10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended: June 30, 2019

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: 1-34242

DNB Financial Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania23-2222567

Pennsylvania (State or other jurisdiction of incorporation or organization) 23-2222567 (I.R.S. Employer Identification No.)

4 Brandywine Avenue - Downingtown, PA 19335

(Address of principal executive offices and Zip Code)

(610) 269-1040

(Registrant's telephone number, including area code)

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock ($1.00 Par Value)	DNBF	The NASDAQ Stock Market LLC

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 

Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

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) (Class)   4,334,431(Shares Outstanding as of August5, 2019)

DNB FINANCIAL CORPORATION AND SUBSIDIARY

INDEX

	PART  I - FINANCIAL INFORMATION	PAGE NO.
ITEM 1.	FINANCIAL STATEMENTS (Unaudited):
	CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
	June 30, 2019 and December 31, 2018	3
	CONSOLIDATED STATEMENTS OF INCOME
	Three and Six Months Ended June 30, 2019 and 2018	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	Three and Six Months Ended June 30, 2019 and 2018	5
	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	6
	Three and Six Months Ended June 30, 2019 and 2018
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended June 30, 2019 and 2018	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4.	CONTROLS AND PROCEDURES	45
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	45
ITEM 1A.	RISK FACTORS	45
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	46
ITEM 4.	MINE SAFETY DISCLOSURES	46
ITEM 5.	OTHER INFORMATION	46
ITEM 6.	EXHIBITS	46
SIGNATURES		47
EXHIBIT INDEX		48

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

DNB Financial Corporation and Subsidiary

Consolidated Statements of Financial Condition (Unaudited)

	June 30,		December 31,
(Dollars in thousands, except share and per share data)	2019		2018
Assets
Cash and due from banks	$	46,398	$	17,321
Cash and cash equivalents		46,398		17,321
Available-for-sale investment securities at fair value (amortized cost of $70,406 and $98,765)		69,931		96,643
Held-to-maturity investment securities (fair value of $60,322 and $61,135)		59,949		62,026
Total investment securities		129,880		158,669
Loans held for sale		501		419
Loans		930,521		934,971
Allowance for credit losses		(6,672)		(6,675)
Net loans		923,849		928,296
Restricted stock		5,734		5,616
Office property and equipment, net		7,230		7,636
Operating lease right-of-use asset		3,792		-
Accrued interest receivable		4,297		4,207
Other real estate owned & other repossessed property		2,825		5,051
Bank owned life insurance (BOLI)		9,635		9,530
Core deposit intangible		302		343
Goodwill		15,525		15,525
Net deferred taxes		2,416		2,762
Other assets		2,025		2,860
Total assets	$	1,154,409	$	1,158,235
Liabilities and Stockholders’ Equity
Liabilities
Non-interest-bearing deposits	$	178,454	$	164,746
Interest-bearing deposits:
NOW		214,806		236,071
Money market		236,707		235,023
Savings		79,489		77,979
Time		178,530		162,096
Brokered deposits		87,877		108,651
Total deposits		975,863		984,566
Federal Home Loan Bank of Pittsburgh (FHLBP) advances		31,203		32,935
Junior subordinated debentures		9,279		9,279
Subordinated debt		9,750		9,750
Other borrowings		272		3,305
Total borrowings		50,504		55,269
Accrued interest payable		641		646
Other liabilities		5,071		5,908
Operating lease liability		4,174		-
Total liabilities		1,036,253		1,046,389
Stockholders’ Equity
Common stock, $1.00 par value;
20,000,000 shares authorized; 4,381,872 and 4,381,872 issued, respectively; 4,331,121 and 4,321,745 outstanding, respectively		4,382		4,391
Treasury stock, at cost; 50,751 and 60,127 shares, respectively		(961)		(1,130)
Surplus		69,613		69,333
Retained earnings		46,791		42,223
Accumulated other comprehensive loss		(1,669)		(2,971)
Total stockholders’ equity		118,156		111,846
Total liabilities and stockholders’ equity	$	1,154,409	$	1,158,235

See accompanying notes to unaudited consolidated financial statements.

3

DNB Financial Corporation and Subsidiary

Consolidated Statements of Income (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2019		2018		2019		2018
Interest Income:
Interest and fees on loans	$	11,358	$	10,164	$	22,648	$	20,046
Interest and dividends on investment securities:
Taxable		812		862		1,623		1,655
Exempt from federal taxes		211		218		427		435
Interest on cash and cash equivalents		138		45		181		66
Total interest and dividend income		12,519		11,289		24,879		22,202
Interest Expense:
Interest on NOW, money market and savings		1,109		994		2,160		1,824
Interest on time deposits		916		333		1,744		658
Interest on brokered deposits		592		414		1,203		613
Interest on FHLB advances		145		239		370		540
Interest on repurchase agreements		-		6		-		12
Interest on junior subordinated debentures		129		113		256		218
Interest on subordinated debt		103		103		207		207
Interest on other borrowings		10		19		26		35
Total interest expense		3,004		2,221		5,966		4,107
Net interest income		9,515		9,068		18,913		18,095
Provision for credit losses		100		375		300		750
Net interest income after provision for credit losses		9,415		8,693		18,613		17,345
Non-interest Income:
Service charges		246		261		537		574
Wealth management		529		512		974		947
Mortgage banking		72		76		146		137
Increase in cash surrender value of BOLI		53		52		105		104
Gain on sale of investment securities, net		1		-		4		-
Gain on sale of loans		-		10		-		10
Other fees		443		421		852		833
Total non-interest income		1,344		1,332		2,618		2,605
Non-interest Expense:
Salaries and employee benefits		3,785		4,261		7,638		8,033
Furniture and equipment		663		550		1,204		1,039
Occupancy		627		634		1,352		1,331
Professional and consulting		440		424		1,017		827
Advertising and marketing		225		204		420		386
FDIC insurance		95		122		209		240
PA shares tax		260		243		520		485
Telecommunications		90		84		178		165
Loss on sale or write down of OREO, net		37		140		150		140
Transaction costs		519		-		519		-
Other expenses		771		878		1,583		1,624
Total non-interest expense		7,512		7,540		14,790		14,270
Income before income tax expense		3,247		2,485		6,441		5,680
Income tax expense		660		436		1,267		1,018
Net income	$	2,587	$	2,049	$	5,174	$	4,662
Earnings per common share:
Basic	$	0.60	$	0.48	$	1.20	$	1.09
Diluted	$	0.60	$	0.47	$	1.19	$	1.08
Cash dividends per common share	$	0.07	$	0.07	$	0.14	$	0.14
Weighted average common shares outstanding:
Basic	4,331,121		4,298,409		4,329,226		4,294,758
Diluted	4,336,254		4,314,418		4,333,181		4,311,696

See accompanying notes to unaudited consolidated financial statements.

4

DNB Financial Corporation and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Net income	$	2,587	$	2,049	$	5,174	$	4,662
Other Comprehensive Income (Loss):
Unrealized holding gains (losses) arising during the period
Before tax amount		838		(235)		1,647		(1,249)
Tax effect		(176)		49		(344)		262
Less reclassification for gains on sales of AFS investment securities included in net income
Before tax amount(1)		(1)		-		(1)		-
Tax effect(2)		-		-		-		-
		(1)		-		(1)		-
Other comprehensive income - securities		661		(186)		1,302		(987)
Total other comprehensive income (loss)		661		(186)		1,302		(987)
Total comprehensive income	$	3,248	$	1,863	$	6,476	$	3,675
(1) Amounts are included in "Gains on sale of investment securities, net" in the consolidated statements of income.
(2) Amounts are included in "Income tax expense" in the consolidated statements of income.

See accompanying notes to unaudited consolidated financial statements.

5

DNB Financial Corporation and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

									Accumulated
									Other
	Common		Treasury				Retained		Comprehensive
(Dollars in thousands)	Stock		Stock		Surplus		Earnings		Loss		Total
Balance at April 1, 2019	$	4,382	$	(1,027)	$	69,454	$	44,507	$	(2,330)	$	114,986
Net income for three months ended June 30, 2019		-		-		-		2,587		-		2,587
Other comprehensive income		-		-		-		-		661		661
Restricted stock compensation expense (no shares vested)		-		-		82		-		-		82
Cash dividends - common ($0.07 per share)		-		-		-		(303)		-		(303)
Non-cash funding of 401(k) (2,335 shares)		-		42		48		-		-		90
Non-cash funding of deferred comp. plan (1,371 shares)		-		24		29		-		-		53
Balance at June 30, 2019	$	4,382	$	(961)	$	69,613	$	46,791	$	(1,669)	$	118,156
									Accumulated
									Other
	Common		Treasury				Retained		Comprehensive
(Dollars in thousands)	Stock		Stock		Surplus		Earnings		Loss		Total
Balance at January 1, 2019	$	4,391	$	(1,130)	$	69,333	$	42,223	$	(2,971)	$	111,846
Net income for six months ended June 30, 2019		-		-		-		5,174		-		5,174
Other comprehensive income		-		-		-		-		1,302		1,302
Restricted stock compensation expense (no shares vested)		(9)		-		152		-		-		143
Cash dividends - common ($0.14 per share)		-		-		-		(606)		-		(606)
Non-cash funding of 401(k) (6,266 shares)		-		114		83		-		-		197
Non-cash funding of deferred comp. plan (3,110 shares)		-		55		45		-		-		100
Balance at June 30, 2019	$	4,382	$	(961)	$	69,613	$	46,791	$	(1,669)	$	118,156

									Accumulated
									Other
	Common		Treasury				Retained		Comprehensive
(Dollars in thousands)	Stock		Stock		Surplus		Earnings		Loss		Total
Balance at April 1, 2018	$	4,383	$	(1,345)	$	69,238	$	35,056	$	(3,662)	$	103,670
Net income for three months ended June 30, 2018		-		-		-		2,049		-		2,049
Other comprehensive loss		-		-		-		-		(186)		(186)
Restricted stock compensation expense (4,012 shares vested)		4		-		104		-		-		108
Exercise of stock options (1,372 shares)		1		-		(1)		-		-		-
Shares withheld for employee taxes on stock option exercise and share award vest		(3)		-		(140)		-		-		(143)
Cash dividends - common ($0.07 per share)		-		-		-		(301)		-		(301)
Non-cash funding of 401(k) (2,428 shares)		-		44		42		-		-		86
Non-cash funding of deferred comp. plan (1,397 shares)		-		25		25		-		-		50
Balance at June 30, 2018	$	4,385	$	(1,276)	$	69,268	$	36,804	$	(3,848)	$	105,333
									Accumulated
									Other
	Common		Treasury				Retained		Comprehensive
(Dollars in thousands)	Stock		Stock		Surplus		Earnings		Loss		Total
Balance at January 1, 2018	$	4,379	$	(1,429)	$	69,110	$	32,272	$	(2,390)	$	101,942
Net income for six months ended June 30, 2018		-		-		-		4,662		-		4,662
Other comprehensive loss		-		-		-		-		(987)		(987)
Restricted stock compensation expense (4,908 shares vested)		8		-		196		-		-		204
Exercise of stock options (2,338 shares)		2		-		(2)		-		-		-
Shares withheld for employee taxes on stock option exercise and share award vest		(4)		-		(176)		-		-		(180)
Cash dividends - common ($0.14 per share)		-		-		-		(601)		-		(601)
Non-cash funding of 401(k) (5,658 shares)		-		102		92		-		-		194
Non-cash funding of deferred comp. plan (2,877 shares)		-		51		48		-		-		99
Adoption impact - ASU 2018-02		-		-		-		471		(471)		-
Balance at June 30, 2018	$	4,385	$	(1,276)	$	69,268	$	36,804	$	(3,848)	$	105,333

See accompanying notes to unaudited consolidated financial statements.

6

DNB Financial Corporation and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
(Dollars in thousands)	2019		2018
Cash Flows From Operating Activities:
Net income	$	5,174	$	4,662
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		694		761
Provision for credit losses		300		750
Stock based compensation		143		204
Non-cash funding of retirement plans		297		293
Net gain on sale of securities		(4)		-
Net loss on sale or write down of OREO and other repossessed property		150		140
Earnings from investment in BOLI		(105)		(104)
Deferred tax expense		-		167
Proceeds from sales of mortgage loans		8,113		8,620
Mortgage loans originated for sale		(8,049)		(8,108)
Gain on sale of mortgage loans		(146)		(137)
Proceeds from sales of loans		-		188
Loans originated for sale		-		(178)
Gain on sale of loans		-		(10)
Write off of property and equipment		3		-
Increase in accrued interest receivable		(90)		(89)
Decrease in other assets		1,215		97
(Decrease) increase in accrued interest payable		(5)		7
(Decrease) increase in other liabilities		(837)		241
Amortization of operating lease right-of-use asset		372		-
Accretion of operating lease liability		(369)		-
Net Cash Provided by Operating Activities		6,856		7,504
Cash Flows From Investing Activities:
Activity in available-for-sale securities:
Sales		13,905		-
Maturities, repayments and calls		45,875		6,953
Purchases		(31,546)		-
Activity in held-to-maturity securities:
Maturities, repayments and calls		2,148		304
Net (increase) decrease in restricted stock		(118)		691
Net decrease (increase) in loans		3,559		(40,102)
Purchases of property and equipment		(192)		(122)
Purchase of third party ownership in OREO		(165)		-
Proceeds from sale of OREO and other repossessed property		2,829		33
Net Cash Provided By (Used In) Investing Activities		36,295		(32,243)
Cash Flows From Financing Activities:
Net (decrease) increase in deposits		(8,703)		72,912
Repayment of FHLBP advances		(66,732)		(200,641)
Funding of FHLBP advances		65,000		184,600
Net decrease in repurchase agreements		-		(6,414)
Decrease in other borrowings		(3,033)		(2,402)
Dividends paid		(606)		(601)
Payment of employee taxes on stock option exercise and share award vest		-		(180)
Net Cash (Used in) Provided by Financing Activities		(14,074)		47,274
Net Change in Cash and Cash Equivalents		29,077		22,535
Cash and Cash Equivalents at Beginning of Period		17,321		10,917
Cash and Cash Equivalents at End of Period	$	46,398	$	33,452
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	5,971	$	4,100
Income taxes		719		600
Supplemental Disclosure of Non-cash Flow Information:
Transfers from loans to real estate owned and other repossessed property		588		274

See accompanying notes to unaudited consolidated financial statements.

7

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, DNB First, National Association (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 amounts not affecting net income are reclassified when necessary to conform to current period classifications. The results of operations for the three and six months ended June 30, 2019 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, 2018. 

Subsequent Events-- Management has evaluated events and transactions occurring subsequent to June 30, 2019 for items that should potentially be recognized or disclosed in these Consolidated Financial Statements. The evaluation was conducted through the date these financial statements were issued.

Merger Agreement.  On June 5, 2019, S&T Bancorp, Inc. (“S&T”) and DNB entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which DNB will merge with and into S&T (the “Merger”), with S&T continuing as the surviving entity in the Merger, subject to the terms and conditions set forth therein.  Immediately following the Merger, DNB’s wholly owned bank subsidiary, DNB First, National Association, will merge with and into S&T’s wholly owned bank subsidiary, S&T Bank (the “Bank Merger”), with S&T Bank continuing as the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved by the Board of Directors of each of S&T and DNB.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), DNB shareholders will have the right to receive 1.22 shares of common stock, par value $2.50 per share, of S&T for each share of common stock, par value $1.00 per share, of DNB.

The merger is subject to customary closing conditions enumerated in the merger agreement, including receipt of regulatory approvals and the approval of DNB’s shareholders. It is anticipated that the transaction will close during the fourth quarter of 2019.

Recent Accounting Pronouncements-  

Accounting Developments Affecting DNB

In May 2014, the FASB issued ASU No. 2014-09, ‘‘Revenue from Contracts with Customers (Topic 606).’’ The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. During 2016 and 2017, the FASB issued ASU Nos. 2016-10, 2016-12, 2016-20, and 2017-13 that provided additional guidance related to the identification of performance obligations within a contract, assessing collectability, contract costs, and other technical corrections and improvements.

DNB adopted the new standards discussed above effective January 1, 2018 using the modified retrospective approach. A significant majority of DNB’s revenues are explicitly excluded from the scope of the new guidance including interest, dividend income, BOLI, gain/loss on sale of loans and investments on the Consolidated Statements of Income. The adoption of ASU 2014-09 did not require a cumulative adjustment to the opening balance of retained earnings as of January 1, 2018 and did not have a material impact on DNB’s Consolidated Statements of Financial Condition, Comprehensive Income, Stockholders’ Equity or Cash Flows for the year ended December 31, 2018. Non-interest income components in the scope of Topic 606 continue to be recognized when DNB’s performance obligations are complete or at the time of sale after a customer’s transaction posts in the account. Disclosures required for DNB’s revenue streams in the scope of ASU 2014-09 are included in Non-Interest Income in the following table.

8

Non-interest Income Non-interest income includes revenue from contracts with customers in the scope of ASU 2014-09 as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Non-interest Income:
Service charges:
Non-sufficient funds charges	$	122	$	142	$	255	$	301
Business analysis charges		46		44		92		85
Cycle charges		21		22		41		45
Lockbox fees		10		8		57		52
Stop payment fees		5		3		9		7
Wire transfer fees		22		22		44		43
Other service charges		20		20		39		41
Total service charges		246		261		537		574
Wealth management:
DNB Investments & Insurance		126		150		202		238
DNB First Investment Management & Trust		403		362		772		709
Total wealth management		529		512		974		947
Other fee income:
Cardholder interchange fees		286		269		539		514
Safe deposit box		24		26		47		50
Check printing		13		12		37		35
Merchant card processing		45		42		87		90
ATM surcharges for non-DNB customers		17		20		32		37
Other fee income		12		13		26		27
Total other fee income		397		382		768		753
Total Revenue from contracts with customers		1,172		1,155		2,279		2,274
Total Revenue not within the scope of ASC 606		172		177		339		331
Total non-interest income	$	1,344	$	1,332	$	2,618	$	2,605

Service charges on deposit accounts are recorded monthly when DNB’s performance obligations are complete. Deposit balances are disclosed in the Consolidated Statement of Condition. For transaction-based service charges such as non-sufficient funds charges, wire transfer fees, stop payment fees, ATM fees, and other transaction-based fees, revenue is recognized at the time of sale after the transaction posts in the customer’s account.

Wealth management revenue includes non-deposit products and services offered under the names “DNB Investment & Insurance” and “DNB First Investment Management & Trust”.

Through a third-party marketing agreement with Cetera Investment Services, LLC (“Cetera”), DNB Investment & Insurance offers a complete line of investment and insurance products. DNB’s performance obligation as an agent is to arrange for the sale of products by Cetera. Monthly, DNB recognizes commission fees in the amounts to which it is entitled in accordance with the terms of the marketing agreement for products sold. Shortly after a sale, the product provider remits the commission payment through Cetera to the Company, and the Company recognizes the revenue. DNB records revenue net of the cost of the services.

DNB First Investment Management & Trust offers a full line of investment and fiduciary services. DNB’s performance obligation is to manage investments, estates and trusts. Investment management and trust income is primarily comprised of fees earned from the management and administration of trusts, estates and investment agency portfolios. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized quarterly, based upon the quarter-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after quarter end through a direct charge to customers’ accounts. While managing estates and trusts, DNB contracts with a third-party tax preparation service. For tax preparation services, DNB’s obligation as an agent is to arrange for the performance of services by the third party. As tax services are rendered, DNB records revenue net of the cost of the services.

Cardholder interchange fees consist of revenue DNB is entitled per agreements with third party debit and credit card providers. DNB’s performance obligation as an agent is to arrange for cardholder services with its customers in accordance with fees and terms offered by the third-party service providers. Based on cardholder transactions reported by third party service providers, DNB recognizes fees for the amount it is contractually entitled.

DNB also contracts with third party providers for check printing, merchant card services, and ATM services. DNB’s performance obligation as an agent is to arrange for the services with its customers in accordance with fees and terms offered by the third-party service providers. Monthly, DNB recognizes fees for the amount it is contractually entitled.

9

DNB adopted ASU 2015-16, Business Combinations (Topic 805), in 2016: Simplifying the Accounting for Measurement Period Adjustments on a prospective basis. This amendment eliminates the requirement to account for adjustments to provisional amounts recognized in a business combination retrospectively. Instead, the acquirer will recognize the adjustments to provisional amounts during the period in which the adjustments are determined, including the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. DNB evaluated the impact of this guidance and it does not have a material impact to the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the guidance revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The guidance also amends certain disclosure requirements associated with fair value of financial instruments. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. As of June 30, 2019, DNB did not hold any equity investments (excluding restricted investments in bank stocks).  DNB does not expect to make significant purchases of equity investments; therefore, the adoption of this ASU is not expected to be material to DNB's consolidated financial statements. Adoption of the standard on January 1, 2018 also resulted in the use of an exit price rather than an entrance price to determine the fair value of loans not measured at fair value on a non-recurring basis in the consolidated balance sheets.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.DNB has determined that upon the adoption of ASU 2016-02 is required to recognize a right-of-use asset and a corresponding liability based on the then present value of such obligation. The adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $4.4 million and right-of-use asset of $4.0 million. The adoption of the new standard did not have a material impact on its Consolidated Statements of Income. Update 2018-11 - Leases (topic 842): Targeted Improvements provided an additional/optional transition method to adopt the new leases standard. Prior to this ASU issuance, a modified retrospective transition approach was required. The adoption of this ASU does not materially impact our Consolidated Statement of Financial Condition and Consolidated Statements of Changes in Stockholders’ Equity. Update 2018-20 - Leases (topic 842): Narrow-Scope Improvements for Lessors was released to better clarify the treatment of sales taxes and other similar taxes related to Lessor and Lessees costs and payments. The amendments in this update permit lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Also, certain lessor costs require lessors to exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties. DNB’s lessor income is immaterial; as such, this ASU does not materially impact our Consolidated Statement of Financial Condition or Consolidated Statements of Comprehensive Income. DNB adopted the use-of-hindsight practical expedient.

DNB recognized rent expense associated with our leases as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Operating lease cost:
Fixed rent expense	$	251	$	284	$	503	$	569
Net lease cost	$	251	$	284	$	503	$	569
Lease costs
Amortization of lease liability	$	186	$	-	$	372	$	-
Interest expense		65		-		131		-
Net lease cost	$	251	$	-	$	503	$	-

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DNB had the following cash and non-cash activities associated with our leases:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Cash paid for the amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	250	$	242	$	500	$	484
Non-cash investing and financing activities:
Additions to ROU assets obtained from:
New operating lease liabilities	$	4,174	$	-	$	4,174	$	-

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," (ASU 2016-13), which addresses concerns regarding the perceived delay in recognition of credit losses under the existing incurred loss model. The amendment introduces a new, single model for recognizing credit losses on all financial instruments presented on cost basis. Under the new model, entities must estimate current expected credit losses by considering all available relevant information, including historical and current information, as well as reasonable and supportable forecasts of future events. The update also requires additional qualitative and quantitative information to allow users to better understand the credit risk within the portfolio and the methodologies for determining allowance. ASU 2016-13 is effective for DNB on January 1, 2020 and must be applied using the modified retrospective approach with limited exceptions. Early adoption is permitted. Although early adoption is permitted for fiscal years beginning after December 15, 2018, DNB does not plan to early adopt. DNB has established a CECL Implementation Team to assess the impact of this ASU on its consolidated financial position, results of operations, and cash flows. DNB has been preserving certain historical loan information from its core processing system in anticipation of adopting the standard and will be evaluating control and process framework, data, model, and resource requirements and areas where modifications will be required. DNB has selected a third party vendor to process and review various calculation methodologies and the approximate impact on DNB’s financial position, results of operations and cash flows. The team continues to assess the impact of the standard; however, DNB does not expect the adoption of this ASU to materially change its allowance for credit losses. The amount of the changein the allowance for credit losses upon adoption will be dependent upon the characteristics of the portfolio at the adoption date, as well as macroeconomic conditions and forecasts at that date. A cumulative effect adjustment will be made to retained earnings for the impact of the standard at the beginning of the period the standard is adopted.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The amendments in this update provide guidance for eight specific cash flow classification issues for which current guidance is unclear or does not exist, thereby reducing diversity in practice. For public companies, the update is effective for annual periods beginning after December 15, 2017. Accordingly, effective January 1, 2018, DNB adopted the pronouncement and it did not have a material impact to DNB’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The new guidance narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs, as defined by the ASU. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods, and should be applied prospectively. Early adoption is permitted. DNB will apply this guidance to applicable transactions after the adoption date.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under the amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value with its carrying amount. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount when measuring the goodwill impairment loss, if applicable. The update also eliminated the requirements for zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments are effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. DNB will not early adopt this ASU for its annual goodwill impairment test, and conducted a qualitative test (step zero) as of October 1, 2018 and determined that its Goodwill has not been impaired. The adoption of this ASU is not expected to have a material impact on DNB’s consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers

11

will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, DNB has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. ASU No. 2017-07 will not have a material impact on DNB Consolidated Financial Statements because the Pension plan has been frozen to new accruals since December 31, 2003, and thus, generated no service cost in any subsequent year.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718):  Scope of Modification Accounting; (“ASU 2017-09”).  ASU 2017-09 provides clarity by offering guidance on the scope of modification accounting for share-based payment awards and gives direction on which changes to the terms or conditions of these awards require an entity to apply modification accounting.  Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.  The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. DNB adopted the ASU on January 1, 2018 and the effects were immaterial.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income; (“ASU 2018-02”). This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act. Consequently, the reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users. However, because the ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. DNB adopted this ASU on January 1, 2018. The amount of this reclassification is $471,000.

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NOTE 2: INVESTMENT SECURITIES

The amortized cost and fair values of investment securities, as of the dates indicated, are summarized as follows:

	June 30, 2019
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,886	$	33	$	-	$	8,919
Government Sponsored Entities (GSE) mortgage-backed securities		341		7		-		348
Corporate bonds		13,728		245		-		13,973
Collateralized mortgage obligations GSE		1,044		2		(4)		1,042
State and municipal taxable		362		5		-		367
State and municipal tax-exempt		35,588		117		(32)		35,673
Total	$	59,949	$	409	$	(36)	$	60,322
Available For Sale
US Government agency obligations	$	24,189	$	15	$	(24)	$	24,180
GSE mortgage-backed securities		26,256		23		(306)		25,973
Collateralized mortgage obligations GSE		9,464		8		(177)		9,295
Corporate bonds		8,796		13		(7)		8,802
State and municipal tax-exempt		1,701		-		(20)		1,681
Total	$	70,406	$	59	$	(534)	$	69,931

	December 31, 2018
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,749	$	41	$	-	$	8,790
Government Sponsored Entities (GSE) mortgage-backed securities		389		-		-		389
Corporate bonds		13,851		124		(47)		13,928
Collateralized mortgage obligations GSE		1,159		-		(27)		1,132
State and municipal taxable		362		-		(3)		359
State and municipal tax-exempt		37,516		19		(998)		36,537
Total	$	62,026	$	184	$	(1,075)	$	61,135
Available For Sale
US Government agency obligations	$	48,082	$	-	$	(359)	$	47,723
GSE mortgage-backed securities		27,563		-		(1,005)		26,558
Collateralized mortgage obligations GSE		10,249		-		(441)		9,808
Corporate bonds		10,890		-		(186)		10,704
State and municipal tax-exempt		1,981		-		(131)		1,850
Total	$	98,765	$	-	$	(2,122)	$	96,643

Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The following table details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2019 and December 31, 2018.

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	June 30, 2019
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Collateralized mortgage obligations GSE	$	171	$	(4)	$	-	$	-	$	171	$	(4)
State and municipal tax-exempt		5,537		(32)		-		-		5,537		(32)
Total	$	5,708	$	(36)	$	-	$	-	$	5,708	$	(36)
Available For Sale
US Government agency obligations	$	13,965	$	(24)	$	-	$	-	$	13,965	$	(24)
GSE mortgage-backed securities		22,599		(306)		-		-		22,599		(306)
Collateralized mortgage obligations GSE		6,980		(177)		-		-		6,980		(177)
Corporate bonds		5,028		(7)		-		-		5,028		(7)
State and municipal tax-exempt		1,681		(20)		-		-		1,681		(20)
Total	$	50,253	$	(534)	$	-	$	-	$	50,253	$	(534)

	December 31, 2018
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Corporate bonds	$	4,157	$	(47)	$	1,887	$	(15)	$	2,270	$	(32)
Collateralized mortgage obligations GSE		1,132		(27)		-		-		1,132		(27)
State and municipal taxable		359		(3)		-		-		359		(3)
State and municipal tax-exempt		26,466		(998)		2,045		(31)		24,421		(967)
Total	$	32,114	$	(1,075)	$	3,932	$	(46)	$	28,182	$	(1,029)
Available For Sale
US Government agency obligations	$	37,723	$	(359)	$	-	$	-	$	37,723	$	(359)
GSE mortgage-backed securities		26,558		(1,005)		-		-		26,558		(1,005)
Collateralized mortgage obligations GSE		9,808		(441)		-		-		9,808		(441)
Corporate bonds		10,704		(186)		2,035		(7)		8,669		(179)
State and municipal tax-exempt		1,850		(131)		-		-		1,850		(131)
Total	$	86,643	$	(2,122)	$	2,035	$	(7)	$	84,608	$	(2,115)

As of June 30, 2019, there were fourteen collateralized mortgage obligations GSE, eighteen GSE mortgage-backed securities, three U.S. agency obligations, nine tax-exempt municipalities, and three corporate bonds which were in an unrealized loss position. DNB does not intend to sell these securities and management of DNB does not expect to be required to sell any of these securities prior to a recovery of their cost basis. Management has reviewed all of these securities and believes that DNB will collect all principal and interest that is due on debt securities on a timely basis.  Management does not believe any individual unrealized loss as of June 30, 2019 represents an other-than-temporary impairment (OTTI). DNB reviews its investment portfolio on a quarterly basis, reviewing each investment for OTTI. The OTTI analysis focuses on condition of the issuers as well as duration and severity of impairment in determining OTTI. As of June 30, 2019, the following securities were reviewed:

Collateralized mortgage obligations GSE  There are fourteen impaired securities classified as collateralized mortgage obligations GSE,  all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 6.34% of its carrying value. All of these securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on all of these securities on a timely basis and none of these agencies have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

GSE mortgage-backed securities  There are eighteen impaired securities classified as GSE mortgage-backed securities, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 1.86% of its carrying value. These securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on these securities on a timely basis and none of these have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

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US Government agency obligations  There are three impaired securities classified as agencies, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.41% of its carrying value. All of these securities were issued and insured by FHLB, FNMA or FHLMC. DNB has received timely interest payments on all of these securities and none of these agencies have ever defaulted on their bonds. DNB anticipates a recovery in the market value as the securities approach their maturity dates. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.  

State and municipal tax-exempt There are nine impaired securities in this category, which are comprised of intermediate to long-term municipal bonds, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 2.10% of its carrying value. All of the issues carry an  “AA” or better underlying credit rating and/or have strong underlying fundamentals; included but not limited to annual financial reports, geographic location, population, and debt ratios. In certain cases, options for calls reduce the effective duration and in turn, future market value fluctuations. All issues are performing and are expected to continue to perform in accordance with their respective contractual terms and conditions. There have not been disruptions of any payments associated with any of these municipal securities. These bonds are investment grade and the value decline is related to the changes in interest rates. Of the nine municipal securities, four are school districts that have state school district credit enhancement programs and one of those has additional insurance. The remaining five are one uninsured school district, oneinsured township, and three uninsured townships, all of which have strong underlying ratings. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

Corporate bonds There are three impaired bonds classified as corporate bonds, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.46% of its carrying value. The bonds are investment grade and the value decline is related to the changes in interest rates that occurred since the time of purchase and subsequent changes in spreads affecting the market prices. All of the issues carry a "BBB+" or better underlying credit support and were evaluated on the basis on their underlying fundamentals; included but not limited to annual financial reports, rating agency reports, capital strength and debt ratios. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

The amortized cost and fair value of investment securities as of June 30, 2019, by final contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid without penalties.

	Held to Maturity				Available for Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,735	$	11,770	$	14,989	$	14,968
Due after one year through five years		14,149		14,245		18,448		18,455
Due after five years through ten years		27,454		27,697		14,329		14,214
Due after ten years		6,611		6,610		22,640		22,294
Total investment securities	$	59,949	$	60,322	$	70,406	$	69,931

The HTM securitiescalled during the six months ended June 30, 2019resulted in a gain on call of $3,000.  Gains and losses resulting from investment sales, redemptions or calls were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross realized gains-AFS	$	10	$	-	$	10	$	-
Gross realized gains-HTM		-		-		3		-
Gross realized losses-AFS		(9)		-		(9)		-
Net realized gain	$	1	$	-	$	4	$	-

At June 30, 2019 and December 31, 2018, investment securities with a carrying value of approximately $69.7 million and $95.8 million, respectively, were pledged to secure public fundsand for other purposes as required by law.

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NOTE 3: LOANS

The following table sets forth information concerning the composition of total loans outstanding, as of the dates indicated.

(Dollars in thousands)	June 30, 2019		December 31, 2018
Residential mortgage	$	98,802	$	99,932
Commercial mortgage		521,060		535,735
Commercial:
Commercial term		179,294		166,335
Commercial construction		77,060		76,302
Consumer:
Home equity		49,492		51,536
Other		4,813		5,131
Total loans	$	930,521	$	934,971
Less allowance for credit losses		(6,672)		(6,675)
Net loans	$	923,849	$	928,296

Information concerning non-accrual loans is shown in the following tables:

					Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
(Dollars in thousands)	June 30, 2019		December 31, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	779	$	905	$	11	$	-	$	11	$	23	$	-	$	23
Commercial mortgage		563		1,307		1		-		1		27		-		27
Commercial:
Commercial term		2,026		2,300		22		-		22		65		-		65
Commercial construction		2,274		476		13		-		13		13		-		13
Consumer:
Home equity		143		391		(1)		-		(1)		6		-		6
Other		138		167		3		-		3		6		-		6
Total non-accrual loans	$	5,923	$	5,546	$	49	$	-	$	49	$	140	$	-	$	140
Loans 90 days past due and accruing		205		233		3		3		-		3		3		-
Total non-performing loans	$	6,128	$	5,779	$	52	$	3	$	49	$	143	$	3	$	140

			Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
(Dollars in thousands)	June 30, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	1,344	$	18	$	-	$	18	$	43	$	-	$	43
Commercial mortgage		1,593		28		-		28		58		-		58
Commercial:
Commercial term		2,583		46		-		46		90		-		90
Commercial construction		488		9		-		9		20		-		20
Consumer:
Home equity		498		3		-		3		8		-		8
Other		215		3		-		3		11		-		11
Total non-accrual loans	$	6,721	$	107	$	-	$	107	$	230	$	-	$	230
Loans 90 days past due and accruing		23		1		1		-		1		1		-
Total non-performing loans	$	6,744	$	108	$	1	$	107	$	231	$	1	$	230

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NOTE 4: ALLOWANCE FOR CREDIT LOSSES

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a scheduled payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2019 and December 31, 2018. 

Age Analysis of Past Due Loans Receivable

	June 30, 2019
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	972	$	378	$	610	$	1,960	$	96,842	$	98,802	$	142
Commercial mortgage (less acquired with credit deterioration)		47		-		625		672		519,867		520,539		63
Acquired commercial mortgage with credit deterioration		-		-		-		-		521		521		-
Commercial:
Commercial term		920		-		296		1,216		178,078		179,294		-
Commercial construction		-		-		-		-		77,060		77,060		-
Consumer:
Home equity		168		120		143		431		49,061		49,492		-
Other		85		2		88		175		4,638		4,813		-
Total	$	2,192	$	500	$	1,762	$	4,454	$	926,067	$	930,521	$	205

	December 31, 2018
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	666	$	1,742	$	845	$	3,253	$	96,679	$	99,932	$	130
Commercial mortgage (less acquired with credit deterioration)		-		-		840		840		534,739		535,579		103
Acquired commercial mortgage with credit deterioration		-		-		-		-		156		156		-
Commercial:
Commercial term		20		37		957		1,014		165,321		166,335		-
Commercial construction		-		-		-		-		76,302		76,302		-
Consumer:
Home equity		398		144		247		789		50,747		51,536		-
Other		26		-		108		134		4,997		5,131		-
Total	$	1,110	$	1,923	$	2,997	$	6,030	$	928,941	$	934,971	$	233

DNB had $353,000 of residential mortgage loans in the process of foreclosure and $97,000 in residential real estate in other real estate owned as of June 30, 2019. DNB had no residential mortgage loans in the process of foreclosure and $97,000 of residential real estate in other real estate owned as of December 31, 2018.

17

The following tables summarize information in regards to impaired loans by loan portfolio class as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018.

Impaired Loans

		June 30, 2019						December 31, 2018
	Recorded		Unpaid		Related		Recorded		Unpaid		Related
	Investment		Principal		Allowance		Investment		Principal		Allowance
(Dollars in thousands)			Balance						Balance
With no related allowance recorded:
Residential mortgage	$	2,759	$	3,110	$	-	$	1,462	$	1,804	$	-
Commercial mortgage		1,513		1,766		-		1,532		1,780		-
Acquired commercial mortgage with credit deterioration		521		535		-		514		527
Commercial:
Commercial term		1,309		1,841		-		1,343		1,845		-
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		156		205		-
Total	$	8,823	$	10,099	$	-	$	6,014	$	7,210	$	-
With allowance recorded:
Residential mortgage		-		-		-		73		73		1
Commercial mortgage		-		-		-		737		802		78
Commercial:
Commercial term		717		744		161		957		1,015		203
Consumer:
Other		-		-		-		41		42		3
Total	$	717	$	744	$	161	$	1,808	$	1,932	$	285
Total:
Residential mortgage		2,759		3,110		-		1,535		1,877		1
Commercial mortgage		1,513		1,766		-		2,269		2,582		78
Acquired commercial mortgage with credit deterioration		521		535		-		514		527		-
Commercial:
Commercial term		2,026		2,585		161		2,300		2,860		203
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		197		247		3
Total	$	9,540	$	10,843	$	161	$	7,822	$	9,142	$	285

18

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	Average	Interest	Average	Interest	Average	Interest	Average	Interest
	Recorded	Income	Recorded	Income	Recorded	Income	Recorded	Income
(Dollars in thousands)	Investment	Recognized	Investment	Recognized	Investment	Recognized	Investment	Recognized
With no related allowance recorded:
Residential mortgage	$           2,770	$                16	$           2,109	$                  5	$           2,358	$                18	$           2,042	$                  6
Commercial mortgage	1,845	12	2,597	12	1,986	24	2,668	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	1,318	-	2,024	-	1,326	-	1,931	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	207	-	180	1	177	-
Total	$           8,167	$                40	$           8,708	$                27	$           7,574	$                65	$           8,686	$                49
With allowance recorded:
Residential mortgage	-	-	37	-	-	-	25	-
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	-	-	81	-	-	-	60	-
Commercial:
Commercial term	717	-	774	-	797	-	628	-
Consumer:
Other	-	-	71	-	-	-	90	-
Total	$              717	$                   -	$              963	$                   -	$              797	$                   -	$              805	$                   -
Total:
Residential mortgage	2,770	16	2,146	5	2,358	18	2,067	6
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	1,845	12	2,678	12	1,986	24	2,728	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	2,035	-	2,798	-	2,123	-	2,559	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	278	-	180	1	267	-
Total	$           8,884	$                40	$           9,671	$                27	$           8,371	$                65	$           9,491	$                49

19

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within DNB’s internal risk rating system as of June 30, 2019 and December 31, 2018.

Credit Quality Indicators

	June 30, 2019
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	96,078	$	142	$	2,582	$	-	$	98,802
Commercial mortgage		504,508		13,387		3,165		-		521,060
Commercial:
Commercial term		174,507		695		4,092		-		179,294
Commercial construction		73,325		935		2,800		-		77,060
Consumer:
Home equity		49,198		151		143		-		49,492
Other		4,674		-		139		-		4,813
Total	$	902,290	$	15,310	$	12,921	$	-	$	930,521

	December 31, 2018
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	97,577	$	-	$	2,355	$	-	$	99,932
Commercial mortgage		528,692		2,367		4,676		-		535,735
Commercial:
Commercial term		161,051		1,178		4,106		-		166,335
Commercial construction		72,077		3,603		622		-		76,302
Consumer:
Home equity		50,988		143		405		-		51,536
Other		4,924		-		207		-		5,131
Total	$	915,309	$	7,291	$	12,371	$	-	$	934,971

Troubled Debt Restructurings Loans whose terms are modified are classified as troubled debt restructurings (“TDR”) if DNB grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. During the six month period ended June 30, 2019, DNB classified two residential mortgage loans totaling $1.5 millionand four commercial term loans totaling $421,000 as TDR. One residential mortgage loan’s rate was changedbut the term was not extended, and the other residential mortgage loan and the four commercial term loans had their terms extended. During thesixmonth period ended June 30, 2018, DNB classified one residential mortgage loan totaling $73,000 as TDR. The loan’s rate was changed but the term was not extended. Loans classified as troubled debt restructurings are designated as impaired. The recorded investments in troubled debt restructured loans at June 30, 2019 and December 31, 2018 are as follows:

	June 30, 2019
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	2,155	$	2,308	$	2,110
Commercial mortgage		992		992		950
Commercial term		421		421		421
Consumer:
Home equity		148		148		136
Other		40		42		30
Total	$	3,756	$	3,911	$	3,647
	December 31, 2018
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	676	$	805	$	630
Commercial mortgage		992		992		962
Consumer:
Home equity		148		148		140
Other		40		42		30
Total	$	1,856	$	1,987	$	1,762

20

At June 30, 2019,  DNB had fifteen TDRs with recorded investment totaling $3,647,000,  ten of which are accruing loans in compliance with the terms of the modifications and fiveof which are non-accrual loans. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of June 30, 2019, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were nodefaults on TDRs during the six months ended June 30, 2019.

At December 31, 2018, DNB had nine TDRs with recorded investment totaling $1,762,000,  all of which were accruing loans in compliance with the terms of the modifications. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. As of December 31, 2018, DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of December 31, 2018, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were no defaults on TDRs within twelve months of restructure during 2018. DNB classified oneresidential mortgage loan totaling $73,000 as TDR during the year ended December 31, 2018.

The following tables set forth the composition of DNB’s allowance for credit losses as of June 30, 2019 and December 31, 2018, the activity for the three and six months ended June 30, 2019 and 2018 and as of and for the year ended December 31, 2018.

Allowance for Credit Losses and Recorded Investment in Loans Receivables

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2019	$	156	$	3,493	$	1,189	$	1,080	$	183	$	43	$	575	$	6,719
Charge-offs		-		(23)		(22)		-		(128)		-		-		(173)
Recoveries		-		7		19		-		-		-		-		26
Provisions		(23)		102		(42)		(48)		154		(4)		(39)		100
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2019	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Charge-offs		-		(105)		(91)		-		(128)		(17)		-		(341)
Recoveries		4		7		27		-		-		-		-		38
Provisions		(32)		30		146		-		147		10		(1)		300
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672
Ending balance: individually evaluated for impairment	$	-	$	-	$	161	$	-	$	-	$	-	$	-	$	161
Ending balance: collectively evaluated for impairment	$	133	$	3,579	$	983	$	1,032	$	209	$	39	$	536	$	6,511
Loans receivables:
Ending balance	$	98,802	$	521,060	$	179,294	$	77,060	$	49,492	$	4,813			$	930,521
Ending balance: individually evaluated for impairment	$	2,759	$	1,513	$	2,026	$	2,274	$	279	$	168			$	9,019
Ending balance: acquired with credit deterioration	$	-	$	521	$	-	$	-	$	-	$	-			$	521
Ending balance: collectively evaluated for impairment	$	96,043	$	519,026	$	177,268	$	74,786	$	49,213	$	4,645			$	920,981
Reserve for unfunded loan commitments included in other liabilities	$	-	$	2	$	189	$	209	$	20	$	-			$	420

21

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2018	$	226	$	2,987	$	904	$	1,219	$	176	$	55	$	578	$	6,145
Charge-offs		(103)		(171)		(47)		-		-		(37)		-		(358)
Recoveries		25		-		-		-		-		1		-		26
Provisions		59		260		32		136		20		30		(162)		375
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2018	$	221	$	2,856	$	845	$	1,128	$	183	$	63	$	547	$	5,843
Charge-offs		(137)		(184)		(64)		-		-		(49)		-		(434)
Recoveries		26		-		2		-		-		1		-		29
Provisions		97		404		106		227		13		34		(131)		750
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188
Reserve for unfunded loan commitments included in other liabilities	$	-	$	3	$	183	$	201	$	21	$	-			$	408

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Ending balance - December 31, 2018	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Ending balance: individually evaluated for impairment	$	1	$	78	$	203	$	-	$	-	$	3	$	-	$	285
Ending balance: collectively evaluated for impairment	$	160	$	3,569	$	859	$	1,032	$	190	$	43	$	537	$	6,390
Loans receivables:
Ending balance	$	99,932	$	535,735	$	166,335	$	76,302	$	51,536	$	5,131			$	934,971
Ending balance: individually evaluated for impairment	$	1,535	$	2,269	$	2,300	$	476	$	531	$	197			$	7,308
Ending balance: acquired with credit deterioration	$	-	$	514	$	-	$	-	$	-	$	-			$	514
Ending balance: collectively evaluated for impairment	$	98,397	$	532,952	$	164,035	$	75,826	$	51,005	$	4,934			$	927,149
Reserve for unfunded loan commitments included in other liabilities	$	-	$	4	$	167	$	206	$	21	$	-			$	398

22

NOTE 5: EARNINGS PER SHARE 

Basic earnings per share (“EPS”) is computed based on the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the treasury stock method and reflects the potential dilution that could occur from the exercise of stock options, and warrants and the amortized portion of unvested stock awards. Stock options and unvested stock awards for which the exercise or the grant price exceeds the average market price over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation. Treasury shares are not deemed outstanding for calculations. There were no outstanding stock warrants,no anti-dilutive stock options, and no anti-dilutive stock awards outstanding at June 30, 2019 and June 30, 2018. The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30, 2019					June 30, 2019
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,587	4,331	$	0.60	$	5,174	4,329	$	1.20
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	5		-		-	4		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,587	4,336	$	0.60	$	5,174	4,333	$	1.19

	Three Months Ended					Six Months Ended
	June 30, 2018					June 30, 2018
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,049	4,298	$	0.48	$	4,662	4,295	$	1.09
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	16		(0.01)		-	17		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,049	4,314	$	0.47	$	4,662	4,312	$	1.08

NOTE 6: ACCUMULATED OTHER COMPREHENSIVE LOSS 

The components of accumulated other comprehensive loss included in stockholders' equity are as follows:

Accumulated Other Comprehensive Loss	Before-Tax		Tax		Net-of-Tax
(Dollars in thousands)	Amount		Effect		Amount
June 30, 2019
Net unrealized loss on AFS securities	$	(475)	$	100	$	(375)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(2,112)	$	443	$	(1,669)
December 31, 2018
Net unrealized loss on AFS securities	$	(2,122)	$	445	$	(1,677)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(3,759)	$	788	$	(2,971)

23

NOTE 7: SUBORDINATED DEBENTURES AND NOTES

DNB has two issuances of junior subordinated debentures (the “debentures”) as follows. The majority of the proceeds of each issuance were invested in DNB’s subsidiary, DNB First, National Association, to increase the Bank’s capital levels. The junior subordinated debentures issued in each case qualify as a component of capital for regulatory purposes. DNB Capital Trust I and II are special purpose Delaware business trusts, which are not consolidated.

DNB Capital Trust I

DNB’s first issuance of junior subordinated debentures was on July 20, 2001. These debentures are floating rate and were issued to DNB Capital Trust I, a Delaware business trust in which DNB owns all of the common equity. DNB Capital Trust I issued $5.0 million of floating rate (6 month Libor plus 3.75%, with a cap of 12%) capital preferred securities to a qualified institutional buyer. The proceeds of these securities were used by the Trust, along with DNB’s capital contribution, to purchase $5.2 million principal amount of DNB’s floating rate junior subordinated debentures. The preferred securities have been redeemable since July 25, 2006 and must be redeemed upon maturity of the debentures on July 25, 2031.

DNB Capital Trust II

DNB’s second issuance of junior subordinated debentures was on March 30, 2005. These are floating rate and were issued to DNB Capital Trust II, a Delaware business trust in which DNB owns all of the common equity. DNB Capital Trust II issued $4.0 million of floating rate (the rate was fixed at 6.56% for the first 5 years and is now adjusting at a rate of 3-month LIBOR plus 1.77%) capital preferred securities. The proceeds of these securities were used by the Trust, along with DNB’s capital contribution, to purchase $4.1 million principal amount of DNB’s floating rate junior subordinated debentures. The preferred securities have been redeemable since May 23, 2010. The preferred securities must be redeemed upon maturity of the debentures on May 23, 2035.

Subordinated Note

On March 5, 2015, DNB Financial Corporation entered into a Subordinated Note Purchase Agreement (the “Agreement”) with an accredited investor under which DNB issued a $9.75 million subordinated note (the “Note”) to the investor. The Note has a maturity date of March 6, 2025, and bears interest at a fixed rate of 4.25% per annum for the first 5 years and then will float at the Wall Street Journal Prime rate plus 1.00%, provided that the interest rate applicable to the outstanding principal balance will at no time be less than 3.0% and more than 5.75% per annum.

DNB may, at its option, beginning with the first interest payment date after March 6, 2019, and on any interest payment date thereafter, redeem the Note, in whole or in part, at par plus accrued and unpaid interest to the date of redemption. The Note is not subject to repayment at the option of the noteholder.

The Note is unsecured and ranks junior in right of payment to DNB’s senior indebtedness and to DNB’s obligations to its general creditors and qualifies as Tier 2 capital for regulatory purposes.

24

NOTE 8: STOCK-BASED COMPENSATION

Stock Option Plan

DNB has a Stock Option Plan for employees and directors. Under the plan, options (both qualified and non-qualified) to purchase a maximum of 793,368 (as adjusted for subsequent stock dividends) shares of DNB’s common stock could be issued to employees and directors. Under the plan, option exercise prices must equal the fair market value of the shares on the date of option grant and the option exercise period may not exceed ten years. Vesting of options under the plan is determined by the Plan Committee. There were 354,090 shares available for grant at June 30, 2019. All options are immediately exercisable. During the six months ended June 30, 2019 and 2018, DNB had no expenses related to the plan. Under the Stock Option Plan, no shares were exercised during the six months ended June 30, 2019. Under the Stock Option Plan, 5,300 shares were exercised during the six months ended June 30, 2018. The shares awarded from the non-qualified cashless exercises resulted in an increase in shares outstanding of 2,338 shares. There was a cash equivalent of 2,962 shares used to pay all applicable taxes on the transactions. DNB had no stock option activity during the six months ended June 30, 2019 and had nostock options outstanding at June 30, 2019 or December 31, 2018.  Stock option activity is indicated below.

	Number		Weighted Average
	Outstanding		Exercise Price
Outstanding January 1, 2018		16,450	$	10.31
Issued		-		-
Exercised		5,300		10.31
Forfeited		-		-
Expired		-		-
Outstanding June 30, 2018		11,150	$	10.31

Other Stock-Based Compensation

DNB maintains an Incentive Equity and Deferred Compensation Plan (the "Plan"). The Plan provides that up to 493,101 (as adjusted for subsequent stock dividends) shares of common stock may be granted, at the discretion of the Board, to individuals of the Corporation. Shares already granted are issuable on the earlier of three or four years (cliff vesting period) after the date of the grant or a change in control of DNB if the recipients are then employed by DNB (“Vest Date”).  Upon issuance of the shares, resale of the shares is restricted for an additional one year, during which the shares may not be sold, pledged or otherwise disposed of. Prior to the Vest Date and in the event the recipient terminates association with DNB for reasons other than death, disability or change in control, the recipient forfeits all rights to the shares that would otherwise be issued under the grant.

Share awards granted by the Plan were recorded at the date of award based on the market value of shares. Awards are being amortized to expense over a three or four year cliff-vesting period. DNB records compensation expense equal to the value of the shares being amortized. For the three andsix month periods ended June 30, 2019,$82,000 and $143,000 was amortized to expense. For the three and six month periods ended June 30, 2018,  $108,000 and $204,000 was amortized to expense.

As of June 30, 2019, there was approximately $568,000 in additional compensation that will be recognized over the weighted average life of1.60 years. At June 30, 2019,  482,501 shares were reserved for future grants under the Plan. 

There were 8,500 restricted shares that vested during the six months ended June 30, 2018. The shares awarded from the cashless exercises resulted in an increase in shares outstanding of 4,908 shares. There was a cash equivalent of 3,492 shares used to pay all applicable taxes on the transactions. There were no such transactions during the six months ended June 30, 2019. Stock grant activity is indicated below:

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2019	18,590	$	30.90
Granted	10,600		39.36
Forfeited	-		-
Vested	-		-
Non-vested stock awards—June 30, 2019	29,190	$	33.98

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2018	31,130	$	26.53
Granted	10,750		33.98
Forfeited	4,345		28.92
Vested	8,500		26.69
Non-vested stock awards—June 30, 2018	29,035	$	28.88

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NOTE 9:  INCOME TAXES

As of June 30, 2019, DNB had no material unrecognized tax benefits or accrued interest and penalties. It is DNB’s policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.  Federal and state tax years 2016 through 2018 were open for examination as of June 30, 2019.

NOTE 10:  FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy based on the nature of data inputs for fair value determinations, under which DNB is required to value each asset within its scope using assumptions that market participations would utilize to value that asset. When DNB uses its own assumptions, it is required to disclose additional information about the assumptions used and the effect of the measurement on earnings or the net change in assets for the period.

The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1—Quoted prices in active markets for identical securities.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Instruments whose significant value drivers are unobservable.

A description of the valuation methodologies used for assets measured at fair value is set forth below:

DNB’s available-for-sale investment securities, which generally include U.S. government agencies and mortgage backed securities, collateralized mortgage obligations, corporate bonds and equity securities are reported at fair value. These securities are valued by an independent third party (“preparer”). The preparer’s evaluations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their evaluated pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

U.S. Government agencies are evaluated and priced using multi‑dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other securities are evaluated using a broker-quote based application, including quotes from issuers.

Impaired loans are those loans that the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

OREO assets are adjusted to fair value less estimated selling costs upon transfer of the loans to OREO establishing a new cost basis. Subsequently, OREO assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When recorded at fair value, these assets are included as Level 3 fair values.

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The following tables present assets measured at fair value on a recurring basis as of June 30, 2019and December 31, 2018:

		June 30, 2019
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	24,180	$	-	$	24,180
GSE mortgage-backed securities		-		25,973		-		25,973
Collateralized mortgage obligations GSE		-		9,295		-		9,295
Corporate bonds		-		8,802		-		8,802
State and municipal tax-exempt		-		1,681		-		1,681
Total	$	-	$	69,931	$	-	$	69,931
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	691	$	691
OREO and other repossessed property		-		-		1,430		1,430
Total	$	-	$	-	$	2,121	$	2,121

		December 31, 2018
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	47,723	$	-	$	47,723
GSE mortgage-backed securities		-		26,558		-		26,558
Collateralized mortgage obligations GSE		-		9,808		-		9,808
Corporate bonds		-		10,704		-		10,704
State and municipal tax-exempt		-		1,850		-		1,850
Total	$	-	$	96,643	$	-	$	96,643
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	1,523	$	1,523
OREO and other repossessed property		-		-		1,247		1,247
Total	$	-	$	-	$	2,770	$	2,770

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The following table presents additional information about assets measured at fair value on a nonrecurring basis and for which DNB has utilized Level 3 inputs to determine fair value:

June 30, 2019
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Commercial term	$	556	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-8%	(-4%)
Impaired loans - Consumer other		135	Appraisal of collateral (1)	Disposal costs (2)	-7%	to	-8%	(-8%)
Impaired loan total	$	691
Other real estate owned	$	1,430		Disposal costs (2)	-8%	to	-8%	(-8%)

(1)

(2)

December 31, 2018
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Residential mortgage	$	72	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loans - Commercial mortgage		659	Appraisal of collateral (1)	Disposal costs (2)	-14%	to	-14%	(-14%)
Impaired loans - Commercial term		754	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-16%	(-11%)
Impaired loans - Consumer other		38	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loan total	$	1,523
Other real estate owned	$	1,247		Disposal costs (2)	-8%	to	-8%	(-8%)

⁽¹⁾ Fair value is generally determined through independent appraisals or sales contracts of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

⁽²⁾ Appraisals are adjusted by management for qualitative factors and disposal costs.

Impaired loans.Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $9.5 million at June 30, 2019. Of this, $717,000 had specific valuation allowances of $161,000, leaving a fair value of $556,000 as of June 30, 2019. In addition, DNB had $152,000 in impaired loans that were partially charged down by $17,000, leaving $135,000 at fair value as of June 30, 2019. The total fair value of impaired loans at June 30, 2019 was $691,000.  

Impaired loans had a carrying amount of $7.8 million at December 31, 2018. Of this, $1.8 million had specific valuation allowances of $285,000, leaving a fair value of $1.5 million at December 31, 2018.  DNB did not have any impaired loans that were partially charged down that didn’t already have a specific reserve during the year ended December 31, 2018. The total fair value of impaired loans at December 31, 2018 was $1.5 million.

Other Real Estate Owned & other repossessed property.  Other real estate owned (“OREO”) consists of properties acquired as a result of, or in-lieu-of, foreclosure. Properties or other assets are classified as OREO and other repossessed property are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense. DNB had $2.8 million of such assets at June 30, 2019, $2.7 million of which was OREO and $106,000 was in other repossessed property. DNB had $5.1 million of such assets at December 31, 2018, which consisted of $4.9 million in OREO and $142,000 in other repossessed property. DNB wrote down the carrying values of certain assets totaling$1.5 millionby $105,000to $1.4 million during the six month period ended June 30, 2019. DNB wrote down the carrying values of certain assetstotaling $1.6million by $355,000to $1.2 millionduring the year ended December 31, 2018.

DNB's policy is to recognize transfer between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Level 1 and 2 for the six months ended June 30, 2019.

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Below is management’s estimate of the fair value of all financial instruments, whether carried at cost or fair value on the Company’s consolidated statement of financial condition. The carrying amounts and fair values of financial instruments at June 30, 2019 and December 31, 2018 are as follows:

		June 30, 2019
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	46,398	$	46,398	$	46,398	$	-	$	-
AFS investment securities		69,931		69,931		-		69,931		-
HTM investment securities		59,949		60,322		-		58,322		2,000
Restricted stock		5,734		5,734		-		5,734		-
Loans held-for-sale		501		515		-		-		515
Loans, net of allowance, including impaired		923,849		921,497		-		-		921,497
Accrued interest receivable		4,297		4,297		-		4,297		-
Financial liabilities
Deposits:
Non-interest-bearing		178,454		178,454		-		178,454		-
NOW, Money market, and Savings		531,002		531,002		-		531,002		-
Time		178,530		178,808		-		178,808		-
Brokered		87,877		87,369		-		87,369		-
FHLBP advances		31,203		31,112		-		31,112		-
Junior subordinated debentures and other borrowings		9,279		9,990		-		9,990		-
Subordinated debt		9,750		9,271		-		9,271		-
Accrued interest payable		641		641		-		641		-
Off-balance sheet instruments		-		-		-		-		-

		December 31, 2018
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	17,321	$	17,321	$	17,321	$	-	$	-
AFS investment securities		96,643		96,643		-		96,643		-
HTM investment securities		62,026		61,135		-		59,135		2,000
Restricted stock		5,616		5,616		-		5,616		-
Loans held-for-sale		419		429		-		-		429
Loans, net of allowance, including impaired		928,296		914,822		-		-		914,822
Accrued interest receivable		4,207		4,207		-		4,207		-
Financial liabilities
Deposits:
Non-interest-bearing		164,746		164,746		-		164,746		-
NOW, Money market, and Savings		549,073		549,073		-		549,073		-
Time		162,096		160,944		-		160,944		-
Brokered		108,651		97,250		-		97,250		-
FHLBP advances		32,935		32,347		-		32,347		-
Junior subordinated debentures and other borrowings		9,279		10,285		-		10,285		-
Subordinated debt		9,750		9,505		-		9,505		-
Accrued interest payable		646		646		-		646		-
Off-balance sheet instruments		-		-		-		-		-

The specific estimation methods and assumptions used can have a substantial impact on the resulting fair values of financial instruments. Following is a brief summary of the significant assumptions, methods, and estimates used in estimating fair value.

Limitations  Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time DNB’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of DNB’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

DNB Financial Corporation (the “Registrant”, “Corporation” or "DNB"), may from time to time make written or oral “forward-looking statements,” including statements contained in the Corporation’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits hereto and thereto), in its reports to stockholders and in other communications by the Corporation, which are made in good faith by the Corporation pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

These forward-looking statements include statements with respect to the Corporation’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Corporation’s control).  The words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements.  The following factors, among others, could cause the Corporation’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Corporation conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; the downgrade, and any future downgrades, in the credit rating of the U.S. Government and federal agencies; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Corporation and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Corporation’s products and services; the success of the Corporation in gaining regulatory approval of its products and services, when required; the impact of changes in laws and regulations applicable to financial institutions (including laws concerning taxes, banking, securities and insurance); technological changes; acquisitions; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms the implementation of Basel III, which may be changed unilaterally and retroactively by legislative or regulatory actions; the ability to complete the previously announced business combination with S&T; the ability to achieve the expected benefits of the merger with S&T in the time frames expected or at all, or may be more costly to achieve; that prior to completion of the merger transaction or thereafter, the parties’ respective businesses may not perform as expected due to transaction-related uncertainties or other factors; the parties’ ability to implement successful integration strategies; the ability to obtain the required regulatory approvals, shareholder approvals, or other closing conditions in a timely manner, or at all; reputational risks and the reaction of the parties’ customers to the merger transaction; diversion of management time to merger-related issues; and the success of the Corporation at managing the risks involved in the foregoing.

The Corporation cautions that the foregoing list of important factors is not exclusive.  Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by the Corporation on its website or otherwise.  The Corporation does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Corporation to reflect events or circumstances occurring after the date of this report.

For a complete discussion of the assumptions, risks and uncertainties related to our business, you are encouraged to review our filings with the Securities and Exchange Commission, including this Form 10-Q, as well as any changes in risk factors or other risks that we may identify in our quarterly or other reports subsequently filed with the SEC.

DESCRIPTION OF DNB'S BUSINESS AND BUSINESS STRATEGY

DNB Financial Corporation, a Pennsylvania business corporation, is a bank holding company registered with and supervised by the Board of Governors of the Federal Reserve System (Federal Reserve Board). The Registrant was incorporated on October 28, 1982 and commenced operations on July 1, 1983 upon consummation of the acquisition of all of the outstanding stock of Downingtown National Bank, now known as DNB First, National Association (the “Bank”). Since commencing operations, DNB’s business has consisted primarily of managing and supervising the Bank, and its principal source of income has been derived from the Bank.

The Bank was organized in 1860. The Bank is a national banking association that is a member of the Federal Reserve System, the deposits of which are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is a full service commercial bank providing a wide range of services to individuals and small to medium sized businesses in the southeastern Pennsylvania market area, including accepting time, demand, and savings deposits and making secured and unsecured commercial, real estate and consumer loans. In addition, the Bank has fourteen (14) full service branches and a full-service wealth management group known as “DNB First Wealth Management.” The Bank’s financial subsidiary, DNB Financial Services, Inc., (also known as “DNB Investments & Insurance”) is a Pennsylvania licensed insurance agency, which, through a third party marketing agreement with Cetera Investment Services, LLC, sells a broad variety of insurance and investment products. The Bank’s other subsidiaries are Downco, Inc. and DN Acquisition

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Company, Inc. which were incorporated in December 1995 and December 2008, respectively, for the purpose of acquiring and holding Other Real Estate Owned acquired through foreclosure or deed in-lieu-of foreclosure, as well as Bank-occupied real estate.

In addition to interest earned on loans and investments, DNB earns revenues from fees it charges customers for non-lending services. These products and services include trust administration, estate settlement, investment management, annuities, insurance and brokerage; cash management services; banking and ATM services; as well as safekeeping and other depository services.

To ensure we remain well positioned to meet the growing needs of our customers and communities and to meet the challenges of the 21st century, we’ve worked to build awareness of our full-service capabilities and ability to meet the needs of a wide range of customers. To that end, DNB continues to make appropriate investments in all areas of our business, including people, technology, facilities and marketing.

Merger Agreement.  On June 5, 2019, S&T Bancorp, Inc. (“S&T”) and DNB entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which DNB will merge with and into S&T (the “Merger”), with S&T continuing as the surviving entity in the Merger, subject to the terms and conditions set forth therein.  Immediately following the Merger, DNB’s wholly owned bank subsidiary, DNB First, National Association, will merge with and into S&T’s wholly owned bank subsidiary, S&T Bank (the “Bank Merger”), with S&T Bank continuing as the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved by the Board of Directors of each of S&T and DNB.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), DNB shareholders will have the right to receive 1.22 shares of common stock, par value $2.50 per share, of S&T for each share of common stock, par value $1.00 per share, of DNB.

The merger is subject to customary closing conditions enumerated in the merger agreement, including receipt of regulatory approvals and the approval of DNB’s shareholders. It is anticipated that the transaction will close during the fourth quarter of 2019.

MATERIAL CHALLENGES, RISKS AND OPPORTUNITIES

The following is a summary of material challenges, risks and opportunities DNB has faced during the six month period ended June 30, 2019:  

Interest Rate Risk Management. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. DNB considers interest rate risk the predominant risk in terms of its potential impact on earnings.  Interest rate risk can occur for any one or more of the following reasons: (a) assets and liabilities may mature or re-price at different times; (b) short-term or long-term market rates may change by different amounts; or (c) the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. 

The principal objective of the Bank’s interest rate risk management is to evaluate the interest rate risk included in certain on and off-balance sheet accounts, determine the level of risk appropriate given the Bank’s business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with management’s approved guidelines. Through such management, DNB seeks to reduce the vulnerability of its operations to changes in interest rates. The Bank’s Asset Liability Committee (the “ALCO”) is responsible for reviewing the Bank’s asset/liability policies and interest rate risk position and making decisions involving asset liability considerations. The ALCO meets on a quarterlybasis and reports trends and the Bank’s interest rate risk position to the Board of Directors.  The extent of the movement of interest rates is an uncertainty that could have a negative impact on the earnings of the Bank.

The largest component of DNB’s total income is net interest income, and the majority of DNB’s financial instruments are comprised of interest rate-sensitive assets and liabilities with various terms and maturities.  The primary objective of management is to maximize net interest income while minimizing interest rate risk.  Interest rate risk is derived from timing differences in the re-pricing of assets and liabilities, loan prepayments, deposit withdrawals, and differences in lending and funding rates.  The ALCO actively seeks to monitor and control the mix of interest rate-sensitive assets and interest rate-sensitive liabilities. One measure of interest rate risk is net interest income simulation analysis.  The ALCO utilizes simulation analysis, whereby the model estimates the variance in net interest income with a change in interest rates. Simulation model results continue to show moderate liability sensitivity to rising rates in 100, 200, 300 and 400 basis point shock scenarios over a 12 month period. Rate changes ramped in over 24 months also show moderate liability sensitivity.

Liquidity and Market Risk ManagementLiquidity is the ability to meet current and future financial obligations. The Bank further defines liquidity as the ability to respond to deposit outflows as well as maintain flexibility to take advantage of lending and investment opportunities. The Bank’s primary sources of funds are operating earnings, deposits (including brokered deposits), principal and interest payments on loans, proceeds from loan sales, sales and maturities of mortgage-backed and investment securities, and FHLBP advances. The Bank uses the funds generated to support its lending and investment activities as well as any other demands for liquidity such as deposit outflows. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit

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flows, mortgage prepayments, loan and security sales and the exercise of call features are greatly influenced by general interest rates, economic conditions and competition.

The objective of DNB’s asset/liability management function is to maintain consistent growth in net interest income within DNB’s policy limits. This objective is accomplished through the management of liquidity and interest rate risk, as well as customer offerings of various loan and deposit products. DNB maintains adequate liquidity to meet daily funding requirements, anticipated deposit withdrawals, or asset opportunities in a timely manner. Liquidity is also necessary to meet obligations during unusual, extraordinary or adverse operating circumstances, while avoiding a significant loss or cost. DNB’s foundation for liquidity is a stable deposit base as well as a marketable investment portfolio that provides cash flow through regular maturities or that can be used for collateral to secure funding in an emergency. As part of its liquidity management, DNB maintains assets, which comprise its liquidity (Federal funds sold, investments and interest‑bearing cash balances, less pledged securities).

Credit Risk Management. DNB defines credit risk as the risk of default by a customer or counter‑party. The objective of DNB’s credit risk management strategy is to quantify and manage credit risk on an aggregate portfolio basis as well as to limit the risk of loss resulting from an individual customer default. Credit risk is managed through a combination of underwriting, documentation and collection standards. DNB’s credit risk management strategy calls for regular credit examinations and quarterly management reviews of large credit exposures and credits experiencing credit quality deterioration. DNB’s loan review procedures provide objective assessments of the quality of underwriting, documentation, risk grading and charge-off procedures, as well as an assessment of the allowance for credit loss reserve analysis process. As the U.S. economy moves through a period of recession, it is possible that delinquencies and non-performing assets may rise as the value of homes decline and DNB’s borrowers experience financial difficulty due to corporate downsizing, reduced sales and income levels, or other negative events which will impact their ability to meet their contractual loan payments. To minimize the impact on DNB’s earnings and maintain sound credit quality, management continues to aggressively monitor credit and credit relationships that may be impacted by such adverse factors.

Competition. In addition to the challenges related to the interest rate environment, community banks in Chester, Philadelphia and Delaware Counties have been experiencing increased competition from large regional and international banks entering DNB’s marketplace through mergers and acquisitions. Competition for loans and deposits has negatively affected DNB’s net interest margin. To compensate for the increased competition, DNB, along with other area community banks, has aggressively sought and marketed customers who have been disenfranchised by these mergers.

To attract these customers, DNB offers deposit products and services, such as Choice Checking relationship products, and Online Banking with bill payment, external transfer and account aggregation functionality. DNB also offers a complete package of cash management services including automated clearing house services, remote deposit, payroll services, merchant services, and account payment solutions. Our broad range of Business Checking products provides solutions to meet the needs of a variety of businesses and non-profit organizations.

FDIC Insurance and Assessments. The Bank’s deposits are insured to applicable limits by the FDIC. Under the Dodd-Frank Act, the maximum deposit insurance amount was permanently increased from $100,000 to $250,000.

The FDIC has adopted a risk-based premium system that provides for quarterly assessments based on an insured institution’s ranking in one of four risk categories based on their examination ratings and capital ratios. Within its risk category, an institution is assigned an initial base assessment which is then adjusted to determine its final assessment rate based on its level of brokered deposits, secured liabilities and unsecured debt.

The FDIC may take action to increase insurance premiums if the deposit insurance fund is not funded to its regulatory mandated Designated Reserve Ratio (DRR). Currently, the FDIC is required to achieve a DRR of 1.35% by September 30, 2020, and has established a target DRR of 2.0%. Under the Dodd-Frank Act, the FDIC assesses premiums from each institution based on its average consolidated total assets minus its average tangible equity, while utilizing a scorecard method to determine each institution’s risk to the deposit insurance fund. The Dodd-Frank Act also requires the FDIC, in setting assessments, to offset the effect of increasing its reserve for the deposit insurance fund on institutions with consolidated total assets of less than $10 billion. To achieve the mandated DRR consistent with these provisions of the Dodd-Frank Act, the FDIC implemented a rule in 2016 imposing a surcharge of 4.5 basis points on all insured depository institutions with consolidated total assets of $10 billion or more in addition to their regular assessments. Under the rule, the surcharge would cease once a DRR of 1.35% had been achieved or on December 31, 2018, whichever came first. On September 30, 2018, the DRR reached 1.36%, and the surcharge was eliminated.

Pursuant to these requirements, the FDIC adopted new assessment regulations effective April 1, 2011 that redefined the assessment base as average consolidated assets less average tangible equity. Insured banks with more than $1.0 billion in assets must calculate quarterly average assets based on daily balances while smaller banks and newly chartered banks may use weekly averages. Average assets would be reduced by goodwill and other intangibles. Average tangible equity equals Tier 1 capital. For institutions with more than $1.0 billion in assets, average tangible equity is calculated on a weekly basis while smaller institutions may use the quarter-end balance. The base assessment rate for insured institutions in Risk Category I will range between 5 to 9 basis points and for institutions in Risk Categories II, III, and IV will be 14, 23 and 35 basis points, respectively. An institution’s assessment rate will be reduced based

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on the amount of its outstanding unsecured long-term debt and for institutions in Risk Categories II, III and IV may be increased based on their brokered deposits.

Material Trends and Uncertainties.

DNB reported net income of $2.6 million, or $0.60 per diluted share, for the quarter ending June 30, 2019, compared with $2.0 million, or $0.47 per diluted share, for the same quarter, last year. For the six months ended June 30, 2019, net income was $5.2 million, or $1.19 per diluted share, compared with $4.7 million, or $1.08 per diluted share, for the same period, last year. Results for the three and six months ending June 30, 2019, included $519,000 of transaction expenses for the recently announced merger with S&T. 

There are many aspects of the economy and the Federal Reserve’s monetary policy that influence DNB’s ability to grow revenues and net income. In general, the U.S. economy is growing at a moderate pace. The Federal Open Market Committee (FOMC) decided at their June 19, 2019 meeting to maintain the current target range for the federal funds rate at 2.25%-2.50%. The FOMC removed the word “patient” from its statement and noted that “uncertainties” have increased in the economic outlook. The Federal Reserve (Fed) will continue reducing its balance sheet through redemptions of Treasury securities of $15 billion per month—while continuing to redeem mortgage-backed security purchases by up to $20 billion per month. The committee intends to conclude its balance sheet runoff at the end of September 2019. Labor market activity remains strong, and economic activity is rising at a moderate rate. Job gains have been solid, while the unemployment rate has remained low. Indicators suggest that growth of household spending has picked up from earlier this year, while business fixed investment remains soft. Both overall inflation—and core inflation, excluding food and energy—have declined. Currently, both are below the Fed’s long-term target of 2%. Looking forward, the committee expects inflation to run near its 2% target over the medium term. Current global economic and financial uncertainties, along with muted inflation pressures, imply that incoming economic data will impact the outlook for any future adjustments to the target range for the federal funds rate. Timing of future federal funds rate changes will reflect labor market conditions; indicators of inflation pressures and expectations; and financial and international developments. The Fed will act appropriately to sustain the expansion.

Although the national and international economies influence DNB’s results, economic conditions in southeastern Pennsylvania are more germane, as the majority of DNB’s loan and deposits relationships are with businesses and individuals within the Third Federal Reserve District. The Federal Reserve’s June 5, 2019 Beige Book summarizes the economic climate which impacts DNB’s operating environment.

The June 5, 2019 Beige Book indicated that, on balance, aggregate business activity in the Third District strengthened further to a modest pace of growth. Growth was characterized as slight in the April 17, 2019 Beige Book Period. Growth of manufacturing, non-auto retail sales, and tourism picked up to a modest pace, while homebuilding held steady and auto sales appeared to have fallen slightly. The Federal Reserve Bank’s contacts noted that tariffs continued to prompt concerns, induce uncertainty, and delay business investment. The labor market tightened further and continued to constrain employment growth and spur moderate wage increases. Overall, price pressures remained modest. The firms' outlook for growth over the next six months remained positive and edged higher overall, with more than half of all firms anticipating increases in general activity and less than a third expecting no change.

Overall, Third District homebuilders reported no change in contract signings for early spring on a year-over-year basis after growing slightly last period. However, better weather this spring has been good for construction activity. Existing home sales continued to decline moderately across most local markets. The spring sales season brought no relief to the falling inventory of new listings.

The Federal Reserve’s non-residential real estate contacts reported that, on balance, commercial real estate construction and leasing activity continued to edge back from relatively high levels, but the Federal Reserve Bank’s contacts describe markets as healthy with room to grow for the remainder of 2019. Office and industrial markets were characterized with positive net absorption, stable vacancy rates, rent growth, and incremental new construction.

Third District financial firms reported a continuation of moderate growth in overall loan volumes (excluding credit cards) on a year-over-year basis and a continuation of modest growth in credit card lending. During the June 5, 2019 period (reported without seasonal adjustments), volumes appeared to grow robustly in home mortgages and auto lending. Loans grew slightly for commercial and industrial lending. Commercial real estate loans, home equity lines, and other consumer loans (not elsewhere classified) were flat to down slightly. The Federal Reserve Bank’s contacts continued to note looser lending standards and aggressive pricing but few problems with credit quality. The Federal Reserve Bank’s contacts in and out of the banking sector have noted that firms are now taking longer to pay (but without becoming delinquent); some suggest this may represent the relative value of money now that deposit interest rates are higher. Bankers and their customers continued to be bullish for the remainder of 2019.

During the June 5, 2019 Beige Book Period, Third District manufacturing firms reported a modest growth in activity after noting a slight increase in the April 17, 2019 Beige Book Period. Shipments and unfilled orders are running a bit above long-term non-recession averages; however, new orders are at typical levels. The makers of lumber products, chemicals, fabricated metal products, and industrial machinery tended to note gains in new orders and shipments, while primary metal producers reported little change. Tariffs remained a key concern for many manufacturers. The Federal Reserve Bank’s contacts noted that much of the impact from the initial 10 percent tariffs was absorbed along the supply chain before reaching the consumer. However, they expect much more of the impact from the 25 percent tariffs to be passed through to the consumer. Manufacturers' expectations of activity and of new orders over the next

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six months have changed little since the April 17, 2019 Beige Book Periodand have generally remained below long-term non-recession averages. Expectations for future shipments did rise somewhat, as did expectations of future employment and planned capital spending. The latter two indicators were above their historical non-recession averages.

Although DNB’s earnings have been impacted by the general economic conditions, the impact has not been as severe as it has been in many parts of the nation, largely due to a relatively healthier economic climate in the Third Federal Reserve District, compared to other areas of the country. DNB’s franchise spans Chester, Philadelphia and Delaware counties in southeastern Pennsylvania and the majority of loans and deposits relationships are with businesses and individuals within the Third Federal Reserve District.

These and other factors have impacted our operations. We continue to focus on the consistency and stability of core earnings and balance sheet strength which are critical success factors in today’s challenging economic environment.

Regulatory Reform and Legislation.From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of DNB in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions and other financial institutions. DNB cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on its financial condition or results of operations. A change in statutes, regulations or regulatory policies applicable to DNB or our subsidiaries could have a material effect on our business, financial condition and results of operations.

Capital Rules. On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules applicable to the Corporation and the Bank. The FDIC and the OCC have subsequently approved these rules. The final rules were adopted following the issuance of proposed rules by the Federal Reserve in June 2012, and implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.

The rules include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019, and refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to the Corporation and the Bank under the final rules effective as of January 1, 2015: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer was 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

The final rules implemented revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that no longer qualify as Tier 1 capital, some of which will be phased out over time. However, the final rules provided that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Corporation) were able to permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

The final rules also contained revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions took effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

The final rules set forth certain changes for the calculation of risk-weighted assets, which have been required to be utilized since January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion in

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consolidated assets. Based on our current capital composition and levels, we believe that we are in compliance with the requirements as set forth in the final rules presently in effect.

Other Material Challenges, Risks and Opportunities. As a financial institution, DNB's earnings are significantly affected by general business and economic conditions.  These conditions include short-term and long-term interest rates, inflation, monetary supply, fluctuations in both debt and equity capital markets, and the strength of the United States economy and local economies in which we operate.  As mentioned above in Material Trends and Uncertainties, the economic downturn, increased unemployment, and other events negatively impact household and/or corporate incomes and could decrease the demand for DNB's loan and non-loan products and services and increase the number of customers who fail to pay interest or principal on their loans.  Geopolitical conditions can also affect DNB's earnings.  Acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and our military conflicts, could impact business conditions in the United States.

CRITICAL ACCOUNTING POLICIES

The following discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Generally accepted accounting principles are complex and require management to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. Actual results may differ from these estimates under different assumptions or conditions.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Statements of Financial Condition, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Amounts subject to significant estimates are items such as the allowance for credit losses and lending related commitments, the fair value of repossessed assets, pension and post-retirement obligations, the fair value of financial instruments, other-than-temporary impairments of investment securities, the valuation of assets acquired and liabilities assumed in business combinations, and the valuations of goodwill for impairment. Among other effects, such changes could result in future impairments of investment securities, and establishment of allowances for credit losses and lending related commitments as well as increased benefit plans’ expenses.  

The notes to DNB's most recent Consolidated Financial Statements as set forth in DNB's Annual Report 10-K identify other significant accounting policies used in the development and presentation of its financial statements. This discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of DNB and its results of operations.

FINANCIAL CONDITION

DNB's total assets were $1.15 billion at June 30, 2019, compared to $1.16 billion at December 31, 2018. The $3.8 million decrease in total assets was primarily attributable to a $28.8 million decrease in investment securities and a $4.4 million decrease in net loans, offset by a $29.1 million increase in cash and cash equivalents.

Investment Securities. Investment securities at June 30, 2019 were $129.9 million, compared to $158.7 million at December 31, 2018. The $28.8 million decrease in investment securities was primarily due to $61.9 million in sales, principal pay-downs, calls and maturities, offset by $31.5 million in purchases of investment securities, and a $1.6 milliondecrease in unrealized loss of the AFS portfolio.

Gross Loans. DNB’s loans held for investment decreased $4.5 million to $930.5 million at June 30, 2019, compared to $935.0 million at December 31, 2018. Total commercial loans decreased $958,000, residential loans decreased $1.1 million, and consumer loans decreased $2.4 million.

Deposits. Deposits were $975.9 million at June 30, 2019, compared to $984.6 million at December 31, 2018. Deposits decreased $8.7 million or 0.88% during the six month period ended June 30, 2019. Core deposits, which are comprised of demand, NOW, money markets and savings accounts, decreased by $4.4 million, time deposits increased by $16.4 and brokered deposits decreased by $20.8 million. 

Borrowings.Borrowings were $50.5 million at June 30, 2019, compared to $55.3 million at December 31, 2018. The decrease of $4.8 million or 8.62% was primarily due to a $1.7 million decrease in FHLBP advances and a $3.0 million decrease in other borrowings.

Stockholders’ Equity.Stockholders' equity was $118.2 million at June 30, 2019, compared to $111.8 million at December 31, 2018. The increase in stockholders’ equity was primarily a result of year-to-date earnings of $5.2 million, other comprehensive income of $1.3 million,  non-cash funding of treasury shares totaling $297,000, and restricted stock compensation expense of $143,000. These additions to stockholders’ equity were partially offset by $606,000 of dividends paid on DNB’s common stock.

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RESULTS OF OPERATIONS

SUMMARY

Net income for the three and sixmonth periods ended June 30, 2019 was $2.6 million and $5.2 million, or $0.60 and $1.20 per diluted share, respectively, compared to $2.0 million and $4.7 million,or $0.47 and $1.08 per diluted share, for the same period in 2018. The $538,000 increase in net income in the second quarter of 2019 compared to the second quarter of 2018 was primarily attributable to a $447,000 increase in net interest income before provision (primarily due to increased interest income on loans), a $275,000 decrease in provision for credit losses, a $28,000 decrease in non-interest expense (primarily due to decreased salaries and employee benefits expenses), and a $12,000 increase in non-interest income, offset by a $224,000 increase in income tax expense. The $512,000 increase in net income during the six month period ended June 30, 2019 compared to the six month period ended June 30, 2018 was primarily attributable to an $818,000 increase in net interest income before provision (primarily due to increased interest income on loans), a $450,000 decrease in provision for credit loss, and a $13,000 increase in non-interest income, offset by a $520,000 increase in non-interest expense (primarily due to $519,000 of transaction costs related to the pending merger with S&T) and a $249,000 increase in income tax expense.

NET INTEREST INCOME

DNB's earnings performance is primarily dependent upon its level of net interest income, which is the excess of interest income over interest expense.  Interest income includes interest earned on loans, investments and federal funds sold and interest-earning cash, as well as loan fees and dividend income earned on investment securities.  Interest expense includes interest on deposits, Federal Home Loan Bank of Pittsburgh ("FHLBP") advances, Federal funds purchased, subordinated debentures and notes, and other borrowings.

Net interest income for the three and six month periods ended June 30, 2019 was $9.5 million and $18.9 million, respectively, compared to $9.1 million and $18.1 million for the same periods in 2018. Interest income for the three and six month periods ended June 30, 2019 was $12.5 million and $24.9 million,  respectively, compared to $11.3 million and $22.2 million for the same periods in 2018. The $1.2 million increase in interest income in the second quarter of 2019, compared to the second quarter of 2018, was primarily due to increases of $1.2  million in interest and fees on loans and $93,000 in interest on cash and cash equivalents, offset by a decrease of $57,000 in interest and dividends on investment securities. The $2.7 million increase in interest income during the six months ended June 30, 2019 compared to the six month period ended June 30, 2018 was primarily due to increases of $2.6 million in interest and fees on loans and $115,000 in interest on cash and cash equivalents, offset by a decrease of $40,000 in interest and dividends on investment securities. The weighted average yield on total interest-earning assets was 4.53%and 4.52% for the three and six month periods ended June 30, 2019, respectively, compared to 4.28%and 4.26% for the same periods in 2018. Interest expense for the three and six month periods ended June 30, 2019 was $3.0 million and $6.0 million, respectively, compared to $2.2 million and $4.1 million for the same periods in 2018. The $783,000 increase in interest expense in the second quarter of 2019, compared to the second quarter of 2018, was primarily due to an increase of $876,000 in interest on deposits offset by a decrease of  $93,000 in interest on borrowings. The $1.9 million increase in interest expense during the six month period ended June 30, 2019, compared to the six month period ended June 30, 2018, was primarily due to an increase of $2.0 million in interest on deposits offset by a decrease of $153,000 in interest on borrowings. The composite cost of funds for the three and six month periods ended June 30, 2019 was 1.17% and 1.16%, respectively, compared to 0.90% and 0.84% for the same periods in 2018.  

Interest on loans was $11.4million and $22.6 million for the three and six month periods ended June 30, 2019,  respectively, compared to $10.2 million and $20.0 million for the same periods in 2018. The average balance of loans was $934.2 million, with a tax equivalent average yield of 4.89% (a non-GAAP measure) for the second quarter of 2019, compared to $869.2 million, with a tax equivalent average yield of 4.70% (a non-GAAP measure) for the same period in 2018.  The average balance of loans was $934.7 million, with a tax equivalent average yield of 4.89% (a non-GAAP measure) for the six month period ended June 30, 2019, compared to $860.4 million, with a tax equivalent average yield of 4.71% (a non-GAAP measure) for the same period in 2018. See the following table for a reconciliation of the non-GAAP measure “tax equivalent average yield on loans.”

Tax equivalent average yield on loans (Non-GAAP)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Interest and fees on loans (GAAP)	$	11,358		$	10,164		$	22,648		$	20,046
Tax adjustment		24			27			51			57
Tax equivalent interest and fees on loans (Non-GAAP)	$	11,382		$	10,191		$	22,699		$	20,103
Average balance of loans	$	934,156		$	869,166		$	934,660		$	860,443
Tax equivalent average yield on loans (Non-GAAP)		4.89	%		4.70	%		4.89	%		4.71	%

Interest and dividends on investment securities was $1.0million and $2.1 million for the three and six month periods ended June 30, 2019,  respectively, compared to $1.1 million and $2.1 million for the same periods in 2018. The average balance of investment

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securities was $149.3 million with a tax equivalent average yield of 2.87% (a non-GAAP measure) for the second quarter of 2019, compared to $178.6 million with a tax equivalent average yield of 2.53% (a non-GAAP measure) for the same period in 2018.  The average balance of securities was $157.4 million with a tax equivalent average yield of 2.75% (a non-GAAP measure) for the six month period ended June 30, 2019, compared to $180.6 million with a tax equivalent average yield of 2.44% (a non-GAAP measure) for the same period in 2018. See the following table for a reconciliation of the non-GAAP measure “tax equivalent average yield on investment securities.”

Tax equivalent average yield on investment securities (Non-GAAP)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Interest on tax exempt investment securities (GAAP)	$	1,023		$	1,080		$	2,050		$	2,090
Tax adjustment		48			52			106			110
Tax equivalent interest on tax-exempt investment securities (Non-GAAP)	$	1,071		$	1,132		$	2,156		$	2,200
Average balance of investment securities	$	149,315		$	178,644		$	157,371		$	180,638
Tax equivalent average yield on investment securities (Non-GAAP)		2.87	%		2.53	%		2.75	%		2.44	%

Interest on deposits was $2.6 million and $5.1 million for the three and six month periods ended June 30, 2019,  respectively, compared to $1.7 million and $3.1 million for the same periods in 2018. The average balance of deposits was $978.6 million, with an average rate of 1.07% for the second quarter of 2019, compared to $907.8 million, with an average rate of 0.77% for the same period in 2018.  The average balance of deposits was $975.3 million, with an average rate of 1.06% for the six month period ended June 30, 2019, compared to $890.4 million, with an average rate of 0.70% for the same period in 2018.

Interest on borrowings was $387,000and $859,000 for the three and six month periods ended June 30, 2019,  respectively, compared to $480,000 and $1.0 million for the same periods in 2018. The average balance of borrowings was $52.3 million, with an average rate of 2.97% for the second quarter of 2019, compared to $87.7 million, with an average rate of 2.20% for the same period in 2018. The average balance of borrowings was $59.3 million, with an average rate of 2.91% for the six month period ended June 30, 2019, compared to $97.8 million, with an average rate of 2.08% for the same period in 2018.

PROVISION FOR CREDIT LOSSES

To provide for known and inherent losses in the loan portfolios, DNB maintains an allowance for credit losses. Provisions for credit losses are charged against income to increase the allowance when necessary. Loan losses are charged directly against the allowance and recoveries on previously charged-off loans are added to the allowance. In establishing its allowance for credit losses, management considers the size and risk exposure of each segment of the loan portfolio, past loss experience, present indicators of risk such as delinquency rates, levels of non-accruals, the potential for losses in future periods, and other relevant factors. Management’s evaluation of criticized and classified loans generally includes reviews of borrowers of $100,000 or greater. Consideration is also given to examinations performed by regulatory agencies, primarily the Office of the Comptroller of the Currency (“OCC”). Based on reviews and analyses by regulators, additional allowances may be required in the future.

Management reviews and establishes the adequacy of the allowance for credit losses in accordance with U.S. generally accepted accounting principles, guidance provided by the Securities and Exchange Commission and as prescribed in OCC Bulletin 2006-47. Its methodology for assessing the appropriateness of the allowance consists of several key elements which include: specific allowances for identified impaired loans; and allowances by loan type for pooled homogenous loans. In considering national and local economic trends, we review a variety of information including Federal Reserve publications, general economic statistics, foreclosure rates and housing statistics published by third parties. We believe this improves the measure of inherent loss over a complete economic cycle and reduces the impact for qualitative adjustments. The unallocated portion of the allowance is intended to provide for probable losses not otherwise accounted for in management’s other elements of its overall estimate. An unallocated component is maintained to cover uncertainties such as changes in the national and local economy, concentrations of credit, expansion into new markets and other factors that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

In addition, DNB reviews historical loss experience for the residential mortgage, commercial mortgage, commercial term, commercial construction, home equity and consumer installment loan pools to determine a historical loss factor. The historical loss factors are then applied to the current portfolio balances to determine the required reserve percentage for each loan pool. A historical loss ratio is determined for each group over a five year period. The five year average loss ratio by type is then used to calculate the estimated loss based on the current balance of each group. This five year time period is appropriate given DNB’s historical level of losses and, more importantly, represents the current economic environment.

This analysis is intended to assess the potential for loss within the loan portfolio and to substantiate the adequacy of the allowance. Should the analysis indicate that the allowance is not adequate, management will recommend a provision expense be made in an amount equal to the shortfall derived. In establishing and reviewing the allowance for adequacy, emphasis has been placed on

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utilizing the methodology prescribed in OCC Bulletin 2006-47. Management believes that the following factors create a comprehensive system of controls in which management can monitor the quality of the loan portfolio. Consideration has been given to the following factors and variables which may influence the risk of loss within the loan portfolio:

· Changes in the nature and volume of the portfolio and in the terms of loans;

· Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans;

· The existence and effect of any concentrations of credit, and changes in the level of such concentrations;

· Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

· Changes in the experience, ability, and depth of lending management and other relevant staff;

· Changes in loan review methodology and degree of oversight by DNB’s Board of Directors;

· Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments;

· The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio; and

· Changes in the value of underlying collateral for collateral‑dependent loans.

Portfolio risk includes the levels and trends in delinquencies, impaired loans, changes in the loan rating matrix and trends in volume and terms of loans. Management is satisfied with the stability of the past due and non-performing loans and believes there has been no further decline in the quality of the loan portfolio due to any trend in delinquent or adversely classified loans. New appraisal values we have obtained for existing loans have generally been consistent with trends indicated by Case-Schiller and other indices.

DNB closely monitors the loan to value ratios of all classified assets and requires periodic current appraisals to monitor underlying collateral values. Management also reviews borrower, sponsorship and guarantor’s financial strength along with their ability and willingness to provide financial support of their obligations on an immediate and continuing basis.

There was a $100,000 and $300,000 provision made during the three and six month periods ended June 30, 2019,  respectively, compared to $375,000 and $750,000 for the same periods in 2018. DNB’s percentage of allowance for credit losses to total loans was 0.72% at June 30, 2019 compared to 0.71% and 0.70% at December 31, 2018 and June 30, 2018, respectively. Net charge-offs were $303,000, $368,000, and $405,000 during the six months ended June 30, 2019, year ended December 31, 2018, and six months ended June 30, 2018, respectively. The percentage of net charge-offs to total average loans were 0.03%, 0.04%, and 0.05% for those same respective periods. Management believes that the allowance for credit losses is adequate, but continues to monitor it along with other performance metrics including those ratios related to non-performing loans. Management is not aware of any potential problem loans, which were accruing and current at June 30, 2019, where serious doubt exists as to the ability of the borrower to comply with the present repayment terms and that would result in a significant loss to DNB. Non-performing loans increased $349,000 during the six month period ended June 30, 2019.  The ratio of the allowance for credit losses as a percentage of loans reflects management’s estimate of the level of inherent losses in the portfolio.

We typically establish a general valuation allowance on classified loans which are not individually impaired. In establishing the general valuation allowance, we segregate these loans by category. The categories used by DNB include “doubtful,” “substandard,” “special mention,” “watch list” and “pass.” For commercial mortgage, commercial and construction loans, the determination of the category for each loan is based on periodic reviews of each loan by our lending and credit officers as well as an independent, third-party consultant. The reviews include a consideration of such factors as recent payment history, current financial data, cash flow, financial projections, collateral evaluations, guarantor or sponsorship financial strength and current economic and business conditions. Categories for residential mortgage and consumer loans are determined through a similar review. Classification of a loan within a category is based on identified weaknesses that increase the credit risk of loss on the loan. Each category carries a loss factor for the allowance percentage to be assigned to the loans within that category. The allowance percentage, is determined based on inherent losses associated with each type of lending as determined through consideration of our loss history with each type of loan, trends in credit quality and collateral values, and an evaluation of current economic and business conditions.

We establish a general allowance on non-classified loans to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem loans. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages to each category. An evaluation of each category is made to determine the need to further segregate the loans within each category by type. For our residential mortgage and consumer loan portfolios, we identify similar characteristics throughout the portfolio including credit scores, loan-to-value ratios and collateral. For our commercial mortgage and construction loan portfolios, a further analysis is made in which we segregated the loans by type based on the purpose of the loan and the collateral properties securing the loan. Various risk factors for each type of loan are considered, including the impact of general economic and business conditions, collateral value trends, credit quality trends and historical loss experience.

As of June 30, 2019, DNB had $9.0 million of non-performing assets, which included $6.1 million of non-performing loans and $2.8 million of OREO and other repossessed assets. This compares to $10.8 million of non-performing assets at December 31, 2018

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which included $5.8 million of non-performing loans and $5.1 million of OREO and other repossessed assets. Loans are reviewed for impairment in accordance with FASB ASC 310-10-35. Impaired loans can either be secured or unsecured. Impairment is measured by the difference between the loan amount and the present value of the future cash flow discounted at the loan’s effective interest rate. Management measures loans for impairment by using the fair value of collateral for collateral dependent loans. In general, management reduces the amount of the appraisal by the estimated cost of acquisition and disposition of the underlying collateral and compares that adjusted value with DNB’s carrying value. DNB establishes a specific valuation allowance on impaired loans that have a collateral shortfall and/or cashflow shortfalls, including estimated costs to sell in comparison to the carrying value of the loan. Of the $9.5million of impaired loans ($5.9 million of non-performing loans, $3.1 million of performing TDRs, and a $521,000 performing ASC 310-30 loan) at June 30, 2019, $717,000 had valuation allowances of $161,000 and $8.8 million had no specific allowance. Of the $7.8 million of impaired loans ($5.5 million of non-performing loans, $1.8 million of performing TDRs, and a $514,000 performing ASC 310-30 loan) at December 31, 2018, $1.8 million had valuation allowances of $285,000 and $6.0 million had no specific allowance. For those impaired loans that management determined that no specific valuation allowance was necessary, management has reviewed the present value of the future cash flows or the appraisal for each loan and determined that no valuation was necessary. During the quarter ended June 30, 2019, DNB recognized $174,000 in total charge-offs, $151,000 of which related to impaired loans. An impaired loan may not represent an expected loss.

We typically order new third-party appraisals or collateral valuations when a loan becomes impaired or is transferred to OREO. This is done within two weeks of a loan becoming impaired or a loan moving to OREO. It generally takes two to eight weeks to receive the appraisals, depending on the type of property being appraised. We recognize any provision or related charge-off within two weeks of receiving the appraisal, after the appraisal has been reviewed by DNB. We generally order a new appraisal for all impaired real estate loans having a balance of $250,000 or higher, every twelve to twenty-four months, dependent upon management’s assessment of trends in relevant markets and property types. We use updated valuations when time constraints do not permit a full appraisal process, to reflect rapidly changing market conditions. Because appraisals and updated valuations utilize historical data in reaching valuation conclusions, the appraised or updated value may or may not reflect the actual sales price that we will receive at the time of sale. Management uses the qualitative factor “Changes in the value of underlying collateral for collateral-dependent loans” to calculate any required reserve to mitigate this risk.

Real estate appraisals typically include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property) and the cost approach. Not all appraisals utilize all three approaches to value. Depending on the nature of the collateral and market conditions, the appraiser may emphasize one approach over another in determining the fair value of collateral.

Appraisals may also contain different estimates of value based on the level of occupancy or future improvements. “As-is” valuations represent an estimate of value based on current market conditions with no changes to the collateral’s use or condition. “As-stabilized” or “as-completed” valuations assume that the collateral is improved to a stated standard or achieves its highest and best use in terms of occupancy. “As-stabilized” valuations may be subject to a present value adjustment for market conditions or the schedule for improvements.

In connection with the valuation process, we will typically develop an exit strategy for the collateral by assessing overall market conditions, the current condition and use of the asset and its highest and best use. For most income-producing real estate, investors value most highly a stable income stream from the asset; consequently, we conduct a comparative evaluation to determine whether conducting a sale on an “as-is” basis or on an “as-stabilized” basis is most likely to produce the highest net realizable value and compare these values with the costs incurred and the holding period necessary to achieve the “as stabilized” value.

Our estimates of the net realizable value of collateral include a deduction for the expected costs to sell the collateral or such other deductions as deemed appropriate. For most real estate collateral, we apply a seven to ten percent deduction to the value of real estate collateral to determine our expected costs to sell the asset.

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Analysis of Allowance for Credit Losses

(Dollars in thousands)

	Six Months Ended		Year Ended		Six Months Ended
	June 30, 2019		December 31, 2018		June 30, 2018
Beginning balance	$	6,675	$	5,843	$	5,843
Provisions		300		1,200		750
Charge-offs:
Residential mortgage		-		(178)		(137)
Commercial mortgage		(105)		(249)		(184)
Commercial:
Commercial term		(91)		(243)		(64)
Commercial construction		-		-		-
Consumer:
Home equity		(128)		-		-
Other		(17)		(72)		(49)
Total charged off		(341)		(742)		(434)
Recoveries:
Residential mortgage		4		341		26
Commercial mortgage		7		22		-
Commercial:
Commercial term		27		4		2
Commercial construction		-		5		-
Consumer:
Home Equity		-		-		-
Other		-		2		1
Total recoveries		38		374		29
Ending balance	$	6,672	$	6,675	$	6,188

The following table sets forth the composition of DNB’s allowance for credit losses for the dates indicated.

Composition of Allowance for Credit Losses

(Dollars in thousands)

		June 30, 2019				December 31, 2018				June 30, 2018
			Percent of				Percent of				Percent of
			Loan Type				Loan Type				Loan Type
			to Total				to Total				to Total
	Amount		Loans		Amount		Loans		Amount		Loans
Residential mortgage	$	133	11	%	$	161	11	%	$	207	11	%
Commercial mortgage		3,579	56			3,647	57			3,076	58
Commercial:
Commercial term		1,144	19			1,062	18			889	15
Commercial construction		1,032	8			1,032	8			1,355	9
Consumer:
Home equity		209	5			190	5			196	6
Other		39	1			46	1			49	1
Unallocated		536	-			537	-			416	-
Total	$	6,672	100	%	$	6,675	100	%	$	6,188	100	%
Reserve for unfunded loan commitments	$	420			$	398			$	408

NON-INTEREST INCOME

Non-interest income includes service charges on deposit products; fees received in connection with the sale of non-depository products and services, including fiduciary and investment advisory services offered through DNB First Investment Management and Trust; securities brokerage products and services and insurance products and services offered through DNB Investments & Insurance; and other sources of income such as increases in the cash surrender value of Bank Owned Life Insurance (“BOLI”), net gains on sales of investment securities, mortgage loans, SBA loans and OREO properties. In addition, DNB receives fees for cash management, mortgage banking, remote capture, merchant services, debit cards, safe deposit box rentals and similar activities.

Non-interest income for the three and six month periods ended June 30, 2019 was $1.3 million and $2.6 million, respectively, compared to $1.3 million and $2.6 million for the same periods in 2018.  The $12,000 increase during the three month period ended June

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30, 2019 was primarily due to increases of $22,000 in other fees (mostly Visa interchange fees) and $17,000 in wealth management, offset by decreases of $15,000 in service charges (mostly NSF fees), $10,000 in gain on sales of loans, and $4,000 in mortgage banking. The $13,000 increase during the six months ended June 30, 2019 was primarily attributable to increases of $27,000 in wealth management, $19,000 in other fees (mostly Visa interchange fees), $9,000 in mortgage banking, and $4,000 in gain on sale of investment securities, offset by decreases of $37,000 in service charges (mostly NSF fees) and $10,000 in gain on sales of loans.

NON-INTEREST EXPENSE

Non-interest expense for the three and six month periods ended June 30, 2019 was $7.5 million and $14.8 million, respectively, compared to $7.5 million and $14.3 million for the same periods in 2018. During the three month period ended June 30, 2019, total non-interest expense decreased by $28,000 compared to the same period in 2018. The $28,000 decrease was mainly attributable to decreases of $476,000 in salaries and employee expenses (compensation expense for the second quarter of 2018 included a one-time severance payment of $434,000 and other related costs of $79,000 associated with an internal restructuring), $107,000 in other expenses (mostly decreased charge-off expense), $103,000 in loss on sale or write down of OREO, $27,000 in FDIC insurance, and $7,000 in occupancy. These decreases were partially offset by increases of $519,000 in transaction costs related to the pending merger with S&T, $113,000 in furniture and equipment (mostly maintenance agreements), $21,000 in advertising and marketing, $17,000 in PA shares tax, $16,000 in professional and consulting (mostly legal expenses), and $6,000 in telecommunications. During the six month period ended June 30, 2019, total non-interest expense increased $520,000 compared to the same period in 2018. The increase was primarily due to increases of $519,000 in transaction costs relating to the pending merger with S&T, $190,000 in professional and consulting (mostly legal expenses), $165,000 in furniture and equipment (mostly maintenance agreements), $35,000 in PA shares tax, $34,000 in advertising and marketing, $21,000 in occupancy (mostly operating lease expense), $13,000 in telecommunications, and $10,000 in loss on sale or write down of OREO. These increases were partially offset by decreases of $395,000 in salaries and employee benefits (internal restructuring costs for 2018 noted above), $41,000 in other expenses, and $31,000 in FDIC insurance.

INCOME TAXES

Income tax expense for the three and six month periods ended June 30, 2019 was $660,000 and $1.3 million, respectively, compared to $436,000 and $1.0 million for the same periods in 2018. The effective tax rate for the three and six month periods ended June 30, 2019 was 20.3%  and 19.7%, respectively, compared to 17.5% and 17.9% for the same periods in 2018.  The effective tax rate increased during 2019 due to certain transaction costs, which are non-deductible for federal tax purposes. Income tax expense for each period differs from the amount determined at the statutory rate, due to tax-exempt income on loans and investment securities and DNB's ownership of BOLI policies.

ASSET QUALITY

DNB works diligently to improve asset quality by adhering to strict underwriting standards and improving lending policies and procedures. Non-performing assets totaled $9.0 million at June 30, 2019 compared to $10.8 million at December 31, 2018 and $11.9 million at June 30, 2018. Loans acquired in connection with the purchase of ERB have been recorded at fair value, in accordance with GAAP, and are based on an initial estimate of the expected cash flows, including a reduction for estimated credit losses, and without carryover of the respective portfolio’s historical allowance for credit losses. DNB will continually evaluate the loans acquired from ERB for additional impairment as part of our normal allowance review process. Non-performing assets have, and will continue to have, an impact on earnings; therefore management intends to continue working aggressively to reduce the level of such assets.

Non-performing assets are comprised of non-accrual loans, loans delinquent over ninety days and still accruing, as well as OREO and other repossessed assets. Non-accrual 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. A non-accrual loan may be restored to accrual status when management expects to collect all contractual principal and interest due and the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms. OREO consists of real estate acquired by foreclosure or deed-in-lieu of foreclosure. Other repossessed assets are primarily assets from DNB’s consumer purchased chattel portfolio that were repossessed. OREO and other repossessed assets are carried at the lower of carrying value or estimated fair value, less estimated disposition costs. Any significant change in the level of non-performing assets is dependent, to a large extent, on the economic climate within DNB’s market area.

DNB’s Credit Policy Committee monitors the performance of the loan portfolio to identify potential problem assets on a timely basis. Committee members meet to design, implement and review asset recovery strategies, which serve to maximize the recovery of each troubled asset. As of June 30, 2019, DNB had $12.9 million of substandard loans. Of the $12.9 million, $7.0 million are performing and are believed to require supervision and review greater than loans rated pass or special mention; and may, depending on the economic environment and other factors, become non-performing assets in future periods. The amount of performing substandard loans at December 31, 2018 was $6.3 million. DNB had $15.3 million of special mention loans at June 30, 2019 compared to $7.3 million at December 31, 2018. The increase in special mention loans during the six months ended June 30, 2019 was primarily due to rating

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downgrades in the portfolio, specifically $11.0 million of commercial mortgage loans, $142,000 of residential mortgages, and $8,000 in home equity loans, offset by upgrades/downgradesof $483,000 in commercial term loans and $2.7 million in commercial construction loans. The majority of the loans are secured by commercial real estate, with lesser amounts being secured by residential real estate, inventory and receivables.

The following table sets forth those assets that are: (i) placed on non-accrual status, (ii) contractually delinquent by 90 days or more and still accruing, and (iii) OREO as a result of foreclosure or voluntary transfer to DNB as well as other repossessed assets. In addition, the table sets forth DNB's asset quality and allowance coverage ratios at the dates indicated:

Non-Performing Assets

(Dollars in thousands)

	June 30, 2019			December 31, 2018			June 30, 2018
Non-accrual loans:
Residential mortgage	$	779		$	905		$	1,344
Commercial mortgage		563			1,307			1,593
Commercial:
Commercial term		2,026			2,300			2,583
Commercial construction		2,274			476			488
Consumer:
Home equity		143			391			498
Other		138			167			215
Total non-accrual loans		5,923			5,546			6,721
Loans 90 days past due and still accruing		205			233			23
Total non-performing loans		6,128			5,779			6,744
Other real estate owned & other repossessed property		2,825			5,051			5,113
Total non-performing assets	$	8,953		$	10,830		$	11,857
Asset quality ratios:
Non-performing loans to total loans		0.66	%		0.62	%		0.76	%
Non-performing assets to total assets		0.78			0.94			1.05
Allowance for credit losses to:
Total loans		0.72			0.71			0.70
Non-performing loans		108.9			115.5			91.8

Troubled Debt Restructurings Loans whose terms are modified are classified as troubled debt restructurings (“TDR”) if DNB grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired. The recorded investments in troubled debt restructured loans at June 30, 2019 and December 31, 2018 are as follows:

	June 30, 2019
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	2,155	$	2,308	$	2,110
Commercial mortgage		992		992		950
Commercial term		421		421		421
Consumer:
Home equity		148		148		136
Other		40		42		30
Total	$	3,756	$	3,911	$	3,647
	December 31, 2018
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	676	$	805	$	630
Commercial mortgage		992		992		962
Consumer:
Home equity		148		148		140
Other		40		42		30
Total	$	1,856	$	1,987	$	1,762

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At June 30, 2019, DNB had fifteen TDRs with recorded investment totaling $3,647,000, ten of which are accruing loans in compliance with the terms of the modifications and fiveof which are non-accrual loans. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of June 30, 2019, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were no defaults on TDRs during the six months ended June 30, 2019.

At December 31, 2018, DNB had nine TDRs with recorded investment totaling $1,762,000, all of which were accruing loans in compliance with the terms of the modifications. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. As of December 31, 2018, DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of December 31, 2018, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were no defaults on TDRs within twelve months of restructure during 2018. DNB classified one residential mortgage loan totaling $73,000 as TDR during the year ended December 31, 2018.

Impaired loans are measured for impairment using the fair value of the collateral for collateral dependent loans.  Information regarding impaired loans is presented as follows:

	At and For the		At and For the		At and For the
	Six Months Ended		Year Ended		Six Months Ended
(Dollars in thousands)	June 30, 2019		December 31, 2018		June 30, 2018
Total recorded investment	$	9,540	$	7,822	$	9,041
Impaired loans with a specific allowance		717		1,808		821
Impaired loans without a specific allowance		8,823		6,014		8,220
Average recorded investment		8,371		9,312		9,491
Specific allowance allocation		161		285		194
Total principal and interest collected		250		204		318
Interest income recorded		65		80		49

LIQUIDITY AND CAPITAL RESOURCES

Management maintains liquidity to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. DNB’s foundation for liquidity is a stable and loyal customer deposit base, cash and cash equivalents, and a marketable investment portfolio that provides periodic cash flow through regular maturities and amortization, or that can be used as collateral to secure funding. As part of its liquidity management, DNB maintains assets that comprise its liquidity, which totaled $121.7 million at June 30, 2019 compared to $97.4 million at December 31, 2018. Liquidity includes investments and restricted stock, Federal funds sold and cash and due from banks, less the amount of securities required to be pledged for certain liabilities. DNB also anticipates scheduled payments and prepayments on its loan and mortgage-backed securities portfolios.

In addition, DNB maintains borrowing arrangements with various correspondent banks, the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs. Through these relationships, DNB had available credit of approximately $557.4 million at June 30, 2019. As a member of the FHLB, we are eligible to borrow up to a specific credit limit which is determined by the amount of our residential mortgages, commercial mortgages and other loans that have been pledged as collateral. As of June 30, 2019, DNB’s Maximum Borrowing Capacity with the FHLBP was $462.3 million. At June 30, 2019, DNB had borrowed $31.2 million and the FHLB had issued letters of credit on DNB's behalf, totaling $50.0 million against its available credit lines. At June 30, 2019, DNB also had available $60.0 million of unsecured federal funds lines of credit with other financial institutions as well as $508.4 million of available short or long term funding through several agreements and programs with brokers. Management believes that DNB has adequate resources to meet its short-term and long-term funding requirements.

At June 30, 2019, DNB had $198.0 million in un-funded loan commitments. Management anticipates these commitments will be funded by means of normal cash flows. Certificates of deposit greater than or equal to $250,000 scheduled to mature in one year or less from June 30, 2019totaled $51.3 million. Management believes that the majority of such deposits will be reinvested with DNB and that certificates that are not renewed will be funded by a reduction in cash and cash equivalents or by pay-downs and maturities of loans and investments.

The Bank has met the definition of “well capitalized” for regulatory purposes on June 30, 2019.  The Bank’s capital category is determined for the purposes of applying the bank regulators’ “prompt corrective action” regulations and for determining levels of deposit insurance assessments and may not constitute an accurate representation of the Corporation’s or the Bank’s overall financial condition or prospects. The Corporation’s capital exceeds the Federal Reserve Bank’s (“FRB”) minimum leverage ratio requirements for bank holding companies and meets other requirements to be considered “well capitalized” (see additional discussion included in Note 17 of DNB’s December 31, 2018 Form 10-K).

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Under federal banking laws and regulations, DNB and the Bank are required to maintain minimum capital as determined by certain regulatory ratios. Capital adequacy for regulatory purposes, and the capital category assigned to an institution by its regulators, may be determinative of an institution’s overall financial condition. Under the final capital rules that became effective on January 1, 2015, there was a requirement for a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do not maintain this required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement is being phased in over three years beginning in 2016. DNB must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is being phased in from 0.0% to 2.50% by 2019. The capital conservation buffer is 2.50% and 1.875% for 2019 and 2018, respectively.

The following table summarizes data and ratios pertaining to the Corporation and the Bank's capital structure.

										To Be Well
						For Capital				Capitalized Under
						Adequacy				Prompt Corrective
		Actual				Purposes*				Action Provisions
(Dollars in thousands)		Amount	Ratio			Amount	Ratio			Amount	Ratio
DNB Financial Corporation
June 30, 2019
Total risk-based capital	$	129,840	14.15	%	$	73,427	8.00	%		N/A	N/A
Common Equity Tier 1 capital		103,998	11.33			41,303	4.50			N/A	N/A
Tier 1 risk-based capital		112,998	12.31			55,070	6.00			N/A	N/A
Tier 1 (leverage) capital		112,998	9.89			45,700	4.00			N/A	N/A
December 31, 2018
Total risk-based capital	$	124,769	13.61	%	$	73,538	8.00	%		N/A	N/A
Common equity tier 1 capital		98,949	10.79			41,365	4.50			N/A	N/A
Tier 1 risk-based capital		107,949	11.77			55,153	6.00			N/A	N/A
Tier 1 (leverage) capital		107,949	9.48			45,557	4.00			N/A	N/A
DNB First, N.A.
June 30, 2019
Total risk-based capital	$	128,208	13.99	%	$	73,288	8.00	%	$	91,610	10.00	%
Common Equity Tier 1 capital		121,116	13.22			41,224	4.50			59,546	6.50
Tier 1 risk-based capital		121,116	13.22			54,966	6.00			73,288	8.00
Tier 1 (leverage) capital		121,116	10.61			45,646	4.00			57,058	5.00
December 31, 2018
Total risk-based capital	$	123,239	13.46	%	$	73,399	8.00	%	$	91,748	10.00	%
Common equity tier 1 capital		116,169	12.69			41,287	4.50			59,636	6.50
Tier 1 risk-based capital		116,169	12.69			55,049	6.00			73,399	8.00
Tier 1 (leverage) capital		116,169	10.21			45,503	4.00			56,879	5.00
*Does not include capital conservation buffer of 2.5% and 1.875% for June 30, 2019 and December 31, 2018, respectively.

In addition, 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, certain perpetual debt instruments such as eligible Trust preferred securities, 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 well in excess of FRB requirements.

REGULATORY MATTERS

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.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

To measure the impacts of longer-term asset and liability mismatches beyond two years, DNB utilizes an Economic Value of Equity ("EVE") model. The EVE model measures the potential price risk of equity to changes in interest rates and factors in the optionality included on the balance sheet. EVE analysis is used to dynamically model the present value of asset and liability cash flows, with rates ranging up or down 200 basis points. The EVE is likely to be different if rates change. Results falling outside prescribed ranges may require action by management. At June 30, 2019 and December 31, 2018, DNB's variance in the EVE as a percentage of assets with an instantaneous and sustained parallel shift of 200 basis points was within its negative 3% guideline, as shown in the following table. The change as a percentage of the present value of equity with a 200 basis point increase was within DNB's negative 25% guideline at June 30, 2019 and December 31, 2018.

(Dollars in thousands)		June 30, 2019						December 31, 2018
Change in rates		Flat		-200bp		+200bp		Flat		-200bp		+200bp
EVE	$	148,474	$	138,915	$	147,575	$	153,190	$	148,270	$	145,420
Change				(9,559)		(899)				(4,920)		(7,770)
Change as % of assets				(0.8%)		(0.1%)				(0.4%)		(0.7%)
Change as % of PV equity				(6.4%)		(0.6%)				(3.2%)		(5.1%)

ITEM 4- CONTROLS AND PROCEDURES

DNB’s Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of June 30, 2019, the end of the period covered by this report, in accordance with the requirements of Exchange Act Rule 240.13a-15(b). Based on that evaluation, Management has concluded that DNB’s current disclosure controls and procedures are effective.

Management of DNB is responsible for establishing and maintaining adequate internal control over financial reporting for DNB, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. There was no change in DNB’s “internal control over financial reporting” (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2019, that has materially affected, or is reasonably likely to materially affect, DNB’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Neither DNB nor any of its subsidiaries is a party to, nor is any of their property the subject of, any material legal proceedings other than ordinary routine litigation incident to their businesses.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Risk Factors” included within the 2018 Form 10-K. The risks described therein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the quarter ended June 30, 2019. The following table provides information on repurchases by DNB of its common stock in each month of the quarter ended June 30, 2019:

				Total Number of		Maximum Number
				Shares Purchased		of Shares that May
	Total Number		Average	as Part of Publicly		Yet Be Purchased
	Of Shares		Price Paid	Announced Plans		Under the Plans or
Period	Purchased		Per Share	or Programs		Programs (a)
April 1, 2019 – April 30, 2019	-	$	-	-	$	63,016
May 1, 2019 – May 31, 2019	-		-	-	$	63,016
June 1, 2019 – June 30, 2019	-		-	-	$	63,016
Total	-	$	-	-	$	63,016

On July 25, 2001, DNB authorized the buyback of up to 175,000 shares of its common stock over an indefinite period. On August 27, 2004, DNB increased the buyback from 175,000 to 325,000 shares of its common stock over an indefinite period.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

a) The following exhibits are filed or furnished herewith:

Exhibit Number	Description
2.1	Agreement and Plan of Merger by and between DNB Financial Corporation and S&T Bancorp, Inc., dated as of June 5, 2019, filed as Exhibit 2.1 to Form 8-K on June 5, 2019 and incorporated herein by reference.
2.2	Agreement and Plan of Merger by and between DNB Financial Corporation and East River Bank, dated as of April 4, 2016, filed as Exhibit 2.1 to Form 8-K on April 5, 2016 and incorporated herein by reference.
3.1	Amended and Restated Articles of Incorporation, as amended effective June 30, 2017, filed as Exhibit 3.1 to Form 8-K on July 3, 2017 and incorporated herein by reference.
3.2	Bylaws of the Registrant as amended January 27, 2016, filed herewith.
3.3	Amendment to Bylaws of DNB Financial Corporation, dated June 5, 2019, filed herewith.
31.1	Rule 13a-14(a)/15d-14 (a) Certification of Chief Executive Officer, filed herewith.
31.2	Rule 13a-14(a)/15d-14 (a) Certification of Chief Financial Officer, filed herewith.
32.1	Section 1350 Certification of Chief Executive Officer, filed herewith.
32.2	Section 1350 Certification of Chief Financial Officer, filed herewith.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

46

Pursuant to the requirements of Section 13 or 15(d) 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
August5, 2019	BY:	/s/ William J. Hieb
		William J. Hieb, Chief Executive Officer, President and Director
August5, 2019	BY:	/s/ Gerald F. Sopp
		Gerald F. Sopp, Chief Financial Officer and Executive Vice President

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Exhibit Index

Exhibit Number	Description
2.1	Agreement and Plan of Merger by and between DNB Financial Corporation and S&T Bancorp, Inc., dated as of June 5, 2019, filed as Exhibit 2.1 to Form 8-K on June 5, 2019 and incorporated herein by reference.
2.2	Agreement and Plan of Merger by and between DNB Financial Corporation and East River Bank, dated as of April 4, 2016, filed as Exhibit 2.1 to Form 8-K on April 5, 2016 and incorporated herein by reference.
3.1	Amended and Restated Articles of Incorporation, as amended effective June 30, 2017, filed as Exhibit 3.1 to Form 8-K on July 3, 2017 and incorporated herein by reference.
3.2	Bylaws of the Registrant as amended January 27, 2016, filed herewith.
3.3	Amendment to Bylaws of DNB Financial Corporation, dated June 5, 2019, filed herewith.
31.1	Rule 13a-14(a)/15d-14 (a) Certification of Chief Executive Officer, filed herewith.
31.2	Rule 13a-14(a)/15d-14 (a) Certification of Chief Financial Officer, filed herewith.
32.1	Section 1350 Certification of Chief Executive Officer, filed herewith.
32.2	Section 1350 Certification of Chief Financial Officer, filed herewith.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

48

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

of

DNB FINANCIAL CORPORATION

(Amended and restated as of January 27, 2016)

Article 1

CORPORATION OFFICE

Section 1. 1 The Corporation shall have and continuously maintain in Pennsylvania a registered office which may, but need not, be the same as its place of business and at an address to be designated from time to time by the Board of Directors.

Section 1. 2 The Corporation may also have offices at such other places as the Board of Directors may from time to time designate or the business of the Corporation may require.

Article 2

SHAREHOLDERS MEETINGS

Section 2.1 All meetings of the shareholders shall be held at such time and place as may be fixed from time to time by the Board of Directors.  The Board of Directors shall have the right to determine that a meeting of shareholders be held solely by means of the Internet or other electronic communications technology in the manner and to the extent provided by the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania BCL").

Section 2.2 The annual meeting of the shareholders shall be held no later than the thirty-first day of May in each year, when the shareholders shall elect members to the Board of Directors and transact such other business as may properly be brought before the meeting.

Section 2.3 Special meetings of the shareholders may be called at any time by the Chairperson of the Board, the President, or the chief executive officer, or a majority of the Board of Directors, or a majority of its Executive Committee.  At any time, upon written request of any person who has called a special meeting, it shall be the duty of the Secretary to fix the time of the meeting which, if the meeting is called pursuant to a statutory right, shall be held not more than sixty (60) days after the receipt of the request.  If the Secretary neglects or refuses to fix the time of the meeting, the person or persons calling the meeting may do so.

Section 2.4 Written notice of all shareholder meetings (other than adjourned meetings of shareholders), shall state the place, date, hour, the purpose thereof and shall be given to the shareholders of record entitled to vote at such meeting either personally, by electronic transmissions or by mail, or by any other means permitted by the Pennsylvania BCL, at least ten days before such meeting, unless a greater period of notice is required by the Pennsylvania BCL or by these Bylaws.  Notice shall be sent to the shareholders, if delivered personally or by mail, to a shareholder's postal address appearing on the books of the Corporation or, if delivered by electronic means permitted by the Pennsylvania BCL, by facsimile transmission, e-mail or other electronic communication to a shareholder's facsimile number or address for e-mail or other electronic communications supplied by such shareholder to the Corporation for the purpose of notice.  Notice delivered personally or by mail in such manner shall be deemed to have been given to the shareholder when deposited in the United States mail or with a courier service for personal delivery to such shareholder.  Notice delivered by electronic means permitted by the Pennsylvania BCL in such manner shall be deemed to have been given to the shareholder when sent to such shareholder.

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Section 2.5 When a meeting of shareholders is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting.

Section 2.6 The right of any shareholder to participate in any shareholder meeting by means of telephone conference, the Internet or other electronic means by which all persons participating in the meeting may hear each other and, in which event, all shareholders so participating shall be deemed present at such meeting, shall be granted solely in the discretion of the Board of Directors.

Article 3

QUORUM OF SHAREHOLDERS

Section 3.1 The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on the particular matter shall constitute a quorum for purposes of considering such matter, and unless otherwise provided by Pennsylvania BCL the acts of such shareholders at a duly organized meeting shall be the acts of the shareholders. If, however, any meeting of shareholders cannot be organized because of lack of a quorum, those present, in person or by proxy, shall have the power, except as otherwise provided by Pennsylvania BCL, to adjourn the meeting to such time and place as they may determine, without notice other than an announcement at the meeting, until the requisite number of shareholders for a quorum shall be present, in person or by proxy, except that in the case of any meeting called for the election of directors such meeting may be adjourned only for periods not exceeding fifteen (15) days as the holders of a majority of the shares present, in person or by proxy, shall direct, and those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At any adjourned meeting at which a quorum shall be present or so represented, any business may be transacted which might have been transacted at the original meeting if a quorum had been present. The shareholders present, in person or by proxy, at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

Article 4

VOTING RIGHTS

Section 4.1 Except as may be otherwise provided by Pennsylvania BCL or by the Articles of Incorporation, at every shareholders meeting, every shareholder entitled to vote thereat shall have the right to one vote for every share having voting power standing in his or her name on the transfer books for shares of the Corporation on the record date fixed for the meeting. No share shall be voted at any meeting if an installment is due and unpaid thereon.

Section 4.2 Except to the extent applicable law or the Articles of Incorporation provide otherwise, when a quorum is present at any meeting, a majority of the votes cast shall decide any question, other than the election of directors, brought before such meeting.

Section 4.3 Upon demand made by a shareholder entitled to vote at any election for directors before the voting begins, the election shall be by ballot.

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Article 5

PROXIES

Section 5.1 Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy. Every proxy shall be executed in writing by the shareholder or his or her duly authorized attorney in fact and filed with the Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation. No unrevoked proxy shall be valid after eleven (11) months from the date of its execution, unless a longer time is expressly provided therein, but in no event shall a proxy, unless coupled with an interest, be voted after three years from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker, unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation.

Article 6

RECORD DATE

Section 6.1 The Board of Directors may fix a time, not more ninety(90) days prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting or to receive payment of such dividend or distribution or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the transfer books for shares of the Corporation after any record date fixed as aforesaid. The Board of Directors may close the transfer books for shares of the Corporation against transfers of shares during the whole or any part of such period, and in such case written or printed notice thereof shall be mailed at least ten (10) days before closing thereof to each shareholder of record at the address appearing on the records of the Corporation or supplied by him or her to the Corporation for the purpose of notice. While the transfer books for shares of the Corporation are closed, no transfer of shares shall be made thereon. If no record date is fixed by the Board of Directors for the determination of shareholders entitled to receive notice of, and vote at, a shareholders meeting, transferees of shares which are transferred on the books of the Corporation within ten (10) days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting.

Article 7

VOTING LISTS

Section 7.1 The officer or agent having charge of the transfer books for shares of the Corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each.

3

Article 8

JUDGES OF ELECTION

Section 8.1 In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for office to be filled at the meeting shall not act as a judge.

Section 8.2 In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof.

Section 8.3 The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum,  the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all.

Section 8.4 On request of the presiding officer of the meeting, or of any shareholder, the judges of election shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein.

Article 9

CONSENT OF SHAREHOLDERS IN LIEU OF MEETING

Section 9.1 Any action required or permitted to be taken at a meeting of the shareholders, or of a class of shareholders, may be taken without a meeting, prior or subsequent to the action, if a consent or consents in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Corporation.

Section 9.2 The consent or consents in writing required by this Article 9 may be given by proxy in accordance with Section 5.1 hereof. 

Article 10

DIRECTORS

Section 10.1 Any shareholder who intends to nominate or to cause to have nominated any candidate for election to the Board of Directors (other than any candidate proposed by the Corporation's then existing Board of Directors) shall so notify the Secretary of the Corporation in writing not less than ninety (90) days prior to the date of any meeting of shareholders called for the election of directors. Such notification shall contain the following information to the extent known by the notifying shareholder.

a) the name and address of each proposed nominee;

b) the age of each proposed nominee;

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c) the principal occupation of each proposed nominee;

d) the number of shares of the Corporation owned by each proposed nominee;

e) the total number of shares that to the knowledge of the notifying shareholder will be voted for each proposed nominee;

f) the name and residence address of the notifying shareholder; and

g) the number of shares of the Corporation owned by the notifying shareholder.

Any nomination for director not made in accordance with this Section shall be disregarded by the presiding officer of the meeting, and votes cast for each such nominee shall be disregarded by the judges of election. In the event that the same person is nominated by more than one shareholder, if at least one nomination for such person complies with this Section, the nomination shall be honored and all votes cast for such nominee shall be counted.

Section 10.2 The number of directors that shall constitute the whole Board of Directors shall be not less than three. The Board of Directors shall be classified into three classes, each class to be elected for a term of three years. The terms of the respective classes shall expire in successive years as provided in Section 10.3 hereof. Within the foregoing limits, the Board of Directors may from time to time fix the number of directors and their respective classifications. The Directors shall be natural persons of full age and need not be residents of Pennsylvania. Each Director shall own, from time to time, the minimum qualifying interest in the Corporation required under applicable law and regulations.  

 Section 10.3 At the 1990 annual meeting of shareholders of the Corporation, the shareholders shall elect three Class A directors to serve until the 1993 annual meeting of shareholders. At each annual meeting of shareholders thereafter successors to the class of directors whose term shall then expire shall be elected to hold office for a term of three years so that the term of office of one class of directors shall expire in each year.

Section 10.4 The Board of Directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or for any other proper cause which these Bylaws may specify or if, within sixty (60) days or such other time as these Bylaws may specify after notice of his or her selection, he or she does not accept the office either in writing or by attending a meeting of the Board of Directors and fulfill such other requirements of qualification as these Bylaws may specify.

 Section 10.5 Upon application of any shareholder or director, the court may remove from office any director in case of fraudulent or dishonest acts, or gross abuse of authority or discretion with reference to the Corporation, or for any other proper cause, and may bar from office any director so removed for a period prescribed by the court. The Corporation shall be made party to the action and, as a prerequisite to the maintenance of an action under this Section 10.5, a shareholder shall comply with Section 1782 of the Business Corporation Law of 1988, and any amendments or supplements thereto.

Section 10.6 An act of the Board of Directors done during the period when a director has been suspended or removed for cause shall not be impugned or invalidated if the suspension or removal is thereafter rescinded by the shareholders or by the Board of Directors or by the final judgment of a court.

Article 11

VACANCIES ON BOARD OF DIRECTORS

Article 11.1 Vacancies on the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled by a majority of the remaining members of the Board of Directors, though less than a quorum, and each person so appointed shall be a director until the expiration of the term of office of the class of directors to which he or she was appointed.

5

Article 12

POWERS OF BOARD OF DIRECTORS

Section 12. 1 The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by Pennsylvania BCL or by the Articles of Incorporation or by these Bylaws directed or required to be exercised and done by the shareholders.

Section 12.2 A director of the Corporation who is present at a meeting of the Board of Directors, or of a Committee of the Board of Directors, at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless he or she files his or her written dissent to the action with the Secretary of the Corporation before the adjournment thereof or transmits the dissent in writing to the Secretary of the Corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this Section 12.2 shall bar a director from asserting that minutes of any meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, he or she notifies the Secretary of the Corporation, in writing, of the asserted omission or inaccuracy.

Article 13

MEETINGS OF THE BOARD OF DIRECTORS

Section 13.1 An organization meeting may be held immediately following the annual shareholders meeting without the necessity of notice to the directors to constitute a legally convened meeting, or the directors may meet at such time and place as may be fixed by either a notice or waiver of notice or consent signed by all of such directors.

Section 13.2 Regular meetings of the Board of Directors shall be held not less often than semi-annually at a time and place determined by the Board of Directors at the preceding meeting. One or more directors may participate in any meeting of the Board of Directors, or of any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another.

Section 13.3 Special meetings of the Board of Directors may be called by the Chairperson of the Board, the President or the chief executive officer on one day's notice to each director, either personally or in the manner set forth under Article 34 hereof; special meetings shall be called by the Chairperson of the Board in like manner and on like notice upon the written request of three directors.

Section 13.4 At all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting in person or by conference telephone or similar communications equipment at which a quorum is present in person or by such communications equipment shall be the acts of the Board of Directors, except as may be otherwise specifically provided by Pennsylvania BCL or by the Articles of Incorporation or by these Bylaws. If a quorum shall not be present in person or by communications equipment at any meeting of the directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or as permitted herein.

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Article 14

INFORMAL ACTION BY THE BOARD OF DIRECTORS

Section 14.1 Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the Secretary of the Corporation.

Article 15

COMPENSATION OF DIRECTORS

Section 15.1 Directors, as such, may receive a stated salary for their services or a fixed sum and expenses for attendance at regular and special meetings, or any combination of the foregoing as may be determined from time to time by resolution of the Board of Directors, and nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.  

Article 16

OFFICERS

Section 16.1 The officers of the Corporation shall be elected by the Board of Directors at its organization meeting and shall be a President, a Secretary and a chief financial officer.  At its option, the Board of Directors may elect a Chairperson of the Board.  The Board of Directors may also elect a chief executive officer, a chief operating officer, one or more Vice Presidents and such other officers and appoint such assistant officers, acting officers and other agents as it shall deem necessary, who shall hold their offices for such terms, have such authority and perform such duties as may from time to time be prescribed by the Board of Directors. Any number of offices may be held by the same person.

Section 16.2 The compensation of all officers of the Corporation shall be fixed by the Board of Directors.

Section 16.3 Each officer shall hold office for a term of one year and until his or her successor has been selected and qualified or until his or her earlier death, resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt thereof by the Corporation or at such subsequent time as may be specified in the notice of resignation. The Corporation may secure the fidelity of any or all of the officers by bond or otherwise.

Section 16.4 Any officer or agent of the Corporation may be removed by the Board of Directors with or without cause. The removal shall be without prejudice to the contract rights,  if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 16.5 An officer shall perform his or her duties as an officer in good faith, in a manner he or she reasonably believes to be in the best interests of the Corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his or her duties shall not be liable by reason of having been an officer of the Corporation.

7

Article 17

THE CHAIRPERSON OF THE BOARD

Section 17.1 The Chairperson of the Board shall preside at all meetings of the shareholders and directors. He or she shall supervise the carrying out of the policies adopted or approved by the Board of Directors. He or she shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned to him or her by the Board of Directors.

Article 18

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Section 18.1 The President shall be the chief executive officer of the Corporation unless the Board of Directors shall have appointed a separate chief executive officer.  The President and any chief executive officer shall, each have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are put into effect, subject, however, to the right of the Board of Directors to distribute the foregoing powers between the President and any chief executive officer and to delegate any specific powers, except such as may be by Pennsylvania BCL exclusively conferred on the President, or to any other officer or officers of the Corporation. The President and the chief executive officer shall each have authority to execute bonds, notes, mortgages, evidences of indebtedness, contracts or other document, or any assignment or endorsement thereof, and other contracts requiring a seal under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. In the absence or incapacity of the Chairperson of the Board, the chief executive officer or, in his or her absence, the President shall preside at meetings of the shareholders and the directors. If there is no Chairperson of the Board, the chief executive officer or, in his or her absence, the President shall have and exercise all powers conferred by these Bylaws or otherwise on the Chairperson of the Board. 

Article 19

THE VICE PRESIDENTS

Section 19.1 The Vice President or, if more than one, the Vice Presidents in the order established by the Board of Directors shall, in the absence or incapacity of the President, exercise all powers and perform the duties of the President. The Vice Presidents, respectively, shall also have such other authority and perform such other duties as may be provided in these Bylaws or as shall be determined by the Board of Directors or the President. Any Vice President may, in the discretion of the Board of Directors, be designated as "executive," "senior", or by departmental or functional classification.

Article 20

THE SECRETARY

Section 20.1 The Secretary shall attend all meetings of the Board of Directors and of the shareholders and keep accurate records thereof in one or more minute books kept for that purpose and shall perform the duties customarily performed by the secretary of a corporation and such other duties as may be assigned to him or her by the Board of Directors, the chief executive officer or the President.  The Chairperson of the Board (for meetings of the shareholders and meetings of the Board of Directors) and the chair of each committee (for committee meetings) shall

8

have authority to appoint an acting secretary for each such meeting, who shall carry out the responsibilities of the Secretary with respect to such meeting.

Article 21

THE CHIEF FINANCIAL OFFICER

Section 21.1 The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall perform such other duties as may be assigned to him or her by the Board of Directors or the chief executive officer. He or she shall give bond in such sum and with such surety as the Board of Directors may from time to time direct.

Article 22

ASSISTANT OFFICERS 

Section 22. 1 Each assistant officer shall assist in the performance of the duties of the officer to whom he or she is assistant and shall perform such duties in the absence of the officer. He or she shall perform such additional duties as the Board of Directors, the chief executive officer, the President or the officer to whom he or she is assistant may from time to time assign him or her. Such officers may be given such functional titles as the Board of Directors shall from time to time determine.

Article 23

INDEMNIFICATION OF OFFICERS AND EMPLOYEES

Section 23.1 The Corporation shall indemnify any officer and/or employee, or any former officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was an officer and/or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of a corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

Section 23.2 The Corporation shall indemnify any officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, and/or employee or agent of a corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of, or serving as a witness in, such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and except that no indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his or her duty to the Corporation.

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Section 23.3 Except as may be otherwise ordered by a court, there shall be a presumption that any officer and/or employee is entitled to indemnification as provided in Sections 23.1 and 23.2 of this Article unless either a majority of the directors who are not involved in such proceedings ("disinterested directors") or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Corporation shall request of independent counsel, who may be the outside general counsel of the Corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 23.1 and 23.2 of this Article.

Section 23.4 Expenses incurred by an officer and/or employee in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 23.3 of this Article upon receipt of an undertaking by or on behalf of the officer and/or employee to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation.

Section 23.5 The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity while serving as an officer and/or employee and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be an officer and/or employee and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 23.6 The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations arising under this Article.

Section 23.7 The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was an officer and/or employee of the Corporation, or is or was serving at the request of the Corporation as an officer and/or employee of a corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article.

Section 23.8 Indemnification under this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. 

Article 24

INDEMNIFICATION OF DIRECTORS

Section 24.1 A director of this Corporation shall stand in a fiduciary relation to the Corporation and shall perform his or her duties as a director, including his or her duties as a member of any committee of the board upon which he or she may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the Corporation, and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his or her duties, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

a) One or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented.

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b) Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person.

c) A committee of the board upon which he or she does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

A director shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause his or her reliance to be unwarranted.

Section 24.2 In discharging the duties of their respective positions, the Board of Directors, committees of the board, and individual directors may, in considering the best interests of the Corporation, consider the effects of any action upon employees, upon suppliers and customers of the Corporation and upon communities in which offices or other establishments of the Corporation are located, and all other pertinent factors. The consideration of those factors shall not constitute a violation of Section 24.1.

Section 24.3 Absent a breach of fiduciary duty, lack of good faith or self-dealing, actions taken as a director or any failure to take any action shall be presumed to be in the best interests of the Corporation.

Section 24.4 A director of this Corporation shall not be personally liable for monetary damages as such for any action taken or for any failure to take any action, unless:

a) the director has breached or failed to perform the duties of his or her office under the provisions of Sections 24. 1 and 24.2, and

b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.

Section 24.5 The provisions of Section 24.4 shall not apply to:

a) the responsibility or liability of a director pursuant to a criminal Pennsylvania BCL, or

b) the liability of a director for the payment of taxes pursuant to local, state or federal law.

Section 24.6 The Corporation shall indemnify any director, or any former director who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of a corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

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Section 24.7 The Corporation shall indemnify any director who was or is a party to, or is threatened to be made a party to, or who is called as a witness in connection with, any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer and/or employee or agent of a corporation, partnership, joint venture, trust or other enterprise against amounts paid in settlement and expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of, or serving as a witness in, such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and except that no indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his or her duty to the Corporation.

 Section 24.8 Except as may be otherwise ordered by a court, there shall be a presumption that any director is entitled to indemnification as provided in Sections 24.6 and 24.7 of this Article unless either a majority of the directors who are not involved in such proceedings ("disinterested directors") or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Corporation determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Corporation. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Corporation shall request of independent counsel, who may be the outside general counsel of the Corporation, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 24.6 and 24.7 of this Article.

Section 24.9 Expenses incurred by a director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 24.8 of this Article upon receipt of an undertaking by or on behalf of the director, officer and/or employee to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article.

Section 24.10 The indemnification provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity while serving as a director and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 24.11 The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations arising under this Article.

Section 24.12 The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or is or was serving at the request of the Corporation as a director, officer, employee or agent of a corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article.

Section 24.13 Indemnification under this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness.

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Article 25

COMMITTEES OF THE BOARD OF DIRECTORS

Section 25.1 The Board of Directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the Corporation. Any committee, to the extent provided in the resolution of the Board of Directors or in these Bylaws, shall have and may exercise all of the powers and authority of the Board of Directors, except that a committee shall not have any power or authority as to the following:

a. The submission to shareholders of any action requiring approval of shareholders under applicable law, the Articles of Incorporation or these Bylaws.

b. The creation or filling of vacancies in the Board of Directors.

c. The adoption, amendment or repeal of these Bylaws.

d. The amendment or repeal of any resolution of the Board of Directors that by its terms is amendable or repealable only by the Board of Directors.

e. Action on matters committed by these Bylaws or resolution of the Board of Directors to another committee of the Board of Directors.

Section 25.2 The Board of Directors may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee.  In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member.

Section 25.3 Each committee of the Board of Directors shall serve at the pleasure of the Board of Directors. The term "Board of Directors", when used in any provision of this Article 25 relating to the organization or procedures of, or the manner of taking action by the Board of Directors, shall be construed to include and refer to any executive or other committee of the Board of Directors. Any provision of this Article 25 relating or referring to action to be taken by the Board of Directors or the procedure required therefor shall be satisfied by the taking of corresponding action by a committee of the Board of Directors to the extent authority to take the action has been delegated to the committee pursuant to this Article 25.

Section 25.4 Except in such cases, approved by Board of Directors resolution from time to time, as may be permitted by applicable law, the Articles of Incorporation and the applicable rules of any exchange or market on which the Corporation's shares are traded or transactions in the Corporation's shares are reported, all of the members of the following committees of the Board of Directors (or any committees performing similar functions), if such committees exist,  shall be "independent" within the meaning of that term as applied by the Corporation to its directors from time to time consistent with applicable law:

· Audit Committee

· Benefits & Compensation Committee

· Corporate Governance Committee

· Nominating Committee

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Article 26

SHARE CERTIFICATES

Section 26.1 The share certificates of the Corporation shall be numbered and registered in a share register as they are issued; shall bear the name of the registered holder, the number and class of shares represented thereby, the par value of each share or a statement that such shares are without par value, as the case may be; shall be signed by two officers:  the chief executive officer, the President or a Vice President, and by the Secretary or the chief financial officer or any other person properly authorized by the Board of Directors; and shall bear the corporate seal, which seal may be a facsimile engraved or printed. Where the certificate is signed by a transfer agent or a registrar, the signature of any corporate officer on such certificate may be a facsimile engraved or printed. In case any officer who has signed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer because of death, resignation or otherwise before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the date of its issue.

Section 26.2 Any or all classes or series of shares of stock, or any part thereof, of the Corporation may be uncertificated shares to the extent determined by the Board of Directors of the Corporation from time to time. However, in no event shall shares represented by a certificate be deemed uncertificated until the certificate is surrendered to the Corporation. 

Article 27

TRANSFER OF SHARES

Section 27.1 Upon surrender to the Corporation of a share certificate duly endorsed by the person named in the certificate or by attorney duly appointed in writing and accompanied where necessary by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate cancelled and the transfer recorded upon the transfer books for shares of the Corporation. No transfer shall be made if it would be inconsistent with the provisions of Article 8 of the Pennsylvania Uniform Commercial Code.

Article 28

LOST CERTIFICATES

Section 28.1 Except where shares are to be uncertificated, where a shareholder of the Corporation alleges the loss, theft or destruction of one or more certificates for shares of the Corporation and requests the issuance of a substitute certificate therefor, the Board of Directors may direct a new certificate of the same tenor and for the same number of shares to be issued to such person upon such person's making of an affidavit in form satisfactory to the Board of Directors setting forth the facts in connection therewith, provided that prior to the receipt of such request the Corporation shall not have either registered a transfer of such certificate or received notice that such certificate has been acquired by a bona fide purchaser. When authorizing such issue of a new certificate the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his or her heirs or legal representatives, as the case may be, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such form and with surety or sureties, with fixed or open penalty, as shall be satisfactory to the Board of Directors, as indemnity for any liability or expense which it may incur by reason of the original certificate remaining outstanding.

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Article 29

DIVIDENDS

Section 29.1 The Board of Directors may, from time to time, at any duly convened regular or special meeting or by unanimous consent in writing, declare and pay dividends upon the outstanding shares of capital stock of the Corporation in cash, property or shares of the Corporation, as long as any dividend shall not be in violation of law and the Articles of Incorporation.

Section 29.2 Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as, the Board of Directors shall believe to be for the best interests of the Corporation, and the Board of Directors may reduce or abolish any such reserve in the manner in which it was created.

Article 30

FINANCIAL REPORT TO SHAREHOLDERS

Section 30.1 The chief executive officer and the Board of Directors shall present prior to each annual meeting of the shareholders a full and complete statement of the business and affairs of the Corporation for the preceding year.

Article 31

INSTRUMENTS

Section 31.1 Any bonds, notes, mortgages, evidences of indebtedness, contracts or other document, or any assignment or endorsement thereof, and other contracts requiring a seal under the seal of the Corporation, executed or entered into between the Corporation and any other person, when signed by the chief executive officer, the President, any Executive Vice President, or one or more other officers or agents having actual or apparent authority to sign it, shall be held to have been properly executed for and in behalf of the Corporation.

Section 31.2 The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement by the Corporation of any instrument or other document.

Article 32

FISCAL YEAR

Section 32.1 The fiscal year of the Corporation shall be the calendar year.

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Article 33

SEAL 

Section 33.1 The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania". Such seal may be used by causing it or a facsimile thereof to be impressed or affixed in any manner reproduced.

Article 34

NOTICES AND WAIVERS THEREOF

Section 34.1 Whenever written notice is required to be given to any person under the provisions of applicable law, by the Articles of Incorporation or of these Bylaws, it shall be valid if given to the person either personally or by sending a copy thereof (i) by first class or express mail, postage prepaid, (ii)  electronically, including without limitation by e-mail, telecopier, TWX or telegram (with evidence of receipt), or (iii) by courier service, charges prepaid, to his or her current address or number appearing on the books of the Corporation or, in the case of directors, supplied by him or her to the Corporation for the purpose of notice. If the notice if sent by mail, postage prepaid and properly addressed, it shall be deemed to have been given to the person when deposited in the United States mail, and in all other cases when actually delivered to the address or number described above.  A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of applicable law or these Bylaws.

Section 34.2 Whenever any written notice is required to be given under the provisions of applicable law, the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Except as otherwise required by these Bylaws, neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. In the case of a special meeting of shareholders, the waiver of notice shall specify the general nature of the business to be transacted.

Section 34.3 Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

Section 34.4 Whenever any notice or communication is required to be given to any person under the provisions of applicable law, the Articles of Incorporation, these Bylaws, the terms of any agreement and any other instrument or as a condition precedent to taking any corporate action, and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required and there shall be no duty to apply for a license or other permission to do so. Any action or meeting that is taken or held without notice or communication to that person shall have the same validity as if the notice or communication had been duly given. If the action taken is such as to require the filing of any document with respect thereto under any provision of law or any agreement or other instrument, it shall be sufficient, if such is the fact and if notice or communication in required, to state therein that notice or communication was given to all persons entitled to receive notice or communication except persons with whom communication was unlawful.

Section 34.5 Section 34.4 shall also be applicable to any shareholder with whom the Corporation has been unable to communicate for more than twenty-four (24) consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address. Whenever the shareholder provides the Corporation with a current address, Section 34.4 shall cease to be applicable to the shareholder under this Section 34.5.

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Article 35

EMERGENCIES

Section 35.1 The Board of Directors may adopt emergency Bylaws, subject to repeal or change by action of the shareholders, which shall, notwithstanding any different provisions of law, of the Articles of Incorporation or of these Bylaws, be effective during any emergency resulting from an attack on the United States, a nuclear disaster or another catastrophe as a result of which a quorum of the Board of Directors cannot readily be assembled.  The emergency Bylaws may make any provision that may be appropriate for the circumstances of the emergency including, procedures for calling meetings of the Board of Directors, quorum requirements for meetings and procedures for designating additional or substitute directors.

Section 35.2 The Board of Directors, either before or during any emergency, may provide, and from time to time modify, lines of succession in the event that during the emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties and may, effective in the emergency, change the head offices or designate several alternative head offices or regional offices of the Corporation or authorize the officers to do so.

Section 35.3 A representative of the Corporation acting in accordance with any emergency Bylaws shall not be liable except for willful misconduct and shall not be liable for any action taken by him or her in good faith in an emergency in furtherance of the ordinary business affairs of the Corporation even though not authorized by the emergency or other Bylaws then in effect.

Section 35.4 To the extent not inconsistent with any emergency Bylaws so adopted, the Bylaws of the Corporation shall remain in effect during any emergency and, upon its termination, the emergency Bylaws shall cease to be effective.

Section 35.5 Unless otherwise provided in emergency Bylaws, notice of any meeting of the Board of Directors during an emergency shall be given only to those directors to whom it is feasible to reach at the time and by such means as are feasible at the time, including publication, radio or television. To the extent required to constitute a quorum at any meeting of the Board of Directors during any emergency, the officers of the Corporation who are present shall, unless otherwise provided in emergency Bylaws, be deemed, in order of rank and within the same rank in order of seniority, directors for the meeting.

Article 36

AMENDMENTS

Section 36.1 These Bylaws may be altered, amended or repealed by the affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock at any regular or special meeting duly convened after notice to the shareholders of that purpose, or by a majority vote of the members of the Board of Directors at any regular or special meeting thereof duly convened after notice to the directors of that purpose, subject always to the power of the shareholders to change such action of the Board of Directors by the affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock.

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Article 37

OPT OUT AND NONAPPLICABLILITY OF SUBCHAPTER G AND SUBCHAPTER H OF CHAPTER 25 OF THE BUSINESS CORPORATION LAW OF 1988, AS ADDED AND AMENDED BY ACT 36 OF 1990.

Section 37.1. Opt Out and Nonapplicability of Subchapters G and H. This Corporation specifically opts out and shall not be governed by Subchapter G, Control-share Acquisitions, and Subchapter H, Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control, of Chapter 25 of the Business Corporation Law of 1988, as added and amended by Act 36 of 1990.  Subchapter G, Control-share Acquisitions, and Subchapter H, Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control, of Chapter 25 of the Business Corporation Law of 1988, as added and amended by Act 36 of 1990, shall not be applicable to the Corporation.  (This Section was adopted on 07/18/90)

Article 38 

NEW BUSINESS PROPOSALS

Section 38.1 Proposals for any new business to be taken up at any annual or special meeting of shareholders may be made by the Board of Directors of the Corporation or by any shareholder of the Corporation entitled to vote generally in the election of directors. In order for a shareholder of the Corporation to make any such proposal, he or she shall give notice thereof in writing to the Secretary of the Corporation (i) in the case of a proposal to be considered at an annual meeting of shareholders, not less than ninety (90) days prior to the date of any such meeting, and (ii) in the case of a proposal eligible for consideration at a special meeting of shareholders, not later than one (1) week after notice of such special meeting shall have been given to shareholders.

Section 38.2 Each such notice given by a shareholder to the Secretary with respect to business proposals to be brought before a meeting shall set forth in writing as to each matter: (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business; (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder; and (iv) any material interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no new business shall be conducted at the meeting except in accordance with the procedures set forth in this Article 38.

Section 38.3 The Chairperson of the annual or special meeting of shareholders may, if the facts warrant, determine and declare to such meeting that a proposal was not made in accordance with the foregoing procedure, and, if he or she should so determine, he or she shall so declare to the meeting and the defective proposal shall be disregarded and laid over for action at the next succeeding special or annual meeting of the shareholders taking place thirty days or more thereafter. This provision shall not require the holding of any adjourned or special meeting of shareholders for the purpose of considering such defective proposal.

Section 38.4 Each shareholder request to include matters in the Corporation's proxy material for a meeting shall be handled in accordance with applicable law. Shareholder requests to include matters in the proxy material for an annual meeting must be received at the Corporation's principal executive offices not less than 120 calendar days before the date of the Corporation's proxy statement released to shareholders in connection with the previous year's annual meeting. If the Corporation did not hold an annual meeting the previous year, or if the date of the annual meeting at which the proposal is to be presented has been changed by more than 30 days from the date of the previous year's meeting, or if the proposal is being submitted for a meeting of shareholders other than a regularly scheduled annual meeting, then the deadline for a shareholder to request inclusion of a proposal in the proxy material for that meeting shall be a reasonable time before the Corporation begins to print and send its proxy materials.

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EX-3.3

Exhibit 3.3

The Amended and Restated Bylaws of DNB Financial Corporation were amended on June 5, 2019 to add the following as a new Article 39:

Article 39

FORUM FOR ADJUDICATION OF DISPUTES

Section 39.1  Unless the Corporation consents in writing to the selection of an alternative forum, the state courts of the Commonwealth of Pennsylvania in and for Chester County and the federal district court for the Eastern District of Pennsylvania shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action or proceeding asserting a claim of breach of a duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s shareholders, (iii) any action or proceeding asserting a claim against the Corporation, or any director, officer or other employee of the Corporation arising pursuant to any provision of the Pennsylvania Associations Code, the Pennsylvania BCL, the Articles of Incorporation or these Bylaws, (iv) any action or proceeding seeking or involving any interpretation, application or enforcement of the Articles of Incorporation or these Bylaws, including any action or proceeding seeking or involving a determination of the validity of the Articles of Incorporation or these Bylaws; or (v) any action or proceeding asserting a claim against the Corporation or any director, officer or other employee of the Corporation governed by the internal affairs doctrine.

Without limiting the effect of Section 1505 of the Pennsylvania BCL, any person or entity owning, purchasing or otherwise acquiring any interest in shares of the Corporation, including any record or beneficial interest therein, shall be deemed, to the fullest extent permitted by law, to be a “shareholder” and to have notice of and consented to the provisions of this Section 39.1.

Without limiting any of the foregoing, nothing contained in this Section 39.1 is intended to limit or otherwise adversely affect any property right vested in the Corporation’s shareholders or is intended to limit, determine or address the merits or substance of any action or proceeding, but instead, the provisions of this Section 39.1 are solely procedural in nature.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, William J. Hieb, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DNB Financial Corporation (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ William J.  Hieb

William J.  Hieb

Chief Executive Officer & President

August 5, 2019

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT

TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gerald F. Sopp, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DNB Financial Corporation (the "Registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ Gerald F. Sopp

Gerald F. Sopp

Chief Financial Officer

August 5, 2019

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DNB Financial Corporation (the "Registrant") on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William J. Hieb, Chief Executive Officer and President of the Registrant, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ William J.  Hieb

William J. Hieb

Chief Executive Officer & President

August 5, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DNB Financial Corporation (the "Registrant") on Form 10-Q for the period ended  June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald F. Sopp, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Gerald F. Sopp

Gerald F. Sopp

Chief Financial Officer

August 5, 2019

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 05, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	DNB FINANCIAL CORP /PA/
Entity Central Index Key	0000713671
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,334,431

XML

Consolidated Statements of Financial Condition - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets
Cash and due from banks	$ 46,398	$ 17,321
Cash and cash equivalents	46,398	17,321
Available-for-sale investment securities at fair value (amortized cost of $70,406 and $98,765)	69,931	96,643
Held-to-maturity investment securities (fair value of $60,322 and $61,135)	59,949	62,026
Total investment securities	129,880	158,669
Loans held for sale	501	419
Loans	930,521	934,971
Allowance for credit losses	(6,672)	(6,675)
Net loans	923,849	928,296
Restricted stock	5,734	5,616
Office property and equipment, net	7,230	7,636
Operating lease right-of-use asset	3,792
Accrued interest receivable	4,297	4,207
Other real estate owned & other repossessed property	2,825	5,051
Bank owned life insurance (BOLI)	9,635	9,530
Core deposit intangible	302	343
Goodwill	15,525	15,525
Net deferred taxes	2,416	2,762
Other assets	2,025	2,860
Total assets	1,154,409	1,158,235
Liabilities
Non-interest-bearing deposits	178,454	164,746
Interest-bearing deposits:
NOW	214,806	236,071
Money market	236,707	235,023
Savings	79,489	77,979
Time	178,530	162,096
Brokered deposits	87,877	108,651
Total deposits	975,863	984,566
Federal Home Loan Bank of Pittsburgh (FHLBP) advances	31,203	32,935
Junior subordinated debentures	9,279	9,279
Subordinated debt	9,750	9,750
Other borrowings	272	3,305
Total borrowings	50,504	55,269
Accrued interest payable	641	646
Other liabilities	5,071	5,908
Operating lease liability	4,174
Total liabilities	1,036,253	1,046,389
Stockholders' Equity
Common stock, $1.00 par value; 20,000,000 shares authorized; 4,381,872 and 4,381,872 issued, respectively; 4,331,121 and 4,321,745 outstanding, respectively	4,382	4,391
Treasury stock, at cost; 50,751 and 60,127 shares, respectively	(961)	(1,130)
Surplus	69,613	69,333
Retained earnings	46,791	42,223
Accumulated other comprehensive loss	(1,669)	(2,971)
Total stockholders' equity	118,156	111,846
Total liabilities and stockholders' equity	$ 1,154,409	$ 1,158,235

XML

Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Consolidated Statements of Financial Condition [Abstract]
Available-for-sale Securities, Amortized Cost	$ 70,406	$ 98,765
Held-to-maturity Securities, Fair Value	$ 60,322	$ 61,135
Common stock par value per share	$ 1.00	$ 1.00
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares, issued	4,381,872	4,381,872
Common stock, shares, outstanding	4,331,121	4,321,745
Treasury stock, shares	50,751	60,127

XML

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest Income:
Interest and fees on loans	$ 11,358	$ 10,164	$ 22,648	$ 20,046
Interest and dividends on investment securities: Taxable	812	862	1,623	1,655
Interest and dividends on investment securities: Exempt from federal taxes	211	218	427	435
Interest on cash and cash equivalents	138	45	181	66
Total interest and dividend income	12,519	11,289	24,879	22,202
Interest Expense:
Interest on NOW, money market and savings	1,109	994	2,160	1,824
Interest on time deposits	916	333	1,744	658
Interest on brokered deposits	592	414	1,203	613
Interest on FHLB advances	145	239	370	540
Interest on repurchase agreements		6		12
Interest on junior subordinated debentures	129	113	256	218
Interest on subordinated debt	103	103	207	207
Interest on other borrowings	10	19	26	35
Total interest expense	3,004	2,221	5,966	4,107
Net interest income	9,515	9,068	18,913	18,095
Provision for credit losses	100	375	300	750
Net interest income after provision for credit losses	9,415	8,693	18,613	17,345
Non-interest Income:
Increase in cash surrender value of BOLI	53	52	105	104
Gains on sale of investment securities, net	1		4
Gains on sale of loans		10		10
Total non-interest income	1,344	1,332	2,618	2,605
Non-interest Expense:
Salaries and employee benefits	3,785	4,261	7,638	8,033
Furniture and equipment	663	550	1,204	1,039
Occupancy	627	634	1,352	1,331
Professional and consulting	440	424	1,017	827
Advertising and marketing	225	204	420	386
FDIC insurance	95	122	209	240
PA shares tax	260	243	520	485
Telecommunications	90	84	178	165
Loss on sale or write down of OREO, net	37	140	150	140
Transaction costs	519		519
Other expenses	771	878	1,583	1,624
Total non-interest expense	7,512	7,540	14,790	14,270
Income before income tax expense	3,247	2,485	6,441	5,680
Income tax expense	660	436	1,267	1,018
Net income	$ 2,587	$ 2,049	$ 5,174	$ 4,662
Earnings per common share:
Basic	$ 0.60	$ 0.48	$ 1.20	$ 1.09
Diluted	0.60	0.47	1.19	1.08
Cash dividends per common share	$ 0.07	$ 0.07	$ 0.14	$ 0.14
Weighted average common shares outstanding:
Basic	4,331,121	4,298,409	4,329,226	4,294,758
Diluted	4,336,254	4,314,418	4,333,181	4,311,696
Service Charges [Member]
Non-interest Income:
Non-interest Income	$ 246	$ 261	$ 537	$ 574
Wealth Management [Member]
Non-interest Income:
Non-interest Income	529	512	974	947
Mortgage Banking [Member]
Non-interest Income:
Non-interest Income	72	76	146	137
Other Fees [Member]
Non-interest Income:
Non-interest Income	$ 443	$ 421	$ 852	$ 833

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements of Comprehensive Income [Abstract]
Net income		$ 2,587	$ 2,049	$ 5,174	$ 4,662
Unrealized holding gains (losses) arising during the period
Before tax amount		838	(235)	1,647	(1,249)
Tax effect		(176)	49	(344)	262
Less reclassification for gains on sales of AFS investment securities included in net income
Before tax amount	[1]	(1)		(1)
Tax effect	[2]
Less reclassification for gains on sales of AFS investment securities included in net income		(1)		(1)
Other comprehensive income - securities		661	(186)	1,302	(987)
Total other comprehensive income (loss)		661	(186)	1,302	(987)
Total comprehensive income		$ 3,248	$ 1,863	$ 6,476	$ 3,675

[1] Amounts are included in "Gains on sale of investment securities, net" in the consolidated statements of income.

[2] Amounts are included in "Income tax expense" in the consolidated statements of income.

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Treasury Stock [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at Dec. 31, 2017	$ 4,379	$ (1,429)	$ 69,110	$ 32,272	$ (2,390)	$ 101,942
Net income				4,662		4,662
Other comprehensive income (loss)					(987)	(987)
Restricted stock compensation expense	8		196			204
Exercise of stock options	2		(2)
Shares withheld for employee taxes on stock option exercise and share award vest	(4)		(176)			(180)
Cash dividends - common				(601)		(601)
Non-cash funding of 401(k)		102	92			194
Non-cash funding of deferred comp. plan		51	48			99
Adoption impact - ASU 2018-02				471	(471)
Balance at Jun. 30, 2018	4,385	(1,276)	69,268	36,804	(3,848)	105,333
Balance at Mar. 31, 2018	4,383	(1,345)	69,238	35,056	(3,662)	103,670
Net income				2,049		2,049
Other comprehensive income (loss)					(186)	(186)
Restricted stock compensation expense	4		104			108
Exercise of stock options	1		(1)
Shares withheld for employee taxes on stock option exercise and share award vest	(3)		(140)			(143)
Cash dividends - common				(301)		(301)
Non-cash funding of 401(k)		44	42			86
Non-cash funding of deferred comp. plan		25	25			50
Balance at Jun. 30, 2018	4,385	(1,276)	69,268	36,804	(3,848)	105,333
Balance at Dec. 31, 2018	4,391	(1,130)	69,333	42,223	(2,971)	111,846
Net income				5,174		5,174
Other comprehensive income (loss)					1,302	1,302
Restricted stock compensation expense	(9)		152			143
Cash dividends - common				(606)		(606)
Non-cash funding of 401(k)		114	83			197
Non-cash funding of deferred comp. plan		55	45			100
Balance at Jun. 30, 2019	4,382	(961)	69,613	46,791	(1,669)	118,156
Balance at Mar. 31, 2019	4,382	(1,027)	69,454	44,507	(2,330)	114,986
Net income				2,587		2,587
Other comprehensive income (loss)					661	661
Restricted stock compensation expense			82			82
Cash dividends - common				(303)		(303)
Non-cash funding of 401(k)		42	48			90
Non-cash funding of deferred comp. plan		24	29			53
Balance at Jun. 30, 2019	$ 4,382	$ (961)	$ 69,613	$ 46,791	$ (1,669)	$ 118,156

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Restricted stock compensation expense, shares	0	4,012	0	4,908
Exercise of stock options, shares		1,372		2,338
Cash dividends- common stock per share	$ 0.07	$ 0.07	$ 0.14	$ 0.14
Non-cash funding of 401(k), shares	2,335	2,428	6,266	5,658
Non-cash funding of deferred comp. plan, shares	1,371	1,397	3,110	2,877

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash Flows From Operating Activities:
Net income	$ 5,174	$ 4,662
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	694	761
Provision for credit losses	300	750
Stock based compensation	143	204
Non-cash funding of retirement plans	297	293
Net gain on sale of securities	(4)
Net loss on sale or write down of OREO and other repossessed property	150	140
Earnings from investment in BOLI	(105)	(104)
Deferred tax expense		167
Proceeds from sales of mortgage loans	8,113	8,620
Mortgage loans originated for sale	(8,049)	(8,108)
Gain on sale of mortgage loans	(146)	(137)
Proceeds from sales of loans		188
Loans originated for sale		(178)
Gain on sale of loans		(10)
Write off of property and equipment	3
Increase in accrued interest receivable	(90)	(89)
Decrease in other assets	1,215	97
(Decrease) increase in accrued interest payable	(5)	7
(Decrease) increase in other liabilities	(837)	241
Amortization of operating lease right-of-use asset	372
Accretion of operating lease liability	(369)
Net Cash Provided by Operating Activities	6,856	7,504
Activity in available-for-sale securities:
Sales	13,905
Maturities, repayments and calls	45,875	6,953
Purchases	(31,546)
Activity in held-to-maturity securities:
Maturities, repayments and calls	2,148	304
Net (increase) decrease in restricted stock	(118)	691
Net decrease (increase) in loans	3,559	(40,102)
Purchases property and equipment	(192)	(122)
Purchase of third party ownership in OREO	(165)
Proceeds from sale of OREO and other repossessed property	2,829	33
Net Cash Provided By (Used In) Investing Activities	36,295	(32,243)
Cash Flows From Financing Activities:
Net (decrease) increase in deposits	(8,703)	72,912
Repayment of FHLBP advances	(66,732)	(200,641)
Funding of FHLBP advances	65,000	184,600
Net decrease in repurchase agreements		(6,414)
Decrease in other borrowings	(3,033)	(2,402)
Dividends paid	(606)	(601)
Payment of employee taxes on stock option exercise and share award vest		(180)
Net Cash (Used in) Provided by Financing Activities	(14,074)	47,274
Net Change in Cash and Cash Equivalents	29,077	22,535
Cash and Cash Equivalents at Beginning of Period	17,321	10,917
Cash and Cash Equivalents at End of Period	46,398	33,452
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for: Interest	5,971	4,100
Cash paid during the period for: Income taxes	719	600
Supplemental Disclosure of Non-cash Flow Information:
Transfers from loans to real estate owned and other repossessed property	$ 588	$ 274

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Basis of Presentation [Abstract]

Basis of Presentation

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, DNB First, National Association (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 amounts not affecting net income are reclassified when necessary to conform to current period classifications. The results of operations for the three and six months ended June 30, 2019 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, 2018. 

Subsequent Events-- Management has evaluated events and transactions occurring subsequent to June 30, 2019 for items that should potentially be recognized or disclosed in these Consolidated Financial Statements. The evaluation was conducted through the date these financial statements were issued.

Merger Agreement.  On June 5, 2019, S&T Bancorp, Inc. (“S&T”) and DNB entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which DNB will merge with and into S&T (the “Merger”), with S&T continuing as the surviving entity in the Merger, subject to the terms and conditions set forth therein.  Immediately following the Merger, DNB’s wholly owned bank subsidiary, DNB First, National Association, will merge with and into S&T’s wholly owned bank subsidiary, S&T Bank (the “Bank Merger”), with S&T Bank continuing as the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved by the Board of Directors of each of S&T and DNB.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), DNB shareholders will have the right to receive 1.22 shares of common stock, par value $2.50 per share, of S&T for each share of common stock, par value $1.00 per share, of DNB.

The merger is subject to customary closing conditions enumerated in the merger agreement, including receipt of regulatory approvals and the approval of DNB’s shareholders. It is anticipated that the transaction will close during the fourth quarter of 2019.

Recent Accounting Pronouncements-  

Accounting Developments Affecting DNB

In May 2014, the FASB issued ASU No. 2014-09, ‘‘Revenue from Contracts with Customers (Topic 606).’’ The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. During 2016 and 2017, the FASB issued ASU Nos. 2016-10, 2016-12, 2016-20, and 2017-13 that provided additional guidance related to the identification of performance obligations within a contract, assessing collectability, contract costs, and other technical corrections and improvements.

DNB adopted the new standards discussed above effective January 1, 2018 using the modified retrospective approach. A significant majority of DNB’s revenues are explicitly excluded from the scope of the new guidance including interest, dividend income, BOLI, gain/loss on sale of loans and investments on the Consolidated Statements of Income. The adoption of ASU 2014-09 did not require a cumulative adjustment to the opening balance of retained earnings as of January 1, 2018 and did not have a material impact on DNB’s Consolidated Statements of Financial Condition, Comprehensive Income, Stockholders’ Equity or Cash Flows for the year ended December 31, 2018. Non-interest income components in the scope of Topic 606 continue to be recognized when DNB’s performance obligations are complete or at the time of sale after a customer’s transaction posts in the account. Disclosures required for DNB’s revenue streams in the scope of ASU 2014-09 are included in Non-Interest Income in the following table.

Non-interest Income Non-interest income includes revenue from contracts with customers in the scope of ASU 2014-09 as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Non-interest Income:
Service charges:
Non-sufficient funds charges	$	122	$	142	$	255	$	301
Business analysis charges		46		44		92		85
Cycle charges		21		22		41		45
Lockbox fees		10		8		57		52
Stop payment fees		5		3		9		7
Wire transfer fees		22		22		44		43
Other service charges		20		20		39		41
Total service charges		246		261		537		574
Wealth management:
DNB Investments & Insurance		126		150		202		238
DNB First Investment Management & Trust		403		362		772		709
Total wealth management		529		512		974		947
Other fee income:
Cardholder interchange fees		286		269		539		514
Safe deposit box		24		26		47		50
Check printing		13		12		37		35
Merchant card processing		45		42		87		90
ATM surcharges for non-DNB customers		17		20		32		37
Other fee income		12		13		26		27
Total other fee income		397		382		768		753
Total Revenue from contracts with customers		1,172		1,155		2,279		2,274
Total Revenue not within the scope of ASC 606		172		177		339		331
Total non-interest income	$	1,344	$	1,332	$	2,618	$	2,605

Service charges on deposit accounts are recorded monthly when DNB’s performance obligations are complete. Deposit balances are disclosed in the Consolidated Statement of Condition. For transaction-based service charges such as non-sufficient funds charges, wire transfer fees, stop payment fees, ATM fees, and other transaction-based fees, revenue is recognized at the time of sale after the transaction posts in the customer’s account.

Wealth management revenue includes non-deposit products and services offered under the names “DNB Investment & Insurance” and “DNB First Investment Management & Trust”.

Through a third-party marketing agreement with Cetera Investment Services, LLC (“Cetera”), DNB Investment & Insurance offers a complete line of investment and insurance products. DNB’s performance obligation as an agent is to arrange for the sale of products by Cetera. Monthly, DNB recognizes commission fees in the amounts to which it is entitled in accordance with the terms of the marketing agreement for products sold. Shortly after a sale, the product provider remits the commission payment through Cetera to the Company, and the Company recognizes the revenue. DNB records revenue net of the cost of the services.

DNB First Investment Management & Trust offers a full line of investment and fiduciary services. DNB’s performance obligation is to manage investments, estates and trusts. Investment management and trust income is primarily comprised of fees earned from the management and administration of trusts, estates and investment agency portfolios. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized quarterly, based upon the quarter-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after quarter end through a direct charge to customers’ accounts. While managing estates and trusts, DNB contracts with a third-party tax preparation service. For tax preparation services, DNB’s obligation as an agent is to arrange for the performance of services by the third party. As tax services are rendered, DNB records revenue net of the cost of the services.

Cardholder interchange fees consist of revenue DNB is entitled per agreements with third party debit and credit card providers. DNB’s performance obligation as an agent is to arrange for cardholder services with its customers in accordance with fees and terms offered by the third-party service providers. Based on cardholder transactions reported by third party service providers, DNB recognizes fees for the amount it is contractually entitled.

DNB also contracts with third party providers for check printing, merchant card services, and ATM services. DNB’s performance obligation as an agent is to arrange for the services with its customers in accordance with fees and terms offered by the third-party service providers. Monthly, DNB recognizes fees for the amount it is contractually entitled.

DNB adopted ASU 2015-16, Business Combinations (Topic 805), in 2016: Simplifying the Accounting for Measurement Period Adjustments on a prospective basis. This amendment eliminates the requirement to account for adjustments to provisional amounts recognized in a business combination retrospectively. Instead, the acquirer will recognize the adjustments to provisional amounts during the period in which the adjustments are determined, including the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. DNB evaluated the impact of this guidance and it does not have a material impact to the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the guidance revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The guidance also amends certain disclosure requirements associated with fair value of financial instruments. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. As of June 30, 2019, DNB did not hold any equity investments (excluding restricted investments in bank stocks).  DNB does not expect to make significant purchases of equity investments; therefore, the adoption of this ASU is not expected to be material to DNB's consolidated financial statements. Adoption of the standard on January 1, 2018 also resulted in the use of an exit price rather than an entrance price to determine the fair value of loans not measured at fair value on a non-recurring basis in the consolidated balance sheets.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.DNB has determined that upon the adoption of ASU 2016-02 is required to recognize a right-of-use asset and a corresponding liability based on the then present value of such obligation. The adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $4.4 million and right-of-use asset of $4.0 million. The adoption of the new standard did not have a material impact on its Consolidated Statements of Income. Update 2018-11 - Leases (topic 842): Targeted Improvements provided an additional/optional transition method to adopt the new leases standard. Prior to this ASU issuance, a modified retrospective transition approach was required. The adoption of this ASU does not materially impact our Consolidated Statement of Financial Condition and Consolidated Statements of Changes in Stockholders’ Equity. Update 2018-20 - Leases (topic 842): Narrow-Scope Improvements for Lessors was released to better clarify the treatment of sales taxes and other similar taxes related to Lessor and Lessees costs and payments. The amendments in this update permit lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Also, certain lessor costs require lessors to exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties. DNB’s lessor income is immaterial; as such, this ASU does not materially impact our Consolidated Statement of Financial Condition or Consolidated Statements of Comprehensive Income. DNB adopted the use-of-hindsight practical expedient.

DNB recognized rent expense associated with our leases as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Operating lease cost:
Fixed rent expense	$	251	$	284	$	503	$	569
Net lease cost	$	251	$	284	$	503	$	569
Lease costs
Amortization of lease liability	$	186	$	-	$	372	$	-
Interest expense		65		-		131		-
Net lease cost	$	251	$	-	$	503	$	-

DNB had the following cash and non-cash activities associated with our leases:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Cash paid for the amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	250	$	242	$	500	$	484
Non-cash investing and financing activities:
Additions to ROU assets obtained from:
New operating lease liabilities	$	4,174	$	-	$	4,174	$	-

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," (ASU 2016-13), which addresses concerns regarding the perceived delay in recognition of credit losses under the existing incurred loss model. The amendment introduces a new, single model for recognizing credit losses on all financial instruments presented on cost basis. Under the new model, entities must estimate current expected credit losses by considering all available relevant information, including historical and current information, as well as reasonable and supportable forecasts of future events. The update also requires additional qualitative and quantitative information to allow users to better understand the credit risk within the portfolio and the methodologies for determining allowance. ASU 2016-13 is effective for DNB on January 1, 2020 and must be applied using the modified retrospective approach with limited exceptions. Early adoption is permitted. Although early adoption is permitted for fiscal years beginning after December 15, 2018, DNB does not plan to early adopt. DNB has established a CECL Implementation Team to assess the impact of this ASU on its consolidated financial position, results of operations, and cash flows. DNB has been preserving certain historical loan information from its core processing system in anticipation of adopting the standard and will be evaluating control and process framework, data, model, and resource requirements and areas where modifications will be required. DNB has selected a third party vendor to process and review various calculation methodologies and the approximate impact on DNB’s financial position, results of operations and cash flows. The team continues to assess the impact of the standard; however, DNB does not expect the adoption of this ASU to materially change its allowance for credit losses. The amount of the change in the allowance for credit losses upon adoption will be dependent upon the characteristics of the portfolio at the adoption date, as well as macroeconomic conditions and forecasts at that date. A cumulative effect adjustment will be made to retained earnings for the impact of the standard at the beginning of the period the standard is adopted.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The amendments in this update provide guidance for eight specific cash flow classification issues for which current guidance is unclear or does not exist, thereby reducing diversity in practice. For public companies, the update is effective for annual periods beginning after December 15, 2017. Accordingly, effective January 1, 2018, DNB adopted the pronouncement and it did not have a material impact to DNB’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The new guidance narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs, as defined by the ASU. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods, and should be applied prospectively. Early adoption is permitted. DNB will apply this guidance to applicable transactions after the adoption date.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under the amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value with its carrying amount. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount when measuring the goodwill impairment loss, if applicable. The update also eliminated the requirements for zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments are effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. DNB will not early adopt this ASU for its annual goodwill impairment test, and conducted a qualitative test (step zero) as of October 1, 2018 and determined that its Goodwill has not been impaired. The adoption of this ASU is not expected to have a material impact on DNB’s consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, DNB has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. ASU No. 2017-07 will not have a material impact on DNB Consolidated Financial Statements because the Pension plan has been frozen to new accruals since December 31, 2003, and thus, generated no service cost in any subsequent year.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718):  Scope of Modification Accounting; (“ASU 2017-09”).  ASU 2017-09 provides clarity by offering guidance on the scope of modification accounting for share-based payment awards and gives direction on which changes to the terms or conditions of these awards require an entity to apply modification accounting.  Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.  The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. DNB adopted the ASU on January 1, 2018 and the effects were immaterial.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income; (“ASU 2018-02”). This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act. Consequently, the reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users. However, because the ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. DNB adopted this ASU on January 1, 2018. The amount of this reclassification is $471,000.

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Investment Securities

6 Months Ended

Jun. 30, 2019

Investment Securities [Abstract]

Investment Securities

NOTE 2: INVESTMENT SECURITIES

The amortized cost and fair values of investment securities, as of the dates indicated, are summarized as follows:

	June 30, 2019
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,886	$	33	$	-	$	8,919
Government Sponsored Entities (GSE) mortgage-backed securities		341		7		-		348
Corporate bonds		13,728		245		-		13,973
Collateralized mortgage obligations GSE		1,044		2		(4)		1,042
State and municipal taxable		362		5		-		367
State and municipal tax-exempt		35,588		117		(32)		35,673
Total	$	59,949	$	409	$	(36)	$	60,322
Available For Sale
US Government agency obligations	$	24,189	$	15	$	(24)	$	24,180
GSE mortgage-backed securities		26,256		23		(306)		25,973
Collateralized mortgage obligations GSE		9,464		8		(177)		9,295
Corporate bonds		8,796		13		(7)		8,802
State and municipal tax-exempt		1,701		-		(20)		1,681
Total	$	70,406	$	59	$	(534)	$	69,931

	December 31, 2018
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,749	$	41	$	-	$	8,790
Government Sponsored Entities (GSE) mortgage-backed securities		389		-		-		389
Corporate bonds		13,851		124		(47)		13,928
Collateralized mortgage obligations GSE		1,159		-		(27)		1,132
State and municipal taxable		362		-		(3)		359
State and municipal tax-exempt		37,516		19		(998)		36,537
Total	$	62,026	$	184	$	(1,075)	$	61,135
Available For Sale
US Government agency obligations	$	48,082	$	-	$	(359)	$	47,723
GSE mortgage-backed securities		27,563		-		(1,005)		26,558
Collateralized mortgage obligations GSE		10,249		-		(441)		9,808
Corporate bonds		10,890		-		(186)		10,704
State and municipal tax-exempt		1,981		-		(131)		1,850
Total	$	98,765	$	-	$	(2,122)	$	96,643

Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The following table details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2019 and December 31, 2018.

	June 30, 2019
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Collateralized mortgage obligations GSE	$	171	$	(4)	$	-	$	-	$	171	$	(4)
State and municipal tax-exempt		5,537		(32)		-		-		5,537		(32)
Total	$	5,708	$	(36)	$	-	$	-	$	5,708	$	(36)
Available For Sale
US Government agency obligations	$	13,965	$	(24)	$	-	$	-	$	13,965	$	(24)
GSE mortgage-backed securities		22,599		(306)		-		-		22,599		(306)
Collateralized mortgage obligations GSE		6,980		(177)		-		-		6,980		(177)
Corporate bonds		5,028		(7)		-		-		5,028		(7)
State and municipal tax-exempt		1,681		(20)		-		-		1,681		(20)
Total	$	50,253	$	(534)	$	-	$	-	$	50,253	$	(534)

	December 31, 2018
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Corporate bonds	$	4,157	$	(47)	$	1,887	$	(15)	$	2,270	$	(32)
Collateralized mortgage obligations GSE		1,132		(27)		-		-		1,132		(27)
State and municipal taxable		359		(3)		-		-		359		(3)
State and municipal tax-exempt		26,466		(998)		2,045		(31)		24,421		(967)
Total	$	32,114	$	(1,075)	$	3,932	$	(46)	$	28,182	$	(1,029)
Available For Sale
US Government agency obligations	$	37,723	$	(359)	$	-	$	-	$	37,723	$	(359)
GSE mortgage-backed securities		26,558		(1,005)		-		-		26,558		(1,005)
Collateralized mortgage obligations GSE		9,808		(441)		-		-		9,808		(441)
Corporate bonds		10,704		(186)		2,035		(7)		8,669		(179)
State and municipal tax-exempt		1,850		(131)		-		-		1,850		(131)
Total	$	86,643	$	(2,122)	$	2,035	$	(7)	$	84,608	$	(2,115)

As of June 30, 2019, there were fourteen collateralized mortgage obligations GSE, eighteen GSE mortgage-backed securities, three U.S. agency obligations, nine tax-exempt municipalities, and three corporate bonds which were in an unrealized loss position. DNB does not intend to sell these securities and management of DNB does not expect to be required to sell any of these securities prior to a recovery of their cost basis. Management has reviewed all of these securities and believes that DNB will collect all principal and interest that is due on debt securities on a timely basis.  Management does not believe any individual unrealized loss as of June 30, 2019 represents an other-than-temporary impairment (OTTI). DNB reviews its investment portfolio on a quarterly basis, reviewing each investment for OTTI. The OTTI analysis focuses on condition of the issuers as well as duration and severity of impairment in determining OTTI. As of June 30, 2019, the following securities were reviewed:

Collateralized mortgage obligations GSE  There are fourteen impaired securities classified as collateralized mortgage obligations GSE, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 6.34% of its carrying value. All of these securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on all of these securities on a timely basis and none of these agencies have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

GSE mortgage-backed securities  There are eighteen impaired securities classified as GSE mortgage-backed securities, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 1.86% of its carrying value. These securities were issued and insured by FNMA, FHLMC or GNMA. DNB receives monthly principal and interest payments on these securities on a timely basis and none of these have ever defaulted on mortgage-backed principal or interest. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

US Government agency obligations  There are three impaired securities classified as agencies, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.41% of its carrying value. All of these securities were issued and insured by FHLB, FNMA or FHLMC. DNB has received timely interest payments on all of these securities and none of these agencies have ever defaulted on their bonds. DNB anticipates a recovery in the market value as the securities approach their maturity dates. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.  

State and municipal tax-exempt There are nine impaired securities in this category, which are comprised of intermediate to long-term municipal bonds, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 2.10% of its carrying value. All of the issues carry an “AA” or better underlying credit rating and/or have strong underlying fundamentals; included but not limited to annual financial reports, geographic location, population, and debt ratios. In certain cases, options for calls reduce the effective duration and in turn, future market value fluctuations. All issues are performing and are expected to continue to perform in accordance with their respective contractual terms and conditions. There have not been disruptions of any payments associated with any of these municipal securities. These bonds are investment grade and the value decline is related to the changes in interest rates. Of the nine municipal securities, four are school districts that have state school district credit enhancement programs and one of those has additional insurance. The remaining five are one uninsured school district, one insured township, and three uninsured townships, all of which have strong underlying ratings. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

Corporate bonds There are three impaired bonds classified as corporate bonds, all of which have been impaired for more than 12 months. The largest unrealized loss of a security in this group is 0.46% of its carrying value. The bonds are investment grade and the value decline is related to the changes in interest rates that occurred since the time of purchase and subsequent changes in spreads affecting the market prices. All of the issues carry a "BBB+" or better underlying credit support and were evaluated on the basis on their underlying fundamentals; included but not limited to annual financial reports, rating agency reports, capital strength and debt ratios. DNB anticipates a recovery in the market value as the securities approach their maturity dates or if interest rates decline from June 30, 2019 levels. Management concluded that these securities were not other-than-temporarily impaired at June 30, 2019.

The amortized cost and fair value of investment securities as of June 30, 2019, by final contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid without penalties.

	Held to Maturity				Available for Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,735	$	11,770	$	14,989	$	14,968
Due after one year through five years		14,149		14,245		18,448		18,455
Due after five years through ten years		27,454		27,697		14,329		14,214
Due after ten years		6,611		6,610		22,640		22,294
Total investment securities	$	59,949	$	60,322	$	70,406	$	69,931

The HTM securities called during the six months ended June 30, 2019 resulted in a gain on call of $3,000. Gains and losses resulting from investment sales, redemptions or calls were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross realized gains-AFS	$	10	$	-	$	10	$	-
Gross realized gains-HTM		-		-		3		-
Gross realized losses-AFS		(9)		-		(9)		-
Net realized gain	$	1	$	-	$	4	$	-

At June 30, 2019 and December 31, 2018, investment securities with a carrying value of approximately $69.7 million and $95.8 million, respectively, were pledged to secure public funds and for other purposes as required by law.

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Loans

6 Months Ended

Jun. 30, 2019

Loans [Abstract]

Loans

NOTE 3: LOANS

The following table sets forth information concerning the composition of total loans outstanding, as of the dates indicated.

(Dollars in thousands)	June 30, 2019		December 31, 2018
Residential mortgage	$	98,802	$	99,932
Commercial mortgage		521,060		535,735
Commercial:
Commercial term		179,294		166,335
Commercial construction		77,060		76,302
Consumer:
Home equity		49,492		51,536
Other		4,813		5,131
Total loans	$	930,521	$	934,971
Less allowance for credit losses		(6,672)		(6,675)
Net loans	$	923,849	$	928,296

Information concerning non-accrual loans is shown in the following tables:

					Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
(Dollars in thousands)	June 30, 2019		December 31, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	779	$	905	$	11	$	-	$	11	$	23	$	-	$	23
Commercial mortgage		563		1,307		1		-		1		27		-		27
Commercial:
Commercial term		2,026		2,300		22		-		22		65		-		65
Commercial construction		2,274		476		13		-		13		13		-		13
Consumer:
Home equity		143		391		(1)		-		(1)		6		-		6
Other		138		167		3		-		3		6		-		6
Total non-accrual loans	$	5,923	$	5,546	$	49	$	-	$	49	$	140	$	-	$	140
Loans 90 days past due and accruing		205		233		3		3		-		3		3		-
Total non-performing loans	$	6,128	$	5,779	$	52	$	3	$	49	$	143	$	3	$	140

			Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
(Dollars in thousands)	June 30, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	1,344	$	18	$	-	$	18	$	43	$	-	$	43
Commercial mortgage		1,593		28		-		28		58		-		58
Commercial:
Commercial term		2,583		46		-		46		90		-		90
Commercial construction		488		9		-		9		20		-		20
Consumer:
Home equity		498		3		-		3		8		-		8
Other		215		3		-		3		11		-		11
Total non-accrual loans	$	6,721	$	107	$	-	$	107	$	230	$	-	$	230
Loans 90 days past due and accruing		23		1		1		-		1		1		-
Total non-performing loans	$	6,744	$	108	$	1	$	107	$	231	$	1	$	230

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Allowance for Credit Losses

6 Months Ended

Jun. 30, 2019

Allowance for Credit Losses [Abstract]

Allowance for Credit Losses

NOTE 4: ALLOWANCE FOR CREDIT LOSSES

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a scheduled payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2019 and December 31, 2018. 

Age Analysis of Past Due Loans Receivable

	June 30, 2019
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	972	$	378	$	610	$	1,960	$	96,842	$	98,802	$	142
Commercial mortgage (less acquired with credit deterioration)		47		-		625		672		519,867		520,539		63
Acquired commercial mortgage with credit deterioration		-		-		-		-		521		521		-
Commercial:
Commercial term		920		-		296		1,216		178,078		179,294		-
Commercial construction		-		-		-		-		77,060		77,060		-
Consumer:
Home equity		168		120		143		431		49,061		49,492		-
Other		85		2		88		175		4,638		4,813		-
Total	$	2,192	$	500	$	1,762	$	4,454	$	926,067	$	930,521	$	205

	December 31, 2018
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	666	$	1,742	$	845	$	3,253	$	96,679	$	99,932	$	130
Commercial mortgage (less acquired with credit deterioration)		-		-		840		840		534,739		535,579		103
Acquired commercial mortgage with credit deterioration		-		-		-		-		156		156		-
Commercial:
Commercial term		20		37		957		1,014		165,321		166,335		-
Commercial construction		-		-		-		-		76,302		76,302		-
Consumer:
Home equity		398		144		247		789		50,747		51,536		-
Other		26		-		108		134		4,997		5,131		-
Total	$	1,110	$	1,923	$	2,997	$	6,030	$	928,941	$	934,971	$	233

DNB had $353,000 of residential mortgage loans in the process of foreclosure and $97,000 in residential real estate in other real estate owned as of June 30, 2019. DNB had no residential mortgage loans in the process of foreclosure and $97,000 of residential real estate in other real estate owned as of December 31, 2018.

The following tables summarize information in regards to impaired loans by loan portfolio class as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018.

Impaired Loans

		June 30, 2019						December 31, 2018
	Recorded		Unpaid		Related		Recorded		Unpaid		Related
	Investment		Principal		Allowance		Investment		Principal		Allowance
(Dollars in thousands)			Balance						Balance
With no related allowance recorded:
Residential mortgage	$	2,759	$	3,110	$	-	$	1,462	$	1,804	$	-
Commercial mortgage		1,513		1,766		-		1,532		1,780		-
Acquired commercial mortgage with credit deterioration		521		535		-		514		527
Commercial:
Commercial term		1,309		1,841		-		1,343		1,845		-
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		156		205		-
Total	$	8,823	$	10,099	$	-	$	6,014	$	7,210	$	-
With allowance recorded:
Residential mortgage		-		-		-		73		73		1
Commercial mortgage		-		-		-		737		802		78
Commercial:
Commercial term		717		744		161		957		1,015		203
Consumer:
Other		-		-		-		41		42		3
Total	$	717	$	744	$	161	$	1,808	$	1,932	$	285
Total:
Residential mortgage		2,759		3,110		-		1,535		1,877		1
Commercial mortgage		1,513		1,766		-		2,269		2,582		78
Acquired commercial mortgage with credit deterioration		521		535		-		514		527		-
Commercial:
Commercial term		2,026		2,585		161		2,300		2,860		203
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		197		247		3
Total	$	9,540	$	10,843	$	161	$	7,822	$	9,142	$	285

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	Average	Interest	Average	Interest	Average	Interest	Average	Interest
	Recorded	Income	Recorded	Income	Recorded	Income	Recorded	Income
(Dollars in thousands)	Investment	Recognized	Investment	Recognized	Investment	Recognized	Investment	Recognized
With no related allowance recorded:
Residential mortgage	$           2,770	$                16	$           2,109	$                  5	$           2,358	$                18	$           2,042	$                  6
Commercial mortgage	1,845	12	2,597	12	1,986	24	2,668	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	1,318	-	2,024	-	1,326	-	1,931	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	207	-	180	1	177	-
Total	$           8,167	$                40	$           8,708	$                27	$           7,574	$                65	$           8,686	$                49
With allowance recorded:
Residential mortgage	-	-	37	-	-	-	25	-
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	-	-	81	-	-	-	60	-
Commercial:
Commercial term	717	-	774	-	797	-	628	-
Consumer:
Other	-	-	71	-	-	-	90	-
Total	$              717	$                   -	$              963	$                   -	$              797	$                   -	$              805	$                   -
Total:
Residential mortgage	2,770	16	2,146	5	2,358	18	2,067	6
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	1,845	12	2,678	12	1,986	24	2,728	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	2,035	-	2,798	-	2,123	-	2,559	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	278	-	180	1	267	-
Total	$           8,884	$                40	$           9,671	$                27	$           8,371	$                65	$           9,491	$                49

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within DNB’s internal risk rating system as of June 30, 2019 and December 31, 2018.

Credit Quality Indicators

	June 30, 2019
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	96,078	$	142	$	2,582	$	-	$	98,802
Commercial mortgage		504,508		13,387		3,165		-		521,060
Commercial:
Commercial term		174,507		695		4,092		-		179,294
Commercial construction		73,325		935		2,800		-		77,060
Consumer:
Home equity		49,198		151		143		-		49,492
Other		4,674		-		139		-		4,813
Total	$	902,290	$	15,310	$	12,921	$	-	$	930,521

	December 31, 2018
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	97,577	$	-	$	2,355	$	-	$	99,932
Commercial mortgage		528,692		2,367		4,676		-		535,735
Commercial:
Commercial term		161,051		1,178		4,106		-		166,335
Commercial construction		72,077		3,603		622		-		76,302
Consumer:
Home equity		50,988		143		405		-		51,536
Other		4,924		-		207		-		5,131
Total	$	915,309	$	7,291	$	12,371	$	-	$	934,971

Troubled Debt Restructurings Loans whose terms are modified are classified as troubled debt restructurings (“TDR”) if DNB grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. During the six month period ended June 30, 2019, DNB classified two residential mortgage loans totaling $1.5 million and four commercial term loans totaling $421,000 as TDR. One residential mortgage loan’s rate was changed but the term was not extended, and the other residential mortgage loan and the four commercial term loans had their terms extended. During the six month period ended June 30, 2018, DNB classified one residential mortgage loan totaling $73,000 as TDR. The loan’s rate was changed but the term was not extended. Loans classified as troubled debt restructurings are designated as impaired. The recorded investments in troubled debt restructured loans at June 30, 2019 and December 31, 2018 are as follows:

	June 30, 2019
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	2,155	$	2,308	$	2,110
Commercial mortgage		992		992		950
Commercial term		421		421		421
Consumer:
Home equity		148		148		136
Other		40		42		30
Total	$	3,756	$	3,911	$	3,647
	December 31, 2018
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	676	$	805	$	630
Commercial mortgage		992		992		962
Consumer:
Home equity		148		148		140
Other		40		42		30
Total	$	1,856	$	1,987	$	1,762

At June 30, 2019, DNB had fifteen TDRs with recorded investment totaling $3,647,000,  ten of which are accruing loans in compliance with the terms of the modifications and five of which are non-accrual loans. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of June 30, 2019, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were nodefaults on TDRs during the six months ended June 30, 2019.

At December 31, 2018, DNB had nine TDRs with recorded investment totaling $1,762,000,  all of which were accruing loans in compliance with the terms of the modifications. As a result of collateral evaluations, specific reserves and charge-offs have been taken where appropriate. As of December 31, 2018, DNB recognized partial charge-offs totaling $151,000 on two residential loans prior to their restructuring and $2,000 on one consumer installment loan after its restructuring. As of December 31, 2018, there were no defaulted TDRs as all TDRs were current with respect to their associated forbearance agreements. There were no defaults on TDRs within twelve months of restructure during 2018. DNB classified one residential mortgage loan totaling $73,000 as TDR during the year ended December 31, 2018.

The following tables set forth the composition of DNB’s allowance for credit losses as of June 30, 2019 and December 31, 2018, the activity for the three and six months ended June 30, 2019 and 2018 and as of and for the year ended December 31, 2018.

Allowance for Credit Losses and Recorded Investment in Loans Receivables

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2019	$	156	$	3,493	$	1,189	$	1,080	$	183	$	43	$	575	$	6,719
Charge-offs		-		(23)		(22)		-		(128)		-		-		(173)
Recoveries		-		7		19		-		-		-		-		26
Provisions		(23)		102		(42)		(48)		154		(4)		(39)		100
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2019	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Charge-offs		-		(105)		(91)		-		(128)		(17)		-		(341)
Recoveries		4		7		27		-		-		-		-		38
Provisions		(32)		30		146		-		147		10		(1)		300
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672
Ending balance: individually evaluated for impairment	$	-	$	-	$	161	$	-	$	-	$	-	$	-	$	161
Ending balance: collectively evaluated for impairment	$	133	$	3,579	$	983	$	1,032	$	209	$	39	$	536	$	6,511
Loans receivables:
Ending balance	$	98,802	$	521,060	$	179,294	$	77,060	$	49,492	$	4,813			$	930,521
Ending balance: individually evaluated for impairment	$	2,759	$	1,513	$	2,026	$	2,274	$	279	$	168			$	9,019
Ending balance: acquired with credit deterioration	$	-	$	521	$	-	$	-	$	-	$	-			$	521
Ending balance: collectively evaluated for impairment	$	96,043	$	519,026	$	177,268	$	74,786	$	49,213	$	4,645			$	920,981
Reserve for unfunded loan commitments included in other liabilities	$	-	$	2	$	189	$	209	$	20	$	-			$	420

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2018	$	226	$	2,987	$	904	$	1,219	$	176	$	55	$	578	$	6,145
Charge-offs		(103)		(171)		(47)		-		-		(37)		-		(358)
Recoveries		25		-		-		-		-		1		-		26
Provisions		59		260		32		136		20		30		(162)		375
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2018	$	221	$	2,856	$	845	$	1,128	$	183	$	63	$	547	$	5,843
Charge-offs		(137)		(184)		(64)		-		-		(49)		-		(434)
Recoveries		26		-		2		-		-		1		-		29
Provisions		97		404		106		227		13		34		(131)		750
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188
Reserve for unfunded loan commitments included in other liabilities	$	-	$	3	$	183	$	201	$	21	$	-			$	408

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Ending balance - December 31, 2018	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Ending balance: individually evaluated for impairment	$	1	$	78	$	203	$	-	$	-	$	3	$	-	$	285
Ending balance: collectively evaluated for impairment	$	160	$	3,569	$	859	$	1,032	$	190	$	43	$	537	$	6,390
Loans receivables:
Ending balance	$	99,932	$	535,735	$	166,335	$	76,302	$	51,536	$	5,131			$	934,971
Ending balance: individually evaluated for impairment	$	1,535	$	2,269	$	2,300	$	476	$	531	$	197			$	7,308
Ending balance: acquired with credit deterioration	$	-	$	514	$	-	$	-	$	-	$	-			$	514
Ending balance: collectively evaluated for impairment	$	98,397	$	532,952	$	164,035	$	75,826	$	51,005	$	4,934			$	927,149
Reserve for unfunded loan commitments included in other liabilities	$	-	$	4	$	167	$	206	$	21	$	-			$	398

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 5: EARNINGS PER SHARE 

Basic earnings per share (“EPS”) is computed based on the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the treasury stock method and reflects the potential dilution that could occur from the exercise of stock options, and warrants and the amortized portion of unvested stock awards. Stock options and unvested stock awards for which the exercise or the grant price exceeds the average market price over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation. Treasury shares are not deemed outstanding for calculations. There were no outstanding stock warrants, no anti-dilutive stock options, and no anti-dilutive stock awards outstanding at June 30, 2019 and June 30, 2018. The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended					Six Months Ended
	June 30, 2019					June 30, 2019
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,587	4,331	$	0.60	$	5,174	4,329	$	1.20
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	5		-		-	4		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,587	4,336	$	0.60	$	5,174	4,333	$	1.19

	Three Months Ended					Six Months Ended
	June 30, 2018					June 30, 2018
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,049	4,298	$	0.48	$	4,662	4,295	$	1.09
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	16		(0.01)		-	17		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,049	4,314	$	0.47	$	4,662	4,312	$	1.08

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Loss [Abstract]

Accumulated Other Comprehensive Loss

NOTE 6: ACCUMULATED OTHER COMPREHENSIVE LOSS 

The components of accumulated other comprehensive loss included in stockholders' equity are as follows:

Accumulated Other Comprehensive Loss	Before-Tax		Tax		Net-of-Tax
(Dollars in thousands)	Amount		Effect		Amount
June 30, 2019
Net unrealized loss on AFS securities	$	(475)	$	100	$	(375)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(2,112)	$	443	$	(1,669)
December 31, 2018
Net unrealized loss on AFS securities	$	(2,122)	$	445	$	(1,677)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(3,759)	$	788	$	(2,971)

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Subordinated Debentures And Notes

6 Months Ended

Jun. 30, 2019

Subordinated Debentures And Notes [Abstract]

Subordinated Debentures And Notes

NOTE 7: SUBORDINATED DEBENTURES AND NOTES

DNB has two issuances of junior subordinated debentures (the “debentures”) as follows. The majority of the proceeds of each issuance were invested in DNB’s subsidiary, DNB First, National Association, to increase the Bank’s capital levels. The junior subordinated debentures issued in each case qualify as a component of capital for regulatory purposes. DNB Capital Trust I and II are special purpose Delaware business trusts, which are not consolidated.

DNB Capital Trust I

DNB’s first issuance of junior subordinated debentures was on July 20, 2001. These debentures are floating rate and were issued to DNB Capital Trust I, a Delaware business trust in which DNB owns all of the common equity. DNB Capital Trust I issued $5.0 million of floating rate (6 month Libor plus 3.75%, with a cap of 12%) capital preferred securities to a qualified institutional buyer. The proceeds of these securities were used by the Trust, along with DNB’s capital contribution, to purchase $5.2 million principal amount of DNB’s floating rate junior subordinated debentures. The preferred securities have been redeemable since July 25, 2006 and must be redeemed upon maturity of the debentures on July 25, 2031.

DNB Capital Trust II

DNB’s second issuance of junior subordinated debentures was on March 30, 2005. These are floating rate and were issued to DNB Capital Trust II, a Delaware business trust in which DNB owns all of the common equity. DNB Capital Trust II issued $4.0 million of floating rate (the rate was fixed at 6.56% for the first 5 years and is now adjusting at a rate of 3-month LIBOR plus 1.77%) capital preferred securities. The proceeds of these securities were used by the Trust, along with DNB’s capital contribution, to purchase $4.1 million principal amount of DNB’s floating rate junior subordinated debentures. The preferred securities have been redeemable since May 23, 2010. The preferred securities must be redeemed upon maturity of the debentures on May 23, 2035.

Subordinated Note

On March 5, 2015, DNB Financial Corporation entered into a Subordinated Note Purchase Agreement (the “Agreement”) with an accredited investor under which DNB issued a $9.75 million subordinated note (the “Note”) to the investor. The Note has a maturity date of March 6, 2025, and bears interest at a fixed rate of 4.25% per annum for the first 5 years and then will float at the Wall Street Journal Prime rate plus 1.00%, provided that the interest rate applicable to the outstanding principal balance will at no time be less than 3.0% and more than 5.75% per annum.

DNB may, at its option, beginning with the first interest payment date after March 6, 2019, and on any interest payment date thereafter, redeem the Note, in whole or in part, at par plus accrued and unpaid interest to the date of redemption. The Note is not subject to repayment at the option of the noteholder.

The Note is unsecured and ranks junior in right of payment to DNB’s senior indebtedness and to DNB’s obligations to its general creditors and qualifies as Tier 2 capital for regulatory purposes.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 8: STOCK-BASED COMPENSATION

Stock Option Plan

DNB has a Stock Option Plan for employees and directors. Under the plan, options (both qualified and non-qualified) to purchase a maximum of 793,368 (as adjusted for subsequent stock dividends) shares of DNB’s common stock could be issued to employees and directors. Under the plan, option exercise prices must equal the fair market value of the shares on the date of option grant and the option exercise period may not exceed ten years. Vesting of options under the plan is determined by the Plan Committee. There were 354,090 shares available for grant at June 30, 2019. All options are immediately exercisable. During the six months ended June 30, 2019 and 2018, DNB had no expenses related to the plan. Under the Stock Option Plan, no shares were exercised during the six months ended June 30, 2019. Under the Stock Option Plan, 5,300 shares were exercised during the six months ended June 30, 2018. The shares awarded from the non-qualified cashless exercises resulted in an increase in shares outstanding of 2,338 shares. There was a cash equivalent of 2,962 shares used to pay all applicable taxes on the transactions. DNB had no stock option activity during the six months ended June 30, 2019 and had no stock options outstanding at June 30, 2019 or December 31, 2018. Stock option activity is indicated below.

	Number		Weighted Average
	Outstanding		Exercise Price
Outstanding January 1, 2018		16,450	$	10.31
Issued		-		-
Exercised		5,300		10.31
Forfeited		-		-
Expired		-		-
Outstanding June 30, 2018		11,150	$	10.31

Other Stock-Based Compensation

DNB maintains an Incentive Equity and Deferred Compensation Plan (the "Plan"). The Plan provides that up to 493,101 (as adjusted for subsequent stock dividends) shares of common stock may be granted, at the discretion of the Board, to individuals of the Corporation. Shares already granted are issuable on the earlier of three or four years (cliff vesting period) after the date of the grant or a change in control of DNB if the recipients are then employed by DNB (“Vest Date”).  Upon issuance of the shares, resale of the shares is restricted for an additional one year, during which the shares may not be sold, pledged or otherwise disposed of. Prior to the Vest Date and in the event the recipient terminates association with DNB for reasons other than death, disability or change in control, the recipient forfeits all rights to the shares that would otherwise be issued under the grant.

Share awards granted by the Plan were recorded at the date of award based on the market value of shares. Awards are being amortized to expense over a three or four year cliff-vesting period. DNB records compensation expense equal to the value of the shares being amortized. For the three and six month periods ended June 30, 2019, $82,000 and $143,000 was amortized to expense. For the three and six month periods ended June 30, 2018, $108,000 and $204,000 was amortized to expense.

As of June 30, 2019, there was approximately $568,000 in additional compensation that will be recognized over the weighted average life of 1.60 years. At June 30, 2019, 482,501 shares were reserved for future grants under the Plan. 

There were 8,500 restricted shares that vested during the six months ended June 30, 2018. The shares awarded from the cashless exercises resulted in an increase in shares outstanding of 4,908 shares. There was a cash equivalent of 3,492 shares used to pay all applicable taxes on the transactions. There were no such transactions during the six months ended June 30, 2019. Stock grant activity is indicated below:

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2019	18,590	$	30.90
Granted	10,600		39.36
Forfeited	-		-
Vested	-		-
Non-vested stock awards—June 30, 2019	29,190	$	33.98

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2018	31,130	$	26.53
Granted	10,750		33.98
Forfeited	4,345		28.92
Vested	8,500		26.69
Non-vested stock awards—June 30, 2018	29,035	$	28.88

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes [Abstract]

Income Taxes

NOTE 9:  INCOME TAXES

As of June 30, 2019, DNB had no material unrecognized tax benefits or accrued interest and penalties. It is DNB’s policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.  Federal and state tax years 2016 through 2018 were open for examination as of June 30, 2019.

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Fair Value

6 Months Ended

Jun. 30, 2019

Fair Value [Abstract]

Fair Value

NOTE 10:  FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy based on the nature of data inputs for fair value determinations, under which DNB is required to value each asset within its scope using assumptions that market participations would utilize to value that asset. When DNB uses its own assumptions, it is required to disclose additional information about the assumptions used and the effect of the measurement on earnings or the net change in assets for the period.

The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1—Quoted prices in active markets for identical securities.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Instruments whose significant value drivers are unobservable.

A description of the valuation methodologies used for assets measured at fair value is set forth below:

DNB’s available-for-sale investment securities, which generally include U.S. government agencies and mortgage backed securities, collateralized mortgage obligations, corporate bonds and equity securities are reported at fair value. These securities are valued by an independent third party (“preparer”). The preparer’s evaluations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their evaluated pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

U.S. Government agencies are evaluated and priced using multi‑dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other securities are evaluated using a broker-quote based application, including quotes from issuers.

Impaired loans are those loans that the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

OREO assets are adjusted to fair value less estimated selling costs upon transfer of the loans to OREO establishing a new cost basis. Subsequently, OREO assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When recorded at fair value, these assets are included as Level 3 fair values.

The following tables present assets measured at fair value on a recurring basis as of June 30, 2019and December 31, 2018:

		June 30, 2019
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	24,180	$	-	$	24,180
GSE mortgage-backed securities		-		25,973		-		25,973
Collateralized mortgage obligations GSE		-		9,295		-		9,295
Corporate bonds		-		8,802		-		8,802
State and municipal tax-exempt		-		1,681		-		1,681
Total	$	-	$	69,931	$	-	$	69,931
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	691	$	691
OREO and other repossessed property		-		-		1,430		1,430
Total	$	-	$	-	$	2,121	$	2,121

		December 31, 2018
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	47,723	$	-	$	47,723
GSE mortgage-backed securities		-		26,558		-		26,558
Collateralized mortgage obligations GSE		-		9,808		-		9,808
Corporate bonds		-		10,704		-		10,704
State and municipal tax-exempt		-		1,850		-		1,850
Total	$	-	$	96,643	$	-	$	96,643
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	1,523	$	1,523
OREO and other repossessed property		-		-		1,247		1,247
Total	$	-	$	-	$	2,770	$	2,770

The following table presents additional information about assets measured at fair value on a nonrecurring basis and for which DNB has utilized Level 3 inputs to determine fair value:

June 30, 2019
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Commercial term	$	556	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-8%	(-4%)
Impaired loans - Consumer other		135	Appraisal of collateral (1)	Disposal costs (2)	-7%	to	-8%	(-8%)
Impaired loan total	$	691
Other real estate owned	$	1,430		Disposal costs (2)	-8%	to	-8%	(-8%)

(1)

(2)

December 31, 2018
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Residential mortgage	$	72	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loans - Commercial mortgage		659	Appraisal of collateral (1)	Disposal costs (2)	-14%	to	-14%	(-14%)
Impaired loans - Commercial term		754	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-16%	(-11%)
Impaired loans - Consumer other		38	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loan total	$	1,523
Other real estate owned	$	1,247		Disposal costs (2)	-8%	to	-8%	(-8%)

⁽¹⁾ Fair value is generally determined through independent appraisals or sales contracts of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

⁽²⁾ Appraisals are adjusted by management for qualitative factors and disposal costs.

Impaired loans.Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $9.5 million at June 30, 2019. Of this, $717,000 had specific valuation allowances of $161,000, leaving a fair value of $556,000 as of June 30, 2019. In addition, DNB had $152,000 in impaired loans that were partially charged down by $17,000, leaving $135,000 at fair value as of June 30, 2019. The total fair value of impaired loans at June 30, 2019 was $691,000.  

Impaired loans had a carrying amount of $7.8 million at December 31, 2018. Of this, $1.8 million had specific valuation allowances of $285,000, leaving a fair value of $1.5 million at December 31, 2018. DNB did not have any impaired loans that were partially charged down that didn’t already have a specific reserve during the year ended December 31, 2018. The total fair value of impaired loans at December 31, 2018 was $1.5 million.

Other Real Estate Owned & other repossessed property.  Other real estate owned (“OREO”) consists of properties acquired as a result of, or in-lieu-of, foreclosure. Properties or other assets are classified as OREO and other repossessed property are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of the assets are capitalized and costs relating to holding the assets are charged to expense. DNB had $2.8 million of such assets at June 30, 2019, $2.7 million of which was OREO and $106,000 was in other repossessed property. DNB had $5.1 million of such assets at December 31, 2018, which consisted of $4.9 million in OREO and $142,000 in other repossessed property. DNB wrote down the carrying values of certain assets totaling $1.5 million by $105,000 to $1.4 million during the six month period ended June 30, 2019. DNB wrote down the carrying values of certain assetstotaling $1.6 million by $355,000to $1.2 million during the year ended December 31, 2018.

DNB's policy is to recognize transfer between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Level 1 and 2 for the six months ended June 30, 2019.

Below is management’s estimate of the fair value of all financial instruments, whether carried at cost or fair value on the Company’s consolidated statement of financial condition. The carrying amounts and fair values of financial instruments at June 30, 2019 and December 31, 2018 are as follows:

		June 30, 2019
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	46,398	$	46,398	$	46,398	$	-	$	-
AFS investment securities		69,931		69,931		-		69,931		-
HTM investment securities		59,949		60,322		-		58,322		2,000
Restricted stock		5,734		5,734		-		5,734		-
Loans held-for-sale		501		515		-		-		515
Loans, net of allowance, including impaired		923,849		921,497		-		-		921,497
Accrued interest receivable		4,297		4,297		-		4,297		-
Financial liabilities
Deposits:
Non-interest-bearing		178,454		178,454		-		178,454		-
NOW, Money market, and Savings		531,002		531,002		-		531,002		-
Time		178,530		178,808		-		178,808		-
Brokered		87,877		87,369		-		87,369		-
FHLBP advances		31,203		31,112		-		31,112		-
Junior subordinated debentures and other borrowings		9,279		9,990		-		9,990		-
Subordinated debt		9,750		9,271		-		9,271		-
Accrued interest payable		641		641		-		641		-
Off-balance sheet instruments		-		-		-		-		-

		December 31, 2018
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	17,321	$	17,321	$	17,321	$	-	$	-
AFS investment securities		96,643		96,643		-		96,643		-
HTM investment securities		62,026		61,135		-		59,135		2,000
Restricted stock		5,616		5,616		-		5,616		-
Loans held-for-sale		419		429		-		-		429
Loans, net of allowance, including impaired		928,296		914,822		-		-		914,822
Accrued interest receivable		4,207		4,207		-		4,207		-
Financial liabilities
Deposits:
Non-interest-bearing		164,746		164,746		-		164,746		-
NOW, Money market, and Savings		549,073		549,073		-		549,073		-
Time		162,096		160,944		-		160,944		-
Brokered		108,651		97,250		-		97,250		-
FHLBP advances		32,935		32,347		-		32,347		-
Junior subordinated debentures and other borrowings		9,279		10,285		-		10,285		-
Subordinated debt		9,750		9,505		-		9,505		-
Accrued interest payable		646		646		-		646		-
Off-balance sheet instruments		-		-		-		-		-

The specific estimation methods and assumptions used can have a substantial impact on the resulting fair values of financial instruments. Following is a brief summary of the significant assumptions, methods, and estimates used in estimating fair value.

Limitations  Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time DNB’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of DNB’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Basis of Presentation (Policy)

6 Months Ended

Jun. 30, 2019

Basis of Presentation [Abstract]

Principles of Consolidation

The accompanying unaudited consolidated financial statements of DNB Financial Corporation (referred to herein as the "Corporation" or "DNB") and its subsidiary, DNB First, National Association (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 amounts not affecting net income are reclassified when necessary to conform to current period classifications. The results of operations for the three and six months ended June 30, 2019 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, 2018. 

Subsequent Events

Subsequent Events-- Management has evaluated events and transactions occurring subsequent to June 30, 2019 for items that should potentially be recognized or disclosed in these Consolidated Financial Statements. The evaluation was conducted through the date these financial statements were issued.

Merger Agreement.  On June 5, 2019, S&T Bancorp, Inc. (“S&T”) and DNB entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which DNB will merge with and into S&T (the “Merger”), with S&T continuing as the surviving entity in the Merger, subject to the terms and conditions set forth therein.  Immediately following the Merger, DNB’s wholly owned bank subsidiary, DNB First, National Association, will merge with and into S&T’s wholly owned bank subsidiary, S&T Bank (the “Bank Merger”), with S&T Bank continuing as the surviving entity in the Bank Merger. The Merger Agreement was unanimously approved by the Board of Directors of each of S&T and DNB.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), DNB shareholders will have the right to receive 1.22 shares of common stock, par value $2.50 per share, of S&T for each share of common stock, par value $1.00 per share, of DNB.

The merger is subject to customary closing conditions enumerated in the merger agreement, including receipt of regulatory approvals and the approval of DNB’s shareholders. It is anticipated that the transaction will close during the fourth quarter of 2019.

Recent Accounting Pronouncements

Recent Accounting Pronouncements-  

Accounting Developments Affecting DNB

In May 2014, the FASB issued ASU No. 2014-09, ‘‘Revenue from Contracts with Customers (Topic 606).’’ The updated standard is a new comprehensive revenue recognition model that requires revenue to be recognized in a manner that depicts the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year. During 2016 and 2017, the FASB issued ASU Nos. 2016-10, 2016-12, 2016-20, and 2017-13 that provided additional guidance related to the identification of performance obligations within a contract, assessing collectability, contract costs, and other technical corrections and improvements.

DNB adopted the new standards discussed above effective January 1, 2018 using the modified retrospective approach. A significant majority of DNB’s revenues are explicitly excluded from the scope of the new guidance including interest, dividend income, BOLI, gain/loss on sale of loans and investments on the Consolidated Statements of Income. The adoption of ASU 2014-09 did not require a cumulative adjustment to the opening balance of retained earnings as of January 1, 2018 and did not have a material impact on DNB’s Consolidated Statements of Financial Condition, Comprehensive Income, Stockholders’ Equity or Cash Flows for the year ended December 31, 2018. Non-interest income components in the scope of Topic 606 continue to be recognized when DNB’s performance obligations are complete or at the time of sale after a customer’s transaction posts in the account. Disclosures required for DNB’s revenue streams in the scope of ASU 2014-09 are included in Non-Interest Income in the following table.

Non-interest Income Non-interest income includes revenue from contracts with customers in the scope of ASU 2014-09 as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Non-interest Income:
Service charges:
Non-sufficient funds charges	$	122	$	142	$	255	$	301
Business analysis charges		46		44		92		85
Cycle charges		21		22		41		45
Lockbox fees		10		8		57		52
Stop payment fees		5		3		9		7
Wire transfer fees		22		22		44		43
Other service charges		20		20		39		41
Total service charges		246		261		537		574
Wealth management:
DNB Investments & Insurance		126		150		202		238
DNB First Investment Management & Trust		403		362		772		709
Total wealth management		529		512		974		947
Other fee income:
Cardholder interchange fees		286		269		539		514
Safe deposit box		24		26		47		50
Check printing		13		12		37		35
Merchant card processing		45		42		87		90
ATM surcharges for non-DNB customers		17		20		32		37
Other fee income		12		13		26		27
Total other fee income		397		382		768		753
Total Revenue from contracts with customers		1,172		1,155		2,279		2,274
Total Revenue not within the scope of ASC 606		172		177		339		331
Total non-interest income	$	1,344	$	1,332	$	2,618	$	2,605

Service charges on deposit accounts are recorded monthly when DNB’s performance obligations are complete. Deposit balances are disclosed in the Consolidated Statement of Condition. For transaction-based service charges such as non-sufficient funds charges, wire transfer fees, stop payment fees, ATM fees, and other transaction-based fees, revenue is recognized at the time of sale after the transaction posts in the customer’s account.

Wealth management revenue includes non-deposit products and services offered under the names “DNB Investment & Insurance” and “DNB First Investment Management & Trust”.

Through a third-party marketing agreement with Cetera Investment Services, LLC (“Cetera”), DNB Investment & Insurance offers a complete line of investment and insurance products. DNB’s performance obligation as an agent is to arrange for the sale of products by Cetera. Monthly, DNB recognizes commission fees in the amounts to which it is entitled in accordance with the terms of the marketing agreement for products sold. Shortly after a sale, the product provider remits the commission payment through Cetera to the Company, and the Company recognizes the revenue. DNB records revenue net of the cost of the services.

DNB First Investment Management & Trust offers a full line of investment and fiduciary services. DNB’s performance obligation is to manage investments, estates and trusts. Investment management and trust income is primarily comprised of fees earned from the management and administration of trusts, estates and investment agency portfolios. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized quarterly, based upon the quarter-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after quarter end through a direct charge to customers’ accounts. While managing estates and trusts, DNB contracts with a third-party tax preparation service. For tax preparation services, DNB’s obligation as an agent is to arrange for the performance of services by the third party. As tax services are rendered, DNB records revenue net of the cost of the services.

Cardholder interchange fees consist of revenue DNB is entitled per agreements with third party debit and credit card providers. DNB’s performance obligation as an agent is to arrange for cardholder services with its customers in accordance with fees and terms offered by the third-party service providers. Based on cardholder transactions reported by third party service providers, DNB recognizes fees for the amount it is contractually entitled.

DNB also contracts with third party providers for check printing, merchant card services, and ATM services. DNB’s performance obligation as an agent is to arrange for the services with its customers in accordance with fees and terms offered by the third-party service providers. Monthly, DNB recognizes fees for the amount it is contractually entitled.

DNB adopted ASU 2015-16, Business Combinations (Topic 805), in 2016: Simplifying the Accounting for Measurement Period Adjustments on a prospective basis. This amendment eliminates the requirement to account for adjustments to provisional amounts recognized in a business combination retrospectively. Instead, the acquirer will recognize the adjustments to provisional amounts during the period in which the adjustments are determined, including the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. DNB evaluated the impact of this guidance and it does not have a material impact to the consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the guidance revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The guidance also amends certain disclosure requirements associated with fair value of financial instruments. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. As of June 30, 2019, DNB did not hold any equity investments (excluding restricted investments in bank stocks).  DNB does not expect to make significant purchases of equity investments; therefore, the adoption of this ASU is not expected to be material to DNB's consolidated financial statements. Adoption of the standard on January 1, 2018 also resulted in the use of an exit price rather than an entrance price to determine the fair value of loans not measured at fair value on a non-recurring basis in the consolidated balance sheets.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.DNB has determined that upon the adoption of ASU 2016-02 is required to recognize a right-of-use asset and a corresponding liability based on the then present value of such obligation. The adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $4.4 million and right-of-use asset of $4.0 million. The adoption of the new standard did not have a material impact on its Consolidated Statements of Income. Update 2018-11 - Leases (topic 842): Targeted Improvements provided an additional/optional transition method to adopt the new leases standard. Prior to this ASU issuance, a modified retrospective transition approach was required. The adoption of this ASU does not materially impact our Consolidated Statement of Financial Condition and Consolidated Statements of Changes in Stockholders’ Equity. Update 2018-20 - Leases (topic 842): Narrow-Scope Improvements for Lessors was released to better clarify the treatment of sales taxes and other similar taxes related to Lessor and Lessees costs and payments. The amendments in this update permit lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Also, certain lessor costs require lessors to exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties. DNB’s lessor income is immaterial; as such, this ASU does not materially impact our Consolidated Statement of Financial Condition or Consolidated Statements of Comprehensive Income. DNB adopted the use-of-hindsight practical expedient.

DNB recognized rent expense associated with our leases as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Operating lease cost:
Fixed rent expense	$	251	$	284	$	503	$	569
Net lease cost	$	251	$	284	$	503	$	569
Lease costs
Amortization of lease liability	$	186	$	-	$	372	$	-
Interest expense		65		-		131		-
Net lease cost	$	251	$	-	$	503	$	-

DNB had the following cash and non-cash activities associated with our leases:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Cash paid for the amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	250	$	242	$	500	$	484
Non-cash investing and financing activities:
Additions to ROU assets obtained from:
New operating lease liabilities	$	4,174	$	-	$	4,174	$	-

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," (ASU 2016-13), which addresses concerns regarding the perceived delay in recognition of credit losses under the existing incurred loss model. The amendment introduces a new, single model for recognizing credit losses on all financial instruments presented on cost basis. Under the new model, entities must estimate current expected credit losses by considering all available relevant information, including historical and current information, as well as reasonable and supportable forecasts of future events. The update also requires additional qualitative and quantitative information to allow users to better understand the credit risk within the portfolio and the methodologies for determining allowance. ASU 2016-13 is effective for DNB on January 1, 2020 and must be applied using the modified retrospective approach with limited exceptions. Early adoption is permitted. Although early adoption is permitted for fiscal years beginning after December 15, 2018, DNB does not plan to early adopt. DNB has established a CECL Implementation Team to assess the impact of this ASU on its consolidated financial position, results of operations, and cash flows. DNB has been preserving certain historical loan information from its core processing system in anticipation of adopting the standard and will be evaluating control and process framework, data, model, and resource requirements and areas where modifications will be required. DNB has selected a third party vendor to process and review various calculation methodologies and the approximate impact on DNB’s financial position, results of operations and cash flows. The team continues to assess the impact of the standard; however, DNB does not expect the adoption of this ASU to materially change its allowance for credit losses. The amount of the change in the allowance for credit losses upon adoption will be dependent upon the characteristics of the portfolio at the adoption date, as well as macroeconomic conditions and forecasts at that date. A cumulative effect adjustment will be made to retained earnings for the impact of the standard at the beginning of the period the standard is adopted.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). The amendments in this update provide guidance for eight specific cash flow classification issues for which current guidance is unclear or does not exist, thereby reducing diversity in practice. For public companies, the update is effective for annual periods beginning after December 15, 2017. Accordingly, effective January 1, 2018, DNB adopted the pronouncement and it did not have a material impact to DNB’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The new guidance narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs, as defined by the ASU. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods, and should be applied prospectively. Early adoption is permitted. DNB will apply this guidance to applicable transactions after the adoption date.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under the amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value with its carrying amount. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount when measuring the goodwill impairment loss, if applicable. The update also eliminated the requirements for zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments are effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. DNB will not early adopt this ASU for its annual goodwill impairment test, and conducted a qualitative test (step zero) as of October 1, 2018 and determined that its Goodwill has not been impaired. The adoption of this ASU is not expected to have a material impact on DNB’s consolidated financial statements. 

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item (e.g., Salaries and Benefits) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately (e.g., Other Noninterest Expense) from the line item that includes the service cost. ASU No. 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, however, DNB has decided not to early adopt. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. ASU No. 2017-07 will not have a material impact on DNB Consolidated Financial Statements because the Pension plan has been frozen to new accruals since December 31, 2003, and thus, generated no service cost in any subsequent year.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718):  Scope of Modification Accounting; (“ASU 2017-09”).  ASU 2017-09 provides clarity by offering guidance on the scope of modification accounting for share-based payment awards and gives direction on which changes to the terms or conditions of these awards require an entity to apply modification accounting.  Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.  The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. DNB adopted the ASU on January 1, 2018 and the effects were immaterial.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income; (“ASU 2018-02”). This ASU allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for certain income tax effects stranded in AOCI as a result of the Tax Act. Consequently, the reclassification eliminates the stranded tax effects resulting from the Tax Act and is intended to improve the usefulness of information reported to financial statement users. However, because the ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. DNB adopted this ASU on January 1, 2018. The amount of this reclassification is $471,000.

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Fair Value (Policy)

6 Months Ended

Jun. 30, 2019

Fair Value [Abstract]

Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy based on the nature of data inputs for fair value determinations, under which DNB is required to value each asset within its scope using assumptions that market participations would utilize to value that asset. When DNB uses its own assumptions, it is required to disclose additional information about the assumptions used and the effect of the measurement on earnings or the net change in assets for the period.

The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1—Quoted prices in active markets for identical securities.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Instruments whose significant value drivers are unobservable.

A description of the valuation methodologies used for assets measured at fair value is set forth below:

DNB’s available-for-sale investment securities, which generally include U.S. government agencies and mortgage backed securities, collateralized mortgage obligations, corporate bonds and equity securities are reported at fair value. These securities are valued by an independent third party (“preparer”). The preparer’s evaluations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their evaluated pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

U.S. Government agencies are evaluated and priced using multi‑dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other securities are evaluated using a broker-quote based application, including quotes from issuers.

Impaired loans are those loans that the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

OREO assets are adjusted to fair value less estimated selling costs upon transfer of the loans to OREO establishing a new cost basis. Subsequently, OREO assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When recorded at fair value, these assets are included as Level 3 fair values.

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2019

Basis of Presentation [Abstract]

Non-Interest Income Including Revenue From Contracts With Customers In Scope Of ASU 2014-09

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Non-interest Income:
Service charges:
Non-sufficient funds charges	$	122	$	142	$	255	$	301
Business analysis charges		46		44		92		85
Cycle charges		21		22		41		45
Lockbox fees		10		8		57		52
Stop payment fees		5		3		9		7
Wire transfer fees		22		22		44		43
Other service charges		20		20		39		41
Total service charges		246		261		537		574
Wealth management:
DNB Investments & Insurance		126		150		202		238
DNB First Investment Management & Trust		403		362		772		709
Total wealth management		529		512		974		947
Other fee income:
Cardholder interchange fees		286		269		539		514
Safe deposit box		24		26		47		50
Check printing		13		12		37		35
Merchant card processing		45		42		87		90
ATM surcharges for non-DNB customers		17		20		32		37
Other fee income		12		13		26		27
Total other fee income		397		382		768		753
Total Revenue from contracts with customers		1,172		1,155		2,279		2,274
Total Revenue not within the scope of ASC 606		172		177		339		331
Total non-interest income	$	1,344	$	1,332	$	2,618	$	2,605

Recognized Rent Expense

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Operating lease cost:
Fixed rent expense	$	251	$	284	$	503	$	569
Net lease cost	$	251	$	284	$	503	$	569
Lease costs
Amortization of lease liability	$	186	$	-	$	372	$	-
Interest expense		65		-		131		-
Net lease cost	$	251	$	-	$	503	$	-

Supplemental Cash Flow Information

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Cash paid for the amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	250	$	242	$	500	$	484
Non-cash investing and financing activities:
Additions to ROU assets obtained from:
New operating lease liabilities	$	4,174	$	-	$	4,174	$	-

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2019

Investment Securities [Abstract]

Amortized Cost and Estimated Fair Values of Investment Securities

	June 30, 2019
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,886	$	33	$	-	$	8,919
Government Sponsored Entities (GSE) mortgage-backed securities		341		7		-		348
Corporate bonds		13,728		245		-		13,973
Collateralized mortgage obligations GSE		1,044		2		(4)		1,042
State and municipal taxable		362		5		-		367
State and municipal tax-exempt		35,588		117		(32)		35,673
Total	$	59,949	$	409	$	(36)	$	60,322
Available For Sale
US Government agency obligations	$	24,189	$	15	$	(24)	$	24,180
GSE mortgage-backed securities		26,256		23		(306)		25,973
Collateralized mortgage obligations GSE		9,464		8		(177)		9,295
Corporate bonds		8,796		13		(7)		8,802
State and municipal tax-exempt		1,701		-		(20)		1,681
Total	$	70,406	$	59	$	(534)	$	69,931

	December 31, 2018
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
Held To Maturity
US Government agency obligations	$	8,749	$	41	$	-	$	8,790
Government Sponsored Entities (GSE) mortgage-backed securities		389		-		-		389
Corporate bonds		13,851		124		(47)		13,928
Collateralized mortgage obligations GSE		1,159		-		(27)		1,132
State and municipal taxable		362		-		(3)		359
State and municipal tax-exempt		37,516		19		(998)		36,537
Total	$	62,026	$	184	$	(1,075)	$	61,135
Available For Sale
US Government agency obligations	$	48,082	$	-	$	(359)	$	47,723
GSE mortgage-backed securities		27,563		-		(1,005)		26,558
Collateralized mortgage obligations GSE		10,249		-		(441)		9,808
Corporate bonds		10,890		-		(186)		10,704
State and municipal tax-exempt		1,981		-		(131)		1,850
Total	$	98,765	$	-	$	(2,122)	$	96,643

Aggregate Unrealized Losses and Aggregate Fair Value of Underlying Securities

	June 30, 2019
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Collateralized mortgage obligations GSE	$	171	$	(4)	$	-	$	-	$	171	$	(4)
State and municipal tax-exempt		5,537		(32)		-		-		5,537		(32)
Total	$	5,708	$	(36)	$	-	$	-	$	5,708	$	(36)
Available For Sale
US Government agency obligations	$	13,965	$	(24)	$	-	$	-	$	13,965	$	(24)
GSE mortgage-backed securities		22,599		(306)		-		-		22,599		(306)
Collateralized mortgage obligations GSE		6,980		(177)		-		-		6,980		(177)
Corporate bonds		5,028		(7)		-		-		5,028		(7)
State and municipal tax-exempt		1,681		(20)		-		-		1,681		(20)
Total	$	50,253	$	(534)	$	-	$	-	$	50,253	$	(534)

	December 31, 2018
					Fair Value		Unrealized		Fair Value		Unrealized
			Total		Impaired		Loss		Impaired		Loss
	Total		Unrealized		Less Than		Less Than		More Than		More Than
(Dollars in thousands)	Fair Value		Loss		12 Months		12 Months		12 Months		12 Months
Held To Maturity
Corporate bonds	$	4,157	$	(47)	$	1,887	$	(15)	$	2,270	$	(32)
Collateralized mortgage obligations GSE		1,132		(27)		-		-		1,132		(27)
State and municipal taxable		359		(3)		-		-		359		(3)
State and municipal tax-exempt		26,466		(998)		2,045		(31)		24,421		(967)
Total	$	32,114	$	(1,075)	$	3,932	$	(46)	$	28,182	$	(1,029)
Available For Sale
US Government agency obligations	$	37,723	$	(359)	$	-	$	-	$	37,723	$	(359)
GSE mortgage-backed securities		26,558		(1,005)		-		-		26,558		(1,005)
Collateralized mortgage obligations GSE		9,808		(441)		-		-		9,808		(441)
Corporate bonds		10,704		(186)		2,035		(7)		8,669		(179)
State and municipal tax-exempt		1,850		(131)		-		-		1,850		(131)
Total	$	86,643	$	(2,122)	$	2,035	$	(7)	$	84,608	$	(2,115)

Investments Classified by Contractual Maturity Date

	Held to Maturity				Available for Sale
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,735	$	11,770	$	14,989	$	14,968
Due after one year through five years		14,149		14,245		18,448		18,455
Due after five years through ten years		27,454		27,697		14,329		14,214
Due after ten years		6,611		6,610		22,640		22,294
Total investment securities	$	59,949	$	60,322	$	70,406	$	69,931

Gains and Losses Resulting from Investment Sales, Redemptions or Calls

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross realized gains-AFS	$	10	$	-	$	10	$	-
Gross realized gains-HTM		-		-		3		-
Gross realized losses-AFS		(9)		-		(9)		-
Net realized gain	$	1	$	-	$	4	$	-

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Loans (Tables)

6 Months Ended

Jun. 30, 2019

Loans [Abstract]

Composition of Total Loans Outstanding

(Dollars in thousands)	June 30, 2019		December 31, 2018
Residential mortgage	$	98,802	$	99,932
Commercial mortgage		521,060		535,735
Commercial:
Commercial term		179,294		166,335
Commercial construction		77,060		76,302
Consumer:
Home equity		49,492		51,536
Other		4,813		5,131
Total loans	$	930,521	$	934,971
Less allowance for credit losses		(6,672)		(6,675)
Net loans	$	923,849	$	928,296

Information on Non-Accrual Loans

					Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
(Dollars in thousands)	June 30, 2019		December 31, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	779	$	905	$	11	$	-	$	11	$	23	$	-	$	23
Commercial mortgage		563		1,307		1		-		1		27		-		27
Commercial:
Commercial term		2,026		2,300		22		-		22		65		-		65
Commercial construction		2,274		476		13		-		13		13		-		13
Consumer:
Home equity		143		391		(1)		-		(1)		6		-		6
Other		138		167		3		-		3		6		-		6
Total non-accrual loans	$	5,923	$	5,546	$	49	$	-	$	49	$	140	$	-	$	140
Loans 90 days past due and accruing		205		233		3		3		-		3		3		-
Total non-performing loans	$	6,128	$	5,779	$	52	$	3	$	49	$	143	$	3	$	140

			Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
(Dollars in thousands)	June 30, 2018		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income		Interest income that would have been recorded under original terms		Interest income recorded during the period		Net impact on interest income
Non-accrual loans:
Residential mortgage	$	1,344	$	18	$	-	$	18	$	43	$	-	$	43
Commercial mortgage		1,593		28		-		28		58		-		58
Commercial:
Commercial term		2,583		46		-		46		90		-		90
Commercial construction		488		9		-		9		20		-		20
Consumer:
Home equity		498		3		-		3		8		-		8
Other		215		3		-		3		11		-		11
Total non-accrual loans	$	6,721	$	107	$	-	$	107	$	230	$	-	$	230
Loans 90 days past due and accruing		23		1		1		-		1		1		-
Total non-performing loans	$	6,744	$	108	$	1	$	107	$	231	$	1	$	230

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Allowance For Credit Losses (Tables)

6 Months Ended

Jun. 30, 2019

Allowance for Credit Losses [Abstract]

Age Analysis of Past Due Loans Receivables

	June 30, 2019
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	972	$	378	$	610	$	1,960	$	96,842	$	98,802	$	142
Commercial mortgage (less acquired with credit deterioration)		47		-		625		672		519,867		520,539		63
Acquired commercial mortgage with credit deterioration		-		-		-		-		521		521		-
Commercial:
Commercial term		920		-		296		1,216		178,078		179,294		-
Commercial construction		-		-		-		-		77,060		77,060		-
Consumer:
Home equity		168		120		143		431		49,061		49,492		-
Other		85		2		88		175		4,638		4,813		-
Total	$	2,192	$	500	$	1,762	$	4,454	$	926,067	$	930,521	$	205

	December 31, 2018
													Loans
	30-59		60-89										Receivable
	Days		Days		Greater						Total		> 90
	Past		Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivable		Accruing
Residential mortgage	$	666	$	1,742	$	845	$	3,253	$	96,679	$	99,932	$	130
Commercial mortgage (less acquired with credit deterioration)		-		-		840		840		534,739		535,579		103
Acquired commercial mortgage with credit deterioration		-		-		-		-		156		156		-
Commercial:
Commercial term		20		37		957		1,014		165,321		166,335		-
Commercial construction		-		-		-		-		76,302		76,302		-
Consumer:
Home equity		398		144		247		789		50,747		51,536		-
Other		26		-		108		134		4,997		5,131		-
Total	$	1,110	$	1,923	$	2,997	$	6,030	$	928,941	$	934,971	$	233

Impaired Loans by Loan Portfolio

		June 30, 2019						December 31, 2018
	Recorded		Unpaid		Related		Recorded		Unpaid		Related
	Investment		Principal		Allowance		Investment		Principal		Allowance
(Dollars in thousands)			Balance						Balance
With no related allowance recorded:
Residential mortgage	$	2,759	$	3,110	$	-	$	1,462	$	1,804	$	-
Commercial mortgage		1,513		1,766		-		1,532		1,780		-
Acquired commercial mortgage with credit deterioration		521		535		-		514		527
Commercial:
Commercial term		1,309		1,841		-		1,343		1,845		-
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		156		205		-
Total	$	8,823	$	10,099	$	-	$	6,014	$	7,210	$	-
With allowance recorded:
Residential mortgage		-		-		-		73		73		1
Commercial mortgage		-		-		-		737		802		78
Commercial:
Commercial term		717		744		161		957		1,015		203
Consumer:
Other		-		-		-		41		42		3
Total	$	717	$	744	$	161	$	1,808	$	1,932	$	285
Total:
Residential mortgage		2,759		3,110		-		1,535		1,877		1
Commercial mortgage		1,513		1,766		-		2,269		2,582		78
Acquired commercial mortgage with credit deterioration		521		535		-		514		527		-
Commercial:
Commercial term		2,026		2,585		161		2,300		2,860		203
Commercial construction		2,274		2,321		-		476		514		-
Consumer:
Home equity		279		284		-		531		535		-
Other		168		242		-		197		247		3
Total	$	9,540	$	10,843	$	161	$	7,822	$	9,142	$	285

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
	Average	Interest	Average	Interest	Average	Interest	Average	Interest
	Recorded	Income	Recorded	Income	Recorded	Income	Recorded	Income
(Dollars in thousands)	Investment	Recognized	Investment	Recognized	Investment	Recognized	Investment	Recognized
With no related allowance recorded:
Residential mortgage	$           2,770	$                16	$           2,109	$                  5	$           2,358	$                18	$           2,042	$                  6
Commercial mortgage	1,845	12	2,597	12	1,986	24	2,668	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	1,318	-	2,024	-	1,326	-	1,931	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	207	-	180	1	177	-
Total	$           8,167	$                40	$           8,708	$                27	$           7,574	$                65	$           8,686	$                49
With allowance recorded:
Residential mortgage	-	-	37	-	-	-	25	-
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	-	-	81	-	-	-	60	-
Commercial:
Commercial term	717	-	774	-	797	-	628	-
Consumer:
Other	-	-	71	-	-	-	90	-
Total	$              717	$                   -	$              963	$                   -	$              797	$                   -	$              805	$                   -
Total:
Residential mortgage	2,770	16	2,146	5	2,358	18	2,067	6
Acquired residential mortgage with credit deterioration	-	-	-	-	-	-	2	-
Commercial mortgage	1,845	12	2,678	12	1,986	24	2,728	24
Acquired commercial mortgage with credit deterioration	521	9	654	8	519	18	748	15
Commercial:
Commercial term	2,035	-	2,798	-	2,123	-	2,559	-
Commercial construction	1,137	-	493	-	758	-	500	-
Consumer:
Home equity	404	3	624	2	447	4	620	4
Other	172	-	278	-	180	1	267	-
Total	$           8,884	$                40	$           9,671	$                27	$           8,371	$                65	$           9,491	$                49

Credit Quality Indicators

	June 30, 2019
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	96,078	$	142	$	2,582	$	-	$	98,802
Commercial mortgage		504,508		13,387		3,165		-		521,060
Commercial:
Commercial term		174,507		695		4,092		-		179,294
Commercial construction		73,325		935		2,800		-		77,060
Consumer:
Home equity		49,198		151		143		-		49,492
Other		4,674		-		139		-		4,813
Total	$	902,290	$	15,310	$	12,921	$	-	$	930,521

	December 31, 2018
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	97,577	$	-	$	2,355	$	-	$	99,932
Commercial mortgage		528,692		2,367		4,676		-		535,735
Commercial:
Commercial term		161,051		1,178		4,106		-		166,335
Commercial construction		72,077		3,603		622		-		76,302
Consumer:
Home equity		50,988		143		405		-		51,536
Other		4,924		-		207		-		5,131
Total	$	915,309	$	7,291	$	12,371	$	-	$	934,971

Recorded Investments in Troubled Debt Restructured Loans

	June 30, 2019
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	2,155	$	2,308	$	2,110
Commercial mortgage		992		992		950
Commercial term		421		421		421
Consumer:
Home equity		148		148		136
Other		40		42		30
Total	$	3,756	$	3,911	$	3,647
	December 31, 2018
	Pre-Modification		Post-Modification
(Dollars in thousands)	Outstanding Recorded Investment		Outstanding Recorded Investment		Recorded Investment
Residential mortgage	$	676	$	805	$	630
Commercial mortgage		992		992		962
Consumer:
Home equity		148		148		140
Other		40		42		30
Total	$	1,856	$	1,987	$	1,762

Allowance for Credit Losses and Recorded Investments In Loans Receivables

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2019	$	156	$	3,493	$	1,189	$	1,080	$	183	$	43	$	575	$	6,719
Charge-offs		-		(23)		(22)		-		(128)		-		-		(173)
Recoveries		-		7		19		-		-		-		-		26
Provisions		(23)		102		(42)		(48)		154		(4)		(39)		100
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2019	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Charge-offs		-		(105)		(91)		-		(128)		(17)		-		(341)
Recoveries		4		7		27		-		-		-		-		38
Provisions		(32)		30		146		-		147		10		(1)		300
Ending balance - June 30, 2019	$	133	$	3,579	$	1,144	$	1,032	$	209	$	39	$	536	$	6,672
Ending balance: individually evaluated for impairment	$	-	$	-	$	161	$	-	$	-	$	-	$	-	$	161
Ending balance: collectively evaluated for impairment	$	133	$	3,579	$	983	$	1,032	$	209	$	39	$	536	$	6,511
Loans receivables:
Ending balance	$	98,802	$	521,060	$	179,294	$	77,060	$	49,492	$	4,813			$	930,521
Ending balance: individually evaluated for impairment	$	2,759	$	1,513	$	2,026	$	2,274	$	279	$	168			$	9,019
Ending balance: acquired with credit deterioration	$	-	$	521	$	-	$	-	$	-	$	-			$	521
Ending balance: collectively evaluated for impairment	$	96,043	$	519,026	$	177,268	$	74,786	$	49,213	$	4,645			$	920,981
Reserve for unfunded loan commitments included in other liabilities	$	-	$	2	$	189	$	209	$	20	$	-			$	420

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - April 1, 2018	$	226	$	2,987	$	904	$	1,219	$	176	$	55	$	578	$	6,145
Charge-offs		(103)		(171)		(47)		-		-		(37)		-		(358)
Recoveries		25		-		-		-		-		1		-		26
Provisions		59		260		32		136		20		30		(162)		375
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Beginning balance - January 1, 2018	$	221	$	2,856	$	845	$	1,128	$	183	$	63	$	547	$	5,843
Charge-offs		(137)		(184)		(64)		-		-		(49)		-		(434)
Recoveries		26		-		2		-		-		1		-		29
Provisions		97		404		106		227		13		34		(131)		750
Ending balance - June 30, 2018	$	207	$	3,076	$	889	$	1,355	$	196	$	49	$	416	$	6,188
Reserve for unfunded loan commitments included in other liabilities	$	-	$	3	$	183	$	201	$	21	$	-			$	408

	Residential		Commercial		Commercial		Commercial		Consumer		Consumer
(Dollars in thousands)	Mortgage		Mortgage		Term		Construction		Home Equity		Other		Unallocated		Total
Allowance for credit losses:
Ending balance - December 31, 2018	$	161	$	3,647	$	1,062	$	1,032	$	190	$	46	$	537	$	6,675
Ending balance: individually evaluated for impairment	$	1	$	78	$	203	$	-	$	-	$	3	$	-	$	285
Ending balance: collectively evaluated for impairment	$	160	$	3,569	$	859	$	1,032	$	190	$	43	$	537	$	6,390
Loans receivables:
Ending balance	$	99,932	$	535,735	$	166,335	$	76,302	$	51,536	$	5,131			$	934,971
Ending balance: individually evaluated for impairment	$	1,535	$	2,269	$	2,300	$	476	$	531	$	197			$	7,308
Ending balance: acquired with credit deterioration	$	-	$	514	$	-	$	-	$	-	$	-			$	514
Ending balance: collectively evaluated for impairment	$	98,397	$	532,952	$	164,035	$	75,826	$	51,005	$	4,934			$	927,149
Reserve for unfunded loan commitments included in other liabilities	$	-	$	4	$	167	$	206	$	21	$	-			$	398

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

	Three Months Ended					Six Months Ended
	June 30, 2019					June 30, 2019
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,587	4,331	$	0.60	$	5,174	4,329	$	1.20
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	5		-		-	4		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,587	4,336	$	0.60	$	5,174	4,333	$	1.19

	Three Months Ended					Six Months Ended
	June 30, 2018					June 30, 2018
(In thousands, except per-share data)	Income		Shares	Amount		Income		Shares	Amount
Basic EPS
Income available to common stockholders	$	2,049	4,298	$	0.48	$	4,662	4,295	$	1.09
Effect of potential dilutive common stock equivalents – stock options and  restricted shares		-	16		(0.01)		-	17		(0.01)
Diluted EPS
Income available to common stockholders after assumed conversions	$	2,049	4,314	$	0.47	$	4,662	4,312	$	1.08

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Loss [Abstract]

Components of Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss	Before-Tax		Tax		Net-of-Tax
(Dollars in thousands)	Amount		Effect		Amount
June 30, 2019
Net unrealized loss on AFS securities	$	(475)	$	100	$	(375)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(2,112)	$	443	$	(1,669)
December 31, 2018
Net unrealized loss on AFS securities	$	(2,122)	$	445	$	(1,677)
Unrealized actuarial losses-pension		(1,637)		343		(1,294)
	$	(3,759)	$	788	$	(2,971)

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Stock-Based Compensation [Abstract]

Stock Option Activity

	Number		Weighted Average
	Outstanding		Exercise Price
Outstanding January 1, 2018		16,450	$	10.31
Issued		-		-
Exercised		5,300		10.31
Forfeited		-		-
Expired		-		-
Outstanding June 30, 2018		11,150	$	10.31

Stock Grant Activity

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2019	18,590	$	30.90
Granted	10,600		39.36
Forfeited	-		-
Vested	-		-
Non-vested stock awards—June 30, 2019	29,190	$	33.98

		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2018	31,130	$	26.53
Granted	10,750		33.98
Forfeited	4,345		28.92
Vested	8,500		26.69
Non-vested stock awards—June 30, 2018	29,035	$	28.88

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value [Abstract]

Assets Measured at Fair Value on a Recurring Basis

		June 30, 2019
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	24,180	$	-	$	24,180
GSE mortgage-backed securities		-		25,973		-		25,973
Collateralized mortgage obligations GSE		-		9,295		-		9,295
Corporate bonds		-		8,802		-		8,802
State and municipal tax-exempt		-		1,681		-		1,681
Total	$	-	$	69,931	$	-	$	69,931
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	691	$	691
OREO and other repossessed property		-		-		1,430		1,430
Total	$	-	$	-	$	2,121	$	2,121

		December 31, 2018
(Dollars in thousands)		Level 1		Level 2		Level 3		Fair Value
Assets Measured at Fair Value on a Recurring Basis
AFS Investment Securities:
US Government agency obligations	$	-	$	47,723	$	-	$	47,723
GSE mortgage-backed securities		-		26,558		-		26,558
Collateralized mortgage obligations GSE		-		9,808		-		9,808
Corporate bonds		-		10,704		-		10,704
State and municipal tax-exempt		-		1,850		-		1,850
Total	$	-	$	96,643	$	-	$	96,643
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired loans	$	-	$	-	$	1,523	$	1,523
OREO and other repossessed property		-		-		1,247		1,247
Total	$	-	$	-	$	2,770	$	2,770

Quantitative Information About Level 3 Fair Value Measurements

June 30, 2019
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Commercial term	$	556	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-8%	(-4%)
Impaired loans - Consumer other		135	Appraisal of collateral (1)	Disposal costs (2)	-7%	to	-8%	(-8%)
Impaired loan total	$	691
Other real estate owned	$	1,430		Disposal costs (2)	-8%	to	-8%	(-8%)

(1)

(2)

December 31, 2018
Quantitative Information about Level 3 Fair Value Measurement
		Fair Value	Valuation		Range
(Dollars in thousands)		Estimate	Techniques	Unobservable Input	(Weighted Average)
Impaired loans - Residential mortgage	$	72	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loans - Commercial mortgage		659	Appraisal of collateral (1)	Disposal costs (2)	-14%	to	-14%	(-14%)
Impaired loans - Commercial term		754	Appraisal of collateral (1)	Disposal costs (2)	0%	to	-16%	(-11%)
Impaired loans - Consumer other		38	Appraisal of collateral (1)	Disposal costs (2)	-8%	to	-8%	(-8%)
Impaired loan total	$	1,523
Other real estate owned	$	1,247		Disposal costs (2)	-8%	to	-8%	(-8%)

⁽¹⁾ Fair value is generally determined through independent appraisals or sales contracts of the underlying collateral, which generally include various level 3 inputs which are not identifiable.

Appraisals are adjusted by management for qualitative factors and disposal costs.

Carrying Amounts and Fair Values of Financial Instruments

		June 30, 2019
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	46,398	$	46,398	$	46,398	$	-	$	-
AFS investment securities		69,931		69,931		-		69,931		-
HTM investment securities		59,949		60,322		-		58,322		2,000
Restricted stock		5,734		5,734		-		5,734		-
Loans held-for-sale		501		515		-		-		515
Loans, net of allowance, including impaired		923,849		921,497		-		-		921,497
Accrued interest receivable		4,297		4,297		-		4,297		-
Financial liabilities
Deposits:
Non-interest-bearing		178,454		178,454		-		178,454		-
NOW, Money market, and Savings		531,002		531,002		-		531,002		-
Time		178,530		178,808		-		178,808		-
Brokered		87,877		87,369		-		87,369		-
FHLBP advances		31,203		31,112		-		31,112		-
Junior subordinated debentures and other borrowings		9,279		9,990		-		9,990		-
Subordinated debt		9,750		9,271		-		9,271		-
Accrued interest payable		641		641		-		641		-
Off-balance sheet instruments		-		-		-		-		-

		December 31, 2018
		Carrying		Fair
(Dollars in thousands)		Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	17,321	$	17,321	$	17,321	$	-	$	-
AFS investment securities		96,643		96,643		-		96,643		-
HTM investment securities		62,026		61,135		-		59,135		2,000
Restricted stock		5,616		5,616		-		5,616		-
Loans held-for-sale		419		429		-		-		429
Loans, net of allowance, including impaired		928,296		914,822		-		-		914,822
Accrued interest receivable		4,207		4,207		-		4,207		-
Financial liabilities
Deposits:
Non-interest-bearing		164,746		164,746		-		164,746		-
NOW, Money market, and Savings		549,073		549,073		-		549,073		-
Time		162,096		160,944		-		160,944		-
Brokered		108,651		97,250		-		97,250		-
FHLBP advances		32,935		32,347		-		32,347		-
Junior subordinated debentures and other borrowings		9,279		10,285		-		10,285		-
Subordinated debt		9,750		9,505		-		9,505		-
Accrued interest payable		646		646		-		646		-
Off-balance sheet instruments		-		-		-		-		-

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Basis of Presentation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 05, 2019	Dec. 31, 2018
Common stock par value per share	$ 1.00		$ 1.00
Right-of-use asset	$ 3,792
Accounting Standards Update 2016-02 [Member]
Operating lease liabilities			$ 4,400
Right-of-use asset			$ 4,000
Accounting Standards Update 2018-02 [Member]
Reclassification amount from accumulated other comprehensive income related to Tax Cuts and jobs Act	$ 471
DNB [Member]
Common stock par value per share		$ 1.00
S&T Bank [Member]
Business acquisition share price		1.22
Common stock par value per share		$ 2.50

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Basis of Presentation (Non-Interest Income Including Revenue From Contracts With Customers In Scope Of ASU 2014-09) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total non-interest income	$ 1,344	$ 1,332	$ 2,618	$ 2,605
Total Revenue Not Within the Scope of ASC 606 [Member]
Revenue from contracts with customers	172	177	339	331
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member]
Revenue from contracts with customers	1,172	1,155	2,279	2,274
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges [Member]
Revenue from contracts with customers	246	261	537	574
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Non-Sufficient Funds Charges [Member]
Revenue from contracts with customers	122	142	255	301
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Business Analysis Charges [Member]
Revenue from contracts with customers	46	44	92	85
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Cycle Charges [Member
Revenue from contracts with customers	21	22	41	45
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Lockbox Fees [Member]
Revenue from contracts with customers	10	8	57	52
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Stop Payment Fees [Member]
Revenue from contracts with customers	5	3	9	7
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Wire Transfer Fees [Member]
Revenue from contracts with customers	22	22	44	43
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Service Charges Other Service Charges [Member]
Revenue from contracts with customers	20	20	39	41
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Wealth Management [Member]
Revenue from contracts with customers	529	512	974	947
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Wealth Management DNB Investments & Insurance [Member]
Revenue from contracts with customers	126	150	202	238
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Wealth Management DNB First Investment Management & Trust [Member]
Revenue from contracts with customers	403	362	772	709
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income [Member]
Revenue from contracts with customers	397	382	768	753
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income Cardholder Interchange Fees [Member]
Revenue from contracts with customers	286	269	539	514
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income Safe Deposit Box [Member]
Revenue from contracts with customers	24	26	47	50
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income Check Printing [Member]
Revenue from contracts with customers	13	12	37	35
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income Merchant Card Processing [Member]
Revenue from contracts with customers	45	42	87	90
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income ATM Surcharges For Non-DNB Customers [Member]
Revenue from contracts with customers	17	20	32	37
Revenue from Contracts with Customers in Scope of ASU 2014-09 [Member] | Other Fee Income Other Fee [Member]
Revenue from contracts with customers	$ 12	$ 13	$ 26	$ 27

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Basis of Presentation (Recognized Rent Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Basis of Presentation [Abstract]
Fixed rent expense	$ 251	$ 284	$ 503	$ 569
Amortization of lease liability	186		372
Interest expense	65		131
Net lease cost	$ 251		$ 503

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Basis of Presentation (Supplemental Cash Flow Information) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Basis of Presentation [Abstract]
Operating cash flows from operating leases	$ 250	$ 242	$ 500	$ 484
New operating lease liabilities	$ 4,174		$ 4,174

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Investment Securities (Narrative) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) security	Dec. 31, 2018 USD ($)
Securities [Line Items]
Available-for-sale securities pledged as collateral | $	$ 69,700	$ 95,800
Gross realized gains-HTM | $	$ 3
Collateralized Mortgage Obligations GSE [Member]
Securities [Line Items]
Securities in unrealized loss positions qualitative disclosure number of positions	14
Number of securities, impaired for more than 12 months	14
Unrealized loss of security from book value	6.34%
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member]
Securities [Line Items]
Securities in unrealized loss positions qualitative disclosure number of positions	18
Unrealized loss of security from book value	1.86%
US Government Agency Obligations [Member]
Securities [Line Items]
Securities in unrealized loss positions qualitative disclosure number of positions	3
Unrealized loss of security from book value	0.41%
State and Municipal Tax-Exempt [Member]
Securities [Line Items]
Securities in unrealized loss positions qualitative disclosure number of positions	9
Number of impaired municipal securities, townships uninsured	3
Unrealized loss of security from book value	2.10%
Corporate Bonds [Member]
Securities [Line Items]
Securities in unrealized loss positions qualitative disclosure number of positions	3
Unrealized loss of security from book value	0.46%

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Investment Securities (Amortized Cost and Estimated Fair Values of Investment Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	$ 59,949	$ 62,026
Held-to-maturity Securities, Unrealized Gains	409	184
Held-to-maturity Securities, Unrealized Losses	(36)	(1,075)
Held-to-maturity Securities, Estimated Fair Value	60,322	61,135
Available-for-sale Securities, Amortized Cost	70,406	98,765
Available-for-sale Securities, Unrealized Gains	59
Available-for-sale Securities, Unrealized Losses	(534)	(2,122)
Available-for-sale, Estimated Fair Value	69,931	96,643
US Government Agency Obligations [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	8,886	8,749
Held-to-maturity Securities, Unrealized Gains	33	41
Held-to-maturity Securities, Estimated Fair Value	8,919	8,790
Available-for-sale Securities, Amortized Cost	24,189	48,082
Available-for-sale Securities, Unrealized Gains	15
Available-for-sale Securities, Unrealized Losses	(24)	(359)
Available-for-sale, Estimated Fair Value	24,180	47,723
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	341	389
Held-to-maturity Securities, Unrealized Gains	7
Held-to-maturity Securities, Estimated Fair Value	348	389
Available-for-sale Securities, Amortized Cost	26,256	27,563
Available-for-sale Securities, Unrealized Gains	23
Available-for-sale Securities, Unrealized Losses	(306)	(1,005)
Available-for-sale, Estimated Fair Value	25,973	26,558
Corporate Bonds [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	13,728	13,851
Held-to-maturity Securities, Unrealized Gains	245	124
Held-to-maturity Securities, Unrealized Losses		(47)
Held-to-maturity Securities, Estimated Fair Value	13,973	13,928
Available-for-sale Securities, Amortized Cost	8,796	10,890
Available-for-sale Securities, Unrealized Gains	13
Available-for-sale Securities, Unrealized Losses	(7)	(186)
Available-for-sale, Estimated Fair Value	8,802	10,704
Collateralized Mortgage Obligations GSE [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	1,044	1,159
Held-to-maturity Securities, Unrealized Gains	2
Held-to-maturity Securities, Unrealized Losses	(4)	(27)
Held-to-maturity Securities, Estimated Fair Value	1,042	1,132
Available-for-sale Securities, Amortized Cost	9,464	10,249
Available-for-sale Securities, Unrealized Gains	8
Available-for-sale Securities, Unrealized Losses	(177)	(441)
Available-for-sale, Estimated Fair Value	9,295	9,808
State and Municipal Taxable [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	362	362
Held-to-maturity Securities, Unrealized Gains	5
Held-to-maturity Securities, Unrealized Losses		(3)
Held-to-maturity Securities, Estimated Fair Value	367	359
State and Municipal Tax-Exempt [Member]
Securities [Line Items]
Held-to-maturity Securities, Amortized Cost	35,588	37,516
Held-to-maturity Securities, Unrealized Gains	117	19
Held-to-maturity Securities, Unrealized Losses	(32)	(998)
Held-to-maturity Securities, Estimated Fair Value	35,673	36,537
Available-for-sale Securities, Amortized Cost	1,701	1,981
Available-for-sale Securities, Unrealized Losses	(20)	(131)
Available-for-sale, Estimated Fair Value	$ 1,681	$ 1,850

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Investment Securities (Aggregate Unrealized Losses and Aggregate Fair Value of Underlying Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities [Line Items]
Held-to-maturity Securities, Fair Value	$ 5,708	$ 32,114
Held-to-maturity Securities, Unrealized Losses	(36)	(1,075)
Held-to-maturity Securities, Fair Value Impaired Less Than 12 Months		3,932
Held-to-maturity Securities, Unrealized Loss Less Than 12 Months		(46)
Held-to-maturity Securities, Fair Value Impaired More Than 12 Months	5,708	28,182
Held-to-maturity Securities, Unrealized Loss More Than 12 Months	(36)	(1,029)
Available-for-sale Securities, Fair Value	50,253	86,643
Available-for-sale Securities, Unrealized Loss	(534)	(2,122)
Available-for-sale Securities, Fair Value Impaired Less Than 12 Months		2,035
Available-for-sale Securities, Unrealized Loss Less Than 12 Months		(7)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	50,253	84,608
Available-for-sale Securities, Unrealized Loss More Than 12 Months	(534)	(2,115)
US Government Agency Obligations [Member]
Securities [Line Items]
Available-for-sale Securities, Fair Value	13,965	37,723
Available-for-sale Securities, Unrealized Loss	(24)	(359)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	13,965	37,723
Available-for-sale Securities, Unrealized Loss More Than 12 Months	(24)	(359)
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member]
Securities [Line Items]
Available-for-sale Securities, Fair Value	22,599	26,558
Available-for-sale Securities, Unrealized Loss	(306)	(1,005)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	22,599	26,558
Available-for-sale Securities, Unrealized Loss More Than 12 Months	(306)	(1,005)
Collateralized Mortgage Obligations GSE [Member]
Securities [Line Items]
Held-to-maturity Securities, Fair Value	171	1,132
Held-to-maturity Securities, Unrealized Losses	(4)	(27)
Held-to-maturity Securities, Fair Value Impaired More Than 12 Months	171	1,132
Held-to-maturity Securities, Unrealized Loss More Than 12 Months	(4)	(27)
Available-for-sale Securities, Fair Value	6,980	9,808
Available-for-sale Securities, Unrealized Loss	(177)	(441)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	6,980	9,808
Available-for-sale Securities, Unrealized Loss More Than 12 Months	(177)	(441)
Corporate Bonds [Member]
Securities [Line Items]
Held-to-maturity Securities, Fair Value		4,157
Held-to-maturity Securities, Unrealized Losses		(47)
Held-to-maturity Securities, Fair Value Impaired Less Than 12 Months		1,887
Held-to-maturity Securities, Unrealized Loss Less Than 12 Months		(15)
Held-to-maturity Securities, Fair Value Impaired More Than 12 Months		2,270
Held-to-maturity Securities, Unrealized Loss More Than 12 Months		(32)
Available-for-sale Securities, Fair Value	5,028	10,704
Available-for-sale Securities, Unrealized Loss	(7)	(186)
Available-for-sale Securities, Fair Value Impaired Less Than 12 Months		2,035
Available-for-sale Securities, Unrealized Loss Less Than 12 Months		(7)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	5,028	8,669
Available-for-sale Securities, Unrealized Loss More Than 12 Months	(7)	(179)
State and Municipal Taxable [Member]
Securities [Line Items]
Held-to-maturity Securities, Fair Value		359
Held-to-maturity Securities, Unrealized Losses		(3)
Held-to-maturity Securities, Fair Value Impaired More Than 12 Months		359
Held-to-maturity Securities, Unrealized Loss More Than 12 Months		(3)
State and Municipal Tax-Exempt [Member]
Securities [Line Items]
Held-to-maturity Securities, Fair Value	5,537	26,466
Held-to-maturity Securities, Unrealized Losses	(32)	(998)
Held-to-maturity Securities, Fair Value Impaired Less Than 12 Months		2,045
Held-to-maturity Securities, Unrealized Loss Less Than 12 Months		(31)
Held-to-maturity Securities, Fair Value Impaired More Than 12 Months	5,537	24,421
Held-to-maturity Securities, Unrealized Loss More Than 12 Months	(32)	(967)
Available-for-sale Securities, Fair Value	1,681	1,850
Available-for-sale Securities, Unrealized Loss	(20)	(131)
Available-for-sale Securities, Fair Value Impaired More Than 12 Months	1,681	1,850
Available-for-sale Securities, Unrealized Loss More Than 12 Months	$ (20)	$ (131)

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Investment Securities (Investments Classified by Contractual Maturity Date) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investment Securities [Abstract]
Held to Maturity, Due in one year or less, Amortized Cost	$ 11,735
Held to Maturity, Due after one year through five years, Amortized Cost	14,149
Held to Maturity, Due after five years through ten years, Amortized Cost	27,454
Held to Maturity, Due after ten years, Amortized Cost	6,611
Held-to-maturity Securities, Amortized Cost	59,949	$ 62,026
Held to Maturity, Due in one year or less, Estimated Fair Value	11,770
Held to Maturity, Due after one year through five years, Estimated Fair Value	14,245
Held to Maturity, Due after five years through ten years, Estimated Fair Value	27,697
Held to Maturity, Due after ten years, Estimated Fair Value	6,610
Held-to-maturity, Total investment securities, Estimated Fair Value	60,322	61,135
Available for Sale, Due in one year or less, Amortized Cost	14,989
Available for Sale, Due after one year through five years, Amortized Cost	18,448
Available for Sale, Due after five years through ten years, Amortized Cost	14,329
Available for Sale, Due after ten years, Amortized Cost	22,640
Available-for-sale Securities, Amortized Cost	70,406	98,765
Available for Sale, Due in one year or less, Estimated Fair Value	14,968
Available for Sale, Due after one year through five years, Estimated Fair Value	18,455
Available for Sale, Due after five years through ten years, Estimated Fair Value	14,214
Available for Sale, Due after ten years, Estimated Fair Value	22,294
Available for Sale, Total investment securities, Estimated Fair Value	$ 69,931	$ 96,643

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Investment Securities (Gains and Losses Resulting from Investment Sales, Redemptions or Calls) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Investment Securities [Abstract]
Gross realized gains-AFS	$ 10	$ 10
Gross realized gains-HTM		3
Gross realized losses-AFS	(9)	(9)
Net realized gain	$ 1	$ 4

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Loans (Composition of Total Loans Outstanding) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	$ 930,521		$ 934,971
Less allowance for credit losses	(6,672)	$ (6,719)	(6,675)	$ (6,188)	$ (6,145)	$ (5,843)
Net loans	923,849		928,296
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	98,802		99,932
Less allowance for credit losses	(133)	(156)	(161)	(207)	(226)	(221)
Commercial Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	521,060		535,735
Less allowance for credit losses	(3,579)	(3,493)	(3,647)	(3,076)	(2,987)	(2,856)
Commercial Term [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	179,294		166,335
Less allowance for credit losses	(1,144)	(1,189)	(1,062)	(889)	(904)	(845)
Commercial Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	77,060		76,302
Less allowance for credit losses	(1,032)	(1,080)	(1,032)	(1,355)	(1,219)	(1,128)
Consumer: Home Equity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	49,492		51,536
Less allowance for credit losses	(209)	(183)	(190)	(196)	(176)	(183)
Consumer: Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	4,813		5,131
Less allowance for credit losses	$ (39)	$ (43)	$ (46)	$ (49)	$ (55)	$ (63)

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Loans (Information on Non-Accrual Loans) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	$ 5,923	$ 6,721	$ 5,923	$ 6,721	$ 5,546
Loans 90 day past due and accruing	205	23	205	23	233
Total non-performing loans	6,128	6,744	6,128	6,744	5,779
Interest income that would have been recorded under original terms, non-accrual loans	49	107	140	230
Interest income that would have been recorded under original terms, 90 days past due and accruing	3	1	3	1
Interest income that would have been recorded under original terms	52	108	143	231
Interest income recorded during the period, 90 days past due and accruing	3	1	3	1
Interest income recorded during the period	3	1	3	1
Net impact on interest income, non-accrual loans	49	107	140	230
Net impact on interest income	49	107	140	230
Residential Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	779	1,344	779	1,344	905
Loans 90 day past due and accruing	142		142
Interest income that would have been recorded under original terms, non-accrual loans	11	18	23	43
Net impact on interest income, non-accrual loans	11	18	23	43
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	563	1,593	563	1,593	1,307
Interest income that would have been recorded under original terms, non-accrual loans	1	28	27	58
Net impact on interest income, non-accrual loans	1	28	27	58
Commercial Term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	2,026	2,583	2,026	2,583	2,300
Interest income that would have been recorded under original terms, non-accrual loans	22	46	65	90
Net impact on interest income, non-accrual loans	22	46	65	90
Commercial Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	2,274	488	2,274	488	476
Interest income that would have been recorded under original terms, non-accrual loans	13	9	13	20
Net impact on interest income, non-accrual loans	13	9	13	20
Consumer: Home Equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	143	498	143	498	391
Interest income that would have been recorded under original terms, non-accrual loans	(1)	3	6	8
Net impact on interest income, non-accrual loans	(1)	3	6	8
Consumer: Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-accrual loans	138	215	138	215	$ 167
Interest income that would have been recorded under original terms, non-accrual loans	3	3	6	11
Net impact on interest income, non-accrual loans	$ 3	$ 3	$ 6	$ 11

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Allowance for Credit Losses (Narrative) (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) loan	Jun. 30, 2018 USD ($) loan	Dec. 31, 2018 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			15		9
TDR recorded investment	$ 3,647,000		$ 3,647,000		$ 1,762,000
Partial charge-off of loan amount	173,000	$ 358,000	$ 341,000	$ 434,000
Number of defaulted TDRs | loan			0		0
Loan defaults on TDRs			$ 0		$ 0
Accruing Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan					9
Accruing Impaired Home Equity Loan [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			10
Nonaccrual Impaired Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			5
Residential Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Real estate loans in process of foreclosure	353,000		$ 353,000
Number of TDR loans | loan					2
TDR recorded investment	2,110,000		2,110,000		$ 630,000
Partial charge-off of loan amount		103,000		$ 137,000	$ 151,000
Consumer Installment Loan [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			1		1
Partial charge-off of loan amount			$ 2,000		$ 2,000
Other Real Estate Owned [Member]
Financing Receivable, Modifications [Line Items]
Real estate loans in process of foreclosure	0		$ 0		$ 97,000
Commercial Term Loan [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			4
TDR recorded investment	421,000		$ 421,000
Commercial Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan				1	1
TDR recorded investment	950,000	73,000	950,000	$ 73,000	$ 962,000
Partial charge-off of loan amount	23,000	$ 171,000	$ 105,000	$ 184,000
Two Residential Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Number of TDR loans | loan			2
TDR recorded investment	$ 1,500,000		$ 1,500,000
Partial charge-off of loan amount			$ 151,000
One Residential Mortgage [Member]
Financing Receivable, Modifications [Line Items]
TDR recorded investment					$ 73,000

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Allowance for Credit Losses (Age Analysis Of Past Due Loans Receivables) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	$ 4,454	$ 6,030
Current	926,067	928,941
Total Loans Receivables	930,521	934,971
Loans Receivable >90 Days and Accruing	205	233	$ 23
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	2,192	1,110
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	500	1,923
Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	1,762	2,997
Residential Mortgage [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	1,960
Current	96,842
Total Loans Receivables	98,802	99,932
Loans Receivable >90 Days and Accruing	142
Residential Mortgage [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	972
Residential Mortgage [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	378
Residential Mortgage [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	610
Residential Mortgage (Less Acquired With Credit Deterioration) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables		3,253
Current		96,679
Total Loans Receivables		99,932
Loans Receivable >90 Days and Accruing		130
Residential Mortgage (Less Acquired With Credit Deterioration) [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables		666
Residential Mortgage (Less Acquired With Credit Deterioration) [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables		1,742
Residential Mortgage (Less Acquired With Credit Deterioration) [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables		845
Commercial Mortgage (Less Acquired With Credit Deterioration) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	672	840
Current	519,867	534,739
Total Loans Receivables	520,539	535,579
Loans Receivable >90 Days and Accruing	63	103
Commercial Mortgage (Less Acquired With Credit Deterioration) [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	47
Commercial Mortgage (Less Acquired With Credit Deterioration) [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	625	840
Acquired Commercial Mortgage With Credit Deterioration [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	521	156
Total Loans Receivables	521	156
Commercial Term [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	1,216	1,014
Current	178,078	165,321
Total Loans Receivables	179,294	166,335
Commercial Term [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	920	20
Commercial Term [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables		37
Commercial Term [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	296	957
Commercial Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	77,060	76,302
Total Loans Receivables	77,060	76,302
Consumer: Home Equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	431	789
Current	49,061	50,747
Total Loans Receivables	49,492	51,536
Consumer: Home Equity [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	168	398
Consumer: Home Equity [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	120	144
Consumer: Home Equity [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	143	247
Consumer: Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	175	134
Current	4,638	4,997
Total Loans Receivables	4,813	5,131
Consumer: Other [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	85	26
Consumer: Other [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	2
Consumer: Other [Member] | Greater than 90 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Past due loans receivables	$ 88	$ 108

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Allowance for Credit Losses (Impaired Loans By Loan Portfolio) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	$ 8,823		$ 8,823		$ 6,014
Unpaid Principal Balance, With no related allowance recorded	10,099		10,099		7,210
Average Recorded Investment, With no related allowance recorded	8,167	$ 8,708	7,574	$ 8,686
Interest Income Recognized, With no related allowance recorded	40	27	65	49
Recorded Investment, with allowance recorded	717		717		1,808
Unpaid Principal Balance, With allowance recorded	744		744		1,932
Average Recorded Investment, With allowance recorded	717	963	797	805
Recorded Investment, Total	9,540		9,540		7,822
Unpaid Principal Balance, Total	10,843		10,843		9,142
Related Allowance, Total	161		161		285
Average Recorded Investment, Total	8,884	9,671	8,371	9,491
Interest Income Recognized, Total	40	27	65	49
Residential Mortgage [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	2,759		2,759		1,462
Unpaid Principal Balance, With no related allowance recorded	3,110		3,110		1,804
Average Recorded Investment, With no related allowance recorded	2,770	2,109	2,358	2,042
Interest Income Recognized, With no related allowance recorded	16	5	18	6
Recorded Investment, with allowance recorded					73
Unpaid Principal Balance, With allowance recorded					73
Average Recorded Investment, With allowance recorded		37		25
Recorded Investment, Total	2,759		2,759		1,535
Unpaid Principal Balance, Total	3,110		3,110		1,877
Related Allowance, Total					1
Average Recorded Investment, Total	2,770	2,146	2,358	2,067
Interest Income Recognized, Total	16	5	18	6
Acquired Residential Mortgage With Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment, With allowance recorded				2
Average Recorded Investment, Total				2
Commercial Mortgage [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	1,513		1,513		1,532
Unpaid Principal Balance, With no related allowance recorded	1,766		1,766		1,780
Average Recorded Investment, With no related allowance recorded	1,845	2,597	1,986	2,668
Interest Income Recognized, With no related allowance recorded	12	12	24	24
Recorded Investment, with allowance recorded					737
Unpaid Principal Balance, With allowance recorded					802
Average Recorded Investment, With allowance recorded		81		60
Recorded Investment, Total	1,513		1,513		2,269
Unpaid Principal Balance, Total	1,766		1,766		2,582
Related Allowance, Total					78
Average Recorded Investment, Total	1,845	2,678	1,986	2,728
Interest Income Recognized, Total	12	12	24	24
Acquired Commercial Mortgage With Credit Deterioration [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	521		521		514
Unpaid Principal Balance, With no related allowance recorded	535		535		527
Average Recorded Investment, With no related allowance recorded	521	654	519	748
Interest Income Recognized, With no related allowance recorded	9	8	18	15
Recorded Investment, Total	521		521		514
Unpaid Principal Balance, Total	535		535		527
Average Recorded Investment, Total	521	654	519	748
Interest Income Recognized, Total	9	8	18	15
Commercial Term [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	1,309		1,309		1,343
Unpaid Principal Balance, With no related allowance recorded	1,841		1,841		1,845
Average Recorded Investment, With no related allowance recorded	1,318	2,024	1,326	1,931
Recorded Investment, with allowance recorded	717		717		957
Unpaid Principal Balance, With allowance recorded	744		744		1,015
Average Recorded Investment, With allowance recorded	717	774	797	628
Recorded Investment, Total	2,026		2,026		2,300
Unpaid Principal Balance, Total	2,585		2,585		2,860
Related Allowance, Total	161		161		203
Average Recorded Investment, Total	2,035	2,798	2,123	2,559
Commercial Construction [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	2,274		2,274		476
Unpaid Principal Balance, With no related allowance recorded	2,321		2,321		514
Average Recorded Investment, With no related allowance recorded	1,137	493	758	500
Recorded Investment, Total	2,274		2,274		476
Unpaid Principal Balance, Total	2,321		2,321		514
Average Recorded Investment, Total	1,137	493	758	500
Consumer: Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	279		279		531
Unpaid Principal Balance, With no related allowance recorded	284		284		535
Average Recorded Investment, With no related allowance recorded	404	624	447	620
Interest Income Recognized, With no related allowance recorded	3	2	4	4
Recorded Investment, Total	279		279		531
Unpaid Principal Balance, Total	284		284		535
Average Recorded Investment, Total	404	624	447	620
Interest Income Recognized, Total	3	2	4	4
Consumer: Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment, With no related allowance recorded	168		168		156
Unpaid Principal Balance, With no related allowance recorded	242		242		205
Average Recorded Investment, With no related allowance recorded	172	207	180	177
Interest Income Recognized, With no related allowance recorded			1
Recorded Investment, with allowance recorded					41
Unpaid Principal Balance, With allowance recorded					42
Average Recorded Investment, With allowance recorded		71		90
Recorded Investment, Total	168		168		197
Unpaid Principal Balance, Total	242		242		247
Related Allowance, Total					$ 3
Average Recorded Investment, Total	$ 172	$ 278	180	$ 267
Interest Income Recognized, Total			$ 1

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Allowance for Credit Losses (Recorded Investments in Troubled Debt Restructured Loans) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018
Pre-modification outstanding recorded investment	$ 3,756	$ 1,856
Post-modification outstanding recorded investment	3,911	1,987
Recorded Investment	3,647	1,762
Residential Mortgage [Member]
Pre-modification outstanding recorded investment	2,155	676
Post-modification outstanding recorded investment	2,308	805
Recorded Investment	2,110	630
Commercial Mortgage [Member]
Pre-modification outstanding recorded investment	992	992
Post-modification outstanding recorded investment	992	992
Recorded Investment	950	962	$ 73
Consumer: Home Equity [Member]
Pre-modification outstanding recorded investment	148	148
Post-modification outstanding recorded investment	148	148
Recorded Investment	136	140
Consumer: Other [Member]
Pre-modification outstanding recorded investment	40	40
Post-modification outstanding recorded investment	42	42
Recorded Investment	$ 30	$ 30

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Allowance for Credit Losses (Credit Quality Indicators) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	$ 930,521	$ 934,971
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	902,290	915,309
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	15,310	7,291
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	12,921	12,371
Residential Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	98,802	99,932
Residential Mortgage [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	96,078	97,577
Residential Mortgage [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	142
Residential Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	2,582	2,355
Commercial Mortgage [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	521,060	535,735
Commercial Mortgage [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	504,508	528,692
Commercial Mortgage [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	13,387	2,367
Commercial Mortgage [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	3,165	4,676
Commercial Term [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	179,294	166,335
Commercial Term [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	174,507	161,051
Commercial Term [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	695	1,178
Commercial Term [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	4,092	4,106
Commercial Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	77,060	76,302
Commercial Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	73,325	72,077
Commercial Construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	935	3,603
Commercial Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	2,800	622
Consumer: Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	49,492	51,536
Consumer: Home Equity [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	49,198	50,988
Consumer: Home Equity [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	151	143
Consumer: Home Equity [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	143	405
Consumer: Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	4,813	5,131
Consumer: Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	4,674	4,924
Consumer: Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans and Leases Receivable, Gross	$ 139	$ 207

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Allowance for Credit Losses (Allowance For Credit Losses And Recorded Investments In Loans Receivables) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 6,719	$ 6,145	$ 6,675	$ 5,843	$ 5,843
Charge-offs	(173)	(358)	(341)	(434)
Recoveries	26	26	38	29
Provisions	100	375	300	750
Ending balance	6,672	6,188	6,672	6,188	6,675
Ending balance: individually evaluated for impairment	161		161		285
Ending balance: collectively evaluated for impairment	6,511		6,511		6,390
Ending balance: Loans receivables	930,521		930,521		934,971
Ending Balance: individually evaluated for impairment	9,019		9,019		7,308
Ending Balance: collectively evaluated for impairment	920,981		920,981		927,149
Reserve for unfunded loan commitments included in other liabilities			420	408	398
Loans Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: Loans receivables	521		521		514
Residential Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	156	226	161	221	221
Charge-offs		(103)		(137)	(151)
Recoveries		25	4	26
Provisions	(23)	59	(32)	97
Ending balance	133	207	133	207	161
Ending balance: individually evaluated for impairment					1
Ending balance: collectively evaluated for impairment	133		133		160
Ending balance: Loans receivables	98,802		98,802		99,932
Ending Balance: individually evaluated for impairment	2,759		2,759		1,535
Ending Balance: collectively evaluated for impairment	96,043		96,043		98,397
Commercial Mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,493	2,987	3,647	2,856	2,856
Charge-offs	(23)	(171)	(105)	(184)
Recoveries	7		7
Provisions	102	260	30	404
Ending balance	3,579	3,076	3,579	3,076	3,647
Ending balance: individually evaluated for impairment					78
Ending balance: collectively evaluated for impairment	3,579		3,579		3,569
Ending balance: Loans receivables	521,060		521,060		535,735
Ending Balance: individually evaluated for impairment	1,513		1,513		2,269
Ending Balance: collectively evaluated for impairment	519,026		519,026		532,952
Reserve for unfunded loan commitments included in other liabilities			2	3	4
Commercial Mortgage [Member] | Loans Receivables Acquired with Deteriorated Credit Quality [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: Loans receivables	521		521		514
Commercial Term [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,189	904	1,062	845	845
Charge-offs	(22)	(47)	(91)	(64)
Recoveries	19		27	2
Provisions	(42)	32	146	106
Ending balance	1,144	889	1,144	889	1,062
Ending balance: individually evaluated for impairment	161		161		203
Ending balance: collectively evaluated for impairment	983		983		859
Ending balance: Loans receivables	179,294		179,294		166,335
Ending Balance: individually evaluated for impairment	2,026		2,026		2,300
Ending Balance: collectively evaluated for impairment	177,268		177,268		164,035
Reserve for unfunded loan commitments included in other liabilities			189	183	167
Commercial Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,080	1,219	1,032	1,128	1,128
Charge-offs
Provisions	(48)	136		227
Ending balance	1,032	1,355	1,032	1,355	1,032
Ending balance: collectively evaluated for impairment	1,032		1,032		1,032
Ending balance: Loans receivables	77,060		77,060		76,302
Ending Balance: individually evaluated for impairment	2,274		2,274		476
Ending Balance: collectively evaluated for impairment	74,786		74,786		75,826
Reserve for unfunded loan commitments included in other liabilities			209	201	206
Consumer: Home Equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	183	176	190	183	183
Charge-offs	(128)		(128)
Provisions	154	20	147	13
Ending balance	209	196	209	196	190
Ending balance: collectively evaluated for impairment	209		209		190
Ending balance: Loans receivables	49,492		49,492		51,536
Ending Balance: individually evaluated for impairment	279		279		531
Ending Balance: collectively evaluated for impairment	49,213		49,213		51,005
Reserve for unfunded loan commitments included in other liabilities			20	21	21
Consumer: Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	43	55	46	63	63
Charge-offs		(37)	(17)	(49)
Recoveries		1		1
Provisions	(4)	30	10	34
Ending balance	39	49	39	49	46
Ending balance: individually evaluated for impairment					3
Ending balance: collectively evaluated for impairment	39		39		43
Ending balance: Loans receivables	4,813		4,813		5,131
Ending Balance: individually evaluated for impairment	168		168		197
Ending Balance: collectively evaluated for impairment	4,645		4,645		4,934
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	575	578	537	547	547
Charge-offs
Provisions	(39)	(162)	(1)	(131)
Ending balance	536	$ 416	536	$ 416	537
Ending balance: collectively evaluated for impairment	$ 536		$ 536		$ 537

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Earnings Per Share (Narrative) (Details) - shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	0	0
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	0	0
Stock Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	0	0

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Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net income available to common stockholders, Income	$ 2,587	$ 2,049	$ 5,174	$ 4,662
Income available to common stockholders after assumed conversions, Income	$ 2,587	$ 2,049	$ 5,174	$ 4,662
Net income available to common stockholders, Shares	4,331,121	4,298,409	4,329,226	4,294,758
Effect of potential dilutive common stock equivalents– stock options and restricted shares, Shares	5,000	16,000	4,000	17,000
Income available to common stockholders after assumed conversions, Shares	4,336,254	4,314,418	4,333,181	4,311,696
Net income available to common stockholders, Amount	$ 0.60	$ 0.48	$ 1.20	$ 1.09
Effect of potential dilutive common stock equivalents– stock options and restricted shares, Amount		(0.01)	(0.01)	(0.01)
Income available to common stockholders after assumed conversions, Amount	$ 0.60	$ 0.47	$ 1.19	$ 1.08

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Accumulated Other Comprehensive Loss (Components of Accumulated Other Comprehensive Loss) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Loss [Abstract]
Net unrealized loss on AFS securities, Before-Tax Amount	$ (475)	$ (2,122)
Net unrealized loss on AFS securities, Tax Effect	100	445
Net unrealized loss on AFS securities, Net-of-Tax Amount	(375)	(1,677)
Unrealized actuarial losses-pension, Before-Tax Amount	(1,637)	(1,637)
Unrealized actuarial losses-pension, Tax Effect	343	343
Unrealized actuarial losses-pension, Net-of-Tax Amount	(1,294)	(1,294)
Total of all items above, Before-Tax Amount	(2,112)	(3,759)
Total of all items above, Tax Effect	443	788
Accumulated other comprehensive loss, net of tax	$ (1,669)	$ (2,971)

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Subordinated Debentures And Notes (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) item	Mar. 05, 2015 USD ($)
Debt Instrument [Line Items]
Number of issuances of junior subordinated debentures | item	2
Subordinated Note [Member]
Debt Instrument [Line Items]
Interest rate period, in years	5 years
Debt instrument, face amount		$ 9,750,000
Debt maturity date	Mar. 06, 2025
Subordinated Note [Member] | Maximum [Member]
Debt Instrument [Line Items]
Variable interest rate	5.75%
Subordinated Note [Member] | Minimum [Member]
Debt Instrument [Line Items]
Variable interest rate	3.00%
Fixed Rate, First 5 Years [Member] | Subordinated Note [Member]
Debt Instrument [Line Items]
Subordinate notes bearing fixed interest rate	4.25%
Prime Rate [Member] | Subordinated Note [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
DNB Capital Trust I [Member]
Debt Instrument [Line Items]
Issuance date	Jul. 20, 2001
Floating rate capital preferred securities	$ 5,000,000
LIBOR rate, borrowing period, in months	6 months
Basis spread on variable rate	3.75%
Fixed interest rate	12.00%
Principal amount, floating rate junior subordinated debentures	$ 5,200,000
Maturity date range, start	Jul. 25, 2006
Maturity date range, end	Jul. 25, 2031
DNB Capital Trust II [Member]
Debt Instrument [Line Items]
Issuance date	Mar. 30, 2005
Floating rate capital preferred securities	$ 4,000,000
LIBOR rate, borrowing period, in months	3 months
Basis spread on variable rate	1.77%
Subordinate notes bearing fixed interest rate	6.56%
Interest rate period, in years	5 years
Principal amount, floating rate junior subordinated debentures	$ 4,100,000
Maturity date range, start	May 23, 2010
Maturity date range, end	May 23, 2035

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares issued			10,600	10,750
Exercise of stock options, shares			5,300
Stock options outstanding	11,150		11,150		16,450
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options outstanding	0		0		0
Incentive Equity And Deferred Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of issuable shares of common stock	493,101		493,101
Share issuance, restricted sale period			1 year
Shares available for future grants	482,501		482,501
Stock based compensation	$ 82	$ 108	$ 143	$ 204
Share based compensation cost not yet recognized	$ 568		$ 568
Share based compensation cost not yet recognized, period for recognition			1 year 7 months 6 days
Incentive Equity And Deferred Compensation Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted shares issued				8,500
Increase in shares outstanding				4,908
Cash equivalent shares used to pay taxes				3,492
Employees And Directors Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of issuable shares of common stock	793,368		793,368
Shares available for future grants	354,090		354,090
Stock based compensation			$ 0	$ 0
Exercise of stock options, shares			0	5,300
Increase in shares outstanding				2,338
Cash equivalent shares used to pay taxes				2,962
Maximum [Member] | Incentive Equity And Deferred Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award issuable period after date of grant			4 years
Cliff-vesting period			4 years
Maximum [Member] | Employees And Directors Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum option exercise period			10 years
Minimum [Member] | Incentive Equity And Deferred Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award issuable period after date of grant			3 years
Cliff-vesting period			3 years

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Stock-Based Compensation (Stock Option Activity) (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Stock-Based Compensation [Abstract]
Balance | shares	16,450
Exercised | shares	5,300
Balance | shares	11,150
Beginning balance, Weighted Average Exercise Price | $ / shares	$ 10.31
Exercised, Weighted Average Exercise Price | $ / shares	10.31
Ending balance, Weighted Average Exercise Price | $ / shares	$ 10.31

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Stock-Based Compensation (Stock Grant Activity) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock-Based Compensation [Abstract]
Non-vested stock awards	18,590	31,130
Granted	10,600	10,750
Forfeited		4,345
Vested		8,500
Non-vested stock awards	29,190	29,035
Non-vested stock awards, Weighted Average Stock Price	$ 30.90	$ 26.53
Granted, Weighted Average Stock Price	39.36	33.98
Forfeited, Weighted Average Stock Price		28.92
Vested, Weighted Average Stock Price		26.69
Non-vested stock awards, Weighted Average Stock Price	$ 33.98	$ 28.88

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Income Taxes (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Income Tax Contingency [Line Items]
Unrecognized tax positions
Minimum [Member] | Federal And State [Member]
Income Tax Contingency [Line Items]
Open tax year for examinations	2016
Maximum [Member] | Federal And State [Member]
Income Tax Contingency [Line Items]
Open tax year for examinations	2018

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Fair Value (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Total recorded investment	$ 9,540	$ 7,822
Recorded Investment, with allowance recorded	717	1,808
Fair value of additional impaired financing receivable recorded investment	161	285
Impaired Financing Receivable, Related Allowance	161	285
Additional impaired financing receivable	152
Partially charged down loans	17
Total fair value of impaired loans	691	1,500
Other real estate owned & other repossessed property	2,825	5,051
OREO	2,700	4,900
Other repossessed property	106	142
Transfers from level 1 to level 2	0
Transfers from level 2 to level 1	0
Estimated Fair Value [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Fair value of additional impaired financing receivable recorded investment	135
Impaired Financing Receivable, Related Allowance	556	1,500
Other Real Estate Owned [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
OREO	1,500	1,600
Other Real Estate, Valuation Adjustments	105	355
Other Real Estate Owned [Member] | Estimated Fair Value [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
OREO	$ 1,400	$ 1,200

XML

Fair Value (Assets Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	$ 69,931	$ 96,643
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring, Total	69,931	96,643
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	691	1,523
OREO and other repossessed property	1,430	1,247
Assets, Fair Value Disclosure, Recurring, Total	2,121	2,770
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	69,931	96,643
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring, Total	69,931	96,643
Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	691	1,523
OREO and other repossessed property	1,430	1,247
Assets, Fair Value Disclosure, Recurring, Total	2,121	2,770
US Government Agency Obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	24,180	47,723
US Government Agency Obligations [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	24,180	47,723
US Government Agency Obligations [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	24,180	47,723
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	25,973	26,558
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	25,973	26,558
Government Sponsored Entities (GSE) Mortgage-Backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	25,973	26,558
Collateralized Mortgage Obligations GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	9,295	9,808
Collateralized Mortgage Obligations GSE [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	9,295	9,808
Collateralized Mortgage Obligations GSE [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	9,295	9,808
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	8,802	10,704
Corporate Bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	8,802	10,704
Corporate Bonds [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	8,802	10,704
State and Municipal Tax-Exempt [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	1,681	1,850
State and Municipal Tax-Exempt [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	1,681	1,850
State and Municipal Tax-Exempt [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for Sale Securities	$ 1,681	$ 1,850

XML

Fair Value (Quantitative Information About Level 3 Fair Value Measurements) (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 691	$ 1,523
Other real estate owned, fair value	1,430	1,247
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	691	1,523
Other real estate owned, fair value	1,430	1,247
Level 3 [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans		72
Level 3 [Member] | Commercial Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans		659
Level 3 [Member] | Commercial Term [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	556	754
Level 3 [Member] | Consumer: Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 135	$ 38
Level 3 [Member] | Minimum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Disposal costs	(8.00%)	(8.00%)
Level 3 [Member] | Minimum [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(8.00%)
Level 3 [Member] | Minimum [Member] | Commercial Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(14.00%)
Level 3 [Member] | Minimum [Member] | Commercial Term [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	0.00%	0.00%
Level 3 [Member] | Minimum [Member] | Consumer: Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	(7.00%)	(8.00%)
Level 3 [Member] | Maximum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Disposal costs	(8.00%)	(8.00%)
Level 3 [Member] | Maximum [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(8.00%)
Level 3 [Member] | Maximum [Member] | Commercial Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(14.00%)
Level 3 [Member] | Maximum [Member] | Commercial Term [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	(8.00%)	(16.00%)
Level 3 [Member] | Maximum [Member] | Consumer: Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	(8.00%)	(8.00%)
Level 3 [Member] | Weighted Average [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Disposal costs	(8.00%)	(8.00%)
Level 3 [Member] | Weighted Average [Member] | Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(8.00%)
Level 3 [Member] | Weighted Average [Member] | Commercial Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments		(14.00%)
Level 3 [Member] | Weighted Average [Member] | Commercial Term [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	(4.00%)	(11.00%)
Level 3 [Member] | Weighted Average [Member] | Consumer: Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Appraisal adjustments	(8.00%)	(8.00%)

XML

Fair Value (Carrying Amounts and Fair Values of Financial Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
AFS investment securities	$ 69,931	$ 96,643
HTM investment securities	59,949	62,026
Loans held-for-sale	501	419
Time	178,530	162,096
Brokered	87,877	108,651
Subordinated debt	9,750	9,750
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	46,398	17,321
AFS investment securities	69,931	96,643
HTM investment securities	59,949	62,026
Restricted stock	5,734	5,616
Loans held-for-sale	501	419
Loans, net of allowance, including impaired	923,849	928,296
Accrued interest receivable	4,297	4,207
Non-interest-bearing deposits	178,454	164,746
NOW, Money market, and Savings	531,002	549,073
Time	178,530	162,096
Brokered	87,877	108,651
FHLBP advances	31,203	32,935
Junior subordinated debentures and other borrowings	9,279	9,279
Subordinated debt	9,750	9,750
Accrued interest payable	641	646
Estimated Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	46,398	17,321
AFS investment securities	69,931	96,643
HTM investment securities	60,322	61,135
Restricted stock	5,734	5,616
Loans held-for-sale	515	429
Loans, net of allowance, including impaired	921,497	914,822
Accrued interest receivable	4,297	4,207
Non-interest-bearing deposits	178,454	164,746
NOW, Money market, and Savings	531,002	549,073
Time	178,808	160,944
Brokered	87,369	97,250
FHLBP advances	31,112	32,347
Junior subordinated debentures and other borrowings	9,990	10,285
Subordinated debt	9,271	9,505
Accrued interest payable	641	646
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	46,398	17,321
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
AFS investment securities	69,931	96,643
HTM investment securities	58,322	59,135
Restricted stock	5,734	5,616
Accrued interest receivable	4,297	4,207
Non-interest-bearing deposits	178,454	164,746
NOW, Money market, and Savings	531,002	549,073
Time	178,808	160,944
Brokered	87,369	97,250
FHLBP advances	31,112	32,347
Junior subordinated debentures and other borrowings	9,990	10,285
Subordinated debt	9,271	9,505
Accrued interest payable	641	646
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
HTM investment securities	2,000	2,000
Loans held-for-sale	515	429
Loans, net of allowance, including impaired	$ 921,497	$ 914,822