DNB S-3
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|
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
DNB
FINANCIAL CORPORATION
|
(Exact
name of registrant as specified in its charter)
|
|
Pennsylvania
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23-2222567
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(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
4
Brandywine Avenue, Downingtown, PA
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19335
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
|
Bruce
E. Moroney, Chief Financial Officer
DNB
FINANCIAL CORPORATION
4
Brandywine Avenue, Downingtown, Pennsylvania 19335
(484)
359-3153
|
(Name,
address, including zip code, and telephone number, including area
code, of
agent for service)
|
Approximate
date of commencement of proposed sale to the public: From time to time after
the
effective date of this Registration Statement.
If
the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box
[X].
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [ ].
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ].
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering [ ].
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box [ ].
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities to
be registered
|
Amount
to be
registered
|
Proposed
maximum
offering
price
per
unit (1)
|
Proposed
maximum
aggregate
offering
price
(1)
|
Amount
of
registration
fee
|
Common
Stock (par value $1 per share)
|
350,000
shares
|
$20.50
|
$20.50
|
$767.73
|
(1)
The
price per share of $20.50 is estimated, in accordance with Rule 457(h)(1) under
the Securities Act, solely for the purpose of determining the registration
fee
and was the average of the bid and asked prices per share of the Common Stock
on
February 17, 2006, which was within five (5) business days prior to the date
of
filing of this registration statement.
Part
I
INFORMATION
REQUIRED IN PROSPECTUS
Dear
Shareholder:
Enclosed
is a prospectus describing our Dividend Reinvestment and Stock Investment
Plan.
Under
the
terms of this convenient and economical plan, shares of DNB Financial
Corporation’s common stock are available for purchase through Registrar and
Transfer Company, the plan administrator. Trading in shares of DNB's stock
is
reported on the Over-The-Counter Electronic Bulletin Board, an automated
quotation service, made available through and governed by the NASDAQ system,
under the symbol DNBF.OB. Under the plan, you will not pay any brokerage fees
on
purchases - including not only purchases you make by reinvesting cash dividends
on DNB common stock, but also purchases you may choose to make with additional
funds.
Please
take a few moments to consider enrolling in the Plan by reviewing the
Prospectus. Should you decide to join other DNB Financial Corporation investors
participating in the Plan or to increase your current holdings in DNB, simply
complete the enclosed form and return it in the postage paid
envelope.
If
you
have any questions, please call Registrar and Transfer Company at 1-800-368-5948
and a representative will be glad to help you.
Sincerely,
/s/
William S. Latoff
William
S. Latoff
Chairman
and
Chief
Executive Officer
DNB
Financial Corporation
4
Brandywine Avenue
Downingtown,
PA 19335
|
DIVIDEND
REINVESTMENT AND STOCK INVESTMENT PLAN ENROLLMENT
CARD
|
Please
print or type all information except signatures. Questions?
Call toll-free
at 1-800-368-5948 from 8:00 a.m. to 7:00 p.m. Eastern Time, Monday
through
Friday. Mail your completed Enrollment Card in the courtesy envelope
provided to the address set forth below. If stock certificates
are
enclosed, please return by registered mail to:
REGISTRAR
AND TRANSFER COMPANY
Dividend
Reinvestment Plans
P.
O. Box 664, Cranford, New Jersey 07016
|
Please
sign the authorization located on reverse side of this form and complete
the information below.
Name(s):_______________________________
______________________________________
Address:_______________________________
City/State/Zip:___________________________
Social
Security Number:____________________
Daytime
Phone Number:____________________
|
Completion
and return of this Enrollment Card authorizes your enrollment in the DNB
Financial Corporation Dividend Reinvestment and Stock Investment
Plan.
DIVIDEND
REINVESTMENT OPTION
Please
check the box below if you choose to reinvest all of the dividends paid on
DNB
Financial Corporation common stock registered in your name and held for you
under the Plan.
[
] Full Dividend Reinvestment
- Please
reinvest all dividends for this account, including dividends paid with respect
to shares I purchase with optional cash payments, if applicable.
[
] Partial Dividend Reinvestment
- Please
reinvest dividends on ______ shares for this account, including dividends paid
with respect to shares I purchase with optional cash payments, if
applicable.
[
] SAFEKEEPING OPTION
I
wish to
take advantage of the Plan’s safekeeping feature. Enclosed please find _____
certificates (#s_______________)
totaling
__________ shares. I understand that dividends on these shares will be
automatically reinvested.
SIGNATURES
By
signing this form, I request enrollment in the Plan, certify that I have
received and read the prospectus describing the DNB Financial Corporation
Dividend Reinvestment and Stock Investment Plan and agree to abide by the terms
and conditions of the Plan. I hereby appoint Registrar and Transfer Company
as
my agent with respect to the Plan and authorize them (and any successor Plan
agent) to apply dividends and any cash payments I make towards the purchase
of
shares of common stock of DNB Financial Corporation under the plan. I understand
that I may revoke or change this authorization at any time by written notice
to
Registrar and Transfer Company in accordance with the terms and conditions
set
forth in the prospectus. ALL JOINT OWNERS MUST SIGN.
___________________________
__________________
___________________________ __________________
Shareholder's
Signature
Date
Shareholder's Signature Date
NOT
FDIC INSURED - MAY LOSE VALUE -NOT BANK GUARANTEED
DNB
FINANCIAL CORPORATION
DIVIDEND
REINVESTMENT AND STOCK INVESTMENT PLAN
350,000
Shares of Common Stock (Par Value $1.00 per Share)
DNB
Financial Corporation ("DNB"), headquartered in Downingtown, Pennsylvania,
is a
Pennsylvania bank holding company with offices in Chester and Delaware counties,
Pennsylvania. Its wholly owned subsidiary, DNB First, National Association
(the
"Bank"), offers a full range of financial, trust and investment services to
its
retail and commercial customers. Market trades of our common stock are quoted
on
the NASDAQ Bulletin Board under the symbol DNBF.OB. With this prospectus, we
are
offering participation in our Dividend Reinvestment and Stock Investment Plan
(the "Plan") to record holders of our shares of common stock.
The
Plan
allows you to:
●
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Participate
if you currently own our common stock.
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|
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●
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Buy
additional shares of our common stock by automatically reinvesting
all or
a portion of the cash dividends paid on your shares of common
stock.
|
|
|
●
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Buy
additional shares of common stock by making optional cash investments
of
$250 to $5,000 per calendar
quarter.
|
The
shares issued under the Plan may be either new issue common stock (this may
consist of shares previously held as treasury stock or authorized shares not
previously issued), common stock purchased on the open market, or a combination
of the foregoing. For common stock issued by us (whether treasury stock or
otherwise), the per share price paid by you will be the fair market value of
the
common stock on the day the shares are purchased. "Fair market value" with
respect to any day means the average of the bid and asked prices for shares
of
our common stock over the most recent three days they are reported, as reported
on the NASDAQ Bulletin Board. When common stock is acquired in the open market,
the share price paid by you will be the weighted average purchase price of
all
shares acquired during the purchase period . Fees
and
brokerage commissions will be charged for using other Plan services, including
if you sell shares of common stock from the Plan.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
shares being offered hereby are not bank accounts or deposits and are not
insured by the federal deposit insurance corporation or any other government
agency, and are subject to investment risk, including the loss of principal.
PLEASE READ THE “RISK FACTORS” SECTION OF THIS PROSPECTUS BEGINNING AT PAGE
5.
The
date of this prospectus is February 21,
2006.
TABLE
OF
CONTENTS
Section
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Page
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WHERE
CAN YOU FIND MORE INFORMATION
|
3
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FORWARD-LOOKING
STATEMENTS
|
4
|
RISK
FACTORS
|
5
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TERMS
AND CONDITIONS OF THE PLAN
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9
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Purpose
and Advantages and Disadvantages of the Plan
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9
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Plan
Administration
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11
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Participation
In The Plan
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11
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Participation
Options
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12
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Investments
of Cash Dividends and Additional Cash
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13
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Methods
of Purchasing Shares
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15
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Share
Certificates
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16
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Safekeeping
of Certificates
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16
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Sale
of Plan Shares
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17
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Termination
of Plan Participation
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17
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Costs
|
18
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Reports
To Participants
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19
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Other
Information
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19
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Federal
Income Tax Information
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21
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DESCRIPTION
OF COMMON STOCK
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22
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USE
OF PROCEEDS
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22
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PLAN
OF DISTRIBUTION
|
23
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EXPERTS
|
23
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LEGAL
MATTERS
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23
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INDEMNIFICATION
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23
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THIS
MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO
BUY ANY SHARES IN ANY STATE OR OTHER JURISDICTION IN, WHICH SUCH AN OFFER OR
SOLICITATION IS NOT, AUTHORIZED. EXCEPT AS OTHERWISE INDICATED, THIS PROSPECTUS
SPEAKS AS OF ITS DATE OF ISSUE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF DNB OR THE BANK SINCE THE DATE OF
THIS PROSPECTUS.
We
have
not authorized anyone to provide you with information that is different from
what is contained in this Prospectus. The Plan is not available to any person
to
whom we may not legally offer it. You should not assume that the information
in
this prospectus is still accurate after the date stated on the front of this
Prospectus.
WHERE
YOU
CAN FIND MORE INFORMATION
We
have
filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3. This prospectus, which is part of the
registration statement, does not contain all the information included in the
registration statement. Some information is omitted, and you should refer to
the
registration statement and its exhibits. With respect to references made in
this
prospectus to any contract, agreement or other document of ours, our
descriptions are summaries and you should refer to the exhibits attached to
the
registration statement for copies of the actual contract, agreement or other
document.
We
also
file annual, quarterly and current reports, proxy statements and other
information with the Commission. You may read and copy any materials we file
with the Commission at the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. In addition, we may file many of our documents electronically
with the Commission, and you may access those documents over the Internet.
The
Commission maintains a "web site" that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with
the Commission. The address is "http://www.sec.gov."
The
Commission allows us to "incorporate by reference" the information we file
with
them in this prospectus. This helps us to disclose information to you by
referring you to the documents we file with the Commission. The information
we
incorporate by reference is an important part of this prospectus. We incorporate
by reference each of the documents listed below:
●
|
Our
Annual Report on Form 10-K for the year ended December 31,
2004.
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●
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Our
Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30
and September 30, 2005.
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●
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Our
Current Reports on Form 8-K filed with the Securities and Exchange
Commission on January 31, February 14, February 25, April 1, April
11,
April 18, April 21, April 27, May 26, June 1, July 27, August 25,
October
18, October 31, November 15, November 18, November 22, November 23,
December 27, 2005 and January 9, January 27, February
1, 2006.
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●
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Our
proxy statement for the 2005 annual meeting of shareholders filed
with the
Commission on March 9, 2005 (File No. 0-16667).
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●
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The
description of our common stock contained in our registration on
Form 8-A
filed with the Commission on April 4, 1988, and the description contained
in our Amended and Restated Articles of Incorporation filed as Exhibit
3(i) to our Form 10-Q filed with the Commission on August 14, 2001
(File
No. 0-16667).
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●
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All
documents filed by us under Section 13(a), 13(c), 14 or 15(d) of
the
Securities Exchange Act of 1934, as amended, after the date of this
prospectus and prior to the termination of the
Plan.
|
All
documents filed by the Registrant with the Commission pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the effectiveness
of this Registration Statement and prior to the filing of a post-effective
amendment hereto that either indicates that all securities offered hereby have
been sold or deregisters all securities then remaining unsold shall be deemed
to
be incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in
a
document incorporated or deemed to be incorporated by reference herein shall
be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Upon
written or oral request by a Plan participant, we will deliver a copy of each
of
the documents described in the two preceding paragraphs to such participant
free
of charge. To request any or all of such documents, a Plan participant may
use
the following contact information:
DNB
Financial Corporation
4
Brandywine Avenue
Downingtown,
PA 19335
Attention:
Bruce E. Moroney, Chief Financial Officer
(484)
359-3153
bmoroney@dnbfirst.com
We
will
also deliver to each Plan participant a copy of each report, proxy statement
and
other communication that we distribute to our security holders generally. Such
materials will be sent at the time that it is sent to our security holders
and,
if not received by any Plan participant, may be obtained free of charge upon
written or oral request using the contact information shown above.
You
should rely only on the information contained in this document or incorporated
by reference. We have not authorized anyone to provide you with information
that
is different.
FORWARD-LOOKING
STATEMENTS
Information
contained in or incorporated by reference into this prospectus and any
accompanying prospectus supplement may include statements that are not of
historical facts and may pertain to future operating results or events or
management’s expectations regarding those results or events. These are
“forward-looking
statements”
within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the
Securities and Exchange Act of 1934. These forward-looking statements may
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in this Prospectus
that are not historical facts. When used in this Prospectus, the words
“expects”,
“anticipates”,
“intends”,
“plans”,
“believes”,
“seeks”,
“estimates”,
or
words of similar meaning, or future or conditional verbs, such as “will”,
“would”,
“should”,
“could”,
or
“may”
are
generally intended to identify forward-looking statements. Forward-looking
statements involve certain risks and uncertainties, and actual results may
differ materially from those contemplated by such statements. For example,
actual results may be adversely affected by the following possibilities: (1)
competitive pressures among financial institutions may increase; (2) changes
in
interest rates may reduce banking interest margins; (3) general economic
conditions and real estate values may be less favorable than contemplated;
(4)
adverse legislation or regulatory requirements may be adopted; (5) other
unexpected contingencies may arise; (6) we may change one or more strategies
described in this document; or (7) management’s evaluation of certain facts,
circumstances or trends and the appropriate responses to them may change. These
forward-looking statements are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
either beyond our control or not reasonably capable of predicting at this time.
In addition, these forward-looking statements are subject to assumptions with
respect to future business strategies and decisions that are subject to change.
Actual results may differ materially from the results discussed in these
forward-looking statements. Readers of this Prospectus are accordingly cautioned
not to place undue reliance on forward-looking statements. We disclaim any
intent or obligation to update publicly any of the forward-looking statements
herein, whether in response to new information, future events or otherwise.
RISK
FACTORS
Your
investment in shares of our common stock involves significant risk, and you
could lose your entire investment. You should carefully consider the following
risk factors and the other information in this Prospectus before you purchase
any shares. Some of the risks are described below. These are not all of
the risks applicable to an investment in our common stock. This
discussion only identifies certain risk factors we think are material for you
to
consider in evaluating us. We are subject to many other risks common to
the banking industry and to the community in which we
operate.
Here
are some risks that affect our business and could affect the value of your
investment:
Heavy
Competition. We
now
face strong competition from many Pennsylvania and out-of-state banking and
thrift institutions, many of which have been in business for a number of years
and have established customer bases. We expect to continue to face this strong
competition in the future. Competition also comes from other businesses that
provide financial services, including consumer loan companies, credit unions,
mortgage brokers, insurance companies, securities brokerage firms, investment
advisors, money market funds and other mutual funds, and private lenders. Many
of these competitors have resources greater than ours. They have the advantages
of an established market presence and customer base, name recognition and a
greater capital base. While our strategy is to attract customers by providing
personalized services and making use of the business and personal ties of our
management, there is no assurance we will keep or increase market acceptance
and
be able to operate profitably. Many financial service providers believe our
market area, Chester County, is an attractive market because of its strong
economic growth. As a result, we are experiencing particularly intense
competition in our primary marketplace. This includes attempts at new entry
into
the market by established competitors that had not previously done business
in
Chester County, as well as the formation of new banks with management that
are
experienced in the Chester County market. All of these factors may adversely
impact our ability to maintain or increase our profitability.
Small
Size and Geographic Restrictions.
We are a
community bank and do not have the capital resources or the number of people
that many of our competitors have. In addition, we cannot provide as many
products or services as some of our competitors, making it more difficult for
us
to compete. Our market territory is relatively small, which limits our ability
to diversify our credit risks and increase our business.
Real
Estate Loans.
Like
many community banks, many of our loans are commercial loans secured primarily
by commercial real estate. We are more vulnerable to losses on these loans
if
commercial real estate generally suffers a downturn in values. As a result,
if
commercial real estate values decline in the future, our profitability could
be
adversely affected.
Dependence
on Interest Income.
Our
profitability depends heavily on net interest income. This means we can only
be
profitable if we lend money at higher interest rates than we borrow it through
deposits and other debt. Recently the margin between lending rates and borrowing
rates has gotten smaller, causing our net interest income to decline. While
we
are increasing fee-based income to make us less dependent on interest rates
for
profitability, we have not completed the implementation of strategies to
increase our fee-based income. If interest rate margins shrink further, or
if we
are unable to diversify our business to generate greater fee-based income,
our
profitability may be negatively impacted.
Dependence
on Key Personnel. As
a
community bank, our success will depend greatly on the continued services of
our
executive officers. In order to be successful, we must attract, retain and
motivate key employees, and if we fail to do that, our profits could be hurt.
We
may not be successful in continuing to recruit experienced people for positions
with us, or in retaining necessary people. If we lose Mr. Latoff’s or Mr. Hieb’s
services or those of other key personnel, our future prospects could be
harmed.
Director
and Officer Liability Limitations. Under
our
articles of incorporation and Pennsylvania law, our directors and officers
may
not be liable to us unless they breach a duty of loyalty, or they engage in
intentional
misconduct
or violate the law, or if they gain an improper personal benefit. Our bylaws
permit us to indemnify our officers and directors to the fullest extent
permitted by law for all expenses incurred in settlement of actions against
them
in connection with their service to us. Because we indemnify our directors
and
officers, there is a risk they could make riskier decisions than they would
make
if we did not offer them this protection.
Risks
Related to Balance Sheet Repositioning. We
announced a comprehensive plan designed to reposition our balance sheet and
improve core earnings. The plan calls for a substantial reduction in the size
of
the investment portfolio and expansion of the loan portfolio through new
originations, increased loan participations, as well as strategic loan and
lease
receivable purchases. We also announced plans to reduce debt borrowings with
cash flows from existing loans and investments and from new core deposit growth.
It is possible we will not be able to originate new loans or additional core
deposits as quickly planned, or that changes in interest rates will make this
strategy less effective in achieving our profitability goals. If we do not
achieve our balance sheet repositioning or revenue enhancement goals, our
profitability may be adversely affected.
Concentration
of Voting Control. William
S. Latoff, our Chairman and Chief Executive Officer, now owns 106,956 shares
of
our common stock, including 4,410 shares of restricted stock that will vest
on
May 25, 2008. He can also obtain 50,352 additional shares of common stock by
exercising options he has previously been granted by the Company. Therefore,
with the shares of common stock represented by options, he potentially controls
6.73% of issued and outstanding voting stock. He has expressed his intent to
purchase additional shares of our common stock in the future. We are likely
to
grant him additional stock options, restricted stock or other equity-based
compensation that would increase his voting percentage further. Our directors
and officers as a group now own a total of 189,140 shares of our common stock,
including 16,569 shares of restricted stock that will vest in the future. They
can also acquire 175,918 additional shares of common stock by exercising options
they have been granted. With the shares of common stock represented by options
granted them, our directors and officers as a group potentially control 14%
of
our issued and outstanding voting stock. Many of our directors and officers
have
indicated their intent to purchase additional shares of common stock in the
future. Further, it is likely they will be granted additional stock options,
restricted stock or other equity-based compensation that would further increase
the total voting percentage of our directors and officers. We believe ownership
of stock causes our directors and officers to have the same interests as our
shareholders, but it also gives them the ability to vote as shareholders for
matters that are in their personal interest.
Possible
Future Capital Needs. There
is
no assurance we will be able to generate sufficient capital through retained
earnings to achieve our operating and growth goals. We may require additional
capital in the future to support growth and expansion, to increase our legal
lending limit, and to accept increased deposits. If we are not able to raise
sufficient capital at an acceptable cost, we may not reach our profitability
goals and the value of a shareholder’s investment may be adversely
affected.
Possible
Dilution from Future Equity or Debt Offerings. We
may
make additional offerings of equity or debt privately or publicly without
further approval by holders of our common stock. These offerings may include
senior debt, subordinated debt, additional trust preferred securities or common
or preferred stock, any of which we can issue without shareholder approval.
Additional debt or equity could be issued at prices that are greater or lower
than the market price of our shares. The offerings could dilute the book value,
voting control or market value of shares you purchase under the
Plan.
Our
Profitability
is
Affected by Interest Rate Changes.
Our
profitability depends largely on our net interest income. This is the difference
between our interest income on loans, investments and other assets, and our
interest expense on our deposits, borrowing and other liabilities. We try to
identify and manage interest rate risk, which is the risk that we will not
be
able to keep investing our money at a higher rate than we borrow it. To manage
interest rate risks, we have to keep track of the interest we earn and the
interest we pay. When interest rates change, the relationship between our
interest income and our interest expense changes. Interest rate changes can
be
complex. For example, the relationship between short-term interest rates and
long-term interest rates can change. We try to limit the chances that these
changes may make us less profitable. The types of assets and liabilities we
have
can also affect our profitability when interest rates change. For
example:
(a)
Our
assets and liabilities may change interest rates at different
times.
(b)
Our
assets and liabilities may not mature at the same time.
(c)
Some
types of assets and liabilities may be repayable sooner or later as interest
rates change.
Normally,
we expect our assets and liabilities not to have the same sensitivity to changes
in interest rates. This means that a change in interest rates will normally
either increase or decrease our net income. As of December 31, 2005, we were
in
an asset sensitive position, meaning that, when interest rates change, the
rates
we earn on our assets change more quickly than the rates we pay on our
liabilities. In this situation, a decline in interest rates could reduce in
our
net income. In addition, as of December 31, 2005, our liabilities, on average,
were scheduled to be repaid sooner than our assets. As a result, when short-term
interest rates rise faster than long-term interest rates, the interest we pay
on
our liabilities will increase faster than the interest we receive on our assets,
which can reduce our net income. We cannot predict interest rate changes or
the
relationships between long-term interest rates and short-term interest
rates.
If
the Economy Gets Worse in Our Market, Our Profits Could be
Hurt. Recent
news reports indicate economists think the U.S. economy might not do well in
2006. Our profits can be hurt if the economy does not do well in areas where
we
do business, because we may not be able to find as many creditworthy borrowers,
or borrowers may decide to borrow less, or our losses on defaulted loans can
increase if borrowers have financial problems.
If
Our Allowance for Credit Losses is Not Enough to Cover Future Loan Losses,
or if
We do not Manage our Credit Risks, Our Earnings Could Decrease.
We
make
assumptions and judgments about the collectibility of our loans, including
the
creditworthiness of our borrowers and the value of any collateral securing
our
loans. To determine our allowance for credit losses, we review our loans and
our
experience with loan losses and late loan payments, and we evaluate economic
conditions. If we make the wrong assumptions, our allowance for credit losses
may not be large enough to cover future losses on our loans. We also might
make
other mistakes in managing our credit risks. For example, we might not identify
credit risks in a loan or in our portfolio accurately. We might make mistakes
in
managing our loans or in trying to recover losses. These mistakes might reduce
our income, or require us to apply more of our income to add to the allowance
for credit losses, or both. Either of these results would hurt our profits.
Our
bank regulators also have to review our allowance for credit losses. If our
regulators decide we should increase it, we have to apply more of our income
to
do so, which might reduce our profits.
We
Have a Concentration of Exposure to Some Borrowers, Which Adds to our
Risks. The
total
amount of loans we make to a group of related borrowers is called our exposure
to a borrowing relationship. As of December 31, 2005, the largest exposure
we had to a group of related borrowers was $3.6 million. This equaled 8.0%
of the total amount of our regulatory capital. For these purposes, our
regulatory capital includes our stated capital, our capital surplus, and certain
portions of our allowance for credit losses, with further adjustments, as
required by our banking regulators. The standard lending limit for national
banks is equal to 15% of this regulatory capital. As
of
December 31, 2005, our total exposure to our 10 largest borrowing
relationships was approximately $27.0 million. This was approximately 60%
of our regulatory capital for these purposes. Because a default on a loan to
one
borrower in a group of related borrowers can often result in defaults on the
other loans to related borrowers, and because larger loan amounts produce more
losses to a bank when they go into a default, if any of these loans goes into
default and we cannot recover all we have lent, there is a greater risk that
a
default
on
these
loans will produce a greater loss, and consequently a greater reduction in
our
profitability. If the total exposure to a few borrowing relationships gets
too
big in relation to a bank’s capital, it increases the risk that loan defaults on
those borrowing relationships will reduce the bank’s capital. Without enough
capital, a bank cannot operate profitably and may be subject to regulatory
enforcement action.
Changes
in Regulations and Accounting Rules May Hurt our Revenue. Section
404 of the Sarbanes Oxley Act requires many companies to spend a lot of money
to
strengthen their internal control. We do not know yet whether that requirement
will apply to us, but we are having to make changes in our accounting and
auditing in case it will. In addition, our auditors are charging us more because
they have to do more work in auditing our records. Other recent accounting
changes, such as the new rules for recognizing expenses associated with the
value of stock options we grant to employees, are changing our accounting and
business practices. The USA Patriot Act and new regulations under the Bank
Secrecy Act are also costing us a lot of money. Other new bank regulations
are
also being adopted, and we must spend money to comply with them. In other cases,
such as with our trust preferred securities, Bank Owned Life Insurance and
tax
and accounting positions we have taken, we depend upon Congress, regulatory
agencies and accounting rulemaking bodies not to make changes in their current
positions on the proper treatment of many of our activities. Any changes in
these positions could hurt our financial position and our profitability. We
do
not know what other rules will be adopted in the future or whether new rules
will be adopted. New rules and changes in rules may increase our expenses in
complying with them. This may hurt our future profits in ways we cannot predict
now.
Unexpected
Events Affecting our Marketing Partners Could Hurt Our Revenues.
Over
recent years, we have sold more products and services jointly with other
organizations, and we have relied more on other organizations to provide
services to us to support our activities. We believe this trend will continue
and that we will be more dependent in the future on other organizations in
order
to run our business efficiently and profitably. If an unexpected loss or problem
affects one of these organizations, it could cost us money or hurt our ability
to be profitable. While we try to plan for these risks, we may not predict
some
of these types of events.
Our
Expansion Plans May Not be Successful. We
have
been adding branches and offices, and we may add more in the future. We do
this
so that we can provide our products and services to more customers, which we
believe will make us more profitable. New offices cost us more money, but we
expect them to become profitable after a time. If new offices do not become
as
profitable as we hope or do not become profitable as quickly as we expect,
our
profits may be hurt.
Unexpected
Disasters May Hurt Our Profitability and Your Investment. Terrorist
acts, conflicts, wars and natural disaster may seriously harm our business
and
revenue, costs and expenses and financial condition and stock price. While
we
try to make contingency plans to help continue our business if a disaster
occurs, we might not anticipate every type of disaster, and our plans might
fail. In addition, some disasters might be so overwhelming that we would not
be
able to recover from them. These situations could hurt our profitability and
in
the worst case could destroy our business and wipe out your
investment.
Here
are some risks that do not affect our business but could affect the value of
your investment:
You
Bear Market Risks Relating to the Timing of Purchases and Sales.
Although
the plan states generally when purchases and sales of shares held in the Plan
will be made, the Plan Administrator will decide exactly when to purchase or
sell shares. You will not be able to control the time or price of purchases
or
sales. As a result, there is a risk that the price or value of shares of our
common stock will go up or down before the Plan Administrator makes purchases
or
sales affecting your account.
Your
Money Will Not Earn Income In the Plan Before a Purchase or After a Sale.
You
will
not receive interest on money the plan holds for you before a purchase or after
a sale.
On
a
Liquidation or in Certain Other Cases, Our Debt Holders May Hold Rights Superior
to Shareholders. We
have
issued trust preferred securities that constitute indebtedness. These securities
contain covenants requiring us to repay the debt with interest. If we fail
to do
so, the holders of that debt will have rights to seek repayment, and their
claims on our assets will have priority over your claim as a
shareholder.
Our
Governing Documents May Reduce the Influence of an Individual
Shareholder. Our
articles of incorporation and bylaws give our directors substantial control
over
who sits on our board of directors and what proposals are presented to our
shareholder to consider. For example, the board is divided into three staggered
classes of directors. Only one class gets re-elected each year. As a result,
it
may take at least two years for a majority of directors to change. Second,
under
our articles of incorporation, a shareholder may not cumulate votes for the
election of directors. As a result, the same majority of shareholders may
control the election of each director position. Third, our bylaws impose time
limits and other requirements on a shareholder who wants to nominate a director
or make a proposal for new business at a shareholder meeting. As a result,
the
nomination or proposal may be delayed until the shareholder meets these
requirements. These provisions may also give our management more time to
evaluate and respond to a shareholder nomination or proposal and, if management
believes the nomination or proposal is not in the best interests of
shareholders, to advocate that it not be adopted.
Our
Governing Documents May Make it More Difficult for Another Company to Buy
DNB. Our
articles of incorporation and bylaws contain provisions that may make it harder
for another company to acquire control of DNB. For example, a change in control
of DNB cannot occur unless it has been approved by shareholders owning at least
75% of the shares of DNB common stock or by two-thirds of DNB’s directors. In
addition, the board of directors may oppose another company’s offer to buy DNB
from its shareholders and in doing so may consider many factors not directly
involving the current value of DNB stock. We believe these provisions help
DNB
become more profitable because they let our management concentrate on developing
the profitability of DNB’s business for the benefit of our shareholders. As a
result of these provisions, if another company tries to offer shareholders
a
higher price than shareholders can obtain by selling them in the open market,
our shareholders may not be able to sell their shares to the other company
without the approval of our board of directors.
Future
Dividends and a Return on Your Investment are Not Guaranteed. THIS
PROSPECTUS DOES NOT REPRESENT A CHANGE IN OUR DIVIDEND POLICY OR A GUARANTEE
OF
FUTURE DIVIDENDS, WHICH WILL CONTINUE TO DEPEND UPON OUR EARNINGS, FINANCIAL
REQUIREMENTS, GOVERNMENT REGULATIONS AND OTHER FACTORS. WE CANNOT ASSURE YOU
A
PROFIT, OR PROTECT YOU AGAINST LOSSES, ON SHARES PURCHASED PURSUANT TO THE
PLAN.
THE MARKET PRICE OF COMMON STOCK CAN FLUCTUATE SUBSTANTIALLY. YOU MUST ACCEPT
THE RISKS AS WELL AS THE BENEFITS OF THE PLAN.
TERMS
AND CONDITIONS OF THE PLAN
The
following questions and answers describe our Dividend Reinvestment and Stock
Investment Plan, as in effect as of February 21, 2006, the date of this
Prospectus.
Purpose
and Advantages and Disadvantages of the Plan
1.
WHAT
IS THE PURPOSE OF THE PLAN?
The
primary purpose of the Plan is to provide shareholders of record with a
convenient and economical way to purchase additional shares of common stock
with
reinvested dividends and cash investments.
2.
WHAT
ARE THE ADVANTAGES OF THE PLAN?
Before
deciding whether to participate in the Plan, you should consider the following
advantages of the Plan:
●
|
You
may invest additional funds (at least $250 per investment per account)
to
purchase shares of common stock. The maximum aggregate additional
cash
investment per quarter is $5,000.
|
|
|
●
|
You
may direct the sale of shares held in your Plan account through the
Plan
subject to all applicable fees and charges.
|
|
|
●
|
You
may deposit your stock certificates with the Plan administrator,
whether
or not the common stock represented by such certificates was purchased
through the Plan, and have your ownership of such shares maintained
by the
Plan administrator. This convenience is provided at no cost to you
and
eliminates the possibility of loss, inadvertent destruction or theft
of
certificates.
|
|
|
●
|
You
will simplify your record keeping by receiving periodic statements
which
will reflect all current activity in your Plan account, including
purchases, sales and latest balances.
|
|
|
●
|
The
brokerage commissions negotiated by the Plan administrator for buying
or
selling shares of common stock for or from the Plan on the open market
are
typically less than those paid by individual investors for such
transactions. No brokerage commissions are paid for the purchase
of newly
issued shares from us.
|
|
|
●
|
You
may transfer shares of common stock held in your Plan account to
another
account at no cost. Our normal transfer requirements will
apply.
|
|
|
●
|
You
will have the convenience of having all or a portion of your cash
dividends automatically reinvested in additional shares of common
stock as
determined by the process described below. Because the Plan administrator
will credit fractional shares of common stock to your Plan account,
you
will receive full investment of your dividends and optional cash
investments. Dividends are paid on fractional shares as well as on
whole
shares maintained in the Plan.
|
3.
WHAT
ARE THE DISADVANTAGES OF THE PLAN?
Before
deciding whether to participate in the Plan, you should consider the following
disadvantages of the Plan:
●
|
No
interest is paid on dividends credited or cash investments made to
Plan
accounts and held pending investment, reinvestment or return to
you.
|
|
|
●
|
Cash
investments sent to the Plan administrator will not be returned to
you
unless a written request is received by the Plan administrator at
least 48
hours prior to the relevant investment date.
|
|
|
●
|
Requests
for the issuance of certificates and the sale of shares from a Plan
account will be delayed during a dividend processing period and during
the
issuance of shares as a result of an acquisition by us. This period
may be
as long as 15 days.
|
|
|
●
|
While
the brokerage commissions negotiated by the Plan administrator for
buying
or selling shares of common stock for or from the Plan on the open
market
are typically less than those paid by individual investors for such
transactions, you may be able to negotiate lower brokerage commissions
on
an individual basis. Brokerage commissions negotiated by the Plan
administrator may change from time to
time.
|
|
|
●
|
You
cannot designate to the Plan Administrator a specific price at which
to
sell or purchase shares of common
stock.
|
Plan
Administration
4.
WHO
ADMINISTERS THE PLAN?
The
"Plan
administrator" is Registrar and Transfer Company, a corporation independent
of
and not affiliated with us,who administers the Plan for participants, keeps
records, sends statements of account to participants, and performs other duties
related to the Plan. Shares purchased through the Plan or deposited into
safekeeping will be registered in the name of the Plan Administrator or its
nominee as agent for participants in the plan.
All
inquiries and communications regarding the Plan should include your account
number and should be directed to the Plan Administrator at:
Registrar
and Transfer Company
Attention:
Dividend Reinvestment Department
10
Commerce Drive
P.O.
Box 664
Cranford,
NJ 07016
Phone:
1-800-368-5948
Email:
info@rtco.com
|
|
When
writing, please include a daytime telephone number to expedite the Plan
administrator's reply.
We
may
amend, supplement, suspend, modify, or terminate the Plan at any time by written
notice to the participants. Thirty (30) days notice of any suspension,
termination, or material amendment shall be sent to all participants, who shall
in all events have the right to withdraw from the Plan.
Participation
In The Plan
5.
WHO IS
ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any
shareholder with common stock registered in his or her name on the records
of
our transfer agent may enroll in the Plan.
If
you already own shares of our common stock and the shares are held in "street
name" through a brokerage, bank or other intermediary account,
you may
be able to arrange for your shares of our common stock to be included in our
plan. You should consult directly with the entity holding your shares to
determine the manner in which that entity is able to include your shares in
our
plan. If this is not possible, you will need to request that the entity holding
your shares arrange to have some or all of your stock registered in your name
and submit an enrollment form to our transfer agent (currently Registrar and
Transfer Company) requesting the stock be transferred to our Plan.
If
you own shares of our common stock that bear a restriction on the transfer
of
such shares
(sometimes called “restricted shares”), you may sign up for the Dividend
Reinvestment Plan. You may continue to hold your certificate or deliver your
certificate to Registrar and Transfer Company for safekeeping. See Question
29
for how to deliver shares for safekeeping. When restricted shares held under
the
Plan are withdrawn from the plan and share certificates are issued for them,
the
share certificates will bear the same legend as the original shares. See
Question 32. If you own additional shares that do not bear a restriction on
the
transfer of such shares, you should instruct Registrar and Transfer company
to
set up a separate account for such shares, so that theses shares are not
intermingled with the restricted shares.
6.
HOW DO
YOU ENROLL IN THE PLAN?
If
you
are one of our shareholders, after you receive a Plan prospectus, you may join
the Plan by completing and signing an enrollment form and returning it to the
Plan administrator.
Once
enrolled in the Plan, you will remain enrolled until you discontinue your
participation, until the Plan is terminated or until you cease to be a record
holder of common stock. See Question 33.
7.
WHEN
MAY YOU JOIN THE PLAN?
If
you
are a shareholder, you may join the Plan at any time by completing and signing
an enrollment form and returning it to the Plan administrator. If you want
to
join in time to have your next dividend included in the Plan and used for
purchasing shares, the Plan administrator must receive enrollment forms at
least
ten (10) business days prior to the dividend payment date. Dividend payment
dates currently are on or about the 20th day of March, June, September and
December of each year. These dates may change. You may authorize dividend
reinvestment for less than all of your shares of our common stock.
Participation
Options
8.
WHAT
PARTICIPATION OPTIONS ARE AVAILABLE IN THE PLAN?
Once
enrolled in the Plan, you may buy shares of common stock through any of the
following investment options:
●
FULL
DIVIDEND REINVESTMENT.
This
option allows you to have dividends earned on all of your shares of common
stock, both in your Plan account and in certificated form, reinvested to
purchase additional shares of common stock. Shares purchased through this option
will be acquired on or about the last business day of each month in which we
pay
a cash dividend to our shareholders.
IF
YOU DO
NOT INDICATE A PARTICIPATION OPTION ON YOUR ENROLLMENT FORM, YOUR ACCOUNT WILL
BE ENROLLED IN THE FULL DIVIDEND REINVESTMENT OPTION.
●
PARTIAL
DIVIDEND REINVESTMENT.
This
option allows you to designate a specific number of shares of common stock
for
dividend reinvestment, with dividends on the balance of your shares to be paid
in cash. Shares purchased through dividend reinvestment will be acquired on
the
last business day of each month in which we pay a cash dividend to our
shareholders. Because we normally pay cash dividends during the last month
of
each calendar quarter, this is likely to occur quarterly.
●
ADDITIONAL CASH INVESTMENTS.
If
you
are a shareholder of record who has submitted a signed enrollment form, you
will
be eligible to make cash investments, regardless of whether you chose a dividend
reinvestment option or which option you chose. Cash investments are subject
to
the Plan’s quarterly minimum and maximum investment restrictions. See Question
14.
9.
MAY
YOU CHANGE YOUR PARTICIPATION OPTION?
You
may
change your participation option by completing and signing a new enrollment
form
and returning it to the Plan administrator. The change will be effective as
of
the next dividend record date following receipt by the Plan administrator of
the
new enrollment form.
10.
MAY
PARTICIPATION IN THE PLAN BE RESTRICTED?
We
reserve the right, in our sole discretion, to restrict or prohibit anyone’s
participation in the Plan. We may, at any time, exercise this discretion if
we
believe that the person’s participation may be contrary to the general intent of
the Plan or is in violation of applicable law.
Investments
of Cash Dividends and Additional Cash
11.
WHAT
IS THE PURCHASE PRICE FOR SHARES PURCHASED UNDER THE PLAN?
When
common stock is acquired in the open market, the share price paid by you will
be
the weighted average purchase price of all shares acquired during the purchase
period. For common stock issued by us (whether taken out of shares we have
purchased and hold in treasury, or shares we have never issued before), the
per
share price paid by you will be the fair market value of the common stock on
the
day the shares are purchased. "Fair market value" with respect to any day means
the average of the bid and asked prices for shares of our common stock over
the
most recent three days they are reported, as reported on the NASDAQ Bulletin
Board.
We,
in
our sole discretion, reserve the right to determine whether shares are purchased
in the open market or issued by us. We are not required to communicate the
source of the shares purchased for the Plan. We can change this choice from
time
to time. We can also decide that part of the purchases on any date will be
made
in the open market and the rest directly from us.
Your
dividends will be reinvested beginning with the first dividend whose record
date
occurs at least ten (10) business days after your enrollment in the Plan is
completed.
12.
HOW
DO YOU MAKE ADDITIONAL CASH INVESTMENTS?
Cash
investments must be made by a personal check drawn on a financial institution
whose main office is located in the United States and payable in United States
dollars to "Registrar and Transfer Company," or electronic debit from a
specified account. DO NOT SEND CASH. The cash investment will be applied to
the
purchase of shares for the account of the participant. A completed and signed
enrollment form must accompany your initial cash investments. A cash investment
form provided by the Plan administrator should accompany all subsequent cash
investments to ensure credit to the proper Plan account. See Questions 13 and
35.
13.
WHAT
IS THE AUTOMATIC MONTHLY INVESTMENT (ELECTRONIC DEBIT) FEATURE OF THE PLAN,
AND
HOW DOES IT WORK?
You
may
make voluntary cash payments of not less than $250 per payment nor more than
an
aggregate total of $5,000 during a calendar quarter by means of a quarterly
automatic electronic funds transfer from a designated account with a United
States financial institution. Any automatic quarterly investment will be treated
as a cash investment.
To
initiate automatic quarterly investments, you must complete, sign and return
to
the Plan administrator an automatic quarterly deduction form with a voided
blank
check (checking account) or deposit slip (savings account) for the account
from
which funds are to be drawn. Automatic quarterly deduction forms may be obtained
from the Plan administrator. Forms will be processed and will become effective
as promptly as practicable.
Once
you
initiate automatic quarterly investments, funds will be drawn from your
designated financial institution account on the fifth business day prior to
the
last business day of each quarter and will be invested in common stock on or
about the last business day of each quarter.
You
may
change the amount of your automatic quarterly investment or the designated
account from which funds are drawn by completing, signing and submitting to
the
Plan administrator a new automatic quarterly deduction
form.
To
be effective with respect to the next purchase period, however, the Plan
administrator must receive the new automatic quarterly deduction form at least
five business days preceding the purchase period for which such change is to
be
effective. Otherwise, the change will be effective the following quarter. You
may terminate your automatic quarterly investment by notifying the Plan
administrator in writing.
14.
IS
THERE A MINIMUM AND MAXIMUM CASH INVESTMENT?
Additional
cash investments must be at least $250 each. The maximum aggregate cash
investment is $5,000 per calendar quarter.
15.
WHEN
WILL YOUR ADDITIONAL CASH INVESTMENT BE INVESTED?
Plan
purchases of common stock are made quarterly as promptly as practicable on
or
about the last business day of each calendar quarter (the last business day
of
March, June, September and December each year). Your cash investments must
be
received by the Plan administrator no later than the fifth business day prior
to
the last business day of each calendar quarter (that is, at least 5 business
days before the last business day in March, June, September or December).
Otherwise, cash investments will be held by the Plan administrator and invested
at the end of the next calendar quarter.
WE
WILL
NOT PAY YOU INTEREST ON THE ADDITIONAL CASH YOU SEND US FOR THE PERIOD WE HOLD
IT BEFORE IT IS INVESTED. Because interest is not paid on funds pending
investment, it is to your benefit to mail your cash investments so they are
received shortly before the fifth business day prior to the last business day
of
each quarter. Funds are considered to be received when delivered, either by
overnight delivery, courier delivery, postal service, electronic funds transfer
or in person, during the normal business hours of the Plan administrator (see
Question 4 for the address).
The
Plan
administrator reserves the right to delay honoring investment requests for
purchasing shares until the Plan administrator confirms receipt of good funds
from you. The Plan administrator also reserves the right to delay issuing
certificates until the Plan administrator confirms that such shares were
purchased with good funds. However, in the event that a check submitted to
the
Plan administrator for investment is returned unpaid for any reason, the Plan
administrator will consider the request for investment of such funds null and
void. Any shares purchased upon the prior credit of such funds will be
immediately removed from your Plan account. The Plan administrator will be
entitled to sell those shares to satisfy any uncollected amounts and impose
an
appropriate fee. See Question 35. If the net proceeds of the sale of such shares
are insufficient to satisfy the balance of such uncollected amounts and fees,
the Plan Administrator will be entitled to sell additional shares of common
stock from your Plan account or bill you to satisfy the uncollected
balance.
16.
WHEN
WILL SHARES PURCHASED WITH YOUR CASH INVESTMENTS BE ENTITLED TO RECEIVE
DIVIDENDS?
Shares
of
common stock purchased with your cash investments will be entitled to payment
of
dividends thereon if the shares were purchased on or before the record date
for
the next cash dividend.
17.
WILL
YOUR CASH INVESTMENT BE RETURNED IF YOU CHANGE YOUR MIND?
If
you
change your mind about investing additional cash after sending us the payment,
you may cancel your investment request and request the return of your additional
cash if you send the request to us in writing. We will cancel your investment
and return any additional cash you sent us if we receive your written request
at
least 1 week before the date the Plan administrator starts making purchases
with
it. Because we do not pay you interest on the additional cash you send us for
investment, if we return it to you, we will not pay you any interest on
it.
18.
IS
THERE A MINIMUM OR MAXIMUM AMOUNT FOR REINVESTED DIVIDENDS?
Dividends
designated for reinvestment through the Plan are not subject to a minimum or
maximum dollar amount.
19.
WHEN
WILL YOUR DIVIDENDS BE REINVESTED?
Your
dividends will be reinvested on or about the last business day of each month
in
which a dividend is paid. We have normally paid cash dividends in the last
month
of each calendar quarter, so reinvestments of cash dividends will probably
occur
at the end of each calendar quarter. However, they could occur at other times.
Purchases may be made over a number of days, but if for any reason, the Plan
administrator is precluded from acquiring shares of our common stock for 30
days
after a dividend for dividend reinvestment or 30 days as it relates to optional
cash payments, the Plan administrator shall return all such cash amounts to
the
participant.
20.
WHEN
WILL SHARES PURCHASED WITH REINVESTED DIVIDENDS BE ENTITLED TO RECEIVE
DIVIDENDS?
Shares
of
common stock purchased with reinvested dividends will be entitled to payment
of
dividends on the next dividend payment date following the purchase of such
shares.
Methods
of Purchasing Shares
21.
WHAT
IS THE SOURCE OF COMMON STOCK PURCHASED THROUGH THE PLAN?
Common
stock purchased through the Plan will be purchased, in our sole discretion,
either on the open market or directly from us or by a combination of the two.
Shares purchased from us will be either newly issued shares allocated from
our
authorized but unissued shares or treasury shares.
22.
HOW
IS COMMON STOCK PURCHASED ON THE OPEN MARKET?
The
Plan
administrator acting through an independent agent will purchase common stock.
The independent agent, will have sole discretion in all matters related to
such
purchases, including the day and time of purchase, purchase price paid, number
of shares purchased and the markets or persons through whom the purchases are
made.
23.
HOW
ARE SHARES PURCHASED DIRECTLY FROM US?
For
reinvestment of cash dividends, the Plan administrator will purchase shares
directly from us on or about the last business day of the month in which we
pay
a cash dividend. We believe that will normally happen quarterly. For additional
cash investments, the Plan administrator will make purchases from us on the
last
business day of the calendar quarter in which the Plan administrator has
received cash from you in time to make the purchases.
24.
HOW
LONG WILL IT TAKE TO MAKE PURCHASES?
Purchases
may be made over a number of days, but if for any reason, the Plan administrator
cannot acquire enough shares of our common stock within 30 days after the date
that purchases are to start, the Plan administrator will return all cash not
used to make purchases to the participants.
25.
WHEN
WILL SHARES BE CREDITED TO YOUR PLAN ACCOUNT?
Shares
will be credited to your Plan account as soon as practicable following the
date
they are purchased. No shares will be allocated to your account until the date
on which the Plan administrator has purchased sufficient shares in the open
market to cover the purchases for that period for all Participants in the
Plan.
Each
Participant's account will be credited with the number of whole and fractional
shares (calculated to four (4) decimal places) equal to the amount to be
invested for the Participant, divided by the applicable purchase price per
share.
26.
HOW
MANY SHARES OF COMMON STOCK WILL BE PURCHASED FOR YOU?
The
number of shares of common stock purchased for your Plan account will normally
be equal to your cash investment (if any) plus any dividends available for
reinvestment, divided by the purchase price of the shares. Your Plan account
will then be credited with the calculated number of whole and fractional shares
of common stock. If for some reason the Plan administrator cannot acquire enough
shares within 30 days after the date that purchases are to start, the Plan
administrator will allocate the purchased shares among participants according
to
the funds to be invested for each participant, and the Plan administrator will
return to you any funds that could not be invested.
27.
CAN
YOU REQUEST THE PURCHASE OF A SPECIFIC NUMBER OF SHARES?
Because
the purchase price of the common stock cannot be calculated until the common
stock is purchased, you may not request or direct the Plan administrator to
purchase a specific number of shares.
Share
Certificates
28.
WILL
CERTIFICATES BE ISSUED FOR SHARES PURCHASED THROUGH THE PLAN?
Shares
of
common stock purchased through the Plan will be credited to your Plan account.
Certificates will not be issued for shares credited to Plan accounts unless
you
specifically request the Plan administrator in writing to do so or unless your
Plan account is terminated. The number of shares credited to your Plan account
will be shown on the investment statement. This service eliminates the need
for
you to find safe storage for your share certificates and protects against the
loss, theft or destruction of your stock certificates.
Certificates,
when issued, will be issued in the name on the account in which they are held
in
the Plan. Requests to issue a certificate into another registration must meet
our stock transfer requirements and is subject to additional fees. See Questions
35 and 42. If
your
shares are restricted shares (that is, shares that are subject to a transfer
restriction), the share certificates sent to you will bear the same legend
as
the original shares and you may not be able to transfer those shares until
you
comply with the restriction requirements. See Question 5 for more information
about treatment of restricted shares.
SUBJECT
TO ANY RESTRICTION ON RESALE OF THE SHARES THAT OTHERWISE APPLIES, YOU MAY
CONTINUE TO SELL AS MANY SHARES OF COMMON STOCK AS YOU WISH THROUGH A BROKER
ONCE SUCH SHARES ARE IN CERTIFICATED FORM.
Safekeeping
of Certificates
29.
CAN
CERTIFICATES BE RETURNED TO THE PLAN ADMINISTRATOR TO BE HELD IN THE PLAN
ACCOUNT?
Certificates
for common stock may be returned to the Plan administrator to take advantage
of
the safekeeping feature of the Plan. The certificates should not be endorsed,
and delivery by registered mail is recommended. The certificates should be
submitted with a new enrollment form with the appropriate options checked
thereon. You may submit certificates for safekeeping upon initial enrollment
in
the Plan or at any time while participating in the Plan. See Question 5 about
special treatment for restricted shares. See Question 35 about fees for
safekeeping of your share certificates.
Sale
of Plan Shares
30.
HOW
MAY YOU SELL YOUR PLAN SHARES?
You
may
sell all or any portion of your Plan shares by notifying the Plan administrator
in writing to that effect and by specifying in the notice the number of shares
to be sold. Such request must be signed by all persons in whose name the account
is registered and be accompanied by such other documentation as the Plan
administrator may reasonably require. IF YOUR SHARES ARE RESTRICTED SHARES
(THAT
IS, SHARES THAT ARE SUBJECT TO A TRANSFER RESTRICTION), YOU MAY NOT BE ABLE
TO
TRANSFER THOSE SHARES UNTIL YOU COMPLY WITH THE RESTRICTION REQUIREMENTS. See
Question 5 for more information about treatment of restricted
shares.
31.
WHEN
WILL PLAN SHARES BE SOLD?
Within
fifteen (15) days after the date such notice is received, the Plan administrator
will execute a sale order and will deliver to the Participant a check for the
proceeds of the sale, less any brokerage commissions, Plan administrator fees,
applicable withholding tax and transfer tax incurred. See Question 35 for the
fees that will apply. However, notices received within the period commencing
fifteen (15) days prior to the dividend payment date through the reinvestment
date will be processed immediately after the reinvestment date.
If
sufficient fractional shares of other Plan participants are also being sold,
the
fractional shares may, if we elect, be combined and sold on the market and
you
will receive your proportionate share of any net sale proceeds after deducting
brokerage commissions and other applicable fees. Otherwise, we will purchase
the
fractional shares from you at the price shares would be purchased directly
from
us under the Plan, but we will not charge you a brokerage commission for
purchasing the fractional shares.
Checks
will only be issued payable to the registered Plan account owner.
Because
the Plan generally describes when shares are to be purchased and sold by the
Plan Administrator and, depending upon circumstances, the Plan Administrator
will decide exactly when to purchase or sell shares, neither we nor you will
have the authority or power to control the timing or pricing of shares that
are
purchased or sold or, if the Plan Administrator makes purchases in the market,
the selection of the broker making the sales. Therefore, you will not be able
to
precisely time your sales through the Plan, and will bear the market risk
associated with fluctuation in the price of DNB Common Stock. For example,
if
you send in a request to sell shares, it is possible that the market price
of
DNB shares could go down or up before the broker sells your shares. In addition,
you will not earn interest on a sales transaction.
Termination
of Plan Participation
32.
HOW
MAY YOU TERMINATE PARTICIPATION IN THE PLAN?
You
may
terminate your participation in the Plan either by selling all the shares in
your Plan account or by having a certificate issued for a specific number of
whole shares held in your Plan account and then selling the balance of the
shares. See Questions 28, 30 and 31. See Question 5 for special provisions
about
restricted shares.
Certificates
cannot be issued for fractional shares. Fractional shares must be sold when
terminating participation.
You
must
notify the Plan administrator in writing of your intention to terminate your
participation in the Plan. All Plan account owners must sign the request and
indicate whether you wish to receive a stock certificate or to have the Plan
administrator sell your shares. In order to terminate participation in the
Plan,
all signatures on requests to sell shares must be guaranteed by a bank,
brokerage firm, or credit union which participates in a Signature Medallion
Guarantee Program.
Cash
investments received prior to the request to terminate Plan participation will
be invested beginning on the next investment date unless you timely request
the
return of such cash investment. See Question 17.
The
termination of Plan participation will be delayed if the request is received
during a dividend-processing period. This is a 15 to 20 business day period
which begins on the date prior to the payment date of the dividend.
33.
MAY
YOUR PLAN PARTICIPATION BE TERMINATED WITHOUT YOUR CONSENT?
If
you do
not maintain at least one whole share of common stock in a Plan account, the
Plan administrator may terminate your participation in the Plan. If your
participation in the Plan has been terminated, you will receive a check for
the
value, as determined under the Plan, of any fractional share in the Plan
account.
In
addition, we reserve the right, in our sole discretion, to terminate anyone's
participation in the Plan for any reason or no reason. If your Plan
participation is terminated, you will receive a certificate for whole shares
of
common stock and a check for the cash value of any fractional share held in
the
Plan account.
34.
WHAT
AMOUNT WILL BE DISTRIBUTED IF YOU SUBMIT A WRITTEN REQUEST FOR LIQUIDATION
OF
ALL PLAN SHARES?
The
person(s) named on the Plan account will receive a check representing the sale
price of the shares, less any brokerage commission, any withholding required
under applicable tax laws and any other unpaid services charges or fees
applicable to the account. See Questions 31 and 35.
Costs
35.
WHAT
FEES AND COSTS WILL YOU PAY TO PARTICIPATE IN THE PLAN?
The
fees
and charges for Plan transactions are as follows:
Dividend
Reinvestment
|
We
will pay any brokerage commissions and transfer fees.
|
Cash
Investment
|
We
will pay any brokerage commissions and transfer fees.
|
Safekeeping
of Share Certificates you send the Plan
Administrator
|
We
will pay this fee.
|
Sale
of shares held in the Plan
|
$15.00
fee per sale plus any applicable brokerage commissions and transfer
fees
and charges of third parties, if any.
|
If
any check you send us is returned to us unpaid
|
$40.00
for each return of each check.
|
Stock
Certificate Issuance
|
$10.00
per certificate
|
Duplicate
Statements
|
$5.00
per copy for statements from current year, $10.00 per copy for statements
from prior years.
|
Termination
of Plan participation
|
$10.00
per account terminated.
|
Sale
requests of $10,000 or higher
|
A
Medallion Signature Guarantee is required for your signature ordering
the
Plan Administrator to sell shares, and you will bear the cost of
this. The
fee for a Medallion Signature Guarantee will be determined by the
institution giving you the signature
guarantee.
|
WE
MAY CHANGE THESE FEES OR ADD NEW FEES OR CHANGE THE RATES OR TERMS ON WHICH
THEY
APPLY, AT ANY TIME, BUT WE WILL NOT DO SO UNTIL AFTER WE SEND YOU WRITTEN NOTICE
OF ANY CHANGE.
We
pay
most of the costs of mailings, materials and other administration costs of
the
Plan. All fees and charges for the Plan are subject to change upon notice to
you. You will share proportionately in brokerage commissions incurred by the
Plan administrator in connection with open market transactions involving shares
of our common stock. There will be no brokerage commissions when shares are
purchased directly from us.
Reports
To Participants
36.
WHAT
REPORTS ARE SENT TO YOU?
You
will
receive an investment statement each period in which an investment, sale,
transfer or withdrawal occurs in your Plan account. THIS STATEMENT WILL PROVIDE
DETAILED ACCOUNT INFORMATION AND SHOULD BE RETAINED FOR TAX
PURPOSES.
You
will
also receive copies of all shareholder communications from us such as quarterly
reports, annual reports and notices of shareholder meetings and proxy
materials.
You
will
receive an IRS Form 1099-DIV showing total dividends reported to the Internal
Revenue Service which were paid to you both on shares held of record and Plan
account shares. An IRS Form 1099-B will be provided for reporting proceeds
from
the sale of shares through the Plan. See Question 45 for further information
regarding tax reporting.
Other
Information
37.
WHAT
HAPPENS IF WE HAVE A RIGHTS OFFERING, ISSUE A STOCK DIVIDEND OR DECLARE A STOCK
SPLIT OR REVERSE STOCK SPLIT?
In
the
event that we should make available to our shareholders rights to purchase
additional shares of common stock or other securities, the administrator will
sell or direct the sale of the rights accruing to shares held in your Plan
accounts and apply the net proceeds of such sales to the purchase of additional
shares of common stock. Any dividends in the form of shares of common stock
and
any shares resulting from a common stock split on shares held in your Plan
account will be credited to your Plan account. Any reverse stock split or other
transaction in which the aggregate number of shares outstanding is reduced
will
result in a proportionate reduction of the number of shares in your
account.
38.
HOW
WILL YOUR SHARES BE VOTED AT MEETINGS OF SHAREHOLDERS?
Prior
to
a shareholders meeting, you will receive our proxy statement and a proxy card
representing Plan account shares you own, as well as any other shares of common
stock you hold of record. If the materials sent to you indicate that you may
do
so, you may deliver your signed proxy card directly to us, or to the Plan
Administrator or broker, or you may appear at the meeting and vote your shares
in person. If the materials sent to you indicate that the Plan administrator
will vote your Plan account shares, the Plan administrator will vote your Plan
account shares in accordance with your written instructions. To the extent
the
Plan administrator does not receive your written instructions, the Plan
administrator will not vote your shares held in your Plan account. Your
fractional shares will not be entitled to any votes.
39.
WHAT
ARE THE RESPONSIBILITIES OF OUR AGENTS AND US UNDER THE PLAN?
The
Plan
administrator, any other independent agent appointed by us pursuant to the
Plan,
DNB Financial Corporation, DNB First, National Association, and their respective
shareholders, directors, officers, employees
and
agents will not be liable for any act performed in good faith or for any good
faith omission to act with respect to the Plan, including, without limitation,
any claim of liability arising out of failure to terminate your account upon
your death, prior to receipt of notice in writing of the death or with respect
to the prices or times at which, or sources from which, shares are purchased
or
sold for your Plan accounts, or with respect to any fluctuation in the market
value of the common stock before or after any purchase or sale of
shares.
40.
MAY
THE PLAN BE CHANGED OR DISCONTINUED?
We
reserve the right, in our sole discretion, to suspend, modify or terminate
the
Plan at any time without prior notice to you. Any suspension, modification
or
termination of the Plan will be communicated by us or the Plan administrator
to
all Plan participants.
41.
MAY
COMMON STOCK HELD IN A PLAN ACCOUNT BE PLEDGED AS COLLATERAL?
You
may
NOT
pledge
or grant a lien, security interest or other encumbrance, or assign your rights
to, your Plan account or any of the shares of common stock so long as they
are
held in a Plan account under your name. In order to do so, you must request
that
the shares be withdrawn and a certificate issued to you for those shares. If
your Plan account holds any restricted shares (that is, shares whose transfer
is
subject to special restrictions), you may not be able to pledge those shares
unless you comply with the transfer restrictions. See Questions 5, 29 and 32
for
more information about the treatment of restricted shares.
42.
MAY
COMMON STOCK HELD IN A PLAN ACCOUNT BE TRANSFERRED OR ASSIGNED TO ANOTHER
PERSON?
Yes,
you
may transfer any shares in your Plan account to someone else, but you may only
do this by giving written instructions to the Plan Administrator and signing
and
returning such other documents as the Plan administrator requires. IF YOUR
PLAN
ACCOUNT HOLDS ANY RESTRICTED SHARES (THAT IS, SHARES WHOSE TRANSFER IS SUBJECT
TO SPECIAL RESTRICTIONS), YOU MAY NOT BE ABLE TO PLEDGE THOSE SHARES UNLESS
YOU
COMPLY WITH THE TRANSFER RESTRICTIONS. When you satisfy the Plan requirements
and (if applicable) any transfer restrictions applicable to any restricted
shares, the shares can be credited to the assignee’s account under the Plan, or
the Plan administrator will issue a certificate for the transferred shares,
either in the name of the original Plan account owner or in the name of the
transferee, according to the documents submitted to and the requirements of
the
Plan administrator. See Questions 5, 29 and 32 for more information about the
treatment of restricted shares.
43.
HOW
MAY INSTRUCTIONS BE GIVEN TO THE PLAN ADMINISTRATOR?
Although
currently all instructions from you to the Plan administrator are required
to be
in writing, the Plan administrator may in the future allow certain instructions
to be given by telephone, by electronic means, or in any other manner as
determined by the Plan administrator.
44.
WHO
INTERPRETS THE PLAN?
Any
questions of interpretation arising under the Plan will be determined by us
and
the Plan Administrator, in our sole discretion, and any such determination
will
be final. Questions or correspondence relating to the interpretation or
administration of the Plan should be directed to:
|
Registrar
and Transfer Company
|
|
Attention:
Dividend Reinvestment Department
|
|
10
Commerce Drive
|
|
P.O.
Box 664
|
|
Cranford,
NJ 07016
|
|
|
|
Phone:
1-800-368-5948
|
|
Email:
info@rtco.com
|
Federal
Income Tax Information
45.
WHAT
ARE SOME OF THE TAX CONSEQUENCES OF YOUR PARTICIPATION IN THE PLAN?
The
following is a summary of all material federal income tax consequences of
participation in the Plan. This summary is for general information only and
does
not constitute tax advice. This summary does not reflect every possible tax
outcome or consequence that could result from participation in the Plan. This
summary does not discuss your tax consequences if you are not a United States
citizen or a resident alien. You must consult your own tax advisors to determine
the tax consequences particular to your situation, that may result from your
participation in the Plan and your subsequent sale of shares acquired pursuant
to the Plan. This summary does not describe any applicable state, local or
foreign income tax or other tax consequences. Any state tax consequences will
vary from state to state, and any tax consequences to you if you reside outside
of the United States will vary from jurisdiction to jurisdiction.
Reinvestment
of Dividends
If
the
shares are purchased from us without brokerage commissions, participants will
be
considered to have received a dividend for federal income tax purposes equal
to
the fair market value as of the investment date of the shares purchased with
the
reinvested dividends. If the shares are purchased through market transactions,
participants will be treated as having received a dividend equal to the cash
dividend paid by us increased by the amount of brokerage fees and charges paid
to the agent by us. Those dividend amounts will become your basis in the shares
purchased, and your holding period of those shares will begin on the day
following the date of purchase.
Optional
Cash Payments
For
shares purchased from us, participants who elect to invest in additional shares
by making optional cash payments will be treated for federal income tax purposes
as having received a dividend equal to the excess (if any) of (i) the fair
market value on the investment date of the shares purchased, over (ii) the
optional cash payments made. You will not be deemed to have received a dividend
with respect to shares acquired by purchases in market transactions, except
to
the extent of brokerage fees and charges paid to the agent by us. Your tax
basis
in the shares purchased will be equal to the cost paid by you in acquiring
the
stock, plus the amount (if any) treated as a dividend for federal income tax
purposes, and the participant’s holding period for those shares will begin on
the day following the date of purchase.
Additional
Information Applicable to Reinvestment of Dividends and Optional Cash
Payments
The
dividend income received by a corporate stockholder generally is eligible for
a
70 percent dividends-received deduction under current federal tax laws. You
will
not realize any taxable income upon the receipt of whole shares credited to
your
account, either upon your request for certificates or book-entry registration
for those shares or upon withdrawal from or termination of the Plan. However,
if
you receive, upon withdrawal from or termination of the Plan, a cash payment
for
a fractional share credit in your account, you will be treated as having
redeemed the fractional share of stock and accordingly will recognize gain
or
loss for tax purposes equal to the difference between the cash payment and
your
tax basis of that fractional share. You will realize gain or loss upon the
sale
or exchange of shares after withdrawal from the Plan. The amount of that gain
or
loss will be the difference between the amount that you receive for each whole
share and your tax basis for the shares. A participant’s (including a foreign
stockholder) dividends that are subject to United States income tax withholding
will have the amount of the tax to be withheld deducted from those dividends
before reinvestment in additional shares for that participant’s Plan account.
Statements confirming purchases made for those participants will indicate that
tax has been withheld. Pursuant to Internal Revenue Service regulations, the
amount of tax to be withheld will be determined by applying the applicable
withholding rate to an amount equal to the sum of the amount of cash dividends
that the participant would have received had the dividends been paid to the
participant in cash plus brokerage fees and charges paid to the agent by
us.
Tax
Relief Act
The
Jobs
and Growth Tax Relief Reconciliation Act of 2003, or the Tax Relief Act, reduced
the maximum rate of tax imposed on most dividends received by individuals from
the higher marginal income tax rates to 15 percent (5 percent for individuals
in
the lower tax brackets and 0 percent for these taxpayers in 2008). This
provision applies to dividends received in taxable years beginning after
December 31, 2002 and before January 1, 2009. The Tax Relief Act is unclear
about whether dividends representing brokerage fees and charges paid to the
agent by us qualify for the reduced rates. In order to be eligible for the
reduced rate described above, an individual stockholder must own our common
stock for more than 60 days during the 121-day period beginning 60 days before
the ex-dividend date. Also, if an individual receives an “extraordinary
dividend” within the meaning of Section 1059 of the Internal Revenue Code (i.e.,
a dividend which equals or exceeds 10 percent of the individual’s tax basis in
our common stock) which is eligible for the reduced rate, any loss on a
subsequent sale of the stock with respect to which such dividend is made is
treated as a long-term capital loss to the extent of such dividend. For purposes
of determining the amount of deductible investment interest, a dividend is
treated as investment income only if the individual elects to treat the dividend
as not eligible for the reduced rate. For sales and exchanges of capital assets
on or after May 6, 2003 and before January 1, 2009, the Tax Relief Act also
reduces the top individual tax rate on adjusted net capital gains from 20
percent (10 percent for individuals in the lower tax bracket) to 15 percent
(5
percent for individuals in the lower tax brackets and 0 percent for these
taxpayers in 2008).
For
participants who are subject to U.S. withholding tax, backup withholding or
foreign taxes, we will withhold the required taxes from the gross dividends
or
proceeds from the sale of shares. The dividends or proceeds received by you,
or
dividends reinvested on your behalf, will be net of the required
taxes.
DESCRIPTION
OF COMMON STOCK
Up
to
350,000 shares of common stock have been registered for issuance in connection
with the Plan for purchases of newly issued shares directly from us.
We
are
authorized by our articles of incorporation to issue an aggregate of up to
10,000,000 shares of common stock, par value $1.00 per share. Our articles
of
incorporation also authorize us to issue up to 1,000,000 shares of preferred
stock, par value $10.00 per share. No other class of capital stock is
authorized. On the date of this Prospectus, we had 2,367,069 shares of common
stock issued and outstanding.
The
common stock to be registered in connection with this offering is of the same
class as our common stock registered pursuant to Section 12 of the Exchange
Act.
Descriptions of our common stock and the terms applicable to it are contained
in
our registration for the common stock on Form 8-A filed with the Commission
on
April 4, 1988, and in our Amended and Restated Articles of Incorporation filed
as Exhibit 3(i) to our Form 10-Q filed with the Commission on August 14, 2001
(File No. 0-16667).
USE
OF
PROCEEDS
The
net
proceeds from the sale of newly issued shares of common stock issued under
the
Plan will be used for general corporate purposes, which may include investment,
operating or capital expenditures, the reduction of indebtedness, investments
at
the holding company level, investments in or extensions of credit to our banking
and nonbanking subsidiaries and other banks and companies engaged in other
financial service activities, the purchase of our outstanding equity securities
and possible acquisitions. The precise amounts and timing of the application
of
net proceeds will depend upon our funding requirements and the availability
of
other funds. Based upon our past and anticipated growth, we may engage in
additional financings of a character and amount to be determined as the need
arises.
We
will
not receive any funds under the Plan from the purchase of shares of our common
stock in market transactions.
PLAN
OF
DISTRIBUTION
Shares
you will purchase under the Plan are not being sold to you through underwriters.
An independent agent acting on behalf of the Plan will purchase some shares
in
open market transactions. Other shares may be purchased directly from us. We
will pay brokerage commissions and transfer fees related to purchases of share
in the open market for participants in the Plan. However, participants will
pay
brokerage commissions, transfer fees and other fees connected with the sale
of
any shares they hold under the Plan. Participants also may have to pay the
other
types of fees, commissions and charges described in this Prospectus. For the
most typical fees and charges, see Question 35 above.
Persons
who acquire shares of common stock through the Plan and resell them shortly
after acquiring them, including coverage of short positions, under certain
circumstances, may be participating in a distribution of securities that would
require compliance with Regulation M under the Securities Exchange Act of 1934
and may be considered to be underwriters within the meaning of the Securities
Act of 1933. We will not extend to any such person any rights or privileges
other than those to which it would be entitled as a participant, nor will we
enter into any agreement with any such person regarding the resale or
distribution by any such person of shares of our common stock so
purchased.
Our
common stock may not be available under the Plan in all states. We are not
making an offer to sell our common stock in any state where the offer or sale
is
not permitted.
EXPERTS
The
consolidated financial statements of DNB Financial Corporation as of December
31, 2004 and 2003, and for each of the years in the three-year period ended
December 31, 2004, have been incorporated by reference herein in reliance upon
the reports of KPMG LLP, independent registered public accounting firm, upon
the
authority of said firm as experts in accounting and auditing.
LEGAL
MATTERS
Certain
legal matters with respect to the common stock offered pursuant to this
prospectus have been passed upon for us by our counsel Stradley Ronon Stevens
& Young, LLP, Philadelphia, Pennsylvania.
INDEMNIFICATION
Our
directors and executive officers are entitled to indemnification as expressly
permitted by the provisions of the Pennsylvania Business Corporation Law and
our
articles of incorporation and bylaws. We also have directors’ and officers’
liability insurance, which provides, in general, insurance to our directors
and
officers against loss by reason of any of their wrongful acts, subject to the
terms and conditions of the policy. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or
persons controlling us pursuant to the foregoing provisions, we have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is therefore unenforceable.
Part
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth the expenses to be paid by the Company in connection
with the offering described in this registration statement. All amounts are
estimates, except the SEC registration fee.
|
SEC
Registration Fee
|
$
|
767.73
|
|
Transfer
Agent/Administrator Fees
|
$
|
15,000.00
|
|
Printing
Costs
|
$
|
4,000.00
|
|
Legal
Fees and Expenses
|
$
|
20,000.00
|
|
Accounting
Fees and Expenses
|
$
|
5,000.00
|
|
TOTAL
|
$
|
44,767.73
|
Item
15. Indemnification of Directors and Officers.
Sections
1741 and 1747 of the Pennsylvania Business Corporation Act, as amended (the
“Act”), provides for indemnification of, and insurance for any person who is or
was a representative of the Company and specifically empowers the Company to
indemnify, subject to the standards therein prescribed, any person who is or
was
a representative of the Company in connection with any action, suit or
proceeding brought or threatened by reason of the fact that he is or was a
representative of the Company. Articles 23 and 24 of the Company’s Bylaws
require the Company to indemnify each of the Company’s directors and officers in
such capacity in which any such director or officer acts for or on behalf of
the
Company including as an employee or agent.
The
Bylaws provide that the Company will indemnify any officer or director who
was
or is a party to, or is threatened to be made a party to, or who is called
to be
a witness in connection with, any threatened, pending or completed action,
suit
or proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company) by reason of the fact that
such person is or was an officer or director of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of a corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney’s fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
In
addition, the Company will indemnify any officer or director who was or is
a
party to, or is threatened to be made a party to, or who is called as a witness
in connection with, any threatened, pending or completed action or suit by
or in
the right of the Company to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, and/or employee or agent
of
a corporation, partnership, joint venture, trust or other enterprise against
amounts paid in settlement and expenses (including attorneys’ fees) actually and
reasonably incurred by him in connection with the defense or settlement of,
or
serving as a witness in, such action or suit if he acted in good faith and
in a
manner he reasonably believed to be in, or not opposed to, the best interests
of
the Company. No indemnification will be made in respect of any claim, issue
or
matter as to which such person shall have been adjudged to be liable for
misconduct in the performance of his duty to the Company.
The
Bylaws permit the payment of expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding in advance of the
final
disposition of such action, suit or proceeding.
As
provided in the Bylaws, the Company may purchase and maintain insurance on
behalf of any person who is or was an officer or director of the Company, or
is
or was serving at the request of the Company as an
officer
or director of a corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any
such capacity, or arising out of his status as such.
The
Company will not indemnify any officer or director in any case where the act
or
failure to act giving rise to the claim for indemnification constituted willful
misconduct or recklessness. The Bylaws also provide that a director of the
Company will not be personally liable for monetary damages as such for any
action taken or for any failure to take any action, unless:
(a) the
director has breached or failed to perform the duties of his office,
and
(b) the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness.
The
Bylaws exclude:
(a) the
responsibility or liability of a director pursuant to a criminal statute, or
(b) the
liability of a director for the payment of taxes pursuant to local, state or
federal law.
Item
16. Exhibits.
See
the
Exhibit Index attached to this Registration Statement.
Item
17. Undertakings.
(a) The
undersigned Registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to
such information in this Registration Statement;
Provided,
however,
that
paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required
to
be included in a post-effective amendment by those paragraphs is contained
in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement;
(2) That,
for
the purpose of determining any liability under the Securities Act of 1933,
each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be an initial bona fide offering thereof; and
(3) To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
(b) The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the Registrant’s
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be
the initial bona fide offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy or expressed in the Act and will be governed by the final adjudication
of
such issue.
EXHIBIT
INDEX
Exhibit
|
Description
|
|
|
(5)
|
Opinion
of Stradley, Ronon, Stevens & Young, LLP.
|
|
|
(15)
|
Consent
of Independent Registered Public Accounting Firm--KPMG LLP.
|
|
|
(23)
|
Consents.
|
|
|
|
(a)
Consent of Stradley, Ronon, Stevens & Young, LLP (included in Exhibit
5).
|
|
|
|
|
SIGNATURES
The
Registrant.
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of
Downingtown, State of Pennsylvania, on February 21, 2006.
DNB
FINANCIAL CORPORATION
(Registrant)
By
/s/
Bruce E. Moroney
Bruce
E.
Moroney
Executive
Vice President and Chief Financial Officer
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the date
indicated.
(Signature)
|
(Date)
|
/s/
William S. Latoff
|
February
21, 2006
|
William
S. Latoff
|
|
Chairman
of the Board and Chief Executive Officer
|
|
Director
|
|
|
|
/s/
Bruce E. Moroney
|
February
21, 2006
|
Bruce
E. Moroney
|
|
Chief
Financial Officer
|
|
(Principal
Accounting Officer)
|
|
|
|
/s/
William J. Hieb
|
February
21, 2006
|
William
J. Hieb
|
|
President
and Director
|
|
|
|
/s/
Mildred R. Joyner
|
February
21, 2006
|
Mildred
R. Joyner
|
|
Director
|
|
|
|
/s/
James J. Koegel
|
February
21, 2006
|
James
J. Koegel
|
|
Director
|
|
|
|
/s/
Eli Silberman
|
February
21, 2006
|
Eli
Silberman
|
|
Director
|
|
|
|
/s/
James H. Thornton
|
February
21, 2006
|
James
H. Thornton
|
|
Director
|
|