qnto20240930

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	September 30, 2024
OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from		to

Commission file number:	000-52694

QUAINT OAK BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania		35-2293957
(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

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 12, 2024, 2,633,465 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 September 30, 2024 and December 31, 2023 (Unaudited)	1

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	2

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	4

Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	5

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)	7

Notes to the Unaudited Consolidated Financial Statements	9

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	41

Item 4 - Controls and Procedures	41

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings	41

Item 1A - Risk Factors	41

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3 - Defaults Upon Senior Securities	42

Item 4 - Mine Safety Disclosures	42

Item 5 - Other Information	42

Item 6 - Exhibits	43

SIGNATURES

ITEM 1. FINANCIAL STATEMENTS

Quaint Oak Bancorp, Inc.

Consolidated Balance Sheets (Unaudited)

	At September 30,			At December 31,
	2024			2023
	(In thousands, except share and per share data)
Assets
Due from banks, non-interest-bearing	$	366		$	767
Due from banks, interest-bearing		60,976			57,239
Cash and cash equivalents		61,342			58,006
Investment in interest-earning time deposits		912			1,912
Investment securities available for sale		1,841			2,341
Loans held for sale		70,855			36,448
Loans receivable, net of allowance for credit losses (2024 $6,897; 2023 $6,758)		547,303			617,701
Accrued interest receivable		4,401			3,502
Investment in Federal Home Loan Bank stock, at cost		1,854			1,474
Bank-owned life insurance		4,416			4,329
Premises and equipment, net		2,931			2,656
Goodwill		515			515
Other intangible, net of accumulated amortization		89			125
Prepaid expenses and other assets		5,146			5,134
Assets from discontinued operations		-			19,975
Total Assets	$	701,605		$	754,118
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Non-interest bearing	$	68,459		$	92,215
Interest-bearing		514,960			539,484
Total deposits		583,419			631,699
Federal Home Loan Bank short-term borrowings		35,000			-
Federal Home Loan Bank long-term borrowings		3,855			29,022
Subordinated debt		22,000			21,957
Accrued interest payable		508			541
Advances from borrowers for taxes and insurance		2,874			3,730
Accrued expenses and other liabilities		2,554			2,438
Liabilities from discontinued operations		-			13,166
Total Liabilities		650,210			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 September 30, 2024 and December 31, 2023, respectively; 2,633,374 and 2,407,048 outstanding at September 30, 2024 and December 31, 2023, respectively		31			29
Additional paid-in capital		22,904			20,299
Treasury stock, at cost: 475,619 and 488,627 shares at September 30, 2024 and December 31, 2023, respectively		(3,502	)		(3,568	)
Accumulated other comprehensive income (loss)		1			(10	)
Retained earnings		31,961			31,741
Total Stockholders' Equity	$	51,395		$	48,491
Noncontrolling interest from discontinued operations		-			3,074
Total Stockholders’ Equity		51,395			51,565
Total Liabilities and Stockholders’ Equity	$	701,605		$	754,118

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
	(In thousands, except for share data)
Interest and Dividend Income
Interest on loans, including fees	$	9,895		$	10,851		$	30,445		$	33,183
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock		577			260			3,046			750
Total Interest and Dividend Income		10,472			11,111			33,491			33,933

Interest Expense
Interest on deposits		5,641			5,068			17,795			13,273
Interest on Federal Home Loan Bank short-term borrowings		32			783			32			3,583
Interest on Federal Home Loan Bank long-term borrowings		62			372			471			1,003
Interest on Federal Reserve Bank long-term borrowings		-			11			-			30
Interest on subordinated debt		489			417			1,461			1,021
Total Interest Expense		6,224			6,651			19,759			18,910
Net Interest Income		4,248			4,460			13,732			15,023
Provision for Credit Losses – Loans		143			270			1,227			279
(Recovery of) Provision for Credit Losses – Unfunded Commitments		(20	)		(13	)		(9	)		181
Total Provision for Credit Losses		123			257			1,218			460
Net Interest Income after Provision for Credit Losses		4,125			4,203			12,514			14,563

Non-Interest Income
Mortgage banking, equipment lending and title abstract fees		237			158			627			421
Real estate sales commissions, net		-			16			20			88
Insurance commissions		198			190			526			486
Other fees and services charges		116			154			582			296
Loan servicing income		2			2			5			148
Income from bank-owned life insurance		30			26			87			75
Net gain on sale of loans		503			381			1,998			1,208
Gain on the sale of SBA loans		124			95			251			346
Total Non-Interest Income		1,210			1,022			4,096			3,068

Non-Interest Expense
Salaries and employee benefits		3,483			3,301			10,818			10,424
Directors' fees and expenses		52			108			153			315
Occupancy and equipment		330			446			996			1,138
Data processing		321			311			894			737
Professional fees		26			255			323			597
FDIC deposit insurance assessment		158			197			494			669
Advertising		42			42			202			208
Amortization of other intangible		12			12			36			36
Other		500			473			1,368			1,367
Total Non-Interest Expense		4,924			5,145			15,284			15,491

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2024		2023			2024		2023
	(In thousands, except for share data)
Income from continuing operations before income taxes	$	411	$	80		$	1,326	$	2,140
Income taxes		168		35			516		648
Net income from continuing operations	$	243	$	45		$	810	$	1,492
(Loss) income from discontinued operations	$	-	$	(417	)	$	564	$	(852	)
Income tax (benefit)	$	-	$	(117	)	$	158	$	(238	)
Net (loss) income from discontinued operations	$	-	$	(300	)	$	406	$	(614	)
Net Income (Loss)	$	243	$	(255	)	$	1,216	$	878

Earnings per share from continuing operations - basic	$	0.09	$	0.02		$	0.32	$	0.68
(Loss) earnings per share from discontinued operations - basic	$	-	$	(0.13	)	$	0.15	$	(0.28	)
Earnings (loss) per share, net – basic	$	0.09	$	(0.11	)	$	0.47	$	0.40
Average shares outstanding – basic		2,631,048		2,244,163			2,560,993		2,221,441
Earnings per share from continuing operations- diluted	$	0.09	$	0.02		$	0.32	$	0.66
(Loss) earnings per share from discontinued operations - diluted	$	-	$	(0.13	)	$	0.15	$	(0.27	)
Earnings (loss) per share, net - diluted	$	0.09	$	(0.11	)	$	0.47	$	0.39
Average shares outstanding - diluted		2,631,048		2,260,176			2,560,993		2,255,315

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
	(In thousands)
Net Income from Continuing Operations	$	243		$	45		$	810		$	1,492

Other Comprehensive Income (Loss):
Unrealized gains on investment securities available-for-sale		4			1			14			12
Income tax effect		(1	)		-			(3	)		(3	)
Other comprehensive income		3			1			11			9

Total Comprehensive Income	$	246		$	46		$	821		$	1,501
Comprehensive Income (Loss) from Discontinued Operations	$	-		$	(300	)	$	406		$	(614	)
Comprehensive Income (Loss) Attributable to Quaint Oak Bancorp, Inc.	$	246		$	(254	)	$	1,227		$	887

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Stockholders' Equity (Unaudited)

For the Three Months Ended September 30, 2024

	Common Stock										Accumulated
	Number of					Additional					Other						Total
	Shares					Paid-in		Treasury			Comprehensive			Retained			Stockholders’
	Outstanding			Amount		Capital		Stock			Income (Loss)			Earnings			Equity
	(In thousands, except share and per share data)
BALANCE – JUNE 30, 2024		2,629,289		$	31	$	22,828	$	(3,527	)	$	(2	)	$	32,060		$	51,390

Treasury stock purchase		(333	)						(4	)								(4	)

Reissuance of treasury stock under 401(k) Plan		4,418					16		29									45

Stock based compensation expense							60											60

Cash dividends declared ($0.13 per share)															(342	)		(342	)

Net income															243			243

Other comprehensive income, net												3						3

BALANCE – SEPTEMBER 30, 2024		2,633,374		$	31	$	22,904	$	(3,502	)	$	1		$	31,961		$	51,395

For the Three Months Ended September 30, 2023

	Common Stock										Accumulated
	Number of					Additional					Other									Total
	Shares					Paid-in		Treasury			Comprehensive			Retained			Noncontrolling			Stockholders’
	Outstanding			Amount		Capital		Stock			Income (Loss)			Earnings			Interest			Equity
	(In thousands, except share and per share data)
BALANCE – JUNE 30, 2023		2,236,422		$	28	$	18,121	$	(3,814	)	$	(16	)	$	31,440		$	3,004		$	48,763

Treasury stock purchase		(5,473	)						(127	)											(127	)

Issued from authorized and unallocated		1,300					20														20

Reissuance of treasury stock under 401(k) Plan		9,699					90		62												152

Reissuance of treasury stock under stock incentive plan		31,103					212		201												413

Stock based compensation expense							61														61

Cash dividends declared ($0.13 per share)															(290	)					(290	)

Net loss															(255	)		(399	)		(654	)

Other comprehensive income, net												1									1

BALANCE – SEPTEMBER 30, 2023		2,273,051		$	28	$	18,504	$	(3,678	)	$	(15	)	$	30,895		$	2,605		$	48,339

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Stockholders' Equity (Unaudited)

For the Nine Months Ended September 30, 2024

	Common Stock												Accumulated
	Number of						Additional						Other						Total
	Shares						Paid-in			Treasury			Comprehensive			Retained			Stockholders'
	Outstanding				Amount		Capital			Stock			Income (Loss)			Earnings			Equity
	(In thousands, except share and per share data)
BALANCE – DECEMBER 31, 2023		2,407,048		$	29	$	20,299		$	(3,568	)	$	(10	)	$	31,741		$	48,491

Treasury stock purchase		(4,575	)							(48	)								(48	)

Issued from authorized and unallocated		213,318			2		2,446												2,448

Reissuance of treasury stock under 401(k) Plan		8,583					35			56									91

Reissuance of treasury stock under stock incentive plan		9,000					(58	)		58

Stock based compensation expense							182												182

Cash dividends declared ($0.39 per share)																(996	)		(996	)

Net income																1,216			1,216

Other comprehensive income, net													11						11

BALANCE – SEPTEMBER 30, 2024		2,633,374		$	31	$	22,904		$	(3,502	)	$	1		$	31,961		$	51,395

For the Nine Months Ended September 30, 2023

	Common Stock											Accumulated
	Number of						Additional					Other									Total
	Shares						Paid-in		Treasury			Comprehensive			Retained			Noncontrolling			Stockholders'
	Outstanding				Amount		Capital		Stock			Income (Loss)			Earnings			Interest			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		(22,327	)						(433	)											(433	)

Issued from authorized and unallocated		1,300					20														20

Reissuance of treasury stock under stock incentive plan		40,225					155		258												413

Reissuance of treasury stock under 401(k) Plan		12,940					135		83												218

Reissuance of treasury stock for exercised stock options		73,300					123		406												529

Stock based compensation expense							165														165

Cash dividends declared ($0.39 per share)															(858	)					(858	)

Noncontrolling interest member distribution																		(866	)		(866	)

Net income (loss)															878			(818	)		60

Other comprehensive income, net												9									9

BALANCE – SEPTEMBER 30, 2023		2,273,051		$	28	$	18,504	$	(3,678	)	$	(15	)	$	30,895		$	2,605		$	48,339
See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months
	Ended September 30,
	2024			2023
	(In Thousands)
Cash Flows from Operating Activities
Net income from continuing operations	$	810		$	1,492
Net income (loss) from discontinued operations		406			(614	)
Net income		1,216		$	878
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit losses		1,218			460
Depreciation expense		433			384
Amortization, net		44			334
Accretion of deferred loan fees and costs, net		(411	)		(587	)
Stock-based compensation expense		182			165
Net gain on sale of loans		(1,998	)		(1,208	)
Loans held for sale-originations		(99,590	)		(59,875	)
Loans held for sale-proceeds		95,128			60,582
Transfer of loans from Oakmont Capital Holdings, LLC		4,388			-
Gain on the sale of SBA loans		(251	)		(346	)
Increase in the cash surrender value of bank-owned life insurance		(87	)		(75	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(899	)		154
Prepaid expenses and other assets		21			(610	)
Accrued interest payable		(34	)		171
Accrued expenses and other liabilities		116			(1,125	)
Net Cash Used in Operating Activities of Continuing Operations		(524	)		(698	)
Net Cash Provided by Operating Activities of Discontinued Operations		27,962			36,454
Net Cash Provided by Operating Activities		27,438			35,756
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		514			501
Net increase (decrease) in loans receivable		8,980			(1,012	)
Proceeds from the sale of Oakmont Capital Holdings, LLC		4,300			-
Purchase of Federal Home Loan Bank stock		(2,627	)		(1,780	)
Redemption of Federal Home Loan Bank stock		2,247			5,067
Purchase of premises and equipment		(708	)		(576	)
Net Cash Provided by Investing Activities		13,706			3,871
Net Cash Provided by Investing Activities of Discontinued Operations		-			1,727
Net Cash Provided by Investing Activities		13,706			5,598
Cash Flows from Financing Activities
Net (decrease) increase in demand deposits, money markets, and savings accounts		(65,928	)		19,504
Net increase in certificate accounts		17,648			22,588
Decrease in advances from borrowers for taxes and insurance		(856	)		(774	)
Repayments of Federal Home Loan Bank short-term borrowings		(30,000	)		(119,700	)
Proceeds from Federal Home Loan Bank short-term borrowings		65,000			61,500
Repayments of Federal Home Loan Bank long-term borrowings		(25,167	)		(25,000	)
Repayments of Federal Reserve Bank short-term borrowings		-			(7,000	)
Net proceeds from subordinated debt		-			13,743
Dividends paid		(996	)		(859	)
Proceeds from the reissuance of treasury stock under 401(k) plan		91			218
Proceeds from shares issued from authorized and unallocated		2,448			434
Acquisition of treasury stock		(48	)		(433	)
Proceeds from the exercise of stock options		-			529

See accompanying notes to the unaudited consolidated financial statements.

Quaint Oak Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

	For the Nine Months
	Ended September 30,
	2024			2023
	(In Thousands)
Net Cash Used in Financing Activities from Continuing Operations	$	(37,808	)	$	(35,250	)
Net Increase in Cash and Cash Equivalents		3,336			6,104
Cash and Cash Equivalents – Beginning of Year		58,006			4,433
Cash and Cash Equivalents – End of Year	$	61,342		$	10,537
Supplementary Disclosure of Cash Flow and Non-Cash Information:
Cash payments for interest	$	19,792		$	17,855
Cash payments for income taxes	$	630		$	2,566
Initial recognition of operating lease right-of use assets	$	-		$	1,563
Initial recognition of operating lease obligations	$	-		$	1,563
Transfer of loans held for investment to loans held for sale	$	(60,862	)	$	-
Net increase in loans receivable from transfer of loans held for investment to loans held for sale	$	60,862		$	-

See accompanying notes to the unaudited consolidated financial statements.

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 September 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 September 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 nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

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

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.

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 September 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 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 of this new guidance on its financial statements.

Reclassifications. Certain items in the prior period consolidated financial statements have been reclassified to conform to the presentation in the current period 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 Income 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 September 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 nine months ended September 30, 2024 and September 30, 2023 (in thousands):

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2024		2023			2024			2023
	(In thousands, except for share data)
Interest and Dividend Income
Interest on loans, including fees	$	-	$	145		$	70		$	423
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock		-		-			-			-
Total Interest and Dividend Income		-		145			70			423

Interest Expense
Interest on other borrowings		-		434			295			1,376
Total Interest Expense		-		434			295			1,376
Net Interest Loss		-		(289	)		(225	)		(953	)

Non-Interest Income
Mortgage banking, equipment lending and title abstract fees		-		281			404			1,390
Other fees and services charges		-		254			197			556
Net loan servicing income		-		801			726			3,008
Net gain on sale of loans		-		671			366			1,796
Gain on sale of OCH ⁽¹⁾		-		-			1,378			-
Total Non-Interest Income		-		2,007			3,071			6,750

Non-Interest Expense
Salaries and employee benefits		-		1,995			1,681			5,741
Occupancy and equipment		-		212			219			608
Professional fees		-		22			31			81
Advertising		-		36			146			306
Other		-		269			987			731
Total Non-Interest Expense		-		2,534			3,064			7,467
Total net loss from discontinued operations	$	-	$	(816	)	$	(218	)	$	(1,670	)
Loss attributable to non-controlling interest		-		(399	)		(782	)		(818	)
Net (loss) gain from discontinued operations	$	-	$	(417	)	$	564		$	(852	)

(1) Gain on sale of OCH has been reclassified from prior periods from continuing operations to discontinued operations.

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 nine months ended September 30, 2024, all unvested restricted stock program awards and outstanding stock options representing shares were anti-dilutive. For the three months ended September 30, 2023, all unvested restricted stock program awards and outstanding stock options representing shares were anti-dilutive. For the nine months ended September 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 Ended September 30,					For the Nine Months Ended September 30,
	2024		2023			2024		2023
Net Income (Loss) Attributable to Quaint Oak Bancorp, Inc.	$	243,000	$	(255,000	)	$	1,216,000	$	878,000

Weighted average shares outstanding – basic		2,631,048		2,244,163			2,560,993		2,221,441
Effect of dilutive common stock equivalents		-		16,013			-		33,874
Adjusted weighted average shares outstanding – diluted		2,631,048		2,260,176			2,560,993		2,255,315

Basic earnings per share from continuing operations⁽¹⁾	$	0.09	$	0.02		$	0.32	$	0.68
Basic (loss) earnings per share from discontinued operations⁽¹⁾	$	-	$	(0.13	)	$	0.15	$	(0.28	)
Basic (loss) earnings per share, net	$	0.09	$	(0.11	)	$	0.47	$	0.40
Diluted earnings per share from continuing operations⁽¹⁾	$	0.09	$	0.02		$	0.32	$	0.66
Diluted earnings (loss) per share from discontinued operations⁽¹⁾	$	-	$	(0.13	)	$	0.15	$	(0.27	)
Diluted earnings per share, net	$	0.09	$	(0.11	)	$	0.47	$	0.39

_________________

(1) Earnings per share from continuing operations and discontinued operations for the nine months ended September 30, 2024 reflect the reclassification of the gain on sale of OCH.

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 nine months ended September 30, 2024 and 2023 (in thousands):

	Unrealized Gains (Losses) on Investment Securities Available for Sale (1)
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023
Balance at the beginning of the period	$	(2	)	$	(16	)	$	(10	)	$	(24	)
Other comprehensive income		3			1			11			9
Balance at the end of the period	$	1		$	(15	)	$	1		$	(15	)

_________________

(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 nine months ended September 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 September 30, 2024 and December 31, 2023 are summarized below (in thousands):

	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale:
Mortgage-backed securities:
Government National Mortgage Association securities	$	1,787	$	-	$	(2	)	$	1,785
Federal National Mortgage Association securities		54		2		-			56
Total available-for-sale-securities	$	1,841	$	2	$	(2	)	$	1,841

	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized 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 September 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	$	1,841	$	1,841
Total	$	1,841	$	1,841

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 September 30, 2024 and December 31, 2023 (in thousands):

						September 30, 2024
		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	6	$	56	$	-	$	804	$	(2	)	$	860	$	(2	)

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 September 30, 2024 and 2023.

There were no credit losses recognized during the three or nine months ended September 30, 2024 and 2023. There were no sales during the three or nine months ended September 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):

	September 30, 2024			December 31, 2023
Real estate loans:
One-to-four family residential:
Owner occupied	$	24,361		$	22,885
Non-owner occupied		34,254			40,455
Total one-to-four family residential		58,615			63,340
Multi-family (five or more) residential		47,463			46,680
Commercial real estate		300,182			331,174
Construction		23,878			35,585
Home equity		5,507			6,162
Total real estate loans		435,645			482,941

Commercial business		118,783			142,220
Other consumer		49			69
Total Loans		554,477			625,230

Deferred loan fees and costs		(277	)		(771	)
Allowance for credit losses		(6,897	)		(6,758	)
Net Loans	$	547,303		$	617,701

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

	Term Loans Amortized Cost by Origination Year
As of September 30, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Total
One-to-four family residential owner occupied
Risk rating
Pass	$	5,782	$	5,525	$	5,222	$	3,749	$	1,648	$	2,435	$	-	$	24,361
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total one-to-four family residential owner occupied	$	5,782	$	5,525	$	5,222	$	3,749	$	1,648	$	2,435	$	-	$	24,361
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

One-to-four family residential non- owner occupied
Risk rating
Pass	$	1,328	$	1,926	$	6,093	$	11,623	$	1,983	$	11,301	$	-	$	34,254
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total one-to-four family residential non-owner occupied	$	1,328	$	1,926	$	6,093	$	11,623	$	1,983	$	11,301		-	$	34,254
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 September 30, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Total
Multi-family residential
Risk rating
Pass	$	5,313	$	928	$	14,280	$	13,245	$	4,096	$	9,601	$	-	$	47,463
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total multi-family residential	$	5,313	$	928	$	14,280	$	13,245	$	4,096	$	9,601	$	-	$	47,463
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate
Risk rating
Pass	$	14,004	$	46,727	$	100,710	$	58,853	$	25,952	$	49,049	$	4,321	$	299,616
Special mention		-		-		333		-		-		-		-		333
Substandard		-		-		233		-		-		-		-		233
Doubtful		-		-		-		-		-		-		-		-
Total commercial real estate	$	14,004	$	46,727	$	101,276	$	58,853	$	25,952	$	49,049	$	4,321	$	300,182
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction
Risk rating
Pass	$	2,862	$	9,527	$	5,916	$	5,573	$	-	$	-	$	-	$	23,878
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total construction	$	2,862	$	9,527	$	5,916	$	5,573	$	-	$	-	$	-	$	23,878
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	187	$	-	$	187

Home equity
Risk rating
Pass	$	-	$	377	$	-	$	116	$	-	$	177	$	4,837	$	5,507
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total home equity	$	-	$	377	$	-	$	116	$	-	$	177	$	4,837	$	5,507
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial business
Risk rating
Pass	$	16,882	$	4,456	$	53,023	$	19,963	$	3,486	$	1,940	$	14,485	$	114,235
Special mention		-		-		-		379		591		-		139		1,109
Substandard		-		-		1,287		2,074		33		-		45		3,439
Doubtful		-		-		-		-		-		-		-		-
Total commercial business	$	16,882	$	4,456	$	54,310	$	22,416	$	4,110	$	1,940	$	14,669	$	118,783
Current period gross charge-offs	$	234	$	-	$	618	$	55	$	-	$	-	$	-	$	907

Other consumer
Risk rating
Pass	$	49	$	-	$	-	$	-	$	-	$	-	$	-	$	49
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total other consumer	$	49	$	-	$	-	$	-	$	-	$	-	$	-	$	49
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total
Risk rating
Pass	$	46,220	$	69,466	$	185,244	$	113,122	$	37,165	$	74,503	$	23,643	$	549,363
Special mention		-		-		333		379		591		-		139		1,442
Substandard		-		-		1,520		2,074		33		-		45		3,672
Doubtful		-		-		-		-		-		-		-		-
Total	$	46,220	$	69,466	$	187,097	$	115,575	$	37,789	$	74,503	$	23,827	$	554,477
Current period gross charge-offs	$	234	$	-	$	618	$	55	$	-	$	187	$	-	$	1,094

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
Risk rating
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 September 30, 2024 and December 31, 2023 (in thousands):

	September 30, 2024
	Non-accrual loans						90 Days or More Past Due and Accruing		Total Non-Performing
	With a Related Allowance		Without a Related Allowance		Total		90 Days or More Past Due and Accruing		Total Non-Performing
Commercial real estate	$	-	$	-	$	-	$	449	$	449
Commercial business		1,991		2,995		4,986		-		4,986
Total	$	1,991	$	2,995	$	4,986	$	449	$	5,435

As part of the discontinued operations of OCH, the Bank retained approximately 60 loans totaling $4.4 million loans, which were classified as non-accrual. As of September 30, 2024, the value of these total $3.5 million, made up of approximately 38 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
	With a Related Allowance		Without a Related Allowance		Total		90 Days or More Past Due and Accruing		Total Non-Performing
One-to-four family residential owner occupied	$	-	$	-	$	-	$	401	$	401
Commercial real estate		-		51		51		-		51
Total	$	-	$	51	$	51	$	401	$	452

For the three and nine months ended September 30, 2024 and September 30, 2023 there was no interest income recognized on non-accrual loans on a cash basis. There was $124,000 and $279,000 of interest income foregone on non-accrual loans for the three and nine months ended September 30, 2024, respectively and $4,000 and $8,000 for the three and nine months ended September 30, 2023, respectively.

For the nine months ended September 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 nine months ended September 30, 2024 (in thousands):

	September 30, 2024
	1-4 Family Residential Owner Occupied			1-4 Family Residential Non-Owner Occupied			Multi-Family Residential		Commercial Real Estate			Construction			Home Equity			Commercial Business and Other Consumer			Total
For the Three Months Ended September 30, 2024 Allowance for credit losses:
Beginning balance	$	179		$	206		$	801	$	2,769		$	459		$	63		$	2,916		$	7,393
Charge-offs		-			-			-		-			(187	)		-			(455	)		(642	)
Recoveries		-			-			-		-			-			-			3			3
Provision		(2	)		(21	)		53		(559	)		(76	)		(13	)		761			143
Ending balance	$	177		$	185		$	854	$	2,210		$	196		$	50		$	3,225		$	6,897

For the Nine Months Ended September 30, 2024 Allowance for credit losses:
Beginning balance	$	153		$	219		$	420	$	2,784		$	583		$	61		$	2,538		$	6,758
Charge-offs		-			-			-		-			(187	)		-			(907	)		(1,094	)
Recoveries		-			-			-		-			-			-			6			6
Provision		24			(34	)		434		(574	)		(200	)		(11	)		1,588			1,227
Ending balance	$	177		$	185		$	854	$	2,210		$	196		$	50		$	3,225		$	6,897

The Bank allocated decreased allowance for credit loss provisions to the commercial real estate loan portfolio classes for the three months ended September 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 commercial real estate loan portfolio classes for the nine months ended September 30, 2024, due primarily to changes in quantitative factors and 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 nine months ended September 30, 2024, due primarily to decrease in loan balances and changes in qualitative 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 nine months ended September 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 September 30, 2024 (in thousands):

September 30, 2024

1-4 Family

Residential Owner Occupied

1-4 Family

Residential Non-Owner Occupied

Multi-Family

Residential

Commercial

Real Estate

Construction

Home

Equity

Commercial Business and Other Consumer

Total

Individually evaluated for impairment

233

(1)

1,758

(2)

1,991

(1)

Collateralized by real estate

(2)

Collateralized by business assets and equipment

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

Following is a summary, by loan portfolio class, of changes in the allowance for credit losses for the three and nine months ended September 30, 2023 (in thousands):

	September 30, 2023
	1-4 Family Residential Owner Occupied		1-4 Family Residential Non-Owner Occupied			Multi-Family Residential			Commercial Real Estate			Construction			Home Equity		Commercial Business and Other Consumer			Unallocated			Total
For the Three Months Ended September 30, 2023 Allowance for credit losses:
Beginning balance	$	137	$	243		$	415		$	3,175		$	848		$	49	$	2,589		$	-		$	7,456
Impact of ASU 326		-		-			-			-			-			-		-			-			-
Charge-offs		-		-			-			-			-			-		(605	)		-			(605	)
Recoveries		-		-			-			-			-			-		-			-			-
Provision⁽¹⁾		5		16			(11	)		(35	)		(166	)		7		454			-			270
Ending balance	$	142	$	259		$	404		$	3,140		$	682		$	56	$	2,438		$	-		$	7,121

For the Nine Months Ended September 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	)		-			-		(702	)		-			(836	)
Recoveries		-		-			-			-			-			-		-			-			-
Provision⁽¹⁾		19		(36	)		(47	)		(476	)		378			23		718			(300	)		279
Ending balance	$	142	$	259		$	404		$	3,140		$	682		$	56	$	2,438		$	-		$	7,121

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

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

The Company allocated decreased allowance for credit loss provisions to the construction loan portfolio class for the three months ended September 30, 2023, due primarily to 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 nine months ended September 30, 2023, due primarily to changes in qualitative factors related to improved asset quality in this portfolio class. The Company allocated increased allowance for credit loss provisions to the commercial business loan portfolio class for the three months ended September 30, 2023, due primarily to changes in quantitative factors in this portfolio class. The Company allocated increased allowance for credit loss provisions to the construction loan portfolio class for the nine months ended September 30, 2023, due primarily to changes in qualitative factors and an increase in loan balances in this portfolio class.

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 September 30, 2024 and December 31, 2023 (in thousands):

	September 30, 2024
	30-89 Days Past Due		90 Days or More Past Due		Current		Total Loans Receivable
One-to-four family residential owner occupied	$	1,486	$	-	$	22,875	$	24,361
One-to-four family residential non-owner occupied		635		-		33,619		34,254
Multi-family residential		-		-		47,463		47,463
Commercial real estate		7,806		682		291,694		300,182
Construction		794		-		23,084		23,878
Home equity		491		-		5,016		5,507
Commercial business		100		4,753		113,930		118,783
Other consumer		-		-		49		49
Total	$	11,312	$	5,435	$	537,730	$	554,477

	December 31, 2023
	30-89 Days Past Due		90 Days or More Past Due		Current		Total Loans 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

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 September 30, 2024 and 2023 was $89,000, and $125,000, respectively, which is net of accumulated amortization of $396,000 and $348,000, respectively. Amortization expense for both the three and nine months ended September 30, 2024 and 2023 amounted to approximately $12,000 and $36,000, respectively.

Note 8 – Deposits

Deposits consist of the following classifications (in thousands):

	September 30, 2024		December 31, 2023
Non-interest bearing checking accounts	$	68,459	$	92,216
Interest bearing checking accounts⁽¹⁾		67,794		104,274
Savings accounts		605		841
Money market accounts⁽²⁾		213,069		218,525
Certificates of deposit		233,492		215,843
Total deposits	$	583,419	$	631,699

(1)

The Company has identified one major interest bearing checking account deposit customer that accounted for approximately 11.6% and 16.5% of total deposits at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, the combined outstanding balances of the major deposit customer’s interest bearing checking account totaled approximately $67.8 million and $104.3 million, respectively.

(2)

The Company has identified one major money market deposit customer, a separate customer than the interest bearing checking account deposit customer referred to above in footnote (1), that accounted for approximately 25.7% and 23.7% of total deposits at September 30, 2024 and December 31, 2023, respectively. At both September 30, 2024 and December 31, 2023, the combined outstanding balances of the major deposit customer’s money market accounts totaled approximately $150.0 million.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 9 – Borrowings

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

	September 30, 2024					December 31, 2023
	Amount		Weighted Interest Rate			Amount		Weighted Interest Rate
Short-term borrowings	$	35,000		5.18	%	$	-		-	%
Fixed rate borrowings maturing:
2024	$	1,000		2.54	%	$	21,167		4.25	%
2025		2,855		1.25			7,855		3.40
Total FHLB long-term debt	$	3,855		1.59	%	$	29,022		4.02	%

The balance of subordinated debt, net of unamortized debt issuance costs, was $22.0 million at both September 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 nine months ended September 30, 2024 and September 30, 2023, the Company did not make a discretionary contribution of shares to the ESOP and no expense was recognized.

Stock Incentive Plan – 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 September 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.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 10 – Stock Compensation Plans (Continued)

Stock Incentive Plans – Share Awards

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

	September 30, 2024
	Number of Shares			Weighted 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 both the three months ended September 30, 2024 and 2023, the Company recognized approximately $41,000 of compensation expense. During both the three months ended September 30, 2024 and 2023, the Company recognized a tax benefit of approximately $9,000. During the nine months ended September 30, 2024 and 2023, the Company recognized approximately $122,000 and $115,000 of compensation expense, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized a tax benefit of approximately $26,000 and $24,000, respectively. As of September 30, 2024, approximately $587,000 in additional compensation expense will be recognized over the remaining service period of approximately 3.6 years.

Stock Incentive Plans – Stock Options

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. 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 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 September 30, 2024, a total of 224,033 grants of stock options were outstanding under the 2013, 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.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 10 – Stock Compensation Plans (Continued)

Stock Option and Stock Incentive Plans – Stock Options (Continued)

During both the three months ended September 30, 2024 and 2023, the Company recognized approximately $20,000 of compensation expense on stock options. During both the three months ended September 30, 2024 and 2023, the Company recognized a tax benefit of approximately $1,000. During the nine months ended September 30, 2024 and 2023, the Company recognized approximately $60,000 and $50,000 of compensation expense, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized a tax benefit of approximately $4,000 and $3,000, respectively. As of September 30, 2024, approximately $292,000 in additional compensation expense will be recognized over the remaining service period of approximately 3.6 years.

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

	September 30, 2024
	Number of Shares		Weighted Average Exercise Price		Weighted 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		6.5
Exercisable at end of period		118,033	$	14.36		4.8

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.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

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

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.

Level III: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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.

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.

Quaint Oak Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

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

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 September 30, 2024 (in thousands):

	September 30, 2024
	Fair Value Measurements Using:
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Recurring fair value measurements:
Investment securities available for sale
Government National Mortgage Association mortgage-backed securities	$	1,785	$	-	$	1,785	$	-
Federal National Mortgage Association mortgage- backed securities		56		-		56		-
Total investment securities available for sale	$	1,841	$	-	$	1,841	$	-
Total recurring fair value measurements	$	1,841	$	-	$	1,841	$	-

Nonrecurring fair value measurements
Collateral-dependent loans	$	1,078	$	-	$	-	$	1,078
Total nonrecurring fair value measurements	$	1,078	$	-	$	-	$	1,078

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 (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (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 September 30, 2024 (in thousands):

	September 30, 2024
	Quantitative Information About Level 3 Fair Value Measurements
	Total Fair Value		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Collateral-dependent loans	$	1,078	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.

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 September 30, 2024 and December 31, 2023 (in thousands):

					Fair Value Measurements at
					September 30, 2024
	Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Financial Assets
Investment in interest-earning time deposits	$	912	$	968	$	-	$	-	$	968
Loans held for sale		70,855		72,164		-		72,164		-
Loans receivable, net		547,303		530,511		-		-		530,511

Financial Liabilities
Deposits		583,419		590,778		349,928		-		240,850
FHLB long-term borrowings		3,855		3,848		-		-		3,848
Subordinated debt		22,000		21,519		-		-		21,519

					Fair Value Measurements at
					December 31, 2023
	Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (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, FHLB short term borrowings, 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.

Note 12 – Subsequent Event

Effective as of October 23, 2024 (the “Effective Date”), Quaint Oak Bancorp, Inc. entered into an Agreement for Purchase and Sale of Property (the “Agreement”) with Mountainseed Real Estate Services, LLC, a Georgia limited liability company (the “Buyer”). Pursuant to the Agreement, the Company agreed to sell to the Buyer property located at 1710 Union Boulevard, Allentown, Pennsylvania (the “Property”) for a purchase price of $2.9 million and the Buyer agreed to lease back the Property to the Bank. The Property is currently used in part as the Bank’s Lehigh Valley banking office, as administrative offices for several of the Bank’s subsidiary companies, and a portion of the Property is also subleased to a third-party real estate company.

The sale of the Property shall close (the “Closing”) on a date mutually acceptable to the Company and the Buyer within thirty (30) days after the expiration of a reasonable inspection period up to forty-five (45) days after the Effective Date of the Agreement granted to the Buyer to evaluate and study the Property, subject to extension.

Pursuant to the Agreement, the Buyer will, concurrently with the Closing, lease the Property to the Bank by execution of a lease and occupancy agreement in a form agreed to by the Company, the Buyer and the Bank. The Bank will continue to use the Property as an administrative office and will sublease a portion of the Property to the current tenant.

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 September 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 September 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.

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 nine months ended September 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 September 30, 2024 and December 31, 2023

General. The Company’s total assets at September 30, 2024 were $701.6 million, a decrease of $52.5 million, or 7.0%, from $754.1 million at December 31, 2023. This decrease in total assets was primarily due to a $70.4 million, or 11.4%, decrease in loans receivable, net of allowance for credit losses. Partially offsetting the decrease in total assets was a $34.4 million, or 94.4%, increase in loans held for sale, a $3.3 million, or 5.8%, increase in cash and cash equivalents, an $899,000, or 25.7%, increase in accrued interest receivable, a $380,000, or 25.8%, increase in investment in Federal Home Loan Bank stock, at cost, and a $275,000, or 10.4%, increase in premises and equipment, net.

Cash and Cash Equivalents. Cash and cash equivalents increased $3.3 million, or 5.8%, from $58.0 million at December 31, 2023 to $61.3 million at September 30, 2024, with the expectation that excess liquidity will be used to fund loans.

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 September 30, 2024 as four interest-earning time deposits matured and were not renewed and one interest-earning time deposit was purchased during the nine months ended September 30, 2024.

Investment Securities Available for Sale. Investment securities available for sale decreased $500,000, or 21.4%, from $2.3 million at December 31, 2023 to $1.8 million at September 30, 2024, due primarily to the principal repayments on these securities during the nine months ended September 30, 2024.

Loans Held for Sale. Loans held for sale increased $34.4 million, or 94.4%, from $36.4 million at December 31, 2023 to $70.9 million at September 30, 2024 as the Bank originated $51.5 million in equipment loans held for sale and sold $71.6 million of equipment loans during the nine months ended September 30, 2024. Partially offsetting this increase 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 $99.6 million of one-to-four family residential loans during the nine months ended September 30, 2024 and sold $93.1 million of loans in the secondary market during this same period. In the third quarter of 2024, management identified $51.0 million of commercial real estate loans and $9.9 million of SBA loans within the loan portfolio and transferred to loans held for sale at amortized cost which was less than fair value.

Loans Receivable, Net. Loans receivable, net, decreased $70.4 million, or 11.4%, to $547.3 million at September 30, 2024 from $617.7 million December 31, 2023. The largest decreases within the loan portfolio occurred in commercial real estate loans which decreased $31.0 million, or 9.4%, commercial business loans which decreased $23.4 million, or 16.5%, construction loans which decreased $11.7 million, or 32.9%, and one-to-four family non-owner occupied loans which decreased $6.2 million, or 15.3%. Partially offsetting these decreases were one-to-four family owner occupied loans which increased $1.5 million, or 6.4%, and multi-family residential which increased $783,000, or 1.7%.

Deposits. Total deposits decreased $48.3 million, or 7.6%, to $583.4 million at September 30, 2024 from $631.7 million at December 31, 2023. This decrease in deposits was primarily attributable to a decrease of $36.5 million, or 35.0%, in interest bearing checking accounts, a decrease of $23.8 million, or 25.8%, in non-interest bearing checking accounts, a decrease of $5.5 million, or 2.5%, in money market accounts, and a $236,000, or 28.1%, decrease in savings accounts. These decreases in deposits were partially offset by an increase of $17.6 million, or 8.2%, in certificates of deposit. The total decrease in interest bearing checking accounts was 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 $146.6 million, or 25.1% of total deposits at September 30, 2024.

Borrowings. Total Federal Home Loan Bank (FHLB) borrowings increased $9.8 million, or 33.9%, to $38.9 million at September 30, 2024 from $29.0 million at December 31, 2023. During the nine months ended September 30, 2024, the Company borrowed $65.0 million of FHLB short-term borrowings, paid down $25.2 million of FHLB long-term borrowings, and paid down $30.0 million of FHLB short-term borrowings.

Stockholders’ Equity. Total stockholders’ equity from continuing operations increased $2.9 million, or 6.0%, to $51.4 million at September 30, 2024 from $48.5 million at December 31, 2023. Contributing to the increase was net income for the nine months ended September 30, 2024 of $1.2 million, shares issued of $2.4 million, amortization of stock awards and options under our stock compensation plans of $182,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $91,000, and other comprehensive income, net of $11,000. The increase in stockholders’ equity was partially offset by dividends paid of $996,000, and $48,000 purchase of treasury stock. In addition, there was a $3.1 million, or 100.0%, decrease in noncontrolling interest from discontinued operations. The $2.4 million of shares issued were due to two private placement offerings to two investors.

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

General. Net income amounted to $243,000 for the three months ended September 30, 2024, an increase of $498,000, or 195.3%, compared to net loss of $255,000 for the three months ended September 30, 2023. The increase in net income on a comparative quarterly basis was primarily the result of a decrease in interest expense of $427,000, a decrease in net loss from discontinued operations of $300,000, a decrease in non-interest expense of $221,000, an increase in non-interest income of $188,000, and a decrease in the provision for credit losses of $134,000, partially offset by a decrease in interest income of $639,000, and an increase in the net provision for income taxes of $133,000.

Net Interest Income. Net interest income decreased $212,000, or 4.8% to $4.2 million for the three months ended September 30, 2024 from $4.5 million for the three months ended September 30, 2023. The decrease was driven by a $639,000, or 5.8%, decrease in interest income, partially offset by a $427,000, or 6.4%, decrease in interest expense.

Interest Income. The $639,000, or 5.8%, decrease in interest income was primarily due to a decrease in the average balance of loans receivable, net, which decreased $114.7 million from $722.4 million for the three months ended September 30, 2023 to $607.6 million for the three months ended September 30, 2024 and had the effect of decreasing interest income $1.7 million. This decrease was partially offset by a 50 basis point increase in the average yield on loans receivable, net from 6.01% for the three months ended September 30, 2023 to 6.51% for the three months ended September 30, 2024, and had the effect of increasing interest income $767,000, and a $39.3 million increase in the average balance of due from banks – interest bearing, which increased from $6.6 million for the three months ended September 30, 2023 to $45.9 million for the three months ended September 30, 2024, and had the effect of increasing interest income $413,000.

Interest Expense. The $427,000, or 6.4%, decrease in interest expense for the three months ended September 30, 2024 over the comparable period in 2023 was driven by a $751,000, or 95.9%, decrease in the interest on Federal Home Loan Bank short-term borrowings due to a $52.4 million, or 97.1%, decrease in the average balance of Federal Home Loan Bank short-term borrowings which decreased from $54.0 million for the three months ended September 30, 2023 to $1.6 million for the three months ended September 30, 2024. Also contributing to the decreases in interest expense for the three months ended September 30, 2024 was $310,000, or 83.3%, decrease in the interest on Federal Home Loan Bank long-term borrowings due to a $33.7 million, or 81.0%, decrease in the average balance of Federal Home Loan Bank long-term borrowings which decreased from $41.7 million for the three months ended September 30, 2023 to $7.9 million for the three months ended September 30, 2024. Partially offsetting these decreases in interest expense for the three months ended September 30, 2024 was a $573,000, or 11.3%, increase in interest expense on deposits, primarily attributable to a 92 basis point increase in average rate of certificates of deposit, which increased from 3.35% for the three months ended September 30, 2023 to 4.27% for the three months ended September 30, 2024, and had the effect of increasing interest expense by $513,000. The average interest rate spread increased from 1.73% for the three months ended September 30, 2023 to 1.87% for the three months ended September 30, 2024 while the net interest margin increased from 2.42% for the three months ended September 30, 2023 to 2.58% for the three months ended September 30, 2024.

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 September 30,
	2024							2023
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing	$	45,870	$	507		4.42	%	$	6,600	$	69		4.18	%
Investment in interest-earning time deposits		912		9		3.95			2,162		19		3.52
Investment securities available for sale		1,962		39		7.95			2,603		44		6.76
Loans receivable, net (1) (2)		607,648		9,895		6.51			722,371		10,851		6.01
Investment in FHLB stock		837		22		10.04			4,421		128		11.49
Total interest-earning assets		657,229		10,472		6.37	%		738,157		11,111		6.02	%
Non-interest-earning assets		15,370							19,980
Total assets	$	672,599						$	758,137
Interest-bearing liabilities:
Savings accounts	$	642	$	-		0.00	%	$	1,316	$	1		0.31	%
Money market accounts		212,229		2,437		4.59			226,765		2,505		4.42
Checking accounts		85,727		819		3.82			57,613		749		5.19
Certificate of deposit accounts		223,645		2,385		4.27			216,681		1,813		3.35
Total deposits		522,243		5,641		4.32			502,375		5,068		4.03
FHLB short-term borrowings		1,587		32		8.07			54,000		783		5.79
FHLB long-term borrowings		7,921		62		3.13			41,652		372		3.56
FRB long-term borrowings		-		-		-			759		11		5.80
Subordinated debt		22,000		489		8.89			21,842		417		7.64
Total interest-bearing liabilities		553,751		6,224		4.50	%		620,628		6,651		4.29	%
Non-interest-bearing liabilities		67,983							91,684
Total liabilities		621,734							712,312
Stockholders’ Equity		50,865							45,825
Total liabilities and Stockholders’ Equity	$	672,599						$	758,137
Net interest-earning assets	$	103,478						$	117,529
Net interest income; average interest rate spread			$	4,248		1.87	%			$	4,460		1.73	%
Net interest margin (3)						2.58	%						2.42	%
Average interest-earning assets to average interest-bearing liabilities						118.69	%						118.94	%

________________________

(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 $134,000, or 52.1%, decrease in the provision for credit losses for the three months ended September 30, 2024 over the three months ended September 30, 2023 was due to a decrease in the average balance of loans receivable, net, partially offset by an increase in individually evaluated loans which increased the provision for credit losses by $259,000.

Non-Interest Income. The $188,000, or 18.4%, increase in non-interest income for the three months ended September 30, 2024 over the comparable period in 2023 was primarily attributable to a $122,000, or 32.0%, increase in net gain on sale of loans, a $79,000, or 50.0%, increase in mortgage banking, equipment lending, and title abstract fees, a $29,000, or 30.5%, increase in gain on sale of SBA loans, and an $8,000, or 4.2%, increase in insurance commissions. These increases were partially offset by a $38,000, or 24.7%, decrease in other fees and service charges, and a $16,000, or 100.0%, decrease in real estate sales commissions, net.

Non-Interest Expense. Total non-interest expense decreased $221,000, or 4.3%, from $5.1 million for the three months ended September 30, 2023 to $4.9 million for the three months ended September 30, 2024, primarily due to a $229,000, or 89.8%, decrease in professional fees, a $116,000, or 26.0%, decrease in occupancy and equipment expense, a $56,000, or 51.9%, decrease in directors’ fees and expenses, and a $39,000, or 19.8%, decrease in FDIC deposit insurance assessment. These decreases were partially offset by a $182,000, or 5.5%, increase in salaries and employee benefits expense, a $27,000, or 5.7%, increase in other expense, and a $10,000, or 3.2%, increase in data processing expense. The decrease in professional fees included a $98,000 recovery of legal fees due to a loan payoff.

Provision for Income Tax. The provision for income tax from continuing operations increased $133,000, or 380.0%, from $35,000 for the three months ended September 30, 2023 to $168,000 for the three months ended September 30, 2024 due primarily to an increase in taxable income from continuing operations.

Comparison of Operating Results for the Nine Months Ended September 30, 2024 and 2023

General. Net income amounted to $1.2 million for the nine months ended September 30, 2024, an increase of $338,000, or 38.5%, compared to net income of $878,000 for the nine months ended September 30, 2023. The increase in net income on a comparative quarterly basis was primarily the result of a decrease in net loss from discontinued operations of $1.0 million, an increase in non-interest income of $1.0 million, a decrease in non-interest expense of $207,000, and a decrease in the net provision for income taxes from continuing operations of $132,000, partially offset by an increase in interest expense of $849,000, an increase in the provision for credit losses of $758,000, and a decrease in interest income of $442,000.

Net Interest Income. Net interest income decreased $1.3 million, or 8.6% to $13.7 million for the nine months ended September 30, 2024 from $15.0 million for the nine months ended September 30, 2023. The decrease was driven by an $849,000, or 4.5%, increase in interest expense, and a $442,000, or 1.3%, decrease in interest income.

Interest Income. The $442,000, or 1.3%, decrease in interest income was primarily due to a decrease in the average balance of loans receivable, net, which decreased $123.7 million from $748.6 million for the nine months ended September 30, 2023 to $624.9 million for the nine months ended September 30, 2024 and had the effect of decreasing interest income $5.5 million. These decreases were partially offset by a 59 basis point increase in the yield on average loans receivable, net, including loans held for sale, which increased from 5.91% for the nine months ended September 30, 2023 to 6.50% for the nine months ended September 30, 2024, and had the effect of increasing interest income $2.7 million, and a $66.7 million increase in the average balance of due from banks – interest bearing, which increased from $6.1 million for the nine months ended September 30, 2023 to $72.7 million for the nine months ended September 30, 2024, and had the effect of increasing interest income $2.1 million, and a 93 basis point increase in the average yield on due from banks – interest bearing which increased from 4.20% for the nine months ended September 30, 2023 to 5.13% for the nine months ended September 30, 2024, and had the effect of increasing interest income $504,000.

Interest Expense. The $849,000, or 4.5%, increase in interest expense for the nine months ended September 30, 2024 over the comparable period in 2023 was driven by a $4.5 million, or 34.1%, increase in interest on average deposits. Also contributing to the increase in interest expense was a 51 basis point increase in the rate on average money market accounts which increased from 4.04% for the nine months ended September 30, 2023 to 4.55% for the nine months ended September 30, 2024 and had the effect of increasing interest expense by $828,000. Partially offsetting the increase in interest expense for the nine months ended September 30, 2024 was a $3.6 million, or 99.1%, decrease in the interest on Federal Home Loan Bank short-term borrowings due to an $89.3 million, or 99.0%, decrease in the average balance of Federal Home Loan Bank short-term borrowings which decreased from $90.1 million for the nine months ended September 30, 2023 to $861,000 for the nine months ended September 30, 2024. The average interest rate spread decreased from 2.03% for the nine months ended September 30, 2023 to 1.83% for the nine months ended September 30, 2024 while the net interest margin decreased from 2.62% for the nine months ended September 30, 2023 to 2.61% for the nine months ended September 30, 2024.

	Nine Months Ended September 30,
	2024							2023
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing	$	72,735	$	2,796		5.13	%	$	6,068	$	191		4.20	%
Investment in interest-earning time deposits		1,075		35		4.34			2,678		80		3.98
Investment securities available for sale		2,133		116		7.25			2,765		114		5.50
Loans receivable, net (1) (2)		624,873		30,445		6.50			748,578		33,183		5.91
Investment in FHLB stock		1,077		99		12.26			5,850		365		8.32
Total interest-earning assets		701,893		33,491		6.36	%		765,939		33,933		5.91	%
Non-interest-earning assets		17,238							21,143
Total assets	$	719,131						$	787,082
Interest-bearing liabilities:
Savings accounts	$	788	$	1		0.17	%	$	1,431	$	2		0.19	%
Money market accounts		215,079		7,344		4.55			236,754		7,172		4.04
Checking accounts		102,486		3,615		4.70			40,328		1,461		4.83
Certificate of deposit accounts		223,175		6,835		4.08			214,951		4,638		2.88
Total deposits		541,528		17,795		4.38			493,464		13,273		3.59
FHLB short-term borrowings		861		32		4.96			90,137		3,583		5.30
FHLB long-term borrowings		16,649		471		3.77			45,938		1,003		2.91
FRB long-term borrowings		-		-		-			829		30		4.83
Subordinated debt		21,995		1,461		8.86			18,657		1,021		7.30
Total interest-bearing liabilities		581,033		19,759		4.53	%		649,025		18,910		3.88	%
Non-interest-bearing liabilities		87,561							92,270
Total liabilities		668,594							741,295
Stockholders’ Equity		50,537							45,788
Total liabilities and Stockholders’ Equity	$	719,131						$	787,083
Net interest-earning assets	$	120,860						$	116,914
Net interest income; average interest rate spread			$	13,732		1.83	%				15,023		2.03	%
Net interest margin (3)						2.61	%						2.62	%
Average interest-earning assets to average interest-bearing liabilities						120.80	%						118.01	%

_______________________

(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 $758,000, or 164.8%, increase in the provision for credit losses for the nine months ended September 30, 2024 over the nine months ended September 30, 2023 was due to an increase in the amount of non-performing loans. There were nineteen individually evaluated loans which increased the provision for credit losses by $913,000. This increase was partially offset by a decrease in the average balance of loans receivable, net.

Non-Interest Income. The $1.0 million, or 33.5%, increase in non-interest income for the nine months ended September 30, 2024 over the comparable period in 2023 was primarily attributable to a $790,000, or 65.4%, increase in net gain on sale of loans, a $286,000, or 96.6%, increase in other fees and services charges, a $206,000, or 48.9%, increase in mortgage banking, equipment lending, and title abstract fees, and a $40,000, or 8.2%, increase in insurance commissions. These increases were partially offset by a $143,000 or 96.6%, decrease in net loan servicing income, a $95,000, or 27.5%, decrease in gain on sale of SBA loans, and a $68,000, or 77.3%, decrease in real estate sales commissions, net.

Non-Interest Expense. Total non-interest expense decreased $207,000, or 1.3%, from $15.5 million for the nine months ended September 30, 2023 to $15.3 million for the nine months ended September 30, 2024, primarily due to a $274,000, or 45.9%, decrease in professional fees, a $175,000, or 26.2%, decrease in FDIC deposit insurance assessment, a $162,000, or 51.4%, decrease in directors’ fees and expenses, and a $142,000, or 12.5%, decrease in occupancy and equipment expense. The decrease in directors’ fees and expenses was primarily due to a reduction in directors' Board meeting and committee meeting fees for the nine months ended September 30, 2024, compared to the prior year period. The decrease in non-interest expense was partially offset by a $394,000, or 3.8%, increase in salaries and employee benefits expense, and a $157,000, or 21.3%, increase in data processing expense.

Provision for Income Tax. The provision for income tax on continuing operations decreased $132,000, or 20.4%, from $648,000 for the nine months ended September 30, 2023 to $516,000 for the nine months ended September 30, 2024 due primarily to a decrease in taxable income from continuing operations.

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 September 30, 2024, the Company's cash and cash equivalents amounted to $61.3 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 September 30, 2024, Quaint Oak Bank had outstanding commitments to originate loans of $24.3 million, commitments under unused lines of credit of $64.9 million, and $1.7 million under standby letters of credit.

At September 30, 2024, certificates of deposit scheduled to mature in one year or less totaled $129.0 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 September 30, 2024, we had $38.9 million of borrowings from the FHLB and had $294.3 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 September 30, 2024, Quaint Oak Bank had $14.8 million in borrowing capacity with the Federal Reserve Bank of Philadelphia.

The Company identified one major interest bearing checking account deposit customer and one major money market deposit customer, a separate customer than the interest bearing checking account deposit customer, that accounted for approximately 11.6% and 25.7% of total deposits at September 30, 2024, respectively. The combined outstanding balances of the two major deposit customers totaled approximately $217.8 million at September 30, 2024. If these deposits were to be withdrawn in whole or in part, replacement of the funds may require us to pay higher interest rates on retail deposits or brokered deposits which would have an adverse effect on our net interest income and net income. The replacement of these deposits with other sources of funding such as borrowings could also increase our overall cost of funds and would negatively impact our results of operations. The Company has significant borrowing capacity available to fund liquidity needs, including borrowing agreements with the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank of Philadelphia described above.

Any requirements that we increase our capital ratios or liquidity could require our seeking additional sources of capital through a capital raise that would necessitate issuing additional securities, which could dilute our outstanding shares of our common stock. We may also liquidate certain assets, perhaps on terms that are unfavorable to us or contrary to our business plan. In March 2024, we sold our 51% ownership interest in OCH, and recognized a $1.4 million gain on sale. Quaint Oak Bank is in the process of closing a sale/leaseback transaction on its property that it owns at 1710 Union Blvd, Allentown, PA 18109. For further discussion of the transaction, see Note 12 - Subsequent Event in the Notes to Unaudited Consolidated Financial Statements contained elsewhere herein. We may also raise capital through the issuance of preferred stock and senior or subordinated debt.

The Company and Quaint Oak Bank are subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (the “FRB”), the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities, each of which may impose restrictions on our ability to pay dividends, repurchase shares or incur additional indebtedness. As the subsidiary of a stock saving and loan holding company, Quaint Oak must file a notice with the appropriate Federal Reserve Bank at least 20 days before a proposed declaration of a dividend to the Company. Under applicable banking regulations, Quaint Oak Bank must file an application for FDIC approval of a capital distribution if: the total capital distributions for the calendar year exceed the sum of Quaint Oak Bank’s net income for that year to date plus the retained net income for the preceding two years; Quaint Oak Bank would not be at least adequately capitalized following the distribution; the distribution would violate any applicable statute, regulation, agreement or FDIC-imposed condition; or Quaint Oak Bank is not otherwise eligible for expedited treatment of its filings with the FDIC. The inability to pay dividends from Quaint Oak Bank to the Company could negatively impact our ability to pay dividends to shareholders, pay interest on our debt or engage in stock repurchases. The Company currently is restricted in declaring or paying dividends, engaging in share repurchases or directly or indirectly, incurring, increasing, or guaranteeing any debt, including any interest payments due on subordinated debentures, without the prior written approval of the FRB. To date, the FRB has approved all requests to pay dividends and interest on subordinated debt, however, no assurance can be given that such approvals will be received in the future.

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

	September 30, 2024
	(Dollars in thousands)

Cash and cash equivalents	$	61,342
Unpledged investment securities, amortized cost		1,841
FHLB advance availability		294,273
Federal Reserve discount window availability		14,756
Total primary and secondary sources of available liquidity	$	372,212

Total stockholders’ equity from continuing operations increased $2.9 million, or 6.0%, to $51.4 million at September 30, 2024 from $48.5 million at December 31, 2023. Contributing to the increase was net income for the nine months ended September 30, 2024 of $1.2 million, shares issued of $2.4 million, amortization of stock awards and options under our stock compensation plans of $182,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $91,000, and other comprehensive income, net of $11,000. The increase in stockholders’ equity was partially offset by dividends paid of $996,000, and $48,000 purchase of treasury stock. In addition, there was a $3.1 million, or 100.0%, decrease in noncontrolling interest from discontinued operations. The $2.4 million of shares issued 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 September 30, 2024, Quaint Oak Bank exceeded each of its capital requirements with ratios of 10.49%, 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.

Commitments. At September 30, 2024, we had unfunded commitments under lines of credit of $64.9 million, $24.3 million of commitments to originate loans, and $1.7 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 a recovery of $9,000 at September 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 September 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 third fiscal quarter of fiscal 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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.

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

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2024 – July 31, 2024		333	$	10.65		-		24,375
August 1, 2024 – August 31, 2024		-		-		-		24,375
September 1, 2024 – September 30, 2024		-		-		-		24,375
Total		333	$	10.65		-		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.

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).

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: November 14, 2024	By:	/s/ Robert T. Strong
		Robert T. Strong President and Chief Executive Officer

Date: November 14, 2024	By:	/s/ John J. Augustine
		John J. Augustine Executive Vice President and Chief Financial Officer