QUAINT OAK BANCORP, INC.

Stock Incentive Plans–** Stock Options (Continued)**

A summary of option activity under the Company’s2018 and2023 Stock Incentive Plans for the year ended* December 31, 2025*is as follows:

The estimated fair value of the options granted in* September 2025*was $2.71 per share. The fair value was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

The dividend yield was calculated on the dividend amount and stock price existing at the grant date. The risk free interest rate used was based on the rates of United States Treasury securities with maturities equal to the expected lives of the options. Although the contractual term of the options granted isten years, the expected term of the options is less. Management estimated the expected term of the stock options to be the average of the vesting period and the contractual term. The expected stock-price volatility was estimated by considering the Company’s own stock volatility. The actual future volatility* may*differ from our historical volatility.

At* December 31, 2025and December 31, 2024,the aggregate intrinsic value of options outstanding and options exercisable was zero. The aggregate intrinsic value of a stock option represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holder had all option holders exercised their options on December 31, 2025and December 31, 2024.*This amount changes based on changes in the market value of the Company’s common stock.

During the years ended* December 31, 2025and2024,* approximately $80,000 in compensation expense was recognized, respectively. During the years ended* December 31, 2025and December 31, 2024,the Company recognized a tax benefit of $5,000. As of December 31, 2025,*approximately $293,000 in additional compensation expense will be recognized over the remaining service period of approximately 3.5 years.

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Note16 - Transactions with Executive Officers and Directors

Certain directors and executive officers of the Company, their families and their affiliates are customers of the Bank. Any transactions with such parties, including loans and commitments, are in the ordinary course of business at normal terms, including interest rate and collateralization, prevailing at the time and donot represent more than normal risks of collectability. None of these individuals were indebted to the Company for loans at* December**31,* 2025 and2024, respectively.

Note17 - Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

A summary of the Company’s financial instrument commitments at* December**31,* 2025 and2024 is as follows (in thousands):

Commitments to extend credit are agreements to lend to a customer as long as there isno violation of any condition established in the contract. Since the commitments* mayexpire without being drawn upon, the total commitment amounts donot* necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and* may*require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but includes principally residential and commercial real estate.

The ACL for off balance sheet credit exposures is recorded in other liabilities on the Consolidated Balance Sheet. This ACL represents management’s estimate of expected losses in its unfunded loan commitments and other off balance sheet credit exposures, such as letters of credit and credit recourse on sold residential mortgage loans. The allowance for credit losses specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for off balance sheet credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses. The balance of off balance sheet credit exposures is $277,000, and $257,000 at* December 31, 2025and December 31, 2024,*respectively.

Note18 - Leases

The Company leases its office at501 Knowles Avenue in Southampton, Pennsylvania, as well as other office facilities and equipment. The Company leasesfour office locations under operating leases. Several assumptions and judgments were made when applying the requirements of Topic842 to the Company’s existing lease commitments, including the allocation of consideration in the contracts between lease and nonlease components, determination of the lease term, and determination of the discount rate used in calculating the present value of the lease payments.

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Note18 – Leases (Continued)

The Company has elected to account for the variable nonlease components, such as common area maintenance charges, utilities, real estate taxes, and insurance, separately from the lease component. Such variable nonlease components are reported in net occupancy expense on the Consolidated Statements of Income when paid. These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they arenot included in the right-of-use assets and lease liabilities reported on the Consolidated Balance Sheets. The lease cost associated with the operating leases was $555,000 for the year ending* December**31,* 2025 and $266,000 for the year ending* December 31, 2024.Cash paid for amounts included in the measurement of lease liabilities was $218,000 for the year ending December 31, 2025,and $213,000 for the year ending December 31, 2024.*

Certain of the Company’s leases contain options to renew the lease after the initial term. Management considers the Company’s historical pattern of exercising renewal options on leases and the positive performance of the leased locations, when determining whether it is reasonably certain that the leases will be renewed. If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease. The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease. The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at* December 31, 2025.*

The following table presents the undiscounted cash flows due related to operating leases as of* December 31, 2025,*along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Under Topic842, the lessee can elect tonot record on the Consolidated Balance Sheets a lease whose term istwelve months or less and doesnot include a purchase option that the lessee is reasonably certain to exercise. As of* December**31,* 2025, the Company hadno leases that had a term oftwelve months or less.

Rental expense under operating leases totaled approximately $547,000 in2025 and $308,000 in2024. Cash paid for rents amounted to $50,000 and $40,000 for the years ended* December 31, 2025and December 31, 2024,*respectively.

On* October 23, 2024,the Company and Mountainseed Real Estate Services, LLC entered into a sale-leaseback transaction for its office building located at1710* Union Boulevard, which is owned by the Company and leased by the Bank as a branch and as offices for the following subsidiaries of the Bank: Quaint Oak Mortgage, LLC, Quaint Oak Abstract, LLC, and Quaint Oak Insurance, LLC. On* December 20, 2024,*the transaction settled and funded and the Bank entered into an initial lease for a term of 15 years. During the initial lease terms, the base annual rental amount of $279,300 will increase annually at a rate of 2.0%. The Company recorded a pre-tax gain, after deduction of transaction-related expenses, of $1.5 million in connection with the sale-leaseback transaction.

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Note19 - Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth below) of total, Tier1, and common equity Tier1 capital (as defined in the regulations) to risk-weighted assets, and of Tier1 capital to average assets. Management believes, as of* December**31,* 2025, that the Bank meets all capital adequacy requirements to which it is subject.

The Bank’s actual capital amounts and ratios at* December**31,* 2025 and2024 and the minimum amounts and ratios required for capital adequacy purposes and to be well capitalized under the prompt corrective action provisions are as follows (dollars in thousands):

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act the Board of Governors of the Federal Reserve System as the primary regulator for the Company is authorized to extend leverage capital requirements and risk based capital requirements applicable to depository institutions and bank holding companies to thrift holding companies. Legislation adopted in late2014 generally exempts small savings and loan holding companies like Quaint Oak Bancorp from these capital requirements if certain conditions are met.

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Note19 - Regulatory Matters (Continued)

Banking regulations place certain restrictions on dividends paid by the Bank to the Company. The Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to the Company’s shareholders, interest payments on the subordinated debt and other general corporate purposes. The Bank’s ability to pay cash dividends directly or indirectly to the Company is governed by federal law, regulations and related guidance. These include the requirement that the Bank must receive approval to declare a dividend if the total amount of all dividends, including the proposed dividend, declared by the Bank in any current year exceeds the total of the Bank’s net income for the current year to date, combined with its retained net income for the previoustwo years. The term “retained net income” as defined by federal regulations means the Bank’s net income for a specified period less the total amount of all dividends declared in that period.

The Bank* may**not* pay dividends to the Company if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines or if the bank regulators have notified the Bank that it is in need of more than normal supervision. Under the Federal Deposit Insurance Act, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is used in the Federal Deposit Insurance Act). Payment of dividends by the Bank also* may*be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.

The Bank paid a total of $5.5 million in cash dividends to the Company in2025. The Bank didnot pay any cash dividends to the Company in2024. At* December 31, 2025,the Bank’s retained net income for the years ended December 31, 2025and2024* totaled $5.1 million.

Note20 – Fair Value Measurements and Fair Values of Financial Instruments

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair values estimates* may**not* be substantiated by comparison to independent markets and arenot intended to reflect the proceeds that* may*be realizable in an immediate settlement of the instruments.

Fair value is determined atone point in time and isnot representative of future value. These amounts donot reflect the total value of a going concern organization. Management doesnot have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses shouldnot be interpreted as a forecast of future earnings and cash flows.

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. Thethree broad levels of pricing are as follows:

This hierarchy requires the use of observable market data when available.

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The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note19 of the Company’s Form10-K for the fiscal year ended* December 31, 2025,as the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and non-performance risk. Loans are considered a Level3* classification.

The following is a discussion of assets and liabilities measured at fair value on a recurring and non-recurring basis and valuation techniques applied:

Investment Securities Available for Sale: The fair value of securities available for sale are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level1), or matrix pricing (Level2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

We* may*be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.

Individually Evaluated Loans: Individually evaluated loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans less estimated costs to sell. Collateral is primarily in the form of real estate. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within Level3 of the fair value hierarchy.

The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of* December 31, 2025 (*in thousands):

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The table below sets forth the financial assets and liabilities that were accounted for on a recurring basis by level within the fair value hierarchy as of* December 31, 2024 (*in thousands):

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has used Level3 inputs to determine fair value as of* December 31, 2025 (*in thousands):

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has used Level3 inputs to determine fair value as of* December 31, 2024 (*in thousands):

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The estimated fair values of the Company’s financial instruments that arenot required to be measured or reported at fair value were as follows at* December 31, 2025and2024* (in thousands):

For cash and cash equivalents, accrued interest receivable, investment in FHLB stock, bank-owned life insurance, FHLB short-term borrowings, accrued interest payable, and advances from borrowers for taxes and insurance, the carrying value is a reasonable estimate of the fair value and are considered Level1 measurements.

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Note21 – Operating Segments

ASC Topic820* – Segment Reporting* identifies operating segments as components of an enterprise which are evaluated regularly by the Company’s Chief Operating Decision Maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company has applied the aggregation criterion set forth in this codification to the results of its operations. The Company's operations currently consist oftwo reportable operating segments: Banking and Oakmont Commercial. The Company offers different products and services through itstwo segments. The accounting policies of the segments are generally the same as those of the consolidated company.

The Banking Segment generates its revenues primarily from its lending, deposit gathering and fee business activities. The profitability of this segment's operations depends primarily on its net interest income after provision for credit losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses. The provision for credit losses is almost entirely dependent on changes in the Banking Segment's loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The profitability of this segment’s operations also depends on the generation of non-interest income which includes fees and commissions generated by Quaint Oak Bank and its wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Abstract, LLC, Quaint Oak Insurance Agency, LLC, and Quaint Oak Properties, LLC, which are included in the Banking Segment for segment reporting purposes. The Banking Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of depositors and other customers, federal deposit insurance funds and the banking system as a whole. These laws and regulations govern such areas as capital, permissible activities, allowance for loan and lease losses, loans and investments, and rates of interest that can be charged on loans. For segment reporting purposes, Quaint Oak Bancorp, Inc. is included as part of the Company’s Banking segment.

The Oakmont Commercial Segment originates commercial real estate loans which are sold into the secondary market along with the loans’ servicing rights. The profitability of this segment’s operations depends primarily on the gains realized from the sale of loans and processing fees. The Oakmont Commercial Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of consumers.

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Note21 – Operating Segments (Continued)

The following table presents summary financial information for the reportable segments (in thousands):

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Note22–** Quaint Oak Bancorp, Inc. (Parent Company Only)**

Condensed financial statements of Quaint Oak Bancorp, Inc. are as follows (in thousands):