Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

STOCK-BASED COMPENSATION

NOTE 9: 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 643,368 (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 198,421 shares available for grant at June 30, 2011. All options with the exception of 44,600 options granted on April 23, 2010 are immediately exercisable. The options granted on April 23, 2010 have a fair value of $100,000 or $2.25 per share, based on a risk free interest rate of 3.273%, a dividend yield of 1.73% and a volatility of 35.564% and are subject to four year cliff vesting. These options which expire on April 23, 2017 if not exercised or cancelled, have an exercise price of $6.93 per share, and the shares are restricted from resale for two years after exercise. These options are exercisable only at and after such time as the market value of the common stock first equals or exceeds $7.97, which is 115% of the $6.93 exercise price. DNB expensed $13,000 during the six months ended June 30, 2011 and anticipates additional expense of $70,000 through April 23, 2014, the date the options can first be exercised.

Stock option activity is indicated below:

	Number Outstanding			Weighted Average Exercise Price
Outstanding January 1, 2011		203,575		$	16.96
Issued		—			—
Exercised		—			—
Forfeited		—			—
Expired		(9,414	)		11.16
Outstanding June 30, 2011		194,161		$	17.24

	Number Outstanding			Weighted Average Exercise Price
Outstanding January 1, 2010		169,503		$	19.19
Issued		44,600			6.93
Exercised		—			—
Forfeited		(9,419	)		(9.23	)
Expired		—			—
Outstanding June 30, 2010		204,684		$	16.98

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

June 30, 2011
Range of						Weighted Average
Exercise Prices		Number Outstanding		Number Exercisable		Exercise Price		Remaining Contractual Life	Intrinsic Value
$	6.93-10.99		44,600		0	$	6.93	5.82 years	$	136,922
	11.00-13.99		0		0		12.67	0.00 years		—
	14.00-19.99		82,419		82,419		17.44	3.48 years		—
	20.00-22.99		19,101		19,101		22.78	3.48 years		—
	23.00-24.27		48,041		48,041		24.27	3.80 years		—
Total			194,161		149,561	$	17.24	4.10 years	$	136,922

June 30, 2010
Range of						Weighted Average
Exercise Prices		Number Outstanding		Number Exercisable		Exercise Price		Remaining Contractual Life	Intrinsic Value
$	6.93-10.99		44,600		0	$	6.93	6.82 years	$	2,230
	11.00-13.99		9,414		9,414		11.16	1.00 years		—
	14.00-19.99		82,805		82,805		17.44	4.48 years		—
	20.00-22.99		19,824		19,824		22.78	4.48 years		—
	23.00-24.27		48,041		48,041		24.27	4.80 years		—
Total			204,684		160,084	$	16.98	4.91 years	$	2,230

Stock-Based Compensation

DNB maintains an Incentive Equity and Deferred Compensation Plan. The plan provides that up to 243,101 (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 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 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 three and six-month periods ended June 30, 2011, $15,000 and $30,000 was amortized to expense. For the three and six-month periods ended June 30, 2010, $36,000 and $62,000 was amortized to expense. At June 30, 2011, approximately $72,000 in additional compensation will be recognized over the remaining service period of approximately 1.31 years. At June 30, 2011, 192,420 shares were reserved for future grants under the plan.

Stock grant activity is indicated below:

	Shares		Weighted Average Stock Price
Non-vested stock awards—January 1, 2011		22,750	$	7.91
Granted		—		—
Forfeited		—		—
Vested		—		—
Non-vested stock awards—June 30, 2011		22,750	$	7.91

	Shares			Weighted Average Stock Price
Non-vested stock awards—January 1, 2010		24,101		$	13.43
Granted		14,200			6.93
Forfeited		(500	)		9.55
Vested		(1,275	)		12.26
Non-vested stock awards—June 30, 2010		36,526		$	11.00