QUAINT OAK BANCORP INC

PRESIDENT’S LETTER TO SHAREHOLDERS

To Our Valued Shareholders:

On behalf of the Board of Directors, Senior Management and Team Members of the Quaint Oak Family of Companies, I am pleased to present our 2023 Annual Report to Shareholders.

Subsequent to the historic action of the Federal Reserve Bank, enacting the rapid rise in interest rates over a considerably short time frame, it appears that we have generally regained stability in the Banking sector. We at the Company have successfully improved our Capital position by $2.5 million and increased our liquidity by $58.2 million at year end 2023 when compared to year end 2022.

We have reduced high-cost leverage borrowings by $137.2 million at 2023 year-end when compared to the same period of 2022. Having improved our balance sheet, accordingly, we are now poised to improve our earnings as we move through 2024. Our endeavor to launch our new Business Line for serving International Correspondent Banking has taken hold. The volume of transactions processed monthly on behalf of our initial group of Banks has become significant and provides us with deposit balances at significantly lower cost. Additionally, our intention is to reduce our investment in two subsidiary companies that have become less productive as a result of the severe increase in market rates. This redirection will allow us to refocus our energies on the core Business Lines of the Company.

As recently announced, the Company declared a quarterly cash dividend of $0.13 per share on the common stock of the Company since paid on February 5, 2024. We are very pleased to have continued our dividend payments during this challenging period. Additionally, as mentioned above, stockholders’ equity increased year over year ending December 31, 2023, by $2.5 million or 5.1%. As always, our current and continued business strategy focuses on long term profitability and maintaining healthy capital ratios, both of which reflect our strong commitment to shareholder value.

Robert T. Strong

President and Chief Executive Officer

Quaint Oak Family of Companies

Quaint Oak Bancorp, Inc.

Quaint Oak Bank

Quaint Oak Abstract, LLC I Quaint Oak Mortgage, LLC I Quaint Oak Real Estate, LLC

Quaint Oak Insurance Agency, LLC

Oakmont Capital Holdings, LLC I Oakmont Commercial, LLC

TABLE OF CONTENTS

Quaint Oak Bancorp, Inc.

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

General

Quaint Oak Bancorp, Inc. (the “Company”) was formed in connection with Quaint Oak Bank’s (the “Bank”) conversion to a stock savings bank completed on July 3, 2007. The Company’s results of operations are dependent primarily on the results of Quaint Oak Bank, a wholly owned subsidiary of the Company, along with the Bank’s wholly owned subsidiaries. The Bank, a Pennsylvania-chartered stock savings bank, is headquartered in Southampton, Pennsylvania and conducts business through three regional offices located in the Delaware Valley, Lehigh Valley and Philadelphia markets. At December 31, 2023, the Bank has 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 Oakmont Commercial, LLC, each a Pennsylvania limited liability company. The mortgage company offers mortgage banking services in the Lehigh Valley, Delaware Valley and Philadelphia County region of Pennsylvania. The real estate and abstract companies offer real estate sales and title abstract services, respectively, primarily in the Lehigh Valley and Bucks County regions 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. Quaint Oak Insurance Agency, LLC, located in Chalfont, Pennsylvania, began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. Oakmont Commercial, LLC began operations in October 2021 and operates as a multi-state specialty commercial real estate financing company. Since January, 2021, the Bank holds a majority equity position in Oakmont Capital Holdings, LLC, a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. The Bank’s 51% ownership interest in Oakmont Capital is currently being marketed for sale in order to reduce the Bank’s asset size and increase its capital ratios. While Oakmont Capital is currently being marketed for sale, there can be no assurances that the transaction will be completed.

Quaint Oak Bank’s profitability depends, 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 credit losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, directors’ fees and expenses, office occupancy and equipment expense, data processing expense, professional fees, advertising expense, FDIC deposit insurance assessment, and other expenses.

Quaint Oak Bank’s business consists primarily of originating commercial real estate loans, commercial business loans, and one-to-four family residential non-owner occupied loans, multi-family residential loans, construction loans, one-to-four family residential owner occupied loans, and home equity loans generally within its market area. At December 31, 2023, commercial real estate loans and commercial business loans comprise the largest percentage of Quaint Oak Bank’s loan portfolio, before net items, at 54.2% and 20.9%, respectively. Quaint Oak Bank’s loans are primarily funded by certificates of deposit, money market accounts and business checking. At December 31, 2023, money market accounts amounted to 34.6% of total deposits compared to 47.5% of total deposits at December 31, 2022. At December 31, 2023, certificates of deposit amounted to 34.2% of total deposits compared to 36.0% of total deposits at December 31, 2022. At December 31, 2023, interest bearing checking accounts amounted to 16.5% of total deposits compared to none at December 31, 2022. At December 31, 2023, non-interest bearing checking accounts amounted to 14.6% of total deposits compared to 16.2% of total deposits at December 31, 2022. Management anticipates that certificates of deposit, money market accounts and business checking will continue to be the primary sources of funding for Quaint Oak Bank’s assets.

Our results of operations are significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities as well as other factors beyond our control. Future changes in applicable law, regulations or government policies may materially affect our financial condition and results of operations.