QUAINT OAK BANCORP INC

Allowance for Credit Losses (ACL)–** Loans**

The Company’s loan portfolio totaled $610.9 million as of December 31, 2023, and the associated ACL was $6.8 million. As described in Notes 2 and 7 to the consolidated financial statements, the determination of the ACL requires significant judgement about the expected future losses, which is based on lifetime loss rates using the weighted-average remaining maturity methodology, and then adjusted as applicable for current qualitative conditions and the forecasted environment, based upon both internal and external factors that are different from the conditions that existed during the historical loss calculation period. The Company implemented the new methodology in accordance with the adoption of ASU 2016-13,* Financial Instruments*–* Credit Losses (Topic 326)* on January 1, 2023, and adjustments to historical loss factors require a significant amount of judgement by management and involve a high degree of estimation.

We identified the implementation of the CECL methodology and the adjustments to the historical loss factor components of the allowance for credit losses as a critical audit matter, as auditing the implementation of a new methodology, as well as the underlying adjustments, required significant auditor judgment, as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

The primary procedures we performed to address this critical audit matter included:

We have served as the Company’s auditor since 2013.

Cranberry Township, Pennsylvania

March 28, 2024

Quaint Oak Bancorp, Inc.