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 | June 30, | ||
OR |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Commission file number: | 000-52694 |
QUAINT OAK BANCORP, INC. | ||||
(Exact Name of Registrant as Specified in Its Charter) |
Pennsylvania | 35-2293957 | |||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
501 Knowles Avenue, Southampton, Pennsylvania | 18966 | |||
(Address of Principal Executive Offices) | (Zip Code) |
(215) 364-4059 | |||
(Registrant’s Telephone Number, Including Area Code) | |||
Not applicable | |||
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None |
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | |||
Indicate by check mark whether the registrant has submitted electronically |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, |
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company | ☒ Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No |
Indicate the number of shares outstanding of each of the |
INDEX
PART I - FINANCIAL INFORMATION | Page | |
Item 1 - Financial Statements | ||
Consolidated Balance Sheets as of | 1 | |
Consolidated Statements of Income for the Three and | 2 | |
Consolidated Statements of Comprehensive Income for the Three and 2023 and | 3 | |
Consolidated | 4 | |
Consolidated Statements of Cash Flows for the | 6 | |
Notes to the Unaudited Consolidated Financial Statements | 8 | |
Item 2 - | 36 | |
Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 47 | |
Item 4 - Controls and Procedures | 47 | |
PART II - OTHER INFORMATION | ||
Item 1 - Legal Proceedings | 48 | |
Item 1A - Risk Factors | 48 | |
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds | 48 | |
Item 3 - Defaults Upon Senior Securities | 49 | |
Item 4 - Mine Safety Disclosures | 49 | |
Item 5 - Other Information | 49 | |
Item 6 - Exhibits | 49 | |
SIGNATURES |
ITEM 1. FINANCIAL STATEMENTS
Quaint Oak Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
At June 30, | At December 31, | |||||||
2023 | 2022 | |||||||
| (In thousands, except share and per share data) | |||||||
Assets | ||||||||
Due from banks, non-interest-bearing | $ | 833 | $ | 421 | ||||
Due from banks, interest-bearing | 8,754 | 3,472 | ||||||
Cash and cash equivalents | 9,587 | 3,893 | ||||||
Investment in interest-earning time deposits | 2,162 | 3,833 | ||||||
Investment securities available for sale | 2,656 | 2,970 | ||||||
Loans held for sale | 115,697 | 133,222 | ||||||
Loans receivable, net of allowance for credit losses (2023 $7,456; 2022 $7,678) | 626,767 | 621,864 | ||||||
Accrued interest receivable | 3,132 | 3,462 | ||||||
Investment in Federal Home Loan Bank stock, at cost | 5,722 | 6,601 | ||||||
Bank-owned life insurance | 4,275 | 4,226 | ||||||
Premises and equipment, net | 2,945 | 2,775 | ||||||
Goodwill | 2,573 | 2,573 | ||||||
Other intangible, net of accumulated amortization | 150 | 174 | ||||||
Prepaid expenses and other assets | 8,129 | 6,757 | ||||||
Total Assets | $ | 783,795 | $ | 792,350 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 123,400 | $ | 88,728 | ||||
Interest-bearing | 449,998 | 460,520 | ||||||
Total deposits | $ | 573,398 | 549,248 | |||||
Federal Home Loan Bank short-term borrowings | 72,000 | 93,200 | ||||||
Federal Home Loan Bank long-term borrowings | 42,022 | 66,022 | ||||||
Federal Reserve Bank short-term borrowings | - | 7,000 | ||||||
Other short-term borrowings | 9,659 | 5,489 | ||||||
Subordinated debt | 21,811 | 7,966 | ||||||
Accrued interest payable | 736 | 584 | ||||||
Advances from borrowers for taxes and insurance | 4,546 | 4,186 | ||||||
Accrued expenses and other liabilities | 10,860 | 9,573 | ||||||
Total Liabilities | 735,032 | 743,268 | ||||||
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; 2,236,422 and 2,167,613 outstanding at June 30, 2023 and December 31, 2022, respectively | 28 | 28 | ||||||
Additional paid-in capital | 18,121 | 17,906 | ||||||
Treasury stock, at cost: 540,828 and 609,637 shares at June 30, 2023 and December 31, 2022, respectively | (3,814 | ) | (3,992 | ) | ||||
Accumulated other comprehensive loss | (16 | ) | (24 | ) | ||||
Retained earnings | 31,440 | 30,875 | ||||||
Total Quaint Oak Bancorp, Inc. Stockholders' Equity | 45,759 | 44,793 | ||||||
Noncontrolling Interest | 3,004 | 4,289 | ||||||
Total Stockholders' Equity | $ | 48,763 | $ | 49,082 | ||||
Total Liabilities and Stockholders’ Equity | $ | 783,795 | $ | 792,350 |
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.
Quaint Oak Bancorp, Inc.
Consolidated Statements of Income (Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In thousands, except for share data) | ||||||||||||||||
Interest Income | ||||||||||||||||
Interest on loans, including fees | $ | 11,852 | $ | 7,200 | $ | 22,446 | $ | 13,500 | ||||||||
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock | 266 | 108 | 490 | 181 | ||||||||||||
Total Interest Income | 12,118 | 7,308 | 22,936 | 13,681 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | 3,983 | 907 | 7,493 | 1,527 | ||||||||||||
Interest on Federal Home Loan Bank short-term borrowings | 1,500 | 53 | 2,800 | 75 | ||||||||||||
Interest on Federal Home Loan Bank long-term borrowings | 354 | 389 | 631 | 501 | ||||||||||||
Interest on Federal Reserve Bank long-term borrowings | 9 | 1 | 19 | 4 | ||||||||||||
Interest on subordinated debt | 582 | 130 | 778 | 260 | ||||||||||||
Interest on other short-term borrowings | 388 | 18 | 604 | 27 | ||||||||||||
Total Interest Expense | 6,816 | 1,498 | 12,325 | 2,394 | ||||||||||||
Net Interest Income | 5,302 | 5,810 | 10,611 | 11,287 | ||||||||||||
(Recovery of) Provision for Credit Losses | (189 | ) | 599 | 203 | 1,278 | |||||||||||
Net Interest Income after (Recovery of) Provision for Credit Losses | 5,491 | 5,211 | 10,408 | 10,009 | ||||||||||||
Non-Interest Income | ||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 566 | 824 | 1,372 | 1,461 | ||||||||||||
Real estate sales commissions, net | 48 | 64 | 72 | 125 | ||||||||||||
Insurance commissions | 160 | 139 | 296 | 255 | ||||||||||||
Other fees and services charges | 212 | 82 | 443 | 248 | ||||||||||||
Loan servicing income | 1,123 | 308 | 2,352 | 474 | ||||||||||||
Income from bank-owned life insurance | 25 | 22 | 49 | 43 | ||||||||||||
Net gain on loans held for sale | 1,073 | 2,858 | 1,953 | 7,068 | ||||||||||||
Gain on the sale of SBA loans | 201 | 34 | 251 | 167 | ||||||||||||
Total Non-Interest Income | 3,408 | 4,331 | 6,788 | 9,841 | ||||||||||||
Non-Interest Expense | ||||||||||||||||
Salaries and employee benefits | 5,528 | 4,891 | 10,870 | 9,482 | ||||||||||||
Directors' fees and expenses | 102 | 72 | 207 | 143 | ||||||||||||
Occupancy and equipment | 561 | 466 | 1,088 | 886 | ||||||||||||
Data processing | 208 | 163 | 425 | 360 | ||||||||||||
Professional fees | 225 | 228 | 400 | 412 | ||||||||||||
FDIC deposit insurance assessment | 240 | 113 | 472 | 229 | ||||||||||||
Advertising | 137 | 154 | 436 | 362 | ||||||||||||
Amortization of other intangible | 12 | 12 | 24 | 24 | ||||||||||||
Other | 1,348 | 490 | 2,069 | 873 | ||||||||||||
Total Non-Interest Expense | 8,361 | 6,589 | 15,991 | 12,771 | ||||||||||||
Income before Income Taxes | $ | 538 | $ | 2,953 | $ | 1,205 | $ | 7,079 | ||||||||
Income Taxes | 273 | 658 | 491 | 1,519 | ||||||||||||
Net Income | $ | 265 | $ | 2,295 | $ | 714 | $ | 5,560 | ||||||||
Net Income (Loss) Attributable to Noncontrolling Interest | $ | (305 | ) | $ | 525 | $ | (419 | ) | $ | 1,541 | ||||||
Net Income Attributable to Quaint Oak Bancorp, Inc. | $ | 570 | $ | 1,770 | $ | 1,133 | $ | 4,019 | ||||||||
Earnings per share - basic | $ | 0.25 | $ | 0.87 | $ | 0.51 | $ | 1.99 | ||||||||
Average shares outstanding - basic | 2,236,885 | 2,038,479 | 2,209,891 | 2,023,511 | ||||||||||||
Earnings per share - diluted | $ | 0.25 | $ | 0.82 | $ | 0.51 | $ | 1.88 | ||||||||
Average shares outstanding - diluted | 2,241,570 | 2,161,277 | 2,233,369 | 2,142,169 |
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 Comprehensive Income (Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
(In thousands) | ||||||||||||||||
Net Income | $ | 265 | $ | 2,295 | $ | 714 | $ | 5,560 | ||||||||
Other Comprehensive Income (Loss): | ||||||||||||||||
Unrealized gains (losses) on investment securities available for sale | (3 | ) | (26 | ) | 10 | (53 | ) | |||||||||
Income tax effect | 1 | 6 | (2 | ) | 12 | |||||||||||
Other comprehensive income (loss) | (2 | ) | (20 | ) | 8 | (41 | ) | |||||||||
Total Comprehensive Income | 263 | 2,275 | 722 | 5,519 | ||||||||||||
Comprehensive Income (Loss) Attributable to Noncontrolling Interest | (305 | ) | 525 | (419 | ) | 1,541 | ||||||||||
Comprehensive Income Attributable to Quaint Oak Bancorp, Inc. | $ | 568 | $ | 1,750 | $ | 1,141 | $ | 3,978 |
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 Stockholders’ Equity (Unaudited)
For the Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
BALANCE – MARCH 31, 2023 | 2,192,432 | $ | 28 | $ | 18,005 | $ | (3,888 | ) | $ | (14 | ) | $ | 31,155 | $ | 4,135 | $ | 49,421 | |||||||||||||||
Treasury stock purchase | (16,854 | ) | (306 | ) | (306 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 1,422 | 16 | 10 | 26 | ||||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,122 | (57 | ) | 57 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 50,300 | 95 | 313 | 408 | ||||||||||||||||||||||||||||
Stock based compensation expense | 62 | 62 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.13 per share) | (285 | ) | (285 | ) | ||||||||||||||||||||||||||||
Noncontrolling interest distribution | (826 | ) | (826 | ) | ||||||||||||||||||||||||||||
Net income (loss) | 570 | (305 | ) | 265 | ||||||||||||||||||||||||||||
Other comprehensive loss | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2023 | 2,236,422 | $ | 28 | $ | 18,121 | $ | (3,814 | ) | $ | (16 | ) | $ | 31,440 | $ | 3,004 | $ | 48,763 |
For the Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Noncontrolling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
BALANCE - MARCH 31, 2022 | 2,016,517 | $ | 28 | $ | 15,813 | $ | (4,955 | ) | $ | 2 | $ | 26,057 | $ | 3,019 | $ | 39,964 | ||||||||||||||||
Common stock allocated by ESOP (4,000 shares) | 4,000 | 59 | 25 | 84 | ||||||||||||||||||||||||||||
Treasury stock purchase | (571 | ) | (14 | ) | (14 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,123 | (57 | ) | 57 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 652 | 11 | 4 | 15 | ||||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 16,000 | 36 | 99 | 135 | ||||||||||||||||||||||||||||
Stock based compensation expense | 42 | 42 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.13 per share) | (263 | ) | (263 | ) | ||||||||||||||||||||||||||||
Noncontrolling interest member distribution | (59 | ) | (59 | ) | ||||||||||||||||||||||||||||
Net income | 1,770 | 525 | 2,295 | |||||||||||||||||||||||||||||
Other comprehensive loss | (20 | ) | (20 | ) | ||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2022 | 2,045,721 | $ | 28 | $ | 15,904 | $ | (4,784 | ) | $ | (18 | ) | $ | 27,564 | $ | 3,485 | $ | 42,179 |
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 Stockholders’ Equity (Unaudited)
For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Income (Loss) | Retained Earnings | Noncontrolling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||||||||||||||||
BALANCE – DECEMBER 31, 2022 | 2,167,613 | $ | 28 | $ | 17,906 | $ | (3,992 | ) | $ | (24 | ) | $ | 30,875 | $ | 4,289 | $ | 49,082 | |||||||||||||||
Treasury stock purchase | (16,854 | ) | (306 | ) | (306 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,122 | (57 | ) | 57 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 3,241 | 45 | 21 | 66 | ||||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 73,300 | 123 | 406 | 529 | ||||||||||||||||||||||||||||
Stock based compensation expense | 104 | 104 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.26 per share) | (568 | ) | (568 | ) | ||||||||||||||||||||||||||||
Noncontrolling interest member distribution | (866 | ) | (866 | ) | ||||||||||||||||||||||||||||
Net income | 1,133 | (419 | ) | 714 | ||||||||||||||||||||||||||||
Other comprehensive income | 8 | 8 | ||||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2023 | 2,236,422 | $ | 28 | $ | 18,121 | $ | (3,814 | ) | $ | (16 | ) | $ | 31,440 | $ | 3,004 | $ | 48,763 |
For the Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Income (Loss) | Retained Earnings | Noncontrolling Interest | Total Stockholders’ 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 (8,000 shares) | 8,000 | 125 | 50 | 175 | ||||||||||||||||||||||||||||
Treasury stock purchase | (1,209 | ) | (28 | ) | (28 | ) | ||||||||||||||||||||||||||
Reissuance of treasury stock under stock incentive plan | 9,123 | (57 | ) | 57 | - | |||||||||||||||||||||||||||
Reissuance of treasury stock under 401(k) Plan | 1,494 | 24 | 9 | 33 | ||||||||||||||||||||||||||||
Reissuance of treasury stock for exercised stock options | 17,000 | 43 | 105 | 148 | ||||||||||||||||||||||||||||
Stock based compensation expense | 84 | 84 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.24 per share) | (485 | ) | (485 | ) | ||||||||||||||||||||||||||||
Noncontrolling interest member distribution | (176 | ) | (176 | ) | ||||||||||||||||||||||||||||
Net income | 4,019 | 1,541 | 5,560 | |||||||||||||||||||||||||||||
Other comprehensive loss | (41 | ) | (41 | ) | ||||||||||||||||||||||||||||
BALANCE – JUNE 30, 2022 | 2,045,721 | $ | 28 | $ | 15,904 | $ | (4,784 | ) | $ | (18 | ) | $ | 27,564 | $ | 3,485 | $ | 42,179 |
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 Cash Flows (Unaudited)
For the Six Months | ||||||
Ended June 30, | ||||||
2023 | 2022 | |||||
(In Thousands) | ||||||
Cash Flows from Operating Activities | ||||||
Net income | $ | 714 | $ | 5,560 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Provision for credit losses | 203 | 1,278 | ||||
Depreciation of premises and equipment | 248 | 177 | ||||
Amortization, net of operating right-of-use assets | 81 | 111 | ||||
Amortization, net of subordinated debt issuance costs | 103 | 16 | ||||
Amortization, net of other intangible | 24 | 24 | ||||
Accretion of deferred loan fees and costs, net | (475 | ) | (296 | ) | ||
Stock-based compensation expense | 104 | 259 | ||||
Net gain on loans held for sale | (1,953 | ) | (7,068 | ) | ||
Loans held for sale-originations | (203,017 | ) | (247,162 | ) | ||
Loans held for sale-proceeds | 222,494 | 271,726 | ||||
Gain on the sale of SBA loans | (251 | ) | (167 | ) | ||
Increase in the cash surrender value of bank-owned life insurance | (49 | ) | (42 | ) | ||
Changes in assets and liabilities which provided (used) cash: | ||||||
Accrued interest receivable | 330 | (515 | ) | |||
Prepaid expenses and other assets | (1,455 | ) | (1,395 | ) | ||
Accrued interest payable | 152 | 254 | ||||
Accrued expenses and other liabilities | 1,287 | 2,262 | ||||
Net Cash Provided by Operating Activities | 18,540 | 25,022 | ||||
Cash Flows from Investing Activities | ||||||
Purchase of interest-earning time deposits | (1,780 | ) | (1,840 | ) | ||
Redemption of interest-earning time deposits | 3,451 | 1,553 | ||||
Principal repayments of investment securities available for sale | 324 | 527 | ||||
Net increase in loans receivable | (4,379 | ) | (144,275 | ) | ||
Purchase of Federal Home Loan Bank stock | (1,140 | ) | (5,652 | ) | ||
Redemption of Federal Home Loan Bank stock | 2,019 | 3,630 | ||||
Purchase of premises and equipment | (418 | ) | (277 | ) | ||
Net Cash Used in Investing Activities | (1,923 | ) | (146,334 | ) | ||
Cash Flows from Financing Activities | ||||||
Net increase in demand deposits, money markets, and savings accounts | 2,991 | 135,828 | ||||
Net increase in certificate accounts | 21,159 | 6,771 | ||||
Increase in advances from borrowers for taxes and insurance | 360 | 1,300 | ||||
Repayments of Federal Home Loan Bank short-term borrowings | (21,200 | ) | (26,000 | ) | ||
Repayments of Federal Home Loan Bank long-term borrowings | (44,000 | ) | (4,000 | ) | ||
Proceeds from Federal Home Loan Bank long-term borrowings | 20,000 | 80,000 | ||||
Repayments of Federal Reserve Bank short-term borrowings | (7,000 | ) | (3,895 | ) | ||
Proceeds from other borrowings | 4,170 | - | ||||
Net proceeds from subordinated debt | 13,742 | - | ||||
Dividends paid | (568 | ) | (485 | ) | ||
Noncontrolling interest capital distribution | (866 | ) | (176 | ) | ||
Purchase of treasury stock | (306 | ) | (28 | ) | ||
Proceeds from the reissuance of treasury stock | 66 | 33 | ||||
Proceeds from the exercise of stock options | 529 | 148 | ||||
Net Cash (Used in) Provided by Financing Activities | (10,923 | ) | 189,496 | |||
Net Increase in Cash and Cash Equivalents | 5,694 | 68,184 | ||||
Cash and Cash Equivalents – Beginning of Year | 3,893 | 10,705 | ||||
Cash and Cash Equivalents – End of Year | $ | 9,587 | $ | 78,889 |
See accompanying notes to the unaudited consolidated financial statements.
Quaint Oak Bancorp, Inc.
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months | ||||||||
Ended June 30, | ||||||||
2023 | 2022 | |||||||
(In Thousands) | ||||||||
Supplementary Disclosure of Cash Flow and Non-Cash Information: | ||||||||
Cash payments for interest | $ | 12,173 | $ | 2,140 | ||||
Cash payments for income taxes | $ | 2,317 | $ | 2,267 | ||||
Initial recognition of operating lease right-of use assets | $ | 1,563 | $ | 560 | ||||
Initial recognition of operating lease obligations | $ | 1,563 | $ | 502 |
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 in Pennsylvania and the Lehigh Valley area in Pennsylvania. The Bank has two locations: the main office location in Southampton, Pennsylvania and athree regional banking officeoffices located in the Delaware Valley, Lehigh Valley area of Pennsylvania.and Philadelphia markets. The principal deposit products offered by the Bank are certificates of deposit, money market accounts, savings accounts and, beginning in December 2014,certificates of deposit, 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 2022 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 2022 Annual Report on Form 10-K.10-K. The results of operations for the three or ninesix months ended SeptemberJune 30, 2017 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
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. TheQuaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)
Critical Accounting Policies. During the intentsix months ended June 30, 2023, the Company implemented new CECL accounting policies, procedures, and abilitycontrols as part of its adoption of ASU No.2016-13 and subsequent ASUs issued to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Bank is generally amortizing these amounts over the contractual life of the loan.
Accounting Policies (Continued)
In February 2016, January 2021, the FASB issued ASU 2016-02, Leases2021-01,Reference Rate Reform (Topic 842). The standard requires lessees848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to recognizenew references rates so that derivatives affected by the assetsdiscounting transition are explicitly eligible for certain optional expedients and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying assetexceptions within Topic 848. ASU 2021-01 clarifies that the lesseederivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is reasonably certain to exercise. For short-term leases, lessees effective immediately for all entities. Entities may elect to recognize lease payments overapply the lease termamendments on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. The amendments should be applied at the beginningfull retrospective basis as of the earliest period presented using a modified retrospective approach with earlier application permitted as ofany date from the beginning of an interim period that includes or annual reporting period.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 issued. The Company is currently assessingamendments 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 practical expedients it may elect at adoption, but does not anticipateaccounting effects are recorded through the amendments willend of the hedging relationship. This update did not have a significant impact to the financial statements. Based on the Company's preliminary analysis of its current portfolio, the impact to the Company's balance sheet is estimated to result in less than a 1% increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption.
In June 2016, January 2017, the FASB issued ASU 2016-13, Financial Instruments 2017- Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.. 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-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 March 2017, 2022, the FASB issued ASU 2017-08,
The Company adopted ASU 326 using the weighted average maturity method (WARM) for all financial assets measured at amortized cost, net of investments in leases and off balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASU 326, while prior period any adjustments should be reflected as ofresults are reported in accordance with the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directlypreviously applicable incurred loss methodology. The Company recorded no change to retained earnings as of January 1, 2023 for the beginningcumulative effect of adopting ASC 326.
The following table presents the impact of adopting ASU 2016-13 on January 1, 2023 (in thousands):
Allowance for credit losses - loans |
Prior to Adopting |
Impact of | As Reported Under ASC 326 | |||||||||
Real estate loans: | ||||||||||||
One-to-four family residential: | ||||||||||||
Owner occupied | $ | 123 | $ | - | $ | 123 | ||||||
Non-owner occupied | 295 | - | 295 | |||||||||
Total one-to-four family residential | 418 | - | 418 | |||||||||
Multi-family (five or more) residential | 451 | - | 451 | |||||||||
Commercial real estate | 3,750 | - | 3,750 | |||||||||
Construction | 304 | - | 304 | |||||||||
Home equity | 33 | - | 33 | |||||||||
Total real estate loans | 4,956 | - | 4,956 | |||||||||
Commercial business and other consumer | 2,422 | - | 2,422 | |||||||||
Unallocated | 300 | - | 300 | |||||||||
Total allowance for credit losses | $ | 7,678 | $ | - | $ | 7,678 | ||||||
Allowance for credit losses – unfunded commitments | ||||||||||||
Reserve for unfunded commitments | $ | 27 | $ | - | $ | 27 | ||||||
Total | $ | 7,705 | $ | - | $ | 7,705 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1 – Financial Statement Presentation and Significant Accounting Policies (Continued)
Loans are stated at their principal amount outstanding, except for loans held for sale, which are carried at fair value. Interest income on loans is accrued as earned.
In general, loans are placed on non-accrual status once they become 90 days delinquent as to principal or interest. In certain cases a loan may be placed on nonaccrual status prior to being 90 days delinquent if there is an indication that the borrower is having difficulty making payments, or the Company believes it is probable that all amounts will not be collected according to the contractual terms of the period of adoption. Additionally,loan agreement. When interest accruals are discontinued, unpaid interest previously credited to income is reversed. Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid currently for six consecutive months or the loan is considered secured and in the periodprocess of adoption,collection. The Company generally applies payments received on non-accruing loans to principal until such time as the principal is paid off, after which time any payments received are recognized as interest income. If the Company believes that all amounts outstanding on a non-accrual loan will ultimately be collected, payments received subsequent to its classification as a non-accrual loan are allocated between interest income and principal.
A loan that is 90 days delinquent may continue to accrue interest if the loan is both adequately secured and is 0in the process of collection. Past due status is determined based on contractual due dates for loan payments. An adequately secured loan is one that has collateral with a supported fair value that is sufficient to discharge the debt, and/or has an entity should provide disclosures aboutenforceable guarantee from a changefinancially responsible party. A loan is considered to be in accounting principle. This Updatethe process of collection if collection is notproceeding through legal action or through other activities that are reasonably expected to result in repayment of the debt or restoration to current status in the near future.
Loans deemed to be a loss are written off through a charge against the allowance for credit losses (ACL). All loans are evaluated for possible charge-off when it is probable that the balance will not be collected, based on the ability of the borrower to pay and the value of the underlying collateral, if any. Principal recoveries of loans previously charged off are recorded as increases to the ACL.
Loan Origination Fees and Costs.Loan origination fees and the related direct origination costs are deferred and amortized over the life of the loan as an adjustment to interest income.
Allowance for Credit Losses. The discussion that follows describes the methodology for determining the ACL under the ASU 326 model that was adopted effective January 1, 2023. The allowance methodology for prior periods is disclosed in the Company’s 2022 Annual Report on Form 10-K.
The Company has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)
The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually for expected credit losses. The ACL also includes certain qualitative adjustments.
Loans Evaluated Collectively. Homogeneous loans are evaluated collectively for expected credit losses.
Loans Evaluated Individually. Loans evaluated individually for expected credit losses could include loans on non-accrual status.
Loans evaluated individually may have specific allocations assigned if the measured value of the loan using one of the noted techniques is less than its current carrying value. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For all loans, an internal risk rating process is used. The Company believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning risk ratings involves judgment. Risk ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.
The following is a summary of the Company's internal risk rating categories:
• | Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk. |
• | Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak. |
• | Substandard: These loans are inadequately protected by current sound worth and paying capacity of the borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt. |
• | Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. |
The allocation of the ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Company considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.
Qualitative and Other Adjustments to Allowance for Credit Losses: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. For example, the Company considers the impact of current environmental factors at the reporting date that did not exist over the period from which historical experience was used. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), economic trends and conditions, changes in underwriting standards, experience and depth of lending staff, trends in delinquencies, and the level of criticized loans. Qualitative adjustments are judgmental and are based on management’s knowledge of the portfolio and the markets in which the Company operates. Qualitative adjustments are evaluated and approved on a quarterly basis. Additionally, the ACL includes other allowance categories that are not directly incorporated in the quantitative results. These include but are not limited to loans-in-process, trade acceptances and overdrafts. The ACL utilizes 36-month economic forecasts which include housing starts, real estate prices, loan delinquency trends, and U.S. GDP changes.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)
Off Balance Sheet Credit Exposures: The ACL for off balance sheet credit exposures is recorded in other liabilities 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 stock (RRP) shares.awards. Common stock equivalents which are considered antidilutive are not included for the purposes of this calculation. For the three and ninesix months ended SeptemberJune 30, 2017 2023 and 2016,2022, all unvested restricted stock program awards and outstanding stock options granted under the 2013 Stock Incentive Plan, the 2018 Stock Incentive Plan and the 2023 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 June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net Income Attributable to Quaint Oak Bancorp, Inc. | $ | 570,000 | $ | 1,770,000 | $ | 1,133,000 | $ | 4,019,000 | ||||||||
Weighted average shares outstanding – basic | 2,236,885 | 2,038,479 | 2,209,891 | 2,023,511 | ||||||||||||
Effect of dilutive common stock equivalents | 4,685 | 122,797 | 23,478 | 118,658 | ||||||||||||
Adjusted weighted average shares outstanding – diluted | 2,241,570 | 2,161,277 | 2,233,369 | 2,142,169 | ||||||||||||
Basic earnings per share | $ | 0.25 | $ | 0.87 | $ | 0.51 | $ | 1.99 | ||||||||
Diluted earnings per share | $ | 0.25 | $ | 0.82 | $ | 0.51 | $ | 1.88 |
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)loss by component, net of tax, for the three and ninesix months ended SeptemberJune 30, 2017 2023 and 20162022 (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 June 30, | For the Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Balance at the beginning of the period | $ | (14 | ) | $ | 2 | $ | (24 | ) | $ | 23 | ||||||
Other comprehensive income (loss) before classifications | (2 | ) | (20 | ) | 8 | (41 | ) | |||||||||
Balance at the end of the period | $ | (16 | ) | $ | (18 | ) | $ | (16 | ) | $ | (18 | ) |
_________________
(1)�� All amounts are net of tax. Amounts in parentheses indicate debits.
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 |
Note 5 4–Investment Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale at SeptemberJune 30, 2017 2023 and December 31, 2016 2022 are summarized below (in thousands):
June 30, 2023 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Government National Mortgage Association securities | $ | 2,584 | $ | - | $ | (18 | ) | $ | 2,566 | |||||||
Federal National Mortgage Association securities | 92 | - | (2 | ) | 90 | |||||||||||
Total available-for-sale-securities | $ | 2,676 | $ | - | $ | (20 | ) | $ | 2,656 |
December 31, 2022 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Available for Sale: | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Government National Mortgage Association securities | $ | 2,902 | $ | - | $ | (31 | ) | $ | 2,871 | |||||||
Federal National Mortgage Association securities | 98 | 1 | - | 99 | ||||||||||||
Total available-for-sale-securities | $ | 3,000 | $ | 1 | $ | (31 | ) | $ | 2,970 |
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 4– Investment Securities Available for Sale (Continued)
The amortized cost and fair value of debtmortgage-backed securities at SeptemberJune 30, 2017, 2023, 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 ten years | $ | 2,676 | $ | 2,656 | ||||
Total | $ | 2,676 | $ | 2,656 |
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 SeptemberJune 30, 2017 2023 and December 31, 2016 (in2022 (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 | ) |
June 30, 2023 | ||||||||||||||||||||||||||||
Less than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||||||
Number of Securities | Fair Value | Gross | Fair Value | Gross | Fair Value | Gross | ||||||||||||||||||||||
Government National Mortgage Association securities | 11 | $ | - | $ | - | $ | 2,584 | $ | (18 | ) | $ | 2,584 | $ | (18 | ) | |||||||||||||
Federal National Mortgage Association securities | 1 | 92 | (2 | ) | - | - | 92 | (2 | ) | |||||||||||||||||||
Total | 12 | $ | 92 | $ | (2 | ) | $ | 2,584 | $ | (18 | ) | $ | 2,676 | $ | (20 | ) |
December 31, 2022 | ||||||||||||||||||||||||||||
Less than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||||||
Number of Securities | Fair Value | Gross | Fair Value | Gross | Fair Value | Gross | ||||||||||||||||||||||
Government National Mortgage Association securities | 11 | $ | 2,871 | $ | (31 | ) | $ | -- | $ | -- | $ | 2,871 | $ | (31 | ) |
The Company’s mortgage-backed securities in an unrealized loss positionhave contractual terms that generally do not permit the issuer to settle the securities at such date had an aggregate depreciation of 0.80% froma price less than the Company's amortized cost basis. Management believes thatof the estimatedinvestment. The change in fair value of thethese securities disclosed above is primarily dependent on the movement of marketattributable to changes in interest rates. Management evaluated the length of timerates and not credit quality, and the extentCompany does not have the intent to which thesell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value has been less than cost andto amortized cost. Therefore, the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company has the ability and intent to hold the securities until the anticipated recovery of fair value occurs. Management does not believe any individual unrealized loss have an allowance for credit losses for these investments as of SeptemberJune 30, 2017 represents an other-than-temporary impairment. 2023.
There were no impairment charges recognized during the three and nine or six months ended SeptemberJune 30, 2017 2023 or 2016.2022.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 65 - Loans Receivable, Net and Allowance for LoanCredit Losses
The composition of net loans receivable is as follows (in thousands):
June 30, 2023 | December 31, 2022 | |||||||
Real estate loans: | ||||||||
One-to-four family residential: | ||||||||
Owner occupied | $ | 17,627 | $ | 18,070 | ||||
Non-owner occupied | 36,791 | 39,315 | ||||||
Total one-to-four family residential | 54,418 | 57,385 | ||||||
Multi-family (five or more) residential | 48,656 | 46,909 | ||||||
Commercial real estate | 342,646 | 333,540 | ||||||
Construction | 35,620 | 28,938 | ||||||
Home equity | 5,241 | 4,918 | ||||||
Total real estate loans | 486,581 | 471,690 | ||||||
Commercial business | 148,527 | 159,069 | ||||||
Other consumer | 13 | 2 | ||||||
Total Loans | 635,121 | 630,761 | ||||||
Deferred loan fees and costs | (898 | ) | (1,219 | ) | ||||
Allowance for credit losses | (7,456 | ) | (7,678 | ) | ||||
Net Loans | $ | 626,767 | $ | 621,864 |
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, 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 65 - Loans Receivable, Net and Allowance for LoanCredit Losses (Continued)
The following table summarizes designated internal risk categories by portfolio segment and loan class, by origination year, as of June 30, 2023 (in thousands):
Term Loans Amortized Cost by Origination Year | ||||||||||||||||||||||||||||||||
As of June 30, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||
One-to-four family residential owner occupied | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 522 | $ | 8,918 | $ | 3,520 | $ | 1,915 | $ | 574 | $ | 2,178 | $ | - | $ | 17,627 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total one-to-four family residential owner occupied | $ | 522 | $ | 8,918 | $ | 3,520 | $ | 1,915 | $ | 574 | $ | 2,178 | $ | - | $ | 17,627 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
One-to-four family residential non- owner occupied | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | - | $ | 6,931 | $ | 8,250 | $ | 3,311 | $ | 924 | $ | 17,375 | $ | - | $ | 36,791 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total one-to-four family residential non-owner occupied | $ | - | $ | 6,931 | $ | 8,250 | $ | 3,311 | $ | 924 | $ | 17,375 | $ | - | $ | 36,791 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Multi-family residential | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 1,858 | $ | 17,268 | $ | 13,491 | $ | 4,544 | $ | 600 | $ | 9,178 | $ | - | $ | 46,939 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | 1,717 | - | 1,717 | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total multi-family residential | $ | 1,858 | $ | 17,268 | $ | 13,491 | $ | 4,544 | $ | 600 | $ | 10,895 | $ | - | $ | 48,656 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Commercial real estate | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 33,012 | $ | 152,049 | $ | 72,479 | $ | 22,558 | $ | 15,755 | $ | 45,337 | $ | 1,383 | $ | 342,573 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | 73 | - | - | 73 | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total commercial real estate | $ | 33,012 | $ | 152,049 | $ | 72,479 | $ | 22,558 | $ | 15,828 | $ | 45,337 | $ | 1,383 | $ | 342,646 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | 134 | $ | - | $ | - | $ | - | $ | 134 | ||||||||||||||||
Construction | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 6,387 | $ | 10,862 | $ | 11,870 | $ | 4,374 | $ | - | $ | - | $ | - | $ | 33,493 | ||||||||||||||||
Special mention | - | - | - | - | - | 2,127 | - | 2,127 | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total construction | $ | 6,387 | $ | 10,862 | $ | 11,870 | $ | 4,374 | $ | - | $ | 2,127 | $ | - | $ | 35,620 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Home equity | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 500 | $ | 40 | $ | - | $ | - | $ | - | $ | 226 | $ | 4,475 | $ | 5,241 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total home equity | $ | 500 | $ | 40 | $ | - | $ | - | $ | - | $ | 226 | $ | 4,475 | $ | 5,241 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 5 - Loans Receivable, Net and Allowance for Credit Losses (Continued)
Term Loans Amortized Cost by Origination Year | ||||||||||||||||||||||||||||||||
As of June 30, 2023 | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||
Commercial business | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 5,357 | $ | 80,234 | $ | 32,281 | $ | 5,153 | $ | 6,956 | $ | 795 | $ | 11,365 | $ | 142,141 | ||||||||||||||||
Special mention | - | 877 | - | - | - | - | 1,999 | 2,876 | ||||||||||||||||||||||||
Substandard | - | - | 2,290 | - | 1,220 | - | - | 3,510 | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total commercial business | $ | 5,357 | $ | 81,111 | $ | 34,571 | $ | 5,153 | $ | 8,176 | $ | 795 | $ | 13,364 | $ | 148,527 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | 97 | $ | - | $ | - | $ | - | $ | 97 | ||||||||||||||||
Other consumer | ||||||||||||||||||||||||||||||||
Risk rating | ||||||||||||||||||||||||||||||||
Pass | $ | 13 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 13 | ||||||||||||||||
Special mention | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Substandard | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total other consumer | $ | 13 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 13 | ||||||||||||||||
Current period gross charge-offs | ||||||||||||||||||||||||||||||||
Total | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Pass | $ | 47,649 | $ | 276,302 | $ | 141,891 | $ | 41,855 | $ | 24,809 | $ | 75,089 | $ | 17,223 | $ | 624,818 | ||||||||||||||||
Special mention | - | 877 | - | - | - | 2,127 | 1,999 | 5,003 | ||||||||||||||||||||||||
Substandard | - | - | 2,290 | - | 1,293 | 1,717 | - | 5,300 | ||||||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total | $ | 47,649 | $ | 277,179 | $ | 144,181 | $ | 41,855 | $ | 26,102 | $ | 78,933 | $ | 19,222 | $ | 635,121 | ||||||||||||||||
Current period gross charge-offs | $ | - | $ | - | $ | - | $ | 231 | $ | - | $ | - | $ | - | $ | 231 |
The information presented in the table above is not required for periods prior to the adoption of ASU 326. The following table presents the most comparable required information for the prior period, internal credit risk ratings for the indicated loan class segments as of December 31, 2022 (in thousands):
December 31, 2022 | ||||||||||||||||||||
Pass | Special Mention | Substandard | Doubtful | Total | ||||||||||||||||
One-to-four family residential owner occupied | $ | 17,663 | $ | 407 | $ | - | $ | - | $ | 18,070 | ||||||||||
One-to-four family residential non-owner occupied | 39,315 | - | - | - | 39,315 | |||||||||||||||
Multi-family residential | 45,201 | - | 1,708 | - | 46,909 | |||||||||||||||
Commercial real estate | 333,406 | - | 134 | - | 333,540 | |||||||||||||||
Construction | 28,938 | - | - | - | 28,938 | |||||||||||||||
Home equity | 4,918 | - | - | - | 4,918 | |||||||||||||||
Commercial business | 153,746 | 2,908 | 2,415 | - | 159,069 | |||||||||||||||
Other consumer | 2 | - | - | - | 2 | |||||||||||||||
Total | $ | 623,189 | $ | 3,315 | $ | 4,257 | $ | - | $ | 630,761 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 5 - Loans Receivable, Net and Allowance for Credit Losses (Continued)
The following table presents non-accrual loans by classes of the loan portfolio as of June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023 | December 31, | |||||||||||||||||||||||
Non-accrual loans | 2022 | |||||||||||||||||||||||
With a Related Allowance | Without a Related Allowance | Total | 90 Days or More Past Due and Accruing | Total Non-Performing | Total Non-Accrual Loans | |||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
One-to-four family residential non-owner occupied | - | - | - | - | - | - | ||||||||||||||||||
Multi-family residential | - | - | - | - | - | - | ||||||||||||||||||
Commercial real estate | 73 | - | 73 | - | 73 | 73 | ||||||||||||||||||
Construction | - | - | - | - | - | - | ||||||||||||||||||
Home equity | - | - | - | - | - | - | ||||||||||||||||||
Commercial business | - | - | - | - | - | - | ||||||||||||||||||
Other consumer | - | - | - | - | - | - | ||||||||||||||||||
Total | $ | 73 | $ | - | $ | 73 | $ | - | $ | 73 | $ | 73 |
For the three and six months ended June 30, 2023 and 2022 there was no interest income recognized on non-accrual loans on a cash basis. There was $1,000 and $60,000 of interest income foregone on non-accrual loans for the three and six months ended June 30, 2023 and $79,000 for both the three and six months ended June 30, 2022.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 5 - Loans Receivable, Net and Allowance for Credit 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 September 30, 2017 as well as the average recorded investment and related interest income for the period then ended (in thousands):
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 |
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, 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 | 7 | 9 | - | 7 | - | |||||||||||||||
Multi-family residential | 1,708 | 1,722 | - | 1,708 | - | |||||||||||||||
Commercial real estate | 129 | 129 | - | 130 | 12 | |||||||||||||||
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 | 134 | 134 | 118 | 136 | 9 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | 97 | 97 | 96 | 102 | 6 | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total: | ||||||||||||||||||||
One-to-four family residential owner occupied | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
One-to-four family residential non-owner occupied | 7 | 9 | - | 7 | - | |||||||||||||||
Multi-family residential | 1,708 | 1,722 | - | 1,708 | - | |||||||||||||||
Commercial real estate | 263 | 263 | 118 | 266 | 21 | |||||||||||||||
Construction | - | - | - | - | - | |||||||||||||||
Home equity | - | - | - | - | - | |||||||||||||||
Commercial business | 97 | 97 | 96 | 102 | 6 | |||||||||||||||
Other consumer | - | - | - | - | - | |||||||||||||||
Total | $ | 2,075 | $ | 2,091 | $ | 215 | $ | 2,083 | $ | 27 |
Prior to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from loss mitigation activitiesthe adoption of ASU 2022-02,Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and could include reductions in the interest rate, payment extensions, forbearance, or other actions. At September 30, 2017,Vintage Disclosures, the Company had eightgranted a variety of concessions to borrowers in the form of loan modifications that were considered TDRs. At December 31, 2022, the Company had two loans totaling $719,000$136,000 that were identified as troubled debt restructurings. All eightBoth of these loans were performing in accordance with their modified terms. At terms as of December 31, 2016, the Company had eight2022.
As of June 30, 2023, there were no loans totaling $733,000 thatwhose terms were identified as troubled debt restructurings ("TDR"). If a TDR is placed on non-accrual it is not reverted back to accruing status until the borrower makes timely payments as contractedmodified for at least nine 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.borrowers who may be experiencing financial difficulties.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 65 - Loans Receivable, Net and Allowance for LoanCredit Losses (Continued)
Following is a summary, by loan portfolio class, of changes in the Company's TDRallowance for credit losses for the three and six months ended June 30, 2023 and recorded investment in loans receivable as of SeptemberJune 30, 2017 and December 31, 2016 (dollar amounts 2023 (in thousands):
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 |
June 30, 2023 | ||||||||||||||||||||||||||||||||||||
1-4 Family Residential Owner Occupied | 1-4 Family Residential Non-Owner Occupied | Multi-Family Residential | Commercial Real Estate | Construction | Home Equity | Commercial Business and Other Consumer | Unallocated | Total | ||||||||||||||||||||||||||||
For the Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 153 | $ | 256 | $ | 396 | $ | 3,367 | $ | 406 | $ | 54 | $ | 3,026 | $ | - | $ | 7,658 | ||||||||||||||||||
Impact of ASU 326 | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Charge-offs | - | - | - | (134 | ) | - | - | (97 | ) | - | (231 | ) | ||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision(1) | (16 | ) | (13 | ) | 19 | (58 | ) | 442 | (5 | ) | (340 | ) | - | 29 | ||||||||||||||||||||||
Ending balance | $ | 137 | $ | 243 | $ | 415 | $ | 3,175 | $ | 848 | $ | 49 | $ | 2,589 | $ | - | $ | 7,456 | ||||||||||||||||||
For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 123 | $ | 295 | $ | 451 | $ | 3,750 | $ | 304 | $ | 33 | $ | 2,422 | $ | 300 | $ | 7,678 | ||||||||||||||||||
Impact of ASU 326 | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Charge-offs | - | - | - | (134 | ) | - | - | (97 | ) | - | (231 | ) | ||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision(1) | 14 | (52 | ) | (36 | ) | (441 | ) | 544 | 16 | 264 | (300 | ) | 9 | |||||||||||||||||||||||
Ending balance | $ | 137 | $ | 243 | $ | 415 | $ | 3,175 | $ | 848 | $ | 49 | $ | 2,589 | $ | - | $ | 7,456 |
(1) | Provision included in the table only includes the portion related to loans receivable. For the three months ended June 30, 2023, the total recovery of credit losses of $189,000 includes a provision of $13,000 for off balance sheet credit exposure, which is reflected in other liabilities on the balance sheet. For the six months ended June 30, 2023, the total provision for credit losses of $203,000 includes a provision of $194,000 for off balance sheet credit exposure, which is reflected in other liabilities on the balance sheet. |
The contractual aging ofCompany allocated increased allowance for credit loss provisions to the TDRsconstruction loan portfolio class for the three and six months ended June 30, 2023, due primarily to increased loan balances and changes in qualitative factors associated with the table above as of Septembercurrent economic environment in this portfolio class. The Company allocated decreased allowance for credit loss provisions to the commercial real estate loan portfolio class for the three and six months ended June 30, 2017 and December 31, 2016 is as follows (in thousands):2023, due primarily to changes in qualitative factors related to improved asset quality in this portfolio class. The Company allocated decreased allowance for credit loss provisions to the commercial business loan portfolio class for the three months ended June 30, 2023, due primarily to decreased loan balances in this portfolio class. The Company allocated increased allowance for credit loss provisions to the commercial business loan portfolio class for the six months ended June 30, 2023, due primarily to changes in qualitative factors in this portfolio class.
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 65 - Loans Receivable, Net and Allowance for LoanCredit Losses (Continued)
Following is a summary, by loan portfolio class, of changes in the allowance for loam losses for the year ended December 31, 2022 and recorded investment in loans receivable based on impairment evaluation as of December 31, 2022 (in thousands):
December 31, 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 | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 73 | $ | 292 | $ | 249 | $ | 2,475 | $ | 119 | $ | 29 | $ | 1,625 | $ | 400 | $ | 5,262 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | (59 | ) | - | (59 | ) | |||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | 50 | 3 | 202 | 1,275 | 185 | 4 | 856 | (100 | ) | 2,475 | ||||||||||||||||||||||||||
Ending balance | $ | 123 | $ | 295 | $ | 451 | $ | 3,750 | $ | 304 | $ | 33 | $ | 2,422 | $ | 300 | $ | 7,678 | ||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Ending balance evaluated for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | - | $ | - | $ | 118 | $ | - | $ | - | $ | 97 | $ | - | $ | 215 | ||||||||||||||||||
Collectively | $ | 123 | $ | 295 | $ | 451 | $ | 3,632 | $ | 304 | $ | 33 | 2,325 | $ | 300 | $ | 7,463 | |||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 18,070 | $ | 39,315 | $ | 46,909 | $ | 333,540 | $ | 28,938 | $ | 4,918 | $ | 159,071 | $ | 630,761 | ||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Ending balance evaluated for impairment: | ||||||||||||||||||||||||||||||||||||
Individually | $ | - | $ | 7 | $ | 1,708 | $ | 263 | $ | - | $ | - | $ | 97 | $ | 2,075 | ||||||||||||||||||||
Collectively | $ | 18,070 | $ | 39,308 | $ | 45,201 | $ | 333,277 | $ | 28,938 | $ | 4,918 | $ | 158,974 | $ | 628,686 |
The Company allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the year ended December 31, 2022, due primarily to changes in qualitative and quantitative factors in this portfolio class. The Company allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the year ended December 31, 2022, due primarily to changes in quantitative factors in this portfolio class. The Company allocated increased allowance for loan loss provisions to the multi-family loan portfolio class for the year ended December 31, 2022, due primarily to changes in qualitative and quantitative factors in this portfolio class.
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 65 - Loans Receivable, Net and Allowance for LoanCredit Losses (Continued)
Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the three and ninesix months ended SeptemberJune 30, 2017 2022 and recorded investment in loans receivable as of SeptemberJune 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 |
June 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 June 30, 2022 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 99 | $ | 305 | $ | 464 | $ | 2,637 | $ | 132 | $ | 28 | $ | 1,876 | $ | 400 | $ | 5,941 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | 5 | (29 | ) | (87 | ) | 746 | 151 | 4 | (141 | ) | (50 | ) | 599 | |||||||||||||||||||||||
Ending balance | $ | 104 | $ | 276 | $ | 377 | $ | 3,383 | $ | 283 | $ | 32 | $ | 1,735 | $ | 350 | $ | 6,540 | ||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 73 | $ | 292 | $ | 249 | $ | 2,475 | $ | 119 | $ | 29 | $ | 1,625 | $ | 400 | $ | 5,262 | ||||||||||||||||||
Charge-offs | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Recoveries | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
Provision | 31 | (16 | ) | 128 | 908 | 164 | 3 | 110 | (50 | ) | 1,278 | |||||||||||||||||||||||||
Ending balance | $ | 104 | $ | 276 | $ | 377 | $ | 3,383 | $ | 283 | $ | 32 | $ | 1,735 | $ | 350 | $ | 6,540 |
The Bank allocated increased allowance for loan loss provisions to the 1-4 family residential non-owner occupied portfolio class for the three and nine months ended September 30, 2017, due primarily to charge-offs in this portfolio class. The BankCompany allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the three and ninesix months ended SeptemberJune 30, 2017, 2022, due primarily to increased balances and delinquencieschanges in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the commercial business portfolio class for the three and nine months ended September 30, 2017, due primarily to increased balances and changes to qualitativequantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the multi-family residential portfolio class for the nine months ended September 30, 2017, due primarily to increased balances in this portfolio class. The Bank allocated decreased allowance for loan loss provisions to the home equity portfolio class for the three and nine months ended September 30, 2017, due primarily to decreased balances and delinquencies in this portfolio class.
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 | ||||||||||||||||||
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 65 - Loans Receivable, Net and Allowance for LoanCredit 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 by the classes of the loan portfolio summarized by the past due status as of SeptemberJune 30, 2017 and December 31, 2016 (in2023 (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 |
June 30, 2023 | ||||||||||||||||
30-89 Days Past Due | 90 Days or More Past Due | Current | Total Loans Receivable | |||||||||||||
One-to-four family residential owner occupied | $ | 403 | $ | - | $ | 17,224 | $ | 17,627 | ||||||||
One-to-four family residential non-owner occupied | 132 | - | 36,659 | 36,791 | ||||||||||||
Multi-family residential | - | 73 | 48,583 | 48,656 | ||||||||||||
Commercial real estate | 1,708 | - | 340,938 | 342,646 | ||||||||||||
Construction | 2,127 | - | 33,493 | 35,620 | ||||||||||||
Home equity | 38 | - | 5,203 | 5,241 | ||||||||||||
Commercial business | 2,004 | - | 146,523 | 148,527 | ||||||||||||
Other consumer | - | - | 13 | 13 | ||||||||||||
Total | $ | 6,412 | $ | 73 | $ | 628,636 | $ | 635,121 |
December 31, 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 | $ | 407 | $ | - | $ | 407 | $ | 17,663 | $ | 18,070 | $ | - | ||||||||||||
One-to-four family residential non-owner occupied | 23 | - | 23 | 39,292 | 39,315 | - | ||||||||||||||||||
Multi-family residential | - | 1,708 | 1,708 | 45,201 | 46,909 | - | ||||||||||||||||||
Commercial real estate | 2,895 | 134 | 3,029 | 330,511 | 333,540 | - | ||||||||||||||||||
Construction | 2,062 | - | 2,062 | 26,876 | 28,938 | - | ||||||||||||||||||
Home equity | 39 | - | 39 | 4,879 | 4,918 | - | ||||||||||||||||||
Commercial business | 10 | 97 | 107 | 158,962 | 159,069 | 51 | ||||||||||||||||||
Other consumer | - | - | - | 2 | 2 | - | ||||||||||||||||||
Total | $ | 5,436 | $ | 1,939 | $ | 7,375 | $ | 623,386 | $ | 630,761 | $ | 51 |
Non-performing loans, which consist of non-accruing loans plus accruing loans 90 days or more past due, amounted to $3.5 million $73,000 at June 30, 2023 and $1.9$2.0 million at September 30, 2017 and December 31, 2016, respectively. 2022. 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.
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 |
24 |
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 SeptemberJune 30, 2017 2023 was $428,000$150,000, which is net of accumulated amortization of $57,000.$335,000. Amortization expense for the three and ninesix months ended SeptemberJune 30, 20172023 and 2022 amounted to $13,000approximately $12,000 and $37,000,$24,000, respectively.
Note 8 7– 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 |
June 30, 2023 | December 31, 2022 | |||||||
Non-interest bearing checking accounts(1) | $ | 123,400 | $ | 88,728 | ||||
Savings accounts | 1,379 | 1,597 | ||||||
Money market accounts(2) | 229,509 | 260,972 | ||||||
Certificates of deposit | 219,110 | 197,951 | ||||||
Total deposits | $ | 573,398 | $ | 549,248 |
The Company has identified one major non-interest bearing checking account deposit customer that accounted for approximately 12.2% and 5.3% of total deposits at June 30, 2023 and December 31, 2022, respectively. At June 30, 2023 and December 31, 2022, the combined outstanding balances of the major deposit customer’s non-interest bearing checking account totaled approximately $70.1 million and $29.2 million, respectively. | ||
The Company has identified one major money market deposit customer that accounted for approximately 26.2% and 27.3% of total deposits at June 30, 2023 and December 31, 2022, respectively. At both June 30, 2023 and December 31, 2022, the combined outstanding balances of the major deposit customer’s money market accounts totaled approximately $150.0 million. |
Note 9 8– Borrowings
Federal Home Loan Bank ("FHLB") advances consist of the following at SeptemberJune 30, 2017 2023 and December 31, 20162022 (in thousands):
June 30, 2023 | December 31, 2022 | |||||||||||||||
Amount | Weighted Interest | Amount | Weighted Interest | |||||||||||||
Short-term borrowings | $ | 72,000 | 5.39 | % | $ | 93,200 | 4.45 | % | ||||||||
Fixed rate borrowings maturing: | ||||||||||||||||
2023 | 13,000 | 2.38 | 57,000 | 2.22 | ||||||||||||
2024 | 21,167 | 4.25 | 6,167 | 2.05 | ||||||||||||
2025 | 7,855 | 3.40 | 2,855 | 1.25 | ||||||||||||
Total FHLB long-term debt | $ | 42,022 | 3.51 | % | $ | 66,022 | 2.16 | % |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 8– Borrowings (Continued)
FHLB borrowings decreased $45.2 million, or 28.4%, to $114.0 million at June 30, 2023 from $159.2 million at December 31, 2022. During the six months ended June 30, 2023, the Company borrowed $20.0 million of FHLB long-term borrowings. During the six months ended June 30, 2023, the Company paid down $21.2 million of FHLB short-term borrowings and $44.0 million of FHLB long-term borrowings. Federal Reserve Bank (FRB) borrowings decreased $7.0 million, or 100.0%, to none at June 30, 2023 as the Company paid off the $7.0 million of FRB borrowings at December 31, 2022.
On December 27, 2018, the Company issued $8.0 million in subordinated notes. These notes have a maturity date of December 31, 2028, and bear interest at a fixed rate of 6.50% for the firstfive years of their term and a floating rate for the remaining five years. The Company may, at its option, at any time on an interest payment date on or after December 31, 2023, redeem the notes, in whole or in part, at par plus accrued interest to the date of redemption.
On March 2, 2023, the Company issued $12.0 million in aggregate principal amount of fixed rate subordinated notes due March 15, 2025 (the “Notes”) to certain qualified institutional buyers. On March 16, 2023, the Company issued an additional $2.0 million in aggregate principal amount of subordinated debt to certain accredited investors under the same terms. The Notes bear interest at a fixed annual rate of 8.50%, payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2023. The Notes’ maturity date is March 15, 2025. The Company is entitled to redeem the Notes, in whole or in part, on or after March 15, 2024, and to redeem the Notes at any time in whole upon certain other events, at a redemption price equal to 100% of the outstanding principal amount of the Notes to be redeemed plus any accrued and unpaid interest to, but excluding, the redemption date.
The balance of subordinated debt, net of unamortized debt issuance costs, was $21.8 million at June 30, 2023 and $8.0 million at December 31, 2022.
Other short-term borrowings increased $4.2 million, or 76.0%, to $9.7 million at June 30, 2023 from $5.5 million at December 31, 2022. Other borrowings represent outstanding balances on two lines of credit that Oakmont Capital Holdings, LLC has with a credit union which are used to fund equipment loans. Detail regarding the two lines of credit as of June 30, 2023 is below (in thousands):
Borrowing Capacity | Borrowings at June 30, 2023 | Rate at June 30, 2023 | Borrowing Capacity | Borrowings at December 31, 2022 | Rate at December 31, 2023 | |||||||||||||||||||
Line of Credit A | $ | 9,000 | $ | 5,996 | 8.25 | % | $ | 9,000 | $ | - | 7.00 | % | ||||||||||||
Line of Credit B | 6,000 | 3,663 | 8.75 | % | 6,000 | 5,489 | 7.50 | % | ||||||||||||||||
Total | $ | 15,000 | $ | 9,659 | $ | 15,000 | $ | 5,489 |
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 | % |
Note 10 9– 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's then outstanding common stock in the open market during 2007. The Bank makesmay make cash contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to make the required loan payments to the Company. The loan bears an interest rate of 7.75% per annum, with principal and interest to be paid quarterly in equal installments over 15 years. The loan is secured by the unallocated shares of common stock held by the ESOP.
During the ratiosix months ended June 30, 2023, the Company did not make a discretionary contribution of each such participant's base compensationshares to the total base compensationESOP and no expense was recognized.
During the second quarter of eligible plan participants. As the unearned shares are committed to be released and allocated among participants,2022, the Company recognizes compensation expense equalmade a discretionary contribution of 4,000 shares to the average market valueESOP. These shares were released from Treasury Stock at a cost of approximately $84,000. During both the shares,three and the shares become outstanding for earnings per share computations. During the three and ninesix months ended SeptemberJune 30, 2017, 2022, the Company recognized $46,000 and $138,000$91,000 of ESOP expense, respectively. During the three and nine months ended September 30, 2016, the Company recognized $43,000 and $129,000 of ESOP expense, respectively.expense.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 9– Stock Compensation Plans (Continued)
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. . The 2013 Stock Incentive Plan terminated on March 13, 2023, however the outstanding unvested shares awards as of such date remained outstanding for the remainder of their original five-year vesting term which ended May 9, 2023.
In order to fund the RRP, the 2008 Recognition and Retention Plan Trust acquired 111,090 shares of the Company's stock in the open market at an average price of $4.68 totaling $520,000. 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%, may be restricted stock awards, for a balance of 116,250 stock options assuming all the restricted shares are awarded.
In May 2023, the shareholders of Quaint Oak Bancorp approved the adoption of the shares may be granted as restricted stock awards.
As of June 30, 2023 a total of 45,000 share awards were unvested under the RRP2018 and2023 Stock Incentive Plan and up to 21,96810,500 share awards were available for future grant under the 2023Stock Incentive Plan and none under the RRP.2018 Stock Incentive Plan. The RRP2018 and2023 Stock Incentive Plan share awards have vesting periods of five years.
A summary of the status of the share awardsaward activity under the RRPCompany’s 2018 and2023 Stock Incentive PlanPlans as of SeptemberJune 30, 2017 2023 and 20162022 and changes during the ninesix months ended SeptemberJune 30, 2017 2023 and 20162022 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 |
June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
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 | 9,122 | $ | 13.30 | 18,845 | $ | 13.30 | ||||||||||
Granted | 45,000 | 18.00 | - | - | ||||||||||||
Vested | (9,122 | ) | 13.30 | (9,123 | ) | 13.30 | ||||||||||
Forfeited | - | - | (600 | ) | 13.30 | |||||||||||
Unvested at the end of the period | 45,000 | $ | 18.00 | 9,122 | $ | 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 the three and nine months ended SeptemberJune 30, 2017and 2016,2023 and 2022, the Company recognized approximately $21,000$43,000 and $63,000 in$31,000 of compensation expense, wasrespectively. During the three months ended June 30, 2023 and 2022, the Company recognized respectively. Aa tax benefit of approximately $9,000 and $7,000, respectively. During the six months ended June 30, 2023 and $21,000, respectively, was2022, the Company recognized during eachapproximately $74,000 and $62,000 of these periods.compensation expense, respectively. During the six months ended June 30, 2023 and 2022, the Company recognized a tax benefit of approximately $15,000 and $13,000, respectively. As of SeptemberJune 30, 2017, 2023, approximately $52,000$790,000 in additional compensation expense will be recognized over the remaining service period of approximately 0.64.9 years.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 9– Stock Compensation Plans (Continued)
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 remained valid and existing for the remainder of their 10 year terms, which expired May 8, 2023. 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 Plan2018 and the2023 Stock Incentive PlanPlans are intended to comply with the requirements of Section 422 of the Internal Revenue Code.
As of SeptemberJune 30, 2017, 2023, a total of 277,548255,136 grants of stock options were outstanding under the Option Plan and 2018 and 2023Stock Incentive PlanPlans and 56,27636,000 stock options were available for future grant under the 2023Stock 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.
During the
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 |
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 11 9– Stock Compensation Plans (Continued)
Stock Option and Stock Incentive Plans – Stock Options
A summary of option activity under the Company’s Option Plan and 2013,2018 and 2023 Stock Incentive Plans as of June 30, 2023 and 2022 and changes during the six months ended June 30, 2023 and 2022 is as follows:
June 30, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
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 | 195,936 | $ | 11.24 | 3.5 | 233,136 | $ | 10.96 | 4.2 | ||||||||||||||||
Granted | 132,500 | 18.00 | 9.9 | - | - | - | ||||||||||||||||||
Exercised | (73,300 | ) | 8.10 | - | (17,000 | ) | 8.71 | - | ||||||||||||||||
Forfeited | - | - | - | (2,000 | ) | 13.30 | - | |||||||||||||||||
Outstanding at end of period | 255,136 | $ | 15.65 | 7.8 | 214,136 | $ | 11.12 | 3.9 | ||||||||||||||||
Exercisable at end of period | 122,636 | $ | 13.30 | 4.9 | 183,209 | $ | 10.79 | 6.0 |
Note 10– 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:
Quoted prices are available in active markets for identical assets or liabilities as of the reported date. | ||
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.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 10– Fair Value Measurements and Fair Values of Financial Instruments (Continued)
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 2022 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.
Non-Performing Loans:
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 SeptemberJune 30, 2017 (in2023 (in thousands):
| June 30, 2023 | |||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||
Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | |||||||||||||
Recurring fair value measurements: | ||||||||||||||||
Investment securities available for sale | ||||||||||||||||
Government National Mortgage Association mortgage-backed securities | $ | 2,566 | $ | - | $ | 2,566 | $ | - | ||||||||
Federal National Mortgage Association mortgage- backed securities | 90 | - | 90 | - | ||||||||||||
Total investment securities available for sale | $ | 2,656 | $ | - | $ | 2,656 | $ | - | ||||||||
Total recurring fair value measurements | $ | 2,656 | $ | - | $ | 2,656 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Collateral-dependent loans | $ | 73 | $ | - | $ | - | $ | 73 | ||||||||
Total nonrecurring fair value measurements | $ | 73 | $ | - | $ | - | $ | 73 |
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 | ||||||||||||
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 10– 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 December 31, 2016 (in2022 (in thousands):
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 | ||||||||||||
| December 31, 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 | $ | 2,871 | $ | - | $ | 2,871 | $ | - | ||||||||
Federal National Mortgage Association mortgage- backed securities | 99 | - | 99 | - | ||||||||||||
Total investment securities available for sale | $ | 2,970 | $ | - | $ | 2,970 | $ | - | ||||||||
Total recurring fair value measurements | $ | 2,970 | $ | - | $ | 2,970 | $ | - | ||||||||
Nonrecurring fair value measurements | ||||||||||||||||
Impaired loans | $ | 1,860 | $ | - | $ | - | $ | 1,860 | ||||||||
Total nonrecurring fair value measurements | $ | 1,860 | $ | - | $ | - | $ | 1,860 |
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 SeptemberJune 30, 2017 2023 and December 31, 2016 (in2022 (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 | %) |
| June 30, 2023 | ||||||||||
Quantitative Information About Level 3 Fair Value Measurements | |||||||||||
Total Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | ||||||||
Collateral-dependent loans | $ | 73 | Appraisal of collateral (1) | Appraisal adjustments (2) | 8% | (8%) |
| December 31, 2022 | |||||||||
Quantitative Information About Level 3 Fair Value Measurements | ||||||||||
Total Fair Value | Valuation Techniques | Unobservable Input | Range (Weighted Average) | |||||||
Impaired loans | $ | 1,860 | Appraisal of collateral (1) | Appraisal adjustments (2) | 10% | (10%) |
________________
(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. |
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 10– 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 | - | - |
The following methods and assumptions were used to measure the fair value of financial instruments recorded at cost on the Company's consolidated balance sheets:
Fair Value Measurements at | ||||||||||||||||||||
June 30, 2023 | ||||||||||||||||||||
Carrying Amount | Fair Value Estimate | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||
Financial Assets | ||||||||||||||||||||
Investment in interest-earning time deposits | $ | 2,162 | $ | 2,235 | $ | - | $ | - | $ | 2,235 | ||||||||||
Loans held for sale | 115,697 | 117,703 | - | 117,703 | - | |||||||||||||||
Loans receivable, net | 626,767 | 610,883 | - | - | 610,883 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 573,398 | 572,360 | 354,288 | - | 218,072 | |||||||||||||||
FHLB long-term borrowings | 42,022 | 41,918 | - | - | 41,918 | |||||||||||||||
Subordinated debt | 21,811 | 20,045 | - | - | 20,045 |
Fair Value Measurements at | ||||||||||||||||||||
December 31, 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 | $ | 3,833 | $ | 3,907 | $ | - | $ | - | $ | 3,907 | ||||||||||
Loans held for sale | 133,222 | 137,253 | - | 137,253 | - | |||||||||||||||
Loans receivable, net | 621,864 | 600,186 | - | - | 600,186 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | 549,248 | 551,157 | 351,297 | - | 199,860 | |||||||||||||||
FHLB long-term borrowings | 66,022 | 65,846 | - | - | 65,846 | |||||||||||||||
FRB long-term borrowings | 7,000 | 6,981 | - | - | 6,981 | |||||||||||||||
Subordinated debt | 7,966 | 7,886 | - | - | 7,886 |
For cash flow methodology. The discount rates take into accountand cash equivalents, accrued interest rates currently being offered to customersreceivable, investment in FHLB stock, bank-owned life insurance, FHLB short-term borrowings, other short-term borrowings, accrued interest payable, and advances from borrowers for loans with similar terms,taxes and insurance, the credit risk associated with the loan and market factors, including liquidity. The valuation of the loan portfolio reflects discounts that the Company believes are consistent with transactions occurring in the market place for both performing and distressed loan types. The carrying value that fair value is compared to is net of the allowance for loan losses and other associated premiums and discounts. Due to the significant judgment involved in evaluating credit quality, loans are classified with Level 3a reasonable estimate of the fair value hierarchy.
Note 11– Operating Segments
The Company's operations currently consist of two 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.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 11– Operating Segments (Continued)
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 difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses. The provision for credit losses is almost entirely dependent on changes in the Banking Segment's loan and investment portfolio and management’s assessment of the collectability of the loan and investment portfolio as well as prevailing economic and market conditions. The profitability of this segment’s operations also depends on the generation of non-interest income which includes fees and commissions generated by Quaint Oak Bank and its wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, which are included in the Banking Segment for segment reporting purposes. The Banking Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of depositors and other customers, federal deposit insurance funds and the banking system as a whole. These laws and regulations govern such areas as capital, permissible activities, allowance for loan and lease losses, loans and investments, and rates of interest that can be charged on loans. For segment reporting purposes, Quaint Oak Bancorp, Inc. is included as part of the Company’s Banking segment.
The Oakmont Capital Holdings, LLC Segment originates equipment loans which are generally sold to third party institutions with the loans’ servicing rights retained. The profitability of this segment’s operations depends primarily on the gains realized from the sale of loans, processing fees, and service fees. The Bank reflects the 49% interest it does not hold in the Oakmont Capital Holdings, LLC Segment in its consolidated financial statements as noncontrolling interest. The Oakmont Capital Holdings, LLC Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of commercial customers.
Quaint Oak Bancorp, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 11– Operating Segments (Continued)
The following table presents summary financial information for the reportable segments (in thousands):
As of or for the Three Months Ended June 30, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | |||||||||||||||||||
Net Interest Income (Loss) | $ | 5,679 | $ | (377 | ) | $ | 5,302 | $ | 5,894 | $ | (84 | ) | $ | 5,810 | ||||||||||
(Recovery of) Provision for Credit Losses | (189 | ) | - | (189 | ) | 599 | - | 599 | ||||||||||||||||
Net Interest Income (Loss) after (Recovery of) Provision for Credit Losses | 5,868 | (377 | ) | 5,491 | 5,295 | (84 | ) | 5,211 | ||||||||||||||||
Non-Interest Income | ||||||||||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 126 | 440 | 566 | 223 | 601 | 824 | ||||||||||||||||||
Real estate sales commissions, net | 48 | - | 48 | 64 | - | 64 | ||||||||||||||||||
Insurance commissions | 160 | - | 160 | 139 | - | 139 | ||||||||||||||||||
Other fees and services charges | 43 | 169 | 212 | 15 | 67 | 82 | ||||||||||||||||||
Net loan servicing income | 2 | 1,121 | 1,123 | - | 308 | 308 | ||||||||||||||||||
Income from bank-owned life insurance | 25 | - | 25 | 22 | - | 22 | ||||||||||||||||||
Net gain on loans held for sale | 437 | 636 | 1,073 | 899 | 1,959 | 2,858 | ||||||||||||||||||
Gain on the sale of SBA loans | 201 | - | 201 | 34 | - | 34 | ||||||||||||||||||
Total Non-Interest Income | 1,042 | 2,366 | 3,408 | 1,396 | 2,935 | 4,331 | ||||||||||||||||||
Non-Interest Expense | ||||||||||||||||||||||||
Salaries and employee benefits | 3,548 | 1,980 | 5,528 | 3,429 | 1,462 | 4,891 | ||||||||||||||||||
Directors’ fees and expenses | 102 | - | 102 | 72 | - | 72 | ||||||||||||||||||
Occupancy and equipment | 350 | 211 | 561 | 343 | 123 | 466 | ||||||||||||||||||
Data processing | 208 | - | 208 | 163 | - | 163 | ||||||||||||||||||
Professional fees | 193 | 32 | 225 | 214 | 14 | 228 | ||||||||||||||||||
FDIC deposit insurance assessment | 240 | - | 240 | 113 | - | 113 | ||||||||||||||||||
Advertising | 82 | 55 | 137 | 84 | 70 | 154 | ||||||||||||||||||
Amortization of other intangible | 12 | - | 12 | 12 | - | 12 | ||||||||||||||||||
Other | 1,015 | 333 | 1,348 | 379 | 111 | 490 | ||||||||||||||||||
Total Non-Interest Expense | 5,750 | 2,611 | 8,361 | 4,809 | 1,780 | 6,589 | ||||||||||||||||||
Pretax Segment Profit (Loss) | $ | 1,160 | $ | (622 | ) | $ | 538 | $ | 1,882 | $ | 1,071 | $ | 2,953 | |||||||||||
Net (Loss) Income Attributable to Noncontrolling Interest | $ | (305 | ) | $ | - | $ | (305 | ) | $ | 525 | $ | - | $ | 525 | ||||||||||
Segment Assets | $ | 743,969 | $ | 39,826 | $ | 783,795 | $ | 730,244 | $ | 21,678 | $ | 751,922 |
(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 11– Operating Segments (Continued)
The following table presents summary financial information for the reportable segments (in thousands):
As of or for the Six Months Ended June 30, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | Quaint Oak Bank(1) | Oakmont Capital Holdings, LLC | Consolidated | |||||||||||||||||||
Net Interest Income (Loss) | $ | 11,275 | $ | (664 | ) | $ | 10,611 | $ | 11,395 | $ | (108 | ) | $ | 11,287 | ||||||||||
Provision for Credit Losses | 203 | - | 203 | 1,278 | - | 1,278 | ||||||||||||||||||
Net Interest Income (Loss) after Provision for Credit Losses | 11,072 | (664 | ) | 10,408 | 10,117 | (108 | ) | 10,009 | ||||||||||||||||
Non-Interest Income | ||||||||||||||||||||||||
Mortgage banking, equipment lending and title abstract fees | 263 | 1,109 | 1,372 | 427 | 1,034 | 1,461 | ||||||||||||||||||
Real estate sales commissions, net | 72 | - | 72 | 125 | - | 125 | ||||||||||||||||||
Insurance commissions | 296 | - | 296 | 255 | - | 255 | ||||||||||||||||||
Other fees and services charges | 142 | 301 | 443 | 164 | 84 | 248 | ||||||||||||||||||
Net loan servicing income | 145 | 2,207 | 2,352 | 5 | 469 | 474 | ||||||||||||||||||
Income from bank-owned life insurance | 49 | - | 49 | 43 | - | 43 | ||||||||||||||||||
Net gain on loans held for sale | 828 | 1,125 | 1,953 | 1,938 | 5,130 | 7,068 | ||||||||||||||||||
Gain on the sale of SBA loans | 251 | - | 251 | 167 | - | 167 | ||||||||||||||||||
Total Non-Interest Income | 2,046 | 4,742 | 6,788 | 3,124 | 6,717 | 9,841 | ||||||||||||||||||
Non-Interest Expense | ||||||||||||||||||||||||
Salaries and employee benefits | 7,124 | 3,746 | 10,870 | 6,666 | 2,816 | 9,482 | ||||||||||||||||||
Directors’ fees and expenses | 207 | - | 207 | 143 | - | 143 | ||||||||||||||||||
Occupancy and equipment | 692 | 396 | 1,088 | 651 | 235 | 886 | ||||||||||||||||||
Data processing | 425 | - | 425 | 360 | - | 360 | ||||||||||||||||||
Professional fees | 341 | 59 | 400 | 385 | 27 | 412 | ||||||||||||||||||
FDIC deposit insurance assessment | 472 | - | 472 | 229 | - | 229 | ||||||||||||||||||
Advertising | 166 | 270 | 436 | 170 | 192 | 362 | ||||||||||||||||||
Amortization of other intangible | 24 | - | 24 | 24 | - | 24 | ||||||||||||||||||
Other | 1,607 | 462 | 2,069 | 678 | 195 | 873 | ||||||||||||||||||
Total Non-Interest Expense | 11,058 | 4,933 | 15,991 | 9,306 | 3,465 | 12,771 | ||||||||||||||||||
Pretax Segment Profit (Loss) | $ | 2,060 | $ | (855 | ) | $ | 1,205 | $ | 3,935 | $ | 3,144 | $ | 7,079 | |||||||||||
Net (Loss) Income Attributable to Noncontrolling Interest | $ | (419 | ) | $ | - | $ | (419 | ) | $ | 1,541 | $ | - | $ | 1,541 | ||||||||||
Segment Assets | $ | 743,969 | $ | 39,826 | $ | 783,795 | $ | 730,244 | $ | 21,678 | $ | 751,922 |
(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. |
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 credit losses; (3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in which the Company is or will be awaredoing business, being less favorable than expected; (6) political and social unrest, including acts of war or terrorism; or (7) legislation or changes in regulatory requirements adversely affecting the business in which the Company is or will be engaged. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that 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 and the Bank’s majority equity position in Oakmont Capital Holdings, LLC. 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 loancredit 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 SeptemberJune 30, 20172023, 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 51% 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. The discussion of financial results that follows includes the Bank’s investment in Oakmont Capital Holdings, LLC. The Bank reflects the 49% interest it does not hold in Oakmont Capital Holdings, LLC in its consolidated financial statements as noncontrolling interest. All significant intercompany balances and transactions have been eliminated.
Critical Accounting Policies
The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. 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.
During the six months ended June 30, 2023, the Company implemented new CECL accounting policies, procedures, and controls as part of losses inherent in the loan portfolio asits adoption of the balance sheet date 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,ASU No. 2016-13 and subsequent recoveries, if any, are creditedASUs issued to amend ASC Topic 326. There were no other changes made to the allowance. All,Company's internal control over financial reporting that occurred during the six months ended June 30, 2023 that materially affected, or part, of the principal balance of loans receivable are charged offreasonably likely 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 September June30, 20172023 and December 31, 2016
General
. TheCash and Cash Equivalents.
Cash and cash equivalentsInvestment in Interest-Earning Time Deposits. Deposits. Investment in interest-earning time deposits decreased $1.2$1.7 million, or 20.0%43.6%, from $6.1$3.8 million at December 31, 20162022 to $4.9$2.2 million at SeptemberJune 30, 2017 primarily due to2023 as six interest-earning time deposits matured and were not renewed and one interest-earning time deposit was purchased during the maturity and redemption of time deposits. The proceeds were used primarily to fund loans.
Investment Securities Available for Sale.
Investment securities available for sale decreasedLoans Held for Sale.
Loans held for saleLoans Receivable, Net
. Loans receivable, net, increasedDeposits. Total deposits increased $5.4$24.2 million, or 3.0%4.4%, to $182.4$573.4 million at SeptemberJune 30, 20172023 from $177.0$549.2 million at December 31, 2016.2022. This increase in deposits was primarily attributable to increasesan increase of $5.3$34.7 million, or 3.9%, in certificates of deposit and $1.9 million, or 31.8%39.1%, in non-interest bearing checking accounts, and an increase of $21.2 million, or 10.7%, in certificates of deposit. The increase in total deposits was partially offset by a $963,000,$31.5 million, or 3.1%12.1%, decrease in money market accounts, a $655,000, or 55.1%, decrease in passbook accounts, and a $200,000,$218,000, or 11.2%13.7%, decrease in savings accounts.
The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was $209.9 million, or 64.5%36.3% of total deposits at June 30, 2023.
Borrowings. FHLB borrowings decreased $45.2 million, or 28.4%, to $114.0 million at June 30, 2023 from $15.5$159.2 million at December 31, 2016 to $25.5 million at September 30, 2017.2022. During the ninesix months ended SeptemberJune 30, 2017,2023, the Company borrowed $4.5$45.5 million of FHLB short-term borrowings and $8.0$20.0 million of FHLB long-term fixed rate borrowings primarily to fund loan growth.borrowings. During the same time period,six months ended June 30, 2023, the Company repaid $2.5paid down $66.7 million of FHLB short-term borrowings and $44.0 million of FHLB long-term fixed rate borrowings.
Accrued Expenses and Other Liabilities. Accrued expenses and other liabilities increased $1.3 million, or 13.4%, to $10.9 million at June 30, 2023 from $9.6 million at December 31, 2022, due primarily to an increase in operating lease liability driven by the capitalization of leases for Oakmont in accordance with Financial Accounting Standards Board accounting standard ASU 2016-02, Leases (Topic 842). Also contributing to the increase is an increase in tax and other expense accruals.
Stockholders’ Equity. Total stockholders’ equity decreased $319,000, or 0.6%, to $48.8 million at June 30, 2023 from $49.1 million at December 31, 2022. Contributing to the increasedecrease was the noncontrolling interest distribution of $866,000, dividends paid of $568,000, net loss attributable to noncontrolling interest of $419,000, and purchase of treasury stock of $306,000, partially offset by net income for the ninesix months ended SeptemberJune 30, 20172023 of $1.3$1.1 million, commonthe reissuance of treasury stock earned by participants in the employeefor exercised stock ownership planoptions of $138,000,$529,000, amortization of stock awards and options under our stock compensation plans of $97,000, the reissuance of treasury stock for exercised stock options of $193,000,$104,000, the reissuance of treasury stock under the Bank'sBank’s 401(k) Plan of $83,000,$66,000, and other comprehensive income, net of $37,000. These increases were partially offset by the purchase of treasury stock of $341,000 and by dividends paid of $269,000.$8,000.
Comparison of Operating Results for the Three Months Ended SeptemberJune 30, 20172023 and 2016
General.
Net income amounted toNet Interest Income.
Net interest incomeInterest Income.
Interest Income. The $4.8 million, or 65.8%, increase in interest income was primarily due to a $37.0$192.5 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of $161.8$590.4 million for the three months ended SeptemberJune 30, 20162022 to an average balance of $198.8$782.9 million for the three months ended SeptemberJune 30, 2017,2023, and had the effect of increasing interest income $505,000. Partially offsetting this$2.3 million. Also contributing to the increase in interest income was a 28119 basis point declineincrease in the average yield on average loans receivable, net, including loans held for sale, which increased from 5.47%4.88% for the three months ended SeptemberJune 30, 20162022 to 5.19%6.06% for the three months ended SeptemberJune 30, 2017, which had the effect of decreasing interest income by $142,000.
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 June 30, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Due from banks, interest-bearing | $ | 5,834 | $ | 66 | 4.53 | % | $ | 50,148 | $ | 42 | 0.33 | % | ||||||||||||
Investment in interest-earning time deposits | 2,646 | 34 | 5.14 | 7,071 | 28 | 1.58 | ||||||||||||||||||
Investment securities available for sale | 2,775 | 38 | 5.48 | 3,682 | 8 | 0.76 | ||||||||||||||||||
Loans receivable, net (1) (2) | 782,855 | 11,852 | 6.06 | 590,403 | 7,200 | 4.88 | ||||||||||||||||||
Investment in FHLB stock | 6,512 | 128 | 7.86 | 4,442 | 30 | 2.70 | ||||||||||||||||||
Total interest-earning assets | 800,622 | 12,118 | 6.05 | % | 655,746 | 7,308 | 4.46 | % | ||||||||||||||||
Non-interest-earning assets | 21,438 | 20,231 | ||||||||||||||||||||||
Total assets | $ | 822,060 | $ | 675,977 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Savings accounts | $ | 1,418 | $ | 1 | 0.28 | % | $ | 1,553 | $ | 1 | 0.26 | % | ||||||||||||
Money market accounts | 234,834 | 2,407 | 4.10 | 255,129 | 476 | 0.75 | ||||||||||||||||||
Certificate of deposit accounts | 218,163 | 1,575 | 2.89 | 185,086 | 430 | 0.93 | ||||||||||||||||||
Total deposits | 454,415 | 3,983 | 3.51 | 441,768 | 907 | 0.82 | ||||||||||||||||||
FHLB short-term borrowings | 109,890 | 1,500 | 5.46 | 19,722 | 53 | 1.07 | ||||||||||||||||||
FHLB long-term borrowings | 44,418 | 354 | 3.20 | 79,061 | 389 | 1.97 | ||||||||||||||||||
FRB long-term borrowings | 756 | 9 | 4.76 | 1,656 | 1 | 0.24 | ||||||||||||||||||
Other short-term borrowings | 13,324 | 582 | 17.44 | 458 | 18 | 15.72 | ||||||||||||||||||
Subordinated debt | 21,772 | 388 | 7.13 | 7,944 | 130 | 6.55 | ||||||||||||||||||
Total interest-bearing liabilities | 644,575 | 6,816 | 4.23 | % | 550,609 | 1,498 | 1.09 | % | ||||||||||||||||
Non-interest-bearing liabilities | 131,709 | 86,895 | ||||||||||||||||||||||
Total liabilities | 776,284 | 637,504 | ||||||||||||||||||||||
Stockholders’ Equity | 45,776 | 38,473 | ||||||||||||||||||||||
Total liabilities and Stockholders’ Equity | $ | 822,060 | $ | 675,977 | ||||||||||||||||||||
Net interest-earning assets | $ | 156,047 | $ | 105,137 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 5,302 | 1.82 | % | $ | 5,810 | 3.37 | % | ||||||||||||||||
Net interest margin (3) | 2.65 | % | 3.54 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 124.21 | % | 119.09 | % |
________________________
(1) Includes loans held for sale.
(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses.
(3) Equals net interest income divided by average interest-earning assets.
Provision for LoanCredit Losses.
Non-performing loans at SeptemberJune 30, 2017.
Non-Interest Income.
Non-interest incomeNon-Interest Expense.
Provision for Income Tax.
The provision for income taxComparison of Operating Results for the NineSix Months Ended SeptemberJune 30, 20172023 and 2016
General.
Net income amounted toNet Interest Income. Net interest income increased $731,000,decreased $676,000, or 15.0%,6.0% to $5.6$10.6 million for the ninesix months ended SeptemberJune 30, 20172023 from $4.9$11.3 million for the ninesix months ended SeptemberJune 30, 2016 due primarily to2022. The decrease was driven by a $1.1$9.9 million, or 15.6%414.8%, increase in interest income,expense, partially offset by a $320,000,$9.3 million, or 17.1%67.6%, increase in interest expense.
Interest Income.
Interest Income. The $9.3 million, or 67.6%, increase in interest income was primarily due to a $34.1$213.1 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of $155.4$559.3 million for the ninesix months ended SeptemberJune 30, 20162022 to an average balance of $189.5$772.4 million for the ninesix months ended SeptemberJune 30, 2017,2023, and had the effect of increasing interest income $1.4$4.9 million. Partially offsetting thisAlso contributing to the increase in interest income was a 2798 basis point declineincrease in the average yield on average loans receivable, net, including loans held for sale, from 5.57% for the nine months ended September 30, 2016 to 5.30% for the nine months ended September 30, 2017, which had the effect of decreasing interest income by $391,000.
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 | % |
Six Months Ended June 30, | ||||||||||||||||||||||||
2023 | 2022 | |||||||||||||||||||||||
Average Balance | Interest | Average Yield/ Rate | Average Balance | Interest | Average Yield/ Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Due from banks, interest-bearing | $ | 5,492 | $ | 122 | 4.44 | % | $ | 31,363 | $ | 44 | 0.28 | % | ||||||||||||
Investment in interest-earning time deposits | 2,941 | 60 | 4.08 | 7,255 | 62 | 1.71 | ||||||||||||||||||
Investment securities available for sale | 2,848 | 70 | 4.92 | 3,808 | 17 | 0.89 | ||||||||||||||||||
Loans receivable, net (1) (2) | 772,425 | 22,446 | 5.81 | 559,307 | 13,500 | 4.83 | ||||||||||||||||||
Investment in FHLB stock | 6,578 | 238 | 7.21 | 3,448 | 58 | 3.36 | ||||||||||||||||||
Total interest-earning assets | 790,284 | 22,936 | 5.80 | % | 605,181 | 13,681 | 4.52 | % | ||||||||||||||||
Non-interest-earning assets | 22,041 | 17,865 | ||||||||||||||||||||||
Total assets | $ | 812,325 | $ | 623,046 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Savings accounts | $ | 1,489 | $ | 1 | 0.13 | % | $ | 1,709 | $ | 2 | 0.24 | % | ||||||||||||
Money market accounts | 242,275 | 4,668 | 3.85 | 226,724 | 681 | 0.60 | ||||||||||||||||||
Certificate of deposit accounts | 214,072 | 2,824 | 2.64 | 184,112 | 844 | 0.92 | ||||||||||||||||||
Total deposits | 457,836 | 7,493 | 3.27 | 412,545 | 1,527 | 0.74 | ||||||||||||||||||
FHLB short-term borrowings | 108,506 | 2,800 | 5.16 | 27,656 | 75 | 0.54 | ||||||||||||||||||
FHLB long-term borrowings | 48,116 | 631 | 2.62 | 51,281 | 501 | 1.95 | ||||||||||||||||||
FRB long-term borrowings | 865 | 19 | 4.39 | 2,613 | 4 | 0.31 | ||||||||||||||||||
Other short-term borrowings | 10,477 | 778 | 14.87 | 229 | 27 | 23.58 | ||||||||||||||||||
Subordinated debt | 17,040 | 604 | 7.09 | 7,940 | 260 | 6.55 | ||||||||||||||||||
Total interest-bearing liabilities | 642,840 | 12,325 | 3.83 | % | 502,264 | 2,394 | 0.95 | % | ||||||||||||||||
Non-interest-bearing liabilities | 123,719 | 83,323 | ||||||||||||||||||||||
Total liabilities | 766,559 | 585,587 | ||||||||||||||||||||||
Stockholders’ Equity | 45,766 | 37,459 | ||||||||||||||||||||||
Total liabilities and Stockholders’ Equity | $ | 812,325 | $ | 623,046 | ||||||||||||||||||||
Net interest-earning assets | $ | 147,444 | $ | 102,917 | ||||||||||||||||||||
Net interest income; average interest rate spread | $ | 10,611 | 1.97 | % | $ | 11,287 | 3.57 | % | ||||||||||||||||
Net interest margin (3) | 2.69 | % | 3.73 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 122.94 | % | 120.49 | % |
________________________
(1) Includes loans held for sale.
(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses.
(3) Equals net interest income divided by average interest-earning assets.
Provision for LoanCredit Losses.
Non-performing loans at June 30, 2023 consisted of one SBA loan on non-accrual status in the amount of $73,000. The non-performing loan at June 30, 2023 is generally well-collateralized or adequately reserved for. During the six months ended June 30, 2023, one commercial business loan and one commercial real estate loan totaling $231,000 that were previously on non-accrual were charged-off through the allowance for credit losses. The allowance for credit losses by $17,000,as a percent of total loans receivable, net was 1.18% at June 30, 2023 and 1.22% at December 31, 2022. Non-performing assets amounted to $73,000, or 9.9%0.01% of total assets at June 30, 2023 compared to $2.0 million, or 0.25%, of total net assets at December 31, 2022.
Non-Interest Income. Non-interest income decreased $3.1 million, or 31.0%, from $172,000$9.8 million for the ninesix months ended SeptemberJune 30, 20162022 to $189,000$6.8 million for the ninesix months ended SeptemberJune 30, 2017.2023. The decrease was primarily attributable to a $5.1 million, or 72.4%, decrease in net gain on loans held for sale, as the general lack of liquidity in the marketplace affected our ability to sell equipment loans during the six months ended June 30, 2023. Also contributing to the decrease in non-interest income was an $89,000, or 6.1%, decrease in mortgage banking, equipment lending, and title abstract fees, and a $53,000, or 42.4%, decrease in real estate sales commissions, net. These decreases were partially offset by a $1.9 million, or 396.2%, increase in loan servicing income, a $195,000, or 78.6%, increase in other fees and service charges, an $84,000, or 50.3%, increase in gain on sale of SBA loans, and a $41,000, or 16.1%, increase in insurance commissions.
Non-Interest Expense. Total non-interest expense increased $3.2 million, or 25.2%, from $12.8 million for the six months ended June 30, 2022 to $16.0 million for the six months ended June 30, 2023, primarily due to a $1.4 million, or 14.6%, increase in salaries and employee benefits expense, a $1.2 million, or 137.0%, increase in other expense, a $243,000, or 106.1%, increase in FDIC deposit insurance assessment, a $202,000, or 22.8%, increase in occupancy and equipment expense, a $74,000, or 20.4%, increase in advertising expense, a $65,000, or 18.1%, increase in data processing expense, and a $64,000, or 44.8%, increase in director’s fees and expenses. As was the case for the quarter, the increase was based on an evaluationin other expense is primarily due to ongoing costs incurred as a result of the allowance relativeBank’s correspondent banking initiatives. The increase in salaries and employee benefits expense is primarily due to such factors as volumeexpanding and improving the level of staff at the loan portfolio, concentrations of credit risk, prevailing economic conditions, prior loan loss experienceBank and amount of non-performing loans. See additional discussion under "Comparison of Operating ResultsOakmont. Oakmont also contributed to the increases in occupancy and equipment expense, advertising expense, and other expense for the Three Months Ended Septembersix months ended June 30, 2017 and 2016-Provision2023. The increase in non-interest expense was partially offset by a $12,000, or 2.9% decrease in professional fees.
Provision for Loan Losses."
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 11 in the Notes to Unaudited Consolidated Financial Statements.
Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the three months ended June 30, 2023 of $1.2 million, a $722,000, or 38.4%, decrease from the same period in 20162022. This decrease in PTSP was primarily due to a $222,000,$941,000 or 17.2%19.6%, increase in non-interest expense, and a $354,000, or 25.4%, decrease in non-interest income. This decrease was partially offset by a $788,000, or 131.6%, decrease in the provision for credit losses, and a $215,000, or 3.6%, decrease in net interest income. The increase in non-interest expense was primarily due to a $636,000, or 167.8% increase in other expense, a $127,000, or 112.4%, increase in FDIC deposit insurance assessment expense, and a $119,000, or 3.5%, increase in salaries and employee benefits expense. The decrease in non-interest income is primarily attributable to a $462,000, or 51.4%, decrease in the net gain on the sales of residential mortgage loans held for sale, and a $196,000,$97,000, or 326.7% increase in insurance commissions earned by Quaint Oak Insurance Agency, a wholly owned insurance subsidiary of Quaint Oak Bank which began operations on August 1, 2016, a $78,000, or 19.1%, increase43.5% decrease in mortgage banking and title abstract fees, partially offset by a $63,000,$167,000, or 50.0%491.2%, increase in the gain on sale of SBA loans.
Our Oakmont Capital Holdings, LLC Segment reported a pre-tax segment loss ("PTSL") for the three months ended June 30, 2023 of $622,000, a $1.7 million, or 158.1%, decrease from the same period in 2022. The decrease in PTSL was primarily due to a $569,000, or 19.4%, decrease in loss on sales and write-downs on other real estate owned, a $25,000,non-interest income, an $831,000, or 69.4%46.7%, increase in other non-interest expense, and a $293,000, or 348.8%, decrease in net interest income. The decrease in non-interest income was primarily due to a $1.3 million, or 67.5%, decrease net gain on loans held for sale, and a $161,000, or 26.8%, decrease in equipment lending fees, partially offset by an $813,000, or 264.0% increase in net loan servicing income, and a $17,000,$102,000, or 53.1%152.2%, increase in other fees and services charges, partially offset byservice charges. The increase in non-interest expense was primarily due to a $60,000, or 55.6%$518,000, 35.4%, decreaseincrease in gain on the sale of SBA loans and a $2,000, or 3.0%, decrease in income from bank-owned life insurance.
Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the six months ended June 30, 2023 of $2.1 million, a $1.9 million, or 47.6%, decrease from the same period in 2022. This decrease in PTSP was primarily due to a $1.8 million, or 18.8%, increase in non-interest expense, a $1.1 million, or 34.5%, decrease in non-interest income, and a $120,000, or 1.1%, decrease in net interest income. This decrease was partially offset by a $20,000,$1.1 million, or 62.5% decrease in other real estate owned expense, a $2,000, or 0.7%84.1%, decrease in professional fees, and a $1,000, or 0.6% decrease in directors' fees and expenses.
Our Oakmont Capital Holdings, LLC Segment reported a PTSL for the exercise of non-qualified stock options during the ninesix months ended SeptemberJune 30, 2017.
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 SeptemberJune 30, 2017,2023, the Company's cash and cash equivalents amounted to $8.2$9.6 million. At such date, the Company also had $761,000$1.3 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 SeptemberJune 30, 2017,2023, Quaint Oak Bank had outstanding commitments to originate loans of $9.5$47.6 million, and commitments under unused lines of credit of $18.8 million.
At SeptemberJune 30, 2017,2023, certificates of deposit scheduled to mature in less than one year or less totaled $42.1$96.1 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 SeptemberJune 30, 2017,2023, we had $25.5$114.0 million of borrowings from the FHLB and had $114.0$323.8 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 SeptemberJune 30, 20172023 Quaint Oak Bank had $539,000$8.1 million in borrowing capacity with the Federal Reserve Bank of Philadelphia. There were no borrowings under this facility at SeptemberJune 30, 2017.
The following table summarizes the Company's primary and secondary sources of liquidity which were available at June 30, 2023 (dollars in thousands).
June 30, 2023 | ||||
(Dollars in thousands) | ||||
Cash and cash equivalents | $ | 9,587 | ||
Unpledged investment securities, amortized cost | 2,656 | |||
FHLB advance availability | 209,500 | |||
Federal Reserve discount window availability | 8,090 | |||
Total primary and secondary sources of available liquidity | $ | 229,833 |
In addition, we anticipate the continued sale on a regular basis of our equipment loans held for sale. We also anticipate that in the future our subsidiary, Oakmont Commercial LLC, will move from an increaseoriginate and hold (i.e., portfolio) commercial real estate lending operation to an originate and sell model of $1.2operations.
Total stockholders’ equity decreased $319,000, or 0.6%, to $48.8 million or 5.9%,at June 30, 2023 from $20.8$49.1 million at December 31, 2016.2022. Contributing to the increasedecrease was the noncontrolling interest distribution of $866,000, dividends paid of $568,000, net loss attributable to noncontrolling interest of $419,000, and purchase of treasury stock of $306,000, partially offset by net income for the ninesix months ended SeptemberJune 30, 20172023 of $1.3$1.1 million, commonthe reissuance of treasury stock earned by participants in the employeefor exercised stock ownership planoptions of $138,000,$529,000, amortization of stock awards and options under our stock compensation plans of $97,000, the reissuance of treasury stock for exercised stock options of $193,000,$104,000, the reissuance of treasury stock under the Bank'sBank’s 401(k) Plan of $83,000,$66,000, and other comprehensive income, net of $37,000. These increases were partially offset by the purchase of treasury stock of $341,000 and by dividends paid of $269,000.$8,000. For further discussion of the stock compensation plans, see Note 109 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 SeptemberJune 30, 2017,2023, Quaint Oak Bank exceeded each of its capital requirements with ratios of 8.61%8.43%, 11.72%9.63%, 11.72%9.63% and 12.77%10.73%, 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.
AtImpact 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 SeptemberJune 30, 2017.2023. 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.
During the period ended June 30, 2023, the Company implemented new CECL accounting policies, procedures, and controls as part of its adoption of ASU No. 2016-13 and subsequent ASUs issued to amend ASC Topic 326. There were no other changes made to the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934)that occurred during the third fiscal quarter of fiscal 2017period ended June 30, 2023 that has materially affected, or isare reasonably likely to materially affect, ourthe Company's internal control over financial reporting.
PART II
ITEM 1. | LEGAL PROCEEDINGS |
The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company.
ITEM 1A. | RISK FACTORS |
There have been no material changes in the Risk Factors previously disclosed in Item 1A of our 2022 Form 10-K.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF |
(a)
Not applicable.(b)
Not applicable.(c)
Purchases of Equity SecuritiesThe Company's repurchases of its common stock made during the quarter ended SeptemberJune 30, 20172023 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) | ||||||||||||
April 1, 2023 – April 30, 2023 | 413 | $ | 20.50 | - | 24,375 | |||||||||||
May 1, 2023 – May 31, 2023 | 16,441 | 18.10 | - | 24,375 | ||||||||||||
June 1, 2023 – June 30, 2023 | - | - | - | 24,375 | ||||||||||||
Total | 16,854 | $ | 18.16 | - | 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.
Date: August 14, 2023 | By: | ||
/s/Robert T. Strong | |||
Robert T. Strong President and Chief Executive Officer | |||
Date: August 14, 2023 | By: | /s/ John J. Augustine | |
John J. Augustine Executive Vice President and Chief Financial Officer |