QNB maintains a 2015 Stock Incentive Plan (the "2015 Plan"), administered by a Board committee (the “Committee”), under which both qualified and non-qualified stock options may be granted periodically to certain employees. Compensation cost has been measured using the fair value of an award on the grant date and is recognized over the service period, which is usually the vesting period.

Stock-based compensation expense related to the 2015 Plan was $20,000 and $23,000 for the three months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense related to the 2015 Plan was $38,000 and $43,000 for the six months ended June 30, 2024 and 2023, respectively. At June 30, 2024, there was approximately $242,000 of unrecognized compensation cost related to unvested share-based compensation award grants that is expected to be recognized over the next 28 months.

Options are granted to certain employees at prices equal to the market value of the stock on the date the options are granted. The 2015 Plan authorized the issuance of 300,000 shares. The time period during which any option is exercisable under the 2015 Plan is determined by the Committee but shall not commence before the expiration of six months after the date of grant or continue beyond the expiration of five years after the date the option is awarded. The granted options vest after a three-year period. The 2015 Plan was amended, effective January 1, 2023, to increase the maximum term of any options granted under the plan from five years to ten years, and to also require that awards granted under the Plan will vest 20% each consecutive year commencing on the first anniversary date of the award unless otherwise specified in an award agreement. As of June 30, 2024, there were 252,550 options granted, 94,450 options forfeited, 20,825 options exercised, and 137,275 options outstanding under this Plan. The 2015 Plan expires on February 24, 2025.

The following assumptions were used in the option pricing model in determining the fair value of options granted during the period:


For the Six Months Ended June 30,	2024			2023
Risk free interest rate		3.98	%		3.64	%
Dividend yield		5.97	%		4.80	%
Volatility		20.96	%		20.36	%
Expected life (years)		8.19			8.35

The risk-free interest rate was selected based upon yields of U.S. Treasury securities with a term approximating the expected life of the option being valued. Historical information was the basis for the selection of the expected dividend yield, expected volatility and expected lives of the options.

The fair market value of options granted in the six months ended June 30, 2024 and 2023 was $3.08 and $4.11, respectively.

Stock option activity during the six months ended June 30, 2024 and 2023 is as follows:


	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2023		121,550		$	34.29
Granted		40,000			23.40
Exercised		—			—
Forfeited		(24,275	)		37.69
Outstanding at June 30, 2024		137,275		$	30.51		5.74	$	3,600
Exercisable at June 30, 2024		45,315		$	33.74		2.26	$	—


	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2022		109,150		$	37.65
Granted		35,000			29.51
Exercised		—			—
Forfeited		(22,600	)		43.15
Outstanding at June 30, 2023		121,550		$	34.29		3.83	$	—
Exercisable at June 30, 2023		41,375		$	37.37		0.60	$	—

QNB maintains a 2021 Employee Stock Purchase Plan (the "2021 ESPP") offering eligible employees an opportunity to purchase shares of QNB Corp. common stock at a 10% discount from the lesser of fair market value on the first or last day of each offering period (as defined by the Plan). Stock-based compensation expense related to the 2021 ESPP was $13,000 and $7,000 for the six months ended June 30, 2024 and 2023, respectively. The 2021 ESPP authorized the issuance of 30,000 shares. As of June 30, 2024, 17,674 shares were issued under the 2021 ESPP Plan. The 2021 ESPP Plan expires May 31, 2026.

The QNB Corp. 2023 Non-Employee Director Compensation Plan was approved by shareholders on May 23, 2023 (The "Director Compensation Plan"). The Director Compensation Plan authorized the issuance of 50,000 shares, is effective January 1, 2023 and expires on January 1, 2033. The Plan requires each non-employee director of the QNB, or any subsidiary of QNB designated by the Board (including QNB Bank), to receive $8,000 of their total annual compensation for service as a director in the form of the QNB’s common stock. Under the Director Compensation Plan, commencing with the six-month period ended June 30, 2023, each non-employee director will receive, in addition to any cash compensation otherwise payable, a semi-annual grant of such number of shares of the QNB’s common stock determined by dividing (i) the Semi-Annual Stock Payment Amount of $4,000 by (ii) the market value of a share of common stock determined as of June 30 or December 31 of any year, as applicable. Payments will be made under the Director Compensation Plan only to non-employee directors in office on the applicable payment date. As of June 30, 2024, 3,270 shares were issued to non-employee directors and there were 46,730 shares remaining under the Plan. Stock-based compensation expense related to the Director Compensation Plan was $36,000 for the six months ended June 30, 2024 and $40,000 for the six months ended June 30, 2023.