Note 6. Stock Option Plans

Delmar Bancorp Stock Option Plan

The Bank had employee and director stock option plans and had reserved shares of stock for issuance thereunder. Options granted under these plans had a ten‑year life with a four‑year vesting period that began one year after date of grant, and were exercisable at a price equal to the fair value of the Company's stock on the date of the grant. Each award from all plans was evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the grantor determines. The plan term ended in 2014, therefore no new options can be granted.

No stock options were exercised during the the nine months ended September 30, 2019. All remaining stock options expired during the second quarter of 2019.

Liberty Bell Bank Stock Option Plans

In 2004 Liberty Bell Bank adopted the 2004 Incentive Stock Option Plan and the 2004 Non‑Qualified Stock Option Plan, which were stock‑based incentive compensation plans (the Plans). In February 2014 the Plans expired pursuant to their terms. Options under these plans had a 10 year life and vested over 5 years. Remaining options under these plans became fully vested with the approval by the board of directors of Liberty signing the Agreement of Merger with Delmar Bancorp in July 2017. In accordance with the terms of the Agreement of Merger between Delmar and Liberty, the Plan was assumed by Delmar, and the options were converted into and became an option to purchase an adjusted number of shares of the common stock of Delmar at an adjusted exercise price per share. The number of shares was determined by multiplying the number of shares of Liberty common stock for which the option was exercisable by the number of shares of Delmar common stock into which shares of Liberty common stock were convertible in the Merger, which was 0.2857 (the “Conversion Ratio”), rounded to the next lower whole share. The exercise price was determined by dividing the exercise price per share of Liberty common stock by the Conversion Ratio, rounded up to the nearest cent. At the effective time of the merger there were 48,225 options outstanding at an exercise price of $1.18. These shares were converted to 13,771 options outstanding at an exercise price of $4.14.

Remaining options for 8,709 shares were outstanding as follows:


	Employees					Directors
		Average					Average
	Shares	Price		Amount		Shares	Price		Amount
September 30, 2019	2,355	$	4.14	$	9,750	6,354	$	4.14	$	26,306

As stated in Note 1, the Company follows ASC Topic 718‑10 which requires that stock‑based compensation to employees and directors be recognized as compensation cost in the income statement based on their fair values on the measurement date, which, for the Company, is the date of the grant. All stock option expenses had been fully recognized prior to 2018. No stock options were exercised or forfeited during the nine months ended September 30, 2019. All remaining stock options expire during the first quarter of 2023.