Note 10 - Long-Term Debt

Under terms of its agreement with the FHLB, QNB maintains otherwise unencumbered qualifying assets (principally 1-4 family residential mortgage loans and U.S. Government and agency notes, bonds, and mortgage-backed securities) in the amount of at least as much as its advances from the FHLB. QNB's FHLB stock of $1,763,000 and $2,164,000 at December 31, 2011 and 2010, respectively, is also pledged to secure these advances.

QNB has a maximum borrowing capacity with the FHLB of approximately $182,419,000. At December 31, 2011 and 2010, QNB had no borrowings outstanding with the FHLB.

Repurchase agreements are treated as financings with the obligations to repurchase securities sold reflected as a liability in the balance sheet. The dollar amount of securities underlying the agreements remains recorded as an asset, although the securities underlying the agreements are delivered to the broker who arranged the transactions. The broker/dealer who participated with the Company in these agreements is PNC Bank. Securities underlying sales of securities under repurchase agreements consisted of municipal securities that had an amortized cost of $22,362,000 and a fair value of $23,163,000 at December 31, 2011.

	2011						2010
				Weighted						Weighted
				average						average
Maturity date		Balance			rate			Balance			rate
2012	$	15,000	¹		4.75	%	$	15,000	¹		4.75	%
2014		5,000	²		4.77			5,000	²		4.77
Total	$	20,000			4.76	%	$	20,000			4.76	%

¹$5,000,000 callable beginning 4/17/09, $10,000,000 callable beginning 4/17/10

²$2,500,000 callable beginning 4/17/10, $2,500,000 callable beginning 4/17/12

Long term debt at December 31, 2011 and 2010 also included secured borrowings of $299,000 and $308,000 at December 31, 2011 and 2010, respectively.