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 twelve 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 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.
The Bank derives its income principally from interest charged on loans and,
to a lesser extent, interest earned on investments, fees received in connection
with the origination of loans, wealth management and other services. The Bank’s
principal expenses are interest expense on deposits and borrowings and operating
expenses. Funds for activities are provided principally by operating revenues,
deposit growth and the repayment of outstanding loans and investments.
The Bank encounters vigorous competition from a number of sources, including
other commercial banks, thrift institutions, other financial institutions and
financial intermediaries. In addition to commercial banks, Federal and state
savings and loan associations, savings banks, credit unions and industrial savings
banks actively compete in the Bank’s market area to provide a wide variety
of banking services. Mortgage banking firms, real estate investment trusts,
finance companies, insurance companies, leasing companies and brokerage companies,
financial affiliates of industrial companies and certain government agencies
provide additional competition for loans and for certain financial services.
The Bank also competes for interest-bearing funds with a number of other financial
intermediaries, which offer a diverse range of investment alternatives, including
brokerage firms and mutual fund companies.
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.
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