Stock Option Plan

12 Months Ended

Dec. 31, 2011

Stock Option Plan

Stock Option Plan

Note 13 - Stock Option Plan

QNB has stock option plans (the Plans) administered by a committee which consists of three or more members of QNB's Board of Directors. The Plans provide for the granting of either (i) Non-Qualified Stock Options (NQSOs) or (ii) Incentive Stock Options (ISOs). The exercise price of an option, as defined by the Plans, is the fair market value of QNB's common stock at the date of grant. The Plans provide for the exercise either in cash or in securities of the Company or in any combination thereof.

The 1998 Plan authorizes the issuance of 220,500 shares. The time period by which any option is exercisable under the 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 ten years after the date the option is awarded. The granted options vest after a three-year period. As of December 31, 2011, there were 225,058 options granted, 28,444 options forfeited, 114,414 options exercised and 82,200 options outstanding under this Plan. The 1998 Plan expired March 10, 2008.

The 2005 Plan authorizes the issuance of 200,000 shares. The terms of the 2005 Plan are identical to the 1998 Plan except the options expire five years after the grant date. As of December 31, 2011, there were 103,200 options granted, 29,125 options forfeited and 74,075 options outstanding under this Plan. The 2005 Plan expires March 15, 2015.

As of December 31, 2011, there was approximately $65,000 of unrecognized compensation cost related to unvested stock option awards granted. That cost is expected to be recognized over the next thirty-one months.

Stock option activity during 2011 and 2010, was as follows:

				Weighted		Weighted average
	Number			Average		remaining contractual		Aggregate
	of options			exercise price		term (in years)		intrinsic value
Outstanding at December 31, 2009		200,802		$	21.36
Exercised		(19,716	)		14.03
Forfeited		(30,571	)		22.32
Granted		20,000			17.63
Outstanding at December 31, 2010		170,515			21.60
Exercised		(18,940	)		14.12
Forfeited		(14,800	)		26.00
Granted		19,500			20.27
Outstanding at December 31, 2011		156,275		$	21.93		1.87	$	406
Exercisable at December 31, 2011		105,725		$	23.55		1.20	$	216

As of December 31, 2011, outstanding stock options consist of the following:

	Options				Remaining life		Options
	outstanding		Exercise price		(in years)		exercisable		Exercise price
		20,700	$	16.13		0.04		20,700	$	16.13
		13,650		17.15		2.06		-		-
		14,400		17.25		3.13		-		-
		3,000		19.76		3.69		-		-
		48,700		20.00		2.11		31,700		20.00
		11,475		21.00		1.04		11,475		21.00
		2,500		22.11		4.66		-		-
		12,050		25.15		0.04		12,050		25.15
		14,800		32.35		3.05		14,800		32.35
		15,000		33.25		2.32		15,000		33.25
Outstanding at December 31, 2011		156,275	$	21.93		1.87		105,725	$	23.55

The cash proceeds, tax benefits and intrinsic value related to total stock options exercised during 2011 and 2010 are as follows:

	2011		2010
Tax benefits related to stock options exercised	$	32	$	3
Intrinsic value of stock options exercised		148		110