QUAINT OAK BANCORP INC

Allowance for Credit Losses

The Company adopted Accounting Standards Update (ASU)2016-13 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, 2023are presented under Accounting Standards Codification (ASC)326, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Company recordedno* change to retained earnings as of* January 1, 2023for the cumulative effect of implementing ASC326.*

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 become90 days delinquent as to principal or interest. In certain cases, a loan* maybe placed on nonaccrual status prior to being90* 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 willnot be collected according to the contractual terms of the loan agreement. When interest accruals are discontinued, unpaid interest previously credited to income is reversed. Non-accrual loans* maybe restored to accrual status when all delinquent principal and interest has been paid currently forsix* consecutive months or the loan is considered secured and in the process of 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.

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Quaint Oak Bancorp, Inc.