(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 recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of December 31, 2012 and December 31, 2011:

Age Analysis of Past Due Loans Receivables



	December 31, 2012
														Loans
														Receivable
		30-59		60-89		Greater						Total		> 90
		Days Past		Days Past		than		Total				Loans		Days and
(Dollars in thousands)		Due		Due		90 Days		Past Due		Current		Receivables		Accruing
Residential mortgage	$	692	$	319	$	2,256	$	3,267	$	22,568	$	25,835	$	60
Commercial mortgage		68		-		3,514		3,582		230,620		234,202		710
Commercial:
Commercial term		-		-		-		-		81,888		81,888		-
Commercial construction		-		-		2,031		2,031		10,216		12,247		-
Lease financing		-		-		28		28		39		67		-
Consumer:
Home equity		162		-		152		314		35,008		35,322		92
Other		95		-		54		149		6,788		6,937		7
Total	$	1,017	$	319	$	8,035	$	9,371	$	387,127	$	396,498	$	869



	December 31, 2011
													Loans
													Receivable
	30-59		60-89		Greater						Total		> 90
	Days Past		Days Past		than		Total				Loans		Days and
(Dollars in thousands)	Due		Due		90 Days		Past Due		Current		Receivables		Accruing
Residential mortgage	$	692	$	-	$	1,873	$	2,565	$	23,896	$	26,461	$	-
Commercial mortgage		257		-		2,324		2,581		229,716		232,297		210
Commercial:
Commercial term		-		54		200		254		76,048		76,302		-
Commercial construction		-		-		312		312		24,506		24,818		-
Lease financing		-		-		61		61		130		191		-
Consumer:
Home equity		175		-		60		235		35,807		36,042		-
Other		15		-		21		36		7,537		7,573		-
Total	$	1,139	$	54	$	4,851	$	6,044	$	397,640	$	403,684	$	210

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, (iii) troubled debt restructurings other than those included in items (i) and (ii), and (iv) OREO as a result of foreclosure or voluntary transfer to DNB as well as other repossessed property.

Non-Performing Assets



	December 31
(Dollars in thousands)	2012		2011
Non-accrual loans:
Residential mortgage	$	2,196	$	1,873
Commercial mortgage		2,804		2,114
Commercial		4,326		3,233
Lease financing		28		61
Consumer		211		151
Total non-accrual loans		9,565		7,432
Loans 90 days past due and still accruing		869		210
Total non-performing loans		10,434		7,642
Other real estate owned & other repossessed property		1,237		3,974
Total non-performing assets	$	11,671	$	11,616

The following tables summarize information in regards to impaired loans by loan portfolio class as of December 31, 2012 and December 31, 2011 and for the years then ended.

Impaired Loans



	December 31, 2012
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Residential mortgage	$	2,386	$	2,883	$	-	$	2,243	$	-
Commercial mortgage		2,807		2,814		-		699		1
Commercial:
Commercial term		-		3		-		111		12
Commercial construction		-		-		-		1,855		130
Lease financing		28		36		-		49		1
Consumer		211		219		-		167		4
With allowance recorded:
Residential mortgage		-		-		-		-		-
Commercial mortgage		2,565		2,569		151		985		158
Commercial:
Commercial term		-		-		-		-		-
Commercial construction		4,326		4,864		864		2,628		66
Lease financing		-		-		-		-		-
Consumer		-		-		-		-		-
Total:
Residential mortgage		2,386		2,883		-		2,243		-
Commercial mortgage		5,372		5,383		151		1,684		159
Commercial:
Commercial term		-		3		-		111		12
Commercial construction		4,326		4,864		864		4,483		196
Lease financing		28		36		-		49		1
Consumer		211		219		-		167		4
Total	$	12,323	$	13,388	$	1,015	$	8,737	$	372



	December 31, 2011
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
(Dollars in thousands)	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Residential mortgage	$	2,014	$	2,413	$	-	$	1,095	$	-
Commercial mortgage		-		-		-		821		58
Commercial:
Commercial term		202		566		-		206		1
Commercial construction		312		634		-		339		-
Lease financing		61		74		-		123		-
Consumer		151		152		-		79		-
With allowance recorded:
Residential mortgage		-		-		-		959		-
Commercial mortgage		2,114		2,116		826		444		-
Commercial:
Commercial term		-		-		-		450		-
Commercial construction		2,720		2,833		359		2,813		-
Lease financing		-		-		-		27		-
Consumer		-		-		-		-		-
Total:
Residential mortgage		2,014		2,413		-		2,054		-
Commercial mortgage		2,114		2,116		826		1,265		58
Commercial:
Commercial term		202		566		-		656		1
Commercial construction		3,032		3,467		359		3,152		-
Lease financing		61		74		-		150		-
Consumer		151		152		-		79		-
Total	$	7,574	$	8,788	$	1,185	$	7,356	$	59

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 December 31, 2012 and December 31, 2011.

Credit Quality Indicators



	December 31, 2012
				Special
(Dollars in thousands)		Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	23,346	$	-	$	2,489	$	-	$	25,835
Commercial mortgage		211,001		10,847		12,354		-		234,202
Commercial:
Commercial term		81,394		73		421		-		81,888
Commercial construction		4,018		-		6,198		2,031		12,247
Lease financing		67		-		-		-		67
Consumer:
Home equity		35,069		-		253		-		35,322
Other		6,933		-		4		-		6,937
Total	$	361,828	$	10,920	$	21,719	$	2,031	$	396,498



	December 31, 2011
			Special
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential mortgage	$	24,589	$	-	$	1,872	$	-	$	26,461
Commercial mortgage		214,086		11,346		4,834		2,031		232,297
Commercial:
Commercial term		74,961		690		586		65		76,302
Commercial construction		17,624		-		7,194		-		24,818
Lease financing		191		-		-		-		191
Consumer:
Home equity		35,976		-		66		-		36,042
Other		7,573		-		-		-		7,573
Total	$	375,000	$	12,036	$	14,552	$	2,096	$	403,684

The following tables set forth the activity and composition of DNB’s allowance for credit losses at the dates indicated.

Allowance for Credit Losses and Recorded Investment in Financing Receivables



	Year Ended December 31, 2012
			Lease		Residential
(Dollars in thousands)	Commercial		Financing		Mortgage		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance — January 1, 2012	$	4,945	$	10	$	383	$	260	$	566	$	6,164
Charge-offs		(886)		(1)		(99)		(31)		-		(1,017)
Recoveries		115		72		21		28		-		236
Provisions		962		(78)		1		7		563		1,455
Ending balance — December 31, 2012	$	5,136	$	3	$	306	$	264	$	1,129	$	6,838
Ending balance: individually evaluated
for impairment	$	1,015	$	-	$	-	$	-	$	-	$	1,015
Ending balance: collectively evaluated
for impairment	$	4,121	$	3	$	306	$	264	$	1,129	$	5,823
Loans receivables:
Ending balance	$	328,337	$	67	$	25,835	$	42,259			$	396,498
Ending balance: individually evaluated
for impairment	$	9,698	$	28	$	2,386	$	211			$	12,323
Ending balance: collectively evaluated
for impairment	$	318,639	$	39	$	23,449	$	42,048			$	384,175
Reserve for unfunded loan
commitments	$	115	$	-	$	-	$	10			$	125



	Year Ended December 31, 2011
			Lease		Residential
(Dollars in thousands)	Commercial		Financing		Mortgage		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance — January 1, 2011	$	4,387	$	86	$	454	$	482	$	475	$	5,884
Charge-offs		(768)		(200)		(280)		(64)		-		(1,312)
Recoveries		9		3		79		21		-		112
Provisions		1,317		121		130		(179)		91		1,480
Ending balance — December 31, 2011	$	4,945	$	10	$	383	$	260	$	566	$	6,164
Ending balance: individually evaluated
for impairment	$	1,185	$	-	$	-	$	-	$	-	$	1,185
Ending balance: collectively evaluated
for impairment	$	3,760	$	10	$	383	$	260	$	566	$	4,979
Loans receivables:
Ending balance	$	333,417	$	191	$	26,461	$	43,615			$	403,684
Ending balance: individually evaluated
for impairment	$	5,348	$	61	$	2,014	$	151			$	7,574
Ending balance: collectively evaluated
for impairment	$	328,069	$	130	$	24,447	$	43,464			$	396,110
Reserve for unfunded loan
commitments	$	90	$	-	$	-	$	9			$	99