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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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4 Brandywine Avenue
Downingtown, Pennsylvania 19335-0904
610-269-1040

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NOTICE OF ANNUAL MEETING
To Be Held on April 28, 2010

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TO THE SHAREHOLDERS:

        NOTICE IS HEREBY GIVEN that the 2010 Annual Meeting of the Shareholders of DNB Financial Corporation, will be held on Wednesday, April 28, 2010, 10:00 a.m. prevailing time, at the Downingtown Country Club, located at 85 Country Club Drive, Downingtown, PA 19335 for the following purposes:

(1)

To elect two directors to serve for three years or until their successors have been elected and qualified; and



(2)

To approve an advisory (non-binding) resolution concerning the Corporation's executive compensation; and



(3)

To ratify the appointment of ParenteBeard LLC as the registered public accounting firm for the fiscal year ending December 31, 2010; and



(4)

To transact such other business as may properly come before the Annual Meeting and any adjournment thereof. Except with respect to procedural matters incident to the conduct of the meeting, the Board of Directors is not aware of any other business which may come before the meeting.

        Shareholders of record at the close of business on March 3, 2010 are entitled to notice of and to vote at the annual meeting.

Downingtown, Pennsylvania
March 26, 2010

        IMPORTANT: Please complete, date, sign, and promptly mail the enclosed proxy card in the accompanying postage-paid envelope to ensure that your shares are represented at the meeting. If you attend the meeting, you may choose to vote in person even if you have previously sent in your proxy card.

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DNB FINANCIAL CORPORATION
PROXY STATEMENT
2010 ANNUAL MEETING OF SHAREHOLDERS

        The enclosed proxy is solicited on behalf of the Board of Directors of DNB Financial Corporation, a Pennsylvania corporation, also called DNB, the Company or the Corporation, for use at our 2010 annual meeting to be held on Wednesday, April 28, 2010, and at any adjournment or postponement thereof, referred to in this proxy statement as the annual meeting. The annual meeting will be held on Wednesday, April 28, 2010, 10:00 a.m. prevailing time, at the Downingtown Country Club, located at 85 Country Club Drive, Downingtown, PA 19335.

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Why am I receiving these proxy materials?

        We sent you this proxy statement and the accompanying proxy card because the Board of Directors of DNB Financial Corporation is soliciting your proxy to vote at the annual meeting. You are invited to attend the annual meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign, and return the accompanying proxy card.

        We mailed this proxy statement, the accompanying proxy card, our 10-K and our Annual Report for the fiscal year ended December 31, 2009, on or about March 26, 2010, to all shareholders of record entitled to vote at the annual meeting.

Who is entitled to vote at the Annual Meeting?

        To be able to vote, you must have been a shareholder on March 3, 2010, the record date on which we determined shareholders entitled to notice of, and to vote at, the annual meeting (the "Record Date").

        Shareholder of Record: Shares Registered in Your Name.    If at the close of business on the Record Date, your shares were registered directly in your name with our transfer agent, Registrar and Transfer Company, then you are a shareholder of record. As a shareholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to complete and return the accompanying proxy card to ensure your vote is counted.

        Beneficial Owner: Shares Registered in the Name of a Broker, Bank, or Other Agent.    If, at the close of business on the Record Date, your shares were not issued directly in your name, but rather were held in an account at a brokerage firm, bank, or other agent, you are the beneficial owner of shares held in "street name" and these proxy materials are being forwarded to you by your broker, bank, or other agent. The broker, bank, or other agent holding your shares in that account is considered to be the shareholder of record for purposes of voting at the annual meeting.

        As a beneficial owner, you have the right to direct your broker, bank, or other agent on how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy issued in your name from your broker, bank or other agent.

What am I being asked to vote on?

        There are three matters scheduled for a vote at the annual meeting:

1.

The election of two Class "C" members of the Board of Directors to hold office until our 2013 annual meeting



2.

The approval of an advisory (non-binding) resolution concerning the Corporation's executive compensation



3.

The ratification of the selection by the Audit Committee of ParenteBeard LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2010

How many votes do I have?

        Each holder of common stock is entitled to one vote per share held. There is no cumulative voting for the election of the directors. Each share of Common Stock is entitled to cast only 1 vote for each nominee. For example, if a shareholder owns 10 shares of Common Stock and nominations have been made for three director positions, he or she may cast up to 10 votes for each of the three positions to be elected. As of the Record Date, a total of 2,618,024 votes may be cast on each matter at the annual meeting.

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What is a quorum?

        For a proposal to be considered at the annual meeting, a quorum must be present. The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on the particular matter will constitute a quorum for purposes of considering such matter. The shareholders present, in person or by proxy, at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. At the close of business on the Record Date, there were 2,618,024 shares outstanding and entitled to vote.

        Abstentions and "broker non-votes" (that is, shares held by a broker or nominee that are represented at the meeting, but with respect to which such broker or nominee is not instructed to vote on a particular proposal and does not have discretionary voting power) will be counted for the purpose of determining whether a quorum is present.

        Your shares will be counted toward the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank, or other agent) or if you vote in person at the meeting. If there is no quorum, the chairperson of the meeting, or a majority of the votes present at the meeting, may adjourn the meeting to another date. A meeting called for the election of directors may be adjourned for periods of not more than 15 days as a majority of shareholders present in person or by proxy may decide. If a meeting to elect directors is adjourned twice, those who attend the second adjourned meeting will be a quorum for the purpose of electing directors, even though they are less than a normal quorum.

        At any adjourned meeting at which a quorum is present in person or by proxy, any business may be transacted which might have been transacted at the original meeting if a quorum had been present.

What vote is required for each item?

•

For the election of directors, the candidates receiving the highest number of "For" votes, in person or by proxy, up to the number of directors to be elected, shall be elected.



•

To be approved, the advisory (non-binding) resolution concerning the Corporation's executive compensation must receive a "For" vote from a majority of the votes cast in person or by proxy by all shareholders entitled to vote on that matter.



•

To be approved, the ratification of the selection of ParenteBeard LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2010 must receive a "For" vote from a majority of the votes cast in person or by proxy by all shareholders entitled to vote on that matter.

How do I vote?

        For the election of directors, you may either vote "For" each of the three nominees or you may "Withhold" your vote for any nominee you specify. For any other matter to be voted on, you may vote "For" or "Against" or abstain from voting. The procedures for voting are as follows.

        Shareholder of Record: Shares Registered in Your Name.    If you are a shareholder of record, you may vote in person at the annual meeting. Alternatively, you may vote by proxy by using the accompanying proxy card. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person if you have already voted by proxy.

        To vote in person, come to the annual meeting and we will give you a ballot when you arrive.

        To vote by proxy, simply complete, sign, and date the accompanying proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct.

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        Beneficial Owner: Shares Registered in the Name of Broker, Bank, or Other Agent.    If your shares are held in "street name," that is, your shares are held in the name of a brokerage firm, bank, or other nominee, in lieu of a proxy card you should receive a voting instruction form from that institution by mail. Simply complete and mail the voting instruction card to ensure that your vote is counted. The voting instruction form should indicate whether the institution has a process for beneficial holders to vote over the Internet or by telephone. A large number of banks and brokerage firms participate in the Broadridge Financial Solutions, Inc. online program, which provides eligible shareholders the opportunity to vote over the Internet or by telephone (see www.broadridge.com.) The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time, April 27th, 2010.

        If your voting instruction form does not reference Internet or telephone information, please complete and return the paper voting instruction form in the postage-paid envelope provided. Shareholders who vote over the Internet or by telephone need not return a proxy card or voting instruction form by mail, but may incur costs, such as usage charges, from telephone companies or Internet service providers.

        If you are a registered holder, you may also vote your shares in person at the annual meeting. If your shares are held in street name and you wish to vote in person at the meeting, you must obtain a proxy issued in your name from the record holder (for example, your broker) and bring it with you to the annual meeting. We recommend that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the annual meeting.

What if I return a proxy card but do not make specific choices?

        If you return a signed and dated proxy card without marking any voting selections, your shares will be voted "For" the election of the two nominees for director in Class "C, "For" the approval of an advisory (non-binding) resolution concerning the Corporation's executive compensation and "For" the ratification of the selection of ParenteBeard LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2010. If any other matter is properly presented at the meeting, then one of the individuals named on your proxy card as your proxy will vote your shares using his or her best judgment.

What if I receive more than one proxy card or voting instruction form?

        If you receive more than one proxy card or voting instruction form because your shares are held in multiple accounts or registered in different names or addresses, please be sure to complete, sign, date, and return each proxy card or voting instruction form to ensure that all of your shares will be voted. Only proxy cards and voting instruction forms that have been signed, dated, and timely returned will be counted in the quorum and voted.

Who will count the votes and how will my vote(s) be counted?

        Votes will be counted by the judge of elections appointed for the annual meeting. The judge of elections will separately count "For" and "Withhold" for the election of each director. The judge of election will also count "For" and "Against" votes for any proposals other than the election of directors. The judge of elections will also count any abstentions, and broker non-votes on each matter. A "broker non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner. Abstentions and broker non-votes will have no effect on the outcome of the election of a director or any other proposal.

        If your shares are held by your broker, bank, or other agent as your nominee (that is, in "street name"), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank, or other agent to vote your shares. If you do not give instructions, your broker, bank, or other agent may vote your shares with respect to "discretionary" items, but not with respect to "non-discretionary" items. Discretionary items are

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proposals considered routine under the rules of the NASDAQ Capital Market, such as the vote for our independent registered public accounting firm.

Can I change my vote after I have voted?

        Yes. You can revoke your proxy at any time before the applicable vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:

1.

You may submit another properly completed proxy with a later date.



2.

You may send a written notice that you are revoking your proxy to our Corporate Secretary at 4 Brandywine Avenue, Downingtown, Pennsylvania 19335.



3.

You may attend the annual meeting and vote in person (however, simply attending the meeting will not, by itself, revoke your proxy).

        If your shares are held by your broker, bank, or other agent, you should follow the instructions provided by them.

How and when may I submit a shareholder proposal for the 2011 Annual Meeting of Shareholders?

        If you wish to present a proposal for consideration at our 2011 annual meeting and you want the proposal to be included in our proxy statement and form of proxy card for that meeting, you must send written notice of the proposal to our Corporate Secretary so that we receive it at our principal executive offices no later than November 26, 2010, which is the month and day next year that is 120 calendar days before the month and day of this year's proxy statement date. The proposal must comply with the requirements of SEC Rule 14a-8, and we can exclude a proposal in the types of cases described in Rule 14a-8.

        Whether or not you want us to include a proposal in our proxy statement, our bylaws require that, if you want a proposal to be eligible for consideration at our 2011 annual meeting, you must give written notice of the proposal to our Corporate Secretary no later than January 27, 2011 (ninety days before April 27, 2011, the scheduled date of our 2011 annual meeting), including:

(i)

a brief description of the proposal, why you are presenting it and why it should be adopted;



(ii)

your name and address as they appear on our shareholder records;



(iii)

the class and number of our shares you own, in your name or beneficially in another name and;



(iv)

any material interest you have in connection with the proposal or its adoption.

        The chairperson of the meeting may determine whether a proposal was made in accordance with this required procedure. If the chairperson decides that the proposal was not made in accordance with this procedure, the chairperson will state that to the meeting and the defective proposal will be disregarded and laid over for action at the next shareholder meeting that is held at least 30 days after the meeting where the proposal was rejected for this reason.

        If a shareholder proposal is presented to the 2011 annual meeting, our management proxy holders will be authorized by our proxy form to vote for or against the proposal, in their discretion, if we do not receive notice of the proposal, addressed to the Secretary at our principal executive offices, prior to the close of business on February 8, 2011, which is the date in 2011 that is the month and day next year that is 45 days before the month and day this year that we first sent this proxy statement to shareholders. Pursuant to SEC Rule 14a-4(c) (2), if we receive timely notice of a proposal, our management proxies may still exercise discretion to vote on a matter if permitted by that rule and if we include in our proxy statement for the meeting, a desc ription of the matter and how the management proxies intend to exercise their discretion to vote on the matter.

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How and when may I nominate a director for consideration at the 2011 Annual Meeting of Shareholders?

        If you want to nominate a candidate for election as a director, you must notify our Corporate Secretary in writing no later than January 27, 2011, which is ninety days before April 27, 2011, the scheduled date of our 2011 annual meeting. If you want our Nominating & Corporate Governance Committee to fully consider your nominee and consider whether the committee should nominate the nominee, you must notify us no later than November 26, 2010. Your notification must contain the following information to the extent you know it:

(a)

the proposed nominee's name and address;



(b)

the proposed nominee's age;



(c)

the proposed nominee's principal occupation;



(d)

the number of our shares the proposed nominee owns;



(e)

the total number of shares you expect to be voted for the proposed nominee;



(f)

your name and residence address; and



(g)

the number of our shares you own.

        If a nomination you make is not made according to these procedures, our bylaws require it to be disregarded by the presiding officer of the meeting, and votes cast for the nominee will be disregarded by the judges of election.

How may I communicate with the board of directors?

        Please address any shareholder proposals or notices of proposals, any nominations for director, and any shareholder communications to our board of directors, in writing to our Corporate Secretary at 4 Brandywine Avenue, Downingtown, Pennsylvania 19335. The Corporate Secretary will relay shareholder communications to board members.

Who will bear the cost of soliciting proxies?

        We will bear the entire cost of the solicitation of proxies for the annual meeting, including the preparation, assembly, printing, and distribution of this proxy statement, the proxy card and any additional solicitation materials furnished to shareholders. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries, and custodians holding shares in their names that are beneficially owned by others so that they may forward the solicitation materials to the beneficial owners. We may reimburse such persons for their reasonable expenses in forwarding solicitation materials to beneficial owners. We have engaged Georgeson Shareholder Communications, Inc. to aid in the solicitation of proxies, for which we will pay a fee of approximately $6,000, plus reimbursement of expenses. The original solicitation of proxies may also be supplemented by solicitation by personal contact, telephone, facsimile, email, or any other means by our directors, officers, or employees, to whom no additional compensation will be paid for any such services.

How can I find out the results of the voting at the Annual Meeting?

        Preliminary voting results will be announced at the annual meeting. The final voting results will be reported on Form 8-K to the Securities and Exchange Commission within four business days of the annual meeting.

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What is the recommendation of the board of directors?

        Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the board of directors.

        The board of directors recommends a vote FOR Proposal No. 1, to elect Mildred C. Joyner and William S. Latoff as "Class C" directors to serve until the 2013 annual meeting of shareholders or until their successors are duly elected and qualified.

        The board of directors also recommends a vote FOR Proposal No. 2, to approve an advisory (non-binding) resolution concerning the Corporation's executive compensation.

        The board of directors also recommends a vote FOR Proposal No. 3, to ratify our appointment of ParenteBeard LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2010.

        With respect to any other matter that properly comes before the meeting, the proxy holders will vote in accordance with their best judgment.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 15, 2010 by:

•

each person, group or company that, to our knowledge, beneficially owns more than 5% of the outstanding shares of the common stock; and



•

each of our directors and named executive officers; and



•

all of our executive officers and directors as a group.

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Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934 requires our directors and certain officers, and persons who own more than ten percent of any class of the Company's registered securities, to file reports of ownership and changes in ownership on Forms 3, 4, and 5 with the Securities Exchange Commission. The Securities Exchange Commission requires officers, directors, and greater-than-ten-percent beneficial owners to furnish us with copies of all Forms 3, 4, and 5 they file. We believe that all of our officers and directors complied with all their applicable filing requirements during the fiscal year ended December 31, 2009, with the exception of Forms 3, 4 and 5 for Gerard F. Griesser, a new director, for which filing was delayed due to inability to located EDGAR filing codes, and for which corrective filings of Forms 3 and 4 were made on March 3, 2010.

PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING


PROPOSAL 1—ELECTION OF DIRECTORS

General

        Our Board of Directors currently consists of eight members. The directors are divided into three classes, with each class serving on the Board of Directors for a staggered three-year term. Class "C" directors, whose terms expire at the annual meeting, consist of Mildred C. Joyner and William S. Latoff. At the annual meeting, two directors will be elected to fill positions in Class "C". Each of the current Class "C" directors is a nominee for election at the annual meeting. The nomination of these directors to stand for election at the annual meeting has been recommended by the Nominating and Corporate Governance Committee and approved by the Board of Directors. Each of the nominees for Class "C", if elected, will serve for a three-year term expiring at the 2013 annual meeting, or until his or her successor is elected and qualified.

        Each of the nominees has consented to serve if elected. However, if any of the persons nominated by the Board of Directors fails to stand for election, or declines to accept election, or is otherwise unavailable for election prior to our annual meeting, proxies solicited by our Board of Directors will be voted by the proxy holders for the election of any other person or persons as the Board of Directors may recommend, or our Board of Directors, at its option, may reduce the number of directors that constitute the entire Board of Directors. The Board of Directors recommends that you vote for the two nominees named below.

        Set forth below is certain information as of March 15, 2010 concerning the nominees for election as director and each other member of the Corporation's Board of Directors. All individuals listed are directors of both the Company and DNB First, National Association, the Company's wholly owned bank subsidiary (also called the Bank). None of the following persons is a director or a person nominated or chosen to become a director in any registered investment company or other SEC registrant.

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NOMINEES FOR THE THREE-YEAR TERM EXPIRING IN 2013

        Mildred C. Joyner, MSW, LCSW, BCD, age 60, has been a Director since 2004 and currently is a member of the Trust, Marketing, and Audit committees. Ms. Joyner is a Professor of Social Work, and the Director and Chairperson of the Undergraduate Social Work Department of West Chester University from July 1995 to present. Prior positions held at West Chester University are: Associate Professor and Chairperson of the Undergraduate Social Work Department from June 1984 to July 1995; Assistant Professor of Social Work from August 1979 to June 1984. Other directorships she holds are: Previous Board Chair of Living Beyond Breast Cancer from January 2008 to December 2009; Vice President of the Council on Social Work Education from July 2003 to June 30, 2009; President Elect of the Council on Social Work Education from July 2009 to June 2010 and will serve as President of CSWE on July 1, 2010 to June 30, 2013. Ms. Joyner earned her undergraduate degree in 1971 from Central State University, Wilberforce, Ohio and graduate degree in 1974 from Howard University in Washington, DC. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Ms. Joyner's qualifications to serve on the Board includes her considerable knowledge and experience acquired while directing a major department at the largest university in Chester County. In addition, the Committee believes that Ms. Joyner's background in community based service provides the Board with a unique perspective and insight regarding the needs of local consumers and strengthens the Board's collective qualifications, skills and experience.

        William S. Latoff, age 61, has been a Director since 1998, Chairman of the Board of DNB since 2003 and assumed the role of CEO in December of 2004. Mr. Latoff currently serves as Chairman of the Board Loan Committee at DNB. Mr. Latoff was a principal of Bliss & Company, Ltd., Certified Public Accountants from 1974 to 2004. Mr. Latoff has owned automotive dealerships since 1988 and has been Chairman and President of Brandywine Automotive Group, Inc., which owns and operates Jaguar/Land Rover West Chester since 1998. He has been a principal in a variety of commercial and residential real estate projects in Chester County. He served on the Board of Directors of Keystone Financial from 1993 to 1998 and on the Board of Elmwood Federal Savings Bank from 1987 to 1993. Mr. Latoff currently serves as Director and Chairman of the Chester County Industrial Development Authority and is a member of the Chester County Economic Development Council and presently serves on its Board. He is currently a Director and Chairman Emeritus of the Chester County Historical Society and is a member of the Chester County Chamber of Business and Industry. Mr. Latoff is Chairman of the Pennsylvania Bankers Public Affairs Committee and serves on the Government Relations Policy Committee. The Nominating & Corporate Governance Committee believes his considerable knowledge and executive experience in the automotive and real estate industries, combined with his broad experience in finance and accounting as well as his service on two publicly traded bank boards, strengthens DNB's Board's collective qualifications, skills and experience.

        Unless marked to the contrary, the shares represented by the enclosed Proxy will be voted "FOR" the election of the nominees named above as directors.

        THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THESE NOMINEES AS DIRECTORS

Continuing Directors for Terms Expiring 2011

        Gerard F. Griesser, age 60, has been a Director since October 2009. He is one of three owners of Prudential Fox & Roach Realtors, the Trident Group and ETC Inc. Mr. Griesser served as the Chairman of the Washington, DC-based Real Estate Settlement Providers Council (RESPRO) from 2003 to 2004 and was on the Board of Directors for Willow Financial Bancorp, Inc. from 2007 to 2009 and Chester Valley Bancorp, Inc. from 1987 to 2007. Mr. Griesser currently serves as the President of Fox Roach Charities, the charitable arm of Prudential Fox & Roach/Trident. Mr. Griesser graduated in 1971 from Villanova University with a BA and from Drexel University in 1975 with an MBA. As a result of these and other

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professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Griesser's qualifications to serve on the Board includes his considerable knowledge and experience acquired while managing the one of the largest privately held mortgage companies in the country. In addition, the Committee believes his business acumen acquired during his 14 years of commercial banking experience as well his service on other publicly traded companies' boards, strengthens the Board's collective qualifications, skills and experience.

        William J. Hieb, age 53, has been a Director of the Corporation since 2005 and a Director of the Bank since 2004. Mr. Hieb serves as President, Chief Operating Officer and Chief Credit Officer of the Corporation and the Bank. Mr. Hieb is presently Chairman of the Trust Committee and a member of the Board Loan Committee. He was employed at First Union National Bank and predecessor banks from 1978 to 2002, most recently serving as a Senior Vice President of First Union National Bank and a Managing Director of First Union Securities in Philadelphia. Mr. Hieb has been a Board Member of the Chester County Economic Development Council since 2008 and the Chester County Chamber of Business and Industry Foundation since 2007. Mr. Hieb also serves as Treasurer, Board Member, and a member of the Executive Committee of The Housing Partnership of Chester County. He is a graduate of The Pennsylvania State University with a degree in Finance. He also holds Series 7, 24 and 63 securities licenses. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Hieb's qualifications to serve on the Board includes his considerable knowledge and experience acquired during his 31 years in commercial banking involving lending, credit administration and wealth management. In addition, the Committee believes his background in the management of the DNB's operations during the last seven years, strengthens the Board's collective qualifications, skills and experience.

        James H. Thornton, age 64, has been a Director since 1995. He is presently Chairman of the Audit Committee and the Benefits & Compensation Committee, and serves on the Executive and Nominating & Corporate Governance Committees. Mr. Thornton is the President of Thornton Consulting, a hospital and healthcare consulting firm, which he established in February 2009. From December 2006 to December 2008, Mr. Thornton was the CEO of John Dempsey Hospital of the University of Connecticut Health Center (UCHC) and was the Interim Chief Operating Officer of the Connecticut Children's Medical Center from December 2005 to December 2006. From July 1994 to December 2000, Mr. Thornton was the Chief Executive Officer of Brandywine Health System. He graduated from Villanova University in 1967 with a BS in Economics and Accounting. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Thornton's qualifications to serve on the Board includes his considerable knowledge and executive experience acquired while managing two regional hospitals with complex operational and financial requirements. In addition, the Committee believes his background in finance and accounting strengthens the Board's collective qualifications, skills and experience.

Continuing Directors for Terms Expiring 2012

        Thomas A. Fillippo, age 62, has been a Director since 2006. He currently serves on the Benefits & Compensation, Marketing, Board Loan and Nominating & Corporate Governance Committees. Mr. Fillippo is the President and Chief Executive Officer of Devault Foods. He serves on the board of the Paoli Hospital Foundation, serves as Chairman of the West Chester University's Council of Trustees and as a board member of the West Chester University Foundation and Sturzebecker Foundation. Mr. Fillippo is a past Chairman of the Chester County Chamber of Business and Industry, past Chairman of the Chester County Industrial Development Authority, past President of the Great Valley Regional Chamber of Commerce, and past President of the Pennsylvania Meat Packers Association. Mr. Fillippo graduated in 1969 from West Chester University with a degree in Health and Physical Education. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Fillippo's qualifications to serve on the Board includes his considerable knowledge and executive

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experience acquired while managing the one of the largest privately held companies in Chester County with complex operational and financial requirements. In addition, the Committee believes his business acumen acquired during years of service on numerous non-profit boards, strengthens the Board's collective qualifications, skills and experience.

        James J. Koegel, age 63, has been a Director since 2003. He is currently Chairman of the Nominating & Corporate Governance Committee and serves on the Benefits & Compensation, Executive, Board Loan, and the Audit Committees. Mr. Koegel is the President of Jones Motor Group, Inc. & Affiliated Companies. He has been a board member of the Chester County Industrial Development Authority since 2006, a member of the Board of Trustees of the Episcopal Academy since 1991 and has served as a board member of the of the Chester County Economic Development Council. Mr. Koegel graduated in 1969 from Villanova University with a degree in Economics and Temple University School of Law in 1975. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Koegel's qualifications to serve on the Board includes his knowledge of law as well as his considerable knowledge and executive experience acquired while managing the operation of a successful privately held company which operates nationwide, strengthens the Board's collective qualifications, skills and experience.

        Eli Silberman, age 70, has been a Director since 2003. He is currently Chairman of the Marketing Committee and serves on the Trust and Board Loan Committees. Mr. Silberman spent 14 years at McCann-Erickson in New York. He founded "The Silberman Group" in 1978. In 1998, Mr. Silberman sold the Silberman Group to Earle Palmer Brown and was Chairman of the Philadelphia region. In 2000 he became President of TSG, Inc., a marketing consulting company. Mr. Silberman sits on several boards: West Chester University, the Chester County Agricultural Conservation Easement Board and has been a trustee of the Pennsylvania Hunt Cup, Upland Country Day School, served on the Outreach Committee of the Philadelphia Museum of Art and served as board member for the Chester County Economic Development Council. Mr. Silberman graduated from SUNY Fredonia in 1961 and served as an officer in the United States Marine Corps from 1961 to 1964. As a result of these and other professional experiences, the Nominating & Corporate Governance Committee believes that Mr. Silberman's qualifications to serve on the Board includes his considerable knowledge and experience in advertising, marketing and communications, which strengthens the Board's collective qualifications, skills and experience.

BOARD GOVERNANCE

Information about our Board of Directors

        During 2009, the Corporation's Board of Directors held 15 meetings and the Bank's Board of Directors held 12 meetings, excluding committee meetings, which are described below. Board and committee meetings of the Corporation and Bank are conducted on a combined basis. Only a single retainer is paid to each Director for their services as directors of both entities. Only a single fee is paid for each board or committee meeting, whether or not the meeting is for the Corporation, the Bank or is conducted on a combined basis. Each of the directors of the Corporation is also a director of the Bank. Each committee described below, unless otherwise noted, is a committee of the Bank and the Corporation.

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        Each of the Directors of the Corporation attended at least 75% of the aggregate of (i) the total number of Board meetings held while he or she was a Director and (ii) the total number of meetings held by committees during his or her service on those committees.

The Audit Committee

        The Audit Committee of the Board of Directors oversees our accounting and financial reporting processes and the audits of our financial statements. For this purpose, the Audit Committee performs several functions:

•

Approves in advance the engagement of the independent registered public accounting firm for all audit and non-audit services, and approves the fees and other terms of the engagement



•

Maintains responsibility for the appointment, compensation, retention, and oversight of our independent registered public accounting firm and evaluates the qualifications, performance, and independence of the independent registered public accounting firm



•

Reviews, with our independent registered public accounting firm, any significant difficulties, disagreements, or restrictions encountered during the course of the audit, and reviews any management letters issued by the independent registered public accounting firm



•

Reviews the critical accounting policies and all alternative treatments of financial information discussed by the independent registered public accounting firm with management, and reviews with management significant judgments made in the preparation of financial statements



•

Reviews, with management and our independent registered public accounting firm, our financial reporting processes and internal financial controls



•

Reviews the annual audited financial statements and recommends to the Board of Directors their inclusion in our annual report



•

Reviews the quarterly financial statements and earnings press releases



•

Reviews and approves any related party transactions



•

Establishes and oversees procedures for the receipt, retention, and treatment of complaints received regarding accounting, internal controls or auditing matters; reviews changes in, or waivers of, our Code of Ethics, and as requested by the Board, reviews and investigates any conduct alleged to be in violation of the Code of Ethics



•

Periodically reviews and discusses with the independent registered public accounting firm the matters required to be discussed by Statement on Accounting Standards 61 and any formal written statements received from the independent registered public accounting firm



•

Overseeing DNB's risk management function

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The Audit Committee held 4 meetings during 2009.

        The Board of Directors has determined that, during 2009, Mr. Thornton would qualify as a "financial expert" within the meaning of that term in the SEC regulations dealing with audit committee financial experts. It has also determined that Mr. Thornton is also "independent" within the meaning of that term under NASD Rule 4200(a)(15).

The Benefits & Compensation Committee

The Benefits & Compensation Committee of the Board of Directors:

•

Periodically reviews and advises the Board concerning both regional and industry-wide compensation practices and trends in order to assess the adequacy and competitiveness of our compensation programs for executive officers and directors relative to comparable companies in our industry



•

Reviews and makes recommendations regarding all benefit programs and human resource policies



•

Review the performance of the CEO on an annual basis and sets goals for the coming year



•

Reviews and approves corporate and personal performance goals and objectives relevant to the compensation of all executive officers, and sets all executive compensation



•

Makes recommendations to the Board regarding the establishment and terms of incentive compensation plans and equity compensation plans, and administers such plans



•

Approves grants of options, restricted stock, and other awards to all executive officers and directors



•

Approves compensation-related matters outside the ordinary course to executive officers and directors, including but not limited to employment contracts, change-in-control provisions, severance arrangements, and material amendments thereto



•

Makes recommendations to the Board regarding director compensation in conjunction with the Nominating & Corporate Governance Committee.

The Benefits & Compensation Committee held 5 meetings during 2009.

The Board Loan Committee

The Board Loan Committee of the Board of Directors:

•

Periodically reviews asset quality, sales & marketing, policy exception and charge-off reports



•

Reviews and takes action on proposed and existing loans in excess of the Officers' Credit Committee authority



•

Ratifies loans approved by officers and the Officers Loan Committee over a specified amount



•

Reviews and approves changes to the Credit policy

The Board Loan Committee held 4 meetings during 2009.

The Trust Committee

The Trust Committee of the Board of Directors:

•

Reviews and approves the recommendations of the Securities & Administrative Review Committee



•

Reviews and ratifies the actions of management regarding the investment portfolios managed by DNB Advisors

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•

Reviews and recommends policies and procedures for DNB Advisors and DNB Financial Services and ensures compliance with applicable federal and state regulations



•

Reviews estate administration

The Trust Committee held 4 meetings during 2009.

The Nominating & Corporate Governance Committee

The Nominating & Corporate Governance Committee of the Board of Directors:

•

Evaluates and selects nominees for each election of directors



•

Determines criteria for selecting new directors, including desired board skills and attributes, and identifies and actively seeks individuals qualified to become directors



•

Considers any nominations of director candidates validly made by shareholders



•

Reviews and makes recommendations to the Board of Directors concerning qualifications, appointment, and removal of committee members



•

Reviews the Code of Ethics & Whistle Blower policy from time to time and recommends such changes to the Code as the Committee shall deem appropriate



•

Reviews our compliance with corporate governance listing requirements established by The NASDAQ Stock Market



•

Assists the Board in developing criteria for the evaluation of Board and committee performance



•

Assists the Board in the orientation of new directors and in the development of corporate governance-related continuing education for all Board members

The Nominating & Corporate Governance Committee held 1 meeting during 2009.

        The Board of Directors has determined that each of the members of the Nominating & Corporate Governance Committee is "independent" within the meaning of that term under NASD Rule 4200(a)(15).

Director Independence

        In determining that Messrs. Fillippo, Griesser, Koegel, Silberman and Thornton and Ms. Joyner are independent, the board of Directors considered routine banking transactions between the Bank or its affiliates and each of the directors, their family members and businesses with whom they are associated, such as loans, deposit accounts, wealth management and fiduciary accounts, routine purchases of insurance or securities brokerage products, any overdrafts that may have occurred on deposit accounts, any contributions the Corporation made to non-profit organizations with whom any of the directors are associated, any transactions that are discussed under "Certain Transactions of Management and Others with the Corporation and its Subsidiaries" beginning on page 37 of this Proxy Statement, and the following transactions, relationships and arrangements: Director participation in the Stock Option Plan and Director participation in the Deferred Compensation Plan for Directors.

Shareholder Director Nominations

        Our bylaws contain provisions that address the process by which a shareholder may nominate an individual to stand for election to the Board of Directors at the Company's annual meeting. The Nominating & Corporate Governance Committee does have a charter regarding director nominations and regarding communications by shareholders with directors, including the process for evaluating director nominees proposed by shareholders.

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        The Nominating & Corporate Governance Committee will evaluate any recommendation for director nominee proposed by a shareholder. In order to be evaluated in connection with the Nominating & Corporate Governance Committee's established procedures for evaluating potential director nominees, any recommendation for director nominee submitted by a shareholder must be sent in writing to the Corporate Secretary, 4 Brandywine Avenue, Downingtown, Pennsylvania, 120 days prior to the anniversary of the date proxy statements were mailed to shareholders in connection with the prior year's annual meeting and must contain the following information:

•

The candidate's name, age, contact information, and present principal occupation or employment



•

A written consent of the recommended individual stating that the individual consents to be nominated for the position of director of the Company and that the individual will submit to the Company all information that the Nominating & Corporate Governance Committee requests in connection with its consideration of the nomination or as the Company may otherwise request in order for it to fulfill its disclosure and legal obligations in connection with the nomination and service of such individual as director



•

A description of the candidate's qualifications, skills, background, and business experience during, at a minimum, the last five years, including his or her principal occupation and employment and the name and principal business of any corporation or other organization in which the candidate was employed or served as a director

        In order for the recommendation to be acted upon in a timely fashion to permit nomination, if appropriate, at any annual meeting of the shareholders of the Corporation, these materials must be received, in proper form, completed and signed, by the Secretary of the Corporation at the address set forth on the first page of this Proxy Statement, not later than the deadline for submission of shareholder proposals for inclusion in the Corporation's proxy materials identified in the section of this Proxy Statement titled, "How and when may I submit a shareholder proposal for the 2011 annual meeting?" on page 5.

Process for Considering and Evaluating Board Nominees

        In evaluating director nominees, the Nominating & Corporate Governance Committee considers the following factors:

•

The appropriate size of our Board of Directors and its Committees;



•

Whether the potential nominee has experience and expertise that is relevant to the Company's business, including any specialized business experience, technical expertise, or other specialized skills, and whether the potential nominee has knowledge regarding issues affecting the Company;



•

The skills, background, reputation, and business experience of nominees compared to the skills, background, reputation, and business experience already possessed by other members of the Board;



•

Whether the potential nominee is independent, as defined by NASDAQ listing standards, whether he or she is free of any conflict of interest or the appearance of any conflict of interest with the best interests of the Company and its stockholders, and whether he or she is willing and able to represent the interests of all stockholders of the Company;



•

Whether the potential nominee is highly accomplished in his or her respective field;



•

Whether the addition of the potential nominee to the Board of Directors would assist the Board of Directors in achieving a mix of Board members that represents a diversity of background and experience, including diversity with respect to age, gender, national origin, race and competencies;



•

Whether the potential nominee has high ethical character and a reputation for honesty, integrity, and sound business judgment;

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•

Whether the potential nominee can work collegially with others; and



•

Any factor which would prohibit the potential nominee to devote sufficient time to its business.

        Other than the items listed above, there are no stated minimum criteria for director nominees, and the Nominating & Corporate Governance Committee may also consider such other factors as it may deem are in our best interests and the interests of our shareholders. The Committee does, however, believe it appropriate for at least one member of the Board to meet the criteria for an "audit committee financial expert," that a majority of the members of the Board meet the definition of "independent director" under NASDAQ rules, and that one or more key members of management participate as members of the Board.

        The Nominating & Corporate Governance Committee identifies nominees by first evaluating the current members of the Board of Directors willing to continue in service. Current members of the Board with skills and experience that are relevant to the Company's business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. With respect to an incumbent director whom the nominating committee is considering as a potential nominee for re-election, the Company's Nominating & Corporate Governance Committee reviews and considers the incumbent director's service to the Company during his or her term, including the number of meetings attended, level of participation, and overall contribution to the Company. If any member of the Board does not wish to continue in service or if the Nominating & Corporate Governance Committee or the Board decides not to re-nominate a member for re-election, the Nominating & Corporate Governance Committee identifies the desired skills and experience of a new nominee, and discusses with the Board suggestions as to individuals that meet the criteria. In addition, the Committee has not engaged third parties to identify, evaluate, or assist in identifying potential nominees, but relies on community and business contacts it has established through its directors, officers and professional advisors to help it identify potential director candidates when a specific need is identified.

Board Leadership Structure

        The Board does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee Directors or be an employee. The Board believes that it should be free to make a choice from time to time in any manner that is in the best interests of the Company and its shareholders.

        The Board of Directors believes that Mr. Latoff's service as both Chairman of the Board and CEO is in the best interest of the Company and its shareholders. Mr. Latoff possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its businesses and is best positioned to develop agendas that ensure that the Board's time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company's ability to communicate its message and strategy clearly and consistently to DNB's shareholders, employees and customers.

        Each of the directors other than Mr. Latoff and Mr. Hieb, DNB's President, is independent and the Board believes that the independent directors provide effective oversight of management. In addition to feedback provided during the course of Board meetings, the independent directors have executive sessions when appropriate.

        Although the Company believes that the combination of the Chairman and CEO roles is appropriate in the current circumstances, DNB's Corporate Governance Guidelines do not establish this approach as a policy, but as a matter that is part of succession planning for the Chief Executive Officer position.

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Risk Oversight

        Under DNB's Corporate Governance Guidelines, the Board is charged with providing oversight of DNB's risk management processes. In accordance with NASDAQ requirements, the Audit Committee is primarily responsible for overseeing the risk management function at DNB on behalf of the Board. In carrying out its responsibilities, the Audit Committee works closely with DNB's Chief Risk Officer and other members of DNB's management team. The Audit Committee meets at least quarterly with the Chief Risk Officer and other members of management to review the processes in place to monitor and control such exposures. The Audit Committee also receives updates between meetings from the Chief Risk Officer, the Chief Executive Officer, the Chief Financial Officer and other members of management relating to risk oversight matters. In addition, at least annually, the Chief Risk Officer and members of management make a presentation on risk management to the full Board.

        In addition to the Audit Committee, the other committees of the Board consider the risks within their areas of responsibility. For example, the Benefits & Compensation Committee considers the risks that may be implicated by our executive compensation programs and the Trust Committee reviews risks associated with the operations of a Trust Department.

Director Attendance at Annual Meetings

        We make every effort to schedule our annual meeting at a time and date to maximize attendance by directors taking into account the directors' schedules. We believe that annual meetings provide an opportunity for shareholders to communicate with directors and have requested that all directors make every effort to attend the Company's annual meeting. Historically, more than a majority of the directors have done so; for example, in 2009, all of the Company's then directors attended the 2009 annual meeting.

Executive Officers Who Are Not Directors

        The following sets forth information with respect to executive officers of the Corporation and the Bank who do not serve on the Corporation's Board of Directors. Each serves at the pleasure of the Board of Directors. There are no arrangements or understanding between the Corporation or the Bank and any person pursuant to which any such officers were selected.

        Richard J. Hartmann (Age 59) was named Executive Vice President of the Corporation and the Bank to head up the Retail Banking Division in January 2006. Prior to his promotion, Mr. Hartmann served as Senior Vice President of the Bank in its Retail Banking Division since June 2005. For 4 years prior to joining the Bank, Mr. Hartmann served as Executive Vice President at Susquehanna Bank (Farmers First Bank), responsible for Retail Banking. During the previous 5 years, Mr. Hartmann was a Senior Vice President and Executive Relationship Market Banker at M&T Bank/Keystone Financial in Horsham, PA, responsible for M&T's Delchester Region.

        Albert J. Melfi (Age 57) joined the Bank in November 2006 and currently serves as Executive Vice President and Chief Lending Officer of the Corporation and the Bank. Prior to joining DNB, Mr. Melfi had been employed as a Regional Vice President with Commerce Bank, PA, N.A. In that position, he had dual responsibilities, including managing the lending function for the bank in Delaware County, Pennsylvania, and overseeing a retail branch region consisting of 12 branches.

        Bruce E. Moroney (Age 53) joined the Bank in May 1992 and currently serves as Executive Vice President and Chief Accounting Officer of the Corporation and the Bank. Prior to that, he served as Executive Vice President and Chief Financial Officer of both the Corporation and the Bank. Mr. Moroney is directly responsible for the Corporation's and Bank's financial reporting and budgeting.

        Gerald F. Sopp (Age 53) joined the Bank in January 2007 and currently serves as Executive Vice President, Corporate Secretary and Chief Financial Officer of the Corporation and the Bank. Mr. Sopp is directly responsible for asset/liability management, strategic planning, human resources, facilities and Sarbanes Oxley compliance. During the five years prior to joining DNB, Mr. Sopp was employed as Vice President and Controller of Wilmington Trust Corporation, Delaware from 2000 to 2006.

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BENEFITS & COMPENSATION COMMITTEE REPORT

        The Benefits & Compensation Committee held 5 meetings during fiscal year 2009. In March, August and November of 2009, the Benefits & Compensation Committee (the "Committee") received reports from DNB's senior risk officer, William J. Hieb, containing an analysis on the risk levels present in executive compensation plans. This analysis was expanded to include all compensation plans and presented to the Committee on August 10th and November 6th of 2009. In addition the specific conclusions described below, the analysis also included a review of whether SEO compensation plans encourage behavior focused on short term results rather than long-term value creation, the risks posed by employee compensation plans and how these risks were limited, including whether the employee compensation plans encourage behavior focused on short term results rather than long-term value creation. The following summary supports the conclusions of the Committee that (i) the SEO compensation plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of DNB, and (ii) the employee compensation plans do not encourage the manipulation of DNB's reported earnings in such a way as to enhance the compensation of an employee. Based on our review and discussion with management, we have recommended to the board of directors that this report be included in the Proxy Statement for the 2010 Annual Shareholders meeting.

        Section 111(b)(2)(A) of the Emergency Economic Stabilization Act requires the Committee to conduct, in conjunction with DNB's senior risk officer, a review of the incentive compensation arrangements in place between DNB and its employees.

        The Compensation Committee certifies that (1) it has reviewed with the senior risk officer of DNB the senior executive officer ("SEO") compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of DNB; (2) it has reviewed with the senior risk officer the employee compensation plans and has made reasonable efforts to limit any unnecessary risks these plans pose to DNB; and, (3) it has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of DNB to enhance the compensation of any employee (the assessments reflected in items (1), (2) and (3) of this certification are collectively called the "TARP Risk Assessment").

        In the course of conducting its TARP Risk Assessment, the Committee considered the overall business and risk environment confronting DNB and how the SEO compensation plans and employee compensation plans serve to motivate employee behavior when operating within that environment.

        The committee compiled an inventory of the design features of all incentive compensation plans and programs for purposes of assessing the potential for encouraging excessive or unnecessary risk-taking that could threaten the value of the enterprise or encourage the manipulation of earnings, including:

•

Plan name



•

Participants



•

Timing (Goal-setting, measurement period, payment)



•

Funding approach (e.g. flat fee or target award approach)



•

Metrics (Financial versus non-financial, number of measures, weightings)



•

Size of incentive opportunities (relative to salary)



•

Award determination (Automatic/formulaic, discretionary, adjustments)

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        The committee then considered how the structure of each plan or program impacted risk-taking of plan participants. In particular, the Benefits & Compensation Committee's TARP Risk Assessment focused on the following compensation plans:

        With the exception of the Supplemental Executive Retirement Plan, DNB does not maintain any compensation plans in which only SEOs participate. For purposes of this discussion, references to "SEO compensation plans" mean the portion of an employee plan in which the SEOs participate.

        With respect to the SEO compensation plans, the Committee believes that such plans do not encourage DNB's SEOs to take unnecessary or excessive risks that could harm the value of DNB. The Committee believes this to be true because the members of the Committee strive to provide a balanced aggregate compensation package to our SEOs that serve to incentivize them to manage DNB in a way that will result in company-wide financial success and value growth for our shareholders.

        We believe it is appropriate for our executives to focus certain of their efforts on near-term goals that have importance to DNB; however, we also acknowledge that near-term focus should not be to the detriment of a focus on the long-term health and success of DNB. In practice, providing base salary to any employee provides the most immediate reward for job performance. The Committee engages in an annual process to set base salary. We believe our process for establishing base salary is relatively free from risk to DNB, as we do not typically make significant adjustments to base salary based on a single year's performance.

        The committee believes it is appropriate to reward our executives focus on near-term goals, when such goals correspond to the overall company or department goals and direction set by our board of directors. To reward the executives for such focus, DNB has an Annual Incentive Plan that provides annual bonuses to our executives and other employees to support and promote the pursuit of our organizational objective and financial goals. This practice permits senior executives, as well as other deserving employees, to receive more compensation if we and the individual meet certain pre-established financial and non-financial performance goals for the year. The performance goals for executives are consistent with our Strategic Plan and Annual Budget and our performance in relation to those plans. We pay bonuses, subject to the discretion of the Committee, to executives and other officers for achieving our annual financial goals at corporate and business unit levels and for achieving measurable individual annual performance objectives. Annual incentive awards for other employees are primarily based on personal goals.

        The Committee limits the maximum amount that may be earned so that SEOs do not feel the need to strive for attainment of unreasonable or unrealistic levels of performance. In this way, we believe the design of the Annual Incentive Plan does not encourage our executives to take unnecessary or excessive risks that could harm the value of DNB.

        The other incentive compensation elements offered to our SEOs are intended to reward performance over the long-term or are intended to focus our SEOs' attention on the long-term performance of DNB. We feel there is little, if any, risk associated with our 401(k) Retirement Savings & Profit Sharing Plan or Pension Plan as they are subject to and maintained in accordance with the mandates of the Internal Revenue Code and the Employee Retirement Income Security Act. We believe that a significant portion of executive compensation should be based on value created for our shareholders. This feature of our SEOs' compensation package consists of a broad range of equity alternatives as provided for in our Incentive Equity and Deferred Compensation Plan, including but not limited to stock options, stock appreciation

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rights, performance shares, performance units, and restricted stock awards. We believe that long-term performance is achieved through an ownership culture that encourages long-term performance by our SEOs through the use of stock-based awards.

        In addition, the Committee believes the Deferred Compensation Plan for Officers for Executives, and the Supplemental Executive Retirement Plan for DNB's CEO encourage our executives to consider the long-term health of the company because, pursuant to the rules under the Internal Revenue Code and applicable guidance, those arrangements must be unfunded, unsecured promises to pay a benefit in the future. In the case of insolvency of the company, the executives participating in those arrangements would be treated as general unsecured creditors of DNB, thus encouraging the executives to ensure a healthy organization remains after their tenure concluded.

        Finally, the committee believes that the Commercial Lending Incentive Plan and the Retail Incentive Plan, which our SEOs are not eligible to participate in, are designed in a fashion that mitigates risk to the organization, and promotes value growth for our shareholders.

        With respect to the employee compensation plans, the TARP Risk Assessment has not resulted in a determination by the Compensation Committee that changes were necessary to bring such plans into compliance with the TARP rules. We believe that DNB has adequate policies and procedures in place to balance and control any risk-taking that may be incentivized by the employee compensation plans. The committee further believes that such policies and procedures will work to limit the risk that any employee would manipulate reporting earnings in an effort to enhance his or her compensation.

        In connection with its process of developing a compensation philosophy and establishing a framework to ensure competitive and reasonable compensation to all executive officers, the Committee directly retained an outside consultant, Robert B. Jones, JD, CPA, CEBS, CEO of Innovative Compensation and Benefits Concepts, LLC to evaluate our compensation practices and to assist in developing and implementing our executive compensation program and philosophy. Neither the Corporation nor the Bank has, in the last three years, engaged Mr. Jones in any capacity other than to advise the committee on the amount or form of executive and director compensation. He was retained by the committee after a determination that he was independent. Mr. Jones:

•

Developed a peer group of financial institutions for comparison. These institutions are in our area and are about the same size as we are.



•

Analyzed our financial performance and compensation levels against members of the peer group.



•

Met individually with members of the Committee and senior management to learn about our business operations and strategies, the key measures and target goals we use to evaluate our performance, and the labor and capital markets in which we compete.



•

Helped the Committee establish tally sheets for analyzing Total Direct Compensation company-wide and for each executive.



•

Submitted executive compensation recommendations to the Committee and the board of directors.

        The Committee determined that the peer group it identified is reasonable to measure our compensation practices given our continued and expected growth. For purposes of benchmarking our compensation, the Committee refers to the following institutions:

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(1)

The columns disclosing Option awards and Non-Equity Incentive Plan Compensation have been omitted from the table because no officer earned any compensation during 2009 or 2008 of a type required to be disclosed in those columns.

(2)

On December 16, 2009, the SEC adopted revisions to the reporting of stock and option awards in the Summary Compensation table. DNB is now required to report the aggregate grant date fair value of stock and option awards made during the prior fiscal year instead of disclosing the dollar amount recognized for financial statement reporting purposes. Companies such as DNB with fiscal years ending on or after December 20, 2009 are also required to recompute the amounts relating to prior years in accordance with these new standards.

(3)

Includes the compensation accrued to Messrs. Latoff's and Hieb's benefit under our Deferred Compensation Plan adopted effective October 1, 2006, described on page 30. For Mr. Latoff, the compensation accrued to Mr. Latoff's benefit during 2009 and 2008 was accrued under a Supplemental Executive Retirement Plan dated December 20, 2006, as amended March 20, 2007 and December 8, 2008. For a summary of the terms of the plan, see "Supplemental Executive Retirement Plan for Chairman and Chief Executive Officer" at pages 33 to 35 of this Proxy.

(4)

The restricted shares reported in column (e) "Stock awards" were granted under the Incentive Equity and Deferred Compensation Plan as more fully described on page 29 of this Proxy and Footnote 14 of DNB's Form 10-K filed for the period ending December 31, 2009. 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.

(5)

Includes the following payments we paid on behalf of the following executives in 2009:

(1)

The contributions paid on the executives' behalf during 2009 under the Bank's 401(k) Retirement Savings and Profit Sharing Plan. For a summary of the terms of the plan, see the description on page 32 of this Proxy.

(2)

The insurance premiums paid on the executives' behalf during 2009 under the Bank's Insurance plans available to all employees. For a summary of the terms of the plan, see the description on page 32 of this Proxy.

(1)

The columns disclosing "number of securities underlying unexercised options—non-exercisable," "equity incentive plan awards—number of securities underlying unexercised unearned options," "equity incentive plan awards: number of unearned shares, units, or other rights that have not vested" and "equity incentive plan awards—market or payout value of unearned shares, units, or other rights that have not vested" have been omitted from the table because no awards were outstanding at December 31, 2009 of a type required to be disclosed in those columns.

(2)

Stock awards were granted under our Incentive Equity and Deferred Compensation Plan and the accompanying Deferred Compensation Plan for officers. For a summary of the terms of these plans, see the description on page 29 of this Proxy.

(1)

The columns disclosing option awards, non-equity incentive plan compensation, and all other forms of compensation have been omitted from the table because no director earned any compensation during 2009 of a type required to be disclosed in those columns. For aggregate numbers of stock awards and option awards outstanding at December 31, 2009, see the following table titled, "Outstanding Equity awards At Fiscal Year End Table—Directors."

(2)

During 2009, the Corporation has paid an aggregate of $30,000 in consulting fees to TSG, Inc., a corporation owned by Eli Silberman, a director of the Corporation, for public relations and marketing services rendered to the Corporation and the Bank. There is no such agreement for similar services to be provided in 2010.

(3)

Messrs. Hieb and Latoff received no compensation for their service on the Board of Directors. Compensation paid to each of them as President & COO and as Chairman & CEO, respectively, is disclosed in the Executive Compensation—Summary Compensation Table on page 22.

(1)

The columns disclosing number of securities underlying unexercised options that are non-exercisable, equity incentive plan awards: number of securities underlying unexercised unearned options, equity incentive plan awards: number of unearned shares, units, or other rights that have not vested and equity incentive plan awards: Market or payout value of unearned shares, units, or other rights that have not vested have been omitted from the table because awards were outstanding at December 31, 2009 of a type required to be disclosed in those columns.

(2)

The stock awards granted to each director were granted under the Corporation's Incentive Equity and Deferred Compensation Plan for Officers and Directors. For a summary of the terms of the plan, see the description on page 29 of this Proxy.

(a)

Includes fees for services reasonably performed by the Corporation's independent registered public accounting firm for services such as statutory and regulatory reports and filings.



(b)

Includes fees for services related to tax compliance and tax planning.



(c)

There were no permitted internal audit outsourcing services provided during 2009 or 2008.