QUAINT OAK BANCORP INC

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. 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 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. Detailed segment information appears in Note 20 in the Notes to Consolidated Financial Statements.

Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the year ended December 31, 2023 of $3.6 million, a $4.8 million, or 56.8%, decrease from the year ended December 31, 2022. This decrease in PTSP was due to a $4.7 million, or 19.6%, decrease in net interest income, a $2.0 million, or 10.5%, increase in non-interest expense, and a $368,000, or 6.5%, decrease in non-interest income, partially offset by a $2.3 million, or 93.7%, decrease in the provision for credit losses. The increase in non-interest expense was due primarily to a $621,000, or 48.1%, increase in other expense, a $382,000, or 30.0%, increase in occupancy and equipment, a $361,000, or 52.3%, increase in data processing expense, a $264,000, or 39.5%, increase in professional fees, a $209,000, or 31.8%, increase in FDIC deposit insurance assessment, and a $98,000, or 52.7%, increase in advertising expense. The decrease in non-interest income was primarily due to a $650,000, or 19.9%, decrease in net gain on loans held for sale, a $204,000, or 68.5% increase in real estate sales commissions, net, a $158,000, or 20.9%, decrease in mortgage banking and title abstract fees, partially offset by a $222,000 increase in loan servicing income, a $181,000, or 54.8%, increase in other fees and service charges, a $158,000, or 51.0%, increase in gain on the sale of SBA loans, a $70,000, or 11.8%, increase in insurance commissions, and a $13,000, or 14.6%, increase in income from bank-owned life insurance.

Quaint Oak Bancorp, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Oakmont Capital Holdings, LLC Segment reported a pre-tax segment loss (“ PTSL”) for the year ended December 31, 2023 of $714,000, a $5.7 million, or 114.3%, decrease from the year ended December 31, 2022. The PTSL was primarily due to a $3.7 million, or 27.0%, decrease in non-interest income, a $1.2 million, or 14.3%, increase in non-interest expense, and an $806,000, or 189.6% increase in net interest loss. The decrease in non-interest income was primarily due to a $5.2 million, or 55.8%, decrease in net gain on loans held for sale, and a $607,000, or 25.9%, decrease in equipment lending fees, partially offset by a $1.6 million, or 87.8%, increase in loan servicing income. The increase in non-interest expense was primarily due to an $814,000, or $12.9%, increase in salaries and employee benefits expense, a $195,000, or 31.0%, increase in occupancy and equipment expense, a $161,000, or 17.3%, increase in other expense, and a $46,000, or 57.5%, increase in professional fees, partially offset by a $23,000, or 6.0%, decrease in professional fees.