Total deposits increased 4.4% year-over-year to $537.54 million at March 31, 2013 compared with $515.06 million at March 31, 2012. Latoff explained that initiatives to grow core deposits, including building customer relationships to incorporate more deposit activity, contributed to the company's consecutive quarter decline in cost of funds, which was 0.56% in the first quarter. A larger core deposit base generated additional liquidity for lending and contributed to DNB's ability to reduce by half its use of Federal Home Loan Bank borrowings compared with the prior year's first quarter, he added.Loans were $402.03 million at March 31, 2013, compared with $409.64 million at March 31, 2012 and up from $396.49 million at December 31, 2012. The company trimmed real estate construction loans in fourth quarter 2012. Loan totals in the most recent two quarters also reflect customer pay-downs of higher-rate loans. Latoff said first quarter 2013's rebound in total loans indicated accelerated new lending activity, primarily in CRE and C&I lending. In first quarter 2013, DNB's loan loss provision was $180,000 compared with $425,000 in first quarter 2012. DNB's allowance for credit losses at March 31, 2013 was $7.12 million compared with $6.14 million at March 31, 2012 and $6.84 million at December 31, 2012. The ratio of loss allowance to total loans in first quarter was 1.77% compared with 1.50% in first quarter 2012. Non-performing loans (NPLs) at March 31, 2013 were $16.28 million or 4.05% of total loans compared with $10.43 million or 2.63% of total loans at December 31, 2012. The increase in the ratio is due primarily to the addition of three commercial credits, which the company believes are well-reserved and that are in the process of collection, partially offset by a $5.2 million increase in loan balances from December 31, 2012. William J. Hieb, President and Chief Risk & Credit Officer, elaborated: "Despite the quarter-over-quarter uptick in NPLs, we do not expect the upward trend to continue. Three loans which were already criticized assets and closely scrutinized went into collection status. We believe the bank is adequately reserved. We immediately began addressing the situation and expect to be moving the properties into foreclosure and off the balance sheet by year end. Two are income producing properties and we have already received strong interest from potential buyers and are actively communicating with these interested parties. The third is a land acquisition loan that we believe is adequately reserved. We continue to have dialogue with the borrower to develop a principal curtailment plan from other assets."