(13) BENEFIT PLANS

Pension Plan The Bank maintains a defined benefit pension plan (the “Plan”) covering all employees, including officers, who have been employed for one year and have attained 21 years of age. Prior to May 1, 1985, an individual must have attained the age of 25 and accrued one year of service. The Plan provides pension benefits to eligible retired employees at 65 years of age equal to 1.5% of their average monthly pay multiplied by their years of accredited service (maximum 40 years). The accrued benefit is based on the monthly average of their highest five consecutive years of their last ten years of service. The Plan generally covers only full-time employees.

Effective December 31, 2003, DNB amended its Plan to curtail future eligibility and so that no participants will earn additional benefits under the Plan after December 31, 2003. As a result of this amendment, no further service or compensation was credited under the Plan after December 31, 2003. The Plan, although frozen, will continue to provide benefit payments and eligible employees can still earn vesting credits until retirement.

The Society of Actuaries released new mortality tables in 2014 which the Company utilized in its pension plan remeasurements at December 31, 2014. The change in mortality assumption resulted in an increase to the pension plan’s accumulated benefit obligation of $99,998.

The following table summarizes the changes in the fair value of plan assets, changes in the projected benefit obligation (PBO), the funded status of both the accumulated benefit obligation (ABO) and the PBO, and the weighted-average assumptions used to determine benefit obligations for the pension plan at December 31, 2014 and 2013. Amounts recognized at December 31, 2014 and 2013 are reflected in other assets, and in accrued expenses and other liabilities on the Consolidated Statements of Financial Condition. The estimation of DNB’s PBO associated with these plans considers various actuarial assumptions for mortality rates and discount rates. As of December 31, 2014, DNB adopted mortality assumptions published by the Society of Actuaries in October 2014, adjusted to reflect observed and anticipated future mortality.

The following table sets forth the Plan’s funded status, as of the measurement dates of December 31, 2014 and 2013 and amounts recognized in DNB’s consolidated financial statements at December 31, 2014 and 2013:



	December 31
(Dollars in thousands)	2014		2013
Projected benefit obligation	$	(6,783)	$	(6,250)
Accumulated benefit obligation		(6,783)		(6,250)
Fair value of plan assets		5,197		5,274
Amounts recognized in the statement of financial position consist of:
Liabilities	$	(1,586)	$	(976)
Funded status	$	(1,586)	$	(976)
Amounts recognized in accumulated other comprehensive loss consist of:
Net loss	$	1,734	$	1,104
Total	$	1,734	$	1,104

The amounts and changes in DNB’s pension benefit obligation and fair value of plan assets for the years ended December 31, 2014 and 2013 are as follows:



	Year ended December 31
(Dollars in thousands)	2014		2013
Change in benefit obligation
Benefit obligation at beginning of year	$	6,250	$	7,221
Interest cost		275		254
Actuarial (gain) loss		636		(728)
Benefits paid		(378)		(497)
Benefit obligation at end of year	$	6,783	$	6,250
Change in plan assets
Fair value of assets at beginning of year	$	5,274	$	5,283
Actual return on plan assets		235		507
Employer contribution		103		-
Benefits paid		(378)		(497)
Estimated expenses		(37)		(19)
Fair value of assets at end of year	$	5,197	$	5,274

The Plan’s assets are invested using an asset allocation strategy in units of certain equity, bond, real estate and money market funds. The following table summarizes the weighted average asset allocations as of the dates indicated:



	December 31
	2014		2013
Cash and cash equivalents	2.4	%	14.4	%
Equity securities	57.8		34.2
Fixed income securities	39.8		51.4
Total	100.0	%	100.0	%

Equity securities consist mainly of equity common trust funds and mutual funds. Fixed income securities consist mainly of fixed income common trust funds and individual securities. Pension plan assets are invested with a moderate growth objective, with target asset allocations of approximately 50 - 60% bonds and cash and approximately 40 - 50% in stocks. As of December 31, 2014, the plan held 42.2% of its assets in bonds and cash.

Net periodic pension costs for the years indicated include the following components:



	Year Ended December 31
(Dollars in thousands)	2014		2013
Service cost	$	44	$	43
Interest cost		275		254
Expected return on plan assets		(285)		(281)
Recognized net actuarial loss		49		151
Net periodic cost	$	83	$	167
Assumptions used:
Discount rate:
Obligation		3.75	%	4.50	%
Expense		4.50		3.60
Rate of increase in compensation level		N/A		N/A
Expected long-term rate of return on assets		5.5		5.5

DNB’s estimated future benefit payments are as follows:



(Dollars in thousands)	Period		Benefits
	2015	$	576
	2016		278
	2017		300
	2018		353
	2019		425
	2020-2024		3,081

The fair value of DNB’s pension plan assets by asset category are as follows:



	December 31, 2014
							Assets at
							Fair
(Dollars in thousands)	Level 1		Level 2		Level 3		Value
Mutual fund - equity:
US equities	$	1,622	$	-	$	-	$	1,622
International equities		1,245		-		-		1,245
Real estate		133		-		-		133
Mutual funds - fixed income:
Domestic fixed income		-		-		-		-
US corporate bonds, notes and cash:
Corporate bonds		-		2,070		-		2,070
Cash		127		-		-		127
Total assets measured at fair value on a recurring basis	$	3,127	$	2,070	$	-	$	5,197



	December 31, 2013
							Assets at
							Fair
(Dollars in thousands)	Level 1		Level 2		Level 3		Value
Mutual fund - equity:
US equities	$	872	$	-	$	-	$	872
International equities		839		-		-		839
Real estate		91		-		-		91
Mutual funds - fixed income:
Domestic fixed income		665		-		-		665
US corporate bonds, notes and cash:
Corporate bonds		-		2,045		-		2,045
Cash		762		-		-		762
Total assets measured at fair value on a recurring basis	$	3,229	$	2,045	$	-	$	5,274

Retirement and Death Benefit Agreement During 1999, the Bank and Henry F. Thorne, its then current Chief Executive Officer (the “Executive”), entered into a Death Benefit Agreement providing for supplemental death and retirement benefits for him (the “Supplemental Plan”). In 2003, the Supplemental Plan was replaced by a Retirement and Death Benefit Agreement (the “Replacement Plan”).

The Replacement Plan provides that the Bank and the Executive share in the rights to the cash surrender value and death benefits of a split-dollar life insurance policy (the “Policy”) The policy is designed to provide the Executive, upon attaining age 65, with projected annual after-tax payments of approximately $35,000. In addition, the Policy is intended to provide the Executive with a projected death benefit of $750,000.

In July 2008, DNB commenced making monthly payments of $3,658 to the Executive. The remaining liability under the plan was $739,000 and $740,000 as of December 31, 2014 and 2013, respectively. The annual expense for the same respective periods was $53,000 and $63,000.

Supplemental Executive Retirement Plan for Chairman and Chief Executive Officer DNB has a Supplemental Executive Retirement Plan (also known as a SERP) for its Chairman and Chief Executive Officer, William S. Latoff. The purpose of the SERP is to provide Mr. Latoff a pension supplement beginning at age 70 for 15 years in approximately equal amounts each year and to compensate him for the loss of retirement plan funding opportunities from his other business interests because of his commitments to DNB as Chairman and CEO.

The remaining liability under the plan was $1.3 million and $1.3 million as of December 31, 2014 and 2013, respectively. The annual expense for the same respective periods was $75,000 and $71,000.

401(k) Retirement Savings Plan The Bank has adopted a retirement savings 401(k) plan. Participants are permitted to authorize pre-tax savings contributions to a separate trust established under the 401(k) plan, subject to limitations on deductibility of contributions imposed by the Internal Revenue Code. The plan allows after-tax contributions to be made as well. The contributions are subject to the same limitations. Management evaluates discretionary matching contributions each quarter based upon DNB’s financial performance. DNB made no matching contributions to the 401(k) plan in 2014 and 2013.

Profit Sharing Plan The Bank maintains a Profit Sharing Plan for eligible employees. The plan provides that the Bank make contributions equal to 3% of the eligible participant’s W-2 wages. DNB’s related expense associated with the Profit Sharing Plan was $246,000 and $231,000 in 2014 and 2013, respectively.

Stock Option Plan DNB has a Stock Option Plan for employees and directors. Under the plan, options (both qualified and non-qualified) to purchase a maximum of 793,368 (as adjusted for subsequent stock dividends) shares of DNB’s common stock could be issued to employees and directors.

Under the plan, option exercise prices must equal the fair market value of the shares on the date of option grant and the option exercise period may not exceed ten years. Vesting of options under the plan is determined by the Plan Committee. There were 354,090 and 335,279 shares available for grant at December 31, 2014 and 2013, respectively. All options currently outstanding are immediately exercisable. DNB expensed $51,000 and $68,000 during the years ended December 31, 2014 and 2013, respectively, with no anticipated additional expense.

Stock option activity is indicated below:



	Number	Weighted Average
	Outstanding	Exercise Price
Outstanding January 1, 2013	214,618	$	15.98
Issued	-		-
Exercised	-		-
Forfeited	(1,000)		10.31
Expired	(6,315)		18.66
Outstanding December 31, 2013	207,303	$	15.92
Issued	-		-
Exercised	(24,906)		15.92
Forfeited	-		-
Expired	(18,811)		22.78
Outstanding December 31, 2014	163,586	$	15.13

The weighted‑average price and weighted average remaining contractual life for the outstanding options are listed below for the dates indicated.



December 31, 2014
Range of			Weighted Average
Exercise	Number	Number	Exercise		Remaining			Intrinsic
Prices	Outstanding	Exercisable	Price		Contractual Life			Value
$ 6.93-10.99	80,650	80,650	$	8.66	3.15	years	$	1,044,000
14.00-19.99	34,895	34,895		17.51	0.97	years		143,000
23.00-24.27	48,041	48,041		24.27	0.29	years		-
Total	163,586	163,586	$	15.13	1.85	years	$	1,187,000



December 31, 2013
Range of			Weighted Average
Exercise	Number	Number	Exercise		Remaining			Intrinsic
Prices	Outstanding	Exercisable	Price		Contractual Life			Value
$ 6.93-13.99	85,050	-	$	8.65	4.15	years	$	1,029,000
14.00-19.99	55,401	55,401		17.51	1.97	years		180,000
20.00-22.99	18,811	18,811		22.78	0.97	years		-
23.00-24.27	48,041	48,041		24.27	1.29	years		-
Total	207,303	122,253	$	15.92	2.62	years	$	1,209,000

Other Stock‑Based Compensation DNB maintains an Incentive Equity and Deferred Compensation Plan. The plan provides that up to 243,101 shares of common stock may be granted, at the discretion of the Board, to individuals of DNB. Shares already granted are issuable on the earlier of three years after the date of the grant or a change in control of DNB if the recipients are then employed by DNB (“Vest Date”). Upon issuance of the shares, resale of the shares is restricted for an additional one year, during which the shares may not be sold, pledged or otherwise disposed of. Prior to the Vest Date and in the event the recipient terminates association with DNB for reasons other than death, disability or change in control, the recipient forfeits all rights to the shares that would otherwise be issued under the grant.

Share awards granted by the plan were recorded at the date of award based on the fair market value of shares. Awards are being amortized to expense over the three-year cliff-vesting period. DNB records compensation expense equal to the value of the shares being amortized. For the twelve‑month periods ended December 31, 2014 and 2013, $216,000 and $136,000 was amortized to expense. At December 31, 2014, approximately $955,000 in additional compensation will be recognized over the weighted average remaining service period of approximately 2.53 years. At December 31, 2014, 116,494 shares were reserved for future grants under the plan. Stock grant activity is indicated below.



		Weighted Average
	Shares	Stock Price
Non-vested stock awards - January 1, 2013	48,270	$	11.39
Granted	17,125		20.43
Forfeited	(400)		15.56
Vested	(14,200)		6.93
Non-vested stock awards - December 31, 2013	50,795	$	15.65
Granted	25,135		21.72
Forfeited	-		-
Vested	-		-
Non-vested stock awards - December 31, 2014	75,930	$	17.66