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CORRESP
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      DNB Correspondence 9-19-05

                  DNB Financial Corporation

                  4 Brandywine Avenue

                  Downingtown,
                    PA 19335

Tel
      610.269.1040. * Fax 484.359.3176 * www.dnbfirst.com

    September
      19, 2005

    By
      Federal Express and Facsimile to 202-772-9208

    United
      States Securities and Exchange Commission

    Donald
      Walker

    Senior
      Assistant Chief Accountant

    450
      Fifth
      Street, NW

    Washington,
      DC 20549

    Dear
      Mr.
      Walker:

    Re:
      DNB
      Financial Corporation

    Form
      10-K

    Filed
      March 10, 2005

    File
      No.
      000-16667

    In
      your
      letter dated September 8, 2005, you had requested an explanation of why DNB
      Financial Corporation “DNB” recorded a valuation allowance related to the
      other-than-temporary impairment charge for our agency preferred
      securities.

    During
      2004, DNB recognized a pre-tax other-than-temporary impairment charge totaling
      $2.3 million or 24% of the book value on four agency preferred stock issues
      totaling $9.98 million. The other-than-temporary impairment charges were
      recognized due to the negative impact on the market value of these securities
      caused by the ongoing accounting, management, and regulatory oversight issues
      confronting Fannie Mae and Freddie Mac. DNB was required to recognize
      other-than-temporary impairment under guidance provided by the Financial
      Accounting Standards Board (FASB115) and the Securities and Exchange Commission
      (SEC).

    DNB
      recorded a valuation allowance for realization of deferred tax asset benefits
      after considering the following positive and negative factors as prescribed
      by
      paragraphs 20-25 of SFAS 109, “Accounting for Income Taxes”.

    1.
      The
      perpetual preferred agency securities that DNB owned at December 31, 2004
      (preferred stock) were “Capital Assets” as defined under Internal Revenue Code
      (IRC) Section 1221. In general, when the preferred stock securities would be
      sold or disposed of, any net gain or loss on such securities would generate
      a
      capital gain or capital loss. It is anticipated that the sale of the preferred
      stock securities would give rise to a realized capital loss for income tax
      purposes. Realized capital losses can only be used to offset capital gain income
      and not ordinary taxable income from operations (IRC Section 1211(a) To the
      extent a corporate taxpayer is unable to utilize a net realized capital loss,
      such losses can be carried forward to each of the 5 taxable years succeeding
      such loss year (IRC Section 1212(a)(1)(B)). If unutilized after 5 taxable years,
      such capital losses will expire unused. Neither DNB Financial Corporation,
      nor
      its wholly owned subsidiary DNB First, National Association, had a history
      of
      generating such capital gains within the past 3 tax years, nor did the
      management of DNB anticipate that it would generate such capital gains within
      five (5) years of the anticipated sale of these securities. When the impairment
      charge was recognized, DNB contemplated selling some or all of these securities
      during 2005. The 5 year period to recover the capital loss would start when
      these securities were sold. At December 31, 2004 DNB did not anticipate
      recognizing gains from the sale of any capital assets that it may have held
      as
      of this date (including these preferred stock securities) during the next 5
      - 6
      years.

    United
      States Securities and Exchange Commission

    Donald
      Walker

    Senior
      Assistant Chief Accountant

    September
      19, 2005

    Page
      2

    2.
      Management did not anticipate that these securities would recover in value
      before they were sold due to:

            ·

              The
                low trading volumes;

            ·

              The
                ongoing regulatory oversight issues confronting the various government
                agencies;

            ·

              The
                perpetual nature of this preferred
                stock;

            ·

              The
                limited number of buyers in the market that could benefit from the
                Dividend Received Deduction (DRD) that was associated with these
                securities;

            ·

              The
                benefit of owning Agency Preferred Stock with a DRD feature had diminished
                in the low interest rate
                environment;

            ·

              On
                December 29, 2004, after the OFHEO classified Fannie Mae significantly
                undercapitalized for the third quarter of 2004, Fannie Mae sold $5
                billion
                of preferred stock (stock similar to the stock that DNB took the
                impairment charge on) at very attractive terms. This made the securities
                that DNB owned less attractive to potential investors and contributed
                to
                management’s decision to recognize the $2.3 million impairment charge. The
                new Fannie Mae issue was perpetual, reset quarterly at the 10 year
                UST
                plus 237.5 basis points, with a floor of 7% and 3 years of call
                protection.

    Given
      these facts, management determined that it was more like than not that the
      income tax benefits associated with the above impairment write down would not
      be
      realizable and accordingly recorded a valuation allowance for deferred tax
      asset
      in the amount of $733,000.

    It
      is
      management’s intent to include requested revisions, if any, in future filings
      and we would be happy to provide any requested supplemental
      information.

    In
      addition, DNB Financial Corporation (“the Company”) acknowledges
      that:

            ·

              the
                Company is responsible for the adequacy and accuracy of the disclosure
                in
                the filing;

            ·

              staff
                comments or changes to disclosure in response to staff comments do
                not
                foreclose the Commission from taking any action with respect to the
                filing; and

            ·

              the
                Company may not assert staff comments as a defense in any proceeding
                initiated by the Commission or any person under the federal securities
                laws of the United States.

    United
      States Securities and Exchange Commission

    Donald
      Walker

    Senior
      Assistant Chief Accountant

    September
      19, 2005

    Page
      3

    If
      you
      have any questions regarding this response, please do not hesitate to contact
      me
      at 610-873-5253 or at Bmoroney@DNBFirst.com.

              Sincerely,

              /s/
                Bruce E. Moroney

              Bruce
                E. Moroney

              Executive
                Vice President

              Chief
                Financial Officer

              cc:

              John
                Depman, KPMG LLP

              Carlo
                Toscano, KPMG LLP

              David
                Scranton, Stradley, Ronon, Stevens and
                Young