SEC Company Response from DNB FINANCIAL — Sep 29, 2005
DNB FINANCIAL CORP /PA/ (CIK 0000713671)
Date: Sept. 29, 2005 · CIK: 0000713671 · Accession: 0000950159-05-001132
AI Filing Summary & Sentiment
File numbers found in text: 000-16667
Referenced dates: September 23, 2005
Letter
United States Securities and Exchange Commission Donald Walker Senior Assistant Chief Accountant 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 23, 2005, you had requested an explanation of why the management of DNB Financial Corporation “DNB” believes that we will not realize the benefits of the deferred tax asset related to the impairment of DNB’s Preferred Stock given that we have a history of gains on sales of available-for-sale securities.
As stated in my September 19, 2005 letter to you, 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 the above referenced 10-K filed March 10, 2005, DNB reported net gains (losses) on sales of available for sale securities of ($16,000), ($362,000) and $165,000 for 2004, 2003 and 2002, respectively, none of which was related to “Capital Assets”. In the same report under “Footnote 2 - Investment Securities” DNB reported the estimated fair value of our available-for-sale securities at $132,288,000.
Only $7,653,000 of the $132,288,000 were “Capital Assets” as defined under IRC Section 1221. The $7,653,000 of Preferred Stock represented DNB’s carrying value after the $2.3 million other-than-temporary impairment charge taken in the 4th Quarter 2004. The remainder of these securities are investments that are represented by evidence of indebtedness and are considered “Ordinary Assets” for income tax purposes for a financial institution under IRC Section 582(a). There were no other securities that qualified as “Capital Assets” in the available-for-sale portfolio.
Management did not anticipate that the $7,653,000 of preferred stock would recover in value before they were sold for the six (6) reasons stated in my September 19, letter (page 2, number 2).
United States Securities and Exchange Commission
Donald Walker
Senior Assistant Chief Accountant
September 29, 2005
Page
In addition, since the remainder of the AFS portfolio did not include any securities that qualified as “Capital Assets”, no gains coming from the sale of any securities could be used to realize the benefits of the deferred tax asset related to the impairment of DNB’s Preferred Stock. In addition, DNB has no intention of purchasing any additional securities that would qualify as “Capital Assets” in the future.
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 of 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.
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
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CORRESP
1
filename1.htm
corresp
DNB Financial Corporation
4 Brandywine Avenue
Downingtown,
PA 19335
Tel
610.269.1040. * Fax 484.359.3176 * www.dnbfirst.com
September
29, 2005
By
Edgar
Correspondence 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 23, 2005, you had requested an explanation of why
the
management of DNB Financial Corporation “DNB” believes that we will not realize
the benefits of the deferred tax asset related to the impairment of DNB’s
Preferred Stock given that we have a history of gains on sales of
available-for-sale securities.
As
stated
in my September 19, 2005 letter to you, 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 the above
referenced 10-K filed March 10, 2005, DNB reported net gains (losses) on
sales
of available for sale securities of ($16,000), ($362,000) and $165,000 for
2004,
2003 and 2002, respectively, none of which was related to “Capital Assets”. In
the same report under “Footnote 2 - Investment Securities” DNB reported the
estimated fair value of our available-for-sale securities at
$132,288,000.
Only
$7,653,000 of the $132,288,000 were “Capital Assets” as defined under IRC
Section 1221. The $7,653,000 of Preferred Stock represented DNB’s carrying value
after the $2.3 million other-than-temporary impairment charge taken in the
4th
Quarter
2004. The remainder of these securities are investments that are represented
by
evidence of indebtedness and are considered “Ordinary Assets” for income tax
purposes for a financial institution under IRC Section 582(a). There were
no
other securities that qualified as “Capital Assets” in the available-for-sale
portfolio.
Management
did not anticipate that the $7,653,000 of preferred stock would recover in
value
before they were sold for the six (6) reasons stated in my September 19,
2005
letter (page 2, number 2).
United
States Securities and Exchange Commission
Donald
Walker
Senior
Assistant Chief Accountant
September
29, 2005
Page
2
In
addition, since the remainder of the AFS portfolio did not include any
securities that qualified as “Capital Assets”, no gains coming from the sale of
any securities could be used to realize the benefits of the deferred tax
asset
related to the impairment of DNB’s Preferred Stock. In addition, DNB has no
intention of purchasing any additional securities that would qualify as “Capital
Assets” in the future.
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 of 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.
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