Deposits declined by $13.3 million, or 2.62%, to $494.1 million at September 30, 2010 compared to $507.3 million at December 31, 2009. Core deposits, which management considers to be demand, money market, NOW and savings accounts, increased $9.6 million in aggregate or 2.85%, compared to December 31, 2009. DNB's composite cost of funds for the third quarter of 2010 dropped 67 basis points to 1.09% compared to 1.76% for the three months ended December 31, 2009. Time deposits declined $22.8 million to $148.3 million at September 30, 2010 compared to $171.1 million at December 31, 2009.
Capital remained strong at the end of the third quarter of 2010, as DNB's tier 1 leverage ratio stood at 9.03% and its total risk-based capital ratio stood at 14.88%, well above the levels of 5.00% and 10.00% respectively to be deemed "well capitalized" for regulatory purposes. These are levels management feels are appropriate for current market conditions.
During the third quarter of 2010, DNB increased its allowance for credit losses to $6.1 million. This strengthens our allowance as a percentage of loans to 1.59% compared to 1.52% at December 31, 2009. Our coverage ratio, defined as the allowance for credit losses as a percentage of non-performing loans, improved to 66.50% compared to 59.60%. The level of non-performing loans at 2.39% of total loans compares to 2.53% at December 31, 2009.
Net income for the nine months ended September 30, 2010 was $2.6 million compared to $1.1 million for the same period for 2009. Earnings per common share for the first nine months of 2010 were $0.82 on a fully diluted basis compared to $0.25 for the same period in 2009. Core earnings, defined above, improved to $2.1 million for the nine months ended September 30, 2010, compared to $531,000 for the same period in 2009.