSETS> 253,077,825
<DEPOSITS> 214,658,752
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,433,710
<LONG-TERM> 16,000,000
0
0
<COMMON> 1,451,961
<OTHER-SE> 18,533,402
<TOTAL-LIABILITIES-AND-EQUITY> 253,077,825
<INTEREST-LOAN> 8,853,388
<INTEREST-INVEST> 3,478,832
<INTEREST-OTHER> 735,784
<INTEREST-TOTAL> 13,068,004
<INTEREST-DEPOSIT> 5,741,609
<INTEREST-EXPENSE> 5,990,228
<INTEREST-INCOME-NET> 7,077,776
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 4,682
<EXPENSE-OTHER> 5,168,707
<INCOME-PRETAX> 3,062,949
<INCOME-PRE-EXTRAORDINARY> 2,143,949
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,143,949
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 7.79
<LOANS-NON> 2,334,150
<LOANS-PAST> 710,836
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6,794,000
<ALLOWANCE-OPEN> 5,280,958
<CHARGE-OFFS> 285,835
<RECOVERIES> 175,092
<ALLOWANCE-CLOSE> 5,170,215
<ALLOWANCE-DOMESTIC> 5,170,215
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<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-30-1997
<CASH> 6,625,880
<INT-BEARING-DEPOSITS> 484,707
<FED-FUNDS-SOLD> 8,146,000
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<INVESTMENTS-CARRYING> 50,482,321
<INVESTMENTS-MARKET> 50,692,223
<LOANS> 132,096,607
<ALLOWANCE> 5,228,158
<TOTAL-ASSETS> 213,609,319
<DEPOSITS> 194,377,709
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,363,545
<LONG-TERM> 0
0
0
<COMMON> 1,382,844
<OTHER-SE> 16,485,221
<TOTAL-LIABILITIES-AND-EQUITY> 213,609,319
<INTEREST-LOAN> 8,588,471
<INTEREST-INVEST> 3,280,876
<INTEREST-OTHER> 296,183
<INTEREST-TOTAL> 12,165,530
<INTEREST-DEPOSIT> 4,923,887
<INTEREST-EXPENSE> 5,125,780
<INTEREST-INCOME-NET> 7,039,750
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,249,998
<INCOME-PRETAX> 2,690,633
<INCOME-PRE-EXTRAORDINARY> 2,044,633
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,044,633
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.39
<YIELD-ACTUAL> 8.18
<LOANS-NON> 3,064,511
<LOANS-PAST> 56,923
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 5,579,000
<ALLOWANCE-OPEN> 5,112,486
<CHARGE-OFFS> 43,481
<RECOVERIES> 159,153
<ALLOWANCE-CLOSE> 5,228,158
<ALLOWANCE-DOMESTIC> 5,228,158
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
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<NAME> DNB FINANCIAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-30-1996
<CASH> 9,184,741
<INT-BEARING-DEPOSITS> 150,429,035
<FED-FUNDS-SOLD> 7,032,000
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<LOANS> 116,542,629
<ALLOWANCE> 5,085,164
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<DEPOSITS> 175,345,066
<SHORT-TERM> 14,003,865
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<LONG-TERM> 0
0
0
<COMMON> 691,422
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<INTEREST-LOAN> 7,918,831
<INTEREST-INVEST> 3,039,272
<INTEREST-OTHER> 292,395
<INTEREST-TOTAL> 11,250,498
<INTEREST-DEPOSIT> 4,466,137
<INTEREST-EXPENSE> 4,780,434
<INTEREST-INCOME-NET> 6,470,064
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<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,963,586
<INCOME-PRETAX> 2,129,032
<INCOME-PRE-EXTRAORDINARY> 1,701,032
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<NET-INCOME> 1,701,032
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 8.09
<LOANS-NON> 3,270,701
<LOANS-PAST> 395,190
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,539,000
<ALLOWANCE-OPEN> 5,514,600
<CHARGE-OFFS> 498,961
<RECOVERIES> 69,525
<ALLOWANCE-CLOSE> 5,085,164
<ALLOWANCE-DOMESTIC> 5,085,164
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<ALLOWANCE-UNALLOCATED> 0
</TABLE>
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<S> <C>
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<PERIOD-END> JUN-30-1997
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0
0
<COMMON> 691,422
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<TOTAL-LIABILITIES-AND-EQUITY> 215,058,307
<INTEREST-LOAN> 5,649,524
<INTEREST-INVEST> 2,279,017
<INTEREST-OTHER> 89,124
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<CIK> 0000713671
<NAME> DNB FINANCIAL CORP.
<S> <C>
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0
0
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