UNITED STATES |
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, |
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. |
Indicate by check mark whether the registrant has submitted electronically during the preceding 12 months (or for such shorter period that the registrant was required to submit |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a See the definitions of |
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). | ||||
Indicate the number of shares outstanding of each of the shares of the |
INDEX
PART I - FINANCIAL INFORMATION | Page | |
Item 1 - | Financial Statements | |
Consolidated Balance Sheets as of September 30, | 1 | |
Consolidated Statements of Income for the Three and Nine Months Ended September 30, | 2 | |
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and | 4 | |
Consolidated | 5 | |
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, | 8 | |
Notes to the Unaudited Consolidated Financial Statements | 10 | |
Item 2 - | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 |
Item 3 - | Quantitative and Qualitative Disclosures About Market Risk | 47 |
Item 4 - | Controls and Procedures | 47 |
PART II - OTHER INFORMATION | ||
Item 1 - | Legal Proceedings | 47 |
Item 1A - | Risk Factors | 48 |
Item 2 - | Unregistered Sales of Equity Securities and Use of Proceeds | 48 |
Item 3 - | Defaults Upon Senior Securities | 48 |
Item 4 - | Mine Safety Disclosures | 48 |
Item 5 - | Other Information | 48 |
Item 6 - | Exhibits | 49 |
SIGNATURES |
ITEM 1. FINANCIAL STATEMENTS
Quaint Oak Bancorp, Inc. |
Consolidated Balance Sheets (Unaudited) |
At September 30, | At December 31, | |||||||
2022 | 2021 | |||||||
(In thousands, except share data) | ||||||||
Assets |
| |||||||
Due from banks, non-interest-bearing | $ | 830 | $ | 854 | ||||
Due from banks, interest-bearing | 7,509 | 9,851 | ||||||
Cash and cash equivalents | 8,339 | 10,705 | ||||||
Investment in interest-earning time deposits | 5,569 | 7,924 | ||||||
Investment securities available for sale | 3,193 | 4,033 | ||||||
Loans held for sale | 88,400 | 107,823 | ||||||
Loans receivable, net of allowance for loan losses (2022 $7,141; 2021 $5,262) | 579,154 | 403,966 | ||||||
Accrued interest receivable | 3,658 | 3,139 | ||||||
Investment in Federal Home Loan Bank stock, at cost | 3,953 | 2,178 | ||||||
Bank-owned life insurance | 4,203 | 4,137 | ||||||
Premises and equipment, net | 2,916 | 2,653 | ||||||
Goodwill | 2,573 | 2,573 | ||||||
Other intangible, net of accumulated amortization | 186 | 222 | ||||||
Prepaid expenses and other assets | 5,116 | 4,762 | ||||||
Total Assets | $ | 707,260 | $ | 554,115 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 79,825 | $ | 64,731 | ||||
Interest-bearing | 467,289 | 382,435 | ||||||
Total deposits | 547,114 | 447,166 | ||||||
Federal Home Loan Bank short-term borrowings | 10,000 | 26,000 | ||||||
Federal Home Loan Bank long-term borrowings | 83,022 | 23,193 | ||||||
Federal Reserve Bank long-term borrowings | - | 3,895 | ||||||
Subordinated debt | 7,958 | 7,933 | ||||||
Accrued interest payable | 412 | 174 | ||||||
Advances from borrowers for taxes and insurance | 3,612 | 2,856 | ||||||
Accrued expenses and other liabilities | 9,532 | 5,989 | ||||||
Total Liabilities | 661,650 | 517,206 | ||||||
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; 2,777,250 issued; 2,053,554 and 2,011,313 outstanding at | ||||||||
September 30, 2022 and December 31, 2021, respectively | 28 | 28 | ||||||
Additional paid-in capital | 16,024 | 15,685 | ||||||
Treasury stock, at cost: 723,696 and 765,937 shares at September 30, 2022 and December 31, 2021, respectively | (4,748 | ) | (4,977 | ) | ||||
Accumulated other comprehensive (loss) income | (19 | ) | 23 | |||||
Retained earnings | 29,933 | 24,030 | ||||||
Total Quaint Oak Bancorp, Inc. Stockholders' Equity | 41,218 | 34,789 | ||||||
Noncontrolling Interest | 4,392 | 2,120 | ||||||
Total Stockholders' Equity | $ | 45,610 | $ | 36,909 | ||||
Total Liabilities and Stockholders’ Equity | $ | 707,260 | $ | 554,115 |
At September 30, | At December 31, | ||||||||
2017 | 2016 | ||||||||
(In thousands, except share data) | |||||||||
Assets | |||||||||
Due from banks, non-interest-bearing | $ | 547 | $ | 399 | |||||
Due from banks, interest-bearing | 7,682 | 8,901 | |||||||
Cash and cash equivalents | 8,229 | 9,300 | |||||||
Investment in interest-earning time deposits | 4,879 | 6,098 | |||||||
Investment securities available for sale | 8,434 | 9,555 | |||||||
Loans held for sale | 6,473 | 4,712 | |||||||
Loans receivable, net of allowance for loan losses (2017 $1,735; 2016 $1,605) | 193,771 | 176,807 | |||||||
Accrued interest receivable | 925 | 862 | |||||||
Investment in Federal Home Loan Bank stock, at cost | 1,134 | 713 | |||||||
Bank-owned life insurance | 3,793 | 3,728 | |||||||
Premises and equipment, net | 1,973 | 1,730 | |||||||
Goodwill | 515 | 515 | |||||||
Other intangible, net of accumulated amortization | 428 | 465 | |||||||
Other real estate owned, net | 185 | 435 | |||||||
Prepaid expenses and other assets | 1,467 | 1,243 | |||||||
Total Assets | $ | 232,206 | $ | 216,163 | |||||
Liabilities and Stockholders' Equity | |||||||||
Liabilities | |||||||||
Deposits: | |||||||||
Non-interest bearing | $ | 7,713 | $ | 5,852 | |||||
Interest-bearing | 174,685 | 171,155 | |||||||
Total deposits | 182,398 | 177,007 | |||||||
Federal Home Loan Bank short-term borrowings | 11,500 | 7,000 | |||||||
Federal Home Loan Bank long-term borrowings | 14,000 | 8,500 | |||||||
Accrued interest payable | 147 | 142 | |||||||
Advances from borrowers for taxes and insurance | 1,781 | 2,210 | |||||||
Accrued expenses and other liabilities | 362 | 514 | |||||||
Total Liabilities | 210,188 | 195,373 | |||||||
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; 2,777,250 | |||||||||
issued; 1,914,486 and 1,891,150 outstanding at September 30, 2017 and December 31, 2016, respectively | 28 | 28 | |||||||
Additional paid-in capital | 14,415 | 14,240 | |||||||
Treasury stock, at cost: 2017 862,764 shares; 2016 886,100 shares | (4,689 | ) | (4,611 | ) | |||||
Unallocated common stock held by: | |||||||||
Employee Stock Ownership Plan (ESOP) | (270 | ) | (320 | ) | |||||
Recognition & Retention Plan Trust (RRP) | (24 | ) | (47 | ) | |||||
Accumulated other comprehensive loss | (1 | ) | (38 | ) | |||||
Retained earnings | 12,559 | 11,538 | |||||||
Total Stockholders' Equity | 22,018 | 20,790 | |||||||
Total Liabilities and Stockholders' Equity | $ | 232,206 | $ | 216,163 |
See accompanying notes to the unaudited consolidated financial statements.
1 |
Quaint Oak Bancorp, Inc. |
Consolidated Statements of Income (Unaudited) |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(In thousands, except for share data) | ||||||||||||||||
Interest Income | ||||||||||||||||
Interest on loans, including fees | $ | 8,671 | $ | 5,944 | $ | 22,171 | $ | 16,422 | ||||||||
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock | 325 | 73 | 506 | 327 | ||||||||||||
Total Interest Income | 8,996 | 6,017 | 22,677 | 16,749 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | 1,672 | 702 | 3,199 | 2,370 | ||||||||||||
Interest on Federal Home Loan Bank short-term borrowings | 58 | 8 | 133 | 14 | ||||||||||||
Interest on Federal Home Loan Bank long-term borrowings | 457 | 124 | 958 | 392 | ||||||||||||
Interest on Federal Reserve Bank long-term borrowings | - | 8 | 4 | 77 | ||||||||||||
Interest on subordinated debt | 130 | 130 | 390 | 390 | ||||||||||||
Interest on other short-term borrowings | 22 | 31 | 49 | 127 | ||||||||||||
Total Interest Expense | 2,339 | 1,003 | 4,733 | 3,370 | ||||||||||||
Net Interest Income | 6,657 | 5,014 | 17,944 | 13,379 | ||||||||||||
Provision for Loan Losses | 655 | 557 | 1,933 | 1,259 | ||||||||||||
Net Interest Income after Provision for Loan Losses | 6,002 | 4,457 | 16,011 | 12,120 | ||||||||||||
Non-Interest Income | ||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 760 | 604 | 2,221 | 1,657 | ||||||||||||
Real estate sales commissions, net | 88 | 79 | 213 | 143 | ||||||||||||
Insurance commissions | 152 | 133 | 407 | 373 | ||||||||||||
Other fees and services charges | 131 | 38 | 379 | 211 | ||||||||||||
Net loan servicing income | 480 | 475 | 954 | 1,026 | ||||||||||||
Income from bank-owned life insurance | 23 | 21 | 66 | 61 | ||||||||||||
Net gain on loans held for sale | 4,281 | 1,866 | 11,349 | 4,416 | ||||||||||||
Gain on the sale of SBA loans | 58 | 369 | 225 | 636 | ||||||||||||
Gain on the sale of investment securities available for sale | - | - | - | 362 | ||||||||||||
Total Non-Interest Income | 5,973 | 3,585 | 15,814 | 8,885 | ||||||||||||
Non-Interest Expense | ||||||||||||||||
Salaries and employee benefits | 5,335 | 4,100 | 14,817 | 10,939 | ||||||||||||
Directors' fees and expenses | 67 | 58 | 210 | 186 | ||||||||||||
Occupancy and equipment | 477 | 379 | 1,363 | 1,143 | ||||||||||||
Data processing | 140 | 234 | 500 | 641 | ||||||||||||
Professional fees | 257 | 107 | 669 | 488 | ||||||||||||
FDIC deposit insurance assessment | 225 | 97 | 454 | 221 | ||||||||||||
Other real estate owned expenses | - | 2 | - | 14 | ||||||||||||
Advertising | 169 | 110 | 531 | 337 | ||||||||||||
Amortization of other intangible | 12 | 12 | 36 | 36 | ||||||||||||
Other | 636 | 326 | 1,509 | 974 | ||||||||||||
Total Non-Interest Expense | 7,318 | 5,425 | 20,089 | 14,979 |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands, except for share data) | ||||||||||||||||
Interest Income | ||||||||||||||||
Interest on loans | $ | 2,577 | $ | 2,213 | $ | 7,530 | $ | 6,497 | ||||||||
Interest and dividends on short-term investments and investment securities | 96 | 96 | 262 | 244 | ||||||||||||
Total Interest Income | 2,673 | 2,309 | 7,792 | 6,741 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | 685 | 638 | 1,987 | 1,774 | ||||||||||||
Interest on Federal Home Loan Bank borrowings | 100 | 34 | 207 | 100 | ||||||||||||
Total Interest Expense | 785 | 672 | 2,194 | 1,874 | ||||||||||||
Net Interest Income | 1,888 | 1,637 | 5,598 | 4,867 | ||||||||||||
Provision for Loan Losses | 83 | 61 | 189 | 172 | ||||||||||||
Net Interest Income after Provision for Loan Losses | 1,805 | 1,576 | 5,409 | 4,695 | ||||||||||||
Non-Interest Income | ||||||||||||||||
Mortgage banking and title abstract fees | 229 | 129 | 487 | 409 | ||||||||||||
Other fees and services charges | 5 | (20 | ) | 49 | 32 | |||||||||||
Insurance commissions | 90 | 60 | 256 | 60 | ||||||||||||
Income from bank-owned life insurance | 21 | 23 | 65 | 67 | ||||||||||||
Net gain on the sale of residential mortgage loans | 687 | 531 | 1,511 | 1,289 | ||||||||||||
Gain on sale of SBA loans | 32 | 51 | 48 | 108 | ||||||||||||
Loss on sales and write-downs on other real estate owned | - | (54 | ) | (63 | ) | (126 | ) | |||||||||
Other | 32 | 13 | 61 | 36 | ||||||||||||
Total Non-Interest Income | 1,096 | 733 | 2,414 | 1,875 | ||||||||||||
Non-Interest Expense | ||||||||||||||||
Salaries and employee benefits | 1,324 | 1,132 | 3,994 | 3,321 | ||||||||||||
Directors' fees and expenses | 52 | 48 | 154 | 155 | ||||||||||||
Occupancy and equipment | 137 | 143 | 427 | 413 | ||||||||||||
Data processing | 86 | 52 | 219 | 137 | ||||||||||||
Professional fees | 105 | 94 | 289 | 291 | ||||||||||||
FDIC deposit insurance assessment | 44 | 35 | 131 | 103 | ||||||||||||
Other real estate owned expense | 4 | 13 | 12 | 32 | ||||||||||||
Advertising | 39 | 23 | 117 | 84 | ||||||||||||
Amortization of other intangible | 13 | 8 | 37 | 8 | ||||||||||||
Other | 144 | 109 | 447 | 333 | ||||||||||||
Total Non-Interest Expense | 1,948 | 1,657 | 5,827 | 4,877 | ||||||||||||
Income before Income Taxes | 953 | 652 | 1,996 | 1,693 | ||||||||||||
Income Taxes | 358 | 250 | 706 | 650 | ||||||||||||
Net Income | $ | 595 | $ | 402 | $ | 1,290 | $ | 1,043 | ||||||||
Earnings per share - basic | $ | 0.32 | $ | 0.22 | $ | 0.69 | $ | 0.59 | ||||||||
Average shares outstanding - basic | 1,868,969 | 1,792,673 | 1,857,682 | 1,774,343 | ||||||||||||
Earnings per share - diluted | $ | 0.30 | $ | 0.21 | $ | 0.65 | $ | 0.54 | ||||||||
Average shares outstanding - diluted | 2,007,819 | 1,950,413 | 1,998,138 | 1,935,757 |
See accompanying notes to the unaudited consolidated financial statements.
Quaint Oak Bancorp, Inc. |
Consolidated Statements of |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(In thousands, except for share data) | ||||||||||||||||
Income before Income Taxes | $ | 4,657 | $ | 2,617 | $ | 11,736 | $ | 6,026 | ||||||||
Income Taxes | 1,012 | 702 | 2,531 | 1,693 | ||||||||||||
Net Income | $ | 3,645 | $ | 1,915 | $ | 9,205 | $ | 4,333 | ||||||||
Net Income Attributable to Noncontrolling Interest | $ | 1,010 | $ | 133 | $ | 2,551 | $ | 12 | ||||||||
Net Income Attributable to Quaint Oak Bancorp, Inc. | $ | 2,635 | $ | 1,782 | $ | 6,654 | $ | 4,321 | ||||||||
Earnings per share - basic | $ | 1.29 | $ | 0.89 | $ | 3.27 | $ | 2.17 | ||||||||
Average shares outstanding - basic | 2,050,650 | 2,002,816 | 2,034,153 | 1,991,336 | ||||||||||||
Earnings per share - diluted | $ | 1.22 | $ | 0.85 | $ | 3.09 | $ | 2.07 | ||||||||
Average shares outstanding - diluted | 2,168,732 | 2,100,026 | 2,150,944 | 2,085,286 |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Net Income | $ | 595 | $ | 402 | $ | 1,290 | $ | 1,043 | ||||||||
Other Comprehensive Income (Loss): | ||||||||||||||||
Unrealized gains (losses) on investment securities available-for-sale | 11 | (5 | ) | 56 | 15 | |||||||||||
Income tax effect | (4 | ) | 2 | (19 | ) | (5 | ) | |||||||||
Other comprehensive income (loss) | 7 | (3 | ) | 37 | 10 | |||||||||||
Total Comprehensive Income | $ | 602 | $ | 399 | $ | 1,327 | $ | 1,053 |
See accompanying notes to the unaudited consolidated financial statements.
Quaint Oak Bancorp, Inc. |
Consolidated Statements of |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(In thousands) | ||||||||||||||||
Net Income | $ | 3,645 | $ | 1,915 | $ | 9,205 | $ | 4,333 | ||||||||
Other Comprehensive Income (Loss): | ||||||||||||||||
Unrealized gains (losses) on investment securities available-for-sale | (1 | ) | - | (54 | ) | 257 | ||||||||||
Income tax effect | - | - | 12 | (55 | ) | |||||||||||
Reclassification adjustment for gain on sale of investment securities included in net income | - | - | - | (362 | ) | |||||||||||
Income tax effect | - | - | - | 76 | ||||||||||||
Other comprehensive loss | (1 | ) | - | (42 | ) | (84 | ) | |||||||||
Total Comprehensive Income | $ | 3,644 | $ | 1,915 | $ | 9,163 | $ | 4,249 | ||||||||
Comprehensive Income Attributable to Noncontrolling Interest | $ | 1,010 | $ | 133 | $ | 2,551 | $ | 12 | ||||||||
Comprehensive Income Attributable to Quaint Oak Bancorp, Inc. | $ | 2,634 | $ | 1,782 | $ | 6,612 | $ | 4,237 |
For the Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||
Unallocated | ||||||||||||||||||||||||||||||||
Common Stock | Common | Accumulated | ||||||||||||||||||||||||||||||
Number of | Additional | Stock Held | Other | Total | ||||||||||||||||||||||||||||
Shares | Paid-in | Treasury | by Benefit | Comprehensive | Retained | Stockholders' | ||||||||||||||||||||||||||
Outstanding | Amount | Capital | Stock | Plans | Income (Loss) | Earnings | Equity | |||||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||||||
BALANCE –DECEMBER 31, 2016 | 1,891,150 | $ | 28 | $ | 14,240 | $ | (4,611 | ) | $ | (367 | ) | $ | (38 | ) | $ | 11,538 | $ | 20,790 | ||||||||||||||
Common stock allocated by ESOP | 87 | 51 | 138 | |||||||||||||||||||||||||||||
Treasury stock purchase | (27,363 | ) | (341 | ) | (341 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 6,502 | 49 | 34 | 83 | ||||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 5,397 | (28 | ) | 28 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 38,800 | (8 | ) | 201 | 193 | |||||||||||||||||||||||||||
Stock based compensation expense | 97 | 97 | ||||||||||||||||||||||||||||||
Release of 4,864 vested RRP shares | (22 | ) | 22 | - | ||||||||||||||||||||||||||||
Cash dividends declared ($0.14 per share) | (269 | ) | (269 | ) | ||||||||||||||||||||||||||||
Net income | 1,290 | 1,290 | ||||||||||||||||||||||||||||||
Other comprehensive income, net | 37 | 37 | ||||||||||||||||||||||||||||||
BALANCE – SEPTEMBER 30, 2017 | 1,914,486 | $ | 28 | $ | 14,415 | $ | (4,689 | ) | $ | (294 | ) | $ | (1 | ) | $ | 12,559 | $ | 22,018 |
See accompanying notes to the unaudited consolidated financial statements.
Quaint Oak Bancorp, Inc. |
Consolidated Statements of |
For the Three Months Ended September 30, 2022 |
|
|
|
| |||||||||||||||||||
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, 2022 | 2,045,721 | $ | 28 | $ | 15,904 | $ | (4,784 | ) | $ | (18 | ) | $ | 27,564 | $ | 3,485 | $ | 42,179 | ||||||
Common stock allocated by ESOP (4,000 shares) | 4,000 | 59 | 25 | 84 | |||||||||||||||||||
Treasury stock purchase | (760 | ) | (18 | ) | (18 | ) | |||||||||||||||||
Reissuance of treasury stock under stock incentive plan | - | ||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 593 | 11 | 4 | 15 | |||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 4,000 | 8 | 25 | 33 | |||||||||||||||||||
Stock based compensation expense | 42 | 42 | |||||||||||||||||||||
Cash dividends declared ($0.13 per share) | (266 | ) | (266 | ) | |||||||||||||||||||
Noncontrolling interest member distribution | (103 | ) | (103 | ) | |||||||||||||||||||
Net income | 2,635 | 1,010 | 3,645 | ||||||||||||||||||||
Other comprehensive loss, net | (1 | ) | (1 | ) | |||||||||||||||||||
BALANCE – SEPTEMBER 30, 2022 | 2,053,554 | $ | 28 | $ | 16,024 | $ | (4,748 | ) | $ | (19 | ) | $ | 29,933 | $ | 4,392 | $ | 45,610 |
For the Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Unallocated | ||||||||||||||||||||||||||||||||||||
Common | Accumulated | |||||||||||||||||||||||||||||||||||
Number of | Additional | Stock Held | Other | Total | ||||||||||||||||||||||||||||||||
Shares | Paid-in | Treasury | by Benefit | Comprehensive | Retained | Noncontrolling | Stockholders' | |||||||||||||||||||||||||||||
Outstanding | Amount | Capital | Stock | Plans | Income | Earnings | Interest | Equity | ||||||||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2021 | 2,004,015 | $ | 28 | $ | 15,457 | $ | (5,022 | ) | $ | (17 | ) | $ | 34 | $ | 20,606 | $ | 2,115 | $ | 33,201 | |||||||||||||||||
Common stock allocated by ESOP (3,607 shares) | 48 | 17 | 65 | |||||||||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 1,080 | 14 | 6 | 20 | ||||||||||||||||||||||||||||||||
Stock based compensation expense | 42 | 42 | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.11 per share) | (220 | ) | (220 | ) | ||||||||||||||||||||||||||||||||
Net income | 1,782 | 133 | 1,915 | |||||||||||||||||||||||||||||||||
Other comprehensive income, net | - | - | ||||||||||||||||||||||||||||||||||
BALANCE – SEPTEMBER 30, 2021 | 2,005,095 | $ | 28 | $ | 15,561 | $ | (5,016 | ) | $ | - | $ | 34 | $ | 22,168 | $ | 2,248 | $ | 35,023 |
For the Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 1,290 | $ | 1,043 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Provision for loan losses | 189 | 172 | ||||||
Depreciation expense | 121 | 140 | ||||||
Amortization of intangibles | 37 | 8 | ||||||
Net amortization of securities premiums | 15 | 14 | ||||||
Accretion of deferred loan fees and costs, net | (253 | ) | (227 | ) | ||||
Stock-based compensation expense | 235 | 225 | ||||||
Net gain on the sale of loans | (1,511 | ) | (1,289 | ) | ||||
Gain on the sale of SBA loans | (48 | ) | (108 | ) | ||||
Net loss on sale and write-downs of other real estate owned | 63 | 126 | ||||||
Increase in the cash surrender value of bank-owned life insurance | (65 | ) | (67 | ) | ||||
Changes in assets and liabilities which provided (used) cash: | ||||||||
Loans held for sale-originations | (62,106 | ) | (47,942 | ) | ||||
Loans held for sale-proceeds | 61,856 | 50,048 | ||||||
Accrued interest receivable | (63 | ) | 51 | |||||
Prepaid expenses and other assets | (243 | ) | (166 | ) | ||||
Accrued interest payable | 5 | 13 | ||||||
Accrued expenses and other liabilities | (152 | ) | 45 | |||||
Net Cash Provided by (Used in) Operating Activities | (630 | ) | 2,086 | |||||
Cash Flows from Investing Activities | ||||||||
Net decrease in investment in interest-earning time deposits | 1,219 | 73 | ||||||
Purchase of investment securities available for sale | - | (7,833 | ) | |||||
Principal repayments of investment securities available for sale | 1,162 | 784 | ||||||
Net increase in loans receivable | (16,852 | ) | (18,159 | ) | ||||
Net increase (decrease) in investment in Federal Home Loan Bank stock | (421 | ) | 25 | |||||
Proceeds from the sale of other real estate owned | 210 | 844 | ||||||
Capitalized expenditures on other real estate owned | (23 | ) | (280 | ) | ||||
Purchase of premises and equipment | (364 | ) | (50 | ) | ||||
Purchase of insurance agency | - | (1,000 | ) | |||||
Net Cash Used in Investing Activities | (15,069 | ) | (25,596 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Net increase in demand deposits and savings accounts | 43 | 3,273 | ||||||
Net increase in certificate accounts | 5,348 | 22,149 | ||||||
Net proceeds from Federal Home Loan Bank short-term borrowings | 4,500 | - | ||||||
Proceeds from Federal Home Loan Bank long-term borrowings | 8,000 | - | ||||||
Repayment of Federal Home Loan Bank long-term borrowings | (2,500 | ) | (1,000 | ) | ||||
Dividends paid | (269 | ) | (218 | ) | ||||
Purchase of treasury stock | (341 | ) | (13 | ) | ||||
Proceeds from the reissuance of treasury stock | 83 | 82 | ||||||
Proceeds from the exercise of stock options | 193 | 133 | ||||||
Decrease in advances from borrowers for taxes and insurance | (429 | ) | (422 | ) | ||||
Net Cash Provided by Financing Activities | 14,628 | 23,984 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (1,071 | ) | 474 | |||||
Cash and Cash Equivalents – Beginning of Period | 9,300 | 17,206 | ||||||
Cash and Cash Equivalents – End of Period | $ | 8,229 | $ | 17,680 | ||||
Cash payments for interest | $ | 2,189 | $ | 1,861 | ||||
Cash payments for income taxes | $ | 789 | $ | 560 |
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, 2022 | ||||||||||||||||||||||||||||||||
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, 2021 | 2,011,313 | $ | 28 | $ | 15,685 | $ | (4,977 | ) | $ | 23 | $ | 24,030 | $ | 2,120 | $ | 36,909 | ||||||||||||||||
Common stock allocated by ESOP (12,000 shares) | 12,000 | 184 | 75 | 259 | ||||||||||||||||||||||||||||
Treasury stock purchase | (1,969 | ) | (46 | ) | (46 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,123 | (57 | ) | 57 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 2,087 | 35 | 13 | 48 | ||||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 21,000 | 51 | 130 | 181 | ||||||||||||||||||||||||||||
Stock based compensation expense | 126 | 126 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.37 per share) | (751 | ) | (751 | ) | ||||||||||||||||||||||||||||
Noncontrolling interest member distribution | (279 | ) | (279 | ) | ||||||||||||||||||||||||||||
Net income | 6,654 | 2,551 | 9,205 | |||||||||||||||||||||||||||||
Other comprehensive loss, net | (42 | ) | (42 | ) | ||||||||||||||||||||||||||||
BALANCE – SEPTEMBER 30, 2022 | 2,053,554 | $ | 28 | $ | 16,024 | $ | (4,748 | ) | $ | (19 | ) | $ | 29,933 | $ | 4,392 | $ | 45,610 |
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 , 2021 | Unallocated | |||||||||||||||||||||||||||||||||||
Common | Accumulated | |||||||||||||||||||||||||||||||||||
Number of | Additional | Stock Held | Other | Total | ||||||||||||||||||||||||||||||||
Shares | Paid-in | Treasury | by Benefit | Comprehensive | Retained | Noncontrolling | Stockholders' | |||||||||||||||||||||||||||||
Outstanding | Amount | Capital | Stock | Plans | Income | Earnings | Interest | Equity | ||||||||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||
BALANCE – DECEMBER 31, 2020 | 1,986,528 | $ | 28 | $ | 15,282 | $ | (5,114 | ) | $ | (51 | ) | $ | 118 | $ | 18,465 | $ | - | $ | 28,728 | |||||||||||||||||
Common stock allocated by ESOP (10,821 shares) | 136 | 51 | 187 | |||||||||||||||||||||||||||||||||
Treasury stock purchase | (1,398 | ) | (25 | ) | (25 | ) | ||||||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 3,044 | 35 | 18 | 53 | ||||||||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,421 | (58 | ) | 58 | - | |||||||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 7,500 | 40 | 47 | 87 | ||||||||||||||||||||||||||||||||
Stock based compensation expense | 126 | 126 | ||||||||||||||||||||||||||||||||||
Noncontrolling interest initial contribution | 2,236 | 2,236 | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.31 per share) | (618 | ) | (618 | ) | ||||||||||||||||||||||||||||||||
Net income | 4,321 | 12 | 4,333 | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net | (84 | ) | (84 | ) | ||||||||||||||||||||||||||||||||
BALANCE – SEPTEMBER 30, 2021 | 2,005,095 | $ | 28 | $ | 15,561 | $ | (5,016 | ) | $ | - | $ | 34 | $ | 22,168 | $ | 2,248 | $ | 35,023 |
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, | ||||||||
2022 | 2021 | |||||||
(In Thousands) | ||||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 9,205 | $ | 4,333 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Provision for loan losses | 1,933 | 1,259 | ||||||
Depreciation of premises and equipment | 244 | 228 | ||||||
Amortization of operating right-of-use assets | 151 | 122 | ||||||
Amortization of subordinated debt issuance costs | 25 | 25 | ||||||
Amortization of other intangible | 36 | 36 | ||||||
Net amortization of securities premiums | - | 6 | ||||||
Accretion of deferred loan fees and costs, net | (1,629 | ) | (3,482 | ) | ||||
Stock-based compensation expense | 385 | 313 | ||||||
Gain on the sale of investment securities available for sale | - | (362 | ) | |||||
Net gain on loans held for sale | (11,349 | ) | (4,416 | ) | ||||
Loans held for sale-originations | (377,608 | ) | (276,705 | ) | ||||
Loans held for sale-proceeds | 408,381 | 238,398 | ||||||
Gain on the sale of SBA loans | (225 | ) | (636 | ) | ||||
Increase in the cash surrender value of bank-owned life insurance | (66 | ) | (61 | ) | ||||
Changes in assets and liabilities which provided (used) cash: | ||||||||
Accrued interest receivable | (519 | ) | (284 | ) | ||||
Prepaid expenses and other assets | (493 | ) | 1,093 | |||||
Accrued interest payable | 238 | (52 | ) | |||||
Accrued expenses and other liabilities | 3,540 | (224 | ) | |||||
Net Cash Provided by (Used in) Operating Activities | 32,249 | (40,409 | ) | |||||
Cash Flows from Investing Activities | ||||||||
Purchase of interest-earning time deposits | (2,132 | ) | (2,141 | ) | ||||
Redemption of interest-earning time deposits | 4,487 | 3,712 | ||||||
Principal repayments on investment securities available for sale | 787 | 801 | ||||||
Proceeds from the sale of investment securities available for sale | - | 5,862 | ||||||
Net increase in loans receivable | (175,266 | ) | (21,335 | ) | ||||
Purchase of Federal Home Loan Bank stock | (8,331 | ) | (913 | ) | ||||
Redemption of Federal Home Loan Bank stock | 6,556 | 560 | ||||||
Acquisition of Oakmont Capital Holdings, net of cash acquired | - | 1,259 | ||||||
Capitalized expenditures on other real estate owned | - | (203 | ) | |||||
Purchase of premises and equipment | (507 | ) | (400 | ) | ||||
Net Cash Used in Investing Activities | (174,406 | ) | (12,798 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Net increase in demand deposits, money markets, and savings accounts | 103,630 | 111,258 | ||||||
Net decrease in certificate accounts | (3,682 | ) | (30,596 | ) | ||||
Increase (decrease) in advances from borrowers for taxes and insurance | 756 | (423 | ) | |||||
Repayments of Federal Home Loan Bank short-term borrowings | (131,300 | ) | (10,000 | ) | ||||
Proceeds from Federal Home Loan Bank short-term borrowings | 115,300 | 21,000 | ||||||
Repayments of Federal Home Loan Bank long-term borrowings | (20,171 | ) | (4,000 | ) | ||||
Proceeds from Federal Home Loan Bank long-term borrowings | 80,000 | - | ||||||
Repayments of Federal Reserve Bank long-term borrowings | (3,895 | ) | (43,170 | ) | ||||
Repayments of other borrowings | - | (9,956 | ) | |||||
Dividends paid | (751 | ) | (618 | ) | ||||
Noncontrolling interest capital distribution | (279 | ) | - | |||||
Purchase of treasury stock | (46 | ) | (25 | ) | ||||
Proceeds from the reissuance of treasury stock | 48 | 53 | ||||||
Proceeds from the exercise of stock options | 181 | 87 | ||||||
Net Cash Provided by Financing Activities | 139,791 | 33,610 | ||||||
Net Decrease in Cash and Cash Equivalents | (2,366 | ) | (19,597 | ) | ||||
Cash and Cash Equivalents – Beginning of Year | 10,705 | 33,913 | ||||||
Cash and Cash Equivalents – End of Year | $ | 8,339 | $ | 14,316 |
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, | ||||||||
2022 | 2021 | |||||||
(In Thousands) | ||||||||
Supplementary Disclosure of Cash Flow and Non-Cash Information: | ||||||||
Cash payments for interest | $ | 4,496 | $ | 3,348 | ||||
Cash payments for income taxes | $ | 2,892 | $ | 2,405 | ||||
Initial recognition of operating lease right-of use assets | $ | 560 | $ | 670 | ||||
Initial recognition of operating lease obligations | $ | 502 | $ | 670 |
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 (theThe Bank is subject to regulation by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. Pursuant to the Bank'sBank’s election under Section 10(l)10(l) of the Home Owners'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, County, Pennsylvania and to a lesser extent, Montgomery and Philadelphia Counties and the Lehigh Valley area in Pennsylvania. The Bank has twothree banking locations: the main office location in Southampton, Pennsylvania and a regional banking officeoffices in the Lehigh Valley area ofand Philadelphia. The Bank also has a mortgage office in Philadelphia and an insurance agency office in New Britain Township, Pennsylvania. The principal deposit products offered by the Bank are certificates of deposit, money market accounts, savings accounts and, beginning in December 2014, non-interest bearing checking accounts for businesses and consumers.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, and commercial business loans.
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,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, 2016 2021 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 2016Bancorp’s 2021 Annual Report on Form 10-K.10-K. The results of operations for the three or nine months ended September 30, 2017 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022.
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'sCompany’s most significant estimates are the determination of the allowance for loan losses and the valuation of deferred tax assets.
Critical Accounting Policies. The Company’s critical accounting policies involving significant judgments and Significant Accounting Policies (Continued)
Recent Accounting Pronouncements.
The Company has contracted with a third-party software vendor to assist with the implementation of CECL. The Company is actively working on preliminary test calculations, data validation, as well as process and procedural documentation. The Company is currently conducting runs of the CECL model and the incurred-loss model in parallel. The new model will include additional assumptions used to calculate credit losses over the estimated life of financial assets and will include the impact of forecasted economic conditions. While the total impact of CECL to the Company’s financial statements is unknown at this time, the Company recognizes it may be material.
In November 2019, the FASB issued ASU 2019-10,Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-timeone-time adjustment or the overall impact of the new guidance on the consolidated financial statements.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)
In August 2016, January 2017, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing diversity in practice. Among these include recognizing cash payments for debt prepayment or debt extinguishment as cash outflows for financing activities; cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage; and cash proceeds received from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities while the cash payments for premiums on bank-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact the adoption of the standard will have on the Company's statement of cash flows.
In May 2019, the FASB issued ASU 2019-05,Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. In November, 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 944,Financial Services – Insurance, for public business entities that are SEC filers, except for smaller reporting companies, to fiscal years beginning after December 15, 2021, and interim periods within those fiscal years and for all other entities, including smaller reporting companies, to fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This Update is not expected to have a significant impact on the Company’s financial statements.
In March 2020, the FASB issued ASU 2020-03,Codification Improvements to Financial Instruments.
This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825,Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)
In March 2017, 2020, the FASB issued ASU 2017-08,
In January 2021, the FASB issued ASU 2021-01,Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain callable debt securities held at a premium. Specifically,optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments requireon a full retrospective basis as of any date from the premiumbeginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be amortized to the earliest call date.issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. 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 March 2022, the FASB issued ASU 2022-02,Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an accounting changeentity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for securities held at a discount; the discount continues to be amortized to maturity. For public business entities that have adopted the amendments in this Update are effective2016-13 for fiscal years, and interim periods within those fiscal years, beginningbeginning after December 15, 2018. 2022. Early adoption is permitted,using prospective application, including adoption in an interim period. If an entity early adoptsperiod where the amendments in an interim period, any adjustmentsguidance should be reflectedapplied as of the beginning of the fiscal year that includes that interim period. An entity should applyyear. The Company is currently evaluating the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings asimpact the adoption of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected tostandard will have a significant impact on the Company'sCompany’s financial statements.position or results of operations.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 1– Stock Compensation (Topic 718), which affects any entity that changes the terms or conditions of a share-based payment award. This Update amends the definition of modification by qualifying that modification accounting does not apply to changes to outstanding share-based payment awards that do not affect the total fair value, vesting requirements, or equity/liability classification of the awards. The amendments in this Update are effective for all entities for annual periods, Financial Statement Presentation and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. This Update is not expected to have a significant impact on the Company's financial statements.
Reclassifications.
Certain items in theNote 2– Earnings Per Share
Earnings per share ("EPS"(“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”). 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 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.awards. 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, 2017 2022 and 2016,2021, all unvested restricted stock program awards and outstanding stock options granted under the 2008 Stock Option Plan, the 2013 Stock Incentive Plan and the 2018 Stock Incentive Plan 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, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net Income Attributable to Quaint Oak Bancorp, Inc. | $ | 2,635,000 | $ | 1,782,000 | $ | 6,654,000 | $ | 4,321,000 | ||||||||
Weighted average shares outstanding – basic | 2,050,650 | 2,002,816 | 2,034,153 | 1,991,336 | ||||||||||||
Effect of dilutive common stock equivalents | 118,082 | 97,211 | 116,791 | 93,950 | ||||||||||||
Adjusted weighted average shares outstanding – diluted | 2,168,732 | 2,100,026 | 2,150,944 | 2,085,286 | ||||||||||||
Basic earnings per share | $ | 1.29 | $ | 0.89 | $ | 3.27 | $ | 2.17 | ||||||||
Diluted earnings per share | $ | 1.22 | $ | 0.85 | $ | 3.09 | $ | 2.07 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Income | $ | 595,000 | $ | 402,000 | $ | 1,290,000 | $ | 1,043,000 | ||||||||
Weighted average shares outstanding – basic | 1,868,969 | 1,792,673 | 1,857,682 | 1,774,343 | ||||||||||||
Effect of dilutive common stock equivalents | 138,850 | 157,740 | 140,456 | 161,414 | ||||||||||||
Adjusted weighted average shares outstanding – diluted | 2,007,819 | 1,950,413 | 1,998,138 | 1,935,757 | ||||||||||||
Basic earnings per share | $ | 0.32 | $ | 0.22 | $ | 0.69 | $ | 0.59 | ||||||||
Diluted earnings per share | $ | 0.30 | $ | 0.21 | $ | 0.65 | $ | 0.54 |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 3– Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and nine months ended September 30, 2017 2022 and 20162021 (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, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Balance at the beginning of the period | $ | (8 | ) | $ | 1 | $ | (38 | ) | $ | (12 | ) | |||||
Other comprehensive income (loss) before classifications | 7 | (3 | ) | 37 | 10 | |||||||||||
Amount reclassified from accumulated other comprehensive income (loss) | - | - | - | - | ||||||||||||
Total other comprehensive income (loss) | 7 | (3 | ) | 37 | 10 | |||||||||||
Balance at the end of the period | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | $ | (2 | ) |
Unrealized Gains (Losses) on Investment Securities Available for Sale (1) | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Balance at the beginning of the period | $ | (18 | ) | $ | 34 | $ | 23 | $ | 118 | |||||||
Other comprehensive income (loss) before classifications | (1 | ) | - | (42 | ) | 202 | ||||||||||
Amount reclassified from accumulated other comprehensive loss | - | - | - | (286 | ) | |||||||||||
Total other comprehensive loss | (1 | ) | - | (42 | ) | (84 | ) | |||||||||
Balance at the end of the period | $ | (19 | ) | $ | 34 | $ | (19 | ) | $ | 34 |
_________________
(1) All amounts are net of tax. Amounts in parentheses indicate debits.
The following table presents significant amounts reclassified out of each component of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Details About Other Comprehensive Loss | Amount Reclassified from Accumulated Other Comprehensive (Loss) Income (1) | Affected Line Item in the Statement of Income | |||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Unrealized losses on investment securities available for sale | $ | - | $ | - | $ | - | $ | 362 | Gain on sales of investment securities available for sale | ||||||||
- | - | - | (76 | ) | Income taxes | ||||||||||||
$ | - | $ | - | $ | - | $ | 286 |
(1) | Amounts in parentheses indicate debits to net income. |
Note 4– Investment in Interest-Earning Time Deposits
The investment in interest-earning time deposits as of September 30, 2017 2022 and December 31, 2016,2021, by contractual maturity, are shown below (in(in thousands):
September 30, 2022 | December 31, 2021 | |||||||
Due in one year or less | $ | 3,111 | $ | 4,487 | ||||
Due after one year through five years | 2,458 | 3,437 | ||||||
Total | $ | 5,569 | $ | 7,924 |
September 30, 2017 | December 31, 2016 | |||||||
Investment in interest-earning time deposits | ||||||||
Due in one year or less | $ | 761 | $ | 2,849 | ||||
Due after one year through five years | 4,118 | 3,249 | ||||||
Total | $ | 4,879 | $ | 6,098 |
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, 2017 2022 and December 31, 2016 2021 are summarized below (in thousands):
September 30, 2017 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Governmental National Mortgage Association securities | $ | 5,884 | $ | 20 | $ | - | $ | 5,904 | ||||||||
Federal Home Loan Mortgage Corporation securities | 1,605 | - | (15 | ) | 1,590 | |||||||||||
Federal National Mortgage Association securities | 586 | - | (3 | ) | 583 | |||||||||||
Total mortgage-backed securities | 8,075 | 20 | (18 | ) | 8,077 | |||||||||||
Debt securities: | ||||||||||||||||
U.S. government agency | 360 | - | (3 | ) | 357 | |||||||||||
Total available-for-sale securities | $ | 8,435 | $ | 20 | $ | (21 | ) | $ | 8,434 |
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Governmental National Mortgage Association securities | $ | 6,608 | $ | 1 | $ | (19 | ) | $ | 6,590 | |||||||
Federal Home Loan Mortgage Corporation securities | 1,892 | - | (21 | ) | 1,871 | |||||||||||
Federal National Mortgage Association securities | 752 | - | (12 | ) | 740 | |||||||||||
Total mortgage-backed securities | 9,252 | 1 | (52 | ) | 9,201 | |||||||||||
Debt securities: | ||||||||||||||||
U.S. government agency | 360 | - | (6 | ) | 354 | |||||||||||
Total available-for-sale securities | $ | 9,612 | $ | 1 | $ | (58 | ) | $ | 9,555 |
September 30, 2022 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Government National Mortgage Association securities | $ | 3,100 | $ | - | $ | (26 | ) | $ | 3,074 | |||||||
Federal National Mortgage Association securities | 117 | 2 | - | 119 | ||||||||||||
Total available-for-sale-securities | $ | 3,217 | $ | 2 | $ | (26 | ) | $ | 3,193 |
December 31, 2021 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Government National Mortgage Association securities | $ | 3,860 | $ | 22 | $ | - | $ | 3,882 | ||||||||
Federal National Mortgage Association securities | 144 | 7 | - | 151 | ||||||||||||
Total available-for-sale-securities | $ | 4,004 | $ | 29 | $ | - | $ | 4,033 |
The amortized cost and fair value of debtmortgage-backed securities at September 30, 2017, 2022, 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 | |||||||
Debt securities | ||||||||
Due after one year through five years | $ | 360 | $ | 357 | ||||
Due after ten years | 8,075 | 8,077 | ||||||
Total | $ | 8,435 | $ | 8,434 |
Available for Sale | ||||||||
Amortized Cost | Fair Value | |||||||
Due after five years through ten years | $ | - | $ | - | ||||
Due after ten years | $ | 3,217 | $ | 3,193 | ||||
Total | $ | 3,217 | $ | 3,193 |
The following tables show the Company'sCompany’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, 2017 and 2022 (in thousands):
September 30, 2022 | ||||||||||||||||||||||||||||
Less than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||
Number of | Unrealized | Unrealized | Unrealized | |||||||||||||||||||||||||
Securities | Fair Value | Loss | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||||||
Government National Mortgage Association securities | 11 | $ | 3,074 | $ | (26 | ) | $ | - | $ | - | $ | 3,074 | $ | (26 | ) |
At December 31, 2016 (in thousands):
September 30, 2017 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Federal Home Loan Mortgage Corporation mortgage-backed securities | 2 | $ | 768 | $ | (8 | ) | $ | 822 | $ | (7 | ) | $ | 1,590 | $ | (15 | ) | ||||||||||||
Federal National Mortgage Association mortgage-backed securities | 1 | - | - | 583 | (3 | ) | 583 | (3 | ) | |||||||||||||||||||
Debt securities, U.S. government agency | 1 | - | - | 357 | (3 | ) | 357 | (3 | ) | |||||||||||||||||||
Total | 4 | $ | 768 | $ | (8 | ) | $ | 1,762 | $ | (13 | ) | $ | 2,530 | $ | (21 | ) |
December 31, 2016 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Governmental National Mortgage Association mortgage-backed securities | 8 | $ | 5,874 | $ | (19 | ) | $ | - | $ | - | $ | 5,874 | $ | (19 | ) | |||||||||||||
Federal Home Loan Mortgage Corporation mortgage-backed securities | 2 | 1,871 | (21 | ) | - | - | 1,871 | (21 | ) | |||||||||||||||||||
Federal National Mortgage Association mortgage-backed securities | 1 | 740 | (12 | ) | - | - | 740 | (12 | ) | |||||||||||||||||||
Debt securities, U.S. government agency | 1 | 354 | (6 | ) | - | - | 354 | (6 | ) | |||||||||||||||||||
Total | 12 | $ | 8,839 | $ | (58 | ) | $ | - | $ | - | $ | 8,839 | $ | (58 | ) |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses
The composition of net loans receivable is as follows (in thousands):
September 30, 2017 | December 31, 2016 | |||||||
Real estate loans: | ||||||||
One-to-four family residential: | ||||||||
Owner occupied | $ | 5,434 | $ | 5,389 | ||||
Non-owner occupied | 52,501 | 51,893 | ||||||
Total one-to-four family residential | 57,935 | 57,282 | ||||||
Multi-family (five or more) residential | 20,326 | 14,641 | ||||||
Commercial real estate | 86,800 | 77,730 | ||||||
Construction | 15,387 | 15,355 | ||||||
Home equity | 4,201 | 4,775 | ||||||
Total real estate loans | 184,649 | 169,783 | ||||||
Commercial business | 11,571 | 9,295 | ||||||
Other consumer | 43 | 26 | ||||||
Total Loans | 196,263 | 179,104 | ||||||
Deferred loan fees and costs | (757 | ) | (692 | ) | ||||
Allowance for loan losses | (1,735 | ) | (1,605 | ) | ||||
Net Loans | $ | 193,771 | $ | 176,807 |
September 30, 2022 | December 31, 2021 | |||||||
Real estate loans: | ||||||||
One-to-four family residential: | ||||||||
Owner occupied | $ | 17,424 | $ | 9,779 | ||||
Non-owner occupied | 39,410 | 38,752 | ||||||
Total one-to-four family residential | 56,834 | 48,531 | ||||||
Multi-family (five or more) residential | 48,468 | 29,344 | ||||||
Commercial real estate | 313,160 | 183,822 | ||||||
Construction | 25,838 | 15,843 | ||||||
Home equity | 5,265 | 4,706 | ||||||
Total real estate loans | 449,565 | 282,246 | ||||||
Commercial business(1) | 138,133 | 129,608 | ||||||
Other consumer | 3 | 12 | ||||||
Total Loans | 587,701 | 411,866 | ||||||
Deferred loan fees and costs | (1,406 | ) | (2,638 | ) | ||||
Allowance for loan losses | (7,141 | ) | (5,262 | ) | ||||
Net Loans | $ | 579,154 | $ | 403,966 |
__________________
(1)Includes $3.0 million and $42.6 million of PPP loans at September 30, 2022 and December 31, 2021, respectively.
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company'sCompany’s internal risk rating system as of September 30, 2017 2022 and December 31, 2016
September 30, 2022 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | 17,014 | $ | 410 | $ | - | $ | - | $ | 17,424 | ||||||||||
One-to-four family residential non-owner occupied | 39,402 | - | 8 | - | 39,410 | |||||||||||||||
Multi-family residential | 46,760 | - | 1,708 | - | 48,468 | |||||||||||||||
Commercial real estate | 312,163 | - | 997 | - | 313,160 | |||||||||||||||
Construction | 25,838 | - | - | - | 25,838 | |||||||||||||||
Home equity | 5,265 | - | - | - | 5,265 | |||||||||||||||
Commercial business | 136,310 | 103 | 1,720 | - | 138,133 | |||||||||||||||
Other consumer | 3 | - | - | - | 3 | |||||||||||||||
Total | $ | 582,755 | $ | 513 | $ | 4,433 | $ | - | $ | 587,701 |
December 31, 2021 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | 9,365 | $ | 414 | $ | - | $ | - | $ | 9,779 | ||||||||||
One-to-four family residential non-owner occupied | 38,743 | - | 9 | - | 38,752 | |||||||||||||||
Multi-family residential | 27,621 | 1,723 | - | - | 29,344 | |||||||||||||||
Commercial real estate | 181,914 | - | 1,908 | - | 183,822 | |||||||||||||||
Construction | 15,843 | - | - | - | 15,843 | |||||||||||||||
Home equity | 4,706 | - | - | - | 4,706 | |||||||||||||||
Commercial business | 125,725 | - | 3,883 | - | 129,608 | |||||||||||||||
Other consumer | 12 | - | - | - | 12 | |||||||||||||||
Total | $ | 403,929 | $ | 2,137 | $ | 5,800 | $ | - | $ | 411,866 |
September 30, 2017 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | 5,434 | $ | - | $ | - | $ | - | $ | 5,434 | ||||||||||
One-to-four family residential non-owner occupied | 51,963 | - | 538 | - | 52,501 | |||||||||||||||
Multi-family residential | 20,326 | - | - | - | 20,326 | |||||||||||||||
Commercial real estate | 85,716 | 117 | 967 | - | 86,800 | |||||||||||||||
Construction | 13,318 | - | 2,069 | - | 15,387 | |||||||||||||||
Home equity | 4,201 | - | - | - | 4,201 | |||||||||||||||
Commercial business | 11,535 | 36 | - | - | 11,571 | |||||||||||||||
Other consumer | 43 | - | - | - | 43 | |||||||||||||||
Total | $ | 192,536 | $ | 153 | $ | 3,574 | $ | - | $ | 196,263 |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
December 31, 2016 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | 5,389 | $ | - | $ | - | $ | - | $ | 5,389 | ||||||||||
One-to-four family residential non-owner occupied | 50,864 | 122 | 907 | - | 51,893 | |||||||||||||||
Multi-family residential | 14,641 | - | - | - | 14,641 | |||||||||||||||
Commercial real estate | 76,281 | 117 | 1,332 | - | 77,730 | |||||||||||||||
Construction | 13,355 | - | 2,000 | - | 15,355 | |||||||||||||||
Home equity | 4,775 | - | - | - | 4,775 | |||||||||||||||
Commercial business | 9,295 | - | - | - | 9,295 | |||||||||||||||
Other consumer | 26 | - | - | - | 26 | |||||||||||||||
Total | $ | 174,626 | $ | 239 | $ | 4,239 | $ | - | $ | 179,104 |
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2017 2022 as well as the average recorded investment and related interest income for the period then ended (in thousands):
September 30, 2022 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 8 | 9 | - | 9 | - | |||||||||||||||
Multi-family residential | 1,708 | 1,723 | - | 1,723 | - | |||||||||||||||
Commercial real estate | 130 | 130 | - | 130 | 9 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
- | ||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | - | - | - | - | - | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | - | - | - | - | - | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 8 | 9 | - | 9 | - | |||||||||||||||
Multi-family residential | 1,708 | 1,723 | - | 1,723 | - | |||||||||||||||
Commercial real estate | 130 | 130 | - | 130 | 9 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 1,846 | $ | 1,862 | $ | - | $ | 1,862 | $ | 9 |
September 30, 2017 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 565 | 565 | - | 1,058 | 18 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 398 | 398 | - | 398 | - | |||||||||||||||
Construction | 2,069 | 2,069 | - | 2,061 | 58 | |||||||||||||||
Home equity | 46 | 46 | - | 48 | 4 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 170 | 170 | 38 | 95 | 4 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 133 | 133 | 1 | 395 | 7 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 735 | 735 | 38 | 1,153 | 22 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 531 | 531 | 1 | 793 | 7 | |||||||||||||||
Construction | 2,069 | 2,069 | - | 2,061 | 58 | |||||||||||||||
Home equity | 46 | 46 | - | 48 | 4 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 3,381 | $ | 3,381 | $ | 39 | $ | 4,055 | $ | 91 |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, 2016 2021 as well as the average recorded investment and related interest income for the year then ended (in thousands):
December 31, 2016 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 925 | 925 | - | 1,208 | 56 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 660 | 660 | - | 660 | 7 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 49 | 49 | - | 82 | 6 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 167 | 167 | 28 | 169 | 8 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 133 | 133 | 11 | 133 | 9 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 1,092 | 1,092 | 28 | 1,377 | 64 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 793 | 793 | 11 | 793 | 16 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 49 | 49 | - | 82 | 6 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 1,934 | $ | 1,934 | $ | 39 | $ | 2,252 | $ | 86 |
December 31, 2021 | ||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | 66 | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 9 | 9 | - | 9 | - | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 131 | 131 | - | 131 | 12 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | 18 | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
With an allowance recorded: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | - | - | - | - | - | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | - | - | - | - | - | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | 66 | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 9 | 9 | - | 9 | - | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 131 | 131 | - | 131 | 12 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | - | - | - | 18 | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 140 | $ | 140 | $ | - | $ | 224 | $ | 12 |
The loan portfolio also includes certain loans that have been modified in a troubled debt restructuring, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forbearance, or other actions. At September 30, 2017,September30,2022, the Company had eighttwo loans totaling $719,000$138,000 that were identified as troubled debt restructurings. All eightOne of these loans werewas performing in accordance with theirits modified terms.terms and one was on non-accrual as of September 30, 2022. During the nine month period ended September 30, 2022, no new loans were identified as TDRs. At December 31, 2016, 2021, the Company had eighttwo loans totaling $733,000$140,000 that were identified as troubled debt restructurings ("TDR"). restructurings. One of these loans was performing in accordance with its modified terms and one was on non-accrual as of December 31, 2021. If a TDR is placed on non-accrual it is not reverted back to accruing status until the borrower makes timely payments as contracted for at least ninesix months and future collection under the revised terms is probable. During the nine months ended September 30, 2017, no new loans were identified as TDRs.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
September 30, 2017 | ||||||||||||||||||||
Number of Contracts | Recorded Investment | Non- Accrual | Accruing | Related Allowance | ||||||||||||||||
One-to-four family residential owner occupied | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
One-to-four family residential non-owner occupied | 5 | 540 | - | 540 | 21 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 1 | 133 | - | 133 | 1 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 2 | 46 | - | 46 | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | 8 | $ | 719 | $ | - | $ | 719 | $ | 22 |
December 31, 2016 | ||||||||||||||||||||
Number of Contracts | Recorded Investment | Non- Accrual | Accruing | Related Allowance | ||||||||||||||||
One-to-four family residential owner occupied | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
One-to-four family residential non-owner occupied | 5 | 551 | - | 551 | 28 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 1 | 133 | - | 133 | 11 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 2 | 49 | - | 49 | - | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | 8 | $ | 733 | $ | - | $ | 733 | $ | 39 |
September 30, 2017 | ||||||||||||||||||||
Accruing Past Due Less than 30 Days | Past Due 30-89 Days | 90 Days or More Past Due | Non- Accrual | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 540 | - | - | - | 540 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 133 | - | - | - | 133 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 46 | - | - | - | 46 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 719 | $ | - | $ | - | $ | - | $ | 719 |
December 31, 2016 | ||||||||||||||||||||
Accruing Past Due Less than 30 Days | Past Due 30-89 Days | 90 Days or More Past Due | Non- Accrual | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 551 | - | - | - | 551 | |||||||||||||||
Multi-family residential | - | - | - | - | - | |||||||||||||||
Commercial real estate | 133 | - | - | - | 133 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | 49 | - | - | - | 49 | |||||||||||||||
Commercial business | - | - | - | - | - | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 733 | $ | - | $ | - | $ | - | $ | 733 |
Any reserve for an impaired TDR loan is based upon the present value of the future expected cash flows discounted at the loan'sloan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. At September 30, 2017 2022 there were no commitments to lend additional funds to debtors whose loan terms have been modified as TDRs.
The general practice of the Bank is to work with borrowers so that they are able to pay back their loan in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR modification and the loan is determined to be uncollectible, the loan will be charged off.
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the three and nine months ended September 30, 2017 2022 and recorded investment in loans receivable as of September 30, 2017 (in2022 (in thousands):
September 30, 2017 | ||||||||||||||||||||||||||||||||||||
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, 2017 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 45 | $ | 465 | $ | 156 | $ | 645 | $ | 137 | $ | 41 | $ | 111 | $ | 90 | $ | 1,690 | ||||||||||||||||||
Charge-offs | - | (38 | ) | - | - | - | - | - | - | (38 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | (2 | ) | 93 | (14 | ) | 10 | (4 | ) | (18 | ) | 18 | - | 83 | |||||||||||||||||||||||
Ending balance | $ | 43 | $ | 520 | $ | 142 | $ | 655 | $ | 133 | $ | 23 | $ | 129 | $ | 90 | $ | 1,735 | ||||||||||||||||||
For the Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 41 | $ | 503 | $ | 103 | $ | 616 | $ | 138 | $ | 37 | $ | 87 | $ | 80 | $ | 1,605 | ||||||||||||||||||
Charge-offs | - | (38 | ) | - | (24 | ) | - | - | - | - | (62 | ) | ||||||||||||||||||||||||
Recoveries | - | - | - | 3 | - | - | - | - | 3 | |||||||||||||||||||||||||||
Provision | 2 | 55 | 39 | 60 | (5 | ) | (14 | ) | 42 | 10 | 189 | |||||||||||||||||||||||||
Ending balance | $ | 43 | $ | 520 | $ | 142 | $ | 655 | $ | 133 | $ | 23 | $ | 129 | $ | 90 | $ | 1,735 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 38 | $ | - | $ | 1 | $ | - | $ | - | $ | - | $ | - | $ | 39 | ||||||||||||||||||
Collectively | $ | 43 | $ | 482 | $ | 142 | $ | 654 | $ | 133 | $ | 23 | $ | 129 | $ | 90 | $ | 1,696 | ||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||
Ending balance: | $ | 5,434 | $ | 52,501 | $ | 20,326 | $ | 86,800 | $ | 15,387 | $ | 4,201 | $ | 11,614 | $ | - | $ | 196,263 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 735 | $ | - | $ | 531 | $ | 2,069 | $ | 46 | $ | - | $ | - | $ | 3,381 | ||||||||||||||||||
Collectively | $ | 5,434 | $ | 51,766 | $ | 20,326 | $ | 86,269 | $ | 13,318 | $ | 4,155 | $ | 11,614 | $ | - | $ | 192,882 |
September 30, 2022 | ||||||||||||||||||||||||||||||||||||
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, 2022 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 104 | $ | 276 | $ | 377 | $ | 3,383 | $ | 283 | $ | 32 | $ | 1,735 | $ | 350 | $ | 6,540 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | (54 | ) | - | (54 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | 15 | 7 | 90 | 187 | (76 | ) | 3 | 379 | 50 | 655 | ||||||||||||||||||||||||||
Ending balance | $ | 119 | $ | 283 | $ | 467 | $ | 3,570 | $ | 207 | $ | 35 | $ | 2,060 | $ | 400 | $ | 7,141 | ||||||||||||||||||
For the Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 73 | $ | 292 | $ | 249 | $ | 2,475 | $ | 119 | $ | 29 | $ | 1,625 | $ | 400 | $ | 5,262 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | (54 | ) | - | (54 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | 46 | (9 | ) | 218 | 1,095 | 88 | 6 | 489 | - | 1,933 | ||||||||||||||||||||||||||
Ending balance | $ | 119 | $ | 283 | $ | 467 | $ | 3,570 | $ | 207 | $ | 35 | $ | 2,060 | $ | 400 | $ | 7,141 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Collectively | $ | 119 | $ | 283 | $ | 467 | $ | 3,570 | $ | 207 | $ | 35 | $ | 2,060 | $ | 400 | $ | 7,141 | ||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||
Ending balance: | $ | 17,424 | $ | 39,410 | $ | 48,468 | $ | 313,160 | $ | 25,838 | $ | 5,265 | $ | 138,136 | $ | 587,701 | ||||||||||||||||||||
Ending balance evaluated | �� | |||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 8 | $ | 1,708 | $ | 130 | $ | - | $ | - | $ | - | $ | 1,846 | ||||||||||||||||||||
Collectively | $ | 17,424 | $ | 39,402 | $ | 46,760 | $ | 313,030 | $ | 25,838 | $ | 5,265 | $ | 138,136 | $ | 585,855 |
The Bank allocated increased allowance for loan loss provisions to the 1-4 family residential non-owner occupiedcommercial real estate loan portfolio class for the three and nine months ended September 30, 2017, 2022, due primarily to charge-offschanges in quantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the nine months ended September 30, 2022, due primarily to changes in quantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the multi-family residential loan portfolio class for the nine months ended September 30, 2022, due primarily to changes in qualitative and quantitative factors in this portfolio class.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the three and nine months ended September 30, 2021 and recorded investment in loans receivable as of September 30, 2021 (in thousands):
September 30, 2021 | ||||||||||||||||||||||||||||||||||||
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, 2021 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 72 | $ | 356 | $ | 242 | $ | 1,617 | $ | 163 | $ | 26 | $ | 970 | $ | 300 | $ | 3,746 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | - | 22 | 5 | 407 | (28 | ) | (4 | ) | 205 | (50 | ) | 557 | ||||||||||||||||||||||||
Ending balance | $ | 72 | $ | 378 | $ | 247 | $ | 2,024 | $ | 135 | $ | 22 | $ | 1,175 | $ | 250 | $ | 4,303 | ||||||||||||||||||
For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 88 | $ | 362 | $ | 229 | $ | 1,287 | $ | 62 | $ | 20 | $ | 763 | $ | 250 | $ | 3,061 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | (17 | ) | - | (17 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | (16 | ) | 16 | 18 | 737 | 73 | 2 | 429 | - | 1,259 | ||||||||||||||||||||||||||
Ending balance | $ | 72 | $ | 378 | $ | 247 | $ | 2,024 | $ | 135 | $ | 22 | $ | 1,175 | $ | 250 | $ | 4,303 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Collectively | $ | 72 | $ | 378 | $ | 247 | $ | 2,024 | $ | 135 | $ | 22 | $ | 1,175 | $ | 250 | $ | 4,303 |
The Bank allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the three months ended September 30, 2021, due primarily to changes in quantitative and qualitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the three and nine months ended September 30, 2017, 2021, due primarily to increased balances and delinquencieschanges in quantitative factors in this portfolio class.class The Bank allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the three and nine months ended September 30, 2017, 2021, due primarily to increased balanceschanges in qualitative and changes to qualitativequantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions toIn general, the multi-family residential portfolio class forprimary driver of the nine months ended September 30, 2017, due primarily to increased balancesincrease in this portfolio class. The Bank allocated decreased allowance for loan loss provisions toqualitative factors was the home equity portfolio class foreconomic trends factor associated with the three and nine months ended September 30, 2017, due primarily to decreased balances and delinquencies in this portfolio class.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
September 30, 2016 | ||||||||||||||||||||||||||||||||||||
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, 2016 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 46 | $ | 525 | $ | 66 | $ | 484 | $ | 115 | $ | 51 | $ | 37 | $ | 100 | $ | 1,424 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | (9 | ) | 25 | (11 | ) | 63 | 28 | (19 | ) | 14 | (30 | ) | 61 | |||||||||||||||||||||||
Ending balance | $ | 37 | $ | 550 | $ | 55 | $ | 547 | $ | 143 | $ | 32 | $ | 51 | $ | 70 | $ | 1,485 | ||||||||||||||||||
For the Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 55 | $ | 486 | $ | 81 | $ | 389 | $ | 153 | $ | 50 | $ | 18 | $ | 81 | $ | 1,313 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | (18 | ) | 64 | (26 | ) | 158 | (10 | ) | (18 | ) | 33 | (11 | ) | 172 | ||||||||||||||||||||||
Ending balance | $ | 37 | $ | 550 | $ | 55 | $ | 547 | $ | 143 | $ | 32 | $ | 51 | $ | 70 | $ | 1,485 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 30 | $ | - | $ | 11 | $ | - | $ | - | $ | - | $ | - | $ | 41 | ||||||||||||||||||
Collectively | $ | 37 | $ | 520 | $ | 55 | $ | 536 | $ | 143 | $ | 32 | $ | 51 | $ | 70 | $ | 1,444 | ||||||||||||||||||
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the year ended December 31, 2016 2021 and recorded investment in loans receivable based on impairment evaluation as of December 31, 2016 (in2021 (in thousands):
December 31, 2016 | ||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 55 | $ | 486 | $ | 81 | $ | 389 | $ | 153 | $ | 50 | $ | 18 | $ | 81 | $ | 1,313 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | (14 | ) | 17 | 22 | 227 | (15 | ) | (13 | ) | 69 | (1 | ) | 292 | |||||||||||||||||||||||
Ending balance | $ | 41 | $ | 503 | $ | 103 | $ | 616 | $ | 138 | $ | 37 | $ | 87 | $ | 80 | $ | 1,605 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 28 | $ | - | $ | 11 | $ | - | $ | - | $ | - | $ | - | $ | 39 | ||||||||||||||||||
Collectively | $ | 41 | $ | 475 | $ | 103 | $ | 605 | $ | 138 | $ | 37 | $ | 87 | $ | 80 | $ | 1,566 | ||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 5,389 | $ | 51,893 | $ | 14,641 | $ | 77,730 | $ | 15,355 | $ | 4,775 | $ | 9,321 | $ | - | $ | 179,104 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 1,092 | $ | - | $ | 793 | $ | - | $ | 49 | $ | - | $ | - | $ | 1,934 | ||||||||||||||||||
Collectively | $ | 5,389 | $ | 50,801 | $ | 14,641 | $ | 76,937 | $ | 15,355 | $ | 4,726 | $ | 9,321 | $ | - | $ | 177,170 |
December 31, 2021 | ||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 88 | $ | 362 | $ | 229 | $ | 1,287 | $ | 62 | $ | 20 | $ | 763 | $ | 250 | $ | 3,061 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | (17 | ) | - | (17 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | 17 | - | 17 | |||||||||||||||||||||||||||
Provision | (15 | ) | (70 | ) | 20 | 1,188 | 57 | 9 | 862 | 150 | 2,201 | |||||||||||||||||||||||||
Ending balance | $ | 73 | $ | 292 | $ | 249 | $ | 2,475 | $ | 119 | $ | 29 | $ | 1,625 | $ | 400 | $ | 5,262 | ||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Collectively | $ | 73 | $ | 292 | $ | 249 | $ | 2,475 | $ | 119 | $ | 29 | $ | 1,625 | $ | 400 | $ | 5,262 | ||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 9,779 | $ | 38,752 | $ | 29,344 | $ | 183,822 | $ | 15,843 | $ | 4,706 | $ | 129,620 | $ | 411,866 | ||||||||||||||||||||
Ending balance evaluated | ||||||||||||||||||||||||||||||||||||
for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | $ | 9 | $ | - | $ | 131 | $ | - | $ | - | $ | - | $ | 140 | |||||||||||||||||||||
Collectively | $ | 9,779 | $ | 38,743 | $ | 29,344 | $ | 183,691 | $ | 15,843 | $ | 4,706 | $ | 129,620 | $ | 411,726 |
The Bank allocated increased allowance for loan loss provisions to the commercial real estate commercial business, and multi-familyloan portfolio classesclass for the year ended December 31, 2016, 2021, due primarily to increased balanceschanges in thesevolume and qualitative factors in this portfolio classes.class. The Bank allocated increased allowance for loan loss provisions to the one-to-four family residential non-owner occupiedcommercial business loan portfolio class for the year ended December 31, 2016, 2021, due primarily to increased specific reserveschanges in qualitative factors in this portfolio class. The Bank allocated decreasedincreased allowance for loan loss provisions to the multi-family loan portfolio class for the year ended December 31, 2021, due primarily to changes in qualitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the construction home equity, and one-to-four family owner occupied classesloan portfolio class for the year ended December 31, 2016 2021, due decreased balances orprimarily to changes toin quantitative and qualitative factors in thesethis portfolio classes.class. In general, the primary driver of the increase in qualitative factors was the economic trends factor associated with the COVID-19 pandemic. In this regard, the Bank increased the unallocated component of the allowance for the year ended December 31, 2021 to cover uncertainties that could affect management’s estimate of probable losses primarily associated with the COVID-19 pandemic.
The following table presents non-accrual loans by classes of the loan portfolio as of September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022 | December 31, 2021 | |||||||
One-to-four family residential owner occupied | $ | - | $ | - | ||||
One-to-four family residential non-owner occupied | 8 | 9 | ||||||
Multi-family residential | 1,708 | - | ||||||
Commercial real estate | - | - | ||||||
Construction | - | - | ||||||
Home equity | - | - | ||||||
Commercial business | - | - | ||||||
Other consumer | - | - | ||||||
Total | $ | 1,716 | $ | 9 |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents nonaccrual loans bytables present the classes of the loan portfolio summarized by the past due status as of September 30, 2017 2022 and December 31, 2016 (in2021 (in thousands):
September 30, 2017 | December 31, 2016 | |||||||
One-to-four family residential owner occupied | $ | - | $ | - | ||||
One-to-four family residential non-owner occupied | 195 | 541 | ||||||
Multi-family residential | - | -- | ||||||
Commercial real estate | 398 | 660 | ||||||
Construction | 2,069 | - | ||||||
Home equity | - | - | ||||||
Commercial business | - | - | ||||||
Other consumer | - | - | ||||||
Total | $ | 2,662 | $ | 1,201 |
September 30, 2022 | ||||||||||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans Receivable | Loans Receivable 90 Days or More Past Due and Accruing | |||||||||||||||||||
One-to-four family residential owner occupied | $ | 556 | $ | - | $ | 556 | $ | 16,868 | $ | 17,424 | $ | - | ||||||||||||
One-to-four family residential non-owner occupied | 57 | 8 | 65 | 39,345 | 39,410 | - | ||||||||||||||||||
Multi-family residential | 873 | 1,708 | 2,581 | 45,887 | 48,468 | - | ||||||||||||||||||
Commercial real estate | 2,133 | - | 2,133 | 311,027 | 313,160 | - | ||||||||||||||||||
Construction | - | - | - | 25,838 | 25,838 | - | ||||||||||||||||||
Home equity | 40 | - | 40 | 5,225 | 5,265 | - | ||||||||||||||||||
Commercial business | 2,129 | - | 2,129 | 136,004 | 138,133 | - | ||||||||||||||||||
Other consumer | - | - | - | 3 | 3 | - | ||||||||||||||||||
Total | $ | 5,788 | $ | 1,716 | $ | 7,504 | $ | 580,197 | $ | 587,701 | $ | - | ||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans Receivable | Loans Receivable 90 Days or More Past Due and Accruing | |||||||||||||||||||
One-to-four family residential owner occupied | $ | 809 | $ | - | $ | 809 | $ | 8,970 | $ | 9,779 | $ | - | ||||||||||||
One-to-four family residential non-owner occupied | 285 | 9 | 294 | 38,458 | 38,752 | - | ||||||||||||||||||
Multi-family residential | - | - | - | 29,344 | 29,344 | - | ||||||||||||||||||
Commercial real estate | - | - | - | 183,822 | 183,822 | - | ||||||||||||||||||
Construction | - | - | - | 15,843 | 15,843 | - | ||||||||||||||||||
Home equity | - | - | - | 4,706 | 4,706 | - | ||||||||||||||||||
Commercial business | 367 | - | 367 | 129,241 | 129,608 | - | ||||||||||||||||||
Other consumer | - | - | - | 12 | 12 | - | ||||||||||||||||||
Total | $ | 1,461 | $ | 9 | $ | 1,470 | $ | 410,396 | $ | 411,866 | $ | - |
Non-performing loans, which consist of non-accruing loans plus accruing loans 90 days or more past due, amounted to $3.5 million and $1.9$1.7 million at September 30, 2017 2022 and $9,000 at December 31, 2016, respectively. 2021. 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.
For the three and nine months ended September 30, 2017 2022 and 20162021 there was no interest income recognized on non-accrual loans on a cash basis. InterestThere was $43,000 and $122,000 of interest income foregone on non-accrual loans was approximately $63,000 and $103,000 for the three and nine months ended September 30, 2017, 2022, respectively. InterestThere was $1,000 of interest income foregone on non-accrual loans was approximately $26,000for both the three and $82,000 for the three and nine months ended September 30, 2016, respectively.2021.
September 30, 2017 | ||||||||||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans Receivable | Loans Receivable 90 Days or More Past Due and Accruing | |||||||||||||||||||
One-to-four family residential owner occupied | $ | 468 | $ | 417 | $ | 885 | $ | 4,549 | $ | 5,434 | $ | 417 | ||||||||||||
One-to-four family residential non-owner occupied | 611 | 439 | 1,050 | 51,451 | 52,501 | 244 | ||||||||||||||||||
Multi-family residential | 81 | - | 81 | 20,245 | 20,326 | - | ||||||||||||||||||
Commercial real estate | 2,603 | 617 | 3,220 | 83,580 | 86,800 | 219 | ||||||||||||||||||
Construction | 509 | 2,069 | 2,578 | 12,809 | 15,387 | - | ||||||||||||||||||
Home equity | 34 | - | 34 | 4,167 | 4,201 | - | ||||||||||||||||||
Commercial business | - | - | - | 11,571 | 11,571 | - | ||||||||||||||||||
Other consumer | - | - | - | 43 | 43 | - | ||||||||||||||||||
Total | $ | 4,306 | $ | 3,542 | $ | 7,848 | $ | 188,415 | $ | 196,263 | $ | 880 |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 6 - Loans Receivable, Net and Allowance for Loan Losses (Continued)
December 31, 2016 | ||||||||||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans Receivable | Loans Receivable 90 Days or More Past Due and Accruing | |||||||||||||||||||
One-to-four family residential owner occupied | $ | 310 | $ | 9 | $ | 319 | $ | 5,070 | $ | 5,389 | $ | 9 | ||||||||||||
One-to-four family residential non-owner occupied | 271 | 778 | 1,049 | 50,844 | 51,893 | 237 | ||||||||||||||||||
Multi-family residential | - | - | - | 14,641 | 14,641 | - | ||||||||||||||||||
Commercial real estate | 385 | 777 | 1,162 | 76,568 | 77,730 | 117 | ||||||||||||||||||
Construction | 596 | 308 | 904 | 14,451 | 15,355 | 308 | ||||||||||||||||||
Home equity | 115 | - | 115 | 4,660 | 4,775 | - | ||||||||||||||||||
Commercial business | 43 | - | 43 | 9,252 | 9,295 | - | ||||||||||||||||||
Other consumer | - | - | - | 26 | 26 | - | ||||||||||||||||||
Total | $ | 1,720 | $ | 1,872 | $ | 3,592 | $ | 175,512 | $ | 179,104 | $ | 671 |
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. On August 1, 2016, Quaint Oak Insurance Agency, LLC began operations by acquiring the renewal rights to thea book of business produced and serviced by Signature Insurance Services, LLC, 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 assetsasset at September 30, 2017 2022 was $428,000$186,000, which is net of accumulated amortization of $57,000.$299,000. Amortization expense for the three and nine months ended September 30, 20172022 and 2021 amounted to $13,000approximately $12,000 and $37,000,$36,000, respectively.
Note 8– Deposits
Deposits consist of the following classifications (in thousands):
September 30, 2017 | December 31, 2016 | |||||||
Non-interest bearing checking accounts | $ | 7,713 | $ | 5,852 | ||||
Passbook accounts | 534 | 1,189 | ||||||
Savings accounts | 1,584 | 1,784 | ||||||
Money market accounts | 30,151 | 31,114 | ||||||
Certificates of deposit | 142,416 | 137,068 | ||||||
Total deposits | $ | 182,398 | $ | 177,007 |
September 30, 2022 | December 31, 2021 | |||||||
Non-interest bearing checking accounts | $ | 79,825 | $ | 64,731 | ||||
Passbook accounts | 4 | 10 | ||||||
Savings accounts | 1,662 | 1,828 | ||||||
Money market accounts | 289,395 | 200,687 | ||||||
Certificates of deposit | 176,228 | 179,910 | ||||||
Total deposits | $ | 547,114 | $ | 447,166 |
Note 9– Borrowings
Federal Home Loan Bank advances consist of the following at September 30, 2017 2022 and December 31, 2016 (in2021 (in thousands):
September 30, 2022 | December 31, 2021 | |||||||||||||||
Amount | Weighted Interest | Amount | Weighted Interest | |||||||||||||
Short-term borrowings | $ | 10,000 | 3.11 | % | $ | 26,000 | 0.28 | % | ||||||||
Fixed rate borrowings maturing: | ||||||||||||||||
2022 | 17,000 | 1.72 | 7,171 | 2.10 | ||||||||||||
2023 | 57,000 | 2.22 | 7,000 | 2.16 | ||||||||||||
2024 | 6,167 | 2.05 | 6,167 | 2.05 | ||||||||||||
2025 | 2,855 | 1.25 | 2,855 | 1.25 | ||||||||||||
Total FHLB long-term debt | $ | 83,022 | 2.07 | % | $ | 23,193 | 2.00 | % |
September 30, 2017 | December 31, 2016 | |||||||||||||||
Amount | Weighted Interest Rate | Amount | Weighted Interest Rate | |||||||||||||
Short-term borrowings | $ | 11,500 | 1.27 | % | $ | 7,000 | 0.54 | % | ||||||||
Fixed rate borrowings maturing: | ||||||||||||||||
2017 | $ | - | - | % | $ | 2,500 | 1.15 | % | ||||||||
2018 | 3,000 | 1.46 | 3,000 | 1.46 | ||||||||||||
2019 | 3,000 | 1.86 | 2,000 | 1.95 | ||||||||||||
2020 | 2,000 | 2.00 | 1,000 | 2.15 | ||||||||||||
2021 | 2,000 | 1.96 | - | - | ||||||||||||
2022 | 2,000 | 2.12 | - | - | ||||||||||||
2023 | 2,000 | 2.28 | - | - | ||||||||||||
Total FHLB long-term debt | $ | 14,000 | 1.90 | % | $ | 8,500 | 1.56 | % |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 9 – Borrowings (Continued)
Federal Reserve Bank long-term borrowings decreased $3.9 million, or 100.0%, to none at September 30, 2022 from $3.9 million at December 31, 2021 as the Company paid off first round PPP loans pledged as collateral under the FRB’s Paycheck Protection Program Liquidity Facility (PPPLF). The Company did not utilize the FRB’s PPPLF to fund second round PPP loans. Under the PPPLF the Company pledged certain PPP loans as collateral and borrowed from the Federal Reserve at a rate of 0.35% that was fixed for two years.
There were no other short-term borrowings representing outstanding balances on two lines of credit that Oakmont Capital Holdings, LLC has with a credit union which are used to fund equipment loans. Borrowing capacity on the two lines of credit total $15.0 million at September 30, 2022.
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. Using proceeds from a loan from the Company, the ESOP purchased 8%, or 222,180 shares of the Company'sCompany’s then outstanding common stock in the open market during 2007. The Bank makesmade cash contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to make the required loan payments to the Company. Company until the loan was repaid in full as of September 30, 2021. The loan bearsbore an interest rate of 7.75% per annum, with principal and interest to be paid quarterly in equal installments over 15 years.years pursuant to the terms of the original note. The loan iswas secured by the unallocated shares of common stock held by the ESOP.
During the third quarter of 2022, the Company made a discretionary contribution of 4,000 shares to participants. As the debt is repaid,ESOP. These shares arewere released from collateral and are allocated to each eligible participant based on the ratioTreasury Stock at a cost of each such participant's base compensation to the total base compensation of eligible plan participants. As the unearned shares are committed to be released and allocated among participants, the Company recognizes compensation expense equal to the average market value of the shares, and the shares become outstanding for earnings per share computations.approximately $84,000. During the three and nine months ended September 30, 2017, 2022, the Company recognized $46,000$84,000 and $138,000$259,000 of ESOP expense, respectively. During the three and nine months ended September 30, 2016, 2021, the Company recognized $43,000$65,000 and $129,000$187,000 of ESOP expense, respectively.
Stock Incentive Plans
In May 2008, 2013, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Recognition and Retention2013 Stock Incentive Plan (the "RRP"“2013 Stock Incentive Plan”) and Trust Agreement. In order to fund the RRP, the 2008 Recognition and Retention. The 2013 Stock Incentive Plan Trust acquired 111,090approved by shareholders in May 2013 covered a total of 195,000 shares, of which 48,750, or 25%, may be restricted stock awards, for a balance of 146,250 stock options assuming all the Company's stock in the open market at an average price of $4.68 totaling $520,000.restricted shares are awarded. In May 2013, 2018, the shareholders of Quaint Oak Bancorp approved the adoption of the 20132018 Stock Incentive Plan (the "Stock“2018 Stock Incentive Plan"Plan”). The2018 Stock Incentive Plan provides that no more than 48,750,approved by shareholders in May 2018 covered a total of 155,000 shares, of which 38,750, or 25%, of the shares may be granted as restricted stock awards.
As of September 30, 2017, 2022 a total of 10,2619,122 share awards were unvested under the RRP2013 and2018 Stock Incentive PlanPlans and up to 21,96811,750 share awards were available for future grant under the 2018Stock Incentive Plan and none1,800 share awards under the RRP.2013 Stock Incentive Plan. The RRP2013 and2018 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 (Continued)
A summary of the status of the share awards under the RRP2013 and2018 Stock Incentive PlanPlans as of September 30, 2017 2022 and 20162021 and changes during the nine months ended September 30, 2017 2022 and 20162021 is as follows:
September 30, 2017 | September 30, 2016 | |||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Unvested at the beginning of the period | 20,524 | $ | 8.10 | 30,784 | $ | 8.10 | ||||||||||
Granted | - | - | - | - | ||||||||||||
Vested | (10,263 | ) | 8.10 | (10,260 | ) | 8.10 | ||||||||||
Forfeited | - | - | - | - | ||||||||||||
Unvested at the end of the period | 10,261 | $ | 8.10 | 20,524 | $ | 8.10 |
September 30, 2022 | September 30, 2021 | |||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Unvested at the beginning of the period | 18,845 | $ | 13.30 | 28,266 | $ | 13.30 | ||||||||||
Granted | - | - | - | - | ||||||||||||
Vested | (9,123 | ) | 13.30 | (9,421 | ) | 13.30 | ||||||||||
Forfeited | (600 | ) | 13.30 | - | - | |||||||||||
Unvested at the end of the period | 9,122 | $ | 13.30 | 18,845 | $ | 13.30 |
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 and nine months ended September 30, 2017and 2016,2022 and 2021, the Company recognized approximately $21,000 and $63,000 in$31,000 of compensation expense was recognized, respectively.expense. A tax benefit of approximately $7,000 was recognized during each of these periods. During both the nine months ended September 30, 2022 and $21,000, respectively,2021, the Company recognized approximately $93,000 of compensation expense. A tax benefit of approximately $20,000 was recognized during each of these periods. As of September 30, 2017, 2022, approximately $52,000$74,000 in additional compensation expense will be recognized over the remaining service period of approximately 0.6 years.
Stock Option and Stock Incentive Plans
In May 2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Stock Option Plan (the "Option Plan"“Option Plan”). The Option Plan authorizesauthorized the grant of stock options to officers, employees and directors of the Company to acquire 277,726 shares of common stock with an exercise price no less than the fair market value on the date of the grant. The Option Plan expired February 13, 2018, however, outstanding options granted in 2013 remain valid and existing for the remainder of their 10 year terms. As described above under “Stock Incentive Plans – Share Awards”, the 2013Stock Incentive Plan approved by shareholders in May 2013 covered a total of 195,000 shares, of which 48,750 146,250 may be restricted stock awards, for a balance of 146,250 stock options assuming all the restricted shares are awarded.
All incentive stock options issued under the Option Plan and the 2013 and 2018Stock Incentive PlanPlans are intended to comply with the requirements of Section 422 of the Internal Revenue Code.
As of September 30, 2017, 2022, a total of 277,548205,936 grants of stock options were outstanding under the Option Plan and 2013 and 2018Stock Incentive PlanPlans and 56,27640,250 stock options were available for future grant under the2018 Stock Incentive Plan, 7,400 stock options under the 2013 Stock Incentive Plan and none under the Option 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)
A summary of option activity under the Company'sCompany’s Option Plan and 2013 and 2018Stock Incentive PlanPlans as of September 30, 2017 2022 and 20162021 and changes during the ninethree months ended September 30, 20172022 and 2016 2021is as follows:
2017 | 2016 | |||||||||||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | |||||||||||||||||||
Outstanding at the beginning of the year | 316,348 | $ | 6.49 | 3.8 | 354,266 | $ | 6.33 | 4.7 | ||||||||||||||||
Granted | - | - | - | - | - | - | ||||||||||||||||||
Exercised | (38,800 | ) | 5.00 | - | (26,518 | ) | 5.00 | - | ||||||||||||||||
Forfeited | - | - | - | - | - | - | ||||||||||||||||||
Outstanding at end of period | 277,548 | $ | 6.70 | 3.4 | 327,748 | $ | 6.44 | 4.0 | ||||||||||||||||
Exercisable at end of period | 247,228 | $ | 6.53 | 3.1 | 266,148 | $ | 6.06 | 1.6 |
2022 | 2021 | |||||||||||||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | |||||||||||||||||||
Outstanding at the beginning of the period | 233,136 | $ | 10.96 | 4.2 | 240,636 | $ | 10.98 | 5.2 | ||||||||||||||||
Granted | - | - | - | - | - | - | ||||||||||||||||||
Exercised | (21,000 | ) | 8.60 | - | (7,500 | ) | 11.57 | - | ||||||||||||||||
Forfeited | (6,200 | ) | 10.62 | - | - | - | - | |||||||||||||||||
Outstanding at end of period | 205,936 | $ | 11.21 | 3.7 | 233,136 | $ | 10.96 | 4.5 | ||||||||||||||||
Exercisable at end of period | 175,009 | $ | 10.96 | 6.3 | 180,081 | $ | 10.28 | 5.6 |
During both the three and nine months ended September 30, 2017 2022 and 2016,2021, approximately $12,000 and $34,000$11,000 in compensation expense on stock options was recognized, respectively.recognized. A tax benefit of approximately $1,000 $1,000, was recognized during each of these periods. During both the nine months ended September 30, 2022 and $3,000, respectively,2021, approximately $33,000 in compensation expense on stock options was recognized. A tax benefit of approximately $2,000, was recognized during each of these periods. As of September 30, 2017, 2022, approximately $28,000 in additional compensation expense will be recognized over the remaining service period of approximately 0.6 years.
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 valuevalues estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.
Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.
The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing are as follows:
Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 11– Fair Value Measurements and Fair Values of Financial Instruments (Continued)
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 2021 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:
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.
Impaired Loans:
Impaired 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 andOther Real Estate Owned:
Other real estate owned is carried at the lower of the investment in the real estate or the fair value of the real estate less estimated selling costs. The use of independent appraisals andQuaint 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, 2017 (in2022 (in thousands):
September 30, 2017 | ||||||||||||||||
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 | ||||||||||||||||
Governmental National Mortgage Association mortgage-backed securities | $ | 5,904 | $ | - | $ | 5,904 | $ | - | ||||||||
Federal Home Loan Mortgage Corporation mortgage-backed securities | 1,590 | - | 1,590 | - | ||||||||||||
Federal National Mortgage Association mortgage-backed securities | 583 | - | 583 | - | ||||||||||||
Debt securities, U.S. government agency | 357 | - | 357 | - | ||||||||||||
�� Total investment securities available for sale | $ | 8,434 | $ | - | $ | 8,434 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Impaired loans | $ | 3,342 | $ | - | $ | - | $ | 3,342 | ||||||||
Other real estate owned | 185 | - | - | 185 | ||||||||||||
September 30, 2022 | ||||||||||||||||
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 | $ | 3,074 | $ | - | $ | 3,074 | $ | - | ||||||||
Federal National Mortgage Association mortgage- backed securities | 119 | - | 119 | - | ||||||||||||
Total investment securities available for sale | $ | 3,193 | $ | - | $ | 3,193 | $ | - | ||||||||
Total recurring fair value measurements | $ | 3,193 | $ | - | $ | 3,193 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Impaired loans | $ | 1,846 | $ | - | $ | - | $ | 1,846 | ||||||||
Total nonrecurring fair value measurements | $ | 1,846 | $ | - | $ | - | $ | 1,846 |
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, 2016 (in2021 (in thousands):
December 31, 2021 | ||||||||||||||||
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 | $ | 3,882 | $ | - | $ | 3,882 | $ | - | ||||||||
Federal National Mortgage Association mortgage- backed securities | 151 | - | 151 | - | ||||||||||||
Total investment securities available for sale | $ | 4,033 | $ | - | $ | 4,033 | $ | - | ||||||||
Total recurring fair value measurements | $ | 4,033 | $ | - | $ | 4,033 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Impaired loans | $ | 140 | $ | - | $ | - | $ | 140 | ||||||||
Total nonrecurring fair value measurements | $ | 140 | $ | - | $ | - | $ | 140 |
December 31, 2016 | ||||||||||||||||
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 | ||||||||||||||||
Governmental National Mortgage Association mortgage-backed securities | $ | 6,590 | $ | - | $ | 6,590 | $ | - | ||||||||
Federal Home Loan Mortgage Corporation mortgage-backed securities | 1,871 | - | 1,871 | - | ||||||||||||
Federal National Mortgage Association mortgage-backed securities | 740 | - | 740 | - | ||||||||||||
Debt securities, U.S. government agency | 354 | - | 354 | - | ||||||||||||
Total investment securities available for sale | $ | 9,555 | $ | - | $ | 9,555 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Impaired loans | $ | 1,895 | $ | - | $ | - | $ | 1,895 | ||||||||
Other real estate owned | 435 | - | - | 435 | ||||||||||||
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, 2017 2022 and December 31, 2016 (in2021 (in thousands):
September 30, 2017 | |||||||||||
Quantitative Information About Level 3 Fair Value Measurements | |||||||||||
Total Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Impaired loans | $ | 3,342 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-23% (1 | %) | |||||
Other real estate owned | $ | 185 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-10% (10 | %) |
December 31, 2016 | |||||||||||
Quantitative Information About Level 3 Fair Value Measurements | |||||||||||
Total Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Impaired loans | $ | 1,895 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-22% (2 | %) | |||||
Other real estate owned | $ | 435 | Appraisal of collateral (1) | Appraisal adjustments (2) | 0%-29% (12 | %) |
September 30, 2022 | ||||||||||||||
| Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||
Total Fair Value | Valuation Techniques |
| Unobservable Input | Range (Weighted Average) | ||||||||||
Impaired loans | $ | 1,846 | Appraisal of collateral (1) |
| Appraisal adjustments (2) | 8%(8%) |
December 31, 2021 | ||||||||||||||
| Quantitative Information About Level 3 Fair Value Measurements | |||||||||||||
Total Fair Value | Valuation Techniques |
| Unobservable Input | Range (Weighted Average) | ||||||||||
Impaired loans | $ | 140 | 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 estimated fair values of the Company'sCompany’s financial instruments that are not required to be measured or reported at fair value were as follows at September 30, 2017 2022 and December 31, 20162021 (in thousands):
Fair Value Measurements at | ||||||||||||||||||||
September 30, 2022 | ||||||||||||||||||||
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 | $ | 5,569 | $ | 5,635 | $ | - | $ | - | $ | 5,635 | ||||||||||
Loans held for sale | 88,400 | 95,437 | - | 95,437 | - | |||||||||||||||
Loans receivable, net | 579,154 | 553,379 | - | - | 553,379 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 547,114 | 547,151 | 370,886 | - | 176,265 | |||||||||||||||
FHLB long-term borrowings | 83,022 | 82,791 | - | - | 82,791 | |||||||||||||||
Subordinated debt | 7,958 | 7,911 | - | - | 7,911 |
Fair Value Measurements at | ||||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||
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 | ||||||||||||||||||||
Cash and cash equivalents | $ | 8,229 | $ | 8,229 | $ | 8,229 | $ | - | $ | - | ||||||||||
Investment in interest-earning time deposits | 4,879 | 4,935 | - | - | 4,935 | |||||||||||||||
Investment securities available for sale | 8,434 | 8,434 | - | 8,434 | - | |||||||||||||||
Loans held for sale | 6,473 | 6,741 | - | 6,741 | - | |||||||||||||||
Loans receivable, net | 193,771 | 194,955 | - | - | 194,955 | |||||||||||||||
Accrued interest receivable | 925 | 925 | 925 | - | - | |||||||||||||||
Investment in FHLB stock | 1,134 | 1,134 | 1,134 | - | - | |||||||||||||||
Bank-owned life insurance | 3,793 | 3,793 | 3,793 | - | - | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 182,398 | 183,882 | 39,982 | - | 143,900 | |||||||||||||||
FHLB short-term borrowings | 11,500 | 11,500 | 11,500 | - | - | |||||||||||||||
FHLB long-term borrowings | 14,000 | 13,997 | - | - | 13,997 | |||||||||||||||
Accrued interest payable | 147 | 147 | 147 | - | - |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 11– Fair Value Measurements and Fair Values of Financial Instruments (Continued)
Fair Value Measurements at | ||||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
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 | ||||||||||||||||||||
Cash and cash equivalents | $ | 9,300 | $ | 9,300 | $ | 9,300 | $ | - | $ | - | ||||||||||
Investment in interest-earning time deposits | 6,098 | 6,163 | - | - | 6,163 | |||||||||||||||
Investment securities available for sale | 9,555 | 9,555 | - | 9,555 | - | |||||||||||||||
Loans held for sale | 4,712 | 4,879 | - | 4,879 | - | |||||||||||||||
Loans receivable, net | 176,807 | 177,870 | - | - | 177,870 | |||||||||||||||
Accrued interest receivable | 862 | 862 | 862 | - | - | |||||||||||||||
Investment in FHLB stock | 713 | 713 | 713 | - | - | |||||||||||||||
Bank-owned life insurance | 3,728 | 3,728 | 3,728 | - | - | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 177,007 | 179,050 | 39,939 | - | 139,111 | |||||||||||||||
FHLB short-term borrowings | 7,000 | 7,000 | 7,000 | - | - | |||||||||||||||
FHLB long-term borrowings | 8,500 | 8,507 | - | - | 8,507 | |||||||||||||||
Accrued interest payable | 142 | 142 | 142 | - | - |
Fair Value Measurements at | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
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 | $ | 7,924 | $ | 8,091 | $ | - | $ | - | $ | 8,091 | ||||||||||
Loans held for sale | 107,823 | 112,843 | - | 112,843 | - | |||||||||||||||
Loans receivable, net | 403,966 | 409,203 | - | - | 409,203 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 447,166 | 446,576 | 267,255 | - | 179,321 | |||||||||||||||
FHLB long-term borrowings | 23,193 | 23,231 | - | - | 23,231 | |||||||||||||||
FRB long-term borrowings | 3,895 | 3,895 | - | - | 3,895 | |||||||||||||||
Subordinated debt | 7,933 | 8,312 | - | - | 8,312 |
For cash and assumptions were used to measurecash equivalents, accrued interest receivable, investment in FHLB stock, bank-owned life insurance, FHLB short-term borrowings, accrued interest payable, and advances from borrowers for taxes and insurance, the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.
Note 12– Operating Segments
The Company's operations currently consist of financial instruments recorded at costtwo reportable operating segments: Banking and Oakmont Capital Holdings, LLC. The Company offers different products and services through its two segments. The accounting policies of the segments are generally the same as those of the consolidated company.
The Banking Segment generates its revenues primarily from its lending, deposit gathering and fee business activities. The profitability of this segment's operations depends primarily on its net interest income after provision for credit losses, which is the Company's consolidated balance sheets:
The carrying amountOakmont Capital Holdings, LLC Segment originates equipment loans which are generally sold to third party institutions with the loans’ servicing rights retained. The profitability of accrued interest receivable approximates its fair value.
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 12– Operating Segments (Continued)
The following table presents summary financial information for the reportable segments (in thousands):
As of or for the Three Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | |||||||||||||||||||
Net Interest Income (Loss) | $ | 6,766 | $ | (109 | ) | $ | 6,657 | $ | 5,022 | $ | (8 | ) | $ | 5,014 | ||||||||||
Provision for Loan Losses | 655 | - | 655 | 557 | - | 557 | ||||||||||||||||||
Net Interest Income (Loss) after Provision for Loan Losses | 6,111 | (109 | ) | 6,002 | 4,465 | (8 | ) | 4,457 | ||||||||||||||||
Non-Interest Income | ||||||||||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 173 | 587 | 760 | 332 | 272 | 604 | ||||||||||||||||||
Real estate sales commissions, net | 88 | - | 88 | 79 | - | 79 | ||||||||||||||||||
Insurance commissions | 152 | - | 152 | 133 | - | 133 | ||||||||||||||||||
Other fees and services charges | 57 | 74 | 131 | 36 | 2 | 38 | ||||||||||||||||||
Net loan servicing income | 6 | 474 | 480 | 62 | 413 | 475 | ||||||||||||||||||
Income from bank-owned life insurance | 23 | - | 23 | 21 | - | 21 | ||||||||||||||||||
Net gain on loans held for sale | 891 | 3,390 | 4,281 | 843 | 1,023 | 1,866 | ||||||||||||||||||
Gain on the sale of SBA loans | 58 | - | 58 | 369 | - | 369 | ||||||||||||||||||
Total Non-Interest Income | 1,448 | 4,525 | 5,973 | 1,875 | 1,710 | 3,585 | ||||||||||||||||||
Non-Interest Expense | ||||||||||||||||||||||||
Salaries and employee benefits | 3,547 | 1,788 | 5,335 | 2,867 | 1,233 | 4,100 | ||||||||||||||||||
Directors’ fees and expenses | 67 | - | 67 | 58 | - | 58 | ||||||||||||||||||
Occupancy and equipment | 323 | 154 | 477 | 295 | 84 | 379 | ||||||||||||||||||
Data processing | 140 | - | 140 | 234 | - | 234 | ||||||||||||||||||
Professional fees | 240 | 17 | 257 | 67 | 40 | 107 | ||||||||||||||||||
FDIC deposit insurance assessment | 225 | - | 225 | 97 | - | 97 | ||||||||||||||||||
Other real estate owned expenses | - | - | - | 2 | - | 2 | ||||||||||||||||||
Advertising | 95 | 74 | 169 | 75 | 35 | 110 | ||||||||||||||||||
Amortization of other intangible | 12 | - | 12 | 12 | - | 12 | ||||||||||||||||||
Other | 314 | 322 | 636 | 288 | 38 | 326 | ||||||||||||||||||
Total Non-Interest Expense | 4,963 | 2,355 | 7,318 | 3,995 | 1,430 | 5,425 | ||||||||||||||||||
Pretax Segment Profit | $ | 2,596 | $ | 2,061 | $ | 4,657 | $ | 2,345 | $ | 272 | $ | 2,617 | ||||||||||||
Segment Assets | $ | 683,882 | $ | 23,378 | $ | 707,260 | $ | 520,005 | $ | 15,861 | $ | 535,866 |
_______________________
(1) | Includes Quaint Oak Bancorp, Inc. and the Bank’s subsidiaries, Quaint Oak Mortgage, Quaint Oak Real Estate, Quaint Oak Abstract, Quaint Oak Insurance Agency, QOB Properties, and Oakmont Commercial. |
Quaint Oak Bancorp, Inc. |
Notes to Unaudited Consolidated Financial Statements |
Note 12– Operating Segments (Continued)
As of or for the Nine Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | |||||||||||||||||||
Net Interest Income (Loss) | $ | 18,160 | $ | (216 | ) | $ | 17,944 | $ | 13,476 | $ | (97 | ) | $ | 13,379 | ||||||||||
Provision for Loan Losses | 1,933 | - | 1,933 | 1,259 | - | 1,259 | ||||||||||||||||||
Net Interest Income (Loss) after Provision for Loan Losses | 16,227 | (216 | ) | 16,011 | 12,217 | (97 | ) | 12,120 | ||||||||||||||||
Non-Interest Income | ||||||||||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 600 | 1,621 | 2,221 | 990 | 667 | 1,657 | ||||||||||||||||||
Real estate sales commissions, net | 213 | - | 213 | 143 | - | 143 | ||||||||||||||||||
Insurance commissions | 407 | - | 407 | 373 | - | 373 | ||||||||||||||||||
Other fees and services charges | 221 | 158 | 379 | 182 | 29 | 211 | ||||||||||||||||||
Net loan servicing income | 11 | 943 | 954 | 128 | 898 | 1,026 | ||||||||||||||||||
Income from bank-owned life insurance | 66 | - | 66 | 61 | - | 61 | ||||||||||||||||||
Net gain on loans held for sale | 2,828 | 8,521 | 11,349 | 2,283 | 2,133 | 4,416 | ||||||||||||||||||
Gain on sale of investment securities available for sale | - | - | - | 362 | - | 362 | ||||||||||||||||||
Gain on the sale of SBA loans | 225 | - | 225 | 636 | - | 636 | ||||||||||||||||||
Total Non-Interest Income | 4,571 | 11,243 | 15,814 | 5,158 | 3,727 | 8,885 | ||||||||||||||||||
Non-Interest Expense | ||||||||||||||||||||||||
Salaries and employee benefits | 10,213 | 4,604 | 14,817 | 7,942 | 2,997 | 10,939 | ||||||||||||||||||
Directors’ fees and expenses | 210 | - | 210 | 186 | - | 186 | ||||||||||||||||||
Occupancy and equipment | 975 | 388 | 1,363 | 895 | 248 | 1,143 | ||||||||||||||||||
Data processing | 500 | - | 500 | 641 | - | 641 | ||||||||||||||||||
Professional fees | 625 | 44 | 669 | 356 | 132 | 488 | ||||||||||||||||||
FDIC deposit insurance assessment | 454 | - | 454 | 221 | - | 221 | ||||||||||||||||||
Other real estate owned expenses | - | - | - | 14 | - | 14 | ||||||||||||||||||
Advertising | 265 | 266 | 531 | 224 | 113 | 337 | ||||||||||||||||||
Amortization of other intangible | 36 | - | 36 | 36 | - | 36 | ||||||||||||||||||
Other | 990 | 519 | 1,509 | 858 | 116 | 974 | ||||||||||||||||||
Total Non-Interest Expense | 14,268 | 5,821 | 20,089 | 11,373 | 3,606 | 14,979 | ||||||||||||||||||
Pretax Segment Profit | $ | 6,530 | $ | 5,206 | $ | 11,736 | $ | 6,002 | $ | 24 | $ | 6,026 | ||||||||||||
Segment Assets | $ | 683,882 | $ | 23,378 | $ | 707,260 | $ | 520,005 | $ | 15,861 | $ | 535,866 |
____________________
(2) | Includes Quaint Oak Bancorp, Inc. and the Bank’s subsidiaries, Quaint Oak Mortgage, Quaint Oak Real Estate, Quaint Oak Abstract, Quaint Oak Insurance Agency, QOB Properties, and Oakmont Commercial. |
ITEM 2. MANAGEMENT'SMANAGEMENT’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 in this document as to what we expect may happen(as defined in the future. TheseSecurities Exchange Act of 1934 and the regulations thereunder). Forward-looking statements usually containare 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 "believe," "estimate," "project," "expect," "anticipate," "intend"as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar expressions. Because thesemeaning, or future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly.” Forward-looking statements lookinclude, 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 future, they are based on our current expectationscontrol of and beliefs. Actualits management, that could cause actual results or events mayto differ materially from those reflectedexpressed 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. You shouldstatements: (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 loan 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 awaredoing business, being less favorable than expected;(6) political and social unrest, including acts of war or terrorism; (7) the impact of the current outbreak of the novel coronavirus (COVID-19) or (8) 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 our current expectations and beliefs as to future events are subject to change at any time, and we can give you no assurances thatoccur after the future events will actually occur.
General
The Company was formed in connection with the Bank'sBank’s conversion to a stock savings bank completed on July 3, 2007. The Company'sCompany’s results of operations are dependent primarily on the results of the Bank, which is a wholly owned subsidiary of the Company.Company, along with the Bank’s wholly owned subsidiaries. The Bank'sBank’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 loan losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, directors'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, 20172022, the Bank had fivehas 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 QOB Properties,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 real estate and abstract companies offer mortgage banking, real estate sales and title abstract services, respectively, andprimarily in the Lehigh Valley region of Pennsylvania. 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. On August 1, 2016, Quaint Oak Insurance Agency, LLC began operations by acquiring the renewal rights to the book of business producedin August 2016 and serviced by Signature Insurance Services, LLC, an independent insurance agency located in New Britain, Pennsylvania, that 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 holds a majority equity position 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. All significant intercompany balances and transactions have been eliminated.
COVID-19
On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The effects of COVID-19 did not have a material impact on the financial results of the Company as of September 30, 2022. Due to orders issued by the governor of Pennsylvania and for the health of our customers and employees, the Bank closed lobbies to all three branch offices but remained fully operational. Other immediate responses to the pandemic included some of the following actions by the Company:
• Moved more than 92% of its employees to remote work-from-home status.
• Waived fees on deposit accounts and cash management services.
In response to the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides an estimated $2.2 trillion of economy-wide financial stimulus to combat the pandemic and stimulate the economy in the form of financial aid to individuals, businesses, nonprofits, states, and municipalities through loans, grants, tax changes, and other types of relief.
The following describes some of our responses to COVID-19 relative to the CARES Act, and other effects of the pandemic on our business.
Paycheck Protection Program. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, we were automatically authorized to originate PPP loans and chose to participate. Since March 2020, the Company has continued to work diligently to help support its existing and new customers through the SBA Paycheck Protection Program (“PPP”), loan modifications, loan deferrals and fee waivers. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) became law. The Economic Aid Act opened a new PPP loan period for first loans and implemented a second loan draw for certain PPP borrowers, each through May 31, 2021. Under the first round, the Company funded 854 PPP loans totaling $95.1 million. As of September 30, 2022, 853 of these first round PPP loans totaling $95.1 million were forgiven under the SBA forgiveness program. Under the second round of PPP the Company funded 985 PPP loans totaling $88.4 million. As of September 30, 2022, 922 of the second round PPP loans totaling $85.4 million have been forgiven under the SBA forgiveness program. The Company recognized approximately $1.1 million and $4.4 million of deferred loan fees amortization related to PPP loans for the nine months ended September 30, 2022 and the year ended December 31, 2021, respectively.
Paycheck Protection Program Liquidity Facility. The CARES Act also allocated a limited amount of funds to the Federal Reserve Board (FRB) with a broad mandate to provide liquidity to eligible businesses, states or municipalities in light of COVID-19. On April 9, 2020, the U.S. Department of the Treasury announced several new or expanded lending programs to provide relief for businesses and governments. One of these programs was the Paycheck Protection Program Liquidity Facility (PPPLF). Under the PPPLF, all depository institutions that originate PPP loans are eligible to borrow on a non-recourse basis from their regional Federal Reserve Bank using SBA PPP loans as collateral. The principal amount of loans will be equal to the PPP loans pledged as collateral. There are no fees associated with these loans and the interest rate is 35 basis points. The maturity date of PPPLF loans will be the same as the maturity date of the PPP loans pledged as collateral. The PPPLF loan maturity date will be accelerated if the underlying PPP loan goes into default and the lender sells the PPP loan to the SBA under the SBA guarantee. The PPPLF loan maturity date also will be accelerated for any loan forgiveness reimbursement received by the lender from the SBA.
In April 2020, the Bank received approval to borrow from the FRB under the PPPLF program to assist in funding PPP loans. Through September 30, 2022, the Bank used the FRB program to fund $52.1 million of PPP loans. The Bank paid all PPP loans pledged as collateral under the PPPLF program and had no outstanding advances with the FRB at September 30, 2022. Through September 30, 2022 the Bank has not used the PPPLF program to fund any round two PPP loans.
Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Quaint Oak Bank has made that election. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief will not be considered TDRs.
Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.
The Bank addresses loan payment modification requests on a case-by-case basis considering the effects of the COVID-19 pandemic, related economic slow-down and stay-at-home orders on our customer and their current and projected cash flows through the term of the loan. Through September 30, 2022, the Bank modified 231 loans with principal balances totaling $90.6 million representing approximately 15.6% of our September 30, 2022 loan balances. A majority of deferrals are two-month payment deferrals of principal and interest, with payments after deferral increased to collect amounts deferred. In some cases, certain loans were granted additional deferrals. As of September 30, 2022 there are no loans that are still on deferral.
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. The followingCritical 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.
Our critical accounting policies involving significant judgments and is recorded as a reduction to loans receivable. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.
Comparison of Financial Condition at September30, 20172022 and December 31, 2016
General
. TheCash and Cash Equivalents.
Cash and cash equivalents decreasedInvestment in Interest-Earning Time Deposits
Investment Securities Available for Sale.
Investment securities available for sale decreasedLoans Held for Sale.
Loans held for saleLoans Receivable, Net. Loans receivable, net, increased $17.0$175.2 million, or 9.6%43.4%, to $193.8$579.2 million at September 30, 20172022 from $176.8$404.0 million December 31, 2016.2021. This increase was funded primarily from Federal Home Loan Bank borrowings and deposits. Increases within the portfolio occurred in commercial real estate loans which increased $9.1$129.3 million, or 11.7%70.4%, multi-family residential loans which increased $5.7$19.1 million, or 38.8%65.2%, construction loans which increased $10.0 million, or 63.1%, commercial business loans which increased $2.3$8.5 million, or 24.5%6.6%, one-to-fourand one -to-four family residential non-owner occupied loans which increased $608,000, or 1.2%, one-to-four family residential owner occupied loans which increased $45,000,$7.6 million, or 0.8%, construction78.2%. However, by excluding PPP loans which increases $32,000,from commercial business loans, the balance of commercial business loans increased $46.3 million, or 0.2%, and other consumer52.1%. The increase in commercial real estate loans which increased $17,000, or 65.4%. These increases were partially offsetwas primarily due to the purchase of a $55.5 million loan portfolio by a $574,000, or 12.0%, decreasethe Bank's wholly-owned subsidiary, Oakmont Commercial, LLC in home equity loans.April, 2022. The Company continues its strategy of diversifying its loan portfolio with higher yielding and shorter-term loan products and selling substantially all of its newly originated one-to-four family owner-occupied loans into the secondary market.
Deposits. Total deposits increased $5.4$99.9 million, or 3.0%22.4%, to $182.4$547.1 million at September 30, 20172022 from $177.0$447.2 million at December 31, 2016.2021. This increase in deposits was primarily attributable to increases of $5.3$88.7 million, or 3.9%44.2%, in certificates of depositmoney market accounts, and $1.9$15.1 million, or 31.8%23.3%, in non-interest bearing checking accounts,accounts. The increase in deposits was partially offset by a $963,000,$3.7 million, or 3.1%2.0%, decrease in certificates of deposit, a $166,000, or 9.0%, decrease in savings accounts and a $6,000, or 60.0%, decrease in passbook accounts. The increase in money market accounts was primarily due to a $655,000, or 55.1%, decrease$150.0 million deposit in passbook accounts, andMay, 2022 through a $200,000, or 11.2%, decrease in savings accounts.
Borrowings.
Total Federal Home Loan Bank (FHLB) borrowings increasedAccrued Expenses and Other Liabilities. Accrued expenses and other liabilities increased $1.2$3.5 million, or 5.9%59.2%, to $22.0$9.5 million at September 30, 20172022 from $20.8$6.0 million at December 31, 2016.2021, due primarily to an increase in tax and other expense accruals.
Stockholders’ Equity. Total stockholders’ equity increased $8.7 million, or 23.6%, to $45.6 million at September 30, 2022 from $36.9 million at December 31, 2021. Contributing to the increase was net income for the nine months ended September 30, 20172022 of $1.3$6.7 million, net income attributable to noncontrolling interest of $2.6 million, common stock earned by participants in the employee stock ownership plan of $138,000,$259,000, amortization of stock awards and options under our stock compensation plans of $97,000,$126,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $48,000 and the reissuance of treasury stock for exercised stock options of $193,000, the reissuance of treasury stock under the Bank's 401(k) Plan of $83,000, and other comprehensive income of $37,000.$181,000. These increases were partially offset by dividends paid of $751,000, noncontrolling interest distribution of $279,000, the purchase of treasury stock of $341,000$46,000, and by dividends paidother comprehensive loss, net of $269,000.$42,000.
Comparison of Operating Results for the Three Months Ended September 30, 20172022 and 2016
General.
Net income amounted toNet Interest Income.
Net interest income increasedInterest Income.
Interest Expense.
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, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
Interest-earning assets: | (Dollars in thousands) | |||||||||||||||||||||||
Due from banks, interest-bearing | $ | 8,247 | $ | 30 | 1.46 | % | $ | 18,833 | $ | 26 | 0.55 | % | ||||||||||||
Investment in interest-earning time deposits | 5,370 | 21 | 1.56 | 6,120 | 32 | 2.09 | ||||||||||||||||||
Investment securities available for sale | 8,774 | 36 | 1.64 | 8,547 | 30 | 1.40 | ||||||||||||||||||
Loans receivable, net (1) (2) (3) | 198,780 | 2,577 | 5.19 | 161,840 | 2,214 | 5.47 | ||||||||||||||||||
Investment in FHLB stock | 1,134 | 9 | 3.17 | 633 | 7 | 4.42 | ||||||||||||||||||
Total interest-earning assets | 222,305 | 2,673 | 4.81 | % | 195,973 | 2,309 | 4.71 | % | ||||||||||||||||
Non-interest-earning assets | 9,159 | 9,425 | ||||||||||||||||||||||
Total assets | $ | 231,464 | $ | 205,398 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Passbook accounts | $ | 671 | $ | * | * | % | $ | 1,182 | $ | * | * | % | ||||||||||||
Savings accounts | 1,550 | 1 | 0.26 | 2,173 | 1 | 0.18 | ||||||||||||||||||
Money market accounts | 32,070 | 65 | 0.81 | 29,614 | 60 | 0.81 | ||||||||||||||||||
Certificate of deposit accounts | 139,918 | 619 | 1.77 | 134,099 | 577 | 1.72 | ||||||||||||||||||
Total deposits | 174,209 | 685 | 1.57 | 167,068 | 638 | 1.53 | ||||||||||||||||||
FHLB short-term borrowings | 9,875 | 32 | 1.30 | 6,000 | 8 | 0.53 | ||||||||||||||||||
FHLB long-term borrowings | 15,625 | 68 | 1.74 | 7,294 | 26 | 1.43 | ||||||||||||||||||
Total interest-bearing liabilities | 199,709 | 785 | 1.57 | % | 180,362 | 672 | 1.49 | % | ||||||||||||||||
Non-interest-bearing liabilities | 9,787 | 5,038 | ||||||||||||||||||||||
Total liabilities | 209,496 | 185,400 | ||||||||||||||||||||||
Stockholders' Equity | 21,968 | 19,998 | ||||||||||||||||||||||
Total liabilities and Stockholders' Equity | $ | 231,464 | $ | 205,398 | ||||||||||||||||||||
Net interest-earning assets | $ | 22,596 | $ | 15,661 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 1,888 | 3.24 | % | $ | 1,637 | 3.22 | % | ||||||||||||||||
Net interest margin (4) | 3.40 | % | 3.34 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 111.31 | % | 108.66 | % |
Three Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Due from banks, interest-bearing | $ | 29,437 | $ | 196 | 2.66 | % | $ | 23,162 | $ | 5 | 0.09 | % | ||||||||||||
Investment in interest-earning time deposits | 7,202 | 46 | 2.55 | 7,917 | 46 | 2.32 | ||||||||||||||||||
Investment securities available for sale | 3,357 | 19 | 2.26 | 4,487 | 7 | 0.62 | ||||||||||||||||||
Loans receivable, net (1) (2) | 666,501 | 8,671 | 5.20 | 488,518 | 5,944 | 4.87 | ||||||||||||||||||
Investment in FHLB stock | 4,348 | 64 | 5.89 | 1,648 | 15 | 3.64 | ||||||||||||||||||
Total interest-earning assets | 710,845 | 8,996 | 5.06 | % | 525,732 | 6,017 | 4.58 | % | ||||||||||||||||
Non-interest-earning assets | 21,988 | 15,013 | ||||||||||||||||||||||
Total assets | $ | 732,833 | $ | 540,745 |
Interest-bearing liabilities: | ||||||||||||||||||||||||
Passbook accounts | $ | 3 | $ | - | * | % | $ | 14 | $ | - | * | % | ||||||||||||
Savings accounts | 1,611 | 1 | 0.25 | 1,766 | 1 | 0.23 | ||||||||||||||||||
Money market accounts | 309,742 | 1,159 | 1.50 | 192,515 | 263 | 0.55 | ||||||||||||||||||
Certificate of deposit accounts | 183,740 | 512 | 1.11 | 168,204 | 438 | 1.04 | ||||||||||||||||||
Total deposits | 495,096 | 1,672 | 1.35 | 362,499 | 702 | 0.77 | ||||||||||||||||||
FHLB short-term borrowings | 9,065 | 58 | 2.56 | 13,163 | 8 | 0.24 | ||||||||||||||||||
FHLB long-term borrowings | 88,269 | 457 | 2.07 | 24,193 | 124 | 2.05 | ||||||||||||||||||
FRB long-term borrowings | 130 | - | 0.00 | 8,976 | 8 | 0.36 | ||||||||||||||||||
Subordinated debt | 7,953 | 130 | 6.54 | 7,919 | 130 | 6.57 | ||||||||||||||||||
Other short-term borrowings | 458 | 22 | 19.21 | 1,071 | 31 | 11.58 | ||||||||||||||||||
Total interest-bearing liabilities | 600,971 | 2,339 | 1.56 | % | 417,821 | 1,003 | 0.96 | % |
Non-interest-bearing liabilities | 92,048 | 94,725 | ||||||||||||||||||||||
Total liabilities | 693,019 | 512,546 | ||||||||||||||||||||||
Stockholders’ Equity | 39,814 | 28,199 | ||||||||||||||||||||||
Total liabilities and Stockholders’ Equity | $ | 732,833 | $ | 540,745 | ||||||||||||||||||||
Net interest-earning assets | $ | 109,874 | $ | 107,911 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 6,657 | 3.50 | % | $ | 5,014 | 3.62 | % | ||||||||||||||||
Net interest margin (3) | 3.75 | % | 3.82 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 118.28 | % | 125.83 | % |
________________________
* Not meaningful.
(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 loan losses.
(3) Equals net interest income divided by average interest-earning assets.
Provision for Loan Losses.
The Company’s provision for loan losses increasedNon-performing loans amounted to $3.5 million, or 1.83%, of net loans receivable at September 30, 2017, consisting2022 consisted of thirteentwo loans five of which are on non-accrual status and eightin the aggregate amount of which are 90 days or more past due and accruing interest. Comparably, non-performing loans amounted to $1.9 million, or 1.06%, of net loans receivable at December 31, 2016, consisting of fourteen loans, seven of which were on non-accrual status and seven of which were 90 days or more past due and accruing interest.$1.7 million. The non-performing loans at September 30, 2017 include six one-to-four family non-owner occupied residential loans, three commercial real estate loans, two one-to-four family owner occupied residential loans, and two construction loans, and all2022 are generally well-collateralized or adequately reserved for. During the quarter ended September 30, 2017, one new loan was placed on non-accrual status resulting in the reversal of approximately $48,000 of previously accrued interest income and two loans previously on non-accrual status were paid-off. The allowance for loan losses as a percent of total loans receivable, net was 0.89%1.22% at September 30, 2017,2022 and 0.90%1.30% at December 31, 2016.
Non-Interest Income.
Non-interest income increasedNon-Interest Expense. Total non-interest expense increased $1.9 million, or 34.9%, from $5.4 million for the three months ended September 30, 2017. Salaries and employee benefits expense accounted for $192,000 of the change as this expense increased 17.0%, from $1.12021 to $7.3 million for the three months ended September 30, 20162022, primarily due to $1.3a $1.2 million, or 30.1%, increase in salaries and employee benefits expense, a $310,000, or 95.1%, increase in other expense, a $150,000, or 140.2%, increase in professional fees, a $128,000, or 132.0%, increase in FDIC deposit insurance assessment, a $98,000, or 25.9%, increase in occupancy and equipment expense, a $59,000, or 53.6%, increase in advertising expense, and a $9,000, or 15.5%, increase in Directors’ fees and expenses. The increase in salaries and employee benefits expense is primarily due to expanding and improving the level of staff at the Bank and its subsidiary companies, including Oakmont Capital Holdings, LLC. Oakmont Capital Holdings, LLC’s results for the three months ended September 30, 2022 also contributed to the increases in occupancy and equipment expense, professional fees, advertising expense, and other expense. The increase in non-interest expense was partially offset by a $94,000, or 40.2%, decrease in data processing expense, and a $2,000, or 100.0%, decrease in other real estate owned expenses.
Provision for Income Tax. The provision for income tax increased $310,000, or 44.2%, from $702,000 for the three months ended September 30, 2021 to $1.0 million for the three months ended September 30, 2017 due primarily to increased staff related to the continued expansion of the Company's mortgage banking and lending operations and the launch of Quaint Oak Insurance Agency on August 1, 2016. Also contributing to the increase was a $35,000, or 32.1%, increase in other expense, a $34,000, or 65.4%, increase in data processing expense, a $16,000, or 69.6%, increase in advertising expense, an $11,000, or 11.7%, increase in professional fees, a $9,000, or 25.7%, increase in FDIC insurance assessment, a $4,000, or 8.3%, increase in directors' fees and expenses, and a $5,000, or 62.5%, increase in amortization of other intangible related to the renewal rights of the book of business acquired from Signature Insurance Services, LLC on August 1, 2016. These increases were partially offset by a $9,000, or 69.2%, decease in other real estate owned expense and a $6,000, or 4.2%, decrease in occupancy and equipment expense.
Comparison of Operating Results for the Nine Months Ended September 30, 20172022 and 2016
General.
Net income amounted toNet Interest Income. Net interest income increased $4.6 million, or 34.1% to $17.9 million for the nine months ended September 30, 2016 due primarily to2022 from $13.4 million for the nine months ended September 30, 2021. The increase was driven by a $1.1$5.9 million, or 15.6%35.4%, increase in interest income, partially offset by a $320,000,$1.4 million, or 17.1%40.4%, increase in interest expense.
Interest Income. Interest income increased $1.1 The $5.9 million, or 15.6%35.4%, to $7.8 million for the nine months ended September 30, 2017 from $6.7 million for the nine months ended September 30, 2016. The increase in interest income was primarily due to a $34.1$116.5 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of $155.4$478.9 million for the nine months ended September 30, 20162021 to an average balance of $189.5$595.4 million for the nine months ended September 30, 2017,2022, and had the effect of increasing interest income $1.4$4.0 million. Partially offsetting thisAlso contributing to the increase in interest income was a 2740 basis point declineincrease in the average yield on average loans receivable, net, including loans held for sale, which increased from 5.57%4.57% for the nine months ended September 30, 20162021 to 5.30%4.97% for the nine months ended September 30, 2017, which2022, and had the effect of decreasingincreasing interest income $1.8 million. Contributing to both the increase in average balance of loans receivable, net and yield was the purchase of a $55.5 million commercial real estate loan portfolio by $391,000.
Interest Expense.
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.Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
Interest-earning assets: | (Dollars in thousands) | |||||||||||||||||||||||
Due from banks, interest-bearing | $ | 8,428 | $ | 70 | 1.11 | % | $ | 17,994 | $ | 70 | 0.52 | % | ||||||||||||
Investment in interest-earning time deposits | 5,597 | 67 | 1.60 | 6,135 | 82 | 1.78 | ||||||||||||||||||
Investment securities available for sale | 9,092 | 101 | 1.48 | 6,080 | 70 | 1.54 | ||||||||||||||||||
Loans receivable, net (1) (2) (3) | 189,527 | 7,530 | 5.30 | 155,459 | 6,497 | 5.57 | ||||||||||||||||||
Investment in FHLB stock | 883 | 24 | 3.62 | 631 | 22 | 4.65 | ||||||||||||||||||
Total interest-earning assets | 213,527 | 7,792 | 4.87 | % | 186,299 | 6,741 | 4.82 | % | ||||||||||||||||
Non-interest-earning assets | 9,143 | 8,995 | ||||||||||||||||||||||
Total assets | $ | 222,670 | $ | 195,294 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Passbook accounts | $ | 768 | $ | 1 | 0.17 | % | $ | 1,268 | $ | 1 | 0.11 | % | ||||||||||||
Savings accounts | 1,588 | 2 | 0.17 | 2,527 | 4 | 0.21 | ||||||||||||||||||
Money market accounts | 32,687 | 196 | 0.80 | 28,099 | 169 | 0.80 | ||||||||||||||||||
Certificate of deposit accounts | 137,957 | 1,788 | 1.73 | 125,589 | 1,600 | 1.70 | ||||||||||||||||||
Total deposits | 173,000 | 1,987 | 1.53 | 157,483 | 1,774 | 1.50 | ||||||||||||||||||
FHLB short-term borrowings | 8,350 | 68 | 1.09 | 6,000 | 24 | 0.53 | ||||||||||||||||||
FHLB long-term borrowings | 10,996 | 139 | 1.69 | 7,434 | 76 | 1.36 | ||||||||||||||||||
Total interest-bearing liabilities | 192,346 | 2,194 | 1.52 | % | 170,917 | 1,874 | 1.46 | % | ||||||||||||||||
Non-interest-bearing liabilities | 8,820 | 4,791 | ||||||||||||||||||||||
Total liabilities | 201,166 | 175,708 | ||||||||||||||||||||||
Stockholders' Equity | 21,504 | 19,586 | ||||||||||||||||||||||
Total liabilities and Stockholders' Equity | $ | 222,670 | $ | 195,294 | ||||||||||||||||||||
Net interest-earning assets | $ | 21,181 | $ | 15,382 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 5,598 | 3.35 | % | $ | 4,867 | 3.36 | % | ||||||||||||||||
Net interest margin (4) | 3.50 | % | 3.48 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 111.01 | % | 109.00 | % |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Due from banks, interest-bearing | $ | 30,668 | $ | 241 | 1.05 | % | $ | 27,624 | $ | 23 | 0.11 | % | ||||||||||||
Investment in interest-earning time deposits | 7,237 | 107 | 1.97 | 8,154 | 155 | 2.53 | ||||||||||||||||||
Investment securities available for sale | 3,656 | 35 | 1.28 | 6,553 | 92 | 1.87 | ||||||||||||||||||
Loans receivable, net (1) (2) | 595,354 | 22,171 | 4.97 | 478,864 | 16,422 | 4.57 | ||||||||||||||||||
Investment in FHLB stock | 3,751 | 123 | 4.37 | 1,483 | 57 | 5.12 | ||||||||||||||||||
Total interest-earning assets | 640,666 | 22,677 | 4.72 | % | 522,678 | 16,749 | 4.27 | % | ||||||||||||||||
Non-interest-earning assets | 19,225 | 15,232 | ||||||||||||||||||||||
Total assets | $ | 659,891 | 537,910 |
Interest-bearing liabilities: | ||||||||||||||||||||||||
Passbook accounts | $ | 6 | $ | - | * | % | $ | 11 | $ | - | * | % | ||||||||||||
Savings accounts | 1,672 | 3 | 0.24 | 1,605 | 2 | 0.17 | ||||||||||||||||||
Money market accounts | 254,701 | 1,840 | 0.96 | 166,791 | 791 | 0.63 | ||||||||||||||||||
Certificate of deposit accounts | 183,987 | 1,356 | 0.98 | 179,589 | 1,577 | 1.17 | ||||||||||||||||||
Total deposits | 440,366 | 3,199 | 0.97 | 347,996 | 2,370 | 0.91 | ||||||||||||||||||
FHLB short-term borrowings | 21,391 | 133 | 0.83 | 5,462 | 14 | 0.34 | ||||||||||||||||||
FHLB long-term borrowings | 63,746 | 958 | 2.00 | 26,255 | 392 | 1.99 | ||||||||||||||||||
FRB long-term borrowings | 1,776 | 4 | 0.30 | 29,733 | 77 | 0.35 | ||||||||||||||||||
Subordinated debt | 7,944 | 390 | 6.55 | 7,910 | 390 | 6.57 | ||||||||||||||||||
Other short-term borrowings | 229 | 49 | 28.53 | 4,022 | 127 | 4.21 | ||||||||||||||||||
Total interest-bearing liabilities | 535,452 | 4,733 | 1.18 | % | 421,378 | 3,370 | 1.07 | % |
Non-interest-bearing liabilities | 86,585 | 89,534 | ||||||||||||||||||||||
Total liabilities | 622,037 | 510,912 | ||||||||||||||||||||||
Stockholders’ Equity | 37,854 | 26,998 | ||||||||||||||||||||||
Total liabilities and Stockholders’ Equity | $ | 659,891 | $ | 537,910 | ||||||||||||||||||||
Net interest-earning assets | $ | 105,214 | $ | 101,300 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 17,944 | 3.54 | % | $ | 13,379 | 3.20 | % | ||||||||||||||||
Net interest margin (3) | 3.73 | % | 3.41 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 119.65 | % | 124.04 | % |
________________________
* Not meaningful.
(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 loan losses.
(3) Equals net interest income divided by average interest-earning assets.
Provision for Loan Losses.
TheNon-performing loans at September 30, 2022 consisted of two loans on non-accrual status in the aggregate amount of $1.7 million. The non-performing loans at September 30, 2022 are generally well-collateralized or adequately reserved for. The allowance for loan losses as a percent of total loans receivable, net was 1.22% at September 30, 2022 and 2016-Provision for Loan Losses."1.30% at December 31, 2021. Non-performing assets amounted to $1.7 million, or 0.24% of assets at September 30, 2022 compared to $9,000 at December 31, 2021.
Non-Interest Income. Non-interest income increased $539,000,$6.9 million, or 28.7%78.0%, from $8.9 million for the nine months ended September 30, 2017 over2021 to $15.8 million for the comparable period in 2016nine months ended September 30, 2022. The increase was primarily dueattributable to a $222,000,$6.9 million, or 17.2%157.0%, increase in net gain on the sales of residentialloans held for sale, a $564,000, or 34.0%, increase in mortgage loans,banking, equipment lending, and title abstract fees, a $196,000,$168,000, or 326.7%79.6%, increase in other fees and service charges, a $70,000, or 49.0%, increase in real estate commissions, net, and a $34,000, or 9.1%, increase in insurance commissions earnedcommissions. The increase in net gain on loans held for sale was primarily due to the sale of $274.4 million of equipment loans during the nine months ended September 30, 2022. These increases were partially offset by Quaint Oak Insurance Agency, a wholly owned insurance subsidiary$411,000, or 64.6%, decrease in gain on sale of Quaint Oak Bank which began operationsSBA loans, a $362,000, or 100.0%, decrease in gain on August 1, 2016,sale of investment securities available for sale, and a $78,000,$72,000, or 19.1%7.0%, decrease in net loan servicing income.
Non-Interest Expense. Total non-interest expense increased $5.1 million, or 34.1%, from $15.0 million for the nine months ended September 30, 2021 to $20.1 million for the nine months ended September 30, 2022, primarily due to a $3.9 million, or 35.5%, increase in salaries and employee benefits expense, a $535,000, or 54.9%, increase in other expense, a $233,000, or 105.4%, increase in FDIC deposit insurance assessment, a $220,000, or 19.2%, increase in occupancy and equipment expense, a $194,000, or 57.6%, increase in advertising expense, a $181,000, or 37.1%, increase in professional fees, and a $24,000, or 12.9%, increase in Directors’ fees and expenses. The increase in salaries and employee benefits is primarily due to expanding and improving the level of staff at the Bank and its subsidiary companies, including Oakmont Capital Holdings, LLC. Oakmont Capital Holdings, LLC’s results for the nine months ended September 30, 2022 also contributed to the increases in occupancy and equipment expense, professional fees, advertising expense, and other expense. The increase in non-interest expense was partially offset by a $141,000, or 22.0%, decrease in data processing expense, and a $14,000, or 100.0%, decrease in other real estate owned expenses.
Provision for Income Tax. The provision for income tax increased $838,000, or 49.5%, from $1.7 million for the nine months ended September 30, 2021 to $2.5 million for the nine months ended September 30, 2022 due primarily to the increase in pre-tax income.
Operating Segments
The Company's operations consist of two reportable operating segments: Banking and Oakmont Capital Holdings, LLC. Our Banking Segment generates revenues primarily from its lending, deposit gathering and fee business activities. Our Oakmont Capital Holdings, LLC Segment originates equipment loans which are generally sold to third party institutions with the loans’ servicing rights retained. Detailed segment information appears in Note 12 in the Notes to Unaudited Consolidated Financial Statements.
Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the three months ended September 30, 2022 of $2.6 million, a $251,000, or 10.7%, increase from the same period in 2021. This increase in PTSP was primarily due to a $1.7 million or 34.7%, increase in net interest income. This increase was partially offset by a $968,000, or 24.2%, increase in non-interest expense, a $427,000, or 22.8%, decrease in non-interest income and $98,000, or 17.6%, increase in the provision for loan losses. The decrease in non-interest income was primarily due to a $311,000, or 84.3%, decrease in the gain on sale of SBA loans, and a $159,000, or 47.9%, decrease in mortgage banking and title abstract fees, partially offset by a $63,000,$48,000, or 50.0%5.7%, increase in gain on loans held for sale. The increase in non-interest expense was primarily due to a $680,000, or 23.7%, increase in salaries and employee benefits expense, a $173,000, or 258.2%, increase in professional fees, a $128,000, or 132.0%, increase in FDIC deposit insurance assessment expense, and a $28,000, or 9.5%, increase in occupancy and equipment expense.
Our Oakmont Capital Holdings, LLC Segment reported a pre-tax segment profit (“PTSP”) for the three months ended September 30, 2022 of $2.1 million, a $1.8 million, or 657.7%, increase from the same period in 2021. The increase in PTSP was primarily due to a $2.8 million, or 164.6%, increase in non-interest income partially offset by a $925,000, or 64.7%, increase in non-interest expense, and a $101,000, or 1,262.5%, decrease in lossnet interest income. The increase in non-interest income was primarily due to a $2.4 million, or 231.4%, increase net gain on salesloans held for sale, and write-downs on other real estate owned, a $25,000,$315,000, or 69.4%115.8%, increase in equipment lending fees. The increase in non-interest expense was primarily due to a $555,000, 45.0%, increase in salaries and employee benefits expense, a $284,000, or 747.4%, increase in other non-interest income,expenses, and a $17,000,$70,000, or 53.1%83.3%, increase in occupancy and equipment expense.
Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the nine months ended September 30, 2022 of $6.5 million, a $528,000, or 8.9%, increase from the same period in 2021. This increase in PTSP was primarily due to a $4.7 million, or 34.8%, increase in net interest income. This increase was partially offset by a $2.9 million, or 25.5%, increase in non-interest expense, a $674,000, or 53.5% increase in the provision for loan losses, and a $587,000, or 11.4%, decrease in non-interest income. The increase in non-interest expense was primarily due to a $2.3 million, or 28.6%, increase in salaries and employee benefits expense, a $269,000, or 75.6%, increase in professional fees, a $233,000, or 105.4%, increase in FDIC deposit insurance assessment, a $132,000, or 15.4%, increase in other feesnon-interest expenses, and services charges, partially offset byan $80,000, or 8.9%, increase in occupancy and equipment expense. The decrease in non-interest income was primarily due to a $60,000,$411,000, or 55.6%64.6%, decrease in gain on the sale of SBA loans, and a $2,000,$390,000, or 3.0%39.4%, decrease in income from bank-owned life insurance.
Our Oakmont Capital Holdings, LLC Segment reported a pre-tax segment profit (“PTSP”) for the nine months ended September 30, 20162022 of $5.2 million, a $5.2 million, increase from the same period in 2021. The increase in PTSP was primarily due to $5.8a $7.5 million, or 201.7%, increase in non-interest income, partially offset by a $2.2 million, or 61.4%, increase in non-interest expense, and a $119,000, or 122.7%, decrease in net interest income. The increase in non-interest income was primarily due to a $6.4 million, or 299.5%, increase in net gain on loans held for the nine months ended September 30, 2017. Salariessale, and a $954,000, or 143.0%, increase in equipment lending fees. The increase in non-interest expense was primarily due to a $1.6 million, or 53.6%, increase in salaries and employee benefits expense, accounted for $673,000 of the change as this expense increased 20.3%, from $3.3 million for the nine months ended September 30, 2016 to $4.0 million for the nine months ended September 30, 2017 due primarily to increased staff related to the continued expansion of the Company's mortgage banking and lending operations and the launch of Quaint Oak Insurance Agency on August 1, 2016. Also contributing to the increase was a $114,000,$403,000, or 34.2%347.4%, increase in other expense due primarily to a $76,000 increase in recruiting fees, an $82,000, or 59.9%, increase in data processingnon-interest expense, a $33,000,$153,000, or 39.3%135.4%, increase in advertising expense, a $28,000, or 27.2%, increase in FDIC insurance assessment, a $29,000, or 362.5% increase in amortization of other intangible related to the renewal rights of the book of business acquired from Signature Insurance Services, LLC on August 1, 2016, and a $14,000,$140,000, or 3.4%56.5%, increase in occupancy and equipment expense. These increases wereexpense, partially offset by a $20,000,an $88,000, or 62.5% decrease in other real estate owned expense, a $2,000, or 0.7%66.7%, decrease in professional fees, and a $1,000, or 0.6% decrease in directors' fees and expenses.
Liquidity and Capital Resources
The Company'sCompany’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, 2017,2022, the Company's cash and cash equivalents amounted to $8.2$8.3 million. At such date, the Company also had $761,000$3.1 million invested in interest-earning time deposits maturing in one year or less.
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, 2017,2022, Quaint Oak Bank had outstanding commitments to originate loans of $9.5$20.3 million, and commitments under unused lines of credit of $18.8 million.
At September 30, 2017,2022, certificates of deposit scheduled to mature in less than one year or less totaled $42.1$85.8 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, 2017,2022, we had $25.5$93.0 million of borrowings from the FHLB and had $114.0$344.2 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'sBank’s FHLB stock as collateral for such advances. In addition, as of September 30, 20172022 Quaint Oak Bank had $539,000$5.3 million in borrowing capacity with the Federal Reserve Bank of Philadelphia. There were no borrowings under this facility at September 30, 2017.
Total stockholders’ equity increased $8.7 million, or 5.9%23.6%, to $45.6 million at September 30, 2022 from $20.8$36.9 million at December 31, 2016.2021. Contributing to the increase was net income for the nine months ended September 30, 20172022 of $1.3$6.7 million, net income attributable to noncontrolling interest of $2.6 million, common stock earned by participants in the employee stock ownership plan of $138,000,$259,000, amortization of stock awards and options under our stock compensation plans of $97,000,$126,000, the reissuance of treasury stock under the Bank’s 401(k) Plan of $48,000 and the reissuance of treasury stock for exercised stock options of $193,000, the reissuance of treasury stock under the Bank's 401(k) Plan of $83,000, and other comprehensive income of $37,000.$181,000. These increases were partially offset by dividends paid of $751,000, noncontrolling interest distribution of $279,000, the purchase of treasury stock of $341,000$46,000, and by dividends paidother comprehensive loss, net of $269,000.$42,000. 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, 2017,2022, Quaint Oak Bank exceeded each of its capital requirements with ratios of 8.61%6.82%, 11.72%8.45%, 11.72%8.45% and 12.77%9.67%, 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, 2017,2022, we had unfunded commitments under lines of credit of $18.8$49.0 million, and $9.5$20.3 million of commitments to originate loans.loans, and $3.3 million under standby letters of credit. We had no commitments to advance additional amounts pursuant to outstanding lines of credit or undisbursed construction loans.
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'sCompany’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company'sCompany’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"“Exchange Act”)) as of September 30, 2017.2022. Based on their evaluation of the Company'sCompany’s disclosure controls and procedures, the Company'sCompany’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 20172022 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 |
Not applicable.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
(a)
Not applicable.(b)
Not applicable.(c)
Purchases of Equity SecuritiesThe Company'sCompany’s repurchases of its common stock made during the quarter ended September 30, 20172022 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, 2017 – July 31, 2017 | - | $ | - | - | 38,344 | |||||||||||
August 1, 2017 – August 31, 2017 | 4,440 | 13.00 | - | 38,344 | ||||||||||||
September 1, 2017 – September 30, 2017 | 22,538 | 12.34 | 15,000 | 23,344 | ||||||||||||
Total | 26,978 | $ | 12.46 | 15,000 | 23,344 |
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, 2022 – July 31, 2022 | - | $ | - | - | 24,375 | |||||||||||
August 1, 2022 – August 31, 2022 | - | - | - | 24,375 | ||||||||||||
September 1, 2022 – September 30, 2022 | 760 | 23.00 | - | 24,375 | ||||||||||||
Total | 760 | $ | 23.00 | - | 24,375 |
Notes to this table:
(1) | On |
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 | ||
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 |
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.
/s/Robert T. Strong | ||
Date: November 14, 2022 | By: | Robert T. Strong |
President and Chief Executive Officer | ||
/s/John J. Augustine | ||
Date: November 14, 2022 | By: | John J. Augustine |
Executive Vice President and Chief Financial Officer |