QNB sponsors stock-based compensation plans, 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 was $22,000 and $20,000 for the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, there was approximately $204,000 of unrecognized compensation cost related to unvested share-based compensation award grants that is expected to be recognized over the next 35 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. As of March 31, 2022, there were 177,550 options granted, 63,175 options forfeited, 20,825 options exercised, and 122,050 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 Three Months Ended March 31,	2022			2021
Risk free interest rate		1.25	%		0.20	%
Dividend yield		3.64	%		4.17	%
Volatility		22.68	%		21.14	%
Expected life (years)		4.05			4.88

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 three months ended March 31, 2022 and 2021 was $5.02 and $3.08, respectively.

Stock option activity during the three months ended March 31, 2022 and 2021 is as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2021		113,950		$	37.58
Granted		29,350			37.26
Exercised		—			—
Forfeited		(21,250	)		37.69
Outstanding at March 31, 2022		122,050		$	37.49		3.01	$	117
Exercisable at March 31, 2022		44,500		$	40.86		1.39	$	—

	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2020		116,550		$	37.42
Granted		25,000			32.50
Exercised		(17,525	)		30.40
Forfeited		(3,125	)		30.40
Outstanding at March 31, 2021		120,900		$	37.60		2.17	$	—
Exercisable at March 31, 2021		46,975		$	40.63		0.64	$	—