3. STOCK-BASED COMPENSATION AND SHAREHOLDERS’ EQUITY

All Stock-based compensation plans are administered by a Board committee (the “Committee”).

2015 Stock Incentive Plan (the "2015 Plan"), under which both qualified and non-qualified stock options were granted periodically to certain employees, was authorized to issue 300,000 shares. 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. The 2015 Plan expired February 24, 2025.

The 2025 Stock Incentive Plan (the "2025 Plan"), authorizing the issuance of 500,000 shares, was approved at the Company's 2025 Meeting of Shareholders. Under the 2025 Plan, qualified stock options may be granted to certain employees and non-qualified stock options, restricted stock and awards may be granted to certain employees and non-employee directors. Compensation cost will be measured using the fair value of an award on the grant date and recognized over the service period, which is usually the vesting period. The 2025 Plan will expire on May 19, 2035.

Stock-based compensation expense related to the 2015 and 2025 Plan was $69,000 and $30,000 for the three months ended September 30, 2026 and 2025, respectively. At March 31, 2026, there was approximately $728,000 of unrecognized compensation cost related to unvested share-based compensation on stock option award grants that is expected to be recognized over the next 30 months; and $467,000 or unrecognized compensation cost related to share-based compensation on restricted stock awards that is expected to be recognized over the next 19 months.

Options were granted to certain employees at prices equal to the market value of the stock on the date the options are granted. The time period during which any option is exercisable under the 2025 Plan was determined by the Committee but shall not commence before the expiration of six months after the date of grant. Stock option 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. Restrict Stock Awards granted under the plan will vest over three year; however some of the awards are performance-based and will vest over three years based of performance factors. As of March 31, 2026 there were 50,000 total options and awards granted and outstanding and 450,000 shares available for future grants under the 2025 Plan. As of March 31, 2026 there were 149,445 options outstanding under the 2015 Plan.

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, 2026 and 2025 was $7.17 and $6.64, respectively.

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). There was no stock-based compensation expense related to the 2021 ESPP for the three months ended March 31, 2026 and 2025, respectively. The 2021 ESPP authorized the issuance of 30,000 shares. As of March 31, 2026 there were 3,319 shares remaining for issuance 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 initially required each non-employee director of 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; this amount was increased to $19,230 for 2025 to align director compensation with our peers. 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 (which is one-half of the annual compensation paid in stock) 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 March 31, 2026, 10,884 shares were issued to non-employee directors and there were 39,116 shares remaining under the Plan. Stock-based compensation expense related to the Director Compensation Plan was $48,000 for the three months ended March 31, 2026 and $43,000 for the three months ended March 31, 2025.