NOTE 8: STOCK-BASED COMPENSATION

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 shares available for grant at September 30, 2019. All options are immediately exercisable. During the nine months ended September 30, 2019 and 2018, DNB had no expenses related to the plan. Under the Stock Option Plan, no shares were exercised during the nine months ended September 30, 2019. Under the Stock Option Plan, 16,450 shares were exercised during the nine months ended September 30, 2018. The shares awarded from the non-qualified cashless exercises resulted in an increase in shares outstanding of 7,798 shares. There was a cash equivalent of 8,652 shares used to pay all applicable taxes on the transactions. DNB had no stock option activity during the nine months ended September 30, 2019 and had no stock options outstanding at September 30, 2019 or December 31, 2018. Stock option activity is indicated below.



	Number		Weighted Average
	Outstanding		Exercise Price
Outstanding January 1, 2018		16,450	$	10.31
Issued		-		-
Exercised		16,450		10.31
Forfeited		-		-
Expired		-		-
Outstanding September 30, 2018		-	$	-

Other Stock-Based Compensation

DNB maintains an Incentive Equity and Deferred Compensation Plan (the "Plan"). The Plan provides that up to 493,101 (as adjusted for subsequent stock dividends) shares of common stock may be granted, at the discretion of the Board, to individuals of the Corporation. Shares already granted are issuable on the earlier of three or four years (cliff vesting period) 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 market value of shares. Awards are being amortized to expense over a three or four year cliff-vesting period. DNB records compensation expense equal to the value of the shares being amortized. For the three and nine month periods ended September 30, 2019, $82,000 and $225,000 was amortized to expense. For the three and nine month periods ended September 30, 2018, $66,000 and $270,000 was amortized to expense.

As of September 30, 2019, there was approximately $486,000 in additional compensation that will be recognized over the weighted average life of 1.37 years. At September 30, 2019, 482,501 shares were reserved for future grants under the Plan.

There were 8,500 restricted shares that vested during the nine months ended September 30, 2018. The shares awarded from the cashless exercises resulted in an increase in shares outstanding of 4,908 shares. There was a cash equivalent of 3,492 shares used to pay all applicable taxes on the transactions. There were 540 restricted shares that vested during the nine months ended September 30, 2019. The shares awarded from the cashless exercises resulted in an increase in shares outstanding of 351 shares. There was a cash equivalent of 189 shares used to pay all applicable taxes on the transactions. Stock grant activity is indicated below:



		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2019	18,590	$	30.90
Granted	10,600		39.36
Forfeited	-		-
Vested	540		26.00
Non-vested stock awards—September 30, 2019	28,650	$	34.13



		Weighted Average
	Shares	Stock Price
Non-vested stock awards—January 1, 2018	31,130	$	26.53
Granted	10,750		33.98
Forfeited	4,345		28.92
Vested	8,500		26.69
Non-vested stock awards—September 30, 2018	29,035	$	28.88