QUAINT OAK BANCORP, INC.

Allowance for Credit Losses

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

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Quaint Oak Bancorp, Inc.