QNB CORP.

Note 7 - Intangible Assets and Loan Servicing

Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The unpaid principal balances of mortgage loans serviced for others were $58,957,000 and $63,411,000 at December 31, 2025 and 2024, respectively.

The following table reflects the activity of mortgage servicing rights for the periods indicated:

The balance of these mortgage servicing rights is included in "Other assets" at December 31, 2025 and 2024 and the fair value of these rights was $530,000 and $556,000, respectively. The fair value of servicing rights was determined using discount rates ranging from 12.0% to 12.5% for both 2025 and 2024; and prepayment speeds ranging from 92% to 199% for 2025 compared to 90% to 185% for 2024.

The annual estimated amortization expense of intangible assets for each of the five succeeding fiscal years is as follows:

Note 8 - Time Deposits

The aggregate amount of time deposits was $375,797,000 and $381,458,000 at December 31, 2025 and 2024, respectively. Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2025 and 2024 were $59,037,000 and $46,681,000, respectively.

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At December 31, 2025, the scheduled matur ities of time deposits were as follows:

Note 9 - Short-Term Borrowings

(a)

Securities sold under agreements to repurchase mature overnight. The repurchase agreements were collateralized by U.S. Government mortgage-backed securities and CMOs with an amortized cost of $29,224,000 and $30,729,000 and a fair value of $26,122,000 and $26,501,000 and at December 31, 2025 and 2024 respectively. These securities are held in safekeeping at the Federal Reserve Bank of Boston.

(b)

Other short-term borrowings include Federal funds purchased, overnight and short term borrowings from the FHLB, and short-term FRB borrowings.

The Bank hasfour unsecured Federal funds lines granted by correspondent banks totaling $86,000,000. Federal funds purchased under these lines were $0 at both December 31, 2025 and 2024.

Note 10 - Long-Term Debt

FHLB advances are collateralized by certain mortgage loans and also require the purchase of FHLB capital stock, which is included within "Restricted investment in stocks" on the Consolidated Balance Sheets. QNB’s FHLB stock was $3,586,900 and $3,510,000 at December 31, 2025 and 2024, respectively.

QNB has a maximum borrowing capacity with the FHLB of approximately $484,377,000. At December 31, 2025 QNB hadno long-term advances outstanding with the FHLB, $66,000,000 in short term borrowings as reported in Note 9 andno letters of credit issued. At December 31, 2024 QNB had $30,000,000 in long-term advances outstanding with the FHLB at fixed rates, $35,208,000 in short term borrowings as reported in Note 9 and a letter of credit issued of $283,000.

There wereno long-term advances at the FHLB at December 31, 2025.

Note 11 - Subordinated Debt

On August 30, 2024, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited investors (collectively, the "Subordinated Note Purchasers") pursuant to which the Company issued and sold $40.0 million

-93 - inaggregate principal amount of its 8.875% Fixed-to-Floating Rate Subordinated Notes due 2034 (the "Subordinated Notes"). The Subordinated Notes were offered and sold by the Company to the Subordinated Note Purchasers in a private offering in reliance on the Section 4(a)(2) exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the provisions of Regulation D thereunder. The Company intends to use the proceeds from the offering for general corporate purposes and potential future strategic opportunities.

The Subordinated Notes mature on September 1, 2034 and bear interest at a fixed annual rate of 8.875%, payable semi-annually in arrears, to but excluding September 1, 2029. From and including September 1, 2029 to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an interest rate per annum initially equal to the then-current three-month Secured Overnight Financing Rate published by the Federal Reserve Bank of New York plus 545 basis points, payable quarterly in arrears. The Company is entitled to redeem the Subordinated Notes, in whole or in part, at any time on or after September 1, 2029, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.

The Subordinated Notes are not subject to any sinking fund and are not convertible into or exchangeable for any other securities or

assets of the Company or any of its subsidiaries. The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Subordinated Notes rank junior in right to payment to the Company's current and future senior indebtedness. The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.

The carrying cost of the Subordinated Notes on the consolidated balance sheets represents the outstanding balance of the notes net of unamortized origination costs of $732,000 which amortize to interest expense through September 1, 2029.

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Note 12 - Income Taxes

The components of the provision for income taxes are as follows:

At December 31, 2025 and 2024, the tax effects of temporary differences that represent the significant portion of deferred tax assets and liabilities are as follows:

The ability to realize deferred tax assets is dependent upon a variety of factors, including the generation of future taxable income, the existence of taxes paid and recoverable, the reversal of deferred tax liabilities and tax planning strategies. Based upon these and other factors, management believes it is more likely than not that QNB will realize the benefits of the above deferred tax assets except a $442,000 deferred tax related to a state net operating loss that it is more likely than not that the carryforward period will expire prior to the ability to offset the loss. A valuation allowance was recorded for this amount.

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A reconciliation of the tax provision on income before taxes computed at the statutory rates of 21% for 2025, 2024 and 2023 and the actual tax provision was as follows:

Note 13 - Employee Benefit Plans

The QNB Bank Retirement Savings Plan provides for elective employee contributions up to the maximum allowed by the IRS and a matching company contribution limited to 3%. In addition, the plan provides for safe harbor non-elective contributions of 5% of total compensation by QNB. QNB contributed a matching contribution of $447,000, $400,000 and $376,000 for the years ended December 31, 2025, 2024, and 2023, respectively, and a safe harbor contribution of $756,000 for 2025, $706,000 for 2024, and $669,000 for 2023.

QNB’s Employee Stock Purchase Plan (the Plan) offers 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). At the 2021 Annual Meeting, shareholders approved the 2021 Employee Stock Purchase Plan (the 2021 Plan), which authorizes the issuance of 30,000 shares. As of December 31, 2025,26,681 shares were issued under the 2021 Plan. The 2021 Plan expires May 31, 2026.

Shares issued pursuant to the Plan were as follows:

QNB implemented the Nonqualified Deferred Compensation Plan (NDCP) during 2023 for the benefit of a select group of its management or highly compensated employees. The purpose of the NDCP is to provide a deferred compensation vehicle to which QNB may credit discretionary amounts on behalf of the participants for recruitment and reward. QNB contributed $157,000 and $136,000 to the NDCP in 2025 and 2024, respectively. The NDCP liability was $401,000 at December 31, 2025.

Note 14 - Stock Option Plan and Non-Employee Director Compensation Plan

QNB has a stock incentive plan (the 2025 Plan) administered by a committee which consists of three or more members of QNB’s Board of Directors. 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. There were no grants under the 2025 Plan. 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. The time period by which any option is exercisable under this Plan is determined by the Committee but shall not commence before the expiration ofsix months after the date of grant.

The 2015 Stock Incentive Plan (the 2015 Plan) provides 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 2015 Plan, is the fair market value of QNB’s common stock at the date of grant. The 2015 Plan provides for the exercise either in cash or in securities of the Company or in any combination thereof. The 2015 Plan, which expired March 15, 2025, authorized the issuance of 300,000 shares. The 2015 Plan was amended, effective January 1, 2023, to increase the maximum term of any options granted under the plan from five years toten 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. There were 321,525 options granted,115,500 options forfeited,29,880 options exercised and 176,145 options outstanding under the 2015 Plan as of December 31, 2025. The 2015 Plan expired February 24, 2025.

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As of December 31, 2025, there was approximately $505,000 of unrecognized compensation cost related to unvested stock option awards granted. That cost is expected to be recognized over the next 28 months.

Stock option activity during 2025, 2024, and 2023 was as follows:

As of December 31, 2025, outstanding stock options consist of the following:

The intrinsic value related to total stock options exercised during 2025, 2024, and 2023 are as follows:

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 December 31, 2025,8,418 shares were issued to non-employee directors and there were 41,582 shares remaining under the Director Compensation Plan. Stock-based compensation expense related to the Director Compensation Plan was $173,000 and $72,000 for the for the years ended December 31, 2025 and 2024, respectively.

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Note 15 - Related Party Transactions

QNB has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal shareholders, their immediate families and affiliated companies. The following table presents activity and amounts due from directors, principal officers, and their related interests. All of these transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. These transactions did not involve more than normal risk of collectability or present any other unfavorable features.

The following table provides additional information regarding transactions with related parties.

Note 16 - Commitments and Contingencies

Financial instruments with off-balance sheet risk:

In the normal course of business there are various legal proceedings, commitments, and contingent liabilities which are not reflected in the Consolidated Financial Statements. Management does not anticipate any material losses as a result of these transactions and activities. They include, among other things, commitments to extend credit and standby letters of credit. The maximum exposure to credit loss, which represents the possibility of sustaining a loss due to the failure of the other parties to a financial instrument to perform according to the terms of the contract, is represented by the contractual amount of these instruments. QNB uses the same lending standards and policies in making credit commitments as it does for on-balance sheet instruments. The activity is controlled through credit approvals, control limits, and monitoring procedures. QNB applies the resulting loss factors under the allowance for credit losses on loans to its unused commitments, assuming: additional funding for commercial lines up to the average line usage for non-pass rated lines with no current usage; and, additional funding up to the average line usage for retail lines with no current usage. This resulted in an allowance for credit losses on unused commitments of$76,000 at December 31, 2025 and $87,000 at December 31, 2024, which is included in other liabilities on the Consolidated Balance Sheets.

A summary of the Bank's financial instrument commitments is as follows:

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. QNB evaluates each customer’s creditworthiness on a case-by-case basis.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial or performance obligation of a customer to a third party. QNB’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making conditional obligations as it does for on-balance sheet instru ments. Standby letters of credit totaling $16,013,000 expire withinone year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires collateral and personal guarantees supporting these letters of credit as deemed necessary. The amount of collateral obtained for letters of credit and commitments to extend credit is based on management’s credit evaluation of the customer. Collateral varies, but may include real estate, accounts receivable, marketable securities, pledged deposits, inventory or equipment. Management believes that the proceeds obtained through a liquidation of such collateral and the enforcement of personal guarantees would be

-98 - sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees. The amount of the liability as of December 31, 2025 and 2024 for guarantees under standby letters of credit issued is not material.

Other commitments:

QNB has committed to various operating leases for several of their branch and office facilities. Some of these leases include specific provisions relating to rent increases. A maturity analysis of the operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is as follows:

Some of the leases contain renewal options to extend the initial terms of the lease for periods ranging from five toten years and certain leases allow for multiple extensions, the commitment for such renewals is not included above if they have not been exercised as of December 31, 2025. Operating lease costs, which include common area maintenance costs not included in the minimum lease payments above, for the years ended December 31, 2025, 2024 and 2023, was $739,000, $734,000 and $723,000, respectively.

Note 17 - Accumulated Other Comprehensive Income (Loss)

The following shows the components of accumulated other comprehensive income (loss) during the periods ended December 31, 2025, 2024 and 2023:

*At blended rates of federal and state tax rates of 21.5%,21.5% and 21.0%

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023:

**At blended rates of federal and state tax rates of 21.0%,21.0% and 21.0%

Note 18 - Fair Value Measurements and Fair Values of Financial Instruments

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (fair values are not adjusted

-99 - for transaction costs). ASC 820 also establishes a framework (fair value hierarchy) for measuring fair value under US GAAP and expands disclosures about fair value measurements.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach, and/or cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the security’s relationship to other benchmark quoted securities.

For financial assets measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used were as follows:

*impairment

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• impairment

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which QNB has utilized Level 3 inputs to determine fair value:

(1)

Fair value is primarily determined through appraisals of the underlying collateral by independent parties, which generally includes various level 3 inputs which are not always identifiable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and the age of the appraisal. The range is presented as a percent of the initial appraised value.

(3)

Appraisals and pending agreements of sale are adjusted by management for estimated liquidation expenses. The range is presented as a percent of the initial appraised value.

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The following table presents additional information about the securities available-for-sale measured at fair value on a recurring basis and for which QNB utilized significant unobservable inputs (Level 3 inputs) to determine fair value for the year ended December 31:

There were also no transfers in or out of level 3 for the same periods. There wereno losses included inearnings attributable to the change in unrealized gains or losses relating to the available-for-sale securities above with fair value measurements utilizing significant unobservable inputs for the years ended December 31, 2025 and 2024.

The Level 3 securities consist ofone collateralized debt obligation security (“PreTSL”), which is backed by trust preferred securities issued by banks. The market for this security at December 31, 2025 was not active and markets for similar securities also are not active. The new issue market is also inactive and there are currently very few market participants who are willing and or able to transact for these securities.

Given conditions in the debt markets today and the absence of observable transactions in the secondary and new issue markets, we determined:

•

The few observable transactions and market quotations that are available are not reliable for purposes of determining fair value at December 31, 2025;

•

An income valuation approach technique (present value technique) that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs will be equally or more representative of fair value than the market approach valuation technique used at prior measurement dates; and

•

PreTSLs will be classified within Level 3 of the fair value hierarchy because significant adjustments are required to determine fair value at the measurement date.

The Bank used an independent third party to value this security using a discounted cash flow analysis. Based on management’s review of the bond’ssingle underlying issuer, there areno expected credit losses or prepayments; cashflows used were contractual based on the Bloomberg YA screen. The assumed cashflows have been discounted using an estimated market discount rate based on the 30-year swap rate. The 30-year swap rate is used as the reference rate since it is indicative of market expectation for short-term rates in the future. This is consistent with the 30-year nature of PreTSL securities, which are priced using the 3-month LIBOR as a reference rate. The discount rate of 8.9% includes the risk-free rate, a credit component and a spread for illiquidity.

The following information should not be interpreted as an estimate of the fair value of QNB since a fair value calculation is only provided for a limited portion of QNB’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between QNB’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of each major classification of financial instrument and non-financial asset at December 31, 2025 and 2024:

Cash and cash equivalents, accrued interest receivable and accrued interest payable (carried at cost): The carrying amounts reported in the balance sheet approximate those assets’ fair value.

Investment securities (including derivative instruments) (carried at fair value): The fair value of securities is primarily determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Level 2 debt securities are valued by a third-party pricing service commonly used in the banking industry. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution date,

-102 - market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

The fair value of derivatives instruments designated as fair value hedges are based on estimates QNB would receive or pay to terminate the contracts or agreement, taking into account current interest rates and when appropriate, the credit-worthiness of the counterparties; these values are included in Level 2.

Restricted investment in stocks (carried at cost): The fair value of stock in ACBB, the FHLB, the SHCPFIC and VISA Class B-2 is the carrying amount, based on redemption provisions, and considers the limited marketability of such securities.

Loans Held for Sale (carried at lower of cost or fair value): The fair value of loans held for sale is determined, when possible, using quoted secondary market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan.

Loans Receivable (carried at cost): The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Collateral Dependent Loans (generally collateral value less cost to sell): Collateral dependent loans are loans for which the Company has measured generally based on the fair value of the loan’s collateral, less cost to sell. The value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Mortgage Servicing Rights (carried at lower of cost or fair value): The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The mortgage servicing rights are stratified into tranches based on predominant characteristics, such as interest rate, loan type and investor type. The valuation incorporates assumptions that market participants would use in estimating future net servicing income.

Deposit liabilities (carried at cost): The fair value of deposits with no stated maturity (e.g. demand deposits, interest-bearing demand accounts, money market accounts and savings accounts) are by definition, equal to the amount payable on demand at the reporting date (i.e. their carrying amounts). This approach to estimating fair value excludes the significant benefit that results from the low-cost funding provided by such deposit liabilities, as compared to alternative sources of funding. Deposits with a stated maturity (time deposits) have been valued using the present value of cash flows discounted at rates approximating the current market for similar deposits.

Short-term borrowings (carried at cost): The carrying amount of short-term borrowings approximates their fair values.

Long-term debt (carried at cost): Long-term debt has stated maturities and have been valued using the present value of cash flows discounted at rates approximating the current market for similar debt instruments.

Subordinated debt (carried at cost): Subordinated debt has stated maturities and call dates and have been valued using the present value of cash flows discounted at rates approximating the current market for similar debt instruments.

Off-balance-sheet instruments (disclosed at cost): The fair value for the Bank’s off-balance sheet instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

Management uses its best judgment in estimating the fair value of QNB’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of the respective period ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end.

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The estimated fair values and carrying amounts of QNB’s financial and off-balance sheet instruments are summarized as follows:

(1) Includes derivatives designated as fair value hedging instruments.

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Note 19 - Derivatives and Hedging Activities

QNB's risk management objective with respect to derivative financial instruments is to hedge the risk of changes in the fair value of certain fixed-rate available-for-sale investment securities, included in a closed portfolio, for changes in the Secured Overnight Financing Rate ("SOFR"), to add stability to interest income and to manage its exposure to interest rate movements. The effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income, net of tax, and are reclassified to interest income as interest payments are made or received on the hedged portfolios. QNB assesses the effectiveness of each hedging relationship using a regression analysis of prior periodic changes in fair value of both the hedge and the hedged item. In the assessment of hedge effectiveness, QNB will consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative that could require the counterparty to make payments (counterparty default risk). If the likelihood that the counterparty will not default ceases to be probable, the hedge may no longer be highly effective and hedge ineffectiveness due to counterparty payment risk will be assessed.

The following table presents the notional amounts of derivatives designated as fair value hedging instruments at December 31, 2025 and 2024. QNB pledges cash or securities to cover the negative fair value of derivatives instruments. Cash collateral associated with the derivative instruments are not added to or netted against the fair value amounts.

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The following table presents amounts of included in the Consolidated Statements on Income for derivatives designated as fair value hedging instruments for the years ended December 31, 2025 and 2024.

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Note 20 - Revenue Recognition from Contracts with Customer

QNB generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The main types of revenue contracts included in non-interest income within the Consolidated Statements of Income are as follows:

•

Fees for services to customers—fees include service charges on deposits which are included as liabilities in the consolidated statement of financial position and consist of transaction-based fees, stop payment fees, Automated Clearing House (ACH) fees, account maintenance fees, and overdraft services fees for various retail and business checking customers. These fees are charged as earned on the day of the transaction or within the month of the service, with the exception of Enhanced Account Analysis Fees, which are calculated on the previous month’s activity and assessed on the following month. The Enhanced Account Analysis Fees are currently being accrued; the revenue is currently being recorded in the month it is earned. Service charges on deposits are withdrawn directly from the customer’s account balance.

•

ATM and debit card – fees are recognized at the time the transaction is executed as that is the point in time QNB fulfills the customer’s request.

•

Retail brokerage and advisory—fee income and related expenses are accrued monthly to properly record the revenues in the month they are earned. Advisory fees are collected in advance on a quarterly basis. These advisory fees are received in the first month of the quarter for which the service is being performed and recognized evenly in each month of the quarter. Fees that are transaction based are recognized at the point in time that the transaction is executed (i.e. trade date).

•

Merchant – QNB earns interchange fees from credit/debit cardholder transactions conducted through VISA/MasterCard payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized monthly, concurrently with the transaction processing services provided to the cardholder within the month.

•

Other—includes credit card fees, sales of checks to depositors, miscellaneous fees and gain/losses on sale of other real estate owned (OREO).

•

Credit card fees are recognized monthly, concurrently with the transaction processing services provided to the cardholder within the month.

•

Sales of checks to depositors are commissions earned from a third-party who provides checks to QNB’s customers. There is a pre-paid incentive with the third party which is recognized over the term of the contract. Other commissions on the sales of checks are recorded weekly.

•

Miscellaneous fees, such as wire, cashier check and garnishment fees, are charged as earned on the day of the transaction.

•

Gain (loss) on sales of OREO – QNB records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When QNB finances the sale of OREO to the buyer, QNB assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, QNB adjusts the transaction prices and related gain (loss) on sale if a significant financing component is present.

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Note 21 - Parent Company Financial Information

Condensed financial statements of QNB Corp. only:

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Note 22 - Regulatory Restrictions

Dividends payable by the Company and the Bank are subject to various limitations imposed by statutes, regulations and policies adopted by bank regulatory agencies. Under Pennsylvania and Federal banking law, the Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval. Under Federal Reserve regulations, the Bank is limited as to the amount it may lend affiliates, including the Company, unless such loans are collateralized by specific obligations.

Both the Company and the Bank are subject to regulatory capital requirements administered by Federal bank regulatory agencies. Failure to meet minimum capital requirements can initiate actions by regulators that could have an effect on the financial statements. Under the framework for prompt corrective action, both the Company and the Bank must meet capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items. The capital amounts and classification are also subject to qualitative judgments by the regulators. Management believes, as of December 31, 2025, that the Company and the Bank met capital adequacy requirements to which they were subject.

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The Bank is presently considered to be “well capitalized” under the regulatory framework. To be categorized as well capitalized, the Company and the Bank must maintain minimum ratios set forth in the table below. The Company and the Bank’s actual capital amounts and ratios are presented as follows:

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Note 23 - Consolidated Quarterly Financial Data (Unaudited)

The unaudited quarterly results of operations for the years ended 2025 and 2024 are in the following table:

*Due to rounding, quarterly earnings per share may not sum to annual earnings per share

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