Equibles

10-Q

QUAINT OAK BANCORP, INC. (QNTO)

10-Q 2024-08-14 For: 2024-06-30
View Original
Added on April 06, 2026
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
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OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Commission file number: 000-52694
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QUAINT OAK BANCORP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania 35-2293957
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
501 Knowles Avenue, Southampton, Pennsylvania 18966
(Address of Principal Executive Offices) (Zip Code)
(215) 364-4059
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(Registrant’s Telephone Number, Including Area Code)
Not applicable
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
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Title of each Class Trading Symbol(s) Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes  ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐       Accelerated filer ☐           Non-accelerated filer ☒         Smaller reporting company ☒          Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No<br> <br><br> <br>Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 12, 2024, 2,629,273 shares of the issuer’s common stock were issued and outstanding.

INDEX

PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (Unaudited) 1
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 2
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 4
Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited) 6
Notes to the Unaudited Consolidated Financial Statements 9
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 41
Item 4 - Controls and Procedures 41
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 42
Item 1A - Risk Factors 42
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 42
Item 3 - Defaults Upon Senior Securities 43
Item 4 - Mine Safety Disclosures 43
Item 5 - Other Information 43
Item 6 - Exhibits 43
SIGNATURES **** ****

ITEM 1. FINANCIAL STATEMENTS

Quaint Oak Bancorp, Inc.

Consolidated Balance Sheets (Unaudited)

At December 31,
2023
Assets
Due from banks, non-interest-bearing 5,771 $ 767
Due from banks, interest-bearing 69,804 57,239
Cash and cash equivalents 75,575 58,006
Investment in interest-earning time deposits 912 1,912
Investment securities available for sale 2,020 2,341
Loans held for sale 10,062 36,448
Loans receivable, net of allowance for credit losses (2024 7,393; 2023 6,758) 593,775 617,701
Accrued interest receivable 4,164 3,502
Investment in Federal Home Loan Bank stock, at cost 2,098 1,474
Bank-owned life insurance 4,385 4,329
Premises and equipment, net 2,791 2,656
Goodwill 515 515
Other intangible, net of accumulated amortization 101 125
Prepaid expenses and other assets 5,488 5,134
Assets from discontinued operations - 19,975
Total Assets 701,886 $ 754,118
Liabilities and Stockholders’ Equity
Liabilities **** **** **** **** ****
Deposits:
Non-interest bearing 62,993 $ 92,215
Interest-bearing 513,448 539,484
Total deposits 576,441 631,699
Federal Home Loan Bank short-term borrowings 30,000 -
Federal Home Loan Bank long-term borrowings 14,955 29,022
Subordinated debt 22,000 21,957
Accrued interest payable 857 541
Advances from borrowers for taxes and insurance 3,727 3,730
Accrued expenses and other liabilities 2,516 2,438
Liabilities from discontinued operations - 13,166
Total Liabilities 650,496 702,553
Stockholders’ Equity **** **** **** **** ****
Preferred stock – 0.01 par value, 1,000,000 shares authorized; none issued or outstanding - -
Common stock – 0.01 par value; 9,000,000 shares authorized;3,108,993 and 2,895,675 issued as of June 30, 2024 and December 31, 2023, respectively; 2,629,289 and 2,407,048 outstanding at June 30, 2024 and December 31, 2023, respectively 31 29
Additional paid-in capital 22,828 20,299
Treasury stock, at cost: 479,704 and 488,627 shares at June 30, 2024 and December 31, 2023, respectively (3,527 ) (3,568 )
Accumulated other comprehensive loss (2 ) (10 )
Retained earnings 32,060 31,741
Total Stockholders' Equity 51,390 $ 48,491
Noncontrolling interest from discontinued operations - 3,074
Total Stockholders’ Equity 51,390 51,565
Total Liabilities and Stockholders’ Equity 701,886 $ 754,118

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.

1

Quaint Oak Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

For the Three<br> <br>Months Ended For the Six<br> <br>Months Ended
June 30, June 30,
2024 2023 2024 2023
(In thousands, except for share data)
Interest Income **** **** **** **** **** **** **** **** **** ****
Interest on loans, including fees $ 9,317 $ 11,647 $ 20,550 $ 22,332
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock 1,580 266 2,469 490
Total Interest Income 10,897 11,913 23,019 22,822
Interest Expense **** **** **** **** **** **** **** **** **** ****
Interest on deposits 6,168 4,439 12,154 8,205
Interest on Federal Home Loan Bank short-term borrowings - 1,500 - 2,800
Interest on Federal Home Loan Bank long-term borrowings 167 354 409 631
Interest on Federal Reserve Bank long-term borrowings - 9 - 19
Interest on subordinated debt 488 388 972 604
Total Interest Expense 6,823 6,690 13,535 12,259
Net Interest Income 4,074 5,223 9,484 10,563
(Recovery of) Provision for Credit Losses – Loans - (202 ) 1,084 9
(Recovery of) Provision for Credit Losses – Unfunded Commitments (41 ) 13 11 194
Total (Recovery of) Provision for Credit Losses (41 ) (189 ) 1,095 203
Net Interest Income after (Recovery of) Provision for Credit Losses 4,115 5,412 8,389 10,360
Non-Interest Income **** **** **** **** **** **** **** **** **** ****
Mortgage banking, equipment lending and title abstract fees 183 126 390 263
Real estate sales commissions, net 16 48 20 72
Insurance commissions 176 160 328 296
Other fees and services charges 240 44 466 142
Loan servicing income 2 2 3 145
Income from bank-owned life insurance 28 25 57 49
Net gain on sale of loans 561 437 1,495 828
Gain on sale of the Oakmont Capital Holdings, LLC - - 1,378 -
Gain on the sale of SBA loans 98 201 127 251
Total Non-Interest Income 1,304 1,043 4,264 2,046
Non-Interest Expense **** **** **** **** **** **** **** **** **** ****
Salaries and employee benefits 3,673 3,548 7,335 7,124
Directors' fees and expenses 50 102 101 207
Occupancy and equipment 416 350 666 692
Data processing 311 209 573 425
Professional fees 156 193 297 341
FDIC deposit insurance assessment 163 240 336 472
Advertising 73 83 160 166
Amortization of other intangible 12 12 24 24
Other 382 557 869 895
Total Non-Interest Expense 5,236 5,294 10,361 10,346

See accompanying notes to the unaudited consolidated financial statements.

2

Quaint Oak Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

For the Three<br> <br>Months Ended For the Six<br> <br>Months Ended
June 30, June 30,
2024 2023 2024 2023
(In thousands, except for share data)
Income from continuing operations before income taxes $ 183 $ 1,161 $ 2,292 $ 2,060
Income Taxes 83 362 733 613
Net income from continuing operations $ 100 $ 799 $ 1,559 $ 1,447
Loss from discontinued operations $ - $ (318 ) $ (814 ) $ (436 )
Income tax benefit $ - $ (89 ) $ (228 ) $ (122 )
Net loss from discontinued operations $ - $ (229 ) $ (586 ) $ (314 )
Net Income $ 100 $ 570 $ 973 $ 1,133
Earnings per share from continuing operations - basic $ 0.04 $ 0.36 $ 0.62 $ 0.65
Loss per share from discontinued operations - basic $ - $ (0.11 ) $ (0.23 ) $ (0.14 )
Earnings per share, net – basic $ 0.04 $ 0.25 $ 0.39 $ 0.51
Average shares outstanding – basic 2,600,346 2,236,885 2,525,580 2,209,891
Earnings per share from continuing operations- diluted $ 0.04 $ 0.36 $ 0.62 $ 0.65
Loss per share from discontinued operations - diluted $ - $ (0.11 ) $ (0.23 ) $ (0.14 )
Earnings per share, net - diluted $ 0.04 $ 0.25 $ 0.39 $ 0.51
Average shares outstanding - diluted 2,600,346 2,241,570 2,525,580 2,233,369

See accompanying notes to the unaudited consolidated financial statements.

3

Quaint Oak Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

For the Three<br> <br>Months Ended For the Six<br> <br>Months Ended
June 30, June 30,
2024 2023 2024 2023
(In thousands)
Net Income from Continuing Operations $ 100 $ 799 $ 1,559 $ 1,447
Other Comprehensive Income (Loss): **** **** **** **** **** **** **** **** **** **** **** ****
Unrealized gains (losses) on investment securities available-for-sale 3 (3 ) 10 10
Income tax effect (1 ) 1 (2 ) (2 )
Other comprehensive income (loss) income 2 (2 ) 8 8
Total Comprehensive Income $ 102 $ 797 $ 1,567 $ 1,455
Comprehensive Loss from Discontinued Operations $ - $ (229 ) $ (586 ) $ (314 )
Comprehensive Income Attributable to Quaint Oak Bancorp, Inc. $ 102 $ 568 $ 981 $ 1,141

See accompanying notes to the unaudited consolidated financial statements.

4

Quaint Oak Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Three Months Ended June 30, 2024 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Amount Additional<br> <br>Paid-in<br> <br>Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained<br> <br>Earnings Total<br> <br>Stockholders’<br> <br>Equity
**** **** (In thousands, except share and per share data)
BALANCE – MARCH 31, 2024 2,493,975 $ 30 $ 21,370 $ (3,554 ) $ (4 ) $ 32,302 $ 50,144
Treasury stock purchase (4,242 ) (44 ) (44 )
Issued from authorized and unallocated 128,500 1 1,447 1,448
Reissuance of treasury stock under 401(k) Plan 2,056 8 13 21
Reissuance of treasury stock under stock incentive plan 9,000 (58 ) 58
Stock based compensation expense 61 61
Cash dividends declared (0.13 per share) (342 ) (342 )
Net income 100 100
Other comprehensive income, net 2 2
BALANCE – JUNE 30, 2024 2,629,289 $ 31 $ 22,828 $ (3,527 ) $ (2 ) $ 32,060 $ 51,390

All values are in US Dollars.

For the Three Months Ended June 30, 2023 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Amount Additional<br> <br>Paid-in<br> <br>Capital Treasury Stock Accumulated Other Comprehensive Loss Retained<br> <br>Earnings Noncontrolling<br> <br>Interest Total<br> <br>Stockholders’<br> <br>Equity
**** **** (In thousands, except share and per share data)
BALANCE – MARCH 31, 2023 2,192,432 $ 28 $ 18,005 $ (3,888 ) $ (14 ) $ 31,155 $ 4,135 $ 49,421
Treasury stock purchase (16,854 ) (306 ) (306 )
Reissuance of treasury stock under 401(k) Plan 1,422 16 10 26
Reissuance of treasury stock under stock incentive plan 9,122 (57 ) 57 -
Reissuance of treasury stock for exercised stock options 50,300 95 313 408
Stock based compensation expense 62 62
Cash dividends declared (0.13 per share) (285 ) (285 )
Noncontrolling interest distribution (826 ) (826 )
Net income (loss) 570 (305 ) 265
Other comprehensive loss, net (2 ) (2 )
BALANCE – JUNE 30, 2023 2,236,422 $ 28 $ 18,121 $ (3,814 ) $ (16 ) $ 31,440 $ 3,004 $ 48,763

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.

5

Quaint Oak Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Six Months Ended June 30, 2024 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Amount Additional<br> <br>Paid-in<br> <br>Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained<br> <br>Earnings Total<br> <br>Stockholders’<br> <br>Equity
BALANCE – DECEMBER 31, 2023 2,407,048 $ 29 $ 20,299 $ (3,568 ) $ (10 ) $ 31,741 $ 48,491
Treasury stock purchase (4,242 ) (44 ) (44 )
Issued from authorized and unallocated 213,318 2 2,446 2,448
Reissuance of treasury stock under 401(k) Plan 4,165 19 27 46
Reissuance of treasury stock under stock incentive plan 9,000 (58 ) 58
Stock based compensation expense 122 122
Cash dividends declared (0.26 per share) (654 ) (654 )
Net income 973 973
Other comprehensive income, net 8 8
BALANCE – JUNE 30, 2024 2,629,289 $ 31 $ 22,828 $ (3,527 ) $ (2 ) $ 32,060 $ 51,390

All values are in US Dollars.

For the Six Months Ended June 30, 2023 **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
Amount Additional<br> <br>Paid-in<br> <br>Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained<br> <br>Earnings Noncontrolling<br> <br>Interest Total<br> <br>Stockholders’<br> <br>Equity
**** **** (In thousands, except share and per share data)
BALANCE – DECEMBER 31, 2022 2,167,613 $ 28 $ 17,906 $ (3,992 ) $ (24 ) $ 30,875 $ 4,289 $ 49,082
Treasury stock purchase (16,854 ) (306 ) (306 )
Reissuance of treasury stock under stock incentive plan 9,122 (57 ) 57 -
Reissuance of treasury stock under 401(k) Plan 3,241 45 21 66
Reissuance of treasury stock for exercised stock options 73,300 123 406 529
Stock based compensation expense 104 104
Cash dividends declared (0.26 per share) (568 ) (568 )
Noncontrolling interest member distribution (866 ) (866 )
Net income (loss) 1,133 (419 ) 714
Other comprehensive income, net 8 8
BALANCE – JUNE 30, 2023 2,236,422 $ 28 $ 18,121 $ (3,814 ) $ (16 ) $ 31,440 $ 3,004 $ 48,763

All values are in US Dollars.

See accompanying notes to the unaudited consolidated financial statements.

6

Quaint Oak Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

For the Six Months
Ended June 30,
2024 2023
Cash Flows from Operating Activities (In Thousands)
Net income from continuing operations $ 1,559 $ 1,447
Net loss from discontinued operations (586 ) (314 )
Net income 973 $ 1,133
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 1,095 203
Depreciation expense 280 248
Amortization, net 67 208
Accretion of deferred loan fees and costs, net (288 ) (475 )
Stock-based compensation expense 122 104
Net gain on loans held for sale (1,495 ) (828 )
Loans held for sale-originations (64,029 ) (37,112 )
Loans held for sale-proceeds 58,995 37,356
Transfer of loans from Oakmont Capital Holdings, LLC 4,388 -
Gain on the sale of SBA loans (127 ) (251 )
Gain on the sale of Oakmont Capital Holdings, LLC (1,378 ) -
Increase in the cash surrender value of bank-owned life insurance (56 ) (49 )
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable (662 ) 182
Prepaid expenses and other assets (356 ) 434
Accrued interest payable 316 476
Accrued expenses and other liabilities 77 (2,046 )
Net Cash Used in Operating Activities of Continuing Operations (2,078 ) (417 )
Net Cash Provided by Operating Activities of Discontinued Operations 29,340 24,154
Net Cash Provided by Operating Activities 27,262 23,737
Cash Flows from Investing Activities **** **** **** **** **** ****
Purchase of interest-earning time deposits - (1,780 )
Redemption of interest-earning time deposits 1,000 3,451
Principal repayments of investment securities available for sale 331 324
Net increase (decrease) in loans receivable 23,246 (4,814 )
Proceeds from the sale of Oakmont Capital Holdings, LLC 4,300 -
Purchase of Federal Home Loan Bank stock (1,227 ) (1,140 )
Redemption of Federal Home Loan Bank stock 603 2,019
Purchase of premises and equipment (414 ) (282 )
Net Cash Provided by (Used in) Investing Activities 27,839 (2,222 )
Net Cash Provided by Investing Activities of Discontinued Operations - 1,312
Net Cash Provided by (Used in) Investing Activities 27,839 (910 )
Cash Flows from Financing Activities **** **** **** **** **** ****
Net decrease in demand deposits, money markets, and savings accounts (61,757 ) (349 )
Net increase in certificate accounts 6,499 21,159
(Decrease) increase in advances from borrowers for taxes and insurance (3 ) 360
Repayments of Federal Home Loan Bank short-term borrowings - (66,700 )
Proceeds from Federal Home Loan Bank short-term borrowings 30,000 45,500
Repayments of Federal Home Loan Bank long-term borrowings (14,067 ) (24,000 )
Repayments of Federal Reserve Bank short-term borrowings - (7,000 )
Net proceeds from subordinated debt - 13,743
Dividends paid (654 ) (568 )
Proceeds from the reissuance of treasury stock under 401(k) plan 46 66
Proceeds from shares issued from authorized and unallocated 2,448 -
Acquisition of treasury stock (44 ) (306 )
Proceeds from the exercise of stock options - 529

See accompanying notes to the unaudited consolidated financial statements.

7

Quaint Oak Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

For the Six Months
Ended June 30,
2024 2023
(In Thousands)
Net Cash Provided by (Used in) Financing Activities from Continuing Operations $ (37,532 ) $ (17,566 )
Net Increase in Cash and Cash Equivalents 17,569 5,261
Cash and Cash Equivalents – Beginning of Year 58,006 4,433
Cash and Cash Equivalents – End of Year $ 75,575 $ 9,694
Supplementary Disclosure of Cash Flow and Non-Cash Information: **** **** **** **** **** ****
Cash payments for interest $ 13,219 $ 12,173
Cash payments for income taxes $ 420 $ 2,317
Initial recognition of operating lease right-of use assets $ - $ 1,563
Initial recognition of operating lease obligations $ - $ 1,563

See accompanying notes to the unaudited consolidated financial statements.

8

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Financial Statement Presentation and Significant Accounting Policies

Basis of Financial Presentation. The consolidated financial statements include the accounts of Quaint Oak Bancorp, Inc., a Pennsylvania chartered corporation (the “Company” or “Quaint Oak Bancorp”) and its wholly owned subsidiary, Quaint Oak Bank, a Pennsylvania chartered stock savings bank (the “Bank”), along with its wholly owned subsidiaries. At June 30, 2024, the Bank has six wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, each a Pennsylvania limited liability company. The mortgage company offers mortgage banking in the Lehigh Valley, Delaware Valley and Philadelphia County regions of Pennsylvania. The abstract company offers title abstract services, primarily in the Lehigh Valley region of Pennsylvania. These companies began operation in July 2009. As of June 30, 2024, the real estate company was inactive. In February, 2019, Quaint Oak Mortgage opened a mortgage banking office in Philadelphia, Pennsylvania. QOB Properties, LLC began operations in July 2012 and holds Bank properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. Quaint Oak Insurance Agency, LLC began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. Oakmont Commercial, LLC was formed in October 2021 and operates as a multi-state specialty commercial real estate financing company. As of January 4, 2021, the Bank held a majority equity position in Oakmont Capital Holdings, LLC (“OCH”), a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. On March 29, 2024, Quaint Oak Bank sold its 51% interest in OCH. All significant intercompany balances and transactions have been eliminated.

The Bank is subject to regulation by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. Pursuant to the Bank’s election under Section 10(l) of the Home Owners’ Loan Act, the Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. The market area served by the Bank is principally Bucks, Montgomery and Philadelphia Counties in Pennsylvania and the Lehigh Valley area in Pennsylvania. The Bank has three regional offices located in the Delaware Valley, Lehigh Valley and Philadelphia markets. The principal deposit products offered by the Bank are money market accounts, certificates of deposit, non-interest bearing checking accounts for businesses and consumers, and savings accounts. The principal loan products offered by the Bank are fixed and adjustable rate residential and commercial mortgages, construction loans, commercial business loans, home equity loans, and lines of credit.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) for interim information and with the instructions to Form 10-Q, as applicable to a smaller reporting company. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

The foregoing consolidated financial statements are unaudited; but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of December 31, 2023 have been derived from the audited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in Quaint Oak Bancorp’s 2023 Annual Report on Form 10-K. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Use of Estimates in the Preparation of Financial Statements. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant estimates are the determination of the allowance for credit losses and the valuation of deferred tax assets.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 1 – Financial Statement Presentation and Significant Accounting Policies (Continued)

Critical Accounting Policies. The Company’s critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, 2024 have remained unchanged from the disclosures presented in our Annual Report on Form 10-K.

Accounting Pronouncements Not Yet Adopted. In November 2023, the Financial Accounting Standards Board (“FASB”) issued **** Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (TOPIC 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis.  This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.  Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption.  The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for public business entities for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact the impact of this new guidance on its financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years.  The Company is currently evaluating the impact the impact of this new guidance on its financial statements.

Reclassifications. Certain items in the 2023 consolidated financial statements have been reclassified to conform to the presentation in the 2024 consolidated financial statements. Such reclassifications did not have a material impact on the presentation of the overall financial statements. The reclassifications had no effect on net income or stockholders’ equity.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 2 – Discontinued Operations

On March 29, 2024, Quaint Oak Bank sold its 51% interest in OCH. The decision was based on a number of strategic priorities and other factors. As a result of this action, the Company classified the operations of OCH as discontinued operations under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows present discontinued operations for the current period and retrospectively for prior periods.

No assets or liabilities for OCH were held at June 30, 2024. The following is a summary of the assets and liabilities of the discontinued operations of OCH at *December 31, 2023 (*in thousands):

At December 31,
2023
(Unaudited)
Assets from Discontinued Operations **** ****
Cash and cash equivalents $ 4,121
Loans held for sale 9,580
Premises and equipment, net 277
Goodwill 2,058
Prepaid expenses and other assets 3,939
Total Assets from Discontinued Operations $ 19,975
Liabilities and Stockholders’ Equity from Discontinued Operations **** ****
Liabilities from Discontinued Operations **** ****
Other short-term borrowings $ 5,549
Accrued interest payable 565
Accrued expenses and other liabilities 7,052
Total Liabilities from Discontinued Operations 13,166
Total Stockholders’ Equity from Discontinued Operations 6,809
Total Liabilities and Stockholders’ Equity from Discontinued Operations $ 19,975

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 2 – Discontinued Operations (Continued)

The following presents operating results of the discontinued operations OCH for the three and six months ended June 30, 2024 and *June 30, 2023 (*in thousands):

For the Three<br> <br>Months Ended For the Six<br> <br>Months Ended
June 30, June 30,
2024 2023 2024 2023
(In thousands, except for share data)
Interest and Dividend Income **** **** **** **** **** **** **** **** **** **** ****
Interest on loans, including fees $ - $ 197 $ 70 $ 278
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock - - - -
Total Interest and Dividend Income - 197 70 278
Interest Expense **** **** **** **** **** **** **** **** **** **** ****
Interest on other borrowings - 574 295 942
Total Interest Expense - 574 295 942
Net Interest Income - (377 ) (225 ) (664 )
Non-Interest Income **** **** **** **** **** **** **** **** **** **** ****
Mortgage banking, equipment lending and title abstract fees - 440 404 1,109
Other fees and services charges - 169 197 302
Net loan servicing income - 1,120 726 2,207
Net gain on sale of loans - 636 366 1,125
Total Non-Interest Income - 2,365 1,693 4,743
Non-Interest Expense **** **** **** **** **** **** **** **** **** **** ****
Salaries and employee benefits - 1,980 1,681 3,746
Occupancy and equipment - 211 219 396
Professional fees - 32 31 59
Advertising - 54 146 270
Other - 334 987 462
Total Non-Interest Expense - 2,611 3,064 4,933
Total net loss from discontinued operations $ - $ (623 ) $ (1,596 ) $ (854 )
Loss attributable to non-controlling interest - (305 ) (782 ) (419 )
Net loss from discontinued operations $ - $ (318 ) $ (814 ) $ (436 )

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 3 – Earnings Per Share

Earnings per share (“EPS”) consists of two separate components, basic EPS and diluted EPS. Basic EPS is computed based on the weighted average number of shares of common stock outstanding for each period presented. Diluted EPS is calculated based on the weighted average number of shares of common stock outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of shares that are assumed to have been purchased with the proceeds from the exercise of stock options, as well as unvested restricted stock (RRP) shares. Common stock equivalents which are considered antidilutive are not included for the purposes of this calculation. For the three and six months ended June 30, 2024, all unvested restricted stock program awards and outstanding stock options representing shares were anti-dilutive. For the three and six months ended June 30, 2023, all unvested restricted stock program awards and outstanding stock options representing shares were dilutive.

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computations.

For the Three Months<br> <br>Ended June 30, For the Six Months<br> <br>Ended June 30,
2024 2023 2024 2023
Net Income Attributable to Quaint Oak Bancorp, Inc. $ 100,000 $ 570,000 $ 973,000 $ 1,133,000
Weighted average shares outstanding – basic 2,600,346 2,236,885 2,525,580 2,209,891
Effect of dilutive common stock equivalents - 4,685 - 23,478
Adjusted weighted average shares outstanding – diluted 2,600,346 2,241,570 2,525,580 2,233,369
Basic earnings per share from continuing operations $ 0.04 $ 0.36 $ 0.62 $ 0.65
Basic earnings per share from discontinued operations $ - $ (0.11 ) $ (0.23 ) $ (0.14 )
Basic earnings per share, net $ 0.04 $ 0.25 $ 0.39 $ 0.51
Diluted earnings per share from continuing operations $ 0.04 $ 0.36 $ 0.62 $ 0.65
Diluted earnings per share from discontinued operations $ - $ (0.11 ) $ (0.23 ) $ (0.14 )
Diluted earnings per share, net $ 0.04 $ 0.25 $ 0.39 $ 0.51

Note 4 – Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended June 30, 2024 and 2023 (in thousands):

Unrealized Gains (Losses) on Investment Securities Available for Sale (1)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2024 2023 2024 2023
Balance at the beginning of the period $ (4 ) $ (14 ) $ (10 ) $ (24 )
Other comprehensive income 2 (2 ) 8 8
Balance at the end of the period $ (2 ) $ (16 ) $ (2 ) $ (16 )

_________________

(1)    All amounts are net of tax. Amounts in parentheses indicate debits.

There were no reclassifications from accumulated other comprehensive loss by component for the three or six months ended June 30, 2024 and 2023.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 5 – Investment Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale at June 30, 2024 and December 31, 2023 are summarized below (in thousands):

June 30, 2024
Amortized Cost Gross<br> <br>Unrealized<br> <br>Gains Gross<br> <br>Unrealized<br> <br>Losses Fair Value
Available for Sale:
Mortgage-backed securities:
Government National Mortgage Association securities $ 1,968 $ - $ (3 ) $ 1,965
Federal National Mortgage Association securities 55 - - 55
Total available-for-sale-securities $ 2,023 $ - $ (3 ) $ 2,020
December 31, 2023
--- --- --- --- --- --- --- --- --- ---
Amortized Cost Gross<br> <br>Unrealized<br> <br>Gains Gross<br> <br>Unrealized<br> <br>Losses Fair Value
Available for Sale:
Mortgage-backed securities:
Government National Mortgage Association securities $ 2,281 $ - $ (13 ) $ 2,268
Federal National Mortgage Association securities 73 - - 73
Total available-for-sale-securities $ 2,354 $ - $ (13 ) $ 2,341

The amortized cost and fair value of mortgage-backed securities at June 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):

Available for Sale
Amortized Cost Fair Value
Due after ten years $ 2,023 $ 2,020
Total $ 2,023 $ 2,020

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2024 and *December 31, 2023 (*in thousands):

June 30, 2024
**** **** Less than Twelve Months Twelve Months or Greater Total
Number of Securities Fair Value Gross<br> <br>Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Government National Mortgage Association securities 8 $ - $ - $ 1,301 $ (3 ) $ 1,301 $ (3 )

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 5 – Investment Securities Available for Sale (Continued)

December 31, 2023
**** **** Less than Twelve Months Twelve Months or Greater Total
Number of Securities Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Government National Mortgage Association securities 11 $ - $ - $ 2,268 $ (13 ) $ 2,268 $ (13 )

The Company’s mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality, and the Company does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. Therefore, the Company does not have an allowance for credit losses for these investments as of June 30, 2024 and 2023.

There were no credit losses recognized during the three or six months ended June 30, 2024 and 2023. There were no sales during the three or six months ended June 30, 2024 and 2023.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses

The composition of net loans receivable is as follows (in thousands):

June 30,<br> <br>2024 December 31,<br> <br>2023
Real estate loans:
One-to-four family residential:
Owner occupied $ 24,058 $ 22,885
Non-owner occupied 36,388 40,455
Total one-to-four family residential 60,446 63,340
Multi-family (five or more) residential 48,841 46,680
Commercial real estate 338,192 331,174
Construction 32,644 35,585
Home equity 6,233 6,162
Total real estate loans 486,356 482,941
Commercial business 115,106 142,220
Other consumer 62 69
Total Loans 601,524 625,230
Deferred loan fees and costs (356 ) (771 )
Allowance for credit losses (7,393 ) (6,758 )
Net Loans $ 593,775 $ 617,701

The following table summarizes designated internal risk categories by portfolio segment and loan class, by origination year, as of *June 30, 2024 (*in thousands):

Term Loans Amortized Cost by Origination Year
As of June 30, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total
One-to-four family residential owner occupied
Risk rating
Pass $ 4,236 $ 5,715 $ 6,192 $ 3,780 $ 1,666 $ 2,069 $ - $ 23,658
Special mention - - - - - - - -
Substandard - - - - - 400 - 400
Doubtful - - - - - - - -
Total one-to-four family residential owner occupied $ 4,236 $ 5,715 $ 6,192 $ 3,780 $ 1,666 $ 2,469 $ - $ 24,058
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
One-to-four family residential non- owner occupied
Risk rating
Pass $ - $ 2,183 $ 7,063 $ 12,163 $ 2,000 $ 12,979 $ - $ 36,388
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total one-to-four family residential non-owner occupied $ - $ 2,183 $ 7,063 $ 12,163 $ 2,000 $ 12,979 - $ 36,388
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

Term Loans Amortized Cost by Origination Year
As of June 30, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total
Multi-family residential
Risk rating
Pass $ 5,440 $ 1,546 $ 14,669 $ 13,326 $ 4,124 $ 9,736 $ - $ 48,841
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total multi-family residential $ 5,440 $ 1,546 $ 14,669 $ 13,326 $ 4,124 $ 9,736 $ - $ 48,841
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Commercial real estate
Risk rating
Pass $ 21,635 $ 57,737 $ 117,012 $ 60,188 $ 26,181 $ 51,557 $ 3,312 $ 337,622
Special mention - - 570 - - - - 570
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total commercial real estate $ 21,635 $ 57,737 $ 117,582 $ 60,188 $ 26,181 $ 51,557 $ 3,312 $ 338,192
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Construction
Risk rating
Pass $ 5,753 $ 11,655 $ 6,588 $ 6,500 $ - $ - $ - $ 30,496
Special mention - - - - - 2,148 - 2,148
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total construction $ 5,753 $ 11,655 $ 6,588 $ 6,500 $ - $ 2,148 $ - $ 32,644
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Home equity
Risk rating
Pass $ - $ 887 $ - $ 118 $ - $ 186 $ 5,042 $ 6,233
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total home equity $ - $ 887 $ - $ 118 $ - $ 186 $ 5,042 $ 6,233
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Commercial business
Risk rating
Pass $ 7,593 $ 5,021 $ 58,788 $ 21,948 $ 4,157 $ 2,110 $ 10,604 $ 110,221
Special mention - - 569 390 - - 172 1,131
Substandard - - 103 2,053 33 1,565 - 3,754
Doubtful - - - - - - - -
Total commercial business $ 7,593 $ 5,021 $ 59,460 $ 24,391 $ 4,190 $ 3,675 $ 10,776 $ 115,106
Current period gross charge-offs $ - $ - $ 432 $ 20 $ - $ - $ - $ 452
Other consumer
Risk rating
Pass $ 62 $ - $ - $ - $ - $ - $ - $ 62
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total other consumer $ 62 $ - $ - $ - $ - $ - $ - $ 62
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Total
Risk rating
Pass $ 44,719 $ 84,744 $ 210,312 $ 118,023 $ 38,128 $ 78,637 $ 18,958 $ 593,521
Special mention - - 1,139 390 - 2,148 172 3,849
Substandard - - 103 2,053 33 1,965 - 4,154
Doubtful - - - - - - - -
Total $ 44,719 $ 84,744 $ 211,554 $ 120,466 $ 38,161 $ 82,750 $ 19,130 $ 601,524
Current period gross charge-offs $ - $ - $ 432 $ 20 $ - $ - $ - $ 452

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

The following table summarizes designated internal risk categories by portfolio segment and loan class, by origination year, as of *December 31, 2023 (*in thousands):

Term Loans Amortized Cost by Origination Year
As of December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
One-to-four family residential owner occupied
Risk rating
Pass $ 6,044 $ 8,574 $ 3,840 $ 1,850 $ 571 $ 2,006 $ - $ 22,885
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total one-to-four family residential owner occupied $ 6,044 $ 8,574 $ 3,840 $ 1,850 $ 571 $ 2,006 $ - $ 22,885
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
One-to-four family residential non- owner occupied
Risk rating
Pass $ 2,195 $ 7,153 $ 12,362 $ 3,268 $ 1,026 $ 14,451 $ - $ 40,455
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total one-to-four family residential non-owner occupied $ 2,195 $ 7,153 $ 12,362 $ 3,268 $ 1,026 $ 14,451 - $ 40,455
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Multi-family residential
Risk rating
Pass $ 1,566 $ 15,542 $ 13,853 $ 4,483 $ 2,386 $ 8,850 $ - $ 46,680
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total multi-family residential $ 1,566 $ 15,542 $ 13,853 $ 4,483 $ 2,386 $ 8,850 $ - $ 46,680
Current period gross charge-offs $ - $ - $ - $ - $ - $ 2 $ - $ 2
Commercial real estate
Risk rating
Pass $ 61,338 $ 121,006 $ 64,684 $ 26,631 $ 16,571 $ 38,897 $ 1,996 $ 331,123
Special mention - - - - - - - -
Substandard - - - - 51 - - 51
Doubtful - - - - - - - -
Total commercial real estate $ 61,338 $ 121,006 $ 64,684 $ 26,631 $ 16,622 $ 38,897 $ 1,996 $ 331,174
Current period gross charge-offs $ - $ - $ - $ 134 $ - $ - $ - $ 134
Construction
Risk rating
Pass $ 14,777 $ 11,244 $ 7,417 $ - $ - $ - $ - $ 33,438
Special mention - - - - - - - -
Substandard - - - - - 2,147 - 2,147
Doubtful - - - - - - - -
Total construction $ 14,777 $ 11,244 $ 7,417 $ - $ - $ 2,147 $ - $ 35,585
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

Term Loans Amortized Cost by Origination Year
As of December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
Home equity
Risk rating
Pass $ 1,062 $ 35 $ 122 $ - $ - $ 205 $ 4,738 $ 6,162
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total home equity $ 1,062 $ 35 $ 122 $ - $ - $ 205 $ 4,738 $ 6,162
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Commercial business
Risk rating
Pass $ 20,793 $ 69,913 $ 27,022 $ 4,324 $ 1,955 $ 1,109 $ 13,593 $ 138,709
Special mention - - - - - - - -
Substandard - - 1,946 - 1,242 323 - 3,511
Doubtful - - - - - - - -
Total commercial business $ 20,793 $ 69,913 $ 28,967 $ 4,324 $ 3,197 $ 1,433 $ 13,593 $ 142,220
Current period gross charge-offs $ - $ 29 $ 613 $ 97 $ - $ - $ - $ 739
Other consumer
Risk rating
Pass $ 69 $ - $ - $ - $ - $ - $ - $ 69
Special mention - - - - - - - -
Substandard - - - - - - - -
Doubtful - - - - - - - -
Total other consumer $ 69 $ - $ - $ - $ - $ - $ - $ 69
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ -
Total
Pass $ 93,492 $ 233,467 $ 129,300 $ 40,556 $ 22,509 $ 65,518 $ 20,327 $ 619,521
Special mention - - - - - - - -
Substandard - - 1,946 - 1,293 2,470 - 5,709
Doubtful - - - - - - - -
Total $ 93,492 $ 233,467 $ 131,246 $ 40,556 $ 23,802 $ 67,988 $ 20,327 $ 625,230
Current period gross charge-offs $ - $ 29 $ 613 $ 231 $ - $ 2 $ - $ 875

The following table presents non-performing loans by classes of the loan portfolio as of June 30, 2024 and *December 31, 2023 (*in thousands):

June 30, 2024
Non-accrual loans 90 Days<br> <br>or More Past Due and Accruing Total<br> <br>Non-Performing
With a Related Allowance Without a<br> <br>Related Allowance Total ****
One-to-four family residential owner occupied $ - $ - $ - $ 400 $ 400
Commercial real estate - - - 947 947
Commercial business 3,016 4,192 7,208 130 7,338
Total $ 3,016 $ 4,192 $ 7,208 $ 1,477 $ 8,685

As part of the discontinued operations of OCH, the Bank retained approximately 60 loans totaling $4.4 million, which were classified as non-accrual. As of June 30, 2024, the value of these total $4.1 million, made up of approximately 55 loans. The Bank continues to monitor these loans for collectability.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

December 31, 2023
Non-accrual loans 90 Days<br> <br>or More Past Due and<br> <br>Accruing Total<br> <br>Non-Performing
With a Related Allowance Without a<br> <br>Related Allowance Total
One-to-four family residential owner occupied $ - $ - $ - $ 401 $ 401
Commercial real estate - 51 51 - 51
Total $ - $ 51 $ 51 $ 401 $ 452

For the three and six months ended June 30, 2024 and June 30, 2023 there was no interest income recognized on non-accrual loans on a cash basis. There was $97,000 and $251,000 of interest income foregone on non-accrual loans for the three and six months ended June 30, 2024, respectively and $59,000 for both the three and six months ended June 30, 2023.

For the six months ended June 30, 2024, there were no loans whose terms were modified for borrowers who may be experiencing financial difficulties.

Following is a summary, by loan portfolio class, of changes in the allowance for credit losses for the three and six months ended *June 30, 2024 (*in thousands):

June 30, 2024
1-4 Family<br> <br>Residential Owner Occupied 1-4 Family<br> <br>Residential Non-Owner Occupied Multi-Family<br> <br>Residential Commercial Real Estate Construction Home Equity Commercial Business and Other Consumer Total
For the Three Months Ended June 30, 2024
Allowance for credit losses:
Beginning balance $ 166 $ 210 $ 427 $ 2,881 $ 563 $ 66 $ 3,191 $ 7,504
Charge-offs - - - - - - (114 ) (114 )
Recoveries - - - - - - 3 3
Provision 13 (4 ) 374 (112 ) (104 ) (3 ) (164 ) -
Ending balance $ 179 $ 206 $ 801 $ 2,769 $ 459 $ 63 $ 2,916 $ 7,393
For the Six Months Ended June 30, 2024
Allowance for credit losses:
Beginning balance $ 153 $ 219 $ 420 $ 2,784 $ 583 $ 61 $ 2,538 $ 6,758
Charge-offs - - - - - - (452 ) (452 )
Recoveries - - - - - - 3 3
Provision 26 (13 ) 381 (15 ) (124 ) 2 827 1,084
Ending balance $ 179 $ 206 $ 801 $ 2,769 $ 459 $ 63 $ 2,916 $ 7,393

The Bank allocated decreased allowance for credit loss provisions to the commercial real estate loan portfolio classes for the three and six months ended June 30, 2024, due primarily to changes in qualitative factors associated with the current economic environment in this portfolio class. The Bank allocated decreased allowance for credit loss provisions to the construction loan portfolio class for the three and six months ended June 30, 2024, due primarily to decrease in loan balances and changes in quantitative factors associated with the current economic environment in this portfolio class. The Bank allocated increased allowance for credit loss provisions to the commercial business loan portfolio classes for the six months ended June 30, 2024, due primarily to changes in qualitative factors in this portfolio class.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

The following table presents the balance of collateral-dependent loans individually evaluated with the ACL by collateral type at *June 30, 2024 (*in thousands):

June 30, 2024
1-4 Family<br> <br>Residential Owner Occupied 1-4 Family<br> <br>Residential Non-Owner Occupied Multi-Family<br> <br>Residential Commercial Real Estate Construction Home Equity Commercial Business and Other Consumer Total
Individually evaluated for impairment $ - $ - $ - $ - $ 2,148^(1)^ $ - $ 868^(2)^ $ 3,016
(1) Collateralized by real estate
--- ---
(2) Collateralized by business assets and equipment
--- ---

Following is a summary, by loan portfolio class, of changes in the allowance for credit losses for the three and six months ended June 30, 2023 and recorded investment in loans receivable as of June 30, 2023 (in thousands):

June 30, 2023
1-4 Family<br> <br>Residential Owner Occupied 1-4 Family<br> <br>Residential Non-Owner Occupied Multi-Family<br> <br>Residential Commercial Real Estate Construction Home Equity Commercial Business and Other Consumer Unallocated Total
For the Three Months Ended June 30, 2023
Allowance for credit losses:<br> ****
Beginning balance $ 153 $ 256 $ 396 $ 3,367 $ 406 $ 54 $ 3,026 $ - $ 7,658
Impact of ASU 326 - - - - - - - - -
Charge-offs - - - (134 ) - - (97 ) - (231 )
Recoveries - - - - - - - - -
Provision^(1)^ (16 ) (13 ) 19 (58 ) 442 (5 ) (340 ) - 29
Ending balance $ 137 $ 243 $ 415 $ 3,175 $ 848 $ 49 $ 2,589 $ - $ 7,456
For the Six Months Ended June 30, 2023
Allowance for credit losses:
Beginning balance $ 123 $ 295 $ 451 $ 3,750 $ 304 $ 33 $ 2,422 $ 300 $ 7,678
Impact of ASU 326 - - - - - - - - -
Charge-offs - - - (134 ) - - (97 ) - (231 )
Recoveries - - - - - - - - -
Provision^(1)^ 14 (52 ) (36 ) (441 ) 544 16 264 (300 ) 9
Ending balance $ 137 $ 243 $ 415 $ 3,175 $ 848 $ 49 $ 2,589 $ - $ 7,456
(1) Provision included in the table only includes the portion related to loans receivable. For the three months ended June 30, 2023, the total recovery of credit losses of $189,000 includes a provision of $13,000 for off balance sheet credit exposure, which is reflected in other liabilities on the balance sheet. For the six months ended June 30, 2023, the total provision for credit losses of $203,000 includes a provision of $194,000 for off balance sheet credit exposure, which is reflected in other liabilities on the balance sheet.
--- ---

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

The Company allocated increased allowance for credit loss provisions to the construction loan portfolio class for the three and six months ended June 30, 2023, due primarily to increased loan balances and changes in qualitative factors associated with the current economic environment in this portfolio class. The Company allocated decreased allowance for credit loss provisions to the commercial real estate loan portfolio class for the three and six months ended June 30, 2023, due primarily to changes in qualitative factors related to improved asset quality in this portfolio class. The Company allocated decreased allowance for credit loss provisions to the commercial business loan portfolio class for the three months ended June 30, 2023, due primarily to decreased loan balances in this portfolio class. The Company allocated increased allowance for credit loss provisions to the commercial business loan portfolio class for the six months ended June 30, 2023, due primarily to changes in qualitative factors in this portfolio class.

Following is a summary, by loan portfolio class, of changes in the allowance for credit losses for the year ended *December 31, 2023 (*in thousands):

December 31, 2023
1-4 Family<br> <br>Residential Owner Occupied 1-4 Family<br> <br>Residential Non-Owner Occupied Multi-Family<br> <br>Residential Commercial Real Estate Construction Home Equity Commercial Business and Other Consumer Unallocated Total
Allowance for credit losses:
Beginning balance $ 123 $ 295 $ 451 $ 3,750 $ 304 $ 33 $ 2,422 $ 300 $ 7,678
Impact of ASU 326 - - - - - - - - -
Charge-offs - - (2 ) (134 ) - - (739 ) - (875 )
Recoveries - - - - - - - - -
Provision 30 (76 ) (29 ) (832 ) 279 28 855 (300 ) (45 )
Ending balance $ 153 $ 219 $ 420 $ 2,784 $ 583 $ 61 $ 2,538 $ - $ 6,758

There were no collateral-dependent loans individually evaluated with the ACL by collateral type at December 31, 2023.

For the year ended of December 31, 2023, there were no loans whose terms were modified for borrowers who may be experiencing financial difficulties.

The Bank allocated decreased allowance for credit loss provisions to the commercial real estate loan portfolio class for the year ended December 31, 2023, due primarily to changes in qualitative factors in this portfolio class. The Bank allocated increased allowance for credit loss provisions to the commercial business loan portfolio class for the year ended December 31, 2023, due primarily to changes in qualitative factors in this portfolio class. The Bank allocated increased allowance for credit loss provisions to the construction loan portfolio class for the year ended December 31, 2023, due primarily to changes in qualitative and quantitative factors in this portfolio class.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 6 - Loans Receivable, Net and Allowance for Credit Losses (Continued)

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of June 30, 2024 and *December 31, 2023 (*in thousands):

June 30, 2024
30-89 Days<br> <br>Past Due 90 Days<br> <br>or More Past<br> <br>Due Current Total Loans<br> <br>Receivable
One-to-four family residential owner occupied $ 412 $ 400 $ 23,246 $ 24,058
One-to-four family residential non-owner occupied 356 - 36,032 36,388
Multi-family residential 378 - 48,463 48,841
Commercial real estate 5,275 947 331,970 338,192
Construction 415 2,148 30,081 32,644
Home equity 375 - 5,858 6,233
Commercial business 100 5,190 109,816 115,106
Other consumer - - 62 62
Total $ 7,311 $ 8,685 $ 585,528 $ 601,524
December 31, 2023
--- --- --- --- --- --- --- --- ---
30-89 Days<br> <br>Past Due 90 Days<br> <br>or More Past<br> <br>Due Current Total Loans<br> <br>Receivable
One-to-four family residential owner occupied $ 136 $ 401 $ 22,348 $ 22,885
One-to-four family residential non-owner occupied 256 - 40,199 40,455
Multi-family residential 175 - 46,505 46,680
Commercial real estate 3,944 - 327,230 331,174
Construction - - 35,585 35,585
Home equity 403 - 5,759 6,162
Commercial business - - 142,220 142,220
Other consumer - - 69 69
Total $ 4,914 $ 401 $ 619,915 $ 625,230

Non-performing loans, which consist of non-accruing loans plus accruing loans 90 days or more past due, amounted to $8.7 million at June 30, 2024 and $452,000 at December 31, 2023. For the delinquent loans in our portfolio, we have considered our ability to collect the past due interest, as well as the principal balance of the loan, in order to determine whether specific loans should be placed on non-accrual status. In cases where our evaluations have determined that the principal and interest balances are collectible, we have continued to accrue interest.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 7 – Goodwill and Other Intangible, Net

On January 4, 2021, the Bank acquired a majority ownership interest in Oakmont Capital Holdings, LLC, a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. The Bank recognized $2.1 million of goodwill as part of the acquisition of Oakmont Capital Holdings, LLC. The Bank sold its 51% interest in OCH on March 29, 2024. See Note 2 – Discontinued Operations.

On August 1, 2016, Quaint Oak Insurance Agency, LLC began operations by acquiring the renewal rights to a book of business produced and serviced by an independent insurance agency located in New Britain, Pennsylvania, that provides a broad range of personal and commercial insurance coverage solutions. The Company paid $1.0 million for these rights. Based on a valuation, $515,000 of the purchase price was determined to be goodwill and $485,000 was determined to be related to the renewal rights to the book of business and deemed to be an other intangible asset. This other intangible asset is being amortized over a ten year period based upon the annual retention rate of the book of business. The balance of other intangible asset at June 30, 2024 and 2023 was $101,000, and $125,000, respectively, which is net of accumulated amortization of $384,000 and $360,000, respectively. Amortization expense for both the six months ended June 30, 2024 and 2023 amounted to approximately $24,000.

Note 8 – Deposits

Deposits consist of the following classifications (in thousands):

June 30,<br> <br>2024 December 31,<br> <br>2023
Non-interest bearing checking accounts $ 62,992 $ 92,216
Interest bearing checking accounts^(1)^ 76,131 104,274
Savings accounts 685 841
Money market accounts^(2)^ 214,290 218,525
Certificates of deposit 222,343 215,843
Total deposits $ 576,441 $ 631,699
(1) The Company has identified one major interest bearing checking account deposit customer that accounted for approximately 10.9% and 16.5% of total deposits at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, the combined outstanding balances of the major deposit customer’s interest bearing checking account totaled approximately $76.3 million and $104.3 million, respectively.
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(2) The Company has identified one major money market deposit customer that accounted for approximately 26.0% and 23.7% of total deposits at June 30, 2024 and December 31, 2023, respectively. At both June 30, 2024 and December 31, 2023, the combined outstanding balances of the major deposit customer’s money market accounts totaled approximately $150.0 million.
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Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 9 – Borrowings

Federal Home Loan Bank (“FHLB”) advances consist of the following at June 30, 2024 and *December 31, 2023 (*in thousands):

June 30, 2024 December 31, 2023
Amount Weighted Interest Rate Amount Weighted Interest Rate
Short-term borrowings $ 30,000 5.67 % $ - - %
Fixed rate borrowings maturing:
2024 $ 7,100 4.06 % $ 21,167 4.25 %
2025 7,855 3.40 7,855 3.40
Total FHLB long-term debt $ 14,955 3.71 % $ 29,022 4.02 %

The balance of subordinated debt, net of unamortized debt issuance costs, was $22.0 million at both June 30, 2024 and December 31, 2023.

Note 10 – Stock Compensation Plans

Employee Stock Ownership Plan ****

The Company maintains an Employee Stock Ownership Plan (ESOP) for the benefit of employees who meet the eligibility requirements of the plan. The Bank may make cash contributions to the ESOP on a quarterly basis which are allocated to participant accounts on an annual basis.

During the three and six months ended June 30, 2024 and June 30, 2023, the Company did not make a discretionary contribution of shares to the ESOP and no expense was recognized.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 10 – Stock Compensation Plans (Continued)

Stock Incentive Plans – Share Awards ****

In May 2018, the shareholders of Quaint Oak Bancorp approved the adoption of the 2018 Stock Incentive Plan (the “2018 Stock Incentive Plan”). The 2018 Stock Incentive Plan approved by shareholders in May 2018 covered a total of 155,000 shares, of which 38,750, or 25%, may be restricted stock awards, for a balance of 116,250 stock options assuming all the restricted shares are awarded.

In May 2023, the shareholders of Quaint Oak Bancorp approved the adoption of the 2023 Stock Incentive Plan (the “2023 Stock Incentive Plan”). The 2023 Stock Incentive Plan approved by shareholders in May 2023 covered a total of 175,000 shares, of which 43,750, or 25%, may be restricted stock awards, for a balance of 131,250 stock options assuming all the restricted shares are awarded.

As of June 30, 2024 a total of 45,000 share awards were unvested under the 2018 and 2023 Stock Incentive Plan and up to 10,500 share awards were available for future grant under the 2023 Stock Incentive Plan and none under the 2018 Stock Incentive Plan. The 2018 and 2023 Stock Incentive Plan share awards have vesting periods of five years.

A summary of share award activity under the Company’s 2018 and 2023 Stock Incentive Plans as of June 30, 2024 and changes during the six months ended June 30, 2024 is as follows:

June 30, 2024
Number of<br> <br>Shares Weighted<br> <br>Average Grant Date Fair Value
Unvested at the beginning of the period 45,000 $ 18.00
Granted - -
Vested (9,000) 18.00
Forfeited - -
Unvested at the end of the period 36,000 $ 18.00

Compensation expense on the restricted stock awards is recognized ratably over the five year vesting period in an amount which is equal to the fair value of the common stock at the date of grant. During the three months ended June 30, 2024 and 2023, the Company recognized approximately $41,000 and $43,000 of compensation expense, respectively. During both the three months ended June 30, 2024 and 2023, the Company recognized a tax benefit of approximately $9,000. During the six months ended June 30, 2024 and 2023, the Company recognized approximately $81,000 and $74,000 of compensation expense, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized a tax benefit of approximately $17,000 and $15,000, respectively. As of June 30, 2024, approximately $628,000 in additional compensation expense will be recognized over the remaining service period of approximately 3.9 years.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 10 – Stock Compensation Plans (Continued)

Stock Option and Stock Incentive Plans – Stock Options ****

In May 2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Stock Option Plan (the “Option Plan”). The Option Plan expired February 13, 2018, however, outstanding options granted in 2013 remained valid and existing for the remainder of their 10 year terms, until May 2023. As described above under “Stock Incentive Plans – Share Awards”, the 2013 Stock Incentive Plan approved by shareholders in May 2013 terminated March 13, 2023, however, the outstanding options granted in 2018 remain exercisable until May 2028, to the extent still outstanding. The 2018 Stock Incentive Plan approved by shareholders in May 2018 covered a total of 155,000 shares, of which 116,250 may be stock options assuming all the restricted shares are awarded. In May 2023, the shareholders of Quaint Oak Bancorp approved the adoption of the 2023 Stock Incentive Plan. The 2023 Stock Incentive Plan approved by shareholders in May 2023 covered a total of 175,000 shares, of which 131,250 may be stock options assuming all the restricted shares are awarded.

All incentive stock options issued under the Option Plan and the 2013, 2018 and 2023 Stock Incentive Plans are intended to comply with the requirements of Section 422 of the Internal Revenue Code. Options will become vested and exercisable over a five year period and are generally exercisable for a period of ten years after the grant date.

As of June 30, 2024, a total of 224,033 grants of stock options were outstanding under the Option Plan and 2018 and 2023 Stock Incentive Plans and 36,000 stock options were available for future grant under the 2023 Stock Incentive Plan. Options will become vested and exercisable over a five year period and are generally exercisable for a period of ten years after the grant date.

During the three months ended June 30, 2024 and 2023, the Company recognized approximately $20,000 and $19,000 of compensation expense, respectively. During both the three months ended June 30, 2024 and 2023, the Company recognized a tax benefit of approximately $1,000. During the six months ended June 30, 2024 and 2023, the Company recognized approximately $40,000 and $30,000 of compensation expense, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized a tax benefit of approximately $3,000 and $2,000, respectively. As of June 30, 2024, approximately $312,000 in additional compensation expense will be recognized over the remaining service period of approximately 3.9 years.

A summary of option activity under the Company’s Option Plan and 2013, 2018 and 2023 Stock Incentive Plans as of June 30, 2024 and changes during the six months ended June 30, 2024 is as follows:

June 30, 2024
Number of<br> <br>Shares Weighted<br> <br>Average Exercise Price Weighted<br> <br>Average Remaining Contractual Life (in years)
Outstanding at the beginning of the period 224,033 $ 15.98 8.6
Granted - - -
Exercised - - -
Forfeited - - -
Outstanding at end of period 224,033 $ 15.98 6.8
Exercisable at end of period 91,533 $ 13.30 5.0

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair values estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing are as follows:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
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Level III: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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This hierarchy requires the use of observable market data when available.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 19 of the Company’s 2023 Form 10-K, as the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and non-performance risk. Loans are considered a Level 3 classification.

The following is a discussion of assets and liabilities measured at fair value on a recurring and non-recurring basis and valuation techniques applied:

Investment Securities Available For Sale: The fair value of securities available for sale are determined by using 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.

We may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)

Individually Evaluated Loans: Individually evaluated loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans less estimated costs to sell. Collateral is primarily in the form of real estate. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within Level 3 of the fair value hierarchy.

The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of *June 30, 2024 (*in thousands):

June 30, 2024
Fair Value Measurements Using:
Total Fair Value Quoted Prices in Active Markets for Identical Assets<br> <br>(Level 1) Significant Other Observable Inputs<br> <br>(Level 2) Unobservable Inputs<br> <br>(Level 3)
Recurring fair value measurements: **** **** **** **** **** **** **** ****
Investment securities available for sale
Government National Mortgage Association mortgage-backed securities $ 1,965 $ - $ 1,965 $ -
Federal National Mortgage Association mortgage- backed securities 55 - 55 -
Total investment securities available for sale $ 2,020 $ - $ 2,020 $ -
Total recurring fair value measurements $ 2,020 $ - $ 2,020 $ -
Nonrecurring fair value measurements **** **** **** **** **** **** **** ****
Collateral-dependent loans $ 3,016 $ - $ - $ 2,362
Total nonrecurring fair value measurements $ 3,016 $ - $ - $ 2,362

The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of *December 31, 2023 (*in thousands):

December 31, 2023
Fair Value Measurements Using:
Total Fair Value Quoted Prices in Active Markets for Identical Assets<br> <br>(Level 1) Significant Other Observable Inputs<br> <br>(Level 2) Unobservable Inputs<br> <br>(Level 3)
Recurring fair value measurements:
Investment securities available for sale
Government National Mortgage Association mortgage-backed securities $ 2,268 $ - $ 2,268 $ -
Federal National Mortgage Association mortgage- backed securities 73 - 73 -
Total investment securities available for sale $ 2,341 $ - $ 2,341 $ -
Total recurring fair value measurements $ 2,341 $ - $ 2,341 $ -

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has used Level 3 inputs to determine fair value as of *June 30, 2024 (*in thousands):

June 30, 2024
Quantitative Information About Level 3 Fair Value Measurements
Total Fair Value Valuation Techniques Unobservable Input Range (Weighted Average)
Collateral-dependent loans $ 2,362 Appraisal of collateral (1) Appraisal adjustments (2) 8% ( 8%)

____________________________________________

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are identifiable.
(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal.
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The fair values of the Company’s financial instruments that are not required to be measured or reported at fair value were as follows at June 30, 2024 and December 31, 2023 (in thousands):

**** **** **** **** Fair Value Measurements at
**** **** **** **** June 30, 2024
Carrying Amount Fair Value Estimate Quoted Prices in Active Markets for Identical Assets<br> <br>(Level 1) Significant Other Observable Inputs<br> <br>(Level 2) Unobservable Inputs<br> <br>(Level 3)
Financial Assets **** **** **** **** **** **** **** **** **** ****
Investment in interest-earning time deposits $ 912 $ 976 $ - $ - $ 976
Loans held for sale 10,062 10,255 - 10,255 -
Loans receivable, net 593,775 575,560 - - 575,560
Financial Liabilities **** **** **** **** **** **** **** **** **** ****
Deposits 576,441 582,126 354,099 - 228,027
FHLB long-term borrowings 14,955 14,929 - - 14,929
Subordinated debt 22,000 21,339 - - 21,339
Fair Value Measurements at
--- --- --- --- --- --- --- --- --- --- ---
December 31, 2023
Carrying Amount Fair Value Estimate Quoted Prices in Active Markets for Identical Assets<br> <br>(Level 1) Significant Other Observable Inputs<br> <br>(Level 2) Unobservable Inputs<br> <br>(Level 3)
Financial Assets
Investment in interest-earning time deposits $ 1,912 $ 1,981 $ - $ - $ 1,981
Loans held for sale 60,380 62,072 - 62,072 -
Loans receivable, net 603,349 584,842 - - 584,842
Financial Liabilities
Deposits 631,699 636,946 415,855 - 221,091
FHLB long-term borrowings 29,022 29,001 - - 29,001
Subordinated debt 21,957 20,666 - - 20,666

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)

For cash and cash equivalents, accrued interest receivable, investment in FHLB stock, bank-owned life insurance, accrued interest payable, and advances from borrowers for taxes and insurance, the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements Are Subject to Change

This Quarterly Report contains certain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder). Forward-looking statements are not historical facts but instead represent only the beliefs, expectations or opinions of the Company and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar meaning, or future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly.” Forward-looking statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to predict and generally are beyond the control of and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) economic and competitive conditions which could affect the volume of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of credit losses; (3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in which the Company is or will be doing business, being less favorable than expected; (6) political and social unrest, including acts of war or terrorism or (7) legislation or changes in regulatory requirements adversely affecting the business in which the Company is or will be engaged. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

General

The Company was formed in connection with the Bank’s conversion to a stock savings bank completed on July 3, 2007. The Company’s results of operations are dependent primarily on the results of the Bank, which is a wholly owned subsidiary of the Company, along with the Bank’s wholly owned subsidiaries. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by provisions for credit losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, directors’ fees and expenses, office occupancy and equipment expense, data processing expense, professional fees, advertising expense, FDIC deposit insurance assessment, and other expenses. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial condition and results of operations.

At June 30, 2024, the Bank has six wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, each a Pennsylvania limited liability company. The mortgage company offers mortgage banking primarily in the Lehigh Valley, Delaware Valley and Philadelphia County regions of Pennsylvania. The abstract company offers title abstract services primarily in the Lehigh Valley region of Pennsylvania. As of June 30, 2024, the real estate company was inactive. These companies began operation in July 2009. In February, 2019, Quaint Oak Mortgage opened a mortgage banking office in Philadelphia, Pennsylvania. QOB Properties, LLC began operations in July 2012 and holds Bank properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. Quaint Oak Insurance Agency, LLC began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. Oakmont Commercial, LLC was formed in October 2021 and operates as a multi-state specialty commercial real estate financing company. All significant intercompany balances and transactions have been eliminated.

32

Critical Accounting Policies

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

There were no changes made to the Company's internal control over financial reporting that occurred during the six months ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Comparison of Financial Condition at June 30, 2024 and December 31, 2023

General. The Company’s total assets at June 30, 2024 were $701.9 million, a decrease of $52.2 million, or 6.9%, from $754.1 million at December 31, 2023. This decrease in total assets was primarily due to a decrease in loans held for sale of $26.4 million, or 72.4%, and a $23.9 million, or 3.9%, decrease in loans receivable, net. Partially offsetting the decrease in total assets was a $17.6 million, or 30.3%, increase in cash and cash equivalents, a $662,000, or 18.9%, increase in accrued interest receivable, a $624,000, or 42.3%, increase in investment in Federal Home Loan Bank stock, at cost, and a $135,000, or 5.1%, increase in premises and equipment, net. Contributing to the $17.6 million increase in cash and cash equivalents were the proceeds from the sale of loans held for sale.

Cash and Cash Equivalents. Cash and cash equivalents increased $17.6 million, or 30.3%, from $58.0 million at December 31, 2023 to $75.6 million at June 30, 2024, with the expectation that excess liquidity will be used to fund loans. Contributing to the $17.6 million increase in cash and cash equivalents were the proceeds from the sale related to the sale of loans held for sale.

Investment in Interest-Earning Time Deposits. Investment in interest-earning time deposits decreased $1.0 million, or 52.3%, from $1.9 million at December 31, 2023 to $912,000 at June 30, 2024 as four interest-earning time deposits matured and were not renewed and one interest-earning time deposit was purchased during the six months ended June 30, 2024.

Investment Securities Available for Sale. Investment securities available for sale decreased $321,000, or 13.7%, from $2.3 million at December 31, 2023 to $2.0 million at June 30, 2024, due primarily to the principal repayments on these securities during the six months ended June 30, 2024.

33

Loans Held for Sale. Loans held for sale decreased $26.4 million, or 72.4%, from $36.4 million at December 31, 2023 to $10.1 million at June 30, 2024 as the Bank originated $51.6 million in equipment loans held for sale and sold $71.6 million of equipment loans during the six months ended June 30, 2024. Contributing to the decrease in loans held for sale was $8.5 million of loan amortization and prepayments. On March 29, 2024, the Bank transferred $4.4 million of equipment loans held for sale into loans receivable as part of the discontinued operations of OCH. Additionally, the Bank’s mortgage banking subsidiary, Quaint Oak Mortgage, LLC, originated $64.0 million of one-to-four family residential loans during the six months ended June 30, 2024 and sold $57.5 million of loans in the secondary market during this same period.

Loans Receivable, Net. Loans receivable, net, decreased $23.9 million, or 3.9%, to $593.8 million at June 30, 2024 from $617.7 million December 31, 2023. The largest decreases within the loan portfolio occurred in commercial business loans which decreased $27.1 million, or 19.0%, one-to-four family non-owner occupied loans which decreased $4.1 million, or 10.1%, and construction loans which decreased $2.9 million, or 8.3%. Partially offsetting these decreases were commercial real estate loans which increased $7.0 million, or 2.1%, one-to-four family owner occupied loans which increased $1.2 million, or 5.1%, and home equity loans which increased $71,000, or 1.2%.

Deposits. Total deposits decreased $55.3 million, or 8.8%, to $576.4 million at June 30, 2024 from $631.7 million at December 31, 2023. This decrease in deposits was primarily attributable to a decrease of $29.2 million, or 31.7%, in non-interest bearing checking accounts, a decrease of $28.1 million, or 27.0%, in interest bearing checking accounts, a decrease of $4.2 million, or 1.9%, in money market accounts, and a $155,000, or 18.5%, decrease in savings accounts. These decreases in deposits were partially offset by an increase of $6.5 million, or 3.0%, in certificates of deposit. The decreases in non-interest bearing and interest bearing checking accounts was primarily due to reduced correspondent banking activity.

The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was $145.1 million, or 25.2% of total deposits at June 30, 2024.

Borrowings. Total Federal Home Loan Bank (FHLB) borrowings increased $15.9 million, or 54.9%, to $45.0 million at June 30, 2024 from $29.0 million at December 31, 2023. During the six months ended June 30, 2024, the Company paid down $14.1 million of FHLB long-term borrowings and borrowed $30.0 million of FHLB short-term borrowings.

Stockholders’ Equity. Total stockholders’ equity increased $2.9 million, or 6.0%, to $51.4 million at June 30, 2024 from $48.5 million at December 31, 2023. Contributing to the increase was net income for the six months ended June 30, 2024 of $973,000, shares issued from authorized and unallocated of $2.4 million, amortization of stock awards and options under our stock compensation plans of $122,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $46,000, and other comprehensive income, net of $8,000. The increase in stockholders’ equity was partially offset by dividends paid of $654,000, and a $44,000 purchase of treasury stock. In addition, there was a $3.1 million, or 100.0%, decrease in noncontrolling interest from discontinued operations. The $2.5 million of shares issued from authorized and unallocated were due to two private placement offerings to two investors.

34

Comparison of Operating Results for the Three Months Ended June 30, 2024 and 2023

General. Net income amounted to $100,000 for the three months ended June 30, 2024, a decrease of $470,000, or 82.5%, compared to net income of $570,000 for the three months ended June 30, 2023. The decrease in net income on a comparative quarterly basis was primarily the result of a decrease in interest income of $1.0 million, an increase in the provision for credit losses of $148,000, and an increase in interest expense of $133,000, partially offset by a decrease in the net provision for income taxes of $279,000, an increase in non-interest income of $261,000, a decrease in net loss from discontinued operations of $229,000, and a decrease in non-interest expense of $58,000.

Net Interest Income. Net interest income decreased $1.1 million, or 22.0% to $4.1 million for the three months ended June 30, 2024 from $5.2 million for the three months ended June 30, 2023. The decrease was driven by a $1.0 million, or 8.5%, decrease in interest income, and a $133,000, or 2.0%, increase in interest expense.

Interest Income. The $1.0 million, or 8.5%, decrease in interest income was primarily due to a decrease in the average balance of loans receivable, net, which decreased $164.2 million from $769.5 million for the three months ended June 30, 2023 to $605.3 million for the three months ended June 30, 2024 and had the effect of decreasing interest income $2.5 million. This decrease was partially offset by a $98.1 million increase in the average balance of due from banks – interest earning, which increased from $5.8 million for the three months ended June 30, 2023 to $103.9 million for the three months ended June 30, 2024, and had the effect of increasing interest income $1.1 million, and a 127 basis point increase in the average yield on due from banks – interest earning from 4.53% for the three months ended June 30, 2023 to 5.80% for the three months ended June 30, 2024, and had the effect of increasing interest income $330,000.

Interest Expense. The $133,000, or 2.0%, increase in interest expense for the three months ended June 30, 2024 over the comparable period in 2023 was driven by a $1.7 million, or 39.0%, increase in interest on deposits, primarily attributable to an increase in the average balance of interest-bearing checking accounts which increased from $38.1 million for the three months ended June 30, 2023 to $120.2 million for the three months ended June 30, 2024, and had the effect of increasing interest expense by $855,000. Also contributing to the increase in interest expense was a 117 basis point increase in average rate of certificates of deposit, which increased from 2.89% for the three months ended June 30, 2023 to 4.06% for the three months ended June 30, 2024, and had the effect of increasing interest expense by $654,000. Also contributing to the increase in interest expense was a 44 basis point increase in the rate on average money market accounts which increased from 4.10% for the three months ended June 30, 2023 to 4.54% for the three months ended June 30, 2024 and had the effect of increasing interest expense by $234,000. Partially offsetting these increases in interest expense for the three months ended June 30, 2024 was a $1.5 million, or 100.0%, decrease in the interest on Federal Home Loan Bank short-term borrowings due to a $109.0 million, or 99.1%, decrease in the average balance of Federal Home Loan Bank short-term borrowings which decreased from $108.9 million for the three months ended June 30, 2023 to $989,000 million for the three months ended June 30, 2024. The average interest rate spread decreased from 2.05% for the three months ended June 30, 2023 to 1.57% for the three months ended June 30, 2024 while the net interest margin decreased from 2.65% for the three months ended June 30, 2023 to 2.28% for the three months ended June 30, 2024.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

Three Months Ended June 30,
2024 2023
Average<br> <br>Balance Interest Average<br> <br>Yield/<br> <br>Rate Average<br> <br>Balance Interest Average<br> <br>Yield/<br> <br>Rate
(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing $ 103,930 $ 1,507 5.80 % $ 5,834 $ 66 4.53 %
Investment in interest-earning time deposits 912 9 3.95 2,646 34 5.14
Investment securities available for sale 2,141 39 7.29 2,775 38 5.48
Loans receivable, net (1) (2) 605,337 9,317 6.16 769,531 11,647 6.05
Investment in FHLB stock 1,084 25 9.59 6,512 128 7.86
Total interest-earning assets 713,404 10,897 6.11 % 787,298 11,913 6.05 %
Non-interest-earning assets 15,585 21,438
Total assets $ 728,989 $ 808,736
Interest-bearing liabilities:
Savings accounts $ 805 $ 1 0.50 % $ 1,418 $ 1 0.28 %
Money market accounts 215,795 2,450 4.54 234,834 2,407 4.10
Checking accounts 120,215 1,448 4.82 38,141 456 4.78
Certificate of deposit accounts 223,755 2,269 4.06 218,163 1,575 2.89
Total deposits 560,570 6,168 4.40 492,556 4,439 3.60
FHLB short-term borrowings 989 - - 109,890 1,500 5.45
FHLB long-term borrowings 17,054 167 3.92 44,418 354 3.19
FRB long-term borrowings - - - 756 9 4.76
Subordinated debt 22,002 488 8.89 21,772 388 7.13
Total interest-bearing liabilities 600,615 6,823 4.54 % 669,392 6,690 4.00 %
Non-interest-bearing liabilities 77,328 93,568
Total liabilities 677,943 762,960
Stockholders’ Equity 51,046 45,776
Total liabilities and Stockholders’ Equity $ 728,989 $ 808,736
Net interest-earning assets $ 112,789 $ 117,906
Net interest income; average interest rate spread $ 4,074 1.57 % $ 5,.223 2.05 %
Net interest margin (3) 2.28 % 2.65 %
Average interest-earning assets to average interest-bearing liabilities 118.78 % 117.61 %

________________________

(1) Includes loans held for sale.
(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses.
--- ---
(3) Equals net interest income divided by average interest-earning assets.
--- ---

Provision for Credit Losses. The $148,000, or 78.3%, increase in the provision for credit losses for the three months ended June 30, 2024 over the three months ended June 30, 2023 was due to an increase in the amount of non-performing loans. There was a recovery of $41,000, compared to a recovery of $189,000 for the three months ended June 30, 2023. There were two individually evaluated loans for the three months ended June 30, 2024, which increased the provision for credit losses by $640,000.

Non-Interest Income. The $261,000, or 25.0%, increase in non-interest income for the three months ended June 30, 2024 over the comparable period in 2023 was primarily attributable to a $196,000, or 445.5%, increase in other fees and service charges, a $124,000, or 28.4%, increase in net gain on sale of loans, a $57,000, or 45.2%, increase in mortgage banking, equipment lending, and title abstract fees, and a $16,000, or 10.0%, increase in insurance commissions. These increases were partially offset by a $103,000, or 51.2%, decrease in gain on sale of SBA loans, and a $32,000, or 66.7%, decrease in real estate sales commissions, net. The increase in net gain on sale of loans was due to the sale of mortgage loans during the three months ended June 30, 2024.

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Non-Interest Expense. Total non-interest expense decreased $58,000, or 1.1%, from $5.3 million for the three months ended June 30, 2023 to $5.2 million for the three months ended June 30, 2024, primarily due to a $175,000, or 31.4%, decrease in other expense, a $77,000, or 32.1%, decrease in FDIC deposit insurance assessment, a $52,000, or 51.0%, decrease in directors’ fees and expenses, a $37,000, or 19.2%, decrease in professional fees, and a $10,000, or 12.1%, decrease in advertising expense. The decrease in non-interest expense was partially offset by a $125,000, or 3.5%, increase in salaries and employee benefits expense, a $102,000, or 48.8%, increase in data processing expense, and a $66,000, or 18.9%, increase in occupancy and equipment expense.

Provision for Income Tax. The provision for income tax decreased $279,000, or 77.1%, from $362,000 for the three months ended June 30, 2023 to $83,000 for the three months ended June 30, 2024 due primarily to a decrease in pre-tax income and an increase in the effective tax rate which was driven by the increase in state taxes related to subsidiary activity in various states.

Comparison of Operating Results for the Six Months Ended June 30, 2024 and 2023

General. Net income amounted to $973,000 for the six months ended June 30, 2024, a decrease of $160,000, or 14.1%, compared to net income of $1.1 million for the six months ended June 30, 2023. The decrease in net income on a comparative six-month basis was primarily the result of an increase in interest expense of $1.3 million, an increase in the provision for credit losses of $892,000, an increase in net loss from discontinued operations of $272,000, an increase in the net provision for income taxes of $120,000, and an increase in non-interest expense of $15,000, partially offset by an increase in non-interest income of $2.2 million, and an increase in interest income of $197,000.

Net Interest Income.  Net interest income decreased $1.1 million, or 10.2% to $9.5 million for the six months ended June 30, 2024 from $10.6 million for the six months ended June 30, 2023.  The decrease was driven by a $1.3 million, or 10.4%, increase in interest expense, partially offset by a $197,000, or 0.9%, increase in interest income.

Interest Income. The $197,000, or 0.9%, increase in interest income was primarily due to a 202 basis point increase in the yield on average loans receivable, net, including loans held for sale, which increased from 4.92% for the six months ended June 30, 2023 to 6.94% for the six months ended June 30, 2024, and had the effect of increasing interest income $2.0 million. Also contributing to the increase in interest income was an $81.3 million increase in the average balance of due from banks – interest earning, which increased from $5.5 million for the six months ended June 30, 2023 to $86.8 million for the six months ended June 30, 2024, and had the effect of increasing interest income $1.8 million and an 83 basis point increase in the average yield on due from banks – interest earning which increased from 4.44% for the six months ended June 30, 2023 to 5.27% for the six months ended June 30, 2024, and had the effect of increasing interest income $365,000. These increases were partially offset by a decrease in the average balance of loans receivable, net, which decreased $130.1 million from $761.9 million for the six months ended June 30, 2023 to $631.9 million for the six months ended June 30, 2024 and had the effect of decreasing interest income $3.8 million.

Interest Expense. The $1.3 million, or 10.4%, increase in interest expense for the six months ended June 30, 2024 over the comparable period in 2023 was driven by a $3.9 million, or 48.1%, increase in interest on average deposits, primarily attributable to an increase in the average balance of interest-bearing checking accounts which increased from $79.3 million for the six months ended June 30, 2023 to $110.9 million for the six months ended June 30, 2024, and had the effect of increasing interest expense by $1.7 million. Also contributing to the increase in interest expense was an increase in the average rate on interest-bearing checking accounts to 5.04% that had the effect of increasing interest expense by $415,000. Also contributing to the increase in interest expense was a 135 basis point increase in the average rate on certificates of deposit, which increased from 2.64% for the six months ended June 30, 2023 to 3.99% for the six months ended June 30, 2024, and had the effect of increasing interest expense by $1.5 million. Also contributing to the increase in interest expense was a 68 basis point increase in the rate on average money market accounts which increased from 3.85% for the six months ended June 30, 2023 to 4.53% for the six months ended June 30, 2024 and had the effect of increasing interest expense by $736,000. Partially offsetting the increase in interest expense for the six months ended June 30, 2024 was a $2.8 million, or 100.0%, decrease in the interest on Federal Home Loan Bank short-term borrowings due to a $108.0 million, or 99.5%, decrease in the average balance of Federal Home Loan Bank short-term borrowings which decreased from $108.0 million for the six months ended June 30, 2023 to $495,000 for the six months ended June 30, 2024. The average interest rate spread decreased from 2.16% for the six months ended June 30, 2023 to 1.82% for the six months ended June 30, 2024 while the net interest margin decreased from 2.71% for the six months ended June 30, 2023 to 2.62% for the six months ended June 30, 2024.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

Six Months Ended June 30,
2024 2023
Average<br> <br>Balance Interest Average<br> <br>Yield/<br> <br>Rate Average<br> <br>Balance Interest Average<br> <br>Yield/<br> <br>Rate
(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing $ 86,762 $ 2,288 5.27 % $ 5,492 $ 122 4.44 %
Investment in interest-earning time deposits 1,158 26 4.49 2,941 60 4.08
Investment securities available for sale 2,220 77 6.94 2,848 70 4.92
Loans receivable, net (1) (2) 631,881 20,550 6.50 761,947 22,332 5.86
Investment in FHLB stock 1,198 78 13.02 6,578 238 7.21
Total interest-earning assets 723,219 23,019 6.37 % 779,806 22,822 5.85 %
Non-interest-earning assets 17,735 22,041
Total assets $ 740,954 $ 801,847
Interest-bearing liabilities:
Savings accounts $ 863 $ 1 0.23 % $ 1,489 $ 1 0.13 %
Money market accounts 216,519 4,906 4.53 242,275 4,667 3.85
Checking accounts 110,912 2,796 5.04 31,590 713 4.51
Certificate of deposit accounts 222,937 4,451 3.99 214,072 2,824 2.64
Total deposits 551,231 12,154 4.41 489,426 8,205 3.35
FHLB short-term borrowings 495 - - 108,506 2,800 5.16
FHLB long-term borrowings 21,061 409 3.88 48,116 631 2.62
FRB long-term borrowings - - - 865 19 4.39
Subordinated debt 21,991 972 8.84 17,039 604 7.09
Total interest-bearing liabilities 594,778 13,535 4.55 % 663,952 12,259 3.69 %
Non-interest-bearing liabilities 95,851 92,129
Total liabilities 690,629 756,081
Stockholders’ Equity 50,325 45,766
Total liabilities and Stockholders’ Equity $ 740,954 $ 801,847
Net interest-earning assets $ 128,441 $ 115,854
Net interest income; average interest rate spread $ 9,484 1.82 % 10,563 2.16 %
Net interest margin (3) 2.62 % 2.71 %
Average interest-earning assets to average interest-bearing liabilities 121.59 % 117.45 %

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Provision for Credit Losses. The $892,000, or 439.4%, increase in the provision for credit losses for the six months ended June 30, 2024 over the six months ended June 30, 2023 was due to an increase in the amount of non-performing loans. There were three individually evaluated loans which increased the provision for credit losses by $654,000.

Non-Interest Income. The $2.2 million, or 108.4%, increase in non-interest income for the six months ended June 30, 2024 over the comparable period in 2023 was primarily attributable to a $1.4 million gain on sale of Oakmont Capital Holdings, LLC, a $667,000, or 80.6%, increase in net gain on sale of loans, a $324,000, or 228.2%, increase in other fees and service charges, a $127,000, or 48.3%, increase in mortgage banking, equipment lending, and title abstract fees, and a $32,000, or 10.8%, increase in insurance commissions. These increases were partially offset by a $142,000 or 97.9%, decrease in net loan servicing income, a $124,000, or 49.4%, decrease in gain on sale of SBA loans, and a $52,000, or 72.2%, decrease in real estate sales commissions, net.

Non-Interest Expense. Total non-interest expense increased $15,000, or 0.1%, from $10.3 million for the six months ended June 30, 2023 to $10.4 million for the six months ended June 30, 2024, primarily due to a $211,000, or 3.0%, increase in salaries and employee benefits expense, and a $148,000, or 34.8%, increase in data processing expense. The increase in non-interest expense was partially offset by a $136,000, or 28.8%, decrease in FDIC deposit insurance assessment, a $106,000, or 51.2%, decrease in directors’ fees and expenses, a $44,000, or 12.9%, decrease in professional fees, a $26,000, or 3.8%, decrease in occupancy and equipment expense, and a $26,000, or 2.9%, decrease in other expense. The decrease in directors’ fees and expenses was primarily due to a reduction in directors’ fees for the six months ended June 30, 2024.

Provision for Income Tax. The provision for income tax increased $120,000, or 19.6%, from $613,000 for the six months ended June 30, 2023 to $733,000 for the six months ended June 30, 2024 due primarily to an increase in pre-tax income, partially offset by an increase in the effective tax rate, similar to the quarter, which was driven by the increase in state taxes related to subsidiary activity in various states.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, amortization and prepayment of loans and to a lesser extent, loan sales and other funds provided from operations. While scheduled principal and interest payments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company sets the interest rates on its deposits to maintain a desired level of total deposits. In addition, the Company invests excess funds in short-term interest-earning assets that provide additional liquidity. At June 30, 2024, the Company's cash and cash equivalents amounted to $75.6 million.

The Company uses its liquidity to fund existing and future loan commitments, to fund deposit outflows, to invest in other interest-earning assets and to meet operating expenses. At June 30, 2024, Quaint Oak Bank had outstanding commitments to originate loans of $37.3 million, commitments under unused lines of credit of $62.3 million, and $2.5 million under standby letters of credit.

At June 30, 2024, certificates of deposit scheduled to mature in one year or less totaled $121.5 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.

In addition to cash flow from loan payments and prepayments and deposits, the Company has significant borrowing capacity available to fund liquidity needs. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Pittsburgh (FHLB), which provide an additional source of funds. As of June 30, 2024, we had $45.0 million of borrowings from the FHLB and had $294.9 million in borrowing capacity. Under terms of the collateral agreement with the FHLB of Pittsburgh, we pledge residential mortgage loans as well as Quaint Oak Bank’s FHLB stock as collateral for such advances. In addition, as of June 30, 2024, Quaint Oak Bank had $14.1 million in borrowing capacity with the Federal Reserve Bank of Philadelphia.

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The following table summarizes the Company's primary and secondary sources of liquidity which were available at June 30, 2024 (dollars in thousands).

June 30, 2024
(Dollars in thousands)
Cash and cash equivalents $ 75,575
Unpledged investment securities, amortized cost 2,020
FHLB advance availability 294,915
Federal Reserve discount window availability 14,131
Total primary and secondary sources of available liquidity $ 386,641

Total stockholders’ equity increased $2.9 million, or 6.0%, to $51.4 million at June 30, 2024 from $48.5 million at December 31, 2023. Contributing to the increase was net income for the six months ended June 30, 2024 of $973,000, shares issued from authorized and unallocated of $2.4 million, amortization of stock awards and options under our stock compensation plans of $122,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $46,000, and other comprehensive income, net of $8,000. The increase in stockholders’ equity was partially offset by dividends paid of $654,000, and a $44,000 purchase of treasury stock. In addition, there was a $3.1 million, or 100.0%, decrease in noncontrolling interest from discontinued operations. The $2.5 million of shares issued from authorized and unallocated were due to two private placement offerings to two investors.

For further discussion of the stock compensation plans, see Note 10 in the Notes to Unaudited Consolidated Financial Statements contained elsewhere herein.

Quaint Oak Bank is required to maintain regulatory capital sufficient to meet tier 1 leverage, common equity tier 1 capital, tier 1 risk-based and total risk-based capital ratios of at least 4.00%, 4.50%, 6.00%, and 8.00%, respectively. At June 30, 2024, Quaint Oak Bank exceeded each of its capital requirements with ratios of 9.59%, 12.64%, 12.64% and 13.89%, respectively. As a small savings and loan holding company eligible for exemption, the Company is not currently subject to any regulatory capital requirements.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers' requests for funding and take the form of loan commitments and lines of credit. Our exposure to credit loss from non-performance by the other party to the above-mentioned financial instruments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. In general, we do not require collateral or other security to support financial instruments with off–balance sheet credit risk.

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Commitments. At June 30, 2024, we had unfunded commitments under lines of credit of $62.3 million, $37.3 million of commitments to originate loans, and $2.5 million under standby letters of credit. We had no commitments to advance additional amounts pursuant to outstanding lines of credit or undisbursed construction loans.

The ACL for off balance sheet credit exposures is recorded in other liabilities on the Consolidated Balance Sheet. This ACL represents management’s estimate of expected losses in its unfunded loan commitments and other off balance sheet credit exposures, such as letters of credit and credit recourse on sold residential mortgage loans. The balance of off balance sheet credit exposures was $11,000 at June 30, 2024.

Impact of Inflation and Changing Prices

The consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2024. Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the first fiscal quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company.

ITEM 1A. RISK FACTORS

There have been no material changes in the Risk Factors previously disclosed in Item 1A of our 2023 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
--- ---
(b) Not applicable.
--- ---
(c) Purchases of Equity Securities
--- ---

The Company’s repurchases of its common stock made during the quarter ended June 30, 2024 including stock-for-stock option exercises of outstanding stock options, are set forth in the table below:

Period Total Number of Shares<br> <br>Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares<br> <br>that May Yet Be<br> <br>Purchased Under the Plans<br> <br>or Programs (1)
April 1, 2024 – April 30, 2024 2,567 10.55 - 24,375
May 1, 2024 – May 31, 2024 1,676 10.10 - 24,375
June 1, 2024 – June 30, 2024 - - - 24,375
Total 4,243 10.37 - 24,375

Notes to this table:

(1) On December 12, 2018, the Board of Directors of Quaint Oak Bancorp approved its fifth share repurchase program which provides for the repurchase of up to 50,000 shares, or approximately 2.5% of the Company’s then issued and outstanding shares of common stock, and announced the fifth repurchase program on Form 8-K filed on December 13, 2018. The repurchase program does not have an expiration date.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS
No. Description
--- ---
31.1 Rule 13a-14(d) and 15d-14(d) Certification of the Chief Executive Officer.
31.2 Rule 13a-14(d) and 15d-14(d) Certification of the Chief Financial Officer.
32.0 Section 1350 Certification.
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definitions Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 14, 2024 By: /s/ Robert T. Strong
Robert T. Strong<br> <br>President and Chief Executive Officer
Date: August 14, 2024 By: /s/ John J. Augustine
John J. Augustine<br> <br>Executive Vice President and<br> <br>Chief Financial Officer

HTML Editor

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Robert T. Strong, certify that:

1.         I have reviewed this quarterly report on Form 10-Q of Quaint Oak Bancorp, Inc. (the "registrant");

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.         The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2024 /s/ Robert T. Strong
Robert T. Strong<br><br> <br>President and Chief Executive Officer

HTML Editor

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, John J. Augustine certify that:

1.         I have reviewed this quarterly report on Form 10-Q of Quaint Oak Bancorp, Inc. (the "registrant");

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.         The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.         The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2024 /s/ John J. Augustine
John J. Augustine<br><br> <br>Executive Vice President and<br><br> <br>Chief Financial Officer

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Exhibit 32.0

SECTION 1350 CERTIFICATION

Each of Robert T. Strong, President and Chief Executive Officer and John J. Augustine, Executive Vice President and Chief Financial Officer of Quaint Oak Bancorp, Inc. (the "Company"), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)         The quarterly report on Form 10-Q of the Company for the period ended June 30, 2024 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2)         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2024 By: /s/ Robert T. Strong
Robert T. Strong<br><br> <br>President and Chief Executive Officer
Date: August 14, 2024 By: /s/ John J. Augustine
John J. Augustine<br><br> <br>Executive Vice President and<br><br> <br>Chief Financial Officer

Note: A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act has been provided to Quaint Oak Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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